Parnell Pharmaceuticals Holdings Ltd Announces Business Results for the Year Ended 31 December 2018 and 2019 Guidance

Parnell Delivers 39% Revenue Growth and a $6.5 Million Improvement in EBITDA in 2018 Compared to 2017, Returns to NPAT Profitability, and Provides Provisional 2019 Guidance For a 17 – 25% Increase Over 2018 Revenue to $31 – $33 Million and an EBITDA Range of $7.5 – $8.5 Million.

SYDNEY, AUSTRALIA / ACCESSWIRE / April 5, 2019 / Parnell Pharmaceuticals Holdings Ltd (OTC PINK: PARNF) today announced financial results for the full year ended 31 December 2018 comprising; revenue growth of 39% over the full year in 2017 to $26.5 million and a reduction of $1.6 million (or 13%) in operating expenses, combining to deliver a $6.5 million improvement over 2017 in annual Earnings Before Interest, Tax, Depreciation, Amortization and Other Income (or EBITDAOI) prior to non-recurring items to $6.1 million; and Net Profit After Tax (or NPAT) of $0.1 million, an improvement of $23.3 million over a full year loss of $23.1 million in 2017.

Brad McCarthy, CEO and Executive Director, said, “Our full-year financial results for 2018 illustrate a significant turnaround in our business. In 2018 we set out to return to profitability. Having met that goal, we are now focused on further profitable growth across all our operations in 2019. Our 2018 performance in those markets in which we have a direct presence, being USA, Australia and New Zealand, was especially pleasing and position us for further growth in those geographies in 2019.”

“Our 2018 business performance enables the Board to provide provisional full-year 2019 guidance at 17-25% revenue growth to $31 – $33 million, and an EBITDA range of $7.5 – $8.5 million, over our 2018 results of $26.5 million revenue and $6.1 million EBITDAOI,” Mr. McCarthy said.

Business Segment Performance

Unless otherwise specified, all amounts are presented in Australian Dollars (AUD).

“Consistent with our public announcements throughout 2018, sales performance during the course of the full year has been consistently strong,” Mr. McCarthy stated. “Solid revenue growth across our major business segments ultimately enabled us to meet our 2018 revenue and earnings guidance.”

“In US Production Animal, full-year sales to December 31, 2018 increased 19% over 2017 to $10.9 million. Our mySYNCH technologies assist our dairy customers to get more cows pregnant first time, bringing economic benefits from efficient utilization of our products. We have a great team of people in the field who continue to increase our market share and database of cows, and to grow our revenues faster than the overall market,” Mr. McCarthy said.

“In manufacturing, we grew revenues 138% over 2018. To achieve this, we rapidly expanded our manufacturing output throughout 2018, demonstrating our capabilities and readiness to existing and future CMO customers respectively and to pharmatech licensing partners generally,” Mr. McCarthy continued. “Our total CMO revenues to 31 December 2018 were $10.3 million, compared to $4.3 million in all of 2017,” Mr. McCarthy said.

“Our Australia-New Zealand businesses had a stellar year in 2018,” Mr. McCarthy said, “while in US Companion we reduced costs and converted to our inside sales and digital marketing model with promising results. Difficulties with our Rest of World Production business persisted through to year-end and we continue to work with our distribution partners toward a better outcome in 2019.”

Business Development and Legal

Dr. Alan Bell, Executive Director and Chairman of the Board, said, “During 2018 we identified and worked with numerous Animal Health companies interested in our sterile injectable contract manufacturing (or CMO) services. While we have been encouraged by those interactions and many of the discussions remain open, none progressed to contract by the end of 2018. Our 2019 Guidance is contingent on one or more contracts being won, none of which have currently progressed beyond the Request-For-Proposal (or RFP) stage. Should at least one such contract not eventuate our financial results would be adversely affected and impact our 2019 Guidance provided today. Pursuit of new CMO opportunities continues to be a focus for us in 2019 although lead times in these negotiations can be prolonged.”

“The global Zydax Canine project has not progressed further, however our discussions with qualified potential partners remain open. At this time we do not expect to restart this project during 2019, and as previously stated, a path to commercialization in major world markets may ultimately elude us. Until these develop we have ceased investment in this franchise. The human generic license agreement we signed in 2018 for our proprietary Active Product Ingredient is continuing and the current development phase is expected to advance during 2019. Any public updates will remain subject to the confidentiality provisions of the license agreement,” Dr. Bell stated.

“In late 2018 we settled the second of two employment claims initiated by ex-staff and relating to the former CEO, and filed a counter-suit in response to litigation begun by the latter against the Company,” Dr. Bell said.

Commercial Highlights to 31 December 2018

Unless otherwise specified, all amounts are presented in Australian Dollars (AUD).

