Ipsen’s Full Year 2007 Results and Financial Objectives for the Full Year 2008
- Results in line with the Group’s objectives
- Group operating income reached 22.7% of sales, up 11.6% year-on-year
- 3 positive opinions from the EU and US regulatory agencies in 7 months
PARIS--(BUSINESS WIRE)--
Regulatory News:
The Board of Directors of Ipsen (Paris: IPN), chaired by Jean-Luc Bélingard, met on 26 February 2008 to review the Group’s results for 2007, published today.
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Summary of audited consolidated results for 2007 and 2006 |
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| (in millions of euros) | 2007 | 2006 |
% change |
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| Sales | 920.5 | 861.7 | +6.8% | |||
| Other revenues | 73.3 | 83.6 | (12.3)% | |||
| Total revenues | 993.8 | 945.3 | +5.1% | |||
| Operating income | 208.9 | 187.2 | +11.6% | |||
| Operating margin (in % of sales) | 22.7 | 21.7 | ||||
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Consolidated net profit (attributable to the Group) |
150.6 | 144.0 | +4.6% | |||
| Earnings per share – fully diluted (€) | 1.79 | 1.71 | +4.7% | |||
| Average number of shares | ||||||
| Non diluted | 83,875,853 | 84,000,717 | ||||
| Fully diluted | 83,972,411 | 84,024,179 | ||||
Commenting on the performance in 2007, Jean-Luc Bélingard, President of the Ipsen Group, stated: “The Group’s performance in 2007 is in line with our objectives despite a difficult environment marked by sustained price pressure and increased competition, notably in France. This set of results shows once again Ipsen’s ability to generate a strong and recurring cash flow. We will use our solid balance sheet as a tool to accelerate Ipsen’s growth going forward.” Jean-Luc Bélingard added: “In the framework of our strategy, we have further optimized our primary care franchise after the sale of Ginkor Fort®, with the launch of Adrovance® in France and the recent positive CHMP opinion for Adenuric® (febuxostat) in Europe. With Somatuline® Depot in the United States on 31 August 2007, Increlex® in Europe on 9 August 2007 and Adenuric® on 21 February 2008, the Group has obtained 3 positive opinions from regulatory agencies in 7 months, thereby confirming the quality of its clinical development and regulatory teams. Furthermore, upon marketing approval by the European Commission, Adenuric® will stand out as a major therapeutic innovation in a pathology for which none has emerged during the past 40 years, thereby illustrating Ipsen’s mission to propose treatments for high unmet medical needs.” Jean-Luc Bélingard concluded: “In 2008, we will pursue our entry into the North American market and will reinforce our portfolio of products; notably, the publication of clinical results, such as the phase III for Acapodene®, phase II for our GLP-1 analogue partnered with Roche or phase I for our promising anti-tumor agent STX-64, will confirm Ipsen’s strong Research & Development capabilities. Our energy in 2008 will be steered toward further developing Ipsen while ensuring we meet the objectives set today.”
Review of full year 2007 results
Consolidated Group sales reached €920.5 million, up 6.8% year-on-year. This increase was fuelled by the strong growth in endocrinology and neuromuscular disorders franchises, up 19.7% and 13.6% respectively over the period, and by the strong performance of gastro-enterology products in international markets, up 9.2% year-on-year, partly offset by slower sales in France, notably of Tanakan® and Ginkor Fort®, both products suffering from price cuts respectively enforced in July 2007 and March 2006. Price pressure negatively impacted Ipsen’s consolidated sales growth by 2.1 points representing €17.9 million. This performance is line with the Group’s objective set a year ago to grow its sales by 6.5 to 7.5% year-on-year.
Other revenues reached €73.3 million, down 12.3% year-on-year. In 2007, the Group ceased billings for Research & Development services within the framework of partnership agreements, mainly with Roche for the development of BIM 51077.
Total revenues therefore reached €993.8 million during the period, up 5.1% year-on-year. This performance is slightly above the objectives set by the Group a year ago (of growing total revenues by 4.0 to 5.0% year-on-year).
Research & Development expenses amounted to €184.7 million, up 3.6% year-on-year, despite lower revenues received from third parties stemming from partnership agreements (notably BIM 51077), implying a 7.9% increase in self-financed Research & Development effort.
Operating income reached €208.9 million in 2007, up 11.6% year-on-year, despite the significant negative impact of price cuts in major Western European countries and the fall of other revenues. Operating margin stood at 22.7% of sales versus 21.7% a year ago, in line with the Group’s objective set a year ago to reach 22.0 to 23.0% of sales in 2007.
