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Aspen Pharmacare Holdings Limited. Interim Results for the six months ended 31 December 2008. Take a pill…. Income statement re-analysed. Segmental revenue. Segmental EBITA. Analysis of revenue. Average movement currency against USD for the six months ended 31 December 2008.

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Interim Results for the six months ended 31 December 2008


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interim results for the six months ended 31 december 2008

Aspen Pharmacare Holdings Limited

Interim Results

for the six months

ended 31 December 2008

slide2

Take a pill…

Aspen Pharmacare Holdings Limited Interim Results for the six months ended 31 December 2008

income statement re analysed
Income statement re-analysed

Aspen Pharmacare Holdings Limited Interim Results for the six months ended 31 December 2008

segmental revenue
Segmental revenue

Aspen Pharmacare Holdings Limited Interim Results for the six months ended 31 December 2008

segmental ebita
Segmental EBITA

Aspen Pharmacare Holdings Limited Interim Results for the six months ended 31 December 2008

analysis of revenue
Analysis of revenue

Aspen Pharmacare Holdings Limited Interim Results for the six months ended 31 December 2008

average movement currency against usd for the six months ended 31 december 2008
Average movement currency against USD for the six months ended 31 December 2008

Aspen Pharmacare Holdings Limited Interim Results for the six months ended 31 December 2008

ebita margin comparison
EBITA margin comparison

Aspen Pharmacare Holdings Limited Interim Results for the six months ended 31 December 2008

funding costs
Funding costs

Aspen Pharmacare Holdings Limited Interim Results for the six months ended 31 December 2008

abridged balance sheet
Abridged balance sheet

Aspen Pharmacare Holdings Limited Interim Results for the six months ended 31 December 2008

funding raised by aspen global
Funding raised by Aspen Global
  • Value
    • USD 385 million
    • USD 346 million for acquisition of Eltroxin, Imuran, Lanoxin and Zyloric from GSK
    • Balance of facility for further investments
  • Repayment terms
    • Effective 10 October 2008
    • 5-year amortising loan of USD 255 million with 1-year capital repayment holiday
    • 5-year non-amortising loan of USD 130 million to be paid out of free cash flows
  • Interest hedge arrangement
    • Fixed cost of 6.11% for 90% of the term
    • Year 1 to 3: 100% cover
    • Year 4: 83% cover
    • Year 5: 66% cover
    • Uncovered interest payments charged at 3-month USD LIBOR + 2.8%

Aspen Pharmacare Holdings Limited Interim Results for the six months ended 31 December 2008

key ratios
Key ratios

Aspen Pharmacare Holdings Limited Interim Results for the six months ended 31 December 2008

distribution of fund managers
Distribution of fund managers

Aspen Pharmacare Holdings Limited Interim Results for the six months ended 31 December 2008

south africa private sector per ims december 2008
South AfricaPrivate sector (per IMS December 2008)

Key Growth Drivers

 Pricing

 Generic shift and acceptance

 Emerging middle class driving volume growth

 GEMS

 Patent expirations

 New trend to self medicate

Aspen Pharmacare Holdings Limited Interim Results for the six months ended 31 December 2008

south africa total private market
South Africa Total private market

Aspen Pharmacare Holdings Limited Interim Results for the six months ended 31 December 2008

south africa e thical generic percentage split mat rand market share sch 3 7 per ims december 2008
South Africa Ethical / generic percentage splitMAT Rand market share (Sch 3-7) (per IMS December 2008)

Aspen Pharmacare Holdings Limited Interim Results for the six months ended 31 December 2008

south africa ethical generic percentage split mat units market share sch 3 7 per ims december 2008
South AfricaEthical / generic percentage splitMAT Units market share (Sch 3-7) (per IMS December 2008)

Aspen Pharmacare Holdings Limited Interim Results for the six months ended 31 December 2008

south africa total pharma market mat rand shares per ims december 2008
South AfricaTotal pharma marketMAT Rand shares (per IMS December 2008)

Aspen Pharmacare Holdings Limited Interim Results for the six months ended 31 December 2008

slide19
South AfricaAspen Pharmacare total vs. total industryMAT Units and Rand market growth (per IMS December 2008)

