ADVANZ PHARMA Corp. Limited Announces Fourth Quarter and 2019 Results
-- 2019 revenue of $508 million, fourth quarter 2019 revenue of $122
million
-- 2019 net loss of $196 million and fourth quarter net loss of $25 million
-- 2019 Adjusted EBITDA(1) of $234 million and fourth quarter 2019 Adjusted
EBITDA(1 )of $53 million
-- Generated cash flow from operations of $188 million in 2019 and
concluded the year with a cash and cash equivalents balance of $261
million
-- Provides COVID-19 update relative to its business
LONDON, March 25, 2020 /PRNewswire/ - ADVANZ PHARMA Corp. Limited ("ADVANZ PHARMA" or "the Company") (TSX:ADVZ), an international specialty pharmaceutical company focused on serving the needs of patients and healthcare providers around the world with enhanced access to high quality, niche-established medicines, today announced its financial and operational results for the three and twelve months ended December 31, 2019. All financial references are in U.S. dollars ("USD") unless otherwise noted.
"Our fourth quarter and 2019 results, combined with our recent acquisition announcements of the rights to a portfolio of medicines from UCB, and our arrangement agreement to acquire specialty pharmaceutical company Correvio Pharma, demonstrate the progress we are making towards becoming the leading global platform for niche-established medicines, while building advanced commercial capabilities in Western Europe," said Graeme Duncan, Chief Executive Officer of ADVANZ PHARMA.
Consolidated Fourth Quarter and 2019 Financial and Operational Results
-- Reported fourth quarter 2019 revenue of $122.0 million, compared to
$117.6 million for the fourth quarter of 2018, and $119.6 million for
the third quarter of 2019.
-- Reported a net loss for the fourth quarter of 2019 of $24.6 million.
-- Reported fourth quarter Adjusted EBITDA(1 )of $52.8 million, compared to
$52.5 million for the fourth quarter of 2018, and $55.9 million for the
third quarter of 2019.
-- Generated cash flows from operating activities of $188.2 million in
2019, compared to $141.6 million in 2018.
-- Recorded total asset impairments for the year ended December 31, 2019 of
$129.3 million. These impairments were primarily recorded during the
third quarter of 2019; however, the Company recorded an additional
impairment of $21.0 million during the fourth quarter of 2019, primarily
related to its Photofrin® asset.
-- As of December 31, 2019, the Company had a cash and cash equivalents
balance of $261.1 million compared to $224.4 million as of December 31,
2018.
Fourth Quarter 2019 Segment Results
International Segment
ADVANZ PHARMA International segment revenue for the year ended December 31, 2019 of $378.8 million decreased by $24.9 million or 6%, compared to 2018. A $6.8 million decrease in revenue was further compounded by a $18.0 million decrease in revenue as a result of the GBP weakening against the USD, when compared against the corresponding period in 2018.
Declines in revenue attributable to key products during the year, excluding the impact of foreign currency translation, included a $5.0 million decrease from Levothyroxine Sodium; a $3.1 million decrease from Liothyronine Sodium; a $2.8 million decrease from Nitrofurantoin Sodium; a $2.7 million decrease from Carbimazole; and a $2.5 million decrease from Cyclizine Hydrochloride.
These lower product volumes and revenues are primarily due to ongoing competitive market pressures resulting in market share erosion in the U.K.
These declines to revenue were partially offset by a $6.0 million increase from Fusidic Acid; a $5.0 million increase from recently acquired Salagen® and Panretin® brands; and a $2.5 million increase from Zapain®.
North America Segment
ADVANZ PHARMA North America segment revenue of $129.5 million for the year ended December 31, 2019, decreased by $3.8 million or 3%, compared to the corresponding period in 2018.
The decrease was primarily due to a $15.0 million decrease from Donnatal®, as a result of competitive pressures that have resulted in a loss of market share; a $5.6 million decrease from Orapred®; a $2.6 million decrease from Lanoxin®; and a $2.3 million decrease from Nilandron®.
