Alliance Pharma reports landmark full-year results with strong growth

Alliance Pharma (AIM: APH) published its results from a landmark year in which the pharmaceutical company increased sales by 44% to £31.2m compared with 21.8m in the previous financial year. In the twelve months ended 31 December 2009, the company achieved a three-fold increase in pretax profit before exceptionals to £8.6m as well as in adjusted earnings per share (EPS) to 3.55p.

According to Alliance, its record sales performance reflects the company’s transition to the new business model, set-out in 2007, with the benefits clearly evidenced in the results.

"2009 was a landmark year for Alliance, with major increases in turnover, profitability and cash generation, and the commencement of dividend payments”, Alliance chairman Michael Gatenby commented. “We look forward to more strong results in 2010, particularly following the Cambridge Laboratories acquisition last month".

Alliance said that the development side of the business is now in abeyance, with no investment of any substance made last year, stating there are no further plans to do so. Through its concentration on the trading side of its business, the company said it has reached a critical mass of human, product and financial resources which enable it to invest confidently in adding more established products to its portfolio.

The company’s substantial 44% sales growth was driven by its rheumatology product, Deltacortril which regained market share as Alliance fully restored production levels. Additionally, the company’s enteric coated aspirin based cardiovascular product, Nu-Seals, also provided strong growth with sales growth in Ireland further boosted by favourable exchange rates.

Furthermore, the sales performance was also supported by a continued improvement in average gross margins, following changes in the sales mix to favour higher-margin products. Alliance noted that, in recent years, the average margin has risen from around 50% to 58%. In recent years the average margin has risen from around 50% to 58%. The company said its operating costs remain well controlled although to support growth, sales general and administration (SG&A) costs rose to £6.9m (FY08: £4.8m).

Adjusted pre-tax profit grew more than threefold to £8.6m, before an impairment charge of £2.8m for Isprelor, and after this exceptional item, the reported pretax profit was £5.7m which is more than double the previous year's figure of £2.4m.

At the half-year, Alliance decided to begin paying shareholders modest dividends and at year-end this is set to continue.  In light of the company's strong performance in the second half, Alliance is recommending a final dividend of 0.23p per share, making a total dividend for the year of 0.30p per share.

In terms of its operational performance Alliance acquired two brands from Reckitt Benckiser in August, Buccastem and Timodine, to complement its existing portfolio. The acquisition was funded by a combination of debt and an oversubscribed share placing. Buccastem is a treatment for nausea and vomiting with a novel delivery system and Timodine is a triple action, anti-inflammatory, antifungal and antibacterial skin cream.

Since year-end, Alliance made another considerable acquisition adding 18 products from Cambridge Laboratories. On closing the company said it expects the deal to be significantly earnings enhancing in the current financial year. The new product portfolio covers a broad range of therapeutic areas include oncology, toxicology and others.

Looking ahead, Alliance said the integration of the Cambridge Laboratories business is progressing well, and subsequently sales in the first two months of 2010 have been slightly ahead of its expectations. 

In the remainder of the year the company is well placed to maintain strong growth, particularly driven by the Cambridge Laboratories acquisition, the full year effect of the Buccastem and Timodine acquisition, and organic growth from the dermatology portfolio, Alliance said. Whilst the company noted its caution in terms of competition in Deltacortril’s market, Alliance is confident that it is set for another strong performance this year.