SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13A-16 OR 15D-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
For the month of February, 2003
Serono S.A.
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(Registrant's Name)
15 bis, Chemin des Mines
Case Postale 54
CH-1211 Geneva 20
Switzerland
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(Address of Principal Executive Offices)
1-15096
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(Commission File No.)
(Indicate by check mark whether the registrant files or will file annual
reports under cover of Form 20-F or Form 40-F.)
Form 20-F X Form 40-F
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(Indicate by check mark if the registrant is submitting the Form 6-K in
paper as permitted by Regulation S-T Rule 101 (b)(1).)
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(Indicate by check mark if the registrant is submitting the Form 6-K in
paper as permitted by Regulation S-T Rule 101 (b)(7).)
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(Indicate by check mark whether the registrant by furnishing the
information contained in this form is also thereby furnishing the information to
the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.)
Yes No X
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(If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b): 82- )
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[GRAPHIC OMITTED]
SERONO
Media Release
FOR IMMEDIATE RELEASE
---------------------
SERONO 2002 REVENUES BREAK THROUGH THE $1.5 BILLION MARK
PRODUCT SALES UP 13.9% TO $1.42 BILLION
- STRONG FOURTH QUARTER WITH REVENUES UP 20.9% TO $442M
AND EXCELLENT PERFORMANCE OF REBIF IN US AND EUROPE -
GENEVA, SWITZERLAND, FEBRUARY 3, 2003 - Serono S.A. (virt-x: SEO and NYSE: SRA),
the third largest biotechnology company in the world, today reported its fourth
quarter and full year results for the period ended December 31, 2002.
KEY POINTS FOR FULL YEAR 2002
- Total revenues up 12.4% to $1,546.5m
- Product sales up 13.9% to $1,423.1m, with Neurology sales up 44.6% to
$548.8m and Reproductive Health franchise growing 8.3% to $621.9m
- Reported net income up 1.3% to $320.8m and up 14.6% to $333.8m on a
like-for-like* basis, reflecting final stage of phase-out of urine-derived
products
- Net cash flows from operating activities up 31.4% to $532.0m
- Reported EPS of $20.07 per bearer share and $0.50 per ADS and
like-for-like* EPS of $20.88 per bearer share and $0.52 per ADS. Proposed
dividend of CHF7.00 per bearer share and of CHF0.175 per ADS**
- Two in-licensing agreements signed in fourth quarter - Novantrone(R), a
marketed product in the US, from Amgen and cladribine from IVAX
- 2003 outlook is growth of 15% to 20% in total revenues and net income
growth of 15% to 20% on a reported basis
"2002 was a very successful year for our company. We broke through the $1.5
billion revenue mark and achieved sales growth of 13.9%," said Ernesto
Bertarelli, Chief Executive Officer of Serono. "I am particularly pleased with
the excellent performance of Rebif in the US, and the significant investments we
have made, which position us very well for future growth."
* Excluding a $16.3m restructuring charge, related primarily to the closure of
production facilities for urine-derived reproductive hormones, taken in the
fourth quarter of 2002, and exceptional licensing payments of $27.6m and $0.6m
received from a third party in 2001 and 2002 respectively from the divestiture
of a product which was non-core to Serono's business - see attached income
statements
** i.e. $0.13 based on an exchange rate of $1=CHF1.3578, as of January 31, 2003.
The actual dividend will be based on the exchange rate in effect on the date the
dividend is converted into $ by the depositary for the ADS
-more-
"Our excellent cash flow has led to a further strengthening of our balance sheet
during the past year," said Allan Shaw, Chief Financial Officer. "This provides
us with the financial flexibility to continue investing in opportunities to grow
our business."
FOURTH QUARTER AND FULL YEAR FINANCIAL PERFORMANCE
Total revenues increased by 12.4% to $1,546.5m in the full year 2002, and by
20.9% to $442.1m in the fourth quarter (2001: $365.6m).
Worldwide product sales were $1,423.1m in 2002, up 13.9% (2001: $1,249.4m), and
up 21.0% to $409.4m in the fourth quarter (2001: $338.4m).
Royalty and licensing income was $123.4m in 2002 (2001: $127.1m which included
exceptional payments of $27.6m from a third party related to the divestiture of
a product which was non-core to Serono's business). It was up 20.1% to $32.7m
(2001: $27.2m) in the fourth quarter. This increase largely reflects the
licensing income related to the co-promotion with Pfizer of Rebif(R) in the US.
The gross margin has increased to 84.3% of product sales in 2002 (2001: 82.9%),
as a result of the continued increase in the proportion of biotechnology
products among our total sales as well as further manufacturing improvements
leading to higher production yields. In the fourth quarter of 2002 recombinant
products accounted for 87.9% of product sales (Q4 2001: 82.1%).
