Quantum Pharma Plc FY17 Results – A Year of Change

Quantum Pharma Plc

Quantum Pharma plc (LON:QP), the service-led niche pharmaceutical developer and supplier to the health and care sectors, has reported its Preliminary financial results for the 12 months to January 31, 2017. Net sales grew by 28% to £88.8m while adjusted EBITDA was in-line with expectations at £10.1m, down from £12.5m in FY16. During the year management took a number of decisive actions to focus and simplify the business, and the company is now on a much stronger operational and financial footing as it moves forward. The actions resulted in the prioritisation of the product development portfolio within the Niche Division and the closure of the loss-making NuPharm. The core Specials division continues to generate the majority of Group adjusted EBITDA and its strength in the UK unlicensed market was underscored again by renewed exclusive supply contracts with 3 of the 4 main wholesale and pharmacy chains. Our profit forecasts for FY2018 and FY2019 remain unchanged. Quantum is valued at around a 40% discount to peers at 7.4x EV/EBITDA (9.8x PE) in the year to Jan 31st, 2018.

Financials: Overall net revenues grew by 28% to £88.8m with sales in the Specials and Medication Adherence (MA) divisions performing better than expected. Net sales grew in all divisions: – Specials £57.6m (+7%, FY16: £53.6m), Niche Pharma £5.8m (+36%, FY16: £4.3m), and MA £25.4m (+124%, FY16: £11.4m). Group adjusted EBITDA was £10.1m (FY16: £12.5m) with an adjusted Profit after tax of £8.0m (FY16: £9.3m profit). As reported (excluding discontinued operations), the Group had an Operating Loss of £9.8m (FY16: £7.5m profit) due to impairments related to the Niche portfolio as well as non-recurring or non-operational charges. With careful management of working capital and an equity financing in November 2016 raising £15.0m (gross), Quantum ended the period with Net Debt of £13.0m (FY16: £24.6m).

Operations: The core Specials division remains strong as evidenced by renewed exclusive supply contracts with AAH Pharmaceuticals (over 1,800 Lloyds Pharmacies and 8,000 independents), Bestway Panacea Healthcare (Well Pharmacy), and Phoenix Healthcare Distribution (Rowlands pharmacies). The Niche division was reorganised to focus and simplify the business and has since done very well with new product launches performing as expected. Glycopyrronium bromide continues to lead the way in sales while others (e.g. Mucodis) have been discontinued as part of the rationalisation of the division’s activities. MA sales grew strongly and saw small monthly profits at year end but FY profit was limited by typically thin margins. MA is under strategic review.

Outlook: We are encouraged that H2 FY17 saw a solid new operational footing established and Quantum Pharma plc Group businesses streamlined, particularly with the focus on the optimal product mix for Niche. With the most challenging steps now behind it and further efficiencies still to come, we are optimistic for the future.

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