DJ DGAP-IRE: SCHWARZ PHARMA AG: Full Year Report 2007 – Integration of SCHWARZ PHARMA Business into UCB Group on Target

SCHWARZ PHARMA AG / Release of an announcement according to Article 37 of the WpHG [the German Securities Trading Act] 

29.02.2008 

Interim report according to Article 37 of the WpHG, transmitted by DGAP - a company of EquityStory AG.
The issuer is solely responsible for the content of this announcement.
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February 29, 2008
Full Year Report 2007: 

Integration of SCHWARZ PHARMA Business into UCB Group on Target 

Within the course of the integration process, a large share of SCHWARZ
PHARMA AG's foreign business was transferred to the UCB Group. At the end
of fiscal year 2007, 13 affiliates ceased to belong to the scope of
consolidation of SCHWARZ PHARMA AG. Hence the presented business figures
(preliminary and unaudited) show the results of the continued business
activities of the remaining consolidated companies. The latter achieved net
sales of EUR327.3 million in 2007 compared to EUR362.1 million in the
previous year (-9.6%). SCHWARZ PHARMA expects a sales increase in fiscal
year 2008. 

February 29, 2008 - 'Fiscal year 2007 was the year that marked our
successful integration into the UCB Group', says Peter Möller, Chairman of
the Executive Board of SCHWARZ PHARMA AG. 'Together with UCB, we want to
form a leading, next-generation biopharma company. The joint development
pipeline, with its main focus on neurology and inflammatory diseases, is
one of the 'best-filled' pipelines in the world.' In May 2007, the annual
general meeting of SCHWARZ PHARMA AG approved the domination and profit
transfer agreement, with UCB SP GmbH as the controlling company and SCHWARZ
PHARMA AG as the controlled company. This agreement was registered in the
German commercial register in July 2007, thus becoming legally effective.
Shareholders who did not accept the cash settlement offer from UCB SP GmbH,
amounting to EUR104.60 per share, will receive a guaranteed dividend per
share of
EUR3.18 (net)/EUR3.43 (gross). 

Sales Trend January to December 2007:
Sales: EUR327.3 million, -9.6% 

In fiscal year 2007, SCHWARZ PHARMA Group sales reached EUR327.3 million,
marking a decrease compared to the previous year (-9.6%). 

German sales fell by 24.2% to EUR163.7 million. This significant sales
decline is mainly due to the sales decline of the gastrointestinal drug
Rifun(R) (pantoprazole) which amounted to only EUR3.9 million (-90.3%) as a
result of the change of ownership. The top-performing products were the
antiasthmatic drug Atmadisc(R) (fluticasone/salmeterol), achieving EUR47.8
million (+1.5%), and the hypertension drug Provas(R) (valsartan) with sales
of EUR25.4 million (-31.9%). The sales decline of Provas(R) is due to a
change in the reporting of earnings arising from a contractual adjustment.
In 2007, sales of Neupro(R) (rotigotine transdermal patch) already reached
EUR16.5 million, significantly exceeding our expectations. 

Sales in the area 'Rest of Europe' came to EUR17.4 million (+29.0%),
marking a significant increase over last year. The group's licensing
business with other countries (Rest of the world) rose by 5.0% to EUR44.4
million. The top-performing products were Elantan(R) (isosorbidmononitrate)
with sales of EUR10.7 million (+/- 0.0%), Ferro(R) (iron) with sales of
EUR10.5 million (+1.5%), and Deponit(R) (glyceryl trinitrate) with sales of
EUR8.7 million (+14.1%). 

The sales of SCHWARZ PHARMA's Asian affiliates remained almost unchanged at
a level of EUR37.5 million. 

Earnings trend January to December 2007:
Operating result: -EUR8.5 million;
Result of continued operations: -EUR74.7 million 

SCHWARZ PHARMA achieved gross profit of EUR201.7 million in 2007, marking a
year-over-year decline of -10.1%. The gross margin fell insignificantly
from 61.9% to 61.6%. 

Selling, general and administrative expenses fell significantly by 22.2% to
EUR162.4 million. Restructuring programs and lower expenses for executive
stock option programs led to a reduction in personnel expenses. 

Research and development expenses fell significantly to EUR90.0 million
(-29.0%), also due to progress made in the development pipeline where four
projects are in the early stages of the filing process. 

Other income came to EUR56.2 million in 2007. Again in 2007, other income
was significantly affected by received milestone payments. 

