Okay. Good morning, everyone. Good to see you all here today, and welcome to Aspen's full year financial results for the 2024 period. In today's program, we're gonna have Stephen, who's gonna start us off with the performance overview. Sean will then follow with the financial highlights and review. Stephen will then return, and he's gonna give us the strategic review and some outlook, and then we'll move on to questions and answers. The attendees that are joining us online are requested to put their questions in the left-hand side of the screen, and that question box is already open. For our attendees in the room today, we'll be using a roving mic. Thank you all. Over to you, Stephen.
Good morning, everyone. Lovely to be here, and thank you for your attendance and for, I believe, there are many, many more online, so welcome to all that are listening. I think, if we reflect on where we are and where we're going to, this second half was a really important half for Aspen. We flagged it over a year ago as being a critical inflection point for Aspen, and indeed it was. We had some very, very important deliverables. Now, after the last seven to eight years, we've had pretty much a... You know, we building this, and this might happen, and if we operationalize successfully or tech transfer, then this will happen. You know, for the last few years, we've been flagging the, for example, the VBP risks in China. So there were lots of risks.
So it was always, this is where we're going, but there are these potential threats to the business. I mean, to quantify these type of things, the commercial pharma business had a couple of billion ZAR, over a billion ZAR in gross margin at risk between China and Russia, and in fact, China was even worse. So that was. That's a challenge we had to choose. We had to work out what we deal with. It's one thing dealing with the commercial challenge, I mean, the absolute number challenge. Probably the bigger concern from our perspective was what happens in China sustainably? Because China is a good market for what Aspen does, but would we still have a model that could work in China after all of this?
From a manufacturing that exists in the industry and in and the related sterile industry is what you do with GLP-1s. Now, what are GLP-1s? They are the products that people are using for diabetes, for weight loss, et cetera. It was important that Aspen take into this market, obviously, because it's a big commercial opportunity, but also it was a very big manufacturing opportunity as well. Given the shortage of manufacturing, where would Aspen and how would Aspen position ourselves? We'll discuss that pathway and where we are, and the idea really is for Aspen to be a participant. We really are hoping that we can be a party to assisting patients around affordability, and helping people slim down a bit. What we weren't expecting was that people would take the opportunity to slim the Aspen share price down a bit.
So that was a bit of a curveball. We have got commercial solutions regionally. You know, for those of you who know, we are about to launch Mounjaro in South Africa, that we hope to do and still in this calendar year, over the next few months. So that's the commercial, but we didn't have a commercial, we don't, didn't really have a commercial plan for the rest of the world. We certainly had a manufacturing plan. We've had opportunities, and we had to decide which opportunities to take. We'll talk about those. And we really and at the end of this year, we're in a pretty good space. We're pretty excited now about where we are. Business has been de-risked and a clear path forward.
But, you know, in life, we always. I've always said to you, "Rest is rust," and firmly believe it, and you wanna be. You gotta be very careful sometimes when you're at the top of the mountain. We don't wanna end up like the All Blacks and just not finishing the game in the last 20 minutes. So we into closure at this point. So let's move forward, and let's look at the different results and where we are. I've discussed the importance of this year and the de-risking of our commercial business. I mean, it was, it's been de-risked, albeit that the VBP impacts in China were larger than we thought, particularly on Diprivan, one of our key products.
We have successfully integrated some regional transactions, and we've got a platform set. So we've got a... We no longer talk about what if in our base. The base is the base, and now we move forward. There's no more, "Well, what other major threats are there?" We don't have these type of threats. In the business, as you know, Aspen has a very diverse portfolio of products, and we had a couple of really big products in China, which effectively we almost preempt because I see VBP as a patent cliff in China. Manufacturing, this is probably the... When you sit inside the business, and all things work nicely on an Excel spreadsheet, but this is where the rubber really hits the road. Have you got the skills in your group?
Can you really do all these tech? Can you keep things frozen, isolators? Can you keep all your machines running? This was probably the most important internal delivery for ourselves, was to show that what we built, we can operationalize. As I told you, we had ZAR 1 billion of risk in there that related to grant income, COVID vaccines, et cetera. You will also notice that we've had a sustained unwind of heparin stock. I think it was nearly ZAR 3 billion of stock there. So getting there, and hopefully, we've received some cash for it this year, but hopefully, Sean will show you there's some more cash coming in next year.
And then on the financial highlights, we had to achieve our just to get to where we hope to get to, we had to get our highest EBITDA in the second half. Our business will always be second-half weighted because a lot of the vaccines and manufacturing is sort of Northern Hemisphere winter, so they're seasonal. We had very good operating cash conversion, which was really important for us, and as I've discussed, the heparin turnover came down. If we look at the group revenue, we had 10% growth in revenue. We had a strong manufacturing performance, and it was led by the finished dose form and the heparin unwind.
You know, there's a couple of billion ZAR in there that relates to heparin that's is really a stock unwind rather than any profitability attached to it. The commercial pharma business grew at 4%. The constant currency, we were relatively flat. I'd point out to you, at the half, it was a minus three, so we had to have some growth in this half in spite of the VBP, just to get back to where we've got to. So it gives you a trend that the business now is moving forward from a negative into positive. So showing you what's what can kick in there.
And you'll see that the injectables are which is where we had the Russian and the VBP risk, and I'll talk to you, are the areas that are impacted. But the prescription and OTC business are a nice weighting between prescription, OTC, and injectables, means we've got a balanced portfolio of products, and they more than offset what happened in injectables. And we'll see that on the next slide, when you'll see even geographically how we perform. If you looked at China, if you took Asia and you pulled it aside out there, you'll see we have double-digit underlying growth in the business. And that was. And that just gives you, but it also gives you a sense of the geographical diversity.
So yes, we didn't perform in Asia, but fortunately, we performed in the Americas in South Africa, et cetera. We have a very balanced product portfolios between injectables, steriles, and OTCs, and we also have a very good geographical balance as well. What you will see too here is that the Americas are now larger than Australasia, so that Latin American region is really an exciting region for Aspen. For those that have watched you for a long time, we had to persevere, but we had problems worse than China in those initial days.
Certainly, I remember the board telling me, "Please exit Brazil." And I said, "No, it's an- it'll be an opportunity loss for Aspen." And we persevered, and look where it is today, and it's a, it's really one of the most exciting, if not the most exciting region within the Aspen business at the moment. Russia, we took a big loss in the first half, so yes, it's got an annualized decline, but it wasn't much in the second half. There's not much left, to be candid with you. What is heartening to see is that the European business in the Europe CIS is growing and has continued to grow, and we've got a portfolio and a team in place that are delivering results across Europe.
Prescription's been the biggest section for us now, and it is the fastest growing. It's accelerated. You know, in the half, we were at 7%. We're now growing at 15%, so there's some strong growth in there, some of it driven by currency. The difference between the 15% reported and 11% is currency related. Some of it is also the products required in Latin America. We've had good organic growth, battled a bit on the pricing in this period, and you'll see a decline here. What is worth looking at is when you turn over the page, you'll see as to being where we have some freedom with pricing around OTCs, et cetera, and it's now nearly a 50-50 split, which is an almost exclusively an Rx business.
The South African business continues to deliver, and the women's health products are also really assisting, and the anesthetic creams in the European business. We've got steady growth in OTCs across all the regions. To do this, you need good teams of people, of course, and because they, they've got to position them correctly on the shelf in the consumer's mind. But also, the brands have really good brand equity, but we used to have a business in Russia that did ZAR 1 billion . It does very little now, so it no longer will have an impact on results, a downward impact. We've had really good growth in Latin America and in South Africa.
This is an area that we've dropped a lot of turnover, and it's been the area that we had to address. There's some really good news coming into this section. It's not. We'll talk about it when we talk about strategy and prospects. But aside from the obvious launch of Mounjaro in South Africa, there's some other wins that we've managed to achieve, and so this is an area that's gonna bounce back strongly. Manufacturing was all about how we deliver on our sterile contracts. Finished dose form manufacture, which is where the steriles are, was sometimes the smallest or close to the smallest segment in here, and the value of those contracts coming through now shows you that it is...
