Aspen Buys Remaining Rights to AstraZeneca’s Anesthetics

LAGOS (Capital Markets in Africa) – Aspen Pharmacare Holdings Ltd. is resuming deal making, agreeing to buy more rights to AstraZeneca Plc’s anesthetic medicines for $555 million while reporting full-year profit that beat analysts’ estimates. 

Earnings per share at Africa’s largest generic-drugs maker climbed 16 percent to 14.63 rand in the year through June, the Durban, South Africa-based company said in a statement on Thursday. Analysts expected 14.61 rand. Sales also increased 16 percent to 41.2 billion rand ($3.1 billion).

The AstraZeneca deal, which includes medicines such as Diprivan, Xylocaine Marcaine and Naropin, builds on Aspen’s 2016 acquisition of other anaesthetics from the same drugmaker. On top of the $555 million up-front agreement, the South African company will pay as much as $211 million in performance-related instalments until November 2019. For its part, Cambridge, England-based AstraZeneca will continue to manufacture and supply the medicines to Aspen for up to five years.

A combination of acquisitive and organic growth is “expected to lift earnings in the year ahead,” Chief Executive Officer Stephen Saad said in the statement. “Aside from the additional value acquired, further upside can be expected to be realized, phased over a number of years as Aspen increases the in-house production of anaesthetics.”

Eliminates Royalties
Aspen shares rose as much as 4.6 percent to 298.54 rand , their biggest intraday gain since November. They were up 3.9 percent at 10:57 a.m. in Johannesburg, valuing the company at 135 billion rand. Gains in the share price this year have been curbed by a European Union antitrust probe into drug pricing as well as a U.K. newspaper report of a dispute on pricing with Spanish authorities. AstraZeneca rose 0.4 percent to 4,864 pence in London.

The deal gives Astra an up-front payment while eliminating annual royalty payments the company was set to receive from Aspen, Mathew Menezes, a Citi Research analyst, said in a note to clients. If the agreement is consolidated in fiscal 2018, it could add 10 percent to Aspen’s operating profit, he said.

Roger Franklin, an analyst with Liberum, cut his rating on AstraZeneca to hold from buy, saying that the drug maker’s share price fairly prices the company’s immunotherapy business after the failure of the Mystic lung cancer trial.

Aspen, which sells products such as hormones, infant formula and antiretroviral medicines in more than 150 countries, is seeking acquisitions as revenue rises and spending falls, Saad said in July.

The drug maker categorized performance based on type of pharmaceutical as well as geography for the first time. It reported a turnaround at its South African unit and more than doubled cash generated from operating activities.