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December 2012

BioGaia – a healthcare company in probiotics

Vision: BioGaia´s vision is to improve the health of people around the world by offering first class probiotic products.

Business concept: BioGaia´s concept is to develop, market and sell well documented probiotic products worldwide in the form of innovative and appealing dietary supplements and food products.

Probiotics: Live microorganisms which when administered in adequate amounts confer a documented health benefit.

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BioGaia

• Founded in 1990

• Probiotics (strains of Lactobacillus reuteri)

• 74 employees (Stockholm 26, Lund 22, Eslöv 16, Raleigh 2,

Hiroshima 6, Shanghai 2)

• Two segments: Finished consumer products/Component products

• More than 100 clinical studies

• Products in 60 markets through distributors

• Contract manufacturing

• TwoPac (50% owned)

• Holds over 200 patents in 25 families

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Change of focus

Functional Foods / Dairies

Animal Health

Dietary Supplements

Infant formula

1990 1995 2000 2005 2010

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5

Business model – three networks

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Distribution partner network

BioGaia Brand

• Branding for Health professionals• Sold in over 40 countries• 44% of sales of finished products (incl. co- branding 51%)• Build value, less dependence

on distributors and patents

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Competition Strategy

• Clinical trials of high quality

• Attractive and unique formulations and packaging solutions

• Strong partner support

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Scientific network

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Completed clinical trials Nov. 2012

• 108 trials in 8600 individuals

whereof:• 76 randomised, double-blind /

blind, placebo-controlled studies in

6 800 subjects

• 32 open studies in 1 770 subjects

• 35 studies in 0-3y in 3 900 subjects

Clinical trials supporting the use of BioGaia Probiotics with L. reuteri – including the strains L. reuteri Protectis, Prodentis and Gastrus

Results are published in 67 scientific articles and 5 doctoral theses

Feeding tolerance

Neonatal Intensive Care

Necrotising Enterocolitis

Product Indications Overview

BioGaia ProTectis (82*)

BioGaia ProDentis (22*) BioGaia Gastrus (2*)

Functional abdominal Pain (FAP)

Gut Motility

Regurgitation

Infantile colic

Constipation

Diarrhoea

Prevention

Acute Gastroenteritis

Antibiotic AssociatedDiarrhoea (AAD)

Gingivitis/plaque

Periodontitis

Gum Integrity

H. Pylori infection/inflammation

H. pylori side effects

Stomach Health

L. reuteri DSM 17938 (ATCC 55730)

L. reuteri DSM 17938 & L. reuteri ATCC PTA 5289L. reuteri DSM 17938 & L. reuteri ATCC PTA 6485

* Number of completed clinical studies by Nov 2012

Weizman et al., Pediatr 115; 5-9 (2005)

Children (4-10 m) with increased risk for infection

12 weeks supplementation in baby formula

Health protection by L. reuteri Protectis in children

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Health economics of L. reuteri Protectis supplementation

Children (4-10 m) with increased risk for infection

12 weeks supplementation in baby formula

Weizman et al., Pediatr 115; 5-9 (2005)13

L. reuteri Protectis prevents antibiotic- associated diarrhoea

Cimperman et al. ASPEN meeting February 2009

Adults in hospital on antibiotics

Supplemented with L. reuteri Protectis or placebo for 4 weeks

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L. reuteri Protectis reduces infantile colic

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***

***

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*****

p < 0.01p < 0.001

Days of supplementation

Savino et al. Pediatr Res 58: 411 (2005)Savino et al. Pediatr, in press (2006)

Cry

ing

time

(med

ian;

min

s/da

y)

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Attractive and unique formulations and packaging solutions

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TabletsDrops Drops

ProTectisDigestive Health

ProDentisOralHealth

GastrusStomach Health

ProTectis D3

Baby

ProTectis

Baby

ProTectis

Junior

ProTectis

Baby/Junior

ProTectis ProDentis ProDentis Gastrus

Drops Lozenges TabletsORS Tablets

BioGaia product portfolio

Strong partner support

• Clinical trials• Marketing and PR support• BioGaia Academy• Web site• Participation in conferences• Speakers at symposiums• Education of sales representatives

