Biohit Group Financial Statement Release 2019

Biohit Oyj Financial Statement Release 

SUMMARY

January-December 2019

• Net sales EUR 10.1 million (EUR 9.9 million)
• Net sales grew by 1.2% compared to 2018
• Operative EBITDA EUR +0.6 million (EUR -0.1 million)*
• Cash at the end of the period EUR 1.3 million (EUR 1.4 million)
• Net sales from international operations 96.0% (95.6%) of total net sales
• Equity ratio 83.9% (89.2%)**

* Biohit Group implemented the IFRS 16 Leases -standard effective from 1 January 2019. This impacted on Operative EBITDA +0.2 million euros in 2019 due to reason that comparative amounts has not been restated.

** The Group’s equity ratio without the impact of the implementation of the IFRS 16 -standard would have been 85.2%.

July-December 2019

• Net sales EUR 5.1 million (EUR 5.0 million)
• Net sales grew by 1.5% compared to H2/2018
• Operative EBITDA EUR +0.2 million (EUR -0.0 million)*
• Cash at the end of the period EUR 1.3 million (EUR 1.4 million)
• Net sales from international operations 96.4% (94.0%) of total net sales
• Equity ratio 83.9% (89.2%)**

* Biohit Group implemented the IFRS 16 Leases -standard effective from 1 January 2019. This impacted on Operative EBITDA +0.1 million euros in H2/2019 due to reason that comparative amounts has not been restated.

** The Group’s equity ratio without the impact of the implementation of the IFRS 16 -standard would have been 85.2%.

BIOHIT GROUP KEY FIGURES

* In 2017 we capitalized the patent regarding divestment of Biohit Healthcare (Hefei) Co. Ltd. which is depreciated EUR 1.5 million annually until end of 2021

PRESIDENT AND CEO SEMI KORPELA:

Our profitability improved

The year 2019 was exceptional for Biohit due to the completion of GastroPanel® product’s re-registration only at the end of the year in China. Regardless of a delay in the registration our Net Sales grew slightly and the profitability improved.

Our Net Sales grew 1 % compared to 2018. GastroPanel® Net Sales in China decreased due to the above mentioned delay in the re-registration. At the same time our Middle-East business, subsidiaries in Italy and the UK and Acetium® lozenge Net Sales for smoking intervention grew.

Operative EBITDA improved to EUR +0.6 million (EUR -0.1 million) due to increased raw material deliveries to China and reduced fixed costs. The 2019 Operative EBITDA was 6 % of Net Sales. Our cash at the end of the period amounted to EUR 1.3 million (EUR 1.4 million). Our cash position was negatively impacted by the delay in customer payments worth of EUR 0.8 million. Payments were received in January 2020.

We increased our distibution network

We continued our domestic sales and marketing efforts for the Acetium® Iozenge and as a result  our distribution network expanded significantly for example inside SOK.

We made several international distribution agreements for Acetium® Iozenge during the review period. PT Satya Abadi Pharma is our distributor in Indonesia. In Italy, Difar Distribuzione S.r.l. received the exclusive distribution rights to the product. We also signed an agreement with Precision Health Co., Ltd over the distribution of Acetium® Iozenge in Thailand. Towards the end of the year, we signed an agreement with Slim Pharmaceuticals ( Pvt ) Ltd concerning the distribution of both Acetium® capsules and lozenges in Sri Lanka.

During 2019, we also signed new agreements for the distribution of Biohit diagnostic test kits in Colombia with BioSystems & D-Diagnostica SAS and in Mexico with Uniparts SA DE CV.

GastroPanel® Quick Test and the results of the clinical studies

Significant confirmatory evidence to the existing data on GastroPanel® biomarkers as predictors of gastric cancer was provided by a recently published nationwide multi-center study from China which included 14,929 people. This important study provides additional confirmatory evidence to the two previous studies, where GastroPanel® biomarkers were shown to be significant independent predictors of incidental gastric cancer.

