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SnowWorld N.V. — Earnings Release 2006
Mar 15, 2007
3886_iss_2007-03-15_be9b0f4e-5517-40af-9963-2e96cfbbfe15.pdf
Earnings Release
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Fornix BIOSCIENCES
PRESS RELEASE
Lelystad, 15 March 2007
Disclaimer:
This document is a translation of the Dutch original and is provided as a courtesy only. In the event of any inconsistencies or differences of interpretation between the original and translated versions, the Dutch version shall prevail. No rights may be derived from the translated document.
FORNIX PUBLISHES FINAL 2006 FIGURES
FORNIX POSTS 28% GROWTH IN NET PROFIT AND PROPOSES TO DISTRIBUTE ENTIRE PROFIT AS DIVIDEND
| in millions of euros (under IFRS) (except figures per share) | 2006 | 2005 | Increase/decrease |
|---|---|---|---|
| Net turnover | 96.0 | 87.7 | + 9% |
| Gross result | 31.9 | 27.3 | + 167% |
| Investments in research | 3.0 | 0.8 | + 253% |
| Result from operating activities (EBIT) | 16.6 | 13.9 | + 20% |
| Net profit | 12.4 | 9.7 | + 28% |
| Earnings per share | €1.88 | €1.53 | + 23% |
| Dividend per share | €1.88 | €1.05 | + 79% |
| EBIT for Allergy Division | 13.1 | 14.2 | - 8% |
| EBIT for Medical Aids Division | 2.1 | 0.3 | + 642% |
| EBIT for Trading Division | 0.8 | 1.3 | - 39% |
| EBIT for holding company (including discontinued operations) | 0.6 | -1.9 | + 132% |
Highlights of 2006
- Net profit up 28% to €12.4 million (2005: €9.7 million)
- Net turnover up 9% to €96.0 million (2005: €87.7 million)
- Result from operating activities (EBIT) up 20% to €16.6 million (2005: €13.9 million)
- Earnings per share up 23% to €1.88 (2005: €1.53)
- Fornix to distribute entire net profit of €12.4 million as dividend (€1.88 per share), in cash or shares
- Investments in (clinical) studies (chiefly for Oralgen®) of €3.0 million (2005: €0.8 million)
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Outlook for 2007
- Further growth in net profit of at least 5% to around €13.0 million
- Further growth in net turnover of at least 5% to approximately €101 million
- Similar level of investment in clinical studies in support of application for registration of allergen products
CEO Cees Bergman says of Fornix's results:
'2006 was an important year of transformation and one that presented major challenges for us. Despite those challenges, we were able to post a record profit for the seventh successive year. We intend to distribute the entire profit to our shareholders this year, because the planned acquisitions have still not materialised and our cash position is sufficient to fund appropriate acquisitions without further reinforcement. The successful launch of our new Medical Aids Division demonstrates that the strategic reorientation we embarked upon at the end of 2005 with the acquisition of Laprolan/ComforMed and the disposal of the loss-making Theranostics Division was the right decision. All activities are now contributing to profit and our risk profile has improved, although in the case of the Allergy Division a great deal will depend on the large-scale European study of the effectivity of Oralgen® Grass Pollen, which will be completed in 2007. The outlook for both the allergy market and the Medical Aids Division's market is encouraging. Fornix will continue in the years ahead to seek appropriate acquisitions.'
Fornix BioSciences (Euronext code: AFORBI) posted 28% growth in net profit to €12.4 million in 2006 (2005: €9.7 million), exceeding by a significant margin the projection given in early 2006 of net profit growth of at least 20%. Turnover was 9% higher at €96.0 million (2005: €87.7 million), compared with the earlier projection of 13% turnover growth. The result from operating activities (EBIT) rose 20% from €13.9 million to €16.6 million, despite the sharp increase to €3.0 million in investments in clinical studies for the Allergy Division. Earnings per share were 23% higher at €1.88 (2005: €1.53). The entire profit will be distributed as dividend, payable in cash or shares. Growth of at least 5% in both turnover and profit is projected for 2007.
The Laprolan/ComforMed activities relating to the field of operations of the Medical Aids Division, which were acquired at the end of 2005 started immediately to make a contribution to the Fornix BioSciences result. The growth in turnover achieved by Fornix BioSciences in 2006 fell short of expectations, mainly due to slower growth in the Trading Division's sales. Although the Trading Division achieved a marginal increase in its share of a contracting market, the margins were under sustained heavy pressure from competition and price controls. All business units still contributed to Fornix BioSciences' profit. The capital ratio at year end was 71%, providing the company with a strong financial base which will enable it to fund suitable small and medium-sized acquisitions from its own resources.
The new Medical Aids Division accounted for over 60% of the increase in Fornix BioSciences' EBIT. The remainder of the profit growth was largely due to the absence of the loss-making Theranostics Division, which was disposed of in 2005. Fornix also received net non-recurring income of approximately €1.0 million from discontinued operations, including the release of most of a provision for disability insurance premiums and a tax provision, and non-recurring income from the sale of the Theranostics Division's SeaPro and Fornix Medical Systems business units.
