Ownership arrangement in Biohit Oyj’s Chinese Joint Venture – 2017 operating result expected to be positive
Biohit Oyj Stock Exchange Release January 2, 2017 at 09:30 am local time (EEST)
Biohit Oyj and Anhui Wisdom-Win Investment Co. Ltd have signed a resolution authorised by shareholders of Biohit HealthCare (Hefei) Co. Ltd, a joint venture operating in Hefei, China, concerning reduction of the joint venture share capital for an amount equal to Biohit Oyj’s shareholding. Biohit Oyj owns 40% of the company, and the agreement is for reduction of the entire share capital. As a result of the transaction Biohit Oyj estimates its operating result to turn clearly positive for 2017. The company continues to not provide profit guidance concerning continuing business operations.
In conjunction with the reduction of the share capital, Biohit Oyj has signed a license and distribution agreement with Biohit HealthCare (Hefei) Co. Ltd giving Biohit HealthCare (Hefei) Co. Ltd rights to manufacture and sell GastroPanel® product in China, Macao and Hongkong as well as use Biohit Oyj’s trademarks. In consideration for the rights, Biohit Oyj receives a royalty that is calculated from GastroPanel® product net sales of Biohit HealthCare (Hefei) Co. Ltd throughout the duration of the agreement. Pursuant to the distribution agreement, Biohit Oyj also sells raw materials required for manufacturing GastroPanel® products exclusively to Biohit HealthCare (Hefei) Co. Ltd. The license and distribution agreement remains in force for at least 15 years.
The transaction requires approval from the authorities and it is expected to be completed during the first quarter of 2017. Following the transaction, the intellectual property rights, which were invested in the joint venture as a basis for business operations, will return to Biohit Oyj’s balance sheet and as a result a profit of EUR 7,1 million resulting from the transaction will be booked in the first quarter of 2017. Additionally a cash payment will be received as part of the transaction which corresponds to ca. EUR 1.8 million calculated with CNY rate at the date of this release. The transaction is expected to be recognised during the first quarter of 2017 after the approval from the authorities. The total impact on the operating profit is estimated to be EUR 8,9 million with consolidated November figures. The final impact will be calculated upon completion of the transaction. When recognised, the profit will have an impact on the comparability of the operating profit. After the transaction, Biohit HealthCare (Hefei) Co. Ltd is no longer Biohit Oyj’s joint venture and it is no longer consolidated to the group balance sheet.
CEO Semi Korpela, Biohit Oyj: ‘Together with our partner we have brought Biohit HealthCare (Hefei) Co. Ltd up to the point where the products have received their registration and the production facility has been granted approval by the authorities. Now it is time for the commercial phase of the operation. Following the transaction, we are avoiding significant recapitalisation needs required for growth in the Chinese market. At the same time we are shifting from a joint venture model to a license-based revenue model containing less business risks. This agreement is a logical step in a path strengthening the consolidated balance sheet of the group while keeping the expected profit from GastroPanel® business operations in China at a similar level than without the ownership arrangement.’
General Manager Liu Feng, Biohit HealthCare (Hefei) Co. Ltd: ‘GastroPanel® sales has had a good start and demand for the product has increased continuously. The arrangement enables more flexible further investments in the company and its production capacity. It also makes possible to improve the use of state subsidies and to achieve faster growth.’
Additional information:
CEO Semi Korpela, Biohit Oyj
tel. +358 9 773 861
investor.relations@biohit.fi
www.biohithealthcare.com
Biohit in brief
Biohit Oyj is a globally operating Finnish biotechnology company. Biohit 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