RNS Number:0653L
Galen Holdings PLC
14 May 2003
Craigavon, Northern Ireland/Rockaway, NJ 14 May 2003
Galen Holdings PLC
Results for the second quarter ended 31 March 2003
Craigavon, Northern Ireland/Rockaway, New Jersey, USA - 14 May 2003: Galen
Holdings PLC ("Galen") (LSE: GAL.L, Nasdaq: GALN), announces its results for the
quarter ended 31 March 2003.
Financial Highlights
Quarter ended Quarter ended
31 March 2003 31 March 2002 Change
($ m) ($ m) (%)
Revenues
- Products 89.2 56.7 57%
- Services (Discontinued) -- 19.7 --
_____ _____ _____
Total 89.2 76.4 17%
Operating profits*
- Products 34.8 19.9 75%
- Services (Discontinued) -- 3.6 --
_____ _____ _____
Total 34.8 23.5 48%
Earnings per share*
Adjusted EPS (cents) 16.1 10.1 59%
*before amortisation of goodwill and intangibles
* Earnings per ordinary share, before amortisation of goodwill and
intangible assets, increased to 16.1 cents, up 59% over the same quarter in the
prior year.
* Total pharmaceutical product revenues increased by 57% from $56.7
million to $89.2 million reflecting strong underlying growth of 39% from our
core promoted brands, Ovcon(R), Estrace(R) cream and Doryx(R) (see table on page
3 for breakdown), the addition of Duricef(R) and Moisturel(R), acquired in March
2002, and Sarafem(R), the US sales and marketing rights of which were acquired
in January 2003. Sarafem(R) contributed $15.4 million in revenues during the
quarter.
* The results of the comparative quarter include the Pharmaceutical
Services business, which was disposed of in the year ended 30 September 2002.
* Operating profit, before amortisation of goodwill and intangibles,
increased to $34.8 million compared to $23.5 million in the same quarter last
year, an increase of 48%, despite divestment of Services business.
* During the quarter, the business generated cash of $36.2 million.
Cash on hand at 31 March 2003 was $50 million. During the quarter we purchased
Estrostep(R) and Loestrin(R) and the US sales and marketing rights for Sarafem
(R) for approximately $500 million. These transactions were financed from
existing cash resources and the drawdown of approximately $200 million in senior
debt, part of a new $450 million facility put in place during the quarter. Net
debt at 31 March 2002 was $197.8 million.
* The Board has recommended the payment of an interim dividend of
1.20p per share, up 20% from last year.
Business Highlights
* Completed acquisition of US sales and marketing rights, and recorded
first sales of Sarafem(R) (January).
* Announced the acquisition of Estrostep(R), Loestrin(R) and the
proposed acquisition of femhrt(R) from Pfizer for $359 million (March).
* Received an approvable letter for new Ovcon(R) (February).
* Received FDA approval for FemringTM (March).
Commenting on the results, Roger Boissonneault, Chief Executive, said:
"During the period, we have made excellent progress in all elements of the
business as we continue to build our position in our markets. We have again
achieved record sales and profit growth, our recent corporate activity has
expanded our US product portfolio, and our investment in R&D was rewarded by our
first major NDA approval in the US. We believe our strategy is well set for the
future and we approach the second half of 2003 with much confidence."
For further information, please contact:
Galen Holdings PLC
David G. Kelly Today: + 44 (0) 207 831 3113
Thereafter: + 44 (0) 28 3833 4974
Financial Dynamics
Sophie Pender-Cudlip / Francetta Carr Tel: + 44 (0) 20 7831 3113
For further information on Galen visit: www.galenplc.com
An analyst presentation will take place at 9.30am (GMT) today at the offices of
Financial Dynamics, Holborn Gate, 26 Southampton Buildings, London WC2. A
conference call will also take place at 2pm (GMT). Please call Mo Noonan on 020
7269 7116, for further details.
Commentary on the results of the 2nd Quarter to 31 March 2003
Sales & Marketing
Sales of pharmaceutical products by the group continue to show growth as
illustrated by the table below.
% Growth over % Growth over
prior year QTR prior Half-Year
Product/Group 2nd Quarter Half-Year
Net Sales $'M % $'M %
Sarafem(R) 15.4 N/A 15.4 N/A
Ovcon(R) 13.4 20% 25.8 25%
Estrace(R) Cream 10.1 34% 20.8 22%
Estrace(R) Tablets 8.3 9% 12.9 13%
Doryx(R) 17.2 62% 31.1 44%
Duricef(R) and Moisturel(R) 6.0 N/A 11.6 N/A
Other US 2.5 -54% 4.8 -53%
Other U.K. and Ireland 16.3 13% 35.5 16%
TOTAL 89.2 57% 157.9 42%
For the quarter ended 31 March 2003 total product sales were $89.2 million, an
increase of 57% over the same quarter last year. While a significant part of
this growth was driven by newly acquired products and product rights,
particularly Sarafem(R), we nevertheless saw growth of 39% for our three US
promoted products, Ovcon(R), Estrace(R) Cream and Doryx(R).
