Shaping the Future of Aesthetic dermatology: 2015 Annual Report January 8, 2016

100 Pages·2015·5.12 MB·English

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SHAPING
THE FUTURE
Sinclair Pharma plc (formerly Sinclair IS Pharma plc)
Aesthetic dermatology
Annual Report and Accounts 2015
INTRODUCTION
Sinclair Pharma is a pure-play WHAT’S INSIDE THIS
ANNUAL REPORT
Strategic Report
Aesthetics business with a
Highlights 2015 01
At a Glance 02
highly differentiated portfolio Chairman’s Statement 04
Chief Executive’s Review 08
Financial Review 16
based on improving facial Principal Risks and Uncertainties 19
Corporate Governance
shape and volumisation. Board of Directors 20
Senior Management 21
Directors’ Report 22
Statement of Directors’
Responsibilities 25
Corporate Governance Report 26
AT A GLANCE FACE SHAPING AESTHETICS Remuneration Report - Part 1 30
Remuneration Report - Part 2 31
pg02 pg06
Remuneration Report - Part 3 42
Independent Auditor’s Report 47
Financial Statements
A TRULY Consolidated Income Statement 53
DIFFERENTIATED Consolidated Statement
of Comprehensive Income 53
AESTHETICS Consolidated Balance Sheet 54
Company Balance Sheet 55
PORTFOLIO
Consolidated Statement of
Changes in Shareholders’ Equity 56
Company Statement of Changes
in Shareholders’ Equity 57
SILHOUETTE UNIQUE RESULTS ELLANSÉ THE NEXT GENERATION
Cash Flow Statements 58
pg10 pg14
Notes to the Financial Statements 59
Advisers IBC
sinclairpharma.com
STRATEGIC CORPORATE FINANCIAL
REPORT GOVERNANCE STATEMENTS
HIGHLIGHTS 2015
Highlights 2015
• Revenues increased by 19.4% to £75.9m (7.7% Like-for-like1 growth)
• Aesthetic brands growth drives strong gross margin improvement to 62.9% from 56.3% in 2014
• Silhouette® growth rate 120% LFL
• Ellansé™ growth rate 86% LFL (excluding Korea)
• Adjusted EBITDA2 increased 70% to £17.1m
• Operating profit of £4.5m (2014: loss of £1.8m)
• Net debt at 30 June 2015 of £42.2m, 2.5xAdjusted EBITDA
• Silhouette Instalift® FDA approved in April 2015, with launch expected in 2016
Post period highlights
• Sale of non-aesthetics business for c.£132m in cash plus a sales royalty for US Flammacerium®
• Sinclair to collect remaining working capital, c.£4m net
• Proceeds to repay debt facility in full
• Estimated pro forma net cash of £82m at completion
• Business complexity significantly reduced
• Company to focus on high growth aesthetics market
• Silhouette® launched in South Korea in September 2015
• Silhouette® Worldwide Experts’ meeting in October 2015 again attracts over 1,000 physicians
• Q1 FY16 in market growth of 46% versus same period last year
• Option to acquire Brazilian Silhouette® distributor to create direct affiliate
• The Company is remaining in an offer period under the framework provided by a formal sales process under the Takeover
Code as it continues to receive attention for the remaining aesthetics business from a number of international companies
Annual revenue £m EBITDA
25%
80 20
20%
15 15%
60
10%
10
40 5%
5
0%
20 0 -5%
-10%
0 2010 2011 2012 2013 2014 2015 -5 2010 2011 2012 2013 2014 2015
EBITDA £m EBITDA Margin %
1 Like-for-like (‘LFL’) revenues presented on a constant currency basis and exclude product disposals, and one-off licence fee income.
2 Adjusted EBITDA defined as earnings before interest, tax, depreciation, amortisation, share-based payments, exceptional items and loss from discontinued operations.
