TIDMBTG
RNS Number : 1993F
BTG PLC
16 May 2017
Press Release
BTG plc: Final Results
Strong strategic progress in 2016/17 with double-digit growth in
product sales
London, UK, 16 May 2017: BTG plc (LSE: BTG), the global
specialist healthcare company, today announces its final results
for the year ended 31 March 2017.
Louise Makin, BTG's CEO, commented: "We have delivered strong
double-digit product sales growth and generated significant cash
flows, enabling us to invest in product innovation, clinical data,
geographic expansion and acquisitions. We have a broad portfolio
and a scalable platform, and there is momentum across the business.
With the financial strength to continue our investment plans, we
are well positioned to capture further value in the growing
Interventional Medicine space and to deliver sustained business
growth."
Financial summary
2016/17 2015/16 Growth Growth at CER(2) (%)
(GBPm) (GBPm) (%)
======================================= ==== ======== ======== ======= =====================
Revenue 570.5 447.5 27 11
Product sales 387.3 283.3 37 19
Licensing revenues 183.2 164.2 12 (3)
Adjusted operating profit(1) 129.6 93.0 39 13
IFRS operating profit 57.5 56.5 2
Adjusted basic EPS(1) 23.1p 21.9p 5
IFRS basic EPS 8.7p 15.8p (45)
Free cash flow(1) 64.7 88.1 (27)
Net cash flow from operating activities 74.2 95.6 (22)
Cash and cash equivalents at year end 155.5 140.4
============================================= ======== ======== ======= =====================
1. Certain financial measures in this press release, including
adjusted operating profit, adjusted basic EPS and free cash flow,
are not prepared in accordance with IFRS. All adjusted financial
measures are explained on page 20, and are reconciled to the most
directly comparable measure prepared in accordance with IFRS on
pages 21 to 22.
2. Constant Exchange Rate (CER) growth is computed by restating
2016/17 results using 2015/16 foreign exchange rates for the
relevant period.
-- Interventional Medicine now the largest and fastest growing
revenue contributor, delivering 15% organic CER growth (25% CER
growth including Galil Medical)
-- Adjusted operating profit up 13% at CER in 2016/17
-- Strong financial position with GBP155.5m of cash at 31 March 2017
-- IFRS operating profit and IFRS EPS impacted by previously
announced legal settlement (GBP28.0m)
-- Translation benefits from weaker sterling offset by hedging
losses on forward contracts (GBP25.2m), impacting the year's
Adjusted and IFRS EPS
Operating highlights
Interventional Medicine
Oncology
-- Acquisition of Galil Medical, a leader in interventional oncology cryoablation technology
-- Liver cancer treatment DC Bead LUMI(TM) , the first and only
visible chemoembolising bead, approved in the EU and Canada
-- Availability of TheraSphere(R) , the radiation treatment for
liver cancer, expanded in Asia; new dosimetry software launched
-- Collaboration with the Society of Interventional Oncology
(SIO) to test locoregional therapies alongside immuno-oncology
agents
Vascular
-- Enrolment completed into OPTALYSE and ACCESS PTS studies of
EKOS(R) , the blood clot treatment device
-- Steady increase in use of the varicose veins treatment
Varithena(R) ; new reimbursement codes due January 2018
Pulmonology
-- Premarket Approval (PMA) application accepted in the US for
PneumRx(R) Coils for severe emphysema; coils included in new GOLD
guidelines; progress made towards national coverage/reimbursement
determinations in Germany and France
Specialty Pharmaceuticals
-- CroFab(R) copperhead snakebite study completed successfully;
targeted sales campaign delivered higher sales of digoxin overdose
antidote DigiFab(R) into US hospitals
-- Oncology sales force expanded to support growth of
Voraxaze(R) and recently launched Vistogard(R) chemotherapy
antidotes
Licensing
-- Continued strong contribution from Zytiga(R) and last full
year's contribution from Lemtrada(TM) royalties
For further information contact:
BTG FTI Consulting
Andy Burrows, VP Corporate & Investor Relations Ben Atwell / Simon Conway
+44 (0)20 7575 1741; Mobile: +44 (0)7990 530 605 +44 (0)20 3727 1000
Stuart Hunt, Investor Relations Manager
+44 (0)20 7575 1582; Mobile: +44 (0)7815 778 536
Chris Sampson, Corporate Communications Director
+44 (0)20 7575 1595; Mobile: +44 (0)7773 251 178
About BTG
BTG is a global specialist healthcare company bringing to market
innovative products in specialist areas of medicine to better serve
doctors and their patients. We have a portfolio of Interventional
Medicine products to advance the treatment of cancer, severe
emphysema, severe blood clots and varicose veins, and Specialty
Pharmaceuticals that help patients overexposed to certain
medications or toxins. Inspired by patient and physician needs, BTG
is investing to expand its portfolio to address some of today's
most complex healthcare challenges. To learn more about BTG, please
visit: btgplc.com.
OPERATING REVIEW
BTG has made significant progress in executing its growth
strategy and demonstrating leadership in Interventional Medicine.
The business is now capable of delivering sustained double-digit
product sales growth based on the momentum in Interventional
Oncology and EKOS(R) , together with the financial underpin from
Specialty Pharmaceuticals. BTG has the potential to deliver higher
growth by continuing to invest in the regulatory and commercial
development of Varithena(R) and the PneumRx(R) Coils and in product
innovation, geographic expansion, clinical data and
acquisitions.
Interventional Medicine
Oncology
BTG's leadership strategy in interventional oncology is to
provide differentiated products across multiple technology
platforms, and to advance overall understanding of the conditions
that the products treat by providing comprehensive disease and
product education. The Company is committed to innovation and to
generating clinical data, which support the interventional
radiologist in the multidisciplinary cancer team.
In June 2016, BTG expanded its oncology portfolio through the
acquisition of Galil Medical, a leader in interventional oncology
cryoablation technology. Galil Medical continued to grow strongly
throughout the integration, especially in its largest market,
kidney cancer. Good progress was also made in studies using Galil
Medical's cryoablation platform technology to treat metastatic
tumours. These are on track to yield results over the coming year
and if successful could expand the opportunity in treating lung
metastases and provide a new opportunity in treating bone
metastases. BTG's expanded Interventional Oncology sales force in
the US is now promoting all technologies in the portfolio.
TheraSphere(R) , the differentiated internal radiation product
used in the treatment of liver cancer, delivered strong growth in
the US and EU, and became available for the first time in a number
of markets in Asia and elsewhere including South Korea, Malaysia
and Mexico. Recruitment continued on track into STOP-HCC and EPOCH,
two Phase III trials designed to support product label expansions
and to generate data in primary liver cancer and metastatic
colorectal cancer respectively.
LC Bead LUMI(TM) , the first and only radiopaque embolising
bead, was first launched in the US in early 2016 into oncology
centres of excellence. Treating physicians have given positive
feedback on their ability to locate the beads precisely during the
embolisation procedure. DC Bead LUMI(TM) , the first and only
visible chemoembolisation bead, received a CE mark in the EU and
was approved in Canada. The first European patients have now been
treated and the product will be made available throughout the EU
over the coming months.
During the year, BTG formed a collaboration with the SIO, a
global organisation working to nurture and support interventional
oncology worldwide, to explore the role of interventional oncology
alongside immuno-oncology. BTG also joined the Global Liver
Institute's (GLI) Partnership Network as a founding member. The GLI
is an innovation and collaboration platform for the liver community
worldwide; BTG will provide expertise and support on key
initiatives to help transform care for liver cancer patients.
Vascular
Continued high growth in revenue from EKOS(R) , which uses
ultrasound accelerated thrombolysis to treat severe blood clots,
reflects increased penetration into US hospitals, of which
approximately 75% now use EKOS(R) products. EKOS(R) sales have also
benefitted from an increase in total procedures, which has risen to
approximately 150,000 per annum in the US.
