- Net income up 21.6% to $390.0 million in 2003 -
ROCKLAND, Mass., Feb. 2 /PRNewswire-FirstCall/ -- Serono (virt-x: SEO and
NYSE: SRA; Reuters: SEO.VX / SRA; Bloomberg: SEO VX / SRA US), the third
largest biotechnology company in the world, today reported its fourth quarter
and full year results for the period ended December 31, 2003.
Key Points for Full Year 2003
* Total revenues up 31.3% to $2,018.6m (up 20.9% in local currencies)
* Neurology now Serono's largest therapeutic area with sales up 54.9% to
$850.2m
* Reproductive Health core portfolio growing at 20.7% to $593.7m
* Reported net income up 21.6% to $390.0m (up 14.2% in local currencies)
and up 26.9% (or 18.9% in local currencies) excluding non-recurring
non-operational charges
* Reported EPS up 22.7% to $24.63 per bearer share and $0.62 per ADS
* Proposed dividend of CHF8.0 per bearer share and of CHF0.2 per ADS*
* 2004 growth outlook in local currencies of 12% or more for total
revenues and 15% to 20% for net income
"2003 was a record year for Serono with total revenues breaking through
the $2 billion mark," said Ernesto Bertarelli, Chief Executive Officer of
Serono. "Going forward we are very well positioned to take advantage of the
many opportunities which exist in the biotech sector."
"We forecast another strong financial performance in 2004," said Allan
Shaw, Chief Financial Officer. "This year, we expect our net income growth to
be between 15% and 20%, inclusive of launch costs for Raptiva(TM)."
Fourth Quarter And Full Year Financial Performance
Total revenues increased by 31.3% to $2,018.6m in the full year 2003
(2002: $1,537.8m), and by 29.1% to $565.1m in the fourth quarter (2002:
$437.7m).
Worldwide product sales were $1,858.0m in 2003, up 30.6% (2002:
$1,423.1m), and up 26.8% to $519.3m in the fourth quarter (2002: $409.4m).
Notwithstanding weakness in the US dollar, product sales in local currencies
grew by 19.9% in 2003 and 16.5% in the fourth quarter.
Royalty and licensing income increased by 40.0% to $160.6m in 2003 (2002:
$114.7m), and was up 61.8% to $45.8m (2002: $28.3m) in the fourth quarter,
reflecting the company's strong intellectual property rights.
Gross margin increased to 85.0% of product sales in 2003 (2002: 84.3%), as
a result of continuing manufacturing improvements leading to higher production
yields. In the fourth quarter of 2003 gross margin was 84.5% (2002: 84.1%).
Selling, General and Administrative expenses were $636.8m or 31.5% of
total revenues in 2003 (2002: $504.2m or 32.8% of total revenues), and 31.7%
of revenues at $178.9m in the fourth quarter (2002: $144.5m or 33.0% of
revenues). The decrease in SG&A as a percentage of revenues reflects an
improvement in the company's operating leverage in 2003.
Research and Development expenses were $467.8m or 23.2% of total revenues
(2002: $358.1m or 23.3% of total revenues) for the full year, and $124.2m or
22.0% of total revenues in the fourth quarter (2002: $95.4m or 21.8% of total
revenues).
Other operating expenses in 2003 were $199.5m (2002: $85.8m), and $49.2m
(2002: $27.7m) in the fourth quarter. The increase in other operating
expenses reflects payments related to licensing agreements for new products
and higher royalties paid to third parties.
Full year 2003 operating income increased by 24.4% to $434.9m or 21.5% of
total revenues (2002: $349.6m or 22.7% of total revenues), and was up 49.5% to
$132.4m in the fourth quarter or 23.4% of total revenues (2002: $88.6m or
20.2% of total revenues).
Net financial income was $44.0m in 2003 (2002: $36.5m) and $15.2m in the
fourth quarter (2002: $9.2m).
Other expense was $19.7m in 2003 (2002: $1.7m) and $16.1m in the fourth
quarter (2002: income of $0.2m), reflecting non-recurring non-operational
charges. In the fourth quarter, the company took a non-cash charge of $16.1m
related to the write-down of an equity investment made in Swiss International
Air Lines.
Total taxes in 2003 were $68.9m, representing an overall tax rate of 15.0%
of profit before tax (2002: $63.1m, or 16.4% of profit before tax). In the
fourth quarter, taxes were $19.7m, or 15.0% of profit before tax (2002: $15.8m
or 16.2% of profit before tax).
Reported net income in the full year 2003 was up 21.6% to $390.0m (2002:
$320.8m), or 14.2% in local currencies. Excluding non-recurring non-
operational charges, net income growth was 26.9%, or 18.9% in local currencies
in 2003. In the fourth quarter, reported net income grew 36.8%, or 25.8% in
local currencies, to $111.6m (2002: $81.6m).
