Total Revenues Grew 21.8% and EPS Increased 31.3%

    ROCKLAND, Massachusetts, February 1 /PRNewswire-FirstCall/ -- Serono
(virt-x: SEO and NYSE: SRA), the world's third largest biotechnology company,
today reported its fourth quarter and full year results for the period ended
December 31, 2004.
    Key Points for Full Year 2004
    - Total revenues up 21.8% to $2,458.1m (+16.1% in local currencies)
    - Product sales up 17.2% to $2,177.9m (+11.5% in local currencies)
    - Rebif(R) sales up 33.1% to $1,090.6m (+25.4% in local currencies)
    - Reported net income up 26.7% to $494.2m (+21.7% in local currencies)
    - Reported EPS up 31.3% to $32.35 per bearer share and $0.81 per ADS
    - Raptiva(R) registered in key markets and now available in 15 countries
    - New R&D collaborations with CancerVax and Micromet for novel
anti-cancer drug candidates
    - Significant steps forward in R&D with 6 late-stage clinical development
programs on-going (5 Phase III, 1 post-registration head-to-head study)
    - 2005 outlook for product sales growth between 10% and 15%, total
revenues of at least $2.6 billion and net income between $520m and $540m
    "We had excellent growth in 2004 and made significant investments for our
future," said Ernesto Bertarelli, Chief Executive Officer of Serono. "Going
forward we have a number of exciting late-stage development projects to drive
our future growth and we will continue to invest in both internal R&D
programs and external collaborations to sustain that growth over the
longer-term."
    Fourth Quarter And Full Year Financial Performance
    Total revenues increased by 21.8% (+16.1% in local currencies) to
$2,458.1m in the full year 2004 (2003: $2,018.6m), and by 20.3% (+15.7% in
local currencies) to $679.7m in the fourth quarter (2003: $565.1m).
    Worldwide product sales were $2,177.9m in 2004, up 17.2% (2003:
$1,858.0m), and up 16.4% to $604.5m in the fourth quarter (2003: $519.3m).
Product sales in local currencies grew by 11.5% in 2004 and 11.7% in the
fourth quarter.
    Royalty and licensing income increased by 74.4% to $280.1m in 2004,
representing 11.4% of total revenues (2003: $160.6m), and was up 64.4% to
$75.3m (2003: $45.8m) in the fourth quarter due to Serono's strong
intellectual property rights. In the third quarter exceptional license income
of $67m was reported and in the fourth quarter Serono received additional
license income totaling $11m for the grant of technology licenses to third
parties.
    Gross margin increased to 86.0% of product sales in 2004 (2003: 85.0%),
as a result of a more favorable product mix and continuing manufacturing
improvements. In the fourth quarter of 2004, gross margin reached 87.9%
(2003: 84.5%).
    Selling, General and Administrative expenses were $807.9m or 32.9% of
total revenues in 2004 (2003: $636.8m or 31.5% of total revenues), and
$234.3m or 34.5% of total revenues in the fourth quarter (2003: $178.9m or
31.7% of revenues). The increase in SG&A as a percentage of revenues in 2004
reflects expenditures related to the launch of Raptiva(R), the launch of the
Gonal-f(R) pre-filled pen and the continued investment to drive Rebif(R) to
worldwide market leadership.
    Research and Development expenses were $594.8m or 24.2% of total revenues
(2003: $467.8m or 23.2% of total revenues) for the full year, and $221.3m or
32.6% of total revenues in the fourth quarter (2003: $124.2m or 22.0% of
total revenues). The increase in R&D as a percentage of revenues in 2004,
particularly in the fourth quarter, results from the commencement of several
external R&D collaborations (e.g. ZymoGenetics, Micromet and CancerVax), as
well as significant progress made in R&D. Six late-stage clinical development
programs are currently on-going, involving up to 6,500 patients (five Phase
III, one post-registration head-to-head study).
    Other operating expenses in 2004 were $227.1m (2003: $199.5m), and $66.4m
(2003: $49.2m) in the fourth quarter. The increase in other operating
expenses results from payments made to third parties related to licensing
agreements.
    Full year 2004 operating income increased by 20.5% to $524.1m or 21.3% of
total revenues (2003: $434.9m or 21.5% of total revenues). In the fourth
quarter, operating income was $84.8m or 12.5% of total revenues (2003:
$132.4m or 23.4% of total revenues).
    Net financial income was $63.3m in 2004 (2003: $44.0m) and $20.7m in the
fourth quarter (2003: $15.2m) as a result of higher returns on our financial
assets and foreign exchange gains.
    Total taxes in 2004 were $90.9m, representing an overall tax rate of
15.5% of profit before tax (2003: $68.9m, or 15.0% of profit before tax). In
the fourth quarter, taxes were $13.9m, or 13.2% of profit before tax (2003:
$19.7m or 15.0% of profit before tax).
