Aspen Pharmacare Holdings Limited · JSE:APN

Aspen Pharmacare — FY2016 Earnings Presentation

62 slides from Aspen Pharmacare's earnings presentation, Sep 19, 2016

1. Slide 1: Annual Results Presentation

   Annual Results Presentation For the year ended 30 June 2016

2. Slide 2: Comparable information note

   The comparable information in this presentation has been derived from the reviewed financial information and has not been reported on by Aspen’s auditors. This information has been prepared for illustrative purposes only and is the responsibility of the Board of Directors of Aspen. 2

3. Slide 3: Performance overview

   Performance overview

4. Slide 4: Segmental analysis – Comparable business

   Performance overview Segmental analysis – Comparable business R'million FY 2016 FY 2015 % change Commercial - pharmaceutical 27 715 25 307 10% International 12 288 10 320 19% Asia Pacific 6 056 5 625 8% South Africa 6 175 6 580 -6% Sub-saharan Africa 3 196 2 782 15% Commercial - nutritionals 3 513 3

5. Slide 5: Commercial Pharmaceuticals – International and Asia Pacific

   Performance overview Commercial Pharmaceuticals – International and Asia Pacific  Europe revenue up 22% ◦ H1 positive momentum accelerates ◦ Currency tailwinds + Mono-Embolex annualised  CIS down 18% ◦ Currency impact ◦ Russia sales up 11% in Ruble − Volume +13%, Price -2%  Latam ◦ Latam in-marke

6. Slide 6: Commercial Pharmaceuticals – South Africa

   Performance overview Commercial Pharmaceuticals – South Africa  Sales impacted by poor management of supply chain ◦ Public sector prioritised vs private sector ◦ Exports  Profit impact greater ◦ Exchange rates − Particularly tenders ◦ Fixed costs on lower sales ◦ Lower margin mix  Anticipated imp

7. Slide 7: Comparable Nutritional revenue

   Performance overview Comparable Nutritional revenue R'million FY 2016 FY 2015 % change International 1 544 1 322 17% Asia Pacific 1 034 975 6% South Africa 859 772 11% Sub-saharan Africa 76 50 52% Commercial - nutritionals 3 513 3 119 13%  Australian market impacted by China’s tightened import and

8. Slide 8: Manufacturing revenue

   Performance overview Manufacturing revenue R'million FY 2016 FY 2015 % change International 4 699 3 849 22% Asia Pacific 482 481 0% South Africa 1 268 777 63% Manufacturing 6 449 5 107 26%  Manufacture and supply chain ◦ Core focus area for Aspen ◦ Quality and efficiency of supply chain is our stra

9. Slide 9: Manufacturing – NDB and Oss

   Performance overview Manufacturing – NDB and Oss  NDB ◦ Single new line in NDB − Operational and replaced three lines − Lines decommissioned and entire block closed – June 2016 ◦ Cost savings/capacity and quality enhancement  Oss site ◦ EHS challenged ◦ Chemical repositioned/being repositioned − F

10. Slide 10: Manufacturing - Capacity overview

    Performance overview Manufacturing - Capacity overview  Available Capacity - Solid/API/Sterile at PE, Dandenong, FCC & NDB  Sustained SA export growth anticipated in both solid and API sales ◦ Competitiveness of South African sites enhanced by exchange rate benefits − Now a Top 100 exporter from S

11. Slide 11: Therapeutic overview

    Therapeutic overview

12. Slide 12: Thrombolytic portfolio

    Therapeutic overview Thrombolytic portfolio  Complex sterile, biochem products ◦ High volumes ◦ Low prices  Core focus – building strategic sustainability  Efficient supply chain management ◦ API and FDF  Broad portfolio ◦ Arixtra, Fraxiparine, Orgaran and Mono-Embolex  Global representation ◦

13. Slide 13: Thrombolytics portfolio

    Therapeutic overview Thrombolytics portfolio  Performance has been solid ◦ Demonstrated in EU performance +31%  Anticipate possible biosimilar/generic introduction for Enoxaparin/Arixtra  Impact of Enoxaparin biosimilar hard to assess ◦ Pricing already low ◦ Will switch be permissible? ◦ Impact o

