Quarterly Report • Aug 21, 2012
Quarterly Report
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"Earlier this year, as previously mentioned, we signed several agreements with Nestlé through which they have among other things obtained exclusive rights to use Lactobacillus reuteri in infant formula throughout the term of patent in order to guarantee their access to our component product in this area. One effect of this is that our reported sales of component products have decreased, although this has been offset by license revenue from Nestlé. Within the framework of these agreements, we have also initiated a distribution collaboration with Nestlé for some of our existing finished consumer products and a close partnership in development of new products related to Nestlé's business.
The extended partnership with Nestle is of major strategic importance for BioGaia and will also create additional resources for development of our own consumer products under the BioGaia brand. This has resulted in the already announced launch of our drops in the fourth quarter through Gerber (100% owned by Nestlé), which is one of the absolutely strongest players in the infant nutrition area in the USA. The product will be sold with prominent exposure of BioGaia's brand. In view of Gerber's position in the US market and the size of its investment, we anticipate substantial growth in our US sales next year and a significant increase in awareness of the BioGaia brand.
Our finished product sales have been affected by our termination of certain existing distribution agreements and the change to new distributors. In spite of this, sales of BioGaia's finished consumer products rose by 9% in the first half of the year and 16% in the second quarter compared to the corresponding periods of 2011", says Peter Rothschild president, BioGaia.
You are welcome to take part in a teleconference on the interim report that will be held today at 10:00 a.m. by President Peter Rothschild and CFO Margareta Hagman. To participate in the conference, please see http://www.biogaia.com/investor-relations for telephone numbers.
BioGaia has published this information in accordance with the Swedish Securities Market Act. The information was issued for publication on 21 August 2012, 8:00 a.m. CET.
Figures in brackets refer to the same period of last year.
The Board of Directors and the President of BioGaia AB (publ) hereby present the interim report for the period from 1 January to 30 June 2012. A brief description of the company's operations is provided on page 15.
Earlier this year, as previously mentioned, we signed several agreements with Nestlé through which they have among other things obtained exclusive rights to use Lactobacillus reuteri in infant formula throughout the term of patent in order to guarantee their access to our component product in this area. One effect of this is that our reported sales of component products have decreased, although this has been offset by license revenue from Nestlé. Within the framework of these agreements, we have also initiated a distribution collaboration with Nestlé for some of our existing finished consumer products and a close partnership in development of new products related to Nestlé's business.
The extended partnership with Nestle is of major strategic importance for BioGaia and will also create additional resources for development of our own consumer products under the BioGaia brand. This has resulted in the already announced launch of our drops in the fourth quarter through Gerber (100% owned by Nestlé), which is one of the absolutely strongest players in the infant nutrition area in the USA. The product will be sold with prominent exposure of BioGaia's brand. In view of Gerber's position in the US market and the size of its investment, we anticipate substantial growth in our US sales next year and a significant increase in awareness of the BioGaia brand.
During the quarter we stepped up efforts to replace our distributors in the markets where we believe this will result in higher growth. Furthermore, we are working actively to start new distributors in the markets where we have already changed, such as Sweden and Spain. For our drops in the USA we have, as mentioned above, switched to absolutely the best distributor possible, namely Gerber. We are now trying to ensure that the transition from our current distributor to Gerber proceeds as smoothly as possible. We are planning additional distributor changes that will naturally cause certain disruptions during 2012 but will lead to increased future growth. In spite of this, sales of BioGaia's finished consumer products rose by 9% in the first half of the year and 16% in the second quarter compared to the corresponding periods of 2011.
Our refocus on oral health products is starting to pay off and in the second quarter we signed distribution agreements for South Africa and a number of smaller countries in Europe. We see good potential in the oral health area and are seeking new distributors with sales forces that work with dentists and oral hygienists, but would also consider other sales channels for this product.
In the past quarter we initiated a relatively complex clinical study in Gothenburg on patients with type 2 diabetes. The hope is that supplementation with our product will lead to a decrease in blood glucose in these patients. This is of course a highly interesting and expanding market, but we are well aware that a great deal of work is required to build up arguments strong enough to alter the treatments doctors recommend to
their patients. With this in mind, parallel to the clinical studies we are also conducting laboratory trials aimed at defining potential mechanistic explanations for the possible effects.
So far, the financial crisis in Europe has not had any major direct impact on our sales, but we will be indirectly affected by the weak euro in that around 70% of our sales are denominated in this currency. We are minimising the earnings impact by selling parts of our euro flow on forward contracts for 24 months forward. Our euro-dependency has decreased and we are taking steps to reduce it further.
Consolidated net sales reached SEK 510 million (159.5). This figure includes license revenue from Nestlé of SEK 356 million that is regarded as non-recurring revenue but is to a certain extent attributable to sales in 2012. In February 2012 BioGaia signed several new agreements with Nestlé including the acquisition of a perpetual license to use BioGaia's probiotic in infant formula during the remaining term of the patent. The purchase price was EUR 50.8 million, of which EUR 40 million (SEK 356 million) was received and recognised in the first quarter of 2012. The sale of the license will lead to a decrease in culture revenue from Nestlé during 2012, which will also result in lower sales of component products. BioGaia's assessment is that revenue (excluding license revenue) from Nestlé will be equal to approximately 50% of the value of sales during 2011, and will increase in 2013 to close to the 2011 level. From 2014 forward, sales are expected to exceed those in 2011.
Excluding license revenue from Nestlé, net sales amounted to SEK 154.0 million (159.5), a decrease of SEK 5.5 million (3%) compared to the same period of last year.
For the past 12-month period, sales were up by 14% (excluding license revenue from Nestlé) compared to the same period of last year.
A large share of sales take place in foreign currency, primarily EUR. Changes in exchange rates in the first half of 2012 compared to the first half of 2011 have not had any material foreign exchange effects on sales or profit.
