Press Release 23 August, 2007 (10 pages) BioGaia AB Interim report 1 January – 30 June 2007 (Figures in brackets refer to the previous year)

Net sales amounted to SEK 51.2 million (41.2), an increase of SEK 10 million (24%).
Operating profit was SEK 2.6 million (0.1), an improvement of SEK 2.5 million.
Profit after tax was SEK 3.3 million (0.5), an improvement of SEK 2.8 million.
Earnings per share were SEK 0.19 (0.03).
The period's cash flow from operating activities before change in working capital was SEK 6.2 million (3.1). Total cash flow for the period was SEK 1.3 million (-1.1). Cash and cash equivalents at 30 June 2007 amounted to SEK 41.1 million.

Key events in the second quarter of 2007

Global agreement with Sunstar for an option to distribute BioGaia's oral health products in more than 100 countries.
Agreement with Earth Biochemical for the right to sell oil drops with Reuteri for dogs in Japan.
Agreement with Biolife for the right to sell BioGaia's newly developed portion-packed sachet containing colostrum and Reuteri in China.
BioGaia's employee incentive scheme was carried out.

Key events after the end of the second quarter

Agreement with Verman for distribution of oral health products in Finland.
Agreement with Thebe Medicare for distribution of oral health products in South Africa.
Agreement with Ferring for distribution of BioGaia's probiotic drops in Brazil, Mexico and Greece.

Latest press releases from BioGaia:

2007-08-16	BioGaia signs new agreement with Ferring Pharmaceuticals
2007-08-09	BioGaia signs agreement for oral health products in South Africa
2007-08-07	BioGaia signs agreement for oral health products in Finland

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

www.biogaia.com

^{-------------------------------------------------------------------------------------------------------------------------------------------------} 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, healthenhancing effects. The class ^B share of the Parent Company BioGaia AB is quoted on the Small Cap list of the Nordic Stock Exchange in Stockholm.

BioGaia AB (publ.) Interim report

1 January – 30 June 2007 Figures in brackets refer to the same period of last year.

The Board of Directors and Managing Director of BioGaia AB (publ) hereby present the interim report for the period 1 January – 30 June 2007.

BIOGAIA AB

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 straws and caps containing probiotics, that make it possible to create probiotic products with a long shelf life.

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 probiotic products:

stimulate the human immune system,
protect against gastrointestinal and

respiratory 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, and
reduce the risk for infection in premature infants.

BioGaia primarily sells finished probiotic products such as tablets, drops, oral health products (chewing gum and lozenges) and probiotic-containing straws and caps, but also sells license rights for the use of Reuteri cultures in customers' own products, such as dairy products and baby formula.

BioGaia's products are sold through nutrition, food, natural health, pharmaceutical and animal feed companies in some 30 countries worldwide. BioGaia holds patents for the use of Reuteri in all major markets.

BioGaia has 37 employees, of whom 16 are based in Stockholm, ¹⁴ in Lund, ² 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 Stock Exchange in Stockholm.

KEY EVENTS IN THE SECOND QUARTER OF 2007

Agreement with Sunstar

In April BioGaia signed an additional agreement with Sunstar Suisse SA giving Sunstar an option within 12 months to obtain exclusive rights to distribute BioGaia's oral health products in more than 100 countries. The first launch under the new agreement is expected to take place in the USA during 2008. Sunstar will pay compensation to BioGaia during the option period.

Under an earlier agreement, Sunstar has the right to sell BioGaia's oral health products in Germany, France, Italy and Spain. The products, which are effective in treating gingivitis and reducing plaque are sold through pharmacies and dental clinics. Sunstar is one of the world's leading oral health companies.

Annual General Meeting of BioGaia AB

On 24 April, a unanimous AGM decided the following:

election of Inger Holmström as a new Board member
election of David Dangoor as the new Board Chairman
an employee incentive scheme in accordance with the Board proposal,
principles for remuneration and other terms of employment of senior executives in accordance with the Board proposal.

Agreement with Earth Biochemichal

In June BioGaia signed an agreement with Earth Biochemical, a company in the Otsuka group, for the right to sell oil drops for dogs in Japan. The oil drops contain a Reuteri strain that has been specially developed for dogs.

