European Performance

"As the enlarged product portfolio now has three areas of focus, food producing animal products, companions animal products and companion animal diets, a new strategy has been developed to give the sales and marketing teams across Europe clear direction."

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European Pharmaceuticals

Revenue from this segment increased by 61.0% (66.3% at constant currency) compared to last year. On a like-for-like basis, including the contribution from the Eurovet business, revenue grew by approximately 5%.

DVP EU

The initial objectives of the integration of Eurovet have been achieved within the year:

  • Closure and restructuring of duplicate sales and marketing offices and teams in the UK, Benelux and Denmark;
  • Dechra products launched in Germany through the newly acquired subsidiary with a smooth transition and retention of market share following the termination of the prior distribution agreement;
  • The majority of the Eurovet companion animal products have been transferred to Dechra's own sales organisation in France;
  • Eurovet's major swine and poultry products have been launched for the first time in France;
  • All Eurovet products have been transitioned ready for launch into Norway, Finland and Sweden in the first quarter of the new financial year;
  • Manufacturing rationalisation is underway, further details of which are provided later in this report; and
  • Management teams have been successfully integrated creating a new operating board.

This first phase of integration has progressed in line with our strategy and is delivering the expected cost and revenue synergies.

Despite a very slow third quarter following the prolonged bad winter weather, pharmaceutical sales for the full year increased by approximately 5% on a comparable basis. There were big variations in performance on a territory by territory basis with the UK, France, Germany and Iberia performing well, and the Netherlands and Nordics underperforming. The underlying performance of our key strategic licensed veterinary products was robust. Our own branded pharmaceuticals grew by 5.1% at constant currency; growth was delivered across all key therapeutic sectors. Food producing animal antibiotic usage remains under review in a number of EU markets due to concerns regarding antimicrobial resistance; however, we still saw overall growth in this sector in all markets other than Belgium and the Netherlands. Our Specific pet diets grew by 2.6% at constant currency; this growth was assisted by the relaunch of a new presentation of our wet diet range and also by the introduction of a new intensive support diet for animals in rehabilitation post-surgery.

As the enlarged product portfolio now has three areas of focus, food producing animal products, companion animal products and companion animal diets, a new strategy has been developed to give the sales and marketing teams across Europe clear direction. In our key therapeutic areas, where Dechra has a substantial market position, a strong reputation and an in-depth knowledge and expertise have been better defined and prioritised. Clear focus on these therapeutic sectors will allow us to target our marketing support and provide sales team prioritisation and also provide a structure to support key pipeline products which fit into these therapeutic segments. Two distinct marketing teams have been created, one focusing on food producing animal and equine products, the other on companion animal products and diets. We are already seeing the benefits of improving the alignment of diets with companion animal pharmaceuticals. Our allergy diet range was promoted as part of a dermatological campaign, one of our key therapeutic categories, which resulted in strong sales growth. Furthermore, a key account management structure has been implemented to focus on swine, poultry and equine as the veterinarians within these sectors have become very specialised and work increasingly in a concentrated number of practices.

"Third party contract manufacturing continues to perform strongly."

Manufacturing

Following the Eurovet acquisition our manufacturing sites were rebranded as Dechra Pharmaceuticals Manufacturing. After a detailed review of our capabilities following this acquisition, it was decided to close the manufacturing facility in Uldum, Denmark. This site only produced two major prescription products which have now been successfully transferred into Skipton. The care range of unlicensed products, previously manufactured at the site, are now being outsourced to a third party supplier. This site will be closed prior to the end of the 2013 calendar year. We are also in the process of transferring two Eurovet products, which were previously manufactured by a third party, into the Skipton tableting facility. Once the transfer of these products is complete, the full manufacturing synergies identified prior to the acquisition will be delivered. The manufacturing management teams of both businesses have been fully integrated and programmes to standardise IT systems and GMP compliance systems are progressing well. Further efficiencies are also being delivered; significant yield improvements have been achieved and batch failure rates have halved. Furthermore, there has been a year on year improvement in accident rates with no reported RIDDOR's in the last 12 months.

Third party contract manufacturing continues to perform strongly with an increase in external sales of 12.5% at constant currency year on year. We continue to have a high level of new external contract manufacturing business enquiries.

Fuciderm manufactured at DPM, Skipton