Parnell Pharmaceuticals Holdings Ltd (NASDAQ:PARN), a fully
integrated, commercial stage pharmaceutical company focused on
developing, manufacturing and marketing innovative animal health
solutions, today announced financial results for the year ended
December 31, 2015.
"In 2015 we executed on our commercial and development
milestones and demonstrated successful transfer of our proven
business model from Asia Pacific origins to the large U.S.
market. We nearly tripled the size of our U.S. Production
Animal business while establishing a substantial sales and
marketing presence in the U.S. Companion Animal sector. Most
impressive was the rapid development of our digital technology
assets which continue to evolve as a key differentiator in our
value proposition to veterinarians and animal owners. In 2016
we expect revenues to again grow rapidly and our goal is to launch
at least two new products including; Zydax and Luminous; in the
U.S. and generate our first revenues from our Contract
Manufacturing operations" said Robert Joseph, President and Chief
Executive Officer of Parnell Pharmaceuticals Holdings Ltd.
Unless otherwise specified, all amounts are presented in
Australian Dollars (AUD). For convenience 2016 Guidance is
presented in U.S. dollars based on a consistent foreign exchange
rate of $0.72 AUD to $1.00 USD.
2015 COMMERCIAL HIGHLIGHTS: GROUP SALES GROW 58% OVER
2014
- U.S. Production Animal: significant sales growth of 269% to
$8.1 million 260% driven by the expansion of our sales team to 7
territories and 9% driven by favorable exchange gains. In 2014 for
the same period, we had 4 territories and had not commenced
marketing of mySYNCH®, our innovative digital technology designed
to assist dairy farmers in improving the profitability of their
operations. Ongoing success commercializing our reproductive
hormones saw our U.S. market share in December 2015 reach 10.5%,
the highest level since our launch.
- Rest-of-World Production Animal: sales declined by $1.8 million
to $3.0 million in 2015 compared to 2014, primarily driven by
year-to-year differences in the timing of orders to our
international marketing partners and a decline in sales in
Australia-New Zealand, where sharply lower milk prices adversely
impacted demand. In 2016, we intend to launch a new version
of mySYNCH®, which we expect to improve sales given the
efficiency of breeding programs becomes even more important
during periods of low milk prices. In Canada sales improved in 2015
with in-market sales (from our marketing partner (Vetoquinol) to
distributors) growing 17% over 2014.
- Companion Animal: sales grew 51% to $2.1M primarily from the
establishment of our companion team in the U.S. and the launch of
Glyde Chews and FETCH in September 2015.
- Contract Manufacturing: no revenues were recorded in
2015. We have negotiated the key terms of contracts with two
multi-national customers with whom we expect to sign agreements in
the coming weeks.
2015 DEVELOPMENT HIGHLIGHTS
- Zydax®: we completed and submitted all remaining technical
sections to the Center for Veterinary Medicines (CVM) of the U.S.
FDA, namely:
- Veterinary Master File, for the Active Pharmaceutical
Ingredient (API) of Zydax in conjunction with our development
partner Lonza AG
- Chemistry and Manufacturing Controls
- Target Animal Efficacy
- As communicated previously, we understand that it typically
takes two 180-day cycles at CVM to complete all reviews. We
therefore anticipate approval of Zydax in the U.S. in Q4, 2016 and
once approved, an immediate commercial launch.
- We converted our U.S. filings to an EU submission and intend to
file with the EMA in February, 2016, anticipating approval in early
Q1, 2017.
- We completed a full development plan for Zydax for Cats and
expect to commence pilot and pivotal studies in 2016, leading to a
potential approval in early 2018.
- Our development partner Lonza AG has commenced commercial scale
manufacture of the Zydax API for the launch of Zydax, once approved
in the U.S. and EU.
