Serono 6-K 4-21-2005
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
________
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 April, 2005
Serono
S.A.
(Registrant’s
Name)
15 bis,
Chemin des Mines
Case
Postale 54
CH-1211
Geneva 20
Switzerland
(Address
of Principal Executive Offices)
1-15096
(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
Ö
Form 40-F
____
(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).)
(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).) _______
(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
Ö
(If “Yes”
is marked, indicate below the file number assigned to the registrant in
connection with Rule 12g3-2(b): 82-______)
Media
Release
FOR
RELEASE APRIL 21, 2005, 10.01 pm CET
SERONO
REPORTS Q1 2005 RESULTS
-
Rebif® US market share at
all-time high and Raptiva®
now reimbursed in 12 countries -
-
Provision taken for Serostim® investigation
resulting in one-time exceptional charge of $725m
-
|
Geneva,
Switzerland, April 21, 2005 - Serono
(virt-x: SEO and NYSE: SRA), the third largest biotechnology company
in the world, today reported its first quarter results for the period ended
March 31, 2005.
Key
Points for First Quarter 2005
|
|
Total
revenues up 8.0% to $601.4m (up 4.4% in local currencies) and product
sales up 6.7% to $551.4m (up 3.1% in local
currencies) |
|
|
Exceptional
charge of $725.0m related to previously reported US Attorney’s Office
investigation of Serostim®
resulting in reported net loss of $567.7m |
|
|
Excluding
exceptional charge net income down 11.7% to $92.7m (down 12.9% in local
currencies) and basic
EPS down
4.4% to $6.37
per bearer share and $0.16 per ADS* |
|
|
Rebif® US
market share at all-time high with 18.2% of total prescriptions and 22.4%
of new prescriptions at the end of the
quarter |
|
|
Raptiva®
reimbursement progressing well and now reimbursed in 12
countries |
|
|
Initiation
of Mylinax®
phase III trial, potentially the first oral treatment for people living
with multiple sclerosis |
“Serono’s
strong fundamentals in each of its therapeutic areas give us confidence to
deliver our top and bottom-line guidance for the full year, excluding the
one-time exceptional charge,” said Ernesto Bertarelli, Chief Executive Officer
of Serono, “I am very pleased with the recent market share of Rebif® in the
US which is at an all-time
high as well as with the reimbursement progress of Raptiva®.”
“Excluding
the one-time exceptional charge, our first quarter net income is in line with
our expectations for quarterly phasing this year,” said Stuart Grant, Chief
Financial Officer of Serono.
_______________________
* Non-IFRS
financial measures included in order to permit assessment of the performance of
the company’s underlying business for the quarter
Investigation
of Past Serostim®
Marketing Activity
The
company has taken a provision of $725.0m, in connection with the previously
reported Serostim®
investigation. The group’s principal US subsidiary, Serono, Inc., received a
subpoena in 2001 from the US Attorney’s office in Boston, Massachusetts
requesting that it produce documents for the period from 1992 to the present
relating to Serostim®. As part
of an ongoing, industry-wide investigation by the states and the federal
government into the setting of average wholesale prices and commercial
practices, other pharmaceutical companies have received similar subpoenas. These
investigations seek to determine whether such practices violated any laws,
including the Federal False Claims Act or the US Food, Drug and Cosmetic Act or
constituted fraud in connection with Medicare and/or Medicaid reimbursement to
third parties.
Serono
has cooperated fully with the investigation and continues to do so. Although no
final agreement has been reached, the company’s discussions with the US
Attorney’s office have advanced to a point where it is now appropriate to take a
provision that management believes will be sufficient to cover resolution of the
investigation related to Serostim®.
Serono is
committed to meet the highest standards of ethical behaviour. The company
participated in the setting of industry-wide codes of conduct, and has in place
a rigorous compliance program.
Financial
Performance
Total
revenues increased by 8.0% to
$601.4m in the
first quarter of 2005 (Q1 2004: $557.1m), or 4.4% in local currencies.
Product sales grew 6.7% to $551.4m (Q1 2004: $516.7m), or 3.1% in
local currencies, reflecting the strength of the first quarter 2004 and recent
developments in the competitive environment in the United States. Royalty and
license income increased by 23.8% to $50.0m
(Q1 2004: $40.4m).
Excluding
the one-time exceptional charge of $725.0m, total
operating expenses increased by 11.8% to $494.2m* in the
first quarter of 2005 (Q1 2004: $442.0m), or 7.6% in local currencies,
reflecting tight control on costs, particularly in view of a low base in the
first quarter of 2004.
Gross
margin increased to 89.2% of product sales (Q1 2004: 85.4%), as a
result of continuing manufacturing improvements, an increased proportion of
recombinant products sold, as well as a benefit following the closure of an
obsolete manufacturing plant last year.
Selling,
General and Administrative expenses were $214.6m (Q1 2004: $184.2m),
an increase of 16.5%. This increase is related to the Rebif® share of
voice expansion program and the on-going launch of Raptiva®.
_______________________
* Non-IFRS
financial measures included in order to permit assessment of the performance of
the company’s underlying business for the quarter
Research
and Development expenses of $156.3m (Q1 2004: $126.2m) were in line
with the previous quarter’s underlying level. R&D expenses increased by
23.8% from the first quarter of 2004, reflecting a strong increase in the number
of patients enrolled in late-stage projects during the first quarter of
2005.
Other
operating expenses were $63.8m (Q1 2004: $56.0m) incorporating for the
first time expenses of $4.0m related to stock options according to the IFRS 2
accounting change.
Including
the one-time exceptional charge of $725.0m, Serono
reported an operating loss of $617.8m in the first quarter of 2005. Excluding
the one-time exceptional charge, operating income decreased by 6.9% to $107.2m
or 17.8% of total revenues*
(Q1 2004: $115.1m
or 20.7% of total revenues).
Net
financial income was $6.9m (Q1 2004: $9.0m). Additionally a charge of
$4.7m was taken in the first quarter, in accordance with IAS 38 revised to
reflect the impairment in value of our equity stake in CancerVax.
Including
the one-time exceptional charge of $725.0m, Serono
reported a net loss of $567.7m in the first quarter of 2005. Excluding the
one-time exceptional charge, net income was down 11.7% to $92.7m*
(Q1 2004: $105.0m), or
12.9% in local currencies.
Basic
loss per share was $38.99 per bearer share (Q1 2004 EPS: $6.66) and
$0.97 per American Depositary Share (ADS) (Q1 2004 EPS: $0.17).
Excluding the one-time exceptional charge, basic earnings per share were down
4.4% to $6.37 per bearer share and $0.16 per ADS*.
