Annual Report • Mar 16, 2009
Annual Report
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| The Last Piece of the Puzzle | 3 |
|---|---|
| Highlights | 5 |
| Routine diagnostics market | 6 |
| The Selection Strategy and Current Situation | 10 |
| Activities | |
| Sales and marketing activities | 12 |
| Product pipeline and development activities | 16 |
| Intellectual property rights | 20 |
| Process development, manufacturing and QA/RA | 24 |
| Intellectual Resources | 25 |
| Social responsibility | 27 |
| Shareholder Information | 28 |
| Corporate Governance | 31 |
| Future Prospects | 34 |
| Financial Statements | 36 |
| Financial Highlights Risks | 38 |
| Risks . |
39 |
| Capital Resources | 40 |
| Statement by the Management and Board of Directors | 41 |
|---|---|
| Report of the Independent Auditor | 42 |
| The BioPorto group | |
|---|---|
| -------------------- | -- |
| Income Statement | 43 |
|---|---|
| Balance Sheet | 44 |
| Statement of Changes in Equity | 46 |
| Cash Flow Statement | 47 |
| Note Index | 48 |
| Income Statement | 74 |
|---|---|
| Balance Sheet | 75 |
| Statement of Changes in Equity | 77 |
| Note Index | 78 |
| Glossary | 89 |
|---|---|
| Corporate Information | 90 |
2008 was a year characterized by global economic slowdown which will also affect individuals, companies and the world economy from now on. In spite of the crisis, BioPorto left 2008 with revenue growth of 18% and a substantially improved production economy. This growth is primarily related to the portfolio of products within the areas of NGAL (immunoassays for measuring acute renal injury) and GLP1 (antibodies for diabetic and obesity research), which rose by 44% and 45% respectively. NGAL was the largest product area in 2008 in every respect.
Large diagnostics companies like Abbott and Biosite have decided to implement and launch NGAL immunoassays for their existing analyzing devices set up at hospitals all over the world. According to the most recent announcements, the launch is expected to take place in Europe in 2009. At the same time, BioPorto had its NGAL patent application accepted in 2008 for the issuance of the patent in Europe and obtained a patent for the immunoassay in New Zealand, Singapore and South Africa. Patents are pending for several other countries. These very favorable developments in BioPorto's patent-rights situation have meant that diagnostics companies wishing to launch an NGAL immunoassay for measuring acute renal injury are seeking licensing access to BioPorto's patents. Comparing these favorable developments with NGAL's market potential, which, in the event of complete market penetration, is estimated to comprise 150–200 million tests a year, the group's top priorities are obviously aimed at NGAL:
As a result of this, the patent rights for measuring NGAL are a substantial asset for BioPorto and appreciable resources were spent in 2008 on achieving the best conditions for future licensing agreements. Various options have been considered and many ideas have been tested, but efforts to resolve the negotiation process have yet to succeed. In the light of the most recent launch announcements in 2009, BioPorto expects to obtain negotiation results before this that conform to NGAL's future earning potential. We are continuing the negotiations in 2009 and the outcome will be of great importance to BioPorto's future.
The diagnostics market has also started to look at the prospects of using BioPorto's in-house developed NGAL ELISA immunoassay. It is anticipated that it will be possible to sell the ELISA immunoassay in areas where expensive analyzing devices are unavailable, e.g. China and India. At the same time, BioPorto is focusing on the possibilities of transferring the NGAL immunoassay to other immunoassay formats. The group supplemented the portfolio in 2008 by developing NGAL products for use in preclinical animal testing in the pharmaceutical industry. These products are expected to generate rising sales and, at the same time, their use will contribute to furthering the acceptance of the NGAL immunoassay itself for human use.
BioPorto has developed and markets other diagnostic immunoassays: an MBL ELISA for diagnosing immune system deficiencies; a Gc-globulin ELISA for assessing hepatic injury and multiple traumas; and, recently, an APC-PCI ELISA is under development for selecting patients for sepsis (blood poisoning) treatment.
One of the group's successful product areas outside the NGAL field comprises antibodies against the peptide hormone GLP-1 and the related peptide exendin-4, which is used in diabetes and obesity research. BioPorto is still experiencing growing sales in this area, which is related to the general rise in cases of obesity and diabetes around the world. As a result, development and sales in this area have been given a high priority in the group.
In recent decades, making an exact diagnosis, which thus results in more precise treatment, has become a crucial decision-making factor for doctors around the world. This is naturally related to the improved options that have arisen over the years for being able to make the diagnosis. To patients, improved diagnostic methods mean that their treatment will be more specific, safe and successful. For the healthcare system, improved diagnosis leads to reduced costs by reducing the waste of resources that arises whenever ineffective and costly treatment processes are chosen and by reducing the number of hospitalization days.
As a result, the diagnostics market has intensified its requirements for a greater number of highly specialized diagnostic immunoassays, and accordingly, suppliers of this market are not expected to be appreciably affected by the present financial crisis. There is a risk, however, that the research market will be affected to some extent by cost-cutting measures in the years ahead, but as BioPorto is gradually and increasingly moving away from the research-based market to the diagnostics market, the group will be less vulnerable to market trends.
It is crucial for BioPorto's continued growth that a corporate structure and underlying business goals for progress have been established – in addition to having the proper selection of development programs and areas of focus. The consolidation of the group in recent years – including changing the make-up of the board by adding targeted commercial and professional expertise, enlarging the sales organization, optimizing the distribution network and achieving significant intellectual property rights, together with the original business activities – has laid the groundwork for our continued growth.
Looking to the future, an increasing number of BioPorto's immunoassays, including NGAL, will be established on the diagnostics market. This market is attractive not only because of its size and growth, but especially because it is characterized by recurring sales once the acceptance of a new diagnostic immunoassay has been achieved. Over a number of years, the group's activities in this market are expected to generate positive results, independently of income generated by licensing the group's NGAL patents. In addition to the organic growth generated by the sale of own products, it is also crucial to establish optimized licensing agreements concerning access to the group's patent rights for NGAL, APC-PCI, etc. In future, our activities can be expanded by purchasing technologies or through acquisitions, provided that such expansions are favorable for our growth and earnings.
In connection with the conclusion of 2008, I would also like to take this opportunity to express my deep satisfaction with the efforts made by our entire organization. Everyone has focused on the goals we have set and assumed personal responsibility for achieving them. Continuing to be inventive, enthusiastic and productive in 2009 and beyond, BioPorto is able to achieve the group's objectives.
The time is now ripe to put the last piece in the puzzle to achieve our first licensing agreement. Every piece has been turned over and over again, and in the future, some will be turned over yet again to determine the best options for achieving down-payments, milestone payments, royalties and the decisive step of getting NGAL established as a recognized renal marker for getting the largest share possible of the diagnostics market. Our shareholders' attention is directed to the progress of these negotiations, which we now expect to bear fruit with fine results in 2009.
Thea Olesen, Managing Director
This annual report contains statements regarding forecasts for future developments, including in particular future revenues and net financial results. Such statements are uncertain and risky as many factors, some of which are out of BioPorto's control, may cause actual trends to deviate from the forecasts contained in the report.
Please also note that this is a translated version. In case of discrepancy, the original Annual Report in Danish should be referred to for the correct wording and/or figures.
The market for in vitro diagnostics (IVD) represents more than USD 30 billion. The market is not directly affected by the world-wide financial crisis as the financial crisis does not have a direct impact on the costs incurred by the healthcare sector. For this reason, the positive growth is expected to continue in the years ahead, which makes the market very attractive.
One of the factors that contribute to growth is the enlargement taking place by establishing new markers for diagnostics, including for instance BioPorto's NGAL immunoassay. Another important factor for continued growth is an increasing wish for customized medical treatment for each patient, which makes huge demands for more comprehensive and accurate diagnostics.
Like most IVD market segments, the immunodiagnostic market – the subsidiary market in which BioPorto participates – is dominated by sales in US and European markets. The US market represents 41% of the total immunodiagnostic market, while 39% is dispersed over the European countries. Some markets entail a number of regulatory challenges, including the US's requirement of FDA approval and Japan's comprehensive registration process. So far, BioPorto has obtained IVD registration in Europe, Canada and India and is continuously seeking IVD registration in other regions (see the section on QA & RA).
expected in 2009–2010. The patient base for NGAL utilization encompasses all critically ill patients, including post-operative patients after major surgery, including heart operations. Roughly 10% of all hospitalized patients risk suffering renal failure, and 5% of them will experience acute renal failure during hospitalization. The total number of NGAL immunoassays is estimated to be 150–200 million a year.
It is expected that a large share of the NGAL immunoassay market will be covered by major diagnostics companies with access to BioPorto's patent rights to the diagnostic method. Yet BioPorto also expects to be capable of gaining a share of the immunoassay market itself, including by means of the NGAL Rapid ELISA Kit in regions where diagnostic analyzing devices are less common, such as in China and India.
In 2009, BioPorto expects to launch an ELISA kit for measuring APC-PCI. BioPorto's APC-PCI ELISA Kit makes it possible to measure APC-PCI complexes in patients with sepsis (blood poisoning), and it is expected that it will be possible to use this immunoassay to select the sepsis patients who will respond to Xigris treatment. The active component of Xigris (Eli Lilly) is activated protein C, which has a coagulant and anti-inflammatory
Market data source: Clinica Reports "Complete Guide to the Diagnostics Market 2007-2012", by Michael Simonsen, Ph.D.
BioPorto has great expectations for the IVD market, especially for the Human NGAL immunoassay, but also for the new APC-PCI immunoassay, which is expected to be launched in Q1 2009.
Recognition of the renal marker NGAL is rising year by year, and an outright diagnostic breakthrough is effect. Previously it has not been possible to properly identify which sepsis patients would actually respond to the treatment. In the US, 900,000 sepsis patients are hospitalized each year, which on a world-wide level equals more than seven million immunoassays for selecting sepsis patients for Xigris treatment. See also the facts box about BioPorto's APC-PCI immunoassay. Klinisk forskning Grund forskning Selektion Dokumentation Implementering
Today, the biomarker NGAL is now in the process of becoming a recognized routine diagnostics marker for renal injury . As part of the processes of recognizing a new development, preclinical and clinical phases . The aim of this process is to develop a unique medicine with the desired effect, yet without undesirable side effects . In the early phases, experimental animals are used for
biomarker, it is important to try to infl uence the greatest number of prospective users of the immunoassay . Exerting infl uence on several different market segments (the IVD market and the pharmaceutical industry) at the same time increases the probability of achieving widespread market acceptance more quickly . For this reason, it has been natural for BioPorto to also target marketing of the NGAL immunoassay at the pharmaceutical industry, which constitutes a potential routinediagnostics market for an immunoassay like NGAL in connection with the development and testing of new medicines .
Generating sales to the pharmaceutical industry could be a faster route to obtaining recognition for several reasons, partly because the industry's will to test new methods that can reduce costs are greater in this market and partly because of the absence of regulatory requirements and barriers .
The pharmaceutical industry is also one of the largest industries in the world: research and development costs alone amount to USD 110 billion p .a .
Medicines are developed in several phases, divided into
testing the prospective medicines and they are not tested on human beings until the fi nal stages . Around 10,000 potential medicines are initially developed in order to be able to launch one certifi ed medicine (see the fi gure for more details) .
One of the biggest problems is the loss of prospective medicines (attrition) due to ineffectiveness or toxicity (harmful effects) after many resources have already been expended in the early phases . This is where the FDA, the EMEA and the pharmaceutical industry see an opportunity to save upwards of USD 100–300 million in developing each medicine solely by improving the screening methods for safety and effectiveness .
The cost of developing a new medicine is naturally reduced if the proper tools are available in an early development phase to weed out prospective medicines that are ineffective or produce undesirable side effects such as being harmful to the kidneys . For this reason it is critically important for the pharmaceutical industry to have access to a selection of immunoassays, thus creating a large, important NGAL market for animal testing . At the same time, this means that it will be possible to reduce the total number of experimental
| Mouse | Rat | Dog | Pig | Monkey | |
|---|---|---|---|---|---|
| No . of animals | 700,000 | 1,100,000 | 68,000 | 8,600 | 31,800 |
animals per prospective medicine, which will have economic and ethical benefits for the medical industry. The table below shows the estimated number of experimental animals used each year around the world in the pharmaceutical industry for testing the safety of medicines. In addition, a large number of experimental animals are used for testing a medicine's effect and for quality control.
In toxicological studies, i.e. examining substances' toxicity and harmful effects, specific organs (heart, liver and kidneys) are examined, as these are especially vulnerable. The tests performed today to assess whether kidneys have been injured by a given substance are slower, more difficult and thus more costly than NGAL immunoassays would be. In addition, the NGAL immunoassay is a highly reliable indicator.
In preclinical phases, a specific number of lines of very well-defined animal models are usually used, e.g. a rodent (rat) model and a larger mammal (dog/monkey) model. BioPorto will seek to cover all the most frequently used models so NGAL can be a strong marker of safety and/or therapeutic effectiveness, which will ultimately make NGAL a natural choice in subsequent human studies (clinical phases). Especially in subsequent preclinical models (dog/monkey), the pharmaceutical companies have a major investment at stake and therefore seek better tools for analyzing the safety and effectiveness of their prospective medicines.
BioPorto has already launched the first NGAL products aimed at the pharmaceutical industry, and will continue to develop this field in 2009. If an NGAL immunoassay for mouse, rat, pig, dog and monkey is recognized by the pharmaceutical industry as a standard early indicator of acute renal injury, it is estimated that 900,000 animals a year will be tested for renal injury, equivalent to a market of more than 3.6 million immunoassays a year.
Sources: websites of the US Food and Drug Administration, Critical Path Institute, Tufts Center for the Study of Drug Development and PhRMA, as well the UK Home Office: "National Statistics, Statistics of Scientific Procedures on Living Animals 2007".
BioPorto intends to enlarge the number of marketed monoclonal antibodies and antibody-based products for the basic research market by means of in-house development, licensing and acquisitions to stay abreast of market trends where sales and development are concerned . Based on market reactions within specifi c areas, the company will focus on products in the area . On this basis, the clinically relevant monoclonal antibody with intellectual protection potential or other competitive advantage and potential as a new routine assay will be selected . In 2008, new antibodies were developed for this market .
An ELISA kit will be developed from the antibodies selected for use in clinical research . In so doing, a new potential marker can show whether it has the clinical potential to become implemented in routine diagnostics . At the same time, a study of the market potential will be carried out . 2007 saw the launch of a Rat NGAL ELISA Kit aimed specifi cally at the pharmaceutical research market . The Rat NGAL kit is the fi rst kit to be produced in-house in BioPorto's own facilities and future ELISA kits launched by BioPorto are similarly expected to be produced in-house .
BioPorto endeavors to protect its IP rights for new biomarkers as soon as possible once the biomarker in question can be identifi ed as having clinical diagnostic applicability . Intense follow-up and management of IP rights are ongoing . In 2008, as a result of this strategy, BioPorto obtained patent rights for the use of NGAL as a marker for renal injury in a number of countries as well as a favorable written opinion regarding the APC-PCI patent application . BioPorto submitted new patent applications related to NGAL in 2008 and has spent many resources on ensuring and developing the company's own patent claims .
BioPorto will gain a share of the routine diagnostics market by entering into licensing and collaboration agreements with major diagnostics companies . In addition, the company wishes to develop a niche market with in-house-developed and IVD registered ELISA kits, particularly in regions in which expensive laboratory equipment is not widespread . In 2009, BioPorto continues negotiations with leading diagnostics companies regarding the sale of licenses for BioPorto's NGAL cut-off patent application . The fi rst licensing agreement is expected to be concluded in 2009 . With a view to the sale of ELISA kits for the routine diagnostics market, the company obtained IVD product registrations of both the MBL ELISA Kit and the NGAL Rapid ELISA Kit . In addition, a transfer of the company's ELISA kits for use in automated devices has been completed . In 2009, BioPorto will continue focusing on test formats in preparation for routine diagnostic use .
The group's overarching goals are:
• to create organic growth and reach a target of net revenues generated by the sale of our own products in the area of DKK 40–60 million within a couple of
Selektion Dokumentation Implementering
years (excl . license income for IP rights)
As the group reaches its targets and suffi cient funds for the contemplated expansions are in place, the group expects to gain a better foothold in the different markets and expand its activities . A number of plans for the development of new biomarkers have already been made as well as the assessment of a range of new products to be licensed, all with a view to creating growth . Furthermore, an expansion could include the establishment of a trade platform in the US market . For immunoassays in routine testing, the format is of decisive importance why BioPorto uses a great deal of resources on collaborations and on entering license agreements in order to gain the largest possible share of the routine test market . 12
The overall activities and expectations are explained in more detail in the following sections of the annual report . 0 4
1,000,000
BioPorto's sales activities are dispersed over two overarching areas: product sales and licensing sales . Product sales are described below and comprise the existing business . Licensing sales currently and primarily concern the sale of licensing access to the group's IP rights for using NGAL as an acute renal-injury marker . This is a complex area entailing great earning potential . This will subsequently be discussed in the section about selling licenses .
BioPorto's revenues amounted to DKK 9 .9 million in 2008, which is 18% more than in 2007 . The revenues are on a par with the most recently announced forecast but somewhat lower than originally expected .
The primary causes of the lower growth rate:
The year's revenue growth is still regarded as satisfactory, in light of the generally negative fi nancial developments in BioPorto's primary export markets .
Revenues are primarily generated by the group's four product areas: NGAL, MBL, peptide hormones (especially GLP-1 and exendin-4) and research antibodies . In 2008, sales of NGAL products and peptide hormone antibodies achieved especially high growth of 39% and 61% respectively .
In order to achieve acceptance of a new marker in routine
diagnostics, it is crucial to generate an awareness of the marker's existence and document its value to healthcare authorities and the individual patients . For this reason, the success of the NGAL immunoassay depends on generating as much awareness as possible and on the contribution of the large diagnostics companies to the promotion of the new renal immunoassay .
For this reason, BioPorto was represented at many international conferences and meetings in 2008 with special focus on NGAL and other renal injury markers . Over the past year, the group has noted a sharply rising awareness and familiarity with NGAL and the biomarker's diagnostic value from the world's leading nephrologists (kidney doctors/experts) . At renal-specifi c meetings like "Renal Week" in the US, and Europe's counterpart the ERA–EDTA in Sweden, there were many lectures and posters with information about the results achieved using NGAL . At Renal Week, the two large diagnostic companies Abbott and Biosite (Inverness) also confi rmed their expectations for the launch of their fi rst diagnostic NGAL immunoassay for use on their specifi c analyzing device respectively in 2009 . These expectations were subsequently repeated: Abbott has indicated a launch date in August/September 2009, for instance . Also, no competing products appeared at these meetings that are capable of challenging NGAL as the top marker for acute renal injury .
