Actelion announces Half Year 2012 financial results

Thu Jul 19, 2012 1:03am EDT

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Actelion Pharmaceuticals Ltd / Actelion announces Half Year 2012 financial results . Processed and transmitted by Thomson Reuters ONE. The issuer is solely responsible for the content of this announcement.

Total Product sales of CHF 861.8 million, down 3 % in local currencies - Core earnings of CHF 300.7 million, up 14 % in local currencies supported by partial reversal of doubtful debt provisions and improved operating leverage - Upgraded 2012 guidance and new higher profitability base due to recently announced cost saving initiative

ALLSCHWIL/BASEL, SWITZERLAND - 19 July 2012 - Actelion Ltd (SIX: ATLN) today announced its financial results for the first half of 2012.

In CHF Million
(except for per share data)
Results
H1 2012
Results
H1 2011
% Variance
In CHF
% Variance
In LC
Total net revenues 865.0 969.9 (11) (10)
Product sales 861.8 890.1 (3) (3)
US GAAP EBIT 229.2 (223.1) - -
Core earnings 300.7 266.7 13 14
US GAAP EPS (fully diluted) 1.46 (2.20) - -

As of 30 June 2012, Actelion had cash and cash deposits of CHF 1.4 billion (of which CHF 378.9 million is restricted). In addition, Actelion holds 14.7 million treasury shares (includes 4.4 million shares that will be cancelled in late July 2012).

Jean-Paul Clozel, M.D. and Chief Executive Officer of Actelion commented: "In the first half of 2012 we have taken decisive action to ensure that the company is able to take full advantage of the growth opportunity we have created with macitentan, thereby further strengthening our pulmonary arterial hypertension (PAH) franchise. I am very pleased, that our efforts to control costs are already having an impact on profitability."

Jean-Paul Clozel, continued: "Actelion is focused on and committed to optimizing the earning power of the business. To best achieve this, Actelion has launched a cost saving initiative as an integral part of its strategy for value creation."

Jean-Paul Clozel concluded: "I strongly believe that through the execution of our strategy, with our available assets as well as the cost control measures we have committed to, Actelion is well-positioned for sustainable core earnings growth and greater shareholder returns in the future."

Andrew J. Oakley, Chief Financial Officer of Actelion commented: "Actelion continues to expect product sales to decrease in the low single-digit range for the full year 2012. However, based on an accelerated impact from the cost saving initiative, Actelion has increased its full year earnings outlook for 2012, thereby creating a higher base from which to drive future profitability."

Actelion now expects core earnings to grow in the mid single-digit percentage range for 2012. This guidance excludes any impact from movements in provisions relating to receivables in Southern Europe. Previously, the company had guided for no 2012 core earnings growth.

Andrew Oakley concluded: "On the same 2012 basis and unforeseen events excluded, we also expect to maintain core earnings in 2013 at this higher forecasted 2012 level (in local currencies) and expect to return to single-digit growth in 2014 and double-digit growth by 2015."

As a result of the cost saving initiative announced on 12 July 2012, the company expects to include in its full year 2012 financial statements a restructuring charge, the exact amount is yet to be determined. As a one-off event the charge will not be included in core earnings.

Revenue performance
Product sales for the first half of 2012 were CHF 861.8 million (H1 2011
CHF 890.1 m), a decrease of 3 % in local currencies, with 40 % of sales coming from the United States, 39 % from Europe, 11 % from Japan and 10 % from the rest of the world.

Tracleer (bosentan) sales decreased by 4 % in local currencies to total CHF 752.4 million.  The decrease is attributed to the competitive situation in the US as well as price cuts in other regions. Underlying unit growth (+2 %) was driven by Japan, Europe and other markets.

Ventavis (iloprost) sales for the period were CHF 56.1 million. This represents a decrease of 8 % in local currencies, the result of a decline in units shipped.

Sales of VeletriR (epoprostenol for injection), amounted to CHF 11.4 million during the first six months of 2012, compared to CHF 6.1 million in the first half of 2011. Registration in Japan and Europe with the second generation formulation is ongoing. On 29 June 2012, Actelion Pharmaceuticals US, Inc. announced that the US Food and Drug Administration (FDA) approved their supplemental new drug application (sNDA) for second generation Veletri, for the treatment of PAH (WHO Group 1) to improve exercise capacity.

