Financial Statement

Financial Statement, 1 January - 31 December 2001 · MIV-606 against shingles: Outlicensing activities are in an intensive phase. · In December, Medivir and Peptimmune announced a research breakthrough in the treatment of RA (rheumatoid arthritis). · In the fourth quarter 2001, Medivir selected a CD (candidate drug) in its HIV polymerase research program. · MIV-310 against multi-resistant HIV-phase IIa trial began in October. · MIV-210 against hepatitis B-phase I trial demonstrated good oral bioavailability. · In August, Medivir signed a preclinical research agreement on hepatitis C with Chiron. · Also in August, Medivir entered a new antibiotics research collaboration with scientists at Bart's and the London School of Medicine, Queen Mary College, the University of London. · ME-609 against oral herpes-definitive phase II trial results demonstrated good efficacy; ME-609 is also the first pharmaceutical to prevent the incidence of cold sores with early treatment. Strategy ahead of forthcoming phase III trials finalized; outlicensing efforts recently initiated. · Profit after financial items was SEK -139.4 m (-85.4 m); net sales grew to SEK 125.9 m (110.4 m). · CCS increased net sales to SEK 126.4 m (77.7 m), with operating profit of SEK 16.4 m (15.0 m). Forthcoming financial information in 2002 · The Annual General Meeting will be held on 9 April 2002 · The First-quarter Interim Report will be published on 26 April 2002 · The Second-quarter Interim Report will be published on 8 July 2002 · The Third-quarter Interim Report will be published on 31 October 2002 Teleconference Medivir will host a teleconference at 15.00 SE time. Jonas Frick, CEO and President; Bertil Samuelsson, Head of Research; Johan Harmenberg, Head of Pharmaceutical Development and Rein Piir, CFO and IR will guide you through the financial statement for 2001 and a Q&A session will be held. For participance please dial +44 (0)20 8781 0562, code medivir. The teleconference will be recorded and saved for 7 days. To reach the recorded version please dial +44 (0)20 8288 4459 and use code 670 812 from 17.00 SE time. For more information, please contact: Jonas Frick, CEO, +46 (0)8 608 3117 Rein Piir, CFO/VP IR, +46 (0)8 608 3123, +46 (0)70 853 7292 [REMOVED GRAPHICS] Medivir's clinical projects in 2001 MIV-606 against shingles Efforts to develop a synthesis methodology for large-scale production, and the optimization of a tablet formulation proceeded favorably. Moreover, an evaluation of tablets versus a suspension in a clinical phase I trial has been performed with positive results. Initiatives to identify a partner for further development of MIV-606 are now in an intensive phase. ME-609 against oral herpes The US patent for ME-609 was approved in the first quarter, with the definitive results of phase II trials reported in spring 2001. ME-609 is the first pharmaceutical to demonstrate prevention of the incidence of cold sores with early treatment. These results are the foundation for Medivir's formulated strategy ahead of phase III trials and registration. Activities ahead of forthcoming outlicensing began in late 2001. MIV-310 against multiresistant HIV A compilation of IND (investigational new drug) documentation comprising summarized clinical data, patient risk/benefit analysis and selection of investigator has been completed. Ethical Committee approval was received for a phase IIa trial to begin, planned to demonstrate antiviral efficacy on patients with multi-resistant HIV at a toxicologically acceptable dosage. This trial, which is a conceptual test, will involve the monitoring of multi-resistant HIV levels during one month's treatment with MIV-310. The treatment is administered as a supplement to ongoing standard treatment. Medivir will be able to use data from previous phase I and II trials regarding substance safety. Phased IIa trials began in October, and continue. The next developmental stage is the evaluation, report of results, and Medivir will embark on efforts to outlicense the project. MIV-210 against HBV (hepatitis B virus) Preclinical efficacy trials demonstrated that at dosages of 6 mg/kg/d (equivalent 1-2 mg/kg/d in humans) and day, MIV-210 elicits a significant reduction in virus levels. In comparative trials on the same model, MIV-210's efficacy was superior to lamivudine, the market's predominant HBV drug, while also reducing HBV amounts significantly. The production methods for the MIV-210 substance have been enhanced, resulting in a better yield and reduced production costs. Phase I trials demonstrated MIV-210's very good oral absorption when administered in capsules, and no side-effects were observed. Preclinical efficacy and toxicology trials are currently underway. The next phase is to compile all data in a prospectus as supporting data for the project's forthcoming outlicensing. MIV-150 against HIV Chiron is undertaking phase I trials with multiple dosages, with parallel in vitro and in vivo metabolism trials indicating low risk of