BioGaia a healthcare company working with probiotics

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2 BioGaia a healthcare company working with probiotics BioGaia s vision is to improve the health of people around the world by offering first class probiotic products. BioGaia s business concept is to develop, market and sell well-documented probiotic products worldwide in the form of innovative and convenient formulations 2

3 BioGaia AB Founded in employees Officies in Stockholm, Lund, Eslöv, Raleigh, Hiroshima, Shanghai Listed on the OMX Nordic Exchange in Stockholm 1998 Products in 90 markets through distributors Contract manufacturing (TwoPac AB 100% owned) Holds 400 patents in 31 families The founders Peter Rothschild och Jan Annwall 3

4 Change of focus Oral Health Dietary Supplements Infant formula Functional Foods / Dairies Animal Health

5 BioGaia s global network Partners! Pharma and Health Food companies BioGaia! Product development, product strategies, research, Quality, market support Suppliers! Contract Manufacturing Research! Pre-clinical and clinical studies in hospitals and universities BioGaia Universities and hospitals where research is conducted. Manufacturing and Production Partners selling component products Partners selling finished goods 5

6 Business model three networks Distribution partners Sales force Pharmacies Physicians Product development Innovation & IPR Product strategies Research Quality systems Marketing support Indications Clinical Research Preclinical Food supplements Production Probiotic cultures 6

7 Distribution partner network Local distributors with medical representatives who promote to health professionals Dietary supplement BioGaia BioGaia brand Sales through Pharmacies 7

8 Bran Brand Branding for Health professionals Sold in 55 countries 61% of sales 2014 of finished products (incl. co-branding) Build value, less dependence on distributors and patents 8

9 Competition Strategy Engaged and competent personnel challenging existing solutions Clinical trials of high quality Attractive and unique formulations and packaging solutions Strong partner support 9

10 Clinical trials supporting the use of BioGaia Probiotics Lactobacillus reuteri Protectis, Prodentis and Gastrus 137 completed clinical trials in individuals 97 randomised, double-blind / blind, placebo-controlled studies in subjects 41 open studies in subjects 45 studies in 0-3y in subjects 108 scientific articles and 9 doctoral theses

11 Efficient BioGaia probiotics Functional gastrointestinal disorders Colic Regurgitation Constipation Functional abdominal pain Acute gastroenteritis Support of gastrointestinal health Antibiotic-associated side-effects Hp-infection Eradication treatment associated side-effects Gingivitis Periodontitis 11

12 Colic studies with L. reuteri Protectis Chau (2014) Szajewska (2013) L. reuteri (n = 24) Placebo (n = 28) Placebo (n=40) L. reuteri Protectis (n=40) Median duration of crying and fussing (min/day) P=0.032 P=0.018 P=0.045 P=0.804 Day 0 Day 7 Day 14 Day 21 Median crying time per day (minutes) P< P< P< P=0.002 Day 0 Day 7 Day 14 Day 21 Day 28* Savino (2010) Savino (2007) Placebo (n=21) L. reuteri Protectis (n=25) Simethicone (n=42) L. reuteri Protectis (n=41) Median crying time per day (minutes) P=0.022 Day 0 Day 7 Day 14 Day 21 Median crying time per day (minutes) P=0.005 P<0.001 P<0.001 P<0.001 Day 0 Day 7 Day 14 Day 21 Day 28 Reduction in median crying time after 21 days! Szajewska: 69% reduction with L. reuteri Protectis compared to 47% with placebo! Savino: 90% reduction with L. reuteri Protectis compared to 70% with placebo! Savino: 62% reduction with L. reuteri Protectis compared to 22% with simethicone! Chau: 54% reductiong with L. reuteri Protectis compared to 16% with placebo * Follow-up 1 week after termination of intervention

13 Cimperman et al, % reduction in diarrhoea incidence with L. reuteri Protectis compared to placebo Adults in hospital given a course of antibiotics were supplemented with L. reuteri Protectis or placebo for 4 weeks L. reuteri Protectis reduced incidence of diarrhoea by 84% compared to placebo 13

