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Biotage

Interim / Quarterly Report Jul 18, 2017

2894_ir_2017-07-18_bb68693f-58ee-4dae-adde-b0fa204db382.pdf

Interim / Quarterly Report

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Interim report

January - June 2017

July 18, 2017

Continued strong sales growth and increased profitability

Second quarter

  • Net sales amounted to 196.3 MSEK (162.9), which is an increase by 20.5 percent compared to the corresponding quarter last year. At comparable exchange rates net sales increased by 15.9 percent.
  • Operating profit increased by 54 percent to 37.2 MSEK (24.2).
  • Result after tax increased by 52 percent to 37.7 MSEK (24.7).
  • Earnings per share amounted to 0.58 SEK (0.38).
  • The cash flow from operating activities amounted to 43.1 MSEK (29.1).
  • Dividends to the shareholders were paid to the amount of 80.9 MSEK (80.9).
  • Net cash at June 30 amounted to 101.6 MSEK (99.6), compared to 152.1 MSEK at March 31 and 128.6 at the start of the year.
  • At the end of the reported period Biotage had no holding of own shares. No shares have been acquired under the repurchasing program resolved at the 2017 Annual General Meeting.

Six months, January – June

  • Net sales amounted to 381.5 MSEK (321.7), which is an increase by 18.6 percent compared to the corresponding period last year. At comparable exchange rates net sales increased by 14.0 percent.
  • Operating profit increased by 51 percent to 72.1 MSEK (47.8).
  • Result after tax increased by 53 percent to 73.0 MSEK (47.6).
  • Earnings per share amounted to 1.13 SEK (0.74).
  • The cash flow from operating activities amounted to 72.2 MSEK (65.9).

Group financial development in brief

Amounts in SEK millions $2nd$ quarter
Apr-Jun
2017
$2nd$ quarter
Apr-Jun
2016
6 months
Jan-Jun
2017
6 months
Jan-Jun
2016
12 months
Jan-Dec
2016
Net sales 196.3 162.9 381.5 321.7 667.9
Cost of sales $-75.3$ $-69.8$ $-147.7$ $-138.0$ $-282.1$
Gross profit 121.0 93.1 233.8 183.8 385.8
Operating expenses $-83.9$ $-68.9$ $-161.7$ $-136.0$ $-286.7$
Operating profit/loss (EBIT) 37.2 24.2 72.1 47.8 99.1
Financial items 0.6 0.8 1.9 1.1 $-6.7$
Profit/loss before tax 37.8 25.0 74.0 48.9 92.4
Tax expenses $-0.1$ $-0.3$ $-1.1$ $-1.3$ 0.4
Total profit/loss for the period 37.7 24.7 73.0 47.6 92.8
Gross margin 61.7% 57.2% 61.3% 57.1% 57.8%
Operating margin (EBIT) 18.9% 14.9% 18.9% 14.9% 14.8%

Note that Biotage presents some financial metrics in the interim report that are not defined according to IFRS. Definitions of these are found in the 2016 Annual Report, page 34.

Comments by CEO Torben Jörgensen

The sales successes of Biotage continue with yet another record quarter. At comparable exchange rates, sales in the quarter and the half-year increased by 15.9 and 14.0 percent, respectively, which is considerably higher than the average for our markets. The gross margin for the quarter as well as for the six-month period exceeds our strategic 60 percent goal. Higher sales in relation to the fixed cost base contribute significantly to the improved margin. The operating margin (EBIT) is 18.9 percent for the quarter as well as for the half-year, and averages 13.9 percent for the last three years.

All our product areas are growing. This quarter we saw especially strong sales in the product areas peptide synthesis, evaporation systems and industrial products. The combination of good system solutions and media for flash purification makes Biotage an attractive partner in the peptide area. For industrial products the sales of systems as well as consumables are increasing and we note that our products are used in a number of new projects among customers in the pharma industry. Also the system sales in organic synthesis are developing well.

All geographies show double digit growth in the quarter as well as in the six-month period. Asia is the area showing the strongest growth. Above all South Korea develops strongly, but also Japan had a good quarter. The sales successes are benefiting from the increased direct sales. The latest investments in South Korea and China are good examples of this. The direct sales will now be expanded to Italy, where we from July will be selling out entire product range through our own organization. Our evaluation of the sales strategy for India is now nearing completion and we expect to be operative with our own company in India in 2018. We are using the same approach as in South Korea and China with a combination of direct sales and local distributors.

