Ipsen's Half-Year 2012 Results

Ipsen's Half-Year 2012 Results

Regulatory News:

The Board of Directors of Ipsen (Paris:IPN) (Euronext: IPN; ADR: IPSEY), chaired by Marc de Garidel, met on 27 August 2012 to approve the financial statements for the first half 2012, published today. The interim financial report, with regard to regulated information, is available on the Group's website, , under the Regulated Information tab in the Investor Relations section. The 2012 half year financial statements have been subject to a limited review by statutory auditors.

Commenting on the first half 2012 performance, , said:

Sales growth are computed excluding foreign exchange impacts

amounted to€629.8 million, up 8.0% year-on-year (+6.3% excluding foreign exchange impacts). Sales ofproductstotalled €439.8 million, up 15.4% year-on-year (13.5% excluding foreign exchange impacts). Specialty care products represented 69.8% of the Group’s consolidated sales, compared with 65.3% a year earlier. Sales of products totalled €172.2 million, down 7.2% year-on-year (down 8.5% excluding foreign exchange impacts).

grew 8.0% year-on-year (+6.3% excluding foreign exchange impacts) mainly driven by:

In the first half 2012, amounted to €272.4 million, down 0.9% year-on-year excluding foreign exchange impacts. Dynamic sales volume growth of specialty care products were more than offset by the consequences of a tougher competitive environment in the French primary care landscape and administrative measures in Spain. In the , sales amounted to €159.8 million, up 10.0% excluding foreign exchange impacts, driven by the strong performance of Russia which, benefited from both growth in volume and numerous tenders. Sales in amounted to €36.3 million, up 2.1% excluding foreign exchange impacts. Restated to exclude Apokyn sales (no longer recorded by Ipsen in its accounts since 30 November 2011), North American sales were up 11.7% year-on-year, driven by strong supply of Dysport for aesthetic use to Medicis, the continued penetration of Somatuline in acromegaly and the value growth of Dysport in the treatment of cervical dystonia. In the sales amounted to €161.3 million, up 22.3% year-on-year or up 17.9% excluding foreign exchange impacts. This performance was notably driven by certain non-recurring stocking effects: in Australia where Ipsen signed an agreement in April 2012 with Galderma for the distribution and promotion of Dysport for aesthetics use; and in Vietnam, where some orders of Primary care products were anticipated prior to the expiry of import licenses.

amounted to €45.2 million in the first half 2012, up 24.6% year-on-year (€36.3 million at June 2011). This growth results from both increased royalties paid by Medicis, Galderma and Menarini, and, the rebilling of OBI-1 industrial development and European Hemophilia (set up on 30 August 2011) expenses as part of the agreements signed with Inspiration Biopharmaceuticals Inc.. Under the terms of the agreement signed with Inspiration on August 21 2012, the European Hemophilia will no longer be billed to Inspiration.

Consequently, reached €675.0 million in the first half 2012, up 9.0% year-on-year.

increased by €25.7 million compared with June 2011 and represented €131.5 million, or 20.9% of sales, compared with 18.1% of sales the prior year. Excluding industrial development expenses relating to OBI-1, invoiced to Inspiration Biopharmaceuticals Inc., R&D expenses represented 18.5% of sales and increased by 17.9% year-on-year.

In the first half 2012, amounted to €278.6 million, or 44.2% of sales, up 12.3% compared with €248.2 million, or 42.6% of sales in the first half 2011, reflecting on the one hand the Group's selective commercial resources allocation policy to growth geographies and, on the other hand, stable French primary care selling costs but increasing costs to sales ratio in a context of declining sales.

In the first half 2012, the Group recorded in an income of €2.5 million and expenses of €14.1 million composed of non-recurring costs related to the implementation of the new strategy announced on 9 June 2011, the settlement of a trade dispute with a partner and an administrative procedure involving the Group.

In the first half 2012, represented an expense of €5.6 million, including mainly the amortization of Hexvix rights acquired from Photocure in September 2011 and the amortization of the trademark of Nisis-Nisisco, primary care product deprioritized following the arrival of generics on the French market as a result from the patent loss in November 2011.

In the first half 2012, the Group recorded €3.9 million as part of the strategy announced on 9 June 2011, compared to €28.1 million a year earlier.