The Group’s effective tax rate in 2007 reached 25.3% of net profit from continuing operations before tax and the Group’s loss from associates, compared with a reported effective tax rate of 21.8% a year ago and with a recurring effective tax rate of 25.9% in 2007.
The Group’s loss from associates amounted to €(8.8) million ($(12.0) million) and was solely composed of the Group’s share in the net losses of Tercica Inc. for the year 2007, stated as required under IFRS. Tercica Inc. has been reported under the equity method in the Group’s financial statements since October 2006.
Consolidated net profit for 2007 reached €150.6 million, up 4.6% compared with €144.0 million in 2006.
Net cash flow generated by operating activities amounted to €176.0 million in 2007, compared with €327.6 million in 2006, when the Group benefited from important payments received in relation to its partnership agreements. At 31 December 2007, the Group's cash position stood at €240.9 million, compared with €283.7 million at 31 December 2006.
Total milestones received in cash but not yet recognised as revenues amounted to €218.7 million, compared with €184.3 million in 2006.
Dividend for the financial year 2007 proposed to the approval of Ipsen’ shareholders
Ipsen’s Board of Directors met on 26 February 2008 and proposed a dividend of 0.66 euros per share, up 10% year-on-year, yielding a 37% pay-out ratio, to Ipsen’s shareholders annual meeting to be held on 4 June 2008. The payment of the dividend will be made on 11 June 2008.
2008 financial objectives
Based on currently available information, the Group has set for itself the following objectives for 2008:
- An underlying1 sales growth of 6.5% to 7.5%2 year-on-year; at constant exchange rates, despite sustained price pressure in most countries where the Group operates, and an increased competitive environment notably in France, following the recent launch of a new product containing a Ginkgo biloba extract.
- A reported ‘other revenues’ growth of 13.0% to 16.0%, at constant exchange rates;
- A reported operating margin of 22.0% to 23.0% of sales, despite the ongoing launch costs of Increlex® in Europe, Adrovance® in France, as well as the pre-marketing costs in connection with the launch of Adenuric® (febuxostat) in France.
Ipsen - Analyst and Investor conference call and webcast (in English)
Ipsen will host a conference call on 27 February 2008 at 2.00 p.m. (Paris time). A live webcast will be available at www.ipsen.com. The webcast will be archived on the Ipsen website for 3 months following the live call. Callers should dial in approximately 5 to 10 minutes prior to the start of the call. No reservation is necessary to participate in the call. The telephone numbers to join the conference call are, from France and Europe: +33 (0) 1 70 99 42 96 and from the United States: +1 718 354 1385. No access code is necessary.
A replay will be available soon after the live call. The telephone numbers to access the replay are, from France and Europe: +33 (0) 1 71 23 02 48 and from the United States: +1 718 354 1112. The access code is 4313749#. The replay will be available for one week following the live call.
1 Excluding the sales of Ginkor Fort®, which the Group is not marketing with effect from 1 January 2008 following its dereimbursement by the French authorities. Actual Group sales excluding Ginkor Fort® in 2007 amounted to €883.6 million
2 Corresponding to a reported 3.2 to 4.2% sales growth year-on-year
About Ipsen
Ipsen is a European pharmaceutical group with over 20 products on the market and a total worldwide staff of nearly 4,000. The company’s development strategy is based on a combination of products in targeted therapeutic areas (oncology, endocrinology and neuromuscular disorders) which are growth drivers, and primary care products which contribute significantly to its research financing. This strategy is also supported by an active policy of partnerships. The location of its four R&D centres (Paris, Boston, Barcelona, London) gives the Group a competitive edge in gaining access to leading university research teams and highly qualified personnel. In 2007, Research and Development expenditure was €185 million, in excess of 20% of consolidated sales, which amounted to €920.5 million while total revenues amounted to €993.8 million (in IFRS). More than 700 people in Research & Development are dedicated to the discovery and development of innovative drugs for patient care. Ipsen’s shares are traded on Segment A of Eurolist by EuronextTM (stock code: IPN, ISIN code: FR0010259150). Ipsen’s shares are eligible to the “Service de Règlement Différé” (“SRD”) and the Group is part of the SBF 120 index. For more information on Ipsen, visit our website at www.ipsen.com.
