30.7.2003: Meldung: Aventis Second-Quarter and First-Half Results
* Q2 core business sales activity (excluding currency impact) increases 6.9% to euro 4.17 billion (4.74 billion USD) * Q2 U.S. sales activity rises 14.3% to euro 1.6 billion (1.8 billion USD), representing 38.4% of core business sales * Q2 core business net income up 18.8% to euro 603 million (685 million USD) and earnings per share rises 19.3% to euro 0.76 (0.86 million USD) Allegra and Lovenox Q2 performance in line with 2003 objectives * Allegra/Telfast global and U.S. sales activity up 8.6% * Lovenox/Clexane global sales activity rises 21.3%, U.S. sales growth accelerates to 18.5% Other strategic brands and vaccines continue to deliver very strong growth * Taxotere sales activity ahead 25%, increasing use in treating breast and lung cancer * Delix/Tritace sales activity climbs 17.3%, set to become fourth Aventis blockbuster in 2003 * Lantus sales activity advances 81%, now the U.S. insulin market leader * Actonel Aventis sales grow 64.4% as new once-weekly version gains market share * Human vaccines sales rise 23.7%, driven by strong performance in U.S. market Aventis confirms 2003 core business outlook despite currency impact
"We are pleased with our performance in the second quarter in which we delivered solid top-line and earnings growth despite adverse currency developments. Aventis remains on track to achieve its full-year growth targets for the core business: high single-digit percentage sales activity growth and earnings per share growth in the mid to high teens," said Igor Landau, Chairman of the Management Board.
STRASBOURG, France, July 29 /PRNewswire-FirstCall/ -- CONSOLIDATED GROUP RESULTS
Aventis reported today consolidated group sales of euro 8.622 billion (9.801 billion USD) for the first half of 2003 compared to euro 11.304 billion (12.849 billion USD) in the year-ago period. The sales decline was mainly due to the divestment of Aventis CropScience and Aventis Animal Nutrition during the first half of 2002 and the weakening of some currencies against the euro. Group net income for the first half of 2003 was euro 813 million (924 million USD) compared to euro 1.488 billion (1.691 billion USD) in the same period of 2002, which included net gains related to the Aventis CropScience divestment. Consolidated earnings per share (EPS) were euro 1.03 (1.17 USD) compared to euro 1.87 (2.13 USD).
Sales of the core business (prescription drugs, human vaccines, 50% equity interest in the animal health joint venture Merial, and corporate activities) on an activity basis (excluding currency translation effects) rose 6.9% to euro 4.17 billion (4.74 billion USD) in the second quarter and rose 5.2% to euro 8.14 billion (9.25 billion USD) in the first half of 2003. Core net income increased 18.8% to euro 603 million (685 million USD) from euro 507 million (576 million USD) in the second quarter of 2002. EPS in the second quarter increased 19.3% to euro 0.76 (0.86 USD) from euro 0.64 (0.73 USD) despite the negative impact of adverse exchange rate developments. For the first six months of 2003, earnings per share rose 16.5% to euro 1.38 (1.57 USD).
H1 2003 H1 2002 Total AVENTIS CORE BUSINESS Q2 2003 Q2 2002 Total variance KEY FIGURES (1) (2) variance (in euro million, except EPS) 8,141 8,799 -7.5 % Sales 4,170 4,447 -6.2 % 5.2 % Activity variance(3) 6.9 % 1,088 937 16.0 % Net income 603 507 18.8 % 1.38 1.18 16.5 % EPS (in euro) 0.76 0.64 19.3 % (1) Not subject to a review by the auditors (2) Aventis Core Business comprises activities that the Group considers to be strategic and intends to retain. It includes prescription drugs, human vaccines, a 50% equity interest in the Merial animal health joint venture and corporate activities. (3) Excluding currency translation effects Percentages are calculated before rounding the data in million euros
"Our strategic brands are delivering very strong growth, particularly our newer products such as the long-acting insulin Lantus and the osteoporosis treatment Actonel, while our human vaccines business continues to build on its global leadership position. Taxotere is expanding its status as a standard of care in the treatment of breast and lung cancer and three new indications are anticipated for submission for regulatory approval in the U.S. and EU. At the same time, the anti-thrombotic agent Lovenox is regaining momentum for long-term future growth, while Allegra is delivering in line with our 2003 expectations," Landau said.
