Crucell Announces Second Quarter 2006 Results
Leiden, The Netherlands, August 29, 2006 - Dutch biotechnology company Crucell N.V. (Euronext, NASDAQ: CRXL, SWX: CRX) today announced its financial results for the first half-year ended June 30, 2006, based on International Financial Reporting Standards (IFRS).
Total revenues for the second quarter were €18.9 million and other operating income was €2.8 million. Net loss for the second quarter of 2006 attributable to equity holders of the parent amounted to €25.7 million. Total revenues for the six months ended June 30, 2006, were €30.6 million; other operating income amounted to €4.8 million for the first six months of 2006. Net loss for the first six months of 2006 attributable to equity holders of the parent amounted to €40.4 million.
Cash and cash equivalents were €177.7 million on June 30, 2006, compared to €178.7 million at the end of the first quarter. Proceeds from the sale of discontinued operations and a reclassification of short-term financial assets to cash, offset cash used in operations in the second quarter. Total assets on June 30, 2006, were €616.1 million.
Crucell’s Chief Financial Officer Leonard Kruimer said: “The second quarter results are in line with our expectations as they reflect the effects of purchase price allocation, one-time integration costs, and fully integrated R&D and SG&A costs. Product sales in our Berna subsidiary were up 9% over the same six-month period last year. Given the strong seasonal pattern of these sales, and the expected launch of Quinvaxem(TM), we reiterate our previous guidance for full-year revenue and cash burn: revenue, including other operating income, of €130 to €150 million, with 2006 operational cash burn in the range of €33 to €38 million.”
Operational Review Second Quarter 2006
* Berna Biotech Acquisition: Crucell’s offer for Berna Biotech AG was settled on February 22, 2006. The Company now holds 98.4% of all issued Berna shares. The Company is in the process of delisting the remaining shares, which is expected to be completed in the fourth quarter.
* Quinvaxem: The Korea Food and Drug Administration (KFDA) awarded licensure to Quinvaxem(TM), a fully liquid pentavalent vaccine co-developed with Chiron Corporation, in March 2006. Crucell has started production of the vaccine in Korea and first shipments will be made once pre-qualification is received from the WHO.
* Divestments: Crucell concluded the sale of Rhein Biotech GmbH and veterinary pharmaceuticals company Dr. E. Gräub AG. These divestments enabled Crucell to align its portfolio of activities with its strategic priorities. Total proceeds amounted to €15.4 million.
* Avian influenza vaccine clinical trial: Crucell announced the start of a clinical trial, performed in collaboration with the University of Leicester, UK, testing three types of vaccines against the H9N2 avian influenza virus in humans. The trial involves the vaccination of 560 healthy adults, and will allow Crucell to choose the best vaccine modality for further clinical studies with pandemic flu vaccines. First results of the study are expected by the end of 2006.
* Patent infringement: Crucell settled its patent infringement proceedings against CEVEC Pharmaceuticals GmbH. The final claim in the case was withdrawn following CEVEC’s commitment not to use its cell bank in any way that would constitute further infringement of Crucell’s European PER.C6® patent.
* STAR(TM) Technology: Crucell signed a non-exclusive STAR(TM) research license agreement with Cambridge, Massachusetts-based Millennium Pharmaceuticals Corporation.
* PER.C6® Licensing: Crucell secured new PER.C6® licensing deals with Upstate USA, BIOA&D and Immuno-Biological Laboratories during the second quarter.
* PER.C6® R&D Center: Crucell and technology partner DSM Biologics announced the establishment of a new PER.C6® R&D Center in Cambridge, Massachusetts, and the appointment of Dr Marco Cacciuttolo as CEO. Operations are expected to commence by the end of 2006.
* Supervisory Board: Mr. Pieter Strijkert, chairman of Crucell’s Supervisory Board since the Company’s incorporation, stepped down at the Annual General Meeting of Shareholders on June 2, 2006. He was succeeded by the vice-chairman of the Supervisory Board, Mr. Jan Oosterveld.
* Suspension of Aerugen® clinical development: On July 18, 2006, the Company announced the suspension of the clinical development program for Aerugen®, a vaccine for the prevention of Pseudomonas aeruginosa infection.