- PAR121 and PAR122 (developmental compounds for bone healing and
wound healing respectively): through CIMTECH (the licensor) we
received a grant from the United Nations under the Nagoya Protocol
for up to US$1 million in matched funding to develop infrastructure
and capability in the Cook Islands enabling us to transform the
botanical extract precursors for the anticipated drug substances in
PAR121 and PAR122. We expect to complete manufacturing
process development in early 2016 to be followed by in-vitro and
in-vivo pilot efficiency studies during 2016.
- mySYNCH® and FETCHTM: we launched the latest versions of our
innovative digital tools which we have designed to drive sales
growth of our reproductive hormones and osteoarthritis products
respectively. We believe our digital technologies are a key
element of our commercial success, coupling best-in-class medicines
with leading technology applications to create fundamental
differentiation in our offering to veterinarians and animal
owners.
- LuminousTM: we developed an innovative nutraceutical product
that we believe is applicable to the sizeable dermatology market
for dogs. This category is undergoing rapid expansion and we
believe that Luminous will fill an unmet need by aiding in the
reduction of inflammation associated with atopic dermatitis and
supporting the growth of healthy new skin and hair. We will
launch Luminous in the U.S. in Q2, 2016 beside our current
companion animal product offerings Glyde and FETCH.
2015 CORPORATE HIGHLIGHTS:
- Board: we appointed two new Independent Directors, Ellen
Richstone and David Rosen, to our Board of Directors. These
Directors bring significant finance and animal pharmaceutical
experience to the strategic oversight and governance our
Company.
- Business Development: we are negotiating with multi-national
parties interested in acquiring the rights to market Zydax® and
Glyde® in Europe and Asia. We have taken a measured approach
to this deal as we believe that it is imperative that we optimize
both the terms and selection of a long-term partner given the
significant potential value of Zydax in these markets. We
remain confident a deal will be completed in ample time prior to
potential approval and launch in these markets.
- Licensing: we continue to assess multiple in-licensing
opportunities, including several products that could be swiftly
taken to market by our Companion Animal sales team spanning
pharmaceutical, nutraceutical and medical device products.
- Capital: On January 11, 2016, we entered into a share purchase
agreement with Lincoln Park Capital Fund, LLC, a Chicago-based
institutional investor ("Lincoln Park"). The agreement is
structured as an equity commitment and enables us to elect entirely
at our discretion to sell up to 35,000 shares (and under certain
circumstances up to 55,000 shares) on any one day to Lincoln Park
at a price that is known to Parnell before we choose to issue
shares. Up to the date of this press release we have not
utilized this facility and plan only to do so with
discretion. We see the Lincoln Park facility as a way for us
to sell modest amounts of new shares to Lincoln Park, in turn
bringing in growth capital and loosening the tightly held nature of
our stock.Unrelated to the equity commitment and in recognition of
Lincoln Park’s belief in our company’s business and the
potential value of our stock, Lincoln Park agreed to purchase
175,000 unregistered shares at $3.50 per share, which represents a
10% premium to the closing price on February 23, 2016, in addition,
Lincoln Park has the option to purchase up to a further 150,000
shares at $5 per share for cash consideration as provided in the
option, which would represent a 57% premium to the February 23
closing price.Furthermore, we have negotiated key terms for a
senior debt facility of approximately $US30 million that we expect
to announce in coming weeks subject to completion of an
agreement.
FINANCIAL RESULTS (for the year ended December 31,
2015)
Revenue Total revenues were $13.2 million
for the twelve months ended December 31, 2015, an increase of $4.8
million, or 58% (of which 7 percentage points related to a
favorable exchange variance), over the same period in 2014.
Growth momentum accelerated in the second half of 2015, with
total revenues increasing by $4.7 million, or 130%., as both our
U.S. operating segments (Production and Companion Animal) performed
strongly.
- Production Animal – U.S.: sales ex-Parnell (sales from Parnell
to distributors) increased by 269% (of which 9 percentage points
related to a favorable exchange variance), or $5.9 million,
compared to 2014, to reach $8.1 million for the year ended December
31, 2015. Sales increased in the second half of 2015 over the first
half by $3.9 million, or 330%. Full year sales in-market (sales
from distributors to veterinarians and dairy producers) grew 55%
from US$3.1 million in 2014 to US$4.9 million in 2015. This clearly
demonstrates that distributors ran down the large inventories they
had been holding in 2013 and 2014 and that ex-Parnell sales in 2015
continued to track in-market demand.
