Recurring Operating Margin(2) above Objectives: 23.7% of Net Sales
Strong Increase in Recurring Consolidated Profit(2): +15.6%
All Time High Cash Flow from Operating Activities: ?328 Millions
The Board of Directors of Ipsen (Paris:IPN), chaired by Jean-Luc
Belingard, met on 16 March 2007 to review the Group's full year 2006
results published today.
-0-
*T
Summary of audited consolidated full year 2005 and 2006 results
(in million euros) 2006 2005 (1) % change 2006/2005
----------------------------------------------------------------------
Sales 861.7 807.1 +6.8%
Other revenues 83.6 80.7 +3.5%
Total revenues 945.3 887.9 +6.5%
----------------------------------------------------------------------
Operating profit 187.2 185.3 +1.0%
Operating margin (in % of
sales) 21.7% 23.0%
Recurring operating
profit(2) 204.1 177.8 +14.8%
Recurring operating
margin(2) (in % of sales) 23.7% 22.0%
----------------------------------------------------------------------
Consolidated profit
(attributable to the
Group) 144.0 148.6 (3.0)%
Earnings per share - fully
diluted (EUR ) 1.71 2.20
Recurring consolidated
profit(2) 148.9 128.9 +15.6%
Recurring earnings per
share - fully diluted
(EUR ) 1.77 1.91
----------------------------------------------------------------------
Average number of shares
Non diluted 84,000,717 67,418,123
Fully diluted 84,024,179 67,418,123
----------------------------------------------------------------------
Cash flow from operating
activities 327.6 176.9
Net cash, end of period(3) 252.9 138.8
----------------------------------------------------------------------
(1) All financial information for 2005 is shown on a pro forma basis.
The pro forma consolidated statements present the Group's activity as
if the legal reorganisation of the Group, completed in June 2005, had
taken place on January 1, 2002.
(2) Unaudited data - please refer to Appendix 4 of this document
(3) Net cash: cash and cash equivalents minus bank overdrafts, bank
borrowings and other financial liabilities plus or minus derivative
financial instruments
*T
Commenting on the performance in 2006, Jean-Luc Belingard,
Chairman and CEO of the Ipsen Group, stated: "Ipsen achieved a solid
performance in 2006 and surpassed the financial objectives which it
had set for itself, with a recurring operating profit which reached
23.7% of sales, a recurring consolidated profit increase of 15.6% over
the previous year and a net cash position of EUR 253 million at year
end." Jean-Luc Belingard added: "2006 has been a very rich and
defining year for Ipsen. In accordance with its regulatory plan, the
Group submitted three registration applications, including that for
Somatuline(R) Autogel(R) to the FDA in the United States. It obtained
marketing authorisations for Somatuline(R) Autogel(R) in Canada, and
for Dysport(R) in Germany for indications in aesthetic medicine. It
enriched its product portfolio with two promising new medicines. The
first, Increlex(R), now represents as we anticipated the reference
treatment for children suffering from severe primary IGF-1deficiency.
The second, Acapodene(R), will complete our offer of treatment for
prostate cancer when the product has obtained the necessary regulatory
approvals. Moreover, the Group has set out important milestones for
its future growth, with its strategic partner Tercica in the
development of its endocrinology franchise in the United States, with
Medicis for the development and distribution of its botulinum toxin in
the United States, and with Roche for the development and
commercialisation of its GLP-1."
On the prospects for the Group, Jean-Luc Belingard stated: "2007
will be yet another year of rich events for Ipsen. We have five
filings in the course of regulatory review: Somatuline(R) Autogel(R)
for the treatment of acromegaly, the submission of which was validated
by the FDA in the United States in December 2006 ; febuxostat for the
treatment of hyperuricaemia, the submission of which to the EMEA in
Europe was validated in October 2006; NutropinAq(R) for the treatment
of idiopathic short stature, the submission of which to the EMEA in
Europe was validated in April 2006; and Increlex(R) for the treatment
of severe primary IGF-1 deficiency, the submission of which to the
EMEA in Europe - carried out by Tercica - was validated in December
2005. As far as use of our botulinum toxin type A in aesthetic
medicinal indications in Europe is concerned, the AFSSAPS regulatory
review process is still ongoing. In this context, we have decided - in
conjunction with our partner Galderma - to optimise the product's
profile by including, as soon as possible in 2007 in our marketing
authorisation application, the full results of clinical studies in the
product's efficacy and safety carried out by our partner Medicis in
the United States. Furthermore, we anticipate submitting two new
registration applications for Reloxin(R) and Dysport(R) in the United
States, and defining our strategic approach to the distribution of our
botulinum toxin in therapeutic indications in the United States."
Jean-Luc Belingard concluded: "Our objectives in 2007 consist of
ensuring rigorous execution of our current projects and continuing to
apply our development strategy in order to make Ipsen a leading
international specialist pharmaceutical company in the treatment of
hormone-dependent diseases."
Review of full year 2006 results
In 2006, Group sales reached EUR 861.7 million, up 6,8% compared
to 2005, driven by the 7.6% growth of drug sales, which accounted for
97% of total Group sales. This performance was driven by strong sales
in Ipsen's targeted therapeutic areas (oncology, endocrinology,
neuromuscular disorders) as well as by strong sales momentum in
international markets despite downward price pressures in Major
Western European Countries negatively impacting sales by EUR 19.4
million over the period.
Other revenues totalled EUR 83.6 million, up 3.5% compared with
EUR 80.7 million in 2005. The 2005 income included EUR 10.0 million
resulting from the termination of a research contract.
