INTERIM REPORT JANUARY – JUNE 2019
THE PERIOD AND THE SECOND QUARTER
Net sales amounted to MSEK 808.2 (756.5), whereof the second quarter MSEK 387.4 (489.4). This corresponds to an increase for the period of 7% and a decrease for the quarter of 21%. Excluding one-off income in the second quarter of 2018, net sales in the second quarter decreased by 4%.
Adjusted EBITDA amounted to MSEK 290.8 (234.4), whereof the second quarter MSEK 137.8 (145.7). During the second quarter of 2019, the company has also had non-recurring costs related to the acquisition of Trimb and restructuring costs of MSEK 35.3. During the second quarter of 2018, the company had one-off incomes of MSEK 86.6 in the form of a milestone payment.
The gross margin was 55.2% (55.8%) for the period, and 54.5% (55.1%) for the second quarter. Including one-off income, the gross margin in 2018 was 60.8% during the period and 63.1% during the quarter.
Cash flow from operating activities amounted to MSEK 203.6 (136.7), whereof the second quarter was MSEK 111.8 (95.2).
Earnings per share were SEK 0.21 (5.07), of which the second quarter amounted to SEK -0.04 (3.86). For 2019, earnings per share are affected by costs affecting comparability and for 2018 by a milestone payment from Pfizer and recognition of deferred tax assets on loss carry forwards (417,7 MSEK).
Cash and short-term investments at period end amounted to MSEK 561.2 (398.6 as of December 31, 2018).
On April 3, it was announced that Karo Pharma’s Board had appointed Christoffer Lorenzen as the new CEO of Karo Pharma. He replaces Peter Blom. Christoffer took up his new position on July 1, 2019. During the period April 3 through June 30, Ulf Mattson served as acting CEO.
On June 21, Karo Pharma announced that it had agreed to acquire all shares in Trimb Holding AB from Avista Capital Partners and other shareholders, for MSEK 3,400. The transaction is expected to enhance Karo Pharma’s market position and is expected to create a stable platform for Karo Pharma’s continued growth. The combined company had annual sales in 2018 of about MSEK 2,640.
A rights issue of approximately MSEK 1,500 is planned. The Board of Directors of Karo Pharma intends to propose that the company’s shareholders at an extraordinary general meeting resolves to authorize the Board to decide on the rights issue. Notice to the extraordinary general meeting where the authorization will be resolved upon will be published separately and will also be available on Karo Pharma’s website.
COMMENT ON OPERATIONS
In the second quarter of 2019, Karo Pharma continued to develop in line with the long-term strategy of advancing the company by growing through acquisitions as a complement to organic growth.
On June 21, we announced the acquisition of Trimb Holding AB for MSEK 3,400 on a cash and debt free basis (Enterprise Value). Trimb is a prominent company in self-care drugs and healthcare products, which over the past few years successfully has built a Nordic business with growing presence in northern Europe. Trimb complements Karo Pharma well, both in terms of geographical presence, sales channels and product range. The merged company had annual sales in 2018 of approximately MSEK 2,640 and becomes a clear leader in its field in the Nordic region.
Regarding the development of Karo Pharma’s existing business, adjusted for a milestone payment in Q2 2018, we saw a negative development in the second quarter by 4 percent. Excluding discontinued business relationships in a number of smaller markets that were obtained through the acquisition of the product portfolio from LEO Pharma, sales declined organically by 2 percent. Adjusted for currency effects, sales decreased by 3 percent.
Developments in the various markets varied, and while we saw a positive development in Denmark and Finland, the trend was negative in Sweden and Norway. In other European markets, sales increased, while we saw a negative trend in markets outside Europe primarily driven by discontinued business relationships in a number of smaller markets.
The period and the second quarter have been affected by an ongoing change of contract manufacturer, which has meant some delays and delivery problems especially in the Norwegian market. However, we expect these changes to improve our profitability and business in the long term. Unrelated thereto we faced supply issues after the close of the second quarter related to a specific product, Lithionit, which now have been resolved.
The quarter was also affected by restructuring costs as well as costs related to the acquisition of Trimb.
SIGNIFICANT EVENTS AFTER PERIOD END
Christoffer Lorenzen took over as President and CEO on July 1.
Christoffer Lorenzen, born 1975, has been a member of Group Management and a member of the Executive Board of Chr. Hansen Holding A / S, which is listed on the Copenhagen Stock Exchange. He holds a master's degree in marketing from Copenhagen Business School and is a board member of Hamlet Protein A / S and in Schultz Holding A / S. He has previously been Head of Corporate Strategy at H. Lundbeck A / S. In February this year, he was elected to Karo Pharma's Board of Directors, a positioned he left in connection with Karo Pharma’s Annual General Meeting.
This report has not been subject to auditor’s review.
|Interim report Jan-Sept
||Nov 1, 2019|
|Year-end report 2019||Feb 13, 2019|
ABOUT KARO PHARMA
Karo Pharma is a specialty pharma company that develops and markets products to pharmacies and directly to healthcare providers. The share is listed on Nasdaq Stockholm in the Mid Cap segment.
The information in this report is such that Karo Pharma is obliged to make public pursuant to the EU Market Abuse Regulation and the Securities Markets Act. The information was submitted for publication, through the agency of the contact person set out above, on July 19, 2019 at 8.00 a.m. CET.