Actelion announces Half Year 2011 financial results

Total Product sales up 10% in local currencies - Non-GAAP EBIT of CHF 346.5 million, up 8% in local currencies - Negative impact of Asahi provision - Sound commercial performance impacted by currency headwinds - Significant value drivers ahead

ALLSCHWIL/BASEL, SWITZERLAND - 21 July 2011 - Actelion Ltd (SIX: ATLN) today announced its financial results for the first half of 2011.

In CHF Million
(except for per share data)

Results
H1 2011

Results
H1 2010

% Variance
In CHF

% Variance
In LC

Total net revenues

969.9

1,024.9

(5)

8

Product sales

890.1

933.2

(5)

10

US GAAP EBIT

(223.1)

326.6

-

-

Non-GAAP EBIT

346.5

405.1

(14)

8

US GAAP EPS (fully diluted)

(2.20)

2.10

-

-

As of 30 June 2011, Actelion had cash and cash equivalents of CHF 1.4 billion. In addition, Actelion holds 11.2 million treasury shares.

Jean-Paul Clozel, M.D. and Chief Executive Officer of Actelion commented: "In a highly challenging environment for our industry globally and for Swiss companies more specifically due to strong negative currency headwinds, Actelion has delivered a solid commercial performance with sales growth of 10% in local currencies for the first six months of 2011. In Swiss Franc terms this sales performance translates into a decrease of 5%."

 

 

Jean-Paul Clozel continued: "Actelion made progress in building a long-term business by taking measures to maximize the value generated by our current product portfolio and to build and develop our business beyond our core disease areas. One such example is the positive Phase II study with our CRTH2 antagonist providing the proof that this mechanism can bring clinically relevant benefit to patients suffering from allergic rhinitis."

Jean-Paul Clozel added: "In the coming weeks we expect results of the Phase II study with ponesimod in multiple sclerosis. This will be followed shortly thereafter by macitentan reporting Phase II results for the exploratory study in idiopathic pulmonary fibrosis (IPF). These results are eagerly anticipated since, in addition to determining the future development path of macitentan in IPF, the study will generate additional safety and tolerability data at the 10 mg dose, ahead of the conclusion of the Phase III study with macitentan in PAH expected in the first few months of next year."

Jean-Paul Clozel concluded: "By the end of the year we also expect the results of the study with olesoxime - conducted by Trophos - as a treatment for amyotrophic lateral sclerosis. This data will then determine whether Actelion will exercise its option to acquire Trophos."

Andrew J. Oakley, Chief Financial Officer of Actelion commented: "With 99% of product sales generated outside of Switzerland and close to 50% of our operating expenditure in Swiss Francs, the underlying performance of our business is not fully transparent at first glance. Our performance and profitability has been further negatively impacted by the provision related to the litigation with Asahi Kasei in the California courts."

Andrew J. Oakley added: "A provision reflecting the jury verdict of USD 577 million has been made in the second quarter financial statements. When a final judgment is entered by the court, we will adjust the provision in the third quarter as required. Given current exchange rates and should the judgment award remain at USD 577 million, the company will likely record a US GAAP operating loss for the full year."

The company and its external advisors believe that the verdict is neither supported by the facts nor is it correct as a matter of law. The company is therefore confident that there are significant grounds for a successful appeal, which will be filed in due course.

Andrew J. Oakley continued: "The impact of the strengthening Swiss Franc is even more evident when looking at the second quarter results. As reported, in Swiss Francs, product sales decreased by 9%. On a local currency basis product sales, increased by 8% despite a very strong second quarter in 2010."

Andrew Oakley concluded: "In this increasingly difficult environment and unforeseen events excluded, I remain confident that we will meet the guidance given earlier this year with product sales on a local currency basis increasing in the mid-single digit, Cash OPEX flat and Non-GAAP EBIT also on a local currency basis increasing in the low-double digit range."

Revenue performance

Product sales for the first half of 2011 were CHF 890.1 million (H1 2010
CHF 933.2 million), an increase of 10% in local currencies, with 43% of sales coming from the United States, 39% from Europe, 9% from Japan and 9% from the rest of the world. Product sales growth was driven by patient demand, supported by price increases for Ventavis® and Zavesca® in the US.

