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BioGaia

Quarterly Report Aug 20, 2008

3013_ir_2008-08-20_bd19e66e-bdd8-416a-a223-346fe4d39976.pdf

Quarterly Report

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Press Release, 20 August 2008 (12 pages)

BioGaia AB Interim report 1 January – 30 June 2008

(Figures in brackets refer to the same period of the previous year)

  • Net sales amounted to SEK 72.4 million (51.2), an increase of SEK 21.2 million (41%) compared to the same period of last year.
  • Operating profit was SEK 12.6 million (2.6), an improvement of SEK 10 million over same period of last year.
  • Profit before tax was 13.6 million (3.3), an increase of SEK 10.3 million compared to the same period of last year.
  • Profit after tax was SEK 22.1 million (3.3), an improvement of SEK 18.8 million over the same period of last year. The profit includes a tax benefit of SEK 8.5 million pertaining to a change in the deferred tax asset.
  • Earnings per share were SEK 1.29 (0.19).
  • The period's cash flow from operating activities before change in working capital was SEK 16.2 (6.2) million. Total cash flow for the period was SEK 5.0 (1.3) million. Cash and cash equivalents at 30 June 2008 totalled SEK 47.9 (41,1) million.

Key events in the second quarter of 2008

  • Agreement with NeoCare for the sale of BioGaia's Probiotic drops and tablets in Belgium and Luxembourg.
  • Agreement with BERICAP for the sale of LifeTop Cap.
  • Agreement with Verman for the sale of drops and tablets in Russia.

Key events after the end of the second quarter

  • Extended agreement with Ferring for the sale of BioGaia's Probiotic drops and tablets in 10 countries in Latin America.
  • Agreement with AllergyCare AG for the sale of BioGaia's Probiotic drops and tablets in Switzerland.

"What we are now seeing in the form sales and earnings growth is the fruit of a long-term focus on R&D and product development, and that we have a well functioning business model. Our market is growing fast and our own brand is gaining increasingly widespread recognition. We anticipate continued strong sales development," says Managing Director Peter Rothschild.

Latest press releases from BioGaia:

  • 2008-07-24 BioGaia completes its Latin American market coverage and signs agreement for Switzerland
  • 2008-06-24 BioGaia extends partnership with Verman
  • 2008-04-29 BioGaia in strategic alliance with BERICAP

For additional information contact: Peter Rothschild, Managing Director, telephone: +46 8 -555 293 00, Jan Annwall, Deputy Managing Director, telephone: +46 8 - 555 293 00 --------------------------------------------------------------------------------------------------------------------------------------

BioGaia is a biotechnology company that develops, markets and sells probiotic products with documented health benefits. The products are primarily based on the lactic acid bacterium Lactobacillus reuteri (Reuteri), which has probiotic, health-enhancing effects. The class B share of the Parent Company BioGaia AB is quoted on the Small Cap list of the OMX Nordic Exchange Stockholm. www.biogaia.com

BioGaia AB (publ.)

Interim report

1 January – 30 June 2008

Figures in brackets refer to the same period of last year.

The Board of Directors and the Managing Director of BioGaia AB (publ) hereby present the interim report for the period 1 January – 30 June 2008.

BioGaia AB

The company

BioGaia is a biotechnology company that develops, markets and sells probiotic products with documented health benefits. The products are primarily based on the lactic acid bacterium Lactobacillus reuteri (Reuteri) which has health-enhancing effects. BioGaia has also developed unique delivery systems, such as probiotic-containing straws and caps, that make it possible to create probiotic products with a long shelf life.

BioGaia has 38 employees, of whom 15 are based in Stockholm, 16 in Lund, 3 in Raleigh, USA, and 4 in Hiroshima, Japan.

The class B share of the Parent Company BioGaia AB is quoted on the Small Cap list of the OMX Nordic Exchange Stockholm.

Business model

BioGaia's revenue is derived mainly from the sale of finished products, but also from license rights for the use of Reuteri cultures in customers' own products (such as baby formula and dairy products).