The increasing sales put higher demands on and enable a more efficient production. Great efficiency improvements have been implemented at the plant in Cardiff, Wales, among other things through increased automation. The increased production volumes motivate investments in the production and in the later part of 2017 the production space in Cardiff will be expanded. Access to the new premises enables further automation of the production.

The strong sales growth in China is primarily related to systems. In order to better meet the price competition on consumables we have now introduced a locally adapted line of consumables for flash purification. If the locally produced raw material can maintain an even, if not high, quality there is a possibility to introduce these consumables also in other markets.

At the end of the quarter two new system launches were made, Biotage Isolera™ Dalton 2000 and a new generation of the evaporation system TurboVap®. Biotage Isolera™ Dalton 2000 is a new mass detection system for flash purification that opens up for a broader functionality with a detection range up to molecular weights of 2000 m/z (mass-to-charge ratio). The new system is integrated with Biotage's flash system Isolera™ and the software functionality Isolera™ Spektra through Isolera™ Dalton Nanolink. The new TurboVap® system is based on the previous system which has been successful for a number of years, but has increased functionality and improved user friendliness. We are eagerly looking forward to the results of these product launches.

Group result, financial position and cash flow

Second quarter April - June 2017

Group net sales in the second quarter 2017 amounted to 196.3 MSEK (162.9), which is an increase by 20.5 percent (10.0). At comparable exchange rates sales increased by 15.9 percent (11.1) compared to the corresponding quarter last year. The Americas was the largest market with 44 percent (43) of the net sales. The EU area contributed 28 percent (30), Japan 14 percent (12), China 8 percent (9), South Korea 3 percent (2), EMEA 1 percent (2) and APAC 2 percent (3).

The Group's gross margin improved to 61.7 percent (57.2). The improved profitability is mainly attributable to the increased sales volume and efficiency improvements in the production. The distribution of sales between systems and aftermarket products was 49 percent (45) and 51 percent (55), respectively. The strong systems sales have effected a change in the relation between systems and aftermarket further away from the strategic goal of 40/60.

The operating expenses amounted to 83.9 MSEK (68.9). Of this sum 52.7 MSEK (46.6) were sales costs. The increase in sales costs by 6.1 MSEK compared to the corresponding period last year is attributable primarily to increases in the sales force and a part of this is the establishment of direct sales in South Korea from the fourth quarter 2016. The research and development costs amounted to 13.7 MSEK (13.2). The administration costs amounted to 13.2 MSEK (13.0). Other operating items, amounting to -4.3 MSEK (4.0), primarily consists of currency effects on operations related liabilities and receivables.

Operating profit improved by 54 percent to 37.2 MSEK (24.2), corresponding to an operating margin (EBIT) of 18.9 percent (14.9). Net financial income amounted to 0.6 MSEK (0.8). The result after tax improved by 52 percent to 37.7 MSEK (24.7).

The cash flow from operating activities improved to 43.1 MSEK (29.1). The investments amounted to 10.7 MSEK (12.9). Amortizations and write-downs amounted to 9.0 MSEK (12.8). Capitalized development costs accounted for 6.6 MSEK (9.9) of the investments and for 5.0 MSEK (8.6) of the amortizations and writedowns.

Six months January - June 2017

The Group's net sales in the six-month period increased by 18.6 percent (10.1) and amounted to 381.5 MSEK (321.7). At comparable exchange rates net sales increased by 14 percent (10.3). The Americas was the biggest market with 43 (43) percent of the net sales. The EU area contributed 28 percent (30), Japan 14 percent (14), China 8 percent (8), South Korea 3 percent (1), EMEA 2 percent (2) and APAC 2 percent (3).

The Group's gross margin improved to 61.3 percent (57.1). Systems accounted for 48 percent (44) of the sales and aftermarket products for 52 percent (56).

The operating expenses amounted to 161.7 MSEK (136.0). The increase is mainly attributable to the increase in sales costs by 14.0 MSEK to 102.9 MSEK (88.8).

