Interim Report for Saniona AB (PUBL)

Saniona made a flying start in Q1 with three new Collaborations and an increase in revenues of 227%

Financial highlights

Q1 2016 (Q1 2015)

  • Net revenues were KSEK 15,853 (4,848)
  • EBIT was KSEK -1,058 (-5,103)
  • Earnings per share were SEK -0.12 (-0.30)
  • Diluted earnings per share were SEK -0,12 (-0.30)

Business highlights in Q1 2016          

  • Saniona and Upsher-Smith, through its wholly-owned UK subsidiary Proximagen, sign collaboration agreement for the research and development of therapeutics for neurological disorders. Proximagen is granted exclusive worldwide rights to develop, manufacture and commercialize medicines identified through the collaboration. Saniona is entitled to pre-commercial milestone payments of up to US$30 million (about SEK 250 million) and tiered royalties on product sales.
  • Saniona and Medix sign a drug development and commercialization collaboration. Medix is granted exclusive rights to develop and commercialize tesofensine and Tesomet in Mexico and Argentina. Medix will finance the clinical development in the two countries. Medix intends to initiate Phase 3 clinical studies for tesofensine for obesity later this year. Saniona retains all rights to tesofensine and Tesomet in the rest of the world including clinical data developed by Medix. Medix will pay Saniona an upfront payment of US$ 1.25 million (about SEK 10.5 million), regulatory milestone payments, and double-digit royalties on product sales.
  • Saniona is awarded a grant of up to USD 590,700 (approximately SEK 5.1 million) by The Michael J. Fox Foundation for Parkinson's Research to develop drug candidates for the treatment of Parkinson’s disease.
  • Saniona obtains patent in the United States until 2033 for the combination of tesofensine and metoprolol.
  • Saniona appoints Laika Consulting for IR and PR support and issue the first newsletter.
  • Saniona obtains approval by BfArM to initiate Phase 2a clinical study for Tesomet in type 2 diabetes patients.

Significant events after the reporting period

  • Saniona initiates recruitment of patients in the Phase 2a clinical studies for Tesomet in type 2 diabetes. The trial comprises a total of 60 patients. Saniona expects to report the results from the trial within one year.
  • Saniona submits an application for trading on Nasdaq First North Premier as a step in company’s plans to list its shares on Nasdaq Stockholm Small Cap later in 2016.
  • Saniona initiates extended preclinical research studies on backup compound to AN363; AN363 is put on hold
  • Saniona invests in a new company, Initiator Pharma A/S, and spins out three programs, which Saniona does not plan to pursue internally.

Comments from the CEO                                   

"Saniona made a flying start in Q1 2016 where we signed three new collaboration agreements. This had direct impact on revenues, which increased by 227% compared to Q1 2015. After the end of the quarter we have started a Phase 2 study for Tesomet and announced our intention to be listed on Nasdaq First North Premier in May, a step on the road to Nasdaq Stockholm. I see great opportunities for the company in the future,” says Jørgen Drejer, CEO of Saniona.

For more information, please contact

Thomas Feldthus, EVP and CFO, Saniona, Mobile: +45 2210 9957, E-mail: tf@saniona.com

Letter from the CEO

“We have had a fantastic start in 2016 with three new collaboration agreements during the first quarter. All agreements are important to us and enable us to report significantly higher sales compared to first quarter last year.

  • The agreement with Upsher-Smith relates to one of our early stage discovery programs which we have not discussed in public previously. It illustrates that we are able to create significant value for our shareholders by entering into early stage collaborations on assets belonging to our broad pipeline of discovery programs. In the long term, Saniona may receive up to USD 30 million (about SEK 250 million) in milestone payments plus royalties on net sales of products coming of this collaboration.
  • The agreement with Medix is highly interesting and illustrates how Saniona may finance late stage clinical development of specific programs. Furthermore, the collaboration takes the company a significant step forward towards the market and potential royalty income since Medix intends to start Phase 3 trials this year.
  • The agreement with Michael J. Fox Foundation for Parkinson’s Research relates also to one of our early stage discovery programs which we have not discussed in public previously. We are very proud that The Michael J. Fox Foundation for Parkinson’s Research supports the development of our technology and we are pleased to be collaborating with such a prestigious organization. Moreover, the grant illustrates how Saniona may finance early stage programs and still retain the commercial rights.

During the quarter, two other important achievements should be noted. First, we obtained a patent in the United States covering the combination of tesofensine and metoprolol, which are the active ingredients in our internal lead candidate, Tesomet. Second, we obtained approval by the German authorities, BfArM, to initiate Phase 2a clinical study for Tesomet in type 2 diabetes.

We have continued in high pace after the end of the quarter.

First, we started a Phase 2 clinical study for Tesomet. This is in every way an important milestone for the company. Our vision for Tesomet is to develop a new type of treatment for type 2 diabetes which can bring certain groups of patients in complete remission. The market is huge and the clinical need significant. Therefore, Tesomet has the potential to become a blockbuster if developed successfully.

