BTG — Update 8 April 2016

BTG — Update 8 April 2016

BTG

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BTG

Interventional medicine: An engine of growth

Close period statement

Pharma & biotech

8 April 2016

Price

US$8.94

Market cap

US$3,424m

ADR/Ord conversion ratio 1:1

Net cash ($m) at 30 September 2015

155.9

ADRs in issue

383.0

Free float

97%

ADR Code

BTGYY

ADR exchange

OTC

Underlying exchange

LSE

Depository

JP Morgan

ADR share price performance

52-week high/low

$12.2

$8.0

Business description

BTG is a UK-based specialist healthcare company with a direct commercial presence from its interventional medicine portfolio and in US acute care medicine. It also receives royalties from a number of licensing agreements.

Next events

FY16 prelims

17 May

AGM and IMS

14 July

US filing of PneumRx

Mid-2016

Varithena sales expansion

2016-2017

Analyst

Lala Gregorek

+44 (0)20 3681 2527

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, or $578-620m). 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 ($1.76bn) in 2021.

Year end

Revenue
(US$m)

PTP*
(US$m)

EPADR
($)

DPADR
($)

P/E
(x)

Gross Yield
(%)

03/14

409.6

108.0

0.27

0.0

33.1

N/A

03/15

518.6

80.9

0.25

0.0

35.8

N/A

03/16e

617.0

125.4

0.30

0.0

29.8

N/A

03/17e

691.5

150.1

0.30

0.0

29.8

N/A

Note: Converted at $1.41/US$ Dividend yield excludes withholding tax. Investors should consult their tax advisor regarding the application of any domestic and foreign tax laws.

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 $5.2bn

FY16 sales were confirmed at the upper half of £410-440m. 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 $5.2bn or $13.59/ADR.

Exhibit 1: Financial summary

$m

2013

2014

2015

2016e

2017e

Year end 31 March

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

329.5

409.6

518.6

617.0

691.5

COGS/revenue sharing

(94.8)

(134.0)

(161.7)

(192.9)

(209.8)

Gross profit

234.7

275.6

356.9

424.1

481.7

R&D expenses

(58.1)

(66.6)

(96.3)

(111.7)

(118.7)

SG&A expenses

(81.8)

(118.4)

(176.0)

(210.4)

(232.1)

EBITDA

 

105.9

104.3

100.3

117.6

150.1

Operating Profit (norm)

101.5

99.5

92.5

109.8

138.8

Operating Profit (BTG underlying)

97.3

87.8

95.7

104.9

130.9

Amortization and impairment

(61.2)

(34.3)

(40.0)

(47.9)

(53.6)

Profit on disposals

0.6

1.6

0.4

0.0

0.0

Write-offs

(2.5)

0.0

0.0

0.0

0.0

Restructuring costs

4.5

(20.9)

4.2

0.8

0.0

Share based payments

(6.6)

(7.5)

(7.9)

(7.9)

(7.9)

Operating Profit

36.2

38.5

49.2

54.9

77.3

Net Interest

(2.3)

8.5

(11.6)

15.5

11.3

Pre-tax profit (norm)

99.2

108.0

80.9

125.4

150.1

Pre-tax profit (reported)

34.0

46.9

37.6

70.4

88.6

Tax

(10.9)

(12.7)

9.7

(5.6)

(20.4)

Profit After Tax (norm)

0.0

0.0

0.0

0.0

0.0

Profit After Tax (reported)

0.0

0.0

0.0

0.0

0.0

Average Number of ADRs Outstanding (m)

326.9

355.2

367.9

382.3

382.9

EPADR - reported ($)

0.07

0.10

0.13

0.17

0.18

EPADR - normalized ($)

0.27

0.27

0.25

0.30

0.30

Dividend per ADR ($)

0.0

0.0

0.0

0.0

0.0

Gross Margin (%)

71.2

67.3

68.8

68.7

69.7

EBITDA Margin (%)

32.1

25.5

19.3

19.1

21.7

Operating Margin (before GW and except.) (%)

30.8

24.3

17.8

17.8

20.1

BALANCE SHEET

Fixed assets

434.3

797.4

1,182.0

1,141.0

1,090.8

Intangible assets

295.0

561.0

843.0

797.1

745.5

Goodwill

83.5

174.3

259.2

259.2

259.2

Tangible assets

35.8

44.1

50.1

55.0

56.4

Investment in associates

20.0

17.9

29.8

29.8

29.8

Current assets

334.0

206.1

292.7

394.8

497.9

Stocks

32.9

38.1

57.1

58.4

73.9

Debtors

76.8

105.9

129.6

141.9

159.1

Cash

223.7

53.9

104.1

192.6

262.9

Other

0.6

8.3

2.0

2.0

2.0

Current liabilities

(92.5)

(123.8)

(163.0)

(160.7)

(179.4)

Creditors

(86.9)

(112.7)

(156.5)

(154.2)

(172.9)

Accruals/deferred income

0.0

0.0

0.0

0.0

0.0

Employees/provs/tax

(2.5)

(11.1)

(5.2)

(5.2)

(5.2)

Derivative instruments

(3.1)

0.0

(1.3)

(1.3)

(1.3)

Short-term borrowings

0.0

0.0

0.0

0.0

0.0

Long-term liabilities

(63.0)

(131.8)

(242.1)

(242.1)

(242.1)

Long-term borrowings

0.0

0.0

0.0

0.0

0.0

Other long-term liabilities

(63.0)

(3.7)

(25.2)

(25.2)

(25.2)

Net assets

612.7

747.9

1,069.6

1,133.0

1,167.2

CASH FLOW

Operating cash flow

86.0

78.2

88.4

102.4

94.1

Net interest

1.0

0.3

(0.1)

15.5

11.3

Tax

(7.8)

(9.9)

(21.4)

(5.6)

(20.4)

Acquisition/disposal of intangibles

(3.7)

3.2

(1.8)

(2.0)

(2.0)

Capital expenditure

(10.7)

(16.4)

(13.8)

(12.7)

(12.7)

Acquisitions/disposals

0.0

(367.0)

(208.3)

0.0

0.0

Financing

0.0

144.8

207.6

0.0

0.0

Dividends

0.0

0.0

0.0

0.0

0.0

Other

0.4

(3.2)

(0.3)

(9.2)

0.0

Net cash flow

65.3

(169.9)

50.2

88.5

70.4

Opening net debt/(cash)

(158.5)

(223.7)

(53.9)

(104.1)

(192.6)

HP finance leases initiated

0.0

0.0

0.0

0.0

0.0

Other

0.0

0.0

0.0

0.0

0.0

Closing net debt/(cash)

(223.7)

(53.8)

(104.1)

(192.6)

(262.9)

Source: Edison Investment Research, company accounts. Note: Solely for the convenience of the reader the financial summary table has been converted at a rate of US$1.41/£. BTG reports statutory accounts in pounds. These translations should not be considered representations that any such amounts have been or could be converted into US dollars at the assumed conversion rate.

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New Zealand

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

Research: Financials

Park Group — Update 8 April 2016

Park Group

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