You will see what a large it's now become the largest contributor and will accelerate relative to the other sections over the next few years, and if you want to get a sense of how big the second half was, you'll see that we grew at 33% in finished dose form, which is a great number. However, we were only 10% up at the half, so understand how much we achieved in the second half. We had an onerous contract in the API business. That's which resulted in us getting lower revenue. Unfortunately, those concepts are beyond me. I mean, I think when I was a chartered accountant, we had one statement, so this is beyond. This is something that the accountants can explain.
Heparin, we sustained the elevation, the elevated sales are explained by the unwind, the sale of the stock, and that's unwind is a permanent unwind. The future model is really working capital light, and effectively, we've got about ZAR 1 billion of stock on the... That's something that we need to work on, is how we actually ship the stock out of our system so that everything relates to what is effectively almost going forward. So with that, I hand over to you, Sean.
Thank you, Stephen. That's when I was sitting, preparing my notes this morning, I looked out the window, and I saw the Springbok bus on the other side. So, really proud thing for Aspen, and I think similar for the Springboks, making us proud on the global stage, and we're hoping that we'll emulate them and make us all proud for many years to come. Two financial highlight slides, which will just give us a really high-level view of where we've performed. Some of it, Stephen has covered already, so I won't sort of go through that again.
If we look at the first slide, on the left, you'll see that our revenue's up 10%, and the big driver there is our manufacturing business growing 25%, commercial pharma growing 4%, and bearing in mind, we had very strong growth in prescription and OTC to over... You know, to offset the decline in injectables. So a good performance from commercial pharma, withstanding the VBP impact. The standout performers, I think from a half, on a half perspective are our normalized EBITDA and our normalized HEPS. And I promise we didn't do this on purpose, but both numbers, you can see, have grown by 17% in the second half, so quite a strong growth.
You can see both in our EBITDA and our NHEPS from half one to half two, and that really gives us the foundation in building momentum to go forward with our new strategy, underpinned by our new de-risk commercial pharma business and also our sterile foray to fill our capacity. I think also important, if you look at the EBITDA, up 1%. That's 1% after absorbing ZAR 1 billion, as Stephen mentioned, in the manufacturing side of the grant funding and the loss of vaccine, the last vaccine benefit in the prior and some onerous contract, and also withstanding the impact of VBP. So we had to overcome all of that and grow by 1%. You can see the second half is testimony to where we are, where we're aiming to go going forward.
Standout performer, for me, obviously on the finance side, our working capital. Big underpin there is the unwind of our heparin inventory, which we dropped by ZAR 3 billion, which we did guide in the first half, and we met that guidance. I know a lot of you have always watched this ratio, but if you look at our working capital ratio as a percentage of sales, in FY 2023, at 55%. At the half, we're at 49%, and we ended the year at 45%, and we aim to keep that ratio at that level and perhaps down going forward. So a strong performance there.
That obviously is a good segue into how we ended on our operating cash flow, where we exceeded 100% cash conversion rate at 103%, up from 88% in the prior. If we go back previously, FY 2022, we were at 81%, a really nice trajectory back on a positive cash generation and supported by, you know, a permanent reduction in our working capital investment. On our normalized net financing cost, which is the third graph on this page, you'll see that in total, we were relatively flat at ZAR 1.2 billion, but it is the tale of two stories.
The one is, you can see in the dark blue, our interest has gone up from ZAR 800 million to about ZAR 1.2 billion, about ZAR 400 million up on interest, and that's driven by the higher interest rates, which we'll unpack in a later slide, and also our higher average debt levels. The counterbalance is that we have had a significant reduction in our foreign exchange losses this year. If you remember last year, we took a hit of about ZAR 400 million on our foreign exchange losses because of the volatility in the emerging market currencies, and that has been squashed pretty much down to below ZAR 100 million this year. So that counterbalances the impact of the increased interest cost and puts us in a pretty flat trajectory for the year.
From a net debt perspective, net debt grew from ZAR 22.2 billion up to just under ZAR 27 billion, an increase of ZAR 4.7 billion. We'll unpack that in a later slide as well, but that's driven by our acquisitions during the year, the main one being the one in LatAm, and our leverage ratio ended at 2.3 times, slightly above what we guided, but very comfortable and still well within the range of 1.5-2.5, depending on where we are with our acquisition journey. On to gross profit percentage. On the gross profit percentage, if I start off with the commercial segments, and I'll start off with prescription, prescription being our largest business segment, supported now with that Viatris LatAm transaction that we did and was effective in last...
From last year, November. You'll see, if I just sort of take you through the bars, to navigate the... We start with the FY 2023 margin on the left. We then talk you through the two halves, and then we show you the full year margin on the right. So for prescription, you can see we ended the year pretty much in line with the prior year. There was a bit of mix between the two halves, but overall, a pretty steady margin, and if you remember, we do have-- That's after having as well price cuts in the Australian market, but we have got quite good margin benefit in our new LatAm business, that that's also helped to drive our margin for this year.
We do anticipate the prescription margins are growing in the new year, because we're gonna have 12 full months of the LatAm business. So I think from a guidance perspective, you can look at as an increase in the prescription margins for the year ahead, a marginal increase there. On the OTC side, we ended last year at 58.2%, this year at 58.7%, so a nice trajectory there, a nice jump. Our enhanced portfolio sales mix has ensured that positive trend. And obviously, we continue to refresh that portfolio and drive and optimize the gross margins. For OTC, we do see this margin staying pretty steady in FY 2025.
So from a guidance perspective, you can take that as a, you know, as a steady margin going into the new year. Then we get to injectables, and there you can see the impact of VBP. We started the year at 59.7%, 59% in the first half, and then with Diprivan coming into the VBP net in the second half, our margin has dropped down to 57.3%, with an overall full year margin of 58.2%. We do anticipate that the half two margin will be the margin that you can expect in the year ahead for the injectables, obviously, as the VBP now is out of the system, and that seems to be where we expect it to be in the new year.
But the power of a diversified portfolio, I think Stephen spoke about it in his sales slide, where you've got a very even split, obviously more weighting to prescription and OTC now than injectables. Injectables is now number three in terms of segment size. When you put all of those three together, and you know, and look at the... We're now at a much lower trajectory now that we've unwound into the toll model, and obviously with the sterile contribution coming into play, we do see quite strong margin growth coming from the manufacturing division in the new year.
From an overall group perspective, you'll see that our margins have dropped from 46.2%, ending the year at 43.5%, and that is predominantly a function of the mix of manufacturing, being a much larger mix proportion of sales than commercial pharma. Because if you look at commercial pharma, if you recall, the margins are relatively flat year- on- year, and it's just really the mix of the business that's moved us into this lower margin trajectory. We do anticipate, again, for FY 2025, with the heparin now at its new lower level, the increased sterile contribution coming into play, the steady commercial pharma margins going into the new year with a slight increase potentially.
We do anticipate that the gross margin for FY 2025 will at least get to what we were in FY 2023, and perhaps a little higher. On to normalized EBITDA, I think maybe just to navigate this slide. So what we've got here, we've got revenue, gross profit going all the way down to normalized EBITDA, and we're comparing our current year's performance versus FY 2023 at a reported, and then on the far right, at a constant exchange rate base percentage. So if we just...
First of all, I think we've unpacked the gross margin already, but you can see that our 10% revenue growth translated to only a 3% gross profit growth, and that was a function of the mix that we covered in the previous slide, and also some impact from the China VBP on the commercial pharma margins. Very proudly, on the expenses line, if you look at it from a constant exchange rate perspective, we only grew our expenses at 4% relative to 5% of turnover growth in CER, and you can see our expense ratio running quite tightly there, under 23% of sales. From a normalized EBITDA perspective, as we've already gone through, we've grown at 1%.
You'll see our EBITDA margin is down at 25.2%, relative to FY 2023 of 27%, and that purely is a function of the increased manufacturing mix this year. For FY 2025, with the improved gross margin mix from steriles and the lower heparin sales mix, we do anticipate EBITDA margins returning back to the 2023 EBITDA margin percentage levels of around 27% odd. I think just again, to emphasize that this EBITDA being up at 1% is after having absorbed ZAR 1 billion impact from our manufacturing and another probably around ZAR 1 billion from the impact of VBP in Russia in the current year. I think overall, we've de-risked the business, and I think we've got a solid platform going forward. On to finance costs.
