1st Oct 2008 07:00
Sinclair Pharma plc
Preliminary Results for the year ended 30 June 2008: Sinclair's first EBITDA profitable full year
1 October 2008, Godalming, UK. Sinclair Pharma plc (SPH.L), the internationalspecialty pharma company, today announces its preliminary results for the yearended 30June 2008.FINANCIAL HIGHLIGHTS * Total revenues up 31% to ‚£30.3m (2007: ‚£23.2m) * Gross profit up 29% to ‚£19.4m (2007: ‚£15.1m)
* Operating profit of ‚£2.2m after exceptionals (2007: Operating loss of ‚£3.9m)
* Profit Before Tax ‚£1.9m (2007:Loss before tax ‚£4.0m) * EBITDA profit of ‚£1.3m before exceptionals (2007: Loss ‚£1.1m) * Earning Per Share of 4.2p(2007: Loss Per Share of 4.8p) * Exceptional credits of ‚£4.7m (2007: Costs of ‚£1.5m) * Sales through own operations up 16% to ‚£13.7m (2007: ‚£11.8m)
* Growth of product revenues through marketing partners up 46% to ‚£16.6m (2007: ‚£11.3m)
OPERATING HIGHLIGHTSRobust product portfolio: * Eight products that contributed more than ‚£1m revenue per annum * Successful integration of Syrio and Derma Omnium products * Strong performance of Dermo-cosmetics portfolio with revenues of ‚£6.6m
Decapinol:
* Decapinol sales nearly trebled due to organic growth with existing distributors and new distributors signed up during FY2008 * Decapinol rinse made available on-line in Europe
* In the US we continue working with Orapharma in relation to the launch of a
modified formulation of Decapinol rinse required by Orapharma in the USA.
Due to a longer than anticipated timeframe related to developing the new
formulation and establishing manufacture in Europe we do not expect that
launch of Decapinol in the USA will take place until the next financial
year
Continued growth of own sales and marketing operations:
* 16% growth in revenues through own sales and marketing operations, now representing 45% of total revenues * Restructuring of French and UK businesses to maximise revenue growth; rebranded to Sinclair Pharma France and Sinclair Pharma UK * Key product launches in France include: + Sebclair - a non steroidal treatment for seborrheic dermatitis + Paulex Eau - a line extension of the anti-acne cream + Mĩla'Aura products - a range of ethnic creams and lotions * Key product launches by Sinclair Italy include: + Papulex Cream - anti-acne treatment
+ B.Lift and B.Derm products - a range of corrective dermatology products
for the anti-ageing and anti-wrinkle market * Key product launches by UK include: + Atopiclair - Sinclair's flagship non steroidal atopic dermatitis treatment + Xclair - an oncology product for treating radiation dermatitis
Continued geographical expansion through marketing network:
* 46% growth in revenues through marketing partners
* 17 new distribution agreements in 17 countries, including US (Dr Reddy's)
and India (Wockhardt)
* 20 product launches in 12 months, covering nine products in 17 markets
Pipeline advancement
* Seven new product registrations, covering the Aloclair range and four novel
pipeline products: + Teething gel (SPHO220) + Head lice treatment(SPHR980) + Herpes treatment (SPHR900) + Dermacide plus (SPHD470) * Ten new filings in the EU and US * Eight clinical studies generating supporting data covering Atopiclair, Xclair, Decapinol gel, Sebclair, Dry Eye product and Papulex
Steve Harris, Chairman, commented:
"Sinclair has made tremendous progress over the past 12 months which hasdelivered our first year of EBITDA profit since IPO. This has resulted fromrobust sales performance from an ever widening portfolio of growing productsstill in their commercial infancy, despite the challenges with Decapinol andAtopiclair in the US."Looking ahead we are very confident in Sinclair's future. Our rapidly growingdermo-cosmetics portfolio and strong performance of many of our other productswill help drive growth"."Sinclair's geographical expansion programme continues with a focus on flagshipbrands in key markets. We now have a dedicated team concentrating on the growthmarkets such as the BRIC countries and the Middle East. These strategicinitiatives show we are on track to establish Sinclair as a leading specialtypharma company generating substantial profits." - Ends -
For further information please contact:
Sinclair Pharma plc Tel: +44 (0) 1483 410 600Dr Michael Flynn, CEOJerry Randall, CFOMariyam Rawat, Communications & Investor relations [email protected] MS&LMary Clark, Anna Mitchell Tel +44 (0)20 7307 5340Chief Executive Officer Michael Flynn and Chief Financial Officer Jerry Randallwill discuss the company's results at a presentation and conference call foranalysts today at 9.30am which will be held at Landsbanki Securities, BeaufortHouse,15 Botolph Street, London EC3A 7QR. Please contact Anna Mitchell atCapital MS&L for further information on Tel +44 (0)20 7307 5346.
Notes to Editors:
About Sinclair Pharma Plc www.sinclairpharma.com
Sinclair Pharma plc is an international specialty pharmaceutical company. Ithas a growing sales and marketing operation that is already present in France,Italy, UK, Spain and Portugal, and a complementary marketing partner networkthat spans more than 80 countries."Safe Harbor" Statement under the US Private Securities Litigation Reform Actof 1995: Some or all of the statements in this document that relate to futureplans, expectations, events, performances and the like are forward-lookingstatements, as defined in the US Private Securities Litigation Reform Act of1995. Actual results of events could differ materially from those described inthe forward-looking statements due to a variety of factors.
CHAIRMAN'S STATEMENT
First year of profit
This has been a transformational year with strong performances across our business, resulting in an increase in revenues of 31% to ‚£30.3m and Sinclair's first full year of EBITDA profit of ‚£1.3m (before exceptional items) since IPO.
