Quarterly Report • Aug 7, 2015
Quarterly Report
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As at 30 July 2015
| PRODUCT | INDICATION | RESEARCH | PRECLINICAL | PHASE I | PHASE II | REGION/COMMER CIALISATION RIGHTS |
|---|---|---|---|---|---|---|
| RESMINOSTAT | ||||||
| CUTANEOUS T-CELL LYMPHOMA (CTCL) |
||||||
| HODGKIN'S LYMPHOMA (HL) |
Worldwide | |||||
| COLORECTAL CANCER (CRC) |
without Asia | |||||
| LIVER CANCER (HCC) (2nd line/Europe) |
||||||
| LIVER CANCER (HCC) (1st line/Asia) |
||||||
| NON-SMALL-CELL LUNG CANCER (NSCLC) |
Japan | |||||
| PANCREATIC CANCER BILIARY TRACT CANCER |
||||||
| Concrete studies currently in evaluation | Asia/Pacific without Japan |
|||||
| 4SC-202 | ||||||
| SMALL CELL LUNG CANCER (SCLC) |
* | Worldwide | ||||
| HAEMATOLOGICAL CANCER | * | |||||
| 4SC-205 | ||||||
| CANCER | Worldwide | |||||
| VIDOFLUDIMUS | ||||||
| AUTOIMMUNE DISEASES (Morbus Crohn a.o.) |
Worldwide | |||||
| Study in preparation Study ongoing |
* Study execution with 4SC-202 pending partnering and/or financing
Headquartered in Planegg-Martinsried near Munich, 4SC is a highly innovative biotech company with a focus on research and development.
We are a discovery and development company of targeted small molecule drugs for the treatment of autoimmune diseases and cancer in indications with a high unmet medical need. In so doing, we wish to offer affected patients treatment options that are more effective and better tolerated to provide a better quality of life and create value for our shareholders, partners and employees.
Our product pipeline comprises promising drug programmes at various stages of clinical development, as well as early-stage research projects. We are focussing on attractive fields of research such as epigenetics, cancer
stem cells, and other, important molecular signalling patterns that contribute to the development and proliferation of cancer and autoimmune diseases.
Through development and marketing partnerships with pharmaceutical and biotech companies, we want to bring our programmes closer to market approval, thus ensuring commercial success. We are also strengthening our business model by entering into service and research collaborations in the field of pharmaceutical early-stage research.
4SC was established in 1997. 4SC AG has been listed on the Prime Standard of the Frankfurt Stock Exchange since December 2005 (ISIN DE000A14KL72).
| in € 000's unless stated otherwise | ||||||
|---|---|---|---|---|---|---|
| Q2 2015 | Q2 2014 | in % | Change 6M 2015 resp. 6M 2014 resp. 30.06.2015 |
30.06.2014 | Change in % |
|
| Results of operations, financial position and net assets | ||||||
| Revenue | 496 | 2,535 | -80 | 2,488 | 3,975 | -37 |
| Operating profit/loss | -2,370 | -1,747 | 36 | -3,703 | -3,870 | -4 |
| Net profit/loss for the period | -2,408 | -1,853 | 30 | -3,949 | -3,974 | -1 |
| Earnings per share (basic and diluted, in €) 1) |
-0.24 | -0.18 | -33 | -0.39 | -0.39 | 0 |
| 3) Equity (end of period) |
-2,416 | 7,558 | -132 | |||
| Equity ratio (end of period) in %3) | -20.5 | 46.5 | -67%P | |||
| Total assets (end of period) | 11,760 | 16,268 | -28 | |||
| 2) Monthly cash inflow (+)/outflow (-) from operations (average) |
-599 | -647 | -7 | |||
| Capital and financing measures3) | -517 | 250 | -307 | |||
| Cash and cash equivalents (end of period) 3) |
908 | 3,423 | -73 | |||
| Q2 2015 | Q2 2014 | in % | Change 6M 2015 resp. 6M 2014 resp. 30.06.2015 |
30.06.2014 | Change in % |
|
|---|---|---|---|---|---|---|
| Staff | ||||||
| Total number of employees (incl. Management Board) (end of period) | 68 | 65 | 5 | |||
| Number of full-time employees (incl. Management Board) (end of period) | 60 | 55 | 9 | |||
| 1) To facilitate comparability, the number of shares used for the calculation of the 2014 figure was adjusted to reflect the capital reduction and reverse stock split carried out in 2015. |
Calculation: (Change in cash funds at end of period compared with the end of the prior period + proceeds from corporate actions and financing measures) / 6 3) The figures do not yet include the gross issuing proceeds of €29 million from the capital increase completed in early July 2015. This has considerably improved the Company's liquidity position.
Dr Susanne Danhauser-Riedl joins 4SC's management and the clinical oncology team as Chief Medical Officer (CMO). A physician with many years of experience in the field of haematology/oncology, both in scientific and clinical practice and in the pharmaceutical industry, she is responsible in particular for the further development of the oncology pipeline and will be in charge of the preparation and subsequent execution of the planned Phase II clinical trial with resminostat in the indication of cutaneous T-cell lymphoma (CTCL).
4SC signed a licence and development agreement for resminostat for the Asia/Pacific ("APAC") region – excluding Japan – with Menarini AP, a Singapore-based subsidiary of the largest Italian pharmaceutical company Menarini. For 4SC, the upfront payment received and other potential future performance-related milestone payments amount to up to €95 million. In addition, 4SC will be eligible to double-digit royalties linked to potential future net sales.
The capital reduction and the 1-for-5 reverse stock split, which had been resolved by the Extraordinary General Meeting on 11 March 2015, is implemented as planned. Effective its entry in the commercial register, the share capital of 4SC AG was reduced to €10,169,841.00. In the 5:1 conversion, five old no-par value shares were replaced with one converted no-par value share. The 4SC share (stock exchange symbol: VSC) receives a new ISIN (DE000A14KL72) and a new German security identification number (A14KL7).
Positive results on the safety, pharmacokinetics and efficacy of the 4SC-205 cancer compound from the Phase I AEGIS trial involving 59 patients with solid tumours were published at the annual meeting of the American Society of Clinical Oncology (ASCO) in Chicago. The daily dosage of the oral, anti-mitotic Eg5 inhibitor shows good safety and
tolerability. A recommended Phase II dosage was established.
The newly launched Phase I trial in Japan examines resminostat as monotherapy or in combination with chemotherapy in up to 44 Japanese patients with advanced pancreatic or biliary tract cancer. The open study investigates the safety, pharmacokinetics, biomarkers and efficacy of various dosing schemes. Its main goal is to determine the recommended dosing scheme for potential subsequent Phase II trials.
The US Patent Office has granted the patent for the use of resminostat in cancer indications. In Canada, the composition of matter patent has been granted for resminostat. This further strengthens the patent protection of 4SC's lead compound in western markets.
The capital increase resolved in June to finance the cancer research and development programmes, especially a planned Phase II clinical trial of 4SC's lead compound resminostat in the haematological tumour indication of cutaneous T-cell lymphoma (CTCL), generates gross proceeds of €29 million, which is at the upper end of the targeted proceed range of €24 to €29 million. The new shares are placed with existing and new investors. In addition to the anchor shareholder Wellington Partners, other prestigious life science investors from the United States and Europe are acquired as new shareholders. Baader Bank AG conducted the cash capital increase as global coordinator and sole bookrunner.
In the past weeks, we successfully created the economic conditions for continuing to develop the full potential of our compound resminostat. We significantly strengthened our Company's financial base in close cooperation and with the support of our old and new anchor investors.
By implementing a successful €29 million capital increase at the beginning of July 2015, we are now in a particularly good position to guide the clinical development of resminostat in a specific direction. We intend to use most of the proceeds to start a Phase II clinical trial of resminostat in the haematological tumour indication of cutaneous T-cell lymphoma (CTCL) in the first half of 2016. This is an area in which other HDAC inhibitors have already demonstrated efficacy, but no member of this class of compounds has yet been approved in Europe. Using the results that would probably be available in 2018, we could ideally – assuming the data is positive – apply for conditional approval in Europe. 4SC's first approved drug could therefore become a reality earlier than originally planned. From a commercial standpoint, this would also be a huge success for 4SC because according to our current calculations peak sales of up to €140 million in Europe are
possible in the CTCL indication alone.
Apart from resminostat in the CTCL indication, we believe that 4SC has additional attractive potential to add value in the coming years. We intend to start tapping into some of this potential using the remaining proceeds from the capital increase; in other cases, this value will be developed by our partners independently of 4SC.
At the end of the first quarter, for example, we presented convincing initial preclinical results that show resminostat's potential in the area of immune priming. Activation and improvement of cancer patients' immune systems is currently one of the most important issues in the entire biotechnology industry. Resminostat could therefore improve the efficacy of other cancer immunotherapies, which would give it substantial additional potential. We will actively pursue this approach, initially in other preclinical models.
