Ipsen´s First Half 2016 Results

Regulatory News:

Ipsen (Euronext: IPN; ADR: IPSEY), a global specialty-driven pharmaceutical group, today announced financial results for the first half 2016. The Board of Directors, chaired by Marc de Garidel, met on 27 July 2016 to approve the financial statements for the first half 2016.

Extract of consolidated results for the first halves 2016 and 2015

Commenting on the first half 2016 performance, David Meek, Chief Executive Officer of Ipsen, said: “We are very pleased with the Group’s strong operating performance in the first half of 2016. Sales grew by nearly 10% year-on-year and core operating margin improved by 1.2 points, both driven primarily by solid Specialty Care growth.”

David Meek added: “Ipsen is in a unique transformational phase with several key drivers to accelerate growth. Somatuline® and Dysport® have both established strong momentum with additional opportunities for expanded indications. We are also preparing for the successful launch of two new products. First, Cabometyx™ in Europe for advanced renal cell carcinoma, for which we recently received a positive CHMP opinion, and subsequently, telotristat etiprate in 2017 to further build our position in the neuroendocrine tumor market. We continue to advance many important pipeline programs and are encouraged by the significant potential of the company as we enter this new era of growth.”

Review of the first half 2016 results

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

In the first half of 2016, Group sales reached €763.8 million, up 9.7% year-on-year. Specialty Care sales reached €613.5 million, up 14.3%, driven by the strong growth of Somatuline® in the neuroendocrine tumor indication in North America, as well as a solid performance throughout Europe.

For Dysport®, good performance in Russia, the US and Germany was offset by inventory trends in the Middle East and Brazil. Decapeptyl® sales reflect good volume growth in Europe offset by inventory trends in the Middle East and price pressure in China.

In the first half of 2016, Primary Care reached €150.4 million, down 5.9% year-on-year. Sales were impacted by lower Smecta® sales in Asia and Tanakan® sales in Russia.

Core Operating Income totaled €188.8 million in the first half of 2016, up 12.6%. Core operating margin reached 24.7%, up 1.2 points compared to the first half of 2015, mainly driven by strong business performance, partially offset by investments for the Cabometyx™ launch and the adverse impact of foreign currencies.

Consolidated net profit was €133.3 million, up 47.4% over the period, compared to €90.5 million in 2015, which included the net impact of the depreciation of intangible assets related to tasquinimod in the amount of €39.6 million after tax.

Fully diluted core earnings per share (see Appendix 4) grew by 16.0% year-on-year to reach €1.74 for the first half of 2016, compared to €1.50 in 2015.

Free cash flow generated in the first half of 2016 reached €73.6 million, up significantly by €51.2 million, driven by the increase in core operating income and improved management of working capital.

Closing net cash reached €17.3 million as of June 2016, compared to €70.8 million as of June 2015 after the upfront payment for the cabozantinib license to Exelixis for €183.8 million in March 2016.

2016 financial objectives

Based on the first half 2016 performance, the Group raises its guidance for Specialty Care sales growth to greater than 12% and reaffirms its target for Core Operating margin of around 21%, assuming higher investments required to prepare the commercial launch of Cabometyx™, and further investments in the US to support the accelerated growth of Somatuline® and additional launches of Dysport®.

Sales objectives are set at constant currency.

The interim financial report, with regard to regulated information, is available on the Group´s website, www.ipsen.com, under the Regulated Information tab in the Investor Relations section.

Meeting, webcast and conference call (in English) for the financial community

Ipsen will host an analyst meeting on Thursday 28 July 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 dial in to the call approximately 5 to 10 minutes prior to its start. No reservation is required to participate in the conference call.

France and continental Europe: +33 (0)1 70 99 32 08
UK: +44 (0)20 7162 0077
United States: +1 646 851 2407
Conference ID: 959296

A recording will be available for 7 days on Ipsen’s website and at the following numbers:

France and continental Europe: +33 (0)1 70 99 35 29
UK: +44 (0)20 7031 4064
United States: +1 954 334 0342
Conference ID: 959296

About Ipsen

Ipsen is a global specialty-driven pharmaceutical 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 expenditures neared €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 are 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 trades 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 favorable 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 2015 Registration Document available on its website (www.ipsen.com).

Comparison of consolidated sales for the second quarters and first halves of 2016 and 2015:

Sales by therapeutic area and by product1

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 second quarters and first halves 2016 and 2015:

%
Variation

%
Variation
at
constant
currency

%
Variation

%
Variation
at
constant
currency

Somatuline®

Decapeptyl®

Hexvix®

Dysport®

NutropinAq®

Increlex®

Smecta®

Forlax®

Tanakan®

In the second quarter of 2016, sales reached €401.9 million, up 14.5%, driven by the 18.6% growth of Specialty Care sales, while Primary Care sales slightly declined by 0.1%. In the first half of 2016, sales amounted to €763.8 million, up 9.7%, driven by the 14.3% growth of Specialty Care sales, while Primary Care sales declined by 5.9%.