The usability of the GastroPanel® Quick Test was initially evaluated at the world's largest medical event, MEDICA 2019, where the test was well received by international health tech and medical experts for its fast turn-around time and its ease of use. Also, the results of an external multi-center clinical study have been completed in one hospital. Starting the clinical studies, getting ethical approvals for the study and collecting study subjects has taken more time than anticipated. GastroPanel® Quick Test development continues and the target is to CE-mark the product during the first half of the 2020.  

During the review period, we finished two clinical studies about the effectiveness of Acetium® capsules as an inhibitor for migraine-type headaches. Although the result of the study was not positive, the subgroup analysis revealed patients who clearly benefitted from the Acetium® Iozenge capsules. We are considering the possibility of a new clinical study regarding said subgroup.

China, Russia and Middle-East

In the beginning of the 2020 our business in China has normalized and we are able to deliver GastroPanel® products to China as previously. According to the latest estimate our GastroPanel® distributor’s new production facility will be available at the end of the year 2020. GastroPanel® deliveries to China will grow in 2020 if the logistics problems created by coronavirus (2019-nCoV) won’t continue.  

The Ministry of Health of the Russian Federation gave recommendation for early detection of gastrointestinal diseases by using GastroPanel® biomarkers. This was a significant step in developing our Russia business further. The recommendation increases Biohit probabilities to win tenders in Russia’s national “Healthcare” project. Biohit also has national recommendations in Italy and China for GastroPanel® product.

Our Middle-East business developed positively during the review period despite the increasing uncertainty regarding the region’s political situation.   

OUTLOOK FOR 2020

Biohit expects its 2020 Net Sales growing comparing 2019 (previous year EUR 10.1 million).

In the outlook we have not taken into account possible prolonging coronavirus epidemic and its negative impact on our business in China.

REPORTING

Biohit's product portfolio consists of diagnostic tests, analysis systems, products binding carcinogenic acetaldehyde into a harmless compound, monoclonal antibodies, as well as service laboratory operations. The entire product and service portfolio is reported under a single segment.

NET SALES AND RESULT

January-December

ALTERNATIVE PERFORMANCE MEASURES

 Bridge calculation of operative EBITDA

BALANCE SHEET

On the 31 December 2019, the balance sheet totalled EUR 17.4 million (EUR 17.9 million 31 Dec 2018). At the end of the reporting period, our equity ratio stood at 83.9% (89.2% 31 Dec 2018). The Group’s equity ratio without the impact of the implementation of the IFRS 16 -standard would have been 85.2%.

                                                                             
FINANCING AND OPERATIONAL CONTINUITY

Biohit Oyj has a stable financing position, which allows for the necessary actions towards strengthening an international distributor network as well as the development and commercialization of new products. On the 31 December 2019 company’s financial assets totalled EUR 5.6 million (EUR 5.5 million) which does not include Genetic Analysis AS shares.

Despite significant financial investments the company has managed to keep its working capital on a good level and the management believes that working capital will cover the operations for the next 12 months and the company is not dependent on external financing to be able to guarantee the continuity of its operations. Cash flow from operating activities was EUR +0.1 million during the review period. Company’s management assessment is that company’s ability to continue its operations is good and there are no indications towards events or circumstances that alone or together might give a significant reason to doubt the organisation’s ability to continue its operations. 

RESEARCH AND DEVELOPMENT

R&D operations focus on innovations, as well as product development and further improved usability. Biohit also employs external experts and subcontractors in its R&D operations. Development expenditure has not been capitalised. Research and development expenditure during the 1-12/2019 reporting period amounted to EUR 1.2 million (EUR 1.3 million), of which the second half-year accounted for EUR 0.6 million (EUR 0.7 million).

The development of the GastroPanel® Quick Test, intended as the first-line diagnostic test for dyspeptic patients, has been advanced and the results of an external multi-center clinical study have been completed in one hospital where plasma samples collected from patients were analysed and their results were compared to those of the ELISA-based GastroPanel® test. After promising results, the external clinical performance study has been continued by extending the specimen types studied to finger-prick blood specimens and examining the usability of the test platform under point-of-care settings. The usability of the GastroPanel® Quick Test was also initially evaluated at the world's largest medical event MEDICA where the test was well received by international health tech and medical experts for its fast turn-around time and its ease of use. Our target is to CE-mark the product during the first half of the 2020

The development of ColonView ELISA Test, automated screening test intended for detection of fecal occult blood (FOB) in stool samples, continues in 2020.

