Serono has announced a mixed third quarter 2005 with product sales and total revenues weaker than predicted. Its net income beat market consensus but the company was hit by an $18.3 million (€15.2 million) one-off charge related to the transfer of the Serono Genetics Institute (SGI).
Europe's largest biotechnology company attributed an eleven per cent drop in profit after a $67 million payment from a partner wasn't repeated. Net income dropped to $142 million, or $9.77 a bearer share, from 2004's figure of $160 million, or $10.51. This included a charge of $18.3m for the transfer of the Serono Genetics Institute (SGI).
The Swiss biotech company, makers of Rebif, the drug used to treat multiple sclerosis and Serono's flagship product, generated $316 million, up 19.8 per cent in worldwide sales in the third quarter. Analysts were expecting $323 million.
Sales of multiple sclerosis drug Rebif, which accounts for about half of the company's sales, is being used by Serono to support growth until it can introduce new drugs.
Serono said it expects Rebif, which competes with Biogen Idec's Avonex, Schering's Betaseron and Teva Pharmaceutical Industries' Copaxone, to capture 30 per cent of the $2 billion US market by 2006.
The drug received a timely boost in February when Elan Corp. and Biogen Idec withdrew their Tysabri, the MS drug introduced in eight years. Tysabri was removed from the market after being linked to a rare nerve disease in two patients.
"We remain focused on maximising the potential of our marketed products," said Stuart Grant, chief financial officer at Serono.
"Our gross margin is best-in-class and we continue to seek sustained improvement in operating margin. Given our momentum, we are confident that we will reach the upper end of our adjusted net income guidance for the full year," he added.
Reported net income of $142.4 million was down 10.3 per cent and reported basic EPS of $9.77 per bearer share and $0.24 per ADS down 7 per cent including a charge of $18.3 million for the transfer of the Serono Genetics Institute (SGI).
Only last week, Serono announced that its US affiliates agreed to settle the government investigation involving commercial practices related to Serostim.
The company had taken a $725 million provision to cover the settlement and related costs of the investigation, which had been recorded as an exceptional charge in the company's earnings report for the first quarter of 2005.
"This settlement concludes a four-year investigation into commercial practices related to Serostim, and we are pleased to put the matter behind us," said Thomas Gunning, vice president and General Counsel of Serono US Operations.
Serono's therapeutic areas generally performed well under scrutiny. In the third quarter of 2005, total neurology sales increased by 18.4 per cent to $321.9m (Q3 2004: 271.8m).
Sales of GONAL-f decreased by 5.8 per cent, or 6.6 per cent in local currencies, to $125.6m (Q3 2004: $133.3m).
Saizen sales increased by 15.2 per cent (13.9 per cent in local currencies) to $50.8m (Q3 2004: $44.1m) in the third quarter, while Serostim sales were $17.8m (Q3 2004: $21.2m), consistent with the previous two quarters.
Sales of Raptiva, the first-to-market biological treatment for psoriasis in the European Union, reached $10.0m in the third quarter (Q3 2004: $1.0m). Raptiva was launched in France in the third quarter, has just been approved in Canada and will be fully rolled-out in Italy in the fourth quarter.