Speakers, please begin.
Thank you, good morning, everybody. Welcome to BioGaia quarter three presentation. You ha ve already heard about our disappointing results on October 12th when we issued our profit warning. Alex and I are going to explain to you today what is behind the figures. To start with, we are facing a total sales decrease by 21%, which is -17% if you exclude the currency impact. This is mainly due to COVID-19. The main reason is that our distributors in the world, their sales force, that are mainly medical sales force visiting doctors, have not to the same extent been able to visit the doctor, the healthcare professional, or the pharmacy. In most of our markets, that's where we operate. If you look at split per region, basically we are facing a decrease in all regions, but not at the same pace.
You will notice that America is facing a lower decrease thanks to the omni-channel strategy we initiated in the end of 2018. In terms of products, here as well, we could notice a decrease of BioGaia Protectis drops, BioGaia Prodentis, and BioGaia Gastrus. If I just comment on Prodentis here already, the main problem is Japan. Our only channel almost in Japan for Prodentis is the dental clinics, and they have been in a heavy lockdown, so they've been closed. No one could go to the dentist, and therefore no one could be recommended on the spot by the dentist to buy Prodentis, and nobody can buy it. The part of the business in OTC has been hurt, but not that much, but for Prodentis lozenges only sold in dental clinic in Japan, that has been a major issue, obviously. Next page, please. Key events.
We communicated on 3rd of September that we will not have any extraordinary general meeting, we had in mind perhaps to warn to decide either or not we should distribute the extra dividend. The board decided not to distribute any extra dividend this year due to the context. Good news, if that happened, good news, is that we have a new clinical study published in functional abdominal pain for children, which is very close to our focus area, pediatrics product, with very good results showing that with Protectis, so our mainstream DSM17, we were the only probiotic showing reduced pain intensity, so which we were very happy about. On 7 October, you all know, we established our profit warning. Next page, please. Despite COVID-19 and heavy lockdowns about everywhere in the world, we've been able to secure digitally eight new launches.
I'm not going to comment all of them, but I would like to underline two. The first one is the launch of Gastrus in France, which has been a long discussion with our distributor, PediAct. France is doing very well. PediAct is extremely talented to promote our product for children within midwives. We decided in 2019 to launch Gastrus, and that's another type of doctor they have to visit. They really focus on the gastroenterologist, and they are really the gastroenterological association recommended to use Gastrus. Based on that, they have been able to launch in pharmacies, and the first results are really promising. That we are very happy about. The second one I would like to emphasize is in U.S., via Everidis. Everidis represented Prodentis before our oral health portfolio, but just Prodentis adult.
That was a bit of kind of sleeping SKU because they were focusing mainly on the drops and on Protectis and then launch of Prodentis. The American Academy of Pediatrics has recently decided that it is up to the pediatrician to look at the children's oral health, which is very new. Now when the American goes to their pediatrician for the control of their children, it's up to the pediatrician to look at their mouth as well. Obviously, if they see something, then they send it to the dentist. As this is a type of doctor Everidis sales force is visiting, for us, it has been very easy to launch Prodentis KIDS.
While they are promoting the drops already, at the end they say, "Okay, by the way, you remember you are in charge as well of the oral health of the children, and we have Prodentis KIDS for you." Now, we've been launching the whole portfolio to both for adults and for children, and in as well one specific target group for children, like children with problem like autism. These children, they cannot brush their teeth. They cannot articulate, and they cannot brush their teeth, which is always a fight with their parents. We propose the Prodentis tablet for these children. It's a nice taste with apple flavor. It tastes good. It doesn't harm them, so they just have to take it, and it works as a protection against caries.
The first result from the market, both the pediatrician and the dentist, has been really strong. Next page, please. If we look at our sales per segment, both pediatric and adult sales are decreasing. The pediatrics are decreasing slightly lower. If you look at the year-to-date, we are stable, so we can see a slightly resilience coming from our pediatrics product, decreasing heavily in the quarter three. Next page, please. In terms of gross margin, here you have probably noticed the higher decrease behind pediatrics product. The first reason is a product mix, where the drops were decreasing a lot compared to the tablet, and that's where we have our highest margin, secondly, the one-off unfortunate event where we receive a batch from Danisco that in term of culture that respected the specification.
