SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULES 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Month of September 2003
SANOFI-SYNTHELABO
(Exact name of registrant as specified in its charter)
174, avenue de France, 75013 Paris, FRANCE
(Address of principal executive offices)
(Indicate by check mark whether the registrant files or will file
annual reports under cover Form 20-F or Form 40-F.)
Form 20-F X Form 40-F
--- ---
(Indicate by check mark whether the registrant by furnishing the
information contained in this Form is also thereby furnishing the
information to the Commission pursuant to Rule 12g3-2(b) under the
Securities Exchange Act of 1934.
Yes No X
--- ---
(If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b): 82-_______________.
[SANOFI-SYNTHELABO LOGO]
~ Investor Relations Paris, September 2nd, 2003
>> 2003 FIRST-HALF EPS* UP 18.6% ON A REPORTED BASIS
AND 31.9% AT 2002 EXCHANGE RATES
>> 2003 FULL-YEAR FORECASTS UPGRADED:
AT A RATE OF 1.10 DOLLARS TO ONE EURO, EPS* GROWTH
CLOSE TO 20%
*Earnings per share before exceptional items and goodwill amortization
FIRST HALF 2003:
o Acceleration in consolidated sales growth in the second quarter to
15.4%(1), against 13.4%(1) in the first quarter.
- Very strong growth in first-half consolidated sales of
Plavix(R)(27%(1)), Aprovel(R)(29.5%(1)) and Ambien(R)(20.8%(1)).
- Confirmation of blockbuster status for Eloxatin(R)
o Continued investment in R&D, with expenditure up by 12.9% at 2002 exchange
rates and by 5.8% on a reported basis.
- Progress to phase III of xaliprodene in Alzheimer's disease and
SR 58611 in depression
- Progress to phase II b of SR 57667 in Alzheimer's disease
o Strong growth in operating profit, up by 30.3% at 2002 exchange rates and
by 12.8% on a reported basis.
o First-half net income(2) 27.5% higher at 2002 exchange rates and 14.4%
higher on a reported basis.
o 2003 first-half EPS(2) up 18.6% at 1.34 euros, ahead of the Group's
forecasts.
OUTLOOK FOR 2003:
o Upgrade to our forecast for 2003 full-year sales growth, which we now
expect to be in the region of 15% on a comparable basis, as opposed to our
initial forecast of close to 12.8%.
o Growth of close to 20% in full-year 2003 EPS(2) expected at an average
annual rate of 1.10 dollars to one euro (as opposed to the 1 dollar per
euro rate previously assumed), giving an upgrade of 20% to our original
forecast for 2003 full-year EPS(2) growth. The sensitivity of this growth
rate to fluctuations in the dollar is unchanged at 1% for a 3-cent
movement.
o These revised expectations are, after taking account of a sustained effort
during the second half of the year designed to build for the future,
involving:
- an acceleration in R&D spend, associated with clinical trials;
- a reinforcement of marketing resources, especially in the United
States for the launch of Uroxatral(R).
----------------------------
(1) on a comparable basis
(2) before exceptional items and goodwill amortization
SHARE BUY-BACK PROGRAM 2003/2004:
o New authorization(3) for 1 billion euros, without any significant impact on
2003 EPS(2)
On September 1st, 2003, the Sanofi-Synthelabo Board of Directors examined the
Group's consolidated financial statements for the six months to June 30, 2003.
o Sanofi-Synthelabo generated consolidated sales of 3,903 million euros in
the first half of 2003, an increase of 14.4% on a comparable basis(4) and
6.1% on a reported basis.
Currency fluctuations had an unfavorable impact of 7.8 percentage points
over the half-year. Of this, half was due to the weakening of the US
dollar, and the rest was due to the weakness of some Latin American and
Asian currencies. Changes in Group structure(5) had an unfavorable impact
of 0.5 of a percentage point over the half-year.
o Gross profit was 3,153 million euros, a rise of 6.0%. At 2002 exchange
rates, gross profit would have risen by 16.9%.
