Report on the IIIrd Quarter 2003 for the period from 1 January to 30 September 2003 Specialists in Regenerative Medicine
Vorwort Letter to Shareholderst CONSOLIDATED GROUP curasan AG, D-Kleinostheim Parent Company DEAR SHAREHOLDERS, BUSINESS ASSOCIATES, AND COLLEAGUES, curasan Benelux BV, NL-Barneveld 100 % Sales GerontoCare GmbH, D-Kleinostheim 100 % Regulatory Affairs Pro-tec Medizinische Produkte GmbH, D-Kleinostheim 100 % Manufacturing Titanium Innovations GmbH, D-Kleinostheim 100 % Manufacturing SHARE DATA WKN / ISIN / Symbol 549 453 / DE 000 549 453 8 / CUR Type of stock No-par-value common stock Share volume 5.0 million Free float 53.74 % Closing price 2/1/2003 / Closing price 30/9/2003 (Xetra) Euro 2.00 / Euro 3.37 High / Low (closing price Xetra) Euro 4.07 / Euro 1.90 Trading volume Xetra and Frankfurt (1/10/2002-30/9/2003) Euro 6.6 million Market capitalisation as at 30/9/2003 Euro 16.9 million Free float factor acc. to Deutsche Börse AG 0.5374 Free float market capitalisation as at 30/9/2003 Euro 9.1 million KEY FIGURES Euro Million 1.1.-30.09.03 1.1.-30.09.02 Change Sales 12.8 10.7 20 % Biomaterials 4.4 3.6 22 % Pharmaceuticals 8.4 7.1 18 % EBIT 1.1 2.9 62 % Cash Flow 2.9 3.7 178 % Employees (absolute) 103 134 23 % operating within a precarious economic environment, curasan AG has succeeded in further strengthening its market position. In the third quarter just ended, the curasan Group generated revenues of Euro 3.98 million (Q3 2002: Euro 3.56 million). Revenue growth was adversely affected by two key factors: tentative investment spending and the record-breaking heatwave experienced in July and August. We expect to see a considerable boost in revenues in our core business in the final quarter of 2003, following the seasonal downturn in growth over the summer months. In September, we once again hosted for the seventh time our specialist congress on implantology, by the name of Frankfurter Implantologie Tage. The event, held at Höchster Jahrhunderthalle, was well received by the 200 or so guests who attended the congress ( 7th FIT...Long-Term Results and Innovations Bone Regeneration, Odontoscopy, PRP, Tissue Engineering ). For a detailed report on this first-class event, please visit our website at www.curasan.de. Having successfully established two entirely independent business units, in September we took the decision to channel all our energy and expertise into Biomaterials. Towards the end of the quarter under review, an agreement was signed (subject to the Extraordinary Meeting of Shareholder s approval on 31 October) covering the sale of the entire Pharmaceuticals unit to DeltaSelect GmbH, a subsidiary of the exchange-listed German company PlasmaSelect AG. The business unit centred around our lead product Cerasorb, which is responsible for generating margins of 70 per cent and more, will in future represent the main focus of our corporate activities within the growth segment of Regenerative Medicine. curasan AG The Management Board Kleinostheim, October 2003 2 3
Our Shares Sales of the Product Divisions Since the beginning of the year, curasan s shares have been performing well, registering growth rates that are well above average. While the Prime Pharma & Health Index achieved an increase of 13.7 % in the first nine months of the financial year, curasan AG s share price was propelled by an impressive 68.5 % over the same period. In mid-september, the share price even advanced beyond the threshold of four Euros, thus registering an increase of over 100 % since January 2003. The share s performance after the end of the third quarter underlines its ability to sustain this forward momentum. Indeed, in the first three weeks of October curasan s shares frequently breached the four Euro mark, while at the same time registering an upward trend in terms of share turnover. This particularly encouraging trend has been supported by the considerable increases in sales revenues and the much improved earnings performance achieved over the course of the last few quarters. Without doubt, market penetration in the US has contributed substantially to curasan s solid performance in terms of revenue and profit. The company s shares also benefited from the announcement that curasan s Pharmaceuticals business unit is to be sold, an incisive strategic move that will allow the company to focus on the growth segment of regenerative medicine and will also enable it to strengthen its liquidity base by a considerable margin. 