EKOS(R) has seen steady growth in its deep vein thrombosis (DVT)
and peripheral arterial occlusion (PAO) catheter sales and strong
growth in pulmonary embolism (PE) catheter sales, where it is the
only device cleared in the US for treating PE. In February 2017,
EKOS(R) also received 510(k) approval for a new control unit that
is optimised for PE.
EKOS(R) has strengthened its sales and marketing presence in
Europe and has improved its distribution network. It has also made
progress in other territories, with the first patients treated in
Taiwan and Hong Kong.
Recruitment was completed into the OPTALYSE and ACCESS PTS
studies. OPTALYSE is a multi-arm study exploring whether reduced
drug doses and infusion times can achieve similar outcomes as the
current standard PE treatment protocol. Success in this study would
offer safety and cost benefits, providing additional rationale for
using the EKOS(R) device to treat PE. The OPTALYSE results will be
presented on 21 May 2017 at American Thoracic Society International
Conference in Washington, DC, USA. ACCESS PTS is evaluating the
efficacy of EKOS(R) for post-thrombotic syndrome and chronic venous
occlusion; the results will be presented at the Society for
Vascular Medicine 28(th) Annual Scientific Sessions in New Orleans,
LA, USA on 15 June 2017.
New sales force and market access initiatives helped
Varithena(R) make steady progress in the US reimbursed sector, with
more vein clinics starting to use the product and reorder rates
increasing among existing customers month on month. A key
development during the year was the confirmation that there will be
new dedicated reimbursement codes from January 2018 covering the
use of Varithena(R) . Once established, the new codes will simplify
administration of the claims procedure for physicians and insurers.
They will also provide clarity for physicians in relation to the
economics of using Varithena(R) in different vein segments (i.e.
for the great saphenous vein, and for other varicosities above and
below the knee) compared with other treatment options, which will
influence usage in the different segments.
BTG continues to explore the use of Varithena(R) in the
treatment of venous leg ulcers.
Pulmonology
European sales of the PneumRx(R) Coils, which are used for the
treatment of severe emphysema, fell as a result of fewer procedures
in Germany, currently the largest market. Activities to support the
resumption of growth in Europe are focused on medical therapy area
development, including using the expanded clinical data and medical
insights to establish appropriate patient selection criteria, and
on extending reimbursement coverage.
National reimbursement determinations in Germany and France
progressed, with decisions anticipated in the current financial
year that are expected to secure the availability of the coils in
both countries. France would be a new market.
In the US, a Premarket Approval application was submitted and
accepted for review in March 2017. Planning is underway for a
potential US launch in 2018, depending on the PMA review process
and approval timeline.
During the year, the PneumRx(R) Coils were included in the new
GOLD (Global Initiative for Chronic Obstructive Lung Disease)
treatment guidelines.
Specialty Pharmaceuticals
A strong performance in Specialty Pharmaceuticals reflects the
success of targeted activities to strengthen the brands. The
results of the copperhead bite study, increased usage of the
SnakeBite911(TM) app and educational programmes continued to drive
appropriate CroFab(R) usage and dosing. DigiFab(R) benefitted from
a targeted sales initiative to raise awareness of the potential for
digoxin toxicity.
The expanded oncology sales force generated good growth in
Voraxaze(R) and continued to raise awareness of toxicity associated
with the use of 5-fluorouracil, to support the adoption of the
recently launched antidote Vistogard(R) .
Licensing
Royalties from Johnson & Johnson's Zytiga(R) continued to
deliver a good cash contribution. Royalties from Sanofi's multiple
sclerosis treatment Lemtrada(TM) increased during the year but are
expected to be much lower in the current year, ceasing from
September 2017 due to patent expiries.
FINANCIAL REVIEW
BTG has delivered a strong financial performance in 2016/17,
reflecting the Group's increasing financial maturity and progress
on its strategic objective to achieve sustained profitable
growth.
2016/17 2015/16 Growth Growth at CER(1) (%)
(GBPm) (GBPm) (%)
Interventional Medicine
Interventional Oncology TheraSphere(R) / Beads 121.8 91.4 33 16
GALIL(TM) 17.2 - n/a n/a
Total Interventional Oncology 139.0 91.4 52 32
Interventional Vascular EKOS(R) 64.0 45.4 41 22
Varithena(R) 4.1 1.0 310 270
Total Interventional Vascular 68.1 46.4 47 27
Interventional Pulmonology PneumRx(R) Coil 9.1 12.4 (27) (36)
Total Interventional Medicine 216.2 150.2 44 25
Specialty Pharmaceuticals
CroFab(R) 82.4 67.9 21 6
DigiFab(R) 64.1 47.0 36 17
Voraxaze(R) 21.1 16.6 27 15
Vistogard(R) /other 3.5 1.6 119 94
Total Specialty Pharmaceuticals 171.1 133.1 29 12
Product sales 387.3 283.3 37 19
Licensing
Zytiga(R) 123.2 118.9 4 (10)
Lemtrada(TM) 39.0 19.8 97 67
Others 21.0 25.5 (18) (24)
Total Licensing 183.2 164.2 12 (3)
Total revenue 570.5 447.5 27 11
(1) For the methodology applied to calculate CER growth, refer to page 20.
Revenue
Revenues were GBP570.5m (2015/16: GBP447.5m), up 11% on a CER
basis. At actual exchange rates revenues were up 27%, as a result
of significant foreign exchange tailwinds from weaker sterling in
2016/17.
Product sales delivered 14% organic growth at CER (19% CER
growth including Galil Medical). At actual exchange rates product
sales were up 37%.
Interventional Medicine
Interventional Medicine revenues increased to GBP216.2m
(2015/16: GBP150.2m), delivering 15% organic growth at CER (up 25%
at CER including Galil Medical). Interventional Medicine now
represents the Group's largest and fastest growing business
unit.
Interventional Oncology revenues were GBP139.0m (2015/16:
GBP91.4m), up 32% at CER including sales from Galil Medical, which
was acquired in June 2016. The TheraSphere(R) / Beads portfolio of
products grew 16% at CER, driven by the continued expansion of
TheraSphere(R) in the US and EU. Galil Medical revenues delivered
20% year on year growth on a pro forma basis, including sales for
the period prior to BTG's ownership.
Interventional Vascular revenues were GBP68.1m (2015/16:
GBP46.4m), up 27% at CER.
Sales of the EKOS(R) blood clot treatment device were up 22% at
CER. Strong growth has been delivered through increased penetration
into US hospitals and use in the treatment of pulmonary
embolism.
Sales of the varicose veins treatment Varithena(R) were GBP4.1m
(2015/16: GBP1.0m), the growth reflecting targeted marketing and
market access initiatives.
Interventional Pulmonology revenues were GBP9.1m (2015/16:
GBP12.4m), down 36% at CER. Lower sales of the PneumRx(R) Coil
treatment for severe emphysema were due to a lower number of
procedures in Germany, the largest market. Resumption of growth in
Europe is anticipated when appropriate patient selection criteria
are established and as reimbursement coverage expands.
Speciality Pharmaceuticals
Specialty Pharmaceuticals revenues were GBP171.1m (2015/16:
GBP133.1m) up 12% at CER. Growth was principally driven by
single-digit price increases for the established products, strong
reorders of DigiFab(R) , and volume growth for the newer oncology
products.
Sales of CroFab(R) , the snakebite antivenin, were up 6% at CER
and the digoxin toxicity treatment DigiFab(R) was up 17% at
CER.
Voraxaze(R) , for treating high-dose methotrexate toxicity,
delivered 15% CER growth. Revenues from Vistogard(R) grew to
GBP3.2m during its first full year of sales following US launch in
2015/16.
Licensing
Licensing revenues were GBP183.2m (2015/16: GBP164.2m), down 3%
at CER.
Royalties from Zytiga(R) were GBP123.2m (2015/16: GBP118.9m).
Royalties from Lemtrada(TM) grew strongly to GBP39.0m (2015/16:
GBP19.8m). The 2016/17 financial year represented the last year of
significant Lemtrada(TM) royalties, as the European patent expired
in March 2017 and the US patent expires in September 2017.
