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Sterile Focus Brands

Sterile Focus Brands icon

Aspen's Sterile Focus Brands comprise our Anaesthetics and Thrombosis Brands, largely niche sterile products.

 2019
R’million
2018(CER)
R’million
Change
%
Gross profit percentage54,8%52,0%
Revenue
Developed markets4 3984 644(5)
Emerging markets9 9389 04810
Total14 33613 6925

47% EM revenue contribution

53% DM revenue contribution

sterile-focused-brands-pie-1

Anaesthetics Brands

Anaesthetics icon

Aspen has a comprehensive portfolio of 20 mature Anaesthetics Brands, having acquired two complementary Anaesthetics portfolios from AstraZeneca and GSK. Our diverse product range includes general anaesthetics, muscle relaxants as well as a number of local anaesthetics including topical agents, making Aspen a leading global supplier in the Anaesthetics category, outside of the USA. Strategic investments in our sterile manufacturing facilities will provide us with the production capabilities to ensure sustainable security of supply of high quality anaesthetic products.

 2019
R’million
2018(CER)
R’million
Change
%
Total8 683 8 840(2)
Revenue
Developed markets4 6724 808(3)
Emerging markets4 0114 032 (1)

Key brands

BrandType of anaesthetic
DiprivanGeneral
MarcaineRegional
NaropinRegional
UltivaGeneral
XylocaineRegional

% of total group revenue

22%

46% EM revenue contribution

54% DM revenue contribution

sterile-focused-brands-pie-2

Performance

Anaesthetics Brands' revenue declined 2%, negatively impacted by constrained supply of products in the portfolio acquired from AstraZeneca. Europe CIS declined 8%, with growth of 1% from the remaining regions, partially offsetting the decline.

Developed markets

Developed markets, which contributed 54% to Anaesthetics revenue, reduced by 3% to R4,7 billion as compared to the prior period. Supply constraints impacted our growth across all territories, with the exception of Japan, which was sufficiently stocked in the period and delivered flat revenue growth. While Japan has been stable in the current year, performance is likely to be impacted by ongoing price cuts. Our efforts in this country will be aimed at

* All commentary in the Business segment overview reflects CER performance.

Developed Europe and Asia Pacific, contributed 47% and 46% to developed markets revenue respectively. Developed Europe decreased 3%, recording revenue of R2,2 billion. The EU5* account for 77% of the value of the European^ injectable anaesthetic market and represent those countries where we generate the majority of our revenue from these products. Asia Pacific declined 3% to R2,2 billion. Supply constraints were particularly challenging across Australasia which was 9% lower. Despite supply constraints, commercial efforts promoting Xylocaine were successful, supporting positive growth in the brand across major customer geographies.

Emerging markets

Emerging markets contributed 46% to Anaesthetics Brands revenue and declined 5% to R4,0 billion, with a 2% increase in Asia Pacific offset by a poor performance in Developing Europe. Asia Pacific, which contributed 62% to emerging market Anaesthetics Brands revenue, was driven by another strong performance in China, despite supply constraints.

Latin America, which grew 7% to R894 million, is the second largest emerging market region for Anaesthetics, contributing 22% to Aspen's revenue from emerging markets. MENA also performed well, increasing revenue 12% to R237 million, while the remaining territories declined, affected by the constrained supply.

Prospects

In support of the growth of the Anaesthetics Brands, Aspen has committed to R4,9 billion in strategic capital expenditure at our existing Port Elizabeth, Bad Oldesloe and Notre Dame de Bondeville sites. These site upgrades, once in commercial production, will provide us with a sustainable supply of quality products, allowing us to focus on reducing the underlying cost of goods sold, to drive volume growth and to compete effectively in markets characterised by downward pricing pressure. We have commenced activities to introduce the majority of our Anaesthetics Brands to our own facilities, but intend to retain the production of certain brands at contract manufacturers.

Public sector tenders represent a significant portion of the total European anaesthetic segment and are largely awarded on price, quality and security of supply. The competitive cost of goods achieved by bringing Anaesthetics manufacturing in-house as well as our comprehensive portfolio, will ensure that in future we have the opportunity to participate actively in these tenders.

* EU5: France, Germany, Italy, Spain and the United Kingdom.
^ IQVIA definition. Europe EU28 member states (including EU5) plus Switzerland.

Thrombosis Brands

Thrombosis icon

Our Thrombosis portfolio is a global offering (excluding USA) which is comprised largely of a broad range of specialist injectable anticoagulants. Aspen currently holds approximately 16% share in injectable anticoagulants in Europe, making it the second largest supplier of these products to patients in this region. Our niche products are complex to manufacture and our fully integrated biochemical supply chain for heparin-based products combined with our sterile manufacturing capabilities allows us to respond to market and production needs as well as to execute control over the production of our high quality Thrombosis products. In addition to the heparin based anticoagulant portfolio, Aspen also produces Arixtra, a synthetic anticoagulant not impacted by the supply and pricing dynamics of the market for heparin based products. Arixtra is a Xa Inhibitor with a wide range of indications, including VTE treatment and prophylaxis, deep vein thrombosis, pulmonary embolism and acute coronary syndrome treatment. Growing aging populations and our adapted dose for obese patients provides growth potential for Arixtra.

