Financial outlook
From Six-month interim report (Q2) 2018 released on 15 August 2018
2018 OUTLOOK
Full-year guidance has been updated based on better than expected results in the first half-year and more clarity on market conditions in Southern Europe.
2018 guidance history
FY guidance, | 15 Aug | 4 May | 6 Feb |
Total revenue | More than 2,800m | More than 2,700m | Approx. 2,700m |
EBITDA | Around +50m | Around 0m | -50m |
Free cash flow | -550m or better | -600m or better | Approx. -600m |
Total revenue from ALK’s existing business is now expected to be more than DKK 2.8 billion (previously: more than DKK 2.7 billion). Exchange rates are now projected to negatively affect reported revenue by approximately DKK 50 million versus 2017.
Revenue in Europe and North America is still expected to be negatively impacted by product discontinuations and previous constraints in SCIT and SLIT-drops production. But these trends are expected to be largely offset by continued strong overall growth from tablet sales. Moreover, pressure on the pricing and reimbursement of legacy products in Southern Europe has still not materialised to the extent that was previously anticipated.
Despite the financial progress in the first half of 2018, earnings and free cash flow will still be significantly impacted by business investments associated with the transformation of ALK, as outlined in the new strategy which was announced in December 2017.
EBITDA is now anticipated at around DKK 50 million (previously: around DKK 0 million) while free cash flow is now expected at minus DKK 550 million or better (previously: minus DKK 600 million or better). In addition to subdued earnings, free cash flow is impacted by working capital requirements – including inventory build-up – and CAPEX investments in capacity expansions and production upgrades.
The outlook does not include any revenue from acquisitions, new partnerships or adjacent products and services, nor does it include any sizeable payments related to future in-licensing or M&A activity.
The outlook is based on current exchange rates.
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From Three-month interim report (Q1) 2018 released on 4 May 2018
2018 OUTLOOK
Full-year guidance has slightly improved compared with the 2017 Annual Report (released on 6 February 2018):
Total revenue from ALK’s existing business is now expected to be more than DKK 2.7 billion (previously approximately DKK 2.7 billion). Exchange rates fluctuations are still projected to negatively affect reported revenue with DKK 50-75 million versus 2017.
Revenue in Europe is still expected to decline due to three factors: product discontinuations, the impact of continued constraints in SCIT and SLIT-drops production, as well as expected pressure on the pricing and reimbursement of legacy products in Southern Europe. However, continued strong growth from tablet sales is expected to partly mitigate these factors.
Outside Europe, revenue in North America is expected to grow, driven by bulk allergen extracts and SLIT-tablets, among others. Growth is also anticipated in International markets.
Earnings and free cash flow are significantly impacted by business investments associated with the transformation of ALK in line with the new strategy.
Earnings (EBITDA) are now anticipated at around DKK 0 (previously minus DKK 50 million), mainly reflecting improved operational efficiencies and the better than expected financial performance in Q1.
Free cash flow is now expected at minus DKK 600 million or better due to subdued earnings following the investments in North America, working capital requirements – including inventory build-up and CAPEX investments in capacity expansions and production upgrades.
The outlook does not include any revenue from acquisitions, new partnerships or adjacent products and services, nor does it include any sizeable payments related to future in-licensing or M&A activity. The outlook is based on current exchange rates.
From Annual report 2017 released on 6 February 2018
2018 OUTLOOK
Free cash flow is still expected at approximately minus DKK 700 million and includes high tax payments and increased working capital. Free cash flow is also impacted by the CAPEX-programme, significant business investments, continued inventory build-up as well as payments related to the ALOK acquisitions.
The full-year outlook is in line with the preliminary outlook presented on 4 December 2017. Group revenue is expected at below 2017 levels while earnings (EBITDA) and free cash flow will be impacted by business investments associated with the transformation of ALK as part of its new growth strategy.
Revenue
Total revenue from ALK’s existing business is expected at around DKK 2.7 billion.
European revenue is expected to decline due to three factors: planned product discontinuations, continued impact of constraints to SCIT and SLIT-drops production following the decision to reduce output while essential upgrades are completed and inventory levels are replenished, as well as expected pressure on pricing of legacy products in Southern Europe where ALK sees a risk that market access conditions could be further challenged during 2018 with respect to both price and reimbursement. The revenue outlook assumes that the combined squeeze on revenue from these factors in 2018 totals DKK 250-300 million, of which approximately DKK 100 million relates to pressure on price and reimbursement. This squeeze will only be partly offset by strong, double-digit growth in tablet sales and single-digit growth in sales of other products, including the adrenaline auto-injector Jext®. Hence, strong fundamental growth is being offset short term by the factors described above.
Revenue in North America is expected to grow, driven by allergen extracts and SLIT-tablets, among others, with current projections planning approximately 5,000 new patients to be initiated on ODACTRA™ in the USA during 2018. Revenue in International markets is also projected to grow.