The operating profit improved by 51 percent (34) to 72.1 MSEK (47.8) corresponding to an operating margin (EBIT) of 18.9 percent (14.9). Net financial income amounted to 1.9 MSEK (1.1). The result after tax was 73.0 MSEK (47.6), an increase by 53 percent.

The cash flow from operating activities was 72.2 MSEK (65.9). The working capital increased by 17.2 MSEK during the period. Of this sum 6.3 MSEK relates to inventories and 8.7 MSEK to operating receivables. The increase is mainly due to higher sales and launch of new products. The investments amounted to 16.7 MSEK (21.1). Amortizations and write-downs amounted to 17.3 MSEK (23.5). Capitalized development costs accounted for 10.7 MSEK (16.4) of the investments and for 9.2 MSEK (9.5) of the amortizations and write-downs.

Balance sheet items

At June 30, 2017 the Group's cash and cash equivalents amounted to 101.6 MSEK (99.6), compared to 152.1 MSEK at March 31 and 128.6 MSEK at the start of the year. The Group had no interest-bearing liabilities, neither at the end of the reported period, nor at the end of the comparative period. Net cash at June 30 thus amounted to 101.6 MSEK (99.6) compared to 128.6 at the start of the year. During the period dividends to the shareholders were paid to the amount of 80.9 MSEK (80.9).

The Group reports a total goodwill of 104.0 MSEK (104.0) at June 30. The reported goodwill is related to the acquisition of MIP Technologies AB and two product lines from Caliper Life Sciences Inc. in 2010.

Other intangible fixed assets amounted to 115.9 MSEK (114.7), compared to 116.0 MSEK at the start of the year. Of this sum, patents and license rights amounted to 23.6 MSEK (27.3) compared to 25.2 MSEK at the start of the year, and capitalized development costs to 92.3 MSEK (87.4), compared to 90.8 MSEK at the start of the year.

At June 30 the equity capital amounted to 545.7 MSEK (510.3) compared to 563.2 MSEK at the start of the year. The change in equity capital during the first six months is attributable to the net result 73.0 MSEK (47.6), dividends to the shareholders - 80.9 MSEK (-80.9), and hedging and currency effects at the translation of foreign subsidiaries -9.8 MSEK (-4.0).

Repurchasing program

Biotage had no holding of own shares at the end of the reported period. No shares have been acquired under the repurchasing program resoved at the 2017 Annual General Meeting. Complete documentation from the AGM is available at www.biotage.com.

Patent dispute in the US

Biotage has as previously reported been sued for alleged patent infringement in the US by Scientific Plastic Products, Inc. ("SPP"). These plaints are declared resting by the court awaiting the results of reexamination cases of the validity of the patents by the US Patent and Trademark Office. Biotage's analysis indicates that the company has a strong position and that the other party lacks good cause for the alleged patent infringement. Thus no reserves have been booked due to the conflict.

Major events after the reported period

There are no major events after the reported period to report.

Human resources

The Group had 334 employees (305) at June 30, compared to 323 at the start of the year.

Parent company

The Group's parent company, Biotage AB, has wholly owned subsidiaries in Sweden, the United States, United Kingdom, Germany, France, Italy, Japan and China, and from June 2016 in South Korea. The parent company is responsible for group management, strategic business development and administrative functions at group level and towards subsidiaries.

The parent company's net income was 0.6 MSEK (0.6) in the second quarter and 1.2 MSEK (1.1) in the six month period. Operating expenses amounted to 5.6 MSEK (4.9) in the quarter and to 10.9 MSEK (10.8) in the six month period. The operating result was -5.0 MSEK (-4.4) for the quarter and -9.7 MSEK (-9.6) for the six month period.

The parent company's net financial income was 1.6 MSEK (-1.0) for the quarter and 2.2 MSEK (3.4) for the six month period. The parent company's result after financial items was -3.4 MSEK (-5.3) for the quarter and -7.5 MSEK (-6.2) for the half-year period.

Investments in intangible assets amounted to 0.0 MSEK (0.6) in the quarter and 0.0 MSEK (1.0) for the six month period. The parent company's cash and bank balance was 1.5 MSEK (1.3) at June 30, compared to 1.4 MSEK at the start of the year.

