MILAN--(BUSINESS WIRE)--At a meeting held today and chaired by Rosario Bifulco, the Sorin S.p.A. (MIL:SRN) Board of Directors analyzed the results for the fourth quarter 2014 and the preliminary unaudited consolidated results for the year 2014. The final draft of the financial statements for 2014 will be approved by the Board of Directors at a meeting to be held on March 16, 2015.
“Our 2014 results came in within our previously communicated guidance, supported by a solid fourth quarter. The top-line performance in 2014 was driven by strong results of the cardiopulmonary products and by continuous improvement in the CRM business. Net earnings were also in line with our expectations taking into account the negative impact of FX and our continued investments in growth initiatives. During the year, the Company continued the roll-out of important new products, closed several strategic deals including the joint venture with MicroPort in CRM and the acquisition of Oscor’s leads business and made significant progress on the development of its New Ventures programs, as illustrated by the first successful implants of the EquiliaTM neurostimulation system for heart failure patients and by the commercialization of Respicardia’s product,” said André-Michel Ballester, Sorin Group's Chief Executive Officer. “For 2015 Sorin remains committed to top line growth acceleration and financial discipline. We plan to continue to invest in our high-growth platforms and return to more favorable earnings momentum by 2016,” he added.
CONSOLIDATED RESULTS FOR THE FOURTH QUARTER 2014
In the fourth quarter of 2014, Sorin Group posted revenues of €196.5 million, a 5.0%4 increase over the fourth quarter of 2013.
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The Cardiac Surgery Business Unit (cardiopulmonary products for
open heart surgery and heart valve repair or replacement products)
reported revenues of €136.5 million. The heart-lung machine
segment performed positively, driven by penetration in the US and
emerging markets. Both the oxygenator and ATS system segments reported
strong growth, confirming Sorin’s successful roll-outs of the InspireTM-
HeartlinkTM- ConnectTM and XtraTM
systems. The tissue valves business posted negative results primarily
due to the temporary limitation in the production capacity for PercevalTM
at Sorin’s Saluggia plant. The Company expects to restore full
availability of PercevalTM by the first quarter of 2015. In
the fourth quarter, mechanical valves were flat as a result of volume
growth in emerging markets and Japan, offset by the continued shift
toward tissue valves in Europe and the US.
In the fourth quarter, Sorin Group announced CE mark and FDA clearance of its new MEMO 3D ReChordTM mitral valve annuloplasty ring.
In the fourth quarter, the results of the Perceval CAVALIER Trial and of the Pooled European Multicenter Experience were presented at the 28th Annual Meeting of the European Association for Cardio-Thoracic Surgery (EACTS) in Milan (Italy) showing Perceval’s durability, excellent hemodynamic performance, low complication rates and ease of implant. At the EACTS Annual Meeting, were also presented the results of the European and North American cohort study on the Freedom SoloTM valve, demonstrating its safety and excellent clinical and hemodynamic performance.
In January 2015, Sorin Group announced the completion of patient enrollment for the PercevalTM IDE (Investigational Device Exemption) study in the US. The IDE trial, involving eighteen centers across the US, is designed as a prospective, non-randomized, multi-center clinical trial.
| (Euro million) | ||||
| Q4 14 Revenues | Underlying growth %* | |||
| Heart-lung machines | 33.0 | 4.3% | ||
| Oxygenators | 53.6 | 5.2% | ||
| Autotransfusion machines and devices | 17.5 | 9.9% | ||
| Mechanical Heart Valves | 13.0 | -0.1% | ||
| Tissue Heart Valves | 15.4 | -7.1% | ||
| Other | 3.9 | n.m. | ||
| Total Cardiac Surgery | 136.5 | 3.8% |
(*) For details, see attached table “Consolidated revenues by Business Unit”
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The Cardiac Rhythm Management Business Unit (implantable
devices to manage cardiac rhythm disorders) reported revenues
of €59.4 million, a 7.7%5 increase compared to the
fourth quarter of 2013. CRM revenues, excluding Japan, were
substantially flat in the quarter compared to the same period of 2013,
confirming the stabilization of the business initiated in the previous
quarters. Low voltage revenues were driven by the continued
penetration of KORATM 100 and REPLYTM 200
systems. Upon introduction of the latest generation of devices in
Japan, the Company has decided to record a €8.1 million sales reserve
in the fourth quarter for old generation products to be returned in
2015, reflecting Sorin’s commitment to provide the most advanced
devices available to its Japanese customers. High voltage revenues
continue to be affected by a challenging pricing environment in Europe
and lower volumes in Japan.
