Ipsen´s 2015 Results and 2016 Financial Objectives

Regulatory News:

The Board of Directors of Ipsen (Euronext: IPN; ADR: IPSEY), chaired by Marc de Garidel, met on 29 February 2016 to review the Group’s results for 2015, published today. The annual financial report, with regards to the regulated information, will be available on the Group’s website, www.ipsen.com, Investor Relations section.

Extract from audited consolidated results for 2015 and 2014 (in million euros)

1 Sales growth excluding foreign exchange impact, calculated by applying the average 2015 rates to the 31 December 2014 sales figures

Commenting on the full year 2015 performance, Marc de Garidel, Chairman and Chief Executive Officer of Ipsen, said: “We are pleased with the Group’s excellent 2015 operating performance. Sales grew by more than 10% year-on-year, driven by the successful launch of Somatuline® in neuroendocrine tumors in the US and Europe, and the sound Dysport® performance in aesthetics. Core operating income grew by close to 24%, reflecting our continuous transformation and cost monitoring efforts.” Marc de Garidel added: “In 2016 we will continue to post strong sales growth thanks to the good Somatuline® and Dysport® momentum. In addition, we are pleased to announce the in-licensing of the global rights ex North America and Japan of cabozantinib for the second line treatment of advanced renal cell carcinoma, for which commercial launch is expected in 2017 in Europe. This sizeable operation will provide Ipsen with a global platform in oncology and a key growth driver for the coming years.”

Review of the full year 2015 results

Note: Unless stated otherwise, all variations in sales are stated excluding foreign exchange impacts.

In 2015, Group sales reached €1,443.9 million, up 10.4% year-on-year. Specialty care sales reached €1,114.2 million, up 14.4%, driven by:

• The strong growth of Somatuline® in North America following the launch of the neuroendocrine tumor indication, as well as a solid performance throughout Europe;
• The good performance of Dysport® in the aesthetic indication, notably through the Galderma partnership ;
• Decapeptyl® sales, up 1.3% over the period, affected by the slowdown in China.

In 2015, primary care reached €329.7 million, down 1.1% year-on-year. Sales declined by 7.7% in France, partially offset by international growth of 1.2%.

Core Operating Income totaled €322.5 million in 2015, up 23.8%. Core operating margin reached 22.3%, up 1.9 point compared to 2014, mainly driven by the acceleration of the development in the United States, the good performance in Europe, and appropriate cost control.

As of 31 December 2015, the Group recorded a €57.0 million impairment loss to fully impair the intangible asset related to tasquinimod following the decision to stop all clinical trials with the product as announced on 16 April, 2015.

Consolidated net profit was up 23.8% over the period to €190.7 million. Fully diluted core earnings per share (see Appendix 4) grew by 25.3% year-on-year to reach €2.78 for 2015, compared to €2.22 in 2014.

Net operating cash-flow generated in 2015 reached €223.6 million, compared to €245.8 million in 2014, due to a €81.2 million increase of the working capital requirement for operating activities in 2015, compared to a decrease of €5.3 million in 2014.

Closing cash reached €214.0 million over the period, compared to €180.1 million in 2014.

Comparison of 2015 performance with financial objectives

Financial objectives1

≥+14%2

Dividend for the 2015 financial year proposed for the approval of Ipsen’s shareholders

Ipsen S.A. Board of Directors, which met on 29 February 2016, has decided to propose at Ipsen’s annual shareholders’ meeting to be held on 31 May 2016 the payment of a dividend of €0.85 per share, stable year-on-year.

In-licensing agreement for the rights ex North America and Japan of cabozantinib (Exelixis)

Ipsen today announced a licensing agreement for the rights ex-North America and Japan of cabozantinib, a compound owned by US company Exelixis, which is already marketed under the name COMETRIQ® for the treatment of thyroid cancer. The compound is also developed for other indications, with a regulatory application filed in Europe in January 2016 for the second line treatment of advanced renal cell carcinoma (RCC), and an ongoing phase 3 clinical trial for the second line treatment of Hepatocellular carcinoma (HCC). Upon regulatory approval, the commercial launch for the treatment of RCC is expected early 2017 in Europe.

