BIOTOSCANA INVESTMENTS S.A.

Transcription

1 Société Anonyme (Formerly: Biotoscana Investments & Cy S.C.A.) 2-4, rue Beck, L-1222 Luxemburgo R.C.S. Luxemburgo B Interim condensed consolidated financial statements for the period ended 2017

2 MANAGEMENT REPORT In the terms of legal and bylaws dispositions, the management of Biotoscana Investments S.A. ( Company, GBT or Biotoscana ) submits to its shareholders the Management Report and the consolidated financial statements of the Company, as well as the independent auditors report, regarding the quarter ended All the below information is provided to the best of our knowledge at the time of signing this letter as well as based on information received from our subsidiaries, auditors and advisors as well as external sources. MESSAGE FROM MANAGEMENT GBT Group Interim Condensed Consolidated Statement of Profit or Loss for the nine-month period ended 2017, drawn up under the International Financial Reporting Standards (IFRS), show a Net Loss for the period of BRL after income tax, amortization and depreciation of BRL , stock grants of BRL and reorganization of BRL that mainly includes M&A and reorganization. In this document, we present certain Non-GAAP measures, including EBITDA, EBITDA Adjusted 1, Operating Profit, Net Financial Position/Indebtedness and Financial Indebtedness. For the nine-month period, we achieved Net Revenues amounting to BRL and a Gross Profit of BRL , representing a Gross Margin of 52,2% on Net Revenues 1 We define EBITDA as operating profit before financial and income taxes ( EBIT ) plus amortization and depreciation. EBITDA Adjusted refers to EBITDA as adjusted to remove accounting effects and costs associated with some non-recurring income and considered by our management to be non-recurring and exceptional in nature. It uses similar indicators for its net financial indebtedness, the components of which are described in the relative section of the notes. We believe that EBITDA is a useful indicator of our ability to incur and service our indebtedness and can assist certain shareholders, certain investors, security analysts and other interested parties in evaluating us. We believe that EBTIDA Adjusted is a relevant measure for assessing our performance because it is adjusted for certain changes which we believe, are not indicative of our underlying operating performance and thus aid in an understanding of EBITDA. EBITDA and EBITDA Adjusted and similar measures are used by different companies for differing purposes and are often calculated in ways that reflect the circumstances of those companies. Reader should exercise caution in comparing EBITDA and EBITDA Adjusted as reported by us to EBITDA and EBITDA Adjusted of other companies. The information presented by each of EBITDA and EBITDA Adjusted is unaudited and has not been prepared in accordance with IFRS or any other accounting standards. None of EBITDA or EBITDA Adjusted is a measurement of performance under IFRS and you should not consider EBITDA and EBITDA Adjusted as an alternative to net income or operating profit determined in accordance with IFRS as the case may be, or to cash flows from operations, investing activities EBITDA and EBITDA Adjusted have limitations as analytical tools and you should not consider them in isolation. Some of these limitations are: - they do not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments; - they do not reflect changes in or cash requirements for our working capital needs; - they do not reflect the significant interest expense, or the cash requirements necessary, to service interest or principal payments on our debt; - although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often need to be replaced in the future and EBITDA and EBITDA Adjusted do not reflect any cash requirements that would be required for such replacements, and the fact that other companies in our industry may calculate EBITDA and EBITDA Adjusted differently than we do, which limits their usefulness as comparative measures.

3 (50,4% in the quarter) and an Adjusted EBITDA Margin for the period of 22% on Net Revenues (21% in the quarter). Despite downward for the quarter the Company managed to keep same trend levels for EBIDTA margin over the past quarters. The Company continues to make good progress in its key strategic initiatives. We continue to advance in our efforts to secure new novel drugs. In this quarter, the Company has signed a new contract with Eisai for four novel oncology and neurology products. The four products HALAVEN (eribulin mesylate), LENVIMA (lenvatinib), FYCOMPA (perampanel) and INOVELON (rufinamide) give us immediate access to two assets in Mexico and four in Brazil. We have launched ABRAXANE (nab-paclitaxel) in Brazil in October and initiated sales in the beginning of this month. The rest of our molecule pipeline has progressed strongly and we continue to evaluate a good number of opportunities to license in all of our territories. We have made progress with our operations in Mexico, that are already in business, with ABRAXANE sales and six other products scheduled to register and launch between 2018 and Excluding SOVALDI, the performance of the other recently launched products VELETRI, OPSUMIT and ABRAXANE amounted to BRL 25.8M in the third quarter of 2017, up 68.9% when compared to third quarter of 2016 and up 95.5% for the nine months of 2017, in comparison with 9M16. INITIAL PUBLIC OFFERING On July 21 we successfully concluded our initial public offering of primary and secondary distribution of Brazilian Depositary Receipts, representing common shares issued by the Company, all registered, without par value, free and clear of any liens or encumbrances, type Sponsored Level III, in accordance with CVM Instruction n 322 of April 4th, 2000, as amended (BDRs), each BDR representing one common share issued by the Company (Shares); comprising: (i) the primary distribution of BDRs, representing shares to be issued by the Company (Primary Offer and BDRs of the Primary Offer); and (ii) the secondary distribution of, BDRs, representing shares, held by the Selling Shareholders (Secondary Offer and BDRs of the Secondary Offer. BDRs of Secondary Offer together with BDRs of the Primary Offer will be denominated BDR s Base Offer), held in Brazil, in non-organized stock market in accordance with CVM 400 Instruction, with the AMIBA Code of Regulation and Best Practices of Public Offering of Distribution and Acquisition of

