Biotest AG — Interim / Quarterly Report 2005

Nov 14, 2005

Quarterly report as of September 30, 2005

Biotest Aktiengesellschaft, Dreieich

Excellent business growth continues: Revenues +9%, EBIT +43% / net income € 6.5 million

The Company

After the initial capital increase against cash and non-cash contributions totaling € 2.92 million which was entered in the commercial register on August 3, 2005, and which we reported in the quarterly report as of June 30, 2005, Biotest implemented a further capital increase with stock ex change subscription rights with a volume of € 3.90 million. This was entered in the commercial register on October 18. As part of this capital increase, 856,525 new ordinary shares were issued at a subscription price of € 22.50 per ordinary share, and 666,667 preferred shares were issued at a subscription price of € 18.50 per preferred share, and these were offered to Biotest AG's shareholders for subscription with a 6:1 subscription ratio in each case. The new shares carry full dividend rights for fi scal year 2005. The capital increase was implemented successfully, and all of the nonsubscribed shares were placed completely.

The new shares have been listed since October 31.

The placement resulted in net proceeds from the issue totaling around € 30 million. Biotest intends to use these proceeds to drive promising research projects, accelerate admission proceedings and expand distribution on a global scale. As the proceeds from the issue will be needed over a period of several years, part of the proceeds will initially be available for the temporary reduction of fi nancial debt.

The two capital increases augment Biotest's share capital by a total of € 6.82 million, and increase share premium by a total of € 43.3 million after taking issuing costs into account. This puts the equity ratio at signifi cantly above 40%.

Products

The approval of test reagents for use in the fully automated TANGO® blood analysis system by the FDA in the US on July 27, 2005 cleared the way for marketing to start as scheduled. The TANGO® system itself had already been approved in March of this year. Marketing by our distribution partner Olympus America Inc. was offi cially kicked off on October 15 when the system was presented at the world's largest professional conference, this year's annual meeting of the American Association for Blood Banks in Seattle. We have already been able to install the fi rst systems for testing at various customers. In total, approx. 300 systems are to be placed in North America over the next fi ve years. The \$ 200 million US market is the world's

largest market for transfusion diagnostics, and Biotest and Olympus are planning to win a 20% market share over the coming years with the sale of TANGO® systems and manual reagents.

European approval for Intratect® based on the German approval (MR process) was successfully concluded on September 27, 2005. As a result, Intratect® – the ultra-pure next generation immunoglobuline developed by Biotest – is just about to be approved for nine countries in the European Union. After formal notifi cations have been issued, Biotest will start marketing Intratect® in neighboring European countries this year. These include the United Kingdom and Italy – two countries which have very high demand for immunoglobulines. The growth of Intratect® in Germany means that sales of Biotest's polyvalent immunoglobulines are up by more than 30% year-on-year.

Biotest has already received German approval for albumin, produced using the FH process. European approval using the MR process is expected for the end of 2006. The coag ulant Haemoctin® has already been approved in sever al European countries. Approval in additional European countries is being prepared. In addition, Biotest is also working on approval for Hepatect® in Germany using the FH process. Approval at an European level is also scheduled for 2006.

A multi-center Italian study (G. Nigro et al., 2005), which was published in the prestigious New England Journal of Medicine, shows that Biotest – with its antibody product Cytotect® Biotest – has been able to allow cytomegalic virus infec tions to be treated during pregnancy for the fi rst time, thus avoiding birth defects in newborn infants Cytotect® Biotest is already the world's leading hyperimmunoglobuline for cytomegalic treatment, and this new research means that a whole new area of application has been opened up in the fi eld of gynecology, with additional sales potential totaling tens of millions.

Revenue growth up further year-on-year at 8.5%

Revenue in the fi rst nine months of the year totaled € 177.0 million, up 8.5 % on revenue in the fi rst three quarters of 2004.

This was due to the excellent pharmaceuticals business in the third quarter, which recorded growth of 27.5%. This is very high compared to the corresponding quarter of the previous year.

