PRESS RELEASE: STADA: satisfactory growth in H1/2008 - subdued growth dynamic
STADA Arzneimittel AG / Half Year Results
13.08.2008
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Important items at a glance
? H1/2008: Preliminary results confirmed - satisfactory growth despite
difficult market environment:
o Group sales EUR 822.8 million (+12%)
o Operating profit EUR 109.5 million (+8%) or adjusted EUR 114.4
million (+10%)
o Earnings before taxes (EBT) EUR 88.1 million (+3%) or adjusted EUR
92.0 million (+4%)
o Net income EUR 64.7 million (+11%) or adjusted EUR 67.2 million
(+14%)
? Outlook: from today's perspective the Executive Board expects
o subdued growth dynamic in H2/2008
o significant growth in sales and earnings for the years to come
The financial figures, published by STADA Arzneimittel AG today, on August
13, 2008, in the report on the first six months of 2008 unconditionally
confirm the preliminary results (see the company's ad hoc release from July
28, 2008). Accordingly, as expected, STADA was exposed to a difficult
market environment in various national markets in the first half of 2008.
'Despite difficult framework conditions we were once again able to achieve
double-digit growth in sales as well as in net income. Under the particular
circumstances this is a satisfactory result' said Hartmut Retzlaff,
Chairman of the Executive Board of STADA Arzneimittel AG.
In the outlook, the Executive Board assumes that the business trends will
recover in several national markets as compared to the first half of 2008,
but that overall the Group's business results in the second half of 2008
will be characterized by a subdued growth dynamic - particularly compared
to the operationally very good second half of 2007. However, from today's
perspective the Executive Board expects again significant growth in sales
and earnings in the years to come.
Sales and earnings development of the STADA Group
Group sales increased by 12% to EUR 822.8 million in the first six months
of the current fiscal year (first half of 2007: EUR 737.4 million). Sales
of STADA's international business activities recorded an increase of 18% to
EUR 525.4 million in the reporting period (first half of 2007: EUR 446.4
million), thus rising once again at a higher rate as compared to Group
sales. In the first six months of 2008 sales achieved by the Group outside
Germany had a share of 63.9% (first half of 2007: 60.5%) of Group sales.
Generics, which continues to be the significantly larger core segment
(share in Group sales in H1/2008: 68.3%), recorded sales growth of 1% to
EUR 561.7 million in the reporting period (first half of 2007: EUR 554.9
million). Sales of the core segment Branded Products (share in Group sales
in H1/2008: 22.7%) showed an increase of 31% to EUR 186.4 million in the
first half of 2008 (first half of 2007: EUR 142.1 million).
In net income, STADA recorded an increase of 11% to EUR 64.7 million in the
reporting period (first half of 2007: EUR 58.3 million). Earnings per share
in the first six months of 2008 amounted to EUR 1.10 (first half of 2007:
EUR 1.00) and diluted earnings per share in the first six months of the
current fiscal year amounted to EUR 1.06 (first half of 2007: EUR 0.96).
The other earnings figures recorded the following growth rates in the first
six months of 2008 as compared to the first half of 2007: operating profit
by 8% to EUR 109.5 million (first half of 2007: EUR 101.6 million),
earnings before taxes (EBT) by 3% to EUR 88.1 million (first half of 2007:
EUR 85.5 million), earnings before interest and taxes (EBIT) by 9% to EUR
110.6 million (first half of 2007: EUR 101.6 million) and earnings before
interest, taxes, depreciation and amortization (EBITDA) by 7% to EUR 148.9
million (first half of 2007: EUR 139.5 million).
Overall, these earnings figures are thereby burdened by one-time special
effects in the amount of EUR 3.9 million before taxes and EUR 2.5 million
after taxes (first half of 2007: burden in the amount of EUR 2.6 million
before taxes and EUR 0.9 million after taxes). Net income adjusted for
special effects thus reached EUR 67.2 million in the first half (first half
of 2007: EUR 59.2 million), being by 14% above the same period in the
previous year.
Operating profit in the Generics segment amounted to EUR 77.2 million in
the first half of 2008 (first half of 2007: EUR 100.5 million), thus
resulting in a sales-related operating segment margin for Generics of 13.7%
(first half of 2007: 18.1%). The Branded Products segment recorded an
operating segment profit of EUR 36.4 million in the reporting period (first
half of 2007: EUR 24.2 million), corresponding to an operating segment
margin for Branded Products of 19.5% (first half of 2007: 17.1%).
