Parnell announces 2019 year-to-date revenue growth of 9% over the first 9 months of 2018, start of work on its new 2019 CMO contract, and updates to 2019 financial results.
SYDNEY, AUSTRALIA / ACCESSWIRE / December 23, 2019 / Parnell Pharmaceuticals Holdings Ltd (OTC PINK:PARNF) today announced: ongoing 2019 revenue growth of 9% to September 30 compared with the first 9 months of 2018; commencement of technical work to establish the first of three new contract manufactured products; and updated financial results to the end of Quarter 3, 2019.
Brad McCarthy, CEO and Executive Director, said, "Our established business units continue to perform strongly through Quarter 3 of 2019. Overall, revenues grew 9% to September 30 compared to the corresponding period in 2018. This growth reflects the consistently sound performance of our Production Animal and CMO teams in securing and delivering customer orders and meeting market expectations."
Mr. McCarthy continued, "The initial technical transfer fee on the newest CMO contract has been received and our technical work on the first of the three proposed products is now well under way. We anticipate receiving the second customer technology transfer fee on the second product early in 2020 after which the technical transfer process will likewise begin at our Sydney facility. We are well into discussions with the customer on timing for the third product under the agreement, which is currently proposed for the second half of 2020."
"The achievement of zero 483 observations at the mid-2019 FDA routine re-inspection of our sterile manufacturing facility has proven very positive for our industry positioning and reputation, having increased the level of inbound enquiry from potential CMO customers seeking a highly reliable FDA-approved product source with an established track record of excellence," Mr. McCarthy continued.
Mr. McCarthy updated the Company's financial results for the first 9 months of 2019 year comprising: revenue of $21.8 million compared to $20.0 million for the corresponding period in 2018, and a $0.8 million increase in operating expenses from increased investment in US Production and Manufacturing, combining to deliver a $0.1 million increase over the same period in 2018 in Earnings Before Interest, Tax, Depreciation, Amortization and Other Income/(Expense) (EBITDAOI) to $5.4 million.
Business Segment Performance
Unless otherwise specified, all amounts are presented in Australian Dollars (AUD).
"Sales of our proprietary products and CMO product revenues to the end of Quarter 3 grew 7% over the corresponding period in 2018," Mr. McCarthy stated. "With the recent inception of our newest CMO contract, technology transfer revenue from new CMO contracts increased in the third quarter of 2019 to be year-to-date $0.5 million up on the same period in 2018."
"Production Animal sales to Quarter 3, 2019 increased 3% over the corresponding period in 2018 to $10.4 million. As we have introduced new Territory Managers in the US Production Animal business during the first nine months of 2019 the sales response has been encouraging from their presence in the field, especially in Quarter 3 where in-market sales grew 18% over the same quarter in 2018," Mr. McCarthy said. "US Companion Animal sales continue to track slightly behind plan, with the commensurate lower expense base minimising the effect on 2019 profit projections for this business unit overall. Both our Australian Companion business and Australia and New Zealand Production Animal businesses have continued strong growth again during Quarter 3, 2019."
"Our Board has now restated provisional full-year 2019 guidance at 8-11% revenue growth to $28.5 – $29.5 million, and an EBITDAOI range of $6.5 – $7.5 million, over our 2018 results of $26.5 million revenue and $6.1 million," Mr. McCarthy said. "As foreshadowed in our previous release, a delay in the commencement of our new contract manufacturing agreement and the associated effect of some CMO revenue pushing into 2020 resulted in a timing impact on our full year 2019 guidance."
Corporate Updates
Dr. Alan Bell, Executive Director and Chairman of the Board, said "The breadth of our CMO and new product development discussions widened again during Quarter 3. With in-house technical work now well under way on our newest CMO contract, we are currently engaged with prospective new CMO and development partners aiming to add further contracts in 2020."
Dr. Bell continued, "We have continued to make good progress on the human generic project. We are excited by the latest achievements and remain positive on the prospects for future success in this franchise."
"On the capital front, the Board of Directors recently appointed advisors to assist the Company in seeking the appropriate level of growth capital for business expansion projects in 2020 and beyond. In effect the Board is seeking to build on the priority initiatives of the past 2 years in creating sound business growth that enhances asset and shareholder value," Dr. Bell said. "We expect to provide further updates on this process in coming months."
"An employment claim by our former CEO following his dismissal in 2017 and our counter-suit were tried together in the Federal Court of Australia on October 2019. We now await judgement, which we anticipate will be handed down in 2020," Dr. Bell concluded.
Commercial Highlights to 30 September 2019
Unless otherwise specified, all amounts are presented in Australian Dollars (AUD).
Regarding the Company's financial performance at the end of Quarter 3 2019, your directors report the following achievements:
Total revenue was $21.8 million for the nine months ended September 30, 2019, being $1.8 million (9%) up over the same period in 2018.