During manufacturing, when we checked before launching, we noticed that we didn't have the right number of living bacteria in the product and therefore destroyed the batch. That explains 1% of the decrease in margin. Year to date is stable for the whole portfolio at 73%. Next page, please. In term of geographic markets, if we look at the quarter, all the regions are decreasing, but as you can see, at different pace. If I start with EMEA, that's -25%, and it's mainly due to some of our biggest markets, namely Italy and Spain. Here the first reason is the COVID-19. These two markets has been in a really strong lockdown, where consumer has not been able to go as usual to their pharmacy, or distributors have been very reluctant to start our online strategy, even if that was our recommendation.
Their whole model is based on medical marketing, their sales force could not visit the doctor, as I mentioned in the introduction. If you add up all this, it has a very bad impact on our sales. I have to admit that in Italy, it has well a problem to be another distributor. We have a distributor which is extremely conservative that we are trying to push to open new way of promoting probiotics to consumer, and it takes a bit of time. We look at APAC, it's a bit disappointing compared to the super nice figures we always disclose for APAC. I have to say that it's mainly because of a phasing of order regarding China. One order that should have ended up in Q3, end up in Q4, which is the reason of the decline in China.
South Korea, here I think I already mentioned we are changing distributor. Every time you change distributor, there is a bit of a slowdown. Vietnam is mainly a phasing issue as well, to be honest. If we look at America, so we decrease only by 6%. We have a year-to-date at plus 5%. Here it's different if you look at South America and if you look at North America. Actually here as well for U.S., it's mainly a prioritization of order effect. The sell-out in U.S. are extremely good and will continue to be good. I really would like you not to look at the - 6% as something which is a problem, because it's not. I can even disclose that we received the biggest ever order from Amazon for the drops.
We get an order of 40,000 units of drops. It has never happened before. On the sell-out side, the U.S. is doing very well. Same for Canada. Regarding Mexico, though, here they are really badly impacted by the COVID-19. We know that because we have a lot of researcher working for us in Mexico, and they say that it's really bad. Here it's not only the oldest people dying, it's as well the youngest. Old people having obesity, suffering from metabolic disease, and they are young, they are 35. It's almost impossible for us to as at Abbott to focus on sales of probiotics when the whole country is impacted so badly by the COVID-19. Next page, please.
Yes. If we go to slide number nine, we look at our costs, the OPEX. We see that the OPEX in the quarter was about SEK 62 million versus SEK 72 million in the same quarter last year, which is a decline of the cost with 14%. As you can see, our cost in the core, the core is our cost excluding our subsidiaries, MetaboGen and BioGaia Pharma. In these areas, we see cost decreasing versus last year in basically all areas. This is, again, it's mainly relating to COVID-19. In sales, for example, we have a lower activity level in terms of the number of congresses, customer visits, et cetera, that we do. That is one of the reasons why the sales and marketing costs are lower this quarter compared to a year ago. The same goes for R&D.
We have a lower level of activity in terms of our clinical studies due to delays relating to COVID-19. All in all, we have a decline in our OpEx of 14%. Regarding the non-core OpEx, the MetaboGen and the BioGaia Pharma, we have an increase of 8%, and they are fairly unaffected by COVID-19. Let's move on to slide number 10. To conclude, we can see in our P&L, we have a sales decline of 21%, our OpEx declining, as mentioned, with 14%, which leads to an EBIT decline of 45%, which is, of course, we are not satisfied with this. Our total EBIT was SEK 27 million versus SEK 49 million in the same period last year. This leads to an EBIT margin of 20% versus 30% last year. Year to date, we are at 33%, which is more in line with our long-term ambition.
Looking at the EPS, it's SEK 1.18/ share versus SEK 2.19 in the same quarter last year. We move on to slide number 11, the cash flow. We see that our cash flow from operating activities before changes in our working capital was SEK 15 million versus SEK 41 million last year. The main reason is obviously the lower sales for the quarter. In terms of the working capital, we see that the change in working capital was SEK 41 million versus SEK 20 million in the same quarter last year. The main explanation is, of course, the decline in sales and the fact that we then release working capital. The cash flow from operating activities was SEK 55 million versus SEK 61 million last year. All in all, the cash flow for the period was SEK 50 million versus SEK 51 million last year.
