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 Reports and Commentary from the Investment World

Reports and commentaries are posted here on a regular basis.


Ascent Pharmahealth Ltd


Ascent Pharmahealth Ltd (ASX:APH ), formerly Genepharm Australasia Limited (GAA)) is a generic pharmaceutical company and is a parent company of Genepharm (Australia) Ltd and Drug Houses of Australia (Asia) Pte Ltd.

Ascent registers, markets, distributes and sells generic pharmaceuticals, consumer skincare and over-the-counter medicines. Key subsidiaries are Genepharm, one of Australia’s top 5 generic pharmaceutical companies and Drug Houses of Australia, Singapore’s largest generic pharmaceutical company with products distributed across seven Asian countries.

This is a small cap generic pharmaceuticals company that we have made money on trading a number of times since the IPO listing on the Australian Securities Exchange in June 2004.  Check out the reports for "Genepharm" in our archived reports on our website.

The “Genepharm” brand continues to be the face of Ascent's Australian generic pharmaceutical products along with other leading consumer brands. The company's range includes:

Dermatology – a comprehensive range of dermatology products that enable pharmacists to provide complete treatment solutions, including products such as Oratane, Estelle ED 35, Zorac and Zindaclin.

Over-the-Counter (OTC) - products include Hairy Lemon, Uricleanse and Iron Melts which have strong consumer branding.

Skincare  – Avene and Klorane – Eau Thermale Avene is the No. 1 dermo-cosmetic in France and No. 2 in Europe for all products sold through the pharmacy channel. It is a range that combines pharmaceutical ethics with cosmetic appeal.

Organics - Ascent launched it's first organic skincare products under the name "Dermorganics" in July 2008. Dermorganics is a range of organic-based skincare products containing 75% organic content.

Hospital products – medicines dispensed in hospitals include Curosurf, the patented formulation for pre-mature babies.

The shares have languished for a long time in a narrow trading range, but some recent developments have drawn our attention to them again. These shares could easily double in the next year. Certainly, the conditions look right for some significant upside in the share value.

What has happened to pique our interest again?

At the end of July 2008 the Company completed the acquisition of Strides Arcolab's Asian business operations which included Drug Houses of Australia Pte Ltd, Singapore's leading local generic company.This acquisition expanded the Ascent Pharmahealth operations into 8 Asian countries with 400 registered health products. During 2008 the company also grew its field force to become one of the leading in-field sales operations to Australian pharmacies and launched its first new range of organic skincare products.

In January 2009 the acquisition of Green Cross Pharma (Singapore) was completed which further expands the rollout into Asia.

In October 2009 Ascent entered into an agreement with Pfizer to sell and promote Pfizer off-patent products in Australia. The Agreement represents a significant market initiative for both parties for the sale of Pfizer’s off-patent medicines via Genepharm’s marketing and sales force Australia wide. 
Under the Agreement, the Pfizer products will supplement Ascent's extensive range of over 60 generic prescription medicines sold to pharmacists across Australia and distributed directly by Genepharm.

Over the past year the Company has developed and expanded its range of prescription and consumer dermatological products to create a total range for the treatment and management of acne, psoriasis and eczema. This Genepharm Dermatology range is promoted by a specialist dermatology sales force to dermatologists, doctors and pharmacists to offer patients a number of contact points for the care of mild to severe skin conditions.

The results of the recent acquisitions and newly expanded range of products has already started to show up in the company's bottom line. On the 23rd February 2010, Ascent Pharmahealth Ltd reported its results for the full-year to 31 December 2009. The company delivered strong sales and EBITDA growth across its Australian and Asian operations, in a tough market. Australian sales for the second half of 2009 were $35.4 million, up 20% on the 2008 results for the same time frame. Asian sales for the second half of 2009 were $22.4 million, up a massive 109% on second half  2008 results. (Asian sales are for five months only and do not include the Green Cross acquisition).

Earnings before interest, tax and depreciaition ( EBITDA ) were $14.0 million. EBITDA/Sales ratio was 13.3%, this is an increase of 30% on the previous corresponding period. Positive operating cash flow of $9.8 million was achieved for the full-year period. The Australian operations achieved a gross profit increase of 8.3% on a 12-month comparative basis. 

These are certainly encouraging results for Ascent and indicate to us that 2010 growth could be significantly higher.

CEO Dennis Bastas, commented that “The Company has achieved growth in its Australian and Asian sales operations as its customer focussed strategies delivered market share increases. Ascent has seen significant increases in generic pharmaceutical usage in Australia post PBS reforms introduced in August 2008. This increase, along with customer growth and the introduction of a number of new generic medicines, has helped the business in Australia realise improved profitability despite increased competition. The acquisition of the Green Cross Pharma business in Singapore has also assisted the Company’s Singapore operations achieve solid growth in the face of a market downturn associated with the global financial crisis. The Australian and Asian markets continue to experience strong generic pharmaceutical growth as patent expiries and financial imperatives drive increased demand. The Company’s organic growth strategies along with the expansion of its sales operations in key Asian markets are expected to continue to provide Ascent with sustainable profit growth."
We feel that a rebound in the share price is about to commence. The company appears well positioned now to further increase its organic growth and the cost improvements introduced in 2009 bode well for sustainable profit growth in the competitive market of generic pharmaceuticals and consumer healthcare products in Australia and Asia. We expect to see market share growth in all its markets during 2010.
Buy Ascent Pharmahealth Ltd (ASX:APH ) up to $0.28 .

Note: Remember this is a small cap company and should be seen as a speculative, higher risk investment. Expect volatility in the share price.


Disclaimer: All the information above is provided as a service for individuals and institutions. It should in no way be construed as a recommendation as an investment. Investment decisions should be based on the risk tolerance and planning horizon of the investor. Market participants must understand that past performance is also not a guarantee or predictor of future results.