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Ypsomed is on the right track - However, the transformation takes longer
- In the 2010/11 business year, Ypsomed generated consolidated sales of CHF 242.5 million and was 4.5% below the previous year's figure of CHF 254.0 million, principally as a result of the strong Swiss franc. Although there was a slight overall sales increase of 0.5% in local currency compared to the previous year, sales were reduced by total currency effects amounting to CHF 12.9 million.
- The ongoing decrease in revenues from Sanofi (proportion of sales of 24% vs. 28% in the previous year) could not be fully compensated and lead in the Delivery Devices Business segment to sales of CHF 155.8 million compared to CHF 168.3 million in the previous year. Despite decreasing sales, the operating profit of the Delivery Devices Business segment increased by 11.6 % from CHF 19.8 million to CHF 22.1 million.
- In the 2010/11 business year, Ypsomed continued to expand the Diabetes Direct Business with the market launch of the new mylife(TM) OmniPod® insulin patch pump and intensified sales of the mylife(TM) Pura® blood glucose monitoring system thereby generating consolidated sales of CHF 69.4 million. Although a positive increase in sales was achieved with both products in the last business year, the strong Swiss franc resulted in a major currency translation effect of CHF 8.3 million in the Diabetes Direct Business. The operating result of the Diabetes Direct Business, however, was impacted by the high cost for the new product launches and amounted to a loss of CHF -12.9 million compared to CHF -9.2 million in the previous year.
- Despite the higher marketing and sales expenses, the consolidated operating profit in the 2010/11 business year reached CHF 8.6 million, not least as a result of the substantial cost savings and major efforts to improve efficiency in all areas of the company. With 3.6%, the EBIT margin was in the communicated range (previous year 5.3%). Due to unrealized exchange losses the consolidated net profit amounted to CHF 5.2 million compared to CHF 9.4 million in the previous year.
- Ypsomed is convinced about the strategy and the growth potential in the injection device and diabetes care businesses. Therefore, Ypsomed continues to invest in research and development as well as in the international expansion of pen needle distribution and the ongoing launch of promising products, such as the new mylife(TM) Clickfine® 4.5mm pen needle, the mylife(TM) Clickfine® AutoProtect(TM) safety pen needle and the mylife(TM) OmniPod® insulin patch pump.
- The ongoing market launch activities for new products, however, require more resources and it is taking longer than expected to compensate for the declining revenues with Sanofi. Ypsomed is therefore still going through a demanding transformation phase. Thanks to solid equity financing, Ypsomed enjoys financial security and is proposing to the General Meeting of Shareholders on 28th June 2011 a dividend payment of CHF 0.20 per registered share to be made from tax-beneficial capital reserves.
- For the 2011/12 business year, Ypsomed expects sales to reach last year's level and aims for a slightly improved EBIT margin compared to the previous year.
Rapid launch of the mylife(TM) OmniPod® insulin patch pump
Sales development in the individual business segments illustrates the fact that Ypsomed is still in a demanding trans-formation phase. Ypsomed is investing in building up its diabetes care business and is simultaneously diversifying its customer base for pen systems with globally active pharmaceutical companies. An important milestone in the previous business year was the rapid launch of the mylife(TM) OmniPod® insulin patch pump, the only one of its kind in the world, in mid-July 2010 in Germany and Great Britain, followed by staggered launches in the Netherlands, Switzerland, Norway and Sweden. The new insulin patch pump impresses both customers and leading diabetes experts. With the exception of France, the registration process for the mylife(TM) OmniPod® went smoothly. New launches are planned in further countries during 2011.
Investing in diabetes care market development - sales increases with pen needles and mylife(TM) Pura®
In the 2010/11 business year, Ypsomed invested substantial resources in the ongoing market launch of the mylife(TM) OmniPod® insulin patch pump and in market activities for the mylife(TM) Pura® blood glucose monitoring system, requiring new staff for the European sales forces as well as for the central marketing department in Burgdorf. Thanks to intensified sales efforts, Ypsomed has increased sales of the mylife(TM) Pura® blood glucose monitoring system in the business year 2010/11 by more than 80% compared to the previous year and has expanded the distribution of its self-manufactured pen needles to 50 countries worldwide. In addition, at the start of the business year, Ypsomed took over its former distributor in Great Britain to form a wholly-owned Ypsomed subsidiary. Overall, marketing and sales expenses increased by a total of 15.8 % in the 2010/11 business year, from CHF 31.9 million to 36.9 million.
