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BioGaia

Quarterly Report Apr 22, 2008

3013_10-q_2008-04-22_70e1692c-ff3b-42e8-9cbd-b902caa8bb4d.pdf

Quarterly Report

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Press Release, 22 April 2008 (10 pages) BioGaia AB Interim report 1 January – 31 March 2008 (Figures in brackets refer to the same period of the previous year)

  • Net sales amounted to SEK 36.1 million (26.4), an increase of SEK 9.7 million (37%) compared to the same period of last year.
  • Operating profit was SEK 7.5 million (2.3), an improvement of SEK 5.2 million compared to the same period of last year.
  • Profit after tax was SEK 8.0 million (2.6), an improvement of SEK 5.4 million compared to the same period of last year.
  • Earnings per share were SEK 0.47 (0.15).
  • Cash flow from operating activities before change in working capital was SEK 9.3 million (4.1). Total cash flow for the period was SEK 3.5 (-1.1). Cash and cash equivalents at 31 March 2008 totalled SEK 46.5 million.

Key events in the first quarter of 2008

  • Agreement with Sunstar for the sale of oral health products in more than 100 countries.
  • BioGaia continues its Japanese venture.
  • New and extended agreement with Ferring for the sale of BioGaia's Probiotic drops and tablets in a number of countries.

Key events after the end of the first quarter

  • Agreement with Neocare for the sale of BioGaia's Probiotic drops and tablets in Belgium and Luxembourg

Latest press releases from BioGaia: 2008-04-21 BioGaia signs agreement for Belgium and Luxembourg 2008-03-19 Notice of Annual General Meeting of BioGaia AB 2008-02-20 BioGaia signs new agreement with Ferring Pharmaceuticals

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

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BioGaia AB (publ.)

Interim report

1 January – 31 March 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 – 31 March 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 37 employees, of whom 15 are based in Stockholm, 14 in Lund, 3 in Raleigh, USA, and 5 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 (drops) and GUM Periobalance (chewing gum) int the pharmacies and Semper Fullkornsvälling (baby formula with active culture, Prima Liv drinking yoghurt by Skånemejerier and Probiomax

Maghälsotabletter (tablets) in supermarkets.

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

The BioGaia brand

Earlier, many of BioGaia's products have been sold under the customer's own brands. BioGaia launched its own brand at the end of 2005 and today has several customers 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 FIRST QUARTER

Launches during the quarter

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

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.

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 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.

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 and Jordan, and will be launched in Mexico in the second quarter of 2008. Ferring also

has exclusive rights to sell BioGaia's Probiotic drops in Brazil, Egypt, Greece, Iran, Lebanon, Saudi Arabia and Syria.

KEY EVENTS AFTER THE END OF THE QUARTER

Agreement with NeoCare

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

FINANCIAL PERFORMANCE IN THE FIRST QUARTER OF 2008

The Group's net sales amounted to SEK 36.1 million (26.4), an increase of 37% compared to the same period of last year. Compared to the previous quarter, net sales rose by SEK 4.1 million (13%).

BioGaia's Probiotic drops in Europe accounted for most of the period's sales growth.

Gross profit reached SEK 24.4 million, an improvement of SEK 6.8 compared to the same period of last year.

Selling expenses were up by SEK 0.7 million over the same period of last year, which is explained by higher personnel costs and increased costs for the registration of new products.

The period's R&D expenses amounted to SEK 5.3 million (4.3), which is equal to 18% (18%) of total operating expenses. The higher R&D expenses are due to an increased level of activity in clinical studies that began during the quarter. The amortisation component of research and development expenses amounted to SEK 0.8 million (0.9). Investments in capitalised development expenses totalled SEK 0 million (0).

Operating profit was SEK 7.5 million (2.3), an improvement of SEK 5.2 million compared to the same period of last year.

Profit after tax amounted to SEK 8,0 million (2,6), an increase of SEK 5,4 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 at 31 December 2007 was SEK 123.1 million.

The Group's cash and cash equivalents at 31 March 2008 totalled SEK 46.5 million (38.6).

Cash flow for the quarter was SEK 3.5 million (-1.1), an improvement of SEK 4.6 million compared to the same period of last year.

In the first quarter of 2008, the company paid a conditional shareholder contribution of SEK 1.0 million to the associated company TwoPac AB.

Cash flow from operating activities before change in working capital was SEK 9.3 million (4.1), an improvement of SEK 5.2 million compared to the same period of last year. The increase in working capital was SEK 3.4 million and is mainly attributable to inventories and accounts receivable.