"We are making good progress on our pipeline. In the second quarter, the rapid-acting insulin glulisine, was submitted for regulatory approval in the U.S. and EU, and three other new products in key therapeutic areas are planned for regulatory submission this year," Landau added.
Note: Unless otherwise stated, all references below to sales growth are on an activity basis, i.e. excluding currency translation effects.
Core business net sales in the second quarter rose 6.9% to euro 4.170 billion (4.740 billion USD). Reported core business sales declined 6.2% as a result of negative currency developments that accounted for 13.1 percentage points (p.p.) of the decline and were mainly attributable to the weakness of the U.S. dollar, which had a negative impact of 8.6 p.p. on the sales evolution.
Sales of strategic brands and vaccines in the second quarter totaled euro 2.696 billion (3.065 billion USD), a 20% increase compared to the year-ago period, and accounted for 64.6% of total core business sales. Strategic brand sales rose 20.0% to euro 2.363 billion (2.686 billion USD) in the second quarter, while human vaccines sales advanced 23.7% to
euro 333 million (379 million USD), helped by strong sales of pediatric combination vaccines in the United States.
Sales activity of products in the rest of the core business portfolio fell by about 12%. This decline was due to the negative evolution of sales of some older products that are exposed to cost-containment measures, price controls and generic competition as well as to a slowdown in the bulk and toll manufacturing activities.
In the United States, core business sales rose 14.3% to euro 1.603 billion in the second quarter, accounting for 38.4% of total core business sales. Strategic brands and vaccines accounted for approximately 87% of total U.S. core business sales, driven by the three Aventis blockbusters -- the allergy medication Allegra, the oncology drug Taxotere and the anti-thrombotic agent Lovenox/Clexane. Robust sales growth from the new long-acting insulin Lantus and vaccines sales growth of 22% also contributed significantly to the strong performance in the U.S.
In France, second-quarter sales declined 4.2% to euro 513 million, as government measures to reduce healthcare costs, including efforts to bolster the use of generic drugs and reduce antibiotic consumption, hampered sales of several non-strategic products and offset the strong performance of the cardiology and oncology franchises. In Germany, sales fell 2.9% to euro 263 million as the ongoing growth of strategic brands -- particularly Lovenox/Clexane and Taxotere -- failed to offset the negative impact of the government""s cost-containment measures and increased parallel imports. Most European regions such as United Kingdom/Ireland, Spain/Portugal and Austria/Switzerland reported higher sales. However, sales in Italy declined, also as a result of government cost-containment measures.
In Japan, the world""s second-largest pharmaceutical market, sales rose 2.8% to euro 202 million in the second quarter. Growth factors included expanded use of the antihistamine Allegra for the treatment of skin diseases, strong sales of the diabetes treatment Amaryl, now the leading drug in its class, and the ongoing launch of the osteoporosis treatment Actonel. Aventis has restructured its oncology unit in Japan, reinforcing its focus on breast, gastric and non-small cell lung cancer.
