Biohit Oyj
Interim report (Q1 and Q3)

Interim report of the Biohit Group 1 January to 30 June 2011

SUMMARY

January–June H1/2011:

• Net sales EUR 20.5 million (EUR 19.3 million 1-6/2010), growth 6.1%
• Operating profit EUR 0.7 million (EUR 0.0 million)
• Profit before taxes EUR 0.0 million (EUR 0.4 million)
• International operations accounted for 96.0 per cent (96.5%) of net sales
• Earnings per share EUR -0.01 (EUR 0.02)

April–June Q2/2011:

• Net sales EUR 10.2 million (EUR 9.9 million), growth 2.4%
• Operating profit EUR 0.1 million (operating loss EUR 0.1 million)
• Profit before taxes EUR -0.1 million (EUR 0.3 million)
• International operations accounted for 95.6 per cent (96.5%) of net sales
• Earnings per share EUR -0.01  (EUR 0.01 )

JUSSI HEINIÖ, PRESIDENT AND CEO:

“Our net sales continued to grow during the second quarter of the year. In the first half of the year, net sales grew by 6.1% and in the second quarter by 2.4%. Fixed costs remained at the previous year's level. Consequently, the operating result also improved in the second quarter, representing 0.9% of net sales or 3.3% cumulatively. However, the loss for the reporting period was EUR 0.1 million, mainly due to exchange rate losses related to the long payment terms of subsidiaries’ account payables.

In the liquid handling business, demand particularly focused on mechanical pipettes, where net sales for the first half grew by 17.0% on the previous year. Other product groups showed somewhat more moderate growth. Geographically, Europe, Russia and China saw fairly strong growth. However, sales decreased elsewhere in Asia. In Japan, the economic situation after the earthquake is still negatively affecting demand. In North America, demand decreased, possibly due to the country's challenging economic situation.

In our diagnostics business, we focused on seeking new distributor partners for our products and on shifting the sales focus from the Finnish to the international markets. In addition to Finland, Acetium has now been launched in Germany, but thus far, growth in total net sales of the product has been modest. With Acetium launched on the French market at the end of the second quarter, new sales have yet to impact on the second quarter figures.

As stated in our strategy, we will continue our cost saving efforts and we aim at investing in profitable growth. However, the possibility of an increase in the current uncertainty in the world economy will hamper efforts to assess the future outlook.”

KEY FIGURES

REPORTING

Biohit reports on its business segments, which are the liquid handling and diagnostics businesses. In addition, the company reports its net sales by main market area.

NET SALES AND RESULT

April–June

In the second quarter, net sales were up 2.4 per cent on the corresponding period in 2010, amounting to EUR 10.2 million (EUR 9.9 million). International operations accounted for 95.6 per cent (96.5%) of net sales in April–June.

Operating profit for the second quarter amounted to EUR 0.1 million (operating loss EUR 0.1 million), loss before taxes to EUR 0.1 million (profit before taxes EUR 0.3 million) and earnings per share were EUR -0.01 (EUR 0.01). Loss for the reporting period was EUR 0.1 million due to exchange rate changes related to receivables from subsidiaries.

In the second quarter, growth in net sales was more moderate than in the early months of the year. Net sales continued to grow in Europe and Russia, but decreased in America and Asia, except for China.

January–June

In January–June, net sales were up 6.1 per cent on the corresponding period in 2010, and amounted to EUR 20.5 million (EUR 19.3 million). International operations accounted for 96.0 per cent (96.5 %) of net sales.

Operating profit amounted to EUR 0.7 million (EUR 0.0 million) and the profit before taxes to EUR 0.0 million (EUR 0.4 million). Earnings per share were EUR -0.01 (EUR 0.02).

Biohit's net sales developed favourably during the first half of the year, although the company still lags behind its growth targets for the entire year. Moderate growth was mainly due to the more modest than expected development among North American and Indian units, as well as a slow start to new sales of products in the diagnostics business.

Thanks to efficiency measures and growth in net sales, profitability improved on the previous year. However, the result for the reporting period showed a loss of EUR 0.1 million due to exchange rate changes connected with receivables from subsidiaries. The result was thus significantly weakened by the strengthening of the euro from the previous year.

Key figures by segment, January–June

During the period, 95.3% of the net sales was generated by liquid handling products and related maintenance services. The net sales of the liquid handling business amounted to EUR 19.5 million (EUR 18.3 million) and the net sales of the diagnostics business to EUR 1.0 million (EUR 1.1 million). The liquid handling business grew by 6.9% and the diagnostics business decreased by 8.0%

The operating profit of the liquid handling business amounted to EUR 1.9 million (EUR 1.3 million), while the operating loss of the diagnostics business totalled EUR 1.3 million (operating loss of EUR 1.3 million).