If we look to the right of the screen, you'll see the evolution of our interest rates over the last period of time, starting from 2023 half one, and you can see how it's jumped up to 0.8% in 2023 first half up to 3.6%. We've then put the average for the year, so last year we ended at 3.2% average. Then you can see how it's hopped up this year to 4.4% at the half, up to 5% in the second half, and ending at 4.7%. If you remember, we did guide that our interest rates would go up between 120 and 150 basis points, and then we've pretty much come in on that guidance as we said.
Going into the new year, we do anticipate our finance costs to increase. I know it sounds counterintuitive, because we know that the interest rate cycle's at a peak, and we are gonna start seeing, and we have started to see interest rate cuts. But obviously, going into the new year, we still, we've still got the residual carryover of the high interest rates from this year. You can see that in half two, we ended at 5%, so that'll carry through into the new year, and we'll only start to see interest rate benefit, I think, from FY 2026 onwards. In addition, we've also started to repay the IFC loan that, if you remember, was at a 0% base rate.
We expect to pay EUR 120 million of that back in the new year, and that will then be replaced by interest-bearing debt, so that'll also put some pressure on the interest line. From a guidance perspective, we expect interest rates to increase between 60 to 80 basis points from the FY 2024 closing interest rate. Very proud to announce, and I can see we've got IFC representation here, and thank you. We've now managed to raise or secure funding of EUR 500 million from the development finance institutions, of which IFC is one, Proparco, DFC and DEG.
They've really been supportive, and this financing will be, you know, will be used to enhance our capital structure mix, and also, it provides a lot of support and confidence in our sterile capacity journey in Africa, for Africa. So we're very happy to have announced that, and it certainly puts us at a very strong position from an overall funding mix perspective. So thank you to the DFIs for that support. And, you know, from an ESG perspective, a really big tick. We've got to go through a lot of hoops.
You can't just get this funding and, you've got to go through a lot of ESG hoops and commitments, and I think we've ticked all those boxes and worked in a very strong and collaborative way with the DFIs. So we're hoping to, yeah, to use that money wisely going forward. From a foreign exchange perspective, you'll see the drop in the, in the foreign exchange losses from the 434 down to the 64 million in the current year, so that's what's counterbalanced the, the high interest increase, and that little graph on the right, you can see, how, you know, how less volatile. I didn't put the previous year's one, but that looked like, spaghetti compared to this. So you do have...
If you look at just towards May and June, you can see that, look, that little blue line, for example, and I think the and the gray line starting to pop up there at the end, and that's the peso and the Brazilian real starting to weaken against the euro. So we do anticipate. And obviously, you also noticed the ZAR has also got stronger, in the last period of time. So, you know, with the stronger ZAR, and we do anticipate there could be some weakening of our reported results if the ZAR continues at that strength. And that would be that's the main underpin why all of our guidance has been provided in CER, so that we can give you proper guidance without the impact of currency volatility. Onto probably my favorite slide.
The accountants love this slide, but it certainly wasn't my least favorite slide for two years, but definitely my favorite slide now. So if we perhaps just look at the graph on the right, I think you saw it on the very first page, but just to show it in a little bit more detail, you... That depicts our net working capital as a percentage of revenue, and you can see how we've dropped from FY 2023 through down through half one of 2024 to 49% to 45%. And if you recall, our API business has got a much longer working capital cycle, so for those of you who want to benchmark us against other pharma, if you strip that out and exclude the API business, we're down at 36% at the end of the year.
Still not where we wanna be. We wanna probably be below 35, but certainly a big step, if you look at it from 36 from 44 last year, a big step in the right direction. If you look at the graph on the left, that's our operating cash conversion cycle. The light blue line there just shows what the ratios were in each of the halves. So, you can see that in H2 2022, we had 117. Last year, our first half was 58. We then came up to 115%, in half two last year, 89, in the first half, and now at 115. The red line is our target of 100%, cash conversion rate.
But the most important line is that very dark blue line, and that takes our twelve-month moving average of our cash conversion ratio. You'll see for the whole of this financial year, you'll see that dark blue line is above the red line, which means we've been over 100% on cash conversion for the full twelve months, rolling, for this financial year. The big underpins there, obviously, are the heparin unwind. We do also see further opportunity to reduce inventory levels. I think Stephen's mentioned that we've still got ZAR 1 billion of, let's call it old model heparin, that we wanna liquidate. And we've also got opportunities within the broader business, both in manufacturing and commercial pharma, to drop inventory levels further.
So that will be a next an area we're gonna focus on quite a lot in the new year. So I think the big takeaways from this slide are the operating cash conversion ratio exceeding 100% at 103, and the net working capital ratio returning to FY 2022 levels of 40%-45%. From a guidance perspective, we expect to at least be at 45% next year, and hopefully, slightly lower. Onto net debt. Just to sort of talk you through the moving parts here. On the left is our net debt at the FY 2023 of ZAR 22.2 billion, and on the far right, we ended the year at ZAR 26.9 billion. If you look at the bridge between, we've generated operating cash flows of ZAR 8.3 billion.
If you're wondering why that's different to what you're seeing in the operating cash flow, we have also funded ZAR 2.1 billion of the Viatris transaction through operating cash flows. So what we do is we add that back in that block, and we put the funding in the block on the right, in the acquisitions block. So if you take the net of the ZAR 8.3 billion and our CapEx spend for the year, ZAR 3.8 billion, and a positive free cash flow there of around ZAR 4.5 billion, we've obviously got our dividends. And then you can see the big outflow for the year is our acquisitions of ZAR 7.7 billion, of which the big one is the Viatris LatAm.
We've obviously got Sandoz in there, and we've got its other smaller bolt-on, IP acquisition sitting in there as well. From a leverage perspective, we ended the year two point, to be precise, 2.28 times, but we rounded it up to 2.3. And for FY 2025, based on the strong cash flows we're expecting, we do expect our leverage ratio to dip below two into the FY 2025 period. I think the other point to make on this slide is that, we've funded all the debt this year, but we haven't had the full benefit of those profits in this financial period. So that cash benefit will come through next year on the profit line as well. On to intangible assets.
You'll note that we're having quite a big increase in our impairments for the year. It's gone up. If you look at the graph on the left, this is our net impairments, so gross impairments less the reversal of impairments. And you can see in FY 2022, we were at ZAR 1.2 billion of impairments, slightly down at last year at ZAR 1.1 billion, and that's gone up to ZAR 1.6 billion, a 49% increase in impairments. The big driver there is the VBP impact that we've picked up on Fraxiparine and Diprivan, which was not anticipated either at the half or at the prior year. We knew we had VBP impact. We didn't anticipate the impact of it at this level.
We have got future risk mitigation strategies in place, and, you know, if, you know, if those come to fruition, then we do not see any further impairment risk. However, very unpredictable. If something does change in the market, then we'll have to look at you know, our view on these impairments going forward. But just to put it into context, I mean, impairments at a total level are 2.2% of our net book value of 72 billion of R, so only 2% of our R is impaired. The other thing to note is if you do a full valuation of your intangible assets, we've got 60% headroom above the 72 billion. But unfortunately, as accountants do, we can't write anything up. We can only write things down.
So the focus is always on impairments and never on... You can only write things up to the original book value or original cost, but not above that. So just to bear in mind that, you know, if you look at our whole portfolio, we are well, well valued. It's just unfortunately, you only look at negatives when you look at impairments. I think the positive is that we have, and probably similar to what I said in the interest rate slide, we do anticipate interest rates softening going forward, obviously, which means also risk-free rates and discount rates will start to soften, and so that will have a positive impact when we do our impairment assessments going forward. We do see that discount rate softening over the next two to three years.
