Nycomed Group. Interim financial information for January 1, March 31, 2003

Transcription

1 Nycomed Group Interim financial information for January 1, March 31, 2003 May 19, 2003

2 Index Foreword 2 Introduction 2 Highlights 2 Summary Results 3 Factors affecting comparability of results - Variations in quarterly results and seasonality - New ownership of Nycomed - The Leiras acquisition - Divestiture of our skin care business Results - Net turnover - Cost of sales - Gross profit and gross profit margin - Sales and marketing expenses - Research and development expenses - Administration expenses - Operating income - Net financial items - Income tax expenses - Net income - EBITDA and Adjusted EBITDA 3 5 Liquidity 9 - Cash flow from operating activities - Cash flow from sales / purchase of business activities - Cash flow from investment activities - Cash flow from financing activities Capital resources 10 Market risks 11 - Interest rate risk - Foreign exchange risk Consolidated statements of profit and loss 13 Consolidated balance sheet 14 Consolidated statement of Cash Flows 15 Forward-looking statements 16 More information 17 About Nycomed 17 Denmark Page 1

3 Foreword In the following discussion, references to "we", "us", "our", "Nycomed and the "Nycomed Group" are to Nyco Holdings 2 ApS and its consolidated subsidiaries and affiliates, and with respect to periods prior to our acquisition of Nycomed Holding ApS, these terms refer to our predecessor Nycomed Holding ApS and its consolidated subsidiaries and predecessors. This discussion should be read in conjunction with the unaudited financial statements of the Nycomed Group as of and for the three months ended March 31, 2003 and the unaudited financial statements of our predecessor as of and for the three months ended March 31, These financial statements have been prepared in accordance with Danish GAAP. For the reasons described under "Factors affecting comparability of results" below, including the application of purchase accounting in connection with our acquisition of Nycomed Holding ApS, the consolidated financial statements relating to the three months ended March 31, 2003 and the same period in the prior year are not directly comparable. Our critical accounting policies are substantially identical to those described in our offering circular dated March 18, Introduction We are a pharmaceutical company headquartered in Denmark and focused on the marketing of pharmaceutical products in Europe. We source, develop, manufacture and market a diversified range of Rx and OTC pharmaceutical and consumer health products. We differentiate ourselves from other pharmaceutical companies by a combination of our strong geographic focus and our marketing-led strategy. Founded in 1874 in Norway as an importer of pharmaceutical products, we have grown into a multinational company with our own sales force presence in 15 European countries and in the CIS and China. In addition, our products are sold through export or licensing agreements with other pharmaceutical companies in other countries including Japan, the UK, and the US. On November 29, 2002, a consortium of investors led by CSFB Private Equity and Blackstone Private Equity acquired 100% of the issued share capital of Nycomed Holding ApS. Consequently, the results of operations for the three month period ended March 31, 2002 are those of our predecessor. Highlights - During the first quarter 2003, Nycomed achieved a net turnover of million, representing an increase of 9.3% over the same period in On December 31, 2002, Nycomed purchased an additional 26.1% equity ownership in Oy Leiras Finland Ab. This transaction, pursuant to the Leiras joint venture agreement with Schering AG, brought our total ownership to 51.0%. On May 31, 2003, pursuant to the exercise by Schering of their right to sell their remaining interest in Leiras to Nycomed, we will acquire the remaining 49.0% stake in Oy Leiras Finland Ab. - On January 23, 2003, we initiated internal marketing preparations at a market level for the launch of Angiomax, a direct thrombin inhibitor for use with patients undergoing angioplasty. Nycomed will exclusively market Angiomax in 23 markets outside the USA. The first European launches are expected in On February 1, 2003, we sold our non-core Scandinavian skin care business, consisting of products such as Cosmica/Cosmea and Cliniderm, to ACO HUD for 10.6 million. Our Denmark Page 2