14. Slide 14: Thrombolytics portfolio

    Therapeutic overview Thrombolytics portfolio  Mono-Embolex pricing challenge ◦ Legal intervention  Mono-Embolex transitioning to NDB ◦ Limited additional cost ◦ Reduces cost price per unit for Fraxiparine/Arixtra ◦ Additional volumes under discussion for NDB  Orgaran (Danaparoid) ◦ Currently sold

15. Slide 15: Thrombolytics portfolio

    Therapeutic overview Thrombolytics portfolio  Exercised option to acquire GSK retained thrombolytic markets (China, India and Pakistan) ◦ Arixtra/Fraxiparine sales about USD40 million ◦ Additional representation in China of 300 people  Therapeutic area is a core focus area for Aspen ◦ Ambitious pl

16. Slide 16: Anaesthesia portfolio

    Therapeutic overview Anaesthesia portfolio  Aspen has acquired IP from AZ and GSK Global anaesthesia market ◦ AZ - commenced September 2016 (excluding USA) ◦ GSK - projected March 2017 IMS value $2952m AZ  Comprehensive and diverse portfolio 17.4% − general, local and topical  Global anaesthesia

17. Slide 17: Anaesthesia portfolio - Opportunity

    Therapeutic overview Anaesthesia portfolio - Opportunity  Logical fit with thrombolytic portfolio ◦ Anaethetists, key target for both ◦ Fits largely within existing infrastructure  Facilitates increased geographic expansion ◦ 350 representatives added in China ◦ Increased representation in Japan,

18. Slide 18: Anaesthesia portfolio - Opportunity

    Therapeutic overview Anaesthesia portfolio - Opportunity  Significant contributor to future Aspen performance Regional Annualised Sales  Diverse range of products Acquired Anaesthesia Portfolio  Strong presence in emerging markets $670m  Complements our core strengths 4% 3% 1% 4%  Aspen has pro

19. Slide 19: High Potency and Cytotoxic portfolio

    Therapeutic overview High Potency and Cytotoxic portfolio  Women’s Health/Steroids/Hormones ◦ Focus on pipeline enhancement − We have differentiation that will give us limited competition − Resolving technical issues on previously discontinued products − Product acquisitions under consideration − U

20. Slide 20: Geographical overview

    Geographical overview

21. Slide 21: North America

    Geographical overview North America  USA ◦ Maximise the value of our IP ◦ Launch our own and through partnering ◦ Assessing our in market footprint − Stand alone, partner, acquire or combination  Launched HPC - formulary driven, incremental momentum as contracts are signed ◦ Ramp up in H2 2017  A

22. Slide 22: Asia Pacific

    Geographical overview Asia Pacific Asia Pacific – pro forma annualised sales  China Asia Other >$900m ◦ AZ go live date September 2016 16% ◦ 6 - 12 months independent operation Japan − Including 6 branches to be established Australia/New 15% Zealand ◦ Massive administrative and logistical 52% chall

23. Slide 23: Sub-Saharan Africa

    Geographical overview Sub-Saharan Africa R'million FY 2016 FY 2015 % change Collaboration 2 567 2 264 13% Own pharma 710 568 25% Total 3 277 2 832 16%  Own pharma contributed R128 million to EBITA +25% (FY 2015 R102 million)  Exited collaboration with GSK for Sub-Saharan Africa ◦ Prompted by chang

24. Slide 24: Prospects

    Prospects

25. Slide 25: Looking back

    Prospects Looking back  Aspen’s historical performance has been characterised by ◦ Organic growth ◦ Facilitated, cash based acquisitions − Focus on integration into operations − Synergies have driven payback  Three years to bed down latest acquisitions ◦ Given their complexity, scale and proximity

26. Slide 26: Moving forward

    Prospects Moving forward  The next three years ◦ Characterised by increasing profitability from acquisitions ◦ Realisation of synergies ◦ Global platforms established − Sustain base organic growth drivers − Augmentation of this base through realisation of value from pipeline launches − Enabler for