Our Japanese partner Yakult Honsha is also making good progress in its ongoing Phase II trials with resminostat in the indications of liver cancer and lung cancer. We expect that the results of these trials in Asian patient populations, particularly the evaluation of our
potentially predictive biomarker ZFP64, will give us important insights, also for the possible further development of resminostat in Western countries by 4SC. Here, we continue to focus especially on the liver cancer indication. Over and above this, in the last quarter, Yakult Honsha started a Phase I clinical trial on patients with pancreatic or biliary tract cancer that expanded the range of clinical applications for the compound.
In the second quarter, we also gained a further wellknown licensing partner in the Asian subsidiary of the Menarini Group, Italy's largest pharmaceutical company. The licensing and development partnership signed with Menarini Asia-Pacific covers the potential clinical development of resminostat in the entire Asia/Pacific region. In addition to the first upfront payment received, the collaboration is expected to increase 4SC's revenue through performance-based payments and accelerate the compound's further development in a key market.
Concentrating on our value drivers is proving to be the right decision.
Our two other cancer compounds, 4SC-202 and 4SC-205, have also developed very encouragingly. The results of a Phase I trial of 4SC-202 on patients with advanced leukaemia reveal a good safety profile and excellent tolerability as well as promising initial indications of efficacy. We are currently in talks with potential partners to investigate options for clinical development in Phase II.
In the second quarter, we presented positive results from a Phase I trial with 4SC-205 at ASCO in Chicago, the world's foremost oncology event. By specifically inhibiting a certain protein, the compound can have a direct influence on cell division, thereby inhibiting tumour growth. Here, too, our goal is continued development of the compound, and we are mainly searching for a qualified academic partner to evaluate further the potential of 4SC-205 for particularly suitable patient populations.
Developing new drugs is a time-consuming, costly discipline. However, the success that can be achieved with a strong compound is also very rewarding, from both a social and a commercial perspective. Thanks to the recent financing measure, we will power ahead on the path we have taken with resminostat. This would not have been possible without the outstanding support of all involved. My very special thanks therefore go to our numerous shareholders, partners and employees for their commitment, trust and loyalty. We would like to give a warm welcome to our new investors.
Yours sincerely,
Planegg-Martinsried, August 2015
Enno Spillner Chairman of the Management Board
In its most recent outlook, published in July 2015, the International Monetary Fund (IMF) estimates that global economic growth will be 3.3% for 2015 as a whole, slightly weaker than the figure forecast in the April outlook (3.5%). The IMF experts project that the advanced economies will expand by just 2.1% (April: 2.4%), citing in particular a temporary weakness in the US economy as the reason for this. The euro zone's economic recovery appears to be essentially continuing on the back of stronger domestic demand and a slight increase in inflation. The growth forecast for Germany remains unchanged at +1.6%.
Economic growth in emerging market and developing economies is expected to slow from 4.6% in 2014 to 4.2% in the current year owing to the dampening effect of lower commodity prices and stricter external financing conditions in addition to structural problems and economic hardship caused by geopolitical factors. Chinese GDP growth is expected to slacken to 6.8%.
Developments in the biotech and pharmaceuticals sector
Strong gains were recorded by the DAXsubsector Biotechnology (+17%) and NASDAQ Biotechnology (+21%) sector indices in the first six months of 2015. However, there was a significant downturn at the end of the first half year – also caused by external factors such as the Greek financial crisis – with the result that in the second quarter the sector indices gained no more than 1% (DAXsubsector Biotechnology) and 8% (NASDAQ Biotechnology) overall. According to industry analysts BioCentury, investors in the industry nevertheless remain optimistic about the sector – despite the fact that biotechnology stocks have been doing well for six years now – due among other things to solid financial data and upcoming milestones. There was positive financing news from the German biotech sector, where both Medigene and Pieris successfully completed capital increases on the Frankfurt Stock Exchange and on NASDAQ, respectively.
Some good news for 4SC's immediate industry sector, epigenetic compounds, became public at the end of June: the Committee for Human Medicinal Products (CHMP) of the European Medicines Agency (EMA) recommended that Novartis' pan-histone deacetylase (HDAC) inhibitor Panobinostat (Farydak®) be approved in Europe in a strictly limited application in the indication of multiple myeloma. This was overshadowed by the announcement by the
French biotech company Transgene that it was shedding around 120 jobs to cut its losses in development and manufacturing and to focus together with partners on preparing a Phase III trial for initial treatment of advanced liver cancer with its compound Pexa-Vec in combination with sorafenib. The trial is expected to begin in the fourth quarter of 2015.
In the first six months of 2015, 4SC AG's shares posted gains of 14%, thus slightly underperforming the NASDAQ Biotechnology (+21%) and DAXsubsector Biotechnology (+17%) benchmark indices.
In the first quarter, 4SC's shares had benefited not only from the good news released by the Company but also from the highly optimistic prevailing mood for German biotechnology stocks, posting gains of 55%. The stock lost some ground again in the second quarter. The Company's shares initially performed positively until reaching their high for the quarter of €7.18 in XETRA trading on 7 April 2015. This was followed by strong profit-taking in some cases, and from mid-May onwards the share price hovered around the €4.50 mark. Following 4SC's announcement on 22 June 2015 of its intention to implement a capital increase, the shares reached a temporary low for the quarter of €4.10 on 25 June 2015. On 30 June 2015, 4SC's shares finished trading at €4.52, which equates to a market capitalisation of €46.0 million.
The capital reduction and the 1-for-5 reverse stock split to €10,169,841.00 or 10,169,841 no-par value bearer shares, which had been resolved at 4SC AG's Extraordinary General Meeting on 11 March 2015, were entered in the commercial register in April 2015. The converted 4SC shares have been traded on the stock exchanges under the new international securities identification number (ISIN) DE000A14KL72 and the new German securities identification number (WNK) A14KL7 since 27 April 2015. The stock exchange symbol remains unchanged (VSC).
In May 2015, some of the convertible notes from the financing arrangement with the US investor Yorkville were converted into a total of 46,805 shares.
From the end of June until the beginning of July 2015, 4SC AG implemented a capital increase from authorised capital. In a cash capital increase, a total of 7,250,000 offer shares were placed at a subscription price of €4.00 per share. In a capital increase in return for contributions in kind, a further 1,500,000 consideration shares were issued at the same price. Together, this raised 4SC AG's share
capital from €10,216,646.00, divided into 10,216,646 nopar value bearer shares, by €8,750,000.00 or 8,750,000 shares to €18,966,646.00, divided into 18,966,646 shares. The cash capital increase was entered in the commercial register on 9 July, while the capital increase in return for contributions in kind was entered in the commercial register on 17 July 2015. The new shares from the cash capital increase were traded on XETRA from 10 July to 27 July 2015 with the ISIN DE000A14KD72, the German securities identification number A14KD7 and the stock exchange symbol VSCJ. The new shares from the capital increase in return for contributions in kind were admitted for trading on 28 July to 29 July 2015 and included in trading on 29 July 2015. As a result, all new shares from
the cash capital increase and the capital increase in return for contributions in kind have been assigned the ISIN, German securities number and stock exchange symbol of the existing 4SC shares (ISIN DE000A14KL72, WKN A14KL7, VSC).
The average daily trading volume across all German stock exchanges, including Tradegate, of 28,888 shares (adjusted for the reverse stock split) continued to develop positively in the first half of 2015. This constitutes an increase of 92% compared with the first six months of the previous year (average of 15,051 shares, adjusted) and an increase of 73% compared with the 2014 financial year (average of 16,721 shares, adjusted).
| Q2 2015 | Q2 2014 | 6M 2015 | 6M 2014 | |
|---|---|---|---|---|
| Number of shares issued (average, in 000's) | 10,185 | 10,099* | 10,178 | 10,089* |
| Free float (%) | 41.1 | 35.0 | 41.1 | 35.0 |
| 3- resp. 6-month high (Xetra) (€) | 7.18 | 6.60* | 7.18 | 8.95* |
| 3- resp. 6-month low (Xetra) (€) | 4.10 | 4.65* | 3.34 | 4.65* |
| Price at beginning of the period (Xetra) (€) | 6.08 | 6.95* | 3.98 | 8.00* |
| Price at end of the period (Xetra) (€) | 4.52 | 4.85* | 4.52 | 4.85* |
| Market capitalisation at end of the period (€000's) | 45,968 | 49,065 | 45,968 | 49,065 |
| Average daily trading volume | 34,495 | 17,111* | 28,888 | 15,051* |
| (all German stock exchanges incl. Tradegate, shares) |
*) Adjusted to reflect the capital reduction entered in the commercial register in April 2015 and the 1-for-5 reverse stock split.
The 4SC Group continued its development in the second quarter of 2015. In the Group segments ("Development" and "Discovery & Collaborative Business"), the Company further pursued its research and development activities. There were important events at Group level too.
The Development segment comprises the clinical development work on 4SC's drug candidates as carried out within the Group's parent company 4SC AG. The candidate compounds at the end of the second quarter of 2015 were resminostat, 4SC-202, 4SC-205 and vidofludimus.
