Aspen Achieves Net Cash Position for the First Time
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JIMMY MOYAHA: Aspen Pharmacare Holdings Limited has published their financial results for the year ending 30 June 2026. To discuss these numbers in depth, we have the company’s chief financial officer, Sean Capazorio, joining us today to evaluate their performance.
Sean, it’s a pleasure to have you back on the show. Thank you for coming on.
The year appears to have been quite successful from a business operations standpoint. Although there was a slight decline in gross profits year-over-year, the overall health of the business appears stronger when we consider normalized headline earnings and other factors that influenced the company’s results.
How do you assess the year that just passed?
SEAN CAPAZORIO: We had previously indicated that we would achieve all our core goals, and I believe we did just that.
It was a challenging year, particularly as we worked to recover from losing the contract last year in the sterile FDF [finished dose form] business.
We’ve been diligently reshaping our sterile facilities within the manufacturing business, and I must say, we’ve made significant progress this year. The cost savings are starting to positively impact our manufacturing EBITDA [earnings before interest, tax depreciation, and amortisation].
On the commercial pharma side, our profit generation was robust.
We saw normalized profits grow by about 13%. Coupled with a 21% increase in manufacturing profits, our overall group normalized EBITDA grew by 14%.
Additionally, we experienced very strong free cash flow this year.
In combination with the APAC [Asia Pacific] divestment, we achieved a net cash position for the first time in Aspen’s history.
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This has provided us with considerable balance sheet flexibility regarding capital allocation.
Overall, it was a very successful year, translating into double-digit growth in earnings as well.
A lot of hard work was put in this year, and it certainly showed.
JIMMY MOYAHA: Sean, it appears that many pharmaceutical companies are focusing on capturing the GLP-1 [appetite-reducing medication] market to expand their presence there.
I’d like to hear your thoughts on how Aspen fits into that picture.
While you already have distribution rights for some of these products in South Africa, I’d like to contextualize that within the array of regulatory approvals you’ve secured, particularly the Canadian approval for Aspen and the South African approval for local insulin manufacturing.
The pharmaceutical sector seems increasingly competitive. How crucial is it for Aspen to secure these regulatory approvals and enhance market share?
SEAN CAPAZORIO: Yes, this is a significant growth area for Aspen.
To break this down, we can categorize the GLP-1s into two segments. First, we have our distribution agreement with Lilly for the diabetes/weight-loss treatment Mounjaro, which has performed exceptionally well in South Africa this year.
We had projected over a billion rand in sales, and we have indeed surpassed that figure this year, significantly growing the entire market.
We also plan to launch Mounjaro in sub-Saharan Africa, which is on track for 2027.
That’s within the ‘originator space’.
In the generic space, as you mentioned, we’ve invested heavily in intellectual property and licensing. We have a strategy in place to launch these generic semaglutides in emerging markets, including South Africa – and I’ll elaborate on that.
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Our first successful registration happened in Canada, which we announced back in July. We are currently dependent on raw material supply from Dr. Reddy’s [Laboratories], which will be produced by another supplier in India for the Canadian market.
Once we have clarity on the timing, we will inform everyone – but Canada will be our initial launch market.
We also have opportunities in Brazil and several other Latin American countries, as well as the Middle East.
In South Africa, our generic product is presently under registration, pending approval from the regulatory authorities.
In South Africa, we hold over 50% market share with Mounjaro.
While the generic semaglutide market will introduce more competition, we believe this will actually expand the market rather than detract from Mounjaro’s share, by increasing access to these valuable medications due to affordability.
We are genuinely excited about this development.
JIMMY MOYAHA: Sean, you mentioned the APAC divestment, which served as a positive catalyst for the earnings-per-share figure. It might have been even more positively received if the R2.3 billion in impairments due to elevated discount rates hadn’t overshadowed it. Impairments are never ideal and can be unavoidable.
Could you share your thoughts on that impairment figure and how it may have dampened the overall sentiment?
SEAN CAPAZORIO: Certainly. Impairments, as they don’t affect cash, are essentially just an accounting correction.
When I assess impairments, I consider how much stems from performance versus factors beyond our control.
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As stated in our results, the majority of that impairment was due to technical issues. The increase in global discount rates, brought about by worldwide volatility, influenced this.
It’s really a mechanical impairment. Our operational impairments regarding intangibles were very minimal. Furthermore, as I mentioned, there’s no cash impact.
Looking at the APAC divestment, we recognized a profit of a similar magnitude, all in cash.
So, while we reported R2.4 billion in cash profit from APAC, we also faced a R2.3 billion impairment with no cash effect, leading to a net improvement in our cash position.
Though impairments are never pleasant to witness, they don’t affect our cash flow or trading outlook.
Furthermore, Jimmy, it’s worth noting that when valuing our entire intangible asset base, we actually have a 45% buffer above our book values.
Unfortunately, accounting regulations only account for writedowns; therefore, if assets are above their book values, they cannot be adjusted upward. It’s always a one-way street in this regard.
To summarize, we maintain approximately a 45% buffer over our carrying value.
Overall, I believe our portfolio is well-evaluated, and this was simply a technical impairment.
JIMMY MOYAHA: That’s quite a substantial buffer to have, especially from an accounting perspective and regarding the balance sheet. Hopefully, this continues to benefit the company as it moves forward into the new fiscal year.
Best of luck to you and your team, Sean. We anticipate another solid year for Aspen.
We’ll conclude our discussion on that positive note. Sean Capazorio, the chief financial officer of Aspen Pharmacare Holdings Limited, joined us today to reflect on the company’s recent financial year and to share insights on their performance.