Selling, General and Administrative expenses were $512.9m or 33.2% of total
revenues in 2002 (2001: $446.9m or 32.5% of total revenues), and 33.7% of
revenues at $148.9m in the fourth quarter (2001: $126.7m or 34.7% of revenues).
Research and Development expenses were $358.1m or 23.2% of total revenues (2001:
$308.6m or 22.4% of total revenues) in the full year, and $95.4m or 21.6% of
total revenues in the fourth quarter (2001: $80.0m or 21.9% of total revenues).
In order to proceed with the final stage of closure of its production facilities
for urine-derived reproductive hormone products in Italy, Serono decided to take
a restructuring charge of $16.3m in the fourth quarter. This business decision
reflects Serono's strategic emphasis on high quality human proteins produced
through recombinant technology for the treatment of infertility. We expect this
final phase-out to have a positive impact on gross margin and a neutral effect
on sales growth of reproductive health products over the next two to three
years.
Other operating expenses in 2002 were $85.8m (2001: $70.2m). In the fourth
quarter, the increase in other operating expenses to $27.7m (2001: $18.8m)
reflects increased royalties to third parties related to Serono's product sales,
as well as the amortisation of goodwill associated with the acquisition of
Genset.
-more-
Full year 2002 operating income increased by 3.5% to $349.6m or 22.6% of
revenues (2001: $337.7m or 24.5% of revenues), and was $88.6m in the fourth
quarter or 20.0% of total revenues (2001: $88.1m or 24.1% of total revenues).
Net financial income was $36.5m in 2002 (2001: $51.4m) reflecting the low
interest rates in the past year, and was $9.2m in the fourth quarter (2001:
$2.9m).
Total taxes in 2002 were $63.1m, representing an overall tax rate of 16.4% of
profit before tax (2001: $69.8m, or 18.1% of profit before tax). In the fourth
quarter, taxes were $15.8m, or 16.2% of profit before tax.
Net income in the full year 2002 was up 1.3% to $320.8m (2001: $316.7m). On a
like-for-like* basis net income in 2002 rose by 14.6% to $333.8m, or 21.6% of
total revenues. In the fourth quarter, reported net income grew 6.3% to $81.6m
or 18.5% of total revenues (2001: $76.7m or 21.0% of total revenues).
Despite the large fluctuation of the US dollar versus European currencies during
the year, the broad geographic nature of our international operations provided a
natural hedge to the company's currency exposures in 2002. The negative impact
of translation of currency on our operating results was $2.9m, or less than a 1%
effect on reported net income.
Basic earnings per share (EPS) were $20.07 per bearer share (2001: $19.72) and
$0.50 per American Depositary Share (ADS) (2001: $0.49). On a like-for-like*
basis EPS were $20.88 per bearer share (2001: $18.14) and $0.52 per American
Depositary Share (ADS) (2001: $0.45).
On May 6, 2003, the Board of Directors will propose to the Annual General
Meeting a cash dividend of CHF7.0 per bearer share (2001: CHF 6.25) or CHF0.175
per ADS**, representing a payout ratio of 25.7% (2001: 18.8%) at current
exchange rates.
For the full year ended 2002, net cash flow from operating activities was
$532.0m, up 31.4% compared to $405.0m for 2001.
On July 15 Serono announced a share buy back program for the repurchase of
bearer shares up to a value of CHF 500m over a three-year period. At the year
end, 226,507 shares had been purchased on the open market, representing 34.6% of
the authorised amount.
As of December 31, 2002, there were 15.851 million outstanding equivalent bearer
shares. 5.5% of bearer shares were in the form of American Depositary Shares
(24.957 million ADS outstanding) representing 3.9% of Serono's market
capitalization.
* Excluding a $16.3m restructuring charge, related primarily to the closure of
production facilities for urine-derived reproductive hormones, taken in the
fourth quarter of 2002, and exceptional licensing payments of $27.6m and $0.6m
received from a third party in 2001 and 2002 respectively from the divestiture
of a product which was non-core to Serono's business - see attached income
statements
** i.e. $0.13 based on an exchange rate of $1=CHF1.3578, as of January 31, 2003.
The actual dividend will be based on the exchange rate in effect on the date the
dividend is converted into $ by the depositary for the ADS
-more-
NEUROLOGY - REBIF(R) BECOMES TOP-SELLING PRODUCT IN 2002
Full year sales of Rebif(R) (interferon beta 1-a) in multiple sclerosis were up
44.6% to $548.8m (2001: $379.6m) making it the Company's top selling product in
2002. In the fourth quarter, worldwide sales of Rebif(R) in MS increased by
55.3% to $171.5m (2001: $110.5m).
