Interim report of the Biohit Group 1 April to 30 June 2012

Biohit Oyj    Interim report    16.8.2012    9:30 a.m.
 

SUMMARY   

January–June H1/2012

• Net sales EUR 0.9 million (EUR 1.0 million)
• Operating result EUR -2.3 million (EUR -1.8 million)
• Result before taxes EUR -2.0 million (EUR -0.1 million). International operations accounted for 90 per cent of net sales
• Earnings per share EUR -0.15 (EUR -0.01)

April–June 2012

• Net sales EUR 0.4 million (EUR 0.5 million)
• Operating result EUR -1.2 million (EUR -0.9 million)
• Result before taxes EUR -1.2 million (EUR -0.1 million). International operations accounted for 88 per cent of net sales
• Earnings per share EUR -0.09 (EUR -0.01)
   

SEMI KORPELA, PRESIDENT AND CEO

Change in distribution strategy continues - Turnover of the first six months decreased by 8.5% from 2011.

The Group's comparable net sales for January-June was EUR 0.9 m, in the previous year corresponding period was 1.0 m EUR.. The main reason for this was a change in the distribution channel strategy. Instead of subsidiaries, we are focusing on direct cooperation with distributors and partners. The reduction in sales corresponds the diagnostic sales of Biohit subsidiaries, those were sold to Sartorius. 

The increase of sales and marketing resources and investments in the change of distributor strategy resulted in an increase of fixed costs.

Also this year, the development of operations has been focused on the acquisition of new customers both in Finland and especially internationally through partners. We are establishing an international distributor network in which our primary goal is to create a strong, global network consisting of motivated professionals.

The claims period of the European patent of Biohit Oyj’s Acetium product has expired and no claims have been made. This means that Acetium has extensive patent coverage in Europe. This is expected to have a positive influence on negotiations with potential distributors.

In the second quarter of this year, we made an exclusive distributor agreement with the international Eurodiagnostica company located in Sweden on cooperation in sales and marketing in Sweden, Norway and Denmark. The company operates also in the Netherlands, Germany and Switzerland. Also the Swedish company Wieslab, which specialises in autoimmune products, added GastroPanel to its product range in Sweden and in the Netherlands.

The company has also signed additional distributor agreements during the period under review. 

GROUP'S KEY FIGURES

*) Includes a goodwill write-down of MEUR 2.6

**) Earnings per share for 2011 have been calculated from the result of both continuing and discontinued operations

REPORTING

Since the beginning of 2012, Biohit Oyj has reported income statement figures for the current and comparison periods in an operation-specific format.

General administrative expenses for the reporting and comparison periods have been allocated to continuing and discontinued operations on the basis of the number of personnel. In the 2012 reporting, general administrative expenses for the comparison period 2011 will be re-allocated fully to continuing operations. Administrative costs that were allocated according to personnel figures in 2011 have this year been transferred from the expenses of the liquid handling business to the expenses of the Healthcare business.

NET SALES AND RESULT

April–June

The net sales of the second quarter decreased by MEUR 0.1 from 2011 and amounted to MEUR 0.4 (0.5).

The operating loss was MEUR 1.2 (MEUR -0.9). International operations accounted for 88 per cent (85%) of net sales in April–June. Benefitting from the very high potential of HealthCare products and services and increasing turnover from it requires major investments in marketing and the strengthening of the organisation. Front-loaded costs, coupled with the delay in net sales growth caused by the company's new focus, have had an unfavourable impact on the second-quarter result. 

 

Net sales and result of the Group

BALANCE SHEET

On 30 June 2012, the balance sheet total was EUR 42.3 million (EUR 31.7 million) and the equity ratio was 88.1 per cent (40.7%).

CASH AND SHORT TERM INVESTMENTS

The company's cash and short-term investments are a total of EUR 33.0 million. (EUR 1.6 million).

FINANCING

The company’s solvency is good. This is mainly due to the divestment of the liquid handling business to Sartorius at the end of 2011. Investing the company’s liquid assets is aimed at achieving profit at a very low risk of capital loss. The investment portfolio consists of deposits, investments in the financial market and company loans. Sufficient spreading of investments between different asset classes, financial instruments and counterparties is considered essential. The company uses at least two partners in its investment operations.

