Aspen Pharmacare Holdings Ltd (JSE: APN), a leading South African pharmaceutical company, has reported its financial results for the fiscal year ending June 30, 2024. The company saw a 5% year-on-year (YOY) increase in revenues in constant currency terms, reaching ZAR 44.7 billion (USD 2.5 billion). However, EBITDA profits experienced a decline of 3% YOY, amounting to ZAR 11.3 billion (USD 630 million), which fell short of investor expectations and led to a roughly 10% drop in Aspen’s share price.
Aspen attributed a significant part of this underperformance to the impact of China’s volume-based procurement (VBP) program, particularly on its injectable products fraxiparine (nadroparin), an anticoagulant, and diprivan (propofol), a sedative-hypnotic agent. This resulted in a substantial 26% YOY decrease in the company’s commercial pharmaceuticals business in Asia, marking the sole region with negative growth in commercial pharmaceuticals sales for the year.
While Aspen’s annual earnings call was pending at the time of writing, the company had previously discussed its strategic approach to the Chinese market during earnings calls in March 2024 and August 2023. According to data, Aspen has 13 products with valid approvals in China, predominantly generics. Faced with the prospect of VBP affecting some key products, CEO Stephen Saad had posed the critical question in August: “How do we manage China? Do we just write it all down and exit?” This strategic consideration was in response to competitors experiencing market share losses due to VBP. Saad argued that exiting China would equate to a “massive opportunity loss,” stating: “China is a market which should be the largest territory within the Aspen business if we get it right.”
In an effort to counterbalance the VBP’s effects, Aspen executed a strategic move in December 2023, acquiring Sandoz’s China portfolio through the purchase of Sandoz (China) Pharmaceutical Co., Ltd for EUR 92.6 million (USD 100.5 million). Saad anticipates that while 2024 may present challenges, it will also lay the groundwork for future growth in China, with a projected upturn starting from 2025. – Flcube.com
