Is There Hope for Ascendis Health?
On June 29, 2023, Ascendis Health resolved to initiate a delisting process from the Johannesburg Stock Exchange (JSE). This decision marked a sad end for one of South Africa's most admired medtech companies.
Ascendis Health possessed all the hallmarks of a successful business: visionary founders, deep industry experience, a well-crafted business model, and secure funding. Founded in 2008, the company achieved rapid growth through acquisitions such as Farmalider, Remedica, Scitec, and others. Ascendis's diverse portfolio encompassed 134 entities across consumer health, pharmaceuticals, medical devices, animal health, and biosciences. The company boasted a collection of well-respected brands, including Solal and Junglevites.
The World Bank even featured Ascendis as a case study, praising them for bringing high-quality pharmaceuticals and medical devices to over 100 countries. The case study highlighted Ascendis's achievement of pharma and medical synergies through mergers and acquisitions. Additionally, the IFC invested $30 million in Ascendis Health to promote access to high-quality pharmaceuticals in emerging markets.
What went wrong?
The exact cause of Ascendis Health's troubles is still unclear, with experts sifting through the remains of the company. However, a Value Added Tax (VAT) dispute with the South African Revenue Service (SARS) in their surgical innovation division appears to be the initial trigger. Additionally, the company shouldered a massive R7.7 billion debt burden while boasting a market capitalization of only R230 million. Legal disputes further clouded the future.
Ironically, the South African arm of the business seemed to be thriving, with their wellness brands leading their respective categories. The challenges seemingly stemmed from the international operations in countries like Cyprus and Romania, despite Remedica's success there. This situation strongly suggests a case of "premature optimization." The company's rapid growth proved unsustainable. Despite its past merits, Ascendis Health ultimately faltered.
What are the lessons to be learned?
It's easy to criticize from the sidelines, but far more difficult when you're the one in the arena, as President Theodore Roosevelt aptly stated: 'It is not the critic who counts; not the man who points out how the strong man stumbles, or where the doer of deeds could have done them better.' That being said, Ascendis health made some mistakes. They bought too many companies too quickly, kind of like what happened with Steinhoff. This focus on buying new businesses meant they didn't pay enough attention to their existing ones. Growth by all means! Ascendis is now being described as cooperate banana republic!
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It does not matter what happens in the end, Ascendis Health was a very good business. Investor will get some very good business from the company and will probably thrive under new owners. The hope is that the soap opera do not turn investors off medtech in South Africa. Lord knows we need them!
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