Sales of ZavescaR (miglustat), for the first half of 2012 amounted to CHF 40.6 million compared to CHF 34.7 million during the same period last year. This represents an increase of 20 % in local currencies driven predominantly by strong patient demand in Niemann Pick Type-C indication with 23 % growth in patients on therapy (outside the US) as well as a positive US pricing impact.

As announced in April, Japan's Ministry of Health, Labor and Welfare granted approval for Actelion's miglustat for the treatment of Niemann-Pick type C disease. Since the approval, Actelion has launched miglustat in Japan under the trade name BrazavesR .

Otto Schwarz, Chief Operating Officer of Actelion commented: "Despite a decrease in local currency product sales, I am encouraged that underlying unit shipments continued to increase for Tracleer, Veletri and Zavesca. I am also glad to report a collection of over CHF 100 million of receivables, resulting in the reversal of a significant portion of the doubtful debt provision from Southern European countries. Actelion is now preparing to maximize the significant potential of our unique compound, macitentan."

Contract revenues for the first half of 2012 amounted to CHF 3.2 million. As a reminder, the first half of 2011 included the remaining deferred revenue from the ongoing orexin collaboration with GlaxoSmithKline (CHF 76.5 m).

Operating expenses
Total operating expenses for the first six months of 2012 were CHF 635.8 million compared to CHF 1,193.0 million for the first half of 2011 that included the Asahi litigation provision of CHF 485.2 million, which was subsequently reduced. The decrease in operating expenses is largely due to a partial reversal of doubtful debt provisions and tight cost control. Cash operating expenses for the first half of 2012 were down 10 % in Swiss Francs and in local currencies.

Research and Development (R&D) expenses in the first half of 2012 were up 1 % to CHF 232.1 million (H1 2011: CHF 228.7 m). This increase includes the USD 10 million milestone payment to Auxilium Pharmaceuticals, Inc. in relation to our collaboration on XIAFLEXR in certain territories. Non-GAAP R&D expenses for the same period, which excludes stock-based compensation expense, amortization and depreciation, were CHF 198.1 million compared to CHF 199.7 million in the first half of 2011, a 1 % decrease.

Selling, General and Administrative expenses (SG&A) for the first half of 2012 were CHF 284.5 million (H1 2011: CHF 357.4 m). The net benefit from the reduction in allowance for doubtful debt receivables in Southern Europe for the half year was CHF 19.3 million. Additionally, lower legal expenses as well as tight cost control contributed to this decrease.

Non-GAAP SG&A expenses for the first half of 2012, which excludes stock-based compensation expense, amortization and depreciation, were CHF 263.1 million compared to CHF 322.2 million in the first half of 2011, a decrease of 18 % in local currencies.

Operating income
Operating income for the first six months of 2012 was CHF 229.2 million compared to an operating loss of CHF 223.1 million for the same period in 2011.

In order to better compare the company's underlying performance, Actelion reports core earnings as product sales minus cash operating expenses, as well as other items that may distort comparison.

For the first half of 2012, core earnings amounted to CHF 300.7 million compared to CHF 266.7 million during the first half of 2011. This represents an increase of 14 % in local currencies. Excluding the movement of doubtful debt, the increase was 6 %.

Net income
Net income for the first half of 2012 amounted to CHF 173.7 million (H1 2011: net loss of CHF 262.3 m).

Net income for the period includes interest income of CHF 1.1 million, interest expense related to litigation provisions of CHF 20.5 million, interest expense on the CHF 235 million bond of CHF 6.0 million, other interest expense of CHF 0.5 million, impairment on financial assets of CHF 0.3 million, other financial income of CHF 3.4 million as well as an income tax expense of CHF 32.7 million.

The net income translates into fully diluted earnings per share of CHF 1.46 compared to a loss per share of CHF 2.20 in the first half of 2011. Core EPS for the period under review amounted to CHF 2.12, an increase of 14 % compared to the same period in 2011.

Dividend payment
At this year's Annual General Meeting on 4 May 2012, Actelion's shareholders voted to approve the Board's recommendation to distribute a dividend, out of legal reserve originating from capital contribution, in the amount of CHF 0.80 per registered share.

