Sanochemia: Final results for 2006/2007 fiscal year

Sanochemia: Final results for 2006/2007 fiscal year Sales revenues increase by 6% in core segments – one-off impairment charge impacts EBIT – operational cash flow doubles – well positioned for future periods due to new products

SANOCHEMIA Pharmazeutika AG, Vienna, listed in the Prime Segment of the Frankfurt Stock Exchange, today announces its final results for the 2006/2007 financial year (to 30 September):

The financial period closed with sales revenues of € 29.6m, down from € 30.3m a year earlier, due to lower milestone payments. The operating result of € 37.4m (prior year: € 36.0m) is in part accounted for by a rise in the value of inventories. The main revenue drivers remain synthetic active pharmaceutical ingredients (APIs) and Scanlux®, the strongest selling product from the Human Pharmaceuticals Division’s range of x-ray imaging agents. These two core segments achieved top line year-on-year growth of around 6%, with both reporting positive contributions to consolidated results. The Human Pharmaceuticals Division boosted EBIT by 56%. The Research & Development Division, however, reported lower licensing revenues and higher costs following a one-off impairment charge against the investment in AlcaSynn and a marked increase in the development costs of projects associated with this interest.

Consequently, EBITDA (earnings before interest, tax, depreciation and amortisation) was negative at € -1.8m (prior year: € +6.0m) and, in response to the additional write down of shares in AlcaSynn, accounted for the low forecast EBIT of € -5.5m following € +2.2m a year earlier.

The unscheduled write down of the AlcaSynn investment in the current financial year was necessary as it had not been possible to place these shares in a Life Science Fund as originally planned. As a result, it was no longer possible to recognise the shares as assets held for sale (under IFRS 5), whereupon the write down of this investment became unavoidable. The bottom line was also marred by a marked increase in severance payments following the departure of senior management figures during the period.

The lower financial result of € 0.5m (prior year: € 1.5m), following the change in the Group’s investment strategy, was in line with variations seen in previous periods and led to a pre-tax result of € -5.0m (prior year: € +3.7m). In order to reduce the volatility of the financial result, the Group has revised its investment strategy to focus more on funds with capital guarantees and fixed rates of return and bonus agreements. The remaining forex positions should be closed out in the course of the 2007/2008 financial period, after which returns are expected to be lower but more predictable. Taxes on income in the amount of T€ 2 (PY: € 0.8m) had little impact on the result for the period which amounted to € -5.0m (PY: € +3.0m), equivalent to € -0.44 per share (PY: € 0.29).

The operational cash flow improved significantly from € 3.8m to € 8.4m, which was largely attributable to the change in receivables and other assets and a further reduction in receivables from foreign exchange options (of € 3.1m). A role was also played here by a greater emphasis on debt management and a reduction in accounts payable (€ 5.5m). The negative cash flow from investment activity increased to € 7.7m due to higher investments in tangible and intangible assets (PY: € -1.8m). The cash flow from financing activities in the amount of € 2.1m was only marginally lower than that of the earlier period (€ 2.3m). The equity ratio also remained largely unchanged at 59.2% on 30 September 2007 following 59.8% a year earlier. The balance of cash and cash equivalents stood € 2.9m higher at the close of the period at € 24.3m (PY: € 21.4m).

OUTLOOK – growth through internationalisation

Well positioned for the near future due to new products

The Human Pharmaceuticals Division is expected to generate rising sales revenues and earnings following the expansion of its new diagnostics and therapeutics sales activities. The launch of SANOCHEMIA’s tolperisone formulation in Germany – marketed under the Orion brand name Viveo®, is reported to have gone extremely well and our marketing and sales partner expects this product to rapidly penetrate the market. Actual sales volumes are twice as high as originally forecast. The magnetic resonance diagnostic MR-Lux®, developed by SANOCHEMIA to complete its radiological portfolio, has made this product range more attractive and increased its competitiveness. Sales of Secrelux®, a pancreas function diagnostic, are rising constantly in the UK and Germany, while preparations for marketing authorisations throughout the EU are on-going.

The Production Division is expected to see steady improvements in terms of capacity utilisation as production of the API tolperisone gathers pace. This new product will also help to eliminate much of the volatility in revenue terms experienced by this division due to the irregular timing of orders. Considerable work has also gone into modernising the Neufeld plant in order to install the equipment and obtain the certifications necessary to be able to increase the number of products that can be produced in-house. This work will open up new opportunities for profitable, organic growth in the mid-term.

Development focussed on products approaching the market

Following its strategic realignment of the Research and Development Division’s activities, SANOCHEMIA will in future concentrate more on projects that are nearer the market and commercially more lucrative. The focus of the R&D effort in 2008 will continue to be on tolperisone and registrations in other European markets. SANOCHEMIA produces a highly pure form of tolperisone which is markedly different from other tolperisone formulations currently available. Having filed for a substance patent for this innovative formulation, SANOCHEMIA expects to receive extended patent protection and comprehensive product exclusively in due course.

Pipeline projects with long-term perspectives will no longer be pursued with the same intensity as previously, or, for strategic reasons, will only be developed for specific indications, such as opiates in pain management, in cooperation with suitable development partners. Future R&D budgets will reflect these new priorities and will entail expenditure of around 15% of annual sales revenues.

Q1 2007/2008 is forecast to bring lower sales revenues than in the corresponding period of the past financial year, one in which synthesis revenues were unusually high. Given that synthesis products tend to yield high margins, the result in terms of EBIT is expected to be weak, something that the rise in tolperisone production will not be able to fully compensate.

In the 2007/2008 financial period, SANOCHEMIA expects to see a continuation of its recent sales revenue growth. The re-evaluation of AlcaSynn’s projects and cost-savings through the optimisation of processes are expected to lead to an overall improvement in the financial situation.

The development of the operating result in the 2007/2008 period cannot yet be forecast accurately given the fact that the effects of the steps taken and the cost-cutting programme initiated, not to mention the possibility of further licensing incomes, remain unclear.

The audited annual results including the segment report for the past financial year are to be published on schedule today, 29 January 2008, and can be downloaded from the SANOCHEMIA website. Details of forthcoming financial events can also be found online at or may be requested from the Company.

SANOCHEMIA Pharmazeutika will be holding an annual results press conference (in German) for analysts and investors at 10:00 today, 29 January 2008.

For further information, please contact:

Margarita Hoch

Investor Relations Tel.: + 43 / 1 / 3191456 - 335 Mobile: + 43 (0) 664 / 21 38 152


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