THORNEY OPPORTUNITIES LTD
ACN 080 167 264
ASX Announcement: 20 November 2019 | ASX Code: TOP |
THORNEY INVESTMENT FORUM - COMPANY PRESENTATIONS
Please find attached a company presentation from Palla Pharma Limited [ASX:PAL] being presented at today's Thorney Investment Forum in Melbourne.
Forum details: | |
Date | Wednesday 20 November 2019 |
Location: | Ernst & Young |
Address: | Level 23, 8 Exhibition Street, Melbourne |
Time: | 9.30am for 9.45am, concluding by 1.00pm |
A video recording of the presentations will also be uploaded to the respective websites a few days after the forum concludes.
Please direct enquiries to:
Craig Smith
Company Secretary
Email:craig.smith@thorney.com.au
Telephone: + 61 3 9921 7116
Website:http://thorneyopportunities.com.au/
Level 39, 55 Collins Street, Melbourne Vic 3000
Telephone + 61 3 9921 7116 Facsimile + 61 3 9921 7100
THORNEY INVESTMENT FORUM
Sue MacLeman - Non -Executive Director
20 NOVEMBER 2019
ASX : PAL
COMPANY OVERVIEW
Lowest cost narcotic raw material producer globally using novel water
PALLA PHARMA AT A GLANCE
Fully integrated opiate manufacturer from farm gate to tablet production.
-based extraction process
SHAREHOLDERS (pre placement and entitlement offering announced 17 October 2019)
Lowest cost Narcotic Raw Material ("NRM") and Active Pharmaceutical
Ingredient ("API") production capability based on unique water -based extraction technology.
Rapidly growing global supplier of pain relief, cough medicines and plans for anti -addiction products.
Significant contract manufacturer of Finished Dosage Formulation ("FDF") tablets via contract manufacturing supply agreements ("CMO").
Founded in 2004 and headquartered in Victoria, Australia with production facilities in Victoria, Australia and Kragerø, Norway.
CAPITAL STRUCTURE
O t h e r Ext e rn a l In ve st o rs,
51.0%
DIRECTORS & SENIOR MANAGEMENT
W a sh in g t o n H So u l P a t t in so n , 20.0%
Th o rn e y In ve st m e n t s,
17.0%
W e n t w o rth W illia m so n ,
7.5 %
Bo a rd & Ma n a g e m e n t ,
4.5%
Share Price 15 November | 2019 | $0.85 | |
Fully Paid Ordinary Shares | 108.0m | ||
Share Appreciation Rights | 2.1m | ||
Market Capitalisation | $91.8m | ||
Net Cash (post placement and entitlement | $0.8m | ||
offering proforma 30 | June | 2019) | |
Simon Moore | Independent | Non -Executive Chairman |
Jarrod Ritchie | Chief Executive Officer | |
Stuart Black | Independent | Non -Executive Director |
Todd Barlow | Non -Executive Director | |
Sue MacLeman | Independent | Non -Executive Director |
Jaime Pinto | Company Secretary | |
Brendan Middleton | Chief Financial Officer | |
2
COMPELLING INVESTMENT CASE
One of few producers globally of a highly regulated active compound of high demand essential medicine
Industry thematic supports continued strong organic growth with opportunities for strategic acquisitions as opportunities arise.
Revenue ($M)
27.3
One of three (3) fully integrated suppliers of opiate | -based | |
medications globally. | ||
Morphine remains the gold standard for | "Pain Relief and Palliative |
Care " p e r th e W orld He a lth Org a n iza tion Mod e l List of Esse n tia l Me d icin e s 21st e d ition re le a se d in 20 19; u n a va ila b ilit y p e rsist s o f e sse n t ia l o p ia t e -b a se d m e d ica t io n s in d e ve lo p in g co u n t rie s .
Fe n t a n yl (syn t h e t ic o p io id ) a b u se in t h e Un it e d St a t e s is d rivin g 10 0 % p .a g ro w t h o f o ve rd o se t re a t m e n t n a lo xo n e w h ich is
m a n u fa ct u re d fro m o p ia t e s .
P AL re ve n u e h a s in cre a se d a t a CAGR o f 123% fo r la st 5 ye a rs a n d
t u rn e d O p e ra t in g EBITDA* p o sit ive in 1H 20 19 a ft e r re a ch in g b re a k e ve n re ve n u e .
