Sanochemia: Nine-Months-Report 2007 published

(1.10.2006 – 30.6.2007)

- Forecast increase in sales revenues of 5%
- Marked improvement in operating performance
- All business segments with positive EBIT
- Prioritisation of R&D projects


(Vienna, 24. 8. 2007) Sanochemia Pharmazeutika AG, Vienna, quoted in the Prime Segment of the Frankfurt Stock Exchange (ISIN AT0000776307), today announced results for the first nine months of its 2006/2007 financial year (to 30 June).

In line with issued guidance, sales revenues increased across the board to reach €24.2m (PY: €23.0m) despite higher milestone receipts in the prior period. The considerably higher operating performance of €29.6m (PY: €26.3m) is in part attributable to the reversal of a prepayment for galantamine deliveries and to the capitalisation of development costs for tolperisone – the company’s most advanced drug candidate.*

Despite the higher milestone payment revenues in the earlier period and the rise in expenses associated with the integration of AlcaSynn, it was nonetheless possible to generate positive EBIT of €0.4m (PY: €2.0m) in line with forecasts. It is also notable that the development of new synthesis substances entailed a marked increase in costs of materials, which rose from €6.6m to €10.0m.

The additional costs incurred as a result of the acquisition of an interest in AlcaSynn are largely accountable for the significantly lower result (minus €3.5m as opposed to minus €2.0m in the prior period) reported in the non-operative Reconciliation segment.

A strong financial result of €1.5m (following minus €1.4m a year earlier) and taxes in the amount of €0.4m (PY: €0.3m) culminated in net profits of €1.5m (PY: €0.3m), equivalent to earnings per share of €0.14 (PY: €0.03).

Cash flow from operating activities changed only marginally to €5.6m (PY: €5.8m), while the equity ratio on the balance sheet date of 30 June 2007 had increased to 63.1% from 55.4% a year earlier. The drop in the value of cash and cash equivalents to €22.1m (PY: €23.8m) is attributable to the redemption of short-term borrowings.

The operative segments – HUMAN PHARMACEUTICALS and PRODUCTION – both received their respective targets while R&D failed to meet expectations. It was possible, however, for all segments to make a positive contribution to group profitability.

OUTLOOK 2006/2007

The Board of Management is determined to forge ahead with its existing strategy, but aims to focus more attention on the company’s cost structures, particularly with regard to more efficient cost management in R&D. The targets in detail:
- Growth in sales revenues at a rate above that achieved by the global pharmaceutical market
(with more rapid growth in sales forecast for subsequent years)
- A clear focus on positive EBIT (especially with regard to R&D expenses and those of AlcaSynn in particular)
- Sustainable improvements on the bottom-line.

The complete Nine-Month Report including the segment reporting will be available from 27 August 2007 either on request from the company or via the website at www.sanochemia.at.


NEWS ON KEY DEVELOPMENT PROJECTS

GALANTAMINE – NEW ADMINISTRATION OPTIONS


The first-time publication of data by the University of Maryland, Baltimore, on a previously unconsidered administration of galantamine throws open the possibility of entering completely new markets and indications. The scientists at UMB demonstrated a potential role of galantamine in the treatment of nerve gas poisoning both for military and civil defence purposes. The university’s Institute of Pharmacology has already established Proof of Concept in an animal model.

- Through its subsidiary Sanochemia Corporation, USA (Westport, NJ), Sanochemia holds a 37.8% interest in the US-based company Countervail Corp. Countervail is a private sector enterprise that was established to develop forms of protection from chemical and biological weapons for both military and civil defence purposes. The company has acquired exclusive worldwide licenses and patent rights from the University of Maryland, Baltimore, to develop, use and market galantamine in the treatment of cases of nerve gas poisoning.

- Alongside the other shareholders (including Northstar Corp., Invesa Corp., and the University of Maryland), Sanochemia will pursue the development of the substance in this indication drawing on its pharmaceutical experience and facilities in Neufeld, Austria, to undertake the necessary analytical development and the synthesis of galantamine for the antidote.

TOLPERISONE – GERMAN LAUNCH AND NEW STUDIES

- As previously announced*, Orion Pharma is on track to launch tolperisone in Germany during the second half of the calendar year. The production of tablets for pipeline filling has already begun, with consignments expected to be ready for delivery in September.

- In late autumn, the drug will enter the Mutual Recognition Procedure (MRP), the precursor to Europe-wide marketing authorisation. The company forecasts the first launches of Sanochemia’s proprietary tolperisone formulation as early as 2008, with other markets assumed to follow in subsequent years. Sanochemia is currently holding out-licensing discussions with regard to other partnerships and cooperations.

New studies in Avigen’s US development programme for tolperisone
… represent a key milestone in the creation of the preconditions for marketing authorisation to launch tolperisone in the USA (see Corporate News dated 23 August 2007).

PVP-HYPERICIN – in the diagnosis of bladder cancer: development work is progressing on schedule.

TOPICAL GALANTAMINE (liposomal) – in the treatment of chronic neutral pain (polyneuropathy): a Phase IIa clinical trial has been successfully completed.

The above projects involve innovative drug substances in the company’s development pipeline and both are being accorded high priority.

PRIORITISATION OF R&D PROJECTS

There is now a clear focus on rapidly advancing these key projects towards market maturity. The aim is to maximise value added through a combination of licensing revenues, milestone payments and manufacturing and marketing activities. In the course of its on-going re-assessment of its portfolio, Sanochemia will also undertake steps to increase the efficiency of its R&D effort. The primary goal is to achieve a streamlining of current projects to yield improvements in terms of throughput and costs.

- New substance patent for tolperisone

Due to the new priorities assigned to the leading R&D projects, the decision has been taken to discontinue the development of a controlled release formulation of tolperisone due to severe physiological problems. During the company’s efforts to address this issue it managed to synthesise a high-purity form of the substance and has subsequently filed for patent protection of this API.

- All analgesic substances to be out-licensed

An immediate assessment and evaluation of the company’s morphinane derivatives is to be carried out to determine their actual market potential. Assuming positive results, Sanochemia plans to out-license these substances due to the fact that the highly complex development work required would stretch both the company’s capacity and resources. Sanochemia aims to retain the right to be the exclusive manufacturer of any APIs in order to generate licensing revenues, and may also elect to act as a co-marketing partner in selected markets.



For further information please contact:
Margarita Hoch
Investor Relations Tel.: + 43 / 1 / 3191456 - 335 Mobile: + 43 (0) 664 / 21 38 152
mailto: m.hoch(at)sanochemia.at
www.sanochemia.at

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