Building on the excellent US launch of Rebif(R) in March 2002, Serono
successfully started the co-promotion with Pfizer and initiated a direct to
consumer marketing campaign. Sales in the US were $34.7m in the fourth quarter
and $71.2m for the full year. At the end of the fourth quarter, over 13,000
patients were being treated with Rebif(R) in the US and our estimated dollar
market share was 8.5%.
Rebif(R) continues its market leadership outside the US with 2002 sales
increasing by 25.8% to $477.6m in the rest of the world (2001: $379.6m), within
which European sales increased by 29.9% to $314.1m (2001: $241.9m). In the
fourth quarter of 2002 Rebif(R) sales in Europe were $91.9m, an increase of
28.8%.
In November 2002, the 12-month data from the EVIDENCE study was published in the
peer-reviewed journal Neurology. This data had been instrumental in overcoming
the Orphan Drug status of Avonex(R), currently the market leading product for
multiple sclerosis in the US. Publication of this data allows it to be more
effectively disseminated in the neurological community worldwide.
In the fourth quarter of 2002 Serono successfully concluded its licensing
agreement with Amgen for the marketed product Novantrone(R) in the US.
Novantrone(R), for worsening forms of MS is complementary to Rebif(R) and makes
Serono the only MS company to offer a portfolio of products to neurologists and
patients. This is consistent with our strategy of building the leading MS
portfolio.
REPRODUCTIVE HEALTH - COMPLETE RECOMBINANT PORTFOLIO DELIVERING RESULTS
In 2002, worldwide reproductive health sales grew 8.3%, which is faster than the
overall reproductive health market, to $621.9m (2001: $574.3m) and by 7.1% to
$165.8m in the fourth quarter (2001: $154.8m). Sales of Gonal-F(R) (recombinant
human FSH) increased by 9.7% to $450.4m (2001: $410.5m) in the full year and by
10.6% to $121.3m (2001: $109.7m) in the fourth quarter.
Given the demonstrated benefits of recombinant products in infertility, Serono's
strategy for some time now has been to replace old-generation urine-derived
products as the recombinant products are registered and become available around
the world. Recombinant human DNA technology is a superior method for providing
human proteins for therapeutic use as it enables the production of consistent
and extremely pure proteins in guaranteed quantities. In accordance with our
strategy, the Company is now proceeding with the final closure of its production
facilities for urine-derived products. During the phase-out period,
urine-derived products will remain available on a country by country basis, and
we expect substantial sales from existing inventory. At the end of 2002
recombinant products accounted for more than 89.9% of Serono's combined
gonadotropin sales in the US and Europe.
-more-
METABOLIC ENDOCRINOLOGY
Saizen(R) sales increased by 15.6% to $124.0m (2001: $107.3m) in 2002, and were
up 24.8% to $36.0m (2001: $28.9m) during the fourth quarter.
Serostim(R) sales reached $95.1m in the full year (2001: $125.3m), and were
$26.5m (2001: $27.0m) in the fourth quarter.
In October 2002, Serono announced the implementation of the new Serostim(R)
Secured Distribution Program in the US. This is designed to track and manage
Serostim(R) through the distribution process, and ensure that patients who
require Serostim(R) receive genuine products on a timely basis.
REGIONAL SALES
North American sales grew by 22.8% to $479.6m in 2002 (2001: $390.6m). European
sales increased by 14.4% to $620.4m (2001: $542.2m). Sales in the Middle East,
Africa and Eastern Europe were up 28.0% to $107.6m (2001: $84.1m), and up 22.8%
in Oceania to $21.9m (2001: $17.9m). Sales in Asia Pacific were up 1.4% to
$55.2m (2001: $54.4m) and were steady at $29.2m in Japan (2001: $29.3m).
Economic conditions in Latin America led to lower full year sales of $109.2m
(2001: $130.9m).
SIGNIFICANT ADDITIONS TO DEVELOPMENT PIPELINE THROUGH LICENSING ACTIVITIES
2002 was a year of significant progress in the area of business development with
the achievement of agreements with leading biotechnology partners for late-stage
and marketed products. Through these agreements Serono has augmented its
position in existing therapeutic areas and accelerated its entry into the
important new area of psoriasis. Although associated with some earnings
dilution in the short-term these agreements are expected to be catalysts for
growth in the medium to long term. The key agreements concluded were:
- In November 2002 Amgen licensed to Serono the rights to commercialize
Novantrone(R) (mitoxantrone) in the US.
