SOURCE: Recordati S.p.A.

October 30, 2006 08:33 ET

Recordati S.p.A.: Revenues and profitability increase in the first nine months 2006 thanks to continuing international growth

MILANO (MI -- (MARKET WIRE) -- October 30, 2006 --


- Consolidated revenue EUR 439.6 million, up 3.6%.

- Pharmaceutical revenue up 3.4%, sales in Italy down 3.0%, international sales up 7.8%.

- Operating income EUR 92.0 million, up 10.1%.

- Net income EUR 55.9 million, up 9.7%.

- Net cash position EUR 64.1 million.

- Buy back of the sales and marketing rights of Corifeo®(lercanidipine) in Germany.

- A product license obtained for Infasurf®.

- Zanitek®/Zanipress® (lercanidipine+enalapril) approved in Germany (Reference Member State for the European mutual recognition process)

- Acquisition of the Jaba group pharmaceutical business in Portugal

- Proof of concept trials update

Milan, 30 October 2006 - The Board of Directors of Recordati S.p.A. approved the Group's consolidated results for the first nine months 2006 prepared in accordance with the IAS/IFRS requirements for interim reporting (IAS 34).

First nine months financial highlights

- In the first nine months consolidated revenue is EUR 439.6 million, an increase of 3.6% over the restated revenue of the same period of the preceding year. Pharmaceutical sales increase by 3.4% driven by the good performance of the international business (+7.8%). In Italy sales are down by 3.0% mainly due to price reductions. Lercanidipine, our original antihypertensive drug, continues to perform very well with global sales growing by over 26%. Pharmaceutical chemicals sales increase by 5.8%.

- Operating income, at 20.9% of sales, is EUR 92.0 million, an increase of 10.1% over the first nine months of the preceding year. The operating margin improvement is mainly due to gross profit which achieved a margin on sales of 67.1%, thanks to a favorable product mix.

- Net income at 12.7% of sales is EUR 55.9 million, an increase of 9.7% over the same period of the preceding year.

- The net financial position at 30 September 2006 is cash positive by EUR 64.1 million, an increase of EUR 38.0 million over that at 31 December 2005. The increase is to be attributed to cash flow generated by operations and to the proceeds from the sale of the Murcia pharmaceutical chemicals plant for an amount of EUR 13 million. Shareholders' equity increased and is EUR 349.1 million.

Business development news

- In January the pharmaceutical chemicals plant in Beniel (Murcia, Spain) was sold to Apotecnia S.A., an affiliate of the Spanish pharmaceutical company Asturpharma S.A., for a price of EUR 13 million. The sale of the plant in Murcia represents a further step in the reorganization of the pharmaceutical chemicals business which will be focused on a selection of products that will be produced only in our plant at Campoverde di Aprilia in Italy. This plant is increasingly dedicated to the production of Recordati's original active ingredients, an activity considered to be strategic for the group.

- At the beginning of April the 20mg dosage form of Zanidip® (lercanidipine) was launched on the British market by Recordati Pharmaceuticals. With a sales organization of 65 medical representatives our subsidiary is relaunching our main drug in this important market and is ready to effectively launch in the future the new products currently in our pipeline.

- During April an agreement was reached with the licensee UCB to buy back the sales and marketing rights in Germany of Corifeo®, one of the two brands under which lercanidipine is sold on the German market, for a price of EUR 10 million. Our subsidiary Merckle Recordati now sells Corifeo® in this market.

- In June Recordati entered into an exclusive license agreement with Ony Inc., a U.S. drug development company, for the marketing and sale in Europe of Infasurf®, a calf derived surfactant for the prevention and treatment of neonatal Respiratory Distress Syndrome (RDS). Infasurf®, together with stannsoporfin (a drug licensed for Europe from Infacare, USA), shall form the basis for Recordati's new European franchise in the highly specialized area of neonatology.

- At the end of July we received the approval for our new product Zanitek®, a fixed combination of lercanidipine and enalapril, from the BfArM, the German medicines agency. Germany will act as Reference Member State in the mutual recognition approval process for the rest of Europe which is expected to be completed during 2007. Most hypertensive patients, especially those with other associated risk factors, now require multiple therapies using more than one drug to keep their blood pressure at desired levels. Fixed combinations of more than one antihypertensive agent will therefore play a significant and increasing role in the future hypertension market. The advantages of fixed combinations as opposed to the administration of separate treatments are significant. The combined dosages of the drugs are those used in best clinical practice and their efficacy and tolerability have been proven in clinical trials. The reduction of the number of pills a patient must take, especially in the elderly, increases patient compliance - which is extremely important in chronic treatments aimed at reducing and preventing cardiovascular risk.