Aspen Pharmacare Holdings Limited Interim Results for the six months ended 31 December 2008

aspen in south africa
Aspen in South Africa
  • Aspen is the largest pharma company in South Africa:
    • Leadership position in both the public and private sectors
  • Extended our market share in the private market:
    • Market share at its highest point
  • Focus on manufacturing excellence:
    • Professionalism, credibility, affordability, quality and service:
      • Key factors influencing providers
      • Facilitates a generic shift
      • Secure platform for international expansion
      • Reinforces confidence in the Aspen brand
  • Public sector continue to show volume growth:
    • Volumes significantly higher than forecast by the State:
      • Caused by the suspension of many previously approved facilities
      • Unplanned, erratic demands places severe pressure on operations
      • Increased uptakes of ARVs
      • Absolute number of patients increasing

Aspen Pharmacare Holdings Limited Interim Results for the six months ended 31 December 2008

aspen in south africa cont
Aspen in South Africa (cont.)
  • Margin contraction:
    • Depreciating rand
    • Shift in mix to higher value / lower margin ARVs in public sector
    • Price increases in both the public and private sector to provide relief
  • Aspen has outperformed the market in total:
    • Aspen has achieved this in each individual market segment
    • Expect more of the same in the second half

South Africa continues to perform.

Exceeded our own expectations of market penetration!

Aspen Pharmacare Holdings Limited Interim Results for the six months ended 31 December 2008

south africa private generic market mat rand shares per ims december 2008
South Africa Private generic marketMAT Rand shares (per IMS December 2008)

Aspen Pharmacare Holdings Limited Interim Results for the six months ended 31 December 2008

slide23
South AfricaAspen generic vs. generic industryMAT Units and Rand market growth (per IMS December 2008)

Aspen Pharmacare Holdings Limited Interim Results for the six months ended 31 December 2008

aspen in south africa private generic industry
Aspen in South AfricaPrivate generic industry
  • Aspen has extended its leadership position
  • The ownership of competitors has changed:
    • Aside from Adcock Ingram, competitors are international:
      • Small local operators purchased or closed
      • Reflection of the increased capex required
      • Competitive pressures in the market
  • Demand to remain buoyant:
    • Given patent expirations will continue to 2011
    • Definitely emerging middle class factor:
      • Absolute numbers increasing
    • Aspen has a large share of private ARV market
    • Government initiatives driving volume growth
    • Reviewed volume trends of individual product sold in 2003 vs. 2008:
      • Trend of increased volumes on existing / base generics
  • Price increases to be implemented in February / March 2009:
    • Regulation 9 (special price increases) also applied for:
      • Margin improvements and supply security

Aspen Pharmacare Holdings Limited Interim Results for the six months ended 31 December 2008

aspen in south africa private generic industry cont
Aspen in South AfricaPrivate generic industry (cont.)
  • We are working through the process with the regulators:
    • Commitment from both sides
    • Still many wrinkles, but Regulator now more pro-active and engaging
    • Aspen has a better understanding of process

Never been an advocate of price controls,

however, if applied consistently, system can work.

Aspen Pharmacare Holdings Limited Interim Results for the six months ended 31 December 2008

slide26
South Africa Antiretrovirals - private sector market share per company MAT Rand Value (per IMS December 2008)

Percentage

Aspen Pharmacare Holdings Limited Interim Results for the six months ended 31 December 2008

slide27
South AfricaAspen Pharmacare OTC vs. OTC industryMAT Units and Rand market growth (per IMS December 2008)

Percentage

Aspen Pharmacare Holdings Limited Interim Results for the six months ended 31 December 2008

south africa otc business
South AfricaOTC business
  • Increased market share
  • Significant volume increases:
    • New trend
    • Historic sector volume growth had been pedestrian
  • Profitability pressure in OTC:
    • Rand effect / components etc.
    • Detrimental loss of high margin slimming business:
      • Battling to regain lost sales with new product formulations
    • Volume increases have not offset these losses

OTC Volumes growths great, but profitability still recovering from the

slimming products body blow. Should continue to benefit in

tough economic times as people tend to self-medicate.