Regarding the Company’s financial performance at the end of 2018, your directors report the following achievements:

Total revenue was $26.5 million for the twelve months ended December 31, 2018, being $7.4 million (39%) up over the same period in 2017.

Our operating segments performed as follows:

• Production Animal sales of $13.1 million globally for 2018 represented an increase of $1.5 million (13%) over the same period in 2017, comprised of; 19% growth in US Production; 32% growth in Australia and 36% in New Zealand Production; and a 45% decline year on year in Rest of World Production due to variations in shipment timing for committed orders. The performance in our direct markets (USA, Australia and New Zealand) was particularly pleasing as it further supports our market positioning and value proposition. In the US, despite having an average of only 7 territories occupied by sales staff across the year, our market share continued to grow with in-Market sales increasing by 9% over the twelve months ended December 31, 2017. With this strong performance we intend to expand our presence in this market to at least 10 territory managers in 2019.
• Companion Animal sales of $3.2 million for the year ended December 31, 2018 were down slightly, $0.1 million, compared to the same period in 2017, arresting the decline in this segment due to prior year underperformance in US Companion seen in 2017. This revenue result in conjunction with the reduction in cost base of the US Companion Animal segment has delivered a $1.4 million year on year improvement in contribution margin from this business for the twelve months of 2018. The Australian Companion Animal business continues to outgrow the market, posting a further 11% year on year revenue growth in 2018, after recording 12% full-year growth in 2017.
• Contract Manufacturing revenues for 2018 were $10.3 million, an increase of 138% over revenues of $4.3 million for the same period in 2017. 2018 comprised technology transfer revenues of $2.6 million, compared to $3.5 million in 2017, and batch delivery revenues of $7.7 million, compared to $0.8 million in 2017. Our manufacturing business increased our sterile injectable product volumes by 254% in 2018 over 2017 in addition to bringing in-house all manufacturing of our Glyde Chew extrusion products.
• Operating expenditure across the business decreased by $1.6 million (13%) in 2018 to $10.4 million, compared to $12.0 million for the same period in 2017.

As a result, EBITDAOI prior to non-recurring items improved $6.5 million to $6.1 million for the full year 2018 over a $0.5 million loss for the same period in 2017, while NPAT was $0.1 million positive in 2018 compared to a loss of $23.1 million in 2017.

2019 Guidance

Unless otherwise specified, all amounts are presented in Australian Dollars (AUD).

Mr. McCarthy said, “Our 2019 full year revenue guidance of $31.0 to $33.0 million, and an EBITDAOI range of $7.5 to $8.5 million, is subject to us securing certain third-party manufacturing contracts that are currently uncertain, as mentioned above. This guidance represents a 17% to 25% increase in revenues and EBITDA over 2018.”

Financial Results for the nine months ended 31 December 2018:

Unless otherwise specified, all amounts are presented in Australian Dollars (AUD).

Total revenue was $26.5 million for the twelve months ended December 31, 2018, a 39% increase compared to $19.1 million for the same period in 2017. A detailed description of the revenue performance by business unit is provided above.

Expenses:

• Cost of Sales for the year ended December 31, 2018 were $10.1 million, compared to $7.3 million for the comparable period in 2017. Gross margin as a percentage of revenue, using a Cost of Goods Sold – Product basis, was 86% in 2018 compared to 84% in 2017, due to improved manufacturing operations and efficiencies implemented since late 2017 and increased sales in our US, Australian & New Zealand Production Animal segments.
• Selling and Marketing expenses decreased by $1.2 million, or 19%, to $5.2 million for the 2018 year compared to the same period in 2017 resulting primarily from the reduction of our US Companion Animal field sales and marketing cost base of $1.5 million offset by an increase in US Production Animal sales and marketing costs of $0.3 million.
• Regulatory and R&D spending for the year was $0.6 million, a 38% reduction over the same period in 2017. Termination of PAR121 and PAR122 earlier in the year was the major contributor to this reduction.
• Administration expenses decreased $0.3 million, or 6%, to $4.5 million in 2018 compared to $4.8 million for the same period in 2017 as a result of the management changes and savings initiatives implemented in late 2017.
• Finance costs of $7.0 million for the twelve months ended December 31, 2018 decreased by $2.3 million over the same period in 2017, due to the payout of our previous senior debt facility and the transition to our new facility with Marathon entered into in July 2018.
• Other Income/(expense) for the twelve months ended December 31, 2018 was income of $4.1 million compared to an expense of $2.8 million for the same period in 2017. This increase is primarily due to foreign exchange movements between the Australian dollar and the US dollar for the period. For 2018, $0.1 million was recorded in Other Income as part of research and development incentives received in Australia compared to $0.7 million recorded during the same period in 2017. In addition, in 2017 Other expense included an impairment of bad debts of $0.6 million and a $0.6 million write off of receivables due to a customer being placed into administration in the Middle East. There was no impairment of bad debts in 2018.
• Non-recurring items for the twelve months ended December 31, 2018 was an expense of $0.4 million compared to $2.5 million for the same period in 2018. In 2018 this item was all related to settlement and legal costs associated with ex-employee claims. Two claims were settled in 2018 and one remains ongoing. In 2017, these items comprised; $1.0 million of settlement and legal costs associated with ex-employee claims and $1.5 million in inventory revaluation charges taken as a result of improved manufacturing efficiencies thereby reducing the cost of inventory recorded.
• Impairment of Intangible Assets for the twelve months ended December 31, 2018 was $Nil. In 2017 an impairment of Intangible Assets charge of $5.5 million was incurred to write down the carrying value of the Zydax Canine project to $Nil.