RESEARCH AND DEVELOPMENT

R&D operations have focused on improvements and further developments to existing innovations and products. The company also employs external experts and subcontractors in its R&D operations. No development costs were activated for the HealthCare business. 

Gross investments in R&D during the reporting period totalled EUR 0.2 million (EUR 0.1 million in 1–6/2011).
 

INVESTMENTS

Gross investments during the reporting period totalled EUR 0.0 million (EUR 3.3 million).

PERSONNEL

During the reporting period, the average number of personnel in the HealthCare business employed by the Group was 36 (36 in the corresponding period in 2011), of whom 29 (22) were employed by the parent company and 7 (14) by the subsidiaries. At the end of the reporting period, the Group had 36 employees, of whom 29 were employed by the parent company and 7 by its subsidiaries. During the transitional phase, 5 people worked for the company's former subsidiaries.

 SHORT-TERM RISKS AND UNCERTAINTY FACTORS

The company's key risks relate to the investments required to grow its HealthCare business. Risks are involved in the selection and development of distribution channels, in recruitment and in product margin structures. Significant short-term risks are associated with the selection of new market areas, the timing of expansion into the selected markets and product success in these markets.

Business development and new product launches require additional investments in sales and marketing as well as R&D.

Customers in the HealthCare business will spread across a large area. As a result, the company will not have significant dependencies on individual customers or project deliveries. 

Utilising the very high potential of HealthCare products requires major investments in the sales and marketing of products.

OUTLOOK FOR 2012

The company is strongly focusing on finding foreign partners. This is expected to result in new distributor agreements during the remainder of the year. The improvement of net sales in 2012 will depend on how quickly the new distributor agreements will result in orders.

The claims period of the European patent of Biohit Oyj’s Acetium product has expired and no claims have been made. This means that Acetium has extensive patent coverage in Europe. This is expected to have a positive influence on negotiations with potential distributors.

The net sales of the Group do not reach quite the same level as in the previous year. The company expects to achieve a positive result at the end of 2013 or the beginning of 2014. (In the interim report published on 26 April 2012, the outlook was stated as follows: Net sales from continuing operations in 2012 are expected to improve from 2011. According to the company´s estimate, it will achieve a positive result during 2013.)

MAIN EVENTS IN THE REPORTING PERIOD

International research groups recommend blood sample biomarker tests for the diagnosis and screening of gastric diseases 
 

In an article published in a prestigious magazine, the Healthy Stomach Initiative group’s 16 leading gastroenterology experts from twelve different countries suggest using the GastroPanel biomarkers for diagnosing and screening for H. Pylori infections or atrophic gastritis caused by an autoimmune disease in patients suffering from stomach discomfort. The GastroPanel test provides a lot of information and helps in, for example, screening and referring patients suffering from abdominal problems and gastric cancer patients with or without symptoms and other risk patients to gastroscopy and treatment (www.biohit.fi/ ”GastroPanel biomarkers”: Rationale in diagnosis and screening of atrophic gastritis with stomach-specific plasma biomarkers”).

The April 2012 Maastricht IV consensus report of the international Helicobacter Pylori Study Group recommends blood sample biomarker tests as a reliable method of acquiring information on diseases of the stomach mucosa and the associated risk conditions. Researchers recommend biomarker tests for the diagnosis of Helicobacter pylori infection and especially an anacidic stomach caused by atrophic gastritis in patients suffering from stomach problems and for the screening of asymptomatic patients. 

The state-of-the-art, highly informative, safe and cost-effective GastroPanel examination for diagnosing dyspepsia and Helicobacter pylori infection does not involve any of the serious medical and ethical problems described below: 

•The 13C urea breath test (UBT), stool antigen test and antibody tests alone do not detect atrophic gastritis of the corpus caused by H. pylori infection or autoimmune disease, or atrophic gastritis of the antrum caused by H. pylori infection. Atrophic gastritis is nearly always asymptomatic,often permanent, and carries associated risks, including gastric cancer.

• Atrophic gastritis of the corpus (anacidic stomach) may cause gastric and oesophageal cancer and malabsorption of vitamin B12, iron, magnesium, calcium and certain drugs.

• Calcium deficiency causes osteoporosis. Vitamin B12 deficiency can cause pernicious anaemia, dementia, depression and damage to the peripheral nervous system as well as high homocysteine content in the body, which in turn is thought to be an independent risk factor for atherosclerosis, heart attacks and strokes.