The finished probiotic products consist of tablets, drops and oral health products (chewing gum and lozenges), as well as probiotic-containing straws and caps. BioGaia's products are sold through nutrition, food, natural health, pharmaceutical and animal feed companies in 36 countries worldwide. In Sweden, BioGaia's products are sold under the brands Semper Magdroppar and Gum PerioBalance chewing gum in pharmacies, as well as Semper baby and infant formula with active culture and Probiomax gut health tablets in grocery stores.

BioGaia holds patents for the use of Reuteri in all major markets.

The BioGaia brand

Many of BioGaia's products are sold under the customer's own brands. At the end of 2005 BioGaia launched its own brand and today has many distributors in a large number of countries that sell products partly or entirely under the BioGaia brand. Even in cases where customers use their own brands, the BioGaia

brand is featured on the package. BioGaia's strategy is to increase the share of sales consisting of BioGaia-branded products.

Research

BioGaia's research is focused on selection of different probiotics for gut health, the immune system and oral health. Extensive clinical studies have shown that BioGaia's various probiotic products:

  • stimulate the human immune system,

  • protect against GI tract and respiratory tract infections,

  • alleviate the side effects of antibiotic

  • treatment, - reduce the level of H. pylori infection,
  • relieve infantile colic,
  • reduce gum inflammation and the risk for

dental caries, - reduce the risk of infection in premature

infants.

KEY EVENTS IN THE SECOND QUARTER

Launches during the second quarter

  • Ferring, BioGaia's Probiotic drops in Mexico
  • Sunstar Lozenges in the UK
  • Semper infant formula with Reuteri in Sweden

The length of time between contract and launch varies between countries due to differing amounts of time needed for the registration process. The products are normally registered as dietary supplements and in certain cases as pharmaceuticals.

Agreement with NeoCare

In April BioGaia signed an agreement with the Belgium pharmaceutical company NeoCare, giving NeoCare the right to sell BioGaia's Probiotic drops and tablets in Belgium and Luxembourg. The products will be sold under BioGaia's trademark.

Agreement with BERICAP

In April BioGaia entered into a global collaborative agreement with Bericap Sarl, a subsidiary of Bericap, one of the world's largest manufacturers of plastic caps and other packaging closures.

Under the agreement, the two companies will collaborate in development, manufacturing and marketing of BioGaia's patented beverage cap, LifeTop Cap, which has been developed to protect sensitive ingredients such as probiotics from the effects of moisture, heat and light in PET bottles.

The Bericap Group will market LifeTop Cap to its customers worldwide, manufacture the plastic details and develop new varieties for

different bottle types. BioGaia will sell and market the product and, through its 50%-owned company Two Pac, handle the ingredients and manufacture the aluminium blister that protects the ingredients and is placed in the LifeTop Cap.

Agreement with Verman for Russia

In June BioGaia signed an additional collaborative agreement with BioGaia's Finnish partner, Verman OY, for the Russian market. Under the agreement, Verman has been granted a non-exclusive right to distribute and sell BioGaia's Probiotic tablets and drops under Verman's own Rela brand on the Russian market. Today Rela is the top-selling probiotic brand in the Finnish pharmacy market. In autumn 2008 Verman will open its own office in Moscow from which it manage the Russian business activities.

Annual meeting of BioGaia

The Annual General Meeting of BioGaia AB on 22 April 2008 resolved unanimously in favour of the following: - that no dividend will be paid to the shareholders

  • re-election of sitting Board members Jan Annwall, Stefan Elving, Thomas Flinck, David Dangoor, Inger Holmström and Paula Zeilon

-election of Jörgen Thorball as a new Board member

  • re-election of David Dangoor as Board Chairman

  • principles for remuneration and other terms of employment of senior executives in accordance with the Board's proposal - principles for nominating committee in accordance with the proposal in the notice of the Annual General Meeting.

KEY EVENTS AFTER THE END OF THE QUARTER

Extended agreement with Ferring

In July BioGaia extended its agreement with Ferring Pharmaceuticals to cover essentially all of Latin America. The agreement gives Ferring exclusive rights to sell BioGaia's Probiotic tablets and drops in 10 additional countries: Colombia, Costa Rica, Nicaragua, Panama, the Dominican Republic, Guatemala, Honduras, Cuba, El Salvador and Trinidad-Tobago. The products will be sold under the BioGaia brand.