Possessing a broad spectrum of possible deployment options both for solid tumours and malignant haematological disorders, the oral HDAC inhibitor resminostat is the most advanced compound in 4SC's product pipeline. Due to its epigenetic mechanism of action, resminostat is expected to show its therapeutic potential both in combination with conventional cancer drugs and as monotherapy. Resminostat has been and is being examined in clinical trials – by 4SC in Europe and its development partner Yakult Honsha Co., Ltd. in Japan – for the treatment of liver cancer (HCC), colorectal cancer (CRC), Hodgkin's lymphoma (HL), non-small-cell lung cancer (NSCLC) and pancreatic and biliary tract cancer. In this context, resminostat has been deployed both in combination therapy with conventional cancer drugs (with sorafenib in HCC, with FOLFIRI in CRC, with docetaxel in NSCLC) and as monotherapy (in HL).
4SC's goal is to achieve first-time regulatory approval for resminostat as quickly as possible. The Company is seeking this approval in the haematological niche indication of advanced cutaneous T-cell lymphoma (CTCL). HDAC inhibitors have already demonstrated efficacy in this indication. Two compounds in CTCL have already achieved regulatory approval in the United States and other non-European countries. In Europe, however, no member of this class of compounds has yet received market approval, which 4SC believes is due in particular to the single-arm study design used at the time. For this reason, 4SC's management believes that the conditions for achieving
first-time regulatory approval for resminostat in this indication in Europe relatively quickly and with a comparatively moderate level of expense and risk are generally favourable – provided correspondingly positive clinical results can be generated in a study design accepted by the European Medicines Agency (EMA). 4SC therefore aims to conduct a randomised, placebo-controlled Phase II clinical trial with resminostat on patients with advanced CTCL. Ideally, 4SC will be able to apply to the regulatory authorities in Europe for conditional approval on the basis of the results of this Phase II trial. In the reporting period, 4SC drew up the concrete development plans for this trial and drafted the trial design in collaboration with external experts. According to the current plans, the trial will comprise approximately 120 patients who no longer respond to treatment with the first-line therapy bexarotene. The Company plans to discuss the study protocol with other external experts as well as with the regulatory authorities (especially EMA) and to refine it.
At the end of the first quarter of 2015, 4SC presented initial preclinical data for resminostat at the ITOC-2 Conference (Second Immunotherapy of Cancer Conference) in Munich. The immunomodulator activity shown in preclinical testing suggests that resminostat is able to activate the immune system in a specific fashion, known as immune priming. In the future, this immune priming ability could improve the response rates of patients to treatment with cancer immunotherapy treatments such as checkpoint inhibitors that have already been approved or are in clinical development. 4SC is currently putting great effort into generating further preclinical data and has continued this work in the reporting quarter.
4SC's Japanese resminostat partner, Yakult Honsha Co., Ltd., continues to actively pursue clinical development of resminostat in Asia. In this context, the company commenced a clinical Phase I trial in the reporting quarter in Japanese patients with advanced pancreatic or biliary tract cancer. The multi-centre open-label study investigates the safety, pharmacokinetics, biomarkers and efficacy of various dosing schemes of resminostat in monotherapy or in combination with the S-1 chemotherapy in up to
44 Japanese patients. In preclinical models, resminostat has already shown first positive results in pancreatic and biliary tract cancer. At the same time, 4SC's Japanese partner Yakult Honsha Co., Ltd. has pushed ahead with its ongoing Phase II trials with resminostat in the indications of liver cancer (HCC) and lung cancer (NSCLC).
In April 2015, 4SC signed a licence and development agreement for resminostat for the Asia/Pacific region – excluding Japan – with Menarini AP, a Singapore-based subsidiary of the Italian pharmaceutical multinational Menarini. For 4SC, the upfront payment received and other potential future performance-related milestone payments amount to up to €95 million. In addition, 4SC will be entitled to double-digit royalties linked to potential future sales.
Together with the licence deal signed with Yakult Honsha Co., Ltd. for Japan, this completes coverage for the development of resminostat throughout Asia/Pacific – a region in which 75% of all cases of liver cancer occur, among others.
4SC hopes that this collaboration with Menarini in connection with the ongoing clinical developments of Yakult Honsha Co., Ltd. in Japan will also deliver important results for the possible clinical development of resminostat in the Western world by 4SC in other indications. This applies in particular to the potentially predictive biomarker ZFP64, which will likewise be evaluated in these trials under randomised conditions.
4SC-202 is the second epigenetic drug candidate in 4SC's clinical development portfolio. The compound is an orally available selective inhibitor of the epigenetic targets LSD 1 as well as HDAC 1, 2 and 3. This combination is used by 4SC-202 to modulate the hedgehog and WNT pathways – two important signalling pathways that play a key role in the development, growth and proliferation of cancer cells, while also being present in cancer stem cells. To the best of 4SC's knowledge, 4SC-202 is the only blocker of the SMO-independent, hedgehog pathway in clinical development and therefore could be a treatment option for those cancers for which hedgehog inhibitors to date have shown no efficacy or a quick build-up of resistance.
The compound was clinically investigated in a Phase I trial (TOPAS study) involving patients with advanced malign haematological diseases. In 2014, this study
returned positive data for safety, tolerability and pharmacokinetics as well as initial indications of antitumour activity on the part of 4SC-202.
4SC continued its talks with potential financing and industry partners in the second quarter with the aim of securing the further development of 4SC-202 in a clinical Phase II programme.
4SC-205 is 4SC's third oncology compound in clinical development. 4SC-205 is an oral inhibitor of the human kinesin spindle protein Eg5. This protein plays a role in mitosis (cell division), among other things, and thus presumably also for tumour growth. To the best of the Company's knowledge, 4SC-205 is the only oral Eg5 inhibitor currently investigated in clinical trials anywhere in the world.
Following the completion of the Phase I AEGIS trial on 59 patients with advanced solid tumours in the first quarter of 2015, 4SC released good clinical results on the safety, pharmacokinetics and efficacy of 4SC-205 at the Annual Meeting of the American Society of Clinical Oncology (ASCO) in June 2015. In the trial, the compound was initially tested in a conventional, intermittent dosing scheme consisting of relatively high single doses and breaks of several days between treatments. Given its oral availability and its mechanism of action as a potential inhibitor of cell division, it was subsequently examined in a daily dosing scheme consisting of daily smaller single doses without breaks between treatments. Daily doses of the compound showed good profiles of safety and tolerability and very good linear pharmacokinetic parameters. Specifically, no peripheral neuropathies were observed in the entire study. These serious side effects, which affect the nervous system, typically occur with conventional anti-mitotic chemotherapeutic agents. In addition, a recommended daily dose of 20mg was established in the trial for a possible Phase II development. This dose revealed promising initial indications of efficacy in several patients.
4SC has begun developing scenarios for the further clinical development of 4SC-205 and has initiated discussions with clinical experts and potential academic and industry partners.
Vidofludimus is a 4SC compound in the field of autoimmune diseases that has returned initial positive data from an open Phase IIa trial in inflammatory bowel disease. In line with the strategy of focusing on its main value drivers in the field of oncology, 4SC currently will not be investing any appreciable resources of its own in the further development of this compound. That said, the Company is making every effort to facilitate the further development of this compound with external partners and investors.
The Discovery & Collaborative Business segment comprises the activities involved in the discovery, earlystage research and subsequent commercialisation of drug compounds by 4SC Discovery GmbH. This wholly-owned subsidiary of 4SC AG is concentrating, among other things, on the research disciplines of epigenetics, cancer stem cells, cancer immunotherapy and cellular signalling pathways involved in the genesis of cancer and/or chronic inflammatory diseases. Some of these research programmes have already been transferred to partnerships with other pharmaceutical/biotechnology companies.
The collaborative activities of 4SC Discovery GmbH include partnerships with BioNTech AG (Mainz), AiCuris GmbH & Co. KG and a strategic technology and sales partnership with CRELUX GmbH. In addition, there are scientific collaborations with academic institutions such as the Helmholtz Institute in Munich, Heidelberg University Hospital and the Faculty of Medicine at the University of Munich.
A research collaboration and licence option agreement in the area of inflammatory skin diseases entered into in 2013 with the Danish pharmaceutical company LEO Pharma A/S has now been terminated. The research collaboration was terminated at the end of March 2015 as planned. In May 2015, LEO Pharma notified 4SC Discovery GmbH that the licence option will not be exercised. Consequently, 4SC Discovery GmbH retains all rights to the compounds that have been researched further under this partnership.
In April 2015, Dr Susanne Danhauser-Riedl joined 4SC's management and the clinical oncology team as Chief Medical Officer (CMO). A physician with many years of experience in the field of haematology/oncology, she is responsible in particular for the further development of the oncology pipeline and will be in charge of the preparation and subsequent performance of the planned Phase II clinical trial with resminostat in the indication of cutaneous T-cell lymphoma (CTCL). Dr Danhauser-Riedl has more than 20 years of senior management experience both in research and clinical practice and in the fields of medical affairs and clinical development in the pharmaceutical industry.
