INTERIM REPORT OF THE BIOHIT GROUP 1 JAN ? 30 SEPTEMBER 2005
BIOHIT OYJ STOCK EXCHANGE RELEASE 4 NOV 2005 10:00 AM
INTERIM REPORT OF THE BIOHIT GROUP 1 JAN 30 SEPTEMBER 2005
The Biohit Group had total net sales of EUR 20.3 million during
the reporting period (EUR 19.6 million in 1Q-3Q/2004). The
operating loss for the reporting period came to EUR 0.3 million
(operating profit EUR 0.4 million). The loss for the reporting
period was EUR 0.5 million (EUR 0.0 million). The Groups result
was weakened by the investements in the diagnostics business and
also tightened price competition for liquid handling products as
well as the increase in fixed expenses. The decline in sales of
the beginning of the year is still being reflected in the net
sales; development for the entire reporting period has thus been
affected in an unfavourable manner.
The interim financial report has been prepared in accordance with
the International Financial Reporting Standards (IFRS). The Biohit
Group has adopted IFRS reporting since 1 January 2005. Further
information on the impact of the transition to IFRS can be found
in the stock exchange release published on 14 March 2005. The
comparative figures presented in this report are in accordance
with the IFRS figures of 2004 published in the above-mentioned
release. The accounting principles are the same as in the above-
mentioned release.
Net sales
The Biohit Group net sales increased 4% compared with the
corresponding period in 2004 and totalled EUR 20.3 million (EUR
19.6 million).
The Groups net sales during the reporting period were generated
primarily from the sale of liquid dispensers and disposable
pipettor tips and from maintenance services for liquid dispensers.
The liquid handling business net sales were EUR 19.3 million (EUR
18.8 million), the net sales for the diagnostics business being
EUR 1.0 million (EUR 0.8 million). The growth in sales of
diagnostics products was slowed down due to a delay in the
acquisition of authority approvals and to a prolongation in
negotiations with importers in the diagnostics business.
Result
The operating loss was EUR 0.3 million (operating profit EUR 0.4
million). The loss for the reporting period was EUR 0.5 million
(EUR 0.0 million).
The operating profit of the liquid handling business was EUR 1.6
million (EUR 1.8 million), the operating loss of the diagnostics
business being EUR 1.9 million (EUR 1.4 million). The decreased
profitability is due to the sales development for liquid handling
products being weaker than expected, as well as to an increase in
fixed expenses. The weakened profitability of the diagnostics
business is due to marketing investments.
Balance sheet
The balance sheet total was EUR 23.7 million (EUR 22.6 million)
and the equity ratio was 58.5% (63.3%) on 30 September 2005. In
accordance with a decision made at the Annual General Meeting on
21 April 2005, the share premium fund has been used to cover the
parent companys EUR 0.3 million losses for 2004.
Liquidity
During the reporting period, the operating activities had a net
cash flow of EUR 0.6 million (EUR 1.9 million). At the end of the
reporting period, the liquid assets of the Group totalled EUR 1.0
million (EUR 1.6 million).
Investments
Gross investments in the reporting period totalled EUR 1.4 million
(EUR 1.2 million). The investments consisted mainly of machinery
and equipment acquired for the automation of liquid handling
product manufacture at the Kajaani and Helsinki plants and also
included the acquisition of injection moulding tools used in the
manufacture of liquid handling products.
Convertible bond
The Extraordinary General Meeting of Biohit Oyj that was held
after the end of the reporting period (on 27 October 2005)
resolved, in accordance with the proposal by the Board of
Directors, to issue a convertible bond. The objective of the
transaction is to strengthen the companys growth potential and
broaden its investor basis. The bond was offered to a limited
group of professional domestic investors, and 4,050,000 euros
worth of subscriptions were entered during the time the offer was
open.
The annual fixed interest to be paid on the convertible bond is
6.5 per cent. The convertible bond will have a five year maturity.