The gross margin rate was unchanged relative to the first half of 2002 at
80.8%. This reflects a favorable product mix/industrial cost effect, offset
by a negative currency effect. At 2002 exchange rates, the gross margin
rate would have been 81.9%, an improvement of 1.1 percentage points.
o Research and development expenses increased by 5.8% during the first half
of 2003 to 621 million euros, representing 15.9% of sales, in line with the
2002 first-half figure. At 2002 exchange rates, research and development
expenses would have risen by 12.9%. This increase was mainly due to major
clinical trials programs covering products already on the market
(Plavix(R), Aprovel(R)/Avapro(R)), products in phase III (rimonabant,
idraparinux, zolpidem MR, tirapazamine), and phase I and II projects.
During the second half of the year, the rate of growth in research and
development expenditure is likely to accelerate, due in particular to the
progress of two new compounds into phase III.
o Selling and general expenses amounted to 1,204 million euros, 2.8% lower
than in the first half of 2002. At 2002 exchange rates, rigorous cost
management kept general expenses stable, restricting the rise in selling
and general expenses to 5.1%. Marketing spend rose by 6.6% at 2002 exchange
rates. Growth in marketing spend should accelerate in the second half of
2003, especially in the United States in anticipation of the launch of
Uroxatral(R).
----------------------------
(3) decided by the Board of Directors further to being authorized by the
Shareholders'Meeting of May, 19th 2003 (Prospectus visa COB n. 03-299 dated
April 22nd 2003).
(4) Comparable basis means constant Group structure and constant 2003 exchange
rates
(5) Primarily, change from full consolidation to 51% proportionate
consolidation of Sanofi-Synthelabo-Fujisawa (Taiwan) in May 2002
o Other operating income and expenses, mainly comprising transfers in respect
of joint operations with our partners (primarily Bristol-Myers Squibb),
represented a net gain of 63 million euros, against 85 million euros for
the first half of 2002. At 2002 exchange rates, this item would have shown
an increase of about 12.9%. The reported-basis decline in this item was due
mainly to the following factors:
- Negative currency effect on the share of profits generated by
Plavix(R)and Avapro(R)in the United States transferred by
Bristol-Myers Squibb.
- An increase in profits transferred to Bristol-Myers Squibb as a result
of the strong growth of Plavix(R)and Aprovel(R)in Europe.
o Operating profit rose to 1,391 million euros in the first half of 2003, up
by 12.8% over the first half of 2002. The operating margin rate advanced by
more than 2 percentage points to 35.6%, against 33.5% in the first half of
2002. If the net gains arising from the Group's currency hedging policy had
been recognized at operating level, operating profit would have risen by
approximately 16%. At 2002 exchange rates, growth in operating profit would
have been 30.3%.
o During the first half of 2003, net financial income totaled 63 million
euros, compared with 28 million euros in the first half of 2002. The
reduction in the Group's net cash position as a result of the share
buy-back program initiated in 2002 and a fall in the rate of interest on
the investment of surplus cash led to a decline in investment income.
However, two other factors resulted in an overall increase in net financial
income:
- A net foreign exchange gain generated by the Group's hedging policy of
53 million euros in the first half of 2003, against 13 million euros
in the first half of 2002.
- A further charge of 20 million euros in the first half of 2003 to the
provision for treasury shares allocated to stock option plans, against
the 38 million euros charged in the first half of 2002.
o Income taxes amounted to 458 million euros, against 313 million euros in
the first half of 2002, bringing the Group's effective tax rate to 33%
(versus 26% in the first half of 2002). The effective tax rate was
abnormally low in the first half of 2002, due to the write-back of
provisions for taxes and to the non-taxation of the share of Lorex profits
transferred to Pharmacia.
o Minority interests came to 2 million euros, compared with 83 million euros
in the first half of 2002. The 2002 first-half figure mainly comprised the
entitlement of Pharmacia to a share in the profits of the Lorex joint
venture for the period from January 1st, 2002 through April 16th, 2002, the
date on which Sanofi-Synthelabo bought out Pharmacia's 51% interest in
Lorex.
o Net income came to 944 million euros, an increase of 13.7%. At 2002
exchange rates, the increase would have been 26.7%.