Business Development
Actelion and Auxilium collaboration
In February 2012, Actelion announced that it had entered into a long-term partnership with Auxilium Pharmaceuticals, Inc. for the development, supply and commercialization of XIAFLEXR (collagenase clostridium histolyticum), a novel, first-in-class biologic for the potential treatment of Dupuytren's contracture and Peyronie's disease.

Under the terms of the agreement, Actelion will receive exclusive rights to commercialize XIAFLEX for the treatment of Dupuytren's contracture and Peyronie's disease in Canada, Australia, Brazil and Mexico upon receipt of the respective regulatory approvals. Actelion will be primarily responsible for the applicable regulatory and commercialization activities for XIAFLEX in these countries.

In July 2012, Auxilium was granted a Notice of Compliance (approval) by Health Canada for XIAFLEX, for the treatment of Dupuytren's contracture in adults with a palpable cord in Canada. Actelion expects to make XIAFLEX available to patients in Canada in the first half of 2013.

Actelion and EchoSense Inc. collaboration
Also in February 2012, Actelion entered into a collaboration with privately-held EchoSense Inc., an Israeli company. EchoSense is a medical device company which develops novel non-invasive and non-imaging ultrasound Doppler and signal processing technologies capable of extracting parametric information regarding both the coronary arteries and the pulmonary system, including but not limited to pulmonary blood pressure measurements. EchoSense is currently conducting clinical studies with its portable, non-invasive ultrasound system having graphic and numeric (parametric) outputs that serve to diagnose and evaluate, in real time, the state of different cardiac and pulmonary diseases and thus improve treatment.

Nicholas Franco, Chief Business Development Officer commented: "Our commitment to PAH is further demonstrated by our collaboration with EchoSense to test and validate this non-invasive innovative device. The device would potentially allow an earlier diagnosis of pulmonary hypertension and the monitoring and evaluation of the functional state of the cardio-pulmonary system. The device might therefore play a key role in identifying and therapeutic monitoring of PAH."

Actelion and Merck & Co., Inc. collaboration
Also in this reporting period, Merck notified Actelion of its intent to conclude the collaboration to discover, develop and market new classes of orally available renin inhibitors, for patients suffering from diseases related to the Renin-Angiotensin-Aldosterone-System (RAAS), has concluded. Upon completion of contractual obligations, all rights to the renin inhibitors discovered during the alliance are held by Actelion and the program is available for out-licensing.

Clinical Development
As announced in May 2012, Actelion has chosen to focus on projects in PAH and additional orphan and specialty indications. Following this announcement the company has reviewed its entire portfolio and decided to focus on, prepare for partnership/out-license or discontinue certain development projects. The company has made capital allocation decisions focusing on the projects that offer the best risk/reward profile and hence should optimize return on invested capital.

Pulmonary Arterial Hypertension
Macitentan
In April 2012, Actelion announced that the pivotal Phase III SERAPHIN (Study with an Endothelin Receptor Antagonist in Pulmonary arterial Hypertension to Improve clinical outcome) outcome study met its primary endpoint.

Initial analysis indicated that in this long-term event-driven study in patients with PAH - who were allowed to receive PAH background therapy throughout the study, either PDE-5 inhibitors or oral/inhaled prostanoids and were treated for up to three and a half years - macitentan, at both the 3 mg and 10 mg dose, decreased the risk of a morbidity/mortality event over the treatment period versus placebo. This risk was reduced by 45 % in the 10 mg dose group (p<0.0001). At 3 mg, the observed risk reduction was 30 % (p=0.0108).

Secondary efficacy endpoints including change from baseline to month 6 in six-minute walk-distance, change from baseline to month 6 in WHO functional class and time - over the whole treatment period - to either death due to PAH or hospitalization due to PAH also showed a dose-dependent effect (p<0.05 for either dose). A trend in favor of 10 mg macitentan was observed on all-cause mortality (p=ns).

Submission of the registration dossier to Health Authorities worldwide is expected by the fourth quarter of 2012.

Furthermore, the company believes that the data generated with macitentan demonstrates the significant potential of this unique compound and, as a result, targeted investment is required to maximize the opportunity that has been created.

