Aspen’s cost competitiveness is demonstrated through its performance in the South African tender business where it is the leading supplier to the ARV, OSD, TB and Anti-infectives tenders, having secured 41%, 30%, 29% and 21% respectively in these tenders. With pricing being the key factor in awarding these tenders, Aspen’s performance is commendable amid strong competition, particularly from Asian companies. Aspen’s cost competitiveness has been maintained and, in some instances, improved despite increases in the electricity and wage costs ahead of reported inflation in South Africa. These costs are the major components of pharmaceutical conversion cost.
Analysis of aggregate conversion and production cost allocations at the Port Elizabeth site for the 2011 year
More than R2 billion has been invested in the construction and upgrade of the Group’s South African manufacturing sites in Port Elizabeth, East London and Johannesburg over the past five years. This strategic investment has been undertaken in order to accommodate growing demand from both the South African and international markets, to diversify Aspen’s manufacturing capability and competence to support future commercial strategies and to achieve enhanced GMP compliance which will leave the Group well positioned for future regulation upgrades. Advanced technologies have been installed at the facilities to increase throughput, enhance the consistency of product quality and improve cost efficiencies.
Increasing throughput improves economies of scale at a facility as fixed manufacturing overheads are absorbed over a larger volume of products. To optimise production planning, predictability of volumes is essential. For this reason, private sector business is favoured to public sector work as demand patterns can be managed with more certainty as state tender business is characterised by volatile buying patterns. This has been recently evidenced in the new South African ARV tender where anticipated volumes have not materialised as Government turned to donor funding which resulted in alternative supply sources. Plans are in progress to transfer volumes from the International businesses to the Port Elizabeth site over the medium term. The project has commenced with the transfer of selected global brands from Aspen Bad Oldesloe and products from the Australian manufacturing sites. In total, four billion additional tablets are targeted to be introduced into the Port Elizabeth site which is currently manufacturing 4,8 billion tablets in Units 1 and 2. This will increase exports from the Port Elizabeth site. Please refer here where Aspen’s manufacturing capabilities and capacities are detailed.
Aspen has homogenised manufacturing capability at the Port Elizabeth and East London sites to reduce complexity and optimise production planning at dedicated sites. In Australia, in pursuit of production efficiency from an underutilised manufacturing base, the Tennyson manufacturing site was disposed of during the year and the Croydon and Noble Park sites will commence decommissioning during the first half of the 2012 year. Products from these sites are being transferred to Aspen’s South African manufacturing sites and to third party manufacturers in the Group manufacturing network. A manufacturing strategy is being developed for the Dandenong site to leverage its liquids manufacturing capability to supply products into Australasia and South East Asia. The prospect of supplying the highly regulated Japanese market from this site is also being investigated. In East Africa, the new Nairobi site has been approved to manufacture both pharmaceutical and OTC products for sale into Kenya, Uganda, Tanzania and selected export territories. A strategic decision was taken to dispose of the Campos site in Brazil as Aspen redirected its business away from the product manufacturing speciality of this site. Commercial opportunities are being evaluated to improve utilisation at Aspen Bad Oldesloe and at the Aspen Mexico site. To date, long-term manufacturing agreements have been secured with GSK at both sites.
Aspen’s manufacturing facilities are accredited by the appropriate regulatory authorities to produce products for the territories for which manufacture is undertaken. A summary of facility accreditations per site can be found here.
Over a number of years, Aspen has developed a world-class procurement management system. Long-standing partnerships have been developed with accredited suppliers internationally and in South Africa. Foresight redirected Aspen’s procurement strategy from Europe and the United States to Asia approximately 10 years ago. This enabled Aspen to evaluate the price, quality and service levels of a large base of new and emerging suppliers over a protracted period of time. Today, alternative suppliers are registered for most key raw materials and Aspen’s accumulated procurement intelligence secures optimum benchmarked pricing for APIs acquired from international and domestic suppliers for products manufactured at any of the Group’s sites.
The ongoing optimisation and effective management of materials and conversion costs makes Aspen a formidable and cost effective pharmaceutical manufacturer. These manufacturing best practices are being transferred to Aspen’s international manufacturing sites in Europe, Australia and East Africa.