Further diversification of sales in Delivery Devices - successful ServoPen® launch in China
An important success in the previous business year was the successful launch of the newly developed ServoPen® reusable insulin pen in China in collaboration with the long-standing customer Tonghua Dongbao Pharmaceutical Co. Ltd., a leading pharmaceutical company and insulin manufacturer in China. With the ServoPen® reusable insulin pen, Ypsomed is introducing a top-quality Swiss product to the booming Chinese insulin market. The numerous audits performed by customers and in particular the very successfully passed audit by the US health authority FDA at the beginning of 2011 in Burgdorf demonstrate that customers and end-users can rely on the quality of Ypsomed products. Ypsomed is currently engaged in projects and negotiations with several pharmaceutical and biotech companies regarding new pen systems and auto-injectors.
Necessary cost savings - slightly improved gross profit margin
Despite lower overall sales, Ypsomed improved the gross profit margin from 26.2% to 27.5% in the business year 2010/11, especially due to efficiency improvements and cost savings in personnel expenses. Ypsomed downsized by a total of 102 staff members within the Group and thus reduced personnel expenses by more than 10% on a comparable basis to the previous year. Furthermore, administration expenses were reduced significantly by a total of CHF 4.6 million from CHF 18.0 million to CHF 13.4 million. However, patent expenses amounting to CHF 1.8 million were allocated to R&D expenses for the first time.
High R&D investment continues - lower capital expenditures
Innovation and new product developments are key success factors for Ypsomed. Consequently, Ypsomed continues to invest more than 10% of sales in the development of new products amounting to CHF 26.1 million in the 2010/11 business year. Thanks to recent significant investments, Ypsomed today has sufficient modern manufacturing capacity and infrastructure at its disposal. Investments in fixed assets in the 2010/11 business year were correspondingly lower. They totalled CHF 14.5 million and were thus 55% lower than the previous year's figure of CHF 32.5 million. For the 2011/12 business year, Ypsomed expects further decreases in capital expenditure.
Temporarily lower profitability levels - solid equity financing secures the implementation strategy
Overall, Ypsomed achieved an operating profit before depreciation and amortization (EBITDA) of CHF 33.7 million (EBITDA margin of 13.9% compared with 16.1% in the previous year). The consolidated net profit amounted to CHF 5.2 million compared to CHF 9.4 million in the previous year. Translated for the total of 12'621'863 outstanding shares, this resulted in net earnings of CHF 0.41 per share (previous year CHF 0.79). In the 2010/11 business year, the compre- Page 3 hensive income amounted to CHF 3.5 million, which was significantly lower mainly due to currency effects than the previous year's figure of CHF 13.9 million. Particularly pleasing was the fact that in the 2010/11 business year, the participations in Bionime Corp. and Insulet Corp. improved again by an additional CHF 2.1 million compared to the previous year. Ypsomed enjoys a healthy balance sheet and a high equity ratio of 79.8%, which provide the Group with financial security even during the current transformation phase.
Outlook: diabetes and insulin markets provide significant sales potential for Ypsomed
Ypsomed will continue to implement its strategy and thereby invest in the market launch of new products and at the same time make further cost savings. Chairman Dr. h.c. Willy Michel is very confident: "By the year 2030, there will be over 440 million people worldwide living with diabetes, with 70 million of them in China alone and with as many as 90 million in India. The diabetes and insulin markets are currently changing very significantly and new suppliers are pushing into the market. This opens up opportunities for Ypsomed to win new customers for our pen systems and to expand sales of our patented click-on pen needles to even more countries." In addition, thanks to its specialist diabetes European sales force, Ypsomed sees a substantial sales potential for its mylife(TM) Pura® blood glucose monitoring system und particularly for the mylife(TM) OmniPod® insulin patch pump.
CEO Richard Fritschi adds: "Ypsomed continues with the market launch of new products and plans to introduce the mylife(TM) OmniPod® insulin patch pump in further countries. This will require significant resources and affect short-term profitability. For the 2011/12 business year, Ypsomed expects sales to reach last year's level and aims for a slightly improved EBIT margin compared to the previous year."
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