Untitled - Sigma Tau

Transcription

2009
Consolidated Financial Statements as at 31 December 2009
Sigma-Tau Finanziaria SpA
drawn up according to the International Accounting Standards (IAS/IFRS)
Contents
General Information
5
Independent Auditors’ Report
6
Management Report
8
Consolidated Financial Statements
30
Notes to the Consolidated Financial Statements
40
2 |3
General Information
Board of Directors
Chairman
Claudio Cavazza
Deputy Chairman and Corporate Managing Director
Ugo Di Francesco
Vice President
Corporate Administration Finance & Control
Marco Codella
Vice President Corporate Development
Mauro Bove
Vice President
Corporate Legal Affairs & Intellectual Property
Stefano Marino
Directors
Mario Artali
Enrico Cavazza
Marco Cerrina Feroni
Emilio Platè
Trevor M. Jones
Board of Statutory Auditors
Chairman
Vittorio Bennani
Standing Auditors
Roberto Capriata
Massimiliano Alberto Tonarini
Independent Auditors
Reconta Ernst & Young SpA
4 |5
Independent Auditors’ Report
6 |7
Management Report
Dear Shareholders,
in 2009 the decrease in global demand, together with the worsening of the global financial situation, the decrease in consumption and the drop in business confidence, continued to aggravate the
crisis in almost all economic segments, including the pharmaceutical sector.
For the first time since 1945, the world GDP decreased, falling
by 0.8% (against a 3% increase in 2008). International trade
also reported extremely negative results, with a decrease of
12.3% (it was up 3% in 2008).
The GDP decrease was higher in the Eurozone, where it fell
3.9% (+0.6% in 2008), and in the USA, with a decrease in
Gross Domestic Product of 2.5% (against an increase of 0.4%
in 2008). Italy’s and Germany’s GDP decreased by 4.8%,
followed by Spain (-3.6%) and France (-2.3%).
The emerging Asian countries showed an opposite trend and
acted, for the first time, as development drivers, thus replacing
the USA and Europe. More specifically, reference is made to the
increase in China’s GDP (8%) and India’s GDP (5.6%). Figures
show that China is gaining more and more ground at a global
level: it is estimated that it will become the second world power
in 2014 in terms of GDP, with an incidence on world GDP of
11%. On the contrary, the decrease in Japan’s GDP (5.3%)
marked the end of a long expansionary trend that started after
the Second World War.
Within this difficult international macro-economic
environment, the Sigma-Tau Group ended the year with a profit
after taxes of Euro 21.7 million, a strong increase compared to
2008, when profits (Euro 3.2 million) were strongly penalised
by the impact of the financial crisis on the value of some equity
investments held.
Before analysing in detail the Group’s economic-financial results
and operations, it should be underlined that during the year the
Group made greater efforts in the “biotech” segment, especially
with regard to those companies listed in the United States.
Reference should be made to the increase in the equity
investment held by Sigma-Tau Pharmaceuticals Inc. in Soligenix
Inc. (formerly DOR BioPharma Inc.), equal to 24.6% of the
share capital. The company – that is listed on the OTCBB – is
engaged in the study of an important product (orBec®) for the
treatment of gastrointestinal disorders.
The Group continued its project with the US firm SciClone
Inc., a biotech company listed on NASDAQ and 13.93%
owned by the Group, for the study of an important product to
be used in the treatment of hepatitis C and with possible
applications in the oncology segment. In 2009, following a
compromise settlement with the Company, the Sigma-Tau
Group appointed 3 members on the SciClone Board, in order
to actively take part in the management of the Company.
Moreover, a long negotiation was carried out during the year,
which led to the binding purchase offer, by the Sigma-Tau
Group, of the “specialty pharma” business division of the
company Enzon Pharmaceuticals Inc. (listed on Nasdaq). In
order to obtain detailed information on this transaction – which
was carried out and completed in February 2010 with the
approval of the Enzon Shareholders’ Meeting – see the section
concerning “Significant events after the year end”.
During 2009, in order to avoid the dilution of the equity
investment held by the Group in Lee’s Pharmaceuticals
(a company listed on the Hong Kong Stock Exchange) due to
a share capital increase, shares in the company have been
purchased so as to maintain unchanged the old shareholding
percentage (approx. 30%). The investment was strategic from a
financial point of view, taking into account that the company’s
security appreciated by 400% in 2009.
The reorganisation of the “Europe” segment led to the creation
of Sigma-Tau Pharma Belgium Sprl in June 2009.
The liquidation of Sigma-Tau Ireland Ltd was completed
during the year.
8 |9
SUMMARY OF 2009 RESULTS AND FINANCIAL ANALYSIS
A summary of the Group’s results for the year 2009 is provided below:
Consolidated Income Statement
Euro (Mln)
2009
% on sales
2008
% on sales
2009/2008
Change %
635.5
100.0%
639.3
100.0%
(3.9)
-0.6%
Purchase of raw material and finished goods
211.8
33.3%
213.4
33.4%
(1.6)
-0.8%
Operating expenses
338.8
53.3%
348.6
54.5%
(9.8)
-2.8%
Gross operating margin
84.9
13.4%
77.4
12.1
7.5
9.7%
Depreciation, amortisation, write downs and accruals
40.7
6.4%
37.2
5.8%
3.5
9.5%
Net operating margin
44.2
7.0%
40.2
6.3%
4.0
9.9%
Financial income (expense)
(7.0)
-1.1%
(13.4)
-2.1%
6.4
-47.9%
Write ups (Write downs) on investments
(1.3)
-0.2%
(20.3)
-3.2%
19.0
-93.4%
Profit before tax
35.9
5.6%
6.4
1.0%
29.4
456.6%
Total operating revenues
Taxes
12.3
1.9%
3.3
0.5%
9.1
276.9%
Net gains from continuing operations
23.5
3.7%
3.2
0.5%
20.4
642.0%
Net gains from discontinued operations
(1.9)
-0.3%
-
0.0%
(1.9)
N/A
Net profit (Loss) for the period
21.7
3.4%
3.2
0.5%
18.5
583.6%
of which:
Group
21.8
3.3
Third parties
(0.1)
(0.1)
As can be seen in the Consolidated Income Statement, the
Group ended the year with a net profit after taxes of around
Euro 21.7 million, an increase of Euro 18.5 million on the
previous year.
This increase is only partially due to operations, that recorded
an increase of Euro 4 million (+10%) despite the slight decrease
in sales (-Euro 3.9 million), that was more than offset by the
reduction in operating expenses (-Euro 9.8 million).
The balance of financial management makes a significant
contribution to the profit (+Euro 25.4 million), mainly due to
two factors:
• lower costs for interest expenses, resulting from both a
decrease in total Group’s borrowings during the year and
extremely favourable market rates;
• lower write-down costs, in particular with regard to the value
of the equity investments held in biotech companies listed in
the USA, that in the previous year had a significant impact
on the final result (-Euro 20.3 million).
The impact of taxes on the consolidated profit went from
50.8% in 2008 to 34.4% in 2009, mainly due to the lower
percentage value of the IRAP tax applied to Italian companies,
against a higher taxable income.
Finally, it should be noted that the 2009 net profit (loss) is
influenced by the loss resulting from the measurement at fair
value of discontinued operations, in particular those assets that
the Group holds in Sudan and that are not considered strategic
anymore.
EBITDA (Earnings Before Interest, Tax, Depreciation and
Amortisation) is a summary indicator of the profitability of a
company’s operations and its ability to generate cash flows. This
measure, although not significant for accounting purposes, is
very useful for the assessments performed by market analysts,
due to both its economic and financial significance, with the
latter linked to the elimination of non-cash items such as
depreciation and amortisation.
The Sigma-Tau Group therefore uses this performance indicator
for its internal management reporting. The table below shows
the calculation, for the years 2009 and 2008, of the normalised
EBITDA, in other words stripped of extraordinary and nonrecurring items.
S I G M A - TA U F I N A N Z I A R I A S p A C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S A S AT 3 1 D E C E M B E R 2 0 0 9
EBITDA
Euro (Mln)
2009
2008 2009/2008 Change %
Gross operating margin
84.9
77.4
7.5
9.7%
(5.8)
(3.7)
(2.2)
59.4%
-
(5.6)
5.6
-100.0%
2.6
6.5
(3.9)
-60.0%
-
1.2
(1.2)
-100.0%
81.6
75.8
7.0
9.3%
Adjustments:
Risk provision
2007 income for R&D tax credit
Restructuring expenses (Italy)
Other extraordinary expenses
(contractual transactions, penalties, etc.)
Normalised EBITDA
Investments
Euro (Mln)
2009
2008
2009/2008
167.1
168.1
(1.0)
Inventory
76.2
72.0
4.2
Other current assets
29.5
29.6
(0.2)
(109.2)
(102.5)
(6.8)
Account receivables
(Account payables)
(Other current liabilities)
Specifically the reconciliation, starting from the gross operating
margin of the IAS compliant Income Statement, shows the
following adjustments:
1. A negative adjustment of the risk provision, relating to the
risk of returns on sales, because, despite not having any
financial significance, this item usually forms part of the
recurring operating costs.
2. The benefit from the 2007 R&D tax credit, recognised as
extraordinary income in 2008, has been written off from the
operations of the year.
3. An adjustment with a positive impact on the EBITDA for
extraordinary costs relating to non-recurring activities, such
as settlements with employees regarding the corporate
restructuring that affected the Italian companies from 2007,
as well as costs relating to penalties, contractual transactions
and other items.
From a balance sheet perspective, the year 2009 shows a net
invested capital that is mainly in line with the previous year
(+0.6%), even if it breaks down differently: the net working
capital decreased by approximately Euro 9 million and fixed
assets increased by Euro 13 million.
This increase – against the decrease in property, plant and
equipment and intangible assets due to their typical
amortisation/depreciation – is due to the equity investments in
other companies (+Euro 25.6 million). However, only a small
part of this delta has been generated by new investments – in
particular, approximately Euro 4 million related to the increase in
the equity investment held in Soligenix (formerly DOR), a
biotech company listed on the NY Nasdaq. The residual amount
is due to the reclassification of some equity investments that were
previously held under short-term financial assets, as well as to
their revaluation according to the most recent market rates.
M A N A G E M E N T R E P O RT
2009 Consolidated Balance Sheet
(60.2)
(55.2)
(5.0)
103.4
112.1
(8.7)
Intangible assets
245.6
252.9
(7.3)
Property, plant and equipment
129.6
136.0
(6.4)
52.0
25.3
26.8
Total fixed capital
427.3
414.2
13.1
Net invested capital
530.7
526.2
4.4
Funds
2009
2008
2009/2008
(Cash and cash equivalents)
(23.4)
(72.9)
49.4
(Short-term financial assets)
(3.0)
(15.5)
12.5
Short-term borrowings
43.8
155.9
(112.1)
Long-term borrowings
117.5
97.9
19.7
Net financial position
134.9
165.4
(30.4)
Net working capital
Financial fixed assets
Other non current liabilities
61.4
57.2
4.2
Shareholders’ equity
334.3
303.7
30.7
Total funds
530.7
526.2
4.4
The cash flow generated by operations resulted in a significant
decrease (-Euro 30.4 million) in the Net Financial Position
(NFP), which represents the Group’s overall financial borrowing
from banks net of cash and cash equivalents and short-term
financial assets (securities held for sale, listed on regulated
markets and consequently highly liquid).
An indicator of the financial strength of a company is represented
by the following ratio: Net Financial Position/EBITDA.
This ratio shows the capacity of the company to sustain a given
borrowing level by generating cash flows through its typical
activities.
Against average market values of more than 3.0, that are
generally considered adequate, the Sigma-Tau Group went from
2.2 in 2008 to 1.7 in 2009, thus underlying the good Group
performance and its general financial strength.
The summary of the Cash Flow Statement below shows the
breakdown of 2009 cash flows compared to 2008 and confirms
the above-mentioned information.
1 0 |1 1
Cash Flow Statement
2009
2008
Beginning cash and cash equivalents
72.9
36.9
Profit (Loss) for the year
21.7
3.2
Depreciations, amortisation and accruals
46.2
46.0
1.4
20.3
(Write ups) Write downs on investments
Taxes
Interest expenses
Other
Operating cash flow
(Increase) Decrease in net working capital
Net operating cash flow
12.3
3.3
7.1
14.5
(0.1)
(1.0)
88.6
86.2
(25.4)
(20.1)
63.2
66.1
Cash flow from investing activities
(26.1)
(35.9)
Cash flow from financing activities
(86.3)
4.9
Exchange rate effect on cash and cash equivalents
Total cash flow
Ending cash and cash equivalents
(0.2)
0.8
(49.4)
36.0
23.4
72.9
Net sales slightly increased compared to the previous year
(+0.5%), due to the better performance of revenues generated in
Italy (+1%), North America (+2.7%) and China (+69.2%),
while European sales decreased (-7.9%) mainly due to the
impact of economic policies aimed at reducing pharmaceutical
spending, the genericisation of important molecules and the
general economic crisis that continued throughout 2009.
Italy
Europe
North America
Rest of the World
OPERATIONS
The Sigma-Tau Group has a prime position in the Italian market, but
it also operates in all the major international markets, both directly
through its own branches and through third-party distributors.
The table below shows the net consolidated revenues for the year
2009, highlighting the main geographical areas where the Group is
present through its associated companies:
The chart shows that sales turnover in the Italian market is by far
the most significant (around 79% of the total) and the leading
subsidiaries, in terms of sales, are located in France, the United
States and Spain, where the Group also has one of its three
production sites.
Euro (Mln)
Euro (Mln)
2009
487.7
482.9
4.8
1.0%
Carnitine (*)
85.5
79.3
6.2
8%
France
28.1
30.8
(2.7)
-8.7%
Sivastin
28.5
29.5
(1.0)
-3%
USA & Canada
23.8
23.2
0.6
2.7%
Betamethasone (**)
23.8
19.3
4.5
23%
Spain
18.5
19.0
(0.5)
-2.6%
Anafranil
15.7
14.1
1.6
11%
Benelux
8.0
8.3
(0.3)
-3.1%
Lysanxia®
12.6
12.2
0.4
3%
Switzerland
7.6
7.5
0.1
1.4%
Procarbazine (***)
9.5
9.4
0.1
1%
China
6.9
4.1
2.8
69.2%
Hydergin
7.6
10.1
(2.5)
-25%
Germany & Austria
5.6
8.4
(2.8)
-33.0%
Biochetasi
7.4
7.3
0.1
1%
Portugal
2.3
2.8
(0.4)
-15.6%
Zaditen®
7.3
7.8
(0.4)
-6%
Naprilene®
6.9
9.4
(2.5)
-26%
6.7
6.5
0.2
2%
Syntocinon
5.7
6.2
(0.5)
-8%
Synachten®
3.1
3.8
(0.7)
-18%
33.7
31.4
2.4
8%
253.9
246.2
7.7
3%
Italy
United Kingdom
Other international sales
Total sales
Other revenues
Total operating revenues
2009
2008 2009/2008
Change %
1.7
1.8
(0.1)
-5.6%
25.9
24.7
1.2
4.8%
616.3
613.4
2.9
0.5%
19.2
25.9
(6.7)
-25.9%
635.5
639.3
(3.9)
-0.6%
The total operating revenues include the revenue from product
sales and other sundry revenues relating to operating grants
(R&D), royalties and other operating income.
®
®
®
®
Yovis
®
®
Other Families
Total
2008 2009/2008
Change %
(*) Carnitene® - Carnitor® - Levocarnil® - Carnicor® - Nicetile® - Dromos®
- others; (**) Bentelan® - Betnesol® - Betapred®; (***) Natulan® - Matulane®.
The figures shown in the table relate to the main products
owned by the Sigma-Tau Group that have either been developed
internally or whose intellectual property rights have been
acquired in full from third parties. The various brands
associated with the same molecule are essentially linked to the
different markets where they are sold. These are mature and offpatent drugs, which have been present on the market for many
years; the turnover of these products tends to generate stable
revenues over time.
In terms of therapeutic areas, Group sales particularly
concentrated on the following areas: the Cardiovascular System,
with products such as Eskim®, Losazid®, Losaprex®, Sivastin®,
the Metabolic area (Carnitine, Limpidex®, Debridat®) and the
Nervous System (Nicetile, Anafranil, Lysanxia and Elontril).
and with a turnover of Euro 11,852 million, i.e. +1.1%
(IMS figures).
The Italian Pharmaceutical Market
year
1,804
+1.0%
2009
1,786
+2.8%
2008
1,738
+2.5%
2007
1,692
+2.3%
2006
1,654
+1.1%
2005
1,636
+0.5%
2004
1,628
+3.6%
2003
0
Euro (Mln)
2009
2008 2009/2008
C-Cardiovascular System
219.1
215.4
3.7
2%
A-Alimentary Tract
& Metabolism
106.0
109.1
(3.0)
-3%
N-Nervous System
R-Respiratory System
M-Musculo-Skeletal System
800
1,200
1,600
2,000
units/millions
year
11,852
+1.1%
2009
11,719
+1.0%
2008
49.9
44.2
40.6
47.1
46.6
35.6
2.8
(2.4)
5.0
6%
-5%
14%
J-Antiinfectives
for Systemic Use
30.5
H-Systemic Hormonal
Preparations
29.0
G-Genito Urinary System
& Sex Hormones
13.1
15.4
(2.2)
-15%
L-Antineoplastic &
Immunomodulating Agents
11.0
11.1
(0.1)
-1%
Other
72.8
68.5
4.4
6%
616.3
613.4
2.9
0.5%
Total consolidated sales
400
Change %
39.7
(9.2)
-23%
11,605
-2.1%
2007
11,912
+2.4%
2006
11,642
-0.3%
2005
11,679
+3.1%
2004
11,322
+2.2%
2003
25.0
4.0
16%
0
2,000
4,000
6,000
8,000
10,000
12,000
Euro millions
ITALIAN MARKET
The Sigma-Tau Group operates in Italy through its three
associated companies: Sigma-Tau Industrie Farmaceutiche
Riunite SpA (ST IFR SpA), Biofutura SpA and Avantgarde SpA,
the first of which represents 66% of overall sales.
The Group’s performance should be analysed against the
background of the Italian market and the developments of the
various therapeutic classes within this market.
The Italian Pharmaceutical Market ended 2009 with a volume
of 1,804 million units sold, an increase of 1.0% on 2008,
IMS Health Data
Among the factors that generated the increase in values, there
was a recovery in non-reimbursed trademarks that increased by
2.8%, thanks to the significant growth of the average price
(+4.7%).
year
NSH Drugs
8,234
+0.4%
2009
8,196
+0.7%
2008
8,136
-4.0%
2007
8,475
+4.3%
2006
8,214
-1.2%
2005
8,316
+4.3%
2004
7,970
2003
+0.9%
Euro mln 2009
1 2 |1 3
year
Non-NHS Drugs
3,619
2009
+2.8%
3,524
+1.6%
2008
3,465
+2.5%
2007
3,437
+0.1%
2006
3,427
+1.9%
2005
3,363
+0.3%
2004
3,352
+5.5%
2003
Euro mln 2009
IMS Health figures
The Italian Pharmaceutical Market 2009 vs 2008
The external factors that have characterised 2009 and had an
impact on the performance of the pharmaceutical market
include the effect of Law Decree no. 39 of 28 April 2009 (the
so-called “Decree for Abruzzo”) that set out new pharmaceutical
spending reduction measures, among which:
• reduction of the ceiling for pharmaceutical expenditure, from
14.0% to 13.6%;
• 12.0% reduction of the retail price for equivalent drugs;
• ceiling for local pharmaceutical expenditure decreased by
0.4%;
• 1.4% discount on the amounts due to pharmacies for the
supply of drugs, which costs are borne by the Italian National
Health Service (NHS).
+2.8%
+0.4%
4.7
2.5
-1.8
-2.0
NHS drugs
Non-NHS drugs
% Increase in values
% Increase in units
% Increase in average price
I.M.S. Health figures
IMS HEALTH DATA
UNITS (Thousand)
2008
MS%
Change %
2009
MS%
Change %
ITALY
1,787,173
100.0
2.9
1,804,294
100.0
1.0
NHS
1,156,032
64.7
4.8
1,184,439
65.6
2.5
631,142
35.3
-0.4
619,855
34.4
-1.8
PRESCRIPTION ONLY PHARMACEUTICALS
294,031
16.5
-0.1
291,159
16.1
-1.0
NON-PHARMACEUTICALS
337,110
18.9
-0.7
328,696
18.2
-2.5
ITALY
11,718,919
100.0
1.0
11,852,275
100.0
1.1
NHS
8,198,705
70.0
0.8
8,233,734
69.5
0.4
NON-NHS
3,520,214
30.0
1.4
3,618,541
30.5
2.8
PRESCRIPTION ONLY PHARMACEUTICALS 1,888,585
16.1
0.9
1,948,324
16.4
3.2
NON-PHARMACEUTICALS
13.9
2.0
1,670,217
14.1
2.4
NON-NHS
VALUES (Thousand)
The effects of the above-mentioned information are detailed
below:
1,631,629
NHS= Reimbursed; NON-NHS= Non reimbursed
Here follows a detailed analysis of the main therapeutic classes.
Among the first 6 most important classes, which represent 77%
of the turnover, it is noted that the market segments related to
the nervous system (N) and the respiratory system (R) recorded
the best value performance.
The therapeutic classes of the market are analysed in detail below:
UNITS 2009
Change %
MS%
EV
Value € 2009
Change %
MS%
EV
ITALY
1,804,294
1.0
100.0
100
11,852,275
1.1
100.0
100
I MAIN GROUPS
1,383,717
1.0
76.7
100
9,092,568
0.8
76.7
100
C CARDIOVASCULAR SYSTEM
421,782
1.1
23.4
100
3,057,554
0.4
25.8
99
A ALIMENTARY TRACT - METABOLISM
330,673
2.1
18.3
101
1,711,288
1.0
14.4
100
N NERVOUS SYSTEM
275,109
0.4
15.2
99
1,657,211
2.9
14.0
102
R RESPIRATORY SYSTEM
148,234
0.9
8.2
100
1,126,206
3.9
9.5
103
J GEN. SYST. ANTI-INFECTIVES
126,071
-0.3
7.0
99
829,610
-5.5
7.0
93
81,847
-0.3
4.5
99
710,699
-0.3
6.0
99
118,163
-1.2
6.5
98
706,690
1.4
6.0
100
B BLOOD + HAEMATOPOIETIC ORG.
87,054
3.8
4.8
103
439,901
0.2
3.7
99
T DIAGNOSTIC AGENTS
22,477
9.0
1.2
108
412,400
11.7
3.5
110
D DERMATOLOGICAL DRUGS
64,668
-1.0
3.6
98
375,456
1.8
3.2
101
6,771
1.7
0.4
101
295,090
-3.5
2.5
95
S SENSE ORGANS
49,798
-0.9
2.8
98
290,990
4.0
2.5
103
H NON-SEX HORM.
46,913
3.8
2.6
103
170,612
3.7
1.4
103
3,720
-0.2
0.2
99
31,988
-3.4
0.3
96
20,099
-2.2
1.1
97
29,969
-3.5
0.3
95
914
-1.3
0.1
98
6,612
-0.4
0.1
98
IMS HEALTH DATA
G GENITAL-URINARY SYSTEM - SEX HORM.
M SKELETAL MUSCLE SYSTEM
L ANTINEOP./IMMUNOMOD.
V SUNDRY
K HOSPITAL SOLUTIONS
P ANTIPARASITICS
To carry out a complete analysis of the general market, reference
should be made to the significant improvement recorded by
generic drugs’ companies.
UNITS +000
CHANGE %
1,804,294
1.0
1 MALESCI
22,548
15.9
2 MYLAN
30,656
12.9
3 DOC GENERICI
23,921
10.7
4 SANDOZ
28,470
10.7
5 ANGELINI
61,599
3.8
6 GUIDOTTI
27,172
3.2
7 NOVARTIS CONS. MEAL
29,441
2.7
8 BRACCO
36,793
2.5
9 RECORDATI
27,000
2.2
10 CHIESI
24,476
2.2
11 MENARINI
41,918
1.5
ITALY
1 4 |1 5
The first 10 companies of the Italian pharmaceutical market
include, in terms of units, 3 companies: Mylan, Doc Generici
and Sandoz.
With regard to Sigma-Tau, the Company ended the year with
-2.2% in terms of turnover and -3.7% in units. The gap trend,
although negative, continues to increase year after year (-6.55%
in 2007, -5.8% in 2008, -3.3% in 2009).
DECEMBER 2009
MONTHLY
PROGRESSIVE
VALUES
±%
VALUES
±%
Domestic Market
939,544
-0.1
11,852,275
1.1
Sigma-Tau
27,656
-1.5
340,223
-2.2
DECEMBER 2009
MONTHLY
Domestic Market
Sigma-Tau
12 ROLLING MONTHS
VALUES
PROGRESSIVE
UNITS
±%
UNITS
±%
139,985.3
-0.5
1,804,294.0
1.0
3,294.6
-3.2
41,427.0
-3.7
±%
12 ROLLING MONTHS
UNITS
±%
GAP TREND
18
Change+-%
14
10
6
2
-2
-6
-0.4
-2.8
-1.6
-3.8
-1.1
-1.8
-7.3
-1.5
-5.2
-1.4
-7.0
-6.4
-10
-14
-18
Jan 09
Feb 09
Mar 09
Apr 09
May 09
Jun 09
Jul 09
Aug 09
Sep 09
Oct 09
Nov 09
Dec 09
Mkt
-3.2
-3.3
8.5
2.6
-3.4
5.3
0.3
-0.3
1.0
0.4
7.1
-0.1
Sigma-Tau
-3.6
-6.1
6.9
-4.7
-5.2
4.2
-3.5
-5.5
-5.4
-1.1
0.1
-1.5
Gap trend
-0.4
-2.8
-1.6
-7.3
-1.8
-1.1
-3.8
-5.2
-6.4
-1.5
-7.0
-1.4
The market share is stable in terms of both units (2.30%) and
values (2.87%), despite the new genericisations of Acesistem
and Trozocina and the price decrease of genericised products
that were already available in January 2009.
SIGMA-TAU QM% UNITS AND VALUES
5.00
% Units
% Values
5.00
4.00
4.00
3.00
3.00
2.00
2.00
1.00
1.00
0.00
0.00
Jan 09
Feb 09
Mar 09
Apr 09
May 09
Jun 09
Jul 09
Aug 09
Sep 09
Oct 09
Nov 09
Dec 09
Units
2.33
2.32
2.40
2.31
2.44
2.32
2.42
2.30
2.10
2.18
2.11
2.35
Values
2.89
2.86
2.96
2.86
2.98
2.95
2.98
2.91
2.66
2.78
2.71
2.94
An analysis of the product portfolio is detailed below:
SIGMA-TAU change ±% (2009 vs 2008)
15.0
Change ±% units
Change ±% values
SPECIAL OFFER
10.0
5.0
0.0
4.1
4.7
Off Patent
Other
Patent
-5.0
-7.1
-10.0
-7.1 -7.8
-10.9
-15.0
Off Patent= Acesistem, Dronal, Limpidex, Naprilene, Prostide, Sivastin.
