BIOHIT GROUP FINANCIAL STATEMENT RELEASE 2014

Biohit Oyj Financial Statement Release, 26 February 2015 at 9:30 am local time (EET)

SUMMARY

January–December 2014

• Net sales grew by 26.4% compared to 1-12/2013
• Net sales EUR 4.4 million (EUR 3.5 million)
• Operating loss, continuing operations, totalled EUR -4.5 million (EUR -5.9 million)
• The result for the reporting period, continuing operations, totalled EUR -4.4 million (EUR -5.9 million)
• The result for the reporting period, discontinued operations, totalled EUR 3.3 million (EUR 0.0 million)
• The result for the reporting period was EUR -1.2 million (EUR -5.9 million)
• Net sales from international operations 91.5% (87.8%) of total net sales
• Equity ratio 87.5% (82.2%)

October-December / Q4 2014

• Net sales grew by 44.2% compared to Q4/2013
• Net sales EUR 1.1 million (EUR 0.8 million)
• Operating loss, continuing operations, totalled EUR -1.2 million (EUR -1.5 million)
• The result for the reporting period, continuing operations, totalled EUR -1.2 million (EUR -1.6 million)
• The result for the reporting period, discontinued operations, totalled EUR 0.0 million (EUR 0.0 million)
• The result for the reporting period was EUR -1.2 million (EUR -1.6 million)
• Net sales from international operations 92.7% (84.3%) of total net sales
• Equity ratio 87.5% (82.2%)

PRESIDENT & CEO SEMI KORPELA:

‘In the fourth quarter of 2014, our net sales grew by 44.2% year on year. In terms of operational development, Biohit Oyj has focused on supporting its international distributor network, investing in clinical research and preparing for new product launches.

During the year, Biohit launched three new products, of which the BIOHIT ColonView test for tracing fecal occult blood was re-launched in the last quarter. The other new products were the BIOHIT Active B12 (Holotranscobalamin) vitamin test and the BIOHIT Calprotectin ELISA test for the differentiation of inflammatory bowel disease (IBD) and irritable bowel syndrome (IBS) as well as monitoring of inflammatory bowel disease.

During the year, we continued to expand our distributor network. We also signed a distributor agreement with the Taiwanese Giraffes Pharmaceutical Company on sales and marketing rights to the Acetium^® capsule and Acetium lozenge in Taiwan. In addition, we signed an agreement with Eastar Pharmaceuticals LLC on the distribution of the Acetium lozenge in China. We strengthened our international diagnostics distribution network by beginning cooperation with Eurobio, which acts as Biohit's diagnostics distributor in France, Morocco, Tunisia and Algeria. In addition, we signed an agreement with Bestbion on the distribution of quick tests in Germany.

We also entered into the following diagnostics agreements during the year: A&P Italian Pharmaceuticals S.r.l. (Romania), Biohemed (Serbia), Biomed S.A. (Spain), Meditecno Mèdicos e Sistemas de Diagnòstico Lda (Portugal), Polygon Diagnostics AG (extension of scope of agreement, Switzerland), ERICON S.r.l. (Moldova), R&D Systems China Co. Ltd. (China), MoiGen (Korea), Biospacific Inc. (USA), Kureha trading Co. Ltd. (Japan), Laboratorios Progalénika S.A. de C.V. (extension of scope of agreement, Argentina, Bolivia, Brazil, Chile, Columbia, Costa Rica, Ecuador, El Salvador, Guatemala, Guyana, French Guyana, Honduras, Mexico, Nicaragua, Panama, Paraguay, Peru, Surinam, Uruguay, Venezuela), JOLI Medical Products Inc. (USA), Al-Misbar Medical Technology Co. (Jordan), Gulfmed (Egypt), Aloris Vital s.r.o (Slovakia), Gulf Orlando Medical Company (Kuwait), Youlum Biotechnology Co. Ltd. (Taiwan), Productos Weens S.r.l. (Peru) and Jolex (Taiwan). In addition, we made the following agreements on Acetium products: A&P Italian Pharmaceuticals S.r.l (Romania), IlDengunHoshuu (Mongolia) and Biohemed (Serbia).

The duration of the product registration process is different in each market area. For this reason, it is not possible to accurately assess the time taken for the authorities to handle registrations in these areas and for product sales to begin. The registration of the acetaldehyde-binding capsule in Mexico has been delayed due to organizational changes in the local register authority.

