Embargoed for release at 7am 12th March 2002CELLTECH GROUP PLCPRELIMINARY ANNOUNCEMENT OF RESULTS FOR YEARENDED 31ST DECEMBER 2001
The past year has seen sustained progress in Celltech’s development as a European-based biotechnology leader with a major commitment to innovative R&D, financed by extensive US and European operations. Across all areas of its operations, the Company has achieved significant improvements in its risk/reward profile. There have been important advances with Celltech’s exceptional pipeline, which includes a series of products addressing very large market opportunities, developed in collaboration with high quality partners. Celltech retains substantial value in these partnerships, through co-marketing rights and/or through profit-sharing and royalties. In addition, Celltech’s continued progress during 2001 was reinforced by its strong financial performance. Highlights are as follows:
* Comparative figures are proforma, as reported in note 31 to the 2000 audited accounts
Ø New Product Pipeline
Ø Celltech Pharmaceutical Operations
¨
Pharmaceutical product sales: £241.7 million
(+14%; + 10% @ CER), including US sales (£166.4 million; + 21%) were influenced by significant increases in Tussionex (+49%) and Zaroxolyn (+35%). ¨ Celltech has continued to invest in expanding and reinforcing its US and European pharmaceutical operations throughout 2001. Important steps have included: - The acquisition of Thiemann for £31 million, providing Celltech with a high quality sales and marketing organisation in Germany, the largest EU market. - Steady progress with Metadate® CD, which was launched in the US in May 2001. This product has now achieved a share of over 9% of the once-daily methylphenidate market, and continues to represent a growth opportunity for the US business. - The filing of a US NDA for Codeprex™, a new proprietary anti-tussive, with 12-hour action. This is expected to be launched at end-2002, and will expand Celltech’s valuable anti-tussive franchise. Ø Royalties ¨ Very substantial increase in Royalty income as follows:
*Proforma, at constant exchange rates In December 2001, Celltech announced a far-reaching settlement with Genentech of a long running patent dispute relating to Celltech’s Boss patent and Genentech’s Cabilly patent. Under the terms of the court approved settlement the Cabilly patent has been granted and Celltech will receive compensation until the original expiry date of the Boss patent in 2006, for royalty income it would have received from Boss licensees. Additionally, Celltech has secured preferential licensing terms to the Cabilly patent for its products.
Ø Management Simon Cartmell, CEO of Celltech Pharmaceuticals, will be leaving Celltech during Q2 2002. The Board thanks Mr. Cartmell for his contribution to the pharmaceutical business and wishes him every success in the future. He will be succeeded by Ms. Ingelise Saunders, who joined Celltech in September 2001. She was previously Chief Executive of Novo Nordisk in the UK, and also Vice-President, Novo Nordisk Europe, and has extensive pharmaceutical marketing and operational experience. She will report to Dr. Peter Fellner, Group CEO.
Ø New Product Pipeline Celltech has an exceptionally competitive pipeline, with 11 products in development, including 6 which are in Phase II or Phase III studies. Recent advances with these key products in mid- or late-stage development are summarised below: ¨ CDP 870 This third generation anti-TNFa therapy (a PEGylated antibody fragment) achieved very encouraging efficacy in a Phase IIb dose-ranging study in rheumatoid arthritis, conducted in over 200 patients. Patients were treated for 3 months, with a once-monthly subcutaneous injection of the product. The results, which were reported at the American College of Rheumatology Meeting held in San Francisco in November 2001, showed that the efficacy of the product, at a 400mg monthly dose, was fully competitive with other TNFa therapies, but with the advantage of once-monthly dosing. No safety issues were identified. Celltech’s partner, Pharmacia Corporation is leading the development of CDP 870 in RA, and is initiating Phase III studies in this indication Celltech recently announced successful results from a large dose-ranging Phase II study in Crohn’s disease, involving 292 patients. In this study the patients were treated for three months with once-monthly doses of CDP 870. The product showed promising efficacy, at a 400mg dose, and a good safety profile. It is expected that the product will enter Phase III studies in Crohn’s disease later in 2002. A further Phase II study, evaluating the product when administered intravenously, will be completed in the near future. Celltech’s partnership with Pharmacia provides for Celltech to have co-development and co-promotion rights in the