4SC AG — Interim / Quarterly Report 2007

Aug 9, 2007

INTERIM REPORT AND INTERIM MANAGEMENT REPORT BY 30 JUNE 2007

Table of contents

General information	2
Development of important key figures	3
Shareholders' letter	4
Interim management report	5
Income statement	12
Balance sheet	13
Cash flow statement	15
Statement of changes in equity	17
Notes	18
1. Basis of valuation and significant accounting and valuation policies	18
2. Segment report	18
3. Earnings per share	20
4. Financing measures	20
5. Share property and directors' dealings	20
6. Employees' subscription rights	22
7. Related party disclosure	22
8. Review	23
9. Events after the end of the reporting period	23
Review report	24
Financial calendar / Imprint	25

General information

Security code
number	575381
ISIN	DE0005753818
SE code	VSC
Management Board	Dr Ulrich Dauer, CEO Dr Gerhard Keilhauer, CDO Dipl.-Kfm. Enno Spillner, CFO Dr Daniel Vitt, CSO
Principal Office	4SC AG, Am Klopferspitz 19a, 82152 Planegg-Martinsried, Germany
IR Contact	Bettina von Klitzing E-Mail: Bettina.von.Klitzing@4SC.com Phone 0049 (0) 89 700 763 - 0 www.4SC.com

Development of important key figures

	2007-04-01 - 2007-06-30	2006-04-01 - 2006-06-30	2007-01-01 -	2006-01-01 -
	resp. 2007-06-30	resp. 2006-06-30	2007-06-30	2006-06-30
in KEUR
Net sales	348	529	635	1,032
Result from operating activities	- 2,101	- 1,736	- 4,259	- 3,473
Period result	- 2,085	- 1,720	- 4,241	- 3,462
Equity	6,710	9,825
Equity ratio	71.6%	83.1%
Balance sheet total	9,374	11,829
Cash flows from operating and investing activities	- 1,342	- 1,551	- 1,650	- 3,901
Cash flows from financing activities	2,989	4,096	2,989	4,096
Net change in cash and cash equivalents	1,647	2,545	1,339	195
Cash and cash equivalents1	3,861	7,073
Employees (at end of period)	61	55
The 4SC share
Earnings per share (undiluted and diluted) [EUR]	- 0.17	- 0.16	- 0.36	- 0.32
Shares in circulation (average; in thousands)	11,998	11,047	11,729	10,789
Percentage of freely tradable shares2	94%	41%
3 resp. 6 month high (Xetra) [EUR] [EUR]	3.61	5.45	3.85	5.45
3 resp. 6 month low (Xetra) [EUR]]	2.65	3.99	2.65	3.99
Open at beginning of period (Xetra) [EUR]	3.69	4.40
Close at end of period (Xetra) [EUR]	3.05	4.23
Market capitalisation at end of period [TEUR]	38,637	48,482
Daily turnover (units; Xetra)	19,503	5,666	11,072	6,976

1: This position does not include securities with a maturity > 3 months, since they are included in cash flows from investing activities (see cash flow statement).

2: In accordance with the regulations of Deutsche Börse (stock exchange) in Frankfurt concerning the determination of the percentage of freely tradable shares, the free float of 4SC AG is only about 35%. Accordingly, all of shareholder's shares that make up an aggregate of at least 5% of a corporation's capital stock allocable to a share category are deemed to be largely held.

Dear Shareholders,

Dr Ulrich Dauer, Chief Executive Officer

This summer, 4SC AG is celebrating its first 'round' anniversary and looking back on an exciting decade – including a year and a half of being publicly traded. During that time we have managed to push significantly ahead with our project pipeline, the actual core of 4SC AG, and also to expand with new projects.

We have also made good progress along this path in the first six months of the current financial year, thus holding on to the goals laid out for 2007. The fact that sales over the past six months have lagged behind those of the same period last year does not really say much in this context because last year we also achieved the lion's share of our revenues shortly before the end of the year. At the moment, current sales are attributed almost solely to research and development work for our American partner QuoNova LLC.: 4SC AG is providing it with substantial research and development capacities for the further development of QSB substances against biofilms, which in the meantime have also been expanded upon. Moreover, together with a potential new partner we are conducting promising negotiations regarding extensive research cooperation, and we expect to reach a conclusion in the near future.

Several projects are about to enter into the clinical trial phase

The most important business division of 4SC is and remains the development of our own project pipeline, which currently includes six drug candidates. The phase IIa clinical study for our lead compound SC12267 is proceeding on schedule: At the end of June, we completed the recruitment of the targeted number of 120 patients with rheumatoid arthritis, and we expect to have the results of the study sometime this year.

Recently, for the same drug candidate, we were also able to report positive results from a pre-clinical proof of concept study for chronic inflammatory bowel diseases such as Colitis Ulcerosa and Morbus Crohn. Important prerequisites for clinical trial were met upon conclusion of this study – added proof that SC12267's potential is by no means limited to a rheumatoid arthritis application.

The drug candidates SC68896 for haematopoietic and solid tumours and SC71570 from the NFκB project for chronic inflammatory bowel disease are also in advanced pre-clinical studies. Therefore, they too are almost ready for clinical studies. However, for the time being, we will focus our clinic trial resources on completing the current phase IIa study. Should it take a positive course, as expected, it will no doubt further enhance the attractiveness of our lead compound amongst potential licensees and create greater latitude for our company.

Sustainable business model

The capital increase completed at the end of May did not entirely live up to expectations due to the difficult market environment. However, it did contribute to the fact that our company was able to bring several projects closer to clinical development and also push ahead with the phase IIa study with SC12267 as per schedule. Of course, we will continue to examine and, if applicable, take advantage

of all options so that in future we may exploit the potential of our project pipeline even better.

