BTG
Written by
BTG |
Interventional medicine: An engine of growth |
Close period statement |
Pharma & biotech |
8 April 2016 |
Share price performance
Business description
Next events
Analyst
BTG is a research client of Edison Investment Research Limited |
|||||||||||||||||||||||||||||||||||||||||||||||||||
Growth across all three divisions of BTG’s Interventional Medicine (IM) franchise (oncology, vascular and pulmonology), coupled with currency tailwinds, helped push FY16 revenue towards the upper end of guidance (£410-440m). Strong cash flows from the Specialty Pharma (SP) and Licensing businesses are reinvested, establishing BTG as a leader in the growing IM market. The company has successfully integrated a number of IM acquisitions, including the most recent, PneumRx, which combined with strong execution underpin BTG’s IM sales target in excess of £1.25bn in 2021.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
03/14 |
290.5 |
76.6 |
19.0 |
0.0 |
32.6 |
N/A |
03/15 |
367.8 |
57.4 |
17.5 |
0.0 |
35.4 |
N/A |
03/16e |
437.6 |
88.9 |
21.4 |
0.0 |
28.9 |
N/A |
03/17e |
490.5 |
106.4 |
21.4 |
0.0 |
28.9 |
N/A |
Note: *PBT and EPS are normalised, excluding intangible amortisation, exceptional items and share-based payments.
IM: Improved reimbursement position to lift sales
Increased US TheraSphere sales and the switch to European direct sales both contributed to mid-teens growth in Interventional Oncology. Increasing use of interventional therapy for severe blood clots on the US benefited EkoSonic sales against a background of expanding hospital penetration and growing awareness of regulatory clearance in pulmonary embolism. Broadly flat Varithena sales have been hampered by administrative and reimbursement delays; BTG is working to address this and highlights significant physician interest, and an expectation of a sales inflection point in FY17. Interim reimbursement status of PneumRX in Germany (c 80% sales) contributed to flat revenues in Interventional Pulmonology; improved reimbursement in Germany and nationally in France should enhance sales potential, as would US market entry. US regulatory filing is expected mid-2016 following positive top-line data from the RENEW study in December.
SP and licensing: Solid cash flow generation
Following two years of exceptional 20%+ growth in Specialty Pharma driven by pricing and withdrawal of a competing product, revenue growth has reverted to a more sustainable single-digit level, with steady sales of CroFab and DigiFab and modest Voraxaze growth. Meaningful sales from Vistogard (uridine triacelate) should start to flow through following US launch in March. Licensing revenues were boosted by higher Lemtrada royalties post-FDA approval for multiple sclerosis, and a non-recurring £8.5m payment for backdated Zytiga royalties.
Financials and valuation: DCF unchanged at £3.45bn
FY16 sales were confirmed at the upper half of £410-440m (at $1.61/£). Our forecast R&D spend of £79.2m is in line with BTG’s outlook of £75-85m, but SG&A of £149m remains above £142-148m guidance. Ahead of FY16 results on 17 May, we maintain our £3.45bn (900p/share) valuation.
Exhibit 1: Financial summary
£m |
2014 |
2015 |
2016e |
2017e |
||
Year end 31 March |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
||||||
Revenue |