Each EUR 4,500 note unit can be converted into 1,000 Biohit Oyj B-
shares with a nominal value of EUR 0.17. The conversion rate is
EUR 4.50. The bond can be converted to a total of maximum 900,000
Biohit Oyj B-shares. As a result of the conversion the share
capital of the company may be increased by a maximum of EUR
153,000 and the number of B-shares by a maximum of 900,000 new
shares. The share of stock converted on the basis of the
convertible bond is a maximum of 6.5 per cent of company shares,
and 1.0 per cent of the votes granted with this stock after a
possible increase in share capital.
The company is entitled to repay the entire share capital of the
bond providing that the mean rate weighted with the Biohit B-share
(share) conversion in the Helsinki Stock Exchange has been at
least 10 euros immediately before the decision date regarding the
repayment on 20 exchange days of 30 consecutive exchange days.
Personnel
The average number of personnel in the reporting period was 297
(294), with 164 (168) persons being employed by the parent company
and 133 (126) by the subsidiaries.
Personnel negotiations
As part of the measures to improve operational efficiency, and in
order to streamline personnel-related costs, the company started
personnel negotiations in the end of June 2005 (Biohits stock
exchange release, published on 23 June 2005). The negotiations
lasted until the end of August. Under the terms of the
co-operation negotiations, cuts in personnel expenses are to be
implemented near the end of the year in the form of short-term
layoffs, of less than one month in duration, and shortened work
hours. The measures undertaken affects only the personnel in
Helsinki, and they will be implemented gradually.
Main events of the reporting period and focus points in the near
future
Liquid handling business area
Biohits liquid handling business includes mechanical (the mLINE
and Proline product ranges) and electronic (the eLINE, Proline,
ePET, rLINE, Midi, and XL product ranges) liquid dispensers as
well as disposable tips. In addition, the company offers services
related to the maintenance and calibration of liquid handling
products as well as training services on these products. The
companys liquid handling products are combined with diagnostic
products (such as GastroPanel), instruments and related software
(such as GastroSoft), forming comprehensive analysing systems for
research and clinical diagnostics.
During the reporting period, Biohit increased its co-operation
with Jencons (Scientific) Ltd. regarding the global sales and
marketing of private-label (PL) products. In addition to Proline
pipettors, Jencons now also sells mechanical mLINE pipettors,
manufactured by Biohit, under its own product name, globally.
Biohit, in turn, has complemented its product range with
maxi-volume liquid handling products manufactured by Jencons.
During the reporting period, Biohit began supplying multichannel
electronic pipettors based on the eLINE electronic pipettor model
as well as pipettor tips for the international group bioMérieux.
bioMérieux will integrate these products in its globally marketed
DNA analyzer. In addition to these, bioMérieux uses several other
OEM (Original Equipment Manufacture) and private label products
manufactured by Biohit in connection with its systems, e.g. a
single-channel electronic OEM pipettor produced by Biohit with an
analysing system, as well as mechanical private label pipettors
produced by Biohit with diagnostic test applications. Biohit is
still also working in close cooperation with other OEM customers,
such as 3M and Ortho Clinical Diagnostics as well as two other
subsidiaries of Johnson&Johnson.
In addition to new OEM products, Biohit launched certified DNase,
RNase and endotoxin free pipettor tips during the reporting
period. These free tips are especially important in medical and
bioscientific research.
In order to better meet the liquid handling product demand and to
ensure delivery quality, Biohit started to rationalise production
and storage activities for pipettors and disposable tips during
the reporting period. Part of the pipettor production will be
transferred from Kajaani to Helsinki, and the disposable tip
production and storage capacity will be increased in Kajaani. New
production lines will be introduced during 2005.
Focus points of the liquid handling business in the near future
The growth of the total liquid handling product market has abated
in many western countries. Tightening price competition is
characteristic of the liquid handling business. Due to this,
Biohit will focus on the following business areas, among others:
increasingly cost-efficient manufacture; strengthening of its
operations in Asia, particularly in China; development of new OEM
technologies and products; and development of maintenance
services.
