Consolidated Annual Report 2018
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Annual Report 2018 CMYK Annual Report 2018 CMYK 4 RECORDATI, AN INTERNATIONAL GROUP 6 THE FUTURE OF THE GROUP 7 LETTER TO OUR SHAREHOLDERS 10 THE GROUP IN FIGURES 12 GEOGRAPHICAL PRESENCE 14 GROUP ACTIVITIES HEALTH, A GLOBAL OBJECTIVE CORPORATE PRODUCTS OUR PRIMARY AND SPECIALTY CARE SUBSIDIARIES RARE DISEASES AND ORPHAN DRUGS 36 RESEARCH AND DEVELOPMENT 42 PHARMACEUTICAL CHEMICALS AND PRODUCTION PLANTS 46 THE RECORDATI SHARE 49 FINANCIAL HIGHLIGHTS 50 2018 OPERATIONAL AND FINANCIAL REVIEWS 69 CONSOLIDATED FINANCIAL STATEMENTS 101 ATTESTATION IN RESPECT OF THE CONSOLIDATED FINANCIAL STATEMENTS 103 AUDITORS’ REPORT 109 DISCLOSURE OF CONSOLIDATED NON FINANCIAL STATEMENT 161 INDEPENDENT AUDITORS’ REPORT ON THE CONSOLIDATED NON-FINANCIAL STATEMENT 164 CORPORATE GOVERNANCE REPORT MANAGEMENT AND SUPERVISORY BODIES 4 | Annual Report 2018 RECORDATI, AN INTERNATIONAL GROUP Revenue Net Income Employees Million Euros Million Euros 1,352.2 312.4 Exceed 4,100 Annual Report 2018 | 5 its product portfolio by developing of the Group’s most important Recordati is a well-established its own pipeline of products and by specialties. This product is now growing international entering the segment dedicated to marketed successfully in 39 rare diseases. Recordati develops, countries. Also pitavastatin, a latest pharmaceutical group produces and sells drugs for the generation statin for controlling listed on the Italian Stock treatment of rare diseases through hypercholesterolemia, discovered Exchange (now part of the Orphan Europe and Recordati Rare and developed by Kowa, was Diseases, two companies dedicated obtained under license for Europe. London Stock Exchange) mainly to metabolic deficiencies Recordati has six pharmaceutical since 1984. of a genetic nature. production facilities and a The Group’s most important specialized packaging and The Group has its headquarters in products are those, in the distribution facility dedicated Milan and is one of the oldest Italian cardiovascular therapeutic area, to rare disease products all of pharmaceutical companies. Since based on lercanidipine, a latest which operate with full respect it was founded in 1926 Recordati generation calcium channel for environmental protection has grown constantly for more than blocker indicated for the treatment regulations and in compliance ninety years thanks to the success of hypertension, discovered with current Good Manufacturing of its products and to its strategy and entirely developed in the Practices (cGMP). Recordati also for growth and development Recordati research laboratories, produces a number of active based on internationalization and its combination with ingredients and intermediates for and diversification through an enalapril, a widely prescribed the pharmaceutical industry. acquisition strategy initiated in the ACE inhibitor. The Group’s It has two pharmaceutical chemical 1990’s and still ongoing. It actively presence in this therapeutic area plants one in Campoverde di Aprilia, seeks new opportunities and faces was further strengthened with Latina, Italy, and the other in County the challenges of a constantly the acquisition of the products Cork, Ireland. changing marketplace with based on metoprolol, a beta- The broad geographical coverage determination. In 2018 the Group blocker mainly indicated for the achieved by the Group, its own generated revenues of € 1,352.2 control of a range of conditions efficient network of medical sales million and has a staff of 4,142 including hypertension, angina representatives in addition to its employees. pectoris, disturbances of cardiac many years of experience in the rhythm, maintenance treatment Today the company has many regulatory field and its expertise after myocardial infarction, and subsidiaries, both in Europe and in the management of highly functional heart disorders with outside Europe. In addition to the specialized products, makes palpitations. countries in Western Europe the Recordati an ideal partner for the Group is also directly present in The company’s commitment in development and marketing of new the Central European countries, the uro-genital therapeutic area products in all the territories where in Russia and the other countries and its know-how and expertise it is present with its marketing belonging to the Commonwealth of accumulated over 40 years of organizations. Independent States (C.I.S.), Ukraine, research and study has led to Turkey, Tunisia, U.S.A., Canada, its being the European partner Mexico, in some South American of established international countries, Japan and Australia. pharmaceutical companies. Recordati sells its products in Silodosin, a molecule used in the over 150 markets both directly treatment of benign prostatic