ADVANZ PHARMA Corp. (“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 months ended March 31, 2019.
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MISSISSAUGA, ON, May 10, 2019 /PRNewswire/ - ADVANZ PHARMA Corp. (“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 months ended March 31, 2019. All financial references are in U.S. dollars (“USD”) unless otherwise noted. “ADVANZ PHARMA continued to leverage its scalable operating model, global commercialization platform, and expertise within the niche-established medicine sector during the Company’s first quarter,” said Graeme Duncan, Chief Executive Officer of ADVANZ PHARMA. “The collective efforts from our global team, in addition to positive wholesaler trading patterns, culminated in first quarter financial results that are marginally ahead of our expectations.” Consolidated First Quarter 2019 Financial and Operational Results
First Quarter 2019 Segment Results International Segment ADVANZ PHARMA International segment revenue of $99.1 million for the quarter ended March 31, 2019, decreased by $13.8 million, or 12%, compared to the corresponding period in 2018. The 12% decline consisted of a $6.6 million decrease in baseline revenue, which was further compounded by a $7.2 million decrease in revenue as a result of the GBP weakening against the USD, when compared against the first quarter of 2018. Declines to revenue attributable to key products during the quarter, excluding the impact of foreign currency translation, included a $1.6 million decrease from Liothyronine Sodium; a $1.5 million decrease from Carbimazole; a $1.4 million decrease from Cyclizine Hydrochloride; and a $1.4 million decrease from Levothyroxine Sodium. These lower product volumes and revenues are primarily due to ongoing competitive market pressures resulting in market share erosion in the UK market. These declines to revenue were partially offset by $1.0 million increase in revenue from Fusidic Acid as a result of product volume increases. The remaining decrease was primarily due to general competitive market pressures across the segment’s product portfolio. North America Segment ADVANZ PHARMA North America segment revenue of $36.5 million for the quarter ended March 31, 2019, decreased by $2.8 million, or 7%, compared to the corresponding period in 2018. The decrease was primarily due to a $4.4 million decrease from Donnatal® as a result of additional competitive pressures that have resulted in a loss of market share; a $2.1 million decrease from Orapred® authorized generic due to higher product returns in the first quarter of 2019; and a $1.3 million decrease from Nilandron® as a result of lower product volumes. In the first quarter of 2019, Donnatal® tablets continued to face pressure from two competitive products. Additionally, the launch of additional non-FDA approved competitive products to Donnatal® elixir during the second quarter of 2018 has resulted in lower product volumes of the elixir in the first quarter of 2019 compared to the corresponding period in 2018. These declines in revenue were partially offset by a $3.2 million increase in revenue from Kapvay® due to higher volumes and lower Medicaid utilization; a $1.3 million increase in revenue from Plaquenil® due to lower chargebacks; and a $1.2 million increase in revenue from Plaquenil® authorized generic due to lower product returns compared to the corresponding period in 2018. The remaining decrease for the segment was primarily due to general competitive market pressures across the product portfolio. Pipeline Update Consistent with ADVANZ PHARMA’s prior disclosure, with its leadership and board transition, the Company continues to evaluate the composition of its pipeline of medicines during the first quarter of 2019. In the first quarter of 2019, ADVANZ PHARMA launched a company-wide initiative focussed on idea generation, refined its target product-type definitions, introduced a new rapid-stage gating process to assess and fast track new product ideas, and submitted for approval, or received approval, for eight 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 2019, the Company does not believe that product launches from its pipeline will generate a material amount of revenue. Consolidated Financial Results
Consolidated Results of Operations Revenue for the first quarter ended March 31, 2019, decreased by $16.6 million, or 11%, compared to the corresponding period in 2018. This decrease was due to lower sales from both segments, combined with lower foreign exchange rates impacting translated revenues from the ADVANZ PHARMA International segment. Gross profit for the first quarter ended March 31, 2019, decreased by $10.0 million, or 10%, compared to the corresponding period in 2018 primarily due to the revenue declines on key products. Gross profit percentage for the first quarter of 2019 increased by 1%, compared to the corresponding period in 2018, primarily due to a 2% increase in gross profit percentage within the ADVANZ PHARMA North America segment. The change in gross profit percentage for the ADVANZ PHARMA North America segment is due to a shift in the mix of product sales within the segment. Operating expenses for the first quarter of 2019 decreased by $26.7 million, or 24%, compared to the corresponding period in 2018. Operating expenses were lower primarily due to $12.5 million lower amortization charges on intangible assets; $11.0 million lower restructuring-related, acquisition and other costs mainly associated with the Company’s Recapitalization Transaction in 2018; and $2.0 million lower general and administrative costs. 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 first quarter of 2019 decreased by $2.0 million, or 18%, compared to the corresponding period in 2018. This decrease is primarily due to $0.9 million 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, combined with favourable foreign exchange rate movements impacting translation of general and administrative expenses from the ADVANZ PHARMA International segment, partially offset by increased legal costs within the ADVANZ PHARMA North America segment associated with claims brought against the non-FDA approved competitors of Donnatal®. Selling and marketing expenses reflect costs incurred by the Company for the marketing, promotion and sale of the Company’s broad portfolio of products across the Company’s segments. Selling and marketing costs for the first quarter of 2019 decreased by $1.6 million, or 16%, compared to the corresponding period of 2018, which is comprised of a $1.3 million decrease within the ADVANZ PHARMA International segment and a $0.3 million decrease within the ADVANZ PHARMA North America segment. The decrease within the ADVANZ PHARMA International segment is primarily as a result of lower costs associated with sales promotion and advertising activities, as well as reduced salaries and benefits costs due to lower headcount in the sales and marketing functions. The decrease within the ADVANZ PHARMA North America segment is primarily attributable to $0.1 million of salaries and benefits costs of certain segmental senior management primarily being recorded in general and administrative expenses for the first quarter of 2019 compared to selling and marketing expenses in the corresponding period of 2018, partially offset by higher costs associated with the co-promotion agreement for sales of Donnatal®. 