For the cost-efficient manufacturing of liquid handling products,
Biohit is establishing a production facility in China in 2006. The
intensified business activities in China involve assembly
capabilities and sourcing of materials and services on a local
level for liquid handling products. The main objective is to
configure the products to the Asian market, China in particular,
in a more efficient manner. Production in Finland will continue.
The collaboration between the operations in China and Finland also
allows for more cost-efficient production on a Group level.
The OEM business, in which Biohit is the global market leader, is
in good progress. The most significant change in customer demand
is the greater integration between pipettors and analysis systems.
Biohit has developed two new technology platforms to meet these
needs. The company has already started to deliver products based
on the new technologies to a Canadian instrument supplier, and
several other customer projects are ongoing.
Pipettor calibration and maintenance services are the fastest
growing sector of the liquid handling business. In some
subsidiaries, this important business area already accounts for
more than a quarter of the total net sales. Biohit has started to
develop and homogenise its global maintenance service concept
which aims to achieve a holistic control of the pipettor life
cycle and to increase customer satisfaction. The after-sales
marketing including maintenance services also help increase
pipettor sales. The concept will first be introduced in the
subsidiaries and gradually extended to cover all main business
areas.
Diagnostics
In the diagnostics business, Biohit focuses on the research,
development, production, and marketing of products for the
screening, prevention, and diagnosis of diseases of the
gastrointestinal tract. The companys diagnostic products include
the GastroPanel examination performed on a blood sample
(biomarkers: Pepsinogen-I, Pepsinogen-II, Gastrin-17, and
Helicobacter pylori antibodies), for the diagnosis of upper
abdominal complaints (dyspepsia), H. pylori infection, atrophic
gastritis and associated risks (gastric cancer, vitamin B12
deficiency and peptic ulcer disease). In addition, GastroPanel
reveals the risk of gastroesophageal reflux disease. The company
also provides biopsy specimen quick tests for the diagnosis of
lactose intolerance and H. pylori infection. The companys
diagnostic tests are combined with pipettors, instruments based on
vertical photometry technology, and related software (such as
GastroSoft) to provide comprehensive analysing systems for
research and clinical diagnostics.
The connection between Helicobacter pylori infection and peptic
ulcer disease has only recently got widely known. The 2005 Nobel
Prize for Medicine was awarded (on 3 October 2005) to researchers
who proved more than 20 years ago that severe gastric diseases
such as gastritis and peptic ulcer disease are caused by the
bacterium Helicobacter pylori. The recognition is expected to
increase the interest for Helicobacter pylori tests and thus
favourably affect the demand for Biohits GastroPanel and
Helicobacter pylori quick tests.
During the reporting period, Biohit and Luminex Corporation, a US-
based company on the global markets, have signed an agreement to
combine their knowledge for the development and commercialisation
of a diagnostic test system in a new market segment. (Biohits
stock exchange release, published on 27 September 2005) Under the
terms of the agreement, Biohit will supply diagnostic test kits to
users of the Luminex 100 System. In addition, Biohit has the
opportunity to market, world-wide, the complete analysis system,
comprising the Luminex 100 analyzer or Biohits vertical
photometry analyzer in association with pipettors, diagnostics
test kits and software (e.g., GastroSoft).
In July China´s State Food and Drug Administration (SFDA) granted
Biohit a marketing authorization for the Pepsinogen I, Pepsinogen
II and Gastrin-17 tests included in the GastroPanel examination
(Biohits stock exchange release, published on 29 July 2005).
Furthermore, the company has signed a contract with Da An Gene
Co., Ltd., owned by the Sun Yat-sen (Zhongshan) University
(www.daangene.com), for the marketing and sales of GastroPanel in
China. Da An Gene is the second largest organisation for the
development and sales of diagnostics products in China.