27. Slide 27: Focus areas

    Prospects Focus areas  Commercial Pharmaceutical and Nutritional ◦ Sustained organic performance from both segments − SA Pharma to make substantial improvement ◦ Focus on daily performance − Real success comes from doing the ordinary well  Manufacturing investment is reaping rewards of bold capaci

28. Slide 28: Outlook

    Prospects Outlook  Global therapeutic platforms established ◦ Organic growth in each ◦ Anaesthesia strategic fit ◦ Pipeline to sustain growth  Broadened geographic expansion ◦ Focus on China, Japan and USA  Past period, toughed out major operational challenges including impairing Venezuela ◦ Soli

29. Slide 29: DIPRIVAN

    DIPRIVAN ULTIVA 29

30. Slide 30: Financial Review

    Financial Review

31. Slide 31: Highlights

    Financial review Highlights Comparable revenue & earnings Comparable EBITA Gross revenue (R' bn) Comparable NHEPS (R/share) Comparable EBITA (R' bn) Distribution to shareholders (R/share) 37.7 9.4 33.5 8.6 10.67 12.22 2.16 2.48 FY 2015 FY2016 FY 2015 FY2016 Cash generated Leverage Cash operating pro

32. Slide 32: Abridged comparable statement of comprehensive income

    Financial review Abridged comparable statement of comprehensive income For the year ended 30 June 2016 R’million FY 2016 FY 2015 % change Net revenue 35 348 31 614 12% Cost of sales (17 537) (16 118) 9% Gross profit 17 811 15 496 15% Net operating expenses (8 410) (6 862) 23% EBITA 9 401 8 634 9% Am

33. Slide 33: H2 2016 vs H1 2016: comparable measures

    Financial review H2 2016 vs H1 2016: comparable measures For the year ended 30 June 2016 Fixed costs in R’million H1 2016 H2 2016 South Africa on declining revenue, Net revenue 17 310 18 038 increased Gross profit 8 745 9 066 promotional spend in Europe CIS EBITA 4 763 4 638 Net funding costs ( 741)

34. Slide 34: Reconciliation of earnings per share

    Financial review Reconciliation of earnings per share Cents FY 2016 FY 2015 % change Basic earnings per share (EPS) 945.4 1 139.8 -17% (Profit)/Loss on sale of property, plant and equipment 0.3 ( 14.3) Net impairment of property, plant and equipment 3.5 1.7 Impairment of intangible assets 198.2 35.5

35. Slide 35: Group gross revenue

    Financial review Group gross revenue R'million FY 2016 FY 2015 % change Regional sales mix International 18 531 15 491 20% 9% South Africa 8 302 8 129 2% 20% Asia Pacific 7 572 7 081 7% 49% SSA 3 272 2 832 16% Comparable revenue 37 677 33 533 12% Venezuela - 2 677 22% Divestments 210 1 836 Internati

36. Slide 36: International revenue

    Financial review International revenue R'million FY 2016 FY 2015 % change Revenue growth Europe CIS 13 242 10 856 22% 65% Middle East Pharma 8 543 7 007 22% North Africa 55% 51% Manufacturing 4 699 3 849 22% Latin America 3 557 3 451 3% 45% Europe CIS Pharma 2 013 2 129 -5% 35% 22% North America Nut

37. Slide 37: International revenue - Europe CIS revenue

    Financial review International revenue - Europe CIS revenue R'million FY 2016 FY 2015 % change Sales mix Pharma revenue - Europe 7 852 6 161 27% Thrombolytics 5 303 4 051 31% Other brands 2 549 2 110 21% 36% Pharma revenue - CIS 691 846 -18% 40% Total commercial revenue 8 543 7 007 22% Manufacturing

38. Slide 38: South Africa revenue

    Financial review South Africa revenue R'million FY 2016 FY 2015 % change Sales mix Pharma revenue 6 175 6 580 -6% 10% Private sector 4 732 5 091 -7% 5% Public sector 1 443 1 489 -3% - ARV tender 879 969 -9% 10% - Other tenders 564 520 8% Nutritional revenue 859 772 11% 7% 57% Manufacturing - API & F

