Aspen increased both revenue and net profit after tax by 15% for the six months ended 31 December 2006, to R1.936 billion and R332 million respectively. This translates into growth of 13% in earnings per share to 95.3c as the weighted average number of shares in issue rose as a consequence of the issue of 2.6 million ordinary shares in terms of the Aspen share incentive schemes. Headline earnings per share of 95.6c represents an 11% increase.
Prospects
All of the key business units are performing well. Aspen maintained its leading position in the South African generic market despite intensified competition. Continuous focus is given to the South African pipeline, which remains a rich source of future product launches. The DoH has provided greater clarity on pricing in the South African pharmaceutical market by establishing a mechanism for annual price increases which takes consideration of the changing economic fundamentals to which the industry is exposed. Aspen implemented the 5.2% increase permitted by the DoH in January 2007. This will go some way to relieving the pent-up margin pressures caused by cost inflation and exchange rate weakness over the extended period when price increases were prohibited. However, the legislative environment for pharmaceuticals remains uncertain. The regulator has invited comment on the proposed international benchmarking legislation. Given the proposed structure of this legislation it is not possible to evaluate the potential impact until greater clarity has been achieved in respect of originator products. Aspen is confident that the regulator will take due consideration of pertinent factors raised in comment by the industry. Aspen's ARV offering continues to expand by product and territory providing scope for further strong growth in this life-sustaining treatment category. Viread and Truvada, originator products which are leading second-line treatments, will both be launched into African markets before the end of the financial year. Growing capacity utilisation in the oral solid dose ("OSD") production facility will lead to enhanced production efficiencies. Opportunities to provide manufacturing services from the OSD facility for multi-national pharmaceutical companies are under consideration. There has also been substantial international interest in the production capabilities offered by the sterile facility, which is due to commence commercial production towards the end of 2008. Aspen has already concluded a long-term agreement for production from the sterile facility, with a subsidiary of Prestige Brands Inc, a leading supplier of eye drops in the USA and Canadian markets. As has been previously communicated, the current year is one in which Aspen is focusing on the consolidation of past gains and on establishing the platform for the implementation of growth strategies through to the end of the decade. The benefits of these initiatives should be reflected in the results of future financial years.
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