Tag: Business

ISELIN, N.J. — (BUSINESS WIRE) — #awards–Ernst & Young LLP (EY US) announced that Jimmy Placa of Davion Inc. was named an Entrepreneur Of The Year^® 2021 New Jersey Award winner.

The Entrepreneur Of The Year program is one of the preeminent competitive awards for entrepreneurs and leaders of high-growth companies. The award recognizes those who are unstoppable entrepreneurial leaders, excelling in talent management; degree of difficulty; financial performance; societal impact and building a values-based company; as well as originality, innovation, and future plans.

 

Jimmy Placa was selected by an independent panel of judges and the award was announced during the program’s awards gala.

 

“Winning the Entrepreneur of the Year 2021 New Jersey Award among so many talented and deserving entrepreneurs is a tremendous honor. No entrepreneur can go it alone. This award serves as recognition of the entire Davion team in the U.S. and Canada that have worked so hard to make us leaders in our industry,” Jimmy Placa said.

 

Davion is a contract manufacturer of health, beauty, personal care, and household products. Davion manufactures and distributes consumer products for indie and major brands as well as regional and national retailers from our U.S. and Canadian facilities. Their facilities are FDA and Health Canada registered as well as ISO and cGMP certified.

 

In addition to Davion’s manufacturing and distribution expertise, Davion provides clients with targeted market research, custom formulation development, packaging design, procurement, quality control, and regulatory services (www.davioninc.com).

 

For 35 years, EY US has honored entrepreneurs whose ambition, courage and ingenuity have driven their companies’ success, transformed their industries and made a positive impact on their communities. Mr. Placa will go on to become a lifetime member of the esteemed multi-industry community of award winners, with exclusive, ongoing access to the experience, insight and wisdom of fellow alumni and other ecosystem members in over 60 countries — all supported by vast EY resources.

 

As a New Jersey award winner, Mr. Placa is now eligible for consideration for the Entrepreneur Of The Year 2021 National Awards. Award winners in several national categories, as well as the Entrepreneur Of The Year National Overall Award winner, will be announced in November at the Strategic Growth Forum^®, one of the nation’s most prestigious gatherings of high-growth, market-leading companies.

 

In past years, the Entrepreneur Of The Year program has honored the inspirational leadership of entrepreneurs such as:

• Brian Niccol of Chipotle Mexican Grill, Inc.
• Saeju Jeong of Noom
• Joe DeSimone of Carbon, Inc.
• Howard Schultz of Starbucks Corporation
• Jodi Berg of Vitamix
• Reid Hoffman and Jeff Weiner of LinkedIn
• Hamdi Ulukaya of Chobani
• Kendra Scott of Kendra Scott LLC
• Andreas Bechtolsheim and Jayshree Ullal of Arista Networks
• James Park of Fitbit
• Daymond John of Fubu

Contacts

Jimmy Placa

Davion Inc.

973-485-0793 x. 108

james.placa3@davioninc.com

PARSIPPANY, N.J. — (BUSINESS WIRE) — B&G Foods, Inc. (NYSE: BGS) today announced financial results for the second quarter and first two quarters of 2021.

 

Executive Summary (vs. Second Quarter of 2020 and vs. Second Quarter 2019 for two-year annual compound growth rates, where applicable):

• Net sales decreased 9.4% to $464.4 million and base business net sales decreased 20.8%, driven by comparisons against the extraordinary demand and pantry loading at the height of the COVID-19 pandemic during the second quarter of 2020, partially offset by the Crisco acquisition.
• Net sales and base business net sales for the second quarter of 2021 were 25.1% and 7.1% higher than pre-pandemic net sales and base business net sales for the second quarter of 2019. On a two-year compound annual growth basis, relative to pre-pandemic levels, second quarter net sales increased 11.8% and base business net sales increased 3.5%.
• Diluted earnings per share decreased 45.7% to $0.38. On a two-year compound annual growth basis, second quarter diluted earnings per share increased 16.5%.
• Adjusted diluted earnings per share¹ decreased 42.3% to $0.41. On a two-year compound annual growth basis, second quarter adjusted diluted earnings per share increased 5.0%.
• Net income decreased 45.3% to $24.6 million. On a two-year compound annual growth basis, second quarter net income increased 16.0%.
• Adjusted net income¹ decreased 41.2% to $27.1 million. On a two-year compound annual growth basis, second quarter adjusted net income increased 5.0%.
• Adjusted EBITDA¹ decreased 18.3% to $83.8 million. On a two-year compound annual growth basis, second quarter adjusted EBITDA increased 8.7%.
• Adjusted EBITDA before COVID-19 expenses¹ decreased 20.5% to $85.0 million. On a two-year compound annual growth basis, second quarter adjusted EBITDA before COVID-19 expenses increased 9.4%.
• Net sales guidance reaffirmed at a range of $2.05 billion to $2.10 billion.

 

Commenting on the results, Casey Keller, President and Chief Executive Officer of B&G Foods, stated, “We are pleased with the Company’s performance in the second quarter, and our prospects for the remainder of the year. The second quarter was expected to be the most challenging to lap from a comparative perspective given that the second quarter of 2020 occurred at the height of pantry loading and stocking during the COVID-19 pandemic. However, as expected, our net sales performance has remained elevated relative to 2019. When we look at the consumer trends that accelerated during the early stages of the pandemic—including an increase in cooking, baking and eating at home—trends which we expect may be longer term, our brands are well positioned to continue to capitalize on these opportunities.”

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1

Please see “About Non-GAAP Financial Measures and Items Affecting Comparability” below for the definition of the non-GAAP financial measures “adjusted diluted earnings per share,” “adjusted net income,” “EBITDA,” “adjusted EBITDA,” “adjusted EBITDA before COVID-19 expenses” and “base business net sales,” as well as information concerning certain items affecting comparability and reconciliations of the non-GAAP terms to the most comparable GAAP financial measures.

 

Mr. Keller continued, “Another significant impact coming out of the pandemic is inflation at unprecedented levels across the economy, including the food industry. We are seeing inflation on key input costs across our portfolio. We identified the risks of inflation early and have initiated price increases and cost savings initiatives to offset these costs. While the impact of pricing and cost savings may lag behind the rising input costs, we expect our margins to remain fairly stable in the long term.”

 

“Lastly, I’m pleased to report that as of earlier this week, the integration of the Crisco brand is substantially complete and we have assumed full responsibility for the operation of the business. Crisco is a tremendous addition to the B&G Foods portfolio.”

