Lotus Pharmaceutical (1795:TT), a multinational pharmaceutical company, today reported its financial results for the second quarter ended 30 June 2022.
Second quarter financial highlights:
- A solid quarter with both the top line and bottom line meeting the expectation. Financial performance is tending toward achieving the higher end of the full year target.
- Consolidated net sales were NT$2,910 million, reflecting 16.0% decrease versus prior year period, but 13.3% excluding unfavorable impact on foreign exchange between Korean Won and New Taiwan Dollar.
◆ Asian Businesses grew over 10% over last quarter and almost 8% over the same period last year, or 13% excluding Korean Won versus New Taiwan Dollar exchange impact. Korean and Taiwan brand businesses led the strong growth.
◆ Export outside of Asia decreased 31% compared to last quarter and 42% compared to prior year period, due to the absence of Lenalidomide EU launch in the previous quarter and generic Suboxone stock build in the first half 2021. - Gross margin returned to 47.4% after the manufacturing issues resolved for generic Suboxone incurred last quarter.
- Second quarter EPS was NT$1.26 and the first half 2022 EPS totaled NT$2.97, comparable to the same period of 2021, despite the absence of the generic Suboxone stock build this year.
Petar Vazharov, Chief Executive Officer of Lotus, said: “We are very pleased with another great quarter delivered in line with our expectation. As expected, without the generic Suboxone stock build this year, we had lower sales in this quarter and the first half in the Export Business, while the Asian Businesses stepped up strongly. Our Korea and Taiwan units achieved double digit growth over the same period last year. In particular, the Taiwan businesses grew almost 50% versus the same period last year and nearly 30% versus the previous quarter. Moreover, we are deploying our own sales and marketing field force and expanding our portfolio into Vietnam and Philippines, which will start to deliver strong growth in the following quarters and years from these key SEA markets.
Export wise, we continued to deliver important milestones. During the quarter, our internal R&D completed the pivotal studies of our first co-developed high value generic product with Fuji for Japan market and we will soon be submitting our application with the authorities accordingly. We also received the marketing authorization of Lenalidomide in Brazil, making Lotus as one of the few Taiwan-based pharmaceutical companies capable of supplying complex oncology product to major markets in Latin America. As of today, our first true global product, Lenalidomide, is already available in more than 40 countries around the world and the preparation for the largest launch is on track as scheduled.
At the same time, we are securing more pipeline via business development and equity investment to accelerate the growth. 12 business development deals were signed year-to-date, including brand, 505(b)2 and long acting injectable, and 12 more projects are under negotiation, including biosimilar and peptide, to enhance the completeness of our product portfolio.
With all these strategic deliverables continuously executed, the management is confident to deliver another record year for the Company and its shareholders.”
Operational results for the second quarter 2022
Total net sales were NT$2,910 million, compared to NT$3,464 million for the comparable period last year, representing a decrease of 16.0%, or 13.3% excluding the unfavorable impact on foreign exchange between the Korean Won and New Taiwan Dollar.
- Revenue from the Asian Businesses continued to grow with Taiwan market being the major contributor during the quarter. The successful relaunch of the erectile dysfunction brand Cialis and expansion of the Osteoporosis brands, Aclasta and Evista, delivered growth close to 50% compared to the same period last year. Korea also saw sequential growth in 2 quarters in a row, mainly led by the continued growth from the branded portfolio, especially Qsymia.
- Export Business was softer, a 42% decrease comparing to the second quarter 2021, mainly due to the replenishment pattern and the customer’s stock build-up plan of generic Suboxone in the US last year. Global Oncology Export sales were also slightly slower, resulted from order fulfillment timing.
Gross margin was 47.4% for the quarter, significantly better than 41.8% for the same period 2021 and 43.4% in the previous quarter. The variance was explained mainly by shelf-stock adjustment due to competitive pricing in the second quarter last year and temporary manufacturing equipment related issues in the first quarter this year.
R&D expenses was NT$108 million for the three months ended 30 June 2022, a 38.3% less compared to a year before due to the cessation of two R&D projects and thus recognizing the impairment charge of approximately NT$100 million last year, slightly offset by more R&D projects kicked off during the quarter.
SG&A expenses saw an increase of 16.8% compared to the same prior year period mostly driven by higher amortization of the newly-acquired Cialis and Evista brands, and less sales and marketing activities in the second quarter last year due to the severe COVID situation in the region.
The Company delivered similar operating margin around 16.8% for the quarter, versus 17.5% for the comparable period last year.
During the quarter, the Company also continued to generate stable cash inflow from operations and made NT$759 million from operations before tax and interest. Its net debt to LTM EBITDA ratio remained stable at 1.83x as of the second quarter 2022.
With all the major deliverables achieved as expected, the Company reported an EPS of NT$1.26 for the second quarter 2022 and NT$2.97 for the first half 2022.
Pipeline and business development update
During the second quarter 2022, Lotus continued to expand the addressable markets with more diversified portfolio, especially in key SEA markets, through internal R&D as well as in-licensing business development deals. 20 submissions were made in total, including 14 in Asia covering Philippines, Hong Kong, Thailand, Bangladesh, Taiwan and Korea to strengthen the Company’s overall product portfolio in the region. 6 more were made by its global partners for its leading oncology products, including Sunitinib and Pomalidomide, in Latin America, MENA, and Africa. 9 approvals were granted during the quarter, including Lenalidomide in Brazil, the most important market in Latin America, Gefitinib and Vinorelbine in Mexico, and Enzalutamide in Europe to further expand the worldwide potentials.
- As of the second quarter 2022, the Company has 95 countries covered in the world, which includes the single largest market in the US and several major European countries, for its Lenalidomide – 59 counties approved with 1 more tentative approval, 26 countries under registration, and 9 submissions under preparation. Moreover, the Company has shipped its Lenalidomide into 2 more international markets during the quarter and thus made it available in 41 countries around the world as of the quarter end.
- There are 54 countries covered for Lotus’s Gefitinib – 37 approved with 28 countries already launched, 11 under registration, and 6 submissions under preparation.
- 50 countries are covered for Lotus’s Vinorelbine – 40 approved including the largest 2 markets globally Taiwan and Vietnam, 4 under registration, and 6 more under preparation. It has launched in 21 countries, with being the first oral dosage generic marketed in Taiwan.
- The Company also has 50 countries covered for its Sunitinib, 38 countries for Enzalutamide, 32 countries for Pazopanib, 2 countries for Midostaurin, and 6 countries for Pomalidomide, as of the quarter end. Among the second-wave oncology portfolio, the Company has launched its Enzalutamide in 3 countries, including Chile and Colombia, and made its fourth Global Oncology product available in global markets.
In addition to its internal R&D projects continuously building up, the Company has signed 6 business development deals, including one long-acting injectable, during the quarter and has 12 more projects under negotiation to accelerate the substantial growth for both top line and bottom line.