FINANCIAL
REPORT.
HALF-YEAR REPORT 2016
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CONTENTS
ACTELION’S MISSION:
TREAT MORE PATIENTS WITH
GROUNDBREAKING MEDICINES
03 Financial Review
Actelion Ltd. is a leading biopharmaceutical
company focused on the discovery, development and
commercialization of innovative drugs for diseases
with significant unmet medical needs.
19 Interim Consolidated
Financial Statements
Actelion is a leader in the field of pulmonary
arterial hypertension (PAH). Our portfolio of PAH
treatments covers the spectrum of disease, from
WHO Functional Class (FC) II through to FC IV,
with oral, inhaled and intravenous medications.
Although not available in all countries, Actelion
also has treatments approved by health authorities
for a number of specialist diseases including Type
1 Gaucher disease, Niemann-Pick type C disease,
Digital Ulcers in patients suffering from systemic
sclerosis, and mycosis fungoides type cutaneous
T-cell lymphoma.
HALF-YEAR
FINANCIAL REPORT.
CONTENTS
FINANCIAL
REVIEW
INTERIM CONSOLIDATED
FINANCIAL STATEMENTS
2
FINANCIAL
REVIEW
HALF-YEAR
FINANCIAL REPORT.
CONTENTS
FINANCIAL
REVIEW
INTERIM CONSOLIDATED
FINANCIAL STATEMENTS
3
1
PROFIT AND LOSS
(in CHF millions, except % variance and EPS)
2016
Half Year
2015
variance
CHF
Second Quarter
2016
2015
Sales
Product sales
Opsumit®
Tracleer®
Uptravi®
Other
1,179
378
546
90
165
1,008
208
645
155
17%
82%
-15%
nm
6%
13%
76%
-18%
nm
3%
590
200
256
56
78
493
113
301
79
20%
77%
-15%
nm
-0%
15%
71%
-19%
nm
-4%
Core results
Operating income
Net income
Diluted EPS
499
440
4.05
423
357
3.11
18%
23%
30%
11%
16%
23%
250
224
2.07
205
172
1.51
22%
30%
38%
14%
22%
29%
US GAAP results
Operating income
Net income
Diluted EPS
412
361
3.32
344
287
2.50
20%
25%
33%
12%
17%
23%
204
182
1.68
154
128
1.12
33%
42%
50%
22%
31%
38%
CER
variance
CHF
CER
CASH FLOW
(in CHF millions)
2016
Half Year
2015
2016
Second Quarter
2015
Cash flow
Operating cash flow
Capital expenditure
Cash returned to shareholders
Free cash flow
420
(31)
(294)
14
278
(11)
(596)
(540)
247
(26)
(225)
(53)
183
(5)
(596)
(483)
CASH POSITION AND SHARES
(in CHF millions)
June 30,
2016
Cash position
Net cash
418
472
405
114.1
8.9
4.7
114.1
9.5
5.6
114.1
9.1
5.9
Share count (million shares)
Issued common shares
Treasury shares held
Outstanding equity instruments
March 31, December 31,
2016
2015
Disclaimer and notes to this financial report:
Actelion continues to measure, report and issue guidance on its core operating performance, which management believes more
accurately reflects the underlying business performance. The Group believes that these non-GAAP financial measurements provide
useful supplementary information to investors. These non-GAAP measures are reported in addition to, not as a substitute for, US GAAP
financial performance.
Constant Exchange Rates (CER) percentage changes are calculated by reconsolidating both the H1 2015 and H1 2016 results at constant
currencies (the average monthly exchange rates for H1 2015).
Rounding differences may occur
nm = not meaningful
Europe = EU28 and Switzerland
HALF-YEAR
FINANCIAL REPORT.
CONTENTS
FINANCIAL
REVIEW
INTERIM CONSOLIDATED
FINANCIAL STATEMENTS
4
ACTELION FINANCIAL REPORT 2014
2
During the first six months of 2016, Actelion continued to deliver double digit sales and core operating income growth
through excellent execution across the commercial organization and disciplined management of the business. Due to this
continued strong performance and increased clarity on a number of factors, Actelion is upgrading its full-year 2016
financial guidance: the company is now confident that, barring unforeseen events, core operating income growth will be in
the low-teen percentage range at CER.
Product sales rose 13% at CER to 1,179 million Swiss francs driven by the continued growth of our PAH product portfolio
led by the strong uptake of Opsumit and the very successful Uptravi launch in the United States where the product was
introduced on January 4, 2016. With this strong performance along with the continued growth of Veletri, the transformation
of Actelion’s PAH portfolio is well underway with almost half of the second quarter 2016 sales stemming from its new
outcome-based therapies.
Core operating income increased by 11% at CER to 499 million Swiss francs. The strong sales performance was supported
by increased investment, as the commercial organization launched Uptravi in the United States, prepared to launch Uptravi
in Europe and beyond, and continued Opsumit and Veletri roll-outs in markets around the globe. Core R&D expenses
increased to 21% of sales as the company is advancing its late-stage pipeline. The company also made significant progress
by entering into Phase II clinical development with its new dual orexin receptor antagonist and Phase III with macitentan
(Opsumit) in children with PAH. G&A expenses increased by 5% at CER.
US GAAP operating income amounted to 412 million Swiss francs compared to 344 million Swiss francs in the first half of
2015, an increase of 12% at CER.
Core net income amounted to 440 million Swiss francs resulting in core diluted earnings per share (EPS) of 4.05 Swiss
francs, an increase of 16% and 23% at CER respectively compared to the first half of 2015.
US GAAP net income amounted to 361 million Swiss francs resulting in diluted earnings per share (EPS) of 3.32 Swiss
francs, an increase of 17% and 23% at CER respectively compared to the first half of 2015.
Actelion’s net cash position of 418 million Swiss francs at the end of June 2016 is almost unchanged since the start of the
year as the company believes the current cash levels are appropriate to retain full financial flexibility in order to seize any
external opportunities that would fit the company’s strategy while meeting its strict financial criteria to ensure value
creation for its shareholders.
In the absence of any meaningful acquisition, operating cash flow of 420 million Swiss francs for the first six months of 2016
was almost fully dedicated to return cash to shareholders and manage dilution arising from stock-based compensation, as
committed by the Board of Directors: Actelion paid an increased dividend of 1.50 Swiss franc per share (159 million Swiss
francs), purchased 0.9 million second-line shares (135 million Swiss francs) and 0.8 million first-line shares (113 million
Swiss francs).
HALF-YEAR
FINANCIAL REPORT.
CONTENTS
FINANCIAL
REVIEW
INTERIM CONSOLIDATED
FINANCIAL STATEMENTS
5
ACTELION FINANCIAL REPORT 2014
3
SALES
Sales by product
(in CHF millions, except % variance)
Product sales
Opsumit®
Tracleer®
Uptravi®
Veletri®
Ventavis®
Valchlor®
Zavesca®
Others
Total product sales
2016
Half Year
2015
378
546
90
48
43
18
52
4
1,179
208
645
38
57
12
44
3
1,008
variance
CHF
82%
-15%
nm
24%
-24%
49%
17%
17%
17%
CER
76%
-18%
nm
19%
-27%
43%
15%
22%
13%
Second Quarter
2016
2015
200
256
56
24
17
9
27
2
590
113
301
19
26
7
25
2
493
variance
CHF
CER
77%
-15%
nm
24%
-35%
24%
8%
13%
20%
71%
-19%
nm
18%
-37%
20%
6%
15%
15%
Actelion delivered an outstanding first half 2016, driven by a very strong Uptravi launch in the US and the continued
successful uptake of Opsumit. The excellent performance of the company’s outcome-based PAH portfolio is the result of
consistently strong referrals of new PAH patients across markets, as well as an increase in the number of patients
benefitting from double and triple combination PAH therapy.
In the US, sales increased by 25% at CER, driven by the strong Uptravi launch, continued Opsumit momentum and ERA
market share gains. European sales were 1% lower at CER, despite increased Opsumit uptake and Tracleer use in the
digital ulcer indication, due to continued pricing pressure and market erosion from generics particularly in Spain. Sales in
Japan increased by 20% at CER, mostly driven by very strong sales of Opsumit (launched in June 2015), Veletri and Zavesca
(Japanese trade name Brazaves).
Comparing average exchange rates for the first six months of 2016 to the first six months of 2015, the Swiss franc
weakened against the US dollar, euro and Japanese yen, but strengthened - on average - against all other currencies,
which resulted in a positive currency variance of 39 million Swiss francs.
Sales by region
(in CHF millions, except % variance)
Product sales by region
United States
Europe
Japan
Rest of the world
Total product sales
HALF-YEAR
FINANCIAL REPORT.
2016
Half Year
2015
639
322
116
102
1,179
495
318
86
109
1,008
CONTENTS
variance
CHF
CER
29%
1%
34%
-6%
17%
25%
-1%
20%
-3%
13%
FINANCIAL
REVIEW
Second Quarter
2016
2015
313
158
66
54
590
243
155
45
50
493
INTERIM CONSOLIDATED
FINANCIAL STATEMENTS
variance
CHF
CER
29%
1%
48%
8%
20%
25%
-3%
29%
10%
15%
6
ACTELION FINANCIAL REPORT 2014
4
PAH FRANCHISE
Opsumit®
(in CHF millions, except % variance)
Sales by region
United States
Europe
Japan
Rest of the world
Total
2016
Half Year
2015
246
82
22
28
378
149
46
1
12
208
variance
CHF
CER
66%
79%
nm
nm
82%
60%
74%
nm
nm
76%
Second Quarter
2016
2015
126
44
14
16
200
80
25
1
7
113
variance
CHF
CER
58%
74%
nm
nm
77%
53%
68%
nm
nm
71%
Sales of Opsumit (macitentan) amounted to 378 million Swiss francs for the first six months of 2016, an increase of 76% at
CER compared to the first six months of 2015. This increase continues to be driven by the uptake trajectory with commercial
availability in over 30 countries. The strong increase in patients benefitting from Opsumit was driven by referral of
treatment-naïve patients together with increased early combination with PDE-5 inhibitors, and some switching from
Tracleer, notably in Japan.
Tracleer®
(in CHF millions, except % variance)
Sales by region
United States
Europe
Japan
Rest of the world
Total
2016
Half Year
2015
207
203
80
57
546
249
241
74
81
645
variance
CHF
-17%
-16%
8%
-31%
-15%
CER
-19%
-18%
-3%
-28%
-18%
Second Quarter
2016
2015
89
95
45
28
256
115
114
38
34
301
variance
CHF
CER
-23%
-17%
18%
-18%
-15%
-25%
-20%
3%
-16%
-19%
Sales of Tracleer (bosentan) amounted to 546 million Swiss francs for the first six months of 2016, a decrease of 18% at
CER compared to the first six months of 2015. This decrease was mostly a consequence of lower volumes in countries
where Opsumit is available, due to lower referrals of new patients as well as switches to Opsumit. Underlying volumes
decreased globally by 16%. Tracleer sales were further impacted by increased generic bosentan competition, notably in
Spain, continued pricing pressure in Europe and buying pattern variations in the US.
