LEO Pharma Annual Results 2018: A year in line with expectations

BALLERUP, Denmark, 28 February 2019 – Today, LEO Pharma A/S announced its annual results for 2018 and outlined expectations for 2019. 

“We have set ourselves ambitious goals to make a true difference in the lives of people living with skin diseases. 2018 has been yet another eventful year on this pioneering journey, as we have strengthened LEO Pharma’s foothold in medical dermatology significantly. We are pleased to present the 2018 results which are satisfactory and in line with expectations and will help us further drive scientific advancements, and bring much-needed progress for patients,” said Gitte P. Aabo, CEO and President of LEO Pharma.

LEO Pharma’s consolidated revenue amounted to DKK 10,410 million in 2018, a level similar to revenue in 2017 (DKK 10,481 million).

Operating profit increased from DKK 852 million in 2017 to DKK 1,605 million in 2018. The increase in operating profit was predominantly driven by the strategic decision to divest LEO Pharma’s non-strategic derma portfolio to Karo Pharma AB. The divestment resulted in a net gain of DKK 1,566 million recognized as other operating income.

Key figures	2017	2018	Change in %
Revenue (DKK million)	10,481	10,410	-1%
Operating profit (DKK million)	852	1,605	88%
Investments in R&D (% of Revenue)	15%	18%	3%

A strong and expanding pipeline

Increasing investments in R&D to 18% of revenues in 2018 fueled the progression of the company’s clinical pipeline and added candidates to the future innovative portfolio. In 2018, LEO Pharma initiated its third phase 3 clinical study for tralokinumab, an investigational monoclonal antibody for the treatment of moderate-to-severe atopic dermatitis, and entered phase 2b for delgocitinib for atopic dermatitis and hand eczema.

In Q4 2018, the tralokinumab clinical development program reached a very important milestone by reaching the recruitment target of 369 patients for the ECZTRA 3 trial on time. Thereby, patient recruitment is finalized for the three pivotal trials, putting them firmly on track.

ECZTRA 3 (ECZema TRAlokinumab trial no. 3), is a randomized, double-blind, placebo-controlled, phase 3 trial to evaluate the efficacy and safety of tralokinumab in combination with topical corticosteroids in adults with moderate-to-severe atopic dermatitis (AD).

Together with more early-stage projects, including oral treatments, LEO Pharma now has one of the world’s strongest pipelines in eczema. Moreover, LEO Pharma followed through on its strategic intent to enter the rare disease arena by partnering with PellePharm on the development of a solution for Gorlin Syndrome, a condition for which there is currently no approved treatment available.

Established portfolio

Revenue from the established portfolio amounted to DKK 10,268 million in 2018, which is in line with 2017 (in local currencies). Enstilar^® continued to be the primary growth driver of the established portfolio, which grew 95% to DKK 929 million, in 2018 compared to DKK 477 million in 2017 in local currencies.

To further improve the EBITDA margin in the estab­lished portfolio, LEO Pharma divested its non-strategic derma­tology portfolio to Karo Pharma AB in April 2018. This led to a significantly reduced number of stock keeping units, simplified manufacturing and improved gross profit margins.

In addition, LEO Pharma acquired Bayer’s prescrip­tion dermatology unit to gain scale in specific markets in Europe, Asia and Latin America, and to add sales to the existing organization.

The US Bayer prescription dermatology business was integrated as of September 2018, with an impact of DKK 124 million on 2018 revenue. The full integration of the rest of the world will take place in July 2019.

Innovative portfolio

The European launches of Kyntheum^®, LEO Pharma’s biologic solution for psoriasis and the first approved treatment in the innovative portfo­lio, continued throughout 2018 following the first launch in Germany in late 2017. Kyntheum^® sales in Region Europe+ contributed DKK 141 million in local currencies. 

Germany continued to be a key driver of revenue within LEO Pharma’s innovative portfolio, representing 80% of Kyntheum^® revenue in 2018, growing from DKK 14 million in 2017 to DKK 112 million in 2018. In 2018, Region Europe+ launched Kyntheum^® in an additional 10 markets, including Spain and France. LEO Pharma expects to launch in Italy and Portugal in 2019.

Operating expenses of the innovative portfolio amounted to DKK 1,836 million in local currencies, which is an increase of DKK 814 million compared to 2017. The increase was mainly driven by investments in tralokinumab. EBITDA for the innovative port­folio ended at a loss of DKK 1,679 million in local currencies.

Regional results

In Region Europe+ LEO Pharma saw net sales growth of DKK 186 million, or 5% in local currencies, to DKK 4,302 million. Sales were impacted by DKK 397 million due to the divestment to Karo Pharma AB. The psoriasis business grew by 17% in local currencies, driven by Enstilar^® sales growth of 179%, from DKK 234 million to DKK 651 million, driven by unprecedented rates of switch from steroids.

In Region US net sales declined by DKK 220 million, or 17% in local currencies, to DKK 1,077 million. In spite of this decline reflecting the local competitive landscape and high pricing pressure, we saw nice performance of Enstilar^® where sales increased 11% due to a successful patient support program. Also, Picato^® sales grew by 10% in the US, driven by promotional activities.

In Region International net sales increased by DKK 127 million, or 5% in local currencies, to DKK 2,785 million.

Looking ahead

In 2019, LEO Pharma will continue to move forward towards its strategic 2025 goals. This entails signifi­cant investments in innovative products, progress in the tralokinumab development, continued launches of Enstilar^® and Kyntheum^® in Europe, and the inte­gration of the remaining part of the Bayer prescrip­tion dermatology portfolio.

LEO Pharma expects sales growth primarily from the acquisition of Bayer’s prescription dermatology unit, which will have full-year impact in the US and six-months impact in Rest of World. Enstilar^® and Kyntheum^® in Europe will also contribute to this positive trend.

LEO Pharma expects a growth in annual revenue of 4-6% to DKK 10.8-11.0 billion in 2019. LEO Pharma will continue to focus on profitability improvements in the established portfolio, while also significantly increasing spending on research and development activities, including spending related to the phase 3 studies of tralokinumab and phase 2b studies of delgocitinib. LEO Pharma expects this to lead to an operating loss for the LEO Pharma Group in 2019 of up to DKK 750 million. Further divestments or write­-downs of R&D investments can change the outlook. 

Towards 2025, LEO Pharma will continue its substan­tial investments in future growth opportunities. LEO Pharma intends to finance these investments, partially through external loan capital, and partially through shareholder loans granted by LEO Holding A/S.