Parnell Pharmaceuticals Holdings Ltd
(NASDAQ:PARN)
, a fully integrated, commercial-stage
pharmaceutical company focused on developing, manufacturing and
marketing innovative animal health solutions, today announced
financial results for the first six months of 2016 including;
strong revenue growth of 67%; the commencement of contract
manufacturing revenues; the upcoming US launch of two new companion
animal products, Luminous ™ and Reviderm™; and the commencement of
several new studies for PAR121, PAR122 and Zydax for cats.
“We have consistently communicated our strength in being a fully
integrated animal health company, and our results for the first
half of 2016 are certainly illustrative of that strength,” said
Robert Joseph, President and CEO of Parnell. “Year-to-date we
have achieved excellent revenue growth across our business with
notable above-budget performances in US Production Animal,
Australian Companion Animal and Contract Manufacturing. Our
US Companion Animal team continued to establish a meaningful market
footprint with FETCH™, our digital app., and Glyde™, our
nutraceutical for osteoarthritis, or OA, and will soon launch
Luminous™, our nutraceutical for dermatology, and Reviderm™, an
antimicrobial spray on liquid bandage.”
Mr. Joseph went on to say, “Our R&D team is making excellent
progress on our lead projects; in the first half we commenced
several investigational studies into PAR121, our osteogenic drug
candidate, and PAR122, our dermatotrophic drug candidate. We
expect to report results from these studies in the second half of
2016. We have commenced studies into the potential use of
Zydax for osteoarthritis in cats, and expect to commence
investigational studies into applicability of Zydax for
interstitial cystitis in cats.”
“We progressed preparations for the re-filing of the two
remaining technical sections for the use of Zydax in treating
osteoarthritis in dogs and expect to submit those filings to the
FDA this quarter,” continued Mr. Joseph. “We will meet with
the Center for Veterinary Medicine of the FDA prior to re-filing
the Chemistry and Manufacturing Controls (CMC’s) section and the
Target Animal Efficacy (TAE) section seeking to align with the
Agency on our responses to their questions. We anticipate
attending that meeting, subject to scheduling, in early September
and re-filing shortly thereafter. Under statute, the Agency
then has 180 days to consider our responses after which, provided
there are no further Agency questions, at this time we expect a
potential approval and immediate launch of Zydax for dogs in Q2,
2017. Whilst later than our original expectations, we do not
anticipate this updated timeline being likely to have a material
impact on our revenue expectations for Zydax in 2017 given our
strategy of establishing a US companion animal presence in
osteoarthritis with FETCH and Glyde in advance of the launch of
Zydax. Because the additional time to US launch provides us a
greater opportunity to engage with more pet parents through FETCH
and Glyde, we believe we could have access to a larger population
of dogs ready to commence Zydax treatment programs immediately once
approved. Importantly, as time has progressed, we have been
able to observe the competitive landscape for Zydax directly
through our sales team and we continue to believe that Zydax has a
unique position in the market. As we have shown to be the
case in the analogous Australian market, Zydax can effectively be
used as a first-line treatment for OA in earlier stage, younger
dogs and can also be used adjunctively with non-steroidal
anti-inflammatory drugs (NSAIDs). We also remain excited
about geographical expansion for Zydax and we continue to progress
discussions with various potential marketing partners. We are
seeking a deal structure that will ensure long term value for this
important franchise by leveraging our experience in marketing and
manufacturing Zydax, balanced with a marketing partner who can
bring focus and expertise to the launch of Zydax in Europe.
Strong interest has been expressed by a number of parties and we
remain confident of signing an appropriate deal in advance of a
potential launch in Europe, Canada and other markets in 2017 and
beyond”, Mr. Joseph said.
Unless otherwise specified, all amounts are presented in
Australian Dollars (AUD) and are for the six-months ended June 30,
2016.
