4SC AG — Earnings Release 2006

Nov 13, 2006

News Details

Corporate | 13 November 2006 10:00

4SC AG publishes nine months’ results

Planegg-Martinsried, Germany, 13 November 2006 – The drug discovery and development company 4SC AG (Frankfurt, Prime Standard: VSC) today published its financial results for the first nine months of the fiscal year 2006.

According to these figures, net sales in the first nine months of 2006 reached 1.769 million euros. This is 6.8 per cent higher than in the first nine months of 2005 (1.657 million euros) and as expected came almost exclusively from the ‘Collaborative Business’ segment. Research and development costs rose by 44.1 per cent to 4.304 million euros (same period in 2005: 2.986 million euros). This is a result of progressive development of the project pipeline and, in this context in particular, of increased expenditure for external development services. Administration costs rose as a consequence of the stock exchange listing by 3.6 per cent to 1.615 million euros (same period in 2005: 1.559 million euros).

The result from operating activities in the first nine months of 2006 amounted to – 5.072 million euros (same period in 2005: – 3.798 million euros). The period result of – 5.062 million euros fell within the expected range (same period in 2005: – 3.994 million euros). The diluted and undiluted earnings per share totalled – 0.46 euros (same period in 2005: – 0.52 euros). Equity amounted to 8.232 million euros compared to 9.159 million euros on

31 December 2005, therefore on 30 September 2006 the equity ratio was 77.8 per cent (31 December 2005: 81.5 percent). At the end of the third quarter 2006, the stock of cash and cash equivalents reached 6.364 million euros, compared to 6.878 million euros on 31 December 2005.

**Results of the Third Quarter 2006

**In the third quarter of 2006, 4SC AG generated net sales in the amount of 0.737 million euros (0.517 million euros in the same quarter in 2005). The distinct rise by 42.6 per cent compared to the same quarter of the previous year is essentially a result of successful completion of the research collaboration with Sanwa Kagaku Kenkyusho (SKK). Against a background of increased expenditure for external development services, research and development costs increased from – 0.888 million euros in the same quarter of the previous year to – 1.592 million euros in the third quarter of 2006. Due to one-off effects in the same quarter of the previous year, administration costs fell in the third quarter of 2006 from – 0.627 million euros to – 0.464 million euros, despite increased follow-up costs resulting from the public listing. Operating activity results in the third quarter in 2006 totalled – 1.599 million euros compared to – 1.266 million euros in the same period in 2005.

New Projects and Successes in Cooperation Business

The company has largely developed according to plan, explained CEO Ulrich Dauer. For example, the most advanced drug candidate SC12267 for treating rheumatoid arthritis is currently reaching an important milestone for adding value. Preparations are complete for the clinical study phase IIa; the necessary documentation has been handed in to the relevant authorities. ‘In the next few weeks we expect to obtain the approval and can then begin immediately with the decisive patient study,’ says Dauer.

There has also been progress in three pre-clinical projects in the pipeline, meaning that we can expect another clinical study to begin soon. The diverse potential of the company’s project pipeline is also proven by the most recent success story from the research cooperation with the Institute for Molecular Virology at Münster University. According to this, recent research activities have shown that the substance developed by 4SC AG as part of its NFkB project also inhibits the reproduction of the avian flu virus H5N1, which can also be dangerous for humans, and also fights the main causes of severe flu symptoms. The company will now start working on a formulation for a corresponding inhalable compound which will then be developed further by the Institute for Molecular Virology in pre-clinical studies. Once a successful ‘proof of concept’ is reached, 4SC AG will approach potential partners in the pharmaceutical industry to accompany the drug candidate through the clinical development phase.

4SC AG’s collaborative business is proceeding successfully: the cooperation with SKK on the revised target in the area of diabetes was completed successfully in September of this year – considerably faster than expected. This means that the company has significantly exceeded expectations with regards to the milestone criteria, and again was able to prove the added value of its technology platform, says Dauer. SKK is also willing to work on comparable projects with 4SC AG in future.

**Prospects

**In light of the fact that development went according to plan in the first nine months, the targets set for 2006 will remain unchanged. In coming months the company will concentrate on driving its pipeline projects forward, thus setting further milestones for adding value. This particularly applies to the most advanced drug candidate SC12267 for treating rheumatoid arthritis. In this area, preparations are so far advanced that after approval by the relevant authorities – still to be obtained – the clinical study phase IIa can start in the current financial year.

At the same time, 4SC AG continues to hold talks with potential partners in order to enter licensing agreements. In this respect, CEO Dauer is not just concerned with the SC12267 but also with other projects in the company’s portfolio, which currently occupy less of today’s attention. Concrete negotiations that may be completed in this financial year are well underway, he said. However, the company will not be making any hurried decisions, solely to be able to generate according news. ‘Not putting ourselves under any time pressure is in the interest of both greater enterprise value, and therefore the shareholders,’ says Dauer. The management will identify best time for the company to enter into licensing and development partnerships.

**About 4SC AG

**4SC AG (ISIN DE0005753818) has been listed in the Prime Standard of Frankfurt Stock Exchange since 15 December 2005. Founded in 1997 and now with a staff of 59, the company develops novel drug candidates for inflammatory diseases and cancer using a cheminformatics based technology platform. Traditional high throughput screening of therapeutic agents has been transferred from the lab to the computer. Thus, the company offers substantial cost and time advantages as well as increased success rates in drug development. 4SC AG uses its patented technology platform to create a sustainable product pipeline for active agents that are developed in early clinical phases (‘proof of concept’) and subsequently result in upfront and milestone payments as well as participation in sales generated by out-licensed products to the pharmaceutical industry. The pipeline currently has five projects, the first of which, on the treatment of rheumatoid arthritis, has successfully completed clinical phase I. Preparations for the conduct of the IIa clinical phase are well under way. In addition the project pipeline contains three projects in pre-clinical stage as well as one project in discovery stage. Furthermore, the company has its technology platform in co-operation projects with biotech and pharma companies and is already generating initial revenues.

Legal note

This document may contain forecasts, estimates and assumptions concerning business plans and goals, products and services and future results or assumptions based on or relating to them. Any statements about the future are subject to risks and uncertainty that are not predictable and are beyond the control of 4SC AG. Many factors may cause the actual results to differ substantially from the results contained in such statements about the future.