Pharming Group N.V. — Form 6-K Summary
Business context and reporting period
Pharming is a commercial-stage biopharmaceutical company focused on rare diseases and unmet medical needs. Its principal product is RUCONEST®, a recombinant human C1 esterase inhibitor for acute hereditary angioedema (HAE) attacks. The company also develops leniolisib for activated PI3K delta syndrome (APDS) and additional recombinant protein therapies.
The filing furnishes Pharming’s preliminary, unaudited financial results for the year ended December 31, 2020, compared with 2019 results. The information was released on March 4, 2021.
Financial performance and liquidity
| Metric | 2020 | 2019 | Change |
|---|---|---|---|
| Revenue | €185.7 million | €169.0 million | 9.9% |
| Gross profit | €165.1 million | €147.7 million | 11.8% |
| Operating profit | €67.4 million | €60.9 million | 10.7% |
| Net finance cost | €28.5 million | €14.5 million | 96.9% |
| Profit for the year | €32.7 million | €36.2 million | (9.8%) |
| Operating cash flow | €74.0 million | €66.5 million | 11.2% |
| Cash and cash equivalents, including restricted cash | €168.3 million | €68.6 million | 145.3% |
| Basic earnings per share | €0.051 | €0.058 | (12.1%) |
Gross margin was approximately 88.9% in 2020, compared with approximately 87.4% in 2019. Operating margin was approximately 36.3%, compared with 36.0%, while net margin declined to approximately 17.6% from 21.4%.
U.S. revenue increased to €177.4 million from €162.7 million, while Europe and the rest of the world increased to €8.3 million from €4.9 million. Cost of sales declined to €20.6 million from €21.4 million, reflecting higher sales and manufacturing economies of scale. Operating costs increased to €99.3 million from €87.2 million, driven by higher sales activity, research and development, headcount and general and administrative costs.
Net finance cost increased primarily because of negative foreign-exchange effects, including €12.6 million related to U.S. dollar-denominated cash reserves and additional effects on U.S. dollar revenue. Lower interest expense following repayment of the Orbimed loan partly offset these costs.
Cash growth reflected €74.0 million of operating cash flow and €122.7 million of net convertible-bond proceeds, partly offset by €50.1 million of loan repayment, €18.1 million of contingent-consideration payments, investments and €12.6 million of negative currency effects. Shareholders’ equity increased to €146.3 million from €104.7 million.
Pharming issued €125 million of senior unsecured convertible bonds due 2025. At year-end, the balance sheet included approximately €123.6 million of convertible bonds and no loans and borrowings; liquidity therefore improved materially, although leverage increased through the new bonds.
Material changes versus 2019
- Revenue and operating profit grew, primarily from continued RUCONEST sales growth in the United States and expanding European operations.
- Net profit declined despite higher operating profit because of substantially higher finance costs and foreign-exchange losses.
- Operating cash flow increased to €74.0 million, and year-end cash and restricted cash rose by €99.7 million.
- The Orbimed loan was repaid in full using proceeds from the convertible-bond offering, extending debt maturity to 2025 but creating new convertible-bond obligations.
- The company completed a secondary listing of American Depositary Shares on Nasdaq and converted from a two-tier to a one-tier board structure.
- Capital investment increased, including €4.1 million in property, plant and equipment and investments to expand manufacturing and processing capacity.
- Pharming paid €7.5 million related to the reacquisition of European RUCONEST commercial rights from Swedish Orphan Biovitrum.
Guidance, outlook, risks and unusual items
For 2021, management expects continued RUCONEST revenue growth, mainly from the United States and expanded European operations, while noting that quarterly revenue may fluctuate because of COVID-19 effects and ordering patterns. Management expects positive net earnings and does not expect additional financing to maintain the current business. No further specific financial guidance was provided.
Planned spending includes production expansion for RUCONEST and leniolisib, leniolisib pre-marketing and registration-enabling studies, ongoing clinical development, and potential acquisitions or in-licensing transactions. Management expected a potential leniolisib launch in the second half of 2022, subject to regulatory approval and clinical progress.
COVID-19 affected sales and marketing activity, clinical-trial recruitment, manufacturing consumables and supply chains. Trials for pre-eclampsia and acute kidney injury remained halted. RUCONEST production, availability and distribution were not materially affected as of the report date. RUCONEST studies for severe COVID-19 pneumonia continued, but their commercial and regulatory outcomes remain uncertain.
Key risks include clinical, scientific, regulatory and technical development risks; delays or increased costs in clinical trials; supply-chain disruption; COVID-19 impacts; foreign-exchange volatility; dependence on RUCONEST; and the uncertainty of regulatory approval for leniolisib and other pipeline products. The filing’s financial results are preliminary and unaudited.
Investor verification checklist
- Verify the final audited 2020 results and any differences from the preliminary figures.
- Reconcile year-end cash, restricted cash, convertible-bond balances and remaining contingent-consideration obligations.
- Assess the effect of U.S. dollar exchange rates on finance costs, cash balances and reported earnings.
- Monitor RUCONEST sales growth, U.S. ordering patterns and the company’s European commercial expansion.
- Track regulatory and clinical milestones for leniolisib, including the expected potential launch timing, and for RUCONEST programs.
- Evaluate the financial impact and timing of the final $25 million Bausch Health milestone, scheduled for payment in the second quarter of 2021.
- Confirm whether COVID-19-related trial, supply-chain and customer-access disruptions affect 2021 performance or development timelines.