SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
For the month of July, 2004
Serono S.A.
-----------------------------------
(Registrant's Name)
15 bis, Chemin des Mines
Case Postale 54
CH-1211 Geneva 20
Switzerland
-----------------------------------
(Address of Principal Executive Offices)
1-15096
-----------------------------------
(Commission File No.)
(Indicate by check mark whether the registrant files or will file annual
reports under cover of Form 20-F or Form 40-F.)
Form 20-F X Form 40-F
--- ---
(Indicate by check mark if the registrant is submitting the Form 6-K in
paper as permitted by Regulation S-T Rule 101 (b)(1).) ______
(Indicate by check mark if the registrant is submitting the Form 6-K in
paper as permitted by Regulation S-T Rule 101 (b)(7).) ______
(Indicate by check mark whether the registrant by furnishing the
information contained in this form is also thereby furnishing the information to
the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.)
Yes No X
--- ---
(If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b): 82-______)
SERONO
Media Release
FOR RELEASE JULY 21, 2004, 4:01 pm ET
-------------------------------------
--------------------------------------------------------------------------------
STRONG SECOND QUARTER WITH ROBUST EPS GROWTH OF 28.5%
- SIGNIFICANT REVENUE GROWTH AND GROSS MARGIN IMPROVEMENT
PROPEL NET PROFIT UP 26.0% TO $135.8M -
--------------------------------------------------------------------------------
ROCKLAND, MA, JULY 21, 2004 - 04:01 PM ET - Serono (virt-x: SEO and NYSE: SRA),
the world's third largest biotechnology company, today reported its second
quarter results for the period ended June 30, 2004.
KEY POINTS FOR SECOND QUARTER 2004
- Total revenues up 15.6% to $587.6m (up 11.2% in local currencies)
- Product sales up 15.2% to $538.6m (up 10.6% in local currencies)
- Gross margin of 86.6% of product sales
- Net income up 26.0% to $135.8m (up 21.5% in local currencies)
- Basic EPS up 28.5% to $8.75 per bearer share and $0.22 per ADS
- Significant expansion in Rebif(R)'s global sales and marketing
activities initiated
- Unanimous positive opinion from the CHMP recommending approval of
Raptiva(R) in the EU
- Phase III study of Serostim(R) in HARS initiated
"Our second quarter results are excellent with strong EPS growth of 28.5%," said
Ernesto Bertarelli, Chief Executive Officer of Serono. "I am very pleased with
the recent recommendation for Raptiva(R) made by the scientific committee of
Europe's regulatory agency (CHMP). Raptiva(R) will further diversify our
product portfolio and contribute to our future growth."
-more-
SECOND QUARTER FINANCIAL PERFORMANCE
Total revenues increased by 15.6% to $587.6m in the second quarter of 2004 (Q2
2003: $508.4m), or 11.2% in local currencies. Sales of marketed products
climbed 15.2% to $538.6m (Q2 2003: $467.4m), or 10.6% in local currencies,
despite the continued tightening of the pricing and reimbursement climate in
some European countries. Royalty and license income increased by 19.4% to
$49.0m (Q2 2003: $41.0m) primarily due to higher sales by various licensees.
Gross margin increased to 86.6% of product sales (Q2 2003: 84.8%), as a result
of the improvement of product mix and continued productivity gains.
Selling, General and Administrative expenses were $193.1m or 32.9% of total
revenues (Q2 2003: $158.1m or 31.1% of total revenues). The relative increase
in SG&A as a percentage of revenues reflects the investment in promotional
activities for the Gonal-f(R) prefilled pen, as well as pre-launch costs for
Raptiva(R). Research and Development expenses were $123.2m or 21.0% of total
revenues (Q2 2003: $108.5m or 21.3% of total revenues). Other operating
expenses were $53.7m (Q2 2003: $50.9m).
Operating income increased by 21.2% to $145.5m or 24.8% of total revenues (Q2
2003: $120.0m or 23.6% of total revenues) and net financial income was $15.3m
(Q2 2003: $12.8m), benefiting from foreign exchange hedging gains as a result of
the strengthening of the Swiss franc against the Euro.
Total taxes were $25.7m, representing an overall tax rate of 16.0% of profit
before tax (Q2 2003: $20.6m, or 16.0% of profit before tax).
Reported net income jumped 26.0% to $135.8m (Q2 2003: $107.7m), or 21.5% in
local currencies. Basic earnings per share (EPS) were up 28.5% to $8.75 per
bearer share (Q2 2003: $6.81) and $0.22 per American Depositary Share (ADS) (Q2
2003: $0.17).
For the first six months, net cash flows from operating activities increased
36.1% to $252.1m (H1 2003: $185.2m).
On May 25, 2004, a new share buy-back program was authorized for up to CHF 750
million, and following regulatory approval this program started in June 2004.
The shares are purchased on the open market via a second trading line (security
code SEOE), and will be subsequently cancelled.
As of June 30, 2004, there were 16,140,341 outstanding equivalent bearer shares
of Serono S.A. including 708,271 treasury shares available for general corporate
purposes.
-more-
NEUROLOGY
Given the multiple sclerosis market's significant growth potential, coupled with
Rebif(R)'s long-term efficacy and unsurpassed ability to significantly delay
accumulation of disability, Serono believes there is an opportunity to further
grow Rebif(R)'s share. Serono is therefore increasing the size of its sales and
medical teams, as well as introducing new field nurse programs, and extending
call centers to many countries, to further support Rebif(R) patients.
In the second quarter, neurology sales were $266.2m (Q2 2003: $205.5m), up 29.5%
or 23.6% in local currencies. Sales of Rebif(R) were up 29.2% (23.1% in local
currencies) to $257.1m (Q2 2003: $199.0m) and Novantrone(R) sales in MS
increased by 39.3% to $9.1m (Q2 2003: $6.6m).
