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Zurich, Switzerland, 22 October 2002 – Tecan, a leading player in the Life Sciences supply industry, today reported worldwide sales of CHF 244.5 million for the nine months ending September 30, 2002, a decrease of 5.5% or -0.5% in local currencies (2001: CHF 258.6 million). Operating profit amounted to CHF 32.3 million or 13.2% of sales (2001: CHF 39.0 million or 15.1% of sales) and EBITDA reached 17.7% of sales (2001: 18.3% of sales). Net profit was CHF 23.4 million or 9.6% of sales (2001: CHF 27.5 million or 10.6% of sales). Cash flow from operations increased to CHF 31 million (2001: CHF 13 million).
For the three months ending September 30, 2002, worldwide sales reached CHF 77.6 million, a decrease of 7.6% or -1.3% in local currencies (2001: CHF 84.0 million). During this quarter, sales in Drug Discovery increased significantly and could compensate for a slowdown in Diagnostics sales. Net profit increased by 8.2% to CHF 7.2 million or 9.2% of sales (2001: CHF 6.6 million or 7.9% of sales).
“In a difficult market environment, we registered an encouraging increase in sales in Drug Discovery during the third quarter of 2002 as well as some resilience in Genomics/Proteomics. However these positive developments were offset by the general economic slowdown that affected our Diagnostics sales, particularly in Latin America. The continuing appreciation of the Swiss franc against the US Dollar and the Euro also affected our business,” said Emile Sutcliffe, CEO of the Tecan Group.
Mr Sutcliffe added: ” While we expect to benefit from the ongoing launch of significant new products and applications during the second half of this year, we maintain, in the current economic environment, a cautious outlook for 2002. The implementation of our cost stabilisation program has allowed us to reduce our operating expenses for the first nine months of 2002. As of the fourth quarter of this year, we will also realize the impact of our cost reduction program which was announced and implemented in July 2002.”
Notable increase in Drug Discovery sales in the third quarter
For the three months ending September 30, 2002, worldwide sales reached CHF 77.6 million, compared with CHF 84.0 million in the same period in 2001, a decrease of 7.6% or -1.3% in local currencies. This lower sales level is largely attributable to a 28.6% decline in Diagnostic sales (-24.5% in local currencies) to CHF 28.9 million (2001: CHF 40.4 million), which was due to a strong base effect in 2002, as well as to a 80.1% decrease in sales in Latin America from CHF 4.8 million in 2001 to CHF 0.9 million in 2002. This decline was in part compensated by a notable increase in Drug Discovery sales by 16.2% (+24.6% in local currencies) to CHF 30.7 million (2001: CHF 26.4 million). Sales in Genomics/Proteomics increased by 5.0% or 14.5% in local currencies to CHF 18.1 million (2001: CHF 17.2 million). Net profit reached CHF 7.2 million or 9.2% of sales (2001: CHF 6.6 million or 7.9% of sales), an increase of 8.2%.
Stable sales in local currencies for the first nine months
For the first nine months of 2002, sales in Genomics/Proteomics increased by 2.2%, or 8.5% in local currencies, to CHF 54.7 million (2001: CHF 53.5 million). Drug Discovery declined by 5.3%, but increased slightly by 0.7% in local currencies, to CHF 82.3 million (2001: CHF 86.9 million). The flat growth in Drug Discovery is largely attributable to a 29.6% drop in sales in this market segment during the second quarter 2002, which was however compensated during the third quarter. Diagnostics sales reached CHF 107.5 million (2001: CHF 118.1 million), a decrease of 9.0% (–5.4% in local currencies).
Resilience in Europe and in the US
For the first nine months of 2002, sales in the United States, Tecan’s largest geographical market by location of customers, reached CHF 119.6 million (2001: CHF 125.1 million), an increase of 1.9% in local currencies (-4.4% in CHF). Sales in Europe reached CHF 100.2 million (2001: CHF 97.1 million) an increase of 6.6% in local currencies (3.2% in CHF). Sales in Asia reached CHF 20.1 million (2001: CHF 21.8 million) during the first nine months of 2001, corresponding to flat sales in local currencies (-7.8% in CHF). Sales in the remaining markets (rest of the world, mainly Latin America) suffered from a very difficult economic environment as they declined from CHF 14.6 million in 2001 to CHF 4.6 million this year. This corresponds to a decrease of 67.9% in local currencies (-68.4% in CHF).
Launch of significant new products in the second half of 2002
The ongoing launch of new products and applications in all business areas continued to gather pace. By the end of 2002, Tecan expects to have around 50% more product launches compared to last year. Significant launches in the third quarter of this year included the LabCD for a range of applications in Drug Discovery and further elements in the ProTeam suite for Proteomics.
The LabCD-ADMET System was officially launched at two major meetings held recently in Europe and the United States. The new system supports important applications in secondary drug screening assays, specifically applications for a family of cytochrome P450 inhibition assays and a family of serum protein-binding assays. Further applications will be introduced in the first half of 2003.
In September, Tecan unveiled an automated proteomics suite that for the first time is capable of carrying out all the steps from cell disruption up to mass spectrometry and data analysis. The new ProTeam suite of modular products is composed of solutions for Protein Fractionation, Protein Identification and Protein Characterization. The ProTeam FFE, a fractionation technology that reduces the complexity of proteomes, and the ProTeam Protein Digest were launched earlier this year. The Advanced Digest will be launched shortly and remaining products in the suite will be introduced throughout the course of next year.
Tight control of operating expenses offset by negative currency fluctuations
Tecan’s gross margin remained stable at a high level of 69.4% of sales (2001: 68.6%) indicating that Tecan was on average able to maintain the price level for its products during the entire period. Tecan’s gross profit margin reached 54.9% of sales (2001: 56.9%) reflecting mainly a decrease in sales and an under utilisation of some of the company’s capacity.
During the first nine months of 2002, R&D expenditure reached CHF 30.0 million (2001: CHF 34.7 million) and represented 12.3% of sales (2001: 13.4%). R&D resources were allocated to position Tecan in Proteomics and miniaturization and also to strengthen its existing core competencies.
Operating expenses were reduced to CHF 102.0 million (2001: CHF 108.1), due to the continued implementation of Tecan’s cost stabilization program. The cost reduction program that was announced on July 24th 2002, will show most of its impact as of the fourth quarter 2002. EBITDA was CHF 43.3 million or 17.7% of sales (2001: CHF 47.4 million or 18.3% of sales). Operating profit reached CHF 32.3 million, or 13.2% of sales (2001: CHF 39.0 million, or 15.1% of sales). The appreciation of the Swiss franc against the US Dollar and the Euro had a significant impact on Tecan’s operating profit, representing -0.6% of sales.
Tecan’s net profit for the first nine months reached 9.6% of sales at CHF 23.4 million (2001: 10.6% and CHF 27.5 million). Earnings per share reached CHF1.88 (2001: CHF 2.13).
Cash flow from operations more than doubled to CHF 31 million (2001: 13 million), mainly due to an improvement in net working capital. This increase in cash flow was primarily utilized for the company’s share buy back program.
Considering the continuing slowdown in the Life Sciences industry and the reduced visibility in the Life Sciences market, Tecan continues to assume, for the time being, that spending by the pharmaceutical and biotech industry will remain weak for the remainder of the year. Tecan expects to take advantage of any upturn in the market conditions by continuing to develop a strong pipeline of new products and maintaining the pace of its introduction of new products.
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