4 Securities, currently in force (ANBIMA Code) and other applicable regulation, which also had efforts to place BDRs and/or Shares abroad (offer) at a price of R$ per BDR (price for BDR). SUBSEQUENT EVENTS During November, GBT has completed its acquisition of Laboratorios DOSA S.A. Founded in 1999, the company is focused on severe pulmonary pathologies and has additional portfolios on oncology, hematology and HIV. The company is mostly focused in Argentina (around 85% of its revenues), but already exports to several geographies in Latin America (including Brazil and Colombia) with businesses that GBT believes can expand significantly given its presence. The company posted revenues of ARS 326M in 2016, up from ARS 227M in 2015, with net profits of ARS 116M and ARS 80M respectively. The operation was closed at a price of USD 29.9M. DOSA has been experiencing strong revenue growth for the past years. This was chiefly due to the success of its pulmonary line. The company today draws its revenues 63% from its pulmonary line and within it, its main diagnostics are idiopathic pulmonary fibrosis, cystic fibrosis and PAH. DOSA has a rich pipeline, with 8 pulmonary products under registration and launch phases. COMPANY OVERVIEW Grupo Biotoscana is the result of the successful integration of three strong, complementary, Latin American specialty pharmaceutical companies: Biotoscana, United Medical and LKM. We are one of the only Latin American integrated pharmaceutical companies engaged primarily in the development, manufacturing and commercialization of branded specialty pharmaceutical products throughout the region. Our business model is centered on specialty therapeutic areas that include infectious diseases, oncology and oncohematology, special treatments, immunology and inflammation and orphan/rare diseases, among others, and emphasizes sales to non-public channels such as private hospitals, HMOs and specialized distributors. We have an established presence in all major Latin American markets, with operations in Brazil, Argentina, Colombia, Bolivia, Chile, Ecuador, Mexico, Panama, Paraguay, Peru and Uruguay. Our operations are comprised of a single operating segment, which primarily focuses on innovative products and high quality branded specialty generics to meet significant unmet patient needs.

5 Our product portfolio focuses on drugs in key therapeutic areas that meet one or more of the following criteria: (1) high value (typically cost more than USD 500-USD per month of therapy); (2) high complexity (typically difficult to manufacture); (3) high touch (i.e. professionally administered or injectable/infusions, which usually require special monitoring programs to control side effects and ensure compliance); (4) limited availability (e.g., they may require special handling procedures and/or controlled environments, which are often only available via limited distribution networks); and/or (5) treat rare diseases and complex medical conditions. We believe we have a broad revenue base of trusted and established brands with a high level of visibility among physicians and patients in their respective therapeutic categories, with several category-leading brands in our key therapeutic areas, including Ambisome, Sovaldi, Vidaza, Tracleer, Opsumit, Abraxane, Zyvalix, Telavir and Ladevina. PORTFOLIO & INNOVATION New product development is a key element of our business model, one of our core strengths and a strong basis for our future growth. We constantly aim to introduce innovative products in categories with growth potential and to develop product formulations that are differentiated from those available in the market, ensuring a robust product portfolio offering that brings innovative and high-quality specialty products to Latin America. Our product development pipeline is divided into two business models: (1) partnership product development, which is focused on building relationships to license and commercialize innovative products that are new to Latin America, and (2) internal product development, which is focused on studying, designing, formulating and manufacturing branded generic (BGx) products, which are the bioequivalents of innovative products without patent protection.

6 FINANCIAL AND OPERATING PERFORMANCE The following table summarize and shows the Group s financial performance (in millions of BRL): 3Q Q 2017 sep-16 sep-17 Net revenues 220,8 199,5 579,5 573,1 Cost of sales (114,9) (98,8) (308,5) (273,8) Gross profit 105,9 100,6 271,0 299,3 Selling and marketing (31,2) (31,1) (93,7) (95,4) General and administrative (20,9) (38,2) (62,8) (100,2) R&D, medical, reg. and BD (8,1) (9,1) (21,2) (25,9) Reorg., integration and acquisition (2,3) (1,7) (8,9) (6,1) Other operating income/ 0,1-0,4 1,9 Operating income 43,5 20,5 84,8 73,6 (+) D&A (+) Stock Grants (+) One-time adjustment 3,2 4,4 9,6 12,4-15,2-34,1 2,3 1,7 8,9 6,1 Adjusted EBITDA 48,9 41,8 103,4 126,2 Adjusted EBITDA margin 22,2% 21% 17,8 22% EBITDA 46,6 24,9 94,5 86 EBITDA margin 21,1% 12,5% 16,3% 15% In the quarter (3Q), our Net Revenues decreased by 9,7% (approximately 3,4% in constant currency) in 2017 as compared to 2016, reaching BRL 199,5 million in the 3Q, 2017, from BRL 220,8 million in This is mainly explained by the impact of Sovaldi, related to the decrease of number of patients and larger coverage from the governance in Brazil, and a slight drop on Ambisome.

