Significant Progress in Late-Stage R&D Programs GENEVA,
Switzerland, February 6 /PRNewswire-FirstCall/ -- Serono (virt-x:
SEO and NYSE: SRA) today reported its fourth quarter and full year
results for the period ended December 31, 2005. Key Points for Full
Year 2005 - Adjusted(i) net income up 28.4% to $565.3m and adjusted
basic EPS(i) up 34.6% to $38.80 per bearer share and $0.97 per ADS
- Significant improvement in adjusted(i) operating margin to 24.0%
of revenues - Reported net loss of $106.1m and $7.28 per bearer
share and $0.18 per ADS - Total revenues of $2,586.4m and product
sales of $2,338.9m - Global Rebif(R) sales up 16.4% to $1,269.8m
with US sales up 31.8% to $389.5m - Progress in key MS clinical
trials - REGARD 1st year of treatment completed in Rebif(R) vs
Copaxone head-to-head study - CLARITY: oral cladribine Phase III
study enrolling - Positive outcomes in two phase III programs -
r-hGH in HIV-associated adipose redistribution syndrome (HARS) -
IFN-beta 1a with or without ribavirin in chronic hepatitis C in
Asian patients - R&D pipeline expanded through new
collaborations with Biomarin, Genmab, NovImmune and Rigel - 2006
outlook for high single-digit product sales growth and EPS between
$42.00 and $43.40 per bearer share "2005 was a year of continued
growth and business expansion. Our improved operating leverage led
to higher adjusted profit, while our aggressive business
development strategy resulted in a stronger pipeline," said Ernesto
Bertarelli, Chief Executive Officer. "During 2006, we will maintain
our focus on maximizing the potential of our marketed products, the
efficiency of our business operations and the advancement of our
most promising clinical programs." Fourth Quarter And Full Year
Financial Performance Product sales were up 7.4% to $2,338.9m in
2005 (2004: $2,177.9m), and were unchanged in the fourth quarter
2005 (2004: $604.5m) adversely influenced by the strengthening of
the US dollar versus the Euro. Product sales in local currencies
grew by 6.7% in 2005 and by 3.3% in the fourth quarter. During
2005, Western European sales increased by 11.4% to $1,038.3m (2004:
$931.6m), while North American sales grew by 1.2% to $848.2m (2004:
$837.9m). In the rest of the world, sales grew by 10.8% in 2005 to
$452.4m (2004: $408.4m). Royalty and licensing income was $247.5m
in 2005, representing 9.6% of total revenues (2004: $280.1m), and
was $65.4m in the fourth quarter (2004: 75.3m). The decrease from
the prior year reflects a one-time payment of $67m from a licensing
agreement in the third quarter 2004 and an additional license
income totaling $11.0m for the grant of technology licenses to
third parties in the fourth quarter 2004. Total revenues increased
by 5.2% (+4.5% in local currencies) to $2,586.4m in the full year
2005 (2004: $2,458.1m), and decreased by 1.4% (+1.7% in local
currencies) to $669.9m in the fourth quarter 2005 (2004: $679.7m).
Excluding the one-time payment of $67m from a licensing agreement
in the third quarter 2004, total revenues grew by 8.2% in 2005.
Gross margin increased to 88.6% of product sales in 2005 (2004:
86.0%), reflecting continuing manufacturing efficiency gains and a
charge of $20.5m for the closure of an obsolete manufacturing site
in the third quarter 2004. In the fourth quarter 2005, gross margin
of product sales reached 88.9% (2004: 87.9%). Selling, general and
administrative expenses increased 6.7% to $862.3m in 2005 (2004:
$807.9m), including the launch of Raptiva(R). In the fourth quarter
2005, SG&A expenses decreased 4.5% to $223.9m (2004: $234.3m),
reflecting our focus on operational efficiency. Research and
development expenses were flat at $593.6m in 2005 (2004: $594.8m).
