Discuss about the Company Research for Acrux Limited.
Acrux Limited is considered one of the major producer and supplier of topical drugs and generic pharmaceuticals in the global pharmaceutical market. The company came into existence in the year 1998 in Australia under the provision of Polled Development Act 1992 (Acrux, 2016). There are two major streams of pharmaceutical products for Acrux which are popular in the global drugs market namely generic and speciality ptoducts. Axiron, Ellavie, Lenzetto, Axiron (testosterone), Evamist, topical solution CIII are the main products of Acrux.
The central objective of the company is to produce drugs, which can resolve the hormonal deficiencies and imbalance, advanced contraceptive, pain, nervous system disorder, skin related problems. Acrux uses the newest advanced technology for developing the drugs, which are mainly insexternally (Acrux, 2016). Company has number of scientists, who are actively involved in the formulation and research work of new drug and therapies in the state of art in-house laboratory of the company. The company has effectively commercialized its pharmaceutical products in the USA and Europe market with the help of licensees. The company has also licensed for its products to Gedeon Richter in order to commercialize number of estradiol drugs in the states of Eurasia and Europe. In regards to commercializing pharmaceutical products in the global market, it has licensed the latest technology to Eli Lilly (Acrux, 2016).
The central focus of the company in the process of product pipeline is to formulate new process technology and form low cost attractive pharmaceutical products that serve the physician and patients (Acrux, 2016). Acrux is using the advance process of developing drugs termed as Patchless Patch, which has been formulated at Monash University Australia. This technology has facilitated the company to produce the effective and flexible products (variable dosage) with high molecule breadth application along with clinical trials of the topical pharmaceutical drugs for phase two and phase three trials (Acrux, 2016). Acrux Limited is also honoured with the Government of Victoria Export Award and Victoria Export Award in the field of innovation excellence in the year 2010 (Bloomberg, 2016). Despite the slight fall in the market value of the share, Acrux Limited is considered the largest sole producer of drugs in the Australian pharmaceuticals market.
With regards to the products, the company currently has four speciality products which are being commercially produced. There are Axiron, Ellavie, Evamist and Lenzetto. Axiron is a topical solution used in the treatment of adult males suffering from deficiency of testosterone. The company has executed an exclusive agreement with Eli Lilly and is available for sale in several developed nations such as USA, Australia, Canada, Germany and South Korea. Ellavie, Evamist and Lenzetto are the names of an estradiol spray which is used by women. This spray is used for treating menopause related hot flushes experienced by women. The different names of the same spray are primarily because the spray is sold in different geographies by different vendors under different brand names. Besides, the above mentioned speciality products already in market, the company also has some speciality products in development along with generic products (Products –Acrux, 2016).
The company is led by an experienced, talented and passionate management. The brief profile of the management team is discussed below.
At the helm of affairs is Micheal Kotsanis who serves as both the CEO and MD of the firm. He has a humungous experience in the pharmaceutical industry at various positions. He has vast experience in being associated with organisations having significant footprint in the generic medicine space. Additionally, he has served in various geographies across the world which enables him to have a sound understanding of various markets. Tim Bateman is the CFO of the company which has vast experience in financial positions taken in a host of firms listed on the ASX (Australian Stock Exchange). Besides, Tim is a CA by qualification and has served organisations based in various sectors which ensure wide experience and knowledge. Nina Webster, an industry veteran is the commercial director who is majorly responsible for IP (Intellectual Property) portfolio management besides business development and R&D. She has been with the company since long and previously was in the position of head of business development. Felicia Colagrande is the Technical Affair Director and responsible for product development. She had wide experience in the industry and has been closely associated with various facets of product development. Charles O’Sullivan is acting as the portfolio director and has wide experience in the industry on being associated with a host of companies in the past (Management Team-Acrux, 2016).
The company envisions delivering sustainable value for the shareholders through development and commercialisation of pharmaceutical products. In this endeavour, the company intends to ensure that the lives of the patients should be positively influenced. Further, innovation and excellence should be embraced. Also, the employees are valued and the contribution of each employee is appreciated (Company Philosophy-Acrux, 2016). This is also apparent from the fact that some of the top management positions are being currently occupied by employees who have served the company for more than 15 years. Further, the company provides a professional and diverse work environment where the employees can discharge their professional duties. The company highly values honesty and integrity considering the industry in which the company is based in. As a result, it is imperative that no lapses should be observed in the overall process of drug development and marketing.
Employee Benefits
The employees at Acrux may expect a host of benefits. These include annual leaves and contribution to the superannuation funds of employees besides wages and salaries. Additionally, based on the employment contract of the respective employees, annual bonus is also provided based on their respective performance and also of the company as a whole. Also, employees especially at middle and higher management are also provided share based payments as incentives which also ensure higher loyalty towards company leading to lower attrition rate. Besides, the company also provides termination benefits to employees if the company terminates the employment contract before the retirement date or ending date of the contract (Financial Report FY2016 Acrux, 2016).