Commercial Highlights
- 67% increase in total Company sales to $8.2 million for the six
months ending Q2, 2016 compared to $4.9 million for the
corresponding period in 2015 as we continued to experience
accelerated growth in both our Production Animal and Companion
Animal businesses and now in Contract Manufacturing;
- 40% revenue growth in our U.S. Production Animal segment over
the prior period in 2015 driven by strong acquisition of new
customers including many from the continued roll-out of mySYNCH®;
our innovative digital technology that assists dairy producers to
improve the profitability of their operations.
- 158% revenue growth in our Companion Animal business across the
US and Australia over the prior period in 2015. The continued
roll-out of Glyde and FETCH in the US market complemented a strong
first half year in Australia, where Companion Animal revenues grew
37% over the first half of 2015. FETCH, our digital application for
dogs, has now been used by over 7,000 pet parents in the US market.
Based on such strong uptake in the first half of the year, we
expect pet parent users to increase to over 20,000 by year
end.
- Our Contract Manufacturing segment generated its first revenues
through the previously announced CMO agreement with Merial, taking
advantage of excess capacity in our FDA-approved injectables
manufacturing facility. This is a significant milestone and
we anticipate potentially adding further contract manufacturing
deals in 2016. The Company did not generate any Contract
Manufacturing revenue in 2015.
- We previously provided full year 2016 revenue guidance of US$14
– US$16 million. Given our significant outperformance in the
first half, we now increase full year 2016 guidance to US$17 –
US$18 million. For our current business operations, we expect
2017 revenues to grow to approximately $25 million which we
estimate will make the Company profitable in the second half of
2017. This guidance excludes the impact of launching Zydax in
the US, Canada and Europe which we estimate, if approved, would add
substantially to revenues and earnings in 2017.
Development Highlights
- We are close to completing our responses to the FDA’s questions
from our filings of the Target Animal Effectiveness Technical
Section and the Chemistry and Manufacturing Controls Technical
Section for Zydax. As is customary, we will meet with the
Agency prior to filing to discuss and seek alignment on our
proposed responses. Subject to scheduling, we anticipate this
meeting taking place in early September and our re-filing to
proceed shortly thereafter.
- We have received the first round of questions from the European
Medicines Agency, or EMA, for our submission of the use of Zydax to
treat osteoarthritis in dogs. These questions are in line
with our expectations and in large part similar to the questions
received from the FDA. We therefore anticipate compiling our
responses in line with the work we are undertaking for the FDA
re-filing.
- We anticipate that we could potentially obtain approval of
Zydax in both the US and EU in the first half of 2017. We
also believe we may be able to file for approval in Canada adopting
the dossier compiled for the FDA and that approval may be achieved
in the second half of 2017.
- We have successfully completed pilot safety studies for the use
of Zydax in cats and have now commenced pilot efficacy studies in
client-owned cats. If this study is successful, we anticipate
commencing pivotal studies for Target Animal Safety and Target
Animal Effectiveness in late 2016 and potentially filing for
approval with the FDA in the first-half of 2017.
- We are also preparing to commence studies investigating the use
of Zydax for treating feline interstitial cystitis, a disease that
we believe is both common and difficult to treat.
- We commenced manufacturing process development for PAR121 and
PAR122 in the first half of 2016. This in turn has enabled the
commencement of drug characterization studies and in-vitro and
in-vivo efficacy studies. We expect to report results from
these studies in the second half of 2016 which, if positive, could
lead to the commencement of pivotal efficacy and safety studies in
2017. We continue to believe both these compounds have the
potential to be highly valuable assets if approved.
Corporate Highlights
- Continued negotiations with multiple parties to acquire the
rights to market Zydax in Europe.
- Completed the in-licensing of Reviderm™, a novel antimicrobial
liquid bandage for use on wounds in dogs, cats and horses.
- Completed negotiations on a contract manufacturing agreement
with a major multi-national and progressed several other contract
manufacturing opportunities which if successful, could commence in
the second-half of 2016.
- Completed a strategic equity issuance to broaden our
institutional and retail shareholding.
- Continued negotiations to increase our debt facility up to $30
million to underpin the launch of Zydax in 2017.
