4SC AG — Earnings Release 2005

Mar 30, 2006

News Details

Corporate | 30 March 2006 10:00

4SC AG reports financial results for financial year 2005

Planegg-Martinsried, 30 March 2006 – The drug discovery and development company 4SC AG based in Martinsried (Frankfurt, Prime Standard: VSC) has reported a successful financial year 2005, in which important milestones were reached. The company completed two rounds of financing and listed its shares in the Prime Standard of Frankfurt stock exchange in mid-December. In 2005, two comprehensive phase I clinical studies were successfully completed for the most advanced project of 4SC AG, a drug candidate for treating rheumatoid arthritis (SC12267). The three pre-clinical projects combating cancer and inflammatory diseases made significant progress and are advancing towards clinical trial stage. An additional research project was launched with the support of the Federal Ministry of Education and Research (BMBF). In addition, during the reporting year, 4SC AG substantially extended its research partnership with Schwarz Pharma and entered into a multi-year collaboration with Japanese pharmaceutical company Sanwa Kagaku Kenkyusho as a new partner.

Financial summary of 2005

As expected, net sales declined by 32% from KEUR 3,023 to KEUR 2,068 during the reporting year. With 94% the larger part of net sales was contributed by the ‘Collaborative Business’ segment. Revenues rose by 43% from KEUR 1,356 to KEUR 1,936 in this segment. The company’s net sales in the ‘Drug Discovery & Development’ segment amounted to KEUR 132 (2004: KEUR 1,667). This decline had been expected, since 4SC AG did not license any projects out to external partners in the financial year 2005, instead concentrating on further development of its own project pipeline.

Administrative costs increased to KEUR 2,998 (2004: KEUR 1,803) due to one-off expenses of KEUR 1,079 resulting from the public listing. The decline in distribution costs to KEUR 433 (2004: KEUR 625) resulted from the lower number of employees in the ‘Business Development’ department. Because comprehensive third-party services had been engaged for phase I development of drug candidate SC12267 in the previous year, research and development costs declined from KEUR 5,402 in 2004 to KEUR 4,259. 4SC AG’s result from operating activities amounted to KEUR -6,337 (2004: KEUR -5,458). The period result for the reporting year amounted to KEUR -6,277 (2004: KEUR -5,821). Undiluted and diluted earnings per share amounted to EUR -0.77 (2004: EUR -0.89).

The two rounds of financing completed during the reporting year substantially strengthened the company’s financial position. This applies, in particular, to the pre-listing round of financing of KEUR 10,16 at the end of November. The company’s share capital increased in several steps from KEUR 6,956 at the start of the reporting year to KEUR 10,530 at the end of it. 4SC AG’s equity capital increased from KEUR -49 in the previous year to KEUR 9,159 in the reporting year and its equity ratio increased to 81.5%. Its cash and cash equivalents (current asset securities) amounted to KEUR 6,878 at the end of the reporting year (2004: KEUR 2,058).

Outlook

‘With the funds we have raised and revenues from our Collaborative Business, we will be able to develop our project pipeline rapidly’, claims Ulrich Dauer, CEO of 4SC AG. ‘Our business model allows to run a number of projects at the same time for only a moderate investment of capital and therefore avoids putting all our eggs into one basket.’

The project to combat rheumatoid arthritis should enter clinical phase IIa in 2006. First results are expected for the second half of 2007. 4SC AG is also planning to advance one or two drug candidates from its own research into clinical development. At the same time, the company is also conducting negotiations with potential pharmaceutical partners regarding the out-licensing of individual projects. With four of its five pipeline projects, 4SC AG is in dialog with the industry in order to identify specific requirements for respective study designs early on as well as to elicit opportunities for licensing partnerships. The ‘Collaborative Business’ segment is to be further expanded in 2006. Concrete negotiations are already being conducted with potential partners. In January 2006, 4SC reached an important milestone with its research partner Sanwa Kagaku Kenkyusho and already received payments. The company expects to receive net sales and milestone payments from this collaboration in 2006.

4SC AG expects the period result to be negative once again in the financial year 2006, however on a lower level compared with the reporting year as a result of expected sales in the ‘Collaborative Business’ segment and possible first revenues from licensing agreements in the ‘Drug Discovery & Development’ segment. Overall, the company considers itself to be well positioned to achieve its strategic and commercial goals. The management is convinced that the company will be able to make significant progress in the current year through the conclusion of service and research collaboration agreements and licensing agreements.

You can view the management report at http://www.4sc.com .

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 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 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. A further one to two other product candidates should go into clinical development in 2006. 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.