4SC AG

Earnings Release • Aug 6, 2015

News Details

Corporate | 6 August 2015 07:30

Press Release: 4SC announces financial results for the first half of 2015

4SC AG / Key word(s): Half Year Results

2015-08-06 / 07:30

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Press Release

4SC announces financial results for the first half of 2015

Planegg-Martinsried, Germany, 6 August, 2015 – 4SC AG (Frankfurt, Prime Standard: ISIN DE000A14KL72, VSC), a discovery and development company of targeted small molecule drugs for cancer and autoimmune diseases, today published its consolidated financial results for the first six months of 2015 (1 January – 30 June 2015).

Key operating events in Q2 2015 and beyond:

– 4SC AG: Successful capital increase in return for cash and in-kind contributions strengthens financial position: Gross issue proceeds of EUR 29 million at upper end of targeted issue range; financing of planned clinical Phase II trial of resminostat in CTCL tumour indication and further operations secured until into second half of 2018. At the same time, substantial portions of a shareholder loan converted into equity, reducing liabilities significantly.

– Resminostat: Main clinical focus on cutaneous T-cell lymphoma (CTCL). In this niche indication with high medical need, 4SC aims at conducting a Phase II trial which ideally would result in first market approval (“conditional approval”). Development in liver cancer in Western patients is to be advanced further once data from an Asian Phase II trial of 4SC’s partner Yakult is available.

– Resminostat: Partner Yakult Honsha starts Phase I trial in two further indications of pancreatic and biliary tract cancer in Japan. Its main goal is to determine a dosing scheme for potential subsequent Phase II trials.

– Resminostat: Menarini AP, Singapore, becomes new licensing and development partner for Asia-Pacific excluding Japan; agreement has potential upfront and milestone volume of up to EUR 95 million plus double-digit percentage royalties.

– Resminostat: Patent protection of lead compound strengthened further in North America.

– 4SC-205: Positive results on safety, pharmacokinetics and efficacy of oral anti-mitotic Eg5 inhibitor from Phase I trial in patients with solid tumours published at ASCO oncology conference in Chicago.

Key financial figures for the first half of 2015:

– Consolidated half year revenue amounted to EUR 2.49 million (H1 2014: EUR 3.98 million). Second quarter 2015 (EUR 0.50 million) significantly down compared with the prior-year period (Q2 2014: EUR 2.54 million), which included a milestone payment from Yakult and higher payments from collaborations in the Development and Discovery segments.

– Operating result (EBIT) improved to EUR -3.70 million in the reporting period (H1 2014: EUR -3.87 million); operating result in the second quarter down to EUR -2.37 million (Q1 2014: EUR -1.75 million) due to lower revenue.

– Cash balance as at 30 June 2015 markedly improved to EUR 0.91 million as a result of the capital increase completed subsequent to the reporting period.

Enno Spillner, CEO of 4SC AG, commented:

“We are looking back at an eventful first half of 2015, in which we were able to improve the operating and financial position of 4SC AG significantly. Our rights issue generated income of EUR 29 million, which is at the upper end of the targeted proceeds range. We both received strong support from existing shareholders and succeeded in acquiring important new investors, among them acknowledged life science specialists. Our plan is to use the funds in particular for the implementation of the clinical Phase II trial of resminostat in CTCL but also for financing the Company’s further research and development activities, including the preparation of studies with our two other cancer drugs, 4SC-202 and 4SC-205.”

Enno Spillner continued: “Cutaneous T-cell lymphoma (CTCL) is a type of cancer with a very high medical need. In Europe, there are currently only a few treatment options available for advanced stages of the disease, none of which offer prospects of recovery. At the same time, we believe that this indication has attractive market potential. Provided the data is positive, we could ideally use the study results, which will probably be available in the second half of 2018, to apply for conditional approval in Europe. 4SC’s first approved drug might therefore become a reality faster than originally planned. We believe that resminostat also has significant potential in indications other than CTCL. The ongoing Phase II trials of our Japanese partner Yakult in liver cancer and lung cancer are already in a very advanced stage. Based on their results, we want to push ahead with the development of resminostat in Western patients, especially in liver cancer.”

