On July 27, 2017 Ipsen (Euronext: IPN; ADR: IPSEY), a global specialty-driven biopharmaceutical group, reported financial results for the first half of 2017 (Press release, Ipsen, JUL 27, 2017, View Source [SID1234519893]).

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H1 2017 Highlights

Strong operating performance of 18.8%1 Group sales growth and Core Operating Income margin improvement by 1.2 points to 26.2% of sales
Specialty Care sales growth of 23.1%1 reflects continued Somatuline momentum and includes contribution of key new products Cabometyx and Onivyde
Consumer Healthcare sales growth of 1.3%1 including contribution of newly acquired products
Upgraded full year 2017 guidance of Specialty Care sales growth greater than 24.0%1, slight growth1 of Consumer Healthcare sales, and Core Operating Income margin greater than 25.0% of sales
H1 2017 Key figures

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David Meek, Chief Executive Officer of Ipsen, stated: “Our performance in the first half of 2017 exceeded expectations, leading to an improved financial outlook for the full year. Sales grew in the first half by an impressive 19% year-on-year and core operating margin improved by 1.2 points, both driven by Specialty Care performance. In the second half of the year, we expect Somatuline to continue along its positive growth trajectory and also an increasing contribution from our new products Cabometyx in Europe and Onivyde in the U.S. We remain focused on the successful execution of the commercial portfolio as well as the transformation of our R&D model to build an innovative and sustainable pipeline.”

Full year 2017 upgraded guidance

Following the strong performance in the first half of 2017, the Group updates its financial targets for the full year 2017:

Specialty Care sales growth upgraded to greater than +24.0%, reflecting the strong momentum for Somatuline and Cabometyx;
Revised slight growth of Consumer Healthcare, reflecting primarily lower sales expected in the second half for Prontalgine following a decree from the French Minister of Health on July 12, 2017 for all medicines containing codeine (e.g. Prontalgine), dextromethorphan, ethylmorphine or noscapine to be available by prescription only to prevent misuse;
Core Operating Income margin upgraded to greater than 25.0% of sales, based on the improved sales guidance and assuming additional investments to support the Cabometyx and Onivyde launches, increased R&D spend and higher employee variable compensation.
tableau 2

Definition of Core Financial Measures

Effective December 31st, 2016, Ipsen updated its definition of Core financial measures (Core Operating income, Core consolidated net profit, Core EPS) to exclude the amortization of intangible assets (excluding software) and the gain or loss on disposal of fixed assets.

These performance indicators do not replace IFRS indicators, and should not be relied upon as such.

Reconciliations between IFRS H1 2016/2017 results and the newly defined Core financial measures are presented in Appendix 4 and in the “Reconciliation from Core consolidated net profit to IFRS consolidated net profit” table on page 13.

Below is a reconciliation of the Core Operating Income from the previous definition to the new reported definition:

tableau 3

Review of the first half 2017 results

Note: Unless stated otherwise, all variations in sales are stated excluding foreign exchange impacts.

Group sales reached €919.5 million, up 18.8% year-on-year.

Specialty Care sales reached €764.6 million, up 23.1%, driven by the strong growth of Somatuline and the contribution of €28.6 million of key new products Cabometyx (mainly sales from Germany and France) and Onivyde (with first sales booked in the second quarter following the closing of the transaction in early April 2017). Somatuline growth of 31.8% was driven by a continued growth in North America, and a solid performance throughout Europe. Dysport growth was fueled by the good performance of our partner Galderma in North America and Europe but still impacted by importation issues related to the temporary cancellation of the certificate of Good Manufacturing Practices (cGMP) in Brazil. Decapeptyl sales reflect good volume growth in most geographies but also some continued price pressure, notably in China.

Consumer Healthcare sales reached €154.8 million, driven by the good performance of Smecta thanks to the retail strategy in China and a positive sales dynamic in Russia, as well as the contribution of the recent acquisitions of new OTC products (including Prontalgine in France) and the new products from Akkadeas Pharma in Italy. This performance was partly offset by some continued pressure in emerging markets like Algeria and Russia.

Core Operating Income totaled €240.5 million, up 25.7%, driven by the strong Specialty Care sales growth and reflects increased commercial investments mainly for the new products Cabometyx and Onivyde.

Core operating margin reached 26.2% of sales, up 1.2 points.

Core consolidated net profit was €169.2 million, compared to €145.7 million in 2016, up 16.2% and impacted by higher financial and income tax expenses.

Fully diluted core earnings per share grew by 15.7% to reach €2.04, compared to €1.76 in 2016.

IFRS Operating income was €176.4 million, up 1.0% compared to €174.6 million in 2016 after higher amortization of intangible assets from Cabometyx and Onivyde, and costs associated primarily with Onivyde integration and R&D restructuring expenses. Operating income margin at 19.2% is down 3.6 points compared to the first half of 2016.

IFRS Consolidated net profit was €125.9 million versus €133.3 million in 2016 after higher financial and income tax expenses.

IFRS Fully diluted EPS (Earning per share) was €1.52 versus €1.61 in 2016.

Free cash flow reached €94.9 million, up by €21.3 million, driven by the improvement in Operating Cash Flow, partially compensated by higher restructuring costs and financial expenses.

Closing net debt reached €669.4 million at the end of June 2017, versus a cash position of €17.3 million at the end of June 2016 reflecting the acquisitions completed during the first half of 2017 for Onivyde, the Consumer Healthcare product portfolio and the equity stake in Akkadeas Pharma.

The interim financial report, with regard to regulated information, is available on the Group’s website, www.ipsen.com, under the Regulated Information tab in the Investor Relations section.