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Pre-tax profits up 53% at £9.7m on sales up 86% at £61.0m.
Burton-on-Trent, UK – 27 February 2013 – Clinigen Group plc (AIM: CLIN, “Clinigen” or “the Group”), the global specialty pharmaceuticals and pharmaceutical services business, has today published its maiden half year results for the six months ended 31 December 2012.
*Underlying PBT and EPS excludes one off costs and share based payments arising wholly as a result of IPO. Underlying EPS is based on the weighted average number of shares in issue post IPO.
Peter George, Chief Executive Officer, said:
“The first half of the financial year has been eventful with the achievement of some key strategic and operational developments. We listed successfully on AIM and saw excellent growth across the three divisions. We also made significant investments in our underlying infrastructure and have continued our evaluation of product acquisitions and in-licensing opportunities.
“The second half of the financial year has started well and we remain confident that the underlying performance of the business will enable us to meet our full year expectations.”
In the six months to 31 December 2012, the Group has undergone many changes, both financial and strategic. There has been significant organic growth in both revenues and operating profit with contributions from all three operating businesses.
The strongest organic growth has come from CTS which has been the dominant revenue generator historically. This has been driven by the expansion into the US markets and winning new business on the basis of Clinigen’s credibility and global distribution network.
GAP has changed its focus over the past two years from a UK to a global business. Now that this change is complete, the business is developing and growing its existing 32 programs, whilst seeking new contracts. The Board expects to expand the customer base further across the large pharmaceutical companies that are already clients of the other operational businesses.
Sales from SP are from the hospital-based, anti-infective Foscavir which the Group acquired from Astra Zeneca in February 2010. The Group’s focus, since its acquisition, has been expansion of market coverage, seeking new indications to increase patient exposure and ensure pricing is competitive across all markets. Further progress is expected in the second half of the year. Coupled with the organic growth strategy, additional growth will be driven by acquisition or in-licensing of other hospital-based products which meet the Group’s specific criteria. The SP team continues to review various opportunities that arise from Clinigen’s connections with the pharma sector and through synergies with the other two businesses to add further products to the portfolio.
A notable highlight in the first half of the financial year was Clinigen’s successful admission to AIM, raising £6.8m (net) for the Group and £43.1m (net) for selling shareholders. The rationale for the IPO was to raise funds to support the SP acquisition programme, invest in infrastructure and for working capital. In addition, it enabled the departing Chairman/founder, Andrew Leaver to realise the majority of his investment. The Group successfully maintained operational momentum during the IPO process, a reflection of the strong management team.
Current trading and outlook
The Group had a strong first half, producing solid financial results and making good operational progress. Overall, trading in the second half of the year has started well. The Board expects sales to be ahead of market forecast, largely due to CTS, and profits to be in line with expectations, therefore margin percentages will be reduced.
By operating business, the largest proportion of organic growth is expected to continue from CTS, but with a growing influence from GAP, which remains on target to more than treble its sales and profit year on year. SP sales are expected to grow ahead of expectations due to increased US demand for Foscavir in H1. This organic growth is expected to continue steadily, with acquisitions and in-licensing of new products a priority in the second half.
Revenues in the half year grew by 86% (H1 11/12: £32.8m) to £61.0m as a result of strong organic growth in all three operating businesses.
Underlying EBITDA increased by 48% to £10.5m (H1 11/12: £7.1m) as a result of gross profit growth, from all three operating businesses, of £4.8m, offset by overhead growth of £1.4m supporting the significant organic growth.
Underlying pre-tax profit, which excludes a non-cash, share based payment charge of £2.1m, associated social security costs of £0.5m and £3.4m from costs arising as a result of the Admission to AIM, jumped by 53% to £9.7m (H1 11/12: £6.3m). The Group reported a statutory profit before tax of £3.7m (H1 11/12: £4.0m).
Allowable UK corporation tax (CT) deductions arise from the exercise, pre IPO, of two equity-settled share based remuneration schemes. This generates a reduction in CT payable in current and future years of £10.0m.
Underlying earnings per share, excluding one off exceptional costs and share based payments arising wholly as a result of IPO and based on the number of shares in issue post IPO, is 9.0p. The reported earnings per share is *3.5p and reported diluted earnings per share is 2.9p. In line with our stated dividend policy, the Board approved the payment of a maiden interim dividend of 0.6p per share. The dividend will be payable on 28 March 2013 to all shareholders on the register at 8 March 2013.
The Group is in a healthy cash position with cash and cash equivalents at £22.3m, up from £5.2m at 30 June 2012. Loans from the pre IPO principal shareholder were paid down in full and the Group is debt free at the period end. The working capital model continues to be self-funding.
The cash increase in the period of £17.1m is generated by cash from operations of £11.0m, net proceeds from share issue of £8.7m, offset by loan repayments of £1.6m and tax payments and investing activities of £1.0m.
