Preliminary report on 1998 operations

Preliminary report on 1998 operations Following the results of the Phase III studies of krill enzymes for wound debridement, it is clear that the project has a value that is considerably lower than previously assumed. @ O perating expenses in 1999 are less than SEK 2 M per month. ® Following the Swedish Medical Products Agency's approval of RescueFlow , an agreement was signed with Pharmalink to market the product in the Nordic countries. A patent application for using hyaluronidase to treat traumatic swelling has been approved. @ R esearch and development costs amounted to SEK 34.9 M (36.2). @ A loss of SEK 47.8 M (loss: 65.1) was posted for 1998. Research and development Research and development costs in 1998 amounted to SEK 34.9 M (36.2). The proportion pertaining to clinical research was high. In January, 1999, following the Swedish Medical Products Agency's approval of ® RescueFlow in November, applications for marketing authorisations could be submitted in nine more EU countries. The first registrations are expected to be approved in early summer. ® An agreement regarding the marketing of RescueFlow in the Nordic countries was signed with Pharmalink Basläkemedel. BioPhausia receives a nonrecurring sum of SEK 1.5 M plus 15 % in royalty. Apoteksbolaget AB has set the price for ® RescueFlow in Sweden at SEK 790 per unit. Discussions regarding a license agreement for the rest of the world are under way with another party. ® Negotiations with conceivable partners for licensing of Krillase continue. Preliminary results of the Phase III studies show that the project has a considerably lower value than was previously estimated. The BP-04 project, which aims to facilitate cytostatics penetration in tumours, is developing according to plan. The target of starting clinical studies in the year 2000 is unchanged. In February, 1999, the patent application for the BP-03 project, the use of hyaluronidase to treat traumatic oedema, was approved in Sweden. BioPhausia owns all commercial rights to this treatment method. A research co-operation with Active Biotech, Sweden, BP-05, concerns testing the effect of the hyaluronidase enzyme on tumours. The goal of this project, which may have enormous potential, is to jointly test the hypothesis within one year, in order to determine the value of the project. Personnel In February, 1999, Erika Kjellberg Eriksson assumed duties as acting president of the company. On January 1, 1999, the company had 20 (24) employees, of whom 1 (3) in the U.S. subsidiary. Results In the U.S., until October 1998, BioPhausia conducted sales of dextran substance and dextran solutions, commissioned by Cooper Surgical Inc. and Pharmalink Basläkemedel, which acquired these operations in 1997. In 1998, this resulted in sales of SEK 12,317,000, producing a gross profit of SEK 1,147,000. ® Parent company sales, attributable to the Perfadex product, a low- concentration dextran product for organ preservation prior to transplantation, amounted to SEK 319,000 in 1998. The consolidated operating loss amounted to SEK 47.7 (loss: 68.2), and the loss after net financial items was SEK 47.7 M (loss: 70.3). Operating expenses in 1999 are less than SEK 2 M per month. Financial position and investments The Group's liquid funds at the close of the period amounted to SEK 23.1 M (39.2). The equity/assets ratio was 55.1% (35.0%). The Board is studying future financing possibilities for the research projects. Group investments in fixed assets amounted to SEK 1,172,000 (1,392,000). Accounts payable and accounts receivable Since the BioPhausia Group until further notice is formally responsible for sales of dextran substances, accounts receivable and accounts payable related to these products are included in the accounts. Operations are conducted back- to-back, without effect on earnings. The Annual General Meeting will be held at 2:00 p.m. on April 26, 1999 in the company's offices in Knivsta, Sweden. Public announcement will be inserted in the daily press and the Swedish Official Gazette, after which registration must be made to BioPhausia in accordance with instructions given in the announcement. Summary of Consolidated Income Statement (SEK 000´s) 1998 1997 Net sales 12 636 72 432 Cost of goods sold -11 269 -52 163 Gross profit 1 367 20 269 Selling expenses -2 522 -18 406 Administrative expenses -11 638 -9 218 Research end development expenses -34 913 -36 242 Items affecting comparability - -27 990 Exchange profit 1 427 6 350 Exchange loss -1 455 -2 953 Operating loss -47 734 -68 190 Interest income and similar 1 487 893 revenues Interest expenditure and similar costs -1 443 -3 018 Loss after financial items -47 690 -70 315 Taxes -87 -5 174 Net loss for the year -47 777 -65 141 Summary of Consolidated Balance Sheet (SEK 000´s) 1998-12-31 1997-12-31 Fixed assets 46 216 49 232 Other current 2 042 3 432 assets Inventories 75 939 Accounts 17 472 28 778 receivables Liquid assets 23 095 39 281 Total assets 88 900 121 662 Equity 48 957 42 527 Interest-bearing 20 000 43 500 liability Operating liability 19 943 35 635 Total equity 88 900 121 662 Cash Flow Analysis, Group (SEK 000´s) 1998 1997 Operating activities Loss after financial items -47 690 -70 315 Adjustments for non cash items 3 279 3 103 Taxes -87 5 174 Cash used in operating activities before change in working capital -44 498 -62 038 items Change in working capital items -2 132 10 983 Cash used in operating activities -46 630 -51 055 Investing activities Changes in fixed assets -346 39 732 Financing activities Changes in current liabilities -23 500 6 500 Changes in long-term liabilities - -26 495 Changes in deferred taxes -83 -5 200 Changes in minority share - -98 Share issue 54 242 70 156 Translation difference and other 131 -321 differences Cash provided by financing 30 790 44 542 activities Total cash flow -16 186 33 219 Balance at beginning of year 39 281 6 062 Balance at end of the year 23 095 39 281 Summary of operating profit/loss, Group Q 4 Q 3 Q 2 Q 1Full Q 4 Q 3 Q 2 Q 1 Full 1998 1998 1998 1998year 1997 1997 1997 1997 year 1997 1998 Gross 1 367 -72 -290 1 183 546 20 2 737 5 671 5 5 885 profit/los 269 976 s Selling -2 522 -459 -423 -799 -841 -18 -4 -4 -4 -5 expenses 406 495 078 527 306 Admin. -11 -2 869 -2 636 -2 492 -3 -9 -2 -1 -4 -1 cost 638 641 218 151 264 194 609 R&D cost -34 -8 860 -7 741 -7 567 -10 -36 -11 -8 -8 -7 913 745 242 720 405 127 990 Items affecting - - - - - -27 -27 - - - comparabil 990 990 ity Exchange loss/profi -28 -79 593 327 -869 3 292 -183 1 1 488 t 397 800 Operating -47 -12 -10 -9 348 -15 -68 -43 -8 -9 -7 profit/los 734 339 497 550 190 327 259 072 532 s Key ratios 1998 1997 Equity per share, SEK 5.6 6.5 Earnings per share -5.4 -7.4 Net debt, MSEK 3.1 -4.2 Equity/assets ratio 55.1 35.0 Uppsala February 25, 1999 Erika Kjellberg Eriksson President Based on its contact network and know-how, primarily in connective tissue biology, BioPhausia is developing products for licensing to well-established pharmaceutical companies with strong marketing organisations. The product and project portfolio includes RescueFlow®, a resuscitation solution, Krillase® for the debridement of chronic wounds (clinical phase III), and preclinical projects in the tumour and trauma treatment areas. ------------------------------------------------------------ Please visit http://www.bit.se for further information The following files are available for download: http://www.bit.se/bitonline/1999/03/08/19990308BIT00390/bit0001.doc http://www.bit.se/bitonline/1999/03/08/19990308BIT00390/bit0002.pdf