In the US, sales of Rebif(R) jumped 65.0% to $69.6m in the second quarter (Q2
2003: $42.2m). Rebif(R) is market leader outside the US with sales increasing
by 19.6% to $187.5m (Q2 2003: $156.8m), or 12.3% in local currencies.
Serono continues to lead the way in developing patient-friendly injection
devices, with advanced functionality. In May, the new Rebiject II(TM)
auto-injector was launched. This device is specifically designed to make
self-injection of Rebif(R) more convenient for multiple sclerosis patients.
REPRODUCTIVE HEALTH
Sales of Gonal-f(R) rose in the second quarter by 8.1% (4.0% in local
currencies) to $150.9m (Q2 2003: $139.6m). Serono's core reproductive health
portfolio consisting of three recombinant hormones (Gonal-f(R),
Ovidrel(R)/Ovitrelle(R), Luveris(R)) and two complementary products
(Cetrotide(R), Crinone(R)) grew by 8.2% (4.0% in local currencies) to $168.6m
(Q2 2003: $155.9m).
The phase-out of urine-derived products was completed in Europe by the end of
2003, and in the United States this quarter. By the end of 2004, the phase-out
of these products will be completed on a global basis, except in Japan where
recombinant gonadotropins are not yet approved.
In May, the FDA approved the Gonal-f(R) prefilled pen, a ready-to-use pen for
the treatment of infertility. The Gonal-f(R) prefilled pen, which combines the
efficacy of the most consistent FSH with enhanced accuracy of dosing, is already
available in many European countries as well as in Australia, and will be
introduced in the US shortly. Serono recently announced that in a phase IIIb
study that compared the Gonal-f(R) prefilled pen with another pen available on
the market, twice as many of the treated patients preferred the Gonal-f(R)
prefilled pen, as it required less time for training, less time and fewer steps
to prepare a daily injection and also gives patients more confidence that they
have injected the right dose of FSH.
-more-
METABOLIC ENDOCRINOLOGY
In the second quarter, Saizen(R) sales increased by 12.7% (7.4% in local
currencies) to $44.2m (Q2 2003: $39.2m). Serostim(R) sales continue to be
stable at $21.5m (Q2 2003: $23.0m). Sales of Serono's recombinant growth
hormone products rose by 5.8% to $65.8m (Q2 2003: $62.2m).
During the second quarter Serono submitted an application for a new indication
for Saizen(R) in the treatment of growth disturbance in children born small for
gestational age to the health authorities in Europe, and the regulatory review
has commenced.
DERMATOLOGY
On June 23rd, Raptiva(R) (efalizumab) was granted a unanimous positive opinion
from the Committee of Medicinal Products for Human Use (CHMP) recommending
approval. Serono expects the European Commission's Marketing Authorisation
during the third quarter of this year, which would give Raptiva(R) a first mover
advantage. Raptiva(R) will be launched in some EU countries shortly thereafter.
Serono received approval for Raptiva(R) in moderate-to-severe psoriasis in
Switzerland in March and in Argentina in May, as well as a positive
recommendation in Australia. Outcomes of marketing applications in a number of
other territories for which Serono is responsible are awaited and launch in some
of these countries will take place by the end of the year.
REGIONAL SALES
North American sales grew by 21.0% to $208.8m (Q2 2003: $172.5m). Despite
pricing and reimbursement pressures notably in Germany, European sales increased
by 8.5% (0.2% in local currencies) to $215.6m (Q2 2003: $198.7m). In the rest
of the world, sales grew by 18.9% (15.4% in local currencies) to $114.3m (Q2
2003: $96.2m).
R&D NEWS
On May 1st, results from the CLEAR trial, the first randomized
placebo-controlled study with Raptiva(R) conducted outside of the US, were
presented at the EADV (European Academy of Dermatology and Venerology) Congress
in Budapest. The results of CLEAR demonstrate that Raptiva is safe and
efficacious in patients whose psoriasis cannot be controlled by, are intolerant
to or are contraindicated to other currently available systemic therapies. The
results in these high need patients were also consistent with the results in the
broader moderate-to-severe population.
-more-
On May 4th, 4SC and Serono entered into an exclusive worldwide agreement to
develop and commercialize 4SC's program of dihydroorotate dehydrogenase (DHODH)
inhibitors. This series consists of small molecules with potential as orally
active treatments in autoimmune disorders, such as rheumatoid arthritis and
multiple sclerosis and includes a lead compound, which is currently completing
Phase I.
In June, Serono announced the start of a Phase III trial of Serostim(R) in
HIV-associated adipose redistribution syndrome (HARS). HARS is a potentially
debilitating medical condition experienced by people being treated for HIV for
which there is currently no medical treatment.
***
-more-
CONFERENCE CALL AND WEBCAST
Serono will hold a conference call on July 22nd, 2004, starting at 10:00 am
Eastern Time (4:00 pm Central European Time) during which Serono Management will
present the Company's Second Quarter 2004 Results. To join the telephone
conference please dial 412 858 4600 (from the US), 091 610 5600 (from
Switzerland), 0207 107 0611 (from the UK) and +41 91 610 5600 (from elsewhere).
Telephone playback will be available one hour after the conference call and
until close of business 6:00 pm ET on July 30th, 2004. To access this playback
please dial the following numbers: 412 317 0088 (from the US), 091 612 4330
(from Switzerland), 0207 866 4300 (from the UK) and +41 91 612 4330 (from
elsewhere) and enter the PIN code 483# from a touch tone telephone.
The event will also be relayed by live audio webcast which interested parties
may access via Serono's Corporate home page, www.serono.com. A link to the
webcast will be provided immediately prior to the event.