4 strategy in the non-prescription market is to focus on our core product categories - pain, cough & cold and vitamins & minerals - and to further develop the potential of these categories in partnership with pharmacies. - On April 2, 2003, we officially inaugurated the world s largest tablet production site for pharmaceutical calcium. We have invested over 18 million in the enlargement and modernisation of this plant in Asker, Norway. The plant employs 180 full-time employees and will be used to meet the increasing needs of the European market for pharmaceutical calcium. Summary results Our operating results for the three months ended March 31, 2002 and 2003 are summarized in the table below: Three Months Ended March 31, Change /2003 ( in millions) (%) Net turnover % Cost of sales (1) % Gross profit (16.8%) Sales and marketing expenses (2) % Research and development expenses % Administration expenses % Operating income (15.1) (168.6%) Gross profit margin % 42.9% EBITDA (3) (71.6%) EBITDA margin % 6.2% Adjusted EBITDA (3) (13.0%) Adjusted EBITDA margin % 19.0% (1) Three months ended March 31, 2003 includes 20.6 million amortization of inventory step-up associated with the acquisition of Nycomed Holding ApS in November 2002, which is recorded as an indirect production cost. (2) Three months ended March 31, 2003 includes amortization of intangible assets and goodwill of 19.6 million vs. 8.8 million for the prior period. This increase reflects the step-up of amortization following the acquisition of Nycomed Holding ApS in November (3) EBITDA means net income plus net financial items, income taxes, depreciation of tangible assets and amortization of intangible assets. Adjusted EBITDA includes certain unusual or non-recurring items (as described below). EBITDA and Adjusted EBITDA are not measurements of performance under Danish GAAP. See EBITDA and Adjusted EBITDA below. Factors affecting comparability of results Variations in quarterly results and seasonality We may experience significant quarterly fluctuations in sales of our export and contract manufacturing businesses because many of our customer orders occur in bulk and may occur unevenly and relatively infrequently in the year. In addition, we may experience additional fluctuations of sales in the fourth quarter of the year as a result of the practice of customers to either spend or risk losing remaining funds available under their annual budgets. We may also experience significant variations from period to period for products such as cough and cold products and antihistamines, the sales of which can vary according to factors such as the severity of winter and the severity of allergy seasons. In addition, a large portion of our sales in the CIS may occur in the fourth quarter. Denmark Page 3

5 New ownership of Nycomed The acquisition of Nycomed Holding ApS on November 29, 2002, the application of purchase accounting adjustments related thereto, and the related financing transactions have affected and will continue to affect our results of operations following the acquisition. In particular: - the substantial indebtedness we incurred to finance the acquisition has increased our interest expense significantly; - we recorded a significant adjustment to intangible assets in connection with the acquisition in respect of patents and other intellectual property rights, goodwill, inprocess research and development and the contract manufacturing business. This has led to a significant increase in amortization expense; - the purchase accounting adjustment relating to property, plant and equipment has resulted in an increase in depreciation expense and therefore an increase in indirect production costs included in our costs of goods sold; and - the purchase accounting adjustment relating to inventory required us to adjust the book value of inventory at hand at the time of the acquisition to reflect its resale value rather than its cost. This has resulted in a non-recurring charge of 39.6 million that will be reflected in our income statement, net of the related income tax benefit, as the inventory on hand at the acquisition date is sold to customers. We expect that this adjustment and the related effect on gross and operating margins will impact our income statement mainly within the first six months following closing of the acquisition. The Leiras acquisition In 2001, we entered into a joint venture agreement with Schering AG which combined the Finnish businesses of both parties. We contributed our Finnish subsidiary, Oy Nycomed Finland, and Schering AG contributed its Finnish business, to form Oy Leiras Finland AB. At inception, we owned a 24.9% equity interest in Leiras. On December 31, 2002, we paid 25.5 million to acquire an additional 26.1% equity interest in Leiras, bringing our ownership interest to 51.0%. We proportionally consolidated 24.9% of Leiras' profit and loss and equity in 2001 and 2002 on a line-by-line basis. As of December 31, 2002, we consolidated 100% of Leiras on our balance sheet and recorded a minority interest to reflect Schering AG's 49.0% interest. Effective May 31, 2003, Schering will exercise its right to sell to us its remaining interest in Leiras for 44.2 million, and as of that date we will no longer record a minority interest with respect to Schering. Divestiture of our skin care business Effective as of January 31, 2003, we sold our non-core skin care business for 10.6 million (and additional 0.9 million of inventory which is subject to a final adjustment). The skin care business contributed 6.7 million in net turnover and 1.5 million in operating income to our Scandinavian segment during The financial results for the divested businesses will be excluded from the point of divestiture. Denmark Page 4

