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Additional information to the consolidated "extended" quarterly report of the BIOTON S.A. Group for the third quarter 2019
1
ADDITIONAL INFORMATION
TO THE CONSOLIDATED 'EXTENDED' QUARTERLY REPORT OF THE
BIOTON S.A. GROUP
FOR THE 3rd QUARTER 2019
Pursuant to §66 of the Regulation of the Minister of Finance of 29 March, 2018 on current and periodic information published
by issuers of securities and conditions for recognizing as equivalent information required by the laws of a non-member state
(Journal of Laws of 2018 item 757 as amended) BIOTON
S.A. ("Company") provides the following information:
1. Rules adopted when preparing the report.
Since 1 January, 2005, the BIOTON S.A. Capital Group (The " Group ") has been maintaining the books according to
International Financial Reporting Standards (" IFRS "), in the version approved by the European Union and in the scope not
regulated by the above standards in accordance with the requirements of the Accounting Act (Journal of Laws of 2019, item
351) and implementing regulations issued on its basis and in accordance with the requirements set out in the Regulation of
the Minister of Finance of 29 March, 2018 on current and periodic information published by issuers of securities and
conditions for recognizing as equivalent information required by the laws of a non-member state (Journal of Laws of 2018,
item 757 as amended).
The financial data included in the report cover the accounting period from 01 July 2019 to 30 September 2019 and cumulative
data for the period from 1 January, 2019 to 30 September, 2019 and [as at?] 30 September, 2019, comparative data for the
period from 1 July, 2018 to 30 September, 2018 and as at 30 September, 2018 and 31 December, 2018. The financial data
presented for the accounting period from 1 January, 2019 to 30 September, 2019, and comparative data for the period from
1 January, 2018 to 30 September, 2018, was not audited by an independent auditor. The comparative financial data as at 31
December, 2018 was audited by an independent certified auditor.
The financial statements of the Group are based on the historical cost principle, except for the following financial instruments
at fair value through profit or loss.
According to the assessment of the Management Board of BIOTON SA, the financial statement of the Group is based on the
Group's principle of continuation of operations. The Group has or will have sufficient resources to conduct operational,
investment, and development activities.
In the 9-month period of 2019, the Capital Group recorded sales revenues worth PLN 147.9 million compared to PLN 180.1
million for the previous year (the decrease in revenues is related to the sale of shares in the SciGen Group in mid-2018). In
addition, the Group recognized capitalized expenditure on operating profit before tax regarding a development project
related to the implementation of insulin analogues included in the results of 2018. The decision by the Parent company to
the change in the recognition of these expenditures was dictated by (i) the auditor's reservation with regard to the summary
of the interim consolidated financial statements of the Capital Group as at 30 June, 2018 and (ii) the recommendation,
received on 25 February, 2019, of the Polish Financial Supervision Authority ("PFSA") indicating the need for a change of
recognition of capitalized expenditure on development projects in the income statement until biosimilar drug registration is
obtained and (iii) the PFSA announcement regarding the possibility of recognizing assets arising from development works by
issuers of securities applying IFRS of 5 March, 2019. The Parent Company, since receiving the recommendation from the PFSA,
has conducted a number of consultations, analyses, correspondence exchanges, and meetings with the PFSA to explain in
detail all the conditions and risks associated with compliance with the PFSA's recommendations. Ultimately, the Management
Board of the Parent Company decided to change the recognition of capitalized expenditure to intangible assets related to an
analogue project in the costs for the period.
On 16 July, 2019, the Management Board concluded a contract with Yifan Pharmaceutical Co., Limited ("Yifan"), the subject
of which is mutual cooperation of the parties in the field of active substances, insulin analogues, and the final drug product
(in a finished form) from their production to commercialization ("Contract"). The contract provides financing for the whole
project because all the costs associated with the purchase and installation of the equipment needed to complete each stage
of the Contract, purchase of raw materials and auxiliary substances necessary to manufacture products in the scope included,
and relevant orders will be covered by Yifan. If the result of the work proves that the commercial production line is adapted
Additional information to the consolidated "extended" quarterly report of the BIOTON S.A. Group for the third quarter 2019
2
to the production of the drug product in finished form, Bioton will be granted the right to use Yifan intellectual property as
well as the 25-year right to manufacture, distribute, market, offer, and sell the product on the basis of exclusivity in the
territory of Poland as well as being granted priority rights for use in European countries under its own brand. Bioton will also
act as a producer of products around the world.
At the same time, the balance sheet of the interim individual financial statement of BIOTON S.A. as at 30 June, 2019 prepared
by the Management Board and subject to review by the auditor showed the sum of:
(i) losses from previous years mainly caused by updating the value of non-financial assets of BIOTON S.A. made
in previous years (mainly non-cash), and
(ii) net loss from the current period, which was influenced by the revaluation of the investment in BIOLEK
estimated on the basis of the method of discounted possible future cash flows which, due to the situation in
the market for fodder additives in swine breeding around the world, and in particular the Chinese market,
resulted in the write-down amounting to PLN 173.5 million - see note 7.12 to the Individual financial statement
of BIOTON S.A.,
which together exceed the sum of (i) supplementary capital, (ii) reserve capital and (iii) one-third of the share capital, and in
view of the above, the Management Board, in accordance with applicable regulations, immediately convened an
extraordinary general meeting in order to adopt an appropriate resolution regarding the Company's going concern, which is
a formal requirement of the Code for commercial companies. At the same time, the Management Board notes that the value
of equity of Bioton S.A. as at 30 June, 2019 is over PLN 619.9 million. In the interim consolidated financial statement of Bioton
Capital Group, a write-down of the carrying amount of the license to sell products under an agreement with Beijing Smile
Feed Sci & Tech. Co., LTD to the utility value of the license has been included estimated on the basis of the method of
discounted possible future cash flows and the goodwill value of BIOLEK estimated based on the method of discounted possible
future cash flows which resulted in the total write-down amounted to PLN 100.7 million. It should be mentioned that the
amounts of the said write-downs are non-monetary and do not have an impact on the Group's cash flow statement. - see
note 5 to the interim individual financial statement of BIOTON S.A.
The Extraordinary General Meeting of Bioton S.A. adopted a resolution on further existence on 31 October, 2019.
The activities and plans of the Management Board are aimed at successive improvement of the operating results of the
Company and the Capital Group, mainly through actions aimed at developing export sales markets, reviewing the product
portfolio in the country and abroad, along with an assessment of their profitability at all levels of margins as well as the
introduction of process changes in organizational measures aimed at improving the efficiency of the working capital of the
Company and the Capital Group.
As at the date of publication, financial covenants as at the balance sheet date indicated in the loan agreement terms were
met or BIOTON S.A. received the approval of financial institutions for exceeding them, which resulted in the presentation of
values resulting from loan agreements in short-term liabilities; however, their repayment dates have not been changed and
include original dates resulting from loan agreements.
The measurement currency and the reporting currency of these financial statements is the Polish zloty, data is presented in
thousands of zlotys. The following principles were used to present selected financial data in EUR and the following PLN to
EUR conversion was applied:
• balance sheet data was converted according to the average NBP exchange rate announced for:
− 30.09.2019 with the exchange rate of EUR/PLN 4.3736,
− 30.06.2019 with the exchange rate of EUR/PLN 4.2520,
− 31.12.2018 with the exchange rate of EUR/PLN 4.3000,
− 30.09.2018 with the exchange rate of EUR/PLN 4.2714,
• data from the income statement and the cash flow statement has been converted at the standing exchange rate,
the arithmetic average of average rates for the day ending each month during this period as follows:
− for the third quarter of 2019 at the EUR/PLN exchange rate of 4.3497,
− for the third quarter of 2018 at the EUR/PLN exchange rate of 4.2815,
Additional information to the consolidated "extended" quarterly report of the BIOTON S.A. Group for the third quarter 2019
3
2. Information on revenues and results of the BIOTON S.A. Capital Group falling in individual industry segments.
Since 1 January, 2009, IFRS 8 "Operating Segments" has been in force, which replaced the existing IAS 14 "Segment reporting".
This standard requires disclosure of information about segments on the basis of the components of the entity which are
monitored by the managers in terms of making operational decisions. Operating segments are the components of the entity
for which separate financial information is available on a regular basis, regularly assessed by persons making key decisions
regarding resource allocation and assessing the Group's activities.
For management purposes, the Group has been divided into operating segments based on capital groups and companies
included in the Group. The following reporting segments have been separated:
• BIOTON S.A. and BIOTON MARKETING AGENCY Sp. z o.o. (together BIOTON PL),
• SciGen Ltd Capital Group (the group was sold in the first half of 2018),
• Biopartners Holdings AG Capital Group (companies forming the group are under bankruptcy or in liquidation),
• BIOLEK Sp. z o.o.,
• BIOTON International GmbH.
The accounting policies of operating segments are the same as the accounting policies of the Group.
The Company's Management Board mainly monitors the operating results of the segments separately in order to make
decisions on resource allocation, impact assessment, and performance results. The assessment of individual segments is
made to the level of profit / loss on operating activities.
The Group's financing (including financial costs and revenues) and income tax are monitored at the Group level and are not
allocated.
The Group reports segments in geographical terms. The most important countries from the point of view of the Group’s operations are presented below:
• Poland,
• Australia,
• Singapore,
• Uruguay,
• Malta,
• China,
• Thailand,
• South Korea,
• Vietnam.