Aspen Pharmacare Holdings Limited Interim Results for the six months ended 31 December 2008

south africa consumer business
South AfricaConsumer business
  • Unaffected by pricing legislation
  • Infant Milk Formulas:
    • Core brands within consumer
    • Continue to over-perform
    • Aspen’s quality standards ensued that our brands were unscathed by the milk scares
    • Driven both volume and value growth in consumer sector
  • Other core brands include inter alia:
    • Lennon Dutch medicines, Guronsan C, Safyr Bleu & Woodwards:
      • Showing double digit value/volume growth
      • Laxatives only under performers, post phenolphthalein

Our “pharma-based” consumer products appear immune to economic climate.

Aspen Pharmacare Holdings Limited Interim Results for the six months ended 31 December 2008

south africa public sector
South AfricaPublic sector
  • Aspen supplies billions of tablets to government
  • Large fluctuations in this demand places operational stress on the business:
    • Joint tenders have become exclusive:
      • Experienced two year projected off takes within two months
    • When tendering next year need to take cognizance of the above
  • Public sector business is key in driving:
    • Economies of scale through the facilities
    • Volumes give procurement leverage
    • Security of supply for South Africa through domestic procurement
    • Has a pricing mechanism which takes cognisanceof shifting exchange rates
    • Profitability
  • We measure the number of patients on ARVs by our Lamivudine off take:
    • Molecule is used in almost all combinations

Aspen Pharmacare Holdings Limited Interim Results for the six months ended 31 December 2008

south africa public sector antiretrovirals
South AfricaPublic sector - Antiretrovirals

Aspen Pharmacare Holdings Limited Interim Results for the six months ended 31 December 2008

analysis of south african business
Analysis of South African business

Aspen Pharmacare Holdings Limited Interim Results for the six months ended 31 December 2008

south africa summary and prospects
South AfricaSummary and prospects
  • Aspen enjoys growing market shares in all sectors:
    • Both public and private sector showing volume growths
  • Price increases will provide relief:
    • Positive effects from both public and private to flow next half
  • Generic sector is buoyant:
    • Competition intense
  • Regulator is approachable:
    • Trying to find solutions together
    • Pricing methodologies more predictable
    • Aspen has a better understanding of what is required
  • Government initiatives could result in even further increases in private market patients
  • Sector is resilient and growing:
    • Generics in particular have and will continue to grow faster than the market

Aspen Pharmacare Holdings Limited Interim Results for the six months ended 31 December 2008

south africa summary and prospects cont
South AfricaSummary and prospects (cont.)
  • Aspen is the spine of the South African pharmaceutical industry
  • We will continue to perform in this dynamic market
  • Increased emphasis on our profitability:
    • Benefits should flow through in this half
  • Traditionally our second half has:
    • More turnover and better profitability returns
    • Project the trend to continue
    • Anticipate higher profit growth rates over last year in H2 than those achieved in H1

Aspen, well positioned to continue to build on the momentum

created over the last decade.

Aspen Pharmacare Holdings Limited Interim Results for the six months ended 31 December 2008

south africa operations
South AfricaOperations
  • Without our operations, our international aspirations would have stayed a dream
  • Embarked on an ambitious programme of technology and process improvements five years ago:
    • Decrease process times
    • Improve GMP
    • Improve yields
    • Increase compliance
    • Decrease manual intervention
    • PIC compliance
  • Time consuming and intensive, but starting to reap the rewards
  • Positioned to:
    • Export
    • Benefit from our economies of scale
    • Export Aspen IP to other markets:
      • Export revenues already material

Aspen Pharmacare Holdings Limited Interim Results for the six months ended 31 December 2008

south africa operations cont
South AfricaOperations (cont.)
  • Transfer of products from the heritage facility to OSD 2 start from June

Aspen Pharmacare Holdings Limited Interim Results for the six months ended 31 December 2008

south africa operations osd recovery history
South AfricaOperations – OSD recovery history
  • Continue to build on our skill base:
    • Showing tangible improvements
    • Output doubling year on year

Aspen Pharmacare Holdings Limited Interim Results for the six months ended 31 December 2008

south africa sterile facility
South AfricaSterile facility
  • Undergoing start up:
    • Media fills completed
    • Commence manufacture in April
    • Sales to start in June:
      • Prestige
    • Will be in excess of 1,5 million units per month