During the quarter, Sorin Group completed patient enrollment in the Respond CRT IDE clinical study, ahead of schedule. The trial, that evaluates the safety and effectiveness of the innovative SonRTM CRT optimization system in patients with severe heart failure, enrolled over 1,000 patients in Europe, the US and Australia.
In February 2015, Sorin announced the approval from Japan’s Pharmaceutical and Medical Devices Agency (PMDA) for its KORATM 100 pacing system with automatic MRI mode.
| (Euro million) | ||||
| Q4 14 Revenues | Underlying growth %* | |||
| High Voltage (defibrillators and CRT-D) | 18.9 | -10.1% | ||
| Low Voltage (pacemakers) | 37.2 | 19.6% | ||
| Other | 3.3 | n.m. | ||
| Total Cardiac Rhythm Management | 59.4 | 7.7% |
(*) For details, see attached table “Consolidated revenues by Business Unit”
PRELIMINARY CONSOLIDATED RESULTS FOR 2014
In 2014, Sorin Group reported revenues of €746.9 million, a 3.4%6 increase compared to 2013.
- The Cardiac Surgery Business Unit reported revenues of €500.9 million, up 5.1%6 compared to 2013.
| (Euro million) | ||||
| 2014 Revenues | Underlying growth %* | |||
| Heart-lung machines | 106.7 | 12.5% | ||
| Oxygenators | 205.1 | 5.2% | ||
| Autotransfusion machines and devices | 64.4 | 8.3% | ||
| Mechanical Heart Valves | 49.1 | -5.8% | ||
| Tissue Heart Valves | 62.6 | -0.8% | ||
| Other | 12.9 | n.m. | ||
| Total Cardiac Surgery | 500.9 | 5.1% |
(*) For details, see attached table “Consolidated revenues by Business Unit”
The heart-lung machine segment posted strong revenues, further
reinforcing the Company’s leadership position in every major market. The
oxygenator and autotransfusion segments also performed positively,
driven, respectively, by the successful roll-out of the new InspireTM-
HeartlinkTM-ConnectTM System in Europe, the US and
Japan and by the continued penetration of XtraTM in all
markets. The Company estimates it has over-achieved its 100 bps market
share gain objective in the oxygenator segment for 2014.
The
mechanical valve segment witnessed a decrease in revenues in line with
the continued shift of the market toward biological valves and lower
volumes in emerging markets particularly during the first nine months of
the year. Tissue valve performance was impacted by weaker performance of
the traditional tissue heart valves in the US, partially compensated by
the positive performance of PercevalTM.
During
2014, Sorin Group obtained CE mark for an expanded adult age indication
for PercevalTM, as well as dedicated reimbursement status in
the Czech Republic and Germany. In October, significant clinical and
health economic data from European studies were presented on PercevalTM
at the EACTS congress in Milan. In January 2015, Sorin Group announced
the completion of US patient enrollment for the PercevalTM
IDE study. All these factors further reinforce the Company’s confidence
in the long-term success of Perceval.
In 2014, Sorin Group
obtained US FDA approval for MitroflowTM with Phospholipid
Reduction Treatment (PRT) and Solo SmartTM valves, now both
commercially available in the US, as well as CE mark certification for
the innovative stented aortic bioprosthesis CROWN PRTTM. The
Company also obtained CE mark and FDA approval for the MEMO 3D ReChordTM
mitral valve annuloplasty ring.
During 2014, Sorin Group
completed the acquisition of the cardiac surgery cannulae activities
from its supplier Bioengineering Laboratories S.p.A. (BEL).
- The Cardiac Rhythm Management Business Unit posted revenues of €243.5 million in 2014, a slight growth of 0.3%7 compared to 2013.
| (Euro million) | ||||
| 2014 Revenues | Underlying growth %* | |||
| High Voltage (defibrillators and CRT-D) | 84.4 | -5.0% | ||
| Low Voltage (pacemakers) | 146.6 | 2.5% | ||
| Other | 12.5 | n.m | ||
| Total Cardiac Rhythm Management | 243.5 | 0.3% |
(*) For details, see attached table “Consolidated revenues by Business Unit”
Revenues outside Japan grew by approximately 1%7 in 2014
compared to 2013, confirming the continuous improvement in the CRM
business. High voltage revenues were affected by a challenging pricing
environment in the implantable defibrillator segment, notwithstanding
the continued penetration of SonRTM in Europe in 2014. Low
voltage revenues grew in 2014, driven by the roll-out of KORATM
100 and REPLYTM 200 pacing systems.