Total revenues reached EUR 945.3 million in 2006, up 6.5%
year-on-year (EUR 887.9 million in 2005).
The Group's operating income stood at EUR 187.2 million, up 1.0%
year-on-year despite severe price pressure in major European
countries, a poor performance of Ginkor Fort(R) in France and a
negative impact of one-off items such as a non-recurring payment of
EUR 8.4 million to Inamed for the recovery of all rights related to
Reloxin(R)and a EUR 7.3 million impairment charge relating to
Testim(R). Therefore, Ipsen's operating income stood at 21.7% of sales
compared with 23.0% in 2005.
The Group's recurring operating profit stood at EUR 204.1 million,
up 14.8% year-on-year, reaching 23.7% of sales, compared with 22.0% of
sales a year ago.
The effective tax rate in 2006 amounted to 21.8% of consolidated
pre-tax profit from continuing operations before net loss from
associates, compared with 19.1% in 2005. Excluding the tax-related
one-off impacts, the Group's effective tax rate would have been
comparable in both periods, at 25.6% in 2006 against 24.0% a year ago.
The Group's consolidated profit for 2006 reached EUR 144.5 million
(EUR 144.0 million attributable to equity holders of Ipsen S.A.), down
3.0% year-on-year, including the one-offs mentioned above.
The Group's recurring consolidated profit increased by 15.6% in
2006 to reach EUR 148.9 million, from EUR 128.9 million in 2005.
The Group generated a strong EUR 327.6 million cash flow from
operating activities, against EUR 176.9 million a year earlier. The
cash position at December 31, 2006 benefited from strongly sustained
activity during the year and from milestones stemming from the
partnerships, notably with Medicis and Roche. The Group utilised EUR
163.6 million in investment transactions, notably EUR 63.1m for the
acquisition of 25% of Tercica's capital and EUR 20.7 million for the
subscription to a convertible bond in the same transaction. Moreover,
in June 2006, Ipsen paid dividends of EUR 50.4 million to its
shareholders.
Dividend for the financial year 2006 proposed to the approval of
Ipsen' shareholders
Ipsen's Board of Directors met on March 16, 2007 and proposed a
dividend of 0.60 euros per share, yielding a 35% pay-out ratio, to
Ipsen' shareholders annual meeting to be held on June 6, 2007. The
payment of the dividends will be made on the same day.
2007 financial objectives
The Group's performance in 2006 was ahead of expectations and
increases the Group's confidence in its perspectives, despite a
challenging regulatory and economic environment for the pharmaceutical
industry.
Therefore, before taking into account any price decrease on
Tanakan(R) in France and before taking into account any change in
situation unknown at this date, the Group has set for itself the
following objectives for 2007:
-- Sales growth of 6.5% to 7.5%;
-- Total revenues growth of 4.0% to 5.0%;
-- Operating margin of 22.0% to 23.0% of sales.
These targets were prepared without taking into account external
growth assumptions, which may alter these parameters. These targets
are based on data and assumptions regarded as reasonable by the Group.
These targets depend on conditions or facts likely to happen in the
future, some of which are beyond the Group's control, and not
exclusively on historical data. Actual results may depart
significantly from these targets given the occurrence of certain risks
and uncertainties. The Group does not commit nor gives any guarantee
that it will meet the targets mentioned above.
Conference call Analysts and webcast (in English)
Ipsen will host a conference call on March 19, 2007 at 2.00 p.m.
(Paris time). A live webcast will be available at www.ipsen.com. The
webcast will be archived on the Ipsen website for 3 months following
the live call.
Callers should dial in approximately 5 to 10 minutes prior to the
start of the call. No reservation is necessary to participate in the
call. The telephone numbers to join the conference call are, from
France and Europe: +33 (0) 1 72 28 25 88 and from the United States:
+1 866 907 59 26.
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 72
28 01 49 and from the United States: +1 866 828 22 61. The access code
is 194594#. The replay will be available for two weeks 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 2006, Research and
Development expenditure was EUR 178.3 million, i.e. 20.7% of
consolidated sales, which amounted to EUR 861.7 million while total
revenues amounted to EUR 945.3 million (in IFRS). 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). Ipsen' s
shares are eligible to the "Systeme a Reglement Differe" ("SRD") and
the Group is part of the SBF 250 index.For more information on Ipsen,
visit our website at www.ipsen.com.
Forward-looking statements
The forward-looking statements and targets contained herein are
based on Ipsen's management's current views and assumptions. Such
statements involve known and unknown risks and uncertainties that may
cause actual results, performance or events to differ materially from
those anticipated herein.
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.