Gross Profit
Adjusted gross profit was GBP391.6m (2015/16: GBP308.2m), with
an adjusted gross margin of 69% (2015/16: 69%).
On an IFRS basis, gross profit was GBP390.6m (2015/16:
GBP306.7m), at a gross margin of 68% (2015/16: 69%).
Interventional Medicine gross margin remained constant at 71%
(2015/16: 71%). Interventional Medicine gross margin reflects the
fixed manufacturing cost base for the early-stage Varithena(R) and
PneumRx(R) products, and is expected to increase over time as
revenues from these products grow. Specialty Pharmaceuticals gross
margin was 90% (2015/16: 89%). Licensing gross margin was 45%
(2015/16: 50%) reflecting increased revenues from lower margin
royalty streams in 2016/17.
SG&A
Adjusted SG&A was GBP178.6m (2015/16: GBP141.4m), up 26% at
actual exchange rates, the increase in part due to weaker sterling
in 2016/17. On a CER basis adjusted SG&A was up 14%. The
increase in adjusted SG&A reflects the inclusion of Galil
Medical's operating costs for the first time, representing five
percentage points of the year on year increase, and continued
targeted investment in Interventional Medicine commercial
capabilities while continuing to effectively manage the cost
base.
On an IFRS basis SG&A was GBP206.6m (2015/16: GBP141.4m).
SG&A in 2016/17 included a one-time charge of GBP28.0m ($36m)
relating to the previously announced legal settlement with the US
government following its investigation into the historic marketing
of LC Bead(R) .
Research and development
Research and development was GBP87.8m (2015/16: GBP77.2m), up
14% at actual exchange rates and in line with prior year on a CER
basis.
There was good pipeline progress during the year, including
acceptance of the PMA submission for PneumRx(R) Coils in the US and
completion of enrolment for the OPTALYSE PE and ACCESS PTS studies.
R&D investment was focused on the Interventional Medicine
business, including the recently acquired Galil Medical programmes
for lung and bone metastases and increased patient enrolment for
the EPOCH and STOP-HCC TheraSphere(R) Phase III trials designed to
support PMA applications in the US.
Operating profit
Adjusted operating profit was GBP129.6m (2015/16: GBP93.0m), up
39% at actual exchange rates. On a CER basis adjusted operating
profit was up 13%, driven by higher revenues coupled with continued
effective cost management and targeted commercial investment in
Interventional Medicine.
Adjusted operating margin increased by two percentage points to
23% (2015/16: 21%).
IFRS Operating Profit was GBP57.5m (2015/16: GBP56.5m), up 2% at
actual exchange rates. This reflects higher acquired intangible
asset amortisation of GBP42.0m (2015/16: GBP35.0m), principally due
to intangible assets acquired with Galil Medical, and the
previously announced legal settlement that resulted in a one-time
charge of GBP28.0m.
IFRS operating margin was 10% (2015/16: 13%).
Financial expense/income
Adjusted net financial expense was GBP26.6m (2015/16: expense of
GBP0.4m). Following the significant weakening of sterling in
2016/17, hedging losses of GBP25.2m (2015/16: gain of GBP1.2m)
relating to foreign exchange forward contracts were recognised.
These losses have offset the foreign exchange translation benefits
realised at the operating profit level.
IFRS net financial expense was GBP25.9m (2015/16: net financial
income of GBP1.0m). IFRS net financial expense includes a net
credit of GBP0.7m relating to the change in fair value of
contingent consideration liabilities (2015/16: net credit of
GBP1.4m).
Taxation
Adjusted effective tax rate was 14% (2015/16:10%). This is lower
than the standard rate of UK corporate tax due to the patent box
deduction on royalty income, the benefit of US R&D credits and
the recognition of deferred tax assets for historic US losses and
timing differences.
On an IFRS basis, there was a tax credit of GBP2.0m (2015/16:
credit of GBP3.0m). The tax credit arises from deferred tax credits
on the amortisation of acquired intangible assets at rates above
the UK tax rate and the effect of a legal settlement which was only
partially tax deductible.
Earnings per share
Adjusted basic EPS was 23.1p (2015/16: 21.9p), up 5% due to
higher adjusted profit after tax of GBP88.7m (2015/16: GBP83.6m).
Adjusted profit after tax was higher in 2016/17 due to growth in
adjusted operating profit, partly offset by hedging losses on
foreign exchange forward contracts.
IFRS basic EPS was 8.7p (2015/16: 15.8p), down 45% due to lower
IFRS profit before tax. IFRS profit before tax was lower as the
effect of the hedging losses more than offset slightly higher IFRS
operating profit.
Balance sheet
31 March 31 March
2017 2016
GBPm GBPm
Non-current Assets 968.8 851.3
Current Assets 342.3 297.5
Non-current Liabilities (165.7) (176.1)
Current Liabilities (165.5) (125.0)
Net Assets 979.9 847.7
Non-current assets
Non-current assets increased to GBP968.8m (31 March 2016:
GBP851.3m), due to higher intangible assets of GBP678.9m (31 March
2016: GBP599.2m) and goodwill of GBP225.6m (31 March 2016:
GBP187.9m). Intangible assets increased by GBP79.7m due to assets
acquired with Galil Medical and foreign exchange translation,
offset by intangible asset amortisation charges.
The Group's defined benefit pension scheme net asset decreased
slightly to GBP17.2m (31 March 2016: net asset of GBP19.3m),
principally due to a reduction in the discount rate used to value
the defined benefit obligation offset by actual returns on fund
assets.
Current assets
Current assets increased to GBP342.3m (31 March 2016:
GBP297.5m). Cash and cash equivalents were slightly higher at
GBP155.5m (31 March 2016: GBP140.4m).
Inventory increased to GBP58.4m (31 March 2016: GBP46.5m) and
receivables increased to GBP125.7m (31 March 2016: GBP106.5m) as a
result of underlying business growth.
Non-current liabilities
Non-current liabilities decreased to GBP165.7m (31 March 2016:
GBP176.1m). Non-current liabilities were lower at 31 March 2017 due
to the reclassification of contingent consideration liabilities
relating to the PneumRx acquisition from non-current to current
liabilities in the year (see below). This decrease was partially
offset by higher deferred tax liabilities following the acquisition
of Galil Medical and the effects of foreign exchange
translation.
Current liabilities
Current liabilities increased to GBP165.5m (31 March 2016:
GBP125.0m). Derivative financial instrument liabilities increased
to GBP7.9m (31 March 2016: GBP3.0m) due to unrealised losses on
foreign exchange forward contracts. Trade and other payables
increased to GBP152.5m (31 March 2016: GBP116.2m) reflecting the
underlying growth of the business and the classification of PneumRx
contingent consideration liabilities to current liabilities from
non-current liabilities.
Included within current liabilities is a contingent
consideration liability of GBP28.2m (31 March 2016: non-current
liability of GBP27.2m) relating to a $60m milestone which may be
payable to the former shareholders of PneumRx, Inc. if FDA approval
for the PneumRx(R) Coils is received by 31 December 2017. This
milestone is reflected at its current fair value, which reflects
the probability of receiving FDA approval and the anticipated
timing of any such approval.
While the Group remains confident of FDA approval, the event
which would require payment of the milestone, receipt of FDA
approval by 31 December 2017, will only be resolved in the 2017/18
year. If FDA approval is received by 31 December 2017, the Group
will record a fair value charge of GBP19.8m to record the liability
at its full value of $60m. Alternatively, if FDA approval is not
received by 31 December 2017 the Group will credit the income
statement with GBP28.2m to release in full this liability. Any such
charge or credit will be reflected in IFRS earnings but not
adjusted earnings, in line with the Group's adjusted earnings
policy.
