We are delighted to be working with Moderna on this vital project in order to support the fight against COVID-19. Our operations in France are ideally suited to perform this work by combining our technical and operational knowhow to deliver high-quality pharmaceutical manufacture of biologics with a challenging timeline. We anticipate that the final agreement will be finalised during December.
I am very pleased we can announce this joint venture as it represents another piece in the jigsaw to build Recipharm into a world leading integrated device development and manufacturing provider. The novel softmist technology represents an opportunity to deliver inhaled therapies in a highly environmentally friendly manner without the need for propellants and less drug being wasted. We are already seeing significant interest in such technologies and by combining Medspray’s knowhow in spray nozzle technology with Recipharm’s device and pharmaceutical expertise, we are confident we will provide a unique offering to the market
Adding the softmist technology is well aligned with our overall strategy of making available more novel intellectual property to our customers offering as well as providing pharmaceutical products with less impact on the environment.
We are excited about the establishment of Resyca. By combining all the resources and capabilities of both Medspray and Recipharm we see great potential to offer customers a fully integrated solution from device development through to commercial supply in an environmentally sustainable way.
The demand for pMDI valves has increased significantly over the last years and we are committed to supporting this growth from our Kings Lynn operation. The investment is a great opportunity to translate our acquisition into new high-quality profitable business and accelerate growth within our Advance Delivery Systems segment.
The acquisition of Consort has also allowed Recipharm to build a truly integrated platform of inhalation services. This expansion will bolster our offering even further by ensuring we are able to fulfil the forecasted increase in demand for respiratory devices whilst enabling our development team to support customers in inhalation and nasal drug development. In parallel, we are offering support to customers in using new more environmentally friendly propellants in their pMDIs.
Our efforts during past years to build a resilient top 5 CDMO with global reach will continue to bring benefits to customers and patients. Overall demand continues to be largely unaffected during the ongoing pandemic and we are securing more valuable new contracts than ever before. We will deliver on our strategy and explore the value creating opportunities we see in the market. Looking forward we see continued good organic growth and we expect to well reach our EBITA-margin and return on operating capital long term targets already during next year.
We have now been able to confirm the beneficial effects of Erdosteine in restoring the pulmonary functions also in patients affected by COVID-19. We are planning to develop further studies to investigate if the molecule can have a role in prophylaxis for this pandemic treatment.
It’s great to see more investment into our facility. Our sustained growth over the last few years is testament to our talented and passionate team. We continue to look for new ways to develop our offering and implement our continued growth plan, which will naturally bring more employment opportunities to the region.
We’re delighted to be able to support Arcturus Therapeutics on such an important project. Our experience in managing the complexity of biologic projects means that we are ideally placed to support from early phase discovery all the way through to successful commercialisation. We’re looking forward to working together and using our development and manufacturing expertise to continue to progress the project.
We’re looking forward to working closely with Recipharm in order to advance our objectives toward distribution of ARCT-021 broadly and playing an important role in global immunization to protect against COVID-19.
We have worked for several years with process development and scale up to commercial scale of the manufacturing of opicapone. The approval in Japan marks a significant milestone for this important product for patients suffering Parkinson’s disease and we look forward to continue to work together with BIAL to supply opicapone to Japan and elsewhere.
The divestments will help strengthen our financial position and we see them as a positive step in streamlining our operations and consolidating our position as a top five global Contract Development and Manufacturing Organisation. I am pleased that these two businesses will get committed owners with the capacity and capability to develop them to their full potential. We will continue to develop and invest in our highly successful Portuguese contract manufacturing business.
Alcohol addiction is a common but serious health problem all over the world, lacking effective treatments. As such there is strong demand for new and improved therapies to help better manage this condition. We are very proud to be able to work with Sobrera on such an important project and we believe that our excellent capabilities at our Centre of Excellence in Oral Solids, will be very valuable assets throughout the partnership.
Increased alcohol intake is strongly related to increased mortality and morbidity and, every year over 3 million people globally die in alcohol related illnesses and accidents. A more efficacious, easy to use product, is much needed to reduce high risk alcohol consumption. This product potentially offers us an opportunity to bring significant value to patients and family and to lessen the socio-economic burden of AUD. The decision to commence the collaboration and start formulation development, marks an important milestone for our company and we’re delighted to be working with Recipharm on this important development work.