4 OUR SHARES DEVELOPEMENT OF curasan-shares 200 % 150 % 100 % 50 % JAN FEB MAR APR MAY JUNE JULY AUG SEPT curasan-share, indexed Prime Pharma & Health Perf. Index, indexed SALES OF THE PRODUCT DIVISIONS Supported by encouraging business activities abroad, revenues generated by Biomaterials in the first nine months of the current financial year increased by an impressive 22 per cent compared with the same period a year ago, thus reaching a figure of Euro 4.4 million. Stypro, our haemostatic product, recorded the most substantial growth rates in relation to other areas of our product offering. Hy-Gag, a hyaluronic acid used for the treatment of arthrosis and only marketed in Germany, also achieved tangible growth, albeit at a level which was somewhat lower than the aforementioned product. In terms of product specification, Cerasorb granules took pole position with regard to revenues generated. Indeed, revenue growth within this area was above average. Cerasorb block forms developed in line with expectations. Business within the area of titanium foils was less buoyant. Indeed, we had to contend with a number of unavoidable knock-on effects associated with the distribution problems outlined in our last quarterly report. It should be noted, however, that these issues have now been addressed. Nevertheless, as expected, we were unable to recover lost ground in the summer months. In the period under review, the Pharmaceuticals business unit grew by approx. 18 per cent, thus achieving sales of Euro 8.4 million. Statutory charges in accordance with Germany s Act on Stabilisation of Contribution Rates to Statutory Health Insurance and Social Security Pension Insurance (Beitragssatz-Sicherungsgesetz) have been accounted for in the revenue figures outlined in this report. Anti-Infectives, in particular the active agent Cefuroxim, proved to be highly successful revenue drivers. Once the agreement with DeltaSelect GmbH has been implemented, revenue inflows from this area of our business are likely to cease effective from November 2003. At the end of September 2003, foreign sales stood at Euro 2.8 million. This corresponds to approx. 22 % of aggregate sales (same period last year: 15.3 %). The increase is mainly attributable to Biomaterials. Following payment-related problems among importers in some regions, business developed conservatively within the Pharmaceuticals segment. 5
Sales of the Product Divisions Consolidated Income Statement Export Sales North-/South- America 846 Rest 104 Europe 1,198 Segment reporting (period) Pharma Bio N.A. Total Germany Abroad N.A. Segment revenues 2003 3,031 1,369 0 4,400 3,644 756 0 2002 2,601 1,262 0 3,863 3,390 473 0 Segment results 2003 49 234 141 424 89 194 141 2002 349 441 208 998 325 465 208 Segment reporting (year) Middle East 385 Segment reporting for all the defined segments reveals palpable year-on-year improvements both in terms of revenues and results. Owing to the below-par earnings position after the first nine months, segment assets were slightly lower than those recorded at last year s balance sheet date. Pharma Bio N.A. Total Germany Abroad N.A. Segment revenues 2003 9,173 5,007 0 14,180 11,447 2,733 0 2002 7,894 3,829 0 11,723 10,290 1,433 0 Segment results 2003 434 250 428 1,112 204 480 428 2002 1,022 1,291 608 2,921 953 1,360 608 Segment assets 2003 10,183 4,721 0 14,904 12,197 2,707 0 2002 9,153 5,865 0 15,018 12,252 2,766 0 6 Asia 280 INCOME STATEMENT Aggregate sales revenues for the period from January to September amounted to Euro 12.8 million, i.e. Euro 2.1 million more than in the same period a year ago. A figure of approximately Euro 4 million was generated in the period under review (same period last year: Euro 3.6 million). Gross performance, i.e. sales revenue plus changes in inventories plus work performed by the enterprise and capitalised, amounted to Euro 13.9 million (same period last year: Euro 11.5 million). At 44.7 % in aggregate, the cost-of-sales ratio i.e. cost of sales, adjusted for changes in inventories, in relation to revenues was approximately one percentage point lower than the figure recorded at the end of the first three quarters of 2002. Work performed by the enterprise and capitalised, which relates to internally generated registrations for medical products and drugs, was comparable to last year s figure. The downward trend in staff costs continued in the third quarter of the current financial year. Furthermore, staffing levels will be reduced further as soon as curasan has disposed of its Pharmaceuticals unit. Owing to the current below-par earnings position of the Group as a whole, curasan s supplementary staff payments to employees, which are to be effected in November, are yet again expected to be limited in volume, as was the case in the previous year. The contract of sale in connection with our Pharmaceuticals unit contains provisions specifying that annual remuneration shall be covered by the seller and buyer on a pro-rata basis. The number of staff employed (incl. members of the Management Board), computed on the basis of full-time staff and listed according to their respective functional areas, is as follows: Full-Time Employees 30.09.2003 31.12.2002 30.09.2002 Marketing / Sales 47 49 53 Operations 25 24 30 Research / Registration 10 13 14 Finance / Controlling 6 7 7 Central Division 7 7 9 Total 95 100 113 7
