FULL YEAR REPORT 2016

Transcription

1 FULL YEAR REPORT 2016 THE FULL YEAR AND THE FOURTH QUARTER o Net sales amounted to MSEK (69.1), whereof the fourth quarter MSEK 96.5 (57.4) o EBITDA was MSEK 51.7 (-71.7), whereof the fourth quarter MSEK 28.9 (-22.3) o Earnings per share amounted to SEK 1.51 (-1.46), whereof the fourth quarter SEK 1.36 (-0.46) o Cash and cash equivalents at period end amounted to MSEK (76.5) o Acquisition of BioPhausia with a well established portfolio of drugs o A long term credit facility has been signed in conjunction with the acquisition of BioPhausia o KB9520 was outlicensed to the cancer research company Oasmia o Decision on a rights issue of MSEK 374 SIGNIFICANT EVENTS AFTER PERIOD END o o The rights issue raised a total of MSEK 374 and was oversubscribed at 132 percent, of which 98.5 percent by subscription rights Karo Pharma transferred from Nasdaq Stockholm Small Cap to Nasdaq Stockholm Mid Cap AUDIOCAST TODAY AT A.M. CET A presentation of the report (in Swedish) will take place today at 11 a.m. The presentation can be attended through the corporate website or by telephone Questions may be submitted over the internet or by the telephone. 1

2 COMMENT ON OPERATIONS ACQUISITIONS RAISE KARO PHARMA TO THE NEXT LEVEL In 2016, Karo Pharma continued to develop well, with rising sales and improved cash flow. Towards the end of the year, BioPhausia with an established drug portfolio was acquired. The acquisition provides Karo Pharma further improved profitability and strengthened cash flow. The acquisition of BioPhausia is a large and important step. Since the products are well established and fit into our range, all profitability parameters improve and our cash flow strengthens. Through the acquisition, Karo Pharma aims to achieve significant improvements in EBITDA. Furthermore, the acquisition is strategically important because it brings us one big step closer to our vision to lead the consolidation in the Health Care sector in Sweden. Efforts to identify and evaluate various acquisition opportunities continues. In October, we licenced our project KB 9520 to the cancer research company Oasmia. The deal provided Karo Pharma a down payment of shares in Oasmia and 20 percent of all Oasmia s future revenue from the project Acquisitions raises Karo Pharma to a new level with stable earnings, and agreements with partners for development projects provide opportunities for milestones and royalties. Most of the major product groups acquired in 2015, such as Mabs, Hospital supply and Allevo have during in 2016 seen strong growth of 5 to 15 percent. We have also incurred costs in the fourth quarter in order to become even more cost efficient in Karo Pharma is an interesting alternative for shareholders who wish to invest in the Healthcare field. We are confident of our capability to continue delivering good shareholder returns. Anders Lönner Executive Chairman 2

3 KEY FINANCIAL DATA (MSEK) Full year Oct - Dec Net sales Gross earnings Gross margin, % Operating expenses Earnings/Loss before tax EBITDA, % Earnings before tax Earnings per share (SEK) Cash flow from operating activities 1) Cash and cash equivalents ) Excluding settlement of current liabilities during the second quarter of MSEK 26affecting comparability, cash flow from operating activities during January to December 2016 amounted to MSEK -10 SALES AND EARNINGS Net sales in 2016 was MSEK (69.1), whereof the fourth quarter MSEK 96.5 (57.4). Since September 2015, net sales comprise mainly of product sales in acquired companies. Cost of goods sold was MSEK (40.5), whereof the fourth quarter MSEK 57.1 (41.3), resulting in gross earnings of MSEK (28.6), whereof the fourth quarter MSEK 39.4 (22.1) and a gross margin of 42.8 (41.4) per cent for the period and 40.8 (38.5) per cent for the quarter. Operating costs, including depreciation and excluding other operating income amounted to MSEK (103.5), whereof the fourth quarter MSEK 47.5 (46.5). Selling expenses was MSEK (26.7), whereof the fourth quarter MSEK 35.3 (25.7). Research and development amounted to MSEK 5.3 (35.0), whereof the fourth quarter MSEK 0.6 (5.4). Partners continue the development of projects and assume responsibility for related costs. Operating profit was MSEK 29.6 (-74.9), whereof the fourth quarter MSEK 20.8 (-24.7). Items affecting comparability in the form of among others relocation of inventory, and costs for restructuring in combination with currency losses of MSEK 1, have negatively impacted operating earnings during the fourth quarter with MSEK Furthermore, the sale of KB 9520 had a positive impact of MSEK 28.9 on operating profit. Net profit amounted to MSEK 95.6 (- 78.2), and MSEK 91.4 (-24.7) respectively. Net income was positively affected by MSEK 75 million from a recognized tax receivable attributable to parent company's losses, which in part can be utilized due to acquisitions. Earnings per share was SEK 1.51 (-1.46), whereof the fourth quarter SEK 1.36 (-0.46). CASH FLOW AND FINANCIAL POSITION Cash flow from operating activities, including settlement in the second quarter of short term liabilities of MSEK 26 affecting comparability, was MSEK (-52.2), 3

