Alliance Pharma's (APH) profits surged during the first half after sales of the speciality pharma company's toxicology product reached a natural peak as part of a government supply contract. This alone contributed £3.2m of sales during the period, but management expects this to fall away as the year progresses. Alliance Pharma also has to contend with added uncertainty arising from manufacturing problems at a partner company and pressure on reference prices for medicines in the UK and Ireland.
It is fair to say that many of Alliance's operational problems were beyond its control. For example, the withdrawal of the ImmuCyst bladder cancer treatment was due to the manufacturing problems plaguing Sanofi-Aventis' operations in the US, while Novartis has decided to cease production of nine products within Alliance's portfolio. These alone previously contributed around £0.5m of gross margin. Meanwhile, ImmuCyst isn't expected to come back on-stream until the second half of next year. So to offset these losses, Alliance has been acquiring rights to other products. For instance, it signed the international rights to Syntometrine, an obstetrics drug, with Novartis in June.
Chief executive John Dawson confirmed that Alliance Pharma would need to go on the acquisition trail this year. He said the company's revolving credit facility would allow it a gearing of up to two times cash profits from its current level of 1.5 times.
Cannacord Genuity forecasts adjusted pre-tax profits of £12m and EPS of 3.9p (2012: £10.6m and 3.5p).
ALLIANCE PHARMA (APH) | ||||
|---|---|---|---|---|
| ORD PRICE: | 36.1p | MARKET VALUE: | £90.8m | |
| TOUCH: | 35.5-36.75p | 12-MONTH HIGH: | 39.5p | LOW: 25.25p |
| DIVIDEND YIELD: | 2.4% | PE RATIO: | 9 | |
| NET ASSET VALUE: | 23p* | NET DEBT: | 47% | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2012 | 22.0 | 5.31 | 1.80 | 0.28 |
| 2013 | 22.8 | 6.83 | 2.22 | 0.30 |
| % change | +4 | +29 | +23 | +9 |
Ex-div: 4 Dec Payment: 15 Jan *Includes intangible assets of £87.2m, or 35p a share | ||||