- Production Animal – Rest of World (ROW): sales declined in 2015
by $1.8 million, or 37%, compared to 2014, to be $3.0 million for
the year ended December 31, 2015. This was primarily due to
timing difference of shipments to our distribution partners in
Canada and Turkey. In Canada, our distribution partner Vetoquinol
placed only one order in 2015 compared to two in 2014, and our
marketing partner in Turkey moved their normal Q4, 2015 order into
2016. We expect that inventory levels and timing of orders
have now normalized and we expect in 2016 to show growth over
2015. The decline was partially offset by favorable exchange
gains of 4%.
- Companion Animal: sales increased $0.7 million, or 51%,
compared to 2014 to be $2.1 million for the year ended December 31,
2015. The increase in revenue was related to the launch of Glyde
Chews and FETCH in the U.S. in September 2015. Our Companion Animal
segment in Australia continued to perform strongly nine years after
launch, although regulatory delays for the approval of Glyde Chews
impacted Australian sales in the first half of 2015, such that full
year sales in 2015 were flat when compared to the same period in
2014. With this fully resolved in May 2015, sales of our Companion
Animal products in Australia for the six-months to December 31,
2015, were up 51%, compared to the same period in 2014, building
strong momentum as we proceed into 2016.
- Contract Manufacturing: We have not yet derived revenue for
this operating segment but we were very pleased to be successfully
appointed through a tender process by a major multinational as
their contract manufacturer for a range of sterile injectable
products. We have reached agreement on the major terms of this
contract and expect the contract to be finalized in the coming
month. Technology transfer would commence on contract signing
likely followed by initial commercial supply in 2016. The terms of
the deal and expected revenues will be announced in more detail
upon completion of the contract.We also reached agreement on key
terms with a second major multinational to undertake contract
manufacturing services for a sterile injectable product. We expect
to complete the final contract in the coming weeks from which we
will derive a contract establishment fee as well as immediate
commercial supply of this product. The terms of the deal and
expected revenues will be announced in more detail upon completion
of the contract.
Cost of Sales$7.7 million for the year ended
December 31, 2015, up from $6.7 million in the same period in 2014
primarily as a result of increased revenues. Our product
gross margin continued to improve throughout 2015, increasing 3.6%
to 82.1% for the full year of 2015 compared to 78.5% in 2014.
Selling and marketing expenses Increased
$5.8 million, or 96%, for the year ended December 31, 2015,
compared to 2014, 88% of this increase was a result of increased
personnel costs associated with the expansion of our commercial
infrastructure in the U.S and a further 8% was driven by
unfavorable foreign exchange fluctuations. The increased
personnel costs was driven by the recruitment of 55 new staff to
establish our U.S. Companion Animal sales and marketing team to
launch Glyde and FETCH in the U.S. in September 2015 and in
anticipation of the launch of Zydax in Q4, 2016. Furthermore, this
team is expected to launch both Luminous™ – a nutraceutical product
for dermatological disorders in dogs and Reviderm™ – a unique
liquid bandage for use in companion animals in Q2, 2016.
Regulatory expensesIncreased by 4.3% compared
2014 primarily due to an increase in staff to support our new
product filings.
Administration expensesIncreased $8.9 million,
or 149%, for the year ended December 31, 2015 compared to 2014,
primarily as a result of increased headcount and external costs to
support a substantially larger Commercial and R&D organization
in the U.S., as well as increased compliance, regulatory and
statutory costs associated with being a public organization for the
full year of 2015, unfavorable foreign exchange fluctuations and
the recording of share-based compensation expense for the first
time.