Sinclair has seen excellent sales performance from a widening portfolio of growing products, many still in their commercial infancy. The portfolio now contains eight products that contribute in excess of ‚£1m in revenue annually.
Sinclair continues to leverage its own sales and marketing operations tofurther drive revenue growth. We have recently refocused our business on salesand marketing and continued to grow achieving revenues of ‚£13.7m. We alsoexperienced strong sales growth through our marketing partners that increasedsales in this channel by 46%. This success is underpinned by the achievement of20 product launches and 17 new distribution agreements which cover a widegeography, expanding the commercial reach of Sinclair and its products..
Product Development
Our successful product development and acquisition strategy has provided us with a healthy portfolio of patented products for the international markets. The momentum of our pipeline continues to enhance our business, leading to seven licence approvals in the last year.
People
The employees of Sinclair are one of its greatest assets. Led by a strong management team, their commitment and drive has enabled Sinclair to meet the commercial challenges of today's marketplace.
During the last 12 months there has been some organisational restructuring toensure Sinclair remains well positioned to continue delivering against itstargets, with new senior appointments in France and the UK. In November 2007,we welcomed Jean-Charles Tschudin to the board as a non-executive director,replacing Andrew Sinclair, who has maintained an advisory role as Honorary LifePresident.
On behalf of the Board and shareholders I would like to thank the management team and employees for their valued contribution.
Outlook
We are very confident in Sinclair's future prospects. With a broad productportfolio that is no longer reliant on two or three products to generate thecore of its revenues, we are focussed on increasing sales of all major productsunderpinned by additional sales and marketing investment. There is also a focuson building sustainable brands and looking at developing key brands in majormarkets.
Finally, an aggressive geographical expansion strategy aimed at bringing existing products into new geographies and new products into existing and new geographies will further drive revenue growth.
We look towards a truly exciting year ahead.
Steve HarrisChairmanCHIEF EXECUTIVE'S REVIEWOverviewThis has been a very successful year, driven by the strong commercial,regulatory and pipeline operations of the business. During the course of theyear 17 new marketing agreements were signed and 20 product launches wereachieved globally. This resulted in revenues of ‚£13.7m from our own sales andmarketing operations and a further ‚£16.6m from our marketing partner networkwhich is now present in over 80 countries.To date Sinclair has more than 20 products registered in the EU, 11 in the USand an enviable pipeline. Our current product range focuses on Dermatology andOral Health with a few additional non core products that fall outside of thesetwo categories. We had seven new product registrations during the year andreported clinical data in several therapeutic areas with nine published in peerreviewed journals or presented at international conferences.During the course of the year we also realigned our internal capabilities andare well positioned to maximise the potential growth of the company. With analready established infrastructure for growth, young products and a strongpipeline we are on track to establish Sinclair as a leading specialty pharmacompany generating sustainable profits.
Operational review
Sales & Marketing
Sinclair's sales and marketing operations
We leverage our own sales operations now present in five countries to driverevenue growth by utilising the expertise of our sales force on the ground. Wealso benefit from access to higher revenues due to enhanced gross marginsassociated with selling products directly. Sinclair's own sales and marketinghas continued to gain momentum this year, contributing ‚£13.7m to totalrevenues, an increase of 16% on the prior period.
* France, Spain & Portugal
The French market saw successful launches of Sebclair, Papulex Eau - a lineextension of Papulex and also the Mƒ©la'Aura products which are designed forethnic skin. This resulted in a revenue contribution of ‚£9.6m from SinclairPharma France which also incorporates the Spanish and Portuguese operation. Theexport business from France has been moved to our marketing partner network tofocus the French company on its domestic market. Christophe Foucher, who hasextensive commercial experience in the European dermatology sector, wasappointed General Manager. Since joining in January 2008 Christophe hasrestructured the business to maximise Sinclair's pipeline by leveraging thestrength of the existing French brands dedicated to dermatology. This includedthe creation of a sell-out team, the addition of four further medical salesrepresentatives and the establishment of internal marketing and financecapabilities.
* Italy
Sinclair Srl contributed ‚£2.6m to group revenues during the year. It launchedPapulex cream as well as the B.Lift and B.Derm range, a line of anti-ageing andanti-wrinkle products, which were acquired from Syrio Pharma in the year.
* UK
The revenue contribution from Sinclair Pharma UK Ltd this year was ‚£1.5m. Theintegration of the former Ashbourne Pharmaceuticals continued during the secondhalf of the year. Sinclair Pharma UK Ltd also launched Atopiclair and Xclair.Ashbourne's core business was sales and promotion to dispensing doctors forthird parties. Recent legislation changes have resulted in the practicaldisappearance of dispensing doctors and as a consequence we have acceleratedthe conversion of Ashbourne to a specialty pharma operation initially focussedon dermatology.Marketing partner network
In territories where Sinclair does not have a sales and marketing presence, weuse the experience and local knowledge of our marketing partners to extend thecommercial reach of our product portfolio. This network is carefully managed byour business development and alliance management team and continues to be avery important part of the business.This year we experienced 46% growth of revenues through marketing partnerswhile 17 new marketing agreements, involving 9 products covering 17 countriesprovide confidence of accelerated growth for FY2009. The agreements include thedistribution of Sebclair in the US by Dr Reddy's and the landmark agreementwith Wockhardt for the distribution of a range of skincare products in India.
Product Review
Sinclair has a broad portfolio of products on the market for treating skin anddental conditions, including the growing range of Dermo-cosmetics products. Theproducts are available through prescriptions and over-the-counter (OTC). Fromour extensive product portfolio eight of our growth products each generaterevenues over ‚£1m with this number anticipated to increase during FY2009. Witha broad and growing range of products the company company becomes lesssusceptible to any single product underperformance.
