4SC AG — Interim / Quarterly Report 2008

Nov 6, 2008

Interim Report and Quarterly Management Report by 30 September 2008

CONTENTS INTERIM REPORT BY 30 SEPTEMBER 2008

4SC AG

Contents

The Company
General information	04
Key figures	05
Shareholders' letter	06
Quarterly Management Report
Presentation of the course of business	09
Presentation of the situation	12
Risk and chance report	15
Events after the end of the reporting period	16
Business outlook	16
Financial Statements
Income statement	20
Balance sheet	21
Cash flow statement	22
Statement of changes in equity	23
Notes	24
Other Information
Financial calendar	30
Imprint	31

General information

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

Development of important key figures

	07-01 -	07-01 -
	2008-09-30	2007-09-30
	resp.	resp.	01-01 -	01-01 -
in K €	2008-09-30	2007-09-30	2008-09-30	2007-09-30
Net sales	490	325	2,472	960
Result from operating activities	- 3,777	- 1,944	- 8,484	- 6,203
Period result	- 3,370	- 1,948	- 7,829	- 6,189
Equity	41,342	21,457
Equity ratio	91.9%	89.5%
Balance sheet total	44,976	23,982
Cash flows from operating and investing activities	- 35,036	- 1,902	- 33,778	- 3,552
Cash flows from financing activities	29,359	16,641	29,359	19,630
Net change in cash and cash equivalents	- 5,677	14,739	- 4,419	16,078
Cash and cash equivalents1	5,916	18,600
Funds	25,663	19,361
Number of employees (at end of period)	83	63
The 4SC share
Earnings per share (undiluted and diluted) (€)	- 0.12	- 0.14	- 0.36	- 0.49
Shares in circulation (average, in thousands)	27,130	14,357	21,711	12,605
Percentage of freely tradeable shares2	100%	96%
3 resp. 9 month high (Xetra) (€)	3.80	3.40	3.80	3.85
3 resp. 9 month low (Xetra) (€)	2.50	2.53	3.05	2.53
Open at the beginning of period (Xetra) (€)	3.42	3.69
Close at the end of period (Xetra) (€)	3.40	3.35
Market capitalisation at the end of period (K €)	96,909	63,656
Average daily turnover (Xetra, Units)	4,730	9,318	4,963	10,475

1: This position does not include securities with an original maturity of more than three months, since they are included in cash flows from investing activities (see cash flow statement).

2: According with the regulations of Deutsche Börse (stock exchange) in Frankfurt concerning the determination of the percentage of freely tradeable shares, the free float of 4SC AG is only about 29,4%.

3: On 30 September 2008 shares issued in the context of the capital increase carried out on 14 July 2008 (33% of total stock, i.e. 9.500.913 new shares) were not yet approved for trading at Frankfurt Stock Exchange. We are hoping to achieve tradability in the fourth quarter of 2008.

Dear shareholders,

4SC AG has made considerable progress, despite the further aggravated conditions on the capital market in the past quarter. The integration of the oncology pipeline acquired from Nycomed, as well as the successful conclusion of a capital increase in July, indicate that we are capable of implementing the corporate strategy in spite of all unfavourable external factors.

Thanks to the capital increase, we were able to raise funds totalling approximately 29.45 million €.This reflects our investors' confidence in our business model. Our product portfolio is focused on commercially lucrative indications such as cancer and autoimmune diseases. Our wide-ranging pipeline enables us to better diversify our business risk. At the same time, we are limiting research and development costs by contributing our expertise up to the successful conclusion of the efficacy studies in the clinical phase II, before putting forward the candidates in licensing agreements with prospective partners from the pharmaceutical industry. With our strategy and our expanded and matured product portfolio, as well as our capital endowment, we are confident that we are well prepared, even for difficult times.

Attractive pipeline

The acquisition of eight candidates from the oncology pipeline of Nycomed was completed in July. We are proud of the fact that we were able to assert ourselves against larger major players in the bid to secure this attractive portfolio, not least due to the fact that we were able to act promptly and efficiently in the bidding process, thanks to our flexible organisation.

With this transaction, we have expanded our research activities to include projects that fit in perfectly with our portfolio with regard to indications and effect. We are confident that the Nycomed newcomers will enable us to achieve long-term value growth. Three of the products have meanwhile been integrated into our clinical and pre-clinical development pipeline. The decisive factor for their selection was the portfolio candidates' extensive molecular mechanisms and the definition of their unique selling points, as well as their market potential.

Clinical advances

At the end of the period under review, 4SC AG reported initial, highly promising results from the clinical phase I for the cancer drug 4SC-201. The preparation from Nycomed's portfolio demonstrates good tolerability and safety and stabilised progression of the disease in a number of patients. Conclusive data is expected at the end of the year. If this extremely positive trend is confirmed, we will launch a number of phase II projects for a variety of cancer indications in 2009.

Furthermore, we expect at least one further candidate to receive approval for the start of a clinical phase in the current year. In the case of 4SC-101, our most advanced project for the treatment of rheumatoid arthritis, we are adhering to the twin-track strategy: On the one hand negotiations are currently underway to license out the product. On the other hand preparations for a further phase II study are in full swing in order to increase the significance of the available data package and hence the potential project value. In addition, preparations for the phase IIa study for the chronic inflammatory bowel diseases indication are at an advanced stage.

Dr Ulrich Dauer Chairman of the management board

Sound financial basis

We are convinced that our strategy is correct, sound and sustainable, and promoted the "investment case 4SC" during many talks. In this context, we recently increased our presence at national and international investor conferences and are experiencing growing interest. Following the most recent capital measure, we have no need to procure further funds on the capital market. In light of the current credit crunch, this is a major competitive advantage.

