Aspen Pharmacare Reports Disappointing Results! Stock Plunges 13%, EBITDA Increases by Only 1% in Full Year, VBP Policy to Blame

Aspen Pharmacare (APNJ.J) released its financial results on Tuesday, Reuters reported. The report showed that the company's core profit failed to meet the expected mid-single digit growth target. Despite this challenge, the company's positive expectations for GLP-1 pharmaceutical contracts will provide strong support for future profit growth. At the close of trading, shares in Aspen Pharmacare slipped, falling 13.23 per cent to close at R213.60.

Aspen Pharmacare, Africa's largest drugmaker, reported normalised earnings per share of R14.92 in the year to June 30, a slight change from R14.98 in the same period of the previous fiscal year. In its half-year results report, the company forecast its normalized earnings before interest, taxes, depreciation and amortization (EBITDA) to grow in the mid-single digits for fiscal 2024.

Despite achieving a record normalised EBITDA of R6.1 billion in the second half, up 17% from the first half, full-year EBITDA increased by just 1% to a total of R11.3 billion (equivalent to $628.77 million). The company attributed the shortage to the larger-than-expected impact of the Chinese government's Purchase by Volume (VBP) policy. Under the VBP policy, the Chinese government purchases medicines and medical devices in bulk at discounted prices.

At the same time, Aspen Pharmacare has invested heavily in the production of sterile products or drugs that are injected directly into the bloodstream. The company said that over the next two years, the profitability of its manufacturing division will be enhanced by aseptic filling capabilities. Although the company did not disclose the specific name, it has confirmed that it has obtained a commercial license for the intellectual property required to commercialize the GLP-1 drug after the expiration of the original product patent. GLP-1 drugs are a highly effective class of drugs used to treat diabetes and obesity. The company says it will be the exclusive global supplier of these products.

Aspen Pharmacare chief executive Stephen Saad told Reuters: "We asked for the right to sell in key emerging markets outside of Europe and the United States due to production shortages." In addition, last year Aspen Pharmacare signed a deal with US pharmaceutical giant Eli Lilly to market and market the new diabetes drug Mounjaro in South Africa.