In the fourth quarter 2005, R&D expenses were $144.6m (2004:
$221.3m) and included an additional $5.5m charge related to the
transfer of Serono Genetics Institute, while in the fourth quarter
2004, R&D expenses included payments totaling $66.3m related to
collaborations with ZymoGenetics, Micromet and CancerVax. Reported
other operating expenses in 2005 were $992.1m (2004: $239.8m) and
$70.8m (2004: $70.5m) in the fourth quarter. Adjusted other
operating expenses were $267.1m in the full year, excluding the
$725.0m charge reported in the first quarter 2005 related to the
Serostim(R) settlement. Full year 2005 operating loss was $127.5m
(2004: $511.4m or 20.8% of total revenues). Adjusted(ii) operating
income was up 33.6% to $621.3m in 2005.This significant improvement
in adjusted operating margin to 24.0% of total revenues reflected
steady underlying revenue growth, tight control over SG&A and
R&D expenses and improvement in gross margin. In the fourth
quarter, operating income was $163.6m or 24.4% of total revenues
(2004: $80.6m or 11.9% of total revenues). Net financial income was
$40.3m in 2005 (2004: $63.3m) and $12.7m in the fourth quarter 2005
(2004: $20.7m) reflecting lower foreign exchange gains in 2005 and
an unrealized gain of $8.6m in the fourth quarter 2004 related to
the acquisition of ZymoGenetics' shares. In the fourth quarter
2005, unrealized losses of $8.0m and $1.5m were recorded in other
expense, in accordance with IAS 39 revised to reflect the
impairment in value of our equity stakes in Rigel and CancerVax
respectively. The reported net loss for 2005 was $106.1m compared
with reported net income of $479.7m[1] in 2004. Adjusted(ii) net
income for 2005 increased 28.4% to $565.3m. In the fourth quarter
2005, reported net income increased 72.2%, or 70.1% in local
currencies, to $144.1m (2004: $83.7m). Basic loss per share for
2005 was $7.28 per bearer share (2004 EPS: $31.40) and $0.18 per
American Depositary Share (ADS) (2004 EPS: $0.78). Adjusted(ii)
basic earnings per share were up 34.6% to $38.80 per bearer share
and $0.97 per ADS. On April 25, 2006, the Board of Directors will
propose to the Annual General Meeting a cash dividend of CHF10.0
per bearer share, CHF4.0 per registered share, and CHF 0.25 per
ADS, representing an increase of 11.1% over the 2004 dividend. For
the full year ended 2005, net cash flows used for operating
activities were $126.5m (2004: net cash flows from operating
activities $471.7m). The company's liquid financial assets were
$1.5 billion at the end of 2005 (2004: $1.8 billion). As of
December 31, 2005 there were 14,596,253 equivalent bearer shares of
Serono S.A. issued and 14,571,273 equivalent bearer shares of
Serono S.A. outstanding. At the Annual General Meeting on April 26,
2005 shareholders approved the cancellation of 962,435 bearer
shares purchased by Serono under its Share Buy Back Plan. Full Year
2006 Outlook In 2006, Serono expects high single-digit product
sales growth based on 2005 average currency exchange rates and
earnings per bearer share between $42.00 and $43.40. This outlook
does not include expenses related to any new business development
transactions or other non-recurring items in 2006. Key Product
Review Rebif(R) full year 2005 worldwide sales were up 16.4% (15.4%
in local currencies) to $1,269.8m (2004: $1,090.6m). In the fourth
quarter 2005, sales of Rebif(R) increased by 8.2% (11.9% in local
currencies) to $335.3m (2004: $310.0m). In 2005, Rebif(R) was the
fastest growing multiple sclerosis (MS) therapy in the US, with
sales up 31.8% to $389.5m for the full year (2004: $295.6m), and up
32.6% to $114.0m in the fourth quarter (2004: $86.0m). Rebif(R)
continues its market leadership outside the US with 2005 sales
increasing by 10.7% to $880.3m (2004: $795.0m). Sales ex-US were
$221.3m in the fourth quarter 2005 (2004: $224.0m) and increased
4.0% in local currencies. Two key clinical trials in multiple
sclerosis have made significant progress. All patients in the
REGARD (REbif vs Glatiramer Acetate in Relapsing MS Disease) study
of Rebif(R) vs Copaxone have recently completed their first year of
treatment. The Phase III CLARITY (CLAdRIbine Tablets Treating MS
OrallY) study of oral cladribine is enrolling patients. In 2005,
sales of Gonal-f(R) decreased by 4.5% (-5.2% in local currencies)
to $547.0m (2004: $572.7m) and by 11.7% (-9.0% in local currencies)
to $133.5m in the fourth quarter 2005 (2004: $151.1m), due to
continued competitive pressure in the United States. In December,
Serono achieved the milestone of one million Gonal-f(R) pens sold.
On January 24, 2006, Serono announced that the Japanese Ministry of
Health, Labour and Welfare has approved Gonal-f(R) for
co-administration with Profasi(R) for the induction of
spermatogenesis in men with hypogonadotropic hypogonadism.
Gonal-f(R) will be marketed in Japan under the brand name of
GONALEF(R) and launch is anticipated in the second quarter 2006.
Saizen(R) sales increased by 13.4% (12.5% in local currencies) to
$206.5m (2004: $182.1m) in 2005, and were up 2.1% (5.9% in local
currencies) to $54.3m (2004: $53.2m) during the fourth quarter. In
2005, Saizen(R) was approved by the FDA in Adult Growth Hormone
Deficiency and successfully completed the European mutual
recognition procedure leading to marketing approval for the
treatment of children born Small for Gestational Age (SGA) in 15 EU
countries. Serostim(R) sales decreased to $70.4m for the full year
2005 (2004: $86.8m) and $17.0m (2004: $22.6m) in the fourth
quarter. Sales of Raptiva(R) were $33.4m for the full year 2005
(2004: $4.9m), and $11.6m in the fourth quarter 2005 (2004: $3.7m).
Raptiva(R) is now approved in 49 countries and available in over 40
countries. Raptiva(R), the first biological to market in the
European Union for the treatment of moderate to severe psoriasis
provides a safe and effective alternative to conventional systemic
therapies. Company Update Serono announced on November 8, 2005,
that Goldman Sachs has been retained to explore various strategic
alternatives for the company. This process is on-going. However,
there is no assurance that any transaction will be consummated.