We would like to thank you for your trust in our firm.

Yours, Dr Ulrich Dauer

QUARTERLY MANAGEMENT REPORT INTERIM REPORT BY 30 SEPTEMBER 2008

Quarterly Management Report of 4SC AG

For 4SC AG, the third quarter of 2008 was dominated by the takeover of the oncology projects of Nycomed.

1. Presentation of the course of business

1.1 Current developments in the biotech industry

Unlike developments on the overall market, the turbulence on the financial markets during the third quarter 2008 had barely any negative effects on the price of shares in the biotech sector. Thus, in the period leading up to 30 September 2008, the AMEX Biotechnology Index gained 6.3% to 784.16 points, while the NASDAQ Biotechnology Index improved by 5.6%, reaching 836.08 points during the same period. The relevant German DAXsubsector Biotechnology Performance Index rose by 6.3% during the reporting period to 178.97 points. By comparison, during the same period, the DAX fell by 8.8% to 5,831.02 points.

As in the previous quarter, the sector was dominated by takeover bids. Expiring patents and the lack of new top sellers stemming from in-house research continue to be the central motives for pharmaceutical companies submitting take-over bids.The most spectacular offer was submitted to the world's largest Biotech enterprise Genentech by Swiss pharmaceuticals giant Roche. Roche already holds some 56% of the stock in the US firm, and wishes to pay 89 US-\$ per share for the remaining 44%, which corresponds to an aggregate amount of 43.7 billion US-\$. The supervisory board of Genentech rejected the offer as being too low. It now remains to be seen to what extent Roche is willing to up the purchase price.

Eli Lilly has gone one step further. At the end of the period under review, the US pharmaceuticals group announced the acquisition of the biotech company ImClone for 6.5 billion US-\$ or 70 US-\$ per share. Previously, rival Bristol Myers-Squibb had failed with an offer of 60 US-\$ per share. ImClone's Erbitux, an antibody for treating a variety of different types of cancer, has already earned the company billions. In addition, there are five further candidates in an advanced stage of clinical development. In Germany, Berlin-based company Jerini became the object of desire: At 6.25 € per share, which equates to a hefty mark-up of 199% compared to the average share price over the previous three months, UK pharmaceuticals specialists Shire in July secured itself access to Firazyr, a drug used in the treatment of a rare hereditary disease which had previously been approved in Europe.

The strategic alliances between big pharma and biotech have also made significant headway. In July, for example, GlaxoSmithKline and the Swiss company Actelion concluded a lucrative deal for the joint development of the sleeping pill Almorexant. The development costs for the clinical phase III will be split, as will the future revenues. Ideally, Actelion will receive 3.3 billion US-\$ prior to the launch of Almorexant.

1.2 Development of the company 1.2.1 General development

For 4SC AG, the third quarter of 2008 was dominated by the takeover of the oncology projects of Nycomed. The acquisition, which was announced back in June, was successfully concluded on 31 July 2008: Nycomed transferred all rights in connection with a total of eight projects to 4SC AG in a 14 million € cash transaction.

In the run-up to the transaction, 4SC AG had carried out a capital increase to finance the purchase price using approved capital whilst maintaining the subscription rights of existing shareholders. The non-subscribed shares were issued in full, within the scope of a private placement at the subscription price. This capital measure was assisted by

The acquisition of projects of Nycomed, which was announced back

in June, was successfully concluded on 31 July 2008.

Santo Holding (Deutschland) GmbH, the largest single shareholder of 4SC AG.The gross issuing revenue from the capital increase amounted to approximately 29.45 million €. In addition to financing the purchase price for the acquisition of the Nycomed projects, the new funds will be used for the advancement of existing and newly-acquired 4SC AG projects.

1.2.2 Research and development (Drug discovery & development)

After acquiring the Nycomed oncology projects at the end of July, 4SC AG focused during the quarter under review on integrating the new projects into the existing development pipeline. To this end, all existing and acquired projects were prioritised in order to decide on which of the selected programmes to first concentrate available resources, so as to generate the greatest increase in value.

Three of the projects from Nycomed's oncology portfolio

have been initially integrated into the development pipeline of 4SC AG.

The decisive factor for the selection of the projects was the portfolio candidates' wide range of molecular mechanisms, the definition of their unique selling points, as well as the indications and markets addressed by them.

At the same time, 4SC AG used the integration of the new projects into its own pipeline as an opportunity to rename all drug candidates. The new names are made up of the abbreviation 4SC in conjunction with three digits. The first digit refers to the indication (1 = autoimmune diseases; 2 = oncology; 3 = other indications), while the second and third digits are for numbering the individual programmes.

Of the active components developed by 4SC AG itself up until now, drug candidate SC12267 for treating rheumatoid arthritis has been renamed 4SC-101. The substance SC71492, likewise one of the indicators for autoimmune diseases, has been renamed 4SC-102. SC68896 and SC71710 – both drug candidates for treating cancer – have been renamed 4SC-206 and 4SC-203 respectively. And finally, the substance SC75741, in the viral infection indication, has been renamed 4SC-301.

Three of the projects from Nycomed's oncology portfolio have been initially integrated into the development pipeline of 4SC AG and renamed accordingly:

4SC-201 is an orally-administered histone-deacetylase (HDAC) enzyme inhibitor which has been successfully tested on cancer patients for safety and tolerability in a phase I clinical trial that is on the verge of completion. The first data gleaned from this study was published on 21 October 2008, after the end of the reporting period. Preclinical models had previously shown 4SC-201 to have a very good clinical safety profile and a highly efficacious antitumour activity. Compared with other substances, whose efficacy is also based on blocking this HDAC enzyme, 4SC-201 displays especially good pharmacokinetic properties.