Positively, Tracleer sales were supported by the digital ulcer indication in Europe and Japan and continued solid demand in
markets where Opsumit is not yet available.
Following the Pediatric Investigation Plan (PIP) compliance statement from the European Committee for Medicinal
Products for Human Use (CHMP), applications for extension of the Supplementary Protection Certificate (SPC) were filed in
19 EU countries and have been granted in 15 of those, with 4 still pending.
HALF-YEAR
FINANCIAL REPORT.
CONTENTS
FINANCIAL
REVIEW
INTERIM CONSOLIDATED
FINANCIAL STATEMENTS
7
ACTELION FINANCIAL REPORT 2014
5
Uptravi®
(in CHF millions, except % variance)
Sales by region
United States
Europe
Japan
Rest of the world
Total
2016
Half Year
2015
90
0
0
90
-
variance
CHF
CER
nm
nm
nm
nm
nm
nm
nm
nm
Second Quarter
2016
2015
55
0
0
56
-
variance
CHF
CER
nm
nm
nm
nm
nm
nm
nm
nm
Sales of Uptravi (selexipag) amounted to 90 million Swiss francs for the first six months of 2016. Approximately 60 million
Swiss francs can be attributed to patient demand and 30 million Swiss francs to the build-up of the US inventory as 10
different presentations of the drug across the various doses were made available. Uptravi has been launched in the US
since January 4, 2016 and in Germany since June 15, 2016.
During the second quarter 2016, Uptravi also became available in France under a temporary cohort authorization of use
(“ATU”) and in Canada for the private market segment. At the end of June, around 1,150 patients were using this outcomebased, oral selective IP receptor agonist.
Veletri®
(in CHF millions, except % variance)
Sales by region
United States
Europe
Japan
Rest of the world
Total
2016
Half Year
2015
20
11
13
3
48
20
6
10
3
38
variance
CHF
CER
3%
nm
22%
17%
24%
-0%
nm
10%
19%
19%
Second Quarter
2016
2015
10
6
6
2
24
9
3
5
1
19
variance
CHF
CER
7%
80%
20%
23%
24%
4%
74%
4%
25%
18%
Sales of Veletri (epoprostenol for injection) amounted to 48 million Swiss francs for the first six months of 2016, an increase
of 19% at CER compared to the first six months of 2015. This increase was mostly driven by increased market penetration,
successful launches in additional markets and continued growth in Japan (where it is marketed as Epoprostenol “ACT”). In
March 2016, Actelion Japan was notified of an average 12% price cut for Veletri, effective March 1, 2016. At the end of June
2016, Veletri was available in 15 countries globally.
Ventavis®
(in CHF millions, except % variance)
Sales by region
United States
Europe
Japan
Rest of the world
Total
2016
Half Year
2015
43
43
57
57
variance
CHF
CER
-24%
-27%
-24%
-27%
Second Quarter
2016
2015
17
17
26
26
variance
CHF
CER
-35%
-37%
-35%
-37%
Sales of Ventavis (iloprost) amounted to 43 million Swiss francs for the first six months of 2016, a decrease of 27% at CER
compared to the first six months of 2015 due to competitive environment, including the availability of Uptravi. Underlying
units decreased by 34%.
HALF-YEAR
FINANCIAL REPORT.
CONTENTS
FINANCIAL
REVIEW
INTERIM CONSOLIDATED
FINANCIAL STATEMENTS
8
ACTELION FINANCIAL REPORT 2014
6
SPECIALTY PRODUCTS
Valchlor®
(in CHF millions, except % variance)
Sales by region
United States
Europe
Japan
Rest of the world
Total
2016
Half Year
2015
17
1
0
18
11
1
12
variance
CHF
56%
-14%
nm
nm
49%
CER
50%
-17%
nm
nm
43%
Second Quarter
2016
2015
9
1
0
9
7
1
7
variance
CHF
CER
27%
-19%
nm
nm
24%
24%
-23%
nm
nm
20%
Sales of Valchlor (mechlorethamine) amounted to 18 million Swiss francs for the first six months of 2016, an increase of
43% at CER compared to the first six months of 2015. In the US, the company is continuing its efforts to establish Valchlor
as an option in the treatment algorithm for early-stage mycosis fungoides, a type of Cutaneous T-Cell Lymphoma
(MF-CTCL).
In France, patients benefited from the drug under a temporary nominative authorization for use (“ATU”) program initiated
during the second half of 2014. The regulatory dossier is currently under review with the European Medicines Agency
(under the trade name Ledaga®).
Zavesca®
(in CHF millions, except % variance)
Sales by region
United States
Europe
Japan
Rest of the world
Total
2016
Half Year
2015
16
24
2
10
52
10
24
1
9
44
variance
CHF
CER
54%
0%
33%
16%
17%
49%
-2%
19%
22%
15%
Second Quarter
2016
2015
7
12
1
6
27
6
12
1
6
25
variance
CHF
CER
17%
4%
43%
4%
8%
14%
-0%
25%
7%
6%
Sales of Zavesca (miglustat) amounted to 52 million Swiss francs for the first six months of 2016, an increase of 15% at CER
compared to the first six months of 2015. Sales in the US were strong due to a relatively low prior year base as a
consequence of last year’s inventory adjustment. The global number of patients receiving therapy grew by 5% compared to
the first half of 2015, driven by a 14% increase in Niemann-Pick type C demand ex-US.
In Europe, sales decreased by 2% mainly due to the launch of generic miglustat (approved for the type 1 Gaucher disease
indication only), which has become commercially available in Spain, Sweden and the Czech Republic. Sales in Japan were
19% higher driven by increased patient demand in the Niemann-Pick type C indication.
HALF-YEAR
FINANCIAL REPORT.
CONTENTS
FINANCIAL
REVIEW
INTERIM CONSOLIDATED
FINANCIAL STATEMENTS
9
ACTELION FINANCIAL REPORT 2014
7
OPERATING EXPENSES
Operating expenses break down as follows:
(in CHF millions, except % variance)
Operating expenses
Core cost of sales
Core research and development
Core SG&A
Core operating expenses
Depreciation of assets
Amort. of acquired intangible assets
Stock-based compensation
Milestone payment
Doubtful debt movements
Accretion expenses (benefits)
Other expenses
Non-core operating expenses
US GAAP operating expenses
2016
Half Year
2015
92
250
338
681
16
28
32
2
0
9
(0)
87
767
94
191
300
585
18
27
27
11
5
(7)
0
82
667
2016
Half Year
2015
56
36
92
9
101
63
31
94
(7)
88
variance
CHF
-2%
31%
13%
16%
-12%
3%
18%
nm
nm
nm
nm
6%
15%
CER
-4%
30%
11%
15%
-12%
2%
18%
nm
nm
nm
nm
6%
14%
Second Quarter
2016
2015
46
124
169
340
8
14
16
2
0
6
(0)
46
386
43
94
151
288
9
12
15
11
5
1
(0)
53
341
variance
CHF
7%
32%
13%
18%
-10%
16%
8%
nm
nm
nm
nm
-14%
13%
CER
5%
31%
10%
16%
-11%
15%
8%
nm
nm
nm
nm
-14%
12%
Cost of sales
(in CHF millions, except % variance)
Cost of sales
Royalty expenses
Cost of goods sold
Core cost of sales
Non-core cost of sales
US GAAP cost of sales
variance
CHF
-11%
16%
-2%
nm
15%
CER
-14%
16%
-4%
nm
13%
Second Quarter
2016
2015
31
16
46
6
52
28
15
43
1
45
variance
CHF
CER
11%
1%
7%
nm
17%
7%
2%
5%
nm
15%
Core cost of sales for the first six months of 2016 decreased by 4% at CER to 92 million Swiss francs, despite an increase in
sales of 13% at CER.
Royalties in the first half of 2016 were lower, mainly due to ceased royalty obligations, following the patent expiry of
Tracleer in the US (late November 2015) and Ventavis (mid-March 2015). Royalties were also lower due to a favorable
product mix with a low single-digit royalty rate paid on Opsumit sales compared to a high single-digit rate paid on Tracleer
sales in markets where Tracleer is still under patent protection and despite a mid-teen royalty rate on Uptravi.
Non-core cost of sales relate to the accretion expense for the contingent consideration for Valchlor in H1 2016 compared to
a positive impact in H1 2015 due to adjusted sales projections.
HALF-YEAR
FINANCIAL REPORT.
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FINANCIAL STATEMENTS
10
ACTELION FINANCIAL REPORT 2014
8
Research and development (“R&D”) expenses
(in CHF millions, except % variance)
Core R&D expenses
Depreciation
Stock-based compensation
Milestone payment
US GAAP R&D expenses1
Amort. of acquired intangible assets
US GAAP R&D expenses
2016
Half Year
2015
250
11
14
2
277
3
280
191
13
12
11
227
1
228
variance
CHF
31%
-11%
19%
nm
22%
nm
23%
CER
30%
-12%
19%
nm
22%
nm
22%
Second Quarter
2016
2015
124
6
6
2
138
2
139
94
6
6
11
117
1
118
variance
CHF
CER
32%
-9%
7%
nm
18%
nm
18%
31%
-9%
7%
nm
17%
nm
18%
As reported in the consolidated income statements, excluding amortization of acquired intangible assets.
1
Core R&D expenses amounted to 250 million Swiss francs, an increase of 30% at CER. This increase was driven by higher
clinical trial expenses, mainly driven by the strong recruitment in the Phase III OPTIMUM study (ponesimod in multiple
sclerosis announced in April 2015) and the Phase III IMPACT study (Cadazolid in Clostridium difficile associated diarrhea), in
order to complete enrollment before year-end. Core R&D expenditure represented 21% of product sales. Actelion will
continue to focus on carefully balancing investments so as to ensure future growth and delivery of appropriate shareholder
returns.
US GAAP R&D expenses included depreciation of 11 million Swiss francs (relating to the research building and laboratory
equipment) and stock-based compensation expenses of 14 million Swiss francs.
Selling, general and administrative (“SG&A”) expenses
(in CHF millions, except % variance)
SG&A expenses
Marketing, selling and distribution
General and administrative
Core SG&A expenses
Depreciation
Stock-based compensation
Doubtful debt movements
Other
US GAAP SG&A expenses1
Amort. of acquired intangible assets
US GAAP SG&A expenses
1
2016
Half Year
2015
243
95
338
5
18
0
0
362
25
386
210
89
300
6
15
5
326
26
351
variance
CHF
16%
6%
13%
-12%
17%
nm
nm
11%
-4%
10%
CER
13%
5%
11%
-13%
17%
nm
nm
9%
-4%
8%
Second Quarter
2016
2015
122
48
169
3
9
0
182
12
194
106
44
151
3
9
5
167
11
179
variance
CHF
15%
8%
13%
-13%
8%
nm
nm
9%
8%
9%
CER
11%
6%
10%
-14%
8%
nm
nm
6%
7%
6%
As reported in the consolidated income statements, excluding amortization of acquired intangible assets.