Group net sales by segment

Group operating profit by segment

Group net sales by geographical area

The impact of currency exchange rates

The net sales grew by 6.1% during the review period, and by 7.3% in local currencies. The operating profit was significantly weakened by the strengthening of the euro from the previous year, Biohit recording currency exchange losses of EUR 0.3 million in receivables from subsidiaries. In the corresponding period in 2010, Biohit booked currency exchange gains of EUR 0.6 million.

BALANCE SHEET

On 30 June 2011, the balance sheet total was EUR 31.7 million (EUR 29.7 million) and the equity ratio 40.7 per cent (44.9%). The decrease in equity ratio was mainly due to investments.

FINANCING

Cash flow in the reporting period was EUR -0.0 million (EUR 0.2 million). Net cash flow from operating activities amounted to EUR 0.6 million (EUR 1.5 million). At the end of the reporting period, the Group's liquid assets totalled EUR 1.6 million (EUR 2.0 million on 30 June 2010 and EUR 2.2 million on 31 December 2010). Current ratio was 2.0 (1.4). Financing costs have increased significantly from last year, mainly due to the exchange rate changes related to receivables from subsidiaries.

RESEARCH AND DEVELOPMENT

Research and development expenditure during the reporting period amounted to EUR 1.2 million (EUR 1.2 million), representing 6.0% of net sales (6.4%). EUR 0.4 million (EUR 0.4 million) in development expenditure was capitalised during the period.

INVESTMENTS

Gross investments during the reporting period totalled EUR 3.3 million (EUR 1.5 million). During the reporting period, Biohit made a real estate acquisition in France, to optimise its operations by centralising its functions in one location. The acquisition accounted for EUR 2.0 million of the total investments and it was financed with finance leasing. As a result of the sale of Biohit’s previous real estate unit, the net investment in land and building was EUR 1.6 million.

PERSONNEL

During the period, the average number of personnel employed by the Group was 441 (394 in the corresponding period in 2010), of whom 195 (182) were employed by the parent company and 246 (212) by the subsidiaries. The number of personnel has increased particularly in the Asian units.

SHORT-TERM RISKS AND UNCERTAINTY FACTORS

There have been no significant changes in the short-term risks previously reported by the company since the first quarter. Costs arising from Biohit's business growth and their impact on the company's profitability, as well as changes in currency exchange rates, still represent the company's most relevant risks.

Costs arising from the Group's business growth represent the most essential risk associated with Biohit's business operations. Although there was significant growth in net sales in 2010, at the same time the fixed costs grew considerably. Business development and new product launches require continuous investments that represent a challenge in terms of the Group's financial position. By increasing sales and cutting costs, the company has managed to improve its profitability during the current year.

The development of the diagnostics business directly affects the profitability of the entire Group. Failure to meet the net sales targets of the segment weakens the Group's profitability. In the long term, failing to meet these growth expectations may also result in a EUR 2.6 million impairment of goodwill associated with the diagnostics products. That said, long-term development efforts of the diagnostics business continued during the reporting period, and seems to be yielding results. The company thus estimates that the risk of impairment has not grown.

Profitability of the liquid handling business has been burdened this year by lower than expected sales in the North American, Indian and Japanese markets. The impact of the earthquake in Japan has proven to have a significant impact on the country's infrastructure and demand for liquid handling products. No growth is therefore expected this year for Biohit's net sales in Japan. In North America and India, the company expects to see a more favourable growth trend during the rest of the year. However, uncertainty in the U.S. market may have a significant impact on demand.

The company conducts a large part of its business in currencies other than the Euro. Exchange rate fluctuations related to intra-Group receivables are recorded under financial items. The parent company partly finances the working capital needs of the subsidiaries by granting long payment terms on accounts payables, which results in changes in exchange rates items and thus in the financing costs of the Group.

The company hedges against the currency risks associated with external receivables by making procurements in currencies other than the Euro and by making every effort to build a cost structure in which a significant proportion of fixed costs are in other currencies.

OUTLOOK FOR 2011

The strong growth in Biohit's net sales in 2010 was partly a result of the economic recovery. This year, the growth trend has been more moderate. The uncertainty in the world economy has strengthened in the spring and summer, which has reflected also on the demand of Biohit’s products, especially in North America. Biohit has, however, strengthened its position in the Asian market and in South America, which is anticipated to have a favourable impact on the development of the net sales.

The growth in the liquid handling business is anticipated to continue also this year, based mainly on the growth in demand for mechanical pipettes and disposable tips.

