Business 8.5.2018 07:37 am

Aspen opens R1bn manufacturing facility

Aspen opens R1bn manufacturing facility

While another R2bn of manufacturing investment is underway in Port Elizabeth.

JSE-listed Aspen Pharmacare opened its R1 billion high-containment facility in Port Elizabeth on Monday. This is the first of three planned manufacturing plants that will see Aspen advancing its stated goal of becoming a global specialist in the production of niche pharmaceuticals requiring complex manufacturing. It expects to export 90% of this production.

From June the plant will begin commercial production of oncology drugs Alkeran, Leukeran and Purinethol, used for difficult-to-treat and intractable cancers; Imuran, a high-potency molecule used to prevent rejection in organ transplants and Benztropine, which acts on the central nervous system and is effective in the treatment of Parkinson’s disease.

In the pharmaceutical industry, traditional oral solid dosage (OSD) medicines account for about two-thirds of all pharmaceutical products worldwide. However, this value speaks more to the sheer volume of products than the financial turnover. Active pharmaceutical ingredients (APIs) have become stronger and increasingly more active in recent years.

This increase in potency is catalysing an industry transformation. These drugs need high-containment facilities to avoid cross-contamination – important to protect the product, operators and the environment, particularly in the manufacturing of high-potency (in other words toxic) active pharmaceutical ingredients. This is the opportunity Aspen aims to capitalise on.

Beyond this Aspen is in the process of investing a further R2 billion in the building of two sterile facilities for the manufacture of anaesthetic and injectable thrombosis products – in which Aspen is already a world leader in manufacture and supply. To build critical mass in these facilities Aspen will relocate its offshore anaesthetic manufacture, mostly carried out by third parties, to this site over the next few years.

At full capacity the 23 000m² high-containment facility will produce 3.6 billion tablets a year.

“High-containment facilities are not readily found globally and present a strategic domestic and export opportunity,” says Aspen Group CE Stephen Saad.

The investment will also hopefully add impetus to President Cyril Ramaphosa’s drive to attract $100 billion in foreign investment to South Africa, says Stavros Nicolaou, Aspen senior executive, Strategic Trade. “It is a stretch target, but when the various arms of government and business work together to overcome obstacles and red tape – as they did to ensure this plant came to fruition – the target becomes achievable.”

Sentiment is a key factor in determining private sector willingness to invest, particularly fixed capital investment, adds Saad. “This is the most important health barometer for both current and future economic growth. We have noticed a sharp uplift in investor sentiment [in SA] and this will bode well for our economy. But sometimes it takes someone to walk the walk, to invest and show confidence and then others will follow. That said, investors want clear and coherent policies and to know their investment is safe.”

Collectively South African pharmaceutical companies produce drugs worth R49 billion (at manufacturing exit prices) on an annual basis. However, the country imports another R68 billion worth of drugs, creating a R20 billion trade deficit in the sector. “This is a huge trade deficit. We need to grow our industrial base in order to address this,” said trade and industry (Dti) minister Rob Davies at the factory opening. “We need SA companies to be more active in the export space. Aspen is taking the industry into a new space with its production of real value-added products. The plan [for Aspen] is now to move into other similar products.”

The high-containment facility is the recipient of a Dti S12i tax allowance that will allow it to claim tax credits to the value of R209 million over the next few years.

“It is no secret that we have been through a tough time, but the mood of investors has changed,” Davies said. “Part of that is due to government’s determination to also not just talk the talk, but to walk it too.” For instance, ahead of the WEF meeting in Davos in January this year government took steps to reconfigure the Eskom board. That is just the beginning of a new commitment to growth, he said.

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