From an income tax perspective, we ended pretty much in the range we guided for the year, for our normalized tax rate between 16% and 18%, and our all-in tax rate of 22.9%. That went up because of the impairments, because impairments aren't tax deductible, so you do have that increase in your all-in rate, but certainly well within the guidance. Obviously, with the increase in our sterile contribution, we do anticipate tax rates lifting a little bit in the new year.
And then we all, as everyone is, there's a lot of global uncertainty around BEPS Pillar Two and its impact on the business, so we're gonna be going through a full assessment of that in FY 2025 and come back to you on that into the future. But it's certainly very uncertain at this stage. You speak to anyone about BEPS Pillar Two, and they, they've all got very different answers. From an ESG perspective, Aspen is, you know, fully committed to running a sustainable business in a very responsible manner. As one of our KPIs in FY 2024, we had to come up with with goals.
We've put all of our sustainability objectives into a pot, and we've come up with 16 sustainability goals, which we feel will give meaningful impact to the way we run the business into the new year. We've put those in four pillars: patient, our people, society, and environment. Within those, we've set KPIs, which I think will be published in our integrated report, which comes out, I think, at the end of October. We will start to measure ourselves against these goals and also link it to remuneration outcomes. We certainly are fully committed to sustainability and sustainability goals in terms of our overall balanced scorecard approach to running the business in a profitable but sustainable manner.
Perhaps just a little snippet on our renewable energy projects. If you recall, we did guide you that we were gonna be launching our plastic waste to energy project early calendar year 2025. I'm pleased to report that is still on track, and following that, Quebec, our Quebec site will be fully off the municipal grid. As we sit now, 18% of our electricity consumption is from renewable energy, which is up from 11% in the prior year, and obviously, that'll have quite a this new project will have quite a big impact on that ratio into FY 2025. And you can imagine the benefits it's gonna have on carbon emission as well. So we're very proud of the initiatives.
And if you look at the far right picture there, you'll see all those solar panels. That's not in South Africa. That's at our NDB. You might have seen it there when you visited, and it was snowing, but the sun does sometimes shine in France, and they also generate solar power in France when it's sunny. Certainly during the Olympic period, they had a lot of sun, so our projects across the globe are progressing to plan.
We do have some nice slides in the appendix around how we providing access to medicine for all of our patients and the journey that we've followed over many years, and we've got some little snippets there on how we've reduced our water consumption and electricity consumption just to give you a sense of how we're gonna be measuring ourselves going forward, but just overall, fully committed to sustainability and all the objectives around it. So on that note, I'm gonna hand over to Steve for the most exciting part of the presentation, which is the strategic review. Thank you, Stephen.
Thank you, Sean. Thank you. Well done, Sean. I mean, for those of you that were doubting, I think Sean has proven that he really does have a black belt in budgetary control. Yeah, so well done, Seanie. And only advice I'll give you is, if I go back 20 odd years in South African Druggists, we did a one-off journal entry. We just wrote off that IP in one go. We got a tax deduction in those days, but I've gotta give you that. It's gotta be worth it, gotta be better than all the theory we've gotta go through here. And I know the auditors are cringing, but I have begged them a few times just to knock it off. Anyway, here we go. Onto a strategic review.
So in this review, you know, we find ourselves in a very sweet spot in the industry as Aspen. We're really well positioned with, you know, commercially and from a manufacturing base. And just to have a little bit of history here, you know, have we ended up here by accident? Is that? Was it just we're just fortunate? But I think just to give you some grounding as to how we got here. We've got a strong relationship and partnership with multinationals. Those of you that know have worked with us over the decades will know that that's been core and fundamental to our growth. Many of our key transactions have come because we're good at manufacturing, we fix factories, we're able to get commercial opportunities as well.
What we noticed in Big Pharma was a big shift in their focus, and they were increasingly moving to high-value pro- high value units per, per, high value per unit products, and many of these products were in the sterile space. What it does, of course, at those prices and those volume, and those type of manufacturing, it made their businesses less relevant in emerging markets. So we decided to match the shift and to see where the gaps might come, and that's why we've spent a lot of money building up a sterile platform. And we've built a strong commercial footprint focusing on emerging markets, because we think this is where the gaps and the opportunities will come. Filling our capacity really will have a material impact on Aspen. It's been incredibly capital intensive.
It's very resource, human capital, not just money, it's human capital, and it takes up a lot of resource. And it's taken up years and years of time and effort, but it's all coming to fruition now, and I think we've managed to put ourselves in the forefront of the industry in terms of technologically and where it's going. We can make mRNA, insulins, vaccines, GLP-1s. So when someone comes and says, "Can you make the mpox vaccine?" We get the dossier, we see what it is, and we say, "Yes, we can. Yes, we can make the mpox vaccine." So we're in a situation where we have skills, capabilities to address many, if not most of these, the needs in the sterile business.
Our emerging market footprint is a particularly valuable footprint for us, and it's given us access, once again, working with multinationals. You've seen the transactions that we've done with some of the largest multinationals around the world, and they've been. A lot of them have been regional. And I think what you should be aware of is we think this is. Well, we think this is something that we can keep building on. There are more opportunities out there. There's some further ones that are under discussion, and, you know, we'll announce them as they come around, but that footprint is definitely particularly relevant. If you are unsure, you just have to look at the history of what's gone on and, sit in the room when I'm there with people that are talking to me at a global level.
There's real interest in what people can do with us on this footprint. So let's talk about the GLP-1s. This has been. I think of the last six months since I've spoken to you, I've probably spent five months in this space. It's been a space that we've, as a group, have had huge focus on, and how we position ourselves is important. So let's understand a little bit about the industry, which I'm sure a lot of you know, but let's at least make sure we're all on the same base. It's been the largest opportunity for global pharma. You just have to see where the innovators in this space are.
They've mastered. They're the biggest in America. They're the biggest in Europe, just as a result of having these products in the space. There really have been breakthrough treatments, and there's more and more. They're finding more and more benefits way beyond diabetes and weight loss. There are many, many other things that are coming through with the latest results. However, there's a lot of complexity in manufacturing, and the capacity in these spaces globally is very limited and prohibitive to put in. The innovators themselves, and for those of you that understand, have been in the market or trying to acquire these products, you simply can't get the products.
The innovators have insufficient capacity, and they are building capacity at a rate to try and meet the capacity gap. And they themselves have stressed the global supply chains for these products at every level, whether it's API, whether it's devices, whether it's the manufacturing and the sterile fill. The markets are undersupplied, particularly, you know, even the U.S. is undersupplied, and I say even the U.S., because that's always the first port of call for these companies. And the products that are available are really, really, really prohibitively expensive. Yes, there's a portion of the market that can afford them, but there's only a portion. So you've got an undersupplied market, and you have a price point.
So when you sit back as us and you say, "Well, you know, what is the size of this market?" And it's very hard to call because you say to yourself, if the market was supplied, if the price point was affordable, what size will this market be? Now, when you sit with a manufacturing hat on only, you're only thinking about volume. It doesn't matter whether you make for A, and he's selling at a thousand, and B, who's selling at fifty, you know, it's all about the volume because you, you're not... don't be confused. You're not getting a higher price by selling to A. You, you're gonna get the same price. You've probably got more chance of selling at a higher price to B because that capacity is tightened further.
Capacity is at a premium, and what you're seeing is that many generic companies are really battling to get access, and the development companies, to capacities that really the door just keeps shutting in terms of the capacity. It's a bit like airplane seats. You know, we're now getting to the expensive ones. So there's been a flurry of activity in this space, and the reason there's a flurry of activity is that some of these GLPs are coming off in some key markets outside of Europe and the U.S. in 2026 , calendar year 2026 . And there's patent expirations that continue during 2026 all the way through to, I think, 2032 or so, or 2033. And some of these markets simply have got no patents even filed in them.
But I just wanna stress from that Europe and the USA are not early patent markets. So big markets, over $100 billion projected, et cetera. We don't know where the top and the bottom is. I've put two pictures on there for you. The first one is what we call an auto-injector. So you pull the top off, you don't see a needle. Now, that's the type of product that we make in our French facility. The base of that product is a pre-filled syringe. At the bottom is a multi-dose pen. In that, underneath there is a cartridge, which we make in our South African facility, and you do see a needle. So you... The one you sort of throw away, you use it once, one and done, and the second one is like a month's supply.
