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Biohit Oyj Half Year Financial Report 14 August 2019 at 9:30 am local time (EET)

January-June 2019

Our Net Sales grew 1% during first half of the year 2019. GastroPanel® Net Sales in China decreased during first half of the year 2019 due to a delay in the re-registration of one of our GastroPanel products in China. China’s National Medical Products Administration (NMPA, formerly the China Food and Drug Administration, CFDA) has presented supplementary questions during August 2019 and the registration is still unfinished. The registration will be completed during H2/2019. Even though Net Sales in China decreased during the review period raw material deliveries to China grew significantly which had positive impact on our profitability. Acetium revenue grew during the review period due to Acetium® lozenge. At the same time Acetium Net Sales worth EUR 0.1 million were shifted to H2/2019 due to 3rd party delivery problems. Our Middle-East business grew significantly during the review period and also subsidiaries in Italy and in the UK performed well.

During the review period Operative EBITDA adjusted for items affecting comparability improved significantly to EUR +0.4 million (EUR -0.1 million) due to increased raw material deliveries to China as mentioned above. Operative EBITDA was 8% of Net Sales. Our cash at the end of the period amounted to EUR 1.3 million (EUR 1.3 million).  

During the review period, we continued our domestic sales and marketing efforts for the launch of Acetium® Iozenge. By the end of the review period, for example, SOK expanded the distribution of our product, which can now be found in almost all the S-Markets and the larger small stores (Alepa and Sale) as well as selected ABC service stations.

We made several international distribution agreements for Acetium® Iozenge during the review period. PT Satya Abadi Pharma is our distributor in Indonesia. In Italy, Difar Distribuzione S.r.l. received the exclusive distribution rights to the product. We also signed an agreement with Precision Health Co., Ltd over the distribution of Acetium® Iozenge in Thailand during this review period.

Immediately after the review period, we finished two clinical studies about the effectiveness of Acetium® capsules as an inhibitor for migraine-type headaches. Although the result of the study was not positive, the subgroup analysis revealed patients who clearly benefitted from the Acetium® Iozenge capsules. We are considering the possibility of a new clinical study regarding said subgroup.

The development of the GastroPanel® quick test is proceeding as planned and we expect to have the CE mark by the end of 2019, after which we can begin the sales of the product. Customer feedback regarding GastroPanel® quick test has been highly positive. The development of ColonView ELISA Test, intended for screening of colorectal cancer, is also progressing as planned.

A significant confirmatory evidence to the existing data on GastroPanel® biomarkers as predictors of gastric cancer was provided by a recently published nationwide multicentre study from China which included 14,929 people. This important study provides additional confirmatory evidence to the two previous studies, where GastroPanel® biomarkers were shown to be significant independent predictors of incident gastric cancer.

Despite the temporary registration delay with the GastroPanel® product in China, the market outlook regarding China is unchanged. We see the China markets for GastroPanel® growing in 2020 and beyond.  

Biohit expects moderate growth in 2019 Net Sales due to the GastroPanel® product’s re-registration in China having negative impact on 2019 Net Sales growth.

Biohit’s previous outlook on 2019:

Biohit's product portfolio consists of diagnostic tests, analysis systems, products binding carcinogenic acetaldehyde into a harmless compound, monoclonal antibodies, as well as service laboratory operations. The entire product and service portfolio is reported under a single segment.

On the 30 June 2019, the balance sheet totalled EUR 18.1 million (EUR 18.9 million 30 June 2018). At the end of the reporting period, our equity ratio stood at 85.9% (89.4% 30 June 2018). The Group’s equity ratio without the impact of the implementation of the IFRS 16 -standard would have been 87.0%.

Biohit Oyj has a stable financing position, which allows for the necessary actions towards strengthening an international distributor network as well as the development and commercialization of new products. On the 30 of June 2019 company’s financial assets totalled EUR 5.5 million (EUR 5.6 million) which does not include Genetic Analysis AS shares.

