Meda AB (publ.) January - September 2007, interim report

Meda AB (publ.) January - September 2007, interim report

•	The Group's net sales reached SEK 5,820.8 million (3,904.6).

•	EBITDA, excluding non-recurring impact on profits, rose to SEK 1,980.8 (1)
million (1,072.4)(2), thus yielding a 34.0% margin (27.5). 

•	Operating profit, excluding non-recurring profit impact, increased to SEK
1,440.8 (1) million (788.9)(2).

•	Including non-recurring items, operating profit totalled SEK 1,322.7 million
(1,111.4).

•	Profit after tax was SEK 749.0 million (614.5). Excluding non-recurring items,
profit after tax rose to SEK 701.0(3) million (397.1)(3). 

•	Earnings per share (EPS) were SEK 3.20 (2.83). Excluding one-offs, EPS climbed
to SEK 3.00(3) (1.83)(3).

•	Full-year forecast for 2007 (excluding Recip): The Meda Group estimates
full-year sales of about SEK 8,000 million and EBITDA - excluding non-recurring
profit effects - exceeding SEK 2,500 million.

Highlights

Establishment in the US
•	Acquisition of MedPointe is complete, and the company was consolidated in the
Meda Group starting on 21 August.

•	Integration occurred faster than expected.

•	A new, improved formulation for Astelin (rhinitis treatment) was submitted to
the FDA for registration.

•	Launch of SOMA 250 (a muscle relaxant) commenced after FDA approval on 14
September 2007.

BEMA Fentanyl - new pain treatment
•	Meda acquired the exclusive rights to the US market.

•	BEMA Fentanyl is a patented drug for treatment of breakthrough pain episodes
in cancer patients.

•	Application for US registration is expected to take place shortly.

Acquisition of Recip
•	The deal is expected to add sales of about SEK 850 million in 2008 and enhance
Meda's operation in several key ways:

- Well-established drugs with stable profitability strengthen Meda's home base
in Sweden.
      - New products from Recip's portfolio can be sold outside the Nordics.

•	Purchase price: SEK 2,650 million in cash and 5.7 million newly issued shares
in Meda.

•	The acquisition is subject to competition authorities' approval.

SALES

The Meda Group's net sales for January - September rose nearly 50% to SEK
5,820.8 million (3,904.6), mainly due to acquisition of 3M's pharma division in
Europe. Exchange rate changes adversely affected Group sales by SEK 25.0
million, compared to 2006. The product portfolio acquired from 3M accounted for
SEK 1,565.7 million of the increase, and sales of its main products Tambocor,
Minitran, and Aldara rose as planned. Launch of Aldara's new indication (actinic
keratosis) is under way on the European markets and has been well-received. 
Formatris (asthma medication) demonstrated good sales growth after its launch on
several European markets during Q2 2007.

Sales in the US from the new acquisition were consolidated in the Meda Group
starting on 21 August. Sales totalled SEK 287.5 million for this part of Q3.
Sales of Astelin (azelastine), an allergy drug for treatment of rhinitis, were
SEK 155.3 million for the period, which due to continued robust growth in
prescriptions compared to 2006. SOMA (a muscle relaxant) was affected positively
by sales to wholesalers and retailers in preparation for launch of SOMA 250 mg.
SOMA sales reached SEK 67.6 million for the period.

PROFIT 

Non-recurring items 
Some non-recurring items, which have an effect on profit, affect comparability
with the same period in 2006. 

As stated in this year's earlier interim reports, integration of 3M's pharma
division was completed during Q1. Restructuring costs of SEK 118.1 million were
recognised during Q1, and these costs affect profit for January - September
2007. In the same period in 2006, profit included a positive non-recurring
impact of SEK 322.5 million due to disposal of a production plant in the
Netherlands and a collaboration agreement with Almirall, a Spanish pharma
company. 

Operating profit  
Group operating profit for January - September totalled SEK 1,322.7 million
(1,111.4). Operating expenses for the same period were SEK 2,320.0 million
(1,488.5); SEK 480.5 million (208.3) comprised intangible rights amortisation.
Restructuring costs after integration of 3M's pharma division were SEK 118.1
million. Group operating profit, excluding non-recurring items for January -
September thus increased to SEK 1,440.8(4) million (788.9)(5). 

EBITDA, excluding non-recurring profit impact for the same period, climbed to
SEK 1,980.8(4) million (1,072.4)(5) - about an 85% increase. So the EBITDA
margin, adjusted for non-recurring items, improved substantially to 34.0%
(27.5). Including non-recurring items, EBITDA for January - September totalled
SEK 1,862.7 million (1,394.9). 