For the
first quarter, net cash flow from operating activities before change in working
capital was $146.4m (Q1 2004: $157.1m), or $53.3m after change in
working capital (Q1 2004: $102.9m), reflecting milestone payments made
in the first quarter of 2005 relating to agreements signed in 2004 with
CancerVax and Micromet.
As of
March 31, 2005, there were 14,563,008
outstanding equivalent bearer shares of Serono SA, net of treasury
shares.
Therapeutic
Areas
Review
In the
first quarter of 2005, sales of Rebif® were up
12.8% (8.4% in local currencies) to $292.8m (Q1 2004: $259.6m).
Rebif®
continues its market leadership outside the US with sales increasing by 9.7% to
$216.1m (Q1 2004: $196.9m), or 4.1% in local currencies. Sales in the
US were up 22.4% to $76.8m in the first quarter. Rebif® ended
the quarter with an all-time high US market share of 18.2% of
total prescriptions and 22.4% of new prescriptions.
_______________________
* Non-IFRS
financial measures included in order to permit assessment of the performance of
the company’s underlying business for the quarter
Sales of
Raptiva®, the
first biological treatment for psoriasis to be authorized for marketing in the
European Union, were $4.5m in the first quarter 2005 (Q1 2004: $0.1m).
The pricing and reimbursement process progresses well and we recently achieved
reimbursement in the Netherlands, Spain, Italy and Norway. Raptiva® is now
reimbursed in 12 countries and the roll-out will continue throughout
2005.
Sales of
Gonal-f®
increased by 0.5% (-2.7% in local currencies) to $138.0m
(Q1 2004: $137.4m). Gonal-f®
performed well outside of the US but was impacted in the US by significant
discount programs offered by a competitor. In keeping with the phase out plan,
urine-derived gonadotropin sales were $5.1m in the first quarter (Q1 2004:
$12.9m).
Saizen® sales
increased by 17.6% (13.1% in local currencies) to $47.8m
(Q1 2004: $40.7m). Serostim® sales
decreased by 15.2% (15.3% in local currencies) to $18.3m
(Q1 2004: $21.5m). In April, Saizen®
successfully completed the EU mutual recognition procedure leading to marketing
approval for the treatment of short children born small for gestational age.
National approvals in 15 European countries based on this procedure will follow
shortly.
Regional
Sales
European
sales increased by 10.8% (4.4% in local currencies) to $264.9m
(Q1 2004: $239.1m). North American sales grew by 0.8% to $184.9m
(Q1 2004: $183.3m). In the rest of the world, sales grew by 7.8% (5.6%
in local currencies) to $101.7m (Q1 2004: $94.3m).
R&D
News
In the
first quarter Serono initiated a Phase III trial with Mylinax® in
relapsing forms of multiple sclerosis (MS). This is a two-year, double-blind,
placebo-controlled study. Endpoints include assessment of clinical relapses,
disability and MRI (magnetic resonance imaging) brain scans.
Serono’s
commitment to the field of MS is further underlined by its in-house research
programs and in-licensing activities. Recently Serono achieved a major milestone
in the identification of 80 genes involved in the inflammatory and
neuro-degenerative pathways of MS thereby providing potential new drug targets.
On March 31 Serono concluded an agreement with Syntonix to develop and
commercialize interferon-beta:Fc products. Syntonix’ technologies may enable the
development of an interferon-beta therapy for MS that can be administered by
inhalation.
On April
6 Serono announced the discontinuation of two clinical trial programs; onercept
(recombinant tumor necrosis factor binding protein) in moderate to severe
psoriasis and Canvaxin™ in stage IV melanoma. The decision to discontinue these
clinical programs is based on the recommendations of two separate independent
Data and Safety Monitoring Boards.
Conference
Call and Webcast
Serono
will hold a conference call on April 22nd, 2005, starting at 15:00 Central
European Time (9:00 am US Eastern Time) during which Serono Management will
present the Company's First Quarter 2005 Results. To join the telephone
conference please dial 1 866 291 4166 (from the US), 091 610 5600 (from
Switzerland), 0207 107 0611 (from the UK) and +41 91 610 5600 (from
elsewhere). 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 and will be
available for replay following the event.
###
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 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 US Securities
and Exchange Commission on March 16, 2005. 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, the outcome of government
investigations and litigation 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 eight biotechnology products,
Rebif®,
Gonal-f®,
Luveris®,
Ovidrel®/Ovitrelle®,
Serostim®,
Saizen®,
Zorbtive™ and Raptiva®. In
addition to being the world leader in reproductive health, Serono has strong
market positions in neurology, metabolism and growth and has recently entered
the psoriasis area. The Company's research programs are focused on growing these
businesses and on establishing new therapeutic areas, including oncology.
Currently, there are approximately 30 ongoing development projects.
In 2004,
Serono achieved worldwide revenues of US$2,458.1 million, and a net income of
US$494.2 million, making it the third largest biotech company in the world. Its
products are sold in over 90 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).
