Year-end Report 2011

JANUARY – DECEMBER 2011
- Net sales amounted to SEK 145.2 million (92.7)
- EBITDA was SEK -20.1 million (-6.8)
- Earnings per share totaled SEK -1.09 (-0.60) before dilution

OCTOBER – DECEMBER 2011
- Net sales amounted to SEK 41.6 million (27.8)
- EBITDA was SEK -6.6 million (-2.2)
- Earnings per share totaled SEK -0.33 (-0.16) before dilution

HIGHLIGHTS
Continued top-line growth
- Net sales increased by 57% compared to 2010
- A larger portfolio together with growing market shares behind growth in net sales

Number of portfolio products increased by 111%
- Portfolio consists of 80 products whereof 44 have been launched
- Acquisition of BMM Pharma, new licenses and development projects

Outlook for 2012
- Continued strong growth in net sales
- Ambition to improve gross margin through efficiencies and new product launches

BUSINESS UPDATE
During 2011, Bluefish has confirmed and grown its position in several European markets and the product portfolio has increased both in terms of pipeline and new products launched. The specific country portfolios have been customized for certain local market needs and products that earlier only were available in the Nordic markets are now gradually being added to other markets. In markets where the company has been active for more than two years, a certain level of maturity and loyalty within various market segments has been established, including the Nordics, Austria, Germany, the Netherlands and Portugal.

Net sales during 2011 amounted to SEK 145.2 million, an increase by 57% compared to last year. Net sales in the fourth quarter amounted to SEK 41.6 million, which is equivalent to an increase of 50% compared to the fourth quarter in 2010. Since 2009, Bluefish has delivered a strong trend in net sales growth. The gross margin was 27.1% for the year and 25.6% for the fourth quarter. One-off items, consisting of price adjustments on the Danish market related to 2010, of SEK 3.1 million partly explain the difference in gross margin compared to previous years (31.1%). Adjusted for these extraordinary costs, net sales amounted to SEK 148.3 million with a corresponding margin of 28.6%. In addition, as a result of a broader European activity, logistic expenses have increased during 2011. The company is actively seeking to improve the gross margin by realizing greater efficiencies within logistics and distribution but also through an improved product and market mix.

Increased business complexity
During 2011, the company’s product portfolio has grown significantly which has introduced an increased complexity for all of the company’s functions, including logistics, quality assurance, pharmacovigilance, selling and finance. At the end of the year, as a result of more products launched and new markets entered, the company had 724 different articles on the market, compared to 384 at the end of 2010, equivalent to an increase of 89%. To meet the increased demand that results from managing a broad European presence with rapid launches and new products, the company has expanded its workforce. At the end of 2011, Bluefish had 78 employees compared to 57 at the end of 2010. The increased size of the organization, together with the increased use of consultants, has resulted in higher operating costs. During Q4 2011, operating costs, excluding depreciation and amortizations, amounted to SEK 17.2 million, compared to SEK 12.3 million in Q4 2010. This is equivalent to an increase of 40%. The existing organizational structure is well prepared for the expected increase in volumes during 2012.

Number of portfolio products increased by 111%
During 2011, Bluefish initiated two new development projects, inlicensed 15 new products, signed distribution agreements for nine products and acquired a portfolio from BioPhausia consisting of 16 products. In total, Bluefish portfolio grew from 38 to 80 products, an increase by 42 products. By the end of 2011, 44 products had been launched, compared to 21 products by the end of 2010. As a result, Bluefish today has a more diversified portfolio consisting of products from a broader range of therapeutic categories. Bluefish long-term strategy is to expand the product portfolio of generic versions of blockbusters as well as to gradually offer a broader range of niche products within more narrow disease areas or to meet the demand for regional treatment principles. The volumes in the blockbuster segments offer interesting opportunities to grow market share, while the niche products will allow Bluefish to enjoy higher margins in less competitive market segments.
 
Funding the operations
During 2011, the company’s working capital increased by SEK 78.2 million, primarily due to increased inventory. As a result, cash flow from operating activities amounted to SEK 102.4 million during the year. The increase in working capital has mostly been financed by the issue of convertible debt or new shares. In total, Bluefish raised SEK 119.5 million during 2011, including SEK 60 million from a convertible bond issue in May, and another SEK 59.5 million from two new share issues in December. Also, in November, Bluefish reached an agreement with one of the leading Nordic banks, SEB, regarding a credit facility for  the company’s increased need for working capital. The credit facility includes SEK 65 million with the Nordic inventory as security and an additional SEK 20 million for factoring. The new facility will be implemented during March 2012. The acquisition of BMM Pharma AB was funded through a separate debenture from Färna Invest of SEK 40 million.

Outlook
As market shares increase and the product offering grows, Bluefish expects a gradual increase in net sales throughout the year. As a result, the company expects continued strong growth in net sales in 2012. The existing organizational structure is well prepared for the expected increase in volumes during 2012. Thus, the operating costs are expected to increase at a considerably lower rate than during 2011 and also compared to the expected growth in net sales for 2012.

About Bluefish Pharmaceuticals
Bluefish has undergone significant international expansion since the company was founded in 2005. Bluefish focuses on the development, manufacture and sale of generic pharmaceuticals. The company conducts marketing operations in 19 European markets and has a technology center in Bangalore, India. The product portfolio consists of a total of 80 products and is growing.

www.bluefishpharma.com