It is quite positive that the group's Human ELISA kit (KIT 037), certifi ed for diagnostic use in several countries, grew by 95% from 2007 to 2008 . The fi gure shows the
sales trends from 2007 to 2008; KIT 036 is designed for research use (RUO) and KIT 037 is, as mentioned, for diagnostic use (IVD) .
BioPorto has yet to obtain FDA certifi cation in the US for diagnostic use . However, it is possible to achieve what is known as in-house certifi cation from the FDA based on an in-house validation so that the hospital which has performed the validation and applied for the certifi cation can start using the test . BioPorto's Human NGAL ELISA Kit is currently undergoing internal validation with a view to implementing the test at several important US hospitals . The validation at one hospital is expected to prompt others to take the same step and thus open up the possibility of routine diagnostics customers in the US .
In early February 2009, Enzon Pharmaceuticals announced that the testing of recombinant human MBL for therapeutic use would be discontinued due to disappointing treatment results . Needless to say, BioPorto's expectations for future sales of the diagnostic MBL test are negatively affected by this turn of events, but BioPorto expects the level of current sales of MBL products to be maintained, as the immunoassay is still used for diagnostic purposes . The sales of the MBL immunoassay are therefore not expected to rise to the extent assumed previously . No changes will be made to BioPorto's offering of the immunoassay but, in the near future, the group will assess whether some of the resources earmarked for the MBL area should be used in the NGAL area instead .
At the same time, IBT Laboratories - one of the large reference laboratories in the US – is offering BioPorto's MBL Oligomer immunoassay to its customers, and the immunoassay was implemented in IBT's automated ELISA analyzing device in late 2008, which further documents BioPorto's expectations for continued satisfactory sales of the MBL kit .
BioPorto sells most of its products in the US and Europe, which corresponds to the geographic sales distribution in the sector . BioPorto expects product sales to grow
by 25–35% in 2009, in spite of the economic downturn . The areas of focus for product sales in 2009 will be:
In 2008, BioPorto launched an ELISA kit and 20 monoclonal antibodies, six of which were developed in-house and the rest were in-licensed products .
The group's most important product launch in 2008 was the Rat NGAL ELISA Kit . The development and launching of ELISA kits for analyzing NGAL in animals is done as a follow-up of the growing interest in NGAL assays primarily in experimental animals and secondarily in livestock and pets . The Rat NGAL immunoassay will be used for research and toxicological studies in the pharmaceutical industry which will promote the general clinical acceptance with the routine diagnostics segment at the same time .
| Time of launch | Area/target | No. of products | Own development/ In-licensing |
|---|---|---|---|
| April | Monkey NGAL | 1 | Own development |
| May | Oncology | 13 | In-licensing |
| May | Complement activation | 1 | In-licensing |
| August | Mouse NGAL | 3 | Own development |
| December | Peptide hormone – GLP-1 | 2 | Own development |
The Rat NGAL ELISA Kit was favorably received by the market, and in the first six months after launch, revenues were generated in the amount of DKK 200,000, which are fine sales figures for a newly launched product. There is also great market interest in NGAL ELISA kits for mouse, monkey, pig and dog. In addition to the Rat-NGAL Kit, BioPorto launched monkey and mouse NGAL antibodies in 2008, and BioPorto expects to be able to launch a number of new products in 2009, both antibodies and ELISA kits, for analyzing NGAL in mouse, monkey, pig and dog. After the end of the fiscal year, BioPorto launched a pair of antibodies in January for analyzing NGAL from dog.
In May, the group launched thirteen antibodies in the area of cancer research and one antibody in the complement activation area. The primary sales of these antibodies are expected to take place via the OEM sales channels, as the specificities largely target the research market.
In December, BioPorto launched two more unique new GLP-1 antibodies with primary relevance to the pharmaceutical industry. In 2008, the sales of peptide hormone antibodies – the group's product portfolio in the areas of diabetes, appetite control and obesity – accounted for 23% of total sales, and continued growth is expected in this niche area. For this reason, promotional activities of the peptide hormone antibodies will be increased, both by means of exhibitions at trade conferences and through increased product advertising.
Sales of newly launched products rose from 4.7% of total revenues in 2007 to 5.1% in 2008. The new launches' percentage of total revenues was lower than forecast. This is due to the delayed development of the APC-PCI ELISA Kit and because only a small number of the assessed in-licensing candidates could meet the group's requirements for new in-licensed products (see descriptions of LICA and ALRI in the 2007 Annual Report).
After the end of the fiscal year, BioPorto launched a pair of antibodies for analyzing aprotinin, a protein previously used as a medicine called Trasylol (Bayer). The newly launched pair of antibodies is expected to be used in relation to research relating to Trasylol's effect and side effects.
In 2008, BioPorto in-licensed 14 new antibody products and, at year end, negotiations were being conducted for the in-licensing of an additional 20 to 30 new antibody specificities. The number of in-licensed products is expected to be in the neighborhood of 30 to 40 new antibodies in 2009.
In 2007, the group in-licensed the antibody "Human IgE (non-immune)" which is primarily used for allergy testing. The product lived up to the sales forecasts in 2008.
The total sales of in-licensed antibody products amounted to DKK 5.1 million.
In 2008, BioPorto became more competitive in terms of a number of individual antibodies by reducing manufacturing costs and subsequently noted a rising demand from the diagnostics and pharmaceutical industries for larger volumes of specific antibodies. Targeted marketing activities will be set in motion in Q1 2009 aimed at further developing this product area typified by large, recurring orders. Focus must be brought to bear on the additional requirements for matching antibody specificity and quality, while maintaining competitive pricing at the same time.
In 2008, BioPorto initiated a plan for the optimization and enlargement of the distribution network over the next two years. The plan includes the establishment of sales channels that can target their efforts on sales of routine diagnostics products like NGAL and MBL. In so doing, BioPorto expects to be able to enter into new distribution partnerships with this focus already in 2009.
In 2008, efforts were especially aimed at enlarging the distributor network in the Asian market with its rapidly growing healthcare sector. BioPorto's current level of sales to this market amount to 8% of total revenues. In the enlargement process, BioPorto joined forces with the Danish chambers of commerce in Beijing and Chongqing regarding the selection of prospective distributors in China, resulting in the establishment of four collaboration agreements. In addition to distributors in the Chinese market, BioPorto established relations with yet another OEM partner in Asia, and a distribution partner in Taiwan and, after the end of the fiscal year, two OEM partners in Japan and the US respectively.
BioPorto held its annual distributor meeting in November to coincide with the MEDICA trade fair in Düsseldorf, Germany. This was the group's best-attended meeting to date, with 25 participants from the North and South American markets, the major European markets and several of the most important Asian markets.
BioPorto gives high priority to participating in conferences and exhibitions as interacting with customers and partners is key to the success in introducing new markers and continuing to promote familiar markers. The number of scheduled events will be increased in 2009, also for the purpose of promoting peptide hormone antibodies in a conference setting.
BioPorto's most important task is the current sale of licensing access to the group's IP rights for using NGAL as an acute renal injury marker. This is a complex area entailing great earning potential.
BioPorto is strengthened in relation to licensing negotiations in the following areas:
The favorable developments in BioPorto's patent-rights situation has meant that diagnostics companies wishing to launch an NGAL immunoassay for measuring acute renal injury seek to get licensing access to BioPorto's patents; The NGAL market potential is estimated at 150–200 million immunoassays a year. Further details about the patenting situation, including details about other NGAL patent applications, are found in the section on intellectual property rights. A market description is found in the section on the routine diagnostics market and processing of market acceptance under the product sales section.
The licensing negotiations include a wide range of parameters that must be clarified between the parties before it is possible to negotiate actual prices and terms. BioPorto's IP NGAL immunoassay-method rights can be divided into more than one license with access to various combinations of immunoassays of urine or plasma and/ or for use in a specific application, such as central laboratory equipment and/or point-of-care. As an alternative, one market player can be given exclusive access to the entire patent by submitting an offer to this effect, or non-exclusive agreements could be concluded with several companies. The diagnostics companies' respective strengths and expectations, specific equipment, sales forecasts and geographic cover will be included in these considerations for the purpose of optimizing earning potential and market cover. For strategic reasons, the licensing negotiations concerning the NGAL rights are only discussed here in general terms.
In 2008, BioPorto spent many resources on achieving the very best conditions for future licensing agreements. In light of the most recent launch announcements in 2009, BioPorto expects to obtain negotiation results before this that conform to NGAL's future earning potential. The group is conducting reality negotiations with several parties and upholds its licensing income forecast of double-digit millions in 2009 and the years ahead.
At the end of 2008, a non-exclusive agreement was concluded with a major US company relating to the thrombin-antithrombin test (TAT), BioPorto's fully developed immunoassay for diagnosing thrombosis. Due to the stiff competition in this area, BioPorto does not expect to gain a large market share from TAT. Nevertheless, the agreement means that BioPorto expects to receive minor royalties for the licensee's TAT sales, presumably already in 2009. Negotiations are still in progress with another US company relating to licensing access to the manufacture and sale of the same immunoassay.
The royalties are not expected to have a significant impact on the group's financial result for 2009.
The new APC-PCI marker for selecting patients suitable for sepsis treatment and the patent applications submitted in this context for the new utilization method for APC-PCI are also expected to be the object of negotiations regarding partnerships and licensing access in 2009.
The group's development programs focus on developing and selecting monoclonal antibodies, primarily for clinical diagnostics. By monitoring the market and the research environments, the group selects the targets (marker molecules) expected to be of diagnostic relevance, to make it possible to achieve intellectual property-right protection of the immunoassays developed, as well as to have great potential in the routine diagnostics market. The group subsequently endeavors to develop assays aiming at these targets in ELISA format and seeks to achieve documentation for the expected clinical relevance and market expectations by implementing clinical validation, making presentations at conferences, preparing and reviewing scientific articles and following up the market interest on an ongoing basis. At the same time, the group seeks to enlarge the product line by developing complementary antibodies and further developing assay formats, if relevant. Paralleling the development programs, the group focuses on achieving protection of the group's innovative results by submitting patent applications on an ongoing basis.
NGAL continued to be the primary object of focus in 2008. Substantial resources were used to characterize a series of monoclonal antibodies specifically for treating various epitopes (areas) of NGAL. This was done for the purpose of obtaining the greatest possible knowledge about NGAL. This knowledge is crucial and in 2008 was especially used for improving current and forthcoming patent applications, but BioPorto will also seek to use them for optimizing existing diagnostic NGAL analyses.
Good progress in the development of NGAL analyses for experimental animals was made in 2008. As planned, a sandwich pair of antibodies against NGAL from mouse and monkey (Cynomolgus), and a pair of antibodies against NGAL from dog were developed and launched in January 2009. The portfolio is expected to be enlarged in 2009 to include a sandwich pair of antibodies against NGAL from pig. Pigs are the most frequently used experimental animal for experimental surgery and for studies of sepsis (blood poisoning), where acute renal failure is a frequently occurring complication. In all probability, BioPorto's NGAL products, including products for Pig-NGAL, could help to promote the development of new medicines that can counteract renal injury. Recombinant Dog-NGAL and Pig-NGAL for immunizing mice in connection with the development of the above-mentioned antibodies are not commercially available, but are the first important products from BioPorto's internal GMO laboratory facilities, established in 2007.
The Rat-NGAL ELISA Kit, launched in 2008, is the first kit to be developed in-house by the group. In conformity with our strategy to enlarge and consolidate the NGAL product portfolio, we plan to develop ELISA kits against NGAL from mouse, monkey, dog and pig and expect to be able to launch the first of these in 2009.
BioPorto continues its commitments to clinical validation of NGAL. The purpose of the clinical validations is to collect additional information on the use of the marker, thus generating documentation about the value of the marker and the requisite attention at the same time. A study was carried out in 2008 with an internationally reputed research group under the management of consultant surgeon Peter Rossing, Steno Diabetes Center, which showed that the NGAL level in urine reflects the extent of renal injury in patients with diabetes. Further studies intend to show whether NGAL can assist doctors in treating diabetics, who are at great risk of developing chronic renal injury. In cooperation with staff physician Frank Schiødt (now consultant surgeon at Bispebjerg Hospital, Denmark), NGAL and Gc-globulin have been measured in samples taken from patients with hepatic disorders at the University Hospital of Copenhagen (Rigshospitalet). The analysis efforts are still not completed, but the final results are expected to be published in the course of 2009.
In diabetes and obesity treatments, great focus is brought to bear on the peptide hormone GLP-1, including how to inhibit dipeptidyl peptidase IV, the enzyme which naturally breaks down GLP-1. BioPorto launched two antibodies in 2008 which specifically counteract the decomposed form of GLP-1. The GLP-1 antibody portfolio marketed by BioPorto is unique, as it contains a range of antibodies that are difficult to develop. Further details are available in the 2007 Annual Report's facts box on this topic (pp. 17 and 18). Efforts will continue in 2009 to complement and improve our existing portfolio.
It was necessary to develop a number of additional reagents for the APC-PCI ELISA Kit before it could be transferred to the group's in-house production. Although this turn of events relating to the reagent process further delayed the launch of the immunoassay, it is expected to be launched in Q1 2009. The group's results show that the APC-PCI level can identify the subgroup of sepsis patients who respond to an activated protein C treatment, marketed by Eli Lilly under the product name "Xigris". BioPorto expects that improving the selection of patients will lead to more widespread use of Xigris than is currently the case. Further details about APC-PCI are found in the facts box later in this section.
A pair of aprotinin antibodies was launched after the end of 2008. Aprotinin is marketed by Bayer under the name "Trasylol" and was previously used on a routine basis to inhibit bleeding during major surgery, but its use turned out to have serious side effects, e.g. acute renal failure. The group expects that this will generate substantial research in the area and thus generate sales of these unique antibodies. Efforts are continuing with a number of other potential renal and sepsis markers in 2009.
BioPorto decided not to pursue the announced plans for a business Ph.D. in collaboration with the University of Southern Denmark, Odense, as the scheme does not guarantee that the group will obtain the intellectual property rights which are the product of the project.
| Product | Antibody develop ment |
Patent application |
Kit develop ment |
Clinical validation |
Routine marker |
Market Potential (No. of tests) |
Most important events, 2007/2008 |
|---|---|---|---|---|---|---|---|
| MBL | | | | () | 80,000 | Assay used in conjunction with clinical testing |
|
| Gc globulin | | | | 2 mill. | Clinical validation | ||
| NGAL | | / | | | () | 150-200 mill. |
Patent issued, expansion of patent and product portfolio |
| Rat NGAL | | | | 2 mill. | Licensing negotiations | ||
| NGAL, other animal species |
/ | | 1 mill. | Launch of kit | |||
| 2 potential renal markers |
/ | | | unknown | Launch of antibody pairs for mouse and monkey |
||
| APC-PCI | | | | 7 mill. | Cells producing antibodies |
= completed = in process () = ready, but not widespread in the market
Not only are efficient diagnostic methods important to the identification of illness, but they can also be decisive for choosing the most effective treatments of a specific disease. In recent years, this familiar medical principle has received special attention from the pharmaceutical and diagnostics industries as the concept "customized medicine", where treatment is adapted to the individual patient to a greater extent than usual. By contrast, certain diseases are often treated using standard treatments that the individual patient may not respond to, which thus entail a risk of, at best, being unnecessary and, at worst, having serious side effects. These standard treatments also generate unnecessary added costs in the healthcare sector.
Blood poisoning (sepsis) is a severe illness with a high mortality rate which unfortunately occurs all too frequently, including as a complication of other serious diseases that weaken the immune response. The treatment is based on antibiotics, on measures for maintaining blood circulation and on attempts to inhibit the dangerous inflammatory condition that affects the whole body. A diagnosis of "blood poisoning" does not provide enough guidelines for the optimal treatment of the individual patient. The following is a description of how BioPorto's APC-PCI test can be used as a "customized" sepsis treatment for the individual patient by selecting the very patients who would respond to a specific treatment of this dangerous infection. The therapy concerned already exists on the market. Only a few patients respond to the treatment, and it is not possible to make a satisfactory selection of these patients using existing methods.
The acronym APC-PCI stands for "Activated Protein-C with Protein-C Inhibitor Complex", tiny amounts of which form in the blood once the blood coagulation process is triggered and protein C (blood-coagulant regulator) is also activated. Activated protein C (APC) has both coagulant and anti-inflammatory effects, and the recombinant protein (marketed by Eli Lilly under the name "Xigris") can be used for treating patients with severe sepsis. Only a percentage of patients seem to respond to it and Xigris is the only treatment besides antibiotics which reduces the mortality rate among these patients.
If it was possible to predict which patients with severe blood poisoning would respond to APC treatment, the treatment could be efficiently administered solely to these patients. This would reduce the mortality rate and involve sizeable economic savings by avoiding the unnecessary treatment of patients who do not respond to the treatment and also by avoiding serious unnecessary side effects such as cerebral hemorrhages that can be caused by the substance's anticoagulant effect.
BioPorto's APC-PCI immunoassay reveals which sepsis patients are able to create their own APC and which are not. If a patient has already created abundant amounts of APC, it is unlikely that an additional dose of APC will help. On the other hand, APC could probably have a beneficial anti-inflammatory effect on those very patients where blood poisoning has destroyed the natural mechanism used for creating APC in the body where the level of APC-PCI is low. This is the very same use of the APC-PCI immunoassay for which BioPorto has applied for a patent. As a result of selecting the minority of sepsis patients who could respond to APC treatment, the immunoassay is expected to be able to result in a threefold increase in the treatment's cost-effectiveness, saving two-thirds of the present costs of unnecessarily treating unresponsive patients. This cost reduction would help to re-establish APC treatment as a useful procedure for patients with severe sepsis.
This new diagnostic application for the APC-PCI immunoassay for selecting sepsis patients opens up an appreciably larger market for the immunoassay than its previous use as an immunoassay for verifying the presence of blood clots. Nine hundred thousand people a year are hospitalized with sepsis in the US alone. If the immunoassay was efficiently applied to these patients, it would lead to 2.7 million immunoassays a year in the US and more than 7 million assays a year throughout the western world.