Trozocina Off Patent as from July.
The turnover performance of the main Sigma-Tau products
within their markets is provided below, by starting with the
analysis of patented products.
Eskim: unchallenged leader in its market (“C10B0 omega-3”).
It increased by 21.8% in 2008, against a market growth of
17.4%. Unfortunately, the procurement problems led to a more
limited increase in 2009 (+8.6%).
Losazid: Euro 34.7 million, down 5.8%. It ended the year with
a market share of 8.3% and an increase of 88.
Losaprex: turnover equal to Euro 26 million, with a share of
6.4% that is slightly lower than the one recorded in 2008 and
equal to 7.0%. The percentage change was equal to -1.2%,
against a market value of +7.1%.
Libradin: with regard to the antihypertensive drugs included in
the calcium antagonist category, this is the product of this
market segment that, together with Vasexten, recorded the
highest increase in 2009 (+15.4%), against a market decrease of
3.4%. Reference should also be made to the market share
increase (from 6.5% in the previous year to 7.9% this year).
Tauxib: the coxibs market is characterised by a downward trend,
but our brand broke even at the end of 2009. The good
performance of Tauxib is supported by the performance of its
market share. The percentage change went from 21.7% in 2008
to 22.6% in 2009, with an increase of 0.9%.
Sinestic: Budesonide+Formoterol, a combination therapy for
COPD (Chronic Obstructive Bronchopneumopathy). The brand
posted a turnover of Euro 10.3 million, up 1.9%. The market
share was mainly unchanged (3.8% in 2008 and 3.7% in 2009).
Lukasm: another product of the “Respiratory” area for the
1 6 |1 7
treatment of persistent asthma. It ended 2009 with excellent
assessment parameters. It posted a turnover of slightly more
than Euro 8 million (+19.9%) against a market trend of +7.8%,
with an increase of 111. The market share increased by 1.5
percentage points (13.9% in 2008 and 15.4% in 2009).
Adrovance: it more than doubled its turnover in 2009. The
market share in bone calcium regulators went from 1.8% in
2008 to 3.5% in 2009.
Keplat: ketoprofen plaster; it closed the year with a decrease of
16.0%. Thanks to a turnover of Euro 4.9 million, it achieved a
market share of 9.7%.
Ivor: this product recorded an extremely interest growth.
Almost all assessment parameters are favourable. In 2008, the
fractionated heparin market recorded a value decrease of 0.3%,
while Ivor decreased by 13.1%, with a market share of 1.8%.
In 2009, the increase of the product is 11.2 points higher than
the total fractionated heparin portion (Ivor: +18.9%; category:
+7.7%). The market share increased to 2.0%.
Elontril: a product for the treatment of major depression, which is
included in a wider antidepressant market. Despite a low turnover
of Euro 1.524 million in 2009, and if compared to the broad
reference market, it is interesting to observe that the market share
increased significantly (0.2% in 2008, 0.6% in 2009).
Tesavel and Efficib: Both products are being launched at the
moment and are included in the therapeutic plan, with strict
restrictions in terms of prescriptions. In 2009, they posted a
total turnover of Euro 850 thousand.
The following chart describes the sales and performance
obtained by those products with expired patent:
SIGMA-TAU: Products with expired patent
in thousands of Euro (2009 vs 2008)
Limpidex
-3.2%
Sivastin
-0.8%
Prostide
-12.6%
Trozocina
-27.7%
Acesistem
-21.5%
Naprilene
-22.0%
Dronal
-26.8%
0
The chart indicates that, in 2009, Limpidex and Sivastin
represented a significant portion of the total turnover of
trademarks with expired patent. Their total value was equal to
approximately 66%.
Sivastin: this is the only trademark with expired patent that
recorded a positive performance (+4.3%) compared to 2008.
Not only was the market influenced by various genericised
molecules, but also by several trademarks with excellent sales
volumes and a performance that is significantly higher than
Sivastin, Crestor and Torvast. In terms of value, the product
ended 2009 with a slight decrease (-0.8%) but confirmed a
strong performance increase also in this channel.
Limpidex: this is the product marketed by Sigma-Tau with the
oldest expired patent (December 2005). This year it improved
its performance, from -8.9% in 2008 to -3.2%.
Prostide: this product is used for the treatment of benign
prostatic hyperplasia. In 2009 it posted a turnover of 8.140
million, with a decrease of 12.6% compared to the previous
year. The market share totalled 4.7%.
Trozocina: having been genericised in July this year, its value
decreased by 27.7% compared to 2008. The turnover amounted
to Euro 7.944 million and the market share due to the
genericisation decreased by 0.9 points (from 7.4% to 6.5%).
Acesistem and Naprilene: these products are included in the
ACE-inhibitors category. In 2009, they posted a turnover of
approximately Euro 15 million, with a decrease of almost 22%.
Dronal: a product for the treatment of osteoporosis. It posted a
turnover of approximately Euro 5 million, with a decrease of
26.8%.
In the past, the Sigma-Tau Group has launched a series of
products on the nutraceutical market that, over the years,
formed the “Dietary Supplement” brand line. In 2009, the main
trademarks of the off-take market that were included in the
price lists of the Italian and international subsidiaries sold a total
of 2.3 million units, for a total turnover of approximately Euro
25 million.
Revenues from nutraceutical products represented 4.4% of the
Group’s consolidated turnover in Italy.
5,000 10,000 15,000 20,000 25,000 30,000 35,000
Total Company=340 million -2.2%
Trozocina=patent expired in July
PRODUCT
LAUNCH
INDICATION
CLASS
2009
Units
Change %
Values
Change %
Carnidyn
APR04
Proenergetic
05A1
Tonics
740
13.0%
7,490
19.1%
Amedial
JAN08
Osteoarticular rehabilitation
02G2
Joint care products
339
49.3%
3,709
49.3%
Resvis XR
AUG05
Immunostimulant for adults
01B4
Cold flu immunostimulance
427
106.7%
3,665
118.1%
Fish Factor
OCT90-SEPT09 Omega3
10F1/10FC Heart/Circ/Lipids/Col products
154
-14.1%
1,987
-9.7%
Floretrix
FEB09
Intestinal balance
03F1
Probiotics Digest Health
175
0.0%
1,077
0.0%
Ezerex
DEC07
Erectile dysfunction
05A1
Tonics
73
13.9%
840
16.9%
Fluoff
JUL09
Immunostimulant for children 04J1
Cell Protection
60
0.0%
642
0.0%
Proxeed NF
SEP08
Male infertility
04H1
Other Dietary Supplements
29
293.6%
606
274.8%
Gravidha
JUL08
Fetal development support
04G1
Omega 3 Fatty Acids
57
371.2%
561
385.8%
Proxana
NOV08
Prevention of prostate diseases
12C2
Prds. Urolog. Male Cond.
35
1007.4%
408
872.2%
Ryabilex
JUN09
Muscular rehabilitation
05A1
Tonics
30
0.0%
305
0.0%
Restorfast
JUN09
Bone fractures
04F1
Calcium Supplements
14
0.0%
145
0.0%
23
-42.2%
143
-44.1%
2,155
54.7%
21,580
54.7%
Other products
Total
In 2009, the product with the highest number of units sold was
Carnidyn that, in the basic and plus versions, sold 740 thousand
units and totalled Euro 7,5 million. The increase compared to
2008 was equal to 13% and 19%, respectively.
Amedial, a product for the osteoarticular rehabilitation
launched at the beginning of 2008, closed the year with an
increase of 49% in terms of both volumes and values.
Resvis XR and Forte, an immunostimulant for adults launched
in August 2005, closed 2009 with a strong increase in both
volumes (+107%) and values (+118%). Fluoff, the version for
paediatric patients launched in July 2009, sold 60 thousand
units, for a total turnover of Euro 642 thousand.
Proxeed NF, a product for the treatment of male infertility, sold
more than 29 thousand units in 2009 (Euro 606 thousand),
with an increase in both volumes (+294%) and values (+275%)
compared to the previous year.
The sales posted by Fish Factor totalled more than Euro 1.9
million and recorded a decrease compared to the previous year
(-10%). The Omega3 market (EPA-DHA) and, more generally,
the market which includes products to reduce cholesterol, is
now full of competitors.
Floretrix, a product to restore intestinal balance launched in
February 2009, posted sales of Euro 1 million, while Ezerex, a
product for the treatment of erectile dysfunction launched in
December 2007, sold more than 86 thousand units (approx.
Euro 916 thousand), with an increase of almost 30%.
The nutraceutical products were added to a high-value product
portfolio under a scientific and therapeutic point of view. Also
thanks to a good management of pharmaceutical marketing
activities, the Group’s Italian subsidiaries were among the
leading companies in an ever demanding and highly competitive
market.
FRENCH MARKET
The Group has been operating in France since 1975 through its
subsidiary Sigma-Tau Sarl, that was merged into the company
Lynapharm SA – already 50%-owned by the Group – at the
beginning of 2008. Nowadays, Sigma-Tau Sarl is the main
foreign associated company in terms of sales, with an annual
turnover of around Euro 28 million.
1 8 |1 9
The table below shows the net sales for the main products in France:
Euro (Mln)
Lysanxia
®
2009
2008 2009/2008
Change %
12.56
12.23
0.3
2.7%
Levocarnil
5.16
6.52
(1.4)
-20.8%
Anafranil
3.16
3.61
(0.4)
-12.4%
Zaditen
2.44
3.34
(0.9)
-27.1%
Syntocinon®
1.48
1.60
(0.1)
-7.3%
Betnesol®
0.87
0.90
(0.0)
-3.1%
Hydergin®
0.74
0.94
(0.2)
Natulan
0.72
0.59
Synacthen
0.55
Other products
®
®
®
®
®
Total
Inc. (MD) and Sigma-Tau HealthScience Llc. (NY), with the
latter specialised in the distribution of raw materials (Carnitine)
for nutraceutical use.
The table below shows the net sales for the main products in
North America:
Euro (Mln)
2009
2008 2009/2008
Change %
Matulane
6.82
7.75
(0.9)
-12.0%
Carnitor
and Levocarnitine
6.11
6.05
0.1
1.0%
-21.3%
VSL#3®
5.95
4.41
1.5
35.0%
0.1
22.5%
Chemical (Carnitine)
3.56
3.64
(0.1)
-2.2%
0.63
(0.1)
-12.9%
Other families
1.33
1.30
0.0
2.4%
0.41
0.40
0.0
3.4%
23.78
23.15
0.63
2.7%
28.10
30.76
(2.7)
-8.7%
®
®
Lysanxia : an anxiolytic belonging to the benzodiazepine class,
continued the growth seen in recent years (+3% on 2008), despite
strong competition from the numerous players in this market,
exacerbated by the strong pressure from the authorities to reduce
the prescription of drugs in this class. Lysanxia®’s positive
performance is due to the successful strategic repositioning of the
product with respect to its competitors and constant promotion
by the sales force, focused on the general practitioner as the target.
Levocarnil®: it ended the year with a decrease (-21%) and is the
traditional product of the French subsidiary. This is a hospital
product with therapeutic indication for primary deficiency of
Carnitine and partial secondary deficiency linked to metabolic
disorders (Organic Aciduria and fatty acid beta-oxidation
deficiency). In November 2008, it suffered the last of three
consecutive price cuts, scheduled by the French Health Authorities
from April 2006. The price for both the injectable and the oral
formulation has consequently progressively fallen, with a total
reduction of around 70% over three years. Despite the increase in
volumes, price cuts led to a significant decrease in revenues (-21%).
Anafranil®: it totalled Euro 3.2 million at the end of 2009, down
12.4%. It is an antidepressant belonging to the clomipramine
class and continues its decline that had already begun in 2007 as a
result of the entry of generics into the market.
®
NORTH AMERICAN MARKET
The Group sells its products in North America (USA and
Canada) through its two subsidiaries, Sigma-Tau Pharmaceuticals
Total
The turnover in US dollars benefited from the favourable impact
of the Euro/USD exchange rate, equal to approximately 5%.
Matulane®, an oncological product used for a rare form of tumour,
recorded a decrease compared to the previous year (-12%).
Carnitor® and its generic version Levocarnitine (oral formulations)
totalled more than Euro 6 million in 2009, with an increase of 1%
compared to the previous year, despite the strong competition
from competing generics.
The injectable formulation of Carnitor®, used to treat L-Carnitine
deficiency in dialysis treatment, totalled Euro 2.2 million in 2009,
with a slight increase in turnover (+3.5%) compared to 2008.
Sales of Carnitor® and Levocarnitine in tablets totalled Euro 1.8
million, with a slight increase compared to the previous year. The
portion sold as “branded” posted decreasing revenues compared to
2008 (-Euro 129 thousand, i.e. -12.6%), which were offset by the
increase in sales of the “generic” drug (+Euro 185 thousand, i.e.
+24.6%), introduced by the company to resist the strong
competition that started in 2004.
Carnitor® and Levocarnitine (oral solution) closed 2009 with Euro
2.1 million, with a slight decrease compared to the previous year (Euro 64 thousand, i.e. -3%). The portion sold as “branded”
posted decreasing revenues compared to 2008 (-Euro 112
thousand, i.e. -7.1%), which were offset by the increase in sales as
a “generic” (+Euro 48 thousand, i.e. +8.1%).
VSL#3®, a probiotic product used in the gastrointestinal area,
continued the growth that began right from its acquisition in
2004. Its sales turnover increased from Euro 4.4 million in 2008
to Euro 5.9 million in 2009 (+35%).
Despite the severe economic crisis that hit the United States and
put sales of nutraceutical products under pressure, the turnover of
Carnitine, as a raw material for neutraceutical use, recorded only a
slight decrease compared to the previous year (-2.2%). The
AminoCarnitines® are molecules that, unlike the more traditional
Carnitines, are covered by patent and represented 40% of total
sales in Euro in 2009. The outlet for these products, which are
technically considered as “dietary supplements”, is predominantly
the market for dietary products, vitamins and fitness.
SPANISH MARKET
The Group’s operations in Spain are handled by the subsidiary
Sigma-Tau SA, which, in addition to operating in the area as a
commercial distributor of drugs, also carries out the production
of solid oral pharmaceutical forms (tablets and capsules) for the
other Group companies and for third party companies. The
table below shows the net sales for the main products in Spain:
Euro (Mln)
2009
2008 2009/2008
Change %
Anafranil
4.22
3.69
0.5
14%
Ceprandal®
3.39
3.04
0.3
11%
Angileptol®
3.08
4.30
(1.2)
-28%
Carnicor®
1.90
1.98
(0.1)
-4%
®
Zaditen
1.39
1.13
0.3
23%
®
Tautoss
1.05
0.86
0.2
22%
Syntocinon®
0.88
0.93
(0.1)
-6%
Acediur®
0.79
0.80
(0.0)
-1%
Hydergin
0.73
0.73
(0.0)
-1%
Other products
1.11
1.57
(0.5)
-29%
18.54
19.04
(0.5)
-2.6%
®
®
Total
Anafranil®: the marketing drive enabled this product to achieve
significant results in terms of both volumes (1.1 million units)
and values (Euro 4.2 million), although it has already been on
the Spanish market for many years. It is the subsidiary’s leading
product representing over 22% of its business and recorded an
increase of more than Euro 500 thousand (+14%) compared to
the previous year.
Ceprandal®: the competition with Omeprazole-based generics
has already for several years now resulted in a steady reduction
in prices and an ever increasing number of competitors. In
2009, our subsidiary achieved 1.6 million units and Euro 1.1
million, with a strong increase in both volumes (+485 thousand
units, i.e. +43%) and values (+Euro 344 thousand, i.e. +11%)
compared to 2008.
Angileptol®: the severe economic crisis that hit Spain, with a
decrease in patients’ spending capacity, together with the
extremely mild weather conditions in 2009, led to a strong sales
decrease for this product. It closed the year with 811 thousand
units and more than Euro 3 million, with a decrease of 299
thousand units (-27%) and -Euro 1.2 million (-28%).
Carnicor®: the subsidiary’s traditional product. It is prescribed
for primary and secondary carnitine deficiency, acute
myocardial ischemia and cardiomyopathy, and is marketed in
solid, injectable and oral form. In 2009, it recorded a slight
decrease in volumes (-3%) and values (-4%) and for several
years now sales have regularly represented around 10% of the
total turnover.
OTHER SALES ABROAD
Sales in other foreign countries include both the sales of the
Group’s other smaller associated companies and the sales by
licensees and third-party distributors, and amount to a total of
Euro 58.1 million, a slight increase on the previous year
(+1.3%).
RESEARCH AND DEVELOPMENT
The continued commitment and investment of resources in
Research and Development (R&D) is of fundamental
importance to the Group’s strategy. The supply of new drugs,
both through internal research and through agreements with
other pharmaceutical companies, is crucial to the Group’s future
growth. Consequently, in 2009 Research and Development was
again focused on the following key areas:
• consolidation of the project/product portfolio in terms of
development and discovery;
• management of partnerships for products under
development;
• advancement of key products under clinical trial;
• institutional relations and activities;
• consolidation of the commitment to biotech;
• continuation of the policy of recovery and implementation of
financial support by means of funded projects.
2 0 |2 1
Research and Development takes place through the Sigma-Tau
Group’s R&D companies, namely the corporate structure of
Sigma-Tau Industrie Farmaceutiche Riunite SpA (Pomezia,
RM), the biotechnology arm Tecnogen (Piana di Monteverna,
CE), Sigma-Tau Research Inc. (Maryland, USA) and Sigma-Tau
Research Switzerland SA (Mendrisio, CH). The last of these is a
company that became operational in October 2007 with the
“mission” of coordinating the research and development on a
selected number of projects in the immuno-oncology area.
These are implemented by the research activities carried out by
Sigma-Tau Pharmaceuticals Inc. (Maryland, USA), which focus
on rare diseases.
More specifically, in 2009 the Sigma-Tau Group was engaged in
scientific activities concerning three main areas: regulatory and
registration activities; management of projects and products that
can be subject to licensing activities; research and development
activities of new drugs in relevant therapeutic areas.
REGULATORY ACTIVITIES
With regard to regulatory activities, significant goals have been
met, which are detailed below.
Eurartesim: the R&D department gave a significant
contribution to carry out the activities necessary to obtain data
concerning the CMC, clinic and pharmacokinetic
characteristics of the product and provided support for
regulatory issues. This led to the creation of a registration
dossier that was filed with the European Authorities (EMEA) at
the beginning of July, as well as of some documents concerning
the questions asked by EMEA with regard to the dossier.
IART: based on the dosimetry data obtained from a phase II
clinical study concerning patients affected by mammary
carcinoma (stage I/II) for whom adjuvant radiotherapy could be
prescribed, a request was submitted to EMEA with regard to a
registration clinical development plan. Based on the results
obtained, a pivotal clinical study is being planned, according to
which the reproducibility of the dosimetric measure should be
assessed. The use of end-points to predict the clinical
effectiveness is currently being discussed.
The creation of the components for the IART kit is carried out
by the associated company Tecnogen.
Cooperation activities were carried out with GP Pharm also in
2009 for the registration of a new formulation of slow release
Leuprolide (1 month), while a second formulation with a longer
release is being studied.
Moreover, following a phase I registration study on the
bioavailability of a fixed, co-formulated combination of
simvastatin and omega 3 fatty acids (SimvaPufa), the activities
for the development of registration documents are being carried
out.
Finally, the positive results obtained from the GISSI-HF study
made it possible to launch a regulatory strategy in order to
obtain the extension of the indication of the Eskim product
based on omega 3 fatty acids.
R&D ACTIVITIES LINKED TO LICENSING
With regard to licensing activities, the R&D department
supports the Business Development and Licensing divisions
with regard to both the assessment of new opportunities and the
search for collaboration on own projects/products.
More specifically, in the light of the fact that Novartis
terminated the cooperation agreement on Gimatecan and that
in 2009 Debiopharm terminated the agreement on Istaroxime,
the Group managed the transfer of data, reports and any other
information obtained during the cooperation on both drugs.
Moreover, a Gimatecan clinical development project for
gynaecological tumours has been set up and contacts have been
initiated in order to raise the interest of third parties
(Companies or lenders), as well as to identify regional strategies
in emerging markets (China and India).
Similarly, also with regard to Istaroxime, available documents
have been collected and analysed, development assumptions
have been identified and contacts were initiated with other
prospective licensees or financing partners.
TRADITIONAL R&D ACTIVITIES
With regard to development and research activities in the fields
of interest, the strategic guidelines of the last years were
followed, by focusing in particular on oncology, immunology,
nervous system and orphan diseases/carnitine.
Moreover, particular attention was given to the mechanisms that
can influence the modulation of the energy metabolism as an
approach to the oncology therapy.
A similar line of research led to the study of the antiproliferative
activity of Acetyl-L-Carnitine (ALC) in a synergic combination
with chemotherapeutics. These studies generated pre-clinical
data that is the rational for a clinical protocol to be
implemented in the near future.
The immunological area has been working for a long time on the
application of the technology platform based on the avidin-biotin
interaction for tumour therapy. In this view, in addition to the
involvement in the development of IART, the development of the
Pre-Targeted Antibody Guided Radio Immuno Therapy
(PAGRIT) was launched for the treatment of tumours expressing
tenascin antibody, as well as the development of a brachytherapy
approach by using oxidised avidin.
Two important phase II clinical studies were completed during
2009. The first one focused on the assessment of Propionyl-LCarnitine (PLC) in patients affected by chronic inflammatory
disease and demonstrates that the use of PLC in patients affected
by mild/moderate ulcerative colitis led to a significant decrease in
the assessment scores of the disease as compared to placebo.
The second study demonstrated that the use of Thymosin-α
together with the H1N1 influenza vaccine increases the
immune response after 21 and 42 days. Assessments are under
way following several days from the vaccination (day 84) in
order to analyse the extent of this response over time.
RARE DISEASES
Sigma-Tau Group is also highly involved, through its US
associated company Sigma-Tau Pharmaceuticals Inc., in the
development of treatments for rare diseases (also known as
orphan diseases). The latter are identified in the USA as diseases
that affect less than 200,000 people.
Sigma-Tau is particularly proud of its research in this field, which
has often been neglected by the pharmaceutical world due to its
lack of attraction from a financial perspective, and was the fourth
firm in the world to obtain an “Orphan Drug Designation”, in
1984, in the United States, followed by seven more.
Working together with the “National Organization for Rare
Diseases” (NORD), Sigma-Tau has raised the awareness of the
medical community on the problem of rare diseases also
through the publication of the “Physicians’ Guide to Rare
Diseases”, which was widely recognised for the contribution
provided to doctors in the diagnosis of some of the rarest
medical conditions in the world. The main projects under
development within the area of orphan diseases are as follows:
RARE DISEASES PIPELINE
Development programme
Indications
Stage of development
Xenbilox® (chenodeoxycholic acid) Capsules
Treatment of cerebrotendinous xanthomatosis (CTX)
NDA/Registration
CystoranTM (cysteamine hydrochloride) Ophthalmic Solution 0.65%
Treatment of ocular crystals for patients with cystinosis
NDA Preparation
Defibrotide in severe Venous Occlusive Disease
Hepatic venous occlusive disease after stem cell transplantation
Phase III
Nuartez® (artesunate) Injection in severe malaria
Immediate treatment of severe and complicated falciparum malaria
NDA/Registration
orBec® (oral beclomethasone dipropionate)
Treatment of acute GI Graft versus-Host disease
Phase III
STP-206 live biotherapeutic
Prevention of necrotizing enterocolitis (NEC)
Preclinical
Xenbilox®: Chenodeoxycholic Acid for Cerebrotendinous
Xanthomatosis (CTX) is a disease caused by the accumulation of
lipids, characterised by symptoms of diarrhoea and cataracts at the
newborn and infant stage, by xanthoma tendinosum in
adolescents and young adults, and by progressive neurological
dysfunction in adults (dementia, psychiatric disorders, spasms,
etc.). CTX is an ultra-rare disease and the “Leukodystrophy
Foundation” estimates that there are a total of 70 to 200 patients
in the whole of the United States, although some recently
published scientific articles have suggested a higher estimate.
Cystoran™: is an ophthalmic solution in drops for the treatment
of ocular cystinosis. Cystinosis is a rare hereditary genetic disease
2 2 |2 3
that affects both adults and children and causes the
accumulation (50-100 times higher than normal values) of an
amino acid, cystine, in various organs (kidneys, eyes, liver,
muscles, pancreas, brain and white blood cells). Specifically, the
cystine crystals accumulated in the eyes cause damage to the
cornea, scarring and photophobia. Cystinosis is usually
diagnosed during infancy by nephrology paediatricians and
nephrologists. The population of patients in the United States is
estimated at 250 people. Cystoran™ was acquired in
collaboration with the NIH, its clinical trials have been
completed and the NDA dossier was submitted to FDA in the
first quarter of 2010.
Defibrotide (Venous Occlusive Disease - VOD): is a Phase III
development program conducted by Gentium SpA. Sigma-Tau
has acquired the marketing licence for Defibrotide in the
treatment and prevention of VOD (prevention rights were
acquired during 2010) for North, Central and South America.
VOD is a complication following the transplant of stem cells,
which affects approximately 1,500 to 20,000 patients in the
United States. 80% of patients with severe VOD die within 100
days. There is currently no cure for VOD.
Nuartez®: in the USA infection by malaria annually affects
1,000 – 1,500 people, who mainly contract malaria during
journeys made in areas of the world at risk, with around 4-8
cases of death a year. Artesunate is a semi-synthetic derivative of
the natural product Artemisinin, whose injectable formulation
(IV-AS) should be approved by the FDA for the treatment of
severe malaria. Sigma-Tau has entered into a research and
development contract in cooperation with the Walter Reed
Army Institute of Research (WRAIR) to develop and market
IV-AS in the treatment of malaria in its acute stages. Its
development is currently in clinical phase II/III.
orBec® (oral beclomethasone dipropionate): this originated
from a partnership agreement with Soligenix (formerly known
as DOR Biopharma), a biotechnology company listed on
NASDAQ, for the treatment of Graft versus Host gastrointestinal disease, which is a serious complication of the
transplant of bone marrow. Sigma-Tau has purchased the
exclusive rights for the marketing of DOR Biopharma in North
America and Mexico once the product has been approved. Its
development is currently in phase III.
STP-206 live biotherapeutic (LBP): the project for the
prevention of necrotising enterocolitis (NEC) is an internally
developed program relating to an exclusive formulation and
administration of lyophilised bacteria to particularly
underweight newborns (<1,500 g). NEC is a particularly
debilitating gastrointestinal disease that can have a systemic
impact and is often fatal. Although the disease genesis still
remains relatively unclear, the evidence suggests a multifactor
etiology relating to an altered intestinal bacterial flora, an
intestinal ischemia and immaturity of the intestinal mucosae.
