The Galenica Group has posted a double-digit year-on-year increase in profit for the twelfth year in a row. With net sales totalling CHF 2,529.1 million, consolidated net profit for 2007 amounts to CHF 134.9 million. Highlights for the company included the registration of Ferinject® in Europe and its market launch in Germany, the progress made in the construction of the new distribution centre in Niederbipp, and the integration of the specialty pharmacy MediService into the Retail business sector. The successful acquisition of the Canadian pharmaceutical company Aspreva Pharmaceuticals Corporation will have major strategic impact, although it will only be included in the balance sheet for the first time in 2008.
The Galenica Group sets a new record
Galenica's consolidated net sales for 2007 amount to CHF 2,529.1 million (+17.5%). Earnings before interest, taxes, depreciation and amortisation (EBITDA) increased by 29.3% to CHF 191.9 million, as reflected in an operating result (EBIT) of CHF 154.1 million. Consolidated net profit for 2007 stands at CHF 134.9 million, which corresponds to earnings growth of 30.1%.
In 2007, investments in intangible and tangible assets totalled CHF 110.1 million (compared with CHF 60.7 million in 2006), whilst investments in research and development came to CHF 35.3 million(compared with CHF 36.6 million in 2006).The Board of Directors will propose an ordinary dividend of CHF 6.00 per registered share to the General Meeting, an increase of +20%.
REVIEW 2007
Pharma: Further sales growth; Ferinject® registered in Europe and launched on the market in Germany
The Pharma business sector generated net sales of CHF 400.4 million in 2007, surpassing the previous year s figure by 11.6%. The operating result was up 18.1% to CHF 115.0 million. This increase was achieved in spite of major expenditures on research and development, for preparing the market roll-out of Ferinject® and for the work performed in the lead-up to the acquisition of Aspreva.
Demand for medicinal iron products continues to grow and has also had an impact on the sales of Vifor (International). Sales of the injectable iron replacement product Venofer® alone increased worldwide by 10.5% to CHF 174.7 million. Maltofer® has likewise enlarged its global market leadership:Notwithstanding increasing competition with generics, sales rose by 3.6% to CHF 49.3 million.
In the second half of 2007, Ferinject® was registered by the health authorities in a total of 18 EU countries as well as in Switzerland. The first market launch took place in Germany in November 2007, and the drug has also been available in Switzerland since February 2008.
Planning for the Phase II clinical development programme for the novel phosphate binder PA21 was initiated in 2007. With the benefit of new development expertise coming from the acquisition of Aspreva, Galenica decided to review the project. The aim of this review is to optimise the formulation and the clinical development programme for PA21 in order to enhance its potential benefit for patients.The effect of this decision will be a delay to the original project schedule. Phase II clinical studies with the new formulation are expected to commence before the end of 2008. Galenica anticipates regulatory filing of PA21 by 2011.
Vifor Pharma streamlined its organisation in Switzerland by combining the OTC and Parapharmaceuticals business units into a new unit called Consumer Health. Vifor plans to focus more on its growing core business with OTC products and to expand this business both in Switzerland and internationally. The Swiss OTC market saw relatively flat growth of 1.0% in 2007. Sales of Vifor s OTC products rose by 4.8% to CHF 74.7 million, thus growing faster than the market as a whole.Perskindol® remains the best-selling product; sales increased by 1.9% to CHF 10.2 million. Sales of Algifor® were up by 19.2%, sales of Triofan® rose by 6.0%. Sales of Anti-Brumm® jumped 5%, enabling it to increase its share of the Swiss insect repellent market.
The Rx business unit (prescription medicines) posted 12.9% higher sales of CHF 67.4 million, with sales of Venofer® (up 61.3% to CHF 16.2 million) playing a key role. One of the success factors behind these strong sales is an expanding market; awareness of iron deficiency is rising steadily, which is leading in turn to the development of new indication areas. In addition, the anti-depressant Trittico® posted an encouraging 38.3% increase in sales.
Sales of the OTC export business soared by 110.8% to CHF 14.5 million. In the United Kingdom, Potters sales, which include Equazen products for the first time, totalled CHF 33.7 million, a 216.0%increase over the previous year.
