Interim results for 6 months end 31 December 2014

Clinigen Group plc

Half year revenues up 17% to £72.6m, underlying EBITDA up 8% to £13.5m

Burton-on-Trent, UK - 3 March 2015 - Clinigen Group plc (AIM: CLIN, Clinigen or the Group), the global specialty pharmaceuticals and pharmaceutical services business, has today published its half year results for the six months ended 31 December 2014.

Financial highlights

- Group revenue up 17% to £72.6m (H1FY14: £61.8m); on a constant exchange rate basis up 21%

- Gross profit up 11% to £22.0m (H1FY14: £19.9m)

- Underlying EBITDA* up 8% to £13.5m (H1FY14: £12.5m), despite significant additional new product integration investment

- Adjusted underlying earnings per share** up 12.6% to 12.5p (H1FY14: 11.1p). Reported earnings per share up 5.7% to 9.2p (H1FY14: 8.7p)

- Interim dividend up 10% to 1.1p per share (H1FY14: 1.0p per share)

- Net cash of £12.9m at 31 December 2014 (30 June 2014: £5.3m)

Business highlights

- CTS: 28% revenue growth, 14 new customers, underlying activity up (requests up 11%, medicines supplied up 13%)

- GAP: 51% increase in units shipped, seven new programs to start in CY15 including first program for AstraZeneca for their product CAZ-AVI. Fycompa program extended for a further 18 months

- SP: SP sales and gross profit up 21% driven by new products and underlying volume growth in Foscavir. Ethyol acquisition (August 2014) already contributing to revenues. Revitalisation plans for dexrazoxane portfolio of products, Cardioxane and Savene on track. Final Marketing Authorisations for Cardioxane transferred from Novartis, in February 2015.

* Underlying EBITDA is defined as earnings before interest, tax, depreciation and amortisation excluding share based payments and associated Employer's National Insurance

** Underlying earnings exclude share based payments, associated Employer's National Insurance costs, amortization and are adjusted for associated tax

Peter George, Chief Executive Officer, said:

"After another strong first half, with all three divisions making good profit contributions, we are in a great position to continue our ambitious pursuit to become the world leaders in Clinical Trial Services, Global Access Programs and have a Specialty Pharmaceutical portfolio with 10 revitalized products.

"For the second half of the year gaining regulatory clearance for our dexrazoxane portfolio of drugs is a priority, along with the constant drive to convert the pipeline of new business and extend current customer relationships within CTS and GAP. In addition, we continue to explore opportunities to extend our global footprint and unlicensed supply market position.

"We anticipate another busy six months ahead."

-Ends-

An analyst briefing will be held at 9:30am today at the offices of Instinctif Partners, 65 Gresham Street, London EC2V 7NQ.

An audio replay file will be made available shortly afterwards via the Group's website:

www.clinigengroup.com.

For further information, please contact:

About Clinigen Group

The Clinigen Group is a specialty global pharmaceutical company headquartered in the UK, with offices in the US and Japan. The Group, dedicated to delivering 'the right drug, to the right patient at the right time', has three operating businesses; Specialty Pharmaceuticals (SP), Clinical Trials Supply (CTS), and Global Access Programs (GAP). SP focuses on acquiring and in licensing specialist, hospital only medicines worldwide and commercializing them within niche markets. CTS sources commercial medical products for use in clinical studies only, including comparator drugs, adjuvant drugs and rescue therapies. GAP specializes in the consultancy, development, management and implementation of programs providing access for patients and their clinicians to drugs not available in their markets.

For more information, please visit www.clinigengroup.com.

Forward-looking statement

This announcement contains certain projections and other forward-looking statements with respect to the financial condition, results of operations, businesses and prospects of Clinigen Group plc ("Clinigen"). These statements are based on current expectations and involve risk and uncertainty because they relate to events and depend upon circumstances that may or may not occur in the future. There are a number of factors which could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements. Any of the assumptions underlying these forward-looking statements could prove inaccurate or incorrect and therefore any results contemplated in the forward-looking statements may not actually be achieved. Recipients are cautioned not to place undue reliance on any forward-looking statements contained herein. Clinigen undertakes no obligation to update or revise (publicly or otherwise) any forward-looking statement, whether as a result of new information, future events or other circumstances.

