Ipsen's First Half 2006 Results

06/09/2006 - 11:13

Ipsen (Paris: IPN)

-- Results in line with expectations: annual objectives
maintained

-- Strong cash-flow generation during the period: EUR 130 million

-- Financial flexibility strengthened, with a net cash position
of EUR 193 million at 30 June 2006

The Board of Directors of Ipsen (Paris: IPN), chaired by Jean-Luc
Belingard, met on September 5, 2006 to review the Group's first half
of 2006 results published today.

First half consolidated results summary(1)

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(in EUR million unless
otherwise stated) 2006 2005(2) % change 2006/2005
-------------------------- ----------- ----------- -------------------
Sales 430.6 404.1 +6.6%
-------------------------- ----------- ----------- -------------------
Other revenues 46.6 45.7 +1.9%
-------------------------- ----------- ----------- -------------------
Total revenues 477.2 449.8 +6.1%
-------------------------- ----------- ----------- -------------------
Operating profit 108.4 115.8 (6.4)%
Operating margin (as a %
of sales) 25.2% 28.7%
-------------------------- ----------- ----------- -------------------
Restated operating profit
(3) 116.8 115.8 +0.8%
Restated operating margin
(as a % of sales) 27.1% 28.7%
-------------------------- ----------- ----------- -------------------
Consolidated profit -
attributable to the Group 88.1 89.4 (1.4)%
-------------------------- ----------- ----------- -------------------
Earnings per share (EUR)
(4) 1.05 1.19 (12.0)%
-------------------------- ----------- ----------- -------------------
Average number of shares:
--------------------------
Outstanding 84,013,049 74,936,490
On a diluted basis 84,031,717 74,936,490
-------------------------- ----------- ----------- -------------------
Net cash (debt), end of
period 193.3 (153.1)
-------------------------- ----------- ----------- -------------------
*T

(1) Ipsen's auditors have performed a limited review of these
financial statements.

(2) The 30 June 2005 pro forma income statement as shown above
differs from that published in the 31 December 2005 "Document de
Base". In compliance with IFRS 5 the Group's primary care business in
Spain, divested in October 2005, has been treated as "discontinued
operations" from 1 January 2005, whereas in the financial statements
reported for 2005 this business was treated as "discontinued
operations" only from 30 September 2005. Such restated information
presents comparable data over the two periods reported as at 30 June
2006.

(3) In order to better assess the Group's operating performance,
the restated operating profit for the first half of 2006 excludes an
EUR 8.4 million one-off expense paid in March 2006 to Inamed for the
recovery of all rights related to Reloxin(R)

(4) On a diluted basis.

Review of first half results

For the first half of 2006, consolidated sales grew by 6.6%
year-on-year. This increase was fuelled by the growth of products in
targeted therapeutic areas (oncology, endocrinology, neuromuscular
disorders) and strong sales momentum in international markets, despite
downward price pressures in Major Western European Countries
negatively impacting sales by EUR 14.3 million over the period.
Other revenues in the first half of 2006 totalled EUR 46.6
million, up 1.9% compared with EUR 45.7 million in the first half of
2005, which included EUR 10.0 million income resulting from the
termination of a research contract.
Operating income for the first half of 2006 was EUR 108.4 million,
representing 25.2% of sales, down 6.4% from a high baseline in 2005
(first half of 2005, EUR 115.8 million representing 28.7% of sales),
when R&D and commercial costs in 2005 were particularly back-loaded in
the second half of that year. Restated for an EUR 8.4 million one-off
expense paid in March 2006 to Inamed for the recovery of all rights
related to Reloxin(R), the Group's operating profit in the first half
of 2006 stood at EUR 116.8 million, stable year-on-year despite severe
price pressure in major European countries, to reach 27.1% of sales
compared with 28.7% a year ago. This 1.6 points decrease in restated
operating margin as a percentage of sales notably includes (i) a
continued improvement of 0.3 points in cost of goods sold due to a
better product mix, (ii) an increase of 0.8 points in R&D expenses due
to the preparation of filings for Somatuline(R) Autogel(R) and
Dysport(R) in the US plus finalisation of the BIM 51077 (GLP-1
analogue) development programme and (iii) an increase of 0.6 points in
SG&A mainly resulting from an increase in sales taxes in France and in
costs of certain corporate functions - notably expenses in respect of
stock exchange listing requirements - partially offset by productivity
improvements in sales and marketing expenses.
The consolidated profit attributable to the Group amounted to EUR
88.1 million in the first half of 2006, representing 18.5% of
revenues, compared with 19.9% a year earlier.
The Group generated a strong EUR 130.2 million cash flow from
operating activities, against EUR 62.5 million a year earlier. Cash
flow in the first half of 2006 benefited from sustained activity
during the period as well as from payments of milestones by Medicis
under the Reloxin(R) distribution licence granted by the Group for the
United States, Canada and Japan in the aesthetics indication. As a
result, the Group has reimbursed most of its credit facilities, in
addition to utilising EUR 25.2 million for its investment transactions
and paying out EUR 50.4 million in dividends during the half-year.
Overall, the first half of 2006 showed a net increase in cash flow of
EUR 24.2 million compared to a decrease of EUR 55.6 million for the
same period a year ago.