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| Turnover | EBIT | |||
|---|---|---|---|---|
| 2006 | 2005 | 2006 | 2005 | |
| Allergy Division | 26.4 | 25.0 | 13.1 | 14.2 |
| Medical Aids Division | 8.4 | 1.7 | 2.1 | 0.3 |
| Trading Division | 61.2 | 61.0 | 0.8 | 1.3 |
| Holding company (including discontinued operations) | - | 0.1 | 0.6 | -1.9 |
| Fornix BioSciences total | 96.0 | 87.7 | 16.6 | 13.9 |
Fornix expects growth in turnover and net profit of at least 5% in 2007. This projection is lower than those given in recent years, partly reflecting the structurally rather slower growth rates achieved by the Allergy Division. The results will also be held back in the coming years by the substantial investments in the clinical study of the effectivity of the various allergen products in the context of the large-scale Clinical Development Plan. This effect will be offset to some extent by the sustained growth in turnover and profit projected for the Medical Aids Division. Healthy profitability will be further supported by acquisitions.
The outlook is discussed in greater depth on page 13 of this press release.
Registration of Oralgen®
Fornix is currently focusing all research activities in its Allergy Division, with the primary objective of conclusively demonstrating the effectivity and safety of the Oralgen® allergen products through extensive clinical studies involving a large group of patients, to support the favourable outcome of its registration applications.
On the basis of the results of the STARDROP study of the effectivity of Oralgen® Grass Pollen in children, which was completed at the end of 2005, the Dutch Medicines Evaluation Board (CBG) had previously ruled that the contribution made by that study did not justify bringing the current definitive registration procedure to a successful conclusion. At the end of 2006, Fornix therefore launched a new large-scale pan-European clinical study of 600 adult allergy patients to convincingly demonstrate the effectivity and safety of Oralgen® Grass Pollen.
The CBG decided in February 2007 to rule the appeal against the previous refusal to grant official registration to Oralgen® Grass Pollen unfounded unless the results of the new study currently in progress justified a ruling in favour of official registration. Fornix intends to appeal against the CBG's decision.
Pending the final ruling on the application, the Oralgen® products will retain their present provisional registration status, which is important for the continuity of Oralgen® sales. The findings of the current study will be published and submitted to the CBG in early 2008.
Dividend: distribution of entire profit proposed
Fornix, which distributed an interim dividend for the first time in 2002, decided in August 2006, in view of the healthy half-year results, the company's strong financial position and the favourable
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outlook, to distribute a higher interim dividend in September 2006 of €0.65 (2005: €0.50) per share, payable as usual in cash or shares at the shareholder's option.
At the forthcoming General Meeting of Shareholders on 20 April 2007, Fornix will invite the shareholders to approve the distribution of the entire net profit for 2006 as dividend, payable in cash or shares at the shareholder's option. This decision has been taken because the acquisitions envisaged in 2006 have still not materialised and the company's already excellent liquidity position requires no further reinforcement at this time. This absence of acquisitions reflects the strict criteria which Fornix expects acquisition candidates to meet and the relative shortage of suitable candidates in the allergen products and medical aids sectors.
The proposed dividend for 2006 will be €1.88 per share, compared with €1.05 for 2005. The dividend will be paid net of the interim dividend of €0.65 distributed in September 2006. The dividend is well above the maximum pay-out ratio of 40% of net profit set in the 2002 dividend policy.
Results – general
Turnover
Fornix BioSciences' turnover was up 9.4% in 2006 at €96.0 million (2005: €87.7 million), reflecting higher turnover at both the Allergy Division and the new Medical Aids Division. Exports accounted for €10.4 million or 11% of total turnover (2005: €13.3 million or 15%), a relative decrease of 21.5% compared with export volume in 2005. This continuing decline was largely due to the effect on the Trading Division in 2006 of the strict price controls in the United Kingdom.
Gross margin
Gross margin (gross result in the financial statements) turned out at €31.9 million in 2006, or 33.3% of turnover, an increase of 16.8% compared with 2005 (€27.3 million or 31.1% of turnover). The higher gross margin was largely due to increased sales of allergen products by the Allergy Division and the sales volume added by Medical Aids Division.
Expenses
Expenses in 2006 totalled €15.9 million (2005: €13.5 million), an increase of €2.4 million or 18.1%. The increase mainly reflected higher research and development costs of €3.0 million in 2006 (2005: €0.8 million) in connection with the ongoing study of the effectivity of the various Oralgen® products. The 2006 figures also include cost of the Laprolan/ComforMed acquisitions on 1 January 2006.
Results
EBIT was 20% higher at €16.6 million (2005: €13.9 million) and profit after tax was up 28% at €12.4 million (2005: €9.7 million).
