Sinclair Pharma Demand growing in target markets

Hardman & Co

Hardman & Co Report Report DownloadsIn 2016 Sinclair Pharma Plc (LON:SPH) was transformed into a streamlined, pure-play aesthetics company with a concentrated, competitive portfolio of differentiated injectable products. Effective, longer-lasting, natural looking, minimally invasive treatments are benefiting from trends away from intensive plastic surgery and represent a major growth opportunity. Strong Silhouette sales in the US and Brazil, and declining Sculptra sales are pushing gross margins >70%. Demand in Brazil, the US, and China is set to deliver major value following approvals in the near- and mid-term. In market US demand has lifted InstaLift sales to $2.9m/£2.3m.

Strategy: Sinclair operates in the aesthetics market with a focused portfolio of products for natural-looking and minimally-invasive treatments. It sells directly in Europe and Brazil and uses distributors elsewhere, including the US. It will be launching/re-launching principal products in new territories in coming years.

Sales: Underlying (CER) sales growth for the interim period was a solid +6% to £20.1m (£17.3m), affected by some unusual buying patterns from some overseas distributors, e.g. South Korea, that did not reflect in-market demand. Net cash at the period end was £0.1m (31st Dec 2016: £16.8m).

InstaLift: Following training of further US physicians towards a planned 1000 in 2017, demand from ThermiGen has been better than expected, with ex-factory sales reaching $2.9m/£2.3m compared to $2.0m forecast. Contributed to the gross margin improvement to 72.4% (70.5%). Full year sales forecast is $5.5m.

Refine: Rights to the suture-based product for lifting heavy tissue were acquired in June 2017 for a full consideration of up to $11.3m. The product is patent protected and FDA approved, with the intention to target the growing breast lift market in the US, then expanding to other body aesthetics and geographies.

Investment summary: Strong in-market demand for Sinclair Pharma plc leading products shows the benefits of running a more streamlined business. Key will be the performance of Silhouette InstaLift in the US which is gaining sales traction. Even with very conservative expectations for InstaLift sales, Sinclair remains on target to deliver an EBITDA profit in 2017 and overall profitability in 2018. The risk/reward profile is looking increasingly favourable.

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