STADA Arzneimittel AG — Earnings Release 2006

May 15, 2006

News Details

Corporate | 15 May 2006 07:25

STADA: Very successful Q1/2006 – profit +30% (adjusted +36%), sales +22%

Corporate-news transmitted by DGAP – a company of EquityStory AG. The issuer is solely responsible for the content of this announcement. —————————————————————————— Important items at a glance • Net income Q1/2006: EUR 22.1 million (+30%) – increase significantly stronger than the increase in sales • Net income adjusted for one-time special effects in Q1/2006: EUR 26.6 million (+36% vs. adjusted Q1 2005) • Group sales Q1/2006: EUR 299.6 million (+22%) – STADA’s highest quarterly Group sales in company history • Especially strong sales growth of 29% in international business • Optimistic outlook with a stronger increase in earnings than in sales confirmed Figures for the first quarter of 2006, published today on May 15, 2006, confirm the continuation of the sustainable and robust growth course of STADA Arzneimittel AG. “In the first quarter, as expected, we increased net income by 30% or adjusted for one-time special effects by 36% and thereby at a rate stronger than sales. We are also very pleased with the sales growth of 22%. We have thus achieved the highest quarterly sales in our company history. From this very successful first quarter we draw optimism for the further course of the entire fiscal year“, said STADA CEO Hartmut Retzlaff. Sales development In the reporting period, Group sales rose by 22% to EUR 299.6 million (first quarter of 2005: EUR 245.0 million). A one-time positive special factor in the form of significant sales from a tender business in Vietnam also contributed to this strong increase in sales. The share of initially consolidated sales included in this growth (acquisition-related effects) in particular through the staggered initial consolidation of product sales in the current fiscal year from the acquisition of the SANKYO product package in the fourth quarter of 2005 – amounted to EUR 3.4 million or 1 percentage point; the organic growth of the Group in the first quarter of 2006 was thus 21%. In the largest core segment Generics (share of Group sales 67.3%), sales in the first three months of 2006 were up strongly by 15% to EUR 201.6 million (first quarter of 2005: EUR 174.8 million). In the reporting period, the second largest core segment Branded Products (share of Group sales 22.4%), recorded sales growth of 27% to EUR 67.0 million (first quarter of 2005: EUR 52.8 million). The initial consolidation of the SANKYO product package also contributed 7 percentage points to this growth. By far the smallest core segment Specialty Pharmaceuticals (share of Group sales 2.2%), managed to raise sales in the first quarter of 2006 by 13% to EUR 6.7 million (first quarter of 2005: EUR 5.9 million). STADA’s international business activities, with an increase of 29%, again grew at a stronger rate as compared to the overall sales of the Group in the reporting period and contributed 57.5% to Group sales (first quarter of 2005: 54.5%). Regional developments In Germany, which continues to be STADA’s largest national market, sales in the first three months of 2006 grew by 14% to EUR 127.3 million (first quarter of 2005: EUR 111.5 million). Sales in the German market thus contributed a share of 42.5% to Group sales (first quarter of 2005: 45.5%). Currently, the German market is subject to significant and complex regulatory changes due to the Economic Optimization of Pharmaceutical Care Act (AVWG). The AVWG took effect in the current second quarter, on May 1, 2006. STADA’s current assessment of the Act is preliminary because it depends for the most part on the competitive reaction of numerous different market participants (e.g. pharmacists, doctors, wholesalers, health insurance organizations, competitors). STADA continues to expect, however, that the effects for generics suppliers could, overall, balance each other out. Prior to the passing of the AVWG, in the current second quarter of 2006, there have apparently been bringing-forward effects through stockpiling on the part of distribution channels which STADA believes are significant, although the exact extent of this cannot be estimated. After the AVWG took effect on May 1, 2006, a more restrained sales development can be expected in the Generics core segment in the German market for several weeks or months until the distribution channels, in STADA’s view, have once again depleted their stocks. Outside of Germany, in the reporting period, STADA recorded particularly pleasing sales growth in Italy (by 22% to EUR 25.1 million), in Russia (by 69% to RUB 699.0 million or in Euro by 83% to EUR 20.8 million), in Belgium (by 12% to EUR 23.7 million) and in Spain (by 17% to EUR 15.8 million). In France – despite regulatory measures which took effect on February 1, 2006 and which, among other things, aim to reduce the local price level for drugs – sales development in the first quarter of 2006 was nearly even with EUR 16.3 million (first quarter of 2005: EUR 16.1 million). However, the margin situation was significantly burdened by the regulatory-related price decreases. In view of the expected strong increase in volumes as well as numerous planned new product introductions, STADA continues to expect, from today’s perspective, to be able to achieve an overall increase in sales in France in fiscal year 2006 as compared to the previous year. In the USA, sales in the reporting period of the local currency decreased by 1% to US-$ 9.5 million, whereas the figure in Euro rose by 8% to EUR 7.9 million. Here, sales development of the local STADA sales company continued to be affected by price and margin pressure in the US pharmaceuticals market. For the US business, STADA continues to pursue the goal of significantly reducing the burden on the Group’s operating profit and, in this regard, is investigating all options. In Asia, sales in the first quarter of 2006 were increased by 157% to EUR 18.9 million. Sales were up in the Philippines in particular, with a rise of 12% to EUR 1.8 million and in Vietnam with an increase of 686% to EUR 14.1 million. In Vietnam, the special factor of a one-time