Almirall Sees Global Growth Despite Fierce Reforms Hitting Sales Performance

Almirall's net sales performance for the first quarter of 2012 suffered a 5.9% decrease on the same time last year, and the Spanish company was also hit by a substantial decrease in net income of 40.2%. Nevertheless, the company performed strongly on cost base and international growth. International sales experienced substantial growth representing 57% of total sales in the first quarter of 2012 versus 44% in the first quarter of 2011.

According to company sources, net sales stood at EUR200.2 million (USD 257.14), a 5.9% fall on the same time last year when net sales hit EUR212.7 million. The company's gross profit was EUR124 million, representing 61.9% of the overall operating income, mainly due to Almirall's international expansion through proprietary products. Operating income (earnings before interest, taxes, depreciation and amortisation; EBITDA) was EUR31.3 million, reflecting a 41.3% decrease on the first quarter of 2011. Net income reached EUR18.3 million, a 40.2% decrease. Other income was recorded at EUR20.7 million, showing a 12.7% decrease on the first quarter of last year, however, this figure should see some upwards movement throughout 2012 due to regulatory events affecting the firm's drug aclidinium in the United States and EU.

According to company sources, research and development (R&D) expenses were temporarily up to EUR38 million due to the phasing of clinical studies, but it is expected that at the end of the year these will be very similar to 2011 figures in absolute terms. The selling, general and administrative (SG&A) expenses grew 9.2% to EUR91.8 million on the back of pre-launch activities and the step-wise deployment of commercial resources. The free cash flow generated during the first quarter of 2012 stayed at 27.2 million, and investment activities are reported to have lowered since the same time last year.

New Products and Performance

Almirall's product pipeline is continuing to be significantly positive, with progress made in 2011 for two of its main projects: Aclidinium for chronic obstructive pulmonary disease (COPD) and linaclotide for irritable bowel syndrome with constipation (IBS-C). In February 2012, aclidinium bromide was recommended for approval by the US FDA, with a final response expected by end of 2012 (see Spain: 28 February 2012: Almirall Shares Rise Following FDA Approval of COPD Drug).The aclidinium monotherapy administered through the Almirall inhaler Genuair was filed for registration in the US and EU in 2011 to treat moderate to severe COPD. Almirall expects a regulatory response during 2012. Linaclotide was filed for registration in Europe in 2011 and a regulatory response is expected during 2012.

Latest launches, Actikerall (fluororacil); Efficib (Metformine); Sativex (nabiximols); Silodyx(silodosin); Tesavel (sitagliptin); and Toctino (alitretinoin) have seen a more than 50% increase in revenues as compared to the same period last year, and Almirall's derma franchise is also showing steady growth (10%).

Sativex has just received recommendation for approval in 10 additional European countries through the Mutual Recognition Procedure. The medicine is already available in Spain, Germany, and Denmark, and Almirall holds marketing licensing agreements in Europe (except the UK) and Mexico.

In regards to Almirall's R&D operations, the combination of aclidinium + formoterol BID1 for COPD is in Phase III among the firm's respiratory franchise, and a proprietary derma compound LAS41007 for non-melanoma skin cancer and Sativex in oncological pain are also both undergoing Phase III trials.

Outlook and Implications

Despite the fact that the substantial decrease in net sales may affect the company's overall performance in 2012, this decrease is in line with the firm's expectations given the fierce set of reforms carried out by the Spanish government that favour the use of generics which are hitting brands such as Almirall. International sales are continuing to grow and now account for 57% of the company's total. Despite the challenging environment, the financial guidance for the year is so far confirmed for Almirall.

The company is mostly investing in international growth, and plans to expand to most Latin American countries, especially to the strong markets such as Mexico, Brazil, and Argentina, which will benefit the company the most in terms of R&D. In terms of new approvals, the regulatory process of the company's key platforms, aclidinium and linaclotide, are on track and expecting regulatory feedback for approval throughout the EU and the US by the end of 2012. These recent launches, as well as Sativex receiving recommendation for approval in 10 additional countries, is expected to contribute to the improvement and expansion of Almirall's portfolio.

Despite the negative domestic economic outlook, the company has attained its financial targets and maintains strong financial fundamentals to perform as one of the leading pharma companies in Spain. Six new products have been launched in the past two years. The company's strategic investment on international growth is paying off as international sales now account for 57% of profit and Almirall's strategic priority will be to continue its internationalisation process in the short-to-medium term, investing in its new products in new areas and being supported by partners whenever necessary.