Operating profit impacted by market expansion activities and currency effects

Burgdorf, (PresseBox) - Ypsomed has had an eventful first half of the 2011/12 business year. In August Dr. h. c. Willy Michel assumed the role of CEO from Richard Fritschi. Dr. h. c. Willy Michel is focusing on optimization of the cost structure, and building up new customers for injection systems and the diabetes care traded products with the aim of transferring operative management to his son Simon Michel in the foreseeable future. In September the Board of Directors decided to switch the financial reporting standards from IFRS (International Financial Reporting Standards) to Swiss GAAP FER (Swiss Accounting and Reporting Recommendations). The change has no impact on the transparency of the reporting or the information policy, as it is based on a true and fair view. In September Ypsomed announced at the EASD meeting in Lisbon the launch of the second generation mylife(TM) Omnipod® in 2012. Another important milestone in the first half of 2011 was the preparation of the first delivery of ServoPens® to Ypsomed's new customer B. Braun. The German health care provider will launch the Swiss-manufactured insulin pen in Germany.

- In the first half of the 2011/12 business year, Ypsomed generated sales of goods and services amounting to CHF 122.8 million. This represents a change of -6.6 % on the previous year (CHF 131.5 million) due to the currency effect and lower levels of remuneration for research and development services.

- The strong Swiss franc had a negative effect on sales of goods amounting to CHF 6.9 million. After adjustments for currency effects, sales represented an increase in the reporting year of some CHF 1.5 million (+1.3 %) year-on-year.

- The Ypsomed Group's operating profit was down from CHF 4.9 million in the previous year to CHF 3.0 million, with the investments involved in building up and expanding the Diabetes Direct Business once again placing a considerable burden on operating results. This meant a loss of CHF 5.8 million in the Diabetes Direct Business segment despite rising sales (previous year loss of CHF 5.9 million). In the Delivery Devices segment, along with the drop in Sanofi sales, it was mainly currency losses in pen needles that had a negative effect on the operating profit. This resulted in an operating profit of CHF 8.7 million (previous year CHF 11.5 million) in this segment.

- Net profit has more than doubled year-on-year, up from CHF 3.4 million to CHF 7.6 million. The main factor behind this increase is the sale of long-term financial assets, which were sold off at a profit of around CHF 5.1 million thanks to the attractive market price.

Sales of goods slightly up after adjustment for currency effects

In the first half of the 2011/12 business year, Ypsomed generated sales of goods and services amounting to CHF 122.8 million. This represents a change of -6.6 % on the previous year (CHF 131.5 million). The trend in the Swiss franc exchange rate and lower levels of remuneration for research and development services both influenced the sales of goods and services significantly. The strong Swiss franc had a negative effect on sales of goods amount to CHF 6.9 million. After adjustments for currency effects, this sales figure represented an increase in the reporting year of some CHF 1.5 million (+1.3 %) year-on-year.

Gross profit margin down slightly due to currency effects

The gross profit margin was down slightly on the previous year, due to the significant impact of currency effects on the needles business. In accordance with the new reporting requirements under Swiss GAAP FER, the gross profit margin now includes research and development income and expenses and income from marketing services. Targeted and intensive efforts are being made in all areas to improve the contribution being made to gross profit+:
- In order to increase the gross profit margin, production and procurement processes are being regularly reviewed to identify optimization potential and implement measures in accordance with the principle of continuous improvement processes.
- The second new needle assembly machine in Solothurn has been successfully industrialised, significantly boosting production efficiency.

Operating profit impacted by market expansion activities, significant increase in net profit

The Ypsomed Group's operating profit was down to CHF 3.0 million from CHF 4.9 million in the previous year, with the investments involved in building up and expanding the Diabetes Direct Business once again placing a considerable burden on operating results. This meant a loss of CHF 5.8 million in the Diabetes Direct Business segment despite rising sales. In the Delivery Devices segment, along with the drop in Sanofi sales, it was mainly currency losses of some CHF 2.0 million in pen needles that had a negative effect on the operating profit. This resulted in an operating profit of CHF 8.7 million (previous year CHF 11.5 million).

Net profit has more than doubled year-on-year, up from CHF 3.4 million to CHF 7.6 million. The main factor behind this significant increase is the sale of long-term financial assets, which were sold off at a profit of around CHF 5.1 million thanks to the attractive market price.

Ypsomed achieves positive cash flow of CHF 14.2 million

As of September 30, 2011, Ypsomed has substantial cash and cash equivalents at its disposal. The increase of CHF 14.2 million within the reporting period was mainly generated from business activities (operational cash flow of CHF 20.0 million. With the free cash flow at CHF 22.3 million, financial liabilities to the major shareholder were reduced by CHF 10.0 million and dividends to the amount of CHF 2.5 million were paid free of withholding tax to shareholders out of capital reserves. Thanks to the high level of investment in previous years, Ypsomed possesses extremely modern and efficient production facilities, and was therefore able to reduce investments in fixed assets by 60.6 % to CHF 3.5 million. Purchases of intangible assets were down from the first half of the 2010/11 business year by 21.1 % to CHF 4.5 million. This is primarily due to the fact that fewer in-house developments were capitalised, as Ypsomed currently has a comprehensive range of self-injection systems for use in the treatment of diabetes, infertility, growth disorders and autoimmune diseases. Even after the offsetting of goodwill as of April 1, 2011, an equity ratio of 63.6 % was still achieved, boosted further by 3.2 % to 66.8 % due to the net profit generated.

The mylife(TM) OmniPod® insulin patch pump is a success - the second generation will be launched in 2012

The unique mylife(TM) OmniPod® insulin patch pump is very popular with patients and diabetes specialists alike. In Germany, as many as one in three new patients or patients moving to a new pump system are opting for a mylife(TM) OmniPod® insulin patch pump. The tubing-free insulin pump is particularly popular with women (55 %) and patients aged between 30 and 50 (39 %).

From 2012, Ypsomed will be launching the new, second-generation pod that has undergone further development. Valuable experience over the last four years have fed into the technical development of the product resulting in a new pod that is not only significantly smaller and flatter but also consumes less energy. After use the pods are recycled by Ypsomed in an environmentally sound manner.

Ypsomed is continuing to work actively on preparing for the launch of the mylife(TM) OmniPod® insulin patch pump in additional countries. It is common knowledge that the process for approving the pump as "reimbursable" by the health insurance system in France has been delayed, with approval now expected by the end of February 2012. In Norway, the product will be launched within the context of a national tender procedure in spring 2012. In Sweden, Ypsomed has submitted its application for "reimbursable" status to the relevant authorities. The first quarter of 2012 is also when Ypsomed plans to launch the pump via qualified distributors in Austria, Kuwait and the United Arab Emirates. Preparations to begin marketing in China are also well under way.

Ypsomed supplies new customer, B. Braun, with the ServoPen® insulin pen

An important milestone in the first half of 2011 was the preparation of the first delivery of ServoPens® to Ypsomed's new customer B. Braun. After a long and intensive evaluation phase, B. Braun opted to use the ServoPen® under the name Omnifill® Pen for its insulin B. Braun. The high-quality design of the ServoPen®, which received the red dot award in 2010, as well as its comprehensive functionality and simple and safe mode of operation were important criteria in B. Braun's decision.

Outlook

We remain convinced of the market potential of our products, but due to the financial and currency crisis we remain cautious. For the second half year we expect turnover and the operational profit margin to be slightly higher compared to the first half year based on current exchange rates.

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