Financing
Fornix BioSciences funds most of its activities from shareholders' equity, which stood at €40.5 million at year-end 2006, or 71% of the balance sheet total (year-end 2005: 70%). This percentage point increase in shareholders' equity relative to total assets (balance sheet total) is accounted for largely by the 2006 profit, the exercise of staff stock options and the 2005 final dividend (in cash) and 2006 interim dividend (in cash).
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Fornix BioSciences has an overdraft facility of a maximum of €4.5 million, which had not been used as at 31 December 2006 and is expected to be sufficient for the coming year. All the collateral lodged as security for the overdraft was released by the lender on 22 December 2004, since when Fornix BioSciences has only been required to comply with a small number of covenants and financial ratios.
Repayment in 2006 of a technical development loan in respect of research project F991, the first instalment of €0.6 million of which was received in December 2002, yielded other operating income of €0.3 million.
Other balance sheet positions
The value of the inventories at year-end was €9.5 million (year-end 2005: €8.7 million), an increase of 9%. Of this, approximately €6.4 million relates to trade stocks of pharmaceutical products held by Fisher Farma (2005: €6.6 million). The increase largely reflects the acquisition of Laprolan/ComforMed. The value of the Medical Aids Division's inventories at year-end 2006 was €1.2 million.
The debtor portfolio as at 31 December 2006 was 21.8% higher at €9.5 million (2005: €7.8 million), on virtually unchanged credit terms. Trade payables increased from €3.0 million as at year-end 2005 to €7.2 million as at 31 December 2006. The €4.2 million increase was due partly to the costs of €2.0 million charged by the clinical research organisation (CRO) in December 2006.
Healthy liquidity position
Thanks to the good results achieved by the Allergy Division and Medical Aids Division, the liquidity position at year-end 2006 was again excellent. Fornix BioSciences is debt-free and had cash reserves of almost €20.7 million (2005: €22.7 million) as at 31 December 2006. The company also holds own shares to the value of €7.0 million (based on the year-end closing price). Maintaining healthy balance sheet ratios is consistent with the company's strategy of funding suitable small and medium-sized acquisitions from its own resources as far as possible.
Effects of termination of R&D and Theranostics Divisions
Following the decision in 2005 to dismantle the R&D Division, the research and development costs, which are extremely important on commercial grounds and in the context of the registration procedures, were transferred to the Allergy Division as from the beginning of 2006.
In the absence of any prospect of profits in the foreseeable future, it was also decided in 2005 to dispose of or terminate the activities of the Theranostics Division (products for diagnosis and treatment of infectious diseases and equipment and disposables for diagnosis of urological complaints). The activities and trademark rights relating to seaFAST® technology (products for fast diagnosis of infectious diseases) were sold in March 2006. The shares in Fornix Medical Systems B.V., the other part of the Theranostics Division under which the activities and technology in the field of urology (DynamiX®) were organised, were sold in May 2006 for a modest price to Laborie Medical Technologies in Canada.
The technical development loan received in 2002 for the research expenses of the R&D Division was repaid in 2006. The proceeds of sale of trademarks and Fornix Medical Systems B.V. and
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the repayment of the technical development loan, less subsequent expenses, resulted in a positive EBIT of €0.5 million.
Shareholding structure
Via a private sale of shares, former member of the Board of Directors and current Supervisory Board member Mr. T.J.A. Visser reduced his shareholding in the company to zero in the first quarter of 2006. The company considers that a good balance has now been reached between long-term shareholders with interests of 5% or more and other shareholders.
Strategy and objectives
Fornix BioSciences revised its strategy at the end of 2005. The loss-making Theranostics Division and the R&D Division were discontinued in connection with the termination of the biotechnological research programmes. The research activities and know-how were transferred to the Allergy Division, to support the application for registration of the allergen products. The company now has the following profile: Fornix BioSciences is a biopharmaceutical company that focuses, via a group of companies in the medical sector, on the production, marketing and sale of diagnostic and therapeutic allergen products, the trade in patented pharmaceuticals and the distribution of medical aids and nursing disposables. Fornix BioSciences's aim is to hold leading positions in the niches in which it operates.
Fornix BioSciences regards the Netherlands as its home market, but seeks to expand its activities and sales, particularly in the allergy and medical aids sectors, to other European countries. The company also aims to expand its activities into other areas of the medical sector, though organic growth and via medium-sized and, if possible, large acquisitions.
Fornix BioSciences seeks to generate a good return for its shareholders, by achieving sustained growth in earnings per share and paying an attractive dividend.
Fornix BioSciences also aims to maintain healthy balance sheet ratios. Its target is a capital ratio (shareholders' equity/total assets) of at least 35%. The current ratio of 71% offers ample scope for acquisitions.
