The drugs are clearly working: Behind Aspen’s magic formula

Business

The drugs are clearly working: Behind Aspen’s magic formula

Not just R5.5-billion invested in Port Elizabeth and thousands of jobs, but billions in export revenue too

Mark Allix

Aspen Pharmacare’s new R1-billion facility at its Port Elizabeth production site will soon be making drugs for treating late-stage cancers, Parkinson’s disease and medicines that prevent organ rejection in liver and kidney transplant patients. At full capacity the facility will produce about 3.6 billion tablets a year and package about three million bottles a month. It will start production in June.
The JSE-listed company, with market capitalisation of more than R100-billion, is already the world’s largest exporter of eyedrops into the US and is the largest supplier of generic medicines in South Africa. It also mass-produces anti-retrovirals for the state’s HIV/Aids programme and for other parts of Africa.
Aspen’s export plans for its new facility dovetail with government’s vision to make SA a leading exporter of high technology products. Its opening comes ahead of a R4.5-billon investment at the same complex that is slated to be completed in 2023. This will cement the group’s place as the leading producer of general anaesthetics and injectable anti-coagulants globally, after the US.But Trade and Industry Minister Rob Davies, who presided over the facility’s opening earlier in May, says public sector procurement of pharmaceuticals in SA makes up only 15% of the total. Private sector demand for medicines takes up 85%. This means the government needs to procure far more locally, Davies says.
Aspen’s products are available in 150 countries, with 25 manufacturing facilities in Latin America, the US, Europe, Africa, India, Australia and New Zealand. The company has sales representation in 43 nations. China is now its largest market, while Japan is a big destination for generics and anaesthetics and anti-thrombosis drugs.
“Aspen’s capital investment into the South African market over the past two years has outstripped investments made into the [local] pharmaceutical industry by the entire domestic and international industry over the past decade,” Aspen CEO Stephen Saad says.
About 80% of annual group revenues of about R41-billion come from abroad, and offshore growth will continue, he says. But Port Elizabeth will remain the company’s global flagship production facility, making more than 100 lines of medicines. About 40% of Aspen’s more than 10,000 employees work in SA.The latest investment creates 500 new jobs at the Port Elizabeth plant, in addition to more than 2,000 existing posts. Most of these will be filled locally with training on site. Saad says the new facility will generate export revenues for Aspen and will be important for import substitution in SA. “To make SA work you need to invest. Our biggest investments [in Port Elizabeth] are yet to come,” he says.
Aspen’s further R4.5-billion investment at the Port Elizabeth site will see the relocation of the group’s anaesthetic facilities from Europe to SA. This will  save on production costs of between 30% and 40%.
“The investment climate in SA has improved very significantly,” says Davies. He witnessed a positive change in investor mood towards SA at the World Economic Forum in Davos in early 2018, with President Cyril Rampahosa’s plans to attract R1.2-trillion of investment in the next five years being a catalyst for this.Davies says the South African pharmaceutical industry is worth about R47-billion a year, but that an estimated growth rate of 6.6% per annum over five years will take the sector’s worth to about R54-billion annually.
However, he also says there is a nearly R22-billion trade deficit in the pharmaceutical industry, which Aspen’s export production from the new facility will help alleviate. In this respect, the facility was built under the department’s 12i greenfield investment programme, providing Aspen with tax credits of R209-million.
Saad echoes Davies in saying Ramaphosa’ s accession to the presidency has given investor sentiment a boost. With its new investments totalling R5.5-billion in due course, Aspen will become the second largest employer in the Nelson Mandela Bay metropolitan area after German global car maker Volkswagen.
Nelson Mandela Bay mayor Athol Trollip says the biggest  challenge in Port Elizabeth is unemployment. “It’s an incredible investment that has been made in this city. I want to thank the incentivisation and facilitation of national government. All political parties want to see jobs and dignity regardless of what political party we come from,” he says.

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