So you take it, injection, you got to take the needle off, throw it away, and then put the needle back on. So pretty similar to what people often see with insulin and insulin pens. But just so that you understand the difference between auto-injector and a multi-dose pen. So what have we done? We've had a look at it, and what we've managed to achieve was a license agreement for IP to these early exploration companies. And there's both a commercial and a manufacturing opportunity. To date, we've only really spoken to you about manufacturing opportunities, and I'm gonna explain the distinction now. And it includes both for multi-dose pens and auto-injectors. So manufacturing will impact both our South African and our French site. The IP around these GLP-1 is exceedingly complex to develop, and the license for us is a significant, significant coup.
It's not easy to get access to these products. The reason we did get access to these products is because of the manufacturing capabilities and the capacity we have, and that really has been the catalyst here. Without that, we wouldn't without those capabilities, we wouldn't have had the opportunity commercially. And the opportunity commercially is effectively Aspen has its own brand to put into the market. And that's, you know, those numbers could be pretty large, and we really are dependent. The values are, you can do it on a spreadsheet and, you know, you run out of zeros. But the reality is that you've got to have a regulatory pipeline. You've got to get the products registered. These products are hormonal peptides.
They're not. They don't have guaranteed pathways by country, but it will get registered at some point, and we have good IP, and it's just with how closely we get to market formation. Interestingly, from a manufacturing point of view, and this was the quid pro quo to getting the commercial operation, we the exclusive manufacturer to the license holder for total global products. So you've got a license holder that owns the IP. They look for commercial partners around the world, and the license holder volumes for Aspen Manufacturing will be supported by global generic players. And this will include the U.S. and the European offtake.
What we see here is an opportunity to supply and to have continued supply running and growing supply running right into the mid-thirties into both our sites on this and that. It's an exclusive supply agreement from us. They will only buy from us. They exclusively buy from us, and we in turn will supply them. We're not exclusive to them. We can manufacture where we want, but we will make all of their volumes, and we will also have access to the IP for selected markets. Those selected markets, there's a few exceptions, but are largely outside of Europe and the USA. As I've told you, the opportunity is not without risk.
You know, regulatory timelines are never certain, but this is one Aspen has chosen to pursue this opportunity. And, and it's really you've got to look at it and say, the return per unit manufactured for the license holder, plus the opportunity for additional returns on commercial sales, effectively the profit on the products you sell by Aspen, and we had to take that and compare it with a finite long-term supply contract only with a lower per pen unit with higher per unit returns and higher volumes. So that's the balancing act that we've had to do. And I think when you cut through it all, what is our downside here? Our downside is it doesn't achieve what it's supposed to, but we still got the manufacturing, and at that stage, it's tightened even further.
So we don't lose the opportunity to manufacture or contractually manufacture, but we've got a potential opportunity here where we can harness maybe the biggest opportunity Aspen could ever have been involved in, would be involved in. So that was the sort of risk-benefit we had in looking into GLPs, and I'll take you through it a bit more when we look at manufacturing. Commercial pharma, we spent a bit of time here already, and when I spoke to you at the start, our revenue was up ZAR 3 billion, and that was before Russia and China decreases of ZAR 2 billion.
Happy to say financial year 2025 doesn't face the same challenges, and we've absorbed the impact of China, and we did a transaction with Sandoz, as you know, where we bought some products from them in China, sold some products in Europe, and that's gonna work well in terms of giving us some sustainability in China. None of their all of their products were also with VBP impacted like us, so we have no more exposure to VBP besides the annualizing of some things into the first half of the new year from the second half. But I think for your assumptions, you should assume no more VBP. We also don't have any more. Russia, CIS is no longer a material problem.
There's no turnover left to lose, really. We will have added impact from the annualization of the acquisitions. As Sean told you, you know, we've got. We haven't had the full value. We've got the full debt burden, but we don't have the value of those coming in, but they will also contribute to sales, and that includes the Lilly product portfolio acquired and the products acquired in LatAm. We expect growth in all segments, injectables, prescription, and OTC. We also believe that if we're successful with the GLP-1, these will be big contributors to revenue from financial year 2026. So in the calendar year 2026 period, sorry, not financial, as it unrolls. 2026 is a big period for patent expirations.
And we're working on further bolt-on transactions, and we're hoping to leverage the footprint, which I discussed with you earlier. Let's look at the different segments. Injectable revenue gains projected to recover to around financial 2023 levels. So that's a big comment. We've got to get. We were down 10% or around about 10% odd in injectables, and we expect to pull that off. We pull that back. We've got organic growth, which we've shown in the previous period as well, and we've got products that we've acquired in China, and then there'll be some offset for what we've sold in Europe, but the net impact will be that we get injectables back to the levels before. South Africa will depend. It depends on the Mounjaro launch.
We're hoping to launch at the end of this calendar year, so in the next two or three months or so, and that will also positively impact the injectable business. The OTC business is really steady, and it's sort of shown growth year- on- year for those of you that followed us, and there's strong brand recognition, and we don't think it's gonna do much different. It's gonna keep growing. Prescriptions, which is our highest section, that business will have very strong revenue growth. It has organic growth, but it'll be boosted by the product acquisitions, particularly around LatAm, South Africa, and what we've achieved in China. We expect the revenue growth in double digits, so that's what we're targeting to do in constant exchange rate.
If we now move to manufacturing, finished dose form is really where we want to spend time here. It's a main contributor to revenue, and it's an absolutely core growth driver. Just to give you a sense of how one sells capacity and the volumes of capacity. So what do we do in a site? We fill a product, and then we pack it. Fill it means you put the liquid into that pre-filled syringe, and then packing it means you put it into, you simply put the label on or, put the device around the product in the, those devices that you saw, like the pens, and that's called packing, and they've got a sort of equal value. When someone says: "What do you take?" You say, X for this and X for that.
When you get very high volume filling, so someone that comes to you and says, "Hey, I want to take your whole line, and I want it for my innovative product, and I want the whole line." And you say: What do you want to do this? "So we just want to fill with you. We've got all our own auto injector packing capabilities. We've got our own device. We want to do it separately." You say, Fine, and you'll get a really nice number. It's X, and it's a big number, but you've now got packing capacity that's unutilized, and you will never utilize it because they've taken so much of your filling, so you're not gonna have anything to pack.
If you get, for example, someone who says, "We can take your whole line, we want a hundred and fifty million units from you," et cetera, "and we'll fill and pack with you," you literally get double. And your overheads aren't that much more. You've got a few extra people in the packing area, so that's much better. And then you've got someone in the middle that says: I can't give you a hundred and fifty million. "We can give you fifty million, but we'll fill and pack with you." And there, your opportunity is three times. The value you get for three times. So you've got to decide where you want to, where you want to be here.
Manufacturing people, if you just speak to the manufacturing team, wow, we just want, we want, the second option because no tech transfers, easy to make, we haven't got lots of changeovers, and it's easier to... If you sit next to Sean and he says to you: "Now, I want you to do the bottom one. I want to know where we make the most profitability," and our focus now is gonna be in that section. I'm not saying we won't do work in the first two, but our focus is going to be there, which it does maximize value, and particularly if Aspen can get its own off-takes through here, we have certainty on off-takes and sustainability.
And for those of you that followed us over the years when we built our big facilities in South Africa, we started with third-party manufacturing, predominantly to full capacity and ultimately moved to our own products. Obviously, it would be utopia for us to be making for ourselves only, and that's certainly. Hopefully, it's the first step in achieving some of that. GLP-1 manufacturing presents an opportunity for both South Africa and France. We've reserved 50 million units of pre-filled syringe capacity for our own use, and we're the exclusive supplier to the licensor for the GLP volumes. And we have further manufacturing and commercial contracts under discussion. Sorry, I'm just jumping around now, I think. Sorry. And there are, and we'll talk about where those are and where we have some capacities.