Second, we submitted an application for trading on Nasdaq First North Premier in May as a step in company’s plans to list its shares on Nasdaq Stockholm Small Cap later this year. The aim of the Nasdaq Stockholm listing is to make the company more visible for foreign investors and not least institutional investors, who in most cases do not have a mandate to invest in companies listed at AktieTorget and First North.

Third, we decided to initiate extended non GLP preclinical studies on a backup compound to AN363. We remain highly enthusiastic about the concept of using GABAA α2, α3 subtype specific compounds for chronic pain. However, we are still concerned about using AN363 for chronic pain still not having a clear understanding of the observed toxicological finding in the rat. Rather than continuing an expensive and time consuming investigation of this finding without any guarantee for success, we have concluded that a more constructive path forward is to focus on a backup compound from the broad preclinical program.

Finally, we participated in the formation of a new company, Initiator Pharma A/S, which subsequently acquired three Saniona programs, which we do not intend to pursue internally. Saniona commercializes its research efforts through three different business models including internal development in early phases of drug development, through early stage research collaborations, and through spin-outs. The formation of Initiator Pharma represents a variant of the third model. The intention is that Initiator Pharma applies for listing at AktieTorget in Sweden and that Saniona’s shareholding in Initiator Pharma is distributed to Saniona’s shareholders before the listing. We have applied for Lex ASEA in Sweden with the aim of distributing our shareholding in Initiator Pharma as a specific dividend to our shareholders. By pursuing this opportunity, we hope to create a new interesting company to the benefit of patients and Saniona’s shareholders.

If I should summarize the first quarter in one word it would be “fantastic”. However, we know that superlatives of the past do not help us in the future. We have retained a high pace after the quarter and we intend to continue to do so in the future. We have still a lot to do, the opportunities are significant and the future looks bright.”

Jørgen Drejer

CEO, Saniona AB

About Saniona

Saniona is a research and development company focused on drugs for diseases of the central nervous system, autoimmune diseases, metabolic diseases and treatment of pain. The company has a significant portfolio of potential drug candidates at pre-clinical and clinical stage. The research is focused on ion channels. Saniona has ongoing collaboration agreements with Upsher-Smith Laboratories, Inc., Productos Medix, S.A de S.V and Saniona’s Boston based spinout Ataxion Inc., which is financed by Atlas Venture Inc. and Biogen Inc. Saniona is based in Copenhagen, Denmark, where it has a research center of high international standard.

Vision
Saniona will be a leading biotech company within the field of ion channel-dependent diseases.

Business idea

Saniona will discover and develop better medical treatments in areas with significant unmet medical needs through modulation of ion channels.

Overall objective

Saniona’s overall objective is by itself and together with partners to develop and provide new medicines for severe diseases, more specifically diseases of the central nervous system, auto-immune diseases, metabolic diseases and treatment of pain.

Business model

The company commercializes its research efforts through the following 3 business models:

  • By internal development of selected programs through the early phases of drug development before out-licensing to pharmaceutical companies who will take over the further development of Saniona’s programs and typical pay upfront, milestone and royalty payments on product sales to Saniona;
  • Through early stage research and development collaboration with pharmaceutical companies who will fund the research and development activities and pay upfront, milestones and royalty payments on product sales to Saniona; and
  • Through joint ventures or spin-outs, where Saniona’s financial partner will obtain a share of the upside by financing the development of one of Saniona’s programs.

Project portfolio

Saniona currently has nine active programs of which five are financed through grants, by collaborations with partners, or in joint ventures/spin-outs. Saniona’s pipeline is set in attached pdf-file.

In addition to the active pipeline shown above, Saniona has a range of validated drug discovery assets as well as clinical stage assets (e.g. AN788 and AN761) positioned for partnering or spin-out.

Market

Saniona’s research is focused in the field of ion channels, which is an established concept in pharmaceutical development. Saniona’s ongoing programs address significant market segments:

Product Indication Market estimate
Tesomet Type 2 diabetes > USD 23 billion[1]
Tesofensine Obesity -  USD 250 million in Mexico[2]
NS2359 Cocaine addiction > USD 1.8 billion[3]
AN363 Program (GABAA α2α3) Neuropathic pain > USD 6 billion[4]
AN470 program (GABAA α5) Schizophrenia > USD4.8 billion[5]
AN346 program (IK) Inflammatory bowel disease > USD 5.9 billion[6]
Nic-α6 Parkinson’s disease > USD 2.8 billion[7]

For a significant time to come, Saniona will be dependent on major pharmaceutical companies’ interest in purchasing, developing and commercializing projects from Saniona’s pipeline of preclinical and clinical drug candidates. According to the Board's assessment, there is a well-developed market for licensing, sale, and establishment of research and development collaboration between smaller, research-intensive businesses and large pharmaceutical companies.