From the end of June until the beginning of July 2015, 4SC implemented a capital increase from authorised capital, obtaining gross proceeds of €29 million, at the upper end of the targeted price range. In a cash capital increase, 7,250,000 offer shares were issued at a subscription price of €4.00 per share to existing shareholders via pre-emptive rights as well as to new institutional shareholders in a rump placement. Furthermore, 1,500,000 consideration shares were issued at the same issue price of €4.00 in return for contributions in kind for the purpose of settling the material portion of €6 million of a shareholder loan from Santo Holding (Deutschland) GmbH. Together, this raised 4SC AG's share capital from €10,216,646.00, divided into 10,216,646 nopar value bearer shares, by €8,750,000.00 or 8,750,000 shares to €18,966,646.00, divided into 18,966,646 shares. Part of 4SC's authorised capital was used for this purpose. The amount of €20,250 thousand exceeding the new shares' nominal value will be transferred to the capital reserves after deducting the expected transaction costs of €1,479 thousand.
4SC plans to use the proceeds from the capital increase for the further development of its anti-cancer compounds. Specifically, a Phase II clinical trial with resminostat will be conducted in the CTCL indication which, if successful, could provide the basis for an application for conditional approval for the European market. Furthermore, the proceeds will serve to further accelerate preparations for clinical Phase II trials with the anti-cancer compound 4SC-202, the initiation of partnerships for the further clinical development of the anti-cancer compound 4SC-205 and negotiations with potential partners concerning all of the Company's compounds. This capital increase should secure the Company's overall financing until the results of the CTCL study are expected in the second half of 2018.
As at 30 June 2015, the headcount of the 4SC Group totalled 68 employees (incl. the Management Board of 4SC AG and the executive management of 4SC Discovery GmbH) (31 December 2014: 66). The Development segment had 40 employees as at 30 June 2015 (31 December 2014: 40), while the Discovery & Collaborative Business segment had 28 (31 December 2014: 26). On average, 68 employees (headcount) worked for the 4SC Group in the first six months of 2015 (H1 2014: 65). The Company had a total of 60 full-time employees (fulltime equivalents, FTEs) as at 30 June 2015 (31 December 2014: 57), taking part-time employees and employees on parental leave into account. As at the end of the first six months of 2015, 74% of these FTEs (31 December 2014: 71%) worked in Research and Development, with the remaining 26% (31 December 2014: 29%) working in Sales and Administration.
The 4SC Group, comprising 4SC AG and its wholly-owned subsidiary 4SC Discovery GmbH, reports consolidated figures for both the first six months of the 2015 financial year and the comparative period of the 2014 financial year.
Since the beginning of 2012, the 4SC Group has reported in the operating segments Development and Discovery & Collaborative Business. As at 30 June 2015, the Development segment comprised the development programmes for resminostat, 4SC-202 and 4SC-205 as well as vidofludimus. The Discovery & Collaborative Business segment comprised the activities involved in drug discovery and early-stage research plus subsequent commercialisation and, in particular, service business and research collaborations related to drug discovery and optimisation.
4SC's consolidated revenue fell to €496 thousand in the second quarter of 2015 (Q2 2014: €2,535 thousand). Consolidated revenue in the first half of 2015 amounted to €2,488 thousand (H1 2014: €3,975 thousand), a decrease of 37%. In the reporting quarter, the figure for the Discovery & Collaborative Business segment included revenue from the cooperation agreement with BioNTech AG. In the Development segment, 4SC recognised revenue of €232 thousand achieved with its partner Yakult Honsha Co., Ltd. and posted initial revenue with its new partner, Menarini Asia-Pacific Holdings Pte. Ltd., generated from the deferred income from the upfront payment made in connection with the licence agreement for resminostat.
Revenue of €279 thousand was generated in the Development segment in the second quarter of 2015 (Q2 2014: €1,704 thousand). This segment's revenue for the first half year amounted to €1,699 thousand, a decrease of 12% (H1 2014: €1,927 thousand). The year-on-year decline is due in particular to the milestone reached in the previous year in the partnership with Yakult Honsha Co., Ltd.
The Discovery & Collaborative Business segment contributed €216 thousand to consolidated revenue in the second quarter (Q2 2014: €831 thousand). In the first six months, this segment generated revenue of €789 thousand (H1 2014: €2,048 thousand), a decrease of 61%. The large drop compared with the previous year is attributable to three factors in particular. Firstly, the cost allocations to the cooperation partners invoiced in the current reporting period were significantly lower than in the prior-year period. Secondly, deferred income from an upfront payment received in February 2013 in connection with a licence option agreement with LEO Pharma A/S was generated only up until August 2014, in line with planning. Thirdly, the research collaboration with LEO Pharma A/S was terminated according to plan at the end of March 2015.
Further information regarding segment results can be found in chapter 2 of the consolidated notes.
Operating expenses, comprising the cost of sales, distribution costs, research and development costs and administrative costs, amounted to €2,889 thousand in the second quarter of 2015 (Q2 2014: €4,291 thousand) and to €6,324 thousand in the first half of 2015 (H1 2014: €7,854 thousand). Both figures were down compared with the previous year.
The Development segment accounted for €4,931 thousand (H1 2014: €6,322 thousand) of operating expenses in the first half-year, while the Discovery & Collaborative Business segment incurred €2,013 thousand (H1 2014: €2,159 thousand) and the consolidation accounted for €-620 thousand (H1 2014: €-627 thousand).
Research and development costs incurred in connection with the optimisation of the manufacturing process for resminostat and the analysis of completed clinical studies continued to make up the majority of expenses. Research and development costs amounted to €1,888 thousand for the second quarter of 2015 (Q2 2014: €1,830 thousand) and to €3,016 thousand for the first six months of 2015 (H1 2014: €3,862 thousand). This decrease results from the lower level of activity in the area of clinical trials compared with the previous year.
The cost of sales decreased significantly to €217 thousand in the second quarter of 2015 (Q2 2014: €1,494 thousand) and to €1,596 thousand in the first six months of 2015 (H1 2014: €2,133 thousand). These costs are comprised of research collaborations of 4SC Discovery GmbH with BioNTech AG, on the one hand, and the cost of sales incurred to produce the medication for clinical trials of resminostat in Japan which were on-charged to Yakult Honsha Co., Ltd., on the other hand. The year-on-year decline is due especially to a lower level of activity in the
manufacturing of the resminostat compound on behalf of Yakult Honsha Co., Ltd.
Distribution costs, which comprise business development and PR and marketing costs, fell by 51% to €132 thousand in the second quarter of the year (Q2 2014: €269 thousand) and by 38% to €242 thousand in the first six months of the year (H1 2014: €389 thousand) due to a lower level of consulting services.
Administrative costs fell to €652 thousand in the second quarter (Q2 2014: €698 thousand) and remained unchanged at €1,470 thousand in the first half of 2015 (H1 2014: €1,470 thousand).
The Company's loss from operating activities increased by 36% to €2,370 thousand owing to the decrease in revenue in the second quarter of 2015 (Q2 2014: €1,747 thousand). However, comparing the first six months of 2015 with the same period in 2014, the loss from operating activities decreased slightly by 4% to €3,703 thousand (H1 2014: €3,870 thousand).
A net finance income of €2 thousand was recorded in the second quarter of 2015 (Q2 2014: €36 thousand). The net finance loss for the first half of 2015 was €206 thousand (H1 2014: €34 thousand). This was attributable to interest expense of €391 thousand in the first half of 2015 (H1 2014: €54 thousand), resulting primarily from the draw-down of the shareholder loan from Santo Holding (Deutschland) GmbH. The share in the profit/loss of associates improved year-onyear to €33 thousand (H1 2014: €17 thousand).
In the second quarter and the first half of 2015, 4SC reported income tax expense of €40 thousand (Q2 2014 and H1 2014: €70 thousand), which is attributable to non-deductible withholding tax in connection with the upfront payment received from Menarini Asia-Pacific Holdings Pte. Ltd.
The net loss for the period increased by 23% year on year to €2,408 thousand in the second quarter of 2015 (Q2 2014: €1,853 thousand) and remained almost stable at €3,949 thousand in the first six months of 2015 (H1 2014: €3,974 thousand). Further information regarding segment results can be found in the consolidated notes.
Due to the capital reduction entered in the commercial register in April 2015 and the 1-for-5 reverse stock split, the total number of shares was reduced from 50,849,206 (31 December 2014) to 10,169,841. In addition, the Company's financing partner Yorkville converted a total of 46,805 4SC shares in the second quarter of 2015, raising the total number of shares to 10,216,646 on 30 June 2015.
Owing to the decrease in earnings for the quarter and the much lower number of shares, the loss per share increased to €0.24 in the second quarter of 2015 (Q2 2014: loss of €0.04; adjusted for the reverse stock split in 2015: -€0.18) and to €0.39 in the first half of 2015 (H1 2014: loss of €0.08; adjusted for the reverse stock split in 2015: -€0.39).
