Integrated Report

Business unit review – International business

Aspen’s footprint extends across five continents

The Group’s international business extends Aspen’s footprint to more than 100 countries across five continents. Aspen’s international product offering comprises a portfolio of branded, generic OTC, consumer and infant nutritional products which are relevant to disease profiles in the territories concerned and which are largely sold into the private sector.

Gross revenue   5 617     3 603   +56  
By customer geography:          
Asia Pacific   3 091     1 394   +122  
Latin America   925     774   +19  
Rest of the World   1 601     1 435   +12  
EBITA*   1 377     1 023   +35  
EBITA* margin   24,5%     28,4%    

Acquisition of Sigma pharmaceutical business propels Asia Pacific region to a new level

The growth prospects in the Asia Pacific business were enhanced through the acquisition of the Sigma pharmaceutical business with effect from 31 January 2011. The addition of the Sigma pharmaceutical business was the primary driver in revenue from customers in the Asia Pacific region increasing 122% to R3,1 billion. However, the original Australian business also performed strongly, raising revenue by 33% to R1,7 billion.

The integration of Sigma’s pharmaceutical business into Aspen Australia has progressed well, exceeding expectations under the leadership of a focused and experienced management team. The Australian business has grown to 768 employees from just 84 a year ago. The Sigma pharmaceutical business acquired includes branded, OTC and a consumer range of products – all business segments with which the Aspen Australia management team has considerable experience. New elements introduced by the investment are generics and manufacturing facilities. Direction was provided by the Group in formulating a strategy around these unfamiliar aspects and in selecting appropriate former Sigma employees to lead these areas.

Five manufacturing sites were acquired from Sigma. Following the acquisition, the Tennyson site in Brisbane was sold off in accordance with the manufacturing consolidation plan, and announcements have been made for the closure of the Noble Park and Croydon sites. Manufacturing will be centred at the Dandenong site for the manufacture of liquids, semi-solids, consumer and OTC products, local packing and to leverage the Australian manufacturing base for exports into Asia Pacific, specifically into Japan – a market with stringent quality requirements for all products which are imported. Baulkham Hills will concentrate on flexible manufacturing and packaging.

Following the acquisition of the Sigma pharmaceutical business, Aspen is ranked number one in Australia for the number of scripts written, 14% of the script share being for a product marketed by Aspen. Aspen is placed seventh in IMS sales value rankings in Australia. The acquired Herron brand was voted by Australian Readers Digest readers as one of the pharmaceutical industry’s most trusted brands and provides a robust platform for the OTC and consumer portfolio. The potential for launching a Herron infant milk formula in Australia and South East Asian markets is under investigation.

The New Zealand business has grown from strength to strength, delivering R79,9 million of sales in a very tough market.

A regional office was established in Hong Kong in 2009 which has overseen the introduction of the Aspen brand into Asia. Aspen is expanding its footprint in the region with the incorporation of a subsidiary in the Philippines. Marcelina Itchon has been appointed as Aspen’s Chief Executive Officer in the Philippines and a sales representative team of up to 100 is in the process of being recruited.

Aspen’s Asia Pacific business is set to become a significant contributor to the Group.

Leading brands in Asia Pacific include:

  Product       Description  
  Bio-Oil       For the treatment of scars and skin care  
  Cardizem       For the treatment of hypertension  
  Chlorsig       For the treatment of eye infections  
  Coloxyl       For the treatment of constipation  
  Coumadin/Marevan       For the treatment of prophylaxis and/or venous thrombosis  
  Keflex       For the treatment of upper respiratory, ear, skin and urinary tract infections  
  Murine       For the treatment of ophthalmic conditions  
  Oroxine       For the treatment of thyroid hormone deficiency  
  Salofalk       For the treatment of ulcerative colitis  
  Tritrace       For the treatment of hypertension  




Foundation set in Latin America for a sustainable business model

In Latin America, revenue of R0,9 billion was generated, an increase of 19%. Brazil contributed 54% to this revenue, with the balance being generated in Mexico (24%), Venezuela (11%) and the rest of Spanish Latin America (11%).

Aspen augments its business in Brazil

At an IMS value of USD21 billion, Brazil remains the largest pharmaceutical market in Latin America and during 2011 it grew by 19%. In this brand conscious, high-priced market, the generic sector is showing healthy growth. Demographics in Brazil indicate a growing middle class which further favours growth in generics.

