BIOHIT OYJ STOCK EXCHANGE RELEASE 16 FEB 2007 10:00 AM FINANCIAL STATEMENT REPORT OF BIOHIT GROUP 1 JANUARY TO 31 DECEMBER 2006 The Biohit Group had total net sales of EUR 31.4 million during the financial year (EUR 28.7 million in 1Q-4Q/2005). The operating loss for the financial year was EUR 0.1 million (operating loss EUR 0.0 million). The loss for the financial year was EUR 0.8 million (loss EUR 0.2 million). Increased fixed costs, financing expenses and taxes weakened earnings compared to 2005. NET SALES The Biohit Groups net sales totalled EUR 31.4 million (EUR 28.7 million). Although this represented an increase of 10% on 2005, net sales growth still fell short of the targets set for 2006. Sales of liquid handling products in Asian market areas and global sales of diagnostics products did not develop as expected during the financial year. Sales and maintenance of liquid handling products still accounted for 94% of net sales. The net sales of the liquid handling business amounted to EUR 29.5 million (EUR 27.1 million) and the net sales of the diagnostics business to EUR 1.9 million (EUR 1.5 million). RESULT The operating loss was EUR 0.1 million (operating loss EUR 0.0 million). The loss for the financial year was EUR 0.8 million (loss EUR 0.2 million). The operating profit of the liquid handling business was EUR 2.2 million (operating profit EUR 2.3 million), the operating loss of the diagnostics business being EUR 2.4 million (operating loss EUR 2.3 million). In spite of a rise in net sales, earnings for the financial year were down on 2005. Earnings for 2006 were burdened by increased fixed costs, of which a substantial share was associated with starting up the production facility in China and restructuring the organisation in Japan. Financing costs also increased on the previous year due to the issue of a EUR 4.05 million convertible bond in November 2005. The increased profitability of certain Biohit Group subsidiaries also raised income tax by EUR 0.2 million compared to the previous year. BALANCE SHEET The balance sheet total was EUR 27.3 million (EUR 27.9 million) and the equity ratio was 49 % (52 %) on 31 December 2006. In accordance with a decision made at the Annual General Meeting on 20 April 2006, the share premium fund has been used to cover the parent company's EUR 0.6 million losses for 2005. Additionally, EUR 12.2 million have been transferred from the share premium fund to a fund for investments of non-restricted equity. LIQUIDITY During the reporting period, the operating activities had a net cash flow of EUR 0.2 million (EUR 0.7 million). At the end of the reporting period, the liquid assets of the Group totalled EUR 0.9 million (EUR 1.7 million). RESEARCH AND DEVELOPMENT Research and development expenditures amounted to EUR 1.7 million in 2006 (EUR 1.6 million), representing 5 per cent of net sales (6 per cent). EUR 306 thousand in development expenditure was capitalised during the financial year (EUR 112 thousand). INVESTMENTS Gross investments in the reporting period totalled EUR 1.9 million (EUR 2.0 million). Investments were mainly earmarked for the Chinese production facility and equipment to increase the automation level of liquid handling manufacture in the Kajaani and Helsinki production facilities. PERSONNEL The average number of personnel in the reporting period was 310 (295 in 2005 and 291 in 2004), with 162 (162 in 2005 and 164 in 2004) persons being employed by the parent company and 148 (133 in 2005 and 127 in 2004) by the subsidiaries. MAIN EVENTS OF THE REPORTING PERIOD Liquid handling business area Biohits liquid handling business includes mechanical and electronic liquid dispensers as well as disposable tips. In addition, the company offers services related to the maintenance and calibration of liquid handling products as well as training services on these products. The companys liquid handling products are combined with diagnostic products, instruments and related software, forming comprehensive analysis systems for research and clinical diagnostics. - The total