Stallergenes Greer Reports Solid Growth and Continued Recovery in 2017, Delivering on Full Year Guidance

Fereydoun Firouz, Chairman and Chief Executive Officer of Stallergenes Greer, commented:

“2017 was a pivotal year and the results we delivered are evidence of the Group’s transformation which began two years ago. We met our financial guidance and returned to a positive EBITDA representing a €90 million swing over 2016. We reached key innovation milestones, including the completion of patient enrolment in a Phase III trial for our house-dust mite tablet candidate, STAGR320, and the publication of real-world data from the BREATH studies, which notably demonstrated that Oralair® improved control of allergic rhinitis and may have a preventive effect on allergic asthma onset and progression compared to symptomatic treatments.

We made significant progress commercially, delivering a 40% increase in net sales year-over-year as a result of recapturing market share across our product portfolio in all European geographies and continuing to hold market leadership in the U.S. subcutaneous treatment market.

In 2018, we will continue to focus on commercial execution, optimizing our current product portfolio to gain further market share, and developing new offerings to expand allergy immunotherapy penetration in market segments where we see growth opportunities. Our operational plan is focused on driving top line growth, improving profitability, continuing our innovation path and upgrading our technical operations capabilities.”

Full-year net sales increased 40% as a result of market share gains in European and International markets and sales growth of the sublingual product category

Net sales by region: Europe and International grew significantly; Leading position held in the U.S.

The 40% increase year-over-year in net sales reflects the continued recapture of share in European markets and success in new international markets following the temporary suspension of production and distribution at our Antony site in late 2015, which impacted sales in 2016. As of 31 December 2017, Oralair holds 38% of the grass tablet market in France, a 13-percentage point gain over 2016, and 34% of the grass tablet market in Germany, a 3-percentage point gain over last year.² In addition, the Group holds a market leadership position in Russia, Poland, the Balkans and the Middle East, and regained share in Czech Republic and Slovakia. Sales growth and market share gains were the result of a refocused commercial organization and improved product supply lead time.

In local currency (US$), revenue in the U.S. was up 1% in 2017. In the grass tablet market, Oralair nearly doubled its share from December 2016 while the overall market declined by 5% year-over-year³. In the subcutaneous immunotherapy market, Stallergenes Greer maintained its leading position with a strong demand that exceeded supply.

Net sales by product category: Staloral^® drove 83% growth in sublingual; Subcutaneous grew 3%

Full year 2017 sublingual product sales increased 83% to €156.7 million from full year 2016, primarily due to the performance of Staloral, which saw total sales increase 98%, or €61.7 million, compared to 2016. The growth was mainly driven by market share gains and, to some extent, by the industry-wide shortage of subcutaneous immunotherapy treatments in Europe, which resulted in switching of some patients to sublingual therapy. Within the sublingual category, total tablet sales in 2017 reached €30.5 million compared to €21.4 million in 2016, mainly driven by Oralair market share growth in established markets. In the U.S., Oralair market share gained 15 points from 16% in 2016 to 31% in 2017. However, the market is growing more slowly than expected.

In the subcutaneous product category, the Group reported 2017 sales of €70.4 million, a 3% increase compared to 2016, driven by growth in European and International markets while the U.S. market remains flat. Sales from the other product category grew 9% year-over-year to €22.9 million, and veterinary sales declined 11% to €10.2 million compared to 2016, due to increased competition in this segment.

Operational efficiencies delivered margin improvement

The Group’s full year 2017 gross margin of €165.8 million represented 64% of net sales, compared to 54% in full year 2016. The improvement is largely due to a global commitment to cost management and a result of ongoing operational efficiency initiatives. In addition, 2016 margins were impacted by costs incurred during the temporary suspension of production and distribution as well as the product recall in 2015.

The Group reduced its net loss from €60.5 million in 2016 to a net loss of €9.9 million in 2017, and reported a positive 2017 EBITDA of €21.9 million, compared to an EBITDA loss of €67.9 million in 2016. EBITDA increased overall by €89.8 million fuelled by a €74.0 million increase in sales and a decline in Selling, General and Administrative expenses of 11%, from €148.2 million in 2016 to €131.9 million in 2017. In 2018, the Group will continue to recalibrate operating expenditures and will further review areas where efficiencies can be made, including the Group’s footprint and overhead costs. This commitment resulted in a decision to reduce its administrative offices in the U.K., France and the U.S.

As a result of the business recovery and robust measures to contain costs, Stallergenes Greer continues to have a solid balance sheet. At 31 December 2017, the Group’s shareholders’ equity represented 83% of the balance sheet total.