Dear Shareholders, at the moment it is not easy to gain and maintain investors' confidence in our sector. Dashed expectations in individual cases have an almost automatic effect on all other biotechnology stocks. That is why it is all the more important for me and my colleagues to remind people once again of 4SC AG's distinctiveness: Hardly any other German biotech company has such an extensive pipeline, including several projects that are largely ready for clinical trial. For good reason, the interest of potential pharmaceutical partners is not limited solely to our drug candidate SC12267.

As a result, we believe more than ever in the sustainability of our business model – and the accompanying distribution of risks amongst various projects. The development of an extensive pipeline with drug candidates deemed attractive by the pharmaceutical industry is and remains the decisive lever for enhancing company value. As far as that goes, 4SC AG is very much on the right track.

We hope that we have been able to further convince you of that, and we thank you for your confidence.

Dr Ulrich Dauer Chief Executive Officer

1. Presentation of the course of business

1.1 Economic development and development of stock exchange segments

The world economy continues to develop dynamically and is currently driven above all by growth in the emerging economies. However, the industrial economy – above all in the USA – has slowed somewhat. Furthermore, rising interest rates, indications of fear of inflation, high energy and raw material prices and a swelling mortgage lending crisis in the USA could have a negative influence on the world economy.

The German economy also continues on a stable upward trend. But in the view of leading economic research institutes, the highpoint of the economic trend has been reached. In the coming months the growth tempo could slacken off somewhat. However, the general trend will remain intact, so that overall growth of about 2.5% can be expected for the 2007 business year. Currently, the development of the Euro exchange rate, the oil price and interest rate increases are seen as critical.

The major German stock indexes DAX and TecDAX also reflect the relative strength of the European stock markets. For example, since the beginning of the year the lead index DAX and the TecDAX have been able to surge by 21.1% and 24.4% and during the second quarter by 15.9% and 9.9% and closed at the end of June at 8,007.32 and 932.47 points. The representative biotech indexes also developed positively on an annual basis, but below average by comparison: for example, the NASDAQ biotechnology index has risen by 0.4% since the beginning of the year, in the second quarter it grew by 3.0% to 802.68 points. The AMEX biotechnology index has developed somewhat better, increasing by 4.9% since the beginning of the year and by 3.5% in the second quarter to 791.12 points. In the second quarter the German prime IG Biotechnology Performance index lost 2.5%. On an annual basis though it was able to gain 4.0% and closed at 210.39 points.

Since at the moment investors can obtain good returns from commitments in established companies at a relatively low risk, young biotechnology companies continued to find it difficult to attract the attention of the capital markets and if necessary to acquire capital despite the positive overall mood.

In Europe and especially in Germany positive reports on major venture capital financing rounds confirmed the trend to selective, but significant financing initiatives. A multitude of M&A activities likewise documented the further consolidation and formation of larger economic units. The steady flow of reports on the successful conclusion of licensing and cooperation agreements or milestones passed allows one to deduce an increase in company interactions. Only in the area of clinical studies there were clear mixed signals, with some prominent "drop-outs". The latter reveal the inherent risks of this industry and repeatedly lead to insecurity, especially among private investors and those foreign to the industry.

1.2 Development of the company 1.2.1 Research and Development (Drug Discovery & Development)

In its most promising segment "Drug Discovery & Development", 4SC AG concentrated in the past quarter on the active further development of its portfolio of currently six research and development projects on the indications of autoimmune diseases and cancer.

The lead compound SC12267 is currently undergoing a clinical proof of concept study, in which the efficacy and tolerability of this drug candidate is being tested in the treatment of patients with rheumatoid arthritis. The phase IIa study is randomised and placebo controlled. As a result, SC12267 is being tested in patients according to the principle of random sampling in a total of three therapy groups: two patient groups receive the substance at different doses, while an additional patient group receives a placebo. The recruiting of the target number for a meaningful study of 120 patients with rheumatoid arthritis was concluded on schedule at the end of June. According to current plans, the study results are expected at the end of this year.

Furthermore, in the second quarter of this year 4SC AG achieved positive results for the same drug candidate in a preclinical proof of concept study against chronic inflammatory bowel diseases, such as Colitis Ulcerosa and Morbus Crohn. The successful preclinical proof of concept underlines the therapeutic potential of SC12267 in this autoimmune indication as well. The study results are in addition an important precondition for the start of another clinical phase IIa study and as a result represent a significant milestone on the

way to the development of a suitable medication in this indication.

The proteasome inhibitor SC68896, which in view of its good activity in preclinical models for a series of haematopoietic and solid tumours is to be developed as an oncological therapeutic substance, is undergoing advanced preclinical processing. Special attention is being paid here to establishing an optimised treatment scheme with the aid of animal models.

As part of the further development of the substance SC71570 from the NFκB project, very promising activity could be demonstrated in an animal model for chronic inflammatory bowel disease. As a result, there is another interesting development option for this substance, apart from its use in the treatment of rheumatoid arthritis. It was already possible to develop further successor candidates of the chemical series with special pharmacokinetic characteristics and chemical synthesis methods for the provision of large quantities of this substance class.

Progress was also made with the antiviral substance SC75741, a drug candidate that has shown a high degree of activity against the bird flu virus (H5N1). In cooperation with Münster University, 4SC AG has discovered that SC75741 blocks the export of virus particles, the so-called vRNP, from the cell core and so hinders viral proliferation. In comparative studies with licensed flu remedies it turns out that SC75741 – unlike so-called neuramidase inhibitors – does not cause any acquired resistance. Additional investigations on safety and compatibility are in preparation.

The substance SC71710 is also approaching the clinical testing phase. This is a protein kinase blocker developed with ProQinase GmbH from Freiburg, which recently displayed highly promising efficacy in an animal cancer model. The substance has so far proven to be the most potent inhibitor of the growth of acute myeloid leukaemia (AML) cells of the type MV4-11. Currently, all necessary experiments are being conducted in order afterwards to be in a position possibly to start the first clinical study.

