<EXHIBIT 1>
NEWS RELEASE
Craigavon, Northern Ireland/Rockaway, NJ | 14 May 2003 |
Galen Holdings PLC
Results for the second quarter ended 31 March 2003
Craigavon, Northern Ireland/Rockaway, New Jersey, USA - 14 May 2003: Galen Holdings PLC ("Galen") (LSE: GAL.L, Nasdaq: GALN), announces its results for the quarter ended 31 March 2003.
Financial Highlights
| Quarter ended 31 March 2003 ($ m) | Quarter ended 31 March 2002 ($ m) | Change (%) |
Revenues | |||
- Products | 89.2 | 56.7 | 57% |
- Services(Discontinued) | -- | 19.7 | -- |
Total | 89.2 | 76.4 | 17% |
Operating profits* | |||
- Products | 34.8 | 19.9 | 75% |
- Services(Discontinued) | -- | 3.6 | -- |
Total | 34.8 | 23.5 | 48% |
Earnings per share* | |||
Adjusted EPS (cents) | 16.1 | 10.1 | 59% |
*before amortisation of goodwill and intangibles
* Earnings per ordinary share, before amortisation of goodwill and intangible assets, increased to 16.1 cents, up 59% over the same quarter in the prior year.
* Total pharmaceutical product revenues increased by 57% from $56.7 million to $89.2 million reflecting strong underlying growth of 39% from our core promoted brands, Ovcon (R), Estrace (R) cream and Doryx (R) (see table on page 3 for breakdown), the addition of Duricef (R) and Moisturel (R), acquired in March 2002, and Sarafem (R), the US sales and marketing rights of which were acquired in January 2003. Sarafem (R) contributed $15.4 million in revenues during the quarter.
* The results of the comparative quarter include the Pharmaceutical Services business, which was disposed of in the year ended 30 September 2002.
* Operating profit, before amortisation of goodwill and intangibles, increased to $34.8 million compared to $23.5 million in the same quarter last year, an increase of 48%, despite divestment of Services business.
* During the quarter, the business generated cash of $36.2 million. Cash on hand at 31 March 2003 was $50 million. During the quarter we purchased Estrostep (R) and Loestrin (R) and the US sales and marketing rights for Sarafem (R) for approximately $500 million. These transactions were financed from existing cash resources and the drawdown of approximately $200 million in senior debt, part of a new $450 million facility put in place during the quarter. Net debt at 31 March 2002 was $197.8 million.
* The Board has recommended the payment of an interim dividend of 1.20p per share, up 20% from last year.
Business Highlights
* Completed acquisition of US sales and marketing rights, and recorded first sales of Sarafem (R) (January).
* Announced the acquisition of Estrostep (R), Loestrin (R) and the proposed acquisition of femhrt (R) from Pfizer for $359 million (March).
* Received an approvable letter for new Ovcon (R) (February).
* Received FDA approval for Femring (TM) (March).
Commenting on the results, Roger Boissonneault, Chief Executive, said:
"During the period, we have made excellent progress in all elements of the business as we continue to build our position in our markets. We have again achieved record sales and profit growth, our recent corporate activity has expanded our US product portfolio, and our investment in R&D was rewarded by our first major NDA approval in the US. We believe our strategy is well set for the future and we approach the second half of 2003 with much confidence."
For further information, please contact:
Galen Holdings PLC | ||
David G. Kelly | Today: | + 44 (0) 207 831 3113 |
Thereafter: | + 44 (0) 28 3833 4974 | |
Financial Dynamics | ||
Sophie Pender-Cudlip / Francetta Carr | Tel: | + 44 (0) 20 7831 3113 |
For further information on Galen visit: www galenplc com
An analyst presentation will take place at 9.30am (GMT) today at the offices of Financial Dynamics, Holborn Gate, 26 Southampton Buildings, London WC2. A conference call will also take place at 2pm (GMT). Please call Mo Noonan on 020 7269 7116, for further details.
Commentary on the results of the 2nd Quarter to 31 March 2003
Sales & Marketing
Sales of pharmaceutical products by the group continue to show growth as illustrated by the table below.
Product/Group | 2nd Quarter | % Growth over prior year QTR | Half-Year | % Growth over prior Half-Year |
Net Sales | $'M | % | $'M | % |
Sarafem (R) | 15.4 | N/A | 15.4 | N/A |
Ovcon (R) | 13.4 | 20% | 25.8 | 25% |
Estrace (R) Cream | 10.1 | 34% | 20.8 | 22% |
Estrace (R) Tablets | 8.3 | 9% | 12.9 | 13% |
Doryx (R) | 17.2 | 62% | 31.1 | 44% |
Duricef (R) and Moisturel (R) | 6.0 | N/A | 11.6 | N/A |
Other US | 2.5 | -54% | 4.8 | -53% |
Other U.K. and Ireland | 16.3 | 13% | 35.5 | 16% |
TOTAL | 89.2 | 57% | 157.9 | 42% |
For the quarter ended 31 March 2003 total product sales were $89.2 million, an increase of 57% over the same quarter last year. While a significant part of this growth was driven by newly acquired products and product rights, particularly Sarafem (R), we nevertheless saw growth of 39% for our three US promoted products, Ovcon (R), Estrace (R) Cream and Doryx (R).
