The lack of orders from Aspen’s vaccine facility in Gqeberha, Eastern Cape, has left not just shareholders and the company disappointed, but also the Bureau of the African Union Heads of State.
Global vaccine purchasing bodies like the Vaccine Alliance (Gavi) and the COVID-19 Vaccines Global Access (Covax) “have shirked their responsibilities in supporting African vaccine-manufacturing initiatives”, the Bureau said last month.
The bureau exerted pressure on Gavi and Covax to prioritise the procurement of vaccines from African producers, and now, reports Daily Maverick, global pressure is mounting on these organisations, and on the World Health Organisation and Unicef, to put their money where their mouths are.
“We cannot keep our manufacturing lines vacant indefinitely,” says Stavros Nicolaou, Aspen executive responsible for strategic trade development.
“We need Gavi and Covax to come out with a strong statement. They are in an oversupply position, but this is not indefinite. The whole world knew we were bringing on this capacity. We should have been dialled into the supply schedule.”
In 2021, Aspen pivoted part of its sterile manufacturing facility to produce Aspenovax under licence from Johnson & Johnson (J&J), and in March 2022 the deal was signed.
But the company still has no orders.
“There is a lot of pressure to solve this,” says Nicolaou. “We cannot afford to lose this capacity. Our disappointment is for Africa.”
Shareholders, too, appear disappointed. The share price, up to R270 in October last year, is sitting at about R156.
In March, the company reported decent results for the six months to 31 December 2021, with a material improvement in gearing levels and good cash flow generation proving earnings quality.
The company had produced about 180m doses of J&J’s COVID vaccine at its Gqeberha plant – 120m of them in the six months to 31 December – generating R800m in vaccine sales to J&J in the period under review.
But little detail has been provided on the potential profitability of Aspenovax.
Izak van Niekerk, co-portfolio manager at Mergence Investment Managers, said:
“Some investors exited without consideration of the strong fundamentals of the overall business.” He has pencilled in double-digit earnings growth this year, with continued good earnings growth in following years. The growth, he says, will come from increasing utilisation of Aspen’s sought-after sterile manufacturing capacity.
The company has invested R8.7bn in this facility over the past four years, its goal being to bring in-house the manufacturing of its anaesthetics products currently produced by third-party manufacturers.
While capacity will be kept available for the COVID vaccine in the short term,
longer-term plans focus on other solutions for Africa, specifically diabetes, oncology and pain products, says Nicolaou.
Some 70% of Aspen’s sterile manufacturing capacity was never destined for any type of J&J production, which accounts for just a small proportion of revenue.
“The biggest disappointment is that the continent set itself an objective to reduce vaccine imports from 99% to 40% by 2040. It’s a cardinal sin to have this capacity lying idle.”
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