These declines in revenue were partially offset by a $7.4 million increase from Zonegran®; a $5.5 million increase from Plaquenil®; a $2.4 million increase from recently acquired Salagen® and Panretin® brands in the U.S.; and a $1.2 million increase from Kapvay® as a result of higher volumes.
Pipeline Update
The Company continued to make progress with respect to the evaluation and advancement of its pipeline of medicines.
In the fourth quarter of 2019, ADVANZ PHARMA submitted for approval, or received approval, for five medicines.
Going forward, the Company intends to expand its product portfolio in order to deliver mid-term value and long-term growth, through pipeline filling, optimization, licencing and development partnerships. These initiatives will be focussed on niche and differentiated generics, complex specialty and value-added medicines.
For 2020, the Company believes that product launches from its pipeline will not generate a material amount of revenue.
COVID-19 Update
ADVANZ PHARMA is focused on mitigating the effects of COVID-19 on its business while concurrently helping to ensure the well-being of patients by continuing to provide them with the medication required to lead healthier lives in the face of this pandemic.
To support these objectives, ADVANZ PHARMA has set up a COVID-19 taskforce to achieve the following priorities:
Ensure the Health and Wellbeing of the Company's Employees
The Company has implemented a number of initiatives such as instructing all employees, in all offices around the world, to work from home. ADVANZ PHARMA's global workforce has access to technology that will enable the Company to continue to operate its business effectively while employees work remotely.
Ensure That Patients Can Continue to Access ADVANZ PHARMA's Medicines
ADVANZ PHARMA is working with its suppliers, distributors and its key employees to ensure the supply and movement of medicines around the world.
Continue To Execute on the Company's Strategic Plan
Despite the challenges posed by COVID-19, the Company is continuing to implement its P.L.A.N strategy as evidenced by its recent M&A activity.
ADVANZ PHARMA will continue to monitor COVID-19 and intends to provide additional business updates as appropriate relative to the disease.
Consolidated Financial Results
Twelve months ended
(in $000's, except per share data)
Dec 31, 2019
Dec 31, 2018
===
Revenue 508,321 536,986
Gross profit 336,812 361,097
Gross profit % 66% 67%
Total operating expenses 476,846 524,399
Operating income (loss) for the year (140,034) (163,302)
Income tax expense (recovery) (22,007) 1,440
Net income (loss) for the year (196,018) 1,467,303
Earnings (loss) per share
Basic (1) (4.01) 93.69
Diluted (1) (4.01) 93.69
EBITDA (2) 92,013 1,976,271
Adjusted EBITDA (2) 233,581 250,294
===
Notes:
---
(1) 2018 amounts reflect the
retrospective effect of the Share
Consolidation.
(2) Represents a non-IFRS measure. For
the relevant definitions and
reconciliation to reported results,
see "Non-IFRS Financial Measures"
section of this press release.
Management believes non-IFRS
measures, including Adjusted
EBITDA, provide supplementary
information to IFRS measures used
in assessing the performance of the
business.
Consolidated Results of Operations
Revenue
Revenue for the fourth quarter of 2019 increased by $4.4 million or 4% compared to the corresponding period in 2018, primarily due to lower sales in the fourth quarter of 2018 as a result of wholesaler destocking and timing of shipments within ADVANZ's North America segment.
Revenue for the year ended December 31, 2019, decreased by $28.7 million, or 5%, compared to 2018, primarily due to lower sales from the International and North America segments, combined with lower foreign exchange rates impacting translated revenues from the International segment.
Gross profit for the fourth quarter and year ending December 31, 2019 increased by $1.1 million, or 1%, and decreased by $24.3 million, or 7%, respectively, compared to the corresponding periods in 2018, primarily due to changes in the product mix.
Operating expenses for the fourth quarter of 2019 decreased by $35.1 million, or 25%, and decreased by $47.6 million or 9%, for the year ended December 31, 2019, compared to the corresponding periods in 2018.
The decrease in operating expenses for the year is primarily due to $67.1 million lower restructuring related, acquisition and other costs mainly associated with the Company's recapitalization transaction in 2018, $46.0 million lower amortization charges on intangible assets, partially offset by $71.7 million higher impairment charges.
