– Third quarter 2014 Weifa 22 October 2014

Weifa – Third quarter 2014
Kjell Erik Nordby (CEO) and Gunnar Manum (CFO)
22 October 2014
1
Presentation outline
Highlights
I
Business areas
II
Financial performance
III
Summary
IV
Appendix
V
2
Highlights for the quarter
 Spin-off and listing of marine & offshore activities on
Oslo Børs
 Acquisition of Weifa AS for NOK 1,127 million
 Raised gross proceeds of NOK 115.2 million through
private placement
 Strong operational Q3 and further strengthening of
position in Consumer health
 Two new consumer health product launches; Proxan
and Weifa C
 No 1 OTC company year-to-date in the Norwegian
pharmacy channel
 Metformin plant audited and approved by US Food
and Drug Administration (FDA) in July
 Metformin Drug Master File approved by FDA and
listed in the US as the only European supplier of
metformin
3
Weifa AS key figures Q3
Revenue
Margin and EBITDA
NOK million
NOK million
146
Revenue split
28
142
142
24
123
118
NOK
xxx
million
22
20
19
35%
NOK
118
million
65%
20%
19%
17%
15%
Q3 13
Q4 13
Q1 14
Q2 14
Q3 14
Q3 13
14%
Q4 13
Q1 14
Q2 14
Q3 14
Consumer health
B2B
4
Presentation outline
Highlights
I
Business areas
II
Financial performance
III
Summary
IV
Appendix
V
5
Consumer Health
Strategic focus on four categories
Weifa’s position
Norwegian market
 OTC (non-prescription)
 Strong strategic position in four categories
- 2013 market size NOK 1 066 million*
 Presence in pharmacy and mass market
channels
 Rx (prescription)
- OTC sales split 54% pharmacy and 46% mass market
- 2013 market size NOK 567 million*
 OTX (vitamins, minerals, supplements and other
“non-OTC” products)
Pain
#1 player
Cough & cold
*) Source: LMI/Farmastat. Measured in pharmacy purchasing price
#1, 2 and 3
in certain
segments
 Strong track record in Rx-to-OTC switches
 Products with exceptional brand recognition
Nutra & oral health
# 1 and 2
in niche
segments
Wound & sport
#1
disinfection
6
Consumer Health
Third quarter development
 No. 1 OTC company in Norway during the
quarter, based on sales
 Increasing market share
Market share development
84%
86%
 Launch of new Weifa C concept
73%
- Intention of becoming the fastest growing
player within the cough and cold category
 Launch of Proxan
- Positioned as a non-prescription medicine for
the treatment of menstrual pain
- Further strengthening of Weifa’s position in
the pain segment
Paracet + Paracetduo
(paracetamol)
Aug 2013
Source: Farmastat and Nielsen
73%
Ibux
(NSAID)
Aug 2014
7
Metformin business
A high quality provider in first line treatment of diabetes 2
Weifa’s position
Global metformin market
 The standard first line treatment for diabetes 2
 Type 2 diabetes, has become a major global
epidemic (8.3% of adults)
 Metformin market expected annual growth rate
of 7-8%
Estimated global growth in diabetes
Million people
 Weifa provides among the purest and most freeflowing qualities of metformin in the global
market
 Focus on customers demanding reliable supply
and consistent high quality API
- Willingness to pay premium prices
 Close to customer markets
- Can reach to any market in Europe within 24 hours
592
EUR 22%
NAC 37%
Global market 2014 (Metformin HCl)
382
WP 46%
SACA 60%
SEA 71%
MENA 96%
AFR 109%
2013
Europe
Western Pacific
South East Asia
Africa
~35 000MT
Weifa
~8%
2035
North America and Caribbean
Sounth and Central America
Middle East and North Africa
Source: IDF (International Diabetes Federation)
Source: Weifa management estimate
8
Metformin business
Third quarter development
 A state of the art fully automated production
plant dedicated to metformin at
Fikkjerbakke, Kragerø
- Annual capacity of up to 3,100 tons
 FDA approved production facility
- Re-inspected and approved in July 2014
 Weifa’s metformin Drug Master File (DMF)
approved by FDA in Q3
- Listed in the US as the only European supplier
of metformin
Production facility, Fikkjebakke
9
Opioids business
Strong and efficient player in a controlled drugs environment
Global opioids market
Weifa’s position
 Opioids have several applications
 ‘From poppy to pill’