Non-current assets amounted to €10,224 thousand as at 30 June 2015 (31 December 2014: €10,639 thousand. This decrease is mainly due to depreciation and amortisation. Intangible assets included in this figure amounted to €9,433 thousand as at 30 June 2015 (31 December 2014: €9,836 thousand).
Current assets decreased to €1,536 thousand as at 30 June 2015 (31 December 2014: €4,295 thousand), mainly on account of lower cash and cash equivalents of €908 thousand (31 December 2014: €3,202 thousand). Trade accounts receivable also decreased to €220 thousand (31 December 2014: €652 thousand). These are attributable to the research collaborations in the Discovery & Collaborative Business segment. Other current assets amounted to €381 thousand as at 30 June 2015 (H1 2014: €375 thousand).
The decline in equity from €2,050 thousand as at 31 December 2014 to €-2,416 thousand as at 30 June 2015 was driven primarily by the loss for the period of €3,949 thousand, lifting the accumulated deficit accordingly, from €128,956 thousand at the end of the 2014 financial year to €132,905 thousand as at 30 June 2015. Furthermore, there was a neutral reclassification within equity in connection with the capital reduction implemented in the second quarter through the 1-for-5 reverse stock split. The increase in debt (Santo shareholder loan) lowered the equity ratio by 34.3 percentage points, from 13.7% at the end of the 2014 financial year to -20.5% at the end of the first half of 2015.
Non-current liabilities decreased to €4,012 thousand as at 30 June 2015 (31 December 2014: €8,042 thousand). For accounting purposes, a portion of the Santo loan of €6,000 thousand that was converted into shares in connection with the capital increase in return for contributions in kind completed at the beginning of the third quarter was reclassified from non-current to current liabilities at the end of the second quarter. This reduced the non-current liabilities to shareholders to €1,891 thousand as at 30 June 2015 (31 December 2014: €6,131 thousand). Up until the second quarter of 2015, a total of €7,500 thousand had been drawn down from the loan of up to €10 million furnished by Santo Holding (Deutschland) GmbH. Other non-current liabilities amounted to €106 thousand as at 30 June 2015 (31 December 2014: €123 thousand) and included deferred income of €2,015 thousand at the reporting date (31 December 2014: €1,788 thousand). This figure consists largely of deferred income in connection with the partnerships with Yakult Honsha Co., Ltd., Japan, and Menarini Asia-Pacific Holdings Pte. Ltd.
In accordance with the reclassification of the non-current liabilities to shareholders described above, current liabilities as at 30 June 2014 rose to €10,164 thousand (31 December 2014: €4,842 thousand). This item also includes trade accounts payable of €625 thousand (31 December 2014: €993 thousand), deferred income of €1,164 thousand (31 December 2014: €894 thousand) and other liabilities of €2,339 thousand (31 December 2014: €894 thousand).
Total assets/total equity and liabilities of the 4SC Group amounted to €11,760 thousand as at 30 June 2015 (31 December 2014: €14,934 thousand). This 21% decrease is primarily attributable to the net loss for the period.
Cash flows from operating activities for the first six months of 2015 amounted to €-3,562 thousand and thus mainly reflect the operating loss for this period of €-3,703 thousand. In line with a 4% decrease in the operating loss compared with the prior-year period, the cash flows from operating activities are above the comparative figure for the previous year (H1 2014: €-3,880 thousand).
The cash inflows from investing activities in the first six months of 2015 amounted to €32 thousand (H1 2014: €-941 thousand). Of this figure, €32 thousand was invested in property, plant and equipment in the first half of 2015 (H1 2014: €59 thousand). No cash inflow was generated by the sales of financial investments in the reporting period (H1 2014: €1,000 thousand).
The cash flows of €1,300 thousand from financing activities in the first six months of 2015 resulted from different issues with in some cases countervailing effects. The drawdown of further tranches of the shareholder loan from Santo totalling €1,500 thousand (H1 2014: €2,000 thousand) had a positive effect. In addition, a positive financing effect of €135 thousand (H1 2014: €250 thousand) developed in connection with Yorkville's conversion of the convertible note issued. The repayment of the remaining debt of Yorkville's convertible note amounting to €200 thousand and the conversion of the convertible note amounting to €135 thousand had a negative effect. Since no corporate actions were implemented in the first half of 2014, no cash flows from financing activities were generated.
Cash and cash equivalents amounted to €908 thousand as at 30 June 2015 (31 December 2014: €3,202 thousand). The average monthly outflow of cash from operating activities was €599 thousand in the first half of 2015 (H1 2014: €647 thousand).
Please see pages 62 to 75 of the annual report as at 31 December 2014 for a detailed description of the risks and opportunities arising from the Company's business activities as well as of its IT-based risk management and controlling system. Since then no major changes have occurred with respect to our situation in terms of risks and opportunities and no major changes are expected to occur during the remainder of 2015. However, the successful completion of the corporate action in July 2015 has resulted in a sustainable and considerable improvement of the Company's current liquidity position.
At the beginning of July 2015, the Company reported that the patent protection of its anti-cancer compound resminostat in North America had been strengthened. The US Patent Office has granted the patent for the use of resminostat in cancer indications. The patent covers the medical application of resminostat in mono- and/or combination therapy for cancer indications in the USA. In addition, the Canadian patent authority has granted the composition of matter patent for resminostat. Thus resminostat has now composition of matter protection in all major markets including the US, Europe, Japan, China, South Korea, Russia, India, and now Canada.
The corporate action resolved in June to finance 4SC's cancer research and development programmes, especially a planned Phase II clinical trial of its lead oncology compound resminostat in the CTCL indication, generates gross proceeds of €29 million, at the upper end of the targeted price range of €24 to €29 million. The new shares are placed with existing and new investors. In addition, a substantial portion of €6 million of a shareholder loan from Santo Holding (Deutschland) GmbH was converted into equity by way of a capital increase in return for contributions in kind, further strengthening the Company's financial position. Both the cash capital increase and the capital increase in return for contributions in kind were entered in the commercial register in July 2015. For more information on the capital increase, please refer to section 1.2 "4SC on the stock markets" and section 1.3.3 "Significant events at Group level".
The following paragraphs contain forecasts and expectations regarding future developments. Actual results might differ substantially from these estimates of likely developments if uncertainties were to arise or if the assumptions underlying the forward-looking statements turn out to be incorrect.
The industry information service BioCentury reported that in the second quarter of 2015 a total of 15 biotechnology companies announced plans to go public in the United States. This raises the number of envisaged IPOs to 23. In the second quarter, 27 companies from this industry generated a total of \$3 billion from their IPOs, bringing the aggregate proceeds from stock market flotations in the first half of 2015 to \$5 billion. By the end of the second quarter, the market capitalisation of these companies had improved by 10% on average. Through follow-ons, 85 biotechnology companies realised a total of \$7.7 billion in the second quarter of 2015. Total proceeds in the first half of 2015 thus climbed to \$19.1 billion, actually exceeding the record of \$11.4 billion for an entire year that was achieved in 2000. By the end of the second quarter, the market capitalisation of these companies had risen by an average of 5%.
In the first half of 2015, biotech large caps underperformed the small caps in the industry. The experts from BioCentury estimate that the achievement of a series of milestones could trigger a strong uptrend in the second half of the year.
The 4SC Group remains committed to pursuing its refocused research and development strategy. A key part of this strategy involves 4SC concentrating on the clinical development of those programmes that offer the greatest potential to increase value for the Group. Developing the oncology compound resminostat as planned continues to be the primary focus. Clinical development of the two anticancer compounds 4SC-202 and 4SC-205 will also be facilitated, mainly through partnerships.
4SC aims to conduct a randomised, placebo-controlled Phase II clinical trial in the indication of advanced cutaneous T-cell lymphoma (CTCL) with its lead oncology compound resminostat. Now that the financing has been secured through the capital increase that was successfully completed at the beginning of July 2015, the trial is expected to commence in the first half of 2016. According to current planning, the results of the trial could be available in the second half of 2018. 4SC will continue to expedite the preparations for the trial during the rest of the year. Among other things, these include fine-tuning the planned study design, scientific advice meetings with the drug authorities, especially the European Medicines Agency (EMA), and choosing service providers, including a contract research organisation (CRO) for the operational implementation of the trial.
4SC expects its Japanese development partner Yakult Honsha Co., Ltd. to maintain its high level of commitment in proceeding with the two ongoing Phase II trials in Asia investigating resminostat in the indications of advanced liver cancer (HCC) and non-small-cell lung cancer (NSCLC) as well as the Phase I trial started in the second quarter of 2015 in the indications of pancreatic and biliary tract cancer.
The possible development of resminostat in Western patient populations in additional indications, particularly liver cancer (HCC), remains a medium-term focus for 4SC. Once the anticipated data from the randomised Phase II trials being conducted by Yakult Honsha Co., Ltd. in HCC and NSCLC in Asia – which are also evaluating the
potentially predictive biomarker ZFP64 – has been made available, 4SC will use this to examine in depth options for its own further development of resminostat in the western world and ideally implement these.