4 whereof the fourth quarter MSEK 9.6 (-5.5). Cash and cash equivalents at period end amounted to MSEK (76.5). The acquisition of BioPhausia contributed significantly to the increase in balance sheet turnover to MSEK (642.5). Intangible assets amounted to MSEK (475.7). Due to the acquisition, long term debt increased to MSEK (21.0) and short term liabilities to MSEK (225.2). Total shareholders equity taking into account the period s earnings, amounted to MSEK (364.6), translating into equity per share of SEK (7.30). The equity ratio was 40.2 (56.7) percent. THE PARENT COMPANY Net sales for the Parent Company for 2016 amounted to MSEK 48.9 (3.9), whereof the fourth quarter MSEK (1.0). Earnings after financial items was MSEK 0.9 (-61.7), whereof the fourth quarter MSEK 18.5 (- 10.8). Parent company cash and cash equivalents at period end amounted to MSEK 85.7 (68.7). SIGNIFICANT EVENTS At the end of the year, Karo Pharma acquired all shares in BioPhausia for MSEK 908 on a debt and cash free basis. The deal included some 10 well-known drugs, for example Mollipect, Lithionit, Citodon, Paraflex, Laxabon and Solvezink. The acquisition also included rights to license MIV- 802, a project developed for the treatment of hepatitis C, in certain European markets including the Nordic region. In October, a collaboration was entered into with the cancer research company Oasmia, regarding the cancer project KB9520 that has shown favorable effects in preclinical models in a variety of cancers. Oasmia acquired the project from Karo Pharma for a purchase price in the form of 3,080,000 shares in Oasmia, which Karo Pharma's Board of Directors decided to propose the Annual General Meeting to distribute to shareholders. Karo Pharma is also entitled to 20 percent of all Oasmia s future revenues that may be generated from the project. Oasmia assumes responsibility for the continued development of the project, as well as its costs. SIGNFICANT EVENTS AFTER PERIOD END An Extraordinary General Meeting on January 18 resolved on a rights issue of MSEK 374 before transaction costs of approx. MSEK 24, to repay part of the loan raised in connection with the acquisition of Bio- Phausia. The rights issue was oversubscribed at approximately 132 percent, with 98.5 percent of the new shares subscribed for with subscription rights. The share capital increased by SEK 7,303,599 through the issuance of 18,259,198 shares. After sounding out possible guarantors, Executive Chairman Anders Lönner agreed to underwrite 92 percent of the rights issue of MSEK 374 and will receive a fee of 5 percent of the guaranteed amount equivalent to about MSEK 17 in underwriting compensation. In addition, Anders Lönner committed in advance to without compensation subscribe to his own holding of 5 percent, which also board member Per-Anders Johansson did for his 3 percent holding. TRANSACTIONS WITH RELATED PARTIES During the period of Karo Pharma's subsidiary sold two products licensed from a company owned by Anders Lönner, for which 4