 

Financial Results for the Second Quarter of 2021

Net sales for the second quarter of 2021 decreased $48.1 million, or 9.4%, to $464.4 million from $512.5 million for the second quarter of 2020. The decrease was primarily due to comparisons against the extraordinary demand and pantry loading at the height of the COVID-19 pandemic during the second quarter of 2020, partially offset by the Crisco acquisition. Net sales of Crisco, acquired on December 1, 2020, contributed $58.4 million to the Company’s net sales for the quarter. Net sales for the second quarter of 2021 were 25.1% higher than pre-pandemic net sales for the second quarter of 2019. On a two-year compound annual growth basis, relative to pre-pandemic levels, second quarter net sales increased 11.8%.

 

Base business net sales for the second quarter of 2021 decreased $106.6 million, or 20.8%, to $405.9 million from $512.5 million for the second quarter of 2020. The decrease in base business net sales for the second quarter of 2021 reflected a decrease in unit volume of $115.4 million, partially offset by an increase in net pricing and the impact of product mix of $6.2 million and the positive impact of foreign currency of $2.6 million. Base business net sales for the second quarter of 2021 were 7.1% higher than pre-pandemic base business net sales for the second quarter of 2019. On a two-year compound annual growth basis, relative to pre-pandemic levels, second quarter base business net sales increased 3.5%.

 

Net sales of Maple Grove Farms increased $2.2 million, or 11.7%, and net sales of the Company’s spices & seasonings² increased $0.7 million, or 0.7%, for the second quarter of 2021 as compared to the second quarter of 2020. Net sales of Green Giant (including Le Sueur) decreased $58.4 million, or 35.6%; net sales of Clabber Girl decreased $8.9 million, or 33.5%; net sales of Ortega decreased $5.9 million, or 12.7%; and net sales of Cream of Wheat decreased $3.8 million, or 20.8%, for the second quarter of 2021 as compared to the second quarter of 2020. Net sales of all other brands in the aggregate decreased $32.5 million, or 23.0%, for the second quarter of 2021.

 

Net sales for the second quarter of 2021 for spices & seasonings, Ortega, Cream of Wheat, Maple Grove Farms and Clabber Girl were each higher than the net sales for such brands during pre-pandemic second quarter of 2019. Spices & seasonings² net sales were higher than second quarter of 2019 net sales by $18.1 million, or 22.2%; Ortega by $6.9 million, or 20.0%; Cream of Wheat by $2.5 million, or 21.9%; Maple Grove Farms by $2.4 million, or 13.4%; and Clabber Girl³ by $1.1 million, or 12.5%. Net sales of Green Giant (including Le Sueur) were lower than net sales for the second quarter of 2019 by $7.2 million, or 6.4%. Net sales of all other brands in the aggregate were higher by $2.6 million, or 2.7%, compared to the second quarter of 2019.

 

Gross profit was $111.6 million for the second quarter of 2021, or 24.0% of net sales. Excluding the negative impact of $0.4 million of acquisition/divestiture-related expenses and non-recurring expenses included in cost of goods sold during the second quarter of 2021, the Company’s gross profit would have been $112.0 million, or 24.1% of net sales. Gross profit was $134.1 million for the second quarter of 2020, or 26.2% of net sales. Excluding the negative impact of $0.5 million of acquisition/divestiture-related expenses and non-recurring expenses included in cost of goods sold during the second quarter of 2020, the Company’s gross profit would have been $134.6 million, or 26.3% of net sales.

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2		Includes the spices & seasoning brands acquired in the fourth quarter of 2016, as well as the Company’s legacy spices & seasonings brands, such as Dash and Ac’cent.
3		Compares net sales of Clabber Girl from May 15, 2021 through July 3, 2021 versus May 15, 2019 through June 29, 2019. Clabber Girl was acquired on May 15, 2019.

 

During the second quarter of 2021, the Company’s gross profit was negatively impacted by higher than expected input cost inflation, including materially increased costs for raw materials and transportation. The Company expects input cost inflation to be materially higher in the second half of 2021 than it was in the second half of 2020. The Company is attempting to mitigate the impact of inflation on the Company’s gross profit by locking in prices through short-term supply contracts and advance commodities purchase agreements and by implementing cost saving measures. The Company has also announced list price increases and has reduced trade promotions to its customers for certain of its products. However, increases in the prices the Company charges its customers generally lag behind rising input costs. As such, the Company does not expect to fully offset the incremental costs that the Company is facing in fiscal 2021 and expects continued cost inflation in fiscal 2022.

 

Selling, general and administrative expenses increased $2.8 million, or 6.2%, to $47.1 million for the second quarter of 2021 from $44.3 million for the second quarter of 2020. The increase was composed of increases in warehousing expenses of $4.6 million, acquisition/divestiture-related and non-recurring expenses of $1.9 million and consumer marketing expenses of $0.3 million, partially offset by decreases in selling expenses of $2.5 million and general and administrative expenses of $1.5 million. The increase in warehousing expenses was primarily driven by the Crisco acquisition and customer fines related to COVID-19 shortages and delays. Expressed as a percentage of net sales, selling, general and administrative expenses increased by 1.4 percentage points to 10.1% for the second quarter of 2021, compared to 8.7% for the second quarter of 2020.

 

Net interest expense increased $1.9 million, or 7.5%, to $26.7 million for the second quarter of 2021 from $24.8 million in the second quarter of 2020. The increase was primarily attributable to an increase in average long-term debt outstanding during the second quarter of 2021 as compared to the second quarter of 2020, primarily as a result of incremental borrowings the Company made in the fourth quarter of 2020 to fund the Crisco acquisition and related fees and expenses. The increase in net interest expense was partially offset by a lower effective cost of borrowing during the second quarter of 2021.

 

The Company’s net income was $24.6 million, or $0.38 per diluted share, for the second quarter of 2021, compared to net income of $44.9 million, or $0.70 per diluted share, for the second quarter of 2020. The Company’s adjusted net income for the second quarter of 2021 was $27.1 million, or $0.41 per adjusted diluted share, compared to $46.0 million, or $0.71 per adjusted diluted share, for the second quarter of 2020.

 

For the second quarter of 2021, adjusted EBITDA was $83.8 million, a decrease of $18.8 million, or 18.3%, compared to $102.6 million for the second quarter of 2020. Adjusted EBITDA as a percentage of net sales was 18.0% for the second quarter of 2021, compared to 20.0% in the second quarter of 2020.

 

For the second quarter of 2021, adjusted EBITDA before COVID-19 expenses was $85.0 million, a decrease of $21.9 million, or 20.5%, compared to $106.9 million for the second quarter of 2020. COVID-19 expenses of $1.2 million and $4.3 million for the second quarter of 2021 and the second quarter of 2020, respectively, primarily included temporary enhanced compensation for the Company’s manufacturing employees, compensation the Company continued to pay manufacturing employees while in quarantine (which was incremental to the compensation the Company paid to the manufacturing employees who produced the Company’s products while others were in quarantine), and expenses relating to other precautionary health and safety measures. Adjusted EBITDA before COVID-19 expenses as a percentage of net sales was 18.3% for the second quarter of 2021, compared to 20.9% in the second quarter of 2020.

