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Interim Report: First Nine Months 2000
Schering Group
Sales trend
(in EURm)
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1st quarter 2nd quarter 3rd quarter 4th quarter
1999 2000 1999 2000 1999 2000 1999 2000
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Total 838 1,044 916 1,173 933 1,132 987
Foreign 714 914 797 1,046 812 1,010 864
Domestic 124 130 119 127 121 122 123
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This Interim Report for the Schering Group comprises the Consolidated Income
Statements as well as condensed versions of the Consolidated Balance Sheets and
Consolidated Cash Flow Statements. It also provides a regional breakdown of sales
and results. Major earnings indicators are presented on a quarterly basis.
In the preparation of Interim Reports, we apply the same valuation and accounting
policies as in preparation of our Annual Financial Statements. Translation of the
figures from companies outside the European Monetary Union is performed in
accordance with the concept of functional currency. The closing rate method is
used for all such companies.
International Accounting Standards IAS 22 (revised 1998), IAS 36 and IAS 37 are
being applied for the first time in preparation of this year's Interim Reports.
This requires no changes to our previous valuation and accounting policies.
In accordance with International Accounting Standard IAS 38, which is also being
applied for the first time in preparation of this year's Interim Reports,
internally generated intangible assets have been capitalized and written off on
a straight-line basis over their useful life. Additions for the first nine months
of 2000 include EUR10m for software developed in-house.
This Interim Report complies with International Accounting Standard IAS 34.
The Report has not been audited.
The first nine months 2000 at a glance
* Excellent sales trend continues: up 25%
* Earnings per share: up 30%
* Biotech product Betaferon(R) boosts sales 33%
* USA fuels growth: sales up 39%
Excellent trend continues in third quarter
The Schering Group did outstanding business in the first nine months of 2000.
Sales rose 25% year on year to EUR3,349m. Expanding volumes accounted for an
increase of 15% and pricing adjustments for an increase of 2%. Movements in exchange
rates again had a substantial effect, accounting for an increase of 8%.
Basic earnings per share rose 30%.
Excluding business at our recent acquisitions, CIS bio international and Mitsui
Pharmaceuticals, both of which have been consolidated since April 2000, and at Diatide,
which has only been included in the accounts since November 1999, Group sales rose 20%.
We continue making rapid progress in expanding business in the USA. American sales
rose 39%. Increased volumes and exchange-rate effects each accounted for 18%.
Growth in the USA was attributable, above all, to outstanding business with our MRI
contrast medium, Magnevist(R) (+47%), our multiple sclerosis treatment, Betaferon(R)
(+32%), and our antiarrhythmic, Betapace(R) (+48%).
Excluding acquisitions, Japanese sales rose 26%. Changes in exchange rates had a major
impact on figures, accounting for an increase of 20%; but volumes also expanded 8%.
Government-imposed price-cuts averaging 8% were largely offset by reduced margins
in the distribution chain so that, overall, prices were down only 2% over
the first nine months of the year.
Sales in our Latin America/Canada region rose just under 29%. Increased volumes and
exchange-rate effects accounted for 11% and 12%, respectively, while 6% was due to
pricing effects. There was notable growth in Canada (+43%) and Mexico (+42%) as well
as encouraging developments in our largest individual market in the region, Brazil,
where sales increased 26% (adjusted for exchange-rate movements: 8%).
Sales growth in our Asia region amounted to 22%. This breaks down as follows:
increased volumes (+9%); pricing adjustments (+2%); and exchange-rate effects (+11%).
In Europe, the positive trend continued in the third quarter of the year. European sales
rose 14% compared with the first nine months last year with increased volumes accounting
for 13%. Adjusted for acquisitions, the overall increase was 10%. In Germany,
sales rose 4%. Betaferon(R) has considerable importance for growth in this market.
Its turnover in Germany rose 35%.