In the first half 2012, the Group decided to retain the Dreux-based industrial facility within the scope of its activity. Consequently, the Group reassessed the value of this asset taking into account all new elements and recorded an of €12.5 million in its financial consolidated statements at 30 June 2012, partially offset by an additional impairment loss of €1.7 million on assets related to deprioritized R&D projects.

As a result, reported in the first half 2012 amounted to €125.7 million or 20.0% of sales, up 4.1% compared to 20.7% for the same period in 2011.

The Group’s in the first half 2012 amounted to €131.5 million or 20.9% of consolidated sales, down 8.6% year-on-year.

At 30 June 2012, the Group’s amounted to €15.5 million compared with €1.2 million the previous year. The cost of net financial debt represented an income of €1.5 million, including primarily the interests recorded on the five convertible bonds issued by Inspiration Biopharmaceuticals Inc. and subscribed by the Group (versus two at 30 June 2011) partially offset by the non-utilisation fees on the credit line subscribed on 31 January 2012. Other financial income and expenses represented an income of €14.0 million mainly due to positive foreign exchange rate impact, non-recurring profits from additional payments received up on the divestment by the Group in 2010 of its PregLem Holding S.A shares and profit derived from the sale of its Spirogen shares during the period.

At 30 June, 2012, Ipsen’s represented 25.9% of profit from continuing operations before tax and share of profit/loss from associated companies, compared to an effective tax rate of 21.5% at 30 June 2011. This increase mainly resulted from the dilution of the research tax credit positive impact associated to a higher taxable profit as compared to 30 June 2011. The implementation of the exceptional 5% French tax contribution at the end of 2011 also contributed to the effective tax rate increase. Excluding non-recurring operating, financing and tax items, the effective tax rate amounted to 23.9% at 30 June 2012, compared to 22.9% the previous year.

At 30 June 2012, the Group posted of€(14.2) million, representing its share of 22% in Inspiration Biopharmaceuticals Inc.’s result, now attributed to the convertible bonds subscribed by the Group, the carrying value of the Group’s investment being nil since 31 December 2011.

decreased by 1.5% to €90.5 million (attributable to shareholders of Ipsen S.A.: €90.2 million) compared with €91.9 million (attributable to shareholders of Ipsen S.A.: €91.7 million) at 30 June 2011. at 30 June 2012 amounted to €1.02, down 19.7% year-on-year.

At 30 June 2012, the total of as other revenues on the income statement amounted to €191.9 million, compared with €206.1 million the previous year. The Group recorded no new deferred revenue for its partnerships in 2012 against €3.7 million in 2011

represented €63.3 million, compared to €97.3 million the previous year. At 30 June 2012, the Group had a positive of €60.1 million, compared to €121.8 million as of 30 June 2011.

Variations excluding foreign exchange impacts are computed by restating the first half 2011 with the first half 2012 average  exchange rates Before non-recurring elements. See appendix 4

Recent major differences arose between Ipsen and its preferred partner regarding the creation of a common structure for their French primary care commercial activities. The lack of alignment regarding the level of ambition for the project led to the termination of late-stage negotiations.

In accordance with the strategy announced on 09 June 2011, the Group continues to work at optimizing this activity and remains open to the creation of a partnership ensuring the long-term viability of this business.

Recent government measures – Tanakan delisting, Adrovance and Nisis/Nisiscoprice cuts – as well as the introduction of generics of Nisis/Nisisco and the end of the Exforge contract with Novartis, have significantly impacted Ipsen’s primary care activity in France in the first half 2012 with sales down 21.7% (Tanakan sales down 33.3% in France).

As a result, an adjustment of French sales organization has become necessary. This adjustment will affect approximately 100 positions in the Group’s French commercial operations. The social consultations will start during the fourth quarter of 2012.

Based on information currently available and given its solid performance in the first half 2012, the Group is now targeting for the full year 2012:

The above objectives are set excluding foreign exchange impacts.

Ipsen will host a conference call on Tuesday 28 August 2012 at 9:30 am (Paris time - GMT+1).

Participants in the conference call may connect for the meeting 5-10 minutes prior to its start. No reservations are required to participate. The conference ID is 19512749. The telephone number to call in order to connect to the conference call from France is +33 (0)1 76 74 24 28, from other countries in Europe it is +44 (0) 1452 555 566 and from the United States +1 631 510 7498. The telephone number to call in order to access a recording of the conference call is +44 (0) 1452 55 00 00. The access number is 19512749#. The conference call is available for one week following the meeting.