- Continued to optimize operational and development expenditure
to ensure a robust business model, potentially returning to profit
in 2017 prior to the launch of Zydax.
Financial Results (for the six month period ended June
30, 2016)
Revenue
Total revenue of $8.2 million for the six month period ending
June 30, 2016, a 67% increase compared to the same period in
2015.
Our operating segments performed as follows:
- Production Animal – US: Sales for the six months ended June 30,
2016 were $4.1 million, an increase of $1.2 million, or 40%, over
the same period in 2015 and we expect full-year 2016 revenue growth
to be similar.
- Production Animal – Rest of World (ROW): Revenue for the six
months ended June 30, 2016 decreased by 68% to $0.4 million
compared to the same period in 2015, primarily driven by
year-over-year differences in the timing of orders from our
distribution partners in these markets. We expect full year
2016 revenues for this segment to show single-digit revenue growth
over 2015.
- Companion Animal: Revenue for the six months ended June 30,
2016 grew 158% to $1.5 million driven by establishment of our US
operations in this segment and a 37% increase in Australian sales
compared to the same period in 2015. We expect full-year 2016
revenue growth to be of similar magnitude.
- Contract Manufacturing – Revenue of $2.2 million was generated
for the six months ended June 30, 2016. No revenue was
generated during the comparable period in 2015. We expect
continued growth for the full year of 2016 from the existing
contract and anticipate potentially adding further contracts in the
second-half of 2016.
Expenses
Cost of Sales for the six months ended June 30, 2016 was $3.6
million, compared to $3.1 million in the same period of 2015.
This increase was driven by sales growth of 67% on a year-over-year
basis. Gross margin as a percentage of revenue, using a Cost
of Goods Sold – Product basis, remained consistent with the first
half 2015, at 84%. We expect this gross margin level to
continue for the full year 2016.
Selling and marketing expenses increased by $4.3 million to $7.8
million for the six months ended June 30, 2016. This increase
was driven by the establishment of our US Companion Animal business
to launch our nutraceutical product Glyde and FETCH™, our digital
technology, that has now been used by over 7,000 pet parents and we
expect pet parent users of FETCH™ to increase to over 20,000 by
year end. Having established this new team and our digital
presence, we expect growth in sales and marketing expenditure to
flatten in the remainder of 2016.
Regulatory and R&D expenses increased by $0.2 million to
$0.8 million for the first six months of 2016 due to costs
associated with the initiation of several preclinical and target
animal studies aimed at developing our product pipeline.
Administration expenses increased by $2.1 million to $7.3
million for the six months ended June 30, 2016, compared to the
same period in 2015. This increase was driven by higher
staffing and external costs to support a substantially larger
Commercial and R&D organization in the US; increased
compliance, regulatory and legal costs associated with being a
public company; and shared-based compensation related to stock
options and restricted share units to a larger base of US and
Australian employees. Having established our fully-integrated
pharmaceutical operations we expect Administration costs to now
remain flat for the remainder of 2016.
Finance costs and Net foreign exchange losses on borrowings
increased by $0.7 million to $1.1 million for the six months ended
June 30, 2016 from the comparable period in 2015 due to interest
costs on the debt facility that was established in June, 2015.
Other Income/(Expense): for the six-month period ending 30, June
2015 we reported Other Income of $4.7 million and for the same
period in 2016 this declined by $4.9 million to be an Expense of
$0.1 million. This was primarily driven by non-recurring
income that occurred in 2015 including management’s reassessment of
a contingent provision associated with supplier obligations which
resulted in a one-time, non-cash release of $2.6 million being
recorded in Other Income in 2015. Also, Foreign Exchange
movements, primarily between the Australian dollar and the US
dollar, resulted in an unrealized foreign exchange expense of $0.7
million in the first six months of 2016 compared to an unrealized
foreign exchange gain of $1.5 million in the same period of 2015.
