Actelion Ltd : Actelion delivers strong progress in the first half of 2013

ALLSCHWIL/BASEL, SWITZERLAND - 18 July 2013 - Actelion Ltd (SIX: ATLN) today announced financial results for the first six months of 2013. 

OPERATING HIGHLIGHTS

• Strong sales and earnings performance in H1
•  Veletri® (epoprostenol for injection) launched in Japan
• Macitentan (Opsumit®) regulatory procedures on track
• Phase III study with selexipag in PAH passes interim analysis
• Phase III study with novel antibiotic cadazolid in CDAD to start enrolling in Q4
• Phase III study with ponesimod in psoriasis will not be initiated before full assessment of ongoing Phase I program with follow-up compound

FINANCIAL HIGHLIGHTS

• Product sales of CHF 884.1 million, an increase of 3% in local currencies
• Core earnings of CHF 330.7 million, an increase of 18% in local currencies
• Core EPS of CHF 2.39, an increase of 20%
• Guidance upgrade: 2013 local currency core earnings growth to cross into double-digit territory instead of flat
• CHF 800 million share repurchase program on track to be completed by Q4

As of 30 June 2013 Actelion had cash and cash deposits of CHF 1.5 billion (of which CHF 625.8 million is restricted). In addition, Actelion holds 10 million treasury shares.

Jean-Paul Clozel, MD, Chief Executive Officer commented: "I am very pleased with our strong performance in the first half of 2013. We have made significant progress with our pulmonary arterial hypertension franchise. Our existing products continue to be in high demand while our new product opportunities are advancing. The regulatory process for the approval of Opsumit® in the US, the European Union and other territoriesremains on track for a first market introduction later this year. Furthermore selexipag successfully passed the interim analysis, with a unanimous recommendation from the independent Data Monitoring Committee that the study continue as planned. Consequently,  the final results of this pivotal study are now expected in mid-2014."

Jean-Paul Clozel added: "Our efforts to build additional specialty franchises are also making progress. Cadazolid is in preparation for a Phase III program and we plan to initiate the studies by the end of the year. In the field of S1P receptor modulators, we are reviewing our development strategy for immunological disorders on the basis of encouraging data obtained with our follow-up compound. Emerging tolerability data in human volunteers suggest that this compound may be substantially differentiated from other S1P receptor modulators currently on the market or in clinical development."

Andrew Oakley, Chief Financial Officer, added: "Both sales and earnings are ahead of the comparable period last year. In addition, the operational and financial efficiencies introduced as part of our Cost Savings Initiative last year are making a substantial contribution to profitability. As a result, unforeseen events excluded, we expect to accelerate the growth previously forecast for 2014 into 2013, with local currency core earnings growth in 2013 now expected to cross into double-digit territory, compared to the previous guidance for the year of an unchanged core earnings level, relative to 2012."

In May 2012, Actelion gave guidance of flat local currency core earnings in 2012 and 2013, of single-digit core earnings growth (on a like-for-like basis) in 2014, and double-digit growth by 2015.

Andrew Oakley concluded. "Following the accelerated growth in both 2012 and 2013, our guidance for 2014 needs to be adapted to this higher performance base, and we now expect core earnings in local currencies to be at least at the same level for 2014 as for the current year. We would then expect earnings growth in at least the single-digit percentage range in 2015, again from a much higher base than expected when the three-year outlook was issued in 2012."

HALF YEAR REPORT

Full details on the progress made during the first six months of 2013 are available in Actelion's 2013 Half Year Report, available from www.actelion.com.

PRODUCT SALES FOR H1 2013

NON-GAAP TO US GAAP RECONCILIATION FOR H1 2013

CORE EPS CALCULATION

UPCOMING EVENTS

• 9M 2013 Financial Results reporting on 17 October 2013
• FY 2013 Financial Results reporting on 11 February 2014

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NOTES TO EDITORS

MANAGEMENT REVIEW

DEAR SHAREHOLDERS,

We are pleased to report the significant progress the company has made during the first half of 2013 in achieving the company's strategic objectives.

PROGRESS IN THE FIRST HALF OF 2013

Actelion has delivered a strong performance during the first half of the year, with both sales and earnings ahead of the comparable period last year. Good progress has also been made with our pulmonary arterial hypertension (PAH) portfolio and in the development of a new specialty therapeutic area.