Ipsen will host an analyst meeting on Tuesday 28 August 2012 at 2:00 p.m. (Paris time, GMT+1) at its headquarters in Boulogne-Billancourt (France). A web conference (audio and video webcast) and conference call will take place simultaneously. The web conference will be available at . Participants in the conference call should dial in approximately 5 to 10 minutes prior to its start. No reservation is required to participate. The conference ID is . No access code is required. Phone numbers to call in order to connect to the conference are: from France and continental Europe +33 (0) 1 70 99 32 08, from UK +44 (0) 20 7162 0077 and from the United States +1 334 323 6201. A recording will be available shortly after the call. Phone numbers to access the replay of the conference are: from France and continental Europe +33 (0) 1 70 99 35 29, from UK +44 (0) 20 7031 4064 and from the United States +1 954 334 0342 and access code is . This replay will be available for one week following the meeting.

Ipsen is a global specialty-driven pharmaceutical company with total sales exceeding €1.1 billion in 2011. Ipsen’s ambition is to become a leader in specialty healthcare solutions for targeted debilitating diseases. Its development strategy is supported by four franchises: neurology / Dysport, endocrinology / Somatuline, uro-oncology / Decapeptyl and hemophilia. Moreover, the Group has an active policy of partnerships. Ipsen's R&D is focused on its innovative and differentiated technological platforms, peptides and toxins. In 2011, R&D expenditure totalled more than €250 million, above 21% of Group sales. The Group has total worldwide staff of close to 4,500 employees. Ipsen’s shares are traded on segment A of Euronext Paris (stock code: IPN, ISIN code: FR0010259150) and eligible to the “Service de Règlement Différé” (“SRD”). The Group is part of the SBF 120 index. Ipsen has implemented a Sponsored Level I American Depositary Receipt (ADR) program, which trade on the over-the-counter market in the United States under the symbol IPSEY. For more information on Ipsen, visit .

Before non-recurring elements. See appendix 4

The forward-looking statements, objectives and targets contained herein are based on the Group’s management strategy, current views and assumptions. Such statements involve known and unknown risks and uncertainties that may cause actual results, performance or events to differ materially from those anticipated herein. All of the above risks could affect the Group’s future ability to achieve its financial targets, which were set assuming reasonable macroeconomic conditions based on the information available today.

Moreover, the targets described in this document were prepared without taking into account external growth assumptions and potential future acquisitions, which may alter these parameters. These objectives are based on data and assumptions regarded as reasonable by the Group. These targets depend on conditions or facts likely to happen in the future, and not exclusively on historical data. Actual results may depart significantly from these targets given the occurrence of certain risks and uncertainties, notably the fact that a promising product in early development phase or clinical trial may end up never being launched on the market or reaching its commercial targets, notably for regulatory or competition reasons. The Group must face or might face competition from Generics that might translate into loose of market shares.

Furthermore, the Research and Development process involves several stages each of which involve the substantial risk that the Group may fail to achieve its objectives and be forced to abandon its efforts with regards to a product in which it has invested significant sums. Therefore, the Group cannot be certain that favourable results obtained during pre-clinical trials will be confirmed subsequently during clinical trials, or that the results of clinical trials will be sufficient to demonstrate the safe and effective nature of the product concerned. The Group also depends on third parties to develop and market some of its products which could potentially generate substantial royalties; these partners could behave in such ways which could cause damage to the Group’s activities and financial results. The Group expressly disclaims any obligation or undertaking to update or revise any forward looking statements, targets or estimates contained in this press release to reflect any change in events, conditions, assumptions or circumstances on which any such statements are based, unless so required by applicable law.

The Group’s business is subject to the risk factors outlined in its registration documents filed with the French Autorité des Marchés Financiers.