Every year in the USA around 60,000 babies are born weighing
less than 1,500 g and the mortality of newborns, belonging to
this category who contract NEC ranges from 10% to 40% (this
percentage increases to 40%-100% for newborns who contract
NEC and weigh less than 1,000 g). In the first quarter of 2010,
the FDA authorised IND, that in turn allowed Sigma-Tau to
begin the Phase I clinical study (the product was firstly
administered to a patient in March 2010).
MAIN RISKS AND UNCERTAINTIES
The main risk factors that the Sigma-Tau Group is exposed to
are described below.
RISKS ASSOCIATED WITH THE EXTERNAL
ENVIRONMENT
Risks associated with the evolution of the legislative and
regulatory environment of the pharmaceutical sector
The pharmaceutical sector is particularly subject to local,
national and international legislative and regulatory
interventions. These interventions can affect companies
operating in the sector from many different perspectives.
Indeed, they can change prices of products or their
reimbursement status; they can influence the level of investment
in research and development and the time needed to achieve the
approval of a molecule, according to the various administrative
and regulatory requirements demanded; and, lastly, they can
influence the production processes and related costs. The
pressure on public spending and in particular on health
spending prompts the various National Authorities each year to
take steps to reduce the costs borne by the Healthcare System,
with consequent impact on the whole of the sector.
The Sigma-Tau Group, in order to reduce its dependence on the
decisions of the individual national governments in relation to the
control of pharmaceutical spending, continues to pursue the
geographical diversification of its business, in addition to the
ongoing monitoring of regulatory developments in all the markets
it operates in, through its local organisations, suitably coordinated
at Corporate level, with the aim of promptly identifying and
adopting the most appropriate response strategies.
Risks associated with market competition
The Group, like any other company operating in the
pharmaceutical sector, is subject to product competition that can
cause a contraction of its market share. This may take place both
as a result of the launch of new competing products, with greater
efficacy or with a higher safety profile, or, on expiry of patents,
due to the introduction of generic drugs. The Sigma-Tau Group
mitigates this risk by seeking to diversify its portfolio, investing in
research and development and monitoring the market in order to
identify the entry of a new competitor as soon as possible.
Risks associated with expansion to emerging countries
The Sigma-Tau Group considers the expansion of its presence
to emerging countries such as China, India and South American
countries to be a fundamental strategic objective to be pursued
in order to fully exploit the growth opportunities that these
countries have to offer. The Group is also aware that there are
risks in some geographical areas in terms of political, economic
and financial stability and consequently adopts a prudent
approach based on the selection of well-established local
partners that guarantee a reliable distribution network.
OPERATIONAL RISKS
Risks associated with investments in research and
development
Every year the Group invests a significant part of its resources in
research and development, in the belief that this activity is of
strategic value to its future, in addition of course to its ethical
and social value. By its very nature, research and development,
especially in the pharmaceutical field, is characterised by a high
degree of uncertainty both with regard to the results that may be
produced and the timescales over which these results may
become available. In view of this uncertainty, it is impossible to
rule out that investments in research and development will not
produce the expected results due to the failure of the research
conducted or the lack of success in obtaining the necessary
marketing approvals. To mitigate the exposure to these risks, the
Group continually monitors the intermediate results generated
during the various phases of the research and development
process, with the aim of identifying and only carrying forward
the initiatives with the highest probability of success and
economic return.
Risks associated with the expiry and/or infringement of
patents
The patent cover of products sold, in the pharmaceutical sector
as in other sectors, guarantees the protection, for a set time
period, of the intellectual property generated by investments in
research and development. The expiry of this protection,
especially in the case of patents relating to major drugs, is
followed by the introduction in the market of generic versions
and exposes the companies to potentially significant reductions
in their revenues. Sometimes, especially in countries where the
regulations and controls on compliance with patent protection
are not particularly stringent, patents may also be breached by
unscrupulous competitors. In such cases the only option for the
companies is to go through legal channels in the hope of
enforcing their rights in a court of law.
As regards the Group, the patents of Elontril®, Talavir®, Prostide®,
Trozocina® and Eskim® expired in Italy in the second half of
2009, while the patents of the strategic products Losaprex®,
Losazid® and Libradin® will expire in 2010. To deal with the
foreseeable contraction in the sales of these products, as a result of
future competition from generic drugs, the Group plans to launch
new products at the registration phase and expand its operations
in new markets through possible investments and acquisitions.
Production process risks
The Sigma-Tau Group carries out the production of raw
materials, semi-finished and finished products. This activity
entails inevitable risks relating to the interruption of the
production process and the consequences that this can have in
terms of both lost sales and damage to the production cycle
itself (plant, machinery, etc.). In order to mitigate the risk of
stock-out due to the interruption of the process the Group has
set up several production sites and, according to the type of
product, has selected alternative producers that can act as a
back-up if necessary. The Group also operates in full compliance
2 4 |2 5
with the regulations on environmental protection and health
and safety, and with the international standards of Good
Manufacturing Practices codified through the Standard
Operating Procedures applicable to the pharmaceutical sector,
and is subject to inspection by the competent national and
international authorities. To ensure the correct implementation
of these standards, the Group has set up structures specifically
responsible for verification and ongoing monitoring.
Risks associated with product liability
The Group, like any other company operating in the
pharmaceutical sector, may be subject to product liability, in
other words it may be exposed to the risk of compensatory
claims as a result of damage caused by its drugs. Consequently,
to meet any potential liability, the Group has taken out
insurance cover on all its products on sale and under
development with a maximum limit that is considered to be
adequate and is continuously monitored.
FINANCIAL RISKS
For a description of the risks of a financial nature, such as credit
risk, interest rate risk, exchange rate risk and liquidity risk,
please refer to the detailed information included in the Notes to
the Financial Statements.
LEGAL AND COMPLIANCE RISKS
competent authorities. Based on currently available data, there is
no possibility of reports being generated that would create
problems for the Group’s products with respect to the above.
Compliance risks
The Group pays particular attention to compliance with the
applicable rules and regulations in the countries where it
operates, including the national and international regulations
and technical standards applicable to the pharmaceutical sector
that govern research and development, production, distribution
and pharmaceutical marketing of drugs. Also, in relation to the
regulations on pharmaceutical marketing, the Group provides
all of its employees with a continually updated set of rules on
conduct and ethics, which are verified on an ongoing basis to
ensure their correct implementation. Lastly, with reference to
Italian Legislative Decree 231/2001 on the administrative
liability of legal persons, note that the Group’s Italian companies
have set up an Organisation, Management and Control Model,
which is continuously updated to take account of the most
recent new regulations issued in this area.
Risks associated with judicial proceedings
It cannot be ruled out that the Group may be obliged to meet
extraordinary liabilities arising from various kinds of legal
disputes. Please refer to the explanatory notes for a detailed
description of the disputes underway and any related allocation
to the provisions for risks and charges.
Risks in relation to drug monitoring
SIGNIFICANT EVENTS AFTER THE YEAR END
The provisions in relation to drug monitoring require the Group,
as the holder of marketing approvals for proprietary medicinal
products, among other things, to submit information to the
competent Regulatory Bodies concerning the safety of drugs,
especially with regard to adverse reactions. A clear demonstration
of this type of risk is the fact that the discovery of a significant
adverse reaction can result in the restriction of the prescription of
a drug and may extend, in the severest cases, to the complete
revocation of marketing and sales approval. Consequently, in
order to avoid such situations, the Group has assigned specific
responsibilities in relation to drug monitoring to its internal
structures aimed at meeting the applicable national regulations,
and has set up integrated systems for the collection, analysis,
handling and transmission of the required information to the
At the beginning of 2010, the Sigma-Tau Group acquired the
“specialty pharma” business division of the company Enzon
Pharmaceuticals Inc. that is listed on the New York Nasdaq,
following long negotiations that began in the first months of
2009 and reached their climax with the binding purchase offer
submitted in November 2009, that was followed by the official
approval by the Shareholders’ Meeting of Enzon on 27 January
2010 and the official closing on 29 January 2010.
This is the most relevant transaction ever carried out by the
Sigma-Tau Group, with a value of USD 300 million in cash
plus an additional amount until a maximum of USD 27 million
in cash, based on milestones linked to the achievement of the
objectives set out in the agreement.
Moreover, the Sigma-Tau Group will also pay 5-10% royalties
to Enzon according to the area (USA and rest of the world),
which are calculated according to net sales, in addition to the
2009 baseline, achieved by the pharmaceutical products subject
to the acquisition.
The sales agreement also sets out that the Sigma-Tau Group
takes possession of the Enzon production plant in Indianapolis
(State of Indiana).
The acquisition has a particular strategic value for the Group, in
view of a higher international expansion, mainly in the USA,
and especially taking into account that the purchased products
are used in the treatment of some rare oncological diseases. As
already mentioned in the Research & Development section, the
Group is investing in the Orphan Drugs area, not only for the
therapeutic and social value of these drugs, but also for the
overall potential of their market that, according to a study
carried out by the Tufts Center for the Study of Drug
Development (Csdd), is experiencing a significant expansion all
over the world and especially in the USA, where the drugs
classified as “orphan” have doubled in the last decade (from 208
in 2000 to 425 in 2008). Moreover, this study indicates that,
since 2000, orphan drugs have represented 22% of all new
molecules and 31% of all biological drugs that have been
authorised by the Food and Drug Administration.
The four brands acquired by Enzon are detailed below:
• Oncaspar®, a pegylated version of the enzyme L-asparaginase
approved for the treatment of patients affected by “Acute
Lymphoblastic Leukemia” (ALL). This product is used as a
component of the so-called therapeutic cocktails together
with other chemotherapeutic drugs.
• Adagen®, a pegylated version of the bovine enzyme adenosine
deaminase (ADA) approved for the treatment of “Severe
Combined Immunodeficiency Disease” (SCID), also known
as “Bubble Boys disease”.
• Abelcet®, a complex formulation of amphotericin B lipids
approved for the treatment of invasive mycotic infections in
patients intolerant to conventional therapies with
amphotericin B.
• DepoCyt®, an injectable liposomal cytarabine approved for the
intrathecal treatment of patients affected by lymphomatous
meningitis, a form of cancer that affects the central nervous
system and the membranes surrounding the brain.
The total acquired turnover amounts to approximately USD 150
million per year. Sales in the USA represent more than 90%.
Moreover, the turnover includes about USD 10-15 million
concerning the Contract Manufacturing activities to third parties
carried out by the production plant of Indianapolis, which also
manufactures the four products mentioned above.
The transaction was financed in part (20%) with own capital
from all shareholders according to their shareholdings, as well as
with borrowed capital.
Among the significant events after the year end, reference
should be made, as already mentioned in the R&D activities
section, to the purchase from the company Gentium SpA (a
biotechnology company that is 15.46%-owned by the Group)
of the marketing rights of Defibrotide in the prevention of
VOD (Venous Occlusive Disease) in the USA, for an amount of
USD 7 million.
These rights, in addition to those already held for the treatment
of VOD, strengthen the Group’s position in the USA, thus
eliminating any overlapping risks with the company Gentium
concerning the commercial use of this molecule.
Finally, negotiations are under way in order to sell the whole
equity investment of Sigma-Tau Sudan.
BUSINESS OUTLOOK
2009 was defined as a terrible year by all economic indicators
and global analysis institutions.
The burst of the financial bubble affected all world markets and
governments. Credit tightening, together with the social effects
caused by unemployment and the weakness of the economic
cycle, fostered a negative climate and further depressed the
productive sectors, including the pharmaceutical one, that had
already experienced a dramatic 2008. In Italy, the negative trend
was even stronger and year-end statistics indicate a further
decrease in employment levels, following severe restructuring
operations that involved pharmaceutical sales representatives
and research laboratories. The numerous patent expirations of
important drugs for the treatment of diseases with strong social
impact, and their consequent replacement with generics had a
leverage effect as the crisis deepened. This effect was also
supported by purely economic political decisions aimed at
developing the use of generics with the only aim of gaining
money, regardless of a long-term healthcare policy.
2010 started with major concerns regarding the effects of the
global financial crisis on the real economy, in the light of the
severe sector situation and the economic-financial problems that
the operators will face. A series of measures adopted in 20062007 are still in force, which led to a strong decrease in sales
2 6 |2 7
prices of medicinal products dispensed by the NHS, with the
aim of requiring manufacturing companies to contribute to the
balancing of pharmaceutical expenditure overruns by the
Regions. This will strongly penalise the profitability of the
Company, as already happened in the last five years.
In this extremely difficult context, where companies have to
reconsider their growth plans also in the light of the particular
penalisation of the sector with regard to regulatory aspects and
taxation that has reached unsustainable levels, the Group made
its biggest investment ever, as described in the previous
paragraph, in absolute compliance with its strategic
development guidelines and it will continue to pursue
improvements in efficiency and seek to streamline the
organisation.
PERSONNEL AND ENVIRONMENT
During the year there were no significant events in relation to
personnel and the environment to be reported. The Group
considers that it has met all the requirements of the law and has
implemented all necessary safety measures to ensure the
occupational safety, health and compliance of its personnel.
More specifically, with regard to safety and environment, the
Italian production site has obtained the OHSAS 18001
certification during the year.
In the environmental sector, the feasibility study for the creation
of a cogeneration plant was completed and it will be constructed
by March 2010. Moreover, a new potable water treatment plant
will also be constructed. The creation of a photovoltaic system is
still under assessment.
TRANSACTIONS WITH RELATED PARTIES
For a description of the nature and the value of the transactions
of the Group’s relationships with related parties, please refer to
the detailed information included in the explanatory notes to
the financial statements.
2 8 |2 9
Consolidated Financial Statements
CONSOLIDATED INCOME STATEMENT
CONSOLIDATED INCOME STATEMENT
(Euro/000)
Note
2009
2008
616,273
613,411
19,201
25,926
635,474
639,337
218,091
209,701
(6,298)
3,715
211,793
213,416
156,008
150,334
116,519
116,588
33,390
34,199
Employee severance indemnity
5,384
9,258
Other personnel expenses
5,671
13,271
160,964
173,316
21,832
24,907
550,598
561,973
OPERATING MARGIN BEFORE AMORTISATION AND DEPRECIATION
84,876
77,364
Amortisation and depreciation
29,000
29,688
Write downs
5,853
3,819
Accruals to provisions
5,838
3,663
Net revenues from sales
Other revenues
TOTAL OPERATING REVENUES
6
Purchase of raw materials and finished goods
Changes in inventory
Purchase costs of raw materials and finished goods
Service costs
Personnel expenses:
Wages and salaries
Social security costs
Total personnel expenses
Other operating expenses
TOTAL OPERATING EXPENSES
Total
7
8
OPERATING PROFIT
Net gains from equity investments valued at equity
Write ups (Write downs)
NET GAINS FROM CONTINUING OPERATIONS
37,170
40,194
-
-
9
(6,990)
(13,428)
10
(1,338)
(20,324)
35,856
6,442
PROFIT BEFORE TAX
Taxes
40,691
44,184
12
12,328
3,271
23,528
3,171
3 0 |3 1
DISCONTINUED OPERATIONS
13
(1,850)
0
21,678
3,171
21,783
3,315
(105)
(144)
Basic
45.99
7.00
Diluted
45.99
7.00
Basic
49.50
7.00
Diluted
49.50
7.00
NET PROFIT/(LOSS) FOR THE PERIOD
of which:
Group
Third parties
EARNINGS PER SHARE
14
Earnings per share for the period attributable to the
Group's share, per share (in Euro):
EARNINGS PER SHARE FROM CONTINUING OPERATIONS
Earnings per share for the period attributable to the
Group's share, per share (in Euro):
STATEMENT OF CONSOLIDATED COMPREHENSIVE INCOME
ASSETS
Note
Net profit/(loss) for the period
(Euro/000)
2009
2008
21,678
3,171
Translation differences of foreign financial statements
11
(927)
1,445
Net gains from cash flow hedge
11
2,591
-
(700)
-
7,230
-
(1,061)
-
2,244
(2,244)
Statement of comprehensive income, net of taxes
9,378
(799)
Total net profit/(loss) for the period, net of taxes
31,055
2,372
31,166
2,512
(111)
(140)
Income taxes
Net gains from available-for-sale equity investments
11
Income taxes
Net gains from non-current available-for-sale financial assets
11
Income taxes
of which:
Group
Third parties
C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
3 2 |3 3
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
ASSETS
(Euro/000)
Note
2009
2008
15
127,078
133,352
Investment property
16
2,552
2,651
Intangible assets with defined useful life
17
158,834
166,111
Goodwill and other intangible assets with indefinite useful life
18
86,780
86,799
-
-
NON-CURRENT ASSETS
Equity investments valued at equity
Investments in other companies
20
36,398
9,662
Non-current financial assets
21
15,648
15,598
Other non-current assets
22
9,267
9,113
436,555
423,286
TOTAL NON-CURRENT ASSETS
CURRENT ASSETS
Inventory
23
76,226
71,980
Account receivables
24
167,073
168,102
Equity investments, securities and other current financial assets
25
2,950
15,489
Cash and cash equivalents
26
23,443
72,875
Other current assets
27
29,473
29,644
299,164
358,090
TOTAL CURRENT ASSETS
Non-current assets held for sale
13
TOTAL ASSETS
3,574
-
739,293
781,376
SHAREHOLDERS’ EQUITY AND LIABILITIES
Note
2009
2008
332,713
302,099
1,906
1,579
28
334,619
303,678
29
117,521
97,865
Employee severance indemnity and other employee provisions
30
39,038
43,655
Provision for risks and charges
31
4,518
3,183
Deferred tax liabilities
32
17,584
13,127
Other non-current liabilities
33
5,819
6,328
184,479
164,158
Group shareholders’ equity
Minority interest
SHAREHOLDERS’ EQUITY
NON-CURRENT LIABILITIES
TOTAL NON-CURRENT LIABILITIES
CURRENT LIABILITIES
29
23,168
110,584
Short-term portions of long-term borrowings
29
20,639
45,289
Short-term provisions
31
4,035
3,853
Account payables
34
109,224
102,459
Tax payables
35
3,261
2,638
Current financial liabilities
36
733
-
Other current liabilities
37
52,152
48,717
213,213
313,540
TOTAL CURRENT LIABILITIES
LIABILITIES HELD FOR DISPOSAL
Liabilities directly associated with assets held for sale
TOTAL SHAREHOLDERS’ EQUITY AND LIABILITIES
13
6,981
739,293
781,376
3 4 |3 5
STATEMENT OF CHANGES IN CONSOLIDATED SHAREHOLDERS’ EQUITY
AS AT 1 J ANUARY 2008, 31 D ECEMBER 2008 AND 31 D ECEMBER 2009
Balance as at 1 January 2008
(Euro/000)
Share capital
Share premium reserve
Revaluation reserve
Legal reserve
Other reserves
FTA reserve
24,631
67,057
4,290
4,926
202,528
(8,398)
Allocation of profit for the year
8,441
Reclassification of reserves
(112)
103
Purchase of minority interest
Settlement of minority interest losses
Profit for the period
Other total profit/(loss)
Total profit/(loss)
Balance as at 31 December 2008
24,631
67,057
4,393
4,926
Allocation of profit for the year
210,861
(8,398)
3,315
Consolidation difference – joint venture
(576)
Reclassification of reserves
79
(79)
Capital paid-in by minority interest
Other changes
23
Profit for the period
Other total profit/(loss)
Total profit/(loss)
24,631
67,057
4,472
4,926
213,544
(8,398)
Fair value reserve
Cash flow hedge reserve
Translation reserve
Net profit (loss)
Group shareholders’ equity
Minority interest
Total shareholders’ equity
-
-
(3,892)
8,441
299,583
2,704
302,287
(1,474)
(1,474)
489
489
3,315
(144)
3,171
(799)
4
(795)
(8,441)
9
3,315
(2,244)
1,441
(2,244)
(2,244)
-
1,441
3,315
2,512
(140)
2,372
(2,442)
3,315
302,099
1,579
303,678
(3,315)
(576)
(576)
438
23
23
21,783
21,783
438
(105)
21,678
8,413
1,892
(921)
9,384
(6)
9,378
8,413
1,892
(921)
21,783
31,166
(111)
31,055
6,169
1,892
(3,363)
21,783
332,713
1,906
334,619
3 6 |3 7
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEARS ENDED AS AT 31 D ECEMBER 2009 AND 31 D ECEMBER 2008
(Euro/000)
2009
2008
72,874
36,905
21,783
3,315
(105)
(144)
- of which: net gains from continuing operations
23,528
3,171
- of which: net gains from discontinued operations
(1,850)
-
Depreciation of property, plant and equipment
12,823
13,620
Amortisation of intangible assets
16,177
16,068
78
(422)
Write downs of property, plant and equipment, intangible assets and current receivables
5,852
3,718
Write downs of current and non-current financial assets and liabilities
1,423
20,328
-
-
(107)
(1,038)
Allocations to employee provisions and provisions for current/non-current risks and charges
11,273
13,029
Taxes for the period
12,328
3,272
7,098
14,465
88,623
86,210
674
1,053
(Increase) Decrease in inventory
(6,293)
4,145
(Increase) Decrease in account receivables
(1,222)
9,896
(10,001)
(12,333)
(4,373)
(5,044)
6,929
14,700
463
(7,110)
A. BEGINNING CASH AND CASH EQUIVALENTS
B. CASH FLOW FROM OPERATIONS
Group net profit (loss)
Minority interest net profit (loss)
Gains/Losses on disposal of non-current assets
Effect of valuation of equity investments at equity
Effect of exchange adjustments to assets and liabilities in foreign currency,
excluding cash and cash equivalents
Net gains (losses) from financial management
Operating cash flow before changes in working capital
Decrease in other current/non-current receivables
Increase in employee provisions
Increase in current/non-current provisions
Decrease in account payables
(Increase) Decrease in provisions for deferred taxes and tax payables
Decrease in assets held for sale
503
-
Decrease in liabilities held for sale
1,428
-
(Increase) Decrease in other current/non-current payables
4,559
(2,837)
Interest income collected
1,273
2,693
Interest expenses paid
(5,854)
(13,318)
Other financial income/expense collected/paid
(3,973)
(6,271)
Taxes paid
(9,428)
(5,641)
63,309
66,143
2009
2008
(13,786)
(10,451)
- property, plant and equipment
(8,347)
(15,306)
- financial assets
(4,626)
(14,982)
150
316
13
415
400
4,401
Increases/Decreases in investments and current securities
-
(256)
Increases/Decreases in other investments (equity investments valued at equity)
-
-
(26,196)
(35,863)
20,439
54,510
Repayments of medium/long-term borrowings
(155)
(338)
Change in current/non-current financial assets
1,034
1,231
C. CASH FLOW FROM INVESTING ACTIVITIES
Investments in fixed assets
- intangible assets
Gains on sales of intangible assets
Gains on sales of property, plant and equipment
Gains on sales of non-current financial assets
D. CASH FLOW FROM FINANCING ACTIVITIES
New medium/long-term borrowings
Change in bank borrowings
Current change in short-term portions of long/term borrowings
E. EFFECT OF CHANGES IN EXCHANGE RATES ON CASH AND CASH EQUIVALENTS
F. CASH FLOW FOR THE PERIOD
G. ENDING CASH AND CASH EQUIVALENTS
2,058
(1,567)
(109,695)
(48,965)
(86,319)
4,872
(226)
818
(49,432)
35,969
23,443
72,874
3 8 |3 9
Notes to the Consolidated Financial Statements
ACCOUNTING STANDARDS AND NOTES
1. CORPORATE INFORMATION
Sigma-Tau Finanziaria SpA, the Parent Company, is a società
per azioni (joint-stock company) incorporated and domiciled in
Italy, which operates in the pharmaceutical sector. Its operations
are carried out in Italy mainly through Sigma-Tau Industrie
Farmaceutiche Riunite SpA, and outside of Italy by companies
which primarily market Sigma-Tau brand products.
The Company’s registered office is in Rome.
The Sigma-Tau Group’s main activities are described in the
Management Report.
Publication of the Consolidated Financial Statements
Publication of the Consolidated Financial Statements of Sigma-Tau
Finanziaria SpA for the year ended as at 31 December 2009 was
authorised by Board of Directors’ resolution dated 22 April 2010.
and figures are rounded to thousands of Euro, if not otherwise
indicated.
The exchange rates used for translation of foreign currency
balances are those established by the UIC (Italian Foreign
Exchange Office) for the specific dates.
Financial Statements
The Financial Statements used comply with the provisions of
IAS 1 and have been drawn up as follows:
1. the Consolidated Income Statement was drawn up by
classifying operating expenses by type, as this form of
presentation is deemed most suitable for representing the
company’s operations;
2. the Consolidated Statement of Financial Position was drawn
up by separately presenting current and non-current assets
and current and non-current liabilities;
3. the Statement of Changes in Consolidated Shareholders’
Equity was prepared according to IAS 1;
4. the Consolidated Cash Flow Statement was drawn up using
the indirect method, as permitted by IAS 7.
Statement of Compliance with IAS/IFRS
Consolidation Principles
The Consolidated Financial Statements for the year ended as at
31 December 2009 have been prepared in compliance with the
International Accounting Standards (“IAS/IFRS”) issued or
amended by the International Accounting Standards Board
(“IASB”) and adopted by the European Union, as well as in
compliance with the provisions implementing article 9 of Italian
Legislative Decree 38/2005. “IAS/IFRS” also refer to all the
interpretations of the International Financial Reporting
Interpretations Committee (“IFRIC”), previously named the
Standing Interpretations Committee (“SIC”).
Going concern
The Financial Statements have been prepared based on the
assumption that the business is a going concern.
2. DRAFTING CRITERIA
The Consolidated Financial Statements have been drawn up
based on the historical cost principle, except for those items
where the use of fair value is mandatory.
The Consolidated Financial Statements are presented in Euro
N OT E S TO T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
The Consolidated Financial Statements comprise the financial
statements of Sigma-Tau Finanziaria SpA and its direct or
indirect subsidiaries, drawn up as at 31 December 2009.
Subsidiaries are consolidated on a line-by-line basis starting
from the date of acquisition, or from the date in which the
Group acquires control, and cease to be consolidated at the date
when control is transferred outside the Group.
The subsidiaries’ financial statements are drawn up using the
same accounting standards as the Parent Company.
All inter-company balances and transactions, including any
unrealised profit or loss deriving from transactions between
Group companies, are fully eliminated. The Group’s portion of
profit and loss realised through transactions with associated
companies is eliminated.
Minority interest represents the portion of profit or loss and net
assets not held by the Group. This is shown in a separate item in
the consolidated income statement, and among the items of
shareholders’ equity in the statement of financial position,
separate from Group equity.
In preparing the Consolidated Financial Statements, the total
amount of assets, liabilities, costs and revenues of the
4 0 |4 1
consolidated companies are absorbed on a line-by-line basis.
The carrying amount of the equity investment in each
subsidiary is eliminated in relation to the corresponding portion
of shareholders’ equity of each subsidiary, including any
adjustments to the fair value of the assets and liabilities at the
acquisition date.
Subsidiaries consolidated on a line-by-line basis as at 31
December 2009 are listed in Note 41.