39. Slide 39: Asia Pacific revenue

    Financial review Asia Pacific revenue R’million FY 2016 FY 2015 % change Pharma 6 056 5 625 8% Sales mix Australia and New Zealand 4 450 4 381 2% 6% Pharma 4 004 3 558 13% 14% Licences, etc. to be discontinued 446 823 -46% Asia 1 606 1 244 29% Nutritionals 1 034 975 6% Manufacturing 482 481 0% 21% 5

40. Slide 40: Sub-Saharan Africa gross revenue

    Financial review Sub-Saharan Africa gross revenue R'million FY 2016 FY 2015 % change Pharma revenue 3 196 2 782 15% Nutritionals revenue 76 50 52% Total 3 272 2 832 16% Pharma and Nutritionals revenue has been classified by customer geography Revenue growth 30%  Results benefit from a compensation

41. Slide 41: Comparable EBITA margin by region

    Financial review Comparable EBITA margin by region Comparable EBITA margin by region International 32%  Termination of trade in Venezuela 31% negatively affected International margin, offsetting benefits of margin South Africa 22% 19% improvement projects  Weakening exchange rate, low revenue 22%

42. Slide 42: Material currencies

    Financial review Material currencies Currency contribution 35% 32% 30% AUD 30% 27% 27% 25% 25% EUR and related currencies* 20% 20% 20% 17% USD 15% 11% 10% ZAR 5% Other 0% -3% ARV tender -5% -5% -10% -8% -15% Revenue EBITA  Favourable net currency impact  80% of revenue, 73% of EBITA from four majo

43. Slide 43: PPE capital expenditure – Recent and planned

    Financial review PPE capital expenditure – Recent and planned  Projects completed in 2016 ◦ High speed filling line for pre-filled syringes at NDB − In production ◦ High containment facility in PE − Manufacturing trials have commenced 2 573 ◦ New high volume, high potency multipurpose API facility

44. Slide 44: Comparable working capital

    Financial review Comparable working capital R'million FY 2016 FY 2015 Net working capital 17 741 13 835 Net working capital - excluding Oss 12 852 10 113 Working capital as % of revenue 50% 44% • Stock builds Less: Attributable to Oss -10% -8% • Oss SAP Working capital excluding Oss as a % of revenu

45. Slide 45: Debt restructure

    Financial review Debt restructure  Highlights of restructure ◦ EUR facility substantially oversubscribed Analysis of R32.7 billion net ◦ Facilities restructured across EUR, ZAR and AUD borrowings term and revolving facilities with tenures of 2 to 5 30.0 years Net borrowings 33.5 ◦ Covenants now tes

46. Slide 46: Borrowings

    Financial review Borrowings Year ended 30 June 2016 R’million FY 2016 FY 2015 Net borrowings of R32.7 billion Opening balance 30 048 29 765 Cash flow from operating activities (3 225) (4 839) International South Africa 60% 31% Capital expenditure 2 818 2 417 Proceeds from sale of assets (5 254) (3 6

47. Slide 47: Q&A session

    Q&A session

48. Slide 48: Cautionary regarding forward-looking statements

    Disclaimer Cautionary regarding forward-looking statements This presentation has been prepared by Aspen Pharmacare Holdings Limited based on information available to it as at the date of the presentation. This presentation may contain prospects, projections, future plans and expectations, strategy a

49. Slide 49: Appendices

    Appendices Appendix 1: Abridged group statement of comprehensive income Appendix 2: Group statement of financial position Appendix 3: Extract from group statement of cash flows Appendix 4: Net funding costs Appendix 5: Key currency movements vs ZAR Appendix 6: Latin America revenue Appendix 7: Asia

50. Slide 50: Abridged Group statement of comprehensive income

    Appendix 1 Abridged Group statement of comprehensive income For the year ended 30 June 2016 R' million FY 2016 FY 2015 % change Revenue 35 559 36 127 -2% Cost of sales (17 659) (18 872) -6% Gross profit 17 900 17 254 4% Net operating expenses (8 361) (8 317) 1% EBITA 9 539 8 937 7% Amortisation ( 57

