Aspen Pharmacare Holdings Limited · JSE:APN
Aspen Pharmacare — H1 FY2011 Earnings Presentation
51 slides from Aspen Pharmacare's earnings presentation, February 2011
Slide 1: Group Interim Results 2010
Group Interim Results 2010 © aspen H O L D tN G@ §$
Slide 2: Economic Sustainability Highlights
Economic Sustainability Highlights Performance indicators positive Product pipeline offers significant future value No manufacturing capacity constraints Successful ARV tender award validates production competitiveness Sigma acquisition concluded (January 2011) Oncology joint venture div
Slide 3: Social Sustainability Highlights
Social Sustainability Highlights Qualified for the JSE Social Responsibility Index (November 2010) Two new Aspen sponsored clinics opened Volksrust Daggakraal More than 1500 employees participated in skills enhancement programmes More than 1200 employees participated in the HIV/AIDS volu
Slide 4: Environmental Sustainability Highlights
Environmental Sustainability Highlights A group-wide environmental management protocol introduced Energy and water conservation initiatives in place in South Africa and Tanzania S0₂ emissions tested in Port Elizabeth and East London sites and found to be negligible A 10% reduction in land fi
Slide 5: Performance Highlights
Pe r f o r m a n c e H i g h l i g h t s From Continuing Operations Revenue + 33% Operating profit + 28% Headline earnings + 35% Headline earnings per share + 15% 5
Slide 6: Income Statement Re-Analysed
Income Statement Re-Analysed 6 Months Ended 6 Months Ended % Change 31 Dec 2010 31 Dec 2009 R’m R’m Revenue from continuing operations 5 990 4 519 33% Cost of sales (3 381) (2 441) Gross profit 2 609 2 078 26% Net operating expenses (1 051) (921) Other operating income 108 150 EBITA 1 666 1 307 27%
Slide 7: Analysis of Segmental Revenue
Analysis of Segmental Revenue Gross Revenue by Customer Geography R6.4bn (2009 : R4.6bn) 3300 2550 R’millions 957 867 748 666 599 500 493 279 South Africa Sub-Saharan Africa Asia Pacific Latin America Rest of the World 6 Months Ended 31 December 2010 2009 7
Slide 8: Operating Profits before Amortisation and Once Offs
Operating Profits before Amortisation and Once Offs Operating Profit Amortisation Once Offs * Normalised Operating Profit Rm Rm Rm Rm South Africa 2010 996 25 (8) 1 013 2009 810 17 (24) 803 Sub-Saharan Africa 2010 119 1 (9) 111 2009 41 4 - 45 International 2010 499 26 26 551 2009 409 26 - 435 To t a
Slide 9: Segmental Profit Analysis
Segmental Profit Analysis Normalised Operating Margin % Normalised operating profit before amortisation (EBITA) as a percentage of gross revenue 6 Months Ended Year Ended 6 Months Ended Dec 2010 June 2010 Dec 2009 South Africa 30% * 28% * 29% * Sub-Saharan Africa 17% 8% 16% International 23% 28% 25%
Slide 10: Abridged Balance Sheet
Abridged Balance Sheet 31 Dec 2010 30 June 2010 Rm Rm Assets Non-current assets 11 317 12 178 Tangible fixed assets 2 833 3 012 Goodwill 456 456 Intangible assets 7 919 8 610 Other non-current assets 109 100 Current assets 5 516 4 683 Cash 3 810 2 940 20 643 19 801 Equity and Liabilities Capital and
Slide 11: Capex Investment Trend
Capex Investment Trend I n v e s t m e n t i n Ta n g i b l e A s s e t s – R 2 . 2 b n i n 4 ½ y e a r s 627 632 R’millions 379 310 288 2007 2008 2009 2010 H1 2011 11
Slide 12: Abridged Cash Flow Statement
Abridged Cash Flow Statement 6 Months Ended 6 Months ended 6 Months Ended 31 Dec 2010 30 June 2010 31 Dec 2009 R’m R’m R’m Cash flows from operating activities Cash operating profit 1 808 1 788 1 482 Working capital requirements (875) (28) (316) Cash generated from operations 933 1 760 1 166 Net fun
Slide 13: Borrowings and Gearing
Borrowings and Gearing Net Borrowings 4,039 3,041 R’millions 2,147 1,597 497 2007 2008 2009 2010 H1 2011 24% 18% 29% 40% 48% 52% 71% 60% 76% 82% Debt Equity 13
Slide 14: Sigma Transaction