Finally, 4SC AG was also able to report the first success of the latest of its six pipeline projects, the Kv1.3-project: some lead compounds showed a very high activity and simultaneously clear selectivity vis-à-vis other ion channels. The Federal Ministry of Education and Research (BMBF) is supporting this project as part of the "BioChancePLUS" programme. The aim is the development of new therapies to treat multiple sclerosis.

1.2.2 Research collaborations (Collaborative Business)

Cooperation with the US-American QuoNova LLC. in Melbourne, Florida, is based on the quorum sensing modulators developed by 4SC AG, which were sold in December last year to the newly established QuoNova LLC. 4SC AG provides QuoNova LLC. to a substantial extent with research capacity for the further development of these modulators, as well as for the manufacturing and characterisation of new modulators.

1.2.3 Personnel

Compared to previous quarters, 4SC AG has modified the nature of counting. On the one hand the Management Board was included, but on the other hand temporary staff and student trainees excluded, which has led to an almost unchanged number of employees.

In the quarter under review the company appointed a new employee for the area of patents. Consequently, on 30 June 2007 4SC AG employed a total of 61 employees (including the Management Board). At this time last year 55 employees were reported.

45 employees were employed in the Research and Development segment, 14 in the Administration and Distribution segment and two in the Information Technology segment.

The term of office of all Supervisory Board members ended with the conclusion of the annual general meeting on 29 June 2007. With the exception of Mr Stefan Meißner all Supervisory Board members stood for reelection and were confirmed by the annual general meeting. Mr Günter Frankenne, the managing proprietor of STRATCON, is a new member.

2. Presentation of the situation

2.1 Earnings position

Net sales in the second quarter of 2007 amounted to KEUR 348 and were as a result 34.2% below the sales of the same period in 2006 (KEUR 529). They originate from the "Collaborative Business" segment and were achieved essentially in the context of the research and development cooperation with QuoNova LLC., Melbourne, Florida, USA. In the first half of 2007 total sales amounted to KEUR 635 and were as a result 38.5% below those of the first half of 2006 (KEUR 1,032).

Research and development costs rose in the second quarter of 2007 from KEUR 1,312 to KEUR 1,656. Apart from higher patent costs due to the initiation of national registrations, the background was above all increased costs for external services in the context of ongoing pre-clinical and clinical studies for the various substances of 4SC AG – and here above all for the project SC12267 that is in the advanced clinical phase IIa. For this

The net assets position was characterised by the capital increase with subscription rights carried out on 21 May 2007.

reason expenses in the entire first half of the year at KEUR 3,237 in the Research and Development segment were 19.4% higher than in the same period last year (KEUR 2,712).

Administrative costs in the second quarter rose from KEUR 596 to KEUR 625. Accumulated, the costs here rose by 12.3% from KEUR 1,151 to KEUR 1,292. While the costs for consulting and investor relations could be held at the level of the previous year, personnel costs rose by almost 30%. The cause here was essentially rising personnel costs due to share options, but which have no cash effect. In addition, in January a new position for quality assurance was created.

The result from operating activities for the second quarter 2007 was KEUR - 2,101 compared to KEUR - 1,736 in the same period last year. For the entire first half year of 2007 the result from operating activities was KEUR - 4,259 after KEUR - 3,473 last year.

The financial result remained unchanged in the quarter under review at KEUR 16 compared to the same quarter last year. Accumulated there is a slight improvement of KEUR 7 to KEUR 18 (previous year KEUR 11). While the finance expenses at KEUR 87 remained largely unchanged (previous year KEUR 91), finance income increased from KEUR 102 to KEUR 156. However, these are faced by an anticipated proportional loss of KEUR 51 (previous year KEUR 0) resulting from investments accounted for by the equity method in connection with the associated company QuoNova LLC.

The period result for the second quarter of 2007 was KEUR - 2,085 compared to KEUR - 1,720 in the previous year. In the first half year of 2007 the period result was KEUR - 4,241 following KEUR - 3,462 in the same period in 2006 and was hence in the range expected.

The undiluted and diluted earnings per share were for the most part on par with the previous year's level. In the second quarter it was EUR - 0.17 compared to EUR - 0.16 in the same quarter last year and EUR - 0.36 for the first half of 2007 following EUR - 0.32 in 2006.

2.2 Net assets position

The net assets position was characterised by the capital increase with subscription rights carried out on 21 May 2007. In this connection the share capital of the company increased from KEUR 11,461 to KEUR 12,668, the number of shares rose analogously from 11,461,365 to 12,667,884 common bearer shares. The shares were placed at a price of EUR 2.80 per share. Consequently, 4SC AG obtained KEUR 3,378 gross from this transaction, with which the company will further develop the existing project pipeline and expand it with new projects.

The non-current assets declined compared to 31 December 2006 from KEUR 4,177 to KEUR 3,612 on 30 June 2007. The background was the reduction of the non-current accounts receivables from associated companies, the lower valuation of the finance investments accounted for by the equity method and the depreciation of the property, plant and equipment.

The current assets remained almost unchanged at KEUR 5,762 on 30 June 2007 compared to the end of the previous year (31 December 2006: KEUR 5,796). On the one hand, an increase in cash and cash equivalents and securities, and on the other hand, due to the closing date, lower trade accounts receivables, reduced accounts receivables from associated companies and lower other assets were posted. The capital inflow from the capital increase contrasts with capital outflows from the operational business of the company, since currently this is financed to a significant extent by the liquid reserves of the company. In total compared to 31 December 2006 cash and securities increased from KEUR 4,471 to KEUR 4,730.