interaction with other drugs. Enhanced formulations with increased bioavailability have been examined with promising results. Medivir's preclinical research in 2001 General summary In 2001, polymerase-related preclinical research progressed from an exclusive focus on viruses to the entire infection sphere, where Medivir's research is oriented on activities including bacterial infections. Protease research has also become significant within non-infectious diseases, and during the year, Medivir has progressed further in the immunological diseases sphere, where autoimmune deficiencies are a highly significant sub-segment. Medivir's preclinical research underwent a positive year, entering several broad-based, exploratory-phase agreements to ensure the supply of future projects. Meanwhile, Medivir has made several major advances in its existing projects, such as the selection of a HIV-CD. Medivir has defined four preclinical research phases, stated in the visual on page 2. In the first exploratory phase, a multiplicity of activities are maintained. This early-phase research is primarily oriented towards infectious and immunological diseases, but also has other focuses, such as the proteases involved in Alzheimer's Disease. Activities in the exploratory phase are pursued autonomously, through partnerships with corporations or collaborations with universities or similar institutions. Medivir has just over ten such activities in the exploratory phase at present. The exploratory operation harbors independent HIV and RSV (respiratory syncytical virus) activities, RSV being responsible for infections in the nose and throat of adults, and which in children, develops into serious bronchial catarrh. Medivir is also pursuing collaborative projects concerning HCV (hepatitis C virus), immunological diseases, bacterial infections and an Alzheimer's collaboration with the Karolinska Institute, Stockholm, Sweden. 80% of preclinical resources are prioritized on Medivir's four preclinical projects: MV026048 HIV polymerase, HIV protease, Cathepsin S against RA and MS (multiple sclerosis) within immunological diseases and Cathepsin K against osteoporosis. This focusing will enable Medivir to select CDs' repeatedly for outlicensing. The highlights of Medivir's preclinical research in 2001 Infectious diseases CD selected within HIV-NNRTIs HIV research remains a major, crucial activity for Medivir, and in autumn 2001, Medivir's preclinical research made a breakthrough with a substance in the NNRTI pharmaceuticals group. The substance MV026048, a very powerful HIV polymerase inhibitor, was selected as a CD (candidate drug). NNRTI pharmaceuticals are becoming increasingly prevalent in combination therapy administered against HIV/AIDS. MV026048 has good efficacy against viruses that have become resistant to other similar substances. The CD is extremely potent, generating an effect in very small amounts, with just 0.5 nanomolar concentration being necessary to inhibit virus multiplication, which is far lower than other substances. MV026048 is easy to administer orally with highly efficient absorption. The project is in a late preclinical developmental phase. HCV collaboration with Chiron Corporation Medivir and Chiron initiated a collaboration within HCV (hepatitis C virus) infections in August. Chiron is screening Medivir's substance library with its battery of HCV tests. The validation of potential active substances and their usage for researching the structure-activity relationship will proceed for one year initially, with Chiron then gaining an option to continue the collaboration, while offering research support. The collaboration includes Chiron gaining an option on exclusive global rights, and if it exercises this option, this may result in Medivir receiving over USD 10 m in licensing and milestone payments for products developed towards NDA (new drug application), with Medivir also receiving royalties on future product sales. Bacterial infection collaboration Since the autumn, Medivir has been in collaboration with scientists at Bart's, and the London School of Medicine, Queen Mary College, the University of London in the development of new antibiotics-an arrangement funded by the UK Department of Trade and Industry (in its Applied Genomics initiative), the UK's Medical Research Council and Medivir. This project is founded on the expertise within Queen Mary Hospital in identifying and validating microorganism proteases as target enzymes for pharmaceuticals. Medivir is using its pharmaceuticals knowledge and technology platforms-such as RAPiD-in the protease sphere to develop new antibiotics. This project is intended to prepare a new methodology to develop protease inhibitors as antibiotics against Mycobacterium tuberculosis, Helicobacter pylori, Pseudomonas aeroginosa and Staphylococcus aureus, which is founded on in-depth knowledge of the genetics of these bacteria, each of which cause extremely substantial numbers of infections and are becoming progressively harder