Conference Call Transcript

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Conference Call Transcript

CRXLF.PK - Crucell Annual General Meeting of Shareholders

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C O R P O R A T E P A R T I C I P A N T S

Jan Oosterveld

Crucell - Chairman

Jerald Sadoff

Crucell - Chief Medical Officer

Robert Jan Lijdsman

Notary - Allen & Overy

Ronald Brus

Crucell - President, CEO

Leonard Kruimer

Crucell - CFO

Cees de Jong

Crucell - COO

William Burns

Crucell - Member - Supervisory Board

James Shannon

George Siber

Jaap Goudsmit

Crucell - Chief Scientific Officer

Rene Beukema

Crucell - General Counsel, Corporate Secretary

P R E S E N T A T I O N

Jan Oosterveld - Crucell - Chairman

(interpreted) Ladies and gentlemen, good afternoon. I'm Jan Oosterveld. I'm the Chairman of Crucell's supervisory board and I will be chairing this meeting in accordance with the stipulations in Section 1 of Article 38 of the Articles of Association. It's 2 p.m. and I am now opening the meeting.

Welcome on this lovely day in this magnificent church. For those of you who don't know them, I'm pleased to introduce the fellow members of the supervisory board to you. Mr. Waller will be joining us momentarily. Other than that, all of us are present. And Mr. Satow will be leaving a bit before the end.

I'll start with Phil Satow, then. He's at the other side so that he can leave unobtrusively. He's the Chair of the Remuneration Committee. Claes Wilhelmsson chairs the Scientific Advisory Committee. Sean Lance is the Deputy Chairman and a member of the Audit Committee. Arnold Hoevenaars, Chairman of the Audit Committee. Steve Davis, member of the Remuneration Committee. Floris Waller will be joining us momentarily. George Siber is a prospective member. So is William Burns and James Shannon. Misters Siber, Burns and Shannon will be submitted for your approval under item 8 of the agenda to join the Supervisory Board.

We also have present here members of Crucell's Management Committee, Ronald Brus, President and Chief Executive Officer, Leonard Kruimer, Chief Financial Officer, Jaap Goudsmit, Chief Scientific Officer, Rene Beukema, General Counsel and Corporate Secretary, Cees de Jong, Chief Operating Officer. And at the left, Arthur Lahr, is Chief Strategic Officer and Executive Vice President, Corporate Business Development. And Jerald Sadoff, he's with us for the first time, he's our Chief Medical Officer.

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Jerald Sadoff - Crucell - Chief Medical Officer

Welcome, everybody. My name is Jerald Sadoff. I've had about 35 years of experience in developing vaccines. I trained as a physician and started at Walter Reed, where I ran the US Army's vaccine program. Then I went to Merck, where I was there for about eight years and licensed eight vaccines that are currently being used. And I had my own nonprofit where I worked for seven years developing TB vaccine.

And we have four vaccines in the clinic and one of our partners was Crucell. And I came to Crucell because I consider Crucell the best biotech in the world for making vaccines and biologics and I wanted to be part of it. And I think it's got a tremendous pipeline, a great future, and a good present. So, wonderful to be here and to live here in this great country. Nice to meet you.

(interpreted) And Pieter van de Goor, partner of Deloitte, is also with us, as well as Robert Jan Lijdsman, notary for Allen & Overy, who will serve as Secretary to the meeting. I hope the Secretary will establish that the meeting has been legally convened and indicate how many votes are present and represented.

Robert Jan Lisemam Notary

I will be happy to do that, Mr. Chairman. I've been informed that the announcement of the annual shareholders' meeting, including the agenda, was published in Het Financiële Dagblad on 3 May, also for May this year. Accordingly, all announcements were published at least 15 days prior to the meeting.

The announcements also stipulated that the agenda, including explanatory notes and all other documents relating to the meeting, were registered and made available to shareholders, as prescribed by law.

The Executive Board has determined 1 June 2010 as the deadline for informing the Executive Board by those with registered shares or registerd law of property, right of usufruct of shares their intention to attend the meeting. The transfer agent in the United States has informed the proxy statement has been sent to holders of American depository shares on 5 May 2009.

1 June 2010 was also the deadline for submitting a statement concerning the registration of bearer documents. Entitlement to attend the meeting and to exercise rights may be carried out by written proxy, provided this proxy was received by the Executive Board no later than 1 June 2010.

Accordingly, all legal requirements and those under the articles of association have been complied with so that legally valid decisions may be taken on all items on the agenda. According to the attendance sheet, 29,546,331 shares are entitled to cast votes, which is 36.2% of the issued capital.

Thank you, Mr. Secretary. Now, I'd like your attention, please, for agenda item two, which is the report from the Executive Board regarding the state of the business and the annual accounts for 2009, which ended on 31 December 2009.

I'm pleased to give the floor to Mr. Brus, who will deliver the report, but first, please see the disclaimer, which refers to the fact, as you see on the overhead now, the fact that we have met our legal obligations in the United States, including the risk factors concerning Crucell and forward-looking statements made by the Company. I'm now pleased to give the floor to Mr. Brus.

Ronald Brus - Crucell - President, CEO

Thank you very much, Jan. Ladies and gentlemen, I'm happy to review the state of the business at Crucell with you, as well as the course of events, especially with respect to the year 2009, I'll be as forthcoming as possible. This is the seventh time I'm doing this. The first time I had no trouble reading the words in front of me. But I'm a lot older and this fine print is too small for me, so I apologize if I look to my rear once in a while.

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Okay, what I wanted to tell you about is that we've had a very formal opening, but let's think about what Crucell does and say a bit about that. I'll present three or four slides about this. As doctors and physicians and scientists, what motivates us in our surroundings? One, of course, is tuberculosis, which is a disease that is spreading horribly rapidly. It's a bacterial disease and we're the first company that has used a virus vector to conduct studies in newborns, because that's the origin of the serious tuberculosis problem.

Approximately 2 million people die of tuberculosis every year. And what's particularly concerning is that despite the good antibiotics available to treat these people, more and more strains of tuberculosis are no longer treatable. We believe that, thanks to our efforts and the efforts that our scientists and employees make worldwide, the likelihood of a tuberculosis vaccine is increasing and it will be developed soon.

The same holds true for malaria. A great many people suffer from malaria. At the start of the year we closed a deal with GlaxoSmithKline in which we will team up in developing a malaria vaccine that may be administered worldwide. This means in the West that those people who go on holiday to countries where they might be exposed to malaria, and for everybody who is deployed abroad, such as the US military and others, that they would no longer need to take anti-malaria pills. And for everybody who happens to live in areas where malaria is endemic, hopefully we can protect them.