CLINICAL RESEARCH

The randomized, double-blind clinical trials in patients suffering from migraine and cluster headache was completed in respect of data analysis. Data analysis showed that the results were not positive. According to the results, Acetium® capsule was not statistically significantly more effective than placebo in preventing migraine-type headaches when data analysis included all enrolled patients. However, patients who clearly benefitted from Acetium® and whose monthly headache days were reduced by more than 50% was found, and even more patients were found with a reduction of up to 25 % of their monthly migraine days. Because migraine is a complexed neurological disorder with diverse symptoms, it is important next to identify and define this subgroup responding to Acetium®. In addition, the open label experience has provided some evidence that a better treatment response could be achieved if the dosage of Acetium is 2 capsules 3 times a day administered after a meal, instead of 1 capsule twice a day as was administered in these clinical trials.

Preliminary data analysis has been initiated with patient data obtained from a clinical study conducted at GastroCenter and Internal Medicine Department of Oulu University Hospital. The study focuses on patients suffering from type 1 diabetes mellitus (DM1) or autoimmune thyroid disease (AITD) and known to be at increased risk of developing autoimmune atrophic gastritis. Based on the results of approximately 240 DM1 / AITD patients already enrolled in the study, it is decided whether there is a need for further patient enrollments or whether conclusions can be drawn on the prevalence of atrophic gastritis in these risk groups.

INVESTMENTS

Gross investments during the the 1-12/2019 reporting period totalled EUR 0.0 million (EUR 0.0 million).

PERSONNEL

During the review period, the Biohit Group employed on average 46 (50) people, of whom 37 (42) were employed by the parent company and 9 (8) by the subsidiaries.

SHORT-TERM RISKS AND UNCERTAINTY FACTORS

Biohit’s key risks are related to the success of the selection and development of new market areas and distribution channels, product registrations and personnel recruitment. Significant short-term risks are associated with the success of product registration and successful selection of correct distribution channels. The recent increase in uncertainty factors associated with international politics may have an unfavourable impact on the company's business, examples include the Middle-East and Brexit. Spreading of coronavirus (2019-nCoV) might impact negatively on our business in China.

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 and for product sales to begin. The distributor is responsible for the registration process.

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. The investment portfolio is subject to interest rate risk, which is managed by adjusting the duration of the portfolio. The rise of one percentage point in interest rates would have a negative impact of EUR 0.1 million on the fair value of the investment portfolio.

The Group’s investment in Genetic Analysis AS unlisted shares is subject to changes in the terms of transactions involving the company’s shares that take place between third parties. A negative change of 30% in the valuation of Genetic Analysis AS shares, would have a negative pre-tax impact of EUR 1.2 million on the Group comprehensive income. Investment in Genetic Analysis AS is also subject to changes in euro/NOK foreign exchange rate. In addition Genetic Analysis AS is dependent on securing external financing in its operations. Genetic Analysis AS valuation changes have no effect on company’s cash flow.

Biohit’s customer base is widely diversified, with the exception of GastroPanel® sales in China, which currently represents a major single business for Biohit. For this reason, the company is dependent on the continuation of this business relationship in China. Otherwise, the company is not significantly dependent on individual customers or project deliveries. Most of the company’s business is conducted in euro, and the indirect effects of currency exchange rate fluctuations are considered insignificant.

BOARD’S PROPOSAL FOR DISTRIBUTIONS OF PROFIT

The parent company's distributable funds (unrestricted equity) on 31 December 2019 are
EUR 10,420,384.40 of which the period net loss is EUR 1,116,686.74. The Board of Directors proposes to the Annual General Meeting that no dividend be paid for the fiscal year.
 