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:
SEO.VX / SRA |
|
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 months ended March 31, 2005 and
2004. |
|
· |
Consolidated
statements of income for the 3 months ended March 31, 2005 and 2004; the
consolidated balance sheets as of March 31, 2005 and December 31, 2004;
the consolidated statements of equity as of March 31, 2005 and 2004; the
consolidated statements of cash flows for the 3 months ended March 31,
2005 and 2004; and the selected explanatory notes to the consolidated
financial statements. These consolidated financial statements have been
prepared on the basis of International Financial Reporting
Standards. |
Sales
by therapeutic area
|
|
Three
Months Ended March 31, 2005 |
|
|
|
Three
Months Ended March 31, 2004 |
|
|
|
|
|
|
|
|
|
|
|
$
million |
|
%
of sales |
|
%
change $ |
|
$
million |
|
%
of sales |
|
Neurology |
|
|
298.0 |
|
|
54.1 |
% |
|
12.3 |
% |
|
265.5 |
|
|
51.4 |
% |
Reproductive
Health |
|
|
165.5 |
|
|
30.0 |
% |
|
(2.8 |
%) |
|
170.2 |
|
|
32.9 |
% |
Growth
& Metabolism |
|
|
66.4 |
|
|
12.0 |
% |
|
6.8 |
% |
|
62.2 |
|
|
12.0 |
% |
Dermatology |
|
|
4.5 |
|
|
0.8 |
% |
|
3478.5 |
% |
|
0.1 |
|
|
0.0 |
% |
Others |
|
|
17.0 |
|
|
3.1 |
% |
|
(9.0 |
%) |
|
18.7 |
|
|
3.6 |
% |
Total
sales (US$ million) |
|
|
|
|
|
100 |
% |
|
6.7 |
% |
|
|
|
|
100 |
% |
Sales
by geographic region
|
|
Three
Months Ended March 31, 2005 |
|
|
|
Three
Months Ended March 31 , 2004 |
|
|
|
|
|
|
|
|
|
|
|
$
million |
|
%
of sales |
|
%
change $ |
|
$
million |
|
%
of sales |
|
Europe |
|
|
264.9 |
|
|
48.0 |
% |
|
10.8 |
% |
|
239.1 |
|
|
46.3 |
% |
North
America |
|
|
184.9 |
|
|
33.5 |
% |
|
0.8 |
% |
|
183.3 |
|
|
35.5 |
% |
Latin
America |
|
|
29.5 |
|
|
5.4 |
% |
|
11.9 |
% |
|
26.4 |
|
|
5.1 |
% |
Others |
|
|
72.2 |
|
|
13.1 |
% |
|
6.2 |
% |
|
67.9 |
|
|
13.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
sales (US$ million) |
|
|
|
|
|
100 |
% |
|
6.7 |
% |
|
|
|
|
100 |
% |
|
|
Three
Months Ended March, 2005 |
|
Three
Months Ended March, 2004 |
|
|
|
|
|
|
|
|
*TA |
$
million |
%
of sales |
%
change $ |
$
million |
%
of sales |
|
|
|
|
|
|
|
Rebif® |
MS |
292.8 |
53.1% |
12.8% |
259.6 |
50.2% |
Gonal-f® |
RH |
138.0 |
25.0% |
0.5% |
137.4 |
26.6% |
Saizen® |
Growth |
47.8 |
8.7% |
17.6% |
40.7 |
7.9% |
Serostim® |
Wasting |
18.3 |
3.3% |
(15.2%) |
21.5 |
4.2% |
Novantrone® |
MS/Oncology |
16.0 |
2.9% |
4.5% |
15.3 |
3.0% |
Cetrotide® |
RH |
6.2 |
1.1% |
(1.0%) |
6.3 |
1.2% |
Ovidrel® |
RH |
5.7 |
1.0% |
46.2% |
3.9 |
0.8% |
Crinone® |
RH |
5.6 |
1.0% |
24.7% |
4.5 |
0.9% |
Raptiva® |
Dermatology |
4.5 |
0.8% |
3478.5% |
0.1 |
0.0% |
Stilamin® |
Other |
3.5 |
0.6% |
(14.1%) |
4.1 |
0.8% |
*
Therapeutic
Areas
|
RH |
=
Reproductive Health |
Wasting |
=
AIDS Wasting |
MS |
=
Multiple Sclerosis |
Growth |
=
Growth Retardation |
Oncology |
=
Oncology |
Dermatology |
=
Dermatology |
CONSOLIDATED
INCOME STATEMENTS
Three
months ended March 31 |
|
2005*
US$'000 |
|
%
of Revenues |
|
%
change |
|
2004*
US$'000 |
|
%
of Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product
sales |
|
|
551,413 |
|
|
|
|
|
6.7 |
% |
|
516,713 |
|
|
|
|
Royalty
and license income |
|
|
49,969 |
|
|
|
|
|
23.8 |
% |
|
40,378 |
|
|
|
|
Total
Revenues |
|
|
601,382 |
|
|
100.0 |
|
|
8.0 |
% |
|
557,091 |
|
|
100.0 |
% |
Operating
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of product sales |
|
|
59,470 |
|
|
|
|
|
|
|
|
75,669 |
|
|
|
|
%
of Sales |
|
|
10.8 |
% |
|
|
|
|
|
|
|
14.6 |
% |
|
|
|
Selling,
general and administrative |
|
|
214,650 |
|
|
35.7 |
% |
|
16.5 |
% |
|
184,203 |
|
|
33.1 |
% |
Research
and development |
|
|
156,273 |
|
|
26.0 |
% |
|
23.8 |
% |
|
126,199 |
|
|
22.7 |
% |
Exceptional
litigation expense and related costs |
|
|
725,000 |
|
|
120.6 |
% |
|
-- |
|
|
-- |
|
|
-- |
|
Other
operating expense, net |
|
|
63,824 |
|
|
10.6 |
% |
|
14.1 |
% |
|
55,954 |
|
|
10.0 |
% |
Total
Operating Expenses |
|
|
1,219,217 |
|
|
202.7 |
% |
|
175.8 |
% |
|
442,025 |
|
|
79.3 |
% |
Operating
(Loss) / Income |
|
|
(617,835 |
) |
|
(102.7 |
%) |
|
(636.9 |
%) |
|
115,066 |
|
|
20.7 |
% |
Financial
income, net |
|
|
6,887 |
|
|
|
|
|
(23.8 |
%) |
|
9,034 |
|
|
|
|
Other
(expense) / income, net |
|
|
(4,289 |
) |
|
|
|
|
|
|
|
4 |
|
|
|
|
Total
Non Operating Income, net |
|
|
2,598 |
|
|
|
|
|
|
|
|
9,038 |
|
|
|
|
(Loss)
/ Income Before Taxes and Minority Interests |
|
|
(615,237 |
) |
|
(102.3 |
%) |
|
(595.7 |
%) |
|
124,104 |
|
|
22.3 |
% |
Taxes |
|
|
(48,061 |
) |
|
|
|
|
|
|
|
20,031 |
|
|
|
|
(Loss)
/ Income Before Minority Interests |
|
|
(567,176 |
) |
|
|
|
|
|
|
|
104,073 |
|
|
|
|
Minority
interests |
|
|
573 |
|
|
|
|
|
|
|
|
(974 |
) |
|
|
|
Net
(Loss) / Income |
|
|
(567,749 |
) |
|
(94.4 |
%) |
|
(640.5 |
%) |
|
105,047 |
|
|
18.9 |
% |
The
accompanying selected explanatory notes form an integral part of these financial
statements.
*
Unaudited
Proforma
net income excluding exceptional litigation expense and related costs *
*:
Net
(Loss) / Income |
|
|
(567,749 |
) |
|
|
|
|
|
|
|
105,047 |
|
|
1
8.9 |
% |
Exceptional
litigation expense and related costs |
|
|
725,000 |
|
|
|
|
|
|
|
|
-- |
|
|
|
|
Tax
impact |
|
|
(64,525 |
) |
|
|
|
|
|
|
|
-- |
|
|
|
|
Net
Income without exceptional litigation expense and related
costs |
|
|
92,726 |
|
|
15.4 |
% |
|
(11.7 |
%) |
|
105,047 |
|
|
18.9 |
% |
* *
Non-IFRS financial measure included in order to permit assessment of the
performance of the company’s underlying business for the quarter.