6 Results Net turnover Net turnover increased by 13.7 million, or 9.3%, from million for the three month period ended March 31, 2002 to million for the three month period ended March 31, 2003 as a result of growth in each of the home market regions, offset by a decrease in net turnover from the International and Other segments. An analysis of each segment is set forth below. Three Months Ended March 31, Change /2003 ( in millions) (%) ( in millions) (%) (%) Scandinavia % % 4.3% Western Europe % % 15.0% Central Europe % % 12.1% The Baltics, the CIS % % 57.2% and Finland... International % % (15.6%) Other % % (10.9%) Total net turnover % % 9.3% Scandinavia, which comprises Denmark, Norway and Sweden, is Nycomed s largest region by turnover. Net turnover increased by 2.0 million, or 4.3%, from 46.2 million for the three month period ended March 31, 2002 to 48.2 million for the three month period ended March 31, 2003, despite the divesture of skin care (branded OTC) and the withdrawal from the market of Letigen (branded Rx) during the autumn of The sales of the other branded Rx products are growing in each of the home markets in the region. In addition, we also experienced overall growth in our consumer health category, primarily in Sweden, caused by the expansion of our Swedish Nutrilett portfolio following intensified marketing efforts and price increases, as well as slight growth in sales of Zurcal. Our generic portfolio products increased sales by 1.4 million mainly due to the launch of Simvastatin. Western Europe comprises Belgium, France and the Netherlands. Net turnover increased by 2.6 million, or 15.0%, from 17.3 million for the three month period ended March 31, 2002 to 19.9 million for the three month period ended March 31, 2003, reflecting growth in each of the home markets in the region. Growth in the region was led by the three of our top six products that are marketed in the region, Zurcal, Gutron and Calcichew. Central Europe, comprising Austria, Germany and Switzerland, increased net turnover by 2.2 million, or 12.1%, from 18.2 million for the three month period ended March 31, 2002 to 20.4 million for the three month period ended March 31, 2003, due to increased net turnover in each of the home markets. Key growth products in the region were Zurcal, TachoComb, Calcichew and Ubretid. The Baltics, the CIS and Finland, had an increase in net turnover of 13.1 million, or 57.2%, from 22.9 million for the three month period ended March 31, 2002 to 36.0 million for the three month period ended March 31, million of the increase is due to the 100% consolidation of Leiras in Finland versus 25% consolidation in The remaining increase is due to growth in CIS from key products such as Actovegin, Calcichew and the Merck portfolio. International comprises our export operation, Greece and China. Net turnover from the International segment decreased by 5.1 million, or 15.6%, from 32.7 million for the three month period ended March 31, 2002 to 27.6 million for the three month period ended March 31, 2003 primarily due to an anticipated decline in our higher margin export sales. This decline was mainly the result of lower sales of Xefo and Gutron to Japan during the first quarter compared to the high level of Xefo sales during the first quarter of 2002 as a result of the build-up of wholesaler inventory levels in connection with the launch of Xefo in 2002, and a price decrease of Calcium exported to the UK. The price decrease of Calcium in the UK will not have any bottom Denmark Page 5