to treat because of growing resistance to current antibiotics. The genome of these four pathogenic bacteria will be examined to identify those genes that code for proteases usable as target enzymes for pharmaceuticals development. Expressions of these genes in relevant disease models will be analyzed, as will the consequences of isolating the genes from the bacteria, offering information on those proteases useable as target enzymes for drugs. Medivir will use these proteases to produce new inhibitors using its unique substance library specifically intended to inhibit various proteases in order to select new CDs. Immunological diseases RA research breakthrough In December, Medivir and Peptimmune-a Genzyme General business area- announced that an orally active low-molecular inhibitor of the protease enzyme cathepsin S suppresses the development of arthritis in a model of this disease. This discovery will enable the development of pharmaceuticals against RA based on an entirely novel mechanism. In a model, various dosages of this inhibitor obstructed the development of arthritis without causing any apparent signs of side-effects. This independent research-undertaken at the William Harvey Research Institute, St Bartholomew's and the Royal London School of Medicine and Dentistry-revealed positive results in this new means of treating RA. The project is in its preclinical optimization phase. Extant pharmaceuticals merely treat the symptoms of RA, rather than influencing the underlying causative autoimmune mechanism. Accordingly, there is an extensive and unsatisfied need for new types of drug to prevent the development of this everyday, chronic and disabling illness. Osteoporosis The skeleton is subject to a continuous turnover. During growth and healing ofa bone fracture, for example, formation of new bone dominates, while during certain diseases and old age degradation of bone dominates. The enzyme cathepsin K is responsible for bone degradation. This means that degradation can be prevented by a compound inhibiting or blocking cathepsin K. This mechanism has been shown in several models. Degradation of bone decreases markedly if the enzyme is blocked, which means that by inhibiting cathepsin K it ought to be possible to restore the balance between formation and degradation of bone and thereby avoid osteoporosis. Medivir's research on cathepsin K is a collaboration with researchers at St Georges Hospital Medical School in London. The project has made great progress in identifying model compounds and is on its way into the optimizing phase. CCS The CCS group comprises the companies CCS AB, CCS (UK) Ltd and Nordic Care Sweden AB (NCS). The CCS group maintained robust turnover growth in the year, with net sales up 63%, and operating profit rising to SEK 16.4 m. CCS' continued positive sales performance is due to the brisk progress of its proprietary products, that NCS body-care products have been included in the CCS group since 1 January 2001 and CCS have extended the contract manufacturing in the skin-care business area. Operating profit during the year was subject to costs for the integration of Nordic Care AB and costs for the forthcoming take-over of AstraZeneca eye-care products, plus the sub-contract manufacture of Nezeril. In addition to the launch of proprietary products, efforts have been centered on an investment program designed to start producing and selling eye-care products acquired from AstraZeneca, and the forthcoming contract manufacture of Nezeril, starting in 2002. Some minor restructuring measures were undertaken within NCS through the year. Medivir's consolidated turnover and costs The group Consolidated net sales for the year amounted to SEK 125,891,000 (110,365,000); operating costs grew to SEK -279,790,000 (-213,771,000), which included SEK -3,366,000 (-2,979,000) of goodwill amortization. The net financial position was SEK 13,477,000 (15,497,000) of which SEK 3,006,000 (960,000) comprised exchange rate gains. Profit after financial items was SEK -139,418,000 (- 85,373000). Medivir The net sales of Medivir's research operation-encompassing Medivir AB and Medivir (UK) Ltd (consolidated from April 2000 onwards)-were SEK 153,000 (33,479,000) for the period. The turnover downturn was due to Medivir receiving remuneration for a preclinical project in 2000. Operating costs were SEK -166,132,000 (-146,619,000) distributed between external costs of SEK -85,051,000 (-89,392,000), personnel costs of - 67,388,000 (-48,866,000) and depreciation of SEK -13,694,000 (- 8,362,000). The primary reason for the increased personnel costs is more researchers being hired in 2000, exerting its effect on annualized figures in 2001. Depreciation increased mainly because of investments in new research equipment, and the completion of Medivir AB's combinatorial chemistry and HTS (high throughput screening) premises in 2000. Operating profit was SEK -165,947,000 (-112,968,000), with the profit downturn mainly as result of lower turnover and increased