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Edited Transcript of APH.L earnings conference call or presentation 24-Sep-19 9:00am GMT

Half Year 2019 Alliance Pharma PLC Earnings Call

Chippenham Sep 28, 2019 (Thomson StreetEvents) -- Edited Transcript of Alliance Pharma PLC earnings conference call or presentation Tuesday, September 24, 2019 at 9:00:00am GMT

TEXT version of Transcript


Corporate Participants


* Andrew Timothy Franklin

Alliance Pharma plc - CFO & Executive Director

* Peter Jonathan Butterfield

Alliance Pharma plc - CEO & Executive Director


Conference Call Participants


* Andrew Mark Whitney

Investec Bank plc, Research Division - Analyst

* Edward Thomason

Nplus1 Singer Capital Markets Limited, Research Division - Research Analyst

* Sally Anne Taylor

Numis Securities Limited, Research Division - Director & Healthcare Analyst




Peter Jonathan Butterfield, Alliance Pharma plc - CEO & Executive Director [1]


Okay. Good morning, everybody, and welcome to everybody online who's joining us for our interim results. I'm Pete Butterfield, CEO of Alliance Pharma. I'm joined today by Andrew Franklin, our CFO.

So very pleased to take you through our first 6 months of trading. Just in terms of the agenda this morning, as always, we'll give you a quick business overview. I think everybody in the room is relatively familiar with Alliance's story, but I know we're joined online by some new people. So just to take you very quickly through a business overview. Andy is going to talk in-depth about the numbers and H1 results. Then we're going to look at the brands in a bit more detail, what are the key drivers in each of the markets as we've discussed. And just to give you an update on how each of those are performing. And then we'll end with a very quick summary. But as always, happy to take questions at the end. And hopefully, we'll leave a bit of time for that this time.

So yes, very pleased to be able to stand here today, give you a quick overview of the business. So Alliance Pharma is a growing international health care business. We have a portfolio of products that we've built over the last 20 years. And the way that we segment our portfolio is twofold. We have a group of what we call International Star brands, and there are 5 of those at the moment. So Kelo-cote, our treatment for scar reduction; Nizoral, our latest acquisition, medicated anti-dandruff shampoo; MacuShield, eye health supplement; Vamousse, a range of treatments for head lice; and also Xonvea, a prescription medicine for the treatment of nausea and vomiting in pregnancy.

So we have an International Star brand portfolio that provides the growth within our business and then we underpin that with a selection of what we call local brands. They are a key component of our portfolio mix, highly cash generative, sold in a limited number of markets, and they're a mixture of prescription and consumer products and revenues of those are broadly stable over time.

So you'll see the first half of the year, 44% of revenue was generated through International Stars and 56% through the local brands.

And as a business, we've been growing pretty strongly, certainly, over the last 4 years and our business has transformed. We are continuing on that journey today. As I said, over the last 4 years, we've been on a transformative journey. The business is growing very, very strongly from just around GBP 40 million in 2015, up to the end of last year when we tipped GBP 120 million. So that's through a blend of the organic growth that we have in the business, but also some selective acquisitions that we've done in our hallmark of Alliance's businesses as well.

And over time, our portfolio has changed as well. So the mix has changed substantially from not only being a predominantly U.K.-facing business with a little bit of international but we are much more of an international business as the next slide will demonstrate.

Our reach to market have changed as well. So we're moving from being a pure prescription product company into something with much more of a consumer flavor to it. And that is where we're seeing a lot of the growth in our portfolio. Indeed, over half of the portfolio now is in either OTC or in OTX markets.

We have a great track record of acquisitions as well. We've done over 35 in the last 20 years, and the last one that we did was Nizoral. Very pleased to give you an overview of how that's going and how that's performed in the first half of this year.

So it's an exciting time to be in the business. There's an awful lot going on and great to be on that growth trajectory.

I think the other thing I've alluded to is our international reach as well. So we're now present in over 100 different countries through our distributor network. We have offices -- we have 10 offices also around the world, a mix of affiliate and also distributor business.