7 Gross profit decreased by 5% (or 3,6% increase in constant currency), reaching BRL 100,6 million in the third quarter, 2017, from BRL 105,9 million for the same quarter in The Gross profit margin reached 50,4%in the 3Q 2017 up 2,4% from the same quarter, Selling and marketing remained flat, reaching BRL 31,1 million in 3Q 2017 from BRL 31,2 million in 3Q Despite to the pressure in revenues, selling and marketing remained flat due to the fact that Sovaldi sales decreased does not affect our sales team since we do not have a significant sales force or marketing for Sovaldi. General and administrative totaled BRL 38,2 million in 3Q 2017 from BRL 20,9 million in the same period of last year. The main reason for this increase is the non-recurring registration of the stock grants and stock option to the senior management in the period of approximately BRL 15,2 million and 0,7 million respectively. Without this effect, G&A totaled BRL 22,3 million, increase of 6,6% still reflecting the increase on headcount in order to beef up an upgrade the company for the capital markets, including legal & compliance, finance and investor relations teams. R&D, medical, regulatory and business development came to BRL 9,1 million from BRL 8,1 million in 3Q 2016, mainly due to the expansion plan in Argentina to enhance our product development capabilities, ramp up for new products and to add further capacity to export products to the region. There are also related to medical and regulatory processes that were higher since we had more products to register. Reorganization, integration and acquisition amounted to BRL 1,7 million in 3Q2017. This is mainly impacted by corporate reorganization and M&A costs. Other operating income/ totaled BRL 1,9 million in the nine-month period ended 2017 mainly comprised by the recovery of two insurance claims of ABRAXANE and AMBISOME in 2Q For 3Q 2017, we had no impact on this line. Market Risks In the ordinary course of our business activities, we are exposed to various market risks that are beyond our control, including fluctuations in foreign exchange rates, interest rates and the price of our raw materials and supplies, as well as credit risk and liquidity risk, which may have an adverse effect on the value of our financial assets and liabilities, future cash flows and profit. As a result of these market, credit and liquidity risks, we could suffer a loss due

8 to adverse changes in foreign exchange rates, interest rates and the prices of raw materials, as well as adverse changes to our clients and counterparties credit profile and our own liquidity and cash flows. Our policy with respect to these market risks is focused on managing the uncertainty of financial markets and attempting to minimize the possible adverse effects on financial profitability. Our risk management strategy and their results are monitored by Senior Management and periodically reported to our Finance Committee. Risks are identified, analyzed and managed on a regular basis. Our group does not allow entering into derivative instruments for speculative purposes. From time to time, we mitigate the FX exposure that arises between the mismatch of our sales in local currencies and our purchases with our suppliers in hard currencies. This is not a fixed policy, but it is evaluated periodically by our Finance Committee and our Board of Directors. INDEBTEDNESS As of 2017, our outstanding consolidated indebtedness in the aggregate amounted to BRL 300 million. With the IPO proceeds we pre-paid total outstanding Preferred Equitty Certificates (PECs) in August, in the amount of USD 63,1 million. The following table presents the financial liabilities as of 2017: Analysis by category (BRL) 2017 Category Non-current Current Total Debts with financial institutions Creditors for financial leases Total financial debt and borrowings On October 9 Banccolombia debt was partially cancelled for an amount of COP and on the first week of November we contracted a ARS denominated debt with Citibank for a total amount of ARS 531,2 million so as to continue expanding our operations in Argentina. DIVIDENDS & SHARE REPURCHASES From the annual net profits of the Company, 5% shall be allocated to the reserve required by the Luxembourg Corporate Law. This allocation shall cease to be required as soon as such

9 legal reserve amounts to 10% of the subscribed share capital of the Company, but it must be resumed until the reserve is entirely reconstituted if, at any time, for any reason whatsoever, the reserve falls below 10% of the subscribed share capital of the Company. From the balance of the net profit, remaining after the allocation to the legal reserve and the general meeting of shareholders of the Company may then allocate a portion of the annual net profits for the formation of an expansion and capital reserve. The purpose of the expansion and capital reserve is (i) to preserve the integrality of the Company s assets and ownership interests in subsidiaries and affiliates, preventing capital depletion derived from distribution of net profits, as well as to ensure there are sufficient financial resources for additional capital expenditures and for expansion of the business activities and (ii) to ensure an adequate capital and debt structure of the Company, and adequate liquidity for the business of the Company as a whole. From the balance of the net profit, remaining after the allocation of the legal reserve and the expansion and capital reserve as determined under article 34,2, the general meeting of shareholder(s) of the Company may then allocate twenty-five percent (25%) of such balance as a mandatory minimum dividend which shall be paid on all the Company s shares. The balance is at the disposal of the general meeting of shareholder(s) of the Company who may alone decide, in its sole discretion, to distribute such surplus or to carry it forward in whole or in part. There was no distribution of dividends during the nine-month period ended The Company did not acquire any of its own shares during the period ended HUMAN RESOURCES As of 2017, we had approximately 701 employees, of which 327 employees are located in Argentina, 162 employees are located in Colombia, 99 employees are located in Brazil and the remaining 113 employees are located in the rest of Latin America. ENVIRONMENTAL MANAGEMENT Our operations are subject to regulation under various federal, state, local and foreign laws concerning the environment, including laws addressing the discharge of pollutants into the air, soil and water, the management and disposal of hazardous substances and waste and the

