bioMérieux – First-Half 2015 Results

Regulatory News:

The Board of Directors of bioMérieux (Paris:BIM), a world leader in the field of in vitro diagnostics, met on August 28 under the chairmanship of Jean-Luc Belingard and approved the consolidated financial statements for the six months ended June 30, 2015. The Statutory Auditors had performed a review of the financial statements.

(1) Adjusted for the application of IFRIC 21 – Levies, as shown in appendix 1.
(2) Contributive operating income before non-recurring items corresponds to operating income before non-recurring BioFire acquisition and integration costs and before accounting entries relating to BioFire purchase price allocation. Operating income before non-recurring items corresponds to operating income before material, extraordinary and non-recurring items, which are included in "other non-recurring income and expenses from operations”.

FINANCIAL RESULTS

Sales¹

Consolidated sales amounted to €933 million in the first half of 2015, up from €781 million in the year-earlier period. This represented growth of 8.1% like-for-like with FilmArray^® confirming its role as a faster growth driver for the Group, adding approximately 300 basis points to the gains generated by the other bioMérieux lines. After changes in the scope of consolidation related to the BioFire and CEERAM acquisitions, growth reached 9.1% at constant exchange rates. Reported growth stood at 19.5%, lifted by the €81 million (10.4%) positive effect of the increase in the US dollar and other currencies against the euro over the period.

⁽¹⁾ BioFire: sales from January 1 to January 15, 2015 excluded from the organic growth calculation (acquisition date: January 16, 2014)
CEERAM: first-time consolidation of sales from this technological start-up acquired in late December 2014.

Consolidated income statement

• Gross profit

Lifted by a €35-million gain from favorable currency movements, reported gross profit stood at €474 million in first-half 2015, compared with €385 million in the prior-year period and representing a gross margin of 50.8% of sales. At constant exchange rates and scope of consolidation, gross margin came to an estimated 51.4%, up 210 basis points from first-half 2014. The improvement was led by the robust 8.1% organic growth in sales, which raised coverage of fixed costs, and by a more favorable product mix, both of which were partly offset by the impact of provisions on licensing agreements. Expenses committed by the Durham, NC site in response to observations made by the US Food and Drug Administration (FDA) declined gradually during the period, to €12 million from €15 million a year earlier.

• Contributive operating income before non-recurring items

Contributive operating income before non-recurring items ended the first six months at €122 million or 13.1% of sales, versus €91 million and 11.6% a year earlier. The growth reflected the improvement in gross profit, a €6-million positive currency effect and operating cost discipline at a time when the Company is investing to maintain the success of FilmArray^®.

• Selling, general and administrative expenses totaled €254 million, or 27.3% of sales, compared with €215 million and 27.6% in first-half 2014. The around €19-million increase at constant exchange rates primarily reflected the investment in the commercial development of the FilmArray^® line.
• Research and development outlays amounted to €116 million and represented 12.4% of sales, versus €100 million and 12.8% in the prior-year period. The like-for-like increase primarily reflects the stepped-up R&D commitment to FilmArray^® and tight control over spending on the other lines.
• Research tax credits amounted to €11 million, versus €14 million in first-half 2014, when they were lifted by favorable adjustments in relation to prior years.
• "Other operating income", which mainly comprises royalty income, was unchanged for the period, at €7.4 million.

¹ Sales growth by region and by application is presented in Appendix 2. The full first-half 2015 business review may be found at www.biomerieux-finance.com.

• Operating income before non-recurring items

BioFire acquisition expenses primarily include the depreciation and amortization charged against identifiable assets acquired, whose fair value was estimated as part of the purchase price allocation process, as well as the impact of the retention plan adopted in connection with the acquisition, representing a total of €18 million for the period, versus €15 million in first-half 2014. As a result, operating income before non-recurring items stood at €104 million, compared with €76 million a year earlier.

• Operating income

Operating income ended the first half at €103 million or 11.0% of sales, versus €77 million and 9.8% in the prior-year period.

• Financial income and taxes

Cost of debt stood at €12 million, up €10 million from €2 million in first-half 2014, primarily due to the additional debt contracted to acquire BioFire.

In first-half 2015, the interest expense on this financing amounted to €8 million and the fair value of the hedging instruments recognized in the income statement declined by €2 million. On the other hand, in first-half 2014, when euro interest rates were declining, the finance cost was zero on a net basis, as the €6 million in interest expense was offset by the unrealized fair value gains on the hedging instruments.

The effective tax rate came to 34.1% at June 30, 2015, higher than the first-half 2014 figure of 30.7%, which was restated for the impact of IFRIC 21 and reduced by the favorable adjustments in relation to prior years.

• Net income

Given these conditions, net income rose to €59 million or 6.3% of sales, from €51 million in first-half 2014.

Cash management and finance

• Free cash flow

EBITDA² amounted to €179 million in the first half of 2015, compared with €141 million in the prior-year period, reflecting the solid growth of contributive operating income before non-recurring items.

