Executive Summary

On 3 March 2025, Aspen released its H1 FY25 financial results for period ended 31 December 2024.
1.    Total sales increased by 4% to R21.9 billion, up by 9% when adjusted for currency.
2.    EPS (cents) increased by 3% from 520.8 (cents) in December 2023 to 537.7 (cents) in December 2024.
3.    EBITDA margins increased from 24.6% to 26.5% as the company unwinds an inventory backlog of Heparin.
4.    Aspen will restructure Sandoz's China business in the second half of 2025 to enhance its capacity and flexibility for future opportunities and challenges.

Analyst thesis

1. Aspen is facing heightened uncertainty due to the unresolved dispute over its mRNA manufacturing contract, which could reduce EBITDA by up to R2 billion. The potential risk of a R770 million impairment further weighs on near-term profitability. Meanwhile, delays in regulatory approvals for insulin products are also pushing back expected revenue contributions, despite secured take-or-pay agreements.

2.    Key points in the investment thesis are:
a.    Aspen is facing increased regulatory scrutiny in the US following an FDA warning letter, which has resulted in tighter compliance monitoring at a critical manufacturing site. This has elevated external perception risks in the near term specific to Aspen while there is a general drive in the US to move manufacturing domestically.
b.    Exposure to evolving trade dynamics: Potential tariff developments in the US market could increase cost structures and temporarily challenge export competitiveness in select product categories.
c.    Aspen is strategically entering the obesity and diabetes treatment markets via its partnership with Eli Lilly (Mounjaro) and plans to manufacture GLP-1 drugs by FY26, positioning it to benefit from rising global demand.
d.    Following the Sandoz China acquisition, Aspen plans to restructure the business in H2 FY25 to improve flexibility and regulatory readiness.
e.    Regulatory reforms in South Africa, including SAHPRA’s priority review framework, may accelerate approvals for key medicines and support Aspen’s local manufacturing strategy.
3.    APN has an Intrinsic value of R131 per share (down from R206 previously) and a Hold recommendation.
a.    The unresolved mRNA contract dispute and insulin approval delays have introduced material near-term risk to Aspen’s EBITDA.
b.    Aspen is yet to secure major new contracts that could replace the lost mRNA revenue.
c.    The timeline for recovering these revenues remains uncertain, adding to near-term earnings pressure.