o Net income before exceptional items and goodwill amortization totaled 947
million euros, a rise of 14.4%. At 2002 exchange rates, the rise would have
been 27.5%.
o Earnings per share before exceptional items and goodwill amortization was
1.34 euros, compared with 1.13 euros for the first half of 2002, an
increase of 18.6%. At 2002 exchange rates, the increase would have been
31.9%. The difference between growth in net income and growth in earnings
per share was mainly due to the share buy-back initiated in 2002. The
average number of shares used to calculate earnings per share for the first
half of 2003 was 706.5 million, against 731.8 million for the first half of
2002.
Implementation of the share buy-back programs authorized by the General Meetings
of May 22nd, 2002 and May 19th, 2003 led to the repurchase of 13.9 million
shares, acquired during the first half of 2003 in the light of market conditions
for a total of 688 million euros. As of August 31st, 2003, the Group owned 32.3
million shares acquired under the share buy-back programs implemented since
2002. These shares, acquired in the light of market conditions for a total of
1,749 million euros, represented 4.41% of the capital.
The net cash position in the balance sheet as of June 30th, 2003 stood at 1,967
million euros (versus 2,672 million euros as of December 31st, 2002), including
treasury shares amounting to 599 million euros held in connection with stock
option plans.
Recent events
-------------
- Announcement in June 2003 at the 39th annual conference of the ASCO
(American Society of Clinical Oncology) of major results with oxaliplatine
(Eloxatin(R)), clearly demonstrating consistent superiority in the
treatment of colorectal cancer at all settings of the disease (early stage,
adjuvant treatment after surgery, metastatic settings).
- Approval in June 2003 by the US Food and Drug Administration of
Uroxatral(R)in the treatment of the signs and symptoms of benign prostatic
hypertrophy.
- Approval in June 2003 by the US Food and Drug Administration, and favorable
opinion in July 2003 from the Committee for Proprietary Medicinal Products
on approval for marketing in Europe, for Arixtra(R) in the long-term
prevention of deep venous thrombosis in patients undergoing hip fracture
surgery.
- Announcement in July 2003 at the 19th conference of the ISTH (International
Society on Thrombosis and Haemostasis) of favorable results with
Arixtra(R), demonstrating a significant reduction of the risk of deep
venous thrombosis in medical patients (ARTEMIS study) and benefits in
prevention of deep venous thrombosis after major abdominal surgery (PEGASUS
study).
- In connection with the Plavix litigation in the United States, and as
announced on June 20th, 2003, patent "328" expiring 2014 has been withdrawn
from the patent infringement action and will be delisted from the Food and
Drug Administration "Orange Book". This withdrawal has no effect on product
patent "265" expiring 2011, which protects clopidogrel, the active
ingredient of Plavix, which we are confidently defending. As regards the
action itself, fact discovery is scheduled to end on October 15th, 2003,
with the pre-trial order expected towards mid-2004. The trial itself will
follow, on a date to be fixed by the Court.
