Interim report January - June 2014

JANUARY – JUNE 2014

- Net sales amounted to SEK 82.8 million (89.9)
- EBITDA was SEK -25.7 million (-10.0)
- Earnings Per Share before dilution totalled SEK -0.55 (-0.36)

APRIL – JUNE 2014

- Net sales amounted to SEK 38.3 million (43.9)
- EBITDA was SEK -15.0 million (-8.5)
- Earnings Per Share before dilution totalled SEK -0.32 (-0.23)

HIGHLIGHTS

Disappointing net sales development during first six months of 2014
- Temporary stock-outs and sell-outs
- Weak topline reduces profitability

Continued efforts to grow in new territories
- Iraq order to be delivered in Q4
- New tender in Spain valid from Q4

Outlook 2014
- Strong net sales development by the end of the year
- New market and product launches will have a positive effect on earnings

BUSINESS UPDATE
Since last year, Bluefish has actively been seeking opportunities to increase revenues in the short- to mid-term, both in existing markets and also in markets outside Europe by entering into partnerships with local companies that take the main responsibility for marketing and distribution as well as assume the inventory risk. During the first six months, the company has continued to strengthen its organisation in order to be able to grow in territories outside the EU. In April, the company received its first order from a new partner in Iraq and efforts continue to identify business opportunities in new markets. To facilitate product deliveries to these new markets, Bluefish has established a logistic hub in Dubai, from where products aimed for non-EU markets will be distributed.

Net sales during the first six months were disappointing. As a result of the temporary withdrawal of the GMP certificate for one of the company’s main contract partners providing product analysis for batch release, a significant amount of the company’s products could not be released for sale in the EU, resulting in a stock-out situation in several key markets. Major efforts were made to identify alternative suppliers, and by the end of March all products involved had been transferred to a new laboratory. Still, supply in some markets continued to be affected during the second quarter although the impact in Q2 was lower than in Q1. We expect no further effects during the remainder of the year. In addition, due to the imminent expiry of certain goods in combination with an unexpected decline in market prices for these products, the company made the decision to sell these volumes at a loss. This has affected net sales in both the first and second quarters. A reduction in net sales and gross profit has had a negative impact on the company’s earnings. In addition, currencies have had a negative effect on EBITDA profitability amounting in total to SEK 4.1 million during the first six months of 2014.

Development projects are progressing
Several of the company’s proprietary formulation projects are reaching the final stages of development. For the most advanced product, the health authorities have confirmed a slot for submission of the registration file in the beginning of 2015. The company expects to submit four of its development products during next year with market launches expected in 2016. On an annual basis, the total net sales value for these four products in Bluefish territories is estimated to be approximately SEK 100 million. Furthermore, discussions are ongoing with potential partners for markets beyond Bluefish’s existing territory.

Strengthened capital structure
During the second quarter, the company completed a new share issue of SEK 50 million. Further, the offer to extend the holding in the convertible debt until 30 June 2017 has been accepted by holders and is equivalent to SEK 21.7 million. Following the repayment of SEK 18.4 million in June, total net debt amounted to SEK 39.2 million on 30 June 2014 compared to SEK 60.2 million at the beginning of the year. The net debt to equity ratio amounted to 32.4% on 30 June 2014 compared to 54.6% at the beginning of the year.

OUTLOOK
In July, the company won a new tender contract with Servicio Andaluz de Salud (SAS), the public health service in Andalusia in Spain. Initial deliveries are planned for the fourth quarter.

Several new products will be launched during the fourth quarter in various markets, including Co-amoxiclav 500/125 and 850/125mg, Eplerenone 25/50mg, Escitalopram 5/10/15/20mg, Esomeprazole 10/20mg, Finasteride 1/5mg and Irbesartan 75/150/300mg.

Also, the first order from the company’s new partner in Iraq will be delivered during the fourth quarter of 2014. The net sales value of this order is approximately SEK 11 million.

With several new revenue sources added in the fourth quarter, the company expects incremental net sales of approximately SEK 15 million in Q4 2014. This is equivalent to an increase of 35% compared to Q4 2013. Net sales growth for the full year 2014 is expected to be between 5-10%. The incremental sales from new product launches and new market opportunities will have a positive impact on the company’s profit already this year.

For more information, contact

Karl Karlsson, President & CEO Bluefish Pharmaceuticals
Tel. 46 8 519 116 00
Email: karl.karlsson@bluefishpharma.com

Susanna Urdmark, CFO Bluefish Pharmaceuticals
Tel. 46 8 519 116 00
Email: susanna.urdmark@bluefishpharma.com

About Bluefish Pharmaceuticals
Bluefish has undergone significant international expansion since the company was founded in 2005. Bluefish focuses on the development, manufacture and sale of generic pharmaceuticals. The company conducts marketing operations in a large number of European markets and is expanding into territories outside Europe. The product portfolio consists of a total of 80 products and is growing.

www.bluefishpharma.com