US, major EU markets and Japan. Celltech will share the profits arising from product sales in rheumatoid arthritis and Crohn’s disease from these countries, and will receive royalties on sales elsewhere. In addition, Celltech has received an initial payment of $50 million, and will receive further milestone payments of up to $230 million, dependent upon the attainment of certain events. US sales of existing TNFa antagonists were about $1.5 billion in 2001, and the overall TNFa therapy market is predicted to increase to $4-5 billion in the US during the next few years. ¨ Humicade™ This humanised anti-TNFa antibody is being evaluated in two large Phase III studies in Crohn’s disease, which are now fully recruited. In one study, involving 273 patients who are dependent on steroids to control their disease, the ability of Humicade™ to enable the withdrawal of steroids is being assessed over 8 months. A parallel Phase III study, conducted in 397 patients over 7 months, aims to confirm the effectiveness of Humicade™ in the treatment of active Crohn’s disease. Results from both studies will become available in mid-2002, and are expected to lead to a submission of a US Biologics Licence Application, which is planned for late 2002. Celltech retains all rights for Humicade™. ¨ PDE4 Inhibitor Merck has entered into Phase II clinical development a phosphodiesterase 4 inhibitor arising from its collaborative programme with Celltech. It is being evaluated as a novel, oral treatment for both asthma and chronic obstructive pulmonary disease (COPD). The collaboration between Celltech and Merck allows for payment of up to £31.5 million in milestones (of which £15.5 million has been received by Celltech). Under the terms of the agreement, Celltech will receive royalties on worldwide product sales, and has an option to obtain a share of the profits instead, by means of a contribution to Phase III development costs and foregoing its remaining milestone entitlement. Worldwide sales for asthma treatments are about $4 billion, with a compound annual growth rate of 13%. Worldwide sales for COPD are about $1.6 billion, whilst current forecasts predict that the COPD market will exceed $4 billion by 2008. ¨ BMS 27529 Bristol-Myers Squibb is undertaking the development of this second generation selective metalloproteinase inhibitor, which continues to be evaluated in a large Phase II/III study in non-small cell lung cancer, in combination with Taxol® and Paraplatin®. Unlike other compounds in this class, BMS 275291 is well tolerated in patients at doses up to 1200mg/day. The product is also being assessed in earlier phase clinical studies in other cancer types. The partnership with Bristol-Myers Squibb provides for Celltech to receive substantial milestone payments, and significant royalties on worldwide sales. ¨ SCH 55700 This anti-interleukin 5 antibody, which represents a new approach to asthma treatment, is being assessed by Celltech’s collaborator Schering-Plough, in a large international Phase II study. ¨ CDP 860 The development of CDP 860, a PEGylated antibody fragment which binds to the platelet-derived growth factor beta receptor, is being refocused in cancer following the discontinuation of its development in coronary restenosis. It will be assessed in a Phase II clinical study in cancer, in combination with standard chemotherapy. This study is planned to begin during 2002. ¨ Early stage development In addition to its extensive late-stage development pipeline, Celltech and its partners are developing a number of early-stage programmes, which address large market opportunities. · Two new antibody fragment projects were entered into preclinical development in late 2001. CDP 484, which blocks the effects of the pro-inflammatory cytokine interleukin 1 beta, is being pursued as a new treatment for rheumatoid arthritis and other immunity-related and inflammatory disorders. CDP 791, which blocks a receptor involved in promoting new blood vessel formation in solid tumours, is being developed as a novel cytostatic agent for common cancers. · Wyeth is collaborating with Celltech on a further antibody-cytotoxic conjugate, CMC-544 using the technology platform developed for Mylotarg™. This programme is currently in preclinical testing and is expected to enter clinical development for non-Hodgkins lymphoma during 2002. · AAVCF, a cystic fibrosis gene replacement therapy, is being developed by Celltech in collaboration with Targeted Genetics. The product is currently being assessed in a Phase II study to determine if delivery of a functional copy of the gene leads to an improvement in lung function in these patients. · A novel and highly selective phosphodiesterase 4 (PDE4) inhibitor, is being evaluated in Phase I studies by Celltech’s partner, Schering-Plough, as a treatment for asthma and COPD.