7 line effect, due to lower marketing costs associated with these sales. Production delays associated with the transition of Calcium production to the Asker plant also contributed to the decline in sales. Sales in Greece increased as a result of higher sales of Zurcal and Calcium. Other comprises mainly our contract production operation. Net turnover decreased by 1.1 million, or 10.9%, from 10.1 million for the three month period ended March 31, 2002 to 9.0 million for the three month period ended March 31, This was mainly driven by much lower sales of Celiprolol only partly compensated by increase of other products. Cost of sales The following table sets forth, for each of the periods indicated, the elements of cost of goods sold, both in euro and as a percentage of net turnover, and the increase or decrease stated as a percentage from period to period. Three Months Ended March 31, Change /2003 ( in millions) (%) ( in millions) (%) (%) Total direct costs % % 13.2% Amortization inventory step-up % % Indirect production costs % % 5.2 Total cost of sales % % 43.1% Total direct costs increased by 13.2% in absolute terms as a result of increased sales, and as a percentage of net turnover increased from 31.9% for the three month period ended March 31, 2002 to 33.0% for the three month period ended March 31, 2003, primarily reflecting changes in product mix as a result of lower high margin export sales and higher sales in Finland with a lower then average margin. Indirect production costs as a percentage of net turnover decreased from 11.7% to 11.3%. This decrease can be attributed to increased sales of purchased goods and savings in internally produced products as a result of the Origo restructuring project, which lowered indirect production costs per product. The cost of sales includes an amortization of inventory step-up of 20.6 million in 2003, which is recorded as an indirect production cost. Gross Profit and Gross Profit Margin Gross profit decreased by 14.0 million, or 16.8%, from 83.1 million for the three month period ended March 31, 2002 to 69.1 million for the three month period ended March 31, Gross profit margin decreased from 56.4% for the three month period ended March 31, 2002 to 42.9% for the three month period ended March 31, 2003, which corresponds to the increase of cost of sales as a percentage of net turnover as described above. Excluding the amortization of inventory step up in 2003, gross profit increased by 6.6 million, or 7.9%, from 83.1 million to 89.7 million. Excluding the amortization of the inventory step-up, the corresponding gross profit margin decreased from 56.3% for the three month period ended March 31, 2002 to 55.7% for the three month period ended March 31, This is mainly due to the change in product mix as described under cost of sales. Denmark Page 6

8 Sales and marketing expenses The following table sets forth, for each of the periods indicated, the elements of sales and marketing expenses, both in euro and as a percentage of net turnover, and the increase or decrease stated as a percentage from period to period. Three Months Ended March 31, Change /2003 ( in millions) (%) ( in millions) (%) (%) Sales and marketing expenses in regional segments % % 22.4% Centralized selling expenses % % 14.3% Amortization of intangible assets and goodwill fair value adjustments % % 151.3% Total sales and marketing expense % % 44.5% Amortization of intangible assets included in sales and marketing expenses in regional segments Sales and marketing expenses in regional segments increased by 7.8 million, or 22.4%, from 34.8 million for the three month period ended March 31, 2002 to 42.6 million for the three month period ended March 31, Of the 7.8 million increase, 4.0 million is due to the 100% consolidation of Leiras in Finland. The remaining is due to increased sales and marketing efforts for existing products and new product launches. Total amortization of intangible assets and goodwill included in sales and marketing expenses increased by 10.8 million, or 138.5%, from 8.8 million for the three month period ended March 31, 2002 to 19.6 million for the three month period ended March 31, This increase reflects the step-up of amortization of intangible assets and goodwill as part of the purchase price allocation in connection with the acquisition Research and development expenses Research and development expenses increased by 2.2 million, or 43.1%, from 5.1 million for the three month period ended March 31, 2002 to 7.3 million for the three month period ended March 31, As a percentage of net turnover, research and development expenses increased from 3.4% for the three month period ended March 31, 2002 to 4.5% for the three month period ended March 31, Of the 2.2 million increase, 0.8 million is due to the 100% consolidation of Leiras in Finland. The remaining increase reflects ongoing development activities, including those related to TachoComb S, Fentanyl and other line extensions. Administration expenses Administration expenses increased by 1.0 million, or 8.8%, from 11.3 million for the three month period ended March 31, 2002 to 12.3 million for the three month period ended March 31, As a percentage of net turnover, administration expenses decreased from 7.7% for the three month period ended March 31, 2002 to 7.6% for the three month period ended March 31, Of the 1.0 million increase, 0.7 million is due to the 100% consolidation of Leiras in Finland. Operating income Our operating income decreased from 22.0 million for the three month period ended March 31, 2002 to a loss of 15.1 million for the three month period ended March 31, 2003, reflecting in particular the increased cost of sales relating to the amortization of the inventory step-up and sales and marketing expense relating to the amortization of intangibles following the acquisition. Denmark Page 7