In the diagnostics business, Biohit invested heavily in domestic markets in 2010. This year, the focus is being shifted towards international markets, with the aim of strengthening the growth of the diagnostics business. The majority of net sales is expected to come from the sale of diagnostic tests. Net sales growth generated by Acetium materially depends on whether co-operation with bigger players will lead to its international distribution.

The Group’s total net sales are expected to grow by more than 10% this year, and the total operating result is expected to account for approximately 5% of net sales. Meeting this objective is subject to there being no marked increase in the current uncertainty in the market.

MAIN EVENTS IN THE REPORTING PERIOD Liquid handling business

In its liquid handling business Biohit develops, manufactures and markets laboratory equipment and accessories for the pharmaceutical, food, and other industries as well as for research institutes, universities and hospitals. The product range includes mechanical and electronic pipettes and disposable tips. While the majority of the products are marketed under the Biohit brand, the company also manufactures customised OEM (original equipment manufacturer) products based on its innovations and technologies. These products complement the diagnostic test and analysis systems of many global companies, such as 3M, three Johnson & Johnson companies, and bioMérieux. In addition, Biohit offers maintenance, calibration and training services for liquid handling products through its distributor network.

During the reporting period, sales developed favourably in the liquid handling business for mechanical pipettes. The profitability of business remained at a satisfactory level.

In June, Biohit launched a new electronic pipette, ideally suited to dispensing small volumes of liquid. Thanks to the pipette's patented technology, liquid is dispensed from its tip very rapidly. This ensures a completely empty tip, thereby avoiding the usual drop left at the tip end and the need to touch the receiving vessel rim during pipetting. As a result, liquid handling is contamination free, more precise and faster than with other pipettes (www.biohit.com/NeweLine0.1-5ulwithSuperPipettingfunction/ReadmoreandWatchVideo).

Biohit launched the pipette under the commercial name eLINE 0.1 – 5 µl. The pipette is suitable for handling 0.1 – 5 micro litres of liquid and is targeted at molecular biology laboratories in particular. The new unique pipette complements Biohit’s range of single-channel pipettes.

Earlier this year, Biohit expanded its business with a new solution, by launching an automatic liquid handling instrument, Biohit Roboline, which broadens the scope of Biohit’s diagnostics business. The compact structure and operation of the device are based on the innovations and technical solutions utilised in Biohit's electronic pipettes. This product, belonging to diagnostics business, has raised widespread interest in the research laboratories of the pharmaceuticals industry, diagnostics and universities. To date, the product has been introduced to customers in France and the UK as well as in the USA, Russia and China.

Roboline is suitable for accurate, efficient and safe automatic handling of samples and reagents in various types of diagnostics. These include immunoassays especially for the GastroPanel examination and several other immunoassays using microplates and vertical photometry-based analysis instruments.  Roboline increases the automation level of vertical photometry-based analysis instruments already used on the market. Vertical photometry, which can be used to analyse reaction mixtures in cuvettes in microplates, has become a global industrial standard for analysis instruments of various types.

The Roboline based analyzer is under development. This fully automated analyzer for GastroPanel and any other microplate immunoassays, as other microplate readers and automated analyzing systems on the market today, is also based on the vertical measurement principle, which revolutionized microplate analyses worldwide. The vertical measurement principle has been utilized extensively and very successfully since the 1970’s and it can justifiably be called the “global laboratory and industrial standard”. This principle has resulted, among other things, in rapid and broad development of reliable and safe microplate-based immunoassays, which use non-radioactive tracers. GastroPanel immunoassays are based on these immunoassays (www.google.com /”Suovaniemi equation” and www.biohit.com / About Us/ History).

Diagnostics business

In its diagnostics business, Biohit develops, manufactures and markets tests and analysis systems for the diagnosis and prevention of diseases of the gastrointestinal tract. These tests and systems are based on innovations and reliable research data. The product range includes GastroPanel examinations and ColonView quick tests for primary healthcare; lactose intolerance and Helicobacter pylori quick tests for specialised healthcare; and instruments and analysis systems for laboratories. The company also markets GastroPanel laboratory analysis packages. In addition to GastroPanel test kits, this package includes liquid handling products, instruments, and software, as well as installation, training, and maintenance services. The GastroPanel laboratory concept is geared towards facilitating the efficient introduction of GastroPanel examinations.

Biohit’s service laboratory provides analyses of tests developed by Biohit, and the determination of carcinogenic acetaldehyde in foodstuffs and alcoholic beverages. On a global scale, exposure to acetaldehyde is linked to approximately 4 million new cancer cases annually, or nearly 40 per cent of all cancers. Biohit has developed products and a method to reduce exposure to acetaldehyde in the gastrointestinal tract and food.