Logistics: New products and services
Pressure on the Swiss healthcare market heightened the need for security, reliability and comprehensive solutions. By providing new products and services such as TOP HOMECARE and Promologistics, the Logistics business sector fulfilled existing market expectations and thereby strengthened customer confidence. Sales grew by 17.9% to CHF 1,975.9 million. The acquisition of Unione Farmaceutica Distribuzione accounted for 11.5%. Adjusted for the acquisition, sales growth outpaced that of the market as a whole. The operating result at the end of the year was CHF 19.4 million (up 63.9%).Work on Europe s most modern distribution centre in Niederbipp is progressing as scheduled. By merging and relocating the Schönbühl and Schlieren distribution centres to Niederbipp, Galexis will consolidate its logistics services in Switzerland. By the summer of 2008 there will be two locations - Lausanne and the new centre in Niederbipp.
HealthCare Information: An ideal addition
The HealthCare Information business sector, which plays an important strategic role for the companies of the Swiss HealthCare Services, increased sales by 28.2% to CHF 35.4 million and recorded an operating result of CHF 0.1 million.
e-mediat responded well to the increasingly differentiated requirements of service providers and insurers in the healthcare market by developing the products MedINDEX, HospINDEX and InsureINDEX based on Galdat. Documed s new editorial system compendiumPORTAL has made it easier to produce the Swiss Drug Compendium. In July 2007, the Galenica Group acquired the Swiss software company BMC Holding SA and merged it with Triamun AG. The BMC and Triamun products complement one another perfectly. Triamun is now the second-largest provider of IT solutions for medical practices and pharmacies in Switzerland.
Retail: Encouraging growth; integration of MediService
The Retail business sector saw a total increase in sales of 19.6% to CHF 428.8 million, with acquisitions accounting for 15%. Thanks to healthy internal growth of 5.0%, the Retail business sector marginally exceeded the 4.4% growth of the comparable Swiss pharmacy market. The operating result amounted to CHF 16.3 million, which represents an increase of 22.9% year-on-year. (Sales of Coop Vitality are not included in the consolidated statements of the Galenica Group. They amounted to CHF 63.6 million (+32.3%)).
At the end of 2007, the Galenica Group s entire pharmacy network comprised 228 locations (19 more than in 2006). The Group is therefore another step closer to its strategic goal of 300 to 350 networked locations throughout Switzerland. The number of Amavita pharmacies was increased from 100 to 114, Coop Vitality grew from 21 to 25 points of sale. By the end of 2007 80 pharmacies were affiliated to Winconcept.
By acquiring the specialty pharmacy MediService in October 2007, the business sector expanded its existing portfolio to include an extremely specific business model. The unique Pharma Care concept delivers comprehensive in-home medical care for patients with rare diseases and offers them an integrated range of therapeutic services.
OUTLOOK FOR 2008
Specialty Pharma
In the Pharma business sector, the focus for 2008 will be on the integration of Aspreva, the formation of the new Vifor Pharma, and the market launch of Ferinject® in a number of European countries.
The acquisition of the Canadian pharmaceutical company Aspreva Pharmaceuticals Corporation has led to the creation of a new specialty pharma group with an international focus called Vifor Pharma.The group will focus on the following core businesses: anaemia (iron deficiency), nephrology (kidney diseases) and consumer health (non-prescription or OTC products). One of Vifor Pharma s goals will be to market products efficiently. The sales organisation will therefore be expanded to include corporate subsidiaries in addition to existing partners. Now that branches have been established in Switzerland and Germany, more subsidiaries are being set up in markets such as Denmark, Sweden and the United Kingdom.
