Ipsen presents its 2019 results, provides 2020 guidance and updates 2022 financial outlook

Paris (France), 13 February 2020 – Ipsen (Euronext: IPN; ADR: IPSEY), a global specialty-driven biopharmaceutical group, today announced its financial results for the full year 2019.

• Group sales growth of 15.8% as reported or 14.8% at constant currency and scope of consolidation¹, driven by Specialty Care sales growth of 17.2%¹, reflecting strong performance across all major products and geographies, while Consumer Healthcare sales were down -1.2%¹.
• Core Operating margin at 30.4% of net sales, up 0.7 points. IFRS Operating margin at -1.3% of net sales, down 24.6 points.
• Setback in the palovarotene program of partial clinical hold for all patients under 14 years of age and reaching pre-specified second interim analysis futility criteria in the Phase 3 MOVE trial for fibrodysplasia ossificans progressiva (FOP), leading to a partial impairment of €669 million before tax.
• Core consolidated net profit of €563 million (+14.6% vs. 2018), with fully diluted Core EPS growing by 14.1% to reach €6.74. IFRS Consolidated net profit showing a loss of €50 million, with an IFRS net loss per share of €0.61.
• Sound financial structure, with a closing Net Debt of €1,116 million and a Net Debt to EBITDA ratio at 1.3x. Strong Free Cash Flow at €468 million, up 2%, mainly driven by higher Operating Cash Flow.
• Continued commitment to disciplined execution of business development strategy for long-term sustainability focusing on the Group’s core therapeutic areas (Oncology, Neuroscience, Rare Diseases) and across different transaction structures and various phases of drug development.
• Advancing solid pipeline with several significant new chemical entities and Phase 3 / registrational trials, including the initiation of pivotal Phase 3 trials for Onivyde® in 1L Pancreatic Ductal Adenocarcinoma (PDAC) and 2L Small Cell Lung Cancer (SCLC) and upcoming top-line results for the Phase 3 trial of Cabometyx® in combination with nivolumab in 1L Renal Cell Carcinoma (RCC).
• Proposed distribution of €1.00 per share² for the 2019 financial year, consistent with the prior year.
• 2020 guidance³ of Group sales growth greater than +6.0% at constant currency and Core Operating margin around 30.0% of net sales.
• Updated 2022 outlook³ with Group sales greater than €2.8 billion and Core Operating margin greater than 28.0% of net sales.

Aymeric Le Chatelier, Chief Executive Officer and Chief Financial Officer of Ipsen, stated: “2019 was another excellent year of operating performance for Ipsen with continued double-digit top-line growth and core operating margin expansion. Despite the recent palovarotene setback, the fundamentals of our business remain strong with a growing Specialty Care franchise and a sound financial structure including attractive cash flow generation. We are committed to the disciplined execution of our strategy, delivering solid mid-single digit growth in 2020 and further advancing our R&D pipeline programs. We have also updated our 2022 outlook taking into account the latest developments in the current business. We remain focused on executing our internal and external R&D strategy to strengthen our pipeline and deliver sustainable growth for years to come.”

Review of full year 2019 results

Extract of audited consolidated results for the full year 2019 and 2018

Group net sales reached €2,576.2 million, up 14.8%¹ year-on-year.
Specialty Care sales reached €2,299.4 million, up 17.2%¹, driven by the continued strong growth of Somatuline® (lanreotide) and the €376.9 million contribution from the key Oncology launches of Cabometyx® (cabozantinib) and Onivyde® (irinotecan liposome injection). Somatuline growth of 18.3%¹ was driven by continued positive momentum in North America (21.3%) and solid performance throughout Europe, including Germany. Dysport® (botulinum toxin type A) growth was fueled by good performance in the therapeutics and in the aesthetics markets. Decapeptyl® (triptorelin) sales reflect good volume growth across Major European countries and in Southeast Asia.
Consumer Healthcare sales reached €276.8 million, down -1.2%¹, due to a decline in Smecta® (diosmectite) sales, especially in China.
Core Operating Income reached €782.6 million in 2019, compared to €659.9 million in 2018, a growth of 18.6%, driven by the sales growth and after increased R&D investments to support the development of the growing pipeline.
Core Operating margin reached 30.4% of net sales, up 0.7 points compared to 2018.
Core consolidated net profit was €563.4 million in 2019, an increase of 14.6% versus €491.6 million in 2018, driven by higher Core Operating Income compensated by increased net financial costs, notably related to higher net debt from the Clementia acquisition.
Fully diluted Core earnings per share grew by 14.1% to reach €6.74, compared to €5.91 in 2018.
IFRS Operating Income was a loss of €33.4 million, mainly due to an impairment charge of €668.8 million on the intangible assets of palovarotene. IFRS operating margin of -1.3% was down 24.6 points compared to 2018.
IFRS Consolidated net profit was a loss of €50.2 million due to financial expenses resulting from the Onivyde contingent payment reevaluation, financing costs and income tax for a total of €244.8 million, offset by the positive impact on financial result of the revaluation of the Clementia Contingent Value Rights (CVR) and milestones, and on income tax of the tax effect from the palovarotene intangible asset impairment for a total of €220.0 million.
IFRS Fully diluted EPS (Earnings per share) was a net loss per share amounting to €0.61 versus a net profit of €4.68 in 2018.
Free Cash Flow reached €467.7 million, up by €9.3 million, mainly driven by higher Operating Cash Flow partly offset by higher cash out from restructuring costs, financial result and current income tax.
Closing net debt reached €1,115.6 million at the end of 2019, as compared to closing net debt in 2018 of €242.5 million. This reflects the acquisition of Clementia, other business development and milestones, the impact of the application of IFRS16, and the payment of the dividend.

