Inhalation Sciences Sweden AB (publ) releases Interim Report Q2, January 1- June 30, 2020

(Stockholm, Sweden, August 26, 2020) During the second quarter 2020, Inhalation Sciences AB sold all its remaining shares in Ziccum AB for a total value of approximately SEK 21.2 million after selling expenses; it signed a global distribution agreement with TSE Systems GMBH, with an agreement to purchase at least three PreciseInhale® instruments, with associated modules, at an agreed minimum order value of SEK 3 million; it received a new contract research (Inhalation Research Services) assignment worth approx. SEK 0.8 million which will be performed using ISAB's leading in vitro dissolution method DissolvIt®, and it had one of its key patents approved without restrictions in Europe. The patent protects ISAB’s method of being able to control and direct single aerosol exposures to more limited regions of the lungs with high selectivity, so-called "regional targeting" or regional dosing, which is of great importance and relevance to the pharmaceutical industry researching lung diseases.

ISAB also strengthened its Board during the period, increasing its international research and commercial expertise through the appointment of Daniel Spasic and Mårten Winge. Due to prevailing COVID-19 circumstances, ISAB has initiated short-term work for employees and consultants with a 40% reduction in working hours. This should not affect the company's operations and commitments and is seen as a temporary solution until the situation stabilizes.

Apr-Jun 2020

• Net sales 2,442 KSEK (2,695)
• Operating profit SEK -3,823 KSEK (-817)
• Earnings per share before dilution SEK 1.92 (0.44)
• Earnings per share after dilution SEK 1.90 (0.44)

Jan-Jun 2020

• Net sales 8,196 KSEK (3,395)
• Operating profit -2,608 KSEK (-3,159)
• Earnings per share before dilution SEK 1.99 (0.15)
• Earnings per share after dilution SEK 1.98 (0.15)

Significant events during the second quarter (Apr - Jun)

• On April 23, the company announced that all shares in Ziccum AB had been sold at a total value of approximately SEK 21.2 million after selling expenses. The sale entails an accounting profit amounting to approx. SEK 19.5 million. The loan financing during 2019 amounting to SEK 12.5 million was repaid in its entirety on April 28, 2020, which was financed through the sale of all shares in the associated company Ziccum AB
• On April 29, the company announced that a global distribution agreement has been signed with TSE Systems GMBH. TSE Systems is a leading manufacturer of research instruments for laboratories. TSE Systems will immediately include ISAB's PreciseInhale® platform in its broad portfolio of high-quality inhalation laboratory equipment and, with the support of TSE's global sales, marketing and distribution channels, initiate active marketing and sales of PreciseInhale® with associated modules. The global distribution agreement runs to the end of 2022, with the possibility of an extension. As part of the distribution agreement, it has been agreed that TSE Systems will purchase at least 3 PreciseInhale® instruments, with associated modules, at an estimated order value of at least SEK 3 million. One PreciseInhale® system will be delivered in 2020 and two PreciseInhale® systems will be delivered in 2021. ISAB will work closely with TSE's sales organization during the start-up to ensure adequate training and support of TSE's sales force
• On May 4, the company announced that it had signed a Contract Research assignment (IRS) worth approximately SEK 0.3 million with a global pharmaceutical company. The assignment includes testing in ISAB's in vitro dissolution model DissolvIt®, a leading methodology within inhalation research. The total value of the order is approximately SEK 0.5 million, of which approximately SEK 0.3 million is for services provided by ISAB’s research organization
• On June 22, 2020, the company announced that it had signed another new contract research assignment (IRS) valued at approximately SEK 0.8 million. This assignment, commissioned by a returning global pharmaceutical customer, will also be carried out using ISAB's leading in vitro dissolution method DissolvIt®
• On June 30, the company announced that one of its key patents has been approved without restrictions in Europe. The patent primarily protects the technique of being able to control and direct aerosol exposures to a more limited region of the lungs with high selectivity - so-called “regional targeting” or regional dosing.

Regional targeting provides completely new opportunities for mapping how either drug substances or air pollutants affect specific parts of the lungs. This is very relevant for all pharmaceutical research companies and academic institutions conducting lung research. It is expected to increase interest in ISAB's products and services. The patent, with reference number EP2173419 has previously been approved in the USA and China, but now also applies to the important European market

• The company announced on May 12 that it has strengthened the board with the election of Daniel Spasic and Mårten Winge. Both add important expertise for the company in pharmaceutical research, marketing and sales, strategic product positioning and transaction experience
• Due to prevailing COVID-19 circumstances ISAB has initiated short-term work for employees and consultants with a 40% reduction in working hours. This should not affect the company's operations and customer deliveries, but is seen as a short-term solution until the situation stabilizes