    Reported net income in the full year 2004 was up 26.7% to $494.2m (2003:
$390.0m), or 21.7% in local currencies. In the fourth quarter, reported net
income decreased 19.6%, or 19.8% in local currencies, to $89.7m (2003:
$111.6m) as a result of significant R&D expenses resulting from the
commencement of three external R&D collaborations and progress in several
late-stage programs.
    Basic earnings per share (EPS) were up 31.3% to $32.35 per bearer share
(2003: $24.63) and $0.81 per American Depositary Share (ADS) (2003: $0.62).
The average number of equivalent bearer shares outstanding for the year ended
December 31, 2004 was 15,276,403.
    On April 26, 2005, the Board of Directors will propose to the Annual
General Meeting a cash dividend of CHF9.0 per bearer share, CHF3.6 per
registered share, and CHF0.23 per ADS, representing an increase of 12.5% over
the 2003 dividend.
    For the full year ended 2004, net cash flow from operating activities was
$471.7m (2003: $542.9m).
    In 2004, share repurchases were CHF1,017.4m ($833.1m) representing
1,313,644 bearer shares. As of December 31, 2004, there were 14,531,957
outstanding equivalent bearer shares of Serono S.A. The company's liquid
financial assets were $1.8 billion at the end of 2004 providing significant
flexibility for non-organic growth.
    In 2005, Serono expects product sales to grow between 10% and 15% leading
to total revenues of at least $2.6 billion and net income between $520m and
$540m based on prevailing currency exchange rates. This outlook does not
include expenses related to any new business development transactions or
other extraordinary items in 2005.
    Neurology
    Neurology sales were up 32.1% to $1,123.0m for the full year 2004, and
fourth quarter sales were $319.1m. Rebif(R) reached blockbuster status in
2004 with full year sales up 33.1% (25.4% in local currencies) to $1,090.6m
(2003: $819.4m). In the fourth quarter, worldwide sales of Rebif(R) increased
by 32.9% (26.6% in local currencies) to $310.0m (2003: $233.2m). Given the
strong performance of Rebif(R) in 2004, the company is on track to achieve
its goal of worldwide market leadership in 2006.
    In 2004, Rebif(R) was the fastest growing multiple sclerosis (MS) therapy
in the US with $295.6m sales for the full year, representing an increase of
56.8% (2003: $188.5m). In the fourth quarter, sales of Rebif(R) in the US
were up 54.5% to $86.0m (2003: $55.7m).
    Rebif(R) continues its market leadership outside the US with 2004 sales
increasing by 26.0% to $795.0m (2003: $630.8m). Sales ex-US were up by 26.2%
to $224.0m in the fourth quarter (2003: $177.5m).
    On January 5th 2005, Serono announced that patient enrolment for a
head-to-head study comparing Rebif(R) with Copaxone(R) in relapsing remitting
MS had been completed. This trial will provide comparative data that will
support an evidence-based approach for rational treatment decisions in
multiple sclerosis, and Serono expects the data to support Rebif(R) as a
foundation therapy for treatment of multiple sclerosis.
    On January 11th 2005, Serono announced that it will initiate a large
Phase III study with Mylinax(R) (oral formulation of cladribine) in Q1 2005.
Mylinax(R) could be the first oral disease modifying treatment for MS to
reach the market. This multi-center, multi-national study is designed to
assess the effectiveness of Mylinax(R) in patients with relapsing forms of
multiple sclerosis. It will be a two-year, double-blind, placebo-controlled
study involving over 1,200 patients.
    In 2004, Serono introduced Rebiject II, a new auto-injection device, and
an ultra-thin needle for the Rebif(R) pre-filled syringe. A titration pack
has also recently been approved by the FDA simplifying initiation of therapy
for new patients.
    Reproductive Health
    In 2004, sales of Gonal-f(R) increased by 8.7% (3.6% in local currencies)
to $572.7m (2003: $526.9m) and by 2.2% (-1.7% in local currencies) to $151.1m
(2003: $147.9m) in the fourth quarter. Excluding Germany which was impacted
by government and reimbursement issues, Gonal-f(R) worldwide sales grew by
17.5% (12.3% in local currencies) in 2004 reflecting the availability of the
newly launched Gonal-f(R) pre-filled pen.
    Serono's core reproductive health portfolio consisting of three
recombinant hormones (Gonal-f(R), Ovidrel(R)/Ovitrelle(R), Luveris(R)) and
two complementary products (Cetrotide(R), Crinone(R)) grew by 8.5% (3.4% in
local currencies) to $645.6m representing 93.3% of total reproductive health
sales in 2004. With the approval of Luveris(R) in the US, the complete
portfolio of infertility products is now globally available with the
exception of Japan.