And our revenue by geography, as you can see in 2015, that around 88% of our revenue coming from the U.K. and Republic of Ireland. In the first half of this year, that's dropped to 37%. So we have a much bigger play in international markets. Our Mainland Europe business now accounts for 20% of the company's revenue and also delighted to see our footprint in the U.S. doing really well albeit with Vamousse. We look to boost that footprint as we move forward with future acquisitions, but 4% there as well and doing well, as you'll see in the presentation.

So we're headquartered in Chippenham, near Bath, but those offices around the world are absolutely key. We've been doing quite a bit in Singapore and also Shanghai in terms of building out behind Nizoral and making sure that we have the capability in territory.

We employ around 220 people across the globe. And as I say, we're well positioned to not only just grow organically, but also have -- grow through acquisitions through a selected, targeted process that we run.

That just gives you an idea of the shape of the business for those of you that perhaps are a little less familiar with Alliance's model. I'm going to hand over to Andrew now, who's going to take you through the numbers and the results for half 1. Andrew?


Andrew Timothy Franklin, Alliance Pharma plc - CFO & Executive Director [2]


Thank you very much, Pete. Good morning. So this slide to just start off first with a couple of slides looking at the overall highlighted summary. So you can see from a revenue perspective, we grew our sales 29% half year on half year driven by the International Star brands, primarily included within there, we do have the first 6 months of Nizoral for 2019. We acquired Nizoral from J&J at the end of June last year.

Excluding Nizoral, we grew like-for-like at 10% to sales. So that's a really strong performance.

Gross margin also was within 58% to 59% range at 58.8%, and our EBITDA and both PBT grew strongly, 34% up from an EBITDA perspective and 25% from an underlying PBT.

I think it's quite useful just to see these charts just on the right that shows our progression over the past 4 years. H1 2016 includes the first 6 months when we acquired -- after we acquired the assets that of Sinclair. But again, you can see that revenues are growing very healthily at a 15% CAGR and similar numbers for both EBITDA and also for PBT.

Moving on to EPS, grew 15% to 2.34p. So again, strongly generating from an investor metric. And again, the dividend, we're increasing it to 10%. And again, just to remind -- for those folks new to Alliance stats, we've increased our dividend 10% every year since 2011. That dividend will be paid in January next year. So again, just underlines the strong cash flow generative nature of our business, which, again, from a cash flow perspective, up GBP 4 million from the first half last year at GBP 14.5 million. So again, a really strong performance from the business.

And that has a consequence on net debt. Net debt down to GBP 74 million, a near reduction of just under GBP 12 million, and that corresponds to a leverage of 1.95. So that's the first time that Alliance has been below 2x since the acquisition of Sinclair. So again, this shows the leverage profile and the cash profile from within the business, and we should be driving that down in the absence of any other further acquisitions during the rest of this year.

From a P&L perspective, revenues, as I said, grew 29% to GBP 70 million. We've seen Kelo-cote driving that 20% up year-on-year, also the GBP 10 million contribution coming through from Nizoral, but also MacuShield growing 27% and Vamousse, 15%. So again, strong from within the International Stars portfolio, but also our local brands grew 6% year-on-year. So a good performance across the portfolio.

Operating costs have increased from the first half last year. We have a transition service fee, which we're paying to J&J, which is included in the first half this year, wasn't in last year, but also as we invest within our local -- within our star brands as well.

But as a percent of sales, operating costs are slightly below last year's, 31% this year versus 33% last year. So again, a little bit of operating leverage coming through the business. And you can see that coming through in our EBITDA percent of sales, which is now 27% versus 26% last year at GBP 18.8 million.

Financing costs a little higher this first half versus the first half last year. We've had a little -- we've had some movement on FX. We had a little gain in our working capital first half last year of a couple of hundred thousand, GBP 300,000 adverse for this year. But also in our forward currency contracts, we've got an adverse balance of GBP 400,000 coming through in the first half of this year, but that's pretty much where we can expect it to be for the rest of this year, depending where the exchange rates move. But overall, though, notwithstanding that, we grew our PBT to nearly 25%, so up above GBP 15 million or GBP 15.2 million. And as I said earlier, that our EPS metrics, both at a basic and diluted, increased around the 15%, 16% mark. So again, strong delivery from that point.