Sales of finished consumer products rose by SEK 10.3 million (9%) to SEK 121.8 million. For the past 12-month period, sales of finished consumer products grew by 21% compared to the corresponding period of last year.
Sales of finished consumer products rose in Asia and the USA, but declined in Europe and other countries compared to the same period of last year. The increase in Asia is mainly attributable to higher sales in Japan. The increase in the USA is explained primarily by Fleet's launch of strawberry-flavoured tablets. Sales in Europe decreased as an effect of ongoing distributor changes.
Sales of component products improved by SEK 340.0 million. Excluding license revenue from Nestlé, sales fell by SEK 16.0 million (34%) compared to the same period of last year. Sales of component products decreased in Europe and Asia. The drop in Europe is a consequence of the agreement with Nestlé (see above).
The decrease in Asia is explained by the fact that the figures for the previous year include income from the agreement with Yili in China. For the past 12-month period, sales of
component products were down by 1% (excluding license revenue from Nestlé).
Sales in Europe improved by SEK 340.9 million. Excluding license revenue from Nestlé, sales declined by SEK 15.1 million (12%). For the past 12-month period, sales in Europe were up by 4% (excluding license revenue).
Sales in Asia decreased by SEK 2.0 million (10%). For the past 12-month period, sales in Asia grew by 16%.
Sales in the USA and Canada rose by SEK 12.3 million (280%) compared to the same period of last year. For the past 12-month period, sales in the USA and Canada increased by 219%.
Sales in the rest of the world fell by SEK 0.6 million (5%) compared to the same period of last year, which is due to temporary fluctuations in deliveries. For the past 12-month period, sales in the rest of the world increased by 22%.
Of total finished consumer products, 43% (38) were sold under the BioGaia brand. Including so-called co-branding, the percentage was 52% (47).
Gross profit amounted to SEK 465.7 million (111.2). Excluding license revenue from Nestlé, gross profit was SEK 109.7 million (111.2), which is SEK 1.5 million (1%) lower than in the same period of last year.
Gross margin (excluding license revenue) rose from 70% to 71%. This is partly attributable to increased sales in Japan, where the margins are higher.
Selling expenses totalled SEK 38.5 (32.3) million, which is equal to 25% (20) of net sales (excluding license revenue). The increase of SEK 6.2 million (19%) is mainly attributable to higher personnel expenses and marketing activities (increased participation in conferences, new websites and product samples) as well as higher costs in Japan owing partly to exchange rate fluctuations. For the past 12-month period, selling expenses rose by 15%.
Administrative expenses amounted to SEK 6.8 million (6.2), which is equal to 4% (4) of net sales (excluding license revenue). The increase of SEK 0.6 million (10%) is mainly attributable to higher personnel expenses. Administrative expenses for the past 12-month period rose by 23%, mainly due to higher personnel expenses and to a certain extent also the consolidation of TwoPac as of 1 January 2011.
R&D expenses are reported at SEK 18.3 million (16.9), which is equal to 12% (11) of net sales (excluding license revenue). The increase of 8% refers mainly to increased personnel expenses.The amortisation component of R&D expenses was SEK 0.3 million (0.7). Investments in capitalised development expenses totalled SEK 0 million (0). For the past 12-month period, R&D expenses grew by 14%.
Other operating income/expenses refer to foreign exchange gains/losses on operating receivables and liabilities.
Operating profit was SEK 401.5 million (57.3), an increase of SEK 344.2 million. Excluding license revenue from Nestlé,
operating profit was SEK 45.5 million, which is SEK 11.8 million (21%) lower than in the same period of last year.
Profit before tax was SEK 408.5 million (57.8), an improvement of SEK 350.7 million. Excluding license revenue from Nestlé, profit before tax was SEK 52.5 million, down by SEK 5.3 million (9%) compared to the same period of last year.
Net financial items include a foreign exchange gain of SEK 3.0 million (-0.7) on forward exchange contracts in EUR. At 30 June 2012 the company had outstanding forward exchange contracts for EUR 11.0 million at an average exchange rate of SEK 9.21. Forward exchange contracts amounting to EUR 4.0 million will mature for payment in 2012, EUR 5.9 million in 2013 and the remaining EUR 1.1 million in 2014. The actual exchange gain/loss depends on the exchange rate on the maturity date of the contracts. If the EUR rate on the maturity date is lower/higher than that at 30 June 2012 (8.76), an exchange gain/loss will be recognised in the future.
Profit after tax was SEK 299.9 million (42.2), an increase of SEK 257.7 million. Excluding license revenue from Nestlé, profit after tax was SEK 37.5 million, which is a decrease of SEK 4.7 million (11%) compared to the same period of last year.
The tax rate for the Group (excluding license revenue) was 29% (27). The Group pays tax on profits in the Swedish companies. The loss in Japan is not deductible against the Swedish profits. Loss carryforwards in the Japanese subsidiary at 30 June 2012 amounted to SEK 65.7 million. The deferred tax asset for these has not been recognised, since a sustainable profit level has not yet been shown in the Japanese subsidiary.
Earnings per share amounted to SEK 17.27 (2.38). Excluding license revenue, earnings per share were SEK 2.08.
The Group's cash and cash equivalents at 30 June 2012 totalled SEK 414.5 million (126.6).
Cash flow amounted to SEK 243.1 million (-20.2). Cash flow includes a non-recurring payment from Nestlé amounting to SEK 356 million, investments in TwoPac of SEK 16.8 million (6.4), tax payments of SEK 41.3 million (24.5) and dividends of SEK 103.6 million (34.5).
Consolidated equity amounted to SEK 428.0 million (230.4) and the equity/assets ratio was 79% (81).
