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Our footprint and capabilities
Our international segment is predominantly made up of Alliance Medical Group (AMG), Europe's leading independent provider of imaging services including MRI, CT and PET-CT scanning capabilities. Life Radiopharma, an AMG subsidiary, manufactures and distributes radioisotopes for our PET-CT scanning facilities, and also sells these products to third parties. Life Molecular Imaging (LMI), a research and development company, is dedicated to developing and globally commercialising innovative molecular imaging agents for use in PET-CT diagnostics.
ALLIANCE MEDICAL GROUP FOOTPRINT
| Sites | Scanners | Cyclotron sites | ||||
| United Kingdom (UK) | DI static | 36 | MRI | 69 | 5 | |
| PET-CT contract | 38 | CT | 29 | |||
| Mobiles | 57 | PET-CT | 39 | |||
| Italy | Owned clinics | 34 | MRI | 43 | 1 | |
| Static sites | 7 | CT | 20 | |||
| PET-CT | 4 | |||||
| Ireland | Operating sites | 32 | MRI | 28 | ||
| CT | 6 | |||||
| PET-CT | 1 | |||||
| Other (Northern Europe and US) | Operating sites (Spain) | 4 | MRI | 10 | 5 | |
| Mobiles and relocatable sites (N Europe) | 29 | CT | 10 | |||
| PET-CT | 9 | |||||
We are expanding the network of third party manufacturing sites, particularly in the US, but also in parts of Asia and Latin America, as part of our ramping up of NeuraCeq® production.
More on this on LIFE MOLECULAR IMAGING.
When AMG is looked at in conjunction with LMI, these combined international operations provide a unique vertically integrated business.
| OUR OPERATING ENVIRONMENT | Looking forward to 2022 | |||||
| Our international operations, including LMI, are the fastest growing part of the Group, and have proven to be the most resilient during the COVID-19 pandemic. We expect to see continued expansion of this segment’s overall % contribution of Group revenue, as part of our strategy to grow our non-acute and international operations. |
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| Europe and the UK were severely impacted by the COVID-19 pandemic, particularly early in 2020. Extensive government fiscal support for local economies, and job protection programmes, helped to cushion the financial impact of lockdowns. |
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| UK government job protection programmes led to limited loss of jobs compared with the US and South Africa |
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| COVID-19 lockdowns disrupted diagnostic scanning activities within the UK, which led to a significant increase in the number of patients waiting longer than 6 weeks for their diagnostic scan. The NHS England target for this metric is for less than 1% of patients to wait >6 weeks. |
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| Rapid vaccination roll-outs have also allowed faster reopening of European economies. While vaccines have been shown to reduce severe infections, hospitalisations and death from COVID-19, waning immunity >6 months after being vaccinated pose risks to governments wanting to open up their economies. |
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How we performed in 2021
ALLIANCE MEDICAL GROUP
AMG performed strongly during 2021, due to both COVID-19-related contracts carried out for public sector health services and increasing demand for our services as COVID-19-related lockdowns across all our territories were relaxed.
Revenue grew by 21.0% to £368 million (2020: £304 million) and normalised EBITDA grew by 40.7% to £89.2 million (2020: £63.4 million) resulting in the normalised EBITDA margin expanding to 24.2% (2020: 20.9%). This performance was driven by pleasing contributions from all sub-segments, as we detail below.
AMG's capex spend in 2021 totalled £35 million, of which £12 million was invested in growth opportunities, including mobile CT capacity and additional imaging sites in Ireland.
AMG's maintenance capex spend in the 2022 financial year is expected to be around £33 million, of which a significant proportion of this is within the UK and includes spend within our PET-CT contracts where we are expanding scanning capacity on existing sites. Growth capex of £26 million has been allocated to spend on Community Diagnostics Centres (CDC) in the UK, new sites in Ireland as well as further increasing sites providing PET-CT imaging.