- In August 2002 Genentech licensed to Serono the rights to develop and
market Raptiva(TM) (efalizumab) for psoriasis worldwide, except for
the US, Japan and certain Asian countries. This agreement also covers
co-development of Raptiva(TM) for additional indications, including
rheumatoid arthritis, which is currently in Phase 2.
In addition
- In July 2002 AstraZeneca licensed to Serono the rights to develop and
market the aromatase inhibitor, anastrozole, in female infertility.
- In October 2002 IVAX and Serono agreed to develop and market
cladribine, a potential oral therapy for MS.
-more-
R&D NEWS
In 2002, Serono successfully acquired Genset, creating a unique genetics and
genomics discovery platform. The integration of Genset is now completed.
During last year, the following projects have moved into or through the R&D
pipeline:
- Following the positive outcome of a Phase 2 clinical trial for
onercept (r-TBP-1) in psoriasis and psoriatic arthritis, a Phase 3
study is planned to start in the second half of this year.
- Raptiva(TM), in-licensed from Genentech, will be filed in Europe for
moderate to severe psoriasis during the first quarter 2003 and is
currently in Phase 2 in rheumatoid arthritis.
- Following the positive outcome of a Phase 3 clinical trial of
Serostim(R) in short bowel syndrome, a regulatory submission has been
made to FDA in the fourth quarter of 2002. Results from this study
were also presented at the Nutrition Week meeting in San Antonio,
Texas, on January 21, 2003.
- Phase 1 studies of r-IL-18 binding protein are now completed, and
further studies in patients with psoriasis and rheumatoid arthritis
are planned to start in 2003.
- A large Phase 2 study of anastrozole for ovulation induction will
start in the US in the first quarter of this year.
- The positive outcome of a Phase 2/3 clinical trial of Serostim(R) in
HARS (HIV-associated adipose redistribution syndrome) was announced.
- A Phase 3 trial of r-IFN-beta 1a in Asian patients with chronic
hepatitis C was initiated.
- PEG-GHRF (pegylated growth hormone releasing factor), which has the
potential to treat disorders related to growth hormone deficiency, has
recently moved to Phase 1 studies.
- Phase 1 trials of an oral formulation of cladribine, being developed
by Serono and IVAX, are planned for 2003.
- A Phase 2 study of r-hLIF for the treatment of embryo implantation
failure will be initiated in early 2003.
- Based on preclinical work in diabetic neuropathy, r-IL-6 (atexakin
alfa) is moving into Phase 2.
OUTLOOK FOR THE FULL YEAR 2003
Given the strong outlook for Rebif(R), the performance of Reproductive Health,
and taking into account the business developments of 2002, Serono expects US
dollar growth in 2003 of 15% to 20% in total revenues and US dollar net income
growth of 15% to 20% on a reported basis.
-more-
CONFERENCE CALL AND WEBCAST
Serono will hold a conference call today, February 3, 2003, starting at 3.00 pm
Central European Time (09.00 am Eastern Time) during which Serono Management
will present the Company's Fourth Quarter and Full Year 2002 Results. To join
the telephone conference please dial 091 610 5600 (from Switzerland), 0207 866
4111 (from the UK), 412 858 4600 (from the US) and +41 91 610 5600 (from
elsewhere). Telephone playback will be available one hour after the conference
call and until close of business 5.00 pm CET on February 5, 2003. To access
this playback please dial the following numbers: 091 612 4330 (from
Switzerland), 0207 866 4300 (from the UK), 412 858 1440 (from the US) and +41 91
612 4330 (from elsewhere) and enter the PIN code 247# from a touch tone
telephone.
The event will also be relayed by live audio webcast which interested parties
may access via Serono's Corporate home page, www.serono.com. A link to the
webcast will be provided immediately prior to the event. Additionally, the
webcast will be available for replay until close of business on February 18,
2003.
###
Some of the statements in this press release are forward looking. Such
statements are inherently subject to known and unknown risks, uncertainties and
other factors that may cause actual results, performance or achievements of
Serono S.A. and affiliates to be materially different from those expected or
anticipated in the forward-looking statements. Forward-looking statements are
based on Serono's current expectations and assumptions, which may be affected by
a number of factors, including those discussed in this press release and more
fully described in Serono's Annual Report on Form 20-F filed with the U.S.
Securities and Exchange Commission on May 21, 2002. These factors include any
failure or delay in Serono's ability to develop new products, any failure to
receive anticipated regulatory approvals, any problems in commercializing
current products as a result of competition or other factors, our ability to
obtain reimbursement coverage for our products, and government regulations
limiting our ability to sell our products. Serono has no responsibility to
update the forward-looking statements contained in this press release to reflect
events or circumstances occurring after the date of this press release.
