Wednesday, 17 August 2011
Galenica has been strongly affected by the significant drop of both dollar and euro. While the Group generates around two-thirds of its result in these currencies, it pays the salaries of some 6,000 of its 7,000 employees in Swiss francs. The Group can only partially compensate for this situation, hence the unavoidable impact on results. In the first half of 2011, net sales increased by 3.6% to CHF 1,581.2 million. Without the exchange effect, earnings before interest and taxes (EBIT) and Group profits would have risen by 11% and 17% respectively. Converted into Swiss francs, EBIT improved by 5.3% to reach CHF 172.7 million and the Group’s profits increased by 4.4%, reaching CHF 122.6 million. Adjusted for currency differences, and after deducting minority interests, net profit would have risen by roughly 3%. Despite uncertainty in the financial markets, cost pressures on healthcare markets and significant investment targets, Galenica is maintaining its objective of achieving consolidated earnings at the previous year’s level in 2011.
Key pharmaceutical projects continue to make good progress and are set to have a major impact on the Galenica Group’s development in the years to come: Ferinject® is being marketed in more and more countries; the common company Vifor Fresenius Medical Care Renal Pharma began operating in the USA; the phosphate binder PA21 is now in its final phase of clinical trials (phase III); the development of a targeted strategy for the promising Vaxom immunostimulants is on plan.
Thanks to high quality services provided by its companies, the Logistics business sector has succeeded in acquiring several important new customers.
In the Retail business sector, GaleniCare expanded its network of pharmacies to include attractive new locations: seven wholly-owned pharmacies bring the total number of points of sale to 286, while the addition of 12 independent pharmacies increases the number of partners to 145 in all.
_With both the dollar and the euro falling significantly against the Swiss franc in the first half of 2011, the present currency situation is proving very challenging for Galenica. which generates around two-thirds of its profits in euros and dollars, but pays the salaries of 6,000 of its some 7,000 employees in Swiss francs. Only rigorous cost management and a focus on key priorities can limit the impact of the strong franc. Galenica can partially compensate for this negative effect in Europe, where it has its own sales affiliates, but not in the USA, Galenica’s most important market.
_Adjusted for currency effects and after deducting minority interests net profit up around 3%. Net sales of the Galenica Group rose by 3.6% to CHF 1,581.2 million over the same period in 2010. Without the impact of the euro and the dollar, earnings before interest and taxes (EBIT) and Group profits would have risen by 11% and 17% respectively. Converted into Swiss francs, EBIT improved by 5.3% to reach CHF 172.7 million while profits increased by 4.4%, reaching CHF 122.6 million. Adjusted for exchange differences with the euro and the dollar net profit after deducting minority interests would have risen by roughly 3%.
_Despite the current environment, this year will once again see Galenica invest considerable resources in R&D, with CHF 60.1 million being spent in the first half of 2011 alone (compared with CHF 58.0 million in the first half of 2010). Investments in tangible and intangible assets amounted to CHF 26.7 million. The aim, as before, is to ensure that the Galenica Group as a whole can continue to grow sustainably and with the broadest possible risk diversification.
_In the first half of 2011, Vifor Pharma consolidated its position in the global market by restructuring, further developing its product portfolio, and reinforcing the market penetration of its iron-replacement products. The common company, Vifor Fresenius Medical Care Renal Pharma, in which Galenica and Fresenius Medical Care hold 55% and 45% stakes respectively, commenced business operations in the USA. Approval for the European launch is expected from the competition authorities in the second half of the year.
_The Pharma business sector generated net sales of CHF 296.0 million, representing growth of 10.8% in local currencies. The Swiss franc growth of 3.2% was influenced by a number of factors including the weak dollar and euro and pharma-political interventions in pricing. Licence income from CeIlCept amounted to CHF 70.3 million, reflecting an expected fall of 31.7%. Consolidated earnings before interest and taxes (EBIT) increased by 7.9% to CHF 140.3 million.
_Ferinject®: Further market launches. Net sales of Ferinject® rose from CHF 33.6 million to CHF 39.9 million, up 27.8% in local currencies and 18.7% in Swiss francs. Sales in Switzerland were stable at the very high level of CHF 15.4 million.
The number of prescriptions for Ferinject® in new therapeutic indications (outside the field of dialysis) has grown by 40% to 60% in all the European countries where the drug has been launched: for example, 44% in Germany, currently the second largest market for Ferinject®, 50% in Sweden and 60% in the UK.