The NHS's CDC strategy will fundamentally change how MR and CT services are delivered in England, moving services from acute hospitals to new community centres. The strategy is being followed by the NHS as a result of recommendations in the NHS-commissioned "Sir Mike Richard's review", which can be found at:
https://www.england.nhs.uk/publication/diagnostics-recovery-and-renewal-report-of-the-independent-review-of-diagnostic-services-for-nhs-england
AMG is at the forefront of this initiative having already entered into an agreement to build a CDC for an NHS Foundation Trust (the Trust) in the North East of England to deliver MRI, CT and PET-CT services. The key features of this approximately c.£9 million investment are as follows:
- The centre will house two MRI, two CT scanners and one PET-CT scanner on day one, with space for additional scanners in due course
- AMG has agreed a long-term contract which the Trust has an option to extend
- The building work commences in late 2021, with completion due in early 2023
This is an exciting model for future diagnostic capacity in the UK, and one which AMG is preparing to play a meaningful role in delivering.
United Kingdom (UK)
Looking ahead
In our UK operations Diagnostic Imaging (DI) volumes have returned to pre-COVID-19 levels. This was partly attributable to the COVID-19-related CT contracts entered into with the NHS as well as increased demand following the easing of COVID-19 restrictions in the UK. The COVID-19-related CT contracts initially ended on 31 March 2021 but were then extended for a further 6 months until 30 September 2021, albeit at reduced revenue per day compared with the initial contracts in the H1-2021 period. These contracts have now come to an end. For the 2021 period, UK DI volume growth was 16.2% year-on-year. H2-2021 volumes were 44.4% higher than H2-2020 and 4.3% higher than H1-2021.
PET-CT volumes have continued to grow strongly in
H2-2021 and were 33.5% higher than H2-2020 volumes and 8.5% above H1-2021. For the 2021 period PET-CT volume growth was 18.8% year-on-year.
These strong operational results saw revenue from the UK operations for 2021 increase 21.7% year-on-year to £193 million in (2020: £158 million).
With the expiry of the COVID-19-related contracts, we expect some headwinds to revenue and EBITDA growth in 2022, unless local NHS trusts decide to contract out some of this work to private providers.
We are also preparing ourselves for the introduction of Community Diagnostic Centres in the UK via a competitive tendering process. We believe that these one-stop diagnostic facilities within a community setting (as opposed to a hospital setting), are a compelling and convenient diagnostic model, and are confident that our capabilities and service delivery record will enable us to win some of these contracts.
52%
of AMG REVENUE
Italy
Looking ahead
Our Italian diagnostic business is quite different from our other European businesses in that it is clinic-based and covers a wider array of services including routine laboratory work and x-rays in addition to the diagnostic imaging and PET-CT scanning volumes.
For the 2021 period Italian DI volumes were higher than pre-COVID levels with growth 9.1% higher year-on-year. H2-2021 volumes were 10.1% higher than the H2-2020 period but down 7.3% on H1-2021 volumes. This decline relative to
H1-2021 represents typical pre-COVID seasonality related to the timing of the public healthcare (ASL) budget cycle. Some of the Italian volume uplift has been related to COVID-19-related services like blood testing and other COVID-19 screening.
2021 revenue from the Italian business was up 18.4% year-on-year to £104 million (FY2020: £88 million).
ASL budgets have remained largely flat for many years and we do not foresee this changing. Growth is therefore likely to remain linked to volume and/or acquisitive growth.
28%
of AMG REVENUE
Ireland
Looking ahead
The Irish business continued to benefit from a general rebound in activity and increased public sector contracting. For the 2021 period Irish volumes exceeded pre-COVID levels and growth was 34.2% higher year-on-year. H2-2021 volumes were 51.7% higher than the H2-2020 period and 16.3% higher than the H1-2021 period.
The business has seen good growth from private sector demand. This is largely out-of-pocket expenditure on scanning.
The strong rebound in scanning volumes 2021 saw revenue from the Irish business grow by 38.6% year-on-year to £38 million (2020: £27 million).
Continued growth in Ireland is likely in the absence of further COVID-19 waves.
If public sector contracts become more prevalent, it is likely that we will see some reduced demand from private paying patients.