As we have stated in prior quarters, the sales of products in any quarter tend
to fluctuate depending on the buying patterns of a small number of large
distributors in the US. Thus, the performance of any one product in any
particular quarter is not necessarily indicative of a longer term trend.
As illustrated by the above table, the growth in our key promoted products
remains strong. Ovcon(R) (oral contraception) and Doryx(R) (acne) in particular
continue to build market share as new prescriptions grow. This continued growth
in market share is a testament to the commitment and professionalism of our
sales team.
Margins
The gross margin for the quarter was 80% compared to 69% for the same period
last year. This improvement is largely attributable to the disposal of our
lower margin services businesses during our last financial year and as a result
of a greater proportion of our sales being generated from our US business.
Operating margin, before amortisation of goodwill and intangibles, was $34.8
million or 39% compared to $23.5 million or 31% in the same quarter last year.
If the services contribution for last year is excluded, the operating margin
from products showed an improvement from 35% to 39%, and increased in absolute
dollar terms from $19.9million to $34.8million, i.e. 75% growth.
Research & Development
Total research and development costs were $6.6 million, compared to $4.8 million
in the same quarter last year, an increase of 38%. This increase in cost
reflects our ongoing investment in our development pipeline.
During the quarter, we continued clinical work on our oral estradiol-3-acetate
product, for the treatment of the symptoms of menopause, and our vaginal ring
containing metronidazole, for the treatment of bacterial vaginosis.
This quarter was significant from an R&D perspective as we received a approvable
letter for our new Ovcon product and final approval for FemringTM, our first
vaginal ring product to be approved in the United States. FemringTM is due to
be launched in June of this year.
Liquidity
During the quarter we purchased Estrostep(R) and Loestrin(R) and the US sales
and marketing rights for Sarafem(R) for approximately $500 million. These
transactions were financed from existing cash resources and the drawdown of
approximately $200 million in senior debt. Net debt at 31 March 2002 was $197.8
million being a combination of $198.1 million repayable within 3 years, $49.7
million of senior notes and $50 million cash. On our balance sheet $67.0
million of this debt is classified as falling due within one year.
Cash generated from operations during the quarter remains strong at $36.2
million. Strong continuing cashflow, now complemented by cash generated from
Sarafem(R) sales, helped to rebuild cash on hand to $50 million.
Adoption of US Dollar
As noted previously, we have adopted the US dollar as the functional currency
for the Group for the year ending 30 September 2003. We therefore present this
quarter's results in US dollars and under UK generally accepted accounting
principles (UK GAAP).
In addition, we have included our results in US dollars under US GAAP also, as
we have done in prior years.
Chairman & Chief Executive's Report on the Interim Results for the six-months
ended 31 March 2003
Overview
Galen Holdings PLC is a specialty pharmaceutical company essentially focused on
two core therapeutic areas: women's healthcare and dermatology. The acquisition
of Warner Chilcott in October 2000 afforded the Company access to the US
pharmaceuticals market where it has achieved impressive growth and the board
believes that significant future growth can be achieved. Since then, your
directors have invested further in building our US pharmaceuticals business. The
pharmaceutical services business has been disposed of, thereby improving margins
and releasing resources that have been reinvested in the pharmaceutical
business. The success of this approach has been clearly demonstrated in the
continued excellent financial performance of the Company. For the six-month
period ended 31 March 2003, we have had outstanding success in implementing our
strategy to continue organic growth of our pharmaceutical business, develop new
proprietary products and acquire products that complement and strengthen our
existing product range.
Financials
For the six-month period ended 31 March 2003, Galen again achieved a record
performance with sales of $157.9 million. This compares with turnover of $153.8
million for the six-month period ended 31 March 2002, which included sales of
$42.2 million from our services business. Excluding these sales our revenue
growth was 41.5%. Earnings per share before amortisation of goodwill and
intangible assets rose by 48% to 28.9 cents.
Gross profit increased to $124.8 million from $103.8 million, notwithstanding
the sale of our services businesses, reflecting continued strong growth in the
US. Galen's gross profit margin has now risen to 80%. In our first half-year,
78% of our revenues, now exclusively driven by product sales, originated in the
US.
Operating profit for the period before amortisation of goodwill and intangible
assets increased from $46.8 million to $59.8 million, an increase of 27.8%. On
a like for like basis, excluding the now discontinued services businesses, our
operating profit before amortisation rose by 56.3%. For the first half of this
year our operating margin was 37.9%. Research and development costs increased
to $12.1 million as new projects were added, compared to $9.2 million for the
same period last year. For the half-year we generated cash from operations of
$58.9 million, reflecting the underlying strength of our pharmaceutical
business.
These excellent results reflect continued strong growth in the business and a
successful transition to a specialty pharmaceutical business model. Your board
is pleased to declare an interim dividend of 1.2 pence per ordinary share, a 20%
increase over the 1.0 pence declared for the same period last year.
Corporate Activity
Galen is committed to continued growth in its rapidly expanding US
pharmaceuticals business, which is built around Warner Chilcott. Last year we
took the decision to dispose of our pharmaceutical services businesses to free
up resources for our ambitious growth plans in the US pharmaceutical sector.
