Report on the IIIrd Quarter of 2005 Period under review January 1st, 2005 until September 30, 2005 Regenerative Medicine
Vorwort CONSOLIDATED GROUP curasan AG, D-Kleinostheim curasan Benelux BV, NL-Barneveld curasan Inc., US-Raleigh Pro-tec Medizinische Produkte GmbH, D-Kleinostheim Parent Company 100 % Sales 100 % Sales 100 % Manufacturing SHARE DATA WKN / ISIN / symbol Type of stock Share volume 549 453 / DE 000 549 453 8 / CUR No-par-value common stock 5.25 million Free float 53.74 % Closing price 1.7.05 / 30.9.05 (Xetra) Euro 2.92 / Euro 2.81 High / Low (closing price Xetra) Euro 3.49 / Euro 2.65 Trading volume Xetra and Frankfurt (1.10.04 30.9.05) Euro 13.16 million Market capitalisation as at 30.9.05 Euro 14.75 million Free float factor acc. to Deutsche Börse AG 0.5374 Free float market capitalisation as at 30.9.2005 Euro 7.93 million KEY FIGURES Euro million 1.1.-30.9.05 1.1.-30.9.04 Change Sales 5.9 5.8 2 % Biomaterials 4.8 4.7 2 % Pharmaceuticals 1.1 1.1 0 % EBIT 1.7 2.3 26 % Cash Flow 0.3 4.3 Employees (absolute) 72 78 8 % 4
Letter to Shareholders DEAR SHAREHOLDERS, BUSINESS ASSOCIATES AND STAFF, Our third quarterly report for the 2005 financial year outlines the business performance of curasan AG and its subsidiary companies for the period from the beginning of January to the end of September 2005. We are encouraged by the fact that our favourable performance of the first six months continued into the third quarter. The delayed inflow of revenue experienced in the first six months as a direct result of social and, in particular, healthcare reforms in Germany was more than compensated for in the third quarter: third-quarter revenue was 16 % higher than in the preceding year, and year-on-year revenue growth for the first nine months amounted to 2 %. As regards the final quarter of 2005, revenue figures are yet again expected to exceed those posted in the same period a year ago. On July 27, the US Food and Drug Administration (FDA) granted 510(k) approval for Cerasorb M Dental and Cerasorb Perio. Thus, both products can be marketed in the US from 2006 onwards. Cerasorb M Dental is the second generation of a synthetic bone regeneration material, featuring even faster resorption and bone replacement. It is used in regions exposed to lower stress, thus complementing our classic Cerasorb. Cerasorb Perio is designed specifically for bone defects caused by periodontitis, a widespread condition. Thus, curasan has taken a major step forward in terms of developing indicationspecific Cerasorb products. We would like to take this opportunity to thank our employees, customers, suppliers and shareholders. Your trust is the foundation upon which our activities are built. curasan AG, The Management Board Kleinostheim, November 2005 3
Our Shares OUR SHARES In terms of share performance, curasan s upward trend was further bolstered in the third quarter, as evidenced by a gain of 25.44 % since the beginning of the year. In contrast, the company s benchmark the Prime Pharma Health Performance Index increased by just 18.98 %. In the quarter under review, curasan s share price fluctuated between EUR 2.65 and EUR 3.49. Demand for our shares was particularly buoyant on July 21, the day on which curasan s preliminary results for the second quarter of 2005 were announced. Our share price also gained momentum following the announcement of July 27, as part of which the markets were informed that the US Food and Drug Administration had granted approval for Cerasorb M Dental and Cerasorb Perio. CURASAN SHARE PERFORMANCE 200 % 150 % 100 % 50 % JAN FEB MAR APR MAY JUN JUL AUG SEPT curasan-share, indexed Prime Pharma & Health Perf. Index, indexed SALES OF THE PRODUCT DIVISIONS Revenue grew by 2 % year on year in the first nine months of the current financial year. Analysing the third quarter in isolation, the year-on-year increase in revenue was even more pronounced at 16 %. 4
