South Africa's Aspen Pharmacare Holdings is marshalling its manufacturing assets as it prepares for a big global push next year. A big part of that expansion will come from new API and drug manufacturing operations it is buying from Merck ($MRK) and GlaxoSmithKline ($GSK).
Aspen Wednesday reported impressive year-end numbers with revenues up 27% to R19.3 billion ($1.9 billion) while net income was up 25% to R3.52 billion ($354 million) for its year ending June 30. Much of that growth came from the same emerging markets that so many of the West's drugmakers have targeted, like Asia Pacific and Latin America.
But the company also said capital projects are progressing that will upgrade its manufacturing. It has started construction on a new facility that will house a containment suite on a site next to its main manufacturing facility in Port Elizabeth, South Africa. It also is upgrading packaging operations at the complex where it has a facility making oral solid dose meds, one making sterile drugs and a general facility making a variety of products. It claims the complex is the leading producer of tablets and capsules in South Africa. It said it also is making upgrades on manufacturing facilities in East London and Clayville in South Africa.
But a big part of its attention is directed at the manufacturing facilities it is buying from Merck and GSK. The company has global aspirations, and in a one-two punch in June added serious heft to its worldwide operations. The drugmaker agreed to pay GlaxoSmithKline about $1.1 billion for heart medicines Arixtra and Fraxiparine, along with a manufacturing site in France to produce them. Then, a week later, it said it would pay $1 billion to Merck for 11 products and some API operations. Various parts of the deals will close between now and the first half of calendar 2014. The company expects to integrate these operations and its existing operations so that it can make its processes more efficient.
The drugmaker, which claims it is the world's 9th-largest generic drug manufacturer, in June agreed to buy an API facility from Merck in the U.S., along with one API facility and parts of two others in the Netherlands. It buys those as part of a multi-layered deal that also includes 11 products from Merck, known as MSD outside of the U.S. That deal came about a week after GlaxoSmithKline said it was in discussions with Aspen to sell it a large manufacturing facility in Notre-Dame-de-Bondeville, France, with about 1,000 employees as part of a deal for Aspen to buy the pharma giant's older thrombosis drug brands, Arixtra and Fraxiparine. In fact, there is a connection between the two deals. The Merck API business manufactures heparin, the API used in Fraxiparine. The API operation also manufactures the active ingredients for a number of the drugs it intends to buy from Merck. Aspen will have a 10-year contract to continue to manufacture some APIs for Merck and said it intends to drive down costs in the business to be more competitive.
Aspen said Wednesday that both deals are moving forward and will be transformative to its global reach. When it gets those operations under its control, it will enable Aspen to establish its own business units in Russia, other former Soviet republics and across Europe and to build its position in Latin America and Asia. It acknowledged the buyouts will put its debt close to a self-imposed limit but also said it expects them to add significantly to its top line, particularly in the second half of its fiscal year.
- here's the earnings release
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