Sigma Transaction Completed on 31 January 2011 Purchase consideration of AUD 900 million paid in cash Mix of funding sources South Africa (ZAR) Aspen Global (USD) Aspen Australia on takeout of bridge facility (AUD) Combination of cash and debt Blended interest rate of approximately 7
Slide 15: Sigma Transaction
Sigma Transaction Group Effects to 30 June 2011 HEPS close to neutral Transaction and restructuring costs of more than R100 million likely Net debt of approximately R7 billion Gearing of 35% to 40% Potential purchase price adjustment in working capital true up 15
Slide 16: Distribution of Fund Managers
Distribution of Fund Managers As at December 2010 As at June 2010 As at December 2009 Europe 23% South Europe 25% South Europe 24% South Africa 38% Africa 43% Africa 49% Asia Pacific Asia Pacific Asia Pacific 3% 2% Middle East 2% Other 1% Other 1% 1% North North North America America America 35% 29%
Slide 17: Generics Bulletin Report : May 2010
Generics Bulletin Report : May 2010 Teva [incl Ratiopharm] (1,4,5) Sandoz Mylan(2) Watson(3) Stada(4) (1) Sales exclude Ratiopharm; brand sales include Copaxone sales of USD2.83 million Hospira(6) (2) Generics sales growth was 9.2% Perrigo(7,8) (3) Includes Arrow from December 2009 Aspen incl Sigma
Slide 18: in South Africa
in South Africa
Slide 19: Introduction
Introduction Aspen’s legacy stretches back over 160 years in South Africa, linking back to Lennon in 1850 Aspen is South Africa’s number 1 pharmaceutical company Number 1 in the public sector and private sector 16.7% Value share of South Africa’s total private market Number 1 in the generi
Slide 20: South African Market
South African Market Market sales growth 8.0% (13.8%) Unit growth 4.9% (4.7%) Generics 29% of value and 58% of volume Generic market growth at 12% (19%) Revived legislative challenges No SEP increase for 2011 Exchange rate influence on margins SEP set in Rands ARV tender awarded
Slide 21: Market Performance
Market Performance To t a l P r i v a t e M a r k e t a s a t D e c e m b e r 2 0 1 0 R 2 2 . 8 2 b n (December 2009 : R21.13bn) Other R0.93bn (R0.92bn) OTC R5.49bn (R5.10bn) Ethical/Branded R11.65bn (R10.88bn) Generic R4.75bn (R4.23bn) Units growth 4.91% (4.65%) – driven by generic volume growth 21
Slide 22: IMS – New Brand Classification Criteria
IMS – New Brand Classification Criteria Ethicals / Branded Products that are / were patent protected Schedule 3-7 products that were never patent protected Generics Dual / second brands also included here Schedule 0-2 products OTC Unscheduled and proprietary brands Nutritionals Infant Milk formula V
Slide 23: Total South African Private Market
Total South African Private Market M AT Va l u e S h a r e – D e c e m b e r 2 0 1 0 Aspen 16.73% Adcock Ingram 10.24% 7.49% Sanofi-Aventis Pfizer 6.66% Novartis 6.06% 5.08% AstraZeneca Cipla Medpro 4.90% Aspen market share was 16.23% in December 2009 4.30% Merck & Co Roche 3.72% Johnson & Johnson 3
Slide 24: Legislative Challenges
Legislative Challenges International benchmarking Proposal to benchmark South African originator products against a basket of territories and ultimately force South Africa to be the lowest Sympathy with the concept Methodology needs re-examination Risk that medicine prices held hostage to
Slide 25: Legislative Challenges
Legislative Challenges Extract Figure 10.1 from the Government Gazette Page 60 – 17 December 2010 Average (down & up) Median (down & up) Ave lowest 3 (down & up) Ave lowest 2 (down & up) Average down Median (down) Ave lowest 3 (down) Ave lowest 2 (down) Lowest (down) -40% -20% 0% 20% 40% 60% 80% It
Slide 26: Legislative Challenges
Legislative Challenges No SEP Increase – Margin Pressure for Local Producers Heavy reliance on relative strength of Rand versus Dollar / Euro Acceptable for importers Local manufacturers disadvantaged API is often currency dependent Largest local input cost = 0% Salaries and wages Elec