Biohits diagnostics comply with EU standards and regulations,
allowing EU-wide marketing and distribution of all its diagnostics
products. The lactose intolerance and H. pylori quick tests
patented by Biohit were cleared for marketing and distribution in
the Russian market in the beginning of this year. In addition to
the recently granted marketing authorization for China,
GastroPanel has also been cleared for marketing in India, Canada
and Russia. The GastroPanel tests for Gastrin-17 and Helicobacter
pylori antibodies have already been cleared for marketing by the
US Food and Drug Administration (FDA). The tests for Pepsinogen I
and II are still being evaluated by FDA and additional research
required by FDA is being made. In Japan and South Korea, clinical
research is currently being made.
A total of 28 evaluations (with approximately 19,500 patients) and
clinical research utilising GastroPanel have been conducted in
Europe, North and South America, and Asia, and another 33 studies
comprising 32,000 patients are still ongoing. In the ongoing
research, the majority of the patients belong to a few extensive
population studies of the sort that take several years to be
completed (for results, see articles: www.biohit.com / Diagnostics
/ Literature).
During the reporting period, business activities relating to the
Biohit service laboratory have seen an increase in Finland. The
service laboratory offers analysis services for GastroPanel and
other Biohit diagnostic tests. These services are used by other
laboratories and doctors, and also for instances doing larger
studies.
In the United Kingdom, GastroPanel analyses are offered by, for
example, the world's largest service laboratory Quest Diagnostics,
which approved the GastroPanel and included it in its programme
during the reporting period.
Focus points of the diagnostics business for the near future
As the evaluations and authority approvals are mainly completed,
the most significant investments relating to Biohit's diagnostic
products in the near future are focused on development of the
sales and marketing organisation and the distribution and
co-operation network. In addition to this, the company will invest
in product development in its diagnostics branch.
Biohit is currently preparing to begin local sourcing of materials
and services for its diagnostic products in China in 2006. These
preparations are speeded up by the fact that the Chinese
authorities recently approved Biohits GastroPanel tests, an
approval which has been awaited for several years (Biohit stock
exchange release, published on 29 July 2005). Another factor
speeding up the preparations is the great need and growing demand
for functional entities (analysis systems) consisting of Biohit
diagnostic and liquid handling products, particularly in China.
Equity Turnover and Price Development
During the reporting period, the total turnover of Biohits B-
shares on the Helsinki Exchange NM list amounted to EUR
3,691,359.66, and the number of shares traded was 1,694,408. The
highest share price was EUR 2.87 and the lowest EUR 1.75, the
average price being EUR 2.18. The closing price at the end of the
reporting period was EUR 2.59. On 30 June 2005, the market
capitalisation value for the B shares totalled EUR 23,470,908.93.
Outlook for 2005
The company estimates that the Group's net sales and result will
develop more favourably in the fourth quarter in comparison with
the beginning of the year.
According to the company, the decline in the sales of liquid
handling products is now over, and net sales for the entire year
are expected to be slightly better than during the previous year.
However, it is still predicted that the result for 2005 is going
to remain unprofitable.
