Interim Report January - June 1997

Interim Report January - June 1997 The Board of Directors is to propose that a Special Shareholders' Meeting approve a new share issue in an amount of approximately MSEK 200. Sales amounted to MSEK 44. Research and development costs were MSEK 15. A net loss of MSEK 17.4 was posted for the period At a meeting, the FDA offered to actively cooperate with BioPhausia in order to hasten the approval of RescueFlow®. @ The krill project is proceeding as planned with good patient recruitment in Freiburg, Amsterdam and Cardiff. Decision to propose new share issue Following the planned divestment of dextran operations, BioPhausia will become a streamlined research and development company, whose future revenues will consist of lump-sum compensation and royalties from license sales. In view of the considerable commercial potential represented by the company's project portfolio, particularly in the areas of tumor, wound and trauma treatment, the Board of Directors is to propose that a Special Shareholders' Meeting to be held during the autumn to approve a new share issue in an amount of approximately MSEK 200. The issue will be directed to both current shareholders and the capital markets in Sweden and other countries. The planned issue will safeguard the scope and quality of activities related to current projects, at the same time as potential will be provided to broaden the base by adding projects in an early phase of development. Research and development During the first half of the year, research and development costs amounted to MSEK 15, a 95% increase compared with the corresponding period in the preceding year. The increase was mainly attributable to Phase III studies related to Krillase , which have been in progress since November 1996, and to the fact that preclinical projects in the fields of tumor treatment and edema reduction in connection with trauma were developed during the period. On August 6, a further meeting was held with the Federal Drug Administration (FDA) in America regarding registration of RescueFlow®, BioPhausia's patented drug for the treatment of extensive blood loss in connection with injuries and accidents. The meeting resulted in the FDA offering to actively cooperate with BioPhausia in order to hasten the approval of RescueFlow®. The next phase will involve an analysis designed to further illuminate RescueFlow®'s effect and safety. Plans to submit a registration application for RescueFlow® in Europe during 1997 stand firm. TM Clinical studies of Krillase for the debridement of chronic ulcers have now been conducted since November 1996. Patient recruitment remains favorable at all clinics. BioPhausia's projects aimed at drawing cytostatic drugs into tumors in connection with cancer treatment are continuing at the universities of Uppsala and Bergen. With regard to BioPhausia's projects involving the use of hyaluronidase to reduce swelling in connection with transplants, shock lung and other traumatic conditions, it has already been proven that the amount of hyaluronan in the organ decreases in connection with treatment. During the past six months, it has also been documented through continued tests with animals that in connection with heart transplants the water content - the clinical measurement of the swelling - is reduced, which is an established model for this type of trauma. Work involving experiments on animals continues in order to document the treatment of several organs and to determine dosage and treatment times. In order to further strengthen the company's clinical research resources, associate professor Bertil Karlmark and pharmacist Ulf Olsson have been employed. Bertil Karlmark was previously employed as medical director within various units of Pharmacia and, as part of his independent activities, he has conducted research assignments on behalf of a number of Swedish and international pharmaceutical companies. Ulf Olsson joins BioPhausia from Pharmacia & Upjohn, where he was engaged in various clinical research projects. The dextran operation - earnings and divestment work During the first half of the year, sales amounted to MSEK 44, a 7% decrease compared with the corresponding period of 1996. The gross margin was 32%. Negotiations are under way regarding the planned divestment of the various segments of the dextran operation. Results in general and financial position A loss of MSEK 17.4 (loss: 6.3) was reported. Net financial items were positive during the period, as a result of a favorable currency trend. Since BioPhausia's currency policy involves hedging 65% of currency flows in the company's principal currencies, the year-end result, based on current exchange rates, will not match the level that would have been reported if no forward contract transactions had been undertaken. Change of name and new logotype The change of name, approved at the Annual General Meeting on May 20, has been implemented. Medisan Pharmaceuticals is now a registered secondary name of BioPhausia and a collective term used for dextran operations. Consolidated Income Statement (SEK 000´s) Jan-June 1997 Jan-June 1996 Net sales 44 047 47 209 Cost of gods sold -30 088 -30 277 Gross income 13 959 16 932 Sales and Admin -13 336 -12 689 expenses R&D expenses -14 980 -7 668 Depreciation -3 538 -3 449 Operating income -17 895 -6 874 Financial items 383 525 Income before taxes -17 512 -6 349 Deferred taxes 129 - Minority share 13 - Net income -17 370 -6 349 Consolidated Balance Sheet (SEK 000´s) June 30 1997 June 30 1996 Liquid assets 16 976 3 357 Accounts receivables 25 983 22 193 Inventories 17 941 8 862 Other current assets 5 408 2 916 Fixed assets 89 083 94 006 Total assets 155 391 131 334 Interest-bearing 35 500 46 748 liabilities Operating liability 28 770 20 926 Deferred tax 4 087 3 341 liability Minority share 87 - Shareholders´ equity 86 947 60 319 Total liabilities 155 391 131 334 and equity Key ratios June 30 1997 June 30 1996 Earnings per share after neg. neg. tax, SEK Shareholders´ equity per 20.2 14.0 share, SEK* Net liabilities, MSEK 18.5 43.3 Return on capital employed, neg. neg. % Return on equity after tax, neg. neg. % Gross margin, % 32.0 36.0 Operating margin, % neg. neg. Equity ratio, % 56.0 45.9 *The 1996 amount is calculated after the split 2:1 in December 1996, and the share issue in January 1997. Uppsala, September 9, 1997. Stellan Lind President This report has not been subject to a special audit by the company's auditors.

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