CAPE TOWN - Aspen Pharmacare Holdings, the multinational pharmaceutical company, will sell its Japanese operations and related intellectual property to Sandoz, a Novartis division, for EUR 400 million (R6.5 billion).
The disposal is anticipated to complete in the first half of calendar year 2020. Aspen Group CE Stephen Saad said the deal is part of the strategy to focus on their core pharmaceutical business in markets that offer scale and alignment to the business model.
“Our performance in Japan, a startup just a few years ago, can be attributed to the strong management team and how they have totally embraced the strong entrepreneurial culture within Aspen,” he said.
“Although our Japanese-based operations do not provide appropriate scale and leverage in relation to our focus, the strong management team, dedicated staff, specialty portfolio and the commercial platform represent an excellent opportunity for Sandoz when combined with their Japanese portfolio and product pipeline,” he said.
AGI has also entered into a five-year manufacturing and supply agreement with Sandoz (with an additional two-year extension option at the election of Sandoz), effective after the sale, for the supply of active pharmaceutical ingredients, semi-finished and finished products related to the portfolio of divested brands.
Aspen Japan’s operations contributed R2.1bn in revenue and R0.4bn in normalised EBITDA to the group for the year to June 30, 2019. The net asset value of the Japanese operations was about R4.8bn at that date.
The disposal of Aspen’s Japanese operations comprises intellectual property and any related goodwill, and the transfer of all shares in subsidiary Aspen Japan KK, to Sandoz.
The payment comprises EUR 300 million upfront, while the rest would be subject to milestone payments contingent upon achieving supply criteria and licensing opportunities. All milestones earned were expected to have been received by December 31, 2023.
Net proceeds would be used to reduce debt.
Saad said the divestment, together with their infant milk business disposal earlier this year had facilitated their aggressive deleveraging, but validated their assertion that acquisitions were made more valuable than when they were acquired.
Saad said that at Aspen’s last year end, nearly a R1bn a month in earnings before interest tax and amortisation growth was being realised through strong organic growth, acquisitive growth and disposals.
“The process of metamorphosing Aspen from a regional company with significant exposure to commoditization is well advanced. Our end shape will be a globally relevant, niche and branded portfolio” he said.
“Our Sterile and high potent capabilities have bolstered the portfolio. This portfolio has enabled us to expand our geography and technological manufacturing footprint. These facilities give us both a quality underwrite and the related economies of scale and will deliver cost competitiveness in the longer term.,” he added.