employee headcount, with the related increase to research costs. Profit after financial items was SEK -152,579,000 (-97,419,000); staffing increased by nine in the year, of which eight are researchers. CCS From January 2001 onwards, the CCS group comprises CCS AB, Nordic Care Sweden AB and CCS (UK) Ltd. CCS' net sales were SEK 126,422,000 (77,692,000). CCS' operating profit (incl. Nordic Care Sweden AB and CCS (UK) Ltd) stood at SEK 16,418,000 (15,035,000); profit after financial items was SEK 16,526,000 (14,984,000). Of CCS AB's product sales, 36.8% (29.9%) comprised contract manufacture, and 14.2% (20.0%) export sales. The sales gains were due to the positive sales performance of CCS' proprietary products. Nordic Care's (formerly Jillprodukter) body-care products have been consolidated in the CCS group's figures since January 2001 and CCS have extended the contract manufacturing during the year. Moreover, the OTC pharmaceutical Karbasal, launched in late 1999, is maintaining brisk sales. Operating profit during the year was subject to costs for the integration of Nordic Care AB and costs for the forthcoming take-over of AstraZeneca eye-care products, plus the sub- contract manufacture of Nezeril. The CCS group's staff headcount grew by over 40, the consequence of factors including the extended contract manufacturing, staff for the forthcoming production of Nezeril and eye-care products and the acquisition of NCS AB. Financial position Consolidated liquid assets including short-term investments amounted to SEK 182,732,000 (342,784,000), with the market value of listed equities, of SEK 15,554,000 (14,777,000), being additional. As of 31 December, there were interest-bearing liabilities of SEK 953,000 (0). Shareholders' equity was SEK 361,179,000 (497,166,000). The consolidated equity ratio was 88.1%, against 90.3% as of 31 December 2000. Investments Gross investments in consolidated tangible fixed assets were SEK 31,342,000 (43,541,000) in the period, with the bulk of these investments relating to the acquisition of research equipment within Medivir, the conversion and extension of production and office accommodation and the acquisition of production equipment for CCS. Accounting principles The group has observed the Swedish Annual Accounts Act when preparing this Financial Statement. Accounting and valuation principles are consistent with RR's (the Swedish Financial Accounting Standards Council) recommendations and statements. Human resources The number of employees in the Medivir group increased to 212 (161) people in 2001, with 99 staff active in Medivir's two research enterprises. The average number of full-time salaried staff in the group was 179 (122) in the year. The share At year-end 2001, there were 8,288,122 outstanding shares: 660,000 class A shares and 7,628,122 class B shares. The number of outstanding options is 313,400, and upon their full exercise, the total number of shares would be 8,601,522. Dividends The Board proposes no dividends for the financial year 2001. Annual General Meeting The AGM will be held at the Wenner-Gren Center, at Sveavägen 166, Stockholm, Sweden, on 9 April 2002 at 5 pm. Nomination Committee Nomination proposals for new Board members are referred to the nomination committee, comprising Lars-Göran Andrén, Lennart Philipson (+46 (0)8 728 7333), Bo Öberg and Björn Lind of SEB Mutual Funds. Outlook Medivir has expanded its research operations during 2000 and 2001. A part of this expansion was the acquisition of Medivir UK during 2000. Medivir now has the critical mass needed for effective preclinical research. Medivir's capability to develop and deliver CDs and create partnerships is crucial for the company's future. Future partnerships will continue the development of Medivir's projects towards their entry to the market, also generating revenues in terms of down payments, milestones and on longer term royalties. Our commercial focus will remain on creating new partnerships of various kinds. Medivir has strengthened the business development team during the latter part of 2001. It is not possible to give guidance on the timing of future partnerships, but they will have a major impact on Medivir's future revenues as well as cash flow. The research costs for 2002 will be in line with 2001 while CCS' sales are expected to develop positively as will its profitability. Profit prognosis As it is difficult to determine the timing of future out-licensing and partnerships Medivir is unable to give any profit prognosis for 2002. Medivir The Board Huddinge, Sweden, 15 February 2002 This Report has not been subject to specific review by Medivir's auditors. ------------------------------------------------------------ This information was brought to you by Waymaker http://www.waymaker.net The following files are available for download: http://www.waymaker.net/bitonline/2002/02/15/20020215BIT00750/bit0001.doc Full Year-End Report http://www.waymaker.net/bitonline/2002/02/15/20020215BIT00750/bit0001.pdf Full Year-End Report