Contingent liabilities
BTG is in a current dispute with Wellstat over the
commercialisation of Vistogard(R) . Wellstat is seeking damages and
to terminate the commercialisation agreement under which BTG
obtained rights to sell Vistogard(R) in the US. A trial has been
heard in the Court of Chancery of the State of Delaware but no
judgement has yet been issued. The Group estimates the likelihood
of material financial loss or loss of rights to the asset to be
possible, not probable, and therefore no liability has been
recognised. It is currently not possible to make a reliable
estimate of any amount that may be required to be paid in respect
of the dispute.
Cash flow
2016/17 2015/16 Growth
GBPm GBPm %
Free Cash Flow 64.7 88.1 (27)
Acquisition of Galil (55.1) - n/m
Medical
Other investing and
financing activities (0.4) (22.4) n/m
Net Change in Cash 9.2 65.7 (86)
Foreign exchange
on cash 5.9
Closing Cash and
Deposits 155.5 140.4
The business continues to be highly cash generative, and is
delivering strong free cash flow.
Free cash flow was GBP64.7m (2015/16: GBP88.1m), down 27%. Free
cash flow was lower in 2016/17 due to the previously announced
legal settlement of GBP28m. Excluding the effect of this
settlement, free cash flow was up 5%.
On an IFRS basis, cash flow from operating activities was down
22% to GBP74.2m (2015/16: GBP95.6m).
Cash and cash equivalents were GBP155.5m at 31 March 2017 (31
March 2016: GBP140.4m), as free cash flow in 2016/17 was partially
used to fund the acquisition of, and repay debt acquired with,
Galil Medical.
BTG has a GBP100m multi-currency revolving credit facility
(RCF), with an option to increase the RCF by a further GBP100m. The
RCF has a three-year term which expires in November 2018, although
the group has the option to extend it for an additional year. The
RCF currently remains undrawn.
Summary and outlook for 2017/18
BTG has delivered a strong financial performance this year, with
double-digit product sales growth, robust free cash flow and
disciplined cost control.
We have strengthened our portfolio, capabilities and leadership
in interventional medicine, which is our fastest growing and
largest business. We have the resources and capabilities to
capitalise on the expanding opportunities we see in interventional
medicine, by reinvesting our strong cash flows into further
commercial expansion and pipeline development. We continue to look
for opportunities to accelerate our product sales growth through
acquisitions.
We expect to deliver further growth in 2017/18 and our guidance
is as follows:
2017/18 CER guidance(1)
Product sales
Interventional Medicine Mid-to-high teens % growth
Specialty Pharmaceuticals Low-to-mid single digit % growth
Licensing royalties High teens % decline
Gross margin Increasing to 72%-74%
Adjusted SG&A, R&D Mid-to-high single-digit % increase
Adjusted effective tax rate (ETR) Increasing to 22%-26%
(1) The average USD/GBP rate for the year to 31 March 2017 was
$1.31
A $0.05 movement of the USD:GBP exchange rate would impact
revenue, costs and foreign exchange forward contracts for the full
year 2017/18 as follows:
Revenue +/ - GBP20m
SG&A, R&D +/ - GBP7m
Foreign exchange forward contracts + / - GBP5m
In 2017/18 we anticipate a hedging gain on current foreign
exchange forward contracts of GBP5m (at the current rate of $1.30).
At 31 March 2017, BTG had forward contracts to sell $170m at a
weighted average rate of $1.33.
Medium-term outlook
Looking beyond 2017/18, we expect to deliver continued
double-digit product sales growth.
This double-digit growth will be driven by a strong
Interventional Medicine performance, aided by the anticipated
opportunity from Varithena(R) and PneumRx(R) . We expect a
sustained Specialty Pharmaceuticals performance to underpin product
sales over the medium term.
We expect to see a decline in royalties over time.
Over the medium term we expect to deliver enhanced gross
margins, as we switch to higher margin Interventional Medicine
sales from lower margin royalties.
We will continue to make targeted investments in R&D and
commercial capabilities to support additional growth, building upon
the historical investment which has established our current
commercial platform.
Taking these dynamics together, we expect to deliver operational
leverage over the medium term.
CONSOLIDATED INCOME STATEMENT
Year ended Year ended
31 March 31 March
2017 2016
GBPm GBPm
==================================================== =============== ===========
Revenue 570.5 447.5
Cost of sales (179.9) (140.8)
----------------------------------------------------- --------------- -----------
Gross profit 390.6 306.7
Selling, general and administrative
expenses (206.6) (141.4)
Research and development (87.8) (77.2)
Other operating income 4.4 3.4
Amortisation of acquired
intangible assets (42.0) (35.0)
Acquisition and reorganisation (1.1) -
costs
---------------------------------------------------- --------------- -----------
Operating profit 57.5 56.5
Financial income 3.3 4.4
Financial expense (29.2) (3.4)
----------------------------------------------------- --------------- -----------
Profit before tax 31.6 57.5
Tax credit 2.0 3.0
Profit for the year 33.6 60.5
===================================================== =========== ===========
Basic earnings per share 8.7p 15.8p
Diluted earnings per share 8.6p 15.6p
===================================================== =========== ===========
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Year ended Year ended
31 March 31 March
2017 2016
GBPm GBPm
==================================================== =============== ===========
Profit for the year 33.6 60.5
Other comprehensive income
Items that may be reclassified subsequently
to profit or loss
Foreign exchange translation
differences 91.7 18.7
Items that will not be reclassified subsequently
to profit or loss
Actuarial (loss)/gain on
defined benefit pension
scheme (5.2) 3.3
Deferred tax on defined
benefit pension scheme
asset 4.1 (1.1)
===================================================== =========== ===========
Other comprehensive income
for the year 90.6 20.9
===================================================== =========== ===========
Total comprehensive income
for the year 124.2 81.4
===================================================== =========== ===========
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
31 March 31 March
2017 2016
GBPm GBPm
=========================================================== ========= =========
ASSETS
Non-current assets
Goodwill 225.6 187.9
Intangible assets 678.9 599.2
Property, plant and equipment 40.1 35.7
Deferred tax asset 5.3 6.8
Employee benefits 17.2 19.3
Other non-current assets 1.7 2.4
============================================================ ========= =========
968.8 851.3
=========================================================== ========= =========
Current assets
Inventories 58.4 46.5
Trade and other receivables 125.7 106.5
Other current assets 2.7 4.1
Cash and cash equivalents 155.5 140.4
342.3 297.5
=========================================================== ========= =========
Total assets 1,311.1 1,148.8
============================================================ ========= =========
EQUITY
Share capital 38.5 38.3
Share premium 435.4 434.8
Merger reserve 317.8 317.8
Other reserves 119.8 28.1
Retained earnings 68.4 28.7
============================================================ ========= =========
Total equity attributable to equity holders of the parent 979.9 847.7
============================================================ ========= =========
LIABILITIES
Non-current liabilities
Trade and other payables 8.5 29.1
Deferred tax liabilities 157.2 147.0
165.7 176.1
=========================================================== ========= =========
Current liabilities
Trade and other payables 152.5 116.2
Derivative financial instruments 7.9 3.0
Corporation tax payable 5.1 5.8
165.5 125.0
=========================================================== ========= =========
Total liabilities 331.2 301.1
============================================================ ========= =========
Total equity and liabilities 1,311.1 1,148.8
============================================================ ========= =========
CONSOLIDATED STATEMENT OF CASH FLOWS
Year ended 31 March Year ended 31 March
2017 2016
GBPm GBPm
================================================================= ==================== ====================
Profit after tax for the year 33.6 60.5
Tax credit (2.0) (3.0)
Financial income (3.3) (4.4)
Financial expense 29.2 3.4
================================================================== ==================== ====================
Operating profit 57.5 56.5
Adjustments for:
Amortisation and impairment of intangible assets 46.7 38.0
Depreciation and impairment of property, plant and equipment 6.6 6.6
Share-based payments 8.5 6.7
Pension scheme funding (2.9) (2.9)
Other non-cash adjustments 0.9 3.1
================================================================== ==================== ====================
Cash from operations before movements in working capital 117.3 108.0
Increase in inventories (9.3) (7.6)
Increase in trade and other receivables (8.5) (14.4)