Employee incentive scheme

In June BioGaia carried out the warrant programme that was approved by the AGM. The employees subscribed for a total of 128,950 warrants, equal to a dilutive effect of approximately 0.7% in the total number of shares and around 0.5% in the total number of votes. Each warrant entitles the holder to subscribe for one class B share at a price of SEK 76.70 during the period from 15 May 2010 to 31 August 2010. The warrant price was calculated according to the generally accepted Black & Scholes valuation model and was set to SEK 5.32 per warrant.

BioGaia Japan

In the second quarter, the company began trial sales of soy beverages with BioGaia's probiotic straw. Adaptation of the products and marketing strategy to the Japanese

market is in progress. The trial sales will continue in the second half of the year and a decision if and when the launch will take place is expected before the end of the year. The cost of the Japanese venture amounted to SEK 3.2 million in the first half of 2007.

Product launches in the second quarter

Sunstar launched oral health products in Italy and Spain. The products were launched in Germany during the first quarter and the launch in France is taking place in the third quarter.

Ferring launched BioGaia's Probiotic drops in Spain and the Czech Republic.

Semper launched Reuteri drops and baby formula with Reuteri in Sweden. The drops are sold in Swedish pharmacies.

Laboratorios Casen launched Reuteri tablets in Spain.

KEY EVENTS AFTER THE END OF THE SECOND QUARTER

Agreement with Verman

In August BioGaia signed an agreement with Verman OY giving Verman exclusive rights to distribute BioGaia's oral health products in Finland. The products will be sold via pharmacies and dental clinics. The launch of the oral health products is expected at the end of 2007.

Verman sells already BioGaia's probiotic drops and tablets.

Agreement with Thebe

In August BioGaia signed an agreement with Thebe Medicare giving Thebe exclusive rights to distribute BioGaia's oral health products in South Africa. The launch of the oral health products is expected at the end of 2007.

Thebe sells already Reuteri tablets, Reuteri drops and probiotic straws in South Africa.

Agreement with Ferring

In mid-August BioGaia signed an additional agreement with Ferring Pharmaceuticals. The agreement gives Ferring exclusive rights to sell BioGaia's Probiotic drops in Mexico, Brazil and Greece.

The products will be sold under the BioGaia brand. The registration process will start immediately and the launch will take place soon as approval is obtained, which is expected in 2008.

Ferring already sells BioGaia's Probiotic drops in Spain, Portugal, Canada and the Czech Republic.

Ferring also has the right to sell BioGaia's probiotic drops in a number of countries in the Middle East.

EARLIER EVENTS IN 2007

Two agreements with Semper

In January 2007 BioGaia signed an agreement with Semper AB giving Semper the right to sell BioGaia's probiotic drops in Sweden and Norway under the name "Semper Magdroppar". In March BioGaia signed an additional agreement giving Semper the right to use Reuteri in baby formula products for the Nordic market.

Colic study published

At the beginning of 2007 the clinical study on the effects of Reuteri on colic was published in the scientific journal Pediatrics and attracted considerable attention from the media, including coverage by the American TV broadcasting company ABC and Swedish Science Radio P1. The results of the study demonstrate Reuteri's powerful efficacy in treating colic. This study, together with the study carried out on premature infants and large-scale safety studies performed by BioGaia, has further strengthened BioGaia's position in the paediatric area.

Agreement with Delta Medical

In February BioGaia signed a distribution agreement with Delta Medical Promotions AG, Switzerland, giving Delta Medical exclusive rights to sell BioGaia's probiotic drops in Ukraine and non-exclusive rights in Russia. The drops will be sold under the BioGaia brand.

The registration process has started and the launch is scheduled for the end of the year.

Agreement with Everidis

In March BioGaia signed an agreement with Everidis Health Sciences LLC giving Everidis the right to sell BioGaia's probiotic drops, tablets and straws in the USA. The products will be sold under the BioGaia brand to pharmacies and doctors throughout the USA. The launch is expected to begin in the latter part of 2007.

FINANCIAL PERFORMANCE IN THE FIRST HALF OF 2007

The Group posted net sales of SEK 51.2 million (41.2), an increase of 24% compared to the same period of last year. BioGaia's probiotic drops and oral health products accounted for most of the period's sales growth.

The total sales doubled in Europe but fell by 38% in Asia. The drop in Asia is explained by a lump-sum payment in the previous year and decreased orders from two Japanese

customers. The decreased orders are due to owner and organisational changes at these customers. BioGaia is actively working to recover lost sales.

Gross profit for the period was SEK 34.2 million, representing a year-on-year increase of SEK 5.7 million.