In June BioGaia carried out the warrant programme that was decided on by the Annual General Meeting on 8 May 2012. A total of 82,500 warrants were subscribed for, of which the management subscribed for 35,000. The warrants were issued at a market price of SEK 14.27 each following valuation according to the Black & Scholes formula, which provided the Parent Company with proceeds of SEK 1.2 million. Each warrant entitles the holder to subscribe for one class B share for SEK 241.90 on 1 June 2015. Volatility was estimated at 40%.
If all of the subscription warrants are exercised, the company's equity will be increased by SEK 20.0 million.
This represents a dilutive effect of approximately 0.4% on the share capital and 0.3% on the total number of votes.
In order to achieve a high level of participation, the AGM resolved to pay a subsidy of SEK 10 per warrant (after 1 June 2015) to the employees who have subscribed for subscription warrants but have not exercised the right to buy shares. No provisions for this obligation have yet been made, but will be continuously assessed.
The period's investments in property, plant and equipment amounted to SEK 17.8 million (6.7), of which SEK 16.8 million (6.4) refers to TwoPac.
Net sales in the Japanese subsidiary are reported at SEK 7.5 million (5.4). Operating profit amounted to SEK -2.6 million (-2.1).
TwoPac AB is owned 50% by BioGaia and 50% by TwoPac's management. Since 1 January 2011, TwoPac is consolidated in the BioGaia Group.
Net sales in TwoPac amounted to SEK 15.4 million (12.0). Operating profit was SEK 5.1 million (2.6). The company pays tax since 2012. Profit after tax was SEK 3.5 million (2.4). Construction of the new production facility is somewhat behind schedule. The facility is expected to be completed and commissioned in the third quarter.
Net sales in the Parent Company reached SEK 504.3 million (155.5) and profit before tax was SEK 404.4 million (55.3). Profit after tax was SEK 297.1 million (39.7). Cash flow in the Parent Company totalled SEK 246.4 million (-29.3).
A resolution was passed by the AGM in May to reduce the statutory reserve of SEK 77.8 million and transfer this amount to non-restricted reserves. The reduction was registered in August 2012.
Net sales for the second quarter reached SEK 75.7 million (89.6), down by SEK 13.9 million (16%) compared to the same period of last year. The decrease is attributable to component products and is explained above under sales in the first half of 2012.
Sales of finished consumer products amounted to SEK 67.1 million (57.9), an increase of SEK 9.2 million (16%). Compared to the first quarter, sales of finished consumer products rose by SEK 12.3 million.
Sales of component products totalled SEK 8.3 million (31.4), a decrease of SEK 23.1 million that is explained above under sales in the first half of 2012.
Sales growth vary between quarters. For a more accurate picture, a rolling 12-month income statement is presented on page 7.
Gross profit was SEK 54.1 million (62.7), down by SEK 8.6 million compared to the same period of last year.
Selling expenses for the second quarter were SEK 2.7 million (15%) higher than the same period of last year, which is due to increased personnel expenses and marketing activities and higher costs in Japan. Compared to the previous quarter, selling expenses rose by SEK 3.1 million as en effect of increased marketing activities and personnel expenses.
Administrative expenses rose by SEK 0.3 million (8%) compared to the same period of last year and SEK 0.5 compared to the previous quarter.
R&D expenses were up by SEK 0.9 million (10%) compared to the same period of last year, which is mainly explained by increased personnel expenses.
Operating profit for the second quarter was SEK 19.4 million (33,9), which is SEK 14.5 million lower than in the same period of last year.
Profit before tax for the second quarter was SEK 23.6 million (32.3), a decrease of SEK 8.7 million compared to the same period of last year. Net financial items include a foreign exchange gain of SEK 1.6 million on forward exchange contracts in EUR (for more information – see above). The corresponding period of 2011 included a foreign exchange loss of SEK 2.4 million.
Profit after tax was SEK 16.7 million (23.7), down by SEK 7.0 million compared to the same period of last year.
Cash flow for the second quarter was SEK -115.5 million (-22.1).
During the period, the Group paid dividends of SEK 103.6 million (34.5) and tax of SEK 24.0 million (6.1).
| Distributor/licensee | Product | Country |
|---|---|---|
| Ewopharma | Oral health tablets | Croatia, Slovenia, Serbia and Poland |
| Ewopharma | Digestive health tablets with strawberry flavour |
Romania |
| Interbat | Drops | Indonesia |
| Nestlé | Infant formula with Lactobacillus reuteri Protectis |
USA and Sri Lanka |
| Sunstar | Oral health tablets | Canada |
In mid-April BioGaia signed an agreement with Unilab Group for exclusive rights to sell BioGaia's probiotic drops and tablets in Taiwan. The products will be sold under the BioGaia brand and the launch is planned for 2012.
BioGaia has initiated an investigative study on type 2 diabetics together with Gothia Forum for Clinical Research at Sahlgrenska University Hospital in Gothenburg in collaboration with Sahlgrenska Center for Cardiovascular and Metabolic Research.
Based on encouraging findings after supplementation with BioGaia's probiotic strain Lactobacillus reuteri Protectis in patients with type 2 diabetes in an earlier pilot study, this double-blind, placebo-controlled study will examine the effects of Lactobacillus reuteri Protectis supplementation on blood glucose control over a 12 week period. The study will address both clinical outcome parameters as well as attempting to define potential mechanistic explanations for the effects seen.
In May BioGaia signed three different agreements, one with Next Force giving Next Force exclusive sales rights for BioGaia's oral health products in the Czech Republic, one with Ivodent giving Ivodent exclusive sales rights in South Africa, and one with Oral Company giving Oral Company exclusive sales rights in the Netherlands, Belgium and Luxembourg. In all countries, the products will be sold under the BioGaia brand and the launch is planned to take place during 2012.
