South Africa’s Aspen signs drug making deals to utilise idle capacity

JOHANNESBURG (Reuters) -Aspen Pharmacare said on Wednesday it had secured agreements with three global companies to produce their drug at its French facility, as it seeks to monetise billions of rand of loss-making investment.

The South African pharmaceutical major, however, cautioned the impact of the agreements on revenue and profit would only come in late 2024, estimating only a moderate growth for most of next year, sending its shares down 8% in the day.

Africa’s biggest drugmaker invested around 10 billion rand ($540.69 million) to manufacture sterile products – or medicines injected directly into the bloodstream – in South Africa and France, anticipating a major demand for COVID-19 vaccines.

But the demand never materialised, leaving it with idle capacity which hurt revenue and forced it to scout for new partnerships.

“We spend all this money on capacity… but you have no revenues,” Chief Executive Stephen Saad told Reuters, adding the capacities were currently loss-making.

The agreements would entail packaging drugs of three multinational pharmaceutical companies which would contribute 2 billion rand to its top line by 2025, Saad said.

This will be over and above its deal with India’s Serum Institute announced last year for making vaccines in Africa, which would also start to contribute 2 billion rand from next year, he said.

He did not name the companies, but said another partnership with a global major would be announced soon.

It also signed an agreement with the U.S. pharmaceutical giant Eli Lilly to distribute its products in Africa for a period of 10 years.

Aspen posted a 4% drop in annual profit with its headline earnings per share – a profit measure – at 14.05 rand for the year-ending June 30. It announced dividends of 3.42 rand.

($1 = 18.4950 rand)

(Reporting by Promit Mukherjee; Editing by Jason Neely, Nick Zieminski and Mike Harrison)