Sales of the Product Divisions The positive development of our international business especially with the new proprietary product "curavisc for the treatment of joint arthrosis had a particularly favourable impact on revenue. Our subsidiary curasan Benelux achieved turnaround in the period under review, posting above-par operating results. International sales centred around the haemostatic product stypro also contributed to growth: this product matched its revenue total for 2004 as early as the end of August. Domestic business returned to the level recorded in the preceding year, after delays associated with Germany s social and health-care reform within the dental sector were gradually reversed in the period under review. Below-target revenue generated with Mitem, a drug that is used for the treatment of superficial bladder carcinoma, was clawed back to a large extent. Sales within this area had been adversely affected by supply-side shortages. Revenue is expected to return to the original level forecast by the end of 2005. On an aggregated basis (first to third quarter), revenue amounted to EUR 5.9 million (9M 2004: EUR 5.8 million). At the end of September, foreign sales stood at EUR 2.0 million. Thus, the company s export ratio remained unchanged year on year at 35 %. Export Sales North-/South-America 150 Rest 77 Middle East 251 Europe 1,399 Asia 162 5
Sales of the Product Divisions The levels of segment revenue generated within the area of Biomaterials and Pharma were virtually identical in the period under review. Compared with the previous year, the segment result for Biomaterials improved by 20 %, while the Pharma segment increased by 56 %. Growth within this area was attributable mainly to lower costs. Segment assets declined year on year, particularly within the category of intangible assets as well as with regard to goodwill, written down in full, and the reduction in receivables from DeltaSelect GmbH. Segment reporting (period) Pharma Bio N.A. Total Germany Abroad N.A. Segment revenues 2005 546 1,492 0 2,038 1,569 469 0 2004 440 1,568 0 2,008 1,431 577 0 Segment results 2005 33-684 - 126-777 - 162-489 - 126 2004-219 - 497-269 - 985-191 - 525-269 Segment reporting (year) Pharma Bio N.A. Total Germany Abroad N.A. Segment revenues 2005 1,303 5,254 0 6,557 4,655 1,902 0 2004 1,329 5,490 0 6,819 4,569 2,250 0 Segment results 2005-220 - 1,131-345 - 1,696-396 - 955-345 2004-495 - 1,406-448 - 2,349-1,032-869 - 448 Segment assets 2005 1,424 10,668 0 12,092 8,273 3,819 0 2004 2,190 11,008 0 13,198 8,746 4,452 0 6
Consolidated Income Statement CONSOLIDATED INCOME STATEMENT (a 000) Quarter Quarter Acc. Acc. 1.7. 1.7. 1.1. 1.1. 30.9.05 30.9.04 30.9.05 30.9.04 Revenues 1,960 1,694 5,907 5,809 Other operating income 224 160 601 779 Changes in inv. of finished goods and work in progress 146 104 49 74 Production for own fixed assets capitalized 0 50 0 157 Cost of materials / services purchased 535 878 2,175 2,309 Personnel expenses 871 1,034 2,919 3,238 Depreciation and amortization 158 181 400 544 Other operating expenses 1,251 900 2,759 3,077 Operating income/loss 777 985 1,696 2,349 Interest income and expenditure 19 3 49 13 Other income/expenses 0 0 0 0 Result before taxes 796 988 1,745 2,362 Income tax 254 374 636 656 Net income/loss 542 614 1,109 1,706 Earning per share (IAS) 0.11 0.12 0.22 0.34 Earning per share (DVFA/SG) 0.11 0.12 0.22 0.34 Average number of shares (IAS) 5,000 5,000 5,146 5,000 Cash Earnings per share (DVFA) 0.12 0.16 0.26 0.36 7
Consolidated Income Statement In the first nine months, total output i.e. net sales plus inventory changes plus work performed by the enterprise and capitalised amounted to EUR 6.0 million (9M 2004: EUR 6.0 million). Cost of sales within the Group amounted to EUR 2.2 million. This represents 36 % (previous year 38 %) of consolidated total output. The downward trend in staff costs continued in the third quarter of the current financial year. The number of staff employed, computed on the basis of full-time staff and listed according to their respective functional areas, is outlined below. As the table shows, staff downsizing was performed in all