Group income statement
1-9 1-9 1-12
2005 2004 Change Change 2004
MEUR MEUR MEUR % MEUR
Net sales 20,3 19,6 0,7 4 26,7
Other operating income 0,0 0,1 -0,1 -57 0,2
Change in inventories of
finished goods and work in
progress 0,5 -0,3 0,8 239 -0,5
Raw materials and
consumables -3,6 -3,0 0,6 17 -4,4
External services -0,7 -0,5 0,2 54 -0,7
Personnel expenses -8,7 -8,3 0,4 6 -10,7
Depreciation -1,3 -1,1 0,2 13 -1,5
Other operating expenses -6,8 -6,1 0,7 14 -8,9
Operating profit / loss -0,3 0,4 -0,7 -190 0,2
Finance costs (net) -0,1 -0,1 0,0 15 -0,2
Profit / loss before tax -0,4 0,3 -0,7 -261 0,0
Direct taxes -0,1 -0,3 -0,2 -80 -0,2
Profit / loss for the period -0,5 0,0 -0,5 -4102 -0,2
7-9 7-9
2005 2004 Change Change
MEUR MEUR MEUR %
Net sales 6,7 6,1 0,6 11
Other operating income 0,0 0,0 0,0 0
Change in inventories of
finished goods and work in
progress 0,4 0,0 0,4 844
Raw materials and consumables -1,3 -1,0 0,3 26
External services -0,2 -0,2 0,0 41
Personnel expenses -2,6 -2,6 0,0 -2
Depreciation -0,5 -0,4 0,1 20
Other operating expenses -2,3 -1,9 0,4 20
Operating profit / loss 0,2 0,0 0,3 551
Finance costs (net) -0,1 -0,1 0,0 22
Profit / loss before tax 0,1 -0,1 0,2 228
Direct taxes 0,0 -0,1 -0,1 -87
Profit / loss for the period 0,1 -0,2 0,3 152
Group net sales by business segment
1-9 1-9
2005 2004 Change Change
MEUR MEUR MEUR %
Liquid handling 19,3 18,8 0,5 3
Diagnostics 1,0 0,8 0,2 27
Group operating profit / loss by business segment
1-9 1-9
2005 2004 Change Change
MEUR MEUR MEUR %
Liquid handling 1,6 1,8 -0,2 -13
Diagnostics -1,9 -1,4 -0,5 -34
Group balance sheet
30.9.2005 30.9.2004 31.12.2004
Assets MEUR % MEUR % MEUR %
Non-current assets
Property, plant and
equipment 6,5 28 6,4 28 6,8 30
Goodwill 2,6 11 2,6 11 2,6 12
Other intangible
assets 1,6 6 0,9 4 1,2 5
Deferred income tax
assets 1,9 8 2,0 9 1,9 8
12,6 53 11,9 52 12,6 55
Current assets
Inventories 4,7 20 3,9 17 3,6 16
Trade and other
receivables 5,4 23 5,3 24 5,3 23
Cash and cash
equivalents 1,0 4 1,6 7 1,3 6
11,1 47 10,8 48 10,2 45
Total assets 23,7 100 22,6 100 22,8 100
Equity and liabilities
Share capital 2,2 9 2,2 10 2,2 10
Share premium fund 12,8 55 13,1 57 13,1 57
Retained earnings -1,2 -5 -1,0 -4 -1,2 -5
Total equity 13,8 59 14,3 63 14,1 62
Long-term liabilities
Interest-bearing
debt 4,3 18 3,4 15 3,8 17
Deferred income tax
liabilities 0,1 0 0,1 0 0,1 0
Retirement benefit
obligations 0,1 0 0,2 0 0,1 0
Other long-term
liabilities 0,6 3 0,6 3 0,6 3
Total long-term
liabilities 5,1 21 4,2 18 4,6 20
Short-term liabilities
Trade and other
payables 4,1 17 3,4 15 3,0 14
Short-term interest-
bearing debt 0,7 3 0,9 4 1,0 4
Total short-term
liabilities 4,8 20 4,1 19 4,1 18
Total liabilities 9,9 41 8,3 37 8,6 38
Total equity and
liabilities 23,7 100 22,6 100 22,8 100
Cash flow statement
1-9/2005 1-9/2004 1-12/2004
MEUR MEUR MEUR
Cash flow from operating
activities:
Profit / loss -0,3 0,4 0,2
Adjustments 1,4 0,9 1,3
Change in net working
capital -0,4 0,8 0,8
Interest and other
financial items paid -0,2 -0,3 -0,2
Interest received 0,1 0,2 0,1
Income tax paid 0,0 -0,1
Net cash flow from
operating activities 0,6 1,9 2,2
Cash flow from investment
activities:
Investments in tangible and
intangible assets -1,0 -1,2 -2,1
Investments in subsidiaries 0,0 -0,1 -0,1
Net cash flow from
investment activities -1,0 -1,3 -2,2
Cash flow from financing
activities:
Proceeds from borrowings 0,8 0,4 0,8
Repayment of borrowings -0,7 -0,5 -0,6
Net cash flow from
financing activities 0,1 -0,1 0,2
Increase (+) / decrease (-)
in cash equivalents -0,3 0,5 0,2
Cash and cash equivalents
at beginning of period 1,3 1,1 1,1
Cash and cash equivalents
at end of period 1,0 1,6 1,3
Statement of changes in equity on 30 September 2005
MEUR Share Share Trans- Earnings Equity
capital premium lation
fund diff.