Employee Attributes
The company expects that the employee should have strong domain knowledge preferably along with experience in the pharmaceutical industry which would enhance an overall understanding of the business. Besides, the employees are expected to be highly ethical and professional in their work which is highly expected considering the potential implications of any fraud or unintentional lapse. Thus, considering the nature of business and the management, an employee who is highly meticulous in work, has strong domain knowledge and is inherently patient would be happy while working with the company (Financial Report FY2016 Acrux, 2016).
Financial Analysis
The income statement for the company for the year FY2015 and FY2016 is highlighted below (Financial Report FY2016 Acrux, 2016).
It is apparent from the above that the company has witnessed an increase of around 12% in the revenues on a y-o-y basis. There has been a sizable increase of around 30% in the employee benefits expense primarily on account of jump in wages and salaries by about $ 750,000 in FY2016 over FY2015. Additionally, there has been a more than 100% jump in the external R&D expenses which is reflective of a strong product portfolio in the pipeline for the company which is expected to bring incremental revenues in the future and therefore deliver sustainable returns to shareholders. Another significant item which merits discussion is the loss on foreign exchange to the extent of $ 772,000 in FY2016 which is primarily on account of currency fluctuations observed in the value of AUD against various international currencies particularly USD. This is on account of significant sales revenue being earned in the form of foreign currency. Despite, the increasing R &D expenditure coupled with higher salaries and forex losses, the company has managed to post higher EPS in FY2016 as compared to FY2015 which augers well for the valuation of the firm (Financial Report FY2016 Acrux, 2016).
The balance sheet for the company for the year FY2015 and FY2016 is highlighted below (Financial Report FY2016 Acrux, 2016).
It is apparent from the balance sheet shown above that there has been an increase in the cash and cash equivalents in FY2016 which is leading to an increase in the current assets. The plant and equipment for the company are negligible owing to the nature of the business but intangible non-current assets are sizable which constantly undergo amortization. With regards to liabilities both of current and non-current nature, the most prominent item is liabilities related to taxes. In the current liabilities, there has been an increase of about 100% in the current tax payable primarily because of lesser tax being paid in the current year i.e. FY2016. Besides, deferred tax liabilities contribute to majority of the non-current liabilities primarily due to the nature of business. Also, it is noteworthy that the company does not have any outstanding debt either in current or in non-current liabilities. Since, typically a large expenditure has to be made in R&D before commercialising a product, there are huge accumulated losses from the past which have now started trimming as the company has sales from commercial products (Financial Report FY2016 Acrux, 2016).
The relevant financial ratios for the company for the last 10 years are shown below (Morningstar, 2016).
It is apparent from the above that company’s revenue is highly dependent on the product portfolio pipeline. The gross profit margins of the company are exceptionally high since the major cost of products is R&D and raw material constitutes a very miniscule cost. The operating margins are also high and positive since FY2010 when the company started posting significant revenues. The company since FY2014 has also started paying dividends and the payout ratio is very healthy as is apparent from the above. Additionally, the operating cash flows have also turned positive since FY2010 which augers well for the company. Besides, it is also clear that the business is generating positive free cash flow which is indicative of the turnaround in business as the products are generating commercial sales.
It is apparent that the company has a high receivable period which is expected considering the sale through licensee. However, the fact that payable period is significantly higher augers well for the company to reduce the cash cycle. Over the years, the asset turnover has shown improvement which implies that the company is able to generate higher revenue from the available business assets (Morningstar, 2016).
References
About Acrux - Acrux. (2016). Acrux. Retrieved 26 December 2016, from https://www.acrux.com.au/about/
ACR: ASE Stock Quote - Acrux Ltd. (2016). Bloomberg.com. Retrieved 26 December 2016, from https://www.bloomberg.com/quote/ACR:AU
Company Philosophy – Acrux Ltd. (2016), Acrux. Retrieved 26 December 2016, from https://www.acrux.com.au/about/company-philosophy/
Financial Report FY2016 – Acrux (2016), Acrux. Retrieved 26 December 2016, from https://investors.acrux.com.au/FormBuilder/_Resource/_module/NjepwR2K-EWQX6Fr9BvRNg/file/Acrux-Financial-Report-for-the-year-ended-30June2016.pdf
Morningstar (2016). Acrux Ltd:ACR, Retrieved 26 December 2016, from https://financials.morningstar.com/ratios/r.html?t=ACR®ion=aus&culture=en-US
Management Team-Acrux (2016), Acrux. Retrieved 26 December 2016, from https://www.acrux.com.au/about/management-team/
Products – Acrux (2016), Acrux. Retrieved 26 December 2016, from https://www.acrux.com.au/product/