The main transactions involving Group subsidiaries as at 31
December 2009 were as follows:
1. on 22 December 2008, Sigma-Tau Industrie Farmaceutiche
Riunite SpA (with a 63.64% shareholding) and Taufin SpA
(for the remaining part) established Rostaquo SpA. The first
financial statements include accounting data from
22/12/2008 to 31/12/2009;
2. on 26 June 2009 Sigma-Tau Europe SA and Sigma-Tau
International SA established Sigma-Tau Pharma Belgium
Sprl;
3. the liquidation of Sigma-Tau Ireland Ltd took place on 30
November 2009;
4. in January 2009, Sigma-Tau Private India Ltd began
operations. It is wholly owned by the company Defiante
Farmaceutica SA;
5. during 2009, shares of Lee’s Pharmaceuticals Holding Ltd
were purchased, a jointly-controlled company consolidated
using the proportionate method. This purchase has been
considered as a transaction between entities subject to joint
control and the difference between the purchase price and
the shareholders’ equity was booked as a reduction of the
shareholders’ equity. The shareholding as at 31 December
2009 was equal to 29.43%.
International Financial Reporting Standards (IFRS)
The following accounting standards are applied:
IFRS 1
First-Time Adoption of International Financial Reporting Standards
IFRS 5
Non-Current Assets Held for Sale and Discontinued Operations
IFRS 7
Financial Instruments: Disclosures
IFRS 8
Operating Segments
IAS 1
Presentation of Financial Statements
IAS 2
Inventories
IAS 7
Statement of Cash Flows
IAS 8
Accounting Policies, Changes in Accounting Estimates and Errors
IAS 10
Events after the reporting period
IAS 12
Income taxes
IAS 16
IAS 18
Revenues
IAS 19
Employee Benefits
IAS 20
Accounting for Government Grants and Disclosure
of Government Assistance
IAS 21
Changes in Foreign Exchange Rates
IAS 23
Borrowing Costs
IAS 24
Related Party Disclosures
IAS 27
Consolidated and Separate Financial Statements
IAS 28
Investments in Associates
IAS 31
Interests in Joint Ventures
IAS 32
Financial Instruments: Presentation
IAS 33
Earnings per Share
IAS 36
Impairment of Assets
IAS 37
Provisions, contingent liabilities and contingent assets
IAS 38
Intangible Assets
IAS 39
Financial Instruments: Recognition and Measurement
IAS 40
Investment Property
The following standards were not applied to these financial
statements, as the necessary requisites are not in place:
IFRS 2
Share-based Payments
IFRS 3
Business Combinations
IFRS 4
Insurance Contracts
IFRS 6
Exploration for and Evaluation of Mineral Resources
IAS 11
Construction Contracts
IAS 17
Leases
IAS 26
Retirement Benefit Plans
IAS 29
Financial Reporting in Hyperinflationary Economies
IAS 30
Disclosures in Financial Statements of Banks
and Similar Financial Institutions
IAS 34
Interim Financial Reporting
IAS 41
Agriculture
Accounting standards, amendments and interpretations not
yet applicable and not adopted by the Group in advance
IFRS 3 Business Combinations (Revised) and IAS 27
Consolidated and Separate Financial Statements (Revised)
In January 2008, the revised versions of IFRS 3 and IAS 27 were
issued, as approved on 3 June 2009 and to be adopted as from 1
July 2009. Earlier application is permitted.
The IFRS 3 (Revised) introduces significant changes to the
accounting of business combinations after 1 January 2009. These
changes relate to the measurement of non-controlling interests,
accounting of transaction costs, initial recognition and subsequent
measurement of any contingent consideration and of business
combinations in several stages. These changes will impact on the
goodwill amount, the reported results in the period in which the
acquisition is carried out and on future results.
IAS 27 (Revised) sets out that any change to the ownership
structure of a subsidiary (without losing control) is accounted
for as a transaction between shareholders in their role as such.
Therefore, these transactions will not generate goodwill, profit
or losses. Moreover, the revised standard introduces changes to
the accounting of losses recognised by the subsidiary and of its
loss of control. The changes introduced by IFRS 3 (Revised)
and IAS 27 (Revised) will regard future acquisitions or losses of
control of a subsidiary, as well as transactions with minority
interest. The Group does not expect this update to impact its
financial statements as these specific cases do not currently apply.
IAS 39 Financial Instruments: Recognition and
Measurement – Eligible Hedged Items
The revised version of IAS 39 was issued in July 2008 and is to
be adopted as from 1 July 2009. Earlier application is
permitted.
This change clarifies that an entity can recognise a portion of
the changes in fair value or cash flows of a financial instrument
as a hedged item. The change also includes the designation of
inflation as hedged risk or as a portion of risk in particular
situations. The Group believes that this change will not impact
its financial position or performance, since it does not use such
hedging.
IFRIC 12 Service Concession Arrangements
In November 2006, Interpretation IFRIC 12 was issued, which
will become applicable as from 30 March 2009 for financial
years beginning on or after 1 January 2009. This interpretation
applies to operators providing services under concession, and
establishes the rules for accounting for the obligations
undertaken and rights received under concession arrangements.
The Group does not expect this interpretation to impact its
financial statements.
IFRIC 15 Agreements for the Construction
of Real Estate
The Interpretation IFRIC 15, published in July 2008, aimed at
clarifying the accounting practice for recognising revenues and
related costs for entities which develop real estate directly or
through subcontracting agreements. It was approved on 22 July
2009. The interpretation is expected to enter into force starting
from 1 January 2010. Earlier application is expected. This
interpretation does not impact these financial statements.
IFRIC 16 Hedges of a Net Investment in a Foreign
Operation
Interpretation IFRIC 16, published in July 2008, applies to
companies that hedge foreign currency risk arising from net
investments in foreign operations and intend to classify said
hedging as hedge accounting in accordance with IAS 39. It was
approved on 4 June 2009. The interpretation will enter into
force starting from 1 July 2009. Earlier application is permitted.
4 2 |4 3
IFRIC 17 Distributions of Non-cash Assets to Owners
Interpretation IFRIC 17 was issued in November 2008 and
approved on 26 November 2009, in order to clarify how
companies should measure the distribution of non-cash assets
when paying dividends to shareholders. The interpretation will
enter into force starting from 1 November 2009. This
interpretation does not impact the financial statements.
IFRIC 18 Transfers of Assets from Customers
Interpretation IFRIC 18 was issued in January 2009 and
approved on 27 November 2009. It entered into force on 1
November 2009 and earlier application was also permitted. It
provides additional guidance on accounting for transfers of
assets from customers and clarifies the requirements of the
International Financial Reporting Standards (IFRSs) for
agreements in which an entity receives from a customer an item
of property, plant and equipment that the entity must then use
either to connect the customer to a network or to provide the
customer with ongoing access to the supply of goods or services.
This interpretation does not impact the financial statements.
Improvements to IFRS
In May 2008 and April 2009, IASB issued a series of improvements
to the standards, in view of eliminating any inconsistencies and
clarifying terminology. Each standard has ad hoc transition clauses.
The adoption of the following changes translates into changes to
the accounting standards, but they did not impact the Group’s
financial position or results.
• IFRS 5 Non-Current Assets Held for Sale and Discontinued
Operations: it clarifies that the additional disclosures required in
respect of non-current assets and disposal groups classified as
held for sale or related to discontinued operations, are only those
required by IFRS 5. The disclosures required by other IFRSs
only apply if specifically requested for these types of non-current
assets or discontinued operations.
• IFRS 8 Operating segments: it clarifies that the assets and
liabilities referred to the operating segment should be recognised
only if they belong to the reports used by the chief operating
decision makers.
Since the Group’s chief operating decision maker revises segment
assets and liabilities, the Group continued to provide these
disclosures in Note 8.
• IAS 1 Presentation of Financial Statements: assets and liabilities
classified as held for trading according to the provisions set
out in IAS 39 Financial instruments: Recognition and
Measurement are not automatically classified as current items
in the statement of financial position. The Group has changed
its accounting method according to the new directive and
analysed if the management’s expectations concerning the
period of realisation of assets or liabilities differ from the
classification of the instrument. This has not led to new
classifications of financial instruments from current to noncurrent items in the statement of financial position.
• IAS 7 Statement of Cash Flows: it clearly states that only
expenditures resulting from the recognition of an asset can be
classified as cash flows arising from investing activities.
• IAS 16 Property, Plant and Equipment: replacement of the
term “net selling price” with “fair value net of costs to sell”.
The Group changed its accounting method, in compliance
with the new directive; this change does not imply any
modification to the financial position.
• IAS 18 Revenue: the Management integrated the standard
with an application guide (annexed to the standard) for
determining whether an entity is acting as a principal or as an
agent. The following aspects should be taken into account:
• the entity is responsible for supplying the goods or services;
• the entity bears the risk on inventories;
• the entity has the discretionary power to set prices;
• the entity bears the credit risk.
The Group analysed its position by applying the abovementioned criteria and found out to be acting as a principal.
The accounting policy for revenue recognition was
consequently updated.
• IAS 20 Accounting for Government Grants and Disclosure of
Government Assistance: the loans granted as non-burdensome
or with low interest rates are subject to the requirement of
charging interests. Interests should be allocated to the loans
granted with interest rates below the market. This change
does not impact the Group, which received government
assistance as direct grants and not as loans.
• IAS 23 Borrowing Costs: the definition of Borrowing Costs has
been revised in order to include the two items representing
Borrowing Costs into one single item. Interest costs are
calculated by using the effective interest method according to
the provisions set out by IAS 39. The Group changed its
accounting procedures in order to comply with this change,
that does not impact the financial position.
• IAS 36 Impairment of Assets: if discounted cash flows are
used in order to estimate the “fair value net of costs to sell”,
additional disclosure is requested on the discount rate, in
compliance with the disclosure required when the
discounted cash flows are used in order to estimate the
“value in use”. This change does not directly impact the
Group consolidated financial statements, since the
recoverable amount of cash generating units is currently
estimated by using the “value in use”. The change clarifies
that the biggest unit to which the goodwill acquired in a
business combination can be assigned is the operating
segment as defined in the IFRS 8 before the aggregation for
reporting purposes. The change does not impact the Group,
since the annual assessment of impairment loss is carried out
before the aggregation.
In addition to the above amendments and improvements,
which were adopted as at the date of approval of these financial
statements, the European Union has not yet approved the
following improvements issued by the IASB and interpretations
issued by the IFRIC.
IFRS 1 Additional Exemptions for First-time Adopters
The amendment to the IFRS 1 standard was issued in July
2009. The amendment set out further exemptions from the full
retrospective application of IFRS upon first-time adoption of
the international accounting standards, with particular regard
to the oil & gas sector and to leasing contracts.
IFRS 2 Group share-based payment transactions
In June 2009, the IASB amended IFRS 2 concerning the
accounting treatment of group transactions with cash-settled
share-based payments. This amendment is in force for the
financial years starting from 1 January 2010 or later. Moreover,
this amendment replaces IFRIC 8 and IFRIC 11.
IFRIC 14 Limit on a Defined Benefit Asset, Minimum
Funding Requirements and their Interaction
is expected to become applicable for financial years beginning
on or after 1 January 2011. This Interpretation applies to the
assessment of a defined benefit asset as part of a defined benefit
plan following retirement, when there is a minimum funding
requirement. A defined benefit plan represents a surplus when
the fair value of defined benefit assets is higher than the present
value of the defined benefit obligation. Its approval is expected
for the second quarter of 2010.
The Group does not expect this interpretation to impact its
financial statements.
IFRIC 19 Extinguishing Financial Liabilities with Equity
Instruments
is expected to become applicable for financial years beginning
on or after 1 January 2010. This interpretation provides
information on the rules for accounting the extinguishment of
a financial liability by issuing equity instruments.
Its approval is expected for the second quarter of 2010. The
Group does not expect this interpretation to impact its financial
statements.
IAS 24 Related Party Disclosures
IAS 24, which was already revised in 2003, was amended by
the IASB during 2009. The amendments, which will
presumably be published during the second quarter of 2010,
have two main objectives:
– to simplify the definition of related party, by clearly
explaining its meaning and eliminating any inconsistency
contained in the definition;
– to set out a partial exemption from the disclosure on related
parties concerning Public Administration.
Its approval is expected for the second quarter of 2010;
companies will apply the new version of the standard as from 1
January 2011.
IFRS 9 Financial Instruments
IFRS 9 was published in November 2009, in order to clarify
and simplify the interpretation and application of IAS 39. The
simplifications concern the classification and measurement of
financial assets and other hybrid contracts, measurement
criteria for the first recognition and the following ones, the
expectation of a single impairment method that replaces those
set out in IAS 39.
The replacement process of IAS 39 is not yet ended, since it is
being implemented by stages, the first of which was ended with
the publication of IFRS 9. The IASB expects to end the process
by the end of 2010. The standard will be applied starting from
1 January 2013.
4 4 |4 5
3. DISCRETIONARY MEASUREMENTS AND
SIGNIFICANT ACCOUNTING ESTIMATES
In drawing up the Group financial statements and notes, the Directors
were required to make discretionary measurements, estimates and
assumptions which influence the values of revenues, costs, assets and
liabilities, the indication of contingent liabilities and financial
statement disclosures. Estimates are used to measure goodwill, to
recognise allocations to provisions for credit risk, for inventory
obsolescence, to determine write downs of equity investments or
assets, to determine amortisation and depreciation and employee
benefits, to calculate taxes and make allocations to provisions.
These estimates and assumptions are periodically revised and the
effects of each change are immediately reflected in the income
statement. In this context, it is noted that the situation resulting
from the current economic and financial crisis has required that
assumptions be made regarding the future performance which is
riddled with uncertainty. Therefore, the possibility cannot be
ruled out that in the next financial year, results could be achieved
which differ from the estimates made, and thus, could require
adjustments to the carrying amount of the related items, which
may currently be neither estimated nor forecast.
which is the greater of its fair value, less costs to sell, and its
value in use. The Group classifies specific assets as available for
sale, and recognises the changes in their fair value in
shareholders’ equity. If their fair value decreases, the directors
develop assumptions regarding said decrease in fair value, in
order to establish whether it constitutes impairment which must
be recorded in the income statement.
Provisions for doubtful debts
Provisions for doubtful debts reflect the management’s
estimations regarding losses on the portfolio of receivables due
from customers. The estimation of the provisions is based on the
Group’s expected losses, determined on the basis of past
experience, current and historical past due receivables, losses and
collections, the monitoring of credit quality and the forecasts
regarding the conditions of the economy and the market.
Provision for obsolete goods
The provision for obsolete goods reflects the management’s
estimation of the expected losses in value for the Group on the basis
of past experience.
Estimates and assumptions
Fair value of unlisted capital instruments
The key assumptions regarding the future and other significant
sources of uncertainty in the estimates as at the balance sheet
date are illustrated below.
Goodwill
Goodwill is subjected to impairment testing on at least a yearly
basis. This test requires an estimate of the value in use of the cash
generating units to which the goodwill is allocated, which, in
turn, is based on the estimated cash flows expected from the unit,
discounted on at a suitable discount rate. Despite the current
financial crisis, on the basis of the impairment test performed, no
write downs were necessary for this financial statement item.
Further details and a sensitivity analysis of the key assumptions
are set forth in Note 18. Goodwill.
Impairment of available-for-sale financial assets
An impairment occurs when the carrying amount of an asset or
a cash generating unit exceeds its own recoverable amount,
Unlisted capital instruments were measured using the
discounted cash flow method, at current rates applicable for
instruments with similar conditions and elements of risk. This
measurement requires the Group to develop estimates regarding
expected cash flows and discount rates, therefore, these are
subject to uncertainty.
Deferred tax assets
Deferred tax assets are recorded in relation to all tax losses
carried forward, and the mismatching of statutory and tax
values, in the amount in which suitable future taxable profit is
likely against which said losses can be used. The directors are
required to carry out significant discretionary valuation in order
to determine the amount of deferred tax assets which may be
recognised. The directors must estimate the probable time frame
and amount of future taxable profit as well as develop a strategy
for planning future taxes.
Further details are provided in Note 32.
Pension funds and other post-employment benefits
The cost of defined benefit pension plans and other postemployment benefits is determined using actuarial valuation.
Actuarial valuation requires the development of assumptions
regarding discount rates, expected rates of return on investment,
future salary increases, mortality rates and future increases in
pensions. Due to the long-term nature of these plans, these
estimates are subject to a significant degree of uncertainty.
Further details are provided in Note 30. Employee severance
indemnity and other employee provisions
average exchange rate for the year. Exchange rate differences
deriving from said translation shall be recognised in the statement
of comprehensive income. Upon disposal of a foreign operation,
the portion of the statement of comprehensive income which refers
to this foreign operation is recognised in the income statement.
The exchange rates applied for translation are listed below:
Currency
ISO
Average exchange
rate 2009
1MU=1Euro
Exchange rate as at
31 December 2009
1MU=1Euro
US Dollar
USD
1.39478
1.44060
Swiss Franc
CHF
1.51002
1.48360
Sudanese Dinar
SDD
3.23171
3.22660
Hong Kong Dollar
HKD
10.81140
11.17090
British Pound Sterling
GBP
0.89094
0.88810
Translation of items in foreign currency
Indian Rupee
INR
67.36110
67.04000
The Consolidated Financial Statements are presented in Euro,
which is the functional currency and presentation currency adopted
by the Group. Each Group company defines it own functional
currency, which is used to measure the items in the single financial
statements. Foreign currency transactions are initially recognised at
the exchange rate (referring to the functional currency) in force on
the transaction date. Monetary assets and liabilities denominated
in foreign currency are translated into the functional currency at the
exchange rate in force at the balance sheet date. All exchange rate
differences are recognised in the income statement, except for
monetary elements that represent an effective hedging for a net
investment in a foreign operation. These differences are initially
recognised in the statement of comprehensive income until disposal
of the net investment, when they will be recognised in the income
statement. Non-monetary items in foreign currency valued at
historical cost are translated using the exchange rates in force at the
initial recognition date. Non-monetary items in foreign currency
valued at fair value are translated using the exchange rates in force at
the date of determination of the fair value. Any goodwill deriving
from the acquisition of foreign operations and any changes in fair
value which modify the carrying amount of the assets and liabilities
at the time of acquisition are treated as assets and liabilities of the
foreign company and translated using the period-end exchange rate.
At the balance sheet date, the assets and liabilities of these
subsidiaries were converted into the presentation currency of
Sigma-Tau Finanziaria SpA (Euro) at the exchange rate in force at
that date and their income statements were translated using the
The following Group companies which present their financial
statement data in foreign currency:
1) US Dollar: Sigma-Tau Pharmaceuticals Inc., Sigma-Tau
HealthScience LLC, and Sigma-Tau Research Inc.;
2) Swiss Franc: Sigma-Tau Pharma AG and Sigma-Tau Research
Switzerland SA;
3) Sudanese Dinar: Sigma-Tau Sudan Ltd;
4) Hong Kong Dollar: Lee’s Pharmaceuticals Holdings Ltd;
5) British Pound Sterling: Sigma-Tau Pharma Ltd;
6) Indian Rupee: Sigma-Tau Private India Ltd.
4. SUMMARY OF THE MAIN ACCOUNTING
CRITERIA
Property, plant and equipment is recognised at historical cost,
including directly applicable accessory costs which are necessary
for the development of the assets for their use. When significant
renovation occurs, the cost is included in the carrying amount of
the plant or equipment as a substitution, if the recognition criteria
are met. Other repair and maintenance costs are recorded in the
income statement when they are incurred. If significant parts of
said property, plant and equipment have different useful lives,
these components are separately accounted for. Land, both unbuilt
and annexed to buildings, is not depreciated, as it is deemed to
have an unlimited useful life. The value is shown in the financial
statements net of accumulated depreciation and impairment.
Depreciation is calculated on a straight-line basis, according to the
estimated useful life of the asset.
4 6 |4 7
Property
Plant and machinery
Furniture and office machines
50 years
from 15 to 20 years
from 5 to 10 years
Automobiles
5 years
Equipment
5 years
Assets are written off the financial statements upon sale or when
no future economic benefits are expected from their use or
disposal. Any losses or gains (calculated as the difference between
net income on sale and the carrying amount) are included in the
income statement for the year of said elimination. The residual
value of the asset, its useful life and the methods applied are revised
on a yearly basis, and adjusted, if necessary, at the end of each year.
Investment property
Investment property is recorded at historical cost, including
negotiation costs. The carrying amount includes the costs for
the substitution of part of an investment property at the time
the cost is incurred, provided that the recognition criteria are
met. This amount excludes ordinary maintenance costs.
Buildings are depreciated on a straight-line basis over the
estimated useful life of the assets, which is revised on a yearly
basis, or more frequency when deemed necessary, and any
changes are recognised prospectively. Land, both unbuilt and
annexed to civil and industrial buildings, is not depreciated, as it
is deemed to have an unlimited useful life.
Following initial recognition, buildings, plant and machinery
and investment property are recorded net of accumulated
depreciation and any accumulated impairment.
Investment property is eliminated from the financial statements on
disposal or when it is permanently withdrawn from use and no future
economic benefits are expected from its disposal. And gains or losses
on withdrawal from use or disposal of investment property are
recorded in the income statement in the year of withdrawal or
disposal. Reclassifications from or to investment property are carried
out only in the event that the use of the property is changed. If a
property that is used directly becomes investment property, the Group
recognises said assets in compliance with the criteria indicated under
property, plant and equipment up until the date of change in use.
Intangible assets acquired separately are recognised at cost, net
of accumulated amortisation and any impairment, while those
acquired through business combinations are capitalised at fair
value, at the acquisition date. Following initial recognition,
intangible assets are recorded at cost, net of accumulated
amortisation and any impairment. Internally produced
intangible assets are not capitalised, with the exception of
development costs, and are recorded in the income statement
during the year in which they are incurred.
Following initial recognition, intangible assets are amortised
over their useful life, and subject to a value congruity analysis
each time there is an indication of possible impairment. The
amortisation periods and methods applied to intangible assets
are reviewed at the end of each financial year or more frequently,
if necessary. Changes in the expected useful life or the methods
by which the future economic benefits linked to the intangible
assets are achieved by the Group are recognised by modifying
the amortisation period or method, as appropriate, and are
treated as changes to the accounting estimates.
Gains or losses on disposal of an intangible asset are measured
as the difference between the net income on disposal and the
carrying amount of the intangible asset and are recorded in the
income statement at the time the fixed asset is disposed.
The amortisation rates used for intangible assets are as follows:
Licences
Trademarks
Other
3 years
20 years
from 3 to 10 years
Research and development costs
Research costs are charged to the income statement at the time
they are incurred. Development costs relating to a specific
project are capitalised when the Group can demonstrate the
possibility of technically completing the intangible assets in
order to make it available for use or sale, the Group’s intention
to complete said asset in order to use it or sell it, the methods
in which said asset shall generate probable future economic
benefits, the availability of the technical, financial or other
resources to complete the development and the Group’s ability
to reliably measure the cost attributable to the asset during
its development.
Following initial recognition, development costs are valued at
cost, minus any accumulated amortisation or loss. Amortisation
of the asset begins at the time development is completed and the
asset is available for use. The asset is amortised over the period in
which the related project is expected to generate revenues for the
Group. During the period in which the asset is not yet in use, it is
reviewed on a yearly basis in order to determine any impairment.
Goodwill
Goodwill acquired in a business combination is represented by
the excess cost of the business combination compared to the
portion of shareholders’ equity at present values, referring to the
identifiable values of the acquired assets, liabilities and
contingent liabilities acquired. On the other hand, negative
differences, i.e. “negative goodwill”, are recorded in the income
statement at the time of acquisition.
Following initial recognition, goodwill is measured at cost,
minus any accumulated impairment. Goodwill is subject to
impairment testing on a yearly basis or more frequently when
events or changes occur which may give rise to impairment.
For the purpose of impairment testing, goodwill acquired
through business combinations is allocated, from the acquisition
date, to each of the cash generating units (or groups of units)
which are expected to benefit from the synergic effects of the
acquisition, irrespective of the allocation of other acquired assets
or liabilities. Each cash generating unit or group of units to
which goodwill is allocated:
• represents the lowest level at which goodwill is monitored
within the Group for the purposes of internal management;
• is no greater than an operating segment as defined in the
Group’s reporting by primary and secondary segment
pursuant to IFRS 8 “Operating Segments”.
Impairment is determined by defining the recoverable value of
the cash generating unit (or group of units) to which goodwill is
allocated. When the recoverable value of the cash generating
unit (or group of units) is lower than the carrying amount,
impairment is recorded. If the assets of a cash generating unit
(or group of units) associated to goodwill are partially disposed
of, the goodwill of the disposed assets is considered in order to
determine any capital gains (losses) deriving from the
transaction. In this situation, the disposed goodwill is measured
based on the values of the disposed assets compared to the assets
still held relating to said units.
The residual amount of goodwill is taking into consideration in
determining the capital gain (loss) arising on disposal of part of,
or the entire, going concern previously acquired to which
goodwill was associated.
Goodwill is not subject to amortisation.
Impairment of non-financial assets
At each balance sheet date, the Group verifies the existence of
indicators of impairment of assets. If impairment exists, or if an
annual impairment test is requested, an estimate of the
recoverable value is made. The recoverable amount is the greater
of the fair value of an asset or cash generating unit net of costs
of sale and its value in use, and is determined for individual
assets, except when said assets do not generate cash flows which
are significantly independent from those generated by other
assets or groups of assets. If an asset’s carrying amount exceeds
its recoverable amount, the asset has undergone impairment
and, as a result, it is written down to its recoverable value.
In calculating an asset’s value in use, the expected cash flows are
discounted using a discount rate reflecting the current market
value of the time value of money and the specific risks
associated with the asset. The impairment suffered by
continuing operations is recognised in the income statement, in
the cost categories in line with the function of the asset
demonstrating impairment.
At each balance sheet date, the Group also assesses whether the
impairment previously recognised ceases to exist or is reduced,
and the new recoverable value is estimated. The value of a
previously written down asset can be restored only if changes
have occurred in the estimates used to determine the asset’s
recoverable value following the last recognition of impairment.
In this case, the carrying amount of the asset is brought up to its
recoverable value, without, however, the increased value
exceeding the carrying amount that would have been
determined, net of amortisation and depreciation, if no
impairment had been recognised in the previous years. Each
write up in value is recorded as income in the income statement,
except for those occurring when the asset is booked at a revalued
amount. In such case, the write up is treated as a revaluation.
Following a write up, the portion of amortisation or
depreciation of the asset is adjusted in future periods, in order to
divide the amended carrying amount, net of any residual values,
on a straight-line basis of the remaining useful life.
Interests in Joint ventures
Joint ventures are consolidated using the proportionate method,
summing the share in each asset, liability, income and cost of
the jointly-controlled company on a line-by-line basis, with the
respective items of the consolidated financial statements.
4 8 |4 9
The joint venture prepares the financial statements for the same
financial year of the parent company and applies the same
accounting standards. Any inconsistencies in the accounting
standards applied are amended by means of adjustments.