The development of the equity in the first half of 2007 reflects the contrary influences of the capital increase on the one hand and the period result on the other. The total of subscribed capital and additional paid-in capital increased from KEUR 28,068 on 31 December 2006 to KEUR 31,165 on 30 June 2007. The transaction costs connected with the capital increase of KEUR 389 were set off according to IAS 32.35 against the additional paid-in capital. As a result of the negative period result, the equity of 4SC AG decreased from KEUR 7,854 on 31 December 2006 to KEUR 6,710 on 30 June 2007. The equity ratio at the end of the six months under review was 71.6% following 78.8% on 31 December 2006.

At KEUR 832, non-current liabilities remained almost unchanged compared to KEUR 830 on 31 December 2006. By contrast, current liabilities increased to KEUR 1,832 (31 December 2006: KEUR 1,289). This increase is due almost solely to the growth in provisions to KEUR 1,268 on 30 June 2007 (31 December 2006: KEUR 564), mainly due to existing obligations from third-party service agreements as well as patent matters and legal and consulting services not yet accounted for.

In view of the partially contradictory effects described, the balance sheet total of 4SC AG decreased from KEUR 9,973 on 31 December 2006 to KEUR 9,374 on 30 June 2007.

2.3 Financial position

At the end of the quarter under review the stock of cash and cash equivalents amounted to KEUR 3,861 (KEUR 2,522 on 31 December 2006). Additional funds of KEUR 869 are invested in fixed- and floating-rate securities with issuers of sound financial rating (31 December 2006: KEUR 1,949), so that liquid funds and near-term money amounting to KEUR 4,730 are available (31 December 2006: KEUR 4,471).

The cash flows from operating activities amounted in the first half of the year with its negative period result of KEUR - 4,241 to only KEUR - 2,683 and were still below the comparative figure of the previous annual period of KEUR - 2,923 at a period result of KEUR - 3,462. The cause of this was essentially the decline in trade accounts receivables and the increase in provisions.

In the quarter under review it was possible to generate a capital inflow of KEUR 1,033 from investment activities, mainly because of the sale of securities. In the same period last year, in addition to investments in fixed and intangible assets, purchases of securities of KEUR 848 were made, so that a capital outflow of KEUR 978 was posted.

The cash flows from financing activities of KEUR 2,989 net resulted from the cash capital increase of 21 May 2007. In the previous year KEUR 4,096 net flowed into the company during the same period from the capital increase of 11 May 2006.

3. Risk report

Compared to the reporting in the context of the annual report of 31 December 2006, the risk and opportunity position of 4SC AG has essentially remained unchanged.

The implementation of the clinical phase IIa study for the most advanced drug candidate SC12267 also continues according to plan. It was possible to conclude the recruiting of the target of 120 patients suffering from active rheumatoid arthritis successfully at the end of June, so that the study results will likely be available as planned at the end of the year. Positive study results would have a positive effect on the performance of the company. However, as before it still cannot be ruled out that SC12267 may not show sufficiently strong activity in patients or that unexpected safety-relevant side-effects will occur during this first-time use of the substance in patients. This could lead to a significant delay of the study or even to a breakup of the study.

The capital increase concluded in May improved the equity and liquidity position of the company and further strengthened the basis for reaching the company and development goals. But 4SC AG will continue to have a need for capital to realise its company goals. This will depend on various factors, especially whether it is possible to generate sufficient regular income from licensing or cooperation agreements. The costs for product development could exceed this revenue, which would make raising additional equity- and debt capital necessary. 4SC AG can not assume any guarantee that the financing will be available on time, to the extent necessary and on economically reasonable conditions or even at all. The provision of the financial means required is, however, necessary to secure continuance. If sufficient financial means are not available at all or not at acceptable conditions, 4SC AG could be compelled to restrict its costs for research and product development, which could have detrimental consequences for the net asset, financial and earnings position of 4SC AG. In the event that the company raises additional capital by issuing new shares, existing shareholders could experience dilution of their interest.

Contractually fixed payment agreements denominated in foreign currencies are subject to the current strong appreciation of the Euro in particular against the US-dollar. It is possible that these receivables cannot be hedged in an economically viable manner and lead, for instance, to value adjustments in the case of receivables in foreign currencies.

Current legislative developments as part of the company tax reform could result in the fact of not or not completely being able to carry forward losses made by the company in the future as a loss carryforward. The known risks regarding the use of loss carryforwards generated in the past remain unaffected by this.

4. Outlook of further business development

The development of 4SC AG proceeded as far as possible according to plan in the first half of the 2007 business year. Against this background, the goals defined for 2007 business year also remain unchanged.

The focus in the most important business segment "Drug Discovery & Development" continues to be on the conclusion of the clinical IIa study for the drug candidate SC12267 against rheumatoid arthritis, which is planned for the fourth quarter of 2007. If the study results turn out to be positive as The implementation of the clinical phase IIa study for the most advanced drug candidate SC12267 continues according to plan.

5. Responsibility Statement

expected, this should once again clearly increase the attractiveness of the drug candidate for potential licensees from the pharmaceutical industry.

The potential of SC12267 is also supported by the positive results of the preclinical proof of concept study against chronic inflammatory bowel diseases such as Colitis Ulcerosa and Morbus Crohn. With its conclusion important preconditions have been created to be able to test this drug candidate clinically as well. Moreover, two further projects of 4SC AG are at an advanced stage of preclinical studies and approaching clinical study readiness. For the time being, however, the company will concentrate its clinical capacities on conclusion of the current phase IIa study.

To the best of our knowledge, and in accordance with the applicable reporting principles for interim financial reporting, the interim financial statements give a true and fair view of the assets, liabilities, financial position and profit or loss of the company, and the interim management report of the company includes a fair review of the development and performance of the business and the position of the company, together with a description of the principal opportunities and risks associated with the expected development of the company for the remaining months of the financial year.