As we have stated in prior quarters, the sales of products in any quarter tend to fluctuate depending on the buying patterns of a small number of large distributors in the US. Thus, the performance of any one product in any particular quarter is not necessarily indicative of a longer term trend.
As illustrated by the above table, the growth in our key promoted products remains strong. Ovcon (R) (oral contraception) and Doryx (R) (acne) in particular continue to build market share as new prescriptions grow. This continued growth in market share is a testament to the commitment and professionalism of our sales team.
Margins
The gross margin for the quarter was 80% compared to 69% for the same period last year. This improvement is largely attributable to the disposal of our lower margin services businesses during our last financial year and as a result of a greater proportion of our sales being generated from our US business.
Operating margin, before amortisation of goodwill and intangibles, was $34.8 million or 39% compared to $23.5 million or 31% in the same quarter last year. If the services contribution for last year is excluded, the operating margin from products showed an improvement from 35% to 39%, and increased in absolute dollar terms from $19.9million to $34.8million, i.e. 75% growth.
Research & Development
Total research and development costs were $6.6 million, compared to $4.8 million in the same quarter last year, an increase of 38%. This increase in cost reflects our ongoing investment in our development pipeline.
During the quarter, we continued clinical work on our oral estradiol-3-acetate product, for the treatment of the symptoms of menopause, and our vaginal ring containing metronidazole, for the treatment of bacterial vaginosis.
This quarter was significant from an R&D perspective as we received a approvable letter for our new Ovcon product and final approval for FemringÔ , our first vaginal ring product to be approved in the United States. FemringÔ is due to be launched in June of this year.
Liquidity
During the quarter we purchased Estrostep (R) and Loestrin (R) and the US sales and marketing rights for Sarafem (R) for approximately $500 million. These transactions were financed from existing cash resources and the drawdown of approximately $200 million in senior debt. Net debt at 31 March 2002 was $197.8 million being a combination of $198.1 million repayable within 3 years, $49.7 million of senior notes and $50 million cash. On our balance sheet $67.0 million of this debt is classified as falling due within one year.
Cash generated from operations during the quarter remains strong at $36.2 million. Strong continuing cashflow, now complemented by cash generated from Sarafem (R) sales, helped to rebuild cash on hand to $50 million.
Adoption of US Dollar
As noted previously, we have adopted the US dollar as the functional currency for the Group for the year ending 30 September 2003. We therefore present this quarter's results in US dollars and under UK generally accepted accounting principles (UK GAAP).
In addition, we have included our results in US dollars under US GAAP also, as we have done in prior years.
Chairman & Chief Executive's Report on the Interim Results for the six-months ended 31 March 2003
Overview
Galen Holdings PLC is a specialty pharmaceutical company essentially focused on two core therapeutic areas: women's healthcare and dermatology. The acquisition of Warner Chilcott in October 2000 afforded the Company access to the US pharmaceuticals market where it has achieved impressive growth and the board believes that significant future growth can be achieved. Since then, your directors have invested further in building our US pharmaceuticals business. The pharmaceutical services business has been disposed of, thereby improving margins and releasing resources that have been reinvested in the pharmaceutical business. The success of this approach has been clearly demonstrated in the continued excellent financial performance of the Company. For the six-month period ended 31 March 2003, we have had outstanding success in implementing our strategy to continue organic growth of our pharmaceutical business, develop new proprietary products and acquire products that complement and strength en our existing product range.
Financials
For the six-month period ended 31 March 2003, Galen again achieved a record performance with sales of $157.9 million. This compares with turnover of $153.8 million for the six-month period ended 31 March 2002, which included sales of $42.2 million from our services business. Excluding these sales our revenue growth was 41.5%. Earnings per share before amortisation of goodwill and intangible assets rose by 48% to 28.9 cents.
Gross profit increased to $124.8 million from $103.8 million, notwithstanding the sale of our services businesses, reflecting continued strong growth in the US. Galen's gross profit margin has now risen to 80%. In our first half-year, 78% of our revenues, now exclusively driven by product sales, originated in the US.
Operating profit for the period before amortisation of goodwill and intangible assets increased from $46.8 million to $59.8 million, an increase of 27.8%. On a like for like basis, excluding the now discontinued services businesses, our operating profit before amortisation rose by 56.3%. For the first half of this year our operating margin was 37.9%. Research and development costs increased to $12.1 million as new projects were added, compared to $9.2 million for the same period last year. For the half-year we generated cash from operations of $58.9 million, reflecting the underlying strength of our pharmaceutical business.
These excellent results reflect continued strong growth in the business and a successful transition to a specialty pharmaceutical business model. Your board is pleased to declare an interim dividend of 1.2 pence per ordinary share, a 20% increase over the 1.0 pence declared for the same period last year.
Corporate Activity
Galen is committed to continued growth in its rapidly expanding US pharmaceuticals business, which is built around Warner Chilcott. Last year we took the decision to dispose of our pharmaceutical services businesses to free up resources for our ambitious growth plans in the US pharmaceutical sector. These divestments raised approximately $235 million in the 2002 financial year.