The share of unrealised profit and loss concerning transactions
between the Group and the joint venture is eliminated from the
consolidated financial statements of the Group. The loss is
immediately recognised when it indicates a decrease in the net
realisable value of current assets or an impairment.
Proportionate consolidation of the joint venture is interrupted
when the Group ceases to hold joint control over the same.
intention and capacity to keep them in its portfolio until the
time of their natural maturity. Following initial recognition,
these assets are valued at amortised cost, using the effective
interest rate, which represents the interest rate which discounts
the estimated future payments and collections over the expected
life of the financial instrument. Gains and losses are recorded in
the income statement at the time the investment is eliminated
from the accounting records or when impairment occurs, in
addition to through the process of amortisation.
Currently, the Group does not hold any financial instruments
with the intention of keeping them to maturity.
Equity investments and other financial assets
Loans and receivables
The Group’s financial assets can be broken down into the
following categories:
- financial assets at fair value through profit and loss;
- investments held to maturity;
- loans and receivables;
- available-for-sale assets;
- derivatives designated as effective hedging instruments.
Loans and receivables are non-derivative financial assets with
fixed or determinable payments, which are not listed on active
markets. Following initial recognition, these assets are measured
at amortised cost using the effective discount rate net of any
allocations due to impairment.
Gains and losses are recorded in the income statement when
borrowings and receivables are eliminated from the accounts or if
impairment is present, as well as through the amortisation process.
All financial assets are initially recognised at fair value. For assets
other than those valued at fair value with changes booked to the
income statement, the fair value is increased by transactions
costs, that are directly attributable to the acquisition.
The Group determines the classification of its financial assets
following initial recognition and, where suitable and permitted,
revises said classifications at the end of each financial year.
Available-for-sale financial assets
Financial assets at fair value through profit and loss
This category includes all assets held for trading and assets
designated at initial recognition as financial assets valued at fair
value with changes booked to the income statement. Assets held
for trading are those assets acquired in order to be sold in the
short term. Gains or losses on assets held for trading are
recorded in the income statement.
Investments held to maturity
Financial assets which are not derivatives, and which feature
payments with fixed or determinable due dates are classified as
“investments held to maturity”, when the Group has the
Available-for-sale financial assets are financial assets, excluding
derivatives, which are designated as available-for-sale or are not
classified under any of the three previous categories. They
include shares and debt securities. Subsequent to initial
recognition, available-for-sale financial assets are measured at
fair value and the gains and losses resulting from said
measurement are entered as part of the total profit (or loss) in
the reserve of available-for-sale financial assets, until said assets
are sold, recovered, or disposed of, or until it is determined that
said assets have undergone impairment. In these cases, the gains
or losses accumulated until that point are recognised in the
income statement. The interest accrued or paid on these
investments is accounted for as interest income or expense using
the effective interest rate method. Dividends accrued on these
investments are booked to the income statement as “dividends
received” when the right to collection arises.
In this category the Group classifies Auction Rate Securities
(ARS) and investments in other companies (with a percent
shareholding of less than 20% or for which there is no
significant influence by the Group), measured in compliance
with the above provisions. These investments are measured at
their recoverable value, according to the provisions of IAS 39, in
order to determine any lasting impairment.
Last year, with regard to the same type of securities, reference
was made to the market values for the period immediately prior
to the date of approval of the financial statements as, following
the crisis in the financial markets and the fluctuations in share
prices, a stabilisation in share prices was expected. This year, in
order to measure the fair value of listed investee companies,
reference was made to the market values calculated on the basis
of the average values for the last quarter of the financial year.
Impairment of financial assets
At each balance sheet date, the Group verifies whether financial
assets or groups of financial assets are subject to impairment.
A financial asset or a group of financial assets is subject to
impairment only if there is objective evidence of impairment as
a result of one or more events following initial recognition
(when a loss occurs) and this loss event has an impact, that can
be reliably estimated, on estimated future cash flows of the
financial asset or group of financial assets.
Assets valued at amortised cost
If there is objective evidence that a loan or receivable recorded at
amortised cost has undergone impairment, the amount of the
impairment loss is measured as the difference between the
carrying amount and the present value of estimated future cash
flows (excluding future losses on receivables which have not yet
been incurred) discounted at the original effective interest rate
of the financial assets (meaning the effective interest rate
calculated at the date of initial recognition). The carrying
amount of the asset shall be reduced through the accumulated
amortisation. The amount of the impairment loss will be
charged to the income statement.
If, in a subsequent period, the amount of impairment decreases
and this decrease can be objectively attributed to an event
occurring after the recognition of said impairment, the value
previously reduced can be written up. Any subsequent write ups
in value are recognised in the income statement, in the amount
complying with the requirement that carrying amount of the
assets does not exceed the amortised costs at the write up date.
With regard to account receivables, an allocation for impairment
is made when there is objective evidence (such as, for example,
the probability of insolvency or significant financial difficulty of
the debtor) that the Group will not be able to recover all the
amounts owed at the original terms and conditions of the invoice.
The carrying amount of the receivable is reduced through the use
of specific provisions. Impaired receivables are written off when it
is established that they cannot be collected.
Available-for-sale financial assets
In the event of impairment of an available-for-sale financial
asset, an amount equal to the difference between the cost (net of
any repayment of principal and interest) and the current fair
value, net of any impairment losses previously recorded in the
income statement is transferred from shareholders’ equity to the
income statement. Write ups in value regarding equity
instruments classified as available for sale are not recorded in the
income statement. Any increase in fair value following
impairment is directly recognised in the other components of
the statement of comprehensive income. Write ups in value
regarding debt instruments are recorded in the income
statement if the increase in fair value of the instrument can be
objectively attributed to an event occurring after the loss was
recognised in the income statement.
In case of available-for-sale equity instruments, objective
evidence would include a significant or prolonged decrease in
fair value of the instrument below its cost.
In case of available-for-sale debt instruments, the write down is
measured based on the same criteria used for financial assets
recorded at amortised cost.
Financial liabilities
Financial liabilities are recorded as financial liabilities at fair
value recorded in the income statement (e.g. mortgages and
loans) or as derivates designated as hedging instruments,
whatever the case. The Group establishes the classification of its
financial liabilities upon initial recognition.
All financial liabilities are initially recognised at fair value, in
addition to directly attributable transaction costs in case of
mortgages and loans.
Group financial liabilities include current account overdrafts,
mortgages and loans, guarantees granted and derivative financial
instruments.
The measurement of financial liabilities depends on their
classification, as described below.
5 0 |5 1
Financial liabilities at fair value with changes booked to
the income statement
Financial liabilities at fair value with changes booked to the
income statement include liabilities held for trading and
financial liabilities initially recognised at fair value, with changes
booked to the income statement. Liabilities held for trading are
those liabilities acquired in order to be sold in the short term.
This category includes derivative financial instruments
subscribed by the Group and not designated as hedging
instruments in a hedging relationship pursuant to IAS 39.
Separated embedded derivatives are classified as financial
instruments held for trading, unless these are classified as
effective hedging instruments.
Gains or losses on liabilities held for trading are recorded in the
income statement.
Upon initial recognition, the Group did not designate any
financial liability as measured at fair value, with changes booked
to the income statement.
Medium/long-term borrowings and loans
Long-term borrowing and loans are initially recorded at fair
value, increased by the transaction costs. Subsequently, they are
valued at amortised cost, representing the initial value, net of
repayments of capital already made, adjusted (increased or
decreased) based on the amortisation of any differences between
the initial value and the value at maturity, using the effective
interest rate method. Any gains or losses are recorded in the
income statement when the liability is extinguished, as well as
through the amortisation process.
Financial guarantee contract liabilities
Financial guarantee contract liabilities issued by the Group are
contracts that require a payment in order to reimburse the owner
for a loss incurred following default of a debtor in making a
payment due at the date of expiry set out according to the
contract clauses of the debt instrument. Financial guarantee
contracts are initially recognised as a liability at fair value,
increased by the transactions costs that are directly attributable to
the issue of the guarantee. Afterwards, the liability is measured at
the greater of the best estimate of expense required in order to
meet the obligation at the balance sheet date and the amount that
was initially recorded, less any accumulated amortisation.
Derivative financial instruments and hedge accounting
The Group uses derivative financial instruments such as
forward foreign exchange contracts, interest rate swaps in order
to hedge its exchange rate risks and interest rate risks,
respectively. These derivative financial instruments are initially
recorded at fair value as at the date in which the derivative
contract is signed. They are subsequently measured at fair
value. Derivatives are accounted for as financial assets when the
fair value is positive and as financial liabilities when the fair
value is negative.
Any profit or loss resulting from changes in the fair value on
derivatives is directly recognised in the income statement, except
for the effective part of cash flow hedging, that is booked to the
shareholders’ equity.
As regards hedge accounting, hedges are classified as follows:
• fair value hedges, if they relate to the risk of changes in fair
value of the underlying asset or liability, or to an irrevocable
commitment that has not been recognised (except for the
currency risk);
• cash flow hedges, if they relate to the exposure to cash flow
variability that is attributable to a specific risk associated with
a recognised asset or liability or a planned transaction that is
highly probable or a currency risk linked to an unrecognised
irrevocable commitment;
• hedges of a net investment in a foreign company.
At the beginning of a hedging transaction, the Group formally
defines and provides evidence of the hedging relationship for
which hedge accounting shall apply, its objectives with regard
to risk management and its strategy. Documents include the
identification of the hedging instrument, the element or
transaction subject to hedging, the type of risk and the
methods according to which the company wants to assess
hedging effectiveness in offsetting the exposure to the changes
in fair value of the hedged element or in cash flows
attributable to the hedged risk. It is expected that these types
of hedging are highly effective in offsetting the exposure of the
hedged element to changes in the fair value or in cash flows
attributable to the risk hedged. The assessment needed in
order to check if this hedging is highly effective is carried out
on a non-stop basis during the financial years for which it has
been set.
The transactions that meet hedge accounting criteria are
accounted for as detailed below.
Fair value hedges
Hedge of a net investment in a foreign operation
The change in fair value of interest rate hedging derivatives is
booked to the income statement under borrowing costs. The
change in fair value of hedging instruments attributable to the
hedged element is recognised as part of the carrying amount of
the hedged element and is booked to the income statement
under borrowing costs.
With regard to fair value hedges for those elements accounted
for at amortised cost, the adjustment of the carrying amount is
amortised in the income statement in the period until the expiry
date. Amortisation can start as soon as there is an adjustment,
but not later than the date in which the element subject to
hedging is not adjusted anymore with regard to the changes in
its fair value attributable to the risk subject to hedging.
If the hedged element is cancelled, the fair value that has not
been amortised is immediately booked to the income statement.
When an unrecognised irrevocable commitment is classified as
an element subject to hedging, any subsequent cumulated
changes in fair value attributable to the hedged risk are
accounted for as assets or liabilities and the corresponding profit
or loss is booked to the income statement.
Hedges of a net investment in a foreign operation, including
hedges of a monetary item recognised as part of a net
investment, are accounted for similarly to cash flow hedges.
Profit or loss of the hedging instrument is recognised under
other profit for the effective part of the hedging, while the
remaining non-effective part is booked to the income statement.
Upon disposal of the foreign asset, the cumulated value of this
profit or loss is transferred to the income statement.
Cash flow hedging
The part of profit or loss on the hedged instrument related to
the effective hedging portion is recorded under other profit in
the cash flow hedge reserve, while the non-effective portion is
directly booked to the income statement under borrowing costs.
The amounts recognised under other profit are transferred to
the income statement in the period in which the transaction
subject to hedging impact the income statement (e.g. when the
financial expense/income is recorded or when an expected sale
occurs). When the element subject to hedging is the cost of a
non-financial asset or liability, the amounts recognised under
other profit are transferred at the initial carrying amount of the
asset or liability.
If it is believed that the expected transaction or the irrevocable
commitment will not occur again, profit or loss recognised in the
cash flow hedge reserve is transferred to the income statement. If
the hedging instrument expires or is sold, cancelled or exercised
without replacement, or if its hedging designation is revoked, the
amounts that have been previously recorded in the cash flow
hedge reserve remain booked until the expected transaction or
the irrevocable commitment impact the income statement.
Cancellation of financial assets and liabilities
Financial assets
Financial assets (or, where applicable, part of a financial asset or part
of a group of similar financial assets) are cancelled from the financial
statements when:
• the right to receive the cash flows from the assets ceases;
• the Group retains the right to receive the cash flows from the
asset, but has undertaken a contractual obligation to fully and
promptly pay said flows to a third party;
• the Group has transferred the right to receive the cash flows from
the asset and (a) has substantially transferred all the risks and
benefits of ownership of the financial asset, or (b) has not
transferred, nor substantially retained all the risks and benefits of
the asset, but has transferred control over the asset.
In the cases where the Group has transferred the rights to receive the
cash flows from the asset but has not transferred, nor substantially
retained all the risks and benefits of the asset, or has not lost control
over the asset, the asset is recognised in the Group’s financial
statements in the amount equal to the Group’s residual involvement
in said asset. The residual involvement, which takes the form of a
guarantee on the transferred assets, is measured at the lower of the
initial carrying amount of the asset and the maximum amount of
the consideration that the Group could be required to pay.
Financial liabilities are cancelled from the financial statements
when the obligation underlying the liability is extinguished,
cancelled or fulfilled.
If an existing financial liability is substituted by another from the
same lender, at substantially different conditions, or if the conditions
5 2 |5 3
of an existing liability are substantially changed, these substitutions
or changes are treated as an accounting cancellation of the original
liability and the recognition of a new liability, booking any
difference between the carrying amounts to the income statement.
Inventory
Inventory is recorded at the lower of the cost of acquisition or
production and the net realisable value, representing the amount
that the company expects to obtain from sale in the ordinary
course of business. The cost of inventory is determined by
applying the FIFO (First In First Out) method in order to
determine the average cost of products in progress. The value of
inventory obtained using this method is adjusted by the specific
“provision for obsolete goods”, to take into account the goods and
products which are expected to have a realisable value that is lower
than their cost. The write down is eliminated in the following
financial years, if the reasons for such write down no longer apply.
Costs for samples (promotional drug samples) is recorded in the
income statement at the time they are distributed.
Account receivables
Account receivables are recorded at their fair value, identified as
their nominal value, and subsequently written down for any
impairment through the allocation of specific provisions for
doubtful debts, adjusting the value of the asset. Account receivables
whose expiry does not fall within the normal commercial terms and
conditions, and which are not interest bearing, are discounted.
Cash and cash equivalents include cash in hand, including those
instruments which are available on demand or in a very short
term, with positive outcome or lacking fees for collection.
Non-current assets held for sale
Non-current assets and disposal groups classified as held for sale are
measured at the lower of the carrying amount and the fair value,
net of costs to sell. All gains or losses from the redetermination of a
non-current asset (or disposal group) classified as held for sale that
does not comply with the definition of discontinued operation are
included in the profit (loss) of continuing operations.
Non-current assets are classified as held for sale if their value will
be recovered with a sale transaction rather than through their
continued use. This condition is met only if the sale is highly
probable and the asset held for disposal is available for
immediate sale in its current state. The Management must have
undertaken to sell the asset and the transaction should be
completed within one year as from the date of classification.
In the consolidated income statement, the profit (loss) from
assets held for sale is represented separately from the profit (loss)
of continuing operations, under the item profit after taxes, also
when the Group maintains a minority interest in the subsidiary
after the sale. The profit or loss net of taxes are shown separately
in the income statement.
Defined benefit plans
Employee severance indemnity reflects the amount accrued for this
purpose in favour of employees, in compliance with the current
regulations in force and collective labour agreements. Liabilities
relating to defined benefit plans, net of any assets at the service of the
plan, are determined based on actuarial assumptions, and recognised
on an accruals basis in line with the service required to obtain the
benefits. The liabilities are valued by independent actuaries.
The gains and losses deriving from changes in actuarial assumptions
are recognised in the income statement, given that the Sigma-Tau
Group opted not to apply the corridor method in accounting for
employee severance indemnity, as permitted by IAS 19.
Starting from 1 January 2007, the nature of Employee Severance
Indemnity was changed from a “defined benefit plan” to a “defined
contribution plan” for companies with more than 50 employees.
According to the IAS, for these companies, only the employee
severance indemnity accrued up to 31 December 2006 remains
classified as a defined-benefit plan. Thus, the accounting treatment
for the portions accruing from 1 January 2007 is similar to that
applied for other types of contributions, whether allocation is
made to supplementary pension funds or the Treasury Fund of the
Italian National Social Security Institution (INPS).
EPIDS
The Sigma-Tau Group has also set up a supplementary pension
fund for executives of the Group: EPIDS (Sigma-Tau
Supplementary Pension Fund for Executives). The Fund is
structured in two parts: one is a defined benefit segment, while
the other is financed by defined contributions.
As regards the defined benefit portion, the Group, with the aid
of independent actuaries, has determined:
• the current value of the liabilities relating to the portion of
benefits accrued for executives in service, and to be paid
subsequent to termination of their employment;
• the fair value of the plan assets;
• the amount of actuarial gains or losses.
The value of plan assets was deducted from the related liabilities
for pensions, showing the net value between assets and liabilities
of the company.
Provision for risks and charges
The provision for risks and charges regards costs and charges of a
determined nature, which are certain or probable and whose
amount or date of payment cannot be determined at the periodend date. Provisions are recognized only upon the existence of a
present obligation (legal or constructive) as a result of past events
that is expected to result in a future outflow of economic resources
to fulfil said obligation, and when a reliable estimate of the
amount of the obligation can be made.
Provisions are recorded in the amount representing the best estimate
of the amount that the company would have to pay to extinguish
the obligation or to transfer it to third parties at the balance sheet
date. When there is a significant discounting effect, the provisions
are determined by discounting the expected cash flows at a pre-tax
discount rate that reflects the current market value of the time value
of money. When discounting is performed, the increase in the
provision due to the passing of time is recorded as borrowing costs.
Account payables and other payables
Account payables and other payables are initially recognised at
cost, meaning the fair value of the consideration paid during the
transaction. Short-term payables are measured at their original
value. The fair value of long-term payables is established by
discounting the future cash flows: the discount is recorded as a
financial expense over the duration of the payable, until maturity.
that the economic benefits will be achieved by the Group and
the related amount can be reliably determined. Revenues are
valued at the fair value of consideration received, excluding
discounts, allowances and other taxes on sales. More
specifically, the Group has assessed its sales contracts in order
to establish if it is operating as a principal or as an agent.
The Group found to be acting as a principal with regard to all
sales contracts.
The following specific criteria for revenue recognition must be
complied with before booking to the income statement:
Sale of assets
Revenues are recognised when the company transfers all the
significant risks and benefits connected with ownership of the
asset to the buyer, generally upon delivery of the goods.
Provision of services
Revenues deriving from the provision of services are recorded in
the income statement at the time the service is provided.
Interest
Interest is recorded as financial income when interest income for
the period is ascertained, by using the effective interest rate,
which is the rate that specifically discounts expected cash flows
based on the expected life of the financial instrument, at the net
carrying amount of the financial asset.
Dividends
Revenues are recognised when the right of the Group to receive
the payment of dividends arises.
Lease income
Lease rentals deriving from investment property are accounted
for on a straight-line basis over the duration of the lease
agreements in force at the balance sheet date.
Grants
Revenues
Revenues are recognised in the amount in which it is probable
Government grants are recognised when there is reasonable
certainty that said grants will be received, and all the conditions
5 4 |5 5
of said grants are met. When operating grants are correlated to
cost components, they are recognised as a decrease of the costs
to which they refer, so as to be proportional to the costs they
intend to offset. If a grant is related to an asset, the asset and the
grant are recognised according to their nominal values and the
recognition in the income statement is made progressively
during the expected useful life of the reference asset and on a
straight-line basis.
If the Group receives a non-monetary grant, the asset and the
grant are recognised at their nominal value and booked to the
income statement during the expected useful life of the
reference asset and on a straight-line basis.
• when deferred tax liabilities derive from the initial
recognition of goodwill or of assets and liabilities in a
transaction that is not a business combination and which, at
the time of the transaction, does not result in effects on the
profit for the year calculated for the purposes of the financial
statements, nor on the profit or loss calculated for tax
purposes;
• with reference to taxable temporary differences associated
with investments in subsidiaries, associated companies and
joint ventures, when the reversal of the temporary differences
can be controlled and it is likely that such reversal will not
take place in the near future.
Borrowing costs
Deferred tax assets are recorded in relation to all deductible
temporary differences to the extent that it is likely that future
taxable income will be available against which the deductible
temporary differences can be applied, with the exception of the
following cases:
• the deferred tax assets associated with the deductible
temporary differences derive from the initial recognition of
an asset or liability in a transaction that is not a business
combination and which, at the time of the transaction, does
not result in effects on the profit for the year calculated for
the purposes of the financial statements, nor on the loss
calculated for tax purposes;
• with reference to taxable temporary differences associated
with companies and joint ventures, deferred tax assets are
recorded only to the extent that it is likely that the deductible
temporary differences will be reversed in the future and that
future taxable income will be available against which the
temporary differences can be used.
The value of deferred tax assets to be reported in the financial
statements is reviewed at each balance sheet date and reduced in
the amount in which it is no longer likely that sufficient income
will be available in the future in order to permit all or part of
said credit to be used. Deferred tax assets not recognised are
reviewed on a yearly basis at the balance sheet date, and are
recognised to the extent that it becomes probable that the
income for tax purposes will be sufficient to permit said
deferred tax assets to be recovered.
Deferred tax assets and liabilities are measured based on the tax
rates that are expected to apply during the financial year in
which said assets will be realised or said liabilities will be
extinguished, considering the tax rates in force and those already
issued or substantially issued as at the balance sheet date.
Borrowing costs are recognised as a cost for the year in which
they are incurred.
Costs for the purchase of assets and the provision
of services
These are recognised in the income statement on an accruals
basis, and consist of decreases in economic benefits which take
the form of outgoing cash flows, impairment of assets or the
arisal of liabilities.
Current and deferred taxes
Current tax assets and liabilities for the current and previous
years are valued at the amount expected to recover from or pay
to the tax authorities. The tax rates and regulations used to
calculate the amount of taxes are those issued or substantially
issued at the balance sheet date.
Current taxes related to elements recognised outside the income
statement are also booked outside the income statement, i.e. in
the shareholders’ equity or in the statement of comprehensive
income, in compliance with the recognition of the element to
which they refer.
Deferred tax assets and liabilities were calculated using the
liability method, on the temporary differences in existence at
the balance sheet date between the tax values used as reference
for assets and liabilities and the values reported in the financial
statements.
Deferred tax liabilities are recorded in relation to all taxable
temporary differences, with the exception of:
Deferred taxes related to elements recognised outside the
income statement are also booked outside the income
statement, i.e. in the shareholders’ equity or in the statement of
comprehensive income, in compliance with the recognition of
the element to which they refer.
Deferred tax assets and liabilities are offset, if there is a legal
entitlement to offset current tax assets and current tax liabilities,
and deferred income taxes refer to the same taxable entity and
the same tax authority.
Value Added Tax
Costs, revenues and assets are recorded net of value added taxes,
except in the following cases:
• this tax on the purchase of goods or services is nondeductible. In this case, it is recognised as part of the
purchase cost of the asset or part of the cost item booked to
the income statement;
• it refers to account receivables and payables shown including
the tax value.
The net amount of indirect taxes on sales that can be recovered
from, or paid to tax authorities is included in the financial
statements under receivables or payables, according to the
balance (positive or negative).
Earnings per share
Basic earnings per share is calculated by dividing the net profit
for the year attributable to ordinary shareholders of the Group
by the average weighted number of ordinary shares outstanding
during the year.
In order to calculate diluted earnings per share, the average
weighted number of shares outstanding is modified by assuming
that all potential shares having a diluting effect will be converted.
5. SEGMENT REPORTING
The reporting by operating segment and geographical area is
drawn up according to IFRS 8.
The primary segment reporting comprises operating segments, while
the secondary segment comprises reporting by geographical area.
The only operating segment of the Sigma-Tau Group is the
pharmaceutical segment. As a result, the reporting by
operating segment coincides with the Group’s reporting
presented in the Consolidated Financial Statements.
The following table analyses net revenues by geographical area:
Net revenues from sales: Euro (Mln)
2009
2008
487.7
482.9
Europe
79.2
86.0
North America
23.8
23.2
Italy
Other
Total
25.6
21.3
616.3
613.4
The information on revenues indicated above is based on the
geographical location of the customer.
The Sigma-Tau Group is primarily positioned in the Italian market
(79.1% of total revenues), but it also operates in all the major
international markets, both directly through its own branches and
through distributors. The table below shows the net consolidated
revenues for the year 2009, highlighting the main geographical
areas where the Group is present through its associated companies:
Net revenues from sales:
Euro (Mln)
2009
2008
Change
%
487.7
482.9
4.8
1%
France
28.1
30.8
(2.7)
-9%
Spain
18.5
19.0
(0.5)
-3%
Benelux
8.0
8.3
(0.3)
-4%
Switzerland
7.6
7.5
0.1
1%
Germany/Austria
5.6
8.4
(2.8)
-33%
Portugal
2.3
2.8
(0.5)
-18%
United Kingdom
1.7
1.8
(0.1)
-6%
Other
7.4
7.4
0.0
0%
Europe
79.2
86.0
(6.8)
-8%
USA
21.2
20.7
0.5
2%
2.6
2.5
0.1
6%
23.8
23.2
0.6
3%
Africa
3.2
4.0
(0.8)
-20%
South America
2.8
2.4
0.4
17%
Central America
0.6
0.4
0.2
50%
Oceania
0.2
0.2
0.0
0%
China/Hong Kong
6.9
4.1
2.8
68%
South Korea
5.6
4.7
0.9
19%
Other
6.3
5.5
0.8
15%
Other
25.6
21.3
4.3
20%
616.3
613.4
2.9
0%
Italy
Canada
North America
Total
For further information and comments, see the Management Report.
5 6 |5 7
The following table analyses non-current assets by geographical area:
2009
Euro (Mln)
Italy
Europe
North America
Other
Total
117.62
7.16
1.54
0.76
127.08
2.55
-
-
-
2.55
41.87
114.94
0.46
1.56
158.83
23.39
62.90
-
0.49
86.78
-
-
-
-
-
8.30
20.65
7.45
-
36.40
-
-
15.65
-
15.65
7.84
0.32
1.08
0.03
9.27
201.57
205.97
26.18
2.84
436.56
Italy
Europe
North America
Other
Total
119.90
7.58
1.93
3.95
133.35
2.65
-
-
-
2.65
42.75
121.68
0.95
0.74
166.11
23.40
62.90
-
0.50
86.80
-
-
-
-
-
7.27
1.30
1.09
-
9.66
0.10
-
15.50
-
15.60
8.17
0.23
0.64
0.07
9.11
204.24
193.69
20.11
5.24
423.29
NON-CURRENT ASSETS
Investment property
2008
NON-CURRENT ASSETS
Investment property
The information indicated above are based on the geographical locations of the companies of the Group.
