Recordati: strong growth of sales and margins in the first nine months 2002

Milan, 30 October 2002

The Board of Directors of Recordati S.p.A. examined the Group's consolidated results for the first nine months of 2002.

First nine months financial highlights

• Consolidated net sales were € 364.8 million (€ 308.9 million during the first half 2001) increasing by 18.1%, 13.8% of which due to the development of the Group's product portfolio and 4.3% due to a consolidation effect. Sales growth was due entirely to the 24.1% increase in pharmaceutical sales which was achieved through the overall good performance of the product portfolio in addition to new product launches and, above all, to the continuing success of ZanidipÒ (lercanidipine) on international markets. Pharmaceutical chemicals sales, on the other hand, were down by 5.9% due to the continuing pressure on prices. International sales still account for 60% of the total.
• EBITDA, at 24.1% of sales, increased from € 70.0 million to € 87.9 million, up 25.6%. The pharmaceutical segment's EBITDA improved further reaching a margin on sales of 25.1% due to the strong growth of the international pharmaceutical business. EBITDA generated by pharmaceutical chemicals, at 16.4% of sales, was below that of the same period of last year.
• Operating income (EBIT), at 17.3% of sales, increased by 40.4% over the preceding year to € 63.2 million due to improved margins from operations. Also, a re-estimate of the residual useful life of the goodwill associated with the Doms-Adrian and Bouchara acquisitions reduced amortization charges by € 2.5 million.
• Net income, at 9.8% of sales, increased from € 23.6 million to € 35.8 million, up 51.9%.
• The group's financial structure improved thanks to cash flow from operations generated during the period. Net indebtedness at 30 September 2002 was reduced to € 18.9 million, while net equity reached € 228.7 million.
• During the period 279,867 own shares were repurchased, as per the authorization obtained from the Shareholders' Assembly on 16 September 2002, for a total cash outlay of € 6.0 million.

In the third quarter

• Net sales increased by 16.4% entirely due to organic growth. Pharmaceutical sales grew by 21.5%, an improvement over the preceding quarters on a like for like basis. EBITDA was up by 39.1% over the third quarter 2001. In the pharmaceutical business, EBITDA increased even more significantly (+42.9%) reaching a margin of 30.5% on sales. Operating income (EBIT) grew by 83.9% and benefits from the reduction of goodwill amortization charges.
• Forest Laboratories, our licensee for lercanidipine in the U.S.A., received a communication from the Food and Drug Administration that the New Drug Application for lercanidipine for the U.S. market is approvable ("approvable letter"). A $ 3 million payment was received in connection with this milestone. The next step involves the submission of further documentation to address the issues raised by the FDA which is planned to take place within the next few months.
• The U.K. Medicines Control Agency granted a Product License (marketing approval) for Zanidip® (lercanidipine) 20mg tablets which shall be followed by a Mutual Recognition Procedure (MRP) in the European Union which is expected to lead to further marketing approvals over the next few months. The new dosage form provides therapeutic convenience in a single once daily administration to those patients who, on account of the severity of their hypertensive condition, require a higher daily dose.

Comment on operations

"During the first nine months of 2002 the Group again recorded growth, both of sales and profits, and pursued its R&D and product portfolio development strategy. During the second and third quarters the first sales of lercanidipine to Forest took place with a view to the product's launch in the U.S." declared Giovanni Recordati, Chairman and CEO. "Recordati's fundamentals are strong thanks to the international development of the pharmaceutical business, the Group's main growth driver. The increase of international sales will help to compensate for the impact of the Italian government's healthcare cost containment measures. We confirm the profit targets previously announced for 2002 (EBIT € 84 million), to which the savings in goodwill amortization charges must be added."

Stock Option awards and relative capital increase

The Board of Directors resolved to award options for the subscription of a total of 472,000 new ordinary shares as per existing stock option plans in favour of management. In order to service these options the Board approved a capital increase for a maximum value of € 236,000 through the issue of a maximum of 472,000 new ordinary shares with a nominal value of € 0.50 each.

Conference Call

Today 30 October, at 5:30 pm Italian time (4:30 pm London time and 11:30 am New York time), Recordati will be hosting a conference call to discuss the first nine months 2002 results included herewith. Dial-in numbers are:
+39 02 802 09 11
+44 (0)207 866 41 11
+1 412 858 4600

Recordati, established in 1926, is a European pharmaceutical group, listed on the Italian Stock Exchange (Reuters RECI.MI, Bloomberg REC IM, ISIN IT 0003074447), dedicated to the research, development, manufacturing and marketing of pharmaceuticals and pharmaceutical chemicals, with headquarters in Milan, Italy and operating subsidiaries in France, Ireland, Portugal, Spain, Switzerland and the United States.