General and administrative expenses reflect costs related to salaries and benefits, professional and consulting fees, public company costs, travel and other administrative expenditures. General and administrative expenses for the fourth quarter of 2019 and year ended December 31, 2019 decreased by $1.5 million, or 12%, and $4.6 million, or 10.5%, respectively, compared to the corresponding periods in 2018.
These decreases in general and administrative expenses are primarily due to lower costs associated with lease payments recorded in general and administrative expenses as a result of the revised accounting for these costs due to the adoption of IFRS 16 on January 1, 2019.
Selling and marketing expenses reflect costs incurred by the Company for the marketing, promotion and sale of its portfolio of products across its segments. Selling and marketing expenses for the fourth quarter of 2019 increased by $2.4 million, or 39% compared to the corresponding period in 2018 and for the year ended December 31, 2019, decreased by $2.4 million, or 6%.
The annual decreases in selling and marketing expenses are primarily attributable to lower salaries and benefits costs of certain segmental senior management primarily being recorded in general and administrative expenses for the year ended December 31, 2019 compared to selling and marketing expenses in the corresponding period of 2018 combined with lower fees paid to market intelligence database services.
Research and development expenses reflect costs for clinical trial activities, product development, professional and consulting fees and services associated with the activities of the medical, clinical and scientific affairs, quality assurance costs, regulatory compliance and drug safety costs (pharmacovigilance) of the Company.
Research and development costs for the fourth quarter of 2019 and year ended December 31, 2019 decreased by $0.1 million, or 2%, and $0.6 million, or 2%, compared to the corresponding period in 2018 to lower clinical trial spend, combined with lower costs associated with validation and stability testing activities and favourable foreign exchange rate movements impacting translation of research and development costs within the International segment, offset by refunds of regulatory fees within the North America segment in the corresponding period of 2018.
Adjusted EBITDA for the fourth quarter of 2019 increased by $0.3 million, or 0.5%, and decreased by $16.7 million, or 7% for the year ended December 31, 2019, compared to the corresponding periods in 2018.
The decline for the year ended December 31, 2019, compared to 2018, is primarily due to lower sales and gross profits from both the segments, combined with lower foreign exchange rates impacting translated results of the International segment.
In addition, during the fourth quarter of 2019 and year ended December 31, 2019, the Company incurred $3.4 million and $12.9 million, respectively, of Corporate costs.
As of December 31, 2019, the Company had cash and cash equivalents of $261.1 million and 48,913,490 limited voting shares issued and outstanding.
Conference Call Notification
The Company will hold a conference call on Wednesday, March 25, 2020, at 8:30 a.m. ET hosted by senior management. A question-and-answer session will follow the corporate update.
CONFERENCE CALL DETAILS
DATE: Wednesday, March 25, 2020
TIME:
8:30 a.m. ET
DIAL-IN NUMBER: (647) 427-7450 or (888) 231-8191
TAPED REPLAY: (416) 849-0833 or (855) 859-2056
REFERENCE NUMBER: 5760888
This call is being webcast and can be accessed by going to:
https://event.on24.com/wcc/r/2219529/B65DB49039DFFB0498D390764D024257
An archived replay of the webcast will be available by clicking the link above.
(1 )Management uses non-IFRS measures such as EBITDA and Adjusted EBITDA to provide a supplemental measure of operating performance. Please refer to the "Non-IFRS Measures" section of this press release for further information.
About ADVANZ PHARMA
ADVANZ PHARMA operates an international specialty pharmaceutical business with a diversified portfolio of more than 200 branded and unbranded products, and sales in more than 90 countries, and going forward, is focused on becoming the leading platform for niche-established medicines, with advanced commercial capabilities throughout Western Europe.
ADVANZ PHARMA's registered office is in Jersey, Channel Islands. The Company operates globally through its subsidiaries in Sydney, Australia; Mumbai, India; Dublin, Ireland; Helsingborg, Sweden; Chicago, United States; and its head office in London, England.