Despite significant financial investments the company has managed to keep its working capital on a good level and the management believes that working capital will cover the operations for the next 12 months and the company is not dependent on external financing to be able to guarantee the continuity of its operations. Cash flow from operating activities was EUR -0.1 million during the review period. Company’s management assessment is that company’s ability to continue its operations is good and there are no indications towards events or circumstances that alone or together might give a significant reason to doubt the organisation’s ability to continue its operations. 

R&D operations focus on innovations, as well as product development and improved usability. Biohit also employs external experts and subcontractors in its R&D operations. Development expenditure has not been capitalised. Research and development expenditure excluding depreciation and amortization during the reporting period amounted to EUR 0.6 million (EUR 0.6 million).

During the review period we productized and launched a ColonView QT control reagent with optimized concentrations of human hemoglobin (Hb) and hemoglobin/haptoglobin complex (Hb/Hp). The Control Reagent is intended for use as a quality control of the BIOHIT ColonView® Quick Test and thus, to demonstrate the reliability of the measurement results. Biohit Colonview® quick test is intended for a detection of blood in stool samples, indicating bleeding colorectal cancer tumors and their precursors.

In addition, we have continued the development of the GastroPanel® Quick Test, intended as the first-line diagnostic test for dyspeptic patients, by negotiating with international hospitals to conduct external clinical studies as a multi-center study. For the ColonView ELISA Test, intended for automated screening of colorectal cancer and its precursors, we have modified production processes to make them more cost-effective.

The randomized, double-blind clinical trials in patients suffering from migraine and cluster headache have been completed in respect of data analysis. Data analysis showed that the results were not positive. According to the results, Acetium® capsule was not statistically significantly more effective than placebo in preventing migraine-type headaches when data analysis included all enrolled patients. However, patients who clearly benefitted from Acetium® and whose monthly headache days were reduced by more than 50% was found, and even more patients were found with a reduction of up to 25 % of their monthly migraine days. Because migraine is a complexed neurological disorder with diverse symptoms, it is important next to identify and define this subgroup responding to Acetium®. In addition, the open label experience has provided some evidence that a better treatment response could be achieved if the dosage of Acetium is 2 capsules 3 times a day administered after a meal, instead of 1 capsule twice a day as was administered in these clinical trials.

The clinical study, focusing on patients suffering from type 1 diabetes mellitus (DM1) or autoimmune thyroid disease (AITD) and known to have a markedly increased risk of contracting autoimmune atrophic gastritis, is continuing at GastroCenter and Internal Medice Department of Oulu University Hospital. Blood samples of all consenting patients are being analysed with Biohit GastroPanel® test and those whose GastroPanel result suggest atrophic gastritis will be invited to gastroscopy to clarify ., the prevalence of the major risk factor of gastric cancer and atrophic gastritis in these high-risk patients. Currently, about 240 DM1/AITD patents have been participated in the study.

Gross investments during the H1/2019 reporting period totalled EUR 0.0 million (EUR 0.0 million).

During the review period, the Biohit Group employed on average 46 (51) people, of whom 38 (43) were employed by the parent company and 8 (8) by the subsidiaries.

Biohit’s key risks are related to the the success of the product registrations, personnel recruitment, the selection and development of new market areas and distribution channels. Significant short-term risks are associated with the successful selection of new market areas, the timing of expansion into selected markets and product success in these markets. The recent increase in uncertainty factors associated with international politics may have an unfavourable impact on the company's business for example Brexit and Middle-East situation.

The duration of the product registration process is different in each market area. For this reason, it is not possible to accurately assess the time taken for the authorities to handle registrations in these areas and for product sales to begin. The distributor is responsible for the registration process.

When investing liquid assets, the objective is to gain a return on investment with a minimum risk of equity loss. The investment portfolio consists of deposits, money market investments and corporate loans. A fundamental aspect in portfolio management is sufficient diversification across different asset classes, investment instruments and counterparties. The investment portfolio is subject to interest rate risk, which is managed by adjusting the duration of the portfolio. The rise of one percentage point in interest rates would have a negative impact of EUR 0.1 million on the fair value of the investment portfolio.