10 cleanup of contaminated sites. We continuously verify that our operations comply with environmental regulations. Our facilities utilize products and materials that are considered hazardous waste, which transportation, storage, treatment and final disposal is regulated by several governmental authorities. We believe we are in substantial compliance with all applicable environmental regulations in the countries in which we operate. RELATIONSHIP WITH AUDITORS Our external auditors, EY, conducted a limited review of the interim condensed consolidated financial statements which comprise the interim condensed consolidated statement of financial position as of 2017 and the related interim condensed statement of profit or loss and comprehensive (loss) income for the three and nine-month period then ended and changes in equity and cash flows for the nine-month period then ended, and a summary of significant accounting policies and other explanatory notes, prepared in accordance with International Accounting Standard 34. The Company's policy in regard to contracting external audit services assures that there is no conflict of interest, loss of independence or objectiveness of the services eventually provided by independent auditors and not related to external audit services. Our external auditors declared to the Management of the Company that the services provided do not influence the independence and objectiveness which are necessary for the provision of external audit services, as they correspond to verifying the adherence to the fiscal regulation and to commenting and suggesting improvements to the existing controls for the financial risk management process. Luxembourg, November 13, 2017

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12 INTERIM CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS For the nine-month period ended 2017 From January 1 to September 30, 2017 Notes From July 1 to 2017 From January 1 to September 30, 2016 From July 1 to 2016 Net revenues Cost of sales 14 ( ) ( ) ( ) ( ) Gross profit Selling and marketing 14 ( ) ( ) ( ) ( ) General and administrative 14 ( ) ( ) ( ) ( ) R&D, medical, regulatory and business development 14 ( ) ( ) ( ) ( ) Reorganization, integration and acquisition 14 ( ) ( ) ( ) ( ) Other operating income/, net (32.472) Operating income Interest and other financial income/expense, net 14 ( ) ( ) ( ) ( ) Foreign exchange income/expense, net 14 ( ) ( ) ( ) ( ) Financial ( ) ( ) ( ) ( ) Income (loss) before income tax ( ) Income tax 16 ( ) ( ) ( ) ( ) Net (loss) income ( ) ( ) Attributable to Equity holders of the parent ( ) ( ) Earnings per share Basic and diluted, (loss) income for the period attributable to ordinary equity holders of the parent (0,08) (0,08) 0,06 0,11

13 INTERIM CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE (LOSS) INCOME For the nine-month period ended 2017 From January 1 to September 30, 2017 From July 1 to 2017 From January 1 to September 30, 2016 From July 1 to 2016 Net (loss) income ( ) ( ) Other comprehensive (loss) income to be reclassified to income or loss in subsequent periods (net of income tax) Effect of hedging transactions ( ) ( ) ( ) Exchange difference on translation of foreign operations Total other comprehensive (loss) income to be reclassified to income or loss in subsequent periods (net of income tax) ( ) Total comprehensive (loss) income ( ) ( ) Attributable to Equity holders of the parent ( ) ( )

14 INTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION As at 2017 ASSETS Notes 2017 December 31, 2016 NON-CURRENT ASSETS Intangible assets Property, plant and equipment Trade receivables and other account receivables Other assets Deferred tax assets Total non-current assets CURRENT ASSETS Inventories Trade receivables and other account receivables Other assets Cash and short-term deposits Total current assets Assets held for sale TOTAL ASSETS EQUITY AND LIABILITIES EQUITY Issued capital Share Premium Other capital reserves Retained earnings Transactions with equity holders ( ) ( ) Other equity ítems Total equity NON-CURRENT LIABILITIES Long-term provisions Long-term financial debt and borrowings Payroll and social security liabilities Taxes payable Other liabilities Deferred tax liability Total non-current liabilities CURRENT LIABILITIES Short-term provisions Short-term financial debt and borrowings Trade payable Payroll and social security liabilities Taxes payable Other liabilities Total current liabilities Total liabilities TOTAL EQUITY AND LIABILITIES