6. OPERATING REVENUES
7. OPERATING EXPENSES
In 2009 operating revenues amounted to Euro 635,474 (Euro
639,337 in 2008) and can be broken down as follows:
Operating expenses amounted to Euro 550,598 (Euro 561,973
in 2008) and can be broken down as follows:
Operating revenues
(Euro/000)
Operating expenses
(Euro/000)
Service revenues
and services
2009
2008 2009/2008 Change
%
Purchases
209,701
8,390
(6,298)
3,715
(10,013)
211,793
213,416
(1,623)
9,610
9,506
104
Consulting
43,383
42,970
413
Marketing
and promotional activities
31,350
30,939
411
Directors’ and Statutory
Auditors’ fees
1,208
1,208
-
(6,725) -25.9%
Expense reimbursement
9,304
9,824
(520)
(3,863)
Other
33,998
30,302
3,696
Use of third-party assets
27,126
25,558
1,586
156,008
150,334
5,674
116,519
116,588
(69)
Social security costs
33,390
34,199
(809)
609,711
3,979
2,583
3,700
(1,117)
616,273
613,411
2,862
1,763
3,336
(1,573)
Royalties received
565
383
182
Gains on disposals
258
533
(275)
16,615
21,674
(5,059)
Other revenues
19,201
25,926
Total operating
revenues
635,474
639,337
Other
2008 2009/2008 Change
%
218,091
613,690
0.5%
Purchase costs
Utilities
Operating grants
2009
-0.6%
This item decreased by a total of Euro 3,863 (-0.6%).
Services
Net revenues from sales of products and provisions of services
are mainly in line with the previous year and increased by Euro
2,862 (+0.5% compared to 2008).
Wages and salaries
Employee severance
indemnity
5,384
9,258
(3,874)
Operating grants totalled Euro 1,763 (Euro 3,336 in 2008) and
result from total expenses recorded in 2009 for research projects
financed in Sigma-Tau SpA and Tecnogen SpA.
Other expenses
5,671
13,271
(7,600)
160,964
173,316
(12,352)
Entertainment
7,153
7,836
(683)
Indirect taxes
4,454
5,152
(698)
Membership fees
2,392
2,275
117
Other
7,833
9,644
(1,810)
21,832
24,907
550,598
561,973
Royalty revenues, amounting to Euro 565 (Euro 383 in 2008)
increased by Euro 182. This increase is mainly due to SigmaTau Private India Ltd for a licence product.
Other revenues decreased by Euro 5,059 mainly in Sigma-Tau
SpA due to the recognition of Euro 5,600 in the 2008 financial
statements related to the tax credit on 2007 research activities.
Personnel expenses
Other operating expenses
Total operating
expenses
-0.8%
3.8%
-7.1%
(3,075) -12.3%
(11,375)
-2.0%
5 8 |5 9
Purchase costs, equal to Euro 211,793 (Euro 213,416 in 2008)
are mainly in line with the previous year (-0.8%) and break
down as follows:
Purchase costs (Euro/000)
2009
2008
206,747
197,787
Non-inventory purchases
11,344
11,914
(6,298)
3,715
211,793
213,416
Inventory purchases
Purchase costs
Higher inventory purchases are mainly linked to the increase in
the procurement of raw materials and semi-finished products
previous year). Marketing and promotional activities include
expenses for the organisation of scientific congresses,
advertising, promotion, market research and expenses for agents
and pharmaceutical sales representatives (+Euro 411 compared
to the previous year).
Personnel costs amounting to Euro 160,964, decreased by
7.1% compared to 2008, due do the full effect of voluntary
redundancies in the previous year in some Group Italian
companies (Euro 8,094 in 2008). The table below shows the
key figures regarding Group personnel:
Employees
2009
2008
2,289
2,490
Executives
112.9
118.3
Middle managers
504.5
536.7
1,446.6
1,492.4
226.2
348.3
2,290.2
2,495.7
Employees
2008
2007
Change in personnel costs
-7.1%
3.9%
Impact of personnel costs on net sales
26.1%
28.3%
Net sales per capita (Euro/000)
269.2
245.8
Employees at year end
Average number of employees by category:
The increase in closing inventory is mainly due to the purchase
of finished products in the last months of the year.
The changes in closing inventory are shown below:
Inventory (Euro/000)
2009
2008
2009/2008
Raw materials
23,176
20,439
2,737
- Provision for obsolete goods
(1,779)
(1,291)
(488)
9,655
9,900
(245)
(183)
(302)
119
Finished products
47,826
46,914
912
(2,469)
(3,680)
1,211
76,226
71,980
4,246
100
(1,952)
2,052
Semi-finished products
Purchase costs
Change from inventory of
Assets held for sale
6,298
Service costs, amounting to Euro 156,008, increased by Euro
5,674 (+3.8% compared to 2008) mainly due to higher
expenses incurred for outside processing (Euro 2,000) and
royalties (Euro 1,584) for products under concession and to the
increase in other sundry services (Euro 3,696).
The item other sundry services includes outside processing,
which increased by Euro 2,000 compared to the previous year.
The item “expense reimbursement” decreased by Euro 520 and
includes the costs incurred by employees for travels (km
travelled, board and lodging).
Consulting includes legal and notary, administrative, industrial,
advertising and financial services (+Euro 413 compared to the
Office staff
Manual labourers
Total
Work productivity:
Other operating expenses, amounting to Euro 21,833,
showed an overall decrease of Euro 3,074, mainly as a result
of lower entertainment expenses and other operating
expenses. Other operating expenses also include expenses
for donations, gifts, publications, and participation
in tradeshows.
Indirect taxes include local property tax (ICI) and nondeductible VAT on gifts, as well as other indirect taxes.
8. DEPRECIATION, AMORTISATION, WRITE
DOWNS AND ACCRUALS
This item, amounting to Euro 40,691 (Euro 37,170 in 2008)
can be broken down as follows:
Depreciation, amortisation and accruals
(Euro/000)
2009
2008
Amortisation of intangible assets
16,177
16,069
Depreciation of property,
plant and equipment
12,724
13,520
99
99
29,000
29,688
Write downs of fixed assets
2,447
3,718
Write downs of receivables
874
101
Write downs of assets held for sale
2,532
-
Risk provision
5,838
3,663
11,691
7,483
40,691
37,170
Depreciation of investment property
Total
Amortisation and depreciation of fixed assets are calculated
based on rates that reflect the residual possibility of use of
said assets.
Write downs of fixed assets refer to Sigma-Tau SpA (Euro
1,669) mainly due to the write down of the Leuprolide
product licence, to Sigma-Tau Generics Srl (Euro 664) due
to impairment of trademarks and licences and to Tecnogen
SpA (Euro 114) due to impairment of equipment.
Risk provision refers to accruals for returns on sales for Euro
3,764 (Euro 2,468 in 2008) and legal disputes for Euro
2,074 (Euro 1,195 in 2008).
Write downs of assets held for sale (Euro 2,532) refer to the
lower value represented by the fair value of assets compared
to its carrying amount net of costs to sell (Note 13).
(5,789)
(13,504)
Discounts for anticipated collections
(1,457)
(1,676)
(995)
(617)
(86)
-
Other financial expense
(1,972)
(2,015)
Exchange rate losses
(1,538)
(3,920)
(11,837)
(21,732)
(6,990)
(13,428)
Fees and bank charges
Stock trading losses
Total net
Under financial income, interest income on deposits decreased
by Euro 2,124 compared to the previous year, following the
reduction in the Group’s available liquidity.
Under financial expense, interest expenses on short- and
medium/long-term borrowings strongly decreased by Euro
7,715, due to the decrease in interest rates and the different
breakdown of borrowing, that in 2009 was characterised by a
higher component of international cash pooling (in Sigma-Tau
Sarl and Defiante Farmaceutica SA).
Under other financial expense, reference is made to the expense
resulting from hedging derivative contracts against exchange rate
risk and interest rate risk for Euro 374 (Note 40), of which Euro
64 as uneffective share of hedging and Euro 310 as financial
expense related to transactions.
10. WRITE UPS (WRITE DOWNS)
This item has a negative balance of Euro 1,339 (-Euro 20,324
in 2008) and breaks down as follows:
Write ups (Write downs) (Euro/000)
9. FINANCIAL INCOME (EXPENSE)
Write ups
Financial management shows a net negative balance of Euro
6,990 (Euro 13,428 in 2008). This item decreased by Euro
6,438 and breaks down as follows:
Financial income (expense) (Euro/000)
Interest expenses
(Write downs)
Total net
2009
2008
Dividends
-
9
Income on current securities
-
27
Interest income
3,190
5,314
Exchange rate gains
1,657
2,954
4,847
8,304
2009
2008
1
3
(1,340)
(20,327)
(1,339)
(20,324)
Write downs were applied to non-current financial assets held
by Sigma-Tau Pharmaceuticals Inc. Please refer to Note 21 for a
detailed description of this item.
11. STATEMENT OF COMPREHENSIVE INCOME
The statement of comprehensive income breaks down as
follows:
6 0 |6 1
Translation differences
of foreign financial statements
2009
2008
(927)
1,445
(Euro/000)
2009
Net gains from cash flow hedge
2,591
Income taxes
(700)
Cash flow hedging instruments:
Net gains from available-for-sale equity investments
Profit/(loss) incurred during the year
Income taxes
(1,061)
Total amounts
9,821
Forward foreign exchange purchase contracts
Interest rate risk hedging contracts
2,023
7,230
Total income taxes
(132)
(1,761)
1,891
The reconciliation of effective taxes and the theoretical taxes
resulting from the application of the tax rate in force as at 31
December 2009 and 31 December 2008 to the profit before tax
is as follows:
Available-for-sale equity investments:
6,169
6,169
(Euro/000)
Other available-for-sale financial assets:
Reclassification to the income statement
842
(2,244)
1,402
2,244
(2,244)
9,378
(799)
2009
2008
Profit (loss) before tax from
continuing operations
35,856
6,442
Profit (loss) before tax from
discontinued operations
(1,850)
-
Profit (loss) before tax
34,006
6,442
9,352
1,772
-
-
555
3,545
(3,368)
(9,087)
5,789
5,538
12,328
3,271
Current tax rate of 27.5% (2008: 27.5%)
Net gains from statement
of comprehensive income
Adjustments to taxes from previous periods
Permanent tax changes
Effect of foreign tax rates
12. TAXES
Regional Business Tax (IRAP)
Effective tax rate of 36.3% (2008: 50.8%)
Taxes amounted to Euro 12,328 (Euro 3,271 in 2008). They
include income taxes for all consolidated companies and the
regional business tax applied to companies domiciled in Italy
(IRAP).
Taxes (Euro/000)
Income taxes
Regional Business Tax (IRAP)
Adjustments to current taxes for previous years
Total current taxes
13. DISCONTINUED OPERATIONS
2009
2008
10,375
8,775
5,789
5,538
-
-
16,164
14,313
(3,836)
(11,042)
Deferred taxes:
Relating to recognition and
(Euro/000)
reversal of temporary differences
Total income taxes
During the year, the Group decided to carry out the disposal of
Sigma-Tau Sudan Ltd., since it was considered as non-strategic.
Therefore, a negotiation was started with the minority shareholder
that wanted to purchase the whole share owned by the Group
(90%). The disposal is expected to be carried out in 2010 and final
negotiations were under way as at 31 December 2009.
The profit/(loss) of Sigma-Tau Sudan Ltd for the year is broken
down below:
12,328
3,271
Operating revenues
2,743
Operating expenses
(4,279)
The following deferred taxes have been directly booked to the
consolidated shareholders’ equity:
2009
(314)
(1,850)
Assets and liabilities of Sigma-Tau Sudan Ltd are broken down
below:
AfS assets (Euro/000)
2009
Fixed assets
466
Inventories
1,217
Account receivables
1,089
520
Other assets
282
Total
AfS liabilities
3,574
2009
Borrowings
5,448
Account payables
1,101
Other liabilities
Total
432
6,981
The cash flows related to discontinued operations are detailed
below:
2009
Operating flows
Change in working capital
(1,269)
1,349
Investment flows
(98)
Cash flows
424
(Outgoing)/ingoing net cash flows
407
show any differences compared to basic earnings per share, as
there are no convertible bonds or other financial instruments
with dilutive effects.
The table below sets out the income and information on shares
used for calculating the basic earnings per share:
2009
2008
Net profit attributable to shareholders
(in thousands of Euro)
21,783
3,315
Average weighted number of ordinary
shares for the purpose of basic
and diluted earnings per share
473,684
473,684
Basic earnings per share (in Euro)
45.99
7.00
Diluted earnings per share (in Euro)
45.99
7.00
Earnings per share from continuing operations are detailed
below:
2009
2008
Net profit attributable to shareholders
(in thousands of Euro)
23,448
3,315
Average weighted number of ordinary
shares for the purpose of basic
and diluted earnings per share
473,684
473,684
Basic earnings per share (in Euro)
49.50
7.00
Diluted earnings per share (in Euro)
49.50
7.00
Earnings per share in Euro
Basic, from discontinued operations
(3.91)
Diluted, from discontinued operations
(3.91)
During the year, Euro 2,532 were booked to the income
statement as write down of discontinued operations following
their measurement at fair value.
14. EARNINGS PER SHARE
Basic earnings per share is calculated by dividing the net profit
for the year attributable to ordinary shareholders of the Parent
Company by the average weighted number of ordinary shares
outstanding during the year. Diluted earnings per share does not
6 2 |6 3
15. PROPERTY, PLANT AND EQUIPMENT
The changes in individual categories of property, plant and equipment during 2008 and 2009 were as follows:
(Euro/000)
Land and buildings Plant and machinery
Equipment
Other assets
Work in progress
Total
94,055
172,184
40,149
41,502
3,354
351,244
1,590
4,236
3,150
1,660
5,475
16,111
Disposals
(1)
(587)
(1,826)
(1,407)
(166)
(3,987)
Exchange rate differences
85
16
8
225
-
334
561
2,015
282
(29)
(1,874)
955
96,290
177,864
41,763
41,951
6,789
364,657
Increases
869
3,231
1,712
1,168
4,039
11,019
Disposals
(3)
(137)
(160)
(724)
(944)
(1,968)
(195)
(60)
(37)
(106)
-
(398)
Discontinued operations
(2,139)
(557)
(751)
(629)
-
(4,076)
Cost:
As at 1 January 2008
Increases
Other changes
As at 31 December 2008
Other changes
(12)
4,228
492
(26)
(4,777)
(95)
94,809
184,569
43,019
41,634
5,107
369,138
36,915
114,106
33,786
34,706
-
219,513
1,800
7,213
2,320
2,188
-
13,521
-
(382)
(654)
(1,235)
-
(2,271)
24
12
7
161
-
204
129
94
53
62
-
338
38,868
121,043
35,512
35,882
-
231,305
1,742
6,808
2,311
1,863
-
12,724
(1)
(101)
(159)
(703)
-
(964)
(27)
(23)
(66)
-
(116)
Discontinued operations
(50)
(76)
(50)
(88)
-
(265)
Other changes
(71)
(186)
(70)
(299)
-
(626)
40,461
127,465
37,545
36,589
-
242,060
54,348
57,103
5,475
5,045
5,107
127,078
57,422
56,821
6,251
6,069
6,789
133,352
57,140
58,078
6,363
6,796
3,354
131,731
Depreciation:
Accumulated amortisation for the year
Disposals
Other changes
Accumulated depreciation for the year
Disposals
Net carrying amount:
Comments on the individual items are set forth below:
- Land and buildings: the cost of this item increased by Euro
869 (Euro 1,590 in 2008), mainly relating to Tecnogen SpA
for Euro 434, Sigma-Tau SpA for Euro 255 and Biosint SpA
for Euro 80 for renovations, modifications and expenses for
improvements to buildings;
- Plant and machinery: the cost of this item increased by Euro
3,231 (Euro 4,236 in 2008), mainly relating to Sigma-Tau
SpA for Euro 1,692, to Tecnogen SpA for Euro 575, to
Sigma-Tau Espana SA for Euro 454, to Biosint SpA for Euro
350, to Prassis SpA for Euro 28, for the purchase of new
machinery and modifications to pre-existing machinery;
- Equipment: the cost of this item increased by Euro 1,712
(Euro 3,150 in 2008), mainly relating to Sigma-Tau SpA for
Euro 1,472, to Tecnogen SpA for Euro 120 and to Prassis
SpA for Euro 35, for the purchase of new equipment to
substitute equipment considered unusable and obsolete;
- Other assets: this category, which includes electronic office
machines, furniture and furnishings and automobiles,
increased by Euro 1,168 (Euro 1,660 in 2008). The
increase was mainly attributable to Sigma-Tau SpA for Euro
453, to Tecnogen SpA for Euro 356, to Sigma-Tau Pharma
AG for Euro 42, to Sigma-Tau Espana SA for Euro 49 and
to Sigma-Tau Sarl for Euro 32, relating to investments in
new electronic machines required for the development of
IT projects and the purchase of new automobiles.
The main disposals were as follows:
- Plant and machinery: the cost of this item decreased by a
total of Euro 137 (Euro 587 in 2008) in Sigma-Tau SpA,
following the disposal of machinery which was no longer
useable;
- Equipment: the cost of this item decreased by a total of
Euro 160 (Euro 1,826 in 2008). The decrease mainly related
to Sigma-Tau SpA for Euro 120 and Prassis SpA for
Euro 34, due to the destruction of commercial and
laboratory equipment;
- Other assets: the cost of this item decreased by a total of
Euro 724 (Euro 1,407 in 2008). The decrease mainly
related to Biosint SpA for Euro 212, Sigma-Tau
Healthscience Llc for Euro 192, Sigma-Tau SpA for
Euro 105, Sigma-Tau Sarl for Euro 71, Prassis SpA
for Euro 56, Sigma-Tau Espana SA for Euro 14, resulting
from the disposal of obsolete ordinary and electronic
office machinery.
16. INVESTMENT PROPERTY
Investment property regards Avantgarde SpA and consists in one
building and the adjacent land rented to the company DHL.
The changes in this item were as follows:
Investment property (Euro/000)
2009
2008
Opening balance as at 1 January
2,651
2,751
-
-
(99)
(100)
2,552
2,651
Subsequent investments
Write downs for adjustment
to fair value depreciation
Closing balance as at 31 December
The fair value of the building, according to an expert appraisal,
amounts to approximately Euro 6,000.
The said building is systematically depreciated with a rate of 2%
and has a residual useful life of 26 years.
The Group has no financial leases in effect, nor assets acquired
under rental agreements.
6 4 |6 5
17. INTANGIBLE ASSETS WITH DEFINED USEFUL LIFE
This item, amounting to Euro 158,834 (Euro 166,611 in 2008), showed a net decrease of Euro 7,277. The changes in this item were as follows:
(Euro/000)
Patents and know-how
Trademarks, franchise
and licences
Development
costs
Other intangible
assets
Work in progress
Total
50,631
232,476
-
3,307
9,562
295,976
443
4,264
-
1,125
13,452
19,284
-
-
-
(858)
(2,860)
(3,718)
(16)
-
-
-
(105)
(121)
40
334
-
66
-
440
-
-
-
484
-
484
1,554
(1,372)
-
(556)
(323)
(697)
52,652
235,702
-
3,568
19,726
311,648
1,427
1,031
-
1,889
7,145
11,492
Write downs
-
(385)
-
-
(1,947)
(2,332)
Disposals
-
(1,126)
-
(208)
(186)
(1,502)
2
(96)
-
(57)
-
(151)
Cost:
as at 1 January 2008
Increases
Write downs
Disposals
Change in perimeter
Other changes
as at 31 December 2008
Increases
Change in perimeter
Other changes
-
(15)
(15)
579
3,919
379
-
(4,996)
(119)
54,674
239,045
379
5,177
19,759
319,020
47,155
79,717
-
2,833
-
129,705
1,901
14,197
-
125
-
16,223
(11)
-
-
(1)
-
(12)
34
274
-
27
-
335
-
-
-
18
-
18
731
(897)
-
(566)
-
(732)
49,810
93,291
-
2,436
-
145,537
1,613
14,339
76
149
-
16,177
(30)
(863)
-
(207)
-
(1,100)
2
(79)
-
(2)
-
(79)
Change in perimeter
-
-
-
-
-
-
Other changes
-
(332)
-
(17)
-
(349)
51,395
106,356
76
2,359
-
160,186
3,265
132,689
303
2,818
19,759
158,834
2,842
142,411
-
1,132
19,726
166,111
3,476
152,759
-
474
9,562
166,271
Amortisation:
Disposals
Change in perimeter
Other changes
Disposals
Net carrying amount:
The following acquisitions were performed during 2009:
- Patents and know-how: the cost of this item increased by
Euro 1,427 (Euro 443 in 2008), mainly relating to SigmaTau SpA for Euro 1,122, Sigma-Tau GMBH for Euro 77,
Prassis SpA for Euro 73, Biosint SpA for Euro 64, SigmaTau Sarl for Euro 47, for the purchase of application
software;
- Trademarks, franchise and licences: the cost of this item
increased by Euro 1,031 (Euro 4,264 in 2008), mainly
relating to Sigma-Tau SpA (for Euro 810) for the renewal
and extension of several trademarks;
- Other intangible assets: the cost increased by Euro 1,889
(Euro 1,125 in 2008), mainly attributable to Sigma-Tau Sarl
for Euro 368 and to Lee’s Pharmaceuticals Holdings Ltd
for Euro 920;
- Work in progress: the cost increased by Euro 7,145 (Euro
13,452 in 2008), mainly attributable to Sigma-Tau SpA
for Euro 7,123, relating to product licences not yet used,
among which:
- “Pelzont” for Euro 6,000;
- “TD Glucose” for Euro 361;
- “Leuprolide Acetate” for Euro 306;
- “Business Blueprint software licence” for Euro 180.
In addition to the above, reference is made to the purchase by
Defiante Farmaceutica SA of a licence, not yet used, relating to
“Pufa” for Euro 600.
The write down equal to Euro 1,947 refers to Sigma-Tau SpA
and relates to “Leuprolide”.
During the year, no significant disposals or disinvestments
were performed.
18. GOODWILL
Goodwill as at 31 December 2009 amounted to Euro 86,780
thousand (Euro 86,799 thousand in 2008).
This item almost entirely refers to the differences, upon initial
consolidation, between the value of the equity investments and
the consolidated shareholders’ equity, which were generated
following the ongoing reorganisation which began in 2006.
The details are provided as follows:
Company
Balance as at
31/12/2009
Balance as at
31/12/2008
Biofutura Pharma SpA
23,393
23,393
Sigma-Tau Europe SpA
35,577
35,577
Sigma-Tau America SpA
20,496
20,496
6,824
6,824
489
494
1
15
86,780
86,799
Lynapharm SA
Lee’s Pharmaceuticals Holdings Ltd
Other minor companies
Total goodwill
It should be noted that the Group has identified a single cash
generating unit, which is the “Pharmaceutical” CGU,
considering that as a whole, the cash flows deriving from the
Group’s operations concern and primarily relate to the
Pharmaceutical as a whole.
Thus, goodwill mainly relates to:
1. Euro 23,393 thousand: Sigma-Tau Finanziaria’s purchase of
the remaining 35% of Biofutura Pharma SpA in May 2006,
as it already directly held 65%. For the purchase of minority
holdings in Biofutura, Sigma-Tau Finanziaria paid Euro
27,302 thousand, realising gains of Euro 23,993 thousand
(amortised for Euro 600 thousand as at 1 January 2007);
2. Euro 35,577 thousand and Euro 20,496 thousand: the 2006
acquisitions of the remaining percentages of shareholding
held through Sigma-Tau International SA in Sigma-Tau
Europe SA and in Sigma-Tau America SA, respectively,
according to the shareholding restructuring. The amounts
paid by the company to purchase the minority shares
belonging to third parties were determined by experts outside
the company, who determined the value of the individual
companies acquired based on their estimated expected
profitability, also considering the indications provided by the
market for companies operating in the same sector;
3. the acquisition of the remaining 50% of Lynapharm SA in
2008. The goodwill arises as the difference between the price
paid by Sigma-Tau International SA, totalling about Euro
8.3 million, and the value of the net assets acquired,
amounting to a total of Euro 1.5 million. The operation
consisted of the purchase of minority interests, as, despite the
fact that the Group held 50% of the subsidiary during the
previous year, as a result of agreements between the parties, it
already possessed de facto control. The capital gain from the
above operation was accounted for as goodwill according to
the parent entity extension method;
6 6 |6 7
4. Euro 386 thousand: from the consolidation differences
arising upon acquisition of the investment in Lee’s
Pharmaceuticals Holdings Ltd in 2005, recorded under
investments in associates until last year. Now this item has
been reclassified under goodwill, as a result of shareholders’
agreements which determined joint control over the entity,
and Euro 103 thousand from the proportionate
consolidation of the goodwill recorded in the separate
financial statements of Lee’s Pharmaceuticals Holdings Ltd.
Changes in goodwill during the year are illustrated in the table below:
Company
Balance as at
31-12-08
Purchase of
minority interest
Change in
accounting method
Decreases
Write downs
Balance as at
31-12-09
23,393
-
-
-
-
23,393
35,577
-
-
-
-
35,577
20,496
-
-
-
-
20,496
6,824
-
-
-
-
6,824
494
-
-
(5)
-
489
15
-
-
(14)
-
1
86,799
-
-
(19)
-
86,780
Balance as at
31-12-07
Purchase of
minority interest
Change in
accounting method
Decreases
Write downs
Balance as at
31-12-08
23,393
-
-
-
-
23,393
35,577
-
-
-
-
35,577
20,496
-
-
-
-
20,496
Lynapharm SA
-
6,824
-
-
6,824
-
-
494
-
-
494
27
-
-
(12)
-
15
79,493
6,824
494
(12)
-
86,799
Lynapharm SA
Total goodwill
Company
Total goodwill
In compliance with EU provisions, goodwill is no longer
amortised, but is subjected to an impairment test on a yearly
basis, according to the requirements of IAS 36.
In order to identify the recoverable amount, value in use was
determined by discounting the future cash flow of the specific
cash generating unit. The goodwill described above was
allocated to the cash generating unit represented by the
“Pharmaceutical Business” Segment that, until 2009,
substantially coincides with the whole Group, given the
intangible character of the “Rare Diseases Business” Segment.
The Group deemed it suitable to identify the greater value of
the above equity investments in a single CGU, as, in addition to
the fact that the companies are managed according to the
common Group guidelines and strategies, their financial
performance is also considerably affected by centralised
management, to the extent that renders the separate profitability
of the companies irrelevant in relation to that of the Group.
IMPAIRMENT TESTING
The recoverable amount of goodwill can be estimated using two
different values: the fair value minus costs to sell, and the value
in use. As illustrated, the Group chose to estimate the
recoverable amount based on the value in use.