The Group’s investment in unlisted shares of Genetic Analysis AS is subject to changes in the terms of transactions involving the company’s shares that take place between third parties, which are used as input data in the valuation of Biohit’s holding in the company. A negative change of 15% in the valuation of Genetic Analysis AS shares, would have a negative pre-tax impact of EUR 0.6 million on the Group comprehensive income. Genetic Analysis AS valuation changes have no effect on cash flow.

Biohit’s operation’s customer base is widely diversified, with the exception of GastroPanel® sales in China, which currently represents a major single business for Biohit. Due to this reason, the company is dependent on the continuation of this business relationship. Otherwise, the company is not significantly dependent on individual customers or project deliveries. Most of the company’s business is conducted in euro, and the indirect effects of currency exchange rate fluctuations are considered insignificant.

Biohit ColonView test is a new-generation fecal immunochemical test (FIT) designed for detection of fecal occult blood (FOB) in subjects participating in colorectal cancer (CRC) screening.

ColonView-FIT has been compared with a traditional guaiac-based FOB test in a head-to-head study setting conducted in a leading cancer hospital in Brazil (Barretos Cancer Hospital) between 2014-2018.

ColonView-FIT showed a sensitivity far superior to the comparison test in detecting FOB in patients referred for colonoscopy as a part of CRC screening program at BCH.

Biohit’s management team member Business Development Director Lea Paloheimo retired as planned 31st of January 2019. Lea Paloheimo was elected in the annual general meeting 24th of April 2019 as member of the Board of Directors.

A total number of 5,000 new Biohit Oyj B-shares have been subscribed for with stock options I 2013 between 4 December 2018 and 11 February 2019. These shares have been entered into the Trade Register on February 27, 2019, as of which date the new shares established equal shareholder rights with the company's existing B-shares. The share subscription price was EUR 2.2766 per share respectively.

Biohit Oyj and Satya Abadi Pharma have signed an agreement for the distribution of the Acetium lozenge in Indonesia

A significant confirmatory evidence to the existing data on GastroPanel® biomarkers as predictors of gastric cancer was provided by a recently published nationwide multicentre study from China, where an extensive study group headed by professor Cuancai Cai from Changhai Hospital, Naval Medical University (Shanghai, China) studied a Chinese population at high risk for gastric cancer. In this extensive cohort of 14,929 subjects, the authors aimed to develop a prediction algorithm (risk factor combination) to be used as an initial pre-screening tool for identifying individuals at high risk for gastric cancer, before subjected to confirmatory gastroscopy.

Biohit Oyj and Precision Health Co., Ltd have signed an agreement for the distribution of the Acetium lozenge in Thailand.

Biohit Oyj and Difar Distribuzione s.r.l have signed an agreement for the distribution of the Acetium® lozenge in Italy

The Annual General Meeting (AGM) of Biohit Oyj held on April 24, 2019 approved the financial statements of the parent company and the consolidated financial statements and discharged the members of the Board of Directors and the President and CEO from liability for the financial year 2018.

Distribution of dividends

The AGM resolved in accordance with the proposal of the Board of Directors that no dividend is paid for the financial period ended on December 31, 2018.

Members of the Board of Directors

The AGM resolved that six (6) members are elected to the Board of Directors and that professor (h.c.) Osmo Suovaniemi, CEO Franco Aiolfi, emeritus professor Matti Härkönen, Commercial Counsellor Eero Lehti, Ph.D. Lea Paloheimo and CEO Liu Feng are elected as members of the Board of Directors until the end of the next AGM. 

Additionally, the AGM resolved that the Chairman of the Board of Directors and the other Board members are paid a meeting fee of EUR 1,500.   

Election of the Auditor and remuneration for the Auditor

The AGM elected authorized public accountants PricewaterhouseCoopers Oy as the company’s auditor with Pasi Karppinen, Authorised Public Accountant, as chief auditor until the end of the next AGM and that the auditor is paid remuneration according to invoice presented by the auditor.

All decisions of the AGM were made unanimously.

