LEIDEN, Netherlands, March 7, 2018 /PRNewswire/ --
Highlights:
Pharming Group N.V. ("Pharming" or "the Company") (Euronext Amsterdam: PHARM) presents its preliminary (unaudited) financial report for the full year ended 31 December 2017.
The Company will hold a conference call at 13.00 CET/07.00 EST today. Dial in details can be found on page 12 of this report.
Chief Executive Officer Sijmen de Vries said:
"The remarkable growth reported in 2017 was a direct result of our strategic decisions to reacquire the commercial rights to RUCONEST® in North America and implement direct marketing in the major Western European markets. We successfully established the commercial infrastructure to support our existing patients and expand the patient population benefiting from RUCONEST®. As a result, we delivered 547% growth in revenues from product sales in one year and reported our first year of operating profitability. We also continued to invest in our long-term growth through the expansion of the improved delivery methods for RUCONEST®, as well as advancing our pipeline programs for Pompe disease and Fabry's disease. We are confident that with our increasing patient reach and advancing pipeline, we will be able to continue to deliver significant value to our stakeholders."
CEO's Commentary
2017 was a transformational year for Pharming. We built strongly on the foundations of the successful reacquisition of commercial rights for RUCONEST® in North America and continued to develop the product in all key markets, growing product sales from ?13.7 million in 2016 to ?88.7 million in 2017, an increase of 547% and above analysts' estimates. This reflects both the underlying increase in sales of RUCONEST® of 156% growth year on year and our increasing percentage of those sales (from 30% to 100%) as we move from supply price arrangements to making all sales in the USA ourselves.
This growth in the third and fourth quarter was partly driven by temporary shortages as result of manufacturing issues of certain competitor plasma-derived C1 esterase HAE therapies during this period, as outlined in our nine-month financial report for 2017 in October. According to recent reports from those competitors, the supply situation has stabilized during the fourth quarter.
Profitability delivered
In 2016 we committed to delivering operating profit in 2017, and I am delighted to say that not only did we achieve operating profits for the full year, but we were also profitable in every quarter. The total operating profit for the year was ?21.9 million (2016: loss of ?11.5 million), which represents an operating margin of more than 24%. This was achieved despite significant investments in providing support to patients during the stock outages of competitors, building up marketing and sales activities rapidly and intensifying research and development activities. In addition, we achieved net cash profits (defined as the net result excluding one-off refinancing charges and non-cash adjustments) of ?12.9 million in total. The operating profit was subsequently reduced by the regular finance costs and also additional one-off charges relating to the refinancing conducted in May 2017 and adjustments relating to the contingent consideration as well as the amortizing bonds and the ordinary bonds (which were nearly all redeemed during the year) to produce a net loss. Since the year end, all of the remaining ordinary bonds have been redeemed and so this type of adjustment is not expected to occur beyond the first quarter of 2018.
As a result of the continued sales growth, we now believe that we are very likely to hit one or more of the sales-related milestone payments due to Valeant in the near future. Therefore, we have made a (non-cash) provision for additional fair value of the contingent consideration in the balance sheet, and a corresponding charge to the profit and loss account. The upside of this is that payment of the first milestone will not affect profits in the quarter when it is reached and paid. This reflects our strong confidence in the performance of our US commercial team and patients' increasing confidence in the use of RUCONEST® as their therapy of choice to treat attacks of HAE.
The improvements in performance contributed to Pharming achieving significant value for its shareholders in 2017, with our share price appreciating by over 400% during the year.
Investing in sustainable long-term growth
At the end of 2016, we set out a clear strategy for growth based on creating an optimized sales infrastructure for our needs. During 2017 we delivered this strategy. We have built a full RUCONEST® sales force and full support functions and have materially increased patient and physician awareness resulting in strong sales of RUCONEST® in the US market. We now have a complete experienced HAE/rare disease sales force, an excellent medical science liaison team and an experienced and very capable management team expert in marketing, sales, commercial activity, market access and patient support.
We also began marketing in the major markets of Western Europe in earnest, making initial entries and good gains in France and the UK and continued growth in Germany, Austria and the Netherlands. As a result of all this, European direct sales grew strongly during the year, albeit from a low base.