Selling expenses rose by SEK 3.0 million over the same period of last year, mainly due to a cost increase of SEK 1.8 million attributable to the Japanese subsidiary and PR activities in the USA. Administrative expenses were up by SEK 0.4 million owing to legal costs in connection with the warrant programme and higher staff costs arising from a decrease in parental leave. R&D expenses were largely unchanged.

Operating profit was SEK 2.6 million (0.1), an improvement of SEK 2.5 million compared to same period of last year.

Profit after tax was SEK 3.3 million (0.5), an improvement of SEK 2.8 million compared to same period of last year.

BioGaia pays no tax as it has a cumulative loss carryforward. The total loss carryforward in the Group at 30 June 2007 amounted to approximately SEK 132 million. No deferred tax assets have been reported.

The Group's cash and cash equivalents at 30 June 2007 totalled SEK 41.1 million.

Cash flow was SEK 1.3 million, an increase of SEK 2.4 million compared to the same period of last year.

Cash flow from operating activities before change in working capital was SEK 6.2 million, an improvement of SEK 3.1 million compared to the same period of last year.

Consolidated equity amounted to SEK 78.7 million. The Group's equity/assets ratio was 84% (81%).

Capital expenditure on tangible assets totalled SEK 1.3 million (0.8). Expenditure on intangible assets was SEK 0 million (0). Amortisation of capitalised development expenses totalled SEK 1.7 million (1.7).

The Parent Company reported net sales of SEK 52 million (41.0) and a profit after tax of SEK 7.5 million (0.7).

Financial performance in the second quarter of 2007

Second quarter sales amounted to SEK 24.7 million, up by SEK 4.4 million over the same period of last year. Compared to the previous quarter, sales decreased by SEK 1.7 million.

Since BioGaia still has a limited number of customers, the timing of deliveries can lead to sizeable variations in income between periods. However, the Company's recurring order intake is rising steadily, which is helping to reduce quarterly variations.

Operating profit for the second quarter was SEK 0.3 million, a year-on-year improvement of SEK 0.1 million. Compared to the first quarter, operating profit fell by SEK 2.0 million. The decrease is due to lower sales and increased selling expenses.

Profit after tax for the second quarter was SEK 0.7 million, a year-on-year improvement of SEK 0.3 million. Compared to the first quarter of 2007, profit declined by SEK 1.9 million. The decrease is due to lower sales and increased selling expenses.

Second quarter cash flow was SEK 2.5 million. Cash flow from operating activities before change in working capital was SEK 2.1 million.

EMPLOYEES

The total number of employees at 30 June 2007 was 37 (33).

SIGNIFICANT RISKS AND UNCERTAINTIES

The trial sales that have been started in Japanese retail shops give rise to increased market risk. Although there is a strong interest in these products in the market, relatively large volumes are needed to achieve good profitability. If the trial sales do not produce the desired results and the launch is not carried out, this could lead to extra ordinary costs.

In other respects no major changes in significant risks and uncertainties took place during the period, see pages 4 and 5 and Note 30 in the 2006 annual report.

FUTURE OUTLOOK

By maintaining a largely stable cost level, increasing sales to existing customers and developing business with new customers, BioGaia's objective is to attain solid and sustainable profitability.

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-June	Jan-June	April- June	April- June	Jan-Dec
	2007	2006	2007	2006	2006
Net sales	51,163	41,218	24,726	20,345	86,792
Cost of goods sold	-16,985	-12,723	-8,163	-6,333	-27,636
Gross profit	34,178	28,495	16,563	14,012	59,156
Other operating income	437	-	411	-	166
Selling expenses	-18,192	-15,224	-9,646	-7,653	-30,886
Administrative expenses	-3,967	-3,577	-2,007	-1,655	-6,847
Research and development expenses	-9,016	-8,838	-4,677	-4,284	-18,755
Other operating expenses	-	-282	28	-15	-433
Share in profit/loss of associated company	-840	-450	-373	-180	-685
Operating profit	2,600	124	299	225	1,716
Financial income and expenses	686	370	363	180	1,039
Tax expense for the period	-	-	-	-	-35
PROFIT FOR THE PERIOD	3,286	494	662	405	2,720
Earnings per share Earnings per share (average number of shares), SEK	0.19	0.03	0.04	0.02	0.16
Earnings per share after dilution, SEK	0.19	0.03	0.04	0.02	0.16
Number of shares, thousands	17,208	17,208	17,208	17,208	17,208
Average number of shares, thousands Average number of shares after dilution,	17,208	17,208	17,208	17,208	17,208
thousands	17,218	17,208	17,218	17,208	17,208

