Aspen CEO says deal making to resume in emerging markets

Johannesburg - Aspen [JSE:APN] sees further acquisitions in the next 12 months as strong revenue and lower capital expenditure restore its firepower after the purchase of two anesthetics portfolios last year.

The potential deals will probably be made in the South African company’s existing pharmaceutical markets, with womens’ health a possible area of expansion, chief executive officer Stephen Saad, 53, said in an interview at Aspen’s headquarters in Durban on Friday.

The drug maker, which has operations in more than 150 countries, will focus on emerging rather than developed markets, the billionaire said.

"We’re in a great space to make further acquisitions because we have our teams in the right place and we’re generating cash," the CEO said.

"The more we can build on emerging market platforms, the more excited we are. To perform in Asia Pacific is going to be important for Aspen. Latin America and Africa are important for Aspen."

The CEO’s comments reaffirm his commitment to the deal making that’s propelled the business he co-founded as a generic drugs specialist 20 years ago into South Africa’s ninth-largest listed company with a market value of R131bn.

The 2016 purchases of anesthetics portfolios from UK giants GlaxoSmithKline and AstraZeneca for at least $885m trebled the group’s borrowings to R35.7bn as of end December, according to Aspen’s most recent financial results.

Organic growth across the company should bring that down, the CEO said. Sales are expected to have risen 19% to R42.3bn in the year through June, according to analysts polled by Bloomberg.

Aspen shares rose 2.3% to R287.10 by the close in Johannesburg on Friday, moving the stock into positive territory for the year to date. Saad owns about 12% of the drug maker, with his stake valued at about R15.7bn.

Regulator probes

Saad was defiant when addressing a €5.2m fine imposed on Aspen by Italian regulators for raising the price of cancer drugs by as much as 1 500%, saying that the extent of the increase overshadowed the low price of the treatment in question, which had not been raised for more than half a century.

Ramping up prices to unreasonable levels "isn’t in our DNA - it’s not what Aspen stands for," the CEO said. "We’ve clearly got some regulators very comfortable with our pricing."

He said he couldn’t comment on a similar investigation by European Union regulators because it’s still in progress.

Aspen faces EU antitrust probe over pricing of cancer drugs

One change Aspen is making to the way it does business is to alter the way the company reports financials, Saad said. As of full-year earnings to be released in September, the drugmaker will categorize performance based on type of pharmaceutical - such as anticoagulants - as well as geography.

This followed criticism from the analyst community, who he conceded were justified in their complaints about a lack of transparency.

"They are right, you can’t understand the Aspen business in the way it was shown," Saad said.

"It has been a massive task and will take another year or two to get to the level we want. But at least we’ve got the base numbers now."