That's what motivates us. And the same holds true for the next disease, which, to us, is the hardest disease to develop a vaccine for, which is AIDS. We all know that it's caused by a virus. But we also know that there isn't really a cure for that yet. And the first hints seem to suggest that a vaccine is possible.

Some major studies have indicated that there must be some way of stopping AIDS and some way of preventing 2 million people from dying unnecessarily all over the world. We're working with Harvard Medical School and we think we have one of the two best AIDS programs in the world. But we think about this every day when we go to work. This is what we're doing it for.

And finally, everything needs funding, which is why we're also working on diseases that matter in the West. And you may have read that last year we closed a major deal with a US company, Johnson & Johnson, to develop a universal influenza vaccine.

What is a universal influenza vaccine? It's a vaccine that is administered once and provides protection against all flu strains. So, the problems with purchasing vaccine by the government and other problems would no longer enter the picture because this vaccine would address -- would protect people against all strains of flu.

And why do we think that vaccines are the best way to be important in fighting these diseases? There are various reasons. One of the most important reasons is that it's incredibly difficult to imitate vaccines. So, the patent that exists in the pharmaceutical industry, which involved ten years of research and then seven years of earning money because -- and then falling down a cliff because the patent has expired, will be over.

Vaccines are incredibly difficult to develop. The flu vaccine was basically developed 60 years ago and has a value of approximately $3 billion a year worldwide, without any generic varieties being available. So once you know how to do it, you can build it up and invest those proceeds in the research I mentioned above.

Healthcare benefits most from means that work best and are the most effective for the number of Euros they cost. So if we can protect somebody from contracting the flu with a five-year dose, then that's a wonderful option for governments in other countries. And that's about what it costs to have a low cholesterol diet pill for five days. Worldwide healthcare is pressured by those cost issues and we think that vaccines are the most cost efficient for all governments. So, for a relatively modest amount, they're extremely effective.

And there are some other things that we really care about. One is the relatively low marketing and sales costs. Our vaccines that we sell worldwide don't usually need to be sold door-to-door by specialist sales reps at each physician’s office. We try to do it with ten to 15 representatives per country and they contact government officials who purchase wholesale. And that minimizes our marketing and sales budget. We don't need tens of thousands of sales reps worldwide to sell our vaccines. One of our representatives generates a really high return.

Finally, we don't advertise in Time magazine or similar media. And that also curtails our costs and ensures that the profit margins are good. Now, we focus on infectious diseases. Basically you could use vaccines for other types of diseases than really infectious diseases. I don't know whether you read this, but the first vaccine for cancer is uterine cancer, is in the works because even though uterine cancer originates from a virus, we're starting to realize that there will be a lot of research to fight cancer with vaccines so that our body and immunological status will enable us to basically fight these diseases independently.

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And I believe that in the next two decades we'll be able -- we'll have the means necessary. The same holds true for Alzheimer's. That's a typical disease that you might expect a vaccine to generate antibodies within humans that would eliminate the plaques in the nerve cells affected.

Looking at 2009, Crucell had a good year. We saw good growth in our strong revenues and profits. They were up, too. When we acquired Berna Biotech, we said in the second half year that organization can perform better economically, we can cut costs. And we succeeded in getting the organization to operate at considerably less costs annually, 30 million cost savings per year achieved in Berna.

And we also transformed the deal with Johnson & Johnson, worth over 1 billion. And I'll tell you more about that later. In our clinical studies, we're achieving good progress. I'll tell you about that later on. And we received additional awards and orders from UNICEF for our best selling vaccine, which is Quinvaxem.

And we received this not only because our vaccine is so wonderful. It's also because our competitors are finding it very difficult to make this same vaccine and that apparently they can't simply manufacture it in low wage countries. And one of our competitors had to withdraw all its products from the market, and we derived additional benefit from that.

One of the problems that we treated you to last year, I would almost say but that's not really true, basically we informed you about it, is that we'll have to replace our facility in Korea. Because our vaccine was being produced in a facility close to Seoul, but we've transferred close to the airport in Incheon and built a new facility there. And we built that up in a record type setting. It's being reviewed by the authorities right now and we expect the facility to be up and running at the start of 2011. And that would keep us on track.

We also have excellent tax ruling with the Korean authorities so that we won't pay taxes on anything produced there during the early years. At the same time, because of all the fuss concerning the Mexican flu, I consider it flu because we weren't involved in it, but our partner in Taiwan did and had to produce large quantities of flu for the Taiwanese government. And that accelerated getting the factory off the ground.

So we expect our bottleneck in the production of flu vaccines that we ordinarily procure from Australia that we will have an additional source from 2011 that we'll be able to obtain from Taiwan at a better rate and without the bottlenecks. Due to the situation, our position as the sixth largest vaccine player in the world continued. We maintained that and we're -- we left number seven and eight at a considerable distance.

And because of this, our financial figures are getting better and better. As you can see, since 2006 we've had excellent organic growth, where each year we've increased our revenues so that what we call seasonal , for example, selling only flu vaccine in the last gray quarter, that seasonal aspect has basically ended. And now we have a portfolio that we can build on.

We sell medicine in over 80 countries at present and in some of those countries -- we sell them in a great many other countries. We do this by distributors. A great many of these distributors were not selected by us, rather the Company and the companies we acquired selected them. And we've managed to buy out some of those distributors and -- but we're waiting until some of the other contracts with distributors are up for renewal and then we'll discontinue them, because we aim to sell as much as we can ourselves.

I told you that our marketing and sales costs are very low. And we believe that if we do this ourselves, we'll increase our revenues and our margins. Because we need -- we pay a lot of our margin to our distributors. One of the countries where we did this is England. This happened last year. And if we consider the change in revenues we achieved in England, as well as the deals we can reach with the government in England because we're -- because we're present there, we're delighted with this. And this -- the sales force we have of course is far less expensive.

The three categories of our vaccines include pediatric vaccines, travel vaccines and finally, flu vaccines, respiratory. Something about the travel vaccines, because the economy was in a slump last year, far fewer people went on holiday. So that means that our pond for travel vaccines reduced considerably. Nonetheless, we expanded our market share and we hope that when the economy rebounds, people will start traveling again and we'll benefit from our increased market share.

I told you about Korea. This sheet basically reflects the situation about three months ago when we opened the facility. Now, this almost looks like an animation, but these are the colors they like in Korea. And I would say that this is Crucell's largest vaccine factory. The capacity is 200 million doses of hepatitis B and we can build 100 million Quinvaxem.