Oral Health
Decapinol
Our Oral Health portfolio is spearheaded by the Decapinol range, developed fortreating and preventing gingivitis and plaque. This continues to evolve into awide range of products that can meet the needs of dental professionals andpatients. During the year Decapinol sales increased by more than 100%. It iscurrently available in six countries, in three formats and generated productrevenues of ‚£1.0m this year (2007: ‚£0.4m). The company launched in Israel,Greece, Finland and Norway and Decapinol rinse has also been made availableon-line in Europe.
During the past year, Sinclair expanded the product line to include fluoride toothpaste, a gel for use after tooth-cleaning at the dental office, and a spray and a gel that can be applied directly to the gum margin in order to relieve pain after dental procedures. A new angle-use applicator for professional use has also been developed for application of Decapinol into deeper gum pockets. A comprehensive suite of products that will provide the patient with the opportunity to incorporate Decapinol into their daily oral health regime.
Revenues due to organic growth with existing distributors and new distributorssigned up during FY2008 promise continued strong growth during FY2009. In theUS we continue working with Orapharma in relation to the launch of a modifiedformulation of Decapinol required by Orapharma in the US. Due to a longer thanexpected timeframe related to developing the new formulation and establishingmanufacture in Europe we now expect that launch of Decapinol in the USA willtake place during the next financial year.
Aloclair
Sinclair's product for the relief of mouth ulcers is available in a rinse, geland spray format. During the year,Aloclair oral lesion relief spray waslaunched in the US by OMNI Preventive Care, a 3M ESPE Company, under the brandname Ameseal. Aloclair gel is also sold in the US through Sunstar Butler. TheAloclair range of products are now sold in 32 countries. Aloclair deliveredrevenues of ‚£2.3m this year (2007: ‚£2.4m) despite a temporary loss of salesmomentum when we changed distributors in a number of companies. This resultedin an additional ‚£1.1m of licence fees..
Other Oral Health products
Sinclair has a range of smaller products that generate revenues adding to the company's favourable risk profile. In the Oral Health portfolio these include:
Gelclairis Sinclair's product for the relief of severe oral ulceration and inflammation from various causes but most significantly as a side effect of cancer therapies (mucositis). Helsinn SA is the worldwide distributor for Gelclair.
SST & Salinum are Sinclair's products for the treatment of xerostomia, a dry mouth condition caused by a deficiency of saliva production. These products contributed ‚£0.3m in this financial year.
Dermatology
Sinclair's dermatology portfolio comprises three product groups: prescriptions;over-the-counter (OTC) and dermo-cosmetics (which may be promoted to doctors,pharmacists and the public). This allows us to develop a tailored strategy foreach channel taking into consideration the different patient and promotionalneeds. The prescription group contains our flagship product Atopiclair, anon-steroidal cream, registered as a medical device in the US and EU, for themanagement of symptoms of atopic dermatitis and contact dermatitis. Atopiclairis available in 14 countries including France, Italy, UK, US, Germany, Spain,Austria, Portugal, Turkey, Indonesia, Israel and Jordan. During the year, itwas launched in five markets including Hungary and Portugal. Atopiclairdelivered sales of ‚£2.2m this year (2007: ‚£4.7m) following poor performance ofthe atopic dermatitis market in the US, which have been dampened by economicfactors resulting in a 14% decrease in the sector over the last yearand 33%decrease in prescriptions for non steroid treatments. However Atopiclair isdefending its market share and although it has experienced a small drop itoutperformed the total atopic dermatitis market and increased its share of thenon steroidal sector.Sebclairalso available via prescription, is a non steroidal treatment forseborrheic dermatitis, a common skin condition that affects areas of the bodywith a particularly high concentration of sebaceous glands. Sebclair is at thevery beginning of its commercial life and is now sold in five countries. Theproduct has been launched in Italy and France. In the US we partnered with DrReddy's Laboratories, Inc. who are scheduled to launch in FY2009. Dr Reddy's isfocused on building a presence in dermatology in the US, a sector worth anestimated $5bn annually. In addition, Sebclair was also registered in Australiaduring the year.DermaChronic is an emollient non-allergenic moisturiser, developed specificallyfor long term use in remission by patients with chronic skin conditions.DermaChronic is now approved for sale in the EU and has been launched bySinclair Srl in Italy. This new product is available as a cream and a detergentline extension.Dermo-cosmeticsEarlier in the year Sinclair acquired products from Derma Omnium (Bio-Taches)and Syrio Pharma (B.lift and B.derm) which have strengthened Sinclair'sDermo-cosmetic portfolio. These new products in aggregate contributed ‚£2.4m torevenues in their first year. Core products in the Dermo-cosmetics range are:
* B.lift is a range of corrective dermatology products which are applied as
creams and gels and which have unique matrices that facilitate the
penetration of the active ingredient, Hexapeptide B, a 'botox' mimicking
molecule, to reverse skin wrinkles. * B.derm is a range of patented products containing hyaluronic acid for sensitive and hyper reactive skin.
* Papulex is a line of cosmetic products specifically targeted at cleansing,
protecting and keeping acne prone skin in good condition. The patent for
this product was granted this year. It has been developed with a unique
combination of ingredients making them suitable for use alone or in
combination with other acne treatments. The Papulex range is available as a
cream, lotion, Isocorrexion, gel and cleanser.
* The Bio-Taches range has been developed to treat hyperpigmentation.
Bio-Taches cream contains Biotanoid which is particularly rich in Arbutin
which promotes the inhibition of the enzyme which is responsible for the
synthesis of brown pigment spots.