At the end of the reporting period, a reimbursement decision on the three GastroPanel^® tests (pg-l, pg-II, gastrin-17) was issued in seven Chinese provinces: Anhui, Gansu, Henan, Shandong, Shanxi, Sichuan and Tianjin.

In August, the Chinese health associations – The Chinese Society of Digestive Endoscopy and The Society of Ontological Endoscopy of the Chinese Anti-Cancer Association – issued a consensus clause on the screening, endoscopic diagnosis and treatment of early gastric cancer in China. This clause recommends serum screening based on the pg-1, pg-2, gastrin-17 and H. pylori tests, which combine to form GastroPanel. The consensus clause on the new GastroPanel approach to gastrointestinal diagnostics is a clear indication of the pioneering approach taken by Chinese healthcare organizations.

In October the partners Biohit Oyj and its joint venture Biohit Biotech (Hefei) Co., Ltd agreed to start a feasibility study in China regarding Acetium capsule as a potential medication to arrest the progression and even to restore atrophic gastritis. The agreement includes an option to negotiate a licensing deal concerning the product, in case the outcome of the feasibility study is positive. The feasibility study will be funded by the Chinese partners of joint venture Biohit Biotech (Hefei) Co., Ltd, in co-operation with Hefei Medicine.

In November, Niklas Nordström (B. Econ, LL.M.) was appointed as Chief Financial Officer and a member of the Management Team of Biohit Oyj. He will also be in charge of HR and IT management.’
 

THE GROUP’S KEY FIGURES

REPORTING

Biohit's product portfolio consists of diagnostic tests, acetaldehyde-binding products and monoclonal antibodies. The entire product portfolio is reported under a single segment.

NET SALES AND RESULT

January-December

Net sales grew by 26.4% compared with 1-12/2013.

The operating loss from continuing operations was EUR -4.5 million (EUR -5.9 million 1-12/2013). The result for continuing operations during the reporting period totalled EUR -4.4 million (EUR -5.9 million).

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 recognized due to the terms of the sale agreement and other factors, related to the sale, which remained open at the time. The amount was recognized on 31 March 2014 when the deal was closed.

The result for the reporting period was EUR -1.2 million (EUR -5.9 million).

Consolidated net sales and result for continued operations

BALANCE SHEET

On 31 December 2014, the balance sheet total was EUR 14.5 million (EUR 27.3 million) and the equity ratio was 87.5% (82.2%).

                                                                               
FINANCING

Biohit Oyj enjoys a strong financial position, which allows determined investments in an international distributor network as well as the development and commercialization of new products. At the end of the reporting period, the company's financial assets totalled EUR 10.4 million (EUR 15.7 million).

RESEARCH AND DEVELOPMENT

R&D operations were again focused on innovations, as well as product development and improved usability. Biohit also employs external experts and subcontractors in its R&D operations. Development expenditure on the diagnostics business has not been capitalized. Research and development expenditure during the 1-12/2014 reporting period amounted to EUR 2.1 million (EUR 1.1 million), of which the final quarter accounted for EUR 0.6 million (EUR 0.3 million).

Development activities focused on the GastroPanel standardization project – involving improvements to the usability of tests – and on the development of new tests and their market entry. During the year, Biohit introduced three new products onto the market, including the fourth-quarter relaunch of the BIOHIT ColonView test which is a diagnostic quick test for early detection, screening and diagnostics of colorectal cancer (colon cancer) now available also for clinical use. Other new products included the BIOHIT Active B12 (Holotranscobalamin) vitamin test, as well as the BIOHIT Calprotectin ELISA test for the detection, and monitoring during treatment, of inflammatory bowel diseases (IBD) and the differentiation of such conditions from irritable bowel syndrome (IBS).
 

CLINICAL RESEARCH

In Finland, there is an ongoing research project on smoking cessation (with the Acetium lozenge as the research product), and two research projects on preventing migraine-type headache episodes (with the Acetium capsule as the research product) In addition, the study assessing the eradication of the Helicobacter pylori infection is being continued with laboratory tests

Two comparative trials of the celiac quick test are being held abroad. In Brazil, a comparative trial of the ColonView test, involving a sample of 500 colonoscopy patients, is in progress. Registration of the ColonView test has begun as required for the national colorectal cancer screening programme being planned in the country.

At the turn of the year, preparations were being made for a comparative ColonView trial involving a sample of 300 patients, in addition to which a screening trial is being implemented based on a population sample of 1,000 people. The comparative trial is completed and the scientific report on the study has been accepted for publication by the international cancer journal, Anticancer Research.