For the first six months of 2011 sales of Tracleer® (bosentan) amounted to CHF 789.2 million compared to CHF 835.3 million for the same period in 2010. This represents an increase of 8% in local currencies and 10% in unit growth. Tracleer® sales growth was driven by Japan, Europe and emerging markets.

During the first half of 2011, Ventavis (iloprost) had sales in the United States of CHF 59.7 million compared to CHF 61.9 million in the first half of 2010. In local currencies, this represents an increase of 17%, solely driven by an increase in the effective net price.

Sales of Veletri® (epoprostenol for injection), launched in the United States in April 2010, amounted to CHF 6.1 million during the first six months of 2011, with CHF 3.5 million sales generated in the second quarter, demonstrating the continued successful launch uptake. In Europe, the company withdrew the application to the French health authorities in order to move forward in a decentralized procedure with a second generation formulation demonstrating an even better stability profile. We expect the new application to occur before the end of the year. Registration in Japan, with the second generation formulation is ongoing.

Otto Schwarz, Chief Operating Officer of Actelion commented: "I am satisfied with the sound commercial performance in the first six months of 2011, especially considering the difficult currency and competitive environment. In the US we expect to benefit, for the full year 2011, from an increase in the gross to net sales ratio (an effective price increase) as a result of lower rebates and discounts."

Otto Schwarz concluded: "The strong performance in Japan, Europe and emerging markets, together with the effective price increase in the US will, for the remainder of this year, be somewhat offset by the impact of a change in the PAH competitive landscape in the US, where a competitor product has received a revision of its label. It is difficult to estimate the full impact of the label change at this time; although we have seen expansion in the endothelin receptor antagonist market, the label change for the competitor will affect sales growth moving forward."

Sales of Zavesca (miglustat), for the first half of 2011 amounted to CHF 34.7 million compared to CHF 35.8 million during the same period last year. This represents an increase of 10% in local currencies. The continued increase of Niemann-Pick Type C patients on therapy is somewhat masked by a number of Type 1 Gaucher disease patients returning to enzyme replacement therapy (ERT) following a shortage of ERT in 2010.

Contract revenues for the first half of 2011 amounted to CHF 79.8 million, with the majority of this amount (CHF 76.5 million) from the recognition of the remaining deferred revenue from the ongoing orexin collaboration with GlaxoSmithKline.

Operating expenses

Total operating expenses for the first six months of 2011 were CHF 1,193.0 million compared to CHF 698.2 million for the first half of 2010, an increase dominated by the Asahi litigation provision of CHF 485.2 million booked in the second quarter. Cash operating expenses for the first half of 2011 were up 1% in Swiss Francs and 7% in local currencies.

Research and Development (R&D) expenses in the first half of 2011 were down 2% to CHF 228.7 million (H1 2010: CHF 233.2 million). Non-GAAP R&D expenses for the same period, which excludes stock-based compensation expense, amortization and depreciation, were CHF 199.7 million compared to CHF 206.7 million in the first half of 2010, a 3% decrease.

Selling, General and Administrative expenses (SG&A) for the first half of 2011 were CHF 357.4 million (H1 2010: CHF 342.6 million). The increase can be attributed to higher legal costs. Non-GAAP SG&A expenses for the first half of 2011, which excludes stock-based compensation expense, amortization and depreciation, were CHF 322.2 million compared to CHF 312.2 million in the first half of 2010.

As announced on 29 June 2011, the company recorded a provision of USD 577 million (CHF 485.2 million) in the second quarter financial statement related to Asahi Kasei Pharma Corp. v. Actelion Ltd. et al. This provision follows the jury verdict in which Asahi was awarded up to USD 577 million in compensatory and punitive damages. The provision reflecting the judgment award as entered may be subject to adjustment in the third quarter financial statements. Given current exchange rates, should the judgment award remain at USD 577 million, the company will likely record a US GAAP operating loss for 2011.

Operating loss

Operating loss for the first six months of 2011 was CHF 223.1 million compared to an operating profit of CHF 326.6 million for the same period in 2010.