* Mĩla'Aura, the first dermo-cosmetic skincare range designed and
manufactured by a pharmaceutical laboratory, specifically for people with
darker skin. It gives dermatologists an adapted response to factors such as
dryness and dyschromia. The Mĩla'Aura range contains a variety of creams
and lotions for both hair and body.
RESEARCH and DEVELOPMENT
Product pipeline & registrations
A healthy product pipeline is imperative to ensure longevity of the business. Iam pleased to say that pipeline advancement has continued this year as ourpipeline products for herpes simplex, head lice, infant teething and skininfection achieved registration. In total we realised seven new productregistrations in the EU and US and filed a further 10 licences in the EU andUS. These registrations included: * Aloclair Mouthwash PLUS * Aloclair gel PLUS * Aloclair spray PLUS * Teething gel (SPHO220) * Head lice treatment(SPHR980) * Herpes treatment (SPHR900) * Dermacide plus (SPHD470) Many of the pipeline projects are now close to reaching the commercialisationphase. Some of the key projects, which we believe will have a great impact onour product portfolio, are summarised below:SPH913 is a novel anti-ageing and anti-wrinkle product. The product has beentested in clinical trials which showed that SPHR913 is effective in managingdifferent parameters related to the onset of wrinkles, improving cutaneoushydration, elasticity and roughness. It is due to be filed for registration inthe EU and US shortly.SPHR980 Sinclair's product for head lice, was registered as a medical device inthe EU in December 2007. This product is designed to meet a market need for anovel, safe and effective treatment for head lice and utilises proprietarybarrier technology to coat and suffocate head lice and their eggs, killing themand making them easy to remove. The product can be sold without a prescriptionin the EU allowing Sinclair to capitalise on the OTC market. We anticipatefirst revenues in the next financial year.SPHR900 is a topical treatment for the symptoms of herpes simplex cold soresand accelerating the healing process. EU registration as a Class IIa MedicalDevice was granted in January 2008 and it can be sold without a prescription inthe EU. Sinclair plans to begin commercialisation of the product throughmarketing partners during the next year.SPHO220 has been designed to meet a market need for symptomatic relief duringteething, without the use of topical pharmacological agents in infants. It wasregistered as a Class IIa Medical Device in December 2007. Sinclair plans tocommercialise SPHO220 as an OTC product through marketing partners in mostcountries.
Clinical Data
Supporting clinical data is critical in demonstrating the efficacy of ourproducts and can also be a source of competitive advantage. During the lastyear Sinclair ran eight clinical studies generating supporting data for itsproducts. New clinical trials of Atopiclair, Sebclair and Xclair were acceptedfor publication, whilst details of an Atopiclair trial and Xclair trial werepublished in peer reviewed journals. Additionally in October 2007, Sinclairpresented positive data at the World Congress of Dermatology on the followingproducts: SPHD420, designed to treat acne; SPH913, for Corrective dermatology;Xclair, to treat radiation dermatitis; SPHD400, Sinclair's pipeline psoriasisproduct and a poster on its atopic dermatitis study.
Intellectual Property
Innovation is a central pillar of the product development strategy. Ourapproach to product pipeline development combines the sourcing and developingof novel technologies externally and combining the newly acquired and existingtechnologies to create new product concepts. In order to maximise thecommercial benefits arising from the innovative advantages inherent in ourproducts, Sinclair invests in the development of strong intellectual propertyfor all of its new products. Currently 35 Sinclair products enjoy patentprotection.
Geographical Expansion
By extending the commercial presence of our product portfolio on a globalbasis, we aim to provide patients all around the world with an effectivesolution to their oral health and dermatological needs. With a focus on keybrands in core markets, we aim to take existing products into new geographiesand new products into existing and new geographies. Sinclair has recognised thepotential that lies within the emerging markets, as significant value driversfor future growth. We have, therefore, established a geographical expansionprogramme that has a special team focused on pursuing opportunities in the BRICcountries and the Middle East. During the financial year we announcedSinclair's first approvals in Australia, and the landmark deal with Wockhardtin India. The Indian pharmaceutical market is currently valued at $7 billion,with a growth rate of 17% and expected to generate the third largestincremental growth amongst all markets over a decade. We also filed Decapinolin Japan, an important step forward towards commercialisation in the world'ssecond largest pharmaceutical market.
Directors and Advisors:
Board changes
During November 2007, we welcomed Jean-Charles Tschudin to the board as anon-executive director, replacing Andrew Sinclair, who has maintained anadvisory role as Honorary Life President. Jean-Charles has extensive experiencein the pharmaceutical industry at a senior executive level. His considerableexpertise is invaluable to Sinclair's commercial development, particularly inrelation to the expansion of its European sales and marketing operations.
Change of Advisers - Company Brokers
In February 2008, the Company appointed Investec as joint broker alongside Landsbanki.
Management
In November 2007 we announced the appointment of Christophe Foucher as GeneralManager of France, Portugal and Spain. We also announced the promotion of PaulPhull to Managing Director (Europe) & Executive VP to lead Sinclair's growth ofEuropean sales and marketing operations. Mariyam Rawat joined the company inApril 2008 to manage Sinclair's Communications and Investor Relations.