Steriles

Aspen Pharmacare Holdings Limited Interim Results for the six months ended 31 December 2008

international operations
International operations
  • Now a larger contributor to operating income than South Africa:
    • Addition of exports would further skew the picture
  • Realisation of strategic plan which began with the manufacturing and IP upgrades
  • Distribution is divided into following key geographic regions:
    • Asia Pacific Australia / New Zealand / Asia / Japan
    • Latam Brazil / Spanish speaking Latam
    • Sub-Saharan Africa excludes South Africa
    • EMENA Europe / Middle East / North Africa
  • The GSK / Iroko product acquisitions will be overlaid on the above distribution infrastructures:
    • EMENA – turnover predominantly from these products
    • Other regions – bolt on to existing business / infrastructure
  • Profitability is not the risk:
    • Focus is on implementation
    • Structures to drive future growth

Aspen Pharmacare Holdings Limited Interim Results for the six months ended 31 December 2008

international operations cont global products from gsk iroko focus on implementation
International operations (cont.)Global products from GSK / Iroko - focus on implementation
  • Complex process:
    • Requires meticulous planning
  • Key focus areas:
    • Transfer of regulatory applications
    • Change of packaging in all territories
    • Establish distribution platforms
    • Transfer of manufacture
    • Negotiation of API and other key cost inputs
    • Global IT interfaces:
      • Needed for the co-ordination of both procurement and distribution of finished goods and components
    • Establishment of sales and marketing infrastructure to drive sustainable growth
  • Implementation in hand:
    • No quick wins, grinding process, teams diligently working through checklists

Aspen Pharmacare Holdings Limited Interim Results for the six months ended 31 December 2008

international operations cont expected financial outcomes
International operations (cont.)Expected financial outcomes
  • Key outcomes vs our earlier expectations:
    • Sales  higher than budget

 little denominated in dollars

    • Cost of sales  anticipate savings in actives / conversion
    • Marketing & Sales / Distribution  will be higher than current GSK charged costs

 strategy to invest and grow sales

    • Operating Income  higher than we anticipated

A secure income stream which can be launched into additional geographies and sustained through representation and will be further complimented by Aspen’s product stream.

Aspen Pharmacare Holdings Limited Interim Results for the six months ended 31 December 2008

international operations cont
International operations (cont.)

LATAM

  • Split into two regions:
    • Brazil
    • Spanish Latam
  • Given the larger base business and infrastructure acquired in Brazil, this has been our initial focus area

Only Spanish Latam sales

Aspen Pharmacare Holdings Limited Interim Results for the six months ended 31 December 2008

international operations cont1
International operations (cont.)

BRAZIL

Key areas:

  • Understanding and consolidating the business acquired:
    • Focused primarily on hospital tenders
  • Completion of Campos facility:
    • Needed given domestic preferences
    • All local approvals by March 2009
    • International approvals to follow
  • Driving future private market strategy:
    • Employed and trained 158 representatives
    • Acquired branded products
  • Employing the future management structure:
    • Key posts in sales, operations and finance now filled

Aspen Pharmacare Holdings Limited Interim Results for the six months ended 31 December 2008

international operations cont campos
International operations (cont.)Campos

Aspen Pharmacare Holdings Limited Interim Results for the six months ended 31 December 2008

slide45

The Brazil team

Aspen Pharmacare Holdings Limited Interim Results for the six months ended 31 December 2008

international operations cont2
International operations (cont.)
  • New management appointed to hospitals:
    • Grown turnovers and profitabilities
    • Challenged by shifting currencies:
      • R$ / $ = 1.57 → 2.50
    • New focus on private business
  • Pipeline:
    • Strong organic pipeline:
      • Initially Strides based
      • Now supplemented by Aspen
      • Key registrations expected in 2009
    • Registration timelines approximately two years

Brazil is being shaped and remains a priority territory for Aspen.

Aspen Pharmacare Holdings Limited Interim Results for the six months ended 31 December 2008

international operations cont3
International operations (cont.)

