Parnell Delivers 32% Revenue Growth And A $4.0 Million Improvement In EBITDA In The First Six Months Of 2018 Compared To The Same Period In 2017, Returns To Profitability For The First Time Post-IPO And Increases 2018 Guidance To A 35% - 40% Increase In Revenue To $26 - $27 Million And An EBITDA Range Of $5.5 - $6.5 Million.
SYDNEY, AUSTRALIA / ACCESSWIRE / AUGUST 3, 2018 / Parnell Pharmaceuticals Holdings Ltd (OTC PINK: PARNF) today announced business results for the six months ended 30 June 2018 including: revenue growth of 32% over the comparable period in 2017 to $13.5 million, a $4.0 million improvement over 2017 in year-to-date Earnings Before Interest, Tax, Depreciation, Amortization and Other Income (or EBITDAOI) to $3.8 million; and a first positive Net Profit After Tax (or NPAT) result since its Initial Public Offering (or IPO) of $2.1 million.
Brad McCarthy, CEO and Executive Director, said, "In releasing our half-yearly results for 2018 we are extremely pleased to report a 32% increase in revenues and a 23% reduction in operating expenditure. This result generated a $4.0 million EBITDAOI improvement over 2017 and delivered our first positive NPAT result since our public listing four years ago. Reaching this key milestone is testament to the strategy of the current Board of Directors and the execution skills and focus of our management team,"
"In the first half of 2018 we continued to deliver on every business initiative and goal that our Board set out in our 11 January 2018 business update. Consequently, we now increase our 2018 guidance to 35% - 40% revenue growth to $26 - $27 million and an EBITDA range of $5.5 - $6.5 million over our previous guidance of $25 - $26 million revenue and $5.0 - 6.0 million EBITDA," he continued.
"Positive cash-flows from operations in the first half of 2018 combined with our debt financing transaction with Marathon Asset Management (or Marathon) provide us with $6 million in working capital to support our rapid growth trajectory and deliver on the strategic objectives of our Board," Mr. McCarthy said.
Business Segment Performance
"Our US Production Animal sales performance in the six months to 30 June 2018 continued its upward trajectory, increasing in-market product sales 11% and ex-Parnell product sales 8% over the same period in 2017. In the six months to 30 June 2018, our expert field sales team has recruited 140% more US dairy cows onto our digital reproduction technology (mySYNCH) than in the entire year of 2017. Through mySYNCH, more and more of our loyal customers are reviewing their latest on-farm fertility metrics anywhere, anytime", Mr. McCarthy said.
"Turning to our manufacturing division, we are pleased to report that the required ramp-up in production volumes to fulfil our contract manufacturing (or CMO) batch schedule was ably met by our team", Mr. McCarthy continued. "In the six months to 30 June 2018, litre-volume output from our sterile injectables facility increased by 161% over the corresponding period in 2017. New equipment and manufacturing processes brought online during the first half of 2018 across our injectable and solid dose plants enabled us to materially meet demand in both our proprietary-product and CMO businesses".
"Our CMO revenues in the first half of 2018 came from technology transfer and delivery of manufactured batches. Tech transfer revenues were a combination of ongoing services to established CMO business and initial income received under the new contract to commercialize Parnell's proprietary Pentosan Polysulfate Active Pharmaceutical Ingredient (or API) for the human market. Total CMO revenues to 30 June 2018 were $5.8 million, an increase of 130% over the 30 June 2017 result, putting us on track to meet our updated 2018 guidance by year end," Mr. McCarthy said.
"Proprietary product sales for first-half 2018 in our US Companion, Australia-New Zealand and Rest of World businesses tracked to our updated 2018 guidance. Year-on-year growth of 21% in the Australian Companion business and 24% in the Australian-New Zealand Production business, respectively, were standout performances", Mr. McCarthy concluded.
Business Development, Capital and Corporate
Dr. Alan Bell, Executive Director and Chairman of the Board, said, "In Quarter Two we have engaged with new prospects and further advanced discussions begun in Quarter One with multiple potential new CMO customers for our injectables facility. The level of enquiry we are experiencing is beyond expectation and we will continue to seek out and assess CMO opportunities that appear to fit our adoption criteria".
"Our recent US$32 million debt transaction with Marathon provides working capital for us to fund our strategic objectives. Combined with our positive cashflow from operations, and subject to the provisions of the credit agreement with Marathon, we anticipate being able to invest in ramping up manufacturing capacity to accommodate any new CMO business that we may adopt in the future", Dr. Bell said.
"We continue to seek a new direction in the clinical development of Zydax Canine via discussions with potential partners who have a presence and track record in the field. We expect to provide further updates on this initiative during the second half of 2018", Dr. Bell continued.
"In June 2018, we moved into our new leased premises in Overland Park, KS. The facility fully accommodates our current US head office team and crystallizes annual savings in rental expense of approximately $0.5 million", Dr. Bell said.
"Efforts to settle the outstanding legal claim of an ex-employee remain ongoing from 2016. The company's ex-CEO has also recently commenced a legal claim against us. We have denied liability and are defending the claim; we will also shortly commence our own claim against him", Dr. Bell said.