10%
of AMG REVENUE
Other (Northern Europe and US)
This sub-division includes facilities in Spain, Germany, Netherlands, Austria, Switzerland, Poland, Estonia, Finland, Norway and the United States. Revenue is generated from both diagnostic imaging services and from AMG's radiopharmacy business (Life Radiopharma) which manufactures and distributes radioisotopes for our PET-CT scanning facilities, and also sells these products to third parties.
During the year our diagnostic imaging contract in Spain came to an end after 17 years. The ongoing volumes and revenue relate to our Northern European services and radiopharmacy revenue.
Radiopharmacy revenue is derived from manufacturing isotopes in our cyclotrons and selling them to our own PET-CT scanning facilities and to third parties. The revenue and volumes disclosed here exclude isotope manufacturing from LMI. Radiopharmacy doses produced grew by 15% to 204 472 doses in 2021 (2020: 177 945) including volumes derived from the cyclotron we purchased in Italy during the year.
Revenue for 2021 grew by 9.1% to £33 million (2020: £30 million).
9%
of AMG REVENUE
LMI has developed a pipeline of novel imaging agents that address major unmet clinical needs in neurological, oncological and cardiovascular diseases.
The key development during the year was the FDA approval of Biogen's Aduhelm®, a key milestone event for LMI's only approved radioisotope, NeuraCeq®. We highlight some key points on NeuraCeq® separately below. This event triggered the commencement of our Invest for Success programme (see commentary below).
During 2021 LMI saw continued demand for NeuraCeq® for use as part of ongoing clinical trials for potential Alzheimer's drugs.
NeuraCeq® is currently LMI's flagship product. It is a radiotracer, which when used as part of a PET-CT scan, enables the identification of amyloid proteins, which are central to the diagnosis of Alzheimer's diseases (AD).
AD makes up a significant proportion of dementia cases and the prevalence of dementia is expected to grow from 50 million people to 152 million by 2050*.
NeuraCeq® was granted US Federal Drug Administration (FDA) approval as a beta-amyloid radiotracer in 2014 and it has been used extensively in various pharmaceutical companies' research efforts to develop Alzheimer's disease modifying drugs.
With the recent FDA approval of Biogen's Aduhelm® (an Alzheimer's DMD agent which reduces beta-amyloid deposits in the brain), we believe Aduhelm® will become widely used in the US and Europe, and PET-CT scans using NeuraCeq® will soon be reimbursed as a key diagnostic approach.
In anticipation of these approvals, we are rapidly expanding our NeuraCeq® production capability (both inhouse and via third party manufacturing agreements).
* According to forecasts by The Economist
Below: Amyloid plaques highlighted (on the right) by amyloid tracer
This demand increased following the Biogen approval, although we have seen very little ramp-up in clinical demand for NeuraCeq® related to PET-CT scanning for patients about to start Aduhelm® treatment. This is likely to remain the case until reimbursement of Aduhelm® within the US is finalised, along with the pathways patients, will need to take prior to commencing treatment with Aduhelm®.
LMI saw revenue grow to £19 million, up 25.4% versus 2020 revenue of £15 million. This growth was largely on the back of NeuraCeq® sales.
LMI's pipeline includes a number of additional products which may assist in scanning for other neuro-degenerative conditions such as Parkinson's disease and Progressive supranuclear palsy (PSP), as well as two cardiovascular products. LMI's full product pipeline is shown below.
Looking ahead
We anticipate US reimbursement for Aduhelm® will be forthcoming during early 2022, with news from European and UK regulators expected later on in 2022. These events will likely lead to rapid uptake of amyloid diagnostic testing, including PET-CT scanning, in these regions. As part of our Invest for Success programme we have begun to ramp-up our capability to meet this demand by expanding our third-party manufacturing agreements (see the chart above) and by hiring a commercial operating officer in the US during 2021 to build out our US sales force.
During 2021 our Invest for Success programme saw us committing to invest £7 million on headcount (opex) and £2 million on manufacturing equipment, intellectual property and technology transfers (capex), of which £1 million was spent during 2021.