Crucell Announces Second Quarter 2008 Results
Tuesday August 12, 1:55 am ET
LEIDEN, NETHERLANDS--(MARKET WIRE)--Aug 12, 2008 -- Total revenue and other operating income increased by 51% to EUR 59.6 million, compared to EUR 39.4 million in the second quarter of 2007. Solid gross margins of 36% and significantly reduced net loss for the second quarter to EUR 7.9 million compared to EUR 18.2 million in Q207. 2008 full year guidance reiterated: total revenue and other operating income growth of 20% in constant currencies[1]; higher margins; positive cash flow.
Leiden, The Netherlands (August 12, 2008) - Dutch biopharma company Crucell N.V. (Euronext, Nasdaq: CRXL; Swiss Exchange: CRX) today announced its financial results for the second quarter of 2008, based on International Financial Reporting Standards (IFRS). These financial results are unaudited.
Highlights:
* DSM Biologics and Crucell announced another breakthrough in the
production of IgG antibodies using Crucell's PER.C6® technology.
By employing the PER.C6® human cell line and proprietary XD(TM)
technology, a record yield of over 27 grams per liter has been
achieved.
* Product sales increased driven by continued growth of paediatric
and travel vaccines; in particular Quinvaxem®, Epaxal® and
Dukoral®.
* Crucell's rabies monoclonal antibody cocktail entered a second
Phase II clinical trial in the Philippines in May 2008.
Preliminary results of Crucell's U.S. Phase II study are expected
to be presented on October 1 at the 19th annual RITA meeting in
Atlanta.
* Crucell announced three non-exclusive STAR® research license
agreements; with Bioceros, covering the production of monoclonal
antibodies; with Celltrion, Inc. for the manufacturing of
biopharmaceuticals and with Toyobo Gene Analysis Co. LTD. for
the production of recombinant proteins for third-party customers.
* DSM Biologics and Crucell announced to have entered into an
agreement with Avid Bioservices to join their Vendor Network.
* Crucell's operational excellence program "Healthy Ambition" is
being rolled out at full steam. Target savings of EUR 30 million by
the end of 2009.
* Initial net cost savings of EUR 3 million expected in the second
half of 2008.
* Crucell's shareholders appointed Mr. Steve Davis as member of the
Supervisory Board at the Annual Meeting for Shareholders, held in
May. Dr. Cees de Jong was appointed as a member of the Board of
Management for a term of four years.
Financial Highlights:
* Combined total revenue and other operating income for the quarter
of EUR 59.6 million compared to EUR 39.4 in the same quarter of 2007.
The increase of 51% (63% in constant currencies) was driven by
strong sales of paediatric vaccines, in particular by Quinvaxem®,
higher sales of travel vaccines as well as higher license fees.
* Increase of license revenues driven by milestone payments as a
result of the start of two phase II clinical studies of Crucell's
rabies monoclonal antibody cocktail.
* Gross margins of 36% compared to 39% in the second quarter of
2007 due to a variation in the product mix in this quarter. Gross
margins in the second half of 2008 are expected to be positively
influenced by the seasonality of our flu product (Inflexal® V) in
particular.
* Net loss in the second quarter of 2008 narrowed by 57% to EUR 7.9
million versus a net loss of EUR 18.2 million in the same quarter of
2007.
* Cash and cash equivalents at the end of the second quarter
amounted to EUR 106.9 million versus EUR 163.2 million at year-end
2007. Deterioration of cash flow and working capital in the
second quarter of 2008 was due to the seasonality of our
business, in which we build inventory in the first half of the
year to sell our products in the second half of the year. Full
year expectations of positive cash flow are reiterated.
* Net cash used in operating activities in the second quarter of
2008 was EUR 18.0 million compared to net cash used in operating
activities of EUR 10.2 million in the same quarter of 2007.
Key Figures Q2 2008:
(EUR million, except net loss per share)
Second Quarter Six months ended June 30
2008 2007 Change 2008 2007 Change
Total revenues and
other operating
59.6 39.4 51% income 107.5 74.6 44%
(7.9) (18.2) (57%) Net loss (16.9) (36.7) (54%)
Net loss per share
(0.12) (0.28) (basic and diluted) (0.26) (0.57)
Cash & cash equiv.:
- June 30, 2008 106.9
- Dec 31, 2007 163.2
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Crucell's Chief Executive Officer Ronald Brus said:
"In the second quarter of 2008 we saw strong growth of our paediatric vaccines, driven by Quinvaxem®. This innovative, fully-liquid pentavalent vaccine was described by the World Health Organization (WHO) as 'one of the most advanced immunization products available, enabling countries to make a large stride towards their health targets'. We are very proud to have this product in Crucell's paediatric portfolio and expect to see continued growth going forward."
