Lotus Pharmaceuticals (1795:TT), a multinational pharmaceutical company, today reported its financial results for the third quarter ended 30 September 2022.
Third quarter financial highlights:
- Third quarter 2022 is the best quarter ever in the Company’s history majorly driven by the successful launch of Lenalidomide (generic of Revlimid®) in the US – the biggest launch in Lotus history so far. Basic EPS for the first nine months ended 30 September 2022 totaled NT$10.96, setting the course for the Company to achieve another record year in 2022.
- Consolidated net sales were NT$5,389 million, representing a growth of 85.2% over the last quarter and 76.3% versus prior year period.
o Export Business was the main growth driver, contributed by the successful launch of Lenalidomide in the US, as well as the first delivery to Brazil, the largest market in Latin America. Sales from Export increased 245% compared to last quarter and 183% compared to same period last year.
o Asian Business continued to grow for the third consecutive quarter, 3.2% over last quarter,also 10.8% over the same period last year when excluding foreign exchange impact. Key brands in major markets, including Korea, Taiwan, and Thailand, continued the growth momentum.
- Gross margin rose to 67.9%, driven by product mix with higher contribution from more profitable export oncology products during the quarter.
- Comparing to the prior year, operating profits grew by 353%, to NT$2,641 million, with 49.0% operating margin for the quarter, mainly driven by higher gross margin.
- Historic high third quarter EPS of NT$7.97 led the first 9 months basic EPS landed at NT$10.96.
Robert Wessman, Chairman of Lotus said: “I am very happy to share such a record setting quarter that will most certainly lead to the most profitable year in Lotus’s history. Thanks to the team’s strong commitment and well execution, Lotus delivered the most important product launch since the Company’s inception. Lenalidomide is among the first wave of global oncology products fully developed and manufactured in its facilities in Taiwan. With Lenalidomide launch in the US, the largest market in the world and the first delivery to Brazil, the largest market in South America, Lotus has achieved major milestones of its transformation to a global oncology player. I am confident that the team will continue to set records with further achievements driving sustainable growth.”
Petar Vazharov, Chief Executive Officer of Lotus, continued to indicate: “I would like to use the opportunity to congratulate our partner Alvogen as well as Lotus with the successful launch of Lenalidomide and express my gratitude for the excellent collaboration and outstanding execution by both teams. Lotus will continue to build US pipeline and the recent tentative approval of the generic Midostaurin softgel capsules from the US FDA is a testimony to that. Lotus believes that this is a potential first-to-file opportunity and expects to launch the generic Midostaurin softgel capsules subject to the intellectual property clearance in the US. Another important milestone occurred during the quarter is Lenalidomide filing in Japan, and similar to the US, we are ramping up a robust pipeline of products for Japan market based on strategic partnership.
The Asian markets also performed very well during the quarter by delivering strong growth in all major markets. In particular, Taiwan continued to outperform, increasing by over 80% over the same period last year and nearly 20% versus the previous quarter, mainly driven by flagship brands Cialis and Evista. The approval of Alyssa®, innovative oral contraceptive in-licensed from Mithra, in both Taiwan and Hong Kong during the quarter is a milestone in building strong women healthcare franchise.
Lotus received during this quarter from the HR Asia 2022 “Best Companies to Work for in Asia” award, which is a major recognition for the Company and our employees. I am very pleased with the award achieved after significant transformation of the Company and the record results.
Lotus’s success during recent years provides necessary financial resources to continue investing in new products, new partnerships, entering new markets and, at the same time, provide returns to our shareholders. We believe this is the beginning of a new chapter of Lotus’s growth story.”
Operational results for the third quarter 2022
Total net sales were NT$5,389 million, comparing to NT$3,058 million for the same period last year, representing an increase of 76.3%, or 78.9% excluding the unfavorable impact on foreign exchange between the Korean Won and New Taiwan Dollar.