Additional information to the consolidated "extended" quarterly report of the BIOTON S.A. Group for the third quarter 2019
4
Operating segments - the Group
For the period from 01.01.2019 to 31.09.2019
in thousand PLN
BIOTON
PL
BIOLEK
BIOTON International
GmbH
Reconciliation items
Total
Revenues Sales to external customers 147 311 688 147 999
Sales between segments 38 722 2 537 (41 259) Total segment revenues 186 033 3 225 (41 259) 147 999
Result Segment result 76 247 (1 193) 75 054
Other operational revenues 2 532 5 2 537
Other operational costs 4 317 117 316 121 633
Selling expenses 46 503 114 46 617
General administration costs 26 658 260 638 27 556
Research and development costs 3 546 1 3 547
Gross profit / (loss) on operating activities
(2 245)
(118 879)
(638)
(121 762)
Financial revenues 8 966 8 966
Financial costs 7 838 7 838
Net financial income / (expenses) 1 128 1 128
Profit before tax (2 245) (118 879) (638) 1 128 (120 634)
Income tax (32 807) (32 807)
Net profit /(loss) (2 245) (118 879) (638) 33 935 (87 828)
Operating segments –Group
as at 30.09.2019.
in thousand PLN
BIOTON
PL
BIOLEK
BIOTON International
GmbH
Total
Segment assets Tangible fixed assets 318 455 318 455
Goodwill 25 534 25 534
Other intangible assets 372 272 5 284 377 556
Inventory 83 157 248 83 406
Receivables due to deliveries, and services 35 917 120 36 037
Cash 7 815 264 4 8 083
Other assets 51 091 625 0 51 717
TOTAL ASSETS 868 707 32 075 4 900 786
Segment liabilities Long-term liabilities 113 155 0 113 155
Short-term liabilities
177 602
2 599
(136)
180 065
Additional information to the consolidated "extended" quarterly report of the BIOTON S.A. Group for the third quarter 2019
5
Geographical segments - the Group
For the period from 01.01.2019 to 30.09.2019 and as at 30.09.2019.
in thousand PLN
Poland
Malta
Singapore,
China (including Hong Kong)
Vietnam.
Others
Total
Income from continuing operations
Sales to external customers
80 562
5 724
14 884
28 776
6 825
11 227
147 998
Total segment revenues 80 562 5 724 14 884 28 776 6 825 11 227 147 998
Fixed assets, including:
Tangible fixed assets 318,455 318 455
Intangible assets 382 981 382 981
Operating segments - the Group
For the period from 01.01.2018 to 30.09.2018
in thousand PLN
BIOTON
PL SciGen
Group
Group BioPartners Holdings AG
BIOLEK
BIOTON International
GmbH
Reconciliation items
Total
Revenues Sales to external customers
144 036
57 718
201 754
Sales between segments 50 199 1 214 407 (51,820) Total segment revenues* 194 235 58 932 407 (51 820) 201 754
Result Segment result 81 584 24 995 (138) 106 441
Other operational revenues 3 121 60 3 181
Other operational costs 3 661 145 10 3 816
Selling expenses 43 603 19 525 99 63 227
General administration costs
27 310 6 029 2 909 156 42 36 446
Research and development costs
5 167 5 167
Gross profit / (loss) on operating activities
4 964
(644)
(2 909)
(403)
(42)
966
Financial revenues 72 475 72 475
Financial costs 6 582 6 582
Net financial income / (expenses)
65 893
65 893
Profit before tax 4 964 (644) (2 909) (403) (42) 65 893 66 859
Income tax 1 034 1 034
Net profit /(loss) 4 964 (644) (2 909) (403) (42) 64 859 65 825
* Upfront adjustments have been included in connection with the application of IFRS 15 from 01.01.2018
1 The general and administrative expenses of the SciGen Ltd Capital Group include depreciation of the fair value of licenses resulting from the acquisition of the
Group Capital SciGen Ltd by the Group.. For the period from 01.01.2018 to 30.09.2018, the value of depreciation of fair values of licenses in the SciGen Capital
Group Ltd amounted to PLN 2,817 thousand PLN.
Additional information to the consolidated "extended" quarterly report of the BIOTON S.A. Group for the third quarter 2019
6
Operating segments - the Group
As at 30.09.2018
In thousand PLN
BIOTON
PL SciGen Group
Group BioPartners Holdings AG
BIOLEK
BIOTON International
GmbH
Reconciliation items
Total
Segment assets Tangible fixed assets 337 884 337 884
Goodwill 55 534 55 534
Other intangible assets 271 538 92 852 364 426
Inventory 89 102 10 381 383 89 485
Receivables due to deliveries, and services
64 337 19 958 27 402 64 768
Cash 17 498 26 366 283 5 9 17 898
Other assets 140 055 21 689 1 263 406 (81) 141 654
TOTAL ASSETS 920 414 426 150 475 415 (81) 1 071 649 1 071 649
Geographical segments - the Group
For the period from 01.01.2018 to 30.09.2018 (including the SciGen Group for the period 01.01.-30.06.2018) and as at 30.09.2018
in thousand PLN
Poland
Australia
Singapore
China (including Hong Kong)
Thailand
South Korea
Vietnam
Others
Total
Income from continuing operations
Sales to external customers
99 571
16 209
6 754
24 629
5 434
31 835
8 180
9 142
201 754
Total segment revenues
99 571
16 209
6 754
24 629
5 434
31 835
8 180
9 142
201 754
Fixed assets, including:
Tangible fixed assets 337 884 337 884
Intangible assets 364 426 364 426
3. Brief description of significant achievements or failures of the Company and the BIOTON S.A. Capital Group in the
period from 01.07.2019 to 30.09.2019 along with a list of the most important events related to them.
3.1. Information on domestic sales
The share of "Gensulin" in the classic insulins market in Poland in the third quarter of 2019 was about 34.4% despite the
results of changes in refunds made by introducing a 75+ List. The share of "Gensulin" is the leader in the classic insulin segment
in Poland.
3.2. Information on sales in foreign markets
In the third quarter of 2019, the value of insulin sales in foreign markets amounted to PLN 12.2 million and is comparable to
the same period of the previous year.
Sales of the SciGen Ltd Capital Group in the markets of Southeast Asia and Australia took place in the first two quarters of
2018.
Additional information to the consolidated "extended" quarterly report of the BIOTON S.A. Group for the third quarter 2019
7
3.3. National and EU registrations
In the third quarter of 2019:
• Post-registration change procedures for Gensulin products were continued.
• Post-registration change procedures (reducing the validity of permits) for products have been completed
(Iviprolol, Ivisart, Preheftari, Avaron).
3.4. Foreign registrations
In the third quarter of 2019:
• Nigeria - the registration process of Gensulin, GensuPen Improve, GensuPen2 products was continued,
• Macedonia - the registration process of Gensulin, GensuPen Improve, GensuPen2 products was continued,
• Albania - the registration process of Gensulin cartridge, GensuPen2 products was continued,
• Vietnam - a package of registration changes has been submitted for SciLin R, N, M30 products,
• Belarus - the registration changes package for Gensulin R, N, M30 and insulin substances has been approved,
• Belarus – the registration certificate for Gensupen 2 was obtained,
• Kyrgyzstan - the process of re-registration of Gensulin was continued,
• Philippines - a package of registration changes has been submitted for SciLin R, N products,
• Turkmenistan - the registration process of Gensulin, GensuPen 2 was continued,
• China - a registration change package has been submitted for RHI substances and SciLin R and N products,
• Thailand - a package of registration changes has been submitted for Gensulin R.
• Indonesia - the registration for SciLin R, N, M30 was renewed,
• Chile - the process of registration of Gensulin was continued,
• Tunisia - the process of registration of Gensulin was continued,
• Russia - MAH transfer for Gensulin was continued.
3.5. Research and development works
In the third quarter of 2019:
• Production research was carried out to implement modern solutions at the stage of purification of the active
substance in the technology of producing recombinant human insulin.
• Development works related to registration procedures were continued.
• Research was carried out related to the implementation of new technological solutions on the production line in the finished product plant.
• Works were continued on the development and validation of biological methods for the active substance human
insulin.
• Works were continued on the development and validation of bioanalytical methods applicable in preclinical
research.
• Works were carried out to develop and validate physicochemical analytical methods for the active substance and
forms of ready-made recombinant human insulin.
On 16 July, 2019, the Management Board concluded a contract with Yifan Pharmaceutical Co., Limited ("Yifan"), the subject
of which is mutual cooperation of the parties in the field of active substances, insulin analogues, and the final drug product
(in a finished form) from production to commercialization ("Contract"). The contract provides financing for the entire project,
because all the costs associated with the purchase and installation of equipment needed to complete each stage of the
Contract, purchase of raw materials and auxiliary substances necessary to manufacture products in the scope, included in the
relevant orders will be covered by Yifan. If the result of the work shows that the commercial production line is adapted to the
production of the finished drug product - finished form, Bioton will be granted the right to use Yifan’s intellectual property as
well as the 25-year right to manufacture, distribute, market, offer, and sell the product on the basis of exclusivity in the
territory of Poland, as well as priority rights for use in European countries under its own brand. Bioton will also act as a
producer of products around the world. The parties also started work on the implementation of analogues on the Company's
production lines.
Additional information to the consolidated "extended" quarterly report of the BIOTON S.A. Group for the third quarter 2019
8
4. Description of factors and events, in particular of an unusual nature, having a significant impact on the achieved
financial results of the Company and the BIOTON S.A. Capital Group
4.1. Sales revenues
Company:
Sales
01.01-30.09.2019
01.01-30.09.2018
Changes
(in thousand PLN)
(%) structure
.