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Our top-selling products in the first nine months
Jan. - Sept. 2000: Change
(in EURm) year-on-year
1. Betaferon(R)* 440 + 33%
2. Iopamiron(R) 269 + 24%
3. Magnevist(R) 214 + 26%
4. Ultravist(R) 185 + 13%
5. Diane(R)-35 152 + 19%
6. Betapace(R) 151 + 48%
7. Microgynon(R) 98 + 21%
8. Climara(R) 83 + 29%
9. Fludara(R) 82 + 36%
10. Femovan(R) 82 + 6%
11. Androcur(R) 79 + 7%
12. Meliane(R) 75 + 26%
13. Triquilar(R) 68 - 6%
14. Mirena(R) 51 + 16%
15. Noctamid(R) 32 + 9%
*Trade name in the USA and Canada Betaseron(R)
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Female Health Care:
success with Meliane(R) and Climara(R)
Sales in Fertility Control and Hormone Therapy rose 15%. Particularly fast-growing
products were Meliane(R), a very low-dose oral contraceptive (+26%), and Climara(R),
a hormone patch for the treatment of typical menopausal complaints (+29%).
One of the most important features of Climara(R) is its ease of application.
The patch provides continuous hormone delivery and only has to be changed once a week.
The Dutch health authority's decision to grant market authorization to Yasmin(R),
our oral contraceptive containing the novel active ingredient, drospirenone,
has now been recognized by the other EU member states as well as Iceland and Norway
(mutual recognition procedure). The US Food and Drug Administration has confirmed
the product's suitability in the USA, issuing a so-called approvable letter in July.
In Germany, Yasmin(R) has been approved since the beginning of October.
Sales are due to commence in November this year.
Therapeutics:
substantial sales growth with Betaferon(R)
Sales in the Therapeutics business area rose 31% year on year. Growth in the business
area was due in large part to our excellent business with the biotech product,
Betaferon(R). Global sales of the product rose 33% to EUR440m. Sales in the USA
amounted to EUR180m (+32%). In Europe, sales rose 34% to EUR224m, so that Schering's
position at the front of the European market for multiple sclerosis preparations was
again confirmed. One factor contributing to the success of Betaferon(R) is that it is
suitable for a broader spectrum of patients than other interferons. Applications
range from the early treatment of relapsing-remitting multiple sclerosis to treatment
of the disease in its secondary progressive form.
Sales of Fludara(R), which is used for the treatment of chronic lymphocytic leukemia,
again developed very well, rising 36%. We expect additional stimulus to growth from
an oral dosage form of Fludara(R) whose first launch is scheduled in the UK at the
end of the year.
Products from our recently acquired company, Mitsui Pharmaceuticals, have been included
in Group reporting since April this year. Mitsui sales amounted to EUR65m between April
and September and account for eight of the 31% sales growth in the Therapeutics
business area year on year.
Sales by region* Schering Group
1-9/2000 1-9/1999 Change
% (in EURm) in %
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Europe** 2000 45 1,513 + 14
1999 49 1,323
USA 2000 22 750 + 39
1999 20 541
Latin America/ 2000 10 345 + 29
Canada 1999 10 268
Japan 2000 14 477 + 48
1999 12 322
Asia 2000 5 149 + 22
1999 5 122
Other 2000 4 115 + 4
activities 1999 4 111
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Total 100 100 3,349 2,687 + 25
* regions defined in accordance with internal financial reporting,
1999 figures adjusted
** incl.Africa,Australia and New Zealand
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Diagnostics and Radiopharmaceuticals:
sustained growth with Magnevist(R)
Despite continued pricing pressure in imaging diagnostics, we were able to increase sales
in the Diagnostics and Radiopharmaceuticals business area by 32%. Overall, sales in the
business area amounted to EUR991m. Of this, EUR552m relates to X-ray contrast media (+18%),
EUR215m to products for MRI (+27%), EUR139m to contrast medium application technologies
(+33%) and EUR76m to radiopharmaceuticals. First-time consolidation of Diatide and CIS bio
international accounted for nine of the 32% sales growth in the business area this year.
We did very encouraging business with Magnevist(R), sales of which rose 26%. Above all,
we achieved a notable increase in sales of the product in the USA.
