Pharming Group N.V. — Q3 2023 Form 6-K Summary
Business context and reporting period
Pharming Group N.V. is a Netherlands-based biopharmaceutical company commercializing RUCONEST® for acute hereditary angioedema attacks and Joenja® (leniolisib) for activated phosphoinositide 3-kinase delta syndrome (APDS). The filing reports preliminary, unaudited results for the three and nine months ended September 30, 2023, furnished on Form 6-K on October 26, 2023.
Financial performance and liquidity
| US$ millions, except per-share data | Q3 2023 | Q3 2022 | 9M 2023 | 9M 2022 |
|---|---|---|---|---|
| Revenue | 66.7 | 54.2 | 164.1 | 151.0 |
| Gross profit | 58.4 | 51.9 | 146.0 | 139.7 |
| Operating profit/(loss) | 1.9 | 7.8 | (6.5) | 28.4 |
| Profit/(loss) for period | 3.5 | 9.1 | (7.4) | 28.3 |
| Basic EPS | 0.005 | 0.014 | (0.011) | 0.043 |
- Q3 revenue increased 23% year over year, driven by RUCONEST revenue of US$60.2 million and initial U.S. Joenja revenue of US$6.5 million. Nine-month revenue increased 9% to US$164.1 million.
- RUCONEST revenue increased 11% year over year in Q3 and 2% year to date to US$153.8 million. The U.S. generated 97% of RUCONEST revenue in Q3, with Europe and the rest of the world contributing 3%.
- Joenja generated US$10.3 million in nine-month revenue following U.S. FDA approval in March 2023. At September 30, 76 APDS patients were enrolled and 63 were receiving paid therapy.
- Q3 gross margin was approximately 87.6%, compared with 95.8% in Q3 2022. Nine-month gross margin was approximately 89.0%, compared with 92.5% in the prior-year period. The decline reflected higher RUCONEST production costs, foreign-exchange effects and Joenja royalties.
- Q3 operating margin was approximately 2.8%, compared with 14.4% in Q3 2022. The nine-month operating margin was approximately negative 3.9%, compared with 18.8% in 9M 2022.
- Nine-month operating expenses increased by US$48.4 million, including US$10.5 million of Joenja milestone payments, US$17.4 million of leniolisib-related research, commercialization, market-access and amortization costs, and US$17.1 million of higher payroll expenses.
- Nine-month operating cash flow was negative US$28.9 million, compared with positive US$17.2 million in 9M 2022. Investing cash flow was negative US$125.5 million, primarily reflecting purchases of marketable securities, partly offset by US$21.1 million of proceeds from a priority review voucher sale.
- Cash, restricted cash and marketable securities totaled US$199.2 million at September 30, 2023, compared with US$208.7 million at December 31, 2022. Cash and cash equivalents alone were US$54.7 million, with US$142.9 million of current marketable securities.
- Total assets were US$436.5 million and equity was US$209.9 million. Debt included US$131.5 million of convertible bonds, consisting of US$129.7 million non-current and US$1.7 million current, plus US$32.5 million of lease liabilities.
Material changes versus the prior comparable period
- Commercial revenue growth accelerated through the U.S. Joenja launch while RUCONEST also delivered year-over-year growth.
- Profitability deteriorated despite higher revenue because of increased commercialization, research and development, payroll, milestone and amortization costs. The company moved from a nine-month operating profit of US$28.4 million to a US$6.5 million operating loss.
- Nine-month net income changed from a US$28.3 million profit to a US$7.4 million loss. The comparison was also affected by lower net finance gains and foreign-exchange benefits than in 2022.
- Liquidity declined modestly from year-end on a combined cash, restricted cash and marketable-securities basis, while the company shifted substantial cash into marketable securities.
Guidance, outlook, risks and unusual items
- Management remains on track for low-single-digit full-year 2023 RUCONEST revenue growth. No further specific 2023 financial guidance was provided.
- Pharming anticipated an EMA CHMP opinion on leniolisib in the fourth quarter of 2023; subject to a positive opinion, European marketing authorization was expected approximately two months later. A U.K. filing was planned shortly after a positive CHMP opinion.
- Regulatory submissions in Canada and Australia were progressing toward anticipated approvals in the second quarter of 2024, while Israel approval was expected in the first half of 2024. A Japanese Phase III trial had begun.
- Pediatric leniolisib trials were progressing for patients aged 4–11 and 1–6 years. The company was also evaluating additional leniolisib indications and continuing preclinical OTL-105 work.
- Management expects available cash, ongoing RUCONEST and Joenja cash flows to fund planned investments, but continued spending on commercialization, clinical development and market access is expected to weigh on profit during 2023. Potential acquisitions or in-licensing could be financed through the balance sheet and capital markets if required.
- Key risks include regulatory approval and launch timing, patient identification and reimbursement for Joenja, clinical-trial outcomes, competitive HAE dynamics, commercialization costs, foreign-exchange movements and funding needs. The interim financial statements were unaudited, and the company stated that risks in its 2022 Annual Report continued to apply.
- Unusual items included a US$10.5 million Joenja milestone payment, US$21.1 million of priority review voucher-sale proceeds, increased leniolisib-related costs and US$0.9 million of costs related to discontinuing the Pompe disease program.
Important facts for investors to verify
- Progression from enrolled APDS patients to paid Joenja therapy, reimbursement approvals and patient-finding results.
- Actual EMA, U.K., Canadian, Australian, Israeli and Japanese regulatory outcomes and launch timing.
- RUCONEST fourth-quarter performance and whether full-year low-single-digit growth is achieved.
- Operating cash burn, conversion of marketable securities into usable liquidity and the sustainability of cash flows as commercialization spending continues.
- Future milestone, royalty, research and development, payroll and acquisition-related commitments, including the terms and maturity profile of the convertible bonds.
- Whether pediatric trials and additional-indication development generate incremental value without materially increasing funding requirements.