(in thousand PLN)
(%) structure
.
(in %)
Insulin 76 189 50.13 94.712 60.88 -19.6
Finished products 76 189 50.13 94.712 60.88 -19.6
OAD PL 21 818 14.36 17 411 11.19 25.3
Other goods PL 19 578 12.88 17 051 10.96 14.8
Devices 6 599 4.34 10 836 6.96 -39.1
Goods and materials 47 995 31.58 45 298 29.12 6.0
Services* 27 805 18.29 4 672 16.87 5.9
Adjustments related to termination of contracts **
0 0.0 -10 681 -6.87 -100.0
Total sales 151 989 100.0 134 001 100.0 9.9
* Upfront adjustments have been included in connection with the application of IFRS 15 from 01.01.2018
** Includes adjustments related to termination of contracts reduced the position of services
In the third quarter of 2019, the Company generated sales revenues of PLN 151.9 million, the largest of which was the share
of insulin sales which represented PLN 76.1mln. In the comparable period of 2018, revenues amounted to PLN 134 million,
which means an increase of 13.3%.
The gross margin on sales was at a similar level as the corresponding period of the previous year and was formed at 50%
(excluding costs of downtime and unused production capacity).
Group
Sales
01.01.2019-30.09.2019
01.01.2018-30.09.2018
Changes
(in thousand PLN)
(in %) structure (in thousand PLN)
(in %) structure (in %)
Insulin 76 189 51.48% 95 835 47.50% -20.5
Finished products 76 189 51.48% 95 835 47.50% -20.5
Oral anti-diabetic drugs 21 818 14.74% 17 411 8.63% 25.3
Growth hormone 0 0.00% 17 793 8.82% -100.0
Oncology 0 0.00% 18 029 8.94% -100.0
Other goods and materials 20 266 13.69% 33 874 16.79% -40.2
Needles, pens, belts 3 002 2.03% 4 364 2.16% -31.2
Goods and materials 45 086 30.46% 91 471 45.34% -50.7
Services * 26 722 18.06% 3 555 12.46% 6.3
Adjustments related to termination of contracts **
0 0.00% -10 681 -5.29% -100.0
Total sales 147 998 100.00% 180 180 100.00% -26.6
* Upfront adjustments have been included in connection with the application of IFRS 15 from 01.01.2018
** Includes adjustments related to termination of contracts reduced the position of services
Additional information to the consolidated "extended" quarterly report of the BIOTON S.A. Group for the third quarter 2019
9
The Group's sales revenues in the first three quarters of 2019 amounted to PLN 147.9 million and were at a lower level than
the previous year by 26%.
The gross margin on sales at the Group level reached 50% and was higher by 10 p.p. compared to the same period of 2018.
The main reason for the increase in the margin is the change in the share of products with different margins in the sales
structure. In the third quarter of 2019, the share of sales of goods in total sales was lower compared to the third quarter of
2018.
4.2.General administration costs
The Company:
General and administrative expenses during the three quarters of 2019 amounted to PLN 26.4 million and were lower by 1
PLN million in the same period of 2018, mainly due to the sale of the SciGen Group.
The Group
General administrative expenses during the three quarters of 2019 amounted to PLN 27.5 million and were lower by PLN
8.9 million in the corresponding period of 2018.
4.3.Selling expenses
The Company:
Selling expenses in the three quarters of 2019 amounted to PLN 49.8 million and were lower by PLN 3.5 million in the
corresponding period of 2018.
The Group
Selling expenses in the three quarters of 2019 amounted to PLN 46.6 million and were lower by PLN 16.6 million in the
corresponding period of 2018, which is mainly due to the sale of the SciGen Group.
4.4.Costs of the research and development department
The Company:
Research and development costs in the three quarters of 2019 amounted to PLN 3.5 million and were lower by PLN 16.2
million compared to the same period of 2018.
The Group
Research and development costs in the three quarters of 2019 amounted to PLN 3.5 million and were lower by PLN 16.2
million compared to the same period of 2018.
4.5.Result on operating activity
The Company:
Operating loss (EBIT) during the first three quarters of 2019 amounted to PLN 6.6 million, compared to a loss of PLN 33.4
million in the corresponding period of 2018.
EBITDA achieved the value of PLN 16.6 million in the first three quarters of 2019, while in the corresponding period of 2018,
it amounted to PLN (-) 14.1 million.
The Group
Operating loss (EBIT) in the three quarters of 2019 was PLN 121.7 million compared to a loss of PLN 35.1 million in the
same period of 2018.
In terms of value, EBITDA for the first three quarters of 2019 amounted to PLN (-) 97.5 million, while in the corresponding
period in 2018, it was (-) PLN 12.2 million.
Additional information to the consolidated "extended" quarterly report of the BIOTON S.A. Group for the third quarter 2019
10
5. Explanations regarding the seasonality or cyclicity of operations of the Company and the BIOTON S.A. Capital Group
Insulin sales are characterized by relatively small seasonal fluctuations in respect of taking medications by patients. Due to
the chronic nature of the disease and the long period of use of these preparations by patients, insulin sales remain similar
throughout the months of the year (except for holiday months, traditionally the least favourable for the pharmaceutical
industry). However, it should be noted that most new cases of diabetes are diagnosed while the patient is suffering from
infections. Infections can also disturb the metabolic balance of patients already being treated for diabetes. That is why
patients most often change treatment in spring and autumn and so, it is then that most new cases of diabetes are diagnosed.
Insulin sales in a quarter depend on the strategy adopted for selling the product to distributors who are the Group's
customers.
6. Information on write-downs on inventories to net realizable value and reversal of write-downs on this account.
The Company:
Increase in write-downs from 01.07.2019 to 30.09.2019. thousand PLN
Inventory revaluation write-downs -
Total -
Reduction of write-downs (use and termination) in the period from 01.07.2019 to 30.09.2019. thousand PLN
Inventory revaluation write-downs 6
Total 6
The Group
Increase in write-downs from 01.07.2019 to 30.09.2019. thousand PLN
Inventory revaluation write-downs -
Total -
Reduction of write-downs (use and termination) in the period from 01.07.2019 to 30.09.2019. thousand PLN
Inventory revaluation write-downs 6
Total 6
Information on write-downs for impairment of financial assets, property, plant and equipment, intangible assets or other
assets, and reversal of such write-downs.
The Company:
Increase in write-downs from 01.07.2019 to 30.09.2019. thousand PLN
Impairment losses -
Impairment losses on intangible assets -
Impairment losses on property, plant, and equipment -
Impairment losses on financial assets -
Impairment losses on investments in subsidiaries -
Total -
Additional information to the consolidated "extended" quarterly report of the BIOTON S.A. Group for the third quarter 2019
11
Reduction of write-downs (use and termination) in the period from 01.07.2019 to 30.09.2019. thousand PLN
Impairment losses -
Impairment losses on intangible assets -
Impairment losses on property, plant, and equipment -
Impairment losses on financial assets -
Impairment losses on investments in subsidiaries -
Total -
The Group
Increase in write-downs from 01.07.2019 to 30.09.2019. thousand PLN
Impairment losses -
Impairment losses on intangible assets -
Impairment losses on property, plant, and equipment -
Impairment losses on financial assets -
Impairment losses on investments in subsidiaries -
Total -
Reduction of write-downs (use and termination) in the period from 01.07.2019 to 30.07.2019. thousand PLN
Impairment losses -
Impairment losses on intangible assets -
Impairment losses on property, plant, and equipment -
Impairment losses on financial assets -
Impairment losses on investments in subsidiaries -
Total -
5. Information on the creation, increase, use, and termination of reserves.
The Company:
Increase in provisions from 01.07.2019 to 30.09.2019. thousand PLN
Provision for employee benefits 0
Provision for remuneration costs 1 021
Provision for leave 0
Provision for financial costs 0
Provision for audit costs 0
Provision for marketing costs 0
Provision for legal costs 0
Provision for sale costs 1 384
Other reserves 0
Total 2 405
Decreases in reserves (use and termination) in the period from 01.07.2019 to 30.09.2019 thousand PLN
Provision for employee benefits 1
Provision for leave 1 043
Provision for audit costs 0
Provision for financial costs 70
Provision for media costs 583
Additional information to the consolidated "extended" quarterly report of the BIOTON S.A. Group for the third quarter 2019
12
Decreases in reserves (use and termination) in the period from 01.07.2019 to 30.09.2019 thousand PLN
Provision for marketing costs 1 165
Provision for legal costs 42
Provision for sale costs 1 961
Provision for the purchase of intangible assets -
Other reserves 1 321
Total 6 186
The Group
Increase in provisions from 01.07.2019 to 30.09.2019. thousand PLN
Provision for employee benefits -
Provision for remuneration costs 1 617
Provision for leave 1
Reserve for audit and consulting services 11
Provision for financial costs -
Provision for media costs -
Provision for marketing costs -
Provision for legal costs 699
Provision for advertising and promotion costs -
Provision for sale costs 1 384
Other reserves 1
Total 3 713
Reductions in reserves (use and termination) in the period from 01.01.2019 to 31.03.2019 thousand PLN
Provision for retirement benefits and similar benefits 2 005
Provision for employee benefits 1
Provision for remuneration costs -
Provision for leave 1 345
Reserve for audit and consulting services 77
Provision for financial costs 70
Provision for media costs 583
Provision for marketing costs 1 165
Provision for legal costs 42
Provision for advertising and promotion costs 232
Provision for sale costs 1 961
Provision for the purchase of intangible assets -
Other reserves 1 365
Total 8 846
Additional information to the consolidated "extended" quarterly report of the BIOTON S.A. Group for the third quarter 2019
13
6. Information on assets and provisions for deferred income tax.
The Company:
Changes in deferred tax assets in the period from 01.07.2019 to
30.09.2019.
thousand PLN
Increase 1 088
Decrease -
The Group
Changes in deferred tax assets in the period from 01.07.2019 to
30.09.2019.
thousand PLN
Increase 1 123
Decrease -
The Company:
Changes in the provision for deferred income tax in the period from
01.07.2019 to 30.09.2019.
thousand PLN
Increase -
Decrease -
The Group
Changes in the provision for deferred income tax in the period from
01.07.2019 to 30.09.2019.
thousand PLN
Increase -
Decrease -
7. Information on significant purchase and sale transactions of property, plant, and equipment.
The Company:
In the period from 01.07.2019 to 30.09.2019, acquisition by BIOTON S.A of property, plant, and equipment amounted to PLN
5 641 thousand, while the sale of property, plant, and equipment amounted to PLN 48 000.