Consolidated equity amounted to SEK 102.9 million (77.1). The Group's equity/assets ratio was 85% (84%).

Capital expenditure on tangible assets totalled SEK 1.4 million (1.2).

The Parent Company reported net sales of SEK 36.2 million (26.9) and a profit after net financial items of SEK 9.8 million (5.2).

EMPLOYEES

The number of employees in the Group at 31 March 2008 was 37 (36).

SIGNIFICANT RISKS AND UNCERTAINTIES; GROUP AND PARENT COMPANY

No major changes in significant risks and uncertainties have taken place during the period. See pages 4 and 5 and Note 29 of the annual report for 2007.

FUTURE OUTLOOK

BioGaia's goal is to provide the shareholders with a good return through long-term profitability based on increased sales to both existing and new customers and limited growth in the cost level.

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

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

CONSOLIDATED INCOME STATEMENTS

(Amounts in SEK 000s) Jan-Mar Jan-Mar Jan-Dec
2008 2007 2007
Net sales 36,079 26,437 106,580
Cost of goods sold -11,657 -8,822 -35,122
Gross profit 24,422 17,615 71,458
Other operating income 164 26 1,691
Selling expenses -9,297 -8,546 -37,739
Administrative expenses -2,210 -1,960 -7,487
Research and development expenses -5,279 -4,339 -17,938
Other operating expenses - -28 -
Share in profit/loss of associated company -260 -467 -1,103
Operating profit 7,540 2,301 8,882
Financial income and expenses 474 323 1,807
Profit before tax 8,014 2,624 10,689
Tax expense for the period - - 8,970
PROFIT FOR THE PERIOD 8,014 2,624 19,659
Earnings per share
Earnings per share (average number of shares),
SEK
0.47 0.15 1.14
Earnings per share after dilution, SEK 0.47 0.15 1.14
Number of shares, thousands 17,208 17,208 17,208
Average number of shares, thousands 17,208 17,208 17,208
Average number of shares after dilution,
thousands
17,208 17,208 17,208
CONSOLIDATED BALANCE SHEETS 31 Mar 31 Dec 31 Mar
(Amounts in SEK 000s) 2008 2007 2007
ASSETS
Intangible assets 7,399 8,199 10,545
Tangible assets 3,781 2,617 2,466
Participations in associated company 6,325 5,585 4,721
Long-term receivables 4,400 4,400 5,400
Deferred tax asset 9,000 9,000 -
Other long-term receivables 25 27 19
Current assets excl. cash and cash equivalents 43,985 37,968 30,062
Cash and cash equivalents 46,487 42,977 38,626
TOTAL ASSETS 121,402 110,773 91,839
EQUITY AND LIABILITIES
Shareholders' equity 102,924 94,910 77,112
Interest-free current liabilities 18,478 15,863 14,727

TOTAL EQUITY AND LIABILITIES 121,402 110,773 91,839

CONSOLIDATED CASH FLOW STATEMENTS Jan-Mar Jan-Mar Jan-Dec
(Amounts in SEK 000s) 2008 2007 2007
Operating activities
Operating profit 7,540 2,301 8,882
Depreciation/amortisation 1,020 1,023 3,979
Capital gains/losses on the sale of fixed assets 7 - -
Share in profit/loss of associated company 260 467 1,103
Other non-cash items 28 -35 -12
Interest received and paid 474 323 1,807
Cash flow from operating activities before
changes in working capital
9,329 4,079 15,759
Changes in working capital -3,411 -4,002 -10,671
Cash flow from operating activities 5,918 77 5,088
Cash flow from investing activities -2,398 -1,226 -2,516
Cash flow from financing activities - - 686
Cash flow for the period 3,520 -1,149 3,258
Cash and cash equivalents at beginning of period
Exchange differences in cash and
42,977 39,719 39,719
cash equivalents -10 56 -
Cash and cash equivalents at end of period 46,487 38,626 42,977

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

(Amounts in SEK 000s) Jan-Mar Jan-Mar Jan-Dec
2008 2007 2007
At beginning of period 94,910 74,530 74,530
The period's translation difference - -42 35
Warrants in BioGaia AB - - 686
Profit for the period 8,014 2,624 19,659
At end of period 102,924 77,112 94,910