Basic earnings per share (EPS) were up 22.7% to $24.63 per bearer share
(2002: $20.07) and $0.62 per American Depositary Share (ADS) (2002: $0.50).
On May 25, 2004, the Board of Directors will propose to the Annual General
Meeting a cash dividend of CHF8.0 per bearer share, CHF3.2 per registered
share or CHF0.2 per ADS*, representing an increase of 14.3% over the 2002
dividend.
For the full year ended 2003, net cash flow from operating activities was
$542.9m (2002: $532.0). When excluding one-time payments received from third
parties in connection with the signing of collaborative agreements (Pfizer in
2002 and OSI Pharmaceuticals in 2003), operating cash flows increased 47.0%
compared to 2002.
As of December 31, 2003, there were 15.812 million outstanding equivalent
bearer shares of Serono S.A.
Neurology
Neurology sales were up 54.9% to $850.2m for the full year 2003, and
fourth quarter sales were $242.2m. Full year sales of Rebif(R) were up 49.3%
(34.1% in local currencies) to $819.4m (2002: $548.8m). In the fourth
quarter, worldwide sales of Rebif(R) increased by 35.9% (22.7% in local
currencies) to $233.2m (2002: $171.5m).
Sales of Rebif(R) in the US were up 60.0% to $55.7m in the fourth quarter
(2002: $34.8m). In 2003, with $188.5m sales for the full year, representing
an increase of 164.8% (2002: $71.2m), Rebif(R) was clearly the fastest growing
multiple sclerosis (MS) therapy in the US, more than doubling its market share
during the year.
Rebif(R) continues its market leadership outside the US with 2003 sales
increasing by 32.1% to $630.8m (2002: $477.6m). European sales increased by
39.0% (16.9% in local currencies) to $436.8m (2002: $314.1m). Sales outside
the US were $177.5m in the fourth quarter (2002: $136.7m).
In 2003, the performance of Rebif(R) was supported by the release of a
series of positive study results. These included the final 63-week EVIDENCE
study results, data showing greater efficacy with Rebif(R) in patients who
converted from Avonex(R) to Rebif(R) at the end of the comparative phase of
the study, as well as the safety and efficacy results from the eight-year
long-term follow-up of the PRISMS study.
Given the strong performance of Rebif(R) in 2003, the company is on track
to achieving its goal of worldwide market leadership by the end of 2006.
Novantrone(R) sales in MS were $30.9m in 2003 and $9.0m the fourth quarter
(total Novantrone(R) sales were $77.1m in 2003 and $22.4m the fourth quarter).
Reproductive Health
In 2003, worldwide reproductive health sales grew 11.4% to $692.9m (2002:
$621.9m), and by 15.2% to $191.0m in the fourth quarter (2002: $165.8m).
Sales of Gonal-f(R) increased by 16.8% (7.3% in local currencies) to $526.1m
(2002: $450.4m) in the full year, and by 21.6% (11.2% in local currencies) to
$147.5m (2002: $121.3m) in the fourth quarter.
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 20.7% (10.7% in
local currencies) to $593.7m representing 85.7% of total reproductive health
sales in 2003. In the fourth quarter this core portfolio grew by 25.6% (14.7%
in local currencies) to $168.1m (2002: $133.8m).
In October, the Ovidrel(R)/Ovitrelle(R) pre-filled syringe was approved by
both the FDA and the European Commission making it the first liquid, ready-to-
use recombinant hCG.
Metabolic Endocrinology
Saizen(R) sales increased by 22.1% (11.0% in local currencies) to $151.5m
(2002: $124.0m) in 2003, and were up 17.4% (7.1% in local currencies) to
$42.3m (2002: $36.0m) during the fourth quarter.
Serostim(R) sales were $88.8m for the full year (2002: $95.1m), and $22.8m
(2002: $26.5m) in the fourth quarter.
In December 2003, the FDA approved Zorbtive(TM) [somatropin (rDNA origin)
for injection], Serono's recombinant human growth hormone, for use in the
treatment of short bowel syndrome, a serious and potentially life-threatening
condition. Zorbtive(TM) was granted orphan drug status for use in the
treatment of patients with short bowel syndrome by the FDA Office of Orphan
Products Development.
Psoriasis
Serono is committed to developing and commercializing new biotherapeutics
for psoriasis, a chronic skin disease.
On October 27, 2003, our partners Genentech and XOMA announced that
Raptiva(TM) (efalizumab) was approved by the FDA for the treatment of chronic
moderate-to-severe plaque psoriasis. Raptiva(TM) is the first biologic
therapy designed to provide continuous control of chronic moderate-to-severe
plaque psoriasis and can be self-administered by patients as a single, once-
weekly, subcutaneous injection. Long-term data on Raptiva(TM) was presented
at the American Academy of Dermatology in July 2003.