Slide 27: Aspen and the Market Performance
Aspen and the Market Performance South African Private Market Growth as per IMS – December 2010 Market Aspen Total +8.0% +11.3% Generic +12.4% +14.2% OTC +7.7% +6.7% Branded +7.1% +13.2% Total Units 4.9% 9.6% Generics continue to outpace the market Aspen outpaced the market in both value and volume
Slide 28: Aspen and the Market Performance
Aspen and the Market Performance Aspen is off to a great start Sales 29% to R3.3 billion Operating profit 26% to R1.0 billion GSK contributed about half of above sales growth Included for 1 month last year Aspen continues to outpace the market Private market leadership position mai
Slide 29: New Launches
New Launches Va l u e a n d N u m b e r o f N e w P r o d u c t L a u n c h e s p e r C o m p a ny 4 29 1 4 24 4 18 4 4 20 ADCOCK ASPEN ASTRA BAYER CIPLA MERCK & CO NOVARTIS PFIZER ROCHE SANOFI Value indication of products launched 0-12 months No. of products launched 0-12 months 29
Slide 30: MAT Value Share (Generics)
MAT Value Share (Generics) M AT Va l u e S h a r e o f t h e G e n e r i c s M a r k e t (R4.75bn at December 2010) Dr Reddys 1% Other Ranbaxy 10% 1% Aspen Pharmaplan 31% 2% Pfizer 3% Sanofi Aventis 3% Daiichi Sankyo 4% Lupin 4% Servier 4% Novartis 9% Cipla Medpro 17% Adcock Ingram 11% 30
Slide 31: Generics Sector
Generics Sector Generics are the main driver behind market growth Value and volume growth Aspen outperformed the generic market Both in volume and value Sustained growth anticipated through continued product launches Number of products budgeted to be launched in the next 12 months 30 b
Slide 32: Branded Division
Branded Division 14% M AT Va l u e S h a r e Tr e n d ( E t h i c a l ) 12% 10% 8% 6% 4% 2% Yes - we did! 0% Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 SANOFI-AVENTIS A
Slide 33: Branded Division – We are number 1!
Branded Division – We are number 1! Phenomenal performance Trust of specialists / physicians in Aspen demonstrated Aspen’s reach beyond generics and OTCs Endorsement of quality Tough challenges ahead - generic erosion on top brands Truvada / Seretide To mitigate above Aspen has launched
Slide 34: ARVs
ARVs Aspen won Abacavir solution 20mg/ml 40% Efavienz tablets 600mg 70% Lamivudine scored tablets 150mg 70% Nevirapine tablets 200mg 40% Tenofovir tablets 300mg 70% Zidovudine tablets 300mg 40% This represents 41% of the value of the South African tender 50% prior tender Credible
Slide 35: Consumer – loss of Pfizer license
Consumer – loss of Pfizer license Lost sales of R240 million Aspen’s license is not being renewed Wyeth have taken products back before Unsuccessful both previous times Aspen rescued brand from discontinuation Pfizer hope to be different Aspen has its own brand Infacare Defensive bra
Slide 36: The Opportunity
The Opportunity The global IMF is growing It is Aspen’s most complex manufacturing process and carries numerous risks Substandard products have caused infant deaths Huge premium and loyalty placed on quality Limited international competition because of the above Aspen has not competed in
Slide 37: Aspen’s Presence in the South African Market
Aspen’s Presence in the South African Market 6 Month Review 2011 – Market Performance by Therapeutic Class Therapeutic Category IMS Market Value Class Aspen Aspen Growth Aspen Share Aspen Ranking Ranked by Value MAT Dec 2010 Growth MAT Growth Evolution vs. Market In Class In Class R’m (Share ranking
Slide 38: South Africa Prospects – Next 6 Months
South Africa Prospects – Next 6 Months Challenges No SEP increase Less ARV sales and profit Truvada / Seretide genericisation Positives Sustained volume growth New generic product launches Includes generic Truvada / Seretide Result We anticipate a second half that in absolute terms wil
Slide 39: in Sub Saharan Africa & International
in Sub Saharan Africa & International
Slide 40: Aspen in Sub Saharan Africa
