Interim Report January-march 2001

INTERIM REPORT JANUARY-MARCH 2001 · Biacore's business continues to grow rapidly. Sales in the first quarter rose by 46% to SEK 132.5 million. · Earnings per share rose 43% to SEK 1.91 after a further SEK 5.6 million of investment to speed up the commercialization of the Company's unique SPR array chip technology. Biacore plans to invest SEK 30 million on this highly innovative technology in 2001. · · The collaboration with Millennium Pharmaceuticals on SPR array chip technology continues to make good progress. Biacore anticipates the first launch of new systems based on this technology to take place in 2004. · · BiacoreS51, Biacore's first new high performance system, which is designed for lead optimization and certain specific ADME applications, will be introduced in 3rd Quarter 2001. · · Biacore was awarded damages of approximately USD 1.7 million in the U.S. patent dispute. The decision of the Court can be appealed. · · Sales for the full-year 2001 are expected to increase by more than 20%, with the usual significant variations between quarters. · January- March 2001 2000 Change Sales, SEK million 132.5 91.0 +46% Operating income, SEK 25.8 17.1 +51% million Operating margin, % 19 19 Income after financial items, SEK million 28.0 19.0 +47% Earnings per share, 1.91 1.34 +43% SEK Biacore is the global market leader in Surface Plasmon Resonance (SPR) based biosensor technology with its own operations in the U.S., across Europe, Japan, Australia and New Zealand. A strong patent portfolio protects Biacore's technology. 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 its prime area for future growth. Based in Uppsala, Sweden, the Company is listed on the Stockholm Stock Exchange and Nasdaq in the U.S. OPERATIONAL REVIEW JANUARY- MARCH 2001 Amounts stated in this report pertain to the Biacore Group, unless indicated otherwise. Figures in parentheses refer to January-March 2000. The growing recognition of the value of Biacore's unique SPR technology led to another quarter of strong sales growth for the Company. Sales during the first quarter 2001 were up 46% to SEK 132.5 million. Excluding the impact of changes in exchange rates, sales increased by 34%. Sales were divided geographically as follows: January- March SEK 2001 2000 Change million Americas 74.1 45.4 +63% Europe 22.8 29.2 -22% Asia- 35.6 16.4 +117% Pacific The continued revenue growth seen in the first quarter reflects increasing awareness amongst Biacore's key customer groups of the benefits that its SPR technology systems can bring. This is due to the broad range of molecular binding studies that can be carried out using the Company's most sophisticated system, Biacore3000. Biacore3000 has played an important role in the Company's aggressive strategic move to become an important technology supplier to the drug discovery industry. The success that Biacore has achieved to-date with this customer group provides strong support for the Company's current strategy of investing heavily to accelerate the introduction of new systems for the pharmaceutical and biotechnology industries. The Biacore3000 is used for applications in the critical areas of drug discovery upstream of high-throughput screening (HTS). These include target identification and validation, and assay development for HTS. The system has also been particularly well accepted by academic customers in Biacore's core basic life science research market where it is used to solve a wide range of research problems encountered by biological scientists around the world. Sales during the first quarter increased at a very fast rate in the Americas and Asia-Pacific but declined in Europe. Substantial variations between the quarters are normal in Biacore's business. The gross margin for the first three months of 2001 was 82.2%, in line with prior periods. In the first quarter total costs for marketing, administration and research and development amounted to SEK 87.2 million (57.5), a 52% increase. Marketing costs rose by 36% as the Company continued to develop its sales capability in key markets in order to support the sales growth. The first quarter also saw a 55% increase in R&D spending to SEK 25.2 million. This increase was driven by further investment in the structure and resources needed to commercialize the Company's unique SPR array chip technology. This technology will provide major throughput advantages in comparison to current products and as a result will transform Biacore's product offering to the drug discovery industry. SEK 5.6 million was spent on this technology in the first quarter of 2001. First quarter administration expenses rose to SEK 23.0 million (12.5). A major part of this increase was non-recurring professional fees associated with exploring a number of strategic options. Administration expenditure was also higher as a result of further investments in support of the Company's new business unit structure, which was implemented in August 2000. Operating income for the first quarter amounted to SEK 25.8 million (17.1), an increase of 51%. The operating margin was 19% (19). Excluding the investments that were