4SC-202 is a further orally-administered HDAC inhibitor, which is currently undergoing final preclinical development in preparation for filing for approval to conduct an initial clinical trial. In contrast to 4SC-201, this drug exhibits a special cytostatic (anti-mitotic) effect. This property means that this candidate may be potentially suitable for treating especially aggressive types of cancer that display a high cell division rate.

4SC-205 is the third Nycomed drug candidate to be integrated into the 4SC AG development pipeline for the time being. This substance is a so-called EG5 kinesin inhibitor, which is currently in the closing stages of preclinical trials. Since the target structure of 4SC-205 is detectable only in actively dividing cells, it is expected that a specific inhibition of tumour cell growth can be achieved. The preparation inhibits the mitotic spindle apparatus, which is responsible for the correct distribution of chromosomes to the daughter cells during cell division. This prevents their cell division. In contrast to other drugs that likewise attack the spindle apparatus, 4SC-205 offers the option of being developed as an oral medication.

The remaining Nycomed projects were integrated into the 4SC AG research pipeline. In future, this extensive pool of projects will enable the company to continually expand the development pipeline to include those drug candidates, which offer the greatest potential in terms of value enhancement and sustainability.

Indication	Discovery	Pre-Clinic	Phase I	Phase II	Phase III
Rheumatoid Arthritis	4SC-101 (DHODH)				INFLAMMATION
IBD	4SC-101 (DHODH)
IBD/RA	4SC-102 (Immunmodul.)
Viral Infections	4SC-301 (NFκB)
Oncology	4SC-201 (HDAC)				ONCOLOGY
Oncology	4SC-206 (Proteasome)*		*Licensed to ViroLogik for antiviral applications
Oncology	4SC-203 (Multi Kinase Inhibitor)
Solid Tumours	4SC-202 (HDAC)
Solid Tumours	4SC-205 (Eg5-kinesin)

1.2.3 Research collaborations (Collaborative business)

In the "Collaborative Business" segment, 4SC AG continued its collaboration with Wuppertal-based AiCuris GmbH & Co. KG on anti-infective drug research during the third quarter of 2008. The scope of the collaboration with US-based QuoNova LLC. has been reduced during the reporting period for the time being, in line with the project progress. Owing to the current uncertain economic situation, 4SC AG shall refrain for the moment from making any substantial advanced performance within the framework of the cooperation with QuoNova LLC.

1.2.4 Personnel

Number of employees

As of 30 September 2008, 4SC AG employed a total of 83 staff (including the Management Board and two apprentices) as compared to 63 employed as at the end of the third quarter of 2007. Of these, 61 persons were employed in the research and development department, 19 in administration and sales and three in the information technology department. The new employees taken on in the quarter under review included four persons in the research departments and one apprentice in both the research and information technology departments.

Changes in the Management Board

In the previous quarter, the company announced that Dr Gerhard Keilhauer would be retiring from the Management Board of 4SC AG with effect on 30 June 2008.The new chief development officer at 4SC AG is Dr Bernd Hentsch, who held this position since 1 July 2008 and has taken on all the duties previously carried out by Dr Gerhard Keilhauer.

2. Presentation of the situation

2.1 Earnings position

Net sales

Net sales in the third quarter amounted to 490 k € as compared to 325 k € in the same period of the previous year. Whereas the previous year's sales were primarily generated by the contract with the US-American company QuoNova LLC., this cooperation contributed less than 10% of sales in the quarter under review. The main share of sales was realised by Wuppertal-based AiCuris GmbH & Co. KG.

The first nine months of the financial year saw a significant increase

in sales as compared to the previous year.

The first nine months of the financial year saw a significant increase in sales as compared to the previous year: net sales improved from 960 k € to 2,472 k € over the ninemonth period. Whereas sales in the "Collaborative Business"segment almost doubled to 1,722 k € over the 960 k € generated in the previous year, the "Drug Discovery & Development" segment also made a contribution to this growth with sales of 750 k € (previous year: 0 k €). In this case, the sales can be attributed to the licence and cooperation contract concluded with Erlangen-based ViroLogik GmbH in the second quarter of 2008.

Operating expenses

The significant rise in the cost of sales from 94 k € to 853 k € in the quarter under review and from 285 k € to 1,259 k € in the first nine months results above all from value adjustments. Due to the increased uncertainty in terms of the liquidity position of QuoNova LLC., 4SC AG adjusted the entire amount of 694 k € as of 30 September 2008 for both the outstanding receivables from the purchase price for the worldwide exclusive rights to QSB substances and from the cooperation with the company in general.

At the same time, research and development costs doubled, from 1,476 k € to 2,991 k €, as against those of the third quarter of 2007. This development is attributable in part to the integration of the projects acquired from Nycomed into the company's own pipeline and in part to the increasing level of external services used in connection with the further development of 4SC projects already in existence. This was further aggravated by the rise in personnel

costs due to the strengthening of the research and development team. Seen from an aggregate perspective, research and development costs in the first nine months increased from 4,717 k € in the previous year to 7,660 k € in the current year.

The rise in administrative costs can be attributed to the increase in personnel costs. By contrast, the other expenses in this area largely remained on the previous year's level both in the third quarter as well as over the nine-month period. In all, administrative costs in the third quarter rose from 644 k € to 720 k € and over the nine-month period from 1,998 k € to 2,236 k €.