The Group
In the period from 01.07.2019 to 30.09.2019, the Group's acquisition of property, plant, and equipment amounted to PLN 5
641 thousand, while the sale of property, plant, and equipment amounted to PLN 48 000 (entirely in BIOTON S.A.)
8. Information on any significant liability for the purchase of property, plant, and equipment.
As at 30.09.2019, liabilities related to the purchase of property, plant, and equipment in the Group amounted to PLN 3 238
thousand (entirely in BIOTON S.A.)
9. Information on significant settlements due to court cases.
In the third quarter of 2019, there were no significant settlements related to court cases.
Additional information to the consolidated "extended" quarterly report of the BIOTON S.A. Group for the third quarter 2019
14
10. Indication of corrections of errors from previous periods.
In the third quarter of 2019, the Group did not make any corrections of errors from previous periods.
11. Information on changes in the economic situation and business conditions that have a significant impact on the fair
value of the entity's financial assets and liabilities, regardless of whether these assets and liabilities are recognized
at fair value or adjusted purchase price (amortized cost).
In the third quarter of 2019, there were no changes in the economic situation and business conditions that would have
significant impact on the fair value of financial assets and financial liabilities of the Company and the Group in addition to
those described in the interim financial statements of the entity and the Group affecting fair value of financial assets regarding
the recognition of intangible and goodwill write-downs of Biolek Sp. z o. o. in the first half of 2019.
12. Information on loan default or borrowing default or breach of material provisions of the loan agreement or
borrowing agreement for which no corrective action has been taken by the end of the reporting period.
The liabilities of the Company and the Group resulting from loan agreements are repaid on a regular basis.
13. Information on the conclusion by BIOTON S.A. or its subsidiary of one or more transactions with related entities, if
individually or jointly they are significant and were concluded on terms other than market terms, along with an
indication of their value, while information on individual transactions may be grouped by type, except when
information on individual transactions is necessary to understand their impact on the property, financial standing,
and financial result of the issuer.
In the third quarter of 2019, the Company and its subsidiaries did not enter into transactions with related entities on terms
other than a commercial basis.
14. For financial instruments measured at fair value - information on the change in method (methods) to determine it.
Due to the small share of financial instruments in the global currency position of the Company and the Group, their valuation
does not have a significant impact on the financial result and are presented in conjunction with statistical exchange
differences on account of the valuation of the surplus of receivables over liabilities and loans granted to subsidiaries,
expressed in foreign currencies. Due to the fact that the Company does not apply hedge accounting, all changes in the fair
value of the instruments are recognized in the profit and loss account and published in the financial statements.
15. Information on any change in the classification of financial assets as a result of a change in purpose or use of these
assets.
In the third quarter of 2019, the Company and its subsidiaries did not change the classification of financial assets as a result
of the change of the purpose or use of these assets.
16. Information on the issue, redemption, and repayment of non-equity and equity securities.
In the third quarter of 2019, the Company and the Group did not make any transactions in securities.
17. Information on dividend paid (or declared), in total and per share, divided into ordinary and preference shares.
The company does not plan to pay any dividends for 2019.
Additional information to the consolidated "extended" quarterly report of the BIOTON S.A. Group for the third quarter 2019
15
18. Events that occurred after the date on which the quarterly financial statement was prepared, not included in in this
report, and which may significantly affect the future financial results of the Company and the BIOTON S.A. Capital
Group.
Such events did not occur.
19. Information on changes in contingent liabilities or contingent assets that have occurred since the end of the last
financial year.
In connection with the signing of the loan agreement with BANK OF CHINA (LUXEMBOURG) S.A. operating as Bank Of China
(Luxembourg) S.A. (Joint Stock Company) Branch in Poland of BIOLEK Sp. z o. o. and BIOTON MARKETING AGENCY Sp. z o.o.
granted to BIOTON S.A. a guarantee in the amount of EUR 9 million each. The sureties were granted until the day on which
all liabilities of BIOTON S.A. will be repaid or by 31 March, 2026.
In addition, Bioton S.A. obtained the return of a blank promissory note issued in order to secure a commercial contract with
PGNiG S.A. and the return of a promissory note issued to secure the contract with Xerox.
By the end of September 2019, Bioton S.A. had signed notarial deeds - Statements regarding the establishment of the title
enforcement pursuant to art. 777 par. 1 point 5 of the Code of Civil Procedure, for a total amount of PLN 2.41 million with
the enforcement clause on 31.12.2020. Until the day of publication, additional statements on submission to enforcement
have been signed for the amount of PLN 0.5 million with an enforcement clause as of 31.12.2021. The above statements
constitute security for orders placed and implemented by the company GE MEDICAL Systems Polska Sp. z o. o. for the
company BIOTON S.A.
20. Description of the organization of the BIOTON S.A. Capital Group, with the indication of entities subject to
consolidation.
As at 30.09.2019 the subsidiaries of BIOTON S.A. were:
• BIOTON MARKETING AGENCY Sp. z o. o. based in Macierzysz, in which BIOTON S.A. held 100% of the shares,
• Mindar Holdings Ltd with its registered office in Nicosia (Cyprus), in which BIOTON S.A. held 100% of the shares,
• Germonta Holdings Ltd with its registered office in Nicosia (Cyprus), in which BIOTON S.A. held 100% of the shares,
• BioPartners Holdings AG based in Baar (Switzerland), in which BIOTON S.A. held 100% of the shares, the company
submitted a bankruptcy petition on 13.03.2019 (the bankruptcy process has been completed); BioPartners Holdings
A.G. was the owner of 100% of the shares in the following companies:
o BioPartners GmbH with its registered office in Baar (Switzerland), the company filed for bankruptcy on
12.03.2019, the process is pending.
o BioPartners GmbH with its registered office in Reutlingen (Germany), company in liquidation.
• BIOLEK Sp. z o.o. based in Macierzysz, in which BIOTON S.A. held 100% of the shares,
• BIOTON (International) GmbH with its registered office in Baar (Switzerland), in which BIOTON S.A. has 100% of the shares
21. Description of changes in the organization of the BIOTON S.A. Capital Group, including as a result of business
combinations, obtaining of or loss of control over subsidiaries and long-term investments as well as division,
restructuring, and discontinuing operations.
In the first quarter of 2019, BIOTON S.A. lost control over the BioPartners Holdings AG Capital Group.
On 8 November, 2018, the management board of BioPartnersGmbH (Germany) adopted a resolution to liquidate the
company. Until the date of publication of this report, the liquidation of Biopartners GmbH (Germany) has not been completed.
In contrast, Biopartners GmbH (Switzerland) on 12 March, 2019, and Biopartners Holdings AG on 13 March 2019, filed for
bankruptcy. The bankruptcy procedure began on 21 March, 2019. The companies were entered in the commercial register as
'in liquidation'. The companies are not allowed to conduct business activity and they do not have access to bank accounts.
Following the termination of the bankruptcy proceedings, the companies will be deleted from the commercial register. Due
to the above on the day of commencement of the bankruptcy procedure, the Company lost control over Biopartners GmbH
(Switzerland) and Biopartners Holdings AG.
Additional information to the consolidated "extended" quarterly report of the BIOTON S.A. Group for the third quarter 2019
16
22. The position of the Company's Management Board regarding the possibility of fulfilling previously published results
forecasts for a given year, in the light of the results presented in the quarterly report in relation to the forecast
results.
The company has not published a results forecast for 2019.
23. Shareholders owning directly or indirectly through subsidiaries at least 5% of the total number of votes at the
General Meetings of BIOTON S.A. as at the date of submitting the quarterly report and changes in ownership
structure of significant blocks of shares of the Company in the period from the publication of the last periodic report.
According to information held by BIOTON S.A. based on shareholders’ notices, the ownership structure of the Company's
share capital, as at the date of submitting this report, is presented in the following table:
No. The number of shares/ votes (in pcs.)