1 - COMPARISON OF THE CONSOLIDATED INCOME STATEMENT FOR THE YEARS
2006 AND 2005
A comparison of the income statement is presented below:
-0-
*T
31 December 2006 31 December 2005
pro forma
------------------------------------------------
(in % of (in % of 2006/2005
thousands sales thousands sales variation
of euros) of euros)
----------------------------------------------------------------------
Sales 861,676 100.0% 807,114 100.0% 6.8 %
Other revenues 83,581 9.7% 80,738 10.0% 3.5 %
Total revenues 945,257 109.7% 887,852 110.0% 6.5 %
Cost of goods sold (181,377) -21.0% (171,042) -21.2% 6.0 %
Research and
development expenses (178,348) -20.7% (169,025) -20.9% 5.5 %
Selling, general and
administrative
expenses ( 383,015) -44.5% (364,135) -45.1% 5.2 %
Other operating ns
income and expenses (8,223) -1.0% 1,169 0.1%
Restructuring costs 190 ns 530 ns -64.2 %
Impairment losses (7,265) -0.8 % - - ns
Operating profit 187,219 21.7% 185,349 23.0% 1.0 %
- Income from cash
and cash equivalents 7,974 1,952
- Cost of gross
financial debt (2,142) (7,870)
Cost of net financial ns
debt 5,832 0.7 % (5,918) -0.7 %
Other interest income ns
and expense (5,707) -0.7% (632) -0.1 %
Income tax (40,891) -4.7% (34,208) -4.2% 19.5 %
Net loss from
associates (1,666) -0.2% - -
Profit from
continuing
operations 144,787 16.8% 144,591 17.9% 0.1 %
Profit from
discontinued ns ns
operations (290) 4,416 0.5 %
Consolidated profit 144,497 16.8% 149,007 18.5% -3.0 %
- Attributable to
equity holders of
Ipsen S.A. 144,006 148,638
- Minority interests 491 369
----------------------------------------------------------------------
*T
Other revenues
In 2006, other revenues, which include royalties and milestone
payments from partners and for various services, totalled EUR 83.6
million, up 3.5% year-on-year (2005, EUR 80.7 million).
Other revenues break down as follows:
-0-
*T
2006/2005
31 Dec. variation
(in thousands of euros) 31 Dec. 2005
2006 pro forma Amount %
----------------------------------------------------------------------
Breakdown by revenue type
- Royalties received 41,650 45,049 (3,399) -7.5 %
- Milestone payments and licensing
agreements 20,199 21,126 (927) -4.4 %
- Other (co-promotion revenues,
recharging) 21,732 14,563 7,169 49.2 %
----------------------------------------------------------------------
Total other revenues 83,581 80,738 2,843 3.5 %
----------------------------------------------------------------------
*T
-- Royalties received mainly comprised royalties from the
Kogenate(R) licence, which amounted to EUR 38.7 million for
2006, down 7.8% year-on-year (EUR 42.0 million in 2005). The
first quarter of 2005 had been particularly high due to the
carry-over of some 2004 royalties into 2005.
-- Milestone payments and licensing agreements represent
recognition of payments received over the life of contracts.
In 2006, this income mainly comprised milestones in relation
to the Reloxin(R) agreement with Medicis, the Tenstaten(R)
agreement with Recordati and the recognition of advance
payments made by Roche as a result of the BIM 51077 (GLP-1
analogue) partnership. Moreover, in 2005, an income of EUR
10.0 million was recorded in connection with the termination
of a research contract.
-- Other revenues reached EUR 21.7 million in 2006, up 49.2%
year-on-year (EUR 14.6 million in 2005). This increase stemmed
from higher billings for R&D services within the framework of
existing partnerships, such as with Roche for the development
of BIM 51077 (GLP-1 analogue) and with Genentech. Co-promotion
revenues were slightly down year-on-year, as new revenues
generated by Artotec(R) and Tenstaten(R) in 2006 did not
offset the negative impact of early termination of the
co-promotion contract for Zoxan(R) with Pfizer.
Cost of goods sold
In 2006, cost of goods sold amounted to EUR 181.4 million,
representing 21.0% of sales compared with 21.2% in 2005, as increased
production volumes, a more favourable product mix and an increase in
productivity more than offset the negative impact of price cuts during
the year (e.g. as a percentage of sales, price cuts alone would have
amounted to an increase of 0.5% in the cost of goods sold).
Research and development expenses
A comparison of research and development expenses for the years
2006 and 2005 is presented in the following table:
-0-
*T
2006/2005
variation
31 Dec.
31 Dec. 2005
(In thousands of euros) 2006 pro forma Amount %
----------------------------------------------------------------------
Breakdown by expense type
- Drug-related research and
development(1) 150,083 145,805 4,278 2.9 %
- Industrial development(2) 22,957 18,333 4,624 25.2 %
- Strategic development(3) 5,308 4,887 421 8.6 %
----------------------------------------------------------------------
Total 178,348 169,025 9,323 5.5 %
----------------------------------------------------------------------
(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 drugs approved by
regulatory authorities and is also used to improve existing drugs and
to research new therapeutic indications for them. Patent-related
costs are included in this type of expense.
(2) Industrial development includes chemical, biotechnical and
development-process research costs to industrialise small-scale
production of agents developed by the research laboratories.
(3) Strategic development includes costs incurred for research into
new product licences and establishing partnership agreements.
*T
Research and development expenses increased by 5.5% to EUR 178.3
million, representing 18.9% of total revenues and 20.7% of sales,
compared with EUR 169.0 million in 2005, representing 19.0% of total
revenues and 20.9% of sales.
-- In 2006, major research and development projects included
preparation for registration of Somatuline(R) Autogel(R) with
the Food and Drug Administration (FDA), continuation of phase
III clinical trials for Dysport(R) in the USA and finalisation
of BIM 51077 development programmes agreed within the
partnership with Roche, until July 2006 when the latter
opted-in.
-0-
*T
The growth in drug-related research and development expenses
reflects in particular the full-year impact of the Group's
strengthening of its clinical development teams, started in
2004.
*T
-- In the area of industrial development, the increase is mainly
linked to costs incurred in preparation for pre-approval
inspections by the FDA (Food and Drug Administration) at some
of the Group's manufacturing sites, in anticipation of future
launches of Dysport(R) and Somatuline(R) Autogel(R) in the
USA.