While stable in first-half 2014, operating working capital requirement rose in first-half 2015, by €62 million, under the combined impact of:

• Movements of around €33 million in trade receivables, down €2 million from the movements recorded in first-half 2014 when €13 million in past-due Spanish receivables were paid.
• A rise in the value of inventories that was almost €20-million higher than the increase recorded in first-half 2014, in particular at the Durham, NC site, due to the return to satisfactory production conditions in the blood culture bottle unit, and the Salt Lake City, UT facility, where FilmArray^® inventory is being rebuilt after the winter flu epidemic.
• Trade payables were down to €37 million at June 30, 2015, compared with a €9-million increase a year earlier, due to slight differences in payment schedules from one month to the next, which had no impact on days sales outstanding.

As expected, capital expenditure outlays rose steeply over the period, to €86 million including €67 million in industrial capital expenditure versus €56 million and €42 million respectively in first-half 2014. The outlays were primarily committed to installing a new BacT/ALERT^® blood-culture bottle line at the Durham, NC site, building the new BioFire facility in Salt Lake City, UT and extending the Marcy l’Etoile, France site with a new VIDAS^® strip packaging line.

In light of the above, free cash flow³ amounted to €24 million for the period versus €62 million in first-half 2014.

² EBITDA corresponds to the aggregate of contributive operating income before non-recurring items, depreciation and amortization.
³ Free cash flow corresponds to cash generated from operations, net of cash used in investing activities.

• Net debt

Against a backdrop of significant operational and industrial investment, net debt amounted to €274 million at June 30, 2015, versus €249 million at December 31, 2014. Dividends totaling €39.5 million were paid in June 2015, an amount virtually unchanged from 2014.

The Company has €300 million in seven-year bonds, placed with institutional investors in October 2013. It also has an undrawn €350-million syndicated line of credit expiring on May 20, 2019. Lastly, on March 31, 2015, it signed a 12-year, €45-million lease financing agreement to fund the extension of the Marcy l'Etoile, France site.

OTHER INFORMATION

• Installed base

The installed base at June 30, 2015 stood at approximately 81,200 instruments, including 1,867 FilmArray^® instruments. This represented an increase of around 1,700 new instruments over the period, of which 266 FilmArray^® units.

• Human resources

The Company had a total of 9,258 full-time-equivalent employees and temporary staff as of June 30, 2015, compared with 8,935 at December 31, 2014.

SIGNIFICANT EVENTS OF FIRST-HALF 2015

• Commercial offer

During the first quarter, the new generation FilmArray^® system, FilmArray^® 2.0, was cleared by the FDA and CE-marked. The main feature of this compact instrument is its higher throughput, which allows laboratories to process up to 175 samples in a day. The solution accommodates up to eight FilmArray^® 2.0 units operated by a single computer and is capable of connecting to Laboratory Information Systems (LIS).

In addition, bioMérieux broadened its offering in molecular biology, with the introduction of a new version of the NucliSENtral^® middleware, and in immunoassays, with the launch of the bioNexia^® Legionella rapid diagnostic test that detects the presence of Legionella pneumophila serogroup 1, the most commonly identified pathogen in Legionnaires' disease.

• De novo application submitted for the FilmArray^® Meningitis/Encephalitis Panel

In April 2015, BioFire submitted a de novo classification request to the US Food and Drug Administration (FDA) for the FilmArray^® Meningitis/Encephalitis (ME) panel. The pioneering FilmArray^® ME panel addresses a critical, unmet need for quickly identifying central nervous system infections by utilizing a comprehensive panel to test cerebrospinal fluid (CSF) for the most common bacteria, viruses and fungi responsible for community-acquired meningitis or encephalitis. A one-hour or so turnaround time has the potential to reduce mortality and morbidity from these devastating diseases and to positively impact patient management. FilmArray^® ME will only be available for sale once the FDA has completed its process. Subject to FDA clearance, the panel will be the fourth clinical diagnostic test to run on the FilmArray^® system, making its syndromic menu the largest commercially available for a multiplexing platform.

• Production and quality system

In February 2015, France's ANSM drug regulatory agency issued an injunction letter requesting that bioMérieux complete, within 12 months, the work required to bring into compliance certain production units at the site in Craponne, France. Based on discussions with the ANSM, an action plan was defined in April to address this request and is now being deployed.

In June 2015, the FDA re-inspected the site in St. Louis, Missouri and reviewed all of the corrective actions implemented in response to the October 2014 Warning Letter. It determined that there were no repeat observations as regards the Letter. Following the inspection, the FDA issued two new observations, which bioMérieux is already addressing with a corrective action plan.

Also in the United States, the Durham, NC site continued to deploy the action plans defined with the FDA to address its observations and prepare for the coming re-inspections.

• Assets held for sale

To refocus its commercial offering, bioMérieux has initiated a plan to dispose of its microplate immunoassay product line, which it deems to be non-strategic for the Company. After talks with potential buyers proved inconclusive, the production and sale of certain product lines will be terminated as of year-end 2015. As a result, €8 million in assets previously recorded under "Assets held for sale" have been reclassified under their initial headings as of June 30, 2015

The search for a partner to step up bioTheranostics's growth was still underway at period-end.