Un iq u e w a t e r-b a se d e xt ra ct io n t e ch n o lo g y p ro vid e s sig n ifica n t m a n u fa ct u rin g co st a d va n t a g e in n a rco t ic ra w m a t e ria l
p ro d u ct io n , p ro vid in g a co m p e t it ive a d va n t a g e a n d le a d in g t o
a t t ra ct ive g ro ss m a rg in o p p o rt u n it y t h ro u g h o u t t h e su p p ly ch a in .
* Op e ra tin g EBITDA is a n on -GAAP fin a n cia l m e a su re - re fe r 20 19 Ha lf Ye a r Re su lts p re se n ta tion for fu rth e r in form a tion .
22.7 | 23.5 | |||||||||||||
15.7 | ||||||||||||||
6.1 | 6.0 | |||||||||||||
1.5 | ||||||||||||||
1H16 | 2H16 | 1H17 | 2H17 | 1H18 | 2H18 | 1H19 | ||||||||
Operating EBIT | DA* ($M) | |||||||||||||
0 .3 | ||||||||||||||
-0 .6 | ||||||||||||||
-1.8 | ||||||||||||||
-3.6 | ||||||||||||||
-4 .2 | ||||||||||||||
-5.0 | -5.6 | |||||||||||||
1H16 | 2H16 | 1H17 | 2H17 | 1H18 | 2H18 | 1H19 |
Sou rce : h istorica l a u d ite d fin a n cia l re p orts
3
STRONG RATE OF GROWTH AFTER RELOCATION FROM TASMANIA (FY15 TO 1H 2019)
Revenue CAGR of 123%, Gross Profit CAGR of 147%, GM% increase of 12 bps and $12.5m improvement in Operating
EBITDA*
CAGR REVENUE (%)
+123%
O n FY15 t o $ 27.3m 1HFY19; So lid
o rg a n ic re ve n u e g ro w t h in AP I a n d o p ia t e b a se d FDF p ro d u c t s .
CAGR GROSS PROFIT (%)
+14 7%
O n FY15 t o $ 9 .4 m ; g ro w t h in AP I a n d o p ia t e b a se d FDF p ro d u c t s .
Revenue ($M)
60 .0
4 6.2
GM (%)
+12 b p s
O n FY15 t o 35.2%; t h ro u g h p u t
e ffic ie n c ie s fro m in c re a se d p la n t u t ilisa t io n d rivin g m a rg in s .
OP ERATING EBITDA* CHANGE ($ m )
+$ 12.5m
O n FY15 t o $ 0 .5m (lo ss) fo r LTM t o J u n e '19 a n d 0 .3m (p ro fit ) in 1HFY19;
21.7
2.17.6
FY15 | FY16 | FY17 | FY18 | FY19 Estimate |
* Op e ra tin g EBITDA is a n on -GAAP fin a n cia l m e a su re - re fe r 20 19 Ha lf Ye a r Re su lts p re se n ta tion for fu rth e r in form a tion .
Sou rce : h istorica l a u d ite d fin a n cia l re p orts for p a st p e rform a n ce / in te rn a l m a n a g e m e n t fore ca sts for FY19 e stim a te
4
NRM MANUFACTURING COST ADVANTAGE
Lower operating cost, lower capital cost, no toxic solvents
Palla Pharma Water Based Technology
$20 million AUD capital investment (100 tonne facility)
No toxic solvents
No wastewater treatment
Operating cost lower than competitors
Competitors Solvent Based Technology
$100 -150 million capital investment (100 tonne facility)
Toxic solvents
Wastewater treatment required
Significantly higher engineering/QA burden/indirect costs
5
FULLY INTEGRATED GLOBAL OPIATE SUPPLY CHAIN
Diversified straw supply, NRM IP provides competitive advantage throughout the supply chain
Northern
Hemisphere
Straw Supply
Raw material (Poppy Straw)
Southern
Hemisphere
Straw Supply
Sale of poppy | NRM sales to external | |||
seed for culinary | ||||
customers | ||||
purposes | ||||
Narcotic Raw | Active | |
Pharmaceutical | ||
Material ("NRM") | ||
Ingredient ("API") | ||
Morphine | Codeine Phosphate | |
Codeine | ||
Thebaine | Pholcodine | |
Oripavine | ||
API sales to external customers
Finished Dosage Formulation ("FDF")
Contract manufacturing ("CMO") of tablets
Opiate based tableted pain medications
Cod e in e P h osp h a t e
Co -cod a m ol
Non -opiate based tableted pain medications
P a ra ce t a m ol
Ib u p rofe n
Accretive gross margin for the group as NRM moves to higher value opiate products through the supply chain
6
MARKET OPPORTUNITY
Significant addressable opiate equivalent market opportunity
Opiate Equivalent Volumes Sold
Integrate | Accelerate | ||||||||||||||
revenue | |||||||||||||||
Expansion | Acquired | Norway & | |||||||||||||
growth | |||||||||||||||
of mainland | downstream | position for | |||||||||||||
growing & | Norway | growth | |||||||||||||
European | operations | ||||||||||||||
straw | |||||||||||||||
Relocation | supply | ||||||||||||||
Tonnes | of NRM | sources | |||||||||||||
production | |||||||||||||||
to Victoria | |||||||||||||||
2015 | 2016 | 2017 | 2018 | 2019 |
Source: Company records for historical data / management estimate for 2019
- Reliable and low cost straw supply hampered NRM volume growth prior to 2015; relocation of NRM production facility to Victoria, expansion of mainland growing, and alternative European supply sources significantly improved straw supply reliability.