Sanofi-Synthelabo consolidated statements of income
---------------------------------------------------
----------------------------------------------------
In millions of euros H1 2002 H1 2003 Change
===========================================================================================================================
Net sales 3,680 3,903 +6.1%
===========================================================================================================================
Gross profit 2,974 3,153 +6.0%
===========================================================================================================================
Research and development expenses (587) (621) +5.8%
---------------------------------------------------------------------------------------------------------------------------
Selling and general expenses (1,239) (1,204) -2.8%
---------------------------------------------------------------------------------------------------------------------------
Other operating income/(expense), net 85 63 -25.9%
===========================================================================================================================
Operating profit 1,233 1,391 +12.8%
===========================================================================================================================
Intangibles - amortization and impairment (55) (66) +20.0%
---------------------------------------------------------------------------------------------------------------------------
Financial income/(expense), net 28 63 +125.0%
---------------------------------------------------------------------------------------------------------------------------
Exceptional items 6 1 -
---------------------------------------------------------------------------------------------------------------------------
Income taxes (313) (458) +46.3%
---------------------------------------------------------------------------------------------------------------------------
Income from equity investees, net 18 19 +5.6%
---------------------------------------------------------------------------------------------------------------------------
Goodwill amortization (4) (4) -
---------------------------------------------------------------------------------------------------------------------------
Minority interests (83) (2) -
===========================================================================================================================
Net income 830 944 +13.7%
===========================================================================================================================
Exceptional items and goodwill amortization, net of income taxes (2) 3 -
===========================================================================================================================
Net income before exceptional items and goodwill amortization 828 947 +14.4%
===========================================================================================================================
Average number of shares outstanding 731,762,997 706,514,070 -
===========================================================================================================================
Earnings per share before exceptional items and goodwill 1.13 1.34 +18.6%
amortization, in euros
===========================================================================================================================
Sanofi-Synthelabo simplified balance sheet
------------------------------------------
In millions of euros
==================================================================================================================
ASSETS June 30, June 30, LIABILITIES & June 30, June 30,
2002 2003 SHAREHOLDERS' 2002 2003
EQUITY
==================================================================================================================
Total fixed assets 2,879 2,819 Shareholders' equity 5,905 5,591
------------------------------------------------------------------------------------------------------------------
Deferred income taxes 487 471 Minority interests 10 18
------------------------------------------------------------------------------------------------------------------
Inventories, accounts 3,022 3,273 Other long-term liabilities 813 780
receivable and other current
assets
------------------------------------------------------------------------------------------------------------------
Short-term investments and 3,045 2,274 Accounts payable and other 2,252 2,141
deposits, cash short-term liabilities
------------------------------------------------------------------------------------------------------------------
Debt 453 307
==================================================================================================================
Total assets 9,433 8,837 Total liabilities & 9,433 8,837
shareholders' equity
------------------------------------------------------------------------------------------------------------------
Sanofi-Synthelabo simplified statement of cash flows
----------------------------------------------------
------------------------------------------
In millions of euros H1 2002 H1 2003
--------------------------------------------------------------------------------------------------------------
Operating cash flow before changes in working capital 1,087 1,114
--------------------------------------------------------------------------------------------------------------
Changes in working capital (697) (355)
--------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 390 759
--------------------------------------------------------------------------------------------------------------
Total investments (1,026) (187)
--------------------------------------------------------------------------------------------------------------
Asset disposals and other items 17 6
--------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (1,009) (181)
--------------------------------------------------------------------------------------------------------------
Change in borrowings and other items 68 (102)
--------------------------------------------------------------------------------------------------------------
Dividends paid (476) (582)
--------------------------------------------------------------------------------------------------------------
Repurchase of own shares (386) (684)
--------------------------------------------------------------------------------------------------------------
Net cash used in financing activities (794) (1,368)
--------------------------------------------------------------------------------------------------------------
Net change in cash and cash equivalents (1,413) (790)
--------------------------------------------------------------------------------------------------------------
First-half consolidated sales by geographical region
----------------------------------------------------
----------------------------------------------------------------------------------------------
Change on a Change
Millions of euros H1 2003 H1 2002 H1 2002 comparable on a reported
(comparable) (reported) basis basis
--------------------------------------------------------------------------------------------------------------------
Europe 2,320 2,151 2,176 +7.9% +6.6%
United States 884 631 756 +40.1% +16.9%
Rest of the world 699 630 749 +11.0% -6.7%
--------------------------------------------------------------------------------------------------------------------
Total 3,903 3,412 3,680 +14.4% +6.1%
--------------------------------------------------------------------------------------------------------------------
First-half consolidated sales of the top 10 products
----------------------------------------------------
----------------------------------------------------------------------------------------------
Change on a Change
Millions of euros H1 2003 H1 2002 H1 2002 comparable on a reported
(comparable) (reported) basis basis
--------------------------------------------------------------------------------------------------------------------
Stilnox(R)/Ambien(R) 627 519 623 +20.8% +0.6%
Plavix(R) 612 482 496 +27.0% +23.4%
Eloxatin(R) 384 120 124 +220.0% +209.7%
Aprovel(R) 334 258 266 +29.5% +25.6%
Fraxiparine(R) 166 160 166 +3.8% +0.0%
Depakine(R) 137 130 135 +5.4% +1.5%
Xatral(R) 103 86 89 +19.8% +15.7%
Cordarone(R) 73 80 85 -8.8% -14.1%
Solian(R) 71 67 68 +6.0% +4.4%
Tildiem(R) 67 72 73 -6.9% -8.2%
-----------------------------------------------------------------------------------------------------------------
Total 2,574 1,974 2,125 +30.4% +21.1%
-----------------------------------------------------------------------------------------------------------------
Explanatory notes:
------------------
All figures in this press release are in French GAAP.