Financial objectives for 2006 full year

The Group's performance in the first half of 2006 is consistent
with management expectations and enables the Group to confirm its
financial objectives set out for the full year of 2006:

-- Sales growth of 6.5% to 7.5%

-- Operating margin of 21.5% to 22.0% of sales(1)(1)

-- Based on the guidance issued by Tercica on its 2006 financial
results, and assuming completion of Ipsen's acquisition of 25%
of Tercica's equity in early October 2006, Ipsen's financial
statements in 2006 could also include an additional c.EUR 4
million charge(2)(2)("income/loss from associates ").

Commenting on the performance in the first half of 2006, Jean-Luc
Belingard, Chairman and Chief Executive Officer of Ipsen, stated:
"These results confirm the soundness of Ipsen's strategic focus:
strong growth in targeted therapeutic areas and strong operating
margins generating strong cash-flows. This allows us to confirm our
full year 2006 objectives".

(1) including the negative impact of a non-recurring expense of
EUR 8.4 million paid to Inamed and excluding any potential loss from
associates arising from Tercica.

(2) Assuming Tercica's net loss during the second half of 2006 is
spread evenly between the third and fourth quarters of 2006.

Regarding Ipsen's evolution since the beginning of 2006, Mr
Belingard said: "We have significantly reshaped Ipsen's profile,
notably by expanding its marketing reach and overall market coverage
worldwide: we have gained exposure to the aesthetic market through our
partnership with Medicis in North America and, subject to completion,
we are building with Tercica our platform to market Somatuline(R) in
the US whilst preserving our profitability profile. We have also
broadened our product portfolio with the addition of Increlex(R) to
our endocrinology offering in Europe. Last but not least,
Somatuline(R) Autogel(R) has been approved in Canada, the first time
ever one of our products has been registered in North America".
Mr Belingard added: "Since December 2005, we have achieved our
objectives for the period. The second half of 2006 will be another
important period for Ipsen, with the expected filings of febuxostat in
Europe and Somatuline(R) Autogel(R) in the US in the fourth quarter.
We are also progressing our discussions with potential distributors
for our botulinum toxin product in aesthetic use in Europe.
Furthermore, we are continuing to investigate potential acquisitions
of late-stage products, as well as seeking R&D partnerships for some
of our early-stage products. Going forward, we intend to continue to
unfold our strategy, capitalizing on our R&D capabilities and our
market positioning in order to grow Ipsen into a tier-1 international
specialty pharmaceutical company enjoying sustained profitable
growth".
A review of the financial position and results in Ipsen's
consolidated financial statements for the half-year ended 30 June 2006
and 30 June 2005 is attached to this press release.

Conferences Calls

Conference call Media (in French)

Ipsen will host a conference call on Wednesday 6 September at
10.00 a.m. (Paris time).
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 number to join the conference call is +33 (0)1 71
23 04 21 . Please mention the company name (Ipsen) and our CEO's name
(Jean-Luc Belingard) to the operator. No access code is necessary for
the live call.
A replay will be available soon after the live call. The telephone
number to access the replay is +33 (0)1 71 23 02 48. The access code
is 5482558#. The replay will be available for one week following the
live call.

Conference call Analysts and webcat (in English)

Ipsen will host a conference call on Wednesday 6 September at 3.00
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 71 23 04 21 and from the United States: +1
718 354 1362.
Please mention the company name (Ipsen) and our CEO's name
(Jean-Luc Belingard) to the operator. No access code is necessary for
the live call.
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 9210426#. The replay will be available for one week following the
live call.

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 2005, Research and
Development expenditure was EUR 169.0 million, i.e. 20.9% of
consolidated sales, which amounted to EUR 807.1 million in the Group's
pro forma accounts prepared in accordance with IFRS. Nearly 700 people
in R&D are dedicated to the discovery and development of innovative
drugs for patient care. Ipsen's shares are traded on Segment A of
Eurolist by Euronext(TM) (stock code: IPN, ISIN code: FR0010259150).
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.
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 Autorite des marches financiers.

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For further information :

Didier Veron, Director of Public Affairs and Corporate Communications
Tel.: +33 (0)1 44 30 42 38 - Fax: +33 (0)1 44 30 42 04
E-mail : didier.veron@ipsen.com

David Schilansky, Investor Relations Officer
Tel.: +33 (0)1 44 30 43 31 - Fax: +33 (0)1 44 30 43 21
E-mail: david.schilansky@ipsen.com
*T

1 - Comparison of the consolidated income statement for the
half-years ended 30 June 2006 and 30 June 2005

A comparison of the income statement is presented below:

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30 June 2006
------------------------------------
(in thousands of % of revenues
euros)
--------------------------------------------------- ------------------
Sales 430,607 90.2 %
Other revenues 46,569 9.8 %
Total revenues 477,176 100.0 %
Cost of goods sold (88,879) -18.6 %
Research and development expenses (83,817) -17.6 %
Selling, general and
administrative expenses (188,000) -39.4 %
Other operating income and
expenses (8,298) -1.7 %
Restructuring costs 189 n/s
Impairment losses - -
Operating profit 108,371 22.7 %
- Income from cash and cash
equivalents 2,767
- Cost of gross financial debt (1,208)
Cost of net financial debt 1,559 0.3 %
Other interest income and expense (1,202) -0.3 %
Income tax (20,280) -4.3 %
Profit from continuing operations 88,448 18.5%
Profit from discontinued n/s
operations 33
Consolidated profit 88,481 18.5%
- Attributable to equity holders
of Ipsen S.A. 88,144
- Minority interests 337
--------------------------------------------------- ------------------