SELECTED SALES OF AVENTIS STRATEGIC BRANDS AND VACCINES (1) (in euro million) H1 2003 H1 2002 Activity Q2 Q2 Activity Variance (2) 2003 2002 variance(2) 919 1,050 6.2 % Allegra/Telfast global 501 565 8.6 % sales 751 874 5.8 % U.S. sales 433 492 8.6 % 799 809 15.9 % Lovenox/Clexane global 411 397 21.3 % sales 490 538 12.1 % U.S. sales 248 259 18.5 % 667 596 30.2 % Taxotere global sales 343 320 25.0% 363 331 35.0 % U.S. sales 185 181 26.8% 504 445 20.9 % Delix/Tritace global 263 239 17.3 % sales (Not sold by Aventis in the U.S.) 199 124 90.1 % Lantus global sales 109 72 81.0 % 153 99 91.1 % U.S. sales 83 58 75.4 % 39 15 N.S. Ketek global sales 13 6 N.S. (Not yet sold by Aventis in the U.S.) 81 54 71.7 % Actonel sales 48 33 64.4 % consolidated by Aventis(3) (U.S. sales consolidated by P&G) 683 643 23.1 % Human vaccines sales 333 311 23.7 % consolidated by Aventis(4) 385 358 32 % U.S. sales 182 184 22 % (1) Not subject to a review by the auditors (2) Excluding currency translation effects (3) Cooperation with Procter & Gamble; Actonel sales as consolidated by Aventis including sales in Japan (4) Vaccines sales in Europe through the Aventis Pasteur MSD joint venture are not consolidated by Aventis N.S. Not significant
Allegra/Telfast (fexofenadine): Sales of the non-sedating allergy medication grew 8.6% in the second quarter, in line with the same percentage increase in the U.S. market. Global sales in the first half of 2003 rose 6.2%, while U.S. sales climbed 5.8% despite a weaker and shorter pollen season compared to 2002 and changes in the reimbursement of prescription antihistamines by managed care organizations. The performance of Allegra continued to be in line with the company""s stated expectation of delivering single-digit U.S. sales growth in 2003. Allegra monthly total prescriptions for the first half of 2003 rose 6% compared to the same period in 2002, according to IMS Health data. Prescription growth for the remainder of 2003 will depend on the severity of the fall U.S. allergy season, which was unusually strong in 2002.
Lovenox/Clexane (enoxaparin sodium): Sales of this anti-thrombotic agent rose 18.5% in the U.S., returning to historical double-digit growth rates, while global sales increased 21.3%. The improved U.S. performance was the result of an action plan to capitalize on the untapped growth potential of Lovenox in replacing unfractionated heparin in the treatment of medical patients at risk for deep vein thrombosis (DVT) as well as patients with acute coronary syndrome. In July, Aventis received FDA approval for a new label with revised information regarding the use of Lovenox in patients with mechanical prosthetic heart valves, including pregnant women with mechanical prosthetic heart valves.
Taxotere (docetaxel): Worldwide sales rose 25.0% in the second quarter, while U.S. sales increased 26.8%, bolstered by the increasing use of the chemotherapy agent in the treatment of breast and non-small cell lung cancer (NSCLC). An important catalyst has been the recent U.S. and EU approvals for the first-line treatment of NSCLC, the most common form of lung cancer.
Delix/Tritace (ramipril): The ACE inhibitor, which generated a 17.3% increase in second quarter sales, is expected to become the next blockbuster drug for Aventis due to increasing use among people with hypertension and/or diabetes seeking to reduce the risk of cardiovascular events.
Lantus (insulin glargine): Sales of the long-acting insulin surged 81% worldwide, with sales rising 75% in the U.S. Lantus was the leading insulin in the U.S. on a total prescription (TRx) basis at the end of June with a market share of 18.6%, according to IMS Health data. The global rollout of Lantus is progressing. Aventis expects to complete the launch in remaining key markets worldwide, including France and Italy, by the end of 2003.
Ketek (telithromycin): Sales of the world""s first ketolide antibiotic doubled in the second quarter, boosted by a strong performance in France, the world""s third largest antibiotic market. More than 3.6 million people in 40 countries have benefited from Ketek""s optimally targeted spectrum of activity for uncomplicated, mild to moderate respiratory tract infections.
Aventis is continuing discussions with the U.S. Food and Drug Administration (FDA) on submitting a response to a second "approvable letter" issued by the FDA in January 2003. The recent approvable letter requested additional analysis and information related to the company""s 24,000-patient usual care study but did not request any additional studies. Aventis remains
committed to gaining U.S. approval for Ketek and anticipates submitting a response in time to gain approval in early 2004.