The Group operates in an environment which is undergoing rapid change and exposes its operations to a number of risks, some of which are outside its control. The risks and uncertainties set out below are not exhaustive and the reader is advised to refer to the Group’s 2011 Registration Document available on its website

During the first half 2012, major developments included:

After 30 June 2012, major developments included:

Furthermore, under the new terms, Ipsen has agreed to invest up to $20.0 million in Inspiration, as follows:

The above elements represent an indication of impairment loss on the net investment the Group holds in Inspiration. While the Board of Directors approved the financial statements on 27 August 2012, Inspiration was still actively seeking external funds to secure its financing needs. The Group ran an impairment test under the assumption that Inspiration would successfully raise external financing in the short term. Accordingly, no further impairment loss was recorded in the consolidated financial statements as of 30 June 2012. Should Inspiration fail to raise external financing and according to the terms of the new partnership agreement signed with Inspiration, the Group would have several options available to protect its interest. As of 30 June 2012, based on the consolidated financial statements, the total after tax amount of Inspiration-related assets on the Group’s balance sheet reached approximately 81 million euros.

Impact estimated for full year

In a context of financial and economic crisis, the governments of many countries in which the Group operates continue to introduce new measures to reduce public health expenses, some of which affected the Group sales and profitability in 2012. In addition, certain measures introduced in 2011 have continued to affect the Group's accounts year-on-year.

Furthermore, and in the context of financial and economic crisis, governments of many countries in which the Group operates continue to introduce new measures to reduce public health expenses, some of them will affect the Group sales and profitability beyond 2012.

Group sales by geographical area in the second quarters and first halves 2012 and 2011 were as follows:

In the second quarter 2012, sales generated in the amounted to €136.9 million, down 3.4% year-on-year. For the first half 2012, sales generated in the major Western European countries amounted to €272.4 million, down 0.9% year-on-year excluding foreign exchange impacts. Dynamic volume sales growth of specialty care products were more than offset by the consequences of a tougher competitive environment in the French primary care landscape and administrative measures in Spain, outlined below. As a result, sales in the Major Western European countries represented 43.3% of total Group sales at the end of the first half 2012, compared with 46.9% a year earlier.

In the second quarter 2012, sales reached €64.7 million, down 19.5% year-on-year. In the first half 2012, sales totalled €133.1 million, down 11.0% year-on-year, penalized by the acceleration of the decline of primary care sales, down 21.7% year-on-year. Despite the strong growth of Somatuline, sales were negatively impacted by declining sales of Nisis and Nisisco, following a 15% price reduction and the arrival of several generics in November 2011 and by decreasing sales of Tanakan after the delisting of the product as of 1 March 2012. Consequently, the relative weight of France in the Group’s consolidated sales continued to decrease, representing 21.1% of total Group sales compared to 25.6% a year earlier.

In the second quarter 2012, sales reached €14.9 million, up 44.5% year-on-year, benefiting from a favourable comparison basis related to accruals booked in 2011 in line with the Pharmaceutical Price Regulation Scheme (PPRS) and from a strong performance of specialty care products. Restated to exclude this basis effect, the second quarter 2012 sales were up 21.0% year-on-year. In the first half 2012, sales totalled €27.7 million, up 22.6% excluding foreign exchange impacts, fuelled by strong double digit volume growths of Decapeptyl, Somatuline and NutropinAq. Restated to exclude the non-recurring effect of the PPRS, sales were up 12.6%. In the first half 2012, the United Kingdom represented 4.4% of total Group sales compared to 3.7% the previous year.

In the second quarter 2012, sales reached €15.4 million, stable year-on-year. In the first half 2012, sales totalled €30.4 million, down 2.1% year-on-year, penalized by the tax increase on sales to 15.0% from 7.5% implemented on 1 November 2011, partly offset by a strong volume growth of the new 6-month formulation of Decapeptyl and of NutropinAq. At the end of the first half 2012, sales in Spain represented 4.8% of total group sales, compared to 5.3% a year earlier.

In the second quarter 2012, sales reached €19.9 million, up 34.2% year-on-year. In the first half 2012, sales amounted to €38.2 million, up 28.8% year-on-year, driven by strong volume growth of Somatuline, Hexvix and drug-related sales. In the first half 2012, sales in Germany represented 6.1% of total Group sales compared to 5.1% a year earlier.

In the second quarter 2012, sales reached €22.1 million, up 5.7% year-on-year. In the first half 2012, sales reached €43.2 million, up 2.3% year-on-year, driven by the good performance of Somatulinebut partly offset by the decline of Forlaxsales following a shift in the country distribution model. Italy represented 6.9% of the Group’s consolidated sales at the end of the first half 2012 compared to 7.2% a year earlier.

