Interim report of the Biohit Group 1 January to 31 March 2012

Biohit Oyj    Interim report    26.4.2012    9:30 a.m.
                           
SUMMARY   

January–March 2012

• Biohit divested its liquid handling business to Sartorius Lab Holding GmbH on 14 December 2011. Biohit Oyj will now focus on its diagnostics business. The diagnostics business will therefore be reported on as continuing operations and the liquid handling business as discontinued operations.
• Net sales EUR 0.4 million (EUR 0.4 million)
• Operating result EUR -1.1 million (EUR -0.9 million)
• Operating reault EUR -1.1 million (EUR -0.9 million)
• Result before taxes EUR -0.9 million (EUR -1.4 million), international operations accounted for 85 % of net sales
• Earnings per share EUR -0.07 (EUR Biohit Oyj divested its liquid handling business to Sartorius Lab Holding GmbH on 14 December 2011. Biohit will now focus on its HealthCare business. The divestment lightened the Group's structure and, as part of the transaction, Biohit also divested its subsidiary network, except for one subsidiary in the UK.

Biohit Oyj divested its liquid handling business to Sartorius Lab Holding GmbH on 14 December 2011. Biohit will now focus on its HealthCare business. The divestment lightened the Group's structure and, as part of the transaction, Biohit also divested its subsidiary network, except for one subsidiary in the UK.

  
SEMI KORPELA, PRESIDENT AND CEO

Net sales of continuing operations rose by 2 per cent on 2011

During the first quarter of this year, operational developments concentrated on getting the new organisation up and running, and making further investments in marketing and the sales organisation. We also focused on establishing an international distributor network, where our primary goal is to create a strong, global network consisting of motivated professionals.

During the first quarter, we signed a distribution agreement with CanAg Diagnostics, a Chinese subsidiary of the Japanese company Fujirebio, to launch the sale and marketing of GastroPanel in China.

In February 2012, the company paid back a capital loan of EUR 0.6 million to its principal shareholders, as well as the accumulated interest of EUR 0.6 million (at a rate of 5 per cent). In the same month, the bearers of Biohit's convertible bond sold back the loan. The convertible bond was worth EUR 4.1 million at an interest rate of 6.5 per cent. As a result, the company's equity ratio stood at 81.6 per cent at the end of the first quarter (74 per cent at the end of December 2011).

GROUP’S KEY FIGURES

REPORTING

Following the sale of the liquid handling business at the end of 2011, the diagnostics business is now reported as continuing operations and the liquid handling business as discontinued operations.

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

January-March

The net sales rose by 2 per cent on 2011.

 Biohit made an operating loss of EUR 1.1 million (loss of EUR 0.6 million). Business growth will require investments in marketing and personnel. 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 first-quarter result. 

NET SALES AND RESULT
  

BALANCE SHEET

On 31 March 2012, the balance sheet total was EUR 63.5 million (EUR 30.2 million) and the equity ratio was 81.6% (43.5%).

FINANCING

Biohit Oyj has been able to materially strengthen its financial position since the sale of its liquid handling business to Sartorius Lab Holding Gmbh on 14 December 2011.

RESEARCH AND DEVELOPMENT

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

Product development expenses for the reporting period totalled EUR 0.2 million (EUR 0.2 million, Jan–Mar/2011).

INVESTMENTS

Gross investments in continuing operations during the reporting period totalled EUR 0.0 million (EUR 0.4 million).

PERSONNEL

During the reporting period, the average number of personnel employed by the Group was 36 (37 in the corresponding period of 2011) of whom 29 (22) were employed by the parent company and 7 (7) by its subsidiaries. At the end of the reporting period, the Group had 36 employees, of whom 29 were employed by the parent company and 2 by its subsidiaries. During the transitional phase, 5 people worked for the company's former subsidiaries.
 

SHORT-TERM RISKS AND UNCERTAINTY FACTORS

Biohit's key risks have to do with the investments required to grow its diagnostics 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 investments that represent a challenge in terms of Biohit's financial position. However, due to the directed share issue arranged during the period and the sale of the liquid handling business, the company was able to improve its cash position and liquidity considerably.

When investing liquid assets, the objective is to gain a return on investment with a minimum risk of losing any capital. 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.

The diagnostics business has a wide customer base, which means Biohit does not materially depend on any individual customers or individual project deliveries. Most of the company's business is conducted in euro, and the indirect effects of currency exchange rate fluctuations are considered minor.

Determined sales and marketing efforts will be required to fully tap into the potential offered by the diagnostics products.  

OUTLOOK FOR 2012

Net sales from continuing operations in 2012 is 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

Scandinavian Journal of Gastroenterology

The respected Scandinavian Journal of Gastroenterology has published an article stating that Biohit Oyj's patented GastroPanel biomarker examination is a primary examination for patients suffering from abdominal complaints and can be used at any clinic whatsoever. The article was written by 16 gastroenterology experts from twelve different countries. This expert team is engaging in international cooperation to develop a safer and more cost-effective way to diagnose, prevent and treat gastric

Before the GastroPanel innovation, atrophic gastritis (damage or dysfunction of the mucous membrane of the stomach) caused by a helicobacter infection or autoimmune disease and the associated risks, such as stomach or oesophageal cancer or a deficit of vitamin B12, iron and calcium, were often discovered by chance before any alarming symptoms appeared when a histological examination was performed on biopsies obtained during gastroscopy on symptomless patients or patients only suffering from minor stomach problems. After the appearance of alarming symptoms, conditions such as stomach cancer have often progressed beyond treatment.