Forward-looking statements
The forward-looking statements and targets contained herein are based on Ipsen's management's current views and assumptions. Such statements involve known and unknown risks and uncertainties that may cause actual results, performance or events to differ materially from those anticipated herein. The targets contained herein were prepared without taking into account external growth assumptions, which may alter the parameters. These targets are based on data and assumptions regarded as reasonable by the Group and depend on conditions or facts likely to happen in the future, and not exclusively on historical data. Actual results may depart significantly from the targets given the occurrence of certain risks and uncertainties. The Group does not commit nor gives any guarantee that it will meet the targets mentioned above. Moreover, the Research and Development process involves several stages at each of which there is a substantial risk that the Group will fail to achieve its objectives and be forced to abandon its efforts in respect of a product in which it has invested significant sums. Therefore, the Group cannot be certain that favourable results obtained during pre-clinical trials will be confirmed subsequently during clinical trials, or that the results of clinical trials will be sufficient to demonstrate the safe and effective nature of the product concerned. Moreover, the targets described in this document were prepared without taking into account external growth assumptions, which may alter these parameters. These targets are based on data and assumptions regarded as reasonable by the Group. These targets depend on conditions or facts likely to happen in the future, and not exclusively on historical data. Actual results may depart significantly from these targets given the occurrence of certain risks and uncertainties. The Group does not commit nor gives any guarantee that it will meet the targets mentioned above. Ipsen expressly disclaims any obligation or undertaking to update or revise any forward looking statements, targets or estimates contained in this press release to reflect any change in events, conditions, assumptions or circumstances on which any such statements are based, unless so required by applicable law. Ipsen's business is subject to the risk factors outlined in its information documents filed with the French Autorité des Marchés Financiers.
APPENDICES
1. Comparison of the consolidated income statement for 2007 and 2006:
| 31 December 2007 | 31 December 2006 | % change | ||||||||
| (in thousands of euros) | % of sales | (in thousands of euros) | % of sales | |||||||
| Sales | 920,475 | 100.0% | 861,676 | 100.0% | 6.8% | |||||
| Other revenues | 73,282 | 8.0% | 83,581 | 9.7% | (12.3)% | |||||
| Total revenues | 993,757 | 108.0% | 945,257 | 109.7% | 5.1% | |||||
| Cost of goods sold | (199,025) | (21.6)% | (181,377) | (21.0)% | 9.7% | |||||
| Research & development expenses | (184,739) | (20.1)% | (178,348) | (20.7)% | 3.6% | |||||
| Selling, general and administrative expenses | (401,481) | (43.6)% | (383,015) | (44.5)% | 4.8% | |||||
| Other operating income and expenses | 368 | nm | (8,223) | (1.0)% | nm | |||||
| Restructuring costs | 8 | nm | 190 | nm | nm | |||||
| Impairment losses | - | nm | (7,265) | (0.8)% | nm | |||||
| Operating income | 208,888 | 22.7% | 187,219 | 21.7% | 11.6% | |||||
| - Income from cash and cash equivalents | 11,541 | 1.3% | 7,974 | 0.9% | 44.7% | |||||
| - Cost of gross financial debt | (1,950) | (0.2)% | (2,142) | (0.2)% | (9.0)% | |||||
| Cost of net financial debt | 9,591 | 1.0% | 5,832 | 0.7,% | 64.5% | |||||
| Other interest income and expense | (2,855) | (0.3)% | (5,707) | (0.7)% | (50.0)% | |||||
| Income tax | (54,478) | (5.9)% | (40,891) | (4.7)% | 33.2% | |||||
| Share of loss/profit from associated companies | (8,764) | (1.0)% | (1,666) | (0.2)% | nm | |||||
| Net profit/loss from continuing operations | 152,382 | 16.6% | 144,787 | 16.8% | 5.2% | |||||
| Net profit/loss from discontinued operations | (1,313) | (0.1)% | (290) | Ns | nm | |||||
| Consolidated net profit | 151,069 | 16.4% | 144,497 | 16.8% | 4.5% | |||||
| - Equity holders of Ipsen S.A. | 150,611 | 144,006 | 4.6% | |||||||
| - Minority interests | 458 | 491 | (6.7)% | |||||||
► Other revenues
In 2007, other revenues reached €73.3 million, down 12.3% year on year (2006: €83.6 million).
Other revenues break down as follows:
| (in thousands of euros) |
31 December |
31 December |
2007/2006 change |
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| In value | % | |||||||
| Breakdown by revenue type | ||||||||
| - Royalties received | 49,767 | 41,650 | 8,117 | 19.5% | ||||
| - Milestone payments – licensing agreements | 17,349 | 20,199 | (2,850) | (14.1%) | ||||
| - Other (co-promotion revenues, recharging) | 6,166 | 21,732 | (15,566) | (71.6%) | ||||
| Total | 73,282 | 83,581 | (10,299) | (12.3%) | ||||
- Royalties received mainly comprised royalties from the Kogenate® licence, which amounted to €47.6 million in 2007, up 22.8% compared with the same period last year (€38.7 million in 2006). The first quarter 2007 had been particularly high due to the carry-over of some fourth quarter 2006 royalties into 2007 (for €3 million).