Product revenues rose to CHF 884 million, (+3% in LC). Core earnings increased to CHF 331 million, (+18% in LC), and core earnings per share (EPS) rose by 20% to CHF 2.39 per share. This significant uplift in profitability was driven by continuing to deliver in the market place and better-than-expected results from the company's Cost Savings Initiative (CSI), which was announced in the middle of last year. The current expenditure base is expected to rise in the second half of this year, with R&D expenditure increasing as clinical trials are commenced or accelerated, and with extra resources being directed toward the launch of Opsumit®.

SUSTAINING GLOBAL LEADERSHIP IN PAH THERAPY

Actelion's leadership in PAH continues to be the foundation of our commercial strength. In the first half of 2013, this core franchise performed well, with demand for our existing PAH products remaining strong.

Tracleer® (bosentan) revenues rose to CHF 767 million (+3% in LC), and sales of Veletri® (epoprostenol for injection)  were CHF 14 million (+28% in LC). At the end of the second quarter - following approval by the local regulatory authorities in February - this product was launched in Japan, where it is being marketed as Epoprostenol "ACT" (0.5 mg and 1.5 mg). In addition, during the first half of 2013, the company successfully concluded a decentralized authorization procedure in Europe, with approvals secured in the Netherlands and the UK, and further national approvals expected in the near future. Following the approvals this product will be available to prescribers in the first European markets and in Canada in July, under the trade names Veletri and Caripul®, respectively. Competitive sales pressure continues to impact our inhaled form of prostacyclin, Ventavis® (iloprost), with sales of CHF 53 million (-6% in LC).

Meanwhile, our new product opportunities in PAH continue to make good progress. Further data on Opsumit presented at the American Thoracic Society (ATS) International Congress in Philadelphia in May were well received by the medical community. The regulatory process for the approval of Opsumit in the US, the European Union and other territories remains on track for a first market introduction later this year.

We also announced in May that selexipag, under evaluation in the Phase III GRIPHON study, successfully passed the interim analysis, with a unanimous recommendation from the independent Data Monitoring Committee that the study continue as planned. The final results of this pivotal study - designed to demonstrate a reduction in risk of morbidity/mortality events - are now expected in mid-2014. Selexipag, another product with the potential to change the PAH treatment paradigm, is an orally available selective IP receptor agonist that showed very positive results on pulmonary circulation in a Phase II study.

BUILDING ADDITIONAL SPECIALTY FRANCHISES

Zavesca® (miglustat) sales for the period rose to CHF 48 million (+17% in LC). We continued to see additional Niemann-Pick Type C patients benefiting from this substrate reduction therapy, which is still the only medicinal option available for this condition, demonstrating our commitment to meeting unmet medical needs in small patient populations.

Other efforts to build additional specialty franchises are also making progress. For example, our novel antibiotic cadazolid, used to treat Clostridium difficile associated diarrhea (CDAD), is in preparation for a Phase III program, and we plan to initiate the studies by the end of the year.

In the field of S1P receptor modulators, we are reviewing our development strategy for immunological disorders on the basis of encouraging data obtained with our follow-up compound. The company will not initiate a Phase III trial with ponesimod in psoriasis until the ongoing Phase I program with our second-generation compound has been fully assessed. Emerging tolerability data in human volunteers suggest that this compound may be substantially differentiated from other S1P receptor modulators currently on the market or in clinical development.

OPTIMIZING PROFITABILITY

We are committed to optimizing the earning power of the business. The operational and financial efficiencies resulting from last year's CSI are making a substantial contribution to profitability. The benefits of the CSI are larger and are being realized faster than anticipated.

OUTLOOK

In May 2012, Actelion gave guidance of flat local currency core earnings in 2012 and 2013, single-digit core earnings growth (on a like-for-like basis) in 2014, and double-digit growth by 2015.

In the second half of 2013, as mentioned above, we anticipate increased expenditure on SG&A and R&D. Nonetheless, given the strong performance of our marketed products and the ongoing benefits of the CSI program, we now expect to accelerate the growth previously forecast for 2014 into 2013. Barring unforeseen events, we expect 2013 local currency core earnings growth to cross into double-digit territory, compared to the previous guidance for the year of an unchanged core earnings level relative to 2012.

Compared to the original earnings guidance provided in May of last year, we will enter 2014 with a much higher than anticipated earnings base on the back of higher than previously guided earnings levels in both 2012 and 2013. Accordingly, our guidance for 2014 needs to be adapted to this higher performance base, and we now expect core earnings in local currencies to be at least at the same level for 2014 as for the current year. We would then expect earnings growth in at least the single-digit percentage range in 2015, again from a much higher base than expected when the three-year outlook was issued in 2012.