Overview

Clinigen's ambition is to become both the global leader in clinical trial supply and global access programs whilst significantly expanding its specialty pharmaceutical business through acquiring products. To enable the Group to achieve these goals it will also focus on expanding its global footprint. The Group is driving its growth plans aggressively, focussing on these key strategic objectives and is expecting another busy six months in the second half of the financial year.

The first six months have been strong, again, with revenue up 17% to £72.6m. The weaker US Dollar and Euro adversely impacted reported revenues, therefore, on a constant exchange rate basis revenues were up 21%. CTS was the main revenue generator again, contributing 70% of total sales in H1FY15 (H1FY14: 64%). This increase in revenue resulted from a combination of new customers and growth in existing customers.

Gross profit was up 11% to £22.0m (H1FY14: £19.9m) and underlying EBITDA was up 8% to £13.5m (H1FY14: £12.5m). Administrative expenses included non-recurring new product integration costs of circa £0.3m. These expected on-boarding costs negatively impact EBITDA during the transition period. Underlying pre-tax profit was 2.5% higher at £11.1m (H1FY14: £10.9m) and adjusted underlying earnings per share increased by 12.6% to 12.5p (H1FY14: 11.1p). The interim dividend has increased 10% to 1.1p per share (H1FY14: 1.0p per share).

Significant growth in CTS has further strengthened the Group's position as one of the global leaders in the supply of clinical trial products. GAP's gross profit, one of the main markers of growth, has continued to increase. Finally, Ethyol, the Group's fifth acquired product has broadened further the offering of the oncology support portfolio and is already contributing to revenues and profits. Potential product acquisitions continue to be appraised, Clinigen's strong reputation and compelling business model is attracting pharma companies who are looking to divest their products.

Current trading and outlook

Clinigen is on track to meet the Board's FY15 expectations.

The CTS pipeline for H2FY15 remains strong, with conversion levels as expected. A number of new initiatives are being developed to enhance the gross profit, these include direct to site delivery and utilising the Group's expertise in sourcing biosimilars; the aim is still to achieve gross margins averaging 15% on a longer term basis.

Although GAP is the smallest of the operating businesses, the supply of unlicensed supply is seen by management as a key area of growth. The need for critically ill patients to be able to access medicines earlier or in territories where the products are not licenced is a specific focus in modern disease management globally and many governments are legislating to enable this access. This opening up of barriers creates many opportunities for GAP to be at the forefront of this expansion utilising its reputation and strong market position.

Within SP, Foscavir continues to be the lead product demonstrating volume growth of 5% in line with the growth of the underlying treatment area. The last of the Marketing Authorisations for Cardioxane were transferred in February 2015. Vibativ product was made available in September 2014, however, the sensitivity test strips for the drug are currently only available on a research basis. Sales from Vibativ are expected to be low until the test strips are commercially available. The technical transfer of the manufacturing process of Ethyol, which was acquired in August last year, is underway and on target for completion by the end of 2016. Ethyol is contributing strongly already.

The revitalisation plans for the dexrazoxane portfolio (Cardioxane and Savene) are progressing and initial meetings have been held with Agence Nationale de Securite du Medicament ("ANSM"). Key opinion leader support and clinical evidence is strongly in favour of this drug class. The Directors are therefore, hopeful that, Article 31 which sets certain restrictions on the usage of Cardioxane, will be lifted and therefore, a broader oncology population treated with anthracyclines can benefit from its use.

Financial Review

Reported Group revenues in the half year grew by 17% to £72.6m (H1FY14: £61.8m), and gross profit grew by 10.6%.

The significant increase in revenues was due to a combination of increased CTS sales (+£11.0m, 28%) and the contribution from new products, Ethyol and Savene.

In CTS, the significant sales increase of 28% (+ £11.0m) was due to a combination of new customers and increased volume from existing key customers. The gross profit of £6.4m (12.6% margin) shows a slight decline on H1FY14, due to the geographical mix of high value sales. US product sales greater than £1m, which tend to be at a much lower margin than EU product, have increased from £2.6m in H1FY14 to £16.8m in H1FY15. EU product sales greater than £1m have remained at £18m.