Risks and uncertainties

As an international Group, Biotage is exposed to various risks that affect the possibilities to achieve the established targets. There are operational risks, such as the risk that competitive situations affect price levels and sales volumes, and the risk that the economic development in the markets and segments where the Group operates is not stable. There are also financial risks, such as currency risks, interest risks and credit risks. No major changes in significant risks or uncertainty factors have occurred during the period. Our assessment thus remains unchanged compared to the description of the company's risks, uncertainty factors and the handling of these in the company's Annual Report for 2016. Readers wishing to study the Annual Report can download this from the company's website www.biotage.com or order it from Biotage AB, Box 8, SE-751 03, Uppsala, Sweden or [email protected].

Coming financial reports

The interim report for the third quarter 2017 will be issued on November 2, 2017. The year-end report for 2017 will be issued on February 8, 2018.

This report has not been reviewed by the company's auditor.

Assurance

The Board of Directors and the CEO assure that the interim report gives a fair review of the operations of the Parent Company and the Group, their financial positions and results, and describes the significant risks and uncertainties that the Parent Company and the Group companies are facing.

Uppsala July 18, 2017

Torben Jörgensen President and CEO

Ove Mattsson Nils-Olof Björk Yvonne Mårtensson
Chairman Board Director Board Director
Thomas Eklund Peter Ehrenheim Karolina Lawitz
Board Director Board Director Board Director
Love Amcoff Malin Albertsson Annika Gärdlund Anders Wessman
Board Director Board Director Deputy Board Director Deputy Board Director
Employee Representative Employee Representative Employee Representative Employee Representative

For further information, please contact:

Torben Jörgensen, President and CEO, phone: +46 707 49 05 84 Erika Söderberg Johnson, CFO, phone: +46 707 20 48 20

This information is information that Biotage AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation and the Securities Markets Act. The information was submitted for publication, through the agency of the contact persons set out above, at 11.00 CET on July 18, 2017.

About Biotage

Biotage offers efficient separation technologies from analysis to industrial scale and high quality solutions for analytical chemistry from research to commercial analysis laboratories. Biotage's products are used by government authorities, academic institutions, pharmaceutical and food companies, among others. The company is headquartered in Uppsala and has offices in the US, UK, China, Japan and South Korea. Biotage has approx. 330 employees and had sales of 668 MSEK in 2016. Biotage is listed on NASDAQ Stockholm. Website: www.biotage.com