During the half-year ended 31 March 2003, the company successfully completed two major product acquisitions in the women's healthcare category and negotiated a major strategic alliance in dermatology. Your directors believe that the impact of these activities has greatly enhanced the Company's opportunity for growth.
In January 2003, we completed the acquisition of the US sales and marketing rights for Sarafem (R) from Eli Lilly and Company. Sarafem (R) (fluoxetine hydrochloride) is a prescription treatment for premenstrual dysphoric disorder (PMDD), a severe form of premenstrual syndrome, and was the first FDA-approved product for this condition. Launched by Lilly in 2000, Sarafem (R) had revenues of approximately $80 million in the calendar year 2002 and the cash consideration for this transaction was approximately $295 million.
In contraception and hormone therapy we announced in March 2003 the acquisition from Pfizer Inc. of the oral contraceptives Loestrin (R) and Estrostep (R) and an oral continuous combined hormone therapy, femhrt (R). The total consideration for the transaction was approximately $359.0 million with up to a further $125 million contingent on the maintenance of market exclusivity for Estrostep (R) to 2008 and femhrt (R) to 2010. Total revenues for these three products in the year 2002 were $228.3 million.
These acquisitions complement our existing women's healthcare franchise. Sarafem (R) represents a new non-hormonal therapy in a developing therapeutic area. Estrostep (R) and femhrt (R) were developed by our CEO, Roger Boissonneault whilst at Warner Lambert. These products are complementary to existing Warner Chilcott products and greatly strengthen our position in these two important therapeutic areas.
The Company is engaged in legal proceedings against Barr Laboratories for patent infringement in respect of Estrostep (R) and femhrt (R) and Teva Pharmaceuticals USA, Inc. for patent infringement in respect of Sarafem (R). Galen continues to pursue these claims vigorously.
On 1 April 2003, we entered into a co-promotion agreement with Bristol-Myers Squibb Company for Dovonex (R) and a development agreement with LEO PHARMA A/S for Dovobet (R). This alliance represents a key milestone in the development of our US dermatology franchise. Dovonex (R) is a leading non-steroidal product in the treatment of psoriasis, and Dovobet (R) (which is a combination of the active ingredient in Dovonex (R) and the steroid betamethasone diproprionate) gives us access to new treatment technology through a formal relationship with one of the worlds leading dermatology R&D companies. Under the terms of the agreements for Dovobet (R), Galen will pay LEO Pharma a total of $47 million by the time Dovobet (R) progresses to full FDA approval, $40 million of which is payable upon approval. In the case of Dovonex (R) the term of the co-promotion agreement is until 31 December 2007 and between now and 1 January 2006, Galen has an option to purchase Bristol-Myers Squibb's US right s to the product under pre-negotiated terms; however, BMS can refuse to sell its rights to Dovonex prior to 1 August 2005. If Galen exercises its option on 1 August 2005, Bristol-Myers Squibb is obliged to conclude the purchase transaction. This is an exciting development for the evolution of our dermatology franchise and pipeline.
During this intensive period of corporate activity our balance sheet remains robust. At 31 March 2003, total borrowings, including $50.0 million of high yield (12.625%) bonds inherited at the time of the Warner Chilcott acquisition, were $247.0 million. We have put in place a senior debt facility of $450.0 million. Of this, $200.0 million was drawn down at 31 March to finance the acquisition of Estrostep (R) and Loestrin (R). The balance remains available to the company and was part utilised to complete the acquisition of femhrt (R) in April.
Cash generated during the six months to 31 March 2003 was $58.9 million and cash at hand 31 March 2003 was $50 million. The company continues to generate strong cashflow, which will now be complemented by the addition of recently acquired products to the portfolio.
Sales and Marketing
Our sales and marketing capabilities continue to be the key contributor to our success. We have a proven track record of sustaining product growth, revitalising acquired products and successfully launching new products in the United States utilising precision marketing techniques. These techniques are used to target marketing and promotion of our key branded products to high volume prescribing physicians and to employ our resources effectively with a view to maximizing growth in sales and market share for our key products.
During the half-year we continued to make gains in our core therapeutic areas. Total pharmaceutical product revenues for the period were $157.9 million representing a 41.5% increase over the previous year. When the sales of Sarafem (R) (acquired in January 2003) and Duricef (R) and Moisturel (R) (acquired on 28 March 2002), are excluded, the increase in sales was a healthy 17%. The United States now represents 78% of total revenues, a proportion which will increase as we include revenues from the recently acquired products and Femring (TM) in the second half of this financial year.
In women's healthcare, Galen has products in two categories important to our target clinician, the obstetrician and gynaecologist (OBGYN): contraception and hormone therapy. Our oral contraceptive Ovcon (R) continues to grow strongly, with sales in the period of $25.8 million up 25% over the same period last year. This is an excellent platform for the launch of our Ovcon (R) line extension, for which we received an approvable letter in January 2003. Oral contraceptives Loestrin (R) and Estrostep (R) will join Ovcon (R) in our oral contraceptive offerings in the second half of this financial year.