Clear product differentiation
The HAE market is dynamic and product choice has increased and will continue to increase as new products enter the market for prophylaxis. RUCONEST® has a unique competitive advantage in that it remains the only product with the potential to be approved for both prophylaxis and treatment of attacks of HAE in the same dosage form. In order to increase the convenience of RUCONEST® for patients, we are also developing new forms of RUCONEST® with new routes of administration, including sub-cutaneous and intramuscular injection.
During the year we have also taken next steps in the initiation of clinical development for additional indications for RUCONEST®, including support for as-yet undisclosed Investigator Sponsored Studies. We have also brought forward our pipeline of products developed using our proprietary technology platform. The first of these new products; recombinant human ?-glucosidase (enzyme replacement therapy for Pompe disease) is now expected to reach IND filing towards the end of 2018.
As a result of taking direct control of key EU and US markets, we now operate with an appropriate commercial presence in both Western Europe and the USA and can focus fully on delivering on our commitment to become a net earnings-generating company during 2018.
The support, expertise and hard work of all our employees makes Pharming what it is today. I would like to again take this opportunity to thank all Pharming employees as well as all of our investors, partners and debt providers for their support and commitment throughout 2017, which enabled us to execute on the commercial development of the Company to create a platform to deliver significant growth.
We look forward with confidence to accelerating the growth story of Pharming in 2018, with increasing sales, a new exciting pipeline and new opportunities for enhanced shareholder value.
Leiden, 7 March 2018
Sijmen de Vries
Chief Executive Officer and Chairman of the Board of Management
Financial summary
Amounts in EURm except per share data 2017 2016 % Change Income Statement 88.7 13.7 547% Product Sales 0.9 2.2 (59%) License Revenue 89.6 15.9 464% Total Revenue 77.2 11.2 589% Gross profit 21.9 (11.5) 290% Operating result (101.9) (6.0) n/a Financial Income, expenses and adjustments (80.0) (17.5) (357%) Net result Balance Sheet 60.0 32.1 87% Cash & marketable securities Share Information (0.160) (0.042) (492%) Earnings per share before dilution (EUR)
Summary of 2017
Operational highlights
Financial highlights
After the year end
Since 31 December 2017, the following additional events have occurred:
Financial review
Revenues and gross profit
Revenues increased to ?89.6 million in 2017 (2016: ?15.9 million). Both years include amounts of deferred license revenue released, reflecting a portion of earlier license fee payments from partners including SOBI, Salix and SIPI which have been allocated across a number of financial years in accordance with accounting guidelines. These amounts were ?0.9 million in 2017 and ?2.2 million in 2016.
Revenues from product sales by Pharming and its partners increased to ?88.7 million (2016: ?13.7 million) reflecting a much better year overall for RUCONEST® sales in the USA producing ?84.1 million ($95.1 million), up from ?11.8 million in 2016. This shows the immediate effect on the top line of the concentrated effort in the US with a full sales activity.
Sales for RUCONEST® in Europe and the Rest of World ("RoW") were ?5.0 million (2016: ?1.9 million), reflecting slow growth in sales by SOBI in Europe coupled with strong growth in direct sales by Pharming in the countries recovered from SOBI in 2016.
Costs of product sales in 2017 amounted to ?12.4 million (2016: ?4.7 million), reflecting the strongly increased sales volume and savings obtained by better inventory management, plus the cost of contributing to patients during the stock limitations at competitors in the fourth quarter.
Gross profit increased in to ?77.2 million in 2017 (2016: ?11.2 million), an increase of 589%. The main reasons for this increase were the increased sales in the US and EU.
Operating costs
Operating costs increased to ?56.1 million in 2017 (2016: ?23.1 million). This increase was substantially due to the added cost of marketing and sales activities both in the US and in the new territories taken over from SOBI in October 2016, mainly in France and the United Kingdom.
Marketing and sales costs of ?31.4 million (2016: ?3.0 million) reflect Pharming's additional new full direct commercialization activities in the US and in France and the United Kingdom in Europe.
