Lotus Pharmaceuticals (1795:TT), a multinational pharmaceutical company, today reported its financial results for the first quarter ended 31 March 2022.
First quarter financial highlights:
- Strong start of 2022, with both top line and bottom line exceeding the management expectation.
- Consolidated net sales reached NT$3,161 million, representing a 12.8% growth compared to last quarter.
◆ Asian Business segment continues to be a solid foundation for our business, increasing by 1.4% QoQ to NT$1,704 million with steady performance of the key products including the oncology portfolio in Korea, Taiwan, and Thailand.
◆ Export Business segment was the key growth driver of the quarter, growing by 30.7% QoQ to NT$1,428 million. It was mainly driven by Lenalidomide launches on patent expiry in 14 European countries including Germany, France, Spain, Italy, Netherlands Austria, Belgium, Switzerland, Czech Republic, Denmark, Finland, Ireland, Portugal, and Sweden.
- Operating profits were up 58.7% over last quarter to NT$624 million.
- First quarter EPS was NT$1.72, a 70.6% increase versus the last quarter, achieving the second highest single quarter earnings in Lotus history. If using the same capital share as the comparable period last year, this quarter EPS would be NT$1.83, comparable with NT$1.85 for the first quarter 2021.
Petar Vazharov, Chief Executive Officer of Lotus, said: “We are very pleased with the strong start of 2022, following 2021 – so far the most successful year in Lotus history. All business units performed very well and we are confident that Lotus is in a very strong position to deliver 2022 objectives despite the turbulences caused by the COVID recurrence in certain Asian countries as well as the rising uncertainties of global economy.
We would like to highlight the major deliverables on the portfolio part during this Quarter from both Business development and R&D. As you know the company completed the acquisition of Cialis from Eli Lilly for Taiwan market in March. Cialis deal not only reinforces our portfolio with leading brand but also sets a very strong foundation for entry in the fast-growing drugstore channel in Taiwan. In addition, we have signed 7 In-licensing deals, including one 505(b2) respiratory product for selective markets in SEA Ryaltris with Glenmark. As for the in-house research and development the quarter was also very successful. We have completed important ANDA filing based on challenging BE study and high-barrier manufacturing technology of a suspension-based soft gel formulation as well as initiated two new projects to further boost our global portfolio pipeline.
Last but not the least, Lotus witnessed a major milestone this quarter - the transaction led by Aztiq and Innobic, two strategic partners we’ve been working closely with, to acquire the 100% shares of Lotus’s controlling shareholder AEMH has been officially closed. Following the completion of this transaction, Aztiq and Innobic joined force and formally became the leading shareholders of Lotus. This is a powerful alliance that not only paves the way for the regional expansion in ASEAN countries but also creates a compelling platform to support Lotus both commercially and financially and leads Lotus to start a new chapter of accelerated business expansion.”
Operational results for 2022 Q1
Total net sales were NT$3,161 million, compared to NT$3,324 million for the comparable period last year, representing a decrease of 4.9%, or 1.6% excluding the unfavorable impact on foreign exchange between the Korean Won and New Taiwan Dollar.
- Net sales from Asian Business steadily grew during the quarter. All the major markets, including Korea, Taiwan, and Thailand, reported healthy growth in local currencies comparing to the same period last year, led mainly by revenue expansion in our brand businesses, such as Qsymia in Korea, Aclasta and Evista in Taiwan, Aclasta in Thailand. The Company has also successfully launched the newly-acquired brand Cialis in Taiwan in March.
- Export Business revenues decreased slightly by 4.9% overall comparing to the same period last year, mainly due to the replenishment pattern of generic Suboxone in the US and the price erosion in Q3 last year. However, this was offset by the Company successfully launching Lenalidomide in 14 European countries in February as scheduled, which boosted the Global Oncology Export sales over 90% year-over-year.
Gross margin was 43.4% for the quarter, compared to 45.0% for the same period 2021. The shortfall was mostly caused by the manufacturing variance related to its generic Suboxone in the US, including scrapping of one out-of-spec batch.
R&D expenses was NT$101 million for the three months ended 31 March 2022, a 29.7% more compared to a year before as more internal R&D projects have been kicked off for global markets to continuously build up the pipeline.
SG&A expenses decreased by 8.3% compared to the same prior year period given that one-time expenses associated with group optimization programs in Korea plant were recognized in the first quarter 2021, which led more synergies to be realized from operational efficiency.
With well-managed spending, the Company’s operating margin landed at 19.7% for the quarter. Compared to 18.1% as average through the year of 2021, the operating margin of this quarter increased by 1.6 percentage points with the continuous improvement of operating leverage.
The Company also continued to generate stable cash inflow from operations. During the quarter, the Company generated NT$634 million from operations before tax and interest and made NT$ 523 million after those payments. Its net debt to LTM EBITDA ratio was 1.79x as of the first quarter 2022, compared to 1.69x as of the first quarter 2021 and 1.49x as of the fourth quarter 2021. The change was mainly driven by the short-term borrowing drawn down for the Cialis Taiwan acquisition at the end of this quarter while the newly-acquired product has yet generated sales and EBITDA accordingly, which also led its finance costs slightly increase to NT$79 million during the quarter, versus NT$70 million in the first quarter 2021 and NT$73 million last quarter.
With all the major deliverables achieved on track, the Company made the second highest quarterly earnings in Lotus history and reported an EPS of NT$1.72 for the first quarter 2022.
Pipeline and business development update
During the first quarter 2022, Lotus continued to develop its pipeline through internal R&D, in-licensing as well as brand acquisitions. 28 submissions were made in total, including biosimilar oncology product Adalimumab in both Korea and Vietnam and its internal R&D project LP654, which is indicated for IPF, in the US by itself and in Canada via a strategic partner. 21 approvals were granted during the quarter, including biosimilar Bevacizumab in both Korea and Taiwan and its first 2 oncology products Gefitinib and Lenalidomide in Philippines, to further strengthen the overall competitiveness of its product portfolio.
- As of Q1’22, the Company has 94 countries covered in the world, which includes the single largest market in the US and several major European countries, for its Lenalidomide – 58 counties approved with 1 more tentative approval, 26 countries under registration, and 9 submissions under preparation. The Company has also launched Lenalidomide in 39 countries around the world as of quarter end.
- There are 54 countries covered for Lotus’ Gefitinib – 36 approved with 26 countries already launched, 10 under registration, and 8 submissions under preparation.
- 50 countries are covered for Lotus’ Vinorelbine – 37 approved including the largest 2 markets globally Taiwan and Vietnam, 7 under registration, and 6 more under preparation. It has launched in 18 countries, with being the first oral dosage generic marketed in Taiwan.
- The Company also has 49 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.
The Company, during the quarter, also achieved several milestones by in-licensing deals and brand acquisitions. It secured Ryaltris, the first brand product to be included in its respiratory portfolio with strong clinical data and IP protection, by signing an exclusive commercial right with Glenmark in key SEA markets. The Company also acquired Cialis®, the second largest brand by revenue in Taiwan indicated for erectile dysfunction with very high brand loyalty, in Taiwan from Eli Lilly aiming to further expand its drugstore coverage and accelerate the growth of its existing OTC portfolio. The acquisition was successfully closed by the end of the quarter and made immediate contribution to the Company’s sales since the end of March.