Recordati S.p.A. - Recordati: positive first nine months 2007 results, sales and margin grow

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Recordati: positive first nine months 2007 results, sales and margin grow

Milan, 25 October 2007

Consolidated revenue € 466.4 million, + 6.1%.
Pharmaceutical revenue € 440.4 million, + 7.4%.
International sales € 313.3 million, + 11.9%.
Operating income € 100.9 million, + 9.7%.
Net income € 64.0 million, + 14.5%.
Net financial position* cash positive by € 22.3 million.
Agreement signed for the acquisition of Orphan Europe.

Milan, 25 October 2007 – The Board of Directors of Recordati S.p.A. approved the Group’s consolidated results for the first nine months 2007 prepared in accordance with the IAS/IFRS requirements for interim reporting (IAS 34).

First nine months financial highlights

In the first nine months consolidated revenue is € 466.4 million, an increase of 6.1% over the same period of the preceding year. Pharmaceutical sales are € 440.4 million, an increase of 7.4% and include the Portuguese business acquired at the end of 2006. Pharmaceutical chemicals sales are € 26.0 million, down by 12.0%. International sales are € 313.3 million, an increase of 11.9%, and now represent 67.2% of total revenue. Sales in Italy are down by 4.0% mainly due to the price cuts imposed in the second half 2006.
Operating income, at 21.6% of sales, is € 100.9 million, an increase of 9.7% over the first nine months of the preceding year. The operating margin improvement is mainly due to a higher gross margin and to the reduction in selling expenses, while R&D expenditure increased by 8.0%.
Net income is € 64.0 million, an increase of 14.5% more than the increase in operating income due to an improved tax rate.
The net financial position* at 30 September 2007 is cash positive by € 22.3 million, substantially unchanged from that at 31 December 2006. During the period dividends for an amount of € 37.0 million were paid out and own shares repurchased for a total cash outlay of € 29.9 million. Shareholders’ equity increased and is € 367.8 million.

* Cash and short-term financial investments net of bank overdrafts and medium/long-term loans which include the measurement at fair value of hedging derivatives (fair value hedge).

Business development news

At the end of September an agreement was signed for the acquisition of Orphan Europe, a European pharmaceutical group with headquarters in Paris dedicated to the development, registration, marketing and distribution of unique drugs for the treatment of rare and orphan diseases. Orphan Europe employs about 120 personnel, and has subsidiaries in nine European countries and in the United Arab Emirates as well as representative offices in seven countries. Sales for the full year 2006 were € 40 million with EBIT of € 7.6 million. The company’s net financial position is positive. The price to be paid at the closing, which is expected to take place before the end of 2007, is € 135 million. Orphan Europe currently markets ten products which target mostly chronic and life-threatening diseases and has other high potential drugs in development. The orphan drug market is a niche market with significant growth potential. Only a few of the total estimated 6,000 to 8,000 rare diseases are currently treated pharmacologically. The identification and awareness of rare diseases is constantly increasing and the continuous scientific advances are enabling earlier diagnosis of these diseases and the development of adequate therapies.
Zanipress^®, our new antihypertensive product which associates lercanidipine and enalapril in a fixed combination, was launched in Germany in April by our subsidiary Merckle Recordati. This product was also launched by Meda, an international pharmaceutical company with which a non-exclusive co-marketing agreement was signed in February, as Zaneril^®. In July the agreement with Meda was extended to the Spanish market as well. Furthermore, at the end of September the license agreement with Berlin Chemie (Menarini group) for the marketing of Carmen^® (lercanidipine) in Germany was extended to the new combination product which will be launched in October as Carment ACE^®.
In January Recordati Ireland Ltd. initiated commercial operations in the Irish pharmaceutical market where Zanidip^® (lercanidipine) is now promoted directly by this subsidiary following the termination of the agreement with the previous licensee. Furthermore, in April our subsidiary Recordati Hellas initiated sales of Lercadip^® (lercanidipine) in Greece in both its 10 and 20mg dosage forms.
In September the double-blind portion of the phase III study of silodosin, licensed from Kissei, was successfully completed. Silodosin is a new selective alpha blocker for the treatment of symptoms associated with benign hypertrophy of the prostate, a condition affecting millions of male patients across the world. The trial was conducted in 11 European countries with 1128 patients (977 randomized) enrolled in 70 clinical centres. The study was designed to show superiority of silodosin over placebo and non-inferiority to tamsulosin. Silodosin 8mg dosed once daily was found to be significantly superior to placebo in all parameters, with scores that were always equal to or better than those of tamsulosin. There were no safety issues. The drug is already on the market in Japan and has completed phase III studies in the US. Recordati is completing the long-term portion of the phase III study and plans to file for approval in Europe, and in other countries of the licensed territory, during the last quarter of 2008.
At the end of May Jaba Recordati transferred its industrial lease agreement for the production site in Loures, Portugal, and the associated pharmaceutical manufacturing business to Clintex Produtos Farmacêuticos for an amount of € 1.8 million which includes the value of existing inventories.