Commercial Highlights to 30 June 2018
Unless otherwise specified, all amounts are presented in Australian Dollars (AUD).
Turning to the business performance for the first half year of 2018, your directors report the following achievements:
Total Company sales of $13.5 million for the six months ended 30 June 2018, comprising growth of 32% over the same period in 2017;
Production Animal sales of $6.2 million for the six months ended 30 June 2018 represented an increase of $0.1 million over the same period in 2018, comprised of: 8% growth in US Production; 24% growth in Australia-New Zealand Production; and 74% decline year-on-year in Rest of World Production due to variation in shipment timing for committed orders. Overall, Production Animal sales remain in line with guidance for the full year.
Companion Animal sales of $1.6 million for the six months ended 30 June 2018 were equivalent to sales for the same period in 2017, arresting the decline in this segment due to prior year underperformance in US Companion. The year-to-date revenue performance in conjunction with the reduction in cost base has delivered a $1.1 million year-on-year improvement in contribution margin from US Companion in the first six months of 2018. The Australian Companion business continues to perform strongly, posting a further 21% year-on-year revenue growth in the first half of 2018 after recording 12% growth for the full year in 2017.
Contract Manufacturing revenues for the six months ended 30 June 2018 were $5.8 million, a 130% increase over revenues of $2.5 million for the same period in 2017. The first half 2018 total revenue comprised technology transfer revenues of $2.3 million, compared to $2.5 million for the same period in 2017, and batch delivery revenues of $3.5 million, compared to $Nil in 2017.
Operating expenditure across the business decreased by 23% in the first six months of 2018 to $5.3 million, compared to $6.9 million for the same period in 2017.
As a result, EBITDAOI improved $4.0 million to $3.8 million for the six months ended 30 June 2018 over a $0.2 million loss for the same period in 2017 while NPAT was $2.1 million positive in 2018 compared to a loss of $5.5 million in 2017.
2018 Guidance
Unless otherwise specified, all amounts are presented in Australian Dollars (AUD).
Mr. McCarthy said, "In light of our business achievements in the first half of 2018, your directors now update 2018 full year revenue guidance to the range of $26.0 to $27.0 million, being a 35% to 40% increase over 2017, and an EBITDAOI range of $5.5 to $6.5 million compared to a near-breakeven result in 2017. This updated guidance replaces our previous 2018 guidance, namely, revenue of $25.0 to $26.0 million and EBITDAOI of $5.0 to $6.0 million".
Financial Results for the six months ended 30 June 2018:
Unless otherwise specified, all amounts are presented in Australian Dollars (AUD).
Revenue:
Total revenue was $13.5 million for the six months ended 30 June 2018, a 32% increase compared to the same period in 2017. A detailed description of the revenue performance by business unit is provided above.
Expenses:
Cost of Sales for the six months ended 30 June 2018 was $4.4 million, compared to $3.6 million for the comparable period in 2017. Gross margin as a percentage of revenue, using a Cost of Goods Sold - Product basis, was 86% for the first half of 2018 compared to 87% in 2017, due to slightly higher technology transfer services revenues in 2017 compared to 2018, partially offset by improved manufacturing operations and efficiencies implemented since late 2017.
Selling and Marketing expenses decreased by $0.9 million, or 25%, to $2.6 million for the first half of 2018 compared to the same period in 2017 resulting from the reduction of our US Companion Animal field sales and marketing cost base.
Regulatory and R&D spending year to date 2018 was $0.3 million, a 47% reduction over the same period in 2017. Termination of PAR121 and PAR122 was the major contributor to this reduction.
Administration expenses: As an ongoing effect of the management changes and savings implemented in late 2017, administration expenses decreased $0.4 million, or 13%, to $2.3 million in the six months to 30 June 2018 compared to $2.7 million for the same period in 2017.
Finance costs of $2.9 million for the first six months of 2018 increased by $0.6 million over the same period in 2017. Our future finance costs are expected to be reduced under the new debt arrangement with Marathon.
Other income/(expense) for the six months ended 30 June 2018 was income of $2.4 million compared to a $1.8 million expense for the same period in 2017. This reduction in expense is entirely due to non-cash foreign exchange movements between the Australian dollar and the US dollar for the period.
Earnings Before Interest, Tax, Depreciation, Amortization and Other Income/(Expense) (EBITDAOI) & Net Profit After Tax:
EBITDAOI for the first six months of 2018 improved by $4.0 million to a profit of $3.8 million compared to a $0.2 million loss for the same period in 2017. As stated above, this was achieved by strong revenue growth for the first half of 2018 in conjunction with significant operational cost reductions totalling $1.6 million for the six month period.
NPAT for the period ended 30 June 2018 improved by $7.7 million to a net profit of $2.1 million from a net loss of $5.5 million in the first half of 2017.
The unaudited financial statements for the six months ended 30 June 2018 compared to prior year are presented below.
About Parnell
Parnell (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.
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.
