Interim report for Saniona AB (publ) January - June 2015 (new corrected version was published Sept 1th 2015)

SANIONA ON ROUTE TO BECOME CLINICAL STAGE COMPANY AND TO BE LISTED ON NASDAQ STOCKHOLM SMALL CAP

Financial highlights
H1 2015 (H1 2014)

  • Net revenues were KSEK 9,848 (12,751)
  • EBIT was KSEK -21,738 (-12,445)
  • Earnings per share were SEK -0.59 (-0.03)

Q2 2015 (Q2 2014)

  • Net revenues were KSEK 5,000 (5,886)
  • EBIT was KSEK -6,787 (-818)
  • Earnings per share were SEK -0.32 (-0.05)

Business highlights in Q2 2015

  • Saniona announces its intention to list the company on Nasdaq Stockholm Small Cap in 2016 and appoints CFO Thomas Feldthus as executive vice president to head up the process.
  • Results reported from preclinical development and disclosure of Phase 1 plans for AN363.
  • University of Pennsylvania’s Treatment Research Center (TRC) is granted rights to perform a Phase 2 trial with Saniona’s compound NS2359 for treatment of cocaine addiction.

Significant events after the reporting period

  • IFRS implemented from the Q2 interim report 2015 in preparation for the planned listing on Nasdaq Stockholm Small Cap in 2016.
  • New data will be published in two programs at the Society for Neurosciences 2015 Conference in Chicago in October. Saniona will present new pre-clinical efficacy data for AN363, supporting the use of AN363 for treatment of neuropathic pain. In addition, scientific data in relation to the AN346 program will be presented.
  • FDA has accepted the University of Pennsylvania Treatment Research Center’s (TRC) IND for NS2359. Saniona has full ownership of the compound NS2359. TRC is currently applying for public funding with the aim of conducting a Phase 2 clinical trial for NS2359 for treatment of cocaine addiction.
  • Professor Carl Johan Sundberg proposed as new member of the Board of Directors. Extraordinary general meeting to be held on September 4, 2015.

Comments from the CEO

”The transition of Saniona towards a clinical stage company has advanced significantly in this quarter demonstrated by the progress of the preclinical development and announcement of clinical plans for AN363 in neuropathic pain as well as the new agreement with TRC regarding the planned clinical development of NS2359 in cocaine addiction. We are on route to be listed on Nasdaq Stockholm Small Cap during 2016”, 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

“Saniona is now well on the way to transforming radically. From a preclinical company listed on AktieTorget to a clinical stage company listed on Nasdaq Stockholm Small Cap. During the first half of 2015, we have accelerated our activities and reached critical milestones in order to achieve these goals.

To continue the pace of Saniona’s exciting development the Board of Directors has decided to make a rights issue of SEK 60.7 million. The rights issue is guaranteed up to 80 %. It represents a big step forward for the company and a clear proof that we are on the right way.

This acceleration also means that we now are pursuing opportunities that may take the company into Phase 2 clinical trials in the foreseeable future. Not only with regards to one of our projects, but two.

In August, the FDA approved an IND for initiation of Phase 2 clinical trials for NS2359 in cocaine addiction. There is no proven therapy today for cocaine addiction, which is a serious public health problem that results in high costs for society and destroys the life of hundreds of thousands of people in the US alone. Saniona has provided world-leading researchers at University of Pennsylvania’s Treatment Research Center (TRC) right to conduct a Phase 2 trial for NS2359. The researchers at TRC are now seeking public grants to support the trial. The IND represents an important and significant milestone, which may have a positive impact on TRC’s funding efforts. We retain all commercial rights to NS2359.

Our activities on repositioning our other Phase 2-candidate, Tesofensine, have also accelerated during the period. We are now planning to position it for type 2 diabetes. The market for type 2 diabetes is estimated to grow from USD 23 billion in 2014 to USD 43 billion in 2023 due to the increasing problems with obesity. Type 2 diabetes is a progressive chronic disease in most patients today. However, recent published research concludes that type 2 diabetes is reversible and that large patient populations may undergo long term remission if they reach a substantial weight loss. We believe that Tesofensine represents an interesting new therapy for type 2 diabetes, which not only may be used in parallel to existing therapies but also may offer potential long term remission in many patients by contributing to a substantial weight loss. We are currently working with an advisory board comprising world-leading researchers and regulatory specialists in order to develop a solid clinical plan for the development of Tesofensine.

