Sijmen de Vries, Chief Executive Officer, commented:
"These are excellent quarterly results and show that we are on the right track with our strategy for RUCONEST(R) in all markets. We now see real growth in terms of both volume and value for RUCONEST(R). In addition, we continue to make good progress with our pipeline research and development programs.
Towards the end of the quarter we were informed of acute shortages of HAE medication as a result of manufacturing issues for certain competitor HAE products, mainly in the US. To help resolve this situation for patients, we immediately offered instant access to our patient care programme, RUCONEST(R) SOLUTIONS, including its free starter medication and bridging support for those patients in acute need of alternative medication to treat their HAE attacks. We have therefore been supplying considerable amounts of RUCONEST(R) free-of-charge to cover treatment of attacks for the period during which those patients are being cleared for RUCONEST(R) reimbursement. Patients are at the very centre of Pharming's business and we are doing our best to ensure that HAE patients get effective treatment. As a result of this situation, we have accelerated planned increases in capacity across our supply chain. We do not believe this situation has had any real effect on our results for the third quarter, but it is likely to have a positive effect on the company's performance in the fourth quarter."
Financial summary
3rd Quarter and 9 months to 30 September
2017 2017 2016 %
Amounts in EURm except per
share data 3rd Quarter 1st 9 months 1st 9 months Change
Income Statement
Revenue from product sales 25.9 56.0 7.0 700%
Other revenue 0.2 0.7 1.7 (59%)
Total revenue 26.1 56.7 8.7 552%
Gross profit 21.8 48.8 5.5 787%
Operating result 8.5 12.7 (9.4) 235%
Net result (7.5) (37.7) (10.4) (263%)
Balance Sheet
Cash & marketable securities 38.6 38.6 17.0 127%
Share Information
Earnings per share before
dilution (EUR) (0.015) (0.077) (0.025) (208)%
Commentary on the Report
The third quarter of 2017 demonstrates the strong growth in Pharming's RUCONEST(R) sales and validates our strategic decision to reacquire the commercial rights to the product in North America last year. Importantly, it was the first full quarter in which we saw the full potential of the integrated commercialization team that we have built for RUCONEST(R) in the US, as well as the Company's careful expansion into western EU markets. As a result, Pharming has delivered an operating profit and generated positive net cash flow during each of the last three full quarters since we regained the US rights for RUCONEST(R) and the Company is close to achieving sustainable net profit.
Net product sales for the nine months to 30 September increased to EUR56.0 million (Q3: EUR25.9 million), an increase of 700% compared to the nine months to 30 September 2016 (EUR7.0 million), mainly as a result of the increase in volumes generated by Pharming's full commercial team in the US and significant market share gains in European and RoW sales. Total revenues for the first nine months of the year increased by 552% to EUR56.7 million (including EUR0.7 million of license revenue) from EUR8.7 million in 2016 (including EUR1.7 million in license revenue).
An operating profit of EUR8.5 million was achieved in Q3 2017, compared with an operating loss of EUR3.2 million in Q3 2016. The nine months' operating profit was EUR12.7 million in 2017 compared with an operating loss of EUR9.4 million for the same period in 2016, despite considerable investments in the ramp-up in commercialization activities, especially in the US.
The nine months' net result was a loss of EUR37.7 million (H1 2017: EUR30.2 million), compared with a loss of EUR10.4 million in the same period last year. The improvement in the quarter to EUR7.5 million loss resulted mainly from improved operating profits and the elimination of regular non-cash financing adjustments required to be shown under IFRS following the refinancing of bonds and debt in May 2017.
The net result includes EUR14.0 million relating to fair value adjustments for the Ordinary Bonds, arising from the strong increase in the share price over the third quarter. This is an entirely theoretical non-cash accounting adjustment required under IFRS which has no cash effect on the company. The net result during the third quarter without this adjustment would have been a profit of EUR6.5 million.
The increase of EUR2.0 million in other financial expense during the quarter related to the cash interest on the Orbimed loan and the Ordinary Bonds. The cash element of these expenses was EUR1.9 million.
The equity position reduced slightly to EUR6.2 million at the end of September 2017 from EUR6.8 million at the end of June 2017, mainly due to the conversion of Convertible Bonds and warrants into shares and the net loss of EUR7.5 million caused by the revaluation of the derivative financial liabilities.
Inventories changed from EUR17.5 million at the end of June to EUR18.0 million at the end of September, largely due to the increasing manufacturing activities to meet anticipated sales demand in the US resulting in a greater proportion of high value finished goods.
Positive cashflows during Q3, driven by increasing revenues, together with the proceeds from warrant exercises, resulted in an increase in the cash position to EUR38.6 million from EUR25.2 million at June 30 2017 (EUR17.0 million at 30 September 2016).
US revenues continued to be affected by the changing exchange rate between US dollars and Euros during the quarter, but the negative effect on the revenues is largely balanced out by the positive effect on costs and on the company's debt, which is mostly denominated in US dollars for this reason.
We look forward to the remainder of 2017 and expect an increase in patients treated with RUCONEST(R), as a result of the underlying demand. We therefore remain confident that sales in the last quarter of this year will increase and that 2017 will be the first operationally profitable year for Pharming. We should start 2018 on a very strong footing with new opportunities to enhance shareholder value further.
The Board of Management
Pharming Group N.V.
Outlook
For the remainder of 2017, the Company expects:
- FY 2017 revenues from product sales to exceed analysts' forecasts and for the
fourth quarter results to exceed the third quarter significantly, driven by underlying
increasing demand
- Achievement of continued operating profit and positive cashflows for the remaining
quarter
- Continued investment in the production of RUCONEST(R) in order to ensure continuity of
supply to the growing markets in the US, Europe and the RoW
- Investment in the approval for RUCONEST(R) in prophylaxis of HAE and in further
clinical trial development of a small, fast IV version and new intramuscular,
subcutaneous and other delivery options for RUCONEST(R)
- Continued and enhanced support for patients in all territories, as we continue to
believe that RUCONEST(R) represents a fast, effective, reliable and safe therapy
option available to HAE patients
- Continued progress in the new pipeline programs in Pompe disease and Fabry's disease,
and additional development opportunities and assets as they occur