Biotest AG — Interim / Quarterly Report 2004

Nov 22, 2004

Biotest Aktiengesellschaft Dreieich

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Quarterly report as of September 30, 2004

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Biotest Aktiengesellschaft Dreieich

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During the third quarter, the Biotest Group’s sales were up on the previous year, and the group was able to increase its quarterly EBIT by 70 % compared to Q3 2003. During the first nine months, sales were thus at almost the same level as the previous year, however EBIT increased by nearly 70%.

Strategic action plan continues on schedule

The Biotest Group is implementing the extensive measures of its strategic restructuring concept.

In September 2004, the Paul Ehrlich Institute approved our new immunoglobulin Intratect[®] . This allowed us to take our new fractioning line into routine operations. Sales of the new product in Germany started immediately afterwards.

Biotest Hellas MEPE (corresponds to a limited liability company) commenced its business operations in August after receiving pharmaceutical distribution rights.

The agreement on further developing the fully automated TANGO blood grouping system was signed by STRATEC. After receipt of FDA approval the new TANGO II system should be available from mid-2005 on the US market. Pre-marketing activities in the US with our distribution partner Olympus have already started.

Quarterly sales return to growth compared to previous year

Quarterly sales were up 2.2 % on the previous year at Ä 52.2 million. Year-to-date sales total Ä 163.1 million, almost equaling last years sales (Ä 164.3 million).

In Germany and the rest of Europe, growth of 5.4% and 7.1% was recorded during the current quarter, in contrast activities in export regions as well as Asia and South America were again consciously reduced, in particular for tender business with pressure on margins. This means that the situation in Germany has stabilized again over the year-to-date, with growth of 3.1% despite the cost-cutting measures in the healthcare sector. Growth continued in the rest of Europe at 8.2 %, which is offset – as already mentioned – by downturns in Asia and South America.

The individual divisions grew as follows in the first three quarters:

	Q3	Q3	Q2	Q2	Q1	Q1
	2004	2003	2004	2003	2004	2003
Division	Ämillion	Ämillion	Ämillion	Ämillion	Ämillion	Ämillion
Pharma-
ceutical	33.5	32.6	33.7	35.0	38.8	40.0
Diagnostic	18.7	18.5	19.1	19.0	19.3	19.2
Group	52.2	51.1	52.8	54.0	58.1	59.2

The Pharmaceutical division continues to face harsh competition from the suppliers of plasma derivatives – which means that Biotest is focusing on countries and business with sufficient contribution margins, and is moving away from lower-margin tender business. The sales growth in the third quarter is due, above all, to the positive growth in Germany and Europe.

Above all, our products Hepatect CP[®] , Haemoctin SDH[®] and Cytotect CP[®] were highly successful in this regard.

The key product approval for our new immunoglobulin Intratect[®] was issued on September 29. The product was launched in October 2004, and the market’s reactions have been very positive. We immediately launched measures for pan-European approval using a mutual recognition process.

Quarterly sales in the Diagnostic division were at the same level as in 2003 at Ä 18.7 million (+0.5 %). Sales in Germany and the US fell slightly – partially due to the exchange rate – and were offset by higher sales in Europe. This means that year-to-date sales are stable at the same level as the previous year (+ 0.7 %)

Infectious disease diagnostics exhibited excellent growth this quarter, which were able to compensate for downturns in transplantation diagnostics.

Biotest concluded an agreement with STRATEC Biomedical Systems AG, Birkenfeld, in September for the further development of the fully automated TANGO[®] blood grouping system. This further development takes into account the requirements of the US diagnostics market, and also includes additional new functionalities and further improved technologies. Once the inspection of our production facilities has been successfully completed this summer, FDA approval is expected for the start of 2005, with marketing in the US market starting in mid2005.

Operating result (EBIT) significantly up year-on-year

We were able to further significantly increase our EBIT during the third quarter compared to the previous year (+70 %).

During the fiscal year to date, we improved our operating result to Ä 12.9 million – a significant improvement compared to last year’s figures of Ä 7.6 million with sales remaining at a near-constant high level. Earnings after taxes are positiv, too.