Outlook
We continue building our reputation as a world class specialty pharma company,with innovative products that meet the needs of the patient. The refocusing ofour business on sales and marketing, and additional emphasis on emergingmarkets, will provide the platform for our future growth. The hard work put into enhance our internal capabilities mean we are well positioned to meet thechallenges of the market place and ensure consistent delivery of our targets.The flourishing pipeline has several products close to entering the commercialstage which we believe provide innovative and efficacious solutions to apatients' oral health and dermatological needs. This year we also began to reapthe benefit of our broad product portfolio which has a number of productscontributing healthy revenues and are no longer reliant on two or three keyproducts.We are delighted to finish the year on a positive note having moved into fullyear EBITDA profit for the first time since IPO and we look toward the yearahead with enthusiasm as we anticipate capitalising on the exciting array ofgrowth opportunities ahead.Dr Michael FlynnChief Executive OfficerFINANCIAL REVIEWHighlights
Sinclair recorded its first profitable full year at the EBITDA level since IPO,recording an EBITDA profit of ‚£1.3m before exceptional items (2007: loss of ‚£1.1m) and basic earnings per share of 4.2p (2007: loss per share of 4.8p) afterexceptionals. The results for the year ended 30 June 2008 show total revenuesof ‚£30.3m (2007: ‚£23.2m) for the Group. Gross profit increased by 29% to ‚£19.4m(2007: ‚£15.1m) whilst the operating profit for the year was ‚£2.2m, afterexceptional items (2007: operating loss of ‚£3.9m). This strong performance wasattributable to solid organic revenue growth and management of overheads,fulfilling our commitment to growing sales in line with expectations whilekeeping costs under control.
Revenue
Total revenue for the year increased 31% to ‚£30.3 million (2007: ‚£23.2m), reflecting the continued growth of our products through our marketing partners and the increased contribution of our own sales and marketing operations in France, Italy, UK, Spain and Portugal.
Product revenue for the year was ‚£24.8m (2007:‚£20.1m). A further ‚£0.7m wascontributed by royalty payments (2007: ‚£0.7m). ‚£4.8m in revenues were alsogenerated by licence fee and milestone payments (2007: ‚£2.3m).
Direct sales through own sales and marketing operations
Sinclair's own sales and marketing operations in the UK, France, Italy, Spainand Portugal, and generated revenue of ‚£13.7m, an increase of 16% year on year(2007: ‚£11.8m).
A breakdown of the contribution from Sinclair's own sales and marketing operations for the period are summarised below:
2008 2007 ‚£m ‚£m France, Spain & 9.6 8.8Portugal Italy 2.6 1.5 UK 1.5 1.5 Total 13.7 11.8
Sales through marketing partner network
Revenues from our out-licensing activities for the period are summarised below: 2008 2007 ‚£m ‚£m Product sales 11.0 8.3 Royalties 0.7 0.7 License fees and 4.8 2.3milestones Total 16.6 11.3
Revenues through marketing partners have been primarily driven by growth inDecapinol and a significant contribution from exports of the Dermo-cosmeticranges. During the year Sinclair recognised license fees and milestones of ‚£4.8m (2007: ‚£2.3m). This included ‚£1.1m from the re-licensing of Aloclair inEurope following the termination of the agreement with Sunstar Butler; ‚£1.2mfrom licensing some of the patents acquired with the Syrio range and ‚£0.7m fromthe Dr Reddy's agreement for the distribution of Sebclair in the US.
As discussed earlier, all export revenues are now reported through the marketing partner segment, 2007 comparatives have been amended to reflect this classification.
Product ContributionThe Company has evolved over the last 12 months and this can be seen in theprofile of the revenue contribution made by the products in our portfolio. Weare no longer reliant on two or three products to generate the core of ourrevenues and have eight products that contributed more than ‚£1m revenue. TheDermo-cosmetic portfolio which include the recently acquired Syrio and DermaOmnium products is central to this and was responsible for contributing ‚£6.6mthis year and expected to grow significantly during the next fiscal year.
Exceptional items
During the year there were some exceptional items recorded which were outside the normal trading activities of the company:
* The company received confirmation that it had won its dispute against the
French tax authorities relating to a claim initiated by Groupe CS
Dermatologie prior to its acquisition by Sinclair. This has resulted in a
tax repayment of ¢â€š¬1.7m being received in September 2008.
* Foreign exchange gains of ‚£3.7m were recorded in the year on the
translation of an intra-group loan balance as a result of the sterling
weakening against the Euro during the course of the year.
* The company was involved in preparing for a major acquisition in July 2007.
Sinclair was substantially outbid in this transaction. As a consequence exceptional costs of ‚£0.3m were incurred. * An impairment charge of ‚£0.4m has been recorded against the goodwill
arising on the acquisition of Sinclair Pharma UK Ltd (formerly Ashbourne
Pharmaceuticals Ltd) in 2006 following the decision to exit the dispensing
doctors market and focus on dermatology.
Total operating expenses
Total operating expenses of the Group excluding exceptional items were ‚£20.2m(2007: 17.6m) a 15% increase on the prior year. Costs for selling marketing anddistribution were ‚£8.4m (2007: ‚£7.2m) reflecting an increased spend on productpromotion. Other administrative expenses increased by 13% to ‚£11.8m (2007: ‚£10.4m). This was partially due to the increased amortisation charges whichincreased to ‚£1.5m from ‚£1m due to the purchase of the Syrio and Derma Omniumranges and also an increase in the IFRS2 charge for share awards to employeeswhich rose to ‚£0.7m from ‚£0.2m.
Profit
Sinclair recorded an Operating profit for the year of ‚£2.2m (2007: Operating loss of ‚£3.9m) after exceptional items.
Taxation
There is a pre-exceptional tax credit of ‚£0.4m for the year (2007: charge of ‚£0.2m) in addition to the exceptional tax item mentioned above. This resultsfrom an increase of ‚£0.4m in the value of the deferred tax asset, which islinked to the value of the product rights, included in intangible assets. In2007 the deferred tax asset was reduced by ‚£0.2m. Sinclair has also received R&D tax credits of ‚£0.1m, which offset our overseas corporation tax charges of ‚£0.1m. There is no corporation tax charge on the profit for the year as a resultof the tax losses carried forward from prior years.