CONSOLIDATED
BALANCE SHEETS
As of |
|
March
31, 2005 *
US$'000 |
|
December
31, 2004
US$'000 |
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
Current
Assets |
|
|
|
|
|
|
|
Cash
and cash equivalents |
|
|
486,187 |
|
|
275,979 |
|
Short-term
financial assets |
|
|
715,836 |
|
|
784,999 |
|
Trade
accounts receivable |
|
|
415,595 |
|
|
427,935 |
|
Inventories |
|
|
314,556 |
|
|
326,937 |
|
Prepaid
expenses and other current assets |
|
|
243,680 |
|
|
237,205 |
|
Total
Current Assets |
|
|
2,175,854 |
|
|
2,053,055 |
|
|
|
|
|
|
|
|
|
Non-Current
Assets |
|
|
|
|
|
|
|
Tangible
fixed assets |
|
|
764,905 |
|
|
799,878 |
|
Intangible
assets |
|
|
283,317 |
|
|
290,558 |
|
Deferred
tax assets |
|
|
264,722 |
|
|
201,021 |
|
Long-term
financial assets |
|
|
818,589 |
|
|
929,030 |
|
Other
long-term assets |
|
|
128,988 |
|
|
133,302 |
|
Total
Non-Current Assets |
|
|
2,260,521 |
|
|
2,353,789 |
|
Total
Assets |
|
|
4,436,375 |
|
|
4,406,844 |
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
Current
Liabilities |
|
|
|
|
|
|
|
Trade
and other payables |
|
|
389,773 |
|
|
426,616 |
|
Short-term
financial debts |
|
|
38,791 |
|
|
34,527 |
|
Income
taxes |
|
|
156,361 |
|
|
166,861 |
|
Deferred
income - current |
|
|
32,948 |
|
|
33,128 |
|
Other
current liabilities |
|
|
915,255 |
|
|
208,071 |
|
Total
Current Liabilities |
|
|
1,533,128 |
|
|
869,203 |
|
|
|
|
|
|
|
|
|
Non-Current
Liabilities |
|
|
|
|
|
|
|
Long-term
financial debts |
|
|
625,136 |
|
|
640,892 |
|
Deferred
tax liabilities |
|
|
20,347 |
|
|
24,242 |
|
Deferred
income - non current |
|
|
149,367 |
|
|
157,004 |
|
Provisions
and other long-term liabilities |
|
|
275,625 |
|
|
276,610 |
|
Total
Non-Current Liabilities |
|
|
1,070,475 |
|
|
1,098,748 |
|
Total
Liabilities |
|
|
2,603,603 |
|
|
1,967,951 |
|
|
|
|
|
|
|
|
|
Minority
Interests |
|
|
3,869 |
|
|
3,343 |
|
|
|
|
|
|
|
|
|
Shareholders'
Equity |
|
|
|
|
|
|
|
Share
capital |
|
|
254,951 |
|
|
254,420 |
|
Share
premium |
|
|
1,039,557 |
|
|
1,023,332 |
|
Treasury
shares |
|
|
(984,874 |
) |
|
(987,489 |
) |
Retained
earnings |
|
|
1,453,114 |
|
|
2,020,863 |
|
Fair
value and other reserves |
|
|
19,940 |
|
|
56,829 |
|
Cumulative
foreign currency translation adjustments |
|
|
46,215 |
|
|
667,595 |
|
Total
Shareholder's Equity |
|
|
1,828,903 |
|
|
2,435,550 |
|
|
|
|
|
|
|
|
|
Total
Liabilities, Minority Interests and Shareholders' Equity |
|
|
4,436,375 |
|
|
4,406,844 |
|
The
accompanying selected explanatory notes form an integral part of these financial
statements.
* Unaudited
CONSOLIDATED
STATEMENTS OF CHANGES IN EQUITY
|
|
Share
capital
US$'000 |
|
Share
premium
US$'000 |
|
Treasury
shares
US$'000 |
|
Retained
earnings
US$'000 |
|
Fair
value and
other reserves US$'000 |
|
Cumulative
foreign currency translation adjustments
US$'000 |
|
Total
US$'000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as of January 1, 2004: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
previously reported |
|
|
253,895 |
|
|
1,002,991 |
|
|
(157,642 |
) |
|
1,669,700 |
|
|
22,711 |
|
|
88,535 |
|
|
2,880,190 |
|
Effect
of revisions to IAS 39 Financial Instruments: Recognition and
Measurement |
|
|
|
|
|
|
|
|
|
|
|
(26,649 |
) |
|
33,137 |
|
|
(2,035 |
) |
|
4,453 |
|
Effect
of IFRS 2 Share Based Payments |
|
|
|
|
|
|
|
|
|
|
|
(2,945 |
) |
|
|
|
|
|
|
|
(2,945 |
) |
As
restated |
|
|
253,895 |
|
|
1,002,991 |
|
|
(157,642 |
) |
|
1,640,106 |
|
|
55,848 |
|
|
86,500 |
|
|
2,881,698 |
|
Acquisition
of treasury shares |
|
|
|
|
|
|
|
|
(103,125 |
) |
|
|
|
|
|
|
|
|
|
|
(103,125 |
) |
Issue
of share capital |
|
|
419 |
|
|
16,690 |
|
|
3,189 |
|
|
|
|
|
|
|
|
|
|
|
20,298 |
|
Net
income |
|
|
|
|
|
|
|
|
|
|
|
105,047 |
|
|
|
|
|
|
|
|
105,047 |
|
Fair
value adjustments on available-for sales investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,962 |
|
|
|
|
|
9,962 |
|
Translation
effects |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(23,540 |
) |
|
(23,540 |
) |
Balance
as of March 31, 2004 * |
|
|
254,314 |
|
|
1,019,681 |
|
|
(257,578 |
) |
|
1,745,153 |
|
|
65,810 |
|
|
62,960 |
|
|
2,890,340 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as of January 1, 2005: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
previously reported |
|
|
254,420 |
|
|
1,023,125 |
|
|
(987,489 |
) |
|
2,064,499 |
|
|
23,482 |
|
|
69,841 |
|
|
2,447,878 |
|
Effect
of revisions to IAS 39 Financial Instruments: Recognition and
Measurement |
|
|
|
|
|
|
|
|
|
|
|
(28,546 |
) |
|
33,347 |
|
|
(2,246 |
) |
|
2,555 |
|
Effect
of IFRS 2 Share Based Payments |
|
|
|
|
|
207 |
|
|
|
|
|
(15,090 |
) |
|
|
|
|
|
|
|
(14,883 |
) |
As
restated |
|
|
254,420 |
|
|
1,023,332 |
|
|
(987,489 |
) |
|
2,020,863 |
|
|
56,829 |
|
|
67,595 |
|
|
2,435,550 |
|
Issue
of share capital |
|
|
531 |
|
|
16,206 |
|
|
2,615 |
|
|
|
|
|
|
|
|
|
|
|
19,352 |
|
Fair
value of stock options on Serono shares that have
vested |
|
|
|
|
|
19 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19 |
|
Net
loss |
|
|
|
|
|
|
|
|
|
|
|
(567,749 |
) |
|
|
|
|
|
|
|
(567,749 |
) |
Recognition
of unrealized loss on available-for-sale
investment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,700 |
|
|
|
|
|
4,700 |
|
Fair
value adjustments on available-for sales
investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(40,111 |
) |
|
|
|
|
(40,111 |
) |
Fair
value adjustments on financial instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,478 |
) |
|
|
|
|
(1,478 |
) |
Translation
effects |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(21,380 |
) |
|
(21,380 |
) |
Balance
as of March 31, 2005 * |
|
|
254,951 |
|
|
1,039,557 |
|
|
(984,874 |
) |
|
1,453,114 |
|
|
19,940 |
|
|
46,215 |
|
|
1,828,903 |
|
The
accompanying selected explanatory notes form an integral part of these financial
statements.
