Photocure ASA: Market update #2

Oslo, Norway, 7 April 2020: The Board of Directors and Management of Photocure ASA (OSE:PHO) follow the COVID-19 situation closely and have implemented strict measures to ensure the safety of patients, customers, employees and business partners while maintaining an uninterrupted level of service and supply. The company today provides the second COVID-19 Oslo Stock Exchange notification to ensure updated and transparent stakeholder information.

“The pandemic continues to bring tremendous hardship on those affected by the virus; families, communities and business. The Photocure team expresses its sincere gratitude to the many healthcare professionals around the world providing lifesaving care and support. Our main priority is to ensure safe operations and an uninterrupted supply of Hexvix®/Cysview® while maintaining business in this new uncharted business and healthcare environment. Bladder cancer treatments are a prioritized procedure for the healthcare systems, but we must expect short-term postponements as resources are reallocated to prepare for the exponentially growing number of COVID-19 patients in the coming weeks and months,“ says Daniel Schneider, President & Chief Executive Officer of Photocure.

Photocure has adapted a framework for disclosure of COVID-19 related information*, suggesting several topics for a risk and effect assessment, including the following:

  • COVID-19 impact on financial condition and results of operations.
    Photocure comment: Bladder cancer treatments are prioritized procedures for the healthcare systems, but Photocure expects restricted access to hospitals. Short-term postponements of procedures and cystoscope installations will be temporarily slowed. Hospitals are reallocating health care providers and resources to handle the increase of COVID-19 patients. The long-term outlook remains strong, but the visibility, especially in the U.S. remains limited for the coming weeks and months.
     
  • COVID-19 impact on capital and financial resources, including overall liquidity position and outlook.
    Photocure comment: The company had a cash position of NOK 123 million at the end of March 2020 and carries no interest-bearing debt. Cost saving exercises are being implemented to reduce cash burn through the restricted access period. In addition, the company is pursuing various governmental subsidies and programs to further help bridge this short-term period.  Postponements of procedures will affect the short-term kit shipments, impacting the working capital, but Photocure has a solid financial position.
     
  • COVID-19 impact on balance sheet and the ability to timely account for those assets.
    Photocure comment: The company expects the COVID-19 situation to have short-term impact on the balance sheet, but an extended and profound virus situation in the U.S. with a major and lasting impact on the business environment, may challenge booked values.  
     
  • COVID-19 impact on impairments, increases in allowances for credit losses, restructuring charges, other expenses, or changes in accounting judgments that have had or are reasonably likely to have a material impact on the financial statements.
    Photocure comment: The company expects the COVID-19 situation to have impact on the short-term financial statements, but an extended and profound virus situation in the U.S., with a major and lasting impact on the business environment, may affect the financial statements. 

     
  • COVID-19 impact on circumstances such as remote work arrangements adversely affecting the ability to maintain operations, including financial reporting systems, internal control over financial reporting and disclosure controls and procedures.
    Photocure comment: The company has implemented remote work arrangements across its locations and is fully operational. All functions are designed to accommodate remote work and no disruptions are expected. The main priority of the organization is the health and welfare of all Photocure employees and stakeholders. Business and travel policies which supported work from home and social distancing were implemented prior to governmental orders. Where access to hospitals and clinics is restricted because of the situation, Photocure’s sales force maintains contact as needed through remote channels in order to guarantee optimal service and support.
     
  • COVID-19 impact on implementing business continuity plans.
    Photocure comment: In light of the seriousness of the current COVID-19 global health care crisis, the evolving circumstances require a different way of working between Photocure and the health care providers. In a changing environment, the company will continue to adapt to any new way of working to provide our partners with uninterrupted service in treating patients with bladder cancer. The company intends to keep the lines of communications open and plans to offer a variety of means to keep Blue Light Cystoscopy with Cysview in the forefront of patient care.
     
  • COVID-19 impact on the demand for products or services.
    Photocure comment: Bladder cancer treatments are prioritized procedures for the healthcare systems, but the company expects short-term postponements, especially in the low and medium risk patient category, as resources are reallocated to prepare for the exponentially growing number of COVID-19 patients. In addition, the opening of new accounts and placement of new scopes will be affected in the short-term. The long-term outlook remains strong, but the visibility, especially in the U.S. will stay low for the coming weeks and months.
     
  • COVID-19 impact on supply chain.
    Photocure comment: The company has increased the inventory of Hexvix®/Cysview® to accommodate the estimated procedures through the first quarter of 2021 and production remains at full capacity and on schedule. The international distribution lines are uninterrupted and the inventory levels of kits at partners and hospitals remain satisfactory.
     
  • COVID-19 impact on human capital resources and productivity.
    Photocure comment: The company has a highly specialized workforce committed to improving patients’ lives. The majority of their work requires interaction with healthcare providers.  In the short-term, many institutions are restricting access to protect patients, providers and suppliers from contracting COVID-19. Photocure supports any employees willing to volunteer their medical expertise to the communities in which they reside.

    The U.S. sales team is supporting customers remotely and dedicating administrative time to develop business plans to accelerate recovery after the quarantine measures are lifted. Training sessions and virtual educational events with leading urologists are also being organized and executed.
     
  • COVID-19 impact on ability to operate and achieve business goals following travel restrictions and border closures.
    Photocure comment: Border closures do not affect the company´s national and regional sales force. However, in many cases, hospital restrictions prohibit supplier sales representatives from entry into the buildings. The long-term outlook remains strong, but short-term business development initiatives will be limited in the coming weeks following the travel restrictions and social distancing measures.

“Photocure has a cash position of NOK 123 million at the end of March 2020 and carries no interest-bearing debt. We have a strong underlying sales momentum in the U.S when returning to a normalized business environment, providing a solid platform for long-term growth. Short term business development and operations will be affected by this unprecedented crisis in various ways, but we remain confident in the significant commercial opportunities in the U.S. and reiterate our long-term ambitions”, Schneider concludes.

*Division of Corporation Finance Securities and Exchange Commission CF Disclosure Guidance: Topic No. 9. Date: March 25, 2020.

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