SUBSEQUENT EVENTS

• VIDAS^® 3 cleared by the FDA

On July 9, bioMérieux received 510(k) clearance from the FDA to market VIDAS^® 3, the new generation of VIDAS^® that further enhances the range of automated VIDAS^® and mini VIDAS^® immunoassay instruments in the United States. VIDAS^® 3 reinforces the ease of use that has made the VIDAS^® range so popular. Thanks to its design, tests can be performed on demand, individually or in series, 24 hours a day and seven days a week. As a result, it is perfectly suited to centralized as well as satellite laboratories, bringing both versatility and reliability to healthcare professionals who are able to optimize their workflows and guarantee the quality of biological testing.

• Non-exclusive license agreement signed with LBT Innovations Ltd

On August 27, 2015, a non-exclusive license agreement was signed with LBT Innovations for the MicroStreak^® technology used in the PREVI^® Isola automated culture-plate streaking system. The agreement terminates the exclusive license initially granted in 2007 and leaves each company free to independently pursue its own developments in the field of microbiology lab automation. bioMérieux will retain the right to maintain the installed base of PREVI^® Isola systems, including the supply of patented inoculation applicators, but will no longer market new PREVI^® Isola systems after August 2016.

• FilmArray^® BioThreat-E for the detection of the Ebola virus receives WHO Emergency Use Assessment and Listing

In view of the unprecedented outbreak of Ebola virus raging in West and Central Africa since summer 2014, the World Health Organization (WHO) introduced an emergency mechanism to assess in vitro diagnostics that will be used to diagnose Ebola virus disease. As a result, the FilmArray^® BioThreat-E test for the detection of the Ebola virus was accepted for UN procurement in August 2015. The FilmArray^® BioThreat-E test enables a simple, rapid and reliable diagnosis of the Zaire Ebola virus involved in the current epidemic.

2015 OBJECTIVES

Based on the current business outlook, the Company maintains its objective of reporting between 4.5% and 6.5% organic growth in sales in 2015, at constant exchange rates and scope of consolidation. It is also maintaining its contributive operating income before non-recurring items target of between €240 million and €265 million for the year. In an unstable economic environment, bioMérieux remains confident about the strength of the performance expected for 2015 in relation to the objectives set.

Jean-Luc Belingard, Chairman, concluded: "The market we serve continues to expand. In particular, the fight against microbial resistance is now considered a global public health priority, supported by a wide range of government initiatives in which we are actively participating. As a result, backed by its extensive international presence and broader business portfolio, bioMérieux will continue to assertively deploy its strategy and its operational action plan, the validity of which is confirmed by the solid results announced today."

INVESTOR CALENDAR

Third-quarter sales: October 22, 2015, before start of trading

The above forward-looking statements are based, entirely or partially, on assessments or judgments that may change or be modified, due to uncertainties and risks related to the Company's economic, financial, regulatory and competitive environment, notably those described in the 2014 Registration Document. Accordingly, the Company cannot give any assurance nor make any representation as to whether the objectives will be met. The Company does not undertake to update or otherwise revise any forecasts or objectives presented herein, except in compliance with the disclosure obligations applicable to companies whose shares are listed on a stock exchange.

ABOUT BIOMÉRIEUX

Pioneering Diagnostics

A world leader in the field of in vitro diagnostics for 50 years, bioMérieux is present in more than 150 countries through 42 subsidiaries and a large network of distributors. In 2014, revenues reached €1,698 million with 88% of sales outside of France.

bioMérieux provides diagnostic solutions (reagents, instruments, software) which determine the source of disease and contamination to improve patient health and ensure consumer safety. Its products are used for diagnosing infectious diseases and providing high medical value results for cancer screening and monitoring and cardiovascular emergencies. They are also used for detecting microorganisms in agri-food, pharmaceutical and cosmetic products.

bioMérieux is listed on the NYSE Euronext Paris stock market (Symbol: BIM – ISIN: FR0010096479).

Corporate website: www.biomerieux.com

Investor website: www.biomerieux-finance.com

Appendix 1: Adjustments Following Application of IFRIC 21

Appendix 2: Sales by Region and Application

⁽¹⁾ Including the Middle East and Africa.

⁽¹⁾ Including VIDAS^®: up 7.4% like-for-like over the period
⁽²⁾ Including €67 million in BioFire Diagnostics sales for the period

Appendix 3: bioMérieux Consolidated Financial Statements at June 30, 2015

(a) Financial statements since January 1, 2014 have been adjusted for the impact of applying IFRIC 21.
(b) Given the scale of the BioFire acquisition, the related fees have been broken out from operating income before non-recurring items and shown on a separate line, so as to give a better view of operating income.

(a) Financial statements since January 1, 2014 have been adjusted for the impact of applying IFRIC 21.

Balance sheet items do not include the corresponding assets and liabilities of bioTheranostics, which have been reclassified as either "Assets held for sale or "Liabilities related to assets held for sale".

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