The Acetium capsule developed by the company binds (inactivates) carcinogenic acetaldehyde in the stomach. Acetium products were developed in cooperation with researchers at the University of Helsinki and Biohit's scientific advisors.

Prescription-free Acetium capsules are recommended for use after the consumption of food or alcohol in order to prevent the eventual risk for gastric and oesophageal cancer by those who:

1. exhibit damage to the mucosa of the stomach caused by autoimmune disease, and an anacidic or low-acid stomach due to a functional disorder (atrophic gastritis) (diagnosed with GastroPanel)
2. have an untreated Helicobacter pylori infection (diagnosed with GastroPanel)
3. use protein pump inhibitors (PPIs) or H2-receptor blockers
4. have undergone stomach surgery.

Biohit’s GastroPanel and Acetium innovations form a unique pairing in the prevention of gastric and oesophageal cancer. GastroPanel detects atrophic gastritis and its associated risk of gastric and oesophageal cancer in time, while treatment is still possible. Atrophic gastritis of the corpus, which rarely heals, leads to a permanently low-acid or anacidic stomach. Mouth microbes are able to live in an anacidic stomach and produce acetaldehyde from alcohol and the sugars contained in food. In October 2009, the WHO classified acetaldehyde as a Group I carcinogen – a group which also includes asbestos, tobacco and benzene.

Standardised ethical and legislative principles govern all Group I carcinogens, regardless of their source. All available means should be used to reduce exposure to these carcinogens in food and the organs. Protected by granted and pending patents, Acetium capsules are the only way of inactivating carcinogenic acetaldehyde in the stomach, which in turn enables the prevention of gastric and oesophageal cancer. Biohit has applied for patents in several countries for the BioFood method, which can be used to bind (inactivate) acetaldehyde in alcoholic beverages and foodstuffs before it enters the mouth. The Acetium lozenge binds acetaldehyde already dissolved into saliva from cigarette smoke. Protected by pending patents, the Acetium innovation may also help users to give up smoking. This will be further examined in a study on the topic. In animal tests, acetaldehyde has been found to be addictive.

At Group level, the sales of the diagnostics business did not develop as expected during the reporting period. Sales mainly increased in Biohit's domestic market in Finland, where most marketing efforts were focused on during the previous year and the reporting period.

At the beginning of the year, Biohit combined the management of sales and marketing for the liquid handling and diagnostics businesses. New business plans are now being introduced throughout the Group. In addition, the company has made changes to its sales organisation since the end of the reporting period, with the aim of coordinated, more efficient sales of diagnostics in the international arena too.

Terveystalo, a private healthcare company operating nationwide, included the GastroPanel examination, developed by Biohit, in its service offering. During the reporting period, Biohit began training Terveystalo doctors to implement the examination. The GastroPanel examination is available from all of the one hundred-plus Terveystalo sites across Finland. For Terveystalo doctors, the test is a safe way of examining both dyspeptic patients and symptomless patients attending a health check.  Diacor Oy has also included the GastroPanel examination in its offering. Doctor training will start in August.

In the spring, Biohit launched the Acetium capsule on the German market. The Acetium capsule is recommended for people suffering from an anacidic stomach and for those obliged to use antacids due to for example reflux disease. Approximately three million people suffer from reflux disease in Germany alone. During the first phase, the product will be marketed mainly through online pharmacies. In Germany, nine million pharmacy customers, or some 18 per cent of all internet users, purchase their pharmaceuticals through an online pharmacy. Online pharmacies are allowed to sell both prescription and non-prescription (OTC) drugs in Germany. With the marketing measures, the German markets for Acetium are now in the launch phase.

ADMINISTRATION

Authorisations of the Board of Directors

Based on a resolution of the AGM held on 13 April 2011, the Board of the company is authorised to decide on the issue of shares and to issue the special rights referred to in Chapter 10, Section 1 of the Limited Liability Companies Act so that the maximum number of new Series B shares to be issued pursuant to the special rights is 2,000,000, which corresponds to approximately 20% of the company's Series B shares.

According to the resolution, the Board of Directors is entitled to decide on all terms and conditions regarding the issue of shares and the issue of special rights. The issue of shares and the issue of special rights entitling to the receipt of shares can occur in deviation from the subscription right of shareholders (special issue). Such an authorisation remains valid for three years from the resolution of the AGM.

Changes in the company's managementNina Hasu, M.Sc (Econ.), born 1970, has been appointed Financial Director and a member of the Management Team of Biohit Oyj as of 8th August, 2011, replacing Tiina Hankonen. Hasu has previously worked as Business Controller at UPM-Kymmene Wood Oy.