###
Some of the statements in this press release are forward looking. Such
statements are inherently subject to known and unknown risks, uncertainties and
other factors that may cause actual results, performance or achievements of
Serono and affiliates to be materially different from those expected or
anticipated in the forward-looking statements. Forward-looking statements are
based on Serono's current expectations and assumptions, which may be affected by
a number of factors, including those discussed in this press release and more
fully described in Serono's Annual Report on Form 20-F filed with the U.S.
Securities and Exchange Commission on March 25, 2004. These factors include any
failure or delay in Serono's ability to develop new products, any failure to
receive anticipated regulatory approvals, any problems in commercializing
current products as a result of competition or other factors, our ability to
obtain reimbursement coverage for our products, and government regulations
limiting our ability to sell our products. Serono has no responsibility to
update the forward-looking statements contained in this press release to reflect
events or circumstances occurring after the date of this press release.
###
ABOUT SERONO
Serono is a global biotechnology leader. The Company has eight biotechnology
products, Rebif(R), Gonal-F(R), Luveris(R), Ovidrel(R)/Ovitrelle(R),
Serostim(R), Saizen(R), Zorbtive(TM) and Raptiva(R) (Luveris(R) is not approved
in the USA). In addition to being the world leader in reproductive health,
Serono has strong market positions in neurology, metabolism and growth and has
recently entered the psoriasis area. The Company's research programs are focused
on growing these businesses and on establishing new therapeutic areas.
Currently, there are approximately 30 ongoing development projects.
In 2003, Serono achieved worldwide revenues of US$2,018.6 million, and a net
income of US$390.0 million, making it the third largest biotech company in the
world. Its products are sold in over 90 countries. Bearer shares of Serono S.A.,
the holding company, are traded on the virt-x (SEO) and its American Depositary
Shares are traded on the New York Stock Exchange (SRA).
- more -
BACKGROUND MATERIAL
For free B-roll, video and other content about Serono, please visit the Serono
Media Center www.thenewsmarket.com/Serono. You can download print-quality images
----------------------------
and receive broadcast-standard video digitally or by tape from this site.
Registration and video is free to the media.
FOR MORE INFORMATION, PLEASE CONTACT:
SERONO IN GENEVA, SWITZERLAND:
MEDIA RELATIONS: INVESTOR RELATIONS:
Tel: +41-22-739 36 00 Tel: +41-22-739 36 01
Fax: +41-22-739 30 85 Fax: +41-22-739 30 22
http://www.serono.com Reuters: SEO.VX / SRA
--------------------- Bloomberg: SEO VX / SRA US
SERONO, INC., ROCKLAND, MA
MEDIA RELATIONS: INVESTOR RELATIONS:
Tel. +1 781 681 2340 Tel. +1 781 681 2552
Fax: +1 781 681 2935 Fax: +1 781 681 2912
http://www.seronousa.com
------------------------
On the following pages, there are:
- Tables detailing sales in dollars by therapeutic area, geographic
region and the top 10 products for the 3 and 6 months ended June 30,
2004 and 2003.
- Consolidated statements of income for the 3 and 6 months ended June
30, 2004 and 2003; the consolidated balance sheets as of June 30, 2004
and December 31, 2003; the consolidated statements of equity as of
June 30, 2004 and 2003; the consolidated statements of cash flows for
the 6 months ended June 30, 2004 and 2003; and the selected
explanatory notes to the interim consolidated financials statements.
These consolidated financial statements have been prepared on the
basis of International Financial Reporting Standards.
SALES BY THERAPEUTIC AREA
-------------------------
THREE MONTHS ENDED THREE MONTHS ENDED
JUNE 30, 2004 June 30, 2003
$MILLION % OF SALES % CHANGE $ $MILLION % OF SALES
-------------------------------------------------------------------------------------
Neurology 266.2 49.4% 29.5% 205.5 44.0%
Reproductive Health 180.8 33.6% (1.4%) 183.4 39.2%
Growth & Metabolism 65.8 12.2% 5.8% 62.2 13.3%
Others 25.8 4.8% 57.8% 16.4 3.5%
-------------------------------------------------------------------------------------
Total sales (US$ million) $ 538.60 100% 15.20% $ 467.40 100%
SALES BY GEOGRAPHIC REGION
--------------------------
THREE MONTHS ENDED THREE MONTHS ENDED
JUNE 30, 2004 JUNE 30, 2003
$MILLION % OF SALES % CHANGE $ $MILLION % OF SALES
---------------------------------------------------------------------------------------
Europe 215.6 40.0% 8.5% 198.7 42.5%
North America 208.8 38.8% 21.0% 172.5 36.9%
Latin America 28.7 5.3% 12.6% 25.5 5.5%
Others 85.6 15.9% 21.1% 70.7 15.1%
---------------------------------------------------------------------------------------
Total sales (US$ million) $ 538.6 100% 15.2% $ 467.4 100%
SALES BY THERAPEUTIC AREA
-------------------------
SIX MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 2004 JUNE 30, 2003
$MILLION % OF SALES % CHANGE $ $MILLION % OF SALES
-----------------------------------------------------------------------------------
Neurology 531.7 50.4% 37.8% 385.9 44.1%
Reproductive Health 351.0 33.3% 2.0% 344.0 39.3%
Growth & Metabolism 128.0 12.1% 11.0% 115.2 13.2%
Others 44.6 4.2% 48.3% 30.1 3.4%
-----------------------------------------------------------------------------------
Total sales (US$ million) $1'055.3 100% 20.6% $ 875.2 100%
SALES BY GEOGRAPHIC REGION
SIX MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 2004 JUNE 30, 2003