9 Excluding these two amounts, the operating income would be 16.3 million for the three month period ended March 31, 2003 or a decrease of 5.7 million compared to the three month period ended March 31, The decrease is a combination of higher gross profit of 6.6 million with higher costs of 12.3 million. Net financial items Interest and financial charges increased by 13.2 million, or 392%, from 4.5 million for the three month period ended March 31, 2002 to 17.7 million for the three month period ended March 31, This increase includes a 4.1 million amortization of financing costs and increased interest payments and other financial charges due to the new debt structure. Exchange rate gains increased by 5.2 million from 0.0 million for the three month period ended March 31, 2002 to a gain of 5.2 million for the three month period ended March 31, This increase mainly relates to the foreign exchange gain on the dollar loan that was part of our bridge facility. Income tax expenses Income tax expenses increased by 13.6 million, or 181%, from tax expense of 7.5 million for the three month period ended March 31, 2002 to tax benefit of 6.1 million for the three month period ended March 31, The increase of tax benefit was due to lower income before taxes between the two periods of 45.2 million. Net income Our net income decreased by 31.4 million, or 314%, from an income of 10.0 million for the three month period ended March 31, 2002 to a loss of 21.4 million for the three month period ended March 31, 2003 for the reasons described above. Denmark Page 8

10 EBITDA and Adjusted EBITDA EBITDA means net income plus net financial items, income taxes, depreciation of tangible assets and amortization of intangible assets. Adjusted EBITDA comprises EBITDA (as described above) adjusted for certain unusual or non-recurring items (as described below). Neither EBITDA nor Adjusted EBITDA is a measurement of performance under Danish GAAP and you should not consider EBITDA or Adjusted EBITDA as an alternative to any other measures of performance under generally accepted accounting principles. EBITDA and Adjusted EBITDA have been disclosed in this report to permit a more complete and comprehensive analysis of our operating performance relative to other companies and of our ability to service our debt. Because all companies do not calculate EBITDA measures identically, our presentation of EBITDA and Adjusted EBITDA may not be comparable to similarly titled measures of other companies. In addition, EBITDA is not calculated the same as EBITDA will be calculated under the indenture for the notes. Three Months Ended March 31, ( in millions) Net income (loss) (21.4) Adjustments: Net financial items Income tax expense (benefit) (6.0) Minority interest (0.3) Depreciation Amortization EBITDA Adjustments: Inventory fair value adjustment (a) Adjusted EBITDA (a) Represents non-cash amortization of the fair value adjustment recorded to inventory in connection with the acquisition. Liquidity The table below summarizes our cash flows for the three months ended March 31, 2002 and 2003: Three Months ended March 31, ( in millions) Net cash as of beginning of period Translation differences (3.5) Net cash flow from (used in) operating activities... (6.0) (8.3) Net cash flow from sale/purchase of business activities Net cash flow from (used in) investment activities... (8.2) (4.2) Net cash flow from (used in) financing activities 0 (8.3) Net change in cash and cash equivalents... (14.2) (14.2) Net cash as of end of period Denmark Page 9

