Having embarked on an aggressive acquisition trail this year, Aspen Pharmacare is fully expecting to start reaping results from the second half of next year.

Speaking at the release of the company’s annual results to the end of June 2023, group chief executive Stephen Saad said reported revenue growth of 6% and 5% was achieved by commercial pharmaceuticals and manufacturing respectively, despite a volatile global trading environment.

“We have achieved outstanding progress in our endeavours to secure additional manufacturing volumes for our newly installed expanded sterile production capacities. 

“We are tracking well to achieve our previous guidance of related contributions of R2-billion in calendar year 2024, increasing to R4-billion in calendar year 2025,” said Saad.

“These new long-term collaborative opportunities in manufacturing, together with the serum agreement concluded in 2022, will provide substantial support to our medium-term strategy to fill our sterile manufacturing capacity. This in turn presents a potential annual contribution of at least R8-billion per annum.”

New distribution agreements

The company also announced a new product distribution agreement with Lilly, which will see Aspen and its subsidiary, Beta Healthcare, hold the rights to sell, promote and distribute Lilly’s pharmaceutical portfolio in sub-Saharan Africa for an initial term of 10 years, automatically renewable for two further periods of five years.

The sales revenue of the Lilly portfolio in sub-Saharan Africa was about R440-million in 2022, and this is expected to be materially increased by the launch of key Lilly pipeline products in the short to medium term. 

The pipeline includes Lilly’s tirzepatide, marketed globally as Mounjaro, a molecule currently under evaluation by the SA Health Products Regulatory Authority and expected to be launched in South Africa soon.

Mounjaro is a medication used to treat diabetes. It has very similar outcomes to Ozempic, which was in short supply not so long ago as consumers desperate for a weight loss product snapped up what was on the shelves.

Saad says this move, combined with Aspen’s recent agreement with Amgen and Viatris, will provide growth momentum in the company’s commercial pharmaceuticals segment.

“We continue to actively explore additional contract manufacturing opportunities as well as further product portfolio enhancements to further drive growth into the future.”

Manufacturing agreements

In Europe, Aspen has secured three sterile manufacturing agreements with multinational pharma companies for production at its French manufacturing facility.

These new long-term opportunities, with the Serum agreement concluded in 2022, are expected to materially contribute to the foundation of Aspen’s medium-term strategy to fill its sterile manufacturing capacity. 

Additional agreements are under negotiation, including one for the Gqeberha facility that has already progressed to an advanced technical transfer stage. The medium-term strategy is to fill existing sterile manufacturing capacity, which has a potential annual total contribution of at least R8-billion.

“We’ve been investing a lot over the last five years in our manufacturing facilities, and we are now starting to see the benefit of that. Going forward, we are concentrating on either going into partnership agreements or buying ownership of products from various companies,” said chief financial officer, Sean Capazorio.

The annualised revenue for the Viatris product portfolio in Latin America is $92-million and includes well-known brands such as Viagra, Lipitor, Zoloft, Norvasc, Lyrica and Celebrex.

The promising pipeline from the various agreements concluded over the past six months bodes well for shareholders who may have raised an eyebrow at the 4% drop in gross profit for the period under review. 

Management says factors that negatively affected the first half performance included the Russia-Ukraine war, inflationary pressures, Covid lockdowns and volume-based procurement impacts in China, the loss of Covid vaccine revenue as well as investing in non-revenue generating technical transfer activities relating to the onboarding of new sterile manufacturing opportunities. 

Reassuringly, group revenue was up 5% to R40.7-billion, and shareholders also saw a 5% increase in dividends at R3.42 a share.

17% increase in annual dividends for Adcock Ingram shareholders

The other JSE-listed pharmaceutical manufacturer, Adcock Ingram, saw a 12% increase in headline earnings per share for the year ended 30 June 2023, with a 5% increase in turnover to R9.1-billion.

Chief executive, Andy Hall, says organic volumes declined by 2.7% due to lower demand for products used in the treatment of Covid-19, and lower ARV tender sales.

Good demand in the over-the-counter and prescription portfolios mostly compensated for these declines.

“The significantly weaker exchange rate, increased production costs and significant cost push from suppliers were mostly compensated for by improved factory throughput and efficiencies, as well as selling price increases in the non-regulated portfolio,” Hall says, adding that management remains cautious about the general state of the operating environment.

Shareholders saw an annual increase of 17% in the total dividend for the year, with a final dividend of R1.25 a share. DM