30 June 2005 30 June 2005
pro forma (1) pro forma
as reported
----------------------------------- -------------
(in % of 2006/2005 (in thousands
thousands revenues variation of euros)
of euros)
------------------------------- ----------- ------------ -------------
Sales 404,099 89.8 % 6.6 % 412,704
Other revenues 45,684 10.2 % 1.9 % 45,684
Total revenues 449,783 100.0 % 6.1 % 458,388
Cost of goods sold (84,437) -18.8 % 5.3 % (88,961)
Research and
development expenses (75,565) -16.8 % 10.9% (75,635)
Selling, general and
administrative
expenses (174,166) -38.7 % 7.9 % (177,317)
Other operating n/s n/s
income and expenses 174 174
Restructuring costs - - n/s -
Impairment losses - - n/s -
Operating profit 115,789 25.7 % -6.4% 116,649
- Income from cash
and cash equivalents 1,089 1,089
- Cost of gross
financial debt (4,378) (4,378)
Cost of net financial
debt (3,289) -0.7 % -147.4 % (3,289)
Other interest income
and expense (1,348) -0.3 % -10.8% (1,348)
Income tax (22,256) -4.9 % -8.9% (22,433)
Profit from
continuing
operations 88,896 19.8 % -0.5% 89,579
Profit from
discontinued n/s
operations 683 0.2 % -
Consolidated profit 89,579 19.9 % -1.2 % 89,579
- Attributable to
equity holders of
Ipsen S.A. 89,368 89,368
- Minority interests 211 211
------------------------------- ----------- ------------ -------------
*T

(1) The 30 June 2005 pro forma income statement as shown above
differs from that published in the 31 December 2005 "Document de
Base". In compliance with IFRS 5 the Group's primary care business in
Spain, divested in October 2005, has been treated as "discontinued
operations" from 1 January 2005, whereas in the financial statements
reported for 2005 this business was treated as "discontinued
operations" only from 30 September 2005. Such restated information
presents comparable data over the two half-years reported as at 30
June 2006.

-- Sales

-- Other revenues

In the first half of 2006, other revenues, which include royalties
and milestone payments from partners and for various services,
totalled EUR 46.6 million, up 1.9% year-on-year (first half of 2005,
EUR 45.7 million).

Other revenues break down into half-years as follows:

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30 June 30 June 2006/2005
(in thousands of euros) 2006 2005 variation
pro forma Amount %
------------------------------- ---------- ----------- ------- -------
Breakdown by revenue type
- Royalties received 21,865 22,684 (819) -3.6%
- Milestone payments 4,128 60 4,068 ns
- Licensing agreements 6,717 16,033 (9,316) ns
- Other (co-promotion revenues,
recharging) 13,859 6,907 6,952 100.6 %
------------------------------- ---------- ----------- ------- -------
Total other revenues 46,569 45,684 885 1.9 %
------------------------------- ---------- ----------- ------- -------
*T

-- Royalties received mainly comprised royalties from the
Kogenate(R) licence, which amounted to EUR 20.2 million for
the first half of 2006 (first half of 2005, EUR 21.1 million).
The first quarter of 2005 had been particularly high due to
the carry-over of some 2004 royalties into the first half of
2005.

-- Milestone payments represent recognition of payments received
over the life of contracts. In the first half of 2006, this
income mainly comprised the milestones in relation to the
Reloxin(R) and Tenstaten(R) agreements.

-- In the first half of 2006, licensing agreements mainly
comprised the recognition of advance payments made by Roche as
a result of the BIM 51077 partnership. In the first half of
2005, income of EUR 10.0 million was recorded in connection
with the termination of a research contract.

-- The increase in other revenues during the first half of 2006
was due to higher billings for R&D services within the
framework of existing partnerships as well as an increase in
co-promotion revenues, notably related to the early
termination in April 2006 of the co-promotion contract for
Zoxan with Pfizer, which was initially due to expire on 30
November 2006.

-- Cost of goods sold

In the first half of 2006, cost of goods sold amounted to EUR 88.9
million, representing 20.6% of sales. By comparison, in the same
period of 2005, cost of goods sold amounted to EUR 84.4 million,
representing 20.9% of sales. This favourable trend was mainly due to
increased production volumes and a favourable product mix, despite the
negative impact of price cuts during the first half of 2006.

-- Research and development expenses

A comparison of research and development expenses for the
half-years ended 30 June 2006 and 30 June 2005 is presented in the
following table:
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30 June 30 June 2006/2005
(In thousands of euros) 2006 2005 pro variation
forma
Amount %
------------------------------------------ ----------- ------- -------
Breakdown by expense type
- Drug-related research and
development(1) 70,645 65,613 5,032 7.7 %
- Industrial development(2) 10,218 7,518 2,700 35.9 %
- Strategic development(3) 2,954 2,434 520 21.4 %
------------------------------------------ ----------- ------- -------
Total 83,817 75,565 8,252 10.9 %
------------------------------------------ ----------- ------- -------
*T

(1) Drug-related research and 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
regulatorily-approved drugs 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.
(2) Includes chemical, biotechnical and development-process
research costs to industrialise the small-scale production of agents
developed by the research laboratories.
(3) Includes costs incurred for research into new product licences
or establishing partnership agreements.
Research and development expenses increased by 10.9% to EUR 83.8
million, representing 17.6% of total revenues and 19.5% of sales for
the half-year to 30 June 2006. That compares with the half-year to 30
June 2005, when research and development expenses totalled EUR 75.6
million, representing 16.8% of total revenues and 18.7% of sales.

