Well positioned to realise long term growth potential with doubled production capacity

 

Total revenues in the quarter increased to NOK 437.9 million (NOK 363.3 million), driven by increased production output and shipments. Sales in USD were recorded at an average exchange rate of NOK 6.07 per USD (NOK 5.70).

 

Gross margin was 74.4 per cent (75.7 per cent) for the quarter and 73.6 per cent (77.9 percent) YTD. The gross margin for the quarter was negatively impacted by the planned in-sourcing of intermediaries and by the increased cost of materials. This increase in cost was somewhat offset by increase in inventory of work in progress following the start of production in Kalundborg.

 

Following the growth in revenues, EBITDA for the third quarter increased by 15.8 per cent in the quarter and amounted to NOK 207.5 million (NOK 179.1 million) and NOK 592.6 million for the first nine months (NOK 451.8 million), representing an EBITDA margin of 47.4 per cent in the quarter (49.3 per cent) and 47.3 per cent YTD (48.1 per cent).

 

The group's operating profit for the quarter was in line with the same period last year. The increase was offset by increased depreciation in Denmark. Operating profit for the quarter amounted to NOK 135.4 million (NOK 136.3 million). The operating profit for the first nine months of 2009 increased by 34.2 per cent and amounted to NOK 433.6 million compared to NOK 323.1 million for the same period in 2008. The growth in operating profit in the
first nine months is a result of the growth in revenues and gross profit.

 

The capacity investment programme is now close to completed. The Kalundborg plant was GMP certified during the quarter, and with doubled capacity available, Pronova BioPharma will be able to meet the strong increase in demand, driven by continued growth in end-user sales. Pending regulatory approval from EU authorities, the group is well on track for the first commercial shipment from the plant in the first quarter of 2010.

 

A volume of 396 tonnes was produced in the quarter (321 tonnes), up 23.2 per cent year-over-year. The total volume shipped was 389 tonnes (342 tonnes), an increase of 13.8 per cent.

 

A letter of intent was signed in September for the VITAL study. Pending a final agreement, Pronova BioPharma will supply the trial with Omacor as study drug. The study is one of the largest primary prevention trials, studying the effect of Omega-3 FA / Vitamin D, in a population of 20 000 trial subjects (men >= 60 years, women >= 65 years) with no history of cancer or cardiovascular disease (CVD).

 

The ongoing litigation processes in the United States District Court for the District of Delaware are progressing according to the agreed schedule and the parties are preparing for the discovery phase. The scheduled trial date is set to 28 March 2011.

 

IBSA's application for marketing authorisation of a generic version of Seacor in Italy has been rejected by the Italian Pharmaceutical Agency (AIFA). IBSA has appealed AIFA's decision. In the nullity action against the Italian patent covering the company's API, a hearing was held 28 October 2009 in the District Court of Milan and the judge set the deadlines in early 2010 for the submission of the parties' final briefs and final replies. No generic entrants have been observed in the quarter post patent expiry in any of the European countries.

 

The Italian GISSI group is finalising the study report from the GISSI-HF study, including several sub-group analysis. One of the subgroup analysis that was presented at the ESC 2009 in Barcelona showed encouraging results where Omacor/ Seacor significantly reduced death or hospitalization for ventricular arrhythmias. The group will evaluate the full set of results from the GISSI-HF study and is expected to conclude in Q1 2010 on the further utilisation of the clinical data.

 

The group's R&D initiatives on several PRB candidates (next generation omega-3 derived pharmaceuticals) have increased during the quarter, preparing to advance into clinical Phase I during 2010. The fixed-dose combination product, consisting of 1 g of Pronova BioPharma's API and 20 mg simvastatin, has been tested in bioequivalence studies with encouraging results. The group's partner Sigma Tau (Defiante) has consulted regulatory agencies in Europe with positive feedback on the planned regulatory approach and expected launch of the product is in 2010/2011.

 

Some of the agreements between Pronova BioPharma and its licensing partners have price adjustment elements that are partly linked to the crude fish oil price, which has been subject to extraordinary fluctuations. As a consequence, 2010 sales price to some partners will be negatively impacted. The revenues per shipped volume (NOK million per tonne shipped) in 2010 is expected to be in the range 0.95-1.0. The negative impact will partly be offset by reduced material costs.

 

With the completion of the new plant in Kalundborg, the group is well positioned to meet the increasingly strong growth in end-user demand. The additional capacity available from the beginning of 2010 enables Pronova BioPharma to further strengthen its focus on increasing market potential for its lead product, such as continued growth in existing markets, successful launches in new markets, and the development of new indications, new formulations and new products.

 

The increase in production, supported by the in-sourcing of intermediate products, gives the group confidence that the full year production target for 2009 of 1 550-1 600 tonnes will be met. With commercial production starting in Kalundborg late in the third quarter and the first commercial shipments expected in Q1 2010, the group expects to build a finished goods inventory level of approximately 80-100 tonnes by the end of 2009. Expected demand
in 2010 is estimated to be approximately 1 800 -2 000 tonnes, depending on potential generic competition in the European market in 2010 and the developments in end-user sales.

 

The complete third quarter report is available at www.newsweb.no and at www.pronova.com.

The company will present the results today at 08:30AM CET/07:30 GMT. The presentation, will be webcasted live and can be accessed at www.pronova.com.  (Internet explorer web browser needed). Web cast attendants may send questions electronically during the session.

 

Hilde H. Steineger, Vice president IR and communications +47 48 00 42 40
Synne Røine, CFO +47 22 53 49 10