Objectives
- Emphasis on further development of activities in the field of allergy and medical aids, with a turnover target for the Medical Aids Division of around €20 million by the end of 2009
- Enhanced research effort in support of registration of allergen products
- Priority for obtaining definitive registration of the Oralgen® products
- Sustained healthy growth in net profit and earnings per share in 2007 and subsequent years
- New acquisitions in the medical sector
- Growth in activities and sales in other European countries
- Improved performance by the Trading Division
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Results by division
Fornix BioSciences currently comprises the Allergy Division, the Medical Aids Division and the Trading Division. Details of the performance of the three divisions are given below.
Allergy Division
Results
In a more difficult market climate, the Allergy Division once again posted solid results in 2006. Sales increased by 6% overall, up from €25.0 million in 2005 to €26.4 million in 2006. The result from operating activities fell 8% from €14.2 million in 2005 to €13.1 million in 2006. However, this apparently unfavourable development was entirely attributable to the substantial investment of €3.0 million in 2006 (2005:€0.6 million) in the newly launched Clinical Development Plan (CDP) in support of the registration application for the various Oralgen® products, as well as the substantially higher internal on-costs of €2.0 million in 2006 compared with €1.5 million in 2005. Without these increased costs, which bear no relationship to the operational activities, the EBIT of the Allergy Division would have been around €2.9 million higher at €17.1 million, an increase of more than 30%.
Another positive factor was the reduction in the relative contribution of the still highly successful Allergy Division to the EBIT of Fornix BioSciences, from 102% in 2005 to 79% in 2006. This reduction was primarily due to the contribution by the new Medical Aids Division.
Operationally, Dutch sales of the main product of the Allergy Division, Oralgen®, rose 8%. This increase was achieved despite the dampening effect of the introduction of the new health care system in the Netherlands – and the concomitant temporary shrinkage of the market – and the slight negative impact of the less favourable results of the STARDROP study, completed in 2005, of the effectivity of Oralgen® Grass Pollen in children. The solid growth under more challenging market conditions was driven primarily by the successful programmes launched in recent years to boost brand loyalty among existing users.
On the other hand, the Allergy Division was, as expected, confronted with a group of patients who were able to stop taking Oralgen® after the regular therapy period of three to five years. The growing competition in the Netherlands from internationally operating companies active in the field of allergies was also a factor. The Allergy Division succeeded in restricting the projected fall in sales of the licensed and registered product Pollinex®, a subcutaneous (administered by injection) immunotherapy, to 6%.
The introduction of Anapen® for use in treating anaphylaxis took place later in the year than planned. As a result, part of the bee and wasp season had elapsed before the full impact of the sales activities was brought to bear. The reactions of professionals to patient-friendly Anapen® were positive across the board.
The veterinary allergy activities made a satisfactory contribution to the sales growth of the Allergy Division in 2006, with an increase in sales of 9%.
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Strategy and outlook for 2007
For the Allergy Division, 2007 will be not only the year of the crucially important Oralgen® study, but also a year of innovation in addressing the market and focusing on service delivery to GPs and specialists. The therapy-loyalty programme will also be intensified. Anapen® will be promoted among doctors and pharmacists in the Netherlands. Despite a falling trend, the company will continue its sales efforts in promoting Pollinex® among medical professionals. 2007 will also see further implementation of the Artuvetrin® Serum Test in Europe. An update of the registration dossier for Artuvetrin® will also be prepared, which could lead to new registrations in Europe.
Attention will also be given in 2007 to the addition of licensed products to the existing portfolio of Artu Biologicals.
Fornix BioSciences expects to see a continuing rise in the sales and results of the Allergy Division. However, in view of the market conditions referred to above, the uncertainties concerning the outcome of the ongoing study of Oralgen® Grass Pollen and the loss of another group of treated patients on reaching the end of their therapy, the increase will be less marked than in recent years.
Medical Aids Division
Results
The Medical Aids Division, which was included in the consolidation with effect from 1 January 2006, holds the exclusive sales rights in the Netherlands, as well as for a number of products in the rest of Europe, to a wide range of innovative patented medical aids and consumables for which the customers include hospitals, nursing homes, pharmacies, specialist medical centres, wholesalers and home care organisations.
The division immediately got off to a good start in 2006. A great deal of effort was focused on ensuring the successful integration of Laprolan/ComforMed into the Fornix BioSciences organisation and the amalgamation of this company with Artu Biologicals Medical, the distributor of the Safehip® and the Scarban® wound dressings. The organisation was also further professionalised to keep pace with the growing demand for products. A number of innovations were introduced in the area of logistics in particular.
Thanks to astute marketing and a carefully balanced product range, coupled with the higher priority given by health care/home care professionals to facilitating self-help and self-reliance well into old age and the rapid ageing of the population, that sales of medical aids and consumables again improved strongly in 2006. Despite the continuing reticence of the government to reimburse the costs, Safehip® again made a good contribution to the result, as did the silicone dressing Scarban®.