 

Financial Results for the First Two Quarters of 2021

Net sales for the first two quarters of 2021 increased $7.6 million, or 0.8%, to $969.5 million from $961.9 million for the first two quarters of 2020. The increase was primarily due to the Crisco acquisition, largely offset by comparisons against the extraordinary demand and pantry loading at the height of the COVID-19 pandemic during the last four months of the first two quarters of 2020. Net sales of Crisco, acquired on December 1, 2020, contributed $116.5 million to the Company’s net sales for the first two quarters. Net sales for the first two quarters of 2021 were 23.7% higher than pre-pandemic net sales for the first two quarters of 2019. On a two-year compound annual growth basis, relative to pre-pandemic levels, net sales for the first two quarters of 2021 increased 11.2%.

 

Base business net sales¹ for the first two quarters of 2021 decreased $109.1 million, or 11.3%, to $852.8 million from $961.9 million for the first two quarters of 2020. The decrease in base business net sales for the first two quarters of 2021 reflected a decrease in unit volume of $125.2 million, partially offset by an increase in net pricing and the impact of product mix of $12.8 million and the positive impact of foreign currency of $3.3 million. Base business net sales for the first two quarters of 2021 were 5.5% higher than pre-pandemic base business net sales for the first two quarters of 2019. On a two-year compound annual growth basis, relative to pre-pandemic levels, base business net sales for the first two quarters of 2021 increased 2.7%.

 

Net sales of the Company’s spices & seasonings² increased $30.7 million, or 17.9%, and net sales of Maple Grove Farms increased $4.3 million, or 11.9%, in the first two quarters of 2021, as compared to the first two quarters of 2020. Net sales of Green Giant (including Le Sueur) decreased $84.4 million, or 26.2%; net sales of Clabber Girl decreased $10.1 million, or 22.5%; net sales of Ortega decreased $5.8 million, or 6.8%; and net sales of Cream of Wheat decreased $4.5 million, or 12.2%, in the first two quarters of 2021, as compared to the first two quarters of 2020. Net sales of all other brands in the aggregate decreased $39.3 million, or 14.9%, for the first two quarters of 2021.

 

Net sales for the first two quarters of 2021 for spices & seasonings, Ortega, Maple Grove Farms, Cream of Wheat and Clabber Girl were each higher than the net sales for such brands during the pre-pandemic first two quarters of 2019. Spices & seasonings² net sales were higher than first two quarters of 2019 net sales by $35.2 million, or 21.1%; Ortega by $8.5 million, or 11.9%; Maple Grove Farms net sales by $5.1 million, or 14.5%; Cream of Wheat by $3.3 million, or 11.4%; and Clabber Girl³ by $1.1 million, or 12.5%. Net sales of Green Giant (including Le Sueur) were lower than net sales for the first two quarters of 2019 by $10.9 million, or 4.4%. Net sales of all other brands in the aggregate were higher by $0.8 million, or 0.3%, compared to the first two quarters of 2019.

 

Gross profit was $229.4 million for the first two quarters of 2021, or 23.7% of net sales. Excluding the negative impact of $5.9 million of acquisition/divestiture-related expenses, the amortization of acquisition-related inventory fair value step-up and non-recurring expenses included in cost of goods sold during the first two quarters of 2021, the Company’s gross profit would have been $235.3 million, or 24.3% of net sales. Gross profit was $239.0 million for the first two quarters of 2020, or 24.8% of net sales. Excluding the negative impact of $2.8 million of acquisition/divestiture-related expenses and non-recurring expenses included in cost of goods sold during the first two quarters of 2020, the Company’s gross profit would have been $241.8 million, or 25.1% of net sales.

 

During the first two quarters of 2021, the Company’s gross profit was negatively impacted by higher than expected input cost inflation, including materially increased costs for raw materials and transportation. The Company expects input cost inflation to be materially higher in the second half of 2021 than it was in the second half of 2020. The Company is attempting to mitigate the impact of inflation on its gross profit by locking in prices through short-term supply contracts and advance commodities purchase agreements and by implementing cost saving measures. The Company has also announced list price increases and has reduced trade promotions to its customers for certain of its products. However, increases in the prices the Company charges its customers generally lag behind rising input costs. As such, the Company does not expect to fully offset the incremental costs that it is facing in fiscal 2021 and expects continued cost inflation in fiscal 2022.

 

Selling, general and administrative expenses increased $13.2 million, or 15.6%, to $97.5 million for the first two quarters of 2021 from $84.3 million for the first two quarters of 2020. The increase was composed of increases in warehousing expenses of $8.7 million, consumer marketing expenses of $4.3 million and acquisition/divestiture-related and non-recurring expenses of $3.8 million, partially offset by decreases in selling expenses of $3.3 million and general and administrative expenses of $0.3 million. The increase in warehousing expenses was primarily driven by the Crisco acquisition and customer fines related to COVID-19 shortages and delays. Expressed as a percentage of net sales, selling, general and administrative expenses increased by 1.3 percentage points to 10.1% for the first two quarters of 2021, compared to 8.8% for the first two quarters of 2020.

 

Net interest expense increased $2.8 million, or 5.5%, to $53.7 million for the first two quarters of 2021 from $50.9 million in the first two quarters of 2020. The increase was primarily attributable to an increase in average long-term debt outstanding during the first two quarters of 2021 as compared to the first two quarters of 2020, primarily as a result of incremental borrowings the Company made in the fourth quarter of 2020 to fund the Crisco acquisition and related fees and expenses. The increase in net interest expense was partially offset by a lower effective cost of borrowing during the first two quarters of 2021.

 

The Company’s net income was $51.4 million, or $0.79 per diluted share, for the first two quarters of 2021, compared to net income of $73.0 million, or $1.14 per diluted share, for the first two quarters of 2020. The Company’s net income in the first two quarters of 2020 benefited from a discrete tax benefit of $2.3 million related to the U.S. CARES Act. The Company’s adjusted net income for the first two quarters of 2021, which excludes, among other things, the impact of the discrete tax benefit received in the first quarter of 2020, was $61.2 million, or $0.94 per adjusted diluted share, compared to $75.3 million, or $1.17 per adjusted diluted share, for the first two quarters of 2020.

 

For the first two quarters of 2021, adjusted EBITDA was $176.7 million, a decrease of $6.6 million, or 3.6%, compared to $183.3 million for the first two quarters of 2020. Adjusted EBITDA as a percentage of net sales was 18.2% for the first two quarters of 2021, compared to 19.1% in the first two quarters of 2020.