- On 28 July Recordati agreed to acquire Jaba Farmacêutica and the other pharmaceutical businesses belonging to the Grupo Jaba in Portugal. The purchase price is EUR 45 million approximately but may be adjusted contingent upon the full year 2006 operating results. The closing is expected to take place during 2006. Founded in 1927, Jaba, the third largest Portuguese pharmaceutical group, has a significant market share and an extensive product portfolio. The acquired business, which is headquartered near Sintra, comprises an organization of around 330 employees, including more than 100 medical representatives, and generated revenues in 2005 of approximately EUR 39 million with positive margins. The agreement concluded with Jaba allows us to enter the Portuguese market directly and represents a further step in our strategy to expand our direct presence in the European pharmaceutical market.

- In connection with our original research the first proof of concept trials conducted to evaluate the therapeutical efficacy of REC 2615 and REC 0545 were completed. REC 2615, a topical new drug with potential use for female sexual dysfunction, tested in a pharmacodynamic clinical proof of concept trial, did not reach statistical significance on the main pharmacological end point. It is believed that this may be due to the too slow build up of tissue levels and therefore reformulation work is ongoing. REC 0545 was administered to 18 patients with hyperactive bladder in a proof of concept, crossover clinical trial conducted to test the efficacy of the molecule in the treatment of overactive bladder. No statistically significant difference between active treatment and placebo was evidenced. An in depth evaluation is ongoing, including the possibility of pursuing the development of another compound with a mixed mechanism of action, including 5HT1A antagonism.

Management comments

"In the third quarter two important events for our growth strategy took place: the approval of our new combination product Zanitek® in Germany and the agreement to acquire the Jaba pharmaceutical business in Portugal" stated Giovanni Recordati, Chairman and CEO. "In the first nine months of this year our results confirm once again our group's growth and profitability improvement, thanks to the development of our international pharmaceutical operations. In Italy, on the other hand, revenues are down due to the continuing pricing pressure. The negative price effect will increase in the last quarter due to the further price cut of 5% announced at the end of September. However, the positive performance of our international activities also in the fourth quarter" concluded Giovanni Recordati, "will allow us to mitigate the impact of these measures. Therefore, we expect operating income for the whole year 2006 to be around EUR 120 million".

Conference call

Recordati will be hosting a conference call today 30 October 2006 at 4:00 pm Italian time, 3:00 pm London time and 10:00 am New York time. Dial-in numbers are:

Italy +39 02 802 09 11

UK +44 208 7929 750

USA +1 866 2396 425

France +33 170 700 532

Germany +49 69 2222 2225

A set of slides which will be referred to during the call will be available on our website www.recordati.com under Investors/Company Presentations.

Callers are invited to dial-in 10 minutes before conference time and ask for the Recordati conference call. If conference operator assistance is required during the connection please digit * followed by 0. A recording of the conference call will be placed on the website www.recordati.com .

Recordati, established in 1926, is a European pharmaceutical group, listed on the Italian Stock Exchange (Reuters RECI.MI, Bloomberg REC IM, ISIN IT 0003828271), dedicated to the research, development, manufacturing and marketing of pharmaceuticals, with headquarters in Milan, Italy, operations in the main European countries, and a total staff of over 2,000. A European field force of over 1,000 medical representatives promotes a wide range of innovative pharmaceuticals, both proprietary and under license, in a number of therapeutic areas. Recordati's current and growing coverage of the European pharmaceutical market makes it a partner of choice for new product licenses from companies which do not have European marketing organizations. Recordati is committed to the research of new drug entities within the cardiovascular and urogenital therapeutic areas in which its research team has proven scientific competence and a track record of discovery and development of original drugs, the most recent of which, lercanidipine, a latest generation calcium channel blocker for the treatment of hypertension, is the company's leading product. Consolidated revenue for 2005 was EUR 576.1 million, operating income was EUR 111.1 million and net income was EUR 64.5 million.