Core marketing, selling and distribution expenses amounted to 338 million Swiss francs, an increase of 11% at CER. This
increase was driven mostly by costs relating to launch activities of Uptravi in the United States, Canada, Germany and other
anticipated European launches. Additionally, the company is continuing the roll-out of Opsumit and Veletri in various
markets around the globe. G&A expenses increased by 5%.
US GAAP SG&A expenses included depreciation of 5 million Swiss francs and stock-based compensation expenses of
18 million Swiss francs.
HALF-YEAR
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CONTENTS
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11
ACTELION FINANCIAL REPORT 2014
9
OPERATING RESULTS
(in CHF millions, except % variance)
2016
Half Year
2015
Operating results
Product sales
Core operating expenses
Core operating income
Contract revenue
Non core operating expenses
US GAAP operating income
1,179
(681)
499
0
(87)
412
1,008
(585)
423
3
(82)
344
variance
CHF
CER
Second Quarter
2016
2015
17%
16%
18%
nm
6%
20%
13%
15%
11%
nm
6%
12%
590
(340)
250
0
(46)
204
493
(288)
205
2
(53)
154
variance
CHF
20%
18%
22%
nm
-14%
33%
CER
15%
16%
14%
nm
-14%
22%
Core operating income amounted to 499 million Swiss francs, an increase of 11% or 47 million Swiss francs at CER. The
weakening of the Swiss franc against the major currencies affecting Actelion’s performance had a positive impact of
29 million Swiss francs on core operating income.
Non core operating expenses were stable excluding accretion effects and milestone payments.
US GAAP operating income amounted to 412 million Swiss francs, an increase of 12% at CER.
NET RESULTS
(in CHF millions, except % variance)
Net results
Core operating income
Core financial results
Core income tax
Core net results
2016
Half Year
2015
499
3
(62)
440
423
(17)
(48)
357
variance
CHF
CER
18%
nm
nm
23%
11%
nm
nm
16%
Second Quarter
2016
2015
250
4
(30)
224
205
(10)
(23)
172
variance
CHF
CER
22%
nm
nm
30%
14%
nm
nm
22%
Core net income amounted to 440 million Swiss francs, an increase of 16% at CER.
Core financial result amounted to 3 million Swiss francs related to foreign exchange gains. Actelion aims to minimize the
volatility of the company’s financial results and uses forward contracts to hedge transaction exposures arising from foreign
currency cash flows and cash positions held in foreign currencies. Actelion no longer incurs interest expense as the
company is debt-free.
Core tax expense amounted to 62 million Swiss francs, which translates into an effective core tax rate of 12.3%. This core
tax rate is slightly higher than in 2015 due to higher profits outside of Switzerland and is expected to remain around this
level for the remainder of the year.
(in CHF millions, except % variance)
Net results
Operating results
Financial results
Income tax
Net results
Net loss attr. to the nonctrl. interests
US GAAP net results
2016
Half Year
2015
412
3
(55)
360
1
361
344
(17)
(42)
284
3
287
variance
CHF
CER
20%
nm
nm
26%
nm
25%
12%
nm
nm
18%
nm
17%
Second Quarter
2016
2015
204
4
(26)
182
1
182
154
(10)
(18)
125
3
128
variance
CHF
CER
33%
nm
nm
45%
nm
42%
22%
nm
nm
34%
nm
31%
Below the operating line, US GAAP results do not materially differ from core results.
HALF-YEAR
FINANCIAL REPORT.
CONTENTS
FINANCIAL
REVIEW
INTERIM CONSOLIDATED
FINANCIAL STATEMENTS
12
ACTELION FINANCIAL REPORT 2014
10
EARNINGS PER SHARE (EPS)
2016
Half Year
2015
440
361
Basic earnings per share
Weighted avg no. of shares (in mm)
Core basic EPS (in CHF)
US GAAP basic EPS (in CHF)
Diluted earnings per share
Weighted avg no. of shares (in mm)
Core diluted EPS (in CHF)
US GAAP diluted EPS (in CHF)
(in CHF millions, unless otherwise indicated)
Net results
Core net results
US GAAP net results
variance
CHF
CER
Second Quarter
2016
2015
variance
CHF
CER
357
287
23%
25%
16%
17%
224
182
172
128
30%
42%
22%
31%
105.1
4.18
3.43
110.5
3.23
2.60
nm
29%
32%
nm
22%
23%
105.3
2.13
1.73
110.0
1.56
1.16
nm
36%
49%
nm
27%
37%
108.6
4.05
3.32
114.7
3.11
2.50
nm
30%
33%
nm
23%
23%
108.2
2.07
1.68
114.1
1.51
1.12
nm
38%
50%
nm
29%
38%
The increase in core and US GAAP EPS was driven by higher net income and the decrease in number of common shares.
The average share count for basic EPS decreased by 5.4 million shares due to the second-line share repurchase program.
The average share count for diluted EPS decreased by 6.1 million shares as the average number of dilutive instruments
decreased by 0.7 million shares despite an increase in the average share price (145 Swiss francs per share in H1 2016
compared to 119 Swiss francs in H1 2015).
IMPACT OF FOREIGN EXCHANGE RATES ON SALES AND OPERATING RESULTS
Actelion’s exposure to foreign currency movements affecting its sales and operating results as expressed in Swiss francs is
summarized in the table below.
(in CHF millions, except % variance)
2016
Half Year
2015
variance
CHF
Core operating results
Product sales
Operating expenses
Operating income
Net income
1,179
681
499
440
1,008
585
423
357
171
95
76
82
17%
16%
18%
23%
132
85
47
57
13%
15%
11%
16%
US GAAP results
Revenues
Operating expenses
Operating income
Net income
1,180
767
412
361
1,011
667
344
287
169
100
69
73
17%
15%
20%
25%
130
92
40
48
13%
14%
12%
17%
CHF %
variance
CER
CER %
As a result of the weakening of the Swiss franc against the main currencies that the company operates, foreign exchange
rates had for the first half year 2016 a positive net impact of 39 million Swiss francs on sales (US dollar 22 million, euro 9
million and Japanese yen 12 million Swiss francs) and 29 million Swiss francs on core operating income (US dollar 16
million, euro 7 million and Japanese yen 7 million Swiss francs).
HALF-YEAR
FINANCIAL REPORT.
CONTENTS
FINANCIAL
REVIEW
INTERIM CONSOLIDATED
FINANCIAL STATEMENTS
13
ACTELION FINANCIAL REPORT 2014
11
CASH FLOW AND CASH POSITION
Operating cash flow
2016
Half Year
2015
2016
Second Quarter
2015
Operating cash flow
Net results
Depreciation and amortization
Stock-based compensation
Other non cash items
Funds from operations
360
44
32
6
442
284
45
27
(41)
316
182
22
16
15
235
125
21
15
(15)
146
Net change in trade and other receivables
Net change in trade and other payables
Net change in other operating assets and liabilities
Decrease (increase) in net working capital
Decrease (increase) in deferred taxes
(11)
(6)
(34)
(51)
28
(58)
(10)
(2)
(71)
32
16
3
(16)
2
10
2
(6)
25
21
16
Operating cash flow
420
278
247
183
(in CHF millions)
Operating cash flow amounted to 420 million Swiss francs for the first six months of 2016.
The strong underlying business performance resulted in funds from operations of 442 million Swiss francs.
Working capital increased by 51 million Swiss francs, driven by an increase of 11 million Swiss francs in trade and other
receivables due to strong sales. Cash collection remained solid with days of sales outstanding (DSO) at 53 days.
Deferred tax net positions decreased by 28 million Swiss francs mainly driven by the utilization of net operating losses in
the US and Switzerland.
Free cash flow
(in CHF millions)
Free cash flow
Operating cash flow
Acquisition of tangible, intangible and other assets
Acquisition of businesses
Operating free cash flow
Second-line share repurchase
Dividend
First-line share purchase
Proceeds from exercise of stock options
Other items
Free cash flow
2016
Half Year
2015
2016
Second Quarter
2015
420
(31)
(2)
387
278
(11)
(1)
266
247
(26)
(1)
221
183
(5)
(1)
178
(135)
(159)
(113)
19
14
(454)
(142)
(261)
61
(10)
(66)
(159)
(76)
13
14
(454)
(142)
(100)
38
(3)
14
(540)
(53)
(483)
Free cash flow reconciles the net cash position between the opening and closing period.
In the absence of any meaningful acquisition, operating cash flow was fully dedicated to return cash to shareholders and to
manage dilution arising from stock-based compensation, as the company believes that cash levels around 400 million
Swiss francs are appropriate to retain full financial flexibility.
The company paid a dividend of 159 million Swiss francs, purchased 0.9 million second-line shares for a consideration of
135 million Swiss francs (including withholding tax) and also acquired 0.8 million first-line shares for a consideration of 113
million Swiss francs.
HALF-YEAR
FINANCIAL REPORT.
CONTENTS
FINANCIAL
REVIEW
INTERIM CONSOLIDATED
FINANCIAL STATEMENTS
14
ACTELION FINANCIAL REPORT 2014
12
Net cash position
The net cash position amounted to 418 million Swiss francs on June 30, 2016 and breaks down by currency as follows:
June 30,
2016
in %
Closing rate
against CHF
97
115
115
32
58
418
23%
27%
28%
8%
14%
100%
1 USD = 0.98
1 EUR = 1.09
100 JPY = 0.95
-
June 30,
2016
March 31,
2016
December 31,
2015
418
447
185
340
408
134
52
1,985
472
452
166
343
401
134
52
2,021
405
427
131
348
414
134
56
1,915
467
175
642
427
171
598
421
179
600
2,522
(1,175)
1,347
2,632
(1,206)
1,426
2,455
(1,137)
1,318
Noncontrolling interests
Equity attributable to noncontrolling interests
Total equity
(4)
1,343
(3)
1,423
(3)
1,315
Total liabilities and equity
1,985
2,021
1,915
(CHF millions unless otherwise indicated)
Cash position by currency
Swiss franc
US dollar
Euro
Japanese yen
Other foreign currencies
Total net cash position
BALANCE SHEET
(in CHF millions)
Assets
Cash position1
Trade and other receivables, net
Other current assets
Tangible assets
Intangible assets
Goodwill
Other non-current assets
Total assets
Liabilities and shareholders' equity
Other current liabilities
Other non-current liabilities
Total liabilities
Share capital and accumulated reserves
Treasury shares
Total Actelion's shareholders' equity
1
Cash position includes cash, cash equivalents and short-term deposits.
There are no significant changes in the balance sheet which continues to be strong with a net cash position of 418 million
Swiss francs ensuring full financial flexibility.
HALF-YEAR
FINANCIAL REPORT.