Our operating segments performed as follows:
Production Animal sales of $10.4 million globally representing an increase of $0.4 million (3%) over the same period in 2018, comprised of: 16% growth in Australia and New Zealand Production, 38% growth in Rest of World Production and flat in US Production Animal due to year on year timing of orders into distribution partners. The performance in our key markets (USA, Australia and New Zealand) continues to demonstrate our strong market positioning, especially in those regions in which we have an established presence. As we continue to on-board sales staff in additional territories in the US we have been very pleased with the progress made during the quarter with 18% growth in our US Production business alone in Quarter 3. Our digital asset, mySYNCH, continues to build significant momentum in 2019 with an additional 2% of the total US dairy cows added during the three months to September 30, 2019.
Companion Animal sales of $2.4 million for the nine months ended September 30, 2019 were flat compared to the same period in 2018. US Companion Animal was down 10% for the period, with a similar reduction in cost base of this business segment delivering a small increase in year on year contribution. The Australian Companion Animal business continues to grow, posting 6% growth through the end of Quarter 3, 2019, after recording 11% full-year growth in 2018.
Contract Manufacturing revenues for the nine months ended September 30, 2019 were $9.0 million, an 18% increase over revenues of $7.7 million for the same period in 2018. The total for the first three quarters of 2019 comprised technology transfer and milestone revenues of $2.9 million, compared to $2.5 million for the same period in 2018, and batch delivery revenues of $6.0 million, a 17% increase compared to $5.2 million in 2018.
Operating expenditures across the business increased by $0.8 million in the period to $8.6 million, compared to $7.8 million for the same period in 2018.
As a result, EBITDAOI increased $0.1 million to $5.4 million for the nine months ended September 30, 2019, compared to $5.3 million for the same period in 2018.
2019 Guidance
Unless otherwise specified, all amounts are presented in Australian Dollars (AUD).
2019 guidance is lowered to $28.5 – $29.5 million in sales, an 8 – 11% increase over 2018 revenue, and an EBITDA range of $6.5 – $7.5 million due to postponement of some contracted technology transfer income and CMO product sales until early 2020.
Financial Results for the six months ended 30 September 2019:
Unless otherwise specified, all amounts are presented in Australian Dollars (AUD).
Total revenue was $21.8 million for the nine months ended September 30, 2019, a 9% increase compared to $20.0 million for the same period in 2018. A detailed description of the revenue performance by business unit is provided above.
Expenses:
Cost of Sales for the period ended September 30, 2019 were $7.8 million, compared to $6.9 million for the comparable period in 2018. Gross margin as a percentage of revenue, using a Cost of Goods Sold – Product basis, was 84% in 2019 compared to 86% in 2018, due to a slight mix variance in 2019 as our CMO product revenues continue to grow as a proportion of our total business.
Selling and Marketing expenses increased by $0.6 million, or 15%, to $4.4 million for the period ended September 30, 2019 compared to the same period in 2018, primarily from the increase in US Production Animal sales and marketing presence as we continue to establish new territories in this region.
Regulatory and R&D spending for the quarter was $0.6 million, an increase of $0.2 million over the same period in 2018, primarily due to increased government regulatory fees.
Administration expenses were $3.5 million in 2019, flat with the same period in 2018.
Finance costs of $6.3 million for the nine months ended September 30, 2019 increased by $0.8 million over the same period in 2018, due to the difference in structure of our senior debt facility compared to the previous facility; however the cost of the new facility is substantially lower over the full term of the loan.
Other Income/(Expense) for the nine months ended September 30, 2019 was income of $2.0 million compared to income of $3.2 million for the same period in 2018. This reduction in income was entirely due to foreign exchange movements between the Australian dollar and the US dollar for the period. $0.1 million of non-recurring legal costs were recorded in 2019.
Earnings Before Interest, Tax, Depreciation, Amortization and Other Income/(Expense) (EBITDAOI) & Total Comprehensive Loss:
Earnings Before Interest, Tax, Depreciation, Amortization and Other Income/(Expense) for the nine months ended September 30, 2019, increased by $0.1 million to $5.4 million compared to $5.3 million for the same period in 2018.
Total comprehensive loss for the nine month period ended September 30, 2019 was $5.1 million compared to $4.0 million in 2018, predominately due to a reduction in other income associated with foreign exchange movements, offset by a decrease in foreign currency translation reserve expenses.
The unaudited Financial Statements for the nine months ended September 30, 2019 compared to prior year are presented below.