It's right next to the airport in what's known as a free economic zone. So we get very good tax benefits from the Korean government. And we built the facility in record time. It's going to be evaluated by the Korean FDA. And this is a very gradual process and that will increase our likelihood of being up and running at this site in the first quarter of 2011. We need to be because our competitors are having a lot of time producing a liquid pentavalent vaccine.

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And this shows where we started in 2006 at a factory with a maximum capacity of 22 million doses. In the first year we sold 6 million doses. In 2009, we sold 64 million doses of pediatric vaccines. And all that came from the same factory. We hope that the new factory will operate even more efficiently.

And the following diagram shows how difficult this is. Several months ago we received a new order from UNICEF to the tune of $110 million, because our biggest competitor would have to withdraw its product from the market. It wasn't a piece of cake. We helped UNICEF, but we see that our competitor is in deep trouble and this year and next year we will be producing and selling as much Quinvaxem as possible.

Now, I'll tell you a bit about Quinvaxem. It is a pentavalent vaccine, which means that this one vaccine provides protection against five pediatric diseases. One tube, or one shot, as we call it, will protect your children against five well-known children's diseases. It's particularly popular now in the third world. And we keep expanding our territory.

Generally, these vaccines are paid by UNICEF, and the World Health Organization basically monitors the quality. We've never disappointed UNICEF or the World Health Organization, and we are looking forward to a good year for Quinvaxem. The total award value that we have received since 2007 is $910 million. And worldwide, we've traced what and how and which patients use our drugs. That's pharmacological vigilance, so everybody knows what the side effects are and that's how we can really keep track of the quality.

In the first quarter we had low revenues for Quinvaxem. This was because shipments to Pakistan and other countries were a bit behind schedule. It was a matter of timing because very difficult for us to time arrivals each quarter. As a consequence, until April we sold more Quinvaxem than in all the three months before that. And we think that this quarter will be particularly good because we're participating in huge global vaccination programs.

Now I'm going to tell you a bit about the pipeline, but I'll go into more detail about that later on. One of the things we often hear is that we started with a PerC.6 cell line that was very successful, what's the present story? We haven't heard much about that. All the products that we have in our pipeline are produced on that site and we have 60 to 80 customers producing products for clinical trials in all different stages.

And our idea is that perhaps it's not happening as fast as we would like it to, but that's not only our fault. It's also because pharmacological development, especially in the biotech sector, is a very slow process. That's why we bought Berna Biotech, to make sure that our cash flow is sufficient and can generate good cash flow to do what we need to do.

Now, at present, downsizing, what we're doing with this huge production facility, is very popular here. We're trying to replace those huge boilers of 20,000 liters with 500-liter boilers. And a major advantage is that we can do this with disposable materials, materials we can dispose of afterward so that we needn't clean the entire factory. Because that's an incredibly costly process and there are sweeping consequences for the initial investments, which are considerably lower and the cost of goods.

So, the cost of producing such medication plummets. We're working on that now. It also means that basically we could set up these factories all over the world, not necessarily in Switzerland. But we could easily set up such a factory in Korea because they're relatively small factories.

One thing we hope to produce in those factories is an antibody to the flu. Johnson & Johnson published this last year in Science and was very excited about this. And they made us an offer in which they would take 18% of the Company with a substantial premium. They paid us a lot of money. On top of that -- on top of a deal value in excess of 1 billion, they fund a lot of our development and receive a fair amount in return. They receive half the market for our flu vaccine. They do pay a lot for that.

But in addition to that, they have four additional boxes of things that we'll be doing together with them. These are not things presently in the pipeline, so we'll keep our pipeline entirely to ourselves. These are things that we'll be doing together with them. We may not be very good in them, but our vaccine technology will be really useful to them.

The first thing we're going to do with them is developing the antibody. Second is the flu vaccine. And then there are three other things they want to do together with us. And I think we'll disclose those things in the course of this year. They pay our research and at the end of the line, there are joint milestones as well as rights that Crucell has to sell in certain countries. And we always try to obtain rights for the countries where we are already active.

One thing that's important is that we didn't want to get tied to Johnson & Johnson. So the deal we reached is where Johnson & Johnson purchase shares at a major premium to the tune of EUR302 million at EUR20.63, which means that we have a lot of surplus cash from that. And in

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addition -- but that also means that Johnson & Johnson has an 18% share in our firm. And that doesn't coincide with a board seat or with something else.

But if another party bids on our firm, Johnson & Johnson either has to sell its share or they have to make a counteroffer. Not like you. You're entitled to hang onto your shares if there's an offer if you don't like the offer. If the majority of the shareholders likes the offer, then JNJ has to sell or make a counteroffer. We thought this would be the best of all possible worlds for Crucell. And it generated a lot of cash for the firm.

Consequently, we can continue working on the diseases presently in our portfolio. We have two studies on rabies. 55,000 people die of rabies annually. If you're bitten by a rabid dog or bat or skunk, the likelihood of becoming rabid, you'll know that within five to 20 days. And once the symptoms materialize, it's always a fatal disease.

And we think this is particularly sad because these tend to be children who find a dog or a bat lying on the road and pick it up, are bitten, and then there's no cure. Even though if they had been given an antibody in time, they would have 100% chance of avoiding developing rabies. And that would save their life. The problem is that what we now have available is obtained from human blood and it takes -- it costs $500 to $750, which is a very high cost for a lifesaving medicine.

So every American bitten by a dog or a bat receives that drug, but in China hardly anybody does. And in the US, only 45,000 people a year are bitten by a suspect animal, whereas in China the figure is 13 million, and in India it's very high as well. The people in India and China get something different. They get a horse serum, which isn't equivalent of human blood, but from a horse. And that's not a very good thing.

Why not? Because there are children that die from the medicine because they develop a serum disease, without even knowing whether or not they have rabies. We can produce this medicine for only $6 or EUR6, it depends on where we do it. And we think that we could then make it more widely available. The same basically holds true for our tuberculosis vaccine. We think that we need facilities and they would generate 50 million to 100 million doses.

The stage II results we have in our tuberculosis vaccine are promising. But that doesn't tell us what lies ahead in stage III. Then we'll be able to tell whether this drug really cures tuberculosis or not. This holds true for all our activities and for what Merck and other pharmaceutical companies are working on. It takes a long series of clinical trials to reveal whether our medicine is effective.

And we can conquer the market with what's already been approved, but the things that are in the pipeline have to prove their merits. And we need to find out about that in time. Otherwise it will be really expensive for us. So we want to find out as quickly as possible whether something works.

We have now started a cooperation with GlaxoSmithKline. They are in a phase III of their field trials. So the effectiveness of this malaria vaccine prove to be too low, about 40%. But, and this is very important, it was demonstrated for the first time that this is possible, that one can make a malaria vaccine.