Selexipag
Selexipag is being evaluated in the Phase III GRIPHON (Prostacyclin PGI2 Receptor agonist in pulmonary arterial hypertension) trial. GRIPHON is a multicenter, double-blind, placebo-controlled trial evaluating the efficacy and safety of oral selexipag in patients with pulmonary arterial hypertension.

GRIPHON is currently enrolling a target of 1,150 patients around the world. As with SERAPHIN, this pivotal study is designed to demonstrate a reduction in risk of morbidity/mortality events. Results are expected to be available mid-2014. There will be an interim analysis for efficacy and futility at around two thirds of the total number of required events, expected by mid-2013.

Specialty & Orphan Disease Opportunities
Macitentan in Ischemic Digital Ulcers
Macitentan is currently investigated in a pivotal Phase III program in an estimated 570 patients with ischemic digital ulcers associated with systemic sclerosis. The program was initiated in December 2011 and is expected to be completed in the second half of 2014.

Cadazolid 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. Study results are expected in the second half of 2012.

Macitentan in Glioblastoma
Macitentan is currently assessed in an open-label, single arm, Phase I study to assess the safety and tolerability of macitentan in combination with dose-dense temozolomide in adult patients with recurrent glioblastoma or gliosarcoma. A Phase Ib period will expand the safety and tolerability data on the recommended macitentan and dose-dense temozolomide dosing schedule and explore efficacy.

Early-stage compounds
Actelion is also pursuing additional early-stage compounds in the fields of lipid storage disorders and immunology.

Partnership / Out-license Opportunities
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.

A Phase IIb dose-finding study with ponesimod in multiple sclerosis was successfully completed in July 2011. The study assessed efficacy, safety and tolerability of three ponesimod doses (10 mg, 20 mg or 40 mg) versus placebo, administered orally once daily for 24 weeks. With 464 patients enrolled, this is the largest ever dose-finding study conducted in this autoimmune disorder of the central nervous system.

In this study, ponesimod significantly reduced the cumulative number of new active lesions on monthly magnetic resonance imaging (MRI) brain scans performed from weeks 12 to 24, with the most effective dose showing statistical significance (p<0.0001).

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 with an estimated 320 patients. Enrollment commenced in the fourth quarter of 2010 and study results are expected in the second half of 2012.

A decision regarding potential partnership or direction of future development of this compound is expected by the end of the year. Until such a decision is taken, the company will not further advance the multiple sclerosis indication.

The decision will also influence how Actelion will move forward with its S1P1 rector agonist follow-up currently in Phase I development.

CRTH2 receptor antagonist in Asthma
In preparation for the partnership / out-licensing of this asset, the company will seek to determine efficacy of the current development compound in a Phase II study in asthma.

Anti-malarial
Actelion's anti-malarial compound, discovered in collaboration with the Basel-based Tropical and Public Health Institute (Swiss TPH), will be prepared for partnership.

Discontinued Compounds
Two early-stage development compounds will be discontinued due to the sub-optimal risk/return profile relative to other opportunities available to the company. These compounds are an orexin receptor antagonist and a cardiovascular compound which had targeted a broad use cardiovascular disorder.

In relation to the field of orexin receptor antagonism, with our expertise and the promise of this mechanism of action, we will continue research in the field, together with our partner GSK. Discontinuation of the development efforts of the cardiovascular compound will have an immediate effect on operating costs and the company may still seek to out-license this compound.

Legal update
In 2008, a lawsuit was filed by Asahi Kasei Pharma Corporation against Actelion Ltd, certain subsidiaries and three individual officers in a Californian Superior Court. The action arises from a dispute involving the license and development agreement between Asahi and CoTherix for the drug compound fasudil that has been terminated upon the acquisition of CoTherix in 2007.

During 2011, the case was heard in trial court and resulted in a jury award of compensatory and punitive damages. Following post-trial motions the trial court entered a final judgment of USD 407.3 million and additional prejudgment interest and costs of USD 8.3 million, in November 2011. The company and its external advisors believe that the jury verdict and trial court judgment are neither supported by the facts nor correct as a matter of law. The company strongly believes that there are significant grounds for a successful appeal, notice of which was filed with the California Courts of Appeal in December 2011. The appeal is proceeding as expected.

