• Net sales amounted to MSEK 721.2 (649.3). This corresponds to an increase of 11% for the period.

• The organic growth* during the fourth quarter was +1%. The currency impact in the quarter was -1% while the acquisitions of the product portfolios Proct[® ]from Leo Pharma and Pevaryl[® ]from Johnson & Johnson generated growth of 11%.

• EBIT (Operating Profit) amounted to MSEK -19.4 (8.2).

• Adjusted EBITDA* amounted to MSEK 164.8 (151.4) corresponding to growth of 9% excluding non-recurring items related to acquired product portfolios totalling MSEK -53.4 (-43.7).

• The gross margin, defined as gross profit divided by net sales, was 49.3% (46.8%) for the quarter. The margin was affected positively by the acquired product portfolios.

• Cash flow from operating activities amounted to MSEK 104.8 (-10.8).

• Earnings per share was SEK -0.12 (-0.11), before and after dilution.

• During the period Karo Pharma divested the Hospital Supply business to J2L. The transaction closed on December 1, 2020. The net gain of the divestment was MSEK 5.2 and the cash flow effect MSEK 151.0.

* Alternative Financial Ratios (APM), note 4 for further information.

• Net sales amounted to MSEK 2 882.9 (1 901.2). This corresponds to an increase of 52% for the period.

• The organic growth* for the year was 1%, currency impact -1% while 52% relates to the acquisition of Trimb in 2019 and the acquired product portfolios Proct[® ]from Leo Pharma and Pevaryl[® ]from Johnson & Johnson.

• EBIT (Operating Profit) amounted to MSEK 227.0 (172.1) corresponding to 32% growth.

• Adjusted EBITDA* amounted to MSEK 784.8 (599.1) corresponding to a 31% growth, excluding non-recurring items of -63.1 MSEK (-107.2) related to the acquisitions.

• The gross margin, defined as gross profit divided by net sales, was 55.3% (51.8%) for the period. The margin was positively affected by product mix from the acquired portfolios and tech transfer projects related hereto where benefits from economy of scale has been achieved.

• Cash flow from operating activities amounted to MSEK 329.2 (106.8).

• Earnings per share was SEK 0.37 (0.05), before and after dilution.

• During the period, the Proct[® ]portfolio was acquired from Leo Pharma with all related rights and assets. The transaction closed on March 2, 2020.

• During the period Karo Pharma acquired Hygis SA, a Swiss distributing company with exclusive distribution rights to Karo's brands MultiGyn[®] and MultiMam[®] in Switzerland. The transaction closed on April 1, 2020.

• During the period, the Pevaryl[®] portfolio was acquired from Johnson & Johnson with all related rights and assets. The transaction consolidates the ownership of the Pevaryl[®] brand portfolio in Europe with Karo Pharma.The transaction closed on May 8, 2020.

• During the period Karo Pharma divested the three brands - Suscard, Egazil and Digoxin - to Evolan Pharma. The transaction closed on July 1, 2020 but the effect on the result for the period is not significant.

• During the period Karo Pharma divested the Hospital Supply business to J2L. The transaction closed on December 1, 2020. The net gain of the divestment was MSEK 5.2.

• Based on the authorization from the Annual General Meeting, Karo Pharma has in 2020 sold 525.301 own shares during the year to expand the company's financial flexibility at Nasdaq Stockholm.

• The Board of Directors proposes that no dividend is to be paid for 2020.

• At the end of the period, cash and cash equivalents and other current investments amounted to MSEK 570.4 (248.8) and net debt to MSEK 5 235.4 (5 028.9).

* Alternative Financial Ratios (APM), note 4 for further information.

Comments by CEO Christoffer Lorenzen

Karo Pharma realized net sales growth of 11% in Q4, which was mainly driven by the acquisitions of the product portfolios Proct® (March 2020) and Pevaryl® (May 2020). The business saw a 1% organic growth in the quarter, which indicates that the Q1 stock-building among wholesales, pharmacies and consumers largely reversed in Q2 and Q3 and that underlying business momentum is improving.

For the full year, net sales grew 52%, mainly driven by acquisitions. The business saw 1% organic growth for the full year. Performance was strong in new markets where we repatriated sales in 2020, whereas core markets such as Sweden saw weaker performance.