made in the SPR array chip technology, the operating margin would have increased to 24%. Currency differences amounted to SEK 5.3 million (-0.6) in 'Other income and expenses' and SEK 0.0 million (0.2) in 'Financial items.' The tax charge was 32% (31) of income after financial items. Net income was SEK 19.0 million (13.1), giving a 43% increase in diluted earnings per share to SEK 1.91 (1.34). INVESTING ACTIVITIES Capital expenditures totalled SEK 3.5 million (2.7) during the first quarter. PERSONNEL At the end of March 2001, Biacore had 249 (204) permanent employees. BIACORE AWARDED DAMAGES IN PATENT DISPUTE On April 23, 2001, the U.S. District Court for the District of Delaware granted a permanent injunction preventing Thermo Bioanalysis Corp (Thermo) from infringing Biacore's patent (U.S. patent 5,436,161). Furthermore, the Court awarded damages in favor of Biacore AB and Biacore Inc. to be calculated based upon a royalty rate of 40% of the sales price of each IAsys biosensor sold by Thermo since July 25, 1995, plus interest. Although the final amount due to Biacore has not been determined at this time, it is estimated to be in the region of USD 1.7 million. The decision of the Court can be appealed. PROGRESS ACROSS ALL BUSINESS UNITS In August 2000, Biacore put in place a new corporate structure that is designed to enable the Company to focus its efforts on three key target markets: · the pharmaceutical/biotechnology industry, · the life science research market, and · the food industry These business units are in turn supported by a new Technology Supply division, which will bring together the Company's extensive technical resources in research and development, manufacturing, and quality assurance. Pharmaceutical/Biotechnology Business Unit In 1999, Biacore decided to increase focus on the drug discovery market based on the Company's confidence that its systems would be able to overcome some key bottlenecks faced by the pharmaceutical and biotechnology industries in development of new medicines. The success that Biacore has achieved to-date has served to reinforce this strategy and as a result the Company is now investing heavily to bring its new SPR based systems to the market as rapidly as possible. New High-Performance Systems The Company's new high-performance systems are designed to help solve some of the major analytical problems facing the drug discovery industry, particularly downstream of HTS. These include aspects of hit characterization, lead optimization and ADME, each of which is a serious bottleneck in drug discovery today. The new high-performance systems will complement the Biacore3000 system, which targets applications upstream of HTS. The new systems, which have been developed in collaboration with major pharmaceutical partners such as SmithKline Beecham, Pharmacia Corporation and Millennium Pharmaceuticals, will offer high sensitivity, high quality data and high throughput capabilities for specific applications downstream of HTS. The first of these new systems, named BiacoreS51, which will be used for lead optimization and certain specific ADME applications, is on track to be launched in the third quarter of 2001. The second half of 2001 will also see the launch of the Company's first QC system, which is designed for quality control applications by the pharmaceutical industry. This new system has been developed in conjunction with Boehringer Ingelheim. SPR Array Chip Technology - A Transforming Technology Looking further ahead, the key to Biacore achieving its aggressive growth ambitions is its unique SPR array chip technology. This technology is a major breakthrough as it can potentially increase 1,000 fold the number of binding assays that can be performed per day. It is this dramatic increase in throughput that should allow Biacore to become a major player in the proteomics revolution that is expected to become the most important area of life science research over the next decade. The last three months has seen further progress in Biacore's collaboration with Millennium Pharmaceuticals to commercialize its SPR array chip technology for proteomics and drug discovery applications. This collaboration, which was signed in June 2000, is the first of a number of collaborations that Biacore expects to sign, in order to achieve the full potential of this technology. Biacore is confident that the successful development of 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 genomic research as potential therapeutic targets. Higher Investment to Continue The substantial commercial potential for Biacore's unique SPR array chip technology has led the Company to increase significantly its overall investment in this technology in order to bring it to the market as rapidly as possible. In the year 2001, Biacore expects to invest in the region of SEK 30 million on commercializing its SPR array chip technology. This investment is in addition to the Company's on-going level of R&D spending. Life Science Business Unit The benefits of Biacore's unique SPR array chip technology will also be of major importance for the customers of the Company's core Life Science Business