4SC AG — Earnings Release 2007

May 10, 2007

News Details

Corporate | 10 May 2007 10:00

4SC publishes results for the first quarter

Planegg-Martinsried, Germany, 10 May 2007 – Martinsried-based drug discovery and development company 4SC AG (Frankfurt, Prime standard: VSC) today published its financial results for the first quarter of 2007. As expected, net sales decreased during the first three months of 2007 by 42.9 percent to 0.287 million Euros (same period last year: 0.503 million Euros), since sales in the same quarter last year mainly resulted from two cooperations that have meanwhile been successfully completed. As in the comparable period, the net sales were generated in the ‘Collaborative Business’ segment, above all within the scope of the successfully launched research and development work for US partner QuoNova LLC. Compared to the first quarter of 2006, research and development costs increased by 12.9 percent to 1.581 million Euros (same period last year: 1.400 million Euros). This is due primarily to rising costs for external services, among other things in the course of the clinical phase IIa study of the drug candidate SC12267 for treating rheumatoid arthritis. In the course of forming provisions for legal and advisory costs, inter alia in connection with the planned capital increase, administrative costs rose year-on-year during the first quarter of 2007 by 20.2 percent to 0.667 million Euros (same period last year: 0.555 million Euros).

During the first quarter of 2007 results from operating activities totalled – 2.158 million Euros (same period last year: – 1.737 million Euros). At – 2.156 million Euros (same period last year: – 1.742 million Euros) the period result turned out better than anticipated. Undiluted and diluted earnings per share amounted to – 0.19 Euro (same period last year: – 0.17 Euro). As a consequence of the result, the equity of 4SC AG fell to 5.753 million Euros (31 December 2006: 7.854 million Euros). The equity ratio stood at 71.9 percent on the reporting date (31 December 2006: 78.8 percent). The levels of cash and cash equivalents amounted to 2.214 million Euros (31 December 2006: 2.522 million Euros). Moreover the company currently holds securities valued at 1.050 million Euros (31 December 2006: 1.949 million Euros) that were not posted under cash and cash equivalents.

Progress in the pipeline and cooperation business

In our ‘Drug Discovery & Development’ business segment, the focus in the past quarter was on the clinical phase IIa study on drug candidate SC12267. ‘The study is proceeding according to schedule and more than half of the targeted patients have already been recruited,’ explains Ulrich Dauer, CEO of 4SC AG. ‘If the study results anticipated during the fourth quarter turn out as expected, our company is likely to become significantly more attractive to potential licensing partners and the capital market,’ added Dauer.

Two more out of the six pipeline projects are currently in the advanced preclinical study phase, for which approval for clinical trials could be applied for in 2007 if everything proceeds according to plan. Most recently 4SC AG’s drug candidate SC75741 for treating influenza virus infections made some progress. ‘In cooperation with the University of Münster we were recently able to provide the preclinical proof of concept,’ reported Dauer. Based on these results, the company is already holding initial talks with possible development partners from the pharmaceutical industry.

In the ‘Collaborative Business’ segment the company recently significantly expanded the work plan for the cooperation with its US partner QuoNova to achieve the project targets in the shortest possible time. In addition, 4SC AG is currently engaged in promising contract negotiations with a new potential partner regarding a wide-ranging research cooperation.

Outlook

Dauer stressed that in the first quarter of financial year 2007, 4SC AG has progressed largely as planned and that the targets set for the current business year remain unchanged. Over the coming months, the company will continue to forge ahead with its pipeline projects, with the focus in the most important segment ‘Drug Discovery & Development’ continuing to be on the completion of the clinical phase IIa study for drug candidate SC12267 for treating rheumatoid arthritis.

In addition, 4SC AG intends to include further projects into the development pipeline in the near future that offer growth potential and risk diversification for the project portfolio. At the same time drug candidate SC12267, which is currently already undergoing clinical tests for the treatment of rheumatoid arthritis, is a platform for additional projects with regards to the indications atopic dermatitis and psoriasis, as well as chronic inflammatory bowel diseases and multiple sclerosis. ‘With regards to these indications our experiences to date with SC12267 mean that the clinical development can be undertaken within a relatively short timeframe and at comparatively moderate expense,’ so Dauer.

With the backing of external partners, corresponding animal and bioavailability studies are currently underway; in the case of indication multiple sclerosis, there is even sufficient animal data available to apply for a clinical trial. ‘We are confident as to the market potential of these additional projects and are determined to leverage this opportunity,’ concluded Dauer. This was an important reason for the coming capital increase.

4SC AG continues to pursue its strategy of establishing a comprehensive pipeline of drug candidates in close dialogue with the pharmaceutical industry with a view to gradually enhancing the value of the company. Management believes that the company’s business will continue to strengthen in both the short and mainly the medium term with the signing of new sales-generating licensing deals with partners in the pharmaceutical industry and additional service and research collaborations.

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 60, 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. There are currently six projects in the pipeline. The first project on the treatment of rheumatoid arthritis is currently undergoing clinical phase IIa. Four other product candidates are in preclinical development and another project is in the research stage. Furthermore, the company has its technology platform in co-operation projects with biotech and pharma companies and is already generating initial revenues.

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