Performance by operational businesses
CTS works with 15 of the top 20 pharmaceutical companies providing global procurement and supplies of drugs to meet clinical trial needs from phase ll through IV.
Top-line growth for the Group has been predominantly driven by CTS, which grew by 113% along with gross profit growth of £2.6m (83%). CTS revenue growth was supported by biologic drug studies. As previously reported, 35 of these biologic drugs will come off patent between 2013 and 2020 and Clinigen has now sourced and supplied 20 of these medicines for biosimilar comparator studies.
Sales in CTS can be lumpy. In H1 there have been particularly strong sales for a number of anti-viral comparator studies amounting to £24.0m, 52% (c.£8m) higher than the equivalent sales in the full year 2011/12. These studies have been largely supplied now and this activity is unlikely to continue at this level into H2. £20.0m of these sales came through three large projects with scale-related lower margins, leading to margins on a like-for-like basis on anti-virals being reduced by 8% on the full year 2011/12. Larger projects are typically lower margin contracts by nature, but given the operational gearing within CTS, these contracts are significantly value accretive. This has led to an overall dilution on margin percentage to 13% (FY 2011/12: gross margin of 17%).
Whilst the current pipeline suggests there might not be margin percentage improvements in H2 this year, the Board expects margin improvements in the longer term.
GAP specialises in designing and executing Global Access Programs to allow critically ill patients access to potentially life saving treatments. GAP works with companies to provide early market access to important medicines before obtaining regulatory approval for these drugs or to continue to provide the drug to patients on a named basis after discontinuation or withdrawal.
GAP is showing excellent growth in both sales and profit, having changed its strategy from the supply of UK Specials to 100% Global Access Programs. The Board planned a threefold growth in this operating business in FY13 and remains well on track to deliver this. Programs under management now stand at 32, although one is closing down, 16 are active and a further 15 are in start-up mode and expected to become active during 2013 depending on phase 3 trial outcomes. The two new large early access programs, Campath (Sanofi) and MDV3100 (Astellas), have now started and are running to plan and are close to peak levels. In total 7,800 units of these two drugs have been supplied by the Group in H1, meeting demand for unmet medical need in these oncology treatment areas.
For SP, Clinigen is targeting niche, hospital only, mature, end of lifecycle drugs, typically owned by large pharmaceutical companies that cannot devote the required time, attention and marketing effort to the product. By acquiring or in-licensing products, Clinigen is providing the pharmaceutical industry with a solution to divest of products that are no longer sufficiently profitable for their own business models, but are strategically valid for Clinigen. Clinigen’s first product is hospital-based, anti-infective Foscavir. The Group is intending to drive growth through organic sales and acquisition of further products which fit its specific criteria.
Foscavir® continues to demonstrate steady growth, with sales up 22% on the comparable period for the previous year. There are a number of underlying factors behind this. Following license approval in the US effective 1 July 2012, there was a one-off “pipeline fill” of US approved product estimated at £2.0m and underlying volume growth of £1.1m (10%). This was partially off-set by £0.8m from an expected reduction in Clinigen’s US and Japanese selling price due to the shift from direct named patient supply to a distributor model. The US volume growth is higher than expected and is undoubtedly driven by increased market access of the newly licensed product through the distributor. The US-approved product has only been available since 1 July 2012, thus it is too early to estimate where US levels will settle.
SP had made an application to a number of European markets to extend Foscavir’s license into a new indication for bone marrow transplant patients. Applications have now been successfully approved in two countries (the Netherlands and Hungary, approval for these two countries was received in January 2013) with further discussions taking place in Germany. A response is awaited from three other markets. The strategy is to build on this, worldwide, and the application process has already started in South Korea, using the European data pack. The US application is being reviewed in light of the European approvals.
Clinigen has commissioned a second API manufacturer on an exclusive supply agreement which will complete its goal of securing and de-risking the supply chain for Foscavir. This project is currently running to schedule and should be complete, following 12 months stability data, in Q2 2014.
SP continues to progress well a number of the product acquisition and in-licensing opportunities discussed in the admission document. This is a priority the second half of the financial year. In addition a number of new opportunities have also presented themselves, which the Group is pursuing. Clinigen has also “walked away” from opportunities, where the price expectation went beyond value assessment.
Clinigen continues its strategy of investing in personnel and infrastructure to support its significant growth. As expected headcount has increased to 90 at the end of H1 2012/13, with logistics, finance, CTS and GAP being the main areas of investment. The cold chain capabilities have been increased by doubling the 2˚c - 8˚c storage facility.
During H1, the Group has successfully completed the upgrading of its IT platform as one of its IPO commitments. During H2, further previously identified IT investments will be made, delivering a GAP software platform that will further support large early access projects for key current and new customers, as well as starting the project to replace the finance and enterprise resource planning (ERP) system.
Issued for and on behalf of Clinigen Group plc.
To contact the Clinigen team at College Hill, email email@example.com
Melanie Toyne-SewellManaging Partner