-- In 2006, major research and development projects included
the continuation of phase III clinical trials for
Somatuline(R) and Dysport(R) with a view to preparing for
their filing with the Food and Drug Administration in the
USA ("FDA"), as well as the finalisation of the BIM 51077
development programmes agreed within the partnership with
Roche. The growth in drug-related research and development
expenses particularly reflects the full-period impact of
the Group having strengthened its clinical development
teams, starting in 2004.

-- In the area of industrial development, the increase during
the first half of 2006 in industrial development expenses
is mainly linked to costs required for the preparation for
pre-approval inspections by the FDA in some of the Group's
manufacturing sites, to prepare for future launches of
Dysport(R) and Somatuline(R) in the USA.

-- Selling, general and administrative expenses

A comparison of selling, general and administrative expenses for
the half-years ended 30 June 2006 and 30 June 2005 is presented in the
following table:
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30 June 2006/2005
30 June 2005 variation
2006 pro
(In thousands of euros) forma Amount %
---------------------------------------------- -------- ------- ------
Breakdown by expense type
Royalties paid 15,839 14,088 1,751 12.4 %
Taxes and sales tax 7,548 5,828 1,720 29.5 %
Other sales and marketing expenses 127,221 121,578 5,643 4.6 %
---------------------------------------------- -------- ------- ------
Selling expenses 150,608 141,494 9,114 6.4 %
---------------------------------------------- -------- ------- ------
General and administrative expenses 37,392 32,672 4,720 14.4 %
---------------------------------------------- -------- ------- ------
Total 188,000 174,166 13,834 7.9 %
---------------------------------------------- -------- ------- ------
*T

For the first half of 2006 , selling, general and administrative
expenses increased by 7.9% to EUR 188.0 million, representing 43.7% of
sales compared with EUR 174.2 million a year ago (representing 43.1%
of sales).

-- Selling expenses amounted to EUR 150.6 million, or 35.0%
of sales for the first half of 2006, a flat rate
year-on-year (first half of 2005, EUR 141.5 million
representing 35.0% of sales). Selling expenses include
royalties paid to third parties on the sales of products
marketed by the Group amounting to EUR 15.8 million for
the first half of 2006, up 12.4% year-on-year, stemming
from the sales growth of the corresponding products. Taxes
and sales taxes for the first half of 2006 were up 29.5%
at EUR 7.5 million, mainly due to an increase of sales tax
in France to 1.76% imposed on 1 January 2006, up from 0.6%
a year ago. For the first half of 2006, other sales and
marketing expenses amounted to EUR 127.2 million, up 4.6%
from EUR 121.6 million for the same period a year ago.
This increase is significantly below the sales growth
level, and reflects the success of the Group's
productivity improvement programmes.

-- General and administrative expenses grew by 14.4% to EUR
37.4 million for the first half of 2006, representing an
increase of EUR 4.7 million from a year ago. This
evolution stemmed mainly from an increase in costs of
corporate functions, notably due to the stock exchange
listing of the Group, as well as reinforcement of certain
administrative functions of the Group related to its
expansion in international markets.

-- Other operating income and expenses

For the first half of 2006, other operating income and expenses
amounted to an EUR 8.3 million expense compared with EUR 0.2 million
income a year ago. In 2006, this amount essentially comprises a
non-recurring payment of USD10.0 million to Inamed for the recovery of
all rights related to Reloxin(R) in the United States, Canada and
Japan in accordance with the termination agreement between the Group
and Inamed.

-- Operating profit

Operating income for the first half of 2006 was EUR 108.4 million,
representing 25.2% of sales, down 6.4% from a high baseline in 2005
(first half of 2005, EUR 115.8 million representing 28.7% of sales),
when R&D and commercial costs were particularly back-loaded into the
second half of the year.
Restated for an EUR 8.4 million one-off expense paid in March 2006
to Inamed for the recovery of all rights related to Reloxin(R), the
Group's operating profit in the first half of 2006 stood at EUR 116.8
million, stable year-on-year despite severe price pressure in major
European countries, representing 27.1% of sales compared with 28.7% a
year ago. This 1.6 points decrease in restated operating profit as a
percentage of sales notably includes (i) a continued improvement of
0.3 points in cost of goods sold due to a better product mix, (ii) an
increase of 0.8 points in R&D expenses due to the preparation of the
filings for Somatuline(R) Autogel(R) and Dysport(R) in the US plus
finalisation of the BIM 51077 (GLP-1 analogue) development programme
and (iii) an increase of 0.6 points in SG&A mainly resulting from an
increase in sales taxes in France and in costs of certain corporate
functions - notably stock exchange listing requirements expenses -
partially offset by productivity improvements in other sales and
marketing expenses.