The individual segments grew as follows during the quarters:

Biotest group	61.8	52.2	59.4	52.8	55.8	58.1
Diagnostic	19.1	18.7	19.3	19.1	19.1	19.3
Pharmaceutical	42.7	33.5	40.1	33.7	36.7	38.8
Segment	€ million		€ million € million	€ million	€ million € million
	2005	2004	2005	2004	2005	2004
	Q3	Q3	Q2	Q2	Q1	Q1

Revenues in the Pharmaceutical segment totaled € 119.5 million in the first nine months, surpassing revenue in the first nine months of 2004 by 12.8%. The third quarter was up 27.5% on Q3 2004 at € 42.7 million.

Growth in Germany totaling € 7.8 million and in the rest of Europe totaling € 7.0 million was offset by downturns in the Middle East totaling € 3.2 million. The downturns in the Middle East were mostly due to a lack of tender business in the first quarter. Coagulation factors and immunoglobulines also recorded double-digit growth. Intratect® has already reached a market share of 15% in Germany in the space of less than one year. Biotest was able to significantly expand its business with Factor VIII in Russia, as the Russian government has now also made funding available for the treatment of adult hemophiliacs. Hyper-immunoglobulines were down on the previous year, which was impacted by extraordinary factors, however they substantially exceeded our expectations. The situation for human albumin continues to be difficult due to low prices.

The Diagnostic segment recorded revenues of € 57.5 million in the first three quarters – up 0.7% on the previous year. Slight growth was recorded in Europe and the Middle East. Deliveries of the first TANGO® systems in the US to our distribution partner Olympus America Inc. in the third quarter meant that Biotest recorded 6.6% revenue growth in the America region over the first nine months. Asia and the other regions recorded a downturn in business. The delivery of the TANGO® systems in the US means that the transfusion diagnostics segment is again linking into the excellent growth in the first quarter. The Hycon segment also generated further growth in the third quarter as a result of the excellent growth of Heipha products. Transplant and infection diagnostics recorded a downturn. Although merchandise revenues at our subsidiaries were slightly lower in the third quarter, they were significantly up on the previous year taken over the first nine months.

In the Biotherapeutics (monoclonal antibodies) segment, during the first nine months research and development expenses totaled € 2.7 million for our development project BT-061 to treat rheumatoid arthritis and psoriasis, BT-062 as a candidate for a new therapy approach for patients with multiple myeloma, and BT-063 to treat systemic lupus erythematosus and other autoimmune diseases.

In total, development of the monoclonal antibody projects is on schedule.

As part of its strategy, Biotest has reorganized its pharmaceutical research and development in order to optimize functional workflows between the R&D segments of plasma proteins and biotechnology. In order to increase development capacity for biotechnology staffing in this segment has also been increased. Biotest has implemented these measures to realize both biotechnology as well as plasma protein projects more effectively and faster.

Operating result in third quarter up still further / up 43% on previous year over first nine months

The operating result (EBIT) totaled € 18.4 million in the first nine months, up € 5.5 million (+43.2%) in the first three quarters of 2004. The third quarter enjoyed particularly excellent growth with EBIT totaling € 7.1 million (previous year: € 4.0 million).

The gross profit on sales was still depressed by the weaker first and second quarters, and totaled € 82.7 million, up € 3.2 million on the previous year.

Sales and marketing costs increased almost proportionately to revenues in the first nine months of 2005. This figure is due to factors including increased commission expenses, the inclusion for the full year of the subsidiary we acquired in Greece last year and the associated costs from distribution rights acquired for Greece.

Other operating income totaled € 1.5 million in the first nine months of 2005; other operating income/expenses was still depressed last year by restructuring expenses.

Charges from the financial result in the first nine months of 2005 totaled € -8.4 million, and were down € 1.6 million on the same period of the previous year. This is mostly due to deductions for loans redeemed in advance from the collateral trustee agreement and interest credit from tax refunds for previous fiscal years.

