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You can also listen to this podcast on iono.fm here.<\/p>\n
JIMMY MOYAHA: Aspen Pharmacare Holdings Limited released their results for the financial year ended 30 June 2026. We\u2019re going to look at these numbers in more detail with the company\u2019s chief financial officer, Sean Capazorio, who joins me on the line now to see what we make of their performance.<\/p>\n
Sean, lovely having you on the show, as always. Thanks so much for taking the time. A stronger year by all accounts from a business operating perspective. Gross profits declined slightly year to year, but the business is in overall better shape if we look at normalised headline earnings, and look at some of the other moving parts that would have affected the business.<\/p>\n
How do you reflect on the year that was?<\/p>\n
SEAN CAPAZORIO: I think we guided that we would deliver on all our core priorities, and we did just that.<\/p>\n
It was a hard year. We had to recover from the loss of the contract last year in sterile FDF [finished dose form] business.<\/p>\n
And so we\u2019ve been working hard in our manufacturing business to reshape those sterile facilities \u2013 and we\u2019ve made exceptionally good progress this year. You can see the cost savings starting to benefit the manufacturing Ebitda [earnings before interest, tax depreciation and amortisation].<\/p>\n
On the commercial pharma side, we had a good year in terms of profit generation.<\/p>\n
We grew normalised profits by about 13%. And combined with manufacturing growth of 21% profits, our overall group\u2019s what we call normalised Ebitda grew at 14%.<\/p>\n
Then I think we also had the benefit of really strong free cash flow this year.<\/p>\n
And that, coupled with the APAC [Asia Pacific] divestment, put us in a net-cash position for the first time, I think, in Aspen\u2019s history.<\/p>\n
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So it\u2019s really given us a very strong balance sheet flexibility in terms of capital allocation.<\/p>\n
Overall I think a very successful year, and obviously that all translated to double-digit growth in earnings as well.<\/p>\n
So a lot of hard work done this year, but a lot of delivery.<\/p>\n
JIMMY MOYAHA: Sean, it seems as though the focus for a lot of the pharmaceutical businesses is to win the GLP-1 [appetite-reducing medication] market and to gain bigger access into that market.<\/p>\n
I want to get your thoughts around where you guys find yourselves there.<\/p>\n
You already have distribution rights on some of those products in the South African market, but I want to look at that in the context of some of the other regulatory approvals you\u2019ve been able to secure from a business perspective \u2013 most notably the Canadian approval for Aspen, as well as the South African approval for the insulin manufacturing locally.<\/p>\n
The pharmaceutical space looks to be growing in terms of competitiveness.\u00a0How important is it for Aspen to be able to secure, number one, these regulatory approvals, but also to be able to access greater market share?<\/p>\n
SEAN CAPAZORIO: Yes, it\u2019s a big growth driver for Aspen.<\/p>\n
I think if we just look, if I sort of compartmentalise the GLP-1s into two categories, we\u2019ve got let\u2019s call it, the distribution agreement with Lilly where we do [the diabetes\/weight-loss treatment] Mounjaro, and that\u2019s done very well in South Africa this year.<\/p>\n
We said we\u2019d do over a billion rand of sales, and we have exceeded that number in the current year and grown the whole market quite substantially.<\/p>\n
And we\u2019ve got the opportunity to launch Mounjaro in sub-Saharan Africa, which we look to be doing in calendar year 2027, so that\u2019s on track.<\/p>\n
That\u2019s on let\u2019s call it the \u2018originator space\u2019.<\/p>\n
Then on the generic space, as you correctly say we\u2019ve done a lot of work in the background investing in intellectual property and licensing opportunities. We\u2019ve obviously got a strategy to launch these generic semaglutides in our emerging markets, including South Africa \u2013 and I\u2019ll come back to that.<\/p>\n
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But yes, our first successful registration has been in Canada, and that I think we announced sometime in July. We\u2019re just now reliant on the supply of the raw material from Dr. Reddy\u2019s [Laboratories], and that will be manufactured through another one of the suppliers in India for supply into the Canadian market.<\/p>\n