 

For the first two quarters of 2021, adjusted EBITDA before COVID-19 expenses was $180.8 million, a decrease of $6.9 million, or 3.7%, compared to $187.7 million for fiscal 2020. COVID-19 expenses of $4.1 million and $4.4 million for the first two quarters of 2021 and the first two quarters of 2020, respectively, included temporary enhanced compensation for the Company’s manufacturing employees, compensation the Company continued to pay manufacturing employees while in quarantine (which was incremental to the compensation the Company paid to the manufacturing employees who produced the Company’s products while others were in quarantine), and expenses relating to other precautionary health and safety measures. Adjusted EBITDA before COVID-19 expenses as a percentage of net sales was 18.6% for the first two quarters of 2021, compared to 19.5% in the first two quarters of 2020.

 

Full Year Fiscal 2021 Guidance

B&G Foods reaffirmed its net sales guidance for full year fiscal 2021. Net sales, which will be positively impacted by a full twelve months of ownership of the Crisco brand, are expected to be approximately $2.05 billion to $2.10 billion.

 

B&G Foods continues to see strong consumer demand for its products relative to pre-pandemic 2019. The Company has also seen and expects to continue to see significant cost inflation for various inputs, including ingredients, packaging and transportation. The Company has initiated various revenue enhancing activities (including list price increases and trade spend initiatives) and cost savings initiatives to offset these costs but there can be no assurance at this point of the ultimate effectiveness of these activities and initiatives. Because the Company’s management is not able to fully estimate the impact COVID-19, cost inflation and the Company’s cost inflation mitigation efforts will have on the Company’s results for the remainder of fiscal 2021, the Company is unable at this time to provide more detailed guidance for full year fiscal 2021. The ultimate impact of the COVID-19 pandemic on the Company’s business will depend on many factors, including, among others: how long social distancing and stay-at-home and work-from home policies and recommendations remain in effect; whether, and the extent to which, additional waves or variants of COVID-19 will affect the United States and the rest of North America; the Company’s ability to continue to operate its manufacturing facilities, maintain its supply chain without material disruption, procure ingredients, packaging and other raw materials when needed; the extent to which macroeconomic conditions resulting from the pandemic and the pace of the subsequent recovery may impact consumer eating and shopping habits; and the extent to which consumers continue to work remotely even after the pandemic subsides and how that may impact consumer habits.

 

Conference Call

B&G Foods will hold a conference call at 4:30 p.m. ET today, August 5, 2021 to discuss second quarter 2021 financial results. The live audio webcast of the conference call can be accessed at www.bgfoods.com/investor-relations. A replay of the webcast will be available following the conference call through the same link.

 

About Non-GAAP Financial Measures and Items Affecting Comparability

“Adjusted net income” (net income adjusted for certain items that affect comparability), “adjusted diluted earnings per share,” (diluted earnings per share adjusted for certain items that affect comparability), “base business net sales” (net sales without the impact of acquisitions until the acquisitions are included in both comparable periods and without the impact of discontinued or divested brands), “EBITDA” (net income before net interest expense, income taxes, depreciation and amortization and loss on extinguishment of debt), “adjusted EBITDA” (EBITDA as adjusted for cash and non-cash acquisition/divestiture-related expenses, gains and losses (which may include third party fees and expenses, integration, restructuring and consolidation expenses, amortization of acquired inventory fair value step-up and gains and losses on sale of assets) and non-recurring expenses, gains and losses) and “adjusted EBITDA before COVID-19 expenses” (adjusted EBITDA as adjusted for COVID-19 expenses) are “non-GAAP financial measures.

Contacts

Investor Relations:

ICR, Inc.

Dara Dierks

866.211.8151

Media Relations:

ICR, Inc.

Matt Lindberg

203.682.8214

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– Encouraging initial launch of ZYNLONTA™ (loncastuximab tesirine-lpyl) driven by favorable product profile to address high unmet medical need in relapsed / refractory DLBCL market

– Company to host conference call today at 8:30 a.m. EDT

 

LAUSANNE, Switzerland — (BUSINESS WIRE) — ADC Therapeutics SA (NYSE: ADCT), a commercial-stage biotechnology company improving the lives of those affected by cancer with its next-generation, targeted antibody drug conjugates (ADCs) for patients with hematologic malignancies and solid tumors, today reported financial results for the second quarter ended June 30, 2021 and provided business updates.

“We were thrilled to receive accelerated FDA approval for the first indication for ZYNLONTA^™ and are encouraged by the momentum and positive feedback in the initial weeks following approval. We remain highly focused on the successful execution of the launch and positive about the longer-term potential of the product,” said Chris Martin, Chief Executive Officer of ADC Therapeutics. “During the second quarter, we were also pleased to present positive data on ZYNLONTA and our exciting pipeline of advancing programs at key medical meetings. Looking to the rest of the year, we have several notable milestones on the horizon and look forward to keeping you updated on our progress.”

Recent Highlights and Developments

ZYNLONTA (loncastuximab tesirine-lpyl)

• Launch update:
  • ZYNLONTA generated net sales of $3.8 million for the two-month period following accelerated U.S. Food and Drug Administration (FDA) approval on April 23, 2021, reflecting patient demand with no material inventory build. Launch performance was driven by the differentiated profile of ZYNLONTA in addressing an area of high unmet medical need.
  • The Company has engaged prioritized accounts, with patient starts at a significant percentage of key accounts. A substantial number of the National Comprehensive Cancer Network (NCCN) centers have ordered and reordered ZYNLONTA. There has been positive reception across the treatment site spectrum from academic- to community-based centers reflecting the broad applicability of ZYNLONTA in the 3L+ setting supported by the LOTIS-2 pivotal data.
  • ZYNLONTA was added to the NCCN Guidelines with a Category 2A recommendation just two weeks after receiving accelerated FDA approval. The NCCN guidelines listing is consistent with the broad FDA-approved indication. As a result, payer access and medical policy publication have accelerated.
  • The Company is pleased with the positive launch momentum in a continuing COVID environment. The sales and medical teams are executing with a hybrid model, and there has been an increase in face-to-face visits.

• Online publication of LOTIS-2 results in The Lancet Oncology: Results of LOTIS-2, a Phase 2 clinical trial evaluating the safety and efficacy of single-agent ZYNLONTA in adult patients with relapsed or refractory diffuse large B-cell lymphoma (DLBCL) following two or more systemic treatments, were published in The Lancet Oncology. The trial included patients with high-risk characteristics for poor prognosis, such as double-/triple-hit, transformed, and primary refractory DLBCL.