Management Board of 4SC AG (from left to right): Dr Daniel Vitt, Dr Ulrich Dauer, Dipl.-Kfm. Enno Spillner and Dr Gerhard Keilhauer

Planegg-Martinsried, 3 August 2007

Dr Ulrich Dauer, CEO

Dipl.-Kfm. Enno Spillner, CFO

Dr Gerhard Keilhauer, CDO

Dr Daniel Vitt, CSO

INTERIM REPORT | OVERVIEW

INTERIM REPORT OF 4SC AG (IFRS)

Income statement	12
Balance sheet	13
Cash flow statement	15
Statement of changes in equity	17
Notes	18

Income statement

for the period from 1 January to 30 June 2007

in KEUR	2007-04-01 - 2007-06-30	2006-04-01 - 2006-06-30	2007-01-01 - 2007-06-30	2006-01-01 - 2006-06-30	Notes
Net sales	348	529	635	1,032
Cost of sales	- 86	- 157	- 191	- 308
Gross profit	262	372	444	724
Distribution costs	- 87	- 109	- 168	- 217
Research and development costs	- 1,656	- 1,312	- 3,237	- 2,712
Administrative costs	- 625	- 596	- 1,292	- 1,151
Other operating income	39	6	60	11
Other operating expenses	- 34	- 97	- 66	- 128
Result from operating activities	- 2,101	- 1,736	- 4,259	- 3,473
Financial result
Result from an associate accounted
for by the equity method	- 14	0	- 51	0
Finance income	92	64	156	102
Finance expenses	- 62	- 48	- 87	- 91
Financial result	16	16	18	11
Period result	- 2,085	- 1,720	- 4,241	- 3,462
Earnings per share
(undiluted and diluted) [EUR]	- 0.17	- 0.16	- 0.36	- 0.32	3.

INTERIM REPORT 2007-06-30 12

Balance sheet – Assets

for the period ended 30 June 2007

in KEUR	2007-06-30	2006-12-31
ASSETS
Non-current assets
Intangible assets	1,867	1,875
Fixed assets	1,045	1,230
Investments accounted for by the equity-method	0	51
Accounts receivables from associated companies	700	1,021
Total non-current assets	3,612	4,177
Current assets
Inventories	23	17
Trade accounts receivables	15	134
Accounts receivables from associated companies	386	518
Cash	1,692	464
Securities	3,038	4,007
Other current assets	454	550
Prepaid expenses and accrued income	154	106
Total non-current assets	5,762	5,796
TOTAL ASSETS	9,374	9,973

Balance sheet – Equity and liabilities

for the period ended 30 June 2007

in KEUR	2007-06-30	2006-12-31
EQUITY AND LIABILITIES
Equity
Subscribed capital	12,668	11,461
Additional paid-in capital	18,497	16,607
Retained earnings	67	67
Loss carryforward	- 20,281	- 14,741
Period result	- 4,241	- 5,540
Total equity	6,710	7,854
Non-current liabilities
Long-term loans	832	830
Total non-current liabilities	832	830
Current liabilities
Provisions and deffered liabilities	1,268	564
Trade accounts payable	389	499
Accounts payable to associated companies	0	29
Down payments received	6	37
Other current liabilities	169	160
Total current liabilities	1,832	1,289
TOTAL EQUITY AND LIABILITIES	9,374	9,973

INTERIM REPORT 2007-06-30 14

Cash flow statement

for the period from 1 January to 30 June 2007

in KEUR	2007-01-01 - 2007-06-30	2006-01-01 - 2006-06-30
Cash flows from operating activities:
Period result before taxes	- 4,241	- 3,462
Corrections for:
Depreciation on fixed assets and intangible assets and impairment of goodwill	241	338
Non-cash affecting expenses and income	108	37
Financial result	- 18	- 11
Interest received	88	63
Interest paid	- 18	- 18
Decrease of trade accounts receivables	119	126
Decrease of accounts receivable from associated companies	453	30
Increase of inventories	- 6	- 3
Decrease of other current assets	96	3
Increase/Decrease of prepaid expenses and accrued income	- 48	95
Decrease/Increase of trade accounts payables	- 110	81
Decrease of accounts payable to associated companies	- 29	- 29
Decrease/Increase of down payments received	- 31	126
Increase/Decrease of provisions and deffered liabilities	704	- 207
Increase/Decrease of other current liabilities	9	- 92
Cash flows from operating activities:	- 2,683	- 2,923
Cash flows from investing activities:
Purchase of intangible assets	- 1	- 2
Purchase of fixed assets	- 46	- 128
Purchase of securities (maturity > 3 months)	- 370	- 848
Sales of securities (maturity > 3 months)	1,450	0
Cash flows from investing activities:	1,033	- 978
Cash flows from financing activities:
Payments to subscribed capital	1,207	931
Payments to additional paid-in capital	1,782	3,165
Cash flows from financing activities:	2,989	4,096
Net change in cash and cash equivalents	1,339	195
+ Cash and cash equivalents at the beginning of the period	2,522	6,878
= Cash and cash equivalents at the end of the period	3,861	7,073

Cash flow statement

for the period from 1 January to 30 June 2007

For the reason of comparability the securities purchased with a maturity of more than three months, which were reported as part of the cash and cash equivalents in the previous year, were re-classified as cash flows from investing activities. In the previous year, for the period 1 January 2006 to 30 June 2006 cash flows from investing activities which amounted to KEUR - 130, a net change in cash and cash equivalents amounting to KEUR 1,043, as well as cash and cash equivalents at the end of the period amounting to KEUR 7,921 were reported.

This re-classification was similarly applied to the following table.