* Unaudited
CONSOLIDATED
CASH FLOW STATEMENTS
Three
months ended March 31 |
|
2005
*
US$'000 |
|
2004
*
US$'000 |
|
|
|
|
|
|
|
|
|
(Loss)
/ Income before taxes and minority interests |
|
|
(615,237 |
) |
|
124,104
|
|
Reversal
of non-cash items |
|
|
|
|
|
|
|
Depreciation
and amortization |
|
|
34,493
|
|
|
33,204
|
|
Financial
income |
|
|
(13,716 |
) |
|
(16,864 |
) |
Financial
expense |
|
|
4,550
|
|
|
6,896
|
|
Legal
provision |
|
|
725,000
|
|
|
--
|
|
Other
non-cash items |
|
|
11,302
|
|
|
9,730
|
|
Cash
Flows From Operating Activities Before Working Capital
Changes |
|
|
146,392
|
|
|
157,070
|
|
|
|
|
|
|
|
|
|
Working
Capital Changes |
|
|
|
|
|
|
|
Trade
accounts payable, other current liabilities and deferred
income |
|
|
(40,892 |
) |
|
19,332
|
|
Trade
accounts receivable and other receivables |
|
|
(5,671 |
) |
|
(16,154 |
) |
Inventories |
|
|
(3,254 |
) |
|
1,148
|
|
Prepaid
expenses and other current assets |
|
|
(19,866 |
) |
|
(20,817 |
) |
Taxes
paid |
|
|
(23,434 |
) |
|
(37,704 |
) |
Total
working capital changes |
|
|
(93,117 |
) |
|
(54,195 |
) |
Net
Cash Flows From Operating Activities |
|
|
53,275
|
|
|
102,875
|
|
|
|
|
|
|
|
|
|
Investment
in tangible fixed assets |
|
|
(36,554 |
) |
|
(39,492 |
) |
Proceeds
from disposal of tangible fixed assets |
|
|
74
|
|
|
2,954
|
|
Purchase
of intangible and other long-term assets |
|
|
(5,427 |
) |
|
(3,510 |
) |
Purchase
of available-for-sale investments |
|
|
(193,331 |
) |
|
(574,439 |
) |
Proceeds
from sale of available-for-sale investments |
|
|
334,820
|
|
|
159,208
|
|
Interest
received |
|
|
29,138
|
|
|
26,931
|
|
Net
Cash Flows From Investing Activities |
|
|
128,720
|
|
|
(428,348 |
) |
|
|
|
|
|
|
|
|
Acquisition
of treasury shares |
|
|
--
|
|
|
(103,125 |
) |
Proceeds
from issue of Serono shares |
|
|
11,055
|
|
|
10,333
|
|
Proceeds
from exercise of options on Serono shares |
|
|
2,220
|
|
|
318
|
|
Proceeds
from issue of options on Serono shares |
|
|
283
|
|
|
--
|
|
Increase
in long-term financial debts |
|
|
14,125
|
|
|
8,784
|
|
Change
in short-term financial debts |
|
|
5,071
|
|
|
(5,582 |
) |
Other
non-current liabilities |
|
|
(2,883 |
) |
|
1,985
|
|
Interest
paid |
|
|
(953 |
) |
|
(1,894 |
) |
Net
Cash Flows From Financing Activities |
|
|
28,918
|
|
|
(89,181 |
) |
Effect
of Exchange Rate Changes on Cash and Cash Equivalents |
|
|
(705 |
) |
|
(1,489 |
) |
Net
Increase/(Decrease) in Cash and Cash Equivalents |
|
|
210,208
|
|
|
(416,143 |
) |
|
|
|
|
|
|
|
|
Cash
and cash equivalents at the beginning of period |
|
|
275,979
|
|
|
1,003,972
|
|
Cash
and cash equivalents at the end of period |
|
|
486,187
|
|
|
587,829
|
|
The
accompanying selected explanatory notes form an integral part of these financial
statements.
Selected
explanatory notes to the interim consolidated financial statements
(unaudited)
The
accompanying condensed unaudited interim consolidated financial statements have
been prepared in accordance with International Accounting Standard 34 (Interim
Financial Reporting). The accounting policies used in the preparation of the
interim consolidated financial statements are consistent with those used by
Serono in its annual consolidated financial statements for the year ended
December 31, 2004. These interim consolidated financial statements should be
read in conjunction with the 2004 annual consolidated financial statements.
These consolidated financial statements were approved for issuance on April
19th, 2005 by
Serono S.A.’s board of directors.
2. |
Adoption
of International Accounting
Standards |
On
January 1, 2005, the group adopted revisions that were made to International
Accounting Standard 39 Financial Instruments: Recognition and Measurement (“IAS
39”). Under the revised version of IAS 39, the definition of objective evidence
related to the impairment of available-for-sale investments has been expanded
such that any significant or prolonged decline in the fair value of an
available-for-sale investment below its cost is objective evidence of
impairment. The management of the Serono considers “significant” to mean at
least 25% of the cost of an investment and “prolonged” to mean more than six
months. Accordingly, several of the group’s equity investments were technically
impaired in prior years under the revised definition of objective
evidence.