The launch of Ferinject® on the German market, which began in November 2007, will be continued and intensified. The medication has also been available in Switzerland since February 2008. Other European countries such as the United Kingdom and Scandinavia will follow in the very near future. In the USA, meanwhile, an Advisory Committee appointed by the FDA recommended in early February 2008 that Injectafer® (name of Ferinject® in the USA) be approved as a second-line treatment, when oral iron is ineffective or insufficient, for treating women with heavy uterine or postpartum bleeding.This recommendation is in line with the current approvals in Europe. On March 11, 2008, Galenica was informed by Luitpold Pharmaceuticals, Inc., its US licensing partner, that they have received a non- approvable letter from the U.S. Food and Drug Administration for Luitpold s New Drug Application for Injectafer®. In its letter, the FDA said it needs more information to better characterise the benefit to risk ratio and dosage in this patient population for Injectafer® and requested additional safety data from clinical studies. Galenica is committed to working together with Luitpold in furthering ongoing discussions with the Agency to better understand its perspective and to work on defining a regulatory path forward that will lead to NDA approval. At the moment, Galenica cannot comment on the timing of approval until further FDA dialogue has taken place.
Sustained activity in the area of scientific information for physicians
Most European countries are largely unfamiliar with the therapeutic application of injectable iron replacement products other than those used in dialysis. It is therefore necessary for a systematic information campaign to be carried out amongst opinion leaders and subsequently in the academic arena. The pioneering work which the Galenica Group has done in Switzerland will benefit this information process (top-down approach). After more than seven years of intensive work, and thanks to the recommendations of the most renowned specialists in this field, injectable iron replacement products are currently prescribed in 85% of cases outside dialysis in Switzerland. Vifor Pharma is aware of the enormous challenge that this process represents at international level. The newly acquired competencies following the acquisition of Aspreva takeover are the ideal complement for this new and promising project.
In April 2008, Vifor plans to launch the clinically tested unique combination of essential fatty acids eye q under the brand Equazen IQ on the Swiss market. Marketing activities for iron replacement products are being stepped up in various therapeutic areas of gynaecology. Vifor and Potters intend to build a broader support network geographically in order to exploit the growth potential of exports.
Swiss HealthCare Services
The move to the new Galexis distribution centre in Niederbipp will start in April 2008 and will be completed in late summer. The new distribution centre will be 65 to 70% automated, which will provide for new functionalities at attractive prices. Although the project will tie up a significant proportion of company resources, Galexis will fully guarantee the quality and stability of its services.
e-mediat and Documed will continue to adapt their products to specific market requirements. For this purpose, pilot testing will be carried out at Berne University Hospital in collaboration with the company Qualidoc, among others, with the aim of adding new specific functionalities to e-MED. The integration of the BMC products into the Triamun product line is set to continue and potential synergies arising from the merger between BMC and Triamun will likewise be exploited.
In 2008, new and extremely attractive sales points will complement the network of Amavita pharmacies. There will be three at Zurich airport alone, and an Amavita pharmacy will also be opened in RailCity Berne. In view of the trend in the price of medications, more pharmacies are expected to join the Amavita partnership. As of 1 April, the members of the Conpharm group of pharmacies from north-western Switzerland will adopt the Feelgood s brand of Winconcept. The company will continue to equip Amavita points of sale with Triamun's modern pharmacy management solution TriaPharm®, and new functions will also be integrated. MediService s Pharma Care format will be further improved and gradually expanded to include all potential indications and medicines.
GALENICA GROUP STRATEGY
The transformation strategy Galenica has pursued since 1995, which is designed to create a diversified company in the healthcare market from the original Swiss pharmacy wholesaler, has proven extremely successful to date. Galenica today has two main strategic thrusts: The central element of the strategic Specialty Pharma axis is the integrated specialty pharma group Vifor Pharma, which is based on the following three core businesses at international level: anaemia, nephrology and consumer health. It is engaged in the research and development of pharmaceutical specialties and with the further development of international activities in the increasingly important OTC market. Swiss HealthCare Services constitutes the second strategic axis. It represents a hitherto unique integrated business model in the Swiss healthcare market, which links all players together in a network. Drawing on its core competencies Logistics, Information and Retail, the Galenica Group plans to strengthen its special position in the Swiss healthcare market and utilise the excellent picture it has of market trends for this purpose.