Together with Glaxo, we will develop a prime boost in which we will first give our oral Glaxo's vaccine, and then followed by a dose of the other vaccine. We have shown in the first trials with Walter Reed that we can achieve very good results. And the American government and the American Army have supported us in doing something about this, together with GlaxoSmithKline. This may become a good vaccine, only it is going to take time. And it has the same risks as the others.

And I want to finish with this by telling you that currently our business is solid. We are showing good growth. Our factories are working well. We can put a lot of money into research and development. We are showing a consistent sales growth. We have transformed the Company into a profitable company. And we have a good potential for the practice -- our products, which are already on the market, and that do not entail products that are to be developed.

At the same time, we have a pipeline which may prove very productive. But of course there's always a risk in these products that I may have failed somewhere along the way. And having said that, I should like to give the floor back to the Chairman.

Thank you, Mr. Brus. Later on we will have a Q&A session, but I suggest first giving the floor to Mr. Kruimer, who will discuss the financials with you.

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Leonard Kruimer - Crucell - CFO

Thank you, Chairman. It's a pleasure for me to discuss the financials with you, the financial paragraph. And Ronald Brus has already pointed out some elements from that, but I'll discuss it with you in some detail.

First of all, the main figures and core elements. The year was characterized by a strong increase in sales and increase in profitability. Our total revenues and other operating income increased by 26% with total of EUR358 million, which is a record figure in Crucell's history. Our operating profit quadrupled to EUR39 million and a net profit increase 68% to EUR23.9 million. And the earnings per share, the EPS, went up 55% to EUR0.34.

These are figures from the profit and loss accounts. And for those who have checked our annual report, you will have seen that our balance sheet per year-end was very strong, with a total of over EUR1 billion, of which more than EUR735 million was owned equity and the amount of short term liquidities and cash amounted to EUR428 million. So, in that sense, we are a company practically without debt and with a very strong balance sheet. And part of that balance sheet consists of very strong cash and liquidities.

In this slide, you can see our total revenues, operating profit, profit before tax, and the net profit for the period. And you can see also how that relates to last year. You can see that in all aspects, we have shown a very strong increase and strong growth.

In terms of the sources of the profit and where we spend it, I should like to share this information with you. In 2006, if I could take you back to that year, and Ronald Brus already referred to it, we took over a number of businesses that allowed us to increase our sales and our profitability. But these were companies which, in the year 2006, were consolidated for Crucell and led to a loss of EUR80 million.

In the four years since then, this has been transformed into a profit before tax of nearly EUR38 million. And where does this profit come from? It all comes from countries outside the Netherlands. 82.3% is generated by activities outside of the Netherlands. The Netherlands caused a loss of 44.4. That's the Netherlands. That is because we do all of our research here.

And there are very serious reasons also from a fiscal point of view to do research and development here by means of facilities such as the so-called [troy box] and the innovation box. But you can see here that activities outside of the Netherlands provide the cash for the research which is performed here and that's exactly part of our strategy.

Some more details here. The profit and loss account on the left, you see the figures of 2009. And you see the other operating income, such as from distribution and grants from the government, EUR358 million. Total revenue and principle, that is our sales plus income from licenses, amounts to EUR338 million. We have a gross margin percent of 42%. This percentage is up from 31% in 2006, so it has gone up 10 percentage points over the years. That, too, indicates that we have a very sound financial development in our business.

Operating expenses amounted to EUR124 million. That's a slow drop from the year before. And profit before tax was EUR38 million. For the first time in our history, Crucell had to face the fact that we had to pay income tax, corporate tax. That amounted to EUR14 million. Most of that was not really paid in cash, but concerns compensation for losses that we incurred in a number of countries. And our profit for the entire period last year ended up at EUR24 million, which translates into a result per share of EUR0.34. And that was an interesting increase from EUR0.22, which the share generated last year.

A few more details about our revenues and what we call other operating income. Total sales consists -- total sales consists of product sales, sales of our various products all over the world. Furthermore, license revenues, that is revenues connected with licensing agreements that we sign with partners, and that consists of initial income. You can see that this amount has dropped slightly to EUR23 million from EUR30 million in the fiscal year 2008.

Now, this is due to the fact that in 2008 we received a number of success payments, milestone payments, which we did not have in 2009. This is due with the planned -- the plans concerning clinical developments. EUR10.7 million is service fees. This is work that we do for partners, where we do not really have an interest in the final product.

And on top of that, there are grants, subsidy, most of that coming from the American government, the National Institutes of Health, and other income, which is a combination of also across income distribution and so on.

Our cash flow, this shows you what our cash flows are, funds that were received and that were spent. You can tell that from our operating activities, including transactions in our working capital, and there have been a few of those, 76.9 million was received. From a total operating

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activities running our business, we invested another EUR54.4 million. That's an enormous amount, especially when you look at the amount for 2008.

But don't be shocked because EUR100 million of this is nothing else but our cash, which we invest in a bank deposit at low risk for a term of over 90 days. And when you do that, then according to the accounting principles, this is no longer cash but it's a short term investment. And that is why this item is so high.

Financing was also a high amount with EUR231 million and principle. This is the balance sheet, the rest of the money that we received from Johnson & Johnson and the cooperation project which Ronald Brus has been referring to. And then we have some exchange rate effects on cash, which has led to a net income and cash in the year of 2009 of EUR156.8 million, which gives us a very healthy balance sheet at the end of the year.

Our outlook. At the end of the year for this year, well, we stated that we will use our continued strong operating cash flow to accelerate to finance our product development. That also means that research and development spending will increase, we have said, by about one-third. Last year we spent EUR70 million on this item.

And this year, this will increase by one-third, more or less, as I said. Nevertheless, we will want to maintain a healthy operating profit. And finally, total revenues and other operating income we think will broadly be in line with that of 2009. Well, that's all. And I should like to give the floor back to the Chairman.

Thank you, Mr. Kruimer. As usual, there is now time for a Q&A session concerning item two of the agenda and any other issues that you may want to raise. I suggest that you tell us your name and whom you represent. And I propose that we limit the number of questions to be asked by each person to three, and after that you may use another. And the floor is yours.

Q U E S T I O N A N D A N S W E R

Mr Zomer

(interpreted) Good afternoon. My name is Zomer. I have a question about an element that -- something that we read in Het Financiële Dagblad (spoken in foreign language) this morning. Could Mr. Brus please react to that because I have an inkling that a takeover is imminent. Could you tell us some more about the competition in vaccines in India and what went wrong there? And should we have fears about our margins in India in the future?