Consolidated Income Statement Consolidated Income Statement Write-downs in connection with property, plant and equipment, intangible assets, and goodwill were in line with the underlying depreciation and amortisation schedules. There were no write-downs beyond the normal level with regard to current and non-current assets. In the third quarter of the current financial year, the figure posted in connection with other operating expenses was lower than that recorded in the same period last year. The accumulated figures for the relevant period in 2003 and 2002 were more or less the same. Overall, other operating expenses were approx. Euro 0.1 million higher in 2003 than in the same period last year. The principal cost drivers were company-related insurance policies and activities aimed at maintaining existing licences. As outlined in the section on revenue performance, the contributions paid in accordance with the Act on Stabilisation of Contribution Rates to Statutory Health Insurance and Social Security Pension Insurance have been deducted from revenues (net figures). In contrast to the alternative gross presentation method, other operating expenses were not subject to adjustments, and therefore comparability with figures posted for the previous year has been maintained. The form of presentation chosen within this area has no influence on earnings before interest and taxes, as presented in the income statement. The loss before interest and taxes for the first nine months amounted to Euro 1.1 million (same period last year: Euro 2.9 million). Having accounted for financing costs and deferred taxes, the loss for the first three quarters of the current financial year stands at Euro 0.8 million (same period last year: Euro 1.9 million). Long-term projects within the area of Biomaterials developed in line with expectations. FDA approval of Cerasorb for dental applications in the US is expected to be the next milestone for curasan. CONSOLIDATED INCOME STATEMENT (IAS) Quarter Quarter Cumulated Cumulated 01.07. 01.07. 01.01. 01.01. 30.09.03 30.09.02 30.09.03 30.09.02 Revenues 3,982 3,561 12,825 10,717 Other operating income 96 51 320 256 Changes in inv. of finished goods and work in progress 106 37 318 57 Production for own fixed assets capitalized 216 214 717 693 Cost of materials / services purchased 1,947 1,808 6,052 4,967 Personnel expenses 1,305 1,359 4,076 4,729 Depreciation and amortization 260 240 789 706 Other operating expenses 1,312 1,454 4,375 4,242 Operating income/loss 424 998 1,112 2,921 Interest income and expenditure 41 1 99 32 Other income/expenses 0 12 0 168 Result before taxes 465 1,009 1,211 3,057 Income tax 140 377 374 1,110 Net income/loss 325 632 837 1,947 Earning per share (IAS) 0.07 0.13 0.17 0.39 RESEARCH, DEVELOPMENT AND REGULATORY AFFAIRS In view of the sale of the Pharmaceuticals unit, the majority of employees working within the area of Regulatory Affairs will be taken over by the new owner as part of the agreement. The remaining members of staff will be focusing solely on medical products. Earning per share (DVFA/SG) 0.07 0.12 0.17 0.36 Average number of shares (IAS) 5,000 5,000 5,000 5,000 Cash Earnings per share (DVFA) 0.04 0.14 0.08 0.46 8 9
Balance Sheet and Cash flow Balance Sheet and Cash flow BALANCE SHEET AND CASH FLOW At Euro 24.6 million, the balance sheet total as at 30 September 2003 was roughly Euro 3.7 million higher than at the end of the previous financial year. This is mainly attributable to initial payments received in connection with the contract of sale for our Pharmaceuticals business unit. These payments are still subject to certain contractual provisions and have therefore been carried in equal amounts under cash and cash equivalents and other current liabilities, thus increasing the balance sheet totals. The full effects with regard to curasan s financial position and the recognition of gains from the asset deal will be recorded in the fourth quarter. Therefore, these aspects will be discussed in the annual report for the 2003 financial year. As a result of the Company s accumulated loss, shareholders equity declined by Euro 0.8 million to Euro 14.1 million compared with the figure posted for 31 December 2002. The equity ratio currently stands at 57.6 %. This ratio is expected to be considerably higher once the asset deal has been accounted for by the company. At around Euro 0.4 million, cash flow from operating activities was above par. Overall, i.e. including the contractual prepayment, cash flow from operating activities amounted to Euro 3.5 million. In accordance with the agreement, as at the reporting date of the third quarter curasan was not in a position to utilise the prepaid cash and cash equivalents in full. Around Euro 1.0 million was invested in non-current assets. This figure is 22 per cent higher than the aggregate depreciation and amortisation expense for the same period. Since the last balance sheet date, the total amount of cash and cash equivalents used increased by approx. Euro 0.4 million. Total cash and cash equivalents reported at the end of the third quarter were Euro 2.9 million higher than at the beginning of the financial year. CONSOLIDATED BALANCE SHEET (IAS) (a 000) 30.09.2003 31.12.2002 ASSETS Current assets Cash