Quantum Pharma's shares plummet as it expects to perform below expectations in H2

Shares in AIM-listed drug manufacturer Quantum Pharma plunged nearly 50% on Tuesday morning as it said it expects the performance in the second half of the year to be “materially below market expectations” although it anticipates “strong” growth.

Chief financial officer and acting chief executive, Chris Rigg said: “Although we continue to expect to deliver strong growth in the second half of the year and beyond, given the recent performance of products other than unlicensed to licensed products and the conclusions of the business review, the board now expects performance will be materially below market expectations.

“The board is confident in the growth potential of the business from this revised base with its renewed focus on our key strategic objectives."

For the six months ended 31 July, revenue increased by about 25% to £42.8m, compared to last year, as revenue grew from all three of the company's divisions with the strongest coming from Medication Adherence, which experienced a rise of £5.9m, which made a small contribution to gross profit.

Gross profit rose slightly by 1.5% to £13.3m as pre-tax profit fell 71% to £800,000.

Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) decreased by about 24% to £4.2m.

Basic earnings per share fell to 0.8p from 2p last year.

Meanwhile net debt narrowed slightly by 1.6% to £23.8m as expenditure on development fell 23% to £2.3m due to the cost benefit of the niche pharmaceuticals division's Lamda business’ in-house development capability and programme.

On a like-for-like basis the company said it is trading in line with the previous year as the cost base of the Colonis business in the niche pharmaceuticals division increased by £1.2m due to recent product launches.

The NuPharm business, which the company bought in July 2015, suffered a loss of around £500,000 and used £700,000 to rectify works in the period.

During the six months the company signed a new five-year contract extension with AAH Pharmaceuticals, a pharmaceutical wholesaler.

The niche pharmaceuticals division launched five products, including expanding the vitamin D range and two further products in the Mucodis range of medical devices.

Rigg completed a review of the business and found that the core specials business was cash generative and that there was potential for growth from the niche pharmaceuticals pipeline, which included unlicensed to licensed products.

“We believe that a simplified business, primarily focused on specials and the group's unlicensed to licensed growth platform offers the best opportunity for value creation.”

He also found that there will be more conservative sales from the medical devices due to a challenging market and the company has decided to start discussions about the closure of the underperforming and loss making NuPharm business.

Shares in Quantum Pharma were down 48.83% to 35.82p at 1007 BST.