15 INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY For the nine-month period ended 2017 Issued capital Share premium Attributable to the equity holders of the parent Other capital reserves Retained earnings Transactions with equity holders Effect of cash flow hedges Exchange differences on translation of foreign operations Total As at January 1, ( ) ( ) Capital reduction (3) (3) Issued capital (Note 17) Share issued cost (Note 17) - ( ) ( ) Share-based payments (Note 15) Net loss for the period ( ) ( ) Other comprehensive loss for the period ( ) ( ) At ( ) ( ) Issued capital Share premium Attributable to the equity hoders of the parent Retained earnings Transactions with equity holders Effect of cash flow hedges Exchange differences on translation of foreign operations Total As at January 1, ( ) Net income for the period Other comprehensive income for the period ( ) At ( ) ( )

16 INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS For the nine-month period ended 2017 From January 1 to September 30, 2017 From January 1 to September 30, 2016 Notes Cash flow from operating activities Income before income tax Adjustments to reconcile profit before income tax to net cash flows: PP&E depreciation and intangible amortization 4 and PP&E and intangible disposals 4 and Share-based payments Inventory allowance for impairment in value Allowance for debtors impairment Movements in provisions ( ) Interest and other financial Changes in assets and liabilities Inventories ( ) ( ) Trade receivables and other account receivables ( ) ( ) Other assets ( ) Trade payable and other liabilities Other cash flows from operating activities Income tax payments ( ) ( ) Net cash flow from operating activities Cash flows from investing activities Acquisition of intangible assets 4 ( ) ( ) Acquisition of property, plant and equipment 5 ( ) ( ) Proceeds from sale of assets held for sale Net cash flow from investing activities ( ) ( ) Cash flows from financing activities Proceeds from financial debt and borrowings Payment of financial debt and borrowings ( ) ( ) Interest and other financial expense payments ( ) ( ) Proceeds from issued capital (net of share issued cost) Net cash from financing activities ( ) Effect of foreign exchange results ( ) ( ) Net increase of cash and short-term deposits Cash and cash equivalents at the beginning of the period (1) Cash and cash equivalents at the end of the period (1) (1) Includes cash and short-term deposits and bank overdrafts.

17 1. CORPORATE INFORMATION Biotoscana Investments S.A. (formerly Biotoscana Investments & CY S.C.A.) is a Luxembourg Company incorporated on July 26, 2011 as a "société en commandite par actions for an unlimited duration and is subject to general company law. It was incorporated as Advent Cartagena & CY S.C.A. and an Extraordinary General Meeting held on August 17, 2011, decided to change the Company's corporate name into Biotoscana Investments & CY S.C.A. During the first quarter of 2017, the Board of Directors resolved the Company s transformation from a partnership limited by shares (Société en Comandite par Actions) into a corporation (Société Anonyme). Consequently, the Company s name was changed from Biotoscana Investments & CY S.C.A. to Biotoscana Investments S.A. These interim condensed consolidated financial statements of Biotoscana Investments S.A. and its subsidiaries (collectively, the Group or the Company) for the nine-month period ended 2017 were authorized for issue in accordance with a resolution of the Directors on November 13, Biotoscana Investments S.A. (the issuer) is a company domiciled in Luxembourg. The registered office is located at 2-4 Rue Beck, L-1222, Luxembourg. The Group is the result of the conglomeration of three complimentary Latin America specialty pharma companies (Biotoscana, United Medical and Laboratorios LKM). The main activity of the Group companies is the sale of pharmaceutical products for humans. This is made for own manufactured medicines and also through the purchase, sale, distribution, importation, exportation, trade in general of pharmaceutical, parapharmaceutical, and chemical products under several license agreements with different global pharmaceutical companies (third parties). The Group is currently controlled by the global equity fund Advent International with other significant shareholders, including Essex Woodlands and other minority private investors. On July 21, 2017 the Company was authorized to list and trade its Brazilian Depositary Receipts (BDRs) on the Sao Paulo Stock Exchange. The Company has also been admitted to list and trade its common shares on the Euro MTF market, the exchange unregulated market operated by the Luxembourg Stock Exchange. The relationship of subsidiaries as of 2017 and December 31, 2016, included in the consolidation perimeter, and the information related thereto is as follows: Corporate name Biotoscana Ecuador S.A. Biotoscana Farma de Perú S.A.C. Biotoscana Farma S.A. Biotoscana Farma S.A. Colveh1 S.A.S Colveh2 S.A.S Domicile Manuel Córdova Galarza S/N, KM 7,5, Quito, Ecuador Av. República de Panamá 3591, Floor 13, San Isidro, Lima, Perú Pte. Arturo Illia 668, Haedo, Buenos Aires, Argentina Cra. 106 No Lote 135A Manzana 23, Bogotá, Colombia Av , Floor 6, Bogotá, Colombia Av , Floor 6, Bogotá, Colombia Interest Direct interest Indirect interest Activity 0,00% 100% Pharmaceutical 0,00% 100% Pharmaceutical 0,00% 100% Pharmaceutical 0,00% 100% Pharmaceutical 0,00% 100% 0,00% 100% Other scientific and technical activities Other scientific and technical activities