CONSOLIDATED BALANCE SHEETS	30 June	31 Dec	30 June
(Amounts in SEK 000s)	2007	2006	2006
ASSETS
Intangible assets	9,685	11,416	13,270
Tangible assets	2,364	1,389	1,442
Participations in associated company	4,348	5,188	4,423
Long-term receivables	5,418	5,418	5,418
Current assets excl. cash and cash equivalents	31,319	27,633	17,398
Cash and cash equivalents	41,087	39,719	47,167
TOTAL ASSETS	94,221	90,763	89,118
EQUITY AND LIABILITIES
Shareholders' equity	78,696	74,530	72,200
Interest-bearing current liabilities	-	-	2,984
Interest-free current liabilities	15,525	16,233	13,934
TOTAL EQUITY AND LIABILITIES	94,221	90,763	89,118

CONSOLIDATED CASH FLOW STATEMENTS	Jan-June	Jan- June	April- June	April- June	Jan-Dec
(Amounts in SEK 000s)	2007	2006	2007	2006	2006
Operating activities
Operating profit	2,600	124	299	225	1,716
Depreciation/amortisation Capital gains/losses on the sale of fixed assets	2,090 -	2,125 -107	1,067 -	1,060 -107	4,314 -147
Share in profit/loss of associated company	840	450	373	180	685
Other non-cash items	-33	93	2	66	143
Interest received and paid	686	370	363	180	1,039
Cash flow from operating activities before changes in working capital	6,183	3,055	2,104	1,604	7,750
Changes in working capital	-4,183	-1,643	-181	-2,598	-8,581
Cash flow from operating activities	2,000	1,412	1,923	-994	-831
Cash flow from investing activities	-1,340	-2,473	-114	-1,793	-4,566
Cash flow from financing activities	686	-	686	-	-2,984
Cash flow for the period	1,346	-1,061	2,495	-2,787	-8,381
Cash and cash equivalents at beginning of period Exchange differences in cash	39,719	48,349	38,626	50,034	48,349
and cash equivalents Cash and cash equivalents at	22	-121	-34	-80	-249
end of period	41,087	47,167	41,087	47,167	39,719

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

(Amounts in SEK 000s)	Jan- June	Jan- June	Jan-Dec
	2007	2006	2006
At beginning of period	74,530	71,779	71,779
The period's translation difference	194	-73	31
Warrants in BioGaia AB	686	-	-
Profit for the period	3,286	494	2,720
At end of period	78,696	72,200	74,530

SEGMENT REPORTING - GROUP

(Amounts in SEK 000s)	Jan-June	Jan-June	Jan-Dec
Sales	2007	2006	2006
Europe	33,231	16,359	37,290
USA and Canada	3,412	2,830	6,888
Asia	11,257	18,218	32,027
Rest of world	3,263	3,811	10,587
	51,163	41,218	86,792

PARENT COMPANY INCOME STATEMENTS	Jan-June 2007	Jan-June 2006	Jan-Dec 2006
Net sales	52,044	40,985	86,855
Cost of goods sold	-17,908	-12,669	-27,777
Gross profit	34,136	28,316	59,078
Selling expenses	-14,846	-15,224	-28,676
Administrative expenses	-3,967	-3,577	-6,846
Research and development expenses	-8,995	-8,810	-18,553
Other operating income	-	-	80
Other operating expenses	437	-331	-433
Operating profit	6,765	374	4,650
Result from participations in associated company	-	-	-3,712

Net financial items PROFIT FOR THE PERIOD	770 7,535	370 744	1,036 1,974

PARENT COMPANY BALANCE SHEETS	2007-06-30	2006-12-31	2006-06-30
ASSETS
Intangible assets	9 685	11 416	13 270
Tangible assets	2 161	1 145	1 313
Shares in group companies	4 137	4 137	3 568
Shares in associated companies	5 188	5 188	7 900
Long-term receivables from group companies	4 796	-	-
Long-term receivables from associated companies	5 400	5 400	5 400
Current assets excl. cash and cash equivalents	30 918	28 450	16 709
Cash and cash equivalents	40 221	38 640	46 958
TOTAL ASSETS	102 506	94 376	95 118