The Galenica Group s strategy is to secure long-term growth while at the same time distributing risk effectively thanks to healthy diversification. This is also the reason why the Group will not be broken up in the foreseeable future, for example by selling non-pharma activities. Furthermore, Galenica believes these activities have considerable potential.
The Galenica Group has every confidence in its strategy and also expects earnings growth to exceed 20% in 2008.
The Galenica Group sets a new record
Galenica's consolidated net sales for 2007 amount to CHF 2,529.1 million (+17.5%). Earnings before interest, taxes, depreciation and amortisation (EBITDA) increased by 29.3% to CHF 191.9 million, as reflected in an operating result (EBIT) of CHF 154.1 million. Consolidated net profit for 2007 stands at CHF 134.9 million, which corresponds to earnings growth of 30.1%.
In 2007, investments in intangible and tangible assets totalled CHF 110.1 million (compared with CHF 60.7 million in 2006), whilst investments in research and development came to CHF 35.3 million(compared with CHF 36.6 million in 2006).The Board of Directors will propose an ordinary dividend of CHF 6.00 per registered share to the General Meeting, an increase of +20%.
REVIEW 2007
Pharma: Further sales growth; Ferinject® registered in Europe and launched on the market in Germany
The Pharma business sector generated net sales of CHF 400.4 million in 2007, surpassing the previous year s figure by 11.6%. The operating result was up 18.1% to CHF 115.0 million. This increase was achieved in spite of major expenditures on research and development, for preparing the market roll-out of Ferinject® and for the work performed in the lead-up to the acquisition of Aspreva.
Demand for medicinal iron products continues to grow and has also had an impact on the sales of Vifor (International). Sales of the injectable iron replacement product Venofer® alone increased worldwide by 10.5% to CHF 174.7 million. Maltofer® has likewise enlarged its global market leadership:Notwithstanding increasing competition with generics, sales rose by 3.6% to CHF 49.3 million.
In the second half of 2007, Ferinject® was registered by the health authorities in a total of 18 EU countries as well as in Switzerland. The first market launch took place in Germany in November 2007, and the drug has also been available in Switzerland since February 2008.
Planning for the Phase II clinical development programme for the novel phosphate binder PA21 was initiated in 2007. With the benefit of new development expertise coming from the acquisition of Aspreva, Galenica decided to review the project. The aim of this review is to optimise the formulation and the clinical development programme for PA21 in order to enhance its potential benefit for patients.The effect of this decision will be a delay to the original project schedule. Phase II clinical studies with the new formulation are expected to commence before the end of 2008. Galenica anticipates regulatory filing of PA21 by 2011.
Vifor Pharma streamlined its organisation in Switzerland by combining the OTC and Parapharmaceuticals business units into a new unit called Consumer Health. Vifor plans to focus more on its growing core business with OTC products and to expand this business both in Switzerland and internationally. The Swiss OTC market saw relatively flat growth of 1.0% in 2007. Sales of Vifor s OTC products rose by 4.8% to CHF 74.7 million, thus growing faster than the market as a whole.Perskindol® remains the best-selling product; sales increased by 1.9% to CHF 10.2 million. Sales of Algifor® were up by 19.2%, sales of Triofan® rose by 6.0%. Sales of Anti-Brumm® jumped 5%, enabling it to increase its share of the Swiss insect repellent market.
The Rx business unit (prescription medicines) posted 12.9% higher sales of CHF 67.4 million, with sales of Venofer® (up 61.3% to CHF 16.2 million) playing a key role. One of the success factors behind these strong sales is an expanding market; awareness of iron deficiency is rising steadily, which is leading in turn to the development of new indication areas. In addition, the anti-depressant Trittico® posted an encouraging 38.3% increase in sales.
Sales of the OTC export business soared by 110.8% to CHF 14.5 million. In the United Kingdom, Potters sales, which include Equazen products for the first time, totalled CHF 33.7 million, a 216.0%increase over the previous year.