18 Corporate name Colveh3 S.A.S Colveh4 S.A.S Cufré S.A. Grupo Biotoscana Costa Rica S.R.L. Grupo Biotoscana de Especialidad S.A. de C.V. Grupo Biotoscana Panamá S.A. Grupo Biotoscana S.L.U. Grupo Biotoscana S.A. Laboratorio Biotoscana Farma Ltda. Domicile Av , Floor 6, Bogotá, Colombia Av , Floor 6, Bogotá, Colombia Miraflores 1445, Office 1028, Montevideo, Uruguay San Rafael de Escazú, 300 mts. west of Centro Comercial Paco, Office 103, San José, Costa Rica Jaime Nuno 1915, Guadalupe Inn, Distrito Federal, México Street 56 y 57 Este, Obarrio, Sortis Business Tower, Office 10 H, Panamá Cl Pradillo 5 Bajo Ext, Madrid, España Luis Bonavita 1294, Office 2004, WTC, Montevideo, Uruguay Av. Los Militares 5001, Floor 12, Comuna de las Condes, Santiago de Chile, Chile Interest Direct interest Indirect interest 0,00% 100% 0,00% 100% Activity Other scientific and technical activities Other scientific and technical activities 0,00% 100% Pharmaceutical 0,00% 100% Pharmaceutical 0,00% 100% Pharmaceutical 0,00% 100% Pharmaceutical 100% 0,00% Pharmaceutical 0,00% 100% Pharmaceutical 0,00% 100% Pharmaceutical Laboratorio LKM S.A. Montevideo 589, Floor 4, Buenos Aires, Argentina 0,00% 100% Pharmaceutical Latin American Pharma Travessera de Grácia 11, Floor Company ETVE S.L.U. 5, Barcelona, España 0,00% 100% Pharmaceutical LKM Bolivia S.A. Arce 2132, La Paz, Bolivia 0,00% 100% Pharmaceutical LKM Chile S.A. Av. Los Militares 5001, Floor 12, Comuna de los Condes, Santiago de Chile, Chile 0,00% 100% Pharmaceutical LKM Ecuador S.A. Diego de Almagro , Quito, 0,00% Ecuador 100% Pharmaceutical LKM Paraguay S.A. Mainumby 2062, Fernando de la Mora, Paraguay 0,00% 100% Pharmaceutical LKM Perú S.A. Los Zorzales 130, Lima, Perú 0,00% 100% Pharmaceutical GBT - Grupo Biotoscana S.A. Luis Bonavita 1294, Office 2004, (formerly Perbal S.R.L.) WTC, Montevideo, Uruguay 0,00% 100% Pharmaceutical Quality Pharma S.A. Montevideo 589, Floor 4, Buenos Aires, Argentina 0,00% 100% Pharmaceutical United Medical Distribution Al Dos Maracatins 1435, Office Ltda. 104, São Paolo, Brazil 0,00% 100% Pharmaceutical United Medical Ltda. Avenida dos Imarés 401, Bairro Moema, São Paolo, Brazil 0,00% 100% Pharmaceutical 2. SIGNIFICANT ACCOUNTING POLICIES 2.1. Basis of preparation The interim condensed consolidated financial statements for the nine-month period ended 2017 have been prepared in accordance with IAS 34 Interim Financial Reporting.

19 The interim condensed consolidated financial statements do not include all the information and disclosures required in the annual consolidated financial statements, and should be read jointly with the Group s annual consolidated financial statements as at December 31, The issuer functional currency is USD. However, the interim condensed consolidated financial statements are presented in Brazilian Reais (BRL), except when otherwise indicated. Conversion to BRL is made based on IAS 21 rules New standards, interpretations and amendments adopted by the Group The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those used in the preparation of the Group s annual consolidated financial statements for the year ended December 31, The adoption of new standards effective as of January 1, 2017 did not imply any effect on the Group financial position of the information of previous periods presented in these financial statements. The Group has not early adopted any standard, interpretation or amendment that has been issued but is not yet effective. The nature and the effect of these changes are disclosed in Note 2.4 to the consolidated financial statements as of December 31, 2016 and complemented below considering new standards issued during the current period. Although these amendments apply for the first time in 2017, they do not have a material impact on the interim condensed consolidated financial statements of the Group. The nature and the impact of each amendment is described below: Amendments to IAS 7 Statement of Cash Flows: Disclosure Initiative The amendments require entities to provide disclosures about changes in their liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes (such as foreign exchange gains or losses). On initial application of the amendment, entities are not required to provide comparative information for preceding periods. The Group is not required to provide additional disclosures in its condensed interim consolidated financial statements, but will disclose additional information in its annual consolidated financial statements for the year ended December 31, Amendments to IAS 12 Income Taxes: Recognition of Deferred Tax Assets for Unrecognized Losses The amendments clarify that an entity needs to consider whether tax law restricts the sources of taxable profits against which it may make deductions on the reversal of that deductible temporary difference. Furthermore, the amendments provide guidance on how an entity should determine future taxable profits and explain the circumstances in which taxable profit may include the recovery of some assets for more than their carrying amount. Entities are required to apply the amendments retrospectively. However, on initial application of the amendments, the change in the opening equity of the earliest comparative period may be recognized in opening retained earnings (or in another component of equity, as appropriate), without allocating the change between opening retained earnings and other components of equity. Entities applying this relief must disclose that fact. The application of this amendment has no effect on the Group s financial position and performance as the Group has no deductible temporary differences or assets that are in the scope of the amendments. Annual Improvements Cycle Amendments to IFRS 12 Disclosure of Interests in Other Entities: Clarification of the scope of disclosure requirements in IFRS 12 The amendments clarify that the disclosure requirements in IFRS 12, other than those in paragraphs B10 B16, apply to an entity s interest in a subsidiary, a joint venture or an associate (or a portion of its interest in a

