Serono Delivers Strong Adjusted* Net Income of $183.5m in Third Quarter 2006
19 October 2006 - 4:00PM
PR Newswire (US)
Excellent Performance of Rebif(R) With Sales Up 18.7% to $374.8m
GENEVA, Switzerland, October 19 /PRNewswire-FirstCall/ -- Serono
(virt-x: SEO and NYSE: SRA) today reported its third quarter
results for the period ended September 30, 2006. Key Points for
Third Quarter 2006 - Total revenues of $699.1m, up 9.5% - Product
sales up 8.4% to $619.2m - Rebif(R) sales up 18.7% to $374.8m
worldwide and up 30.1% to $133.3m in USA - Operating margin of
28.6% of total revenues, up from 25.0% in Q3 2005 - Reported net
income of $170.6m, up 19.8% - Reported basic EPS of $11.64 per
bearer share and $0.29 per ADS - Continued good progress in several
R&D programs: - In-licensing of safinamide in early Phase 3 in
Parkinson's Disease - Fast Track designation for oral cladribine in
relapsing forms of multiple sclerosis - Rebif New Formulation (RNF)
12-month results presented - substantially improved tolerability
and much lower immunogenicity compared with historical data ** *
Non-IFRS earnings measure which excludes a $13.0m charge related to
the revised carrying value of the convertible bond in Q3 2006. **
The new formulation of Rebif(R) is currently under regulatory
review by the European Medicines Agency, the US Food and Drug
Administration and other healthcare authorities. - Aurora kinase
inhibitor oncology project moved to Phase 1 "We have delivered an
excellent quarter with strong performance of our leading product,
Rebif(R), and our company has again generated strong cash flow,"
said Ernesto Bertarelli, Chief Executive Officer. "Our investment
in R&D has yielded good progress in several clinical programs."
"During the third quarter of 2006, we sustained the operating
leverage we established over the last 18 months resulting in higher
operating margin and strong growth on the bottom line," said Stuart
Grant, Chief Financial Officer. Financial Performance Total
revenues increased by 9.5%, or 7.0% in local currencies, to $699.1m
in the third quarter of 2006 (Q3 2005: $638.3m). Product sales grew
8.4%, or 5.7% in local currencies, to $619.2m (Q3 2005: $571.5m).
Royalty and license income increased by 19.4% to $79.8m (Q3 2005:
$66.9m), representing 11.4% of revenues. Gross margin continues to
be strong at 88.6% of product sales (Q3 2005: 88.6%). Selling,
General and Administrative expenses were $226.1m (Q3 2005: $201.3m)
while Research and Development expenses were $141.3m (Q3 2005:
$146.9m). Other operating expenses were down 6.4% to $61.7m (Q3
2005: $65.9m). Operating income in the third quarter of 2006 was up
25.2% to $199.6m (Q3 2005: $159.4m). Continued operational leverage
has delivered an operating margin of 28.6% of total revenues
compared to 25.0% of total revenues in the same period last year.
Financial income was $23.2m (Q3 2005: $17.3m) and financial expense
was $19.7m (Q3 2005: $5.9m) including a $13.0m charge related to
the revised carrying value of the convertible bond as a consequence
of the anticipated change of control. Reported net income in the
third quarter of 2006 was $170.6m up 19.8% (Q3 2005: $142.4m),
leading to a net margin of 24.4% of total revenues (Q3 2005: 22.3%
of total revenues). Basic earnings per share in the third quarter
of 2006 were up 19.1% to $11.64 per bearer share (Q3 2005: $9.77)
and $0.29 per American Depositary Share (Q3 2005: $0.24). On an
adjusted basis, net income increased 15.5% to $183.5m from $158.9m
in the prior year. Adjustments included an $18.3m charge related to
the transfer of the Serono Genetics Institute in the third quarter
2005 and a $13.0m charge related to the convertible bond taken in
the third quarter 2006. For the first nine months, net cash flow
from operating activities before change in working capital was
$750.0m (YTD 2005: $555.0m), or $622.7m after change in working
capital (YTD 2005: $439.5m). The company's liquid financial assets
were $2.1 billion at the end of the third quarter 2006. As of
September 30, 2006, there were 14,661,190 outstanding equivalent
bearer shares of Serono S.A., net of treasury shares. The total
weighted average number of equivalent bearer shares of Serono S.A.