Logistics: New products and services
Pressure on the Swiss healthcare market heightened the need for security, reliability and comprehensive solutions. By providing new products and services such as TOP HOMECARE and Promologistics, the Logistics business sector fulfilled existing market expectations and thereby strengthened customer confidence. Sales grew by 17.9% to CHF 1,975.9 million. The acquisition of Unione Farmaceutica Distribuzione accounted for 11.5%. Adjusted for the acquisition, sales growth outpaced that of the market as a whole. The operating result at the end of the year was CHF 19.4 million (up 63.9%).Work on Europe s most modern distribution centre in Niederbipp is progressing as scheduled. By merging and relocating the Schönbühl and Schlieren distribution centres to Niederbipp, Galexis will consolidate its logistics services in Switzerland. By the summer of 2008 there will be two locations - Lausanne and the new centre in Niederbipp.
HealthCare Information: An ideal addition
The HealthCare Information business sector, which plays an important strategic role for the companies of the Swiss HealthCare Services, increased sales by 28.2% to CHF 35.4 million and recorded an operating result of CHF 0.1 million.
e-mediat responded well to the increasingly differentiated requirements of service providers and insurers in the healthcare market by developing the products MedINDEX, HospINDEX and InsureINDEX based on Galdat. Documed s new editorial system compendiumPORTAL has made it easier to produce the Swiss Drug Compendium. In July 2007, the Galenica Group acquired the Swiss software company BMC Holding SA and merged it with Triamun AG. The BMC and Triamun products complement one another perfectly. Triamun is now the second-largest provider of IT solutions for medical practices and pharmacies in Switzerland.
Retail: Encouraging growth; integration of MediService
The Retail business sector saw a total increase in sales of 19.6% to CHF 428.8 million, with acquisitions accounting for 15%. Thanks to healthy internal growth of 5.0%, the Retail business sector marginally exceeded the 4.4% growth of the comparable Swiss pharmacy market. The operating result amounted to CHF 16.3 million, which represents an increase of 22.9% year-on-year. (Sales of Coop Vitality are not included in the consolidated statements of the Galenica Group. They amounted to CHF 63.6 million (+32.3%)).
At the end of 2007, the Galenica Group s entire pharmacy network comprised 228 locations (19 more than in 2006). The Group is therefore another step closer to its strategic goal of 300 to 350 networked locations throughout Switzerland. The number of Amavita pharmacies was increased from 100 to 114, Coop Vitality grew from 21 to 25 points of sale. By the end of 2007 80 pharmacies were affiliated to Winconcept.
By acquiring the specialty pharmacy MediService in October 2007, the business sector expanded its existing portfolio to include an extremely specific business model. The unique Pharma Care concept delivers comprehensive in-home medical care for patients with rare diseases and offers them an integrated range of therapeutic services.
OUTLOOK FOR 2008
Specialty Pharma
In the Pharma business sector, the focus for 2008 will be on the integration of Aspreva, the formation of the new Vifor Pharma, and the market launch of Ferinject® in a number of European countries.
The acquisition of the Canadian pharmaceutical company Aspreva Pharmaceuticals Corporation has led to the creation of a new specialty pharma group with an international focus called Vifor Pharma.The group will focus on the following core businesses: anaemia (iron deficiency), nephrology (kidney diseases) and consumer health (non-prescription or OTC products). One of Vifor Pharma s goals will be to market products efficiently. The sales organisation will therefore be expanded to include corporate subsidiaries in addition to existing partners. Now that branches have been established in Switzerland and Germany, more subsidiaries are being set up in markets such as Denmark, Sweden and the United Kingdom.
The launch of Ferinject® on the German market, which began in November 2007, will be continued and intensified. The medication has also been available in Switzerland since February 2008. Other European countries such as the United Kingdom and Scandinavia will follow in the very near future. In the USA, meanwhile, an Advisory Committee appointed by the FDA recommended in early February 2008 that Injectafer® (name of Ferinject® in the USA) be approved as a second-line treatment, when oral iron is ineffective or insufficient, for treating women with heavy uterine or postpartum bleeding.This recommendation is in line with the current approvals in Europe. On March 11, 2008, Galenica was informed by Luitpold Pharmaceuticals, Inc., its US licensing partner, that they have received a non- approvable letter from the U.S. Food and Drug Administration for Luitpold s New Drug Application for Injectafer®. In its letter, the FDA said it needs more information to better characterise the benefit to risk ratio and dosage in this patient population for Injectafer® and requested additional safety data from clinical studies. Galenica is committed to working together with Luitpold in furthering ongoing discussions with the Agency to better understand its perspective and to work on defining a regulatory path forward that will lead to NDA approval. At the moment, Galenica cannot comment on the timing of approval until further FDA dialogue has taken place.