In May, new Acetium research results were introduced in the major international meeting for gastroenterologists (Digestive Disease Week) in Chicago. The Congress examined Acetium capsule results from the studies carried out in Japan and Sweden, which confirmed the earlier results of Acetium studies. The studies found that Acetium binds 60 to 80% of Group I carcinogen acetaldehyde, forming a harmless compound that is excreted from the body. The results are clinically highly significant, since carcinogenic DNA-changes caused by acetaldehyde increase exponentially in increasing acetaldehyde concentrations. Based on the results, manuscripts will be written for their publication in international scientific journals. The results of the Japanese study have been accepted for publication in the international journal PLOS One during 2015.

The conference also heard the results of an Italian study, which has found Acetium capsule to improve the condition of the gastric mucosa in patients diagnosed with anacidic stomach (atrophic gastritis) caused by a Helicobacter pylori infection or autoimmune disease. This study involved the next stage of an earlier trial, announced by Biohit in September 2013, with a larger number of patients and a longer treatment period. Based on these results, Biohit will launch a completely new controlled double-blind clinical study with a research team consisting of Italian and German scientists. The new study will assess the efficacy of Acetium capsules in recovering from atrophic gastritis in a sample of 120 biopsy-confirmed patients.

In October, the partners Biohit Oyj and its joint venture Biohit Biotech (Hefei) Co., Ltd agreed to begin a feasibility study in China regarding the Acetium capsule as a potential medication for arresting the progression of, or reversing, atrophic gastritis. The agreement includes an option to negotiate a licensing deal concerning the product, if the result of the feasibility study is positive. The feasibility study will be funded by the Chinese partner of the joint venture Biohit Biotech (Hefei) Co., Ltd in co-operation with Hefei Medicine.

INVESTMENTS

Gross investments during the 1-12/2014 reporting period totalled EUR 0.5 million (EUR 1.8 million), of which the fourth quarter accounted for EUR 0.2 million (EUR 0.6 million). The biggest individual investment during the financial year, EUR 0.4 million, was made in the development of automated production lines.

PERSONNEL

During the review period, the Biohit Group employed 50 (44 in 2013) people on average, 41 (34) of whom were employed by the parent company and 9 (10) by the subsidiaries. At the end of the year, the Group employed 51 (47) personnel, of whom 42 (38) were employed by the parent company and 9 (9) 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 political decision-making affecting the progress of screening programs. Significant short-term risks are associated with the successful selection of new market areas, the timing of expansion into selected markets, and product success in these markets. The recent increase in uncertainty factors associated with international politics may have an unfavorable impact on the company's business.

The duration of the product registration process is different in each market area. For this reason, it is not possible to accurately assess the time it takes the authorities to handle registrations in these areas and for product sales to begin.

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 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.
 

OUTLOOK FOR 2015

Together with its distributors and license partners, Biohit has several product registrations ongoing in a number of markets. A number of such registrations are expected to be completed in 2015. In addition, negotiations are in hand with new partners, including on the launch of major screening projects, but a number of political risks are affecting the progress of such projects.

Biohit's cost structure is characterized by high investment in research to obtain further evidence on the efficacy of Biohit's diagnostic tests in various clinical settings and in population-based screenings.  Various placebo-controlled double-blind studies assessing the efficacy of Biohit’s Acetium products in entirely new indications are expected to be completed in 2015. The project on the unification of the GastroPanel test, and production investments in Finland, are to be concluded during 2015. These new, strategically significant projects will require additional investments in 2015.

We aim to grow profitable and are strongly committed to taking necessary actions in order to build a profitable future for the company. Net sales growth is expected in 2015. The company does not assess when the result of its continuing operations will turn to positive.

BOARD’S PROPOSAL FOR DISTRIBUTIONS OF PROFIT

The parent company's distributable funds (unrestricted equity) on 31 December 2014 are 9,132,650.85 (EUR 18,925,151.92), of which the period net loss is 550,514.94 euros (a loss of 4,353,257.22 euros).The Board of Directors proposes to the Annual General Meeting that no dividend be paid for the financial year.

MAIN EVENTS IN THE FOURTH QUARTER

WHO prompts Helicobacter pylori screening to prevent gastric cancer

According to a recent report from the International Agency for Research on Cancer (IARC)( JAMA. 2014;312(12):1197-1198. doi:10.1001/jama.2014.10498), which is  the specialized cancer agency of the World Health Organization, evaluating the possibility of large population-based programs of Helicobacter pylori (HP)-screening and treatment should be a global priority to reduce the burden of gastric cancer. Gastric cancer is the third most common cancer worldwide, and 80% of the 1 million new cases annually are caused by a treatable infection, according to the report. However, despite these alarming figures, practically no country has a public health program to prevent gastric cancer.