2017-04-01 2016-04-01 2017-01-01 2016-01-01 2016-01-01
2017-06-30 2016-06-30 2017-06-30 2016-06-30 2016-12-31
Attributable to parent company's shareholders:
Total profit/loss for the period
37,677 24,730 72,970 47,602 92,796
Attributable to parent company's shareholders:
Total comprehensive income for the period 30,628 26,085 63,329 43,613 97,474
Average shares outstanding 64,714,447 64,714,447 64,714,447 64,714,447 64,714,447
Shares outstanding at end of reporting period 64,714,447 64,714,447 64,714,447 64,714,447 64,714,447
Total profit/loss for the period per share SEK 0.58 0.38 1.13 0.74 1.43
Total profit/loss for the period per share SEK after dilution 0.58 0.38 1.13 0.74 1.43
Earnings per share relates to:
Continuing operations 0.58 0.38 1.13 0.74 1.43
Total comprehensive income for the period
per share SEK
0.47 0.40 0.98 0.67 1.51
Total comprehensive income for the period
per share after dilution SEK
0.47 0.40 0.98 0.67 1.51
Quarterly summary 2016 and 2017 2017 2017 2016 2016 2016 2016
Amounts in KSEK Q 2 Q 1 Q 4 Q 3 Q 2 Q 1
Net Sales 196,315 185,228 179,145 167,032 162,859 158,875
Cost of sales $-75,270$ $-72,473$ $-73.272$ $-70,849$ $-69,769$ $-68,208$
Gross profit 121,045 112,755 105,873 96,183 93,091 90,666
Gross margin 61.7% 60.9% 59.1% 57.6% 57.2% 57.1%
Operating expenses $-83.853$ $-77.808$ $-81,791$ $-68,951$ $-68,865$ $-67,092$
Operating profit/loss 37,192 34.947 24,082 27,232 24,225 23,574
Financial net 600 1.304 $-5,852$ $-1,963$ 761 343
Profit/loss before income tax 37,793 36,250 18,230 25,269 24,986 23,917
Tax expenses $-116$ $-958$ $-738$ 2.432 $-256$ $-1,044$
Total profit/loss for the period 37,677 35,293 17,492 27,701 24,730 22,872
Amounts in SEK thous ands 2017-06-30 2016-12-31
ASSETS
Non-Current assets
Property, plant and equipment 44,284 45,447
Goodwill 104,023 104,023
Other intangible assets 115,854 116,015
Financial assets 20,728 21,389
Deferred tax asset 53,578 52,344
Total non-current assets 338,467 339,217
Current assets
Inventories 90,804 88,906
Trade and other receivables 142,516 138,451
Cash and cash equivalents 101,637 128,622
Total current assets 334,957 355,980
TOTAL ASSETS 673,424 695,196
EQUITY AND LIABILITIES
Capital and reserves attributable to equity holders of the
parent company
Share capital 89,953 89,953
Reserves $-93,579$ $-83,938$
Retained earnings 549,300 557,223
Total equity 545,675 563,238
Non-current liabilities
Other financial liabilities 727 815
Deferred tax liability 1,734 1,759
Non-current provisions 1,554 1,663
Total non-current liabilities 4,014 4,237
Current liabilities
Trade and others liabilities 118,629 123,733
Other financial liabilities
Tax liabilities 1,160 1,085
Current provisions 3,947 2,903
Total current liabilities 123,735 127,721
TOTAL EQUITY AND LIABILITIES 673,424 695,196
Accumulated
Share translation Hedging Retained Total
Amounts in SEK thous ands capital reserve reserve earnings equity
Opening balance January 1, 2016 89,953 $-88,687$ 70 545,320 546,657
Changes in equity in the
period of January 1 -december 31, 2016
T otal comprehensive income 4,460 218 92,796 97,474
Total non-owners changes 4,460 218 92,796 97,474
Transactions with equity holders of the company
Dividend to shareholders of the parent company $-80,893$ $-80,893$
Reclassification terminated option program
Closing balance December 31, 2016 89,953 $-84,227$ 289 557,223 563,238
Changes in equity in the
period of January 1, - June 30, 2016
T otal comprehensive income $-2,779$ $-1,210$ 47,602 43,613
Total non-owners changes $-2,779$ $-1,210$ 47,602 43,613
Transacitions with equity holders of the company
Dividend to shareholders of the parent company $-80,893$ $-80,893$
Reversal unpaid additional purchase consideration 888 888
Closing balance June 30, 2016 89,953 $-91,466$ $-1,139$ 512,918 510,266
Changes in equity in the
period of January 1, - June 30, 2017
T otal comprehensive income $-9,774$ 133 72,970 63,329
Total non-owners changes $-9,774$ 133 72,970 63,329
Transacitions with equity holders of the company
Dividend to shareholders of the parent company $-80,893$ $-80,893$
Closing balance June 30, 2017 80.053 94.001 422 549.300 545.675
2017-04-01 2016-04-01 2017-01-01 2016-01-01 2016-01-01
Amounts in SEK thous ands 2017-06-30 2016-06-30 2017-06-30 2016-06-30 2016-12-31
Operating activities
Profit/loss before income tax 37,793 24,986 74,043 48,903 92,401
A djustments for non-cash items 11.694 9,732 17,665 18,785 42,649
49,487 34,718 91,708 67,688 132,051