The cash and cash equivalents break down as follows:

in KEUR	2007-01-01 - 2007-06-30	2006-01-01 - 2006-06-30 4,570 3,351 - 848 7,073
Cash	1,692
Securities	3,038
./. maturity > 3 months	- 869
	3,861

Statement of changes in equity

for the period from 1 January to 30 June 2007

in TEUR		Subscribed capital	Additional paid-in capital shares	Additional paid-in capital WSV1	Additional paid-in capital ESOP2	Retained earnings	Loss carryforward / Period result Total
Balance on 2006-01-01	10,530	13,172	11	120	67	- 14,741	9,159
Issued options (ESOP 2001 / 2003)				17			17
Issued options (ESOP 2004 / 2004)				7			7
Issued options (ESOP 2004 / 2005)				7			7
Capital increase of 11 May 2006	931	3,165					4,096
Issued options (ESOP 2004 / 2006/1)				1			1
Period result 2006-01-01 - 2006-06-30						- 3,462	- 3,462
Balance on 2006-06-30	11,461	16,337	11	152	67	- 18,203	9,825
Balance on 2007-01-01	11,461	16,361	11	235	67	- 20,281	7,854
Issued options (ESOP 2001 / 2003)				3			3
Issued options (ESOP 2004 / 2004)				7			7
Issued options (ESOP 2004 / 2005)				7			7
Issued options (ESOP 2004 / 2006/1)				3			3
Issued options (ESOP 2006 / 2006/2)				54			54
Issued options (ERSATZ-ESOP 2001 / 2006/3)				34			34
Capital increase of 21 May 2007	1,207	1,782					2,989
Period result 2007-01-01 - 2007-06-30						- 4,241	- 4,241
Balance on 2007-06-30	12,668	18,143	11	343	67	- 24,522	6,710

1: WSV = convertible bonds; 2: ESOP = Employee stock option programme for employees and Management Board

Notes

to the interim report dated 30 June 2007

1. Basis of valuation and significant accounting and valuation policies

1.1 Basis of valuation

This interim report has been prepared entirely in accordance with the accounting principles of the International Financial Reporting Standard (IFRS) and of IAS 34 (Interim Financial Reporting) in accordance with the requirements of the International Accounting Standards Board (IASB). The recommendations of the Standing Interpretations Committee (SIC) and the International Financial Reporting Interpretations Committee (IFRIC) have been taken into account. All of the IFRS adopted by the European Commission have been taken into account.

In the preparation of the interim report, Management had to make a number of estimations and assumptions exerting an influence on the disclosed value of assets and liabilities on the balance sheet date, and on expenditure and revenue within the reporting period. The actual value may deviate from these estimates. The discretionary decisions taken correspond to the Financial Statements for the year up to 31 December 2006.

This interim report represents the individual Financial Statements of the Germany-based 4SC AG, and in addition to 4SC AG, also takes account of the associated companies, quattro research GmbH, Planegg-Martinsried and QuoNova LLC., Melbourne, Florida, USA.

The interim report was approved for publication by the Management Board on 3 August 2007.

1.2 Significant accounting and valuation policies

The applied accounting and valuation policies correspond to those used for the Financial Statements for the year ending 31 December 2006.

The German "Bundesrat" decided on 6 July 2007 in his sitting about the corporation tax reform 2008. As part of the regulations being effective as of 1 January 2008 the corporation tax rate will be reduced from 25% to 15% with a moderate rise in the effective trade income tax rate against it. One of the refinancing measures is a limit with regard to the deductibility of certain business expenses. These new regulations will have effect on the company but are not recognized within this interim financial report.

2. Segment report

4SC AG operates in the two business segments of "Drug Discovery & Development" and "Collaborative Business". In the "Drug Discovery & Development" segment, 4SC AG has specialised in research and development of novel therapeutic drugs to combat chronic inflammatory diseases and cancer. The objective of the "Drug Discovery & Development" segment is to realise the commercial potential of the sustainable project pipeline put in place by 4SC AG by means of licensing contracts concluded with the pharmaceutical industry. 4SC AG is the holder of proprietary and patent rights and takes the decisions on the progress of projects. In the "Collaborative Business" segment, within the context of collaborative agreements, 4SC AG makes its technology platform available to partners and customers from the pharmaceutical and biotechnology industry, in the form of a service package. The collaborative partner is the holder of proprietary and patent rights and takes decisions on the progress of projects.

Segment report according to business segments:

in KEUR	Drug Discovery & Development		Collaborative Business			Not assigned	Consolidated
	01-01 - 06-30		01-01 - 06-30			01-01 - 06-30	01-01 - 06-30
	2007	2006	2007	2006	2007	2006	2007	2006
Net sales	0	26	635	1,006	0	0	635	1,032
Personnel costs	- 1,033	- 892	- 207	- 278	- 782	- 663	- 2,022	- 1,833
Depreciation	- 168	- 182	- 40	- 100	- 33	- 56	- 241	- 338
Other income and expenses	- 1,795	- 1,300	- 153	- 327	- 683	- 707	- 2,631	- 2,334
Segment result /
Result from operating activities	- 2,996	- 2,348	235	301	- 1,498	- 1,426	- 4,259	- 3,473
Financial result							18	11
Period result							- 4,241	- 3,462
Other information:
Segment assets	1,772	817	212	524	7,390	10,488	9,374	11,829
Segment liabilities	6	76	0	50	2,658	1,878	2,664	2,004
Investments	22	50	12	26	13	54	47	130

In particular, administrative costs are not assigned. Net sales are realised and shown both with external customers and with the associated company QuoNova LLC., Melbourne, Florida, USA.

Net sales according to headquarters of the performance recipient:

in KEUR	USA 01-01 - 06-30			Germany 01-01 - 06-30		Japan 01-01 - 06-30	Consolidated 01-01 - 06-30
	2007	2006	2007	2006	2007	2006	2007	2006
Net sales	623	25	12	507	0	500	635	1,032

Germany is the geographical location of the overall segment assets and the segment investments.