In order to better compare the company's underlying performance, Actelion continues to report Non-GAAP EBIT, which excludes employee stock options, amortization and depreciation as well as other one-off elements, such as the above-mentioned provision, that distort comparison. Non-GAAP EBIT for the first half 2011 was CHF 346.5 million (H1 2010: CHF 405.1 million), an increase of 8% in local currencies compared to the same period last year.

Net loss

Net loss for the first half of 2011 amounted to CHF 262.3 million (H1 2010: net income of CHF 254.2 million).

Net loss for the period includes interest income of CHF 4.6 million, interest expense of CHF 6.9 million, amortization of debt discount of CHF 9.6 million, other financial income of CHF 1.8 million as well as an income tax expense of CHF 29.0 million.

The net loss translates into a loss per share of CHF 2.20 compared to fully diluted earnings per share of CHF 2.10 in the first half of 2010.

Dividend payment

At this year's Annual General Meeting on 5 May 2011, Actelion's shareholders voted to approve the Board's recommendation that Actelion become the first biotech to offer a regular dividend payment. As a result of their support, Actelion's first dividend was paid at CHF 0.80 per registered share five days later.

Clinical Development

Actelion is currently pursuing three ongoing Phase III programs:

Macitentan in pulmonary arterial hypertension

Macitentan is investigated in a Phase III study, SERAPHIN, designed to evaluate the efficacy and safety of this highly potent, tissue-targeting, endothelin receptor antagonist. The primary endpoint is morbidity and all-cause mortality in patients with symptomatic PAH.

Global enrollment was completed in December 2009, with more than 700 patients included in the trial. The study is event-driven and, based on the progress observed, results are expected to become available in the first half of 2012.

During its plenary meeting on 06-08 July 2011, the Committee for Orphan Medicinal Products (COMP) at the European Medicines Agency (EMA) adopted a positive opinion recommending macitentan for the treatment of pulmonary arterial hypertension for designation as orphan medicinal product to the European Commission.

This recommendation is based on well-justified assumptions that macitentan will be of significant benefit compared to the existing authorized medicinal products or methods at the time of designation.

In the United States, the orphan drug designation was granted in September 2009.

 

Selexipag in pulmonary arterial hypertension

Selexipag is investigated in a Phase III study, GRIPHON, designed to evaluate the efficacy and safety of this first-in-class, orally available, selective IP receptor agonist in patients with pulmonary arterial hypertension. The primary endpoint is morbidity and all-cause mortality in patients with symptomatic PAH.

Global enrollment is ongoing and early estimates of the availability of results indicate 2013 but, as an event-driven study, timelines are subject to change.

Olesoxime in amyotrophic lateral sclerosis

In July 2010, Actelion and Trophos entered into a binding agreement whereby Actelion obtained an exclusive option to acquire privately-held Trophos SA, a clinical-stage pharmaceutical company. The decision on whether Actelion will exercise the option to acquire Trophos will be made upon completion of the ongoing pivotal Phase III study with olesoxime, expected by the end of 2011.

Olesoxime is investigated in a Phase III study designed to evaluate the efficacy and safety of this mitochondrial pore modulator in patients with amyotrophic lateral sclerosis (ALS, often referred to as Lou Gehrig's disease) who are currently receiving standard care.

Enrollment was completed in the first quarter of 2010 with a total of 512 patients. The primary endpoint of the study is the overall 18-month survival rate;study results are therefore expected to become available at the end of 2011.

The mid-stage clinical development programs include:

Ponesimod in multiple sclerosis and psoriasis

Actelion's selective S1P1 receptor agonist, ponesimod, is currently in development as an immunomodulator, with the potential for once-a-day oral dosing for multiple autoimmune disorders.

Ponesimod is investigated in a dose-response study in patients with relapsing-remitting multiple sclerosis. The study is designed to evaluate the efficacy, safety and tolerability of three doses administered for 24 weeks. Enrollment has concluded with a total of 464 patients and results are expected in the coming weeks.

Ponesimod is also investigated in a dose-finding study in patients with moderate to severe chronic plaque psoriasis. The study is designed to evaluate the efficacy, safety, and tolerability of two doses of this compound administered for up to 28 weeks. Enrollment commenced in the fourth quarter of 2010 and the study is estimated to enroll 320 patients.

