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Acrux Limited (ASX:ACR) Acrux Files Half Year Results

Acrux Reports Half Year Profit of $56.7 million
 
Highlights:
- Profit after tax $56.7 million (2009: loss $2.1 million)
- Diluted earnings per share 34 cents (2009: loss 1 cent)
- Cash reserves $147 million (2009: $9.6 million)
- Revenue $90.5 million (2009: $0.6 million)
- Axiron® commercialisation:
   - US marketing authorisation issued by FDA
   - Milestone payment of US$87 million received from Eli Lilly
   - US market launch expected by mid-2011
   - Marketing applications for other territories in preparation
   - Acrux to receive royalties on worldwide sales, as well as potential sales milestone
     payments of US$195 million
- First distribution to shareholders of approximately 60 cents per share expected in 
  March 2011
 
Acrux (ASX: ACR) today announced a profit after tax of $56.7 million for the half-year to 31 December 2010, resulting in diluted earnings of 34 cents per share. This follows on from the maiden profit after tax of $46.6 million and diluted earnings of 29 cents per share reported for the year to 30 June 2010. The full year profit after tax is expected to be similar to the first half result.
 
The result was driven by revenue of $90.5 million. In November 2010, ten months after Acrux submitted a marketing application, Axiron® was approved by the Food and Drug Administration (FDA) for marketing in the United States. The approval triggered a milestone payment of US$87 million from Acrux’s global licensee Eli Lilly. Acrux is eligible to receive further sales milestone payments of up to US$195 million and will receive royalties on worldwide sales of Axiron. Lilly is expected to launch Axiron in the United States by mid-2011 and marketing applications for other territories are in preparation.
 
“We are delighted to report another substantial profit following our success in achieving FDA approval of Axiron ahead of expectations. We now look forward to the launch of Axiron into the US market which is worth US$1 billion annually”, said Acrux CEO Richard Treagus. “Today, the board reaffirmed its intention to make afirst distribution to shareholders of approximately 60 cents per share in March 2011, with details to be announced in due course” he added.
 
A summary of the Company’s financial results are contained in the ASX announcement.
 
Revenue
 
Total revenue for the half-year was $90.5 million (2009: $0.6 million). Revenue from product agreements was $88.7 million (2009: $0.4 million), due to the receipt of US$87 million from Eli Lilly. Interest on cash deposits increased to $1.8 million (2009: $0.2 million), due to higher cash reserves following the receipt of payments from Eli Lilly under the Axiron agreement.
 
Expenses
 
Operating expenditure after capitalisation of product development expenditure was $8.9 million (2009: $2.7 million). Total expenditure before capitalisation was $10.4 million (2009: $5.6 million). The increased expenditure was due to royalties of $3.0 million (2009: Nil) payable to Monash Investment Trust following the receipt of the US$87 million milestone revenue from Eli Lilly and to foreign exchange losses of $3.2 million (2009: Nil) incurred as the Australian dollar strengthened prior to settlement of the milestone revenue. These additional expenses were offset by a reduction in total external research and development expenses before capitalisation, which decreased to $1.0 million (2009: $2.3 million), as activities related to the development of Axiron neared completion. Expenditure of $1.4 million (2009: $2.8 million) for Axiron and $0.1 million (2009: $0.1 million) for Ellavie™ were capitalised as an asset, as required by AASB138 Intangible Assets.
 
Income tax expense of $24.9 million was recognised for the 6 months to December 2010 (2009: Nil), of which approximately $5 million was deferred tax expense. Provision for current tax payable at 31 December 2010 was $19.9 million.
 
Cash flow
 
Net cash inflow for the half-year was $88.5 million (2009: $5.1 million outflow), resulting in cash and cash equivalents at 31 December 2010 of $147.1 million (30 June 2010: $58.6 million). Net payables increased by $25.8 million, mainly due to payables for current tax of $19.9 million and royalties of $3.0 million. Cash received on exercise of employee share options increased to $7.4 million (2009:$1.2 million).
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