Interim Report January-June 1998

Interim report January - June 1998 -The clinical part of the phase III Krillase® study was completed during July. Processing of the results is in progress. -The Swedish Medical Products Agency is not requiring additional studies of RescueFlow®. Registration is expected during the autumn. -A new study shows that RescueFlow® produces a significantly greater increase in volume of blood than dextran or salt solution alone. -preclinical studies have shown significantly prolonged survival of a transplanted heart treated with hyaluronidase. -BioPhausia reported a loss of MSEK -25.3 for the period, of which MSEK 16.0 was incurred in the first quarter and MSEK 9.3 in the second quarter. Research and development Research and development costs during the period amounted to MSEK 18.3 , 14% higher than in the year-earlier period. The increase was attributable in its entirety to the first quarter, while R&D costs in the second quarter were lower than in the corresponding quarter in 1997. The most important project involves Krillase®, BioPhausia´s product used for the cleansing of chronic wounds. The recruitment and treatment of patients in the Phase III study were completed during July. A total of 179 patients were included. The results of this study are now being processed and are expected to be completed in the beginning of October. Discussions regarding licensing are continuing with a number of companies. The Swedish Medical Products Agency has announced that it will not require additional preclinical or clinical studies for registration of RescueFlow®, which is used for the treatment of trauma. Questions that had been raised pertain to documentation from the contract manufacturer. Answers to these questions were submitted to the Agency on August 26. The earlier estimate - that initial approval of RescueFlow® will be received during the autumn of 1998 - remains valid. A study conducted at Uppsala University Hospital to document the effect of RescueFlow® on blood volume has been completed. The results show a significantly greater increase in blood volume following treatment with RescueFlow®, compared with an infusion of dextran or salt solution alone. This is of critical importance in connection with both trauma and elective surgery. The results of the study are important for the discussions of licensing and joint ventures that are currently under way, and for the choice of strategy to be used when reapplying for registration in the United States. In continuing preclinical studies, the project involving the use of hyaluronidase to treat traumatic swelling of tissue, has shown significantly prolonged survival of a transplanted heart when hyaluronidase is administered prior to standard treatment with cyclosporin - a rejection-inhibiting drug. BioPhausia holds all commercial rights to this method of treatment, for which a patent has been applied. Personnel As of June 30, BioPhausia had 21 (27) employees, of whom 2(3) were in the subsidiary in the United States. Results Group results are attributable entirely to managing the sale of dextran substances and solutions in the United States for Pharmalink Basläkemedel and Cooper Surgical, which acquired the dextran business in 1997. Sales amounted to MSEK 7.1. Sales in the first half of 1997, when BioPhausia still owned the dextran business, amounted to MSEK 44.0. The consolidated operating loss amounted to MSEK 24.9, compared with a loss of MSEK 16.6 in the first half of 1997, and the loss after net financial items was MSEK 25.3, as against a loss of MSEK 17.5 in the year-earlier period. Costs in connection with the issue of new shares in April have not been charged against results for the period, but have been deducted from the addition to shareholder's equity. Financial position and investments The Group's liquid funds at the close of the period amounted to MSEK 49.3 (17.0) The equity assets ratio was 55.2% (56.0%). Group investments in fixed assets during the first half of the year amounted to SEK 660,000 (845,000). Due to BioPhausia´s Group's time-specific responsibility for the sale of dextran substances and products to Cooper Surgical and Pharmalink, accounts receivable, inventories and accounts payable are included in the balance sheet at the end of the period. The next interim report will be released on November 30. Home page on the Internet BioPhausia now has a home page on the Internet. The address is http://www.biophausia.se Summary of Consolidated Income Statement (SEK 000´s) Jan-June 1998 Jan-June 1997 Net sales 7 124 44 047 Cost of goods sold -5 395 -32 186 Gross profit 1 729 11 861 Selling expenses -1 640 -9 833 Administrative expenses -6 133 -5 803 Research and development -18 312 -16 117 costs Exchange rate gains 767 3 661 Exchange rate losses -1 309 -373 Operating loss -24 898 -16 604 Interest income and similar 666 419 revenues Interest expenditure and -1 033 -1 327 similar costs Loss after financial items -25 265 -17 512 Taxes -43 129 Minority share - 13 Net loss for the year -25 308 -17 370 Summary of Consolidated Balance Sheet (SEK 000´s) June 30, 1998 June 30, 1997 Fixed assets 48 228 89 083 Other current assets 4 495 5 408 Inventories 1 160 17 941 Accounts receivable 26 197 25 983 Liquid funds 49 288 16 976 Total assets 129 368 155 391 Equity 71 454 86 947 Minority share - 87 Deferred tax - 4 087 liability Interest-bearing 20 000 35 500 liabilities Operating liability 37 914 28 770 Total equity and 129 368 155 391 liabilities Summary of consolidated operating profit/loss 2q 1998 1q 1998 Full year 1997 2q 1997 1q 1997 Gross profit 1 183 546 20 269 5 976 5 885 Selling expenses -799 -841 -18 406 -4 527 -5 306 Administrative -2 492 -3 641 -9 218 -4 194 -1 609 expenses R&D expenses -7 567 -10 745 -36 242 -8 127 -7 990 Other expenses 327 -869 -24 593 1 800 1 488 Operating loss -9 348 -15 550 -68 190 -9 072 -7 532 Key ratios June 30,June 30,1997 1998 Equity per share, SEK* 8.1 9.9 Net debt, MSEK 29.3 -18.5 Equity ratio, % 55.2 56.1 *1997 figures adjusted for redemption of options in December 1997, and new share issue in April 1998. Uppsala August 31, 1998 Stellan Lind President This interim report has not been subject to examination by the company's auditors.