RETURNS TO SHAREHOLDERS

It has been a year since the company's new strategy was announced, and we are fully committed to further deliver on all aspects of the strategy. Substantial returns have already been achieved for shareholders, as reflected by Actelion's share price performance against benchmark indices during the past twelve months. Shareholders have also benefited from continuation of the CHF 800 million share repurchase program; a total of CHF 349 million has been spent during the first half of the year, leaving just CHF 67 million of the repurchase program outstanding. In addition, shareholders have benefited from the 25% increase in the dividend to CHF 1.00 per share, paid on 25 April 2013.

Building on the encouraging progress made to date, we believe that the company's current strategy will enable us to continue to deliver returns to shareholders, as well as providing significant value for the patients who benefit from our medicines.

Jean-Paul Clozel                                            Andrew J. Oakley

Chief Executive Officer                                   Chief Financial Officer

FINANCIAL SUMMARY

Product sales advanced to CHF 884 million an increase of 3% in local currencies. Core earnings were CHF 331 million, an increase of 18% in local currencies, and core earnings per share (EPS) rose to CHF 2.39 per share, a rise of 20%.

PRODUCT SALES

Overall, 42% of sales came from the US, 38% from Europe, 10% from Japan and 10% from other regions of the world.

Tracleer sales, on a local currency basis, increased by 3% to reach CHF 766.9 million. In the US, the company continued to see erosion of market share, leading to a decrease in shipments to patients, although unit performance for the half year was assisted by a marginal increase in wholesaler inventory levels. Sales performance in the US was also aided by an increase in the average selling price of 4%. In Europe, along with the rest of the pharmaceutical industry, Actelion saw price levels continue to erode with average pricing for the half year down approximately 3%, which eroded an otherwise solid underlying performance. In Japan, Actelion's second-largest country market, continued patient demand saw shipments increase by 10% with pricing virtually unchanged.

Veletri continued to gain share of the i.v. epoprostenol market in the US, finishing the first half of 2013 with an estimated 55% of the market share. Overall unit shipments were up 16% and the company also benefited from a price increase. Actelion also saw first sales in Japan late in the second quarter.

Ventavis sales for the period were CHF 53.2 million. This represents a decrease of 6% in local currencies, with unit volume decreasing by 10% in the face of continued competition but somewhat offset by an average upward price rise of 4%.

Zavesca sales continued to increase strongly with local currency growth of 17% to CHF 47.7 million. Actelion saw continued strong uptake in the Niemann-Pick Type C indication, outside of the US, with 29% more patients on therapy.

In the United States, sales deductions in the first half of 2013 were slightly higher in comparison to the same period a year ago. Nevertheless, net sales were positively affected by rebate reversals related to prior year sales to government customers of approximately CHF 8 million.  There may be an additional such benefit in the second half of the year, potentially further adding to core earnings growth.

OPERATING EXPENSES

Total core operating expenses for the half year were CHF 553.3 million, a decrease in local currency terms of 4%, a result of last year's Cost Saving Initiative (CSI) as well as some phasing of both R&D and SG&A as the company awaits the conclusion of the regulatory process for Opsumit.

During the first half of 2013, core research and development expenses totaled CHF 167.7 million a decrease of 16% on a local currency basis. Both fixed and variable costs decreased with personnel related costs at headquarters 9% lower than for the corresponding period a year ago. Discretionary spending was also lower, with the SERAPHIN study concluding in April 2012 and a number of studies being discontinued as a result of the CSI. With the cadazolid Phase III and other early development programs expected to start before the end of 2013, research and development expenses will increase in the second half of the year compared to the first.

Core selling, general and administration (SG&A) costs for the first half of the year amounted to CHF 283.2 million, an increase of 3% on a local currency basis. The second quarter of the year saw an acceleration of launch activities for both Veletri and Opsumit. Veletri, launched in Japan as Epoprostenol "ACT", saw first sales late in June. In Europe the registration process for Veletri was successfully concluded and the company is preparing for imminent launch in the first markets. With a number of major scientific congresses taking place in the second quarter, the company's outreach to PAH physicians was accelerated ahead of the expected approval of Opsumit in the first markets later this year. Additional costs were also seen at the corporate level in support of the commercial arbitration proceedings.