Impairment testing was aimed at determining the value in use of
the CGU which comprises the Group’s operations, through DCF
Analysis, based on cash flows from the Strategic Plan 2010-2012,
duly integrated in order to take into account the significant events
after the end of the year, i.e. the acquisition of the “specialty
pharma” business division from Enzon Pharmaceuticals Inc., as
thoroughly described in the related section of the Management
Report. The plans considered for the estimation comply with the
indications of IAS 36 as regards rationalisation/restructuring and
management optimisation: thus, these plans do not include the
effects of any measures which are not currently in progress.
IAS 36 establishes that, to test for impairment of goodwill, the
recoverable amount of the CGU to which the goodwill is
allocated must be compared with the net carrying amount of
the CGUs. That being said, the impairment test conducted is
based on the following, in short:
- the goodwill was allocated to the CGU represented by the
“Pharmaceutical Business” Segment, and only the value in
use of this segment was considered for the purpose of
impairment testing;
- the value in use of each CGU is the sum of two elements: (a) the
current value of “available” operating cash flows expected for the
period being analysed, which comprises the years 2010 to 2012;
(b) the current value of the Terminal Value (TV), applying the
growth in perpetuity method, with a growth rate of 2%;
- to obtain the operating cash flows of the CGU, the operating
profit is taken, net of taxes, increased by amortisation,
depreciation and write downs and decreased to reflect operating
investments and cash flow generation/absorption deriving from
changes in operating working capital. Cash flows deriving from
non-recurring operations are not taken into consideration;
- the cash flow thus determined is discounted using a discount
rate (8.28%) which reflects the weighted opportunity cost of
all sources of capital (Weighted Average Cost of Capital WACC), based on a financial structure that represents the
specific sector of reference. The cost of debt is estimated using
the weighted average cost of financial payables contracted by
the Group, net of taxes. The cost of own capital was defined by
considering the following elements: (a) the risk-free rate, equal
to the yield of ten-year Treasury Bonds available at that date;
(b) the risk bonus, used to supplement the risk-free rate in
order to express the greater return required for the use of own
capital in the company considered; (c) the beta which reflects
the debt/equity structure taken as a reference; beta is estimated
using the average beta of a representative sample of comparables.
STRATEGIC PLAN ASSUMPTIONS
Considering that the business division acquired by Enzon was
fully allocated to the “Rare Diseases Business” Segment, thus
making it relevant within the Group but irrelevant for the
purpose of impairment testing on goodwill that was fully
allocated to the “Pharmaceutical Business” CGU, the main
assumptions which form the basis of the forecast cash flows of this
CGU for the purpose of impairment testing are illustrated below:
• intensification of in/out licensing activities, meaning the
Group’s capacity to obtain/grant products under licence,
especially in Italy. The Groups actions will be targeted to
locating new business opportunities in this area;
• development of new market niches, such as the
Neutraceutical segment, which has significant potential for
development at international level, and which features
quicker possibility of access as it is less regulated in terms of
product distribution. Penetration and development of these
new market segments will be carried out through the launch
of new products or products already in production;
• international expansion, meaning higher penetration in the
emerging markets (India and China) through partnerships
with local companies;
• launch of new products on the market as a result of research
and development activities, such as Eurartesim and
Stanins/ω3PUFA, products which are coming to the end of
the Health Authorities’ testing process and are expected to be
launched during the period covered by the plan;
• as regards expected revenues from the portfolio of existing
products, various assumptions have been made: the value of sales
6 8 |6 9
of products whose patent cover is expiring during the Business
Plan period has been valued on a case by case basis, taking into
account the expected reduction in sales prices and changes in
volumes. For other products, the value of sales was estimated
based on the historical trend over the last 3 years. Sales turnover
expected by new in-licensing products were estimated taking
into account the various probabilities of success;
• the changes in net working capital were estimated based on the
stock turnover, payment of payables and collection of receivables;
• investments were estimated based on the development plans
which will permit the Group to achieve greater production
efficiency.
It is noted that the test performed on 31 December 2009 had a
positive outcome, and therefore, no write downs were made.
The Directors note that the value in use of goodwill is sensitive to
deviations from the underlying assumptions used in drawing up the
Business Plan 2010-2012, such as the achievement of the expected
revenues and the implementation of the planned strategies.
19. INTERESTS IN JOINT VENTURES
The Group has a 29.43% equity investment in Lee’s
Pharmaceuticals Holdings Ltd, a joint venture operating in the
Pharmaceutical sector, based in Hong Kong.
The share of assets, liabilities, revenues and costs of the joint
venture included in the Consolidated Financial Statements as at
31 December 2009 and 31 December 2008 is as follows:
HKD/000
As already commented above, the equity investment in Lee’s
Pharmaceuticals Holding Ltd, equal to 29.43%, is consolidated
using the proportionate method for inclusion in the
consolidated financial statements as at 31 December 2009.
20. AVAILABLE-FOR-SALE EQUITY INVESTMENTS
This item, equal to Euro 36,398 (Euro 9,662 in 2008) significantly
increased compared to the previous year (Euro 26,736), following
classification of two securities, SciClone and RegeneRx, from
“Investments and current securities” to this item, as well as new
acquisitions and changes in value booked to the statement of
comprehensive income. This reclassification was necessary given the
fact that the reasons that led to the will to dispose of the share
packet held no longer existed, taking into consideration that the
said equity investments are considered strategic for the Group.
Equity investments in listed companies, held by Defiante
Farmaceutica SA, Sigma-Tau Pharmaceuticals Inc. and SigmaTau Finanziaria SpA, were measured based on the recent market
trends considered representative of the fair value. Equity
investments are broken down as follows:
Available-for-sale equity investments
2009
2008
12,297
-
RegeneRx Biopharmaceuticals Inc.
5,959
-
Gentium SpA
3,657
1,573
GP Pharm SA
4,639
4,639
937
1,236
7,452
1,078
SciClone Pharmaceuticals Inc.
2009
2008
Current assets
35,031
16,997
Soligenix (formerly DOR)
Non-current assets
26,340
15,366
Powder Pharmaceuticals Inc.
694
-
Current liabilities
(14,965)
(6,228)
Giuseppe Laterza & Figli SpA
667
667
Non-current liabilities
(3,818)
(542)
96
469
Shareholders' Equity
42,587
25,592
36,398
9,662
2009
2008
51,152
37,614
Cost of sale
(14,495)
(11,030)
Other operating (expenses) revenues
(20,923)
(17,261)
15,734
9,323
(203)
(151)
Profit before tax
15,531
9,171
Taxes
(1,887)
(756)
13,644
8,415
HKD/000
Revenues
Operating margin
Net profit
Biodelivery Sciences Int.
Other minor investments
Total
It is noted that also the equity investments held in RegeneRx
Biopharmaceuticals Inc. and Soligenix (formerly DOR) are
included among those available for sale and are not consolidated
according to the equity method, although they exceed 20% of
voting shares. This classification is due to the fact that the
Group does not exercise significant influence over these
companies. The Sigma-Tau Group only has a minimum
representation on the boards of directors and does not take part
in the definition of corporate policies, including those related to
dividend distribution. Moreover, it does not have significant
transactions with these investee companies, nor exchange of
personnel at managerial level.
The changes during the year are shown below:
Available-for-sale equity investments
(Euro/000)
2008
Increases/
Reclassifications
(Write downs)/
Write ups
Decreases
Other changes
2009
-
8,471
3,826
-
-
12.297
-
7,018
(1,059)
-
-
5,959
Gentium SpA
1,573
-
2,084
-
-
3,657
GP Pharm SA
4,639
-
-
-
-
4,639
1,236
-
(299)
-
-
937
1,078
3,818
2,678
-
(122)
7,452
-
694
-
-
-
694
667
-
-
-
-
667
469
-
(23)
-
(350)
96
9,662
20,001
7,207
-
(472)
36,398
Total
The cost and fair value is compared below:
cost
2009
fair value
carrying amount
cost
2008
fair value
carrying amount
21,575
12,297
12,297
-
-
-
11,249
5,959
5,959
-
-
-
Gentium SpA
20,031
3,657
3,657
20,031
1,573
1,573
GP Pharm SA
4,639
4,639
4,639
4,639
4,639
4,639
1,236
937
937
1,236
1,236
1,236
4,859
7,452
7,452
1,078
1,603
1,078
694
694
694
-
-
-
667
667
667
667
667
667
469
96
96
469
469
469
Gentium SpA: the investment was written up through
shareholders’ equity, by taking into account the average price of
the equity security in the last quarter of 2009;
GP Pharm SA: the equity investment was not written down,
since a forecast analysis of future cash flows showed the
sustainability of the value of the equity investment recorded in
the financial statements;
Biodelivery: the investment was written down through
shareholders’ equity, by taking into account the average price of
7 0 |7 1
the equity security in the last quarter of 2009;
Soligenix Inc.: during the year, Sigma-Tau Pharmaceuticals Inc.
purchased another investment for an amount of USD 4,000;
Powder Pharmaceuticals Inc.: near the end of the year, Defiante
Farmaceutica SA purchased a 12.3% investment (Euro 694) in
Powder Pharmaceuticals Inc., a pharmaceutical company with
registered office in Hong Kong;
SciClone Pharmaceuticals Inc.: the investment was written up,
by taking into account the average price of the equity security in
the last quarter of 2009;
RegeneRx Biopharmaceuticals Inc.: the investment was written
down, by taking into account the average price of the equity
security in the last quarter of 2009;
Other minor investments: last year, this item included the
equity investment in Rostaquo SpA for Euro 350, that was not
consolidated since the first financial statements were submitted
at the end of this financial year.
As already explained in another section of this document, the
investments held in RegeneRx Biopharmaceuticals Inc. and
SciClone Pharmaceuticals Inc. were included among those
available for sale. This classification is given to the fact that the
Group does not exercise a significant influence over these
companies. The Sigma-Tau Group only has a minimum
representation on the boards of directors and does not take part
in the definition of corporate policies, including those related to
dividend distribution. Moreover, it does not have significant
transactions with these investee companies, nor exchange of
personnel at managerial level.
21. NON-CURRENT FINANCIAL ASSETS
This item totalled Euro 15,648 (Euro 15,598 in 2008). It
mainly includes the “Auction Rate Securities (ARS) in student
loan” held by Sigma-Tau Pharmaceuticals Inc., which are
classified as available for sale. These financial assets, guaranteed
by the issuing states or federal government, are comprised of
floating rate securities with long-term nominal maturities,
whose rates are periodically renegotiated through auction. In the
past, these periodic auctions guaranteed the high liquidity of
these securities, enabling their holders to renew their
investments and continue to benefit from the interest accrued,
or to liquidate the securities at their nominal value.
Already in 2008, due to the severe financial crisis in the
United States that made these securities poorly liquid,
it was deemed necessary to write down such financial assets
through shareholders’ equity, thus taking into account this
temporary loss.
Unfortunately, in the light of a stalled international economicfinancial situation and taking into consideration their long
maturity (on average 20-30 years), it does not seem probable
that these securities may become liquid in a short time.
During the first quarter of 2010, some Issuers offered to
repurchase part of the securities issued at a value lower than the
nominal one. Sigma-Tau Pharmaceuticals Inc. accepted these
offers and liquidated two tranches with a nominal value of USD
1 million each, against a discount of 4% and 8%, respectively,
for a total amount of USD 1.88 million.
These two transactions have been taken into account with
regard to the measurement at fair value of these instruments, by
identifying in the less profitable option (8% discount) the most
reliable market reference to be applied to the whole portfolio,
based on the uniform type of securities included.
Moreover, having taken into account the will of the company to
liquid these financial assets as soon as possible, without waiting
for their maturity, a write down was carried out for Euro 1,402,
representing an impairment and booked to the Income
Statement. At the same time, the fair value decrease booked at
the end of the previous year was recovered in the statement of
comprehensive income for Euro 2,244.
22. OTHER NON-CURRENT ASSETS
This item amounts to Euro 9,265 (Euro 9,113 in 2008),
mainly in line with the previous year (it increased by Euro
152). It includes non-current prepaid expenses for Euro 5,958,
mainly referable to Sigma-Tau SpA for a contract signed in
2008 with a major pharmaceutical company, through which
the commercial agreements for some products have been
extended. Moreover, it includes tax credits for VAT
reimbursement for Euro 905 (Euro 792 in 2008), for direct
taxes recoverable beyond 12 months for Euro 171 (Euro 469
in 2008) and receivables from public authorities for
Euro 1,035 (this amount is unchanged compared to the
previous year).
23. INVENTORY
The value of inventory increased by Euro 4,246 during the year.
The item is broken down as follows:
Inventory (Euro/000)
Raw materials, ancillary materials
and consumables
Work in progress and semi-finished products
2008
21,397
19,149
9,472
9,598
45,357
43,233
76,226
71,980
Finished products and goods
Total
2009
24. ACCOUNT RECEIVABLES
Account receivables, amounting to Euro 167,073 (Euro
168,102 in 2008) refer to normal sales operations, and
decreased by Euro 1,029 compared to the previous year.
Account receivables are non-interest bearing and usually have a
payment deadline of 30-60 days.
As at 31 December 2009, account receivables, which showed a
nominal value of Euro 175,446 (Euro 173,487 in 2007) were
written down by Euro 8,373.
This includes the provision for obsolete goods of Euro 4,431
(Euro 5,273 in 2008). Changes in the provision were as follows:
01-01-2009
5,273
Increases
Changes in the provisions for doubtful debts were as follows:
1,905
Uses
(2,747)
31-12-2009
4,431
1 January 2008
8,173
Accruals
102
Uses
(444)
31 December 2008
It should be underlined that the change compared to the
previous year does not take into account the changes in
inventory resulting from the classification, under discontinued
operations, of Sigma-Tau Sudan and, consequently, of the value
of inventory as at 31 December 2009 (Note 7).
7,831
Accruals
874
Uses
(332)
31 December 2009
8,373
As at 31 December, past due account receivables which were not written down were as follows:
(Euro/000)
Past due but not written down
Total receivables
Not past due
<30 days
30-60 days
60-90 days
90-120 days
>120 days
2009
167,073
138,505
9,381
4,173
3,021
2,430
9,563
2008
168,102
137,500
6,646
2,967
4,310
2,494
14,185
The group of receivables past due by more than 120 days refers
mainly to the financial statements of Sigma-Tau SpA and,
specifically, to receivables due from hospitals. Based on past
experience, on the analysis of historical past due receivables,
losses and collections, as these are receivables due from public
entities, which are not contested, their collection is deemed
certain.
7 2 |7 3
25. EQUITY INVESTMENTS, SECURITIES AND
OTHER CURRENT FINANCIAL ASSETS
At the end of the year, this item amounted to Euro 2,950 (Euro
15,489 in 2008) and breaks down as follows:
Securities valued at market value (Euro/000)
2008
Increases
Write downs
Disposals/Reclassification
2009
8,471
-
-
(8,471)
-
7,018
-
-
(7,018)
-
-
2,950
-
-
2,950
15,489
2,950
-
(15,489)
2,950
CFH foreign exchange derivatives assets
Total
The SciClone and RegeneRx securities were reclassified in noncurrent assets under “Available-for-sale equity investments”
(Note 20).
Moreover, in November 2009, following the “Enzon
Pharmaceuticals Inc.” investment, the Parent Company
subscribed two cash flow hedge derivative instruments with a
nominal value of USD 100,000 each, in order to hedge its
foreign currency exposures against exchange rate risk.
The above-mentioned amount of Euro 2,950 represents the fair
value as at 31 December 2009 of one of the two subscribed
derivative instruments.
The second derivative contract signed as part of the said transaction
is recognised under current financial liabilities and the related note.
The said cash flow hedge was valued as partially effective.
The other components of the statement of comprehensive
income include an unrealised net profit of Euro 2,246. The
ineffective part generated a loss booked to the income statement
for Euro 126.
26. CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise bank and postal accounts with
positive balances, and cash in hand. At the end of the year, the
item is equal to Euro 23,443 (Euro 72,875 in 2008), with a
decrease of Euro 49,432, mainly relating to Defiante Farmaceutica
SA (Euro 40,805) and Sigma-Tau Sarl (Euro 3,693), for taking
part in the Group cash pooling that allowed to reduce a significant
part of short-term borrowings. Liquidity decreased also for SigmaTau Pharmaceuticals Inc. (Euro 6,110), especially following the
amounts used in relation to investments in shareholdings, as
already commented in another section of this note.
27. OTHER CURRENT ASSETS
This item amounted to Euro 29,473 and is mainly in line with
the previous year (Euro 29,644 in 2008). It includes current
receivables from employees, social security and tax authorities.
28. SHAREHOLDERS’ EQUITY
Share capital as at 31 December 2009, equal to Euro 24,631,
fully subscribed and paid in, comprises 473,684 ordinary shares
with a nominal value of Euro 52 each. This item is unchanged
The share premium reserve was generated by the share
premium paid by IntesaSanPaolo SpA upon purchase of 23,684
new shares in 2006.
The revaluation reserves refer to monetary revaluations
pursuant to Law 413/1991 and Law 72/1983. They are
unchanged compared to the previous year.
There were no changes to the legal reserve during the period.
The item other reserves mainly comprises the consolidation
reserves and retained earnings (losses). The change for the period,
equal to -Euro 547, is mainly due to the purchase of new shares of
the joint venture Lee’s Pharmaceuticals Ltd by Defiante.
The FTA reserve comprises the effects of transition to the
International Accounting Standards as at 1 January 2007, net of
exchange rate effects.
The reserve for available-for-sale assets refers to the change in
value of non-current available-for-sale financial assets, net of
exchange rate and tax effects.
The cash flow hedge reserve includes the effective part of the cash
flow hedge incurred as at the balance sheet date, net of tax effects.
The exchange rate reserve derives from the translation of the
financial statements of consolidated subsidiaries drawn up in
foreign currency, recorded directly in consolidated shareholders’
equity, according to the consolidation principles indicated in the
specific paragraph under measurement criteria.
The following table shows the reconciliation of Parent Company
shareholders’ equity and consolidated shareholders’ equity:
Reconciliation statement
(Euro/000)
Net profit
(loss) 2009
as at 31-12-2009
Net profit
(loss) 2008
as at 31-12-2008
Balances as per the Parent Company
financial statements
(1,139)
185,971
(4,686)
195,067
Effect of consolidation of subsidiaries
60,861
123,746
50,894
99,532
(18,884)
(48,083)
(8,811)
(66,031)
(2,062)
(15,063)
(967)
(13,018)
(20,881)
-
(32,769)
-
3,888
86,142
(346)
86,549
21,783
332,713
3,315
302,099
(105)
1,906
(144)
1,579
21,678
334,619
3,171
303,678
Consolidation adjustments
Elimination of inter-company inventory margin
Elimination of dividends
Other eliminations
Total net profit (loss) for the Group
Minority interest
Shareholders’ equity and net profit (loss)
as stated in the consolidated financial statements
29. BORROWINGS
This item includes:
(Euro/000)
2009
2008
2009/2008
117,521
97,865
19,656
23,167
110,585
(87,418)
Short-term portions
of long-term borrowings
20,640
45,289
(24,649)
161,328
253,739
(92,411)
Non-current liabilities
Current liabilities
Compared to the previous year, this item decreased by Euro
92,411. This decrease is due to the start of the foreign treasury
project during the year (Sigma-Tau Sarl and Defiante
Farmaceutica SA), that was launched by Sigma-Tau Finanziaria
SpA, as already explained in another section of this note. Shortterm borrowings are mainly represented by account overdrafts,
whose rates are almost entirely in line with bank borrowings.
7 4 |7 5
Long-term borrowings totalled Euro 138,161 (Euro 143,154 in
2008). The item is broken down as follows:
Medium/long-term borrowings
Borrowings
Interest Granting
rate
bank
Euro 4,906,000 bank borrowing
Year of Guaranteed Short-term
expiry (YES/NO) borrowings
Short-term Portion from
Portion
portion 1 to 5 years over 5 years
Total
Total
M/L-term M/L-term
2009
2008
SEB
2009
NO
-
-
-
-
-
4,989
Euro 25,000,000 bank borrowing (a)
1.657
ISP
2010
NO
-
4,167
-
-
-
4,167
Euro 25,000,000 bank borrowing (c)
1.231
MCC
2011
NO
-
-
20,000
-
20,000
-
Euro 25,000,000 bank borrowing (c)
1.223
MCC
2011
NO
-
-
25,000
-
25,000
-
Euro 50,000,000 bank borrowing
1.337
ISP
2011
NO
-
14,000
14,000
-
14,000
28,000
Euro 50,000,000 bank borrowing (b)
1.338
ISP
2011
NO
-
-
50,000
-
50,000
50,000
Euro 1,693,101.16 bank borrowing
6.100
ISP
2012
YES
-
282
282
-
282
564
2.140
ISP
2015
YES
-
275
1,238
-
1,238
1,416
2.140
ISP
2015
YES
-
952
3,810
-
3,810
4,902
2.140
ISP
2015
YES
-
743
2,972
-
2,972
3,827
Euro 900,000 bank borrowing
1.230
SEB
2009
NO
900
-
-
-
-
-
Sundry bank borrowings
6.005
sundry
2009
NO
-
221
219
-
219
-
sundry
n/a
NO
22,267
-
-
-
-
-
23,167
20,639
117,521
-
117,521
97,865
Bank overdrafts
Total
New borrowings were granted for Euro 439 in Lee’s
Pharmaceuticals Ltd.
Repayments of Euro 45,289 were made for instalments due in
2009, and the instalments falling due in 2010, amounting to
Euro 20,640 were reclassified from Medium/Long-term to
Short-term.
Current account overdrafts: showed a net increase of Euro
1,089 compared to the previous year.
During the year, the following changes occurred in Short-term
and Medium/Long-term Bank Borrowings:
Short-term borrowings: they are exclusively represented by an
outstanding borrowing in Sigma-Tau GMBH.
Long-term borrowings: the exercise of the term out option in
November 2009 allowed to fix again the repayment date of the
borrowing amounting to Euro 50,000 (which is referred to in
letter c) taken out by Sigma-Tau Finanziaria SpA with MCC, on
21 December 2011. New borrowings were granted for Euro
20,000; the amount of borrowing as at 31 December 2009
totalled Euro 45,000.
(Euro/000)
The changes in this item during the year were as follows:
2008
Incr.
Decr.
Short-term portions of
medium/long-term borrowings
Reclass.
Other changes
2009
89,407
-
-
-
(25,000)
(63,507)
900
Current account overdrafts
21,178
-
-
-
-
1,089
22,267
110,585
-
-
-
-
-
23,167
M/L-term borrowings
97,865
20,439
(155)
(20,640)
25,000
(4,988)
117,521
Reclassified from M/L to S-term
45,289
-
(45,289)
20,640
-
-
20,640
253,739
20,439
(45,444)
-
-
(67,406)
161,328
Total
Some of the medium/long-term borrowings include covenants
regarding the maintenance of specific financial ratios.
Specifically:
• the borrowing marked by letter (a), from Intesa SanPaolo for a
total of Euro 25,000, envisages a commitment by the beneficiary,
Sigma-Tau Finanziaria, to maintain at least one of the two values
regarding the following consolidated financial ratios:
1. Net Financial Debt/Shareholders’ Equity < 1.5;
2. Net Financial Debt/EBITDA < 3.5.
• The borrowing marked by letter (d) with Intesa SanPaolo for
a total of Euro 50,000, envisages compliance by Sigma-Tau
Finanziaria with the following consolidated financial ratios:
1. Net Financial Debt/EBITDA < 4;
2. Net Financial Debt/Shareholders’ Equity < 1.5.
Failure to comply with these financial ratios shall result in the
application of the acceleration clause.
As at 31 December 2009, these ratios were complied with.
The borrowings marked by letter (c) with Medio Credito
Centrale should be reimbursed if one of the following ratio is
not met for two consecutive years:
1. Net Financial Position/Shareholders’ Equity < 1.5;
2. Net Financial Position/EBITDA < 2.5.
As of today, there is reasonable certainty that these borrowings
will be outstanding until their maturity.
30. EMPLOYEE SEVERANCE INDEMNITY AND
OTHER EMPLOYEE PROVISIONS
This item as at 31 December 2009 and 31 December 2008 is
broken down below:
(Euro/000)
31-12-09
31-12-08
2009/2008
3,306
3,676
(370)
35,732
39,979
(4,247)
39,038
43,655
(4,617)
Other employee provisions
Total employee severance
indemnity and other
employee provisions
In the financial year 2008-2009, the following changes occurred
in employee severance indemnity:
(Euro/000)
Employee severance indemnity provisions
Employee severance indemnity as at 1 January 2008
Current service cost
Financial expense
Benefits paid
In all loan agreements subject to covenants, the beneficiary is
prohibited, for the entire duration of the loans, from granting real
security or constraints of any type on assets (with the exception of
subsidised loans, to substitute pre-existing guarantees in relation
to financial lease transactions) currently owned by the company,
without the prior approval of the lending banks.
At the balance sheet date, there were no deviations in relation to
the above negative pledge clauses.
Other negative obligations
The loan agreement entered into with MCC prohibits the
Sigma-Tau Group to carry out disposals which would constitute
a prejudicial event, to third parties outside the Group, of i)
business branches; ii) trademarks; iii) patents; or iv) know-how
and licences, where acquired using the above borrowings.
At the balance sheet date, this clause had been complied with.
433
1,696
(5,828)
Change in the scope of consolidation and other changes
326
Actuarial loss (profit) recognised
143
Employee severance indemnity as at 31 December 2008
Negative pledge clauses
43,209
Financial expense
Benefits paid
Change in the scope of consolidation and other changes
Actuarial loss (profit) recognised
Employee severance indemnity as at 31 December 2009
39,979
240
1,146
(2,648)
(16)
(2,969)
35,732
The method used for actuarial valuation is closely linked to the
number of employees of the company.
To determine Employee severance indemnity for companies
with fewer than 50 employees, future salary increases and a
suitable length of service were considered. The actuarial
valuation was performed using the “projected unit credit
method”, as follows:
1. On the basis of demographic, economic and financial
assumptions, the employee severance indemnity accrued at
the valuation date was projected, along with the future
portions which will accrue up to the random time of
7 6 |7 7
termination of the employment relationship. Future salary
increases and increases in the portions of employee severance
indemnity accrued were considered in the projection;
2. For each period, the amount of employee severance
indemnity to be paid was determined, based on the actuarial
assumptions regarding settlements and advances;
3. The company’s outlays at the valuation date were discounted
and reproportioned based on the seniority matured at the
valuation date compared to the seniority reached at the
random time of settlement. Rates of return referring to bonds
from issuers with excellent ratings were used for discounting.
To determine employee severance indemnity for companies with at
least 50 employees, the effect of the pension reform was considered,
established through Legislative Decree 252/2005. Specifically for
employees who have allocated their accruing employee severance
indemnity to supplementary pension funds or the Treasury Fund of
the Italian National Social Security Institution (INPS), for IAS
purposes only the liability regarding the employee severance
indemnity remaining with the company was measured.