Tough competition in the pharmaceutical sector means that the improved earnings were due to a great extent to the effects of cost cuts, in particular at our companies in Dreieich, resulting from the restructuring program introduced last year. However, the additional measures resolved in 2004 are still partially impacting earnings in the current fiscal year, and will only have their full impact on lifting earnings in 2005.

The cash flow from operating activities in the third quarter totaled Ä 7.1 million, and was higher than on the cash flows in the two previous quarters.

The cash flow from operating activities for the current fiscal year to date totaled around Ä 16.4 million, and capital expenditures during the fiscal year have been fully financed from this amount.

In addition, bank liabilities of Ä 9.2 million and leasing liabilities of Ä 2.9 million have been paid from the cash flow from operating activities and from the cash and cash equivalents as of December 31, 2003.

Human Resources

Compared to December 31, 2003, the number of full time employees decreased by 13 employees, from 1037 to the current figure of 1024, which is due to the restructuring measures in Germany. This was offset by growth resulting from the new formation of Biotest Hellas and slight staff increases at some subsidiaries.

Financial position

Total assets decreased from Ä 350 million at the end of fiscal year 2003 to around Ä 337 million on September 30, 2004.

Fixed assets at net book values are up slightly by Ä 1 million. Amortization and depreciation totaling Ä 9.1 million were offset by investments in intangible assets and property, plant and equipment totaling Ä 10.9 million. In general capital expenditure is in 2004 significantly lower than in 2003 caused by the completion of the new fractionion line.

The additions to intangible assets mostly relate to the acquisition of distribution rights for the Greek market from the former distributor. The downturn in financial assets shows the sale of our investment in the SIFIN Institut für Immunpräparate und Nährmedien GmbH, Berlin, at book value.

Financial debt decreased by around Ä 12 million. In total, liabilities were reduced by around Ä 15 million compared to December 31, 2003.

The increase in provisions for taxes compared to December 31, 2003 relates to tax payments not yet made for this year, mainly by our subsidiary in Italy. The other provisions mostly relate to deferrals during the year and personnel-related provisions.

Outlook

Middle-term, the market for plasma derivatives will continue to be characterized by continued price pressure and significant insecurity as well as cost-cutting measures prescribed by government policy. In the meantime, prize stabilisation on the US market has occurred.

The technical advantages offered by our new production facilities will show the main economic effect from 2006 on as a result of the new product registrations – approved first of all in Germany and then in Europe. The impact from the approval of Intratect[®] in Germany will only have a relatively minor impact on the annual earnings in the final quarter of 2004.

In the Diagnostic division we expect sales on previous year level.

In total, Biotest is expecting 2004 sales slightly below the previous year with significantly improved EBIT, which will bring Biotest back to positive earnings before taxes (EBT) this year.

Quarterly financial statements of the Biotest group as of September 30, 2004

All figures in Ä million

Biotest consolidated balance sheet

	30.09.	31.12.	30.09.
Assets	2004	2003	2003
Intangible assets	4.8	3.5	2.9
Property, plant and equipment	145.2	145.0	143.5
Financial assets	0.5	1.0	1.0
Noncurrent assets	150.5	149.5	147.4
Inventories	112.7	117.2	123.7
Trade receivables	58.7	59.0	55.8
Other assets	6.3	8.9	10.7
Cash and cash equivalents	5.6	12.1	7.5
Current assets	183.3	197.2	197.7
Deferred tax assets	3.6	3.3	6.6
Total assets	337.4	350.0	351.7
Liabilities and shareholders’ equity
Issued capital	20.5	20.5	20.5
Sharepremium	79.0	79.0	79.0
Retained earnings	1.7	8.1	8.9
Consolidated net loss for theyear	0.0	– 5.7	– 1.9
Equity	101.2	101.9	106.5
Minority interests	2.0	1.4	1.4
Provisions for pensions and
similar obligations	35.3	34.6	34.3
Provisions for taxes	1.8	0.8	4.1
Otherprovisions	19.2	18.7	23.8
Provisions	56.3	54.1	62.2
Financial liabilities	150.9	163.0	154.3
Tradepayables	15.2	14.8	14.3
Other liabilities	9.8	12.9	10.9
Liabilities	175.9	190.7	179.5
Deferredprovisions for taxes	2.0	1.9	2.1
Total equity and
shareholders’ liabilities	337.4	350.0	351.7