MAIN EVENTS IN THE SECOND HALF OF THE YEAR (H2)
Biohit Oyj closes two clinical trials with Acetium® capsule for prevention of migraine-type headache

In 2014, Biohit Oyj initiated two clinical trials for prevention of migraine-type headache attacks, testing the efficacy of Acetium® capsule in this novel indication. Although the study results were not positive for the whole cohort, subgroup analyses disclosed migraine patients who benefit from Acetium® capsule.

TREATMENT RECOMMENDATION IN RUSSIA: GastroPanel®-biomarkers should be used for detection of gastrointestinal diseases

The Ministry of Health of the Russian Federation's recommendation for early detection of gastrointestinal diseases is published in the Journal of Gastroenterology, Hepatology, Coloproctology. This official recommendation, published by three members of the Russian Academy of Sciences representing the Russian Gastroenterology and Oncology Organizations, describes in detail the research and treatment practices that require early detection of gastrointestinal diseases throughout the Russian Federation 

The recommendation of the Russian Federation contains a clear statement. Accordingly, a panel of four biomarkers (pepsinogen I, pepsinogen II, gastrin-17 and Helicobacter pylori antibody test) should be used to assess the state of gastric mucosa before undergoing gastroscopy among the low-risk patients for gastric cancer.

The GastroPanel® innovation of Biohit Oyj is the only biomarker panel of this type on the market that can reliably detect Helicobacter pylori (HP) infection and atrophic gastritis due to HP or autoimmune disease.

MAJOR EVENTS AFTER THE CLOSE OF THE REVIEW PERIOD

The company's management is not aware of any material events since the balance sheet date.

ADMINISTRATION

Biohit's financial reporting and Annual General Meeting in 2020

Biohit Oyj’s Annual General Meeting has been planned to be held at 5.00 pm on Wednesday 22 April 2020 in Helsinki. The Board of Directors will call the General Meeting at a later date. In 2020 the company will publish the half-year financial report for period January - June 2020 (H1) at 9:30 am on Wednesday 12 August 2020.

Biohit Oyj's Management Team

The members of Biohit's Management Team are: CEO Semi Korpela, CFO Jukka Kainulainen, Production & Research and Development Director Minna Mäki, Sales and Marketing Director Ilari Patrakka and Quality and Regulatory Affairs Director Daniela Söderström.

SHARES AND SHAREHOLDERS

Biohit Oyj’s number of shares is 15,045,593 (14,952,041), of which 2,975,500 (2,975,500) are Series A shares and 12,070,093 (11,976,541) are Series B shares. The Series B shares are quoted on NASDAQ Helsinki in the Small cap/Healthcare group under the code BIOBV.

Shareholders

At the end of the reporting period on 31 December 2019, the company had 6,980 shareholders (6,847 on 31 December 2018). Private households held 63.5% (63.3%), companies 7.5% (7.5%) and public sector organisations 0.0% (0.0%). Foreign ownership or nominee registrations accounted for 29.1% (29.2%) of shares.

Further information on the shares, major shareholders and management shareholdings is available on the company's website.

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 2018 except 2019 implemented IFRS standard changes and interpretations. Additional information of IFRS 16 implementation has been presented in this financial statement release. Other changes in IFRS standards and interpretations has no material impact in this financial statement release. The figures in the financial statement release have not been audited.

Alternative performance measures and items affecting comparability:

Biohit Group presents certain alternative performance measures to reflect the underlying business performance and to enhance comparability between financial periods according European Securities and Markets Authority, ESMA’s guidance. Alternative performance measures should not be considered in isolation as a substitute for measures of performance in accordance with IFRS. Operative performance measures have been adjusted for certain non-operative items or non-cash valuation items that affect comparability between periods.

Certain items that are not related to the underlying business or non-cash valuation items that have material effect on the profit and loss for the period are adjusted as items affecting comparability. These items can arise for example from:

- Impairment of assets

- Sale or acquisition of asset or business

- Share based payment expences in accordance with IFRS 2

Additionally Biohit Oyj presents the following alternative performance measures:

IFRS16 Leases

Biohit implemented IFRS 16 for the first time for the reporting period beginning on 1 January 2019. It will result in almost all leases being recognised on the balance sheet by lessee as the distinction between operating and finance leases is removed.