BioPorto expects to launch an APC-PCI ELISA Kit in Q1 2009, though solely for research purposes, like the completion of clinical studies and validation processes. After this, it will take a number of years to introduce and win acceptance in the market for the new marker. There was great initial interest among sepsis experts for using the immunoassay when it was presented to them at the international sepsis forum in Granada, November 2008.
Patient base: patients with sepsis. Treatments include antibiotics, maintenance of blood circulation and attempts to control the inflammatory state. One way of achieving the latter is by treating with activated protein C (APC, trade name Xigris).
However, only a few patients benefit from Xigris treatment, which has limited its use. Sepsis patients can be assessed by means of BioPorto's APC-PCI test. A minority of these patients will typically show a low level of APC-PCI.
Sepsis patients with a low level of APC-PCI have an elevated mortality and may be especially suitable for APC treatment, as the low level of APC-PCI implies. The remaining patients may not benefit from APC treatment and may be at risk of severe side effects.
The group's patent policy is to seek to protect new commercially viable technologies and products by submitting relevant patent applications and passing them on to the final patient.
The NGAL cutoff patent application (PCT/DK2005/ 000806 "Determination of neutrophil gelatinaseassociated lipocalin (NGAL) as a diagnostic marker for renal disorders") is still BioPorto's most important NGAL patent application. On 30 July 2008, the group was informed by the European patent authorities that the most important claims (1 to 17) were approved for issuance in Europe. Patent protection prevents other NGAL-assay suppliers from marketing an NGAL assay for diagnostic use in the event of acute renal injury, which occurs as a complication of other illnesses, without having access to BioPorto's patent. Translations have been submitted to the European patent authorities and the payment of registration fees is commencing in all the important European countries. The patents will be subsequently issued in the individual countries in the course of 2009. In addition, the NGAL cutoff patent was definitively issued in South Africa, New Zealand and Singapore. The issuance of the cutoff patent in a number of countries also increases the likelihood that the patent will be issued in the US and other countries. Achieving patent protection in Europe and other countries markedly improves the group's negotiating position and amounted to a giant step towards achieving market shares for the NGAL assay. This topic is discussed in more detail in the "Licensing sales" section under "Sales and marketing activities".
After the end of the fiscal year, Cincinnati Children's Hospital (CCH) has issued a writ of summons before the Copenhagen Maritime and Commercial Court, claiming that the right to granting of BioPorto's NGAL cutoff patent belongs to CCH, because BioPorto's patent is alleged to encroach on CCH's invention. The allegation is undocumented and it may be supposed that the sole reason for issuing the summons is to interrupt the grant proceedings for BioPorto's European patent as a tactical maneuver connected with licensing negotiations. BioPorto naturally claims full responsibility and credit for having made its invention and full ownership of the same. The case has been presented to the Company's legal adviser, who after review of the documents considers it probable that the EPO grant proceedings can be resumed before reaching a formal resolution of the legal dispute. The case does not influence BioPorto's financial expectations for 2009 and is not expected to interrupt current licensing negotiations (see also Stock Exchange Announcement no. 1, March 12, 2009).
BioPorto is continuously seeking to strengthen and enlarge the IP NGAL rights it has achieved, and the group submitted new applications and carried on existing ones in 2008, as follows:
The NGAL exclusion patent application ("Diagnostic test to exclude significant renal injury"), underpinning an aspect of the cutoff patent, was published in Q1 2008. This application strengthens BioPorto's position in negotiations regarding licensing access and is continued in the national phase in Q1 2009.
The NGAL ratio patent application: after a quick international novelty study and initial assessment, the application was approved both in terms of inventive step and novelty value, which is promising for the continued processing of the application up to the issuance of a patent. In this patent application, BioPorto is seeking to protect the diagnosis of acute renal injury by determining the ratio between NGAL levels in urine and plasma. This procedure makes it possible to further increase the specificity of the NGAL assay for renal injury and to obtain an even earlier diagnosis. The NGAL ratio patent could be used/licensed out, independent of previous NGAL patents, and this has established a stronger base for and greater leeway during licensing negotiations.
The NGAL triage patent application on utilization as a triage and ambulance assay ("Methods and devices for rapid assessment of severity of injury"), which received a preliminary written opinion of the PCT authorities in late 2007, was sent on to the national phase in the US and Europe by submitting revised claims in November 2008.
Additional NGAL applications were submitted in 2008 which will not be discussed here until they are published for technical patenting and competition-related reasons.
In addition, the following developments have occurred concerning other patent applications and patents in renal injury diagnostics based on NGAL assays:
The Cincinnati Children's Hospital (CCH) has two pending patent applications for diagnosing renal injury by means of NGAL assays in urine and serum respectively. The NGAL patent application for measurement in urine (license given to Abbott) received a final rejection as part of the case processing procedure of the US patent authorities. The applicants applied for a continued review, but the revised claims were preliminarily rejected in September 2008 for the same reasons as previously.
At an oral hearing on November 21, the European patent authorities also processed the application and approved a revised set of claims solely relating to tracing tubular cellular injury caused by ischemia by means of an NGAL assay. This appreciably reduces the patent's sphere of validity and is why BioPorto and the group's patent consultants assess that the patent will not be practically or commercially applicable, as ischemic renal injury cannot be differentiated from renal injury caused by other factors by means of NGAL assays. It is also assessed that the patent will not block the use of BioPorto's cutoff patent for diagnosing renal injury, as opposed to other diseases that cause NGAL to increase.
CCH's NGAL patent application for measuring in serum (license issued to Biosite) previously received a final rejection from the US patent authorities, and ongoing case processing of revised claims has so far resulted in a preliminary rejection of all claims. The European patent authorities have also cited objections to novelty and inventive step in respect of the claims submitted.
In the US, CCH submitted new NGAL patent applications, which are a continuation of the original applications, meaning that the patents are being applied for in a prioritized order on the basis of the original submissions. The common element of these applications is that they include the claims from BioPorto's cutoff patent application. The applications were submitted with the explicit desire to obtain the right to file "interference" litigation under US patent law. One of the criteria for being able to file a case such as this is that the new claims submitted must be based on the application; in other words, it must be possible for text and data to lead to the patent claims specified. The texts and data are the same as those originally submitted by CCH, together with the claims from BioPorto's cutoff application. BioPorto's patent consultants have compared the two elements of the new applications and think that it is improbable that the case officer in the US will be able to find grounds to verify that the new claims are based on the application.
Phadia's NGAL patent Phadia AB, a Swedish company, holds the patent for diagnostic application of NGAL, which is relatively broad in scope and can thus be called an "umbrella" patent. It is still possible to obtain specific patent rights within areas generally covered by this patent. Thus a situation may arise where it is necessary to buy license access for the umbrella patent. If the scope of cover in the patent claims is too broad, it is also possible to apply to have the patent declared wholly or partly invalid. If an underlying patent is obtained, the holder of the umbrella patent is precluded from exploiting the holder's rights within the specific area of the underlying patent.
Phadia's patent is issued with slightly differing claims in two geographic areas. In the US, the patent covers the diagnostic use of NGAL for infection and inflammation. In Europe, the patent also covers the diagnostic use of NGAL for all human illnesses. The European patent is the one that could affect BioPorto's freedom to operate on the European market. For this reason, BioPorto chose to file an invalidity action in 2007 against the European patent, initially in Denmark, demanding that the broad claim for diagnostic use of NGAL for all human illnesses be ruled invalid in any event. During the case, Phadia filed a claim that BioPorto violates Phadia's patent rights. Phadia has further demanded that BioPorto's NGAL products be withdrawn from the market and that compensation be paid for any units already sold. In 2008, the case mainly involved determining the theme of an expert appraisal and designating the experts. BioPorto's lawyer in the case does not consider it very likely that the court will concur with Phadia's separate claim. At the same time, BioPorto's patent consultant, Høiberg A/S, has stated that it is very likely that Phadia's broad claims will be ruled invalid, with the result that BioPorto will receive unobstructed market access.
As the group's primary area of focus, BioPorto has developed a separate risk assessment for the patenting of the NGAL method as an acute renal marker and for implementing the ongoing licensing negotiations, including plans of action for different outcomes. The most probable scenario is that BioPorto, as the only company to do so, will obtain practically and commercially applicable patent rights for the NGAL assay.
A patent application concerning new applications of the sepsis marker APC-PCI was submitted as a PCT application in December 2007. It has long been known that APC-PCI could be used as a verifying assay for the presence of blood clots, whereas the diagnostic application for selecting sepsis patients is new. The novelty study and the initial assessment by the international patent authority, as received in Q2 2008, presents some references cited concerning related topics, but in the assessment of BioPorto and its patent consultants, it will be possible to issue the most important claims as patents. This process will take place when the patent application is continued in the national phase.
Based on a specific assessment of market potential and the possibility of obtaining a patent pursuant to the application, the decision was made to desist from continuing the patent application for the Gc-globulin assay as a triage and ambulance assay ("Methods and devices for rapid assessment of the severity of injury and disease") to the national phase. The application is now prior art in the area, which prevents other companies from patenting the same principles.
Many different assay formats designed for the routine diagnostics market are available. They have different advantages and drawbacks. The optimal format for one specific biomarker can easily be less suitable for another. BioPorto wants the group's biomarker assays to make their way to the routine diagnostics market, as this is much larger and more predictable than the comparatively modest and changeable research market. The main groups of formats currently used on the routine diagnostics market are described below.
ELISA is a robust, simple assay that is relatively inexpensive to develop. It is a manual method that must be performed by a well-trained technician and requires a relatively long time to analyze each sample. For this reason, the method is mostly used by research laboratories and in markets where the hourly wage of qualified medical technologists is low. The price per assay is high if only one or a few samples a day are to be analyzed, and applying the method to a large number of samples requires a lot of work.
Automated ELISA is a technology that has achieved widespread use and combines the benefits of the manual method with a robot. The robot reduces the number of technician hours required and allows for the processing of a much larger number of samples. Compared to an ordinary ELISA assay, the method requires a substantially bigger implementation effort in a laboratory, but requires a much lower investment than the establishment of a fully automated assay. This technology appears to be especially suitable for interesting new biomarkers that do not involve a large number of samples.
Point-of-care assays can be performed without having appreciable laboratory facilities. The best known are pregnancy tests where urine is dripped onto a testing stick and one or two visible lines indicate whether a woman is pregnant. The same principle can be used for most other biomarkers and the assay can be made quantitative, which usually requires an instrument with a display, however. The assay principle is best suited for biomarkers where the difference between positive and negative samples is great and where the reply desired is largely "yes" or "no" instead of "how much". As every single sample must be individually processed and as only one assay at a time can be performed, point-ofcare assays are best suited for situations where a few
samples arrive at a time or where it is important to get the reply here and now, such as for coronary thrombosis. The point-of-care area is rapidly growing. This is because new individual assays are being implemented all the time, both as assay sticks and for reading devices, especially for use by general practitioners and for home use, and because the use of these assays is continuously winning additional acceptance and proliferation.
These assays are performed on highly specialized machinery and are the essence of routine diagnostics at central hospital laboratories in the western world. The full automation means that a blood sample is placed on a machine that reads a barcode thus identifying the assay to be performed, after which the assays are carried out and the assay results are submitted to the hospital computer system. One machine can perform 100 different assays, can process up to several thousand patient samples per hour, and is largely self-operating. Fully automatic systems are expensive to buy, but it is estimated that roughly 80% of all assays at hospitals are run on such systems today. These formats are not suitable for analyzing a few samples, which is why a biomarker can be used for routine diagnostics for several years before the time seems ripe to develop a fully automatic assay. The marketing of fully automatic assays explains why the biggest diagnostics companies such as Roche and Abbott have grown to the size they are today.
The group's diagnostic assays – MBL Oligomer, Gc-globulin and NGAL Rapid – are marketed today as ELISA assays.
In 2007, the group appointed a project group to focus on optimizing the group's ELISA kits for used on automatic devices. In 2008, the project group studied and reported on the adjustments to the group's NGAL and MBL kits that are required in order for these products to be used on automatic devices for the purpose of routine diagnostic application. In the course of 2008, a number of collaborative efforts were initiated with customers regarding the use of the group's ELISA kits on automatic equipment, and BioPorto has been in continuous dialogue with the users regarding validation and implementation. In the course of 2008, there are a number of customers who have already implemented the group's NGAL or MBL ELISA kits on different types of automatic devices for routine diagnostics, and the lessons they have learned from these efforts can be used for general marketing and for advising about implementation on automatic equipment on the premises of other customers in the future. As an example, IBT Laboratories offers the MBL assay which was implemented on this large testing laboratory's automatic equipment in 2008.
In addition, the initiative was taken in 2009 for a project to obtain information on how to use the group's products in a point-of-care format. The point-of-care market is currently the most rapidly growing diagnostics market segment. The enormous technological developments have been one of decisive factors in this growth, making it relatively simple and inexpensive to develop point-of-care assays today. The objective of the project group is to study whether point-of-care is yet another viable route to the routine diagnostics market for the group's products.
Although BioPorto does not have direct access to getting immunoassays implemented on large fully automatic devices, the company is establishing licensing agreements and partnerships with large diagnostics companies for the purpose of reaching this market.
In 2008, the group achieved a vastly improved manufacturing economy. Better capacity utilization, improved yields and cost-saving measures contributed to these favorable developments.
The group aims to continue optimizing current manufacturing methods and to develop and implement new methods in the production process so that it is possible in the long term to further reduce manufacturing costs, to improve the general quality of the group's products and to optimize the products for applicability in routine diagnostics. In 2008, substantial improvements were achieved for all parameters.
In 2008, BioPorto built up know-how and expertise for the complete manufacturing process and established a smooth-running in-house production of ELISA kits. BioPorto was previously dependent on a single external manufacturing partner. This situation constituted a substantial risk, especially in conjunction with a possible expansion of the production batches to a very large scale, such as for the NGAL kit. The knowledge of the entire manufacturing process makes it possible to have manufacturing processes carried out by other external suppliers, which lays the groundwork for comparisons of price and quality. Also, BioPorto has benefitted from a shorter time-to-market for new kits produced in-house. The group plans to implement the complete process development for all existing kits in 2009 and 2010.
The Rat-NGAL ELISA Kit was launched in 2008 as the first kit to be produced in-house, and efforts are currently being made to take the fully developed APC-PCI ELISA Kit through process development to manufacture, with the expectation that this new product can be launched in Q1 2009.
In 2008, satisfying results with large-scale production of antibodies via an external manufacturer were achieved. BioPorto also commenced testing of techniques for increasing the capacity of the existing in-house manufacturing facilities for antibodies. These optimization efforts will continue in 2009 to assess whether it will be possible to implement outright in-house bulk production.
In 2008, the quality management system was further optimized and implemented during the course of the year. The system fulfills the requirements of ISO 13485:2003, the internationally recognized standard for quality assurance of medical equipment and in vitro diagnostics. Further details are also available in BioPorto's quality policy on the group's website.
In 2008, BioPorto achieved certification from the Indian healthcare authorities for diagnostic application of the NGAL Rapid Kit (KIT 037) and the MBL Oligomer Kit (KIT 029). The certification was achieved in collaboration with Biogenuix Medsystems, BioPorto's representative in India.
In addition, the MBL Oligomer Kit (KIT 029) was certified by the Canadian authorities in early 2009, in collaboration with Cedarlane Laboratories Ltd, the group's distributor. The NGAL Rapid assay was certified for diagnostic application in Canada in 2007.
An application was submitted to ANSIVA (Brazilian healthcare authorities) for certification of the NGAL Rapid ELISA Kit. A decision regarding this application is expected at the end of Q1 2009. The application was jointly submitted with Genese Produtos Diagnósticos, BioPorto's local representative in Brazil.
The discussions initiated with a US kit manufacturer with a view to manufacture and possible FDA certification of one or more of BioPorto's ELISA kits are continuing in 2009.
In addition to this, ongoing product-registration efforts are being made in relevant markets where the main emphasis is on the NGAL Rapid and MBL Oligomer assays. The respective product registrations are necessary for the implementation of the products in routine diagnostics in the areas concerned and are thus crucial for sales.
The biotech sector is characterized by high complexity, long, cost-intensive development processes, fluctuation and intense competition. Thus, the group's success depends on having the appropriate intellectual resources. The management has identified and follows up the four key areas of importance to the group's future development:
The group's scientific expertise must identify the types of products to be developed and also possess the knowledge required for successfully developing the product based on the appropriate requirements, including being able to identify critical stages of development before and during the development process. In addition, it must be possible to assess the accessibility of intellectual property-right protection and the consequences of existing patent protection, if any.
The group's development and production expertise must ensure that the finished product conforms to official specifications of requirements, that the development and production processes are straightforward and cost-effective and that the development processes are reproducible.
The group's financing expertise must enable the group to plan and act in relation to the scientific development process characterized by high complexity and low predictability, and in relation to the commercialization of new markers including expectations of market potential and penetration, which may lead to significant deviations in relation to the budget. Knowledge of IR and communication serves to strengthen the relationship and dialogue with investors, analysts, the press and other stakeholders.
Knowledge of the diagnostics market is needed for commercializing new markers, including the estimate of market potential and penetration, and optimizing sales. Similarly, knowledge of licensing in the biotech sector is needed for being able to identify complementary and commercially interesting in-licensing objects. Furthermore, insight into the sale of licenses to the company's own rights or products is essential, as is the ability to negotiate the proper terms and conditions for such licenses.
The group's existing intellectual resources are focused in the following areas: the operation of biotech companies; scientific development processes; methods for developing diagnostic analyses; negotiating and concluding contracts; financing and investment; commercialization; communications; providing information; quality and certification requirements; clinical relevance; immunology; antibody development; immunochemical analysis; molecular biology; protein chemistry; and manufacturing processes. In addition to the group's own expertise, the group's activities are conducted in close cooperation with permanent scientific employees and an external staff of senior researchers and alliance partners, as well as external consultants in business development, licensing, communications, etc., which thus increases the organization's knowledge base.