Earnings Before Interest, Tax, Depreciation, Amortization and Other Income/(Expense) (EBITDAOI) & Net Profit after Tax:

• Earnings Before Interest, Tax, Depreciation, Amortization and Other Income/(Expense) for the twelve months ended December 31, 2018, before non-recurring items, improved by $6.5 million to profitable earnings of $6.1 million compared to a $0.5 million loss for the same period in 2017. Including non-recurring items it was a $5.7 million profit in 2018 compared to a $3.0 million loss in 2017. This was achieved by total revenue being 39% up on prior year, operational cost reductions of $1.6 million and an improvement in manufacturing operations delivering an increase in gross margin as a percentage of revenue, using a Cost of Goods Sold – Product basis, to 86% in 2018 compared to 84% in 2017.
• Net loss after tax for the period ended December 31, 2018 decreased by $23.3 million to record a profit of $0.1 million compared to a $23.1 million loss in 2017 as a result of the items detailed above.

The audited Financial Statements for the full year ended December 31, 2018 compared to prior year are presented below.

About Parnell

Parnell (OTC Pink: PARNF) is a fully integrated pharmaceutical company focused on developing, manufacturing and commercializing innovative animal and human health solutions. Parnell is a technology and clinical science leader in dairy reproduction, marketing its proprietary brands estroPLAN and GONAbreed via its dedicated sales force and digital technology mySYNCH in the USA and Australia-New Zealand, and via distributors in other markets. Parnell has a rapidly growing contract manufacturing business supplying industry majors with specialized sterile injectable products. Recently, Parnell leveraged its novel intellectual property position in the Pentosan Polysulfate drug class to address the human market through a new contract with a major global human health company. In companion animal, Parnell manufactures and markets its proprietary canine osteoarthritis brands Zydax and Glyde.

For more information on the company and its products, please visit www.parnell.com.

Cautionary Note Regarding Forward-Looking Statements

This press release contains forward-looking statements and information within the meaning of the U.S. Private Securities Reform Act of 1995. Words such as “may,” “anticipate,” “estimate,” “expects,” “projects,” “intends,” “plans,” “develops,” “believes,” and words and terms of similar substance used in connection with any discussion of future operating or financial performance identify forward-looking statements. Forward-looking statements represent management’s present judgment regarding future events and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. These risks include, but are not limited to, risks and uncertainties regarding Parnell’s research and development activities, its ability to conduct clinical trials of product candidates and the results of such trials, as well as risks and uncertainties relating to litigation, government regulation, economic conditions, markets, products, competition, intellectual property, services and prices, key employees, future capital needs (including the ability to progress its current debt refinancing discussions), dependence on third parties, and other factors, including those described in Parnell’s Annual Report on Form 20-F filed with the Securities and Exchange Commission, or SEC, on March 31, 2017, along with its other reports filed with the SEC. In light of these assumptions, risks, and uncertainties, the results and events discussed in any forward-looking statements contained in this press release might not occur. Investors are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date of this press release. Parnell is under no obligation, and expressly disclaims any obligation, to update or alter any forward-looking statements, whether as a result of new information, future events, or otherwise.

For more information, contact:

Parnell Pharmaceuticals Holdings
Brad McCarthy
Phone: +61 2 9667 4411
Email: brad.mccarthy@parnell.com

Financial Statement for the twelve months ended December 31, 2018
Consolidated Statements of Comprehensive Profit and Loss
(Audited)

Consolidated Balance Sheets
(Audited)

SOURCE: Parnell Pharmaceuticals Holdings Ltd.

View source version on accesswire.com:
https://www.accesswire.com/541177/Parnell-Pharmaceuticals-Holdings-Ltd-Announces-Business-Results-for-the-Year-Ended-31-December-2018-and-2019-Guidance