R&D costs within these figures increased from ?15.4 million in 2016 to ?18.7 million in 2017. In 2017, the costs have mainly been incurred in developing the two new major pipeline programs for Pompe and Fabry's disease, new routes of administration and opportunities for RUCONEST® including the pediatric study in HAE and improvement in the technology platform to enable better versions of new products.
General and administrative costs increased slightly to ?6.0 million (2016: ?4.6 million). The increase is mainly related to the addition of senior management in the US, and costs incurred in connection with management of the more internationally active company in 2017, as well as increases in provision for share-based compensation following the large share price rise.
Operating result
The operating result improved from a loss of ?11.5 million in 2016 to an operating profit of ?21.9 million, in spite of a considerable increase in R&D expense and marketing and sales activity in 2017. This is mainly due to the last two quarters, once sales growth was firmly established with the completion of the US sales infrastructure and the EU sales and marketing team expansion.
Financial income and expenses
The 2017 net loss on financial income and expenses was ?111.3 million, compared with a loss of ?6.0 million a year earlier. This is mainly due to four items: (i) the IFRS non-cash adjustments to fair value in respect of derivative financial liabilities assessed against the Amortising Convertible Bonds and Ordinary Bonds during the year, largely as a result of the very large share price change (?40.3 million); (ii) the interest on loans and borrowings (?7.9 million) and non-cash adjustments of approximately ?9.7 million; (iii) the settlement fees associated with the refinance and redemption of the bonds (?34.9 million) and (iv) the increase in the provision for contingent consideration (i.e. the milestones due to Valeant upon reaching certain sales targets) of ?23.6 million. A gain of ?5.2 million was also recorded on the change of value of the loans and borrowings as a result of exchange rates during the year. Of this total amount, the large majority (>78%) comprises non-cash adjustments required under IFRS.
Taxation
As a result of the growth in sales, it is now probable that the Company will be able to use its net operating tax losses from previous years going forward. The Board of Management has therefore elected to report a deferred tax asset in accordance with IFRS, reflecting the timing differences between the tax value of those losses and the time when they can be exercised. This has led to a credit to the income tax charge (i.e. a positive movement) of ?9.4 million in 2017 (2016: Nil).
Net result
As a result of the above financial items, the net loss increased to ?80.0 million in 2017 (2016: loss of ?17.5 million). Nearly all of the deductions from operating profits are non-recurring, although interest and related costs will continue to appear in 2018 and beyond.
Inventories
Inventories increased slightly to ?18.3 million in 2017 (2016: ?17.9 million), largely due to the need to convert raw materials into higher value stock types including finished goods to cover the improving sales level in the USA and to make RUCONEST® available to patients who were left without adequate therapy by stock limitations of competitor products. A provision against impairment of inventories of ?0.3 million was applied (2016: ?0.6 million), reflecting small amounts of older stock not expected to sell for its full holding value. Generally, as sales increase and inventory throughput increases, the risk of obsolescence is reducing.
Cash and cash equivalents
The total cash and cash equivalent position (including restricted cash) increased from ?32.1 million at year-end 2016 to ?60.0 million at year-end 2017.
The principal elements of cash flow were the operating cash flow of ?27.1 million (2016: operating loss of ?10.7 million), improvement in working capital management of ?11.1 million (2016: ?0.6 million); capital expenditure on new assets of ?6.0 million (2016: ?57.5 million, including the upfront payment for the Valeant transaction), and the net cash effect of all of the refinance, repayments and interest on of loans, bonds and warrant exercise transactions of a cost of ?3.5 million (2016: gain of ?67.3 million including all the new finance for the Valeant transaction in December 2016).
The Company's current pattern of sales growth, together with the strong cash generation and cash balance and the tight control over costs going forward, forms the basis of the Board of Management's view that Pharming Group should be accounted for as a going concern.
As the Company's sales are largely in US dollars and the Company's debt is largely in US dollars, a natural hedge exists which means that any decline in the US dollar exchange rate over the year to reduce sales reported in Euros has a balancing effect of reducing the size of the debt liability when reported in Euros. These movements had a total cash effect of a loss of ?1.1 million (2016: gain of ?0.4 million).