2016 financial objectives

The Group has set the following financial targets for 2016:

• Specialty care sales growth year-on-year in excess of 10.0%;
• Slight primary care sales growth year-on-year;
• Core operating margin of around 21%, including a negative impact of around 150 basis points resulting from the investment required to prepare the commercial launch of cabozantinib for the treatment of advanced renal cell carcinoma in Europe (in-licensing agreement announced today), and of around 100 basis points from foreign exchange rates.

Sales objectives are set at constant currency.

Update of 2020 outlook

Taking into account the additional growth stemming from the in-licensing of cabozantinib, Ipsen upgrades its sales targets and confirms its core operating margin objective for 2020, with:

• Sales in excess of 2.0 billion euros, driven by cabozantinib sales in 2019 and 2020;
• A core operating margin beyond 26%, despite the investment phase in 2017 and 2018 to launch cabozantinib for the treatment of advanced renal cell carcinoma in Europe. Ipsen will continue to implement cost containment initiatives and project arbitration to minimize impact on overall Group profitability.

1 2015 revised financial objectives communicated on 31 July 2015
2 Sales growth excluding foreign exchange impact, calculated by applying the average 2015 rates to the 31 December 2014 sales figures

Press conference (in French)

Ipsen will host a press conference on Tuesday 1 March 2016 at 9:00 a.m. (Paris time, GMT +1) at Salons de l’hôtel des Arts et Métiers – 9 bis avenue d’Iéna - 75116 Paris (France).

Meeting, webcast and Conference Call (in English) for the financial community

Ipsen will host an analyst meeting on Tuesday 1 March 2016 at 2:30 p.m. (Paris time, GMT+1) at its headquarters in Boulogne-Billancourt (France). A conference call will take place and a web conference (audio and video webcast) will be available at www.ipsen.com. Participants should enter the call in approximately 5 to 10 minutes prior to its start. The reference for the conference is ID 957325. No reservation is required to participate in the conference call.. Phone numbers to call in order to connect to the conference are: from France and continental Europe +33 (0)17 0993 209, from UK +44 (0)207 1312 711 and from the United States +1 646 461 1757. A recording will be available for 7 days on Ipsen’s website and at the following numbers: from France and continental Europe +33 (0)1 70 99 35 29, from UK +44 (0)20 7031 4064 and from the United States +1 954 334 0342 and access code is 957325.

About Ipsen

Ipsen is a global specialty-driven biotechnological group with total sales exceeding €1.4 billion in 2015. Ipsen sells more than 20 drugs in more than 115 countries, with a direct commercial presence in more than 30 countries. Ipsen’s ambition is to become a leader in specialty healthcare solutions for targeted debilitating diseases. Its fields of expertise cover oncology, neurosciences and endocrinology (adult & pediatric). Ipsen’s commitment to oncology is exemplified through its growing portfolio of key therapies improving the care of patients suffering from prostate cancer, bladder cancer and neuro-endocrine tumors. Ipsen also has a significant presence in primary care. Moreover, the Group has an active policy of partnerships. Ipsen´s R&D is focused on its innovative and differentiated technological platforms, peptides and toxins, located in the heart of the leading biotechnological and life sciences hubs (Les Ulis/Paris-Saclay, France; Slough/Oxford, UK; Cambridge, US). In 2015, R&D expenditure totaled close to €193 million. The Group has more than 4,600 employees worldwide. Ipsen’s shares are traded on segment A of Euronext Paris (stock code: IPN, ISIN code: FR0010259150) and eligible to the “Service de Règlement Différé” (“SRD”). The Group is part of the SBF 120 index. Ipsen has implemented a Sponsored Level I American Depositary Receipt (ADR) program, which trade on the over-the-counter market in the United States under the symbol IPSEY. For more information on Ipsen, visit www.ipsen.com.