About Parnell
Parnell (OTC: PARNF) is a fully integrated pharmaceutical company focused on developing, manufacturing and commercializing innovative animal and human health solutions. Parnell is a technology and clinical science leader in dairy reproduction, marketing its proprietary brands estroPLAN and GONAbreed via its dedicated sales force and digital technology mySYNCH in the USA and Australia-New Zealand, and via distributors in other markets. Parnell has a rapidly growing contract manufacturing business supplying industry majors with specialized sterile injectable products. Recently, Parnell leveraged its novel intellectual property position in the Pentosan Polysulfate drug class to address the human market through a new contract with a major global human health company. In companion animal, Parnell manufactures and markets its proprietary canine osteoarthritis brands Zydax and Glyde.
For more information on the company and its products, please visit www.parnell.com.
Cautionary Note Regarding Forward-Looking Statements
This press release contains forward-looking statements and information within the meaning of the U.S. Private Securities Reform Act of 1995. Words such as "may," "anticipate," "estimate," "expects," "projects," "intends," "plans," "develops," "believes," and words and terms of similar substance used in connection with any discussion of future operating or financial performance identify forward-looking statements. Forward-looking statements represent management's present judgment regarding future events and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. These risks include, but are not limited to, risks and uncertainties regarding Parnell's research and development activities, its ability to conduct clinical trials of product candidates and the results of such trials, as well as risks and uncertainties relating to litigation, government regulation, economic conditions, markets, products, competition, intellectual property, services and prices, key employees, future capital needs, dependence on third parties, and other factors, including those described in Parnell's Annual Report on Form 20-F filed with the Securities and Exchange Commission, or SEC, on March 31, 2017, along with its other reports filed with the SEC. In light of these assumptions, risks, and uncertainties, the results and events discussed in any forward-looking statements contained in this press release might not occur. Investors are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date of this press release. Parnell is under no obligation, and expressly disclaims any obligation, to update or alter any forward-looking statements, whether as a result of new information, future events, or otherwise.
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For more information, contact:
Parnell Pharmaceuticals Holdings
Brad McCarthy
Phone+61 2 9667 4411
Email: brad.mccarthy@parnell.com
Consolidated Statements of Comprehensive Loss (Unaudited)
For the Nine – Months Ended
September 30,
2019
($AUD)
2018
($AUD)
Revenue
21,759,728
19,982,608
Cost of goods sold
(7,782,072
)
(6,876,228
)
Gross Margin
13,977,656
13,106,380
Selling and Marketing expenses
(4,418,763
)
(3,845,743
)
Regulatory, R&D expenses
(654,315
)
(443,928
)
Administration Expenses
(3,524,290
)
(3,488,396
)
E.B.I.T.D.A.O.I.
5,380,288
5,328,313
Depreciation and Amortization expenses
(2,296,723
)
(1,752,227
)
Finance costs
(6,322,051
)
(5,496,174
)
Other income/(expense)
1,860,963
3,192,623
(Loss)/profit before income tax
(1,377,523
)
1,272,535
Income tax expense
0
0
(Loss)/profit for the year
(1,377,523
)
1,272,535
Foreign currency translation
(3,745,130
)
(5,256,809
)
Total comprehensive loss for the year
(5,122,653
)
(3,984,274
)
Consolidated Balance Sheets (Unaudited)
30 September 2019
AUD$
31 December 2018
AUD$
ASSETS
CURRENT ASSETS
Cash and cash equivalents
3,681,772
4,400,647
Trade and other receivables
4,465,121
1,739,466
Inventories
2,617,746
3,194,154
Prepayments
591,980
444,313
TOTAL CURRENT ASSETS
11,356,619
9,778,580
NONCURRENT ASSETS
Trade and other receivables
68,166
60,200
Property, plant and equipment
15,043,365
10,593,307
Intangible assets
13,561,078
13,052,325
TOTAL NONCURRENT ASSETS
28,672,609
23,705,832
TOTAL ASSETS
40,029,228
33,484,412
LIABILITIES
CURRENT LIABILITIES
Trade and other payables
7,166,502
5,974,086
Borrowings
15,345
9,718
Provision for employee benefits
882,851
780,970
TOTAL CURRENT LIABILITIES
8,064,698
6,764,774
NONCURRENT LIABILITIES
Trade and other payables
4,610,457
62,319
Borrowings
50,762,304
45,032,806
Provision for employee benefits
240,312
152,127
TOTAL NONCURRENT LIABILITIES
55,613,073
45,247,252
TOTAL LIABILITIES
63,677,771
52,012,026
NET ASSETS
(23,648,543
)
(18,527,614
)
EQUITY
Ordinary shares
63,515,902
63,515,902
Share-based compensation reserve
3,251,515
3,251,515
Reserves
(10,766,096
)
(7,022,336
)
Accumulated losses
(79,649,864
)
(78,272,695
)
TOTAL EQUITY
(23,648,543
)
(18,527,614
)
SOURCE: Parnell Pharmaceuticals Holdings
ReleaseID: 571147
