Advanced Medical Solutions Group shares tanked on Monday after announcing the removal of key royalty revenue from their profit forecasts for the year ending 31 December 2023.
The company stated that due to uncertainty around the revenue outlook for products licensed from AMS, it believes it is prudent to remove royalty income from Organogenesis Inc. in its entirety from Q4 2023 guidance onwards.
Advanced Medical Solutions (LON:AMS) shares were down over 30% at the time of writing on Monday.
This removal of this royalty revenue is expected to significantly impact AMS’s adjusted pre-tax profit. For the 2023 full year, AMS anticipates the lower royalty will reduce its profit by £2 million. Additionally, in fiscal years 2024 and 2025, eliminating the royalty is forecast to cut pre-tax profit by £4 million annually. A similar pro-rata reduction is projected through September 2026 until the conclusion of the licensing agreement.
The update comes after AMS’s first half was affected by decreased royalties from the patent deal with Organogenesis. Recently, Organogenesis reported US reimbursement changes that have created uncertainty around revenues for key products using AMS patents.
With Organogenesis withdrawing its own guidance and AMS having minimal visibility into its sales, AMS stated it cannot quantify the financial impact at this stage. The combined impact is expected to lower AMS’s 2023 revenues to approximately £124-127 million and adjusted pre-tax profit to about £25-27 million.
AMS said its confidence remains intact, and guidance beyond 2023 is unchanged except for the Organogenesis royalty adjustment. Further details will be shared when AMS announces interim results on 20 September.