Actonel (risedronate): Benefiting from sustained growth of the once-weekly version in the U.S. and EU as well as its ability to rapidly reduce the risk of fractures, total Alliance sales of the osteoporosis treatment with partner Procter & Gamble rose 44% in the second quarter to euro 170 million. In the U.S., the Actonel share of bisphosphonate sales is now 22%, up eight percentage points compared to last year. Sales consolidated by Aventis amounted to euro 48 million in the second quarter.
Human vaccines sales rose 23.7% during the second quarter, primarily due to ongoing growth in the U.S. market. Pediatric combination vaccines were among the key drivers, particularly the successful launch of the trivalent vaccine Daptacel in the U.S. in 2002. Other contributing factors to the growth in the U.S. were increased sales of adult booster vaccines and additional supply of meningitis vaccines for the college market. International sales also were robust, reflecting strong performances in Mexico and Canada. Sales in Europe by the Aventis Pasteur MSD joint venture, which are not consolidated by Aventis, were euro 132 million in the second quarter, up 11% compared to the year-ago period.
PROGRESS WITH SUBMISSIONS FOR NEW PRODUCTS AND KEY INDICATIONS
Aventis achieved an important milestone during the second quarter when insulin glulisine, a rapid-acting insulin, was submitted for regulatory approval in the U.S. and EU. Insulin glulisine will expand the Aventis diabetes portfolio and complement the long-acting insulin Lantus.
Three other new products are currently anticipated for regulatory submission in 2003:
* The clinical activities associated with the U.S. submission of the inhaled corticosteroid Alvesco (ciclesonide) have been completed. Aventis is co-developing this compound with Altana Pharma in the U.S. for use in both adults and children, and Aventis is responsible for the U.S. regulatory filing. * Analysis of results from the lead phase III clinical trial for the targeted anti-cancer therapy Genasense (oblimersen sodium) will allow for a decision on a potential U.S. regulatory submission by the end of the third quarter. Enrollment is complete for the studies in first-line metastatic melanoma (skin cancer) as well as in chronic lymphocytic leukemia and multiple myeloma (two different forms of blood cancer) with partner Genta Inc. * Menactra, the first quadrivalent conjugate vaccine for the prevention of meningococcal meningitis (four serogroups), is planned to be submitted for U.S. regulatory approval earlier than expected by the end of 2003 for use in children age 11 and older as well as adults. Anothersubmission is planned for 2004 for use in younger children. Pentacel, a new pediatric combination vaccine against five diseases, is planned to be submitted for U.S. approval in 2004.
Three new indications for the oncology agent Taxotere, for its use in patients with adjuvant breast cancer, prostate cancer and gastric cancer are planned to be submitted for U.S. and EU regulatory approval.
CORE BUSINESS PROFITABILITY ANALYSIS
Gross margin as a percentage of sales declined to 74.3% in the second quarter from 74.6% in the year-ago period due to currency translation effects. At comparable exchange rates, the gross margin would have been 75.1%, an increase of 0.5 percentage point over the same period in 2002.
Selling, general and administrative expenses and other revenues net were euro 1.286 billion in the second quarter (31% of sales), an 11.8% decrease compared to euro 1.458 billion (33% of sales) in the year-ago period. Excluding currency translation effects, SG&A and other revenues net increased 2.4%. This development was mainly driven by higher advertising and commission expenses to support strategic brands, especially in the U.S. market. Foreign exchange gains and losses amounted to a gain of euro 17 million in the second quarter compared to a gain of euro 66 million in the year-ago period.
R&D expenses totaled euro 691 million (16.6% of sales) compared to euro 816 million (18.3% of sales) in the second quarter of 2002. R&D expenses declined 5.0% on an activity basis. However, R&D expenses would have risen 1% compared to the year-ago period when excluding euro 49 million in milestone payments made in the second quarter of 2002 to Genta Inc. as part of the cooperation agreement for Genasense.
Restructuring expenses amounted to euro 44 million in the second quarter compared to euro 12 million in the year-ago period.