With regards to AN363, we are aiming at initiating Phase 1 clinical trial for treatment of neuropathic pain by the end of 2015. We hope that AN363 may provide relief to patients suffering from this devastating pain condition which often is chronic, irreversible and notoriously difficult to manage. The potential market is in excess of 6 billion USD and there is a huge medical need in terms of efficacy and reduced side effects. We now have efficacy data from four different animal models, which supports the use of AN363 for treatment of neuropathic pain. Furthermore, we have completed the dosing of AN363 in two animal species as part of the preclinical toxicology program. The toxicology and safety data generated so far support progression into human trials. We are currently awaiting the final toxicological analysis and the final reports. We expect to file a CTA to EMA in the fourth quarter, which is required for administration of AN363 in humans.

We are working on a number of fronts in line with our strategy – high ambitions with low operating costs. This means that we constantly are looking for partnerships with global or international pharmaceutical companies. It can be in the form of a collaboration and licensing agreement such as our collaboration with Pfizer, one of the largest pharmaceutical companies in the world. It can also be in the form of spin-outs such as the company Ataxion, which is financed by Biogen Inc. and Atlas Venture, where we hold a 14% ownership.

The third leg of our strategy is to develop candidates internally. AN363 is an example of this. It is not our intention to develop these programs internally until they reach market approval. Our strategy is to build further value into these programs and out-license them to pharmaceutical companies when they have reached a stage where a high value may be realized. The timing will be dependent on the individual program. However, it will typical be before or on completion of Phase 2a proof of concept in humans.

We have very high ambitions with Saniona and I am very proud of the progress we have made. The results speak for themselves. We are on the verge of becoming a clinical stage company, on the way for a listing on Nasdaq Stockholm Small Cap and, hopefully, also on the way for helping people who suffer from diseases where there is no good treatment options or help today.”

Jørgen Drejer

CEO, Saniona AB

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 drug candidates at pre-clinical and clinical stage. The research is focused on ion channels. Saniona has ongoing collaboration agreements with major pharmaceutical companies including Pfizer Inc. and Saniona’s Boston based spinout Ataxion Inc., which is financed by Atlas Venture Inc. and Biogen Idec Inc. Saniona is based in Copenhagen, Denmark, where it has a research center of high international standard and 18 employees.

Vision and objective

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

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

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 five active research programs. The company is developing three internal research programs. The lead candidate, AN363 for neuropathic pain, is expected to initiate Phase 1 studies at the end of 2015. Furthermore, Saniona has two active research programs in collaboration with Pfizer Inc. and Saniona’s spin-out Ataxion Inc. Ataxion is financed by Atlas Venture Inc. and Biogen Inc. The clinical stage programs include Tesofensine, which has demonstrated strong weight reducing effects in Phase 2 clinical studies in obese patients, and NS2359, which is a promising drug candidate for the treatment of cocaine dependence. The company is currently allocating limited resources to prepare a Phase 2a trial for Tesofensine in type 2 diabetes and a potential Phase 2a trial for NS2359 in cocaine addiction in collaboration with the University of Pennsylvania’s Treatment Research Center (TRC). The company’s project portfolio is set-out below.

Market

According to a recent global strategic business report, the global market for ion channel-modulators is expected to exceed $21 billion in 2018[1].

For a significant time to come, Saniona will be dependent on major pharmaceutical companies’ interest in purchasing, developing and commercialising 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.

 [1] http://www.prweb.com/releases/ion_channel_modulators/electrophysiology/prweb10579822.htm. Further details may be found in the annual report for 2014 page 6.