Non-IFRS Financial Measures
This press release makes reference to certain measures that are not recognized measures under International Financial Reporting Standards ("IFRS"). These non-IFRS measures are not recognized measures under IFRS and do not have a standardized meaning prescribed by IFRS, and are therefore unlikely to be comparable to similar measures presented by other companies. When used, these measures are defined in such terms to allow the reconciliation to the closest IFRS measure. These measures are provided as additional information to complement those IFRS measures by providing further understanding of the Company's results of operations from management's perspective. Accordingly, they should not be considered in isolation nor as a substitute to the Company's financial information reported under IFRS. Management uses non-IFRS measures such as EBITDA, and Adjusted EBITDA, to provide investors with supplemental information of the Company's operating performance and thus highlight trends in the Company's core business that may not otherwise be apparent when relying solely on IFRS financial measures. Management believes that securities analysts, investors and other interested parties frequently use non-IFRS measures in the evaluation of issuers. Management also uses non-IFRS measures in order to facilitate operating performance comparisons from period to period, prepare annual operating budgets, to assess its ability to meet future debt service requirements, in making capital expenditures, and to consider the business's working capital requirements. Readers are cautioned that the non-IFRS measures contained herein may not be appropriate for any other purpose.
EBITDA
EBITDA is defined as net income (loss) adjusted for interest and accretion expense, interest income, income taxes, depreciation and amortization of intangible assets. Management uses EBITDA to assess the Company's operating performance.
Adjusted EBITDA
Adjusted EBITDA is defined as EBITDA adjusted for certain charges including costs associated with acquisitions, restructuring initiatives, and other costs (which includes onerous contract costs and direct costs associated with contractual terminations), management retention costs, non-operating gains / losses, integration costs, legal settlements (net of insurance recoveries) and related legal costs, non-cash items such as unrealized gains / losses on derivative instruments, share based compensation expense / recovery, fair value changes including purchase consideration and derivative financial instruments, asset impairments, fair value increases to inventory arising from purchased inventory from a business combination, gains / losses from the sale of assets and unrealized gains / losses related to foreign exchange. Management uses Adjusted EBITDA, among other Non-IFRS financial measures, as the key metric in assessing business performance when comparing actual results to budgets and forecasts. Management believes Adjusted EBITDA is an important measure of operating performance and cash flow and provides useful information to investors because it highlights trends in the underlying business that may not otherwise be apparent when relying solely on IFRS measures.
The table below sets forth the reconciliation of net income (loss) to EBITDA and to Adjusted EBITDA for the three and twelve month periods ended December 31, 2019, and December 31, 2018.
Three months ended Twelve months ended
(in $000's)
Dec 31, 2019
Dec 31, 2018
Dec 31, 2019
Dec 31, 2018
===
Net income (loss) for
the period (24,600) (84,930) (196,018) 1,467,303
Interest and accretion
expense 25,017 26,675 105,683 257,655
Interest income (562) (592) (2,195) (2,229)
Income taxes (14,661) (1,918) (22,007) 1,440
Depreciation 72 397 2,201 1,720
Amortization of
intangible assets 46,116 59,811 204,349 250,382
---
EBITDA 31,382 (557) 92,013 1,976,271
===
Impairment 21,000 49,625 129,281 57,560
Restructuring related,
acquisition and other 10,506 3,156 33,841 100,972
Share-based
compensation expense 741 1,389 3,943 2,537
Fair value (gain) loss 425
Foreign exchange
(gain) loss 75 722 (820) 6,100
Unrealized foreign
exchange (gain) loss (10,890) (1,804) (24,677) 38,257
Gain on debt and
purchase
consideration
settlement (1,931,828)
---
Adjusted EBITDA 52,814 52,531 233,581 250,294
===
Notice Regarding Trademarks
This press release includes trademarks that are protected under applicable intellectual property laws and are the property of ADVANZ PHARMA or its affiliates or its licensors. Solely for convenience, the trademarks of ADVANZ PHARMA, its affiliates and/or its licensors referred to in this press release may appear with or without the ® or TM symbol, but such references or the absence thereof are not intended to indicate, in any way, that the Company or its affiliates or licensors will not assert, to the fullest extent under applicable law, their respective rights to these trademarks. Any other trademarks used in this press release are the property of their respective owners.
