Procaps Group reports third quarter 2023 results

Procaps Group, S.A. announced its financial results for the three months ended September 30, 2023 (“3Q23”) and the nine months ended September 30, 2023 (“9M23”).

Financial highlights 3Q23 & 9M23

• Net revenues totaled $118 million for 3Q23, positively impacted by the performance of RX and OTC portfolios, offset by lower CDMO revenues. On a constant currency basis, net revenues increased by 2% in 3Q23. For 9M23, net revenues totaled $313 million, an increase of 5% on a constant currency basis.
• Gross profit for 3Q23 totaled $68 million with a 58% gross margin and totaled $176 million for 9M23 with a 56% gross margin, mainly impacted by higher costs and mix of products sold.
• Adjusted EBITDA was $22 million in 3Q23, with an Adjusted EBITDA margin of 19%. For 9M23, Adjusted EBITDA was $51 million.

Management commentary
Procaps Chief Executive Officer, Ruben Minski, commented:

“The third quarter of 2023 showed signs of improvement after a challenging first half of the year. We are encouraged by our strong operational execution and refinement of our strategic plan to ensure a stronger, more resilient organization that thrives beyond short-term hurdles.

“Multiple macroeconomic factors continued to challenge the industry in our region, impacting our revenues. We continue to adapt our strategies to navigate this dynamic landscape and protect our profitability and are seeing positive trends materializing in 4Q23 which we expect will lead to improved results over 4Q22.

“During the quarter we announced an agreement with BDR Pharmaceuticals for 27 oncology molecules for Latin America, including 20 TKIs (Tirosyne Kinase Inhibitors). Under the agreement, Procaps is responsible for registration, branding, marketing and commercialization throughout Latin America. We are very excited to expand our oncology portfolio in the region and add more partner companies and potentially broaden cancer treatment options with several new molecules to better serve more patients and physicians.

“To support increased U.S. demand of our advanced gummy technologies for the global nutraceutical industry capacity expansion in the U.S. continue as planned with the ongoing construction of a new gummy manufacturing facility in Florida. We expect operations to commence in 1Q24 with revenues following later in the quarter. Also in the U.S. we are exploring new products, especially high potency compounds, to take advantage of the West Palm Beach facility which has production capacity of approximately 1.8 billion softgel capsules per year for our iCDMO business unit.

“During the quarter we participated as one of the five sustainable sponsors at CPHI Barcelona 2023 and welcomed over 300 business partners, current and new, at our booth. We were very pleased with the level of interest across the global pharma community of attendees.

“As we continue to focus on growth, and after months of considering how to best serve the Company, earlier this year I announced that leading the Company on important strategic initiatives rather than on day-to-day matters would be of better value to the Company. We have in place the necessary capabilities to position the Company for long-term success and as announced, I will transition to Executive Chairman of the Company on January 15, with the announcement of Jose Antonio Vieira as the new CEO,” concluded Minski.

Guidance update
Given the slowdown in growth in some markets, especially during the month of September and October and the current macroeconomic environment, we are revising our guidance for the full year.

The impact of the macroeconomic conditions that the industry has experienced through the year, followed the same pattern in the third and fourth quarter – order phasing from CDMO partners, OTC taking longer to recover, launches delays due to delay in registration approvals, and sales of brands that were postponed.

The Company now expects full year 2023 net revenues growth of approximately 6% on a constant currency basis, and an adjusted EBITDA in the range of $77M – $82M.

This short-term scenario does not change our medium and long-term expectations for the Latin American market. We believe this market slowdown is only temporary and in the next years the market will continue to benefit from the aging of the population, greater market access and increase in health coverage.
MB Bureau