Financial outlook
From three-month interim report (Q1) 2019 released on 9 May 2019
OUTLOOK FOR 2019
For 2019, ALK continues to expect broad-based growth across its sales regions and product segments. The better than expected results in previous quarters and the creation of a more robust business platform allows ALK to accelerate its investments to transform the company. As a result, earnings (EBITDA) and free cash flow will continue overall to be subdued.
The full-year outlook has slightly improved compared with the annual report, which was released on 7 February 2019, and is now tracking towards the higher end of the guidance range. The outlook for free cash flow has been refined:
- Full-year revenue is projected to be DKK 3,100-3,300 million (2018: DKK 2.9 billion).
- Operating profit (EBITDA) is expected at DKK 100-200 million (2018: DKK 136 million).
- Free cash flow is now expected at DKK minus 400 million or better (previously: approximately DKK minus 400) (2018: minus DKK 294 million).
The mid-point of the revenue guidance still assumes that sales in Europe will grow in single digits, driven by strong growth in tablet sales and increasing SCIT-sales. By contrast, European topline growth is still expected to be negatively impacted by portfolio rationalisations and lower SLIT-drops sales. Meanwhile, revenue in North America is expected to increase by double digits with growth from all product categories. Revenue in International markets is projected to grow in high double digits on increased tablet income from Japan and geographic expansion.
The profit guidance still assumes that the gross margin will increase incrementally, while capacity costs will be impacted by a significant increase in R&D costs in support of the global paediatric clinical development of ACARIZAX® for children with allergic asthma and allergic rhinitis. ALK is also planning to conduct a separate allergic rhinitis trial in adolescents and a trial to pave the way for a launch of ACARIZAX® in China. Sales and marketing costs are still expected to increase modestly to support the launch of the tree SLIT-tablet in Europe, the continued commercialisation of SLIT-tablets in the USA, international expansion and patient engagement activities. Administrative expenses are still expected to show a small increase.
The free cash flow guidance assumes, in addition to the subdued earnings, continued investment in support of strategic growth and reflects the timing of certain end-of-2018 payments. CAPEX is still projected at DKK 200-250 million with investments focused on streamlining the manufacturing footprint and further specialisation at ALK’s production facilities in line with the 2018 site strategy. CAPEX investments will also be channelled into technology upgrades as well as capacity expansion.
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 2018 released on 7 February 2019
2019 OUTLOOK
For 2019, ALK expects broad-based growth across its sales regions and product segments. The better than expected results in 2018 and the creation of a more robust business platform will allow ALK to accelerate its investments to transform the company. As a result, earnings (EBITDA) and free cash flow will continue to be subdued.
Revenue
Total revenue from ALK’s existing business is expected at DKK 3.1-3.3 billion.
The higher end of the range factors in:
- accelerated tablet sales across all regions including a modest contribution from the USA
- a minor contribution from consumer care products
- continued market share gains
- stable pricing and reimbursement conditions in Europe
The lower end of the range factors in:
- lower growth for tablets compared to 2018, including largely unchanged sales in the USA
- a more pronounced effect from European portfolio pruning
- pricing pressure, particularly, in Southern Europe
The mid-point of the range guidance assumes that revenue in Europe will grow in single digits, driven by strong growth in tablet sales and increasing SCIT-sales. By contrast, European top-line growth is expected to be negatively impacted by portfolio rationalisations and lower SLIT-drops sales. Meanwhile, revenue in North America is expected to increase by double digits with growth from all product categories. Revenue in International markets is projected to grow in high double digits on increased tablet income from Japan, and geographic expansion.
Globally, tablet sales are expected to grow continuously in double digits at a similar rate to 2018. Combined SCIT/SLIT-drops sales are expected to be largely unchanged based on higher SCIT sales facilitated by improved product availability, while SLIT-drops sales are projected to decrease as a consequence of product rationalisations and the expected continuing market trend in France. Sales of Other products are projected to grow around 10%.
Earnings
Subject to revenue development, earnings before interest, tax, depreciation and amortisation (EBITDA) is projected at DKK 100-200 million.
Gross margin is expected to increase incrementally, while capacity costs will be impacted by a significant increase in R&D costs, prompted by the global paediatric clinical development of ACARIZAX® for children with allergic asthma and allergic rhinitis. ALK is also planning to conduct a separate allergic rhinitis trial in adolescents and a trial to pave the way for a launch in China. Sales and marketing costs are expected to increase modestly to support the launch of the tree tablet in Europe, the continued commercialisation of tablets in the USA, international expansion and patient engagement activities. Administrative expenses are expected to show a small increase. EBITDA is expected to be positively influenced by approximately DKK 40 million as a consequence of a change in ALK’s accounting policies related to the implementation of IFRS16 (leases).
Free cash flow
Free cash flow is expected to be negative at approximately DKK 400 million as a consequence of the subdued earnings, investments in support of strategic growth and timing of end of 2018 payments. CAPEX is projected at DKK 200-250 million with investments focused on streamlining the manufacturing footprint and further specialisation at ALK’s production facilities in line with the 2018 site strategy. CAPEX investments will also be channelled into technology upgrades as well as capacity expansion.
Other assumptions
The outlook is based on current exchange rates, causing a minor positive effect on reported revenue and an immaterial effect on reported EBTIDA. The outlook does not include any revenue from acquisitions and/or new partnerships, nor does it include any sizeable payments related to future M&A or in-licensing activity.
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