Cash flow is very strong within the business. We generated nearly GBP 20 million worth from the trading. We've got a slight inflow coming through reduction of working capital and that was mainly around the levels of inventory that we built towards the end of last year in preparation for both the introduction of a new directive, the Falsified Medicines Directive, but also pre-Brexit build for March, which we've actually now begun to reduce that down as we've implemented FMD and run down those Brexit stock build, but we're now bringing them back up for the expected exit at the end of October.

But after that, with tax payments, interest and CapEx, again, we generated cash flow of nearly GBP 15 million at GBP 14.5 million. And we'd expect a sort of similar level for the full year around the high GBP 20 million for free cash flow. So again, just showing the strong cash flow generation within the business.

Balance sheet for this year is pretty straightforward, actually. [It's strange that we] didn't have too much of a movement on it from this half versus the year-end, and there was some movement within our working capital. But also, you can see at the bottom of the net debt movement, as you can see, and that's really coming through from the cash that we've generated from the business, which is neatly summarized on this next slide, where we started this year at just under GBP 86 million, we repaid debt of just over GBP 6 million and generated around GBP 6 million worth of net cash within the business, exiting the half year at GBP 74 million. And I'd say, that translates from a leverage of 2.33 to sub 2 at the half year. So it's a great performance for Alliance and there we've -- some investors have said, your leverage is too high, so we can show we can get it below 2. And I think that's a really positive message that go out. I would expect that to continue to reduce during the second half of the year, barring anything else -- acquisitions we plan to do in the second half or into the new year.

With regards to the debt facility, as we announced in our interim trading update, we refinanced the business up -- a previous facility ran through to the end of December 2020. We've refinanced that with a slightly larger facility, fully revolving, with a wider bank syndicate and that's on slightly improved terms. So again, that also gives us the capability to -- and flexibility to continue the growth of the business.

Okay. So I'll just hand back to Pete. We'll take questions at the end. So Pete will then just go through more detail about individual brand performances and then the outlook for the business.


Peter Jonathan Butterfield, Alliance Pharma plc - CEO & Executive Director [3]


Okay. Thank you, Andrew. Thanks very much. So now into the brand. So as I say, we'll give you an overview of each of the star brands' performances, what's happening there.

I think, as you've seen, really good growth in the first half. Even if you stripped out Nizoral, we're still at 10% growth over half 1 2018. What's driving that? Well, clearly, Kelo-cote is -- continues to be a very, very important product for us, up 20% in the half. Nizoral contributes to the 29% overall growth, clearly at GBP 10 million.

MacuShield, up 27%. There's some dynamics behind that I want to talk you through. Vamousse does really, really well, particularly in the U.S., so I want to talk a bit more about that category.

And that's very interesting.

Xonvea, we'll come to it. So with Xonvea, we're still selling through the stock that we placed with the wholesaler in December. I just want to talk you through the product and where we find ourselves with that.

I think the other thing to pick out here is the local brands. So local brands are performing in line with our expectations, up 6%. You would expect that given the slightly softer first half that we had last year, but very much performing in line with our expectations, which is good to see.

So let's talk -- let's get to Kelo-cote first. So it's our fastest-growing brand, another good performance as I say. Half 1 sales, GBP 13.1 million. I think it's worth noting, again, that the full year sales of this when we acquired it for the full year was GBP 7 million. So we've almost done double the full year at the point of acquisition in 6 months.

If you look at the manufacturer's selling price, the MSP, into this market, we think, baseline, about GBP 225 million. That's according to Nicholas Hall data. That's probably the best data that we can get hold of for Kelo-cote.

You can add probably another GBP 35 million, GBP 40 million on top of that for Internet sales as well. And that's something that we look at. But the category is in good shape. It's growing at 5% and our expectations for Kelo-cote are always sort of shifting as the brand grows. When we brought it in, we thought if we can make it a $20 million brand, that would be excellent. We are clearly well in excess of that and growing strongly.

