Interim report January - September 1997

Interim report January - September 1997 -Sales amounted to MSEK 63.6. -Research and development costs were MSEK 22.8. -A net loss of MSEK 25.6 was posted for the period. -The major proportion of the dextran operation has been divested to Pharmalink Basläkemedel AB. -Krillase for cleaning damaged tooth-root surfaces -BioPhausia will apply for listing on the Stockholm Stock Exchange O-List" in connection with the new share issue, previously announced by the company. -Aros Securities is BioPhausia's new market maker. Listing decision The Board of Directors has decided that the company will apply for listing on the Stockholm Stock Exchange "O List" in connection with the impending issue of new shares. This listing could extend the ownership base, securing access to capital. BioPhausia currently has more than 1,500 shareholders and trading turnover averages 5,000 shares a day. Research and development Research and development costs amounted to MSEK 22.8 in the period, an increase of 77% compared with the corresponding period in the preceding year. This increase may be largely attributed to the commencement of Phase III studies for Krillase in November 1996, the strengthening of the department for clinical research and the start of the tumor therapy and edema reduction projects in 1997. The clinical studies of Krillase at university clinics in Freiburg, Amsterdam and Cardiff are proceeding according to plan. Recruitment of patients continues to be satisfactory. Cooperation has been established with Biora regarding Biophausia'a technology for enzymatic cleansing, with the object of investigating the possibility of employing Krillase to clean damaged tooth- root surfaces prior to the application of growth-stimulating protein. The task of preparing a joint analysis plan with the American Food and Drug Administration (FDA) to provide further information concerning the properties of RescueFlow® is continuing. The next stage is evaluation of the possibility of using a study in Brazil which has already been completed to supplement the existing statistical data. The initial series of tests has been extended in BioPhausia's tumor project, where the aim is to achieve more effective cytoxic drug treatments. There has been further confirmation of the preliminary results, indicating that tumor pressure can be reduced to establish an absorption effect. The Patent and Registration Office's initial examination of BioPhausia's patent application for the use of hyaluronidase to reduce traumatic swellings which threaten the functioning of organs has indicated that there are no objections to registration on the grounds that this is not a novel therapy. Dextran operations Sales amounted to MSEK 63.6 in the first nine months of the year, a 4% decrease compared with the corresponding period of 1996. The gross margin was 30%. Restructuring Pharmalink Basläkemedel has acquired BioPhausia's international operations centered on dextran-based intravenous pharmaceuticals. The payment made on the date of access was MSEK 20. Negotiations are under way to divest the remaining part of the dextran business, Hyskon® for gynecological use. The BioPhausia restructuring process is completed when an agreement on this divestment has been reached. The restructuring involves nonrecurring costs in 1997 of approximately MSEK 10 for the writedown of intangible assets. The agreement contains provisions regarding additional future payments which may compensate for this writedown. After these divestments, BioPhausia will be a streamlined research and development company, focusing on tissue biology. The company aims to be in a position to meet international requirements for a company of this nature, with projects in all development stages and a sufficient range of operations to ensure that at least one product enters into the clinical phase every year. A company of this size will be able to spread its risks, in combination with satisfactory profitability based on lump-sum compensation and royalty revenues. Financial position A loss of MSEK 25.6 was reported (loss: 17.8). Net financial items were positive during the period, as a result of a currency trend which was favorable to the company. Consolidated Income Statement (SEK 000´s) Jan-Sept 1997 Jan-Sept 1996 Net sales 63 612 66 422 Cost of goods sold -44 571 -47 191 Gross income 19 041 19 231 Sales and Admin -17 509 -18 072 expenses R&D expenses -22 799 -12 880 Depreciation -5 343 -5 418 Operating income -26 610 -17 139 Financial items 625 -680 Income before taxes -25 985 -17 819 Taxes 367 -1 060 Minority share 4 - Net income -25 614 -18 879 Consolidated Balance Sheet (SEK 000´s) 1997-09-30 1996-09-30 Liquid assets 18 996 2 546 Accounts receivables 22 968 19 743 Inventories 23 210 12 252 Other current assets 4 872 6 404 Fixed assets 87 591 92 124 Total assets 157 637 133 069 Interest-bearing 39 500 47 343 liabilities Operating liability 35 482 33 007 Deferred tax 3 848 4 394 liability Minority share 96 - Shareholders´ equity 78 711 48 325 Total liabilities 157 637 133 069 and equity Key ratios 1997-09-30 1996-09-30 Earnings per share after neg. neg. tax, SEK Shareholders´ equity per 18.3 11.2 share, SEK* Net liabilities, MSEK 20.5 44.8 Return on capital employed, neg. neg. % Return on equity after tax, neg. neg. % Gross margin, % 30.0 29.0 Operating margin, % neg. neg. Equity ratio, % 49.9 36.3 *The 1996 amount is calculated after the split 2:1 in December 1996, and the share issue in January 1997. New share issue The new issue is due to be implemented in February/March 1998. The Special General Meeting which will determine this matter will be held in early 1998. Uppsala, November 27, 1997. Stellan Lind President This report has not been subject to a special audit by the company's auditors.

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