Selling, general and administrative expenses
A comparison of selling, general and administrative expenses for
the years 2006 and 2005 is presented in the following table:
-0-
*T
2006/2005
variation
31 Dec.
31 Dec. 2005
(In thousands of euros) 2006 pro forma Amount %
----------------------------------------------------------------------
Breakdown by expense type
Royalties paid 31,186 29,033 2,153 7.4 %
Taxes and sales tax 15,207 11,142 4,065 36.5 %
Other sales and marketing
expenses 261,402 255,183 6,219 2.4 %
----------------------------------------------------------------------
Selling expenses 307,795 295,358 12,437 4.2 %
----------------------------------------------------------------------
General and administrative
expenses 75,220 68,777 6,443 9.4 %
----------------------------------------------------------------------
Total 383,015 364,135 18,880 5.2 %
----------------------------------------------------------------------
*T
In 2006, selling, general and administrative expenses increased by
only 5.2% to EUR 383.0 million, representing 44.5% of sales against
45.1% of sales a year earlier.
-- Selling expenses amounted to EUR 307.8 million, 35.7% of
sales, up by 4.2% year-on-year (EUR 295.4 million in 2005,
representing 36.6% of sales). This increase stands well below
the sales growth level, despite a significant negative impact
resulting from the increases in royalties paid to third
parties and taxes and sales taxes:
-0-
*T
-- Royalties paid to third parties on sales of products
marketed by the Group amounted to EUR 31.2 million in 2006,
up 7.4% year-on-year, stemming from the sales growth of the
corresponding products.
-- Taxes and sales taxes were up 36.5% at EUR 15.2 million,
mainly due to an increase of sales tax in France enforced
from 1 January 2006.
-- Other sales and marketing expenses (ie. marketing and sales
force costs) were up by only 2.4% year-on-year, amounting
to EUR 261.4 million in 2006, compared with EUR 255.2
million in 2005. This increase is significantly below the
sales growth level and reflects the success of the Group's
productivity improvement programmes in a context where the
growth in volume of drugs sold by the Group reached +10.2%
in 2006.
*T
-- General and administrative expenses grew by 9.4% to EUR 75.2
million in 2006, representing an increase of EUR 6.4 million
from a year ago. This evolution stemmed mainly from an
increase in the costs of corporate functions, particularly due
to the stock exchange listing of the Group, as well as
reinforcement of certain administrative functions related to
the Group's expansion in international markets. General and
administrative expenses in 2006 included a non-recurring
expense of EUR 1.4 million.
Other operating income and expenses
In 2006, other operating income and expenses amounted to an EUR
8.2 million expense compared with a EUR 1.2 million income a year ago.
In 2006, this amount essentially comprised a non-recurring payment of
USD10.0 million to Inamed for the recovery of all rights related to
Reloxin(R) in the USA, Canada and Japan, in accordance with the
termination agreement between the Group and Inamed.
Impairment charges
Impairment charges relating to Testim(R) amounted to a EUR 7.3
million expense in 2006. This corresponds to the full impairment of
the net book value of the intangible asset related to Testim(R)
rights. The performance of this product was below the Group's
expectations, with growth and market penetration lower than
anticipated in all territories where the product is marketed, and thus
no longer justified the existing asset carrying value in the Group's
accounts.
Operating profit
As a result of the above, the Group's operating income for 2006
reached EUR 187.2 million, representing 19.8% of total revenues and
21.7% of sales, up 1.0% over 2005, when it represented 20.9% of total
revenues and 23.0 % of sales.
Restated for non-recurring charges, the Group's operating profit
in 2006 amounted to EUR 204.1 million, representing 21.6% of total
revenues and 23.7% of sales. This compares with a recurring operating
profit of EUR 177.8 million in 2005, representing 20.3% of total
revenues and 22.0% of sales.
Segment reporting: Operating profit by geographical region
In compliance with IAS 14 "Segment Reporting", the Group's primary
reporting format is presented according to geographical segment, since
Ipsen operates in a single business segment, i.e. drug research and
development, production and sales.
Sales, revenues and operating profit for the years 2006 and 2005
are presented in the following table by geographical region:
-0-
*T
31 December 2005 2006/2005
31 December 2006 pro forma variation
(in (in (in
thousands % of thousands % of thousands
of euros) sales of euros) sales of euros) %
----------------------------------------------------------------------
Major Western European countries (1)
Sales 551,674 100.0% 547,287 100.0% 4,387 0.8 %
Revenues 564,528 102.3% 559,461 102.2% 5,067 0.9 %
Operating
profit 215,829 39.1% 219,652 40.1% (3,823) (1.7) %
----------------------------------------------------------------------
Other European countries
Sales 184,800 100.0 % 155,893 100.0% 28,907 18.5 %
Revenues 184,800 100.0 % 156,258 100.2 % 28,542 18.3 %
Operating
profit 71,516 38.7 % 54,969 35.3 % 16,547 30.1 %
----------------------------------------------------------------------
Rest of the World
Sales 125,202 100.0 % 103,934 100.0 % 21,268 20.5 %
Revenues 125,202 100.0 % 103,934 100.0 % 21,268 20.5 %
Operating
profit 42,309 33.8 % 29,228 28.1 % 13,081 44.8 %
----------------------------------------------------------------------
Allocated Total
Sales 861,676 100.0% 807,114 100.0% 54,562 6.8 %
Revenues 874,530 101.5% 819,653 101.6% 54,877 6.7 %
Operating
profit 329,654 38.3% 303,849 37.6 % 25,805 8.5 %
----------------------------------------------------------------------
Non-Allocated Total (2)
Revenues 70,727 7.5% 68,199 7.7% 2,528 3.7 %
Operating
loss (142,435) (76.1%) (118,500) (63.9%) (23,935) 20.2 %
----------------------------------------------------------------------
Ipsen Total
Sales 861,676 100.0% 807,114 100.0% 54,562 6.8 %
Revenues 945,257 109.7% 887,852 110.0% 57,405 6.5 %
Operating
profit 187,219 21.7% 185,349 23.0% 1,870 1.0 %
----------------------------------------------------------------------
(1) France, Spain, Italy, Germany and the UK.