Elina Ämmälä, M.Pol.Sc, born 1976, has been appointed Communications Director of Biohit Oyj as of 8th August, 2011, replacing Josefin Hoviniemi. Prior to joining Biohit, Ämmälä worked as Director at Cocomms Oy, a communications consulting company.

SHARE TURNOVER AND PRICE DEVELOPMENT

Biohit Oyj's shares are divided into series A and series B shares. There are 2,975,500 series A shares and 9,962,127 series B shares, totalling 12,937,627 shares. Series A shares confer 20 votes per share and Series B shares 1 vote per share. The dividend paid for Series B shares is, however, two (2) per cent of the nominal value higher than that paid for Series A shares. The total market capitalisation value (supposing that the market capitalisation value for series A and B shares is equal) at the end of the period was EUR 31.1 million (EUR 32.9 million on 30 June 2010).

Biohit Oyj's series B shares are quoted on NASDAQ OMX Helsinki in the Small cap/Healthcare group under the code BIOBV.

Shareholders

At the end of the reporting period on 30 June 2011, the company had 4,545 shareholders (4,789 on 30 June 2010). Private households held 71.92% (73.14%), companies 24.46% (23.25%), and public sector organisations 2.65% (2.81%) of the shares. Foreign ownership or nominee registrations accounted for 0.76 % (0.73 %) of shares.

Further information on the shares, major shareholders, and management’s shareholdings is available on the company’s website at www.biohit.com/investors.

ACCOUNTING PRINCIPLES

This interim report was prepared in accordance with the IAS 34 standard.

Biohit Oyj has applied the same accounting principles in preparing this financial statement bulletin as for its 2010 financial statements. The IFRS standards that came into effect in 2011 did not affect the accounting principles.

All the figures in the interim report have been rounded up or down, due to which the sums of figures may deviate from the sum total presented.

The figures in this interim report have not been audited.

CONSOLIDATED INCOME STATEMENT

Biohit Oyj's earnigs are attributable to the parent company shareholders in their entirety, as there are no minority interests

CONSOLIDATED BALANCE SHEET

 RELATED PARTY TRANSACTIONS

There have been no noticeable changes in related party transactions during the reporting period.

NEXT FINANCIAL STATEMENT

The third interim report for 2011 will be published at 9.30 a.m. on Friday 20 October.

Helsinki, on 18 August 2011

Biohit Oyj
Board of Directors

Further information:

Jussi Heiniö, President and CEO
Tel: +358 (0) 9 773 861
jussi.heinio@biohit.com

Distribution:

NASDAQ OMX Helsinki Oy
Central storage facility (www.oam.fi)
Press
www.biohit.com

About Biohit Oyj:

Biohit Oyj is a globally operating Finnish biotechnology company that was established in 1988.

Biohit's mission crystallises in its motto “Innovating for Health”. The purpose of the company is to produce innovations, new technologies and analysis systems for use in medicine, research institutions and industry, helping to promote research and diagnostics and to improve the quality of life of people by means of preventing disease, human suffering and financial loss. Our duty is also to innovate and develop the marketing and availability of our products and services in order to ensure a profitable growth of the company and its ability to pay dividends.

Biohit works with scientific communities to produce new technologies, products and services based on research results and innovations that can be used to develop safe and cost-effective liquid handling solutions for laboratory work as well as diagnostic tests for the early detection and prevention of diseases of the gastrointestinal tract.

Biohit has two business segments: liquid handling and diagnostics. Liquid handling products include electronic and mechanical pipettes, disposable tips as well as pipette maintenance and calibration services for research institutions, healthcare and industrial laboratories.

The diagnostics business comprises products and analysis systems for the early diagnosis and prevention of gastrointestinal diseases, such as the blood-sample based GastroPanel examinations for the diagnosis of stomach illnesses and associated risks, quick tests for the diagnosis of lactose intolerance and H. pylori infection in connection with gastroscopy, and the ColonView examination for the early detection of intestinal bleeding that indicates a risk of colorectal cancer. Acetium reduces the amount of carcinogenic acetaldehyde in an anacidic stomach.

The Biohit Group employs around 440 people. The company is headquartered in Helsinki, Finland, and has subsidiaries in France, Germany, the UK, Russia, India, China, Japan and the USA. The company also has a representative office in Singapore. Biohit's products are also sold through about 200 distributors in 70 countries.

Since 1999, Biohit's Series B share has been quoted on NASDAQ OMX Helsinki in the Small cap/Healthcare group and is traded under the code BIOBV.

Read more at www.biohit.com