bioMérieux - First-Quarter 2014 Business Review

Regulatory News:

bioMérieux (Paris:BIM):

Alexandre Mérieux, Chief Executive Officer, said: "During the first quarter of 2014, bioMérieux's sales rose by 4.1% at constant exchange rates and scope of consolidation, in line with our target for the year, and by 7.9% after consolidating the sales from BioFire, acquired in mid-January 2014. Sales continued to trend upwards in Europe and North America. BioFire’s FilmArray^® system pursued its rapid expansion, with 55 new instruments installed since the company’s acquisition. In addition, we continued to roll out VIDAS^® 3, whose application for approval was filed with Chinese authorities, and we prepared for the forthcoming market launch of our innovative new clinical microbiology platforms. Lastly, in line with our strategic plan, we are deploying a new operating organization designed to effectively meet public health challenges and our customers' needs around the world”.

bioMérieux, a world leader in the field of in vitro diagnostics, today released its business review for the three months ended March 31, 2014.

SALES

Net sales for the period amounted to €371 million, up a reported 3.3% from €359 million in first-quarter 2013. Organic growth (at constant exchange rates and scope of consolidation) stood at 4.1%, lifted by favorable prior-year comparatives. In addition, consolidated sales included the €14 million in sales of BioFire as from January 16, driving a 7.9% increase in sales at constant exchange rates.

⁽¹⁾ BioFire has been consolidated since its acquisition closed on January 16, 2014

First-quarter 2014 sales include the first-time consolidation of BioFire sales. Based in Salt Lake City, UT in the United States, BioFire is a molecular biology specialist that has developed FilmArray^®, a CE-marked, FDA-cleared multiplex PCR molecular biology system. FilmArray^® introduces the syndromic approach to the diagnosis of infectious diseases: this new medical approach is based on analyzing a syndrome (i.e. a set of symptoms) and, with a single reagent, identifying the disease-causing organisms responsible for the syndrome, whether they are viruses, bacteria, fungi or parasites. The fully integrated FilmArray^® solution is easy to use and quickly generates accurate, comprehensive diagnostic results. FilmArray^®'s menu currently comprises two panels, the respiratory panel and the sepsis panel, both of which are CE-marked and FDA-cleared.

The two companies present strong strategic synergies, especially in marketing, manufacturing and innovation. As soon as the transaction closed, the bioMérieux and BioFire teams began the integration and alignment process.

In conjunction with the BioFire acquisition, a wholly owned subsidiary (BioFire Defense, LLC) was created to focus on U.S. military contracts. In February 2014, the U.S. Department of Defense (DoD) awarded BioFire Defense the $240 million Next Generation Diagnostic System (NGDS) Technology Development contract. A legal protest action has been initiated by another competing company and in accordance with Federal Acquisition Regulations, a stop work order was received by BioFire Defense at the end of March. BioFire Defense is working with government officials on this issue.

In addition, in early February 2014, BioFire submitted its FilmArray^® Gastrointestinal (GI) Panel to the FDA for 510(k) clearance for sale in the United States.

Based on 2.5 months of consolidation in the first quarter, BioFire contributed sales of €14 million, reported in "change in the scope of consolidation” for the period. They included €12 million in sales of FilmArray^®, which continued to deliver fast growth (of around 60% year-on-year), particularly in North America.

bioMérieux’s first-quarter sales performance was in line with the annual target set early in the year. Over the period, the geographic diversification of the sales base once again demonstrated its effectiveness, with business temporarily slowing to 7.3% in the emerging markets following the very strong gains in fourth-quarter 2013, but stabilizing in Western Europe and remaining robust in North America (all figures stated at constant exchange rates and scope of consolidation).