• The absorption of dipyridamole, some iron products and antifungals (fluconazole, itraconazole), thyroxine and atazanavir is considerably impaired in an anacidic stomach. The risk of pneumonias and, in senior citizens, even the risk of fatal intestinal infections (such as giardiasis, malaria, Clostridium difficile and E. coli EHEC) may increase significantly in an anacidic stomach.

• Atrophic gastritis in the gastric antrum increases the risk of peptic ulcer disease and gastric cancer. If both the antrum and corpus mucosa are atrophic, this condition is the highest risk for gastric cancer known to date. In some cases, gastric cancer is directly caused by H. pylori and gastritis. Less than 1% of the population has hereditary gastric cancer.

• Furthermore, none of the aforementioned three H. pylori tests provides any information on excessive gastric acid secretion, which in patients with gastro-oesophageal reflux disease may cause complications of this disease. Such complications are often asymptomatic and include ulcerative oesophagitis and Barrett’s oesophagus, which may lead to oesophageal cancer if left untreated.

• In addition, the 13C urea breath test and stool antigen test may give up to 40% false negative results if the patient has atrophic gastritis, MALT lymphoma or bleeding peptic ulcer disease or if the patient is currently receiving antibiotics or PPI treatment.

Biohit signed a distribution agreement with the international Euro Diagnostica

The Sweden-based Euro Diagnostica became the sole distributor of Biohit’s biomarker test, GastroPanel, in Sweden, Denmark and Norway. The company also operates as the distributor of GastroPanel in Germany, the Netherlands and Switzerland. Also the Swedish company Wieslab, which focuses on autoimmune products, added GastroPanel to its product range in Sweden and in the Netherlands.

Clinical trial

BioAcetium

Biohit Oyj has begun a clinical study in cooperation with the gastroenterology clinic of HUS (Hospital District of Helsinki and Uusimaa) and GastroLääkärit. The trial seeks to determine the capacity of the new BioAcetium property to eradicate Helicobacter in individuals over 55 years of age who have not been diagnosed with a prior Helicobacter infection.

The BioAcetium innovation could provide an entirely new possibility for Helicobacter eradication treatment that is significantly safer and more cost-effective than the previous treatment models for Helicobacter infection and has either a non-existent or minimal risk of leading to the development of antibiotic-resistant strains of the bacteria.

Over half of the world’s population continues to suffer from Helicobacter infection. Those who suffer from a Helicobacter infection have a 10–12% chance of developing a gastric and duodenal ulcer and a 1–2% risk of developing gastric cancer over the course of their lives. Gastric cancer is still the second most common cause of cancer-related death worldwide. According to modern treatment recommendations, measures should be taken to eliminate the bacteria in at least all individuals who suffer from gastric ailments. However, the bacteria’s ability to develop antibiotic-resistant strains is a quickly growing worldwide problem.

Suitable participants for the clinical trial are being sought using the blood sample-based GastroPanel examination. In addition to providing information about potential Helicobacter pylori infection, Biohit Oyj’s GastroPanel examination also identifies atrophic gastritis (anacidic or low-acid stomach) that is caused by Helicobacter pylori infection or an autoimmune disease. Atrophic gastritis is the most important risk factor for gastric cancer. This information will be given to everyone who takes a GastroPanel examination. Those who are suitable for the actual Helicobacter pylori eradication trial will be sent a separate, more detailed letter outlining the new treatment model and the associated volunteer clinical trial.

Acetium lozenge and BioFilter

In the beginning of the year, the company started the completion and preparation of Acetium lozenges and BioFilters for research use.

Our research project starting in autumn 2012 will study whether the Acetium lozenge tablet binding and neutralising acetaldehyde dissolved into saliva from cigarette smoke help smokers to give up smoking.

Similarly, it is expected that BioFilter effectively binds acetaldehyde from cigarette smoke, thereby preventing it from entering the smoker’s saliva and respiratory tract. It is known based on numerous animal tests that the cancer-causing acetaldehyde also causes strong addiction. Discontinued business

Biohit Oyj sold its liquid handling business to Sartorius Lab Holding GmbH on 14 December 2011.