Notice Regarding Forward-looking Statements and Information:
This news release includes forward?looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995 and forward?looking information within the meaning of Canadian securities laws, regarding ADVANZ PHARMA and its business, which may include, but are not limited to, statements with respect to ADVANZ PHARMA's focus on serving the needs of patients and healthcare providers around the world with niche-established medicines, ADVANZ Pharma's ability to become the leading global platform for niche-established medicines while building advanced commercial capabilities in Western Europe, ADVANZ PHARMA's long-term growth strategy and refined strategic direction and the continued implementation of its P.L.A.N strategy, ADVANZ PHARMA's intention to expand its product portfolio in order to deliver mid-term value and long-term growth through pipeline filling, optimization, licencing and development partnerships, its focus on niche and differentiated generics, complex speciality and value-added medicines, ADVANZ PHARMA's focus on niche and differentiated generics, complex specialty and value-added medicines, ADVANZ PHARMA's ability to operate its business effectively while employees work remotely and to ensure the supply and movement of medicines around the world, and the Company's belief that product launches from its pipeline will not generate a material amount of revenue in 2020. Often, but not always, forward?looking statements and forward?looking information can be identified by the use of words such as "plans", "is expected", "expects", "scheduled", "intends", "contemplates", "anticipates", "believes", "proposes" or variations (including negative and grammatical variations) of such words and phrases, or state that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved. Such statements are based on the current expectations of ADVANZ PHARMA's management, and are based on assumptions and subject to risks and uncertainties. Although ADVANZ PHARMA's management believes that the assumptions underlying these statements are reasonable, they may prove to be incorrect. The forward?looking events and circumstances discussed in this news release may not occur by certain dates or at all and could differ materially as a result of known and unknown risk factors and uncertainties affecting ADVANZ PHARMA, including risks associated with ADVANZ PHARMA's securities, increased indebtedness and leverage, ADVANZ PHARMA's growth, risks associated with the use of ADVANZ PHARMA's products, the inability to generate cash flows, revenues and/or stable margins, the inability to repay debt and/or satisfy future obligations, risks associated with a delay in releasing ADVANZ PHARMA's financial statements (which could result in a default under ADVANZ PHARMA's debt agreements and a violation of applicable laws), ADVANZ PHARMA's outstanding debt, risks associated with the geographic markets in which ADVANZ PHARMA operates and/or distributes its products, risks associated with distribution agreements, the pharmaceutical industry and the regulation thereof, regulatory investigations, the failure to comply with applicable laws, economic factors, market conditions, risks associated with growth and competition, the failure to obtain regulatory approvals, the equity and debt markets generally, general economic and stock market conditions, risks associated with fluctuations in exchange rates (including, without limitation, fluctuations in currencies), political risks (including changes to political conditions), risks associated with the United Kingdom's exit from the European Union (including, without limitation, risks associated with regulatory changes in the pharmaceutical industry, changes in cross?border tariff and cost structures and the loss of access to the European Union global trade markets), risks related to patent infringement actions, the loss of intellectual property rights, risks and uncertainties detailed from time to time in ADVANZ PHARMA's filings with the Canadian Securities Administrators, risks related to the spread of COVID-19 (including, without limitation, risks associated with reliance on third party manufacturers and suppliers, uncertainties relating to its ultimate spread, severity and duration, and related adverse effects on the economies and financial markets of many countries), and many other factors beyond the control of ADVANZ PHARMA. Although ADVANZ PHARMA has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward?looking statements and information, there may be other factors that cause actions, events or results to differ from those anticipated, estimated or intended. No forward?looking statement or information can be guaranteed. Except as required by applicable securities laws, forward?looking statements and information speak only as of the date on which they are made and ADVANZ PHARMA undertakes no obligation to publicly update or revise any forward?looking statement or information, whether as a result of new information, future events, or otherwise.
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SOURCE ADVANZ PHARMA Corp.