11 Cash Flow - Operating activities Cash flow from operating activities showed an outflow of 7.8 million for the three month period ended March 31, 2003, reflecting primarily increased payments of financial expenses and taxes. Significant items that affected cash flow from operating activities for the three month period ended March 31, 2003 included the 22.2 million increase in inventories, receivables, accounts payable and other liabilities, which relates to seasonal differences in our business as the first quarter is normally a quarter with higher activity and hence higher working capital requirements. Adjusting for working capital inflow of 9.3 million in the period from 29 November December 2002 the change in working capital in the four month period ending March 31, 2003 was negative by approximately 12.9 million. Cash Flow - Sale/Purchase of Business Activities Cash flow from the sale and purchase of business activities showed an inflow of 6.6 million in the first three months of Proceeds from the sale of the skincare business totalled 10.4 million (net of costs) while a post-closing adjustment of the purchase price in connection with the acquisition on 29 November 2002 resulted in an outflow of 3.8 million. Cash Flow - Investment Activities Cash flow related to investing activities showed a cash outflow of 4.2 million for the three month period ended March 31, The outflow can be attributed to low capital expenditure in the first three months of 2003 which only comprised of normal maintenance capital expenditure compared to the same period in 2002 which also included investment in the new calcium plant in Asker, Norway, which has now been completed. Furthermore, no major in-licensing related payments were made during the first 3 months of Cash Flow - Financing Activities The cash outflow from financing activities for the three month periods ended March 31, 2003 was 8.3 million. This includes a net cash outflow of 9.9 million representing the repayment of the 305 million equivalent bridge loan and the associated 295 million financing of Senior Notes and Subordinated Mezzanine Notes in March 2003, a foreign exchange gain of 14.7 million connected to the repayment of the US $150.0 million part of the bridge loan, and financing fees paid in the first three months of 18.1 million. Capital resources In line with our business plan and strategy, we will continue to devote significant cash resources to the continued growth of our business. As of March 31, 2003, we had cash of 69.9 million. Our cash balance at that date included 34.5 million of cash which was pre-funded at the closing of the acquisition to acquire the remaining 49.0% stake in Leiras, and 17.6 million which was pre-funded to meet various tax liabilities and other expenses. In addition, due to the 100% consolidation of Leiras as of December 31, 2002, our cash balance also includes 7.2 million of cash at 31 March We have as part of our senior credit facilities the following facilities: - a 40 million in-licensing credit facility, which may be used primarily to in-license products that are entering Phase III clinical trials; - a 15 million capex loan facility, which may be used to finance expenditure in respect of the capital investments in the Linz, Austria manufacturing facility; Denmark Page 10

12 - a 15 million acquisition facility, which may be used together with available cash designated for such purpose to purchase the remaining interest in Leiras; and - a 40 million revolving credit facility, which may be used to finance working capital and for general corporate purposes or to finance expansion capital expenditure, but not to finance certain of the activities provided for in the other facilities as long as those facilities are not fully utilized. - As of March 31, 2003, 15.0 million was drawn under the revolving credit facility. On 31 May, 2003, we will pay Schering 44.2 million to acquire the remaining 49% stake in Oy Leiras Finland Ab. This amount will be composed of the 34.5 million of pre-funded cash described above and 9.7 million drawn under the acquisition facility. We believe that our operating cash flows, together with available borrowings under the senior credit facilities and existing cash resources, will be sufficient to fund our currently anticipated working capital needs, capital expenditures and debt service requirements, although we cannot assure you that this will be the case. See "Forward-looking Statements". In particular, future drawings under the senior credit facilities will be available only if, among other things, we meet the financial maintenance covenants and other conditions included in the senior credit facilities. Our ability to meet those covenants will depend on our results of operations and factors outside of our control. We have a substantial amount of debt and significant debt service obligations. As of March 31, 2003, we had million of consolidated debt (or reported as million net of financing costs), million of which is indebtedness under the senior credit facilities. We expect to borrow the undrawn portion of our senior credit facilities over the coming years and as a result we expect our total debt to increase. Market risks We are exposed to market risk, primarily related to foreign exchange and interest rates. We actively monitor these exposures. We have set up strategies to hedge fluctuations in exchange rates through forward exchange contracts and interest rates using interest rate swaps. Our objective is to reduce, where we deem it appropriate to do so, fluctuations in earnings and cash flows associated with these risks. We do not enter into any financial transaction containing a risk that cannot be quantified at the time the transaction is concluded. Interest rate risk Interest is payable under our senior credit facilities at variable rates. As a result, we could be adversely affected if interest rates were to rise significantly. Our exposure to interest rate fluctuations will depend on the amount of variable-rate indebtedness that we have outstanding and the extent of any hedging arrangements that we put in place. Under the senior credit facilities, we are required to hedge at least 50% of the variable-rate indebtedness under our term loan facilities for a duration of three years. In order to hedge this risk, we enter into interest rate swaps that exchange our variable interest payments for fixed interest payments. As at March 31, 2003, we had hedged approximately 57% of the indebtedness under the senior credit facilities for 36 months starting in December 2002 using interest rate swaps, and we will continue to review the percentage hedged periodically with a view to determine whether a greater proportion should be hedged. Based on the variable rate indebtedness outstanding on our senior credit agreement at March 31, 2003 of million (excluding the revolving credit facility), if the variable interest rates for an annual period changed by a full percentage, the interest payable would be 1.4 million higher or Denmark Page 11