We have delivered our best quarter ever, in a tough environment. Organic growth was 12 per cent in sales and 34 per cent in EBITA, net profit has never been higher, cash flow was good, and leverage decreased materially. Our COVID-19 strategy has been effective in protecting our employees and safeguarding business continuity. After a challenging start, with lockdowns and other COVID-19 related issues, operating conditions stabilized gradually, and we managed to successfully mitigate these challenges. In addition, we supplied the back log from the first quarter. Operating costs in locations highly affected by COVID-19 have been higher, mainly affecting our Sterile Liquids segment. However, we estimate net effects on results from COVID-19 during the quarter to be overall positive for the group.
During the quarter we managed to successfully mitigate operational challenges from lockdowns and other Covid-19 related issues. In the second half of the quarter we compensated from the April shortfall and in addition managed to supply the back log we had from the first quarter. We therefore estimate net effects on results from Covid-19 during the quarter to be positive. In addition, product mix has been favourable with a material increase in demand for Covid-19 related products and services. This has significantly improved results in the Development & Licensing segment.
Following the recently completed directed issue, we are now fulfilling the authorisation that the Board of Directors was given from the Annual General Meeting through the share issue of approximately SEK 2.0 billion, with preferential rights for existing shareholders in Recipharm. We are very pleased with the confidence existing shareholders are now showing with shareholders representing about 58.6 percent of the shares having announced that they will subscribe for their respective pro rata shares in the rights issue already in advance. When the rights issue has been carried out, we will have completed the shares issues we announced our intention to make in conjunction with the offer to acquire Consort.
We are very proud of the interest we have received from well-renowned international investors. Noting that the issue was subscribed in line with the price recently traded on NASDAQ Stockholm also confirms the strong support of our strategy and is a message of strength in these volatile times.
As a pharmaceutical company we have a strong commitment to contribute to the treatment of COVID-19 patients. There is still a great need for more clinical evidence regarding the use of chloroquine, but we also need to prepare for the event that it could be identified as an effective part of COVID-19 treatment. I am therefore proud that we have been able to source API so quickly and that we are now prepared to build up our stock of chloroquine.
We continue to make good progress towards the long-term strategic objectives which have propelled Recipharm into a top 5 global CDMO. Our strong operational and financial foundations and deep expertise helped us deliver organic growth of 4 per cent in sales and no less than 21 per cent in EBITA, increase margin, progress our integration activities and adapt our business to respond to the dynamic situation COVID-19 presents. /.../ In summary, our operations are performing as planned or better, but in the short to medium term, like most across the industry and wider, we face significant uncertainty and I cannot exclude further impact on our sales and profit. That said, our long-term prospects remain unchanged. Demand is stable or even increasing and we have seen operating conditions stabilize compared to March/April. I am confident that our great teams will be able to continue to mitigate the challenges the COVID-19 situation may bring. Our strong reputation for customer satisfaction, uninterrupted during these difficult times, will bring recognition and further benefits as we leverage our top five position in the global CDMO industry.
There is already some rationale that mucolytic drugs could be part of the treatment of COVID-19 patients. Considering the specific properties of our molecule and the proven clinical results in COPD treatment, we truly hope that Erdosteine could play a role in the treatment of this pandemic pathology.
There is growing demand for inhalable products to treat patients with respiratory diseases and this is an ongoing core focus in our business. Having a role in this industry-leading collaboration is an exciting opportunity for Recipharm and as Bespak integrates into our business, we look forward to working closely with Perrigo and Catalent to ensure the commercial success of this important new product.
We are delighted to present the 2019 award to Dana Kolpin. His work represents a pioneering approach to exploring the potential effects and risks of contaminants, including pharmaceuticals, on the environment. His research has been both influencial and inspirational for other scientists in this field and has without doubt been essential in building a stronger understanding of the environmental impact of various types of contaminants.
I am very honoured to receive this award and thank Recipharm for the recognition of the research that has been conducted by me and my team. It is satisfying to know that our work has inspired others to conduct environmental research on this rapidly evolving topic. Since the start of my career, science has come a long way regarding the understanding of the potential consequences from contaminant exposures, but there more to be understood, particularly when it comes to the effects of chronic exposures to complex mixtures of environmental contaminants. We need to take stock of where we are and what we have learned to better position our future research priorities in both the short and long term.
The good performance we saw in the third quarter has continued to further improve. Today I’m therefore pleased to report our strongest quarter ever. It also means that results for the second half of 2019 exceeded the first half of the year for the first time ever. We continue to report double digit organic growth and we saw strong growth across all three business segments and in all geographies where we operate. With full year net sales of SEK 7.5 billion we are well positioned to reach our previous target of SEK 8.0 billion without further acquisitions.
We have recently announced new, more ambitious, targets going forward, but our strategies remain unchanged. The acquisition of Consort will give us leadership in selected markets and with the resources in the combined group we are ideally positioned to continue to build powerful long-lasting partnerships with our customers, explore exciting opportunities and build an even stronger position in our industry.
