The following article ran on Alliance News Professional on Tuesday, October 20. It is an example of In Depth reporting on UK-listed companies by Alliance News journalists.
LONDON (Alliance News) – Interim results from Quantum Pharma PLC were mixed Tuesday, as it proposed a maiden interim dividend and said it expects to meet market expectations for its full year, but it also warned that the launch of some of it products have been delayed and flagged slower-than-expected sales of vitamin D deficiency product Aviticol.
The niche pharmaceutical manufacturer said its pipeline of products continues to grow, standing at over 70 licensed pharmaceuticals and medical devices. However, a few products that were planned to launch earlier in the year have been delayed. It expects to have at least 10 products in the market by the end of the year.
Chief Executive Officer Andrew Scaife told Alliance News that of the ten, around half were delayed due to a number of reasons, including problems with scaling up manufacturing and with third parties. He said there wasn’t “anything internally” that had caused the delays.
Scaife stressed that it was a case of “when, not if” those products would come through, and whilst there might be delays, they would never be anything that can’t be overcome.
All of the 70 products are “achievable”, Scaife said. Quantum would “potentially” face further delays in the future, he said, although these would not be the same issues, as they now know how to handle those. Plus, due to the large scope of the pipeline, “whilst we might get the odd delay here or there it clearly won’t impact significantly,” he said.
In spite of the delays, the company said that a number of product launches on the way underpin its forecast of meeting market expectations for its full year.
According to forecasts provided by Morningstar, N+1 Singer expects Quantum to report a pretax profit of GBP12.09 million for the full year to end-January, whilst Edison Research expects it to report a pretax profit of GBP12.7 million. The company reported a profit of GBP1.1 million in its 2015 financial year, after a loss of GBP2.6 million the year before.
Quantum proposed a maiden interim dividend per share of 0.5 pence. It had previously proposed a maiden final dividend of 0.25 pence with its full year results reported in May.
The company is planning for a full year dividend of 1.5 pence, and said it expects to implement a progressive dividend policy in future years. Chief Financial Officer Martin Such noted that the company’s proposed full-year dividend represents a 20% uplift on the pro-rata full-year dividend the previous year, but Such said that the company “can’t guarantee we’re going to give a 20% uplift every year”.
The company will address its dividend on a year-by-year basis until its progressive dividend policy is implemented, and Such said it is not looking at keeping it flat for a couple of years.
For the half year to end-July, Quantum reported a pretax profit of GBP2.8 million, down from GBP3.5 million a year before, as a rise in revenue to GBP34.3 million from GBP28.0 million was offset by higher cost of sales and a more than doubling of administrative expenses.
The company noted that sales of Aviticol were below its initial expectations, although this slower-than-expected growth was partly compensated by out-licensing, and following the year end the company’s signed an out-licensing deal for the product with an undisclosed German pharmaceutical company.
The jump in administrative costs was partly related to the company’s acquisitions of Lamda and NuPharm during the year, alongside a step-up in product development costs of GBP3.0 million from GBP1.1 million a year before, and senior management appointments. On Tuesday, the company appointed Nicola Massey, formerly UK and Ireland country general manager for FTSE 100-listed Shire PLC, as managing director of its Niche Pharmaceuticals division.
Such told Alliance News that Quantum’s expenses “aren’t going to continue to grow like that”, and in the second half the company will focus on adding to the top line and gross margin line without the incremental expenses.
N+1 Singer trimmed its earnings forecasts for Quantum’s current year to end-January by 10%, and by 6% for the following year due to the product delays. N+1 said that whilst any downgrade is disappointing, it remains attracted to the company’s positioning and strong growth prospects. Newsflow on product approvals, which N+1 Singer expects over the next few months, should restore confidence in Quantum’s growth outlook.
N+1 Singer has a Buy rating for Quantum with a price target of 170 pence. Shares in Quantum Pharma closed at 115.40 pence Tuesday.
By Hana Stewart-Smith; hanassmith@alliancenews.com; @HanaSSAllNews
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