Full Press Release Details
Group Reports Third Quarter and Nine Months 2022 Results
Constant currency Net
Revenues Increased by 15% year-over-year in the 9M22 and by 11% in the 3Q22,
signaling a strong demand across our businesses
MIAMI, USA - BARRANQUILLA, COL -
November 14, 2022 - Procaps Group S.A. (NASDAQ: PROC) ("Procaps"), a leading integrated LatAm healthcare and pharmaceutical
conglomerate, today announced its financial results for the three months ended September 30, 2022 ("3Q22") and the nine months
ended September 30, 2022 ("9M22").
"Demand remains robust for RX and consumer health products
as well as for all our CDMO products, and gross margin remained strong despite the challenging macro scenario we have been facing. We
have continued to invest and prepare the company for the organic and inorganic growth that is about to come, and we expect to see continued
revenue growth and improved operating leverage," said Rub n Minski, CEO of Procaps.
Highlights 9M22 & 3Q22
Product Development & Market
| 3Q22 | 3Q21 | % | 9M22 | 9M21 | % | |||||||||||||||||||
| Net Revenues | 110 | 107 | 3 | % | 308 | 283 | 9 | % | ||||||||||||||||
| FX Impact on Net Revenues | (8 | ) | - | -7 | % | (16 | ) | - | -5 | % | ||||||||||||||
| Constant Net Revenues | 118 | 107 | 11 | % | 325 | 283 | 15 | % |
Management Commentary
Procaps Chief Executive Officer, Ruben Minski,
"The third quarter was highlighted by our
ongoing pace of innovative new products launches and product rollouts to new regions, as well as increased demand and market share for
existing products. Despite macroeconomic headwinds and the depreciation of some local currencies, we continued to make significant progress
on our strategy of building an integrated healthcare organization that will capture the benefits of our organic and inorganic growth.
"The cadence of new product launches and
product rollouts to new regions combined to deliver 11% revenue growth on a constant currency basis during the quarter compared to 3Q21,
supported by product development and new launches. With our strong focus on continuous innovation and internationalization, we continue
to expand our portfolio within selected therapy areas and geographies. We have launched over 40 products in Colombia during the first
nine months of 2022 and continuing with our geo expansion, we have launched approximately 100 products in the rest of the region, in the
"We are delivering double-digit growth on
a constant currency basis, and those results support our belief that we are making the necessary investment in our business and that the
key drivers and competitive advantages are in place to execute our long-term strategy, despite currency headwinds.
"Looking ahead, we continue to expect to
close on our Grupo Somar acquisition by the end of the year which will represent a significant step forward for our regional consolidation
strategy, expanding our reach in Mexico. Our West Palm Beach facility pipeline of RX product development has been growing as expected,
and we have a positive perspective for the next twelve months.
"In summary, while we are experiencing headwinds
in the second half of this year, we believe we are well positioned to build significant momentum in 2023 as we drive growth, expand our
portfolio and continue to focus on our roll-up strategy - all with the goal of building sustainable value for our shareholders over
the long-term. I look forward to driving new momentum towards the realization of Procaps's significant potential," said Minski.
Procaps Chief Financial Officer, Patricio Vargas,
"We ended the third quarter of 2022 with
revenue increase of 11% over the same period of the previous year on a constant currency basis, and 15% in the first nine months, driven
by multiple therapeutic areas across the company. We believe our ongoing discipline in the execution of our growth strategy, combined
with the soundness of our core business operations, will position us for continued growth as the macroeconomic environment normalizes.
Currency devaluation during the last few months
in some of our markets negatively impacted our 3Q22 revenues by $8 million compared to the third quarter of 2021 and by $16 million in
the first nine months of the year compared to the same period in the prior year.
"Our gross margin remains robust at 61%
both for the 3Q22 as well as for the 9M22, positively impacted by the portfolio mix during the third quarter.
To address the specific headwinds, we have been
facing in these past months, we have been proactive in seeking out new ways to strengthen our multi-prong growth strategy that we expect
will continue to deliver growth in our core markets with strong cash generation to the bottom line.
"Our strategy going forward will continue
to prioritize high value uses for our capital, with an emphasis on reinvesting in our business by funding our internal R&D and innovation
initiatives. With our substantial efforts to establish the necessary building blocks for growth, including our recent acquisition announcement,
I'm confident that we are well positioned to achieve our near and long-term goals.
"Looking to 4Q22 and 2023, we expect to
see continuing challenges and uncertainties, such as a possible recession in the United States and Europe, supply chain disruptions, and
the continued depreciation of the currencies in the markets where we operate.
Despite these possibilities, we believe the diversified
nature of our businesses, our efforts to meet these challenges, and ongoing expansion at every level of the Company, position us to combat
potential challenges ahead and to continue our growth. The mid-term outlook for growth is positively driven by our product pipeline which
is paramount to sustain our growth.," concluded Vargas.