In 2014, the
Company presented the results of the ANSWER study demonstrating that
Sorin’s SafeR significantly reduces heart failure events and improves
clinical outcomes, and also completed enrollment in the Respond CRT IDE
clinical study to demonstrate safety and effectiveness of its SonR CRT
optimization system.
During 2014, Sorin Group executed
several important deals including the joint-venture with MicroPort
Scientific Corporation to enter the Chinese CRM market and the
acquisition of Oscor’s leads business, including a manufacturing
facility in the Dominican Republic.
- In 2014, Sorin Group confirmed its continued commitment to New Ventures (new growth platforms in neurostimulation to treat heart failure and percutaneous mitral valve therapies). During 2014, the Company executed a US$20 million minority investment in Respicardia, a US-based developer of implantable therapies designed to improve respiratory and cardiovascular health. Under the terms of this transaction, Sorin also acquired the exclusive right to distribute the remedē® System in selected European countries and an exclusive option to acquire Respicardia in the future. Throughout 2014, Sorin Group continued to support the development of New Ventures investments, as confirmed by the first commercial sales of Respicardia’s device in Europe and today’s announcement of the successful first implants of Sorin EquiliaTM, neurostimulation system for heart failure patients. In February 2015, the Company also executed further investments of €2.8 million and US$7.5 million, respectively, in HighLife and Caisson, companies that focus on the development of innovative mitral valve replacement systems, for the important milestones achieved.
Gross profit in 2014 was €438.5 million, or 58.7% of revenues, compared to 59.1% of revenues in 2013. The decrease in Gross margin is mainly due to an unfavourable country mix, to pricing erosion in CRM globally and to the effect of foreign exchange rates, partially compensated by continuous progress in manufacturing efficiencies.
Selling, general and administrative (SG&A) expenses were €285.2 million compared to €280.3 million in 2013. At constant foreign exchange rates, SG&A were substantially flat over the same period of 2013. Both fiscal years include a €2.7 million negative impact of the US medical device excise tax.
Research and development (R&D) expenses were €80.3 million (10.8% of revenues) compared to €73.7 million (10.0% of revenues) in 2013. R&D activity was primarily focused on the new product releases of InspireTM, HeartlinkTM, ConnectTM, the clinical studies for PercevalTM and SonRTM, the development of Platinium and internal neurostimulation projects.
EBITDA was €120.7 million, or 16.2% of revenues, compared to €131.1 million, or 17.8% of revenues in 2013. EBITDA included a €7.2 million impact from New Ventures and reflected a €14.0 million unfavorable foreign exchange effect.
EBIT was €74.1 million compared to €68.6 million in 2013. EBIT before special items was €73.0 million in 2014 compared to €82.8 million in 2013. Special items, positive for €1.1 million in 2014, primarily included restructuring charges for €1.5 million and €7.6 million related to the impact from the sales return reserve, balanced by a €15.5 million income related to the insurance indemnification for the earthquakes in Emilia of 2012. The remaining non-recurring charges mainly refer to business development activities and litigation costs.
Net financial charges were €7.9 million compared to €5.7 million in 2013, reflecting FX charges. On a run-rate basis, the financial charges in 2014 increased by €0.2 million compared to 2013.
Net profit was €52.5 million compared to €48.9 million in 2013. The net profit for 2014 includes €15.5 million, considered the minimum insurance payment due to the Company in relation to the damage caused by the 2012 earthquakes. Negotiations for the definitive settlement are ongoing.
Adjusted net profit8 was €55.1 million, compared to €60.8 million in 2013. Adjusted net profit included a €5.3 million impact from New Ventures and reflected a €10.0 million unfavorable foreign exchange effect.
Net financial debt as of December 31, 2014 was €124.4 million, compared to €68.7 million as of December 31, 2013 (€113.2 million as of September 30, 2014). Special items for the period were negative for €57.9 million, including €35.7 million for business development initiatives (see details in the attached table). In June 2014, Sorin paid-down the 2007-2014 loan from the European Investment Bank (EIB) and signed a finance contract with EIB for a new €100 million medium-long term facility.
In 2014, the Company's free cash flow9 amounted to €2.2 million, reflecting one-off investments related to the reconstruction of the Mirandola site and a temporary absorption in working capital.
Guidance for the current fiscal year and for the first quarter of 2015
For 2015, the Company expects revenues to grow by 4-6%10 over 2014 and Adjusted net profit8 of approximately €55 million, equivalent to Adjusted EPS (Earnings per share) of 11.5 euro cents, substantially in line with 2014.