The company needs to continue developing, retaining and actively applying its knowledge. The group's HR accounting established for in-house use is part of the management's tools and comprises the following action areas for 2009 (see next page).
| Human Resource Accounting | |||||||
|---|---|---|---|---|---|---|---|
| Needs | Areas of focus | Results, 2008 | Expected, 2009 | ||||
| Basic framework / human resources |
− HR policy − Training − OSH − Terms of employment |
− The group established a health care and pension plan for staff and a warrant program − Establishment of an intranet which has created more knowledge of each department's area of responsibilities and expertise − Carried out a study of the working environment, including laboratory conditions and noise reduction |
− Continued focus on training needs with the goal of providing supplementary training to more than 25% of the staff − Follow-up on working environment, including reduction of noise and indoor climate control |
||||
| Strengthen the scientific and development environment |
− Scientific skills − Involve knowledge from the entire organization − Make better use of external networks − New inspiration − Intellectual property right protection |
− Researched into the employment of a person under the business PhD scheme and decided not to proceed − Hiring of an employee for the development of recombinant proteins − Optimization of searches and gathering of information on IP protection |
− Establishment of advisory board − Increase knowledge within the patent area |
||||
| Commercialization and license |
− Knowledge of the diagnostics market − Licensing knowledge − Identify complementary and commercially interesting in-licensing candidates − Intellectual property-right protection |
− Established a plan for changing the distributor network − Continuous updates of in-house knowledge of diagnostics market and licensing − New competencies within the area of licensing |
− Establishment of new distributors and optimizing the collaboration with current distributors, particularly within IVD and sales to the pharmaceutical industry − Focus on business development within sales − Create further awareness of NGAL |
||||
| Process development, production optimization, and QA/RA |
− Quality and registration requirements − Improvement of cost-effectiveness − Reproducibility |
− Establishment of in-house kit production for each kit − Registration of IVD kits in India and Canada − Sizeable reduction of production costs |
− Establish in-house bulk production of antibodies − Continuous registration of IVD kits − Complete production processes for current kits in preparation for possible transfer of production |
||||
| IR and com-munications |
− More information for investors and other stakeholders − Formalization of IR efforts − Improvement of the website as a channel of communications |
− Issuance of quarterly reports − Continued expansion of the website with new information − Increase the number of investor meetings |
− Contact to analysts − Increased media coverage |
BioPorto is aware of its social responsibility and takes an active approach to social issues and to environmental and climate-change-related issues, etc. During the course of 2009, the group will take a more systematic approach to its social responsibility which will result in a statement, not later than at the time of the 2009 annual report. The areas currently being focused on include:
BioPorto develops, produces and sells a number of antibodies and antibody-based diagnostic immunoassays for the benefit of patients and the effectiveness of the healthcare sector. The customer base is found within research, the medical industry and the healthcare sector and it is crucial that BioPorto's products comply with the quality expected and contribute to providing accurate results wherever the products are used. BioPorto has a fully developed quality system and complies with international standards and labeling schemes as described in the group's quality policy. As an integrated aspect of BioPorto's strategy, customer needs and preferences are used as the basis for the group's initiation of research and development for new products.
Since 2005, BioPorto has been preparing knowledge accounts which also include employee factors. In the course of 2008, BioPorto also focused on health promotion and the psychological aspects of the working environment. Employee make-up is typified by diversity with a balanced gender dispersion and a variety of educational backgrounds, nationalities and cultures. This provides a dynamic working environment and excellent interaction of various approaches.
BioPorto is in dialogue with various patient associations involved with primary immunodeficiency in Denmark and abroad. BioPorto can contribute knowledge and at the same gain insight into patient experiences. Another common interest is to disseminate knowledge about MBL deficiency. The group is open to queries from students and continuously contributes to projects and studies. The group's dialogue with investors and others interested in the group is described under "Investor Relations".
BioPorto's in-house production is limited in scope and of such a nature that it has an insignificant environmental impact. Other possible environmental impacts, e.g. the consumption of water and electricity, will be incorporated into an environmental policy, the purpose of which is to reduce the impact on the environment wherever possible.
BioPorto takes sharp issue with corruption, bribery and similar business methods. Problems of this kind have not been encountered in BioPorto's activities up to now, but concurrent with internationalization and the group's activities in new markets, it will become more relevant to prepare guidelines for dealing with such issues. The guidelines must primarily be based on the group's own conduct, but demands must also be placed on distributors, suppliers and other business associates.
BioPorto's shares are listed on the NasdaqOMX Copenhagen . The shares are traded under securities identifi cation code DK0011048619 (BIOPOR) . Until September 16, 2008 the short name was BIOP B . BioPorto's share capital of DKK 114,907,872 comprises 38,302,624 shares at a nominal value of DKK 3 .00, each of which are entitled to one vote .
On December 31, 2008, the closing price of BioPorto's shares was DKK 5 .25 equivalent of a 2% rise in 2008 . BioPorto's market capitalization on December 31, 2008 was DKK 201 million . In 2008, the turnover of shares was DKK 202,402,000 and 27,750,940 shares were traded .
In order to optimize the capital structure, BioPorto has ended the classifi cation of A and B shares as of September 16, 2008 after which all shares belong to the same share class with the same rights . The 20,000 A-shares have thus been admitted to trading and offi cial listing .
The following investor has notifi ed BioPorto of a share holding of 8 .4%: T. Bernt Nielsen and associates, Helsinge, Denmark .
On December 31, 2008, BioPorto had 2,208 registered shareholders, whose accumulated shareholding equates to 57% of the share capital .
In 2006, BioPorto A/S introduced a warrant program comprising management and employees in both BioPorto A/S and its wholly owned subsidiary BioPorto Diagnostics A/S (previously AntibodyShop A/S) . The program was in some respects retroactive, as one of the purposes was to remunerate staff and board members who at the time of the granting of the warrants had made a great effort for the group . The company's board made partial use of its authorization to issue stock options by issuing a total of 910,000 warrants on July 12, 2006, each of which entitled the subscription of one class-B share at a nominal value of DKK 3 .00 in BioPorto A/S . The exercise price was set at DKK 4 .66 . Under this program, 87,840 warrants have been exercised and 771,160 warrants still remain .
With a view to establish an incentive for retaining the current skilled employees and their active effort for the company and more attractive to prospective employees, the board established a new warrant program in 2008 . At the same time, it is possible to use the warrant program in conjunction with recruiting members for a Scientifi c Advisory Board and fi nally the program should serve as an incentive for the company's management and board of directors .
The new warrant program can be found in the articles of association article 15d according to which the board is authorized to issue, on one or more occasions, a number of warrants for shares at a nominal value of DKK 3 .00, equivalent to up to 5% of the company's nominal share capital at the time in question with no priority subscription right for the company's shareholders .
In accordance with the approval of the annual general meeting, the board has granted the management, employees and board of directors warrants . The issued warrants allow for subscription of 517,500 of nominally DKK 3 .00 each in BioPorto A/S by cash payment, equivalent to a nominal value of DKK 1,552,500 . The exercise price for management and employees is set at DKK 4 .18 and the exercise price for the board of directors is set at DKK 6 .15 . See note 5, incentive schemes, for further details .
BioPorto A/S's policy is that share holders should receive a return on their investment in the form of a price increase based on the group's performance . The payment of dividend must always consider the requisite consolidation of equity as the basis of the group's continued expansion .
In consequence of the group's need for capital for implementing the selection strategy, expanding the group's development programs and in-licensing of new products, the management and the board of directors do not expect to disburse dividend in 2009 .
BioPorto aims to give the market open, satisfactory information about the company's operations, strategy and results with a view to ensuring fair pricing of the share and to contribute to ensuring good corporate governance . All stakeholders should have fast, equal access to important information about BioPorto's development and growth . One of the ways this is effectuated is by publicizing in-house knowledge in company announcements to NasdaqOMX, Copenhagen, which are subsequently made available at the company's website, www bioporto .com .
Other publicized information, including general corporate and investor presentations, are made available to the general public at the website, and BioPorto also publishes an investor newsletter for investors and others with an interest in the group, published according to the news fl ow . BioPorto offers a news subscription service . Investors and other interested can sign up for notifi cation of published company announcements, newsletters and other material in the investor section of the website .
| Date | Announcement |
|---|---|
| January 2, 2008 | Name change in affi liate |
| January 4, 2008 | Financial calendar |
| March 11, 2008 | Annual Report 2007 |
| March 12, 2008 | Annual General Meeting |
| March 28, 2008 | Development of Annual General Meeting |
| April 1, 2008 | Issue of warrants in BioPorto A/S |
| May 28, 2008 | Interim fi nancial statement, fi rst quarter 2008 |
| May 30, 2008 | Articles of association |
| June 23, 2008 | New diagnostic application of the APC-PCI test |
| June 27, 2008 | BioPorto launches Rat NGAL ELISA Kit |
| July 30, 2008 | BioPorto's NGAL patent approved for issue in Europe |
| August 28, 2008 | Interim Financial Report for Q2 2008 |
| August 29, 2008 | Announcement from major shareholder |
| August 29, 2008 | Insiders dealings |
| September 9, 2008 | Insiders dealings |
| September 16, 2008 | Shares and votes |
| September 25, 2008 | Announcement from major shareholder |
| September 30, 2008 | Announcement from major shareholder |
| November 26, 2008 | Interim Financial Report for Q3 |
| December 5, 2008 | Insiders dealings |
| December 9, 2008 | Financial calendar 2009 |
| December 12, 2008 | BioPorto's patent rights for NGAL |
| December 12, 2008 | BioPorto's patent rights strengthened for NGAL |
| December 18, 2008 | Insiders dealings |
| December 22, 2008 | Insiders dealings |
In 2008, BioPorto increased the number of investor meetings and will continuously aim at a satisfactory flow of information including efforts to create awareness among media and analysts.
To ensure an efficient, expedient dialog with our share holders, BioPorto encourages its share holders to let their share holding be registered and to participate in annual general meetings. The IR Department is also responsible for ensuring that information from the company's IR stakeholders is passed on to the management and the board of directors.
BioPorto A/S plans to issue the following financial announcements, etc., in 2009.
Additional information is available at the company's website, www.bioporto.com. For Investor Relations, please contact:
Christina Tønnesen Investor Relations
Tel.: +45 4529 0000 Fax: +45 4529 0001 E-mail: [email protected]
The annual general meeting, at which the annual report for 2008 will be discussed, is held on April 1, 2008 at 3 p.m. at the company address
| Date | Announcement |
|---|---|
| February 16, 2009 | Quiet period prior to the annual report begins |
| March 16, 2009 | Annual report from 01.01.2008 – 31.12.2008 |
| April 1, 2009 | Shareholders meeting |
| May 12, 2009 | Quiet period prior to the interim report begins |
| May 27, 2009 | Interim report – 3 months |
| August 11, 2009 | Quiet period prior to the interim report begins |
| August 25, 2009 | Interim report – 6 months |
| November 12, 2009 | Quiet period prior to the interim report begins |
| November 26, 2009 | Interim report – 9 months |
The management and board of directors of the company, BioPorto A/S, bring great focus to bear on investor relations, and the company's board of directors is committed to exercising good corporate governance. Following the recommendations for good corporate governance generates value for the company in the long term and ensures the immediate publicizing of information to share holders and the stock market.
The board is responsible for the overarching management and control of BioPorto A/S. Once a year, the board reviews its Rule of Procedure and the company's guidelines, policies and procedures, including the recommendations for good corporate governance for the purpose of ensuring that these are up to date and appropriate.
Six board meetings were held in 2008, including one lengthy strategy meeting and a number of ad hoc meetings. Six meetings have also been planned for 2009, in accordance with the board's annual schedule, which obviously can be changed or added to at any time to allow for additional meetings, if the need arises.
The members of the board are selected and put up for election on the basis of their specific qualifications and experience that are relevant to BioPorto. Thus, the board is composed with a view to ensuring an optimal combination of professional experience in the sector in general, in research and development, in sales and marketing, as well as in finance and economy. In the review of the composition of the board, diversity in relation to gender and age etc. is included. The board's age distribution is suitable and where the board members are all male, the company is represented by a female CEO. All board members are assessed by the board as being independent. The election term is one year at a time and the age limit is set at 70 years.
Ejner Bech Jensen, President, Novozymes Inc., has chosen to resign from the date of the annual general meeting 2009, as he finds his time for the board responsibilities in BioPorto insufficient. Ejner Bech Jensen has contributed to the board of directors with competencies such as R&D and IPR management as well as strategic and international experience. At the annual general meeting 2009, the board nominates Marianne Weile Nonboe, Director for Patents & Licensing in Novozymes. From Novozymes, Marianne Weile Nonboe has solid experience within IPR, licensing and business development, all valuable competencies for the board and the company's strategic situation. Marianne Weile Nonboe is 48 years of age and holds an MBA and a bachelor degree in biochemistry. Marianne Weile Nonboes candidature will be described in further detail in the summoning of the annual general meeting.
The chairman of the board is responsible for evaluating the management and the board of directors every year. The evaluation also includes the working relationship with the management. The result of the evaluation process is subsequently presented to and discussed at a board meeting. In 2008, the overall result of the evaluation was favorable, reflecting order and structure in the work of the board, and minor adjustments to be implemented in 2009.
Until 2008, BioPorto's share capital was made up of class A and class B shares, yet with no differentiation in voting rights between the two share classes. As part of the board's assessment of the company's capital structure and share structure, the board proposed to the annual general meeting to discontinue the class A shares which was subsequently effected (see share holder information for further details).
In order to comply with a statutory requirement that has come into force, BioPorto established an audit committee in 2008. The tasks of the audit committee will be performed by the board in full as the board meets the prerequisites that no board member is simultaneously a member of management and that at least one board member has specific accounting skills.
The aim of the audit committee is to:
BioPorto complies with the recommendations for good corporate governance with the following few exceptions:
ensures that all information relating to the work performed by the board is received by all board members .
• The board participates in the company's warrant program, as the company has found it suitable to make use of this remuneration form for the board in the light of the company's current situation and based on general practice in the sector .
A detailed review of BioPorto's position in the individual recommendation can be found on www .bioporto .com Investor Relations/Corporate Governance .
The basic fee of the board is set at a level which is assessed as being competitive and reasonable compared to the sector in general and the company's current situation . In 2008, the annual board fee was set at DKK 125,000 and the chairman of the board receives twice this fee . For 2009, the board proposes that the fees remain unchanged at DKK 125,000 and DKK 250,000 respectively . The board participates in the company's warrant program (see note 5) . The annual general meeting gives fi nal approval of the board's fees in connection with the discussion of the 2008 annual report .
The management is made up of one person, employed on a contract basis . In 2008, the management received a salary of DKK 1,220 thousand including pension . An agreement from 2008 exists with the management for 2009 regarding the disbursement of bonus, if a down payment is achieved or milestone payments in conjunction with the ongoing negotiations regarding license access to the company's NGAL IP rights . The management participates in the company's warrant program (see note 5) . No extraordinary or unusual agreements exist regarding remuneration at the time of retirement . The share holders' meeting approves the management's remuneration as part of discussing the annual report .
From left: Carsten Lønfeldt, Peter Nordkild, Niels T. Foged and Ejner Bech Jensen
The company's members of the board and management have the following shareholdings in BioPorto A/S.
They hold the following directorships in other companies. Directorships in wholly owned subsidiaries are not included.
| Share- | Directorship | ||
|---|---|---|---|
| Board positions | holding | In other companies | Function |
| Carsten Lønfeldt (1947) Director, KCBL Management ApS Joined the board in 2007 |
30,000 | Gypsum Recycling International A/S Deadline Games A/S Clirecon ApS |
CB CB CB |
| ByrumLabflex A/S ALK-Abelló A/S Dameca A/S Polaris management A/S ATP Invest Investeringsforeningen Nykredit Invest Investeringsforeningen Investin Capital+ Management ApS |
MB MB MB MB MB MB MB MB |
||
| NKB Invest 106 ApS | D | ||
| Peter Nordkild (1955) Man. Director, Egalet A/S Joined the board in 2007 |
67,900 | Sundhedsguiden ApS K/S Asschenfeldt, Tyskland Super VIII K/S Asschenfeldt, Redcote Lane, Leeds K/S Asschenfeldt, the Pentagon, Derby K/S Asschenfeldt, Lange Strasse K/S Asschenfeldt, Tyskland Super II |
MB MB MB MB MB CB |
| Niels Tækker Foged (1961) CSO, Visiopharm A/S Joined the board in 2007 |
26,000 | Visiopharm A/S In Situ RCP A/S Bioanophotonics A/S |
MB MB MB |
| Ejner Bech Jensen (1955) Director, Novozymes Inc. Joined the board in 2005 |
0 |
| Share- | Directorship | |||
|---|---|---|---|---|
| Management | holding | In other companies | Function | |
| Thea Olesen (1966) | 195,664 | Olesens A/S | CB | |
| Joined the management of BioPorto A/S in 2005 |
Wulff.Olesen ApS | D | ||
| Chairman of the board | CB | Managing director | D | |
| Member of the board | MB |
In recent decades, exact diagnosis and thus more correct treatment have become crucial decision-making factors for doctors around the world. This is naturally related to the improved options that have arisen over the years for being able to make the diagnosis. Whereas the pathological picture used to be determined using more or less vague indicators and symptoms, many diseases can now be detected based on molecular information. This means that successful treatment is largely dependent on the diagnostic techniques and tests available. To patients, improved diagnostic methods mean that their treatment will be more specific, safe and successful. For the healthcare system, improved diagnosis leads to reduced costs by reducing the waste of resources that arises whenever ineffective and costly treatment processes are chosen and by reducing the number of hospitalization days.
As a result, the diagnostic market has intensified its requirements for a greater number of highly specialized diagnostic tests and, as a supplier in this market, BioPorto does not expect to be appreciably affected by the present financial crisis. There is a risk, however, that the research market will be affected to some extent by cost-cutting measures in the years ahead, but as BioPorto is gradually and increasingly moving away from the research-based market to the diagnostics market, the group will be less vulnerable to market trends.
In the years ahead, BioPorto will seek to increase its access to the rapidly growing routine diagnostics market. Gaining a share of this market is exceptionally interesting, as a new diagnostic immunoassay, after market acceptance and implementation, will retain its market shares for a long time, thus becoming the basis for a larger sales volume and recurring orders.
Firmly rooted in this overarching objective, and on the basis of the group's existing portfolio of unique antibodies, BioPorto has laid down a selection strategy focusing on the development of in-licensing and the sale of market-relevant monoclonal antibodies and antibodybased products for the basic research market. This ensures access to important market information which can be commercially utilized in the diagnostic areas of interest for clinical research and routine diagnostics. The antibodies with potential as IVD assays are selected on the basis of the knowledge obtained by the group, and from here, the company endeavors to develop and patent a new assay of this sort with a view to sales for routine diagnostics.
It is crucial for continued growth to establish a corporate structure and underlying business goals for progress, in addition to having the proper selection of development programs and areas of focus. The consolidation of the group in recent years – which includes changing the composition of the board by adding targeted commercial and professional expertise, enlarging the sales organization, optimizing the distribution network and achieving significant intellectual property rights, together with the original business areas – has laid the groundwork for our continued growth.