But I think the thing to say is we only have around a 7% global market share right now. So there's quite a lot of room for Kelo-cote to grow, obviously, with category growth, the markets that we're positioned in. The top 5 global markets are U.S.A., Brazil, China, Mexico and Germany. We're in all of those. We're in China quite heavily, and China was the fastest-growing market in this category of 22%. And Kelo-cote was actually the fastest-growing scar treatment globally in 2018, according to the data that we have.

So what are the performance drivers around Kelo-cote? Well, Kelo-cote is a fantastic product. That's the first thing to say. It works. It is -- has got good key opinion leader endorsement. We're seeing continued growth through our existing markets. So we have that nice demographic dividend in the Asia Pacific region and also in China. And that's continuing to drive through sales. But we're also seeing sales come good in some of our smaller markets as well. In the U.K., our home market, where sales are relatively modest, we managed to grow those very healthily and we will continue to do so.

So it is a continuation of the strategy that we put in place 3 years ago. We'll continue on our marketing support. We've just brought in a brand-new Head of Global Marketing for the business as well. He's landed very well and has got some great vision for Kelo-cote, which in another presentation we'll take you through.

And looking at half 2, again, we'll be increasing the penetration in existing markets, pursuing further geographic expansion, but that's not really the driver of this, it's those markets that we're in currently. We're in over 60 markets with Kelo-cote already. But the category fundamentals are good, and we're maintaining our level of marketing support behind that. And I think we're very, very well placed to carry on growing Kelo-cote. So in very good health, and obviously, on a good trajectory.

Nizoral. So Nizoral was the brand that we bought from J&J. Nizoral, for those of you that aren't aware of Nizoral, it's a ketoconazole-based medicated anti-dandruff shampoo. It's been around for over 40 years worldwide. We acquired this in June 2018 from Johnson & Johnson. It's still very much under J&J's control right now. As Andrew said, we have this 2-year transitional services agreement, but that ends in June 2020. So it's amazing how time flies. So rest assured, we're doing a lot in the background to bring Nizoral in. The transition of that has gone very well so far, with our first 2 submissions in, our marketing authorization submissions in for Hong Kong and Taiwan. Most of the other markets are following very, very quickly. China may just take a little bit longer because there's a new marketing authorization holder system that they're bringing in, which is great for us. So that's where we're positive. It just means the transition might be a little bit longer. But we're also sourcing out the manufacturing of this product, looking at new product development, looking at our cost of goods and bringing this all in under the Alliance -- into the Alliance family because it basically is 14 different brands in 14 different territories that we're managing. So there's definitely some work to do on Nizoral.

In terms of sales, it generated GBP 10 million worth of net sales for us. I think it's holding firm. So we're not concerned about Nizoral. In fact, the main market, China, is growing very, very nicely. So we've got some interesting dynamics there and something that I think we can really capitalize on moving forward. Again, the fundamentals of this category are great. The product is good. The category across the region is growing around 8%. Clearly, it's going to be different in different marketplaces. But overall, in aggregate, that's our best data point for the growth. And again, we see the future brand potential of this is to be anywhere between GBP 25 million and GBP 30 million.

So I guess, the other thing that we've been doing over the last 6 months since we spoke to you last is not only integrating the product, but establishing our infrastructure in Singapore and Shanghai to get behind this. And that just isn't commercial, it's also all our regulatory capability. A lot of our manufacturing capability is out there as well and done in market, which is great. And we've got a great team out there behind Nizoral. So very excited about what we can do.

So the next 6 months or the 6 months that we're already in is all around continuing to transition those MA transfers, developing new distributor relationships where we need to, continuing to make sure that, that infrastructure is right to support that and also securing supplier. I think when I spoke to you last, the trick with Nizoral was just making sure that it remains in supply and we've been able to do that, and then we can get a solid base from which we can grow. So yes, very pleased with the way Nizoral is going so far. Really, we really want to get our hands on it as soon as we possibly can because we can then sort of affect some of our marketing and distributor management where necessary.

Three more star brands under that. So MacuShield, again, very good sales in half 1 of GBP 4.7 million. Again, just to give you an idea of when we acquired this brand, this is doing GBP 3.5 million in the full year of 2015. This has done GBP 4.7 million in the first half of 2019. And I think you're seeing growth come through. For that 27% growth, we repatriated a distribution agreement, which has worked quite well for us. Underlying growth is sort of high single digit for MacuShield, which is good.

