GENEVA, Switzerland, April 20 /PRNewswire-FirstCall/ -- Serono , today reported its first quarter results for the period ended March 31, 2006.
Key Points for First Quarter 2006
- Strong underlying top-line performance with total revenues up 11.0% (+16.4% in local currencies) to $667.5m and product sales up 7.9% (+13.4% in local currencies) to $594.9m
- Reported net income of $179.9m and basic EPS of $12.29 per bearer share and $0.31 per ADS
- Adjusted* net income up 76.1% to $171.6m and adjusted* basic EPS up 75.2% to $11.72 per bearer share and $0.29 per ADS
- Rebif(R) worldwide sales up 11.7% (+17.7% in local currencies) to $327.0m
- Gonal-f(R) sales of $139.1m increased vs both Q1 2005 and Q4 2005 - Good progress in late-stage clinical programs: - Rebif(R) new formulation filed in USA and Europe - Positive outcome from Phase III study of Phenoptin for PKU - 2006 EPS outlook raised to $45.00 per bearer share
"Our strong first quarter top-line performance reflects a healthy business across the board. I am pleased with the performance of our Reproductive Health franchise, particularly in the US, as well as with the underlying growth of our Rebif(R) worldwide sales of 17.7%," said Ernesto Bertarelli, Chief Executive Officer. "Moving forward we will continue to invest in our existing businesses and R&D pipeline, and we intend to actively pursue opportunities for growth through acquisitions."
"Given the strength of our financial performance in the first quarter, we now raise our EPS guidance to $45.00," said Stuart Grant, Chief Financial Officer.
Financial Performance
Total revenues increased by 11.0%, or 16.4% in local currencies, to $667.5m in the first quarter of 2006 (Q1 2005: $601.4m). Product sales grew 7.9%, or 13.4% in local currencies, to $594.9m (Q1 2005: $551.4m). Sales were adversely influenced by the strengthening of the US dollar versus the Euro year-over-year. Royalty and license income increased by 45.3% to $72.6m (Q1 2005: $50.0m), continuing to provide a substantial revenue stream derived from Serono's intellectual property rights.
Gross margin remains solid at 88.4% of product sales (Q1 2005: 89.2%). Selling, General and Administrative expenses remained stable at $211.5m (Q1 2005: $214.6m) reflecting operational leverage. Research and Development expenses were $122.9m (Q1 2005: $156.3m), reflecting the completion of a number of phase III trials in the last 12 months. Other operating expenses were $64.3m (Q1 2005: $788.4m).
Operating income in the first quarter of 2006 was $200.0m compared to a loss of $617.4m in the first quarter of 2005. On an adjusted* basis this represents an increase of 85.9% and led to an operating margin of 30.0% of total revenues (Q1 2005: $107.6m or 17.9% of total revenues on an adjusted* basis), reflecting steady underlying revenue growth, tight control over SG&A and R&D expenses and continued solid gross margin.
Financial income was $23.9m (Q1 2005: $12.0m), reflecting a net gain of $8.4m from the sale of 1,434,607 shares of ZymoGenetics, Inc. in March 2006. Financial expense decreased to $6.3m (Q1 2005: $10.6m), as a result of last year's first quarter write-down of $4.7m related to impairment in value of an equity stake in CancerVax.
Reported net income in the first quarter of 2006 was $179.9m compared to a loss of $567.7m in the first quarter of 2005. Adjusted* net income was up 76.1% to $171.6m (Q1 2005: $97.4m), or 77.4% in local currencies.
Reported basic earnings per share in the first quarter of 2006 were $12.29 per bearer share and $0.31 per American Depositary Share (ADS). Adjusted* basic earnings per share were up 75.2% to $11.72 per bearer share (Q1 2005: $6.69) and $0.29 per ADS (Q1 2005: $0.17).
For the first quarter, net cash flow from operating activities before change in working capital was $237.8m (Q1 2005: $146.4m), or $189.0m after change in working capital (Q1 2005: $53.3m). The company's liquid financial assets were $1.7 billion at the end of the first quarter 2006.
As of March 31, 2006, there were 14,641,246 equivalent bearer shares of Serono S.A. issued and 14,639,138 equivalent bearer shares of Serono S.A. outstanding.
Full Year 2006 Outlook
Given the strength of the first quarter 2006 results, Serono now raises its outlook for 2006 earnings per bearer share to $45.00. This outlook does not include expenses related to any new business development transactions or other non-recurring items in 2006.
Therapeutic Areas Review
In the first quarter of 2006, Rebif(R) had a solid performance with sales up 11.7%, 17.7% in local currencies, to $327.0m (Q1 2005: $292.8m) further consolidating its position as a foundation therapy. Rebif(R) continues its market leadership outside the US with sales growing 3.1%, or 10.8% in local currencies, to $222.7m (Q1 2005: $216.1m). Rebif(R), the fastest growing brand for the treatment of relapsing forms of multiple sclerosis in the US in 2005, reached sales of $104.2m, up 35.8% in the first quarter (Q1 2005: $76.8m).
Sales of Gonal-f(R) increased by 0.8%, or 6.3% in local currencies, to $139.1m (Q1 2005: $138.0m). This is an encouraging performance reflecting high single-digit growth in local currencies outside of the US and marking a change in trend in the US. Contrary to usual seasonal patterns, Gonal-f(R) sales increased 4.2% in the first quarter of 2006 compared with the fourth quarter of 2005. Global sales of supporting products (Ovidrel(R), Cetrotide(R), Crinone(R) and Luveris(R)) were up 11.3%, or 16.6% in local currencies, to $22.6m.
