LION Aims for Break Even in Q4 2003/2004 Despite Difficult ...
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LION Aims for Break Even in Q4 2003/2004 Despite Difficult Market and Business Conditions
 
  • LION continues with necessary measures to reach profitability
  • Declining markets and longer than expected sales cycles lead to revision of revenue target for the current fiscal year to around 20 m € (former target: 27.5 m €). Revenues in the first half of fiscal year 2003/2004 reached 7.5 m € (vs. 12.3 m € in fiscal year 2002/2003)
  • EBITDA improved in the first six months by 55% to (12.5) m €;
  • net loss was reduced by 88% to 14.0 m €
  • Cash burn declined in the first six months to 18.9 m € after 35.9 m € in first six months of 2002/2003. Cash position as of September 30, 2003: 53.9 m €

Cambridge, MA, USA, Heidelberg, Germany, November 5, 2003 – LION bioscience (Nasdaq: LEON) today announced revenues of 7.5 m € in the first six months of the current fiscal year, which ends March 31, 2004 (vs. 12.3 m € in the same period of the previous fiscal year). The company now expects revenues of around 20 m € for the full fiscal year; the former target was 27.5 m €. The primary reason for this lowered revenue expectation is longer than expected sales cycles for the new LION products. These products are competing in a market that is affected by persistently slow investments from the life science industry and by the problematic financing situation in the biotech sector. Furthermore, the weak dollar fostered lower sales.

In order to reach the company’s ambitious goals - to break even in the last quarter of the current fiscal year as well as in fiscal year 2004/05 on an EBITDA-basis - the company has initiated additional restructuring measures. The company intends to concentrate its in-house software development activities from the current three sites to one site by the middle of next year. LION anticipates a reduction of its workforce from currently 271 full-time equivalent employees (as of September 30, 2003) to roughly 190 as March 31, 2004. LION is currently considering possible solutions outside of the company with respect to its ADME development activities in San Diego (iDEA pkEXPRESS™). Sales & Marketing in the United States, the major market for the LION products, remains concentrated in Cambridge, MA and these activities are not influenced by the restructuring measures.

Aside from these restructuring measures, LION has taken necessary steps to ensure that development of the company’s core products, SRS/LION DiscoveryCenter™ and LION Target Engine™, will continue as planned. Due to the recent collaboration with DeltaSoft, including licensing and distribution of DeltaSoft’s innovative cheminformatics products, LION will launch a cheminformatics offering.

Costs are under Control: Restructuring shows Effects

Costs developed positively during the first half of fiscal year 2003/2004 and declined as planed to 20.1 m € (vs. 40.1 m €). The most notable factor for the decline in expenditures was the fact that LION’s restructuring measures are taking hold. In addition, the weak dollar supported LION on the expense side significantly. As expected, costs in comparison to the first quarter of the current fiscal year rose, due primarily to selling costs and research & development costs of 2.5 m € that had been deferred from the first to the following quarter.

Losses considerably reduced

EBITDA (Earnings before Interest, Taxes, Depreciation and Amortization) improved considerably by 55% compared to the same period of the previous fiscal year. Due to a noticeable decline in write-offs during the first half of the current fiscal year, EBIT (Earnings before Interest and Taxes) improved by 84% compared with the same period of the previous fiscal year. Net loss reached 14.0 m € compared to 111.9 m € in the same period of the previous fiscal year. Operative cash flow was reduced to (18.1) m € in the first half of the current fiscal year (vs. (29.5) m € during the first half of the previous fiscal year), with accruals reduced by 6.0 m € as of September 30, 2003 in comparison to the accruals as of March 31, 2003. Cash burn lessened in the reporting period to 18.9 m € compared to 35.9 m € in the first half of the last year. As of September 30, 2003, LION had over 53.9 m € in cash, cash equivalents and marketable securities. This amount reflects the reduction in liabilities for a credit line from the German state bank KfW of 2.6 m €. As of September 30, 2003, LION is debt free.

Outlook - Company confirms its Goal to Break Even on an EBITDA-basis

The global market for software and information solutions for the life sciences is currently driven by weak demand and slow investments by our customers. It is the company’s belief that this situation will not change in the short term. The company expects a considerable rise in revenue in the second half of the current fiscal year, largely due to LION Target Engine™, which was introduced in June 2003. In combination with the previously launched LION DiscoveryCenter™, LION Target Engine™, the functional work environment for molecular biology in drug discovery, is designed to bring substantial time-savings and qualitative value to life science customers. In the first nine months of the calendar year, LION has launched three new products (LION DiscoveryCenter™, LION Target Engine™ and iDEA pkEXPRESS™). LION has announced the first customers for both LION DiscoveryCenter™ and LION Target Engine™.

LION’s restructuring measures are expected to result in one time effects of up to 4 m € in the third quarter, but will reduce total costs and expenditures (including write-offs) in Q4 of FY 2003/2004 to around 7 to 8 m €. LION expects to have liquidity from cash, cash equivalents and marketable securities of at least 35 m € by the end of fiscal year 2003/2004. Total net loss for the full fiscal year is expected to amount to between 22 to 25 m €. LION expects to manage its cost basis towards reaching break even on an EBITDA-basis for the entire FY 2004/05.