For further information:

Recordati website: www.recordati.com

Investor Relations

Marianne Tatschke

(39)0248787393

e-mail: inver@recordati.it

Media Relations

Claudio Rossetti (Echo Comunicazione d'Impresa)

(39)02 62694736

e-mail: crossetti@echocom.it

Statements contained in this release, other than historical facts, are "forward-looking statements" (as such term is defined in the Private Securities Litigation Reform Act of 1995). These statements are based on currently available information, on current best estimates, and on assumptions believed to be reasonable. This information, these estimates and assumptions may prove to be incomplete or erroneous, and involve numerous risks and uncertainties, beyond the Company's control. Hence, actual results may differ materially from those expressed or implied by such forward-looking statements.

All mentions and descriptions of Recordati products are intended solely as information on the general nature of the company's activities and are not intended to indicate the advisability of administering any product in any particular instance.

RECORDATI GROUP

Summary of consolidated results prepared in accordance with the International Accounting Standards and International Financial Reporting Standards (IAS/IFRS)

(thousands of EUR )

+-------------------------+----------------+------------------+----------+
|INCOME STATEMENT         | Jan - Sept 2006| Jan - Sept 2005* |  Change %|
+-------------------------+----------------+------------------+----------+
|REVENUE                  |         439,566|           424,400|       3.6|
+-------------------------+----------------+------------------+----------+
|Cost of sales            |       (144,823)|         (147,733)|     (2.0)|
+-------------------------+----------------+------------------+----------+
|GROSS PROFIT             |         294,743|           276,667|       6.5|
+-------------------------+----------------+------------------+----------+
|Selling expenses         |       (147,463)|         (144,011)|       2.4|
+-------------------------+----------------+------------------+----------+
|Research and development |        (34,140)|          (31,582)|       8.1|
|expenses                 |                |                  |          |
+-------------------------+----------------+------------------+----------+
|General & administrative |        (20,256)|          (17,994)|      12.6|
|expenses                 |                |                  |          |
+-------------------------+----------------+------------------+----------+
|Other income (expenses), |           (899)|               448|      n.s.|
|net                      |                |                  |          |
+-------------------------+----------------+------------------+----------+
|OPERATING INCOME         |          91,985|            83,528|      10.1|
+-------------------------+----------------+------------------+----------+
|Financial income         |         (1,805)|           (3,035)|    (40.5)|
|(expenses), net          |                |                  |          |
+-------------------------+----------------+------------------+----------+
|PRETAX INCOME            |          90,180|            80,493|      12.0|
+-------------------------+----------------+------------------+----------+
|Provision for income     |        (34,258)|          (29,230)|      17.2|
|taxes                    |                |                  |          |
+-------------------------+----------------+------------------+----------+
|NET INCOME from          |          55,922|            51,263|       9.1|
|continuing operations    |                |                  |          |
+-------------------------+----------------+------------------+----------+
|Discontinued operations  |               0|             (273)|   (100.0)|
+-------------------------+----------------+------------------+----------+
|NET INCOME               |          55,922|            50,990|       9.7|
+-------------------------+----------------+------------------+----------+
* Restated for comparison purposes

RECORDATI GROUP

Summary of consolidated results prepared in accordance with the International Accounting Standards and International Financial Reporting Standards (IAS/IFRS)

(thousands of EUR )

+-------------------------+---------------+----------------+--------+
|EARNINGS PER SHARE       |Jan - Sept 2006|Jan - Sept 2005*|Change %|
+-------------------------+---------------+----------------+--------+
|From continuing          |               |                |        |
|operations:              |               |                |        |
+-------------------------+---------------+----------------+--------+
|Basic                    |     EUR  0.279|      EUR  0.259|     7.7|
+-------------------------+---------------+----------------+--------+
|Diluted (1)              |     EUR  0.271|      EUR  0.249|     8.8|
+-------------------------+---------------+----------------+--------+
|From continuing and      |               |                |        |
|discontinued operations: |               |                |        |
+-------------------------+---------------+----------------+--------+
|Basic                    |     EUR  0.279|      EUR  0.258|     8.1|
+-------------------------+---------------+----------------+--------+
|Diluted (1)              |     EUR  0.271|      EUR  0.248|     9.3|
+-------------------------+---------------+----------------+--------+
*Restated for comparison purposes

Earnings per share (EPS) are based on average shares outstanding during each year, 200,195,116 in 2006 and 197,693,492 in 2005, net of average treasury stock which amounted to 5,405,059 in 2006 and 4,798,664 in 2005.