Forward Looking Statement

The forward-looking statements, objectives and targets contained herein are based on the Group’s management strategy, 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. All of the above risks could affect the Group’s future ability to achieve its financial targets, which were set assuming reasonable macroeconomic conditions based on the information available today. Use of the words "believes," "anticipates" and "expects" and similar expressions are intended to identify forward-looking statements, including the Group’s expectations regarding future events, including regulatory filings and determinations. Moreover, the targets described in this document were prepared without taking into account external growth assumptions and potential future acquisitions, which may alter these parameters. These objectives 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, notably the fact that a promising product in early development phase or clinical trial may end up never being launched on the market or reaching its commercial targets, notably for regulatory or competition reasons. The Group must face or might face competition from generic products that might translate into a loss of market share. Furthermore, the Research and Development process involves several stages each of which involves the substantial risk that the Group may fail to achieve its objectives and be forced to abandon its efforts with regards to 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. There can be no guarantees a product will receive the necessary regulatory approvals or that the product will prove to be commercially successful. If underlying assumptions prove inaccurate or risks or uncertainties materialize, actual results may differ materially from those set forth in the forward-looking statements. Other risks and uncertainties include but are not limited to, general industry conditions and competition; general economic factors, including interest rate and currency exchange rate fluctuations; the impact of pharmaceutical industry regulation and health care legislation; global trends toward health care cost containment; technological advances, new products and patents attained by competitors; challenges inherent in new product development, including obtaining regulatory approval; the Group´s ability to accurately predict future market conditions; manufacturing difficulties or delays; financial instability of international economies and sovereign risk; dependence on the effectiveness of the Group’s patents and other protections for innovative products; and the exposure to litigation, including patent litigation, and/or regulatory actions. The Group also depends on third parties to develop and market some of its products which could potentially generate substantial royalties; these partners could behave in such ways which could cause damage to the Group’s activities and financial results. The Group cannot be certain that its partners will fulfil their obligations. It might be unable to obtain any benefit from those agreements. A default by any of the Group’s partners could generate lower revenues than expected. Such situations could have a negative impact on the Group’s business, financial position or performance. The Group 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. The Group’s business is subject to the risk factors outlined in its registration documents filed with the French Autorité des Marchés Financiers.

The risks and uncertainties set out are not exhaustive and the reader is advised to refer to the Group’s 2014 Registration Document available on its website (www.ipsen.com).

Comparison of consolidated sales for the fourth quarters and full years 2015 and 2014:

Sales by therapeutic area and by product

Note: Unless stated otherwise, all variations in sales are stated excluding foreign exchange impacts.

The following table shows sales by therapeutic area and by product for the fourth quarters and full years 2015 and 2014:

%
Variation

%
Variation
at constant
currency

%
Variation

%
Variation
at constant
currency

* Drug-related sales (active ingredients and raw materials) are recorded within Primary care sales.

In the fourth quarter, sales have reached €375.5 million, up 21.3% year-on-year, driven by specialty care growth of 25.8% and primary care growth of 8.4%. In 2015, sales amounted to €1,443.9 million, up 10.4% year-on-year.

In the fourth quarter 2015, Specialty care sales reached €289.7 million, up 25.8% year-on-year. In 2015, sales amounted to €1,114.2 million, up 14.4%. Sales in endocrinology grew 29.2%, while sales in urology-oncology and neurology grew by respectively 1.5% and 10.0%. The relative weight of specialty care products continued to increase to reach 77.2% of total Group sales, compared to 74.3% the previous year.

In Endocrinology, sales reached €131.1 million in the fourth quarter 2015, up 37.8%, driven by the acceleration of Somatuline® growth and the good performance of Increlex® year-on-year. In 2015, sales amounted to €482.3 million, up 29.2%. The annual sales of Somatuline® reached €401.6 million, up 34.2%, driven by strong growth in North America following the launch of the neuroendocrine tumor indication at the beginning of the year. The product also registered excellent performance in Europe, notably in Germany, France, Poland, the UK and Spain. The annual sales of Increlex® amounted to €20.4 million, up 42.2% year-on-year, benefiting from a favorable base effect related to the supply shortage, which started mid-June 2013 in the United States and in August 2013 in Europe. Supply gradually resumed in Europe in early 2014 and in the United States in June 2014. In 2015, sales of Endocrinology represented 33.4% of total Group sales, compared to 28.2% the previous year.