CONTENTS
FINANCIAL
REVIEW
INTERIM CONSOLIDATED
FINANCIAL STATEMENTS
15
ACTELION FINANCIAL REPORT 2014
13
ACTELION SHARES
The movement of Actelion treasury shares is shown in the table below:
(numbers in thousands, except where indicated)
Treasury shares - total
December 31, 2015
Acquisition of treasury shares Q1
Outgoing shares Q1
March 31, 2015
Acquisition of treasury shares Q2
Outgoing shares Q2
June 30, 2016
First-line
treasury shares
Second-line
treasury shares
Total
treasury shares
Average price
(in CHF)
Treasury shares
(in CHF million)
2,988
264
(253)
2,998
498
(1,499)
1,998
6,072
445
6,517
428
6,945
9,060
709
(253)
9,515
926
(1,499)
8,943
125.55
136.69
125.06
126.70
153.64
115.34
131.39
1,137
97
(29)
1,206
142
(173)
1,175
The movement in outstanding dilutive instruments is shown in the table below:
ESOP
RSU
PSU
Total
Issued
shares
Equity
Overhang
2,884
(422)
(1)
2,462
1,523
350
(660)
(22)
1,191
1,454
309
(666)
(16)
1,080
5,862
659
(1,748)
(39)
4,733
114.1
5.1%
114.1
4.1%
(numbers in thousands, except %)
Dilutive instruments and equity overhang
Outstanding dilutive instruments Dec. 31, 2015
Grants
Exercised / Vesting
Forfeited
Outstanding dilutive instruments Jun. 30, 2016
HALF-YEAR
FINANCIAL REPORT.
CONTENTS
FINANCIAL
REVIEW
INTERIM CONSOLIDATED
FINANCIAL STATEMENTS
16
ACTELION FINANCIAL REPORT 2014
14
RECONCILIATION US GAAP TO CORE RESULTS FOR THE FIRST HALF 2016
(in CHF millions, except per share amounts and EPS)
Depreciation,
US GAAP amortization, Stock-based Doubtful debt Milestones or
results impairment compensation movements
contract
Accretion
expense
Core
results
Net revenue
Product sales
Contract revenue
Total net revenue
1,179
0
1,180
-
-
-
(0)
(0)
-
1,179
1,179
Operating (expenses)
Cost of sales
Research and development
Selling, general and administration
Amortization of acquired intangible assets
Total operating (expenses)
Operating results
(101)
(277)
(362)
(28)
(767)
412
11
5
28
44
44
14
18
32
32
0
0
0
2
2
2
9
9
9
(92)
(250)
(338)
(681)
499
3
-
-
-
-
-
3
Income before income tax benefit (expense)
415
44
32
0
2
9
501
Income tax benefit (expense)
Noncontrolling interest
Net results
(55)
1
361
(4)
40
(2)
30
(0)
0
(0)
(1)
1
(1)
8
(62)
440
3.32
108.578
0.37
0.27
0.00
0.01
0.07
4.05
108.578
Depreciation,
US GAAP amortization, Stock-based Doubtful debt Milestones or
results impairment compensation movements
contract
Accretion
expense
Core
results
Total financial results
Diluted net income (loss) per share
Weighted-average number of common shares
RECONCILIATION US GAAP TO CORE RESULTS FOR THE SECOND QUARTER 2016
(in CHF millions, except per share amounts and EPS)
Net revenue
Product sales
Contract revenue
Total net revenue
590
0
590
-
-
-
(0)
(0)
-
590
590
(52)
(138)
(182)
(14)
(386)
204
6
3
14
22
22
6
9
16
16
0
0
0
2
2
2
6
6
6
(46)
(124)
(169)
(340)
250
4
-
-
-
-
-
4
Income before income tax benefit (expense)
208
22
16
0
2
6
254
Income tax benefit (expense)
Noncontrolling interest
Net results
(26)
1
182
(2)
20
(1)
15
(0)
0
(0)
(1)
1
(0)
6
(30)
224
1.68
108.243
0.19
0.14
0.00
0.01
0.05
2.07
108.243
Operating (expenses)
Cost of sales
Research and development
Selling, general and administration
Amortization of acquired intangible assets
Total operating (expenses)
Operating results
Total financial results
Diluted net income (loss) per share
Weighted-average number of common shares
HALF-YEAR
FINANCIAL REPORT.
CONTENTS
FINANCIAL
REVIEW
INTERIM CONSOLIDATED
FINANCIAL STATEMENTS
17
ACTELION FINANCIAL REPORT 2014
15
QUARTERLY RESULTS
Q3 2015
three months
Q4 2015
three months
Q1 2016
three months
Q2 2016
three months
US GAAP Operating results
Net revenue
Operating expenses
Operating income
Financial results
Income tax results
Noncontrolling interest
Net results
515
(325)
189
(2)
(23)
0
165
520
(397)
122
(1)
(22)
1
100
590
(381)
208
(1)
(29)
0
178
590
(386)
204
4
(26)
1
182
Core operating results
Product sales
Operating expenses
Operating income
Financial results
Income tax results
Net results
514
(286)
228
(2)
(24)
203
519
(357)
163
(1)
(28)
133
589
(341)
249
(1)
(32)
215
590
(340)
250
4
(30)
224
(in CHF millions)
HALF-YEAR
FINANCIAL REPORT.
CONTENTS
FINANCIAL
REVIEW
INTERIM CONSOLIDATED
FINANCIAL STATEMENTS
18
ACTELION FINANCIAL REPORT 2014
INTERIM CONSOLIDATED
FINANCIAL STATEMENTS
HALF-YEAR
FINANCIAL REPORT.
CONTENTS
FINANCIAL
REVIEW
INTERIM CONSOLIDATED
FINANCIAL STATEMENTS
19
20
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED INCOME STATEMENTS
Notes
(in CHF thousands, except per share amounts)
Six months ended June 30,
2016
2015
(unaudited)
(unaudited)
1,179,294
261
1,179,555
1,007,883
2,723
1,010,606
(100,560)
(277,389)
(361,633)
(27,512)
(767,094)
412,461
(87,725)
(226,503)
(325,699)
(26,827)
(666,754)
343,852
458
2,124
2,582
(5,545)
(11,838)
(17,383)
Income before income tax benefit (expense)
415,043
326,469
Income tax benefit (expense)
Net income
(55,248)
359,795
(41,977)
284,492
Less: Net loss attributable to the noncontrolling interests
Net income attributable to Actelion's shareholders
915
360,710
2,933
287,425
Net revenue
Product sales
Contract revenue
Total net revenue
15
15
Operating (expenses)1
Cost of sales2
Research and development
Selling, general and administration
Amortization of acquired intangible assets
Total operating (expenses)
Operating income
Interest income (expense), net
Other financial income (expense), net
Total financial income (expense)
7
Basic net income per share attributable to Actelion's shareholders
Weighted-average number of common shares (in thousands)
5
3.43
105,124
2.60
110,480
Diluted net income per share attributable to Actelion's shareholders
Weighted-average number of common shares (in thousands)
5
3.32
108,578
2.50
114,741
Includes stock-based compensation as follows:
1
Research and development
(13,843)
(11,587)
Selling, general and administration
Total stock-based compensation
(18,080)
(15,390)
(31,923)
(26,977)
2
Excludes amortization of intangible assets as presented separately.
The accompanying notes form an integral part of these consolidated financial statements.
HALF-YEAR
FINANCIAL REPORT.
CONTENTS
FINANCIAL
REVIEW
ACTELION INTERIM FINANCIAL REPORT 2016
INTERIM CONSOLIDATED
FINANCIAL STATEMENTS
20
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Six months ended June 30,
2016
2015
(in CHF thousands)
(unaudited)
(unaudited)
Net income
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments
Change of unrecognized components of net periodic benefit costs
Amortization of components of net periodic benefit costs
Other comprehensive income (loss), net of tax
359,795
284,492
6,739
796
7,535
(28,633)
(5,482)
947
(33,168)
Comprehensive income
367,330
251,324
Less: Comprehensive loss attributable to noncontrolling interests
Comprehensive income attributable to Actelion's shareholders
915
368,245
2,933
254,257
The accompanying notes form an integral part of these consolidated financial statements.
ACTELION INTERIM FINANCIAL REPORT 2016
HALF-YEAR
FINANCIAL REPORT.
CONTENTS
FINANCIAL
REVIEW
INTERIM CONSOLIDATED
FINANCIAL STATEMENTS
21
CONSOLIDATED BALANCE SHEETS
Notes
June 30, 2016
December 31, 2015
(unaudited)
(audited)
418,406
447,117
121,026
64,054
1,050,603
404,892
427,223
62,107
68,828
963,050
339,976
408,190
134,096
25,374
26,734
934,370
348,277
413,542
134,494
39,159
16,415
951,887
1,984,973
1,914,937
71,021
352,297
43,808
467,126
83,878
302,729
34,375
420,982
62,353
87,164
25,266
174,783
641,909
67,204
83,759
27,979
178,942
599,924
57,064
2,695,935
(1,174,972)
(231,260)
1,346,767
57,064
2,636,931
(1,137,399)
(238,795)
1,317,801
Equity attributable to noncontrolling interests
Total equity
(3,703)
1,343,064
(2,788)
1,315,013
TOTAL LIABILITIES AND EQUITY
1,984,973
1,914,937
(in CHF thousands, except number of shares)
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables, net
Inventories
Other current assets
Total current assets
6
8/9
7
Noncurrent assets
Property, plant and equipment, net
Intangible assets, net
Goodwill
Deferred tax assets
Other noncurrent assets
Total noncurrent assets
2
TOTAL ASSETS
LIABILITIES
Current liabilities
Trade and other payables
Accrued expenses
Other current liabilities
Total current liabilities
9
7
Noncurrent liabilities
Pension liability
Contingent considerations
Other noncurrent liabilities
Total noncurrent liabilities
Total liabilities
2
EQUITY
Actelion's shareholders' equity
Common shares (par value CHF 0.50 per share, authorized 154,120,077 and
154,120,627; issued 114,128,427 shares in 2016 and 2015, respectively)
Accumulated profit
Treasury shares, at cost
Accumulated other comprehensive income (loss)
Total Actelion's shareholders equity
12
13
The accompanying notes form an integral part of these consolidated financial statements.
ACTELION INTERIM FINANCIAL REPORT 2016
HALF-YEAR
FINANCIAL REPORT.
CONTENTS
FINANCIAL
REVIEW
INTERIM CONSOLIDATED
FINANCIAL STATEMENTS
22
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended June 30,
2016
2015
(in CHF thousands)
Cash flow from operating activities
Net income
Adjustments to reconcile net income to net cash provided from operating activities:
Depreciation and amortization
Stock-based compensation, incl. treasury shares to members of Board of Directors
Excess tax benefits from share-based payment arrangements
Deferred taxes
Deferred revenue
(Gains) Losses on derivative instruments
Interest expense on bonds
Accretion expense (benefit) on contingent considerations
Changes in operating assets and liabilities:
Trade and other receivables
Inventories
Trade and other payables
Accrued expenses
Changes in other operating cash flow items
Net cash flow provided by (used in) operating activities
Cash flow from investing activities
Purchase of property, plant and equipment
Purchase of intangible assets
Acquisition of a business, incl. contingent consideration payments
Net cash flow provided by (used in) investing activities
Cash flow from financing activities
Dividend payment
Payments on capital leases
Proceeds from exercise of stock options, net of expense
Purchase of treasury shares
Excess tax benefits from share-based payment arrangements
Contributions from noncontrolling interests' owners
Net cash flow provided by (used in) financing activities
Net effect of exchange rates on cash and cash equivalents
Net change in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
(unaudited)
(unaudited)
359,795
284,492
43,705
32,401
(11,533)
28,354
(282)
(2,299)
8,517
45,177
27,441
(10,538)
31,661
(778)
(39,229)
5,987
(6,658)
(11,063)
(58,930)
(5,546)
53,975
(17,510)
419,584
(58,376)
5,953
(9,696)
(16,834)
18,990
277,592
(8,124)
(22,705)
(2,036)
(32,865)
(8,303)
(2,222)
(1,095)
(11,620)
(158,510)
19,303
(248,019)
11,533
(375,693)
(142,429)
(3)
60,776
(714,339)
10,538
1,136
(784,321)
2,488
13,514
(21,847)
(540,196)
404,892
418,406
1,204,958
664,762
The accompanying notes form an integral part of these consolidated financial statements.
