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Galenica Group increases profits by more than 40%
For Galenica, 2008 was a year of important milestones: the acquisition of the Canadian company Aspreva and the formation of Vifor Pharma, the launch of Ferinject® in eight European countries, the partnership agreement with Fresenius Medical Care for marketing Venofer® in the dialysis segment, the start-up of the distribution centre in Niederbipp, and the strong growth of the Retail business sector.
Galenica generated consolidated net sales of CHF 2,704.0 million in 2008 (a 6.9% increase). Earnings before interest, taxes, depreciation and amortisation (EBITDA) rose 144.8%, to CHF 469.7 million, while earnings before interest and taxes (EBIT) grew to CHF 263.4 million (an increase of 70.9%). Consolidated net earnings in 2008 totalled CHF 189.4 million, which is equivalent to a 40.4% increase.
Investments in intangible and tangible assets in 2008 stood at CHF 79.4 million (compared with CHF 110.1 million in 2007), while investments in research and development came to CHF 84.7 million (2007: CHF 35.3 million).
The Board of Directors will propose an ordinary dividend of CHF 7.00 per registered share (a 16.7% increase) to the General Meeting.
The Vifor Pharma business sector generated net sales totalling CHF 434.0 million (up 8.4%) in 2008. The CellCept licensing revenue was consolidated for the first time and totalled CHF 354.2 million.
EBITDA was affected by activities such as the integration process, the move to the new company headquarters in Zurich, and research and development projects. Thanks to the worldwide commercial success of Vifor Pharma's iron supplements and the CellCept licensing revenue, however, EBITDA grew to CHF 399.5 million, an increase of 211.1%. Other factors such as the expansion of production capacities in St. Gallen and the write-off of intangible assets from the Aspreva acquisition had an impact on EBIT, which nevertheless increased to CHF 224.0 million, a gain of 94.8%.
Newly formed Vifor Pharma; launch of Ferinject® in eight European countries
In 2008, Galenica spent one billion Swiss francs on its most significant investment to date. It acquired Aspreva Pharmaceuticals Corporation, a Canadian company, and established Vifor Pharma. The successful integration of Aspreva and the newly acquired pharmaceutical expertise strengthen clinical development, regulatory affairs, medical affairs, marketing and international operations. The new resources will help promote and develop the potential of Ferinject®, develop new products, and maintain the market position of the leading products. In 2008, subsidiaries were established in the European key markets UK and Sweden as well as Singapore. This will increase Vifor Pharma's market presence and will support the launch of Ferinject®. In early 2009, Vifor France launched its marketing activities and a new affiliate was also founded in the Netherlands.
The medical community is now giving increasing attention to iron deficiency as a serious disease, even in areas other than nephrology. The global demand for iron supplements is therefore growing.
New indications open up further opportunities for Vifor Pharma. In Switzerland, where Vifor Pharma has been working to build up the market for the last eight years, over 90% of the iron supplement prescriptions are for conditions outside dialysis. However, experience in Switzerland has shown that it will also take time to build up markets in other countries.
Global sales of the injectable iron-replacement products Venofer® and Ferinject® increased by 20.0%, to CHF 209.5 million in 2008 despite the effects of exchange rates. By the end of 2008, Ferinject® had been launched in a total of eight European countries: Germany, Switzerland, the UK, Ireland, Sweden, Denmark, Finland and Portugal. The market launch was well received, and sales growth was encouraging, particularly in Switzerland and Germany. The second wave of registrations in additional European countries began in late 2008, with registration expected in key European countries such as France, Italy, Belgium and Norway by the end of 2009. Regulatory filings in other important markets such as Turkey, Latin America and Asian countries will follow during 2009.
In Switzerland, where Ferinject® has been available since February 2008, the two injectable iron supplements Venofer® and Ferinject® generated sales of almost CHF 30 million (an increase of 85.6%).
Total Swiss sales, including sales of other prescription medicines, reached CHF 57.1 million (up 5.8%).
Maltofer® was able to further solidify its position as the world's leading oral iron preparation. In spite of increasing competition from copies, sales grew to CHF 48.7 million, up 0.7% on a comparable basis.
The strategic joint venture agreement signed in July 2008 with Fresenius Medical Care (FMC), the world's largest supplier of products and services for dialysis, covers marketing and distribution of Venofer® and Ferinject® for dialysis applications in Europe, the Middle East, Africa and Latin America.
The joint venture began on 1 January 2009. Thanks to FMC's specialised expertise and its position in haemodialysis, it will help to further expand the leading market position of both products. Luitpold Pharmaceuticals, Inc. and Vifor Pharma also signed a landmark agreement with FMC for distribution of Venofer® in the United States and Canada in connection with haemodialysis which came into operation on 1 November 2008.