Growth in SP was 21% (+£2.6m) driven by acquisition growth from Ethyol and Savene and organic growth in Foscavir which continues to increase in line with the underlying treatment area and patient numbers. Promising progress is being made towards lifting the Article 31 safety restriction on Cardioxane, however sales continued to be affected during the period by political issues in Venezuela, one of the main markets for the product. Gross profit at £12.8m was in line with sales growth (+20.8%).

The fall in GAP revenues of £2.8m (-29%) is due to the closure of the French Enzalutamide program, which was very active in H1FY14. The ending of this program was expected by the Group, and has been countered at the gross profit level by new and existing programs such as Eisai's Fycompa where the revenue stream is management fee income; having a better impact on gross profit and margin. As a result, gross profit for GAP has increased to £2.9m (+3.5%) at an expected margin of 40.5% (H1FY14: 27.9%).

Underlying Group EBITDA increased by 7.6% to £13.5m (H1FY14: £12.5m) as a result of gross profit growth from SP and GAP, partly offset by overhead growth of £1.1m supporting the integration of acquisitions and organic growth.

Underlying pre-tax profit, which excludes share based payment related charges of £1.2m, increased by 2.5% to £11.1m (H1FY14: £10.9m). The Group reported a profit before tax of £9.9m (H1FY14: £9.6m).

Adjusted underlying earnings per share, excluding, amortisation, share based payment related charges and associated tax, was 12.5p (H1FY14: 11.1p). The reported earnings per share was 9.2p (H1FY14: 8.7p).

The Group is paying an increased interim dividend of 1.1p per share, up 10% (H1FY14: 1.0p). The dividend will be payable on 2 April 2015 to all shareholders on the register at 13 March 2015.

The Group has a strong cash position with net cash at £12.9m, up from £5.3m at 30 June 2014. It also has a £35m banking facility available. The Group is debt free at the period end.

The net cash increase in the period of £7.6m was generated by cash from operations of £11.3m and tax received of £0.7m, offset by capital expenditure of £2.8m, purchase of own shares of £0.3m, dividend of £1.7m and financing costs and positive currency translations of £0.1m. The final tranche payments of circa £5.0m for the acquisition of Ethyol are due to be paid in H2FY15.

Operational review

Clinigen CTS

CTS sales show a significant increase of 28.0% on prior year. However, gross profit shows a slight reduction of 2.4%, reflecting a gross margin percentage of 12.6% (H1FY14: 16.5%). This is due to the geographical and product mix where a number of new and existing key customers have ordered high value, lower margin, US sourced, biosimilar products. In H1FY15, 44% (H1FY14: 26%) of revenues were from US sourced products, which tend to be at a much lower gross margin. The increased US revenues were from large orders (>£1m), which generated revenues of £16.8m (H1FY14: £2.6m).

Year to date, CTS has provided product to 62 customers (H1FY14 56) and underlying activity is up (requests up 11%, medicines supplied up 13%).

Revenue growth will continue to be driven by key decision makers in the US, which Clinigen CTS is in a strong position to benefit from through strong relationships and the ability to ensure global supply.

The Group's US presence will be further strengthened by the slightly delayed completion in Q1FY16 of Clinigen's new US facility at the Navy Yard, Philadelphia, which will provide both offices and warehousing.

Clinigen GAP

H1FY15 revenues have shown a reduction of £2.8m on H1FY14. However, the gross profit has increased by 3.5% to £2.9m. As previously stated, the French Enzalutamide program ceased in November 2013, which contributed significantly to revenues but less so to gross profit. Number of units shipped and gross profit are seen to be the best measure of growth in GAP. The number of units shipped continues to increase, with 36,000 units being delivered in H1FY15 compared to 24,000 in H1FY14.

The gross profit position has been maintained by both existing programs such as Sanofi Genzyme's Campath, Eisai's Fycompa and BTG's Voraxaze, and new programs such as Boehringer Ingelheim's Nintedanib, all of which have performed strongly in the period.

Early access programs are active over a relatively short term of two to three years, up until they are fully licenced. Therefore, in this program category a strong pipeline is required to replace planned program closures. GAP has strengthened its pipeline with the addition of new client relationships, including AstraZeneca which launches its first program with Clinigen in H2FY15. Seven new programs are planned to start activity in CY15.