20 joint venture or an associate) that is classified (or included in a disposal group that is classified) as held for sale. The application of this amendment has no effect on the Group s financial position and performance as the Group has no subsidiaries classified as held for sale New standards, interpretations and amendments adopted by the Group IFRS 9 Financial Instruments In July 2014, the IASB issued the final version of IFRS 9 Financial Instruments that replaces IAS 39 Financial Instruments: Recognition and Measurement and all previous versions of IFRS 9. IFRS 9 brings together all three aspects of the accounting for financial instruments project: classification and measurement, impairment and hedge accounting. IFRS 9 is effective for annual periods beginning on or after January 1, 2018, with early application permitted. Except for hedge accounting, retrospective application is required but providing comparative information is not compulsory. For hedge accounting, the requirements are generally applied prospectively, with some limited exceptions. The Group plans to adopt the new standard on the required effective date. (a) Classification and measurement The Group does not expect a significant impact on its balance sheet or equity on applying the classification and measurement requirements of IFRS 9. Loans as well as trade receivables are held to collect contractual cash flows and are expected to give rise to cash flows representing solely payments of principal and interest. Thus, the Group expects that these will continue to be measured at amortized cost under IFRS 9. However, the Group will analyse the contractual cash flow characteristics of those instruments in more detail before concluding whether all those instruments meet the criteria for amortized cost measurement under IFRS 9. (b) Impairment IFRS 9 requires the Group to record expected credit losses on all of its debt securities, loans and trade receivables, either on a 12-month or lifetime basis. The Group expects to apply the simplified approach and record lifetime expected losses on all trade receivables. The Group expects an impact on its equity due to unsecured nature of its loans and receivables, but it will need to perform a more detailed analysis which considers all reasonable and supportable information, including forward-looking elements to determine the extent of the impact. (c) Hedge accounting The Group believes that all existing hedge relationships that are currently designated in effective hedging relationships will still qualify for hedge accounting under IFRS 9. As IFRS 9 does not change the general principles of how an entity accounts for effective hedges, the Group does not expect a significant impact as a result of applying IFRS 9. The Group will assess possible changes related to the accounting for the time value of options, forward points or the currency basis spread in more detail in the future. IFRS 15 Revenue from Contracts with Customers IFRS 15 was issued in May 2014 and establishes a five-step model to account for revenue arising from contracts with customers. Under IFRS 15, revenue is recognized at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. The new revenue standard will supersede all current revenue recognition requirements under IFRS. Either a full retrospective application or a modified retrospective application is required for annual periods beginning on or after January 1, Early adoption is permitted. The Group plans to adopt the new standard on the

21 required effective date. The Company is analyzing the potential impacts that the application of IFRS 15 may have on its financial statements. IFRS 16 Leases IFRS 16 was issued in January 2016 and it replaces IAS 17 Leases, IFRIC 4 Determining whether an Arrangement contains a Lease, SIC-15 Operating Leases-Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease. IFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for all leases under a single on-balance sheet model similar to the accounting for finance leases under IAS 17. The standard includes two recognition exemptions for lessees - leases of low-value assets (e.g., personal computers) and shortterm leases (i.e., leases with a lease term of 12 months or less). At the commencement date of a lease, a lessee will recognize a liability to make lease payments (i.e., the lease liability) and an asset representing the right to use the underlying asset during the lease term (i.e., the right-of-use asset). Lessees will be required to separately recognize the interest expense on the lease liability and the depreciation expense on the right-ofuse asset. Lessees will be also required to remeasure the lease liability upon the occurrence of certain events (e.g., a change in the lease term, a change in future lease payments resulting from a change in an index or rate used to determine those payments). The lessee will generally recognize the amount of the remeasurement of the lease liability as an adjustment to the right-of-use asset. Lessor accounting under IFRS 16 is substantially unchanged from today s accounting under IAS 17. Lessors will continue to classify all leases using the same classification principle as in IAS 17 and distinguish between two types of leases: operating and finance leases. IFRS 16 also requires lessees and lessors to make more extensive disclosures than under IAS 17. IFRS 16 is effective for annual periods beginning on or after January 1, Early application is permitted, but not before an entity applies IFRS 15. A lessee can choose to apply the standard using either a full retrospective or a modified retrospective approach. The standard s transition provisions permit certain reliefs. The Company is analyzing the potential impacts that the application of IFRS 16 may have on its financial statements. 3. SEGMENT INFORMATION The Company comprises a single operating segment, which primarily focuses on innovative products and high quality branded specialty generics to meet significant unmet patient needs. This segment is supported by several key functions managed in a centralized way: a R&D organization, a manufacturing organization, a supply organization, a partnering and commercialization organization, a business development organization, M&A and treasury, tax and financial functions. The heads of those functions reported directly to the Chief Executive Officer (which is the Chief Operating Decision Maker). Segment information is consistent with the financial information regularly reviewed by the Chief Executive Officer and the Board of Directors for purposes of evaluating performance, allocating resources and planning and forecasting future periods. Geographic information The following table summarizes total revenues from external customers based on the customer s locations. The Company has no revenues attributable to Luxembourg, that is its domicile.

