Biohit Oyj
Interim report (Q1 and Q3)

BIOHIT GROUP INTERIM REPORT Q1/2014

Biohit Oyj Stock Exchange Release, 8 May 2014 at 9:30 am local time (EEST)

SUMMARY

January–March 2014

• Net sales grew by 67.5 % compared with Q1/2013
• Net sales EUR 0.9 million (EUR 0.6 million)
• Operating result, continuing operations EUR -1.2 million (EUR -1.0 million)
• Result for the reporting period, continuing operations EUR -1.0 million (EUR -1.0 million)
• Result for the reporting period, discontinued operations EUR 3.3 million (EUR 0.0 million)
• Total result for the reporting period EUR 2.2 million (EUR -1.0 million)
• Net sales from international operations 90.7% (80.1%) of total net sales
• Equity ratio 91.1% (88.5%)

PRESIDENT & CEO SEMI KORPELA:

We focused on supporting our international distributor network, investing in clinical research and preparing for new product launches in business operations during the first quarter 2014.

During the reporting period, we strengthened our existing partnership with Mexican ProGalénika, our distributor partner for Acetium® products. In the first quarter, we extended this cooperation in Mexico to cover the distribution of GastroPanel, having initiated the registration of this product. In April, we also completed the registration of an acetaldehyde-binding capsule in Mexico.

During the reporting period, we signed the following new distributor agreements. Productos Weens SRL is our new distributor of diagnostics products in Peru, Biomed SA is our new diagnostics distributor in Spain, Youlum Biotechnology Co. is our distributor of GastroPanel in Taiwan, and Gulf Orlando Medical Co. is the distributor of Biohit quick tests in Kuwait. We signed a distributing agreement with Korean MoiGen to boost the sales and marketing of Biohit monoclonal antibodies in the IVD industry and research institutes in Korea. We also signed a cooperation agreement with Biospacific Inc. in relation with the distribution of Biohit's antibodies in the diagnostics industry and research communities in the US and Canada.

In April, we launched two clinical trials with Acetium® capsule for prevention of migraine-type headache, assessing the efficacy of Acetium® capsules for a new use. The research projects aim at assessing the efficacy of Acetium® capsules in preventing headache episodes for persons suffering from migraine and cluster/Horton headaches. Both projects are implemented as multicentre studies in partnership with Terveystalo Oy and Aava Medical Centre in six centres across Finland.

In the beginning of May, new Acetium® research results we introduced in the major international meeting for gastroenterologists (Digestive Disease Week) in Chicago. The Congress examined the replicated and confirmed Acetium® capsule results from the studies carried out in Japan and Sweden. In addition, an Italian study, according to which Acetium® capsule seems to improve gastric acid secretion in patients with acid-free stomach (atrophic gastritis) caused by either H. pylori or autoimmune disorder. In relation to the earlier announced study, this is a follow-up phase with a larger number of patients and longer treatment time.

During the reporting period, we introduced to the market a calprotectin test, which enables the differentiation of inflammatory bowel diseases (IBD) from irritable bowel syndrome (IBS) and is suited to the monitoring of the aforementioned conditions. The calprotectin test further extends Biohit's range of diagnostic tests for the gastrointestinal tract.

In April, the GastroPanel validation project was completed for Dynex Technologies' automated DS2 – ELISA processing system. DS2 users can now run the GastroPanel test in accordance with a protocol validated by Biohit."
 

CONSOLIDATED KEY FIGURES

REPORTING

Biohit's product portfolio consists of GastroPanel (Pepsinogen I, Pepsinogen II, Gastrin-17 and H.Pylori), the acetaldehyde-binding Acetium products, diagnostic quick tests and monoclonal antibodies. Due to the small sales volume of other products such as liquid handling products, instruments and software in relation to total sales, all business is reported under a single segment.

NET SALES AND RESULT

January-March 2014

Net sales grew by 67.5% compared with 1-3/2013.

The operating loss from continuing operations was EUR -1.2 million (EUR -1.0 million 1-3/2013). The result for continuing operations during the reporting period totalled EUR -1.0 million (EUR -1.0 million). In order to exploit the marked potential of diagnostics and acetaldehyde-binding products and the resulting business growth, we must make substantial investments in building a distributor and partner network and supporting these partners (licences, registrations, marketing) and in product development.

The result for discontinued operations during the reporting period totalled EUR 3.3 million (EUR 0.0 million). In conjunction with the liquid handling business divestment in late 2011, EUR 3.5 million of the gains on sale were not recognised due to the terms of the sale agreement and other factors related to the sale that remained open at the time. The amount was recognised on 31 March 2014 when the deal was closed.