Many of the large pharmaceutical companies have in recent years undergone considerable restructuring, which has resulted in fewer research projects and a close-down of research sites. Furthermore, the number of dedicated biotech firms that can provide new innovative products to the pharmaceutical industry has decreased as a result of the global financial crisis. However, there is still a significant need for new and innovative products for the pharmaceutical companies, which often have a limited number of products in their pipelines. Therefore, the market for out-licensing of new, innovative pharmaceutical projects and product programs are considered attractive. Importantly, within the field of ion channels, there are relatively few biotech companies supplying major pharmaceutical companies with research and development projects. Combined, this is creating interesting opportunities for Saniona.

Financial review

2016-01-01 2015-01-01 2015-01-01
2016-03-31 2015-03-31 2015-12-31
3 months 3 months 12 months
Net sales, KSEK 15,853 4,848 13,630
Total operating expenses, KSEK -16,910 -9,951 -41,705
Operating profit/loss, KSEK -1,058 -5,103 -28,075
Cash flow from operating activities 2,307 -878 -27,637
Operating margin, % -7% -105% -206%
Average number of employees, # 17.2 16.9 16.8
2016-03-31 2013-12-31 2015-12-31
Cash and cash equivalent, KSEK 48,876 29,320 47,004
Equity, KSEK 50,380 26,575 52,943
Total equity and liabilities, KSEK 59,812 34,954 57,673
Equity ratio, % 84% 76% 92%

Revenues and result of the operation

Revenue

Saniona generated total revenues of KSEK 15,853 (4,848) for the first quarter of 2016, an increase of 227%. In the first quarter of 2016 revenues comprised upfront payments from Medix and Upsher-Smith as well as services under the agreement with Ataxion and Upsher-Smith. In the first quarter of 2015, revenues comprised primarily services under the agreements with Ataxion and Pfizer.

Operating profit/loss

The company recognized an operating loss of KSEK 1,058 (5,103) for the first quarter of 2016. The reduction in operating loss is primarily due to an increase in revenues of KSEK 11,004. The company recognized operating expenses of KSEK 16,910 (9,995) for the first quarter of 2016, an increase of 70%. External expenses amounted to KSEK 12,250 (5,263) and personnel costs amounted to KSEK 4,067 (3,878). In the first quarter of 2016, external expenses comprised primarily research and development costs in relation to Tesomet followed by AN346 and AN363. In the first quarter of 2015, the external expenses comprised primarily research and development costs in relation to AN363 followed by AN346.

Financial position

The equity ratio was 84 (76) % as of March 31, 2016, and equity was KSEK 50,380 (26,575). Cash and cash equivalents amounted to KSEK 48,876 (29,320) as of March 31, 2015. Total assets as of March 31, 2015, were KSEK 59,812 (34,954). The company expects to have sufficient capital to initiate and finance the planned Phase 2a study for Tesomet in 2016 and 2017.

Cash flow

Operating cash flow for the first quarter of 2016 was an inflow of KSEK 2,307 (outflow of 878). Consolidated cash flow for the first quarter of 2016 was an inflow of KSEK 1,991 (inflow 19,712). The inflow in 2016 is explained by an increase in current liabilities whereas the inflow in 2015 is explained by the right issue in the first quarter last year.

The share, share capital and ownership structure

At March 31, 2016, the number of shares outstanding amounted to 20,841,467 (17,352,750). The company has established a warrant program on July 1, 2015, totaling 64,000 warrants.

At March 31, 2016 the company had 3,705 (1,489) shareholders, excluding holdings in life insurance and foreign custody account holders.

Personnel

As of March 31, the number of employees was 19 (19) of which 10 (10) are women. Of these employees, 4 (4) are part-time employees and 15 (15) are full-time employees, and a total of 17 (17) work in the company’s research and development operations. 11 (11) of Saniona’s employees hold PhDs, 2 (2) hold university degrees and the remaining 6 (6) have laboratory training.

Operational risks and uncertainties

All business operations involve risk. Managed risk-taking is necessary to maintain good profitability. Risk may be due to events in the external environment and may affect a certain industry or market. Risk may also be specific to a certain company.

The main risks and uncertainties which Saniona is exposed to are related to drug development, the company’s collaboration agreements, competition, technology development, patent, regulatory requirements, capital requirements and currencies.

The Group’s programs are sold primarily to pharmaceutical companies and spin-outs funded by pharmaceutical companies and venture capital firms. Historically, the Group has not sustained any losses on trade receivables and other receivables.

Exchange rate risks arise because the Group’s expenses and income in different currencies do not match and because the Group’s assets and liabilities denominated in foreign currency do not balance. The management of these risks is focused on risk mitigation, which is somewhat mitigated by income and cost incurred in USD.

A more detailed description of the Group’s risk exposure and risk management is included in Saniona’s 2015 Annual Report. There are no major changes in the Group’s risk exposure and risk management in 2016.

Audit review

This Interim Report has not been subject to review by the company’s auditors.  

Financial calendar

Interim Report Q2                                 August 23, 2016

Interim Report Q3                           November 15, 2016

Year-End Report                                February 21, 2017

Ballerup, May 10, 2016

Saniona AB

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