Administration

Authorisations of the Board of Directors

Based on a resolution of the AGM held on 13 April 2011, the Board of the company is authorised to decide on the issue of shares and to issue the special rights referred to in Chapter 10. Section 1 of the Limited Liability Companies Act so that the maximum number of new Series B shares to be issued pursuant to the special rights is 2,000,000, which corresponds to approximately 20% of the company's Series B shares. In August, based on the authorisation, the Board of Directors decided to arrange a directed share issue to Sartorius Lab Holding GmbH. The remaining authorisation is for 1.322.034 Series B shares.

According to the resolution, the Board of Directors is entitled to decide on all terms and conditions regarding the issue of shares and the issue of special rights. The issue of shares and the issue of special rights entitling to the receipt of shares can occur in deviation from the subscription right of shareholders (special issue). Such an authorisation remains valid for three years from the resolution of the AGM.

Changes to Biohit Oyj’s management

Jussi Kolunen (born 1969), M.Sc. (Econ.), has been appointed CFO at Biohit Oyj as of 28 May 2012. He has previously been responsible for Bridgestone Finland Oy's financial administration (2005–present), and held the position of Business Controller at Xerox Oy (2003–2005) and Fujitsu Invia (1999–2003).

Anu Mickels, MBA (b. 1972) has been appointed Biohit Oyj’s Sales and Marketing Director as from 2 May 2012. She takes over from Terhi Lampén. Mickels previously worked as Marketing Manager for Orion Diagnostiikka Oy from 2008, and prior to that she held sales and communications management positions in Oy Dagmar Ab, from 1999 to 2008. 

Panu Hendolin, PhD (molecular medicine), born in 1971, was appointed Head of Research and Development at Biohit Oyj as of 17 April 2012. Hendolin worked at Biohit as Research Manager and Head of Research and Development from 2007 to 2008. Previously, Hendolin worked as a Postdoctoral Researcher at the A. I. Virtanen Institute for Molecular Sciences at the University of Eastern Finland, in several product development and managerial positions at Jurilab Oy Ltd and for the last three and a half years as the Technical Manager responsible for product development at Danaher Corporation’s Innotrac Diagnostics. 

Lea Paloheimo, PhD (clinical biochemistry), born in 1951, was appointed Head of Development at Biohit Oyj as of 17 April 2012. Paloheimo has worked at Biohit since 2001. Before her career at Biohit, Paloheimo worked as a Chemist at Huslab, Sales Manager at Dasico A/S in Denmark, Researcher at Orion Diagnostica (Orion Corporation) and as a Chemist at the Clinical Chemistry department of United Laboratories Ltd. She carried out her PhD and postdoctoral research at the University of Copenhagen.

Biohit's Management Team now includes the following members and functions:

Semi Korpela, CEO
Jussi Kolunen, Finance, HR and Communication
Anu Mickels, Sales and Marketing
Panu Hendolin, Research and Product Development
Tapani Tiusanen, Operations and ICT
Lea Paloheimo, Development and Quality

SHARE TURNOVER AND PRICE DEVELOPMENT

Biohit Oyj's shares are divided into series A and series B shares. There are 2,975,500 series A shares and 10,640,093 series B shares, totalling 13,615,593 shares. Series A shares confer 20 votes per share and Series B shares 1 vote per share. The dividend paid for Series B shares is, however, two (2) per cent of the nominal value higher than that paid for Series A shares. The total market capitalisation value (supposing that the market capitalisation value for series A and B shares is equal) at the end of the period was EUR 28,7 million. (EUR 31,1 million 30.6.2011).

Biohit Oyj's series B shares are quoted on NASDAQ OMX Helsinki in the Small cap/Healthcare group under the code BIOBV.

Shareholders

At the end of the reporting period on 30.6.2012 the company had 4,468 shareholders (4,545 omistajaa 30.06.2011). Private households held  70,84 % (71,92 %), companies 21,61 % (24,46 %) and public sector organisations 2,53 % (2,65 %) of the shares. Foreign ownership or nominee registrations accounted for 5,02 % (0,76 %) of shares.

Further information on the shares, major shareholders, and management’s shareholdings is available on the company’s website at www.biohit.fi/investors.

ACCOUNTING PRINCIPLES

This interim report was prepared in accordance with the IAS 34 standard.