(1) Diluted earnings per share is calculated taking into account new shares authorized but not yet issued

+-------------------------+----------------+------------------+----------+
|COMPOSITION OF NET SALES:| Jan - Sept 2006| Jan - Sept 2005* |  Change %|
+-------------------------+----------------+------------------+----------+
|Pharmaceuticals          |         409,991|           396,443|       3.4|
+-------------------------+----------------+------------------+----------+
|Pharmaceutical Chemicals*|          29,575|            27,957|       5.8|
+-------------------------+----------------+------------------+----------+
|Total                    |         439,566|           424,400|       3.6|
+-------------------------+----------------+------------------+----------+
|- of which International |         280,034|           258,540|       8.3|
+-------------------------+----------------+------------------+----------+
+-------------------------+----------------+------------------+----------+
* Excludes discontinued operations

RECORDATI GROUP

Summary of consolidated results prepared in accordance with the International Accounting Standards and International Financial Reporting Standards (IAS/IFRS)

(thousands of EUR )

+-------------------------+-----------------+-----------------+----------+
|                         |           Third |           Third |          |
|INCOME STATEMENT         |     Quarter 2006|    Quarter 2005*|  Change %|
+-------------------------+-----------------+-----------------+----------+
|REVENUE                  |          128,485|          132,038|     (2.7)|
+-------------------------+-----------------+-----------------+----------+
|Cost of sales            |         (42,623)|         (46,057)|     (7.5)|
+-------------------------+-----------------+-----------------+----------+
|GROSS PROFIT             |           85,862|           85,981|     (0.1)|
+-------------------------+-----------------+-----------------+----------+
|Selling expenses         |         (40,225)|         (42,472)|     (5.3)|
+-------------------------+-----------------+-----------------+----------+
|Research and development |         (10,772)|          (9,521)|      13.1|
|expenses                 |                 |                 |          |
+-------------------------+-----------------+-----------------+----------+
|General & administrative |          (6,260)|          (5,812)|       7.7|
|expenses                 |                 |                 |          |
+-------------------------+-----------------+-----------------+----------+
|Other income (expenses), |            (208)|              125|      n.s.|
|net                      |                 |                 |          |
+-------------------------+-----------------+-----------------+----------+
|OPERATING INCOME         |           28,397|           28,301|       0.3|
+-------------------------+-----------------+-----------------+----------+
|Financial income         |            (472)|            (956)|    (50.6)|
|(expenses), net          |                 |                 |          |
+-------------------------+-----------------+-----------------+----------+
|PRETAX INCOME            |           27,925|           27,345|       2.1|
+-------------------------+-----------------+-----------------+----------+
|Provision for income     |          (9,427)|          (9,770)|     (3.5)|
|taxes                    |                 |                 |          |
+-------------------------+-----------------+-----------------+----------+
|NET INCOME from          |           18,498|           17,575|       5.3|
|continuing operations    |                 |                 |          |
+-------------------------+-----------------+-----------------+----------+
|Discontinued operations  |                0|            (199)|   (100.0)|
+-------------------------+-----------------+-----------------+----------+
|NET INCOME               |           18,498|           17,376|       6.5|
+-------------------------+-----------------+-----------------+----------+
* Restated for comparison purposes

RECORDATI GROUP

Summary of consolidated results prepared in accordance with the International Accounting Standards and International Financial Reporting Standards (IAS/IFRS)

(thousands of EUR )

+-------------------------+-----------------+-----------------+----------+
|                         |           Third |           Third |          |
|COMPOSITION OF NET SALES:|     Quarter 2006|    Quarter 2005*|  Change %|
+-------------------------+-----------------+-----------------+----------+
|Pharmaceuticals          |          120,652|          124,080|     (2.8)|
+-------------------------+-----------------+-----------------+----------+
|Pharmaceutical Chemicals*|            7,833|            7,958|     (1.6)|
+-------------------------+-----------------+-----------------+----------+
|Total                    |          128,485|          132,038|     (2.7)|
+-------------------------+-----------------+-----------------+----------+
|- of which International |           87,653|           81,792|       7.2|
+-------------------------+-----------------+-----------------+----------+
+-------------------------+-----------------+-----------------+----------+
* Excludes discontinued operations

RECORDATI GROUP

Summary of consolidated results prepared in accordance with the International Accounting Standards and International Financial Reporting Standards (IAS/IFRS)

(thousands of EUR )