In June, BioGaia and Gerber Products Company, a division of Nestlé S.A., signed an agreement giving Gerber exclusive sales rights for BioGaia's probiotic drops and oral rehydration solution in the USA. The products will be marketed and sold under the well known and highly regarded US Gerber brand. The probiotic drops are planned to launch in the second half of 2012 and will support Gerber's Maternal and Infant Nutrition strategy to offer mothers benefits regardless of whether they choose to breastfeed or supplement with formula.
This is the first contract with Nestlé since BioGaia's sale to Nestlé of perpetual license rights to use BioGaia's patented Lactobacillus reuteri Protectis in infant formula, as announced in February 2012 (see below), at which time the two companies entered into a number of development and option agreements. The agreement with Gerber is a major step forward for BioGaia in the large United States paediatric market.
| Distributor/licensee | Product | Country |
|---|---|---|
| Cube Pharmaceuticals | Oral rehydration solution (ORS) |
Greece |
| Fleet Laboratories | Digestive health tablets with strawberry flavour |
USA |
| Nestlé | Infant formula with Lactobacillus reuteri Protectis |
Bangladesh, Burma, Cambodia, the Caribbean, Laos and Singapore |
| Recalcine | Digestive health tablets and drops |
Bolivia |
Since 2008, BioGaia and Nestlé have collaborated in the field of infant nutrition products. After the signing of several new agreements in mid-February 2012, the parties have further extended this collaboration.
The agreements include the entry by Nestlé into a perpetual licence to use BioGaia's patented Lactobacillus reuteri in infant nutrition products for EUR 50.8 million. The initial payment of EUR 40 million (SEK 356 million) was made and recognised in the first quarter of 2012. Additional payments of EUR 10.8 million will be paid and recognised over a five-year period on the achievement of certain milestones.
The agreements are of significant strategic value for BioGaia, since they not only involve an extended collaboration with Nestlé but also provide greater financial freedom for BioGaia to further invest in its own brand, develop its own new products, conduct research on new indications and increase the distribution of BioGaia-branded products. The additional finances also give the Board scope to propose a generous dividend policy.
In addition, Nestlé has signed an option agreement with BioGaia to extend the use of Lactobacillus reuteri to other product areas. Furthermore, Nestlé and BioGaia are working on several other projects, including the development of innovative products in the infant nutrition and other nutrition categories and the distribution of BioGaia-branded products in new markets. These further developments will be announced at an appropriate time closer to launch.
As a result of the up-front payments for the acquisition of the licence, BioGaia estimates that revenue from Nestlé during 2012, excluding the up-front payment, will be equal to around 50% of the value of sales during 2011, and will increase in 2013 to close to the 2011 level. From 2014 forward, sales are expected to exceed those in 2011.
A double-blind, placebo-controlled study of 494 children showed that supplementation of Lactobacillus reuteri Protectis significantly reduced episodes of diarrhoea. Lactobacillus reuteri Protectis was particularly effective in children with lower nutritional status. Another probiotic strain, which was also tested, was without effect.
The study was conducted independently from BioGaia and the results were announced in a press release by NIZO food research on 21 February 2012. The study was published in Pediatrics.
The number of employees in the Group at 30 June 2012 was 69 (61).
In June BioGaia carried out the subscription warrant programme for all employees in the BioGaia Group that was resolved on by the AGM on 8 May 2012. For more information, see above under "Equity" on page 3.
The business model previously used in Japan was found to be ineffective and the company has changed to the business model that is being used successfully in other markets. The Japanese subsidiary's sales have now picked up and are expected to increase continuously.
On the balance sheet date, assets in the Japanese subsidiary were reported at SEK 9.9 million in the Group. BioGaia's assessment is that there is no indication of impairment of these assets. In the Parent Company, all receivables and participations in the Japanese subsidiary have been written down to zero.
The shares in the subsidiary CapAble amount to a total of SEK 6.9 million in the Parent Company. So far CapAble has reported a loss. CapAble, which is 90.1% owned by BioGaia AB, was started in November 2008 to manufacture and sell the patented LifeTop Cap. BioGaia made total conditional shareholder contributions of SEK 6 million to CapAble in 2009 and 2010. BioGaia's assessment is that CapAble will show profitability in coming years, for which reason there was no indication of impairment on the balance sheet date.
For further information see the administration report and Notes 28 and 29 of the annual report for 2011.
The consolidated financial statements are presented in compliance with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and the interpretations published by the IFRS 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.
Unless otherwise stated below, the Group and Parent Company have applied the same accounting and valuation standards as in the latest annual report.
The applied accounting policies correspond to those described in the annual report for 2011, aside from a number of minor amendments to existing standards and new interpretations that are effective as of 1 January 2012. These are not assessed to have any significant impact on the Group's or the Parent Company's profit, financial position or disclosures.
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.
The financial target is a sustainable operating margin (operating profit in relation to sales) of at least 30% with continued strong growth and increased investments in research, product development and brand building.
BioGaia's dividend policy is to pay a shareholder dividend equal to 30% of profit after tax.
Product launches are planned in a number of countries during the year. In view of the Company's strong portfolio consisting of an increased number of innovative products partly under the company's own brand, together with successful clinical trials and a growing distribution network covering a large share of the key markets, BioGaia's future outlook is bright.
