Medeva Plc Reports 1999 Half Year Results

Business Wire, July 21, 1999

LONDON--(BW HealthWire)--July 21, 1999--

Medeva PLC (NYSE: MDV), the International Pharmaceutical Trading Company, Today Announced its 1999 Half Year Results:

HIGHLIGHTS

-- Non-CNS product sales and royalties grow 7% to(pound)106.9

million ($173.2 million)* with a profit contribution

of(pound)28.5 million ($46.2 million), up 21%.

-- Further significant methylphenidate sales decline. CNS sales fall

to(pound)19.3 million ($31.3 million) with profit contribution of

(pound)9.5 million ($15.4 million) (H1 98 :(pound)29.6 million).

-- Operating profit of(pound)21.1 million ($34.2 million) (H1 98

:(pound)37.2 million); PBT(pound)19.7 million ($31.9 million) (H1

98:(pound)36.7 million).

-- Tax rate reduced to 20% (H1 98 : 31%.).

-- EPS 4.7p (7.6 (cent); ADR 30.5 (cent)) (H1 98 : 7.2p).

-- Interim dividend maintained at 2.0p (3.2(cent): ADR 13(cent)) per

share.

-- (pound)8 million ($13 million) UK restructuring program

announced.(pound)10 million ($16.2 million) per annum cost

savings targeted.

-- Further Clickhaler molecules to be acquired.

Note: Convenience translation only at an assumed exchange rate of (pound)1:$1.62

Commenting on today's results, Medeva's Chief Executive Dr Bill Bogie said:

"Our first half 1999 results reflect the continuing decline in sales of methylphenidate. Our success in growing our core products, our tight control of costs and our investment in the future are, however, all positive. We are intent upon improving our overall performance next year, and we look forward to a period of renewed prosperity as our promising product pipeline starts to deliver new sources of sales."

OVERVIEW AND PROSPECTS

Medeva reports expected half year results that reflect the final transitional year from a Company once heavily dependant on methylphenidate sales to a much more broadly based business. Thus CNS sales in the half year were (pound)19.3 million ($31.3 million) and will decline further in the second half. By contrast non-CNS sales grew by 7% to (pound)106.9 million ($173.2 million) and are expected to continue to grow. New products and contracts will boost future sales, and together with management's plans for restructuring the business should lead to improving performance in 2000.

Our operating priority has been to develop and optimize profits from sales of our non-CNS products, particularly those associated with our Rochester facility. In this regard it is most encouraging to report that non-CNS products generated a profit contribution of (pound)23.8 million ($38.6 million), an increase of 25% over the first half 1998 and together with royalty income of (pound)4.7 million ($7.6 million) contributed (pound)28.5 million ($46.2 million), 75% of total profit before central and development expenditure (H1 98 : 44%).

Of course, our overall results reflect the continuing decline in sales of methylphenidate. This trend was already well established last year, has accelerated during this period and is expected to continue to do so during the remainder of 1999. Full year CNS sales may only total (pound)28 million ($45.4 million) and therefore methylphenidate will only make a small contribution to the Group's future until the expected introduction of a modified release form of methylphenidate in 2001.

Looking forward, we have continued to invest in building up our new product pipeline. We are pleased to announce that agreement in principle has been reached with ML Laboratories to license two further molecules in the Clickhaler DPI range. These are budesonide and formoterol. Further details will be announced when the agreement is finalized. Details of progress of our other principal projects are set out in the development pipeline section below. Our confidence is increasing in the contribution we can expect to enjoy from new products from next year onwards, notably from growing sales of Clickhaler and potential sales of both Hepagene(TM) (initially as a vaccine in Europe) and ConXn(R) for scleroderma once launched. In 2002 Medeva's CF Vector for cystic fibrosis, Hepagene as a treatment, and Nicotine for inflammatory bowel disease may also be launched provided they come successfully through clinical trials and are approved by the various regulatory agencies.

In the meantime our priorities are to remain strongly focused on our core products and to reinforce our cost disciplines. To this end we are today announcing that we plan to undertake a number of measures to reduce our cost base in the UK and increase the profitability of our domestic business; these measures include the closure of our present head office in central London and the reduction in overhead at our UK business headquarters in Leatherhead. These are expected to give rise to an exceptional charge in the second half of 1999 of (pound)8 million ($13.0 million) but will assist in securing annual cost savings of some (pound)10 million ($16.2 million) from 2000 onwards.

Medeva remains on target to achieve a double digit increase in its underlying non-CNS profit contribution in 1999. We have invested heavily in our business in the last three years and will continue to do so in the remainder of 1999 and 2000 with our total central and development expenditure broadly in line with 1998 levels for both those years. Our near term profit opportunities have also been enhanced by the recently announced co-promotion agreement with King Pharmaceuticals for the ACE-inhibitor Altace(R) in the US and by the manufacturing agreement announced last week with Aviron for the manufacture and supply from our specialist Speke site of FluMist(R), the cold-adapted influenza vaccine.