Financial outlook
From nine-month interim report (Q3) 2023 released on 15 November 2023
OUTLOOK FOR 2023
The full-year revenue and earnings outlook is unchanged.
- Total revenue is still expected to grow by 8-10% organically in local currencies. This equals 9-11% growth when disregarding the mandatory rebate increase in ALK’s largest market, Germany.
- The EBIT margin is still expected to improve from 10% in 2022 to 13-15% on growth, efficiencies, economies of scale and lower R&D costs.
The outlook is based on the following assumptions:
Revenue
Revenue growth is expected to be broad-based across all three sales regions.
Global tablet sales are still expected to grow by double digits in the second half of the year. Full-year tablet growth is still expected within the previously communicated range. The previously communicated, pending price adjustments in parts of Europe are still undetermined and no longer projected to materially impact 2023. In Europe, full-year tablet sales are still expected to grow by single digits and growth in Q4 is anticipated to be lower than in Q3. ALK still expects ~10% growth in Europe for the second half year. Double-digit sales growth for tablets is still anticipated for the full year in North America and International markets.
Combined full-year sales of SCIT/SLIT-drops are still expected to grow by double digits, led by SCIT.
Full-year sales of other products are expected to decline due to Jext® mainly as a consequence of intermittent supply shortages in selected markets although this impact will expectedly decrease somewhat in Q4 relative to Q3.
Margins
The full-year gross margin is expected to increase by approximately 1 p.p., as the margin benefits from higher tablet and SCIT sales as well as efficiencies in product supply. However, this impact will be somewhat offset by various factors, including the temporary mandatory 5 p.p. rebate increase in Germany, higher tablet shipments to Japan at lower margins, as well as modest cost inflation.
Capacity costs
The overall capacity cost to revenue ratio is still expected to improve as ALK normalises R&D spend and further leverages existing platforms to drive efficiencies. R&D costs are still planned to be around DKK 600 million for the full-year, while sales and marketing costs are still planned to increase in mid-single digits in support of growth initiatives. Q4 will expectedly see increased sales and marketing costs relative to Q3, reflecting the phasing of certain activities between Q3 and Q4.
Other assumptions
- The outlook assumes that patients will remain able and willing to visit healthcare professionals without significant limitations, although temporary changes may be seen in some markets.
- New respiratory infection waves are not assumed to materially affect clinical and commercial activities, sales, nor investments.
- No additional pressure is expected in 2023 on pricing and reimbursement schemes, except for the one-year rebate increase in Germany and minor adjustments in certain southern European markets.
- ALK’s exposure to inflationary pressure on its cost base is expected to remain modest.
- Capital expenditure (CAPEX) is projected at around DKK 400 million, and free cash flow is expected to be positive.
- The outlook does not include any revenue from acquisitions, new partnerships or the in-licensing of products and services, nor does it include payments in relation to mergers and acquisitions or in-licensing activities.
- The outlook is based on current exchange rates, resulting in a negative effect of approximately 2 p.p. on reported revenue growth and a minor negative effect on reported growth in EBIT.
From six-month interim report (Q2) 2023 released on 24 August 2023
OUTLOOK FOR 2023
The full-year revenue outlook has been narrowed to mainly reflect the year-to-date progress and intermittent supply shortages affecting Jext®. The full-year earnings outlook is unchanged:
- Total revenue is now expected to grow by 8-10% organically in local currencies (previously: 7-11%). This is equivalent to 9-11% growth when disregarding the one-year, temporary mandatory rebate increase for prescription drugs in ALK’s largest market, Germany.
- Earnings margin (EBIT margin) is still expected to increase from 10% in 2022 to 13-15% on sales growth, efficiencies, economies of scale and lower R&D costs.
The outlook is based on the following assumptions:
Revenue
Revenue growth is expected to be broad-based across all three sales regions.
Growth in tablet sales is still expected to pick up and grow by double digits in the second half-year with full year growth expected within the previously communicated range of 9-14% in local currencies. As previously communicated, the upper end of this range is pending possible price adjustments for tablets in parts of Europe. These price adjustments remain undetermined as discussions are still ongoing.
In Europe, full-year tablet sales are still expected to grow by single digits, driven by a higher inflow of new patients especially in the key markets of Germany and the Nordics during the forthcoming treatment initiation season. Double-digit growth in tablet sales is also still anticipated in North America and International markets. The timing of shipments to Torii in Japan may lead to quarterly sales fluctuations.