(2) For revenues and operating loss, percentages are calculated on
"Ipsen Total".
*T
-- In Major Western European countries, sales grew by only 0.8%
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
2006, sales taxes increased by nearly EUR 3 million
year-on-year, mainly in France. As a result, operating profit
declined by 1.7% to EUR 215.8 million for 2006, representing
39.1% of sales, against EUR 219.7 million a year ago,
representing 40.1% of sales.
-- In Other European countries, which include other Western
European countries and Eastern Europe countries, operating
profit for the period increased by 30.1 % to EUR 71.5 million,
compared with EUR 55.0 million a year earlier. As a result,
operating profit in the region for 2006 represented 38.7% of
sales, against 35.3% a year earlier. This good performance was
achieved due to a strong profitable growth increase in sales
despite a EUR 4.5 million negative impact of price reductions,
(i) a reduction in sales taxes and commissions in some
countries including Poland and (ii) the absence of
non-recurring expenses in 2006, which had impacted 2005.
-- In the Rest of the World, most of the Group's products are
marketed by third-party distributors and agents, except in
China, South Korea and Mexico, where Ipsen has a direct
presence. In 2006, operating profit increased sharply to EUR
42.3 million, up 44.8% year-on-year (EUR 29.2 million in
2005), due to a strong 20.5% increase in sales, while costs
have not increased at the same pace. As a result, operating
profit in the region for 2006 represented 33.8% of sales,
against 28.1% a year earlier.
-- Non-allocated operating loss totalled EUR 142.4 million,
against a loss of EUR 118.5 million a year ago. In 2006, the
non-allocated operating loss included:
-0-
*T
-- revenues of EUR 70.7 million against EUR 68.2 million a
year earlier. This increase is particularly explained by
higher billings for R&D services within the framework of
existing partnerships. Royalties received from the
Kogenate(R) licence amounted to EUR 38.7 million for 2006
against EUR 42.0 million a year earlier. Revenues also
included milestone payments in relation to the Reloxin(R)
agreement with Medicis, the Tenstaten(R) agreement with
Recordati and the recognition of advance payments made by
Roche as a result of the BIM 51077 partnership. Moreover,
in 2005, an income of EUR 10.0 million was recorded in
connection with the termination of a research contract;
-- research and development expenses of EUR 159.9 million, up
from EUR 151.1 million a year ago;
-- Non allocated selling, general and administrative expenses
of EUR 38.0 million, compared with EUR 38.4 million a year
ago;
-- other operating and restructuring expenses of EUR 7.9.
million, mainly consisting of the indemnity paid to Inamed
as described above, compared with an income of EUR 2.8
million a year ago;
-- The impairment charge on Testim(R) of EUR 7.3 million.
*T
Cost of net financial debt
-- In 2006, the cost of net financial debt was an income of EUR
5.8 million against an expense of EUR 5.9 million a year
earlier. This positive trend mainly reflects a strong
improvement in the cash position due to the capital increase
in December 2005 and cash received in 2006 from partnerships.
-- Other elements represented a EUR 5.7 million expense, compared
with a EUR 0.6 million expense in 2005, mainly comprising:
-0-
*T
-- A EUR 2.7 million charge in connection with a revaluation
as at 31 December 2006 - according to IAS 39 - of financial
instruments (warrants and convertible bonds) in connection
with the transaction with Tercica
-- A EUR 1.8 million charge due to foreign exchange loss (EUR
0.5 million in 2005) of which EUR 0.7 million stems from
the derivative instruments in connection with the
transaction with Tercica.
*T
Income tax
In 2006, the Group's effective tax rate amounted to 21.8% of net
profit from continuing operations before net loss from associates,
compared with 19.1% a year earlier. The Group's effective tax rate
benefited in 2006 from the non-recurring tax impact of use of UK
capital losses brought forward for a total of EUR 7.1 million. Due to
uncertainty of recovery of these capital losses, no deferred tax asset
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.
The 2006 effective tax rate also benefited from:
-- Tax credits for research activities in France, Spain, Ireland,
UK and the USA of EUR 14.4 million compared with EUR 9.0
million a year earlier
-- A tax credit for reinvesting activities in Spain of EUR 2.6
million; and
-- A beneficial tax rate on EUR 4.5 million of down-payments in
2006 compared with EUR 21.5 million a year earlier.
Excluding these non-recurring impacts, the Group's tax rate would
have been 25.6% in 2006, against a comparable rate (i.e. excluding
non-recurring impacts) of 24.0% in 2005. A year ago, the Group's
effective tax rate had benefited from non-recurring impacts of
recognizing net deferred tax assets and utilizing previously
unrecognized tax loss carry-forwards in UK, Italian and Dutch
subsidiaries, since their profitability had improved.
