Serono Delivers Strong First Quarter 2006 With Revenue Growth of 16.4% in Local Currencies
April 20 2006 - 2:02AM
PR Newswire (US)
Adjusted* EPS Increased by 75.2% and 2006 EPS Outlook Raised to
$45.00 GENEVA, Switzerland, April 20 /PRNewswire-FirstCall/ --
Serono (virt-x: SEO and NYSE: SRA), today reported its first
quarter results for the period ended March 31, 2006. Key Points for
First Quarter 2006 - Strong underlying top-line performance with
total revenues up 11.0% (+16.4% in local currencies) to $667.5m and
product sales up 7.9% (+13.4% in local currencies) to $594.9m -
Reported net income of $179.9m and basic EPS of $12.29 per bearer
share and $0.31 per ADS - Adjusted* net income up 76.1% to $171.6m
and adjusted* basic EPS up 75.2% to $11.72 per bearer share and
$0.29 per ADS - Rebif(R) worldwide sales up 11.7% (+17.7% in local
currencies) to $327.0m - Gonal-f(R) sales of $139.1m increased vs
both Q1 2005 and Q4 2005 - Good progress in late-stage clinical
programs: - Rebif(R) new formulation filed in USA and Europe -
Positive outcome from Phase III study of Phenoptin for PKU - 2006
EPS outlook raised to $45.00 per bearer share "Our strong first
quarter top-line performance reflects a healthy business across the
board. I am pleased with the performance of our Reproductive Health
franchise, particularly in the US, as well as with the underlying
growth of our Rebif(R) worldwide sales of 17.7%," said Ernesto
Bertarelli, Chief Executive Officer. "Moving forward we will
continue to invest in our existing businesses and R&D pipeline,
and we intend to actively pursue opportunities for growth through
acquisitions." "Given the strength of our financial performance in
the first quarter, we now raise our EPS guidance to $45.00," said
Stuart Grant, Chief Financial Officer. Financial Performance Total
revenues increased by 11.0%, or 16.4% in local currencies, to
$667.5m in the first quarter of 2006 (Q1 2005: $601.4m). Product
sales grew 7.9%, or 13.4% in local currencies, to $594.9m (Q1 2005:
$551.4m). Sales were adversely influenced by the strengthening of
the US dollar versus the Euro year-over-year. Royalty and license
income increased by 45.3% to $72.6m (Q1 2005: $50.0m), continuing
to provide a substantial revenue stream derived from Serono's
intellectual property rights. Gross margin remains solid at 88.4%
of product sales (Q1 2005: 89.2%). Selling, General and
Administrative expenses remained stable at $211.5m (Q1 2005:
$214.6m) reflecting operational leverage. Research and Development
expenses were $122.9m (Q1 2005: $156.3m), reflecting the completion
of a number of phase III trials in the last 12 months. Other
operating expenses were $64.3m (Q1 2005: $788.4m). Operating income
in the first quarter of 2006 was $200.0m compared to a loss of
$617.4m in the first quarter of 2005. On an adjusted* basis this
represents an increase of 85.9% and led to an operating margin of
30.0% of total revenues (Q1 2005: $107.6m or 17.9% of total
revenues on an adjusted* basis), reflecting steady underlying
revenue growth, tight control over SG&A and R&D expenses
and continued solid gross margin. Financial income was $23.9m (Q1
2005: $12.0m), reflecting a net gain of $8.4m from the sale of
1,434,607 shares of ZymoGenetics, Inc. in March 2006. Financial
expense decreased to $6.3m (Q1 2005: $10.6m), as a result of last
year's first quarter write-down of $4.7m related to impairment in
value of an equity stake in CancerVax. Reported net income in the
first quarter of 2006 was $179.9m compared to a loss of $567.7m in
the first quarter of 2005. Adjusted* net income was up 76.1% to
$171.6m (Q1 2005: $97.4m), or 77.4% in local currencies. Reported
basic earnings per share in the first quarter of 2006 were $12.29
per bearer share and $0.31 per American Depositary Share (ADS).
Adjusted* basic earnings per share were up 75.2% to $11.72 per
bearer share (Q1 2005: $6.69) and $0.29 per ADS (Q1 2005: $0.17).
For the first quarter, net cash flow from operating activities
before change in working capital was $237.8m (Q1 2005: $146.4m), or
$189.0m after change in working capital (Q1 2005: $53.3m). The
company's liquid financial assets were $1.7 billion at the end of
the first quarter 2006. As of March 31, 2006, there were 14,641,246
equivalent bearer shares of Serono S.A. issued and 14,639,138
equivalent bearer shares of Serono S.A. outstanding. Full Year 2006
Outlook Given the strength of the first quarter 2006 results,
Serono now raises its outlook for 2006 earnings per bearer share to
$45.00. This outlook does not include expenses related to any new
business development transactions or other non-recurring items in
2006. Therapeutic Areas Review In the first quarter of 2006,
Rebif(R) had a solid performance with sales up 11.7%, 17.7% in
local currencies, to $327.0m (Q1 2005: $292.8m) further
consolidating its position as a foundation therapy. Rebif(R)
continues its market leadership outside the US with sales growing
3.1%, or 10.8% in local currencies, to $222.7m (Q1 2005: $216.1m).
Rebif(R), the fastest growing brand for the treatment of relapsing
forms of multiple sclerosis in the US in 2005, reached sales of
$104.2m, up 35.8% in the first quarter (Q1 2005: $76.8m). Sales of
Gonal-f(R) increased by 0.8%, or 6.3% in local currencies, to
$139.1m (Q1 2005: $138.0m). This is an encouraging performance
reflecting high single-digit growth in local currencies outside of
the US and marking a change in trend in the US. Contrary to usual
seasonal patterns, Gonal-f(R) sales increased 4.2% in the first
quarter of 2006 compared with the fourth quarter of 2005. Global
sales of supporting products (Ovidrel(R), Cetrotide(R), Crinone(R)
and Luveris(R)) were up 11.3%, or 16.6% in local currencies, to
$22.6m. Saizen(R) sales increased by 4.4%, or 10.0% in local
currencies, to $49.9m (Q1 2005: $47.8m). Saizen(R) continues to be
differentiated using the innovative devices, cool.click and
one.click, as well as services, such as patient registries, call
centres and nurse trainers, as well as educational programs.
Serostim(R) sales decreased by 13.7% to $15.8m (Q1 2005: $18.3m).
Sales of Raptiva(R) were $13.6m in the first quarter 2006 (Q1 2005:
$4.5m). The focus for 2006 is on increasing market penetration by
differentiating Raptiva(R) from other biologicals and further
establishing the new progressive way of treating psoriasis to
achieve long-term control of this chronic disease. R&D News On
March 15, Serono and BioMarin Pharmaceutical Inc. announced
positive results of a Phase 3, double-blind, placebo-controlled
clinical study of Phenoptin(TM) (sapropterin dihydrochloride), an
investigational oral small molecule for the treatment of
phenylketonuria. All pre-specified primary and secondary endpoints
were met and data demonstrate a statistically significant reduction
at six weeks in blood phenylalanine levels (p