The US operation contributed sales of SEK 287.5 million and EBITDA of SEK 103.0
million for the 21 August - 30 September period. Launch of SOMA 250 commenced
with sales to wholesalers. Intensive marketing to outpatient/ primary care
doctors and specialists is in progress. These efforts did not affect Q3, but
will affect Q4.

Financial items 
Group net financial items for January - September were SEK -316.6 million
(-189.1). A non-recurring effect - i.e., an SEK 65.3 million exchange difference
from Q1 regarding financing of the 3M acquisition - had a positive impact on net
financial items. So Group profit after net financial items totalled SEK 1,006.1
million (922.3) for the period. Net financial items for Q3 totalled SEK -151.1
million, compared to SEK -115.4 million for Q2. The increase is mainly due to a
bridging facility of SEK 3,700 million raised regarding acquisition of
MedPointe. 

Net profit 
Net profit for January - September, excluding non-recurring profit impact,
reached SEK 701.0(6) million (397.1)(7). Net profit for the same period,
including non-recurring profit impact, was SEK 749.0 million (614.5). Group tax
expense for January - September was SEK 257.1 million (307.8), equivalent to a
25.6% tax rate (33.4). A positive one-off effect of SEK 82.7 million had an
impact on tax expense in Q3 and resulted from revaluation of deferred tax
liabilities due to the future company-tax cut in Germany. Tax expense for
January - September, excluding the one-off effect, was SEK 339.8 million,
equivalent to a 33.8% tax rate. 

For the January - September period: earnings per share (EPS) before dilution -
excluding non-recurring profit effects - stood at SEK 3.00(6) (1.83)(7); EPS
before dilution stood at SEK 3.20 (2.83). 

FINANCIAL POSITION 
During January - September, Meda's financial position was reinforced - thanks to
positive cash flow from operating activities and the new share issues
implemented in February and August. Cash flow from operating activities (before
changes in working capital) rose to SEK 1,366.9 million (744.0). Implemented
restructuring measures had an adverse effect of SEK -93.0 million on cash flow.
Change in working capital totalled SEK -498.0 million (-145.6) and is mainly
attributable to the 3M acquisition, which was a net assets acquisition. Total
cash flow from operating activities thus reached SEK 868.9 million (598.4). 

Change in working capital for Q3 2007 totalled SEK -175.0 million - mainly due
to increased trade receivables associated with the acquisition in the US. 

During January - September, cash flow from investing activities was SEK
-11,015.2 million (-106.1). In January, Meda acquired 3M's European pharma
division for SEK 5,605.3 million and in May, a product portfolio from Wyeth in
the US for SEK 530.0 million. In August, Meda acquired MedPointe Inc., a US
pharma company, for SEK 4,556.5 million, less acquired cash assets. In
September, a first milestone payment was paid of SEK 205.9 million for the
acquired rights to BEMA Fentanyl in the US.

Cash flow from financing activities was SEK 10,168.5 million (-712.9) for
January - September. After issue expenses, the new share issue in February
generated cash flow of SEK 1,844.2 million. The MedPointe acquisition was partly
financed through a non-cash issue of SEK 1,723.7 million. The Group's higher net
borrowing led to cash flow of SEK 6,708.4 million. Dividend of SEK 116.1 million
was paid to Meda's shareholders in May. 

In Q3, the Group's increased net borrowing generated cash flow of SEK 2,843.0
million, less acquired loans in MedPointe.

At the end of September, Group cash and cash equivalents were SEK 142.1 million,
compared to SEK 120.6 million at year-end 2006. On 30 September, net debt stood
at SEK 12,040.0 million - compared to SEK 4,512.1 million at the end of 2006.
The equity/assets ratio was 33.9%, compared to 38.0% at year-end 2006. 

On 30 September, equity was SEK 8,429.8 million, compared to SEK 4,296.8 million
at year-end 2006, which corresponds to SEK 33.74 (19.75) per share. 

PARENT COMPANY 

Meda AB markets and sells pharmaceuticals and healthcare products. The company
also has participating interests in subsidiaries that operate in large parts of
Europe and in the US. 

Net sales for January - September 2007 totalled SEK 1,992.6 million (925.2), of
which intra-Group sales represented SEK 1,303.9 million (351.7). The increase in
intra-Group sales is mainly attributable to the parent company's sales of
pharmaceuticals acquired in 2007 to Group companies. Profit before
appropriations and tax totalled SEK 530.4 million (290.8).  