Following the divestment made in 14 December 2011 the diagnostics business is presented as continuing operations and the liquid handling business as discontinued operations. Separate segment-based reporting will no longer be provided. In other respects Biohit Oyj has applied the same accounting principles in preparing this financial statement bulletin as for its 2010 financial statements. The IFRS standards that came into effect in 2012 did not affect the accounting principles.

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 this interim report have not been audited.

 CONSOLIDATED INCOME STATEMENT

 *)  Includes a capital gain of EUR 46.1 million

**)The portion of the repaid convertible bond entered into the fund for the investment of non restricted equity had a EUR 0.2 million effect on the financing costs

*) Convertible bond is not dilutive in respect of earnings per share in the financial years 2012 and 2011

CONSOLIDATED BALANCE SHEET

 

*) Includes EUR 6.8 million in receivables from a business transaction; these funds are placed in a blocked account. Funds will released from the blocked account 31 March 2014, provided no claims concerning the transaction are made.

STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

Statement of changes in consolidated shareholders’ equity on 30th June 2012

Statement of changes in consolidated shareholders’ equity on 30th June 2011

 CASH FLOW STATEMENT

RELATED PARTY TRANSACTIONS

There have been no noticeable changes in related party transactions during the reporting period.

PLEDGES, CONTINGENT LIABILITIES AND OTHER LIABILITIES

 Helsinki 16^th of  August  2012

Biohit Oyj

Board of Directors

Further information:

Semi Korpela

Toimitusjohtaja

Puh. (09) 773 861

semi.korpela@biohit.fi

Distribution:

NASDAQ OMX Helsinki Oyj

Central storage facility (www.oam.fi)

Principal media

http://www.biohit.fi

About Biohit Oyj:

Biohit Oyj is a globally operating Finnish biotechnology company established in 1988. Biohit's mission crystallizes in its motto “Innovating for Health”. The company assumes social responsibility by producing innovations, new technologies and analysis systems for use in medicine, research institutions and industry. These products help to promote research and diagnostics, while improving quality of life by preventing disease, human suffering and financial loss. Biohit also seeks to innovate and develop the marketing and availability of its products and services.

Biohit works with scientific communities to produce new technologies, products and services based on research results and innovations. These can be used to develop safe and cost-effective diagnostic tests for the early detection and prevention of diseases of the gastrointestinal tract. (www.biohit.fi / International / State of the art GastroPanel and Acetium innovations for the unmet need).

In January 2012, sixteen world-leading gastroenterology specialists from twelve countries proposed in their SJG publication the use of the biomarkers of the modern GastroPanel test for safe and cost-efficient primary diagnosis and screening of Helicobacter infection and atrophic gastritis in patients with stomach discomfort and in asymptomatic patients, as it is neither safe nor cost-efficient to use the 13C urea breath test for this purpose. In addition, the authors of the publication state that acetaldehyde generated in an achlorhydric stomach (a consequence of atrophic gastritis) is a significant reason for an increased gastric and oesophageal cancer risk.  Acetium capsules can reduce the amount of cancer-causing acetaldehyde generated in the stomach – and thus, very likely, they also reduce the cancer risk (SJG: “GastroPanel biomarkers: Rationale in diagnosis and screening of atrophic gastritis with stomach-specific plasma biomarkers”, Scadinavian Journal of Gastroenterology. 2012; 47: 136–147).

Biohit's products include analysis systems for the prevention and early diagnosis of gastrointestinal diseases, such as the blood-sample based GastroPanel examinations for the diagnosis of stomach illnesses and associated risks, quick tests for the diagnosis of lactose intolerance and H. pylori infection in connection with gastroscopy, and the ColonView examination for the early detection of intestinal bleeding that indicates a risk of colorectal cancer. Acetium reduces the amount of carcinogenic acetaldehyde in an anacidic stomach. (www.acetium.com/test - reveals acetaldehyde exposure)

The population is aging and, therefore, the need for safe and cost-efficient diagnosis and prevention of diseases is strongly increasing. People are becoming more aware of acetaldehyde and the cancer risks associated with it. This is expected to substantially increase the interest in the company's products and services.

Biohit is headquartered in Helsinki and has a subsidiary in the United Kingdom. Since 1999, Biohit’s Series B share (BIOBV) has been quoted on NASDAQ OMX Helsinki in the Small cap/Healthcare group (www.biohit.fi/Sijoittajat).

Read more at www.biohit.fi