The result for the reporting period totalled EUR 2.2 million (EUR -1.0 million).

Consolidated net sales and result for continued operations

The impact of currency exchange rates

During the reporting period, exchange rates did not have a significant influence, EUR 0.0 million (EUR 0.0 million).

BALANCE SHEET

On 31 March 2014, the balance sheet total was EUR 27.5 million (EUR 39.1 million) and the equity ratio was 91.1% (88.5%).
 

FINANCING

Biohit Oyj enjoys a strong financial position, which allows determined investments in an international distributor network as well as the development and commercialisation of new products.

At the end of the reporting period, the company's financial assets totalled EUR 22.8 million. The financial assets included EUR 6.8 million of receivables in the escrow account related to a business transaction completed in 2011. These were released on 31 March 2014 as no claims concerning the transaction were made.

RESEARCH AND DEVELOPMENT

R&D operations focused on improvements and further developments to existing innovations and products, and on their commercialisation. Biohit also employs external experts and subcontractors in its R&D operations. Development expenditure on the diagnostics business has not been capitalised. Research and development expenditure during the reporting period amounted to EUR 0.5 million (EUR 0.2 million).

Our development activities focused on the GastroPanel standardisation project and launch of a five-test package of Helicobacter pylori quick test.

INVESTMENTS

Gross investments during the reporting period totalled EUR 0.1 million (EUR 0.0 million).

PERSONNEL

During the reporting period, the average number of personnel employed by the Group was 46 (35 in 2013) of whom 38 (29) were employed by the parent company and 8 (6) by its subsidiaries. At the end of the reporting period, the Group employed 47 (34) personnel, of whom 39 (28) were employed by the parent company and 8 (6) by the subsidiaries.

SHORT-TERM RISKS AND UNCERTAINTY FACTORS

Biohit’s key risks have to do with the investments required for business growth. There are risks involved in areas such as the success of clinical trials, new market areas, the selection and development of distribution channels, personnel recruitment, registration processes, product pricing, and the political decision-making affecting the progress of screening programmes. Significant short-term risks are associated with the selection of new market areas, the timing of expansion into selected markets, and product success in these markets.

The duration of the product registration process is different in each market area, and affects the company's business development. It is a big challenge to accurately assess the time it takes to complete all registrations in the main markets and to begin generating net sales.       

When investing liquid assets, the objective is to gain a return on investment with a minimum risk of equity loss. The investment portfolio consists of deposits, money market investments and corporate loans. A fundamental aspect in portfolio management is sufficient diversification across different asset classes, investment instruments and counterparties. Biohit conducts its investment activities with at least two partners.

Thanks to its wide customer base, Biohit does not materially depend on any individual customers or individual project deliveries, with the exception of GastroPanel sales in China, which currently represents a major business for Biohit. Most of the company’s business is conducted in euro, and the indirect effects of currency exchange rate fluctuations are considered minor.
 

MAIN EVENTS IN THE REPORTING PERIOD

New distributor agreements

During the reporting period, we strengthened our existing partnership with Mexican ProGalénika, our distributor partner for Acetium® products. During the first quarter of 2014, we extended this cooperation in Mexico to cover the distribution of GastroPanel, having initiated the registration of this product. In April, we also completed the registration of an acetaldehyde-binding capsule in Mexico.

During the reporting period, we signed the following new distributor agreements. Productos Weens SRL is our new distributor of diagnostics products with exclusive rights in Peru, Biomed SA is our new diagnostics distributor in Spain, Youlum Biotechnology Co. is our distributor of GastroPanel in Taiwan, and Gulf Orlando Medical Co. is the distributor of Biohit quick tests in Kuwait. We signed an exclusivea distributing agreement with Korean MoiGen to boost the sales and marketing of Biohit monoclonal antibodies in the IVD industry and research institutes in Korea. We also signed a cooperation agreement with Biospacific Inc. in relation with the distribution of Biohit's antibodies in the diagnostics industry and research communities in the US and Canada.   

Online shopping expansion in Finland and in international deliveries

In Finland, Biohit and Tamro amended their agreement concerning the Acetium® lozenge, whereby sales of the product with GastroPanel giftcard were launched on the Biohit Shop online in January 2014, in addition to pharmacy sales. In April, we strengthened the sales of the both Acetium® products into international deliveries via online shopping.

