- Second quarter 2020 revenue of $132 million
- Second quarter net loss of $27 million
- Second quarter 2020 Adjusted EBITDA1 of $65 million
- Generated cash flow from operations of $107 million in the first six months of 2020
- Concluded the quarter with a cash and cash equivalents balance of $149 million
- Closed its acquisitions of the rights to a portfolio of alprostadil products, and Correvio Pharma Corp. ("Correvio")
LONDON, Aug. 12, 2020 /PRNewswire/ - ADVANZ PHARMA Corp. Limited ("ADVANZ PHARMA" or "the Company"), a global 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 six months ended June 30, 2020. All financial references are in U.S. dollars ("USD") unless otherwise noted.
"Our financial results for the first half of 2020 have exceeded our expectations," said Graeme Duncan, Chief Executive Officer of ADVANZ PHARMA. "In addition, our recently acquired portfolio of alprostadil products, and the portfolio of medicines from Correvio, made significant contributions to our second quarter results. The integration of these two transactions is proceeding as planned, and we remain excited about the opportunity to continue our expansion into France, Germany, Spain, Italy and the Benelux region by further leveraging the expertise of Correvio's experienced European team."
Consolidated Second Quarter 2020 Financial and Operational Results
- Reported second quarter 2020 revenue of $131.9 million, compared to $131.1 million for the second quarter of 2019, and $130.0 million for the first quarter of 2020.
- Reported a net loss for the second quarter of 2020 of $26.6 million.
- Reported second quarter Adjusted EBITDA1 of $65.1 million, compared to $59.7 million for the second quarter of 2019, and $63.5 million for the first quarter of 2020.
- Generated cash flows from operating activities of $106.8 million in the first six months of 2020, compared to $97.4 million during the same period in 2019.
- On April 1, 2020, the Company closed its acquisition of the rights to a portfolio of alprostadil products in 20 countries around the world, the majority of which are in Western Europe.
- On May 27, 2020, ADVANZ PHARMA closed its acquisition of specialty pharmaceutical company Correvio.
- As of June 30, the Company had a cash and cash equivalents balance of $149.2 million compared to $261.1 million as of December 31, 2019. ADVANZ PHARMA utilized approximately $160 million of its cash on hand in the second quarter of 2020 to fund its acquisitions of the portfolio of alprostadil products from UCB S.A., and all of the issued and outstanding shares of Correvio.
Second quarter 2020 Segment Results
ADVANZ PHARMA International segment revenue of $99.9 million for the quarter ended June 30, 2020, increased by $4.4 million, or 5%, compared to the corresponding period in 2019.
A $7.8 million increase in revenue was offset by a $3.4 million decrease in revenue as a result of the GBP weakening against the USD, when compared against the corresponding period in 2019.
The increase in revenue is primarily due to $5.5 million of revenue from the recently acquired portfolio of alprostadil products sold within the ADVANZ PHARMA International segment, $3.3 million of revenue from the acquisition of Correvio, which were not included in the comparative period, combined with a $4.5 million increase from Cyanocobalamin due to a release of certain provisions.
These increases to revenue were partially offset by a $4.3 million decrease from Fusidic Acid.
North America Segment
ADVANZ PHARMA North America segment revenue of $32.0 million decreased by $3.6 million, or 10%, compared to the corresponding period in 2019. The decrease was primarily due to a $3.2 million decrease from Dyrenium® primarily as a result of generic competition that arose during the latter half of 2019; a $1.4 million decrease from Photofrin as a result of COVID-19; and a $1.2 million decrease from Donnatal® due to continued competitive pressures impacting market share.
These declines in revenue were partially offset by a $2.7 million increase from Plaquenil® due to higher customer demand as a result of COVID-19.
The Company continued to make progress with respect to the evaluation and advancement of its pipeline of medicines.
In the second quarter of 2020, ADVANZ PHARMA submitted for approval, or received approval, for seven 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 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
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Represents a non-IFRS measure. For the relevant definitions and reconciliation to reported results, see "Non-IFRS Financial Measures" section of this press release for further information. Management believes non-IFRS measures, including Adjusted Gross Profit, EBITDA and Adjusted EBITDA, provide supplementary information to IFRS measures used in assessing the performance of the business.
Consolidated Results of Operations
Revenue for the second quarter of 2020 increased by $0.8 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.