We also got a couple of new territories away that if you remember, we didn't quite get off the mark at the end of last year. Those have come through, so Italy and Turkey now, albeit small. We've got another couple of markets coming on as well after that as well.

So H2 is all about supporting new market launches, continuing to build our relationship with our distributors. We've got some interesting developments with MacuShield coming along very soon as well. So just watch this space for that particular brand.

Sales in booths doing really well in the U.K., up 15% in the period. We're also seeing our online sales improve as well. So again, MacuShield keeps moving in a very nice direction. I think, again, future brand potential at GBP 10 million-plus for that.

Vamousse, again, we acquired right at the end of 2017. Annual sales there were GBP 4.9 million. Our H1 sales, GBP 3.1 million. So we've got some decent growth out of that. Again, we see this as a GBP 10 million brand. Vamousse is a treatment for head lice. It's a pesticide-free range of products. It's not just Vamousse. We have a preventative shampoo, we have powders, we have a spray. There are many different facets to the Vamousse range. But the 2 main drivers of this category are the mousse and also the repellent shampoo that we have in the U.S.

Now the category, as you know, ebbs and flows, depending on lice outbreaks. Category went back 1.4% in the half. Actually, we've got 15% growth at Vamousse, very, very pleased with that. In the U.S., it's growing at 22% against a market that is flat to minus 1%. So it's -- that is a great result.

And what's driving that is we're continuing to see the shift in the U.S. from pesticide-based head lice treatments into pesticide-free. So we're really nicely positioned from that. And we've seen 2 strategic moves from Walmart and also Walgreens as well, 2 big purchases of Vamousse. They've rationalized down to fewer brands and also moving towards pesticide-free as well. So that's great and beneficial for us.

So again, this is a product where you need good distribution. It's a distressed purchase. You can't wait for it to come in over the Internet. It needs to be there. Your on-shelf communication is something that's absolutely vital, and that's something that we're working on as we move forward.

So we've got some other territories coming online as well with that. But broadly, we're looking at the U.S. as a key driver for Vamousse moving forward.

And then that takes me to Xonvea. So Xonvea has got off to a slower start than we'd anticipated. We're still fully behind this product. I think that's the first thing to say.

We launched it in October in 2018. It's a licensed pharmaceutical medicine for the treatment in nausea and vomiting in pregnancy. We've had some good lead indicators with this brand. We've had a couple of knock-backs from the SMC and also the All Wales Medicines Strategy Group, who have not approved the product. We're going to appeal on that basis. I think we're going to relook at our health economic data for Xonvea.

The interest is really high. We've had good uptake from some CCGs within the U.K. and also the acute trusts as well have taken it onboard. And what's becoming clear to us is the importance of what's called the RCOG guidelines, which is the Royal College of Obstetricians and Gynecologists, what they call Green-top Guidelines, and those are the guidelines for treating nausea and vomiting in pregnancy.

They got rewritten in 2016 just before we brought Xonvea to market, and they work on a 3-year cycle. They're completely independently written and absolutely should be. We're expecting them to come through in October this year. Actually, that's looking more like quarter 1 next year. February is the timing we have, but my experience of working with guidelines is they're often late and you've just got to bear with us on that one.

But we have other good news with Xonvea as we have the product licensed, I think, in Ireland since we last spoke that's happened. We're getting ready for that. That's the first of our European markets to come to launch as well.

So it's still relatively early days with Xonvea. We're still behind the product. I would have liked it to be in a little bit further on at this point. But I think the RCOG guidelines are going to be key. So we're very much continuing with Xonvea moving forward.