Management comments

“During the third quarter we announced positive outcomes from the phase III study of silodosin and signed an agreement for the acquisition of Orphan Europe, two important steps for the future development of our group” declared Giovanni Recordati, Chairman and CEO. “Our international business continues to drive growth which supports our expansion strategy. During the first nine months of the year profitability has improved both on an operating as well as net income level, and this allows us to confirm our full year operating income and net income targets of € 132 million and € 83 million respectively, with net sales of around € 630 million.”

Conference call

Recordati will be hosting a conference call tomorrow 26 October 2007 at 4.00 pm Italian time (3.00 pm London time, 10.00 am New York time). Dial-in numbers are:

Italy +39 02 802 09 11
UK +44 208 7929 750
USA +1 866 2396 425
France +33 170 700 532
Germany +49 69 2222 2225

A set of slides which will be referred to during the call will be available on our website www.recordati.com under Investors/Company Presentations.

Callers are invited to dial-in 10 minutes before conference time and ask for the Recordati conference call. If conference operator assistance is required during the connection please digit * followed by 0. A recording (Real Audio file) of the conference call will be placed on the website www.recordati.com.

Recordati, established in 1926, is a European pharmaceutical group, listed on the Italian Stock Exchange (Reuters RECI.MI, Bloomberg REC IM, ISIN IT 0003828271), dedicated to the research, development, manufacturing and marketing of pharmaceuticals, with headquarters in Milan, Italy, operations in the main European countries, and a total staff of over 2,200. A European field force of over 1,100 medical representatives promotes a wide range of innovative pharmaceuticals, both proprietary and under license, in a number of therapeutic areas. Recordati’s current and growing coverage of the European pharmaceutical market makes it a partner of choice for new product licenses from companies which do not have European marketing organizations. Recordati is committed to the research of new drug entities within the cardiovascular and urogenital therapeutic areas in which its research team has proven scientific competence and a track record of discovery and development of original drugs, the most recent of which, lercanidipine, a latest generation calcium channel blocker for the treatment of hypertension, is the company’s leading product. Consolidated revenue for 2006 was € 576.2 million, operating income was € 120.3 million and net income was € 74.0 million.

For further information:

Recordati website: www.recordati.com

Investor Relations
Marianne Tatschke
(39)0248787393
e-mail: inver@recordati.it

Media Relations
Claudio Rossetti (Echo Comunicazione d’Impresa)
(39)02 62694736
e-mail: crossetti@echocom.it

Statements contained in this release, other than historical facts, are "forward-looking statements" (as such term is defined in the Private Securities Litigation Reform Act of 1995). These statements are based on currently available information, on current best estimates, and on assumptions believed to be reasonable. This information, these estimates and assumptions may prove to be incomplete or erroneous, and involve numerous risks and uncertainties, beyond the Company’s control. Hence, actual results may differ materially from those expressed or implied by such forwardlooking statements. All mentions and descriptions of Recordati products are intended solely as information on the general nature of the company’s activities and are not intended to indicate the advisability of administering any product in any particular instance.

View the full press release in PDF format (214KB, opens in a new window).