Revenue for the year to date 2020 decreased by $4.9 million, or 2%, compared to the corresponding period in 2019. This decrease was primarily due to lower sales from ADVANZ PHARMA North America segment, partially offset by higher sales from ADVANZ PHARMA International segment.
Approximately $5.5 million of revenue within the ADVANZ PHARMA International segment for the second quarter of 2020 came from the recently acquired portfolio of alprostadil products, and $3.3 million of revenue from the recently acquired Correvio, which were not included in the second quarter of 2019.
This revenue was partially offset by lower revenue due to unfavorable foreign exchange rates negatively impacting second quarter, 2020 translated revenues by $3.4 million.
Gross profit for the second quarter of 2020 increased by $1.4 million, or 2%, compared to the corresponding period in 2019. The increase was primarily due to the net revenue increases described above, partially offset by a non-cash inventory fair value adjustment of $0.6 million increasing the cost of sales due to an increase in the fair value of inventory associated with the Correvio acquisition.
Gross profit for the year to date 2020 decreased by $3.0 million, or 2%, compared to the corresponding period in 2019. The decrease was primarily due to the net revenue decreases described above, combined with a non-cash inventory fair value adjustment of $0.6 million increasing the cost of sales due to an increase in the fair value of inventory associated with the Correvio acquisition.
Gross profit percentage for the second quarter of 2020 increased by 1%, compared to the corresponding period in 2019. The increase was primarily due to a shift in product mix. Gross profit percentage for the year to date 2020 was consistent with the corresponding period in 2019.
Operating expenses for the second quarter of 2020 and year to date decreased by $2.3 million, or 2%, and $11.9 million, or 7%, respectively, compared to the corresponding periods in 2019. The decrease in operating expenses for the second quarter of 2020 compared to the corresponding period in 2019 is primarily due to $5.1 million lower amortization charges on intangible assets due to prior-year impairments, and $3.3 million lower general and administrative, selling and marketing and research and development costs, partially offset by $3.8 million higher impairment charges, and $2.9 million higher acquisition related, restructuring and other costs, primarily related to the Correvio acquisition.
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 second quarter of 2020 and year to date decreased by $0.8 million, or 8%, and $2.4 million, or 13%, respectively, compared to the corresponding periods in 2019.
This decrease is primarily due to closure of the Barbados operations resulting in lower employee costs, and costs related to infrastructure within ADVANZ PHARMA North America, and favourable foreign exchange rate movements impacting translation of general and administrative expenses from ADVANZ PHARMA International, partially offset by higher costs associated with legal compliance within ADVANZ PHARMA International and $1.7 million as a result of the Correvio acquisition, which was not included in the comparative period in 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 costs for the second quarter of 2020 and year to date decreased by $1.7 million, or 20%, and $2.7 million, or 15%, compared to the corresponding periods in 2019.
The decrease in selling and marketing expenses is primarily attributable to lower promotional costs within its North America segment associated with Donnatal®, and within its International segment, as a result of favourable foreign exchange rate movements impacting translation, combined with lower costs related to salaries and benefits costs.
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 of the Company. Research and development costs for the second quarter of 2020 and year to date decreased by $0.7 million, or 10%, and $1.0 million, or 7%, respectively, compared to the corresponding periods in 2019, primarily due to lower clinical trial spend, and lower costs associated with validation and stability testing activities.
Adjusted EBITDA for the second quarter of 2020 and year to date increased by $5.3 million, or 9%, and $3.7 million, or 3%, respectively, compared to the corresponding periods in 2019. Adjusted EBITDA by segment for the second quarter of 2020 was $45.0 million from the Company's International segment, and $22.8 million from its North America segment
In addition, during the second quarter of 2020, the Company incurred $2.8 million of Corporate costs.
As of June 30, 2020, the Company had cash and cash equivalents of $149.2 million and 48,913,490 limited voting shares issued and outstanding.
Conference Call Notification
The Company will hold a conference call on Wednesday, August 12, 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.
CONFERENCE CALL DETAILS
Wednesday, August 12, 2020
8:30 a.m. ET
(647) 427-7450 or (888) 231-8191
(416) 849-0833 or (855) 859-2056
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 operates a global 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 from its headquarters in London, England and through its subsidiaries in Dublin, Ireland; Sydney, Australia; Helsingborg, Sweden; Chicago, United States; Geneva, Switzerland; and Mumbai, India.
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.
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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 six month periods ended June 30, 2020, and June 30, 2019.
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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.