So that takes us to the outlook for the business. And again, our -- so the medium-term vision is just a continuation of our strategy. If you look at the key characteristics of this business. First one is organic growth. So we've got this proven ability to drive organic growth out of the brands that we've brought in. You can see that clearly with Kelo-cote, MacuShield, Hydromol, with numerous examples of that in our history and that's really coming good with some of the larger brands now, and we hope to be able to do the same with Nizoral. If you overlay selective acquisitions on that, so we've got the proven ability to buy well, also integrate into our business, too, because buying them is one thing, but integrating them well is important and then exploiting some good return on investment post those acquisitions. And we're building our capability, right? So over the last 3 years, we've really increased our operational capability as we move into these OTC, OTX and RX markets.

Our supply chain capability is great. It's very, very strong. All our regulatory teams are in-house, all our PV is done in-house, and that's the key strength of us as a business.

We've got good market positioning for some of the star brands. They're in inherently strong markets, but also have inherently strong growth profiles with them as well.

And we have that diversification, which helps reduce risk. It is great to have a portfolio. We're not overly reliant on one particular product. If you look at Kelo-cote, yes, that's growing strongly, but it's still around 1/5 of our total sales. So it's great to have a bit of concentration, but perhaps not too much and having that diversification has been great to reduce downside risk.

And where do we want to take this business? Well, in 3 to 5 years, we'd like it to be at least twice the size we are currently with revenues principally generated from organic growth but augmented by selected acquisitions. And the product portfolio remains the same. The revenue generated from the prescription medicines is fantastic and very, very strong. But having the growth OTC assets on top has also been very, very attractive for us, and we're able to run both quite well.

I think it's important to say, again, we've built this platform out over the last 3 years. And what we're looking to do now is bringing targeted acquisitions, the bolt-on to that platform. We don't have a big ambition as an SLT or as a board to have affiliates everywhere around the world. Actually, we've got the U.S., which is going really well for us. We've got this great Western Europe business and a fast-growing Asia Pacific business, and that Nizoral acquisition doubled the size of our Asia Pacific business overnight and has given us the cash to be able to really reach out in that region.

And again, we don't have a massive desire to build huge sales teams. This blend of affiliates and also distributor business has served us very, very well. We've got some fantastic distributors who really know their markets very, very well. So for us, that's something that we're not looking at right now. The mix of affiliate and distributor is very attractive to us.

I think that's underpinned by 5 key things. So as Andrew mentioned, strong cash flow, you've seen that come through certainly this half, and hopefully, continue this year. A selective approach to acquisitions as well. That's something that we're very keen to maintain, is a key strength of ours, and we're seeing a very, very good deal flow at the moment, but we just have to pick the right ones at the right time for the organization. We'll continue investing in our key growth brands. We talk about the 5 stars over time. They may ebb and flow. We may find one of the local brands doing a little bit better, and we'll put our investment behind that. Trying to drive more operational leverage through the business with those selected acquisitions. And behind all of that is a really high-performing and engaged team. We have great engagement within our business, won several awards about the best place to work. We've also got a great senior leadership team who have been around that table now as a team for over 3 years and really starting to bring through the business and continue the strategy that we set out over 3 years ago now.

So to summarize, I think we've made great progress in growing the business in the first half of this year. Revenue, up 29%; Kelo-cote, up 20%. Got continued strong cash generation. The Nizoral integration is progressing well. As Andrew said, we've increased our dividend 10%. We've also got new enhanced banking facilities in place to help us on our acquisition trail over the next few years. And that leaves us well placed for H2 and beyond, as I say, leveraging the increased scale and geographic presence that we have, continuing to invest in our International Star brands, maximizing these organic growth opportunities whilst maintaining the local brands, but also continuing our acquisition trail and, more importantly, delivering on the vision that we've outlined.

So hopefully, that gives you a tour of the business. I think that's the end of the presentation formally, but happy to take any questions, as always. Thank you.


Questions and Answers


Peter Jonathan Butterfield, Alliance Pharma plc - CEO & Executive Director [1]




Andrew Mark Whitney, Investec Bank plc, Research Division - Analyst [2]


This is Andrew Whitney from Investec. Can I just ask a couple of questions on the -- some of the International Star products? So I guess, Nizoral, the trajectory, the TSAs last for a couple of years. It -- there was a bit of negative growth in the half as it comes in. When do you see that inflecting that trajectory and going back? When do you actually get control of it and can market it? And how do you see that near-term performance?