Cash and cash equivalents totalled SEK 0.5 million, compared to SEK 20.2 million
at year-end 2006. 

Investments in intangible rights amounted to SEK 4,256.2 million during January
- September 2007 and were mainly product acquisitions from 3M and Wyeth. Other
investments in property, plant, and equipment remained essentially unchanged
during the period in relation to the same period in 2006. 

Financial non-current assets totalled SEK 13,183.7 million, compared to SEK
5,872.4 million at year-end 2006. In August, Meda AB acquired all shares in
MedPointe at a purchase price of SEK 5,229.0 million excluding acquisition
costs. This price comprised USD 520 million in cash and 17.5 million newly
issued shares in Meda. The cash payment totalled SEK 3,506 million - an amount
fully financed using existing credit facilities. The newly issued shares were
recognised at SEK 98.50 each. The acquisition of 3M's European pharma division
entailed a rise in internal loan receivables. 

Meda AB implemented a new share issue in February 2007, which generated positive
cash flow of SEK 1,844.2 million after issue expenses. A non-cash issue of SEK
1,723.7 million was implemented in August in conjunction with acquisition of
MedPointe. Bank loans increased SEK 7,264.9 million (net) during the period. 

AGREEMENTS AND KEY EVENTS 

•	ESTABLISHMENT OF MEDA IN THE US 
On 20 July 2007, Meda announced that it had signed an agreement to acquire all
shares in MedPointe Inc. This strategic acquisition was completed on 21 August
2007, and MedPointe was consolidated in the Meda Group from that date. 

This strategic deal established Meda as a world-leading specialty pharma company
with full market coverage in the US and Europe. Meda has a pipeline that can now
be commercialised through a wholly owned subsidiary in the US market. This
retains the entire product value. Through its existing European organisation,
Meda can similarly leverage product development opportunities in MedPointe's
development programme. 

The acquisition gave Meda access to a platform for further expansion on the US
market, as already manifested in acquisition of the rights to BEMA Fentanyl in
the US - a product with potential to generate billions in sales.

Work to integrate MedPointe into the Meda Group is under way. The short-term
goal is to boost profitability significantly in the US operation, on a par with
the rest of the Group. This will be achieved by adapting MedPointe's structure
to the Meda model.  So this mainly means reducing the company's central
functions, about 50 positions, which will be redundant in the Meda Group. The
marketing organisation's dynamism will remain, for use in Meda's continued US
expansion.   

•	BEMA FENTANYL - NEW PAIN PRODUCT
Meda increased its co-operation with BioDelivery Sciences International Inc.
(BDSI), a US development company, by signing an agreement on 5 September 2007
that gave Meda exclusive rights to BEMA Fentanyl (a product with billion-kronor
potential) in the US, Canada, and Mexico. Meda already holds the rights for BEMA
Fentanyl on the European market.

BEMA Fentanyl is a patented pain treatment product consisting of a thin soluble
disc that sticks to the buccal (inner lining of cheek) membranes. The product
contains fentanyl, an opioid-like narcotic substance used for treatment of
breakthrough episodes in cancer patients, for example. In clinical studies, Bema
Fentanyl demonstrated important patient benefits, e.g., fewer side effects than
competing products. 

The basis of BEMA Fentanyl's registration application in the US and Europe
comprises FEN-201 and FEN-202 - two phase III studies. Both show good results.
Submission of the US registration application is expected to occur in Q4 2007,
which enables launch as early as year-end 2008. 
The two largest US products that contain fentanyl achieved sales of about SEK 5
billion in 2006, with growth of 60% compared to 2005.
•	FDA APPROVES SOMA 250 MG
On 14 September 2007, Meda announced that the US Food and Drug Administration
(FDA) approved SOMA 250 mg (a muscle relaxant) as the new recommended dose for
acute pain treatment.

SOMA is a well-established brand in the US, and the substance carisoprodol
generates about 10 million prescriptions per year. SOMA 250 mg is the first
low-dose alternative that can offer comparable efficacy to (yet better tolerance
than) carisoprodol 350 mg - a very frequently prescribed product. SOMA 250 mg
received exclusivity protection in the US for at least three years. The launch
started at the end of September.

•	NEW IMPROVED FORM OF ASTELIN (AZELASTINE) SUBMITTED FOR US REGISTRATION
In July 2007, MedPointe Pharmaceuticals, Meda's US subsidiary, submitted a new
drug application (NDA) to the US FDA for registration of a new improved
formulation of azelastine HCL nasal spray for rhinitis treatment. Studies
demonstrated that the new formulation provides significant improved efficacy
compared with the current product.  