Telephone conference

Today, on 6 August 2015, at 4:00 pm CEDT (10:00 am EDT), 4SC will host a telephone conference in English, in which the Management Board of 4SC AG will report on the principal developments in the second quarter of 2015 and beyond. To participate in the telephone conference, please use the following data:

+49-89-2030-31218 (Germany)

+44-20-3427 1912 (UK)

+1-212-444-0412 (USA)

+49-89-2030-31218 (other countries)

Conference ID: 2879527

After the telephone conference, an audio replay will be available at www.4sc.com under Investors / Events & Presentations / Conference Calls & Webcasts.

Detailed financial review:

The 4SC Group, which comprises 4SC AG and its wholly-owned subsidiary 4SC Discovery GmbH, reports consolidated figures for the Group in accordance with International Financial Reporting Standards (IFRSs) and financial figures for the two operating segments, Development and Discovery & Collaborative Business. For more information on segment reporting, see the full half-yearly report at (http://4sc.de/investors/financial-reports ).

6 months 2015:

In the first six months of 2015, the Company generated consolidated revenue of EUR 2.49 million (H1 2014: EUR 3.98 million). In the Development segment, consolidated revenue was EUR 1.67 million, which represents a decrease of 12% (H1 2014: EUR 1.93 million). The year-on-year change is due in particular to the milestone reached in the prior-year period in the partnership with Yakult Honsha Co., Ltd.; there was no payment in 2015. The Discovery & Collaborative Business segment generated revenue of EUR 0.79 million in the first six months of 2015 (H1 2014: EUR 2.05 million). The 61% decline results from the significantly lower level of cost allocations to collaboration partners in the current year. Furthermore, the prior-year period was impacted positively by a scheduled deferral of income until August 2014 of the payment received from LEO Pharma A/S in 2013.

Despite the decline in revenue, the Company’s operating result improved slightly by 4% to EUR -3.70 million in the first half of 2015 (H1 2014: EUR -3.87 million). The net loss for the period amounted to EUR 3.95 million (H1 2014: EUR 3.97 million). For the first six months of 2015, this translates into a loss per share of EUR 0.39 (H1 2014: EUR -0.39, adjusted based on the lower number of shares after the capital reduction). The average monthly outflow of cash from operations in the first half-year amounts to EUR 0.55 million, which is below the prior-year figure of EUR 0.65 million. As at 30 June 2015, the Company had cash totalling EUR 0.91 million.

Q2 2015:

Compared with the second quarter of the previous year, consolidated revenue decreased in the reporting quarter to EUR 0.50 million (Q2 2014: EUR 2.53 million). The operating result in the second quarter 2015 decreased by 36% to EUR -2.37 million. The net loss in the reporting quarter increased by 23% to EUR 2.41 million (Q2 2014: EUR -1.85 million), resulting in earnings per share of EUR -0.24 (Q2 2014: EUR -0.18, adjusted based on the lower number of shares after the capital reduction).

Successful capital increase

The capital increase started at the end of the second quarter with the goal to finance the research and development programmes, especially a planned Phase II clinical trial of resminostat in the cancer indication of cutaneous T-cell lymphoma (CTCL), was completed successfully after the end of the reporting period. In a cash capital increase, a total of 7.25 million shares were placed at a subscription price of EUR 4.00 per share with existing shareholders in a rights issue during the subscription period from 23 June to 6 July as well as with new institutional investors in a subsequent rump placement. The significant demand from new institutional investors during the rump placement enabled the Company to generate proceeds of EUR 29 million, which is was the upper end of the targeted proceed range of EUR 24 to 29 million. Additionally, 1.5 million consideration shares were issued at the issue price of EUR 4.00 in return for contributions in kind for the purpose of swapping a material portion of EUR 6.00 million of a shareholder loan into equity. This improved 4SC’s cash balance and equity ratio substantially and reduced liabilities significantly.