Financial review

2015-04-01 2014-04-01 2015-01-01 2014-01-01 2014-01-01
2015-06-30 2014-06-30 2015-06-30 2014-06-30 2014-12-31
3 months 3 months 6 months 6 months 12 months
Net Sales, KSEK 5,000 5,886 9,848 12,751 21,718
Total operating expenses, KSEK -11,787 -6,704 -21,738 -12,445 -29,977
Operating profit/loss, KSEK -6,787 -818 -11,891 306 -8,258
Cash flow from operating activities -4,546 -3,595 -5,425 328 -8,478
Operating margin, % -136 -14 -121 2 -38
Average number of employees, # 16.7 13.7 14.8
2015-06-30 2014-06-30 2014-12-31
Cash and cash equivalent, KSEK 22,973 18,867 9,689
Equity, KSEK 21,141 15,080 8,780
Total equity and liabilities, KSEK 33,806 25,546 15,461
Equity ratio, % 63 59 57

Revenues and result of the operation

Revenue

Saniona generated total revenues of SEK 9,848,000 (12,751,000) for the first 6 months of 2015, a decrease of 23%. In 2015 revenues comprised primarily services under the agreement with Pfizer and Ataxion. In 2014 revenues comprised an upfront payment from Pfizer plus fees for services under the agreement with Pfizer and Ataxion.

Operating profit/loss

The company recognised an operating loss of SEK 11,891,000 for the first 6 months of 2015 (operating profit of 306,000 in 2014). The development is primarily due to the increase in external expenses, which amounted to SEK 12,368,000 (5,878,000), and in personnel costs, which amounted to SEK 7,593,000 (5,255,000). The increase in external expenses relates primarily to the preclinical development of the company’s internal lead program, AN363. The loss for the first 6 months of 2015 was SEK 10,198,000 (profit of 391,000). The company recognised a tax credit of SEK 2,683,000 (0) in the first 6 months of 2015. The company did not recognise any tax credit in 2014 since the company reported a net profit for the first 6 months of 2014.

Financial position

The equity/assets ratio was 63 (59) % as of June 30, 2015, and equity was SEK 21,141,000 (15,080,000). Cash and cash equivalents amounted to SEK 22,973,000 (18,867,000) as of 30 June 2015, an increase of SEK 13,283,000 from the beginning of the year. Total assets as of June 30, 2015, were SEK 33,806,000 (25,546,000).

Cash flow

Operating cash flow for the first 6 months of 2015 was an outflow of SEK 5,425,000,000 (inflow of 328,000). Consolidated cash flow for the first 6 months of 2015 was an inflow of SEK 13,237,000 (inflow 17,916,000). The positive inflow in 2014 is explained by the initial public offering in the second quarter last year and the positive inflow in 2015 by the right issue in the first quarter this year.

The share, share capital and ownership structure

At June 30, 2015, the number of shares outstanding amounted to 17,352,750 (13,882,200). In February 2015, Saniona raised about SEK 24.3 million before finance cost through a right issue comprising 3,470,550 shares at SEK 7 per share. The company has after the balance sheet date established a warrant program on July 1, 2015, totalling 64,000 warrants.

At June 30, 2015 the company had 2,073 (497) shareholders, excluding holdings in endowment insurance and foreign custody account holders. The following shareholders own more than 5% of the number of shares in Saniona AB:

Name Number of shares Share of capital and votes
2015-06-30 2014-06-30 2015-06-30 2014-06-30
Jørgen Drejer 2,329,571 2,301,000 13.4% 16.6%
Thomas Feldthus 1,822,857 1,801,000 10.5% 13.0%
Försäkringsaktiebolaget, Avanza Pension 1,516,501 457,535 8.7% 3.3%
Other 11,683,821 9,322,665 67.3% 67.2%
Total 17,352,750 13,882,200 100.0% 100.0%

Personnel

As of June, the number of employees was 18 (16) of which 9 (7) are women. Of these employees, 3 (4) are part-time employees and 15 (12) are full-time employees, and a total of 14 (14) 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 5 (3) 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, competition, technology development, patent, regulatory requirements, capital requirements and currencies.

A more detailed description of the Group’s risk exposure and risk management is included in Saniona’s 2014 Annual Report and in the prospectus published in January 2015. There are no major changes in the Group’s risk exposure and risk management in 2015.

Audit review

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

Financial calendar

Interim Report Q3                          November 20, 2015

Year-End Report                               February 19, 2016

Ballerup, August 31, 2015

Saniona AB

Claus Bræstrup – Chairman Jørgen Drejer – CEO and board member
Anker Lundemose – Board member Leif Andersson – Board member



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