The operating result in the past fiscal year thus came to -EUR8.5 million
against -EUR4.2 million in the previous year. The financial result came to
-EUR3.3 million, compared to -EUR0.2 million in the previous year. The
interest result improved from -EUR8.7 million in the previous year to
EUR0.1 million in the year under review. This development is mainly due to
a downward adjustment of the book value of Lipocine Inc., USA, amounting to
EUR8.6 million, which became necessary last year. 

The pre-tax result amounted to -EUR11.7 million against -EUR13.1 million in
fiscal year 2006. The group's income tax expense came to EUR63.0 million,
up from -EUR7.0 million. 

SCHWARZ PHARMA hence achieved a net result of -EUR74.7 million from
continued operations in fiscal year 2007, compared to -EUR6.1 million in
the previous year. 

The result of discontinued operations (which is shown separately in the
income statement) amounted to EUR946.7 million in the year under review
(2006: EUR19.2 million) and was mainly impacted by the transfer of 13
affiliates to the UCB group and the related deconsolidation effects. These
effects are included in the Other income of the discontinued business
activities. 

Sales achieved by the discontinued operations came to EUR531.0 million in
fiscal year 2007, compared to EUR638.2 million in the previous year, the
USA accounting for more than half this figure. 

Expenses in the discontinued operations came to EUR486.2 million. In
addition, attributable taxes on income came to EUR19.2 million. 

Cash flow statement, balance sheet, and employees
Net Cash Position -EUR2.3 million, Equity Ratio 9% 

The consolidated group recorded a cash outflow from operating activities of
EUR218.5 million in fiscal year 2007. This was mainly due to tax payments,
despite a lower level of trade receivables. 

Cash outflows for investments totaled EUR187.1 million against a figure of
EUR66.7 million in 2006. The majority of investments, totaling EUR150.3
million, were made in property, plant and equipment, primarily for
expanding the company's fine chemistry production in Shannon/Ireland. 

The cash inflow from financing activities came to EUR142.3 million compared
to EUR49.0 million in the same period of the previous year. These changes
are mainly due to the different financing structure of the group since,
compared to the previous year, financial transactions are now concluded by
an affiliate of the UCB Group. Dividend payments led to cash outflows of
EUR10.2 million. The net cash position came to -EUR2.3 million as per
December 31, 2007. 

The SCHWARZ PHARMA Group had an average worldwide workforce of 3,714
employees in fiscal year 2007 (2006: 4,359; -14.8%).
Outlook for 2008 

In 2008, the reported external sales of the group will include, in addition
to the current third-party sales of SCHWARZ PHARMA AG and its affiliates,
the sales achieved through dealings with UCB affiliates excluding the
SCHWARZ PHARMA Group. SCHWARZ PHARMA expects a sales increase and a
negative net result for 2008 in the face of the start-up expenses for
producing the drug fesoterodine. 

This outlook does not include earnings from the divestment of products or
partnerships and other divestments. Not included in this outlook are also
possible costs and expenses arising in connection with the continuing
integration of SCHWARZ PHARMA into the UCB Group as a result of the
domination and profit transfer agreement. 

SCHWARZ PHARMA AG and Affiliates*
(Fiscal year Jan. 1 to Dec. 31) 
EUR million                                          2007          2006 

Continued operations
  Net sales                                         327.3         362.1
  Cost of goods sold                                125.6         137.8
Gross profit (loss) on sales                        201.7         224.3
  Selling and marketing expenses                    109.8         125.7
  General and administrative expenses                52.6          83.2
  Research and development costs                     90.0         126.7
  Amortization of intangible assets                  13.4          11.9
  Impairment loss under IAS 36                        0.6           4.1
  Other income (expense)                             56.2         123.1
Operating result                                     -8.5          -4.2
  Interest result                                    -3.3          -0.2
  Income from at-equity investments                   0.0           0.0
  Other income from investments                       0.1          -8.7
Pre-tax result                                      -11.7         -13.1
  Taxes on income                                    63.0          -7.0
Result after taxes                                  -74.7          -6.1
Discontinued operations
Result from discontinued operations                 946.7          19.2
Net profit (loss) for the year                      872.0          13.1
Minority interests                                    1.2           0.7
Consolidated net income (loss)                      870.8          12.4 

EPS (EUR) in continued operations
 EPS 'basic' (EUR)                                   -1.53         -0.13
 EPS 'diluted' (EUR)                                 -1.53         -0.13 

EBITDA (excl. one-time effects;
   continued business areas)                         34.5          17.5
EBIT (excl. one-time effects;
   continued business areas)                          8.7         -10.9 

Number of shares
Annual average, million units                      48.797         47.418
As per December 31, million units                  48.798         48.776

*Comment:

- Preliminary, unattested figures

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