Consolidated income statement

	Q3	Q3	Q1–3	Q1–3
	2004	2003	2004	2003
Revenue	52.2	51.1	163.1	164.3
Cost of sales	– 26.0	– 28.4	– 83.6	– 90.2
Grossprofit	26.2	22.7	79.5	74.1
Sales and marketingcosts	– 11.8	– 12.0	– 36.4	– 39.4
Administrative costs	– 4.5	– 4.1	– 14.2	– 13.0
Research and development costs	– 5.0	– 4.4	– 13.0	– 12.9
Other operating income
and expenses	– 0.9	0.1	– 3.0	– 1.2
Operating result	4.0	2.3	12.9	7.6
Financial result	– 3.1	– 4.2	– 10.0	– 9.7
Pre-tax earnings	0.9	– 1.9	2.9	– 2.1
Taxes	– 0.3	0.3	– 2.3	0.5
Earnings (after taxes)	0.6	– 1.6	0.6	– 1.6
Minorityinterests	– 0.2	– 0.1	– 0.6	– 0.3
Net income for theperiod	0.4	– 1.7	0.0	– 1.9
Earnings per share(in euros)	0.05	– 0.22	0.00	– 0.24

Consolidated statement of changes in shareholders’ equity

Consolidated statement ofin shareholders’ equity	changes	changes
	Q1–3/2004		Q1–3/2003
Biotest AG shareholders’ equity (January	1)	101.9	108.5
Dividends forpreviousyear		– 0.9	0.0
Net income for theperiod		0.0	– 1.9
Currencyimpact during period		0.2	– 0.1
Biotest AG shareholders’ equity
(September 30)		101.2	106.5
Cash flow statement
	Q1–3/2004		Q1–3/2003
Cash flow from operatingactivities		16.4	21.7
Cash flow from investingactivities		– 10.5	– 8.6
Cash flow from financingactivities		– 12.5	– 13.6
Net change in cash
and cash equivalents		– 6.6	– 0.5
Changes in cash and cash equivalents
due to currencytranslation		0.1	– 0.1
Cash and cash equivalents as of January	1	12.1	8.1
Cash and cash equivalents
as of September 30		5.6	7.5

Notes

1. The above report of the Biotest group for the first to third quarters of 2004 is in line with International Accounting Standard No. 34.

2. The same accounting and valuation methods were applied as for the preparation of the IAS consolidated financial statements for fiscal year 2003.

3. This report is unaudited.

4. Segment reporting

4.1 Revenue

4.1 Revenue
Division	Q1–3/2004	Q1–3/2003
Pharmaceutical	106.0	107.6
Diagnostic	57.1	56.7
Biotestgroup	163.1	164.3
4.2 Operating result
Division	Q1–3/2004	Q1–3/2003
Pharmaceutical	15.4	2.7
Diagnostic	2.4	4.6
Holding	– 4.9	0.3*
Biotestgroup	12.9	7.6

• During the first to third quarters of 2003, the holding company oncharged costs to the Pharmaceuticals and Diagnostics divisions. These costs were not oncharged in 2004.

1. Employees (full-time)

5. Employees (full-time)
	30.09.2004	31.12.2003
Sales	312	310
Administration	128	129
Production	489	494
Research and development	95	104
Biotestgroup	1,024	1,037

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Biotest AG

Landsteinerstr. 5, D-63303 Dreieich PO Box 10 2040, D-63266 Dreieich Phone +49 (0) 6103 801-444 Fax +49 (0) 6103 801-880 Internet: www.biotest.de

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