In addition, in the first six months of 2015, $0.4 million in
government grants were received from the Kansas Department of
Commerce compared to $0.1 million in 2016. In the first six
months of 2016, $0.4 million was recorded in Other Income as part
of research and development incentives received in Australia,
compared to $0.3 million in 2015.
As a result, Net loss after tax for the six months ended June
30, 2016 increased to $12.5 million compared to $3.0 million in
2015.
Net loss per weighted-average share was ($0.85) for the
six-months ended June 30, 2016 compared to a ($0.22) per share loss
for the same period in 2015.
As of June 30, 2016, cash and cash equivalents were $4.1 million
compared to $5.7 million at December 31, 2015.
Conference Call Information
Management will host a conference call on August 4, 2016 at 8 am
EST to discuss financial results and answer questions. Investors
and analysts may access the conference call by dialing (877)
244-6184 FREE (U.S./Canada) or (920) 663-6271 (International)
and using the conference ID# 56384980.
A telephone replay will be available for one week following the
call by dialing (855) 859-2056 FREE (U.S./domestic) and (404)
537-3406 using the conference ID# 56384980.
About Parnell
Parnell (PARN) is a fully integrated, veterinary
pharmaceutical company focused on developing, manufacturing and
commercializing innovative animal health solutions. Parnell
currently markets five products for companion animals and
production animals in 14 countries and augments its pharmaceutical
products with proprietary digital technologies – FETCH™ and
mySYNCH®. These innovative solutions are designed to enhance the
quality of life and/or performance of animals and provide a
differentiated value proposition to our customers. Parnell
also has a pipeline of 7 drug products covering valuable
therapeutic areas in orthopedics, dermatology, anesthesiology,
nutraceuticals and metabolic disorders for companion animals as
well as reproduction and mastitis for cattle.
For more information on the company and its
products, please visit www.parnell.com.
Cautionary Note Regarding
Forward-Looking Statements
This press release contains forward-looking
statements and information within the meaning of the U.S. Private
Securities Litigation Reform Act of 1995. Words such as "may,"
"anticipate," "estimate," "expects," "projects," "intends,"
"plans," "develops," "believes," and words and terms of similar
substance used in connection with any discussion of future
operating or financial performance identify forward-looking
statements. Forward-looking statements represent management's
present judgment regarding future events and are subject to a
number of risk and uncertainties that could cause actual results to
differ materially from those described in the forward-looking
statements. These risks include, but are not limited to, risks and
uncertainties regarding Parnell's research and development
activities, its ability to conduct clinical trials of product
candidates and the results of such trials, as well as risks and
uncertainties relating to litigation, government regulation,
economic conditions, markets, products, competition, intellectual
property, services and prices, key employees, future capital needs,
dependence on third parties, and other factors, including those
described in Parnell's Annual Report on Form 20-F filed with the
Securities and Exchange Commission, or SEC, on March 4, 2016, along
with its other reports filed with the SEC. In light of these
assumptions, risks, and uncertainties, the results and events
discussed in any forward-looking statements contained in this press
release might not occur. Investors are cautioned not to place undue
reliance on the forward-looking statements, which speak only as of
the date of this press release. Parnell is under no obligation, and
expressly disclaims any obligation, to update or alter any
forward-looking statements, whether as a result of new information,
future events, or otherwise.
