Mystery Aspen share price fall

Glaxo sell-off partly to blame, says analyst

PHARMACEUTICAL giant Aspen Pharmacare has seen its share price lose more than 4% this week and more than 10% in the past month.

Investors have been left puzzled by the sudden drop in value with little to no news available about the company in recent weeks.

Vestact analyst Sasha Naryshkine said there were three possible explanations for the lower share price.

“First and foremost, Glaxo [GlaxoSmithKline] have sold shares and have indicated that they may be exiting the business in time,” he said.

“It has been a good relationship of injecting assets, on Glaxo’s part, in return for greater ownership of Aspen.

“Relative in size and scale, it was a lot more significant in the life of Aspen than that of Glaxo.”

Aspen issued shares to Glaxo in May 2009 in return for the rights to distribute the London-based drugmaker’s products in South Africa and as part of an agreement to market and sell medicines in sub-Saharan Africa.

In March this year, GlaxoSmithKline sold half its stake in Aspen through a share placing at a discount to market price in a bid to prune its noncore investments as it refocused its business to protect its sizeable dividend payments to shareholders.

“With Glaxo exiting, there is a likelihood that the market would anticipate another bout of share price weakness, perhaps even another discounted placement,” Naryshkine said. The second reason the share was seeing a pullback could be that the company was working on a large deal, he said.

“Aspen's management has always indicated that if the right deal presented itself, it would be up for it.

“Using increasingly expensive scrip to pay for deals is something shareholders have been on board with . . . but the stock is not cheap.

“I suspect that while this is the case, it is still a business investors must own,” Naryshkine said.

In the year to January, Aspen’s share price had risen by more than 24%.

It reached a new high on January 27 of R448.68, but has been falling gradually but consistently ever since.