Furthermore, 4SC assumes that in the future its new Asian license and development partner Menarini AP will firm up its plans with respect to the development of resminostat in countries in the Asia-Pacific region excluding Japan. 4SC believes that Menarini AP intends to focus its work on the development of resminostat in the indication of liver cancer (HCC), although other indications are also being considered.
For the second epigenetic anti-cancer compound 4SC-202, 4SC expects to be able to complete the official report on the completed Phase I TOPAS trial before the end of this year. Based on positive results from this Phase I trial on patients with advanced haematological tumours, the Company believes that there are attractive opportunities for the further development of 4SC-202. 4SC intends to advance the options for clinical development in Phase II trials. Ideally, these will be implemented together with potential industry or financial partners or, if necessary, by 4SC on its own. At present, 4SC favours two trials – one of a solid tumour indication such as small-cell lung cancer and one of a haematological indication.
On the basis of the positive results of a recent Phase I trial of the candidate compound 4SC-205 on patients with advanced solid tumours, 4SC is working on identifying possible collaborations for the clinical development of 4SC-205. Here, an academic partner that would research 4SC-205 for particularly suitable patient populations would be especially interesting.
Overall, 4SC is seeking to secure further licensing deals with companies from the pharmaceutical and biotech sectors to push ahead the further clinical development of its products and generate additional value for the Company. The aim is to achieve a short- and medium-term flow of funds while optimally exploiting these development programmes' value creation potential over the long term.
In the Discovery & Collaborative Business segment, the plan for the research subsidiary 4SC Discovery GmbH is to enter into new research collaborations with companies in the pharmaceutical/biotech sectors or higher education partners and to further advance existing collaborations to generate income from service provision and maximise internal capacity utilisation. Furthermore, 4SC Discovery GmbH is pursuing the signing of licence deals (early-stage partnering deals), to accelerate its own research programmes currently in development and generate additional income and long-term potential value for 4SC from upfront payments and performance-related milestone payments or royalty payments.
At the beginning of the third quarter of 2015, 4SC generated gross issue proceeds of €29 million from a capital increase. The Company is planning to use these funds primarily to conduct a Phase II clinical trial of resminostat in the indication of cutaneous T-cell lymphoma (CTCL). In addition, a Phase II trial for our second anticancer compound, 4SC-202, and clinical collaborations for our third oncology compound, 4SC-205, will be prepared. Moreover, 4SC plans to use some of the proceeds to advance the licensing activities for all of its compounds and to finance its general administrative and research activities. The Management Board estimates that the funds earmarked for the Company's financing will probably last until into the second half of 2018.
Based on current financial planning and the operating activities announced, the Management Board is expecting an average cash burn rate from operations of approx. €200 thousand per month for 2015 as a whole, significantly more than in the last forecast. This increase, which is in line with planning, is predominantly due to the costs of preparing the planned Phase II clinical trial of resminostat in the CTCL indication. Accordingly, it is expected that operating expenses in 2015 will be higher than in 2014 and that 4SC's consolidated net loss will be up year-on-year. The detailed financial planning for 2015 is currently being reviewed and the Company will specify its guidance with the publication of its nine-month report. 4SC expects to post annual net losses in the short to
Planegg-Martinsried, 30 July 2015
Enno Spillner Dr Daniel Vitt Chairman of the Member of the
medium term.
Management Board Management Board
for the period from 1 January to 30 June 2015
in € 000's
| Q2 2015 | Q2 2014 | 6M 2015 | 6M 2014 | |
|---|---|---|---|---|
| Revenue | 496 | 2,535 | 2,488 | 3,975 |
| Cost of sales | -217 | -1,494 | -1,596 | -2,133 |
| Gross profit | 279 | 1,041 | 892 | 1,842 |
| Distribution costs | -132 | -269 | -242 | -389 |
| Research and development costs | -1,888 | -1,830 | -3,016 | -3,862 |
| Administrative costs | -652 | -698 | -1,470 | -1,470 |
| Other income | 23 | 9 | 133 | 9 |
| Operating profit/loss | -2,370 | -1,747 | -3,703 | -3,870 |
| Net finance income/loss | ||||
| Share in the profit of equity-accounted investees | 0 | 3 | 33 | 17 |
| Finance income | 1 | 0 | 2 | 4 |
| Finance costs | 1 | -39 | -241 | -54 |
| Net finance income/loss | 2 | -36 | -206 | -34 |
| Earnings before taxes | -2,368 | -1,783 | -3,909 | -3,904 |
| Income tax | -40 | -70 | -40 | -70 |
| Net profit/loss for the period = Consolidated comprehensive income/loss | -2,408 | -1,853 | -3,949 | -3,974 |
| Earnings per share (basic and diluted; in €) | -0.24 | -0.04 | -0.39 | -0.08 |
in € 000's
| Non-current assets Intangible assets 9,433 Property, plant and equipment 370 Investments accounted for using the equity method 253 Other assets 168 Total non-current assets 10,224 Current assets Inventories 24 Trade accounts receivable 220 Receivables from investees 0 Cash and cash equivalents 908 Current income tax assets 3 Other assets 381 |
30.06.2015 | 31.12.2014 |
|---|---|---|
| 9,836 | ||
| 425 | ||
| 220 | ||
| 158 | ||
| 10,639 | ||
| 25 | ||
| 652 | ||
| 23 | ||
| 3,202 | ||
| 18 | ||
| 375 | ||
| Total current assets | 1,536 | 4,295 |
| Total assets 11,760 |
14,934 |
| Total equity and liabilities | 11,760 | 14,934 |
|---|---|---|
| Other liabilities Total current liabilities |
2,339 10,164 |
2,632 4,842 |
| Deferred income | 1,164 | 894 |
| Convertible bonds issued | 0 | 317 |
| liabilities to shareholders | 6,000 | 0 |
| Accounts payable to associates | 36 | 6 |
| Trade accounts payable | 625 | 993 |
| Current liabilities | ||
| Total non-current liabilities | 4,012 | 8,042 |
| Other liabilities | 106 | 123 |
| Deferred income | 2,015 | 1,788 |
| liabilities to shareholders | 1,891 | 6,131 |
| Non-current liabilities | ||
| Total equity | -2,416 | 2,050 |
| Accumulated deficit | -132,905 | -128,956 |
| Reserves | 1,818 | 1,818 |
| Share premium | 118,454 | 78,339 |
| Subscribed capital | 10,217 | 50,849 |
| Equity | ||
| 30.06.2015 | 31.12.2014 | |
| in € 000's |
in € 000's
| 6M 2015 | 6M 2014 | |
|---|---|---|
| CASh FlOwS FROM OPERATING ACTIVITIES | ||
| Earnings before taxes | -3,909 | -3,974 |
| Adjustment for statement of comprehensive income items | ||
| Depreciation and amortisation | 490 | 543 |
| Net finance income/loss | 206 | 34 |
| Stock options | 0 | 1 |
| Other non-cash items | 45 | -48 |
| Changes in statement of financial position items | ||
| Inventories | 1 | 0 |
| Trade accounts receivable | 455 | -406 |
| Current income tax assets | 15 | 56 |
| Other assets | -16 | -155 |
| Trade accounts payable | -368 | 733 |
| Accounts payable to associates | 30 | -28 |
| Deferred income | 497 | -781 |
| Other liabilities | -962 | 145 |
| Interest received | 0 | 3 |
| Interest paid | -6 | -3 |
| Income taxes paid | -40 | 0 |
| CASh FlOwS FROM OPERATING ACTIVITIES | -3,562 | -3,880 |
| CASh FlOwS FROM INVESTING ACTIVITIES | ||
| Purchase of intangible assets | 0 | 0 |
| Purchase of property, plant and equipment | -32 | -59 |
| Purchase of financial investments | 0 | 0 |
| Sale of financial investments | 0 | 1,000 |
| CASh FlOwS FROM INVESTING ACTIVITIES | -32 | 941 |
| CASh FlOwS FROM FINANCING ACTIVITIES | ||
| Cash receipts from the increase in subscribed capital/from the capital reduction | 47 | 211 |
| Payments to share premium/from the capital reduction | 88 | 39 |
| Cash received (paid) from the issuance of convertible bonds | -335 | 213 |
| Payments of shareholder loans | 1,500 | 2,000 |
| CASh FlOwS FROM FINANCING ACTIVITIES | 1,300 | 2,463 |
| NET ChANGE IN CASh AND CASh EqUIVAlENTS | -2,294 | -476 |
| + Cash and cash equivalents at the beginning of the period | 3,202 | 3,899 |
| = CASh AND CASh EqUIVAlENTS AT ThE END OF ThE PERIOD | 908 | 3,423 |
in € 000's
| Reserves | ||||||
|---|---|---|---|---|---|---|
| Subscribed capital |
Share premium | Reserves stock options |
Retained earnings |
Accumulated deficit |
Total | |
| Balance on 01.01.2014 | 50,372 | 78,355 | 1,748 | 67 | -119,260 | 11,282 |
| Options issued (ESOP 2009/2009) | 0 | |||||
| Options issued (ESOP 2009/2010) | 0 | |||||
| Options issued (ESOP 2009/2011) | 0 | |||||
| Capital increase from the conversion of convertible bonds | 211 | 39 | 250 | |||
| Comprehensive income/loss 01.01.-30.06.2014 | -3,974 | -3,974 | ||||
| Net profit/loss for the period 01.01.-30.06.2014 | -3,974 | -3,974 | ||||
| Balance on 30.06.2014 | 50,583 | 78,394 | 1,748 | 67 | -123,234 | 7,558 |
| Balance on 01.01.2015 | 50,849 | 78,339 | 1,751 | 67 | -128,956 | 2,050 |
| Options issued (ESOP 2009/2009) | 0 | |||||
| Options issued (ESOP 2009/2010) | 0 | |||||
| Options issued (ESOP 2009/2011) | 0 | |||||
| Capital increase from the conversion of convertible bonds | 47 | 88 | 135 | |||
| 5:1 capital reduction | -40,679 | 40,679 | 0 | |||
| Expenditures related to the implementation of the | -652 | -652 | ||||
| resolved capital increase | ||||||
| Comprehensive income/loss 01.01.-30.06.2015 | -3,949 | -3,949 | ||||
| Net profit/loss for the period 01.01.-30.06.2015 | -3,949 | -3,949 | ||||
| Balance on 30.06.2015 | 10,217 | 118,454 | 1,751 | 67 | -132,905 | -2,416 |
to the consolidated interim report as at 30 June 2015
These interim consolidated financial statements were created in accordance with the accounting principles of the International Financial Reporting Standard (IFRS) – as adopted by the EU – 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. New standards issued by the IASB and adopted by the European Commission are applied without exception starting in the financial year in which their application becomes mandatory.