13 lower. This does not reflect the impact of any hedging instruments associated with the indebtedness or the impact of exchange rate changes. For additional information regarding the breakdown of our indebtedness by currency and interest rate terms, see notes 19 and 14 to our consolidated financial statements contained in our offering circular dated March 18, Foreign exchange risk Our results are exposed to exchange rate fluctuations for the following reasons, among others: - we are exposed to foreign exchange transaction risk as sales and purchases may be denominated in currencies different from the functional currency of our subsidiaries; specifically, most of our sales are denominated in euro, Japanese yen,us dollars, Norwegian kroner and Danish kroner, while our costs are generated in the different currencies of countries where we maintain our production facilities, primarily Norway and Denmark (neither of which have adopted the euro) and in Belgium and Austria; and - we are exposed to foreign exchange translation risk as the financial statements of, and our equity investments in, our subsidiaries as well as our other foreign currency denominated assets and liabilities must be translated as part of our financial reporting from the reporting currency of the subsidiary to the euro. In order to minimize the impact on our operating results and cash flows due to fluctuations in the exchange rate between the euro and other currencies in which we transact business, we hedge our non-euro currency transactions by using forward exchange contracts. We seek to hedge approximately 75% of our expected non-euro currency sales and purchases on a rolling 12 month basis (cash flow hedging). When sales and purchases are invoiced and a receivable or payable is generated, we seek to hedge 100% of the receivables and payables amounts using short-term forward exchange contracts (balance sheet hedging). For additional quantitative information regarding instruments we have entered into to manage foreign exchange risk, see note 19 to our consolidated financial statements included in our offering circular dated March 18, Denmark Page 12

14 Consolidated statements of profit and loss Nyco Holdings 2 ApS Three Months Ended March 31, ( in thousands) Net turnover 147, ,152 Cost of sales (64,282) (92,012) Gross Profit 83,133 69,140 Sales and marketing expenses (44,749) (64,572) Research and development expenses (5,065) (7,355) Administration expenses (11,318) (12,365) Total operating expenses (61,132) (84,292) Operating income (loss) 22,001 (15,152) Financial expenses (4,515) (17,733) Financial income 30 5,156 Net financial items (4,485) (12,577) Income (loss) before taxes 17,516 (27,729) Income tax (expense) benefit (7,530) 6,089 Minority share of result Net income (loss) 9,986 (21,357) Denmark Page 13

15 Consolidated balance sheet Nyco Holdings 2 ApS Assets As of March 31, 2003 ( in thousands) Liabilities Goodwill 455,841 Total equity 601,675 Patents and distribution rights 435,359 Development projects 162,500 Minority shareholders' equity 13,205 Total intangible fixed assets 1,053,700 Pension commitments 22,211 Land and buildings 105,598 Deferred tax provision 223,767 Plant and machinery 55,677 Other provisions 4,275 Fixture, fittings, equipment 17,305 Total provisions 250,252 Assets under construction 4,886 Total tangible fixed assets 183,466 Total loans > 1 year - 3rd party 583,623 Total long term debt 583,623 Investments 4,008 Other receivables 204 Total loans < 1 year - 3rd party 20,188 Total financial fixed assets 4,212 Total trade creditors 38,416 Total taxation 19,351 Total fixed assets 1,241,378 Accruals and deferred income 9,974 Other 50,878 Total current liabilities 138,807 Finished goods 95,404 Semi finished goods 13,561 Total liabilities 722,431 Raw materials 26,273 Packaging materials 4,608 Prepayment for goods 1,692 Total equity and liabilities 1,587,563 Total inventory 141,538 Total trade debtors - 3rd party 102,362 Income tax receivable 203 Deferred tax assets 5,294 Prepayments and accrued income 17,062 Other 9,843 Total receivables 134,765 Cash 69,883 Total current assets 346,185 Total assets 1,587,563 Denmark Page 14