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 (Pharmacovigilence) of the Company. Research and development costs for the first quarter of 2019 increased by $0.6 million, or 8%, primarily due to refunds of regulatory fees within the ADVANZ PHARMA North America segment in the corresponding period of 2018, partially offset by lower costs associated with validation and stability testing activities within the ADVANZ PHARMA International segment. Adjusted EBITDA for the first quarter of 2019 decreased by $6.9 million, or 10%, compared to the corresponding period in 2018. This decline is primarily due to lower sales and gross profits from both segments, combined with lower foreign exchange rates impacting translated results. Adjusted EBITDA by segment for the first quarter of 2019 was $46.8 million from the ADVANZ PHARMA International segment and $21.6 million from the ADVANZ PHARMA North America segment. In addition, during the first quarter of 2019, the Company incurred $3.3 million of Corporate costs. Corporate expenses decreased by $0.7 million compared to 2018, primarily due to lower salaries and benefits costs. As of March 31, 2019, the Company had cash and cash equivalents of $248.6 million and 48,913,490 limited voting shares issued and outstanding. Conference Call Notification The Company will hold a conference call on Friday, May 10, 2019, at 8:30 a.m. ET hosted by senior management. A question-and-answer session will follow the corporate update.
This call is being webcast and can be accessed by going to: https://event.on24.com/wcc/r/1987399/B2DB8A3A2E67DDCB75FE9E80971FDD15 An archived replay of the webcast will be available by clicking the link above. About ADVANZ PHARMA ADVANZ PHARMA operates an international specialty pharmaceutical business with a diversified portfolio of more than 200 patented and off-patent 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 operates out of facilities in Mississauga, Ontario and, through its subsidiaries, operates out of facilities in Sydney, Australia; Bridgetown, Barbados; London, England; Mumbai, India; Dublin, Ireland; St. Helier, Jersey; and in Helsingborg, Sweden. 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 as 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 month periods ended March 31, 2019, and March 31, 2018.
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 future-oriented financial information: To the extent any forward-looking statements or forward-looking information in this press release or in statements made during the corresponding earnings conference call constitute future-oriented financial information or financial outlooks within the meaning of applicable securities laws, such information is being provided to demonstrate the potential financial performance of the Company and readers are cautioned that this information may not be appropriate for any other purpose and that they should not place undue reliance on such future-oriented financial information and financial outlooks. Future-oriented financial information and financial outlooks (collectively, “FOFI”), as with forward-looking statements and forward-looking information generally, are, without limitation, based on the assumptions and subject to the risks set out below under “Notice Regarding Forward-Looking Statements”, a number of which are beyond the Company’s control. In addition, the following is summary of the significant assumptions underlying the FOFI contained in the Company’s earnings disclosure:
The FOFI do not purport to present the Company’s financial condition in accordance with IFRS, and there can be no assurance that the assumptions made in preparing the FOFI will prove accurate. It is expected that there will be differences between actual and forecasted results, and the differences may be material, including due to the occurrence of unforeseen events occurring subsequent to the preparation of the FOFI. The inclusion of the FOFI in the earnings disclosure should not be regarded as an indication that ADVANZ PHARMA considers the FOFI to be a reliable prediction of future events, and the FOFI should not be relied upon as such. Risks and other factors related to FOFI include those risks and other factors referenced in this press release as well as in ADVANZ PHARMA’s filings with the Canadian Securities Administrators, including (a) the factors described under the heading “Forward-looking Statements” in ADVANZ PHARMA’s Management’s Discussion and Analysis dated May 10, 2019, for the period ended March 31, 2019. The Company anticipates that its Management’s Discussion and Analysis will be available online at www.sedar.com on May 10, 2019. 1 Management uses non-IFRS measures such as EBITDA, Adjusted EBITDA, adjusted net income to provide a supplemental measure of operating performance. Please refer to the “Non-IFRS Measures” section of this press release for further information. 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 , statements with respect to ADVANZ PHARMA’s long-term growth strategy and refined strategic direction, ADVANZ PHARMA’s outlook for 2019, 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 financial performance (including the performance of its operating segments), and the Company’s belief that product launches from its pipeline will not generate a material amount of revenue. 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, 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.
SOURCE ADVANZ PHARMA Corp. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Company Codes: OTC-PINK:CXRXF, Toronto:ADVZ | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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