In 2015 the Company will focus on accelerating long-term growth through the roll-out of the InspireTM-HeartlinkTM-ConnectTM system, the continued penetration of PercevalTM and SonRTM, the commercial launch of KORATM in Japan, the initial contribution from remedē® System commercialization and the geographic expansion in emerging markets, primarily China and Brazil.
As for fiscal year 2014, 2015 profitability will still be impacted by unfavourable country mix, pricing erosion in CRM and investments in New Ventures. In particular, Sorin expects the temporary dilutive effect of the New Ventures to be in the region of €10 million (of which approximately €3 million incremental compared to 2014) at EBITDA level. These factors will be more than offset by manufacturing efficiencies and cost containment initiatives as well as by top-line growth. FX impact for 2015 is expected neutral at current FX rates.
Sorin Group also announces the strategic repositioning of its US CRM business. This program, which should allow the CRM business to reach operating break-even in the US by the second half of 2015, confirms Sorin’s commitment to the US market by accelerating the transition to a specific focus premium positioning on the high-tier and undertreated segment of heart failure and related co-morbidities. This strategy is supported by the Company’s strong and unique pipeline of innovative therapies expected to access the US market from 2016 onwards such as SonRTM, EquiliaTM and Respicardia. The program, which is expected to be launched in the first quarter of 2015 and completed by the end of 2015, aims at achieving overall savings, once fully implemented, of approximately €4 million per year on a full year basis.
Sorin Group expects 2016 to show top-line growth and improvement in profitability. Top-line performance and profitability will be driven by the full conversion to Inspire, Perceval’s US FDA approval and access to the US market, the launch of the Platinium platform for CRM devices, SonR’s continued penetration following RESPOND’s clinical results and the contribution of the New Ventures initiatives, Respicardia and EquiliaTM.
For the first quarter of 2015, Sorin Group expects revenues to grow 2-3%11 over the same period of 2014.
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Unaudited data
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The corporate officer responsible for the company’s financial reports, Demetrio Mauro, declares, pursuant to Paragraph 2 of Article 154-bis of the Consolidated Law on Finance that the accounting information contained in this press release corresponds to the documented results and the accounting books and records.
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In addition to the conventional indicators recommended by the IFRS, this press release provides alternative performance indicators. These indicators should not be considered as replacements for the conventional indicators recommended by the IFRS, but rather as an additional source of information, representative of the income statement, balance sheet and financial position parameters used internally in the decision-making process. An explanation of the meaning and structure of these alternative performance indicators is provided in the Interim Report on Operations at June 30, 2014.
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This press release contains forward-looking statements. These statements are based on the Group’s current expectations and projections about future events and, by their nature, are subject to inherent risks and uncertainties. They relate to events and depend on circumstances that may or may not occur or exist in the future, and, as such, undue reliance should not be placed on them. Actual results may differ materially from those expressed in such statements as a result of a variety of factors, including: continued volatility and further deterioration of capital and financial markets, changes in commodity prices, changes in general economic conditions, economic growth and other changes in business conditions, changes in laws and regulations (both in Italy and abroad), and many other factors, most of which are outside of the Company’s control.
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About Sorin Group
Sorin Group (www.sorin.com)
is a global, medical device company and a leader in the treatment of
cardiovascular diseases. The Company develops, manufactures, and markets
medical technologies for cardiac surgery and for the treatment of
cardiac rhythm disorders. With over 3,500 employees worldwide, Sorin
Group focuses on two major therapeutic areas: Cardiac Surgery
(cardiopulmonary products for open heart surgery and heart valve repair
or replacement prostheses) and Cardiac Rhythm Management (pacemakers,
defibrillators and non invasive monitoring to diagnose arrhythmias and
deliver anti-arrhythmia therapies as well as cardiac resynchronization
devices for heart failure treatment). Every year, over one million
patients are treated with Sorin Group devices in more than 100 countries.
For
more information, please refer to www.sorin.com
1 At comparable exchange rates and perimeter
2
Adjusted net profit: net profit before after-tax non-recurring income
and expenses (special items)
3 See Sorin Group’s press
release dated November 27, 2013
4 At comparable exchange
rates and perimeter
5 At comparable exchange rates and
perimeter
6 At comparable exchange rates and perimeter
7
At comparable exchange rates and perimeter
8 Adjusted
net profit: net profit before after-tax non-recurring income and
expenses (special items)
9 Free cash flow: net profit +
depreciation, amortization and writedowns ± ∆ working capital –
investments. This account is net of the impact of special items
10
At comparable exchange rates and perimeter
11 At
comparable exchange rates and perimeter
