Recordati reports revenue and earnings growth in the first half 2008

• Consolidated revenue € 348.2 million, + 8.6%.
• Pharmaceutical revenue € 331.5 million, + 10.0%.
• International sales € 241.5 million (69.4% of total sales), + 13.3%.
• Operating income € 75.8 million, + 8.9%.
• Net income € 52.4 million, + 16.7%.
• Net financial position*:  net debt of € 85.9 million.
• Sale of Jaba Recordati’s production business in Portugal
• Acquisition of FIC and FIC Médical present in Russia and other C.I.S. countries.
• MRP for approval of lercanidipine+enalapril fixed combination in Europe completed.

Milan, 30 July 2008 - The Board of Directors of Recordati S.p.A. approved the half-yearly financial report which was prepared pursuant to Article 154-ter of Legislative Decree 58/1998 and is consistent with applicable international financial accounting standards adopted by the European Union in EC Regulation 1606/2002 issued by the European Parliament and the Council of the European Union on 19 July 2002 – in particular, the requirements of IAS 34: Interim Reporting.

First half financial highlights

• In the first half 2008 consolidated revenue is € 348.2 million, an increase of 8.6% over the same period of the preceding year.  Pharmaceutical sales are € 331.5 million, an increase of 10.0% and include the Orphan Europe group of companies acquired at the end of 2007. The growth is to be attributed to the international sales which are up 16.7% while sales in Italy are down by 2.4% mainly due to a negative price effect. Pharmaceutical chemicals sales are € 16.6 million, down by 13.3%. 

• Operating income, at 21.8% of sales, is € 75.8 million, an increase of 8.9% over the first half of the preceding year.  Gross margin continues to improve and now stands at 68.1% of sales due to a favourable product mix. Other expenses net of other income include the € 8.3 million capital gain realized on the sale of Jaba Recordati’s production facility in Portugal and the write-down of the residual value of two products  following the termination of their license agreements for a total of € 6.4 million.

• Net income is € 52.4 million, an increase of 16.4% more than the increase in operating income thanks to a lower tax rate due in part to the tax exemption applied to the abovementioned capital gain.

• The net financial position* at 30 June 2008 is a net debt of € 85.9 million, a reduction of € 11.2 million as compared to the net debt position at 31 December 2007.  Shareholders’ equity further increased and is € 401.1 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

• During January an exclusive license agreement was signed with a subsidiary of Watson Pharmaceuticals, Inc. a U.S. pharmaceutical company, for the marketing and sale in 29 European countries of Kentera®, a bi-weekly oxybutynin transdermal patch indicated for the symptomatic treatment of urge incontinence and/or increased urinary frequency and urgency as may occur in patients.  Kentera® is on the market in a number of countries with current annual sales of over € 7 million. The acquisition of Kentera® reinforces Recordati’s focus in the urology area where it is developing silodosin, indicated for the treatment of benign prostate hypertrophy, due for filing in Europe in the second half of 2008.

• In February a semi-exclusive licensing agreement was entered into with Menarini, the leading Italian pharmaceutical group, for the marketing and sales of frovatriptan, a medicine belonging to the triptan group of drugs indicated for the acute treatment of migraine attacks with or without aura, in France and Greece. Frovatriptan is a selective 5HT1B/1D receptor agonist. Frovatriptan is distinguished from other triptans by its long half-life (26 hours) which ensures long-lasting clinical efficacy and reduces the recurrence rate of migraine attacks. The product is already approved in the licensed markets and is sold there by Menarini under a different brand. Recordati intends to launch its own brand in these countries in the next few months.

• In March the French companies FIC and FIC Médical which are dedicated to the registration and the promotion of pharmaceutical products on behalf of third party companies in Russia and other Commonwealth of Independent States (C.I.S.) countries were acquired.  FIC Médical, headquartered in Paris, is present in Russia, Ukraine, Belarus, Kazakhstan and Georgia, and is planning to enter Armenia and Azerbaijan.  The company’s business is carried out by around 200 people, of which 150 are medical representatives.  The price of the acquisition is € 12 million, of which € 9 million were paid upon signing the agreement while € 3 million are due over a period of three years contingent upon certain conditions.  FIC Médical’s organization will be the base upon which Recordati will develop its own presence in Russia and in the C.I.S. markets, driven, among others, by the enhancement of the product portfolio through the launch of its new original products.

• Also in March the mutual recognition process for the approval throughout the European Union, in Norway and in Iceland, of Recordati’s new antihypertensive specialty based on a fixed combination of lercanidipine and enalapril was completed.  Germany acted as Reference Member State and the 28 Concerned Member States decided to recognize the approval granted in 2006 by the German medicines agency (BfArM) of this new product in its two dosage forms containing lercanidipine 10mg/enalapril 10mg and lercanidipine 10mg/enalapril 20mg.  The product is already on the market in Germany as from 2007 and sales are growing. Launches in all these countries, in which lercanidipine has already obtained the physicians’ appreciation,  will initiate gradually as from the second half of the year.  During May our licensee Solvay Biosciences launched this new combination product in Australia under the brand Zan-Extra®.  This product, which is designed to meet the requirements of the modern guidelines for the treatment of hypertension, represents an important opportunity for the group to further develop its lercanidipine business, also in view of the compound’s patent expiry in the main European countries at the beginning of 2010. 

• During June Jaba Recordati’s pharmaceutical manufacturing business, which includes third party production, in Sintra, Portugal was split out into a new company (Atlantic Pharma S.A.), 90% of which was subsequently sold to Tecnimede, a Portuguese pharmaceutical group.  The transfer involved the property, plant and equipment, the 120 staff employed in manufacturing activities and the working capital allocated to production.  The price of the transaction is € 25.1 million which gave rise to a € 8.3 million capital gain.

Management comments

“During the first half of the year a series of new events took place which are directed at maintaining the group’s growth trend into the future”, stated Giovanni Recordati, Chairman and Chief Executive Officer. “In particular, we are also now present directly in Russia and other C.I.S. countries where the pharmaceutical market is growing strongly and where we intend to market our new products. We are also very satisfied with the financial results achieved in these last six months.  We therefore confirm our objectives for the full year 2008 with revenue and earnings expected to grow by 10% while we have increased our net income target to approximately € 100 million to incorporate the more favorable tax rate due to the tax exemption applied to the capital gain realized in Portugal.”

Conference call

Recordati will be hosting a conference call today 30 July 2008 at 4.00 pm Italian time (3.00 pm London time, 10.00 am New York time). The conference ID is 53937732 and dial-in numbers are:

Italy   +39 02 36005955
UK   +44 (0) 1452 587 427
USA   18665516755
France   +33 (0) 170751217
Germany  +49 (0) 6922227071

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 state the ID number 53937732.  If conference operator assistance is required during the connection please digit * followed by 0 or call +44 1452 553 456.  A recording 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 2,400. A European field force of over 1,300 medical representatives promotes a wide range of innovative pharmaceuticals, both proprietary and under license, in a number of therapeutic areas including a specialized business dedicated to treatments for rare diseases. 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 2007 was € 628.4 million, operating income was € 131.5 million and net income was € 84.9 million.

For further information:

Recordati website:  www.recordati.com

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 forward-looking 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.

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