$MILLION % OF SALES % CHANGE $ $MILLION % OF SALES
-----------------------------------------------------------------------------------
Europe 446.0 42.3% 17.3% 380.3 43.4%
North America 389.3 36.9% 21.0% 321.7 36.8%
Latin America 55.1 5.2% 34.4% 41.0 4.7%
Others 165.1 15.6% 24.8% 132.3 15.1%
-----------------------------------------------------------------------------------
Total sales (US$ million) $1'055.3 100% 20.6% $ 875.2 100%
==========================================================================================
TOP TEN PRODUCTS
==========================================================================================
THREE MONTHS ENDED THREE MONTHS ENDED
JUNE 30, 2004 JUNE 30, 2003
-------------------------------------------------------------
* TA $MILLION % OF SALES % CHANGE $ $MILLION % OF SALES
Rebif(R) MS 257.1 47.7% 29.2% 199.0 42.6%
Gonal-f(R) RH 150.9 28.0% 8.1% 139.6 29.9%
Saizen(R) Growth 44.2 8.2% 12.7% 39.2 8.4%
Novantrone(R) MS/Oncology 23.6 4.4% 51.6% 15.6 3.3%
Serostim(R) Wasting 21.5 4.0% (6.6%) 23.0 4.9%
Cetrotide(R) RH 6.4 1.2% 9.4% 5.9 1.3%
Crinone(R) RH 4.5 0.8% (4.5%) 4.8 1.0%
Metrodin-HP(R) RH 4.5 0.8% (37.8%) 7.2 1.5%
Ovidrel(R) RH 4.4 0.8% 30.3% 3.3 0.7%
Stilamin(R) Other 4.1 0.8% (6.3%) 4.3 0.9%
SIX MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 2004 JUNE 30, 2003
-------------------------------------------------------------
* TA $ MILLION % OF SALES % CHANGE $ $ MILLION % OF SALES
Rebif(R) MS 516.7 49.0% 38.1% 374.2 42.8%
Gonal-F(R) RH 288.3 27.3% 10.2% 261.6 29.9%
Saizen(R) Growth 84.8 8.0% 17.3% 72.3 8.3%
Serostim(R) Wasting 43.0 4.1% 0.2% 42.9 4.9%
Novantrone(R) MS/Oncology 38.9 3.7% 36.8% 28.4 3.2%
Cetrotide(R) RH 12.7 1.2% 10.9% 11.5 1.3%
Pergonal(R) RH 9.5 0.9% (57.4%) 22.2 2.5%
Crinone(R) RH 9.0 0.9% (2.4%) 9.2 1.1%
Ovidrel(R) RH 8.3 0.8% 45.4% 5.7 0.6%
Stilamin(R) Other 8.2 0.8% 7.2% 7.6 0.9%
* THERAPEUTIC AREAS
RH = Reproductive Health Wasting = AIDS Wasting
MS = Multiple Sclerosis Growth = Growth Retardation
Oncology = Oncology
-more-
Consolidated Income Statements
SIX MONTHS ENDED JUNE 30 2004 * % OF 2003 * % of
US$'000 REVENUES % change US$'000 Revenues
Revenues
Product sales 1'055'335 20.6% 875'200
Royalty and license income 89'360 18.1% 75'633
-------------------------------------------------------------------------------------------------
TOTAL REVENUES 1'144'695 100.0% 20.4% 950'833 100.0%
-------------------------------------------------------------------------------------------------
Operating Expenses
Cost of product sales 147'851 10.8% 133'448
% of Sales 14.0% 15.2%
Selling, general and administrative 377'253 33.0% 26.2% 299'040 31.5%
Research and development 249'379 21.8% 5.5% 236'469 24.9%
Other operating expense, net 108'577 9.5% 12.3% 96'699 10.2%
-------------------------------------------------------------------------------------------------
Total Operating Expenses 883'060 77.1% 15.3% 765'656 80.5%
-------------------------------------------------------------------------------------------------
OPERATING INCOME 261'635 22.9% 41.3% 185'177 19.5%
-------------------------------------------------------------------------------------------------
Financial income, net 24'380 25.5% 19'428
Other income/(expense), net 64 (3'657)
-------------------------------------------------------------------------------------------------
Total Non Operating Income, Net 24'444 15'771
-------------------------------------------------------------------------------------------------
Income Before Taxes and Minority Interests 286'079 25.0% 42.4% 200'948 21.1%
Taxes 45'772 32'151
-------------------------------------------------------------------------------------------------
Income Before Minority Interests 240'307 168'797
Minority interests (1'611) 901
-------------------------------------------------------------------------------------------------
NET INCOME 241'918 21.1% 44.1% 167'896 17.7%
-------------------------------------------------------------------------------------------------
* Unaudited
2004 2003 % CHANGE
Basic Earnings per Share (in U.S. dollars)
--------------------------------------------------------------------
- Bearer shares 15.46 10.60 45.8%
--------------------------------------------------------------------
- Registered shares 6.18 4.24 45.8%
--------------------------------------------------------------------
- American depositary shares 0.39 0.27 45.8%
--------------------------------------------------------------------
Diluted Earnings per Share (in U.S. dollars)
--------------------------------------------------------------------
- Bearer shares 15.43 10.59 45.7%
--------------------------------------------------------------------
- Registered shares 6.17 4.24 45.7%
--------------------------------------------------------------------
- American depositary shares 0.39 0.26 45.7%
--------------------------------------------------------------------
Basic earnings per share are calculated in accordance with IAS 33 (Earnings per
Share) by dividing the net income of the group, US$241.9 million (2003 US$167.9
million), by an appropriate number of shares. This is 11,240,537 bearer shares
(2003 11,431,665) and 11,013,040 registered shares (2003 11,013,040). The total
weighted average equivalent number of bearer shares is 15,645,753 (2003
15,836,881) for the six months ended June 30, 2004. As each American depositary
share represents ownership interest in one fortieth of a bearer share, basic and
diluted earnings per American depositary share is calculated as one fortieth of
the earnings per bearer share.
For diluted earnings per share, the total number of bearer shares is adjusted to
assume conversion of all in the money share options granted to employees and
directors and does not take into consideration the impact of the convertible
bond because it is anti-dilutive. The number of bearer shares used to calculate
diluted earnings per share is 11,270,640 (2003 11,445,711).
-more-
CONSOLIDATED INCOME STATEMENTS
THREE MONTHS ENDED JUNE 30 2004 * % OF 2003 * % of
US$'000 REVENUES % CHANGE US$'000 Revenues
Revenues
Product sales 538'622 15.2% 467'414
Royalty and license income 48'981 19.4% 41'013
-----------------------------------------------------------------------------------------------
TOTAL REVENUES 587'603 100.0% 15.6% 508'427 100.0%
-----------------------------------------------------------------------------------------------
Operating Expenses
Cost of product sales 72'182 1.9% 70'817
% of Sales 13.4% 15.2%
Selling, general and administrative 193'050 32.9% 22.1% 158'124 31.1%
Research and development 123'180 21.0% 13.5% 108'532 21.3%
Other operating expense, net 53'705 9.1% 5.4% 50'948 10.0%
-----------------------------------------------------------------------------------------------
Total Operating Expenses 442'117 75.2% 13.8% 388'421 76.4%
-----------------------------------------------------------------------------------------------
OPERATING INCOME 145'486 24.8% 21.2% 120'006 23.6%
-----------------------------------------------------------------------------------------------
Financial income, net 15'346 20.2% 12'771
Other income/(expense), net 60 (3'883)
-----------------------------------------------------------------------------------------------
Total Non Operating Income, Net 15'406 8'888
-----------------------------------------------------------------------------------------------
Income Before Taxes and Minority Interests 160'892 27.4% 24.8% 128'894 25.4%
Taxes 25'741 20'622
-----------------------------------------------------------------------------------------------
Income Before Minority Interests 135'151 108'272
Minority interests (637) 534
-----------------------------------------------------------------------------------------------
NET INCOME 135'788 23.1% 26.0% 107'738 21.2%
-----------------------------------------------------------------------------------------------
* Unaudited
2004 2003 % CHANGE
Basic Earnings per Share (in U.S. dollars)
------------------------------------------------------------------
- Bearer shares 8.75 6.81 28.5%
------------------------------------------------------------------
- Registered shares 3.50 2.72 28.5%
------------------------------------------------------------------
- American depositary shares 0.22 0.17 28.5%
------------------------------------------------------------------
Diluted Earnings per Share (in U.S. dollars)
------------------------------------------------------------------
- Bearer shares 8.71 6.80 28.2%
------------------------------------------------------------------
- Registered shares 3.49 2.72 28.2%
------------------------------------------------------------------
- American depositary shares 0.22 0.17 28.2%
------------------------------------------------------------------
Basic earnings per share are calculated in accordance with IAS 33 (Earnings per
Share) by dividing the net income of the group, US$135.8 million (2003 US$107.7
million), by an appropriate number of shares. This is 11,112,539 bearer shares
(2003 11,419,355) and 11,013,040 registered shares (2003 11,013,040). The total
weighted average equivalent number of bearer shares is 15,517,755 (2003
15,824,571) for the three months ended June 30, 2004. As each American
depositary share represents ownership interest in one fortieth of a bearer
share, basic and diluted earnings per American depositary share is calculated as
one fortieth of the earnings per bearer share.
For diluted earnings per share, the total number of bearer shares is adjusted to
assume conversion of all in the money share options granted to employees and
directors and also the impact of the convertible bond as it is dilutive. The
number of bearer shares used to calculate diluted earnings per share is
11,561,817 (2003 11,440,499).
-more-
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2004 * December 31, 2003
US$'000 US$'000
ASSETS
Current Assets
Cash and cash equivalents 338'959 1'003'972
Short-term financial assets 800'791 434'810
Trade accounts receivable 333'539 318'388
Inventories 278'855 319'820
Prepaid expenses and other current assets 230'761 220'334
----------------------------------------------------------------------------------------------------
Total Current Assets 1'982'905 2'297'324
----------------------------------------------------------------------------------------------------
Non-Current Assets
Property, plant and equipment 698'416 701'453
Long-term financial assets 1'243'297 1'104'333
Intangible assets 254'012 259'626
Deferred tax assets 169'801 169'693
Other long-term assets 36'541 39'174
----------------------------------------------------------------------------------------------------
Total Non-Current Assets 2'402'067 2'274'279
----------------------------------------------------------------------------------------------------
TOTAL ASSETS 4'384'972 4'571'603
----------------------------------------------------------------------------------------------------
LIABILITIES
Current Liabilities
Trade and other payables 307'293 338'862
Short-term financial debts 47'296 51'224
Income taxes 143'313 146'086
Deferred income - current 46'894 47'200
Other current liabilities 161'282 170'019
----------------------------------------------------------------------------------------------------
Total Current Liabilities 706'078 753'391
----------------------------------------------------------------------------------------------------
Non-Current Liabilities
Long-term financial debts 545'052 532'022
Deferred tax liabilities 13'846 15'919
Deferred income - non current 158'765 174'911
Provisions and other long-term liabilities 215'548 213'556
----------------------------------------------------------------------------------------------------
Total Non-Current Liabilities 933'211 936'408
----------------------------------------------------------------------------------------------------
Total Liabilities 1'639'289 1'689'799
----------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------
Minority Interests (26) 1'614