From an operational point of view, the following operations
were carried out:
1. On the basis of demographic, economic and financial
assumptions, the employee severance indemnity accrued at
the valuation date was projected, without considering future
portions of employee severance indemnity accruing up to the
random time of termination of the employment relationship.
Thus, the rules for indexing employee severance indemnity
based on Italian legislation were considered;
2. For each period, the amount of employee severance
indemnity to be paid was determined, based on the actuarial
assumptions regarding settlements and advances;
3. The company’s outlays at the valuation date were discounted.
Rates of return referring to bonds from issuers with excellent
ratings were used for discounting.
It should be noted that the Sigma-Tau Group opted not to
apply the corridor method in accounting for employee severance
indemnity, as permitted by IAS 19.
The main assumptions used in determining obligations deriving
from pension plans are illustrated below:
- discounting rate: was constructed based on the maturity
structure of the interest rates observed at the valuation date
and derived using bootstrap analysis of the swap rate curve at
the valuation date;
- a nominal average growth rate of 4% was considered for
salaries (unchanged from 2007);
- inflation rate: 2.00% per year (2.00% in 2008);
- demographic bases (mortality/invalidity): with reference to
mortality, the “Mortality Tables for the Italian Population by
Province and Region of Residence” for 2002 were used;
- with reference to invalidity, the tables from the Italian
National Social Security Institution (INPS), National Health
Service (INAM) and the National Institute for Insurance
Against Industrial Accidents (INAIL), regarding office
workers, developed by the Statistical-Actuarial Departments
of these Institutions, were used;
- personnel turnover rate, unchanged compared to 2008,
differentiated based on the age of the employees:
Age/Probability of Turnover
2009
2008
18 to 31
9.00%
9.00%
32
8.50%
8.50%
33
8.00%
8.00%
34
7.50%
7.50%
35
7.00%
7.00%
36
6.50%
6.50%
37
6.00%
6.00%
38
5.50%
5.50%
39
5.00%
5.00%
40
4.50%
4.50%
41
4.00%
4.00%
42
3.50%
3.50%
43
3.00%
3.00%
44
2.50%
2.50%
45
2.00%
2.00%
46
1.50%
1.50%
47
1.00%
1.00%
48
0.50%
0.50%
49
0.00%
0.00%
50 to 59
0.00%
0.00%
20.00%
20.00%
60 and beyond
- a rate of advances on employee severance indemnity of 4%
annually (4% in 2008) and a percentage of employee severance
indemnity accrued requested in advance of 70% (70% in 2008);
- the retirement date was considered the date on which the
requisite of retirement due to age is met (65 years of age for
men, 60 for women).
Other employee provisions
The changes in the fair value of plan assets are as follows:
The Sigma-Tau Group has also set up a supplementary pension
fund for executives of the Group: EPIDS (Sigma-Tau
Supplementary Pension Fund for Executives). The Fund is
structured in two parts: one is a defined benefit segment, while
the other is financed by defined contributions.
The main assumptions regarding the demographic, economic
and financial factors used in determining obligations deriving
from the defined benefit pension plan are illustrated below:
- discounting rate: 2% per year (2% in 2008);
- a nominal average growth rate of 3% was considered for salaries;
- inflation rate: 2% (2% in 2008);
- demographic bases (mortality/invalidity): for mortality rates,
Table “IPS55–imm” was used, distinguishing the data by
gender (Italian statistics from the State General Accounting
Office in 2007);
- for invalidity, the invalidity ratios from the Italian National
Social Security Institution (INPS) regarding banking workers
were used;
- personnel turnover rate: up to 30 years of age - 5%,
decreasing in a linear manner to reach zero at 50 years of age;
- probability of requests for advances of 20% starting from age
60;
- retirement at 65;
- for the financial base, a technical interest rate of 2.0% was used.
The changes in the current value of the defined benefit
obligation are described below:
(Euro/000)
Defined benefit obligation as at 1 January 2008
Benefits paid
EPIDS
13,748
1,647
(2,593)
Actuarial profit/(loss) on the obligation
13,030
-
Benefits paid
(845)
Actuarial profit/(loss) on the obligation
(125)
Exchange rate differences on foreign plans
Defined benefit obligation as at 31 December 2009
EPIDS
Fair value of plan assets as at 1 January 2008
10,237
Expected return
70
Grants by the employer
1,727
Benefits paid
(2,593)
Actuarial profit/(loss)
(87)
-
Fair value of plan assets as at 31 December 2008
9,354
Expected return
70
Grants by the employer
-
Benefits paid
(845)
Actuarial profit/(loss)
426
-
Fair value of plan assets as at 31 December 2009
9,005
The main categories of plan assets expressed as a percentage of
the fair value of total plan assets are as follows:
Description
2009
2008
Value
%
Value
%
520
5.78%
2,414
25.81%
0
0.00%
1,434
15.33%
Bonds issued by governments
and international organisations
100
1.11%
1,323
14.14%
Debt securities
747
8.30%
840
8.98%
Equity securities
0
0.00%
0
0.00%
Units of UCITS
7,631
84.74%
3,336
35.66%
6
0.07%
7
0.08%
9,005
100.00%
9,354
100.00%
Repurchase agreements
Other
Total
228
Defined benefit obligation as at 31 December 2008
(Euro/000)
12,310
31. PROVISION FOR RISKS AND CHARGES AND
SHORT-TERM PROVISIONS
The provision for risks and charges (non-current portion),
amounting to Euro 4,517 (Euro 3,183 in 2008) mainly
comprises the allocations for legal disputes made in relation
to contingent liabilities resulting from disputes with
employees.
7 8 |7 9
Short-term provisions (current portion), amounting to Euro
4,035 (Euro 3,853 in 2008) comprise prudential allocations for
returns on sales of Euro 3,605 in Sigma-Tau SpA, Euro 338 in
Biofutura Pharma SpA, Euro 48 in Sigma-Tau Espana SA and
Euro 44 in Avantgarde SpA. The changes in this item are shown
below:
(Euro/000)
Non-current
Current
Provision for
legal disputes
Provisions for
returns on sales
Total
3,183
3,853
7,036
2,074
3,764
5,838
(740)
(3,582)
(4,322)
4,517
4,035
8,552
Balance as at 1 January 2009
Accruals to provisions
Uses
32. DEFERRED TAX LIABILITIES
Provisions for taxes essentially regard the deferred tax liabilities
net of prepaid tax credits, allocated in relation to the temporary
differences between the balance sheet values recorded in the
financial statements and the corresponding values of the
consolidated companies recognised for tax purposes.
Changes in the provisions for deferred taxes were as follows:
(Euro/000)
2008
Accrual
Other changes
Reclass.
Exch. difference
2009
21,621
(1,525)
-
-
-
20,096
4,691
(918)
138
-
-
3,911
856
833
-
-
-
1,689
1,365
1,262
-
-
(15)
2,612
28,533
(348)
138
-
(15)
28,308
Taxed provisions
(3,599)
27
(8)
-
-
(3,580)
Elimination of internal gains
(2,806)
283
-
-
-
(2,423)
Tax losses
(5,502)
(3,375)
6,400
-
-
(2,477)
Intangible assets
(3,402)
(524)
72
-
-
(3,854)
(97)
1
(20)
-
-
(116)
(15,406)
(3,488)
6,444
-
-
(12,450)
-
-
1,727
-
-
1,727
13,127
(3,836)
8,309
-
(15)
17,584
Deferred tax liabilities:
Excess amortisation/depreciation
Research grants
Other
Total deferred tax liabilities
Deferred tax assets:
Other
Total deferred tax assets
Income taxes booked to Shareholders' Equity
Net deferred taxes
33. OTHER NON-CURRENT LIABILITIES
As part of the exchange rate risk hedging transaction commented
above (Note 24), a financial liability of Euro 489 was recognised in
the financial statements, equal to the fair value of the derivative
instrument as at 31 December 2009, valued as partially effective.
The other components of the statement of comprehensive income
include a net unrealised loss of Euro 223. The ineffective part
generated a loss booked to the income statement of Euro 184.
This item, amounting to Euro 5,819 (Euro 6,328 in 2008)
mainly comprises tax payables and additional client expenses
expiring beyond twelve months.
34. ACCOUNT PAYABLES
This item, amounting to Euro 109,224 (Euro 102,459 in
2008) mainly refers to commercial operations regarding
purchases and the provision of services. The increase of Euro
6,765 was mainly due to Sigma-Tau SpA for the purchase of
raw materials and finished products in November and
December 2009, still to be settled in part.
37. OTHER CURRENT LIABILITIES
This item amounted to Euro 52,152 (Euro 48,717 in 2008). It
includes current payables due to employees, social security and
other sundry payables.
38. FAIR VALUE - HIERARCHY
35. TAX PAYABLES
This item amounted to Euro 3,261 (Euro 2,638 in 2008) and
increased by Euro 623 compared to the previous year. It includes
the settlement of tax withholding on employment and selfemployment of Italian companies referred to December 2009, as
well as the income taxes due of some foreign companies.
36. CURRENT FINANCIAL LIABILITIES
This item totalled Euro 733 and includes the following:
2009
2008
Option flexible forward
489
-
Interest rate swap step-up
244
-
Total
733
-
During the year, the Parent Company signed an interest rate
swap step-up contract (“Receive Euribor” vs. “Step-up fixed
rate”) with a notional value subject to amortisation/depreciation
to hedge a floating rate loan taken out in 2006 for an initial
amount of Euro 50,000 and recognised in the financial
statements as at 31 December 2009 for Euro 35,000.
As part of this transaction, a financial liability of Euro 244 was
recognised in the financial statements, representing the fair
value of the derivative instrument as at 31 December 2009,
valued as partially effective. The other components of the
statement of comprehensive income include a net unrealised loss
of Euro 131. The ineffective part generated a loss booked to the
income statement of Euro 64.
The Group uses the following hierarchy in order to establish
and document the fair value of financial instruments based on
valuation techniques:
Level 1: prices quoted in an active market for similar assets or
liabilities.
Level 2: other techniques for which all market inputs that have
a significant effect on the measured fair value are directly and
indirectly observable.
Level 3: techniques that use inputs with a significant effect on the
measured fair value, but are not based on observable market data.
As at 31 December 2009, the Group holds the following
financial instruments measured at fair value:
Assets measured
at fair value
31/12/2009
Euro/000
Level 1
Euro/000
Level 2
Euro/000
Level 3
Euro/000
2,950
-
2,950
-
Shares
36,398
30,302
Debt securities
15,648
-
15,648
-
31/12/2009
Euro/000
Level 1
Euro/000
Level 2
Euro/000
Level 3
Euro/000
Financial assets at fair value
booked to profit and loss
Interest rate swap
Available-for-sale
financial assets
Liabilities measured
at fair value
6,069
Financial liabilities at fair value
booked to profit and loss
Forward foreign
exchange contracts
489
-
489
-
Interest rate swap
244
-
244
-
8 0 |8 1
39. GUARANTEES GRANTED AND COMMITMENTS
Bank guarantees
At the balance sheet date:
- Sigma-Tau Finanziaria SpA issued bank guarantees for a total
of Euro 6,361 in favour of SEB, on behalf of Sigma-Tau
Sudan Ltd. (Euro 5,460) and Sigma-Tau GMBH (Euro 900)
and in favour of Intesa SanPaolo on behalf of Sigma-Tau
Pharmaceuticals Inc. (Euro 1);
- Sigma-Tau SpA issued bank guarantees for a total of Euro
5,165 (Euro 5,165 as at 31 December 2008) in favour of
Unicredit, on behalf of Prassis SpA. They were extinguished
on 22 January 2010.
In 2008, the following were in existence:
- Tecnogen SpA had surety policies guaranteeing the correct
execution of research works (Euro 136).
Nonetheless, on the whole, account receivables show a
concentration of credit risk in the Italian market equal to about
79% of the business (89% in 2008). This clientele is mainly
comprised of wholesalers and hospitals, which feature a high
level of reliability and maintenance of creditworthiness levels.
Investments in liquidity are performed only with banking
counterparties of high standing. For the breakdown of customer
receivables by expiration date, refer to Note 24.
The credit risk rate, i.e. the ratio between account receivables
and turnover, amounts to 27.1% (27.4% in 2008):
(Euro/000)
2009
2008
Account receivables
167,073
168,102
Turnover
616,273
613,411
27.1%
27.4%
Index
Liquidity risk
Commitments
Third party assets held at Group companies
This item, amounting to Euro 226, unchanged compared to the
previous year, regards the research plant and equipment owned
by MIUR held at Tecnogen SpA.
40. FINANCIAL RISKS
Information on qualitative risks
In carrying out its operations, the Group is exposed to various
financial risks, such as interest rate risk, exchange rate risk,
credit/counterparty risk, and liquidity risk.
These financial risks are defined below, and the methods for
managing such risks are illustrated.
Credit risk
The Group’s exposure to credit risk regards account receivables
and financial receivables. The Group has various concentrations
of credit risk depending on the different markets in which it
operates. However, the risk is mitigated by the fact that credit
exposure is divided over a large number of counterparties and
customers.
Liquidity risk is defined as the possibility that the company will
not be able to settle its payment obligations due to the inability
to obtain new funds (funding liquidity risk) or the inability to
sell assets on the market (asset liquidity risk), or the possibility
that it will incur extremely high costs in order to meet its
obligations.
For the Sigma-Tau Group, exposure to this risk is primarily
represented by borrowing operations undertaken, some of which
are linked to financial statement ratios (covenants), which the
Group currently complies with. At present, there are short-term,
renewable loans and medium-long term loans with banks. The
company managed liquidity risk through careful monitoring of
liquidity and forecast analysis of expected cash flows according
to business plans.
The cash flows, need for financing and liquidity of the Group
companies are monitored and managed at a centralised level by
the Group Treasury, in order to ensure effective, efficient
management of financial resources.
For an analysis of the covenants refer to the note concerning
Borrowings.
The table below breaks down existing liabilities by residual
duration, with reference to financial years 2009 and 2008, for
financial instruments, account payables and other payables.
Financial year ended as at 31 December 2009
(Euro/000)
Total
On demand
Less than
3 months
From 3 to
12 months
From 1 to
5 years
> 5 years
Burdensome loans
161,328
23,167
-
20,640
117,521
-
Other liabilities
137,549
136,030
-
946
573
-
Account payables
109,225
34,071
74,902
251
-
-
408,102
193,268
74,902
21,837
118,094
-
253,738
110,585
-
45,289
97,864
-
-
-
-
-
-
-
102,459
66,598
28,689
7,172
-
-
411,242
177,183
43,304
86,563
104,192
-
Financial year ended as at 31 December 2008
(Euro/000)
Burdensome loans
Other liabilities
Account payables
Interest rate risk
Interest rate risk can be defined as the possibility that financial
management results in a loss, in terms of a lower return on an
asset or a greater cost of a liability (existing or contingent), as a
result of changes in interest rates. Thus, interest rate risk is
represented by the uncertainty associated with the trend in
interest rates.
The company’s exposure to the risk of changes in market rates is
mainly linked to bank debt represented by several floating rate
medium/long-term loans.
In April 2009, the Group carried out a first interest rate risk
hedging transaction based on projections that indicated a
probable reversal in the economic and monetary trend. The
hedging was made on an “amortising” loan outstanding as at
that date, for an amount of Euro 35,000, according to a
principle that perfectly links the adjustment of rates with each
half-year maturity of the Loan. Due to the continuing weak
economic situation, supported by the several statements made
by the ECB management that indicated the will to maintain
low interest rates tuned with the economic situation, in the
second half of 2009 the Parent Company maintained the
biggest part of the Financial Debt with floating rates and shortterm maturities, by taking full advantage of the economic
benefits resulting from a downward trend of interest rates.
With regard to floating rate medium/long-term loans, a shock
up of 150 bps on Euribor would lead to an increase in financial
expense of approximately Euro 1,640 in 2010.
The sensitivity of floating rate financial payables to a change in
interest rates of ± 50 bps would have the following effects:
2009
Shock down (-50 bps)
Shock up (+50 bps)
Euro
964
2,065
Exchange rate risk
As from 9 November 2009, date of acceptance by the Enzon
Pharmaceuticals Inc.’s directors of the offer made by the SigmaTau Group in order to acquire the speciality care segment, the
Parent Company refined its risk management strategy with
regard to the transaction for an outlay of USD 300 million
upon signature, which took place in January 2010.
With regard to the possibility to sign the agreement and the
related commitment to pay, since the Euro/USD exchange
ratio was favourable and better than that applied for the
assessment of the investment, Sigma-Tau Finanziaria SpA
signed a purchase commitment for an amount of USD 200
million in December 2009 and USD 100 million in the first
days of 2010. The said transactions led to a significantly
lower borrowing requirement than that estimated without the
said transactions.
If we exclude the above-mentioned extraordinary transaction,
the Group was exposed to the exchange rate risk resulting from
normal commercial transactions in a currency other than the
Euro (mainly USD), that are irrelevant at a consolidated level.
8 2 |8 3
Capital management
(Euro/000)
The main objective of the Group’s capital management is to
ensure that a solid credit rating is maintained, as well as
adequate levels of capital ratios in order to support operations
and maximise value for shareholders. The Group manages
capital structure and modifies it based on changes in economic
conditions. In order to maintain or adjust the capital structure,
the Group can decide whether or not to distribute dividends
paid to shareholders, repay capital or issue new shares.
Including burdensome loans, account payables and other
payables in net debt, net of cash and cash equivalents, the ratio
of net debt to shareholders' equity is as follows:
(Euro/000)
2009
2008
Borrowings and c/a overdrafts
161,328
253,738
Account payables and other payables
169,407
157,667
(23,442)
(72,875)
307,293
338,530
332,434
302,099
1,906
1,579
Total Shareholders’ Equity
334,340
303,678
Share capital and net debt
27,047
(34,852)
92%
111%
Net debt
Group Shareholders’ Equity
Minority interest
Debt/Shareholders’ Equity Ratio
Carrying amount
2009
2008
2009
2008
CFH derivatives
(733)
(733)
-
-
(22,267)
(21,178)
(22,267)
(21,178)
(137,597)
(229,823)
(138,443)
(229,823)
(564)
(2,737)
(625)
(2,737)
Bank overdraft
Loans:
Floating rate loans
Fixed rate loans
With regard to loans, there is no change between the carrying
amount and the fair value, since they have a duration of no
more than five years.
41. SCOPE OF CONSOLIDATION
The consolidated financial statements include the financial
statements of Sigma-Tau Finanziaria SpA and the subsidiaries
listed right:
Fair Value
The table below compares the carrying amount and the fair
value – by category – of all financial instruments of the Group
recorded in the financial statements, including current and noncurrent financial assets.
(Euro/000)
Financial assets
Carrying amount
Fair value
2009
2008
2009
2008
Cash
23,443
72,875
23,443
72,875
Available-for-sale
equity investments
36,398
6,662
36,398
6,662
Non-current financial assets 15,648
15,598
15,648
15,598
Equity investments,
securities and other current
financial assets
15,489
2,950
15,489
2,950
Fair value
Parent Company
Company name
Sigma-Tau Finanziaria SpA
Country
Registered Office
Business
Presentation currency
Share capital
Italy
Rome
Holding
Euro
24,631,568
Parent Company
%
%
holding of holding of
the Group the Group
2009
2008
Companies consolidated on a line-by-line basis
Company name
Country
Registered
Office
Biosint SpA
Italy
Pomezia
Chemical Bulk
Euro
5,980,000
Direct Sigma-Tau Finanziaria SpA
100.00
100.00
Sigma-Tau Generics Srl
Italy
Pomezia
Pharmaceutical
Euro
100,000
100.00
100.00
Eubiotina Research SpA
Italy
Rome
Research
Euro
80,000
81.00
81.00
Italy
Pomezia
Pharmaceutical
Euro
1,560,000
100.00
100.00
Portugal Funchal-Madeira
Pharmaceutical
Euro
1,000,000
100.00
100.00
Pharmaceutical
Euro 15,860,000
100.00
100.00
Defiante Farmaceutica SA
Share Direct/
capital Indirect
Sigma-Tau IFR SpA
Italy
Avantgarde SpA
Italy
Pomezia Parapharmaceutical
Euro
3,120,000
Indirect
Sigma-Tau IFR SpA
100.00
100.00
Prassis Ist. di Ric. SpA
Italy
Pomezia
Research
Euro
780,000
Indirect
Sigma-Tau IFR SpA
100.00
100.00
Tecnogen SpA
Italy
Caserta
Research
Euro
3,910,764
Indirect
Sigma-Tau IFR SpA
76.95
76.95
Rostaquo SpA
Italy
Pomezia
Research
Euro
903,520
Indirect
Sigma-Tau IFR SpA
63.64
Sigma-Tau Intern. SA
Luxembourg
Luxembourg
Equity
investment
management
Euro 122,164,232
100.00
100.00
Sigma-Tau Europe SA
Luxembourg
Luxembourg
Equity
investment
management
Euro 12,484,527 Indirect
100.00
100.00
Sigma-Tau Pharma AG
Switzerland
Zofingen
Pharmaceutical
CHF
600,000
Indirect
Sigma-Tau Europe SA
100.00
100.00
Spain
Madrid
Pharmaceutical
Euro
3,005,061
Indirect
Sigma-Tau Europe SA
100.00
100.00
France
Ivry sur Seine
Pharmaceutical
Euro
340,000
Indirect
Sigma-Tau Europe SA
100.00
100.00
Germany
Düsseldorf
Pharmaceutical
Euro
25,600
Indirect
Sigma-Tau Europe SA
100.00
100.00
Netherlands
Utrecht
Pharmaceutical
Euro
92,571
Indirect
Sigma-Tau Europe SA
100.00
100.00
Sigma-Tau Healths. Intern. BV Netherlands
Utrecht
Pharmaceutical
Euro
1,000,000
Indirect
Sigma-Tau BV
100.00
100.00
Sigma-Tau Pharma
Belgium Sprl
Belgium
Brussels
Pharmaceutical
Euro
200,000
Indirect
Sigma-Tau Europe SA
100.00
Sudan
Karthoum
Pharmaceutical
Sudanese 18,299,944 Indirect
pound
90.00
90.00
Switzerland
Lugano
Research
Indirect
100.00
100.00
Sigma-Tau America SA
Luxembourg
Luxembourg
Equity
investment
management
Euro 32,987,242 Indirect
100.00
100.00
Sigma-Tau Pharma Ltd.
United Kingdom
London
Pharmaceutical
GBP
275,000
Indirect
100.00
100.00
Sigma-Tau Ireland Ltd.
Ireland
Dublin
Pharmaceutical
Euro
10,000
Indirect
USA
Trenton
(New Jersey)
Pharmaceutical
USD
1,000
Indirect
Sigma-Tau Espana SA
Sigma-Tau Sarl
Sigma-Tau GmbH
Sigma-Tau BV
Sigma-Tau Sudan Ltd
Sigma-Tau Research
Switzerland SA
Sigma-Tau Pharmaceuticals Inc.
Rome
Business Presentation
currency
CHF
5,000,000
100.00
100.00
100.00
8 4 |8 5
Sigma-Tau HealthScience llc.
USA
Wilmington
(Delaware)
Pharmaceutical
USD
1
Indirect
Sigma-Tau Pharm. Inc.
100.00
100.00
Sigma-Tau Research Inc.
USA
(Maryland)
Research
USD
1,000
Indirect
Sigma-Tau Pharm. Inc.
100.00
100.00
Sigma-Tau Private India Ltd.
India
Inr 20,000,000 Indirect Defiante Farmaceutica SA
100.00
Pharmaceutical
Companies consolidated on a line-by-line basis
Company name
Country
Registered
Office
China
Hong Kong
Country
Registered
Office
GP Pharm SA
Spain
Barcelona
Pharmaceutical
Euro 11,620,607
10.00
10.00
Gentium SpA
Italy
Como
Pharmaceutical
Euro 106,962,000
15.46
15.46
Biodelivery Sciences Intern. Inc.
USA
Raleigh
Research
USD 21,181,854
1.52
2.30
Italy
Bari
Publishing
Euro
263,250
3.50
3.50
USA
Delaware
Pharmaceutical
USD
60,407
21.00
USA
Delaware
Pharmaceutical
USD
47,218
13.93
Soligenix
USA
New Jersey
Pharmaceutical
USD
185,656
24.57
Lee's Pharmaceuticals Ltd
currency
Pharmaceutical
Share Direct/
capital Indirect
Parent Company
HK$ 22,506,000 Indirect Defiante Farmaceutica SA
%
%
the Group the Group
2009
2008
29.43
29.82
Main investments in other companies
Company name
currency
Share Direct/
capital Indirect
Parent Company
%
%
the Group the Group
2009
2008
42. INFORMATION ON RELATED PARTIES
The table below shows the total values of transactions with related parties during the year:
Purchases/sales from/to related parties
(Euro/000)
Sales to related parties
Purchases from
related parties
Receivables due
from related parties
Payables due to
related parties
2009
-
351
35
-
2008
-
345
-
-
2009
-
912
-
449
2008
-
662
-
358
2009
-
816
-
279
2008
-
-
-
87
2009
150
-
150
-
2008
-
-
-
-
Related party companies:
Taufin SpA
VSL Pharmaceuticals Inc.
Addenda Pharma Srl
Sirio Pharma Srl
- Sigma-Tau Finanziaria SpA entered into a lease agreement for
the use of the building where its headquarters are located,
with Taufin SpA, with headquarters in Rome. The cost of the
rent amounted to Euro 351 (Euro 345 in 2008).
- Sigma-Tau Pharmaceuticals Inc. entered into a licence
agreement for the marketing of the product VSL#3 with VSL
Pharmaceuticals Inc., based in the United States. This
relationship resulted in the accrual of royalty costs owed
(Euro 662 in 2008) and payables (Euro 358 in 2008).
- Sigma-Tau SpA has commercial relationships, for royalties
owed and lower revenues from AIFA pay-back, with the
company Addenda Pharma Srl, at normal market conditions.
Moreover, Sigma-Tau SpA acquired the licence on the
product Pelzont, recognised under intangible assets
in progress.
- During the year, Sigma-Tau SpA sold a patent to Sirio
Pharma Srl for Euro 150.
Sales and purchases with related parties were carried out
according to terms and conditions similar to those applied in
free transactions. Open balances at the end of the year are not
guaranteed, do not generate interests and the settlement is
carried out on a cash basis. No guarantees for receivables and
payables with related parties were provided or received. With
regard to the year ended 31 December 2009, the Group did not
record any impairment for receivables with related parties
(2008: zero). This assessment is carried out on an annual basis
at each balance sheet date, by analysing the financial position of
the related party and the market in which such party operates.
8 6 |8 7
SIGMA-TAU FINANZIARIA SPA
Head office
Via Sudafrica, 20 - 00144, Rome
Tel +39 06 542771
www.sigma-tau.it
Design
Blueforma | design consultants
www.blueforma.it
Graphic realisation
Fabio Finocchioli
Copy-editing
postScriptum di Paola Urbani
Printed in Italy by
Litografia Bruni Srl, Pomezia (RM)
September 2010

Untitled - Sigma Tau

Transcription

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