- Net sales from Asian Business continued to grow for three consecutive quarters and increased by 6.4%, or 10.8% excluding the foreign exchange impact, over the same period last year. Taiwan grew over 80% comparing to the same period last year, thanks to the newly created drugstore business spearheaded by Cialis, an erectile dysfunction brand, and the osteoporosis franchise. Businesses in both Thailand and Korea also saw solid growth, especially when accounting for the foreign exchange differences.
- Export Business outside of Asia surged by 183% comparing to the same period prior year, mainly contributed by the successful launch of Lenalidomide in the US and the first delivery in Brazil.
Gross margin was 67.9%for the quarter, significantly higher than 45.3% for the same period 2021 and 47.4% in the previous quarter. The difference was mainly explained by more revenues coming from more profitable export segment.
R&D expenses was NT$203 million for the three months ended 30 September 2022, a 66.6% increase compared to a year before due to the cessation of one R&D project and thus recognizing the impairment charge of approximately NT$93 million, slightly offset by less R&D spending during the quarter.
SG&A expenses saw an increase of 19.7% compared to the same prior year period, mostly driven by higher amortization of the newly-acquired Cialis and Evista brands in Taiwan and higher personnel expenses with more headcounts to expand the business.
The Company delivered a historical high operating margin of 49.0% for the quarter, versus 19.1% for the comparable period last year and 16.8% for the prior quarter, resulted from the improved gross margin while maintaining a similar level of operating expenses.
During the quarter, the Company generated steadily cash inflow from operations and had net inflow of NT$1,123 million from operations before tax and interest. Its net gearing has gone down due to increasing profitability. The Company’s net debt to LTM EBITDA ratio landed at 1.23x as of the third quarter 2022, compared to 1.45x as of the same period last year.
Exceeding the expectation, the Company reported an EPS of NT$7.97 for the third quarter 2022 and NT$10.96 for the first nine months ended 30 September 2022.
Pipeline and business development update
During the third quarter 2022, Lotus made several achievements to further expand the addressable markets with more diversified portfolio through internal R&D as well in-licensing business development deals. 15 submissions were made in total, among which 11 in Asia including Lenalidomide in Japan. 4 more were made by its global partners for its leading oncology products, including Tofacitinib, indicated for rheumatoid arthritis (RA), successfully filed in South Africa. 24 approvals were granted during the quarter, including Alyssa®, the first and only oral contraceptive drug containing estetrol, a native estrogen (E4) and drospirenone (DRSP), licensed from Mithra in both Taiwan and Hong Kong to strengthen its existing women healthcare portfolio. The approval of Pomalidomide in Taiwan also marked another important milestone for Lotus to further solidify its leading position in oral oncology space worldwide.
- As of the third quarter 2022, the Company has 95 countries covered in the world for its Lenalidomide, and during the quarter, it has successfully delivered the most important launch in the single largest market US – 65 countries approved, 22 countries under registration, and 8 submissions under preparation. In addition to the US, the Company also made the first delivery to Brazil, the most important market in Latin America, and made its Lenalidomide now is available in 43 countries around the world.
- Addressable markets are also continuously expanding for Lotus’s other leading portfolio globally – as of the third quarter 2022, more than 50 countries are covered for its Gefitinib, Vinorelbine, and Sunitinib, more than 30 countries are covered for its Enzalutamide and Pazopanib. In addition to the tentative approval from the US FDA, the Company’s Midostaurin has also been under registration in Canada. As for its Pomalidomide, there are 17 countries covered as of the quarter end.
- Among the second-wave oncology portfolio, the Company has launched its Enzalutamide in 4 countries, including the newly-approved Taiwan, and added Israel as the 22nd market for its Vinorelbine around the world.
In addition to its internal R&D projects continuously building up, the Company has signed 2 more business development deals during the quarter and has 20 projects under advanced negotiation to accelerate the substantial growth for both top line and bottom line.