Agreement with AllergyCare AG

In July BioGaia signed a distribution agreement with the Swiss-based pharmaceutical company AllergyCare AG. The agreement gives AllergyCare exclusive rights to sell BioGaia's Probiotic drops and tablets in Switzerland and

Liechtenstein. The products will be sold under the BioGaia brand.

EARLIER EVENTS IN 2008

Launches during the first quarter

  • Ferring, BioGaia's Probiotic drops in Jordan
  • Delta Medical, BioGaia's Probiotic drops in Ukraine
  • Ewopharma, BioGaia's Probiotic drops and tablets in Hungary and Bulgaria
  • Ewopharma, BioGaia's Probiotic tablets in the Czech Republic

Global agreement with Sunstar

Sunstar Suisse SA already had an option for a distribution agreement covering a large number of countries. At the beginning of January 2008, Sunstar exercised this option and signed an additional agreement with BioGaia that gives Sunstar exclusive rights to distribute BioGaia's probiotic oral health products in more than 100 countries.

The products will be sold under Sunstar's GUM PerioBalance brand. The agreement also includes possibilities for joint development of new oral products. The launch will be carried out within a 2-year period. One of the first launches will take place in the USA during 2008.

Sunstar already distributes BioGaia's oral health products in Germany, France, Italy, Spain, Sweden and Norway.

BioGaia continues its Japanese venture

The sales of BioGaia's Probiotic drops and soy drinks with BioGaia's Probiotic straw that were started in 2007 are continuing in 2008. Efforts to adapt the products and marketing to the Japanese market are in progress. This venture is part of BioGaia's long-term focus on its own brand. The cost of the Japanese venture during the six-month period amounted to SEK 3.5 million (3.2), which is higher than anticipated. The net cost on a full-year basis is expected to be lower than in the prior year.

New agreement with Ferring

In February BioGaia signed a new agreement with Ferring Pharmaceuticals in Switzerland, giving Ferring exclusive rights to sell BioGaia's Probiotic drops in Australia, New Zealand and Israel, and BioGaia's Probiotic tablets in Brazil, Egypt, Greece, Iran, Jordan, Canada, Lebanon, Mexico, Saudi Arabia and Syria.

The partnership began in the spring of 2006 and has been so successful that Ferring decided, in connection with the extension of its earlier agreement, to begin marketing

BioGaia's Probiotic drops in new markets and to add BioGaia's Probiotic tablets to its product portfolio.

The drops have been launched in Spain, Portugal, the Czech Republic, Canada, Jordan, and Mexico. Ferring also has exclusive rights to sell BioGaia's Probiotic drops in Brazil, Egypt, Greece, Iran, Lebanon, Saudi Arabia and Syria.

FINANCIAL PERFORMANCE IN THE FIRST HALF OF 2008

The Group's net sales amounted to SEK 72.4 million (51.2), an increase of 41% compared to the same period of last year. BioGaia's Probiotic drops in Europe accounted for most of the period's sales growth.

Gross profit reached SEK 47.8 million, an improvement of SEK 13.6 million over the same period of last year.

Selling expenses rose by SEK 1.7 million compared to the same period of last year, which is mainly explained by higher personnel costs and increased costs for the registration of new products.

The period's R&D expenses amounted to SEK 10.7 million (9.0), which is equal to 18% (19%) of total operating expenses. The higher R&D expenses are due to an increased level of activity in clinical studies that began during the half-year period. The amortisation component of R&D expenses amounted to SEK 2.0 million (2.1). Investments in capitalised development expenses totalled SEK 0 million (0).

Operating profit was SEK 12.6 million (2.6), an improvement of SEK 10.0 million compared to the same period of last year.

Profit after tax was SEK 22.1 million (3.3), an increase of SEK 18.8 million compared to the same period of last year.

The Group pays no tax due to the existence of a cumulative loss carryforward. The total loss carryforward in the Group at 31 December 2007 was SEK 123.1 million, of which SEK 113.1 million was attributable to the Swedish companies.

At 30 June 2008 BioGaia recognised a deferred tax asset of SEK 17.5 million, resulting in a tax benefit of SEK 8.5 million in the income statement. In connection with future reports, the company will take a position on whether or not to recognise additional deferred tax assets.