Review of operations in Q2 2015 and outlook for 2015:

Development segment (clinical development activities of 4SC AG)

Resminostat:

4SC aims to conduct a randomised, placebo-controlled Phase II clinical trial in the indication of advanced cutaneous T-cell lymphoma (CTCL) with its lead oncology compound, the HDAC inhibitor resminostat. Now that the financing has been secured through the capital increase that was successfully completed at the beginning of July, the trial is expected to commence in the first half of 2016. According to current planning, the results of the trial could be available in the second half of 2018. 4SC will continue to expedite the preparations for the trial during the rest of the year. It is the goal of 4SC to achieve first-time regulatory approval for resminostat in CTCL in Europe as quickly as possible and, ideally, to apply for conditional approval based on the Phase II data. Two HDAC inhibitors have already been approved for treating CTCL in the US, but none in Europe. Resminostat has already demonstrated preclinical efficacy in this indication.

Furthermore, 4SC continued its activities with resminostat in the reporting quarter in connection with immune priming. The results from initial preclinical testing suggest that resminostat is able to activate the immune system in a specific fashion and thus can possibly improve the response rates of certain cancer immunotherapy treatments such as checkpoint inhibitors.

The signing of a licence and development agreement for resminostat for the Asia/Pacific region excluding Japan with Menarini AP, a Singapore-based subsidiary of the Italian pharmaceutical multinational Menarini Group, in April 2015 represents an important milestone. Menarini AP is currently evaluating its development plans for resminostat. In addition to possible income from performance-based milestone payments and double-digit royalties, 4SC hopes that this collaboration with Menarini in conjunction with the ongoing clinical trials of Yakult Honsha in Japan will deliver important insights for the possible future development of resminostat also in Western patients, especially in the liver cancer indication.

In June 2015, 4SC’s Japanese development partner Yakult Honsha launched a Phase I trial with resminostat as monotherapy or in combination with chemotherapy in up to 44 Japanese patients with advanced pancreatic or biliary tract cancer. The open-label study investigates safety, pharmacokinetics, biomarkers and efficacy of various dosing schemes. Its main goal is to determine the recommended dosing scheme for potential subsequent Phase II trials. At the same time, 4SC’s Japanese partner Yakult Honsha has pushed ahead with its ongoing Phase II trials with resminostat in the indications of liver cancer (HCC) and lung cancer (NSCLC).

In the reporting quarter the US Patent Office granted the patent for the use of resminostat in cancer indications. In Canada, the composition of matter patent was granted for resminostat. This further strengthens the patent protection of 4SC’s lead compound in Western markets.

4SC-202:

For its second epigenetic anti-cancer compound 4SC-202, 4SC expects to be able to complete the official report on the completed Phase I TOPAS trial before the end of this year. Based on positive results from this Phase I trial on patients with advanced haematological tumours, the Company believes that there are attractive opportunities for the further development of 4SC-202 in Phase II. Ideally, these will be implemented together with possible industry or financial partners or – assuming that additional financing is achieved – by 4SC on its own. At present, 4SC favours two trials – one of a solid tumour indication such as small-cell lung cancer and one of a haematological indication.

4SC-205:

The Company’s third oncological compound, 4SC-205, is an oral Eg5 kinesin inhibitor for blocking tumour cell division and thus tumour growth. Positive results on the safety, pharmacokinetics and efficacy of the cancer compound from the Phase I AEGIS trial involving 59 patients with solid tumours were published in June 2015 at the annual meeting of the American Society of Clinical Oncology (ASCO) in Chicago. An attractive dosing scheme, i.e. daily dosage of 4SC-205, showed good safety and tolerability. A recommended daily dose of 20mg, which showed positive initial indications of efficacy in several patients, was established in the trial for possible Phase II development. On the basis of these positive Phase I results, 4SC is working on identifying possible collaborations for the further clinical development of 4SC-205. Here, an academic partner that would continue researching 4SC-205 for particularly suitable patient populations would be especially interesting.