After a lengthy period during which the post was vacant, Alexandre Franca has been appointed as Chief Executive Officer and he has already made a difference in the leadership of the Brazilian business. Focus has been given to developing Aspen’s branded products and private market strategy. By the end of the year, the state tender business had been reduced to represent only 20% of sales. The Campos site, which focused on the manufacture of penicillins and penems mainly for the public and hospital sectors, was disposed of subsequent to year-end, together with related non-core products. In the year ahead, emphasis will be placed on brand building and developing critical mass through product additions when the opportunities to do so can be identified.

Revenue in Brazil showed an increase over the prior year, due to organic growth from the global brands and good performance from brands such as Giamebil and Melxi. Established brands such as Calman and Alcachofra continued to perform well. Aspen made successful inroads into the diabetes market with Insunorm, a product which is included on the State sponsored medicines list. Aspen currently has 126 sales representatives in Brazil.

The business controls systems are being strengthened by investment in a new Enterprise Resource System (SAP) to enhance financial controls and management reporting capability. Employees are receiving systems training and standard operating procedures are being updated to prepare for the implementation of SAP.

Leading brands sold in Brazil include:

  Product       Description  
  Calman       For the treatment of nervous tension and mild depression  
  Giamebil       For the treatment of parasites  
  Insunorm       For the treatment of diabetes  
  Melxi       For the treatment of coughs  
  Zyloric       For the treatment of gout  

Spanish Latin America delivers steady growth

Aspen’s presence in Spanish Latin America is through subsidiaries in Mexico and Venezuela, where it is ranked 50th and 78th respectively in accordance with IMS data, and through distributors in the remaining countries. Mexico is the second largest market in Latin America after Brazil, valued at USD8 billion and is the highest priced market in the region. The Venezuelan market is valued at USD6 billion. The National Development Plan recently implemented in Mexico, aims to introduce a universal medical insurance providing more than 100 million people with access to public healthcare. This increases future growth prospects for high quality, affordable generics in this region.

Aspen’s sales team in Mexico has been split into branded and commercial sales teams to increase pharmacy activities and point-of-sale coverage while retaining brand promotion. Sales force training has been given the necessary focus to support this distinction. The re-introduction of Aldomet and Indocid in August 2010 had a positive impact on revenue growth. Particular promotional focus was given to growing the global brands. Export opportunities for manufactured products are being sought in Venezuela and Panama.

The Venezuelan business delivered pleasing performance but results were impacted by the continued devaluation of the Bolivar against the US Dollar and the implementation of pricing controls by regulators. The transition of global brands to the Aspen Venezuela distribution network commenced during the year. Distribution agreements were signed with Indian company, Intas Pharmaceuticals Ltd, and the existing local partner, Lapreven, for pharmaceutical and OTC products respectively. Registration was received for Clopidogrel, an anticoagulent, which is planned for launch in 2012.

To consolidate commercial and regulatory management of the Spanish Latin American businesses, a central regional structure is being implemented, based in Mexico City. This structure will be responsible for implementing the growth strategy throughout the rest of Spanish Latin America and to provide effective regulatory intelligence and support to meet territory-specific requirements.

Leading brands sold in Spanish Latin America include:

  Product       Description  
  Aggrastat       For the treatment of acute coronary syndrome  
  Fibroxol       For the treatment of hyperlipidaemia  
  Solcer       For the treatment of ulcers and gastroesophageal reflux disease  
  Solipred       For the treatment of bronchial inflammation or acute bronchitis  
  Zyloric       For the treatment of gout  

Rest of the World delivers steady growth

The Aspen business in the Rest of the world territory recorded growth in the global brands marketed in Eastern Europe, the Middle East and in Canada. Value declines were recorded in the Western European markets as pricing regulations diluted value growth for these products. Distribution in this region is currently outsourced to accredited third-party distributors who form part of the Aspen Global distribution network. Commercialisation of the global brands is managed by Aspen Global in Mauritius with assistance in the rest of the world geography from subsidiaries in Dubai and Ireland.

Aspen Bad Oldesloe, the German manufacturing site acquired from GSK in December 2009, has been successfully integrated into the Group over the past year and has made a meaningful contribution to sustaining the reliable supply of the global brands manufactured at this site. A recent employee survey showed that Aspen Bad Oldesloe employees have embraced the transition and are positive about being part of Aspen.

Continuous improvement is an embedded part of the Aspen Bad Oldesloe culture, led by a dedicated team. During the year, enhancements were made to the production planning in the tablet manufacturing area and KAIZEN principles were applied to key activities on the tablet bottle filling line. Barcode scanning systems were also implemented to improve efficiencies in stock controls.

A new SAP system was successfully implemented at Aspen Bad Oldesloe which will improve integration with the Group’s financial systems and facilitate attainment of supply chain efficiencies.

Revenue in the rest of the world territories rose 12% to R1,6 billion.