    New initiatives have been undertaken to raise disease and treatment
awareness, such as http://www.fertility.com and Fertility Lifelines (
http://www.fertilitylifelines.com), educational services that offer customized
information and support to people with fertility concerns.
    Growth and Metabolism
    Total growth hormone sales increased by 12.3% (8.2% in local currencies)
to $269.8m (2003: $240.2m) in 2004 and by 17.3% (13.8% in local currencies)
to $76.4m (2003: $65.1m) in the fourth quarter driven by a strong performance
of Saizen(R).
    Saizen(R) sales increased by 20.2% (13.6% in local currencies) to $182.1m
(2003: $151.5m) in 2004, and were up 25.8% (20.4% in local currencies) to
$53.2m (2003: $42.3m) during the fourth quarter. Our investment in innovative
devices and support tools to improve the management of growth disorders
contributed to making Saizen(R) a popular choice with patients. Saizen(R) was
recently approved by the FDA in Adult Growth Hormone Deficiency (AGHD).
    Serostim(R) sales were $86.8m for the full year (2003: $88.8m), and
$22.6m (2003: $22.8m) in the fourth quarter. A Phase III trial of Serostim in
HIV-associated adipose redistribution syndrome (HARS) completed recruitment
at the end of 2004.
    Dermatology
    In late September 2004, Raptiva(R) was approved by the European
Commission for the treatment of patients with moderate-to-severe chronic
plaque psoriasis for whom other systemic treatments or phototherapy have been
inadequate or are inappropriate. Raptiva(R) was the first biological
treatment for psoriasis to be authorized for marketing in the 25 countries of
the European Union.
    Raptiva(R) is also approved in Switzerland and Australia, as well as
Argentina, Mexico and Brazil and is now available in 15 countries. Sales of
Raptiva(R) were $4.9m for the full year, and $3.7m in the fourth quarter. The
roll-out of Raptiva(R) will continue throughout 2005.
    Regional Sales
    North American sales grew by 20.7% to $837.9m in 2004 (2003: $694.3m).
European sales increased by 12.3% to $895.2m (2003: $796.8m). In the rest of
the world, sales grew by 21.2% to $444.9m (2003: $367.0m).
    In the fourth quarter, North American sales were up 20.8% to $232.7m (Q4
2003: $192.7m) while European sales grew by 8.2% to $247.8m (Q4 2003:
$229.0m) and sales in the rest of the world increased by 27.1% to $124.0m (Q4
2003: $97.5m).
    R&D News
    Significant steps forward in R&D were made in the last twelve months.
Serono now has six late-stage clinical development programs on-going,
consisting of five Phase III programs (onercept in psoriasis; interferon-beta
in chronic hepatitis C in Asian patients; Serostim(R) in HIV-associated
adipose redistribution syndrome; Canvaxin(TM) in stage III and IV melanoma
and Mylinax(R) in relapsing forms of MS) and one post-registration
head-to-head study comparing Rebif(R) with Copaxone(R) in relapsing remitting
MS.
    In December 2004, Serono announced two significant agreements
strengthening its R&D presence in oncology. One collaboration is with
CancerVax for the global development and commercialization of Canvaxin(TM),
currently in two Phase III trials for respectively stage III and IV melanoma
involving over 1,800 patients. The second collaboration is a partnership with
Micromet for the global development and commercialization of adecatumumab
(MT201). This monoclonal antibody is currently in Phase II trials for the
treatment of metastatic breast cancer and prostate cancer.
    Conference Call and Webcast
    Serono will hold a conference call on February 2nd, 2005, starting at
11:00 am Eastern Time (5:00 pm Central European Time) during which Serono
Management will present the Company's Fourth Quarter and Full Year 2004
Results.
    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 February
20th, 2005.
    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 US Securities and Exchange Commission on March 25, 2004. 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,
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, 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. Currently, there are approximately 30 ongoing development projects.
    In 2004, Serono achieved worldwide revenues of US$2,458.1 million, and a
net income of US$494.2 million, making it the third largest biotech company
in the world. Its products are sold in over 90 countries. 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,
2004 and 2003.
    - Consolidated income statements for the 3 and 12 months ended December
31, 2004 and 2003, the consolidated balance sheets as of December 31, 2004
and 2003, the consolidated statement of changes in equity as of December 31,
2004 and 2003, as well as the consolidated cash flow statements for the 12
months ended December 31, 2004 and 2003. These consolidated financial
statements have been prepared on the basis of International Financial
Reporting Standards. The accompanying notes to these 2004 full-year
consolidated financial statements will be available upon the release of
Serono's 2004 Annual Report.
    A full version of this release, including tables, is available at
http://www.serono.com

    Reuters: SEO.VX
    SRA.N
    Bloomberg: SEO VX
    SRA US


    http://www.seronousa.com

Link to this page: