Ypsomed invests in new injection systems and diabetes care - Launch of the new insulin patch pump in the second quarter 2010

(PresseBox) (Burgdorf, ) .
- In the 2009/10 business year the Ypsomed Group generated consolidated sales of CHF 254.0 million (-7.7% or -6% taking into account exchange fluctuations) with increased sales in diabetes direct business by +11.5%.

- The EBIT margin decreased from 11.2% to 5.3% due to lower production volumes for Sanofi-Aventis, setup costs for manufacturing of new pen systems as well as increased marketing and sales expenses for the introduction of the new mylife(TM) Diabetescare umbrella brand and the market launch of the mylife(TM) Pura(TM) blood glucose monitoring system.

- In the 2009/10 business year Ypsomed strengthened both the injection systems and diabetes care business segments, reduced the dependency on individual large customers and invested a total of CHF 31.7 million in research and development as well as CHF 32.5 million in fixed assets.

- Ypsomed will launch the new mylife(TM) OmniPod® insulin patch pump in Germany and Great Britain in the second quarter 2010. Additional countries will follow in the second half year of 2010 and the first half year of 2011.

- A repayment of par value in the amount of CHF 0.25 per registered Ypsomed share will be proposed to Ypsomed's General Meeting of Shareholders to be held in Bern on June 23, 2010.

- Ypsomed is in a transformation and buildup phase and therefore in the business year 2010/11 aims to increase sales slightly and to reach an EBIT at prior year's level.

Sales growth in the diabetes direct business - overall sales below last year's level

In the 2009/10 business year Ypsomed generated consolidated sales of CHF 254.0 million, some 7.7% less than last year's CHF 275.1 million. The lower sales volume was due to the decreasing production volumes for the Sanofi-Aventis products OptiSet®, OptiClik® and OptiPen® Pro. Correspondingly sales of CHF 168.3 million were achieved with delivery devices, which was 13.6% below the previous year's value of CHF 194.9 million. In the diabetes direct business, Ypsomed increased sales from CHF 63.6 million to CHF 70.9 million, up 11.5%, thanks to the launch of new products and entering markets in new countries. In the 2009/10 business year fluctuations in both the euro and US dollar led to a negative currency effect for Ypsomed of around CHF 4.1 million or 4% on sales in foreign currencies with pen needles and in the diabetes direct business.

Decrease in pen production volumes and market launch of mylife(TM) Pura(TM) reduce profitability

In the 2009/10 business year several factors accounted for a reduction in Ypsomed's profitability. CEO Richard Fritschi explains the reasons: "Firstly, Ypsomed experienced a sharp decrease in the volume of pens for Sanofi-Aventis and invested in the industrialization and production setup for pen needles and new pen systems; secondly, we at the same time increased the expenses for marketing and sales significantly in order to introduce the new mylife(TM) Diabetescare umbrella brand and to expand the sales organization and logistics for the mylife(TM) Pura(TM) blood glucose monitoring system." Marketing and sales costs rose by more than 25% from CHF 25.5 million to CHF 31.9 million. In the 2009/10 business year Ypsomed achieved earnings before interest, taxes, depreciation and amortization of CHF 40.9 million, which corresponds to an EBITDA margin of 16.1%. Earnings before interest and tax (EBIT) amounted to CHF 13.5 million or 5.3%. Unrealized exchange losses of CHF 1.1 million reduced the net profit, which came to CHF 9.4 million. In the 2009/10 business year Ypsomed achieved a comprehensive income according to IFRS of CHF 13.9 million. The CHF 7.1 million value increases of the participations in Bionime Corp. and Insulet Corp., which in accordance with IFRS guidelines were included in the other comprehensive income, lead to a positive effect.

R&D revenue for development projects increased by 49% - Ypsomed invested CHF 32.5 million in fixed assets

Due to a large number of development projects for new pharma customers, research and development costs rose from CHF 20.1 million to CHF 21.7 million and customer payments for development services even increased by 49% from CHF 9.7 million to CHF 14.4 million. Ypsomed invested a total of CHF 31.7 million in research and development in the 2009/10 business year, which corresponds to around 12.5% of sales. In the 2009/10 business year, Ypsomed also invested some CHF 32.5 million in fixed assets, such as new production equipment, automatic assembly machines and tools for pen systems and pen needles, as well as in the expansion and maintenance of the required infrastructure and buildings.

Equity ratio increased from 69.1% to 81.2%

With the positive result for the year and the capital increase, the consolidated equity improved in the 2009/10 business year by 23% from CHF 437.0 million to CHF 537.7 million. Ypsomed's equity ratio was increased from 69.1% to a very high 81.2%. The majority shareholder's loan was reduced in the 2009/10 business year from CHF 140.0 million to CHF 44.5 million through the conversion of part of it within the scope of the capital increase and through a further repayment of CHF 10 million.

Injection systems - New customers acquired, diversified customer base and several pen systems in the industrialization phase

Thanks to its extensive development expertise, Ypsomed has a comprehensive patent portfolio and unique technology platforms for modern, userfriendly selfinjection systems. Ypsomed is therefore active in markets of pronounced growth. On the one hand, the worldwide demographic development and transformation in lifestyle, such as poor nutrition and lack of exercise, are resulting in an increasing number of diabetes patients. On the other hand, the number of drugs manufactured using biotechnology (biopharmaceuticals) that need to be injected is rising continuously. Injection and infusion systems, such as those developed and supplied by Ypsomed, are crucial to pharma and biotech companies. Only through userfriendliness and acceptance by patients will the success of a therapy be achieved. Currently Ypsomed has five products in the industrialization phase. The market launch of these new products by our pharma customers is planned for between 2010 and 2013.