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Competitors

Culture suppliers• Chr Hansen• Danisco• Institut Rosell Lallemand

(France)

Probiotic strains• Valio (Finland)• Probi (Sweden)

Functional Foods• Danone• Yakult

Pharma • Merck (Germany)• Novartis• Sanofi Aventis• Ferrosan (Pfizer)

Other• P&G• Local competitors

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Launches and planned launches

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- Drops: Launched in 51 countries (contracts but not launched in 27 countries)

- Tablets: Launched in 47 countries (contracts but not launched in 28 countries)

- ORS: Launched in 6 countries (contracts but not launched in 7 countries)

- Oral health products: Launched in 13 countries (contracts but not launched in 5 countries)

Key events 2012

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• BioGaia extends collaboration with Nestlé• Agreement with Gerber for sales of drops

and ORS in United States• Agreement with Nestlé for sales of drops in

Mexico• Agreement for oral health products in Czech

Republic, the Benelux countries and South Africa

• Agreement for tablets and drops in Taiwan and Pakistan

Key events 2012 (cont’d)

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• Study in type 2 diabetes started

Published studies:• Study on reduction of diarrhoea in children• New confirming study on colic• Two studies on NEC in premature infants

Nestlé Agreement

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• Sale of licence for EUR 50.8 (EUR 40 million paid and accounted for in q1 2012)

• Further projects will be announced closer to launch (USA and Mexico)

• Revenue from Nestlé is estimated in 2012 (excluding the up-front payment) to 50% of sales during 2011, in 2013 close to 2011 level and from 2014 and forward more than 2011

Sales development 2007-2011 (SEK Million)

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2007 2008 2009 2010 2011 0.0

 50.0

 100.0

 150.0

 200.0

 250.0

 300.0

 350.0

Sales per year

Year

Miljo

ner

kro

nor

+23%

+40%

+16%

+33%Average growth: 30%

+36%

EBIT and profit

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2007 2008 2009 2010 2011 0.0

 20.0

 40.0

 60.0

 80.0

 100.0

 120.0

Operating profit (EBIT)

Profit/loss before tax

108,9

103,2

Profit Margin: 35%

Ebit Margin: 33%

Financial target: at least 30% EBIT marginEBIT margin = EBIT/SalesProfit margin = Profit before tax/Sales

Income statement January - September, 2012 vs 2011

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Licence Licence income incl income exclq1-q3 2012 q1-q3 2012 q1-q3 2011

Net sales Finished consumer products 172,0 172,0 158,0 9%Net sales Component products 43,8 43,8 73,2 -40% -7%Net sales Other products 1,0 1,0 1,5 -33%Licence revenue 356,0 - -Cost of goods sold -63,8 -63,8 -73,6

Gross profit 509,0 153,0 159,1 -4%Gross margin 89% 71% 68%

Operating expenses -90,9 -90,9 -81,0 12%Exchange gain/loss on operation -3,2 -3,2 1,4

Operating profit 414,9 58,9 79,5 -26%Operating margin 72% 27% 34%

Exchange gain/loss on forward exchange contracts 7,3 7,3 -2,2Interest income 6,5 6,5 2,0

Profit before tax 428,7 72,7 79,3 -8%Profit margin 75% 34% 34%

Tax -114,6 -21,0 -21,4

Profit after tax 314,1 51,7 57,9 -11%

Income statement Sept 2012 / Sept 2011 (rolling 12 months)

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Licence Licence

income incl income excl

12 months 12 months 12 monhts

sep-12 sep-12 sep-11

Net sales Finished consumer products 229,5 229,5 202,6 13%

Net sales Component products 68,3 68,3 90,9 -25% 1%

Net sales Other products 1,4 1,4 1,9 -26%

Licence revenue 356,0 - -

Cost of goods sold -89,0 -89,0 -93,0

Gross profit 566,2 210,2 202,4 4%

Gross margin 86% 70% 69%

Operating expenses -123,2 -123,2 -107,8 14%

Exchange gain/loss on operation -4,3 -4,3 0,9

Operating profit 438,7 82,7 95,6 -13%

Operating margin 67% 28% 32%

Exchange gain/loss on forward exchange contracts

Interest income 19,6 19,6 2,3

Profit before tax 458,3 102,3 97,9 4%

Profit margin 70% 34% 33%

Tax -122,5 -28,9 -27,2

Profit after tax 335,8 73,4 70,7 4%

Balance sheet September 30, 2012 (MSEK)