Combined sales of SCIT and SLIT-drops are still expected to grow by double digits in the second half-year led by SCIT products. Besides the previously anticipated decrease in sales following exceptional performance in 2022, Jext® sales in the second half-year will also be impacted by intermittent supply shortages in selected markets.
Margins
The gross margin is still expected to increase by up to 1 percentage point. The gross margin is assumed to benefit from higher tablet and SCIT sales, as well as efficiencies in product supply. However, this impact will be somewhat offset by various factors, including the temporary mandatory 5 percentage points rebate increase in Germany, higher tablet shipments to Japan at lower margins, as well as modest cost inflation.
Capacity costs
The overall capacity cost to revenue ratio is still expected to improve as ALK normalises R&D spend and further leverages existing platforms to drive efficiencies. R&D costs are still planned to be around DKK 600 million for the full-year, while sales and marketing costs are planned to increase in mid-single digits to support various growth initiatives, including the continued build-up in China.
Other assumptions
- The outlook assumes that patients in general will remain able and willing to visit healthcare professionals without significant limitations, although temporary changes may be seen in some markets.
- New respiratory infection waves are not assumed to materially affect clinical and commercial activities, sales, nor investments.
- No additional pressure is expected on pricing and reimbursement schemes, except for the one-year rebate increase in Germany and minor adjustments in certain southern European markets.
- ALK’s exposure to inflationary pressure on its cost base is expected to remain modest.
- Capital expenditure (CAPEX) is projected at around DKK 400 million, and free cash flow is expected to be positive.
- The outlook does not include any revenue from acquisitions, new partnerships or the in-licensing of products and services, nor does it include payments in relation to mergers and acquisitions or in-licensing activities.
The outlook is based on current exchange rates, resulting in a negative effect of approximately 2 percentage points on reported revenue growth and a minor negative effect on reported growth in EBIT.
From three-month interim report (Q1) 2023 released on 9 May 2023
As announced on 17 April, ALK confirms its full-year revenue and earnings outlook, albeit with changes in the anticipated product mix:
- Total revenue is still expected to grow 7-11% in local currencies, equalling 8-12% growth when disregarding the one-year, temporary mandatory rebate increase for prescription drugs in ALK’s largest market, Germany.
- EBIT is still expected to increase on sales growth, efficiencies, economies of scale and lower R&D costs, despite tougher market conditions. The EBIT margin is still expected at 13-15% versus 10% in 2022.
The financial outlook is based on the following assumptions:
Revenue
Revenue growth is expected to be broad-based across all sales regions.
SCIT and SLIT-drops sales are expected to exceed original expectations and, together with life science products, lead the growth in the non-tablet portfolio, whereas Jext® sales are still expected to decline somewhat after the exceptional performance in 2022.
Global tablet sales are expected to grow by 9-14% with the upper end of the range assuming a positive outcome of ongoing price discussions in Europe.
Margins
The gross margin is still expected to increase by up to 1 percentage point. The gross margin is projected to benefit from higher tablet and SCIT sales volumes and efficiencies in product supply. However, this impact will be somewhat offset by various factors, including the increased rebate in Germany, higher tablet shipments to Japan at lower margins, changes to the product mix and modest cost inflation.
Capacity costs
The overall capacity to revenue ratio is still expected to improve as ALK further leverages its existing platforms to drive efficiencies and normalises its R&D spend. R&D costs are planned to decline to around DKK 600 million, while sales and marketing costs are planned to increase in the mid-single digits to support growth initiatives.
Other assumptions
- The outlook assumes that patients in general will remain able and willing to visit healthcare professionals without significant limitations, although fluctuations may occur in some markets.
- New respiratory infection waves are not assumed to materially affect clinical and commercial activities, sales, nor investments.
- No additional pressure is expected on pricing and reimbursement schemes, except for the one-year rebate increase in Germany and minor adjustments in certain Southern European markets.
- ALK’s exposure to inflationary pressure on its cost base is expected to remain modest.
- Capacity expenditure (CAPEX) is projected at around DKK 400 million, and free cash flow is expected to be positive.
- The outlook does not include any revenue from acquisitions, new partnerships or in-licensing of products and services, nor does it include payments in relation to mergers and acquisitions or in-licensing activities.
