South Africa’s Aspen to sell Japanese business to Novartis for US$442m

SOUTH AFRICA – Aspen Pharmacare Holdings, a global multinational specialty and branded pharmaceutical company, is set to sell its Japanese operations and related intellectual property to Sandoz, a Novartis division, for US$442m (ZAR6.5 billion).

The disposal is anticipated to complete in the first half of calendar year 2020. Aspen Group CE Stephen Saad said the deal is part of the strategy to focus on their core pharmaceutical business in markets that offer scale and alignment to the business model.

This is the latest disposal from the company, which is seeking to focus on its core pharmaceuticals business as it grapples with a hefty debt burden due to acquisitions. Fears it could breach debt covenants prompted its share price to halve in 2018.

Stephen Saad, Aspen Group Chief Executive said, “This Transaction complements our stated strategic intent to focus on our core pharmaceutical business in markets that offer scale and alignment to our business model. 

“Although our Japanese-based operations do not provide appropriate scale and leverage in relation to this focus, the strong management team, dedicated staff, specialty portfolio and the commercial platform represent an excellent opportunity for Sandoz when combined with their Japanese portfolio and product pipeline.”

AGI has also entered into a five-year Manufacturing and Supply Agreement with Sandoz which will take effect from completion of the transaction, for the supply of active pharmaceutical ingredients, semi-finished and finished products related to the portfolio of divested brands.

Aspen Japan’s operations contributed ZAR 2.1 billion (US$142m) in revenue and ZAR 0.4 billion (US$27m) in normalised EBITDA to the Group for the year ended 30 June 2019. 

The Net Asset Value of the Japanese operations was approximately ZAR 4.8 billion (US$325m) as at 30 June 2019.

The disposal of Aspen’s Japanese operations comprises intellectual property and any related goodwill, and the transfer of all shares in subsidiary Aspen Japan KK, to Sandoz.

The payment comprises US$331m upfront, while the rest would be subject to milestone payments contingent upon achieving supply criteria and licensing opportunities. All milestones earned were expected to have been received by December 31, 2023.

“The process of metamorphosing Aspen from a regional company with significant exposure to commoditization is well advanced. Our end shape will be a globally relevant, niche and branded portfolio” he said.

Net debt has fallen to ZAR40bn (US$2.71bn) as of end-June, from ZAR53.2bn (US$3.61bn) at the end of December, with the company’s market capitalisation standing at ZAR51.67bn (US$11.33m).

Aspen’s share price rose 2.46% to ZAR115.98 in morning trade on Monday, paring its year-to-date loss to 13.97%.

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