Results for the year ended 31 January 2017 Focusing and simplifying 3 May 2017

Transcription

1 Results for the year ended 31 January 2017 Focusing and simplifying

2 Business review Chris Rigg, Chief Executive Officer 1

3 Strategic progress Recent past Present Future New Board appointed Business simplification leading to balance sheet write-downs NuPharm closed in line with plan All trading losses across the Group eliminated Reported loss draws a line under past challenges Balance sheet recapitalised following 15.0m equity fundraise Lower net debt than expected at 13.0m Business well-placed and performing well Run-rate profitability increasing Specials division long-term contracts with AAH, Phoenix and Well Pharmacy secured Niche division transformed focused pipeline, successful launches and lower cost base All recently launched products performing as expected Products in development progressing to timetable, with a full pipeline Simplified strategy Focus on higher-margin Specials and Niche businesses Maximise UK opportunity to move up prescribing hierarchy Develop commercial and international partnerships Strategic review of Medication Adherence 2

4 Financial overview Revenue 88.8m 2016: 69.2m Gross profit 25.9m 2016: 25.9m Adjusted EBITDA 10.1m 2016: 12.5m Statutory operating loss (post-simplification) 9.8m 2016: 7.5m profit Net debt reduced by 11.6m to 13.0m 2016: 24.6m All figures for continuing operations 3

5 Our simplified business model & positioning Market position: No. 2 Licensed medicines preferred choice for patients and prescribers Specials prescribed if licensed medicine not available Specials market: 1% (c. 80m) of England and Wales 1 community prescription market Market backdrop characterised by tariff pricing and regulatory environment Market position: No. 1 1 As of

6 Our strategy Leverage existing business platform Focusing and simplifying Consolidate our market position Partnerships Specialist pharmaceutical business 5

7 Business updates 6

8 Portfolio update Carefully selected products for progression In development / licensing process 35 products Tighter focus allows management to devote more time and attention to the products that matter most MA received not launched 3 products Pipeline is full and includes 25 top UL2L opportunities Launched or out-licensed 19 products Selected larger niche generics with market opportunity will be commercialised in the near term Group has proven capability in developing and licensing products through Lamda Total 57 products Commercialising products through Colonis in the most effective way is key to realising their potential UL2L Non-UL2L Graph depicts number of individual UK-licensed products or developments that is post the impact of product discontinuation and cancelled developments. Branded and generic version of the Group s Vitamin D range (3 strengths across 6 product lines) are counted separately in the above analysis given their different routes to market. The above numbers do not include the range of Dermacool TM prescribable creams (4 products across 13 product lines) as they are not licensed products. A further 12 products are in feasibility assessment stage and are not part of the chart as they may not ultimately proceed to the development stage. 7

9 Launched portfolio update Portfolio EBITDA 1 excluding one-off items Niche division performing well Monthly profitability run-rate transformed Discontinuing underperforming products allowed for removal of supporting costs and greater focus on selected portfolio A number of products successfully launched in Q417 and post year-end are performing to plan, comprising: Break even Post year-end Acetylcysteine Sachets 200mg 3 Metformin Oral Solution strengths Folic Acid Oral Solution 5mg/5ml 3 Levothyroxine Oral Solution strengths Portfolio now consists of 19 UK-licensed products generating sustained revenue and margin, comprising 4 UK out-licenses and 15 launched products 1 Graph depicts EBITDA excluding out-licensing income (to neutralise lumpiness) and other non-recurring items such as restructuring costs. The depicted EBITDA includes the cost of supporting underperforming lines (to show the subsequent improvement following simplification), which is not included in adjusted EBITDA. 8

10 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Specials 80,000 Prescribing of special order products on NHS prescriptions in England 1 vs QPL 2 order numbers in England (excluding special obtains) Despite market maturity and NHS budgetary pressure, Specials business has increased its market share Growth driven by core competencies and competitive advantages: 60,000 Service and quality Breadth of offering Contracted relationships 40,000 Recent long-term exclusive contracts entered into include: 20,000 AAH c.4 years remaining Well Pharmacy 2 years Phoenix Healthcare Distribution 3 years - Business experiencing some margin pressure resulting from switch to tariff lines Specials prescriptions QPL order numbers 1 NHS Business Services Authority website, updated to September Quantum Pharmaceutical Limited Hospital volumes serviced by UL Medicines growing Specials provides profitable, cash generative platform for licensing activities 9

11 Medication Adherence strategic review 2017 Medication Adherence Simplified Specials & Niche Revenue 88.8m ( 25.4m) 63.4m Gross profit 25.9m ( 1.9m) 24.0m Gross profit % 29.2% 7.5% 37.9% Adjusted EBITDA 10.1m 0.2m 10.3m Adjusted EBITDA % 11.4% n/a 16.2% Strategy is to focus on the two core pillars of Specials and Niche A more focused core business means: Lower revenue Higher gross and adjusted EBITDA margin Higher quality earnings Opportunity for further efficiencies 10