The consolidated net income in the first nine months of 2005 totaled € 6.5 million, in the same period of the previous year consolidated earnings were balanced.

Financial position

Total assets fell only slightly by € 3.2 million or 0.9 %. The net cash used at the start of the year stemmed from the redemption of financial and leasing liabilities and the reduction of trade payables. In contrast, trade receivables increased as a result of the high revenue in the third quarter. Equity increased by around € 20 million as of September 30, 2005 with the first capital increase as of August 3, 2005. It was possible to further reduce financial liabilities compared to the previous quarter by transferring shareholder loans to equity and as a result of the additional cash and cash equivalents of around € 10 million. In total, financial liabilities fell from € 163.7 million on December 31, 2005 to € 129.9 million as of September 30, 2005.

The equity ratio (without taking the minority interest into account) improved from 29.6% on December 31, 2004 to 37.1% on September 30, 2005.

Capital expenditure for property, plant and equipment was right on forecast at € 8.3 million, and was offset by slightly higher depreciation and amortization totaling € 8.8 million.

The cash flow from operating activities totaling € 9.0 million is depressed by increased capital lock-up for working capital – in particular from receivables resulting from the excellent sales in the third quarter. The net cash used in investing activities for property, plant and equipment and intangible assets totaling € 8.9 million was generated by internal financing.

The capital increase on August 3 and the cash and cash equivalents at the start of the year allowed financial debt to be significantly redeemed and reduced.

As Biotest already announced in the last quarterly report, loans received as part of the collateral trustee agreement dated July 27, 2005 were redeemed via a syndicated credit agreement with several banks. During this process, part of the short-term credit line totaling € 47.5 million was transformed to long-term financing.

Human Resources

On September 30, 2005, the number of employees in the Biotest group totaled 1,074 full-time employees, an increase of 65 employees on the end of 2004. Key additions of a total of 36 full-time employees were made at our subsidiary Plasma Service Europe with the acquisition of the plasmapheresis station in Halle and the increase in staff numbers at our stations in Halle and Rostock in the third quarter. Further notable increases were made in the sales departments in Dreieich and at our subsidiaries, as well as in R&D.

Outlook

We do not expect to continue to record the high revenues we have enjoyed in the second and third quarters in the last quarter of the financial year, as December is generally a low-sales month. Now that Intratect® has been approved for nine European countries, we are expecting to receive formal notification shortly, so that marketing can start before the end of the year. However, this will not lead to significant revenues this year. We continue to believe that revenues in 2005 will be up slightly year-on-year.

We are sticking to our forecast, that the operating result will increase disproportionately to revenues, and expect the last quarter of 2005 to be weaker than the previous quarters in line with the weaker revenues.

Together with the financial result, which is also improved, the higher operating result will lead to pre-tax consolidated earnings being up significantly on the previous year.

Cash and cash equivalents and financing will continue to increase substantially through to the end of the year as a result of the capital increase implemented in October: the equity ratio (without taking the minority interest into account) will significantly exceed 40%.

Quarterly financial statements of the Biotest group as of September 30, 2005

All figures in € million

Group Balance Sheet

Assets	September 30,	December 31,	September 30,
	2005	2004	2004
Intangible assets	5.3	6.2	4.8
Property, plant and
equipment	146.5	147.4	145.2
Financial assets	1.3	0.6	0.5
Non-current assets	153.1	154.2	150.5
Inventories	114.4	116.7	112.7
Trade receivables	71.4	56.1	58.7
Other assets	6.2	5.5	6.3
Cash and cash equivalents	5.4	19.6	5.6
Current assets	197.4	197.9	183.3
Deferred tax assets	4.6	6.2	3.6
Total assets	355.1	358.3	337.4

Consolidated Statement of Changes in Shareholders' Equity

	Q1 - 3/2005	Q1 - 3/2004
Biotest AG shareholders'
equity (Jan. 1)	106.0	101.9
Dividends for previous year	-0.9	-0.9
Capital increase	20.0	0.0
Consolidated net income	6.5	0.0
Currency impact during period	0.3	0.2
Biotest AG shareholders'
equity (Sept. 30)	131.9	101.2