The
revisions to IAS 39 must be applied retrospectively, and as a result, opening
retained earnings as of January 1, 2004 and 2005 have been adjusted as if this
standard had always been in use. Reported other expense for the twelve months
ended December 31, 2000, 2001 and 2002 has been increased by $19.3 million, $7.2
million and $14.8 million respectively, while other expense for the twelve
months ended December 31, 2003 has been decreased by $10.2 million. Net income
for the twelve months ended December 31, 2000, 2001 and 2002 has been decreased
by $18.5 million, $5.3 million and $12.8 million, respectively, while net income
for the twelve months ended December 31, 2003 has been increased by $10.0
million.
Shareholders
equity as of January 1, 2004 and 2005 has been updated to incorporate the impact
of the revisions made to IAS 39. Retained earnings as of January 1, 2004 and
2005 have been reduced by $26.6 million and $28.5 million, which is net of
income taxes in the amounts of $4.5 million and $2.6 million, respectively. Fair
value and other reserves as of January 1, 2004 and 2005 have been increased by
$33.1 million and $33.3 million, respectively.
The group
also adopted International Financial Reporting Standard 2 Shares-Based Payment
starting January 1, 2005, which must be applied to all grants of shares, stock
option or other equity instruments that were granted after November 7, 2002 and
had not yet vested at January 1, 2005. As a result, other operating expense
reported for the twelve months ended December 31, 2003 and 2004 has been
increased by $2.9 million and $12.1 million, respectively. Other operating
expense for the three months ended March 31, 2004 has been increased by $1.0
million. Net income for the above periods has been decreased by the same amounts
respectively.
Retained
earnings as of January 1, 2004 and 2005 have been reduced by $2.9 million and
$15.1 million, respectively.
3. |
Segment
information - geographical segment |
Three
months ended March 31, 2005 |
|
Europe
US$000 |
|
North
America
US$000 |
|
Middle
East, Africa and Eastern Europe
US$000 |
|
Asia-Pacific,
Oceania and Japan
US$000 |
|
Latin
America
US$000 |
|
Unallocated
US$000 |
|
Total
US$000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product
sales |
|
|
264,876 |
|
|
184,858 |
|
|
42,777 |
|
|
29,396 |
|
|
29,506 |
|
|
- |
|
|
551,413 |
|
Royalty
and license income |
|
|
42,949 |
|
|
428 |
|
|
6,592 |
|
|
- |
|
|
- |
|
|
- |
|
|
49,969 |
|
Total
revenues |
|
|
307,825 |
|
|
185,286 |
|
|
49,369 |
|
|
29,396 |
|
|
29,506 |
|
|
- |
|
|
601,382 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
loss before unallocated expenses |
|
|
(589,495 |
) |
|
88,067 |
|
|
14,391 |
|
|
8,382 |
|
|
15,271 |
|
|
(28,413 |
) |
|
(491,797 |
) |
Corporate
research and development expenses |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(126,038 |
) |
|
(126,038 |
) |
Operating
loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(617,835 |
) |
Selected
explanatory notes to the interim consolidated financial statements
(unaudited)
Three
Months ended March 31,2004 |
|
|
|
|
|
Middle
East, Africa and Eastern
Europe
US$000 |
|
Asia-
Pacific,
Oceania
and Japan
US$000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product
sales |
|
|
239,077 |
|
|
183,318 |
|
|
42,248 |
|
|
25,708 |
|
|
26,362 |
|
|
- |
|
|
516,713 |
|
Royalty
and license income |
|
|
35,101 |
|
|
871 |
|
|
4,406 |
|
|
- |
|
|
- |
|
|
- |
|
|
40,378 |
|
Total
revenues |
|
|
274,178 |
|
|
184,189 |
|
|
46,654 |
|
|
25,708 |
|
|
26,362 |
|
|
- |
|
|
557,091 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income before unallocated expenses |
|
|
107,103 |
|
|
96,168 |
|
|
12,984 |
|
|
6,550 |
|
|
13,659 |
|
|
(23,427 |
) |
|
213,037 |
|
Corporate
research and development expenses |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(97,971 |
) |
|
(97,971 |
) |
Operating
income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
115,066 |
|
Unallocated
items represent income, expenses or corporate coordination functions which are
not directly attributable to specific geographical segments. Product sales are
based on the country in which the customer is located, while royalty and license
income is based on the country that receives the royalty. There are no sales or
other transactions between the business segments.
4. |
Available-for-sale
investments |
During
the first quarter of 2005, the group recognized an unrealized loss within other
expense of $4.7 million that resulted from the decline in the fair value of one
of its available-for-sales investments as required under International
Accounting Standard 39 Financial Instruments: Recognition and
Measurement.
Tax
income recognized for the three months ended March 31, 2005 includes
$64.5million in deferred tax income from the recognition of exceptional
litigation expense and related costs that was recorded during the quarter as
disclosed in note 13 legal proceedings.
Basic
loss per share
Basic
loss per share is calculated by dividing the net loss attributable to
shareholders by the weighted average number of shares outstanding during the
period presented. The number of outstanding shares is calculated by deducting
the average number of shares purchased and held as treasury shares from the
total of all issued shares:
|
|
Three
months ended March 31 |
|
|
|
2005
US
$000 |
|
2004
US
$000 |
|
Net
(loss) / income attributable to bearer shareholders |
|
|
(395,977 |
) |
|
75,710
|
|
Net
(loss) / income attributable to registered shareholders |
|
|
(171,772 |
) |
|
29,337 |
|
Total
net (loss) / income |
|
|
(567,749 |
) |
|
105,047 |
|
|
|
|
|
|
|
|
|
Weighted
average number of bearer shares outstanding |
|
|
10,155,130 |
|
|
1
1
,368,535 |
|
Weighted
average number of registered shares outstanding |
|
|
11,013,040 |
|
|
11,013,040 |
|
|
|
Three
months ended March 31 |
|
|
|
2005
US$ |
|
2004
US$ |
|
Basic
(loss) / earnings per share |
|
|
|
|
|
|
|
Bearer
shares |
|
|
(38.99 |
) |
|
6.66 |
|
Registered
shares |
|
|
(15.60 |
) |
|
2.66 |
|
American
depositary shares |
|
|
(0.97 |
) |
|
0.17 |
|
Selected
explanatory notes to the interim consolidated financial statements
(unaudited)
Net
income without exceptional litigation expense and related costs was $92.7
million and basic earnings per share without exceptional litigation expense and
related costs was $6.37 per bearer share, $2.55 per registered share and $0.16
per American depositary share. Diluted earnings per share without exceptional
litigation expense and related costs was $6.36 per bearer share, $2.54 per
registered share, and $0.16 per American depositary share.