and through license agreements. hyperplasia discovered by Kissei In addition to its geographical and developed for the European expansion the Group has enriched markets by Recordati, is one 6 | Annual Report 2018 THE FUTURE OF THE GROUP Recordati’s proven ability to generate profitable alliances with prominent players in the pharmaceutical industry is the basis of an increasingly intense activity directed at the identification and execution of new license agreements or partnerships for the development of innovative products. In the future Recordati intends to reinforce its presence in the international pharmaceutical market and to extend its rare disease business worldwide. Annual Report 2018 | 7 LETTER TO OUR SHAREHOLDERS During 2018 an important transition in the majority ownership of our The financial results Group took place. An agreement was reached with a consortium of obtained in 2018 investment funds controlled by CVC Capital Partners, a highly respected demonstrate the continued investor group, for the indirect acquisition of 51.791% of the share capital of Recordati S.p.A.. This change in ownership ensures the continuity for growth of the Group, management and employees and a commitment to keep building and with increased revenues developing the company going forward along the strategic lines that have and profitability. been the drivers of the group’s success over many years. In addition, our new majority shareholders will contribute with their expertise and global healthcare network to expand both our rare disease and core business by accelerating our growth strategy. The financial results obtained in 2018 demonstrate the continued growth of the Group, with increased revenues and profitability. All business segments and the main corporate products contributed to these results. Group consolidated revenue for 2018 is € 1,352.2 million, up 5.0% over the preceding year. International sales are € 1,079.0 million, up 4.8% and now represent 79.8% of total revenue. EBITDA, at 36.9% of sales, is € 499.1 million, an increase of 9.8% over 2017. Operating income, at 32.7% of sales, is € 442.2 million, a growth of 8.8% compared with the preceding year. Net income is € 312.4 million, an increase of 8.2%, with a further improvement as margin on sales which is now 23.1%. At 31 December 2018 the Group’s net financial position records a net debt of € 588.4 million compared to net debt of € 381,8 million at 31 December 2017. During the period own shares were purchased for an overall disbursement of € 169.8 million, dividends were distributed for an amount of € 178.9 million. Furthermore, the Italian company Natural Point S.r.l. and the French company Tonipharm S.A.S. were acquired for a total value of around € 148 million. Shareholders’ equity at 31 December 2018 is € 963.6 million. In 2018 a number of initiatives were pursued in line with the group’s strategy of continued growth and development. In April an agreement with Mylan for the acquisition of the rights to Cystagon® (cysteamine bitartrate), indicated for the treatment of proven nephropathic cystinosis in children and adults, for certain territories, including Europe, was concluded. The product was previously commercialized by Orphan Europe (a Recordati group company) under license from Mylan. The definitive acquisition of the rights allows the Group to continue offering this life-saving treatment to patients. In June Recordati acquired 100% of the share capital of Natural Point S.r.l., an Italian company, based in Milan, active in the food supplements market. Natural Point was established in 1993 with the objective of promoting a culture of healthy use of food supplements. It offers a wide portfolio of very efficacious supplements in highly bioavailable formulations, produced with safe active ingredients, to improve health and well-being. The company’s main product is a particular formulation of magnesium carbonate and citric acid that has the characteristic of being easily assimilated into the body, apart from its having an agreeable flavor. 8 | Annual Report 2018 Recordati is the exclusive global partner of NovaBiotics Ltd, a biotechnology company based in Aberdeen, Scotland, for the commercialization of Lynovex®, a first-in-class oral intervention for acute infectious exacerbations associated with cystic fibrosis (CF). Cystic fibrosis exacerbations are major contributors to the irreversible decline in lung function and overall health of people with CF. Treatments that increase recovery from exacerbations might reduce the damaging effects of exacerbations. Lynovex® is designated as an orphan drug in Europe and in the U.S. and is the first multi-active therapy of its kind (anti-infective, mucolytic, anti-biofilm, antibiotic potentiating) to be developed specifically for alleviating the infectious trigger