market for liquid handling products grew by an average of five per cent in 2006. Although growth declined in Western countries, growth in emerging markets has been faster than average. During 2006, Biohit succeeded in gaining market share from its competitors and outpacing market growth in both pipettors and pipettor tips. In spite of heightened competition, the greatest increase was seen in mechanical pipettors. Sales of disposable tips have also risen noticeably on the previous year. During the financial year, Biohit has been particularly successful as a supplier of both mechanical and electronic pipettors to the pharmaceutical industry and global biotechnology companies. - Western markets have exhibited a trend towards computer- controlled analysis systems and robotic pipetting equipment. In 2006, Biohit engaged in even closer co-operation with partners that use robotic pipettors in their analysis equipment and systems. This business is, however, characterised by lengthy product development and customisation periods, meaning that notable sales growth will only occur 1-2 years after the launch of co-operation projects. - There is increasing demand in the market for pipettor calibration and maintenance services, and their significance is being underlined as quality standards rise and the current generation of equipment in use begins to age. Biohit continued the launch of its service concept at subsidiaries and throughout its distribution network during 2006. The new concept has had a favourable effect of the companys net sales and earnings. As part of the service concept, Biohit has designed a new style of management software for pipettor calibration and maintenance. Distribution of the new software was begun in main market areas during the fourth quarter. In addition to OEM products and other pipetting equipment, the company also focused its 2006 product development on further enhancing its pipettor and pipettor tip product families. Products launched during the financial year include a mechanical mLINE pipettor for handling small volumes (0.1-3 microlitres) and an eLINE Dispenser that is suitable for automated repetitive liquid handling. - Biohits quality systems must meet the standards set by both customers and authorities. Det Norske Veritas granted the companys liquid handling business the international ISO 13485 certificate in 2006. (ISO 13485:2003: Medical devices and equipment. Quality systems. Standards required to meet regulatory provisions.) Biohits diagnostics business received the ISO 13485 certificate back in 2003. Since then, the company has in principle adhered to the same quality system in the manufacture of its liquid handling products. The ISO 13485 quality certificate will also bolster Biohits position in the Original Equipment Manufacture (OEM) market, as the majority of the customer base uses Biohits liquid handling products to complement its diagnostics equipment and analysis systems. Diagnostics In the diagnostics business, Biohit focuses on products for the screening, prevention and diagnosis of diseases of the gastrointestinal tract. These products include the GastroPanel examination performed on a blood sample for the diagnosis of upper abdominal complaints (dyspepsia), H. pylori infection, atrophic gastritis and the associated risks (gastric cancer and peptic ulcer disease, as well as calcium, iron and vitamin B12 deficiencies). In addition, GastroPanel reveals the risk of complications of the gastroesophageal reflux disease. The company also provides biopsy specimen quick tests for the diagnosis of lactose intolerance and H. pylori infection. - Biohit has set out to build a strong network of local distributors specialised in diagnostics. During the financial year, Biohit made a number of agreements concerning the sales and marketing of GastroPanel and other diagnostics products in several countries, including Spain, Greece and Iceland. - In order for business to grow, Biohit needs to receive approvals from the relevant authorities in a number of countries. In the USA, the FDA (Food and Drug Administration) is still handling Biohits approval application for GastroPanels Pepsinogen I and II tests, and the requisite additional studies on American patient populations are underway. All GastroPanel tests (Pepsinogen I and II, Gastrin-17 and Helicobacter pylori IgA and IgG antibodies) have currently been granted marketing authorisations for clinical diagnostics throughout the EU and also in countries such as India, Canada, China, Ukraine and Russia. - Biohit has a wide scientific co-operation network. In recent years, the advantages of GastroPanel have been studied in about 40,000 patients across the world. In the fourth quarter of 2006, the Chinese medical journal Wei Chang Bing Xue (Chinese Journal of Gastroenterology; Vol. 11, No. 11, 2006) published a consensus report from Chinese scientists recommending the use of GastroPanel tests (Gastrin 17, Pepsinogen 1 and Pepsinogen II, H. Pylori antibodies) for diagnosing dyspepsia, H. pylori infection and atrophic gastritis in Chinese healthcare. This recommendation has its origins in the Gastritis Consensus Workshop, which was held in Shanghai on 1516 September 2006. Professor Shu-Dong Xiao, whose positions include one at the Chinese Ministry of Health, chaired the workshop. GastroPanels blood tests had already been granted an import licence in China. - Alongside GastroPanel, Biohit has been developing the user- friendly and cost-effective GastroView examination, for which a patent application has been filed. GastroView is primarily intended for use by general practitioners and in healthcare centres and occupational healthcare. Blood samples taken from the fingertip can be sent to Biohits service laboratory for analysis by, for example, pharmacies, health spas, sheltered accommodation and nursing homes for war veterans and the elderly, and nutritional therapists. GastroView is currently only in the launch phase and therefore did not generate net sales during the 2006 financial year. - To supplement current analysis systems, the company is developing a user-friendly automatic analyser for private clinics, health centres, emergency rooms, and special analyses. This analyser would support decentralised laboratory diagnostics, and therefore promote both more rapid diagnoses during doctors appointments and the likelihood of correct treatment (evidence- based medicine). Tekes (Finnish Funding Agency for Technology and Innovation) has awarded a grant to the GastroMate analyser development project, which was begun in 2004. GastroMate performs the GastroView and GastroPanel test on blood samples. GastroSoft software then evaluates and creates a report on the test results, as well as saving them for later use. - During the financial year, Biohit completed a prototype for XyliCyst chewing gum, which eliminates the carcinogenic acetaldehyde that dissolves in saliva during smoking. The company is currently searching for a manufacturer and distributors. Biohit is offering licences to the food industry for both XyliCyst and the BioFood method. The BioFood method eliminates the carcinogenic acetaldehyde contained in many food substances, such as yogurt and beer. Still under development are Biohits BioCyst nutritional supplements (capsules, for example), which rid anacidic stomachs of the carcinogenic acetaldehyde produced by oral bacteria from sugar and carbohydrates. Atrophic gastritis and the resulting anacidic stomach can be diagnosed using Biohits GastroPanel and GastroView examinations. About 300500 million people in the world are estimated to have low-acid stomachs in which oral bacteria can live and produce carcinogenic acetaldehyde. Production As production volumes increased in 2006, Biohit invested in the automation of liquid handling product manufacture and logistics. The company also focused on enhancing efficiency and dividing the workload between the facilities in Helsinki and Kajaani and the new factory in China. In September, Biohit opened a production facility in Suzhou, near Shanghai. The facility, which focuses on pipettor assembly, and