The application has been approved for further FDA review. With an estimated
processing time of 10 months, approval of registration is expected in Q2 2008.
Then, a new, improved, steroid-free antihistamine nasal spray can be launched to
replace Astelin, the currently marketed product.
Two generic companies submitted (in 2006 and 2007, respectively) registration
applications for the azelastine substance in nasal spray. MedPointe has sued
these companies for patent infringement in the federal court, because the patent
is valid until 2011.  

Besides the above-mentioned product improvements for Astelin, several current
projects will strengthen Meda's franchise related to the azelastine substance. 

•	HIGHER DEGREE OF LASTING HEALING DURING ACTINIC KERATOSIS TREATMENT USING
ALDARA
On 20-22 September, new promising results for Aldara in tests to treat actinic
keratosis were presented at Arbeitsgemeinschaft Dermatologische Oncologie (ADO),
an annual congress in Regensburg, Germany.

An open study with parallel groups compared the efficacy of three different
treatments for actinic keratosis; cryotherapy (25 patients), 5% imiquimod cream
(Aldara) (26 patients), and 5% 5 fluorouracil (5 FU) (24 patients). Clinical and
histological evaluation showed that complete healing was observed in 32% of the
patients treated with cryotherapy, 67% with 5 FU, and 73% with Aldara. 

At a 12-month follow-up, new or reoccurring actinic keratosis was observed in a
large proportion of the patients treated with cryotherapy or 5 FU. The entire
treated area remained completely healed in 73% of the patients treated with
Aldara, compared to 4% with cryotherapy and 33% with 5 FU.  

•	ALDARA STUDY (BASAL CELL CANCER TREATMENT) ENDS WITH POSITIVE RESULTS
An open study was recently completed; it examined the effect of Aldara and the
side effects in long-term treatment of 182 patients (62 women and 120 men) with
basal cell cancer. 

Based on clinical evaluation, 90% of the patients' conditions had fully healed
12 weeks after completed treatment. Of these patients, about 85% were still free
of basal cell cancer after five years. Treatment of this cancer using Aldara
produced very good results: 78% of the patients were cured, and for five years
after treatment, they did not suffer from relapse.

No severe side effects were reported. The most common side effects were
well-tolerated and primarily comprised skin irritations, locally or at the
application site. 

•	CO-OPERATION WITH NOVAMED IN CHINA
In the spring of 2007 Meda entered into co-operation with Novamed
Pharmaceuticals Co Shanghai Ltd regarding the Chinese market. Work is
progressing as planned, and Thiocticacid and Tramadol were recently submitted to
the Chinese State FDA for registration. Meda intends to further broaden its
product portfolio in China.

•	ESTABLISHMENT OF MARKETING COMPANY IN TURKEY
During the spring of 2007, Meda decided to establish a marketing company in
Turkey. Local management has been appointed and the company has already a sales
force of 30 people. Meda Turkey initially markets Cibacen, Cibadrex and Parlodel
and thereafter other products will gradually be added to the operation.

KEY EVENTS AFTER PERIOD'S END

•	ACQUISITION OF RECIP, A SWEDISH PHARMA COMPANY
Meda signed an agreement to acquire Recip AB - a Nordic pharma company with
strong growth. As per the agreement, Meda takes over existing Recip AB sales and
the organisation. Meda also obtains  products rights, trademarks, right to the
Recip name. Recipharm, a production company, will continue as a contract
manufacturer for Meda and is not part of the deal.

The acquisition is expected to contribute sales of about SEK 850 million into
Meda's operation during 2008 and strengthens Meda in several significant
respects:

•	Well-established pharmaceuticals, with stable profitability, fortify Meda's
home base.
•	New product opportunities from Recip's portfolio that can be commercialised
outside the Nordic countries.
•	In terms of volume, Meda becomes one of the three largest pharma companies on
the Swedish market.
•	Considerable synergies can be achieved.

Meda is paying SEK 2,605 million in cash and 5.7 million newly issued Meda AB
shares for all shares in Recip AB (debt-free basis). This is comparable to an
acquisition multiple of about 10 times forecasted EBITDA for 2008. Existing
credit facilities finance the cash part. On 31 August 2007, Recip's equity
totaled about SEK 1.5 billion. The acquisition requires competition authority
approval. 