14 L. reuteri Protectis effective in constipated adults 6 p=0.023 Bowel movements per week (mean) Placebo (n=20) L. reuteri Protectis (n=20) 0 Week 0 Week 4

15 Prevention? 15

16 Gutierrez - Diarrhea in Preschool Children and L. reuteri Protectis L. reuteri Protectis (n=168) Placebo (n=168) 16

17 Study outcomes confirm previous results Reduced number of days: Gutierrez, 2014 (n=336) Weizman, 2005 (n=128) Agustina, 2012 (n=250) with diarrhoea with antibiotic use with fever NA absent from day care NA with respiratory tract infection NS NS 17

18 Indrio - Act and not React: Prophylactic use of L. reuteri Protectis in the Prevention of Colic, Regurgitation and Functional Constipation L. reuteri Protectis (n=238) Placebo (n=230) 18

19 Conclusions! Preventive use of L. reuteri Protectis in healthy newborns reduces onset of colic, regurgitation and constipation! Preventive use of L. reuteri Protectis reduces direct costs for both family and community! Preventive use of L. reuteri Protectis is proven to be valuable for both infants, parents and the society Indrio

20 Attractive and unique formulations and packaging solutions 20

21 BioGaia current products ProTectis ProDentis Gastrus Digestive Health Oral Health Stomach Health BioGaia BioGaia BioGaia BioGaia Baby Baby Junior Baby/Junior ProTectis Drops ProTectis D3 Drops ProTectis Tablets ProTectis ORS BioGaia ProTectis Tablets BioGaia ProDentis Drops BioGaia ProDentis Lozenges 1 BioGaia Gastrus Tablets

22 BioGaia partner support Clinical trials Marketing and PR support BioGaia Academy Workshops Participation in medical congresses Speakers at symposiums Education of sales representatives Social media Customer support 24/7/365 22

23 Competitors Culture suppliers Chr Hansen DuPont (Danisco) Institut Rosell Lallemand (France) Probiotic strains Valio (Finland) Probi (Sweden) Functional Foods Danone Yakult Pharma Merck (Germany) Novartis Sanofi Aventis Ferrosan (Pfizer) Bayer (USA) Other P&G Local competitors 23

24 Cooperation with Nestlé Agreement 2008 (Infant formula) Agreement 2012 (EUR 50.8 million) Drops in Mexico, U.S and UK Powder formula for children above the age of one (Royalty agreement 2013, launch end of 2014) Extended collaboration (Royalty SEK 92.0 million over three years from q2 2014) (New segment) Other ongoing development projects 24

25 Sales development 5 years Average growth: 14% Sales % % -8% +9% % Sales ) ) 1) Excluding licence revenue from Nestlé of 356 MSEK / 95,4 MSEK 25

26 Sales per geographical market 2014 Europe 67% (69) USA and Canada 8% (7) Asia 10% (13) Rest of world 15% (11) 26

27 Income statement 2014/2013 Excluding Excl Licence rev. currency effect: Net sales Paediatrics 313,7 313,7 238,6 31% 27% Net sales Adult Health 69,5 69,5 75,6-8% -12% Net sales other 3,2 3,2 1,7 Licence revenue 95,4 - - Total sales 481,8 386,4 315,9 22% 18% Cost of goods sold -131,3-131,3-101,7 Gross profit 350,5 255,1 214,2 19% Gross margin 73% 66% 68% Operating expenses BioGaia -154,7-154,7-134,3 15% Operating expenses IBT -6,6-6,6 - Exchange gain/loss on operation 7,7 7,7 1,8 Operating profit 196,9 101,5 81,7 24% 13% 1) Operating margin 41% 26% 26% Operating margin excl IBT 42% 28% 26% Exchange gain/loss on forward exchange contracts -6,6-6,6-2,9 Interest income 2,2 2,2 5,0 Profit before tax 192,5 97,1 83,8 16% Profit margin 40% 25% 27% Tax -44,5-23,5-19,6 Profit after tax 148,0 73,6 64,2 15% 1) 21 % excluding IBT expenses and currency effects 27