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 profit for the half-years ended 30
June 2006 and 30 June 2005 are presented in the following table by
geographical region:
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30 June 2006 30 June 2005
pro forma

(in (in
thousands thousands
of euros) % of euros) %
---------------------------- ---------- --------- ---------- ---------
Major Western European
countries (1)
Sales 275,645 96.3 % 273,927 97.8 %
Revenues 286,345 100.0 % 280,052 100.0 %
Operating profit 113,110 39.5 % 114,745 41.0 %
---------------------------- ---------- --------- ---------- ---------
Other European countries
Sales 93,324 100.0 % 79,047 99.8 %
Revenues 93,324 100.0 % 79,218 100.0 %
Operating profit 40,372 43.3 % 29,440 37.2 %
---------------------------- ---------- --------- ---------- ---------
Rest of the World
Sales 61,638 100.0 % 51,125 100.0 %
Revenues 61,638 100.0 % 51,125 100.0 %
Operating profit 24,375 39.5 % 15,924 31.1 %
---------------------------- ---------- --------- ---------- ---------
Allocated Total
Sales 430,607 97.6 % 404,099 98.5 %
Revenues 441,307 100.0 % 410,395 100.0 %
Operating profit 177,857 40.3 % 160,109 39.0 %
---------------------------- ---------- --------- ---------- ---------
Non-Allocated Total
Revenues 35,869 100.0 % 39,388 100.0 %
Operating loss (69,486) (193.7) % (44,320) (112.5) %
---------------------------- ---------- --------- ---------- ---------
Ipsen Total
Sales 430,607 90.2 % 404,099 89.8 %
Revenues 477,176 100.0 % 449,783 100.0 %
Operating profit 108,371 22.7 % 115,789 25.7 %
---------------------------- ---------- --------- ---------- ---------

2006/2005 variation

(in thousands of
euros) %
---------------------------- -------------------- --------------------
Major Western European
countries (1)
Sales 1,718 0.6 %
Revenues 6,293 2.2 %
Operating profit (1,635) (1.4) %
---------------------------- -------------------- --------------------
Other European countries
Sales 14,277 18.1 %
Revenues 14,106 17.8 %
Operating profit 10,932 37.1 %
---------------------------- -------------------- --------------------
Rest of the World
Sales 10,513 20.6 %
Revenues 10,513 20.6 %
Operating profit 8,451 53.1 %
---------------------------- -------------------- --------------------
Allocated Total
Sales 26,508 6.6 %
Revenues 30,912 7.5 %
Operating profit 17,748 11.1 %
---------------------------- -------------------- --------------------
Non-Allocated Total
Revenues (3,519) (8.9) %
Operating loss (25,166) (56.8) %
---------------------------- -------------------- --------------------
Ipsen Total
Sales 26,508 6.6 %
Revenues 27,393 6.1 %
Operating profit (7,418) (6.4) %
---------------------------- -------------------- --------------------
*T

(1) France, Spain, Italy, Germany and the UK

-- In the Major Western European countries, sales for the first
half of 2006 grew by only 0.6% year-on-year. This mainly
reflects government measures imposing price cuts, together
with the impact of the Tenstaten(R) agreement with Recordati
in France. Moreover, in the first half of 2006, sales taxes
increased by nearly EUR 2 million year-on-year, mainly in
France. As a result, the operating profit declined by 1.4% to
EUR 113.1 million for the first half of 2006, representing
39.5% of revenues, against EUR 114.7 million a year ago,
representing 41.0% of revenues.

-- In Other European countries, which include other Western
European countries and Eastern Europe countries, the operating
profit for the period increased by 37.1% to EUR 40.4 million,
compared with EUR 29.4 million a year earlier. This good
performance was achieved due to (i) a strong 18.1% sales
increase despite a EUR 3.3 million impact of price reductions,
(ii) a reduction in sales taxes and commissions in some
countries and (iii) the absence of non-recurring expenses in
the first half of 2006, which had impacted the first half of
2005. As a result, operating profit in the region for the
first half of 2006 represents 43.3% of revenues, against 37.2%
a year ago.

-- In the Rest of the World, most of the Group's products are
marketed by third-party distributors and agents, except in
China and South Korea, where Ipsen has a direct presence. For
the first half of 2006, operating profit sharply increased to
EUR 24.4 million, up 53.1% year-on-year (first half of 2005,
EUR 15.9 million) due to a strong 20.6% increase in sales,
while costs have not increased at the same pace.

Non-allocated operating loss for the first half of 2006 totalled
EUR 69.5 million, against a loss of EUR 44.3 million a year ago. For
the first half of 2006, the non-allocated operating loss included:

-- revenues of EUR 35.9 million against EUR 39.4 million a
year earlier. This decrease is explained by (i) the
negative impact of lesser royalties generated by the
Kogenate(R) license, (ii) an income received in May 2005
related to the termination of a research agreement and
(iii) in the first half of 2006, the positive impact of
the recognition of milestones in connection with the
Reloxin(R) agreement in addition to higher billings for
R&D services in existing partnerships.

-- research and development expenses of EUR 75.4 million, up
from EUR 68.0 million a year ago.

-- selling, general & administrative expenses of EUR 21.8
million, compared with EUR 16.9 million a year ago. This
increase results in particular from a reinforcement of
some of the Group's corporate functions.

-- other expense of EUR 8.1 million, mainly comprising the
indemnity paid to Inamed as shown above, compared with
other income of EUR 1.2 million recorded a year ago.

Cost of net financial debt

For the first half of 2006, the cost of net financial debt showed
an income of EUR 1.6 million against an expense of EUR 3.3 million a
year earlier. This positive trend mainly reflects the strong
improvement in the cash position due to the capital increase in
December 2005 and the cash received in 2006 from partnerships.