| (Amounts in SEK 000s) | Jan-Jun | Jan-Jun | Apr-Jun | Apr-Jun | Jan-Dec | Jul 2011- | Jul 2010- |
|---|---|---|---|---|---|---|---|
| 2012 | 2011 | 2012 | 2011 | 2011 | Jun 2012 | Jun 2011 | |
| Net sales | 154,031 | 159,489 | 75,742 | 89,634 | 314,992 | 309,534 | 271,102 |
| License revenue | 356,004 | - | - | - | - | 356,004 | - |
| Cost of goods sold | -44,371 | -48,281 | -21,607 | -26,943 | -98,727 | -94,817 | -84,402 |
| Gross profit | 465,664 | 111,208 | 54,135 | 62,691 | 216,265 | 570,721 | 186,700 |
| Selling expenses | -38,472 | -32,259 | -20,795 | -18,119 | -66,079 | -72,292 | -62,812 |
| Administrative expenses | -6,835 | -6,214 | -3,682 | -3,401 | -13,014 | -13,635 | -11,041 |
| Research and development expenses | -18,268 | -16,946 | -9,854 | -8,978 | -34,317 | -35,639 | -31,196 |
| Other operating expenses | -614 | 1,505 | -410 | 1,716 | 304 | -1,815 | 144 |
| Share in profit/loss of associated company | - | - | - | - | - | - | 315 |
| Operating profit | 401,475 | 57,294 | 19,394 | 33,909 | 103,159 | 447,340 | 82,110 |
| Financial income | 7,111 | 1,304 | 4,256 | 755 | 5,792 | 11,599 | 8,081 |
| Financial expenses | -39 | -769 | -17 | -2,387 | -84 | 646 | -824 |
| Profit before tax | 408,547 | 57,829 | 23,633 | 32,277 | 108,867 | 459,585 | 89,367 |
| Tax expense | -108,641 | -15,650 | -6,922 | -8,579 | -29,345 | -122,336 | -26,302 |
| PROFIT FOR THE PERIOD | 299,906 | 42,179 | 16,711 | 23,698 | 79,522 | 337,249 | 63,065 |
| Other comprehensive income | |||||||
| Gains/losses arising on translation of the financial | |||||||
| statements of foreign operations | 160 | -315 | 856 | 163 | 712 | 1,187 | -742 |
| Comprehensive income for the period | 300,066 | 41,864 | 17,567 | 23,861 | 80,234 | 338,436 | 62,323 |
| Profit for the period attributable to: | |||||||
| Owners of the Parent Company | 298,266 | 41,110 | 15,458 | 23,196 | 76,369 | ||
| Non-controlling interests | 1,640 | 1,069 | 1,253 | 502 | 3,153 | ||
| 299,906 | 42,179 | 16,711 | 23,698 | 79,522 | |||
| Comprehensive income for the period attributable to: | |||||||
| Owners of the Parent Company | 298,426 | 40,795 | 16,314 | 23,359 | 77,081 | ||
| Non-controlling interests | 1,640 | 1,069 | 1,253 | 502 | 3,153 | ||
| 300,066 | 41,864 | 17,567 | 23,861 | 80,234 | |||
| Earnings per share | |||||||
| Basic earnings per share (average number of shares), SEK | 17.27 | 2.38 | 0.90 | 1.34 | 4.42 | ||
| Diluted earnings per share, SEK | 17.27 | 2.38 | 0.90 | 1.34 | 4.42 | ||
| Number of shares, thousands | 17,271 | 17,271 | 17,271 | 17,271 | 17,271 | ||
| Average number of shares, thousands | 17,271 | 17,271 | 17,271 | 17,271 | 17,271 | ||
| Number of outstanding warrants, thousands | 83 | - | 83 | - | - | ||
| Number of outstanding warrants with a dilutive effect, thousands |
- | - | - | - | - | ||
| Number of shares after dilution, thousands | 17,271 | 17,271 | 17,271 | 17,271 | 17,271 |
| CONSOLIDATED STATEMENTS OF FINANCIAL POSITION | 30 Jun | 31 Dec | 30 Jun |
|---|---|---|---|
| (Amounts in SEK 000s) | 2012 | 2011 | 2011 |
| ASSETS | |||
| Intangible assets | 90 | 264 | 693 |
| Property, plant and equipment | 39,506 | 24,158 | 16,484 |
| Other non-current receivables | 18 | 18 | 17 |
| Total non-current assets | 39,614 | 24,440 | 17,194 |
| Current assets excl. cash and cash equivalents | 88,466 | 83,858 | 92,416 |
| Cash and cash equivalents | 414,499 | 171,534 | 126,646 |
| Total current assets | 502,965 | 255,392 | 219,062 |
| TOTAL ASSETS | 542,579 | 279,832 | 236,256 |
| EQUITY AND LIABILITIES | |||
| Equity attributable to owners of the Parent Company | 425,742 | 229,764 | 193,478 |
| Non-controlling interests | 2,230 | 591 | -1,493 |
| Total equity | 427,972 | 230,355 | 191,985 |
| Provision for deferred tax | 185 | 185 | - |
| Interest-free current liabilities | 114,422 | 49,292 | 44,271 |
| TOTAL EQUITY AND LIABILITIES | 542,579 | 279,832 | 236,256 |
| Pledged assets | 2,375 | 5,874 | 9,091 |
| CONSOLIDATED CASH FLOW STATEMENTS | Jan-Jun | Jan-Jun | Apr-Jun | Apr-Jun | Jan-Dec |
|---|---|---|---|---|---|