###
ABOUT SERONO
Serono is a global biotechnology leader. The Company has six recombinant
products on the market, Gonal-F(R), Luveris(R), Ovidrel(R)/Ovitrelle(R),
Rebif(R), Serostim(R) and Saizen(R) (Luveris(R) is not approved in the USA). In
addition to being the world leader in reproductive health, Serono has strong
market positions in neurology, metabolism and growth. The Company's research
programs are focused on growing these businesses and on establishing new
therapeutic areas. Currently, there are over 30 projects in development.
In 2002, Serono achieved worldwide revenues of US$1.546 billion, and a net
income of US$321 million, making it the third largest biotech company in the
world. The Company operates in 45 countries, and its products are sold in over
100 countries. Bearer shares of Serono S.A., the holding company, are traded on
the virt-x (SEO) and its American Depositary Shares are traded on the New York
Stock Exchange (SRA).
-more-
FOR MORE INFORMATION, PLEASE CONTACT:
SERONO IN GENEVA, SWITZERLAND:
MEDIA RELATIONS: INVESTOR RELATIONS:
Tel: +41-22-739 36 00 Tel: +41-22-739 36 01
Fax: +41-22-739 30 85 Fax: +41-22-739 30 22
http://www.serono.com Reuters: SEOZ.VX / SRA.N
--------------------- Bloomberg: SEO VX / SRA US
SERONO, INC., ROCKLAND, MA
MEDIA RELATIONS: INVESTOR RELATIONS:
Tel. +1 781 681 2340 Tel. +1 781 681 2552
Fax: +1 781 681 2935 Fax: +1 781 681 2912
http://www.seronousa.com
------------------------
On the following pages, there are:
- Tables detailing sales in dollars by therapeutic area, geographic
region and the top 10 products for the 3 and 12 months ended December
31, 2002 and 2001.
- The unaudited consolidated financial statements for the 3 and 12
months ended December 31, 2002 and 2001, including income statements,
balance sheets and statements of cash flows, prepared in accordance
with International Accounting Standards (I.A.S.).
-more-
TOP TEN PRODUCTS
THREE MONTHS ENDED THREE MONTHS ENDED
DECEMBER 31, 2002 DECEMBER 31, 2001
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* TA $ MILLION % OF SALES % CHANGE $ $ MILLION % OF SALES
Rebif(R) MS 171.5 41.9% 55.3% 110.5 32.6%
Gonal-F(R) RH 121.3 29.6% 10.6% 109.7 32.4%
Saizen(R) Growth 36.0 8.8% 24.8% 28.9 8.5%
Serostim(R) Wasting 26.5 6.5% (1.8%) 27.0 8.0%
Pergonal(R) RH 13.3 3.2% 11.4% 11.9 3.5%
Metrodin HP(R) RH 10.4 2.5% (39.9%) 17.3 5.1%
Cetrotide(R) RH 5.4 1.3% 38.1% 3.9 1.2%
Profasi(R) RH 5.0 1.2% (23.2%) 6.5 1.9%
Stilamin(R) Other 3.7 0.9% (26.5%) 5.0 1.5%
Crinone(R) RH 3.1 0.8% 484.1% (0.8) (0.2%)
TWELVE MONTHS ENDED TWELVE MONTHS ENDED
DECEMBER 31, 2002 DECEMBER 31, 2001
-----------------------------------------------------------
* TA $ MILLION % OF SALES % CHANGE $ $ MILLION % OF SALES
Rebif(R) MS 548.8 38.6% 44.6% 379.6 30.4%
Gonal-F(R) RH 450.4 31.7% 9.7% 410.5 32.9%
Saizen(R) Growth 124.0 8.7% 15.6% 107.3 8.6%
Serostim(R) Wasting 95.1 6.7% (24.1%) 125.3 10.0%
Metrodin HP(R) RH 50.1 3.5% (25.3%) 67.1 5.4%
Pergonal(R) RH 46.0 3.2% 20.7% 38.1 3.0%
Profasi(R) RH 19.8 1.4% (16.9%) 23.8 1.9%
Cetrotide(R) RH 18.4 1.3% 73.1% 10.6 0.8%
Stilamin(R) Other 13.9 1.0% (17.9%) 16.9 1.4%
Crinone(R) RH 10.9 0.8% 347.0% 2.4 0.2%
* THERAPEUTIC AREAS
RH = Reproductive Health Wasting = AIDS Wasting
MS = Multiple Sclerosis Growth = Growth Retardation
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CONSOLIDATED INCOME STATEMENTS
THREE MONTHS ENDED DECEMBER 31 2002 * % OF 2001 * % of
US$'000 REVENUES % change US$'000 Revenues
Revenues
Product sales 409,429 21.0% 338,440
Royalty and license income 32,654 20.1% 27,186
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TOTAL REVENUES 442,083 100.0% 20.9% 365,626 100.0%
-------------------------------------------------------------------------------------------------------------
Operating Expenses
Cost of product sales 65,167 25.4% 51,985
% of Sales 15.9% 15.4%
Selling, general and administrative 148,865 33.7% 17.5% 126,702 34.7%
Research and development 95,418 21.6% 19.2% 80,042 21.9%
Restructuring 16,303 3.7% 100.0% 0 0.0%
Other operating expense, net 27,748 6.3% 47.7% 18,792 5.1%
-------------------------------------------------------------------------------------------------------------