⁽¹⁾ Including Middle East and Africa
⁽²⁾ Including €14 million in BioFire sales

• Sales in Europe - Middle East - Africa (53% of the consolidated total) rose by 2.7% in the first quarter, confirming the signs of stabilization observed in the second half of 2013.
  • In Western Europe (45% of the consolidated total), sales rose slightly for the third straight quarter. Growth was rapid in Germany and the Nordic countries. Sales stabilized in France, where they had been dampened in first-quarter 2013 by the termination of distribution of certain products previously commercialized by AES. Lastly, in Southern Europe, sales returned to growth for the first time
    since June 2011.
  • Growth remained strong in the Eastern Europe, Middle East and Africa region, at 11% for the period, led by the success of VITEK^® MS, molecular biology products and industrial applications.
• In North America (26% of the consolidated total), sales climbed 5.4%. Although the U.S. market environment showed encouraging signs, with in particular, an acceleration in the number of Americans adhering to the ObamaCare program in the context of the healthcare reform ("Patient Protection and Affordable Care Act”) and a more favorable reimbursement context, clinical laboratories continued to face strong financial pressure.
  The clinical business growth benefited from the Company’s positioning in faster microbiology and better sepsis management. Rapid expansion of the VIDAS^® B.R.A.H.M.S PCT^TM assay drove a nearly 25% year-on-year increase in sales of the VIDAS^® range.
  Industrial application sales rose by close to 8%, lifted by food safety diagnostic solutions, which when combined provide laboratories with actionable results in only 24 hours. In this context, the VIDAS^® and TEMPO^® lines enjoyed rapid sales growth.
• Sales in the Asia-Pacific region (14% of the consolidated total) rose by nearly 2%, following the fourth-quarter 2013 strong billings. Growth slowed to a more modest 5% in China in first-quarter 2014, but is expected to gain momentum over the rest of the year, notably led by deployment of healthcare reform and the broad-based operating initiatives deployed by Institut Mérieux and bioMérieux. In addition, the Company headquarters in Marcy l’Etoile hosted the President of the People’s Republic of China during his state visit to France in March 2014. In India, sales growth was held to 8% by the temporary postponement to the second quarter 2014 of instrument installations, in particular for industrial applications.
  In clinical applications, sales were lifted by the growth in VIDAS^® reagents across the region.
• In Latin America (7% of the consolidated total), sales saw double-digit growth in all of the directly distributed countries in the region, except Chile. Sales were buoyed by reagents, some of whose prices were significantly increased as the Company strived to adjust its commercial strategy to a troubled currency environment.

During the first quarter, sales growth was equally driven by the gains in both clinical and industrial applications (all figures stated at constant exchange rates and scope of consolidation).

⁽¹⁾ Including VIDAS^®, up 6.1%
⁽²⁾ Including €14 million in BioFire sales

• Sales of clinical applications rose by 3.6%, although growth was impacted by the difficulties encountered at the Durham, NC plant in the United States. The deployment of a vast action plan, designed to restore satisfactory blood culture bottle production conditions and strengthen the plant’s quality system, has not yet enabled the Company to effectively fulfill orders from every customer. Compared with first-quarter 2013, when blood culture bottle sales rose quickly on robust demand during the serious outbreak of seasonal flu, the blood culture line sales saw a decline in first-quarter 2014.
  • In this particular environment, microbiology sales rose by 1.7%, led in particular by the solid performance of the automated ID/AST line. In 2014, the Company will broaden its commercial offering with the launch of two new, particularly innovative systems - the Virtuo™ new automated blood culture system and an incubator incorporating imaging technologies. In particular, Virtuo™ is in the final validation and verification phase and the teams are actively preparing its gradual market roll-out, starting in mid-2014.
  • Thanks to its positioning in high medical value assays and in emerging markets, the VIDAS^® line maintained its robust growth, with a 6.1% increase led by reagents and instruments. In addition, sales were spurred by the recent market roll-out of VIDAS^® 3, the new generation VIDAS^® instrument that is now available in nearly 40 countries and whose installed base totaled
    some 270 instruments at end-March 2014. Lastly, the VIDAS^® 25 OH Vitamin D Total test, which was CE-marked in late 2013, has enjoyed a promising start-up in both mature and emerging markets.
  • Molecular biology reported a nearly 11% year-on-year increase in sales, thanks to the fast growth in the ARGENE^® line.
• Industrial applications, which now account for 20% of total sales after consolidation of BioFire, delivered growth of 3.5%, led by strong demand in the Eastern Europe, Middle East and Africa region and in North America. In the Asia-Pacific region, sales got off to a slower start after the strong performance in the final quarter of 2013. However, momentum is expected to pick up over the rest of the year, lifted by the robust demand in both mature and emerging markets, the breadth of bioMérieux's product line-up, and the marketing action plans to intensify deployment of flow cytometry solutions to new customers.
• Sales of reagents and services, which represented 91.1% of sales, rose by 4% on an organic basis. During the period, bioMérieux continued to expand its bioMérieux Performance Solutions™ services offer, in particular by launching its e-learning platform in Switzerland and Germany.