Discovering the risk of gastric cancer (atrophic gastritis) on symptomless patients or patients with minor stomach problems using the GastroPanel examination in time before the alarming symptoms appear could mean the prevention of up to 250–300 unnecessary deaths from gastric cancer annually in Finland as well as the associated great financial losses and sufferingriskejä. Such savings are accumulated by eliminating the outdated 13C urea breath test used in the screening of symptomless patients and those with stomach problems (dyspepsia) as well as in the diagnosis of helico bacteria. This test does not reveal, for example, atrophic gastritis or the risk related to it.

In addition, the 16 international authors of the publication mentioned above 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 (www.acetium.fi/testi detects acetaldehyde exposure

Clinical trial

Biohit Oyj has launched a clinical trial in cooperation with the HUS gastroenterology clinic and GastroLääkärit. The trial seeks to determine how effectively BioAcetium can treat Helicobacter pylori infection in over-55s who have not previously been diagnosed with Helicobacter pylori infection.

Over half of the world’s population continues to suffer from a 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.ongelma.However, the bacteria’s ability to develop antibiotic-resistant strains is a quickly growing worldwide problem

Suitable participants for the clinical trial will be sought using the blood sample-based GastroPanel examination. In addition to providing reliable information about potential Helicobacter pylori infection, Biohit's GastroPanel examination also identifies atrophic gastritis (in a anacidic or low-acid stomach) that is caused by Helicobacter pylori infection or an autoimmune disease. Atrophic gastritis is the major 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 voluntary clinical trial. This study is expected to be completed by autumn 2012.


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 the summer or, at the latest, autumn 2012 will study whether the Acetium lozenge tablet binding and neutralising acetaldehyde dissolved into saliva from cigarette smoke help smokers quit smoking.

It is known based on numerous animal tests that the cancer-causing acetaldehyde also causes strong addiction.

BioFilter effectively binds acetaldehyde from cigarette smoke, thereby preventing it from entering the smoker’s saliva and respiratory tract.

Discontinued business

At the end of 2011. Biohit sold its discontinued business to Sartorius Lab Holding GmbH.

MAJOR EVENTS AFTER THE CLOSE OF THE PERIOD

Resolutions of the Annual General Meeting of Biohit Oyj

The Annual General Meeting (AGM) of Biohit Oyj held on Wednesday 11 April 2012 approved the financial statements of the parent company and the consolidated financial statements, and discharged the members of the Board of Directors and the President and CEO from liability for the financial year 2011.

Distribution of dividends

In accordance with the proposal by the Board of Directors, the AGM decided that the profit for the financial period ended on 31 December 2011 be recorded in the profit and loss account.

In accordance with the proposal by the Board of Directors, the AGM decided that on the basis of the financial statements to be adopted for the financial period ended on 31 December 2011, a dividend of EUR 0.1973 per each A share and EUR 0,2007 for each B share be paid. Dividend will be paid to shareholders recorded in the company's shareholder register on the matching day, 16 April 2012. The Board of Directors proposes that the dividend will be paid out on 23 April 2012.

In accordance with toe proposal of the Board of Directors, the AGM decided that on the basis of the financial statements to be adopted for the financial period ended on 31 December 2011, funds from the invested non-restricted equity fund be distributed to shareholders as a capital repayment, with the capital repaid amounting to EUR 0.80 for each A and B share. Capital will be repaid to shareholders recorded in the company's shareholder register on the repayment day, 16 April 2012. The Board of Directors proposes that the capital repayment will be made on 23 April 2012.

Members of the Board of Directors

The AGM decided that the number of members of the Board of Directors would be seven (7). Furthermore, that the following Board members re-elected until the end of the next AGM: Kalle Kettunen, M.Sc.Eng., Osmo Suovaniemi, professor, Mikko Salaspuro, professor, Eero Lehti, M.Sc (Sos.Sc), Member of Parliament, Petteri Kilpinen, CEO, Seppo Luode, M.Sc.Eng., and Saila Miettinen-Lähde, CFO

Additionally, the AGM decided that the chairman of the Board of Directors would be paid a monthly fee of EUR 1,600 and the ordinary members would be paid a monthly fee of EUR 1,500.

Auditors

The AGM elected authorised public accountants Ernst & Young Oy as the company’s auditors, with APA Erkka Talvinko as the head auditor, until the end of the next AGM.

All decisions of the AGM were made unanimously. The minutes of the AGM will be available for review by shareholders by 15 April 2011 on the company’s website (www.biohit.com/investors) and at the corporate headquarters of Biohit, located at Laippatie 1, 00880 Helsinki.



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

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.

 Irene Hernberg, BA (English Language)(b. 1973) has been appointed Communications Manager at Biohit Oyj as of 2 May 2012. Previously, Hernberg has worked at VTT Technical Research Centre of Finland in various communications-related tasks since 2002 and as Communications Manager in 2009-2012. Before working at VTT, Hernberg worked at AAC Global Oy as Project Manager and Content Provider.

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 51.7 million (EUR 39.9 million on 31 December 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 31 March 2012, the company had 4,368 shareholders (4,328 on 31 December 2011). Private households held 69.84% (72.58%), companies 22.12% (23.25%), and public sector organisations 2.52% (2.65%) of the shares. Foreign ownership or nominee registrations accounted for 5.52% (0.82%) 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

 

*) The convertible bond is not dilutive in respect of earnings per share in the financial years 2011 and 2010.

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 31 March 2012

Statement of changes in consolidated shareholders’ equity on 31 March 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. 26 March 2012

Biohit Oyj

Board of Directors

Further information:

Semi Korpela

Tel. +358 9 773 861

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