These divestments raised approximately $235 million in the 2002 financial year.
During the half-year ended 31 March 2003, the company successfully completed two
major product acquisitions in the women's healthcare category and negotiated a
major strategic alliance in dermatology. Your directors believe that the impact
of these activities has greatly enhanced the Company's opportunity for growth.
In January 2003, we completed the acquisition of the US sales and marketing
rights for Sarafem(R) from Eli Lilly and Company. Sarafem(R) (fluoxetine
hydrochloride) is a prescription treatment for premenstrual dysphoric disorder
(PMDD), a severe form of premenstrual syndrome, and was the first FDA-approved
product for this condition. Launched by Lilly in 2000, Sarafem(R) had revenues
of approximately $80 million in the calendar year 2002 and the cash
consideration for this transaction was approximately $295 million.
In contraception and hormone therapy we announced in March 2003 the acquisition
from Pfizer Inc. of the oral contraceptives Loestrin(R) and Estrostep(R) and an
oral continuous combined hormone therapy, femhrt(R). The total consideration
for the transaction was approximately $359.0 million with up to a further $125
million contingent on the maintenance of market exclusivity for Estrostep(R) to
2008 and femhrt(R) to 2010. Total revenues for these three products in the year
2002 were $228.3 million.
These acquisitions complement our existing women's healthcare franchise.
Sarafem(R) represents a new non-hormonal therapy in a developing therapeutic
area. Estrostep(R) and femhrt(R) were developed by our CEO, Roger Boissonneault
whilst at Warner Lambert. These products are complementary to existing Warner
Chilcott products and greatly strengthen our position in these two important
therapeutic areas.
The Company is engaged in legal proceedings against Barr Laboratories for patent
infringement in respect of Estrostep(R) and femhrt(R) and Teva Pharmaceuticals
USA, Inc. for patent infringement in respect of Sarafem(R). Galen continues to
pursue these claims vigorously.
On 1 April 2003, we entered into a co-promotion agreement with Bristol-Myers
Squibb Company for Dovonex(R) and a development agreement with LEO PHARMA A/S
for Dovobet(R). This alliance represents a key milestone in the development of
our US dermatology franchise. Dovonex(R) is a leading non-steroidal product in
the treatment of psoriasis, and Dovobet(R) (which is a combination of the active
ingredient in Dovonex(R) and the steroid betamethasone diproprionate) gives us
access to new treatment technology through a formal relationship with one of the
worlds leading dermatology R&D companies. Under the terms of the agreements for
Dovobet(R), Galen will pay LEO Pharma a total of $47 million by the time Dovobet
(R) progresses to full FDA approval, $40 million of which is payable upon
approval. In the case of Dovonex(R) the term of the co-promotion agreement is
until 31 December 2007 and between now and 1 January 2006, Galen has an option
to purchase Bristol-Myers Squibb's US rights to the product under pre-negotiated
terms; however, BMS can refuse to sell its rights to Dovonex prior to 1 August
2005. If Galen exercises its option on 1 August 2005, Bristol-Myers Squibb is
obliged to conclude the purchase transaction. This is an exciting development
for the evolution of our dermatology franchise and pipeline.
During this intensive period of corporate activity our balance sheet remains
robust. At 31 March 2003, total borrowings, including $50.0 million of high
yield (12.625%) bonds inherited at the time of the Warner Chilcott acquisition,
were $247.0 million. We have put in place a senior debt facility of $450.0
million. Of this, $200.0 million was drawn down at 31 March to finance the
acquisition of Estrostep(R) and Loestrin(R). The balance remains available to
the company and was part utilised to complete the acquisition of femhrt(R) in
April.
Cash generated during the six months to 31 March 2003 was $58.9 million and cash
at hand 31 March 2003 was $50 million. The company continues to generate strong
cashflow, which will now be complemented by the addition of recently acquired
products to the portfolio.
Sales and Marketing
Our sales and marketing capabilities continue to be the key contributor to our
success. We have a proven track record of sustaining product growth,
revitalising acquired products and successfully launching new products in the
United States utilising precision marketing techniques. These techniques are
used to target marketing and promotion of our key branded products to high
volume prescribing physicians and to employ our resources effectively with a
view to maximizing growth in sales and market share for our key products.
During the half-year we continued to make gains in our core therapeutic areas.
Total pharmaceutical product revenues for the period were $157.9 million
representing a 41.5% increase over the previous year. When the sales of Sarafem
(R) (acquired in January 2003) and Duricef(R) and Moisturel(R) (acquired on 28
March 2002), are excluded, the increase in sales was a healthy 17%. The United
States now represents 78% of total revenues, a proportion which will increase as
we include revenues from the recently acquired products and FemringTM in the
second half of this financial year.
In women's healthcare, Galen has products in two categories important to our
target clinician, the obstetrician and gynaecologist (OBGYN): contraception and
hormone therapy. Our oral contraceptive Ovcon(R) continues to grow strongly,
with sales in the period of $25.8 million up 25% over the same period last year.