Net loss from associates
The Group's loss from associates amounted in 2006 to EUR 1.7
million ($2.1 million) and was solely composed of the Group's share in
the net losses of Tercica in the fourth quarter of 2006, stated as
required under IFRS GAAP. In January 2007, Tercica began shipments of
Increlex(TM) to specialty pharmacy distributors and recorded sales
totalling $D0.7 million for the fourth quarter of 2006. Tercica
recognized as other revenues in 2006 $0.2 million out of EUR 10
million received as an upfront payment on the licensing of
Increlex(TM) to the Group as described above, the balance being
recorded as deferred revenue. As a result, Tercica's total revenues
amounted to $0.9 million in the fourth quarter of 2006. Tercica's
costs of goods sold amounted to $0.3 million, while research and
development costs increased to $4.6 million in the fourth quarter of
2006, essentially related to clinical activities for Primary IGF-1 and
severe Primary IGF-1, and to manufacturing development costs. Selling,
general and administrative expenses amounted to $12.9 million in the
fourth quarter of 2006, reflecting sales and marketing activities
post-launch of Increlex(TM) as well as executive management, corporate
administration, legal fees and other infrastructure support costs. Due
to Tercica's positive net cash position, interest income in the fourth
quarter of 2006 was $4.9 million. Finally, the Group recognised $5
million of tax income on Tercica's loss before tax of $12.0 million in
the fourth quarter of 2006.
Profit from continuing operations
As a result of the items noted above, profit from continuing
operations was in line, at EUR 144.8 million, with EUR 144.6 million a
year earlier. Profit from continuing operations represented 15.3% of
total revenues, compared with 16.3% in 2005.
Profit from discontinued operations
Profit from discontinued operations benefited from an additional
payment received by the Group from the sale of its primary care
business in Spain in October 2005, offset by provisions made in the
USA related to the disposal of Dynport in 2004. Therefore, in 2006,
the net loss was EUR 0.3 million, compared with a net profit of EUR
4.4 million a year earlier.
Consolidated profit
As a result of the items noted above, consolidated profit in 2006
declined by 3.0% to EUR 144.5 million (EUR 144.0 million attributable
to equity holders of Ipsen S.A.), against EUR 149.0 million (EUR 148.6
million attributable to equity holders of Ipsen S.A.) a year earlier.
Consolidated profit represented 15.3% of revenues in 2006, compared
with 16.8% in 2005. Excluding non-recurring items, the Group's net
profit reached EUR 148.9 million, up 15.6% year-on-year (EUR 128.9
million in 2005).
Group's income statement
In 2006, total milestones received in cash by the Group but not
yet recognised as revenue in its consolidated income statement
amounted to EUR 184.3 million, against EUR 21.8 million in 2005. These
payments will be recognised in the Group's income statement as revenue
going forward as follows :
-0-
*T
Milestones received in cash but not yet
(in EUR million) recognized as revenue in the years:
----------------------------------------------------------------------
2006 2005
----------------------------------------------------------------------
Total 184.3 21.8
These will be recognized as
revenue in the future as
follows:
----------------------------------------------------------------------
In 2007 13.6 9.6
In 2008 and beyond 170.7 12.2
----------------------------------------------------------------------
*T
2 - CASH FLOW AND CAPITAL FOR THE YEARS ENDED 31 DECEMBER 2006 AND
31 DECEMBER 2005
In 2006, the Group generated a strong EUR 327.6 million cash flow
from operating activities, against EUR 176.9 million a year earlier.
The cash position at 31 December 2006 benefited from strongly
sustained activity during the year and from receipt of a EUR 102.4
million (USD123.1 million) milestone from Medicis under the Reloxin(R)
distribution agreement granted by the Group for the USA, Canada and
Japan in the aesthetics indication, as well as from a EUR 57.7 million
option payment from Roche following their decision to license-in
BIM51077 worldwide. As a result, the Group reimbursed most of its
credit facilities, while keeping open the option of re-using them (for
a total of EUR 241.2 million at 31 December 2006). The Group utilised
EUR 163.6 million in investment transactions, spending in particular
EUR 63.1m on acquisition of 25% of the capital of Tercica, a
California-based biotechnology company, and subscribing for a EUR 20.7
million convertible bond in the same transaction. No such operations
were undertaken in 2005. Ipsen SA paid dividends of EUR 50.4 million
in June 2006.
Cash arising from discontinued activities amounted to EUR 0.6
million in the year compared with EUR 12 million in 2005.
3 - ANALYSIS OF THE CASH FLOW STATEMENTS FOR THE YEARS ENDED 31
DECEMBER 2006 AND 31 DECEMBER 2005
-0-
*T
31
31 December
December 2005
(in thousands of euros) 2006 pro forma
----------------------------------------------------------------------
- Cash flow before variation in working
capital requirements 167,626 172,967
- (Increase) decrease in working capital
requirements for operations 160,009 3,887
-- Net cash flow generated by operating
activities 327,635 176,854
-- Net cash flow used in investment activities (163,.618) (52,749)
-- Net cash flow used in financing activities (82,214) (18,950)
-- Net cash flow provided by discontinued
activities 647 12,001
Impact of pro forma treatment - (10,150)
Increase (decrease) in cash flow for the year 82,450 107,006
Cash and cash equivalents at beginning of year 200,564 92,763
Impact of foreign exchange variations 729 795
----------------------------------------------------------------------
Cash and cash equivalents at end of year 283,743 200,564
----------------------------------------------------------------------
*T
Net cash flow generated by operating activities
During 2006, net cash flow generated by operating activities
before changes in working capital totalled EUR 167.6 million, against
EUR 173.0 million in 2005. Cash flow before variation in working
capital includes revenue of only EUR 7.5 million from the EUR 160.1
million of milestones received from Medicis and Roche as described
above. Revenue from these agreements is being recognised over the
lives of the corresponding contracts, whereas the whole tax burden on
the full milestones received has increased the deferred tax assets,
such increase being deducted from net cash flow generated by operating
activities before changes in working capital.