"Our travel and endemic vaccines, in particular Epaxal® and Dukoral®, also showed solid growth compared to the second quarter of 2007. We will continue to go after untapped markets, amongst others in the U.S., to expand our geographical presence of our travel and endemic vaccines."
"Together with DSM Biologics we achieved another breakthrough in the production of IgG antibodies using Crucell's PER.C6® technology. A record yield of over 27 grams per liter was achieved, which surpasses all other production systems currently available in the market."
"We are rolling out our operational excellence program Healthy Ambition at full steam. As an integral part of our growth strategy, Healthy Ambition's goal is to improve overall business performance and reduce costs with 15% by the end of 2009 resulting in an overall run-rate of EUR 30 million savings."
"In the first half of the year we also started two Phase II clinical studies (in the U.S and in the Philippines) for our Rabies Monoclonal Antibody Cocktail, a collaboration with sanofi pasteur using Crucell's PER.C6® technology. The Rabies Monoclonal Antibody Cocktail is to be used in combination with rabies vaccines for post-exposure prophylaxis against this fatal disease. Preliminary results of our U.S. study are expected to be presented in the U.S. on October 1 at the 19th annual RITA meeting in Atlanta."
"Based on our second quarter results we reiterate our guidance of combined total revenue and total other operating income for the full year 2008 to grow by 20%[1]. We further expect higher margins and positive cash flow."
Product and Business Update:
Product Update
Product sales for the second quarter of 2008 amounted to EUR 48.4 million and represent sales of paediatric vaccines (56%), travel & endemic vaccines (29%) and other products (15%).
Paediatric
In the second quarter of 2008 we saw good growth of our paediatric vaccines, mainly driven by Quinvaxem®.
* Quinvaxem®: Fully liquid pentavalent vaccine against five
important childhood diseases.
* Hepavax-Gene®: Recombinant vaccine against hepatitis B.
* Epaxal® Junior: Paediatric dose (0.25mL) of Epaxal® - the only
aluminum-free vaccine for children against hepatitis A. The
product is currently under registration in selected countries
worldwide. Sales in South America have started and European
launch is being planned.
* MoRu-Viraten®: Vaccine for protection against measles and rubella
(for all age groups).
Travel and Endemic
The second quarter of 2008 showed continued growth of our travel and endemic portfolio, where Epaxal® and Dukoral® in particular showed growth compared to the second quarter of 2007. We continue to see significant untapped demand and geographical expansion potential of our travel portfolio.
* Epaxal®: The only aluminium-free vaccine against hepatitis A.
* Vivotif®: The only oral vaccine against typhoid fever.
* Dukoral®: The only oral vaccine against diarrhea caused by
cholera and ETEC (enterotoxigenic E.coli).
Respiratory
* Inflexal® V: A virosomal adjuvanted vaccine against influenza
(for all age groups). Due to the seasonality of the product, we
build inventory in the first half of the year to sell the
respiratory products in the second half of the year.
Pipeline Update
* Flavimun® - Live Attenuated Yellow Fever Vaccine: Crucell's
management expects the registration submission of the Yellow
Fever vaccine in Switzerland before the end of 2008.
* Influenza - Seasonal Flu Vaccine (FluCell collaboration with
sanofi pasteur): The seasonal influenza vaccine developed by
Crucell's partner sanofi pasteur, using PER.C6® technology. Phase
II testing of the cell based influenza vaccine was initiated in
the U.S. in November 2007. Phase II trials involving healthy
adult volunteers in the U.S. focus on the safety profile and
immunogenicity of the cell-based vaccine.
* Influenza - H9N2 Pandemic Flu Vaccine: Completed in July 2008.