Liquidity & capital resource
Sinclair had cash balances of ‚£1.1m (2007: ‚£2.8m) at 30 June 2008. Net cashoutflow during the year was ‚£3.3m (2007: ‚£1.8m), which included cash outflowfrom operations of ‚£3.3m (2007: ‚£1.2m) and cash used in investing activities of‚£4.2m (2007: ‚£0.5m). Cash inflow from financing was ‚£4.6m (2007: ‚£0.4m).Earnings per shareSinclair recorded a basic earning per share of 4.2p (2007: loss per share of4.8p).
Additions to intangible assets
Additions to intangible assets were ‚£4.6m resulting from the acquisition of theSyrio and Derma Omnium ranges during the year as well as some other smalleradditions. These additions resulted in an increased amortisation charge of
‚£1.5m (2007: ‚£1.0m).Jerry Randall ACAChief Financial Officer
Unaudited Consolidated Income Statement
For the year ended 30 June 2008
Unaudited Audited 2008 2007 Notes Pre-exceptional Exceptional Total Pre-exceptional Exceptional Total items items items items (note 3) (note 3) ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 Revenue 2 30,278 - 30,278 23,178 - 23,178 Cost of sales (10,830) - (10,830) (8,087) - (8,087) Gross profit 19,448 - 19,448 15,091 - 15,091 Selling, marketing (8,444) - (8,444) (7,195) - (7,195)and distribution costs Administrative (11,803) 2,997 (8,806) (10,375) (1,467) (11,842)expenses Operating (loss)/ (799) 2,997 2,198 (2,479) (1,467) (3,946)profit Finance income 4 67 380 447 95 - 95 Finance costs 4 (741) - (741) (129) - (129) Profit/(loss) before (1,473) 3,377 1,904 (2,513) (1,467) (3,980)taxation Taxation 5 410 1,354 1,764 (226) - (226) Profit/(loss) for (1,063) 4,731 3,668 (2,739) (1,467) (4,206)the year Attributable to: Minority interest 1 - 1 2 - 2 Equity holders of (1,064) 4,731 3,667 (2,741) (1,467) (4,208)the company (1,063) 4,731 3,668 (2,739) (1,467) (4,206) Earnings/(loss) per 6 (1.2)p 5.4p 4.2p (3.2)p (1.6)p (4.8)pshare (basic)
Earnings/(loss) per 6 (1.2)p 5.2p 4.0p (3.2)p (1.6)p (4.8)p share (diluted)
Unaudited Consolidated Balance Sheet
At 30 June 2008 Unaudited Audited 2008 2007 Note ‚£'000 ‚£'000 Non-current assets Goodwill 7 48,110 43,418 Intangible assets 8 14,811 10,042 Property, plant and equipment 1,827 1,976 Non-current tax assets 708 1,512 Other non-current assets 317 78 65,773 57,026 Current assets Inventories 3,380 2,163 Trade and other receivables 9 14,799 7,800 Current tax receivable 1,580 22 Cash and cash equivalents 1,052 2,791 20,811 12,776 Total assets 86,584 69,802 Current liabilities Financial liabilities - borrowings 11 (3,108) (567) Trade and other payables 10 (11,666) (7,134) Deferred income (566) (423) Current tax liabilities (86) (66) (15,426) (8,190) Non-current liabilities Financial liabilities - borrowings 11 (4,140) (709) Non-current tax liabilities 5 - (1,146) Deferred income (357) (822) Other non-current liabilities - (547) (4,497) (3,224) Total liabilities (19,923) (11,414) Net assets 66,661 58,388 Equity Share capital 935 935 Share premium account 21,472 21,472 Merger reserves 50,474 50,474 Other reserves 4,198 271 Retained deficit (10,430) (14,775) Total parent shareholders' equity 66,649 58,377 Minority equity interests 12 11 Total equity 66,661 58,388
Unaudited Consolidated Statement of Changes in Shareholders' Equity
For the year ended 30 June 2008
Share Share Merger Other Retained Attributable Minority TOTAL capital premium reserves deficit to equity interest reserve holders of EQUITY the parent ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 Balance at 1 July 933 21,386 50,404 749 (10,807) 62,665 5 62,6702006 (audited) Exchange - - - (478) - (478) - (478)differences arising on translation of overseas subsidiaries Net expense - - - (478) - (478) - (478)recognised directly in equity Profit/(Loss) for - - - - (4,208) (4,208) 2 (4,206)the period Total recognised - - - (478) (4,208) (4,686) 2 (4,684)(expense)/ income for the period Share based - - - - 240 240 - 240payments - value of employee services Options and 1 86 - - - 87 - 87warrants exercised Shares issued on 1 - 70 - - 71 4 75purchase of minority interest Balance at 30 935 21,472 50,474 271 (14,775) 58,377 11 58,388June 2007 (audited) Exchange - - - 3,927 - 3,927 - 3,927differences arising on translation of overseas subsidiaries Net income - - - 3,927 - 3,927 - 3,927recognised directly in equity Profit for the - - - - 3,667 3,667 1 3,668period Total recognised - - - 3,927 3,667 7,594 1 7,595income for the period Share based - - - - 678 678 - 678payments - value of employee services Balance at 30 935 21,472 50,474 4,198 (10,430) 66,649 12 66,661June 2008 (Unaudited)
Unaudited Consolidated Cash Flow Statement
For the year ended 30 June 2008
Note Unaudited Audited 2008 2007 ‚£'000 ‚£'000
Cash flows from operating activities Net cash outflow from operations 12 (3,250) (1,185) Interest paid (281) (68)
Interest paid on finance leases (41)
(43) Taxation paid (124) (303) Net cash used in operating activities (3,696) (1,599) Investing activities Interest received 67 115 Purchases of property, plant and equipment (166)
(444)
Proceeds from sale of property, plant and equipment 47
74
Purchase of intangible assets (3,907)
(952)
Proceeds from sale of product rights -
1,315
Payment of contingent consideration re CS Dermatologie (223)
-
Acquisition of subsidiary undertaking, net of cash acquired (14) (612)
Net cash used in investing activities (4,196) (504) Financing activities Repayments of obligations under finance leases (156) (103) Proceeds from borrowings 5,370 506 Repayments of borrowings (653) (184)
Proceeds from issue of share capital -
88
Net cash from financing activities 4,561
307
Net decrease in cash, cash equivalents and bank overdrafts (3,331) (1,796)
Cash, cash equivalents and bank overdrafts at 1 July 2,604
4,470
Exchange gains/(losses) on cash and bank overdrafts 373
(70)