This is an excellent platform for the launch of our Ovcon(R) line extension,
for which we received an approvable letter in January 2003. Oral contraceptives
Loestrin(R) and Estrostep(R) will join Ovcon(R) in our oral contraceptive
offerings in the second half of this financial year.
In estrogen replacement therapy, our Estrace(R) Tablets product remains the
second most widely prescribed ERT product in the US. Sales of Estrace(R)
Tablets were $12.9 million for the half-year. We do not actively promote this
product and our strategic objective is to maintain market position until the
launch of our proprietary second generation tablet formulation. We expect to
submit an NDA to the FDA for the new tablet during the second half of this
financial year. Estrace(R) Cream, which is indicated for the treatment of the
local symptoms of the menopause and is prescribed by both the OBGYN and
urologist, had revenues of $20.8 million, an increase of 22% over the same
period last year.
In dermatology, our pelletised formulation of doxycycline, Doryx(R), is the
branded oral tetracycline most widely prescribed by dermatologists in the US for
the treatment of acne. Revenues for this product increased to $31.1 million
which is a 44% increase over the same period last year. The introduction of the
75mg dose in January 2002 has improved flexibility in the prescribing of this
product.
During the past two years our Warner Chilcott salesforce in the US has operated
at a strength of 226 persons. This has given us the reach and frequency of
specialist contact to achieve excellent growth for our major promoted products.
Your board believes that our continued strong organic growth, combined with the
expected impact of recent acquisitions of products and product rights (Sarafem
(R), Estrostep(R), Loestrin(R) and femhrt(R)) and the launch of a new product
(FemringTM), present an exciting growth opportunity for the Company. In order
to support the new value creating opportunities presented and maintain the
momentum of our core products, it has become necessary to increase the size of
our sales organisation. Following the acquisition of the US sales and marketing
rights for Sarafem(R) in January 2003, we commenced a programme to expand our
salesforce to approximately 340 representatives organised in two teams: Warner
Chilcott Women's Healthcare and Warner Chilcott Specialty. We believe that this
sales organisation will be well sized to enhance value in our expanded
portfolio.
Research and Development
Investment in R&D for the six-month period ended March 2003 was $12.1 million,
representing a 31% increase over the same period last year. Our R&D efforts are
now firmly focused on the development of proprietary products for
commercialisation in the US. In the first half of this financial year we have
seen a marketing approval and approvable letters from the FDA for our first
internally developed products. The approval of FemringTM in the US in March
2003 was one of the most significant events in Galen's product development
history.
Our R&D programmes continue to strengthen. In women's healthcare we have
ongoing projects in contraception, estrogen replacement therapy, infection
control and female sexual dysfunction. To this we add PMDD and additional
contraceptive projects flowing from our recent acquisition activity. During the
half-year we received final approval for our vaginal ring estrogen replacement
product (FemringTM) and an approvable letter for our Ovcon(R) line extension.
Our estradiol-3-acetate tablet is in the final stages of Phase III and we
anticipate an NDA submission in the second half of this financial year. Our
metronidazole ring for the treatment of bacterial vaginosis is the first example
of the use of vaginal ring technology in infection control and is well into
Phase III development with a targeted filing date of 2004. Our testosterone
vaginal ring remains in Phase II as we evaluate the regulatory acceptability of
various experimental models to assess treatments for female sexual dysfunction.
In addition, in November 2002 our patent for delivery of two forms of iron in
pre-natal vitamins was granted in the US.
In dermatology we have made a major addition to our pipeline with our
development agreement with LEO PHARMA A/S for Dovobet(R) in the US. We continue
to develop new delivery methods for doxycycline for further generations of our
Doryx(R) franchise in acne with submissions to the FDA expected later this
financial year or early next.
Outlook
In the period since the acquisition of Warner Chilcott in October 2000, Galen
Holdings has transformed its business model to that of a speciality
pharmaceutical company with a clear therapeutic and geographic focus. The
divestment of our services businesses have been effected without disruption to
earnings, and it is the opinion of the directors that the resources released in
this process have been redeployed in the business to achieve greater return.
Our strategy for growth remains constant and comprises three elements:
* the continued organic growth of our pharmaceutical business;
* the internal development of new proprietary products; and
* the acquisition or licensing of products that complement and strengthen
our existing activities.
During the six-month period ended 31 March 2003 we have made excellent progress
in all elements of the business as we continue to build position in our markets.
We have again achieved record sales and profit growth, our recent corporate
activity has expanded our US product portfolio, and our investment in R&D was
rewarded by our first major NDA approval in the United States. We believe our
strategy is well set for the future and we approach the second half of 2003 with
much confidence.