Financial result

The financial result in the quarter under review amounted to 407 k € as compared to the loss of 4 k € reported in the same quarter of the previous year.The company was able to report a positive result from investments accounted for by the equity method amounting to 53 k € (previous year 0 k €).This result reflects the share of 4SC AG in the success of its participating interest in quattro research GmbH. After an interim profit to be offset against this participating interest was recorded in the previous financial statements, the company was able to eliminate this in the quarter under review.The positive result of quattro research GmbH enabled the carrying value of the shares held by 4SC AG to increase accordingly, a change appropriately reported in the financial result. At the same time, finance income rose thanks in the main to the interest-bearing investment of cash and cash equivalents and the income statement related valuation of securities from 89 k € in the third quarter of 2007 to 325 k € in the quarter under review. As the exchange rate of the US dollar on the cut-off date as compared to that of the Euro improved from 1.5780 as of 30 June 2008 to 1.4360 as of 30 September 2008, the devaluation occurring in the first quarter of 2008 underwent a significant correction. It was for this reason that a positive amount of 29 k € could be reported under the item financial expenses. In the same quarter of the previous year, a loss of 93 k € was reported.

Seen in aggregate terms, the financial result amounted to 655 k € as compared to 14 k € in the same period of the previous year, with financial income up from 245 k € to 728 k € and financial expenses reduced from 180 k € to 126 k €. The result of the investments accounted for by the equity method, which stood at - 51 k € in the first nine months of 2007, amounted to 53 k € in the current year under review.

Period result

The period result for the period from July to September 2008 therefore amounted to - 3,370 k € as compared to - 1,948 k € in the third quarter of 2007. Seen in aggregate terms, an increase in the loss was also reported, with the period result amounting to - 7,829 k € compared with - 6,189 k € in the same period in 2007.

Earnings per share

Undiluted and diluted earnings per share amounted to - 0.12 € in the quarter under review, as they did in the first two quarters, and thus 0.02 € better than in the third quarter of 2007. In aggregate terms, earnings per share amounted to - 0.36 € compared with - 0.49 € in the financial year 2007.

2.2 Net asset position

Non-current assets

Non-current assets improved between 31 December 2007 and 30 September 2008 from 5,689 k € to 18,122 k €, a development primarily attributable to the acquisition of the rights to a total of eight Nycomed oncology projects worth 14 million €, which was reflected in the increase in intangible assets.At the same time, fixed assets also increased, with total investment significantly exceeding depreciation in the period under review. The value of the investments accounted for by the equity method as of the end of the quarter under review amounted to 53 k € and can be attributed to the rise in the carrying value of the shares held by 4SC AG in quattro research GmbH, generated via the positive result of the associated company. A decline due to the shifting of financial assets into the current sector to 633 k € was, however, reported under other financial assets (31 December 2007: 1,972 k €).The fall in the value of non-current accounts receivables from associated companies from 623 k € as of 31 December 2007 to 0 k € as of 30 September 2008 was attributable to two factors: quattro research GmbH repaid all non-current and current receivables at the beginning of September, ahead of schedule. At the same time 4SC AG's management decided to subject all outstanding non-current and current accounts receivables from QuoNova LLC. to a value adjustment, due to the increased uncertainty with regard to QuoNova LLC's liquidity position. No accounts receivables from associated companies are therefore shown as of 30 September 2008.

Current assets

Current assets rose from 16,374 k € as of 31 December 2007 to 26,854 k € as of 30 September 2008. While a decrease in current accounts receivables from associated companies from 376 k € to 0 k € was recorded, because of the circumstances previously described, trade accounts receivables increased, as of the record date, from 131 k € to 540 k € and other current assets from 627 k € to 1,103 k €. The decline in cash and cash equivalents as of 30 September 2008 to 5,916 k € (31 December 2007: 10,335 k €) which was a result of 4SC AG's operations, can be more than compensated for through a significant increase in other financial assets. The investment of money in the course of the capital increase during the third quarter of 2008 is reflected in this balance sheet item.

Non-current assets improved between 31 December 2007

and 30 September 2008 by 5,689 k € to 18,122 k €.

Equity

The increase in equity from 19,616 k € as of 31 December 2007 to 41,342 k € as of 30 September 2008, and the three percentage point improvement of the equity ratio from 88.9% to 91.9% that accompanied it was a result of the capital increase completed in the third quarter.As a part of this increase, 9,500,913 shares were issued at a price of 3.10 € a share. The share capital of the company thus increased by 9,501 k €, from 19,002 k € to 28,503 k €. The number of shares analogously increased by 9,500,913 from 19,001,826 to 28,502,739. Inversely, this was counteracted by the negative period result of 7,829 k € during the first nine months of 2008. Net losses increased accordingly from 28,411 k € as of 31 December 2007 to 36,240 k € as of 30 September 2008.

Non-current and current liabilities

Non-current liabilities remained virtually unchanged compared to 31 December 2007, at 57 k €. In comparison, a clear increase in current liabilities was observed: These increased from 2,394 k € to 3,577 k €. On one hand, the trade accounts payable increased as of the record date from 480 k € to 1054 k €; on the other hand an increase from 951 k € to 1618 k € in other liabilities was observable. The latter is particularly attributable to the costs of external services and patents which have yet to be settled.

Balance sheet total

The balance sheet total of 4SC AG doubled, due to the effects described, from 22,063 k € as of 31 December 2007 to 44,976 k € as of 30 September 2008.

2.3 Financial position

Cash flows from operating activities

The cash flows from operating activities in the period under review fell below the previous year's - 4,644 k €, to - 5,902 k €, a difference of 1,258 k €.The change in comparison to the negative operating result of - 7,829 k € resulted from non-cash effective expenses within the operating result, as well as the development of the working capital, and therein, most significantly from the increase in trade accounts payables and other liabilities.