EQUITY AND LIABILITIES
Shareholder's equity	84 399	76 178	74 948
Interest-bearing current liabilities	-	-	2 984
Interest-free current liabilities	18 107	18 198	17 186
TOTAL EQUITY AND LIABILITIES	102 506	94 376	95 118
PARENT COMPANY CASH FLOW STATEMENTS	Jan-June	Jan-June	Jan-Dec
	2007	2006	2006
Operating activities
Operating profit	6,765	374	4,650
Depreciation/amortisation	2,056	2,076	4,187
Capital gains/losses on the sale of fixed assets	-	-	-60
Other non-cash items	-39	35	143
Interest received and paid	769	370	1,036
Cash flow from operating activities before changes in
working capital	9,551	2,855	9,956
Changes in working capital	-2,559	-966	-10,864
Cash flow from operating activities	6,992	1,889	-908
Cash flow from investing activities	-6,136	-2,444	-4,931
Cash flow from financing activities	686	-	-2,984
Cash flow for the period	1,542	-555	-8,823
Cash and cash equivalents at beginning of period Exchange differences in cash	38,640	47,606	47,606
and cash equivalents Cash and cash equivalents at	39	-93	-143
end of period	40,221	46,958	38,640

PARENT COMPANY STATEMENT OF CHANGES IN EQUITY

(Amounts in SEK 000s)	Jan-June	Jan-June	Jan-Dec
	2007	2006	2006
At beginning of period	76,178	74,204	74,204
The period's translation difference	686	-	-
Result for the period	7,535	744	1,974
At end of period	84,399	74,948	76,178

SEGMENT REPORTING	Jan-June	Jan-June	Jan-Dec
(Amounts in SEK 000s)	2007	2006	2006
Europe	33,231	16,359	37,205
USA and Canada	3,316	2,597	6,583
Asia	12,234	18,218	32,480
Rest of world	3,263	3,811	10,587
	52,044	40,985	86,855

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
	2007	2006	2006
Interest income	142	101	227
Purchase of goods	335	173	527
Advance payments for future deliveries	600	-	-
Purchase of machinery and equipment	1,196	-	-

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

Long-term receivables from related parties

	30 June	31 Dec	30 June
	2007	2006	2006
Long-term receivables from TwoPac AB	5,400	5,400	5,400

Current transactions with related parties
Current receivables from TwoPac AB	72	55	65
Current liabilities to TwoPac AB	-92	-77	-44
	-20	-22	21

KEY RATIOS FOR THE GROUP 1)	Jan- June	Jan- June	Jan-Dec
	2007	2006	2006
Return on
- average shareholders' equity	4.3%	0.7%	4.0%
- average capital employed	4.3%	0.9%	4.0%
Capital employed, SEK 000s	78,696	75,184	74,530
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	-	-
Number of outstanding warrants with a dilutive effect, thousands	10	-	-
Average number of shares after dilution, thousands	17,218	17,208	17,208
Earnings per share, SEK	0.19	0.03	0.16
Earnings per share after dilution, SEK	0.19	0.03	0.16
Equity per share, SEK	4.57	4.20	4.33
Equity per share after dilution, SEK	4.57	4.20	4.33
Equity/assets ratio	84%	81%	82%
Average number of employees	36	33	34

1) The definitions of key ratios correspond to those used 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 consolidated interim report has been prepared in accordance with IAS 34, Interim Financial Reporting, which is consistent with the requirements stated in the Swedish Financial Accounting Standards Council's recommendation RR 31, Interim Financial Reporting for Groups. The Group applies the same accounting and valuation principles as in the 2006 annual report.

Financial calendar:

25 October 2007	Interim report 1 January – 30 September 2007
13 February 2008	2007 year-end report

We hereby give our assurance that this interim report provides a true and fair picture of the business operations, financial position and operating results of the Parent Company and the Group, and presents the significant risks and uncertainties to which the Parent Company and the Group companies are exposed.

Stockholm, 23 August 2007

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

Board Member Board Member Board Member

Thomas Flinck Stina Gestrelius Inger Holmström

Paula Zeilon Peter Rothschild Board Member Managing Director

REVIEW REPORT

Introduction

I have reviewed the interim report for BioGaia AB (publ), corporate identity number 556380-8723, for the period from 1 January to 30 June 2007. The Board of Directors and CEO 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.