28 Balance sheets (MSEK) Dec, 31 Dec 31, Assets Intangible assets 6,1 - Tangible assets 72,8 60,3 Other financial assets 4,0 - Current assets 122,0 88,8 Cash and cash equivalents 210,7 234,3 Total assets 415,6 383,4 Equity and liabilities Equity attributable to owners of the Parent company 344,5 317,3 Non-controlling interets 0,1-0,5 Total equity 344,6 316,8 Deferred tax liability 0,2 0,1 Other provisions 3,9 - Interest-free current liabilities 66,9 66,5 Total equity and liabilities 415,6 383,4 Proposed dividend: SEK 5.00 per share 28

29 5 years development (2012 and 2014: excluding licence revenue from Nestlé) Total sales Gross profit Operating expenses (cost of goods excluded) Operating result Profit before tax *) *) 29

30 Key events 2014 Publication of study showing that colic can be prevented No significant differences in BioGaia s diabetes study New extended agreement with Nestlé Publication of study showing that it is possible to prevent common infections in children Agreement for the sale of drops in the UK and India Decision to extend production plant in Eslöv Publication of study showing that infants with colic cry less with BioGaia s drops Publication of study showing that BioGaia Protectis tablets are effective in constipated adults Investment in MetaboGen AB 30

31 First half year

32 Key events first 2015 Agreement on rights to sell drops in Vietnam and oral health tablets in Mexico Nestlé launched new product with BioGaia s probiotic Publication of study showing that Lactobacillus reuteri Prodentis is effective in patients with dental implants Publication of a Chinese study showing the efficacy of BioGaia s drops for infant colic BioGaia investigates the possibility of a separate listing for its subsidiary Infant Bacterial Therapeutics AB Publication of a study showing that Prodentis reduces Candida in elderly patients 32

33 Income statement first half year Exluding Excl. License rev. currenc y q1-q q1-q q1-q Change effect: Net sales Paediatrics 224,1 143,1 143,1 57% 41% Net sales Adult Health 42,1 36,2 36,2 16% 9% Net sales other 6,7 6,3 6,3 Licence revenue - 95,4 - Total sales 272,9 281,0 185,6 47% 34% Cost of goods sold -81,5-58,8-58,8 Gross profit 191,4 222,2 126,8 51% Gross margin 70% 79% 68% Operating expenses BioGaia -87,7-72,9-72,9 20% Operating expenses IBT -9,7-3,1-3,1 Exchange gain/loss on operation 1,0 2,5 2,5 Operating profit 95,0 148,7 53,3 78% 44% Operating margin 35% 80% 29% Opeating margin excl IBT 38% 54% 30% Exchange gain/loss on forward exchange contracts 4,2-3,2-3,2 Interest income 0,1 1,5 1,6 Profit before tax 99,3 147,0 51,7 92% Profit margin 36% 79% 28% Tax -20,4-32,6-11,6 Profit after tax 78,9 114,4 40,1 97% 33

34 Income statement rolling 12 months Excl. Lic. rev Excl q q q currency q q q Change effect: Net sales Paediatrics 382,2 256,0 256,0 49% 38% Net sales Adult Health 75,3 74,0 74,0 2% -4% Net sales other 16,2 7,9 7,9 Licence revenue - 95,4 - Total sales 473,7 433,3 337,9 40% 30% Cost of goods sold -154,0-108,9-108,9 Gross profit 319,7 324,4 229,0 40% Gross margin 67% 75% 68% Operating expenses BioGaia -169,6-137,8-137,8 23% Operating expenses IBT -13,2-3,3-3,3 Exchange gain/loss on operation 6,2 2,9 2,9 Operating profit 143,1 186,2 90,8 58% 32% Operating margin 30% 55% 27% Operating margin excl IBT 33% 44% 28% Exchange gain/loss on forward exchange contracts 0,8-4,5-4,5 Interest income 0,8 3,7 3,7 Profit before tax 144,7 185,4 90,0 61% Profit margin 31% 43% 27% Tax -32,3-41,3-20,3 Profit after tax 112,4 144,1 69,7 61% 34

