Aspen may have started the year on a good note, as British pharmaceutical company Glaxo- SmithKline (GSK) paid the JSE-listed company R761.07m to conclude its sub-Saharan Africa collaboration – officially ending the partnership between the two pharmaceutical companies, after its announcement in September 2016. This information stopped the share price from plummeting further, as it found support at 26,510cps and seems to be recovering.
The collaboration generated approximately R2.6 billion of gross revenue in the 2016 financial year. The two pharmaceutical companies entered into a collaboration arrangement for the commercialisation of a portfolio of branded prescription pharmaceutical products to increase affordable healthcare in sub-Saharan Africa. GSK started gradually divesting its stake in Aspen since November 2013, when it sold 28.2 million shares for about R7bn. Their reasoning? To deploy capital elsewhere in order to develop new products and diversifying its business.
GSK joins a host of pharma companies seeking to slim down and focus on growth areas by selling non-core assets. Investors seem relieved that the collaboration is over – ending the overhang caused by this uncertainty.
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With the 26,510cps level providing strong support from a 32% fall, Aspen could be set to recover and abandon its steep bear trend. A positive breakout would be confirmed above 28,800cps – go long – with potential upside to 35,000cps. Maintain a tight stop-loss at first, then establish a fair trailing level as the share price rises. Alternatively, continued downside through 26,510cps could see Aspen retest the 21,000cps support level or even the 18,000cps mark. In this case, refrain from going long.
Technical Analyst, Sharenet
Moxima has a B.Comm Finance from the University of South Africa and is a certified Chartered Market Technician Level 2, currently completing Level 3. She has been a technical analyst for 10 years, working for BJM, Noah Financial Innovation and for Standard Bank as part of the Research Team in the Treasury Division of CIB. She now runs her own business, The Money Hub, and consults for Sharenet. Moxima has been rated as one of the top 5 technical analysts in South Africa and outperformed the market during the recent recession. She regularly makes an appearance as a guest on CNBC Africa and writes often for Finweek and Sharenet’s Views.