• Phase 2 LOTIS-2 trial update at ASCO and ICML: Updated clinical data from LOTIS-2, the pivotal Phase 2 trial of ZYNLONTA in patients with relapsed or refractory DLBCL, were presented at the American Society of Clinical Oncology (ASCO) Annual Meeting and the International Conference on Malignant Lymphoma (ICML), both in June 2021. As of the March 1, 2021 cutoff date, the overall response rate (ORR) was 48.3% and the complete response rate (CRR) was 24.8%. At this data cut, there was a median duration of response of 13.4 months for the responders, with durable responses in high-risk subgroups. No new safety concerns were identified during the study.

• Other ZYNLONTA trials:
  • The Phase 3 LOTIS-5 clinical trial is evaluating ZYNLONTA in combination with rituximab in second-line patients with relapsed or refractory DLBCL who are not eligible for autologous stem cell transplant.
  • The Phase 2 LOTIS-3 clinical trial of ZYNLONTA in combination with ibrutinib for relapsed or refractory DLBCL patients continues to enroll patients. Updated Phase 1 results presented at ICML demonstrated ORR of 62.2%, CRR of 35.1% and a manageable toxicity profile. Based on interim data from the Phase 2 trial, the Company plans to amend the protocol to evaluate the administration of ZYNLONTA with every cycle to potentially further enhance efficacy and durability. Based on this additional data, the Company could potentially pursue a Phase 3 study in second-line DLBCL, expanding the addressable market and the number of patients who could benefit from ZYNLONTA.
  • The pivotal Phase 2 LOTIS-6 clinical trial in patients with relapsed or refractory follicular lymphoma (FL) is open for enrollment.
  • The Company plans to initiate a clinical trial to evaluate ZYNLONTA in combination with select therapies in B-cell non-Hodgkin lymphoma (NHL).
  • The Company plans to initiate a dose-finding study to evaluate ZYNLONTA in combination with R-CHOP in frontline DLBCL.

Camidanlumab Tesirine (Cami)

• Pivotal Phase 2 trial in Hodgkin lymphoma (HL): Encouraging interim results from the pivotal Phase 2 study in patients with relapsed or refractory HL were presented at ICML. In a heavily pre-treated patient population with a median of six prior lines of systemic therapy, these results included an ORR of 66.3% and CRR of 27.7%. Median duration of response has not been reached, and no new safety signals were identified.
• Phase 1b trial in solid tumors: The Phase 1b clinical trial, enrolling patients with selected advanced solid tumors, is an open-label, dose-escalation and dose-expansion trial evaluating the safety, tolerability, pharmacokinetics and antitumor activity of Cami in combination with pembrolizumab, a checkpoint inhibitor.

ADCT-901

• The FDA has cleared the Investigational New Drug (IND) application for ADCT-901, targeting KAAG-1. The Company expects to initiate the Phase 1 study in the second half of 2021.

Corporate Update

• Geographic Expansion: ADC Therapeutics is committed to expanding its geographic footprint in order to provide ZYNLONTA and other novel treatments to patients who can benefit from them.
  • The Company expects to submit a regulatory filing in the second half of 2021 to the European Medicines Agency (EMA) for ZYNLONTA for the treatment of patients with relapsed or refractory DLBCL.
  • The Overland ADCT BioPharma joint venture in China is making good progress toward initiating a pivotal bridging study and seasoned executive Eric Koo was appointed CEO during the second quarter.

Upcoming Expected Milestones

ZYNLONTA

• Initiate a dose-finding study of ZYNLONTA in first-line DLBCL with R-CHOP in the second half of 2021.
• Initiate a clinical study to evaluate ZYNLONTA in multiple combinations in B-cell non-Hodgkin lymphoma in the second half of 2021.
• Complete safety lead-in of the Phase 3 LOTIS-5 confirmatory study of ZYNLONTA in combination with rituximab in the second half of 2021.
• Continue enrollment in the Phase 2 LOTIS-3 study of ZYNLONTA in combination with ibrutinib in the second half of 2021.

Earlier-Stage Pipeline

• Initiate Phase 1 study of ADCT-901, targeting KAAG1, in the second half of 2021.
• Initiate a Phase 1b combination study of ADCT-601 (mipasetamab uzoptirine), targeting AXL, in multiple solid tumors in the first half of 2022.

Second Quarter 2021 Financial Results

Cash and Cash Equivalents

Cash and cash equivalents were $371.9 million as of June 30, 2021, compared to $439.2 million as of December 31, 2020. During the second quarter of 2021, the Company drew down $50 million under its Convertible Credit Facility with Deerfield, which was contingent upon ZYNLONTA approval.

Research and Development (R&D) Expenses

R&D expenses were $39.5 million for the quarter ended June 30, 2021, compared to $26.0 million for the same quarter in 2020. R&D expenses increased due to investments in programs supporting the ZYNLONTA commercial launch and evaluating the potential of ZYNLONTA in earlier lines of treatment and additional histologies, and due to advancing the portfolio. As a result of these initiatives, employee headcount and share-based compensation expense increased.

Selling and Marketing (S&M) Expenses

During the second quarter of 2021, S&M expenses were $15.2 million, compared to $4.0 million for the same quarter in 2020. The increase in S&M expenses was related to the launch of ZYNLONTA. Prior to December 31, 2020, S&M expenses were reported within General and Administrative (“G&A”) expenses within the condensed consolidated interim statement of operations. The period ended June 30, 2020 has been recast to conform to the current year presentation.

G&A Expenses

G&A expenses were $19.4 million for the quarter ended June 30, 2021, compared to $15.0 million for the same quarter in 2020. G&A expenses increased due to higher headcount to support the commercial launch, increased share-based compensation expense and higher costs of being a public company.

Net Loss and Adjusted Net Loss

Net loss was $72.6 million, or a net loss of $0.95 per basic and diluted share, for the quarter ended June 30, 2021, compared to $126.6 million, or a net loss of $2.01 per basic and diluted share, for the same quarter in 2020. Net loss included share-based compensation expense of $18.3 million for the quarter ended June 30, 2021, compared to $12.7 million for the same quarter in 2020. In addition, net loss for the quarter ended June 30, 2021 includes a $2.1 million non-cash gain related to the changes in fair value of derivatives associated with the convertible loans under the Convertible Credit Facility with Deerfield, compared to a $79.3M charge for the same quarter in 2020. The decrease in fair value for the quarter ended June 30, 2021 was driven by the decrease in the Company’s share price from March 31, 2021. The increase in fair value for the quarter ended June 30, 2020 was driven by the increase in the Company’s share price from the April 2020 inception of the derivative.