 Regulated market with high barriers to entry
 Produces two types of opioids APIs
 Few raw material suppliers
- Codeine (analgesics and cough syrup)
- Pholcodine (cough syrup)
 Weifa’s competitors mainly based in regulated
markets
 Also produces finished dose tablets
 Stable growth in the use of opioids
 Weifa’s customers are reputable international
pharmaceutical companies
 Competitive edge form long standing relations
with suppliers and customers
Codeine market
Weifa
~6%
Source: Weifa management estimate
Pholcodine market
Weifa
~16%
~10MT
~400MT
Source: Weifa management estimate
10
Opioids business
Third quarter development
 High demand for Weifa’s opioids
- Entire production capacity for 2014 sold out during
the third quarter
 Recent longer-term deals with two major raw
material suppliers has established a platform
for growth in the opioids business
 Weifa ready to produce first commercial
delivery of codeine tablets to leading
pharmaceutical companies in the fourth quarter
- Important milestone in “poppy to pill” strategy
11
Presentation outline
Highlights
I
Business areas
II
Financial performance
III
Summary
IV
Appendix
V
12
Weifa AS – profit & loss
Revenue
EBITDA
NOK ‘000
NOK ‘000
123 317
Q3 2013
400 364
402 380
117 538
Q3 2014
21 954
20 229
YTD 13
YTD 14
 Decrease related to the timing of large individual
B2B sales
Q3 2013
Q3 2014
73 951
66 818
YTD 13
YTD 14
 Increase driven by strong result in Consumer
health
- Partly offset by strong sales in Consumer health
13
Weifa AS – segment performance
Consumer health
B2B
Revenue and EBITDA
Revenue and EBITDA
NOK ‘000
NOK ‘000
76 830
225 808
224 529
177 851
52 388
167 356
70 921
40 708
21 926
47 609
15 655
57 583
7 532
20 009
16 368
YTD 13
YTD 14
28
Q3 2013
Q3 2014
YTD 13
YTD 14
 Good development and sales for all consumer
health products
 EBITDA improvement reflects cost
improvements
Q3 2013
Q3 2014
 Decrease in both revenue and EBITDA mainly
caused by timing of individual sales between
quarters
 The underlying segment growth is strong
14
Weifa ASA - consolidated income statement
(NOK '000)
Q3 2014
Q3 2013
9M 2014
9M 2013
63 854
2 993
63 410
3 785
(30 036)
(3 500)
(37 756)
(85 384)
(336)
(3 500)
(8 056)
(85 384)
Profit/(loss) before tax
(35 647)
(3 067)
(40 746)
(83 653)
Profit/(Loss) for the period
184 603
(3 067)
177 860
(83 653)
Total revenue and income
EBITDA
EBITDA adjusted
 Weifa AS post acquisition is the primary contributor to revenues (15 August)
 EBITDA includes NOK 29.7 million which do not have any cash effect
- Related to sale of inventory revalued as part of allocation of purchase price for Weifa AS
 Negative income tax expense of NOK 220.3 million relates mainly to the recognition of
part of the tax losses carried forward in Weifa AS
15
Weifa ASA - sound financial position
(NOK '000)
30.09.2014
30.09.2013
31.12.2013
Total Assets
1 717 009
71 671
212 676
Total equity
1 112 447
56 795
193 786
Total liabilities
Total Equity and Liabilities
Net interest bearing debt
604 562
14 876
18 890
1 717 009
71 671
212 676
223 064
(65 219)
(94 029)
 Increase in assets reflects the acquisition of Weifa AS for NOK 1,127.2 million
 Cash and cash equivalents amounted to NOK 239.8 million at the end of the quarter
 Total borrowings NOK 462.8 million – net interest bearing debt of NOK 223 million
 Equity ratio of 64.8 percent
 Completed a private placement of NOK 115.2 million to fund strategic growth initiatives
16
Presentation outline
Highlights
I
Business areas
II
Financial performance
III
Summary
IV
Appendix
V
17
Summary
 Strong operational Q3 and further strengthening of position in Consumer Health
 Softer quarter for B2B due to timing of large contract sales
 Strengthened market position for flagship products
 Underlining position as number one player in the pain market through launch of Proxan
 Product launch of Weifa C to support strong ambition to become the fastest growing
player within cough & cold
 Important FDA approvals for the metformin business emphasize position as a reliable
supplier of first-line treatment of a high growth disease (diabetes2)