Cash, cash equivalents and bank overdrafts at end of year (354) 2,604
Cash, cash equivalents and bank overdrafts includes:
Cash and cash equivalents 1,052 2,791 Bank overdrafts (1,406) (187) Cash, cash equivalents and bank overdrafts (354)
2,604
1. Basis of preparation
The financial information has been prepared in accordance with InternationalFinancial Reporting Standards (`IFRS') as adopted for use in the EuropeanUnion. In preparing this financial information management has used theprincipal accounting policies as set out in the Group's annual financialstatements for the year ended 30 June 2007 and which will be used in preparingthe financial statements for the year ended 30 June 2008. There have been nochanges to the accounting policies during the year, with the exception of theadoption of IFRS7 Financial Instruments: Disclosures.The preliminary financial information has not been audited and does notconstitute statutory accounts within the meaning of Section 240 of theCompanies Act 1985. The financial information for the year ended 30 June 2007has been extracted from the Group's financial statements for the year ended 30June 2007. The auditors' report on the financial statements for the year ended30 June 2007 was unqualified and did not contain statements under eithersection 237 (2) or section 237 (3) of the Companies Act 1985. The financialstatements for the year ended 30 June 2007 have been delivered to the Registrarof Companies.
This announcement was approved by the Board of Sinclair Pharma plc on 30 September 2008.
2. Segmental information
The information below is not the full segmental disclosure as required by IAS 14 but selected segmental information only.
The Group's primary segment reporting is by business sector with geographicallocation of assets being the secondary format. The Group is organised into twooperating segments: development, registration and commercialisation of productsthrough marketing partners, and direct sales and marketing of pharmaceuticalproducts.
Primary reporting format - business sector
Unaudited Audited 2008 2007 Marketing Direct Total Marketing Direct Total partners partners ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 Revenue 16,540 13,738 30,278 11,344 11,834 23,178 Segmental operating 836 (1,635) (799) (1,974) (505) (2,479)profit/(loss) before exceptional items Exceptional items 2,997 (1,467) Operating profit/(loss) 2,198 (3,946) Finance income 447 95 Finance cost (741) (129) Profit/(loss) before 1,904 (3,980)tax Taxation 1,764 (226) Profit/(loss) for the 3,668 (4,206)financial year Revenue AnalysisBy destination, the Group's revenue derives from the UK, rest of Europe, the USand rest of World. Unaudited Audited 2008 2007 ‚£'000 ‚£'000 United Kingdom 2,450 2,077 Rest of Europe 18,517 15,878 United States of America 2,804 3,278 Rest of World 6,507 1,945 30,278 23,178
An analysis of revenue by category is set out in the
table below: Unaudited Audited 2008 2007 ‚£'000 ‚£'000 Product revenue 24,808 20,091 Royalties 660 747 Licence fees and milestones 4,810 2,340 30,278 23,178
3. Exceptional operating items
Exceptional items represent significant items of income and expense which dueto their nature or the expected infrequency of the events giving rise to them,are presented separately on the face of the income statement to give a betterunderstanding to shareholders of the elements of financial performance in theyear, so as to facilitate comparison with prior periods and to better assesstrends in financial performance. Unaudited Audited 2008 2007 ‚£'000 ‚£'000 Foreign exchange gain/(losses) 3,699 (1,083) Aborted acquisition costs (334) - Goodwill impairment (368) - Provision for doubtful debt - (736) Listing costs - (885) Income from sale of product rights - 1,237 2,997 (1,467)
Foreign exchange gains of ‚£3,699,000 represent the gain on the translation of an intra-group loan balance (2007: loss of ‚£823,000). This is a non-cash item.
Exceptional acquisition related costs were incurred in preparing for a majoracquisition in July 2007. Sinclair was substantially outbid in this transactionwhich resulted in a charge of ‚£334,000 for professional fees.An impairment charge of ‚£368,000 has been recorded against the goodwill arisingon the acquisition of Sinclair Pharma UK Limited (formerly AshbournePharmaceuticals Limited) in 2006, following the decision to restructure thisoperation and exit the dispensing doctors market in the UK. The restructuringplan was announced in July 2008. 4. Finance income and costs Unaudited Audited 2008 2007 ‚£'000 ‚£'000 Finance costs
Interest on bank loans and overdrafts (326)
(63)
Interest due on finance leases (41)
(43)
Net foreign exchange losses on financing activities (338)
-
Unwinding of discount on contingent consideration for (18) (17)Groupe CS Dermatologie Other interest payable (18) (6) Finance costs (741) (129) Finance income Bank interest receivable 22 81
Interest income on tax refund re Groupe CS Dermatologie 380
-- exceptional item Other interest income 45 14 Finance income 447 95
Net finance income/(expense) (294)
(34) 5. Taxation Unaudited Audited 2008 2007 ‚£'000 ‚£'000
UK Corporation tax underprovided for -
3prior years
Research and development tax credits (140)
-receivable Overseas tax 159 4 Deferred overseas tax (429) 203
Deferred overseas tax under provided in -
16prior year
Release of overseas tax provision - (1,354)
-exceptional item
Tax (credit)/expense on operating (1,764)
226
profit/(loss) On 8 July 2008, Sinclair Pharma France received judgement in its favour in thecase against the French tax authorities relating to disputed tax charges leviedon Groupe CS Dermatologie prior to its acquisition by Sinclair. The provisionagainst this tax asset has therefore been released as an exceptional item, andinterest receivable also recovered of ‚£380,000 included in finance income.