Sales by this new division rose 11% in 2006 to €8.4 million, compared with €7.6 million based on the pro forma figures for 2005. EBIT increased from €2.0 million based on the 2005 pro forma figures to €2.1 million in 2006, an increase of 6%. As regards activities, the product range was subjected to a critical review which yielded the first synergy benefits.
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Strategy and outlook for 2007
Fornix BioSciences is aiming to secure strong growth in its activities in the coming years by acquiring businesses which are active in the medical aids and/or medical consumables sectors. The target is to achieve sales of approximately €20 million within three years.
The division will also focus more closely in 2007 on carefully selected product groups aimed specifically at wound and scar care, urology and incontinence. The division aims to remain a product specialist and to continue distributing only patented products on an exclusive basis. The multi-principal nature of the activities, selling products from a total of more than 20 manufacturers, enables the division to make a significant contribution to reducing the Fornix BioSciences risk profile and securing the profitability and continuity of the business in the long term.
A further improvement in sales and result is projected for 2007.
Trading Division
Results
The Trading Division operates under the name Dr. Fisher Farma. The division's main activities are the import, sale and export of patented pharmaceuticals known as eurospecialities. The main customers in the Netherlands are pharmacies, dispensing general practices, wholesalers and hospitals. Exports mainly target wholesalers in the UK, Germany and Scandinavia. The division's product range currently comprises approximately 500 different drugs.
As expected, the Trading Division was also confronted with the adverse effects of the introduction of the new health care system in the Netherlands from 1 January 2006. In particular, the administrative problems faced by many pharmacies depressed demand for eurospecialities. The increasingly stringent price measures imposed by the government, the reduced availability of drugs for export and the tighter quotas imposed by brand owners led to further contraction of the market and thus increased pressure on margins for wholesalers and pharmacies.
Whereas the Trading Division had still been able to achieve healthy sales growth of 11.8% in 2005, when the market climate was already challenging, sales in 2006 rose only slightly to €61.2 million, from €61.0 million in 2005. Compared with the sector as a whole, however, the division performed above the market average.
The external influences cited above did depress the result from operating activities (EBIT) by 39%, from €1.3 million in 2005 to €0.8 million in 2006. As a result, the Trading Division's contribution to Fornix BioSciences's EBIT declined further from 10% in 2005 to 5% in 2006.
Strategy and outlook for 2007
The Trading Division remains important for Fornix BioSciences, given its size and its close relationship with the pharmaceutical sector. Market conditions will remain challenging and no easing of the strict quota regime imposed by brand owners in the Netherlands and other European countries is expected. The division will seek to import and distribute related products – possibly medical aids – via existing purchasing channels, and will make every effort to win back pharmacies which moved to a single supplier in 2006 for administrative reasons. The division also aims to provide a more customised service for pharmacies.
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Given the sharp decline in exports to the United Kingdom, Fisher Farma will further explore the scope for expansion of its activities in Germany, the Scandinavian countries and the new European member states in 2007. A number of new registrations will enable Fisher Farma to further strengthen its position in the hospital segment and discussions are in progress with individual hospital pharmacies on opportunities as a supplier.
Further attempts will be made in 2007 to find suitable products within the European Union which fit within the existing product portfolio. The eurospeciality segment is expected to grow with the market in due course. The target for 2007 is to register approximately 100 new products.
The division is aiming for a slight improvement in its sales and profit contribution.
Research activities
Good progress was made in 2006 in the implementation of the Clinical Development Plan (CDP) for Oralgen® Grass Pollen. The company is being supported in the implementation of the CDP by an international clinical research organisation (CRO) with extensive experience in similarly complex clinical studies.
The programme of clinical studies in support of the applications for registration of the company's main therapeutic products will take an estimated five years and require an investment of at least €10 million. Research and development expenses in the Allergy Division amounted to €3.0 million in 2006, of which €2.7 million was spent on the Clinical Development Plan (CDP) for Oralgen® Grass Pollen.
New research
One of the most important elements of the CDP is a large-scale placebo-controlled, double-blind, multi-centre clinical study code-named AB0602, to demonstrate the effectivity and safety of Oralgen® Grass Pollen. The study also includes evaluation of the effect of different doses on side-effects and effectivity. The data obtained will then serve as a basis for the development of an optimum product formulation in terms of safety, effectivity and compliance. The study will also provide greater insight into the mechanism of the Oralgen® products.
This phase III study, in which approximately 600 patients will take part, began at the end of 2006. The study is being conducted simultaneously in around 40 clinical centres in seven European countries. After the end of the 2007 grass pollen season, the results will be analysed to determine the safety and effectivity of the agent. The analysis results should be announced in early 2008.
A decision will be taken during the course of 2007 on whether to continue the phase III study through the 2008 pollen season, in order to obtain data on the effectivity of immunotherapy over a longer period. Because it involves the simultaneous study of different dosage schemes, the number of patients taking part in the study is relatively large.