The Group's cash and cash equivalents at 30 June 2008 totalled SEK 47.9 million (41.1). Cash flow for the period was SEK 5.0 million (1.3), an improvement of SEK 3.7 million compared to the same period of last year.

In the first half of 2008, the company paid a conditional shareholder contribution of SEK 2.0 million to the associated company TwoPac AB.

Cash flow from operating activities before change in working capital was SEK 16.2 million (6.2), an improvement of SEK 10 million compared to the same period of last year. The increase in working capital was SEK 7.6 million and is mainly attributable to inventories and accounts receivable.

Consolidated equity amounted to SEK 117.0 million (78.7). The Group's equity/assets ratio was 86% (84%).

Capital expenditure on property, plant and equipment totalled SEK 1.6 million (1.3).

The Parent Company reported net sales of SEK 72.6 million (52.0) and a profit after net financial items of SEK 14.3 million (7.5).

Financial performance in the second quarter of 2008

Second quarter sales amounted to SEK 36.4 million, up by SEK 11.7 million over the same period of last year. Compared to the first quarter, sales increased by SEK 0.3 million.

Operating profit for the second quarter was SEK 5 million, an increase of SEK 4.7 million over the same period of last year. Compared to the first quarter, operating profit fell by SEK 2.6 million due to a somewhat changed product mix during the period that resulted in lower gross margins and higher selling expenses.

Profit after tax for the second quarter was SEK 14.1 million, an improvement of SEK 13.4 million compared to the same period of last year. Profit for the period includes a tax benefit of SEK 8.5 million.

Second quarter cash flow was SEK 1.5 million. Cash flow from operating activities before change in working capital was SEK 6.8 million.

EMPLOYEES

The total number of employees in the Group at 30 June 2008 was 38 (37).

SIGNIFICANT RISKS AND UNCERTAINTIES; GROUP AND PARENT COMPANY

No major changes in significant risks and uncertainties have taken place during the period.

The Japanese venture is associated with increased market risk. Although the market has shown a strong interest in these products, relatively large volumes are needed to achieve adequate profitability.

The shares in the associated company (TwoPac AB) and the receivable from the associated company amounted to a total of SEK 11.6 million (10.6). TwoPac AB's primary operations are development of equipment and manufacturing of BioGaia's Probiotic drops and straws and LifeTop Cap on behalf of BioGaia. BioGaia's assessment is that the cash flow from TwoPac will generate good profitability, for which reason no impairment loss was recognised on the balance sheet date. Should BioGaia's investment fail in full or in part, the Company may be forced to recognise an impairment loss on all or parts of the holding in and receivables from the associated company.

BioGaia's capitalised development expenditure amounts to SEK 6.6 million, of which SEK 2.1 million refers to the LifeTop Cap project. BioGaia has a sales agreement for LifeTop Cap and has received inquiries from a number of potential customers. BioGaia has also signed a collaborative agreement with BERICAP (see above), one of the world's largest manufacturers of plastic caps. BioGaia's assessment is that the cash flow

from LifeTop Cap will generate good profitability, for which reason no impairment loss has been recognised. Should this investment fail in full or in part, BioGaia may be forced to recognise an impairment loss on all or parts of the project cost.

FUTURE OUTLOOK

BioGaia's goal is to create strong value growth and a good return for the shareholders. This will be achieved through a greater emphasis on the BioGaia brand, increased sales to both existing and new customers and a controlled cost level.

In 2008 and 2009 BioGaia expects the tablets, drops and oral health products to be launched in a large number of countries.

In view of the Company's strong portfolio of innovative products partly under the company's own brand, successful clinical trials and growing distribution network covering a large share of the key markets, BioGaia's future outlook is bright.