From now on, an increasing number of BioPorto's immunoassays, including NGAL, will be established on the diagnostics market. For this reason, we expect to see an economically viable business in the years ahead that is independent of the licensing income generated by the group's NGAL patents.
The group's aims are unchanged:
As the group gradually achieves the goals it has set, and sufficient capital is available for the envisioned enlargements, the group expects to improve its foothold on the individual markets and expand its activities. In order to use markers as routine immunoassays, it is crucial that the assay is delivered in the proper format, which is why many resources must be applied to the right collaborative efforts and in concluding licensing agreements to achieve the largest possible share of the routine immunoassay market.
The group's net revenues increased in 2008 by 18% to a total of DKK 9.9 million (DKK 8.3 million). Sales of monoclonal antibodies increased by 22% to a total of DKK 6.2 million. Sales of ELISA kits increased by 4% to a total of DKK 3.1 million. The growth is primarily attributable to the group's success with its portfolios of NGAL and GLP-1 products, increasing by 44% and 45% respectively. In 2008, NGAL was the primary product in sales as well.
In 2008, revenue increased in all geographic regions. In Europe and North America the increase was 26% and 18% respectively whereas the increase in Asia only made up 6%. On the whole, the distribution between regions remained unchanged. The largest markets for BioPorto's products were North America and Europe accounting for 48% and 43% of the revenue respectively.
In 2008, the net revenue was lower than expected at the beginning of the year. The primary causes of the lower growth rate include competitive challenges in the basic research NGAL area, impaired consumer spending in the US due to the USD-EUR ratio, and delayed launches of the new ELISA kits for the measurements of Rat NGAL as well as APC-PCI.
Gross income increased by 44% to DKK 5.3 million in 2008 (DKK 3.7 million). The gross income is affected by a greatly improved production economy on top of the increase in net revenue. The gross margin ratio was 54% compared to 45% in 2007. Improved capacity utilization, improved yield, and cost reductions have all contributed to this progress. Write-downs resulting from obsolescence amounted to DKK 0.6 million in 2008 (DKK 2.5 million).
Production costs amounted to DKK 4.5 million in 2008 (DKK 4.6 million).
Sales and marketing costs amounted to DKK 5.6 million in 2008 (DKK 3.9 million).
In 2007, BioPorto strengthened the sales and marketing department by the hiring of product manages for each of the key product areas. This effort affects the costs throughout 2008.
Research and development costs amounted to DKK 7.2 million in 2008 (DKK 6.4 million).
In 2008, extra resources have been spent on in-house product and process development of ELISA kits for Rat NGAL and APC-PCI respectively.
Administration expenses amounted to DKK 8.1 million in 2008 (DKK 7.5 million).
Warrants were granted to employees, management and board of directors in BioPorto A/S and BioPorto Diagnostics A/S. The granting is valued according to the Black-Scholes model and recognized under staff costs. The value of share-based payment included in the administration expenses amounts to DKK 813 thousand (DKK 131 thousand), distributed as follows:
| 1. | Production and distribution costs |
DKK 68 thousand |
|---|---|---|
| 2. | Sales and marketing costs |
DKK 186 thousand |
| 3. | Research and development costs |
DKK 194 thousand |
| 4. | Administration costs | DKK 365 thousand |
Financial income amounted to DKK 860 thousand in 2008 (DKK 764 thousand). The financial expenses were DKK 125 thousand (DKK 982 thousand). The reduction in financial expenses is due to reduced interest expenditures following the conversion and repayment of convertible bonds. The last convertible bond loan at a total of DKK 500 thousand was repaid in the middle of 2008.
The net loss for 200 was DKK 14.7 million (DKK 14.3 million). The loss conforms to the forecasts published in the 2007 annual report.
By the end of 2008 the balance sheet total amounted to DKK 19.2 million (DKK 14.3 million). The primary causes for the change is the reduction in cash resources by DKK 14.6 million due to the net loss.
Property, plant and equipment in the amount of DKK 0.4 million were purchased in 2008 (DKK 0.9 million). The investments break down as DKK 296 thousand for production and laboratory equipment and DKK 95 thousand for the fitting of rented premises.
The book value of tangible assets amounted to DKK 0.9 million as of December 31, 2008 (DKK 0.9 million).
Inventories amounted to DKK 3.1 million as of December 31, 2008 (DKK 3.1 million).
Production overhead totaling DKK 0.3 million is recognized in the inventories (DKK 0.3 million).
Sales receivables and other receivables amounted to DKK 1.9 million as of December 31, 2008 (DKK 2.1 million).
The group's equity amounted to DKK 15.5 million at the end of 2008 (DKK 29.5 million).The change is due to the net loss for the year. The warrant program as mentioned in administration expenses has resulted in an increased reserve concerning share-based payment of DKK 813 thousand.
As a result of the repayment of the remaining convertible bonds the equity interest is settled in 2008 (cf. note 16)
The group has 13,000 shares of treasury stock, equivalent to 0.03% of the share capital.
As of December 31, 2008, the share capital amounted to DKK 114.9 million dispersed over 38,302,624 shares.
The short-term liabilities amounted to DKK 3.7 million as of December 31, 2008 (DKK 4.4 million). The change is due to the repayment of remaining convertible bond loans totaling DKK 0.5 million and a reduction in trade payables totaling DKK 0.6 million.
Cash Flow Statement
Cash generated by the group's operating activities amounted to DKK -13.7 million in 2008 (DKK -14.1 million).
Cash generated by the group's investment activities amounted to DKK -0.4 million in 2008 (DKK -0.7 million).
Cash generated by the group's financing activities amounted to DKK -0.5 million in 2008 (DKK 46.4 million).
As of December 31, 2008, the group's cash resources are primarily in the form of bank deposits, totaling DKK 12.9 million (DKK 27.5 million).
| (T.DKK) | 2008 | 2007 | 2006 | 2005 | 2004 7 months |
|---|---|---|---|---|---|
| Net Revenues | 9,875 | 8,340 | 5,554 | 4,362 | 2,105 |
| Net income/loss from ordinary operating activities (EBIT) | (15, 477) | (14, 045) | (14, 659) | (14, 355) | (6,278) |
| Income/loss from net financials | 735 | (219) | (1,068) | (602) | (378) |
| Net income/loss from ordinary operating activities before tax. | (14, 742) | (14, 264) | (15, 727) | (14, 957) | (6,657) |
| Net income/loss for the year | (14, 742) | (14, 264) | (15, 727) | (7) | (3,088) |
| Long-term assets | 1,206 | 1,182 | 694 | 867 | 874 |
| Short-term assets | 17,951 | 32.718 | 4,108 | 13,598 | 8,614 |
| Total assets | 19,157 | 33,901 | 4,802 | 14,464 | 9,488 |
| Capital Stock | 114,908 | 114 908 | 73,059 | 73,059 | 66,422 |
| Equity …………………………………………………………………………… | 15,502 | 29,456 | (17, 617) | (3,056) | 2,211 |
| Long-term liabilities | 0 | 0 | 10,764 | 14,264 | 3,452 |
| Short-term liabilities | 3.655 | 4,445 | 11,654 | 3,256 | 3,825 |
| Total liabilities | 19,157 | 33,901 | 4,801 | 14,464 | 9,488 |
| Cash generated by operations | (13, 717) | (14, 129) | (13, 456) | (13, 881) | (2,276) |
| Cash generated by investment, net | (361) | (738) | (69) | (516) | (5,445) |
| Of which for investment in property, plant and equipment |
(392) | (880) | (265) | (251) | (412) |
| Cash generated by financing | (508) | 46,377 | 248 | 20,403 | (1, 462) |
| Total cash flow | (14,586) | 31,510 | (13, 277) | 6,005 | (9, 184) |
| Gross margin ratio | 54% | 45% | 56% | $-3%$ | 35% |
| Operating margin | $-157%$ | $-168%$ | -264% | $-329%$ | $-298%$ |
| Return on investment | $-245%$ | $-251%$ | -293% | $-251%$ | $-113%$ |
| Equity interest (equity ratio) | 80.9% | 86.9% | Negative | Negative | 23.3% |
| Return on equity | Negative | Negative | Negative | Negative | Negative |
| Average no. of employees | 20 | 20 | 16 | 16 | 14 |
| Average no. of shares (1,000) | 38,290 | 31,505 | 24,340 | 23,042 | 22,121 |
| Eamings per share (eps), DKK | $-0.39$ | $-0.45$ | $-0.65$ | $-0.65$ | 0.00 |
| Cash Flow Per Share (CFPS), DKK | $-0.36$ | $-0.45$ | $-0.55$ | $-0.60$ | 0.00 |
| Equity value per share, closing, DKK | 0.40 | 0.77 | $-0.72$ | $-0.13$ | 0.10 |
| Listed price, closing, DKK | 5.25 | 4.91 | 3.94 | 5.20 | 3.40 |
The comparative figures for 2005 have been changed in accordance with the decision of the Danish Securities Council and IFRS in general. The comparative figures for 2004 in the five-year overview have also been adjusted in relation to significant changes, including the reversal of goodwill, biological activities and capitalized development costs.
See note 1 of the consolidated accounts for the calculation of the individual financial ratios
BioPorto performs development and sales activities within the area of biotechnology. Through its activities, the group is exposed to a number of risks that could significantly affect the group's activity, in the event these risks were not correctly assessed or controlled. BioPorto's policy is to identify and minimize the risks deriving from the group's operations and to establish sufficient scope of insurance coverage. BioPorto has established risk-management as a formalized process for the purpose of generating a close correlation between the group's ongoing goals and activities and the individual risk elements of the group's sphere of activity.
The process comprises five sub-elements: identification, analysis, planning, action and follow-up. All heads of departments participate in efforts relating to the individual subsidiary activities where the individual risks are evaluated on the basis of probability and impact criteria. These efforts include both financial and non-financial risks. The board approves yearly targets for the risk-management efforts and a situation update is on the agenda of each board meeting.
A number of activities are planned for 2009 for the purpose of reducing, monitoring or controlling the significant areas of risk identified. The activities are included as an integral aspect of subsidiary departmental goals for 2009, and the economic consequences are incorporated into the budgets for the years ahead.
The management assesses that all significant elements of risk have been identified and addressed. See also the section relating to capital resources and note 17 (financial risks).
BioPorto is exposed to commercial risks, including market size, competing products, market penetration, the ability to establish alliances, and the possibility of obtaining patent protection.
BioPorto seeks to control these commercial risks by continuously monitoring and assessing the market situation and patent positions. The success of new diagnostic products and methods depends on the products being accepted in research environments and subsequently by the healthcare system. BioPorto expends significant resources on generating awareness of new biomarkers, supporting clinical experiments and establishing partnerships with a view to commercialization of the products. BioPorto's competitiveness is also ensured by continuously achieving, enlarging and upholding patent rights within the established areas of focus.
There is a potential risk that BioPorto's patent rights will be challenged by competing companies. BioPorto will aggressively seek to defend its rights in all significant markets. Legal action can last for long periods of time and be financially burdensome for the companies involved. If BioPorto were to enter into a legal defense of the group's patent rights, this could affect the annual financial result and the capital resources.
BioPorto is dependent on being able to attract and retain skilled employees in order to create new product opportunities, uphold the group's competitiveness and ensure growth and results. BioPorto offers its employees professional development opportunities, remuneration and incentive schemes at market levels, but also makes an active effort to create a positive working atmosphere where everyone's effort is respected.
BioPorto actively works to establish alternative manufacturing possibilities for the group's ELISA kits for the purpose of enhancing reliable supply. The first in-house produced Rat NGAL ELISA Kits were marketed in 2008, and additional kits will be produced in house. At the same time, BioPorto expects to negotiate collaboration agreements with new suppliers for existing and new ELISA kits.
BioPorto has a quality assurance system that conforms to the requirements in ISO13485:2003. This includes procedures for all product-related processes, supplier audits, optimization plans and periodic management reviews.
The management and board of directors aim to ensure the BioPorto Group's continued development through maintaining adequate capital resources for meeting long-term needs. It is still assumed that the first licensing agreement regarding NGAL patent rights will be in place in 2009. The licensing income is expected to constitute the largest share of the group's future revenues and contribute to making the expansions plans possible. Needless to say, the agreement's financial make-up will affect the management's and board's strategy and objectives for the group's future capital resources.
At the end of 2008, cash funds, in the form of bank deposits, totaled DKK 12.9 million The group's cash flow amounted to DKK -14.6 million in 2008. The group expects to substantially reduce its aggregate negative cash flow in 2009:
Rising costs are anticipated for extending and maintaining the group's IP rights, for consultancy in connection with establishing licensing agreements and developing the group's NGAL product portfolio.
In the management's view, the group's existing capital resources will be adequate for implementing the activities planned for 2009.
If the anticipated licensing income is not realized in 2009, the present capital resources can carry the group to the beginning of 2010. In this event, the management will intend to improve the capital base either by divesting IP rights and NGAL development projects or by raising new capital. At the same time, the group's activities will be focused on NGAL and the profit-making product portfolio of ELISA kits and antibodies.
As of today, the management and the board of directors have discussed and approved the annual report for BioPorto A/S for January 1 – December 31, 2008
The consolidated financial statements are presented in accordance with International Financial Reporting Standards (IFRS) as approved by the EU. The parent company financial statements are presented in accordance with the Danish Financial Statement Act. In addition, the annual report has been prepared in accordance with the additional Danish disclosure requirements for annual reports by listed companies.
In our opinion, the selected accounting policies are appropriate, so that the Annual Report presents a true and fair view of the company's assets, liabilities and financial position as of December 31, 2008, and of the financial result of the group's and parent company's activities and cash flow for the fiscal year from January 1 – December 31, 2008.
In our opinion, the Statement by the Management and the Board of Directors on the Annual Report presents a true and fair view of developments in the group's and the parent company's activities, economic factors, financial result and financial position, and also describes the most significant risks and elements of uncertainty facing the group and the parent company.
The annual report is hereby submitted to the annual general meeting for approval.
Gentofte, Denmark, March 16, 2009
Executive Management:
___________________________
Thea Olesen CEO
Board of Directors:
Carsten Lønfeldt Peter Nordkild Chairman
___________________________ ___________________________
___________________________ ___________________________
Niels T. Foged Ejner Bech Jensen
We have audited the annual report for BioPorto A/S for the fiscal year January 1 – December 31, 2008, comprising the statement by the management on the annual report, the review by the management and the board of directors, the income statement, the balance sheet, the statement of changes in equity, and notes, including the accounting policies for both the group and the parent company and cash flow statement for the group. The consolidated financial statements are presented in accordance with International Financial Reporting Standards as approved by the EU and the parent company financial statements are presented in accordance with the Danish Financial Statement Act. In addition, the annual report has been prepared in accordance with the additional Danish disclosure requirements for annual reports by listed companies.
The management and board of directors are responsible for preparing and presenting an annual report which gives a true and fair view in accordance with International Financial Reporting Standards as approved by the EU in so far as the consolidated financial statements, Danish Financial Statement Act in so far as the parent company and additional Danish disclosure requirements for annual reports by listed companies. This responsibility includes the wording, implementation and maintenance of internal controls which are relevant to preparing and presenting an annual report which gives a true and fair view without material misstatement, regardless of whether the misinformation is due to fraud or error, as well as the choice and application of appropriate accounting policies and the exercise of accounting estimates that are reasonable under the circumstances.
We are responsible for submitting our opinion of the annual report on the basis of our audit. We have performed our audit in accordance with Danish and international auditing standards. As demanded by these standards, we live up to ethical requirements, as well as plan and carry out our audit for the purpose of obtaining a high degree of certainty that the annual report is free of material misstatement.
An audit includes actions performed to obtain audit evidence of the amounts and information specified in the annual report. The actions chosen depend on the auditor's assessment, including the assessment of risk of material misstatement in the annual report, regardless of whether the misstatement is due to fraud or error. In making the assessment of risk, the auditor considers the internal controls that are relevant to the company's preparation and presentation of an annual report that provides a true and fair view for the purpose of drawing up audit procedures that are suitable under the circumstances, but not for the purpose of expressing a conclusion regarding the efficiency of the company's internal control. Our audit also includes an assessment and an opinion of whether the accounting policies applied by the management and the board of directors are appropriate, whether the accounting estimates of the management and board of directors are reasonable, as well as an assessment of the overall presentation of the annual report.
In our view, the audit evidence is sufficient and suitable as a basis for our conclusion.
Our audit has not given cause for qualification.
In our opinion, the annual report presents a true and fair view of the group's assets, liabilities and financial position as of December 31, 2008, and of the financial result of the group's activities and cash flow for the fiscal year from January 1 – December 31, 2008, in accordance with International Reporting Standards as approved by the EU and with additional Danish disclosure requirements for the annual reports of listed companies.
In addition, in our opinion, the annual report presents a true and fair view of the parent company's assets, liabilities and financial position as of December 31, 2008, and of the financial result of the parent company's activities for the fiscal year from January 1 – December 31, 2008, in accordance with the Danish Financial Statement Act and with additional Danish disclosure requirements for the annual reports of listed companies.