The outlook is based on current exchange rates, causing an expected decline in reported revenue of approximately DKK 50-75 million versus 2017.
Earnings (EBITDA) are anticipated at around DKK -50 million. Gross margins are expected to decline slightly due to lower revenue, changes in the product mix, increased costs of compliance and building robustness in product supply, as well as expected price/reimbursement pressure on selected products, most notably in Southern Europe. Capacity costs are expected to increase, driven by sales and marketing expenses related to the emerging tablets business in North America and ACARIZAXR launches in other markets. R&D and administrative expenses are expected to be at the same level as in 2017. Across all functions, ALK will continue its efforts to improve operational efficiencies and capture cost savings.
EBITDA is not expected to be affected by current exchange rates.
Free cash flow is expected to be negative at approximately DKK 600 million due to subdued earnings following the investment in North America, working capital requirements – including inventory build-up and CAPEX investments in the continued expansion of tablet capacity – to accommodate the house dust mite and tree tablets, as well as production upgrades for SCIT and SLIT-drops, and preparing Jext® for a US launch.
The outlook does not include any revenue from acquisitions, new partnerships or adjacent products and services, nor does it include any sizeable payments related to future in-licensing or M&A activity.
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Outlook-update in Company release No 34 dated 4 December 2017
Unchanged financial guidance for 2017
The updated strategy does not change ALK's financial guidance for 2017. ALK continues to expect full-year revenue at around DKK 2.9 billion and an operating profit (EBITDA) of DKK 225-250 million following accelerated investments to consolidate European market share gains and to build up the organisation in North America. Free cash flow is still expected at approximately minus DKK 700 million. As a consequence of the updated strategy, ALK will discontinue certain non-strategic development projects as well as scrap some obsolete equipment, leading to a one-off write-down of assets worth approximately DKK 150 million. The write-down will be recognised in Q4 2017 and does not impact ALK's EBITDA guidance.
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From Nine-month interim report (Q3) 2017 released on 10 November 2017
2017 OUTLOOK
Full-year guidance for revenue has been narrowed while guidances for operating profit (EBITDA) and free cash flow are unchanged from Company release No 22/2017 (21 August 2017).
European revenue is still expected to decline relative to 2016 (DKK 2,434 million) as markets establish a 'new normal' after the disruptions which contributed strongly to ALK's 2016 sales and earnings. Nevertheless, ALK expects to retain much of its market share gains and anticipates 2017 revenue will be significantly higher than in 2015 (DKK 1,937 million), before the market disruptions emerged. Revenue is assumed to be affected negatively by the temporary reduction in SCIT production capacity.
Revenue in North America is still expected to increase (2016: DKK 512 million), driven by diagnostics and other products, including the effect of the ALOK acquisitions, and by the full addition of sales from SLIT-tablets – previously ALK only recognised sales royalties from its former partner.
Revenue in International markets is also still projected to increase (2016: DKK 59 million) as a result of growth in existing markets, primarily China, and expansion into new markets.
No milestone or upfront payments are expected in 2017 (2016: DKK 38 million).
In light of the above, ALK now expects revenue of approximately DKK 2.9 billion (previously DKK 2.8-3.0 billion; 2016: DKK 3.0 billion).
Overall, 2017 will see significant investments and cost increases as ALK seeks to consolidate its market position and advance its long-term growth plans. Particular focus is on the build-up in North America, additional market shaping and expansion activities in Europe and International markets, the ongoing launch of ACARIZAX ® , as well as extra costs and investments to build capacity and secure the robustness of product supply.
The guidance for operating profit (EBITDA) is unchanged at DKK 225-250 million (2016: DKK 642 million), reflecting both significantly increased growth investments and a changed sales mix.
CAPEX is still projected to increase (2016: DKK 204 million) due to accelerated investments in capacity and compliance upgrades and other projects.
Free cash flow is still expected at approximately minus DKK 700 million and includes high tax payments and increased working capital. Free cash flow is also impacted by the CAPEX-programme, significant business investments, continued inventory build-up as well as payments related to the ALOK acquisitions.
The outlook is based on current exchange rates.
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Outlook-update in Company release No 22 dated 21 August 2017
Following the transfer of Biologics Licences for the North American SLIT-tablet portfolio, investments in ALK’s build-up in North America will be accelerated to bring forward the launches of the house dust mite tablet (ODACTRA™ in the USA / ACARIZAX ® in Canada) from mid-2018 to Q4 2017, which will pull forward costs for sales and marketing activities.
Furthermore, following an initial dialogue with the FDA, ALK is now planning to expand a pivotal Phase III clinical trial, to include US patients. The trial will be initiated later this year to support approvals of ODACTRA™/ACARIZAX ® for children with allergic asthma.