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Assets Sept 30, 2012 Sept 30, 2011Intangible assets - 0,3Tangible assets 43,9 24,2Current assets 78,0 83,8Cash and cash equivalents 404,1 171,5Total assets 526,0 279,8

Equity and liabilities

Equity attributable to owners of the Parent company 439,2 229,8Non-controlling interets 2,5 0,6Total equity 441,7 230,4

Deferred tax liability 0,2 0,2Interest-free current liabilities 84,1 49,2Total equity and liabilities 526,0 279,8

Sales per segment (MSEK) (License revenue excluded)

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Jan-Sept Jan-Sept Change 12 month 12 month Change

2012 2011 % sep-12 sep-11 %

Finished consumer products 172,0 158,0 9% 229,5 202,6 13%

Component products 43,8 73,2 -40% 68,3 90,9 -25%

Other products 1,0 1,4 -29% 1,4 1,9 -26%

           

Total net sales 216,8 232,6 -7% 299,2 295,4 1%

Gross margin per segment

Finished consumer products 72% 70% 73% 70%

Component products 65% 64% 62% 66%

Other products 90% 100% 86% 95%

       

Total gross margin 71% 68% 70% 69%

Finished consumer products 79% (68)

Component products 20% (31)Other products 0% (1)

Sales per segment q1 2009- q3 2012, rolling 12 months, MSEK (License revenue excluded)

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q4 2

008

q1 2

009

q2 2

009

q3 2

009

q4 2

009

q1 2

010

q2 2

010

q3 2

010

q4 2

010

q1 2

011

q2 2

011

q3 2

011

q4 2

011

q1 2

012

q2 2

012

q3 2

012

0

50,000

100,000

150,000

200,000

250,000

Finished consumer products

Component products

Sales per geographical market (MSEK)

31

Europe 70% (75)

USA and Canada 10% (4)

Asia 12% (13)

Rest of world 8% (8)

    Change 12 mån 12 mån Change

q1-q3 2012 q1-q3 2011 % sep-12 sep-12 %

Europe 151,6 173,8 -13% 212,3 226,6 -6%

USA and Canada 20,7 9,3 123% 29,2 11,5 154%

Asia 26,1 29,5 -12% 33,5 33,9 -1%

Rest of world 18,4 20,0 -8% 24,0 23,4 3%

           

216,8 232,6 -7% 299,0 295,4 1%

The Board

Thomas Flinck

Jörgen Thorball

David DangoorChairman

Inger Holmström

Stefan Elving

Paula Zeilon

Jan Annwall

Major Shareholders 30 September 2012

Total number of shareholders 30 September 2012: 7,446Foreign owners: 41% of capital (29% of votes)

A shares B sharesShare

capitalNo. of votes Capital Votes

000's 000's SEK 000's 000's % %1 Annwall & Rothschild Inv. AB 741 1 259 2 000 8 666 11,6% 36,2%2 Sebastian Jahreskog 1 140 1 140 1 140 6,6% 4,8%3 David Dangoor (inkl bolag) 569 569 569 3,3% 2,4%4 Futuris 530 530 530 3,1% 2,2%5 Pictet & CIE, W8IMY 506 506 506 2,9% 2,1%6 Swedbank Robur fonder 416 416 416 2,4% 1,7%7 Livförsäkringsaktiebolaget Skandia 413 413 413 2,4% 1,7%8 Skandinaviska Enskilda Banken S.A., NQI 407 407 407 2,4% 1,7%9 AMF-Försäkring och fonder 388 388 388 2,2% 1,6%

10 Handelsbankens fonder 365 365 365 2,1% 1,5%Other shareholders   10 537 10 537 10 537 61,0% 44,0%

Total: 741 16 530 17 271 23 937 100% 100%

• Continued focus on BRIC-countries

• Change of distributors in a number of countries

• A number of development projects with Nestlé

• Business model for Oral Health

Present focus

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