In August, the FDA issued an "approvable letter" for Imavist(TM), an ultrasound contrast
agent designed to improve ultrasound images of the heart that we are developing jointly
with the American company, Alliance Pharmaceuticals. Schering has exclusive worldwide
marketing rights to the product. Imavist(TM) will be Schering's first ultrasound contrast
agent in the USA.
Also in August, our subsidiary, CIS bio international, concluded a 10-year agreement with
Syncor Overseas giving CIS exclusive marketing rights in Europe, North Africa and various
Asian countries to Syncor's iodine-125 (I-125) seeds. The brachytherapy seeds
(capsulated radioactive sources) will be used for the treatment of certain types of
prostate cancer. Prostate cancer is one of the most frequent forms of cancer in men.
Iodine-125 will provide an ideal complement to Androcur(R), which is generally used at an
earlier stage of prostate cancer treatment.
Dermatology:
green light for Blue Light!
The US Food and Drug Administration granted approval for the BLU-U(TM) Blue Light PDT
Illuminator in September, clearing the way for the immediate availability of the
Levulan(R) PDT system. The nonlaser blue light source is used to activate the
photosensitizer during photodynamic therapy. PDT is a novel treatment for actinic
keratosis, a precancerous condition of the skin. Distribution of the Levulan(R)
PDT system in the United States has already begun.
Actinic keratosis is caused by chronic exposure to the sun and appears on the skin in
the form of rough, scaly, discolored patches most often on the face and scalp. If left
untreated, actinic keratosis can develop into squamous cell carcinoma, a malignant
cancer of the skin.
Global sales in the Dermatology business area rose 10%. About half of the increase was due
to price adjustments. Notable contributions to the increase in sales came from our eczema
preparations, Advantan(R) (+28%) and Nerisona(R) (+14%).
Sales by business area Schering Group
% 1-9/2000 1-9/1999 Change
(in EURm) in %
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Fertility Control and 2000 30 1,005 +15
Hormone Therapy 1999 32 871
Therapeutics* 2000 31 1,061 +31
1999 30 808
Diagnostics and 2000 30 991 +32
Radiopharmaceuticals* 1999 28 752
Dermatology 2000 5 166 +10
1999 6 151
Other sources* 2000 4 126 +20
1999 4 105
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Total 100 100 3,349 2,687 +25
* Last year's figures adjusted following product reclassification
Aventis CropScience S.A.
The positive second-quarter trend was sustained in the third quarter of the year. Third-quarter
sales amounted to EUR854m, 7% up on the figure for the same quarter last year. Overall sales
for the first nine months were down 2% year on year. Sales increased in the USA and Brazil
while there has been a reduction in European sales so far this year.
Personnel
The average number of employees in the Schering Group rose 5% year on year to 23,515.
At the same time, personnel costs rose 21% to EUR1,023m. Excluding acquisitions,
the average number of employees rose 1% to 22,728 and personnel costs rose 16% to EUR974m.
Adjusted for exchange-rate developments as well as acquisitions, the increase
in personnel costs was 9%.
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Personnel
January - September 2000 1999 Change Year 1999
Employees* 23,515 22,411 + 5% 22,430
Personnel costs in EURm** 1,023 843 + 21% 1,160
* Average
** Wages and salaries, social contributions, pensions
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Capital expenditure
This year's volume of investment will amount to approximately EUR190m (1999: EUR163m). Of this
planned expenditure, 44% relates to Germany, 17% to other EU countries and 19% to the USA.
Our integration of Mitsui Pharmaceuticals means we will be investing appreciably more in Japan
this year than in previous years. Work on extension of our site in Montville, New Jersey, will
have been completed by the end of the year. This project was undertaken to cater for the
expansion in our activities in the USA. A further focus of investment is Berlin, where we are
bringing formulation and packaging of liquid and solid dosage forms together at one site.