Adjusted net loss was $53.7 million, or an adjusted net loss of $0.70 per basic and diluted share, for the quarter ended June 30, 2021, compared to $32.1 million, or an adjusted net loss of $0.51 per basic and diluted share, for the same quarter in 2020. The increase in adjusted net loss was primarily driven by the expansion of the organization, investment in the expanding clinical portfolio and the preparation for the launch of ZYNLONTA.

Conference Call Details

ADC Therapeutics management will host a conference call and live audio webcast to discuss second quarter 2021 financial results and provide a company update today at 8:30 a.m. Eastern Time. To access the live call, please dial 833-303-1198 (domestic) or +1 914-987-7415 (international) and provide confirmation number 6962756. A live webcast of the presentation will be available under “Events and Presentations” in the Investors section of the ADC Therapeutics website at ir.adctherapeutics.com. The archived webcast will be available for 30 days following the call.

About ZYNLONTA (loncastuximab tesirine-lpyl)

ZYNLONTA is a CD19-directed antibody drug conjugate (ADC). Once bound to a CD19-expressing cell, ZYNLONTA is internalized by the cell, where enzymes release a pyrrolobenzodiazepine (PBD) payload. The potent payload binds to DNA minor groove with little distortion, remaining less visible to DNA repair mechanisms. This ultimately results in cell cycle arrest and tumor cell death.

The U.S. Food and Drug Administration (FDA) has approved ZYNLONTA (loncastuximab tesirine-lpyl) for the treatment of adult patients with relapsed or refractory (r/r) large B-cell lymphoma after two or more lines of systemic therapy, including diffuse large B-cell lymphoma (DLBCL) not otherwise specified (NOS), DLBCL arising from low-grade lymphoma and also high-grade B-cell lymphoma. The trial included a broad spectrum of heavily pre-treated patients (median three prior lines of therapy) with difficult-to-treat disease, including patients who did not respond to first-line therapy, patients refractory to all prior lines of therapy, patients with double/ triple hit genetics and patients who had stem cell transplant and CAR-T therapy prior to their treatment with ZYNLONTA. This indication is approved by the FDA under accelerated approval based on overall response rate and continued approval for this indication may be contingent upon verification and description of clinical benefit in a confirmatory trial.

ZYNLONTA is also being evaluated as a therapeutic option in combination studies in other B-cell malignancies and earlier lines of therapy.

About ADC Therapeutics

ADC Therapeutics (NYSE: ADCT) is a commercial-stage biotechnology company improving the lives of those affected by cancer with its next-generation, targeted antibody drug conjugates (ADCs). The Company is advancing its proprietary PBD-based ADC technology to transform the treatment paradigm for patients with hematologic malignancies and solid tumors.

ADC Therapeutics’ CD19-directed ADC ZYNLONTA (loncastuximab tesirine-lpyl) is approved by the FDA for the treatment of relapsed or refractory diffuse large b-cell lymphoma after two or more lines of systemic therapy. ZYNLONTA is also in development in combination with other agents. Cami (camidanlumab tesirine) is being evaluated in a late-stage clinical trial for relapsed or refractory Hodgkin lymphoma and in a Phase 1b clinical trial for various advanced solid tumors. In addition to ZYNLONTA and Cami, ADC Therapeutics has multiple PBD-based ADCs in ongoing clinical and preclinical development.

ADC Therapeutics is based in Lausanne (Biopôle), Switzerland and has operations in London, the San Francisco Bay Area and New Jersey. For more information, please visit https://adctherapeutics.com/ and follow the Company on Twitter and LinkedIn.

ZYNLONTA™ is a trademark of ADC Therapeutics SA.

Use of Non-IFRS Financial Measures

In addition to financial information prepared in accordance with IFRS, this document also contains certain non-IFRS financial measures based on management’s view of performance including:

• Adjusted net loss

• Adjusted net loss per share

Management uses such measures internally when monitoring and evaluating our operational performance, generating future operating plans and making strategic decisions regarding the allocation of capital. We believe that these adjusted financial measures provide useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and facilitate operating performance comparability across both past and future reporting periods. These non-IFRS measures have limitations as financial measures and should be considered in addition to, and not in isolation or as a substitute for, the information prepared in accordance with IFRS. When preparing these supplemental non-IFRS measures, management typically excludes certain IFRS items that management does not believe are indicative of our ongoing operating performance. Furthermore, management does not consider these IFRS items to be normal, recurring cash operating expenses; however, these items may not meet the IFRS definition of unusual or non-recurring items. Since non-IFRS financial measures do not have standardized definitions and meanings, they may differ from the non-IFRS financial measures used by other companies, which reduces their usefulness as comparative financial measures. Because of these limitations, you should consider these adjusted financial measures alongside other IFRS financial measures.

The following items are excluded from adjusted net loss and adjusted net loss per share:

Shared-Based Compensation Expense: We exclude share-based compensation expense from our adjusted financial measures because share-based compensation expense, which is non-cash, fluctuates from period to period based on factors that are not within our control, such as our stock price on the dates share-based grants are issued. Share-based compensation expense has been, and will continue to be for the foreseeable future, a recurring expense in our business and an important part of our compensation strategy.

Certain Other Items: We exclude certain other significant items that may occur occasionally and are not normal, recurring operating expenses, cash or non-cash, from our adjusted financial measures. Such items are evaluated by management on an individual basis based on both quantitative and qualitative aspects of their nature and generally represent items that, either as a result of their nature or significance, management would not anticipate occurring as part of our normal business on a regular basis. While not all-inclusive, examples of certain other significant items excluded from our adjusted financial measures would be: changes in the fair value of derivatives, the gain recognized in connection with the receipt of the USD 50.0 million disbursement, establishment of the embedded derivative and residual loan, elimination of the derivative immediately prior to FDA approval of ZYNLONTA, the effective interest expense associated with the Facility Agreement with Deerfield, transaction costs associated with debt or equity issuances that are expensed pursuant to IFRS, as well as the non-cash gain related to the contribution of our intellectual property for our equity interest in Overland ADCT BioPharma.

See the attached Reconciliation of IFRS Measures to Non-IFRS Measures for explanations of the amounts excluded and included to arrive at the non-IFRS financial measures for the three-month periods ended June 30, 2021 and 2020.