Working capital requirements for operating activities declined by
EUR 160.0 million in 2006 compared to a EUR 3.9 million decrease in
2005. This evolution is linked to the following:
-- The balance between current assets and current liabilities
represents a debt which increased by EUR 166.1 million during
2006. This increase arose in particular from receipts of
milestone payments not yet recognised as revenue at 31
December 2006, of which EUR 152.6 million was received from
Medicis and Roche.
-- Inventories remained almost stable at the end of 2006 compared
with 2005 (growth of EUR 4.6 million). Trade receivables grew
by EUR 27.4 million, mainly resulting from business growth,
from modification of payment terms of certain customers in
France and from increased sales to hospitals in Italy with
longer payment terms, whereas trade payables decreased by EUR
7.1 million, partly due to 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 33.1 million,
comprising EUR 7.4 million in respect of taxation in the U.K.
on the payment received from Medicis and EUR 14.9 million in
respect of the balance of tax payable related to Group
affiliates in France in 2006.
As a result of the above, net cash flow generated by operating
activities amounted to EUR 327.6 million for 2006 compared with EUR
176.9 million in 2005.
Net cash flow used in investment activities
Net cash flow used in investment activities amounted to EUR 163.6
million in 2006 (2005, EUR 52.7 million). This comprised mainly asset
acquisitions, net of disposals, of EUR 78.8 million, against EUR 43.3
million in 2005. The Group also acquired 25% of the capital of
Tercica, a California-based biotechnology company, for a EUR 63.1
million down payment and subscribed to a EUR 20.7 million convertible
bond in the same transaction. No such operations were undertaken in
2005. Working capital requirements arising from investment activities
in 2006 decreased by EUR 5.8 million due to an increase in payables
linked to investment projects in the UK, compared with an increase of
EUR 7.6 million in 2005. Additionally, the Group utilised EUR 2.5
million in 2006 to fund its liquidity contract on Ipsen shares and EUR
4.2 to fund its post-employment benefit plans.
During 2006, tangible fixed asset acquisitions totalled EUR 40.6
million, mostly consisting of capital expenditure required to maintain
the Group's industrial facilities, namely EUR 6.4 million for
industrial buildings and fittings and EUR 19.9 million for industrial
equipment, mainly at the Dreux and Wrexham production sites. During
the same period, intangible asset acquisition amounted to EUR 41.2,
mainly related to payments due within the framework of alliances, such
as Acapodene(R) and Increlex(TM), and to acquisition of software,
against EUR 7.9 million in 2005.
Net cash flow used in financing activities
In 2006, net cash flow used in financing activities totalled EUR
82.2 million against EUR 18.9 million in 2005. Following payments
received from Medicis, EUR 31.8 million of the Group's credit
facilities has been repaid, thus reducing the overdraft as at 31
December 2006 to EUR 6.3 million. In 2005, repayment of credit
facilities amounted to EUR 190.0 million. The Group has maintained 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 2006, net cash flow from discontinued activities amounted to
EUR 0.6 million (2005, EUR 12 million), resulting from the decrease in
working capital requirements linked to primary care activities in
Spain, which were divested in October 2005.
4 - ANALYSIS OF NET CASH
At 31 December 2006, the Group's net cash (1) was EUR 252.9
million, compared with EUR 138.8 million at 31 December 2005. The
Group has four-year credit facilities totalling EUR 241.2 million, out
of which EUR 6.3 million was in use at 31 December 2006, compared with
utilisation of EUR 37.8 million at 31 December 2005. 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.
(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
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*T
APPENDIX 1: CONSOLIDATED INCOME STATEMENT
----------------------------------------------------------------------
2005
(in thousand of euros) pro forma
2006 (1) 2005 (1)
----------------------------------------------------------------------
----------------------------------------------------------------------
Sales 861 676 807 114 788 709
----------------------------------------------------------------------
Other revenues 83 581 80 738 75 046
----------------------------------------------------------------------
Total revenues 945 257 887 852 863 755
----------------------------------------------------------------------
Cost of goods sold (181 377) (171 042) (176 833)
----------------------------------------------------------------------
Research and development expenses (178 348) (169 025) (167 571)
----------------------------------------------------------------------
Selling expenses (307 795) (295 358) (292 586)
----------------------------------------------------------------------
General and administrative expenses (75 220) (68 777) (66 787)
----------------------------------------------------------------------
Other operating income and expenses (8 223) 1 169 1 185
----------------------------------------------------------------------
Restructuring cost 190 530 530
----------------------------------------------------------------------
Impairment losses (7 265) - -
----------------------------------------------------------------------
Operating income 187 219 185 349 161 693
----------------------------------------------------------------------
- Cash and cash equivalent 7 974 1 952 1 312
----------------------------------------------------------------------
- Cost of financial debt (2 142) (7 870) (7 701)
----------------------------------------------------------------------
Net cost of financial debt 5 832 (5 918) (6 389)
----------------------------------------------------------------------
Other financial income and expenses (5 707) (632) (291)
----------------------------------------------------------------------
Income taxes (40 891) (34 208) (32 643)
----------------------------------------------------------------------
Net losses from associates (1 666) - -
----------------------------------------------------------------------
----------------------------------------------------------------------
Net profit continuing operations 144 787 144 591 122 370
----------------------------------------------------------------------
----------------------------------------------------------------------
Discontinued operations (1) (290) 4 416 4 416
----------------------------------------------------------------------
----------------------------------------------------------------------
Net profit from continuing operation 144 497 149 007 126 786
----------------------------------------------------------------------
- attributable to equity holders of the
parent 144 006 148 638 119 230
----------------------------------------------------------------------
- minority interest 491 369 7 556
----------------------------------------------------------------------