Shareholder % of share capital / votes
1 Dongren Singapore PTE LTD.2 16 989 289 19.79%
2 Perfect Trend Ventures Limited3 10 245 922 11.93%
3 Troqueera Enterprises Ltd. 8 480 570 9.88%
4 Basolma Holding Ltd.4 6 151 852 7.16%
5 AIS Investment 2 Sp. z o.o. 5 151.852 6.00%
6 UniApek S.A.5 4 293 210 5.00%
7 Others 34 551 505 40.24%
Total 85.864.200 100%
The Management Board of BIOTON S.A. with its registered office in Warsaw (the "Company") informs that on 22.07.2019
notifications were received by the Company regarding disclosure of possessions from: UniApek S.A. with its registered office
in Warsaw, Ms Wenjun Cui, and Dongren Investment Co., Ltd. of Ningbo Free Trade Zone (published in the current report
(18/2019) of 22.07.2019).
The Management Board of BIOTON S.A. with its registered office in Warsaw (the "Company") informs that on 28.08.2019
notifications were received by the Company regarding disclosure of possessions from: Wenjun Cui, Dongren Singapore PTE.
LTD. and Dongren Investment Co., Ltd. of Ningbo Free Trade Zone (published in the current report (20/2019) from
28.08.2019).
The Management Board of BIOTON S.A. with its registered office in Warsaw (the "Company") informs that on 29.08.2019
notifications were received by the Company regarding disclosure of possessions from: Jia Wei Wang (published in the current
report (21/2019) from 29.08.2019).
2 Yifan Pharmaceutical Co., Ltd. is entitled indirectly through Dongren Singapore PTE LTD to 16,989,289 dematerialized shares of the Company representing 19.79% of the share capital of the Company. Yifan Pharmaceutical Co., Ltd. is the parent company of Dongren Singapore PTE LTD. 3 Yifan Pharmaceutical Co., Ltd. is indirectly vested through Perfect Trend Ventures Limited in 10,186,419 dematerialized shares of the Company representing 11.86% of the share capital of the Company. Yifan Pharmaceutical Co., Ltd. is the parent company of Perfect Trend Ventures Limited. 2 and 3 Yifan Pharmaceutical Co., Ltd. indirectly holds 27,175,708 shares of the Company, which constitute 31.65% of the share capital of the Company, and is entitled to 27.175.708 votes at the General Meetings of Shareholders of the Company, representing 31.65% of the total number of votes at the General Meetings of Shareholders of the Company. 4 Basolma Holding Ltd is the parent entity in relation to AIS Investment 2 Sp. z o.o.
5 Dongren Investment Co., Ltd. of Ningbo Free Trade Zone is vested indirectly through UniApek in 4,299,210 dematerialized shares of the Company, representing 5% of the share capital of the Company. Wenjun Cui is vested indirectly through Dongren Investment Co., Ltd. of Ningbo Free Trade Zone and UniApek S.A. in 4,293,210 dematerialized shares of the Company representing 5% of the share capital of the Company.
Additional information to the consolidated "extended" quarterly report of the BIOTON S.A. Group for the third quarter 2019
17
The Management Board of BIOTON S.A. with its registered office in Warsaw (the "Company") informs that on 31.10.2019
notifications were received by the Company regarding disclosure of possessions from: Wenjun Cui, Yifan Pharmaceutical Co.,
Ltd and Dongren Investment Co., Ltd. of Ningbo Free Trade Zone (published in the current report (31/2019) of 31.10.2019)
The Management Board of BIOTON S.A. with its registered office in Warsaw (the "Company") informs that on 04.11.2019
notifications were received by the Company regarding disclosure of possessions from: Jia Wei Wang (published in the current
report (32/2019) from 04.11.2019).
24. Statement of the state of ownership of the Company's shares or rights to them by the managers and supervisors
of BIOTON S.A. as at the date of submitting the quarterly report, together with an indication of changes in
ownership during the period from submitting the last periodic report, separately for each person.
According to information available to BIOTON S.A., as at the date of submitting this report:
• supervisors of BIOTON S.A. do not hold any shares in the Company,
• persons managing and supervising BIOTON S.A. did not hold shares in the Company's related entities.
25. Proceedings pending before court, competent arbitration authority or authority public administration.
25.1. "Dobra Macierzysz Ośrodek" Real Estate
In matters relating to real estate, to which the Company has the right of perpetual usufruct and which were part of the former
"Dobra Macierzysz Ośrodek", hereinafter referred to as the "Real Estates", no administrative proceedings are pending
regarding the assessment of whether the above real estates were subject to the provisions of the decree of the Polish
Committee of National Liberation of 06.09.1944 on carrying out the agricultural reform (Journal of Laws of 1945, No. 3, item
13 as amended.). All proceedings ended with final judgments issued by administrative courts, which confirmed the arguments
of the heirs of former owners that the Real Estates were not subject to the provisions of the above Decree.
The last of the court and administrative cases conducted in the above scope, based on a complaint filed by the IBA with the
participation of BIOTON S.A., ended with final and legally binding decisions on 16.01.2018.
Currently, there is one administrative procedure pending before the Mazowieckie Governor, initiated at the request of the
heirs of former owners of the Real Estate of 14.04.2009 regarding the annulment of the decision of the Head of the Ożarów
Mazowiecki Commune of 15.04.1988 on the takeover of part of the Real Estate in the form of two plots with a total area of
78.87 ha, issued on the basis of the Act of 12 March 1958 on sales of state agricultural real estate and sorting out some
matters related to the agricultural reform and agricultural settlement ("Act of 1958").
In the Company's opinion, in the light of the current jurisprudence, and in particular in the light of the Constitutional Tribunal's
ruling of 20.02.1991, the probability of suffering damage by the Company as a result of recognition of possible claims of the
heirs of the former owners of the property "Dobra Macierzysz Ośrodek" by the relevant authorities seems small. In the
Company's opinion, the previous decisions in cases regarding whether the real estate from the "Dobra Macierzysz Ośrodek"
were subject to the provisions of the PKWN Decree, although they are not in line with the procedural position of the Company,
are not fundamental to the Company’s legal position, as the right to the real estate is derived by the Company from the
contract for the transfer of the perpetual usufruct right concluded with IBA.
Any possible consequences for the Company's situation may, however, be caused by the decision on invalidity of the decision
issued on the basis of the Act of 1958 by the Head of the Commune of Ożarów Mazowiecki of 15.04.1988 on the taking over
by the Treasurer of two plots with a total area of 78.87 ha and the decision of the Head of the Commune of Ożarów
Mazowiecki of 19.03.1990 on the transfer of plots of land with a total area of 77.83 ha to the management of IBA.
In the event of a possible decision of the Mazowieckie Voivodeship regarding annulment of the decision of the Head of the
Commune of Ożarów Mazowiecki of 15.04.1988 and of 19.03.1990, which was consistent with the position of the heirs, the
Company will be entitled to further appeal, including a complaint to the Provincial Administrative Court and a cassation
complaint. The very end of administrative proceedings, even incompatible with the Company's position, will not affect the
Company's property relations, which, if any, may change only after a final judgment of the heirs' claims by civil courts. In such
a situation, the Company, with respect to the plot no. 4/43, will be entitled to claim against IBA, which in the contract of
06.11.1997 stated that IBA will be charged by any third party claims.
Additional information to the consolidated "extended" quarterly report of the BIOTON S.A. Group for the third quarter 2019
18
25.2. Dispute with Hefei Life Science & Technology Park Investments & Development Co Ltd.
The company also informs that it is a party to the arbitration proceedings for payment of USD 1 500 000 with interest
submitted to the China International Economic and Trade Arbitration Commission ("CIETAC") by Hefei Life Science &
Technology Park Investments & Development Co Ltd. ("HLST") against the Company and SciGen Ltd. arising out of protracted
negotiations on the repayment of the net amount of mutual settlements between the parties. HLST also brought an action
to order the Company and SciGen Ltd. to pay the unpaid part of the license fee in the amount of USD 194 286, which was
paid by 30.06.2016. The existing dispute has its source in the agreement concluded on 21.10.2011 (with later annexes)
between the Company, SciGen Ltd., HLST, and Mr. Gao Xiaoming. Mutual settlements of the parties resulting from the said
agreement are recognized in the Company's financial statement starting from the year 2011. The company questioned the
basis for HLST's claim for the disputed amount. On 01.09.2017, the Company became aware of an arbitral award issued by
CIETAC. The Arbitration Court adjudged in favor of HLST the amount of USD 1 500 000 and the corresponding interest, as well
as payment of USD 146.80 as license fees for the third quarter of 2015 and USD 184 549.82 for interest on late payments
since the first quarter of 2013, within 15 business days from the date of entry into force of this judgment. In addition, the
court obliged the company to pay the claim fee and part of the arbitration fee.
The company verifies the legal possibilities of a possible appeal against the arbitration award and the grounds for obtaining
enforceability of the award by HLST also in Poland.
The company has taken legal steps for amicable settlement of the case.
25.3. Arbitration proceedings against LG Chem, Ltd.
On 25.05.2017, Biopartners GmbH with its registered office in Baar, Switzerland ("Biopartners"), in which the Company has -
through Biopartners Holdings AG, based in Baar, Switzerland - 100% of the shares, submitted an application for initiating
arbitration proceedings before the arbitration tribunal of the International Chamber of Commerce where it will demand
compensation from LG Chem, Ltd. based in Seoul, Korea ("LG Chem") for non-performance by LG Chem of the obligations
specified in the License and Development Agreement of 16.10.2001 (the "Agreement"). The agreement was terminated by
Biopartners by letter dated 23.05.2017. The Agreement defined, among others, the principles of cooperation between the
parties in the development and commercialization of an innovative endocrine product - prolonged-release growth hormone
('Valtropin SR'). On 05.08.2013, as a result of development works conducted on the basis of the Agreement for development
works and registration processes, a registration certificate enabling sales and distribution of Valtropin SR within the European
Union was obtained. Due to LG Chem's failure to deliver the ready to market product to Biopartners, Valtropin SR has not
been commercialized.
