Year-End Report January ̶ December 2009
Key figures, SEK thousands
• Net sales 986 (380)
• Operating loss 12,553 ( Loss: 25,420)
• Net loss for the period 17,558 (Loss: 27,149)
• Earnings per share -1.17 (-2.65)
• Cash flow from current operations -16,874 (-16,761)
• Cash flow for the period 720 (-294)
Important event during the fourth quarter
• Genovis completed a new share issue with preferential rights to existing shareholders. The share issue was oversubscribed by 102% and in response to the great interest the company followed up with a directed placement of 1,8 million shares.
• Genovis entered agreement with QED Bioscience, USA, for distribution of protein portfolio products.
Other events during 2009
• Genovis achieved an increase of 150 % in sales and a reduction of operational costs parallel to 50 %.
• Genovis entered non exclusive distribution agreements with:
Finnzymes Inc. for USA
Bulldog Bio Inc. for USA
Biozym Scientific GmbH for Germany and Austria.
• Genovis nanoparticles generated very satisfying results in studies using Magnetic Resonance Tomography, MRT. The nanoparticles have unique properties that are extremely useful in the development of new medicinal products, for example in diagnostics and therapeutics used in the neuro and cancer areas.
• Genovis acquired Eijdo research AB; a CRO company specialized in imaging (Medical Imaging and/or MRT) using a magnetic camera. The purchase price SEK 4.7 million was paid through a non-cash issue of Genovis AB shares amounting to SEK 4.5 million, and a cash consideration of SEK 200,000.
• Genovis completed a new share issue during January that was subscribed at 90.5 %.
Important recent events
• The Board of Directors has decided to move the Annual General Meeting (AGM).
New date for the Annual general Meeting is the 30th of March 2010.
• The Board of Directors proposes that the AGM decides on a new share issue.
The Board proposes that the AGM decides on a new share issue giving preferential rights to existing shareholders, so that one existing share entitles to the subscription of one new share at issues price SEK 1. This decision would mean that the share capital is increased up to a maximum total of SEK 9,835,935.6 through the issuing of a maximum total of 24,589,839 shares at full subscription. After completed new share issue the share capital will amount to a maximum total of SEK 19,671,871.2 and the number of shares will amount to 49,179,678. The company will receive approx. SEK 24.5 million before issue expenses. Shareholders who do not participate in the new share issue will have their Genovis AB shareholding diluted with 50 %.
One objective for 2009 was to sign distribution agreements for the US market, with the aim to transfer the sales operation from our own subsidiary, Genovis Inc., to several distribution channels. During the year three separate agreements were signed, which of the last one in the fourth quarter, for non exclusive sales of Genovis products in the US. I am happy that we have found partners with solid experience and ability to develop sales on the American market. Even though just a few months have passed since we signed the agreements, it is clearly noticeable that this has an immediate impact on sales; 65 % of our sales is generated in the US, which is a higher percentage than before and this proves that we have not lost sales through the transfer from our subsidiary to distribution partners. During 2010 we will intensify our work through the distribution partners to increase the growth rate in the US, and we will adopt a similar work mode in Europe.
Product development and research
During the year the R&D operation has primarily been focusing on medical imaging, i.e. the use of nanoparticles as contrast agents in different medical imaging techniques, e.g. MRT (Magnetic Resonance Tomography). We have collaborated with Eijdo research throughout the year, and during this last quarter the collaborative efforts have been very intense, in the sense that Eijdo committed their resources exclusively to product development and research of mutual corporate interest. This line of work will continue to be intensive during most part of 2010. We are focusing on three projects; imaging of tumor growth, imaging of natural migration of stem cells in the brain, and imaging of lymph nodes. The latter project is performed in collaboration with Lund University. In 2009 we were able to demonstrate, for the first time, that we can design, produce, and evaluate biocompatible and injectable nano structures for use in several applications in the area of preclinical medical imaging. We aim to enlarge research and development collaborations in Sweden and in Europe during 2010.