----------------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Share capital 254'359 253'895
Share premium 1'021'095 1'002'991
Treasury shares (413'427) (157'642)
Retained earnings 1'812'264 1'669'700
Fair value and other reserves 12'428 22'711
Cumulative foreign currency translation adjustments 58'990 88'535
----------------------------------------------------------------------------------------------------
Total Shareholders' Equity 2'745'709 2'880'190
----------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------
Total Liabilities, Minority Interests and Shareholders' Equity 4'384'972 4'571'603
----------------------------------------------------------------------------------------------------
* Unaudited
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CONSOLIDATED STATEMENTS OF EQUITY
CUMULATIVE
FOREIGN
FAIR VALUE CURRENCY
SHARE SHARE TREASURY RETAINED AND OTHER TRANSLATION
CAPITAL PREMIUM SHARES EARNINGS RESERVES ADJUSTMENTS TOTAL
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Balance as of January 1, 2003 253'416 989'141 -126'460 1'364'626 -44'807 25'282 2'461'198
Issue of share capital to employees 450 13'259 3'571 17'280
Net income for 2003 167'896 167'896
Purchase of treasury shares -24'637 -24'637
Dividend for 2002 - bearer shares -61'849 -61'849
Dividend for 2002 - registered shares -23'860 -23'860
Revaluation adjustments 8'380 8'380
Foreign currency translation adjustments 29'452 29'452
---------------------------------------------------------------------------------------------------------------------
Balance as of June 30, 2003 * 253'866 1'002'400 -147'526 1'446'813 -36'427 54'734 2'573'860
=====================================================================================================================
Balance as of January 1, 2004 253'895 1'002'991 -157'642 1'669'700 22'711 88'535 2'880'190
Issue of share capital to employees 464 18'104 3'189 21'757
Net income for 2004 241'918 241'918
Purchase of treasury shares -258'974 -258'974
Dividend for 2003 - bearer shares -71'096 -71'096
Dividend for 2003 - registered shares -28'258 -28'258
Revaluation adjustments -10'283 -10'283
Foreign currency translation adjustments -29'545 -29'545
---------------------------------------------------------------------------------------------------------------------
Balance as of June 30, 2004 * 254'359 1'021'095 -413'427 1'812'264 12'428 58'990 2'745'709
=====================================================================================================================
*Unaudited
-more-
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30 2004 * 2003 *
US$'000 US$'000
Cash Flows From Operating Activities
Income before taxes and minority interests 286'079 200'948
Depreciation and amortization 65'905 67'514
Financial income (32'029) (24'964)
Financial expense 12'361 11'325
Other non-cash items 6'607 37'641
--------------------------------------------------------------------------------------------
Cash Flows From Operating Activities Before Working Capital Changes 338'923 292'464
--------------------------------------------------------------------------------------------
Working Capital Changes
Trade accounts payable, other current liabilities and deferred income (2'802) 33'728
Trade accounts receivable (26'532) (50'599)
Inventories 5'942 (31'605)
Prepaid expenses and other current assets (13'858) (5'115)
Taxes paid (49'532) (53'651)
--------------------------------------------------------------------------------------------
NET CASH FLOWS FROM OPERATING ACTIVITIES 252'141 185'222
--------------------------------------------------------------------------------------------
Cash Flows From Investing Activities
Purchase of property, plant and equipment (85'810) (90'301)
Proceeds from sale of property, plant and equipment 3'159 2'689
Purchase of intangible and other long-term assets (9'936) (7'145)
Purchase of financial assets (837'588) (299'384)
Proceeds from sale of financial assets 302'126 185'637
Interest received 53'363 44'424
--------------------------------------------------------------------------------------------
Net Cash Flows From Investing Activities (574'686) (164'080)
--------------------------------------------------------------------------------------------
Cash Flows From Financing Activities
Proceeds from issuance of share capital 10'333 13'105
Proceeds from exercises of stock options 677 470
Premiums received on written calls -- 508
Issuance of long-term financial debt 17'339 7'016
Purchase of treasury shares (258'974) (24'637)
Net change in bank advances 2'301 (30'983)
Repayment of long-term debt (5'436) --
Other non-current liabilities (5'319) (9'444)
Interest paid (2'593) (2'599)
Dividends paid (99'352) (85'709)
--------------------------------------------------------------------------------------------
Net Cash Flows From Financing Activities (341'024) (132'273)
--------------------------------------------------------------------------------------------
Effect of Exchange Rate Changes on Cash and Cash Equivalents (1'444) 3'229
--------------------------------------------------------------------------------------------
Net Decrease in Cash and Cash Equivalents (665'013) (107'902)
--------------------------------------------------------------------------------------------
Cash and Cash Equivalents
- Beginning of period 1'003'972 686'033
--------------------------------------------------------------------------------------------
- End of period 338'959 578'131
--------------------------------------------------------------------------------------------
* Unaudited
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SELECTED EXPLANATORY NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. ACCOUNTING PRINCIPLES
The accompanying condensed unaudited interim consolidated financial statements
have been prepared in accordance with IAS 34 (Interim Financial Reporting). The
accounting policies used in the preparation of the interim consolidated
financial statements are consistent with those used by Serono in its annual
consolidated financial statements for the year ended December 31, 2003. These
interim consolidated financial statements should be read in conjunction with the
2003 annual consolidated financial statements. These consolidated financial
statements were approved for issuance on July 16, 2004 by Serono S.A.'s board of
directors.
2. ADOPTION OF INTERNATIONAL ACCOUNTING STANDARDS
There were no new standards adopted in the first 6 months of the year.