Due to the fact that the lack of delivery of the product by LG caused that the product was not marketed, the registration
certificate expired in November 2017. With the Annual report for 2015, the Company and the Capital Group informed about
making a revaluation write-down of the license granted by the Agreement to zero value. In the arbitration proceedings,
Biopartners claims from LG Chem compensation in an amount not lower than six million US dollars. The final value of the
damage suffered by Biopartners, and hence - the amount of compensation demanded from LG Chem - will be determined
during the arbitration proceedings. BioPartners prepared a Memorial of Claim, which was submitted on 04.01.2018 to the
Arbitration Tribunal of the International Chamber of Commerce.
On 28.02.2018, in accordance with the Schedule contained in International Procedural Order No. 2 of the International
Chamber of Commerce of 16.11.2017, LG Chem responded (Defense Memorial) to Biopartners’ Memorial of Claim. According
to the Schedule, Biopartners responded (Reply Memorial) to LG Chem and supported the testimony of witnesses on
07.06.2018. In early October, hearings of the Parties were held. On 03.01.2019, the Company received information that the
Arbitration Tribunal of the International Chamber of Commerce dismissed the claim for damages of Biopartners GmbH. In an
arbitration award, the Tribunal awarded Biopartners costs of USD 315 000 plus legal costs of USD 2 802 305 with interest of
5.33% from 02.01..2019. Biopartners did not appeal against the abovementioned arbitration award.
Biopartners GmbH (Switzerland), on 12.03.2019 and Biopartners Holdings AG on 13.03.2019 filed for bankruptcy. The
bankruptcy procedure began on 21.03.2019. The companies were entered in the commercial register as being 'in liquidation'.
The companies are not able to run a business and do not have access to bank accounts. It is estimated that the entire
bankruptcy proceedings will take about seven months for both companies, as the companies have no assets. Following the
termination of the bankruptcy proceedings, the companies will be deleted from the commercial register.
Additional information to the consolidated "extended" quarterly report of the BIOTON S.A. Group for the third quarter 2019
19
25.4 The claim for annulment of the resolution of the Ordinary General Meeting of Bioton S.A. of 11 June 2018 on
granting consent to the transaction of sale of SciGen Ltd
On 6 August, 2018 the Company received from District Court 16th Commercial Division in Warsaw a copy of a lawsuit (the
document was published in Current Report No. 23/2018) filed by AIS Investment 2 sp. z o.o. in Warsaw ("The Plaintiff") against
the Issuer to repeal Resolution No. 2 on the consent for the sale of SciGen Ltd based in Singapore and determining the basic
conditions for the transaction undertaken on 11 June, 2018 by Annual General Meeting of the Issuer (c.f. current report no.
12/2018 of 11 June 2018). The Issuer does not agree with the claim and requested its dismissal. On 3 December, 2018 and on
29 May, 2019, a hearing of witnesses was held. The next hearing was scheduled for 30 August 2019 and took place on 30
August, 2019. The next hearing is scheduled for 8 January 2020.
25.5 Application for appointment by the court of an auditor for special cases
On 29 October, 2018 the company received from the District Court 13th Commercial Department in Warsaw (published in
Current Report No. 30/2018), a copy of the application submitted by AIS Investment 2 sp. z o.o. in Warsaw and Basolma
Holding Limited ("Applicants") for the designation of an auditor to special cases, pursuant to art. 85, par. 1 of the Act on public
offering. The content of the application is in accordance with the draft resolution No. 2 being the subject of the Extraordinary
General Meeting on 26 September, 2018, which was not taken by the EGM (cf. current report No. 28/2018). Considering the
position of the EGM, the Issuer applied for refusal to appoint a special auditor. As at the date of submitting the report, no
hearing has been scheduled in this case. On 24 October, 2019, Bioton S.A. received an invalid decision of the Referendary of
the District Court for the capital city of Warsaw in Warsaw on the designation of Grant Thornton Polska Limited Liability
Company/Limited Partnership Company with its registered office in Poznań as a special auditor for Bioton S.A. Bioton S.A. has
lodged a complaint. On 18 November, 2019, the Company received a decision rejecting the complaint against the
referendary's decision regarding the appointment of special auditor. On 25 November, 2019, Bioton S.A. lodged a complaint
against the decision rejecting the complaint against the decision of the legal court referendary on appointing a special auditor.
26. Information on loan or borrowing sureties granted by BIOTON S.A. or its subsidiary, or guarantee granting - jointly
to one entity or a subsidiary of that entity, if the total value of existing sureties or guarantees constitutes the
equivalent of at least 10% of the Company's equity
In connection with the signing by BIOTON S.A. of a loan agreement with BANK OF CHINA (LUXEMBOURG) S.A. operating as
Bank Of China (Luxembourg) S.A. (Joint Stock Company)Branch in Poland of BIOLEK Sp. z o. o. and BIOTON MARKETING
AGENCY Sp. z o.o. granted BIOTON S.A. a surety in the amount of EUR 9 million. The sureties were granted until the day on
which all liabilities of BIOTON S.A. will be repaid or by 31 March 2026. In addition, the Companies BIOLEK Sp. z o.o. and
BIOTON MARKETING AGENCY Sp. z o.o. granted corporate guarantees as a collateral of the said loan. The guarantees granted
exceed 10% of the equity of BIOLEK Sp. z o.o. and BIOTON MARKETING AGENCY Sp. z o.o.
27. Other information relevant to the assessment of the personnel, property, financial situation, and financial result of
the Company and the Capital Group BIOTON S.A. and their changes as well as information that is relevant to
assessing the feasibility of meeting obligations by the company.
27.1. Loan and borrowing agreements
The company was financed in the third quarter of 2019 with short- and long-term bank debt and borrowing from the
shareholder Uniapek S.A. The liabilities of the Company and the Group resulting from loan agreements are repaid up to date.
The value of debt at Bank BOŚ S.A., HSBC Bank Polska S.A., and BANK OF CHINA (LUXEMBURG) S.A. under loan agreements
as at 30.09.2019 amounted to PLN 74.83 million in total. The value of the shareholder loan was PLN 28 million.
On 01.04.2019 the Company concluded with Bank BOŚ S.A. an annex to the factoring line agreement, extending the period
of validity until 31.03.2020, reducing the factoring limit to PLN 30 million, and changing the Company's selected contractual
obligations.
Additional information to the consolidated "extended" quarterly report of the BIOTON S.A. Group for the third quarter 2019
20
Before reclassification reclassification After reclassification
49 843 - 49 843
74 219 0 74 219
124 062 - 124 062
On 27.06.2019, the Company concluded with Bank BOŚ S.A. annex No. 21 to loan agreement No. 2/2007 extending the
period of the loan until 30.07.2019.
On 29.07.2019, the Company concluded with Bank BOŚ S.A. annex No. 22 to loan agreement No. 2/2007 changing the period
of the loan until 30.06.2020 and chosen financing conditions.
On 07.08.2019, the Company concluded an annex to the agreement with BANK OF CHINA (LUXEMBOURG) S.A. operating as
Bank Of China (Luxembourg) S.A. (Joint Stock Company) Branch in Poland, changing financing conditions.
See below an analysis of the age categories of loans and borrowings according to original dates arising from loan
agreements and their recognition in the consolidated balance sheet as at 30.09.2019 .
Analysis of age categories as at 30.09.2019 (loans and borrowings)
In thousands of zlotys up to 1 to 2 years from 2 to 5 years Over 5 years Total
BOŚ SA revolving loan 4 001 - - - 4 001
BOŚ SA mortgage loan 2 527 2 646 8 720 1 840 15 733
BOŚ SA investment loan 324 323 970 216 1 833
BOŚ S.A. (factoring line) 28 203 - - - 28 203
HSBC Bank Polska S.A. 1) 5 815 - - - 5 815
UNIAPEK S.A. 20 717 - - - 20 717
Bank of China 11 920 12 992 22 136 - 47 048
Other 712 0 - - 712
74 219 15 961 31 826 2 056 124 062
30.09.2019
Long-term loans and borrowings
Short-term loans and borrowings
Total loans and borrowings
After the balance sheet date: On 29.07.2019, the Company concluded with Bank BOŚ S.A. annex No. 22 to loan agreement
No. 2/2007 changing the period of the loan until 30.06.2020 and chosen financing conditions. On 07.08.2019, the Company
concluded an annex to the agreement with BANK OF CHINA (LUXEMBOURG) S.A. operating as Bank Of China (Luxembourg)
S.A. (Joint Stock Company) Branch in Poland, changing financing conditions.
According to the current report (RB 23/2019) of 04.09.2019, the Company announced that it is in the process of negotiating
with the Dongren capital group, an extension of the repayment date of the loan granted by UniApek S.A. The company, in a
separate report, will inform about the extension of the repayment date of the loan granted by UniApek S.A.