was 14,654,546 for the three months ending September 30, 2006. Key
Product Sales In the third quarter of 2006, Rebif(R) had an
excellent performance with worldwide sales of $374.8m, up 18.7%, or
15.4% in local currencies (Q3 2005: $315.6m). Rebif(R) continues to
be the best-selling therapy for multiple sclerosis outside the US,
with sales of $241.5m, growing 13.3%, or 8.2% in local currencies
(Q3 2005: $213.2m). More than four years after launch in the US,
Rebif(R) continues to grow strongly and reached US sales of
$133.3m, up 30.1% (Q3 2005: $102.5m). Novantrone(R) sales in the
third quarter of 2006 were $2.8m, down 84.6%, consequent to the
introduction of generics of mitoxantrone in the US in April 2006
(Q3 2005: $18.2m). Sales of Gonal-f(R) were $122.8m in line with
the third quarter of 2005 (Q3 2005: $125.6m). Global sales of
supporting products (Ovidrel(R), Cetrotide(R), Crinone(R) and
Luveris(R)) were up 11.5%, or 9.5% in local currencies to $21.9m
(Q3 2005: $19.6m). Saizen(R) sales were $50.5m (Q3 2005: $50.8m),
while Serostim(R) sales grew 9.5% to $19.5m (Q3 2005: $17.8m).
Sales of Raptiva(R) were up 80.6% to $18.1m in the third quarter
2006 (Q3 2005: $10.0m). R&D News Serono has reported notable
progress in its Neurology R&D pipeline during the last three
months: - Serono has recently announced an agreement with Newron
Pharmaceuticals SpA under which Serono is granted exclusive
worldwide rights for the development of safinamide in Parkinson's
disease, Alzheimer's disease, and other cognitive disorders.
Positive results from a Phase 3 study of safinamide in Parkinson's
disease were reported in June 2006. - In September 2006, oral
cladribine was designated a Fast Track product for patients with
relapsing forms of multiple sclerosis by the US Food and Drug
Administration. Under Fast Track designation oral cladribine is
eligible for Priority Review. Patient enrollment into the ongoing
Phase 3 pivotal trial is planned to be completed by the end of
2006. - Data on a new formulation of Rebif(R) demonstrating a
substantial improvement in tolerability and reduction in antibody
formation at one year, compared with historical data from patients,
were recently presented at the 22nd ECTRIMS congress. In the third
quarter of 2006, Serono further advanced its R&D initiatives in
oncology: - Serono began enrolling patients in a Phase 1 study
evaluating the safety and tolerability of R763, a highly potent,
orally available multi-Aurora kinase inhibitor, for the treatment
of patients with refractory solid tumors in September 2006. - With
respect to adecatumumab, final data from two Phase 2 clinical
trials showed activity in both metastatic breast cancer and
prostate cancer. While neither study reached its primary endpoint,
good tolerability and encouraging trends towards higher activity
for patients with high levels of EpCAM overexpression and treated
at higher doses were observed. Serono and Micromet continue to
investigate opportunities for further development. In September
2006, Serono and Syntonix Pharmaceuticals Inc. entered into an
agreement to pursue the development of a long-acting FSH therapy
for the treatment of infertility that can be inhaled and dosed less
frequently, instead of injected daily. Conference Call and Webcast
Serono will hold a conference call on October 19, 2006, starting at
3.00 pm Central European Time (9.00 am U.S. Eastern Time) during
which Serono Management will present the Company's Third Quarter
2006 results. To join the telephone conference please dial
1-866-291-4166 (from the US), 091-610-5600 (from Switzerland),
0207-107-0611 (from the UK) and +41-91-610-5600 (from elsewhere).