Note:
Forward looking statements in this report, including, without limitation,
statements relating to Galen's plans, strategies, objectives, expectations,
intentions and adequacy of resources, are made pursuant to the safe harbor
provisions of the U.S. Private Securities Litigation Reform Act of 1995. These
forward looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
Galen to be materially different from any future results, performance or
achievements expressed or implied by such forward looking statements. These
factors include, among others, the following: Galen's ability to manage its
growth, government regulation affecting the development, manufacture, marketing
and sale of pharmaceutical products, customer acceptance of new products,
competitive factors in the industries in which Galen operates, the loss of key
senior management or scientific staff, exchange rate fluctuations, general
economic and business conditions, and other factors described in filings of
Galen with the SEC. Galen undertakes no obligation to publicly update or revise
any forward looking statement, whether as a result of new information, future
events or otherwise.
Unaudited results for the period ended 31 March 2003
Consolidated profit and loss account - UK GAAP
Unaudited Unaudited Audited
Quarter ended Six months ended Year ended
31 March 31 March 30 September
2003 2002 2003 2002 2002
$'000 $'000 $'000 $'000 $'000
_____ _____ _____ _____ _____
Turnover
Pharmaceutical products 89,209 56,664 157,852 111,554 235,221
Pharmaceutical services - discontinued operations - 19,711 - 42,239 61,325
_____ _____ _____ _____ _____
Total turnover 89,209 76,375 157,852 153,793 296,546
Cost of sales 17,775 23,842 33,103 50,033 89,983
_____ _____ _____ _____ _____
Gross profit 71,434 52,533 124,749 103,760 206,563
_____ _____ _____ _____ _____
Net operating expenses
Selling, general and administrative expenses 29,957 24,258 52,894 47,723 81,433
Research and development 6,650 4,785 12,087 9,204 20,565
Goodwill amortisation 5,842 5,767 11,605 11,611 23,255
Intangibles amortisation 7,220 3,941 11,972 7,934 17,197
_____ _____ _____ _____ _____
Total net operating expenses 49,669 38,751 88,558 76,472 142,450
_____ _____ _____ _____ _____
Operating profit
Before amortisation of goodwill and intangibles:
Pharmaceutical products 34,827 19,913 59,768 38,234 94,690
Pharmaceutical services - discontinued operations - 3,577 - 8,599 9,875
_____ _____ _____ _____ _____
Total before goodwill and intangibles amortisation 34,827 23,490 59,768 46,833 104,565
Goodwill amortisation (5,842) (5,767) (11,605) (11,611) (23,255)
Intangibles amortisation (7,220) (3,941) (11,972) (7,934) (17,197)
_____ _____ _____ _____ _____
Total operating profit
Pharmaceutical products 21,765 10,775 36,191 19,828 55,584
Pharmaceutical services - discontinued operations - 3,007 - 7,460 8,529
_____ _____ _____ _____ _____
21,765 13,782 36,191 27,288 64,113
_____ _____ _____ _____ _____
Gain on sale of discontinued operations - - - 10,852 104,984
_____ _____ _____ _____ _____
Investment income 213 2,087 2,697 4,601 10,894
_____ _____ _____ _____ _____
Profit on ordinary activities before interest 21,978 15,869 38,888 42,741 179,991
Interest payable and similar charges 1,588 5,066 3,248 13,290 30,592
_____ _____ _____ _____ _____
Profit on ordinary activities before taxation 20,390 10,803 35,640 29,451 149,399
Tax on profit on ordinary activities 3,834 1,847 6,313 6,533 13,461
_____ _____ _____ _____ _____
Profit on ordinary activities after taxation 16,556 8,956 29,327 22,918 135,938
Minority interests - - - 46 46
_____ _____ _____ _____ _____
Profit for the financial period 16,556 8,956 29,327 22,872 135,892
Dividends 3,474 2,635 3,474 2,635 8,353
_____ _____ _____ _____ _____
Retained profit for the financial period 13,082 6,321 25,853 20,237 127,539
_____ _____ _____ _____ _____
Earnings per share (cents) 9.0 4.8 16.0 12.4 73.4
Diluted earnings per share (cents) 9.0 4.8 15.9 12.4 72.9
Adjusted earnings per share (cents) 16.1 10.1 28.9 19.5 47.8
Adjusted diluted earnings per share (cents) 16.1 10.0 28.8 19.4 47.5
_____ _____ _____ _____ _____
Unaudited results for the period ended 31 March 2003
Consolidated balance sheet - UK GAAP
Unaudited Audited
31 March 30 September
2003 2002 2002
$'000 $'000 $'000
_____ _____ _____
Fixed assets
Intangible assets 1,214,113 760,103 756,672
Tangible assets 62,699 109,164 60,840
_____ _____ _____
1,276,812 869,267 817,512
_____ _____ _____
Current assets
Stocks 26,139 26,411 26,902
Debtors 52,505 59,916 37,260
Cash at bank and in hand 50,029 290,216 313,012
_____ _____ _____
128,673 376,543 377,174