According to the current report (RB 35/2019) of 18.11.2019, the Company has concluded Annex No. 1 to the agreement which
is valid from 16.11.2019. The loan agreement was concluded on 16.11.2019 for 12 months for the amount of USD 7 000 000
and is not secured. The annex concerns the extension of the borrowing repayment date by another 24 months (in total 36
months) with UniApek S.A. the Dongren capital group, in connection with negotiations as part of transactions about which
the Company informed in the current report No. 23 of 04.09.2019 and current reports No. 31 of 31.10.2019 and No. 32 of
04.11.2019.
27.2 Exchange rates
The result on exchange rates differences on the valuation of borrowings and loans denominated in foreign currencies granted
by the Company to related entities will be reflected in the change in equity in the consolidated financial statement of the
Additional information to the consolidated "extended" quarterly report of the BIOTON S.A. Group for the third quarter 2019
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Group and will affect the net financial result in the individual and consolidated financial statement of BIOTON S.A.
In the following months, the main assumption of the Company in exchange rate policy will be securing the rate of trade
inflows (in USD). In the third quarter of 2018, USD continued to appreciate against all currencies. In comparison to 30.09.2018,
as at 30.09.2019, the USD / PLN exchange rate increased by 8.8% and the EUR / PLN exchange rate increased by 2.4%. The
company bears the exchange rate risk related to loans granted in foreign currency as well as receipts from the sale of finished
goods and purchases of raw materials that are made in foreign currency.
28. Factors that will affect the results achieved by the BIOTON S.A. Capital Group in the perspective of the next
quarter.
28.1. Settlement of the sale of shares transactions at SciGen Ltd.
On 15 May, 2018, after considering the available alternatives to the investment of BIOTON S.A. in the subsidiary SciGen Ltd.
with registered office in Singapore ("SciGen"), which is a public company, listed on the Australian Stock Exchange, the
management board of BIOTON S.A. resolved to approve the conclusion with Yifan International Pharmaceutical Co., Ltd.
("Investor") of the investment agreement, under which the Investor undertook to purchase all SciGen shares from the
Company, and the Company undertook to sell all SciGen shares owned by them ("Transaction"). The parties concluded the
agreement on 15 May 2018 ("Investment Agreement"). The sale was carried out in the form of a call for purchase of all SciGen
shares, announced by the Investor. As part of the Transaction, the Investor's condition was that a part of SciGen's debt to the
Company should be decommitted. The company made a write-down of the decommitted debt as at 4 December, 2017. The
total value of the Transaction was USD 56 658 787. The price for the block of shares in SciGen owned by the Company was
USD 26 758 787, according to the average exchange rate NBP for USD of 30.06.2018 the value in PLN is 100 184 898.53. The
parties have agreed that as part of the Transaction, the Company will acquire from SciGen (i) the right to conduct business in
a number of markets, mainly East Asia, consisting of trade in products based on recombinant human insulin ("Trade
Agreement") and (ii) the right to a series of SciLin trademarks. After the transfer of rights, the Company and SciGen will
conclude an agreement terminating the agreements on the distribution of profit generated by the Company on the markets
of Vietnam and China. SciGen remuneration for the abovementioned agreements (jointly "Executive Agreements") amounts
to USD 29 900 000 and will be settled as repayment of part of SciGen's debt to the Company due to the borrowing granted
("Borrowing"), by concluding a separate agreement ("Settlement Agreement"), according to the average NBP exchange rate
for USD of 30.06.2018, the value in PLN amounted to 111 945 600. As a result of settlement of the Transaction, the claim
under the Borrowing will be satisfied up to USD 29 900 000. The remaining part of the borrowing receivables will remain
redeemed, under a separate agreement ("Redemption Agreements"). The Executive Agreements, the Settlement Agreement,
and the Redemption Agreement were concluded on 15 May, 2018. Each of these agreements contained conditions precedent
making their effectiveness dependent on the circumstances agreed with the Investor, including the withdrawal procedure of
SciGen shares from stock exchange trading, obtaining the consent of the general meeting of SciGen and obtaining a positive
opinion from an independent financial advisor, which took place on 29 August, 2018 and 20 July, 2018, respectively. The
Settlement Agreement contains provisions according to which, if it is not executed by 30 June, 2019, SciGen will be required
to repay the cash for the borrowing debt on the original repayment date of the Borrowing, the obligation will also have to be
fulfilled. The additional information to the consolidated 'extended' quarterly report of the BIOTON S.A. Group for the first
quarter of 2019 through the transfer of rights and termination of the Issuer's obligations covered by Executive Agreements.
The conditions for fulfilling the transfer of Rights are not dependent on the Company. Considering this uncertainty and the
fact that in the event that the rights are not transferred as at 30 June 2019, the amount of receivables at a value equal to the
fair value of Rights (USD 29.9 million) will be due in 2020, discount of this amount was made. The discount cost amounted to
USD 7 688 thousand, i.e. PLN 28 785 thousand at the exchange rate as at 30 June, 2018. As part of the Settlement Agreement,
SciGen will grant the Company a sub-license to conduct commercial activities on a number of markets, mainly East Asia,
trading in products based on recombinant human insulin and further undertakes not to use the rights arising from the
agreement concluded by SciGen with the license owner for recombinant human insulin. Granting a sub-license is subject to a
positive independent opinion from a financial advisor required by Singapore law. The completion of the Transaction
depended on fulfilment of the precedent conditions, including: (i) obtaining corporate consents by the Company, (ii) consents
of banks financing the Company's operations, (iii) obtaining regulatory approvals by the Investor, which were obtained. On 3
July, 2018, Yifan International Pharmaceutical Co., Ltd. obtained the last necessary regulatory consent indicated in the
Investment Agreement, therefore, the last condition precedent was met, followed by technical steps resulting from the call
offer procedure for SciGen's Ltd. shares listed on the Stock Exchange (ASX) in Australia, in accordance with the
announcements and reports published by the Investor and SciGen arising from the requirements of Singapore law.
Additional information to the consolidated "extended" quarterly report of the BIOTON S.A. Group for the third quarter 2019
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According to the knowledge of the Management Board, the last of the consents was a consequence of the previously obtained
consents. The Company's Management Board has recognized that this condition is routine and formal, and assessed at the
same time, as at 30 June, 2018, that the likelihood of positive processing is very high, therefore, it was considered that loss
of control over SciGen Ltd took place on 30 June, 2018 and the transaction was recorded as at that date. On 19 July, 2018,
the Company received the total sale price of all shares held in SciGen Ltd. with its registered office in Singapore, i.e. USD
26 758 787. In connection with the above, the condition of redemption of the unsettled part of the borrowing granted by the
Issuer SciGen has been met and, therefore, the redemption was made. Then, on 14 February, 2019, resolutions were taken
by the authorities of SciGen PTE Ltd. (formerly SciGen Ltd.), permitting SciGen, among others, to terminate the license
agreement and to distribute the profit of 29 December, 2011, of the profit sharing agreement of 3 January, 2016, transfer of
rights to a number of trademarks and the transfer of access to markets, the entitlement granted to SciGen under the
agreements of 1 April, 2002 and 5 May, 2003 ("Resolutions"). Adoption of the resolutions was the last of the settlement
conditions for the transaction covered by the agreements of 15 May, 2018 regarding the settlement of SciGen's liability to
the Issuer under loans granted, in the amount of USD 29 900 000, which was fully satisfied upon the adoption of the
Resolutions. The license agreement taken over from SciGen of 1 April, 2002 ("SciGen License Agreement") and a technology
transfer agreement of 5 May, 2003 ("Technology Transfer Agreement") indicated above, have changed following the
conclusion by the Company on 15 May, 2018 of annexes to the existing license agreements for insulins produced by BIOTON
S.A. as indicated in the current report RB 9/2018 of 15 May,2018. As part of the annexes concluded, the Company received
unlimited rights to the non-exclusive right to manufacture, sell, and distribute the Product, including the continuous,
perpetual, and non-exclusive right to use and execute production processes based on the rights originally obtained all over
the world. Along with the conclusion of the annexes, the Company was exempted from paying additional licencing fees on
specific markets. The annexes concluded result in an earlier termination of existing license agreements and the concluding of
new license agreements instead regarding the rights originally covered by the Licence Agreement, SciGen License Agreement,
and Technology Transfer Agreement (see the current report RB 9/2018 of 15.05.2018). The transaction is one of the important
elements of rationalizing the organizational structure of the BIOTON S.A. Capital Group ("The Group") in terms of building an
integrated diabetes care system and strengthening the Group's position in the global diabetes market. The sale of SciGen will
allow reduction of the Company's debt while maintaining existing distribution cooperation and sales rights, which will
positively affect the results and the opportunity of financing the key projects from the Issuer's point of view, related to the
market launch of insulin analogue.
28.2. Signing a global sales distribution and product marketing agreement with Yifan International Pharmaceutical
Co.
On 27 March, 2018, the Company concluded with Yifan International Pharmaceutical Co., Ltd. based in Hong Kong (YIFAN) a
framework agreement for the global sales distribution and marketing of the Company's products, granting the exclusive right
(Rights) to use BIOTON trademarks in connection with advertising, promotion, distribution, and sale of products in the
territories covered by the agreement (the "Agreement"). The detailed conditions of the Parties' cooperation on a given
market will be determined in separate executive agreements. The agreement has been concluded for a period of 15 years.