Biohit Oyj’s Board of Directors has in its meeting yesterday elected Mr Osmo Suovaniemi as the Chairman of the Board of Directors.

A total number of 88,552 new Biohit Oyj B-shares have been subscribed for with stock options I 2013 between 12 February 2019 and 31 May 2019. These shares have been entered into the Trade Register on June 12, 2019, as of which date the new shares will establish equal shareholder rights with the company's existing B-shares.

The share subscription price was EUR 2.2766 per share respectively. After the subscriptions the number of all Biohit Oyj's shares rose to 15,045,593 shares and B-shares rose to 12,070,093 shares.

Biohit Colonview® quick test is now available with a control reagent. Biohit ColonView QT Control is intended as a positive quality control for BIOHIT ColonView®. The product is an in vitro diagnostic medical device and intended to be used by healthcare professionals only. BIOHIT ColonView is a qualitative quick test used for detecting presence of human hemoglobin (Hb) and hemoglobin/haptoglobin complex (Hb/Hp) in stool samples. The control has been designed to report a positive result on the BIOHIT ColonView cassette with the optimized concentrations of Hb and Hb/Hp.

In 2014, Biohit Oyj initiated two clinical trials for prevention of migraine-type headache attacks, testing the efficacy of Acetium® capsule in this novel indication. Although the study results were not positive for the whole cohort, subgroup analyses disclosed migraine patients who benefit from Acetium® capsule.

The members of Biohit's Management Team are: CEO Semi Korpela, CFO Jukka Kainulainen Production & Research and Development Director Minna Mäki, Sales and Marketing Director Ilari Patrakka and Quality and Regulatory Affairs Director Daniela Söderström.

Biohit Oyj’s number of shares is 15,045,593 (14,889,278), of which 2,975,500 (2,975,500) are Series A shares and 12,070,093 (11,913,778) are Series B shares. The Series B shares are quoted on NASDAQ Helsinki in the Small cap/Healthcare group under the code BIOBV.

At the end of the reporting period on 30 June 2019, the company had 6,946 shareholders (6,907 on 30 June 2018). Private households held 59.8% (59,5%), companies 4.6% (4,6%) and public sector organisations 0.0% (0.0%). Foreign ownership or nominee registrations accounted for 28.5% (29.1%) of shares. Other owners accounted for 7.1% (6.8%).

Further information on the shares, major shareholders and management shareholdings is available on the company's website.

This half year financial release has been prepared in accordance with the requirements of the IAS 34 Interim Financial Reporting standard. Biohit Oyj has applied the same accounting principles in preparing this half year financial report as for its financial statements 2018 except 2019 implemented IFRS standard changes and interpretations. Additional information of IFRS 16 implementation has been presented in this half year financial report. Other changes in IFRS standards and interpretations has no material impact in this half year financial report. The figures in the half year financial report have not been audited.

The new guidance regarding alternative performance measures (APM) by the European Securities and Markets Authority, ESMA, came into effect in 2016. Biohit Group presents certain alternative performance measures to reflect the underlying business performance and to enhance comparability between financial periods. Alternative performance measures should not be considered in isolation as a substitute for measures of performance in accordance with IFRS. Operative performance measures have been adjusted for certain non-operative items or non-cash valuation items that affect comparability between periods.

Certain items that are not related to the underlying business or non-cash valuation items that have material effect on the profit and loss for the period are adjusted as items affecting comparability. These items can arise for example from:

- Impairment of assets- Sale or acquisition of asset or business- Share based payment expences in accordance with IFRS 2

Additionally Biohit Oyj presents the following alternative performance measures:

Biohit implemented IFRS 16 for the first time for the reporting period beginning on 1 January 2019. It will result in almost all leases being recognised on the balance sheet by lessee as the distinction between operating and finance leases is removed.

Under the new standard, lessee recognises a right-of-use asset (the right to use the leased item) and a lease liability to pay rentals. The standard includes optional recognition exemptions for short-term leases (12 months or less) and leases for which the underlying asset is of low value. Biohit has decided to apply the optional exemptions and recognises these expenses as straight-line basis over the period of the lease. 

