Focused and Simplified
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Quantum Pharma Plc Annual Report and Accounts 2017 Focused and simplified Quantum Pharma Plc Annual Report and Accounts 2017 In this report Quantum Pharma Plc is a service-led niche pharmaceutical developer, manufacturer and supplier to the retail pharmacy, pharmaceutical wholesaler, hospital and homecare markets. Market review Business model Strategy Page 6 Page 8 Page 18 Read about the UK’s prescribing Read more about the Group’s Read more about the Group’s hierarchy, the role of unlicensed and key strengths and competitive refreshed focused and simplified licensed medicines within it and how advantages that set it apart strategy that aims to leverage this offers growth opportunities for in the market and equip it to the strengths of the core Specials the Group. deliver growth. and Niche divisions. www.quantumpharmagroup.com Strategic report 1 Highlights of the year Contents Financial highlights Key developments Strategic report All figures are for continuing operations • Transition to a more focused and Highlights of the year 1 unless otherwise stated. simplified business strategy led by At a glance 2 • Revenue increased by 28% to £88.8m a new Board. Chairman’s statement 4 (2016: £69.2m). • Group repositioned with a leaner Market review 6 • Gross profit remained flat at £25.9m operating structure and balance sheet Business model 8 (2016: £25.9m). aligned to simplified strategy. • Adjusted EBITDA1 of £10.1m (2016: • Secured renewal of long-term exclusive Chief Executive Officer’s review 10 £12.5m) with run-rate profitability contracts to supply unlicensed medicines Chief Financial Officer’s review 14 increasing. to three of the largest wholesale and Non-GAAP measures 17 • Statutory operating loss of £9.8m pharmacy chains in the UK. Strategy 18 (2016: £7.5m profit) resulting from • Successfully launched a number of Key performance indicators 20 decisive and one-off actions to simplify new products during the year and post Principal risks and uncertainties 22 and focus the business. year-end, including key unlicensed- Corporate social responsibility 24 • Net debt1 reduced by almost half to to-licensed product Glycopyrronium £13.0m (2016: £24.6m). Bromide Oral Solution 1mg/5ml. Directors’ report • Simplified product portfolio performing well and refocused pipeline progressing Introduction from the Chairman 29 to plan. Board of Directors 30 • Successful placing in November 2016, Senior executives 32 raising £15.0m (before expenses) to Corporate governance statement 34 significantly reduce net debt. Directors’ report 37 • Closure of loss-making business NuPharm Laboratories Limited. Directors’ remuneration report 41 Financial statements Independent Auditor’s report 45 2015 61.7 2015 12.2 Consolidated income statement 46 2016 69.2 2016 12.5 Consolidated statement of comprehensive income 46 2017 88.8 2017 10.1 Consolidated balance sheet 47 Consolidated statement Group revenue Adjusted EBITDA1 of changes in equity 48 Consolidated cash flow statement 49 Notes forming part of the £88.8m £10.1m financial statements 50 Company balance sheet 76 Company statement of changes in equity 77 2015 1.3 2015 9.0 Notes forming part of the Company statements 78 2016 4.7 2016 24.6 (6.7) 2017 2017 13.0 (Loss) earnings per share2 from Net debt 1 continuing operations (6.7p) £13.0m 1. Adjusted EBITDA and net debt are non-GAAP measures of profit and indebtedness respectively that the Group uses internally to measure business performance. The definitions of adjusted EBITDA and net debt are on page 17 and a reconciliation of adjusted EBITDA to statutory operating profit is set out on page 15. 2. (Loss) earnings per share is calculated using the average number of shares in issue for each period: 2017: 134.8m; 2016: 125.0m; 2015: 54.5m. Quantum Pharma Plc Annual Report and Accounts 2017 2 Strategic report At a glance A service-led niche pharmaceutical developer, manufacturer and supplier to the health and care sectors The Group operates through three trading divisions incorporating 2017 Group revenue1 eight business units across seven locations in the UK and Europe, breakdown offering a portfolio of innovative and synergistic products and services. £88.8m The Group’s strategic focus centres on two product development and licensing pipeline. key pillars represented by the Specials and The Niche division benefits from an in-house Niche Pharmaceuticals (‘Niche’) divisions. product development capability that manages the Group’s development pipeline alongside Specials a range of projects for third-party customers. Manufacture and supply The Specials division operates in the UK’s Licensing products, particularly those specials market where it manufactures, currently prescribed as specials, represents procures and