3. SEGMENT INFORMATION - GEOGRAPHIC SEGMENT
NORTH LATIN
EUROPE AMERICA AMERICA OTHER GROUP
SIX MONTHS ENDED JUNE 30, 2004 US$000 US$000 US$000 US$000 US$000
------------------------------------------------------------------------------
Product sales 445,970 389,260 55,051 165,054 1,055,335
Royalty and license income 39,701 606 - 49,053 89,360
------------------------------------------------------------------------------
Total revenues 485,671 389,866 55,051 214,107 1,144,695
Allocable operating income 217,490 190,110 27,404 67,965 502,969
Corporate R&D expenses (194,067)
Unallocated expenses (47,267)
------------------------------------------------------------------------------
Operating income 261,635
------------------------------------------------------------------------------
North Latin
Europe America America Other Group
Six months ended June 30, 2003 US$000 US$000 US$000 US$000 US$000
------------------------------------------------------------------------------
Product sales 389,035 321,719 40,951 123,495 875,200
Royalty and license income 41,353 270 - 34,010 75,633
------------------------------------------------------------------------------
Total revenues 430,388 321,989 40,951 157,505 950,833
Allocable operating income 196,825 191,623 12,790 39,479 440,717
Corporate R&D expenses (196,087)
Unallocated expenses (59,453)
------------------------------------------------------------------------------
Operating income 185,177
------------------------------------------------------------------------------
Unallocated expenses represent corporate expenses. Product sales are based on
the country in which the customer is located, while royalty and license income
is based on the country that receives the royalty. There are no sales or other
transactions between the business segments.
4. TAXES
The effective tax rate for the six months ended June 30, 2004 amounts to 16.0%
(2003: 16.0%).
-more-
5. EARNINGS PER SHARE
Basic earnings per share is calculated in accordance with IAS 33 (Earnings per
Share) by dividing the net income of the company by the weighted average number
of shares outstanding during the period presented.
2004 2003
Six months ended June 30 (unaudited) US$000 US$000
------------------------------------------------------------------------------
Net income attributable to bearer shareholders 173,803 121,194
Net income attributable to registered shareholders 68,115 46,702
------------------------------------------------------------------------------
Total net income 241,918 167,896
Weighted average number of bearer shares in issue 11,240,537 11,431,665
Weighted average number of registered shares in issue 11,013,040 11,013,040
US$ US$
------------------------------------------------------------------------------
Basic earnings per bearer share 15.46 10.60
Basic earnings per registered share 6.18 4.24
Basic earnings per American depositary share 0.39 0.27
------------------------------------------------------------------------------
For diluted earnings per share, the weighted average number of bearer shares is
adjusted to assume conversion of all potential dilutive shares arising from
outstanding stock options and the convertible bond. For stock options a
calculation is done to determine the number of shares that could have been
acquired at fair value with proceeds from the exercise of stock options and
compared with the number of shares that would have been issued assuming the
exercise of the stock options. The difference is added to the denominator as
additional shares issued for no consideration. There is no adjustment made to
the numerator. During the first six months ended June 30, 2004, share
equivalents of 30,103 bearer shares arising from stock options granted to
employees and directors were included in calculating diluted earnings per share
(2003: 14,046). For the convertible bond, a calculation is done that assumes the
bond is fully converted into bearer shares while the net income is increased by
eliminating the interest expense, net of tax, that would not be incurred if the
bond was converted. In the first half 2004 as well as in 2003, the effect of the
convertible bond was excluded from the calculation of diluted earnings per share
as it was anti-dilutive. Diluted earnings per bearer, registered and American
depositary shares were:
2004 2003
Six month ended June 30 (unaudited) US$000 US$000
------------------------------------------------------------------------------
Net income attributable to bearer shareholders 173,934 121,235
Net income attributable to registered shareholders 67,984 46,661
------------------------------------------------------------------------------
Total net income 241,918 167,896
Weighted average number of bearer shares in issue 11,270,640 11,445,711
Weighted average number of registered shares in issue 11,013,040 11,013,040
US$ US$
------------------------------------------------------------------------------
Diluted earnings per bearer share 15.43 10.59
Diluted earnings per registered share 6.17 4.24
Diluted earnings per American depositary share 0.39 0.26
------------------------------------------------------------------------------
-more-
6. SHARE CAPITAL
NUMBER NOMINAL
CLASS OF SHARES OF SHARES VALUE CHF000 US$000
------------------------------------------------------------------------------------------------------------
As of June 30, 2004
Issued and fully paid share capital
Registered 11,013,040 CHF10 110,130 68,785
Bearer 11,735,125 CHF25 293,379 185,574
------------------------------------------------------------------------------------------------------------
Total 403,509 254,359
------------------------------------------------------------------------------------------------------------
Authorized share capital - bearer 1,400,000 CHF25 35,000 27'917
Conditional share capital - bearer for option and/or convertible 1,452,000 CHF25 36,300 28,954
Debt
Conditional share capital - bearer for stock options 729,701 CHF25 18,243 14,551
------------------------------------------------------------------------------------------------------------
As of June 30, 2003
Issued and fully paid share capital
Registered 11,013,040 CHF10 110,130 68,785
Bearer 11,710,250 CHF25 292,757 185,081
------------------------------------------------------------------------------------------------------------
Total 402,887 253,866
------------------------------------------------------------------------------------------------------------
Authorized share capital - bearer 1,400,000 CHF25 35,000 25,766
Conditional share capital - bearer for option and/or convertible debt 152,000 CHF25 3,800 2,797
Conditional share capital - bearer for stock options 354,572 CHF25 8,864 6,526
------------------------------------------------------------------------------------------------------------
During the Annual General Meeting held on May 25th, 2004, shareholders approved
increasing the conditional capital to CHF 36,300,000 (1,452,000 bearer shares of
a par value of CHF 25) for option and/or convertible loans and to CHF 18,825,000
(753,000 bearer shares of a par value of CHF 25) for stock options. In addition,
shareholders have approved the authorization to increase capital by CHF
35,000,000 (1,400,000 bearer shares of a par value of CHF 25) for a period of
two years.