Forward-Looking Statements

This press release contains statements that constitute forward-looking statements. All statements other than statements of historical facts contained in this press release, including statements regarding our future results of operations and financial position, business and commercialization strategy, products and product candidates, research pipeline, ongoing and planned preclinical studies and clinical trials, regulatory submissions and approvals, planned commercialization activities, research and development costs, timing and likelihood of success, as well as plans and objectives of management for future operations, are forward-looking statements. Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to our management. Such statements are subject to risks and uncertainties, and actual results may differ materially from those expressed or implied in the forward-looking statements due to various factors, including those described in our filings with the U.S. Securities and Exchange Commission. No assurance can be given that such future results will be achieved. Such forward-looking statements contained in this document speak only as of the date of this press release. We expressly disclaim any obligation or undertaking to update these forward-looking statements contained in this press release to reflect any change in our expectations or any change in events, conditions, or circumstances on which such statements are based unless required to do so by applicable law. No representations or warranties (expressed or implied) are made about the accuracy of any such forward-looking statements.

ADC Therapeutics SA
Condensed Consolidated Interim Statement of Operations (Unaudited)
(in KUSD except for share and per share data)
		Three Months Ended June 30,						Six Months Ended June 30,
		2021			2020 (1)			2021			2020 (1)
Product revenues, net		3,760			–			3,760			–
Operating expense
Cost of product sales		(121	)		–			(121	)		–
Research and development expenses		(39,533	)		(25,950	)		(78,705	)		(61,325	)
Selling and marketing expenses		(15,221	)		(4,004	)		(29,132	)		(6,632	)
General and administrative expenses		(19,367	)		(14,995	)		(36,949	)		(20,877	)
Total operating expense		(74,242	)		(44,949	)		(144,907	)		(88,834	)
Loss from operations		(70,482	)		(44,949	)		(141,147	)		(88,834	)
Other income (expense)
Other income		199			130			393			278
Convertible loans, derivatives, change in fair value income (expense)		2,053			(79,261	)		23,222			(79,261	)
Convertible loans, derivatives, transaction costs		(148	)		(1,571	)		(148	)		(1,571	)
Share of results with joint venture		(1,169	)		–			(1,696	)		–
Financial income		15			195			30			569
Financial expense		(2,555	)		(897	)		(4,555	)		(939	)
Exchange differences (loss) income		(242	)		(100	)		152			(71	)
Total other (expense) income		(1,847	)		(81,504	)		17,398			(80,995	)
Loss before taxes		(72,329	)		(126,453	)		(123,749	)		(169,829	)
Income tax expense		(240	)		(104	)		(347	)		(204	)
Net loss		(72,569	)		(126,557	)		(124,096	)		(170,033	)
Net loss attributable to:
Owners of the parent		(72,569	)		(126,557	)		(124,096	)		(170,033	)
Net loss per share, basic and diluted		(0.95	)		(2.01	)		(1.62	)		(2.97	)

(1) Prior period has been recast to conform S&M expenses to the current period presentation.

ADC Therapeutics SA
Condensed Consolidated Interim Balance Sheet (Unaudited)
(in KUSD)
		June 30, 2021			December 31, 2020
ASSETS
Current assets
Cash and cash equivalents		371,884			439,195
Accounts receivable, net		2,079			–
Inventory		7,718			–
Other current assets		12,751			11,255
Total current assets		394,432			450,450
Non-current assets
Property, plant and equipment		3,261			1,629
Right-of-use assets		8,077			3,129
Intangible assets		12,010			10,179
Interest in joint venture		46,212			47,908
Other long-term assets		394			397
Total non-current assets		69,954			63,242
Total assets		464,386			513,692
LIABILITIES AND EQUITY
Current liabilities
Accounts payable		14,631			5,279
Other current liabilities		29,450			30,375
Lease liabilities, short-term		988			1,002
Current income tax payable		237			149
Convertible loans, short-term		6,193			3,631
Total current liabilities		51,499			40,436
Non-current liabilities
Convertible loans, long-term		84,648			34,775
Convertible loans, derivatives		49,619			73,208
Deferred gain of joint venture		23,539			23,539
Lease liabilities, long-term		7,612			2,465
Defined benefit pension liabilities		3,551			3,543
Other non-current liabilities		–			221
Total non-current liabilities		168,969			137,751
Total liabilities		220,468			178,187
Equity attributable to owners of the parent
Share capital		6,445			6,314
Share premium		981,290			981,056
Treasury shares		(134	)		(4	)
Other reserves		74,971			42,753
Cumulative translation adjustment		301			245
Accumulated losses		(818,955	)		(694,859	)
Total equity attributable to owners of the parent		243,918			335,505
Total liabilities and equity		464,386			513,692

ADC Therapeutics SA
Reconciliation of IFRS Measures to Non-IFRS Measures (Unaudited)
(in KUSD except for share and per share data)
		Three Months Ended June 30,						Six Months Ended June 30,
in KUSD (except for share and per share data)		2021			2020			2021			2020
Net loss		(72,569	)		(126,557	)		(124,096	)		(170,033	)
Adjustments:
Share-based compensation expense (i)		18,267			12,734			32,218			16,524
Convertible loans, derivatives, change in fair value (ii)		(2,053	)		79,261			(23,222	)		79,261
Convertible loans, first and second tranche, derivatives, transaction costs (iii)		148			1,571			148			1,571
Effective interest expense (iv)		2,450			868			4,432			868
Adjusted net loss		(53,757	)		(32,123	)		(110,520	)		(71,809	)
Net loss per share, basic and diluted		(0.95	)		(2.01	)		(1.62	)		(2.97	)
Adjustment to net loss per share, basic and diluted		0.25			1.50			0.18			1.72
Adjusted net loss per share, basic and diluted		(0.70	)		(0.51	)		(1.44	)		(1.25	)
Weighted average shares outstanding, basic and diluted		76,728,714			62,863,866			76,725,210			57,225,939

Contacts

Investors
Eugenia Litz

ADC Therapeutics

Eugenia.Litz@adctherapeutics.com
+44 7879 627205

Amanda Hamilton

ADC Therapeutics

amanda.hamilton@adctherapeutics.com
Tel.: +1 917-288-7023

USA Media
Mary Ann Ondish

ADC Therapeutics

maryann.ondish@adctherapeutics.com
Tel.: +1 914-552-4625

EU Media
Alexandre Müller

Dynamics Group

amu@dynamicsgroup.ch
Tel: +41 (0) 43 268 3231

Read full story here

GEORGETOWN, Texas & SOMERSET, N.J. — (BUSINESS WIRE) — DisperSol Technologies, a clinical-stage pharmaceutical company developing new treatments for oncology and rare diseases, and Catalent, the leading global provider of advanced delivery technologies, development, and manufacturing solutions for drugs, biologics, cell and gene therapies, and consumer health products, today announced a strategic manufacturing collaboration to accelerate the development of multiple DisperSol pharmaceutical products. The collaboration will see the installation of a commercial-scale KinetiSol^® technology manufacturing line at Catalent’s oral solids development and manufacturing facility in Somerset, New Jersey.