Peter Jonathan Butterfield, Alliance Pharma plc - CEO & Executive Director [3]


Yes, great question. So let's take when do we get control of it first. So we are sequentially getting the marketing authorizations handed over. It doesn't all come in one big bang, which is quite good for us because it allows us to line things up in one piece. Not wishing to give forecast for next year but we would like to see some of our marketing activities that we're going to put in place at the end of this year and beginning of next year come good for next year. So we are looking to grow that brand for next year.

I think if you look at the markets, some are up, some are down. China is looking really interesting for us at the moment. It certainly can do a lot more in that market with the right distributor. We've got a very good one on board right now. And they're showing quite a lot of promise. It's about turning that promise though into actual sales now. And if you remember, when we did the deal, one of the sort of things that I know investors looked at was, what is exactly happening in that Chinese market? Can it come back? I'm pleased to say, yes, it can, and we'll be looking to exploit that over the next 2 to 3 years. Good question.


Andrew Mark Whitney, Investec Bank plc, Research Division - Analyst [4]


That's helpful. I've got -- I'll ask one more and I'll give it -- give the microphone to someone else. Just on MacuShield, there was the distribution change. I think in the release, you said the market is growing about 3%, isn't it? So is that -- I think you're doing organic -- ex the [stuffing] and all that, you're doing about 10...


Peter Jonathan Butterfield, Alliance Pharma plc - CEO & Executive Director [5]


About 8.5.


Andrew Mark Whitney, Investec Bank plc, Research Division - Analyst [6]


8.5, something like that. So is that -- that incremental growth, is that coming from new territories? Or is it incremental penetration in existing stuff? And how should we see that going forward?


Peter Jonathan Butterfield, Alliance Pharma plc - CEO & Executive Director [7]


Good question. So yes, new territories. The new territories are reasonably small because you've got to start from 0, obviously. We're seeing good growth in booths here in the U.K. We're also seeing good growth on our online sales as well here in the U.K. It has been out for quite some time. So it does very, very well. It is a very strong brand here in the U.K. So we'll probably see that growth sort of maybe tailing off a little bit in its home market, but the newer territories, some of those are going very, very well indeed.

And the other thing that we're doing with MacuShield is some interesting line extensions, which we'll -- you'll see at the end of the year.


Andrew Mark Whitney, Investec Bank plc, Research Division - Analyst [8]


Expect market growth to that as well?


Peter Jonathan Butterfield, Alliance Pharma plc - CEO & Executive Director [9]


Yes, yes. yes.


Sally Anne Taylor, Numis Securities Limited, Research Division - Director & Healthcare Analyst [10]


It's Sally Taylor from Numis. I just wanted -- in terms of your back office, I know you've had a lot of progress with your ERP. I just wondered sort of where you are and what stages you've got to and what's left to deliver on that?


Peter Jonathan Butterfield, Alliance Pharma plc - CEO & Executive Director [11]


Yes. We've really given ERP a rocket this year and we've had to because it's one of these things that we've been sort of building alongside growing the business. And the eternal struggle is how much do you take out of the back office to build ERP versus keeping the business going at the same time. So we're not unique in any sense of businesses putting an ERP.

We are through our first user acceptance testing. That's gone really well. We're into UAT 2.2, which is where we start to bring in some of the affiliates. So the spine is built. The system is built end-to-end. It has not come up with any major glitches so far, and we'll be looking for that to go live early in quarter 1 next year.

So we're almost there with it. And I think that's another sort of key part of our growth strategy to make sure that we have that system in place. I know it's been in our story for quite some time, but we've really doubled down on the effort this year. We've changed the project management team. We've got very good leader in there right now and it's going so far so good. So yes.


Sally Anne Taylor, Numis Securities Limited, Research Division - Director & Healthcare Analyst [12]


That's helpful. And then does that influence sort of acquisitions? Or does it help facilitate future acquisitions in terms of your back office structure? And I guess, leading on to that then, what's the sense -- I mean, getting a bit more sort of statement from you in the sense of appetite. So what's out there in prices and that sort of thing? So quite a few questions in there.