Two patents for Biohit for binding the acetaldehyde found in foods: the United States and Japan

Biohit Oyj has been granted a US patent (application US2010239663A1), which will expire on 21 May 2026. The patent comprises a composition and method forbinding acetaldehyde present in the stomach. A Japanese patent (JP4691312B2) for the same method and preparation for binding acetaldehyde in the saliva, stomach and large intestine, is in effect until 29 October 2020. The patented invention comprises a composition including an acetaldehyde-binding substance. This innovation is intended to reduce the concentration of harmful acetaldehyde in the mouth, pharynx, esophagus, stomach as well as the small and large intestine, and thereby reduce the risk of cancer in these parts of the body.
 

Indian patent for prediction of gastric condition

Biohit Oyj has been granted an Indian patent (no. 258567), which is in effect until 4 March 2024. An anacidic stomach caused by atrophic gastritis is the best-known risk factor for gastric and esophageal cancer. The patented method enables detection of a normal gastric mucosa and antrum atrophic, corpus atrophic and non-atrophic gastritis.

Research aimed at Helicobacter pylori infection eradication

Clinical trial, launched by Biohit, the purpose of which was to find out the ability of BioAcetium® to treat H. pylori infection, has not produced clear-cut results. The study will be continued in laboratory tests in which the combination Acetium® capsule and ampicillin antibiotic are tested against different helicobacter strains in laboratory tests. If the combinations prove to be effective, research can be continued in patients.

Publication of Biohit Oyj Annual Report 2013

Biohit Oyj published its 2013 annual report on 24 March 2014, and the printed Annual Report was distributed to the shareholders at the Annual General Meeting.

Assets in the escrow account related to the liquid handling business divestment were released to Biohit Oyj

In conjunction with the divestment of the liquid handling business, which took place in late 2011, 10% of the sale price, accounting to EUR 6.8 million, was transferred to an escrow account to be retained as security against any claims related to the sale. Biohit Oyj received the remaining sale price of EUR 6.8 million in full on 31 March 2014 since no claims were made.  Due to the terms of sale and other factors related to the sale, which remained open at the time, EUR 3.5 million of the gains on sale were not recognised. The remaining, further specified gains on sale of EUR 3.3 million were recognised in the result for discontinued operations in first quarter of 2014.

MAJOR EVENTS AFTER THE CLOSE OF THE PERIOD

Registration of Biohit's Acetium® completed in Mexico

The registration of the Acetium® capsule was completed in Mexico at the beginning of Q2. The delay in the previously estimated registration deadline (by Q4/2013) was partly attributed to the official requirements, which are stricter than in the European Union, and the registration requirement which, following the extended distributor agreement with ProGalénika, now also applies to Acetium® lozenges.
 

The GastroPanel validation project for the automated Dynex system completed

The GastroPanel validation project for the Dynex Technologies DS2 – ELISA automated system has been completed.  DS2 users can now run the GastroPanel test in accordance with a protocol validated by Biohit. Automated Dynex DS2 systems have already been delivered to over 1,000 laboratories globally. The automated Dynex ELISA analyz, that utilizes vertical measument, enhances GastroPanel's availability and usability (Read more about innovation and patenting strategy at www.biohithealthcare.com/about-us/history). With the help of an integrated system, small- and medium-sized laboratories can easily and cost-effectively add GastroPanel to their range of services.

Annual General Meeting

Biohit Oyj's Annual General Meeting (AGM) took place on Monday 14 April 2014. The AGM adopted the parent company's financial statements and the consolidated financial statements for 2013 and discharged the members of the Board of Directors and the Chief Executive Officer from liability.

Dividend payout

As proposed by the Board of Directors, the AGM decided that the loss for the financial period ended be recorded in the profit and loss account. As proposed by the Board of Directors, the AGM decided that on the basis of the financial statements to be adopted for the financial period ended on 31 December 2013, a dividend of EUR 0.72 per each A share and EUR 0.7234 for each B share be paid. Dividend was paid to shareholders recorded in the company's shareholder register on the matching day, 17 April 2014. Dividend was paid out on 28 April 2014.

Members of the Board of Directors

The AGM decided that the number of members of the Board of Directors would be five (5) and re-elected the following members to the Board until the end of the next AGM: Professor Osmo Suovaniemi, Professor Mikko Salaspuro, Eero Lehti, and Seppo Luode, MSc (Engineering), as well as President and CEO Franco Aiolfi. A decision was made at the Annual General Meeting to pay a meeting fee of EUR 1,600 to the Chairman of the Board and a meeting fee of EUR 1,500 to other Board members.

Election of the auditor

Authorised public accountants PricewaterhouseCoopers Oy were elected as Biohit Oyj's auditors, with Authorised Public Accountant Pasi Karppinen as chief auditor for a term expiring at the end of the next AGM.