We are excited to confirm the acquisition of Consort. There are many complementarities between our businesses and exciting times lie ahead as we work together to create a leading advanced delivery systems company and top 5 global CDMO. The deal enhances our competitive position in the market, expanding the scale and breadth of our service offering so we can become a true end-to-end partner for our customers. In particular, the deal strengthens our inhalation drug product offering which is a key area of growth for our business following the creation of Recipharm Inhalation Solutions™ in 2019.
I am proud to be taking on the position of CEO of Consort having spent many years within the Recipharm leadership team. On behalf of Recipharm, I would like to welcome all new employees to our family and look forward to a bright future for all as we work to integrate our businesses and deliver value to customers.
We are pleased to be able to contribute to the development of Aptahem's leading drug candidate which has the potential to meet the major medical needs that exist for sepsis patients. Recipharm has extensive experience in developing drugs for clinical trials, as well as in commercial manufacturing and we believe that our team’s expertise will be a very valuable asset during this new collaboration.
We are extremely pleased to be able to access the strong competence and experience that Recipharm has through this agreement. Choosing a partner to help us progress our drug candidate is a significant milestone. We are now moving at full speed ahead in the development process of Apta-1 and with this cooperation now established I am convinced that we will be able to accelerate further.
By employing the SprayVIEW® system and expanding our expertise in this technique, we are strengthening our capabilities in inhalation and nasal product development and manufacturing.Inhalation products are extremely complex to develop and manufacture and it is important to understand potential interactions between the formulation and the delivery device throughout the development stages. Acquiring a SprayVIEW® system has allowed our development team to successfully characterise a nasal spray product currently under development. In addition, our expertise in this technique adds new services for our innovator and generics customers who are coming to us for inhalation and nasal product development, as well as for standalone SprayVIEW® analysis.
Recipharm’s end-to-end development and manufacturing capabilities mean we have been able to support RedHill throughout the entire journey to market. We’ve been working closely with RedHill over the past few years to develop and manufacture Talicia®, so gaining FDA approval marks an important milestone in the journey and is testament to the hard work of both teams.
This is a significant moment in our shared collaboration with Recipharm. We have been working diligently to develop and receive FDA approval for Talicia®. This would not have been possible without the mutual activities and work by all of the teams at RedHill and Recipharm, at three different sites.
Recipharm’s strategy is firm, we have a good foundation for continued long-term and competitive value creation. Our decentralised business model promotes the entrepreneurial spirit in which strong leaders develop and drive our operating companies to continuously improve. Our financial targets guide our work to continued profitable growth.
AMR is currently one of the most serious health concerns worldwide. At Recipharm, we manufacture antibiotics in Sweden, Italy and India so it’s important that we get involved in developing solutions to combat AMR. Joining the AMR Industry Alliance was the next natural step for us to take our work on AMR to the next level and allow us to engage with other stakeholders on the subject. /.../. We’re confident the alliance will allow us to continue working with experts in the field of AMR and take positive steps towards developing potential solutions.
We welcome Recipharm as a new member of the alliance. In recent years we’ve seen more and more companies recognising and addressing AMR and we’re delighted to see a leading CDMO like Recipharm committing to the objectives of the AMR Industry Alliance, including minimizing antibiotic emissions from the manufacturing supply chain.
The good performance we saw in the second quarter has continued and further improved. Today I’m therefore pleased to report our strongest ever third quarter. Net sales increased 26 per cent over the previous year with a good contribution from the newly acquired inhalation business. Organic growth was 11 per cent and we see strong growth across all three business segments and in all geographies where we operate.
We are clearly benefitting from our global reach and our competitive value proposition to customers as we are taking leadership in selected markets. Our objectives and strategies remain unchanged. We will continue to build powerful, long lasting partnerships with strategically important customers, in addition to adding further technologies and differentiating businesses, based on customer needs.
Three years after acquiring Nitin Lifesciences Ltd from the Sobti family, we have confirmed our initial views that the Indian-based operations offer high-level expertise and low-cost options for drug development and manufacturing. We have been impressed with Nitin’s strong financial performance on the domestic market as well as with export activities to emerging markets. This is the outcome of Nitin being well positioned at the high-quality end of this market segment, allowing it to saturate its production capacity with available demand. The excellent leadership of Dr. Chetan Sobti, as CEO and Nitin Sobti, as COO, are also key factors in the company’s success.