| (Amounts in SEK 000s) | 2012 | 2011 | 2012 | 2011 | 2011 |
| Operating activities | |||||
| Operating profit | 401,475 | 57,294 | 19,394 | 33,909 | 103,159 |
| Depreciation/amortisation | 2,641 | 4,466 | 1,381 | 3,227 | 5,425 |
| Other non-cash items | 76 | -71 | -190 | -208 | 1,398 |
| 404,192 | 61,689 | 20,585 | 36,928 | 109,982 | |
| Gains/losses on realised forward exchange contracts |
667 | 310 | 382 | -1,625 | -164 |
| Paid tax | -41,294 | -24,472 | -24,048 | -6,097 | -35,768 |
| Interest received and paid | 4,051 | 1,249 | 2,657 | 735 | 3,189 |
| Cash flow from operating activities before changes in working capital |
367,616 | 38,776 | -424 | 29,941 | 77,239 |
| Changes in working capital | -4,227 | -20,387 | -4,689 | -11,985 | -4,447 |
| Cash flow from operating activities | 363,389 | 18,389 | -5,113 | 17,956 | 72,792 |
| Cash flow from investing activities | -17,805 | -4,051 | -7,984 | -5,539 | -13,567 |
| Cash flow from financing activities | -102,449 | -34,542 | -102,449 | -34,542 | -34,542 |
| Cash flow for the period | 243,135 | -20,204 | -115,546 | -22,125 | 24,683 |
| Cash and cash equivalents at beginning of period | 171,534 | 146,903 | 529,923 | 148,514 | 146,903 |
| Exchange difference in cash and cash equivalents | -170 | -53 | 122 | 257 | -52 |
| Cash and cash equivalents at end of period | 414,499 | 126,646 | 414,499 | 126,646 | 171,534 |
| (Amounts in SEK 000s)) | Jan-Jun | Jan-Jun | Jan-Dec |
|---|---|---|---|
| 2012 | 2011 | 2011 | |
| At beginning of period | 230,355 | 187,323 | 187,323 |
| Dividends | -103,626 | -34,542 | -34,542 |
| Subscription warrants | 1,177 | - | - |
| Change in group structure | - | -2,660 | -2,660 |
| Comprehensive income for the period | 300,066 | 41,864 | 80,234 |
| At end of period | 427,972 | 191,985 | 230,355 |
(Amounts in SEK 000s)
| Revenue by segment | Jan-Jun | Jan-Jun | Apr-Jun | Apr-Jun | Jan-Dec | Jul 2011- | Jul 2010- |
|---|---|---|---|---|---|---|---|
| 2012 | 2011 | 2012 | 2011 | 2011 | Jun 2012 | Jun 2011 | |
| Finished consumer products | 121,821 | 111,460 | 67,050 | 57,895 | 215,431 | 225,792 | 187,175 |
| Component products | 31,342 | 47,312 | 8,335 | 31,388 | 97,731 | 81,761 | 82,397 |
| License revenue (component products) 1) | 356,004 | - | - | - | - | 356,004 | - |
| Other products | 868 | 717 | 357 | 351 | 1,830 | 1,981 | 1,530 |
| 510,035 | 159,489 | 75,742 | 89,634 | 314,992 | 665,538 | 271,102 |
| Jan-Jun | Jan-Jun | Apr-Jun | Apr-Jun | Jan-Dec | Jul,2011- | Jul,2010- | |
|---|---|---|---|---|---|---|---|
| Gross profit by segment | 2012 | 2011 | 2012 | 2011 | 2011 | Jun,2012 | Jun,2011 |
| Finished consumer products | 87,855 | 77,713 | 48,391 | 41,032 | 154,015 | 164,157 | 127,168 |
| Component products | 21,103 | 32,790 | 5,426 | 21,316 | 60,523 | 48,836 | 58,050 |
| License revenue (component products) 1) | 356,004 | - | 0 | - | - | 356,004 | - |
| Other products | 702 | 705 | 318 | 343 | 1,727 | 1,724 | 1,482 |
| 465,664 | 111,208 | 54,135 | 62,691 | 216,265 | 570,721 | 186,700 |
1) License revenue refers to revenue from Nestlé (see above in text). The license revenue is included in component products but is reported on a separate line in order to achieve better comparability between years.
| Jan-Jun | Jan-Jun | Apr-Jun | Apr-Jun | Jan-Dec | Jul 2011- | Jul 2010- | |
|---|---|---|---|---|---|---|---|
| Net sales | 2012 | 2011 | 2012 | 2011 | 2011 | Jun 2012 | Jun 2011 |
| Europe | 107,157 | 122,304 | 47,608 | 68,511 | 234,505 | 219,358 | 210,865 |
| License revenue (Europe) 1) | 356,004 | - | - | - | - | 356,004 | - |
| USA and Canada | 16,708 | 4,366 | 11,405 | 3,138 | 17,816 | 30,158 | 9,449 |
| Asia | 18,380 | 20,422 | 9,986 | 11,638 | 37,117 | 35,075 | 30,261 |
| Rest of world | 11,786 | 12,397 | 6,743 | 6,347 | 25,554 | 24,943 | 20,527 |
| 510,035 | 159,489 | 75,742 | 89,634 | 314,992 | 665,538 | 271,102 |
1) License revenue refers to revenue from Nestlé (see above in text). The license revenue is included in Europe but is reported on a separate line in order to achieve better comparability between years.
