Aspen takeover plan hits snags as Sigma cuts 2011 guidance

Australian pharmaceutical major Sigma Pharmaceuticals Limited (Sigma) lowered its profit forecast for the fiscal year 2011 as the company's generics division continues to underperform, which could put at risk the possible takeover attempt by South African drug maker Aspen Pharmacare Holdings Limited (Aspen).

In an announcement to the Australian Stock Exchange yesterday, Sigma said that the net profit for the year ending 31 January 2011 is expected to be in the range of A$43-47 million, approximately 43 per cent lower than the budget estimate. The company said the underlying net profit excluding one time charges and infrequent expenses would be A$53-57 million for 2011.

Earlier, the Melbourne-based drug maker had said the company's FY2011 net profit would return to FY2009 levels which was A$80.1 million. However, in a June statement Sigma indicated that given the performance of its generics division and continuing volatility of the industry in general, there was considerable uncertainty about achieving the target.

For FY2010 Sigma reported a net loss of A$389 million with an underlying profit of A$68 million. The company had a net debt of A$785 million as at the end of January 2010.

 In May, Durban-based Aspen had offered to buy Sigma for A$60 cents a share or A$707 million ($579 million). It however lowered its bid to A$55 cents a share or A$648 million last week and also stipulated more stringent conditions. (See: Aspen lowers takeover offer for Sigma by 8.3 per cent)

Further to that, Sigma said it would continue working with Aspen to assist it to improve the proposal for its shareholders, including the removal of conditions that had the effect of making the proposal highly conditional.