Interim report January - March 2000

INTERIM REPORT JANUARY - MARCH 2000 * Continued rapid growth, sales up 28%. Strong demand from pharmaceutical and biotech customers. * Operating income increased by 41% after provisions for employee incentive plans, triggered by the recent positive development of the Biacore share price. Earnings per share increased by 19%. * Dr Ulf Jönsson, Executive Vice President and Head of Technical Operations and Strategic Marketing, appointed President of Biacore. * Mr Lars-Göran Andrén becomes Executive Chairman and will focus on accelerating the strategic development of Biacore, primarily its drug discovery business. * Development agreements signed with SmithKline Beecham, Pharmacia and Huntsman Cancer Institute for Biacore's new high performance systems. * Biacore's unique SPR array chip technology has the potential to make the company a major player in the field of proteomics and to achieve its goal of more than SEK 1 billion in sales five years from now. Therefore, Biacore has decided to invest an additional SEK 10-15 million in the remainder of this year in order to bring its new technology to the market as quickly as possible. * For the full year 2000, sales growth of at least 15% is now expected. The previous forecast indicated a 10-15% increase in sales. January-March 2000 1999 Change Sales, SEK million 91.0 71.1 +28% Operating income, SEK 17.1 12.1 +41% million Operating margin, % 19 17 Income after financial items, SEK million 19.0 14.3 +33% Earnings per share, SEK 1.34 1.13 +19% Biacore is a global market leader in affinity-based biosensor technology with its own operations in the U.S., across Europe, Japan, Australia and New Zealand. The technology is protected by a strong patent portfolio. Target groups consist primarily of medical and life science research laboratories and pharmaceutical and biotechnology companies all over the world. Biacore focuses on drug discovery as the prime area for future growth. Based in Uppsala, Sweden, the company is listed on the OM Stockholm Exchange and Nasdaq in the U.S. OPERATIONS JANUARY-MARCH 2000 Amounts stated in this report pertain to the Biacore Group, unless indicated otherwise. Figures in parentheses refer to January-March 1999. Biacore continued to make excellent progress during the first quarter 2000. Sales amounted to SEK 91.0 million (71.1), an increase of 28% compared with the same period in 1999. This growth is primarily due to the success of Biacore's most advanced system, the BIACORE 3000. First quarter sales increased by 19% excluding currency effects. Sales were divided geographically as follows: January-March SEK million 2000 1999 Change Americas 45.4 25.4 +79% Europe 29.2 25.3 +15% Asia-Pacific 16.4 20.4 -20% Sales growth in the Americas, principally the U.S., continued at an impressive pace during the first quarter. Strong demand from pharmaceutical and biotech customers led to sales increasing 79%. In Europe, sales in the first quarter increased by 15% with substantial growth in most of the company's key markets. In Asia-Pacific, sales decreased by 20%, largely due to fewer grants being made available for the purchase of instruments in markets outside Japan. The gross margin improved considerably and amounted to 84.0% (80.2). This is largely attributable to favorable changes in the product mix. Total costs for marketing, administration and R&D amounted to SEK 57.5 million (42.8), an increase of 34%. However, SEK 4.4 million of this amount relates to provisions for employee bonuses and stock option programs, which have resulted from the very positive development of Biacore's share price. A further SEK 2.9 million was invested in initiating an accelerated development of the company's new SPR array chip technology. This is described in more detail later in this report. Operating income increased by no less than 41% to SEK 17.1 million (12.1) and the operating margin amounted to 19% (17). Currency differences amounted to SEK -0.6 million (-0.6) in "Other income and expenses" and SEK 0.2 million (0.5) in "Financial items." The tax charge was 31% (23) of income after financial items. In the first quarter of 1999, the distribution of earnings among the companies in the Group resulted in a lower tax rate than normal. Net income was SEK 13.1 million (11.0), giving earnings per share of SEK 1.34 (1.13), an increase of 19%. INVESTING ACTIVITIES Capital expenditures totaled SEK 2.7 million (4.0). PERSONNEL At the end of March 2000, Biacore had 204 (181) permanent employees. NEW PRESIDENT In December 1999, the Board of Biacore decided to appoint Mr Lars-Göran Andrén Executive Chairman when a new President has been appointed. This decision was taken in order to ensure that Biacore has the management resources to capitalize fully on its new business opportunities. The Board today appointed Dr Ulf Jönsson, currently Executive Vice President and Head of Technical Operations and Strategic Marketing, as President of Biacore. A new Head of Technical Operations will be appointed. In his role as CEO and Executive Chairman, Lars-Göran Andrén will focus on the strategic development of the Biacore Group with particular emphasis on alliances and collaborations within the drug discovery area. Donald R. Parfet, currently Chairman of the Board, becomes Deputy Chairman. DRUG DISCOVERY - A MAJOR GROWTH OPPORTUNITY Sales of systems and technology to the drug discovery industry will be Biacore's main source of growth over the remainder of this decade. Biacore is well positioned to achieve sales in excess of SEK 1 billion in five years' time based on the prospects for its existing products, its new high performance systems and the potential of technologies such as its new SPR array chips. Continued growth of the company's core basic life science research business will also make a significant contribution to this sales target. Biacore expects to achieve this rapid growth in sales because its tech- nology has the potential to significantly improve the economics of the drug discovery process. This is because the data generated from Biacore's systems allow its pharmaceutical/biotech customers to take better-informed decisions at a number of key points in the drug discovery process. This in turn enables them to develop better drug candidates and move them into