Finance costs and Net foreign exchange losses on
borrowingsDecreased $5.6 million, or 86%, for the year
ended December 31, 2015 compared to 2014. Finance costs
decreased by $4.6 million due to full repayment of our senior debt
facility with SWK Holdings LLC from the proceeds of our IPO which
resulted in reduced interest expense and $1.0 million due to
current borrowings being denominated in their functional
currencies.
Other Income Increased to $6.7 million for
the year ended December 31, 2015, compared to $5.6 million in 2014.
The increase in other income was primarily driven by
management’s re-assessment of contingent provisions associated with
supplier obligations. As of June 30, 2015 management
determined that a provision was no longer necessary resulting in
$2.6 million (2014: $Nil) being recorded in other income.
This was partially offset by more favorable exchange gains in 2014
as compared to 2015.
EarningsOur Net loss after tax for the year
ended December 31, 2015 was $13.7 million or $1.03 per
weighted-average share compared to $14.3 million or $1.32 per
weighted-average share for the same period in 2014.
At December 31, 2015 Parnell held cash and cash equivalents of
$5.7 million compared to $15.8 million at December 31, 2014.
2016 GUIDANCE
Commercial: Total Group Revenue expected to grow 50% -
70% to $20 – $22 million (US$14 to US$16 million)
- U.S. Production Animal: We expect double digit sales
growth in 2016 driven by acquiring new customers through our
mySYNCH digital technology. In Q4, 2016 we expect to launch
“cow-side care” – a revolutionary function within mySYNCH that will
provide vital health management information to farmers at the point
of contact with individual cows. We also expect the promotion
of PROCEPT™ (a new patent-pending breeding program) will provide us
with a point of differentiation and increased revenues. In
Australia and New Zealand after a challenging 2015 we expect sales
to improve in 2016 as farmers seek to optimize efficiency of milk
production with reproductive breeding programs.
- Companion Animal: we expect sales to grow to rapidly
primarily driven by our US business with a full year of sales of
Glyde and the Q2’ 2016 launch of Luminous. We have not yet
estimated our 2016 sales of Zydax in the U.S., where we expect a
Q4’2016 launch if approved by the FDA, nor have we estimated sales
of Zydax for Europe.
- Contract Manufacturing: we expect to sign final contracts with
two multinationals in the coming weeks. We expect to derive
income of single digit millions from establishment fees, technology
transfer fees and manufacturing income in 2016.
Development
- Zydax: we expect to receive initial responses from the Center
for Veterinary Medicines (CVM) of the U.S. FDA regarding the two
major technical sections; Chemistry and Manufacturing Controls
(CMC) and the Target Animal Efficacy (TAE) in Q2, 2016 and
therefore expect we could achieve marketing authorization in the US
in Q4, 2016.We expect the early establishment of our Companion
Animal commercial team in the U.S. and concurrent development
of our innovative digital technology platform – FETCH™ will
lead to rapid revenue growth immediately following FDA approval of
Zydax.We expect to further leverage our core Zydax asset by:
- signing a marketing partner appointment for Europe and
Asia. We have held discussions with several companies and
expect that such a deal if signed would bring several million
dollars in establishment and milestone fees in 2016/2017.
- commencing pilot and pivotal safety and efficacy trials to seek
an approval for the use of Zydax in Cats. We estimate there
are over 50 million cats in the U.S. alone (compared to over 70
million dogs) and we believe there are very few viable therapeutic
options for the very common disease of osteoarthritis in cats.
- further evaluating the regulatory path for Zydax in horses in
the US and Europe. We already have regulatory approval in
multiple markets where we have historically sold Zydax. We
have more recently concentrated our product development and
commercial efforts on the much larger market for dogs and cats but
expect that Zydax has worthwhile potential in the Equine market in
many countries.
- We expect to continue to receive patent grants relating to
Zydax in 2016.
- PAR121 and PAR122 we expect to complete pilot-scale
manufacturing process development in the Cook Islands in Q2, 2016
the extracts from which will lead to the commencement of pilot
efficacy studies in Q2, 2016. We expect to announce results
from these studies in Q3, 2016. We also expect to undertake
chemical characterization studies for PAR121 and PAR122 in
2016. We continue to receive patent grants in a number of
countries for both compounds.