Clinigen SP

In SP, sales and gross profit have grown substantially, representing a combination of the contribution from new acquisitions and continued organic growth of Foscavir.

Foscavir continues to be the Group's lead product. Although further significant development of the product or markets is unlikely, the underlying volume growth of Foscavir is 3 - 5% in line with the underlying treatment and increases in hematopoietic stem cell transplantation (HSCT) procedures. Foscavir's dominance of the SP portfolio is being diluted as new products start to contribute more; sales from Foscavir accounted for 73% of total sales in H1FY15, down from 86% in the prior year.

Cardioxane, acquired in March 2013, has been negatively impacted by political issues in one of its current main markets, Venezuela, which has disrupted supply. However, the Directors believe that Cardioxane offers one of the greatest opportunities for revitalisation and it is future markets which hold the greatest opportunities. The product is currently restricted from use in a number of patient populations by an EMA Article 31 safety restriction. It is used for prevention of chronic cumulative Cardiotoxicity caused by Doxorubicin or Epirubican in adult breast cancer patients. Using data obtained and with the support of 25 global key opinion leaders Clinigen is working hard to have the Article 31 restriction lifted enabling a broader population of patients to benefit from Cardioxane.

The opportunities for Cardioxane were further strengthened by the acquisition in March 2014 of Savene, which shares the same parent molecule, dexrazoxane. By owning these two related products, Clinigen has the rights to both dexrazoxane indications, cardioprotection (Cardioxane) and extravasation (Savene). Identifying and extracting the benefit that this unique position brings, is a key focus going forward, post Article 31 review. Clinigen has now completed the MA transfers from Novartis and Norgine and has full commercial control of both products.

In August 2014, we acquired a second product, Ethyol, from AstraZeneca. In the four months since acquisition, the product has made a healthy contribution to sales and gross profit. The technical transfer of the manufacturing process is underway and on target for completion in H1FY17.

Full marketing and sales of Vibativ, for the treatment of hospital acquired pneumonia caused by MRSA is yet to commence as the sensitivity test strips required by hospitals are currently only available for research purposes.

Clinigen Group plc

Interim consolidated condensed statement of comprehensive income

All amounts relate to continuing operations.

Clinigen Group plc

Interim consolidated condensed statement of financial position

Clinigen Group plc

Interim consolidated condensed statement of cash flows

Clinigen Group plc

Interim consolidated condensed statement of changes in equity

Included within retained earnings reserve as at 31 December 2014 is £3,569K (30 June 2014: £1,190K, 31 December 2013: £858K) that is non-distributable.

Clinigen Group plc

Notes forming part of the interim consolidated condensed financial statements

1 Basis of preparation

The Group have elected to prepare the interim consolidated financial statements in accordance with IAS34 Interim Financial Reporting as adopted by the European Union. The interim financial information does not comprise statutory accounts within the meaning of S434 of the Companies Act 2006. They do not include all disclosures that would otherwise be required in a complete set of financial statements and should be read in conjunction with the consolidated financial statements of the Group for the year ended 30 June 2014.

The comparative figures for the financial year ended 30 June 2014 are not the Group's statutory accounts for that financial year. Those accounts have been reported on by the Group's auditors and delivered to the registrar of companies. The report of the auditors was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention to by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498 of the Companies Act 2006.

The condensed consolidated interim financial statements have been prepared on a going concern basis, based on the Directors' opinion, after making reasonable enquiries, that the Group has adequate resources to continue in operational existence for the foreseeable future.

2 Significant accounting policies

The preparation of interim consolidated financial statements in compliance with IAS 34 requires the use of certain critical accounting estimates. It also requires Group management to exercise judgment in applying the Group's accounting policies. The areas where significant judgments and estimates have been made in preparing the financial statements and their effect are disclosed in the notes to the Group's statutory consolidated financial statements for the year ended 30 June 2014 in note 2 on page 26 and in the notes to these interim condensed consolidated financial statements.

Clinigen Group plc applies the same accounting policies and methods of computation in its interim consolidated financial statements as in its 2014 annual financial statements. None of the new standards, interpretations and amendments, effective for the first time from 1 July 2014, have had a material effect on the financial statements.