3. Earnings per share

The undiluted earnings per share are calculated in accordance with IAS 33.9 et sqq. by dividing the period result attributable to the shareholders (numerator) by the average weighted number of shares in circulation in the reporting period (denominator). The basis for the second quarter of 2007 is provided by a total number of shares of 11,997,596, and 11,047,459 shares for the same period of the previous year. In the first six months of 2007, the average number of shares stands at 11,729,480 compared with 10,788,788 in the first six months of 2006.

Since, as a result of the loss situation at 4SC AG, the options issued will not have a diluting effect, diluted earnings per share correspond to the undiluted earnings.

4. Financing measures

On 21 May 2007, 4SC AG completed a capital increase. By issuing 1,206,519 shares at a price of EUR 2,80 per share, the company accrued 4.3 million euros gross. The effects of this capital increase on the net assets and financial position of 4SC AG are explained in the interim management report under points 2.2 and 2.3.

5. Share property and directors' dealings

Broken down by individual members of the Management and Supervisory Board, the share and options property of 4SC AG on the reference date of 30 June 2007 are stated as follows:

Share property 2007-06-30					Maximum
Quantity				Options	number of
		Options	Options	exercised	subscribable
	Shares	total	of 2007	in 2007	shares
Management Board
Dr Ulrich Dauer	403,092	40,600	0	0	35,800
Dr Gerhard Keilhauer	9,025	71,500	0	0	66,700
Dipl.-Kfm. Enno Spillner	6,666	138,000	0	0	124,800
Dr Daniel Vitt	396,803	40,600	0	0	35,800
	815,586	290,700	0	0	263,100
Supervisory Board
Dr Jörg Neermann	14,750	0	0	0	0
Dr Manfred Rüdiger	5,000	0	0	0	0
	19,750	0	0	0	0

The former member of the Management Board, Dr Stefan Busemann holds 27,600 options from previous years with subscription rights to a maximum of 13,800 shares.

As a part of the options has a subscription ratio of 2:1, the number of subscribable shares is lower than the total amount of options issued.

There were the following transactions with shares or options of 4SC AG by the board members during the second quarter of 2007 to be reported as per § 15a of the WpHG (German Securities Trading Act):

• On 4 April 2007 the members of the Management Board, Dr Ulrich Dauer und Dr Daniel Vitt, acquired 3,300 shares at a price of EUR 3.03 each by means of XETRA trading, representing an overall transaction volume of KEUR 10 each (DGAP notifications dated 4 April 2007).
• On the same day the Chairman of the Supervisory Board, Dr Jörg Neermann, acquired 6,000 shares at a price of likewise EUR 3.03 each by means of XETRA trading, representing an overall transaction volume of KEUR 18 (DGAP notification dated 4 April 2007).
• In the context of the capital increase Dr Jörg Neermann exercised his subscription right. On 16 May 2007 he acquired over the counter 3,750 shares at a price of EUR 2.80 each, representing an overall transaction volume of KEUR 11 (DGAP notification dated 24 May 2007).
• On 4 June 2007 Dr Jörg Neermann furthermore acquired additional 3,500 shares over the counter at a price of EUR 2.80 each by purchasing and exercising subscription rights in the context of the capital increase dated 21 May 2007, representing an overall transaction volume of KEUR 10 (DGAP notification dated 5 June 2007).
• On 5 June 2007 the member of the Supervisory Board, Dr Manfred Rüdiger, acquired 5,000 shares at a price of EUR 3.15 each by means of Frankfurt Stock Exchange, representing an overall transaction volume of KEUR 16 (DGAP notification dated 5 June 2007).

INTERIM REPORT 2007-06-30 21

6. Employees' subscription rights

As an instrument aimed at increasing the motivation of 4SC AG employees, since the 2001 financial year, at least once per year, stock options have been granted to all active employees to subscribe to 4SC AG shares.

As at 30 June 2007, the total number of all stock options issued to employees (not including the Management Board) breaks down as follows:

						outstanding 2007-01-01 (k)			outstanding 2007-06-30 (k)	exerciseable 2007-06-30 (k)
ESOP	Tranche	Issuance		Exercising price (EUR)	subscription ratio1		forfeited 20072 (k)	exercised 2007 (k)			subscribeable shares max. number of 2007-06-30 (k)
ESOP 2001	2001/1	01-03-31	9,60	2:1	6	0	0	6	6	3
ESOP 2001	2001/2	01-10-10	9,60	2:1	0	0	0	0	0	0
ESOP 2001	2002	02-06-30	12,00	2:1	12	1	0	11	11	6
ESOP 2001	2003	03-09-30	5,08	2:1	65	10	0	55	28	28
ESOP 2004	2004	04-09-30	4,24	2:1	72	0	0	72	0	36
ESOP 2004	2005	05-09-30	4,24	2:1	72	0	0	72	0	36
ESOP 2004	2006/1	06-05-30	4,53	2:1	0	0	0	0	0	0
ESOP 2006	2006/2	06-08-25	3,80	1:1	124	5	0	119	0	119
ERSATZ-ESOP 2001	2006/3	06-08-25	3,80	1:1	101	0	0	101	0	101
Total					452	16	0	436	45	329

1: For the tranches affected by the capital reduction in December 2004, the subscription ratio is 2:1

2: After finalising the annual accounts options of the "ESOP 2004" were reissued to a former employee, who is still operating as consultant for the 4SC AG.