Equity in earnings of affiliated companies amounted to euro 63 million in the second quarter compared to euro 66 million in the year-ago period. The Merial animal health joint venture (with Merck & Co.) was the largest contributor to equity income. Sales by the Merial joint venture were euro 413 million in the second quarter, down 3% from the year-ago period on an activity basis.
EBITA (operating profit before goodwill amortization plus equity in earnings of affiliated companies) amounted to euro 1.141 billion (including euro 55 million in costs related to an ongoing productivity enhancement plan) in the second quarter compared to euro 1.098 billion in the year-ago period. Excluding the currency translation impact, EBITA growth would have been 20%. The EBITA margin as a percentage of sales increased 2.7 percentage points to 27.4% in the second quarter from 24.7% in the year-ago period.
Miscellaneous non-operating income and expenses amounted to a loss of euro 15 million compared to a loss of euro 78 million in the year-ago period. Aventis benefited from a favorable adjustment in the market value of biotechnology investments, including Millennium and Genta.
Net income increased 18.8% to euro 603 million from euro 507 million in the second quarter of 2002, while earnings per share (EPS) rose 19.3% to euro 0.76 from euro 0.64 in the year-ago period. Before goodwill amortization, EPS rose 12.6% to euro 0.91 from euro 0.81 in the year-ago period. Costs related to a productivity enhancement plan initiated at the start of 2003 negatively impacted EPS by euro 0.05 in the second quarter of 2003.
The core business generated free cash flow of euro 682 million in the first half of 2003, compared to euro 10 million in the year-ago period, benefiting from lower working capital requirements, which were euro 520 million compared to euro 1.048 billion in the comparable period in 2002. Cash flow was affected negatively in 2002 from a significant reduction in the asset securitization program, which led to a cash outflow of euro 370 million. In 2003, this program has been maintained at a level comparable to that in 2002. Change in inventories of euro 310 million was slightly higher compared to the first half of 2002. Pension funding increased significantly to euro 149 million in the first half of 2003 compared to euro 50 million in the same period of 2002.
NON-CORE BUSINESS PROFITABILITY ANALYSIS
Non-core business sales were euro 263 million in the second quarter of 2003 compared to euro 1.028 billion in the year-ago period, which included consolidated sales of Aventis CropScience and Aventis Animal Nutrition before their divestiture during the first half of 2002. The therapeutic proteins business Aventis Behring achieved second-quarter sales of euro 246 million, an increase of 1% compared to the year-ago period, while half-year sales fell 4% to euro 462 million because of pricing pressure. Aventis is continuing exclusive negotiations with CSL Ltd. of Australia concerning the divestment of this business. Non-core EBITA in the second quarter was a gain of euro 23 million compared to a loss of euro 323 million in the year-ago period.
Non-core net income was euro 9 million in the second quarter compared to euro 556 million in the year-ago period as the net gains on the disposal of Aventis CropScience and Aventis Animal Nutrition was booked in the second quarter of 2002.
Net cash outflow related to the non-core businesses totaled
euro 525 million for the first six months of 2003, mainly due to one-time payments of euro 390 million including euro 173 million for methionine litigation and euro 85 million for StarLink litigation. Most of these items had already been provisioned in 2002. Furthermore, Aventis Behring free cash flow had a negative impact.
AVENTIS GROUP NET DEBT
Aventis net debt at the end of June 2003 was euro 4.242 billion, reflecting an increase, which is typical of the first half of the year, of euro 790 million compared to the end of 2002. The main cash transactions that led to the increase in net debt were the dividend payment of euro 568 million, the share repurchase program of euro 231 million and the early redemption of quasi-equity financing instruments of euro 204 million. The positive free cash flow of euro 157 million (euro 682 million in free cash flow for the core business and a cash outflow of euro 525 million for the non-core business) and the disposal of the 9.9% of Rhodia shares contributed positively to the evolution of the net debt.