51. Slide 51: Group statement of financial position

    Appendix 2 Group statement of financial position For the year ended 30 June 2016 R' million FY 2016 FY 2015 TOTAL ASSETS Non-current assets 67 137 55 680 Property, plant and equipment 9 670 7 917 Goodwill 6 020 5 026 Intangible assets 49 068 40 522 Investments in joint ventures 79 61 Available-for-s

52. Slide 52: Group statement of financial position (continued)

    Appendix 2 Group statement of financial position (continued) For the year ended 30 June 2016 R' million FY 2016 FY 2015 EQUITY AND LIABILITIES Share capital and reserves 42 535 34 162 LIABILITIES Non-current liabilities 40 676 32 477 Non-current borrowings 32 653 25 492 Deferred tax liabilities 1 75

53. Slide 53: Extract from Group statement of cash flows

    Appendix 3 Extract from Group statement of cash flows For the year ended 30 June 2016 R' million FY 2016 FY 2015 Cash operating profit 9 794 9 507 Changes in working capital (3 381) (1 467) Cash generated from operations 6 413 8 040 Net finance costs paid (1 993) (2 389) Investment income received 3

54. Slide 54: Net funding costs

    Appendix 4 Net funding costs For the year ended 30 June 2016 R’million FY 2016 FY 2015 Net interest paid (1 771) (1 450) Net foreign exchange gains/(losses) 36 ( 480) Notional interest on financial instruments ( 191) ( 175) Comparable (1 926) (2 105) Net hyperinflationary adjustments¹ ( 870) 335 Deb

55. Slide 55: Key currency movements vs ZAR

    Appendix 5 Key currency movements vs ZAR Value of key currencies vs ZAR from June 2015 to June 2016 150.0 140.0 130.0 120.0 110.0 100.0 90.0 80.0 70.0 USD EUR MXN BRL RUB AUD 55

56. Slide 56: Latin America revenue

    Appendix 6 Latin America revenue R'million FY 2016 FY 2015 % change Pharma revenue 2 013 2 129 -5% Nutritional revenue 1 543 1 322 17% Comparable revenue 3 556 3 451 3% Venezuela - 2 677 Total 3 556 6 128 -42% Commercial revenue has been classified by customer geography and manufacturing revenue has

57. Slide 57: Asia revenue

    Appendix 7 Asia revenue R'million FY 2016 FY 2015 % change Japan 700 477 47% Philippines 256 243 5% Taiwan 131 92 42% Malaysia 111 123 -10% Indonesia 108 92 17% Regional sales mix Rest of Asia 300 217 38% Total 1 606 1 244 29% Rest of Asia 19% Indonesia Japan 7% 43% Malaysia 7% Taiwan 8% Philippines

58. Slide 58: Corporate activity

    Appendix 8 Corporate activity  On 9 June 2016, announced signing of agreement to acquire the exclusive rights to commercialise AstraZeneca’s global (excluding the USA) anaesthetics portfolio ◦ USD520 million consideration and double-digit percentage royalties on sales of the Portfolio ◦ AGI to make

59. Slide 59: Corporate activity (continued)

    Appendix 8 Corporate activity (continued)  Divested portfolio of products to Litha Pharma (Pty) Ltd (“Litha”) ◦ Portfolio comprising injectables and established brands ◦ R1.7 billion consideration ◦ Approval by South African Competition Authorities obtained on 4 August 2015. ◦ Transaction completed

60. Slide 60: Institutional investors

    Appendix 9 Institutional investors 100% 90% 80% 70% Southern Africa 60% North America 50% Europe 40% Asia Pacific 30% Middle East 20% 10% 0% June 2012 June 2013 June 2014 June 2015 June 2016 60

61. Slide 61: Accolades

    Appendix 10 Accolades IASSA Readers Digest Australia Best Reporting & Communications Most Trusted Brand – S26 World's Most Innovative Companies 12th position Global Challenger Excellence in Integrated Reporting African Legal award finalist 61

62. Slide 62: Thank you

    Thank you

Aspen Pharmacare Holdings — FY2016 Earnings Presentation on 6ix