Pharming Group N.V. — Form 6-K Summary
Business context and reporting period
Pharming Group N.V. furnished a Form 6-K on October 28, 2021, including its preliminary, unaudited financial results for the nine months ended September 30, 2021. The company is a commercial-stage biopharmaceutical business focused on rare diseases, with RUCONEST® as its principal marketed product and development programs including leniolisib and OTL-105.
Financial performance and liquidity
| Metric | 9M 2021 | 9M 2020 | Change |
|---|---|---|---|
| Revenue | US$146.1 million | US$151.9 million | -4% |
| Gross profit | US$130.6 million | US$135.3 million | -3% |
| Operating profit | US$15.3 million | US$57.7 million | -72% |
| Profit for the period | US$13.9 million | US$28.9 million | -49% |
| Operating cash flow | US$21.9 million | US$62.3 million | Decrease |
| Cash and cash equivalents | US$183.3 million | US$205.2 million at Dec. 31, 2020 | Decrease |
Gross margin was approximately 89.4%, compared with approximately 89.1% in the prior-year period. Operating margin declined to approximately 10.5% from approximately 38.0%, while net margin declined to approximately 9.5% from approximately 19.0%.
RUCONEST® U.S. revenue increased 6% sequentially to US$51.1 million in the third quarter. Nine-month U.S. sales were US$141.1 million, down 3% from US$145.9 million in the comparable period. Europe and rest-of-world revenue was US$5.0 million, down from US$6.1 million.
Cash, cash equivalents and restricted cash totaled approximately US$184.8 million at September 30, 2021. Operating cash flow of US$21.9 million was more than offset by investing cash outflows of US$15.2 million and financing cash outflows of US$27.7 million. The company paid a US$25.0 million final milestone related to the reacquisition of North American RUCONEST® rights and invested in production facilities, intangible assets and equity instruments.
Convertible bond liabilities totaled approximately US$142.9 million, comprising US$141.0 million of non-current liabilities and US$1.9 million of current liabilities. Lease liabilities totaled approximately US$21.9 million. The filing does not provide a separate net-debt figure.
Material changes versus the prior comparable period
- Revenue declined 4%, primarily reflecting the earlier COVID-19 impact on the U.S. healthcare economy, although quarterly sales recovered during 2021.
- Operating expenses increased to US$117.1 million from US$78.5 million, driven by higher research and development, commercial preparation, staffing, insurance, compliance and control costs.
- The company recognized a US$13.1 million upfront payment for the OTL-105 license. Excluding this payment, reported operating profit would have been US$28.4 million.
- Research and development expense increased to US$37.6 million from US$26.8 million, while marketing and sales expense increased to US$43.9 million from US$36.2 million.
- Net finance income was US$5.5 million, compared with net finance expense of US$19.8 million in the prior-year period, primarily reflecting lower finance expenses and higher other finance income.
- Basic and diluted earnings per share declined to US$0.022 and US$0.018, respectively, from US$0.045 and US$0.039.
- Total comprehensive income declined to US$2.0 million from US$29.4 million, including US$10.5 million of currency translation losses and US$1.5 million of fair-value losses on investments.
Outlook, commentary, risks and unusual items
Management expects continued quarter-on-quarter RUCONEST® revenue growth as pharmaceutical markets normalize, while warning that periodic COVID-19-related disruptions may continue. The company expects to maintain positive net earnings for the remainder of 2021 but provided no further specific financial guidance.
Pharming expects significant and increasing investment in launch-critical medical affairs and pre-marketing activities for leniolisib, continued clinical development for recombinant human C1 esterase inhibitor and OTL-105, and potential acquisitions or additional in-licensing transactions.
Leniolisib launch preparation is targeting the fourth quarter of 2022, subject to regulatory approval. Results from its registration-enabling study were expected in early 2022. The company also entered a strategic collaboration with Orchard Therapeutics for OTL-105, an investigational gene therapy for hereditary angioedema, and entered an exclusive Middle East and North Africa distribution agreement for RUCONEST®.
Topline results from two pilot trials evaluating RUCONEST® in hospitalized COVID-19 patients supported further analysis and potential future trials, but do not establish efficacy for a broader COVID-19 indication. Clinical, regulatory, manufacturing, commercialization, financing and COVID-19-related risks remain material. The filing states that the risks in the 2020 Annual Report continued to apply.
The interim financial statements were unaudited. The filing contains forward-looking statements subject to clinical, scientific, regulatory, technical, commercial and cost-related uncertainties. No material changes in related-party transactions were reported.
Important facts for investors to verify
- Confirm the timing and results of the leniolisib registration-enabling study and the probability and timing of any 2022 regulatory approval.
- Assess whether RUCONEST® revenue recovery is sustained and whether COVID-19 or healthcare-market disruptions recur.
- Evaluate the scale and timing of planned pipeline, launch-preparation and business-development spending.
- Verify the financial and development obligations associated with the OTL-105 collaboration and any future milestones.
- Monitor cash burn, capital expenditures, convertible bond obligations and liquidity after the reported US$184.8 million of cash and restricted cash.
- Distinguish recurring operating performance from the US$13.1 million OTL-105 upfront payment and other unusual finance and currency effects.