Financial outlook
From three-month interim report (Q1) 2022 released on 12 May 2022
Outlook for 2022
Based on performance in the first three months and forecasts for the remainder of the year, ALK is maintaining its full-year outlook:
- Revenue is still expected to grow 8-12% in local currencies with tablet sales up by ~20%.
- EBITDA is still expected to increase to DKK 625-725 million (2021: DKK 534 million) on sales growth, improved gross margin and efficiencies.
The updated financial outlook is based on the following assumptions:
Revenue
Revenue growth is expected to be broad-based across all sales regions. The mid-point of the projected revenue range still assumes that sales in Europe will increase in high single digits, whereas sales growth in North America is expected at around 10%, and growth in International markets is expected to exceed 10%.
Tablets remain key to growth, and ALK still sees global sales growth of ~20% in 2022. In addition, ALK still expects low single-digit growth from the remaining non-tablet portfolio, mainly driven by SCIT products and the adrenaline auto-injector, Jext®.
The higher end of the revenue range assumes continued strong sales growth, with tablets leading the way, as well as improved sales of legacy AIT products. The lower end of the range incorporates pricing pressures, particularly in selected markets in Europe, more pronounced, negative effects from COVID, and/or continued impact from minor supply interruptions to certain legacy products.
Margins
The gross margin is still expected to improve by 1-2 percentage points on 61% in 2021, driven by efficiencies and higher sales – especially from tablets.
Operating profit
R&D costs are still expected at DKK 650-700 million. Sales and marketing costs are also expected to increase, reflecting investments in current and future growth drivers, including China. Nevertheless, the ratio to revenue is still expected to improve slightly versus 2021. On this basis, ALK continues to expect operating profit (EBITDA) to be in the range of DKK 625-725 million.
Other assumptions
- The outlook assumes that COVID will not affect home-based tablet treatments, and that patients in general will remain able and willing to visit healthcare professionals without significant limitations, although fluctuations may occur in some markets.
- CAPEX is still projected at around DKK 400 million, and free cash flow is still expected to be negative, mainly due to investments and changes in working capital.
- The outlook does not include any revenue from acquisitions, new partnerships or the in-licensing of adjacent products and services, nor does it include any sizeable payments related to M&As or in-licensing activities.
- The outlook is based on current exchange rates, resulting in a positive effect of approximately 2 percentage points on reported revenue growth and an immaterial effect on reported EBITDA.
From annual report 2021 released on 8 February 2022
2022 OUTLOOK
ALK expects growth across all sales regions in 2022, with revenue projected to increase by 8-12% organically in local currencies, and the tablet portfolio expected to remain the key growth driver.
(Revenue growth rates are stated in local currencies, unless otherwise indicated)
Operating profit (EBITDA) is expected to increase to DKK 625-725 million (2021: 534), reflecting revenue growth and an improved gross margin, both attributable to tablet sales growth, as well as efficiencies.
The COVID pandemic continues to cause a degree of uncertainty regarding capacity at allergy clinics and patients’ behaviour, which may lead to some volatility in the quarterly results.
Revenue
The growth, projected at 8-12% in local currencies, is expected to be broad-based across all sales regions. The mid-point of the projected revenue range assumes that sales in Europe will increase in single digits whereas sales growth in North America is expected at around 10% and growth in International markets is expected to exceed 10%. However, in absolute terms, the majority of growth is expected to come from Europe.
Tablets, ALK’s single largest product category, will remain key to growth in 2022. ALK plans for strong tablet sales growth across its regions and estimates global tablet sales growth of around 20% in 2022, with double-digit growth across all three sales regions, led by market share gains and market expansion, particularly in central and northern Europe, and Japan.
In addition, ALK expects low single-digit sales growth from the remaining, non-tablet portfolio, mainly driven by SCIT products and the adrenaline auto-injector, Jext®.
The higher end of the projected revenue range assumes accelerated sales growth across all regions with tablets leading the way and faster market share gains, supported by continuing regulatory impetus towards evidence-based allergy immunotherapy (AIT) products in key markets. The lower end of the revenue range incorporates pricing pressures, particularly in selected markets in Europe, and/or more pronounced, negative effects from COVID.
Margins
The gross margin is expected to improve by 1-2 percentage points on 61% in 2021, driven by efficiencies and higher sales – especially from tablets, with higher volumes absorbed by existing capacity. ALK will continue to allocate resources to the execution of its product and site strategy. These activities – in combination with the increased sales and efficiencies that come from utilising higher-volume production lines – are expected to lead to long-term margin improvements.
Operating profit
As previously stated, capacity costs will be influenced by a planned increase in R&D expenses in order to complete the clinical development of the respiratory tablet portfolio, gather further evidence for the tablets’ use in children, secure tablet registrations in new geographies and progress the food AIT programme into clinical development. R&D costs for 2022 are estimated at around DKK 650-700 million, roughly a DKK 50 million increase over 2021. The increase mainly relates to activities that were originally scheduled for 2020-21 but were postponed due to the impact of COVID on patient recruitment for clinical trials.
Sales and marketing costs are expected to increase, although the ratio to revenue is expected to improve slightly versus 2021. The expected increase reflects investments in current and future growth drivers, including additional investments to expand in China, further consumer-to-patient initiatives and early preparations for future paediatric tablet launches. ALK will continue to seek to leverage its existing sales and marketing platforms to drive underlying margin improvement.
On this basis, ALK expects the operating profit (EBITDA) to be in the range of DKK 625-725 million, exceeding the level of 2021 and in line with ALK’s long-term earnings ambitions of achieving a ~25% EBIT margin in 2025.
Assumptions
- The outlook assumes that COVID will not affect home-based tablet treatments, and that patients in general will remain able and willing to visit healthcare professionals without significant limitations, although fluctuations may occur in some markets.
- The outlook assumes that COVID will not significantly impact planned clinical activities, sales and marketing activities or investments. CAPEX is projected at around DKK 400 million, with investments focused on supporting long-term growth ambitions relating to tablets and adrenaline auto-injectors, the further streamlining and specialisation of production facilities, as well as IT upgrades. Free cash flow is expected to be negative, mainly due to changes in working capital, including a one-off repayment of up to DKK 175 million in accrued rebates, originally anticipated as due for payment in 2021.
- The outlook does not include any revenue from acquisitions, new partnerships or the in-licensing of adjacent products and services, nor does it include any sizeable payments related to M&As or in-licensing activities.
- The outlook is based on current exchange rates, resulting in a positive effect of approximately 1 percentage point on reported revenue growth and an immaterial effect on reported EBITDA.
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