SEGMENT REPORTING – GROUP

(Amounts in SEK 000s) Jan-Mar Jan-Mar Jan-Dec
Sales 2008 2007 2007
Europe 28,154 16,048 62,354
USA and Canada 372 1,377 7,736
Asia 6,837 7,048 25,895
Rest of world 716 1,964 10,595
36,079 26,437 106,580
PARENT COMPANY INCOME STATEMENTS Jan-Mar Jan-Mar Jan-Dec
2008 2007 2007
Net sales 36,176 26,857 107,034
Cost of goods sold -11,651 -9,029 -35,827
Gross profit 24,525 17,828 71,207
Selling expenses -8,203 -6,731 -39,565
Administrative expenses -2,210 -1,960 -7,488
Research and development expenses -5,287 -4,298 -17,784
Other operating income 164 26 1,691
Other operating expenses - -28 -
Operating profit 8,989 4,837 8,061
Result from participations in associated company - - -1,103
Net financial items 766 355 2,086
Profit before tax 9,755 5,192 9,044
Tax expense for the period - - 9,000
PROFIT FOR THE PERIOD 9,755 5,192 18,044
PARENT COMPANY BALANCE SHEETS 31 Mar 31 Mar 31 Dec
2007 2007 2007
ASSETS
Intangible assets 7,399 10,545 8,199
Tangible assets 3,474 2,227 2,287
Shares in group companies 4,137 4,137 4,137
Shares in associated company 6,585 5,188 5,585
Long-term receivables from subsidiaries 2,840 3,927 1,325
Long-term receivables from associated company 4,400 5,400 4,400
Deferred tax asset 9,000 - 9,000
Current assets excl. cash and cash equivalents 42,017 29,207 36,392
Cash and cash equivalents 45,876 37,832 42,103
TOTAL ASSETS 125,728 98,463 113,428
EQUITY AND LIABILITIES
Shareholders' equity 104,663 81,370 94,908
Interest-free current liabilities 21,065 17,093 18,520
TOTAL EQUITY AND LIABILITIES 125,728 98,463 113,428

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-Mar Jan-Mar Jan-Dec
2008 2007 2007
Operating activities
Operating profit 8,989 4,837 8,061
Depreciation/amortisation 1,005 1,014 3,902
Capital gains/losses on the sale of fixed assets 7
Other non-cash items 28 -39 -8
Interest received and paid 766 355 2,086
Cash flow from operating activities before changes
in working capital
10,795 6,167 14,041
Changes in working capital -3,081 -5,790 -9,373
Cash flow from operating activities 7,714 377 4,668
Cash flow from investing activities -3,913 -1,224 -1,899
Cash flow from financing activities - - 686
Cash flow for the period 3,801 -847 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 45,876 37,832 42,103

PARENT COMPANY STATEMENT OF CHANGES IN EQUITY

(Amounts in SEK 000s) Jan-Mar Jan-Mar Jan-Dec
2008 2007 2007
At beginning of period 94,908 76,178 76,178
New issue of warrants - - 686
Profit for the period 9,755 5,192 18,044
At end of period 104,663 81,370 94,908
SEGMENT REPORTING – PARENT COMPANY Jan-Mar Jan-Mar Jan-Dec
(Amounts in SEK 000s) 2008 2007 2007
Europe 28,004 16,048 62,269
USA and Canada 372 1,322 7,544
Asia 7,084 7,523 26,626
Rest of world 716 1,964 10,595
36,176 26,857 107,034

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-Mar Jan-Mar Jan-Dec
2008 2007 2007
Interest income 70 70 304
Shareholder contributions paid 1,000 - 500
Loan converted to shareholder contribution - - 1,000
Purchase of goods 925 257 2,259
Advance payments for future deliveries - - 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

31 Mar 31 Mar 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 70 70 85
Current liabilities to TwoPac AB -155 -94 -
-85 -24 85
KEY RATIOS 1) Jan-Mar Jan-Mar Jan-Dec
2008 2007 2007
Return on
- average shareholders' equity 8.1% 3.5% 23.2%
- average capital employed 8.1% 3.4% 12.7%
Capital employed, SEK 000s 102,924 77,112 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
Average number of outstanding warrants with a
dilutive effect, thousands
- - -
Average number of shares after dilution, thousands 17,208 17,208 17,208
Earnings per share, SEK 0.47 0.15 1.14
Earnings per share after dilution, SEK 0.47 0.15 1.14
Equity per share, SEK 5.98 4.48 5.52
Equity per share after dilution, SEK 5.98 4.48 5.52
Equity/assets ratio 85% 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.

CALENDAR

20 August 2008 Interim report 1 January – 30 June 2008 23 October 2008 Interim report 1 January – 30 September 2008

Stockholm, 22 April 2008

The Board of Directors and Managing Director

This interim report has not been examined by the Company's auditors.

The information in this interim report was submitted for publication on 22 April, 8.30 a.m.

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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