Creditors: amounts falling due within one year 155,612 78,888 75,866
_____ _____ _____
Net current (liabilities) / assets (26,939) 297,655 301,308
_____ _____ _____
Total assets less current liabilities 1,249,873 1,166,922 1,118,820
Creditors: amounts falling due after more than one year 181,017 257,392 50,953
Provisions for liabilities and charges 1,352 8,478 3,410
Deferred income 6,001 5,961 6,189
_____ _____ _____
Net assets 1,061,503 895,091 1,058,268
_____ _____ _____
Capital and reserves
Called up share capital 29,622 27,265 29,578
Share premium account 382,727 348,934 382,749
Capital redemption reserve 323 - 323
Merger reserve 457,800 457,800 457,800
Profit and loss account 191,031 61,092 187,818
_____ _____ _____
Equity shareholders' funds 1,061,503 895,091 1,058,268
_____ _____ _____
Unaudited results for the period ended 31 March 2003
Consolidated cash flow statement - UK GAAP
Unaudited Unaudited Audited Year
ended
Quarter ended Six months ended
31 March 31 March 30 September
2003 2002 2003 2002 2002
$'000 $'000 $'000 $'000 $'000
_____ _____ _____ _____ _____
Net cash inflow from operating activities 36,231 20,154 58,928 39,726 93,451
_____ _____ _____ _____ _____
Returns on investments and servicing of finance
Interest paid (3,162) (4,936) (3,275) (13,311) (35,174)
Interest received 1,889 1,920 3,599 4,605 10,815
_____ _____ _____ _____ _____
(1,273) (3,016) 324 (8,706) (24,359)
_____ _____ _____ _____ _____
Taxation
Corporation tax paid (2,925) (655) (5,091) (1,905) (6,634)
_____ _____ _____ _____ _____
Capital expenditure
Purchase of tangible fixed assets (1,891) (3,563) (4,409) (10,605) (17,086)
Purchase of intangible fixed assets (502,918) (39,744) (502,918) (42,352) (43,694)
Government grant received 307 - 307 - 2,161
_____ _____ _____ _____ _____
(504,502) (43,307) (507,020) (52,957) (58,619)
_____ _____ _____ _____ _____
Acquisitions and disposals
Sale of businesses (net of costs) - (596) (324) 34,717 230,789
Acquisition costs and deferred consideration - (8,771) - (8,838) (9,118)
payments
_____ _____ _____ _____ _____
- (9,367) (324) 25,879 221,671
_____ _____ _____ _____ _____
Equity dividends paid (5,767) (4,465) (5,767) (4,498) (7,449)
_____ _____ _____
Net cash flow before management of liquid (478,236) (40,656) (458,950) (2,461) 218,061
resources and financing
_____ _____ _____ _____ _____
Management of liquid resources
Decrease in short term deposits 282,500 26,279 264,500 40,072 27,523
_____ _____ _____ _____ _____
Financing
Issue of ordinary share capital (net of 790 2,271 21 102 247
expenses)
Purchase of own shares - - - - (11,813)
Loan notes repaid - - - (19,754) (112,623)
Loans received / (repaid) (net) 196,336 (6,241) 196,198 (6,289) (132,126)
Principal repayment under hire purchase (113) - (252) (140) (549)
agreements
_____ _____ _____ _____ _____
197,013 (3,970) 195,967 (26,081) (256,864)
_____ _____ _____ _____ _____
Increase / (decrease) in cash in the period 1,277 (18,347) 1,517 11,530 (11,280)
_____ _____ _____ _____ _____
Unaudited results for the period ended 31 March 2003
Notes to results
1 Basis of preparation
The financial information for the quarter ended 31 March 2003 and 2002, which is
unaudited and does not constitute statutory accounts, has been prepared using
accounting policies consistent with those set out in the group's 30 September
2002 statutory accounts.
The abridged financial information for the year ended 30 September 2002 has been
extracted from the group's statutory accounts for that year, which have been
filed with the Registrar of Companies. The report of the auditors on those
accounts was unqualified.
As stated in the 2002 results, the predominant focus for Galen's pharmaceutical
activities is now the US where market opportunities exceed those in Europe and
other territories. The US accounts for more than 75% of Galen's total revenues.
The Group has decided to adopt the US Dollar as its functional currency and
has reported these financial results in US dollars.
2 Earnings per share
Earnings per ordinary share is based on profit for the financial period and on
the weighted average number of ordinary shares in issue during the period,
excluding those held in the employee share trust. Diluted earnings per share is
calculated using an adjusted number of shares reflecting the number of dilutive
shares under option. Adjusted earnings per share figures reflecting the results
from continuing operations before the impact of exceptional items and goodwill
and intangibles amortisation have been calculated to provide shareholders with a
clearer understanding of the underlying trading performance of the group (see
below).