Income tax paid $-985$ $-75$ $-2,234$ $-2,911$ $-5,363$
Cash flow from operating activities
before changes in working capital 48,502 34,642 89,474 64,776 129,688
Cash flow from changes in working capital:
Increase $\left(\text{-}\right)$ decrease $\left(\text{+}\right)$ in inventories $-5,165$ $-201$ $-6,343$ 2,679 9,955
Increase $\left(\text{-}\right)$ decrease $\left(\text{+}\right)$ in operating receivables $-136$ $-4,366$ $-8,727$ $-1.946$ $-8,821$
Increase $(+)$ decrease $(-)$ in operating liabilities $-149$ $-997$ $-2,164$ 419 8,250
Cash flow from operating activities 43,053 29,077 72,241 65.929 139,072
Investing activities
Acquisition of intangible assets $-7,763$ $-10,518$ $-11,973$ $-17,639$ $-34,322$
Acquisition of property, plant and equipment $-2.912$ $-1,562$ $-4,760$ $-2,607$ $-13,218$
Acquisition of financial assets $-791$ $\Omega$ $-890$ $-20,620$
Sale of financial assets 626 $\blacksquare$ 1,113 $\blacksquare$ 435
Cash flow from investing activities $-10,048$ $-12,871$ $-15,620$ $-21,137$ $-67,726$
Financing activities
Dividend to shareholders $-80,893$ $-80,893$ $-80,893$ $-80,893$ $-80,893$
Repayment of loans $-46$ $-64$ $-88$ $-165$ $-259$
Cash flow from financial activities $-80.939$ $-80.957$ $-80.981$ $-81,058$ $-81,152$
Cash flow for the period 47.934 $-64,750$ $-24.361$ $-36,266$ $-9,807$
Cash and cash equivalents opening balance 152,097 163,479 128,622 134,885 134,885
Exchange differences in liquid assets $-2,526$ 843 $-2,625$ 952 3,544
Cash and equivalents closing balance 101,637 99,572 101,637 99,572 128,622
Additional information:
Adjustments for non-cash items
Depreciations and impairments 9,031 12,786 17,295 23,473 43,825
Other items 2.663 $-3.054$ 370 $-4,688$ $-1,176$
Total 11.694 9,732 17,665 18,785 42,649
2017-04-01 2016-04-01 2017-01-01 2016-01-01 2016-01-01
Amounts in SEK thous ands 2017-06-30 2016-06-30 2017-06-30 2016-06-30 2016-12-31
Net sales 585 567 1,175 1,132 2,287
Administrative expenses $-4,771$ $-4,417$ $-9,368$ $-9,606$ $-19,227$
Research and development costs $-803$ $-600$ $-1,526$ $-1,171$ $-2,077$
Other operating items $\mathbf{1}$ 91 30 24 -86
Operating expenses $-5,574$ $-4,926$ $-10,865$ $-10,752$ $-21,389$
Operating profit/loss $-4,989$ $-4,359$ $-9,690$ $-9,621$ $-19,103$
Profit/loss from financial investments:
Interest income from receivables from group companies 145
Interest expense from liabilities to group companies -656 $-615$ $-1,311$ $-1.226$ $-2,581$
Result from participations in group companies ٠ 2.793 2,793
Other interest and similar income 2.212 3,492 2.218 1
Other interest and similar expenses $-340$ $-340$ $-2,578$
Group contribution received ٠ 85,500
Financial net income 1,555 -954 2,180 3,445 83,281
Profit/loss before income tax $-3,434$ $-5,314$ $-7,510$ $-6,175$ 64,178
Tax expenses 274 1,419 274 1,419 1,574
Total profit/loss for the period $-3,159$ $-3,894$ $-7,235$ $-4,756$ 65,753
STATEMENT OF COMPREHENSIVE INCOME PARENT
Total profit/loss for the period $-3,159$ $-3,894$ $-7,235$ $-4,756$ 65,753
Other comprehensive income:
Components that may be reclassified to net income:
Translation differences related to
non Swedish subsidiaries
Total comprehensive income, parent $-3,159$ $-3,894$ $-7,235$ $-4,756$ 65,753
Amounts in SEK thous ands 2017-06-30 2016-12-31
ASSETS
Non-current assets
Intangible assets
Patents and licenses 9,645 9,243
Financial assets
Investments in group companies 469,271 469,271
Receivables from group companies 11,852 12,599
Shares in associated companies 19,284 19,284
Deferred tax as set 40,120 39,846
540,526 540,999
Total non-current assets 550,171 550,242
Current assets
Current receivables
Receivables from group companies 2,885 72,419
Other receivables 256 386
Prepaid expenses and accrued income 766 1,067
3,907 73,872
Cash and cash equivalents 1,533 1,392
Total current assets 5,440 75,264
TOTAL ASSETS 555,612 625,506
EQUITY, PROVISIONS AND LIABILITIES
Equity
Restricted equity
Share capital 89,953 89,953
89,953 89,953
Unrestricted equity
Fair value reserve
Retained earnings 392,507 407,647
Profit/loss for the year $-7,235$ 65,753
385,272 473,400
Total equity 475,225 563,353
Current liabilities
Other financial liabilities
Trade payables 419 1,240
Liabilities to group companies 75,652 55,502
Other current liabilities 122 122
Accrued expenses and prepaid income 4,194 5,289
80,387 62,153
TOTAL EQUITY, PROVISIONS AND LIABILITIES 555,612 625,506
Pledged assets 22,500 22,500
Contingent liabilities

