Release Date: September 04, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Aspen Pharmacare Holdings Ltd (JSE:APN, Financial) reported a 10% growth in group revenue, driven by strong manufacturing performance.
- The company achieved its highest EBITDA in the second half, with a 17% growth in normalized EBITDA and normalized HEPS.
- Aspen's Commercial Pharma business grew by 4%, with strong growth in Prescription and OTC segments offsetting declines in Injectables.
- The company successfully integrated regional transactions, particularly in Latin America, which is now one of the most exciting regions for Aspen.
- Aspen has secured a EUR500 million funding package from development finance institutions to support its sterile capacity journey in Africa, enhancing its capital structure mix.
Negative Points
- Aspen faced significant challenges in China and Russia, with a combined ZAR2 billion impact on gross margin due to VBP risks and geopolitical issues.
- The company had to absorb ZAR1 billion in manufacturing impacts from the loss of grant funding and COVID vaccine benefits.
- Aspen's net debt increased by ZAR4.7 billion to ZAR27 billion, driven by acquisitions, including the Viatris LatAm transaction.
- The company's gross profit percentage declined from 46.2% to 43.5%, primarily due to a higher mix of lower-margin manufacturing sales.
- Aspen anticipates further interest rate increases in FY25, which could impact financing costs despite the expected peak in the interest rate cycle.
Q & A Highlights
Q: Can you provide an update on the regulatory progress for your insulin and serum contracts?
A: We are dependent on the South African regulator, SAHPRA, for priority reviews. Progress has been made, and we hope to have insulins available by early next year, with serum to follow. However, the exact timing is uncertain due to regulatory processes.
Q: Are you concerned about the risk of patent extensions for GLP-1s in markets outside the US and EU due to litigation?
A: There is a risk, but some countries have provided clear guidance on patent expirations. Many emerging markets have no patents filed, making it easier to navigate. We are monitoring the situation closely.
Q: How much of your capacity does the licensor for GLP-1s intend to take?
A: The licensor will take a significant portion of our capacity, but our profitability will be higher with our own products. The exact volumes will depend on regulatory pathways and market demand.
Q: What is your strategy for utilizing capacity beyond serum and GLP-1s?
A: We have opportunities to increase insulin volumes and pediatric vaccines. Additionally, we are exploring other products like the Mpox vaccine, provided there is a take-or-pay agreement and funding for tech transfer.
Q: Can you speak to the tenure and terms of the new DFR funding package?
A: The funding package has a seven-year tenure with amortization starting after the first two years.
Q: Why did Sandoz exit China and sell their EU assets to you?
A: Sandoz faced similar VBP challenges in China. By combining our products, we can maintain our sales team and infrastructure. The EU asset swap was minor and helped facilitate the transaction.
Q: How does the pricing work on GLPs, and how will it impact Aspen if prices come down?
A: We expect prices to come down to increase accessibility. Our assumptions are based on significant price reductions, which will drive higher volumes.
Q: What drove the VBP impact being higher than expected in China?
A: The VBP impact was higher due to larger-than-expected price cuts, particularly for Diprivan. The Chinese market is opaque, making it difficult to predict these changes.
Q: What is your outlook for price cuts in Australia?
A: We anticipate the risk of further price cuts in Australia. While we hope for fewer cuts, we factor them into our assumptions. Our strategy includes balancing our portfolio with OTC products to mitigate this risk.
Q: How is Aspen ensuring sustainable medicine supply in Africa?
A: We are working on various initiatives, including collaborating with PEPFAR to supply ARVs locally. We aim to leverage our capacities and capabilities to address healthcare needs on the continent.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
