Boule Diagnostics AB (publ) Year-end report January – December 2018

Good sales of instruments, product and geographic mix resulted in low margins  

Quarter October–December 2018

  •  Net sales amounted to SEK 106.2 million (107.2), down 0.9 percent. Adjusted for the change in exchange rates, this corresponds to a decrease of 6.4 percent.
  •  Number of instruments sold in the quarter was 1,104 (1,024), an increase of 8 percent.
  •  Cash flow from operating activities amounted to SEK 6.6 million (24.1).
  •  Operating profit was SEK 3.4 million (14.9) which corresponds to an operating margin of 3.2 percent (13.9).
  •  Net profit amounted to SEK 1.4 million (8.1).
  •  Earnings per share before dilution amounted to SEK 0.07 (0.42) and after dilution to SEK 0.07 (0.42).

Full year January–December 2018

  •  Net sales amounted to SEK 424.4 million (427.8), down 0.8 percent. Adjusted for the change in exchange rates, this corresponds to a decrease of 2.7 percent.
  •  Number of instruments sold in the period was 4,167 (4,279), a decrease of 3 percent.
  •  Cash flow from operating activities amounted to SEK 22.7 million (57.7).
  •  Operating profit was SEK 54.8 million (54.4) which corresponds to an operating margin of 12.9 percent (12.7).
  •  Net profit amounted to SEK 41.0 million (37.2).
  •  Earnings per share before dilution amounted to SEK 2.11 (1.92) and after dilution to SEK 2.11 (1.92).
  •  The Board of Directors proposes a dividend of SEK 0.55 per share for 2018 (0.50).

Significant events during the quarter 

Warning letter received from the FDA
Following a routine inspection of Boule’s Swedish instrument manufacturing site in May 2018, Boule received inspectional observations from the US Food and Drug Administration (FDA) on October 5. Boule has dedicated significant resources to address these observations and has responded to the FDA with an action plan according to the timelines and implemented procedure improvements accordingly.

Boule takes compliance with regulations very seriously, and this matter has the highest priority in the company. The warning letter does not cause limitations on production or sales of products.

Investment in strategic near-patient diagnostics partnership
In December, a strategic partnership was entered with the Portuguese diagnostic company biosurfit. Biosurfit develops and manufactures spinit®, a system for near-patient diagnostics in hematology, immunology and clinical chemistry. Boule initially acquired shares in biosurfit corresponding to 24.99% of the total share capital and votes in return for an investment of EUR 5 million. During the period until the end of 2021, Boule has the option to acquire an additional 24.99% for EUR 5 million plus interest, and in 2022, the option of acquiring the remaining shares according to a pre-determined multiple valuation formula.

Swelab and Medonic reach the 5-part market
In November, a new five-part system was launched for the Swelab and Medonic brands. The system focuses on customers with relatively low test volumes and serves as a good complement to Boule’s current and future product range. 

Significant events after the quarter
No significant events have occurred in the time between the end of the reporting period and the publishing of the year-end report.

Comments from CEO Fredrik Dalborg

Fourth quarter 2018
” Sales in the fourth quarter were weaker than expected. Despite good growth in several regions, the total sales of consumables remained at the same level compared to the same quarter in the previous year. Instrument sales increased by 11% and included 250 instruments for the Indian tender.

The product mix, with strong sales of instruments and unchanged sales of consumables, had a negative effect on the gross margin. The strong growth in Asia, that was to a large extent driven by the sales of instruments, also affected the average gross margin negatively. A number of non-recurring costs was reported in the quarter and had a negative impact of approximately SEK 4 million on the gross margin. During the quarter, the costs of research and development increased in line with the initiative to develop the next generation hematology system. The quarter was also burdened by costs related to the management of the FDA warning letter.

Full year 2018
Boule’s 2018 was a year characterized by significant activity. After having established the strategies in 2017, a series of actions were taken in 2018 to develop the business in accordance with these.

The quality work has top priority, and during the year the work has intensified and the resources within the quality assurance organization have been strengthened and the processes improved.

The research and development organization has been significantly strengthened to drive the development of the next generation hematology platform, which is an important step in strengthening and broadening Boule’s product portfolio and long-term competitiveness. In line with this, an acquisition of laser module technology was also carried out to increase the pace of the development and to reduce development risk.

Investments have been made in production capacity and process improvements for the manufacturing of controls in Florida, and in new automation solutions for more efficient production of instruments in Sweden.

In November, two new 5-part systems were launched, the Medonic M51 and Swelab Lumi. These systems have been developed in collaboration with an external supplier. The new products are expected to increase sales, both in their own right and in combination with current products, and provide access to new customer segments. However, with lower margins than for proprietary systems.

In December, the strategic partnership with biosurfit was announced, which gives Boule access to a highly innovative platform for hematology, clinical chemistry and immunology in the segment for near-patient diagnostics. The partnership also entails access to new sensor technologies, including image analysis, which creates new future product development opportunities.

These actions are all important steps that significantly strengthens Boule’s market position and competitiveness in the short and long-term. I am proud of Boule’s global organization that has managed all this in a short time span.

Boule also faced challenges during the year. In October, Boule received a warning letter from the FDA. Since 2017, Boule has invested in and improved the quality processes, but the warning letter showed that further efforts are required. Boule is determined to meet the FDA’s requirements, and for the organization this has the highest priority. The team has handled this challenge in a very professional manner, with energy and solution-oriented teamwork. The quality processes have been further developed, which was confirmed by the good results from external audits during the year.

In October, Boule submitted an action plan to the FDA that described the work Boule intends to do to improve quality systems and to meet the FDA’s requirements. The work is proceeding according to plan, most of the process improvements have been implemented, and Boule submits data and reports to the FDA monthly. In January, a comprehensive report was submitted, which among other things included a retrospective analysis requested by the FDA. Boule has also established a dialogue with the FDA regarding the reporting process. The reporting in accordance with Boule’s action plan is expected to be completed during the third quarter of 2019.

In summary, 2018 was a year with significant activity develop the business, but also a year with setbacks in the form of the warning letter from the FDA. The organization has developed and strengthened, and the product portfolio has broadened significantly. Boule enters 2019 a stronger company.”


For further information, please contact:
Fredrik Dalborg, CEO and Group President, Boule Diagnostics AB, phone +46 (0)705-58 51 05
Christina Rubenhag, CFO, Boule Diagnostics AB, phone +46 (0)705-46 72 22

About Boule Diagnostics AB (publ)

Boule Diagnostics AB is a global diagnostics company that develops, manufactures and markets instruments and consumable products for blood diagnostics. The company serves hospitals, clinics, laboratories and companies within blood diagnostics, in both human and veterinary hematology. The company operates via subsidiaries in Sweden, the USA, Mexico and Russia. The company products are sold globally primarily through distributors, supported by Boule’s own local sales and support personnel. The Boule shares are listed on Nasdaq Stockholm since 2011.

This information is information that Boule Diagnostics AB is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact person set out above at 15:00 CET on February 7, 2019


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