- mySYNCH® and FETCHTM: we continue to invest in our digital
technology assets and expect to launch over 10 new enhancements for
mySYNCH and FETCH in 2016. We expect this new functionality
to continue to bolster our commercial point of differentiation with
our customers by combining best-in-class new medicines with digital
tools that help animal owners maximize the use of our products
through better animal health management.
Corporate
- Board: we expect to make an additional appointment of an
Independent Directors to our Board of Directors in Q2, 2016.
The candidates being considered are focused on consumer and digital
technology commercial experience.
- Business Development: we anticipate continuing to investigate
various in-licensing opportunities and will seek additional
contract manufacturing opportunities as well as seeking a marketing
partner for Zydax in various markets where we do not currently
operate.
- Capital: as we have previously communicated, we expect to use
debt financing to augment our growth capital. We are in the
final stages of negotiating terms for an approximate $30 million
debt facility which we anticipate we will conclude in the coming
months. If we complete this transaction, this new larger
facility will replace our current US$11 million dollar debt
facility.We continue to focus on value creating opportunities in
our business and believe that we have balanced our growth needs
with capital utilization. As our core business continues to
grow, and the business development opportunities from these core
assets (such as Zydax US launch, Zydax EU partner appointment and
contract manufacturing) continue to evolve, we expect to generate
increasing amounts of revenue from our current business segments.We
also believe that we need to address the lack of liquidity in our
stock which we believe is due to the small amount of available
shares that are not held by our founders and their families and
the major institutional investors who bought our
Initial Public Offering. We believe the Lincoln Park
agreement that we recently entered into allows us to prudently
release small amounts of new shares to the market in a
discretionary manner that remains entirely within our
control. Of course, our major focus in 2016 is commercial
success of our products in the U.S. and the launch of Zydax if
approved in the U.S. and E.U. which could generate increasing cash
flow and could result in us becoming profitable by late 2017.
Conference Call Information:
Management will host a conference call on February 24, 2016 at
8:00 a.m. ET to discuss financial results. Investors and analysts
may access the conference call by dialing (877) 244-6184
(U.S./Canada) or (920) 663-6271 (International) and using the
conference ID# 54549550.
A telephone replay will be available for one week following the
call by dialing (855) 859-2056 (U.S./domestic) and (404) 537-3406
(International) using the conference ID# 54549550.
About Parnell
Parnell (PARN) is a fully integrated, veterinary pharmaceutical
company focused on developing, manufacturing and commercializing
innovative animal health solutions. Parnell currently markets five
products for companion animals and production animals in 14
countries and augments its pharmaceutical products with proprietary
digital technologies – FETCH™ and mySYNCH®. These innovative
solutions are designed to enhance the quality of life and/or
performance of animals and provide a differentiated value
proposition to our customers. Parnell also has a pipeline of
7 drug products covering valuable therapeutic areas in orthopedics,
dermatology, anesthesiology, nutraceuticals and metabolic disorders
for companion animals as well as reproduction and mastitis for
cattle.
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 risk 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, 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
September 15, 2014, 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.