supplies unlicensed medicines a growth opportunity for the Group. For more and imported medicines licensed abroad information of the UK’s prescribing hierarchy (collectively referred to as ‘specials’), and and the role of specials and licensed products special obtains. Its customers include the within the healthcare industry, turn to page 6. Specials main wholesale and retail pharmacy chains in Niche Pharmaceuticals the UK, with a number of these relationships Medication Adherence underpinned by exclusive supply agreements, Homecare and medication management Medication Adherence as well as hospitals. The division also operates The Group’s visibility over prescribing a dedicated aseptics compounding unit that trends and growth medicines has been manufactures bespoke intravenous specials complemented by the Medication Adherence 1 to order. division, which dispenses and supplies 2016 Group revenue medicines into the homecare market and breakdown The Specials division responds to prescription provides medication management services requests from healthcare professionals. It can through its innovative multi-dose tray system. deliver bespoke specials across a variety of £69.2m dosage forms and strengths in as little as Following implementation of the Group’s new 15 hours through its in-house, state-of-the-art strategy during the second half of this year, compounding and manufacturing facilities. which aims to tighten focus on the growth opportunities available to the Specials and The division therefore occupies a leading Niche divisions, the long-term fit of Medication position in the specials market that enables it Adherence within the Group is under review. to track shifts in demand for medicines across A more detailed explanation of the Group’s the community and hospital pharmacy sectors. new strategy is included in the Chief Executive Officer’s review on page 10, and in the strategy Niche summary on page 18. Develop and supply The Niche division uses this insight into the specials market, together with other data, to Specials identify where patient demand for a particular special is high. These products are assessed Niche Pharmaceuticals to determine their suitability to enter the Group’s Medication Adherence 1 From continuing operations Quantum Pharma Plc Annual Report and Accounts 2017 Strategic report 3 Specials Niche Medication Pharmaceuticals Adherence The Specials division comprises The Niche Pharmaceuticals The Medication Adherence division three business units that division comprises three business comprises two business units that manufacture, procure and supply units that develop, license and provide products and services to unlicensed medicines, special commercialise medicines with support patients in adhering to their obtains and imported medicines a particular focus on those medication regime, patient-focused licensed abroad. currently prescribed as specials. homecare services and services to pharmaceutical companies. The Specials division is the most The Niche Pharmaceuticals division uses The Medication Adherence division established of all the divisions, is profitable the excellent visibility of trends in the UK provides the Group with direct access and cash generative and provides the pharmacy and hospital markets gained to the homecare market. Group with a strong platform. Around 89% through the Specials division to supplement of unlicensed medicines and special external market data analysis, allowing early Key developments obtains volumes supplied into the retail and identification of opportunities to take products • Strong growth in homecare and wholesale pharmacy markets are under from unlicensed-to-licensed status (‘UL2L’). fertility volumes, particularly following exclusive supply contracts with customers. commencement of a major contract The division has a growing portfolio and with the Yorkshire and Humber NHS Key developments pipeline of UL2L products, as well as Pharmaceutical Purchasing Consortium. • Unlicensed medicines and special obtains complementary larger niche generic products • Following development of the Group’s volumes grew moderately despite market across a number of therapeutic areas that focused and simplified strategy (details and competitive pressure. the Group aims to commercialise either of which are explained on pages 18 and • Sales volumes of imported licensed independently or in partnership with other 19), a strategic review of the Medication medicines into the hospital sector pharmaceutical businesses. Adherence division has commenced. also grew. • New five-year contract extension signed Key developments with AAH Pharmaceuticals Limited, the • Launched a number of products during UK’s leading pharmaceutical wholesaler. the year and post year-end, including • Contract renewals with Phoenix Glycopyrronium