Ø Celltech Pharmaceutical Operations Celltech’s pharmaceutical business, which has international sales, marketing and manufacturing operations, has undergone significant restructuring during the past two years to focus and reinforce its capabilities. This will enable Celltech to retain substantial incremental value in the mid-term from its innovative development pipeline, by marketing or co-marketing certain of its key pipeline products to specialist prescribing audiences. In particular, Celltech is currently making plans to establish specialist gastrointestinal-focused sales forces in order to market Humicade™ and CDP 870 in Crohn’s disease. Celltech’s European presence was substantially strengthened by the acquisition of Thiemann for £31 million in September 2001, providing Celltech with a high quality sales and marketing organisation in Germany, the largest EU market. Overall product sales, excluding royalties, increased by 10% to £241.7 million (2000: £220.0 million) at CER. Excluding the impact of the Thiemann acquisition in September 2001, product sales increased by 7% to £235.1 million. Sales of Major Products
* Proforma, at constant exchange rates
Product sales from US operations increased to £166.4 million (2000: £145.1 million at CER). This increase reflected strong performances from Tussionex and Zaroxolyn, as well as an initial contribution from Metadate® CD, and importantly marks an inflection point for US revenues, which had been declining for several years as a result of declining generic methylphenidate sales. Celltech’s valuable anti-tussive franchise is expected to be strengthened by the addition of a new 12-hour product, Codeprex™, which was filed for approval in May 2001. Following its launch in May 2001, Metadate® CD has made steady progress and had achieved a share of over 9% of the once-daily methylphenidate market by end-February 2002. The US ADHD market continues to be highly competitive, particularly in the light of recent and planned competitor launches, and Celltech is undertaking a number of Phase IV studies aimed at highlighting the competitive profile of Metadate® CD. Sales from European operations increased slightly to £75.4 million (2000: £74.9 million at CER). Excluding the acquisition of Thiemann in September 2001, European sales amounted to £68.8 million. As part of the CDP 870 development and marketing agreement with Pharmacia, Celltech gained rights to promote the Pharmacia products Arthrotec® in the UK and France, and Trankimazin in Spain. These co-promotion agreements will assist the growth of Celltech’s pharmaceutical businesses in these markets.
Ø Financial ResultsResults for the Year Ended 31st December 2001
*Comparative figures are proforma as reported in note 31 to the 2000 audited accounts The consolidated statutory financial results for the year ended 31st December 2000 reflect the combination of the Medeva business with Celltech from the effective date of the acquisition, 26th January 2000. In order to provide a clearer indication of the performance of the business, the table above shows the proforma figures for Celltech Group for the year ended 31st December 2000 including the results of Medeva for the period to 25th January 2000. The figures exclude the effect of divested activities and goodwill charges. The operating profit before other income increased by 34% to £25.4 million (2000: £18.9 million), notwithstanding a 24% increase in operating expenses arising from continued heavy investment in innovative research and development, the expansion of the US salesforce and launch activities around Metadate® CD. The operating profit after other income increased to £44.2 million (2000: £23.5 million). During 2001, a further restructuring exercise was undertaken, predominately within the US pharmaceutical business, completing the programme of integration following the mergers with Chiroscience and Medeva. The restructuring is expected to yield annualised savings in excess of £5 million, with a one-off charge of £7.8 million in 2001. These savings will be reinvested in the business. The tax charge for the year of £8.1 million represents a 17% effective rate on net profit before goodwill amortisation and restructuring items. Due to the availability of operating losses carried forward, it is expected that a tax rate of not more than 20% should be sustained for the next three years, based upon the current UK and US fiscal environments. Earnings per share for the year amounted to 14.4p (2000: 8.1p) before restructuring items and goodwill. Excluding other income, which can vary substantially each year depending upon the progress of Celltech’s collaborations, earnings per share amounted to 8.7p (proforma 2000: 6.6p). In line with normal practice amongst international biotechnology companies, no dividend is proposed for the year. Celltech’s financial position has been considerably strengthened during the year, with net cash inflow for the year of £14 million, notwithstanding investments of £50 million made during the second half in the acquisition of Thiemann (£31 million), licensing of SLAM technology from Abgenix (£12 million) and an investment in Neogenesis (£7 million). The year end cash position remains strong at £90.4 million (2000: £76.6 million) before a loan note due December 2003 of £34.5 million. The Group maintains an £80 million, 3 year revolving credit facility to retain flexibility in its future funding requirements. The Group does not envisage needing additional funding for normal operational requirements. Ø Board The Board has initiated a process to identify a successor to John Jackson as Chairman of the Board. A further statement will be made at the time of the AGM.