Total Operating Expenses 353,501 80.0% 27.4% 277,521 75.9%
-------------------------------------------------------------------------------------------------------------
OPERATING INCOME 88,582 20.0% 0.5% 88,105 24.1%
-------------------------------------------------------------------------------------------------------------
Financial income, net 9,152 210.9% 2,944
Other expense/(income), net (175) 722
-------------------------------------------------------------------------------------------------------------
Total Non Operating Income, Net 9,327 2,222
-------------------------------------------------------------------------------------------------------------
Income Before Taxes and Minority Interests 97,909 22.1% 8.4% 90,327 24.7%
Taxes 15,849 13,546
-------------------------------------------------------------------------------------------------------------
Income Before Minority Interests 82,060 76,781
Minority interests 474 42
-------------------------------------------------------------------------------------------------------------
NET INCOME 81,586 18.5% 6.3% 76,739 21.0%
-------------------------------------------------------------------------------------------------------------
Exceptional items
-----------------
License income 1) 0 (419)
Restructuring charges 2) 16,303 0
Tax impact of exceptional items (2,690) 34
-------------------------------------------------------------------------------------------------------------
NET INCOME W/O EXCEPTIONAL ITEMS 95,199 21.5% 24.7% 76,354 20.9%
-------------------------------------------------------------------------------------------------------------
* Unaudited
1) Payments from a third party for the divestiture of a product which was
non-core to Serono's business
2) Restructuring charges primarily related to phased closure of production
facilites for urine-derived reproductive hormone products
2002 2001 % CHANGE 2002 2001 % CHANGE
WITHOUT Without
EXCEPTIONAL exceptional
Basic Earnings per Share (in U.S. dollars) ITEMS items
--------------------------------------------------------------------------------------------------------------------
- Bearer shares 5.15 4.78 7.7% 6.01 4.75 26.3%
--------------------------------------------------------------------------------------------------------------------
- Registered shares 2.06 1.91 7.7% 2.40 1.90 26.3%
--------------------------------------------------------------------------------------------------------------------
- American depositary shares 0.13 0.12 7.7% 0.15 0.12 26.3%
--------------------------------------------------------------------------------------------------------------------
Diluted Earnings per Share (in U.S. dollars)
- Bearer shares 5.14 4.77 7.8% 6.00 4.75 26.4%
--------------------------------------------------------------------------------------------------------------------
- Registered shares 2.06 1.91 7.8% 2.40 1.90 26.4%
--------------------------------------------------------------------------------------------------------------------
- American depositary shares 0.13 0.12 7.8% 0.15 0.12 26.4%
--------------------------------------------------------------------------------------------------------------------
Basic earnings per share are calculated in accordance with IAS 33 (Earnings per
Share) by dividing the net income of the group, US$81.6 million (2001 US$76.7
million), by an appropriate number of shares. This is 11,446,403 bearer shares
(2001 11,655,237) and 11,013,040 registered shares (2001 11,013,040). The total
weighted average equivalent number of bearer shares is 15,851,619 (2001
16,060,453) for the three months ended December 31, 2002. As each American
depositary share represents ownership interest in one fortieth of a bearer
share, basic and diluted earnings per American depositary share is calculated as
one fortieth of the earnings per bearer share.
For diluted earnings per share, the total number of bearer shares is adjusted to
assume conversion of all share options granted to employees and directors. The
number of bearer shares used to calculate diluted earnings per share is
11,457,771 (2001 11,679,571).