I'm not a technical specialist. It's a very -- these are very difficult issues for me, but I understand that PerC.6 is used in vaccines. But according to me, you can also make medicines from it, pills. Usually medicines are given a specific number.

Now, my question is, suppose that another producer decides to make pills, then will they be given Crucell's imprint? Because I saw something like CL184 somewhere. That is something that Crucell has made. But if this -- you understand what I mean. Those were my questions.

(interpreted) Your first question was about Het Financiële Dagblad (spoken in foreign language), the newspaper, the financial daily. This was an interview three weeks ago, which they published this morning. I didn't read all of it, I must admit. But I don't remember saying that we should proceed to a takeover.

Well, you have it here, so let's have a look. All right, I see that Mr. Wijma from Van Leeuwenhoek sees important possible takeover candidates with four names, all of which I know. And I can also tell you that we are not going to buy any of them.

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Okay, so, this was some unrequested advice. But seriously, we think that at this point, a number of things are going quite well. And with the current cash flows, we can do what we need to do and we can make the business grow still. For a relatively slow business, we have a high amount of cash. That is true. But we are not all that keen on spending that cash, even though the interest rates are very low. So they generate very little money. But let me try to explain why.

We do big deals with many large companies, such as Johnson & Johnson. It is important for us to have a strong cash position so that these large corporations, who often have cash positions of EUR10 billion to EUR20 billion, cannot entice us into doing unwise things. We do not need the cash immediately, so that allows us to negotiate with these people until we reach a stage where we think the deal is satisfactory. Also, it has shown us in the past that many companies who used to be bigger than us have now become much smaller.

So, at some point, something interesting may turn up. But we have also said, and I said it today as well, that is no reason for us to use this cash urgently. There is no reason to do so, and we have all sorts of reasons to keep that cash for the time being.

And your other question, I think it was your third. Remind me about your second question later. Now, most things that can be made from PerC.6 are what we call biologicals. These biologicals rarely end up in a pill, but usually they get injected. So they end up in a box, but not in a pill. We think that PerC.6 has one consequence now, and I believe that you can make the factories smaller and the costs lower.

Let me explain right now, EUR65 billion is spent on making these biologicals. And that is made on the cell line and that is a historical cell line called the hamster ovary cell line. People who work with that cell line don't have to pay royalties because that cell line is free. But the only disadvantage is that these cells come from hamsters and, as you know, hamsters react differently than humans.

So, the glucose structure given to these molecules may be different than we can -- those that we can make on a human cell. That means automatically that we cannot copy such a product. That means that products that are made on such Chinese hamsters currently will not be grafted on human cells. New products, however, can do so. And therefore, we are concerned mostly with companies that want to market new products.

When we look at what the distribution is between the number of vaccines and the number of licenses that we have given out to companies that make these products and that are fewer vaccines, but more biologicals. Your last question was about India. I remember now. Perhaps Mr. de Jong wants to say something about this and that'll allow me to do some coughing as well.

Cees de Jong - Crucell - COO

Mr. Zomer, the situation is as follows. We, Crucell, have now sold 150 million doses in vaccine and we do that in such a way that we can have absolutely no complaints about either the product or reliability. As to delivery, we always did that in time. Last year, there were some companies in India who said that they might be capable to do something similar.

And what we have seen recently, and that is definitely not something that makes us happy, is that at least one of these company in India was not capable of supplying a quality product. This is a well-known fact. One of our Indian competitors was forced by the World Health Organization to take back its products because the product was no good.

The effect of that was that we received extra orders because we are able to provide on that request, but that was actually an emergency order because the immunization program in several countries came to a standstill and UNICEF asked us to fill the gap. So we have seen that at least one Indian collaborator has been boasting, exaggerating a bit too much.

And we saw earlier this week that another Indian competitor who stated in the past that they are also capable of making a fully liquid vaccine in a single product that they are not capable of doing that either because they will only get the approval for a partly liquid and partly solid product.

So, your question was what went wrong in India. I don't think we can underestimate how difficult it is to make a product containing five different vaccines in the reliable way. And I think Crucell has proven that they are capable of doing so.

(interpreted) The gentleman is not using a microphone. Okay, you gave me some time to think. The number you refer to is a research number. Generally, we aim during the research phase at giving the product a number. It starts with a C because our name starts with a C. And then during the phases II and III, when -- we must give a name to the product.

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The products which are finally made by -- through our technology, but by another manufacturer, will not have Crucell on the packaging. All the products -- but probably our name will be mentioned in the leaflet and so on. Things that we develop ourselves will be given a typically Crucell-like name.

You may have seen this in one of the photographs. All of the Crucell medicines, the 110 million we sell, all carry the same type of logo. So then it is no longer clear whether it comes from Merck or wherever. It is now Crucell worldwide. And that has made us a stronger brand and that is the way the governments want us to handle this and that's the way we want to do it. Who else would like to take the floor? Mr. Stevens?

Mr Stevens

(interpreted) Thank you, Chair. Is this microphone working? All right. I notice that you haven't forgotten about me. Well, from time to time some things goes wrong, but today I'm here. My name is Stevens. I'm from the Foundation for the Legal Protection of Shareholders. My questions deal with strategy mainly. You declared what you stated, what types of diseases you want to prevent.

But in all that you said I heard nothing about DSM nor about where you think you will be five years from now. I think that you have some idea of the time path and the developments, the products that you are developing, it's always difficult to obtain approval. And considering your experience in the past, I think you are somehow underestimating that. Could you give us some more information on that?

Next, an attempt was once made to take Crucell over this field because the takeover -- the author of the takeover was taken over himself. But could you -- could we hear some more about that? You didn't mention DSM at all. That completes my question for the time being, Chairman. Thank you.

Thank you, Mr. Stevens, for your questions. Let me start right away with this business. The firm you mentioned a few times, DSM, we do a lot with DSM right now. And I must say that we are more and more satisfied with our cooperation with DSM. Most of all we have a kind of cooperate joint venture in Boston and in Cambridge, Massachusetts, with the purpose of making so-called biobetters, our products that use a component of DNA.

But this is very expensive. And you mentioned it. We want to develop that together on a cell line with DSM, based on the technology developed by DSM. In order to do this in extremely high densities, that means that about ten times as many cells fit into a reactor in order to achieve higher productivity. We're working on that. It's going well.

The friendly relations between the two companies are excellent. We often meet -- the Chairmen of the Board often meet. And so we are having very pleasant relations and you will hear more about biobetters in the future about how this is going.