Equity 1.1.2005 2,2 13,1 0,0 -1,2 14,1
Transfer from share premium
fund -0,3 0,3
Translation differences 0,2 0,2
Profit / loss of the period -0,5 -0,5
Equity 30.9.2005 2,2 12,8 0,2 -1,4 13,8
Statement of changes in equity on 30 September 2004
MEUR Share Share Trans- Earnings Equity
capital premium lation
fund diff.
Equity 1.1.2004 2,2 15,4 0,0 -3,3 14,3
Transfer from share premium
fund -2,3 2,3
Translation differences
Profit / loss of the period 0,0 0,0
Equity 30.9.2004 2,2 13,1 0,0 -1,0 14,3
1-9/05 1-9/04 Change Change-% 1-12/04
Investments, gross, MEUR 1,4 1,2 +0,2 16 2,2
% of net sales 6,7 6,0 7,7
Average number of
employees 297 294 3 1 291
Reconciliation of equity 30.9.2004
MEUR 30.9.2004
Equity under FAS 15,1
IAS 19 Employee benefits -0,2
IAS 39 Capital loans -1,2
IAS 23 Interests on capital loans -0,6
IFRS 3 Goodwill amortization 0,2
IAS 17 Financial leasing 0,0
IAS 12 Deferred taxes 1,0
Equity under IFRS 14,3
Reconciliation of profit or loss for the period 1.1-30.9.2004
MEUR 30.9.2004
Profit / loss under FAS -0,2
IAS 19 Employee benefits 0,0
IAS 23 Interests on capital loans 0,0
IFRS 3 Goodwill amortization 0,2
IAS 17 Financial leasing 0,0
IAS 12 Deferred taxes 0,0
Profit / loss under IFRS 0,0
Mortgages and assets pledged for liabilities and leasing
commitments
30.9.2005 30.9.2004 31.12.2004
MEUR MEUR MEUR
Mortgages and pledged assets
Loans from financial
institutions 2,4 1,9 2,4
Corporate mortgages 1,6 3,4 1,6
Mortgages on real estate 1,4 1,5 1,4
Other long-term liabilities 0,6 0,7 0,6
Mortgages on real estate 0,8 0,8 0,8
Leasing commitments 3,6 4,0 4,2
30.9.2005 30.9.2004 31.12.2004
Key ratios
Equity ratio % 58,5 63,3 62,3
Earnings per share, EUR -0,04 0,00 -0,01
Shareholders equity per
share 1,07 1,11 1,09
Average number of shares 12.937.627 12.937.627 12.937.627
Number of shares at the end
of the period 12.937.627 12.937.627 12.937.627
Derivative contracts
The Group does not have any off-balance-sheet financial
instruments.
The figures in the Interim Report are not audited.
Helsinki, 4 November 2005
Board of Directors of Biohit Oyj
Additional information: Osmo Suovaniemi, M.D., Ph.D.
Professor
President & CEO
Tel: 09-773 861, GSM: 040-745 5605
Email: osmo.suovaniemi@biohit.com
http://www.biohit.com
Distribution: Helsinki Exchanges
Financial Supervisory Authority
Press