In terms of profitability, the EBITDA margin in Q4 was 15.4%, which was lower than the earlier quarters in 2020 but follows the pattern observed in 2019. For the full year, the EBITDA margin was 25.0% (27.2% when excluding non-recurring items), implying an EBITDA growth of 47% versus 2019. The EBITDA margin was slightly lower than the previous year due to investments into our commercial organization and our scalable operating platform, which we will leverage as we continue our expansion journey.

Karo Pharma continues to demonstrate resilience and robustness. In terms of our commercial operations, we have increased our investments into the country sales teams as well to strengthen our digital capabilities. We expect to see pay-back from these investments in 2021. We have a large portfolio of brands but are prioritizing our efforts and investments towards 10-15 brands with the strongest market position and best growth outlook.

Supply chain performance is also solid, and we have strengthened the dialogue and interaction with our key partners over the year. We are consolidating our supplier base to reduce complexity, leverage scale benefits and build best-in-class relationships.  We continue to progress the tech transfer projects related to our acquisitions and are running gross margin improvement programs across the entire portfolio. These initiatives will help us improve gross margins and will also yield improvements in our inventory management in the year to come.

Finally, we have made progress regarding business simplification and business integrations. The sale of the hospital supplies business streamlines our organization and focuses our attention on pharmacy and retail channels. Further, we completed the integration of Trimb and ensuring alignment of systems and structures. Similarly, the Proct® portfolio is fully integrated and we are progressing to plan concerning the Pevaryl® business.  

A few weeks ago, we announced the acquisition of a portfolio of OTC products from Teva Pharmaceuticals. The transaction strengthens our commercial position simplifies our day-to-day execution and provides us control over an exciting primarily Nordic group of brands. We plan to fund the transaction entirely from existing means, including the cash generated from the sell-down of Karo treasury shares, which illustrates the power of Karo's expansion model.

Christoffer Lorenzen, CEO

Significant events after period end

Karo Pharma Aktiebolag ("Karo") announced February 3, 2021 the acquisition of an OTC brand portfolio from Teva Pharmaceuticals (Teva) for a total consideration of MEUR 84 and is expected to close on April 1, 2021.

The transaction transfers ownership of the brand portfolio, comprised of Flux®, Decubal®, Lactocare®, Apobase®, Dailycare® and Fludent® from Teva to Karo. The brands generated sales just short of MSEK 350 in 2020 on a global basis. The majority is generated in the Nordic markets, including Scandinavia, where the brands already are distributed and marketed by Karo under a 7-year license agreement that was signed in the spring of 2019.

The transaction adds around MSEK 40 in net sales from new markets outside of Scandinavia of which approx. 80% is in Finland. The transaction simplifies the business set-up and provides Karo with control of the assets, thereby paving the way for long-term optimization of the brands and the value chain.

In terms of financial impact Karo will realize direct savings in year 1 of just under MSEK 50 as costs to Teva are eliminated. Karo already commercializes the products in Scandinavia and has active relationships with the contract manufacturers that supply the brands. Hence, limited added costs and personnel are required as a direct result of the transaction.The acquisition is a pure asset deal. No personnel or manufacturing sites are included, which limits commercial as well as the technology transfer risks. The transaction is financed with existing cash and requires no additional credit facilities outside the already existing such.

Financial Calendar

Interim report Jan-Mar 2021   Apr 21, 2021
Interim report Jan-Jun 2021   Jul 22, 2021
Interim report Jan-Sep 2021   Oct 28, 2021

The annual report for 2020 is planned to be published in week 13, 2021 and the Annual General Meeting takes place on April 21, 2021.

For further information, please contact

Christoffer Lorenzen, CEO, +46 73-501 76 20, christoffer.lorenzen@karopharma.com 
Jon Johnsson, CFO, +46 73-507 88 61, jon.johnsson@karopharma.com

About Karo Pharma
Karo Pharma offers "Smart choices for everyday healthcare". We own and commercialize reliable original brands within prescription drugs and over over-the-counter consumer products. Our products are available in over 60 countries with the core in Europe and the Nordics region. The headquarter of Karo Pharma is in Stockholm and the company is listed on Nasdaq Stockholm, Mid Cap.

This information is information that Karo Pharma AB is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact person set out above, on February 18, 2021 at 14.00 CET.