Global pharmaceutical products and services company Clinigen (CLIN:AIM) announced a reassuring trading update on Tuesday with full year revenues and profits inline with reset guidance following its 9 June profit warning.
The shares ticked up 0.3% to 626.8p but are still around 26% below levels before the profit warning.
The group said it expected full year net revenues to 30 June to be 12% ahead on a constant currency and organic basis to £455 million while EBITDA (earnings before interest, taxes, depreciation, and amortisation) is expected to be 10% lower to £116 million.
These numbers exclude the contribution from the UK Compounding Business which was divested on 30 June and follows a reorganisation of the group into two divisions.
Management said it was conducting a further review to identify new cost cutting initiatives.
DEBT REDUCTION FOCUS
Despite an investment in working capital in the first half net debt is expected to decrease to below £317 million at the end of June, around 4% lower than 2020.
This means that net debt to EBITDA is 2.8 times, well within the group’s banking covenant limit of 3.5 times. The aim is to pay down debts further, so the leverage ratio falls ‘well below’ 2.5 times by the end of the year and within the stated target below two times during 2023.
The company said the positive cash generation seen in the first half continued into the second, equating to cash conversion over 85%.
IMPROVED TRADING
The company said it was seeing ‘significant’ activity in its services division with strong new business wins worth $100 million across clinical services and a record number of wins in managed access.
These higher margin businesses are expected to help drive EBITDA growth in 2022.
Meanwhile, the company said it expected reduced demand for its cancer drug Proleukin to continue until it introduces new indications. A significant reduction in US prescriptions was the main reason for the profit warning.
On a positive note the firm noted that the onboarding and roll-out of cancer drug Erwinase was progressing ahead of plan.
Clinigen said it was confident that the simplified operating structure would deliver synergies and it expects to achieve double digit EBITDA growth in the fiscal 2022 year.