The weighted average numbers of shares used in the calculation of earnings per
share are as follows:
Quarter ended Six months ended Year ended
31 March 31 March 30 September
2003 2002 2003 2002 2002
Number Number Number Number Number
Weighted average number
of shares:
Basic 183,404,495 184,901,919 183,343,764 184,844,558 185,244,963
Diluted 183,813,839 186,195,464 183,919,191 186,320,589 186,330,634
Quarter ended Six months ended Year ended
31 March 31 March 30 September
Adjusted earnings per share (cents) 2003 2002 2003 2002 2002
_____ _____ _____ _____ _____
Earnings per ordinary share 9.0 4.8 16.0 12.4 73.4
Adjustments (net of tax):
Gain on sale of businesses - - - (4.7) (54.5)
Goodwill and intangibles amortisation 7.1 5.3 12.9 10.5 21.8
Exceptional costs of notes redemption - - - 1.3 7.1
_____ _____ _____ _____ _____
Adjusted earnings per share - basic 16.1 10.1 28.9 19.5 47.8
_____ _____ _____ _____ _____
Summary of differences between UK and US Generally Accepted Accounting
Principles ("GAAP")
(1) Profit for the financial year and shareholders' funds
The group financial statements are prepared in accordance with UK GAAP which
differs in certain significant respects from US GAAP. The effect of the US GAAP
adjustments to profit for the financial period and equity shareholders' funds
are set out in the tables below:
6 months to
31 March
2003 2002
$'000 $'000
Unaudited
(a) Reconciliation of profit for the financial year to US GAAP
Profit for the financial period under UK GAAP 29,327 22,872
_____ _____
US GAAP adjustments:
Amortisation of goodwill 11,605 11,611
Amortisation of intangibles (1,537) (893)
Depreciation of interest capitalised (26) (26)
Deferred taxation (4,790) (3,994)
Compensation expense (162) (159)
Deferred tax effect of US GAAP adjustments 220 376
_____ _____
US GAAP adjustments total 5,310 6,915
_____ _____
Profit for the financial period under US GAAP 34,637 29,787
_____ _____
As at As at
31 March 30 September
2003 2002
$'000 $'000
Unaudited
(b) Effect on equity shareholders' funds of differences between UK GAAP and
US GAAP
Equity shareholders' funds under UK GAAP 1,061,503 1,058,268
_____ _____
US GAAP adjustments:
Acquisition accounting (124,979) (135,047)
Functional currency adjustment 21,906 -
Amortisation of goodwill relating to contingent consideration 1,665 1,665
Capitalisation of interest 2,528 2,554
Deferred taxation (28,770) (24,200)
Employee benefit trust (10,716) (11,153)
Share premium account 10,716 11,153
Dividends 3,474 5,767
_____ _____
US GAAP adjustments total (124,176) (149,261)
_____ _____
Equity shareholders' funds under US GAAP 937,327 909,007
_____ _____
Unaudited consolidated statement of operations - US GAAP
(In thousands of US dollars, except per share data)
Quarter ended Six months ended
March 31 March 31
2003 2002 2003 2002
$'000 $'000 $'000 $'000
_____ _____ _____ _____
Revenues
Product revenue 89,209 56,664 157,852 111,554
_____ _____ _____ _____
Operating expenses
Cost of sales (excluding depreciation shown 16,689 11,087 30,963 24,125
separately below)
Selling, general and administrative 29,621 19,934 52,251 38,056
Research and development 6,650 4,507 12,087 8,769
Depreciation 1,516 1,294 2,971 2,542
Amortisation 8,212 4,386 13,509 8,827
_____ _____ _____ _____
Total operating expenses 62,688 41,208 111,781 82,319
_____ _____ _____ _____
Operating income 26,521 15,456 46,071 29,235
_____ _____ _____ _____
Other income (expense)
Interest income 213 2,050 2,697 4,537
Interest expense (1,588) (6,011) (3,248) (13,948)
_____ _____ _____ _____
Total other income (expense) (1,375) (3,961) (551) (9,411)
_____ _____ _____ _____
Income before taxes 25,146 11,495 45,520 19,824
_____ _____ _____ _____
Provision for income taxes 5,357 2,480 10,883 5,769
_____ _____ _____ _____
Income from continuing operations 19,789 9,015 34,637 14,055
Discontinued operations:
Earnings from discontinued operations (net of tax - 4,116 - 7,042
charge of $2,219)
Gain on disposal of discontinued operations (net - - - 8,690
of tax charge of $2,163)
_____ _____ _____ _____
Net income 19,789 13,131 34,637 29,787
_____ _____ _____ _____
Basic net income per ordinary share:
- continuing operations 10.8 4.9 18.9 7.6
- earnings and gain on disposal of discontinued - 2.2 - 8.5
operations
_____ _____ _____ _____
Basic net income per ordinary share 10.8 7.1 18.9 16.1
_____ _____ _____ _____
Diluted net income per ordinary share:
- continuing operations 10.8 4.9 18.8 7.1
- earnings and gain on disposal of discontinued - 2.1 - 8.4
operations
_____ _____ _____ _____
Diluted net income per ordinary share 10.8 7.0 18.8 16.0
_____ _____ _____ _____
Basic net income per ADS equivalent:
- continuing operations 43.2 19.5 75.6 30.4
- earnings and gain on disposal of discontinued - 8.9 - 34.1
operations
_____ _____ _____ _____
Basic net income per ADS equivalent 43.2 28.4 75.6 64.5
