Falling US sales hurt Advanced Medical Solutions

At first glance, Advanced Medical Solutions (AMS) appears to have hit the mark in 2022, with both revenue and pre-tax profit up from the preceding year. However, a closer look at the company’s results reveals that US sales of its key LiquiBand skin adhesive range were weaker than anticipated.

After completing a strategic review of the business, the company chose to move from three US distribution partners down to two – and shipments of the products fell in absolute terms. Adjusted operating margin in Advanced Medical’s surgical division thereby decreased to 29.1 per cent (from 31.4 per cent) year on year. 

Liberum analysts predicted that uncertainty around future LiquiBand sales “significantly increases forecast risk” in the short term. “There is no certainty that the two remaining partners will be able to pick up the slack,” they wrote in a note. “Given that LiquiBand is very profitable, even a small miss on this front could have a material impact on profits.”

Markets also seem concerned about sales of the product, with Advanced Medical's shares falling around 8 per cent on the morning of its results announcement. Still, it’s not all doom and gloom for current shareholders. The company’s net cash position means it has firepower for acquisitions, should it see fit to make them.

Last month, the group announced the purchase of Connexicon Medical, a tissue adhesive technology specialist, for an upfront payment of €7mn (£6.2mn). Further deferred payments will be made depending on whether R&D and regulatory milestones are met.

It’s believed that Connexicon products will launch in the US next year, meaning it could be a tricky 12 months for Advanced Medical in the meantime. We remain on hold.

Last IC view: Hold, 274p, 14 September 2022