Your first question was about strategy. And in fact, I want to split that question -- my answer into two sections. We have a strategy of which I can say that the things that we develop and which we are selling, with our limited means in terms of sales force, there we see growth possibilities for the period that you have been referring to. And I'd like to give the floor to Mr. de Jong, who knows more about this in detail.

And first of all, let's look at the portfolio of products that we have in the pipeline. This should be looked at in two different ways. First of all, the products that we already have in the market. For us, the risk there is a lot lower. When we say where we are going about products which are in the pipeline, we have to be very cautious.

What I can tell you is that within that timeframe, the products -- some products should be introduced in the market across the world. And the margins they should generate should be higher than those we have now. Only, as I said, the pipeline does include risks. And as I said, with our current products, the risks are much lower. Can you say some more about this, Cees?

Cees de Jong - Crucell - COO

Mr. Stevens, there are four blocks where we see possible growth with our existing -- our current products. I'll say something about each of them. The first block concerns our flu vaccine Inflexal. Today, we have one supplier who supplies us with the main ingredients. That's CSL from Australia. And they can only supply a limited amount of antigen annually and that limits our growth.

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Now, in order to counteract that limitation, we started a few years ago with our partner in Taiwan to develop a special factory in order to obtain more antigens for our flu vaccine. I expect that this factory will be capable next year to supply its first antigen so that we will no longer be limited in our supplies. Then, we have the product. We will have the registrations. And that way we will be able to sell more. That's the first growth block.

The second product, which is, in fact, just as interesting as our Inflexal, is Epaxal. That's a hepatitis A vaccine not containing aluminum. We are unique in the world in that respect. It is a great product, which we sell mainly in Europe and in a number of Asian countries. But it is not registered in the biggest market for hepatitis A, which is the US

We have an ongoing project in Switzerland to make sure that we will be capable in the future of selling our Epaxal in the US as well. And you need to realize that we are aiming at revenues of $100 million to $150 million.

In the countries where we use distributors, we're starting to replace those distributors with our own sales force. Mr. Brus indicated earlier that our present corporate scope enables us to do this. Last year we started by purchasing a sales network in England, and we envisaged doing this gradually in other countries in the years ahead.

And it will be an important additional block of income because now, at present, we're seeing a considerable share of our margin to distributors. And we also notice that in many cases those distributors don't work hard enough and don't obtain the market share that our own sales force would.

And that final block, which will be more energy and time consuming, is that our -- we are registering our existing projects in emerging markets such as Asia and Eastern Europe. And we need to conduct clinical research in those countries to get approvals, but we're active there to realize that fourth block of growth.

So, as Mr. Brus said, we have a very auspicious pipeline and our present portfolio is also very promising. I think we omitted one -- the answer to one question and that concerns the projected acquisition of Crucell that didn't take place. And are you asking whether it will happen or are you trying to find out how we feel about that?

Mr Stevens

Regarding my strategy question, are you looking to acquire companies or does anybody contact you? What's the present state of play?

Well, except when Santa Claus comes, it's a difficult question. We're talking with all kinds of people everywhere, at the very highest echelons. And I think in the first or second slide today I described a situation suggesting that we feel that vaccines are unique at present. And that some of the patents are about to expire and will lead to massive reduction in growth potential and profits.

I think there are ample opportunities in vaccines for additional growth, and others will need to judge how desirable Crucell will become. We had taken this into consideration with our partner Johnson & Johnson because they assured that if we ever did receive a proposal, we'd ensure that they wouldn't be able to block this by saying that they were our first love. Mr. Keyner?

Mr Keyner - VEB

Good afternoon. I'm Keyner of the Association of Stockholders (VEB). I'm speaking on behalf of 108 stockholders who have issued me a proxy. I have a large number of questions. But I'll start by asking about the potential of technologies partnerships and products that you're working on. And later on, after somebody else has spoken, I'll ask about the potential earnings per share.

Now, back to the technology potential, my compliments again for your accurate seeing the acquisition of Berna because that generates quite a bit of cash. And I understand that we at the VEB were questioning the takeover. But it was a small head office with good researchers, technologies, and licensing, and they were waiting for major pharmaceuticals through their own successes and get 20% royalties. But you headed down a different course and that works. My compliments.

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I'm also impressed with your cost-cutting program of 30 million a year because we can certainly reinvest that cash wisely. And I'd also like to congratulate you on your deal with Johnson & Johnson. So, a lot of compliments from the VEB.

And now we're going to hear the singer, probably….

Mr Keyner

Well, there's some things that I'm not criticizing, but I'm a bit more reluctant with my praise that concerns the reluctance of Crucell. Your technology that you've been promoting for years, I'm talking about Start, and every year I see that you say less and less about Start. And you could generate at least hundreds of millions and possibly even billions of euros annually. Did we expect too much and get too excited about what you said in the past?

Well, the path vector turned out not to work, and now we understand that. But I'm more concerned about PerC.6. In your presentation you indicated at first that people -- we understand it's really taking a long time. But at the same time, you said very specifically sometimes something works clinically, but when you enter the stage 2 trials it turns out not to work.

My specific question is whether there's any cause for you to make this remark regarding the large projects that you worked on in recent years, so that the rabies vaccine doesn't appear to be progressing as auspiciously as you thought. And that if in next year we might expect a note of optimism. Is there any reason?

Ronald Brus - Crucell - President, CEO I can answer that very briefly. None whatsoever.

Mr Keyner

Excellent. Then let me probe regarding Star. Did I observe correctly that Star appears to be less promising than we or than you thought?

I can be brief about that, too. That's correct. We had expected that the number of companies working with Star would be far larger, that far more companies would work with Star. But I have to qualify this. We were hopeful and we also believed that if we have technologies, we have to be hopeful and optimistic about them because otherwise they'll be very difficult to sell. And we have to sell to large pharmaceutical companies. We succeeded far better with PerC.6 than with Star. And of course we can make mistakes, too, and that's what we did with Star.

Mr Keyner

That's very clear, PerC.6, because that's mainly the issue here. Crucell said a lot of good things about the partnership with DSM. But DSM doesn't sound as excited. Except for some side notes, they're not as focused on it. Of course, it's a much larger firm, but you might say this cutting edge technology in DSM has every reason to be proud of it.

Do you think the -- do you look at the opportunities differently from DSM? Do you have a different perspective?

All the medicines that we produce in our clinical studies are based on PerC.6. So that's very important to us. And we even launched Galapagos, a different firm, based on PerC.6, including our joint venture. Galapagos was originally a joint venture with Johnson & Johnson.