Unit, particularly those focusing on proteomics research. Biacore made further efforts to extend its marketing activities in the proteomics area in the first quarter when it launched a new campaign at the Experimental Biology conference in Florida at the end of March. This campaign focused on the benefits of using SPR technology to study protein-protein interaction and for ligand fishing, two key areas of proteomics research. The first quarter also saw the Life Science Business Unit initiate a major marketing campaign to highlight the benefits of SPR technology as a key tool for cancer research. The launch of this campaign, targeted at researchers in the area of cancer, is designed to complement Biacore's proteomics marketing efforts. The cancer campaign, which was launched at the American Association of Cancer Research Meeting in New Orleans at the end of March, is focused on explaining the broad range of applications that SPR technology has in the area of cancer. These include the identification of DNA binding events and DNA damage, elucidating the action of tumor suppressors/tumor promoters, determining expression levels of selected proteins in normal cells/cancer cells, unravelling the intricate molecular interactions involved in cell signaling pathways, studying pro-apoptotic binding events, optimizing therapeutic antibodies targeted at tumors and identifying tumor markers in clinical samples. Food Business Unit The first quarter had seen a major positive development for the Company's Food Business Unit with the successful completion of an important EC food safety improvement project, FoodSENSE. It is the Company's belief that this project successfully demonstrated the applicability of Biacore's SPR based biosensor technology as a tool for the analysis of veterinary drug residues in foods such as milk and meat. A key finding of the project was the substantially higher daily throughput of tests, over 1,500 analyses per day, that could be performed using SPR technology as well as its ability to detect a much wider range of residues compared with existing test methods. The FoodSENSE project, which was supported by the EC Programme for Agriculture and Fisheries (EC FAIR), started in mid 1998 and was designed to determine the applicability of using optical biosensors for screening analysis of veterinary drug residues in food. This screening is important to ensure that the public is protected against potentially harmful veterinary residues, such as hormones and antibiotics. Although there are numerous other analytical tests available, few techniques have satisfactory throughput, sensitivity or reliability to be used on a routine basis. FACING THE FUTURE WITH CONFIDENCE Biacore's strong technology platform and its new streamlined business unit structure will provide a strong base for the Company's future growth. The Company's confidence is based on: · the growth that can be achieved by the Pharmaceutical/Biotechnology Business Unit through both its present products and the new high- performance systems · the growth prospects for the Company's Life Science Business Unit as a result of the massive global interest in proteomics · the opportunity for SPR technology to gain acceptance as an analytical/screening tool for the food industry · the potential of the Company's new SPR array chip technology which will allow Biacore to become a significant player in the proteomics revolution · the Company's strong financial position, its broad patent portfolio and the determination and experience of the recently expanded Biacore management team. ACCOUNTING PRINCIPLES This interim report has been prepared in accordance with the Swedish Financial Accounting Standards Council's recommendation No. 20 (RR 20), Interim Financial Reporting. As of 2001, a number of new recommendations from the Swedish Financial Accounting Standards Council have become effective. The adoption of these recommendations has not affected the reported results of operations or financial position of the Company. QUARTERLY SALES VARIATIONS Biacore's total sales during the period 1998-2000 were divided between the quarters as follows: Quarter 22% 1 Quarter 22% 2 Quarter 18% 3 Quarter 38% 4 OUTLOOK FOR THE FULL-YEAR 2001 Sales for the full-year 2001 are expected to increase by more than 20%, with the usual significant variations between quarters. Uppsala, Sweden, May 9, 2001 BIACORE INTERNATIONAL AB (publ) Ulf Jönsson President This interim report has not been subject to examination by the Company's auditors. FINANCIAL INFORMATION During 2001, Biacore plans to release its interim reports as follows: January - June Monday, July 23 January - September Friday, October 19 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: Ulf Jönsson, President, Phone +46 18 67 57 52 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) ------------------------------------------------------------ This information was brought to you by BIT http://www.bit.se The following files are available for download: http://www.bit.se/bitonline/2001/05/09/20010509BIT00170/bit0001.doc http://www.bit.se/bitonline/2001/05/09/20010509BIT00170/bit0001.pdf