ASIA PACIFIC

  • Established platform in Australia for the region:
    • Strong management
    • Created capacity in this structure to drive regional growth
  • Shown 55% growth in sales:
    • New Zealand turnover now more than NZ$10 million
    • Achieved in spite of heavy legislative pressure
    • Reimbursed price reductions of up to 25%
    • Growth achieved through product in-licensing and acquisition deals
    • Sustainable growth given strong organic pipeline
    • Margins impacted by depreciating currency
    • Supported by Australia’s best field force

Aspen Pharmacare Holdings Limited Interim Results for the six months ended 31 December 2008

international operations cont aspen rep performance overall up to q4 2008
International operations (cont.)Aspen rep performance overall up to Q4 2008

8.80

ASPEN performance

Industry performance

8.60

8.60

8.40

8.20

8.03

8.00

Average score

7.80

7.60

7.40

7.20

7.00

CSL

GSK

BMS

MSD

Inova

Pfizer

Bayer

Arrow

Aspen

Solvay

Wyeth

Eli Lilly

Abbott

Servier

Innovex

Novartis

Organon

Nycomed

Lundbeck

AstraZeneca

Alphapharm

Janssen-Cilag

Novo Nordisk

Sanofi-Aventis

Munoipharma

Schering-Plough

Boehringer Ing.

Aspen Pharmacare Holdings Limited Interim Results for the six months ended 31 December 2008

international operations cont4
International operations (cont.)
  • Distribution networks throughout Asia being established:
    • Products acquired sold through networks by June 2009
    • Actively seeking to increase product offerings through organic pipeline introduction
    • Complex regulatory channels easier to navigate given progress on regional regulatory harmonisation
    • Key regions initially identified include Japan, Thailand, Taiwan, Philippines
  • The broader region will provide even greater growth opportunities

Aspen Pharmacare Holdings Limited Interim Results for the six months ended 31 December 2008

international operations cont sub saharan african aspen shelys
International operations (cont.)Sub-Saharan African – Aspen Shelys
  • Strong brand presence in East Africa supported by an effective distribution network
  • Manufacturing facilities in Dar-Es-Salaam and Nairobi:
    • Focus on attaining P.I.C. / W.H.O. qualification
    • Donor manufacturing opportunities
  • Sales reached R200 million:
    • 13% increase over last year
    • Aspen pipeline added to provide impetus:
      • Focus both OTC and prescription products

Aspen Pharmacare Holdings Limited Interim Results for the six months ended 31 December 2008

international operations cont sub saharan african aspen shelys revenue
International operations (cont.)Sub-Saharan African – Aspen Shelys revenue

Aspen Pharmacare Holdings Limited Interim Results for the six months ended 31 December 2008

international operations cont sub saharan african aspen shelys awards
International operations (cont.)Sub-Saharan African – Aspen Shelys awards
  • Best Manufacturer of the year
  • Chemical & Chemical Products
  • Large Manufacturers Category

President’s Awards 2008

Aspen Pharmacare Holdings Limited Interim Results for the six months ended 31 December 2008

international operations cont intellectual property to be licensed to gsk
International operations (cont.) Intellectual property to be licensed to GSK
  • Process of co-ordinating the individual GSK regions:
    • Product selection
    • Technical / regulatory back up
    • Territory specific manufacturing anomalies
  • Anticipate GSK will:
    • Select more than 100 molecules initially
    • Quarterly selections thereafter

Much upfront effort – sustainable future rewards.

Aspen Pharmacare Holdings Limited Interim Results for the six months ended 31 December 2008

prospects south africa
ProspectsSouth Africa
  • Private Sector:
    • Pricing increases
    • Good volumes
    • Visibility on earnings
    • Currency exposure
    • Improved market shares across all sectors
    • Have registered over 30 products in 2008:
      • will drive 2009 sales
  • Public Sector:
    • Rising volume
    • ARV patient numbers increasing
    • Erratic demand patterns
    • Currency exposure
    • Pricing increases

Expect a stronger second half in both sales and operating income.

Aspen Pharmacare Holdings Limited Interim Results for the six months ended 31 December 2008

slide56
New product pipelineMAT Rand value of products launched in the last 24 months(per IMS December 2008)

Aspen Pharmacare Holdings Limited Interim Results for the six months ended 31 December 2008

prospects international operations
ProspectsInternational operations
  • Increased capacity and capabilities:
    • Support future turnover growth
  • Predictability of earnings
  • Good brand recognition
  • Key personnel in place
  • Branded generic strategy implemented:
    • Emerging market focus
  • Heavy focus on implementation:
    • Trench warfare, but slowly winning
  • Currency fluctuations a major influence on earnings
  • Focus on delivery of organic pipeline

Pipeline and commercial teams to provide sustained growth.

Aspen Pharmacare Holdings Limited Interim Results for the six months ended 31 December 2008