Non-core costs for the half year were CHF 69.4 million, compared to CHF 55.6 million in 2012. The main driver of the increase is an arbitration settlement of a commercial matter in the amount of CHF 12.9 million in the first quarter of the year. As a reminder, H1 2012 included a CHF 9.1 million milestone payment made to Auxilium Pharmaceuticals Inc. and also had a higher level of doubtful debt reversals, (CHF 19.3 million compared to CHF 8.0 million in 2013).

OPERATING INCOME

Operating income for the period totaled CHF 262.1 million, an increase of 15% on a local currency basis as operating margins increased to 30%, due to improved top-line performance and vigilant cost management.

Core earnings for the period were CHF 330.7 million, an increase of 18% on a local currency basis. A full reconciliation between operating income and core earnings can be found in the summary table.

NON-OPERATING RESULTS AND TAXES

Financial results for the half year showed a loss of CHF 28.3 million, compared to a loss of CHF 22.8 million for the corresponding period in 2012. On an absolute basis, financial results continue to be dominated by the interest provisions related to the Asahi litigation. The total charge for the period was CHF 19.7 million, compared to CHF 20.5 million for the corresponding period a year ago. Movement in other financial expense was mainly due to the weakening of the Japanese Yen compared to the Swiss Franc. Tax expense for the first six months amounted to CHF 34.4 million, which translates into a tax rate of 14.7%.

NET INCOME AND EARNINGS PER SHARE

Net income for the period amounted to CHF 199.5 million, which translates into fully diluted earnings per share of CHF 1.73, an increase of 18%. The continuing share buyback contributed 6% of this increase, demonstrating the company's ongoing commitment to shareholder value creation. Core earnings per share increased, on a local currency basis by 21% to CHF 2.39.

BALANCE SHEET AND CASH FLOW

The balance sheet continues to be very solid with cash and cash equivalents of CHF 1.5 billion. Trade and other receivables continued to increase in line with the trend seen in the second half of last year following the one-off payment of old receivables in Spain. Overall days sales outstanding (DSO) at the end of June was 78 days. Terms of trade remain challenging in a number of countries, but Actelion is encouraged that payment terms overall have not deteriorated during the first half of the year. The other major change was an increase in the amount of restricted cash set aside to secure the Asahi appeal. This increase was undertaken voluntarily in order to reduce both interest and bank charges associated with the insurance contracts securing the appeal.

Cash from operations for the first half of the year totaled CHF 299.2 million, an increase of 18% over the corresponding period last year, with stronger operational results being offset by an increase in working capital. This cash from operations was applied towards capital expenditures of CHF 13.6 million, compared to CHF 45.4 million for the corresponding period last year. Free cash flow for the period was therefore CHF 285.6 million, an increase of 37% compared to last year. Dividend payment for the year was CHF 113.3 million as the dividend was increased by 25% to CHF 1.00 per share. The total amount directed towards the share repurchase for the period was CHF 349.3 million. At the end of June, 92% of the CHF 800 million repurchase had been completed. Furthermore, by the end of the current repurchase, the company will have bought back approximately 13% of its share capital.

CLINICAL DEVELOPMENT UPDATE

Actelion currently has 10 compounds in clinical development studied in several therapeutic areas. The company is currently pursuing Phase III programs with two different compounds with an additional compound in preparation for Phase III investigation. 

Actelion's clinical development pipeline:

ABOUT ACTELION LTD

Actelion Ltd is a biopharmaceutical company with its corporate headquarters in Allschwil/Basel, Switzerland.  Actelion's first drug Tracleer®, an orally available dual endothelin receptor antagonist, has been approved as a therapy for pulmonary arterial hypertension.  Actelion markets Tracleer® through its own subsidiaries in key markets worldwide, including the United States (based in South San Francisco), the European Union, Japan, Canada, Australia and Switzerland.

Founded in late 1997 Actelion is a leading player in innovative science related to the endothelium - the single layer of cells separating every blood vessel from the blood stream.  Actelion's over 2,350 employees focus on the discovery, development and marketing of innovative drugs for significant unmet medical needs. Actelion shares are traded on the SIX Swiss Exchange (ticker symbol: ATLN) as part of the Swiss blue-chip index SMI (Swiss Market Index SMI®).

For further information please contact:

Roland Haefeli
Senior Vice President, Head of Investor Relations & Public Affairs
Actelion Pharmaceuticals Ltd, Gewerbestrasse 16, CH-4123 Allschwil
+41 61 565 62 62
+1 650 624 69 36