Cash Flow Statement

	Q1 - 3/2005	Q1 - 3/2004
Cash flow from operating activities	9.0	16.4
Cash flow from investing activities	-8.2	-10.5
Cash flow from financing activities	-15.1	-12.5
Net change in
cash and cash equivalents	-14.3	-6.6
Changes in cash and cash equivalents
due to currency translation	0.1	0.1
Cash and cash equivalents as of
January 1	19.6	12.1
Cash and cash equivalents as of
September 30	5.4	5.6

Notes

1. The above report of the Biotest group for the third quarter of 2005 is in line with International Accounting Standard No. 34

2. The same accounting and valuation methods were applied as for the preparation of the IFRS consolidated financial statements for fiscal year 2004.

3. This report is unaudited.

4. Segment reporting

4.1 Revenue

Segment	Q1 - 3/2005	Q1 - 3/2004
Pharmaceutical	119.5	106.0
Diagnostic	57.5	57.1
Biotest group	177.0	163.1

4.2 Operating result
Segment	Q1 - 3/2005	Q1 - 3/2004
Pharmaceutical	20.4	14.3
Diagnostic	3.4	1.7
Corporate	-2.7	-2.3
Biotherapeutics
(monoclonal antibodies)	-2.7	-0.8
Biotest group	18.4	12.9

As part of our strategic reorientation, we have thus expanded our management reporting to include the biotherapeutic (monoclonal antibodies) segment. Comparable figures from the previous year have been adjusted accordingly.

1. Employees (full-time)

	September 30, 2005	December 31, 2004
Sales	323	309
Administration	137	132
Production	510	472
Research and development	104	96
Biotest group	1,074	1,009

Issued capital	23.4	20.5	20.5
Share premium	96.1	79.0	79.0
Retained earnings	5.9	1.5	1.7
Consolidated net income	6.5	5.0	0.0
Equity	131.9	106.0	101.2
Minority interests	2.2	1.9	2.0
Provisions for pensions and
similar obligations	35.7	35.5	35.3
Provisions for taxes	2.3	1.2	1.8
Other provisions	27.6	20.5	19.2
Provisions	65.6	57.2	56.3
Financial liabilities	129.9	163.7	150.9
Trade payables	11.7	16.6	15.2
Other liabilities	11,5	10,8	9,8
Liabilities	153.1	191.1	175.9
Deferred tax liabilities	2.3	2.1	2.0

shareholders' liabilities 355.1 358.3 337.4

Group Income Statement

Earnings per share (in euros)	0.23	0.05	0.79	0.00
Consolidated net income	2.0	0.4	6.5	0.0
Minority interests	-0.2	-0.2	-0.7	-0.6
Profits after taxes	2.2	0.6	7.2	0.6
Taxes	-1.7	-0.3	-2.8	-2.3
Profits before taxes	3.9	0.9	10.0	2.9
Financial result	-3.2	-3.1	-8.4	-10.0
Operating result	7.1	4.0	18.4	12.9
(previous year: Expenses)	0.3	-0.9	1.5	-3.0
Other operating income
development costs	-5.0	-5.0	-13.0	-13.0
Research and
Administrative costs	-5.2	-4.5	-14.3	-14.2
Sales and marketing costs	-13.1	-11.8	-38.5	-36.4
Gross profit	30.1	26.2	82.7	79.5
Cost of sales	-31.7	-26.0	-94.3	-83.6
Revenue	61.8	52.2	177.0	163.1
	2005	2004	2005	2004
	Q3	Q3	Q1-3	Q1 - 3

Biotest AG

Landsteinerstr. 5 D-63303 Dreieich, Germany PO Box 10 20 40 D-63266 Dreieich, Germany Tel. +49 (0) 6103 801-444 Fax +49 (0) 6103 801-880 Internet: www.biotest.com