clinical trials faster than is currently the case. The drug discovery market represents a sizeable opportunity for Biacore. In 2000, the pharmaceutical industry is expected to invest well in excess of USD 2 billion* in analytical instruments and reagents. Current projections forecast that this market will continue to grow at over 15%* per annum. First step into drug discovery: BIACORE 3000 Biacore has already made significant inroads into the drug discovery market. The BIACORE 3000 system has been well accepted by both pharmaceutical and biotech customers. This automated system is targeted at applications upstream of high throughput screening (HTS), particularly target identification and validation, areas which are increasingly based on proteomics** research. The growing sales of this system provide clear evidence of companies in the drug discovery market recognizing the value of Biacore's affinity biosensor technology. Next step: high-performance systems The first quarter has seen Biacore make further progress with the devel- opment of the new generation of high-performance systems that will help solve some of the major analytical problems facing the drug discovery industry, particularly downstream of HTS. These include hit characteriza- tion, lead optimization and ADME***. In the last three months Biacore has signed important collaborative deals with SmithKline Beecham, Pharmacia and Huntsman Cancer Institute. These deals, along with the one signed with Millennium Pharmaceuticals late last year, are designed to optimize the development of the new high-performance systems for key ADME applications and for hit validation of the small molecules identified by HTS. These valuable collaborations will also enable Biacore to generate data which will be important for marketing these systems once they are commercialized. The new systems are being developed to be more sensitive, provide higher quality data than the existing instruments and have a throughput capability matched to the growing requirements of the customers. The first of these new systems is planned to be launched in 2001. SPR array chip technology - investing in the proteomics revolution The key to Biacore achieving its longer term growth ambitions is its unique SPR array chip technology. This technology is a major breakthrough for Biacore as it can potentially increase 1,000 fold the number of binding assays that can be analyzed per day. This will allow products based on Biacore's affinity biosensor technology to be used in many more applications than is the case today. This dramatic increase in throughput should allow Biacore to become a major player in the so-called proteomics revolution that is set to have a great impact on the life science industry. The proteomics revolution is rapidly gathering pace. This, in conjunction with the commercial opportunities that proteomics provides, particularly in drug discovery applications, has resulted in the Board of Biacore deciding to increase its development investment in this technology in order to bring it to the market as rapidly as possible. Biacore is confident that its new SPR array chip technology will provide the pharmaceutical industry with a unique tool to both explore protein function and to evaluate the vast number of proteins identified from genomics as potential therapeutic targets. Additional investments in drug discovery In the remainder of the current financial year, Biacore has decided to invest SEK 10-15 million in this new technology. This is in addition to the company's current level of expenditure. Biacore intends to collaborate with leading companies in the pharmaceutical/biotech industry to ensure that the key applications of its SPR array chip technology are developed optimally. This is a similar approach to the one that has been taken with the company's new high-performance systems. In order to fully capitalize on the exciting prospects that exist for its drug discovery business, Biacore has decided to establish it as a separate business area, headquartered close to one of the world's leading centers for pharmaceutical/biotech research. A number of possible locations are currently being evaluated. Continued progress with the new high-performance systems along with the company's strong confidence in the potential of its new SPR array chip technology means that Biacore is on target to become a major technology supplier to the drug discovery industry by the middle of this decade. These developments put Biacore in a strong position to achieve its goal of sales in excess of SEK 1 billion in five years' time. OUTLOOK FOR 2000 For the full year 2000, a sales growth of at least 15% is expected. The previous forecast indicated an increase of 10-15%. Uppsala, Sweden, May 4, 2000 Lars-Göran Andrén President and CEO *) Biacore's conclusions of reports from Business Communications Co. Inc. (1998), Hitech Business Decisions (1998) and market research conducted for Biacore by Scientific Generics Limited (1999). **) Proteomics is the study of structure and function of the proteins expressed in a cell at any one time. ***) ADME stands for absorption, distribution, metabolism and excretion and represents the pharmacological characterization of new drug candidates. This interim report has not been subject to examination by the Company's auditors. Biacore plans to release interim reports on the following dates in 2000: January-June Monday, July 17 January-September Friday, October 20 This press release contains certain forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995 which, by their nature, involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements. For further information, please contact: Lars-Göran Andrén, President and CEO, Phone +46 18 67 57 01 or +46 708 54 02 34 Lars-Olov Forslund, CFO, Phone +46 18 67 57 08 or +46 708 76 56 73 Jan Isoz, Investor Relations, Phone +46 708 10 31 17 More information on Biacore is available at the company's website: www.biacore.com (SSE:BCOR Nasdaq:BCOR Reuters: BCOR.N) ------------------------------------------------------------ Please visit http://www.bit.se for further information The following files are available for download: http://www.bit.se/bitonline/2000/05/04/20000504BIT00270/bit0001.doc http://www.bit.se/bitonline/2000/05/04/20000504BIT00270/bit0002.pdf