- Acquisition of downstream Norway operations in 2017 substantially expanded addressable end use markets and customers to further leverage cost advantage in NRM
production.
Sizeable Addressable Global Opiate Market (Tonnes)
1,100
200
41
2018 Volume Sold | 2021 Production Target | Addressable Market | ||
Source: INCB "Estimated World Requirements of Narcotic Drugs", July 2019.
- One of six licensed NRM producers globally, and one of three fully integrated suppliers of opiates from NRM, API though to FDF products.
-
Key competitive advantage due to NRM source being
70 -80% of the input cost of API/FDF products, therefore lowest cost producer opportunity in NRM, API and FDF products with multiple channels to market relative to other industry participants.
7
EXPERIENCED GROUP EXECUTIVE TEAM
Mr. Jarrod Ritchie
CEO/MD/Founder
Mr. Brendan Middleton | Pending hire | Mr. Richard Scullion | Ms. Lucy Waddell |
Chief Financial Officer | Senior Group Executive | Commercial & Sales Director | Group Head of Quality |
Dr. Artur Abreu | Mr. Michael Long | Dr. Richard Bos | Ms. Nicole Mikschofsky | Mr. Craig Sweenie |
Site Director - Australia | Director of Agriculture | Director of Research & | Finance and Operations | Site Director - Norway |
Development | Manager - Norway |
8
CURRENT OPIOID CRISIS IN THE UNITED STATES
Opioid synthetics, such as fentanyl, are the main factor in current United States opioid crisis
Opioid Associated Deaths (US)
Th e Un ite d Sta te s Na tion a l In stitu te s of He a lth (NIH) 20 17 d a ta
sh ow s th a t th e sh a rp e st in cre a se in op ioid re la te d d e a th s re su lte d from fe n ta n yl u se (syn th e tic op ioid ) w ith m ore th a n 28 ,4 0 0
ove rd ose s in 20 17.
Sin ce 20 16 Dru g En fo rce m e n t Ad m in ist ra t io n (DEA) h a s re d u ce d t h e q u o t a o f a lm o st e ve ry Sch e d u le 2 o p ia t e a n d o p io id
m e d ica t io n b y 25% o r m o re .
DEA is p ro p o sin g t o fu rt h e r re d u ce t h e a m o u n t o f five o p io id su b st a n ce s b y 53% in 20 20 , 31% o f t h e 53% is fe n t a n yl.
Na lo xo n e , a n o p ia t e d e rive d a n t id o t e , is t h e p re fe rre d first lin e t re a t m e n t t o h e lp co m b a t fe n t a n yl o p io id m isu se .
P a lla P h a rm a h a s n e ve r su p p lie d in t o t h e Un it e d St a t e s a n d
p e rce ive s t h e cu rre n t o p io id crisis a s a n o p p o rt u n it y t o d e ve lo p n a lo xo n e a n d a im s t o p ro d u ce first sa m p le s b y 20 21 a n d e n t e r t h e n o n -a d d ict ive m a rke t b y 20 22.
10 | |
9 | |
tion | 8 |
p op u la | 7 |
,00 0 | 6 |
p e r 10 0 | |
5 | |
De a th s | 4 |
3 | |
2 | |
1 | |
0 |
1999 2001 2003 2005 2007 2009 2011 2013 2015 2017
Commonly Prescribed Opiates | Synthetic Opioids (including Fentanyl) | |
Source: Centres for Disease Control and Prevention, National Vital Statistics System Mortality File
9
NALOXONE
"Overdose deaths have stopped rising for the first time in three decades due to naloxone administration"
- Centre's for Disease Control and Prevention, 6 August 2019
US naloxone Prescriptions Dispensed
Naloxone is an antidote for fentanyl and opiate overdose.