The lessee recognises a right-of-use asset (the right to use the leased item) and a lease liability to pay rentals. The standard includes optional recognition exemptions for short-term leases (12 months or less) and leases for which the underlying asset is of low value. Biohit has decided to apply the optional exemptions and recognises these expenses as straight-line basis over the period of the lease. 

Due to adopting IFRS 16 -standard, the balance sheet on December 31 2019 increased by EUR 0.2 million. The most significant impact is that Biohit recognises new liabilities and right-of-use assets, relating to office premises and company cars from lease contracts previously classified as operating leases. Furthermore, the nature of expenses relating to such lease contracts changes when the rent expense is removed and depreciation of the right-of-use asset and interest expense (included in financial expenses) on the lease liability will be recognised. Biohit applies the simplified transition method and does not restate comparative amounts for the year prior to first adoption.

According to IFRS 16 -standard, the lessee’s lease period is the period during which the lease cannot be terminated. Also, a potential extension or termination option should be considered, if the use of such option is estimated to be reasonable certain. The lease term for ongoing contracts is based on estimate by Biohit’s management. Management regularly estimates the length of those leases.

The lessee should value the lease agreement by discounting the future lease payments to the present value at the inception of the contract. The internal interest rate implicit in the lease is not easily available which is why the future minimum lease payments are discounted using Biohit’s incremental borrowing rate. According to the standard, the incremental borrowing rate is defined as the interest that the lessee would have to pay when borrowing for a similar term and with similar security to obtain an asset of an equivalent value to the right-of-use asset in similar economic environment. Biohit has determined the incremental borrowing rate for leases based on the debt based financing offers received from the 3^rd party. Biohit has applied a single discount rate to a portfolio of leases with similar characteristics.

CONSOLIDATED INCOME STATEMENT

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

CONSOLIDATED BALANCE SHEET

STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

Statement of changes in consolidated shareholders' equity on 31 December 2019

Consolidated statement of changes in equity on 31 December 2018

CASH FLOW STATEMENT

RELATED PARTY TRANSACTIONS

Biohit Oyj sold EUR 3.6 million (EUR 3.0 million 8.6.2018-31.12.2018) worth of goods and services to Biohit Healthcare (Hefei) Co. Ltd during the review period. Biohit Healthcare (Hefei) Co. Ltd reached significant influence in Biohit Oyj in accordance with IAS 28 on 8 June 2018.

Biohit Oyj B-shares subscribed with stock options I 2013 during the 1-12/2019 reporting period

A total number of 93,552 new Biohit Oyj B-shares have been subscribed for with stock options I 2013 B during 2019. These shares have been entered into the trade register on 27 February 2019 and 12 June 2019, as of which date the new shares established equal shareholder rights with the company's existing B-shares.

The share subscription price was 2.2766 per share respectively. The entire subscription price of EUR 212,980.50 is credited to the reserve for invested non-restricted equity, and the company share capital remains unchanged. The shares have no nominal value.

After the subscriptions the number of all Biohit Oyj's shares increased to 15,045,593 shares and the number of B-shares to 12,070,093 shares.

The share subscription period with stock options I 2013 B began on 1 June 2015 and ended 31 May 2019. The terms and conditions of the option schemes with additional information are available on Biohit Oyj website at www.biohithealthcare.com.

In order to redeem the stock options, the stock option holder has paid the subscription price in accordance with the stock option plan. The option holder also pays the income tax on the option income.

COLLATERAL, CONTINGENT LIABILITIES AND OTHER COMMITMENTS

NEXT FINANCIAL REPORT AND 2020 FINANCIAL REPORTING

The half-year financial report for January - June 2020 (H1) will be published at 9:30 am local time (EET) on Wednesday 12 August 2020.

Helsinki 19 February 2020

Biohit Oyj
Board of Directors

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

Biohit Oyj in brief

Biohit is a globally operating Finnish biotechnology company. Biohit 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 Series B share (BIOBV) is quoted on Nasdaq Helsinki in the Small cap/Healthcare group. www.biohithealthcare.com