May 2, 2001 10:36am
By Ben Hirschler and Michael Shields
LONDON/ZURICH, May 2 (Reuters) - Serono SA, Europe's biggest biotechnology group, reported a 37.2 percent jump in first-quarter net profits on Wednesday, driven by sales of multiple sclerosis drug Rebif.
The Swiss-based company fuelled hopes that the flagship product could secure an early foothold in the key U.S. marketplace by revealing interim results of head-to-head trials versus Biogen Inc's rival Avonex drug would be released on May 8.
Net profits of $72.0 million and a 13.5 percent rise in sales in local currencies to $294.4 million were broadly in line with expectations but the shares were lifted by the Rebif trials news.
"The fact that they are going to report interim analysis will lead to some supposition that the data might be more likely to be positive than negative," said Steve McGarry, biotech analyst at Goldman Sachs in London.
The company previously said data would be released in the third quarter. However, Nigel Barnes of Merrill Lynch said the earlier-than-expected release of data did not necessarily mean there would be an earlier submission to U.S. regulators.
The showdown with Avonex is vital to Serono. If Serono fails to prove Rebif's superiority it will have to wait until Avonex's "orphan drug" exclusivity runs out in 2003 before it can launch in the United States. A positive result could allow Rebif to go on sale in June or July next year.
Serono said it did not yet know whether the trial outcome would be positive but said it planned a conference call on the trial results on May 8, encouraging hopes of a good result.
"We are hoping the data proves positive and we are hoping the Food and Drug Administration will look favourably on it," said Andrew Galazka, Senior Vice President Scientific Affairs and Investor Relations.
The stock, which see-sawed earlier in the session, stood 6.9 percent higher at a four-month high of 1,529 Swiss francs by 1420 GMT.
Michael Fischer, director of Munich-based Medical Strategy, which advises health care fund managers, said the head-to-head trial would determine the near-term direction of Serono shares, although he was not recommending investors buy immediately.
"If they show superiority for Rebif, this would be a clear 'buy' signal for Serono," he said.
The company, which also makes hormone treatments for infertility and AIDS-related weight loss, reiterated its expectations for strong full-year growth.
"We are very confident we are on track. We think we will reach between 15 and 20 percent growth in sales in local currencies and earnings growth of 20-25 percent," Chief Financial Officer Jacques Theurillat told Reuters.
He predicted gross margins for the full year would average 82-83 percent, against 80.8 in the first quarter and 80 in 2000.
Serono has profited from widening margins as it shifts to producing hormone drugs by recombinant DNA technology rather than using urine extraction.
Rebif sales jumped 71.3 percent to $83.0 million in the first three months of the year as its market share outside the U.S. widened to 31 percent.
Sales of fertility drug Gonal-F rose 15.1 percent to $101 million while a new needle-free delivery system helped turnover of growth hormone Saizen rise 18.3 percent to $22.7 million.
But AIDS-wasting treatment Serostim slipped to $29.5 million from $33.3 million following reimbursement problems in some U.S. states, which the company said had now been resolved.
Theurillat said Rebif should show annual growth of 30-40 percent in 2001 and Gonal-F would increase sales by 10-15 percent, while Serostim would be flat.
He added that Serono would look at joint ventures, product licensing and bolt-on acquisitions to strengthen its portfolio.
Royalty and licensing
income went up 21.1 percent to $26.9 million, while net financial income
more than doubled to $16.5 million, primarily due to interest on proceeds
from the company's global share offering last year. ^ REUTERS@
1999 Reuters Limited.