The KinetiSol platform is a disruptive innovation in amorphous solid dispersion manufacturing owned by DisperSol that is often the best and sometimes the only method to turn molecules with great clinical promise but poor bioavailability into viable medicines for patients. KinetiSol technology underlies all of DisperSol’s pipeline programs including Phase 3 ready KDFX for iron overload disorder, and KABE, which recently commenced Phase 2 studies against prostate cancer.

 

As part of the agreement, DisperSol will tech transfer its proprietary equipment, software and know-how to a dedicated suite in Catalent’s Somerset facility. In turn, Catalent will provide staff for development, scale up, and commercial stage KinetiSol production, as well as associated capabilities including process engineering, Quality Control and Assurance.

 

“This strategic collaboration with Catalent is integral to our company as we now move into late clinical-stage development and commercial-scale manufacturing of our products,” said Dr. Edward M. Rudnic, DisperSol’s Chief Executive Officer. “The commercial amorphous solid dispersion manufacturing expertise of Catalent’s team and their globally accredited quality systems make them a perfect partner for DisperSol.”

 

“Catalent is thrilled to partner with innovators to accelerate development of novel disruptive technologies to scale. Our Somerset development center has a track record of introducing and industrializing new oral technologies such as the KinetiSol platform,” commented Jeremie Trochu, Vice President, Operations, Early Phase Development at Catalent. “We look forward to working together to accelerate DisperSol’s pipeline of medicines, so that patients can benefit from the wide-ranging treatments that it has developed.”

 

About DisperSol

DisperSol is a clinical-stage drug development company focused on developing new treatments for patients utilizing its proprietary KinetiSol^® technology platform. KinetiSol has proven capable of creating novel therapeutics from poorly bioavailable drugs to deliver unique clinical benefits to patients. The platform enables a drug development path forward to patients when other options fail to make a difference. DisperSol’s active programs include, DST-0509 about to enter Phase 3 for iron overload disorder, DST-2970 in Phase 2 for refractory metastatic prostate cancer and DST-8294 for treatment of clotting disorders. Additional earlier-stage programs include, DST-0058 and DST-5407 for idiopathic pulmonary fibrosis and non-squamous non-small cell lung cancer, respectively.

For more information, visit www.dispersoltech.com.

 

ABOUT CATALENT

Catalent is the leading global provider of advanced delivery technologies, development, and manufacturing solutions for drugs, biologics, cell and gene therapies, and consumer health products. With over 85 years serving the industry, Catalent has proven expertise in bringing more customer products to market faster, enhancing product performance and ensuring reliable global clinical and commercial product supply. Catalent employs approximately 15,000 people, including over 2,400 scientists and technicians, at more than 45 facilities, and in fiscal year 2020 generated over $3 billion in annual revenue. Catalent is headquartered in Somerset, New Jersey. For more information, visit www.catalent.com

More products. Better treatments. Reliably supplied.™

Contacts

DisperSol Contacts

Media:
Raj SheelVice President, Business Development & Marketing, DisperSol, (512) 686-5185, raj.sheel@dispersoltech.com

Investors:
David Snyder, Chief Financial Officer, DisperSol, (512) 686-2223, david.snyder@dispersoltech.com

Catalent Contacts

Media:
Chris Halling, Director, Global Communications and Marketing, Catalent, +44 (0)7580 041073, chris.halling@catalent.com
Richard Kerns, Proprietor, Northern Exposure PR, +44 (0)161 728 5880, richard@nepr.agency

OLDWICK, N.J. — (BUSINESS WIRE) — #insurance—AM Best has affirmed the Financial Strength Rating of A+ (Superior) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “aa-” (Superior) of Midland National Life Insurance Company (Midland National) and North American Company for Life and Health Insurance (North American) (both domiciled in West Des Moines, IA). In addition, AM Best has affirmed the Long-Term ICR of “a-” (Excellent) and the Long-Term Issue Credit Rating of “a-” (Excellent) on the $200 million, 7.0% senior unsecured notes, due 2043, the $500 million, 4.45% senior unsecured notes, due 2027, and the $850 million, 3.35% senior unsecured notes, due 2031, of Sammons Financial Group, Inc. (Delaware). The outlook of these Credit Ratings (ratings) is stable. Sammons Financial Group, Inc. is an intermediate holding company for Midland National and North American, and is indirectly owned by Sammons Enterprises, Inc. Midland National and North American – the group’s key life/health insurance subsidiaries – are jointly referred to as the Sammons Financial Group (SFG).

The ratings reflect SFG’s balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, favorable business profile and appropriate enterprise risk management.

 

SFG maintains a very strong level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), despite a noticeable decline over the past year due to a significant increase in annuity sales and a strategic decision to acquire lower rated corporate bonds during the pandemic. The overall balance sheet strength has been supported historically by increasing levels of capital and surplus and a relatively high quality general account investment portfolio. In addition, SFG maintains very good liquidity with strong cash flows from operations, access to the Federal Home Loan Bank and surrender charge protection on the majority of its inforce annuities. The group also has good financial flexibility with demonstrated access to the capital markets if needed.

 

SFG benefits from a diverse distribution platform, which includes personal producing agents, independent marketing organizations, broker/dealers and banks, as well as credit unions. In addition, SFG has increased its focus and expansion into the registered investment adviser channel over the past year. The group also offers a wide array of product offerings with generally favorable market positions in its core lines of business and has recently entered the pension risk transfer market with some initial success. This diversification, along with historical investments in digital capabilities, has enabled the company to significantly increase premiums over the past year despite industry-wide sales disruptions from the pandemic and is supportive of the current business profile assessment. In addition, SFG maintains an extensive enterprise risk management program that is continually evolving and is commensurate with its risk profile.

 

While SFG has generally produced solid earnings in the past five years, they have been pressured by spread compression within the annuity line of business. Additionally, life insurance-related earnings have experienced some volatility due to lack of scale and spread compression within its interest-sensitive universal life insurance segment, along with an increase in mortality over the past year due to the COVID-19 pandemic. Although SFG’s general account investment portfolio experienced an elevated level of impairments over the past year, it was primarily confined to investments within airline securitizations in its asset-backed securities portfolio as well as its investments in the energy sector, two areas hardest hit by the pandemic. AM Best believes that SFG may experience further impairments over the near to medium term but will remain within a manageable range for the group.

 

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

 

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

 

Copyright © 2021 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

Contacts

Michael Adams

Associate Director
+1 908 439 2200, ext. 5133
michael.adams@ambest.com

Rosemarie Mirabella
Director
+1 908 439 2200, ext. 5892
rosemarie.mirabella@ambest.com

Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159
christopher.sharkey@ambest.com

Jim Peavy
Director, Communications
+1 908 439 2200, ext. 5644
james.peavy@ambest.com