ACTELION INTERIM FINANCIAL REPORT 2016
HALF-YEAR
FINANCIAL REPORT.
CONTENTS
FINANCIAL
REVIEW
INTERIM CONSOLIDATED
FINANCIAL STATEMENTS
23
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(in CHF thousands, except number of shares)
At January 1, 2015
Comprehensive income (loss)1:
Net income
Other comprehensive income (loss)
Comprehensive income (loss)1
Excess tax benefits from
share-based payments
Transactions in treasury shares
Stock-based compensation expense
Dividend payment
Contributions from owners
At June 30, 2015 (unaudited)
Comprehensive income (loss)1:
Net income
Other comprehensive income (loss)
Comprehensive income (loss)1
Excess tax benefits from
share-based payments
Transactions in treasury shares
Stock-based compensation expense
Dividend payment
At December 31, 2015 (audited)
Comprehensive income (loss)1:
Net income
Other comprehensive income (loss)
Comprehensive income (loss)1
Excess tax benefits from
share-based payments
Transactions in treasury shares
Stock-based compensation expense
Dividend payment
At June 30, 2016 (unaudited)
1
Noncontrolling
Actelion's shareholders
interests
Common shares
Additional
Accum. other Equity attrib. to
paid-in
Accum.
Treasury comprehensive noncontrolling
Shares Amount
capital
profit
shares income (loss)
interests
111,128,427
57,064
-
2,359,573
(287,701)
(208,513)
-
-
-
287,425
287,425
-
(33,168)
(33,168)
(4,116,146)
107,012,281
57,064
10,538
105,095
26,796
(142,429)
-
(268,749)
2,378,249
(573,540)
(861,241)
(241,681)
-
-
-
264,434
264,434
-
2,886
2,886
(1,943,364)
105,068,917
57,064
(473)
(29,106)
29,540
39
-
(5,752)
2,636,931
(276,158)
(1,137,399)
(238,795)
-
-
-
360,710
360,710
-
7,535
7,535
116,880
105,185,797
57,064
7,182
119,816
31,512
(158,510)
-
(301,706)
2,695,935
(37,573)
(1,174,972)
(231,260)
Total
equity
- 1,920,423
(2,933)
(2,933)
284,492
(33,168)
251,324
10,538
- (737,194)
26,796
- (142,429)
1,136
1,136
(1,797) 1,330,594
(991)
(991)
263,443
2,886
266,329
(473)
- (311,016)
29,540
39
(2,788) 1,315,013
(915)
(915)
359,795
7,535
367,330
7,182
- (219,463)
31,512
- (158,510)
(3,703) 1,343,064
Comprehensive income (loss) is presented net of tax.
The accompanying notes form an integral part of these consolidated financial statements.
ACTELION INTERIM FINANCIAL REPORT 2016
HALF-YEAR
FINANCIAL REPORT.
CONTENTS
FINANCIAL
REVIEW
INTERIM CONSOLIDATED
FINANCIAL STATEMENTS
24
25
NOTES TO THE UNAUDITED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS
(CHF thousands, except share and per share amounts)
NOTE 1.
BASIS OF PRESENTATION
The unaudited interim consolidated financial statements for Actelion Ltd (“Actelion” or the “Group”) have been prepared
under Generally Accepted Accounting Principles in the United States (“US GAAP”) for interim financial information.
Accordingly, such financial statements do not include all the information and footnotes required by US GAAP for annual
financial statements. These interim financial statements should be read in conjunction with the audited consolidated
financial statements of the Group for the year ended December 31, 2015. All US GAAP references relate to the Accounting
Standards Codification (“ASC” or “Codification”) established by the Financial Accounting Standards Board (“FASB”) as the
single authoritative source of US GAAP to be applied by non-governmental entities. All amounts are presented in Swiss
francs (“CHF”), unless otherwise indicated. In addition, certain prior period amounts within the consolidated financial
statements and related notes have been reclassified to conform to the current presentation.
Use of estimates
The preparation of financial statements in conformity with US GAAP requires management to make judgments,
assumptions and estimates that affect the amounts and disclosures reported in the consolidated financial statements and
accompanying notes. On an on-going basis, management evaluates its estimates, including those related to revenue
recognition for contract revenue, allowance for doubtful accounts, stock-based compensation, inventory and costs of goods
sold, intangible assets, clinical trial and rebate accruals, impairment of indefinite lived intangibles including goodwill,
provisions, contingent considerations arising from acquisitions, loss contingencies and income taxes. The Group bases its
estimates on historical experience and on various market-specific and other relevant assumptions that are believed to be
reasonable under the circumstances. The results of these estimates form the basis for making judgments about the
carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ
significantly from these estimates.
NOTE 2.
ACQUISITIONS AND GOODWILL
Ceptaris Therapeutics, Inc.
In 2013, the Group acquired 100 percent of privately-held Ceptaris Therapeutics, Inc. (“Ceptaris”), a specialty
pharmaceutical company based in Malvern, Pennsylvania, US. The transaction was recorded as a business combination in
compliance with the requirements of ASC 805. In conjunction with the acquisition, the Group assumed contingent
considerations related to achievement of future performance and commercialization milestones as well as a contingent
consideration related to future royalty stream payments. The maximum undiscounted amount of the performance and
commercialization milestones is US dollars (“USD”) 445 million as of June 30, 2016. Since arising from the acquisition, the
contingent considerations are re-measured at fair value at each reporting date using Level 3 inputs. The resulting fair value
adjustments of the acquisition contingencies are included in cost of sales. Since denominated in USD, the contingent
considerations are revalued at each reporting date.
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26
As of June 30, 2016, the fair value of the contingent considerations amounts to CHF 91.4 million (USD 93.4 million). Thereof,
CHF 4.2 million (USD 4.4 million) are included in other current liabilities and CHF 87.2 million (USD 89 million) are disclosed
as contingent considerations in the consolidated balance sheet. The table below states the changes in the contingent
considerations for the six months ended June 30, 2016:
Contingent consideration
expense
USD
CHF
7,480
7,309
December 31, 2015
USD
CHF
88,006
87,586
Settlements
USD
CHF
(2,082)
(2,036)
Foreign currency
translation
CHF
(1,431)
USD
93,404
June 30, 2016
CHF
91,427
In determining the fair value of the contingent considerations the Group evaluates probabilities and timing of milestone
events’ occurrence. Further, management develops cash flow projections on expected net revenues and royalty payments,
which are then deferred, probability-weighted and adjusted for the time value of money in order to derive their reporting
date fair value. As of June 30, 2016, the Group applied a discount rate of 8% for the contingent consideration arising from
the royalty streams. This rate corresponds to the weighted-average costs of capital (“WACC”) and is calculated by weighting
the required returns for interest-bearing debt and common equity capital in proportion to their estimated percentages in an
expected capital structure. Management believes that the WACC appropriately captures a market participant’s view of the
risk associated with the expected contingent consideration payments because such payments are impacted by broader,
non-diversifiable industry and business risks which are not completely captured in developing the probability weightedpayment estimates. Further, the Group used a discount rate of 5.3% for determination of the fair value of the contingent
consideration related to the commercialization milestones. This discount rate corresponds to the global market
participants’ required return on debt capital considered in the WACC calculation, which management believes is equivalent
to the market participant’s costs of borrowing.
The following table provides the significant unobservable inputs applied on the fair value measurement of the contingent
considerations for the periods presented:
Level 3 fair value
measurement
Contingent considerations
arising from acquisitions
Assumptions
Valuation technique
Unobservable input
Probability of performance milestones' payments
Probability of commercialization milestones
Probability of royalty payments
Discounted cash flows
Expected period of payments
Discount rate commercialization milestones
Discount rate
June 30, 2016 December 31, 2015
0%
0%
0%-90%
0%-90%
100%
100%
2016-2028
2016-2028
5.3%
5.9%
8%
9%
If the actual results deviate significantly from the developed projections, the net income of the Group may be adversely
affected in future periods. In addition, an increase in the probability of performance milestone payments or a significant
decrease in the discount rate could lead to a significantly higher fair value measurement of the contingent considerations in
the period of revaluation. None of the changes in the unobservable inputs would lead to a change of the current maximum
undiscounted amount of the performance milestones’ contingencies of USD 445 million. If the performance-based
milestone for 2016 is not achieved, the maximum undiscounted amount of the performance milestones’ contingencies will
be decreased to USD 395 million as of December 31, 2016.
Goodwill
Except for the effect of foreign currency translation, the net carrying amount of goodwill has not been adjusted in the
current reporting period:
Balance at January 1
134,494
Translation effects
(398)
Balance at June 30
134,096
.
HALF-YEAR
FINANCIAL REPORT.
CONTENTS
FINANCIAL
REVIEW
ACTELION INTERIM FINANCIAL REPORT 2016
INTERIM CONSOLIDATED
FINANCIAL STATEMENTS
26
27
NOTE 3.
NONCONTROLLING INTERESTS AND VARIABLE INTEREST ENTITIES
Vaxxilon Ltd (“Vaxxilon”)
In 2015, the Group established a new majority owned company, Vaxxilon Ltd., which aims to discover, develop, and
commercialize synthetic carbohydrate vaccines. Vaxxilon was incorporated under the laws of Switzerland together with the
Max Planck Society (“MPS”), a publicly funded non-profit organization in Munich, Germany, and Seeberger Science GmbH, a
private company in Kleinmachnow, Germany. The Group is the principal investor and majority shareholder holding 73.9% of
the voting interests of the company. Vaxxilon has licensed exclusive rights to multiple preclinical vaccine candidates and
additional technologies from Max-Planck Innovation GmbH (“MPI”), Munich, Germany, the technology transfer office of
MPS. As of June 30, 2016, CHF 3.7 million net assets and CHF 0.4 million research and development (“R&D”) expenses
allocated to minority shareholders have been disclosed as noncontrolling interests.
Other
In addition, there are other noncontrolling interests, which are variable interest entities (“VIE”), where the Group is the
primary beneficiary and which are not material to the Group. Note 4. Licensing and collaborative agreements provides
further information on the Group’s involvement with VIEs.
