Full Press Release Details
Procaps Group Reports Third Quarter 2023 Results
Net Revenues Increased
5% in 9M23 Year-over-Year on a Constant Currency Basis, Driven by 13% RX Growth
MIAMI, USA - BARRANQUILLA, COL -
December 26, 2023 - Procaps Group, S.A. (NASDAQ: PROC) ("Procaps" or the "Company"), a leading integrated
international healthcare and pharmaceutical services company, today announced its financial results for the three months ended September
30, 2023 ("3Q23") and the nine months ended September 30, 2023 ("9M23").
Financial Highlights 3Q23 & 9M23
| U$ million | 3Q23 | 3Q22 | % | 9M23 | 9M22 | % | ||||||||||||||||||
| Net Revenues | 118 | 110 | 7 | % | 313 | 308 | 1.4 | % | ||||||||||||||||
| FX Impact on Net Revenues | 6 | - | (12 | ) | - | |||||||||||||||||||
| Constant Currency Net Revenues | 112.9 | 110 | 2 | % | 325 | 308 | 5 | % | ||||||||||||||||
| Gross profit | 68 | 68 | 1 | % | 176 | 187 | -6 | % | ||||||||||||||||
| Gross margin | 58 | % | 61 | % | -343 bps | 56 | % | 61 | % | -454 bps | ||||||||||||||
| Adjusted EBITDA | 22 | 23 | -4 | % | 51 | 60 | -14 | % | ||||||||||||||||
| FX Impact on Adjusted EBITDA | 1 | - | (2 | ) | - | |||||||||||||||||||
| Constant Currency Adjusted EBITDA | 21 | 23 | -9 | % | 53 | 60 | -11 | % | ||||||||||||||||
| Adj. EBITDA margin | 19 | % | 21 | % | -212 bps | 16 | % | 19 | % | -291 bps |
Management Commentary
Procaps Chief Executive Officer, Ruben Minski,
"The third quarter of 2023 showed signs
of improvement after a challenging first half of the year. We are encouraged by our strong operational execution and refinement of our
strategic plan to ensure a stronger, more resilient organization that thrives beyond short-term hurdles.
"Multiple macroeconomic factors
continued to challenge the industry in our region, impacting our revenues. We continue to adapt our strategies to navigate this
dynamic landscape and protect our profitability and are seeing positive trends materializing in 4Q23 which we expect will lead to
improved results over 4Q22.
"During the quarter we announced an agreement
with BDR Pharmaceuticals for 27 oncology molecules for Latin America, including 20 TKIs (Tirosyne Kinase Inhibitors). Under the agreement,
Procaps is responsible for registration, branding, marketing and commercialization throughout Latin America. We are very excited to expand
our oncology portfolio in the region and add more partner companies and potentially broaden cancer treatment options with several new
molecules to better serve more patients and physicians.
"To support increased U.S. demand of our
advanced gummy technologies for the global nutraceutical industry capacity expansion in the U.S. continue as planned with the ongoing
construction of a new gummy manufacturing facility in Florida. We expect operations to commence in 1Q24 with revenues following later
in the quarter. Also in the U.S. we are exploring new products, especially high potency compounds, to take advantage of the West Palm
Beach facility which has production capacity of approximately 1.8 billion softgel capsules per year for our iCDMO business unit.
"During the quarter we participated as one
of the five sustainable sponsors at CPHI Barcelona 2023 and welcomed over 300 business partners, current and new, at our booth. We were
very pleased with the level of interest across the global pharma community of attendees.
"As we continue to focus on growth, and
after months of considering how to best serve the Company, earlier this year I announced that leading the Company on important strategic
initiatives rather than on day-to-day matters would be of better value to the Company. We have in place the necessary capabilities to
position the Company for long-term success and as announced, I will transition to Executive Chairman of the Company on January 15, with
the announcement of Jose Antonio Vieira as the new CEO.," concluded Minski.
Given the slowdown in growth in some markets,
especially during the month of September and October and the current macroeconomic environment, we are revising our guidance for the full
The impact of the macroeconomic conditions that
the industry has experienced through the year, followed the same pattern in the third and fourth quarter - order phasing from CDMO partners,
OTC taking longer to recover, launches delays due to delay in registration approvals, and sales of brands that were postponed.
The Company now expects full year 2023 net
revenue growth of approximately 6% on a constant currency basis, and an adjusted EBITDA in the range of $77M - $82M.
This short-term scenario does not change our medium
and long-term expectations for the Latin American market. We believe this market slowdown is only temporary and in the next years the
market will continue to benefit from the aging of the population, greater market access and increase in health coverage.
Innovation & Launches
Total R&D expenses, including the amount capitalized
as intangible assets, totaled $8.6 million in 3Q23, or 7.3% of total net revenues in the period, including CAPEX expenses in the amount
of $2.8 million, representing 2.3% of total net revenues.
New products launched in the last 36 months delivered
approximately $106.5 million in net revenues for 9M23, including approximately $40.1 million in 3Q23.
Products launched in the last 36 months are highlighted
by Ciferol (oncology product for multiple myeloma) Dolofen Xtra (first ever Unigel triple combo for migraines), DOL B-VIT (injectable
B Complex with lidocaine using dual chamber technology), and Rosuplus (Unigel combo for lipid control for diabetics' patients).
Geographic expansion launches including women's health, cardiovascular, and gastro.