22 From January 1 to 2017 From July 1 to 2017 From January 1 to 2016 From July 1 to 2016 Argentina Bolivia Brazil Chile Colombia Ecuador Mexico Panama Paraguay Peru Uruguay Gross revenues Rebates ( ) ( ) ( ) ( ) Direct taxes ( ) ( ) ( ) ( ) Net revenues In addition, the net book value of property, plant and equipment in Argentina, Brazil and Colombia is , and as of 2017 and , and as of All other individual locations accounted for less than ten percent of the total balances, and no PP&E are held on Luxembourg. Revenues by therapeutic line In the periods set out below, revenues by therapeutic line are as follows: From January 1 to 2017 From July 1 to 2017 From January 1 to 2016 From July 1 to 2016 Infectious Diseases Oncology & Onco-Hematology Specialty Treatments and Immunology and Inflammation (I&I) Orphan and Rare Diseases Others Gross revenues Rebates ( ) ( ) ( ) ( ) Direct taxes ( ) ( ) ( ) ( ) Net revenues Revenue and credit concentration There are no customers that concentrate 10% or more of the Company s gross revenues.

23 4. INTANGIBLE ASSETS Clients' portfolio R&D, trademarks and licenses IT applications Others Total Goodwill Cost Balance as of January 1, Additions (1) Disposals - - ( ) (15.443) - ( ) Translation exchange differences ( ) - ( ) (1.601) - ( ) Balance as of December 31, Additions Disposals - - ( ) - (93.457) ( ) Translation exchange differences ( ) - ( ) ( ) Balance as of Amortization Balance as of January 1, ( ) ( ) ( ) - ( ) Amortization charge for the year - ( ) ( ) (68.012) - ( ) Disposals Translation exchange differences Balance as of December 31, ( ) ( ) ( ) - ( ) Amortization charge for the period - ( ) ( ) (75.155) - ( ) Disposals Translation exchange differences (18.069) Balance as of ( ) ( ) ( ) - ( ) Net book value As of (2) As of December 31, (2) (1) Mainly related to a license acquisition during the previous year to commercialize new products. (2) Includes and related to capitalized R&D as of June 30, 2017 and December 31, 2016, respectively. During the nine-month periods ended 2017 and 2016, the Group acquired assets with a cost of and , respectively. The Group performed its annual impairment test of goodwill in December and when circumstances indicate the carrying value may be impaired. The Group s impairment test for intangible assets with indefinite lives is based on value-in-use calculations. The key assumptions used to determine the recoverable amount for the different cash generating units (CGUs) were disclosed in the consolidated financial statements for the year ended December 31, Management is of the opinion that no indicator of impairment exists as at In addition, did not observe any significant assumption used in the December 2016 impairment analysis was changed and it does not observe any relevant change in the business performance during the nine-month period ended 2017 that contradict the conclusions reached or that need to be assessed as an impairment indicator.

24 5. PROPERTY, PLANT AND EQUIPMENT Work in progress Machinery and equipment Information processing equipment Office equipment Vehicles Total Lands Buildings Cost Balance as of January 1, Additions Disposals ( ) ( ) ( ) ( ) Transfers ( ) - ( ) ( ) Translation exchange differences ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) Balance as of December 31, Additions Disposals - ( ) - - (64.004) (71.036) ( ) ( ) Transfers (1) (98.615) ( ) ( ) Translation exchange differences (85.657) ( ) ( ) ( ) ( ) ( ) ( ) ( ) Balance as of Depreciation Balance as of January 1, ( ) - ( ) ( ) ( ) ( ) ( ) Depreciation charge for the year - ( ) - ( ) ( ) ( ) ( ) ( ) Disposals Translation exchange differences Balance as of December 31, ( ) - ( ) ( ) ( ) ( ) ( ) Depreciation charge for the period - ( ) - ( ) ( ) ( ) ( ) ( ) Disposals Translation exchange differences Balance as of ( ) - ( ) ( ) ( ) ( ) ( ) Net book value As of As of December 31, (1) Corresponds to transfer to assets held for sale. During the nine-month periods ended 2017 and 2016, the Group acquired assets with a cost of and , respectively. 6. INVENTORIES The break-down of inventories as of 2017 and December 31, 2016 is as follows: 2017 December 31, 2016 Raw materials Products in transit Finished products Work in progress products Other inventories Allowance for impairment in value ( ) ( ) Total