Increase in trade and other payables 2.1 14.7
Increase in provisions 0.1 1.1
================================================================== ==================== ====================
Cash from operations 101.7 101.8
Settlement of foreign exchange forward contracts (17.1) -
Corporation tax paid (10.4) (6.2)
------------------------------------------------------------------ -------------------- --------------------
Net cash inflow from operating activities 74.2 95.6
Investing activities
Purchases of intangible assets (0.6) (24.3)
Purchases of property, plant and equipment (8.9) (6.2)
Acquisition of business, net of cash acquired (36.2) -
Other investing activities 0.4 0.6
------------------------------------------------------------------ -------------------- --------------------
Net cash outflow from investing activities (45.3) (29.9)
Cash flows from financing activities
Repayments of debt acquired on business combination (18.9) -
Proceeds of share issues 0.8 1.1
Other financing activities (1.6) (1.1)
------------------------------------------------------------------ -------------------- --------------------
Net cash outflow from financing activities (19.7) -
Increase in cash and cash equivalents 9.2 65.7
Cash and cash equivalents at start of year 140.4 73.8
Effect of exchange rate fluctuations on cash held 5.9 0.9
================================================================== ==================== ====================
Cash and cash equivalents at end of year 155.5 140.4
================================================================== ==================== ====================
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Share Merger Other Retained Total
capital premium reserve reserves earnings equity
GBPm GBPm GBPm GBPm GBPm GBPm
=================================================== ========= ========= ========= ========== ========== ========
At 1 April 2015 38.2 433.8 317.8 9.4 (40.6) 758.6
Profit for the year - - - - 60.5 60.5
Foreign exchange translation differences - - - 18.7 - 18.7
Remeasurements of the net defined benefit pension
asset - - - - 3.3 3.3
Deferred tax on defined benefit pension scheme
asset - - - - (1.1) (1.1)
=================================================== ========= ========= ========= ========== ========== ========
Total comprehensive income for the year - - - 18.7 62.7 81.4
Transactions with owners:
Issue of BTG plc ordinary shares 0.1 1.0 - - - 1.1
Movement in shares held by the Employee Share
Ownership Trust - - - - (0.1) (0.1)
Share-based payments - - - - 6.7 6.7
=================================================== ========= ========= ========= ========== ========== ========
At 31 March 2016 38.3 434.8 317.8 28.1 28.7 847.7
=================================================== ========= ========= ========= ========== ========== ========
Share Share Merger Other Retained Total
capital premium reserve reserves earnings equity
GBPm GBPm GBPm GBPm GBPm GBPm
=================================================== ========= ========= ========= ========== ========== ========
At 1 April 2016 38.3 434.8 317.8 28.1 28.7 847.7
Profit for the year - - - - 33.6 33.6
Foreign exchange translation differences - - - 91.7 - 91.7
Remeasurements of the net defined benefit pension
asset - - - - (5.2) (5.2)
Deferred tax on defined benefit pension scheme
asset - - - - 4.1 4.1
=================================================== ========= ========= ========= ========== ========== ========
Total comprehensive income for the year - - - 91.7 32.5 124.2
Transactions with owners:
Issue of BTG plc ordinary shares 0.2 0.6 - - - 0.8
Movement in shares held by, and gift to the
Employee Share Ownership Trust - - - - (1.3) (1.3)
Share-based payments - - - - 8.5 8.5
=================================================== ========= ========= ========= ========== ========== ========
At 31 March 2017 38.5 435.4 317.8 119.8 68.4 979.9
=================================================== ========= ========= ========= ========== ========== ========
Notes to the consolidated financial statements
1. General information
In accordance with EU law (IAS Regulation EC 1606/2002), the
final results have been prepared in accordance with International
Financial Reporting Standards ("IFRS") adopted for use in the EU as
at 31 March 2017 ("adopted IFRS"), International Financial
Reporting Interpretations Committee ("IFRIC") interpretations and
those parts of the Companies Act 2006 applicable to companies
reporting under IFRS.
The final statements have been prepared in accordance with the
Group's accounting policies approved by the Board. Details of
principal business risks and uncertainties can be found in note
9.
In the period ended 31 March 2017 the Group has changed the
presentation of its consolidated income statement. Under the new
presentation:
a) No separate column to disclose acquisition adjustments and
reorganisation costs arising on corporate acquisitions is
presented. The results for each period are now disclosed in a
single column.
b) 'Foreign exchange gains', 'Profit on disposal of property,
plant and equipment and intangible assets' and 'Other operating
expenses' which were previously disclosed separately on the face of
the consolidated income statement are now disclosed within 'Other
operating income'.
BTG's 2017 Annual Report will be posted to shareholders on 12
June 2017. The financial information set out herein does not
constitute the Group's statutory accounts for the year ended 31
March 2017 but is derived from those accounts and the accompanying
directors' report. Statutory accounts for 2017 will be delivered to
the Registrar of Companies following the Company's Annual General
Meeting, which will be held at 10.30am on 13 July 2017. The auditor
has reported on those accounts; their report was unqualified and
did not contain statements under Section 495 (4)(b) of the
Companies Act 2006.
The comparative figures for the year ended 31 March 2016 are not
the Group's statutory accounts for the financial year but are
derived from those accounts, which have been reported on by the
Group's auditor and delivered to the Registrar of Companies. The
report of the auditor was unqualified and did not contain
statements under Section 495 (4)(b) of the Companies Act 2006.
Interim and preliminary announcements notified to the London Stock
Exchange are available on the internet at www.btgplc.com.
Accounting standards adopted in the year
No standards and interpretations issued by the EU adopted in the
year had a significant impact on the Group.
Accounting standards issued but not yet effective
IFRS 15, 'Revenue from contracts with customers', was issued by
the IASB in May 2014 and will be implemented by the Group from 1
April 2018. The Standard contains a new set of principles on when
and how to recognise and measure revenue as well as new
requirements related to disclosures. The new standard replaces IAS
18 Revenues and related interpretations.
The Group does not anticipate that the new standard will have a
material effect on the Group's consolidated financial
statements.
IFRS 9 'Financial instruments' was issued by the IASB in July
2014, effective for accounting periods beginning on or after
1 January 2018. The Group is currently assessing the impact of
IFRS 9 on the Group's consolidated financial statements.
IFRS 16 'Leases' was issued by the IASB in January 2016,
effective for accounting periods beginning on or after 1 January
2019. The Group is currently assessing the impact of IFRS 16 on the
Group's consolidated financial statements.
Going concern basis
After making enquiries, the directors have a reasonable
expectation that the Company and the Group have adequate resources
to continue in operational existence for the next twelve months.
Accordingly, they continue to adopt the going concern basis in
preparing the Annual Report and Accounts.
This conclusion has been reached having considered the effect of
liquidity risk on the Group's ability to operate effectively.
Currently, liquidity risk is not considered a significant business
risk to the Group given its level of net cash and cash equivalents,
together with its cash flow projections. The Group does not
currently require significant levels of debt financing to operate
its business. The key liquidity risks faced by the Group are
considered to be the failure of banks where funds are deposited and
the failure of key licensees, distribution partners, wholesalers or
insurers.
In addition to the liquidity risks considered above, the
directors have also considered the following factors when reaching
the conclusion to continue to adopt the going concern basis:
-- Many of the Group's products are life-saving in nature,
providing some protection against an uncertain economic
outlook;
-- BTG has a GBP100m multi-currency revolving credit facility
(RCF), with an option to extend this RCF by a further GBP100m. The
RCF has a three-year term, which expires in November 2018, with an
option to extend for a further year. The RCF currently remains
undrawn; and
-- The Group's principal licensees are global industry leaders
in their respective fields and the Group's royalty-generating
intellectual property consists of a portfolio of licensees.
