BioGaia AB (publ)

This is Teresa Agnew, CEO of BioGaia. I want to do an overview of our results for Q3. First off, our sales were 304 million sec, which was a decline of 4%, mainly due to weaker sales in EMEA. as well as some order variability, where we had higher orders in Q2 in certain markets. Sales in Europe, Middle East, Africa decreased by 27%. And in Asia Pacific, sales increased by 24%. And in the Americas, we had an increase of 5%. good growth in Asia Pacific and also solid growth in the Americas. Our EBIT was 41 million sec, which was a decline of 65%. This was primarily due to an impairment loss that we had, which I will talk about. Our EBIT margin because of that was 14%. Without the impairment loss, if you look at the adjusted EBIT margin, it was 31%. and the adjusted EBIT was 93 million sec, or a decline of 22%. So there were items that affected the comparability in the quarter. It was primarily an impairment loss attributed to our metabagen acquisition, and that impairment loss was 51.2 million sec. And I will talk a little bit about the clinical study that we had been doing with prediabetes patients. So in terms of our launches, we had a number of launches, Phyrex drops in Switzerland, Nest Care in Brazil, Protectus drops with vitamin D in Mexico, Prodentis lozenges in a number of markets in Latin America, as well as Protectus tablets with vitamin D in Peru. In addition to other key events, we announced in July our exclusive distribution agreement with Ricardotti in Italy. Ricardotti, as you may know from previous, was a sub distributor that is now our exclusive distributor in Italy. On October 17th, we also announced preliminary results that we would not meet market expectations. We had the impairment loss for the Metabagen acquisition of 51.2 million sec. This was due to a clinical study that had been going on for a number of years. where the primary endpoint for a potential product was not met. This was a product around metabolic syndrome. So it was a clinical study with about 108 patients looking at glucose values over a 12 week period for people with prediabetes to see if glucose levels would decline with the probiotic versus the placebo. And unfortunately we did not see the primary endpoint of reduction in glucose. We did have a secondary endpoint where we saw improvement in triglycerides, but our primary endpoints were not met. In terms of sales, as I said, we had an overall 4% decline for the quarter. Our pediatric sales decreased by 12%, mainly due to protectus drops. And this was mainly in EMEA. And in the Americas, it was more Brazil with the order phasing because we had a very high Q2 and then a lower Q3. And sales decreased in Turkey and Spain. Spain was another example where we had higher orders in Q2 and lower orders in Q3. And for the adult sales portfolio increased by 29%, mainly due to Prodentis and Protectus tablets. Our sales also increased in US as well as in Korea and Protectus tablets increased mainly in Indonesia and Hong Kong. And as you see from a year to date standpoint, our pediatrics business is growing 4% and our adult business is growing 16%. So overall growth of 6%. And our pediatric business remains at around 78% of our overall sales. In terms of the regions, I mentioned the EMEA sales decreased by 27%. That was mainly due to Turkey, Spain, and Poland. In Asia Pacific, we had a healthy increase of 24%, mainly in Indonesia, China, and Australia. Australia is one of our direct businesses that we just took direct actually in Q3. So we have a promising start in both Australia and New Zealand. our China business is doing very well, where we had higher orders in Q2 and now again, higher orders in Q3. So very strong growth in China. In the Americas, our sales increased by 5%, mainly driven by the US, Canada, and Guatemala. And I'm proud to say in the US and Canada, our business is growing very healthy ahead of market. So as you see here then, On the chart, year to date, EMEA is declining 2%, Asia Pacific is growing 25%, and the Americas is growing 4%. And it's good to see that our growth in the US is strong, even though we're still lapping the Gerber sales from last year, where they stopped selling our probiotic drops last year. And now I'll turn it over to Alex to go through the financials in more detail.