“The current fiscal year is more difficult than we expected,“ said LION CEO Dr. Friedrich von Bohlen. “We are reacting to this situation by adapting our costs, capacities and structures to these circumstances accordingly”. He added, “We are concentrating on our core products which are in demand and having a positive response from our customers. Due to a planned reduction in development capacities, we are discontinuing products and projects that are not part of our core activities and we are delaying further development of certain products. In addition we continue to look for complementary collaborations that add to our product portfolio and leverage value to our customers e.g. the most recently announced collaboration with DeltaSoft in the cheminformatics area. It remains our ambitious goal, despite the volatile markets, to break even on an EBITDA-level with a continued strong cash position during the fourth quarter of the current fiscal year and to have no losses on an operative basis for the entire next fiscal year.”














Key Figures for the 2nd quarter and 1st half FY 2003/2004 Ending September 30 and Comparables
In million euroQ2Q26 mo6 mo
2003/20042002/20032003/20042002/2003
Total revenues (excluding discontinued operations)3.65.07.512.3
Total costs and expenses 10.920.320.140.1
EBITDA(7.3)(15.3)(12.5)(27.8)
EBIT(8.6)(80.5)(15.2)(95.8)
Net loss for the period from continuing operations(8.0)(89.0)(14.2)(104.9)
Net loss for the period(7.9)(92.7)(14.0)(111.9)
Operating cash flow (net cash used in operating activities)(10.9)(13.1)(18.1)(29.5)
Cash/cash equivalent end of period53.988.153.988.1
Shareholders’s equity53.6104.553.6104.5


For a complete report of LION’s results for the first six months ended September 30, 2003, please visit https://www.netgenics.com/financials (Financial Year 2004).


For further information please contact:

USA:
Tracy Coffey
Director Global Public Relations
+1 617 245 5433
tracy.coffey@lionbioscience.com

Europe:
Günter Dielmann
Vice President Investor Relations
+49 (0) 6221-4038 249
guenter.dielmann@lionbioscience.com

About LION bioscience AG

LION bioscience (ISIN: DE0005043509, Reuters: LIOG, Bloomberg: LIO, Nasdaq: LEON) provides proven information and knowledge management solutions to significantly improve life science R&D performance and productivity. LION’s performance software solutions developed by its scientific and IT experts enable researchers to simultaneously compile and analyze data across various phases of the R&D process. Research time and costs are reduced, as scientists are able to identify and focus on the most promising drug candidates earlier.

LION (https://www.netgenics.com) sets the standard for integration solutions with more than 280 corporate and academic customers globally including AstraZeneca, Aventis, Bayer, Boehringer Ingelheim, Celera, DuPont, Eli Lilly, GlaxoSmithKline, IBM, Incyte, Johnson&Johnson, Merck Inc., Nestlé, Novartis, Schering AG and Sumitomo Pharmaceuticals. LION’s solutions include SRS for bioinformatics data access, iDEA pkEXPRESSä with analysis and prediction tools for ADME, LION Target Engine™ for target identification and validation, LION Lead Engine™ for lead identification and optimization, LION DiscoveryCenter™ for biological and chemical data and application integration and LION SolutionCenter™ for professional services.


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Except for the historical information contained herein, the matters set forth in this press release are forward looking within the meaning of the Private Securities Litigation Reform Act of 1995, and other applicable U.S. and German laws. These forward-looking statements may include projections, estimates, targets, goals and descriptions of future events. Such statements are based on the current targets that LION has set itself and on LION’s current expectations, each of which is subject to risks and uncertainties. LION’s actual results may vary materially from those targeted, expected or projected because of factors such as uncertainties relating to technologies, product and solution development, acceptance by the market of LION’s offerings, market or industry trends, success of LION’s business model and strategy, competition, exchange rate fluctuations, cost or pricing of LION’s products and solutions, dependence on collaborations and partners, regulatory approvals, competition, intellectual property of others, or patent or copyright protection and litigation. We refer you to LION’s Annual Reports on Form 20-F, as filed with the Securities and Exchange Commission (SEC), as well as LION’s SEC filing, as filed on September 30, 2003, in which these and other risk factors are discussed. LION expressly disclaims any obligation or undertaking to release publicly any updates, revisions or corrections to any forward-looking statements or historical information contained in this announcement, whether as a result of new information, change of assumptions or business model, future developments or otherwise. LION bioscience®, Life Science Informatics™, LION DiscoveryCenter™, LION SolutionCenter™, LION Hosted Services™, LION Target Engine™, LION Lead Engine™, LSI™, bioSCOUT®, arraySCOUT™, arrayTAG™, arrayBASE™, genomeSCOUT™, pathSCOUT™, pSCOUT™ and iDEA™ are either registered trademarks of LION bioscience AG or its subsidiaries in the United States and/or other countries, or there are pending applications by LION bioscience AG or its subsidiaries for these trademarks in the United States and/or other countries. The names of actual companies and products mentioned herein may be the trademark of the respective owners.
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