In 2010, the company reported that its fully owned US subsidiary Actelion Pharmaceuticals US, Inc. had received a subpoena from the United States Attorney's Office for the Northern District of California, requesting documents relating, among others, to marketing and sales practices of Tracleer in the US. The corresponding investigation is ongoing.

New Board member
At this year's Annual General Meeting on 4 May 2012, Actelion's shareholders voted to elect a new Director, Prof. Dr. Peter Gruss, President of the Max Planck Society, to the Board for a term of three years.

Half Year Report
Full details on the progress made in the first half of 2012 are available in Actelion's Half Year Report 2012, available from www.actelion.com - "Our company" - "Half Year Report".

Upcoming events
Pipeline updates in H2 2012

  • Macitentan results in SERAPHIN presentation at scientific congress
  • Ponesimod results in multiple sclerosis presentation at scientific congress
  • Cadazolid in C. difficile infection proof-of-concept results
  • Ponesimod in psoriasis Phase II results
  • Macitentan submission of registration dossier to Health Authorities

Ad hoc events

  • Ponesimod partnership decisions

Financial Reporting

  • 9M 2012 financial results - 18 October 2012

###

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 2012 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 Operating Income reconciliation for H1 2012

In CHF million H1 2012 H1 2011
Core earnings 300.7 266.7
Movement in doubtful debt provision (19.3) 1.6
Core earnings excluding impact of DDP 281.4 268.3
Contract revenues 3.2 79.8
Stock option expenses (25.0) (43.1)
Amortization and depreciation (40.8) (41.2)
Litigation provision - (485.2)
Auxilium milestone payment (9.1) -
US GAAP Operating Income 229.2 (223.1)

Notes to the editor:

Actelion Ltd.
Actelion Ltd is a biopharmaceutical company with its corporate headquarters in Allschwil/Basel, Switzerland.  Actelion's first drug TracleerR , an orally available dual endothelin receptor antagonist, has been approved as a therapy for pulmonary arterial hypertension.  Actelion markets TracleerR through its own subsidiaries in key markets worldwide, including the United States (based in South San Francisco), the European Union, Japan, Canada, Australia and Switzerland. Actelion, founded in late 1997, is a leading player in innovative science related to the endothelium - the single layer of cells separating every blood vessel from the blood stream.  Actelion's over 2,500 employees focus on the discovery, development and marketing of innovative drugs for significant unmet medical needs. Actelion shares are traded on the SIX Swiss Exchange (ticker symbol: ATLN) as part of the Swiss blue-chip index SMI (Swiss Market Index SMIR ).

For further information please contact:
Roland Haefeli
Senior Vice President, Head of Investor Relations & Public Affairs
Actelion Pharmaceuticals Ltd, Gewerbestrasse 16, CH-4123 Allschwil
+41 61 565 62 62
+1 650 624 69 36
www.actelion.com


Conference Call Information
Actelion Ltd will announce the first half 2012 financial results on Thursday, 19 July 2012, at 07.00 hrs CEST / 06.00 hrs BST / 01.00 a.m. EDT. An investor conference call & webcast will be held at 14.00 hrs, CEST to discuss the results.

Date/Time:

19 July 14.00 hrs Basel (CEST)
13.00 hrs UK (BST)
08.00 a.m US (EST)



Conference Call Connect #:

Dial-in participants should start calling the number below 10-15 minutes before the conference is due to start.
                               
Dial:        Europe:                  +41 (0) 44 580 00 74
               UK:                         +44 (0)203 367 94 53
               US:                         +1 866 9075 923

Participant's mode:
Listen-Only with possibility to open individual lines during Q&A session. Participants will be asked for their Name and Company.


Webcast Access:
Webcast participants should visit the Actelion website http://www.actelion.com 10-15 minutes before the conference is due to start.


Participant's mode:
Listen-Only


Webcast Replay:
The archived Investor Webcast will be available for replay through http://www.actelion.com approximately 60 minutes after the call has ended. 





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Actelion Pharmaceuticals Ltd
Gewerbestrasse 16 Allschwil Switzerland

ISIN: CH0010532478;


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