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Cash generative Alliance Pharma poised for further growth

The specialty pharmaceutical company generated over £11mln of cash
strips of pills
The company is looking for additions to its medicine chest

Alliance Pharma plc (LON:APH) is “strategically positioned for growth” following last year’s acquisition of the healthcare assets of Sinclair Pharma, according to chairman Andrew Smith.

His assessment was made alongside interim results, which showed revenue up 8% at £50.3mln and underlying earnings (EBITDA) ahead 3% at £13.6mln in the six months to June 30. Investors were rewarded with a 10% hike to the dividend, which rises to 0.443p.

The specialty pharmaceutical company generated over £11mln of cash, while net debt fell £12.7mln to £63.4mln in the period – equating to 2.4-times EBITDA.

The decline in borrowings provides Alliance with the financial headroom to go out and add more products to its medicine chest.

Integration complete

“With the integration of the Sinclair Pharma products now complete we are strategically positioned for growth and, with leverage levels reducing, we are now able to pursue bolt-on acquisitions," said chairman Smith.

Stand out in the results were the respective performances of the businesses’ two global products – Kelo-cote for scar reduction and MacuShield, used to treat an eye condition called age-related macular degeneration.

Sales of the former rose 52% to £6.2mln, while revenues for the latter were £3.4mln, up 67%.

There was supposed to be a third international product, Diclectin, for nausea during pregnancy, but it failed to gain UK regulatory sign-off.

READ: Alliance Pharma - a business in rude health

New opportunities

While a blow to Alliance’s plans, the short-term financial impact will be negligible, analysts say.

“Diclectin is a much-needed product as there is no licensed medicine for treating nausea and vomiting of pregnancy in the UK,” the company said.

“At this stage we expect these discussions to continue well into 2018 and, in the meantime, we will re-direct our commercial resources to other important growth projects within Alliance.”

It leaves Alliance looking for a Diclectin replacement, which is likely to come via acquisition or in-licensing rather from within the current portfolio.

READ: Alliance Pharma buy-and-build strategy working

The broker Numis said Alliance is on track to achieve revenues of around £103mln for the full-year, giving pretax profit of £24mln.

It said the continued reduction in debt would allow the company to ‘kick-start’ its buy and build strategy next year.

The shares, up 1.4% at 53.25p, are worth 60p each, according to analyst Sally Taylor.  

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Alliance Pharma plc Timeline

Big Picture
August 14 2017
July 31 2017

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