The agreement has been concluded under Hong Kong law and any disputes related thereto will be settled by the courts with
jurisdiction over YIFAN. Cooperation of the Parties on the terms specified in the agreement is associated with significant
benefits for the Company, related mainly to takeover by the distribution partner of registration costs and commercial and
marketing costs, in particular, the costs of building a distribution network in individual markets. The main task of the
distribution partner is development and promotion related to the sale of the Company's products aimed at improving the
results of the Company and its Capital Group. The Company, for granting the Right, received a fee of USD 6.8 million. Payment
received in advance on the basis of the above agreement: (i) gives the distributor YIFAN exclusive right to import the goods,
(ii) results in actions aimed at transferring or changing the Company's existing distribution agreements to the distribution
territory specified in the Agreement, (iii) gives the distributor YIFAN the right to use the trademarks of BIOTON S.A. related
to products solely for the purpose and in connection with advertising, promotion, distribution, and sale of products in the
territory specified in the Agreement.
28.3. Termination of the Agreement and Distribution by Harbin Gloria Pharmaceuticals Co., Ltd
The Management Board of Bioton S.A. ("Company", "Issuer") informs that on 16 August, 2019 a statement of the
management board of Harbin Gloria Pharmaceuticals Co., Ltd was received by the Company, on termination of the Supply
and Distribution agreement concluded between the parties on 23 September 2015, together with the first annex of 31
December, 2016 (hereinafter collectively referred to as the "Agreement"). The Agreement concerned the delivery and
distribution of Bioton insulin products on the Chinese market. The main reason indicated by Harbin Gloria Pharmaceuticals
Co., Ltd. for the termination of the Agreement is changes in the Chinese pharmaceutical market, which, according to Harbin
Gloria Pharmaceuticals Co., Ltd. results in a force majeure. Harbin Gloria Pharmaceuticals Co., Ltd. also informed that they
Additional information to the consolidated "extended" quarterly report of the BIOTON S.A. Group for the third quarter 2019
23
are unable to implement the sales forecasts agreed in the Agreement, including the minimum quantity of orders. In
accordance with the provisions of the Agreement, it will be automatically terminated after 6 months upon the date of the
above termination notice. The Management Board of the Company indicates that for a long time there have been problems
with the implementation of the Agreement by Harbin Gloria Pharmaceuticals Co., Ltd., resulting in the lack of implementation
of the minimum values of orders provided for in the Agreement, which was reflected in the financial statement of the
Company and the Capital Group in 2018, and will have implications for the results of the Company and the Capital Group in
2019. The company will analyse the legal issues of the termination notice to take further steps.
28.4. Termination of the contract for the commercialization of recombinant human insulin on the territory of Brazil
On 6 September, 2019, the Company received from BIOMM S.A. with its registered office in Brazil ("Biomm") a statement
about the termination of the agreement regarding the grant of exclusive rights to Biomm and/or its subsidiaries of
commercialization of recombinant human insulins ("Products") manufactured by the Company in the territory of Brazil
("Agreement"), the conclusion of which was reported in Current Report No. 36/2014 of 01.12.2014. The condition for the
commencement of deliveries of Products under the Agreement was to obtain registration of Products on the territory of
Brazil. The main reason for the termination indicated by Biomm pursuant to the Agreement is not signing the PDP agreement
(agreement with the Ministry of Health of Brazil in the supply of recombinant human insulin to the territory of Brazil) until 31
December, 2015. In addition, PDP for recombinant human insulin was temporarily suspended in August 2019 by The National
Health Surveillance Agency - ANVISA, and product registration at the Brazilian National Health Surveillance Agency has not
been granted until the date of submission of the above notice. According to the official announcement of the Ministry of
Health of Brazil, published on the site saude.gov.br, 19 production partnership programs (PDP) have been suspended,
including the recombinant human insulin project. In addition, Biomm has recently asked the Company to agree to the parallel
conclusion of a cooperation agreement for a period of 5 years with a direct competitor of Bioton; however, the Company
clearly could not agree to such an offer on the terms proposed by Biomm. The legal issues of the termination will be examined
to take further steps. The company indicates that it is currently completing clinical tests and, regardless of the decision,
Biomm will continue the registration process in the Brazilian market, which is still a strategic market and intends to
commercialize the Products as soon as possible.
28.5. Conclusion of a cooperation agreement between Yifan Pharmaceutical Co., Limited and Bioton S.A.
On 16 July, 2019, the Company concluded a contract with Yifan Pharmaceutical Co., Limited ("Yifan"), the subject of which is
the mutual cooperation of the parties in the field of active substances of insulin analogues and the final drug product (in
finished form) from their production to commercialization ("Agreement "). The agreement is a framework agreement. The
individual activities and the conditions related to the implementation of its stages will be detailed in separate orders. All costs
related to the purchase and installation of equipment needed to implement each stage of the Agreement, the purchase of
raw materials and auxiliaries necessary for the manufacture of products in the scope of relevant orders, will be covered by
Yifan. As a rule, the Agreement does not provide for the acquisition of intellectual property rights of the parties, except for
granting a license to the extent enabling performance of the Agreement. However, if the result of the works shows that the
commercial production line is adapted to the production of the Drug Product - Finished Form, Bioton will be granted the right
to use Yifan's intellectual property as well as a 25-year right to manufacture, distribute, market, offer, and sell the product
exclusively in the territory of Poland, and Bioton will be granted priority rights to receive the right to use in European countries
under its own brand. Bioton will also act as a producer of products around the world. Details of cooperation in this scope will
be the subject of a separate agreement. Bioton and Yifan are entitled to terminate the Agreement (or orders made on its
basis) immediately after notifying the other party, if: (i) the other party commits material violation of the provisions regarding
the implementation of stages, intellectual property, confidentiality, assignment of the Agreement, (ii) the other party submits
an application for bankruptcy, liquidation or a similar process or is a party to the agreement with creditors or for cessation of
business, (iii) the other party violates two or more agreements concluded with the dissolving party (including orders under
this Agreement), and (iv) a change of control occurs. Yifan can also terminate particular stages of works, however, in this case,
it is obliged to reimburse Bioton for the costs incurred. The Agreement was concluded under the law of Singapore and the
place of settlement of disputes will be the Arbitration Court in Singapore.
Additional information to the consolidated "extended" quarterly report of the BIOTON S.A. Group for the third quarter 2019
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28.6. Impairment test - BIOLEK
In the first half of 2019, the Management Board of Bioton, in connection with the world's incurable, highly infectious viral
swine disease known as ASF (African swine fever, currently the biggest risk in breeding in many countries in the world,
including the largest market China), decided to update the value of assets in BIOLEK Sp. z o.o., a subsidiary of Bioton
("BIOLEK"). ASF causes much less readiness of breeders to invest in new products and thus makes large veterinary companies
or companies producing feed / feed additives unwilling to promote products that require additional individual intervention,
i.e. manual use for each piglet. BIOLEK has, among others, one innovative product in its portfolio to use in pig farms called
Suilectin ('Suilectin') which has been registered under a central procedure in the EU ("EFSA Registration"). Suilectin's
registration in the most promising Chinese market has not been obtained, despite the agreement signed with Beijing Smile
Feed Sci & Tech Co. The Chinese market is estimated at over 55% of the global market, which in 2018 amounted to around
769 million population (the breeding cycle is six months, so the volume of breeding is about twice as high). According to
available estimates from the Chinese Ministry of Agriculture published in July 2019 (information available at
https://www.pigprogress.net/Health/Articles/2019/7/ASF-China-Pig-herd-shrinks-26-stricter-checks- announced451827E /),
the pig population decreased by 25.8% year-on-year, while according to the report prepared by Rabobank (information
available on the Reuters website https://www.reuters.com/article/us-china-swinefever-pig/ chinas-pigherd-may-shrink-by-
50-due-to-african-swine-fever-rabobank-idUSKCN1UP068) the decline in the population in China is estimated at 40% year-
on-year, and may reach 50% by the end of 2019 year on year. ASF also affects other countries where BIOLEK has conducted
business talks regarding future commercialization, which means that the BIOLEK Management Board is not able to indicate
the realizable revenues from commercialization of Suilectin in individual markets, including the Chinese market.
In connection with the above premises, the Group performed an impairment test as at the balance sheet date to goodwill
and intangible assets, which showed:
(i) write- down of the carrying amount of the license to sell products under the contract with Beijing Smile Feed
Sci & Tech. Co., LTD up to the value in use of the license estimated based on the discounted method of
future cash flows obtainable at PLN 87 294 000 ,
and
(ii) partial adjustment of BIOLEK goodwill estimated based on the discounted obtainable future cash flows method
in the amount of PLN 30 000 thousand .
The Group has identified key assumptions based on the experience and best knowledge of BIOLEK and the Company, the
most important of which include: (i) expected increase in the value of sales of Intesty/Energast human products on the market
in Poland and other markets, (ii) competitive position (including sales prices on the market), (iii) signing agreements with
distributors on new markets including the EU regarding human products, (iv) the expected volume of sales of veterinary
products on the Brazilian market, (v) assumptions regarding the required working capital, (vi) production costs based on
signed production contracts together with accepted delivery prices, (vii) pre-tax discount rate (WACC) and tax rate (CGU
Biolek).
28.7. Termination of the Cooperation Agreement regarding the production, distribution, and promotion of
drug products, medical devices and functional food of 12 July, 2018.
On 22 October, 2019, the Management Board of Bioton S.A. delivered to Sequoia Pharmaceuticals Sp. z o. o. with registered
seat in Warsaw ("Sequoia Pharmaceuticals") a statement of termination of the Cooperation Agreement in the field of
production, distribution and promotion of drug products, medical devices, and functional food of 12 July, 2018 together with
amendments ("Agreement").