The efficacy of Acetium capsule in treatment of atrophic gastritis is studied in China

Biohit Oyj and Biohit Biotech (Hefei) Co., Ltd partners have agreed to start a feasibility study in China regarding Acetium capsule as a potential medication to arrest the progression and even to restore atrophic gastritis. The agreement includes an option to negotiate a licensing deal concerning the product, in case the outcome of the feasibility study is positive. The feasibility study will be funded by the Chinese partners of joint venture Biohit Biotech (Hefei) Co., Ltd, in co-operation with Hefei Medicine.

Biohit re-launches ColonView – test for colorectal cancer screening

Biohit Oyj re-launches BIOHIT ColonView which is a diagnostic quick test for early detection, screening and diagnostics of colorectal cancer (colon cancer). BIOHIT ColonView test has been available for research purpose only, but from now on is available also for the clinical use. CE-marked ColonView test are available via Biohit distributors internationally from November 2014 on.

Biohit and Doctagon to co-operation

Biohit Oyj and Doctagon have agreed to co-operate thereby Doctagon will offer diagnostic tests by Biohit to its customers. Co-operation covers Biohit’s tests for diagnosis of digestinal diseases. Based on the test results, Doctagon medical services offer customers tailor-made follow-up services.

Biohit and Eurobio to sign a distributor agreement

Biohit Oyj and Eurobio have signed a distributor agreement regarding diagnostic tests of Biohit. The agreement is effective immediately, and Eurobio gains exclusive rights for the distribution of diagnostic tests in France, Morocco, Tunisia and Algeria. The agreement covers the following Biohit tests: GastroPanel, Helicobacter Pylori UFT300 Quick Test, BIOHIT Active B12 vitamin test, BIOHIT ColonView Quick Test, Lactose Intolerance Quick Test and Celiac Disease Quick Test.

MAJOR EVENTS AFTER THE CLOSE OF THE PERIOD

Biohit and Ympyrätalo Pharmacy to co-operation

Biohit Oyj and Ympyrätalo Pharmacy (Helsinki, Finland) have agreed to co-operate thereby Ympyrätalo Pharmacy will offer diagnostic tests by Biohit to its customers. Co-operation covers Biohit’s tests for diagnosis of digestinal diseases. Ympyrätalo Pharmacy provides nursing services and the tests as a part of its permanent base range.

Biohit Oyj and Akeso to sign an Acetium distribution agreement in Russia

Biohit Oyj signed a distribution agreement with Akeso Pharmaceuticals. The agreement is effective immediately and Akeso gains exclusive rights for the distribution of Acetium capsules in Russian Federation.

BIOHIT ColonView is the best screening test for colorectal cancer on the market

An international study comparing colorectal cancer screening tests has been completed and the scientific report has been recently accepted for publication in an international cancer journal - Anticancer Research.

ADMINISTRATION

Biohit's financial reporting and Annual General Meeting in 2015

Biohit will release its financial statement release for 2014 at 9:30 am on Thursday 26 February 2015. Biohit Oyj’s Annual General Meeting has been planned for 3.00 pm on Monday 20 April 2015 in Helsinki. The Board of Directors will call the General Meeting at a later date. The company will publish three interim reports in 2015, based on the following schedule: the interim report for the period January–March 2015 (Q1) will be published on Thursday 7 May, the interim report for the period January–June 2015 (Q2) will be published on Thursday 20 August and the interim report for the period January–September 2015 (Q3) will be published on Thursday 22 October.
 

Biohit Oyj's Management Team

The members of Biohit's Management Team are: CEO Semi Korpela, CFO Niklas Nordström, Director of Business Development Lea Paloheimo, Production & Research and Development Director Panu Hendolin, Sales and Marketing Director Anu Mickels, Quality Director Annika Astola and Chief Medical Director Kari Syrjänen.
 

SHARES AND SHAREHOLDERS

Biohit Oyj’s number of shares is 14,135,593, of which 2,975,500 (2,975,500) are Series A shares and 11,160,093 (10,835,093) are Series B shares. The Series B shares are quoted on NASDAQ Helsinki in the Small cap/Healthcare group under the code BIOBV.

Supposing that the market capitalization for series A and B shares is equal, the total market capitalization at the end of the period was EUR 66.2 million (EUR 104.4 million on 31 December 2013). Shares’ trade value during the period amounted to EUR 25.9 million.
 