Prior to study AB0602, the safety of and tolerance to various modified dosage schemes of Oralgen® Grass Pollen had been tested in a group of allergic volunteers in a phase I/II study.
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Strict standards for new study
The pan-European study addresses the shortcomings of the STARDROP study. For example, it will be conducted exclusively among adults and only patients with moderate to severe allergic symptoms will be eligible to take part. The study will take place over an extended geographical area, in approximately 40 clinical centres located in seven European countries, to prevent the results being disproportionately influenced by local seasonal effects, for example if grass pollen levels are low because of local weather conditions. The study will be conducted among a relatively large group of 600 patients, to enable uniform and convincing conclusions to be drawn with regard to effectivity and safety.
The study will be carried out by a professional clinical research organisation (CRO), which will guarantee the quality of the study and ensure rapid evaluation of the results. It has been agreed that the evaluation should be available within four months of completion of the clinical part of the study.
The study
A few months before the start of the 2007 pollen season, all 600 patients began taking their medication. The start date of the pollen season was determined individually for each country on the basis of historical pollen data. The study has been configured on the basis of examples of successful studies by competitors, which engenders confidence in the results.
Post-study strategy
The results of the phase III study will be announced in early 2008 and will be submitted to the Dutch Medicines Evaluation Board (CBG). The main products of comparable companies in Europe will be registered within the next five to seven years. Only registered products will then be able to enter the European market, with the exception of medicines for a small, specific group of patients who form an exception to the rule or who are only eligible for a combination product. In the long term, the market for immunotherapeutic products will be dominated by registered standard products.
If the outcome of the present study is favourable, the logical next step will be to begin immediately gathering data over several years in order to measure the effects in the longer term. It may be that Fornix will then also turn its attention to developing Oralgen® Grass Pollen in tablet form.
If the outcome of the study is negative, Fornix will have to consider the future of the Allergy Division, since such an outcome could lead to substantially lower sales and net income in this division.
Possible parallel study of Oralgen® Mites
In the autumn of 2005 the Erasmus University Medical Centre began a double-blind, placebo-controlled study of the safety and effectivity of the Oralgen® Mites product. The final results of this study are expected to be released in 2009. Given the configuration of this study, it is possible that the findings will be comparable with those of the less than successful STARDROP study. With this possibility in mind, Fornix is considering launching a second, parallel study, which could be completed relatively quickly, to ascertain the effectivity of Oralgen® Mites; this study would be carried out within the framework of the CDP and would be configured in the same way as the current Oralgen® Grass Pollen study. Fornix will make further announcements regarding its decision in the course of 2007.
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Outlook
Fornix BioSciences will explore a number of interesting acquisition candidates in the medical aids and allergy sectors in 2007. The aim will be to acquire at least a majority holding in larger players in order to achieve the necessary scale.
The Allergy Division is facing a crucial year in which much will depend on the imminent results of the pan-European study of Oralgen® Grass Pollen. The division will once again be faced with a group of patients completing their treatment and moving off the therapy. In spite of these factors, sales and results are expected to continue improving, albeit at a slower pace.
The Medical Aids Division will continue to grow in 2007, driven both by market demand and by planned acquisitions that will transform the division. A further increase in the division's contribution to profit is projected.
The Trading Division remains important for Fornix BioSciences in view of its size and its close relationship with the pharmaceutical sector. Market conditions will remain challenging and no easing of the strict quota regime imposed by brand owners or of the price controls imposed by government is likely. The division is expected to return slightly higher sales and a modest improvement in the contribution to profit.
The outlook for 2007 for Fornix BioSciences is positive. The growth of the Allergy Division will be strongly supported by the earnings potential of the new Medical Aids Division. Fornix BioSciences accordingly expects that, barring unforeseen circumstances, consolidated sales will increase by at least 5% to approximately €101 million. Net profit is also forecast to increase by at least 5%, to approximately €13.0 million (2006: €12.4 million).
Fornix expects investments in the Clinical Development Plan for the registration of the allergen products in 2007 to remain close to the 2006 level.
END OF PRESS RELEASE
Further information:
Fornix BioSciences N.V.
C.L. Bergman, CEO Fornix BioSciences N.V.
Tel. +31 320 267 799
Website: www.fornix.nl
Encls.
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FINANCIAL STATEMENTS 2006
Fornix BioSciences N.V.