Equity
The equity position reduced from ?27.5 million in 2016 to ?18.8 million in 2017, mainly due to the net loss for the year balanced by the redemption effects of conversion of the Ordinary Bonds and warrants, as well as the refinancing and deferred tax asset.
Performance of Pharming shares
During 2017, the Pharming stock price fluctuated around an average price of ?0.67 per share. The year-end price was ?1.13 (2016: ?0.22), with a high of ?1.34 in November 2017 and a low of ?0.28 in March 2017.
The closing number of shares as at the reporting date was 579,014,891 (2016: 455,587,312). New issues of stock representing a total of 123,427,579 shares were made to investors during the year related to the conversion of some of the Amortizing Bonds due 2017/18, all of the Ordinary Bonds due 2021 and exercise of warrants, reducing the amount outstanding of all those Bonds from ?38.9 million to ?1.2 million. Since the reporting date, these remaining bonds have also been redeemed. As at the date of this report, the number of shares in issue is 586,667,999.
Outlook 2018
For the remainder of 2018, the Company expects:
No further financial guidance for 2018 is provided.
The Board of Management
Sijmen de Vries, CEO
Bruno Giannetti, COO
Robin Wright, CFO
About Pharming Group N.V.
Pharming is a specialty pharmaceutical company developing innovative products for the safe, effective treatment of rare diseases and unmet medical needs. Pharming's lead product, RUCONEST® (conestat alfa) is a recombinant human C1 esterase inhibitor approved for the treatment of acute Hereditary Angioedema ("HAE") attacks in patients in Europe, the US, Israel and South Korea. The product is available on a named-patient basis in other territories where it has not yet obtained marketing authorization.
RUCONEST® is commercialized by Pharming in Algeria, Andorra, Austria, Bahrain, Belgium, France, Germany, Ireland, Jordan, Kuwait, Lebanon, Luxembourg, Morocco, the Netherlands, Oman, Portugal, Qatar, Syria, Spain, Switzerland, Tunisia, the United Arab Emirates, the United Kingdom, the United States of America and Yemen.
RUCONEST® is distributed by Swedish Orphan Biovitrum AB (publ) (SS: SOBI) in the other EU countries, and in Azerbaijan, Belarus, Georgia, Iceland, Kazakhstan, Liechtenstein, Norway, Russia, Serbia and Ukraine.
RUCONEST® is distributed in Argentina, Colombia, Costa Rica, the Dominican Republic, Panama, and Venezuela by Cytobioteck, in South Korea by HyupJin Corporation and in Israel by Megapharm.
RUCONEST® has recently completed a clinical trial for the treatment of HAE in young children (2-13 years of age) and is also evaluated for various additional follow-on indications.
Pharming's technology platform includes a unique, GMP-compliant, validated process for the production of pure recombinant human proteins that has proven capable of producing industrial quantities of high quality recombinant human proteins in a more economical and less immunogenetic way compared with current cell-line based methods. Leads for enzyme replacement therapy ("ERT") for Pompe and Fabry's diseases are being optimized at present, with additional programs not involving ERT also being explored at an early stage at present.
Pharming has a long-term partnership with the China State Institute of Pharmaceutical Industry ("CSIPI"), a Sinopharm company, for joint global development of new products, starting with recombinant human Factor VIII for the treatment of Haemophilia A. Pre-clinical development and manufacturing will take place to global standards at CSIPI and are funded by CSIPI. Clinical development will be shared between the partners with each partner taking the costs for their territories under the partnership.
Pharming has declared that the Netherlands is its "Home Member State" pursuant to the amended article 5:25a paragraph 2 of the Dutch Financial Supervision Act.
Additional information is available on the Pharming website: http://www.pharming.com
Forward-looking Statements
This press release of Pharming Group N.V. and its subsidiaries ("Pharming", the "Company" or the "Group") may contain forward-looking statements including without limitation those regarding Pharming's financial projections, market expectations, developments, partnerships, plans, strategies and capital expenditures.
The Company cautions that such forward-looking statements may involve certain risks and uncertainties, and actual results may differ. Risks and uncertainties include without limitation the effect of competitive, political and economic factors, legal claims, the Company's ability to protect intellectual property, fluctuations in exchange and interest rates, changes in taxation laws or rates, changes in legislation or accountancy practices and the Company's ability to identify, develop and successfully commercialize new products, markets or technologies.
