PARIS - Cerep SA has announced better-than-expected financial results for 1997, reporting a net profit of FFr900,000 (US$150,000). When it announced its initial public offering (IPO) on France's Nouveau Marché last November, the Paris-based drug discovery company forecast a loss of FFr1.4 million for 1997 as a result of a sharp increase in research and development expenditure. In effect, R&D spending more than tripled to FFr11.2 million last year from FFr2.9 million in 1996.
Revenues increased 95 percent to FFr48.4 million in 1997 from FFr24.7 million the year before, while pretax earnings rose by 69.6 percent to FFr5 million from FFr2.9 million. Net earnings also came out at FFr2.9 million in 1996, and the drop in 1997 was essentially due to an exceptional charge of FFr4.3 million associated with the IPO. Revenue growth has continued at the same pace so far this year. Cerep's turnover in the first quarter was up 109 percent to FFr16.5 million from FFr7.9 million in the first three months of 1997.
Cerep's managing director, Alain Maiore, told BioWorld International the company had avoided a loss in 1997 because its business had grown more rapidly than expected. Its fee-for-service activities accounted for the bulk of its revenue growth, due mainly to increased demand for its profiling and combinatorial chemistry services. In response to that growing demand, Cerep is expanding the capacity of its drug profiling plant in Poitiers, southwest of Paris, where it is doubling its laboratory space from 1,200 to 2,400 square meters and stepping up its work force from 50 to 75.
Maiore said the expansion would cost around FFr12 million and is scheduled for completion within the next 12 months. He added that the company's other two other plants in Lille, France, and in Seattle also were to be expanded starting this year.
In view of its plans for a substantial increase in capital investment to accelerate the growth of its business, last November Cerep not only forecast a small loss for 1997 but also projected much bigger losses of FFr14 million for both 1998 and 1999. According to Maiore, the company is likely to post a loss this year, but it could well be rather smaller than forecast thanks to continued rapid revenue growth and cost-effective management.
After postponing its planned IPO last December because of unfavorable market conditions, Cerep finally completed the operation in February, raising $15 million. At the same time, Paris-based Sanofi SA purchased a 5 to 6 percent stake in the company for $3.7 million, under the terms of the four-year research collaboration agreement it signed with Cerep last December. The company said it expects to sign another strategic alliance this year, “which will further add to our revenue base.“ *