Consolidated Balance Sheets |
|
|
|
|
31 December 2015 |
31 December 2014 |
|
|
AUD$ |
AUD$ |
|
ASSETS |
|
|
|
CURRENT ASSETS |
|
|
|
Cash and cash
equivalents |
|
5,666,679 |
|
|
15,819,418 |
|
|
Trade and other
receivables |
|
7,266,662 |
|
|
4,825,193 |
|
|
Inventories |
|
3,426,926 |
|
|
2,755,956 |
|
|
Prepayments |
|
531,843 |
|
|
470,568 |
|
|
TOTAL CURRENT
ASSETS |
|
16,892,110 |
|
|
23,871,135 |
|
|
NON‑CURRENT ASSETS |
|
|
|
Trade and other
receivables |
|
67,457 |
|
|
50,184 |
|
|
Property, plant and
equipment |
|
12,666,214 |
|
|
11,899,006 |
|
|
Intangible assets |
|
16,583,360 |
|
|
12,419,614 |
|
|
TOTAL NON‑CURRENT
ASSETS |
|
29,317,031 |
|
|
24,368,804 |
|
|
TOTAL ASSETS |
|
46,209,142 |
|
|
48,239,939 |
|
|
LIABILITIES |
|
|
|
CURRENT
LIABILITIES |
|
|
|
Trade and other
payables |
|
6,780,440 |
|
|
8,614,034 |
|
|
Borrowings |
|
3,122,553 |
|
|
4,590,483 |
|
|
Provision for employee
benefits |
|
438,008 |
|
|
379,558 |
|
|
TOTAL CURRENT
LIABILITIES |
|
10,341,001 |
|
|
13,584,075 |
|
|
NON‑CURRENT
LIABILITIES |
|
|
|
Trade and other
payables |
|
1,106,360 |
|
|
668,037 |
|
|
Borrowings |
|
14,353,203 |
|
|
- |
|
|
Provision for employee
benefits |
|
153,781 |
|
|
74,364 |
|
|
TOTAL NON‑CURRENT
LIABILITIES |
|
15,613,344 |
|
|
742,401 |
|
|
TOTAL LIABILITIES |
|
25,954,345 |
|
|
14,326,476 |
|
|
NET ASSETS |
|
20,254,796 |
|
|
33,913,463 |
|
|
|
|
|
|
EQUITY |
|
|
|
Ordinary
shares |
|
55,343,451 |
|
|
55,343,451 |
|
|
Share‑based compensation reserve |
|
1,708,388 |
|
|
- |
|
|
Reserves |
|
(3,214,558 |
) |
|
(1,585,035 |
) |
|
Accumulated losses |
|
(33,582,485 |
) |
|
(19,844,953 |
) |
|
TOTAL
EQUITY |
|
20,254,796 |
|
|
33,913,463 |
|
|
|
Consolidated Statements of Comprehensive
Loss |
|
|
|
For the Year Ended December 31, |
|
2015AUD$ |
2014AUD$ |
Revenue |
|
13,169,753 |
|
|
8,361,058 |
|
Other income |
|
6,725,142 |
|
|
5,614,519 |
|
Cost of goods sold |
|
(7,745,865 |
) |
|
(6,763,913 |
) |
Selling and marketing
expenses |
|
(11,777,492 |
) |
|
(5,999,223 |
) |
Regulatory and research
and development expenses |
|
(881,909 |
) |
|
(846,142 |
) |
Administration
expenses |
|
(11,940,246 |
) |
|
(4,794,461 |
) |
Net foreign exchange
losses on borrowings |
|
- |
|
|
(1,021,927 |
) |
Finance costs |
|
(1,284,802 |
) |
|
(5,912,417 |
) |
Loss before income
tax |
|
(13,735,419 |
) |
|
(11,362,506 |
) |
Income tax
(expense)/benefit |
|
(2,113 |
) |
|
(2,982,854 |
) |
Loss for the
period |
|
(13,737,532 |
) |
|
(14,345,360 |
) |
Other
comprehensive loss, net of income tax |
|
|
Items that will be
reclassified subsequently to loss |
|
|
Foreign currency
translation |
|
(1,629,523 |
) |
|
(1,272,235 |
) |
Other
comprehensive loss for the year, net of tax |
|
(1,629,523 |
) |
|
(1,272,235 |
) |
Total
comprehensive loss for the year |
|
(15,367,055 |
) |
|
(15,617,757 |
) |
CONTACT: For more information, contact:
Parnell Pharmaceuticals Holdings
Robert Joseph, 913-274-2100
robert.joseph@parnell.com
Brad McCarthy, 913-274-2100
brad.mccarthy@parnell.com
Parnell Pharmaceuticals (CE) (USOTC:PARNF)
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