Discovery & Collaborative Business segment (4SC Discovery GmbH):

The business of 4SC AG’s subsidiary 4SC Discovery GmbH, which is based on research collaborations and service partnerships for biotech and pharmaceutical companies and academic institutions, was continued in the second quarter of 2015. Among others, 4SC Discovery GmbH collaborates with the German biotech companies BioNTech, AiCuris and CRELUX. A research collaboration in the field of inflammatory skin diseases entered into in 2013 with the Danish pharmaceutical company LEO Pharma A/S was completed as planned at the end of March 2015. In May 2015, LEO Pharma also informed 4SC that it would not exercise its in-licensing option. As a result, 4SC Discovery GmbH retains all rights to the compounds that have been researched under this partnership.

Financial outlook:

At the beginning of the third quarter of 2015, 4SC was able to generate gross issue proceeds of EUR 29 million from a capital increase. The Company’s Management Board estimates that, in the context of its current financial planning, the funds will probably be sufficient until into the second half of 2018 and will serve to finance and carry out the planned Phase II trial of resminostat in CTCL and further business activities, such as the preparation of the Phase II development of the cancer programmes 4SC-202 and 4SC-205.

Based on current financial planning and the operating activities announced, the Management Board is expecting an average cash burn rate from operations for 2015 as a whole that is significantly higher than in the last forecast. This increase, which is in line with planning, is predominantly due to the costs of preparing the planned Phase II clinical trial of resminostat in the CTCL indication. Accordingly, it is expected that operating expenses in 2015 will be higher than in 2014 and that 4SC’s consolidated net loss will be up year-on-year. The detailed financial planning for 2015 is currently being reviewed and the Company will specify its guidance with the publication of its nine-month report.

Release ends

About 4SC

4SC discovers and develops targeted, small-molecule drugs for treating diseases with high unmet medical needs in various cancer and autoimmune indications. These drugs are intended to provide innovative treatment options that are more tolerable and efficacious than existing therapies, and provide a better quality of life. The Company’s pipeline comprises promising products that are in various stages of clinical development. 4SC’s aim is to generate future growth and enhance its enterprise value by entering into partnerships with pharmaceutical and biotech companies. Founded in 1997, 4SC had a headcount of 68 employees (60 FTEs) at 30 June 2015. 4SC AG has been listed on the Prime Standard of the Frankfurt Stock Exchange (ISIN DE000A14KL72) since December 2005.

Cautionary statement regarding forward-looking statements

This press release contains certain forward-looking statements. Any forward-looking statement applies only on the date of this press release. By their nature, forward-looking statements are subject to a number of known and unknown risks and uncertainties that may or may not occur in the future and as a result of which the actual results and performance may differ substantially from the expected future results or performance expressed or implied in the forward looking statements. No warranties or representations are made as to the accuracy, achievement or reasonableness of such statements, estimates or projections, and 4SC AG has no obligation to update any such information or to correct any inaccuracies herein or omission herefrom which may become apparent.

For more information please visit www.4sc.com or contact:

4SC AG

Jochen Orlowski, Corporate Communications & Investor Relations

jochen.orlowski(at)4sc.com, Tel.: +49-89-7007-6366

MC Services

Katja Arnold, Dorothea Schneider

katja.arnold(at)mc-services.eu, Tel.: +49-89-2102-2840

The Trout Group

Chad Rubin

crubin(at)troutgroup.com, Tel.: +1-646-378-2947

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Language:	English
Company:	4SC AG
	Am Klopferspitz 19a
	82152 Martinsried
	Germany
Phone:	+49 (0)89 7007 63-0
Fax:	+49 (0)89 7007 63-29
E-mail:	public@4sc.com
Internet:	www.4sc.de
ISIN:	DE000A14KL72
WKN:	A14KL7
Listed:	Regulated Market in Frankfurt (Prime Standard); Regulated Unofficial Market in Berlin, Dusseldorf, Munich, Stuttgart, Tradegate Exchange

End of News	DGAP News-Service

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