Our opinion on the current state of ASC

Ascendis Health (ASC) is a South African company operating in the health sector, manufacturing products for animals, plants, and humans. The company underwent significant restructuring and financial transactions to address its debt burden and refocus its business strategy.

In January 2020, Ascendis Health announced its intention to focus on four core business areas: pharmaceuticals, medical, consumer health, and animal health. Despite considering the sale of its subsidiary Remedica, the board opted to negotiate a recapitalization deal with L1 Health and Blantyre Capital to address the company's debt issues.

Following negotiations, a deal was struck in May 2021, where the consortium acquired 100% of Remedica and Sunwave, along with other assets, in exchange for debt and financing facilities. This recapitalization aimed to safeguard the business and improve its liquidity.

As part of its restructuring efforts, Ascendis Health sold its animal health division in July 2021 to reduce debt. Despite a decline in revenue and gross margin in the financial year ending June 2023, the company managed to decrease operating costs and eliminate senior debt, leaving it with cash reserves of R102 million.

In a trading statement for the six months ending December 2023, Ascendis Health estimated a significant improvement in headline earnings per share (HEPS) from continuing operations compared to the previous period, indicating a positive turnaround.

Technically, the company's stock has experienced significant volatility, peaking in 2016 before declining sharply and moving sideways. Despite a recent jump in share price following the announcement of a buyout offer and delisting from the JSE, the stock remains a risky penny stock, priced at around 81 cents.

Overall, Ascendis Health's restructuring efforts and improved financial performance suggest a positive trajectory, but investors should be cautious due to the company's history of volatility and the ongoing risk associated with its penny stock status.