Sinclair Pharma plc Annual Report and Accounts 2015 01
AT A GLANCE
A TRULY DIFFERENTIATED AESTHETICS PORTFOLIO
Aesthetics

Enhancing & lifting Deep tissue regeneration
Silhouette Soft® Ellansé® Sculptra®/New-Fill®
Resorbable PLLA/PLGA New generation of collagen Collagen stimulator made
sutures with bi-directional stimulator made from PCL from PLLA for progressive
resorbable cones for skin for immediate correction correction
repositioning and tightening and tunable longevity from
Western European rights
1 to 4 years
• Redefined face, volume repositioned, • Immediate volumisation through collagen • Deep tissue regeneration
reduced wrinkles stimulation • Full facial approach
• Long-lasting results • Improved skin quality • Gradual and natural results
• Immediate correction • Safe • Long-lasting correction up to 25 months
• Non-surgical procedure • Tunable duration from 1 to 4 years • Recognisable brand
• Minimal downtime
£8.7m £4.5m
FY15 revenue FY15 revenue
02 Sinclair Pharma plc Annual Report and Accounts 2015
STRATEGIC CORPORATE FINANCIAL
REPORT GOVERNANCE STATEMENTS

Deep tissue regeneration Volumising Biostimulating
Atléan®
Ellansé® Sculptra®/New-Fill® Perfectha® Atléan®
New generation of collagen Collagen stimulator made Latest generation of biphasic Injectable collagen
stimulator made from PCL from PLLA for progressive HA filler range for volume stimulator and HA filler
for immediate correction correction and contouring
Currently renewing CE mark
and tunable longevity from
Western European rights Leading viscoelastic profile
1 to 4 years
• Immediate volumisation through collagen • Deep tissue regeneration • High volumising capacity • Short-term contouring and volumisation
stimulation • Full facial approach • Easy to inject • Long-term skin biostimulation
• Improved skin quality • Gradual and natural results • Long-lasting correction • Well tolerated
• Safe • Long-lasting correction up to 25 months • Provides complementary treatments for • Totally resorbable
• Tunable duration from 1 to 4 years • Recognisable brand facial contouring and fine tuning
£6.4m £8.1m
Launch due
FY15 revenue FY15 revenue 2017
Sinclair Pharma plc Annual Report and Accounts 2015 03
CHAIRMAN’S STATEMENT
Last November, at the Company’s AGM,
we highlighted that Sinclair had received
significant interest from a number of
international companies. During the past
12 months we have conducted a strategic
review of the business with our advisers to
evaluate the optimal way to unlock the value
within the Company. During this process we
had a number of discussions with third parties
conducted within the framework of a formal
sales process pursuant to the Takeover Code.
The Takeover Panel granted a dispensation
from the requirements of Rules 2.4 and 2.6
of the Takeover Code. As such interested
parties were not obliged to disclose their
position during discussion, enabling the
Company to conduct these discussions whilst
continuing to successfully run the business
(as outlined below) without the distraction
to employees and our suppliers/customers
of public discussions and speculation.
Grahame Cook
Chairman The strategic review highlighted the
Company has two strong but very distinct and
separable business units. Our fast growing,
This has been a significant year for the Company increasingly successful and differentiated
aesthetics franchise has fundamentally
in which we have redefined our strategic objectives different commercial characteristics to our
traditional, lower growth, medicinal wound
and continued along the path to becoming a leading
and skincare business. This includes different
customers and markets; and different sales
global aesthetics company.
forces and management requirements within
Sinclair. The review also concluded that
greater shareholder value could be unlocked
by conducting discussions with separate
potential partners and buyers for each of
the two businesses individually rather than
with a single party for the entire Company.
04 Sinclair Pharma plc Annual Report and Accounts 2015
STRATEGIC CORPORATE FINANCIAL
REPORT GOVERNANCE STATEMENTS
The aesthetics business has grown rapidly growth projections by geographical expansion enjoyed by the aesthetics business as well as
during the year to become a high growth, and line extensions of our existing products. We one-off licence fee income from Merial of
high margin business. Aesthetics (including believe the US and over the medium-term China, £3.3m. We invested substantially in selling,
Kelo-cote®) accounted for 49% of revenue, are areas of particular potential. In the US we marketing and distribution as we launched
excluding licence income, in the year to received FDA approval for Silhouette Instalift® in Silhouette® and Ellansé™ in the UK, France,
30 June 2015. Where previously we have relied April 2015, which means that we are now able to Spain and Germany. Demand for our products is
upon the cash flow from the medicinal business sell Silhouette Instalift® in the US market. Based significant and physician training is frequently a
to invest in the development of our aesthetics on independent market research, we expect that greater rate limiting step than patient demand, so
franchise, we are now confident that the annual peak US sales for Silhouette Instalift® we are investing heavily in this area.
business can stand alone. will be in excess of $200m. We are currently
evaluating the distribution model and potential The Adjusted EBITDA margin was a record
Our established, medicinal derma business partners in the light of the strategic review. 22.5% compared with 15.8% in the prior year.
is performing well. However, to enable it to Cash flow generated from operations was also
enter the next phase of growth it requires The Company is remaining in an offer period a record £10.0m.
investment, which the Board believes would under the framework provided by a formal sales
divert resources and management attention process under the Takeover Code. The Board Your Board believes that Sinclair is now optimally
from the higher growth aesthetics business. On believes that Sinclair as a dedicated aesthetics positioned to fully exploit its position as a
26 November 2015 the Company announced business is an attractive growth platform refocused aesthetics business. As a dedicated
the sale of the entire non-aesthetic business and has a secure and promising future as an aesthetics company with cash on our balance
(including Kelo-cote®), including the transfer independent business. The Board will continue sheet and differentiated, high margin products
of employees within that business, to Alliance its assessment on how to maximise shareholder in a fast growing consolidating market, our
Pharma plc for £127.5m plus c.£4.7m estimated value and continues to receive attention with operational prospects are strong as a standalone
value of inventory at closing. Sinclair will also regards to the remaining aesthetics business business or as part of a larger group. Whilst we
receive a royalty relating to Flammacerium® US from a number of international companies, remain in an offer period, we continue to be fully
revenues. The sale will transform the Company many of which are interested in some form committed to executing on our strong organic
into a less complex, fast growth, pure-play of co-operation, including (co)-promotion; growth plan. I would like to thank shareholders
aesthetics business. The sale proceeds creates licensing of products; repatriation of distribution for their continued support.