Impairment loss related to palovarotene program
Ipsen recorded a 668.8 million partial impairment, before tax, on the  palovarotene intangible assets at December 31, 2019 as a result of the recent developments in the palovarotene development program. This takes into account:

• 6 December 2019: Following discussions with the U.S. Food and Drug Administration (FDA), a partial clinical hold was issued for patients under the age of 14 for studies evaluating palovarotene for the chronic treatment of fibrodysplasia ossificans progressiva (FOP) and multiple osteochondromas (MO).
• 24 January 2020: Palovarotene Phase 3 MOVE trial for fibrodysplasia ossificans progressiva (FOP) reached pre-specified second interim analysis futility criteria. Ipsen paused dosing patients in FOP trials taking into consideration IDMC’s recommendation to not discontinue trials based on encouraging therapeutic activity observed in preliminary post-hoc analyses.

Ipsen will continue the development of palovarotene, conduct further assessment of the MOVE dataset, address the FDA questions and define next steps for the clinical program to bring palovarotene to patients as quickly as possible.

Strategy update
During 2019, Ipsen made progress on its journey to being a leading global biopharmaceutical company focused on innovation and Specialty Care.
The three Specialty Care franchises all saw significant progress. The Oncology and Neuroscience franchises continued to demonstrate strong double-digit momentum and despite recent developments with palovarotene, Ipsen remains committed to building a successful Rare Diseases franchise and supporting patients living with FOP. In October 2019, Ipsen in-licensed BLU-782 from Blueprint Medicines, a highly selective ALK2 inhibitor in Phase 1 development for the treatment of FOP.
Ipsen is committed to continuing its business development strategy for long-term sustainability. The strategy will focus on the Group’s core therapeutic areas (Oncology, Neuroscience, Rare Diseases) and across different transactions structures and various phases of drug development. The disciplined execution of this strategy will be supported by the Group’s strong Free Cash Flow generation and close internal collaboration across Ipsen’s teams.
In 2020 and beyond, the Group’s mission to bring innovation to patients remains the same. The priorities and roadmap are clear, and Ipsen continues to execute against its objectives to maximize the portfolio while increasing the value of the pipeline.
Sales growth adjusted for consolidation scope including: subsidiaries involved in the partnership between Ipsen and Schwabe Group consolidated in accordance with the equity method since 1 January 2019; and 2018 Etiasa® (mesalazine) sales adjusted for the new contractual set up.

Comparison of 2019 performance with financial objectives
The Group exceeded its upgraded guidance provided on 25 July 2019 as shown in the table below:

Distribution for the 2019 financial year proposed for the approval of Ipsen’s shareholders
The Ipsen S.A. Board of Directors, which met on 12 February 2020, decided to propose at the Annual Shareholders’ meeting on 29 May 2020 the distribution of €1.00 per share for the 2019 financial year, consistent with the prior year.

2020 Financial guidance
The Group has set the following financial targets for the current year, assuming no impact in 2020 of new somatostatin analog (SSA) generic entry:

• Group sales growth year-on-year greater than +6.0% at constant currency; no impact of currency expected based on the current level of exchange rates.
• Core Operating margin around 30.0% of net sales, excluding incremental investments in pipeline expansion initiatives.

Updated 2022 Outlook:  The Group has updated its 2022 outlook taking into account the latest developments in its current business, mainly in the palovarotene development program:

• Group net sales greater than €2.8 billion, assuming current level of exchange rate;
• Core Operating margin greater than 28.0% of net sales

The outlook has been updated assuming no approval of additional meaningful products or indications (including no contribution from palovarotene), progressive entry of additional octreotide and lanreotide generics globally from 2021 and excluding the impact of incremental investments in pipeline expansion initiatives.

Conference call
Ipsen will hold a conference call Thursday, 13 February 2020 at 2:30 p.m. (Paris time, GMT+1). Participants should dial in to the call approximately five to ten minutes prior to its start. No reservation is required to participate in the conference call.
Standard International: +44 (0) 2071 928 000
France and continental Europe: +33 (0) 1 76 70 07 94
UK: 08445 718 892
U.S.: (631) 510-7495
Conference ID: 8178467
A recording will be available for seven days on Ipsen’s website.

1. Year-on-year growth excluding foreign exchange impact established by recalculating net sales for the relevant period at the rate used for the previous period. Sales growth adjusted for consolidation scope including: subsidiaries involved in the partnership between Ipsen and Schwabe Group consolidated in accordance with the equity method since 1 January 2019; and 2018 Etiasa® (mesalazine) sales adjusted for the new contractual set up.
2. Decided by the Ipsen S.A. Board of Directors, which met on 12 February 2020, to propose at the Annual Shareholders’ meeting on 29 May 2020.
3. Assuming no impact of new somatostatin analog (SSA) generic entry in 2020 and excluding impact of incremental investments in pipeline expansion initiatives

Attachment

• FY-2019-Results-announcement