- The outlook is based on current exchange rates, resulting in a negative effect of approximately 1.5 percentage points on reported revenue growth and an immaterial effect on reported EBIT.
From annual report 2022 released on 3 February 2023
ALK expects to continue its trajectory of high organic growth and earnings improvement in 2023.
(Revenue growth rates are stated as organic growth in local currencies, unless otherwise indicated)
ALK expects broad-based growth in all sales regions – Europe, North America and International markets – in 2023. Total revenue is expected to grow by 7-11% organically, equalling 8-12% growth when disregarding the one-year temporary mandatory rebate increase of 5 percentage points for all prescription drugs in ALK’s largest market, Germany, in 2023.
Tablets will remain key to growth, and are expected to grow by around 15%, corresponding to around 17% growth when disregarding the one-year temporary rebate increase in Germany. Growth is anticipated for all tablet brands and all sales regions, with Central Europe, Northern Europe, Japan and North America expected to lead the way through additional market share gains, further expansion of prescriber and patient bases as well as progress from the ongoing market transition in favour of evidence-based allergy medicines. As in previous years, some fluctuations in the quarterly tablet sales are anticipated, reflecting current market dynamics and phasing of product supply to partners.
In addition, ALK expects sales growth from the remaining non-tablet portfolio, mainly driven by SCIT and life science products, whereas Jext® sales are expected to decline somewhat following the extraordinary sales growth of 2022, fuelled by supply issues in the wider market.
Improving EBIT margin in line with long-term ambitions
ALK expects operating profit to improve in 2023, fuelled by revenue growth, and benefits and efficiencies from increased scale. The EBIT margin is expected at 13-15%, versus 10% in 2022, corresponding to an improvement of 25-45%, which is in line with ALK’s long-term earnings ambition of an EBIT margin of around 25% in 2025.
The gross margin is expected to further benefit from higher tablet and SCIT sales volumes as well as efficiencies in product supply. However, this impact will be somewhat offset by different factors, including the increased rebate in Germany, higher tablet shipments to Torii in Japan at lower gross margins, changes to the product mix, and modest cost inflation. Consequently, the gross margin is expected to increase by up to 1% percentage point on the 62% seen in 2022.
The overall capacity cost to revenue is expected to improve as ALK further leverages its existing platforms to drive efficiencies, and normalises R&D spend. Higher sales and marketing costs are planned to support preparations for paediatric tablet launches, the build-up in China, and digital engagement projects, but the overall sales, marketing and administrative expenses ratio to revenue is expected to decrease. R&D expenses are planned to decline to around DKK 600 million, reflecting the start of a normalisation after a number of years with extraordinarily high R&D costs to complete the clinical Phase III programme for the respiratory tablet portfolio.
Key assumptions
- Reduced spending power among consumers amid higher living costs is not expected to materially affect demand for AIT, since the majority of ALK’s sales either involve products with no co-payments or insignificant co-payments by patients.
- The overall AIT market in Germany is expected to gradually recover in 2023 following its weakness in the second half of 2022.
- COVID is not assumed to materially affect clinical and commercial activities, sales, nor investments in Europe and North America, however, the pandemic continues to cause a degree of uncertainty regarding capacity at clinics and patients’ behaviour in some markets, such as China and Japan.
- Pricing and reimbursement schemes are generally expected to be stable, except for the one-year temporary rebate increase in Germany in 2023, which is expected to lower ALK’s revenue by around DKK 50 million, and minor adjustments in certain markets in Southern Europe.
- ALK's exposure to the ongoing inflationary pressure on its cost base is expected to remain modest.
- CAPEX is projected at around DKK 400 million. Free cash flow is expected to be positive.
- The outlook is based on ALK’s current portfolio and does not include revenue from acquisitions, new partnerships, or the 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 a negative effect of approximately 1 percentage point on reported revenue and an immaterial effect on reported EBIT.
From EBITDA to EBIT
ALK will use EBIT – Earnings Before Interest and Taxes – as the prime indicator of the company’s profitability aspirations going forward. Hence, ALK’s short-term financial indications for operating profit are now aligned with its long-term indications, rather than the previously applied EBITDA. The change reflects an increasing focus on the underlying earnings generation of the company and the fact that the next phase of the strategy is one of stable capital expenditure.
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