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CONSOLIDATED INCOME STATEMENT (in euros)
| | 2006 Continuing operations | 2006^{1)} Discontinued operations | 2006 Total | 2005 Continuing operations | 2005 Discontinued operations | 2005 Total | | --- | --- | --- | --- | --- | --- | --- | | Income | 95,982,353 | 1,943 | 95,984,296 | 87,690,063 | 50,013 | 87,740,076 | | Cost of sales | 64,060,092 | 393 | 64,060,485 | 60,212,125 | 197,379 | 60,409,504 | | Gross result | 31,992,261 | 1,550 | 31,923,811 | 27,477,938 | (147,366) | 27,330,572 | | Other income | 43,576 | 587,915 | 631,491 | 28,691 | - | 28,691 | | Distribution expenses | 1,423,616 | - | 1,423,616 | 1,336,520 | 113,058 | 1,449,578 | | Personnel expenses | 6,926,404 | - | 6,926,404 | 6,230,198 | 413,307 | 6,643,505 | | Travel expenses | 1,140,880 | - | 1,140,880 | 964,108 | 99,001 | 1,063,109 | | Depreciation and amortisation | 700,204 | (9,545) | 690,659 | 775,451 | 115,990 | 891,441 | | Accommodation | 275,031 | - | 275,031 | 237,892 | 39,692 | 277,584 | | Research and development | 2,962,204 | 31,888 | 2,994,092 | 634,239 | 214,719 | 848,958 | | Quality control expenses | 517,141 | - | 517,141 | 436,250 | 9,800 | 446,050 | | Production and warehouse expenses | 152,579 | - | 152,579 | 143,225 | - | 143,225 | | General overheads | 3,166,866 | 57,566 | 3,224,432 | 2,932,939 | 244,847 | 3,177,786 | | Inventory costs charged on | (1,400,000) | - | (1,400,000) | (1,445,000) | - | (1,445,000) | | Total expenses | 15,864,925 | 79,909 | 15,944,834 | 12,245,822 | 1,250,414 | 13,496,236 | | Result from operating activities | 16,100,912 | 509,556 | 16,610,468 | 15,260,807 | (1,397,780) | 13,863,027 | | Net financing income/expenses | 438,376 | 8 | 438,384 | 608,980 | (157,780) | 451,200 | | Profit before taxation | 16,539,288 | 509,564 | 17,048,852 | 15,869,787 | (1,555,560) | 14,314,227 | | Tax on profits | 4,536,894 | 65,476 | 4,602,370 | 5,078,578 | (497,803) | 4,580,775 | | Profit for the financial year | 12,002,394 | 444,088 | 12,446,482 | 10,791,209 | (1,057,757) | 9,733,452 |
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Fornix BIOSCIENCES
| 2006 | 2006^{1)} | 2006 | 2005 | 2005 | 2005 | |
|---|---|---|---|---|---|---|
| Continuing operations | Discontinued operations | Total | Continuing operations | Discontinued operations | Total | |
| Attributable to: | ||||||
| Shareholders of the | ||||||
| parent company | 12,002,394 | 443,468 | 12,445,862 | 10,791,209 | (1,057,922) | 9,733,287 |
| Minority interests | - | 620 | 620 | - | 165 | 165 |
| Profit for the financial year | 12,002,394 | 444,088 | 12,446,482 | 10,791,209 | (1,057,757) | 9,733,452 |
| Ordinary earnings per share | 1.81 | 0.07 | 1.88 | 1.69 | (0.16) | 1.53 |
| Diluted earnings per share | 1.80 | 0.06 | 1.86 | 1.66 | (0.16) | 1.50 |
- The discontinued operations accounted for in 2006 reflect the decision taken at the end of the 2005 financial year to terminate the Theranostics and R&D divisions.
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Fornix BIOSCIENCES
CONSOLIDATED SUMMARY OF TOTAL RESULT (in euros)
| 2006 | 2005 | |
|---|---|---|
| Exercise of staff options | 511,953 | 1,229,651 |
| Net profit directly accounted for in shareholders' equity | 511,953 | 1,229,651 |
| Profit for the financial year | 12,446,482 | 9,733,452 |
| Total result for the financial year | 12,958,435 | 10,963,103 |
| Attributable to: | ||
| Shareholders of the parent company | 12,957,815 | 10,962,938 |
| Minority interest | 620 | 165 |
| Total result for the financial year | 12,958,435 | 10,963,103 |
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Fornix BIO SCIENCES
CONSOLIDATED BALANCE SHEET (in euros)
(before profit appropriation)
| 31 December 2006 | 31 December 2005 | |
|---|---|---|
| ASSETS | ||
| Non-current assets | ||
| Intangible assets | 11,647,719 | 300,469 |
| Property, plant and equipment | 4,026,278 | 2,548,112 |
| Deferred tax assets | 188,585 | 169,779 |
| Total non-current assets | 15,862,582 | 3,018,360 |
| Current assets | ||
| Inventories | 9,490,031 | 8,689,211 |
| Trade and other receivables | 10,953,623 | 8,946,789 |
| Cash and cash equivalents | 20,749,318 | 22,660,619 |
| Total current assets | 41,192,972 | 40,296,619 |
| Total assets | 57,055,554 | 43,314,979 |
| EQUITY AND LIABILITIES | ||
| Shareholders' equity | ||
| Paid-up and called share capital | 1,041,010 | 1,004,766 |
| Share premium | 20,340,298 | 15,259,919 |
| Other reserves | 6,678,069 | 4,488,905 |
| Profit for the financial year | 12,445,862 | 9,733,287 |
| Total shareholders' equity attributable to shareholders of the parent company | 40,505,239 | 30,486,877 |