|
Consolidated Balance Sheets |
(Unaudited) |
|
|
30 June 2016
AUD$ |
|
31 December 2015AUD$ |
ASSETS |
|
|
|
|
|
CURRENT
ASSETS |
|
|
|
|
|
Cash and cash
equivalents |
4,103,548 |
|
|
5,666,679 |
|
Trade and
other receivables |
8,936,093 |
|
|
7,266,662 |
|
Inventories |
3,790,815 |
|
|
3,426,926 |
|
Prepayments |
423,867 |
|
|
531,843 |
|
TOTAL CURRENT
ASSETS |
17,254,323 |
|
|
16,892,110 |
|
NON‑CURRENT
ASSETS |
|
|
|
|
|
Trade and
other receivables |
66,515 |
|
|
67,457 |
|
Property,
plant and equipment |
12,254,506 |
|
|
12,666,214 |
|
Intangible
assets |
17,086,104 |
|
|
16,583,360 |
|
TOTAL
NON‑CURRENT ASSETS |
29,407,125 |
|
|
29,317,031 |
|
TOTAL
ASSETS |
46,661,448 |
|
|
46,209,142 |
|
LIABILITIES |
|
|
|
|
|
CURRENT
LIABILITIES |
|
|
|
|
|
Trade and
other payables |
7,701,003 |
|
|
6,780,440 |
|
Borrowings |
8,390,378 |
|
|
3,122,553 |
|
Provision for
employee benefits |
676,356 |
|
|
438,008 |
|
TOTAL CURRENT
LIABILITIES |
16,767,737 |
|
|
10,341,001 |
|
NON‑CURRENT
LIABILITIES |
|
|
|
|
|
Trade and
other payables |
1,097,312 |
|
|
1,106,360 |
|
Borrowings |
11,812,407 |
|
|
14,353,203 |
|
Provision for
employee benefits |
171,156 |
|
|
153,781 |
|
TOTAL
NON‑CURRENT LIABILITIES |
13,080,875 |
|
|
15,613,344 |
|
TOTAL
LIABILITIES |
29,848,612 |
|
|
25,954,345 |
|
NET
ASSETS |
16,812,836 |
|
|
20,254,796 |
|
EQUITY |
|
|
|
|
|
|
|
Ordinary shares |
|
|
63,301,764 |
|
|
55,343,451 |
|
Share‑based compensation
reserve |
|
|
2,576,642 |
|
|
1,708,388 |
|
Reserves |
|
|
(3,005,157 |
) |
|
(3,214,558 |
) |
Accumulated losses |
|
|
(46,060,413 |
) |
|
(33,582,485 |
) |
TOTAL EQUITY |
|
|
16,812,836 |
|
|
20,254,796 |
|
|
Consolidated Statements of Comprehensive
Loss |
(Unaudited) |
|
|
For the Six-Months Ended June 30, |
|
2016 AUD$ |
2015 AUD$ |
Revenue |
|
8,225,614 |
|
|
4,927,965 |
|
Other
income/(expense) |
|
(147,815 |
) |
|
4,742,229 |
|
Cost of goods
sold |
|
(3,650,959 |
) |
|
(3,140,067 |
) |
Selling and
marketing expenses |
|
(7,760,463 |
) |
|
(3,431,718 |
) |
Regulatory,
R&D expenses |
|
(761,282 |
) |
|
(564,904 |
) |
Administration
expenses |
|
(7,298,121 |
) |
|
(5,165,879 |
) |
Net foreign
exchange losses on borrowings |
|
- |
|
|
- |
|
Finance
costs |
|
(1,073,981 |
) |
|
(350,964 |
) |
Loss
before income tax |
|
(12,467,007 |
) |
|
(2,983,338 |
) |
Income tax
expense |
|
(10,924 |
) |
|
(2,106 |
) |
Loss
for the period |
|
(12,477,931 |
) |
|
(2,985,444 |
) |
Other
comprehensive (loss)/profit, net of income tax |
|
|
Items
that will be reclassified subsequently to profit or
loss |
|
|
Foreign
currency translation |
|
209,401 |
|
|
(808,664 |
) |
Other
comprehensive (loss)/profit for the period, net of
tax |
|
209,401 |
|
|
(808,664 |
) |
Total
comprehensive loss for the period |
|
(12,268,530 |
) |
|
(3,794,108 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per
weighted-average share |
|
|
|
AUD$ |
AUD$ |
Net loss attributable to
common stockholders, Basic and diluted |
|
|
(0.85 |
) |
|
(0.22 |
) |
|
|
|
|
|
|
|
|
CONTACT: For more information, contact:
Parnell Pharmaceuticals Holdings
Robert Joseph, 913-274-2100
robert.joseph@parnell.com
Brad McCarthy, 913-274-2100
brad.mccarthy@parnell.com
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