 2019
R’million
2018(CER)
R’million
Change
%
Total6 5846 778 (3)
Revenue
Developed markets3 4883 756(7)
Emerging markets3 096 3 022 2

Key brands

BrandType
ArixtraSynthetic anticoagulant - Xa Inhibitor
Fraxiparine Low molecular weight heparin
FraxodiLow molecular weight heparin
Mono-EmbolexLow molecular weight heparin
Orgaran Heparin derivative

% of total group revenue

17%

47% EM revenue contribution

54% DM revenue contribution

sterile-focused-brands-pie-3

Performance

Thrombosis Brands revenue declined 3% to R6,6 billion, with a 2% increase in emerging markets being offset by a 7% decline in developed markets. The Low Molecular Weight Heparin ("LMWH") portfolio recorded 2 year CAGR of 2% between FY2017* and FY2019. Europe CIS, which contributed 80% to Thrombosis revenue, was 6% lower at R5,3 billion. The remaining regions grew 14% versus the prior year, supported by China which advanced 34% to R869 million.

*China revenue annualised

Developed markets

The developed markets to which we supply our Thrombosis products, being predominantly Developed Europe, reported a decline of 7% to R3,5 billion. Enoxaparin biosimilars have gained a 9%^^ market share in Europe as measured at 30 June 2019, since launching towards the end of the 2016 calendar year. Aspen's LMWH portfolio declined only 1% (2 year CAGR between FY2017 and FY2019), in line with the overall injectable thrombosis market in Europe, demonstrating that our LMWH portfolio can compete effectively against new entrants. Approximately 80% of our developed market sales for the Thrombosis portfolio were derived from Germany, France and Italy. Our competitive advantage in injectable thrombosis products lies in our integrated biochemical supply chain and ability to efficiently produce finished form sterile products. Increased efficiencies have translated into higher gross margins in our overall Sterile Focus Brands segment. We continue to focus on driving and maintaining these efficiencies to offset any headwinds arising in the developed market landscape.

Emerging markets

Emerging markets contributed 47% to Thrombosis Brands revenue and grew 2% to R3,1 billion. Emerging market sales are spread across more territories than developed market sales, providing a level of diversification. The top eight countries, which contributed 80% to emerging market revenue, grew 9%, driven by Fraxiparine. Performance in Developing Europe & CIS was disappointing, declining 5% to R1,9 billion and offsetting the strong growth displayed by the Asia Pacific region. Adjusting out Russia, which was impacted by a change in distribution model, Developing Europe & CIS declined 1%.

The Asia Pacific region, which represents about a third of revenues from emerging markets, increased 27%, supported by strong double-digit growth in China.

Prospects

We are focused on growing the volumes of the Thrombosis Brands supported by the initiatives arising from our recent strategic review of Europe CIS, the biggest territory for Thrombosis. Sales effectiveness is key and we are ensuring that the appropriate customer audience is targeted. Initiatives include increasing awareness of the venous thrombo-embolism ("VTE") prophylaxis for Arixtra and the medically-ill indication for Fraxiparine. Concerns have been raised about the impact novel oral anti-coagulants ("NOACs") may have on our injectable thrombosis segment once these NOACs come off-patent from calendar year 2021 onwards. LMWHs are typically used in respect of a diverse set of acute conditions such as haemodialysis, oncology, general surgery and bedridden patients, as well as for short-term prophylaxis. In these patient groups, the risk of bleeding and renal and hepatic complications are of significant concern. NOACs, on the other hand, which have similar indications to each other, are typically utilised in a non-acute setting for extended prophylaxis in the treatment of atrial fibrillation (continuous) and the treatment of the associated deep vein thrombosis and pulmonary embolisms. Outside of the long-term prophylaxis market, NOACs have made inroads in post-surgical prophylactic treatment of patients undergoing elective/required orthopaedic surgery.

The outbreak of African Swine Fever and the related concerns that this disease potentially poses to porcine mucosa, an essential raw material used in the production of heparin-based anticoagulants, has resulted in an increase in the price of this raw material. Aspen carries a significant reserve of safety stock in heparin and currently sources the majority of its mucosa supply from the United States, with the European Union being its second largest source. Aspen is confident of the high standards of quality being upheld in the production of its heparin-based anticoagulant portfolio, as well as all other heparin-based products manufactured at its facilities.

Over the period, the transfer of Mono-Embolex prefilled syringes to our Notre Dame de Bondeville sites was completed and commercialisation from this site began in the first half of the FY2019. We have spent a considerable amount of time on innovation efficiencies and in managing down the conversion costs on the Thrombosis Brands, which we anticipate will assist in partially offsetting the negative impact of the current heparin price increases.

China remains an opportunity for our Thrombosis Brands, predicated on broadening the indications for which Arixtra is approved on the National Drug Reimbursement List in this country. The next update for this list is in 2020,
suggesting that this opportunity is a medium-term one.

^^ MAT across Austria, Belgium, Czech Republic, France, Germany, Greece, Hungary, Italy, Netherlands, Poland, Romania, Russia, Slovakia, Spain, Switzerland, UK.