Our cash at the end of the period is solid at SEK 292 million versus SEK 213 in the same period last year. Thank you.
Moving to the conclusion, as I mentioned on several occasions, our biggest markets such as Italy and Spain have been facing very strict lockdowns, which has been a problem both for our distributor sales force to visit doctors, but as well for the consumer to reach the pharmacy. Where we had our traditional business model, purely medical marketing, we've been really impacted. In countries such as the U.S., where we are initiating a new B2C strategy, supported by omni-channel distribution possibility, namely having a possibility to buy online, then we have not been suffering that much. I think these markets, on the year perspective, are not going to be impacted at all. This comforts us that we will be able to go out from this economic crisis.
That gives me as well a kind of strong argument to be able to go back to our traditional market to say, "Well, I think you've been noticing that if you would have opened your sales through via Amazon or your local marketplace platform, we might not have been in that situation." Here as well, trying to see all these doctor online network, how we can collaborate. Really try to reinvent ourselves and use the COVID-19 as an opportunity to fast-track our digitalization. In the meantime, we have as well been trying to monitor our costs as much as we could. On a year-to-date basis, you might have noticed as well that our core OpEx costs are decreasing by 7%, but our sales are flat. We really try to monitor the costs in order to face this difficult time and not being impacted too much.
Even though the lower sales is very unfortunate, we believe that it is mainly related to the COVID-19, and we are still confident that our long-term ambition are achievable. Now, operator, we are ready for questions.
Thank you. Ladies and gentlemen, if you do have a question for the speaker, please press zero followed by one on your telephone keypad. Our first question comes from Kristofer Liljeberg from Carnegie. Please go ahead, your line is now open.
Thank you very much, and good morning. Four questions, somewhat related. The first one is, would it be possible to quantify how much of your sales is coming from e-commerce and how that was doing in the quarter versus physical stores and pharmacies? You mentioned this large order in U.S.A. Was that received now in Q4? Also related to Q4, it seems the weakness will continue. I don't know if you could give some more color whether you expect group sales to be declining in the fourth quarter as well. The final question relates to costs. Given how much you already have reduced costs year to date due to COVID-19 in general with less traveling, et cetera. What more could you do on the operating costs for the remainder of the year to compensate for lower than expected sales? Thank you.
Thank you, Kristofer, for question. To quantify internet, that's something we try to consolidate with Alex. We don't have all the sellout figures divided by channel. We would like to get from our partner. Some we have a total transparency, we know exactly what it is, some we don't. We have not been able to quantify for our 109 countries what is on or offline. What I can say is that where we've decided to focus on mainly China and U.S., where there were our two pilot markets. The sales on internet in China is more than 70%, and in U.S., I think now it's more than 80%. Vietnam is transforming itself into 100% online market. If we look at South Korea, we are changing partner because they could not have any sales online, and they were not willing to, a pure pharma thinking.
Now we change from distributor, and they are mainly selling online. We are changing our distribution strategy, but I cannot consolidate figures. It remains at the level of the old company, the majority, because we have still Italy and Spain and Brazil, all these heavy markets where they're not ready and not they start to be willing, but they are not ready with that. That's to answer to your first question. Regarding your second question.
Sorry. Still, you said China now 70% internet sales, U.S. 80% of sales from e-commerce channels.
Yeah.
But still both those countries were still down for you in the quarter. That is only due to timing of shipments to distributors, right?
Exactly. It's just a prioritization issue, which is, to answer your second question, the Amazon order we received for the U.S. is indeed a Q4 order.
Okay. Yeah.
In term of landing, I don't think I'm allowed to disclose the landing for the whole year. That will be difficult to go back to a strong increase with a quarter which is at - 21%. I think that our effort is really to try to do as good as we can. We had two good first quarter, Q1 and Q2, and at [both my] + 10%. Now we are a quarter at - 21%. You can have a hint about what is going to be for the landing. Regarding your cost, the question about cost, I'm sorry, but Alex asked me something at the same time, so I didn't hear the question. Could you please repeat it?