 Dose tablets contract in the UK demonstrates position ‘From poppy to pill’ in opioids
 Establishment of growth platform for opioids through two major long-term supply
agreements
 CH - steady business with expected good performance going forward
 B2B – full year results expected to be in line with last year
18
Q&A
19
Presentation outline
Highlights
I
Business areas
II
Financial performance
III
Summary
IV
Appendix
V
20
Weifa ASA - consolidated cash flow
(NOK '000)
Q3 2014
Q3 2013
9M 2014
9M 2013
2013
Cash flow from operating activities
(45 286)
(21 922)
(233 990)
(140 027)
(151 544)
Cash flow from investing activities
(1 062 866)
958
(1 141 664)
3 458
12 207
Cash flow from financing activities
1 272 337
-
1 421 893
(20 838)
10 787
Net change in cash and cash equivalents
164 185
(20 964)
46 239
(157 407)
(128 550)
Cash and cash equivalents end period
(incl. discont. operations)
239 758
65 219
140 268
65 219
94 029
21
Terms and abbreviations
API
Active pharmaceutical ingredient
B2B
Business-to-business
C&C
CAGR
Cough and cold
Compounded annual growth rate
CEP
Certificate of Suitability to the European Pharmacopoeia
CMO
Contract manufacturing organisation
COGS
CPS
Cost of Goods Sold
Concentrate of poppy straw
DCDA
Dicyandiamide
DMA
Dimetylamin hydrochloride
DMF
EBIT
Drug master file (document with complete information on an API)
Earnings before interest and tax
EBITDA
Earnings before interest, tax, depreciation and amortisation
FB
Fikkjebakke - Metformin production facility in Kragerø, Norway
FDA
FTE
U.S. Food and Drug Administration
Full-time equivalent
GDP
Good Distribution Practice
Generic (OTC)
Term used for non-branded products
Generic (Rx)
GMP
Copy of drug were the substance patent has expired
Good Manufacturing Practice
GP
General practitioners
GV
Gruveveien - Dedicated tablets and opioids production facility in Kragerø, Norway
JM
Joint marketing
LEAN
Line extension
Production practice with focus on creating value for customer
New flavors, forms, colors, added ingredients, packaging size under an existing brand
LMI
The Association of the Pharmaceutical Industry in Norway
MA
Market authorisation
Mass market
MAT
All retail outlets other than pharmacies (grocery, gas stations, kiosks, internet etc.)
Moving annual total (last 12 months)
Metformin DC
Directly compressible Metformin, a granulated pre-tablet form
Metformin HCl
Metformin hydrochloride
MT
NSAID
Metric ton
Non-steroidal anti-inflammatory drugs
Nutraceuticals
Dietary food supplements, nutrition products, vitamins which is not registrated as drugs
Opioids
Collective term chemicals that work by binding to opioid receptors in the body
OTC
PPP
Over-the-counter. Drugs available without a prescription
Pharmacy purchasing price
QA
Quality assurance
QC
Quality control
RX
Rx-to-OTC switch
Drugs that require a prescription
OTC registering a drug product containing an API which previously has only been available as RX
SKU
Stock keeping unit
SYA1
Opioids production facility (located at Gruveveien)
SYA2
USP
Metformin production facility (located at Fikkjebakke)
Unique selling proposition
YTD
Year-to-date
Ø27
Østensjøveien 27 - Weifa's head office in Oslo, Norway
22
Top 20 shareholders as of 17 October
NAME
SHAREHOLDING
% share
STRATA MARINE & OFFSHORE
163 047 697
10.3%
FAMADAY TRADING INC
106 625 000
6.7%
HOLTA LIFE SCIENCES
101 053 269
6.4%
MP PENSJON
87 516 382
5.5%
DEUTSCHE BANK AG
75 894 340
4.8%
ARCTIC FUNDS PLC
61 002 869
3.8%
SUNDT AS
36 400 000
2.3%
VICAMA AS
36 000 000
2.3%
FERNCLIFF LISTED DAI
35 899 808
2.3%
VICTORIA INDIA FUND
31 410 783
2.0%
GROSS MANAGEMENT AS
30 963 748
2.0%
HOLBERG NORDEN
30 000 000
1.9%
STOREBRAND NORGE I
29 294 553
1.8%
KLP AKSJE NORGE
27 605 443
1.7%
TOLUMA NORDEN AS
26 587 302
1.7%
PORTIA AS
25 000 000
1.6%
STOREBRAND OPTIMA
21 459 524
1.4%
KOMMUNAL LANDSPENSJOSKASSE
21 049 131
1.3%
HOLBERG NORGE
20 833 334
1.3%
BORGEN INVESTMENT GROUP
20 000 000
1.3%
Total 20 largest shareholders
987 643 183
62.2%
Other shareholders
598 960 263
37.8%
1 586 603 446
100.0%
Total number of shares
23