5 the subsidiary received commissions worth about KSEK 300. RISKS The Group is exposed to a number of risks and insecurities. Wrongful, delayed or missing deliveries form the Group s suppliers mean that the Group s deliveries also may be delayed, inadequate or wrong. The Group is also exposed to exchange rate fluctuations. It is not guaranteed that Group operations will not be subject to restrictions from governmental agencies or that the Group will receive necessary future authority approvals. There is a risk that the Group s ability to develop products decreases or that the products will not be launched according to set schedules. These risks may involve decreased sales and a negative effect on Group earnings. ANNUAL GENERAL MEETING The annual general meeting will be held in Stockholm om 11 May. DIVIDEND The Board has decided to propose to the AGM a dividend equivalent to the value of the shares in Oasmia that Karo Pharma received as a down payment on the sale of the company's cancer project. ACCOUNTING AND VALUATION PRINCIPLES This interim report has been prepared in accordance with International Accounting Standards (IAS) 34 for interim reports and International Financial Reporting Standards IFRS as adopted by the EU. The accounting and valuation principles applied are unchanged compared to those applied in For the parent company, this interim report has been prepared in accordance with the Swedish Annual Accounts Act and compliance with RFR 2 Accounting for legal entities. The accounting principles applied for the parent company differ from those applied for the Group only regarding accounting of leasing agreements. AUDIOCAST The report will be presented (in Swedish) today at. 11:00 at an audiocast with slides that can be followed on as well as over telephone Questions can be both over the Internet and over the phone. AUDITORS REVIEW This yearend report has not been subject for review by the company s auditors FINANCIAL REPORTS Annual report 2016 April Annual General Meeting May 11, 2017 Interim Report Jan-March May 10, 2017 Interim Report Jan-June Aug 24, 2017 Interim Report Jan-Sept Nov 2, 2017 Full-year Report 2017 Feb 22, 2018 Stockholm on February 28, 2017 Anders Lönner Executive Chairman 5

6 FOR FURTHER INFORMATION, PLEASE CONTACT: Henrik Palm, CFO, or ABOUT KARO PHARMA Karo Pharma is a specialty pharma company that develops and markets products to pharmacies and directly to healthcare providers. The share is listed on Nasdaq Stockholm in the Mid Cap segment. The information in this report is such that Karo Pharma is obliged to make public pursuant to the EU Market Abuse Regulation and the Securities Markets Act. The information was submitted for publication, through the agency of the contact person set out above, on February 28, 2017 at 8.00 a.m. CET. 6

7 CONSOLIDATED INCOME STATEMENT SUMMARY (KSEK) Oct Dec Full year Net sales Cost of sales Gross earnings Operating expenses Distribution costs Administration Research and development Other operating income/expenses Operating result Financial net Earnings before Tax Tax NET EARNINGS Net earnings attributable to: Shareholders in the parent company Non-controlling interests Earnings / loss per share (SEK) Number of shares issued (000) Taking into account the bonus element of the rights issue CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (KSEK) Oct Dec Full year NET EARNINGS FOR THE YEAR Other comprehensive income for the year, net of tax Exchange rate differences TOTAL COMPREHENSIVE INCOME Total comprehensive income attributable to: Shareholders of the parent company Non-controlling interests

8 CONSOLIDATED STATEMENT OF FINANCIAL POSITION (KSEK) 31 Dec Intangible assets Equipment Other financial assets Other current assets Cash and cash equivalents TOTAL ASSETS Shareholders equity and liabilities Equity Deferred tax 1) Long term debt Current liabilities TOTAL SHAREHOLDERS EQUITY AND LIABILITIES ) Attributable to depreciable product rights in connection with business acquisitions CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (KSEK) Attributable to shareholders of the parent company Share capital Other contributed capital Accumulated losses Noncontrolling interest Amount at January 1, Total comprehensive income for the period Acquisition of non-controlling interest Issue of shares at acquisition of operations Issue of shares at acquisition of operations Issue of shares related to reverse split Rights issue at acquisition of operations Rights issue, net of transaction costs Amount at December 31, Total Amount at January 1, Total comprehensive income for the period Acquistion of non-controlling interest Rights issue, net of transaction costs Warrants Amount at September 31,