| PARENT COMPANY INCOME STATEMENTS | Jan-Jun | Jan-Jun | Jan-Dec |
|---|---|---|---|
| (Amounts in SEK 000s) | 2012 | 2011 | 2011 |
| Net sales | 148,351 | 155,493 | 306,182 |
| License revenue | 356,004 | - | - |
| Cost of goods sold | -49,519 | -51,239 | -106,868 |
| Gross profit | 454,836 | 104,254 | 199,314 |
| Selling expenses | -29,129 | -24,618 | -49,406 |
| Administrative expenses | -6,295 | -5,455 | -11,607 |
| Research and development expenses | -18,239 | -16,888 | -34,283 |
| Other operating income | - | - | 304 |
| Other operating expenses | -614 | 1,505 | - |
| Operating profit | 400,559 | 58,798 | 104,322 |
| Impairment loss on receivable from subsidiary | -4,813 | -5,262 | -10,453 |
| Net financial items | 8,681 | 1,806 | 8,391 |
| Profit before tax | 404,427 | 55,342 | 102,260 |
| Tax expense | -107,369 | -15,650 | -29,781 |
| PROFIT FOR THE PERIOD | 297,058 | 39,692 | 72,479 |
| PARENT COMPANY BALANCE SHEETS | 30 Jun | 31 Dec | 30 Jun |
| 2012 | 2011 | 2011 | |
| ASSETS | |||
| Intangible assets | 90 | 264 | 693 |
| Property, plant and equipment | 2,055 | 2,068 | 2,577 |
| Shares in group companies | 21,160 | 21,160 | 21,110 |
| Non-current receivables from subsidiaries | 21,513 | 16,513 | 16,513 |
| Total non-current assets | 44,818 | 40,005 | 40,893 |
| Current assets excl. cash and cash equivalents | 76,280 | 73,643 | 86,880 |
| Cash and cash equivalents | 408,054 | 161,865 | 111,601 |
| Total current assets | 484,334 | 235,508 | 198,481 |
| TOTAL ASSETS | 529,152 | 275,513 | 239,374 |
| EQUITY AND LIABILITIES | |||
| Equity | 407,365 | 212,756 | 181,782 |
| Interest-free current liabilities | 121,787 | 62,757 | 57,592 |
| TOTAL EQUITY AND LIABILITIES | 529,152 | 275,513 | 239,374 |
| Pledged assets | 2,000 | 2,000 | 2,000 |
| PARENT COMPANY CASH FLOW STATEMENTS | Jan-Jun | Jan-Jun | Jan-Dec |
|---|---|---|---|
| 2012 | 2011 | 2011 | |
| Operating activities | |||
| Operating profit | 400,559 | 58,798 | 104,322 |
| Depreciation/amortisation | 766 | 1,100 | 2,096 |
| Other non-cash items | 76 | -73 | 51 |
| Gain/losses on realised foreign exchange contracts | 667 | 310 | -164 |
| Paid tax | -41,273 | -24,472 | -35,769 |
| Interest received and paid | 4,361 | 1,257 | 3,582 |
| Cash flow from operating activities before changes in working capital | 365,156 | 36,920 | 74,118 |
| Changes in working capital | -9,092 | -17,617 | -2,686 |
| Cash flow from operating activities | 356,064 | 19,303 | 71,432 |
| Cash flow from investing activities | -7,250 | -14,073 | -15,813 |
| Cash flow from financing activities | -102,449 | -34,542 | -34,542 |
| Cash flow for the period | 246,365 | -29,312 | 21,077 |
| Cash and cash equivalents at beginning of period | 161,865 | 140,840 | 140,840 |
| Exchange difference in cash and cash equivalents | -176 | 73 | -52 |
| Cash and cash equivalents at end of period | 408,054 | 111,601 | 161,865 |
| (Amounts in SEK 000s) | Jan-Jun | Jan-Jun | Jan-Dec |
|---|---|---|---|
| 2012 | 2011 | 2011 | |
| At beginning of year | 212,756 | 176,632 | 176,632 |
| Dividends | -103,626 | -34,542 | -34,542 |
| Group contributions | - | - | -1,813 |
| Subscription warrant programme | 1,177 | - | - |
| Profit for the period | 297,058 | 39,692 | 72,479 |
| At end of period | 407,365 | 181,782 | 212,756 |
(Amounts in SEK 000s)
The Parent Company holds 100% of the shares in BioGaia Biologics Inc. USA, BioGaia Japan Inc., Tripac AB and Infant Baby AB.
The Parent Company holds 90.1% of the shares in CapAble AB.
The Parent Company holds 50% of the shares in TwoPac AB, which is reported as a group company.
Annwall & Rothschild Investment AB holds 740,668 class A shares and 1,259,332 class B shares, which is equal to 11.6% of the share capital and 36.2% of the votes. Annwall & Rothschild Investment AB is owned by Peter Rothschild, President of BioGaia, and Jan Annwall, a member of the Board of the Parent Company.
| The following transactions have taken place with | |||
|---|---|---|---|
| BioGaia Japan | Jan-Jun | Jan-Jun | Jan-Dec |
|---|---|---|---|
| 2012 | 2011 | 2011 | |
| Interest income | 1,278 | 1,065 | 2,244 |
| Loan provided | -1,670 | -2,819 | -4,451 |
| Sale of goods | 1,865 | 1,378 | 3,759 |
Due to uncertainty about whether the receivable from BioGaia Japan will be recovered in the foreseeable future, a provision has been made for this amount.
| (incl. subsidiary) |
|---|
| Jan-Jun | Jan-Jun | Jan-Dec | |
|---|---|---|---|
| 2012 | 2011 | 2011 | |
| Interest income | 310 | 176 | 487 |
| Loan provided | -5,000 | -11,091 | -11,091 |
| Purchase of goods | -15,415 | -11,979 | -26,179 |
No significant transactions have taken place with other closely related companies.
| 30 Jun | 30 Jun | 31 Dec | |
|---|---|---|---|
| 2012 | 2011 | 2011 | |
| Non-current receivables from TwoPac AB (incl. subsidiary) | 20,491 | 15,491 | 15,491 |
| Current transactions with related parties | |||
| Current receivables from TwoPac AB | 162 | 46 | 349 |
| Current liabilities to TwoPac AB | -2,212 | -3,810 | -3,339 |
| -2,050 | -3,764 | -2,990 |
| CONSOLIDATED KEY RATIOS 1) | Jan-Jun | Jan-Jun 2012 excl. non |
Jan-Jun |
|---|---|---|---|
| 2012 | recurring revenue |
2011 2) |
|
| Return on | |||
| - average equity | 91% | 18% | 22% |
| - average capital employed | 124% | 27% | 31% |
| Capital employed, SEK 000s | 428,157 | 165,782 | 191,985 |
| Number of shares, thousands | 17,271 | 17,271 | 17,271 |
| Average number of shares, thousands | 17,271 | 17,271 | 17,271 |
| Number of outstanding warrants, thousands | 83 | 83 | - |
| Average number of outstanding warrants with a dilutive effect, thousands |
- | - | - |
| Number of shares after dilution, thousands | 17,271 | 17,271 | 17,271 |
| Basic earnings per share, SEK | 17.27 | 2.08 | 2.38 |
| Diluted earnings per share, SEK | 17.27 | 2.08 | 2.38 |
| Basic equity per share, SEK | 24.65 | 9.46 | 11.20 |
| Diluted per equity per share, SEK | 24.65 | 9.46 | 11.20 |
| Equity/assets ratio | 79% | 89% | 81% |
| Operating margin | 79% | 30% | 36% |
| Profit margin | 80% | 34% | 36% |
| Average number of employees | 67 | 67 | 60 |
1) The definitions of key ratios correspond to those in the annual report.