Full-year guidance has consequently been revised. EBITDA is now expected to be approximately DKK 225-250 million (previously: approximately DKK 300 million). Free cash flow is now expected at approximately minus DKK 700 million (previously: minus DKK 600 million or greater.) Full-year revenue is still projected at DKK 2.8-3.0 billion (2016: DKK 3.0 billion).
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From Six-month interim report (Q2) 2017 released on 16 August 2017
2017 OUTLOOK
Full-year guidance for revenue and operating profit (EBITDA) is unchanged from the three-month interim report (Q1) 2017 (9 May 2017) whereas guidance for free cash flow has been revised.
European revenue is still expected to decline relative to 2016 (DKK 2,434 million) as markets establish a 'new normal' after the disruptions which contributed strongly to ALK's 2016 sales and earnings. Nevertheless, ALK expects to retain much of its market share gains and anticipates 2017 revenue will be significantly higher than in 2015 (DKK 1,937 million), before the market disruptions emerged. Revenue is assumed to be affected negatively by the temporary reduction in SCIT capacity. However, this negative effect is expected to significantly decrease during the remainder of 2017.
Revenue in North America is still expected to increase (2016: DKK 512 million), driven by diagnostics and other products, including the effect of the ALOK acquisitions, and by the full addition of sales from SLIT-tablets – previously ALK only recognised sales royalties from its former partner.
Revenue in International markets is also still projected to increase (2016: DKK 59 million) as a result of growth in existing markets, primarily China, and expansion into new markets.
No milestone or upfront payments are expected in 2017 (2016: DKK 38 million).
In light of the above, ALK continues to expect revenue of DKK 2.8-3.0 billion (2016: DKK 3.0 billion).
Overall, 2017 will see significant investments and cost increases as ALK seeks to consolidate its market position and advance its long-term growth plans. Particular focus is on the scale-up in North America, additional market shaping and expansion activities in Europe and International markets, the ongoing launch of ACARIZAX ® , as well as extra costs and investments to build capacity and secure the robustness of product supply.
These investments will position ALK to take advantage of an expected new wave of industry consolidation in Europe, largely driven by increased regulatory and quality requirements, and will also allow ALK to exploit the large, untapped market potential in North America.
The guidance for operating profit (EBITDA) is unchanged at ~DKK 300 million (2016: DKK 642 million), reflecting both significantly increased growth investments and a changed sales mix. Potential costs associated with bringing forward the launches of ACARIZAX ® in North America are not included in the guidance for EBITDA.
CAPEX is still projected to increase (2016: DKK 204 million) due to accelerated investments in capacity and compliance upgrades and other projects.
Free cash flow is now expected at minus DKK 600 million or greater (previously: down to approximately minus DKK 500 million) following higher tax payments and a slightly higher working capital. Free cash flow is also impacted by the accelerated CAPEX-programme, significant business investments, continued inventory build-up as well as payments related to the ALOK acquisitions.
The outlook is based on current exchange rates.
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From Three-month interim report (Q1) 2017 released on 9 May 2017
2017 OUTLOOK
Full-year guidance is unchanged from the 2016 annual report (7 February 2017).
2017 will see significant investments and cost increases as ALK seeks to consolidate its market position and advance its long-term growth plans. Particular focus will be on the scale-up of the North American organisation for the repatriated SLIT-tablets, additional market shaping and expansion activities in Europe and International markets, the launch of ACARIZAX®, as well as extra costs and investments to build capacity and secure the robustness of product supply.
These accelerated investments will position ALK to take advantage of an expected new wave of industry consolidation, largely driven by increased regulatory and quality requirements.
ALK’s European revenue is expected to decline relative to 2016 (DKK 2,434 million) as the markets gradually establish a ‘new normal’ after the market disruptions which contributed positively to ALK’s 2016 sales and earnings. Nevertheless, ALK expects to retain the majority of its market share gains and anticipates 2017 revenue to be significantly higher than in 2015 (DKK 1,937 million), before the market disruptions emerged. Revenue is assumed to be affected negatively by the temporarily reduced manufacturing capacity caused by the 2016 upgrades to SCIT production.
Revenue in North America is expected to increase (2016: DKK 512 million), driven by sales of allergen extracts and other products, including the effect of the recent acquisition, and by the addition of sales from SLIT-tablets, for which revenue from in-market sales will be fully recognised, whereas previously ALK only recognised sales royalties from its former partner.
Revenue in International markets is also projected to increase (2016: DKK 59 million) as a result of growth in existing markets and expansion into new markets.
No milestone or upfront payments are expected in 2017 (2016: DKK 38 million).
In light of the above, ALK expects 2017 revenue of DKK 2.8-3.0 billion (2016: DKK 3.0 billion).
Operating profit (EBITDA) is expected to return to 2015 levels at approximately DKK 300 million before partner income (2016: DKK 642 million), reflecting significantly increased investments to build long-term growth opportunities as well as a changed sales mix.