+-------------------------+------------+------------+
|ASSETS                   |  30.09.2006|  31.12.2005|
+-------------------------+------------+------------+
|Property, plant and      |      58,722|      62,747|
|equipment                |            |            |
+-------------------------+------------+------------+
|Intangible assets        |      92,040|      88,650|
+-------------------------+------------+------------+
|Goodwill                 |      94,568|      94,568|
+-------------------------+------------+------------+
|Equity investments       |         911|         911|
+-------------------------+------------+------------+
|Other non-current        |       1,182|       1,253|
|receivables              |            |            |
+-------------------------+------------+------------+
|Deferred tax assets      |      19,448|      15,062|
+-------------------------+------------+------------+
|TOTAL NON-CURRENT ASSETS |     266,871|     263,191|
+-------------------------+------------+------------+
|Inventories              |      70,268|      68,621|
+-------------------------+------------+------------+
|Trade receivables        |     111,124|     111,924|
+-------------------------+------------+------------+
|Other receivables        |       7,532|      24,030|
+-------------------------+------------+------------+
|Other current assets     |       2,070|       2,069|
+-------------------------+------------+------------+
|Fair value of hedging    |           0|       2,174|
|derivatives (fair value  |            |            |
|hedge)                   |            |            |
+-------------------------+------------+------------+
|Short-term financial     |           0|      34,999|
|investments              |            |            |
+-------------------------+------------+------------+
|Cash and cash equivalents|     180,681|     127,757|
+-------------------------+------------+------------+
|TOTAL CURRENT ASSETS     |     371,675|     371,574|
+-------------------------+------------+------------+
|NON-CURRENT ASSETS HELD  |           0|      12,634|
|FOR SALE                 |            |            |
+-------------------------+------------+------------+
|TOTAL ASSETS             |     638,546|     647,399|
+-------------------------+------------+------------+
RECORDATI GROUP

Summary of consolidated results prepared in accordance with the International Accounting Standards and International Financial Reporting Standards (IAS/IFRS)

(thousands of EUR )

+-------------------------+------------+------------+
|EQUITY AND LIABILITIES   |  30.09.2006|  31.12.2005|
+-------------------------+------------+------------+
|Share capital            |      25,777|      25,631|
+-------------------------+------------+------------+
|Capital in excess of par |      72,356|      67,664|
|value                    |            |            |
+-------------------------+------------+------------+
|Treasury stock           |    (30,653)|    (20,410)|
+-------------------------+------------+------------+
|Hedging reserve          |     (1,655)|     (3,158)|
+-------------------------+------------+------------+
|Translation reserve      |         777|       1,824|
+-------------------------+------------+------------+
|Other reserves           |      24,058|      23,485|
+-------------------------+------------+------------+
|Retained earnings        |     202,541|     165,118|
+-------------------------+------------+------------+
|Net income for the year  |      55,922|      64,543|
+-------------------------+------------+------------+
|SHAREHOLDERS' EQUITY     |     349,123|     324,697|
+-------------------------+------------+------------+
|Loans due after one year |      86,306|     110,057|
+-------------------------+------------+------------+
|Employees' termination   |      23,261|      22,821|
|pay                      |            |            |
+-------------------------+------------+------------+
|Deferred tax liabilities |       6,527|       6,273|
+-------------------------+------------+------------+
|Other non-current        |       5,605|      11,240|
|liabilities              |            |            |
+-------------------------+------------+------------+
|TOTAL NON-CURRENT        |     121,699|     150,391|
|LIABILITIES              |            |            |
+-------------------------+------------+------------+
|Trade payables           |      62,622|      90,095|
+-------------------------+------------+------------+
|Other payables           |      31,400|      33,151|
+-------------------------+------------+------------+
|Tax liabilities          |      28,700|       9,780|
+-------------------------+------------+------------+
|Other current liabilities|         595|         481|
+-------------------------+------------+------------+
|Provisions               |      12,495|       6,937|
+-------------------------+------------+------------+
|Change in fair value of  |       1,655|       3,158|
|hedging derivatives (cash|            |            |
|flow hedge)              |            |            |
+-------------------------+------------+------------+
|Change in fair value of  |       1,987|           0|
|hedging derivatives (fair|            |            |
|value hedge)             |            |            |
+-------------------------+------------+------------+
|Loans due within one year|      20,689|      22,718|
+-------------------------+------------+------------+
|Bank overdrafts          |       7,581|       5,991|
+-------------------------+------------+------------+
|TOTAL CURRENT LIABILITIES|     167,724|     172,311|
+-------------------------+------------+------------+
|TOTAL EQUITY AND         |     638,546|     647,399|
|LIABILITIES              |            |            |
+-------------------------+------------+------------+
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