you teresa so to summarize the quarter three financials we had revenues of 304 million which was a four percent decline our operating profit was 41 million which was a 65 percent decline and our reported ebit margin was 14 percent now of course we had this adjustment so excluding The impairment loss, we had an EBIT of 93 million and an adjusted EBIT margin of 31%. Earnings per share were 0.36 SEC and cash flow was 111 million SEC. If we look at the third quarter then, of the decline of 4% in the quarter, approximately 3% was due to currency and organically we had a decline of 1.5%. And year to date, we had an increase of 6%, of which organically 7% increase and a negative currency effect of about 1%. If we look at the gross margin for the quarter, we had a gross margin of 73% versus 74% in the same quarter last year. In pediatrics, our margin was stable at 75%, and in adults, the margin was slightly lower at 66% versus 68% one year ago. The main reason for the lower adult margin is mixed effects. For example, a larger proportion of sales of Prodentis, where we have a slightly lower margin, and also due to some increased sales in certain markets. So mixed effects is the explanation. And if you look year to date, you can see that in total we have a stable gross margin of 73 percent which is the same as we had one year ago for the same period one year ago we move on to the operating expenses our operating expenses increased with 56 percent again this is due to that impairment loss so if we exclude that we had an increase of operating expenses of 11 percent If we look at the line items, sales and marketing costs increased due to increased activities related to sales and marketing. This is an effect of going direct. So basically when we have increased activity levels in the direct markets, our costs will increase there and therefore sales and marketing costs have increased. So that is the main explanation that we do a larger proportion of our sales direct through our own subsidiaries and therefore those costs increase. In terms of the R&D, it's the impairment loss that is affecting the increase. If you exclude the impairment loss of 51 million, the R&D costs are basically flat. Other OPEX was minus 5 million. This is due to exchange losses. And in the same quarter last year, it was a slightly positive effect there. And then in terms of admin costs, they are somewhat higher in the quarter, but in line with, or actually lower than last year, year to date. So all in all, then we have a total OPEX, which increased with 11% on an adjusted basis. Move on to the P&L then to summarize. Sales decreased with 4%, OPEX increased with 56, and we have an EBIT margin of 14%. And on an adjusted basis, as I mentioned before, we have an EBIT margin of 31% versus 38% one year ago. And year to date, our adjusted EBIT margin is 35% versus one year ago, 36%. And 35% is then above our financial target year to date. If we look at then, to summarize, the cash flow, so cash flow, from operating activities increased with 1% despite the lower operating profit. And that is due to that we have changes in working capital, which are only minus 4 million versus minus 23 one year ago. So cash flow from operating activities then is actually 1 million higher than last year, even though we have a lower operating profit. Cash flow from investing activity is very low, minus 3 million SEC in the quarter. Cash flow from financing activity is actually a positive 14 due to new share issues of about 20 million, which are included in that line item. And those new share issues are due to the incentive program from 2021. So all in all, we have a cash flow of 111 million versus 88 million one year ago. and the cash at the end of the period of 1.115 billion SEC. And with that, I hand over to Theresa for some concluding remarks.

Yes. So overall, as we said, our net sales decreased by 4% and it was a decrease of 2%, excluding the currency effects. Our direct markets are performing strongly across really all of our direct markets, but we have a very strong start in Australia and New Zealand. Our EMEA sales decreased by 27%, mainly due to lower sales in the pediatric segment and primarily in markets such as Turkey, Spain, and Poland. In Asia Pacific, we continue our strong growth with 24%, which was due to higher sales in both the pediatrics and the adult segment. And mainly we saw that in China, Indonesia, and Australia. In Americas, our sales increased modestly by 5%. mainly due to increased sales in the adult segment. And we've seen that growth in predentists, protectists, as well as gastrous. Sales mainly increased in Biogaia US, Canada, as well as Guatemala. And in the quarter, as we said, we recorded an impairment loss, which is attributed to our metabogen acquisition of 51.2 million sacs. Our operating expenses increased by 56%. And if you exclude those items, it increased by 11%. Our EBIT margin was 14% and the adjusted margin was 31%. And we will continue the ramp up of our investments to drive our continued growth. We have investments also in Q4 that we are primarily focusing around sales and marketing in our direct markets. So I open it up for questions.