Sales of naloxone have increased from $21.3 million in 2011 to $60.8 million in 2014 to $274.1 million in 2016 (USD).
The number of US naloxone prescriptions dispensed grew from 1,600
in 2013 to 336,000 in 2017 and nearly doubled to 556,847 between 2017 and 2018.
There are two FDA approved naloxone products for community use:
- Evzio (pre -filled single use auto injector)
- Narcan® (Nasal Spray)
Our competitive advantage stems from the low cost of NRM that is transferable to low cost production of naloxone.
Palla Pharma is fully vertically integrated and willing to compete in the naloxone production market.
400 | |||||
350 | |||||
300 | |||||
d s) | 250 | ||||
ou sa n | 200 | ||||
(Th | |||||
TRx | 150 | ||||
100 | |||||
50 | |||||
0 | |||||
2013 | 2014 | 2015 | 2016 | 2017 |
Sou rce : Na tion a l P re scrip tion Au d it 20 13-20 17, IQVIA
10
STRATEGIC INITIATIVES
How Palla Pharma is delivering on its strategic objectives
Develop strong foundation for growth
- Lowest cost producer NRM globally; continue to develop and refine production processes
- Globally diversified poppy straw supply chain with dual hemisphere supply strategy
- Fully integrated supplier provides multiple channels to market
- Highly experienced management team
Penetrate existing markets
- One of six licensed NRM producers globally; one of three fully integrated suppliers
- Exploit lowest cost to produce competitive advantage and reliability of supply through diversified poppy straw sourcing strategy
- Secure long -term supply agreements
Development of new products
- Develop suite of opiate based API's
- Target anti -addiction API's
• Obtain marketing authorisations to expand opiate based Finished Dosage capability
- Continue to explore market consolidation and downstream value -add acquisition opportunities
Continue to explore and develop new markets
- Significant unmet demand in developing countries with 92% of global supply consumed by 17% of the global population
- Strong population growth demographics in developing countries with lack of access to pain medication
- Activating existing and referral relationships with agents in Africa and Asia
As at 30 June 2019
11
STRATEGIC PATHWAY TO LONG TERM GROWTH
ESTABLISH SUSTAINABLE MANUFACTURING FOOTPRINT
Relocated factory to Victoria
Invested in capacity for long term growth
Listed on ASX
SECURE STRAW SUPPLY AND MARKET ACCESS
Drove legalisation of NSW/VIC/NT/SA poppy cultivation
Secured secondary straw supply from Europe
Acquired Norway operations
Developed toll opportunity with prior industry competitors
2015 to 2017
INTEGRATE NORWAY & POSITIONING FOR GROWTH
Expanded sales channels and offerings to exploit lowest cost NRM producer status
Significant API customer base growth
Realised potential in CMO division resulting in a beneficial turnaround
NRM volume growth drives down costs
Delivered 41 tonnes of opiate equivalent sales volumes
2018
ACCELERATE
REVENUE GROWTH
Market share growth in Codeine Phosphate (CPO) and Pholcodine API's, and opiate based FDF
Continue to diversify customer base and revenue streams: secure long -term supply agreements across API and FDF customer base
Explore FDF dossier purchase (~A$1 million) to capture additional downstream margin
Expand manufacturing capacity to meet sales growth
Realise further cost benefits of increased scale
Further manufacturing process cost reduction initiatives
Secure additional Northern Hemisphere straw supply
2019
DELIVER MEANINGFUL SHAREHOLDER RETURNS
Market share growth: become the leading global supplier of Codeine Phosphate (CPO) and Pholcodine API's
Diversify customer and product revenue: continue to grow sales of existing API products. In addition to CPO, add API products to the portfolio (Morphine Sulphate, Di -Hydrocodeine Tartrate, Diamorphine and naloxone)
First samples of high -value anti -addiction products
Further penetrate developing markets
Consider additional brownfield manufacturing footprint acquisitions
Realise additional cost benefits of increased scale
2020 / 2021
2021 by Production NRM Annual of 200t Targeting
12
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Thorney Opportunities Limited published this content on 20 November 2019 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 19 November 2019 22:04:09 UTC