The Board of Directors of Ipsen (Paris:IPN) (Euronext : IPN ; ADR : IPSEY), chaired by Marc de Garidel, met on 28 February 2012 to review the Group's results for 2011, published today. The annual financial report, with regards to the regulated information, will be available on the Group's website, www.ipsen.com, Investor Relations section.
Commenting the 2011 performance, Marc de Garidel, Chairman and Chief Executive Officer of Ipsen, stated: "The 2011 results highlight the Group's robust operating performance with a recurring adjusted operating profit up by close to 10%, however these results are impacted by impairment charges and non-recurring costs related to the restructuring announced on June 9 of last year. The Group is executing its transformation at an accelerated pace to better face tomorrow's challenges. Ipsen will continue to invest in its technological platforms, franchises and growth territories while managing the significant austerity measures implemented in France."
Review of full year 2011 results
In 2011, Group drug sales grew 5.7% year-on-year at constant currency, fuelled notably by the dynamic growth of specialty care and the strong resilience of primary care.
Consolidated Group sales reached €1,159.8 million for the full year 2011, up 5.4% year-on-year excluding foreign exchange impact.
Other revenues reached €75.1 million in 2011, up 7.1% year-on-year. In 2011, the Group recorded a revenue of €22.2 million, against €15.0 million a year earlier, mainly related to expenses for the industrial development for OBI-1 and costs related to the European commercial platform invoiced to Inspiration Biopharmaceuticals Inc. as part of the agreements. Royalties received amounted to €9.1 million in 2011, up 46.6% year-on-year, driven by the increase in royalties paid by Medicis, Galderma and Menarini.
Total revenues amounted to €1,234.9 million, up 5.5% compared with 2010.
Cost of goods sold amounted to €249.2 million, or 21.5% of sales, ratio stable year-on-year. The cost of goods sold, positively impacted by the favorable mix related to the growth in specialty care sales and the Group's productivity efforts, was offset by custom duties in certain countries in which the Group recorded strong growth.
Research and Development expenses reached €253.6 million in 2011, up 14.7% year-on-year, mainly driven by increasing OBI-1 industrial development costs and by the major research and development projects conducted during the period on Dysport® and Somatuline®. In addition, research and development costs were also recorded with the discontinuation of certain Irosustat (BN83495) and Combo development programs (Combination of GH and IGF-1).
Selling, general and administrative expenses amounted to €526.6 million at 31 December 2011, or 45.4% of sales, stable year-on-year. In the context of a declining Primary Care in France and in line with the strategy announced on 9 June 2011, the Group continued to selectively allocate resources to growth territories, in particular China, Russia and Brazil. Moreover, the Group wrote down certain receivables from public hospitals in Southern Europe (Greece, Spain, Portugal and Italy).
Reported operating income in 2011 reached €75.8 million, down 41.2%, notably affected by:
- A non-recurring profit of €17.2 million following the enforceable ruling handed down in relation to the commercial dispute between the Group and Mylan, partially offset by other operating expenses mainly composed of consulting fees, changes within the Executive Committee and from the sale of the North American development and marketing rights for Apokyn®;
- A set of restructuring charges related to the strategy announced on 9 June 2011, mainly corresponding to the closure of the Research and Development site in Barcelona and the transfer of the Group's North American subsidiary to the East Coast;
- Non-recurring impairment losses for a total amount of €85.2 million before tax, primarily composed of impairment losses on Increlex® related to decreasing sales forecasts in Europe and supply uncertainties in Lonza Hopkinton plant and impairment losses related to Primary care in France.
Excluding purchase price allocation impacts, non-recurring impairment charges and restructuring costs, the Group's recurring adjusted operating income amounted to €200.7 million in 2011, or 17.3% of sales, up 9.6% year on year.
The effective tax rate amounted in 2011 to (32.3)% of profit from continuing activities before tax excluding the share of loss from associates, notably affected by the impairment losses recorded in 2011 and the non-recurring restructuring costs related to the new strategy announced on June 9, 2011.
