Aspen Pharmacare shareholders showed their relief at the group’s decision to pay down its hefty debt of R38 billion, and sell its Thrombosis Business in Europe. News of the sale to US drug maker Mylon injected more than 8% into the share price, pushing it above levels not seen this year. The sale also signalled Aspen’s intention to home in on the developing world and corner the emerging market for its anti-blood clot medicines. – Derek Alberts
By Derek Alberts
Shareholders have welcomed drugmaker Aspen Pharmacare’s decision to sell down R640 million euros (about R12.7 billion) of debt by dispensing with its Thrombosis Business in Europe. News of the deal (Sept 8) to sell the European rights to American pharmaceutical company Mylan lifted Aspen’s share price by more than 8% above the R145.00 mark.
Much to the relief of shareholders, the proceeds from the deal will cut away at Aspen’s almost R40 billion debt.
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Aspen manufacturers and supplies a range of thrombosis products that prevent blood clots.These are sold under the brand names of Arixtra, Fraxiparine, Mono-Embolex and in Europe, Orgaran.
The sale of its European business also signals Aspen’s deepening focus on emerging markets. It planned to retain the thrombosis business almost exclusively in emerging markets, it said.
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“The transaction supports Aspen’s strategy of continuing to reshape the Group towards a greater concentration of revenue in emerging markets,” Aspen said.
From a domestic perspective, the European business contributed about R1.91 billion in revenue, R530 million in operating profit and R450 million in profit after tax to the group’s December 31, 2019 interim results. A Net Asset Value of R9.25 billion guided the value of the transaction.
In terms of the deal, Mylan will acquire the commercialisation rights and related intellectual property of the business, product registrations and marketing authorisations, plus the cost of the related inventory.
The sale will also allow Aspen to streamline its business in Europe, strengthen its balance sheet and provide “financial headroom” for future investments, the company said.
Aspen Pharmacare statement:
Following the release of a cautionary announcement on 24 August 2020, Aspen is pleased to announce that, Aspen Global Incorporated (“AGI”), its wholly owned subsidiary incorporated in Mauritius, has concluded an agreement in terms of which Mylan Ireland Limited (“Mylan”) will acquire the commercialisation rights and related intellectual property relating to Aspen’s Thrombosis Business in Europe 1 (the “Assets”) for a purchase consideration of EUR 641.9 million, plus the cost of the related inventory (the “Transaction”). AGI’s thrombosis products (the “Products”) are sold under the brand names, and variations of the brand names, Arixtra, Fraxiparine, Mono-Embolex and Orgaran in Europe. Mylan has retained AGI (via its subsidiary, Aspen France SAS, “Aspen France”) as its distributor of the Products in France.
The Transaction will be conditional upon the fulfilment of customary conditions precedent applicable to transactions of this nature. It is anticipated that the Transaction will complete before 31 December 2020.
Mylan is a global pharmaceutical company, with principal offices in Canonsburg, Pennsylvania, United States of America. Mylan has a significant presence in Europe, generating sales of over USD 4 billion in 2019.
Transaction details
The disposal of the Assets comprises the following elements relating exclusively to the Products in Europe:
- intellectual property required for their commercialisation, and any related goodwill owned by AGI and its subsidiaries²;
- product registrations and marketing authorisations; and
- the related inventoryÂł.
The purchase consideration payable by Mylan for the Assets, other than the inventory, of EUR 641.9 million is structured as follows:
- Upfront cash consideration upon completion:Â Â Â Â Â Â Â Â Â EUR 263.2 million
- Deferred cash consideration payable on 25 June 2021:Â EUR 378.7 million
The proceeds from the Transaction will be used to reduce the Group’s debt.
The transfer to Mylan of employees engaged in the Thrombosis Business will take place in accordance with European labour law regulations.
Contemporaneously with the Transaction, Aspen and Mylan will enter into a Manufacturing and Supply Agreement (the “MSA”) in terms of which Aspen will supply Products to Mylan for the Territory.
Financial information in respect of the Transaction
The Assets contributed approximately ZAR 1.91 billion4,5 in revenue, ZAR 0.53 billion5 in operating profit and ZAR 0.45 billion5 in profit after tax6 to the Group for the six months ended 31 December 2019. The Net Asset Value of the Assets was approximately ZAR 9.25 billion7 as at 31 December 2019. It is expected that the net proceeds from the Transaction will not vary materially from the Net Asset Value of the Assets at time of completion of the Transaction.
Rationale
In March 2019, Aspen announced that it would undertake a strategic review in respect of its Europe CIS Commercial business (“the Business”). The review has focused on assessing alternative models for the conduct of the Business and in determining the range of available options with a view to optimising the Group’s sustainable returns. In line with the objectives of the strategic review, Aspen is of the view that the disposal of the commercialisation rights to the Products while continuing to manufacture and supply the Products is an attractive option for the following reasons:
- the Transaction supports Aspen’s strategy of continuing to reshape the Group towards a greater concentration of revenue in Emerging Markets (“EMs”) – the Thrombosis business that Aspen will retain is almost exclusively in EMs and well supported by strong sales representation;
- the disposal will allow Aspen to achieve a more streamlined Business in Europe;
- in terms of the MSA, Aspen will continue to manufacture and supply the Products, contributing its significant expertise in the production of sterile injectables;
- the positive cash inflow from the proceeds of the disposal will allow Aspen to further strengthen its balance sheet and assist in establishing financial headroom for future investments; and
- Mylan represents the ideal partner to acquire these assets given the company’s strength in Europe, commitment to the injectables and biosimilars space and comparable employee-first culture and values.
Categorisation of the Transaction and Withdrawal of Cautionary
In terms of the JSE Limited Listings Requirements the Transaction is categorised as a Category 2 transaction.
This cautionary, as issued by Aspen on 24 August 2020, is hereby withdrawn.
- 1 Excludes Russia and the other Commonwealth of Independent States countries
- 2 Excluding certain goodwill relating to distribution of the Products in France
- 3 Excluding inventory in France where Aspen France will continue to distribute the Products
- 4 Includes revenue in France of ZAR 0.36 billion related to the Products that Aspen will continue to distribute and recognise the revenue
- 5 Aspen average exchange rate for the six months ended 31 December 2019 was ZAR16.30 to 1 EUR
- 6 Profit after tax excludes any notional saving in interest paid arising from the repayment of borrowings with the net proceeds from the Transaction
- 7 Aspen closing exchange rate as at the 31 December 2019 was ZAR15.69 to 1 EUR
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