-- Income tax

For the first half of 2006, the Group's effective tax rate
amounted to 18.7% of pre-tax profit from continuing operations,
compared with 20.0% a year earlier.
The Group's effective tax rate benefited in 2006 from the
non-recurring tax impact of the use of UK capital losses carried
forward for a total of EUR 6.9 million.. Due to uncertainty of
recovery of those capital losses, no deferred tax assets had
previously been recognized whereas, in 2006, the capital gain deriving
from the Reloxin(R) agreement with Medicis enabled capital losses to
be offset in the period. Excluding this non-recurring impact, the
Group's tax rate would have been 25.0% for the half-year to 30 June
2006. A year ago, the Group's effective tax rate had benefited from
the non-recurring impacts of recognizing net deferred tax assets and
utilizing previously unrecognized tax loss carry forwards in UK and
Dutch subsidiaries, since their profitability had improved. Excluding
these non-recurring impacts, the Group's effective tax rate for the
half-year to 30 June 2005 would have been 24.9%, in line with the
first half of 2006.

-- Profit from continuing operations

As a result of the items noted above, profit from continuing
operations for the first half of 2006 declined by 0.5% to EUR 88.5
million, against EUR 88.9 million a year earlier. Thus profit from
continuing operations represented 18.5% of revenues, compared with
19.8% for the first half of 2005.

-- Profit from discontinued operations

Profit from discontinued operations relates to toll-manufacturing
for Spain-based FAES FARMA, who acquired the Group's primary care
business in Spain in October 2005. This activity, presented as
"discontinued operations" as from 1 January 2005, will be undertaken
until early 2007. For the first half of 2006, net profit was not
significant and amounted to EUR 0.7 million for the same period a year
ago.

-- Consolidated profit

As a result of the items noted above, consolidated profit declined
by 1.2% to EUR 88.5 million (EUR 88.1 million attributable to equity
holders of Ipsen S.A.) in the first half of 2006, against EUR 89.6
million (EUR 89.4 million attributable to equity holders of Ipsen
S.A.) a year earlier. Consolidated profit represented 18.5% of
revenues for the half-year to 30 June 2006, compared with 19.9% a year
earlier.

-- Milestones received in cash during the period but not yet
recognised as revenues in the Group's income statement

For the half-year ended 30 June 2006, the total milestones
received in cash by the Group but not yet recognised as revenues in
its consolidated income statement amounted to EUR 94.3 million,
against EUR 5.0 million for the half-year to 30 June 2005. These
payments will be recognized in the Group's income statement as
revenues going forward as follows :
-0-
*T

(in EUR million) Milestones received in cash but
not yet recognized as
revenues for the half-year
periods ended :
------------------------------------- --------------------------------
June 30, 2006 June 30, 2005
------------------------------------- ------------------ -------------
Total
These will be recognized as revenues
in the future as follows: 94.3 5.0
------------------------------------- ------------------ -------------
In the second half of 2006 4.0 2.4
In 2007 8.0 1.1
In 2008 and beyond 82.3 1.5
------------------------------------- ------------------ -------------
*T

After 30 June 2006, other milestones have been received in cash
for a total of EUR 73.6 million in the context of Roche's opt-in for
BIM 51077, as well as an additional payment by Medicis within the
framework of the Reloxin(R) distribution agreement for the United
States, Canada and Japan. In the future, these additional payments
will be recognized as revenues in the Group's accounts as follows: EUR
2.6 million in the second half of 2006, EUR 5.5 million in 2007, and
EUR 65.5 million in 2008 and beyond. These amounts are additional to
the amounts shown in the table above.

2 - CASH FLOW AND CAPITAL FOR THE HALF-YEARS ENDED 30 JUNE 2006
AND 30 JUNE 2005

The consolidated cash flow statement shows a net increase in cash
flow of EUR 24.2 million for the first half of 2006, before currency
impact, compared to a decrease of EUR 55.6 million for the same period
a year ago.
In the first half of 2006, the Group generated a strong EUR 130.2
million cash flow from operating activities, against EUR 62.5 million
a year earlier. The cash position as at 30 June 2006 benefited from
sustained activity during the period as well as from the payment of a
EUR 75.5 million (USD90.1 million) milestone by Medicis under the
Reloxin(R) distribution licence granted by the Group for the United
States, Canada and Japan in the aesthetics indication. Under that same
contract, the Group also received from Medicis during the first half
of 2006 a down payment of EUR 10 million on the extra payment of USD35
million due from Medicis after the end of negotiations on a potential
extension of its distribution activities in Europe. As a result, the
Group has reimbursed most of its credit facilities, while keeping open
the option of re-using them (for a total of EUR 241.2 million as of 30
June 2006). The Group utilised EUR 25.2 million for its investment
transactions and paid out EUR 50.4 million in dividends during the
half-year to 30 June 2006. Cash derived from discontinued activities
amounted to EUR 1.6 million for the period (half-year to 30 June 2005
: nil).

ANALYSIS OF THE CASH FLOW STATEMENTS FOR THE HALF-YEARS TO 30 JUNE
2006 AND 30 JUNE 2005

-0-
*T
30 June 30 June
2006 2005
(in thousands of euros) pro forma
------------------------------------------------ ---------- ----------
- Cash flow before variation in working
capital requirements 89,558 98,302
- (Increase) decrease in working capital
requirements for operations 40,616 (35,775)
-- Net cash flow generated by operating
activities 130,174 62,527
-- Net cash flow used in investment activities (25,204) (29,741)
-- Net cash flow used in financing activities (82,358) (88,416)
-- Net cash flow provided by discontinued
activities 1,604 -
Increase (decrease) in cash flow for the half-
year 24,216 (55,630)
Cash and cash equivalents at beginning of year 200,564 92,763
Impact of pro forma treatment - (5,583)
Impact of foreign exchange variations (17) 192
------------------------------------------------ ---------- ----------
Cash and cash equivalents at end of half-year 224,763 31,742
------------------------------------------------ ---------- ----------
*T