16 Consolidated statement of Cash Flows Nyco Holdings 2 ApS Three Months Ended March 31, ( in thousands) Income before net financials and tax 22,000 (15,151) Depreciation of property, plant and equipment 4,435 5,521 Amortization of intangibles 8,771 19,626 Amortization of inventory step-up 0 20,626 Change in provisions (3,848) (1,646) Foreign exchange differences 30 (2,977) Total 31,388 25,999 Change in inventories and receivables (29,670) (16,348) Change in payables and other liabilities (3,618) (6,523) Financial income (expense) (4,515) (9,017) Income taxes paid 435 (2,447) Cash flow from operating activities (5,980) (8,336) Proceeds from sale of business activities 0 10,457 Acquisition of subsidiaries 1 0 (3,813) Cash flow from sale/purchase of business activities 0 6,644 Addition of intangibles (1,814) (384) Addition of property, plant and equipment (5,262) (3,562) Addition of investments and bonds (1,154) (210) Cash flow from investing activities (8,230) (4,156) Proceeds from issuance of capital stock 0 5,000 Change in long-term bank debt 0 (9,928) Exchange effect on USD loan 0 14,716 Acquisition and financing fees paid 0 (18,133) Cash flow from financing activities 0 (8,345) Net cash flow (14,210) (14,193) Net cash beginning of the year 50,828 87,551 Foreign exchange differences 4,380 (3,475) Net cash at March 31 40,998 69,883 1 Final adjustment sales/purchase price from the acquisition. Denmark Page 15

17 Forward-looking statements This report includes forward-looking statements relating to future events or prospects. Because forward-looking statements involve predictions about the future, they are inherently subject to a number of risks and uncertainties and our actual results may differ materially from our historical results or those anticipated or predicted by forward-looking statements. Important factors that could cause those differences include, but are not limited to: general local and global economic and market conditions; our substantial leverage and our ability to meet our debt service obligations; changes in the level of demand for our products, particularly our key products and important branded prescription products; regulatory action and the reimbursement and pricing policies of, and general levels of spending by, the national healthcare systems in our home markets; our ability to increase the level of awareness, brand recognition and reputation of our products; changes in the level of competition faced by our products, including the launch of new products by competitors and the introduction of generic competition upon the expiration of patents associated with our products or competing products; our ability to launch new products, including line extensions or in-licensed products, and introduce our products into new markets; our exposure to currency or interest rate fluctuations; and our ability to protect our intellectual property. These risks and others described in the offering circulars dated March 18, 2003 under the caption Risk Factors are not exhaustive. Given these risks and uncertainties, you should not place undue reliance on forward-looking statements as a prediction of actual results. We undertake no obligation to update publicly or revise any forward-looking statement, whether as a result of new information, future events or otherwise. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained in this report. All forward-looking statements included in this report are based on information available to us on the date of this report. We undertake no obligation to update publicly or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as may be required by applicable law. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained in this report. Denmark Page 16

18 For further information Runar Björklund, CFO Phone: (+45) Christoffer Jensen, VP Communications Phone: (+45) Mobile: (+45) About Nycomed Nycomed is a European-focused pharmaceutical company headquartered in Roskilde, Denmark. Nycomed sources, develops, manufactures and markets specialist and prescription pharmaceuticals and consumer health products. Dedicated sales teams target general practitioners, hospital specialists and pharmacies. In-house capabilities also include international product sourcing, late-stage clinical trials, local and European registration and life-cycle management. Nycomed has 36 sales offices in 15 European markets including the CIS, and manufacturing facilities in Austria, Belgium, Denmark, Estonia, Finland and Norway. The total number of employees is approximately 2,800 of whom most are in sales & marketing. Further information on Nycomed is available on the company s homepage at the address: Denmark Page 17