In estrogen replacement therapy, our Estrace (R) Tablets product remains the second most widely prescribed ERT product in the US. Sales of Estrace (R) Tablets were $12.9 million for the half-year. We do not actively promote this product and our strategic objective is to maintain market position until the launch of our proprietary second generation tablet formulation. We expect to submit an NDA to the FDA for the new tablet during the second half of this financial year. Estrace (R) Cream, which is indicated for the treatment of the local symptoms of the menopause and is prescribed by both the OBGYN and urologist, had revenues of $20.8 million, an increase of 22% over the same period last year.
In dermatology, our pelletised formulation of doxycycline, Doryx (R), is the branded oral tetracycline most widely prescribed by dermatologists in the US for the treatment of acne. Revenues for this product increased to $31.1 million which is a 44% increase over the same period last year. The introduction of the 75mg dose in January 2002 has improved flexibility in the prescribing of this product.
During the past two years our Warner Chilcott salesforce in the US has operated at a strength of 226 persons. This has given us the reach and frequency of specialist contact to achieve excellent growth for our major promoted products. Your board believes that our continued strong organic growth, combined with the expected impact of recent acquisitions of products and product rights (Sarafem (R), Estrostep (R), Loestrin (R) and femhrt (R)) and the launch of a new product (Femring (TM)), present an exciting growth opportunity for the Company. In order to support the new value creating opportunities presented and maintain the momentum of our core products, it has become necessary to increase the size of our sales organisation. Following the acquisition of the US sales and marketing rights for Sarafem (R) in January 2003, we commenced a programme to expand our salesforce to approximately 340 representatives organised in two teams: Warner Chilcott Women's Healthcare and Warner Chilcott Spec ialty. We believe that this sales organisation will be well sized to enhance value in our expanded portfolio.
Research and Development
Investment in R&D for the six-month period ended March 2003 was $12.1 million, representing a 31% increase over the same period last year. Our R&D efforts are now firmly focused on the development of proprietary products for commercialisation in the US. In the first half of this financial year we have seen a marketing approval and approvable letters from the FDA for our first internally developed products. The approval of Femring (TM) in the US in March 2003 was one of the most significant events in Galen's product development history.
Our R&D programmes continue to strengthen. In women's healthcare we have ongoing projects in contraception, estrogen replacement therapy, infection control and female sexual dysfunction. To this we add PMDD and additional contraceptive projects flowing from our recent acquisition activity. During the half-year we received final approval for our vaginal ring estrogen replacement product (Femring (TM)) and an approvable letter for our Ovcon (R) line extension. Our estradiol-3-acetate tablet is in the final stages of Phase III and we anticipate an NDA submission in the second half of this financial year. Our metronidazole ring for the treatment of bacterial vaginosis is the first example of the use of vaginal ring technology in infection control and is well into Phase III development with a targeted filing date of 2004. Our testosterone vaginal ring remains in Phase II as we evaluate the regulatory acceptability of various experimental models to assess treatments for female sexual d ysfunction. In addition, in November 2002 our patent for delivery of two forms of iron in pre-natal vitamins was granted in the US.
In dermatology we have made a major addition to our pipeline with our development agreement with LEO PHARMA A/S for Dovobet (R) in the US. We continue to develop new delivery methods for doxycycline for further generations of our Doryx (R) franchise in acne with submissions to the FDA expected later this financial year or early next.
Outlook
In the period since the acquisition of Warner Chilcott in October 2000, Galen Holdings has transformed its business model to that of a speciality pharmaceutical company with a clear therapeutic and geographic focus. The divestment of our services businesses have been effected without disruption to earnings, and it is the opinion of the directors that the resources released in this process have been redeployed in the business to achieve greater return. Our strategy for growth remains constant and comprises three elements:
* the continued organic growth of our pharmaceutical business;
* the internal development of new proprietary products; and
* the acquisition or licensing of products that complement and strengthen our existing activities.
During the six-month period ended 31 March 2003 we have made excellent progress in all elements of the business as we continue to build position in our markets. We have again achieved record sales and profit growth, our recent corporate activity has expanded our US product portfolio, and our investment in R&D was rewarded by our first major NDA approval in the United States. We believe our strategy is well set for the future and we approach the second half of 2003 with much confidence.
Note:
Forward looking statements in this report, including, without limitation, statements relating to Galen's plans, strategies, objectives, expectations, intentions and adequacy of resources, are made pursuant to the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of Galen to be materially different from any future results, performance or achievements expressed or implied by such forward looking statements. These factors include, among others, the following: Galen's ability to manage its growth, government regulation affecting the development, manufacture, marketing and sale of pharmaceutical products, customer acceptance of new products, competitive factors in the industries in which Galen operates, the loss of key senior management or scientific staff, exchange rate fluctuations, general economic and business conditions, and other factors described in filings of Galen with the SEC. Galen undertakes no obligation to publicly update or revise any forward looking statement, whether as a result of new information, future events or otherwise.
