Recipharm AB : publishes report for the fourth quarter and full year 2020

October - December 2020

· Net sales amounted to SEK 2,812 million (1,981), an increase of 42%
· EBITA increased by 65% and amounted to SEK 378 million (230) corresponding to an EBITA margin of 13.5% (11.6)
· Operating profit (EBIT) amounted to SEK 339 million (117) and was affected by non-recurring items of SEK +54 million (-52)
· Profit after tax amounted to SEK 223 million (90) corresponding to a net margin of 7.9% (4.5)
· Earnings per share amounted to SEK 2.20 (1.32) before dilution and SEK 2.19 (1.32) after dilution. Core EPS amounted to SEK 1.40 (2.55)
· Leverage decreased from 5.1 end of September to 4.4 at the end of the quarter

January - December 2020

· Consort Medical consolidated from February 2020
· Net sales amounted to SEK 11,069 million (7,457), an increase of 48%
· EBITA increased by 66% and amounted to SEK 1,305 million (788) corresponding to an EBITA margin of 11.8% (10.6)
· Operating profit (EBIT) amounted to SEK 842 million (494) and was affected by non-recurring items of SEK -86 million (-52)
· Profit after tax amounted to SEK 339 million (343) corresponding to a net margin of 3.1% (4.6)
· Non-recurring items affected profit after tax with SEK -117 million (-49)
· Earnings per share amounted to SEK 3.97 (5.06) before dilution and SEK 3.97 (5.06) after dilution. Core EPS amounted to SEK 6.86 (7.09)
· Share issues of SEK 2.5 billion in total completed during the year

Recipharm has been able to complete the report already now. Accordingly, this is the final report and not, as stated earlier, a preliminary report.

Thomas Eldered, CEO: 

Exploring opportunities while generating record margins

"We continue to make good progress on the implementation of our strategy.  With a strong comparison quarter, we still managed to achieve organic sales growth of 6 per cent in continuing operations. Despite currency headwinds significantly impacting revenue and profits, we have delivered 65 per cent EBITA growth and 69 per cent adjusted EBIT growth, significantly ahead of the 42 per cent reported sales growth. Cash flow was good and leverage decreased materially from 5.1 in the third quarter to 4.4 at the end of the year. We have almost reached all our financial long-term targets already 2020 which was sooner than planned.

I am pleased to note that during the quarter we reached agreements with two US based companies, Arcturus Therapeutics and Moderna Therapeutics, to manufacture their mRNA-based COVID-19 vaccines. These demanding projects are strategically very important contracts for us and should provide further opportunities in biologics. The two vaccines require different manufacturing processes, but they have very demanding timelines and novel technologies in common. Vaccine projects generated combined revenue of approximately SEK 48 million during the quarter from products, services and set-up fees. We anticipate that we will supply commercial markets for both these vaccines during 2021. There is still an uncertainty regarding total volume demand. However, we are allocating significant capacity to these vaccines and we expect them to have a material positive financial impact going forward. Currently we have orders and purchase commitments for 2021 of approximately SEK 350 million in total associated with COVID-19 vaccines. Any additional vaccine sales will have significantly higher margin than other injectables. 

Our COVID-19 strategy has been effective in protecting our employees and safeguarding business continuity. We continue to operate with enhanced safety protocols causing somewhat lower operating efficiencies. We have also seen some impact on end-market demand of non-COVID-19 related products in all segments, but this is believed to be a temporary effect. In general, we are enjoying a positive business momentum with several important contracts being implemented and new opportunities at a record level.  This is a confirmation of our tight operations control and our agility during this year's challenging conditions.

The execution of our road map to deliver cost and revenue synergies from our acquisition of Consort Medical has delivered SEK 28 million of operating cost synergies in the quarter. We estimate that we now have implemented activities with an annual run rate cost synergy saving of SEK 123 million of the increased target of SEK 140 million to be achieved by the second quarter 2021. Beyond the cost synergies we are now shifting to operational improvements in the acquired entities.  We have started to share best practise and to implement efficiency improvement activities and during the quarter we could already see performance improvements, ahead of plan. The major commercial synergies will come from 2022 when we will start to see material benefits in the combined Advanced Delivery Systems segment but until that we will, as in this quarter, see somewhat softer performance in that segment. We expect 2021 EBITA to be largely in line with 2020 with an upside potential from additional COVID-19 related demand, primarily for vaccines.

Our efforts during past years to build a resilient top 5 CDMO with global reach will continue to bring benefits to customers and patients. Our short-term priorities are to continue with measures to keep our employees and customers safe and to stay focused on executing our initiatives while capturing several of the interesting growth opportunities that now lie ahead of us. This requires increased capital expenditures over the next couple of years. For 2021 we plan for capex of approximately 9 per cent of sales, to be consider in relation to our current leverage situation. Leverage will also restrict possibilities to participate in industry consolidation in the near term, even though we have the management capacity for further acquisitions. Meanwhile we have a sense of purpose and pride being part of the global fight against the COVID-19 pandemic and we will do our utmost to respond to the uncertainties and challenges we may encounter.

Finally, I would like to sincerely thank all our 9,000 employees around the world for their tremendous work despite very difficult circumstances. I am proud and impressed of the level of commitment I have seen." 

The complete report is attached through the link at the end of the press release.

Contact information
Thomas Eldered, CEO, telephone: [phone]
Tobias Hägglöv, CFO, [e-mail], [phone]

This information is information that Recipharm AB is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact persons set out above, on 28 January 2021, at 07:45 CET.

About Recipharm
Recipharm is a leading Contract Development and Manufacturing Organisation (CDMO) in the pharmaceutical industry employing almost 9,000 employees. Recipharm offers manufacturing services of pharmaceuticals in various dosage forms, production of clinical trial material and APIs, pharmaceutical product development and development and manufacturing of medical devices. Recipharm manufactures several hundred different products to customers ranging from big pharma to smaller research and development companies. Recipharm's annual turnover is approximately SEK 11 billion. The company operates development and manufacturing facilities in France, Germany, India, Israel, Italy, Portugal, Spain, Sweden, the UK and the US and is headquartered in Stockholm, Sweden. The Recipharm B-share (RECI B) is listed on Nasdaq Stockholm.

For more information on Recipharm and our services, please visit www.recipharm.com 

Recipharm AB (publ)
Corporate identity number 556498-8425
Address Box 603, SE-101 32 Stockholm, Sweden, Telephone [phone]
www.recipharm.com

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