Peter Jonathan Butterfield, Alliance Pharma plc - CEO & Executive Director [13]


All right. I'll deal with the ERP thing first, what does it do for us. I think there's the existing business that we have. It gives us much more granularity in terms of what we can look at, how we analyze our portfolio, where our spend is going. We have a very good idea of it right now, but it's quite a sort of lag indicator given the time it takes us to pull that together.

In terms of future acquisitions, it allows us much more structure. We will force those into our ERP structure in order to come in line with the business rather than what we've done before and Sinclair was the sort of poster child for that we just added it on. So we're still running some of the old legacy Sinclair systems from 2015, and they were quite old when we brought those in. So that cleanup will allow us a lot more flexibility. It will be quicker and allow Andrew a lot more breathing space when it comes to every month end when we reforecast the business. And it allows us to be a lot more efficient when we're bringing new assets in. So that's the first thing.

And then the landscape, I think, was the second question and what are we seeing. And it's no secret that there's a lot of deal flow. There's a lot of activity in the marketplace. We're seeing continued consolidation from GSK and Pfizer, Novartis, some of the big players out there. Also, smaller things coming to market. And the U.S. is quite an interesting place for some of the -- actually, some of the smaller bolt-on type acquisitions that we're looking at to augment our U.S. footprint.

So never say never, but we're not looking at building an ethical prescription-only medicine business in the U.S. I think as we can see with Vamousse, we've got a fantastic team out there doing a great job in a very, very competitive marketplace against some enormous players. So if we can replicate some of that with some smaller bolt-on acquisitions out there, we'd be delighted.

Traditionally, we're not taking declining assets as well. So it's great the deal flow is there, but assets that are going backwards at a rapid rate have never really been core to what we do. And I think bringing in a big slug of cash flow, great, but declining business that would take the shine off for is a very nicely performing business right now. So getting those right. And then there's a timing issue as well. So candidly, we want Nizoral to land and we want that to be a good acquisition for us. I have every confidence that, that can be, getting the ERP system in as well. And we've got this eternal balance of how much do we put on BD right now and we are doing quite a bit. So we're seeing quite a lot come through because the lifetime is sort of 6 to 9 months on that. Edward?


Edward Thomason, Nplus1 Singer Capital Markets Limited, Research Division - Research Analyst [14]


Great set of results, great to see. Two questions. One, following on from Sally on acquisitions. Just are you agnostic about what route to market you'll be targeting? So is it going to be consumer or prescription or ethical...


Peter Jonathan Butterfield, Alliance Pharma plc - CEO & Executive Director [15]


I think -- yes, if you're looking at -- small profile of products there. But if you're looking at where we're having a lot of success at the moment, it is in those consumer-type brands. So -- and there is a lot of deal flow on those right now. So it would be great to get another consumer brand in to leverage some of the distribution channels that we have. U.S. is -- again, I'll back to the U.S., but we have a very good distributor out there. If we can bring something in, fine. For Western Europe, we can look at pretty much anything that's prescription or OTC. And then in Asia Pacific, we have quite a lot of OTX business. Kelo-cote is the main driver out there. We've got a lot of dermatology business out there. But I think we are relatively agnostic as long as it fits those 3 buckets of geography and those 3 buckets of classification. We're not interested in generic medicine, services, biosimilars. That's not where we play. We play in those 3 main buckets of OTC, OTX and prescription.


Edward Thomason, Nplus1 Singer Capital Markets Limited, Research Division - Research Analyst [16]


And my second question was just an update on the CMA investigation from what you can say?


Peter Jonathan Butterfield, Alliance Pharma plc - CEO & Executive Director [17]


Yes. And I can't say any more about that other than the release that we put out in May, working very closely with the CMA, but that's all I can say about it.


Unidentified Company Representative, [18]


Is there any other questions?


Peter Jonathan Butterfield, Alliance Pharma plc - CEO & Executive Director [19]


Okay. Well, thank you, everybody. It's a wet and horrible day out there, but I hope you've enjoyed our presentation today. As always, Andrew and I will be around to take any questions over the next few minutes. Thank you to Buchanan for hosting, and have a great day. Thank you very much.