A broad programme of clinical studies are expected to support the use of Ferinject® in therapeutic areas other than dialysis. A multi-centre study on the use of Ferinject® in cases of chronic heart failure is underway in a number of European countries. Two studies, one in the area of gastroenterology and a further trial in cardiology were also launched in 2008. Additional studies in the areas of chronic kidney disease, oncology/haematology and iron deficiency anaemia are in the planning stage. Luitpold Pharmaceuticals, Inc. is continuing the studies it initiated in order to provide the US Food and Drug Administration (the FDA) with the additional safety data requested for the approval of Injectafer®. In Switzerland, the use of Ferinject® for the treatment of iron deficiency syndrome is also being studied.
Work on developing a new formulation for the phosphate binder PA21 was successfully completed, and Phase II clinical trials began as scheduled in December 2008. If positive results are obtained, Phase III will begin in 2010 with the aim of submitting the drug for approval in 2011.
Vifor Pharma is also studying the efficacy of CellCept in treating autoimmune diseases such as Pemphigus vulgaris and Lupus nephritis. The scientific data on Cellcept that is being obtained from the collaboration with Roche represents a significant clinical programme for Vifor Pharma. An international clinical study referred to as ALMS (Aspreva Lupus Maintenance Study) that deals with the treatment of Lupus Nephritis patients is being carried out in over 20 countries. Study results from long-term application will probably be available in 2010. Data on a second Phase III clinical trial for Pemphigus vulgaris were available at the beginning of the year. Although an initial evaluation did not indicate that CellCept was significantly superior statistically when compared with the placebo given to the control group, the study showed that CellCept takes effect more quickly and that it can reduce the use of steroids, which is extremely important for patients' quality of life.
Consumer Healthcare products
Vifor Pharma Consumer Healthcare generated total sales of CHF 145.9 million in 2008, which corresponds to an increase of 4.7% on a comparable basis. In Switzerland, Vifor Pharma Consumer Healthcare consolidated its position as the third-largest OTC supplier and boosted comparable-basis sales by 14.2%, to CHF 106.9 million. The OTC export business continues to experience strong growth. Revenues rose 19.9%, to CHF 20.8 million.
The nutritional supplement Equazen eye q(TM) was introduced in the Swiss market under the brand name Equazen IQ(TM) with very successful results. Only six months after launch, the product had a market share of over 50%. Total sales of Equazen eye qTM stood at CHF 17.4 million, down 7%
compared with 2007. This was due primarily to the poor market environment in the UK. Excluding the UK, sales to the other export countries increased 20.9%, showing healthy growth. Vifor Pharma will continue the market launch of Equazen IQ(TM) in Switzerland by implementing additional customised communications campaigns for both professionals and the general public. Additional clinical research data will support the recommendation that the product be used for the treatment of mild forms of hyperactivity and lack of concentration in children.
The other high-volume OTC products from Vifor Pharma all posted positive results: Sales totals were as follows: Perskindol® CHF 14.0 million (up 7.3%), Triofan® CHF 9.6 million (up 23.8%), Algifor® CHF 9.5 million (up 27.5%) and Otalgan® CHF 7.2 million (up 49.0%). Sales of Antibrumm® totalled CHF 4.0 million and remained more or less at the prior-year level. Perskindol®, Triofan® and Algifor® are among the ten leading OTC brands in Switzerland.
Additional cost-cutting measures already announced by the authorities have increased the need for new ideas in pharmaceutical logistics. The Logistics business sector was able to consolidate its position based on farsightedness and innovative concepts. It posted sales totalling CHF 2,034.4 million, which is equivalent to a 3.0% increase. Despite the sale of real estate in Geneva, at CHF 17.3 million the operating result was somewhat below the previous year's figure of CHF 19.4 million. This was mainly due to the negative impact of extraordinary charges resulting from the start-up of the new distribution centre in Niederbipp.
Niederbipp distribution centre creates the basis for new distribution models
The Niederbipp distribution centre, because of its scope and scale, is a pioneering project for Switzerland. This centre, operated by Galexis, is one of the most advanced healthcare logistics centres in Europe. Over 70% of its operations are automated, and it also creates the basis for new distribution models. Galexis will continue to stabilise and optimise the processes in the new distribution centre in Niederbipp. This will also include harmonising the delivery routes based on economical and environmental considerations. Since the start of February, the centre has provided an exceptional level of service quality, with a service rate of more than 98.5%.
With its comprehensive range of services, Alloga strengthened its position as the leading service provider in the pre-wholesale business. Procedures were systematically standardised in 2008, which increased efficiency and improved service quality. This is especially important in connection with the acquisition of Globopharm, which was finalised in early 2009. The pre-wholesale business will be much stronger as a result. Integration is being driven by utilising all possible opportunities for synergy.
