Enzymotec Ltd. Reports Third Quarter 2016 Unaudited Financial Results

Nutrition Segment increased Adjusted EBITDA* to $4M, representing 27% year-over-year and 17% sequential growth

VAYA Pharma sales to patients grew 45% year-over-year, but inventory destocking by wholesalers driven by the rapid adoption of VAYA's online pharmacy negatively impacts EPS by $0.05

MIGDAL HA'EMEQ, Israel, Nov. 16, 2016 (GLOBE NEWSWIRE) -- Enzymotec Ltd. (Nasdaq:ENZY), a developer, manufacturer and marketer of innovative bio-active lipid ingredients and medical foods, today reported financial results for the third quarter ended September 30, 2016.

Third Quarter 2016 Financial and Operational Highlights
  • Net revenues decreased 8.2% and 2.7% to $11.4 million, compared to the third quarter of 2015 and the second quarter of 2016, respectively.
  • Net revenues (utilizing the proportionate consolidation method that is used for segment reporting) increased 1.4% and 1.6% to $15.2 million, compared to the third quarter of 2015 and the second quarter of 2016, respectively.
  • Gross margin increased 590 basis points to 66.0%, from 60.1% in the third quarter of 2015 and decreased 400 basis points from 70.0% in the second quarter of 2016.
  • Selling and marketing expenses increased 62.5% to $4.3 million, compared to the third quarter of 2015 and decreased 11.6%, compared to the second quarter of 2016.
  • Adjusted EBITDA* decreased 54.0% and 21.5% to $1.3 million, compared to the third quarter of 2015 and the second quarter of 2016, respectively.
  • GAAP net loss for the third quarter amounted to $(0.4) million, or $(0.01) per diluted share, compared to GAAP net income of $1.5 million in the third quarter of 2015 and GAAP net income of $0.2 million in the second quarter of 2016.
  • Non-GAAP net income* decreased 68.3% and 24.1% to $0.6 million, or $0.03 per diluted share, compared to the third quarter of 2015 and the second quarter of 2016, respectively.
  • The Company provides updated guidance for the full fiscal year ended December 31, 2016.
  • Announced departure of Dr. Ariel Katz, President and Chief Executive Officer, by the end of May 2017.
  • Board of Directors to initiate search for permanent replacement for CEO position.

* A reconciliation of non-GAAP financial measures to GAAP financial measures is set forth below.

Recent Business Highlights:

Nutrition Segment
  • Generated $4.0 million in Adjusted EBITDA in the third quarter, representing 27% year-over year and 17% sequential growth.
  • New infant formula launches result in strong sales of INFAT ®.
  • Granted new patents for INFAT ® by U.S. Patent and Trademark Office and phospholipid-based products in Canada and Korea.

VAYA Pharma Segment
  • Third quarter "sales out", or sales to end-users, based on IMS data and VAYA Pharma's online sales channel grew 45% year-over-year and 14% sequentially.
  • VAYA Pharma's online pharmacy accounted for approximately 45% of total prescriptions.
  • Growth focused in the online pharmacy led to an inventory destocking by wholesalers, negatively impacting sales by $1.5 million in the third quarter.
  • Recruitment of three clinical trials in Autism and ADHD near completion, which is expected to slightly decrease research and development expenses in 2017.
  • Granted patent for Vayacog ® in Japan.

"Infant nutrition continued to perform well, helping to generate over $4.0 million in Adjusted EBITDA in the Nutrition segment for the third quarter, led by the increased adoption of INFAT by a growing number of leading infant formula companies. We believe that INFAT along with our pipeline of new infant nutritional products will be key growth drivers for Enzymotec in the future. VAYA Pharma's results for the quarter were negatively impacted by wholesalers selling through existing inventory since our sales-out growth came primarily from our online channel, which hurt our overall results. This trend may continue over the coming quarters, as we expect the bulk of future sales growth to flow through our online pharmacy resulting in a slower growth rate in the wholesale channel. We believe that the aggregate impact of any future destocking should not exceed $1.0 million. When the wholesaler channel growth rate stabilizes, we believe VAYA Pharma's fluctuation in quarterly sales may lessen. VAYA Pharma's efficient and primarily self-pay business model continues to generate strong growth in demand for our prescription products and we remain determined to significantly reduce the losses in this business and bring it towards profitability by the end of next year," commented Dr. Ariel Katz, Enzymotec's President and Chief Executive Officer.

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