----------------------------------------------------------------------
Basic earnings per share, continuing
operations (in euros) 1,72 2,14 1,71
----------------------------------------------------------------------
Diluted earnings per share, continuing
operations (in euros) 1,72 2,14 1,71
----------------------------------------------------------------------
----------------------------------------------------------------------
Basic earnings per share, discontinuing
operations (in euros) 0,00 0,06 0,06
----------------------------------------------------------------------
Diluted earnings per share,
discontinuing operations (in euros) 0,00 0,06 0,06
----------------------------------------------------------------------
----------------------------------------------------------------------
Basic earnings per share (in euros) 1,71 2,20 1,77
----------------------------------------------------------------------
Diluted earnings per share (in euros) 1,71 2,20 1,77
----------------------------------------------------------------------
(1) In accordance with IFRS 5, the 2005 income statement has been
restated to provide comparable data for the periods presented
*T
-0-
*T
APPENDIX 2: CONSOLIDATED BALANCE SHEET
----------------------------------------------------------------------
31 31
(in thousand of euros) December December
2006 2005
----------------------------------------------------------------------
----------------------------------------------------------------------
ASSET
----------------------------------------------------------------------
Goodwill 188 836 188 836
----------------------------------------------------------------------
Other intangible assets, net 68 203 39 800
----------------------------------------------------------------------
Property, plant and equipment, net 198 186 187 769
----------------------------------------------------------------------
Equity investments 1 825 2 656
----------------------------------------------------------------------
Investments in associates 50 832 -
----------------------------------------------------------------------
Other non-current assets 30 601 2 671
----------------------------------------------------------------------
Deferred tax assets 64 025 13 096
----------------------------------------------------------------------
Total non-current assets 602 508 434 828
----------------------------------------------------------------------
Inventories 78 947 74 390
----------------------------------------------------------------------
Trade receivables 191 702 164 681
----------------------------------------------------------------------
Current tax assets 2 665 10 951
----------------------------------------------------------------------
Other current assets 44 601 42 966
----------------------------------------------------------------------
Cash and cash equivalent 285 459 202 034
----------------------------------------------------------------------
Total current assets 603 374 495 022
----------------------------------------------------------------------
Non-current assets of discontinued operations 8 391 12 659
----------------------------------------------------------------------
TOTAL ASSETS 1 214 273 942 509
----------------------------------------------------------------------
----------------------------------------------------------------------
SHAREHOLDERS' EQUITY AND LIABILITIES
----------------------------------------------------------------------
Share capital 84 025 84 025
----------------------------------------------------------------------
Share premium and consolidated reserves 506 244 420 591
----------------------------------------------------------------------
Profit for the Year 144 006 119 230
----------------------------------------------------------------------
Cumulative translation reserve (7 789) (4 080)
----------------------------------------------------------------------
Shareholders' equity attributable to equity
holder of the parent 726 486 619 766
----------------------------------------------------------------------
Minority interest 1 419 1 334
----------------------------------------------------------------------
Total shareholders' equity 727 905 621 100
----------------------------------------------------------------------
Retirement benefit obligations 9 299 8 032
----------------------------------------------------------------------
Long-term provisions 11 421 8 266
----------------------------------------------------------------------
Bank loans 6 286 37 751
----------------------------------------------------------------------
Other financial liabilities 15 313 15 508
----------------------------------------------------------------------
Deferred tax liabilities 2 371 1 358
----------------------------------------------------------------------
Other non-current liabilities 172 270 -
----------------------------------------------------------------------
Total non-current liabilities 216 960 70 915
----------------------------------------------------------------------
Short-term provisions 5 323 3 309
----------------------------------------------------------------------
Bank loans 6 973 7 074
----------------------------------------------------------------------
Financial liabilities 2 251 1 760
----------------------------------------------------------------------
Trade payables 100 269 107 045
----------------------------------------------------------------------
Current tax liabilities 27 215 2 223
----------------------------------------------------------------------
Other current liabilities 114 824 113 525
----------------------------------------------------------------------
Bank overdrafts 1 716 1 470
----------------------------------------------------------------------
Total current liabilities 258 571 236 406
----------------------------------------------------------------------
Liabilities of discontinued operations 10 837 14 088
----------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES 1 214 273 942 509
----------------------------------------------------------------------
*T
-0-
*T
APPENDIX 3: CONSOLIDATED STATEMENT OF CASH FLOW
----------------------------------------------------------------------
(in thousand of 'euros) 2005 pro
2006 forma 2005
----------------------------------------------------------------------
Profit for the period 144 497 149 007 126 786
----------------------------------------------------------------------
Profit from discontinued operations 290 (4 416) (4 416)
----------------------------------------------------------------------
Loss from associates 1 666 - -
----------------------------------------------------------------------
Profit from continuing operations
excluding loss from associates 146 453 144 591 122 370
----------------------------------------------------------------------
Non-cash and non-operating items:
----------------------------------------------------------------------
- Depreciation, amortization and
impairment losses 49 940 30 603 28 869
----------------------------------------------------------------------
- Increase/(decrease) in fair value of
financial instruments 1 562 2