areas. Thus, we have now reached a level at which no further reductions can be made without jeopardising business activities. Full-Time Employees 30.9.2005 31.12.2004 30.9.2004 Marketing / Sales 29 30 33 Operations 19 23 23 Research / Registration 5 6 6 Finance / Controlling 5 6 6 Central Division 5 6 6 Total 63 71 74 Write-downs in connection with property, plant and equipment, intangible assets, and goodwill also declined. At the end of the third quarter, a consolidation-related adjustment was performed retroactively for the current year in consultation with the company s auditors. The reduction in material-related expenses corresponds with an increase in other operating expenses. 8
Research, Development and Regulatory Affairs In aggregate, other operating expenses declined year on year as a result of stringent cost management spanning all areas of the company. Overall, staff costs, depreciation/amortisation, and other operating expenses were EUR 0.8 million lower in the first nine months of 2005 than in the same period a year ago. The loss before interest and taxes improved by EUR 0.7 million year on year to EUR 1.7 million. Having accounted for interest expenses and deferred taxes, the net loss for the period was EUR 1.1 million (previous year: EUR 1.7 million). RESEARCH, DEVELOPMENT AND REGULATORY AFFAIRS In the period under review, the US Food and Drug Administration (FDA) granted 510(k) approval for Cerasorb M Dental and Cerasorb Perio. In Europe, Cerasorb block forms have been available for several years. A new generation of Cerasorb M block forms has now been certified, thus complementing the standard product in areas such as traumatology, orthopaedics and sports medicine. In addition, a new dimensionally stable, resorbable polyactide membrane to be sold under licence was launched in the period under review. 9
Balance Sheet and Cash Flow BALANCE SHEET AND CASH FLOW At EUR 18.5 million, the balance sheet total as at 30 September 2005 was EUR 0.2 million lower than at the end of the previous financial year. As regards liabilities and equity, the capital increase implemented in the period under review meant that share capital was augmented by EUR 250,000 to EUR 5,250,000. Tax provisions recognised for the deduction of input VAT associated with the company s IPO were reversed in conformity with a ruling by the European Court of Justice, thereby reducing the level of provisions. Currently standing at 82 %, our significant equity ratio fell by just two percentage points year on year (previous year: 84 %). Cash flow from operating activities was increased significantly compared with the same period a year ago. Growth within this area was attributable to the substantial decline in our net loss. Cash and cash equivalents stood at EUR 0.5 million at the end of the period, a decline of EUR 0.3 million compared with the balance reported at the beginning of the period. The remaining purchase consideration payable to curasan in connection with the sale of the Pharma unit is sufficiently high to safeguard the continued financing of business activities in 2006 if the underlying parameters of financial forecasting are achieved. 10
Balance Sheet and Cash Flow CONSOLIDATED BALANCE SHEET (IAS) (a 000) 30.9.2005 31.12.2004 ASSETS Current assets Cash and cash equivalents 452 775 Securities held as current assets 0 0 Trade accounts receivable 775 672 Inventories 2,672 2,207 Prepaid expenses and other current assets 2,982 3,482 Total current assets 6,881 7,136 Property, plant and equipment 1,848 2,023 Intangible assets 2,115 2,309 Goodwill 0 0 Deferred taxes 5,904 5,250 Other assets 1,700 1,961 Total assets 18,448 18,679 LIABILITIES AND SHAREHOLDERS EQUITY Current liabilities Short-term debt 286 187 Trade accounts payable 1,214 962 Accrued expenses 216 776 Other current liabilities 887 297 Total current liabilities 2,603 2,222 Long-term debt 64 65 Pension accrual 285 269 Other non current-liabilities 365 365 Shareholders equity Share capital 5,250 5,000 Additional paid in capital 19,002 19,844 Adjustment item currency differences 15 35 Profit/loss carried forward 7,997 6,736 Annual result 1,109 2,315 Total shareholders equity 15,131 15,758 Total liabilities and shareholders equity 18,448 18,679 11
