BioGaia AB: Interim report third quarter January – September 2022

THIRD QUARTER 2022

• Net sales amounted to SEK 257.7 million (173.8), an increase of SEK 83.9 million, or 48% (excluding foreign exchange effects, 33%) of which the acquisition of Nutraceutics accounted for an increase of SEK 20.8 million (12%). Organic growth was 21%.
• Net sales in the Paediatrics segment amounted to SEK 205.7 million (130.8), an increase of 57% (excluding foreign exchange effects, 41%).
• Net sales in the Adult Health segment amounted to SEK 50.5 million (42.1), an increase of 20% (excluding foreign exchange effects, 7%).
• Operating expenses amounted to SEK 92.0 million (60.7), an increase of SEK 31.4 million, (52%), of which the acquisition of Nutraceutics accounted for an increase of SEK 24.2 million (40%). Operating expenses included costs for evaluating acquisition candidates of SEK 0.0 million (0.1).
• Operating profit increased by 40% to SEK 93.7 million (67.2), which corresponds to an operating margin of 36% (39%).
• Profit after tax amounted to SEK 79.5 million (52.8), an increase of 50%.
• Earnings per share amounted to SEK 0.79 (0.52) before and after dilution[2].
• Cash flow amounted to SEK 37.3 million (55.6).
• Cash and cash equivalents at 30 September 2022 amounted to SEK 1,402.4 million (1,529.7).
   

Key events in the third quarter of 2022

On 14 July, BioGaia announced that results for the second quarter exceeded market expectations.

On 29 August, BioGaia announced that it has built a pilot plant in Eslöv, Sweden, together with the subsidiary MetaboGen. The facility handles manufacturing of bacteria with different requirements during fermentation, both traditional lactobacilli as well as new, extremely oxygen-sensitive strains

On 22 September, BioGaia announced that BioGaia and Skinome have collaborated on the research and development of a product with live bacteria that can improve skin health in a natural way by supporting the skin microbiome.
 

JANUARY – SEPTEMBER 2022

• Net sales amounted to SEK 829.7 million (578.9), an increase of SEK 250.7 million, or 43% (excluding foreign exchange effects, 32%) of which the acquisition of Nutraceutics accounted for an increase of SEK 50.2 million (9%). Organic growth was 24%.
• Net sales in the Paediatrics segment amounted to SEK 661.0 million (453.6), an increase of 46% (excluding foreign exchange effects, 34%).
• Net sales in the Adult Health segment amounted to SEK 165.5 million (121.7), an increase of 36% (excluding foreign exchange effects, 26%).
• Operating expenses amounted to SEK 303.6 million (223.2), an increase of SEK 80.3 million (36%), of which the acquisition of Nutraceutics accounted for an increase of SEK 67.6 million (30%).
• Operating expenses included costs of evaluation of acquisition candidates of SEK 1.1 million (2.6), restructuring costs (relating to personnel) of SEK 3.9 million (2.4) and the reversal of previous impairment of right-of-use assets linked to a rental contract for premises of SEK -1.7 million (5.1). Excluding these items, operating expenses amounted to SEK 300.3 million (213.2), an increase of 41%.
• Operating profit increased by 45% to SEK 290.3 million (200.6), which corresponds to an operating margin of 35% (35%).
• Profit after tax amounted to SEK 234.3 million (158.0), an increase of 48%.
• Earnings per share amounted to SEK 2.32 (1.56) before and after dilution[2].
• Cash flow amounted to SEK -101.8 million (56.7).
   

Key events after the end of the third quarter

On 17 October, BioGaia announced that profit for the third quarter exceeded market expectations.
 

[2] In view of the 5:1 share split, which took place in May 2022, historical key ratios based on the number of shares have been restated.
 

CEO’S COMMENTS

It is very gratifying to present another strong quarter, which is the fifth consecutive quarter with double-digit growth. BioGaia increased net sales by 48% compared with the year-earlier quarter with an operating margin of 36%. The Paediatrics segment increased 57% and the Adult Health segment by 20%.  This was despite an uncertain business environment, driven by high inflation and geopolitical concerns. Demand will probably remain strong for our Protectis drops for infants with colic regardless of the economic situation, while our products in the Adult Health segment for well-being may be affected by tougher economic times.

In our Americas market area, we can see that inflation is beginning to impact purchasing power in the USA. This mainly concerns sales of our products in retail, while e-commerce sales, primarily through Amazon, but also through Target and Walmart, are rising. After the summer break, when children and adults returned to their daily routines, we noted rising demand for our products for a better immune system and oral health. Extensive work is underway in Canada, where we will soon launch under own management, to ensure that we can take full advantage of valuable synergies with our USA operations. In Latin America, we saw excellent growth thanks to Brazil, Peru, Chile and Costa Rica, which all reported triple-digit sales growth. This is where we launched Gastrus, our product for more severe stomach problems, which was well received by gastroenterologists.

In EMEA, France, Italy and Spain are performing beyond expectations. To increase awareness of BioGaia in the UK, which is an important and relatively new market for us, we have an ongoing digital marketing campaign with the country’s largest website for parents, Mumsnet. In parallel, we are continuing to invest in medical marketing, which includes participation in the PPPP Congress (Probiotics, Prebiotics, Postbiotics in Pediatrics), with the aim of continuing to build important relationships in the health profession. In Sweden, we are launching, in time for the common cold season, Pharax, which strengthens the immune system and supports children’s upper respiratory health. In Finland, we are growing our presence in pharmacy chains and we have also secured a hospital tender for our Protectis drops.  

APAC reported double-digit sales growth in China despite the ongoing Covid-restrictions. High infection rates in Japan are preventing visits to dentists, which normally represent a strong sales channel for us. Instead, we can see in both countries rising sales via e-commerce as a result of successful digital marketing on social platforms. In South Korea and Vietnam, we also noted triple-digit growth because of our digital presence.

As part of our strategy to control our entire value chain, we started a pilot fermentation plant where we will test the manufacturing of bacteria strains that are extremely oxygen-sensitive.

As we look back on another strong quarter, we feel well prepared to get through the very uncertain times ahead. We are continuing our prioritised strategy to selectively increase our marketing to consumers.

People will always prioritise good health and we remain optimistic about the future. Together, we are creating an innovative workplace where employees are enthusiastic and strive towards the same vision: to become the world’s most trusted probiotic brand.

Isabelle Ducellier
CEO BioGaia
21 October 2022
 

Teleconference:
Investors, analysts and the media are invited to take part in a teleconference on the interim management statement to be held today, 21 October 2022, at 09:30 a.m. CEST with CEO Isabelle Ducellier and CFO Alexander Kotsinas. More information about the teleconference is available here: https://financialhearings.com/event/43470

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Contacts:
Alexander Kotsinas, CFO
Email: [email protected]
Phone: +46 (0) 735 00 11 11

Mikaela Idermark Stern, Corporate Communications
Email: [email protected]
Phone: +46 (0) 730 95 61 50

About BioGaia
BioGaia is an innovative Swedish healthcare company that develops, markets, and sells probiotic products with documented health benefits. The products are sold through local distribution partners in more than 100 countries worldwide. The class B share of the Parent Company BioGaia AB is quoted on the Mid Cap segment of Nasdaq Stockholm. biogaia.com

This disclosure contains information that BioGaia is obliged to make public pursuant to the EU Market Abuse Regulation (EU nr 596/2014). The information was submitted for publication, through the agency of the contact person set out above, at 08:00 a.m. CEST on October 21, 2022.