the administrative and marketing centre in Shanghai, will primarily serve the growing Asian markets. The facility produces mechanical pipettors. Pipettors sold in Finland, Europe and the USA will still be produced at the companys Kajaani facility. As production in China has only recently started up, notable net sales were not generated during the financial year. Administration During 2006, Biohit honed its strategic management by, for example, appointing separate management teams for the liquid handling and diagnostics businesses. The division will enable each business to be developed more effectively. The Annual General Meeting held on 20 April 2006 decided that the number of the members of the Board of Directors is six. The AGM appointed Professor Reijo Luostarinen, Professor Osmo Suovaniemi, M.Sc. (Econ.) and LLM Peter Tchernych, Academy Professor Mårten Wikström, PhD Tero J. Kauppinen and PhD Peter B. Coggins as members of the Board. The AGM appointed authorized public accountant PricewaterhouseCoopers Oy as the auditor. Annual General Meeting in 2007 The date of Biohit Oyjs Annual General Meeting, to be held at Restaurant Pörssi, has been changed to Monday 23 April 2007. A separate invitation will be sent later. A change in Biohit Oyjs shareholding On 21 June 2006, Pentti Sipponen gave notification that he had acquired 900,000 Biohit Oyj Series A shares from Erja-Yhtymä Oy. After the flagging notification, the holding in Biohit Oyjs share capital and voting rights of the shareholder (Pentti Sipponen), and the holder of shares falling under his shareholding (Patolab Oy), was as follows: No of shares Votes % Share capital % Series A shares 900,000 20.79 6.95 Series B shares 26,600 0.03 0.21 Distribution of holdings: Pentti Sipponen: 900,000 Series A shares and 14,300 Series B shares. Patolab Oy: 12,300 Series B shares. The date of change in holdings was 21 June 2006. Equity Turnover and Price Development During the reporting period, the total turnover of Biohits series B shares on the Helsinki Exchanges Small Cap list (BIOBV) amounted to EUR 3,465,874 and the number of shares traded was 1,530,490. The highest share price was EUR 2.61 and the lowest EUR 1.99, the average price being EUR 2.26. The closing price at the end of the reporting period was EUR 2.03. On 31 December 2006, the market capitalisation value for the series B shares totalled EUR 18,396,118. Dissolution of the share premium fund The Annual General Meeting (AGM) of Biohit held on 20 April 2006 decided upon a decrease of the share premium fund with a total of EUR 12,842,314.81. EUR 612,688.29 will be used for the direct covering of a loss shown on an adopted balance sheet (for FY 2005), and EUR 12,229,626.52 will be transferred to a fund included in the company's non-restricted equity. The National Board of Patents and Registration of Finland granted permission for the dissolution of the share premium fund on 20 September 2006. RISKS In accordance with the principles of good corporate governance, Biohit has assessed the risks associated with the companys business operations. The most significant risks stem from the international nature of the companys business and the market and financial risks this brings, such as those associated with currency exchange rates. The main responsibility for risk management is held by the parent companys Board of Directors and the Management Team. Market growth for liquid handling products has levelled out in Western countries and price competition has heightened in emerging markets in particular. Falling prices place cost pressures on production and logistics. Biohit is meeting this challenge in various ways, such as by developing the most cost-effective Group- wide production processes possible and by establishing the Chinese production facility, which primarily serves China and its neighbouring markets. Entry into the diagnostics market is slow. The lengthy periods required before approvals are received from the relevant authorities affects the companys growth potential in certain market areas. Taking full