Innovation & Launches
Total R&D expenses, including the amount capitalized
as intangible assets, totaled $7 million in 3Q22, 6% of total net revenues in the period. For 9M22, total R&D expenses totaled $20
million (7% of net revenues).
Our renewal rate (% of net revenues from new products
launched in the last 36 months) was 24% during 9M22. Launches depend on registration approval from regulatory agencies, and we could have
phasing from quarter to quarter, depending on the time of the approval. Our goal continues to be at 25%. Looking only at the 3Q22, the
renewal rate was 30%.
We have registered over 160 products in the region,
and we have 180 products under registration process.
Ramp up for products launched during the first
nine months of the year is going well, highlighted by Aludel, Dolofen Flu, Mentsi and Papilo Care in Colombia. Looking at the geo expansion
launches, women health, cardiovascular, and gastro products are also performing well according to the expected ramp up.
Third Quarter 2022 & Nine Months 2022
Net revenues totaled $110.4 million in 3Q22, compared
to net revenues of $106.8 million for 3Q21, representing a growth of 3.3% year-over-year. On a constant currency basis, net revenues increased
by 10.9% from 3Q21 to 3Q22.
The increase is mainly driven by positive performances
in the Nextgel and CASAND business segments, and the quarter was negatively impacted by macroeconomic headwinds, particularly the depreciation
of some local currencies in those countries where Procaps operates as well as supply chain challenges, such as higher prices and supplier
delivery delays which led to backorders.
Net revenues totaled $308.5 million in 9M22, compared
to net revenues of $283.2 million for 9M21, increasing 8.9%. On a constant currency basis, net revenues increased by 14.6% from 9M21 to
Net revenue by strategic business segment is
| 3Q22 | %NR | 3Q22* | 3Q21 | %NR | % | %* | ||||||||||||||||||||||
| CAN | 14.4 | 13.1 | % | 14.5 | 14.1 | 13.2 | % | 2.3 | % | 2.5 | % | |||||||||||||||||
| CASAND | 17.7 | 16.0 | % | 17.9 | 13.2 | 12.3 | % | 34.7 | % | 36.2 | % | |||||||||||||||||
| Diabetrics | 5.0 | 4.5 | % | 5.7 | 7.3 | 6.8 | % | -31.4 | % | -21.9 | % | |||||||||||||||||
| Nextgel | 36.4 | 33.0 | % | 38.5 | 31.4 | 29.4 | % | 15.9 | % | 22.5 | % | |||||||||||||||||
| Procaps Colombia | 36.8 | 33.4 | % | 41.9 | 40.9 | 38.3 | % | -9.9 | % | 2.5 | % | |||||||||||||||||
| Total Net Revenues | 110.4 | 100.0 | % | 118.5 | 106.8 | 100.0 | % | 3.3 | % | 10.9 | % |
| 9M22 | %NR | 9M22* | 9M21 | %NR | % | %* | ||||||||||||||||||||||
| CAN | 42.5 | 13.8 | % | 42.6 | 31.2 | 11.0 | % | 36.5 | % | 36.7 | % | |||||||||||||||||
| CASAND | 47.4 | 15.4 | % | 47.8 | 38.3 | 13.5 | % | 23.7 | % | 24.8 | % | |||||||||||||||||
| Diabetrics | 15.5 | 5.0 | % | 17.1 | 20.4 | 7.2 | % | -23.8 | % | -16.1 | % | |||||||||||||||||
| Nextgel | 94.7 | 30.7 | % | 97.8 | 83.9 | 29.6 | % | 12.9 | % | 16.6 | % | |||||||||||||||||
| Procaps Colombia | 108.3 | 35.1 | % | 119.2 | 109.5 | 38.6 | % | -1.1 | % | 8.9 | % | |||||||||||||||||
| Total Net Revenues | 308.5 | 100.0 | % | 324.5 | 283.2 | 100.0 | % | 8.9 | % | 14.6 | % |
Central America North (CAN)
Net revenues for the CAN business segment were
$ 14.4 million in 3Q22, an increase of 2.3% vs. 3Q21, primarily as a result of the performance for Rx products, such as Muvett and Citragel
and the roll out of new products. The higher than expected orders from 3Q21 led to a higher comparison basis.
Net revenues totaled $42.5 million in 9M22 with
an increase of 36.5% versus 9M21, positively impacted by our performance in Guatemala and Nicaragua, which presented double-digit growth
in sales and the strengthening of promotional lines by expanding its portfolio, especially in gastrointestinal, cardiovascular, and feminine
care therapeutic areas. On a constant currency basis, net revenues increased by 36.7% from 9M21 to 9M22.
Central America South and Andean Region
Net revenues for the CASAND business segment totaled
$ 17.7 million in 3Q22, an increase of 34.7% when compared to 3Q21, mainly due to the continued strengthening of existing brands in key
growth markets through increased market share, such as Alercet D and Gestavit DHA and the rollout of new products, such as Fortzink Ultra,
Dominican Republic and Ecuador, among others,