Shareholders

At the end of the reporting period on 31 December 2014, the company had 6,841 shareholders (6,126 on 31 December 2013). Private households held 77.9% (77.6%), companies 20.1% (20.6 %) and public sector organizations 0.0% (0.0%). Foreign ownership or nominee registrations accounted for 1.8% (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 financial statement release has been prepared in accordance with the requirements of the IAS 34 Interim Financial Reporting standard. Biohit Oyj has applied the same accounting principles in preparing this financial statement release as for its financial statements 2014.

The IFRS standards that came into effect in 2014 did not have a material impact on the accounting principles with the exception of the introduction of standards IFRS 10 and 11. On 1 January 2014, Biohit Oyj introduced the standards IFRS10 Consolidated Financial Statements and IFRS11 Joint Arrangements. The introduction of the standards had an impact on the accounting of Biohit’s Chinese joint venture, Biohit Biotech (Hefei) Co. Ltd. Joint control specified by the new IFRS 10 standard was not fulfilled on the closing dates of 31 December 2013 and 31 December 2014 in the way referred to in the standard and the shareholders’ agreement, and therefore the investment is not presented in the balance sheet drawn up according to the new standards.

The management estimates that the joint control referred to in IFRS 10 and in the shareholders’ agreement was achieved during the first quarter of 2015. From there on, the joint venture will be consolidated in Biohit’s consolidated financial statements using the equity method.

No adjustment impact on the income statement or the cash flow statement.
 

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 the financial statement release 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 December 2014

Consolidated statement of changes in equity on 31 December 2013

CASH FLOW STATEMENT

RELATED PARTY TRANSACTIONS

During the fourth quarter, there were no notable changes in related party transactions.

Biohit Oyj B-shares subscribed with stock options I and II 2013 during the 1-12/2014 reporting period

A total of 100,000 new Biohit Oyj B-shares were subscribed for with stock options I 2013 during 2014, and at total of 225,000 new Biohit Oyj B-shares were subscribed for with stock options II 2013. These shares have been entered into the trade register and establish equal shareholder rights with the company's existing B-shares. New shares’ are subject to public trading on the NASDAQ Helsinki together with the existing B-shares.

The share subscription price for the stock options in question was either EUR 2.2766 or EUR 3.00 per share, depending on the timing of the subscription. The entire subscription price was EUR 227,660 for the I 2013 option scheme and EUR 533,937 for the II 2013 option scheme, totalling EUR 761,597. Of this, EUR 759,047 was entered in the invested non-restricted equity fund and EUR 2,550 in the share capital. Due to these share subscriptions, the company share capital rose in value to EUR 2,350,350.81 from EUR 2,347,800.81.

After the 2014 subscription (325,000 shares), the total number of Biohit Oyj's shares increased to 14,135,593 shares (13,810,593 shares 31.12.2013) and B-shares to 11,160,093 shares (10,835,093 shares 31.12.2013). The new shares will correspond to a percentage of 2.3% of Biohit Oyj's total number of shares and 0.5 % of the voting rights after registration.

The share subscription period for stock options I 2013 began on 1 June 2014 and will end on 31 May 2019. The share subscription period for stock options II 2013 began on 1 July 2013 and will end on 30 June 2015. These schemes are based on the Biohit Oyj board resolution of 19 June 2013 and the Annual General Meeting authorization of 13 April 2011. The terms and conditions of the option schemes and additional information are available on Biohit Oyj's website at www.biohithealthcare.com.

To exercise their stock options, holders must have paid the subscription price in accordance with the option scheme (EUR 3 or EUR 3 less the dividend depending on the timing). Holders exercising their stock options are liable to pay income tax on the stock option income.
 

COLLATERAL, CONTINGENT LIABILITIES AND OTHER COMMITMENTS  

NEXT FINANCIAL REPORT

The interim report for January–March 2015 (Q1) will be published at 9:30 am local time (EEST) on Thursday 7 May 2015.

Helsinki, 25 February 2015

Biohit Oyj
Board of Directors

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

Biohit in brief

Biohit Oyj is a globally operating Finnish biotechnology company. Biohit’s mission is “Innovating for Health” – we produce innovative products and services to promote research and early diagnosis. Biohit is headquartered in Helsinki, Finland, and has subsidiaries in Italy and the UK. Biohit's Series B share (BIOBV) is quoted on Nasdaq Helsinki in the Small cap/Healthcare group. www.biohithealthcare.com