CAPEX is projected to increase (2016: DKK 204 million) reflecting accelerated investments in capacity and compliance upgrades and other ongoing projects.
Free cash flow is expected to be down to approximately minus DKK 500 million as a consequence of the accelerated CAPEX-programme, significant business investments, relatively high tax payments and continued inventory build-up. The guidance also assumes that the December 2016 acquisitions will be paid for in 2017 and beyond.
The outlook is based on current exchange rates.
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From Annual report 2016, published as company release No 3/2017 on 7 February 2017
2017 OUTLOOK
2016 was an exceptionally good year for ALK, characterised by events that disrupted the status quo in the existing AIT markets and brought new opportunities so that ALK noticeably extended its market leadership. However, the year also brought challenges. In particular, the need to establish a new business model for North America and the need to upgrade ALK’s product supply to support future sales growth.
2017 will see significant investments and cost increases as ALK seeks to consolidate its market position and advance its long-term growth plans. ALK will also continue to build capacity and secure the robustness of its product supply. By doing so, ALK will be well placed to take advantage of an expected new wave of industry consolidation, largely driven by increased regulatory and quality requirements.
These additional growth investments fall into three main categories:
- The scale-up of ALK’s North American organisation for the repatriated SLIT-tablets: ~DKK 150 million in additional sales & marketing, R&D and administrative expenses. This includes the hiring of approximately 50 additional employees in areas such as sales, medical affairs, market access, clinical development, pharmacovigilance and administration, as well as activities in support of the anticipated launch of the HDM SLIT-tablet in North America.
- Market shaping and expansion: ~DKK 50 million in additional sales & marketing and R&D expenses to fund expansion in existing and new markets, to secure new registrations and market access for ACARIZAX®, initiate the ACARIZAX® Phase III asthma and rhinitis paediatric development, and complete Phase III development of the tree SLIT-tablet. Expenses also cover the expansion and digitalisation of ALK’s patient support programmes as well as transformation work towards evidence-based medicines.
- Capacity expansion and Product Supply robustness: ~DKK 75 million of extra costs in product supply (excluding the effect of the recent acquisitions) and additional capital expenditure of DKK 150-200 million to future-proof ALK’s global product supply and establish a robust growth platform. Activities include additional staff and capacity upgrades in Denmark, France and the USA, as well as a general quality and compliance upgrade programme.
Capital expenditure includes ramping-up SLIT-tablet production, primarily for ACARIZAX®, and the API manufacturing plant for the tree SLIT-tablet, further improvements in manufacturing of the adrenaline auto-injector Jext®, and related digitalisation of processes and workflow.
ALK will continue its efforts to improve operational efficiencies and capture cost savings. Costs related to one-off restructuring initiatives will be reported under the relevant item line and not as special items, which has been the custom previously.
In light of the above, ALK expects 2017 revenue of DKK 2.8-3.0 billion (2016: DKK 3.0 billion). Reported operating profit (EBITDA) is expected at approximately DKK 300 million (2016: DKK 642 million), reflecting the significantly increased investments to build ALK’s long-term growth opportunities and a changed sales mix.
Anticipated revenue dynamics
ALK expects European revenue to decline compared with 2016 (DKK 2,434 million) as the markets gradually establish a ‘new normal’ after the market disruptions which contributed positively to ALK’s 2016 sales and earnings. Nevertheless, ALK expects to retain the majority of these gains and anticipates 2017 revenue to be significantly higher than in 2015 (DKK 1,937 million) before the temporary competitor issues emerged. Revenue is assumed to be affected negatively by the temporarily reduced production capacity caused by the 2016 upgrades to SCIT production.
Revenue in North America (2016: DKK 512 million) is expected to increase, driven by sales of allergen extracts and other products, including the effect of the recent acquisition, and by the addition of sales from SLIT-tablets. In-market sales from SLIT-tablets will now be fully recognised in revenue, where previously ALK only recognised sales royalties based on MSD’s in-market sales.
Revenue in International markets (2016: DKK 59 million) is also projected to increase as a result of sales growth in existing markets and expansion into new markets.
No milestone or upfront payments are expected in 2017 (2016: DKK 38 million). Other income from partnerships – product supply, sales royalties and service fees – has been included in the outlook above.
Investments & cash flow
CAPEX is projected to exceed the level of 2016 (2016: DKK 204 million) reflecting accelerated investments in capacity and compliance upgrades and other ongoing projects.
Free cash flow is expected to be down to minus DKK 500 million as a consequence of the accelerated CAPEX-programme and significant business investments as well as relatively high tax payments. The free cash flow guidance also assumes that the recent acquisitions will be paid in 2017 and later as well as a continued inventory build up.
The outlook is based on current exchange rates.
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