Balance Sheet and Cash Flow STATEMENT OF CASH FLOW (IAS) (a 000) 1.1. 1.1. 30.9.2005 30.9.2004 Net income / loss 1,109 1,706 Depreciation of fixed assets 400 544 Unscheduled depreciation of current assets 0 0 Payment invalid assets (deferred taxes) 636 656 Increase in long-term accruals 16 29 Proceeds from fixed asset disposals 0 0 Increase / Decrease in inventories, receivables and other assets 68 64 Increase / Decrease in accounts payable and other liabilities 302 1.421 Cash Flow from operating activities 1,095 3,146 Expenditure in investments in fixed assets 31 450 Proceeds from sale of business unit 1,297 0 Cash Flow from investing activities 1,266 450 Proceeds from capital increase 592 0 Investments / proceeds from the negotiation / liquidation of bonds and debts 98 698 Cash Flow from financing activities 494 698 Change in cash and cash equivalents 323 4,294 Other changes in cash and cash equivalents 0 0 Cash and cash equivalents at the beginning of the period 775 5,636 Cash and cash equivalents at the end of the period 452 1,342 12
Shareholders Equity and Directors Holdings STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY (IAS) Shareholders Equity a m Share Capital Reserves Acc. Deficit Total Status as at 1.1.05 5.0 19.8 9.0 15.8 Acc. net loss 0.25 0.8 0.1 0.65 Status as at 30.9.05 5.25 19.0 9.1 15.15 Status as at 1.1.04 5.0 19.8 6.7 18.1 Acc. net loss 0.0 0.0 1.7 1.7 Status as at 30.9.04 5.0 19.8 8.4 16.4 DIRECTORS HOLDINGS i. thsd. Change since Name Position Stock 31.12.2004 Hans-Dieter Rössler Chairman of the Executive Board 2,316 0 Dr. Detlef Wilke Chairman of Supervisory Board 12 0 13
Outlook OUTLOOK A number of Investor Relations events have been planned for the fourth quarter of the year, as part of which we will have the opportunity to present our company to financial analysts: >> on 14 November at the 2nd SEQ - Smart Equities Conference in Frankfurt am Main >> on 22 November at the Deutsche Eigenkapitalforum in Frankfurt am Main >> on 1 December at the GBC Munich Investor Conference in Munich >> on 6 December at the Small and Mid Caps investor and analysts meeting in Frankfurt am Main. curasan AG will be a Gold Sponsor of the DGOI Congress (Deutsche Gesellschaft für Orale Implantologie German Society for Oral Implantology), which takes place in Strasbourg/France in association with the World Congress of the ICOI (International Congress of Oral Implantologists) from November 10 to 12, 2005. As part of the event, we will have the opportunity to showcase our products at our newly designed exhibition stand. In addition, we shall be hosting a workshop under the heading "Regenerative and Augmentative Surgery. It is directed mainly at general dental practitioners, focusing on the areas of bone regeneration and augmentation techniques in dental surgery. The workshop is designed to impart basic theoretical knowledge within the field, as well as practical skills. The seminar will also provide advice on outlining the benefits of treatment to patients and generating private-treatment revenue through specialist dental services. Our annual report for the 2005 financial year will be published at the end of March 2006. 14
FINANCIAL CALENDAR February 2006 Announcement of preliminary annual results 2006 March 2006 Annual Report 2005 May 2006 June 2006 Publication of first quarter report Annual shareholders Meeting IMPRINT curasan AG Lindigstraße 4 D-63801 Kleinostheim Phone.: +49 (0) 6027 4686-0 Fax: +49 (0) 6027 4686-686 info@curasan.de www.curasan.de Concept and realisation: fischerappelt, ziegler GmbH, Hamburg
Contact: curasan AG Lindigstr. 4 63801 Kleinostheim Phone: +49 (0)6027 46 86 0 Fax: +49 (0)6027 46 86 686 info@curasan.de www.curasan.de Investor Relations: Dr. Erwin Amashaufer Phone: +49 (0)6027 46 86 467 Fax: +49 (0)6027 46 86 469 ir@curasan.de