Cash flows from investing activities

The cash flows from investing activities of - 27,876 k € in 2008 indicates a clear increase in activity. Investments in intangible assets have had an effect on this process, especially the rights to the eight oncology projects from Nycomed totalling 14 million €. In addition to this, 675 k € in fixed assets and 154 k € in interests were invested. At the same time, an outflow of funds totalling 18,300 k € took place, because of the purchase of financial instruments with an original maturity of more than three months, which could be minimally compensated for through the sale of 5,383 k € in financial instruments. During the same time period in the previous year, the cash flow from the purchase and sale of financial instruments netted 1,186 k € with a simultaneous investment volume of 94 k €. The cash flow from investing activities thus came to a total of 1,092 k €.

Cash flows from financing activities

Cash flows from financing activities in the reporting period totalling 29,359 k € (net) resulted from the capital increase as of 14 July 2008. In the same period during the previous year, 4SC AG accrued 19,630 k € (net) through capital increases from 21 May 2007 and 7 September 2007.

Liquid funds

The stock of cash and cash equivalents amounted to 5,916 k € at the end of the period under review. Other funds amounting to 19,268 k € have been invested in current fixed and variable interest-bearing securities and fixed deposits. In addition, 479 k € has been invested as financial instruments with a residual term of more than one year. Thus, as of the cut-off date, 30 September 2008, funds are amounting to 25,663 k € (31 December 2007: 17,193 k €).

3. Risk and chance report

Compared to the report in the framework of the annual report for the year ending 31 December 2007 and within the scope of the interim report as at 30 June 2008, there were the following key changes in the risk and chance position of 4SC AG:

Chances and risks connected with the acquisition of Nycomed oncology projects

The risks arising from the takeover of Nycomed's oncology projects with regard to the transfer of assets – in the form of non-fulfilment of obligations arising from the contract by Nycomed and/or 4SC AG – could be eliminated as far as possible in the quarter under review by finalising the transaction on 31 July 2008.

Despite the positive results reported for the cancer drug candidate 4SC-201 on 21 October 2008 (after the end of the reporting period) from clinical phase I, 4SC AG cannot rule out that unexpected safety or activity-related events will arise during the still ongoing clinical phase I for this project as well as during the follow-up pre-clinical, despite a comprehensive due diligence process, which could lead to delays or even jeopardise the successful execution of the relevant studies.

In addition, the negative operating result of 4SC AG may increase if the necessary additional development costs cannot be compensated for through increased sales or additional licensing revenue.

Economic presentation of QuoNova LLC

The risks reported in the previous quarter which arose in connection with QuoNova LLC were recorded in the books in the reporting quarter in the form of the valuation allowances described. Conversely, a positive clarification of Quo-Nova LLC's financial situation, independently and/or by the principal shareholder and main investor XL TechGroup, could possibly mean the partial or complete reattribution as well as realisation of the unpaid receivables. 4SC AG is actively committed to realising the existing receivables.

The risks arising from the takeover of Nycomed's oncology

projects could be eliminated as far as

possible by finalising the transaction on 31 July 2008.

4. Events after the end of the reporting period

On 21 October 2008, 4SC AG announced initial findings obtained from the phase I clinical trial with drug candidate 4SC-201 for treating cancer patients. The study findings presented prove the excellent tolerability and safety of 4SC-201. Based on the available findings, 4SC AG plans to begin corresponding phase II efficacy studies next year. Possible areas of application will target various tumour diseases, for which there is considerable medical demand.

5. Business outlook

After completing the integration of the Nycomed projects into 4SC AG's development pipeline, the company currently has two clinical development projects, 4SC-101 and 4SC-201. The therapeutic efficacy of these drug candidates will be tested in 2009 for a variety of indications within the scope of a phase II clinical trial.

In total, four other projects from the 4SC pipeline currently have

the potential to reach clinical maturity in the near future.

The management also expects that phase I clinical development will be able to begin on further drug candidates from the new, updated pipeline over the coming twelve months. In total, four other projects from the 4SC pipeline currently have the potential to reach clinical maturity in the near future.

Based on the available results from the phase I trial with drug candidate 4SC-201, 4SC AG will begin with the preparations for corresponding phase II efficacy studies for several oncological indications in the coming months.

Parallel to this, the development strategy for the lead compound 4SC-101 remains on the agenda. In addition to the ongoing talks with the biopharmaceutical industry regarding a potential licensing agreement, the scientific team at 4SC AG is actively engaged in the final preparations for a phase IIa clinical trial for chronic inflammatory bowel diseases (Crohn's disease) as well as for an in-depth phase II clinical trial with regard to rheumatoid arthritis.

In order to be able to master the future challenges resulting from the broad development pipeline, 4SC AG is also currently conducting negotiations with highly-qualified persons, who are expected to reinforce both the project management as well as the clinical development teams of 4SC AG in the very near future.

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

Planegg-Martinsried, 3 November 2008

Dr Ulrich Dauer, CEO Dr Bernd Hentsch, CDO Dr Daniel Vitt, CSO Dipl.-Kfm. Enno Spillner, CFO

FINANCIAL STATEMENTS INTERIM REPORT BY 30 SEPTEMBER 2008

The goals set for the company in the current financial year continue to apply.

