Interim Report January-March 1997

Interim Report January-March 1997 - At the Annual General Meeting on May 21, it was decided that the company change its name to BioPhausia AB (publ). - In January, shareholders' equity was strengthened by MSEK 66 as a result of two new issues. As of March 31, the equity/assets ratio was 57%. - Sales amounted MSEK 19. - R&D costs were MSEK 7.4. - The pre-tax loss was MSEK 8.2. - Research at the College of Dentistry in Umeå showed that krillenzymes have the ability to dissolve plaque on tooth surfaces. Aseparate company will be formed to develop these businesspossibilities. -Due to the dextran operations' poor earnings, this business will be restructured. Research and development The investments in reserach and development continued during the first quarter. Research costs were MSEK 7.4, a 93% increase compared with the same period in 1996. The increase is mainly attributable to the Phase III studies for Krillase , which have been in progress since November 1996. Efforts to obtain FDA approval for RescueFlow® continue. An initial meeting with the administration did not lead to a definitive answer. There are certain possibilities that approval will be final later this year. Further clinical studies will be conducted regardless of the outcome. Europe is also an important market for RescueFlow®. A registration application will be made during the year. The company's project focusing on controlling the pressure between certain common tumor types and surrounding connective tissue continues according to plan. If the results obtained in a series of animal tests, which are based on a well-documented effect principle, can be confirmed in clinical tests, the effect of cytotoxic preparations on tumors can be significantly improved. This project is now being assigned top priority. Studies over the past several years at the colleges of dentistry in Malmö and Umeå show that krill enzymes have unique properties which enable them to quickly reduce plaque-building bacteria's adhesion to the tooth's surface, which is the main cause of cavities. Krill enzymes have also been proven superior to other enzymes in eliminating yeast fungi (blastomycetes), which are a major cause of catarrhs among orthodontic patients. In summary, the potential for krill enzymes for dental indications is deemed very good. Since dental products are separate from BioPhausia's main operations, a separate company will be formed with other partners in order to develop this opportunity. BioPhausia will contribute patent rights and a small investment. The dextran operation - earnings and planned restructuring During the first quarter, sales amounted to MSEK 19.0, a decrease of 14% compared with the corresponding period in 1996. Gross margins were 33% (36). Due to the dextran operations' weak development of sales and earnings during an extended period of time, alternatives for managing this unsatisfactory situation have been analyzed. A decision to restructure has been made. This restructuring does not exclude divestment of well-defined segments. Results in general and the financial situation The result for the period amounted to a loss of MSEK 8.2 (loss: 2.9). Net financial items was positive, due partly to favorable currency trend and partly to a reduction of short-term borrowing which occurred after the new issues in January. Net debt has decreased by MSEK 52.1 since December 31. Inventories have increased since the beginning of the year. The increase is mainly attributable to the take-over of inventory control in Sweden and Norway. Shareholders' equity was strengthened by MSEK 66 through new issues in January. The equity/assets ratio increased accordingly from 28 to 61%. The equity/assets ratio on March 31 was 57%. Name change It was decided at the Annual General Meeting to change the name of the company to BioPhausia AB (publ). The company has shifted focus so that R&D has dominant importance for future growth and performance. Consolidated Income Statement (SEK 000´s) Jan-March Jan-March 1996 1995 Net sales 18 970 22 203 Cost of goods sold -12 656 -14 203 Gross income 6 314 8 000 Sales- and admin. -5 764 - 5 476 expenses R&D expenses -7 424 -3 853 Depreciation -1 766 -1 695 Operating income -8 640 -3 204 Financial items 598 85 Income before taxes -8 042 -2 939 Taxes -131 - Minority shares 23 - Net income -8 150 -2 939 Consolidated Balance Sheet (SEK 000´s) 1997-03- 1996-03- 31 31 Liquid assets 30 228 1 927 Accounts 22 129 22 288 receivables Inventories 18 662 5 516 Other current 7 684 3 449 assets Fixed asets 89 780 92 115 Total assets 168 483 125 295 Interest-bearing 35 500 22 500 liabilities Operating 32 418 34 164 liabilities Deferred tax 4 346 3 341 liabilities Minority shares 75 - Shareholders´equity 96 144 65 290 Total liabilities 168 483 125 295 and equity Keyratios 1996 1995 Earnings per share after Neg. Neg. tax, SEK Shareholders´equity per 22.3 15.2 share, SEK* Net liabilities 5.3 20.6 Return on capital Neg. Neg. employed, % Return on equity after Neg. Neg. tax,% Gross margin,% 33.3 36.0 Operating margin,% Neg. Neg. Equity ratio,% 57.1 52.1 * 1996 years sums after the split at 2:1 in December 1996, and the share issue in January 1997. Uppsala, May 21, 1997. Stellan Lind President This report has not been subject to a special examination by the company's auditors.

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