9 CONSOLIDATED STATEMENT OF CASH FLOWS (KSEK) Oct - Dec Full year Operating activities Operating income/loss before financial items Depreciation Other items not affecting liquid assets Financial items received and paid Cash flow from operating activities before changes in working capital Changes in working capital Cash flow from operating activities Investing activities Net investment in company acquisitions Net investment in intangible assets Net investment in other financial instruments Net investment in equipment Cash flow from investing activities Financing activities Net proceeds from share issues Transaction costs share issue 1) Warrants Borrowings Repayment of borrowings Transactions with minorities Cash flow from financing activities Cash flow for the period Cash at the beginning of the period Currency exchange in cash Cash at the end of the period ) Comprises the portion of transaction related costs that has been paid during the period. 9

10 PARENT COMPANY INCOME STATEMENT SUMMARY (KSEK) Oct-Dec Full Year Net sales Cost of sales Gross earnings Operating expenses Distribution costs Administration Research and development Other operating income/expenses Operating result Financial net Earning after financial items Group contributions paid Tax NET EARNINGS PARENT COMPANY BALANCE SHEET SUMMARY (KSEK) 31 Dec Intangible assets Equipment Deferred tax assets Other financial assets Shares in group companies Other current assets Cash and cash equivalents TOTAL ASSETS Equity and liabilities Total restricted equity Total non-restricted equity Non-current liabilities Current liabilities TOTAL SHAREHOLDERS EQUITY AND LIABILITIES

11 ACQUISITION On December 15, 2016, Karo Pharma acquired all shares in the drug company Bio- Phausia AB. The acquisition includes a portfolio of 13 well-known Nordic drug brands. The brand portfolio is characterized by a long history of stable sales, strong expected cash flows and low marketing and maintenance costs. Information on purchase price, the acquired net assets and goodwill are shown below (all amounts, unless otherwise stated, are expressed in thousands of SEK (KSEK)): For consideration - cash outflow, see below. The assets and liabilities arising from the acquisition are as follows: Assets and liabilities Real value Product rights Tangible fixed assets 153 Inventory Receivables Tax claims Cash 764 Accounts payable VAT liabilities Deferred taxes Deferred costs and prepayed income -548 Acquired identifiable net assets Goodwill Acquired net assets Goodwill is attributable to the flows and processes that has arisen in BioPhausia and thereby created an excellent platform for further expansion. No part of the recognized goodwill is expected to be tax deductible. Fair value of acquired receivables amounted to MSEK 30,7. The acquired business contributed revenues of MSEK 8.9 and earnings after financial net of KSEK 3.5 to the Group for the period from December 15 to December 31, Had the acquisition been completed on January 1, 2016, a consolidated pro forma shows revenue and net profit at December 31, 2016, at MSEK and earnings after financial items of MSEK These amounts have been calculated based on the subsidiary's results, adjusted for: - The change in depreciation that would have occurred provided the adjustment to fair value and the change in the depreciation period for product licenses had been applied from January 1, 2016 together with the related tax effects. - The additional interest expenses for debt financing, net after proceeds from the rights issue as if the debt financing and the rights issue were completed on January 1, Acquisition-related costs of MSEK 1 are included in other operating expenses in the income statement and in operating activities in the cash flow statement. Consideration - cash outflow is shown in the table below: Cash outflow to acquire subsidiaries, after deduction of acquired liquid funds 2016 (KSEK) 2015 (KSEK) Cash consideration Liquid funds in acquired companies Net outflow of liquid funds investment activities The acquisition analysis of BioPhausia AB is preliminary until the final allocation between goodwill, product rights and other intangible assets have been established. The Company is currently evaluating the pre-acquired products' future potential and longevity. The valuation of product rights in the acquisition analysis is based on a 11

12 preliminary estimate of the various products future sales and economic life. Once this thorough analysis is completed, the acquisition analysis will be determined which may cause the breakdown between the product rights and goodwill to change. A change in the valuation of product rightswould also affect the amount of deferred tax liabilities. The preliminary acquisition analysis for acquisitions in 2015 were established in 2016 without adjustments. 12