Financial Statements of 4SC AG (IFRS)

Income statement	20
Balance sheet	21
Cash flow statement	22
Statement of changes in equity	23
Notes	24

Income statement for the period from 1 January to 30 September 2008 (unaudited)

in k €	07-01 - 2008-09-30	07-01 - 2007-09-301	01-01 - 2008-09-30	01-01 - 2007-09-301	Notes
Net sales	490	325	2,472	960
Cost of sales	- 853	- 94	- 1,259	- 285
Gross profit	- 363	231	1,213	675
Distribution costs	- 71	- 78	- 307	- 246
Research and development costs	- 2,991	- 1,476	- 7,660	- 4,717
Administrative costs	- 720	- 644	- 2,236	- 1,998
Other operating income	368	23	506	83
Result from operating activities	- 3,777	- 1,944	- 8,484	- 6,203
Financial result
Result from an associate
accounted for by the equity method	53	0	53	- 51
Finance income	325	89	728	245
Finance expenses	29	- 93	- 126	- 180
Financial result	407	- 4	655	14
Period result	- 3,370	- 1,948	- 7,829	- 6,189
Earnings per share
(undiluted and diluted) [€]	- 0.12	- 0.14	- 0.36	- 0.49	3.

1: The other operating expenses, reported separately in the previous years' interim report, were assigned to the individual areas of activities.

Balance sheet for the period ended 30 September 2008 (unaudited)

in k €	2008-09-30	2007-12-31
ASSETS
Non-current assets
Intangible assets	15,777	1,865
Fixed assets	1,502	1,072
Investments accounted for by the equity method	53	0
Other financial assets	633	1,972
Accounts receivables from associated companies	0	623
Other non-current assets	157	157
Non-current assets	18,122	5,689
Current assets
Inventories	27	19
Trade accounts receivables	540	131
Accounts receivables from associated companies	0	376
Other financial assets	19,268	4,886
Cash and cash equivalents	5,916	10,335
Other current assets	1,103	627
Current assets	26,854	16,374
Total assets	44,976	22,063
EQUITY AND LIABILITIES Equity
Subscribed capital	28,502	19,002
Agio	48,253	28,395
Reserves	826	630
Balance sheet loss	- 36,240	- 28,411
Equity	41,342	19,616
Non-current liabilities
Other liabilities	57	53
Non-current liabilities	57	53
Current liabilities
Trade accounts payable	1,054	480
Accounts payable to associated companies	0	103
Financial liabilities	905	860
Other liabilities	1,618	951
Current liabilities	3,577	2,394
Total equity and liabilities	44,976	22,063

Cash flow statement for the period from 1 January to 30 September 2008 (unaudited)

in k €	01-01 – 2008-09-30	01-01 – 2007-09-30
Cash flows from operating activities
Period result before taxes	- 7,829	- 6,189
Corrections for:
Depreciation on fixed assets and intangible assets and impairment of goodwill	467	304
Financial result	- 655	- 14
Non-cash affecting ESOP1	218	162
Non-cash affecting expenses and income	780	- 44
Interest received	486	154
Interest paid	- 27	- 27
Increase/Decrease of trade accounts receivables	- 409	125
Decrease of accounts receivables from associated companies	409	477
Increase of inventories	- 8	- 3
Increase/Decrease of other current assets	- 476	21
Increase/Decrease of trade accounts payable	574	- 241
Decrease of accounts payable to associated companies	- 103	- 29
Increase of other liabilities	671	660
Cash flows from operating activities	- 5,902	- 4,644
Cash flows from investing activities
Payments for investments in intangible assets	- 14,134	- 1
Payments for investments in fixed assets	- 675	- 93
Payments from the sale of fixed assets	4	0
Payments for investments	- 154	0
Purchase of financial assets that are no cash equivalents	- 18,300	- 363
Sales of financial assets that are no cash equivalents	5,383	1,549
Cash flows from investing activities	- 27,876	1,092
Cash flows from financing activities
Payments to subscribed capital	9,501	7,541
Payment to agio	19,858	12,089
Cash flows from financing activities	29,359	19,630
Net change in cash and cash equivalents	- 4,419	16,078
+ Cash and cash equivalents at the beginning of the period	10,335	2,522
= Cash and cash equivalents at the end of the period	5,916	18,600

1: ESOP = Employee stock option programme for employees and management board

The cash flow statement was prepared in accordance with the provisions of IAS 7.

Statement of changes in equity for the period from 1 January to 30 September 2008 (unaudited)

	Subscribed				Retained earnings	Revaluation	Balance sheet loss
in k €		capital Agio	Reserves ESOP1,2			reserve	Total
				Rücklagen
Balance on 2007-01-01	11,461	16,361	246	67	0	- 20,281	7,854
Issued options (ESOP 2001/2003)			4				4
Issued options (ESOP 2004/2004)			11				11
Issued options (ESOP 2004/2005)			11				11
Issued options (ESOP 2004/2006/1)			4				4
Issued options (ESOP 2006/2006/2)			80				80
Issued options
(ERSATZ-ESOP 2001/2006/3)			52				52
Capital increase of 21 May 2007	1,207	1,782					2,989
Capital increase of 7 September 2007	6,334	10,307					16,641
Overall result 01-01 - 2007-09-30						- 6,189	- 6,189
Period result 01-01 - 2007-09-30						- 6,189	- 6,189
Balance on 2007-09-30	19,002	28,450	408	67	0	- 26,470	21,457
Balance on 2008-01-01	19,002	28,395	583	67	- 20	- 28,411	19,616
Issued options (ESOP 2001/2003)			2				2
Issued options (ESOP 2004/2004)			5				5
Issued options (ESOP 2004/2005)			10				10
Issued options (ESOP 2004/2006/1)			4				4
Issued options (ESOP 2006/2006/2)			107				107
Issued options
(ERSATZ-ESOP 2001/2006/3)			85				85
Issued options (ESOP 2006/2007)			3				3
Capital increase of 14 July 2008	9,501	19,858					29,359
Issued options (ESOP 2006/2008)			2				2
Overall result 01-01 - 2008-09-30					- 22	- 7,829	- 7,851
Valuation of financial instruments					- 22		- 22
Period result 01-01 - 2008-09-30						- 7,829	- 7,829
Balance on 2008-09-30	28,503	48,253	801	67	- 42	- 36,240	41,342

1: ESOP = Employee stock option programme for employees and management board

2: Reclassification of the prior year item Additional paid-in capital convertible bonds to reserves ESOP

Notes to the interim report dated 30 September 2008

1. Summary of significant accounting and valuation policies

1.1 Basis of preparation

This interim report was created in accordance with the accounting principles of the International Financial Reporting Standard (IFRS) in consideration 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 and IFRIC adopted by the European Commission have been taken into account, not adopted IFRS and IFRIC have not been taken into account. New standards issued by the IASB are applied without exception starting in the financial year in which their application becomes mandatory.