Accounting principles

The Group reporting of Biotage is based on International Financial Reporting Standards as adopted by the EU. The Group's interim report is prepared in accordance with IAS 34 Interim Reporting and the Swedish Accounting Act. The parent company's interim report is prepared in accordance with the Swedish Accounting Act and The Swedish Financial Reporting Board's recommendation RFR 2 Reporting for Legal Entities. The Group and the parent company have applied the same accounting principles and calculation methods in the interim report as in the latest annual report. Information according to IAS 34 Interim Reporting is given in notes as well as in other places in the interim report. Changed and new standards and interpretations from IASB and IFRS Interpretations Committee which have come into effect and apply to the fiscal year 2017 have not had any effect on the Group's financial reporting.

For balance sheet items figures in brackets refer to the value at the end of the corresponding period last year. For result and cash flow items the corresponding period last year is referred to.

Fair value

Biotage has a financial asset of 1.0 MSEK measured as fair value concerning an option to acquire all outstanding shares in Chreto Aps. Biotage owns 22 percent of Chreto. Calculations of fair value are based on level 3 in the fair value hierarchy, which means that fair value has been established according to a valuation model where essential inputs are based on unobservable data.

Other financial assets and financial debts are measured according to accrued acquisition value and the value reported for these is considered to be a good approximation of fair value.

In the preparation of the Group's and the parent company's interim reports, the same accounting principles and calculation methods were applied as in the preparation of the Annual Report for 2016. These are described on pp. 43-50 in the Annual Report.

Key ratios and financial metrics

For a summary of definitions of the key ratios and financial metrics used in the Group's financial reporting, see Biotage's Annual Report 2016, page 34.

Financial metrics in the interim report not defined according to IFRS

In this report Biotage discloses information that the corporate management uses to assess the development of the Group. Some of the financial metrics presented are not defined according to IFRS. The company believes that these metrics give valuable supplementary information to stakeholders and corporate management, as they contribute to the evaluation of relevant trends and the company's performance. As not all companies calculate financial metrics in the same way, they are not always comparable with the metrics used by other companies. These financial metrics should thus not be seen as a substitute for metrics defined according to IFRS.

Effective July 3, 2016 ESMA's guidelines on "alternative performance measures" are applied, which means increased information demands concerning financial metrics not defined by IFRS. An explanation of the financial metrics that Biotage finds relevant according to the new guidelines is given below.

Net sales at comparable exchange rates

As the major part of the Group's income is paid in other currencies than the accounting currency SEK, the reported sales are affected to a relatively high degree by exchange rate variations between the periods. In order for stakeholders and corporate management to be able to analyze the sales development cleared of currency effects the company reports the sales development in relation to the comparative period at constant exchange rates. The current period's sales in the respective currencies are recalculated according to the exchange rates used in the reporting of the comparative period.

Sales change in % Apr 1 2017- Apr 1 2016-
Jun 30 2017 Jun 30 2016
Jan 1 2017-
Jun 30
2017
Jan 1 2016-
Jun 30 2016
$\frac{9}{6}$ $\frac{9}{6}$ $\frac{9}{6}$ $\frac{9}{6}$
Sales at comparable exchange rates 15.8 11.1 14.0 10.3
Currency effects 4.7 $-1.1$ 4.6 $-0.2$
Reported change 20.5 10.0 18.6 10.1

Net cash

In order for stakeholders and corporate management to be able to follow and analyze the Group's financial strength, information on the Group's net cash is reported defined as cash reduced by liabilities to credit institutions.

Net cash June 30 2017 June 30 2016
Cash 101,637 99,572
Liabilities to credit institutions 0 0
Net cash 101,637 99, 572

Graphs of net sales and operating result

Biotage has chosen to report graphs of the net sales and the operating result on a rolling 12 month basis as corporate management also follows the development over time on a rolling 12 month basis and believes that this provides supplementary information to the calendar-based interim data otherwise given in the report.

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