2. Operating segments
Operating segments are reported based on the financial
information provided to the Group's chief operating decision-making
body, being the Leadership team. The Group is aligned behind three
reportable segments, being Interventional Medicine, Specialty
Pharmaceuticals and Licensing.
In assessing performance and making resource allocation
decisions, the Leadership Team (which is BTG's chief operating
decision-making body) reviews contribution by segment. Contribution
is defined as being gross profit less directly attributable
selling, general and administrative costs (SG&A). The Licensing
operating segment includes SG&A relating to the Group's
centrally managed support functions and corporate overheads. This
reflects the management structure and stewardship of the business.
No allocation of central overheads is made across the Specialty
Pharmaceuticals or Interventional Medicine operating segments.
Research and development continues to be managed on a global basis,
with investment decisions being made by the Leadership Team as a
whole. It is not managed by reference to the Group's operating
segments, though each programme within the pipeline would
ultimately provide revenues for one of the operating segments if
successful.
There are no inter-segment transactions that are required to be
eliminated on consolidation.
Year ended 31 March 2017
Interventional Specialty Licensing
Medicine Pharmaceuticals Total
GBPm GBPm GBPm GBPm
================================= =================== ==================== ============ =========
Revenue 216.2 171.1 183.2 570.5
Cost of sales(1) (61.9) (16.7) (101.3) (179.9)
================================= =================== ==================== ============ =========
Gross profit 154.3 154.4 81.9 390.6
Selling, general
and administrative
expenses(2) (119.5) (33.3) (53.8) (206.6)
================================= =================== ==================== ============ =========
Contribution 34.8 121.1 28.1 184.0
================================= =================== ==================== ============ =========
Research and development (87.8)
Other operating
income 4.4
Amortisation of acquired
intangible assets (42.0)
Acquisition and
reorganisation
costs (1.1)
================================= =================== ==================== ============ =========
Operating profit 57.5
Financial income 3.3
Financial expense (29.2)
================================= =================== ==================== ============ =========
Profit before tax 31.6
Tax credit 2.0
================================= =================== ==================== ============ =========
Profit for the
year 33.6
================================= =================== ==================== ============ =========
Total assets(3) 1,311.1
================================= =================== ==================== ============ =========
(1) 2017 Cost of sales within the Interventional Medicine
segment includes a GBP1.0m release of a fair value adjustment to
inventory and PP&E acquired with Galil Medical in June 2016.
The release represents the reversal of a fair value uplift applied
to inventory purchased on acquisition, which is recognised through
the P&L when inventory is sold, and incremental depreciation
related to acquired PP&E.
(2) 2017 selling, general and administrative expenses within
Licensing includes a charge of GBP28.0m relating to the Group's
settlement with the US government in relation to the Department of
Justice investigation into the historic marketing of LC
Bead.(R)
(3) The Group does not allocate assets to operating segments
with the exception of Goodwill.
Year ended 31 March 2016
Interventional Specialty Licensing
Medicine Pharmaceuticals Total
GBPm GBPm GBPm GBPm
================ ==== =============== ================ ========== ========================================================================================================================
Revenue 150.2 133.1 164.2 447.5
Cost of sales(1) (43.8) (15.1) (81.9) (140.8)
=================
Gross profit 106.4 118.0 82.3 306.7
Selling, general
and
administrative
expenses (96.2) (25.5) (19.7) (141.4)
================= === =============== ================ ========== ========================================================================================================================
Contribution 10.2 92.5 62.6 165.3
=================
Research and
development (77.2)
Other operating
income 3.4
Amortisation of
acquired
intangible assets (35.0)
Acquisition and
reorganisation
costs -
================= === =============== ================ ========== ========================================================================================================================
Operating profit 56.5
Financial income 4.4
Financial
expense (3.4)
================= === =============== ================ ========== ========================================================================================================================
Profit before
tax 57.5
Tax credit 3.0
================= === =============== ================ ========== ========================================================================================================================
Profit for the
year 60.5
================= === =============== ================ ========== ========================================================================================================================
Total assets(2) 1,148.8
================= === =============== ================ ========== ========================================================================================================================
(1) 2016 Cost of sales within the Interventional Medicine segment includes a GBP1.5m
release of a fair value adjustment to inventory purchased on the acquisition of PneumRx,
Inc. on 7 January 2015. This release represents the reversal of a fair value uplift
applied to inventory purchased on acquisition recognised through the income statement
as the product is sold.
(2) The Group does not allocate assets to operating segments with the exception of
Goodwill.
Revenue analysis
Analysis of revenue, based on the geographical location of
customers and the source of revenue is provided below:
Geographical analysis
Year ended Year ended
31 March 31 March
2017 2016
GBPm GBPm
=============== =========== ===========
USA 513.7 393.1
Europe 41.1 42.3
Other regions 15.7 12.1
=============== =========== ===========
570.5 447.5
=============== =========== ===========
Revenue from major products and services
Year ended Year ended
31 March 31 March
2017 2016
GBPm GBPm
=============== =========== ===========
Product sales 387.3 283.3
Royalties 183.2 164.2
=============== =========== ===========
570.5 447.5
=============== =========== ===========
Major customers
The Group's products are sold both directly and through
distribution agreements in the USA, Europe and Asia Pacific region.
No individual customer generated income in excess of 10% of the
Group revenue during the year ended 31 March 2017 or 31 March
2016.
Products that utilise the Group's intellectual property rights
are sold by licensees. Royalty income is derived from over 40
licences. One licence individually generated royalty income in
excess of 10% of Group revenue of GBP123.2m (2016: GBP118.9m).
3. Financial income and expense
Year ended Year ended
31 March 31 March
2017 2016
GBPm GBPm
===================================== =========== ===========
Interest receivable on money-market
and bank deposits 0.3 0.2
Fair value changes from foreign
exchange forward contracts - 1.2
Fair value movements on contingent
consideration liabilities 3.0 3.0
===================================== =========== ===========
Financial income 3.3 4.4
===================================== =========== ===========
Fair value movements and realised
losses from foreign exchange 25.2 -
forward contracts
Fair value movements on contingent
consideration liabilities 2.3 1.7
Other financial expense 1.7 1.7
===================================== =========== ===========
Financial expense 29.2 3.4
===================================== =========== ===========
In the year to 31 March 2017, the Group recognised a fair value
credit of GBP3.0m related to the contingent consideration from the
PneumRx acquisition and a fair value charge of GBP2.3m related to
the contingent consideration from the Galil Medical
acquisition.
In the year to 31 March 2016, fair value changes on contingent
consideration liabilities related to the PneumRx acquisition was a
net credit of GBP3.0m, being a GBP12.0m credit relating to the
non-payment of the first revenue milestone and a GBP9.0m charge
relating to the US regulatory milestone, and a GBP1.6m charge
related to the contingent consideration milestones for the EKOS
acquisition.
The change in fair value and realised losses on the Group's
forward foreign exchange contracts of GBP25.2m for the year to
31 March 2017 is recorded within Financial expense. The loss of
GBP25.2m included realised losses of GBP17.1m on settlement of
forward contracts and unrealised losses of GBP8.1m on remeasurement
of the Group's outstanding forward contracts to their fair
value.
For the period ended 31 March 2016, the Company recorded
unrealised gains of GBP1.2m on the remeasurement of outstanding
forward contracts to their fair value in 'Financial income', and
included realised foreign exchange gains of GBP1.4m on settlement
of forward contracts in 'Other operating income' above operating
profit.