Two product groups
Genovis has, since a few years back, two product lines as development areas; proteins used as technical tools for development of antibody based pharmaceuticals and diagnostics, and nanoparticles in biomedical applications.
In 2009 we have seen an increasing demand for the products in our protein portfolio, and as a result of our product development efforts we have come up with applications that, to our great satisfaction, attract completely new customer groups. To be able to produce the proteins in bigger quantities it seems more cost-effective to sub-contract the production to a partner that already has an established large scale production of proteins. During the second half of 2009 we decided to maintain and further develop the intellectual property regarding the protein portfolio, and to subcontract production and global sales to one or several actors. The two protein products FabRICATOR® and IgGZERO™ made up some 85 % of our sales in 2009. During 2010 we aim to conclude agreement for external production of the protein products and to fully launch the third portfolio product, FcDOCKER™.
The nanoparticle portfolio has been under continuous development since Genovis was founded, and we have to date built a unique know-how regarding design, production, and evaluation of biocompatible properties that can be used in numerous applications. The very first product we launched was a so called transfection reagent. Transfection means the transfer of a new gene in to a cell or a molecule in order to alter the generic composition of the cell. In 2009 we were able to demonstrate that we can add several properties (or modalities) to one and the same nanoparticle, in addition to its transfection properties. In clinical medical imaging as well as in the laboratory setting such particles are in high demand due to their contrasting properties. The market for contrast agents used for preclinical imaging performed with MRT, gamma camera, PET, fluorescence microscope, optical measurement and ultrasound is expected to grow by 20-30% annually in the next five years. The force stimulating such a growth is the development of new hardware introduced in new equipment, and that software for visual interpretation is in rapid development which in turn creates demand for new contrast agents. In 2010 we will commence marketing of Genovis multimodal nanoparticles, and the know-how related thereto, for use in the preclinical market. We will target those customers who are actively working with medical imaging. There is also among these customers the need to perform transfection, e.g. in connection with stem cell research and when performing cell transplantations. By focusing more on specific customer groups we aim to work more effectively and increase sales of this product group.
In contrast to the production of our protein products, the production methods for our nanoparticles is an important part of the Genovis first-rate competence, and we aim to further develop this concept for contract production ordered by external partners. Our strategy is on the one hand, to continue to develop, launch, and sell nanoparticles as what we call multimodal particles, and on the other hand, to build what we refer to as a nanohouse, which means that we will also offer a platform for the design, production, and verification of nanoparticles for those customers who need the support from the expertise in the area to be able to develop/sell nanostructures of kinds for biomedical applications. This is a cost-effective way to use all our generated know-how and invested capital. The work with multimodal nanoparticles was started in 2009. Our objective is that by the end of 2011 we will have launched both these concepts fully out, and that Genovis shall deliver multimodal nanostructures for use, at the minimum, in one project in clinical diagnostics or as medical-technical tools in clinical use.
In 2008 Genovis refrained from carrying out a new financial round, with the consequence that in the beginning of 2009 we had to complete a new share issue that covered 50% of the bridge financing we had carried during 2008. This meant in turn that the company needed additional capital to complete the acquisition of Eijdo research AB. The overall financial situation at the time impacted on our financing strategy, and we decided in connection with the Eijdo acquisition to complete a share issue to cover only our short term capital need. We did so partly to secure the acquisition, partly to execute the short term plan for integrating Eijdo research into the corporation. To successfully reach the objectives we have set for the operation in the coming two years, we aim to finance the whole plan in order to give the organization the possibility to focus on the set goals.
As I look back at 2009, I can see that it was a financially bumpy and unsecure year, but to Genovis it turned out to be a year during which we thanks to our restructuring work and our consistent and dedicated product development took a great leap forward. To develop a company such as Genovis demands a long term vision and we are grateful to our shareholders for the patience they have shown so far, and we can only hope that there is confidence in our offensive approach over the next two years.