and cash equivalents 4,248 1,344 Securities held as current assets 0 0 Trade accounts receivable 1,203 1,615 Inventories 4,113 3,613 Prepaid expenses and other current assets 609 465 Total current assets 10,173 7,037 Property, plant and equipment 2,188 2,337 Intangible assets 6,244 5,815 Goodwill 547 652 Deferred taxes 5,407 5,033 Total assets 24,559 20,874 LIABILITIES AND SHAREHOLDERS EQUITY Current liabilities Short-term debt 829 308 Trade accounts payable 3,419 2,259 Accrued expenses 689 582 Other current liabilities 3,664 828 Total current liabilities 8,601 3,977 Long-term debt 1,136 1,266 Pension accrual 254 226 Other non current-liabilities 419 419 Shareholders equity Share capital 5,000 5,000 Additional paid in capital 19,844 19,844 Profit/loss carried forward 9,858 7,578 Annual result 837 2,280 Total shareholders equity 14,149 14,986 Total liabilities and shareholders equity 24,559 20,874 10 11
Balance Sheet and Cash flow Shareholders Equity and Directors Holdings STATEMENT OF CASH FLOW (IAS) STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY (IAS) (a 000) 01.01. 01.01. 30.09.2003 30.09.2002 Net income / loss 837 1,947 Depreciation of fixed assets 789 706 Unscheduled depreciation of current assets 0 168 Payment invalid assets (deferred taxes) 374 1,110 Shareholders Equity a m Share Capital Reserves Acc. Deficit Total Status as at 01.01.2002 5.0 19.8 9.9 14.9 Acc. net loss 0.0 0,0 0.8 0.8 Status as at 30.09.2003 5.0 19.8 10.7 14.1 Status as at 30.09.2002 5.0 19.8 9.5 15.3 Increase in long-term accruals 28 28 Increase / Decrease in inventories, receivables and other assets 232 130 Increase / Decrease in accounts payable and other liabilities 4,103 492 Cash Flow from operating activities 3,477-1,793 Expenditure in investments in fixed assets 964 1,346 Cash Flow from investing activities 964 1,346 Investments / proceeds from the negotiation / liquidation of bonds and debts 391 381 Cash Flow from financing activities 391 381 DIRECTORS HOLDINGS in thsd. Change since Name Position Stock 31.12.02 Hans-Dieter Rössler Chairman of the Executive Board 2,316 + 16 Dr. Detlef Wilke Chairman of Supervisory Board 12 0 Helmut Trahmer Member of the Executive Board 1 0 Change in cash and cash equivalents 2,904 3,520 Other changes in cash and cash equivalents 0 168 Cash and cash equivalents at the beginning of the period 1,344 5,173 Cash and cash equivalents at the end of the period 4,248 1,485 EFFECTS OF THE ASSET DEAL As a result of proceeds from the disposal of the Pharmaceuticals business unit, revenues at the end of the financial year will be approx. Euro 15.5 million, while net profit is expected to total approx. Euro 2 million. In the short term, the Company will record an inflow of cash and cash equivalents of around Euro 9 million. 12 13
Outlook OUTLOOK The international auditing and consulting group Deloitte & Touche nominated curasan AG as a Fast 50 company. The award was presented in Düsseldorf on 16 October 2003. Fast 50 is in recognition of the accomplishments of highgrowth companies within the areas of IT, Communication and Life Sciences, in particular those which have achieved top-class performances thanks to initiative, innovatory prowess, professionalism within their field of expertise, and the willingness to take commercial risks. On 31 October 2003, curasan will convene an Extraordinary Meeting of Shareholders in Kleinostheim to discuss the Sale of the Pharmaceuticals Unit to DeltaSelect GmbH, the only item on the agenda. If the Extraordinary Meeting of Shareholders consents to the sale, curasan AG intends to expand its product portfolio centred around the lead product Cerasorb, while at the same time focusing on new markets such as China and the dental sector in the US. The prime objective is to establish the company as a premier international player within the area of regenerative medicine. While Cerasorb Ortho has recently been launched in the US, distribution of the newly developed Cerasorb Paro has now commenced in Europe. This product is targeted specifically at applications within the area of periodontology. Additional product modifications developed in close cooperation with end-users are currently in the pipeline and are to be rolled out over the coming months. Our annual report for the 2003 financial year will be published at the end of March 2004. FINANCIAL CALENDAR November 11, 2003 Publication of third quarter report January 2004 Announcement of preliminary annual results 2003 March 2004 Publication of annual report May 2004 Publication of first quarter report June 2004 Annual Shareholders Meeting IMPRINT curasan AG Lindigstr. 4 D-63801 Kleinostheim Phone: + 49 (0) 6027 4686-0 Fax: + 49 (0) 6027 4686-86 info@curasan.de www.curasan.de Concept and realisation: fischerappelt, ziegler GmbH, Hamburg 14
Contact: curasan AG Lindigstraße 4 63801 Kleinostheim Phone: +49 (0)6027 46 86 0 Fax: +49 (0)6027 46 86 86 info@curasan.de www.curasan.de Investor Relations: Ralph Wintermantel Phone: +49 (0)6027 46 86 468 Fax: +49 (0)6027 46 86 86 ir@curasan.de