Diluted
loss per share
For
diluted loss per share, the weighted average number of bearer shares outstanding
is adjusted to assume conversion of all potential dilutive shares arising from
outstanding stock options and the convertible bond. For stock options, a
calculation is done to determine the number of shares that could have been
acquired at fair value based on proceeds from the exercise of stock
options. The
number of shares calculated as above is compared with the number of shares that
would have been issued assuming the exercise of the stock options. The
difference is added to the denominator as additional shares for no
consideration. There is no adjustment made to the numerator. The weighted
average number of bearer shares outstanding would be increased by 23,807 shares
(2004: 35,641 shares); however, the impact of stock options granted to employees
and directors was not included in the calculated diluted loss per shares as they
were anti-dilutive.
For the
convertible bond, the number of shares into which the bond is assumed to be
fully convertible is added to the denominator. The numerator, net loss, is
decreased by eliminating the interest expense, net of tax, that would not be
incurred if the bond were converted. For the first quarter 2005 and 2004, the
effect of the convertible bond was excluded from the calculation of diluted loss
and earnings per share as it was anti-dilutive.
|
|
As
of March 31, 2005 |
|
Class
of shares |
|
Number
of shares |
|
Nominal
value |
|
CHF000 |
|
US$000 |
|
Issued
and fully paid share capital |
|
|
|
|
|
|
|
|
|
|
|
|
|
Registered |
|
|
11,013,040 |
|
|
CHF10 |
|
|
110,130 |
|
|
68,785 |
|
Bearer |
|
|
11,763,460 |
|
|
CHF25 |
|
|
294,087 |
|
|
186,167 |
|
Total |
|
|
|
|
|
|
|
|
404,217 |
|
|
254,952 |
|
Authorized
share capital - bearer |
|
|
1,400,000 |
|
|
CHF25 |
|
|
35,000 |
|
|
29,276 |
|
Conditional
share capital - bearer for options and/or convertible
bonds |
|
|
1,452,000 |
|
|
CHF25 |
|
|
36,300 |
|
|
30,364 |
|
Conditional
share capital - bearer for stock options |
|
|
701,366 |
|
|
CHF25 |
|
|
17,534 |
|
|
14,667 |
|
|
|
As
of December 31,
2004 |
|
Class
of shares |
|
Number
of shares |
|
Nominal
value |
|
CHF000 |
|
US$000 |
|
Issued
and fully paid share capital |
|
|
|
|
|
|
|
|
|
|
|
|
|
Registered |
|
|
11,013,040 |
|
|
CHF10 |
|
|
110,130 |
|
|
68,785 |
|
Bearer |
|
|
11,738,175 |
|
|
CHF25 |
|
|
293,455 |
|
|
185,635 |
|
Total |
|
|
|
|
|
|
|
|
403,585 |
|
|
254,420 |
|
Authorized
share capital - bearer |
|
|
1,400,000 |
|
|
CHF25 |
|
|
35,000 |
|
|
30,905 |
|
Conditional
share capital - bearer for option and/or convertible bonds |
|
|
1,452,000 |
|
|
CHF25 |
|
|
36,300 |
|
|
32,053 |
|
Conditional
share capital - bearer for stock options |
|
|
726,651 |
|
|
CHF25 |
|
|
18,166 |
|
|
16,041 |
|
The
authorized share capital may be used by Serono S.A. or its affiliates to finance
research and development projects and acquire interests in other companies.
There
were 1,611,434 treasury shares held by the group as of January 1,
2005.
During
the first three months ended March 31, 2005 no additional treasury shares were
acquired (2004: 160,600 treasury shares for a total consideration of CHF131.5
million or $103.1 million). During the first quarter 2005, 5,766 treasury shares
were granted to employees (6,648 shares in 2004), mostly as part of our employee
share purchase plan whereby shares purchased under the plan that are held for
one year after the purchase date entitle each participant to receive, on a
one-time basis, one matching share for every three shares purchased and
held.
Selected
explanatory notes to the interim consolidated financial statements
(unaudited)
The
CHF500.0 million Share Buy Back Plan, that was initiated in July 2002, has been
fully utilized resulting in a total of 647,853 treasury shares acquired. In May
2004, a second Share Buy Back Plan was initiated that is authorized to acquire
CHF750.0 million in bearer shares over a maximum period of five years. The
bearer shares acquired under the second Share Buy Back Plan will be subsequently
cancelled subject to the approval of the Annual General Meeting of shareholders
that will be held on April 26th
2005.
The total
number of treasury shares held as of March 31, 2005 is 1,605,668, of which
962,435 treasury shares will eventually be cancelled.
9. |
Distribution
of earnings |
At the
Annual General Meeting of Shareholders on April 26, 2005, the Board of Directors
will propose a cash dividend in respect of 2004 of CHF3.60 gross (2003: CHF3.20)
per registered share, CHF9.00 gross (2003: CHF8.00) per bearer share or CHF0.23
per American depositary share, amounting to a total of CHF131.1 million. The
amount available for dividend distribution is based on the available
distributable retained earnings of Serono S.A., the holding company of the
group, determined in accordance with the legal provisions of the Swiss Code of
Obligations. These financial statements do not reflect the dividends payable,
which will be accounted for in shareholders’ equity as an appropriation of
retained earnings in the year ending December 31, 2005.
Employee
stock option plan
Stock
options are granted to senior management members of Serono S.A. and its
affiliates. Each stock option gives the holder the right to purchase one bearer
share or one American depositary share (“ADS”) of Serono S.A. stock, depending
on which affiliate employs the holder. Stock options are granted every plan year
and vest as follows: 25% one year after date of grant, 50% after two years, 75%
after three years and 100% after four years. Options expire six years after the
fourth and final vesting date such that each option has a 10-year duration. The
exercise price is equal to the fair market value of the underlying Serono S.A.
bearer share or American depositary shares on the date of grant.
