Pronova BioPharma ASA building a base for sustainable growth

February 18, 2011 14:59

Pronova BioPharma ASA announced fourth quarter revenues of NOK 388 million (NOK 538 million) and EBITDA of NOK 129 million (NOK 231 million). Full year revenues were NOK 1 644 million (NOK 1 790 million) and EBITDA was NOK 627 million (NOK 823 million). The performance reflected the impact of lower 2010 prices and inventory adjustments by Pronova BioPharma's US marketing partner, reports with reference to Pronova BioPharma.

Highlights for the quarter
Strong underlying market growth and continued roll out into new markets including Australia and Mexico
Continued growth in end-user demand offset by partner inventory adjustment in the USA and lower 2010 prices
Improved cost position after implementation of efficiency programme
Strong cash flow enables reduction of net debt
Next-generation omega-3 compound on track to enter clinical phase in Q2 2011

Omacor/Lovaza cemented its position as a blockbuster pharmaceutical product, led by strong demand in the US, Spanish, French and Korean markets. Total end-user demand rose 19 per cent to NOK 7.6 billion in the current eight largest markets. The company ensured its ability to continue to meet rising consumer demand for its pharmaceutical omega-3 drug with the manufacturing plant at Kalundborg, Denmark, coming fully on stream during the year.

The robust end-user demand was offset by a decision by Pronova BioPharma's US marketing partner GSK to bring inventory levels of Lovaza(TM) in line with end-user demand as well as lower partner prices in the USA . The impact of the US inventory adjustment is expected to continue during 2011 but will be partially offset by a sharp rise in US partner prices, which is expected to increase the overall revenue/shipment ratio to 1.10 - 1.20. The end-user market in volume terms is growing at an annual run-rate of 16 per cent in Pronova BioPharma's current eight largest markets.

Pronova BioPharma has taken significant steps during 2010 to diversify into new markets, including signing a new distribution agreement with Abbott Laboratories to market Omacor® in 69 countries around the world. Marketing approval was received in Australia in July and the company's strategy of accelerating roll out in high growth emerging markets was manifested by approvals in Mexico and Paraguay, with Mexico being the world's 14th largest market in value. During 2010, Pronova BioPharma launched and started shipment to Mexico, Paraguay and Australia. Roll out of Omacor® in other fast-growth markets including India, Taiwan, South Africa, Brazil and Venezuela is expected in the coming years, with marketing approvals pending in 27 countries including China and Turkey. In Japan, Phase II trials by Takeda are on track for completion in H2 2011.

Progress was also made on new lifecycle developments for Omacor®/Lovaza(TM) and the group's R&D efforts are expected to result in the first next-generation omega-3 derived pharmaceutical focused on the entire lipid profile entering clinical phase during H1 2011.

The company significantly strengthened its financial position during the year, with full-year cash generation from operations of NOK 484 million. Net debt was reduced by NOK 432 million in the 12 months to December 2010. The company will also benefit from an efficiency programme during the year aimed at reducing manufacturing costs by approximately NOK 50 million in full-year 2011.

Pronova BioPharma continued to act to strengthen and defend its IP position. In December 2009, patents were granted in Europe for the group's proprietary technology for the removal of environmental pollutants and cholesterol. Patents on the same technology were granted in the USA in March and May 2010. In addition, a patent covering pharmaceutical compositions with a low concentration of environmental pollutants was granted in the USA and later listed in the US Food and Drug Administration ("FDA") Orange Book in July 2010. Paragraph IV letters regarding this recently granted pharmaceutical composition patent were received from Par, Apotex and Teva during the year.

Pronova BioPharma will vigorously defend the intellectual property portfolio protecting Lovaza(TM) in the US market. It also remains confident that the quality and manufacturing capacity advantages that it has achieved through significant investment over recent years will provide important protection for the Lovaza(TM)/Omacor® brand. Some 18 months after patent expiry in most countries in Europe, no generic versions of Omacor® have been seen in the European market.

The board has decided not to propose payment of a dividend at this time, but will continue to review use of cash on an ongoing basis as the company maintains focus on creating value for shareholders over the longer term.

Chief Executive Officer Morten Jurs commented, "Pronova BioPharma is well positioned to achieve further growth in revenues and profit. Over the last decade, Pronova BioPharma has shaped the omega-3 industry by developing a differentiated market position within the lipid pharmaceutical industry. In 2011, we intend to continue to build a base for sustainable growth by defending our existing market position and participating in potential new structural solutions
to further strengthen our leadership in the industry domain that we have pioneered. With the benefits of the cost reduction programme implemented during 2010, we will continue to focus on strengthening our financial position whilst investing in broadening our portfolio, bringing new products into the clinic and continuing our expansion into new markets."

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