The event will also be relayed by live audio webcast, which
interested parties may access via Serono's Corporate home page,
http://www.serono.com/. A link to the webcast will be provided
immediately prior to the event and will be available for replay
following the event. Additionally, the webcast will be available
for replay until close of business on November 24, 2006.
Forward-looking statements Some of the statements in this press
release are forward looking. Such statements are inherently subject
to known and unknown risks, uncertainties and other factors that
may cause actual results, performance or achievements of Serono
S.A. and affiliates to be materially different from those expected
or anticipated in the forward-looking statements. Forward-looking
statements are based on Serono's current expectations and
assumptions, which may be affected by a number of factors,
including those discussed in this press release and more fully
described in Serono's Annual Report on Form 20-F filed with the
U.S. Securities and Exchange Commission on February 28, 2006. These
factors include any failure or delay in Serono's ability to develop
new products, any failure to receive anticipated regulatory
approvals, any problems in commercializing current products as a
result of competition or other factors, our ability to obtain
reimbursement coverage for our products, the outcome of any
government investigations and litigation. Serono is providing this
information as of the date of this press release, and has no
responsibility to update the forward-looking statements contained
in this press release to reflect events or circumstances occurring
after the date of this press release. About Serono Serono is a
global biotechnology leader. The Company has eight biotechnology
products, Rebif(R), Gonal-f(R), Luveris(R), Ovidrel(R)
/Ovitrelle(R), Serostim(R), Saizen(R), Zorbtive(TM) and Raptiva(R).
In addition to being the world leader in reproductive health,
Serono has strong market positions in neurology, metabolism and
growth and has recently entered the psoriasis area. The Company's
research programs are focused on growing these businesses and on
establishing new therapeutic areas, including oncology and
autoimmune diseases. In 2005, Serono, whose products are sold in
over 90 countries, achieved worldwide revenues of US$2,586.4
million. Reported net loss in 2005 was US$106.1 million, reflecting
a charge of US$725 million taken relating to the settlement of the
US Attorney's Office investigation of Serostim. Excluding this
charge as well as other non-recurring items, adjusted net income
grew 28.4% to US$565.3 million in 2005. Bearer shares of Serono
S.A., the holding company, are traded on the virt-x (SEO) and its
American Depositary Shares are traded on the New York Stock
Exchange (SRA). Reuters: SEO.VX / SRA Bloomberg: SEO VX / SRA US
This release, including tables, is available at
http://www.serono.com/ . On the website, there are: - Tables
detailing sales in dollars by therapeutic area, geographic region
and the top 10 products for the 3 and 9 months ended September 30,
2006 and 2005. - Consolidated income statements for the 3 and 9
months ended September 30, 2006 and 2005; adjusted net income and
adjusted earnings per share for the 3 and 9 months ended September
30, 2006 and 2005; the consolidated balance sheets as of September
30, 2006 and December 31, 2005; the consolidated statements of
changes in equity as of September 30, 2006 and 2005; the
consolidated statements of cash flows for the 9 months ended
September 30, 2006 and 2005; the selected explanatory notes to the
consolidated financial statements. These consolidated financial
statements have been prepared on the basis of International
Financial Reporting Standards. DATASOURCE: Serono International S A
CONTACT: For more information, please contact: Serono in Geneva,
Switzerland: Media Relations: Tel: +41-22-739-36-00, Fax:
+41-22-739-30-85, http://www.serono.com/. Serono, Inc., Rockland,
MA, Media Relations: Tel: +1-781-681-2340, Fax: +1-781-681-2935,
http://www.seronousa.com/. Investor Relations: Tel:
+41-22-739-36-01, Fax: +41-22-739-30-22. Reuters: SEO.VX
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