Movements
in the number of employee bearer stock options outstanding are as
follows:
|
|
2005 |
|
2004 |
|
|
|
Bearer
options |
|
Weighted
average exercise price CHF |
|
Bearer
options |
|
Weighted
average exercise price CHF |
|
Outstanding
as of January 1 |
|
|
346,446 |
|
|
995 |
|
|
277,782 |
|
|
1,068 |
|
Granted |
|
|
- |
|
|
- |
|
|
500 |
|
|
852 |
|
Exercised |
|
|
(4,345 |
) |
|
609 |
|
|
(740 |
) |
|
546 |
|
Cancelled |
|
|
(4,133 |
) |
|
1,070 |
|
|
(6,257 |
) |
|
1,151 |
|
Outstanding
as of March 31 |
|
|
337,968 |
|
|
999 |
|
|
271
,285 |
|
|
1,067 |
|
Movements
in the number of employee ADS stock options outstanding are as
follows:
|
|
2005 |
|
2004 |
|
|
|
ADS
options |
|
Weighted
average exercise price US$ |
|
ADS
options |
|
Weighted
average exercise price US$ |
|
Outstanding
as of January 1 |
|
|
1
,066,800 |
|
|
15.54 |
|
|
20,000 |
|
|
16.51 |
|
Granted |
|
|
- |
|
|
- |
|
|
14,000 |
|
|
17.21 |
|
Exercised |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Cancelled |
|
|
(59,800 |
) |
|
15.70 |
|
|
- |
|
|
- |
|
Outstanding
as of March 31 |
|
|
1,007,000 |
|
|
15.54 |
|
|
34,000 |
|
|
16.80 |
|
Selected
explanatory notes to the interim consolidated financial statements
(unaudited)
During
the first three months ended March 31, 2005, 4,345 bearer stock options (2004:
740 bearer stock options) were exercised yielding proceeds of CHF2.6 million or
$2.2 million (2004: CHF0.4 million or $0.3 million). Bearer and ADS stock
options cancelled in all years since inception of the plan are the result of
options forfeited by participants upon their departure from the group. The total
number of bearer and ADS stock options available for grant as of March 31, 2005
is 319,771 options (2004: 46,568 options).
Director
stock option plan
Stock
options are granted to members of the Board of Directors of Serono S.A. Each
stock option gives the holder the right to purchase one bearer share of Serono
S.A. stock. Stock options are granted every plan year and vest beginning one
year after their grant ratably over four years. Each option has a 10-year
duration. The exercise price is equal to the fair market value of the underlying
Serono S.A. bearer share on the date of grant. During the first three months
ended March 31, 2005, no stock options (2004: nil) were granted to directors. No
director stock options were cancelled or exercised during the first quarter 2005
and 2004.
There are
20,720 director stock options outstanding as of March 31, 2005 (2004:
15,520 director stock options) with a weighted average exercise price of CHF755
(2004: CHF749).
During
the first quarter of 2005, the group recognized a compensation expense related
to the fair value of stock options granted to employees and directors in the
amount of $4.0 million (2004: $1.0 million) as required under International
Financial Reporting Standard 2 Share-Based Payment. The expense recognized from
stock options is based on the binomial option-pricing model. A separate
valuation is carried out for each grant. There were no options granted during
the first three months of 2005.
Employee
share purchase plan
The group
has an employee share purchase plan (the “ESPP") covering substantially all of
its employees. The ESPP is designed to allow employees to purchase bearer shares
or American depositary shares at 85% of the lower of the fair market value at
the date of the beginning of the plan period and the purchase date. Purchases
under the ESPP are subject to certain restrictions and may not exceed 15% of the
employee’s annual salary. During the first quarter 2005, 20,940 bearer shares
(2004: 20,301 bearer shares) were issued to employees at a price of CHF630 per
share (2004: CHF654 per share). As of March 31, 2005, a total
of $3.2 million (2004: $2.8 million) in contributions was held by the group to
be used to purchase bearer and American depositary shares on behalf of employees
in January 2006. The accrued compensation cost from the discount to be offered
to employees based on the contributions held as of March 31, 2005 was $1.1
million (2004: $0.2 million).
Shares
purchased under the ESPP that are held for one year after the purchase date
entitle each participant to receive, on a one-time basis, one matching share for
every three shares purchased and held. In January 2005, 5,766 bearer shares
(2004: 6,648 bearer
shares) were distributed to employees. The accrued compensation cost for the
three months ended March 31, 2005 related to the matching shares that will be
distributed in January 2006 is $1.1 million (2004:
$1.1
million) and is calculated based on the number of matching shares multiplied by
the quarter-end share price.
Director
share purchase plan
During
2003, the group initiated a share purchase plan reserved for its Board of
Directors (the “DSPP”). The DSPP allows board members to purchase Serono S.A.
bearer shares through allocation of 50% or 100% of their gross yearly fees. Each
cycle commences on the first business day following the Annual General Meeting
of Shareholders (the “AGM”) and concludes on the day of the next AGM. Directors
must elect to participate in the DSPP at the beginning of each cycle. The
purchase price per share is 85% of the fair market value of the share on the
fifth business day following the AGM. Shares are purchased at the end of each
cycle. During the first three months ended March 31, 2005, no bearer shares
(none in 2004) were issued to the directors that participate in the
plan.
12. |
Principal
shareholders |
As of
March 31, 2005, Bertarelli & Cie, a partnership limited by shares with its
principal offices at Chéserex (Vaud), Switzerland, held 51.35% of the capital
and 65.26% of the voting rights in Serono S.A. Ernesto Bertarelli controls
Bertarelli & Cie. On the same date, Maria-Iris Bertarelli, Ernesto
Bertarelli and Donata Bertarelli Späth owned
in the aggregate 7.0% of the capital and 10.51% of the voting rights of Serono
S.A.
Selected
explanatory notes to the interim consolidated financial statements
(unaudited)
The
group’s principal U.S. subsidiary, Serono, Inc., received a subpoena in 2001
from the U.S. Attorney’s office in Boston, Massachusetts requesting that it
produce documents for the period from 1992 to the present relating to Serostim.
During 2002, Serono, Inc. also received subpoenas from the states of California,
Florida, Maryland and New York, which mirror the requests in the U.S. Attorney’s
subpoena. As part of an ongoing, industry-wide investigation by the states and
the federal government into the setting of average wholesale prices and
commercial practices, other pharmaceutical companies have received similar
subpoenas. These investigations seek to determine whether such practices
violated any laws, including the Federal False Claims Act or the U.S. Food, Drug
and Cosmetic Act or constituted fraud in connection with Medicare and/or
Medicaid reimbursement to third parties. Serono has cooperated fully with the
investigation and continues to do so. Although no final agreement has been
reached, the company’s discussions with the US Attorney’s office have advanced
to a point where it is now appropriate to take a provision that management
believes will be sufficient to cover resolution of the investigation related to
Serostim. A provision in the amount of $725.0 million ($660.5 million after-tax)
in connection with these investigations has been charged against the first
quarter 2005 earnings. The company believes that the provision will be fully
utilized before the end of the year.
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) |
|
|
|
|
|
|
|
|
|
April
22, 2005 |
By:
|
/s/
Stuart Grant |
|
|
Name:
Stuart Grant |
|
|
Title:
Chief Financial Officer |