Unaudited results for the period ended 31 March 2003
Consolidated profit and loss account - UK GAAP
Unaudited Quarter ended 31 March | Unaudited Six months ended 31 March | Audited Year ended 30 September | |||
2003 | 2002 | 2003 | 2002 | 2002 | |
$'000 | $'000 | $'000 | $'000 | $'000 | |
Turnover | |||||
Pharmaceutical products | 89,209 | 56,664 | 157,852 | 111,554 | 235,221 |
Pharmaceutical services - discontinued operations | - | 19,711 | - | 42,239 | 61,325 |
Total turnover | 89,209 | 76,375 | 157,852 | 153,793 | 296,546 |
Cost of sales | 17,775 | 23,842 | 33,103 | 50,033 | 89,983 |
Gross profit | 71,434 | 52,533 | 124,749 | 103,760 | 206,563 |
Net operating expenses | |||||
Selling, general and administrative expenses | 29,957 | 24,258 | 52,894 | 47,723 | 81,433 |
Research and development | 6,650 | 4,785 | 12,087 | 9,204 | 20,565 |
Goodwill amortisation | 5,842 | 5,767 | 11,605 | 11,611 | 23,255 |
Intangibles amortisation | 7,220 | 3,941 | 11,972 | 7,934 | 17,197 |
Total net operating expenses | 49,669 | 38,751 | 88,558 | 76,472 | 142,450 |
Operating profit | |||||
Before amortisation of goodwill and intangibles: | |||||
Pharmaceutical products | 34,827 | 19,913 | 59,768 | 38,234 | 94,690 |
Pharmaceutical services - discontinued operations | - | 3,577 | - | 8,599 | 9,875 |
Total before goodwill and intangibles amortisation | 34,827 | 23,490 | 59,768 | 46,833 | 104,565 |
Goodwill amortisation | (5,842) | (5,767) | (11,605) | (11,611) | (23,255) |
Intangibles amortisation | (7,220) | (3,941) | (11,972) | (7,934) | (17,197) |
Total operating profit | |||||
Pharmaceutical products | 21,765 | 10,775 | 36,191 | 19,828 | 55,584 |
Pharmaceutical services - discontinued operations | - | 3,007 | - | 7,460 | 8,529 |
21,765 | 13,782 | 36,191 | 27,288 | 64,113 | |
Gain on sale of discontinued operations | - | - | - | 10,852 | 104,984 |
Investment income | 213 | 2,087 | 2,697 | 4,601 | 10,894 |
Profit on ordinary activities before interest | 21,978 | 15,869 | 38,888 | 42,741 | 179,991 |
Interest payable and similar charges | 1,588 | 5,066 | 3,248 | 13,290 | 30,592 |
Profit on ordinary activities before taxation | 20,390 | 10,803 | 35,640 | 29,451 | 149,399 |
Tax on profit on ordinary activities | 3,834 | 1,847 | 6,313 | 6,533 | 13,461 |
Profit on ordinary activities after taxation | 16,556 | 8,956 | 29,327 | 22,918 | 135,938 |
Minority interests | - | - | - | 46 | 46 |
Profit for the financial period | 16,556 | 8,956 | 29,327 | 22,872 | 135,892 |
Dividends | 3,474 | 2,635 | 3,474 | 2,635 | 8,353 |
Retained profit for the financial period | 13,082 | 6,321 | 25,853 | 20,237 | 127,539 |
Earnings per share (cents) | 9.0 | 4.8 | 16.0 | 12.4 | 73.4 |
Diluted earnings per share (cents) | 9.0 | 4.8 | 15.9 | 12.4 | 72.9 |
Adjusted earnings per share (cents) | 16.1 | 10.1 | 28.9 | 19.5 | 47.8 |
Adjusted diluted earnings per share (cents) | 16.1 | 10.0 | 28.8 | 19.4 | 47.5 |
Unaudited results for the period ended 31 March 2003
Consolidated balance sheet - UK GAAP
Unaudited 31 March | Audited 30 September | ||
2003 | 2002 | 2002 | |
$'000 | $'000 | $'000 | |
Fixed assets | |||
Intangible assets | 1,214,113 | 760,103 | 756,672 |
Tangible assets | 62,699 | 109,164 | 60,840 |
1,276,812 | 869,267 | 817,512 | |
Current assets | |||
Stocks | 26,139 | 26,411 | 26,902 |
Debtors | 52,505 | 59,916 | 37,260 |
Cash at bank and in hand | 50,029 | 290,216 | 313,012 |
128,673 | 376,543 | 377,174 | |
Creditors: amounts falling due within one year | 155,612 | 78,888 | 75,866 |
Net current (liabilities) / assets | (26,939) | 297,655 | 301,308 |
Total assets less current liabilities | 1,249,873 | 1,166,922 | 1,118,820 |
Creditors: amounts falling due after more than one year | 181,017 | 257,392 | 50,953 |
Provisions for liabilities and charges | 1,352 | 8,478 | 3,410 |
Deferred income | 6,001 | 5,961 | 6,189 |
Net assets | 1,061,503 | 895,091 | 1,058,268 |
Capital and reserves | |||
Called up share capital | 29,622 | 27,265 | 29,578 |