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Recordati at a glance Key Financial Data Recordati Share Press Releases 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 Company Presentations Annual and Interim Reports Regulated information Shareholders’ Meetings Calendar Analyst Coverage Contacts	Press Releases Recordati: positive first nine months 2007 results, sales and margin grow Milan, 25 October 2007 Consolidated revenue € 466.4 million, + 6.1%. Pharmaceutical revenue € 440.4 million, + 7.4%. International sales € 313.3 million, + 11.9%. Operating income € 100.9 million, + 9.7%. Net income € 64.0 million, + 14.5%. Net financial position cash positive by € 22.3 million.* Agreement signed for the acquisition of Orphan Europe. Milan, 25 October 2007 – The Board of Directors of Recordati S.p.A. approved the Group’s consolidated results for the first nine months 2007 prepared in accordance with the IAS/IFRS requirements for interim reporting (IAS 34). *First nine months financial highlights* In the first nine months consolidated revenue is € 466.4 million, an increase of 6.1% over the same period of the preceding year. Pharmaceutical sales are € 440.4 million, an increase of 7.4% and include the Portuguese business acquired at the end of 2006. Pharmaceutical chemicals sales are € 26.0 million, down by 12.0%. International sales are € 313.3 million, an increase of 11.9%, and now represent 67.2% of total revenue. Sales in Italy are down by 4.0% mainly due to the price cuts imposed in the second half 2006. Operating income, at 21.6% of sales, is € 100.9 million, an increase of 9.7% over the first nine months of the preceding year. The operating margin improvement is mainly due to a higher gross margin and to the reduction in selling expenses, while R&D expenditure increased by 8.0%. Net income is € 64.0 million, an increase of 14.5% more than the increase in operating income due to an improved tax rate. The net financial position* at 30 September 2007 is cash positive by € 22.3 million, substantially unchanged from that at 31 December 2006. During the period dividends for an amount of € 37.0 million were paid out and own shares repurchased for a total cash outlay of € 29.9 million. Shareholders’ equity increased and is € 367.8 million. * Cash and short-term financial investments net of bank overdrafts and medium/long-term loans which include the measurement at fair value of hedging derivatives (fair value hedge). Business development news At the end of September an agreement was signed for the acquisition of Orphan Europe, a European pharmaceutical group with headquarters in Paris dedicated to the development, registration, marketing and distribution of unique drugs for the treatment of rare and orphan diseases. Orphan Europe employs about 120 personnel, and has subsidiaries in nine European countries and in the United Arab Emirates as well as representative offices in seven countries. Sales for the full year 2006 were € 40 million with EBIT of € 7.6 million. The company’s net financial position is positive. The price to be paid at the closing, which is expected to take place before the end of 2007, is € 135 million. Orphan Europe currently markets ten products which target mostly chronic and life-threatening diseases and has other high potential drugs in development. The orphan drug market is a niche market with significant growth potential. Only a few of the total estimated 6,000 to 8,000 rare diseases are currently treated pharmacologically. The identification and awareness of rare diseases is constantly increasing and the continuous scientific advances are enabling earlier diagnosis of these diseases and the development of adequate therapies. Zanipress^®, our new antihypertensive product which associates lercanidipine and enalapril in a fixed combination, was launched in Germany in April by our subsidiary Merckle Recordati. This product was also launched by Meda, an international pharmaceutical company with which a non-exclusive co-marketing agreement was signed in February, as Zaneril^®. In July the agreement with Meda was extended to the Spanish market as well. Furthermore, at the end of September the license agreement with Berlin Chemie (Menarini group) for the marketing of Carmen^® (lercanidipine) in Germany was extended to the new combination product which will be launched in October as Carment ACE^®. In January Recordati Ireland Ltd. initiated commercial operations in the Irish pharmaceutical market where Zanidip^® (lercanidipine) is now promoted directly by this subsidiary following the termination of the agreement with the previous licensee. Furthermore, in April our subsidiary Recordati Hellas initiated sales of Lercadip^® (lercanidipine) in Greece in both its 10 and 20mg dosage forms. In September the double-blind portion of the phase III study of silodosin, licensed from Kissei, was successfully completed. Silodosin is a new selective alpha blocker for the treatment