advantage of market potential also requires proactive publishing for both the scientific community and the customer base, training healthcare personnel, as well as outlays on sales, marketing and a competent distributor network. Changes in exchange rates and in particular a strengthening euro currently pose notable financial risks that are inherent in the global nature of the companys business. The nature of our business, international operations and the structure of our organisation also place pressure on cost structure and profitability, thereby creating challenges for financing as well. The growth of Biohits operations and the diversity of its business environment mean the company must focus on continually improving the expertise of its personnel. Recruiting the expert personnel required to achieve growth expectations also sets its own challenges. OUTLOOK FOR 2006 The company expects the favourable trends in net sales of liquid handling products to continue in 2007. The diagnostics business is forecast to develop well in new market areas such as China, where a consensus report by scientists is expected to increase GastroPanel sales. An FDA approval is also awaited in the USA. The company therefore estimates that the Groups net sales will exceed those of the previous year. Increased costs from business growth due to outlays on marketing will continue to burden earnings in 2007. The operating result is highly dependent on growth in the diagnostics business. EVENTS AFTER THE CLOSE OF THE FINANCIAL YEAR Plans to separate the diagnostics business. After the close of the financial year, the company announced its plans to hive off the diagnostics business into a separate limited company with its own equity. At a meeting held on 26 January 2007, the Board of Directors decided to investigate the possibility of incorporation. The move would boost international marketing and distribution and rapidly and effectively leverage the significant potential of existing and forthcoming products. THE BOARD OF DIRECTORS PROPOSAL FOR THE DISPOSAL OF EARNINGS AND DISTRIBUTION OF OTHER NON-RESTRICTED EQUITY The Board of Directors proposes that no dividend be paid and that the loss for the financial year be transferred to retained earnings. ACCOUNTING PRINCIPLES FOR THE INTERIM REPORT This financial statement report has been prepared in accordance with IFRS (International Financial Reporting Standards), using IFRS recognition and measurement principles. All the figures in the financial statement report have been rounded up or down, due to which the sums of figures may deviate from the sum total presented. CONSOLIDATED FINANCIAL STATEMENT Financial Year 1-12 1-12 2006 2005 Change Change MEUR MEUR MEUR % Net sales 31.4 28.7 2.7 10 Other operating income 0.0 0.1 0.0 -47 Change in inventories of finished goods and work in progress 0.9 0.6 0.3 57 Raw materials and consumables -6.0 -5.3 0.7 13 External services -1.4 -1.0 0.4 39 Employee benefit expenses -12.7 -11.6 1.2 10 Depreciation -1.8 -1.7 0.1 6 Other operating expenses -10.6 -9.8 0.8 8 Operating profit / loss -0.1 0.0 -0.1 -327 Financial expenses (net) -0.5 -0.2 0.2 108 Profit / loss before tax -0.6 -0.3 -0.4 -137 Income taxes -0.2 0.0 0.2 670 Profit / loss for the period -0.8 -0.2 -0.6 -271 Last quarter 10-12 10-12 2006 2005 Change Change MEUR MEUR MEUR % Net sales 8.7 8.3 0.4 5 Other operating income 0.0 0.0 0.0 -69 Change in inventories of finished goods and work in progress 0.0 0.1 -0.1 -95 Raw materials and consumables -1.6 -1.7 -0.1 -6 External services -0.3 -0.3 0.0 6 Employee benefit expenses -3.5 -3.1 0.4 12 Depreciation -0.4 -0.4 0.0 8 Other operating expenses -3.0 -2.7 0.3 12 Operating profit / loss -0.1 0.3 -0.4 -139 Financial expenses (net) -0.1 -0.1 0.0 -5 Profit / loss before tax -0.2 0.2 -0.4 -252 Direct taxes 0.1 0.1 0.0 17 Profit / loss for the period -0.1 0.2 -0.4 -161 BY BUSINESS SEGMENT Group net sales by business segment 1-12 1-12 2006 2005 Change Change MEUR MEUR MEUR % Liquid handling 29.5 27.1 2.4 9 Diagnostics 1.9 1.5 0.3 22 Group operating result by