|
|
290.5 |
367.8 |
437.6 |
490.5 |
COGS/revenue sharing |
(95.0) |
(114.7) |
(136.8) |
(148.8) |
||
Gross profit |
195.5 |
253.1 |
300.7 |
341.6 |
||
R&D expenses |
(47.2) |
(68.3) |
(79.2) |
(84.2) |
||
SG&A expenses |
(84.0) |
(124.8) |
(149.2) |
(164.6) |
||
EBITDA |
|
|
74.0 |
71.1 |
83.4 |
106.4 |
Operating Profit (norm) |
|
|
70.6 |
65.6 |
77.9 |
98.4 |
Operating Profit (BTG underlying) |
|
|
62.3 |
67.9 |
74.4 |
92.8 |
Amortisation and impairment |
(24.3) |
(28.4) |
(34.0) |
(38.0) |
||
Profit on disposals |
1.1 |
0.3 |
0.0 |
0.0 |
||
Write-offs |
0.0 |
0.0 |
0.0 |
0.0 |
||
Restructuring costs |
(14.8) |
3.0 |
0.6 |
0.0 |
||
Share based payments |
(5.3) |
(5.6) |
(5.6) |
(5.6) |
||
Operating Profit (reported) |
|
|
27.3 |
34.9 |
38.9 |
54.8 |
Net Interest |
6.0 |
(8.2) |
11.0 |
8.0 |
||
Profit Before Tax (norm) |
|
|
76.6 |
57.4 |
88.9 |
106.4 |
Profit Before Tax (reported) |
|
|
33.3 |
26.7 |
49.9 |
62.8 |
Tax |
(9.0) |
6.9 |
(4.0) |
(14.5) |
||
Profit After Tax (norm) |
67.6 |
64.3 |
81.8 |
82.0 |
||
Profit After Tax (reported) |
24.3 |
33.6 |
45.9 |
48.4 |
||
Average Number of Shares Outstanding (m) |
355.2 |
367.9 |
382.3 |
382.9 |
||
EPS - normalised (p) |
|
|
19.0 |
17.5 |
21.4 |
21.4 |
Dividend per share (p) |
0.0 |
0.0 |
0.0 |
0.0 |
||
Gross Margin (%) |
67.3 |
68.8 |
68.7 |
69.7 |
||
EBITDA Margin (%) |
25.5 |
19.3 |
19.1 |
21.7 |
||
Operating Margin (norm) (%) |
24.3 |
17.8 |
17.8 |
20.1 |
||
BALANCE SHEET |
||||||
Fixed assets |
|
|
565.5 |
838.3 |
809.2 |
773.6 |
Intangible assets |
397.9 |
597.9 |
565.3 |
528.7 |
||
Goodwill |
123.6 |
183.8 |
183.8 |
183.8 |
||
Tangible assets |
31.3 |
35.5 |
39.0 |
40.0 |
||
Investment in associates |
12.7 |
21.1 |
21.1 |
21.1 |
||
Current assets |
|
|
146.2 |
207.6 |
280.0 |
353.1 |
Stocks |
27.0 |
40.5 |
41.4 |
52.4 |
||
Debtors |
75.1 |
91.9 |
100.6 |
112.8 |
||
Cash |
38.2 |
73.8 |
136.6 |
186.5 |
||
Other |
5.9 |
1.4 |
1.4 |
1.4 |
||
Current liabilities |
|
|
(87.8) |
(115.6) |
(114.0) |
(127.2) |
Creditors |
(79.9) |
(111.0) |
(109.4) |
(122.6) |
||
Accruals/deferred income |
0.0 |
0.0 |
0.0 |
0.0 |
||
Employees/provs/tax |
(7.9) |
(3.7) |
(3.7) |
(3.7) |
||
Derivative instruments |
0.0 |
(0.9) |
(0.9) |
(0.9) |
||
Short-term borrowings |
0.0 |
0.0 |
0.0 |
0.0 |
||
Long-term liabilities |
|
|
(93.5) |
(171.7) |
(171.7) |
(171.7) |
Long-term borrowings |
0.0 |
0.0 |
0.0 |
0.0 |
||
Other long-term liabilities |
(2.6) |
(17.9) |
(17.9) |
(17.9) |
||
Net assets |
|
|
530.4 |
758.6 |
803.5 |
827.8 |
CASH FLOW |
||||||
Operating cash flow |
|
|
55.5 |
62.7 |
72.7 |
66.8 |
Net interest |
0.2 |
(0.1) |
11.0 |
8.0 |
||
Tax |
(7.0) |
(15.2) |
(4.0) |
(14.5) |
||
Acquisition/disposal of intangibles |
2.3 |
(1.3) |
(1.4) |
(1.4) |
||
Capital expenditure |
(11.6) |
(9.8) |
(9.0) |
(9.0) |
||
Acquisitions/disposals |
(260.3) |
(147.7) |
0.0 |
0.0 |
||
Financing |
102.7 |
147.2 |
0.0 |
0.0 |
||
Dividends |
0.0 |
0.00 |
0.0 |
0.0 |
||
Other |
(2.3) |
(0.2) |
(6.5) |
0.0 |
||
Net cash flow |
(120.5) |
35.6 |
62.8 |
49.9 |
||
Opening net debt/(cash) |
|
|
(158.7) |
(38.2) |
(73.8) |
(136.6) |
HP finance leases initiated |
0.0 |
0.0 |
0.0 |
0.0 |
||
Other |
0.0 |
0.0 |
0.0 |
0.0 |
||
Closing net debt/(cash) |
|
|
(38.2) |
(73.8) |
(136.6) |
(186.5) |
Source: Company data, Edison Investment Research
|