Networking is playing an increasingly important role in the healthcare sector. The continuing trend toward consolidation in the Swiss healthcare industry also led to a sustained demand for corresponding products from the HealthCare Information business sector. Sales increased 17.0%, to CHF 41.4 million, and the operating result stood at CHF 0.2 million (up from CHF 0.1 million in 2007).
Promoting networking through innovation
By further developing its INDEX products, e-mediat met the demand for area-specific content, especially from hospitals (hospINDEX), health and accident insurance companies (insureINDEX) and care or nursing homes and homecare services (careINDEX).
Documed completed its new editing system called compendiumPORTAL and is now developing an added function called RegDocX for product registration with Swissmedic. The new tool enables pharmaceutical companies to submit registration documentation electronically. It improves and accelerates the related processes and, last but not least, saves money.
In the area of software development, Triamun introduced two important versions of the pharmacy solution called TriaPharm®. All Sun Store pharmacies and the majority of Amavita pharmacies now have Triamun products installed, which means a total of more than 200 pharmacies. The new TriaMed® medical practice software was also introduced. Thanks to its expanded functionality, it has become the standard reference for comprehensive data management in doctors' practice, particularly group practices. TriaMed® now has more than 70 interfaces with laboratory equipment in doctors' practices. Development of an electronic prescriptions transmission has been completed. The pilot phase began in early 2009.
The Retail business sector generated total sales of CHF 557.1 million in 2008. This is equivalent to 29.9% growth. Acquisitions accounted for 25.6% and internal growth for 4.3%. This figure does not include sales totalling CHF 85.3 million generated by Coop Vitality, which is consolidated at equity.
The operating result, at CHF 23.1 million, was 41.3% above the prior-year result.
Growth and concentration - a strategy that makes sense
The strategy combining growth with consolidation continues to be successful. The number of Amavita pharmacies rose to 125 (an increase of 11 - 8 of its own pharmacies and 3 partner pharmacies). Very attractive locations such as RailCity Bern, Drachen Center in Basel or Geneva's city centre were another factor. In four restructuring projects, two existing pharmacies each were also merged at a new location in order to achieve a higher critical mass and thus a more profitable size. Amavita continued to expand its range of services which includes not only the CardioCheck® but also an osteoporosis risk check, the Diavita diabetes test and a hearing test.
Coop Vitality had over 31 locations at the end of 2008, having added six during the year. There are new points of sale in Siders, Morges and Kreuzlingen and another in Ticino, to name a few.
Integration of the speciality pharmacy MediService went smoothly. Its therapy support service called Pharma Care increased sales by over 30% thanks to new services.
With the acquisition of the Sun Store pharmacy chain announced in early March 2009, Galenica will be able to expand its pharmacy network by 100 points of sale throughout Switzerland and significantly expand its service offerings in a very competitive environment. The Retail business sector will have the critical mass it needs in order to ensure sustainable business success in Switzerland and expand its leading position in the Swiss healthcare market. The various pharmacy formats within the Retail business sector - Amavita, Sun Store, Coop Vitality, MediService and Winconcept - will continue to be managed independently. Subject to approval by the Competition Commission, the Sun Store deal will take effect as from 1 July 2009.
GALENICA GROUP STRATEGY
Galenica developed its transformation strategy in 1995. The original Swiss pharmacy wholesaler subsequently developed into a diversified company serving the healthcare industry. Since then, the cumulative earnings have increased by almost 800%. Market capitalisation grew by around 900% in the same period, despite the present financial crisis.
Galenica will continue to pursue this strategy in the future. It is oriented to long-term growth with good risk distribution based on healthy diversification.
The strategy focuses on two main areas. The central element of the strategic Specialty Pharma axes is Vifor Pharma, which is based on anaemia, nephrology and consumer healthcare. The strategic axes of Swiss HealthCare Services is an integrated business model that offers services for all players in the Swiss healthcare market. With its core areas of expertise - Logistics, HealthCare Information and Retail - the Galenica Group intends to continue to strengthen its special position in the Swiss healthcare market and to utilise its excellent knowledge of market trends for this purpose.
The Galenica Group will continue to pursue its growth strategy in the future. The two divisions, Pharma and Health, will be further developed as independent but complementary corporate units. No separation of these activities is under consideration In order to ensure long-term growth, the Board of Directors has taken the following action:
- Fritz Hirsbrunner, CFO, will take on the role of Vice-CEO in addition to his current role;
- Jörg Kneubühler, Head of Finance and Controlling, will become a Member of the Corporate Executive Committee of the Galenica Group and will report to the CFO.
On the basis of its strategy and ongoing projects, the Galenica Group is confident that it will also be able to report double-digit earnings growth of about 10% in 2009.
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