Actelion's CRTH2 receptor antagonist in asthma and allergic rhinitis

Actelion's CRTH2 receptor antagonist blocks the effects of prostaglandin D2 (PGD2) in inflammation and, as a consequence, the amplification and maintenance of allergic reactions.

A Phase II study with orally-active CRTH2 antagonist in seasonal allergic rhinitis has met its primary endpoint with statistical significance (p<0.05). The study assessed the efficacy and tolerability of various doses of this novel CRTH2 antagonist in 579 adult patients with seasonal allergic rhinitis due to mountain cedar pollen. Treatment in the study was well tolerated across all treatment groups and no serious adverse events were reported.

A Phase II dose-finding study in asthma is currently enrolling and is expected to report results mid-2012.

Cadazolid (Actelion's novel antibiotic) in Clostridium difficile infection

Actelion's first potent, novel antibiotic, cadazolid, is investigated in a Phase II study in patients with Clostridium difficile infection (CDI). The study is designed to investigate the efficacy, safety and tolerability profile of three doses of drug in an estimated 92 patients. Global enrollment commenced in the fourth quarter of 2010, recruitment is slower than anticipated and therefore study results are expected in the first half of 2012.

Macitentan in idiopathic pulmonary fibrosis (IPF)

Actelion is conducting an exploratory Phase II study, MUSIC, with macitentan in patients with IPF, which completed enrollment of 178 patients at the end of June 2010. Patients are followed for 1 year and study results are therefore expected in the second half of 2011.

The company is also developing earlier-stage compounds and may enter several compounds into the clinic before the end of the year.

Legal update

On 4 May 2011, a California jury awarded Asahi Kasei Pharma ("Asahi") up to USD 547 million in compensatory damages from Actelion. In addition, the jury awarded punitive damages of USD 30 million against certain individual officers of Actelion. In a post-trial motion, Actelion requested an election between damages of USD 358.95 million for alleged lost profits or USD 187.4 million in alleged development costs. In addition, from either amount, the motion requested the deduction (off-set) of USD 78.4 million from a previous payment made by Actelion related to arbitration proceedings in 2009. A judgment has not yet been entered by the trial court.

The company and its external advisors believe that the verdict is neither supported by the facts nor is it correct as a matter of law. The company is therefore confident that there are significant grounds for a successful appeal, which will be filed in due course.

Management update

Given the company's rapid growth and the ever-increasing complexity of the healthcare environment, the company adapted the structure of Actelion's leadership team, bringing the changes into effect in June 2011.

The position of Chief Operating Officer (COO) was created; Otto Schwarz was appointed to the new role with the target of increasing the drive for excellence - a growing demand in these times of operational challenges. The new position allows the CEO function to focus even more on strategic matters. At the same time, the company streamlined the membership of its major decision-making bodies, such as the Actelion Executive Committee, to ensure transparent, efficient and productive decision-making as well as effective execution.

Half Year Report

Full details on the progress made in the first half of 2011 are available in Actelion's Half Year Report 2011, available from www.actelion.com - "Our company" - "Half Year Report 2011".

Upcoming events

  • Ponesimod in relapsing remitting multiple sclerosis Phase IIb results
  • Macitentan in idiopathic pulmonary fibrosis exploratory Phase II results
  • 9M 2011 financial results - 20 October 2011
  • Olesoxime - conducted by Trophos - in amyotrophic lateral sclerosis Phase III results - go/no-go decision on exercising the option to acquire Trophos

 

###

Actelion, Tracleer, Zavesca, Ventavis and Veletri are trademarks registered in the United States and other countries.

 

For Documentation Purposes

Full Financial Statement:

The full financial statement for the first half of 2011 can be found as a PDF attached to the media release. It is also available on www.actelion.com in the Investor section

http://www.actelion.com/en/investors/financial-information/finance-archive/index.page?

 

Non-GAAP to US GAAP reconciliation for H1 2011

 

In CHF Million

H1 2011

H1 2010

Non-GAAP EBIT

346.5

405.1

Stock option expenses

43.1

41.2

Amortization and depreciation

41.2

37.3

   

Posted: July 2011


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