These interim consolidated financial statements as at 30 June 2015 comprise 4SC AG, based in Planegg-Martinsried, and its wholly-owned subsidiary 4SC Discovery GmbH, Planegg-Martinsried, which is fully consolidated (together referred to as the "Group" or "4SC"). The following companies were also taken into account in these financial statements:
| Company / Domicile | Measured as | Measured acc. to |
|---|---|---|
| Panoptes Pharma Ges.m.b.h., | Associate | IAS 28 |
| Vienna, Austria | ||
| quattro research Gmbh, | Associate | IAS 28 |
| Planegg-Martinsried | ||
| quiescence Technologies llC., | Equity investment | IAS 39 |
| Melbourne, Florida, USA |
The consolidated interim report was approved for publication by the Management Board on 6 August 2015. The discussion of the interim report by the Supervisory Board or Audit Committee and the Management Board in line with the German Corporate Governance Code (as amended on 5 May 2015) was held via teleconference on 23 July 2015.
The accounting policies applied and estimates made essentially correspond to those used for the consolidated financial statements for the year ending 31 December 2014.
Since 1 January 2012, 4SC has used two operating segments – "Development" and "Discovery & Collaborative Business" – as its segment reporting format in line with its internal control (management approach). Each individual operating segment, along with its core business and core projects, is set out below.
The Development segment comprises the clinical and preclinical development work for drug candidates from the Group's product pipeline and is conducted by the Group's parent company 4SC AG. As at 30 June 2015, it comprised the development programmes for resminostat, 4SC-202 and 4SC-205 as well as vidofludimus.
The Discovery & Collaborative Business segment comprises the activities collectively handled by 4SC Discovery GmbH as at 30 June 2015, namely drug discovery and early-stage research plus subsequent commercialisation, in particular through service business and research collaborations related to drug discovery and optimisation.
There was no intersegment revenue. The segment results were as follows:
in € 000's
| Discovery & Collaborative Nicht |
||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Development | Business | Not allocated | Consolidation | Group | ||||||
| 6M 2015 | 6M 2014 | 6M 2015 | 6M 2014 | 6M 2015 | 6M 2014 | 6M 2015 | 6M 2014 | 6M 2015 | 6M 2014 | |
| Statement of comprehensive income | ||||||||||
| Revenue (total) | 1,699 | 1,927 | 789 | 2,048 | 0 | 0 | 0 | 0 | 2,488 | 3,975 |
| External revenue | 1,699 | 1,927 | 789 | 2,048 | 0 | 0 | 0 | 0 | 2,488 | 3,975 |
| Intersegment revenue | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Other income | 655 | 563 | 98 | 73 | 0 | 0 | -620 | -627 | 133 | 9 |
| Operating expenses | -4,931 | -6,322 | -2,013 | -2,159 | 0 | 0 | 620 | 627 | -6,324 | -7,854 |
| of which research and | -2,166 | -3,478 | -1,259 | -800 | 0 | 0 | 409 | 416 | -3,016 | -3,862 |
| development costs | ||||||||||
| of which cost of sales, distribution costs | -2,765 | -2,844 | -754 | -1,359 | 0 | 0 | 211 | 211 | -3,308 | -3,992 |
| and administrative costs | ||||||||||
| Segment result | -2,577 | -3,832 | -1,126 | -38 | 0 | 0 | 0 | 0 | -3,703 | -3,870 |
| Net finance income/loss | -3 | -1 | -3 | 0 | -200 | -33 | 0 | 0 | -206 | -34 |
| Earnings before taxes | -2,580 | -3,833 | -1,129 | -38 | -200 | -33 | 0 | 0 | -3,909 | -3,904 |
| Income tax expense | -40 | -70 | 0 | 0 | 0 | 0 | 0 | 0 | -40 | -70 |
| Net profit/loss for the year | -2,620 | -3,903 | -1,129 | -38 | -200 | -33 | 0 | 0 | -3,949 | -3,974 |
| Item of the statement of financial position | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| & fixed assets | ||||||||||
| Non-current assets | 9,515 | 10,382 | 289 | 467 | 420 | 355 | 0 | 0 | 10,224 | 11,204 |
| Current assets | 169 | 403 | 320 | 764 | 1,047 | 3,897 | 0 | 0 | 1,536 | 5,064 |
| Total segment assets | 9,684 | 10,785 | 609 | 1,231 | 1,467 | 4,252 | 0 | 0 | 11,760 | 16,268 |
| Equity | 0 | 0 | 0 | 0 | -2,416 | 7,558 | 0 | 0 | -2,416 | 7,558 |
| Non-current liabilities | 2,015 | 2,544 | 0 | 0 | 1,997 | 2,002 | 0 | 0 | 4,012 | 4,546 |
| Current liabilities | 3,435 | 3,205 | 382 | 752 | 6,347 | 207 | 0 | 0 | 10,164 | 4,164 |
| Total segment liabilities | 5,450 | 5,749 | 382 | 752 | 5,928 | 9,767 | 0 | 0 | 11,760 | 16,268 |
| Capital expenditure | 22 | 13 | 10 | 46 | 0 | 0 | 0 | 0 | 32 | 59 |
| Depreciation and amortisation | 434 | 444 | 56 | 99 | 0 | 0 | 0 | 0 | 490 | 543 |
The following overview shows the regional distribution of the Group's revenue, based on the customers' geographic location:
in € 000's
| 6M 2015 | 6M 2014 |
|---|---|
| Germany 443 |
1,078 |
| Europe 346 |
971 |
| Asia 1,699 |
1,927 |
| Revenue 2,488 |
3,975 |
The basic earnings per share are calculated in accordance with IAS 33.9 ff. by dividing the net profit/loss for the period attributable to the shareholders (numerator) by the average weighted number of shares outstanding in the reporting period (denominator).
| Q 2 2015 | Q2 2014 | 6M 2015 6M 2014 | ||
|---|---|---|---|---|
| Based on net profit/loss for the period | -2,408 | -1,853 | -3,949 | -3,974 |
| (in €000's) | ||||
| Based on average number of shares | 10,164 | 50,450 | 10,167 | 50,438 |
| (in thsd.) | ||||
| Earnings per share | -0.24 | -0.04 | -0.39 | -0.08 |
| (basic and diluted, in €)* |
Adjusted to reflect the capital reduces and reverse stock split carried out in 2015, the figures for q2 2014 are -€0.18 and for 6M 2014 -€0.39 respectively.
Given 4SC's loss, the options issued are not dilutive. As a result, the diluted and basic earnings per share are identical.
In the second quarter of 2015 no reportable transactions pursuant to Section 15a of the German Securities Trading Act (Wertpapierhandelsgesetz - WpHG) were made with shares or options by members of the Management Board or Supervisory Board.