As a result, the Company's actual performance, position and financial results and statements may differ materially from the plans, goals and expectations set forth in such forward-looking statements. The Company assumes no obligation to update any forward-looking statements or information, which should be taken as of their respective dates of issue, unless required by laws or regulations.
Conference call information
Today, Chief Executive Officer Sijmen de Vries and Chief Financial Officer Robin Wright will discuss the preliminary financial results for 2017 in a conference call at 13.00 (CET) / 12:00 (GMT) / 07:00 (EST). To participate, please call one of the following numbers 10 minutes prior to the call:
From the Netherlands: +31 (0) 20 709 5189
From the UK: +44 (0) 33 3300 0804
From Belgium: +32 (0) 2 403 5814
From France: +33 (0) 1 70 75 07 11
From Switzerland: +41 (0) 22 580 9034
From the US: +1 (0) 63 1913 1422
Participant pin code: 88691859#
To access the live conference, please follow the below link:
Presentation link:https://arkadin-event.webex.com/arkadin-event/onstage/g.php?MTID=ec796ae7c227a65b4c4ef465ea9a29f9a
Presentation Password: 301223030
Pharming Group N.V.
Preliminary Consolidated Financial Statements (Unaudited)
For the year ended 31 December 2017
Consolidated Statement of Income
Consolidated Statement of Comprehensive Income
Consolidated Balance Sheet
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Consolidated Statement of Income
For the year ended 31 December
Amounts in EUR '000 2017 2016 Product sales 88,677 13,689 License fees 943 2,184 Revenues 89,620 15,873 Costs of sales (12,445) (4,683) Gross profit 77,175 11,190 Other income 790 335 Research and development (18,657) (15,388) General and administrative (5,974) (4,642) Marketing and sales (31,422) (3,035) Costs (56,053) (23,065) Operating result 21,912 (11,540) Fair value gain (loss) on revaluation derivatives (40,284) 79 Other financial income and expenses (71,027) (6,075) Financial income and expenses (111,311) (5,996) Result before income tax (89,399) (17,536) Income tax credit/(expense) 9,442 - Net result for the year (79,957) (17,536) Attributable to: Owners of the parent (79,957) (17,536) Total net result (79,957) (17,536) Basic earnings per share (EUR) (0.160) (0.042)
Consolidated Statement of Comprehensive Income
For the year ended 31 December
Amounts in EUR '000 2017 2016 Net result for the year (79,957) (17,536) Currency translation differences (998) (6) Items that may be subsequently reclassified to profit or loss (998) (6) Other comprehensive income, net of tax (998) (6) Total comprehensive income for the year (80,955) (17,542) Attributable to: Owners of the parent (80,955) (17,542)
Consolidated Balance Sheet
As at 31 December
Amounts in EUR '000 2017 2016 Non-current assets Intangible assets 56,631 56,680 Property, plant and equipment 8,234 6,043 Long-term prepayments 2,296 1,622 Restricted cash 1,336 248 Deferred tax asset 9,442 - Total non-current assets 77,939 64,593 Current assets Inventories 18,334 17,941 Trade and other receivables 11,260 12,360 Cash and cash equivalents 58,657 31,889 Total current assets 88,251 62,190 Total assets 166,190 126,783 Equity Share capital 5,790 4,556 Share premium 370,220 301,876 Legal reserves (938) 60 Accumulated deficit (356,270) (279,025) Shareholders' equity 18,802 27,467 Non-current liabilities Loans and borrowings 58,684 40,395 Deferred license fees income 1,467 2,270 Finance lease liabilities 390 599 Other financial liabilities 28,319 4,674 Total non-current liabilities 88,860 47,938 Current liabilities Loans and borrowings 21,962 26,136 Deferred license fees income 804 943 Derivative financial liabilities 8,301 9,982 Trade and other payables 27,198 14,054 Finance lease liabilities 263 263 Total current liabilities 58,528 51,378 Total equity and liabilities 166,190 126,783
Consolidated Statement of Changes in Equity
For the year ended 31 December
Attributable to owners of the parent