Regional development in the STADA Group
Despite mixed business development, STADA increased sales in the Group's
ten largest national markets by a total of 13% in the first half of 2008.
In Germany, which continues to be STADA's biggest national market, sales
rose by 2% to EUR 297.4 million in the first half of 2008 (first half of
2007: EUR 291.0 million). Thus, German business activities contributed
36.1% to Group sales in the reporting period (first half of 2007: 39.5%).
In this context, sales in the Branded Products segment in Germany went up
by 26% to EUR 65.9 million in the first half of 2008 (first half of 2007:
EUR 52.2 million) - also due to stockpiling on the part of distribution
channels in advance of price increases for significant parts of the
portfolio of this segment as of July 1, 2008 - while sales in the Generics
segment decreased by 4% to EUR 227.9 million (first half of 2007: EUR 236.9
million).
According to data provided by IMS Health, with 11.4% the STADA Group's
market share in the German generics market in the first half of 2008 was
higher than the market share in the first six months of 2007, with 10.8%.
In the Generics segment the Group's individual sales labels showed very
different business developments, also in the second quarter and thus also
overall for the reporting period of the first half year.
The sales label ALIUD PHARMA, which traditionally operates in the market
without a sales force, based on mailing concepts and which thus, due to
low-price cost structures, is able to pursue more price-aggressive sales
strategies, reported a sales increase of 26% to EUR 122.0 million in the
first half of 2008 (first half of 2007: EUR 96.5 million). This label has
thereby become the strongest German generics label in terms of sales in the
STADA Group and occupies position 3 in the German generics market.
The STADA Group's classic generics sales label in Germany, STADApharm,
which, after the restructuring of sales activities in the fourth quarter of
2007 now operates without its own doctors-related sales force, recorded a
sales decrease of 26% to EUR 96.3 million in the first half of 2008 (first
half of 2007: EUR 129.9 million) and was thus below the original
expectations. In the German generics market this label occupies position 4.
Another Generics sales label from the STADA Group in Germany, cell pharm, a
special supplier for the indication areas oncology, nephrology and
diabetes, also suffered from the structural market changes in Germany in
the first half of 2008. With sales decreasing by 11% to EUR 9.1 million
(first half of 2007: EUR 10.3 million), particularly the profitability of
cell pharm was also clearly below expectation, considering that for the
market launch of the Group's first biosimilar, silapo(TM) (active ingredient
Epo-zeta), on February 1, 2008, significant marketing and sales expenses
were incurred for this label in the first half of 2008. For this reason the
Executive Board launched a sales realignment for this sales label in the
second quarter of 2008. As a result, the Executive Board expects a revival
of cell pharm sales for the second half of 2008. In this context, an
important role will be played by the expected sales increase of silapo(TM),
even if application restrictions for all Erythropoietin products in the
oncology indication area currently imposed by regulatory authorities will
probably subdue the sales increase of silapo(TM) in this indication area.
Overall the Executive Board expects a revival of demand for STADA's
generics labels in the second half of 2008. However, this revival in demand
is opposed by an increased margin pressure. In the course of the
establishment of new reference prices as well as new co-payment exemption
limits for numerous active pharmaceutical ingredients as of June 1, 2008
and, thus, competitive price pressure arising in the current quarter, ALIUD
PHARMA reduced the prices comprehensively and thereby stronger than
originally expected not only to the amount of the new reference prices, but
to the clearly lower level of the co-payment exemption limits, while
STADApharm responded to this lower price level of co-payment exemption
limits for individual products only. In addition, the German generics
labels are faced with demands by health insurance organizations to
significantly increase the discount level for existing discount agreements.
For both labels STADA is prepared to respond actively to competitive
pressure by means of further significant price reductions in the remaining
course of the year.
Moreover, the Executive Board does not rule out that new discount
agreements, also based on individual active ingredients, could be tendered
in the German market to a notable extent as well as that further legal
challenges of new or existing discount agreements could occur. This would
be associated with a further increased margin pressure and/or significant
sales and earnings risks due to legally uncertain framework conditions.
Overall, against the backdrop of the developments of the individual
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