Copenhagen, Denmark, March 16, 2009
State Authorized Partnership of Public Accountants
Jens Sejer Pedersen Martin Faarborg State Authorized State Authorized Public Accountant Public Accountant
January 1 – December 31, 2008
| Note | 2008 T.DKK |
2007 T.DKK |
|
|---|---|---|---|
| 3 | Net Revenues | 9,875 | 8,340 |
| Production and distribution costs | (4,533) | (4,622) | |
| Gross income/loss $\ldots$ $\ldots$ $\ldots$ $\ldots$ $\ldots$ $\ldots$ $\ldots$ $\ldots$ $\ldots$ $\ldots$ $\ldots$ $\ldots$ $\ldots$ $\ldots$ $\ldots$ $\ldots$ | 5,342 | 3,718 | |
| $4 - 7$ | Sales and marketing costs | (5,550) | (3,903) |
| $4 - 7$ | Research and development costs | (7,204) | (6, 382) |
| $4 - 7$ | Administration expenses | (8,065) | (7, 478) |
| Earnings before interest (EBIT) | (15, 477) | (14, 045) | |
| 8 | Financial income | 860 | 763 |
| 8 | Financial expenses | (125) | (982) |
| Earnings before tax | (14, 742) | (14, 264) | |
| 15 | Income taxes relating to net loss | $\circ$ | 0 |
| Net income/loss for the year | (14, 742) | (14, 264) | |
| Earnings per Share (eps) | DKK | DKK | |
| У | Eamings pershare (eps/deps) | $-0.39$ | $-0.45$ |
The BioPorto Group
December 31, 2008
| Note | ASSETS | 2008 Dec. 31 T.DKK |
2007 Dec. 31 T.DKK |
|---|---|---|---|
| Long-term assets | |||
| Tangible assets | |||
| 10 | Other plant, operating equipment and fixtures | 981 | 973 |
| Tangible assets | 981 | 973 | |
| Other long-term assets | |||
| Deposits | 225 | 209 | |
| Other long-term assets, total | 225 | 209 | |
| Long-term assets, total | 1,206 | 1,182 | |
| Short-term assets | |||
| 11 | Invento ries ………………………………………………………………………………………… | 3,129 | 3,148 |
| 12 | Receivables, sales | 1,067 | 809 |
| Prepayments | 0 | 45 | |
| 12 | Other receivables and prepayments | 848 | 1,222 |
| Receivables | 5,044 | 5,225 | |
| Cash resources | 12,907 | 27,494 | |
| Short-term assets, total | 17,951 | 32,718 | |
| ASSETS, TOTAL | 19,157 | 33,901 |
The BioPorto Group December 31, 2008
| Note | LIABILITIES | 2008 Dec. 31 T.DKK |
2007 Dec. 31 T.DKK |
|---|---|---|---|
| Equity | |||
| 13 | Capital stock | 114,908 | 114,908 |
| 16 | Convertible bond loans | 0 | 25 |
| 5 | Share-based payment | 1,855 | 1,042 |
| 14 | Treasury stock | (44) | (44) |
| Retained income/loss | (101, 217) | (86, 475) | |
| Equity, total | 15,502 | 29,456 | |
| Liabilities | |||
| Short-term liabilities | |||
| 16 | Short-term segment of long-term liabilities | $\overline{0}$ | 483 |
| 17 | Suppliers of goods and services | 1,327 | 1,886 |
| 17 | Other debt | 2,328 | 2,077 |
| Short-term liabilities, total | 3,655 | 4,445 | |
| Liabilities, total | 3,655 | 4.445 | |
| LIABILITIES, TOTAL | 19,157 | 33,901 | |
| Other notes: |
| Capital stock T.DKK |
Treasury stock T.DKK |
Premium T.DKK |
Convertible loan T.DKK |
Share-based payment T.DKK |
Retained income/loss T.DKK |
Total T.DKK |
|
|---|---|---|---|---|---|---|---|
| Equity, January 1, 2007 | 73,059 | (44) | 0 | 736 | 1,166 | (92,533) | (17, 617) |
| Changes in equity, 2007 | |||||||
| Net income/loss for the period | $\mathbf{0}$ | $\circ$ | $\mathbf{0}$ | 0 | $\circ$ | (14, 264) | (14, 264) |
| Total income | 0 | $\circ$ | 0 | $\circ$ | 0 | (14, 264) | (14, 264) |
| Capital increase | 41,849 | $\circ$ | 23,060 | 0 | $\circ$ | $\circ$ | 64,909 |
| Convertible bonds | $\mathbf{O}$ | $\circ$ | $\mathbf{O}$ | (711) | $\mathbf{0}$ | $\mathbf 0$ | (711) |
| $\textsf{issue costs}$ | $\Omega$ | $\circ$ | (2,994) | $\circ$ | $\mathbf{0}$ | $\mathbf 0$ | (2,994) |
| Share-based payment | $\circ$ | $\circ$ | $\circ$ | 0 | (124) | 256 | 132 |
| Transferred to "retained income" | $\Omega$ | $\circ$ | (20,066) | $\circ$ | $\mathbf{0}$ | 20,066 | $\mathbf{0}$ |
| Equity December 31, 2007 | 114,908 | (44) | 0 | 25 | 1,042 | (86, 475) | 29,456 |
| Capital stock T.DKK |
Treasury stock T.DKK |
Premium T.DKK |
Convertible loan T.DKK |
Share-based payment T.DKK |
Retained income/loss T.DKK |
Total T.DKK |
|
|---|---|---|---|---|---|---|---|
| Equity, January 1, 2008 | 114,908 | (44) | 25 | 1,042 | (86, 475) | 29,456 | |
| Changes in equity, 2008 | |||||||
| Net income/loss for the period | $\Omega$ | $\Omega$ | (14, 742) | (14, 742) | |||
| Total income | $\Omega$ | $\Omega$ | (14, 742) | (14, 742) | |||
| Convertible bonds | 0 | $\mathbf{0}$ | $\circ$ | (25) | $\mathbf{0}$ | $\mathbf 0$ | (25) |
| Share-based payment | $\circ$ | $\circ$ | $\mathbf{0}$ | $\circ$ | 813 | $\circ$ | 813 |
| Equity December 31, 2008 | 114.908 | (44) | 0 | 0 | 1.855 | (101, 217) | 15,502 |
The BioPorto Group
January 1 – December 31, 2008
| √ote | 2008 T.DKK |
2007 T.DKK |
|
|---|---|---|---|
| Earnings before tax | (15, 477) | (14, 045) | |
| Adjustment for non-cash operating items: | |||
| Depreciation, amortization, write-downs and impairment | 384 | 395 | |
| Share-based payment | 813 | 131 | |
| Cash generated by primary operations before change in working capital |
(14, 280) | (13, 519) | |
| 19 | Change in working capital | (172) | (391) |
| Cash generated by primary operations | (14, 452) | (13,910) | |
| Interest income, included | 860 | 763 | |
| Interest expenses, paid | (125) | (982) | |
| Cash generated by operating activities | (13, 717) | (14, 129) | |
| Purchase of tangible assets | (392) | (880) | |
| Prepayment | 31 | 142 | |
| Cash generated by investment activities | (361) | (738) | |
| Change to short term debt, related parties …………………………………………………… | 0 | (1,038) | |
| Change regarding convertible bonds | (508) | 0 | |
| Shareholders: | |||
| Cash issue, direct placement, incl. exercise of warrant | $\mathbf 0$ | 50,409 | |
| lssue cost ……………………………………………………………………………………………… | 0 | (2,994) | |
| Cash generated by financing activities | (508) | 46,377 | |
| Cash flow for the year | (14,586) | 31,510 | |
| Cash resources at the beginning of the year | 27,493 | (4, 017) | |
| Cash resources at the end of the year | 12,907 | 27,493 |
The annual report for the BioPorto Group is presented in accordance with International Financial Reporting Standards (IFRS) as approved by the EU and in accordance with additional Danish disclosure requirements for the annual reports of listed companies. The disclosure requirements of OMX the Nordic Exchange, Copenhagen, relating to the annual reports of listed companies and the Executive Order on IFRS are issued pursuant to the Danish Financial Statements Act.
The annual report for the group also meets the International Financial Reporting Standards (IFRS) issued by IASB.
The annual report is presented in Danish kroner (DKK), which is regarded as the primary currency for the group's activities and the functional currency of the parent company and the subsidiary alike.
The annual report is presented on the basis of historical costs, except for share-based payment, which is measured at fair value.
The accounting policies, which remain unchanged compared to last year, are otherwise as described below.
Implementation of new and modified standards and interpretations
The 2008 annual report is presented in accordance with the new and modified standards and new interpretations as approved by the EU that apply to fiscal years beginning on January 1, 2008. These standards and interpretations have no influence on the consolidated financial statements.
At the time of publishing this annual report, a number of new or modified standards and interpretations have yet to take effect or have not been approved by the EU and for this reason are not incorporated into the annual report.
In the assessment of the management and the board of directors, the application of these new and modified standards and interpretations has no material effect on the annual report for forthcoming fiscal years, except for the additional disclosure requirements resulting from the implementation of the modified IAS 1, "Presentation of Financial Statements" and IFRS 8 "Operating Segments".
Earnings are recognized in the income statement concurrent with their realization. In addition, all costs incurred to achieve the income for the year are recognized in the financial statements, including depreciation, amortization, write-downs, impairment and provisions, as well as carry backs resulting from modified accounting estimates of amounts previously recognized in the financial statements.
Assets are recognized on the balance sheet when it is likely that future financial benefits will accrue to the company and the asset's value can be measured reliably.
Liabilities are recognized on the balance sheet when it is likely that future economic benefits will flow from the company and the liability's value can be measured reliably.
Assets and liabilities are measured at the cost on initial recognition. Subsequently assets and liabilities are measured as described below for each item.
Some financial assets and liabilities are measured at the amortized cost, whereby a constant, effective rate of interest is recognized over the term of the asset/liability. Amortized cost is calculated as the original cost, minus any repayment, as well as the addition/deduction of the accumulated amortization of the difference between the cost and the nominal amount. In so doing, the capital loss and capital gain are dispersed over the term to maturity.
For recognition and measurement, predictable gains, loss and risk occurring before the submission of the annual report and which confirm or disprove the situation on the balance sheet date are taken into consideration.
The consolidated financial statements include the parent company, BioPorto A/S, and the subsidiaries in which BioPorto A/S has a controlling interest, i.e. controlling influence on financial and operating policies for achieving returns or other benefits for its activities. Controlling interest is achieved by directly or indirectly owning or having at one's disposal more than 50% of the voting rights or otherwise controlling the company concerned. Companies in which the group exercises significant but not controlling influence are regarded as affiliated companies. Significant influence is typically achieved by directly or indirectly owning or having at one's disposal more than 20% but less than 50% of the voting rights. The assessment of whether BioPorto A/S has controlling or significant influence considers potential voting rights that could be exercised on the balance sheet date.
The consolidated financial statements integrate the financial statements for the parent company and the individual subsidiaries, which are accounted for in accordance with the group's accounting policies, with the elimination of intercompany income and expenses, intercompany share holdings, intercompany balances and dividends, as well as realized and unrealized earnings for transactions between the consolidated companies. Unrealized earnings from transactions with affiliated companies are eliminated in proportion to the group's ownership interest in the company. Unrealized losses are eliminated according to the same procedure as unrealized earnings to the extent that an impairment has not occurred.
A functional currency is determined for each of the group's reporting companies. The functional currency is the currency used in the primary financial environment in which the specific reporting company operates. Transactions in other currencies than the functional currency are transactions in foreign currency.
Transactions in foreign currency are translated on initial recognition to the functional currency according to the exchange rate prevailing on the date of the transaction. Currency differences arising between the rate on the date of the transaction and the rate on the date of payment are recognized in the income statement under financial income or expenses.
Receivables, debt and other monetary items in foreign currency are translated into the functional currency according to the exchange rate prevailing on the balance sheet date. The difference between the rate on the balance sheet date and the rate on the date on which the receivable or debt arose or was recognized in the most recent annual report is included in the income statement under financial income and expenses.
The company has granted warrants (share subscription rights) to the board of directors, the management and employees. Share-based incentive programs in which the employees alone have the option of choosing to subscribe to new shares in the parent company (equity-settled share-based payment arrangements) are measured at the fair value of the equity instruments on the date of granting and are recognized in the income statement when the employees acquire the right to subscribe to the new shares. The set-off for this is recognized directly in the equity as a separate reserve until utilized.
Payments in conjunction with operating leases are recognized in the income statement over the term of the lease.
The group is managed as one business entity operating in one geographic market. Separate areas of business cannot be identified for the individual product candidates or geographic markets. As a result of this, segment information is not broken down into business segments or geographic markets. However, the breakdown of net revenues is reported in note 3 for Denmark, EU Member States and other. There are no long-term assets or investments outside Denmark.
Revenues from sales of finished goods are recognized in the income statement if the goods have been delivered and the risk has been passed on to the customer before the end of the year, and if said income can be reliably accounted for and receipt of payment is expected.
Net revenues from development and cooperation contracts are recognized in the income statement if the general criteria for revenue recognition are observed.
This is considered to be the case when:
The revenues are recognized exclusive of VAT and after the deduction of any discount connected to the sale. Production and distribution costs
Production costs include costs incurred for achieving the year's net revenues, including fixed and indirect overhead for raw materials and consumables, wages and salaries, freight, royalties, rent and leasing as well as depreciation of plant.
Costs recognized under sales and marketing costs are those incurred for marketing products sold during the year and sales campaigns, etc., that have been carried out. Costs for sales staff, advertising and exhibition costs, as well as depreciation and amortization are included here.
Wages and salaries, laboratory materials, patent expenses, rent, leasing and other costs relating to the company's research and development activities are recognized under research and development costs.
Costs incurred during the year for the management and administration of the company, including costs for administrative staff, management, office facilities and office costs, depreciation, amortization, etc., are recognized under administration expenses.
Financial income and expenses include interest, capital gains and losses, as well as write-downs and impairment concerning debt, securities and foreign currency transactions, amortization of financial assets and liabilities, as well as charges and refunds under the tax prepayment scheme, etc.
The tax for the year, consisting of the year's current tax and the change in the deferred tax, is recognized in the income statement by the amount attributable to the net loss and directly to the equity by the amount attributable to entries under equity.
To the extent the group obtains deductions by means of the accounting of the taxable income resulting from share-based payment, the tax effect of the schemes is recognized under income taxes relating to net income. If the total tax deduction exceeds the total accounting cost, the tax effect of the surplus deduction is recognized directly to the equity, however.
In accordance with "IAS 38, Intangible Assets", intangible assets arising from development projects must be recognized on the balance sheet when the development project is clearly defined and identifiable where technical utilization options are demonstrated and adequate resources can be documented for completing the development work and marketing or using the product, and the company's management has acknowledged its intention to manufacture and market or use the product.
Finally, it must be possible to document with adequate certainty that the future earnings from the development project will exceed the costs of production and development as well as for selling and administering the product. Development costs concerning individual projects are only recognized as assets in the event it is adequately certain that the future income of the individual projects will exceed not only the production, selling and administration costs, but also the development costs for the product.
In the opinion of the management and board of directors, a large risk is generally associated with the company's products and for this reason it is not possible to obtain adequate certainty for future earnings at present. The future financial advantages associated with product development cannot be calculated with reasonable certainty until the development activities have been completed. As a result of this, development costs are expensed concurrent to being incurred during the year.
Acquired intangible assets, including patents and licenses, are measured at fair value, after the deduction of accumulated depreciation, amortization, writedowns and impairment. Other intangible assets are depreciated/amortized on a straight-line basis during the expected useful life. Intangible assets with an indefinable useful life are not amortized, however, but reviewed for impairment at least once a year.
Other plant, machinery and equipment are measured at the original cost, minus the accumulated depreciation, amortization, write-downs and impairment. The cost includes the acquisition price as well as expenses directly associated with the acquisition up to the date on which the asset is ready for use.
Depreciation and amortization are carried out on a straight-line basis over the expected useful life of the assets, which are assessed as having the following terms of years:
The basis for depreciation and amortization is the original cost, minus the expected residual value at the end of the useful life. The original cost of a total asset is divided into smaller components that are depreciated/ amortized separately if their useful life differs. Depreciation and amortization methods, useful lives and residual values are reassessed each year.
Depreciation and amortization are recognized in the income statement under production costs, research and development costs, selling and marketing costs and administration expenses respectively to the extent the depreciations/amortizations are not included in the original cost for inventory as indirect production overhead (IPO).
Intangible assets with an indefinable useful life are reviewed at least once a year for impairment, the first time before the end of the year of acquisition. Ongoing development projects are similarly reviewed for impairment once a year.
The accounting value of intangible assets with an indefinable useful life and development projects in process is reviewed at least once a year for impairment together with the other qualifying assets belonging to the cash-generating unit to which the asset is allocated and written down to the recoverable amount in the income statement, in the event the accounting value is higher. The recoverable amount is usually accounted for as the present value of the anticipated future net cash flow from the enterprise or activity (cash-generating unit) to which the asset is associated.
Deferred tax assets are assessed yearly and recognized only to the extent it can be rendered probable that they will be utilized in the near future.
The book value of other qualifying assets (including investments in subsidiaries) is assessed annually to determine whether there is an indication of impairment. If an indication is present, the asset's recoverable value is calculated. The recoverable value is the highest value of the asset's fair value, minus the expected costs of disposal and the value in use.
An impairment loss is recognized when the book value of an asset or a cash-generating unit respectively exceeds the asset's or the cash-generating unit's recoverable value. Impairment loss is recognized in the income statement under production, selling and distribution costs respectively or administration costs. Write-down relating to goodwill is recognized on a separate line of the income statement, however.
Write-downs relating to other assets is reversed to the extent changes occur in the prerequisites and estimates that led to the impairment. Impairment is only reversed to the extent that the asset's new book value does not exceed the book value the asset would have had after depreciation or amortization if the asset had not been impaired.
The cost of inventories is measured according to the FIFO method. If the net realizable value is lower than the cost, the inventory in question is written down to this lower value.
The cost for raw materials and consumables is calculated at cost with the addition of transportation and similar costs.
The cost of finished goods and goods in progress includes the cost of raw materials, consumables, direct wages and indirect production overhead (IPO). Indirect production overhead includes indirect costs such as materials and wages, as well as costs for maintenance of and depreciation/amortization of machinery and equipment used in the production process, as well as costs for production administration and management.
The net realizable value of inventories is calculated as the selling price minus completion costs and costs incurred to effectuate sales and is determined under consideration of marketability, obsolescence and developments relating to the loss expected.
Receivables are measured at the amortized cost or a lower net realizable value, which usually equates to the nominal value, minus impairment for meeting a loss. Write-downs for bad and doubtful debts are based on an individual assessment of each receivable.
Prepaid expenses recognized under assets include expenses to be incurred in the subsequent fiscal year. Prepaid expenses are measured at cost.
Acquisition and disposal costs as well as the dividend
for treasury stock are recognized directly in equity. The capital reduction by cancelling treasury stock reduces the share capital by an amount equivalent to the nominal value of the equity investment.
Proceeds received from the exercise of warrants are booked directly under equity.
Convertible loans are viewed as combined financial instruments divided into a debt component and an equity component in the form of an embedded conversion right. Both components are recognized and presented separately. On the date of granting, the fair value of the financial debt is determined by applying a market rate for a similar non-convertible debt instrument. The management and board of directors base their estimate on the market rate of a similar loan without a conversion right. The estimate is subject to some uncertainty. The equity component is calculated as the difference between the loan's present value calculated by means of the respective interest rates.
Current tax liabilities and payable current tax are recognized in the balance sheet as the tax calculated for the year's taxable income, adjusted for the tax on taxable earnings of previous years and for tax paid on account.