So once we know what the timing of that is, we will let everybody know \u2013 but that\u2019s certainly our very first market that we\u2019re going to launch in.<\/p>\n
We\u2019ve also an opportunity to launch in Brazil and a lot of the other Latin American countries \u2013 also the Middle East.<\/p>\n
And then obviously in South Africa our generic product is already in for registration, so we\u2019re just waiting on registration from the South African regulatory authority.<\/p>\n
So certainly, Mounjaro in South Africa \u2013 we\u2019ve got more than 50% market share.<\/p>\n
And obviously, with the generic semaglutide there are going to be a lot more competitors in place, but I think we\u2019re going to see that that\u2019s actually going to grow the markets because it\u2019s going to improve access. People will be able to access those products because of the affordability nature.<\/p>\n
I don\u2019t think it\u2019ll take market share away from products like Mounjaro, but will actually grow the market and give people a lot more access to this very good medication.<\/p>\n
So we\u2019re very excited about it.<\/p>\n
JIMMY MOYAHA: Sean, you touched on the fact that there was that APAC disinvestment \u2013 obviously from a business perspective.<\/p>\n
That was a positive boost towards the earnings-per-share number. I imagine that would have been even more celebrated if we didn\u2019t have to contend with the R2.3\u00a0billion in impairments as a result of the higher discounted rates that the business had to contend with. Impairments are never nice, they\u2019re never easy, but they\u2019re also in some cases unavoidable.<\/p>\n
Your thoughts around that impairment figure, and perhaps how it put a bit of a damper on the rest of the mood?<\/p>\n
SEAN CAPAZORIO: Yes, look, I think impairments, because they have no cash impact, are just an accounting entry.<\/p>\n
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What I always look at in impairments is how much is because of performance, and how much is out of your control.<\/p>\n
As we guided in our results, the bulk of that impairment was because of technical impairments. So the discount rates going up globally \u2013 I think obviously the volatility in the world has pushed up discount rates.<\/p>\n
So it\u2019s really a mechanical impairment. Our operational \u2018impairments for intangibles\u2019 was very, very low. And, as I said, there\u2019s no cash impact.<\/p>\n
If you look at the APAC divestment, there you made a profit of a very similar value, and that was all cash.<\/p>\n
So you\u2019ve got R2.4\u00a0billion cash coming in on the profit on APAC, and you\u2019ve got a R2.3 impairment that has no cash impact. So net-net you\u2019re in a better cash position.<\/p>\n
Still, it\u2019s never nice to see an impairment, but it\u2019s not something that impacts our cash flow and outlook from a trading perspective.<\/p>\n
Also, Jimmy, maybe quickly on this. When you do value your whole intangible asset base, we\u2019ve actually got 45% headroom on valuation versus our book values. But unfortunately the accountants only look at writing down impairing, so if things are above their book value, you can\u2019t write them up. You only have to write down. So it\u2019s always only a one-way gap.<\/p>\n
But if you had to look at it overall, we\u2019re at about a 45% headroom above our carrying value.<\/p>\n
So I think our portfolio is well valued, and it was really a technical impairment.<\/p>\n
JIMMY MOYAHA: That is quite a nice headroom to have, especially from an accounting perspective and from a balance sheet perspective. Hopefully that continues to serve the business well as the business focuses on its strategy into the new year.<\/p>\n
All the best to you and the team, Sean. We look forward to seeing another strong year from the Aspen business.<\/p>\n
We\u2019ll leave the conversation on that note. Aspen Pharmacare Holdings Limited\u00a0chief financial officer\u00a0Sean Capazorio joined us to reflect on the year they just concluded from a financial perspective, and how they fared.<\/p>\n
#Aspen #netcash #position #time<\/p>\n","protected":false},"excerpt":{"rendered":"
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