business segment 1-12 1-12 2006 2005 Change Change MEUR MEUR MEUR % Liquid handling 2.2 2.3 0.0 -2 Diagnostics -2.4 -2.3 -0.1 -3 CONSOLIDATED BALANCE SHEET 31.12.2006 31.12.2005 MEUR % MEUR % Assets Non-current assets Tangible assets 6.9 25 6.9 25 Goodwill 2.6 10 2.6 9 Other intangible assets 1.6 6 1.4 5 Deferred tax assets 2.1 8 2.1 7 Total non-current assets 13.2 48 13.0 47 Current assets Inventories 5.8 21 4.6 16 Trade and other receivables 7.5 28 8.5 31 Cash and cash equivalents 0.9 3 1.7 6 Total current assets 14.2 52 14.9 53 Total assets 27.3 100 27.9 100 Equity and liabilities Share capital 2.2 8 2.2 8 Share premium fund 0.2 1 13.0 47 Fund for investments of non- restricted equity 12.2 45 0.0 0 Retained earnings -1.2 -4 -1.0 -3 Total equity 13.4 49 14.3 51 Non-current liabilities Interest-bearing liabilities 6.7 24 7.3 26 Deferred tax liabilities 0.1 0 0.1 0 Pension obligations 0.0 0 0.1 0 Other liabilities 1.1 4 1.1 4 Total non-current liabilities 7.9 29 8.5 31 Current liabilities Trade and other payables 5.0 18 4.2 15 Current interest- bearing liabilities 1.0 4 0.9 3 Total current liabilities 6.0 22 5.1 18 Total liabilities 13.9 51 13.6 49 Total equity and liabilities 27.3 100 27.9 100 CONSOLIDATED CASH FLOW STATEMENT 1-12/2006 1-12/2005 MEUR MEUR Cash flow from operating activities: Profit / loss before tax -0.6 -0.3 Adjustments 2.2 2.1 Change in working capital -0.9 -0.8 Interest and other financial items paid -0.4 -0.3 Interest received 0.1 0.1 Income taxes paid -0.2 -0.1 Net cash flow from operating activities 0.2 0.7 Cash flow from investment activities: Investments in tangible and intangible assets -1.8 -1.7 Investments in funds and deposits 0.0 -3.4 Capital gain from investments in funds and deposits 2.5 0.0 Net cash flow from investment activities 0.8 -5.1 Cash flow from financing activities: Proceeds from loans 0.1 4.7 Repayment of loans -1.0 -1.0 Net cash flow from financing activities -0.9 3,7 Translation difference adjustment 0,0 0,2 Increase (+) / decrease (-) in cash and cash equivalents 0.1 -0.6 Cash and cash equivalents at beginning of period 0.7 1.3 Cash and cash equivalents at end of period 0.9 0.7 STATEMENT OF CHANGES IN EQUITY Consolidated statement of changes in equity on 31 December 2006 MEUR Share Share Trans- Fund for Earnings Equity capital premium lation investme fund diff. nts of non- restrict ed equity Equity on 1 Jan 2006 2.2 13.0 0.1 0.0 -1.1 14.3 Transfer from share premium fund -12.8 12.2 0.6 0.0 Translation differences 0.0 0.0 Profit/loss for the period -0.8 -0.8 Equity on 31 Dec 2006 2.2 0.2 0.1 12.2 -1.3 13.4 Consolidated statement of changes in equity on 31 December 2005 MEUR Share Share Trans- Earnings Equity capital premium lation fund diff. Equity on 1 Jan 2005 2.2 13.1 0.0 -1.1 14.1 Transfer from share premium fund -0.3 0.3 0.0 Translation differences 0.2 0.2 Profit/loss for the period -0.2 -0.2 Equity share of convertible capital notes 0.2 0.2 Equity on 31 Dec 2005 2.2 13.0 0.1 -1.1 14.3 INVESTMENTS AND PERSONNEL 1-12/06 1-12/05 Change Change % Investments, gross, MEUR 1.9 2.0 -0.1 -3 % of net sales 6.1 7.0 Average number of employees 310 295 15 5 COLLATERAL, CONTINGENT LIABILITIES AND OTHER COMMITMENTS 31.12.2006 31.12.2005 MEUR MEUR Mortgages and pledged assets Loans from financial institutions 1.7 2.3 Corporate mortgages 1.8 1.6 Mortgages on real estate 1.4 1.4 Other long-term liabilities 0.4 0.5 Mortgages on real estate 0.8 0.8 Leasing commitments 5.3 3.8 KEY RATIOS 31.12.2006 31.12.2005 Equity ratio % 49.4 51.5 Earnings per share, EUR -0.06 -0.02 Shareholders equity per share 1.04 1.10 Average number of shares 12,937,627 12,937,627 Number of shares at the end of period 12,937,627 12,937,627 The figures in the Financial Statement Report are not audited. Helsinki on 16 February 2007 Board of Directors of Biohit Oyj Distribution: Helsinki Exchanges Financial Supervisory Authority Press http://www.biohit.com Further information: Osmo Suovaniemi, M.D., Ph.D., Professor President & CEO Tel: +358-9-773 861 Mobile: +358-40-745 5605 Email: osmo.suovaniemi@biohit.com