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Sterile Focus Brands

Aspen’s Sterile Focus Brands include a diverse range of sterile pharmaceutical preparations of high quality, niche medicines across both anaesthetics and thrombosis therapies. These established brands are predominantly used in an acute hospital setting

2021
R’million
2020 (CER)
R’million
Change
%
Revenue 10 691 9 815 9
Gross profit percentage 59,0% 62,5%

Key brands

Brand Description
Diprivan General anaesthetic
Emla Local anaesthetic
Fraxiparine Low molecular weight heparin
Marcaine Regional anaesthetic
Xylocaine Regional anaesthetic

28%

of Group revenue

36%

of Group gross profit

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Performance

The Sterile Focus Brands portfolio increased revenue by 9% to R10 691 million for the 12 months ended June 2021 as compared to the prior year. The demand volatility seen in the prior year as a result of COVID-19, re-emerged in the current financial year but to a lesser extent. Increased demand was seen across certain of our medicines used in the treatment protocols established for patients who tested positive for COVID-19. A few territories experienced early signs of recovery in elective surgeries with the lifting of restrictions, supporting the sound underlying performance of this segment.

In Asia, annual revenue grew 17% to R4 491 million, driven by a full year of trade in China compared to the prior year when a hard lockdown resulted in significant lost sales. Europe CIS revenue posted a modest 2% increase in revenue, negatively affected by the absence of a repeat of the unusually high COVID-19-related demand in the prior year. This was partially offset by high thrombosis demand in Russia, where Fraxiparine was used extensively in treating medically ill pandemic patients. As Fraxiparine in Russia is a lower margin product within the Sterile Focus Brands portfolio, this caused gross profit dilution.

Prospects

Sterile Focus Brands are expected to deliver more modest growth in the coming financial year. Aspen’s guidance is informed by the expectation of a moderation in COVID-19-related demand, as countries progress with their vaccination programmes, and the impact of volume-based procurement on our Asia business. Chinese healthcare reform policies have, since 2018, focused on reducing the cost of off-patent pharmaceuticals and this is expected to have some impact on Aspen’s revenue from this country in the 2022 financial year. Aspen was unsuccessful in the volume-based procurement tender for an anaesthetic product, Naropin, in China, resulting in a material decrease in the revenue outlook for this product. As a result of this outcome, an impairment charge of R630 million was made against Naropin. The losses to Naropin in China are expected to be offset by positive gains from the other Sterile Focus Brands in this country, allowing for modest overall revenue growth to be targeted. We view the 2022 financial year as a transitional year, as countries emerge from different levels of COVID-19 restrictions to the new normal, which will rebase the Sterile Focus Brands business.

Over the next few years, we will transfer a large proportion of our anaesthetics medicines from FDF third-party contractor sites to Aspen-owned manufacturing facilities in South Africa, France and Germany. As a consequence of this transfer process, we expect steady increases in the gross profits earned from Sterile Focus Brands over the medium term. While the previously communicated timelines suggested that all transfers would be finalised by the end of the 2024 financial year, a six-month delay in transferring our anaesthetics brands caused by a COVID-19-related supplier backlog is expected to impact the blow-fill seal manufacturing line in France. The in-house manufacture of the anaesthetics medicines has broader benefits of filling sterile FDF capacity and improving security of supply. The updating of product dossiers, required for in-housing processes, provides an opportunity to facilitate new registrations in countries where the anaesthetic product portfolio could be more broadly represented.

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