CONSOLIDATED INCOME STATEMENTS

April April
(Amounts in SEK 000s) Jan-June Jan-June June June Jan-Dec
2008 2007 2008 2007 2007
Net sales 72,448 51,163 36,369 24,726 106,580
Cost of goods sold -24,663 -16,985 -13,006 -8,163 -35,122
Gross profit 47,785 34,178 23,363 16,563 71,458
Other operating income 238 437 74 411 1,691
Selling expenses -19,902 -18,192 -10,605 -9,646 -37,739
Administrative expenses -4,430 -3,967 -2,220 -2,007 -7,487
Research and development expenses -10,707 -9,016 -5,428 -4,677 -17,938
Other operating expenses - - - 28 -
Share in profit/loss of associated company -410 -840 -150 -373 -1 103
Operating profit 12,574 2,600 5,034 299 8,882
Financial income and expenses 1,055 686 581 363 1,807
Profit before tax 13,629 3,286 5,615 662 10,689
Tax 8,500 - 8,500 - 8,970
PROFIT FOR THE PERIOD 22,129 3,286 14,115 662 19,659
Earnings per share
Basic earnings per share (average number of
shares), SEK
1.29 0.19 0.82 0.04 1.14
Diluted earnings per share, SEK 1.29 0.19 0.82 0.04 1.14
Number of shares, thousands 17,208 17,208 17,208 17,208 17,208
Average number of shares, thousands 17,208 17,208 17,208 17,208 17,208
Average number of shares after dilution,
thousands 17,208 17,208 17,208 17,208 17,208
CONSOLIDATED BALANCE SHEETS 30 June 31 Dec 30 June
(Amounts in SEK 000s) 2008 2007 2007
ASSETS
Intangible assets 6,631 8,199 9,685
Tangible assets 3,645 2,617 2,364
Participations in associated company 7,175 5,585 4,348
Long-term receivables 4,400 4,400 5,400
Deferred tax asset 17,500 9,000 -
Other long-term receivables 46 27 18
Current assets excl. cash and cash
equivalents 48,304 37,968 31,319
Cash and cash equivalents 47,924 42,977 41,087
TOTAL ASSETS 135,625 110,773 94,221
EQUITY AND LIABILITIES
Shareholders' equity 117,020 94,910 78,696
Interest-free current liabilities 18,605 15,863 15,525
TOTAL EQUITY AND LIABILITIES 135,625 110,773 94,221
CONSOLIDATED CASH FLOW
STATEMENTS
Jan-June Jan-June April
June
April
June
Jan-Dec
(Amounts in SEK 000s) 2008 2007 2008 2007 2007
Operating activities
Operating profit 12,574 2,600 5,034 299 8,882
Depreciation/amortisation 2,079 2,090 1,059 1,067 3,979
Capital gains/losses on the sale of fixed
assets
7 - - - -
Share in profit/loss of associated company 410 840 150 373 1,103
Other non-cash items 30 -33 2 2 -12
Interest received and paid 1,055 686 581 363 ,
1,807
Cash flow from operating activities before
changes in working capital
16,155 6,183 6,826 2,104 15,759
Changes in working capital -7,596 -4,183 -4,185 -181 ,
-10,671
Cash flow from operating activities 8,559 2,000 2,641 1,923 5,088
Cash flow from investing activities -3,581 -1,340 -1,183 -114 -2,516
Cash flow from financing activities - 686 - 686 ,
686
Cash flow for the period
Cash and cash equivalents at beginning of
4,978 1,346 1,458 2,495 3,258
period
Exchange differences in cash and
42,977 39,719 46,487 38,626 39,719
cash equivalents
Cash and cash equivalents at end of
-31 22 -21 -34 -
period 47,924 41,087 47,924 41,087 42,977

CONSOLIDATED STATEMENT OF CHANGES IN

(Amounts in SEK 000s) Jan-June Jan-June Jan-Dec
2008 2007 2007
At beginning of period 94,910 74,530 74,530
The period's translation difference -19 194 35
Warrants in BioGaia AB - 686 686
Profit for the period 22,129 3,286 19,659
At end of period 117,020 78,696 94,910

SEGMENT REPORTING – GROUP

(Amounts in SEK 000s) Jan-June Jan-June Jan-Dec
Sales 2008 2007 2007
Europe 48,999 33,231 62,354
USA and Canada 2,504 3,412 7,736
Asia 14,245 11,257 25,895
Rest of world 6,700 3,263 10,595
72,448 51,163 106,580

RELATED PARTY TRANSACTIONS, GROUP AND PARENT COMPANY

(Amounts in SEK 000s)

The Group has a 50% holding in TwoPac AB, which is reported as an associated company.