Cash flow statement
Cash flows from operating activities rose 57% year on year. This increase stems from a slight
reduction in working capital in the period of the report set against a considerable increase
in the corresponding period last year. Last year's figures were affected by increased
inventories related to implementation of our European Production Concept as well as by tax
payments relating to a government tax audit. Cash flows before working capital changes were
down 9% despite a considerable increase in net income. Reasons for this include profits from
the sale of venture capital investments - shown as cash flows from investing activities - and
the higher non-cash share of earnings at Aventis CropScience.
The reduction in cash flows used in investing activities is primarily attributable to increased
income from the sale of marketable securities.
The increase in cash flows used in financing activities results from repayment of loans in
the period of the report compared with net borrowings last year.
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Cash flow statements Schering Group
(values expressed in EURm)
Jan.-Sept. Jan.-Sept. Full year
2000 1999 1999
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Cash flows before working capital changes* 422 466 631
Changes in working capital 29 -179 -356
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Cash flows from operating activities 451 287 275
Cash flows used in investing activities* - 46 -211 -261
Cash flows used in financing activities -259 - 74 -283
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Net change in cash and cash equivalents 146 2 -269
Effect of exchange-rate movements
on cash and cash equivalents* 4 -1 4
Cash and cash equivalents at January,1* 102 367 367
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Cash and cash equivalents
at September 30 / December 31 252 368 102
* Last year's figure for the first nine months has been adjusted
as marketable securities are now excluded from cash and cash
equivalents and presented as a separate item in the
Consolidated Balance Sheets
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Earnings per share up 30%
Following last year's share buyback program, a 27% increase in net income translates to a 30%
increase in basic earnings per share. Prelaunch marketing expenses for new products being
introduced next year combined with the absence of one-off income reported last year meant
there was only a slight increase in operating profit.
The profit contribution from our 24%-stake in Aventis CropScience was affected by
restructuring costs of EUR6m compared with EUR43m in the corresponding period last year.
The other financial result includes profits of EUR38m from the sale of shares in venture
capital investments. Unrecognized changes in the fair value of available-for-sale securities
rose EUR34m to EUR131m.
Outlook
Given we continue to benefit from the strength of the US dollar and the yen, we can revise
our estimate of sales growth for the year 2000 to 23%. Net income will show a slightly higher
rate of growth, as it did in the first nine months of the year. With substantial prelaunch
marketing expenses for the introduction of new products in the USA, the increase in operating
profit will remain lower than the growth in sales. There will be a considerable improvement
in the financial result.
Schering Aktiengesellschaft
The Board of Executive Directors
Berlin, October 2000
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Earnings Indicators by quarter Schering Group
(values expressed in EURm)
1st quarter 2nd quarter 3rd quarter 4th quarter Full year
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Net sales 2000 1,044 1,173 1,132
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1999 838 916 933 987 3,674
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Gross profit 2000 806 876 849
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1999 648 708 698 718 2,772
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Operating 2000 188 173 113
profit -----------------------------------------------------------------
1999 143 138 183 72 536
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Profit on 2000 207 183 105
ordinary -----------------------------------------------------------------
activities 1999 149 148 121 41 459
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Profit after 2000 109 103 65
tax -----------------------------------------------------------------
1999 89 85 45 59 278
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Net income 2000 106 103 61
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1999 87 82 43 60 272
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Basic earnings 2000 0.54 0.51 0.31
per share* ----------------------------------------------------------------
(in EUR) 1999 0.43 0.40 0.22 0.30 1.35
* Figures for last year and the 1st quarter 2000 have been adjusted
because of a 1:3 share split
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Segment reporting* Schering Group
(values expressed in EURm)
January-September 2000 Segment Internal External Change year- Segment Change year- Segment Change year-
net sales net sales net sales on-year perform- on-year result on-year
ance**
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Europe region*** 2,090 577 1,513 14 % 637 5 % 351 5 %
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USA region 754 4 750 39 % 225 22 % 42 20 %