-more-
CONSOLIDATED INCOME STATEMENTS
TWELVE MONTHS ENDED DECEMBER 31 2002 * % OF 2001 % of
US$'000 REVENUES % change US$'000 Revenues
Revenues
Product sales 1,423,130 13.9% 1,249,405
Royalty and license income 123,399 (2.9%) 127,065
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TOTAL REVENUES 1,546,529 100.0% 12.4% 1,376,470 100.0%
---------------------------------------------------------------------------------------------------------------
Operating Expenses
Cost of product sales 223,751 5.0% 213,160
% of Sales 15.7% 17.1%
Selling, general and administrative 512,942 33.2% 14.8% 446,945 32.5%
Research and development 358,099 23.2% 16.1% 308,561 22.4%
Restructuring 16,303 1.1% 100.0% 0 0.0%
Other operating expense, net 85,811 5.5% 22.3% 70,152 5.1%
---------------------------------------------------------------------------------------------------------------
Total Operating Expenses 1,196,906 77.4% 15.2% 1,038,818 75.5%
---------------------------------------------------------------------------------------------------------------
OPERATING INCOME 349,623 22.6% 3.5% 337,652 24.5%
---------------------------------------------------------------------------------------------------------------
Financial income, net 36,476 (29.0%) 51,381
Other expense, net 1,658 2,548
---------------------------------------------------------------------------------------------------------------
Total Non Operating Income, Net 34,818 48,833
---------------------------------------------------------------------------------------------------------------
Income Before Taxes and Minority Interests 384,441 24.9% (0.5%) 386,485 28.1%
Taxes 63,127 69,816
---------------------------------------------------------------------------------------------------------------
Income Before Minority Interests 321,314 316,669
Minority interests 536 (52)
---------------------------------------------------------------------------------------------------------------
NET INCOME 320,778 20.7% 1.3% 316,721 23.0%
---------------------------------------------------------------------------------------------------------------
Exceptional items
-----------------
License income 1) (629) (27,609)
Restructuring charges 2) 16,303 0
Tax impact of exceptional items (2,640) 2,209
---------------------------------------------------------------------------------------------------------------
NET INCOME W/O EXCEPTIONAL ITEMS 333,812 21.6% 14.6% 291,321 21.6%
---------------------------------------------------------------------------------------------------------------
* Unaudited
1) Payments from a third party for the divestiture of a product which was
non-core to Serono's business
2) Restructuring charges primarily related to phased closure of production
facilites for urine-derived reproductive hormone products
2002 2001 % CHANGE 2002 2001 % CHANGE
WITHOUT Without
EXCEPTIONAL exceptional
Basic Earnings per Share (in U.S. dollars) ITEMS items
----------------------------------------------------------------------------------------------------------------------
- Bearer shares 20.07 19.72 1.8% 20.88 18.14 15.1%
----------------------------------------------------------------------------------------------------------------------
- Registered shares 8.03 7.89 1.8% 8.35 7.25 15.1%
----------------------------------------------------------------------------------------------------------------------
- American depositary shares 0.50 0.49 1.8% 0.52 0.45 15.1%
----------------------------------------------------------------------------------------------------------------------
Diluted Earnings per Share (in U.S. dollars)
- Bearer shares 20.04 19.68 1.8% 20.86 18.10 15.2%
----------------------------------------------------------------------------------------------------------------------
- Registered shares 8.02 7.87 1.8% 8.34 7.24 15.2%
----------------------------------------------------------------------------------------------------------------------
- American depositary shares 0.50 0.49 1.8% 0.52 0.45 15.2%
----------------------------------------------------------------------------------------------------------------------
Basic earnings per share are calculated in accordance with IAS 33 (Earnings per
Share) by dividing the net income of the group, US$320.8 million (2001 US$316.7
million), by an appropriate number of shares. This is 11,580,610 bearer shares
(2001 11,658,108) and 11,013,040 registered shares (2001 11,013,040). The total
weighted average equivalent number of bearer shares is 15,985,826 (2001
16,063,324) for the twelve months ended December 31, 2002. As each American
depositary share represents ownership interest in one fortieth of a bearer
share, basic and diluted earnings per American depositary share is calculated as
one fortieth of the earnings per bearer share.
For diluted earnings per share, the total number of bearer shares is adjusted to
assume conversion of all share options granted to employees and directors. The
number of bearer shares used to calculate diluted earnings per share is
11,598,154 (2001 11,687,609).