If you look at where we're going in terms of our projection, in terms of capacity and capacity full, at the moment, our capacity is very, very weighted towards our French facility. It takes with South African facility to come through in a second wave. So that's the impetus in the second wave. I think, really starts to hit its straps financial 2026, 2027, 2028, and I think the GLP opportunity will be pretty big for the South African facility as well, because South Africa will be making pens, and pens are likely to be cheaper or more cost-effective than single dose, and so volumes are likely to be there. Now, the timing is dependent on... So we've got key contracts. We've got Novo contract to come online still, and Serum contract. And here we are very dependent on the regulator.
So people say: "How much are you gonna do in H1 or H2?" Quite hard to tell you when you've got a regulator out there who can delay by six months, nine months. So we have. We are. We've done really, really well with the tech transfers. We can do all these products. There's insulin lying in the factory at the moment or on the line as they are on the pediatric vaccines. We are very dependent on being given a priority review by SAHPRA, the South African regulator, and there's been some really good progress. You'll see the talk around localization and the importance of priority reviews for local manufacturers, and that's a critical step for us, and we're positive that that's where it's gonna go. And that brings you...
And if, given the shortages of insulin in the country, hopefully that also has a really speedy review. And if we have a speedy review, you know, we're selling, we're selling insulins at the very least, you know, towards the end of beginning of next year. If it's not as speedy as we like, you could wait another six months. So it's very hard for us to give you exact dates on everything. What we can tell you is we will get it all. It's just, it's just the timing depends on the regulator. The GLP manufacturing will be for both South Africa and France. And there's been. I had so many questions yesterday around contribution and numbers, et cetera, so I just thought, let's, let's just put it out there and understand what we did.
Before we gave you guidance on contribution, contribution without, which we said converted to 70% of EBITDA. We didn't change any numbers. The contribution we've said to, we said to you was in financial year 2026, was ZAR 4 billion. If you take 70% of ZAR 4 billion, it's ZAR 2.8 billion. We've already achieved over ZAR 500 million, actually, in the first half. At 70% of ZAR 500 million, it's ZAR 350 million. That is why we've said to you that the, what we guided previously was, was effectively ZAR 2.8 billion.
We've realized ZAR 350 million , so we have ZAR 2.4 billion-ZAR 2.5 billion odd, that we still expect as incremental on this year, that we expect by financial year 2026, and that also takes into account all the regulatory noise, et cetera, that could be there. But that's the very least, and we've assumed very little of Serum in there, because over and above regulatory, we've got Gavi, et cetera. We're trying to keep this to where we're very certain. The current guidance and I've told you through that. That guidance, I want to let you know, hasn't changed. It's been maintained.
And regarding how much we get in 2025 and how much we get in 2026 is dependent on the timing, and I'll give you some views on timing a little later when I give guidance. But of course, if the GLPs come in in 2026 and other contracts come online, they may impact generally financial year 2026 more positively and give us more certainty to give you 2027, 2028, et cetera. And from financial year 2027 and calendar year 2027, which will impact our financial year 2028, we expect a really big uptake from the GLP-1 volumes. And that's just that alone, if we achieve what we hope to achieve, could be a material contributor to just closing our total gap.
Beyond the ZAR 4 billion, we've told you before that we could get up to ZAR 8 billion of contribution, and we think that could be a material contributor to getting us to that number and above. So that's a story on commercial. So in commercial pharma, we've told you we're expecting in constant exchange rate double-digit growth, giving you pretty specific guidance around manufacturing, and there are some opportunities in GLP-1s which we see upside on. So let's let me start on the commercial pharma business. We've given you the guidance, as I said, on revenue, and it's really underpinned by the organic growth, which we see continuing and the acquisitions. The revenue impact of VBP has been absorbed and it's out, it's really off the picture, and our sharp focus is really to integration.
Integration is an important, is very important, as we have been successful now. We're putting two teams together in China, and integrating those teams, and shaping the team, shaping the numbers of the team is important for Aspen to get that right as well, because that'll also improve profitability. We expect growth in all three segments, and the footprint we've got in emerging markets sees us well positioned. That could also impact the years, if we do transactions in the year, where people want to put product on our footprint. The manufacturing revenue is expected to decline in financial year 2025. Most people don't like to see that.
I'm quite happy to see that, because it's a reflection of the fact that the heparin turnover will decline by ZAR 2.5 billion as we transition to the toll model. And that's why Sean has guided on the higher margins, et cetera. We do expect double-digit growth to continue in finished dose form, and it's gonna be build. And we hope this is something that we build over the next five to the next next year, and the next five to ten years, is the increased sterile contribution. Heavy seasonal vaccine weighting. Some of these are winter products, so there is seasonal weighting. It is in H2, and I'll come to that as well.
And we told you what we expect the EBITDA to increase by, and the risks around timing. The best estimate that we can give you is that we will get at least 50% or over 50% in the first year of that ZAR 2.5 million, and the balance into financial year 2026. We're obviously hoping, you know, with earlier with the priority review and earlier registrations around insulins, et cetera, we can get you a much higher percentage than the 50%. That percentage probably approaches 70% or more. So when we look at the gross margin and EBITDA margin percentages, they're both set to increase. The commercial pharma percentage should be relatively steady.
Sean's guided to a little bit of growth, but then it gives you t he manufacturing will increase simply because of the change in mix. Lower low-margin heparin, higher sterile, steriles. And you remember, steriles is almost, is, has very high contributions. We pay for very few components, so it's... The incremental business is very working capital light as well. The EBITDA growth will be driven by absolute increases. And what are those absolute? You've got commercial pharma. We've told you double digits. We've told you gross margins are steady, so the EBITDA logically will follow. For, in, commercial pharma will follow, and we've given you very good splits, I believe, in terms of what, how to how you can model your manufacturing. Of seasonality, I mean, these things are very hard to call. You know, it depends. Sometimes you get early off takes on vaccines, sometimes you don't.
But it, we, the best guess we can give you now, the best guidance we can give you now, is that our split's likely to be 45-55, H1 to H2. Sean's taken you through the interest rates, the carryover of interest rates, the tax rate, and the tax rates that are likely to increase as we have more profitability in manufacturing, on a relative basis in the business. We do see the operating cash conversion expected to exceed 100% again, so some of that is further liquidation of some of our stocks. And just generally where our run rate is, and not having the uncertainty of, you know, heparin volatility in there.
Of course, that all leads to lower leverage ratios going forward, and that ratio of less than two is anticipated. Currency is something we don't call. I mean, Sean said it rightly. It's very hard and will impact results, whichever way it goes. You know, when our reported is higher than constant currency, then you know, the rand has weakened relative, and when it strengthens relative, then our constant exchange rate will be higher than reported. But that's our story. It's been a really, really busy time. A busy time fixing, making sure we can operationalize those sterile contracts. I think that was really the single biggest goal for Aspen.
If you had to pick one thing for us, that was the one thing that gave us some confidence that we, we've got something really exciting in sterile manufacturing. But, a tremendous amount of work has gone into GLPs and GLP-1 strategies. Not, not that you can fit it on a single slide or two slides, but, some. It's a, it's a- it's been a long process and a really thought through process of how we get here. And if we can get it even half right, we'll have an unbelievable kick in commercial pharma, and I think a lot of our manufacturing will be spoken for. So, yeah, and I think that's it. So we're into Q&A. Hopefully, that was understandable.
As I've said, the one thing that you'll pick up in the strategy, there's not "if this happens," and showing you pictures of sales teams in China and what we can and can't do, and what we hope to achieve one day in sterile. So, a pretty understandable, I hope. Completely understandable, where we're going in commercial pharma. Understandable, where we're going in manufacturing. And it's just the relative upside on the GLPs that we get. But that we'll get upside, I think, is a given.
Thank you very-
Thank you.
Thank you very much, Stephen, and thank you very much, Sean. We will now move on to the question and answer portion of the presentation, and we'll take questions first from the audience in the building.
Hi, guys, and thanks for taking our questions. Just on the ZAR 4 billion-ZAR 8 billion guidance six months ago, it was all in Serum Institute. That's still the amount on top, possibly, but the timing is very uncertain. So has any of that changed? I'm sorry-
No, no. I said to you in the presentation that we've really put no—we sort of give our guidance without Serum.