a strong net cash position after debt repayment agreements; development collaborations;
and covers future milestone payments relating and merger and acquisition opportunities.
to the aesthetic acquisitions of 2014.
Sinclair has delivered financial results in the
Sinclair is now firmly established in the year to 30 June 2015 at the upper end of
Grahame Cook
aesthetics field and our growth prospects are market expectations despite currency headwinds
Chairman
significant. We have a portfolio of unique in Europe and managing the strategic review
products which are novel, differentiated and process. Revenue grew by 19.4% to £75.9m
address unmet market need for effective, high and we achieved a record gross margin of
quality, non-invasive treatment. The Board 62.9% compared with 56.3% in the prior year
believes we can achieve our aggressive sales due, in no small part, to the higher margins
Sinclair Pharma plc Annual Report and Accounts 2015 05
STRATEGY IN ACTION
FACE
SHAPING
AESTHETICS
Leading edge facial rejuvenation portfolio
• Highly differentiated proposition based on facial rejuvenation with
specific expertise in collagen stimulation and redefinition of jawline
(not simply ‘filling wrinkles’)
– Plays to expected future focus for industry on volumisation and
minimally invasive solutions
– Lifting of mid-face, neck and eyebrows and redefinition of jawline
• Market opportunity driven by the changing fundamentals:
– Range of treatments available on the market is increasing, with
many users opting to undergo multiple types
– Lack of differentiation in the toxin market
• Complementary portfolio of aesthetics dermatology products
addressing fine lines correction to deep tissue regeneration
• Portfolio offers dermatologists the opportunity to create
the clinical output attained by plastic surgeons whilst using
local anaesthetic
C Soilmhpolueemttee nStoafrty® /SInoslutatliifotn®s
Enhancement
Perfectha®
Deep Tissue Regeneration
Full face
Deep Tissue
Regeneration Augmentation
Sculptra®/Ellansé™ Cheeks and Submalar,
Forehead and chin
Correction
Nose
06 Sinclair Pharma plc Annual Report and Accounts 2015
STRATEGIC CORPORATE FINANCIAL
REPORT GOVERNANCE STATEMENTS
K EY
TREATMENT
AREAS
Lifting
Cheeks, eyebrows, jawline, neck
Volume restoration
Malar and submalar area
Volumising
Temples, cheeks, jawline
Enhancing
Wrinkle, lips, periorbital/peri-oral
Sinclair Pharma plc Annual Report and Accounts 2015 07
CHIEF EXECUTIVE’S REVIEW
Sinclair is in the process of transforming from a
highly complex business with multiple products,
to a more focused operation with just four
private-pay brands. The Company’s goal for
FY16 is to optimise Silhouette Soft®, Ellansé™
and Perfectha®, and launch Silhouette Instalift®
in the US.
Sinclair generated £17.1m adjusted EBITDA1 on
FY15 sales of £75.9m. Both sales and EBITDA
were negatively impacted by a weak Euro. 7.7%
LFL sales growth for the Group compared to
35.4% for the aesthetics only business. Certain
territories, notably in APAC (Asia Pacific),
temporarily suffered as Sinclair transferred
and optimised distributor relationships and
all territories have benefited from increased
commercialisation and training efforts.
Consequently there was an acceleration of
the aesthetics growth rate through the period,
which has since continued into FY16.
Chris Spooner
Chief Executive Officer At £17.1m, EBITDA was at the upper end of
expectations although helped by the disposal
to Merial Inc. of rights for the use of delmopinol
Our recent announcement to focus purely on Aesthetic in companion animal oral care for £3.3m.
The aesthetics gross margin improved steadily
Dermatology reflects our strong conviction that Sinclair through the year due to manufacturing process
improvements in Perfectha® leading to
has a major presence in this high margin specialist
reduction in wastage rates and improvements
to process and a sharp increase in volumes
sector and is well placed to leverage the significant
leading to the successful negotiation of a
opportunities for sustainable organic growth. COGS reduction for Silhouette Soft® in Q4
FY15. The medicinal gross margin at 56% is
significantly below that in aesthetics with the
majority of the portfolio commercialised via
distributors and a number of the products
subject to government controlled pricing.
08 Sinclair Pharma plc Annual Report and Accounts 2015