- Milestone payments relating to licensing agreements represent primarily recognition of payments received over the life of partnership agreements. In 2007, this income mainly comprised milestones in relation to the Reloxin® agreement with Medicis, the Tenstaten® agreement with Recordati and the BIM 51077 (GLP-1 analogue) partnership with Roche. Milestone payments recognised in 2006 included primarily the accelerated recognition of payments received by the Group following termination of the Reloxin® distribution agreement with Inamed.
- Other revenues amounted to €6.2 million in 2007, down 71.6% compared to 2006. In 2007, the Group ceased billings for R&D services within the framework of its partnership agreement for the development of BIM 51077, for which development works are now carried out by Roche, as well as the agreement with Genentech concerning a new formulation of the growth hormone, which reached the end of the research phase at the end of 2006.
Furthermore, in 2006, other revenues benefited from a one-off payment of €7.7 million relative to the termination in April 2006 of the co-promotion agreement with Pfizer for Zoxan®, not offset by the co-promotion income relative to Artotec® and Tenstaten®.
► Cost of goods sold
In 2007, cost of goods sold amounted to €199.0 million, representing 21.6% of sales compared with 21.0% a year ago, impacted by the negative effects of price cuts implemented during the period, which could not be offset by an increase in activity or productivity improvements. Also higher growth of in-licensed products and drug related activities as well as slower sales of Ginkor Fort® contributed to softening of the product mix improvement.
► Research & Development expenses
Research & Development expenses increased by 3,6 % and represented €184,7 millions year-on-year, representing 18.6% of total revenues or 20.1% of sales. In 2006, R&D expenses reached €178.3 millions , representing 18.9% of total revenues or 20.7% of sales. Excluding repayments from third parties, the share of self-financed R&D grew by 7.9% year-on-year.
A comparison of research & development expenses for the years 2007 and 2006 is presented in the following table:
| (in thousands of euros) |
31 December |
31 December |
2007/2006 change |
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| in value | % | |||||||
| Breakdown by expense type | ||||||||
| - Drug-related research & development(1) | 152,619 | 150,083 | 2,536 | 1.7 % | ||||
| - Industrial development(2) | 26,380 | 22,957 | 3,423 | 14.9 % | ||||
| - Strategic development(3) | 5,740 | 5,308 | 432 | 8.1 % | ||||
| Total | 184,739 | 178,348 | 6,391 | 3.6% | ||||
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(1) Drug-related research & development is aimed at identifying new agents, determining their biological characteristics and developing small-scale manufacturing processes. Pharmaceutical development is the process through which active agents become drugs approved by regulatory authorities and is also used to improve existing drugs and to research new therapeutic indications for them. Patent-related costs are included in this type of expense. |
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(2) Industrial development includes chemical, biotechnical and development-process research costs to industrialise small-scale production of agents developed by the research laboratories. |
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(3) Strategic development includes costs incurred for research into new product licences and establishing partnership agreements. |
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- Over the period, major Research & Development projects included preparation for registration of Dysport® in the United States and the phase III trials for a longer sustained release formulation of Triptorelin, since then discontinued. In 2006, the development of BIM 51077 in partnership with Roche – R1583 for which Roche is now responsible since the opt-in - and preparation for registration of Somatuline® Autogel® with the FDA (Food and Drug Administration) had represented a significant proportion of the Group's research & development expenses. Excluding these R&D projects – which benefited from repayments from third parties – the share of R&D self-financed by the Group grew by 7.9% year-on-year.
- In the area of industrial development, the increase was mainly linked to costs incurred in preparation for future pre-approval inspections by the FDA at some of the Group’s manufacturing sites, in the the framework of the Somatuline® Depot filing, which received marketing authorisation on 29 August 2007, as well as Dysport®, for which filing took place on 31 January 2008.
► Selling, general and administrative expenses
A comparison of selling, general and administrative expenses for the years 2007 and 2006 is presented in the following table:
| (in thousands of euros) |
31 December |
31 December |
207/2006 change | |||||
| in value | % | |||||||
| Breakdown by expense type | ||||||||
| Royalties paid | (34,723) | (31,186) | (3,537) | 11.3% | ||||
| Taxes and sales tax | (10,686) | (15,207) | 4,521 | (29.7)% | ||||
| Other sales and marketing expenses | (275,643) | (261,402) | (14,241) | 5.4% | ||||
| Selling expenses | (321,052) | (307,795) | (13,257) | 4.3% | ||||
| General and administrative expenses | (80,429) | (75,220) | (5,209) | 6.9% | ||||
| Total | (401,481) | (383,015) | (18,466) | 4.8% | ||||
In 2007, selling, general and administrative expenses were contained and increased by only 4.8% to €401.5 million, representing 43.6% of sales down from 44.5% a year earlier.
