Aspen Pharmacare Holdings Limited has delivered a solid performance with a good set of quarterly results overall in a challenging inflationary environment, which shareholders have heartily welcomed as the share price was up +753,00 (5,71%) on Wednesday shortly after the announcement, reaching 6.11% in late afternoon trade.

That’s the message they would want to focus on, as much of the attention has been swayed by the announcement that the group’s South African operation has just sealed a deal with the Serum Institute of India, the world’s largest vaccine producer, for Aspen SA Operations to manufacture, market and distribute four Aspen-branded routine vaccines in Africa.  

The World Health Organization says immunisation is one of the most impactful and cost-effective public health interventions available, averting more than four million deaths every year. In addition to its impact on population health, it reduces the burden of disease, including through savings on medical expenses, as well as productivity and educational gains. 

But the African region still lags behind other regions of the world in access to vaccines, with the WHO saying about one in five African children do not receive all the necessary and basic vaccines, causing more than 30 million children under the age of five to suffer from vaccine-preventable diseases (VPDs) every year in Africa. Of these, more than half a million children die from VPDs every year.

Aspen’s vaccine production capability could save thousands of lives in Africa.

Gross profit increased 3% to R16.1-billion, supported by improved margins in both regional and sterile focus brands, the group said, despite the inflationary and freight cost headwinds experienced — especially in the second half of the financial year. 

Revenue from continuing operations increased by 2% (+5% in constant exchange rate — or CER — to accommodate for exchange rate fluctuations) to R38.6-billion (up from R37.8-billion in 2021).

Normalised Ebitda from continuing operations was good, increasing by 11% (+13% in CER) to R11-billion (FY2021: R9.9-billion), while normalised headline earnings per share from continuing operations increased by 24% (+26% in CER) to 1,627,6 cents (FY2021: 1 309,7 cents). 

The dividend declared to shareholders increased by 24% to 326 cents per ordinary share (up from 262 cents in 2021).

Headline earnings per share from total operations increased by 31% (+31% in CER) to 1,461,2 cents (FY2021: 1,119,1 cents), with earnings per share from total operations increasing by 36% (+36% in CER) to 1,432.3 cents (FY2021: 1,052.9 cents).

Serum Institute deal

The deal includes paediatric vaccines against pneumococcal disease, rotavirus and the six-in-one hexavalent, protecting babies against diphtheria, tetanus and pertussis, as well as a vaccine preventing polyvalent meningococcal disease, for adults and children. 

The vaccines will be produced in Aspen’s Gqeberha facility.

The fill-and-finish arrangement grants Aspen SA Operations the rights to supply vaccines to member states of the African Union. The Serum Institute, whose vaccine development has been central to the fight against Covid-19, will be supplying APIs, or active pharmaceutical ingredients — critical ingredients to drugs, which are only currently being manufactured in India and China.

In addition to this agreement, Aspen also anticipates receiving grant funding from the Bill & Melinda Gates Foundation and the Coalition for Epidemic Preparedness Innovations to support African regional manufacturing capacity for the affordable supply of vaccines to, among others, African countries and Gavi/Unicef.

It’s an evolution in the group’s existing capabilities rather than a shift of focus, as it will hold the rights to manufacture these life-saving preventive vaccines over the next decade.

In a statement, Stephen Saad, Aspen Group CEO, said, “The group has achieved a robust set of results for the year ended 30 June 2022, supported by improved operating margins underpinned by a lower operating expense base and a strong balance sheet, all of which provide a solid foundation for future sustainable growth.”

Commercial Pharmaceuticals, comprising regional brands and sterile focus brands, grew 1% to R27.658-million. The group said solid underlying volume growth of 4% was affected, primarily by the divestment of certain products in South Africa, challenges faced by its Chinese business — including volume-based procurement and Covid-related lockdowns in China — as well as the impact of the geopolitical situation in Russia and Ukraine on its businesses there. 

Sean Capazorio, Aspen’s group finance officer, said that as the biggest supplier of vaccines to the African continent, the Serum Institute deal was a good opportunity for both companies. 

“With the African Union calling for 30% offtake from African-based manufacturers, it enables Serum to retain the API benefit and for Aspen to obviously provide the finished vaccine product to the patients.” 

Capazorio says that, as witnessed during the pandemic, when there was a shortage, Africa was always the last to get the vaccine. 

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“This gives the continent quite a lot of security of supply. This arrangement is really good from an access perspective and making sure that more people get access to these vaccines. Obviously, we still need to get through all the processes to be able to sell them and get onto the tenders, but this is a really positive step for us.”

On the grant funding from the Gates Foundation, Caparozio said given that Africa had bought all its vaccines from non-African manufacturers, the deal gave the foundation “a lot of comfort” to know now that they had a partner in Africa that they supplied. 

“The vaccines, made in Africa to Africa, give them the comfort of mind that there is a facility on the continent that can get ready for pandemic preparedness.” 

Since the funding is still under discussion, he said that once details had been ironed out, Aspen would make an announcement.

He estimates that it will take about 12 months before the four vaccines go into local production.

“We will always focus on the Covid vaccine. Obviously, we have our own product, Aspenovax, but at this stage in the cycle we haven’t got any orders for it. But if there is another pandemic, we would have the ability to make a vaccine.”

Caparozio says Aspen has the facilities to make not just vaccines, but any other sterile products, including anaesthetics.

“We are looking at the oncology and insulin spaces and broader sterile manufacturing and commercial opportunities. It’s broader than just vaccines, but vaccines are always on standby. If there’s a need and demand for it, we will be able to produce it.” DM/BM