Saizen(R) sales increased by 4.4%, or 10.0% in local currencies, to $49.9m (Q1 2005: $47.8m). Saizen(R) continues to be differentiated using the innovative devices, cool.click and one.click, as well as services, such as patient registries, call centres and nurse trainers, as well as educational programs. Serostim(R) sales decreased by 13.7% to $15.8m (Q1 2005: $18.3m).
Sales of Raptiva(R) were $13.6m in the first quarter 2006 (Q1 2005: $4.5m). The focus for 2006 is on increasing market penetration by differentiating Raptiva(R) from other biologicals and further establishing the new progressive way of treating psoriasis to achieve long-term control of this chronic disease.
R&D News
On March 15, Serono and BioMarin Pharmaceutical Inc. announced positive results of a Phase 3, double-blind, placebo-controlled clinical study of Phenoptin(TM) (sapropterin dihydrochloride), an investigational oral small molecule for the treatment of phenylketonuria. All pre-specified primary and secondary endpoints were met and data demonstrate a statistically significant reduction at six weeks in blood phenylalanine levels (p<0.0001) in patients receiving Phenoptin, compared with those receiving placebo.
On April 4, Serono announced the submission of a supplemental Biologics Licence Application to the US Food and Drug Administration and a variation to the current Marketing Authorization to the European Medicines Agency for a new formulation of Rebif(R) as a treatment of multiple sclerosis. The applications are supported by data from a Phase III clinical trial in patients with relapsing forms of MS which show that the new formulation of Rebif(R) results in a substantial improvement in overall tolerability, as well as a reduction in the incidence of antibody formation. This most recent Rebif(R) lifecycle management initiative further exemplifies Serono's commitment to developing and launching a wide range of product enhancements in support of MS patients worldwide.
Conference Call and Webcast
Serono will hold a conference call today, April 20th, 2006, starting at 15:00 Central European Time (9:00 am US Eastern Time) during which Serono Management will present the Company's First Quarter 2006 Results. To join the telephone conference please dial +1-866-291-4166 (from the US), 091-610-5600 (from Switzerland), 0207-107-0611 (from the UK) and +41-91-610-5600 (from elsewhere). The event will also be relayed by live audio webcast, which interested parties may access via Serono's Corporate home page, www.serono.com. A link to the webcast will be provided immediately prior to the event. Additionally, the webcast will be available for replay until close of business on May 26, 2006.
Forward-looking statements
Some of the statements in this press release are forward looking. Such statements are inherently subject to known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of Serono S.A. and affiliates to be materially different from those expected or anticipated in the forward-looking statements. Forward-looking statements are based on Serono's current expectations and assumptions, which may be affected by a number of factors, including those discussed in this press release and more fully described in Serono's Annual Report on Form 20-F filed with the U.S. Securities and Exchange Commission on February 28, 2006. These factors include any failure or delay in Serono's ability to develop new products, any failure to receive anticipated regulatory approvals, any problems in commercializing current products as a result of competition or other factors, our ability to obtain reimbursement coverage for our products, the outcome of government investigations and litigation and government regulations limiting our ability to sell our products. Serono has no responsibility to update the forward-looking statements contained in this press release to reflect events or circumstances occurring after the date of this press release.
About Serono
Serono is a global biotechnology leader. The Company has eight biotechnology products, Rebif(R), Gonal-f(R), Luveris(R), Ovidrel(R)/ Ovitrelle(R), Serostim(R), Saizen(R), Zorbtive(TM) and Raptiva(R). In addition to being the world leader in reproductive health, Serono has strong market positions in neurology, metabolism and growth and has recently entered the psoriasis area. The Company's research programs are focused on growing these businesses and on establishing new therapeutic areas, including oncology and autoimmune diseases. Currently, there are more than 25 on-going development projects.
In 2005, Serono, whose products are sold in over 90 countries, achieved worldwide revenues of US$2,586.4 million. Reported net loss in 2005 was US$106.1 million, reflecting a charge of US$725 million taken relating to the settlement of the US Attorney's Office investigation of Serostim. Excluding this charge as well as other non-recurring items, adjusted net income grew 28.4% to US$565.3 million in 2005. Bearer shares of Serono S.A., the holding company, are traded on the virt-x (SEO) and its American Depositary Shares are traded on the New York Stock Exchange (SRA).
A full version of this release, including tables, is available at http://www.serono.com
- Tables detailing sales in dollars by therapeutic area, geographic region and the top 10 products for the 3 months ended March 31, 2006 and 2005.
- Consolidated statements of income for the 3 months ended March 31, 2006 and 2005; adjusted net income and adjusted earnings per share for the 3 months ended March 31, 2006 and 2005; the consolidated balance sheets as of March 31, 2006 and December 31, 2005; the consolidated statements of recognized income and expense for the 3 months ended March 31, 2006 and 2005; the consolidated statements of changes in equity as of March 31, 2006 and 2005; the consolidated statements of cash flows for the 3 months ended March 31, 2006 and 2005; and the selected explanatory notes to the consolidated financial statements. These consolidated financial statements have been prepared on the basis of International Financial Reporting Standards.
* Non-IFRS financial measures included in order to permit assessment of the performance of the company's underlying business for the quarter include: In Q1 2006 an $8.4m gain on sale of investment in ZymoGenetics. In Q1 2005 a charge of $725.0m ($660.5m after tax) related to previously reported US Attorney's Office investigation of Serostim (R) and a $4.7m write-down of investment in CancerVax.
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Serono International S.A.CONTACT: Serono in Geneva, Switzerland: Media Relations: Tel:+41-22-739-36-00, Fax: +41-22-739 30 85. Investor Relations: Tel:+41-22-739-36-01, Fax: +41-22-739-30-22. Serono, Inc., Rockland, MA, MediaRelations: Tel. +1-781-681-2340, Fax: +1-781-681-2935. Investor Relations:Tel. +1-781-681-2552, Fax: +1-781-681-2912