Consolidated net profit amounted to €0.9 million at 31 December 2011 (attributable to the shareholders of Ipsen S.A.: €0.4 million), compared to €95.7 million at 31 December 2010 (attributable to the shareholders of Ipsen S.A.: €95.3 million).
The 2011 consolidated net income was strongly and notably impacted by:
- The net impacts of the non-recurring items that affected the Group's operating income, described above;
- The impact of the non-cash and non-recurring impairment charges for a total amount of €26.8 million after tax recorded on the convertible bonds issued by Inspiration Biopharmaceuticals Inc. and subscribed by the Group;
- The impact of the research tax credit on the Group's effective tax rate;
- The share of loss/profit from associated companies of €54.5 million resulting from:
- the 22% stake held by the Group in Inspiration Biopharmaceuticals Inc.'s net result, i.e. a €20.2 million loss
- a €34.3 million non-recurring net impairment loss composed of :
- a €7.5 million non-recurring impairment loss on the intangible asset recognized within the framework of the purchase price allocation in Inspiration Biopharmaceuticals Inc.'s accounts
- a €26.8 million impairment loss on the Group's stake in Inspiration Biopharmaceuticals Inc.
The depreciation of some of the Group's tangible, intangible and financial assets which impacted the 2011 consolidated net profit amounted to a non-cash and non-recurring total amount of €161.5 million before tax and €114.1 million after tax.
Excluding the impacts of the purchase price allocation on the Group's acquisitions and the non-recurring elements mentioned above, the recurring adjusted fully diluted EPS amounted to €1.68 at 31 December 2011, up 2.44% compared to €1.64 a year ago.
Net cash generated by operating activities amounted to €175.4 million in 2011, down 30.9% year-on-year. In 2010, the Group had recognized the remaining deferred revenue relating to its partnership with Roche for a total amount of €48.7 million following the return of the development rights of taspoglutide on 2 February 2011. At 31 December 2011, the net cash position stood at €122.3 million, compared with a net cash position of €156.0 million a year earlier, notably affected by the Group's active partnership policy and by the subscriptions by the Group of two convertible bonds issued by Inspiration Biopharmaceuticals Inc.
Dividend for the 2011 financial year proposed for the approval of Ipsen's shareholders assembly
Ipsen's Board of Directors, which met on 28 February 2011, has decided to propose at Ipsen's annual shareholders' meeting to be held on 1 June 2012 the payment of a dividend of €0.80 per share, stable year-on-year, representing a pay-out ratio of approximately 47% of recurring adjusted consolidated net profit (attributable to the Group's shareholders), compared to a pay-out ratio of approximately 49% for the 2010 financial year.
Financial objectives for 2012
Based on information currently available, the Group has set the following drug sales targets for 2012:
- Specialty Care drug sales growth year-on-year between 8.0% and 10.0%
- Primary Care drug sales decrease year-on-year of approximately 15.0%
In addition, the Group is targeting a 2012 recurring adjusted operating margin of approximately 15.0% of its sales. This objective includes declining profitability of primary care in France, in particular as a result of the delisting of Tanakan® (effective as of 1 March 2012) and enforced price cuts. The impact of this decline on the Group's 2012 recurring adjusted operating margin is estimated at approximately 300 to 400 basis points.
This difficult environment confirms the Group's strategic choice to find a partner for its Primary Care commercial platform in France.
In 2012, the Group will continue to invest in its technological platforms, franchises and growth territories; it will also leverage the following growth drivers presented last June during its strategy update:
- Accelerated growth of its specialty care drugs resulting from the implementation of the franchise-based organization focused on the Group's core drugs: Somatuline®, Dysport® and Decapeptyl®. In addition, Hexvix®, a bladder cancer detection drug in-licensed by Ipsen in September 2011, will support the growth of the uro-oncology franchise.
- Continued performance in fast-growing emerging countries which benefit from the Group's selective commercial resources allocation, notably China, Russia and Brazil. Moreover, the Group expects sustained growth in Germany and in the UK.
In addition, the Group and its partner Inspiration Biopharmaceuticals Inc. are getting ready for the launch of IXinity® (IB1001) in Europe, expected in early 2013.
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