LONDON (ShareCast) - (Sharecast News) - Tissue-healing technology specialist Advanced Medical Solutions Group updated its financial outlook for the year on Monday, amid reduced royalty income and extended destocking.
The AIM-traded firm had earlier reported that its first-half performance had been affected by reduced royalty income generated from its patent licensing agreement with Organogenesis - a deal set to expire in September 2026.

It said that further complications arose in August, when Organogenesis announced that changes to US reimbursement policies for diabetic foot ulcers and venous leg ulcers had cast a shadow over the revenue potential of some of its key products, including those using AMS patents.

Due to those developments, and a lack of control or substantial insight into Organogenesis's sales, AMS said it was opting for a cautious approach by excluding that royalty income from its fourth quarter guidance.

The company expected that would result in a £2 million reduction in its adjusted pre-tax profit for the full year.

In 2024 and 2025, AMS said it anticipated a yearly £4m reduction in adjusted pre-tax profits, with similar pro-rata impacts expected until the agreement's end in September 2026.

Elsewhere, AMS introduced an enhanced partner strategy for LiquiBand, its tissue adhesive product, in the US market in March.

Although discussions with partners were said to have been positive, and progress made on new agreements, the process had taken longer than initially expected.

As a result, the destocking of LiquiBand was impacting the firm's revenues more significantly than previously estimated for the current fiscal year.

Despite those setbacks, AMS said it maintained that the destocking had not affected end-user demand for LiquiBand.

The pipeline for evaluations and conversions of the product's new version, LiquiBand XL, continued to show robust growth.

As such, the board said it remained optimistic about the product's future prospects, retaining unchanged sales forecasts for 2024 and beyond.

Taking into account those developments, AMS said it had adjusted its revenue expectations for 2023 to between £124m and £127m, down from previous projections.

The adjusted pre-tax profit was now anticipated to be in the range of £25m to £27m.

Despite the challenges facing the company in the short term, the board's guidance for future years, apart from the Organogenesis royalty adjustment, remained unchanged.

"While the uncertainty in the Organogenesis royalty stream and the higher destocking of US LiquiBand is clearly disappointing, my confidence in AMS's long term growth prospects is stronger than ever," said chief executive officer Chris Meredith.

"We remain convinced that our new US LiquiBand partner strategy will drive accelerated growth from early 2024 and that this, in conjunction with other initiatives such as the imminent launch of LiquiBand Fix8 in the US, will enable AMS to return to strong growth in 2024 and beyond."

The company said it would provide further information when it announces its interim results on 20 September.

At 0937 BST, shares in Advanced Medical Solutions Group were down 25.71% at 187.55p.

Reporting by Josh White for Sharecast.com.

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