4. Tax
An analysis of the tax credit in the income statement for the
year, all relating to current operations, is as follows:
Year ended Year ended
31 March 31 March
2017 2016
GBPm GBPm
================================= =========== ===========
Current tax
UK corporation tax charge - -
Overseas corporate tax charge 11.8 11.7
Adjustments in respect of prior
years (1.7) (2.2)
================================= =========== ===========
Total current taxation 10.1 9.5
Deferred taxation
Deferred tax credit (13.0) (13.8)
Adjustment to tax rates 0.9 1.3
================================= =========== ===========
Total deferred taxation (12.1) (12.5)
================================= =========== ===========
Total tax credit for the year (2.0) (3.0)
================================= =========== ===========
5. Earnings per share
The calculation of the basic and diluted earnings per share is
as follows:
Year ended Year ended
31 March 31 March
2017 2016
=================================== =========== ===========
Profit for the year (GBPm) 33.6 60.5
Profit per share (p)
Basic 8.7 15.8
Diluted 8.6 15.6
=================================== =========== ===========
Number of shares (m)
Weighted average number of shares
- basic 384.4 382.6
Effect of share options in issue 5.6 5.7
=================================== =========== ===========
Weighted average number of shares
- diluted 390.0 388.3
=================================== =========== ===========
6. Contingent liability
BTG is in a current dispute with Wellstat over the
commercialisation of Vistogard(R) . Wellstat is seeking damages and
to terminate the commercialisation agreement under which BTG
obtained rights to sell Vistogard(R) in US. A trial has been heard
in the Court of Chancery of the State of Delaware but no judgement
has yet been issued. The Group estimate the likelihood of material
financial loss or loss of rights to the asset to be possible, not
probable, and therefore no liability has been recognised. It is
currently not possible to make a reliable estimate of any amount
that may be required to be paid in respect of the dispute.
7. Related parties
In relation to the related party relationship concerning Giles
Kerr, payments made by BTG to Oxford University and Isis
Innovations Ltd under the relevant licence agreements were
GBP19,000 for the year ended 31 March 2017 (GBP24,000 for the year
ended 31 March 2016). There are no amounts still outstanding and
payable by BTG under these agreements as at 31 March 2017 (2016:
nil).
8. Business Combinations
On 15 June 2016 BTG completed the acquisition of 100% of Galil
Medical for an aggregate consideration of $84.5m, subject to
adjustment for cash and debt assumed at acquisition. Contingent
consideration of up to $25.5m may also be payable in future periods
based upon the achievement of regulatory and sales based
milestones.
The total equity consideration for the acquisition of Galil
Medical was GBP39.1m ($55.1m), representing up-front cash
consideration of GBP37.5m ($52.9m) and the fair value of contingent
consideration of GBP1.6m ($2.2m). The remainder of the aggregate
consideration has been used to settle debt and other obligations
assumed on acquisition.
Galil Medical's results of operations have been consolidated
from 15 June 2016, and the fair value of acquired assets and
liabilities has been determined as of that date. The final
determination of these fair values will be completed as soon as
possible but no later than one year from the acquisition date.
In the US, Galil Medical's products are indicated for the
treatment and palliative care of kidney and other cancers, in
addition to a number of other uses, including in urology. Galil
Medical is also conducting two clinical studies that could lead to
US regulatory clearance for use in lung metastases and bone
metastases. The acquisition complements BTG's Interventional
Medicine platform, building on the Group's Interventional Oncology
business area.
Intangible assets of GBP47.7m relate to developed cryoablation
technology. An estimated useful life of 15 years has been assigned
to this developed technology, and associated amortisation expense
will be recorded on a straight line basis. Goodwill arising of
GBP16.4m, which is not deductible for tax purposes, has been
assigned to the Interventional Medicine operating segment. Goodwill
represents future developments to the cryoablation technology and
the value of Galil Medical's workforce which have not been
reflected as separate intangible assets, together with the
recognition for accounting purposes of a deferred tax liability of
GBP17.0m relating to recognised developed technology.
Book Value Fair Value Adjustment Fair Value
GBPm GBPm GBPm
============================================================== =========== ====================== ===========
ASSETS
Non-current assets
Intangible assets 0.4 47.3 47.7
Goodwill - 16.4 16.4
Property, plant and equipment 0.4 0.6 1.0
Current assets
Inventories 2.6 0.8 3.4
Trade and other receivables 3.7 - 3.7
Cash and cash equivalents 1.3 - 1.3
LIABILITIES
Non-current liabilities
Net deferred tax liabilities - (6.1) (6.1)
Current liabilities
Trade and other payables (9.4) - (9.4)
Debt obligations (18.9) - (18.9)
Book value and fair value of assets and liabilities acquired (19.9) 59.0 39.1
=============================================================== =========== ====================== ===========
Cash consideration 37.5
Fair value of contingent consideration 1.6
=============================================================== =========== ====================== ===========
Total equity consideration 39.1
=============================================================== =========== ====================== ===========
During the period ended 31 March 2017, Galil Medical contributed
revenues of GBP17.2m and an operating loss (including intangible
asset amortisation of GBP2.9m) of GBP2.3m in the period since
acquisition. If the acquisition had taken place on 1 April 2016,
the Group's revenue and profit before tax would have been GBP573.5m
and GBP30.2m, respectively.
9. Principal risks and uncertainties
BTG's performance and prospects may be affected by risks and
uncertainties relating to our business and operating environment.
Our internal controls include a risk management process to identify
key risks and, where possible, manage the risks through systems and
processes and by implementing specific mitigation strategies. These
include but are not limited to: market access, obtaining/
maintaining product regulatory approvals, IP/legal challenges,
competition, healthcare law compliance and supply chain/continuity
of supply.
Information on adjusted financial information
The financial review includes financial information prepared in
accordance with International Financial Reporting Standards and the
Group's accounting policies, as well as financial information
presented on an adjusted basis.
Financial information on an adjusted basis excludes certain cash
and non-cash items which management believe are not reflective of
the underlying financial performance of the business and is
consistent with how management reviews the business for the purpose
of making operating decisions.
Metrics presented on an adjusted basis includes Constant
Exchange Rate (CER) growth, Adjusted Gross Profit, Adjusted
SG&A, Contribution, Adjusted Operating Profit, Adjusted Net
Financial Income / Expense, Adjusted Effective Tax Rate, Adjusted
Basic EPS and Free cash flow. A reconciliation between IFRS and
adjusted financial information is included on page 21 and 22 of
this report.
These metrics are further discussed below:
-- CER growth: CER growth is calculated by restating 2016/17
performance using 2015/16 exchange rates for the relevant period.
CER growth allows management to focus on underlying performance
without the impact of foreign exchange, which it cannot
control.
-- Adjusted Operating Profit: Adjusted operating profit reflects
the IFRS operating profit of the Group excluding the impact of
certain adjustments, which have been separately outlined below.
Adjusted operating profit allows management to assess operational
performance without the impact of certain items which are not
reflective of underlying financial performance.
-- Adjusted Basic EPS: Adjusted Basic EPS reflects Basic EPS
excluding the after tax impact of certain adjustments, which have
been outlined below. Adjusted Basic EPS allows management to assess
EPS without the impact of certain items which are not reflective of
underlying financial performance.
-- Free Cash Flow: Reflects the cash generated from operating
activities after recurring capital expenditure, being a measure of
cash flow available for discretionary investing or financing
activities. The reconciliation of free cash flow to net cash flows
from operating activities is show on page 22.
-- Contribution: Contribution is defined as gross profit less
SG&A, which broadly reflects the cash generated by the Group's
reportable segments before investment in R&D or other investing
or financing activities. Management use this metric to assess
performance for each of its reportable segments and reviews the
metric both including and excluding the impact of certain
adjustments outlined below.
Adjusted gross profit, Adjusted SG&A, Adjusted Finance
Income / Expense and Adjusted effective tax rate are stated after
excluding the effect of those items outlined below.
Management apply a consistent policy in determining its adjusted
financial measures. In determining this policy, outlined below,
management assess the nature and materiality of individual or
groups of items, and have deemed it appropriate to adjust for those
items including their tax effect, which (i) occur outside the
normal course of business and (ii) relate to corporate
acquisitions. These adjustments allow better comparability with
historic performance and identify year on year trends in the
underlying performance of the business.