Deferred tax is measured according to the balancesheet liability method by temporary differences between the book value and the tax value of assets and liabilities. However, deferred tax is not recognized for temporary differences concerning tax-related non-deductible goodwill and other entries in which temporary differences – apart from corporate acquisitions – have occurred after the date of acquisition without affecting the financial results or the taxable income. In the cases where the determination of the tax value can be performed according to different taxation rules, deferred tax is measured on the basis of the utilization of the asset or repayment of the debt respectively as planned by the management and board of directors.
Deferred tax assets, including the tax value of tax losses allowed to be carried forward, are recognized under other qualifying assets by the value at which they are expected to be used, either by means of an elimination in tax of future earnings or by offsetting in deferred tax liabilities within the same legal tax unit or jurisdiction (joint taxation).
Deferred tax concerning eliminations of unrealized intercompany profits and losses is adjusted.
Deferred tax is measured on the basis of the tax rules and rates of income tax that will apply when the deferred tax is expected to create a tax liability as a current tax according to the law in force on the balance sheet date. Any change to the deferred tax resulting from changes to rates of taxation is recognized in the income statement. The tax rate used for the current fiscal year is 25%.
Debts to banks and convertible bonds, etc., are recognized at the time of taking out the loan at the fair value of the obligation component, minus the transaction costs incurred. In subsequent periods, the financial liabilities are measured at the amortized cost by applying the effective interest method so the difference between the proceeds and the nominal value is recognized in the income statement under financial expenses during the term of the loan.
Other liabilities are measured at net realizable value.
Advance receipts recognized under liabilities include payments received for income in subsequent years. Advance receipts are measured at cost.
The cash flow statement is presented according to the indirect method and shows cash flow broken down by operating, investment and financing activities for the year, the year's change in cash and cash equivalents and the company's cash and cash equivalents at the beginning and end of the year.
The cash flow from operating activities is accounted for as EBIT, adjusted for non-cash operating items, changes in working capital and corporate income tax paid.
Cash generated by investment activity includes the purchase and sale of intangible, tangible and financial assets.
Cash generated by financing activity includes changes to the amount or composition of BioPorto A/S's share capital and costs connected with this, as well as the raising of loans, payments on interest-bearing debt and the payment of dividends to share holders.
Cash and cash equivalents include cash at bank and cash in hand.
Earnings per share (eps) and diluted earnings per share (deps) are accounted for in accordance with IAS 33.
The financial ratios stated under the key financial data are calculated as follows:
| Operating margin | EBIT x 100 |
|---|---|
| Net revenues | |
| Return on investment | EBIT x 100 |
| Average investment | |
| Equity ratio | Equity, closing x 100 |
| Total liabilities, closing | |
| Return on equity | Result for the year x 100 |
| Average equity | |
| Earnings per share (eps) | Result for the year |
| Average number of shares | |
| Cash flow per share | Cash generated by operations |
| Average number of shares | |
| Equity value per share, | Capital and reserves, closing |
| closing | No. of shares, closing |
| Price/book ratio | Listed price, closing |
| Equity value per share |
The financial ratios were prepared in accordance with "Anbefalinger & Nøgletal 2005" (Recommendations & Financial Ratios 2005) of the Den Danske Finansanlytikerforening (Danish Association of Financial Analysts).
An assessment of how future events will affect the value of certain assets and liabilities on the balance sheet date is required for determining the book value of these assets and liabilities. Assessments significant to the financial reporting are performed by determining development costs, incentive schemes, inventories, deferred tax, etc.
The assessments used are based on assumptions deemed justifiable by the management and the board of directors, but which are inherently uncertain and unpredictable. The assumptions may be incomplete or inaccurate and unforeseen events or circumstances may occur. In addition, the company is subject to risks and uncertainties that could cause the actual results to deviate from the estimates. BioPorto's special risks are discussed in the management review.
A significant deferred tax asset has been calculated (see note 15). In the view of the management and the board of directors, however, the option of using the tax asset in the near future is not sufficiently plausible, taking the IFRS as the point of departure. For this reason, the management and board of directors have chosen not to recognize the calculated tax asset on the balance sheet.
BioPorto has chosen to file an invalidity action against Phadia's European patent, initially in Denmark. During the case, Phadia filed a claim that BioPorto violates Phadia's patent rights and demanded that BioPorto's NGAL products be withdrawn from the market and that compensation be paid for any units already sold. The Phadia patent case and the management's expectations are described in further detail in the management review, intellectual property rights. The management does not expect the patent case to result in any financial obligations for the group.
The other notes disclose information about the assumptions and prerequisites for the future and other discretionary uncertainties on the balance sheet date that entail a significant risk for changes that could lead to a significant adjustment of the book value of assets or liabilities within the next fiscal year.
| 2008 T.DKK |
2007 T.DKK |
|
|---|---|---|
| The geographical dispersion of the net revenues is as follows: |
||
| Denmark | 208 | 102 |
| EU Member States | 3.815 | 3,052 |
| Other | 5,852 | 5,186 |
| Net revenues, total | 9.875 | 8,340 |
| 2008 T.DKK |
2007 T.DKK |
|
|---|---|---|
| Wages and salaries | 10,390 | 8,736 |
| Contribution based pensions | 725 | 252 |
| Other social secutiry costs | 137 | 117 |
| Other staff costs ………………………………………………………………………………… | 426 | 288 |
| Share-based payment | 813 | 131 |
| Staff costs | 12,491 | 9,524 |
| Average number of employees | 20 | 20 |
| Staff costs are comprised of the following: | ||
| Production and distribution costs | 1,481 | 1,913 |
| Sales and marketing costs | 3,454 | 2,285 |
| Administration expenses | 4,376 | 2,804 |
| Research and development costs | 3,180 | 2,522 |
| 12,491 | 9,524 | |
| Payment to the management and board of directors breaks down as follows: | ||
| Management | ||
| Salaries and pensions | 1,220 | 839 |
| Share-based payment | 76 | 0 |
| 1,296 | 839 | |
| Board of directors | ||
| Remuneration | 625 | 250 |
| Share-based payment | 158 | 0 |
| 783 | 250 |
For the purpose of motivating and retaining employees, senior staff, management and board, BioPorto A/S established a warrant program on March 31, 2008, as an incentive and bonus scheme. The scheme, which solely may be exercised by the issuance of new shares (equity scheme) entitles the holder to subscribe to a number of new shares in the parent company at a prearranged price fixed as the average of the price of the share in the most recent 5 trading days prior to March 31, 2008. Warrants may be exercised from 2 up to 5 years after the granting date, though only for a period of 4 weeks after the date of the parent company's preliminary announcement of financial statements for the previous fiscal year. Unexercised warrants lapse on March 31, 2013.
| The granting of warrants breaks down as follows: | 2008 No. of |
Fair value 2008 T.DKK |
2007 No. of |
Fair value 2007 T.DKK |
|---|---|---|---|---|
| Outstanding warrants, January 1 | 771,160 | 1.042 | 910,000 | 1,166 |
| Granted in the fiscal year | 547,500 | 813 | 60,000 | 131 |
| Forfeited due to termination of employment | 0 | 0 | (111,000) | (142) |
| Exercised in the fiscal year | 0 | 0 | (87, 840) | (113) |
| Outstanding warrants, December 31 | 1.288.660 | 1.855 | 771.160 | 1.042 |
| Nominal value ea. DKK |
Subscriptions price ea. DKK |
No. of warrants ea. |
Nominal value, total T.DKK |
|
|---|---|---|---|---|
| Employees | 3.00 | 4.66 | 341,460 | 1,024 |
| Management | 3.00 | 4.66 | 69,700 | 209 |
| Board of Directors | 3.00 | 4.66 | 360,000 | 1.080 |
| Total, December 31, 2007 | 771,160 | 2,313 | ||
| Employees | 3.00 | 4.18 | 342,500 | 1,028 |
| Management | 3.00 | 4.18 | 45.000 | 135 |
| Board of Directors | 3.00 | 6.15 | 130,000 | 390 |
| Total, December 31, 2007 | 1,288,660 | 3,866 |
| Fair value ea. 2008 |
|
|---|---|
| Fair value, according to the Black-Scholes model (DKK), board of directors | 1.21 |
| Fair value, according to the Black-Scholes model (DKK), employees and management | 1.69 |
| 2008 T.DKK |
2007 T.DKK |
|
|---|---|---|
| Tangible assets (see note 10) | (384) | (395) |
| Depreciation, amortization, write-downs and impairment, total | (384) | (395) |
| Depreciation, Amortization, Write-downs and Impairment are recognized in the income statement as follows: |
||
| Production and distribution costs | (149) | (102) |
| Sales and marketing costs | (39) | (44) |
| Research and development costs | (149) | (101) |
| Administration expenses | (47) | (148) |
| (384) | (3.95) |
| 2008 T.DKK |
2007 T.DKK |
|
|---|---|---|
| Total fees, Deloitte State Authorized Partnership of Public Accountants |
346 | 576 |
| Itemized as follows: | ||
| Audit | 258 | 244 |
| Other services | 88 | 332 |
| Total fees, Deloitte | 346 | 576 |
| Fees for accounting firms, total | 346 | 576 |
| Parent Company | ||
|---|---|---|
| 2008 T.DKK |
2007 T.DKK |
|
| Interest income from bank | 838 | 728 |
| Interest income, financial activities not measured at fair value | 838 | 728 |
| Exchange rate adjustments | 18 | 35 |
| Other financial expenses | 4 | |
| Financial income, total | 860 | 763 |
| 2008 T.DKK l |
2007 T.DKK |
|
|---|---|---|
| Interest expenses to bank and credit institutions | 0 | (233) |
| Interest expenses, short-term debt | $\Omega$ | (58) |
| Interest expenses, convertible bonds | (13) | (453) |
| Interest costs, financial activities not measured at fair value | (13) | (744) |
| Exchange rate adjustments | (32) | (57) |
| Other financial expenses | (80) | (181) |
| Financial expenses, total | (125) | (982) |
| 2008 T.DKK |
2007 T.DKK |
|
|---|---|---|
| Net income/loss for the year | (14, 742) | (14, 264) |
| ea. | ea. | |
| Average number of shares | 38,302,624 | 31,517,940 |
| Average number of treasury stocks | (13,000) | (13,000) |
| Average number of shares in circulation | 38,289,624 | 31,504,940 |
| Average dilution effect of outstanding share options | 0 | $\mathbf 0$ |
| Diluted average number of shares in circulation | 38,289,624 | 31,504,940 |
| DKK | DKK | |
| Eamings per share (eps/deps) | (0.39) | (0.45) |
| Diluted eamings per share (deps) @ DKK 3.00 | (0.39) | (0.45) |
| The eps for 2007 is calculated on the basis of the equivalent main figures for eps: | ||
| BioPorto A/S's stockholders' share of: | ||
| Net income/loss for the year | (14, 742) | (14, 264) |
| 2008 T.DKK |
2007 T.DKK |
|
|---|---|---|
| Cost, 1 January | 3.443 | 2.563 |
| Addition during the year | 392 | 880 |
| Cost, December 31 | 3,835 | 3,443 |
| Depreciation and amortization, January 1 | (2, 470) | (2,075) |
| Depreciation and amortization for the year | (384) | (395) |
| Depreciation and amortization, December 31 | (2,854) | (2, 470) |
| Book value, December 31 | 981 | 973 |
| 2008 T.DKK |
2007 T.DKK |
|
|---|---|---|
| Finished products | 2.834 | 2.873 |
| Indirect production overhead | 294 | 275 |
| 3,128 | 3,148 | |
| The following adjustments were made to inventories: | ||
| Opening inventory | 3,148 | 2,773 |
| Cost of sales, recognized under production costs | (1,527) | (1,538) |
| Consumption and depreciation of goods for development purposes | (72) | (283) |
| Write-downs for slowly marketable products | (558) | (2,527) |
| Adjustment for indirect production overhead | 20 | 275 |
| Addition to inventories | 2,118 | 4,448 |
| Closing inventory | 3,129 | 3,148 |
| Inventory that is expected to be sold after twelve months | .994 | .866 |
|---|---|---|
| 2008 T.DKK |
2007 T.DKK |
|
|---|---|---|
| Receivables from sales and services | 1,118 | 859 |
| Other receivables | 848 | 1,268 |
| Write-down for meeting loss | (50) | (50) |
| 1,916 | 2,077 |
| Write-down account for meeting loss | 2008 T.DKK |
2007 T.DKK |
|---|---|---|
| Opening balance of write-down account for meeting loss | (50) | (286) |
| Change during the year | 236 | |
| Closing balance of write-down account for meeting loss | (50) | (50) |
| 2008 | 2007 | |
|---|---|---|
| No. | ea. | ea. |
| January 1 | 38,302,624 | 24,352,851 |
| Capital increase by means of cash issue | 0 | 10.322.225 |
| Conversion of bonds | 0 | 3,539,708 |
| Capital increase by means of exercising warrants | $\mathbf 0$ | 87.840 |
| December 31 ………………………………………………………………………………………… | 38,302,624 | 38,302,624 |
| No. of shares | Nominal DKK. |
Price DKK. |
|
|---|---|---|---|
| Cash issue, private placement | 10,322,225 | 3.00 | 4.84 |
| Conversion of bonds | 3,539,708 | 3.00 | 4.10 |
| Capital increase by means of exercising warrants | 87,840 | 3.00 | 4.66 |
| 13,949,773 |
| No. of shares | Nominal DKK |
Price DKK |
|
|---|---|---|---|
| Cash issue, private placement | 2.212.077 | 3.00 | 4.33 |
| 2,212,077 _________ |
| No. of shares | Nominal DKK |
Price DKK |
|
|---|---|---|---|
| Non-cash contribution by means of private placement | 11,093,750 | 3.00 | 3.20 |
| Debt conversion by means of private placement | 3,599,912 | 3.00 | 3.20 |
| Cash subscription for private placement | 7,149,100 | 3.00 | 3.20 |
| 21,842,762 |
Treasury Stock
| Nominal value | 2008 T.DKK |
2007 T.DKK |
|---|---|---|
| January 1 | -39 | 39 |
| December 31 | 39 | 39 |
| No. | ea. | ea. |
| January 1 | 13,000 | 13,000 |
| December 31 | 13,000 | 13,000 |
| % of share capital | $\frac{0}{0}$ | $\frac{0}{0}$ |
| January 1 | 0.03 | 0.05 |
December 31 |
0.03 | 0.03 |
| 2008 T.DKK |
2007 T.DKK |
|
|---|---|---|
| Tax asset value | 19.137 | 15,385 |
| Write-down to assessed value | (19, 137) | (15, 385) |
| Book value |
| Intangible assets | 4,016 | 4.025 |
|---|---|---|
| Tangible assets | 466 | 295 |
| Short-term assets | 137 | 417 |
| Tax losses allowed to be carried forward |
14,518 | 10,647 |
| Deferred tax, December 31, net | 19.137 | 15.385 |
| Group | ||
|---|---|---|
| 2008 T.DKK |
2007 T.DKK |
|
| Convertible loans, Equity share | 0 | 25 |
| Convertible loans, portion of short-term liabilities | Ω | 475 |
| Convertible loans, Interest due | ∩ | |
| Book value | 508 | |
| Interest on convertible loans | (13) | (453) |
| 2008 T.DKK |
2007 T.DKK |
|
|---|---|---|
| Receivables, sales | 1.067 | 809 |
| Other receivables | 848 | 1.222 |
| Cash resources | 12.907 | 27,494 |
| . |
| Not overdue | 966 | 729 |
|---|---|---|
| Overdue 0-90 days | 90 | 66 |
| Overdue more than 90 days |
| Cash resources | Currency | redemption yield |
31.12.2008 T.DKK |
31.12.2007 T.DKK |
|---|---|---|---|---|
| Deposit | DKK | 4.1% | 12907 | 27,092 |
| Sensitivity at the time of variable interest fluctuation | $1.0\%$ | 129 | 271 | |
| Financial liabilities | ||||
| 2008 T.DKK |
2007 T.DKK |
|||
| Convertible loans | 0 | 508 | ||
| Trade accounts payable | 1.327 | 1,886 | ||
| Other creditors | 1,003 | 1.110 | ||
| Bank debt | 0 | $\Omega$ |
See the general sections of the Annual Report regarding the group's risk-management policy and objectives, as well as the section regarding the group's capital resources and management.
As the group exports its products to a number of different markets, it is vulnerable to changes in currency exchange rates. All foreign customers are invoiced in EUR, which reduces the direct risk. Indirectly, the fluctuations can influence BioPorto's competitiveness which is not recognized in the sensitivity analysis. Otherwise, the group does not hedge exposure to currency fluctuations.
| Currency | Exchange rate |
2008 T.DKK |
|
|---|---|---|---|
| Revenue settled in | EUR | 7.45 | 9,334 |
| Sensitivity to change of currency | 0.15% | 0.01 | 104 |
The group's cash resources earn interest at a variable interest rate on market terms. The company's risk is limited, according to the statement in this note under financial instruments.
At present, the group's credit risk is primarily related to the subsidiary's receivables. The customers' financial situation and ability to pay are known by the company and the credit risk entailed by each receivable is assessed as modest. Prepayment of deliveries may be necessary for new customers. Otherwise, the group does not hedge the credit risk in any other way.
See the general sections of the Annual Report regarding the group's capital resources.
| 2008 าκk |
2007 T.DKK |
|
|---|---|---|
| Less than 1 year | 448 |
| 2008 T DKK |
2007 T.DKK |
|
|---|---|---|
| Less than 1 year | 536 | 511 |
| 1-5 years | 2,188 | 2,310 |
| Over 5 years | 1.872 | 2,286 |
| 2008 T DKK |
2007 T.DKK |
|
|---|---|---|
| Less than 1 year | ||
| 1-5 years | н | 100 |
| 2008 T.DKK |
2007 T.DKK |
|
|---|---|---|
| Minimum lease payment recognized in the net income/loss: | 1.428 | 1.337 |
| 2008 T.DKK |
2007 T.DKK |
|
|---|---|---|
| Change in inventories | 19 | (375) |
| Change in receivables | 118 | (631) |
| Change in supplier debt | (560) | 223 |
| Change in other debt | 251 | 392 |
| (172) | (391) |
BioPorto has chosen to take legal action against the company Phadia for revocation of the company's European NGAL patent, initially in Denmark. Phadia has countered this by claiming that BioPorto violates Phadia's patent rights and has demanded that BioPorto's NGAL products be withdrawn from the market and that compensation be paid for units already sold. On March 4, 2009, Cincinnati Children's Hospital (CCH) has issued a writ of summons claiming that the right to granting of BioPorto's NGAL cutoff patent belongs to CCH.