Phase I and II studies were carried out and no serious adverse
side effects were reported. In the H9N2 trial Crucell's licensed
vaccine method, i.e. a virosomal vaccine was compared to methods
less suitable for seasonal vaccine production. As expected the
immune response to the unlicensed whole virus vaccine, in
particular when adjuvanted with aluminium, appeared to be the
most suitable way to induce immunity against a pandemic H9N2
influenza strain and possibly H5N1 strains. Results from this
trial showed that subjects who were vaccinated with the virosomal
vaccine less frequently reported pain as compared to subjects who
were vaccinated with whole virus (with or without adjuvation). We
have recently shown (Radosevic et al., Vaccine 2008; 26: 3640-46)
that our licensed strategy for seasonal influenza vaccination
could also be used for pandemic influenza strains when the immune
response was enhanced by additional adjuvants. Within the
PanFluVac EU consortium this approach will be tested for a
virosomal H5N1 vaccine in humans in 2009.
* Rabies Human Monoclonal Antibody Cocktail: Crucell's rabies
monoclonal antibody cocktail, a collaboration with sanofi pasteur
using Crucell's PER.C6® manufacturing technology, has entered two
Phase II clinical trials (in the US and in the Philippines). The
start of these Phase II studies triggered the first milestone
payments of a total of up to EUR 66.5 million. This antibody
cocktail is to be used in combination with a rabies vaccine for
post-exposure prophylaxis against this fatal disease. Based on
promising Phase I data in 2007, showing no serious adverse
effects and well tolerated treatment, Crucell was granted a Fast
Track designation by the FDA Department of Health and Human
Services. Crucell will be responsible for the manufacturing of
the final product and has retained exclusive distribution rights
in Europe, co-exclusive distribution rights in China and the
rights to sell to supranational organizations such as UNICEF.
Preliminary results of our U.S. study are expected to be
presented in the U.S. on October 1 at the 19th annual RITA
meeting in Atlanta, at the Centers of Disease Control and
Prevention.
* Malaria Vaccine based on AdVac®/PER.C6® Technology: Crucell and
its partner, the National Institute of Allergy and Infectious
Diseases (NIAID), part of the National Institutes of Health
(NIH), are conducting a Phase I trial in the U.S. The study is
being carried out on two sites, VanderBilt and Stanford
University. The first three cohorts, comprising of 18, 17 and 18
volunteers respectively, have been enrolled. Enrollment for the
fourth and final group of volunteers is expected to start soon.
Initial findings of this Phase I trial are expected to be
available in 2008.
* Tuberculosis Vaccine based on AdVac®/PER.C6® Technology: The
development of this vaccine is being carried out in collaboration
with the Aeras Global TB Vaccine Foundation. A US Phase I trial
(in BCG naïve individuals) has been completed, indicating that
the vaccine candidate is safe in healthy adults in the US. The
results of a second study which took place in South Africa,
launched in May 2007, were presented in April at the
'Tuberculosis Vaccines for the World' conference in Atlanta.
Preliminary data show encouraging results, whereby CD8 immune
responses are considerably higher than previously ever seen in a
tuberculosis vaccine study. A third phase I study in healthy
adults in St. Louis, US was launched in December 2007 and focuses
on the immunogenicity and safety of two AERAS-402/Crucell Ad35
boost doses administered at three to six month intervals after
BCG priming in healthy adults.
* Ebola Vaccine based on AdVac®/PER.C6® Technology: For the Phase I
study for the Ebola vaccine, which Crucell is developing in
partnership with the Vaccine Research Center (VRC) of the
National Institute of Allergy and Infectious Diseases (NIAID),
two groups of 16 volunteers have been enrolled and vaccinated.
The clinical data is still blinded, however initial indications
suggest that the vaccine is safe at the tested doses and appears
to be immunogenic in a subset of subjects.
* Blood Coagulation Factor VL/C: Preclinical work on this program
continues but conclusive proof of concept is not expected in the
near future.
* HIV Vaccine based on AdVac®/PER.C6® Technology: The
Investigational New Drug Application (IND) for Phase I of the
trial with Harvard Medical School (supported by the NIH) was
approved by the FDA in January 2008. In April, Crucell announced
that the novel recombinant vaccine (using the adenovirus serotype
26 (rAd26) as vector), which is jointly developed with the Beth
Israel Deaconess Medical Center (BIDMC), has gone into a Phase I
clinical study to test a new HIV vaccine. The rAd26 vector is
specifically designed to avoid the pre-existing immunity to the
more commonly used adenovirus serotype 5 (Ad5). The phase I
clinical study is being conducted at the Brigham and Women's
Hospital (BWH) in Boston and is focused on assessing the safety
and immunogenicity of the vaccine. The study involves 48 healthy
volunteers.
