RYK VAN NIEKERK: The pharmaceutical group Aspen Pharmacare reported financial results for its financial year to the end of June 2020. The group’s revenue rose by 9% to R38.6 billion, and the headline earnings rose also by 9% to R14.65/share. No dividend was declared. Aspen is one of the biggest pharmaceutical companies in emerging markets. It was founded in 1850, so it has a 160-year heritage. The company employs around 10 000 people and does business in 55 countries.
On the line is Gus Attridge, an executive director. Gus, thank you so much for joining me. Let’s start with Covid-19. Of course you’re a pharmaceutical company. You have several drugs that are being used in the treatment thereof, including Dexamethasone. What impact that Covid-19 have on your numbers?
GUS ATTRIDGE: Hi, Ryk. Thanks for this opportunity. Covid-19 had many mixed influences on our numbers but, overall, we were a net sufferer at the hands of Covid-19. We have posted some very pleasing results, but are certain they would have been somewhat better had we not been through the Covid experience. There have been many upsides, but deeper downsides still as a consequence of Covid-19.
In Europe we had a very strong demand on our anaesthetics products, in particular, which were used across Europe and in late-stage sufferers and helping deal with the particular respiratory issues that those patients were afflicted with.
On the other hand, in China we had to go through a very hard lockdown, where for three months, our capacity to sell our products was severely diminished. So there were offsets to the gains.
We have some very important products which are sold in hospitals, and elective surgery has largely been postponed through the pandemic. So we had a downside there again. And, while there was some very strong advanced selling when the first wave of the pandemic struck, subsequent to that there’s been very low footfall through pharmacies, very low patient visits to their GPS. Overall we’ve had more challenges than benefits out of Covid-19.
RYK VAN NIEKERK: But it seems as if you have reacted quite well, because you saw a revenue increase of 9%; you also saw a headline earnings increase around 9%. How did you mitigate these changes in your operations?
GUS ATTRIDGE: Ryk, we are very grateful. I’m saying that we were net losers at the hands of Covid-19, but we’re very grateful to be, firstly, in an industry which has remained relevant throughout the pandemic for obvious reasons. And I’m also very proud of our employees who have shown enormous commitment to ensure that our manufacturing facilities, in particular, have remained in operation throughout the pandemic. And, when others were locked down and staying in the safety of their homes, we had workers going to the factory floor every day. We really are very grateful for that kind of commitment.
Aspen has always prided itself as an agile organisation, and I think we’ve been able to respond to many of the challenges that have taken an enormous effort from all of our employees to deal with the challenges.
There were times at the sort of peak of the lockdown period where the supply chain needed a huge amount of administration to try and get products from one place to another. But somehow we managed, often at an additional cost. But yes, we really do think we’ve been in a privileged position to be able to help people in the time of the crisis. And we’ve also been very pleased that our business continuity plans have shown to be successful under real tests. So these were a lot of the end outcomes for the business as a consequence.
RYK VAN NIEKERK: Dexamethazone is used to treat Covid-19 patients. How did this drug contribute to the numbers?
GUS ATTRIDGE: Dexamethazone is a product where we’ve supplied tens of millions of tablets to patients around the world. We’ve met all the demand from not only South African sources, but also from health organisations across the world. It’s a very cheap medicine, which is very good from the perspective of being able to reach those who can benefit from it. It’s really been one of those products that we are pleased about for the contribution that it’s made to global healthcare, more than the contribution that it’s made to our bottom line.
RYK VAN NIEKERK: Obviously the focus now moves to a vaccine. There are many trials already ongoing. What would your role be in the supply chain of such a vaccine when it becomes available?
GUS ATTRIDGE: That’s an interesting question, Ryk. We don’t have any vaccines of our own, but we have manufacturing facilities which really can contribute in assisting with the demand which is likely to be placed on the supply of vaccines globally – whether for the Covid vaccine itself or other vaccines for which vaccine manufacturers need to find a new manufacturer so they can concentrate on the Covid vaccine. From a manufacturing perspective, in both Port Elizabeth and France we have the capacity and the technology to play a meaningful role should it be required.
RYK VAN NIEKERK: That’s interesting. Your debt levels have historically been a concern, but have been significantly reduced over the past 18 months – from around R54 billion to the current R35 billion. It still remains a significant level of liability. What are your plans with the current debt levels?
GUS ATTRIDGE: The level, as you’ve noted, has come down significantly, and it’s actually now really within a comfortable and healthy level, relative to the size of our business. But, Ryk, you may have noted that earlier in the week we announced a disposal which relates to that asset that underpinned our European [operation]. From both this business and that transaction we’ll have excellent cash realisation. The transaction’s worth €642 million, which is about R13 billion at today’s exchange rate. So that will also reduced debt even further, and puts us in an extremely healthy balance-sheet position.
RYK VAN NIEKERK: You have sold several operations over the last few years. Of course, that is good for the balance sheet because you’ve reduced debt, but what does that mean for the strategic direction of Aspen? Are you maybe looking to start expanding your reach into the market through acquisitions anytime soon?
GUS ATTRIDGE: Ryk, disposals which we’ve made – we went on a bit of an acquisition-spree five or six years ago, and it was not with an intent to do a lot of acquisitions simultaneously, but a number of projects we’ve been working on all came together at the same time. In the time since then we’ve been settling down the consequences of those transactions, and getting to know and test where we are going to be successful with the assets we’d acquired. It’s better off to put those assets in other people’s hands, where we can achieve fair value for those assets and concentrate on our …..[9:32] . So we’ve been through a reshaping of the business which, with this thrombosis transaction, we believe we are now at an end.
And we are going to be at a stage where we are looking, with the reshaped business, to be able to show really good organic growth from that business and to add to that business in the areas of our strength, where there may be opportunities. We are not going on a buying expedition. But, should an opportunity come to life which we believe will progress our business, we have the capacity to be able to invest now.
RYK VAN NIEKERK: Gus, thank you so much for your time today. That was Gus Attridge, an executive director at Aspen.