The following table reflects the effect of noncontrolling interests on the Group’s equity:
At January 1, 2015
Equity attributable to
Actelion's shareholders
1,920,423
Equity attributable to
noncontrolling interests
-
561,037
(9,178)
551,859
(3,924)
1,136
(2,788)
561,037
(13,102)
1,136
549,071
(1,154,481)
-
(1,154,481)
1,317,801
(2,788)
1,315,013
362,239
(1,529)
360,710
(915)
(915)
362,239
(2,444)
359,795
(331,744)
-
(331,744)
1,346,767
(3,703)
1,343,064
Net income of the Group
Net (loss) from noncontrolling interests
Contributions from owners
Change from net income (loss) and contributions from owners
Other changes in equity1
At December 31, 2015
Net income of the Group
Net (loss) from noncontrolling interests
Change from net income (loss) and contributions from owners
Other changes in equity1
At June 30, 2016
1
Total equity
1,920,423
Details on other changes in equity are provided in the consolidated statements of changes in equity.
NOTE 4.
LICENSING AND COLLABORATIVE AGREEMENTS
Endo International plc (“Endo”)
In February 2012, the Group entered into a long-term collaborative agreement with Auxilium Pharmaceuticals, Inc.
(“Auxilium”) to develop, supply and commercialize Xiaflex® for the potential treatment of Dupuytren’s contracture and
Peyronie’s disease in Canada, Australia, Brazil and Mexico upon receipt of the respective regulatory approvals. During 2013
and 2014, the Group notified Auxilium that it would no longer pursue approval and commercialization in Mexico and Brazil.
In January 2015, Endo acquired Auxilium and consequently assumed Auxilium’s rights and obligations in conjunction with
the collaboration with Actelion. In July 2016, the parties mutually agreed to terminate the collaboration for Canada and
agreed upon certain transition services to be provided by Actelion until approval of the transfer of the drug identification
HALF-YEAR
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REVIEW
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FINANCIAL STATEMENTS
27
28
number by the regulatory authority in Canada to Endo. For Australia the collaboration agreement remains in effect until a
new agreement is reached. In consideration for the rights returned by the Group to Endo, Actelion received a cash payment
of USD 5.5 million (CHF 5.4 million) in July 2016.
Nippon Shinyaku Co., Ltd. (“Shinyaku”)
In April 2008, the Group entered into a worldwide (excluding Japan) exclusive license agreement with Shinyaku on
selexipag, a novel orally available selective IP receptor agonist originally discovered and synthesized by Shinyaku for the
treatment of PAH. Upfront and milestone payments made during the development phase were expensed as R&D costs.
Milestone payments made upon approval of the respective regulatory authority are capitalized and amortized over the
respective patent period. Following approval of Uptravi® (selexipag) by the European Commission in May 2016, the Group
made a milestone payment of USD 20 million (CHF 19.5 million) to Shinyaku, which has been capitalized and will be
amortized over the expected patent period. The Group will make further milestone payments for the second indication
totaling up to USD 40 million depending on achievement of certain development and regulatory approval milestones.
Furthermore, Shinyaku will be entitled to receive additional payments of up to USD 50 million upon achievement of
predetermined sales targets by the Group. The Group also pays a mid-teen royalty to Shinyaku on net sales of products,
with selexipag as the active ingredient.
In conjunction with the semi-exclusive co-promotion and co-development agreement for macitentan in Japan (See Note 5.
Collaborative agreements in the audited consolidated financial statements for the twelve months ended December 31,
2015), the Group recognized a royalty expense of Japanese yen (“JPY”) 428.5 million (CHF 5.2 million), which has been
included in cost of sales for the six months ended June 30, 2016. Further amounts exchanged between the collaborators
were not material to the Group for the six months ended June 30, 2016 and 2015.
ReveraGen Biopharma Inc. (“Reveragen”)
In April 2016, the Group signed a collaborative agreement with ReveraGen Biopharma Inc., a corporation organized under
the laws of Delaware, US, to research and co-develop vamorolone, a non-hormonal steroid modulator for the treatment of
Duchene Muscular Dystrophy (“DMD”). The agreement will only enter into full force upon certain conditions being met.
Upon signature of the agreement, the Group provided a refundable advance payment of USD 2 million (CHF 1.9 million) to
Reveragen which has been expensed as R&D costs. The Group will pay a further USD 8 million upon satisfaction of the
outstanding conditions. Under the terms of the agreement the Group will also support R&D activities up to a maximum
amount of USD 1 million p.a. for the next three years. In addition, the Group acquired an option to obtain the exclusive
worldwide license rights on vamorolone at any time but not later than upon receipt of the Phase IIb study results. If the
option is exercised, Reveragen will be entitled to receive up to USD 165 million in development and regulatory milestones
for the DMD indication and up to USD 190 million for three further indications depending on achievement of certain
development, regulatory approval and commercialization milestones. Furthermore, the Group will pay increasing tiered
double-digit royalties on the net sales of vamorolone.
The Group evaluated the contract with Reveragen under the requirements of the VIE model (See Note 1. Description of
business and summary of significant accounting policies in the audited consolidated financial statements for the twelve
months ended December 31, 2015) and determined that Reveragen is a variable interest entity but Actelion is not the
primary beneficiary. Therefore, the Group would not have any additional financial exposure due to its involvement with
Reveragen as long as the contingent conditions have not been met.
HALF-YEAR
FINANCIAL REPORT.
CONTENTS
FINANCIAL
REVIEW
ACTELION INTERIM FINANCIAL REPORT 2016
INTERIM CONSOLIDATED
FINANCIAL STATEMENTS
28
29
NOTE 5.
EARNINGS PER SHARE
The following table sets forth the basic and diluted earnings per share calculations at:
June 30, 2016
Basic
Numerator
Net income attributable to Actelion's shareholders
Net income available for earnings per share calculation
Denominator
Weighted-average number of common shares
Incremental shares for assumed conversion of stock-based awards
Total weighted-average equivalent shares
Earnings per share attributable to Actelion's shareholders
Diluted
June 30, 2015
Basic
Diluted
360,710
360,710
360,710
360,710
287,425
287,425
287,425
287,425
105,123,997
105,123,997
105,123,997
3,454,364
108,578,361
110,480,138
110,480,138
110,480,138
4,261,181
114,741,319
3.43
3.32
2.60
2.50
For the six months ended June 30, 2016, 52 shares that would have had an anti-dilutive effect were excluded from the EPS
calculation (June 30, 2015: 110,942).
The following table reconciles the number of outstanding to the number of weighted-average common shares used in the
earnings per share calculation:
June 30, 2016
June 30, 2015
Weighted-average number of common shares
Number of common shares issued
Number of treasury shares held
Number of outstanding common shares
114,128,427
(8,942,630)
105,185,797
114,128,427
(7,116,146)
107,012,281
Weighted-average treasury shares' equivalents
Weighted-average number of common shares
(61,800)
105,123,997
3,467,857
110,480,138
NOTE 6.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consisted of the following at:
June 30, 2016
404,464
13,942
418,406
Cash�
Short-term bank deposits
Total¹
1
December 31, 2015
249,182
155,710
404,892
Includes restricted cash and cash equivalents of CHF 1.1 million as of June 30, 2016, and CHF 1 million as of December 31, 2015.
HALF-YEAR
FINANCIAL REPORT.
CONTENTS
FINANCIAL
REVIEW
ACTELION INTERIM FINANCIAL REPORT 2016
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FINANCIAL STATEMENTS
29
30
NOTE 7.
FINANCIAL ASSETS AND LIABILITIES
The following table shows the Group’s financial assets and liabilities carried at fair value:
Financial assets carried at fair value1
Cash and cash equivalents
Derivative financial instruments2
Total
Financial liabilities carried at fair value1
Derivative financial instruments3
Contingent considerations
Total
Total
June 30, 2016
Level 1
Level 2
418,406
582
418,988
418,406
418,406
582
582
404,892
883
405,775
404,892
404,892
883
883
5,630
5,630
See Note 2. Acquisitions for Level 3 disclosures
5,630
5,630
8,230
-
8,230
8,230
-
8,230
1
For the six months ended June 30, 2016 and 2015, no transfers to or from Level 1 and Level 2 took place.
2
Included in other current assets.
3
Included in other current liabilities.
December 31, 2015
Total
Level 1
Level 2
Derivative financial instruments
A significant portion of the Group’s operations is denominated in foreign currencies, principally in USD, Euros (“EUR”) and
JPY. Exposures to fluctuations in foreign currencies may adversely impact the Group’s net income and net assets. The
Group uses derivatives to partially offset these risks. The Group’s derivative instruments, while providing economic hedges
under the Group’s policies, do not qualify for hedge accounting as defined by the Derivatives and Hedging Topic of FASB
ASC (“ASC 815”). Note 14. Concentrations provides further information on the foreign currencies exposure of the Group.
Derivative financial instruments are deployed to manage foreign currency and interest rate exposures and are not used for
speculative purposes.
The Group records all derivatives on the balance sheet at fair value. Changes in fair value as well as gains and losses
realized on derivative financial instruments are reported in other financial income (expense), net in the consolidated income
statements. The Group determines the fair value of these derivative contracts using an income-based industry standard
valuation model which utilizes counterparty information and other observable inputs derived from Reuters or Bloomberg,
which include foreign currency spot rates, forwards points and stated maturities. Fair value amounts recognized for the
right to reclaim and the obligation to return cash collateral, arising from derivative instruments recognized at fair value and
executed with the same counterparty under a master netting arrangement, are not offset. Recognized financial instruments
subject to an enforceable master netting arrangement are presented gross in the consolidated balance sheets.
The Group does not regularly enter into agreements containing embedded derivatives. However, when such agreements
are executed, an assessment is made based on the criteria set out in ASC 815 to determine if the derivative is required to be
bifurcated and accounted for as a standalone derivative instrument. If the derivative is bifurcated, changes in fair value of
the instrument are reported in other financial income (expense), net in the consolidated income statements.
The following tables reflect the contract or underlying principal amounts and fair values of derivative financial instruments,
analyzed by type of contract as of June 30, 2016 and 2015. The underlying principal amount indicates the volume of
outstanding positions at the balance sheet date and does not represent an amount at risk.
HALF-YEAR
FINANCIAL REPORT.
CONTENTS
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REVIEW
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FINANCIAL STATEMENTS
30
31
Location of gain or (loss) recognized
in income on derivatives
Income Statement
Forward rate contracts
Amount of gain recognized in income on derivatives
Amount of (loss) recognized in income on derivatives
Total
Derivative financial instruments
not designated as hedging instruments
June 30, 2016
June 30, 2015
Other financial income (expense), net
Other financial income (expense), net
6,180
(13,739)
(7,559)
44,503
(13,207)
31,296
Balance Sheet Location
June 30, 2016
December 31, 2015
Other current assets
Other current liabilities
582
(5,630)
(5,048)
883
(8,230)
(7,347)
June 30, 2016
June 30, 2015
255,914
272,721
Balance Sheet
Forward rate contracts
Forward rate contracts
Total
Underlying principal amount
Forward rate contracts
As at June 30, 2016, the majority of the foreign currency forwards consists of privately negotiated OTC contracts with
maturities of eight months or less and entered into with counterparties with a Standard & Poor’s (“S&P”) credit rating
ranging from BBB+ to AA. As at December 31, 2015, all foreign currency forwards were privately negotiated OTC contracts
with maturities of twelve months or less and entered into with counterparties with a Standard & Poor’s (“S&P”) credit
rating ranging from A to AA.
