INTERIM REPORT JANUARY – SEPTEMBER 2019

JULY - SEPTEMBER

• Net sales amounted to MSEK 443.7 (395.3). This corresponds to an increase of 12% for the period, of which the acquired operations account for 10% (MSEK 41.0).
• Adjusted EBITDA amounted to MSEK 156.9 (145.8) excluding non-recurring items, costs related to the acquisition of Trimb and restructuring costs totalling MSEK 28.2.
• The gross margin was 52.8% (55.8%) for the period. The period has been affected by an unfavourable product mix.
• Cash flow from operating activities amounted to MSEK -85.9 (153.2). The negative cash flow has been affected by the takeover and payment of debt in the Trimb Group.
• Earnings per share was SEK -0.01 (0.34) before and after dilution.
• Cash and cash equivalents amounted to MSEK 225.0 (398.6 at December 31, 2018) and net debt amounted to 6 102 MSEK at the end of the period (following completion of the rights issue, debt of 1 500 MSEK has been repaid after the reporting period).
• The acquisition of all shares in Trimb Holding AB, which was announced on June 21, 2019, was completed on September 12. The Trimb group has been consolidated as of September 12, 2019.
• Christoffer Lorenzen took up the position as CEO on July 1.
• On September 24, under the authorization from the Extraordinary General Meeting on September 20, Karo Pharma decided to carry out a rights issue of approximately MSEK 2,003.

JANUARY - SEPTEMBER

• Net sales amounted to MSEK 1,251.9 (1,151.8). This corresponds to an increase of 9% for the period, whereof 2 % is impact of positive exchange rates. The sales increase is related to the acquired LEO product portfolio in April 2018 and to Trimb in September 2019.
• Adjusted EBITDA amounted to MSEK 447.7 (466.8) excluding non-recurring items, costs related to the acquisition of Trimb and restructuring costs totalling MSEK 63.5 for 2019. In the second quarter of 2018, the company also received non-recurring revenue of MSEK 86.6 in the form of a milestone payment.
• The gross margin was 54.3% (59.1%). During the second quarter of 2018, the company received non-recurring income of MSEK 86.6. Excluding non-recurring revenue, the gross margin in 2018 was 55.8%
• Cash flow from operating activities amounted to MSEK 117.7 (289.9).
• Earnings per share was SEK 0.20 (4.69) before and after dilution. Earnings per share for 2019 was adversely affected by non-recurring items (MSEK -63.5) and 2018 was positively affected by non-recurring revenue (MSEK 86.6) and the recognition of deferred tax assets on loss carry forwards (MSEK 417.7).

Comments by CEO Christoffer Lorenzen

During the third quarter of 2019, the development of Karo Pharma continued in line with the long-term strategy of developing the company by growing through strategic acquisitions as a complement to organic growth.

On September 12, the acquisition of Trimb Holding AB was completed. The transaction was financed through a combination of loans and a rights issue raising approximately SEK 2 billion, carried out in October.

The merged company is thus established as one of the leading pharmaceutical companies in the Nordic region. Our ambition is to offer products that improve people’s health and quality of life. We have a commercial focus and specialize on the sales and marketing of both prescription drugs (Rx) and over the counter (OTC) products, as well as self-care products sold in pharmacies and retail outlets. Our products are available today in over 60 countries.

In line with our ambition to expand our business outside the Nordic region, we have bought out German distributor, Ardo, and established our own subsidiary in Munich.

The work with integrating Trimb and utilizing and executing on the synergies in the new company continues according to plan. We have announced a new management team, which contains representatives from both Karo and Trimb, and welcome our new CFO, Jon Johnsson, who joined the company on October 1.

Sales increased by 12 percent during the quarter. As previously mentioned, the Trimb Group was consolidated as of September 12, contributing with 10 percent to the increase in sales. The quarter was also affected by restructuring costs and costs related to the acquisition of Trimb.

Christoffer Lorenzen
CEO
 

Significant events after period end

On October 21, the result of the rights issue in Karo Pharma was announced showing that 60,556,339 shares had been subscribed for by virtue of subscription rights. The remaining 144,083 shares had been allotted to persons who subscribed for shares without subscription rights. The rights issue was thus fully subscribed, and Karo Pharma raised approximately MSEK 2,003 prior to issue costs. Following completion of the rights issue, the company has repaid MSEK 1,500 of debt.

On October 31, it was announced that the number of shares and votes in Karo Pharma prior to the rights issue amounted to 164,332,782. 60,556,339 new shares subscribed for with subscription rights and 144,083 new shares subscribed without subscription rights were registered with the Swedish Companies’ Registration Office. As of October 31, 2019, the number of shares and votes in Karo Pharma was thus 225,033,204.

Karo Pharma entered in December 2011 into a research collaboration and licensing agreement reference to ROR-gamma with Pfizer. Pfizer has informed Karo Pharma of its decision to terminate a specific development project under this collaboration. As a result, Karo Pharma will not receive any additional development or sales milestone payments related to the project. In May 2018, Karo Pharma communicated about potential milestone payments amounting to up to about MUSD 200.

The termination of the project has no impact on ongoing operations or the company’s future prospects.
 

FINANCIAL CALENDAR

  

FOR FURTHER INFORMATION, PLEASE CONTACT
 
Christoffer Lorenzen, CEO, + 46 73 501 76 20, christoffer.lorenzen@karopharma.com 
Jon Johnsson, CFO, + 46 73 507 88 61, jon.johnsson@karopharma.com

 
ABOUT KARO PHARMA
 
Karo Pharma is a pharmaceutical company specializing in the sale and marketing of both prescription and non-prescription drugs as well as self-care products sold in pharmacies and retail. Karo Pharma is listed on the Nasdaq Stockholm Stock Exchange’s 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 November 15, 2019 at 8.00 a.m. CET.