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, as well as the investment in the Nexigen GmbH, Bonn, recognised in accordance with IAS 39.

The interim report was approved for publication by the Management Board on 3 November 2008.

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 2007.

The intangible assets acquired during the quarter under review, i.e. the rights to a total of eight Nycomed oncology projects, are carried according to IAS 38 like other intangible assets acquired to date.They are initially recognised at historical cost. They are thereafter carried at historical cost less cumulative, linear amortisation.

1.3 Use of estimates

In producing this interim report it was necessary for Management to make estimates and assumptions impacting the disclosed value of assets and liabilities, the disclosure of uncertain assets and contingent liabilities as of the balance sheet date as well as expenses and income within the reporting period. Actual values may vary from such estimated values.The discretionary decisions taken correspond to the Financial Statements for the year up to 31 December 2007.

1.4 Seasonality of interim operation

The operating activity of 4SC AG does not vary with the season.

2. Segment report

The following segment reporting has been prepared in accordance with the principles of IAS 14.The primary segment report format is the business segments in which 4SC AG is active. According to IAS 14.26, the secondary report format is geographical segments.

4SC AG operates in the two business segments of "Drug Discovery & Development"and "Collaborative Business." In the "Drug Discovery & Development"segment, 4SC AG is the holder of proprietary and patent rights and takes the decision on the progress of projects. In contrast, the cooperation partner in the "Collaborative Business" segment is the holder of proprietary and patent rights and takes decision on the progress of projects.

in k €	Drug Discovery & Development		Collaborative Business		Not assigned		Total
	01-01 - 09-30		01-01 - 09-30			01-01 - 09-30		01-01 - 09-30
	2008	2007	2008	2007	2008	2007	2008	2007
Net sales	750	0	1,722	960	0	0	2,472	960
Personnel costs	- 1,717	- 1,530	- 679	- 314	- 1,351	- 1,172	- 3,747	- 3,016
Depreciation	- 338	- 205	- 47	- 51	- 82	- 48	- 467	- 304
Other operating income and expenses	- 4,631	- 2,638	- 1,009	- 214	- 1,102	- 991	- 6,742	- 3,843
Segment result/Result from operating activities	- 5,936	- 4,373	- 13	381	- 2,535	- 2,211	- 8,484	- 6,203
Financial result							655	14
Period result							- 7,829	- 6,189
Other information:
Segment assets	15,358	1,813	869	208	28,749	21,961	44,976	23,982
Segment liabilities	254	30	0	0	3,380	2,495	3,634	2,525
Investments	14,474	51	136	19	199	24	14,809	94

Segment report according to business segments:

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 k €	Germany		USA			Total
		01-01 - 09-30	01-01 - 09-30			01-01 - 09-30
	2008	2007	2008	2007	2008	2007
Net sales	1,959	37	513	923	2,472	960

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). This is based on a period result for the third quarter 2008 amounting to - 3,370 k € (Previous year: - 1,948 k €) and an average share count of 27,130,385 (Previous year: 14,356,935). In the first nine months of 2008 the period result is - 7,829 k € (Previous year: - 6,189 k €) at a share count of 21,711,346 (Previous year: 12,605,299).

Because the options issued are not diluted by 4SC AG's loss situation, and because the share price has currently dropped below the exercise price of the options, i.e. the options are currently "out of money", the diluted conforms to the undiluted earnings per share.

in €	07-01 - 2008-09-30	07-01 - 2007-09-30	01-01 - 2008-09-30	01-01 - 2007-09-30
Earnings per share
(undiluted and diluted)	- 0.12	- 0.14	- 0.36	- 0.49

4. Financing measures

On 14 July 2008, 4SC AG completed a capital increase. By issuing 9,500,913 shares at a price of 3.10 € per share, the company accrued 29.45 million € gross. The effects of this capital increase on the net assets and financial position of 4SC AG are explained in the quarterly management report under 2.2 and 2.3.

5. Stock option programme

On 22 August 2008, 4SC AG issued a tranche of 43,070 options from its "ESOP 2006". Besides options for employees, who have joined the company since the last issue, or who are entitled to a larger number, 36,220 options were issued to management board member Dr. Bernd Hentsch.

The following assumed parameters were applied to the new options issued:

Tranche	Expected maturity	Market value (€)	Volatility	Risk-free interest rate
2008	3.75 years	3.50	51.07%	3.97%

6. Share property and directors' dealings

The table below shows the shares and stock options which were held by the management board and the Supervisory Board as of 30 September 2008 well as the changes of ownership of the same, compared to the beginning of the year.