6. Earnings/(loss) per share
The basic earnings/(loss) per share has been calculated by dividing the profit/(loss) for the year, by the weighted average number of shares in existence forthe year. Shares held by the Employee's Share Trust, including shares overwhich options have been granted to Directors and staff, have been excluded fromthe weighted average number of shares for the purposes of calculation of thebasic loss per share.Diluted earnings per share is calculated by adjusting the weighted averagenumber of ordinary shares outstanding to assume conversion of all dilutivepotential ordinary shares. Potential ordinary shares of the Company are shareoptions, warrants and awards. A calculation has been undertaken to determinethe number of shares that could have been acquired at fair value (determined asthe average annual market price of the company's shares) based on the monetaryvalue of the subscription rights attached to outstanding options, warrants
andawards. Unaudited Audited 2008 2007 Profit/(loss) attributable to equity shareholders (‚£ 3,667 (4,208)'000) Weighted average number of shares 87,241,256
86,915,094
Adjustment for share options, warrants and awards 4,523,701 n/a
Diluted weighted average number of shares 91,764,957
n/a
Basic earnings/(loss) per share (pence) 4.2p
(4.8)p
Diluted earnings/(loss) per share (pence) 4.0p (4.8)p7. Goodwill Unaudited Audited 2008 2007 ‚£'000 ‚£'000 Cost At 1 July 45,929 46,203
Additions through business combinations -
368
Purchase of minority interest in -
74Sinclair Pharma AB Additional investment 67 - Exchange adjustments 4,993 (716) At 30 June 50,989 45,929
Accumulated amortisation and impairment
At 1 July 2,511 2,511 Impairment charge (note 3) 368 - At 30 June 2,879 2,511 Net book value at year end 48,110 43,418Exchange adjustments arise purely as a result of the impact of the differencein the Sterling : Euro exchange rate at the beginning and end of the year onbalances recorded in Euros.8. Intangible Assets Unaudited Audited 2008 2007 ‚£'000 ‚£'000 Cost At 1 July 11,511 9,826 Additions 4,586 1,908 Disposals (491) (19) Exchange adjustments 2,173 (204) At 30 June 17,779 11,511 Amortisation and impairment At 1 July 1,469 490 Charge for the year 1,483 975 Disposals (51) (19) Impairment charge 13 28 Exchange adjustments 54 (5) At 30 June 2,968 1,469 Net book value at year end 14,811 10,042
Additions in the current period relate to the products acquired from Syrio Pharma SpA and Laboratoires Derma Omnium. The disposals realised no cash proceeds as they were made in part settlement of the outstanding liability in respect of prior period additions.
Exchange adjustments arise purely as a result of the impact of the differencein the Sterling : Euro exchange rate at the beginning and end of the year onbalances recorded in Euros.
9. Trade and other receivables
Unaudited Audited 2008 2007 ‚£'000 ‚£'000 Trade receivables 12,154 7,433 Less provision for impairment of trade receivables (113)
(809)
Trade receivables net of provision 12,041 6,624 Other receivables 1,144 400
Prepayments and accrued income 1,614
776 14,799 7,800 10. Trade and other payables Unaudited Audited 2008 2007 ‚£'000 ‚£'000 Trade payables 6,418 5,258
Other taxes and social security costs 426
506 Other payables 2,060 331 Accruals 2,762 1,039 11,666 7,13411. Borrowings Unaudited Audited 2008 2007 ‚£'000 ‚£'000 Bank loans 4,022 507
Obligations under finance leases 118
202 Non-current borrowings 4,140 709
Obligations under finance leases 218
214 Bank loans 1,350 166 Bank overdrafts 1,540 187 Current borrowings 3,108 567 Total borrowings 7,248 1,276
Borrowings included above are repayable as follows: On demand or within one year 3,108
567
Over one and under two years 1,299
215
Over two and under five years 2,841
494
Beyond five years, by installments -
- Total borrowings 7,248 1,276
The minimum lease payments under finance leases fall due
as follows: 2008 2007 ‚£'000 ‚£'000 Not later than one year 229 234
Later than one year but not more than five 128
222 357 456
Future finance charges on finance leases (21)
(40)
Present value of finance lease liabilities 336
416
12. Cash flow from operations
Unaudited Audited 2008 2007 ‚£'000 ‚£'000 Profit/(loss) before tax 1,904 (3,980) Adjustments for: Finance income (447) (95) Finance costs 741 129
Share based payment - value of employee services 678 240
Depreciation 572 442
Amortisation of intangible assets 1,483 975
Impairment charges 381 28
Profit on disposal of property, plant & (15) (9)
equipment
Profit on sale of product rights (35) (1,237) (Decrease)/increase in provision for doubtful (696) 749
debts Exchange (gain)/loss (4,424) 611 142 (2,147)
Changes in working capital (excluding effects of
acquisitions)
(Increase)/decrease in inventories (888) 484
Increase in receivables (4,858) (358) Increase in payables 2,676 651
(Decrease)/increase in deferred income (322) 185 Net cash outflow from operations (3,250) (1,185)
vendorRelated Shares:
Sinclair Pharma