AVENTIS MAKING PROGRESS IN SHARE REPURCHASE PROGRAM
During the first half of 2003, Aventis repurchased 5.2 million of its shares, or 1.1% of the trading volume. Aventis held approximately 12.1 million of its own shares at the end of the second quarter, representing 1.5% of the company""s share capital of 799,576,080 shares. The average number of outstanding shares in the second quarter of 2003 was 789.5 million. Shares are purchased on the open market or in privately negotiated transactions, from time to time, based on market conditions. The repurchased shares, which are being used for general corporate purposes, are booked against stockholders"" equity and are excluded from earnings per share (EPS) calculations.
OUTLOOK: AVENTIS CONFIRMS FULL-YEAR FINANCIAL TARGETS
Following the positive sales and earnings performance for the first half of 2003, Aventis is again reaffirming the full-year targets established at the start of the year for the core business.
For the full year, Aventis expects core business percentage sales growth in the high single digits, driven by the further expansion of strategic brands and vaccines, while earnings per share are expected to grow in the mid to high teens, which includes the costs related to the productivity enhancement plan initiated at the start of 2003 and based on the assumption of a euro/dollar average rate of $1.10 for the full year.
Aventis is dedicated to treating and preventing disease by discovering and developing innovative prescription drugs and human vaccines. In 2002, Aventis generated sales of euro 17.6 billion, invested euro 3.1 billion in research and development and employed approximately 71,000 people in its core business. Aventis corporate headquarters are in Strasbourg, France.
For more information, please visit: http://www.aventis.com/.
Definition of EBITA
EBITA is an unaudited non-GAAP measure that we define as operating income (loss), excluding goodwill amortization, plus equity in earnings from affiliated companies. We have included EBITA information because it is one of the measurements we use to assess our financial performance. Our EBITA may not be comparable to EBITA as defined by other companies. We believe EBITA is a measure commonly used by financial analysts and others in the pharmaceutical industry.
Definition of EPS
Basis EPS before goodwill amortization is an unaudited non-GAAP measure that we define as basic earnings per share (EPS) excluding goodwill amortization. We have included basic EPS before goodwill amortization since we consider this measurement to be relevant to an understanding of the performance of our activities.
Statements in this news release other than factual or historical information, including but not limited to statements of or relating to Aventis"" financial projections, plans and objectives for future operations, predictions of future product sales or economic performance, and assumptions underlying or relating to any such statements, are forward-looking statements subject to risks and uncertainties. Actual results could differ materially depending on factors such as the availability of resources, the timing and effects of regulatory actions, the success of new products, the strength of competition, the success of research and development efforts, the outcome of significant litigation, the effectiveness of patent protection, the effects of currency exchange fluctuations, and other factors. Estimates of future product sales can be particularly subject to uncertainty due to the multitude of factors that could cause actual results to differ materially. Such factors include, but are not limited to, adverse outcomes in patent infringement litigation; entry into the market of new products, or of generic or over-the-counter versions of Aventis"" products or of competing products; undesirable or untimely regulatory or legislative actions, such as forced conversion of prescription drugs to over-the-counter status; inability to obtain regulatory approval to market drugs for certain indications; and limitations on revenues imposed by volume purchasers, government entities, and by operation of law. Aventis disclaims any obligation to revise or update any such forward-looking statement. Additional information regarding risks and uncertainties is set forth in the current Annual Report on Form 20-F of Aventis on file with the Securities and Exchange Commission.
Brand names appearing in italics throughout this document are trademarks of Aventis, and/or its affiliates, with the exception of trademarks that may be used under license by Aventis and/or its affiliates, such as Actonel, a trademark of Procter & Gamble Pharmaceuticals; Alvesco, a trademark of Altana Pharma AG; and Genasense, a trademark of Genta Inc.
Note to editors: This press release was issued earlier today in France by Aventis S.A. . This version contains key figures converted from euros into U.S. dollars (USD) at the exchange rate of 1 euro = 1.1367
Complete financial tables are available on our website at: http://www.aventis.com/ or by calling 917-965-1413.