Items excluded from adjusted financial measures in 2015/16,
2016/17 and from our outlook for 2017/18 are:
(a) Acquisition related adjustments
-- The release of the fair value uplift of acquired inventory or PP&E
-- Amortisation and impairment charges relating to acquired intangible assets or goodwill
-- Fair value adjustments relating to contingent consideration liabilities
-- Transaction costs incurred in relation to corporate acquisitions
-- Reorganisation costs, including acquisition related
redundancy programmes, property costs, and asset
impairments.
(b) Net costs relating to the settlement of litigation, disputes
and government investigations.
Reconciliation between IFRS and Adjusted Income Statement
For the period ended 31 March 2017
IFRS Release Amortisation Acquisition Fair Litigation Adjusted
Total of the of acquired and value and Total
fair intangible re-organisation adjustments other(5)
value assets(2) costs(3) to contingent
uplift consideration
on liabilities(4)
acquired
inventory
and
PPE(1)
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
================= ======== ========== =============== ================ ================= =========== =========
Revenue 570.5 570.5
Cost of
sales (179.9) 1.0 - - - - (178.9)
================== ======== ========== =============== ================ ================= =========== =========
Gross profit 390.6 1.0 - - - - 391.6
Selling,
general
and
administrative
expenses (206.6) - - - - 28.0 (178.6)
Research
and development (87.8) - - - - - (87.8)
Other operating
income 4.4 - - - - - 4.4
Amortisation
of acquired
intangible
assets (42.0) - 42.0 - - - -
Acquisition
and
reorganisation
costs (1.1) - - 1.1 - - -
================== ======== ========== =============== ================ ================= =========== =========
Operating
profit 57.5 1.0 42.0 1.1 - 28.0 129.6
Financial
income 3.3 - - - (3.0) - 0.3
Financial
expense (29.2) - - - 2.3 - (26.9)
================== ======== ========== =============== ================ ================= =========== =========
Profit before
tax 31.6 1.0 42.0 1.1 (0.7) 28.0 103.0
Tax
credit/(charge) 2.0 (0.3) (13.1) - - (2.9) (14.3)
================== ======== ========== =============== ================ ================= =========== =========
Profit after
tax 33.6 0.7 28.9 1.1 (0.7) 25.1 88.7
================== ======== ========== =============== ================ ================= =========== =========
Weighted
average
number of
shares -
basic 384.4 384.4
------------------ -------- ---------- --------------- ---------------- ----------------- ----------- ---------
Weighted
average
number of
shares -
diluted 390.0 390.0
------------------ -------- ---------- --------------- ---------------- ----------------- ----------- ---------
Basic earnings
per share 8.7p 0.2p 7.6p 0.3p (0.2p) 6.5p 23.1p
================== ======== ========== =============== ================ ================= =========== =========
Diluted
earnings
per share 8.6p 0.2p 7.4p 0.3p (0.2p) 6.4p 22.7p
================== ======== ========== =============== ================ ================= =========== =========
1. The release of the fair value uplift relating to inventory
and property, plant and equipment (PPE) acquired with Galil Medical
in June 2016 of GBP1.0m.
2. Amortisation charges relating to intangible assets acquired
through corporate acquisitions of GBP42.0m.
3. Acquisition and reorganisation costs are directly
attributable costs related to the acquisition of Galil Medical in
June 2016, including costs incurred with professional advisers in
relation to the corporate acquisition of GBP1.1m.
4. Fair value adjustments to contingent consideration
liabilities relating to the PneumRx acquisition (credit of GBP3.0m)
and the Galil Medical acquisition (charge of GBP2.3m).
5. Settlement with the US government in relation to the
Department of Justice's investigation of the historic marketing of
LC Bead(R) of GBP28.0m.
For the period ended 31 March 2016
IFRS Release Amortisation Fair value Adjusted
Total of the of acquired adjustments Total
fair intangible on contingent
value assets(2) consideration(3)
uplift
on acquired
inventory(1)
GBPm GBPm GBPm GBPm GBPm
===================== ======== ============== ============= ================== =========
Revenue 447.5 - - - 447.5
Cost of sales (140.8) 1.5 - - (139.3)
====================== ======== ============== ============= ================== =========
Gross profit 306.7 1.5 - - 308.2
Selling, general
and administrative
expenses (141.4) - - - (141.4)
Research and
development (77.2) - - - (77.2)
Other operating
income 3.4 - - - 3.4
Amortisation
of acquired
intangible
assets (35.0) - 35.0 - -
Operating profit 56.5 1.5 35.0 - 93.0
Financial income 4.4 - - (3.0) 1.4
Financial expense (3.4) - - 1.6 (1.8)
====================== ======== ============== ============= ================== =========
Profit before
tax 57.5 1.5 35.0 (1.4) 92.6
Tax credit/
(charge) 3.0 (0.6) (11.4) - (9.0)
====================== ======== ============== ============= ================== =========
Profit after
tax 60.5 0.9 23.6 (1.4) 83.6
====================== ======== ============== ============= ================== =========
Weighted average
number of shares
- basic 382.6 382.6
---------------------- -------- -------------- ------------- ------------------ ---------
Weighted average
number of shares
- diluted 388.3 388.3
---------------------- -------- -------------- ------------- ------------------ ---------
Basic earnings
per share 15.8p 0.2p 6.3p (0.4p) 21.9p
====================== ======== ============== ============= ================== =========
Diluted earnings
per share 15.6p 0.2p 6.1p (0.4p) 21.5p
====================== ======== ============== ============= ================== =========
1. The release of the fair value uplift relating to inventory
acquired with PneumRx in January 2015 of GBP1.5m.
2. Amortisation charges relating to intangible assets acquired
through corporate acquisitions of GBP35.0m.
3. Fair value adjustments to contingent consideration; includes
the change in fair value of contingent consideration liabilities
relating to the PneumRx acquisition (net credit of GBP3.0m) and
EKOS acquisition (charge of GBP1.6m).
Reconciliation between IFRS and Adjusted financial information -
Free Cash Flow
For the period ended 31 March 2017
Net cash inflow Purchase of Purchase of Free cash flow
from operating intangible property, plant
activities assets and equipment
GBPm GBPm GBPm GBPm
================ ============ ================= ===============
74.2 (0.6) (8.9) 64.7
For the period ended 31 March 2016
Net cash inflow Purchase of Purchase of Free cash flow
from operating intangible property, plant
activities assets(1) and equipment
GBPm GBPm GBPm GBPm
================ ============ ================= ===============
95.6 (1.3) (6.2) 88.1
1. Purchase of intangible assets for the period ended 31 March
2016 excludes the purchase of the residual financial interest of
the originator of Varithena(R) foam sclerotherapy technology for a
one-off cash payment of GBP23.0m, as this does not represent
recurring capital expenditure for the Group.
(c) 2017 BTG International Ltd. All rights reserved. BTG and the
BTG roundel logo are registered trademarks of BTG International
Ltd. DC Bead LUMI, LC Bead and LC Bead LUMI are trademarks and/or
registered trademarks of Biocompatibles UK Ltd. EKOS is a
trademarks and/or registered trademark of EKOS Corporation. Galil
is a trademark and/or registered trademark of Galil Medical Ltd.
PneumRx is a trademark and/or registered trademark of PneumRx, Inc.
TheraSphere is a trademark and/or registered trademark of
Theragenics Corporation used under license by Biocompatibles UK
Ltd. Varithena is a trademark and/or registered trademark of
Provensis Ltd. CroFab and DigiFab are trademarks and/or registered
trademarks of BTG International Inc. SnakeBite911 is a trademark of
Protherics UK Ltd. Vistogard is a trademark and/or registered
trademark of Wellstat Therapeutics Corporation. Voraxaze is a
trademark and/or registered trademark of Protherics Medicines
Development Ltd. Lemtrada is a trademark and/or registered
trademark of Genzyme Corporation. Zytiga is a trademark and/or
registered trademark of Johnson & Johnson. Biocompatibles UK
Ltd, EKOS Corporation, Galil Medical Ltd, PneumRx, Inc., Protherics
Medicines Development Ltd, Protheric UK Ltd, and Provensis Ltd and
are all BTG International group companies.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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