The two cases and the expectations of the management are described in the management review under "Intellectual property rights".
The management does not expect the patent cases to lead to financial or other liabilities for the group.
| ZUU8 | ZUU 1 | |
|---|---|---|
| T DKK | T.DKK | |
| Consulting fee: LAWA Consult, represented by Lars Heslet (former board men | 90 | |
| Consulting fee: Seppo Makinen (former board member) | ||
| Scientific Management: Lars Otto Uttenthal | 944 | 865 |
January 1 – December 31, 2008
| Note | 2008 T.DKK |
2007 T.DKK |
|
|---|---|---|---|
| 3 | Net Revenues | 1,620 | 1,110 |
| Gross income/loss | 1,620 | 1,110 | |
| $4 - 6$ | Administration expenses | (5,301) | (4,706) |
| Earnings before interest (EBIT) | (3,681) | (3,596) | |
| 8 | Financial income | 4,503 | 3,452 |
| 8 | Financial expenses | (60) | (895) |
| Eamings before tax | 762 | (1,040) | |
| 15 | Income taxes relating to net loss | $\circ$ | 0 |
| Net income/loss for the year | 762 | (1,040) | |
| Recommended appropriation of profit: | |||
| У | Carried forward to the coming year | 162 | (1,040) |
BioPorto A/S
December 31, 2008
| Note | ASSETS | 2008 December 31 T.DKK |
2007 December 31 T.DKK |
|---|---|---|---|
| Long-term assets | |||
| Tangible assets | |||
| 8 | Otherplant, operating equipment and fixtures | 5 | 9 |
| Tangible assets | 5 | 9 | |
| Financial assets | |||
| 10 | Receivables, subsidiary | 69.630 | 54,115 |
| 9 | Investment in subsidiary | 48,000 | 48,000 |
| Deposits | 224 | 207 | |
| Financial assets, total | 117,854 | 102,322 | |
| Long-term assets, total | 117,859 | 102,331 | |
| Short-term assets | |||
| Prepayments | $\mathbf 0$ | 45 | |
| 10 | Other receivables | 388 | 708 |
| Receivables | 388 | 753 | |
| Cash resources | 12,380 | 27,092 | |
| Short-term assets, total | 12,768 | 27,845 | |
| ASSETS, TOTAL | 130,627 | 130,176 |
BioPorto A/S December 31, 2008
| ote | |||
|---|---|---|---|
| LIABILITIES | 2008 | 2007 | |
| December 31 | December 31 | ||
| T.DKK | T.DKK | ||
| Equity | |||
| Capital stock | 114,908 | 114,908 | |
| Retained income/loss | 14,777 | 14,014 | |
| Equity, total | 129,685 | 128,922 | |
| Liabilities | |||
| Short-term liabilities | |||
| 12 | Convertible bond loans | $\Omega$ | 508 |
| Suppliers of goods and services | 55 | 75 | |
| Other debt | 887 | 671 | |
| Short-term liabilities, total | 942 | 1,254 | |
| Liabilities , total ……………………………………………………………………………………………… | 942 | 1,254 | |
| LIABILITIES, TOTAL | 130,627 | 130,176 | |
| Other notes: | |||
| Capital stock T.DKK |
Treasury stock T.DKK |
Premium T.DKK |
Convertible loan T.DKK |
Share-based payment T.DKK |
Retained income/loss T.DKK |
Total T.DKK |
|
|---|---|---|---|---|---|---|---|
| Equity, January 1, 2007 | 73,059 | (44) | 0 | 736 | 435 | (5,403) | 68,782 |
| Change in accounting policies | $\mathbf{O}$ | 44 | $\mathbf 0$ | (736) | (435) | 391 | (735) |
| Adjusted equity, January 1, 2007 | 73,059 | $\circ$ | $\mathbf{0}$ | 0 | $\circ$ | (5,012) | 68,047 |
| Net income/loss for the year | $\circ$ | $\mathbf{0}$ | $\mathbf{0}$ | 0 | $\circ$ | (1,040) | (1,040) |
| Capital increase | 41,849 | $\circ$ | 23,060 | $\mathbf 0$ | $\Omega$ | $\circ$ | 64,909 |
| Issue costs | $\mathbf{0}$ | $\circ$ | (2,994) | $\circ$ | $\mathbf{0}$ | $\circ$ | (2,994) |
| Transferred to "retained income" | $\circ$ | $\circ$ | (20,066) | $\circ$ | $\circ$ | 20,066 | $\mathbf{0}$ |
| Equity, December 31, 2007 | 114.908 | $\Omega$ | 14,014 | 128,922 |
| Capital stock T.DKK |
Treasury stock T.DKK |
Premium T.DKK |
Convertible loan T.DKK |
Share-based payment T.DKK |
Retained income/loss T.DKK |
Total T.DKK |
|
|---|---|---|---|---|---|---|---|
| Equity, January 1, 2008 | 114,908 | (44) | 25 | 566 | 13,492 | 128,947 | |
| Change in accounting policies | $\Omega$ | 44 | $\mathbf{0}$ | (25) | (566) | 522 | (25) |
| Adjusted equity, January 1, 2008 | 114.908 | $\Omega$ | $\Omega$ | $\Omega$ | 14,014 | 128,922 | |
| Net income/loss for the year | $\Omega$ | $\Omega$ | $\Omega$ | 762 | 762 | ||
| Equity, December 31, 2007 | 114,908 | $\Omega$ | $\Omega$ | 14,776 | 129,685 |
Other notes
The annual report for the parent company BioPorto A/S is prepared in accordance with the Danish Financial Statement Act's provision for large corporations, class D.
The annual report is presented in Danish kroner (DKK) which is the functional currency of the company.
The annual report for 2008 is prepared in accordance with the Danish Financial Statement Act which has caused minor changes and a reduction in disclosure rules according to IFRS. Other than that, the accounting policies are unchanged compared to previous years.
The consequences for the income/loss for the year and equity for 2008 and 2007 are as follows:
The value of share-based remuneration is not recognized in the income statement. An account of the management's share-based remuneration is found in the notes.
Investment in subsidiaries
Investment in subsidiaries is measured at cost in the parent company's accounts. If the cost exceeds the investment's recoverable amount, the investment is written down to this lower value.
The cost is also written down to the extent the distributed profit exceeds the accumulated earnings after the date of acquisition.
| DKK thousands | Income/loss | Income/loss | Equity |
|---|---|---|---|
| 2008 | 2007 | 31.12.2007 | |
| Share-based remuneration Convertible bonds |
+365 | +131 | (25) |
The company's accounting policies for recognition and measurement are in accordance with the consolidated accounts with the following exceptions:
Investment in subsidiaries
In the income statement for the parent company, investment in subsidiaries is recognized when the shareholder's right to receive dividend is approved with a deduction of write-downs of investments, if any.
In accordance with the Danish Financial Statement Act article 86, 4 a cash flow statement is not prepared as it is part of the consolidated cash flow statement.
The parent company and inland subsidiaries are jointly taxed. Danish jointly taxed companies form part of the tax prepayment scheme. Tax for the current year is recognized in the jointly taxed companies respectively.
The management and board of directors have assessed the investment in the subsidiary BioPorto Diagnostics A/S and the parent company's receivable in the subsidiary with a view to possible impairment of the assets recognized. The two items comprise the following:
| Investment, January 31, 2007 | T.DKK 48,000 |
|---|---|
| Receivables, January 31, 2007 | T.DKK 69.630 |
The management and board of directors have assessed the following areas of the subsidiary:
BioPorto Diagnostics' sales of own products grew by 18% 2008. The sales of the company's own products are expected to continue growing in 2009.
The subsidiary's method for diagnosing acute renal injury (NGAL) turned out to have appreciable potential within the routine diagnosis of patients in intensive care. BioPorto Diagnostics is in dialog with several marketleading companies in the routine diagnostics field with a view to using the NGAL method for their specific systems. Thus, there is a good possibility of achieving one or more licensing agreements of great significance to the subsidiary's earnings.
The company has a financial reserve of DKK 12,380 thousand as of December 31. By way of comparison, the group's cash generated by operating and investment activities amounted to DKK -14,079 in 2008. See the part about capital resources for further detail.
The share holders' assessment of the group represents a market-related measurement for the group's combined activities and assets. As the majority of the group's activities and IP rights are placed in the subsidiary, the measurement (reduced for cash at bank and in hand) is also an approximate value for BioPorto Diagnostics A/S.
The conclusions are as follows:
On the basis of this, the management and board of directors assess that there is no incentive for writing down the parent company's investment in BioPorto Diagnostics A/S or the parent company's receivable in the same company.
| 2008 T.DKK |
2007 T.DKK |
|
|---|---|---|
| The geographical dispersion of the net revenues is as follows: |
||
| Denmark | 1,620 | 1.110 |
| Net revenues, total | 1,620 | 1,110 |
| The net revenues break down as follows: | ||
| Sale of services | 1,620 | 1,110 |
| 1,620 | 1,110 |
| 2008 T.DKK |
2007 T.DKK |
|
|---|---|---|
| Wages and salaries | 3,352 | 2,098 |
| Defined contribution, pensions | 188 | 6 |
| Other social security costs | 26 | 14 |
| Other staff costs | 178 | 218 |
| Staff costs | 3,744 | 2,336 |
| Average number of employees | 5 | 3 |
| Staff costs are comprised of the following: | ||
| Administration expenses | 3.744 | 2.336 |
| _________ |
| 2008 T.DKK |
2007 T.DKK |
|
|---|---|---|
| Tangible assets (see note 8) | (4) | (56) |
| Depreciation, amortization, write-downs and impairment, total | ||
| Depreciation, Amortization, Write-downs and Impairment are recognized in the income statement as follows: |
||
| Administration expenses | (4) | (56) |
| (4) | (56) |
| 2008 T.DKK |
2007 T.DKK |
|
|---|---|---|
| Total fees, Deloitte State Authorized Partnership of Public Accountants |
260 | 494 |
| Itemized as follows: | ||
| Audit | 172 | 162 |
| Other services | 88 | 332 |
| Total fees, Deloitte | 260 | 494 |
| 2008 T.DKK |
2007 T.DKK |
|
|---|---|---|
| Interest income, subsidiaries | 3.689 | 2.744 |
| Interest income from bank | 814 | 708 |
| Interest income, financial activities not measured at fair value | 4.503 | 3.452 |
| Financial income, total | 4,503 | 3,452 |
| 2008 T.DKK |
2007 T.DKK |
|
|---|---|---|
| Interest expenses to bank and credit institutions | 0 | (231) |
| Interest expenses, short-term debt | 0 | (58) |
| Interest expenses, convertible bonds | (13) | (453) |
| Interest costs, financial activities not measured at fair value | (13) | (742) |
| Other financial expenses | (47) | (153) |
| Financial expenses, total | (60) | ( 895 |
| 2008 T.DKK |
2007 T.DKK |
|
|---|---|---|
| Cost, 1 January | 174 | 162 |
| Addition during the year | $\circ$ | 12 |
| Cost, December 31 | 174 | 174 |
| Depreciation and amortization, January 1 | (165) | (109) |
| Depreciation and amortization for the year | (4) | (56) |
| Depreciation and amortization, December 31 | (169) | (165) |
| Book value, December 31 | 5 | 9 |
| 2008 T.DKK |
2007 T.DKK |
||
|---|---|---|---|
| Cost, 1 January | 48,000 | 48,000 | |
| Cost, December 31 | 48,000 | 48,000 | |
| Book value, December 31 | 48,000 | 48,000 | |
| Name | Registered office | Ownership and voting interestind voting interest 2007 |
Ownership 2006 |
| BioPorto Diagnostics A/S | Gentofte, Copenhagen | 100% | 100% |
| BioPorto Diagnostics A/S works with the development, production and sale of antibodies and diagnostic kits for analysis purposes. |
|||
| Recent accounts for BioPorto A/S: | 2007 T.DKK |
||
| Equity | (51, 492) | ||
| 2008 T.DKK |
2007 T.DKK |
|
|---|---|---|
| Intercompany receivables | 69,630 | 54,115 |
| Other receivables | 388 | 753 |
| 70,018 | 54,868 |
| Write-down account for meeting loss | 2008 T.DKK |
2007 T.DKK |
|---|---|---|
| Opening balance of write-down account for meeting loss | 0 | (236) |
| Change during the year | 0 | 236 |
| 2008 T.DKK |
2007 T.DKK |
|
| Intercompany receivables | 69,630 | 54.115 |
| 2008 T.DKK |
2007 T.DKK |
|
|---|---|---|
| Tax asset value | 1.439 | 1.693 |
| Write-down to assessed value | (1,439) | (1,693) |
| Book value |
| Tangible assets | 55 | |
|---|---|---|
| Tax losses allowed to be | ||
| carried forward | 1.384 | ∣.648 |
| Deferred tax, December 31, net | 1.439 | .693 |
See note 16 in the consolidated accounts as the convertible bond loans are specifically BioPorto A/S'.
| 2008 T.DKK |
2007 T.DKK |
|
|---|---|---|
| Less than 1 year | 448 | 415 |
| Parent Company | ||
| 2008 T.DKK |
2007 T.DKK |
|
| Minimum lease payment recognized in the net income/loss: | 893 | 826 |
Refer to note 21 of the BioPorto consolidated accounts for further details concerning related parties, as well as the management's and the board of directors' managerial posts.
| APC-PCI | The complex between activated protein C and the protein C inhibitor. Analyzing this complex in plasma will contribute to the diagnosis of thrombosis and related diseases and the complex also has other utilization possibilities for which BioPorto has patent applications pending. |
|---|---|
| Biomarker/ | Theoretically, any analyzable phenomenon that can be used for indicating a biological condition (e.g. pulse, body temperature). Most often used for a molecule whose level in a patient sample (blood, tissue) indicates the existence of a disease and possibly its seriousness. |
| diagnostic marker | Many hospitals have a central laboratory which handles a wide range of analyses and typically many at a time – by contrast with the relatively few analyses that can be carried out in the individual wards. A central laboratory usually has a number of large automated machines for handling the analyses. |
| Central laboratory | Diagnostics is the process whereby a disease and possibly its cause are identified. Fast, accurate diagnostics are decisive for the subsequent treatment (therapy). Certain diagnostic tests can be used for monitoring the patient's response to treatment and possible needs for changing the treatment. |
| Diagnostics | "Enzyme-linked immunosorbent assay" kit, a laboratory assay format that can determine the content of a biomarker in body fluids such as blood or urine samples. |
| ELISA kit | The "Food and Drug Administration", is the US authority that authorizes the use of medicines, including diagnostic products. |
| FDA approval | "Glucagon-like peptide-1", is a peptide hormone secreted from the intestines during eating. GLP-1 stimulates the secretion of insulin and is relevant for the treatment of type-2 diabetes and other diseases. |
| GLP-1 | Buying rights for the producing and selling of a product developed by others, for instance. |
| In-licensing | "In vitro diagnostic(s)", a diagnostic procedure that takes place outside the body, e.g. by analyzing blood and urine samples in a laboratory, as opposed to "in vivo diagnostics", which are performed on the patient, such as a prick test in the skin or an X-ray. |
| IVD | A system of interacting blood proteins, whose collective role as an important part of the innate immune system includes "complementing" (completing) the protective effect of antibodies, e.g. by killing bacteria (which antibodies cannot do on their own). |
| Complement | "Mannan-binding lectin", a blood protein that binds to foreign organisms and contributes to congenital (innate) immune response. |
| MBL | Derived from a single "clone", in this case a single cell line. A monoclonal antibody thus consists of antibody molecules which are all identical, whereas a polyclonal antibody consists of many different antibody molecules produced by many different cell lines in the body. |
| Monoclonal | That phase of the processing of a patent application in which the application is submitted to the patent offices of the individual countries in which protection is sought. |
| National phase (patent) | "Neutrophil gelatinase-associated lipocalin", a biomarker that can indicate renal injury already at an early stage. |
| NGAL/NGAL Rapid | "Original equipment manufacturer", used in the opposite sense of the word for distributors, for instance, who market products of other companies under their own name. |
| OEM | "Patent Cooperation Treaty" deals with international patent cooperation that makes it possible to apply for patents in a large number of countries in one application. |
| PCT application/ treatment | Different phases in the development of a new medicine. The preclinical phase includes development and testing on experimental animals and occurs before clinical phases I–IV where the medicine is tested on people. |
| Preclinical/clinical phase | Diagnostic analyses that are performed on a routine basis at the time of hospitalization. |
| Routine diagnostics | A pair of antibodies targeting the same biomarker which can be used in the sensitive and specific "sandwich" ELISA method whereby the biomarker is identified by two different antibodies. |
| Sandwich antibody pair | The degree to which an antibody molecule, for example, binds only to a unique structure on another molecule and not to other structures or molecules, or the degree to which a diagnostic procedure only diagnoses a given pathological condition and does not give a positive result in other conditions, including the normal state. |
| Specificity | "Thrombin-antithrombin" is a complex formed during blood coagulation that can thus be used for diagnosing thrombosis or the tendency to form blood clots. Also entails the option of further diagnosis application. |
| TAT | Treatment of diseases and the products used for this, typically medicines. |
| Therapy/Therapeutic products |
Study of the toxicity of substances and the way in which they are capable of causing harmful effects in the body. Toxicological studies are an indispensable part of developing registerable medicines. |
| Toxicology | Studie af stoffers giftighed og den måde, hvorpå de kunne forårsage en skadelig virkning i kroppen. Toksikologiske studier er en ufravigelig del af udviklingen af registrerbare lægemidler. |
| Company | BioPorto A/S Grusbakken 8 DK-2820 Gentofte |
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| Telephone: Fax: Website: E-mail: |
+45 4529 0000 +45 4529 0001 www.bioporto.com [email protected] |
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| Central Business Reg. No.: Established: Registered office: |
17 50 03 17 November 22, 1917 Gentofte, Denmark |
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| Board of Directors | Carsten Lønfeldt, Chairman Peter Nordkild |
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| Niels T. Foged | |||
| Ejner Bech Jensen | |||
| Management | Thea Olesen | ||
| Auditors | Deloitte State Authorized Partnership of Public Accountants |
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| Attorney | Large market Gorrissen Federspiel Kierkegaard potential and repetitive sales |
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| Stockholders' Meeting | Annual stockholders' meeting is held on April 1, at 15:00 p.m. at the company's address. |
BioPorto A/S Grusbakken 8 DK-2820 Gentofte Denmark
Phone (+45) 4529 0000 Fax (+45) 4529 0001 E-mail info@bioporto .com Web www .bioporto .com
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