Details of the Financial Results First Half-Year
Revenues and Other Operating Income
Revenues for the first half-year of 2006 were €30.6 million, compared to €13.4 million in the same period last year. Revenues consist of product sales, license revenues and service fees. Revenues in 2006 represent product sales from Berna from the moment of acquisition at February 22, 2006; license revenues and service fees do not include sales from Berna and are therefore included for six months. Product revenues amount to €21.5 million, concentrated in pediatric and travel vaccines. Product revenues are seasonal and have historically been concentrated in the second half of the year. This is due to seasonal sales of influenza vaccine, and the projected sales of the new Quinvaxem(TM) pediatric vaccine. Comparable product sales from Berna in the first half-year 2006 were up 9% over same period last year.
License revenues were €4.6 million, a decrease of €3.7 million over last year. Last year’s license revenues included a €2 million milestone and a significant €2 million up-front fee from a partner. License revenue consisted of initial payments from new contracts as well as annual and other payments on existing contracts. Service fees amount to €4.5 million, compared to €5.1 million last year, which represents a slight decrease in chargeable development activities. Service fees represent revenues for product development activities performed under contracts with partners and licensees.
Other Operating income was €4.8 million, compared to €2.6 million in the same period last year. Other operating income consists of government grants, which increased slightly to €3.0 million, and other income of €1.8 million.
Cost of Goods Sold
Cost of goods sold for the first six months of 2006 amounted to €27.4 million, €24.2 million of which represents product costs and the remainder of €3.2 million represents costs of service activities. The €24.2 million in product costs is relatively high since it includes a €6.4 million inventory purchase price allocation charge. The remaining step-up in inventory on June 30, 2006, as a result of the purchase price allocation, amounts to €11 million, which will be charged to cost of goods sold in future accounting periods.
Total expenses consist of research and development (R&D) expenses and selling, general and administrative (SG&A) expenses. Total R&D and SG&A expenses were €48.6 for the first six months of 2006. That represents a €27.1 million increase over the same period last year. The difference is primarily attributable to combining activities of Crucell and Berna since acquisition.
R&D expenses amounted to €29.8 million, which represents a €16.3 million increase over the first half of 2005. Berna clinical programs accounted for a €10.6 million increase in R&D costs in the first six months of 2006. Amortization as a result of the purchase price allocation added €2.1 million in expenses. In addition, costs for clinical development in Leiden for Rabies, West-Nile and Influenza clinical programs added €3.6 million in development costs over same period last year.
SG&A expenses for the first half-year 2006 were €18.8 million and represent an increase of €10.8 million over the first half-year of 2005. Of the increase, €3.5 million represents the addition of the Berna G&A costs to the organization; €4.8 million represents sales & marketing expenses; and €2.5 million represents integration costs, like Sarbanes-Oxley implementation and various advisory costs.
The Company reported a net loss attributable to equity holders of the parent for the first half-year 2006 of €40.4 million, or €0.75 net loss per share.
Minority interests of €0.5 million represent the share in results of minority shareholders in Berna Biotech AG as well as in Rhein Biotech NV, which is listed at the Frankfurt Exchange (FWB).
Cash Flow and Cash Position
Cash and cash equivalents increased by €65.9 million in the first six months of 2006 up to an amount of €177.7 million. The net increase is a result of the cash acquired in the acquisition. During the second quarter, cash deposits of €13.0 million were re-classified as restricted cash and serve as collateral for company mortgages and financial leases. These deposits are included on the balance sheet as other financial assets.
Net cash used in operating activities in the first six months of 2006 was €24.1 million. Changes in working capital for the acquired company reflect changes in current assets and current liability balances since the date of acquisition.
Cash from investing activities amounted to €79.3 million. This includes cash acquired in the acquisition of €76.9 million. €9.0 million was used to pay acquisition transaction costs. Proceeds from financial assets include €15.4 million of proceeds from divested assets, Rhein Biotech GmbH and Dr. E. Gräub AG., received in the second quarter. Proceeds from financial assets also include €17.9 million of deposits for which the maturity has decreased to less than 3 months in the second quarter, resulting in a reclassification to cash and cash equivalents.
