Recordati: very positive results in third quarter 2000

Milan, November 13, 2000

The Board of Directors of Recordati S.p.A. approved today the consolidated results of the Group for the third quarter and the first nine months of 2000.

Quarterly results

• Consolidated net sales were 173.2 billion lira, an increase of 46.9% over the same period of last year (117.9 billion lira). In particular, pharmaceutical sales recorded a 65.9% increase. These results reflect also the consolidation of Bouchara, acquired at the end of June. Excluding Bouchara, total sales would have grown by 15.8% and pharmaceutical sales by 20.9%. International sales totalled 110.9 billion lira, or 64.0% of total sales.
• Gross profit (57.9% of sales) was 100.3 billion lira (+ 57.4%). The increase as a percent of sales derives from the strong growth of pharmaceuticals, the favorable sales mix in the same sector and the positive currency effect in pharmaceutical chemicals.
• EBITDA (21.4% of sales) grew by 17.9 billion lira reaching 37.0 billion lira (+ 107.2%). The newly acquired French companies also contributed favorably. Pharmaceuticals recorded a particularly strong performance, with EBITDA of 29.1 billion lira (21.5% of sales), more than double last year's in value. Pharmaceutical chemicals recorded EBITDA of 7.9 billion lira (19.2% of sales).
• Operating income (12.8% of sales) grew from 8.7 billion lira to 22.1 billion lira, or by 153.2%. This increase is higher than that of the previous half year, notwithstanding a sharp increase in goodwill amortization as a consequence of the acquisition of Bouchara.
• Net income (5.3% of sales) grew from 4.9 billion lira to 9.1 billion lira (up 84.2%).

The first nine months

• Consolidated net sales as of September 30, 2000, were 476.4 billion lira, an increase of 25.0% over the same period in 1999 (381.0 billion lira). Excluding the consolidation of Bouchara the increase in sales would have been 15.4%. In particular, pharmaceutical sales grew by 34.2% (including an organic sales growth of 20.2%) while pharmaceutical chemicals recorded a 4.6% increase. International sales grew by 36.8% and amounted to 54.3% of total sales.
• Gross profit reached 275.2 billion lira (57.8% of sales) increasing by 35.1% mainly due to strong growth and a favorable sales mix in pharmaceuticals.
• EBITDA (19.1% of sales) climbed from 52.2 billion lira to 91.2 billion lira, an increase of 74.6%, thanks to the significant improvement of profitability in pharmaceuticals, where EBITDA totalled 62.3 billion lira (17.7% of sales).
• Operating income (12.3% of sales) grew from 26.0 billion lira to 58.5 billion lira, an increase of 125.4%, net of R&D expense for 51.7 billion lira (+25.9% over the same period of 1999).
• Net income (6.9% of sales) grew from 15.6 billion lira to 32.7 billion lira, an increase of 109.8%.
• Net financial indebtedness, totaling 86.9 billion lira at the end of 1999, increased to 260.1 billion lira following the acquisition of Bouchara and is constituted mainly by medium and long term loans which, as of September 30, 2000 amounted to 250.0 billion lira. As of the same date shareholders' equity was 246.4 billion lira.

Third quarter highlights

• A collaboration agreement with Pharmacia Corporation for the research and development of new pharmaceutical products in urology was concluded.
• Regulatory activity for Zanidip® continued, with the objective of filing the registration in the USA and Canada during 2001. In early November an important licensing agreement was signed with Forest Laboratories for the USA.
• The success of Zanidip® continued in the 17 markets were it has already been introduced. Moreover, the product was recently launched in new markets, including Germany.
• The extraordinary shareholders meeting and the special savings shareholders meeting approved a project for conversion of all savings shares into ordinary shares (October 2000).

Comments on operations

"The positive third quarter results derive from actions aimed at securing solid, long term growth to our Group. These actions include focusing our resources on the core businesses of pharmaceuticals and pharmaceutical chemicals, concentrating our marketing efforts on key products, successfully exploiting the market potential of Zanidip®, and carefully controlling costs and expenses. In addition, we continued our efforts in research and development, increasing expense by 25.9% in the first nine months." - said Giovanni Recordati, Chairman - "The recently acquired companies in France contributed to boost the growth of our Group. For the whole of 2000 we are confident that we will achieve positive results, in line with the first nine months of the year."

Stock options plan

The Board of Directors approved a three-year stock option plan which is aimed at further committing top management to the growth and development of the Group and grants options for the subscription of ordinary shares. Specifically, the Board approved the issue of options to 150,000 shares which can be exercised in steps from 2001 to 2003.

Recordati (Reuters: RECI.MI, RECIr.MI, Bloomberg: REC IM, RECNC IM) is a european pharmaceutical group, founded in 1926 and listed on the Milan Stock Exchange. Engaged in the research, manufacturing and marketing of pharmaceuticals and pharmaceutical chemicals, Recordati is headquartered in Milan with operating subsidiaries in France, Portugal, Spain, Switzerland and the USA.