OTHER INFORMATION

• Net debt
  As of March 31, 2014, after payment of the €355-million consideration for the acquisition of BioFire, net debt stood at €322 million. During the quarter, the Company received the €13-million payment from the Spanish authorities settling all of the past-due public-sector receivables until December 31, 2012.
  At December 31, 2013, net cash amounted to €25 million.
  The Company has issued €300-million in seven-year bonds, which were placed with institutional investors in October 2013. It also has a €350-million syndicated line of credit expiring in March 2017.

FIRST-QUARTER OPERATING HIGHLIGHTS

• Commercial offer
  bioMérieux is actively pursuing its innovation strategy. It has extended the marketing of VIDAS^® 3, which is now available in nearly 40 countries, and is continuing to prepare its clinical microbiology platforms that will help to enhance the medical value of diagnostics, the analysis process or laboratory workflows.
  During the quarter, it also continued to broaden its range of reagents and introduced chromID^® CARBA SMART, a new bi-plate Petri dish whose two selective chromogenic media make it possible to screen for all carbapenemase-producing Enterobacteriacae (CPE) in 18 to 24 hours. CPE are particularly multi-resistant bacteria and cause healthcare-associated infections and hospital epidemics.
• Partnership with Philips in automated Point-of-Care (POC)
  At the end of March, given the challenges that bioMérieux sees in developing troponin solutions delivering comparable performance to central laboratory analyzers, the Company decided not to pursue its collaboration with Philips aimed at developing a fully automated handheld diagnostic testing solutions for hospital use that can be deployed at the point-of-care - i.e. close to the patient.
• Deployment of the Global ERP system
  The Global ERP system continued to be successfully deployed during the period. Following launch in South Africa, it is now up and running in 25 subsidiaries.

DEPLOYMENT OF A NEW OPERATING ORGANIZATION

On April 15, 2014, the Company announced that a new organization has been deployed, with Alexandre Mérieux leading the Management Committee as Chief Executive Officer.

The Management Committee is in charge of implementing the strategy decided by the Board of Directors, which remains chaired by Jean-Luc Belingard. In this regard, the Committee’s main missions are to define the priority action and development areas, oversee strategic projects and allocate the necessary resources to the different departments within the Group.

To continue bioMérieux’s international development and always better serve customers, three regional organizations with expanded responsibilities have been created: a Europe-Middle East-Africa region, an Americas region and an Asia-Pacific region. Thierry Bernard, who was previously Corporate Vice President, Global Commercial Operations and since 2011 in charge of Investor Relations and the development of bioMérieux in China, will help to set up this new organization, before leaving the Company to pursue other personal and professional projects. In parallel, two business units for bioMérieux’s customer segments, a Clinical Unit and an Industry Unit, have been established.

The Business Development, Molecular Biology and Quality departments report to Jean-Luc Belingard. All other departments, including Investor Relations, report to Alexandre Mérieux.

2014 OBJECTIVE

Based on the current sales outlook, bioMérieux maintains its 2014 objective of between 3% and 5% organic growth at constant exchange rates and scope of consolidation. The Company will benefit from the resilience of its business model and the technological and geographic diversification of its business base.

Jean-Luc Belingard, Chairman, concluded: "bioMérieux's good sales performance in the first quarter of 2014 offers a solid foundation for development, at a time when the Company has started to effectively integrate BioFire and is pursuing the launch cycle of its innovative new systems.

In addition, we have introduced a new operating structure that is enabling us to step up deployment of our strategic plan and prepare for our company’s future. In this context, Thierry Bernard has chosen to leave bioMérieux and we know that we can count on him to support us in implementing this new organization. In addition, Alexandre Mérieux and I would like to thank him for his undisputable contribution to the Company’s development over the past 13 years”.

INVESTOR CALENDAR

Annual Meeting of Shareholders: May 28, 2014 in Marcy l’Etoile (France)
Second-quarter 2014 sales: July 17, 2014, 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 2012 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 BIOMERIEUX

Pioneering Diagnostics

A world leader in the field of in vitro diagnostics for 50 years, bioMérieux is present in more than 150 countries through 41 subsidiaries and a large network of distributors. In 2013, revenues reached €1,588 million with 87% 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 market (Symbol: BIM – ISIN: FR0010096479).
Corporate website: www.biomerieux.com. Investor website: www.biomerieux-finance.com.

^* Like-for-like: on an organic basis (at constant exchange rates and scope of consolidation)