Number of Share Share Amounts in EUR '000 shares capital Premium Balance at 1 January 2016 411,971,790 4,120 283,396 Result for the year - - Other comprehensive income for the year - - Total comprehensive income for the year - - Share-based compensation - - - Bonuses settled in shares 533,583 5 121 Shares issued for cash 42,981,939 430 8,381 Warrants exercised/ issued 100,000 1 9,978 Options exercised - - - Total transactions with owners, recognized directly in equity 43,615,522 436 18,480 Balance at 31 December 2016 455,587,312 4,556 301,876 Result for the year - - Other comprehensive income for the year - - Total comprehensive income for the year - - Share-based compensation - - - Bonuses settled in shares 908,437 9 246 Shares issued for cash / conversions of bonds 63,476,808 635 50,274 Warrants exercised/ issued 58,123,107 581 17,657 Options exercised 919,227 9 167 Total transactions with owners, recognized directly in equity 123,427,579 1,234 68,344 Balance at 31 December 2017 579,014,891 5,790 370,220
Consolidated Statement of Changes in Equity (Continued)
For the year ended 31 December
Attributable to owners of the parent
Legal Accumulated Total Amounts in EUR '000 reserves Deficit Equity Balance at 1 January 2016 66 (263,743) 23,839 Result for the year - (17,536) (17,536) Other comprehensive income for the year (6) - (6) Total comprehensive income for the year (6) (17,536) (17,542) Share-based compensation - 2,254 2,254 Bonuses settled in shares - - 126 Shares issued for cash - - 8,811 Warrants exercised/ issued - - 9,979 Options exercised - - - Total transactions with owners, recognized directly in equity - 2,254 21,170 Balance at 31 December 2016 60 (279,025) 27,467 Result for the year - (79,957) (79,957) Other comprehensive income for the year (998) - (998) Total comprehensive income for the year (998) (79,957) (80,955) Share-based compensation - 2,712 2,712 Bonuses settled in shares - - 255 Shares issued for cash / conversions of bonds - - 50,909 Warrants exercised/ issued - - 18,238 Options exercised - - 176 Total transactions with owners, recognized directly in equity - 2,712 72,290 Balance at 31 December 2017 (938) (356,270) 18,802
Consolidated Statement of Cash Flows
For the year ended 31 December
Amounts in EUR'000 2017 2016 Operating result 21,912 (11,540) Non-cash adjustments: Depreciation, amortization 3,415 756 Accrued employee benefits 2,712 2,254 Deferred license fees (943) (2,184) Operating cash flows before changes in working capital 27,096 (10,714) Changes in working capital: Inventories (393) (1,712) Trade and other receivables (3,345) (4,695) Payables and other current liabilities 14,837 7,049 Total changes in working capital 11,099 642 Changes in non-current assets, liabilities and equity 281 63 Cash generated from / (used in) operations before interest and taxes 38,476 (10,009) Interest received 3 5 Net cash flows generated from / (used in) operating activities 38,479 (10,004) Capital expenditure for property, plant and equipment (3,247) (1,193) Investment intangible assets (2,797) (321) Acquisition of business - (55,960) Net cash flows generated from / (used in) investing activities (6,044) (57,474) Proceeds of debt loans and borrowings 89,137 68,524 Payments of transaction fees and expenses (15,821) (5,133) Repayment and interest on loans (83,671) (4,889) Proceeds of equity and warrants 6,833 8,825 Net cash flows generated from / (used in) financing activities (3,522) 67,327 Increase (decrease) of cash 28,913 (151) Exchange rate effects (1,057) 445 Cash and cash equivalents at 1 January 32,137 31,843 Total cash and cash equivalents at 31 December 59,993 32,137
Contact:
Pharming Group N.V.
Sijmen de Vries, CEO, Tel: +31-71-524-7400
Robin Wright, CFO, Tel: +31-71-524-7400
FTI Consulting, London, UK:
Julia Phillips/ Victoria Foster Mitchell, T: +44-203-727-1136
LifeSpring Life Sciences Communication, Amsterdam, The Netherlands:
Leon Melens, Tel: +31-6-53-81-64-27
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