- Selling expenses amounted to €321.1 million, representing 34.9% of sales, up 4.3% year-on-year (2006: €307.8 million, representing 35.7% of sales). This increase stands below the sales growth level, despite a significant increase in royalties paid to third parties.
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-- Royalties paid to third parties on sales of products marketed by the Group amounted to €34.7 million, up 11.3% year on year, stemming from the sales growth of the corresponding products. |
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-- Taxes and sales taxes were down 29.7% year-on-year, mainly due to the reduction in 2007 of a sales-based tax rate in France from 1.76% to 1.0%. |
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-- Other sales and marketing expenses (i.e. marketing and sales force costs) were up by 5.4% year on year, amounting to €275.9 million in 2007, or 30.0% of sales, compared with €261.4 million in 2006 or 30.3% of sales. This slight reduction in relative value was achieved despite the launch costs of AdrovanceTM in France and Increlex® in certain European countries. Furthermore, while expenses grew sharply in fast-growing economies such as Central European countries, China, Korea, Algeria, Mexico and certain Western European countries as well as Scandinavia, expenses in Major European countries grew moderately, reflecting productivity improvements as well as arbitrage efforts in the Group’s resource allocation. |
- General and administrative expenses grew by 6.9% to €80.4 million, representing an increase of €5.2 million compared with last year. This increase stemmed mainly from an increase in the costs of corporate functions, particularly in order to upgrade the Group’s IT systems, as well as to support sales growth, especially in international markets, notably North America.
► Other operating income and expenses
In 2007, other operating income and expenses were immaterial, compared with an expense of €8.2 million in 2006 relating primarily to a non-recurring payment of $10 million to Inamed for the recovery of all rights related to Reloxin® in the United States, Canada and Japan.
► Impairment losses
No impairment charge was recorded in 2007, compared with a €7.3 million expense in 2006 relating to full impairment of the net book value of the intangible asset in respect of Testim® rights.
► Operating profit
As a result of the above, the Group’s operating income for 2007 reached €208.9 million, representing 21.0% of total revenues and 22.7% of sales, up 11.6% year on year, (2006: 19.8% of total revenues and 21.7% of sales).
► Segment reporting: Operating profit by geographical region
In compliance with IAS 14 “Segment Reporting”, the Group’s primary reporting format is presented according to geographical segment, since Ipsen operates in a single business segment, i.e. drug research and development, production and sales.
Sales, revenues and operating income for 2007 and 2006 are presented in the following table by geographical region:
| 31 December 2007 | 31 December 2006 |
% change 2007/2006 |
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| (in thousands of euros) | % | (in thousands of euros) | % | (in thousands of euros) | % | |||||||
| Major Western European countries(1) | ||||||||||||
| Sales | 564,262 | 100,0 % | 551,674 | 100,0% | 12,588 | 2,3 % | ||||||
| Revenues | 571,228 | 101,2 % | 564,528 | 102,3% | 6,700 | 1,2 % | ||||||
| Operating income | 216,619 | 38,4 % | 215,829 | 39,1% | 790 | 0,4 % | ||||||
| Other European countries | ||||||||||||
| Sales | 208,121 | 100,0 % | 184,800 | 100,0 % | 23,321 | 12,6 % | ||||||
| Revenues | 208,121 | 100,0 % | 184,800 | 100,0 % | 23,321 | 12,6 % | ||||||
| Operating income | 79,109 | 38,0 % | 71,516 | 38,7 % | 7 593 | 10,6 % | ||||||
| Rest of the World | ||||||||||||
| Sales | 148,091 | 100,0 % | 125,202 | 100,0 % | 22,890 | 18,3 % | ||||||
| Revenues | 150,182 | 101,4 % | 125,202 | 100,0 % | 24,980 | 20,0 % | ||||||
| Operating income | 53,710 | 36,3 % | 42,309 | 33,8 % | 11,401 | 26,9 % | ||||||
| Allocated total | ||||||||||||
| Sales | 920,475 | 100,0 % | 861,676 | 100,0% | 58,799 | 6,8 % | ||||||
| Revenues | 929,531 | 101,0 % | ||||||||||