* H5N1 - Human Monoclonal Antibodies against Flu: Crucell's
scientists discovered a set of 21 human monoclonal antibodies
that provides immediate protection and neutralizes the broadest
range of H5N1 strains in preclinical models. These were found to
be able to neutralize the H5N1 virus of avian influenza, which
currently presents a global threat. The most potent of the
antibodies was shown to neutralize the broadest range of H5N1
strains that have emerged between 1997 and 2004. This antibody
prevents flu, in pre-clinical models, when given twenty four
hours before a challenge with a lethal dose of the pathogenic
H5N1 virus. When given three days after infection, it also was
shown to prevent death and cure the disease. Therefore this
antibody may provide a powerful tool in pandemic preparedness.
Healthy Ambition:
* After a phase of thorough analysis and business process redesign,
the operational excellence program Healthy Ambition is now being
rolled out into Crucell. Important elements of the program are:
product portfolio optimization, process and infrastructure
optimization, network rationalization and further integration and
streamlining of various functions. Target savings of EUR 30 million
are expected to be achieved by the end of 2009. In the second
half of 2008 net savings of EUR 3 million are expected.
PER.C6® technology platform:
* DSM Biologics and Crucell announced another breakthrough in the
production of IgG antibodies using Crucell's PER.C6® technology.
By employing the PER.C6® human cell line and proprietary XD(TM)
technology, a record yield of over 27 grams per liter has been
achieved. In March 2008 a yield of 15 grams per liter was
reported. This milestone is the new manufacturing paradigm for
mammalian cell culture to produce protein products effectively,
where the industry has struggled to date with low yields and
unstable platforms. This record surpasses all other production
systems including those previously set by PER.C6® technology
itself.
Licensing Agreements:
* Crucell announced a non-exclusive STAR® research license
agreement with Bioceros. The license agreement covers the
production of monoclonal antibodies. Financial details of the
agreement were not disclosed.
* Crucell announced a non-exclusive STAR® research license
agreement with Celltrion, Inc. for the production of recombinant
proteins. Under the agreement, Celltrion will evaluate Crucell's
STAR® technology for generating cell lines for the manufacturing
of biopharmaceuticals. Financial details of the agreement were
not disclosed.
* Crucell announced a non-exclusive STAR® research license
agreement with Toyobo Gene Analysis Co. LTD. Under the agreement,
Toyobo Gene Analysis will evaluate Crucell's STAR® technology for
generating cell lines for the production of recombinant proteins
for third-party customers. Financial details of the agreement
were not disclosed.
Vendor Network:
* DSM Biologics and Crucell announced to have entered into an
agreement with Avid Bioservices, Inc. of Tustin, California to
join their Vendor Network. Under the terms of the agreement, Avid
will be a pre-approved contract manufacturer for licensees of the
PER.C6® cell line located in the western U.S. Avid is the first
U.S.-based contract manufacturer to be awarded this status.
Appointments:
* Crucell's Annual General Meeting of Shareholders (AGM), held in
Leiden on May 30th, approved the resignation of Mr. Dominik
Koechlin as a member of the Supervisory Board. In addition Mr.
Steve Davis was appointed as member of the Supervisory Board for
a term of four years, until 2012.
* As member of the Board of Management the shareholders appointed
Dr. Cees de Jong for a term of four years. The other members of
the Board of Management, Dr. Ronald Brus, Mr. Leonard Kruimer and
Dr. Jaap Goudsmit were re-appointed for a term of four years by
Crucell's shareholders.
Patents: In Q2 2008 Crucell received a total of 25 granted patents, including patents for:
* Methods for producing multiple proteins or multimeric proteins
using STAR® technology, in Australia and the U.S.
* Methods of producing particular antibody fragments in PER.C6®
cells, in Europe.
* Improved methods for the production of viruses using PER.C6®
cells, in Australia.
* Adenoviral vector based malaria vaccines, in the
U.S.
Financial Review
Total Revenue and Other Operating Income
Total revenue and other operating income was EUR 59.6 million for the second quarter of 2008, an increase of 51% compared to the same quarter of 2007 (63% in constant currencies). The increase was driven by continued strong sales of paediatric and travel vaccines as well as higher license fees. Increase of license revenues was driven by milestone payments as a result of the start of two Phase II clinical studies of our Rabies program.