(14)

The joint venture that we have with DSM, PERCIVIA, we're really excited about that. And I think that DSM is very excited about it as well. But overall, it matters more to us than DSM does. DSM is a far larger firm and you have to keep everything in perspective. To us, 20 million is different math than for DSM. It's a different order of magnitude.

Mr Keyner

The change of course you announced about two years ago, the old circumstances under which Crucell will issue PerC.6 licenses are gone. You're going to be more rigid. Are you satisfied with the number of PerC.6 licenses you're issuing under the new conditions?

At first, we were a small company that had to issue licenses, for example, to Johnson & Johnson. That was in 2004, when we said you'll get all rights and we'll get the royalties. And it may sound particularly interesting initially, but that way we lose control about the speed of development. And as we become more cash rich, we become more demanding regarding the speed and method of development.

One wonderful example is our rabies deal with the same firm, Johnson & Johnson. All of a sudden the royalty percentage increased from 10% to 37.5%. But that was Sanofi. I've just been corrected.

Second, we retained control in certain parts of the world so that we sell ourselves, which was not possible at first. So we're becoming increasingly powerful with these deals. But it does mean that the number of deals, I assume you're referring to a period when we were announcing a deal almost weekly. So the number of deals diminishes and the pond for new deals is of course shrinking as well.

Now we have a deal structure with 60 to 80 firms where they're entitled to use our sales for certain developments. And at a certain point, we hope and we'll need to try to accelerate them as much as we can.

But many biotech companies and people suggest that everything that you can do with a mouse will work in people, too. And that's not always the case. Even things at stage 1 may need to be abandoned eventually. And I think that we need to inform people that the same holds true for us. And we can do this because we are marketing a few drugs and we know what registration of those drugs means. It doesn't make us less optimistic about our own pipeline.

But everything has to be kept in perspective. It means that if we consider how we're going to grow in the next five years, then we'll discuss some things more easily with you because we know that other things are not certain to succeed. And it wouldn't be a good idea for us to promise too much at this point.

Mr Keyner

Now, the most interesting question to wrap up, if you could choose from your own portfolio and pipeline, which product are you most optimistic about? And the same question for the partners you work with, who develop -- who are licensed to develop your product technology. What are you most optimistic about?

Well, that's a wonderful question. There are two people who would give the best answers. And I think that Mr. Goudsmit, all the way at the left.

Jaap Goudsmit - Crucell - Chief Scientific Officer

I always love getting the tough questions. Of course, that's a very tricky one to answer. And I have to tell you something about vaccines and partnerships. We're at the start of many new fields, so it takes time to develop a new product and get it through the first stage.

But if you want to know what we're most optimistic about, where we have built our hopes in antibodies, it would be rabies and influenza. Those are two in antibodies. And in vaccines I would say, well, at present, we're most optimistic about the tuberculosis vaccine because that's

(15)

progressing fastest. If you have to choose. But admittedly, with -- we're in stage 2 or earlier in all these -- with all these products, so there's still some risk before you really reach the market.

Mr van der Hofstad - MIS

I would say I'm from the MIS Investment vehicle, Mr. van der Hofstad. Mr. Keyner has already asked a few questions that I had. I agree with him regarding the acquisition of Berna. I was also fairly skeptical, especially given the number of shares issued. Right now we're slightly above 80 million shares, so that's a considerable dilution for shareholders.

And I'll get back to a question from Mr. Keyner that hasn't been answered yet. As for the five-year plan, I prefer to look back, as I do in my rearview mirror. And when I do that over time, I see a lot of major contracts when we Star with Genentech, another with Crucell's Sanofi rabies and the Wyeth deal and the JNJ deal.

In all deals, the management team said this was the greatest deal ever. Well, Star is no longer in the picture. It was clear to us that that was vanishing. What are left are the Wyeth and JNJ deals. And in both those cases, they were the greatest deals ever. The same holds true for FluCell.

So could you please tell me about those three aspects? And when I say greatest deal ever, I'm thinking about a deal amounting to at least $1 billion or EUR 1 billion in a timeframe of, say, three to five years. So that's the first question. Could you elaborate on that, please?

I have a lot of questions. Perhaps I'll get to ask all of them. This is my second question, is you're going from 70 million to about 93 million spending in R&D, even though Mr. Kruimer -- the annual report literally reads that (technical difficulty) broadly in line suggests 10% down or 10% above that amount. So, the related question is if you spend an additional 23 million, where do you get the income from? And b. when you say broadly in line, do you mean 10% down or 0% or plus 10%, because that's the traditional barometer of broadly in line. So that covers a broad range. That was my second question.

And the third is in an entirely different category that of course it relates to Crucell. Major tensions in North and South Korea have arisen. And you're right, you're very near the border, if I understood you correctly. And my simple question is how would an explosion in the tensions between North and South Korea affect your industrial platform? Those were my questions for now.

Shall we ask Kruimer the question about R&D spending, the first one? And then we can think about what we're doing in Korea.

Well, if you -- you could interpret my comments according to mock scale, but I don't know if that still applies. We do our best to increase our revenues year-on-year. Clearly, of course, the 36% growth we experienced in recent years will diminish somewhat because the Quinvaxem market, which drove that market, now faces some competitors that are entering a market. But presently you have some problems. That's very clear.

And equally importantly, regarding the Quinvaxem, the five-in-one of our Indian competitor, we still get royalties -- we still got royalties for that in the past. But we're not receiving those royalties now because they're not producing it. So in the first quarter we kept our guidance the same. It's still fairly early in the year and there's some very promising opportunities, such as the supply that Cees de Jong mentioned, supplying the product because Shantha’s production capacity is now at nil. But we expect our revenues to be fairly similar to 2009.

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Well, a lot of that research is funded by Johnson & Johnson. A lot of the work we do, we have a huge team of people and it works together with Johnson & Johnson and waived a lot of milestone and other payments. And the R&D expenses are covered by Johnson & Johnson.

So that's in addition to your present deal?

That is part of the deal. They took an 18% interest at a considerable premium. Every one of the five products that Ronald showed you have milestones exceeding $100 million per product during the development of the product, which will generate income in a few years. Plus, a major share of the R&D costs incurred are paid by Johnson & Johnson.

So that's in addition to the amount that you've already received?

Leonard Kruimer - Crucell - CFO Absolutely.

Okay. I understand. That's clear. And is the $1 billion deals of Wyeth, FluCell

Mr. Van der Hofstad, you probably want me to answer those.

Mr van der Hofstad - MIS I don't care.

Okay, I'll answer it. Let me put things in perspective. When we're talking about the biggest deal we closed, we mean that we did not in the history of this planet, that's not what we mean. When we closed the deal with Sanofi about influenza, that was in -- that was -- with so-called Sanofi and that was in 2004. The market capitalization was just over 100 million and our revenues were about 20 million. When you close a deal with an initial 8 million payment, that was the biggest deal we had ever done back then.

