Crucell Q2 net loss narrows, margin disappoints

(Rewrites, adds analyst comments, updates shares)

By Harro ten Wolde

AMSTERDAM, Aug 12 (Reuters) - Dutch biotechnology firm Crucell's net loss halved in the second quarter, beating expectations, thanks to its key childhood vaccine product Quinvaxem, though gross margins disappointed.

Crucell's shares, which initially rose to a three-month high on Tuesday, sharply reversed gains as investors focused on weakening gross profit margins, which dropped to 36 percent from 39 percent a year earlier and 40 percent in the first quarter.

The net loss was 7.9 million euros ($12 million) compared with an average forecast for a 12 million euros loss in a Reuters survey of four analysts, with estimates ranging from 6 million to 16 million euros.

"Top-line and net profit growth looked good at first sight but underlying, the results seemed disappointing," Petercam analyst Jan van den Bossche said.

He also noted the slow start to Crucell's cost savings programme, with expected net savings of 3 million euros in the second half of this year.

Crucell shares reversed early gains and were down 2.5 percent at 11.76 euros at 0943 GMT, underperforming a 0.7 percent dip in the Amsterdam Midcap index .

The company said it expected gross margins in the second half to be positively influenced by its flu product Inflexal V.

Lehman Brothers analyst Peter Welford said in a client note he expected margins to expand during the second half, improving over the year to 40 percent with volume growth.

QUINVAXEM STRONG

Crucell reported strong growth of its paediatric vaccines, driven by Quinvaxem, a vaccine cocktail for the childhood diseases diphtheria, tetanus, whooping cough, hepatitis B and an antibiotic against bacterial meningitis.

The market for Quinvaxem, acquired in 2006 through the acquisition of Berna Biotech, is expected to be 150 million doses in 2009, Crucell's Chief Executive Ronald Brus said.

He declined to say whether Crucell, which has posted losses in all quarters since listing in Amsterdam in October 2000, would be able to report a quarterly profit this year.

He said the company would be able to say more when reporting third quarter results in November.

Second quarter revenue rose 51 percent to 59.6 million euros, beating the average analyst expectation of 50 million.

Crucell kept its 2008 forecast for 20 percent revenue growth excluding currency effects, with higher margins and positive cash flow.

New competition has emerged for Quinvaxem as two Indian companies, Panacea Biotec and Shantha Biotechnics, have received prequalification from the World Health Organization (WHO) to supply child vaccines to United Nations agencies.

Brus said this was little cause for concern.

"We expect the product can grow significantly in the coming years and we think we are well positioned to become a main player on this market, based on our experience of producing Quinvaxem on a large scale," Brus said.

The company reaffirmed its 15 percent cost savings target by end-2009, excluding research and development costs, resulting in 30 million euros in savings. (Reporting by Harro ten Wolde; editing by Elaine Hardcastle)