of symptoms associated with benign hypertrophy of the prostate, a condition affecting millions of male patients across the world. The trial was conducted in 11 European countries with 1128 patients (977 randomized) enrolled in 70 clinical centres. The study was designed to show superiority of silodosin over placebo and non-inferiority to tamsulosin. Silodosin 8mg dosed once daily was found to be significantly superior to placebo in all parameters, with scores that were always equal to or better than those of tamsulosin. There were no safety issues. The drug is already on the market in Japan and has completed phase III studies in the US. Recordati is completing the long-term portion of the phase III study and plans to file for approval in Europe, and in other countries of the licensed territory, during the last quarter of 2008. At the end of May Jaba Recordati transferred its industrial lease agreement for the production site in Loures, Portugal, and the associated pharmaceutical manufacturing business to Clintex Produtos Farmacêuticos for an amount of € 1.8 million which includes the value of existing inventories. *Management comments* “During the third quarter we announced positive outcomes from the phase III study of silodosin and signed an agreement for the acquisition of Orphan Europe, two important steps for the future development of our group” declared Giovanni Recordati, Chairman and CEO. “Our international business continues to drive growth which supports our expansion strategy. During the first nine months of the year profitability has improved both on an operating as well as net income level, and this allows us to confirm our full year operating income and net income targets of € 132 million and € 83 million respectively, with net sales of around € 630 million.” Conference call Recordati will be hosting a conference call tomorrow 26 October 2007 at 4.00 pm Italian time (3.00 pm London time, 10.00 am New York time). Dial-in numbers are: Italy +39 02 802 09 11 UK +44 208 7929 750 USA +1 866 2396 425 France +33 170 700 532 Germany +49 69 2222 2225 A set of slides which will be referred to during the call will be available on our website www.recordati.com under Investors/Company Presentations. Callers are invited to dial-in 10 minutes before conference time and ask for the Recordati conference call. If conference operator assistance is required during the connection please digit * followed by 0. A recording (Real Audio file) of the conference call will be placed on the website www.recordati.com. Recordati, established in 1926, is a European pharmaceutical group, listed on the Italian Stock Exchange (Reuters RECI.MI, Bloomberg REC IM, ISIN IT 0003828271), dedicated to the research, development, manufacturing and marketing of pharmaceuticals, with headquarters in Milan, Italy, operations in the main European countries, and a total staff of over 2,200. A European field force of over 1,100 medical representatives promotes a wide range of innovative pharmaceuticals, both proprietary and under license, in a number of therapeutic areas. Recordati’s current and growing coverage of the European pharmaceutical market makes it a partner of choice for new product licenses from companies which do not have European marketing organizations. Recordati is committed to the research of new drug entities within the cardiovascular and urogenital therapeutic areas in which its research team has proven scientific competence and a track record of discovery and development of original drugs, the most recent of which, lercanidipine, a latest generation calcium channel blocker for the treatment of hypertension, is the company’s leading product. Consolidated revenue for 2006 was € 576.2 million, operating income was € 120.3 million and net income was € 74.0 million. For further information: Recordati website: www.recordati.com Investor Relations Marianne Tatschke (39)0248787393 e-mail: inver@recordati.it Media Relations Claudio Rossetti (Echo Comunicazione d’Impresa) (39)02 62694736 e-mail: crossetti@echocom.it Statements contained in this release, other than historical facts, are "forward-looking statements" (as such term is defined in the Private Securities Litigation Reform Act of 1995). These statements are based on currently available information, on current best estimates, and on assumptions believed to be reasonable. This information, these estimates and assumptions may prove to be incomplete or erroneous, and involve numerous risks and uncertainties, beyond the Company’s control. Hence, actual results may differ materially from those expressed or implied by such forwardlooking statements. All mentions and descriptions of Recordati products are intended solely as information on the general nature of the company’s activities and are not intended to indicate the advisability of administering any product in any particular instance. View the full press release in PDF format (214KB, opens in a new window).