Okay, but t here's still a possibility to be on top of this time?
Yes. There's that, and also, just bear in mind, we've always told you our contribution is at least ZAR 8 billion at full capacity. A lot depends on the pricing. What we're seeing is higher pricing than we thought before. But I don't want to over-guide you or under-guide you, but it, we do have. At these rates, we do have more capacity available than we value of capacity, but same volume units. But I think the selling prices, at the moment, looks a little higher than what we had budgeted before. But Serum, it's very hard to give you guidance. You know, I hate giving. You know, it's easy on a take-or-pay contract when you get it from a third party, you know, a multinational, whatever, and you put it in, and you've got set timelines.
But, you know, there are lots of regulatory hoops that one has to jump through here. I do think we're in the end phase of it, and I'm really hopeful that the insulins will come online soon, and ultimately, Serum will follow thereafter. So let's see. But we are dependent on, you know. One, we've got to get a priority review from SAHPRA. For Serum, SAHPRA have to align with WHO. These are big organizations. And then you've got to go to Gavi and get an order. Now, there is a commitment to buy from Africa, but, you know, the speed with which people worked during COVID in these organizations, relative to the speed you get now, is different. That's just. I can't say it any other way.
Thanks. And just on the GLP-1, so, there's been a lot of litigation trying to move that patent from FY 2026 to later, especially, I guess, as you referenced, in U.S. and E.U. Are you not worried about a risk here that the countries which you are hoping for, ex U.S. and E.U., might have patents extended due to litigation?
I think that is a risk. I think that is a risk, Isaac, but I think that there's also been some pretty clear guidance from some of the big countries and the courts as to when they see patents, patent expirations, and it's going through. You know, some of those things are going through now. Some have been made really clear, like in Brazil, this is where we are. And some of the countries just don't have patents at all. It was quite astounding to us as we've went through the IP one, so yeah, and there's some pretty large countries that have that. But yes, there's always risk.
Bear in mind, though, that, as what I said earlier, although people are pushing right now, the first to market in the U.S. for 2026, and the court case at the moment stands where you can't claim obesity, but you can only claim. They can only go for. They have, like, an early entry mechanism, yes, and they're trying to push for 2026 and trying to say with a diabetes indication. I'm not sure those will succeed. We haven't assumed any of that or those volumes. And the courts will come out on that, but I think that's, on many of the emerging markets, it's pretty clear-cut that there's a pathway. And quite hard to defend something if you're not supplying something. I mean, that's another story, isn't it?
Thank you.
How is it, Steve? Firstly, it's very commendable to see the balance of your product portfolio and similarly, the balance in your geographic portfolio. Although your profit is pretty flat at a normalized basis, I feel you've got a very solid platform with this finished dose form. I really think this is the great opportunity, and my question is around this license agreement. How much of the capacity does the licensor take of your capacity? Obviously, they won't take a hundred, because that'd be ideal, but your profitability will be obviously linked more towards your own products. So what is the strategy around that?
I don't think it's obviously the profits weighted towards our products, because we have global volumes, and our products will have certain volume, and the global products that would come into manufacturing, and global volumes. And that would depend on their forecast. So they have off takes from the people that they supply, and it would depend on how quickly patent expirations are online, but also regulatory pathways. This is not. These peptides, there's one or two examples I can think of in the past in terms of regulatory pathways. But you have all of these regulators with a regulatory pathway, and how they're gonna deal with with these products is gonna be interesting by market, and I think it's gonna be challenging, although I think they are developing pathways. I've sort of seen the Canadian market.
There are pathways coming through. But even if it's delayed or deferred by a bit, just the volumes are still there. The volumes will still be there. It's just, again, it's a matter of timing. How much volume will... You know, there's eight billion people in the world. A billion people could do with this drug, at least a billion. That's what the WHO, that's from the WHO. It's how many people are just in the obese category as well. So there's a billion people, and that, you know, and we're not taking... There's a whole lot of people that are also on these products, for diabetes, et cetera. And so there's a big market out there, and it's what percentage? You just need a very small percentage of that population to utilize your capacity.
To give you a very simple answer or simple example, on a single dose, an auto-injector, the one I showed you we make in France. For every 1 million patients, every patient needs once a week, just say around 50, 50 injections a year. So 1 million patients is 50 million units. That's what it is. Now, in the U.S., they're selling a unit at $100-$150 a unit for obesity. So these, you know, it's a big market in value, and you're never gonna sell it for $100 because that's the reason you're never gonna get the volumes. You're gonna sell it for a fraction of that. But you only need 1 million patients globally to do 50 million prefilled syringes.
If you have a million patients on the pen, then you'll get 12 million, 12 pens per persons, which would be 12 million units. Those are pretty big units to do, and that's how we look and work through it. And we'll deal with the full costs as they come, and it will depend market by market and how the people. But I'm pretty sure that all I am sure of is that a registered product will sell volumes and decent volumes, and we have global rights to those volumes, to the exclusive rights to those volumes and many more. So that's our focus. Our focus in Aspen is also to try and sell our own product and our own volumes across the globe.
But there is. There's a very big uptake that will also come once the E.U. and the U.S. patents fall.
Thanks, Steve. Congratulations to yourselves on the good results. My question is around more beyond GLP, right? So you have a high fixed cost in these plants. How will you utilize the capacity beyond just Serum and GLP?
Yeah. So I think that in the South African. Well, first of all, Ken, thank you so much for your support, and I'm glad that you were able to afford a bow tie for the occasion. You're looking the business up front here. So into our first interest payment, huh? So we've got lots of opportunities out there. I think the. As I said, I think the French factory is on its way, and we can see a pathway there to increasing, hopefully increasing mRNA, increasing GLP volumes, and I think that will be quite a big capacity for that site. The real kicker for us after that period is in our South African facility. We've got, as you say, the Serum, the insulins, and it's. Can we increase the insulins, you know, the insulin volumes?
There's opportunities to increase the number of pediatric vaccines, so existing base to expand. Beyond that, to give you an example, Ken, the other example that we have now is, people have come to us on mpox, okay? So, you know, we'd like to do good in the world, but we sort of don't want to be the only ones doing good without support. So we've... And you also like to learn your lessons once in life. And, so given the experience we had with COVID, we said, "Yes, we can make it." It's not an easy vaccine to make. It's a live attenuated vaccine, so there's things that move in the bag. So, but there's two preconditions. One, you don't... Whatever volume you give us, you take.
So I don't want to care about the one point two billion units we promised for COVID, and we got zero. You know, it's a take or pay. It's a very expensive and costly process to move this production into your facility. And, you know, will CEPI and will people fund that tech transfer? I just don't think Aspen can afford to go out on a limb anymore, given the experiences that we've had with pandemic volumes, and we had mpox there. So just to answer your question, there's many, many, many more opportunities where Aspen can assist. And of course, you know, our South African facility is so well positioned for access, for global access, and that is a key and core focus for Aspen.
GLP-1s at the right price, for example, in a multi-dose vial, would be a fraction of that price and would be unbelievable for access as well. So if you speak to François Venter, who's the top guy in South Africa, he was a top HIV guy, and he's saying this: everybody should be on a GLP-1, but it's just the affordability. And those are the volumes, too, that we can have. So don't just think about GLP-1s. You know, people have got views of, you know, these Kardashians on the stage, or maybe I should use Saadashians with all my daughters, but there's a whole lot of people bumming around on that stuff, and that's why they're using it. There's a real medical need for it that you will never, ever sort at $100 a vial.
And those products can be made for substantially less than that. There's been interesting pathways around the API that have been found, synthetic pathways around it, which have made it, which I think will give it a lot of affordability going forward.
Okay, we'll move. We'll take some questions from the online audience. The first question comes from Pieter Cromhout , from Mergermarket. Can you speak to the tenure and terms of the new DFI funding package?
Well, Ken?
That's a seven-year tenure and amortizing, with the first two years, only repayment after from year three onwards.
Thank you, Sean. The next question comes from Keith McLachlan, from Integral Asset Management, and he's got, two questions. Can you speak through the rationale for Sandoz to sell you their Chinese business and buy the E.U. assets? ... why were they exiting China? Why sell them the E.U. assets?