Share quantity in units	Shares 2008-01-01	Addition	Sales	Shares 2008-09-30
Dr Ulrich Dauer	410,639	0	0	410,639
Dr Daniel Vitt	396,803	0	0	396,803
Dr Bernd Hentsch	0	0	0	0
Dr Gerhard Keilhauer1	13,537	0	0	13,537
Dipl.-Kfm. Enno Spillner	9,600	60,400	0	70,000
Share property	830,579	60,400	0	890,979

Share property of members of the management board:

1: Share property according to the last official announcement; the management board member retired as of the end of June 2008

Options quantity in units	Options 2008-01-01	Addi- tions	Forfei- tures	Exer- cised	Options 2008-09-30	Max. number of subscribed
						shares
Dr Ulrich Dauer	40,600	0	0	0	40,600	35,800
Dr Daniel Vitt	40,600	0	0	0	40,600	35,800
Dr Bernd Hentsch	0	36,220	0	0	36,220	36,220
Dr Gerhard Keilhauer1	71,500	0	71,500	0	0	0
Dipl.-Kfm. Enno Spillner	138,000	0	0	0	138,000	124,800
Options property	290,700	36,220	71,500	0	255,420	232,620

1: Share property according to the last official announcement; the management board member retired as of the end of June 2008

Share property of members of the supervisory board:

Share quantity in units	Shares 2008-01-01	Addition	Sales	Shares 2008-09-30
Dr Jörg Neermann	77,000	18,000	0	95,000
Dr Robert O'Connell1	10,000	0	0	10,000
Dr Manfred Rüdiger	5,000	10,000	0	15,000
Clemens Doppler	0	3,750	0	3,750
Share property	92,000	31,750	0	123,750

1: Share property according to last official information, he abandoned his brief in the shareholders' meeting dated 2008-06-05

Notifiable transactions according to § 15a of the German Security Trading Act (WpHG)

In the third quarter the following notifiable transactions in shares or options of 4SC AG were carried out by officers according to § 15a of the German Security Trading Act (WpHG):

• On 1 July 2008 the chairman of the supervisory board Dr Jörg Neermann acquired 7,000 shares at 3.066 € per share at XETRA-Trading with a total transaction volume of 21 k € (DGAP-notification of 11 July 2008).
• On 9 July 2008 Clemens Doppler, member of the supervisory board, acquired 2,625 shares at 3.10 € per share at XETRA-Trading with a total transaction volume of 8 k € (DGAP-notification of 16 July 2008).
• Furthermore Clemens Doppler acquired on 10 July 2008 on the Frankfurt Stock Exchange 1,125 shares at 3.10 € per share with a total transaction volume of 3 k € (DGAP-notification of 16 July 2008).
• The member of the management board Enno Spillner exercised his subscription rights in the context of the capital increase. On 10 July 2008 he acquired over the counter 60,400 shares at 3.10 € per share with a total transaction volume of 187 k € (DGAP-notification of 10 July 2008).
• On the same day the chairman of the supervisory board Dr Jörg Neermann also exercised his subscription rights in the context of the capital increase and acquired over the counter 11,000 shares at 3.10 € per share with a total transaction volume of 34 k € (DGAP-notification of 11 July 2008).
• Also the member of the supervisory board Dr. Manfred Rüdiger exercised his subscription rights in the context of the capital increase. On 10 July 2008 he acquired over the counter 5,000 shares at 3.10 € per share with a total transaction volume of 16 k € (DGAP-notification of 7 October 2008).

In addition the following notifiable transactions in shares or options of 4SC AG were carried out according to § 15a of the German Security Trading Act (WpHG) in the third quarter 2008:

• In the context of the capital increase, Maja Vitt, wife of the management board member Dr Daniel Vitt, exercised subscription rights. On 10 July 2008 she acquired over the counter 64,516 shares at 3.10 € per share with a total transaction volume of 200 k € (DGAP-notification of 10 July 2008).
• On the same day Susanne Riedel-Dauer, wife of the chairman of the management Dr Ulrich Dauer, exercised subscription rights in the context of the capital increase and over the counter 67,742 shares at 3.10 € per share with a total transaction volume of 210 k € (DGAP- notification of 10 July 2008).

7. Related party disclosure

Commensurate with an amortization schedule agreed in connection with the sale contract of 7 January 2004 regarding the sale and transfer of software rights, quattro research GmbH paid annual instalments of the sales price. The accounts receivables as of 30 June 2008 totalled 80 k €. During the reporting period, quattro research GmbH repaid all non-current and current amounts, meaning that no accounts receivables were outstanding as of the balance sheet date.

The scope of the collaboration with US-based QuoNova LLC has been reduced during the reporting period for the time being, in line with the project progress. Owing to the current uncertain economic situation, 4SC AG shall refrain for the moment from making any substantial preliminary performance within the framework of the cooperation with QuoNova LLC.Furthermore there were no material changes in business transactions with related parties.

8. Events after the end of the reporting period

Further explanation regarding events after the end of the reporting period can be found in paragraph 4 of the management report. They have no direct effect on the net assets, financial and earnings position of the company.

Financial calendar 2008

2008-03-27	✓ Annual Report 2007
2008-05-08	Three Months' Report 2008 (Q1/2008) ✓
2008-06-05	Annual General Shareholders' Meeting 2008 ✓
2008-08-07	Six Months' Report 2008 ✓
2008-11-06	Nine Months' Report 2008 (Q3/2008) ✓
2008-11-10 - 2008-11-12	Analyst Meeting: Deutsches Eigenkapitalforum, Congress Center Messe Frankfurt

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Editor 4SC AG _ Am Klopferspitz 19a _ 82152 Planegg-Martinsried _ Germany Investor Relations Bettina von Klitzing _ E-Mail: Bettina.von.Klitzing@4SC.com Design Angela Borsche _ Werbeagentur Ursula Borsche GmbH Photography Jan Roeder _ Krailling

4SC AG _ Am Klopferspitz 19a _ 82152 Planegg-Martinsried _ Germany Phone 0049 (0) 89 700 763 - 0 _ Fax 0049 (0) 89 70 07 63 - 29 _ www.4SC.com