As part of our annual reviews, the Group has performed an impairment analysis of its intangible assets and goodwill in accordance with IAS 36 (Impairment of Assets) for its cash-generating units (CGU’s). Based on our long range business plan and related sensitivity scenarios around it, the value-in-use of each CGU exceeds its carrying value and therefore no impairment of goodwill has been recorded in the consolidated Group accounts.

Group continues to invest in innovation to fuel long-term growth

Stallergenes Greer is committed to developing innovative therapies for major respiratory allergies and invested €45.6 million in R&D in 2017, primarily to fund STAGR320, the Group’s Phase III global multi-centre clinical trial for house dust mite (HDM)-induced allergic rhinitis. In July 2017, Stallergenes Greer announced completion of patient enrolment. With more than 1,600 patients enrolled, this study is the largest conducted study to assess the efficacy and safety of a sublingual immunotherapy tablet treatment.

This followed Stallergenes Greer’s announcement in January 2017 of positive top-line results from its Phase III study for paediatric HDM-induced allergic rhinitis in Japan. Results from this study supported the March 2017 submission of a new drug application for paediatric use of Actair (Stallergenes Greer’s commercial name for STAGR320 in registered markets) in Japan, which was approved post-period in February 2018.

In September 2017, the Group received market approval to commercialize STAGR320 in New Zealand under the Actair brand name and in October 2017, Health Canada accepted for review the New Drug Submission for STAGR320.

In addition to STAGR320, in June 2017, Stallergenes Greer published results from BREATH (Bringing Real-World Evidence to Allergy Treatment for Health), the first global, real-world evidence studies demonstrating the long-term benefits of sublingual immunotherapy to control allergic rhinitis and may reduce the risk of the onset and progression of allergic asthma.

Investments in Quality and Technical Operations to continue

The AIT industry’s manufacturing model is based on that of a compounding pharmacy, with processes that must be continuously updated to meet evolving regulatory requirements and comply with the latest Good Manufacturing Process (GMP) biological manufacturing standards. To address this and to ensure product quality and patient safety for all released and distributed products, Stallergenes Greer has made significant investments in its Technical Operations and Quality capabilities over the past two years, including modernizing manufacturing processes and facilities.

As a result of these efforts and the Group’s ongoing commitment to quality, Stallergenes Greer successfully completed three U.S. Food and Drug Administration (FDA) inspections in 2017 at its U.S. facilities. Investments in Lenoir and San Diego will continue in 2018.

In France, the Group made significant progress on operational systems upgrades at its Antony facility, resulting in the reduction of the average product lead time to less than seven days⁷ compared to the industry standard of two to three weeks. In addition, work has continued to enhance quality control methods used for product manufacturing and release. Meanwhile, an inspection conducted in the fourth quarter of 2017 by the National Agency for Medicines and Health Products Safety (ANSM) in France resulted in the issuance of an injunction received on 4 January 2018. The injunction was primarily related to the quality management system and processes at the Antony facility, mostly for the production of subcutaneous products. The remediation plan is well underway and the Group is committed to working with the French authorities. Shipment delays and temporary shortages of subcutaneous products are expected in European and International markets through 2018.

2018 Business outlook

Stallergenes Greer made substantial progress in 2017 and will continue to make strategic decisions in order to improve its competitiveness and solidify its business fundamentals. This includes investing in growth opportunities and delivering cost efficiencies across the organization. The Group expects continued progress in 2018, both through sales growth and strengthened profitability. Stallergenes Greer expects:

• net sales to grow mid-single digit percent in constant currency, and
• EBITDA to be higher than 2017

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Stallergenes Greer plc recognized non-cash impairment with no impact on Group consolidated accounts

As part of our annual reviews, Stallergenes Greer plc has performed an impairment analysis of its “investments in subsidiary undertakings” on its statutory accounts based on the latest long range business plan and related sensitivity scenarios around it and an impairment of €234 million was recorded. The impairment in the statutory accounts for Stallergenes Greer plc has no impact on the Group consolidated accounts, its 2017 operating result, EBITDA or Equity^8.

Webcast and Conference Call Information

Stallergenes Greer will host an Investors and Analysts meeting today, 22 March 2018. The event will be available via live webcast at 10:30 am GMT / 11:30 am CET / 6:30 am EDT. The webcast will be available via the following link: https://edge.media-server.com/m6/p/ptqhwgnv and on the company’s website, http://stallergenesgreer.com/financial-calendar-events.

Please connect at least 15 minutes prior to the conference to register, download and install any necessary audio software.

Financial Calendar

• 16 April 2018: 2017 Annual Report Publication
• 7 June 2018: Annual General Meeting
• 30 August 2018: H1 2018 Results