Share premium account | 382,727 | 348,934 | 382,749 |
Capital redemption reserve | 323 | - | 323 |
Merger reserve | 457,800 | 457,800 | 457,800 |
Profit and loss account | 191,031 | 61,092 | 187,818 |
Equity shareholders' funds | 1,061,503 | 895,091 | 1,058,268 |
Unaudited results for the period ended 31 March 2003
Consolidated cash flow statement - UK GAAP
Unaudited Quarter ended 31 March | Unaudited Six months ended 31 March | Audited Year ended 30 September | |||
2003 | 2002 | 2003 | 2002 | 2002 | |
$'000 | $'000 | $'000 | $'000 | $'000 | |
Net cash inflow from operating activities | 36,231 | 20,154 | 58,928 | 39,726 | 93,451 |
Returns on investments and servicing of finance | |||||
Interest paid | (3,162) | (4,936) | (3,275) | (13,311) | (35,174) |
Interest received | 1,889 | 1,920 | 3,599 | 4,605 | 10,815 |
(1,273) | (3,016) | 324 | (8,706) | (24,359) | |
Taxation | |||||
Corporation tax paid | (2,925) | (655) | (5,091) | (1,905) | (6,634) |
Capital expenditure | |||||
Purchase of tangible fixed assets | (1,891) | (3,563) | (4,409) | (10,605) | (17,086) |
Purchase of intangible fixed assets | (502,918) | (39,744) | (502,918) | (42,352) | (43,694) |
Government grant received | 307 | - | 307 | - | 2,161 |
(504,502) | (43,307) | (507,020) | (52,957) | (58,619) | |
Acquisitions and disposals | |||||
Sale of businesses (net of costs) | - | (596) | (324) | 34,717 | 230,789 |
Acquisition costs and deferred consideration payments | - | (8,771) | - | (8,838) | (9,118) |
- | (9,367) | (324) | 25,879 | 221,671 | |
Equity dividends paid | (5,767) | (4,465) | (5,767) | (4,498) | (7,449) |
Net cash flow before management of liquid resources and financing | (478,236) | (40,656) | (458,950) | (2,461) | 218,061 |
Management of liquid resources | |||||
Decrease in short term deposits | 282,500 | 26,279 | 264,500 | 40,072 | 27,523 |
Financing | |||||
Issue of ordinary share capital (net of expenses) | 790 | 2,271 | 21 | 102 | 247 |
Purchase of own shares | - | - | - | - | (11,813) |
Loan notes repaid | - | - | - | (19,754) | (112,623) |
Loans received / (repaid) (net) | 196,336 | (6,241) | 196,198 | (6,289) | (132,126) |
Principal repayment under hire purchase agreements | (113) | - | (252) | (140) | (549) |
197,013 | (3,970) | 195,967 | (26,081) | (256,864) | |
Increase / (decrease) in cash in the period | 1,277 | (18,347) | 1,517 | 11,530 | (11,280) |
Unaudited results for the period ended 31 March 2003
Notes to results
1 Basis of preparation
The financial information for the quarter ended 31 March 2003 and 2002, which is unaudited and does not constitute statutory accounts, has been prepared using accounting policies consistent with those set out in the group's 30 September 2002 statutory accounts.
The abridged financial information for the year ended 30 September 2002 has been extracted from the group's statutory accounts for that year, which have been filed with the Registrar of Companies. The report of the auditors on those accounts was unqualified.
As stated in the 2002 results, the predominant focus for Galen's pharmaceutical activities is now the US where market opportunities exceed those in Europe and other territories. The US accounts for more than 75% of Galen's total revenues. The Group has decided to adopt the US Dollar as its functional currency and has reported these financial results in US dollars.
Earnings per ordinary share is based on profit for the financial period and on the weighted average number of ordinary shares in issue during the period, excluding those held in the employee share trust.Diluted earnings per share is calculated using an adjusted number of shares reflecting the number of dilutive shares under option.Adjusted earnings per share figures reflecting the results from continuing operations before the impact of exceptional items and goodwill and intangibles amortisation have been calculated to provide shareholders with a clearer understanding of the underlying trading performance of the group (see below).