4. NOTES TO THE CASH BALANCE
4SC has cash and cash equivalents. There were no other financial assets as at 30 June 2015. Taken together, these items comprise the cash balance/funds:
| in € 000's | |||
|---|---|---|---|
| 30.06.2015 | 31.12.2014 | 30.06.2014 | |
| Cash and cash equivalents at the end | 9,086 | 3,202 | 3,423 |
| of the period | |||
| Other financial assets | 0 | 0 | 0 |
| Cash balance/funds | 908* | 3,202 | 3,423 |
| * The Company's current liquidity position improved considerably as a result of the successful completion of the corporate action in July 2015, generating gross issue proceeds of €29 million. |
The following overviews show the shares and stock options held by members of the Management Board and Supervisory Board as at the 30 June 2015 reporting date as well as changes in these holdings compared to the start of the year.
| Number of shares | ||||
|---|---|---|---|---|
| Shares* 01.01.2015 |
Purchase | Sale | Shares 30.06.2015 |
|
| Management Board | ||||
| Dr Daniel Vitt | 83,361 | 0 | 0 | 83,361 |
| Enno Spillner | 14,760 | 0 | 0 | 14,760 |
| Shares held by the Management Board | 98,121 | 0 | 0 | 98,121 |
| Supervisory Board | ||||
| Dr Clemens Doppler | 3,719 | 0 | 0 | 3,719 |
| Dr Manfred Rüdiger | 1,500 | 0 | 0 | 1,500 |
| Shares held by the Supervisory Board | 5,219 | 0 | 0 | 5,219 |
* The figures as at 01.01.2015 were adjusted to the capital reduction and reverse share split carried out in 2015.
| Number of stock options | |||||
|---|---|---|---|---|---|
| Options* 01.01.2015 |
Additions | Expired | Exercised | Options = maximum number of shares 30.06.2015 |
|
| Management Board | |||||
| Dr Daniel Vitt | 28,520 | 0 | 0 | 0 | 28,520 |
| Enno Spillner | 44,640 | 0 | 0 | 0 | 44,640 |
| Options held by the Management Board | 73,160 | 0 | 0 | 0 | 73,160 |
| * The figures as at 01.01.2015 were adjusted to the capital reduction and reverse share split carried out in 2015. |
4SC engaged in the following significant business transactions with related parties in the period from 1 January to 30 June 2015:
In June 2014, Santo Holding (Deutschland) GmbH, Holzkirchen, granted 4SC AG a shareholder loan of up to €10 million earmarked for financing the costs of preparing for a planned clinical trial of the drug resminostat in the liver cancer indication and for financing the ongoing administrative costs of 4SC AG. As per its financial planning, 4SC AG can draw down the credit line in tranches until 31 December 2015. The loan carries interest of 8% p.a. (maturity date) and runs until the end of 2016. In the second quarter of 2015, 4SC AG drew down two further tranches of this loan in the total amount of €1,500 thousand (H1 2014: €2,000 thousand), as a result of which the loan liability as at the end of the second quarter totalled €7.5 million. Furthermore, at the beginning of July 2015 1,500,000 consideration shares were issued at an issue price of €4.00 in return for contributions in kind for the purpose of settling the material portion of €6 million of the existing shareholder loan from Santo Holding (Deutschland) GmbH.
4SC maintains legal relations with quattro research GmbH, in which it has held a 48.8% stake of the share capital since its founding at the beginning of 2004. A software service contract exists between the companies, on the basis of which quattro research GmbH renders services for improvement, further development, user support, further training and database maintenance in relation to software created by 4SC for supporting research activities. In the first six months of 2015, this contract had a net volume of €90 thousand (H1 2014: €60 thousand).
4SC Discovery GmbH maintains legal relations with BioNTech AG, Mainz, and its subsidiary BioNTech RNA Pharmaceuticals GmbH (formerly: Ribological GmbH), which both belong to the Santo Holding (Deutschland) GmbH Group, Holzkirchen, the main shareholder of 4SC. On 17 December 2012, a licensing agreement was concluded for TLR antagonists. Under the agreement, 4SC Discovery GmbH received an upfront payment of €2.5 million from BioNTech AG and is entitled to subsequent performance-based payments on achievement of specific sales milestones and to royalties. Furthermore, at the start of 2013, a service partnership was launched at standard market terms in which 4SC Discovery GmbH will identify new small-molecule, anti-cancer compounds for defined therapeutic targets and optimise these for BioNTech AG and/or its subsidiaries. In the first six months of 2015, this contract had a net volume of €289 thousand (H1 2014: €676 thousand) with respect to BioNTech AG
and €-1 thousand (H1 2014: €31 thousand) with respect to BioNTech RNA Pharmaceuticals GmbH. At the 30 June 2015 reporting date, there were receivables from BioNTech AG amounting to €158 thousand (31 December 2014: €212 thousand), which are expected to be paid in August 2015. There were no receivables from BioNTech RNA Pharmaceuticals GmbH (31 December 2014: €14 thousand).
4SC Discovery GmbH maintains legal relations with AiCuris GmbH & Co. KG, Wuppertal, which belongs to the Santo Holding (Deutschland) GmbH Group, Holzkirchen, the main shareholder of 4SC. In November 2013, a collaboration between 4SC Discovery GmbH and CRELUX GmbH (both in Planegg-Martinsried) on the one hand and AiCuris GmbH & Co. KG (Wuppertal) on the other was arranged at standard market terms. The objective of the collaboration is the identification and validation of innovative small-molecule compounds targeting pathogenspecific interactions in infectious diseases. In the first six months of 2015, this contract with AiCuris GmbH & Co. KG had a net volume of €12 thousand (H1 2014: €0 thousand). At the 30 June 2015 reporting date, there were no receivables from AiCuris GmbH & Co. KG (31 December 2014: €3 thousand).
Beyond this, there were further business transactions with related parties, where the transaction volume in the sixmonth reporting period in each case did not exceed €10 thousand or where the total annual transaction volume is likely not to exceed €10 thousand. No liabilities existed from these transactions as at 30 June 2015.
These interim consolidated financial statements and the interim Group management report as at 30 June 2015 have been subjected to a review by Baker Tilly Roelfs AG Wirtschaftsprüfungsgesellschaft, Munich.
For more information regarding events after the reporting period, please see section 4 of the interim group management report, "Events after the reporting period". In this section, the direct, effects on the Group's results of operations, financial position and net assets are explained.
To 4SC AG, Planegg-Martinsried, District of Munich, Germany We have reviewed the interim consolidated financial statements - comprising the consolidated statement of comprehensive income, consolidated statement of financial position, the consolidated statement of cash flows, consolidated statement of changes in equity as well as selected explanatory consolidated notes - together with the interim Group management report of 4SC AG, Planegg-Martinsried, District of Munich, for the period from 1 January to 30 June 2015 that are part of the consolidated half-year financial report according to Section 37w WpHG ("Wertpapierhandelsgesetz": "German Securities Trading Act"). The preparation of the condensed consolidated interim financial statements in accordance with the IFRS as adopted by the EU and of the interim Group management report in accordance with the provisions of the German Securities Trading Act applicable to interim Group management reports is the responsibility of the Company's legal representatives. Our responsibility is to issue review report on the condensed interim consolidated financial statements and the interim management report of the Group based on our review.
We performed our review of the condensed interim consolidated financial statements and the interim management report of the Group in accordance with German generally accepted standards for the review of financial statements promulgated by the Institut der Wirtschaftsprüfer (IDW). Those standards require that we plan and perform the review so that we can preclude through critical evaluation, with a certain level of assurance, that the condensed interim consolidated
financial statements have not been prepared, in material respects, in accordance with the IFRS applicable to interim financial reporting as adopted by the EU and that the interim management report of the Group has not been prepared, in material respects, in accordance with the provisions of the German Securities Trading Act applicable to interim group 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 statements audit. Since, in accordance with our engagement, we have not performed a financial statements 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 consolidated 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, or that the interim management report of the Group has not been prepared, in all material respects, in accordance with the requirements of the German Securities Trading Act applicable to interim group management reports.
Munich, 28 July 2015
Baker Tilly Roelfs AG Wirtschaftsprüfungsgesellschaft
Stahl Hund Wirtschaftsprüfer Wirtschaftsprüfer
(German Public Auditor) (German Public Auditor)
"To the best of our knowledge, and in accordance with the applicable reporting principles, the consolidated financial statements for the first six months give a true and fair view of the assets, liabilities, financial position and profit or loss of the 4SC Group, and the interim management report of the Group includes a fair review of the development and performance of the business and the position of the 4SC Group, together with a description of the material
opportunities and risks associated with the expected development of the 4SC Group."
Planegg-Martinsried, 30 July 2015
Enno Spillner Dr Daniel Vitt Chairman of the Member of the Management Board Management Board
| Consolidated 9-month financial report (30 September 2015) | 11 November 2015 |
|---|---|
| Analyst conference – German Equity Forum, Frankfurt | 23-25 November 2015 |
4SC AG, Am Klopferspitz 19a, 82152 Planegg-Martinsried, Germany
Mail: [email protected] Phone: +49-89-7007-630
Hardy Lahn (Lahn Consultants, Landsberg am Lech, Germany) www.lahnconsultants.com
Anke Banaschewski (GFD – Gesellschaft für Finanzkommunikation mbH, Frankfurt am Main and Munich, Germany) www.gfd-finanzkommunikation.de
Am Klopferspitz 19a 82152 Planegg-Martinsried Germany Phone: +49-89-7007-630 Fax: +49-89-7007-63-29 www.4sc.com
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