3 Principal Risks and Uncertainties

The principal risks and uncertainties associated with the Group's business can be divided into the following main areas:

• Competitive threat

• International trade, political risk and pharmaceutical regulations

• Counterfeit product

• Foreign exchange

Information on these risks and how they are managed is given on page 12 in the Annual Report. In the view of the Board these principal risks and uncertainties are as applicable to the remaining six months of the financial year as they were to the six months under review.

4 Segment information

The Group's reportable segments are strategic operating business units that provide different products and service offerings into different market environments. They are managed separately because each operational business focuses on a different product or service offering to a different customer group.

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker has been identified as the Board of Directors including the Chief Executive Officer, Chief Operating Officer and the Chief Financial Officer.

There has been no change in the nature of the operating segments or in the accounting policies applicable to these segments during the six months ended 31 December 2014.

All revenues arise from external customers.

5 Earnings before Interest, Taxation, Depreciation and Amortisation ("EBITDA")

Underlying EBITDA is calculated as:

Note: Depreciation and amortisation for the period is £2,315K (H1FY14: £1,595)

6 Non-underlying items

The non-underlying items relate to the following:

Details of the share based payment charge of £704K (H1FY14: £592K) are in note 12. Social security costs of £524K (H1FY14: £672K) relates to amounts that are payable on the exercise of share options granted under unapproved share option plans.

The deferred tax credit relates to the share based payment charge and related proportion of tax loss which will be created at exercise. 

7 Taxation

The Group has recognised a tax charge in the income statement based on the current projected full year tax rate of 20.75%. The effective tax rate of 23.3% is higher than the standard rate due to the timing difference between accounting and corporation tax deduction of the share based payment charges and the profits of Clinigen CTS Inc being subject to the higher US tax rate. The corporation tax payable is reduced by losses brought forward which were generated in previous years on the exercise of share options. The enacted tax rate applicable for deferred tax is 20%, which comes into effect from 1 April 2015.

8 Earnings per share ("EPS")

EPS is calculated based on the share capital of Clinigen Group plc and the earnings of the combined group.

Diluted EPS takes account of the weighted average number of outstanding share options being 2,588,443 (H1FY14: 2,473,352).

9 Dividends

A final dividend in relation to the year ended 30 June 2014 of 2.1p (2013: 2.0p) per ordinary share was paid on 7 November 2014. This amounted to £1,733,553 (2013: £1,651,112).

An interim dividend of 1.1p (2013: 1.0p) per ordinary share is proposed. This amounts to £908,111 (2012: £824,761) and will be paid on 2 April 2015 to all shareholders on the register as at 13 March 2015.

10 Share capital

11 Own shares

The own shares reserve represents the cost of shares in Clinigen Group plc purchased in the market and held by the Clinigen Group Employee Benefit Trust to satisfy options under the Group's share options schemes (see note 12). The number of shares held by the Employee Benefit Trust at 31 December 2014 was 5,428 (2013: 79,500).

12 Share based payment

The Group operated the following schemes:

Details of the share options outstanding during the period are as follows:

Of the total number of options outstanding at 31 December 2014, 4,750 had vested.

The weighted average share price (at the date of exercise) of options exercised during the period was 468p (2013: 583p).

The weighted average fair value of each option granted during the year was 318.4p (2013: 320.9p).

The share-based remuneration expense comprises of equity-settled schemes of £700K (2013: £592K).

The Group did not enter into any share-based payment transactions with parties other than employees during the current or previous period.

At 31 December 2014, the Clinigen Group Employee Benefit Trust held 5,428 ordinary shares (2013: 79,500) for satisfying share options.

13 Capital commitments

At 31 December 2014, the group had committed expenditure of £80K (2013: £523K) on the fit out of the US facility (2013: acquisition of software).

Responsibility statement

The Directors confirm that this Interim Report has been prepared in accordance with IAS 34 and that the financial highlights, operational review and the interim financial information include a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year) and DTR 4.2.8R (disclosure of related party transactions and changes therein).

At the date of this statement, the directors are those listed in the Group's 2014 Annual Report and Accounts.

By order of the Board

Peter George

Group Chief Executive Officer

3 March 2015