12 Financial review Gerard Murray, Chief Financial Officer 11

13 Financial summary Continuing operations Revenue 88.8m 69.2m Gross profit 25.9m 25.9m Gross profit % 29.2% 37.4% Adjusted EBITDA 10.1m 12.5m Adjusted EBITDA % 11.4% 18.1% Depreciation & amortisation ( 2.9m) ( 1.6m) Share based payments ( 0.8m) ( 0.1m) Impairments & exceptionals ( 16.2m) ( 3.3m) Operating (loss) profit ( 9.8m) 7.5m Loss on discontinued operations ( 13.7m) ( 0.3m) 12

14 Adjusting items Continuing operations m Composition of 2017 impairments Group adjusted EBITDA 10.1m 12.5m 2.4m Depreciation & amortisation ( 2.9m) ( 1.6m) Simplification - products Impairments ( 10.0m) ( 0.1m) Exceptionals 1 ( 6.2m) ( 3.2m) 7.2m Medication Adherence Other Share-based payments ( 0.8m) ( 0.1m) Group statutory operating (loss) profit ( 9.8m) 7.5m 1.1m 0.4m Composition of 2017 exceptionals 2.0m Lamda deferred consideration 1 Non-recurring and non-operational items Simplification - reorganisation Board changes Other 2.7m 13

15 Adjusted EBITDA Revenue Revenue bridge ( m) MA growth in homecare sector Homecare sector low margin activity Adjusted EBITDA 40.0 FY17 a year of significant change 20.0 Group margin impacted by mix of divisional activity Specials Niche Medication Adherence 2017 Divisional performance: Specials pricing and product mix Niche simplification offsetting new product launches MA entry in new business activity Adjusted EBITDA bridge ( m) Specials Niche Medication Adherence Group costs

16 m Cash flow The Group generated 6.5m of operating cash excluding the impact of non-cash impairments, depreciation and amortisation Group continues to benefit from strong working capital management established in H1 Majority of capital expenditure relates to capitalised development expenditure ( 4.0m) Cash impact of discontinued operation represents substantially all of the expected cash cost of closing NuPharm (5.0) (9.8) (0.9) 0.5 (2.4) (1.3) (2.0) (4.0) (6.0) (8.0) (10.0) (12.0) Operating loss Depreciation/ amortisation/ impairments Share based payments Mvt in working capital Cash generated from continuing operations Capex Interest paid Net tax receipt Discontinued operation Free cash flow 15

17 Net debt Group banking facilities comprise: Net debt ( m) Term loan m outstanding at year end. 10m revolving credit facility ( RCF ) undrawn at the year-end (14.3) Net debt reduced by almost half by 15.0m fundraise ( 14.3m after expenses) completed in November Debt repayments comprised 3m against term loan and 5m to pay down RCF Opening net debt Free cash flow Proceeds from equity fundraise Dividends paid Other Closing net movements debt 16

18 Outlook Chris Rigg, Chief Executive Officer 17

19 Outlook Strong progress in transition to focused and simplified business Line drawn under historical issues reflected in results Secured key routes to market through long-term contracts in the Specials division Simplified portfolio of launched products in Niche division performing well A number of successful launches post year-end and performing to plan Development pipeline progressing to plan with known routes to market Commercial partnerships being progressed Run-rate profitability supportive of market expectations Confident in the future 18

20 Chris Rigg Chief Executive Officer Gerard Murray Chief Financial Officer Quantum Pharma Plc Quantum House, Hobson Industrial Estate Burnopfield, Co. Durham, NE16 6EA 19

21 Appendices 20

22 Divisional Summary Revenue and EBITDA by division Specials ( m) Niche ( m) (5.0) Medication Adherence ( m) (0.2) Revenue Adjusted EBITDA Revenue growth of 7% reflects growth in lower-margin special obtains volumes and aseptic compounding Growth net of tariff pricing impact, Glyco cannibalisation & short-term softness in ULM 1 Gross margin reduction impacted by revenue mix and FX headwinds in H2 Revenue growth driven by new product launches (including Glyco) and increased third-party development activity Revenue headwinds include declining out-licensing income and simplification actions Cost base increased through investment in go-to-market infrastructure in H1 now addressed Significant revenue growth driven by new homecare contract wins Homecare business operates at very low margin Adjusted EBITDA loss reflecting change in business model and investment to support expansion Division exited the year generating positive EBITDA Operational gearing benefits in H2 21