In this press release, we refer to our historical sales as "reported" sales.
In addition to reported sales, we also present and discuss two other non-GAAP
indicators that we believe are useful measurement tools to explain changes in
our reported sales:
Comparable sales: When we refer to the change in our sales on a "comparable"
basis, we mean that we exclude the impact of exchange rate fluctuations and
changes in Group structure (acquisitions and divestitures of entities and rights
to products as well as change in the consolidation percentage for consolidated
entities).
For any two periods, we exclude the impact of exchange rates by recalculating
sales for the earlier period on the basis of exchange rates used in the later
period.
We exclude the impact of acquisitions by including sales for a portion of the
prior period equal to the portion of the current period during which we owned
the entity or product rights based on sales information we receive from the
party from whom we make the acquisition. Similarly, we exclude sales in the
relevant portion of the prior period when we have sold an entity or rights to a
product.
For a change in the consolidation percentage of a consolidated entity, the prior
period is recalculated on the basis of the consolidation method used for the
current period.
Developed sales When we refer to "developed sales" of a product, we mean
consolidated sales, excluding sales of products to our alliance partners, but
including those that are made through our alliances and which are not included
in our consolidated sales (with Bristol-Myers Squibb on Plavix (R) /Iscover (R)
(clopidogrel) and Aprovel (R) /Avapro (R) /Karvea (R) (irbesartan), with
Fujisawa on Stilnox (R) /Myslee (R) (zolpidem), and with Organon on Arixtra (R)
(fondaparinux)). Our alliance partners provide us with information regarding
their sales in order to allow us to calculate developed sales.
We believe that developed sales are useful measurement tool because they
demonstrate trends in the overall presence of our products in the market.
------------
This release contains statements that constitute forward-looking statements
within the meaning of the U.S. Private Securities Litigation Reform Act of 1995.
These statements are based on management's current expectations or beliefs and
are subject to a number of factors and uncertainties that could cause actual
results to differ materially from those described in the forward-looking
statements. The following factors, among others, could cause actual results to
differ materially from those described in the forward-looking statements: the
ability of Sanofi-Synthelabo to expand its presence profitably in the United
States; the success of Sanofi-Synthelabo's research and development programs;
the ability of Sanofi-Synthelabo to protect its intellectual property rights;
and the risks associated with reimbursement of health care costs and pricing
reforms, particularly in the United States and France. Sanofi-Synthelabo does
not undertake any obligation to provide updates or to revise any forward-looking
statements.
Investors and security holders may obtain a free copy of documents filed by
Sanofi-Synthelabo with the French Commission des Operations de Bourse at
www.cob.fr and with the US Securities and Exchange Commission at www.sec.gov, or
directly from Sanofi-Synthelabo on the web site www.sanofi-synthelabo.com.
Investor Relations Department:
Philippe Goupit Director of Investor Relations
Arnaud Delepine Investor Relations Europe
Sanjay Gupta Investor Relations US
Isabelle Laurent Investor Relations
Contacts:
E-mail: investor-relations@sanofi-synthelabo.com
Europe United States
Tel: + 33 1 53 77 45 45 Tel: 00 1 212 551 42 93
Fax: + 33 1 53 77 42 96 Fax: 00 1 212 551 49 92
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: September 2, 2003
SANOFI-SYNTHELABO
By: /s/ Marie-Helene Laimay
---------------------------------
Name: Marie-Helene Laimay
Title: Senior Vice President and
Chief Financial Officer