Vifor Pharma’s Ferinject® has been launched in a number of new territories and is now approved for use in more than 35 countries. In the USA, good progress has been made to finalise the studies in support of the filing of lnjectafer® (US brand name of Ferinject®).
_Venofer® sustains growth. Venofer® saw a 5.9% increase in global sales in local currencies amounting to CHF 87.2 million overall (-5.7% in Swiss francs). Despite increased pressure from imitation products in various European countries, Venofer® continues to show stable growth – particularly in the USA, where dialysis clinics have begun to make more frequent use of parenteral iron products due to a new reimbursement system and the latest decision by the FDA to reduce ESA (erythropoiesis-stimulating agents) dosing.
_Promising start for Maltofer® in 2011. The oral iron therapy Maltofer® showed very encouraging growth with sales up 29.7% in local currencies to CHF 32.0 million (an increase of 24.0% in Swiss francs). This impressive result stems from several factors including a targeted campaign to revitalise the brand as well as successful public tenders in emerging countries where the management of iron deficiency is becoming increasingly important.
_Sales of other Rx products (prescription drugs) increased by 7.0% to CHF 26.1 million.
_PA 21 in Phase III. Recruitment of patients for Phase III clinical trials started successfully with support from our strategic partner Fresenius Medical Care and its world-leading network of dialysis centres.
_Infectious diseases/OTX. There has been dynamic growth for the products in the Infectious diseases/OTX unit. Sales of Broncho-Vaxom® increased by 8.8% in local currencies (+4.2% in Swiss francs) to CHF 24.9 million, and those of Uro-Vaxom® by 50.7% in local currencies (+37.8% in Swiss francs) to CHF 6.2 million. Work is ongoing to devise a selective strategy for addressing previously unmet medical needs. Vifor Pharma affiliates in Germany, Belgium and Romania have begun promoting OM Pharma products.
_Vifor Pharma Consumer Healthcare. Sales of Vifor Pharma Consumer Healthcare products in Switzerland totalled CHF 39.7 million (+4.6%) in the first half of 2011. Export sales amounted to CHF 12.5 million (-18.5%), and were hard hit by the strong Swiss franc.
In Switzerland sales in the first half of 2011 were slower than expected due to a weak cough-and-cold season and restrictions imposed on promotional claims for Equazen IQTM. By contrast, sales of Algifor® increased significantly, aided by continued success with the recently launched Algifor® OTC syrup for children and a new consultancy programme with complementary information material for migraine sufferers. Anti-Brumm® sales were also very dynamic, thanks to the recent launch of a tick spray and tick test that helped to revitalise this classic brand.
Third-party manufacturing grew by more than 25% in the first half of the year, mainly thanks to increased capacity demands from both new and existing customers.
The first half of 2011 saw a number of international launches, including Equazen eye qTM in Portugal. Nycomed introduced Nasmer® (Nycoklar) onto the Norwegian market in January, while Hermes relaunched Anti-Brumm® in Germany.
Bucking the trend
_The Logistics business sector continued to hold out against the generally negative market trend, with sales up 4.9% on the previous year to CHF 1,033.5 million. At CHF 10.2 million (-20.5%), EBIT remained comparably stable (allowing for a property sale in 2010).
_Galexis succeeded in winning back parts of the TopPharm group of pharmacies as customers and embarked on a new phase of collaboration with the Impuls service cooperative. In Ticino, the successful Galexis collaboration with Unione Farmaceutica Distribuzione saw further expansion in the range of products and services offered to existing customers. The regional inspectorate of medicinal products (RHI) for north-western Switzerland has certified Alloga’s new release platform that simplifies the market approval process for its customers.
New products and services, more pharmacies
_Thanks to strict cost management, synergies in strategic purchasing, a further increase in cash sales and the development of new offerings with suppliers, the Retail business sector succeeded in largely absorbing negative market influences. At CHF 544.4 million, sales were up 3.0% on the previous year and earnings before interest and taxes (EBIT) grew by 8.5% to CHF 24.2 million. In the first half of 2011, the number of Group-owned pharmacies increased to 286 (+7), while that of partner pharmacies grew to 145 (+12).
_Nestlé chose Amavita as its exclusive pharmacy partner in Switzerland for the national launch of BabyNes, the world's first comprehensive feeding system for babies and infants. The launch of a gluten intolerance test proved highly popular among Sun Store customers. In collaboration with MEDGATE, the Swiss centre for telemedicine, Coop Vitality launched a tick check just in time for the tick season. MediService focussed increasingly on the niche area of quality-assured dispatch of prescription drugs by post and added further indications to its existing Pharma Care therapy segments. Winconcept has now been operating in Ticino since July 2011 with 21 new pharmacies.