35 Balance sheet (MSEK) June, 30 Dec 31, Assets Intangible assets 13,8 6,1 Tangible assets 79,4 72,8 Shares 4,0 4,0 Current assets 142,1 122,0 Cash and cash equivalents 202,8 210,7 Total assets 442,1 415,6 Equity and liabilities Equity attributable to owners of the Parent company 353,0 344,5 Non-controlling interets 0,1 0,1 Total equity 353,1 344,6 Deferred tax liability 0,2 0,2 Other provisions 3,9 3,9 Interest-free current liabilities 84,9 66,9 Total equity and liabilities 442,1 415,6 35

36 Sales per business unit first half year and rolling 12 months Q1-q2 Change Change Jul 14- Jul 13- Change Change q1-q ) % % 1) Jun 15 Jun 14 2) % % 1) Pediatrics 224,1 143,1 57% 42% 382,2 256,1 49% 38% Adult health 42,1 36,2 16% 9% 75,3 74,0 2% -4% Other 6,7 6,3 16,2 7,9 Total sales 272,9 185,6 47% 34% 473,7 338,0 40% 30% 1) Excluding currency effects 2) Excluding licence revenue of SEK 95.4 million 36

37 Sales per geographical market (MSEK) (excl. Licence revenue) 12 mån 12 mån Change June 15 June 14 % Europe 284,0 231,8 23% USA and Canada 42,3 21,5 97% Asia 43,7 42,7 2% Rest of world 103,7 42,0 147% 473,7 338,0 40% Europe 60% (69) USA and Canada 9% (6) Asia 9% (13) Rest of world 22% (12) 37

38 Board of Directors 2015 Paula Zeilon Stefan Elfving Chairman David Dangoor Brit Stakston Ingrid Holmström Two new board members from 7 May 2015: Ewa Björling Anthon Jahreskog Jan Annwall 38

39 Major Shareholders 30 June, 2015 A shares B shares Share capital No. of votes Capital Votes SEK 000's 000's % % 000's 000's 1 Annwall & Rothschild Inv. AB ,7% 34,0% 2 Sebastian Jahreskog ,3% 5,2% 3 Fjärde AP-fonden ,0% 2,9% 4 Handelsbankens Fonder AB ,7% 2,6% 5 Livförsäkringsaktiebolaget Skandia ,5% 2,5% 6 David Dangoor (inkl bolag) ,3% 2,4% 7 CBNY Norges Bank ,0% 2,2% 8 Banque Pictet & CIE ,9% 2,1% 9 State Street Bank & Trust com., Boston ,3% 1,7% 10 Swedbank Robur fonder ,2% 1,6% Other shareholders ,2% 42,8% Total: % 100% Total number of shareholders 30 June, 2015: 7,191 Foreign owners: 48% of capital (35% of votes) 39

40 Probiotic supplements global market Probiotic supplements historic global sales and projections (in billions $) Probiotic supplements global sales Euromonitor International

41 Launches - Drops: Launched in 72 countries - Tablets: Launched in 58 countries - ORS: Launched in 14 countries - Oral health products: Launched in 23 countries 41

42 Growth potential existing products 3 or more products from our product line launched in only 21 countries out of 70 countries Drops per new-born (from 3% up to 434%, average 105%) Contract but not launched: UK, India, Vietnam (China, South Korea) White spots: Myanmar, Thailand, Netherlands 42

43 Present focus Japan, US, UK and India Launch of new packaging solutions during the year Development program for fermentation and freeze-drying A number of projects, studies and product developments with Nestlé IBT, separate listing, new share issue and licensing TwoPac to be GMP qualified opens some Asian markets Strategic planning for MetaboGen 43