The weighted average numbers of shares used in the calculation of earnings per share are as follows:
Quarter ended 31 March | Six months ended 31 March | Year ended 30 September | |||
2003 Number | 2002 Number | 2003 Number | 2002 Number | 2002 Number | |
Weighted average number of shares: | |||||
Basic | 183,404,495 | 184,901,919 | 183,343,764 | 184,844,558 | 185,244,963 |
Diluted | 183,813,839 | 186,195,464 | 183,919,191 | 186,320,589 | 186,330,634 |
Quarter ended 31 March | Six months ended 31 March | Year ended 30 September | |||
Adjusted earnings per share (cents) | 2003 | 2002 | 2003 | 2002 | 2002 |
Earnings per ordinary share | 9.0 | 4.8 | 16.0 | 12.4 | 73.4 |
Adjustments (net of tax): | |||||
Gain on sale of businesses | - | - | - | (4.7) | (54.5) |
Goodwill and intangibles amortisation | 7.1 | 5.3 | 12.9 | 10.5 | 21.8 |
Exceptional costs of notes redemption | - | - | - | 1.3 | 7.1 |
Adjusted earnings per share - basic | 16.1 | 10.1 | 28.9 | 19.5 | 47.8 |
Summary of differences between UK and US Generally Accepted Accounting Principles ("GAAP")
The group financial statements are prepared in accordance with UK GAAP which differs in certain significant respects from US GAAP. The effect of the US GAAP adjustments to profit for the financial period and equity shareholders' funds are set out in the tables below:
6 months to 31 March | ||
2003 | 2002 | |
$'000 | $'000 | |
Unaudited | ||
(a) Reconciliation of profit for the financial year to US GAAP | ||
Profit for the financial period under UK GAAP | 29,327 | 22,872 |
US GAAP adjustments: | ||
Amortisation of goodwill | 11,605 | 11,611 |
Amortisation of intangibles | (1,537) | (893) |
Depreciation of interest capitalised | (26) | (26) |
Deferred taxation | (4,790) | (3,994) |
Compensation expense | (162) | (159) |
Deferred tax effect of US GAAP adjustments | 220 | 376 |
US GAAP adjustments total | 5,310 | 6,915 |
Profit for the financial period under US GAAP | 34,637 | 29,787 |
As at 31 March 2003 | As at 30 September 2002 | |
$'000 | $'000 | |
Unaudited | ||
(b) Effect on equity shareholders' funds of differences between UK GAAP and US GAAP | ||
Equity shareholders' funds under UK GAAP | 1,061,503 | 1,058,268 |
US GAAP adjustments: | ||
Acquisition accounting | (124,979) | (135,047) |
Functional currency adjustment | 21,906 | - |
Amortisation of goodwill relating to contingent consideration | 1,665 | 1,665 |
Capitalisation of interest | 2,528 | 2,554 |
Deferred taxation | (28,770) | (24,200) |
Employee benefit trust | (10,716) | (11,153) |
Share premium account | 10,716 | 11,153 |
Dividends | 3,474 | 5,767 |
US GAAP adjustments total | (124,176) | (149,261) |
Equity shareholders' funds under US GAAP | 937,327 | 909,007 |
Unaudited consolidated statement of operations - US GAAP
(In thousands of US dollars, except per share data)
Quarter ended March 31 | Six months ended March 31 | |||
2003 | 2002 | 2003 | 2002 | |
$'000 | $'000 | $'000 | $'000 | |
Revenues | ||||
Product revenue | 89,209 | 56,664 | 157,852 | 111,554 |
Operating expenses | ||||
Cost of sales (excluding depreciation shown separately below) | 16,689 | 11,087 | 30,963 | 24,125 |
Selling, general and administrative | 29,621 | 19,934 | 52,251 | 38,056 |
Research and development | 6,650 | 4,507 | 12,087 | 8,769 |
Depreciation | 1,516 | 1,294 | 2,971 | 2,542 |
Amortisation | 8,212 | 4,386 | 13,509 | 8,827 |
Total operating expenses | 62,688 | 41,208 | 111,781 | 82,319 |
Operating income | 26,521 | 15,456 | 46,071 | 29,235 |
Other income (expense) | ||||
Interest income | 213 | 2,050 | 2,697 | 4,537 |
Interest expense | (1,588) | (6,011) | (3,248) | (13,948) |
Total other income (expense) | (1,375) | (3,961) | (551) | (9,411) |
Income before taxes | 25,146 | 11,495 | 45,520 | 19,824 |
Provision for income taxes | 5,357 | 2,480 | 10,883 | 5,769 |
Income from continuing operations | 19,789 | 9,015 | 34,637 | 14,055 |
Discontinued operations: | ||||
Earnings from discontinued operations (net of tax charge of $2,219) | - | 4,116 | - | 7,042 |
Gain on disposal of discontinued operations (net of tax charge of $2,163) | - | - | - | 8,690 |
Net income | 19,789 | 13,131 | 34,637 | 29,787 |
Basic net income per ordinary share: | ||||
- continuing operations | 10.8 | 4.9 | 18.9 | 7.6 |
- earnings and gain on disposal of discontinued operations | - | 2.2 | - | 8.5 |
Basic net income per ordinary share | 10.8 | 7.1 | 18.9 | 16.1 |
Diluted net income per ordinary share: | ||||
- continuing operations | 10.8 | 4.9 | 18.8 | 7.1 |
- earnings and gain on disposal of discontinued operations | - | 2.1 | - | 8.4 |
Diluted net income per ordinary share | 10.8 | 7.0 | 18.8 | 16.0 |
Basic net income per ADS equivalent: | ||||
- continuing operations | 43.2 | 19.5 | 75.6 | 30.4 |
- earnings and gain on disposal of discontinued operations | - | 8.9 | - | 34.1 |
Basic net income per ADS equivalent | 43.2 | 28.4 | 75.6 | 64.5 |
