Financial outlook
From annual report 2023 released on 8 February 2024
OUTLOOK FOR 2024
ALK expects to continue its trajectory of organic growth and earnings improvement in 2024.
(Revenue growth rates are stated as organic growth in local currencies, unless otherwise indicated)
ALK expects broad-based growth across sales regions and product groups in 2024. Revenue is projected to grow by 9-12% in local currencies.
Tablets continue to be key in driving growth. Global tablet sales are expected to show a double-digit increase. This growth is fuelled by the expansion of both patient and prescriber bases, gains in market share, and the favourable shift towards evidence-based medicines in key markets. Consistent with past trends, some fluctuations in quarterly tablet sales are expected, primarily influenced by the timing of product supply to ALK’s partner in Japan.
Growth in European tablet sales is set to rebound to a level well above the growth in 2023, driven by an increased inflow of new patients in the recent initiation season. Similarly, North America and International markets are expected to see continued sales growth for tablets. However, the anticipated growth in revenue from Japan is expected to be somewhat lower than in 2023, mainly attributable to certain intermittent capacity limitations in our partner’s manufacturing of the active ingredient for the cedar tablet.
The combined sales of SCIT/SLIT-drops are projected to see continued growth. This growth will primarily be driven by SCIT across regions, although at a somewhat lower rate compared to the notable growth seen in 2023, which was influenced by improved pricing and extraordinary rebate adjustments in Europe. Conversely, sales of SLIT-drops are expected to show a slight decline because of the ongoing market transition in France. Sales of Other products and services are expected to resume growth, particularly as the supply of Jext® normalises.
Improved EBIT margin
ALK expects the operating profit to further improve in 2024, driven by revenue growth, benefits of scale, and a significant reduction in external costs for clinical trials. The EBIT margin is expected to be 17-19% against 14% in 2023, corresponding to a 20-35% improvement in the EBIT margin.
The gross margin is expected to be on a par with or slightly above that for 2023. The gross margin will benefit from increased sales volumes, enhanced efficiencies in product supply, and the reversal of mandatory rebate adjustments in Germany. These positive factors will be somewhat counteracted by inflationary pressures on the cost base in ALK's product supply. The capacity cost-to-revenue ratio is expected to see further improvements as ALK capitalises on existing platforms to enhance efficiencies and reduces R&D expenditure. R&D expenses are expected to decline to around 10% of the expected revenue. This reduction reflects the completion of two large-scale clinical Phase 3 programmes for tablets in 2023, enabling ALK to progressively reallocate resources to areas such as food allergies and other innovations. Sales and marketing expenses are expected to see single digits increases, fuelled by investments in the growth of European tablet sales and including preparations for the planned paediatric tablet launches and the organisational build-up in China. Administrative expenses are expected to see a slight decline from 2023, where there were extraordinary costs related to management changes.
Throughout the year, particular attention will be given to optimisation and prioritisation initiatives, enabling ALK to strategically allocate resources to fund future growth initiatives.
2024 targets
Revenue growth: 9-12% (up from DKKm 4,824 in 2023)
Higher EBIT margin: 17-19% (up from 14% in 2023)
Key assumptions
- The European AIT markets are generally expected to be stable. Exceptions include the reversal of the 2023 mandatory rebate increase in Germany and the possibility of minor adjustments in selected Southern European markets.
- The current waves of respiratory infection across ALK's markets are not expected to materially affect capacity at allergy clinics or patient behaviour, nor are they likely to impact ALK’s clinical and commercial activities, sales, and investments.
- Changes in consumers’ spending power, amid higher living costs and challenging macroeconomic conditions in some markets, are not expected to materially affect demand for AIT, as the majority of ALK’s sales involve products with insignificant co-payments (if any) by patients.
- When excluding the effect of the recent acquisition, free cash flow is projected to increase, driven by higher earnings. CAPEX investments are projected at around DKK 400 million, and ALK expects to see a continued inventory build-up in support of revenue growth.
- The outlook does not include potential one-off costs associated with optimisation and prioritisation initiatives. Furthermore, the outlook is based on ALK’s current portfolio and does not include revenue from new acquisitions, new partnerships, or in-licensing of products, nor does it include payments related to M&A or in-licensing activities.
- The outlook is based on current exchange rates, resulting in an immaterial currency effect on reported revenue and EBIT.
Forward-looking statements
This report contains forward-looking statements, including forecasts of future revenue, operating profit, and cash flows as well as expected business-related events. Such statements are, by their very nature, subject to risks and uncertainties, as various factors, some of which are beyond the control of ALK, may cause actual results and performance to differ materially from the forecasts made. Without being exhaustive, such factors include consequences of COVID and other pandemics, general economic and business-related conditions including: legal issues, uncertainty relating to demand, pricing, reimbursement rules, partners’ plans and forecasts, fluctuations in exchange rates, competitive factors and reliance on suppliers. Additional factors include the risks associated with the sourcing and manufacturing of ALK’s products, as well as the potential for side effects from the use of ALK’s products, as allergy immunotherapy may be associated with allergic reactions of differing extents, durations, and severities.
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