Due to adopting IFRS 16 -standard, the balance sheet on June 30 2019 will increase by EUR 0.2 million. Biohit has evaluated that the most significant impact of adopting the standard is that Biohit recognises new liabilities and right-of-use assets, relating to office premises and company cars from lease contracts currently classified as operating leases. Furthermore, the nature of expenses relating to such lease contracts changes when the rent expense is removed and depreciation of the right-of-use asset and interest expense (included in financial expenses) on the lease liability will be recognised. Biohit applies the simplified transition method and does not restate comparative amounts for the year prior to first adoption.

According to IFRS 16 -standard, the lessee’s lease period is the period during which the lease cannot be terminated. Also, a potential extension or termination option should be considered, if the use of such option is estimated to be reasonable certain. The lease term for ongoing contracts is based on estimate by Biohit’s management. Management regularly estimates the length of those leases.

The lessee should value the lease agreement by discounting the future lease payments to the present value at the inception of the contract. The internal interest rate implicit in the lease is not easily available which is why the future minimum lease payments are discounted using Biohit’s incremental borrowing rate. According to the standard, the incremental borrowing rate is defined as the interest that the lessee would have to pay when borrowing for a similar term and with similar security to obtain an asset of an equivalent value to the right-of-use asset in similar economic environment. Biohit has determined the incremental borrowing rate for leases based on the debt based financing offers received from the 3 party. Biohit has applied a single discount rate to a portfolio of leases with similar characteristics.

The company has classified the hierarchies of financial assets according to the availability of data on market terms and other price data.

In significant part, the fair values of level 2 instruments are based on other input data than the quoted prices included in level 1, although this data can be obtained for the assets or liabilities in question either directly (as a price) or indirectly (as a derivative of the price). The Group uses generally accepted valuation models to determine the fair values of these instruments, and the input data for these models are based in significant part on observable market data.

The level in the fair value hierarchy at which a certain item measured at fair value is classified overall is determined on the basis of the significant input data on the lowest level with regard to the entire item measured at fair value. The significance of input data is evaluated in its entirety in relation to the item valued at fair value.

The book value of trade and other receivables and payables and cash and cash equivalents which are measured at amortised cost corresponds to their fair value due to their short maturities.

Other current financial assets on level 2 consists of fixed income funds and corporate loans. Other current financial assets on level 3 consists of the Group’s investment in unlisted shares of Genetic Analysis AS. Its fair value is based on transactions between third parties, which are used as input data in the valuation of Biohit’s holding in the company.

Biohit Oyj sold EUR 2.0 million (EUR 0.7 million 8.6.2018-30.6.2018)  worth of goods and services to Biohit Healthcare (Hefei) Co. Ltd during the review period. Biohit Healthcare (Hefei) Co. Ltd reached significant influence in Biohit Oyj in accordance with IAS 28 on 8 June 2018.

A total number of 93,552 new Biohit Oyj B-shares have been subscribed for with stock options I 2013 B. These shares have been entered into the trade register on 27 February 2019 and 12 June 2019, as of which date the new shares established equal shareholder rights with the company's existing B-shares.

The share subscription price was 2.2766 per share respectively. The entire subscription price of EUR 212,980.50 is credited to the reserve for invested non-restricted equity, and the company share capital remains unchanged. The shares have no nominal value.

After the subscriptions the number of all Biohit Oyj's shares increased to 15,045,593 shares and the number of B-shares to 12,070,093 shares.

The share subscription period with stock options I 2013 B began on 1 June 2015 and ended 31 May 2019. The terms and conditions of the option schemes with additional information are available on Biohit Oyj website at .

In order to redeem the stock options, the stock option holder has paid the subscription price in accordance with the stock option plan. The option holder also pays the income tax on the option income.

Biohit will publish a schedule for 2020 financial reporting and Annual General Meeting later this year. 

Biohit Oyj Board of Directors


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Globe Newswire: 07:30 GMT Wednesday 14th August 2019

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