In the second quarter 2012, sales generated in the reached €82.7 million, up 23.0% year-on-year. In the first half 2012, sales amounted to €159.8 million, up 10.0% excluding foreign exchange impacts. Sales were mainly driven by the good performance of Russia which benefited both from strong volume growth and numerous tenders on specialty care products, partially offset by a destocking effect on Smecta following the drug re-submission in 2011. Over the period, Poland, the Netherlands and Ukraine also contributed to the volume growth. In the first half 2012, sales in this region represented 25.4% of total consolidated Group sales, compared to 24.8% a year earlier.

In the second quarter 2012, sales generated in reached €19.9 million, up 21.2% from a year earlier. In the first half 2012, sales amounted to €36.3 million, up 2.1% excluding foreign exchange impacts. In November 2011, Ipsen sold its North American development and marketing rights for Apokyn. As a consequence, Ipsen stopped recording Apokyn sales in its accounts as of 30 November 2011. Restated to exclude Apokyn sales, North American sales were up 11.7% year-on-year, driven by strong supply of Dysport for aesthetic use to Medicis, the continuous penetration of Somatuline in acromegaly and the value growth of Dysport in the treatment of cervical dystonia. Sales in North America represented 5.8% of total consolidated Group sales, compared to 5.7% a year earlier.

In the second quarter, sales generated in the reached €97.5 million, up 35.7% year-on-year. In the first half 2012, sales amounted to €161.3 million, up 22.3% year-on-year or up 17.9% excluding foreign exchange impacts. This performance was notably driven by some non-recurring stocking effects in Australia where Ipsen signed an agreement in April 2012 with Galderma for the distribution and promotion of Dysport for aesthetics use and in Vietnam, where certain orders of Primary care products were anticipated before the expiry of import licenses. Restated to exclude these non-recurring stocking effects, sales were up 17.2% compared with the 22.3% mentioned above. In the first half 2012, sales in the Rest of the World continued to increase to 25.6% of total consolidated Group sales, up from 22.6% a year earlier.

Active ingredients and raw materials Variations excluding foreign exchange impacts are computed by restating the first half 2011 with the first half 2012 average exchange rates

The following table shows sales by therapeutic area and by product for the second quarters and first halves 2012 and 2011:

In the second quarter 2012, sales of reached €237.3 million, up 19.7% year-on-year. In the first half 2012, sales amounted to €439.8, up 15.4% year-on-year or up 13.5% excluding foreign exchange impacts. Sales in Uro-Oncology, Endocrinology and Neurology grew year-on-year excluding foreign exchange impacts by 14.5%, 13.1% and 12.9%, respectively. At the end of the first half 2012, the relative weight of specialty care products continued to increase to 69.8% of total Group sales, compared to 65.3% a year earlier.

sales of reached €88.1 million in the second quarter 2012, up 19.1% year-on-year. In the first half 2012, sales amounted to €156.1 million, up 10.2% excluding foreign exchange impacts, mainly driven by a good performance in China, Russia, United Kingdom, Algeria and Poland. On 27 September 2011, Ipsen in-licensed Hexvix, the first approved and marketed drug for improved detection of bladder cancer. In the first half 2012, sales of amounted to €6.0 million, mostly generated in Germany. In the first half 2012, sales in Uro-oncology represented 25.7% of total Group sales compared to 23.9% a year earlier.

sales continued to grow, reaching €80.4 million in the second quarter 2012, up 18.2% year-on-year. In the first half 2012, sales amounted to €154.4 million, up 13.1% excluding foreign exchange impacts, representing 24.5% of total Group sales, compared to 23.0% a year earlier.

– In the second quarter 2012, sales reached €58.6 million, up 19.9%. In the first half 2012, Somatuline sales reached €113.3 million, up 17.3% year-on-year excluding foreign exchange impacts, fuelled by strong growth in United Kingdom, France, Italy, Poland, North America, Latin America and the Netherlands.

In the second quarter 2012, sales reached €13.4 million, up 2.8% year-on-year. In the first half 2012, sales of NutropinAq reached €26.5 million, up 1.2% excluding foreign exchange impacts, driven by good performance, notably in France and Spain.