_____ _____ _____ _____
Diluted net income per ADS equivalent:
- continuing operations 43.1 19.4 75.3 30.2
- earnings and gain on disposal of discontinued - 8.8 - 33.7
operations
_____ _____ _____ _____
Diluted net income per ADS equivalent 43.1 28.2 75.3 63.9
_____ _____ _____ _____
Weighted average ordinary shares outstanding
Basic 183,404,495 184,901,919 183,343,764 184,844,558
Diluted 183,813,839 186,195,464 183,919,191 186,320,589
Weighted average ADS equivalents outstanding
Basic 45,851,124 46,225,480 45,835,941 46,211,140
Diluted 45,953,460 46,548,866 45,979,797 46,580,147
Unaudited consolidated balance sheets - US GAAP
(In thousands of US dollars)
Audited
As at As at
March 31 September 30
2003 2002
$'000 $'000
_____ _____
Assets
Current assets:
Cash and cash equivalents 50,029 313,012
Accounts receivable, net 35,387 32,869
Inventories 26,139 26,902
Deferred tax asset 7,590 7,718
Prepaid expense and other assets 17,122 4,397
_____ _____
136,267 384,898
_____ _____
Property, plant and equipment, net 65,227 63,394
Intangible assets, net 1,179,599 623,939
_____ _____
Total assets 1,381,093 1,072,231
_____ _____
Liabilities
Current liabilities:
Accounts payable 10,998 14,007
Accrued and other liabilities 59,743 44,053
Current instalments of long-term debt 66,526 616
Current instalments of obligation under capital leases 274 392
Income taxes 14,616 11,052
_____ _____
Total current liabilities 152,157 70,120
_____ _____
Other liabilities:
Long-term debt, excluding current instalments 180,926 50,729
Long-term obligations under capital leases, excluding current instalments 91 224
Deferred income taxes 104,591 35,962
Other non-current liabilities 6,001 6,189
_____ _____
Total liabilities 443,766 163,224
_____ _____
Shareholders' equity
Ordinary shares, par value (pounds sterling) 0.10 per share; 250,000,000 30,003 29,981
(September 30, 2002;250,000,000) shares authorised, 188,077,951 shares issued
and outstanding at March 31, 2003 and 187,805,263 issued and outstanding at
September 30, 2002
Additional paid in capital 677,580 677,417
Retained earnings 220,676 191,806
Treasury stock (23,893) (23,893)
Accumulated other comprehensive income 32,961 33,696
_____ _____
Total shareholders' equity 937,327 909,007
_____ _____
Total liabilities and shareholders' equity 1,381,093 1,072,231
_____ _____
Unaudited consolidated statements of cash flows - US GAAP
(In thousands of US dollars)
Quarter ended Six months ended
31 March March 31
2003 2002 2003 2002
$'000 $'000 $'000 $'000
_____ _____ _____ _____
Cash flows from operating activities
Net income 19,789 13,131 34,637 29,787
Adjustment to reconcile net income to net cash provided by
operating activities:
Depreciation 1,516 2,459 2,971 4,963
Amortisation of intangibles 8,212 4,386 13,509 8,827
Profit on sale of business - - - (10,853)
Amortisation of government grants (280) (443) (506) (992)
Minority interest - - - 47
Changes in assets and liabilities:
Increase in accounts receivable, prepaid expense and other (14,621) (3,128) (14,955) (9,394)
assets
Decrease/(increase) in inventories 26 76 763 (2,160)
Increase in accounts payable, accrued liabilities and other 15,472 74 12,911 3,290
liabilities
Income taxes 2,362 (3,020) 5,899 2,636
Foreign exchange (loss)/gain (442) 2,263 (1,068) 3,270
_____ _____ _____ _____
Net cash provided by operating activities 32,034 15,798 54,161 29,421
_____ _____ _____ _____
Cash flows from investing activities
Purchase of tangible fixed assets (1,891) (3,458) (4,409) (10,526)
Purchase of intangible fixed assets (502,918) (39,710) (502,918) (42,037)
Government grants received 307 - 307 -
Proceeds from sale of businesses (net of costs) - - (324) 35,758
Deferred consideration and acquisition costs - (8,772) - (8,772)
_____ _____ _____ _____
Net cash used in investing activities (504,502) (51,940) (507,344) (25,577)
_____ _____ _____ _____
Cash flows from financing activities
Long term debt (repaid)/obtained 196,336 (16,137) 196,198 (8,782)
Loan notes repaid - - - (20,000)
Payments under capital leases (113) (172) (252) (313)
Cash dividends paid (5,767) (4,465) (5,767) (4,465)
Proceeds from share capital issue (net of expenses) 790 1,352 21 101
_____ _____ _____ _____
Net cash provided by (used in) financing activities 191,246 (19,422) 190,200 (33,459)
_____ _____ _____ _____
Net increase in cash and cash equivalents (281,222) (55,564) (262,983) (29,615)
Cash and cash equivalents, beginning of period 331,251 348,220 313,012 326,076
Foreign exchange adjustment on cash and cash equivalents - (2,441) - (6,246)
_____ _____ _____ _____
Cash and cash equivalents, end of period 50,029 290,215 50,029 290,215
_____ _____ _____ _____
This information is provided by RNS
The company news service from the London Stock Exchange
END
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