Things have changed and our revenues are now approximately 360 million. And we're closing a deal with Johnson & Johnson that exceeds 1 billion, on top of the payment they already made. So I think that a billion on that total revenue from 2009, 360 million, that's the biggest deal we've done thus far. The same holds true for Wyatt.

You also need to put things into contemporary perspective. The other deals don't -- we didn't qualify those as the biggest deal ever. You may have thought so, but that's not accurate. And as for Korea, I'll have to hand you over to Jan Oosterveld, our Korea expert.

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I saw that one a mile away. Okay, that's clear. The only factory we're leaving is south of Seoul, about 40 kilometers. And the new factory is on the coast, west of Seoul, on the side facing China. About three months ago that risk didn't exist. We were -- we felt we were very fortunate to open the factory and all of a sudden the present situation arose.

We hope that nothing will go awry there, but then you won't be able to watch television or use mobile phones either if something goes wrong there. So given all those issues, I hope that the problems don't escalate. It's not in Seoul, that's true. But if a conflict erupts there, then we're going to be considering an entirely different order of magnitude than this company. So it's good that we still have some cash on tap.

I'm one of the last of the Mohicans who does not have a mobile phone yet. Back to Crucell at the time. If I remember correctly, when Crucell was about to be launched on the market -- FluCell, it was -- and I think it was about EUR300 million a year when FluCell was about to go on the market. I know that rabies was also 300 million.

You're confusing two things. First, you mentioned something about the biggest deal, that's the size of the deal. Now you're talking about the market. That's entirely different. It's like comparing apples and oranges.

Well, I have a small additional question. We hear nothing at all anymore about stage 2 of FluCell.

Okay, I promise you, and maybe other people can ask questions about this, we'll be telling you about that during the course of the year.

Very well. Okay, I'll ask my other questions later on.

Mr Heinemann

Mr. Chairman, I'm Mr. Heinemann. I'm an individual shareholder. I live in The Hague. First, my appreciation for the truly magnificent results for the previous year. But I -- in addition to appreciating your board, I would like to express my praise for all employees who spent long evenings working in the laboratory and undoubtedly faced many failures.

Well, I have three questions, Mr. Chairman. My first question is you will be spending about 92 million on research and development. Will you be doing stem cell research as well, so researching embryonic as well as adult stem cells? And this stem cell research area has truly been thriving recently. It's been growing by leaps and bounds.

The second concerns tax loss compensation. Of course, Crucell had a lot of losses in the beginning and was a cash burner at the start, and now you're gradually making a profit. My question is how large is the conglomerate of fiscally compensable losses?

And my third question concerns Johnson & Johnson. Ultimately, Johnson & Johnson paid about EUR20.63 per share. Why did they pay so much when the share was selling on the stock exchange for EUR14 or EUR15 and has hardly increased in price since then? Couldn't Johnson & Johnson have acquired its stake through different means? I'm not thinking about purchasing shares on the stock exchange because, of course, in that case, the share price would rise substantially. But doesn't Johnson & Johnson feel that they have may have overpaid a bit? Those were my questions.

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Your first question concerns stem cells. I can tell you two things about those very briefly. We need to stick to what we do best and we're good in infectious diseases. And if anything else of interest emerges, then we shouldn't leap too quickly. But I agree with you that stem cells are interesting.

And Mr. Valerio in the early years conducted a huge amount of research on the stem cells and other areas and a few patents still remain from that. But, quite honestly, I haven't related those yet and perhaps Dinko (Valerio) can say something himself about those. I haven't related those to the present stem cell revolution. We'll stick to what we do best and we'll focus on vaccines for infectious diseases and antibodies.

Now, why JNJ paid so much, I can say something about that. It's because that's what we asked them to pay per share. And that's basically the best answer. This was a partnership arrangement. JNJ said that they wanted to do preventive healthcare, and those are vaccines and antibodies used before people actually develop the disease.

So we examined the best interactions between pharmaceutical and biotech companies and Genentech Roche was the example we based ourselves on with respect to how something could really work, whereas Roche in the early '90s acquired a share in the Genentech firm in the United States and that became a thriving partnership. As you know, Johnson & Johnson might want a 50% share of Crucell, but then they would have to bid on the entire company. So we basically settled for a limited stake of Johnson & Johnson and the company at a substantial premium, which was important to us so that we would retain our autonomy and be able to continue financing our growth.

Nonetheless, we did not use that money to fund our growth thus far. But never say never. And in the -- when we saw something in the (spoken in foreign language) we thought, well, we won't be spending the money on that. We do think it's very important to have a lot of money in our coffers. It's my idea, and you would certainly need to ask Johnson & Johnson. but it's my idea that they're very happy with their working relationship with us.

And the only example we can tell you is we advise that you attend Johnson & Johnson's annual shareholders meeting, which took place, I believe, about six weeks ago. And both Bill Weldon, the CEO spoke about Crucell, and the chairman of the pharmaceutical division Sherilyn McCoy explained why they acquired a share in Crucell and they were very satisfied about having done so.

The total of lost compensations we had at the end of the year was about 270 million. That is 180 million directly in losses that may be offset. About 30 million of that is located in Switzerland. And in the Netherlands we have activated losses, which are fiscal assets, but which are not contained in the balance sheet. That's for 90 million, and they will be amortized over a number of years.

So you can see all of these are compensable losses from costs that we may incur for research and development. We try to manage this as well as we can, making sure that few or none of these losses get evaporated.

Mr Heinemann

And the corporate tax that you paid, what country does that relate to?

It does not relate to the Netherlands. But it relates to Korea, in particular where Quinvaxem is made and where considerable profits are obtained. And partially it relates to Switzerland, where we hardly pay any tax, but where we consume our compensable losses. We put that towards the balance sheet last year. That is why you could find a positive tax amount there in 2008, and small bits in countries like Sweden, Spain, the US and so on.

What is important is that because of the investment we did in Korea and the specific location where we made the investment in a new factory, we have received a tax holiday in Korea that was for a five-year period, plus a tax reduction for two more years. And this was negotiated by a fiscal expert for a complete tax offset for five years, and 50% for two years. We think that this improvement of three quarters savings to 100% savings will yield another 10 million in cash for the coming seven years. So that's a considerable improvement.

The tax position of the entire company I think is very favorable. However, we will see that this year and next year we will have a tax amount on the balance sheet and that will be particularly in Korea. Thank you very much, Mr. Heinemann.