4SC AG — Earnings Release 2006

Mar 29, 2007

News Details

Corporate | 29 March 2007 10:00

4SC AG reports on successful financial year 2006

Planegg-Martinsried, Germany, 29 March 2007 – 4SC AG (Frankfurt, Prime Standard: VSC) today reports on the financial results for the financial year 2006. According to these results, net sales rose by 77.2% in the reporting year, from 2,068 million Euros in the previous year to 3,664 million Euros in 2006. Of this total, 1,683 million Euros (2005: 0.132 million Euros) were generated by the ‘Drug Discovery & Development’ segment. The background for this distinct increase is the successful sale of global exclusive rights to QSB substances against bacterial biofilms to QuoNova LLC., Melbourne, Florida, USA. In the ‘Collaborative Business’ segment net sales rose slightly by 2.3% from 1,936 million Euros to 1,981 million Euros.

Administrative costs decreased to 2,254 million Euros in the reporting year, whereas in 2005 these had risen to 2,998 million Euros due to costs relating to the stock exchange listing. Distribution costs amounted to 0.518 million Euros, compared to 0.433 million Euros in the last reporting year. As a result of increased costs for external services as part of clinical and pre-clinical studies, research and development costs increased from 4,259 million Euros in the previous year to 5,708 million Euros this year. Due to higher net sales and lower administration costs, the results from operating activities developed more positively than in the previous year and totalled – 5,530 million Euros compared to – 6,337 million Euros in 2005. The period result for the reporting year was – 5,540 million Euros (2005: – 6,277 million Euros). The undiluted and diluted earnings per share were – 0.50 Euro (2005: – 0.77 Euro).

In May 2006 there was a capital increase without subscription rights, which increased the company’s share capital from 10,530 million Euros to 11,461 million Euros. As part of this capital increase, 4,120 million Euros net of equity were raised. 4SC AG equity on 31 December 2006 was 7,854 million Euros (2005: 9,159 million Euros) and the equity ratio was 78.8 percent (2005: 81.5 percent). The stock of cash and cash equivalents (securities) amounted to 2,522 million Euros (6,878 million Euros in the previous year). Furthermore, the company has securities with a value of 1,949 million Euros that are not shown under cash and cash equivalents.

Highlights of company development in 2006

In 2006 4SC AG made clear progress along its project pipeline. For the most advanced of the six pipeline projects with the drug candidate SC12267 for the treatment of rheumatoid arthritis, a clinical phase IIa study could be initiated according to plan. After extensive preliminary work, at the end of the year the company received official approval. The study on patients with rheumatoid arthritis is taking place at thirteen centres located in Germany, Poland and Serbia. The objective is to determine and prove the therapeutic efficacy and safety of SC12267 as well as the suitable dosage for further development.

The results of this study are expected for the fourth quarter of 2007. ‘If these results turn out as we expect, they will certainly increase the attraction of our drug candidate for potential pharmaceuticals partners,’ emphasises Ulrich Dauer, CEO of 4SC AG.

4SC AG has also made progress with some of its other pipeline projects. From three preclinical projects, two new potential drug candidates were nominated for clinical development: SC68896 against cancerous diseases and SC71570 against chronic bowel inflammation and rheumatoid arthritis. If plans proceed as expected the company could apply for clinical testing approval for both projects in 2007. In addition, the company added a sixth project to its pipeline, which is currently in the preclinical trial phase: Together with the University of Münster, 4SC AG is developing SC75741, a drug candidate against Influenza A and Hepatitis C virus infections.

4SC AG was also successful outside its active pipeline projects: Shortly before the end of the year, the company announced successful completion of a license agreement for its QSB substances against bacterial biofilms. This project came about from research and development activities before the strategic decision was made to focus therapeutically on inflammatory and cancerous diseases. As well as the appropriate fees for exclusive rights to its biofilm blockers, 4SC AG also retained a 10% stake in the newly founded QuoNova LLC, which will continue to develop and market the QSB substances. This interest should also contribute in the medium term to create added value for 4SC AG.

Finally, the ‘Collaborative Business’ segment also developed positively: In October, 4SC AG reported successful completion of its research collaboration with Japanese company Sanwa Kagaku Kenkyusho Co. Ltd. in the area of diabetes. The aims of this collaboration were achieved in an unexpectedly short period of time; 4SC AG is involved in further success of this diabetes project as part of potential milestone payments and commission. In a collaborative partnership that has been running since 2003 with Schwarz Pharma AG, the company also reached important milestones. However, as part of its strategic re-positioning, Schwarz Pharma decided to close down all R&D activities in the urology segment; all relevant project rights were transferred to 4SC AG in return for a share of potential license income. The company is planning to license out the project to a suitable cooperation partner with a suitable therapeutic focus.

Outlook

In 2007 4SC AG will focus on expanding the six pipeline projects as part of continued development of the company. The study results from the clinical phase IIa trial with the drug candidate SC12267 are expected for the fourth quarter of 2007. Other drug candidates should reach important developmental milestones in the short and medium term. Further projects based on existing development candidates may also soon be added into the pipeline, which contain additional value creation potential and create a wider spread of risk in the project portfolio. Corresponding development options are currently under consideration.

The pipeline progress implies an increasing potential for licensing and revenue, but also means increasing development costs, in particular for projects in clinical phases. Even with this background, the company again expects a negative period result for the financial year 2007. Considering the current project progress and discussions, however, 4SC AG expects relevant sales to result from collaboration partnerships in the ‘Collaborative Business’ segment, as well as possible license income from the ‘Drug Discovery & Development’ segment. In total, therefore, the company anticipates continually increasing revenue, which for 2007 should make for a more positive result than in the comparative period in 2006.

You can download the annual report of 4SC AG here.

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 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. 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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