Yeah, so the, yeah, a very good question. So the Sandoz business found the... I mean, I can't really speak for them, but I can only tell you what we worked out along the way with them, is that their business faced all the same problems that we had. They had a couple of big products, also went on to VBP, and their view was, you know, they, they've got this big sales team, you know, how do you support it now with these major products under pressure? Which was the same questions we had to ask ourselves on a standalone basis. What you have got is if you put their products, post-VBP and ours together, you get back to where we started from.
So if they were at a hundred and we were at a hundred, we had two hundred together. You know, we both halved, but if we put it all in one basket, we get back to two hundred, as if we take the Sandoz business on as well. So that then gave us an ability to keep our rep teams in place and representation, and I think that's gonna be key going forward, because many people are facing these hurdles, and we've now got a business that doesn't have their own, but we have similar turnover levels. And it's really about, you know, what infrastructure we put behind the headcount. In terms of the. It really was effectively a swap on a few products. It wasn't very material. The products were about EUR 12 million of sales.
It was EUR 12 million of sales in Europe, in areas where they thought they could perform better than us, and it really, it helped. It was a real offset for the Chinese deal, and that was it. It's not a material... not really material numbers from the European side. But certainly just helped with, you know, being able to do the swap in terms of not really outlaying a lot of cash to do this transaction at all. And save our Chinese business. It was one of the... It was really a very good transaction for Aspen.
Next question comes from Steve Minnaar, from Abax. Semaglutides are to lose patent protection in China in 2026, and Sandoz plans to launch a generic in Canada then. You've done a number of deals with Sandoz. Is this your contract?
That's a, that's a hell of a question. I'm sure I would have put it in the presentation if I could have answered that one. I really can't comment on... I really can't comment on that. But it's interesting that they've raised markets like Canada, for example. That alone is a $2 billion market, just to give you a sense on that.
The next question comes from Gail Daniel from Ninety One. How does the pricing work on GLPs? As the sales price of end products come down, how will this impact Aspen?
I think Aspen would like to be responsible for that sale price coming down, and we have those are all our assumptions. I think the reality is, even if you keep the sale price where it is, you will not access the volumes there of patients, and you won't get to patients. So right now, as I told you, these markets are undersupplied already, but I think even with that value, you will not get to the population that you're looking for. Africa's got very high obesity rates. I mean, South Africa is up there amongst the heavyweights globally. So it's very important to be able to get access, and so pricing is a key driver here of volumes.
I think volumes. I think pricing has to come down, not will it come down or how will it impact. Every assumption we've made is around a significant reduction in pricing.
Then we've got an access to medicine question from Moeti, saying: How is Aspen ensuring sustainable medicine supply on the African continent, i.e., SADC, for coming presence in near future? Any plans in the pipeline?
Yeah, so we work tirelessly on that. It's sort of what helps you get up every morning in a positive way, is what we can do and how we can do what we do, and how lucky we are to have the capacities and capabilities to be able to answer so many of the problems. And it's something we're working really hard on, as you. I don't think I really don't want to embellish what we've what I think all of you already know. But also to mention, you know, we're working. Now, we sort of PEPFAR and people who buying, for example, ARVs, are saying to us, "Look, you do a good job in South Africa. Will you guys do a Can you do a job for us in Africa as well?
We want to buy locally in ARVs." So once again, we're working on getting our, the FDA dossiers in place to be able to cover, and they're talking about a two million lives that they'd like covered out of Africa. With respect, we're probably one of the few companies, if not the only one, that could, one, make those type of volumes on the continent, and two, be able to get the accreditation. Because to supply those programs, you have to be FDA approved.
Thanks, Stephen. And then the next question, we've got two questions coming from Roy Campbell, from RMB Morgan Stanley. What drove the VBP impact being higher than management's expectations? That's the first question. Is this any indication that China could continue to see negative regulatory impacts? Second question.
Sure. You know, these markets are quite opaque. It's quite hard to be able to call them all. The negative for us was we have had a history. So the way it works is that they say, "Okay, there's four generic players, generally all Chinese players," and they have what you call a tender system. And that tender system gets allocated 50% or 60% of the volume, and those prices can drop 80% or 90%. We don't enter that process of tender. We stay out of the process, but that tender price drops and those volumes are lost, and it can be 40%, it can be 60%. Depends, you know, where the product's positioned. Retail products drop a little bit less.
And then you get a price drop, which is, as an innovator, even though you haven't got involved in the tender, they will tell you your price drops. Now, we've had price drops of 5% enforced on us. It's not a set process. We've never had one of more than 20% until we got to around about Diprivan, which was at 30%. Now, the problem with price decreases is, I don't have to tell you, that goes all to profitability. You lose volume, you know, you at least lose the cost of sales as well. We had the highest percentage drop in price, and so is... Are things tougher in China? Yeah, they are. They are tough in China.
It's not always clear where there is, but once you've absorbed that, the big advantage of China relative to other markets is Aspen buys products post-patent, generally across the world, and we get the growth rate, you see 3%, 4%, 5%, 2% with our commercial footprint. So we've got thousands of reps we grow. In China, that process is faster. There, there's a bigger growth rate in that post-patent environment. So I think where we've got the products now is where Aspen ideally wants to buy a product. We don't want to buy a product the day before patent. But in China, no one respects... not respects patents, no one wants to buy the generic product. They only want to buy the innovator. So even though there's the day after patent, there's no impact on the sales.
In fact, the innovative product keeps growing. And that is why they had to put VBP in, which was saying, "We're gonna take half the volume straight away, and we're gonna do a price decrease." Whereas markets, for example, in South Africa, the product goes post-patent, Aspen launches a product at half the price, people might still say, "I want the brand. I don't want the Aspen product." Then you get people like the insurance companies coming and say, "If you don't buy the Aspen product, you will co-pay fifty bucks or a hundred bucks," and the volumes drop. Yet people are a little cautious about moving to a local generic company from a, from a branded international company. So that is why when I say VBP, you should think about pre-patent.
It's not when Aspen tends to buy products, it's just the way the system works in China, that we end up getting these products pre-patent, effectively.
Okay, next question comes from Rendani, from Absa CIB. Firstly, congratulations, Stephen, on your results. Can you speak about your outlook for price cuts in Australia? Is there a risk of further impact in the near term? And then secondly, also just to confirm that post-VBP, does the pricing remain stable or just a smaller price erosion but more than offset by volumes?
Yeah. So Australia, so we talk about China and we say it's opaque. Australia, they just speak with a nice accent and say it's not gonna happen, and you understand them, and you beat them up at rugby, so it's okay. But it's no different really. It's no different. They can tell you there won't be any more price cuts, but they do come, and so we've got to learn from past behaviors. And so I do believe that the risk of price cuts in the Australian market is something that we, as a company and prescription as a group in prescription medicines, make an assumption on. We've got an unbelievable team and a great business in Australia, and our long-term strategy was to go from 100% prescription, 0% OTC.
And now you'll see with the growing balance that we nearly at a 50-50 split between OTC and prescription. Maybe the price cuts won't happen, but we had some pretty serious ones over the last period. We're hopeful that they will be at a lower rate, but it's only a hope. We do factor in price cuts. I can't tell you that it's gonna get any easier. I can't second guess any of the regulators.
Different prices, change in government, these are very. We're in a very political space, so we have those impacts, or it has an impact, but it's much easier when you're selling OTC products, and somebody's got a headache, and they want to go buy your product from the shelf and et cetera. What was the second question? Oh, VBP. The VBP, absolutely the volume and the. You've taken your price hits and your volume. There might be slight modifications in price, but it will be much more than compensated by volume increases.
Thank you, Stephen.
That's it. Well, that's how it was. This presentation was that easy. Good. Thank you. I hope it was understandable, and I really thank everyone who's listening, but particularly those of you in the room. It's really nice to be able to actually see people face to face. I don't think I'm one of those that can do a presentation looking at a wall. So thank you. Thank you for keeping us presenting in person. It's much appreciated. Thank you. Be well.
Thank you, everybody.