The ongoing roll-out of TriaPharm® and strong demand for hospINDEX contributed significantly to the 4.2% increase in mid-year sales to CHF 25.0 million; earnings before interest and taxes (EBIT) amounted to CHF 2.4 million.
_e-mediat was appointed to run the new Swiss Object Identifier (OID) Registration Office. Object identifiers are set to play a key role in Switzerland’s future eHealth system. The new compendium application (CompendiumApp) for iPhone, iPad and iPod Touch will facilitate mobile access to all content in the Swiss Drug Compendium (Arzneimittel-Kompendium der Schweiz®). Additional modules for pharmacy chain administration have been developed for TriaPharm® and Triamun has further expanded its TriaMed® functionalities for group and chain practices.
OUTLOOK FOR 2011
_Currency fluctuations will almost certainly continue to have a negative effect on the Swiss export industry and thus also on the Galenica Group. Added to this is the pressure on service providers and pharmaceutical companies in various healthcare markets, particularly Switzerland. Despite these circumstances, Galenica maintains its 2011 objective of achieving consolidated earnings at last year's level.
_Vifor Pharma continues to focus on achieving regulatory and reimbursement approvals for Ferinject® in more countries. The creation of Vifor Fresenius Medical Care Renal Pharma provides an even stronger global platform for Venofer® and Ferinject® in the field of chronic kidney insufficiency. The company will also support preparations for the filing of phosphate binder PA21 in the USA and EU.
_New MHRA approval for Ferinject®. In July 2011, the UK’s Medicines and Healthcare products Regulatory Agency (MHRA) approved a new, simplified dosing regimen for Ferinject®. Dosing recommendations for iron are shown in an easy-to-read table that makes it more convenient and much simpler for doctors to calculate the required dose. Simultaneously, the authority approved an increase in maximum dosing for a single administration Ferinject® by intravenous injection. The previous limit was 200 mg but now doctors can give 1000mg, another way to simplify therapy and reduce the number of medical consultations. The MHRA is the reference authority for Europe, and applications have been made to adopt this approval in other European countries as well.
_Partnership with Hikma Pharmaceuticals to market Ferinject® in the Middle East and in North Africa. In August 2011, Vifor Pharma and Hikma Pharmaceuticals signed an agreement to market Ferinject® in the regions of the Middle East and North Africa (MENA). Specialised in the development, production and commercialisation of generic and licensed products, Hikma is market leader in the MENA region. The agreement covers countries that are home to some 295 million people and where Hikma employs more than 1,600 sales and marketing personnel. Thanks to Hikma’s local presence, regional marketing know-how and regulatory expertise, the registration and launch of Ferinject® will be accelerated.
_Vifor Pharma Consumer Healthcare will build on its strong position in the Swiss OTC market and work to expand that position among pharmacies. These efforts will focus on life-cycle management of its leading products and the further expansion of successful initiatives such as the Anti-Brumm® tick test and the Algifor® migraine programme.
_Galexis will continue to expand its range of products and services. At the end of 2011, Alloga is to introduce electronic dispatch notification for wholesalers and hospitals.
_The introduction of a new pricing model for generics is likely to add further momentum to the consolidation process within the Swiss pharmacy market. GaleniCare will therefore continue to pursue its strategy of expansion and consolidation. Amavita intends to increase the number of own-brand products to 25 by the end of 2011. Sun Store pharmacies are to receive a facelift, with the redesign of perfumery departments and the revitalisation of the SunCard customer loyalty card.
_The new module 'Clinical Decision Support' for hospINDEX is intended to further improve drug safety in inpatient and outpatient care for specific patient groups. TriaMed® will continue to participate in pilot projects in connection with eHealth.
Galenica is a diversified Group active throughout the healthcare market which, among other activities, develops, manufactures and markets pharmaceutical products, runs pharmacies, provides logistical and database services and sets up networks. With its two Business units Vifor Pharma and Galenica Santé, the Galenica Group enjoys a leading position in all its core business activities. A large part of the Group’s income is generated by international operations. Galenica is listed on the Swiss Stock Exchange (SIX Swiss Exchange, GALN, security number 1,553,646).
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Head of Corporate Communications