Diabetes care - Ypsomed is back in the business of high precision blood glucose monitoring systems as well as with insulin patch pump

In order to strengthen the diabetes care business Ypsomed launched a new, generic umbrella brand, mylife(TM) Diabetescare, which includes all diabetes products manufactured or distributed by Ypsomed. With the introduction onto the market last year of mylife(TM) Pura(TM) , Ypsomed returned to the blood glucose monitoring systems business. The new blood glucose monitoring system has enabled Ypsomed to broaden the mylife(TM) product range with a highmargin product. In a study carried out in accordance with ISO criteria, the Bionime system showed higher measuring accuracy compared with established systems on the market, particularly in the sensitive blood glucose range < 75 mg/dl, and in a largescale comparative study carried out in April 2010 the mylife(TM) Pura(TM) even came out top in the test. In addition, Ypsomed will once again become active in the rapidly growing insulin pump market with the exclusive distribution agreement for Europe, China and Australia signed in early 2010 with Insulet Corp. for the world's first OmniPod® insulin patch pump, the newest and easiesttouse technology available on the market.

Geographic expansion within the CHF 35 billion market of diabetes care

Ypsomed estimates that the global diabetes care market currently has a value of around CHF 35 billion. In addition to pens, Ypsomed today is already represented in the following three diabetes care market segments: pen needles, blood glucose monitoring systems and insulin pumps. With its new mylife(TM) Diabetescare diabetes umbrella brand, Ypsomed is pursuing a multisegment strategy and in the last business year expanded the sales organisation for diabetes care in its own subsidiaries distinctively, created a new subsidiary in Great Britain and signed numerous new agreements with distributors in countries such as Australia, Russia, Ukraine, Croatia, Italy, Greece, Morocco and Tunisia. Senior Vice President Marketing & Sales Simon Michel explains: "Ypsomed is aiming to increase its market share in all three of the market segments it is already involved in through a unified, global brand and to benefit from the growth potential of these markets. Ypsomed wants to achieve this on the one hand through increased globalization in the distribution of the mylife(TM) products and services via its own subsidiaries and distributors, and on the other hand by launching new products in partnership with third parties, such as the Pura(TM) blood glucose monitoring system from Bionime and the OmniPod® insulin patch pump from Insulet, as well as with Ypsomed's own new products, such as safety pen needles or in the future the continuous injection device."

Leading experts recommend the insulin patch pump

In early January 2010 Ypsomed signed an exclusive distribution agreement with Insulet Corp., the leader in insulin patch pump technology, for the OmniPod® Insulin Management System in Europe as well as in Asia for China and Australia. Ypsomed is launching the OmniPod® insulin patch pump under the mylife(TM) Diabetescare brand in Germany, the largest market in Europe, and in Great Britain in the second quarter 2010. Additional countries will follow in the second half year of 2010 and the first half year of 2011. Leading experts consider diabetes therapy using the insulin patch pump to be the way forward, due to the fact that the insulin patch pump offers people who are dependent on insulin all the advantages of insulin pump therapy with a degree of freedom, comfort and ease of use not previously achieved in the treatment of diabetes.

Advantages of the insulin patch pump

The OmniPod® Insulin Management System is the first and only continuous insulin infusion system of its type available on the market. The OmniPod® insulin patch pump consists of two components connected wirelessly: 1. the pod, a compact, lightweight, selfadhesive insulin dispenser that is worn directly on the skin discreetly under clothing, and 2. the Personal Diabetes Manager (PDM), a wireless, menudriven, portable device for controlling the pod. As the pod is attached directly to the skin with micropore tape, an infusion set (catheter) is no longer required. The pod can thus be worn in different places on the body. This gives pump wearers a freedom of movement they have not had before. As there is no tubing, the risk of a blockage or kink is eliminated. In addition, once the pod has been attached to the body, the cannula is inserted fully automatically using the portable control device in a way that is not visible to the patient and is completely painfree. These advantages make the OmniPod® particularly suitable for children with type 1 diabetes. It is therefore not surprising that many typ-1 diabetics, who start an insulin pump therapy, select the OmniPod® insulin patch pump. Users of the OmniPod® system will be able to analyze and display their blood glucose measurements on their OmniPod® Personal Diabetes Manager (PDM).

Outlook

Selfinjection and diabetes care are both particularly large, global growth markets not dependent on the state of the economy. Chairman Dr. h.c. Willy Michel is very optimistic for the future: "The new mylife(TM) Diabetescare strategy and the market launch of the mylife(TM) Pura(TM) blood glucose monitoring system and the mylife(TM) OmniPod® insulin patch pump, are great opportunities for Ypsomed. Sales in diabetes care will increase significantly." At the same time the composition of sales of injection systems will undergo a lasting change compared with the situation today. Several of Ypsomed's pharma customers plan to introduce new injection systems onto the market in the years 2010 through 2013, in order to expand the customer base for injection systems in the future and become more diversified. In the 2010/11 business year, production volumes for the OptiSet®, OptiClik® and OptiPen® Pro systems for Sanofi-Aventis will further decrease and profitability will furthermore be negatively impacted by continued high marketing and sales expenses for the market launch of the mylife(TM) Pura(TM) blood glucose monitoring system and the mylife(TM) OmniPod® insulin patch pump.

Thus in respect to the outlook for the business year 2010/11 CEO Richard Fritschi explains: "Ypsomed is in a challenging transformation and buildup phase, since we invest in new injection systems in order to diversify our customer base, and simultaneously strengthen the diabetes care business both by introducing new products and geographically expanding sales." For the business year 2010/11 Ypsomed aims to increase sales slightly and to reach an EBIT at prior year's level.

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