Alliance Pharma hit by delayed results and chief’s exit

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Alliance Pharmaceuticals has replaced its chief executive and delayed publication of its 2023 results for a third time this year, sending its shares down 20 per cent.

The UK-based company, which sells over-the-counter and prescription drugs in more than 100 countries, said on Wednesday that its auditor Deloitte needed more time to check its accounts. It also announced the departure of long-serving chief executive Peter Butterfield but said this was not related to the delay in its results.

“We’re seeing the market filling a void of news with negative speculation,” said Seb Jantet, an analyst at Liberum. “When you’ve had to delay your results three times, people are questioning why you are delaying them and what the audit is finding.”

The £137mn-valued company first delayed publication of its annual results on 5 April, then again on 22 April and has now done so for a third time, on each occasion attributing the problem to auditing delays. Unlike the previous two updates, Alliance did not provide a new date on Wednesday for when it expects to publish its 2023 results.

It is the latest in a string of challenges for the mid-cap UK pharma company, which has spent heavily on small acquisitions in recent years, increasing its debt. In February 2022, it received a £7.9mn fine from the UK’s Competition and Markets Authority over alleged anti-competitive behaviour and it was forced to suspend its dividend in September 2023.

The CMA had sought to disqualify Butterfield as a director following the fine but in replacing him with Nick Sedgwick, whose most recent role was as UK and Ireland regional director of consumer health at Reckitt, Alliance has avoided further uncertainty over Butterfield’s leadership. This follows the appointment of a new board chair in February, Camillo Pane, who previously worked with Sedgwick at US beauty company Coty.

Sedgwick will have to turn around flagging performance at the company. In an unaudited trading update in January, Alliance cut its profit expectations for 2024 to 18 per cent below analyst estimates, saying that it would need to expand investments in sales and marketing to increase revenues, which were £182.7mn in 2023.

The business has spent £380mn on acquisitions since it listed in 2003, according to Jantet, buying up old medicine brands that it then tried to turn around. This increased debt levels to 2.7x earnings in 2022, although analysts anticipate this level will have fallen in the 2023 results and Jantet said current debt levels were not “concerning”.

Despite its outlay on new products, few have proved successful, said Miles Dixon, an analyst at Peel Hunt. Scar treatment Kelo-Cote accounted for more than a third of total revenue, according to the January update, in a portfolio of about 80 brands.

“If Kelo-Cote slows down, it’s the only growth product. If they were to refinance debt, it’d be expensive,” Dixon added.

The share price fall on Wednesday brings the total decline in the past year to 62.5 per cent, hitting the company’s many UK investors.

“It’s traditionally been a story that’s popular with UK fund managers. It’s easy to explain, traditionally pays a dividend, and has lots of analyst coverage,” Dixon said. “It’s an indictment of UK thinking to stick with something like this rather than look at more specialist healthcare stories,” such as high-growth biotech companies.