7. TREASURY SHARES
There were 304,939 treasury shares held by a group company as of January 1,
2004. During the first five months ended May 31, 2004, 351,209 bearer shares
were purchased for a total consideration of CHF280.9 million or $221.8 million,
which resulted in the complete utilization of the CHF500 million share buy back
plan that was initiated in July 2002. During the same period, 6,927 treasury
shares were distributed to employees mostly as part of an Employee Share
Purchase Plan whereby shares purchased under the plan that are held for one year
after the purchase date entitle each participant to receive, on a one-time
basis, one matching share for every three shares purchased and held.
In June 2004, a second share buy back plan was initiated that is authorized to
acquire CHF750 million in bearer shares; however, the shares acquired under this
second plan will be cancelled and thus will not be available for re-issue. The
total cost of the shares acquired under the second share buy back plan is
CHF46.6 million or $37.2 million. The total number of treasury shares held as of
June 30, 2004 is 708,271 of which 59,050 will eventually be cancelled.
8. DISTRIBUTION OF EARNINGS
At the Annual Shareholders' Meeting on May 25, 2004, a proposed gross dividend
in respect of 2003 of CHF3.20 (2002: CHF2.80) per registered share and CHF8.00
(2002: CHF7.00) per bearer share, amounting to a total of CHF123.9 million
(2002: CHF110.8 million), was ratified. This dividend, equivalent to $99.4
million, was subsequently paid on May 28, 2004 and has been accounted for in
shareholders' equity as an appropriation of retained earnings in the six months
ended June 30, 2004.
-more-
9. STOCK OPTION PLAN
Movements in the number of employee stock options outstanding are as follows:
Weighted
average
exercise
Options price
outstanding CHF
--------------------------------------------------------------
As of January 1, 2003 209,455 1,272
Cancelled (22,062) 1,301
Granted 93,130 655
Exercised (2,741) 546
--------------------------------------------------------------
As of December 31, 2003 277,782 1,070
Cancelled (13,124) 1,103
Granted 120,780 721
Exercised (1,480) 578
--------------------------------------------------------------
As of June 30, 2004 383,958 961
--------------------------------------------------------------
During the first six months ended June 30, 2004, 120,780 options (2003: 91,950
options) were granted to a total of 598 employees (2003: 567 employees), at a
predetermined weighted average exercise price of CHF721 (2003: CHF 655). The
total number of options available for grant as of June 30, 2004 is 327,291
There is also a stock option plan reserved for the Board of Directors that is
similar to the Employee Stock Option plan. In June 2004, 5,200 options (2003:
4,600) were granted to directors, at a predetermined exercise price of CHF772
(2003: CHF 692). There are 20,720 director options outstanding as of June 30,
2004 with a weighted average exercise price of CHF 755.
10. SHARE PURCHASE PLANS
EMPLOYEE SHARE PURCHASE PLAN
The group has an Employee Share Purchase Plan ("the ESPP") covering
substantially all of its employees. The plan is designed to allow employees to
purchase bearer shares or American depositary shares at 85% of the lower of the
fair market value at either the date of the beginning of the plan period or the
purchase date. Purchases under the plan are subject to certain restrictions and
may not exceed 15% of the employee's annual salary. In January 2004, 20,301
bearer shares (2003: 23,229 bearer shares) were issued to employees at a price
of CHF654 per share (2003: CHF654 per share). As of June 30, 2004, a total of
$5.3 million (2003: $4.8 million) in contributions held by the company to be
used to purchase bearer and American depositary shares on behalf of employees in
January 2005. The accrued compensation cost from the discount to be offered to
employees based on the contributions held as at June 30, 2004 is $0.5 million
(2003: $1.5 million).
Shares purchased under the plan that are held for one year after the purchase
date entitle each participant to receive, on a one-time basis, one matching
share for every three shares purchased and held. In January 2004, 6,648 bearer
shares (2003: 4,208) were distributed to employees. The accrued compensation
cost for the six months ended June 30, 2004, related to the matching shares that
will be distributed in January 2005, is $2.1 million (2003: $1.9 million) and is
calculated based on the estimated number of matching shares multiplied by the
current month-end share price.
DIRECTOR SHARE PURCHASE PLAN
During 2003, the group initiated a Share Purchase Plan reserved for its Board of
Directors (the "DSPP"). The DSPP allows board members to purchase Serono S.A.
bearer shares through allocation of 50% or 100% of their gross yearly fees. Each
cycle commences on the first business day following the company's Annual General
Meeting (the "AGM") and concludes on the day of the next AGM. The purchase price
per share is eighty-five percent of the fair market value of the share on the
fifth business day following the AGM. In June, 1,518 bearer shares were issued
to Directors that participated in the plan.
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11. PRINCIPAL SHAREHOLDER
At June 30, 2004, Bertarelli & Cie, a partnership limited by shares with its
principal offices at Cheserex (Vaud), Switzerland, held 53.8% of the capital and
62.7% of the voting rights in Serono S.A. Ernesto Bertarelli controls Bertarelli
& Cie. On the same date, Maria-Iris Bertarelli, Ernesto Bertarelli and Donata
Bertarelli Spath owned in the aggregate 7.3% of the capital and 10.1% of the
voting rights of Serono S.A.
-end-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SERONO S.A.
a Swiss corporation
(Registrant)
July 22, 2004 By: /s/ Francois Naef
----------------------
Name: Francois Naef
Title: Secretary