Yeah. I think you had mentioned both in the press release last week and then the report that you are trying to adjust the cost base for the lower than expected sales. What I wonder is, as costs are already down so much this year because of less traveling, less trade exhibitions, et cetera, what more could you do on the cost really in the short term?
In the short term, not that much, in fairness. We had two strategy days yesterday with the board, and I had two strategy days with the management committee in September. We are looking at it on a broader perspective, how to be more efficient in our way of working, perhaps how to integrate better MetaboGen, Pharma and BioGaia more on the operation side. We are looking at it on a broader perspective to be more efficient to support the whole organization. It will not be like a magical effect on Q4, no.
Okay. Thank you for that clarification. That's all from me. Thank you very much.
Thank you, Kristofer.
Thank you. Our next question comes from Mattias Vadsten from SEB.
Hi, good morning. Thank you very much for taking my questions. Many of them were already answered. I have two. Firstly, can you just repeat the number of units in the large order to Amazon to come in Q4?
Yeah, it's 40,000 units.
40,000?
Yes. Which is for one order of drops. The historical one. This one we will frame it. We hope we will get a lot of them in the future.
Yeah. Thank you. My next question relates to Protectis drops, which has been also weak if you look on a year-to-date figure. Can you just talk us through the dynamics in terms of sales and marketing of this product versus sales of the other products that you have in general? Is this product likely to see the main shortfall also into Q4 here, or how should we think about it? Thank you.
Yeah. The drops, in my opinion, are almost, I would say, secure SKUs. If you have a baby with colic, COVID or no COVID, you're going to buy your drops. Parents are really ready to do anything possible for their babies. You have a resilience towards any type of crisis, but our job is really to make them available. The problem is not the demand, the problem is the availability. I'm not at all worried about the sales of the drops. I have to say as well that when the COVID started, the focus has been for us and for partner to get their product on their market.
We were all afraid that we would neither be able to manufacture because of closing down of the factory or whatever or not being able to ship the product because all the country were closing borders, and it was difficult to find transport. We ask our BioGaia Production to work in two shifts instead of working in one shift, to be able to secure that all the products at least will reach the market. That has worked very well. That explained the Q1 and Q2. Unfortunately, in term of availability, then it has not been available to the consumer. You have this slowdown due to non-availability of the product to the consumer. Now the market are open again. We don't know how long, but for the moment, it has been open during at least all summer. This sell-out effect will be absorbed slightly.
We don't know. Now Ireland closed again six week, and France is in a big curfew. That I cannot control. I don't have the idea about the impact. Availability has been the key problem.
Okay. Thank you very much for that. Can you just elaborate a little bit more? What is the main concern when you ship the product and then for it to reach the end consumer? Can you just elaborate a little bit more on that please?
Normally, the usual way for parents to hear about that, "Oh, your baby has colic, and we recommend you to buy these probiotics magic BioGaia drops to stop the colic and stop the crying." The parents, they were not going to the doctor. The people were not going to the doctor at all. They didn't meet the pediatrician as they used to and didn't get heard about the drops and about our product in general. Another impact for the drops, and here actually, it's mainly in Italy and Spain, is that they recommend the drops together with antibiotics. If your children is sick, they will have antibiotics, and then they say, "Oh, by the way, don't forget, the antibiotics will kill all the bacteria, the good and the bad.
Don't forget to take your probiotics to nurture your good bacteria and stimulate your immune system. That has not happened as well because people have been less sick. They have been at home. They were not going to school. They have not had all these small diseases that you normally get requiring antibiotics, and therefore, you didn't buy your drops either. It has been a lot of impact that to gether explain the decrease for the Q3.
Thank you very much. That's very clear. That was all from me as well.
Thank you, Mattias.
Thank you. As another reminder, to register for a question, please press zero followed by the one on your telephone keypad. There will be a brief pause whilst questions are being registered. Okay, thank you. There appear to be no further questions. I'll return the conference back to you, speaker.
Yep. Thank you so much for listening to us. Thank you so much for your interesting question, and we hear you on for Q4. Thank you so much. Have a nice day, everybody.