Product sales for the second quarter amounted to EUR 48.4 million and represent sales of paediatric vaccines (56%), travel vaccines (29%) and other products (15%). License revenues were EUR 5.5 million in the second quarter, an increase of EUR 4.0 million compared to the same quarter of 2007. License revenues consist of initial payments from new contracts as well as milestones and other payments on existing contracts.
Service fees for the quarter were EUR 2.3 million, compared to EUR 3.2 million last year. Service fees represent revenue for product development activities performed under contracts with partners and licensees.
Total other operating income was EUR 3.4 million for the quarter, compared to EUR 2.4 million in the second quarter of 2007.
Cost of Goods Sold
Cost of goods sold for the second quarter of 2008 amounted to EUR 35.8 million, EUR 34.0 million of which represents product costs and the remainder of EUR 1.7 million the cost of service and license activities.
Gross operating margins of 36% compared to 39% in the second quarter of 2007 due to a variation in the product mix in this quarter. Gross margins in the second half of 2008 are expected to be positively influenced by the seasonality of our flu product (Inflexal® V) in particular.
Expenses
Total expenses consist of research and development (R&D) expenses, marketing and sales (M&S) and general and administrative (G&A) expenses. Total expenses for the period were EUR 33.5 million for the second quarter, representing a EUR 1.7 million decrease over the same period in 2007.
R&D expenses for the second quarter amounted to EUR 17.6 million, which represents a EUR 0.8 million increase versus the second quarter of 2007. The increase can be attributed to the timing of specific R&D expenses during the year. Overall R&D spending for the full year is expected to be around EUR 70 million.
M&S expenses for the quarter were EUR 8.1 million, which represents a EUR 1.3 million decrease versus the second quarter of 2007. This decrease was due to higher one-off expenses in the same quarter last year.
G&A expenses for the second quarter of 2008 were EUR 7.8 million and represent a decrease of EUR 1.2 million over the same quarter in 2007, which include costs related to the 'Healthy Ambition' program. Net financial income in the second quarter of EUR 2.3 million was the result of foreign exchange gains mainly caused by the strengthening of the Swiss Franc against the Euro.
Net Loss
The Company reported a net loss of EUR 7.9 million for the second quarter of 2008 compared to EUR 18.2 million in the same period of 2007. This amounted to EUR 0.12 net loss per share, compared to a net loss per share of EUR 0.28 in the second quarter of 2007.
Balance Sheet
Tangible fixed assets amounted to EUR 148.5 million on June 30, 2008. Intangible assets represent assets acquired in acquisitions and amounted to EUR 84.0 million. This figure represents acquired in-process research and development; developed technology; patents and trademarks; and value of customer and supplier relationships.
Investments in associates and joint ventures amount to EUR 8.7 million and mainly represent investments in AdImmune and PERCIVIA. The Company's investment in Galapagos NV is classified under available-for-sale investments. Total equity on June 30, 2008 amounted to EUR 413.3 million. A total of 65.7 million ordinary shares were issued and outstanding on June 30, 2008.
Cash Flow and Cash Position
Cash and cash equivalents decreased by EUR 15.0 million in the second quarter to EUR 106.9 million.
Reduction of cash flow in the second quarter was due to the seasonality of our business, in which we build inventory in the first half of the year to sell our products in the second half of the year.
Net cash used in operating activities in the second quarter of 2008 was EUR 18.0 million. Overall investments in net working capital increased mainly due inventory build-up in preparation for the flu season as well as accounts receivable.
In the second quarter net cash from investing activities amounted to EUR 1.3 million. In the quarter net cash from financing activities amounted to EUR 2.5 million.
Outlook 2008:
Crucell expects combined full year 2008 total revenue and total other operating income to grow by 20% in constant currencies[1]. The Company expects higher margins compared to 2007 and positive cash flow.
Phasing in 2008:
We expect revenues and operating income to be phased throughout 2008 like in 2007. As expected, cash flow and working capital deteriorated significantly in the first half of 2008 due to the seasonality of our business in which we build inventory in the first half of the year to sell our products in the second half. We expect the negative cash flow in the first nine months to reverse in the final quarter of 2008, to end the year with a positive cash flow.
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