| Minority interests | 906 | 286 |
| Total shareholders' equity | 40,506,145 | 30,487,163 |
| Non-current liabilities | ||
| Interest-bearing loans and other non-current obligations | - | 159,468 |
| Employee benefits | 364,067 | 445,885 |
| Provisions | - | 1,037,990 |
| Deferred tax liabilities | 270,707 | - |
| Total non-current liabilities | 634,774 | 1,643,343 |
| Current liabilities | ||
| Provisions | 263,016 | - |
| Interest-bearing loans and other current financing obligations | - | 609,986 |
| Trade payables | 7,201,904 | 2,983,154 |
| Tax payable | 709,205 | 1,980,136 |
| Other payables | 7,740,510 | 5,611,197 |
Fornix BIOSCIENCES
Total current liabilities 15,914,635 11,184,473
Total equity and liabilities 57,055,554 43,314,979
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Fornix BIOSCIENCES
CONSOLIDATED CASH FLOW STATEMENT (in euros)
| 2006 | 2005 | ||
|---|---|---|---|
| Cash flow from operating activities | |||
| Receipts from customers | 100,232,851 | 94,828,508 | |
| Payments to suppliers and employees | (81,752,931) | (79,792,923) | |
| Net cash flow from business operations | 18,479,920 | 15,035,585 | |
| Interest received | 466,388 | 179,268 | |
| Interest paid | (95,996) | (17,618) | |
| Tax paid on profits | (6,702,779) | (4,106,882) | |
| Grants received | 65,358 | 48,691 | |
| Cash flow from other operating activities | (6,267,029) | (3,896,541) | |
| Net cash flow from operating activities | 12,212,891 | 11,139,044 | |
| Cash flow from investing activities | |||
| Acquisition of subsidiaries | (9,935,454) | - | |
| Investments in intangible assets | (159,636) | (194,405) | |
| Disposals of intangible assets | 100,000 | - | |
| Investments in property, plant and equipment | (757,267) | (242,066) | |
| Disposals of subsidiaries | 200,000 | - | |
| Disposals of property, plant and equipment | 24,469 | - | |
| Net cash flow from investing activities | (10,527,888) | (436,471) | |
| Cash flow from financing activities | |||
| Repayment of interest-bearing loans | (935,281) | (17,392) | |
| Earnings from exercise of staff options | 511,953 | 1,229,651 | |
| Dividend paid | (3,148,618) | (2,413,520) | |
| Net cash flow from financing activities | (3,571,946) | (1,201,261) | |
| Net increase / decrease in cash and cash equivalents | (1,886,943) | 9,501,312 | |
| Cash and cash equivalents as at 1 January | 22,660,619 | 13,159,307 | |
| Cash of newly acquired subsidiaries | (24,358) | - | |
| Cash and cash equivalents as at 31 December | 20,749,318 | 22,660,619 |
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Fornix BIOSCIENCES
CHANGES IN SHAREHOLDERS' EQUITY (in euros)
| Balance as at 1 January 2005 | 21,884,900 |
|---|---|
| 2004 dividend | (1,316,881) |
| 2005 interim dividend | (1,096,639) |
| Profit for 2005 | 9,733,287 |
| Exercise of personnel options | 1,229,651 |
| Cost of share ownership plan 2005 | 52,559 |
| Balance as at 31 December 2005 | 30,486,877 |
| 2005 dividend | (1,495,708) |
| 2006 interim dividend | (1,652,910) |
| Profit for 2006 | 12,445,862 |
| Exercise of personnel options | 511,953 |
| Cost of share ownership plan 2006 | 209,165 |
| Balance as at 31 December 2006 | 40,505,239 |
Notes to the 2006 financial statements
1 General
The financial data as reported in this press release are taken from the financial statements of Fornix BioSciences N.V. but do not represent them in their entirety. The company's consolidated financial statements for 2006 include the company and its subsidiaries (together referred to as the 'Group').
The annual report and financial statements were discussed in the meeting of the Supervisory Board of 13 March 2007 and will be submitted to the Annual General Meeting of Shareholders for adoption on 20 April 2007. The Fornix BioSciences N.V. financial statements have been audited and an unqualified auditors' report has been issued thereon.
The 2006 financial statements will be published on 20 April 2007.
2 Statement of compliance
The 2006 financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS), as adopted by the European Union.
3 Basis of preparation
The preparation of the financial statements requires the management of the Company to form opinions and make estimates and assumptions that influence the application of policies and the reported values of assets and liabilities and income and expenses. The actual outcomes may differ from these estimates.
The Group has reported in conformity with IFRS since 2005. There were no material changes to the Group's accounting policies in 2006.
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