Aspen perks up on stronger rand

Aspen Pharmacare Holdings’ share price increased 1.63% to R279.45 on Monday — its highest for March — on the back of a stronger rand.

About 80% of Aspen’s earnings are offshore, which means the share price largely tracks the rand against forward-exchange contracts.

“A stronger rand results in forex losses against their forward-exchange contracts,” said BPI Africa equity research analyst Kate Turner-Smith.

However, it helps the company, which imports most of its active ingredients.

The share price had its biggest gain since February 13, with the rand 0.38% firmer ahead of the US Federal Reserve’s interest-rate announcement on Wednesday.

Last week’s release of the company’s interim results for the six months to December 2016 did not surprise markets, said Turner-Smith, though it raised the share price slightly as Aspen reported its group revenue grew 13% to R19.8bn. Normalised headline earnings per share rose 6% to R6.92 for the period.

As a global supplier and manufacturer of branded and generic pharmaceutical products, as well as infant nutrition and consumer healthcare products in selected territories, Aspen’s core markets are in Europe and Asia with sales in the Asia Pacific businesses increasing 36% to R5.2bn.

Their target markets in China and Japan are still fairly small but are growing quickly.

The region also added R1.6bn to sales from AstraZeneca anaesthetics products.

With a market capitalisation of R126.82bn, Africa’s largest generic pharmaceutical company is yet to return to its highs of two years ago when it traded at a record R438.78.

The government spends R14.2bn on antiretroviral drugs from local groups Cipla Medpro, Aspen Pharmacare, Mylan Pharmaceuticals and Sonke Pharmaceuticals.

Expansion and innovation are key in an industry driven by the ability to find new markets and create drugs.

Aspen still leads the domestic pharmaceutical industry, but competitors such as pharmaceutical conglomerate Adcock Ingram — now trading at R599.50 with a market capitalisation of R10.5bn — still have their main markets in SA.

At the JSE’s close, Aspen was trading at R279.45.