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Latin America/Canada region 360 15 345 29 % 116 49 % 72 67 %
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Japan region 477 -- 477 48 % 176 30 % 82 21 %
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Asia region 152 3 149 22 % 55 25 % 32 39 %
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Other activities 164 49 115 4 % 54 - 8 % 22 -21 %
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Segment total 3,997 648 3,349 25 % 1,263 14 % 601 13 %
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Research and development
costs -- -- -- -- - 574 18 % -- --
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Central production overheads
and production variances -- -- -- -- - 88 - 3 % -- --
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Other -- -- -- -- - 127 92 % -127 92 %
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Schering Group 3,997 648 3,349 25 % 474 2 % 474 2 %
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January-September 1999
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Europe region*** 1,796 473 1,323 7 % 605 9 % 333 16 %
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USA region 545 4 541 8 % 185 0 % 35 -31 %
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Latin America/Canada region 288 20 268 -2 % 78 -17 % 43 -26 %
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Japan region 322 -- 322 30 % 135 55 % 68 134 %
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Asia region 123 1 122 30 % 44 52 % 23 156 %
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Other activities 157 46 111 11 % 59 31 % 28 56 %
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Segment total 3,231 544 2,687 9 % 1,106 11 % 530 17 %
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Research and development
costs -- -- -- -- - 485 8 % -- --
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Central production overheads
and production variances -- -- -- -- - 91 1 % -- --
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Other -- -- -- -- - 66 - 42 % - 66 -42 %
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Schering Group 3,231 544 2,687 9 % 464 37 % 464 37 %
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* Segments defined in accordance with internal financial reporting,
previous years' figures adjusted
** Measure of performance used internally in the Schering Group
(before allocation of research and development costs and
central production overheads and production variances)
*** incl.Africa, Australien and New Zealand
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Consolidated Income Statements Schering Group
(values expressed in EURm)
January-September 2000 1999 Change Full year 1999
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Net sales 3,349 2,687 +25 % 3,674
Cost of sales - 818 - 633 +29 % - 902
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Gross profit 2,531 2,054 +23 % 2,772
Costs of
marketing and selling -1,093 - 828 +32 % -1,165
engineering and administration - 330 - 273 +21 % - 367
research and development - 574 - 485 +18 % - 684
Other operating expenses / income - 60 - 4 - 20
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Operating profit 474 464 + 2 % 536
Result from Aventis CropScience
(1999 AgrEvo) 16 - 40 - 60
Other financial result 5 - 6 - 17
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Pre-tax profit 495 418 +18 % 459
Taxes on profit - 218 - 199 +10 % - 181
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Profit after tax 277 219 +26 % 278
Minority interests in profit / losses - 7 - 7 - 6
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Net income 270 212 +27 % 272
Basic earnings per share* (in EUR) 1.36 1.05 +30 % 1,35
Diluted earnings per share* (in EUR)** 1.35 1.05 +29 % 1,35
* Figures for last year adjusted because of a 1:3 share split
** Diluted by stock options issued as part of long-term incentive schemes for employees
Consolidated Balance Sheets
(values expressed in EURm)
Schering Group
Assets September 30, 2000 December 31,1999
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Goodwill 375 394
Other intangible assets 127 60
Property, plant and equipment 1,224 1,123
Financial assets 630 581
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Fixed assets 2,356 2,158
Inventories 786 682
Receivables and other assets 1,461 1,206
Marketable securities 367 481
Cash and cash equivalents 252 102
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Other non-current and current assets 2,866 2,471
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5,222 4,629
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Schering Group
Equilty and liabilities September 30, 2000 December 31, 1999
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Paid-up capital 528 528
Retained earnings at January 1 1,570 1,485
Changes in reserves -- - 186
Dividend payments - 165 - 91
Net income 270 272
Translation adjustments 92 90
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Retained earnings at September 30 / December 31 1,767 1,570
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Shareholders' equity 2,295 2,098
Minority interests 81 55
Long-term provisions and liabilities 1,362 1,298
Short and medium-term provisions and liabilities 1,484 1,178
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Provisions and liabilities 2,846 2,476
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5,222 4,629
The Interim Report has not been audited.
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