Sustained activity in the area of scientific information for physicians
Most European countries are largely unfamiliar with the therapeutic application of injectable iron replacement products other than those used in dialysis. It is therefore necessary for a systematic information campaign to be carried out amongst opinion leaders and subsequently in the academic arena. The pioneering work which the Galenica Group has done in Switzerland will benefit this information process (top-down approach). After more than seven years of intensive work, and thanks to the recommendations of the most renowned specialists in this field, injectable iron replacement products are currently prescribed in 85% of cases outside dialysis in Switzerland. Vifor Pharma is aware of the enormous challenge that this process represents at international level. The newly acquired competencies following the acquisition of Aspreva takeover are the ideal complement for this new and promising project.
In April 2008, Vifor plans to launch the clinically tested unique combination of essential fatty acids eye q under the brand Equazen IQ on the Swiss market. Marketing activities for iron replacement products are being stepped up in various therapeutic areas of gynaecology. Vifor and Potters intend to build a broader support network geographically in order to exploit the growth potential of exports.
Swiss HealthCare Services
The move to the new Galexis distribution centre in Niederbipp will start in April 2008 and will be completed in late summer. The new distribution centre will be 65 to 70% automated, which will provide for new functionalities at attractive prices. Although the project will tie up a significant proportion of company resources, Galexis will fully guarantee the quality and stability of its services.
e-mediat and Documed will continue to adapt their products to specific market requirements. For this purpose, pilot testing will be carried out at Berne University Hospital in collaboration with the company Qualidoc, among others, with the aim of adding new specific functionalities to e-MED. The integration of the BMC products into the Triamun product line is set to continue and potential synergies arising from the merger between BMC and Triamun will likewise be exploited.
In 2008, new and extremely attractive sales points will complement the network of Amavita pharmacies. There will be three at Zurich airport alone, and an Amavita pharmacy will also be opened in RailCity Berne. In view of the trend in the price of medications, more pharmacies are expected to join the Amavita partnership. As of 1 April, the members of the Conpharm group of pharmacies from north-western Switzerland will adopt the Feelgood s brand of Winconcept. The company will continue to equip Amavita points of sale with Triamun's modern pharmacy management solution TriaPharm®, and new functions will also be integrated. MediService s Pharma Care format will be further improved and gradually expanded to include all potential indications and medicines.
GALENICA GROUP STRATEGY
The transformation strategy Galenica has pursued since 1995, which is designed to create a diversified company in the healthcare market from the original Swiss pharmacy wholesaler, has proven extremely successful to date. Galenica today has two main strategic thrusts: The central element of the strategic Specialty Pharma axis is the integrated specialty pharma group Vifor Pharma, which is based on the following three core businesses at international level: anaemia, nephrology and consumer health. It is engaged in the research and development of pharmaceutical specialties and with the further development of international activities in the increasingly important OTC market. Swiss HealthCare Services constitutes the second strategic axis. It represents a hitherto unique integrated business model in the Swiss healthcare market, which links all players together in a network. Drawing on its core competencies Logistics, Information and Retail, the Galenica Group plans to strengthen its special position in the Swiss healthcare market and utilise the excellent picture it has of market trends for this purpose.
The Galenica Group s strategy is to secure long-term growth while at the same time distributing risk effectively thanks to healthy diversification. This is also the reason why the Group will not be broken up in the foreseeable future, for example by selling non-pharma activities. Furthermore, Galenica believes these activities have considerable potential.
The Galenica Group has every confidence in its strategy and also expects earnings growth to exceed 20% in 2008.