2) Key ratios excluding non-recurring revenue from Nestlé (see above under "Financial performance in the first half of 2012)
| 21 August 2012 | 10:00 a.m. Teleconference with President Peter Rothschild and CFO Margareta Hagman. To participate in the conference please see http://www.biogaia.com/investor-relations for |
|---|---|
| telephone numbers. | |
| 23 October 2012 | Interim report 1 January – 30 September 2012 |
| 8 February 2012 | Year-end report 2012 |
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, 21 August 2012
Board Chairman Board member Board member
Board member President
David Dangoor Jan Annwall Stefan Elving
Thomas Flinck Inger Holmström Jörgen Thorball Board member Board member Board member
Paula Zeilon Peter Rothschild
We have reviewed the interim financial information (interim report) for BioGaia AB (publ), corporate identity number 556380-8723, at 30 June 2012 and the related statements of income, changes in shareholders' equity and cash flows for the six-month period then ended, and a summary of significant accounting policies and other explanatory notes. The Board of Directors and President are responsible for the preparation and fair presentation of this interim financial information in accordance with IAS 34. Our responsibility is to express a conclusion based on this interim financial information based on our review.
We conducted our review in accordance with the Swedish Standard on Review Engagements (SÖG) 2410, Review of Interim Financial Information Performed by the Independent Auditor of the Entity. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review has a different focus and is substantially less in scope than an audit conducted in accordance with ISA (International Standards on Auditing) and other generally accepted auditing practices. The procedures performed in a review do not enable us to obtain a level of assurance that would make us 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.
Based on our review, nothing has come to our attention that causes us to believe that the accompanying interim financial information does present fairly, in all material aspects, the financial position of the Group and the Parent Company at 30 June 2012 and their financial performance and cash flows for the six-month period then ended for the Group 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, 21 August 2012
Grant Thornton Sweden AB
Lena Möllerström Nording Authorised Public Accountant
BioGaia is a healthcare company that develops, markets and sells probiotic products with documented health benefits. The products are primarily based on different strains of the lactic acid bacterium Lactobacillus reuteri (Reuteri) in combination with unique packaging solutions that make it possible to create probiotic products with a long shelf life.
The class B share of the Parent Company BioGaia AB is quoted on the Mid Cap list of NASDAQ OMX Nordic Exchange Stockholm.
BioGaia has 69 employees, of whom 23 are based in Stockholm, 23 in Lund, 13 in Eslöv, two in Raleigh, USA, six in Hiroshima, Japan, and two in Shanghai, China.
BioGaia's revenue comes mainly from the sale of finished consumer products (digestive health tablets, drops, Oral Rehydration solution (ORS) and oral health products) to distributors, but also of revenue from the sale of component products such as Reuteri cultures, straws and caps.
The products are sold through nutrition, food, natural health and pharmaceutical companies in some 70 countries worldwide.
BioGaia holds patents for the use of Lactobacillus reuteri and certain packaging solutions in all major markets.
At the beginning of 2006 BioGaia launched its own consumer brand and today there are a number of distribution partners that sell finished products under the BioGaia brand in a large number of markets. One central part of BioGaia's strategy is to increase the share of sales consisting of BioGaia-branded products.
Some of BioGaia's distributors sell finished consumer products under their own brand names. For these products, the BioGaia brand is shown on the consumer package since BioGaia is both the manufacturer and licensor.
BioGaia's licensees add Reuteri culture to their products and sell these under their own brand names. On these products, the BioGaia brand is most often shown on the package as the licensor/patent holder.
Lactobacillus reuteri is one of the world's most well researched probiotics, especially in young children. To date, 92 clinical studies using BioGaia's human strains of Lactobacillus reuteri have been performed on around 7,700 individuals of all ages. The results have been published in 55 articles in scientific journals.
Studies have been performed on:
• Infantile colic and digestive health in children
Publication of clinical trial results is a key success factor for BioGaia. The International Committee of Medical Journal Editors has initiated a policy requiring clinical investigators to deposit information about trial design into an accepted clinical trials registry before the onset of patient enrolment, and this has now become a prerequisite for publication of trial outcomes in major medical journals. ClinicalTrials.gov is a registry of clinical trials provided by the U.S. National Institutes of Health and BioGaia encourages all clinicians working with BioGaia products to register their trials on this site. Many of the trials are registered at an early stage, which means that some of the registered trials will not be performed as planned. Consequently, BioGaia takes no responsibility for ensuring that the registered trials reach completion or are successfully reported in the register or the scientific literature. When clinical trials results do become available, BioGaia will report these through press releases.
2012-06-13 BioGaia signs exclusive agreement for its probiotic drops and oral rehydration solution with Nestlé's Gerber division in the United States 2012-05-15 BioGaia signs exclusive distribution agreements for its oral health products in the Czech Republic, the Benelux countries and South Africa 2012-05-14 BioGaia initiates investigative study in type 2 diabetics
Telephone: +46 8-555 293 00, Corp. Identity no. 556380-8723 www.biogaia.com For additional information contact: Peter Rothschild, President, BioGaia AB, telephone +46 8-555 293 00 or Margareta Hagman, Executive Vice President, BioGaia AB, telephone +46 8-555 293 00
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