Pharming Group N.V. Form 6-K Summary
Business context and reporting period
Pharming Group N.V. reported preliminary, unaudited results for the nine months ended September 30, 2022. The company commercializes RUCONEST® for acute hereditary angioedema and is preparing the regulatory approval and launch of leniolisib for activated PI3K delta syndrome (APDS).
Financial performance and liquidity
| Metric | 9M 2022 | 9M 2021 | Change |
|---|---|---|---|
| Revenue | US$151.0 million | US$146.1 million | 3% |
| Gross profit | US$139.7 million | US$130.6 million | 7% |
| Operating profit | US$28.4 million | US$15.3 million | 86% |
| Profit for the period | US$28.3 million | US$13.9 million | 104% |
| Operating cash flow | US$17.2 million | US$21.9 million | Decrease |
| Cash and marketable securities | US$189.9 million | US$184.8 million | 3% |
Gross margin was approximately 92.5%, operating margin approximately 18.8%, and net margin approximately 18.7%. Operating costs increased to US$126.9 million from US$117.1 million, reflecting higher research and development, leniolisib launch preparation, manufacturing, and post-COVID travel costs. The 2021 period included US$13.1 million of OTL-105 in-licensing expense.
Profit growth was significantly supported by US$15.6 million of other income versus US$1.8 million in the prior-year period, including a US$13.8 million benefit associated with the reduced minority stake in BioConnection. Net finance income was US$5.3 million, and profit before tax was US$33.1 million.
Cash and cash equivalents were US$188.7 million at September 30, 2022, compared with US$191.9 million at December 31, 2021. Including restricted cash, total cash was US$189.9 million. Convertible bonds totaled approximately US$121.6 million, including current and non-current amounts. Shareholders’ equity was US$200.3 million.
Cash flow from investing activities was positive US$5.7 million, primarily reflecting US$7.4 million received from an investment in an associate. Financing cash flow was negative US$5.3 million, mainly due to lease and interest payments. Exchange-rate effects reduced cash by US$20.9 million.
Material changes versus the prior comparable period
- Revenue increased 3%, supported by stable and growing RUCONEST® sales.
- Gross profit increased 7%, aided by production efficiencies and favorable currency translation.
- Operating profit and net profit increased substantially, primarily because of higher other income and the absence of the prior-year OTL-105 in-licensing charge.
- Operating cash flow declined from US$21.9 million to US$17.2 million, partly due to increased inventory and income taxes paid.
- Pharming reduced investment in large-scale rhC1INH production for Acute Kidney Injury and discontinued further development of that indication, while continuing to evaluate strategic options.
- The company continued expanding its US field force and investing in leniolisib launch preparations, which are expected to weigh on profitability through 2023.
Guidance, outlook, risks, and unusual items
- For 2022, management expects single-digit growth in Group revenue from RUCONEST® sales, with quarterly fluctuations.
- Leniolisib received FDA Priority Review with a PDUFA goal date of March 29, 2023. Subject to approval, US authorization is expected in the first quarter of 2023 and launch in the second quarter.
- The EMA marketing authorization application received accelerated assessment; European authorization is anticipated in the first half of 2023, with initial EU launches planned for the second half of 2023, subject to regulatory approval.
- The company plans to use the UK European Commission Decision Reliance Procedure following a positive EMA opinion, with an anticipated UK decision in the second half of 2023.
- Pediatric leniolisib studies for patients as young as one year were expected to begin recruitment in the fourth quarter of 2022.
- Management expects RUCONEST® cash generation and the existing balance sheet to fund current operations and leniolisib launch investments without additional financing. Potential acquisitions or in-licensing could require capital-market funding.
- OTL-105 gene-therapy development with Orchard Therapeutics remains in preclinical development. Pompe disease work remains preclinical.
- The principal risks include regulatory approval and launch timing, clinical and technical development, commercialization, costs, foreign exchange, and the ability to identify or finance additional rare-disease assets. The interim financial statements were not audited.
Investor verification points
- Verify the regulatory status and subsequent outcome of the FDA and EMA reviews for leniolisib, including the March 29, 2023 PDUFA date.
- Assess whether RUCONEST® revenue growth and cash generation support planned leniolisib commercialization spending.
- Review the composition and maturity profile of the approximately US$121.6 million of convertible bonds and other liquidity obligations.
- Separate recurring operating performance from the US$13.8 million benefit related to the BioConnection transaction and other unusual income.
- Monitor the impact of currency movements, which reduced reported cash by US$20.9 million during the period.
- Evaluate the financial and strategic consequences of discontinuing Acute Kidney Injury development and pursuing potential acquisitions or in-licensing.