In the second quarter of 2016, sales of Specialty Care products reached €325.4 million, up 18.6% year-on-year. In the first half of 2016, sales amounted to €613.5 million, up 14.3%. Oncology and neurosciences sales grew by 19.7% and 4.6%, respectively, while endocrinology sales decreased by 0.5%. In the first half of 2016, the relative weight of Specialty Care continued to increase to reach 80.3% of Group sales, compared to 76.9% in the previous year.

In oncology, sales reached €227.5 million in the second quarter of 2016, up 22.8% year-on-year, driven by the continued acceleration of Somatuline® growth. In the first half of 2016, sales amounted to €431.9 million, up 19.7%, driven by the strong growth of Somatuline® while Decapeptyl® was slightly up by 1.1%. Oncology sales represented 56.5% of total Group sales, compared to 51.3% in the previous year.

Somatuline®–In the second quarter of 2016, sales reached €133.2 million, up 37.4%. In the first half of 2016, sales amounted to €254.9 million, up 37.0%, driven by strong volume growth in North America following the launch of the new neuroendocrine tumor indication at the beginning of 2015 and by a strong performance in most European countries, notably in Germany, Poland and France.

Decapeptyl® – In the second quarter of 2016, sales reached €89.4 million, up 6.7% year-on-year, driven by strong volume growth in Europe. In the first half of 2016, sales amounted to €167.6 million, up 1.1%, negatively impacted by inventory trends in the Middle East and price pressure in China.

Hexvix® – In the second quarter of 2016, sales reached €4.9 million, up 11.2% year-on-year. In the first half of 2016, sales of reached €9.4 million, up 7.4%, mainly driven by the good performance in Germany, which accounted for a majority of the product sales.

In neurosciences, sales of Dysport® reached €76.4 million in the second quarter of 2016, up 12.2% year-on-year, driven by strong performance in the US and in Russia. In the first half of 2016, sales amounted to €139.6 million, up 4.3%, driven by the good performance in Russia, the US and Germany despite the negative impact of inventory trends in the Middle East and Brazil. Over the period, neurosciences sales represented 18.4% of total Group sales, compared to 19.8% in the previous year.

In endocrinology, sales of NutropinAq®reached €15.2 million in the second quarter of 2016, down 3.4% year-on-year. In the first half of 2016, sales amounted to €30.4 million, down 3.6%, impacted by lower volumes especially in Germany and Italy, partly offset by good performance in France. In the second quarter of 2016, sales of Increlex® reached €5.7 million, up 11.5% year-on-year, notably driven by the United States. In the first half of 2016, sales amounted to €10.7 million, up 9.3%. Over the period, endocrinology sales represented 5.4% of total Group sales, compared to 5.8% in the previous year.

In the second quarter of 2016, Primary Care sales reached €76.5 million, slightly down 0.1% year-on-year. In the first half of 2016, sales amounted to €150.4 million, down 5.9%, mainly impacted by lower Smecta® sales in Asia and Tanakan® sales in Russia. Over the period, Primary Care sales represented 19.7% of total Group sales, compared to 23.1% in the previous year.

In the second quarter of 2016, gastroenterology sales reached €52.4 million, up 2.4% year-on-year. In the first half of 2016, sales amounted to €103.4 million, down 5.5%, negatively impacted by inventory trends in Asia for Smecta®, and for Fortrans®following the product shortage at the beginning of the year.

Smecta® – In the second quarter of 2016, sales reached €24.9 million, up 1.7% year-on-year. In the first half of 2016, sales amounted to €54.1 million, down 9.2%, affected by high inventories in China in the first half of 2015, as well as inventory build in Vietnam, offsetting good performance in Russia.

Forlax® – In the second quarter of 2016, sales reached €10.1 million, up 5.8% year-on-year. In the first half of 2016, sales amounted to €20.1 million, up 8.6%, supported by growing sales to partners and a good performance in Italy.

In the cognitive disorders area, sales of Tanakan®reached €9.1 million in the second quarter of 2016, down 30.8% year-on-year, due to a market slowdown in France and in Russia. Sales in the first half of 2016 amounted to €18.9 million, down 18.9%.

Sales of Other Primary Care productsreached €6.8 million in the second quarter of 2016, down 1.3% year-on-year. In the first half of 2016, sales amounted to €13.4 million, down 9.8%, mainly affected by the 20.7% decline of Nisis®/Nisisco®, an additional 40.0% price cut in February 2015 in France, and by Adrovance® underperformance, down 16.1% sales over the semester.

In the second quarter of 2016, Drug-related sales (active ingredients and raw materials) reached €8.2 million, up 50.7% year-on-year. In the first half 2016, sales amounted to €14.7 million, up 21.3% driven by solid sales to the Group partner Schwabe.

Sales by geographical area

Group sales by geographical area in the second quarters and first halves 2016 and 2015 were as follows:

%
Variation

%
Variation
at
constant
currency

%
Variation

%
Variation
at
constant
currency