R&D News Serono reports today the positive outcome of the
combination phase of a study evaluating the effect of
interferon-beta-1a with ribavirin for the treatment of chronic
hepatitis C (HCV) in Asian patients. The proportion of patients who
achieved sustained virological response, defined as an absence of
detectable HCV RNA in serum after 24 weeks treatment with
interferon-beta-1a in combination with ribavirin followed by 24
weeks of observation, was 57.5% (n=127). On January 9, 2006, Serono
announced the successful completion of a pivotal Phase III
double-blind, placebo-controlled trial of its recombinant human
growth hormone (r���??hGH) in the treatment of HIV-associated
Adipose Redistribution Syndrome (HARS). This trial met all
pre-specified primary and major secondary endpoints. Serono plans
to submit the file to the FDA in the first half of 2006 and expects
that the data will be presented at upcoming scientific meetings. On
January 10, 2006, encouraging preliminary results from a Phase 1b
clinical trial of TACI-Ig in rheumatoid arthritis were announced.
TACI-Ig appeared to be safe and well tolerated, and clear biologic
and clinical responses which appear to correlate with clinical
benefit were observed. Full details from this study will be
presented at a medical meeting later in the year. In addition, a
Phase 1b trial of TACI-Ig in systemic lupus erythematosus is
expected to finish mid-2006, and further updates related to TACI-Ig
as a potential treatment for B-cell malignancies are anticipated
during the second half of 2006. In 2005 Serono added seven new
projects to its R&D pipeline through new collaborations with
Biomarin for Phenoptin and Phenylase, Genmab for HuMax���??CD4
and HuMax���??TAC, NovImmune for the fully human monoclonal
antibodies, NI-0401 (anti-CD3) and NI-0501 (anti-IFN-gamma) and
Rigel for the product candidates from its Aurora kinase inhibitor
program, including R763. Conference Call and Webcast Serono will
hold a conference call today, February 6, 2006, starting at 15:00
Central European Time (9:00 am Eastern Time) during which Serono
Management will present the Company's Fourth Quarter and Full Year
2005 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. Additionally, the webcast will be
available for replay until close of business on March 10, 2006.
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 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 US Securities and Exchange Commission on
March 16, 2005. 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 government investigations and litigation and government
regulations limiting our ability to sell our products. Serono 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 and growth
& metabolism 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. Currently, there are more than 25 ongoing
preclinical and clinical development projects. In 2005, Serono,
whose products are sold in over 90 countries, achieved worldwide
revenues of US$2,586.4 million. 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).
On the following pages, there are: - Tables detailing sales in
dollars by therapeutic area, geographic region and the top 10
products for the 3 and 12 months ended December 31, 2005 and 2004.
- Fourth Quarter Consolidated Income Statements and Full Year
Consolidated Income Statements ended December 31, 2005 and 2004;
the Adjusted Net Income and Adjusted Earnings per Share for the 3
and 12 months ended December 31, 2005; the Consolidated Balance
Sheets as of December 31, 2005 and 2004; the Consolidated Statement
of Changes in Equity as of December 31, 2005 and 2004; as well as
the Consolidated Statements of Cash Flows for the 12 months ended
December 31, 2005 and 2004. These consolidated financial statements
have been prepared on the basis of International Financial
Reporting Standards. The accompanying notes to these 2005 full-year
consolidated financial statements will be available upon the
release of Serono's 2005 Annual Report. A full version of this
release, including tables, is available at http://www..serono.com/
(i) Non-IFRS financial measures are included in order to permit
assessment of the performance of the company's underlying business
and include: In Q4 2005 an additional charge of $5.5m ($5.0m
after-tax) for the transfer of research activities conducted at the
Serono Genetics Institute (SGI) reported in Q3 2005, a $8.0m
write-down of investment in Rigel and a $1.5m write-down of
investment in Cancervax. In Q3 2005 a charge of $18.3m ($16.6m
after-tax) for the transfer of the research activities conducted at
the SGI from Evry, France to Geneva, Switzerland. In Q2 2005 a $30m
($28.5m after-tax) gain on sale of investment in Celgene and a
$3.7m write-down of investment in CancerVax. In Q1 2005 a charge of
$725.0m ($660.5m after=tax) related to previously reported US
Attorney's Office investigation of Serostim® and a $4.7m write-down
of investment in CancerVax. In Q3 2004 a one-time payment of $67m
($56.6m after-tax) from a licensing agreement as well as a charge
of $20.5m ($17.3m after-tax) related to the closure of a
manufacturing facility. Please refer to "Adjusted net income and
adjusted earnings per share" table. [1] Previously reported amounts
have been restated to reflect the adoption of new IFRS accounting
standards that became effective on January 1, 2005 (ii) Non-IFRS
earnings measures which exclude the elements set forth in the
"Adjusted net income and adjusted earnings per share" table. SRA,
Bloomberg: SEO VX / SRA US. Investor Relations: Tel.
+1-781-681-2552, Fax: +1-781-681-2912 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:
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