In the second quarter 2012, sales reached €8.4 million, up 37.7% year-on-year, mainly due to the recognition of the pediatric use of Increlex by the US Centre for Medicare and Medicaid Services (CMS), allowing for a reduced rebate (17% rebate instead of 23%). Sales of Increlex in the first half 2012 amounted to €14.6 million, up 6.4% excluding foreign exchange impacts, largely driven by performance in Europe.

sales reached €65.8 million in the second quarter 2012, up 17.1% year-on-year. For the first half 2012, sales amounted to €123.2 million, up 12.9% excluding foreign exchange impacts. Sales in neurology represented 19.6% of total Group sales, compared to 18.5% a year earlier.

– In the second quarter 2012, sales reached €65.7million, up 19.7% year-on-year. In the first half 2012, sales reached €123.1 million, up 16.2% year-on-year excluding foreign exchange impacts, fuelled by strong sales growth in Russia and supply sales for aesthetic use to the Group’s partners Medicis and Galderma. The performance was also driven by the implementation of the agreement with Galderma in Australia mentioned above.

– In November 2011, Ipsen sold its North American development and marketing rights for Apokyn to Britannia Pharmaceuticals. As a result, Ipsen stopped recording Apokyn sales in its accounts as of 30 November 2011.

In the second quarter 2012, sales of amounted to €90.3 million, down 0.8% year-on-year, negatively impacted by the destocking effect on Smecta in Russia mentioned above and the consequences of a tougher competitive environment in France. In the first half 2012, sales amounted to €172.2 million, down 8.5% year-on-year excluding foreign exchange impacts. Over the period, resilience of primary care sales was partly due to non-recurring effects, including mainly the renewal of import licenses in Vietnam as mentioned above. Restated to exclude these impacts, sales were down 9.3%. Primary Care sales in France represented 41.3% of total group Primary Care sales in 2012, against 49.0% a year earlier.

sales reached €53.8 million in the second quarter 2012, up 14.7% year-on-year. In the first half 2012, sales amounted to €98.3 million, down 3.3% year-on-year excluding foreign exchange impacts.

– In the second quarter 2012, sales reached €27.9 million, up 17.1% year-on-year. Sales of Smecta in the first half 2012 reached €54.5 million, up 0.5% year-on-year excluding foreign exchange impacts, fuelled notably by a good performance in China. Sales of Smecta represented 8.7% of total Group sales during the period compared with 8.9% a year earlier.

– In the second quarter 2012, sales reached €10.8 million, up 3.6% year-on-year. For the first half 2012, sales amounted to €20.7 million, down 5.4% year-on-year, mainly due to the sales decrease in Italy described above. In the first half 2012, France represented 60.0% of the total sales of the product, up from 58.0% a year earlier.

sales of in the second quarter 2012 reached €21.9 million, down 0.5% year-on-year. Sales in the first half 2012 reached €44.9 million, down 0.8% year-on-year excluding foreign exchange impacts, penalized by the delisting in France of the drug as of March 1, 2012 but offset by solid sales in Russia and anticipated orders in Vietnam before the renewal of import licences. In the first half 2012, 34.9% of Tanakan sales were generated in France compared with 52.0% a year earlier.

sales in the second quarter 2012 amounted to €11.4 million, down 37.8% year-on-year. In the first half 2012, sales amounted to €22.4 million, down 33.8% year-on-year, impacted mainly by the 15% price decrease of Nisis/Nisiscoand the arrival of several generics in November 2011.

sales reached €3.2 million in the second quarter 2012, down 15.8% year-on-year. Sales in the first half 2012 amounted to €6.5 million, down 11.0% year-on-year, with sales of contributing to €6.0 million, up 3.8% year-on-year, despite a 33.0% price cut enforced in January 2012 in France.

In the second quarter 2012, reached€9.4 million, up 17.0% year-on-year. In the first half 2012, sales amounted to €17.8 million, up 4.7% excluding foreign exchange impacts.

Active ingredients and raw materials Variations excluding foreign exchange impacts are computed by restating the first half 2011 with the first half 2012 average exchange rates

The Group’s consolidated sales amounted to €629.8 million in the first half 2012, up 8.0% compared to the first half 2011, or an increase of 6.3% excluding foreign exchange impact.

Other revenues amounted to €45.2 million in the first half 2012, up 24.6% year-on-year (€36.3 million at June 2011).

Other revenues breakdown as follows:

Variations excluding foreign exchange impacts are computed by restating the first half 2011 with the first half 2012 average exchange rates

In the first half 2012, the cost of goods sold amounted to €129.0 million, representing 20.5% of sales, compared with €120.9 million, or 20.7% of sales, for the same period in 2011.