Net cash from financing activities was €11.0 million, of which €7.9 million represents an increase in mortgage loans and leasing liabilities. The Company has entered and intends to enter into financial leases to finance investment in property, plant and equipment, the effect of which will be to reduce cash outflow in the year the investment takes place. In the first six months the Company received €3.4 million from the issuance of ordinary shares for employee stock options exercised.
Total equity amounts to €464.3 million, of which €11.2 million represents minority interests. A total of 59 million ordinary shares were issued and outstanding on June 30, 2006.
Inventories increased €12.1 million during the second quarter to €62.7 million by June 30, 2006. The increase in inventory is due to purchase of materials for influenza vaccine production in the second half of the year, as well as stock of intermediate and finished goods of Quinvaxem(TM) vaccine.
Short-term financial assets decreased over the second quarter due to a reclassification of €17.9 million of deposits to cash and cash equivalents, since these deposits now have a maturity date of less than 3 months.
Intangible assets amount to €116.2 million and represent acquired in-process R&D; patents and trademarks; and value of customer and supplier relationships. The purchase price allocation has been further updated during the second quarter and is expected to be finalized before year-end.
Investments in Joint venture represent investment in Pevion. The Company’s investment in Galapagos NV is classified under “Other financial assets.”
Reconciliation IFRS to US GAAP
Shareholders equity under US GAAP is €413.4 million, €50.9 million lower than under IFRS. This is primarily due to the different method to determine the Berna acquisition price and write-off of in-process R&D of €61.8 million required under USGAAP.
Net loss under US GAAP for the six months ended June 30, 2006, is €102.4 million versus a loss of €40.9 million under IFRS. The difference is mainly due to the write-off of in-process R&D under US GAAP as well as some other minor differences.
The Company maintains its revenue outlook, including other operating income, for 2006 in the €130 to €150 million range, which is dependent on obtaining WHO pre-qualification of the Company’s Quinvaxem(TM) vaccine.
2006 will be a year of integration, affecting cash used in operations. Net of integration, one-time transaction costs, investment in plant and equipment and other proceeds from divestitures, the total decrease in cash over 2006 is expected to be in the €33 million to €38 million range. The Company expects to achieve operational cash break-even in 2007.
This press release contains forward-looking statements that involve inherent risks and uncertainties. We have identified certain important factors that may cause actual results to differ materially from those contained in such forward-looking statements. For information relating to these factors please refer to our Form 20-F, as filed with the U.S. Securities and Exchange Commission on July 6, 2006.
Conference Call and Webcast
Crucell will conduct a conference call today, August 29, 2006, starting at 14:00 pm Central European Time (8:00 am US Eastern time). A presentation will be followed by a question and answer session. To participate in the conference call, please call one of the following toll-free numbers within 10 minutes prior to commencement:
888-495-6452 for the US;
0800-358-5255 for the UK; and
0800-265-8531 for the Netherlands.
Crucell N.V. (Euronext, NASDAQ: CRXL; Swiss Exchange: CRX) is a biotechnology company focused on research, development and worldwide marketing of vaccines and antibodies that prevent and treat infectious diseases. Its vaccines are sold in public and private markets worldwide. Crucell’s core portfolio includes a vaccine against hepatitis B and a virosome-adjuvanted vaccine against influenza. Crucell also markets travel vaccines, such as the only oral anti-typhoid vaccine and the only aluminum-free hepatitis A vaccine on the market. The Company has a broad development pipeline, including both early-stage products and products almost ready to go to market. Several Crucell products are based on its unique PER.C6® production technology. The Company licenses this and other technologies to the biopharmaceutical industry. Important partners and licensees include DSM Biologics, sanofi aventis, GSK and Merck & Co. Crucell is headquartered in Leiden (the Netherlands), with subsidiaries in Switzerland, Spain, Italy and Korea. The Company employs about 900 people. For more information, please visit www.crucell.com.
- Contact Information
- Thomas Redington
- For Crucell in the U.S. Redington, Inc.
- Contact via E-mail
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