For the six months ended June 30, 2016, the total net loss recognized on derivative financial instruments amounts to CHF
7.6 million (June 30, 2015: net gain of CHF 31.3 million) and includes CHF 2.3 million gross unrealized gains on the forward
rate contracts (June 30, 2015: gross unrealized gains of CHF 39.2 million). In addition to the net loss recognized on
derivatives of CHF 7.6 million, other financial income (expense), net contains foreign exchange net transaction gains of CHF
9.7 million for the six months ended June 30, 2016 (June 30, 2015: net transaction losses CHF 43.1 million).
For each of the six months ended June 30, 2016, and the twelve months ended December 31, 2015, the Group did not have
any derivatives which were offset in accordance with ASC 210-20-45 or ASC 815-10-45. The following table shows the
derivatives subject to an enforceable master netting arrangement:
Derivative financial instruments subject
to a master netting arrangement
June 30, 2016
Forward rate contracts
Total
December 31, 2015
Forward rate contracts
Total
Gross amount
disclosed
Asset derivatives
Netting
adjustment
Liability derivatives
Gross amount
Netting
disclosed
adjustment
Net amount
118
118
(118)
(118)
-
2,382
2,382
(118)
(118)
2,264
2,264
-
-
-
1,645
1,645
-
1,645
1,645
Net amount
The right to offset these asset and liability derivatives is provided to both the Group and the financial institution only in case
of predefined default events and upon a consequential early contract termination. None of these events occurred as of June
30, 2016, and December 31, 2015.
Credit facilities
At June 30, 2016, the Group had unused credit lines of: a) CHF 5.7 million as margin cover for over-the-counter trades; b)
CHF 3.5 million deployable for issuance of letters of credit; c) JPY 500 million (CHF 4.8 million) established as an overdraft
facility and d) CHF 21.8 million as senior mortgage certificates.
HALF-YEAR
FINANCIAL REPORT.
CONTENTS
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REVIEW
ACTELION INTERIM FINANCIAL REPORT 2016
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FINANCIAL STATEMENTS
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32
NOTE 8.
INVENTORIES
Inventories consisted of the following at:
June 30, 2016
31,142
89,884
121,026
Semi-finished products
Finished products
Total
December 31, 2015
30,510
31,597
62,107
Semi-finished products primarily include active pharmaceutical ingredients used in production of finished goods.
The increase in inventory is mainly related to the launch of Uptravi® (selexipag) in 2016. In accordance with the terms of
the license agreement with Shinyaku (See Note 4. Licensing and collaborative agreements), the Group revalued the existing
stock of the compound to reflect the estimated supply price, which is based on a percentage of annual net sales.
Consequently, the final supply price can be only retroactively determined and is currently based on estimates.
NOTE 9.
ACCRUED EXPENSES
Accrued expenses consisted of the following at:
June 30, 2016
88,923
21,052
79,963
38,964
27,074
1,536
62,669
11,348
20,768
352,297
Personnel and compensation costs
Accrued taxes
Rebates and allowances
Research and development
Marketing and royalties
Fixed assets
Inventory
Professional services
Other accrued expenses
Total
December 31, 2015
101,980
19,163
89,992
22,568
23,356
2,536
7,718
17,991
17,425
302,729
The increase in accrued expenses was mainly related to the purchase price adjustments and obligations towards Shinyaku
for the active ingredient of Uptravi® (selexipag). Note 4. Licensing and collaborative agreements provides further
information on the collaboration with Shinyaku.
NOTE 10.
COMMITMENTS, CONTINGENCIES AND GUARANTEES
Commitments
The Group has entered into capital commitments related to maintenance of the Group’s own facilities, which are expected
to be paid within the next twelve months and which are not material to the Group.
In the ordinary course of business the Group has entered into purchase commitments related to long-term manufacturing
and supply agreements in the total amount of CHF 11.1 million for 2016, CHF 9.4 million for 2017, CHF 13.8 million for 2018,
CHF 11.5 million for 2019 and CHF 11.5 million for 2020. A significant portion of the purchase commitments relates to
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33
purchase obligations to Shinyaku for the active ingredient of Uptravi® (selexipag). Note 4. Licensing and collaborative
agreements provides further details on the collaboration with Shinyaku.
Contingencies
The Group records accruals for loss contingencies, asserted or unasserted, to the extent that their occurrence is deemed to
be probable and the related damages are estimable. If a range of liability is probable and estimable and some amount
within the range appears to be a better estimate than any other amount within the range, the Group accrues that amount. If
a range of liability is probable and estimable and no amount within the range appears to be a better estimate than any other
amount within the range, the Group accrues the minimum of such probable range. Litigation claims that the Group might be
involved in entail highly complex issues which are subject to substantial uncertainties and, therefore, the probability of loss
and an estimation of damages are difficult to ascertain. Consequently, the Group cannot reasonably estimate the maximum
potential exposure or the range of possible loss in excess of amounts accrued for loss contingencies. These assessments
can involve a series of complex judgments about future events and can rely heavily on estimates and assumptions (See
Note 1. Basis of presentation). The Group’s assessments are based on estimates and assumptions that have been deemed
reasonable by management. Litigation is inherently unpredictable, and excessive verdicts do occur. Although the Group
believes to have substantial defenses in these matters, the Group could in the future incur judgments or enter into
settlements of claims that could have a material adverse effect on its results of operations in any particular period.
US department of Justice Investigation
A Group subsidiary, Actelion Pharmaceuticals US, Inc. ("Actelion US") received a subpoena on May 6, 2016, and a follow up
subpoena on June 3 from the US Attorney’s Office for the District of Massachusetts. The subpoena requests documents
related to Actelion US’ support to independent charitable organizations that provide financial assistance to Medicare
patients, and documents related to pricing, marketing and sales strategies related to such financial assistance in the
United States. The Group is aware of multiple other pharmaceutical companies receiving similar requests. The Group is
cooperating fully with the US Authorities and is providing the documents requested pursuant to the subpoena. As of June
30, 2016, the investigation is ongoing, and the Group cannot reasonably estimate the timing of resolution and the final
outcome.
Other contingencies
The Group is involved in commercial disputes and administrative actions in certain jurisdictions. The possible losses which
might arise as a result of these disputes range from CHF 0 million to CHF 3.5 million. As of July 19, 2016, the date these
consolidated financial statements were available to be issued, the Group cannot reasonably estimate the final outcome and
the timing of resolution of these disputes.
Guarantees
In order to secure its obligations from derivative trading, cash pooling, overdraft facilities and forward transactions in
foreign currencies, the Group has issued guarantees and a letter of indemnity to various financial institutions in the total
amount of CHF 79.1 million.
In the ordinary course of business the Group has entered into certain guarantee contracts and letters of credit amounting to
CHF 8.8 million. The guarantees primarily relate to operating leases and credit lines for subsidiaries in foreign jurisdictions.
Due to the nature of these arrangements, the Group has never been required to make payments under these contracts and
does not expect any potential required future payments to be material.
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NOTE 11.
PENSION PLANS
Swiss Employee Pension Plan
The Group maintains a pension plan (the “Basic Plan”) covering all of its employees in Switzerland. The Basic Plan insures
base salary and annual incentives up to an aggregate maximum of CHF 846,000. In addition to retirement benefits, the Basic
Plan provides benefits on death or long-term disability of its employees.
The Basic Plan is organized under the legal form of a pension foundation. The Group and its employees pay retirement
contributions, which are defined as a percentage of the employees’ covered salaries. Interest is credited to the employees’
accounts at the minimum rate provided in the Basic Plan, payment of which is guaranteed by the insurance contract, which
represents the Basic Plan’s primary asset. In 2016, the guaranteed interest rate for withdrawal benefits amounts to 1.25%
(2015: 1.75%) for the mandatory portion of the contributions paid and to 0.75% (2015: 1.25%) for the non-mandatory portion
of the contributions paid. Future benefit payments are managed by the insurance company. The foundation entered into an
insurance contract with a third party insurance company to minimize the risk associated with the pension obligation as well
as a mean to reduce the uncertainty and volatility of the Basic Plan’s assets for the Group. Investment strategy and policies
of the foundation are determined by the insurance company. The Foundation Council’s decision power in relation to
investment strategies and asset allocation is limited to the amount of available unappropriated foundation reserves as
determined by Swiss pension law.
In addition, the Group maintains other pension plans outside Switzerland, which are not material to the Group. The Group
uses a measurement date of December 31 for all pension plans.
Net periodic benefit costs for the Group’s defined benefit pension plans include the following components:
For the six months ended June 30,
2016
2015
10,532
10,166
1,609
2,344
(3,263)
(3,692)
(635)
1,431
947
9,674
9,765
Service cost
Interest cost
Expected return on plan assets
Amortization of prior year service (costs) benefit1
Amortization of net actuarial gains (losses) 1
Net periodic benefit cost
1
For the six months ended June 30, 2016 and 2015, the income tax effect on the amortization of actuarial gains (losses) and prior year service (costs) was not material to the Group See Note 13. Accumulated other comprehensive income (loss).
NOTE 12.
SHAREHOLDERS’ EQUITY
Authorized capital
The Annual General Meeting (“AGM”) on May 8, 2014, approved the creation of authorized share capital to be used for
strategic partnering and financing business transaction purposes at any time until May 8, 2016. The AGM on May 4, 2016,
extended the term by further two years. The Board of Directors (“BoD”) is authorized to increase the Group’s share capital
at any time until May 4, 2018, by an amount not exceeding CHF 6.5 million through the issuance of up to 13,000,000 fully
paid-in registered shares with a nominal value of CHF 0.50 per share (See Articles of Association of Actelion Ltd. Art. 3b).
The BoD is authorized to exclude or restrict pre-emptive rights of existing shareholders in connection with mergers,
acquisitions, strategic partnering or co-operation transactions in a combined capital increase through authorized and
conditional capital of up to CHF 11 million (representing 22,000,000 registered shares of CHF 0.50 par value each). Any
combined capital increase through authorized and conditional capital in conjunction with any such transaction, which
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exceeds CHF 11 million and excludes or restricts pre-emptive rights of existing shareholders, is subject to a new
shareholders’ approval.
Conditional capital
Since inception, the Group has created conditional capital for the establishment of share option plans, convertible bonds
and similar forms of financing. At June 30, 2016, the Group had conditional capital which would enable an increase in its
share capital up to CHF 13.5 million through the issuance of up to 27,000,000 fully paid-in registered shares with a nominal
value of CHF 0.50 per share.
CHF 4 million thereof can be used by issuance of not more than 8,000,000 fully paid-in registered shares with a nominal
value of CHF 0.50 per share by means of the exercise of options and similar rights which are granted to the employees of
the Group (See Articles of Association of Actelion Ltd. Art. 3a Sec.1 and 2). The remaining CHF 9.5 million can be utilized by
issuance of not more than 19,000,000 fully paid-in registered shares with a nominal value of CHF 0.50 per share by means
of the exercise of conversion rights or options in relation with convertible debt instruments, loans and similar forms of
financing (See Articles of association of Actelion Ltd. Art. 3a Sec.3). Limitations in the context of a combined capital increase
pursuant to Art. 3a Sec.3 and Art. 3b of the Articles of Association of Actelion Ltd. are outlined in the authorized capital
section above.