Our understanding of the entire drug development and manufacturing process delivers many benefits, including the ability to develop robust methods made for the stream-lined conditions within QC labs. We are used to working closely with formulation development teams with regulatory implications in mind. We also understand the logistics involved in the scale-up and tech transfer of a drug product, meaning transferring analytical methods should never be an issue.
We are pleased to announce this divestment which allows us to focus on delivering a comprehensive offering from medicinal chemistry through to commercial API manufacturing. This step also further improves the Recipharm Pathway to Clinic offering, where Recipharm continues to facilitate clinical trials by developing and supplying the clinical trial material. The GLP laboratory will now operate within the same group as CTC Clinical Trial Consultants which is a far more logical approach and will result in
the even more efficient conduct of clinical trials ultimately improving the result for our customers.
Through the formation of Lablytica as a sister company to CTC Clinical Trial Consultants we believe we will be able to offer a more integrated approach and develop the services for our customers using the talented staff and facilities in the GLP bioanalysis business. The partnership with Recipharm provides a complete solution for first-in-human projects.
For the sixth consecutive quarter I’m pleased to report record high sales for the quarter. We are also reporting sequential improvement of sales, profitability and cash flow. Net sales increased 10 per cent compared to Q2 2018, corresponding to the net of acquisitions and discontinuing operations. EBITDA increased by 15 per cent and in addition to acquisitions we report good contributions from serialisation, new sterile products in new capacities and our new global development organisation while non-lyophilized injectables and oral solids underperformed during the quarter. EBITDA margin in the quarter increased to 19 per cent, 20 per cent excluding discontinuing operations. Changed accounting standard contributed 1.2 percentage points. /.../ Our current structure has considerable potential for growth and improved performance, also in the short term, but I’m not satisfied with the organic growth in the quarter. We know what to do and expect the increased business momentum we began to see towards the end of the second quarter to continue and strengthen during the rest of the year. We are well on track to reach our overall targets.
The Recipharm team has a long history in inhalation drug product development and manufacturing. This heritage, combined with market demand, made the launch of Recipharm Inhalation Solutions™ a logical step for us. Our team has the depth of knowledge required to overcome the challenges associated with developing and manufacturing these types of products. We also understand the hurdles on the path to commercialisation and are well placed to manage complexity and risk along this journey.
We are delighted to present the 2018 award to Bryan Brooks. His work, which explores the potential effects and risks of contaminants, including pharmaceuticals, on the environment is widely recognised in our industry and beyond. This research will help to build a greater understanding of the impact of certain contaminants on the environment and could potentially provide invaluable guidance on how to reduce any negative effects.
I am humbled and honored to receive this award from Recipharm, which I warmly accept on behalf of our current and former students. I am grateful for support from Baylor University, my long time collaborators Prof. Kevin Chambliss and Dr. Duane Huggett, and other close colleagues with whom we are engaging research on six continents. /.../ Our research examines interfaces among environment and health with a goal of understanding and managing challenges that affect us all, so we’re delighted to be acknowledged for our team’s contributions.
Recipharm is committed to the ongoing development of its sustainability standards. Achieving ISO 45001 at our first site demonstrates that we can perform to the highest standards when it comes to occupational health and safety. We now start the roll-out across our other facilities as we work towards ensuring we have state-of-the-art management systems in place to manage not only occupational health and safety, but also other areas such as the environmental impact.
I’m pleased with our achievements during 2018 and we are well positioned to explore further opportunities. Leverage ratios are good and will continue to improve during 2019, following improved profit and decreased capex. The temporary effects we saw during the fourth quarter will disappear during coming quarters and we expect to see a steady development going forward. Net sales grew by 20 per cent in 2018 and with current structure we expect to continue to show good growth in 2019, towards reaching our SEK 8 billion sales target by 2020. At 15.5 per cent in 2018 we didn’t quite reach our EBITDA-margin target of at least 16 per cent while for 2019 we expect to reach our target.
Recipharm has been very committed to meeting compliance deadlines, establishing a dedicated task force three years ago. A lot of time and effort has gone into our preparations so it’s rewarding to report that we are ready, especially ahead of the enforcement date. Standardising our serialisation capabilities has enabled us to provide a seamless and flexible service to our customers, across multiple markets.
We are thrilled to welcome Kieran to the Recipharm team to help drive sales and business development activity in North America. We are fully committed to achieving our goals there by offering first class development and manufacturing services. I am certain Kieran’s experience will be an asset to the team throughout that journey.
Recipharm’s knowledge and end-to-end offering means it can cater for customised and challenging projects, which will be a great asset in the North American market in the coming years. I’m delighted to be joining the team in its quest for growth and global expansion.