tender business with a sales volume of approx. EUR 14 million, of that EUR 12.6 million in the first quarter of 2006, contributed to the positive development. Profit development On the basis of the strong sales development as well as ongoing cost optimization, particularly in the areas of procurement and production as well as sales and marketing, the earnings situation in the STADA Group in the first quarter of 2006 also developed very positively. Net income in the reporting period rose by 30% to EUR 22.1 million (first quarter of 2005: EUR 17.0 million) and thereby at a stronger rate as compared to sales. Earnings per share in the first quarter of 2006 increased to EUR 0.41 (first quarter of 2005: EUR 0.32). Diluted earnings per share in the reporting period amounted to EUR 0.38 (first quarter of 2005: EUR 0.30). The other key earnings figures for the Group also showed high growth rates in the first three months of 2006. Operating profit in the reporting period went up by 32% to EUR 38.2 million (first quarter of 2005: EUR 29.1 million). Earnings before taxes (EBT) rose by 32% to EUR 35.6 million (first quarter of 2005: EUR 26.9 million). Earnings before interest and taxes (EBIT) recorded a plus of 32% to EUR 38.3 million (first quarter of 2005: EUR 29.1 million). Earnings before interest, taxes, depreciation and amortization (EBITDA) was increased in the first three months of 2006 by 39% to EUR 51.7 million (first quarter of 2005: EUR 37.3 million). These results include burdening one-time special effects which amounted to a total of EUR 5.8 million before taxes. Of this, among other things, EUR 3.8 million is accounted for by unscheduled depreciation on intangible assets in connection with the US business as well as EUR 1.9 million in compensation payments to an initial supplier due to the entry of a generic product prior to patent expiry, this because STADA could not assert its own legal interpretation of the day of patent expiry. The one-time special effects from the first quarter of 2005 burdened earnings before taxes at that time by a net of EUR 4.0 million. Adjusted for one-time special effects of the first quarter of 2006, as well as the first quarter of 2005, earnings before taxes would have risen by 34% and net income by 36%. Product development The comprehensive development and approval activities of the Group ensure that the individual STADA sales companies continue to have access to a constant flow of new products. In this way, 103 new products could be launched Group-wide in the first quarter of 2006 (first quarter of 2005: 95 new product launches). Among these was an analgesic patch containing Fentanyl in Germany. Within the framework of the development of the biosimilar products Erythropoietin, Filgrastim and Interferon beta-1a, which is being carried out by BIOCEUTICALS Arzneimittel AG, a company initiated by STADA and predominantly financed via venture capital, the development of the Erythropoietin biosimilar is at the forefront. The documents for submission of the application for approval are currently being compiled. In a “pre-submission meeting” held at the EMEA in February 2006, remaining questions regarding the approval application were cleared up. The approval application is to be submitted to the EMEA on June 30, 2006. In this regard, STADA is striving for approval for the indications dialysis and oncology. From today’s perspective, STADA continues to assume that there is a chance to obtain an EU-wide approval for a biosimilar from Erythropoietin in 2007. Balance sheet and acquisitions With an equity-to-assets ratio of 50.9% as of March 31, 2006 (50.7% as of December 31, 2005) STADA continues to have a solid balance sheet structure. This is also clear in view of net debt, which is with EUR 280.1 million as of March 31, 2006 (December 31, 2005: EUR 234.2 million) as compared to shareholders’ equity of EUR 708.2 million as of March 31, 2006 (December 31, 2005: EUR 684.8 million), in the view of the Executive Board, moderate. STADA continues to be well positioned in terms of its balance sheet for an active acquisition policy. Also in the future, STADA will continue to pursue the strategy of accelerating growth through appropriate acquisitions. Against this backdrop, the Group is continuously investigating suitable projects which, in view of the size the company has reached, can, in the view of the Executive Board, now include larger acquisitions than what was usual for STADA in the past. Outlook In its prognosis for the further business development of the Group, STADA’s Executive Board continues to be optimistic. Indeed, the percentage sales increase achieved in the first quarter of 2006 cannot be carried over to the full year, considering too that the effects of the regulatory changes in Germany as of May 1, 2006 cannot be conclusively assessed. STADA’s business model, however, is proven and sustainable; the operative positioning is aimed at leveraging structural growth potential in the individual national markets with a clear focus on Europe. Regardless of continued and not always calculable regulatory interventions as well as intensive competition in individual national markets, the Executive Board assumes that the many years of robust growth within the Group will proceed in the future. “From today’s perspective, we continue to expect to be able to further show with our growth course a stronger increase in earnings than in sales”, says STADA’s CEO Hartmut Retzlaff, emphasizing the positive outlook. Further information: STADA Arzneimittel AG / Corporate Communications / Stadastrasse 2–18 / 61118 Bad Vilbel,Germany / Phone: +49(0) 6101 603-113 / Fax: +49(0) 6101 603-506 / E-mail: communications@stada.de Or visit our website at www.stada.com. (c)DGAP 15.05.2006 ————————————————————————— Language: English Issuer: STADA Arzneimittel AG Stadastraße 2-18 61118 Bad Vilbel Deutschland Phone: +49 (0)6101 603- 113 Fax: +49 (0)6101 603- 506 email: communications@stada.de WWW: www.stada.de ISIN: DE0007251803, DE0007251845, DE000AOHN446 WKN: 725180, 725184, AOHN44 indices: MDAX Listed: Amtlicher Markt in Frankfurt (Prime Standard), Düsseldorf End of News DGAP News-Service —————————————————————————