The favourable product mix related to the growth of specialty care sales and the good resilience of the primary care products was partially offset by custom duties in high growth countries and negative exchange impacts on products not manufactured by the Group.

In the first half 2012, research and development expenses increased by €25.7 million compared with June 2011 and represented €131.5 million or 20.9% of sales, compared with 18.1% of sales the previous year. Excluding industrial development expenses relating to OBI-1, invoiced to Inspiration Biopharmaceuticals Inc., research and development expenses represented 18.5% of sales and increased by 17.9% year-on-year.

The table below provides a comparison of research and development expenses during the first halves 2012 and 2011, according to the new segmentation of research and development expenses as defined by the new strategy announced on 9 June 2011:

(1) Drug-related research & development is aimed at identifying new agents determining their biological characteristics and developing small-scale manufacturing processes. The expenses relating to patents are also included in this type of expense.

(2) Pharmaceutical development is associated to industrial development after bringing together both activities in the framework of the new strategy announced on June 9, 2011, in order to build a Department «  ». Industrial development includes chemical, biotechnical and development-process research costs to industrialize small-scale production of agents developed by the research laboratories. Pharmaceutical development is the process through which active agents become drugs approved by regulatory authorities and is also used to improve existing drugs and to search new therapeutic indications for them.

(3) Strategic development includes costs incurred for research into new product licenses and establishing partnership agreements.

Selling, general and administrative expenses amounted to €278.6 million in the first half 2012, representing 44.2% of sales, up 12.3% compared with €248.2 million, or 42.6% of sales in the first half 2011.

The table below provides a comparison of selling, general and administrative expenses in the first halves 2012 and 2011:

Other operating income amounted to €2.5 million in 2012, compared with €20.0 million a year earlier. At 30 June 2011, the other operating income was composed of a non-recurring income of €17.2 million following the enforceable court judgment relating to the trade dispute between the Group and Mylan. Other operating income primarily includes revenues from the sublease of Ipsen’s headquarters building.

Other operating expenses amounted to €14.1 million, compared with €12.5 million for the same period in 2011. The other operating expenses mainly comprised non-recurring costs resulting from the implementation of the new strategy announced on 9 June 2011, the settlement of a trade dispute with a partner and an administrative procedure involving the Group. At 30 June 2011, the other operating expenses were composed of non-recurring costs resulting from the implementation of the new strategy and changes within the Executive Committee.

In the first half 2012, amortization charges of intangible assets reached €5.6 million, compared to €3.1 million a year earlier. This increase mainly included the amortization of Hexvix rights acquired from Photocure in September 2011 and the amortization of the trademarck of Nisis/Nisisco, a primary care product deprioritized following the arrival of generics on the market as a result of the loss of its patent in November 2011. This increase was partially offset by the change in the amortization plan of IGF-1 following the impairment loss recorded at 31 December 2011.

At 30 June 2012, the Group recorded non-recurring restructuring costs of €3.9 million non-recurring restructuring costs as part of the strategy announced on 9 June 2011, compared to €28.1 million a year earlier. At 30 June 2011, restructuring costs included a €18.4 million cost relating to the closing of the Barcelona R&D centre (effective on 31 December 2011) and a €8.7 million (€3.0 million as of 30 June 2012) cost related to the transfer to the East coast of the Group’s North American commercial subsidiary that occurred between June 2011 and June 2012.

At 30 June 2012, the Group decided to retain the Dreux-based industrial facility within the scope of its activity. Following this announcement, the Group reassessed the value of this asset taking into account all new elements and recorded an impairment write-back of €12.5 million in its consolidated financial statements as of 30 June 2012, partially offset by an additional impairment loss of €1.7 million on assets related to deprioritized R&D projects.

Based on above items, the operating income reported in the first half 2012 amounted to €125.7 million or 20.0% of sales, up 4.1% compared to 20.7% of the Group’s sales for the same period in 2011.

The Group’s in the first half 2012 amounted to €131.5 million or 20.9% of consolidated sales, down 8.6% year-on-year.

Internal Reporting provided to the Executive Committee corresponds to the Group’s managerial organisation based on the geographical regions within which the Group operates. Accordingly, operating segments as defined by IFRS 8 equate to long-term groupings of countries.