Movements in conditional capital in CHF thousands for the periods presented are as follows:
January 1, 2015
Forfeited Challenge Award options
Exercise of options
December 31, 2015
Forfeited Challenge Award options
Exercise of options
June 30, 2016
13,499
(3)
13,496
(1)
13,495
Treasury shares
At June 30, 2016, the Group holds 8,942,630 treasury shares acquired at an average purchase price of CHF 131.39. At
December 31, 2015, the Group held 9,059,510 treasury shares acquired at an average purchase price of CHF 125.55.
The Group acquires treasury shares through various share repurchase programs, which are outlined in detail further
below. The Group provides treasury shares in exchange for restricted stock units or option rights which vest or are
exercised in accordance with the conditions of the Group’s share-based payment plans (See Note 21. Stock-based
compensation in the audited consolidated financial statements for the twelve months ended December 31, 2015). In
addition, the Group has a share buyback program (“SRP III”) in place which aims to optimize value return for its
shareholders through an intended future share cancelation. The following table outlines the movements in treasury shares
for the six months ended June 30, 2016:
Treasury shares at January 1, 2016
Acquired through the first or second trading lines at SIX
Provided to employees due to option exercises or RSU vesting
Provided to members of the Board of Directors as compensation
Treasury shares at June 30, 2016
SRP II
2,987,510
762,368
(1,748,964)
(3,284)
1,997,630
SRP III
6,072,000
873,000
6,945,000
Total
9,059,510
1,635,368
(1,748,964)
(3,284)
8,942,630
Treasury shares acquired via the SRP II
On December 5, 2013, the Group announced the repurchase of up to 10,000,000 shares of Actelion’s common stock over the
period of three years. The repurchase is carried out via the first trading line on the SIX Swiss Exchange (“SIX”). The
repurchased shares were and will be further used to service Group’s commitments arising out of its various stock-based
compensation programs thus compensating for a potential dilution as a result of the share ownership schemes. For the six
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months ended June 30, 2016, the Group acquired 762,368 treasury shares through the SRP II at an average price of
CHF 147.71 and used 1,748,964 treasury shares acquired at an average price of CHF 115.09 via the SRP II to offset the effect
of RSU vestings and option exercises by the Group’s employees. In addition, members of the BoD received 3,284 treasury
shares acquired via the SRP II as compensation. At June 30, 2016, the Group held 1,997,630 shares acquired at an average
price of CHF 123.79 via the SRP II (December 31, 2015: 2,987,510 treasury shares acquired at an average price of
CHF 112.58). The Group expects to conclude its SRP II within the next few months. Upon completion of the program the
Group intends to continue repurchasing treasury stock via the first trading line on the SIX.
Treasury shares acquired via the SRP III
On February 16, 2015, the Group announced the buyback of up to 10,000,000 shares of Actelion’s common stock over the
period of three years. The program was commenced on April 9, 2015, and is carried out via a second trading line on the SIX.
At the AGM on May 4, 2016, the shareholders approved the cancellation of 6,367,000 shares, which were acquired via the
SRP III at an average purchase price of CHF 132. The Group is currently undergoing mandatory legal procedures and
expects to cancel the shares acquired via the SRP III and reduce the issued share capital accordingly by the end of the third
quarter of 2016. For the six months ended June 30, 2016, the Group acquired 873,000 treasury shares through the SRP III at
an average price of CHF 145.06. At June 30, 2016, the Group held 6,945,000 shares acquired at an average price of
CHF 133.58 via the SRP III (December 31, 2015: 6,072,000 treasury shares acquired at an average price of CHF 131.93).
Dividends
The AGM on May 4, 2016, approved a cash dividend for 2015 of CHF 1.50 per share. Based on this approval, the Group
distributed gross dividends of CHF 158.5 million to its shareholders (2015: CHF 142.4 million).
NOTE 13.
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Movements in accumulated other comprehensive income (loss) consist of the following for the six months ended June 30,
2016 and 2015:
Changes arising
January 1, 2016
during period
Foreign currency translation
adjustments1
Prior year service costs²
Actuarial (gains) losses3
Total accumulated OCI (loss)
(190,200)
11,018
(59,613)
(238,795)
6,739
6,739
Changes arising
January 1, 2015
during period
Foreign currency translation
adjustments�1
Prior year service costs2
Actuarial (gains) losses3
Total accumulated OCI (loss)
(161,715)
(46,798)
(208,513)
(28,633)
(5,482)
(34,115)
Accumulated OCI (loss), net of tax
Reclassification or
amortization
Translation
through net income
effects
Attributable to
noncontrolling
interests
June 30, 2016
-
-
(183,461)
10,383
(58,182)
(231,260)
Accumulated OCI (loss), net of tax
Reclassification or
amortization
Translation
through net income
effects
Attributable to
noncontrolling
interests
June 30, 2015
-
(190,348)
(5,482)
(45,851)
(241,681)
(635)
1,431
796
947
947
-
1
Income taxes are not provided for foreign currency translation relating to permanent investments in international subsidiaries.
2
Relates to the amortization of prior year service costs on the Group’s defined benefit plans. The amounts disclosed exclude income tax expense of CHF 0.8 million at January 1, and
June 30, 2016, and income tax benefits of CHF 0.4 million at June 30, 2015.
3
Relates to the amortization of actuarial gains (losses) on the Group’s defined benefit plans. The amounts disclosed exclude income tax benefits amounting to CHF 4.6 million at
January 1, and June 30, 2016, respectively. The amounts disclosed exclude income tax benefits amounting to CHF 3.6 million at January 1, and June 30, 2015, respectively.
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NOTE 14.
CONCENTRATIONS
A significant portion of the Group’s earnings is denominated in foreign currencies, principally in USD, EUR and JPY, while a
substantial portion of the Group’s R&D and selling, general and administrative expenses are in CHF. If in the context of the
current economic environment the Swiss franc is to further strengthen against these foreign currencies, the Group’s net
income and net assets may be adversely impacted.
Cash and cash equivalents, derivatives and accounts receivable are financial instruments, which potentially subject the
Group to concentrations of credit risk. The Group could experience credit losses in the event of non-performance by
counterparties to foreign exchange derivative agreements and money market instruments. In order to mitigate such risks,
the Group reviews on an ongoing basis the creditworthiness of counterparties to such contracts. The Group has not
experienced and does not expect to incur any significant losses from failure of counterparties to perform under such
agreements.
The Group invests its cash in money market instruments and derivative financial instruments with major banks. As of June
30, 2016, 13% of the Group’s cash and cash equivalents are held with several financial institutions with a S&P rating below
A, with the bank transacting the Group’s cash pooling holding 9% of the Group’s cash and cash equivalents. The remaining
87% is held with several financial institutions with a S&P rating ranging from A to AA, with one of them holding 22% of the
Group’s cash and cash equivalents. Cash held by the Group’s subsidiaries in Southern Europe with financial institutions with
a S&P rating below A, other than the bank transacting the Group’s cash pooling, is not material to the Group.
Derivative financial instruments mature on average within three months. One financial institution with a S&P rating below A
accounts for 30% of these instruments at June 30, 2016. Several financial institutions with a S&P rating ranging from A to
AA are counterparties to the remaining derivative contracts.
For the six months ended June 30, 2016, one distributor in the US accounted for approximately 54% of total sales. At June
30, 2016, CHF 128.9 million (USD 131.7 million) of trade receivables related to this distributor. Net assets of operations
located in the US amount to CHF 247.3 (USD 253 million) at June 30, 2016. Management believes other distributors could be
identified which would purchase the Group’s products on comparable terms; however, the establishment of new distributor
relationships could take several months. The Group performs ongoing credit evaluations of such distributors. Note 15.
Segment and geographic information outlines the concentrations in geographic areas where the Group operates.
The Group closely monitors its trade receivables and its DSO (“days of sales outstanding”) in Southern Europe. Product
sales to public sector customers where collectability cannot be reasonably assured are only recognized upon cash receipt.
As of June 30, 2016, approximately 15% of trade receivables are due from customers in this region. The Group continues to
implement measures to further increase cash collection in these countries, including among others non-recourse
factoring, legal claims or interest charges for late payments. For the six months ended June 30, 2016, the Group
transferred EUR 16 million (CHF 17.4 million) of its trade receivables owned by foreign subsidiaries to third-party financial
institutions without recourse. The consideration received was paid in cash. The factoring transactions were accounted for
as a sale and the related trade receivables derecognized. Transaction costs and net losses realized on all factoring
transactions for the six months ended June 30, 2016, were not material to the Group.
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The Group is dependent upon toll manufacturers to manufacture its products. For the six months ended June 30, 2016, one
supplier accounted for approximately 36% of total purchases. Management believes other suppliers could provide similar
products on comparable terms. A change in suppliers, however, could cause a delay in fulfilment of customer orders and a
possible loss of sales, which could adversely affect operating results. Management believes that the Group maintains
sufficient inventory levels to minimize the impact that a change in suppliers would have on operating results.
NOTE 15.
SEGMENT AND GEOGRAPHIC INFORMATION
The Group operates in one segment of discovering, developing and commercializing drugs for unmet medical needs. The
Group currently derives product revenue from sales of Tracleer® (bosentan), Opsumit® (macitentan), Uptravi® (selexipag),
Ventavis® (iloprost), Veletri® (epoprostenol for injection), Zavesca® (miglustat) and Valchlor® (mechlorethamine gel).
Product revenue attributable to individual countries is based on the location of the customer. 94% of the product revenue is
related to PAH specialty products which have similar economic and other characteristics, including the nature of the
products and production processes, type of customers, distribution methods and regulatory environment. Contract revenue
is derived from collaboration and service agreements with third parties.
The Group’s geographic information is as follows:
June 30, 2016
Product revenue from external customers
Contract revenue from external customers
Property, plant and equipment
June 30, 2015
Product revenue from external customers
Contract revenue from external customers
Property, plant and equipment
1
Switzerland
United States
EU-281
Japan
Other1
Total
12,695
193
306,995
639,170
29,576
309,203
790
115,910
1,271
102,316
68
1,344
1,179,294
261
339,976
12,407
2,723
320,909
494,679
29,679
305,482
477
86,431
1,201
108,884
1,624
1,007,883
2,723
353,890
Segment information for Europe for 2015 has been adjusted to conform to current presentation to include only the EU-28 member states. Segment information for European
countries not belonging to EU-28 has been included in Other.
NOTE 16.
SUBSEQUENT EVENTS
The Group has evaluated subsequent events through July 19, 2016. These events have been disclosed in the respective
notes of these consolidated financial statements.
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Actelion Ltd
Gewerbestrasse 16
CH-4123 Allschwil
Switzerland
Phone +41 61 565 65 65
Fax +41 61 565 65 00
[email protected]
www.actelion.com
All trademarks are legally protected.
Copyright ©2016 Actelion Pharmaceuticals Ltd.
Details of Actelion Worldwide can be found on
www.actelion.com
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