Significant events during the reporting period (Jan-Jun) 2020

• On 24 January 2020, the company announced that a returning global pharmaceutical customer who had previously contracted ISAB for advanced research services had also chosen to purchase ISAB's lab instrument PreciseInhale®, as well as signing a contract research assignment (IRS) worth SEK 750 thousand.
• On March 12, 2020, the company announced that it had received a new PreciseInhale® order from the Institute of Environmental Medicine (IMM) at Karolinska Institutet, one of the world's leading innovative lung research organizations, and now a returning ISAB customer. IMM has signed an order for approximately SEK 0.5 million for an eight-month lease of a PreciseInhale® system, with a call option at the end of the period. Delivery was planned for spring 2020
• On March 16, 2020, ISAB delivered its first fully commercialized DissolvIt in vitro module with a value of approximately SEK 0.7 million
• During March 2020, a PreciseInhale® system was delivered with an order value of SEK 3 million.

Significant events after the reporting period

No significant events have occurred after the reporting period

Company events

At the Annual General Meeting on May 12, 2020, Board members Per Gerde, Sonja Gerde and Klaus Gottwald were re-elected, and Mårten Winge and Daniel Spasic were newly elected. Daniel Spasic was elected new Chairman of the Board. Members Fredrik Sjövall and Tom Sundelin declined re-election.

Selected financial data in summary

Multi-year overview

Multi-year overview
 

CHAIRMAN’S STATEMENT

 have had a very positive first impression after my short time as Inhalation Sciences’ new Chairman. During that time ISAB has succeeded in moving ahead and demonstrating success in a number of areas. The company has benefitted significantly from having successfully recruited and developed employees with a high level of scientific and technological skills as well as a strong focus on delivering value to customers. We also now have an active plan to expand our resources in Sales and Marketing. PreciseInhale® and its modules are completely unique in lung research, there really are no other alternatives that can compete with our systems and services. It is of great importance now that we communicate these benefits even more clearly to our customers in the pharmaceutical sector, to our academic partners and to our distributor.

The company has also shown in 2020 that it can increase sales relatively quickly, and that the tipping point for stable profitability is close. This is positive and shows how competitive our technology is. Our focus and priority will now be on accelerating this trend and constantly working on improvements and optimizations to ensure long-term growth and profitability. The company's two business areas, product sales and research services, can both independently drive growth and profitability, which is why the combination of these two becomes so powerful.

In addition, the two business areas strengthen and complement each other in terms of sales - with one business area able to compensate for another if events do not develop according to plan, plus strong opportunities to cross-sell products and services between the business areas.

Finally, I would like to thank the company's CEO, Manoush Masarrat, for a great introduction to the company. I look forward to continuing working with him and the Board on building a specialized, high-quality company within lung research.

Daniel Spasic

CEO’S STATEMENT

During the second quarter of 2020 we have maintained a strong, constant organization - despite prevailing Covid-19 circumstances. In mid-April, we introduced reduced working hours for both regular staff and consultants. Despite this, we have been able to run the business according to plan, largely thanks to the strong commitment of all. We are now ready to shift up again and we expect a return to full-time work as soon as the market situation normalizes somewhat. We also plan for new recruitments during the year with increased resources in our Marketing and Sales organization.

Sales of just over SEK 8 million make this the best first 6 months in ISAB's history, and all this despite the fact that we did not have the opportunity to travel and meet customers! First and foremost, our success during the period has been as a result of our intensive work on Contract Research (IRS) assignments, for both new and returning customers.

During this period, when almost all clinical validation has stalled due to Covid-19 (including our planned study to validate PreciseInhale® for clinical use), we have taken the opportunity to update our documentation to harmonize with the latest regulatory requirements for clinical trials. That work will be ongoing for the rest of the year.

We also see that our current market in pre-clinics has a significant underutilized sales potential that can be addressed in the form of new customers accessing the introduction of our new modules and global expansion through partnerships. Additionally, we have interesting discussions underway with potential partners regarding Covid-19.

With that said, we are very much looking forward to continuing 2020 and, even if we are unable to influence the larger circumstances in our world, continuing to build value around our unique PreciseInhale® platform.

Huddinge, 26 August 2020

Manoush Masarrat

CEO

To read full report (in Swedish) go HERE.

For more information about Inhalation Sciences, please contact:

Manoush Masarrat, CEO

E-mail: Manoush.masarrat@inhalation.se

Mobile: +46 (0)73 628 9153

About Inhalation Sciences Sweden AB (publ)

Inhalation Sciences Sweden AB (publ) develops and commercializes world-leading instruments for research into inhalation. The company’s patented lab instrument, PreciseInhale®, enables researchers to characterize, with high precision, how aerosols and small particles impact our lungs, and so our health, when we inhale them.

The information above was provided by Inhalation Sciences Sweden AB (publ) through the above contact person, for publication on August 26, 08.00 (CET), 2020.

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