Glaxo and Aspen at it again!

Aspen Pharma, what happened there yesterday? The stock climbed 4.44 percent on the day to 193.25 ZAR and is up another two odd percent at the open of trade. Well, there was some more clarity on the transaction with their main shareholder, GlaxoSmithKline (GSK) and their local and international businesses (Aspen Global Incorporated – AGI). It seems big, really big. Six month revenues (at last count) were just shy of nine billion Rands, this current transaction that we are talking about here could potentially add 35 percent (at current exchange rates) to their annual revenue. Which would then makes the business more than a two thirds offshore revenue business, which is not necessarily a great thing, but it is amazing how much the business has changed over the last half a decade.


So what was the announcement? Here goes, a copy paste from the SENS announcement:

"AGI will acquire from GSK the Arixtra and Fraxiparine/Fraxodi brands ("the Brands") and business worldwide, except in China, Pakistan and India - these Brands generated approximately £420 million in revenue for GSK in its 2012 financial year ended 31 December 2012. The Brands would transfer to AGI at the end of 2013; and"


"Aspen will acquire from GSK a specialised sterile production site which manufactures the Brands at Notre Dame de Bondeville, France ("the Site"). The Site would transfer to Aspen during the fourth quarter of Aspen's 2014 financial year."

These are anticoagulants, which are administered post orthopaedic surgery. These surgeries are becoming more commonplace, more knee and hip replacements, more shoulder and elbow surgery, and more spinal procedures. Plus these procedures are becoming mechanised to a degree, machines are helping in perfecting the outcome. And growing faster than people would have thought. From my reading on such matters around 750 thousand such procedures are performed annually in the US. Wow. And 60 years ago? Very few as I understand it, the first recorded metallic hip replacement happened as long ago as 1940. But it is now common in the developed world and increasing in the developing world where these procedures are becoming more common. Medical healthcare might be expensive, but the more people that have the expensive therapies, the cheaper they become.

Why the excitement though? Well for one, as we pointed out GSK is the biggest shareholder of Apsen. 18.6 percent. So why does that matter? Because as a shareholder of the entity that is going to accept the assets, they would want a fair price. And as GSK for their shareholders, equally they want to be seen as a dynamic business that is ejecting these less dynamic assets. Aspen can of course spruce and sweat these much harder, it is more core to their business. The way we see it is that it is a win for both businesses. This is a serious cheque that is going to be shelled out and might be part shares and part financed successfully as they have in the past. For the time being the collective are pleased and relieved. Expect more of these as time goes on.