Third Quarter 2023 Financial Results
Net revenues totaled $118.4 million in 3Q23 compared
to net revenues of $110.4 million for 9M22, an increase of 7.3% year-over-year. On a constant currency basis net revenues increased by
2.3% from 3Q22 to 3Q23, totaling $112.9 million.
Net revenues totaled $312.6 million for 9M23,
an increase of 1.4% from 3Q22, impacted mainly by the devaluation of some local currencies totaling $12.2 million (particularly in Colombia)
as well as CDMO order phasing, especially for U.S. and Brazilian clients, and a decrease in sales related to Rymco's ceased operations.
On a constant currency basis 9M23 net revenues increased by 5.3% from 9M22.
In terms of business lines, on a constant currency
basis, Rx (approximately 46% of total net revenues) grew approximately 8%, and OTC (approximately 17% of total net revenues) grew approximately
11%. The growth was partially offset by CDMO performance.
The demand for RX remains solid and with good
penetration of new products with 13% growth for 9M23 on a constant currency basis. The OTC segment grew 3% on a constant currency basis
for 9M23, impacted by the OTC market in El Salvador. The Clinical Specialties segment is ramping up again and recovering from post pandemic
effects with a 5% decrease for 9M23 on a constant currency basis.
Net revenues by strategic business segment are shown below:
| U$ million | 3Q23 | %NR | 3Q23* | 3Q22 | %NR | % | %* | |||||||||||||||||||||
| CAN | 15.8 | 13.3 | % | 15.8 | 14.4 | 13.1 | % | 9.3 | % | 9.7 | % | |||||||||||||||||
| CASAND | 21.9 | 18.5 | % | 21.4 | 17.7 | 16.0 | % | 23.8 | % | 21.1 | % | |||||||||||||||||
| Diabetrics | 7.0 | 5.9 | % | 6.5 | 5.0 | 4.5 | % | 40.7 | % | 30.3 | % | |||||||||||||||||
| Nextgel | 34.5 | 29.1 | % | 32.9 | 36.4 | 33.0 | % | -5.3 | % | -9.6 | % | |||||||||||||||||
| Procaps Colombia | 39.1 | 33.0 | % | 36.2 | 36.8 | 33.4 | % | 6.2 | % | -1.7 | % | |||||||||||||||||
| Total Net Revenues | 118.4 | 100.0 | % | 112.9 | 110.4 | 100.0 | % | 7.3 | % | 2.3 | % |
| U$ million | 9M23 | %NR | 9M23* | 9M22 | %NR | % | %* | |||||||||||||||||||||
| CAN | 39.2 | 12.5 | % | 39.4 | 42.5 | 13.8 | % | -7.9 | % | -7.5 | % | |||||||||||||||||
| CASAND | 59.0 | 18.9 | % | 58.7 | 47.4 | 15.4 | % | 24.5 | % | 24.0 | % | |||||||||||||||||
| Diabetrics | 16.3 | 5.2 | % | 17.2 | 15.5 | 5.0 | % | 4.6 | % | 10.9 | % | |||||||||||||||||
| Nextgel | 91.5 | 29.3 | % | 94.2 | 94.7 | 30.7 | % | -3.4 | % | -0.5 | % | |||||||||||||||||
| Procaps Colombia | 106.7 | 34.1 | % | 115.2 | 108.3 | 35.1 | % | -1.5 | % | 6.4 | % | |||||||||||||||||
| Total Net Revenues | 312.6 | 100.0 | % | 324.8 | 308.5 | 100.0 | % | 1.4 | % | 5.3 | % |
Central America North (CAN)
Net revenues for the CAN business segment were
$15.8 million in 3Q23, an increase of 9.3% from 3Q22, positively impacted by the OTC and Clinical Specialties portfolio performance. On
a constant currency basis net revenues increased 9.7%.
Net revenues totaled $39.2 million for 9M23, a
decrease of 7.9% from 9M22, negatively impacted by the OTC segment in El Salvador in previous quarters. In addition, the previous year
was positively impacted by the sales of brand in the amount of approximately $3.5 million which impacted the 9M22 results. On a constant
currency basis net revenues decreased 7.5%.
Central America South and Andean Region
Net revenues for the CASAND business segment totaled
$21.9 million in 3Q23, an increase of 23.8% versus 3Q22, mainly due to the positive performance of new products launched in the region
such as Fortzink and Dol B-vit, and a sales increase in the existing product portfolio such as Alercet D, the RX portfolio, and price
increases. On a constant currency basis, net revenues increased by 21.1% in the quarter.
Net revenues totaled $59.0 million for 9M23, an
increase of 24.5% from 9M22. On a constant currency basis net revenues increased by 24.0%, positively impacted by performances in Ecuador,
Peru, Panama and Dominican Republic.
Diabetrics net revenues totaled $7.0 million,
an increase of 40.7% from 3Q22, positively impacted by the performance of blood glucose monitoring and Lipotic. On a constant currency
basis net revenues increased 30.3% from 3Q22 to 3Q23.
Net revenues totaled $16.3 million for 9M23, an
increase of 4.6% from 9M22. On a constant currency basis net revenues increased 10.9%.
Net revenues for the Nextgel business segment
were $34.5 million in 3Q23, a decrease of 5.3% versus 3Q22. On a constant currency basis net revenues decreased by 9.6%, compared to 3Q22.
Constant currency net revenues totaled $91.5 million
for 9M23, a decrease of 3.4% versus 9M22. On a constant currency basis net revenues decreased 0.5%.
We continue to experience reduced orders from