4SC AG — Earnings Release 2006

Aug 14, 2006

News Details

Corporate | 14 August 2006 10:00

4SC announces results of the first six months

Planegg-Martinsried, Germany, 14 August 2006 – Today, the drug discovery and development company 4SC AG (Frankfurt, Prime Standard: VSC) published the financial results of the first six months of 2006.

Net sales for the first six months of 2006 amount to Euro 1.032 million (Euro 1.140 million in the first six months of 2005) and came almost exclusively from the ‘Collaborative Business’ segment as was expected. The slightly lower turnover (-9.5 percent) is attributable to the company having not agreed to any short-term projects in the current financial year, rather specifically concentrating on strategic cooperations with long-term potential. The research and development costs increased in relation to the same period of 2005 by 29.3 percent from Euro 2.098 million (first six months 2005) to Euro 2.712 million (first six months 2006). The background for the raised expenditures is the increase of external services in the field of development for the ongoing preparation for clinical phase IIa of the pipeline project SC12267 for the treatment of rheumatoid arthritis. Against the background of increased costs within the framework of the stock exchange listing, administrative costs increased 23.5 percent to Euro 1.151 million (Euro 0.932 million in the first six months 2005).

Results from operating activities amounted to Euro -3.473 million in the first six months of 2006 (same period in 2005: Euro -2.532 million). At Euro -3.462 million, the period results were within the expected range (same period in 2005: Euro -2,740 million). The undiluted and diluted earnings per share were Euro -0.32 (same period in 2005: Euro -0.37). Regardless of the negative period results, equity of 4SC AG increased by the successful capital increase in May 2006 from Euro 9.159 million (31 December 2005) to Euro 9.825 million as of 30 June 2006. The equity ratio increased from 81.5 percent as of 31 December 2005 to 83.1 percent. The level of cash and cash equivalents improved from Euro 6.878 million (31 December 2005) to Euro 7.921 million at the end of the reporting period.

Results of the Second Quarter 2006

In the second quarter of 2006, 4SC AG generated net sales in the amount of Euro 0.529 million compared to Euro 0.688 million in the second quarter of 2005. The research and development costs amounted to Euro 1.312 million following Euro 1.086 million in the second quarter of 2005. Administration costs amounted to Euro 0.596 million following Euro 0.474 million in the same quarter of last year. The results from operating activities during the reporting quarter amounted to Euro -1.736 million (Euro -1.219 million in the second quarter of 2005).

**Progress in Project Pipeline and Cooperation Business

**‘Our company is well on the way to achieving the goals set for the financial year 2006,’ explained Ulrich Dauer, CEO of 4SC AG. In its core business, the own drug discovery and development, the company is making efficient progress. Preparations for the clinical study phase IIa for the most advanced project SC12267 for the treatment of patients with rheumatoid arthritis, are almost complete. In this context, Dauer also referred to the US patent that was granted at the end of July for the group of DH0DH inhibitors, which are chemically related to SC12267. ‘This patent has strategic importance in the context of a potential licence partnership for our clinical project.’ A clear patent situation is very important to pharmaceuticals partners, and the USA is the world’s most important pharmaceutical market.

Furthermore, 4SC AG is consistently preparing the three pre-clinical projects of the pipeline for testing on patients. In the proteasome project, the substance SC68896 was nominated as the first development candidate. Work on this substance is now concentrating on the preparation of a clinical study in the field of oncology. In addition, the company is planning to expand the pipeline by at least one additional research project.

4SC AG also reports progress in its cooperation business. At the end of June, the company reported on the signing of a new partnership with Solvay Pharmaceuticals GmbH, the German subsidiary of the Solvay Group, one of the world’s 40 largest pharmaceuticals companies with its focus on neuroscience and flu vaccines. This is already the second project with Solvay, which has expanded its cooperation with 4SC AG to include an additional disease target.

Prospects

In the first six months of 2006, 4SC AG developed according to plan and goals set for the financial year 2006 have remained unchanged.

In the segment ‘Drug Discovery & Development’, the focus is on completing the preparations for the clinical phase IIa study for the drug candidate SC12267. After receiving the respective approvals from the regulatory authorities, it is most likely possible that treatment of the first patients with SC12267 can begin in the fourth quarter of this financial year. Furthermore, the company is pushing forward intensively with the development of the next pipeline projects. In the segment ‘Collaborative Business’, 4SC is concentrating on existing projects and reaching the related milestones.

For both lines of business, 4SC AG is in active contact with potential partners in the biotechnology and pharmaceuticals industries. Here, the dialogue with the industry about possible licence partnerships for individual projects is not limited to the advanced drug candidate SC12267; rather it also covers all other projects of the company.

‘The strengthened financial situation makes it possible for us to hold discussions with potential licence partners without any time pressure,’ emphasises Dauer. It assists sustainable value increase of the company if 4SC AG can determine the optimum time for a partnership itself. However, in view of the varied potential of the current projects, management is confident that it will be able to report on the signing of a substantial licence agreement during the course of this financial year.

About 4SC

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 55, 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.