(Alliance News) - Advanced Medical Solutions Group PLC shares plummeted on Monday, after it lowered its full-year expectations.

Shares in the Winsford-based surgical dressings company were down 29% to 176.80 pence each in London on Monday morning.

In July, Advanced Medical said that its first half was impacted by reduced royalty income from the patent licencing agreement with Organogenesis Inc. The agreement was signed in 2017 and ends in September 2026.

Advanced Medical said that, in August, Organogenesis noted that changes to US reimbursement coverage for the treatment of diabetic foot ulcers and venous leg ulcers have created uncertainty regarding the revenue outlook for some of its key products, including those utilising AMS patents.

"Given that Organogenesis has withdrawn its own guidance and that we have no control of, and minimal insight into its sales, we are unable to quantify the financial impact on AMS at this stage," the company said.

Based on this, Advanced Medical will be removing this royalty in its entirety from the fourth quarter guidance onwards.

The total 2023 full-year impact of the lower royalty is expected to be a reduction of GBP2 million to adjusted pretax profit. In 2024 and 2025, the removal of the royalty is expected to reduce adjusted pretax profit by GBP4 million per year with a similar pro-rata impact in 2026 until the end of the agreement in September 2026.

Advanced Medical Solutions has also warned that talks with its US partners have taken "longer than first anticipated and associated destocking has been greater."

Based on this, the company expects the full-year impact to be more significant than previously estimated, impacting revenues just in the current year.

However, it did note that the destocking has not affected LiquiBand end sales demand and the pipeline of evaluations and conversions for LiquiBand XL continues to grow strongly.

Looking ahead, Advanced Medical said the combined effect of these factors is expected to impact the 2023 revenue now anticipated to be about GBP124 million to GBP127 million and adjusted pretax profit of approximately GBP25 million to GBP27 million.

In 2022, the company reported revenue of GBP124.3 million and adjusted pretax profit of GBP28.5 million.

Chief Executive Officer Chris Meredith said: "While the uncertainty in the Organogenesis royalty stream and the higher de-stocking of US LiquiBand is clearly disappointing, my confidence in AMS's long term growth prospects is stronger than ever. We remain convinced that our new US LiquiBand partner strategy will drive accelerated growth from early 2024 and that this, in conjunction with other initiatives such as the imminent launch of LiquiBand Fix8 in the US, will enable AMS to return to strong growth in 2024 and beyond."

Advanced Medical Solutions will announce its interim results on September 20.

By Sophie Rose, Alliance News reporter

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