Aspen’s murky contractual dispute with potential R2.8 billion impact dissected

On Tuesday, 4 April 2025, Aspen warned shareholders that risks have recently arisen relating to its manufacturing business, including a material contractual dispute.

This contractual dispute relates to a manufacturing and technology agreement with a contract manufacturing customer for mRNA products.

In a live webcast on 23 April 2025, Aspen CEO Stephen Saad said he could not provide further details due to contractual confidentiality.

Considering the impact, including a R2 billion EBITDA hit and an impairment of R770 million, it created tremendous uncertainty among investors about what was happening.

The market did not like the situation, sparking a tremendous Aspen selloff on Wednesday. The share price plummeted by over 30%.

Graeme Körner from Körner Perspective said the development raised doubts about Aspen’s management team, with investors losing confidence in the company.

“The market is disgusted with this update. We have to assume the worst. The company will be in limbo until we know the nature of the dispute,” he said.

Körner added that the situation will remain sombre until Aspen provides details about the dispute and the impact on its operations.

Grant Nader from Benguela Global Fund Managers said Aspen’s facilities could be impaired, which should have been the company’s growth driver.

“Aspen’s announcement suggests that it may not only be a contractual dispute. It can also be that the ability to fill the manufacturing capacity is in question,” he said.

He explained that the investment case for Aspen centred on utilising the excess manufacturing capacity they had built.

“They have not been using them to capacity. The idea was that growth and improved margin would come with it as they expand this usage,” he said.

Aspen has made many promises about this plan, which have not materialised. “It feels like Aspen over-promised and under-delivered,” Nader said.

He added that Aspen recently failed a few FDA standards in their South African manufacturing facility, which was not a good sign.

He said this hurts confidence in the management team, and considering Aspen’s debt, questions could be asked about the company’s future performance.

“The risk around Aspen and what investors are buying has escalated tremendously. Best to stay on the sidelines for now,” he said.

A look into Aspen’s mRNA manufacturing

Aspen reported in its 2023 annual report that it had secured three sterile manufacturing agreements with multinational pharmaceutical companies.

It said that one of these agreements was to produce mRNA vaccines. This is potentially the contract over which a contractual dispute has arisen.

The dispute appears to involve an international customer of Aspen wanting to withdraw from a sales agreement.

Aspen CFO Sean Capazorio stated in the webcast that Aspen invested a significant amount in France to get access to mRNA technology.

The dispute puts Aspen at risk of losing access to the mRNA intellectual property (IP), which would cause Aspen to experience a R770 million impairment loss.

Saad said Aspen took a bet on mRNA technology and that there was extensive investment in its manufacturing. It started commercial production of mRNA filling and packing in H2 2024.

With the potential loss of mRNA IP, Aspen risks not being able to manufacture mRNA vaccines at all.

Based on the information shared in the SENS announcement and by Aspen management, the dispute appears to relate to a United States customer.

Saad said that the United States is pushing for the sellers of goods in the US to manufacture those goods within the country.

He also said that the current administration is looking into vaccines less favourably than the previous administration, which is impacting vaccine manufacturing.

Saad stated that while Aspen lost the contract, it did not lose the manufacturing facilities. It remains an asset which it can generate revenue from.

Based on the information given, Aspen may be referring to the global pharmaceutical company AstraZeneca.

Aspen acquired the exclusive rights to sell AstraZeneca’s anaesthetics portfolio outside of the United States in 2016.

This led to the building of Aspen’s sterile manufacturing facility in Notre Dame de Bondeville in France, the facility in question.

AstraZeneca was also one of the only companies that developed COVID-19 vaccines, although they were not mRNA vaccines.

However, AstraZeneca has been investing in mRNA technology and has entered into a deal with China’s Cansino Biologics to manufacture and supply them with an unspecified amount of investigational mRNA vaccines in 2023.

This is the same year that Aspen announced its partnership with a multinational company for mRNA vaccines.

Saad mentioned that they lost the contract with a “take-or-pay” clause. This means the buyer agrees to buy a certain amount of the supplied product or must pay a penalty.

He did not want to give further details on the agreed-upon “take-or-pay” clause and would not provide additional information on the dispute.

This means that the nature of the contractual dispute and the company or companies involved remain speculative.

Saad said that Aspen is now focusing on replacing the lost business, which he warned could take considerable time.