Amendment to the Articles of Association

As proposed by the Board of Directors, the AGM decided to amend Article 3 of the Articles of Association so as to remove the provisions on the minimum and maximum numbers of share capital and shares. In addition, as proposed by the Board of Directors, the AGM decided to abolish par value in Article 4 of the Articles of Association.

The new wording of Article 3 of the Articles of Association is as follows:

"Article 3 Biohit Oyj's shares are divided into series A and series B shares. In the general shareholders’ meeting, one A series share entitles the holder to 20 votes, while one B series share entitles to 1 vote.

In terms of dividends, B series shares receive dividends that are 2 (two) percentage points higher than A series shares in relation to the nominal values. In applying this provision, the share par value is considered EUR 0.17, which was the par value of the company share at the time when the company decided to abolish par value of shares.

In the case of dissolution of the company due to a merger or some other reason, holders of A and B series shares have an equal right to merger consideration or other compensation payable due to dissolution.

The shares of the company are listed in a book-entry security system.

A Series A share can be converted, upon the request of its holder, into a Series B share by a decision of the Board of Directors, entitling the holder to receive one Series B share for one Series A share."

As proposed by the Board of Directors, the AGM decided that Article 4 of the Articles of Association will be replaced by a provision specifying that the company's shares do not have par value.

The new wording of Article 4 of the Articles of Association is as follows: "Article 4 The company's shares do not have par values."

Authorisation of the Board of Directors to decide on the issue of shares and the special rights entitling to shares

The AGM authorised the Board of Directors to decide on the issue of shares and the special rights entitling to shares referred to in Chapter 10, Section 1 of the Limited Liability Companies Act as follows:

The maximum number of new Series B shares to be issued pursuant to the special rights is 3,000,000, which corresponds to approximately 30% of the company's Series B shares.

The Board of Directors decides 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.

All decisions taken at the shareholder meeting were unanimous. The minutes of the AGM are available to shareholders on the company's website at www.biohithealthcare.com/investors.

SHARES AND SHAREHOLDERS

Biohit Oyj's shares are divided into series A and series B shares. There are 2,975,500 series A shares and 10,850,093 series B shares, totalling 13,825,593 shares. Series A shares confer 20 votes per share and series B shares 1 vote per share. Supposing that the market capitalisation value for series A and B shares is equal, the total market capitalisation value at the end of the period was EUR 102.3 million (EUR 100.1 million on 31 March 2013).

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 31 March 2014, the company had 6,442 shareholders (6,126 on 31 December 2013). Private households held 78.0% (77.6%), companies 20.2% (20.6%), public sector organisations 0.0% (0.0%) and non-profit organisations 0.0% (0.0%). Foreign ownership or nominee registrations accounted for 1.7% (1.7%) of shares.

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

ACCOUNTING PRINCIPLES

This interim report has been prepared in accordance with the requirements of the IAS 34 standard.

All business operations are presented as one segment. Biohit Oyj has applied the same accounting principles in preparing this interim report as for its financial statements of 2013. The IFRS standards that came into effect in 2014 did not have a material impact on 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

Earnings per share calculated from earnings attributable to equity holders of the parent company

CONSOLIDATED BALANCE SHEET

* Items include EUR 6.8 million in receivables from a business transaction completed in 2011; the funds were placed in an escrow account. Funds placed in the escrow account were released on 31 March 2014.

STATEMENT OF CHANGES IN EQUITY

Consolidated statement of changes in equity on 31 March 2014

Consolidated statement of changes in equity on 31 March 2013

CASH FLOW STATEMENT

RELATED PARTY TRANSACTIONS

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

COLLATERAL, CONTINGENT LIABILITIES AND OTHER COMMITMENTS

NEXT FINANCIAL REPORT

The interim report for January–June 2014 (Q2) will be published on Thursday, 21 August 2014 at 9:30 am.

Helsinki, 7 May 2014

Biohit Oyj
Board of Directors

Additional information:
CEO Semi Korpela, Biohit Oyj
tel. +358 9 773 861
investor.relations@biohit.fi
www.biohithealthcare.com

Biohit Oyj in Brief

Biohit Oyj is a globally operating Finnish biotechnology company. Biohit’s mission ‘Innovating for Health’ means that we provide innovative products and services to promote research and early diagnostics. Biohit is headquartered in Helsinki and has subsidiaries in Italy and the UK. Biohit’s Series B share (BIOBV) is quoted on NASDAQ OMX Helsinki under Small cap/Healthcare. www.biohithealthcare.com