The following transactions have taken place with TwoPac AB:

Jan-June Jan
June
Jan
Dec
2008 2007 2007
Interest income 144 142 304
Shareholder contributions paid 2 000 - 500
Loan converted to shareholder contribution - - 1,000
Purchase of goods 3,267 335 2,259
Advance payments for future deliveries - 600 600
Purchase of machinery and equipment - 1,195 1,195

The closing balance at the end of the period was as follows:

Long-term receivables from TwoPac AB

30 June 30 June 31 Dec
2008 2007 2007
Long-term receivables from TwoPac AB 4,400 5,400 4,400
Current transactions with related parties
Current receivables from TwoPac AB 74 72 85
Current liabilities to TwoPac AB -1,031 -92 -
-957 -20 85
PARENT COMPANY INCOME STATEMENTS Jan-June Jan-June Jan-Dec
2008 2007 2007
Net sales 72,635 52,044 107,034
Cost of goods sold -24,695 -17,908 -35,827
Gross profit 47,940 34,136 71,207
Selling expenses -19,852 -14,846 -39,565
Administrative expenses -4,429 -3,967 -7,488
Research and development expenses -10,961 -8,995 -17,784
Other operating income 238 437 1,691
Operating profit 12,936 6,765 8,061
Result from participations in associated company - - -1,103
Net financial items 1,314 770 2,086
Profit before tax 14,250 7,535 9,044
Tax expense for the period 8,500 - 9,000
PROFIT FOR THE PERIOD 22,750 7,535 18,044
PARENT COMPANY BALANCE SHEETS 30 June 30 June 31 Dec
2008 2007 2007
ASSETS
Intangible assets 6,631 9,685 8,199
Tangible assets 3,347 2,161 2,287
Shares in group companies 4,137 4,137 4,137
Shares in associated company 7,585 5,188 5,585
Long-term receivables from subsidiaries 1,801 4,796 1,325
Long-term receivables from associated company 4,400 5,400 4,400
Deferred tax asset 17,500 - 9,000
Current assets excl. cash and cash equivalents 46,259 30,918 36,392
Cash and cash equivalents 47,023 40,221 42,103
TOTAL ASSETS 138,683 102,506 113,428
EQUITY AND LIABILITIES
Shareholders' equity 117,658 84,399 94,908
Interest-free current liabilities 21,025 18,107 18,520
TOTAL EQUITY AND LIABILITIES 138,683 102,506 113,428
Pledged assets and contingent liabilities for the Parent
Company
Floating charges 2,000 2,000 2,000
Guarantees None None None
PARENT COMPANY CASH FLOW STATEMENTS Jan-June Jan-June Jan-Dec
2008 2007 2007
Operating activities
Operating profit 12,936 6,765 8,061
Depreciation/amortisation 2,021 2,056 3,902
Capital gains/losses on the sale of fixed assets 7 - -
Write-down of receivable from subsidiary 1) 3,258 - 7,330
Other non-cash items 29 -39 -8
Interest received and paid 1,699 769 2,086
Cash flow from operating activities before changes
in working capital
19,950 9,551 21,371
Changes in working capital -7,363 -2,559 -9,373
Cash flow from operating activities 12,587 6,992 11,998
Cash flow from investing activities -7,639 -6,136 -9,229
Cash flow from financing activities - 686 686
Cash flow for the period 4,948 1,542 3,455
Cash and cash equivalents at beginning of period 42,103 38,640 38,640
Exchange differences in cash and cash equivalents -28 39 8
Cash and cash equivalents at end of period 47,023 40,221 42,103

1) Reported net in investing activities at 31 December 2007.