Diluted net income per ADS equivalent: | ||||
- continuing operations | 43.1 | 19.4 | 75.3 | 30.2 |
- earnings and gain on disposal of discontinued operations | - | 8.8 | - | 33.7 |
Diluted net income per ADS equivalent | 43.1 | 28.2 | 75.3 | 63.9 |
Weighted average ordinary shares outstanding | ||||
Basic | 183,404,495 | 184,901,919 | 183,343,764 | 184,844,558 |
Diluted | 183,813,839 | 186,195,464 | 183,919,191 | 186,320,589 |
Weighted average ADS equivalents outstanding | ||||
Basic | 45,851,124 | 46,225,480 | 45,835,941 | 46,211,140 |
Diluted | 45,953,460 | 46,548,866 | 45,979,797 | 46,580,147 |
Unaudited consolidated balance sheets - US GAAP
(In thousands of US dollars)
As at March 31 | Audited As at September 30 | |
2003 | 2002 | |
$'000 | $'000 | |
Assets | ||
Current assets: | ||
Cash and cash equivalents | 50,029 | 313,012 |
Accounts receivable, net | 35,387 | 32,869 |
Inventories | 26,139 | 26,902 |
Deferred tax asset | 7,590 | 7,718 |
Prepaid expense and other assets | 17,122 | 4,397 |
136,267 | 384,898 | |
Property, plant and equipment, net | 65,227 | 63,394 |
Intangible assets, net | 1,179,599 | 623,939 |
Total assets | 1,381,093 | 1,072,231 |
Liabilities | ||
Current liabilities: | ||
Accounts payable | 10,998 | 14,007 |
Accrued and other liabilities | 59,743 | 44,053 |
Current instalments of long-term debt | 66,526 | 616 |
Current instalments of obligation under capital leases | 274 | 392 |
Income taxes | 14,616 | 11,052 |
Total current liabilities | 152,157 | 70,120 |
Other liabilities: | ||
Long-term debt, excluding current instalments | 180,926 | 50,729 |
Long-term obligations under capital leases, excluding current instalments | 91 | 224 |
Deferred income taxes | 104,591 | 35,962 |
Other non-current liabilities | 6,001 | 6,189 |
Total liabilities | 443,766 | 163,224 |
Shareholders' equity | ||
Ordinary shares, par value (pounds sterling) 0.10 per share; 250,000,000 (September 30, 2002;250,000,000) shares authorised, 188,077,951 shares issued and outstanding at March 31, 2003 and 187,805,263 issued and outstanding at September 30, 2002 |
30,003 |
29,981 |
Additional paid in capital | 677,580 | 677,417 |
Retained earnings | 220,676 | 191,806 |
Treasury stock | (23,893) | (23,893) |
Accumulated other comprehensive income | 32,961 | 33,696 |
Total shareholders' equity | 937,327 | 909,007 |
Total liabilities and shareholders' equity | 1,381,093 | 1,072,231 |
Unaudited consolidated statements of cash flows - US GAAP
(In thousands of US dollars)
Quarter ended 31 March | Six months ended March 31 | |||
2003 | 2002 | 2003 | 2002 | |
$'000 | $'000 | $'000 | $'000 | |
Cash flows from operating activities | ||||
Net income | 19,789 | 13,131 | 34,637 | 29,787 |
Adjustment to reconcile net income to net cash provided by operating activities: | ||||
Depreciation | 1,516 | 2,459 | 2,971 | 4,963 |
Amortisation of intangibles | 8,212 | 4,386 | 13,509 | 8,827 |
Profit on sale of business | - | - | - | (10,853) |
Amortisation of government grants | (280) | (443) | (506) | (992) |
Minority interest | - | - | - | 47 |
Changes in assets and liabilities: | ||||
Increase in accounts receivable, prepaid expense and other assets | (14,621) | (3,128) | (14,955) | (9,394) |
Decrease/(increase) in inventories | 26 | 76 | 763 | (2,160) |
Increase in accounts payable, accrued liabilities and other liabilities | 15,472 | 74 | 12,911 | 3,290 |
Income taxes | 2,362 | (3,020) | 5,899 | 2,636 |
Foreign exchange (loss)/gain | (442) | 2,263 | (1,068) | 3,270 |
Net cash provided by operating activities | 32,034 | 15,798 | 54,161 | 29,421 |
Cash flows from investing activities | ||||
Purchase of tangible fixed assets | (1,891) | (3,458) | (4,409) | (10,526) |
Purchase of intangible fixed assets | (502,918) | (39,710) | (502,918) | (42,037) |
Government grants received | 307 | - | 307 | - |
Proceeds from sale of businesses (net of costs) | - | - | (324) | 35,758 |
Deferred consideration and acquisition costs | - | (8,772) | - | (8,772) |
Net cash used in investing activities | (504,502) | (51,940) | (507,344) | (25,577) |
Cash flows from financing activities | ||||
Long term debt (repaid)/obtained | 196,336 | (16,137) | 196,198 | (8,782) |
Loan notes repaid | - | - | - | (20,000) |
Payments under capital leases | (113) | (172) | (252) | (313) |
Cash dividends paid | (5,767) | (4,465) | (5,767) | (4,465) |
Proceeds from share capital issue (net of expenses) | 790 | 1,352 | 21 | 101 |
Net cash provided by (used in) financing activities | 191,246 | (19,422) | 190,200 | (33,459) |
Net increase in cash and cash equivalents | (281,222) | (55,564) | (262,983) | (29,615) |
Cash and cash equivalents, beginning of period | 331,251 | 348,220 | 313,012 | 326,076 |
Foreign exchange adjustment on cash and cash equivalents | - | (2,441) | - | (6,246) |
Cash and cash equivalents, end of period | 50,029 | 290,215 | 50,029 | 290,215 |