-more-
CONSOLIDATED BALANCE SHEETS
As of DECEMBER 31, 2002 * December 31, 2001
US$000 US$000
ASSETS
Current Assets
Cash and cash equivalents 686,033 1,131,091
Short-term investments 378,865 344,413
Trade accounts receivable 257,313 234,490
Inventories 259,477 196,063
Prepaid expenses 26,609 21,857
Other current assets 208,100 134,955
--------------------------------------------------------------------------------------------------------
Total Current Assets 1,816,397 2,062,869
--------------------------------------------------------------------------------------------------------
Long-Term Assets
Property, plant and equipment 554,509 460,767
Long-term financial assets 711,201 241,009
Intangible assets 216,371 110,615
Deferred tax assets 136,687 107,115
Other long-term assets 59,509 36,394
--------------------------------------------------------------------------------------------------------
Total Long-Term Assets 1,678,277 955,900
--------------------------------------------------------------------------------------------------------
TOTAL ASSETS 3,494,674 3,018,769
--------------------------------------------------------------------------------------------------------
LIABILITIES
Current Liabilities
Bank advances 70,093 154,295
Trade accounts payable 60,591 60,151
Current portion of long-term debt 23,505 18,959
Income taxes 55,152 55,948
Other current liabilities 332,893 246,157
--------------------------------------------------------------------------------------------------------
Total Current Liabilities 542,234 535,510
--------------------------------------------------------------------------------------------------------
Long-Term Liabilities
Long-term debt 25,857 37,325
Deferred tax liabilities 12,080 9,003
Other long-term liabilities 452,140 217,430
--------------------------------------------------------------------------------------------------------
Total Long-Term Liabilities 490,077 263,758
--------------------------------------------------------------------------------------------------------
Total Liabilities 1,032,311 799,268
--------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------
Minority Interests 1,165 587
--------------------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Share capital 249,408 252,955
Share premium 866,689 966,295
Retained earnings 1,364,626 1,108,086
Fair value reserves (44,807) (25,135)
Cumulative foreign currency translation adjustments 25,282 (83,287)
--------------------------------------------------------------------------------------------------------
Total Shareholders' Equity 2,461,198 2,218,914
--------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------
Total Liabilities, Minority Interests and Shareholders' Equity 3,494,674 3,018,769
--------------------------------------------------------------------------------------------------------
* Unaudited
-more-
CONSOLIDATED STATEMENTS OF CASH FLOWS
Twelve months ended December 31 2002 * 2001
US$000 US$000
Cash Flows From Operating Activities
Income before taxes and minority interests 384,441 386,485
Depreciation and amortization 100,552 98,906
Financial income (64,645) (75,858)
Financial expense 10,643 14,709
Other non-cash items 17,233 25,595
---------------------------------------------------------------------------------------------
Cash Flows From Operating Activities Before Working Capital Changes 448,224 449,837
---------------------------------------------------------------------------------------------
Working Capital Changes
Trade accounts payable, other current liabilities and deferred income 208,341 20,530
Trade accounts receivable (3,968) (22,231)
Inventories (32,620) (37,335)
Prepaid expenses and other current assets (25,482) 34,879
Taxes paid (62,513) (40,730)
---------------------------------------------------------------------------------------------
NET CASH FLOWS FROM OPERATING ACTIVITIES 531,982 404,950
---------------------------------------------------------------------------------------------
Cash Flows From Investing Activities
Acquisition of subsidiary, net of cash acquired (115,092) -
Purchase of property, plant and equipment (99,144) (78,565)
Purchase of intangible and other long-term assets (25,194) (44,352)
Purchase of financial assets (860,407) (188,853)
Other non-current liabilities (10,257) 1,653
Proceeds from sale of financial assets 344,362 871,343
Disposals of subsidiary, net of cash disposed 6,628 -
Proceeds from sale of property, plant and equipment 10,488 11,033
Interest received 48,005 76,076
---------------------------------------------------------------------------------------------
Net Cash Flows From Investing Activities (700,611) 648,335
---------------------------------------------------------------------------------------------
Cash Flows From Financing Activities
Proceeds from issuance of share capital 11,611 -
Proceeds from exercises of stock options 1,454 1,825
Purchase of treasury shares (117,422) (5,578)
Repayment of bank advances (94,490) 639
Repayment of long-term debt (17,642) (73,701)
Interest paid (8,120) (13,810)
Dividends paid (64,240) (53,759)
---------------------------------------------------------------------------------------------
Net Cash Flows From Financing Activities (288,849) (144,384)
---------------------------------------------------------------------------------------------
Effect of Exchange Rate Changes on Cash and Cash Equivalents 12,420 (819)
---------------------------------------------------------------------------------------------
Net Increase in Cash and Cash Equivalents (445,058) 908,082
---------------------------------------------------------------------------------------------
Cash and Cash Equivalents
- Beginning of period 1,131,091 223,009
---------------------------------------------------------------------------------------------
- End of period 686,033 1,131,091
---------------------------------------------------------------------------------------------
* Unaudited
-end-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SERONO S.A.
a Swiss corporation
(Registrant)
February 3, 2003 By: /s/ Allan Shaw
-------------------------------
Name: Allan Shaw
Title: Chief Financial Officer