PARENT COMPANY STATEMENT OF CHANGES IN EQUITY

(Amounts in SEK 000s) Jan-June Jan-June Jan-Dec
2008 2007 2007
At beginning of period 94,908 76,178 76,178
New issue of warrants - 686 686
Profit for the period 22,750 7,535 18,044
At end of period 117,658 84,399 94,908
SEGMENT REPORTING – PARENT COMPANY Jan-June Jan-June Jan-Dec
(Amounts in SEK 000s) 2008 2007 2007
Europe 48,849 33,231 62,269
USA and Canada 2,504 3,316 7,544
Asia 14,582 12,234 26,626
Rest of world 6,700 3,263 10,595
72,635 52,044 107,034
CONSOLIDATED KEY RATIOS 1) Jan-June Jan-June Jan-Dec
2008 2007 2007
Return on
- average shareholders' equity 20.9% 4.3% 23.2%
- average capital employed 12.9% 4.3% 12.7%
Capital employed, SEK 000s 117,020 78,696 94,910
Number of shares, thousands 17,208 17,208 17,208
Average number of shares, thousands 17,208 17,208 17,208
Number of outstanding warrants,
thousands
129 129 129
Average number of outstanding warrants
with a dilutive effect, thousands
- - -
Average number of shares after dilution,
thousands
17,208 17,208 17,208
Basic earnings per share, SEK 1.29 0.19 1.14
Diluted earnings per share, SEK 1.29 0.19 1.14
Equity per share, SEK 6.80 4.57 5.52
Equity per share after dilution, SEK 6.80 4.57 5.52
Equity/assets ratio 86% 84% 86%
Average number of employees 37 36 37

1) The definitions of key ratios correspond to those in the annual report.

ACCOUNTING POLICIES

The consolidated financial statements have been prepared in compliance with the International Financial Reporting Standards (IFRS) established by the International Accounting Standards Board (IASB) and the interpretations published by the International Financial Reporting Interpretations Committee (IFRIC) that have been endorsed by the European Commission for application in the EU.

This interim report has been prepared for the Group in accordance with IAS 34, Interim Financial Reporting, and the Annual Accounts Act, and for the Parent Company in accordance with the Annual Accounts Act.

The Group and the Parent Company apply the same accounting and valuation principles as in the 2007 annual report.

FINANCIAL CALENDAR

23 October 2008 Interim report 1 January – 30 September 2008 12 February 2009 Year-end report 2008

This interim report provides a true and fair picture of the business activities, financial position and results of operations of the Parent Company and the Group, and describes the significant risks and uncertainties to which the Parent Company and the Group companies are exposed.

Stockholm, 20 August 2008

David Dangoor Jan Annwall Stefan Elving Board Chairman Board member Board member

Thomas Flinck Inger Holmström Jörgen Thorball Board member Board member Board member

Paula Zeilon Peter Rothschild Board member Managing Director

The information in this interim report was submitted for publication on 20 August 2008, 8:30 a.m. CET.

REVIEW REPORT

Introduction

I have reviewed the interim report for BioGaia AB (publ), corporate identity number 556380-8723 at 30 June 2008 and for the six-month period then ended. The Board of Directors and Managing Director are responsible for the preparation and presentation of this interim financial information in accordance with IAS 34 and the Swedish Annual Accounts Act. My responsibility is to express a conclusion on this interim financial information based on my review.

Scope of review

I conducted my review in accordance with the Standard on Review Engagements SÖG 2410, Review of Interim Financial Information Performed by the Independent Auditor of the Entity, issued by FAR. A review consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Standards on Auditing in Sweden (RS) and other generally accepted auditing practices. The procedures performed in a review do not enable me to obtain a level of assurance that would make me aware of all significant matters that might be identified in an audit. Therefore, the conclusion expressed based on a review does not give the same level of assurance as a conclusion based on an audit.

Conclusion

Based on my review, nothing has come to my attention that causes me to believe that the accompanying interim financial information is not, in all material aspects, prepared in accordance with IAS 34 and the Swedish Annual Accounts Act and for the Parent Company in accordance with the Swedish Annual Accounts Act.

Stockholm, 20 August 2008

Lena de Rosche Authorised Public Accountant Grant Thornton Sweden AB

BioGaia AB Box 3242 SE-103 64 STOCKHOLM, Sweden Street address: Kungsbroplan 3A, Stockholm Telephone: +46 (0)8 555 293 00 www.biogaia.com Corp. identity no. 556380-8723

For additional information contact: Peter Rothschild, Managing Director, telephone: +46 (0)8 - 555 293 00, Jan Annwall, Deputy Managing Director, telephone: +46 (0)8 - 555 293 00

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