Serono is responsible for developing and commercializing Raptiva(TM)
worldwide outside of the United States and Japan. During 2003, Serono
submitted regulatory applications in key markets for the use of Raptiva(TM) in
moderate-to-severe plaque psoriasis and currently expects to commence its
launch program for this innovative therapy in the second half of 2004. Costs
associated with the launch of Raptiva(TM) are projected to be between $30m and
$50m in 2004.
Regional Sales
North American sales grew by 44.8% to $694.3m in 2003 (2002: $479.6m).
European sales increased by 31.2% to $813.8m (2002: $620.4m). In the rest of
the world, sales grew by 8.3% to $349.9m (2002: $323.2m). In the fourth
quarter, North American sales were up 32.2% to $192.7m (Q4 2002: $145.8m)
while European sales grew by 31.0% to $233.0m (Q4 2002: $177.8m) and sales in
the rest of the world increased by 9.1% to $93.6m (Q4 2002: $85.8m).
R&D News
A multicentre multinational head-to-head trial comparing Rebif(R) vs.
Copaxone(R) was recently initiated. This is a 2-year study with a relapse-
related primary endpoint, as well as other clinical and MRI secondary
endpoints.
During the last twelve months, key R&D highlights were:
* In June, positive Phase 2 results for onercept (r-hTBP-1) in psoriasis
were presented at the 9th International Psoriasis Symposium. A Phase
3 program is scheduled to start in due course following completion of
discussions with the FDA.
* Phase 2a studies with IL-18 binding protein were started in rheumatoid
arthritis and psoriasis.
* A Phase 2 trial with anastrozole for follicular development and
ovulation induction in infertile women with ovulatory dysfunction was
initiated in the first quarter. The study outcome is expected by mid-
2004.
* In June, positive results from a proof of concept study of emfilermin
(r-hLIF) for improving embryo implantation in women with recurrent
implantation failure were presented at ESHRE. A Phase 2 study aiming
to enhance embryo implantation in patients who have a history of
previous IVF failures was initiated during the second quarter. The
outcome of this study is anticipated in the second half of 2004.
During the last twelve months, significant regulatory milestones were
also achieved including:
* Positive European CPMP opinion for Gonal-f(R) pre-filled pen injector,
* Favorable FDA advisory committee recommendation for Luveris(R) in
treatment of profoundly LH-deficient women,
* EMEA and FDA approvals of Ovidrel(R)/Ovitrelle(R) pre-filled syringe
for infertility,
* FDA approval of Zorbtive(TM) for use in patients with short bowel
syndrome.
Conference Call and Webcast
Serono will hold a conference call on February 3rd, 2004, 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 2003
Results. To join the telephone conference please dial 412 858 4600 (from the
US), 091 610 5600 (from Switzerland), 0207 866 4111 (from the UK) and +41 91
610 5600 (from elsewhere). Telephone playback will be available one hour
after the conference call and until close of business 5.00 pm EST on February
6th, 2004. To access this playback please dial the following numbers: 412 858
1440 (from the US), 091 612 4330 (from Switzerland), 0207 866 4300 (from the
UK) and +41 91 612 4330 (from elsewhere) and enter the PIN code 247# from a
touch tone telephone.
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, 2004.
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
U.S. Securities and Exchange Commission on April 17, 2003. 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 seven recombinant
products, Rebif(R), Gonal-F(R), Luveris(R), Ovidrel(R)/Ovitrelle(R),
Serostim(R), Saizen(R) and Zorbtive(TM) (Luveris(R) is not approved in the
USA). In addition to being the world leader in reproductive health, Serono has
strong market positions in neurology, metabolism and growth. The Company's
research programs are focused on growing these businesses and on establishing
new therapeutic areas. Currently, there are approximately 30 ongoing
development projects.
In 2003, Serono achieved worldwide revenues of US$2,018.6 million, and a
net income of US$390.0 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).
* i.e. $0.16 based on an exchange rate of $1=CHF1.2562, as of January 30,
2004. The actual dividend will be based on the exchange rate in effect
on the date the dividend is converted into $ by the depositary for the
ADS.
A full version of this release, including tables, is available at
http://www.serono.com.
SOURCE Serono International S.A.
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CONTACT:
Serono in Geneva, Switzerland: Media,
+41-22-739-36-00, or Fax, +41-22-739-30-85, or Investors,
+41-22-739- 36-01, or Fax, +41-22-739-30-22, or in US, Media,
+1-781-681-2340, or Fax, +1-781-681-2935, or Investors,
+1-781-681-2552, or fax, +1-781-681-2912
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