ADVANZ PHARMA Corp. Limited Announces Third Quarter 2020 Results
LONDON, Nov. 6, 2020 /PRNewswire/ - ADVANZ PHARMA Corp. Limited ("ADVANZ PHARMA" or "the Company"), a specialty pharmaceutical company with a strategic focus on complex medicines in Europe, today announced its financial and operational results for the three and nine months ended September 30, 2020. All financial references are in U.S. dollars ("USD") unless otherwise noted.
"The Company delivered strong financial results during its third quarter and first nine months of 2020," said Graeme Duncan, Chief Executive Officer of ADVANZ PHARMA. "These results demonstrate the important nature of our established portfolio of medicines, and reflect a significant contribution from our recently acquired Alprostadil products, and Correvio Pharma, which we acquired late in our second quarter. Looking ahead, we believe ADVANZ PHARMA has set a strong foundation for the remainder of the year and beyond, and we remain very excited about our future prospects."
Consolidated Third Quarter 2020 Financial and Operational Results
Third quarter 2020 Segment Results
ADVANZ PHARMA International segment revenue of $103.0 million for the quarter ended September 30, 2020, increased by $12.8 million, or 14%, compared to corresponding period in 2019.
A $8.5 million increase in revenue was further enhanced by a $4.4 million increase in revenue as a result of the GBP strengthening against the USD, when compared against the corresponding period in 2019. The increase in revenue not attributable to foreign exchange translation is primarily due to $7.7 million of revenue from the recently acquired Alprostadil products sold within the ADVANZ PHARMA International segment, and $6.8 million of revenue from the Correvio Acquisition, which were not included in the comparative period.
Increases in revenue attributable to other key products for the third quarter of 2020, excluding the impact of foreign currency translation, were a $1.5 million increase from Dexamethasone; and a $1.5 million increase from Salagen®. These higher product volumes and revenues are primarily due to increased trading, phasing of shipments and price volume mix.
These increases to revenue were partially offset by a $2.5 million decrease from Fusidic Acid due to phasing of shipments, and a $1.5 million decrease from Levothyroxine Sodium impacted by continued competitive pressures.
North America Segment
ADVANZ PHARMA North America segment revenue of $25.8 million decreased by $3.7 million, or 13%, compared to the corresponding period in 2019.
The decrease was primarily due to a $2.6 million decrease from Dyrenium® primarily as a result of generic competition that arose during the latter half of 2019; a $2.0 million decrease from Donnatal® due to continued competitive pressures impacting market share; and a $1.4 million decrease from Photofrin as a result of COVID-19.
These declines in revenue were partially offset by a $1.5 million revenue increase from the portfolio of Alprostadil products, which was not included in the comparative period.
The Company continued to make progress with respect to the advancement of its pipeline of medicines.
In the third quarter of 2020, ADVANZ PHARMA submitted for approval, or received approval, for 31 medicines. In its third quarter of 2020, the Company began counting submissions and approvals as one molecule per geography, whereas prior to the quarter, the Company aggregated the geographies and molecule to count as one submission or approval.
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 continues to believe that product launches from its pipeline will not generate a material amount of revenue.
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.
Presently, the Company has not identified any material continuity-risks specifically associated with COVID-19. ADVANZ PHARMA continues to monitor the situation, working with all relevant bodies, such as various levels of government, suppliers, and its contract manufacturing partners, to ensure that patients are able to access the Company's vital medicines at this time.
The Company also continues to monitor the collectability of its receivables, and has noted no significant change in the expected recoverability.
To support the Company's mitigation efforts with respect to the pandemic, ADVANZ PHARMA has implemented a COVID-19 taskforce in order to continue 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 its 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 successful 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
Consolidated Results of Operations
Revenue for the third quarter of 2020 increased by $9.1 million, or 8%, compared to the corresponding period in 2019. This increase was primarily due to higher sales from the ADVANZ PHARMA International segment combined with higher foreign exchange rates impacting translated revenues from this segment, partially offset by lower sales from the ADVANZ PHARMA North America segment.
Revenue for the year to date 2020 increased by $4.2 million, or 1%, compared to the corresponding period in 2019. This increase was primarily due to higher sales from the ADVANZ PHARMA International segment, partially offset by lower sales from the ADVANZ PHARMA North America segment.
Gross profit for the third quarter of 2020 and year to date decreased by $1.3 million, or 2%, and $4.3 million, or 2%, respectively, compared to the corresponding periods in 2019. These decreases were primarily due to a non-cash inventory fair value adjustment increasing the cost of sales due to an increase in the fair value of inventory associated with the Correvio Acquisition amounting to $1.6 million and $2.3 million, for the third quarter of 2020 and year to date, respectively, combined with shift in product mix and the factors described above.
Gross profit percentage for the third quarter of 2020, and year to date, decreased by 6% and 2%, respectively, compared to the corresponding periods in 2019, primarily due to a change in the mix of product sales within both the segments.
Operating expenses for the third quarter of 2020 and year to date decreased by $107.7 million, or 56%, and $119.6 million, or 32%, respectively, compared to the corresponding periods in 2019. The decrease in operating expenses for the third quarter of 2020 compared to the corresponding period in 2019 is primarily due to $108.0 million lower impairment charges, and $2.9 million lower acquisition related, restructuring and other costs, partially offset by $2.8 million higher general and administrative, selling and marketing and research and development costs.
General and administrative expenses reflect costs related to salaries and benefits, professional and consulting fees, reporting issuer costs, travel and other administrative expenditures. General and administrative expenses for the third quarter of 2020 increased by $0.5 million, or 5%, and decreased by $3.3 million, or 11%, for the year to date 2020, compared to the corresponding periods in 2019.
The increase for the third quarter of 2020 is primarily attributable to the Correvio acquisition, which was not included in the comparative period of 2019, combined with unfavorable foreign exchange rate movements impacting translation of general and administrative costs from ADVANZ PHARMA International.
This was partially offset by lower costs associated with travel and other administrative expenditures, combined with lower costs related to infrastructure within ADVANZ PHARMA North America primarily as a result of closure of the Barbados operations in the third quarter of 2019.
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 third quarter of 2020 increased by $1.1 million, or 13%, and decreased by $0.8 million, or 3%, for the year to date 2020, compared to the corresponding periods in 2019.
The increase by segment for the third quarter of 2020 comprised of an increase of $1.4 million, or 21%, within ADVANZ PHARMA International, and a decrease of $0.3 million, or 18%, within ADVANZ PHARMA North America. The increase within ADVANZ PHARMA International is primarily as a result of costs associated with sales promotion and advertising activities of the Correvio acquisition, which was not included in the comparative period of 2019, combined with unfavorable foreign exchange rate movements impacting translation of selling and marketing costs.
This increase was partially offset by lower sales promotional expenses related to Donnatal® within ADVANZ PHARMA North America.
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 Group. Research and development costs for the third quarter of 2020 and year to date increased by $1.2 million, or 17%, and $0.7 million, or 3%, respectively, compared to the corresponding periods in 2019 primarily due to the Correvio Acquisition. This is partially offset by lower clinical trial spend, combined with lower costs associated with validation and stability testing activities.
Adjusted EBITDA of $53.5 million for the third quarter of 2020 decreased by $2.5 million, or 4%, and increased by $1.2 million, or 1%, for the year to date 2020, compared to the corresponding periods in 2019.
In addition, during the third quarter of 2020 and year to date, the Company incurred $2.2 million, and $7.7 million respectively, of corporate costs. Corporate costs for the third quarter of 2020 and year to date decreased by $0.9 million and $1.8 million, respectively, compared to the corresponding periods in 2019, primarily due to lower salaries and benefit costs.
As of September 30, 2020, the Company had cash and cash equivalents of $141.0 million and 48,913,490 limited voting shares issued and outstanding.
Conference Call Notification
The Company will hold a conference call on Friday, November 6, 2020, at 8:30 a.m. ET, hosted by Mr. Graeme Duncan, Chief Executive Officer, and other senior management. A question-and-answer session will follow the corporate update.
This call is being webcast and can be accessed by going to:
An archived replay of the webcast will be available by clicking the link above.
1 Management uses non-IFRS measures such as EBITDA, Adjusted EBITDA, Adjusted Gross Profit, and Adjusted Gross Profit % to provide a supplemental measure of operating performance. Please refer to the "Non-IFRS Financial Measures" section of this press release for further information.
About ADVANZ PHARMA
ADVANZ PHARMA is a specialty pharmaceutical company with a strategic focus on complex medicines in Europe. With an agile and experienced team, including direct sales, marketing and medical capability across Europe's major markets, the Company innovates and enhances the critical medicines patients depend on, broadening patient access and improving health outcomes.
ADVANZ PHARMA has deep expertise in the Anti-Infectives and Endocrinology therapy areas, along with strong relationships with hospital decision makers, making it a go-to-partner when commercialising complex medicines in Europe.
ADVANZ PHARMA has an operational headquarter in London, an operations centre of excellence in Mumbai, commercial affiliates in North America, Europe, and Australia/NZ, and an established global network of commercial partners throughout the rest of the world.
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 financial 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 Adjusted Gross Profit, 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 financial measures in the evaluation of issuers. Management also uses non-IFRS financial 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' working capital requirements. Readers are cautioned that the non-IFRS financial measures contained herein may not be appropriate for any other purpose.
Adjusted Gross Profit
Adjusted Gross Profit is defined as gross profit adjusted for non-cash fair value increases to the cost of acquired inventory from a business combination. Under IFRS, acquired inventory is required to be recognized at fair value at the date of acquisition. As this inventory is sold the fair value adjustment represents a non-cash cost of sale amount that has been excluded in adjusted gross profit in order to normalize gross profit for this non-cash component.
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 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 nine month periods ended September 30, 2020, and September 30, 2019.
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 and forward-looking information within the meaning of Canadian securities laws. Often, but not always, 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. Forward-looking statements and information include, but are not limited to: the Company's continued expansion into France, Germany, Spain, Italy and the Benelux region, including by leveraging the expertise of Correvio's European team; the expansion of the Company's product portfolio; the Company's ability to deliver mid-term value and long-term growth, including through pipeline filling, optimization, licencing and development partnerships; the Company's initiatives being focussed on niche and differentiated generics, complex specialty and value-added medicines; product launches in 2020 from its pipeline not generating a material amount of revenue; there being no material continuity risks specifically associated with COVID-19; the ability of patients to access the Company's medicines during the COVID-19 pandemic; there being no significant change in the expected recoverability of the Company's accounts receivables; and the impact of COVID-19 on the Company and its business and operations, including the ability of the Company to ensure the health and well-being of its employees, the ability of the Company to ensure the supply and movement of its medicines around the world, and the ability of the Company to continue to execute its strategic plan. Such statements and information 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 and information 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, the pharmaceutical industry and the regulation thereof, regulatory investigations and proceedings, the failure to comply with applicable laws, risks associated with distribution agreements, risks associated with general economic factors and 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.
SOURCE ADVANZ PHARMA Corp.
Company Codes: OTC-PINK:CXRXF, Toronto:ADVZ