Net cash flow generated by operating activities

During the first half of 2006, cash flow before changes in working
capital totalled EUR 89.6 million against EUR 98.3 million for the
same period a year ago. This reflects an increase in deferred tax
assets mainly due to the deferred tax asset recognized on the
milestone of USD90.1 million received from Medicis.
Working capital requirements for operating activities declined EUR
40.6 million for the first half of 2006 against an increase of EUR
35.8 million a year ago. This evolution is linked to the following :

-- The balance between current assets and current liabilities
represents a debt which increased by EUR 58.4 million during
the first half of 2006. This increase resulted notably from
the collection of payments received from Medicis out of which
EUR 83.8 million had not yet been recognised as revenues as at
30 June 2006. This impact has been partially offset by the
decrease of other assets and liabilities (linked in particular
to partnerships and insurance premiums).

-- An increase in inventories of EUR 3.4 million and in trade
receivables of EUR 30.4 million, mainly resulting from
business growth and from the modification of the payment terms
of certain customers in France, were added to the decrease in
trade payables of EUR 18.1 million, partly due to the payment
during the period of IPO-related fees accrued in 2005 and to
an invoicing level from suppliers which was lower than in the
fourth quarter of 2005.

-- Conversely, tax payable increased by EUR 34.1 million,
comprising EUR 12.6 million for the taxation resulting from
the Medicis payment and EUR 16.7 million in respect of the
balance of tax payable related to Group affiliates in France
for the first half of 2006.

As a result of the above, net cash flow generated by operating
activities amounted to EUR 130.2 million for the first half of 2006
against EUR 62.5 million a year ago.

Net cash flow used in investment activities

Net cash flow used in investment activities amounted to EUR 25.2
million for the first half of 2006 (first half of 2005, EUR 29.7
million). This comprised mainly fixed asset acquisitions, net of
disposals, of EUR 14.4 million, against EUR 15.3 million a year ago,
as well as a EUR 7.0 million increase in working capital requirements
linked to investment activities for the period, compared with an
increase of EUR 14.6 million a year ago. Additionally, the Group
utilised EUR 2.1 million in the first half of 2006 to fund its
liquidity contract on Ipsen shares.
During the first half of 2006, tangible fixed asset acquisitions
totalled EUR 14.2 million, mostly consisting of capital expenditure
required to maintain the Group's industrial facilities, namely EUR 3.6
million for industrial buildings and fittings and EUR 4.7 million for
machinery, mainly at the Dreux and Wrexham production sites.
The increase of EUR 7.0 million for working capital in investing
activities during the first half of 2006 is mostly due to the payment
during the period of liabilities recorded in 2005 in France.

Net cash flow used in financing activities

In the half-year to 30 June 2006, net cash flow used in financing
activities totalled EUR 82.4 million against EUR 88.4 million a year
ago. Following payments received from Medicis, EUR 31.1 million of the
Group's credit facilities has been repaid, thus reducing the overdraft
as at 30 June 2006 to EUR 6.6 million. In the half-year to 30 June
2005, repayment of credit facilities amounted to EUR 70.0 million. The
Group still has the option to utilise fully these credit facilities.
In the first half of 2006, the Group paid out EUR 50.4 million in
dividends, compared with EUR 29.3 million in the same period of 2005.

Net cash flow from discontinued activities

In the half-year to 30 June 2006, net cash flow from discontinued
activities amounted to EUR 1.6 million (half-year to 30 June 2005:
nil), resulting from the decrease in working capital requirements
linked to primary care activities in Spain, which were divested in
October 2005.

ANALYSIS OF NET CASH

At 30 June 2006, the Group's net cash(1) was EUR 193.3 million,
compared with EUR 138.3 million net cash as at 31 December 2005. The
Group has four-year credit facilities totalling EUR 241.2 million, out
of which only EUR 6.6 million was in use at 30 June 2006, compared
with a EUR 37.8 million utilisation as at 31 December 2005. The
covenants included in the loan agreements, namely net debt to equity
and net debt to EBITDA(2), are irrelevant in respect of the current
positive net cash situation.

3 - SHAREHOLDING STRUCTURE

On the basis of available information, Ipsen believes that its
shareholding structure as at 30 June 2006 breaks down as follows.

On an outstanding basis:

-0-
*T
Shares held In %
----------------------------------------------------------- ----------
Mayroy 62,162,828 74.0%
Board members 14,345 0.0%
Employees 1,076,830 1.3%
Treasury shares 14,791 0.0%
Public 20,755,889 24.7%
----------------------------------------------------------- ----------
Total 84,024,683 100.0%
----------------------------------------------------------- ----------
*T

On the same basis, after full exercise of stock options and bonus
shares, Ipsen's shareholding structure would break down as follows:
-0-
*T
Shares held In %
------------------------------------------- --------------- ----------
Mayroy 60,506,884 71.7%
Board members 14,345 0.0%
Employees 3,082,774 3.7%
Treasury shares 14,791 0.0%
Public 20,755,889 24.6%
------------------------------------------- --------------- ----------
Total 84,374,683 100.0%
------------------------------------------- --------------- ----------
*T

(1) Net cash: cash and cash equivalents minus bank overdrafts,
bank borrowings and other financial liabilities plus or minus
derivative financial instruments