7. Related party disclosure

In the period 1 January 2007 to 30 June 2007, 4SC AG engaged in the transactions described below with related parties:

4SC AG maintains a legal relationship with quattro research GmbH, Planegg-Martinsried, in which it has held a 48.8% interest in the equity since the latter's foundation at the beginning of 2004. In particular, a software service agreement exists for further development, support and database maintenance regarding software produced by 4SC AG to support research activities. This agreement had a volume of KEUR 128 in the period January to June 2007. In addition, there is an IT service agreement, on the basis of which quattro research GmbH provides 4SC AG with infrastructure support and maintenance services. 4SC AG incurred costs of KEUR 21 net from this agreement in the first six months of the year.

In accordance with a redemption table agreed together with the purchase agreement of 7 January 2004 on the sale and transfer of software rights, quattro research GmbH will pay annual purchase price instalments until December 2010 inclusive. In accordance with the agreement, however, 4SC AG did not record any receipt of payment from this agreement in the first half of 2007, since the instalment only falls due in December.

In addition, there is a sublease agreement between 4SC AG as main tenant and quattro research GmbH as subtenant for rooms and parking spaces on the business premises of 4SC AG. The office equipment, telephone and Internet connection of the landlord are likewise sublet by this agreement. A continuation of the lease agreement beyond 31 March 2007 has been agreed between the parties.

4SC AG also maintains a legal relationship with QuoNova LLC., Melbourne, Florida, USA, established jointly with XL TechGroup, Melbourne, Florida, USA, in which 4SC AG has a share of 10.0%. On 28 December 2006, 4SC AG sold its worldwide exclusive rights to its QSB substances to QuoNova LLC. 4SC AG received the first instalment as agreed from the sale proceeds of two million USD in January 2007.

As part of the cooperation on the further development of QSB substances agreed between 4SC AG and QuoNova LLC. at the end of 2006 and commenced in January 2007, 4SC AG provided research services and in return received FTE payments of KEUR 286 in the first and KEUR 337 in the second quarter of 2007.

On 30 April 2007, 4SC AG concluded an agreement with the Conrad Hinrich Donner Bank, Hamburg, on the implementation of the capital increase of 4SC AG in May 2007 on the Frankfurt stock exchange. One of the directors of the Conrad Hinrich Donner Bank, Marcus Vitt, is a brother of the CSO of 4SC AG, Dr Daniel Vitt.

8. Review

The interim financial statements and the interim management report as of 30 June 2007 have been subjected to a review by KPMG Deutsche Treuhand-Gesellschaft Aktiengesellschaft Wirtschaftsprüfungsgesellschaft, München.

9. Events after the end of the reporting period

No events occurred after the balance sheet date 30 June 2007 which have a significant effect on the net assets, financial and earnings position of the company.

Review Report

To 4SC AG, Planegg, District of Munich

We have reviewed the condensed interim financial statements – comprising the balance sheet, income statement, cash flow statement, statement of changes in equity and selected explanatory notes – and the interim management report of 4SC AG, Planegg, District of Munich, for the period from January 1 to June 30, 2007 which are part of the half year financial reports according to § 37w WpHG ["Wertpapierhandelsgesetz": "German Securities Trading Act"]. The preparation of the condensed interim financial statements in accordance with the IFRS applicable to interim financial reporting as adopted by the EU, and of the interim management report which has been prepared in accordance with the regulations of the German Securities Trading Act applicable to interim management reports is the responsibility of the Company's management. Our responsibility is to issue a review report on these condensed interim financial statements and on the interim management report based on our review.

We performed our review of the condensed interim financial statements and the interim management report in accordance with the German generally accepted standards for the review of financial statements promulgated by the Institut der Wirtschaftsprüfer (IDW). Those standards require that we plan and conduct the review so that we can preclude through critical evaluation, with a certain level of assurance, that the condensed interim financial statements have not been prepared, in material aspects, in accordance with the IFRS applicable to interim financial reporting as adopted by the EU, and that the interim management report has not been prepared, in material aspects, in accordance with the regulations of the German Securities Trading Act applicable to interim management reports. A review is limited primarily to inquiries of company employees and analytical assessments and therefore does not provide the assurance attainable in a financial statement audit. Since, in accordance with our engagement, we have not performed a financial statement audit, we cannot issue an auditor's report.

Based on our review, no matters have come to our attention that cause us to presume that the condensed interim financial statements have not been prepared, in all material respects, in accordance with the IFRS applicable to interim financial reporting as adopted by the EU and that the interim management report has not been prepared, in all material respects, in accordance with the regulations of the German Securities Trading Act applicable to interim management reports.

Without qualifying this opinion we refer to the discussion in section 3 in the interim management report. Therein it is disclosed that the Company's ability to continue as a going concern depends on the contribution of cash or liquid assets in the form of equity capital.

Munich, August 3, 2007

KPMG Deutsche Treuhand-Gesellschaft Aktiengesellschaft Wirtschaftsprüfungsgesellschaft

Wolfs Rahn Wirtschaftsprüfer Wirtschaftsprüfer

INTERIM REPORT 2007-06-30 24

FINANCIAL CALENDAR / IMPRINT

Financial Calendar 2007

2007-03-29	Annual Report 2006	✓
2007-05-10	Quarterly Financial Report 2007 (Q1/2007)	✓
2007-05-31	Extraordinary Shareholders' Meeting	✓
2007-06-29	Annual General Shareholders' Meeting	✓
2007-08-09	Financial Report (half-year) 2007	✓
2007-11-08	Quarterly Financial Report 2007 (Q3/2007)
2007-11-12 -	Analyst Meeting: Deutsches Eigenkapitalforum,
2007-11-14	Congress Center Messe Frankfurt

Imprint

Editor	4SC AG / Am Klopferspitz 19a / 82152 Planegg-Martinsried
Conception/Text	komm.passion Schumacher's AG
Design	Angela Borsche / Werbeagentur Ursula Borsche GmbH
Investor Relations	Bettina von Klitzing / E-Mail: Bettina.von.Klitzing@4SC.com