Pro forma sales for the operation that Meda is acquiring reached SEK 514 million
during the January - September 2007 period. The EBITDA margin was 37%. Of total
sales, 70% occurred in Sweden, 20% in the rest of the Nordic countries, and 10%
in other markets. Meda's well-developed marketing organisations in Europe and
the US form a firm foundation for further growth of Recip's products on new
markets. During 2008, Recip is expected to generate more than five new
pharmaceuticals registrations.

The portfolio consists of well-establish drugs such as Kåvepenin® (infectious
disease treatment), Heracillin® (infectious disease treatment), Kalcipos®
(osteoporosis treatment), and TrioBe® (prevention of vitamin B deficiency). The
deal also includes Aminess® N, a specialist drug for kidney failure, which is
being launched in the US.

Recip has its own operation in all Nordic countries (about 50 employees in
total); the operation mainly consists of marketing and sales.

OUTLOOK

Meda is in a strong expansion phase. During H2 2007, Meda acquired two
companies:  MedPointe in the US and Recip in the Nordics; the latter awaits
competition authorities' approval.  Meda also acquired several new products and
rights. The company is also preparing for product launches during 2008 on
several markets, particularly the US. Meda's goal is the same as before:
continued expansion with good profitability.

Integration of MedPointe into the Meda Group is progressing faster than
expected. Adapting to the Meda model in the US and synergies in Europe are
expected to generate an SEK 100 million non-recurring expense during Q4 2007.

Consolidation of the above-mentioned Recip depends on clearance from the
competition authorities.

Meda forecasts for 2007 (excl. Recip): "The Meda Group estimates sales of about SEK 8,000 million and EBITDA -
excluding non-recurring profit effects - exceeding SEK 2,500 million for all of
2007."

RISKS AND UNCERTAINTIES 

The Meda Group's business is exposed to financial risks. Meda's 2006 annual
report describes its risk management (pages 44-45). Several other factors, which
Meda cannot fully control, affect the Group. Factors that are particularly
significant for Meda's future growth are: competitors and pricing, actions by
authorities, partnerships, market valuations, clinical trials, key individuals
and recruitment, product liability plus patents and trademarks. The 2006 annual
report describes these types of risks (pages 90-91). 

ACCOUNTING PRINCIPLES 

Group 
Meda complies with the EU-approved IFRS standards and their interpretation
(IFRIC). This interim report was prepared as per International Accounting
Standard (IAS) 34 Interim Financial Reporting. Meda applies (1) the new standard
- IFRS 7, Financial instruments: Disclosures, and (2) Supplement to IAS 1,
Presentation of financial statements. The Group's accounting policies and
calculation methods are otherwise unchanged from the 2006 annual report. 
2007 REPORTS
Year-end report for 2007		Tuesday, 26 February 2008


Stockholm, 30 October 2007

Anders Lönner
CEO
The company's auditor did not review this interim report.



(1) Excluding restructuring costs of SEK 118.1 million, due to the 3M pharma
division acquisition. 
(2) Excluding revenue of SEK 76.4 million from disposal of a production plant in
the Netherlands, and SEK 246.1 million in capital    gain in connection with a
partnership agreement with Almirall, a Spanish pharma company. 
(3) Excluding the above non-recurring effects and excluding non-recurring
revenue of SEK 65.3 million in net financial items from Q1 2007. Calculated
using a standard tax rate of 33.8%, equivalent to the tax rate for
January-September 2007, excluding one-off effects from changed tax rates in
Germany.  
(4) Excluding restructuring costs of SEK 118.1 million due to the 3M pharma
division acquisition. 
(5) Excluding revenue of SEK 76.4 million from disposal of a production plant in
the Netherlands, and SEK 246.1 million in capital gain in connection with a
partnership agreement with Almirall, a Spanish pharma company. 
(6) Excluding restructuring costs of SEK 118.1 million due to the 3M pharma
division acquisition and excluding non-recurring revenue of SEK 65.3 million in
net financial items from Q1 2007. Calculated using a standard tax rate of 33.8%,
equivalent to the tax rate for January - September 2007 excluding one-off
effects due to changed tax rates in Germany.
(7) Excluding revenue of SEK 76.4 million from disposal of a production plant in
the Netherlands, and SEK 246.1 million in capital gain in conjunction with a
partnership agreement with Almirall, a Spanish pharma company. Calculated using
a standard 33.8% tax rate. 




For more information, please contact:

Anders Larnholt, Investor Relations, tel. +46 8 630 1972