(2) EBITDA: Earnings before interest, tax, depreciation and
amortisation

-0-
*T
ANNEX 1

RESUME CONSOLIDATED INCOME STATEMENT

30 June
(in thousand of euros) 30 June 2005 30 June
2006 Pro forma 2005 (1)
(1)
---------------------------------------- --------- --------- ---------

---------------------------------------- --------- --------- ---------
Sales 430,607 404,099 385,694
---------------------------------------- --------- --------- ---------
Other revenues 46,569 45,684 39,992
---------------------------------------- --------- --------- ---------
Total Revenues 477,176 449,783 425,686
---------------------------------------- --------- --------- ---------
Cost of goods sold (88,879) (84,437) (90,227)
---------------------------------------- --------- --------- ---------
Research and Development expenses (83,817) (75,565) (74,110)
---------------------------------------- --------- --------- ---------
Selling expenses (150,608) (141,494) (138,627)
---------------------------------------- --------- --------- ---------
General and administrative expenses (37,392) (32,672) (30,682)
---------------------------------------- --------- --------- ---------
Other operating income and expenses (8,298) 174 1,919
---------------------------------------- --------- --------- ---------
Restructuring cost 189 - -
---------------------------------------- --------- --------- ---------
Impairment losses - - -
---------------------------------------- --------- --------- ---------
Operating income 108,371 115,789 93,959
---------------------------------------- --------- --------- ---------
- Cash ans cash equivalent 2,767 1,089 450
---------------------------------------- --------- --------- ---------
- Cost of financial debt (1,208) (4,378) (4,211)
---------------------------------------- --------- --------- ---------
Net cost of financial debt 1,559 (3,289) (3,761)
---------------------------------------- --------- --------- ---------
Other financial income and expenses (1,202) (1,348) (1,007)
---------------------------------------- --------- --------- ---------
Income taxes (20,280) (22,256) (20,400)
---------------------------------------- --------- --------- ---------

---------------------------------------- --------- --------- ---------
Net profit continuing operations 88,448 88,896 68,791
---------------------------------------- --------- --------- ---------

---------------------------------------- --------- --------- ---------
Discontinued operations (1) 33 683 683
---------------------------------------- --------- --------- ---------

---------------------------------------- --------- --------- ---------
Net profit from continuing operation 88,481 89,579 69,474
---------------------------------------- --------- --------- ---------
- attributable to equity holders of the
parent 88,144 89,368 62,075
---------------------------------------- --------- --------- ---------
- minority interest 337 211 7,399
---------------------------------------- --------- --------- ---------

---------------------------------------- --------- --------- ---------
Basic earnings per share, continuing
operations (in euros) 1.049 1.183 1.048
---------------------------------------- --------- --------- ---------
Diluted earnings per share, continuing
operations (in euros) 1.049 1.183 1.048
---------------------------------------- --------- --------- ---------

---------------------------------------- --------- --------- ---------
Basic earnings per share, discontinuing
operations (in euros) 0.000 0.009 0.011
---------------------------------------- --------- --------- ---------
Diluted earnings per share,
discontinuing operations (in euros) 0.000 0.009 0.011
---------------------------------------- --------- --------- ---------

---------------------------------------- --------- --------- ---------
Basic earnings per share (in euros) 1.049 1.192 1.059
---------------------------------------- --------- --------- ---------
Diluted earnings per share (in euros) 1.049 1.192 1.059
---------------------------------------- --------- --------- ---------
*T

(1) In accordance with IFRS 5, the 2005 income statement has been
restated to provide comparable data for the periods presented

ANNEX 2

RESUME CONSOLIDATED BALANCE SHEET

-0-
*T
30 June 31
(in thousand of euros) 2006 December
2005
------------------------------------------------- ---------- ---------
ASSET
------------------------------------------------- ---------- ---------
Goodwills 188,836 188,836
------------------------------------------------- ---------- ---------
Other intangible assets, net 38,949 39,800
------------------------------------------------- ---------- ---------
Property, plant and equipment, at cost 186,058 187,769
------------------------------------------------- ---------- ---------
Equity investments 2,260 2,656
------------------------------------------------- ---------- ---------
Other non-current assets 4,485 2,671
------------------------------------------------- ---------- ---------
Non-current financial assets 6,745 5,327
------------------------------------------------- ---------- ---------
Deferred tax assets 48,621 13,096
------------------------------------------------- ---------- ---------
Total non-current assets 469,209 434,828
------------------------------------------------- ---------- ---------
Inventories 77,738 74,390
------------------------------------------------- ---------- ---------
Trade receivables 194,371 164,681
------------------------------------------------- ---------- ---------
Current tax assets 1,532 10,951
------------------------------------------------- ---------- ---------
Other current assets 56,253 42,966
------------------------------------------------- ---------- ---------
cash and cash equivalent 226,155 202,034
------------------------------------------------- ---------- ---------
Total current assets 556,049 495,022
------------------------------------------------- ---------- ---------
Non current assets classified as held for sale 6,052 12,659
------------------------------------------------- ---------- ---------
TOTAL ASSETS 1,031,310 942,509
------------------------------------------------- ---------- ---------

SHAREHOLDER'S EQUITY AND LIABILITIES
------------------------------------------------- ---------- ---------
Share capital 84,025 84,025
------------------------------------------------- ---------- ---------
Share premiums and consolidated reserves 505,702 420,591
------------------------------------------------- ---------- ---------
Profit of the Year 88,144 119,230
------------------------------------------------- ---------- ---------
Cumulative translation reserve