Notes to the Consolidated Cash Flow Statement
Notes to the Financial Statements
Statutory Accounts The information presented does not constitute statutory accounts, as defined in Section 240 of the Companies Act 1985, for the year ended 31 December 2001 or 2000, but is derived from those accounts. Statutory accounts for 2000 have been delivered to the Registrar of Companies, and those for 2001 will be delivered following the Company’s Annual General Meeting. The auditors have issued an unqualified opinion on the accounts for 2001 and 2000.
1. Other Income
The Pharmacia income relates to $25 million (£17.5 million) of the $50 million initial payment received from the company for the co-development and co-promotion of CDP870. The income recognised is in relation to the non-refundable, non creditable signature payment for the licence. The remainder of the upfront payment will be offset against CDP870 research and development expenditure incurred by the Group. Research and development expenditure in 2001 is shown net of £8.4 million funding, with the remaining £9.1 million held on the balance sheet as deferred income.
2. Restructuring
During 2001 the Group undertook a restructuring programme predominantly affecting the US business but also impacting the UK operations of the Group. In addition on 1 October 2001 the Group acquired effective control of Thiemann resulting in certain other integration costs.
On 26 January 2000 the Group acquired Medeva. The cost of restructuring the Medeva and Celltech businesses was £19.2 million.
As at 31 December £5.9 million still remained to be spent of the 2001 and 2000 restructuring amounts. The remaining provision is expected to be utilised within the next financial year.
3. Taxation
The effective rate is lower than the UK statutory rate principally due to the availability of brought forward losses.
The deferred tax credit on goodwill arises as a result of the adoption of FRS19 ‘Deferred Tax’ during the year. The standard requires that a full provision is recognised for deferred tax liabilities including those in respect of goodwill on which tax benefits are obtained. This has resulted in the group recognising an additional deferred tax liability on the acquisition of Medeva of £15.3 million, recorded as a prior year adjustment, of which £5 million has been taken as a credit in 2000 and £5.2 million has reversed in 2001.
A tax credit has not been taken on the restructuring costs due to the availability of tax losses.
4. Earnings per Share
5. Fixed Asset Investments
Investments include two five year convertible loan notes issued by PowderJect Pharmaceuticals plc, one for £25 million issued on 2 October 2000 and a second for £6 million issued on 30 March 2001. These were issued at par, pay interest half yearly at 4% per annum and have a yield to maturity of 7%. Interest is being accrued and credited in the profit and loss account at the 7% rate. The loan notes convert into PowderJect ordinary shares at a price of £7.19.
6. Equity investments
During the year the group disposed of 459,167 shares in Matrix Pharmaceutical Inc., 1,588,235 shares in Acambis Plc, 531,341 shares in Connetics Corporation and 490,392 shares in Targeted Genetics Corporation. The total proceeds were £11.5 million from these disposals. A net loss of £1.6 million has been recorded to goodwill as a result of the disposal of these former Medeva holdings and marking to market the remaining shareholding as at 31 December 2001.
7. Acquisition of Subsidiary Undertakings
The turnover and operating profits of the business, before restructuring and goodwill items, consolidated by the Group for the period since acquisition are £6.6 million and £1.0 million respectively.
8. Exchange Rates
The Group uses the average exchange rates prevailing during the period to translate the results of overseas subsidiary undertakings and the period-end rates to translate the net assets of those undertakings. The currency which most influences the Group’s results is the US dollar and the relevant exchange rates are as follows:
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