The operating segments existing at 30 June 2012 are as follows:

The table below provides an analysis of sales, revenues and operating income by geographical region at 30 June 2012 and 2011:

See appendix 4 Variations excluding foreign exchange impacts are computed by restating the first half 2011 with the first half 2012 average exchange rates+

At 30 June 2012, the Group’s financial income amounted to €15.5 million compared with €1.2 million the previous year.

At 30 June, 2012, Ipsen effective tax rate represented 25.9% of profit from continuing operations before tax and share of profit/loss from associated companies, compared to an effective tax rate of 21.5% at 30 June 2011.

This increase mainly resulted from the dilution of the research tax credit positive impact associated to a higher taxable profit as compared to 30 June 2011. The implementation of the exceptional 5% French tax contribution at the end of 2011 also contributed to the effective tax rate increase.

Excluding non-recurring operating, financing and tax items, the effective tax rate amounted to 23.9% at 30 June 2012, compared to 22.9% the previous year.

At 30 June 2012 and 31 December 2011, investments in associated companies solely represented the Group’s 22% share capital investment in Inspiration Biopharmaceuticals Inc..

At 30 June 2012, the Group recorded an expense of €14.2 million representing its share of 22% in Inspiration Biopharmaceuticals Inc. result, now attributed to the convertible bonds subscribed by the Group, the carrying value of the Group’s investment being nil since 31 December 2011.

As a result of the items above, the profit from continuing operations at 30 June 2012 amounted to €90.5 million, down 1.2% compared with €91.6 million at 30 June 2011. It represented 14.4% of Group’s sales for the period, compared with 15.7% in the first half 2011.

Excluding the Group’s share in profit of associated companies, attributable to shareholders of Ipsen SA amounted to €100.4 million at 30 June 2012 compared with €111.4 million at 30 June 2011, down 9.9% year-on-year.

Profit from discontinued operations was nil over the first six months of 2012 compared to €0.2 million at 30 June 2011.

As a result of the items above, consolidated net profit decreased by 1.5% year-on-year to €90.5 million (attributable to shareholders of Ipsen S.A.: €90.2 million) compared with €91.9 million (attributable to shareholders of Ipsen S.A.: €91.7 million) at 30 June 2011. Consolidated net profit represented 14.4% of Group’s sales in the first half 2012 and 15.8% in the first half 2011.

amounted to €86.2 million at 30 June 2012, down 19.8% compared with €107.5 million in the first half 2011.

See appendix 4

The Group’s diluted earnings per share at 30 June 2012 amounted to €1.07, down 1.8% compared with €1.09 a year earlier.

The at 30 June 2012 amounted to €1.02, down 19.9% year-on-year.

At 30 June 2012, the total of milestone payments received in cash by the Group and not yet recognised as other revenues on the income statement amounted to €191.9 million, compared with €206.1 million the previous year.

The Group recorded no new deferred revenue for its partnerships in 2012 against €3.7 million in 2011.

These deferred revenues will be recognised in the Group’s future income statements as follows:

See appendix 4

The consolidated cash flow statement shows that the Group’s operating activities in the first half 2012 generated a net cash flow of €63.3 million, down compared with €97.3 million generated over the same period in 2011.

Cash flow from operating activities before changes in working capital requirements decreased in the first half 2012 to reach €95.3 million, compared with €123.8 million generated over the same period the previous year.

Working capital requirements for operating activities increased by €32.0 million in the first six months of 2012 compared to an increase of €26.5 million over the same period in 2011. This change during the first half 2012 was related to the following:

During the first half 2012, the net cash flow from investing activities represented a net use of funds of €56.2 million compared to a net use of €48.1 million in the previous year. It included:

During the first half 2012, the net cash flow from financing activities amounted to €(68.9) million, compared with a net use of €(67.1) million over the same period in 2011. In the first half 2012, the Group paid €66.4 million in dividends to its shareholders, stable year-on-year.

At 30 June 2012 and 2011, cash flow from discontinued operations was not material.

Effects of the allocation of goodwill resulting from transactions by the Group in North America.

Impairment losses recognized over the period detailed in the paragraph “Impairment losses".

Other non-recurring items include:

Effects of the allocation of goodwill resulting from transactions by the Group in North America.

Expenses linked with the strategy announced on 9 June include:

Other non-recurring items including the damages received by the Group after the enforceable court decision relating to the trade dispute between the Group and Mylan.

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