In Urology-oncology, sales of Decapeptyl® reached €83.2 million in the fourth quarter 2015, up 11.0% year-on-year, driven by the performance in Algeria helped by a favorable base effect and a good market dynamics, the performance in Spain where Ipsen is gaining market shares, notably benefiting from a more favorable share of voice to competitors, as well as favorable inventory effects in the Middle-East. In China, growth recovered in the fourth quarter thanks to a favorable base effect, after 9 months of sales decline affected by the context of market slowdown and pricing pressure in some provinces. In 2015, sales amounted to €334.0 million, up 1.3%, affected by the slowdown in China and a more frequent use of co-payment in some Southern European countries and additional price cuts, notably of 11.0% on 1st January 2015 in Greece, of 3.0% on 1st February 2015 in France, and of more than 20% in Algeria. In 2015, sales of Hexvix® amounted to €17.2 million, up 6.6% compared to the previous year, mostly driven by the performance in France and Germany. Germany represented around 71% of total product sales. Over the period, sales in Urology-oncology represented 24.3% of total Group sales, compared to 26.1% the previous year.

In Neurology, Dysport® sales reached €70.7 million in the fourth quarter 2015, up 26.1% year-on-year, driven by the good performance of the aesthetic indication through the partnership with Galderma in Brazil, Australia and Mexico. In 2015, sales amounted to €279.5 million, up 9.7% year-on-year, driven by the performance of the aesthetic indication in Russia, Brazil, Mexico and Australia. Over the period, Neurology sales represented 19.4% of total Group sales, compared to 20.0% a year earlier.

In the fourth quarter 2015, sales of Primary Care reached €85.8 million, up 8.4% year-on-year, driven by the growth of Gastroenterology and Drug-related sales, up respectively 11.2% and 46.6%. In 2015, sales amounted to €329.7 million, down 1.1% year-on-year, affected by a continued decline of 7.7% in France, partially offset by international growth of 1.2%. Primary care sales in France accounted for 24.3% of the Group’s total primary care sales, compared to 26.5% the previous year.

In the fourth quarter 2015, sales of Gastroenterology products reached €59.8 million, up 11.2% year-on-year, despite a 6.2% decline of Smecta®, driven by the performance of Etiasa® in China (where Ipsen is now the direct product distributor), of Fortrans®, especially in Russia, and of Forlax®, supported by sales to our partners marketing generic versions of the product, as well as by Eziclen®’s progressive launch in additional European countries. In 2015, sales in Gastroenterology amounted to €227.2 million, down 0.7% year-on-year, affected by the decline of Smecta® sales, down 10.2% year-on-year, due to an unfavorable inventory effect in the distribution channel during the second and third quarters in China, in a context of pricing pressure in some regions. Sales were also affected in France by the 7.5% price cut implemented in July 2014 and in Algeria with the termination of direct sales in 2015.

In the cognitive disorders area, sales of Tanakan®reached €15.1 million euros in the fourth quarter 2015, up 2.2% year-on-year. Sales in 2015 amounted to €52.0 million euros, down 11.2%, impacted by a market slowdown in France and in Russia.

In the cardiovascular area, sales reached €2.5 million euros in the fourth quarter 2015, down 32.4% year-on-year. In 2015, sales amounted to €15.8 million euros, down 15.8%, mainly impacted by the decline in Nisis® / Nisisco® sales, hit by an additional 40.0% price cut in February 2015 in France.

Sales of Other primary care productsreached €2.5 million in the fourth quarter 2015, down 15.3% year-on-year, mainly affected by the 12.1% decline in Adrovance® sales over the period. In 2015, sales amounted to €10.3 million, down 8.4%.

In the fourth quarter 2015, Drug-related sales (active ingredients and raw materials) reached€6.0 million, up 46.6% year-on-year. In 2015, sales amounted to €24.3 million, up 52.5%. This performance is mainly explained by the new business model in Algeria (where Ipsen now supplies the active ingredient of Smecta® to a local manufacturer and records sales in Drug-related sales), the strong supply sales of Gingko Biloba extracts to Schwabe, and the sales recovery of the active ingredient of Smecta® in South Korea.

Sales by geographical area

Group sales by geographical area in the fourth quarters and full years 2015 and 2014 were as follows:

%
Variation

%
Variation
at
constant
currency

2014

%
Variation

%
Variation
at
constant
currency