Aspen in Sub Saharan Africa Sales and operating profit more than doubled to R666 million and R111 million respectively Collaboration sales included for full period amounted to R495 million Prior period just one month Critical mass attained Aspen Exports / Shelys Marginal / unprofitable s
Slide 41: Aspen in Latin America
Aspen in Latin America L a t a m S a l e s b y Te r r i t o r y 6 Months December 2010 : R600m (R500m) Operations have settled down Private market turnover growth off solid platform Venezuela 8% Considering alternatives for public sector business Mexico 17% Starting to receive registrations
Slide 42: Aspen in Asia Pacific
Aspen in Asia Pacific 6 Months to December 2010 : R957m (R748m) Sales growth of 28% Sustained double digit growth since Taiwan 2% India 4% Pakistan 4% Thailand 1% China 1% Other 1% inception in 2001 Malaysia 1% Indonesia 1% Philippines 2% Australia = 73% of sales New Zealand 4% Focus on Bran
Slide 43: Aspen in Asia Pacific
Aspen in Asia Pacific Rank Manufacturer No. of Scripts % Share 1 in 14 of all Australian 1 Generic 15,515,883 12.04 prescriptions are 2 GlaxoSmithKline 13,284,020 10.30 written for an Aspen 3 Sanofi-Aventis 11,662,125 9.05 product 4 Aspen Pharmacare 9,433,655 7.32 5 Alphapharm 8,932,342 6.93 6 Pfize
Slide 44: Aspen in Asia Pacific
Aspen in Asia Pacific Sigma Long established Australian wholesale company Supplies 1/3 of wholesale market Over 800 banner pharmacies Diversified into pharma 5 manufacturing facilities in Australia Pharma strategy failed Generic business underperformed Aspen acquired the Pharma divis
Slide 45: Aspen in Asia Pacific
Aspen in Asia Pacific Aspen target is to double this EBIT within 2 years KEY DRIVERS INCLUDE: Branded / Consumer / OTC The Aspen team in Australia have proven expertise here Now number 3 by scripts generated Aspen will drive turnover growth Cost of goods improvements to drive margin growth
Slide 46: Aspen in Asia Pacific
Aspen in Asia Pacific Generics Distribution tie-up critical Only 3 large wholesalers Key factor influencing Aspen’s historic decision not enter this market segment aggressively Entrenched contracted position with Sigma wholesale Commercially important for both parties that status quo remai
Slide 47: Aspen in Asia Pacific
Aspen in Asia Pacific Launch Pad for South East Asia Exports to neighbouring territories of A$ 20 million Combine with Aspen current sales Representation in some market now viable Ready acceptance of TGA manufacture by neighbouring territories Geographically well placed Extensive portfol
Slide 48: Aspen in Asia Pacific
Aspen in Asia Pacific Manufacture Sigma’s current facilities include Tennyson - Consumer facility (being closed) Dandenong - Dominant manufacturing facility Baulkham Hills - Former Fison facility Merridale - Penicillin Noble Park - Former BMS facility All sites are being reviewed for capability
Slide 49: Aspen in Asia Pacific
Aspen in Asia Pacific Rank Manufacturer No. of scripts % Share 1 Aspen Australia 17,947,615 13.92 2 Generic* 15,515,883 12.04 3 GlaxoSmithKline 13,284,020 10.30 The combined Sigma / Aspen business is 4 Sanofi-Aventis 11,662,125 9.05 now ranked 1st by volume of scripts 5 Alphapharm 8,932,342 6.93 g
Slide 50: Summary and Prospects
Summary and Prospects South Africa Strong performance from both South Africa and International Aspen in South Africa has lead position Public sector Private sector • Generic • Branded Aspen won the largest portion of ARV tender Lead player in most key therapeutic categories Challenges /
Slide 51: Summary and Prospects
Summary and Prospects International Business Rand values growth impressive Given Rand strength Meeting operational challenges Sub-Saharan Africa on track Collaboration has a substantial impact Latam - growing off a proper foundation Sales growth of 20% Key focus area Asia Pacific -
Aspen Pharmacare Holdings — H1 FY2011 Earnings Presentation on 6ix