Annual Report • Apr 6, 2020
Annual Report
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1 July 2019 – 31 December 2019
| ABOUT ASCELIA PHARMA | 3 |
|---|---|
| CEO COMMENTS | 4 |
| THE YEAR IN BRIEF | 5 |
| OUR STRATEGY | 6 |
| SIGNIFICANT VALUE DRIVERS AHEAD | 7 |
| MANGORAL | 8 |
| ONCORAL | 19 |
| SHAREHOLDER INFORMATION | 24 |
| DIRECTORS' REPORT | 26 |
| CORPORATE GOVERNANCE REPORT | 30 |
| BOARD OF DIRECTORS | 37 |
| MANAGEMENT | 39 |
| Consolidated Income Statement | 42 |
| Consolidated Statement of Comprehensive Income | 42 |
| Consolidated Balance Sheet | 43 |
| Consolidated Statements of Changes in Equity | 44 |
| Consolidated Cash Flow Statement | 45 |
| Parent Company – Income Statement | 46 |
| Parent Company – Statement of Comprehensive Income | 46 |
| Parent Company – Statements of Changes in Equity | 48 |
| Parent Company – Cash Flow Statement | 49 |
| NOTES | 50 |
| DECLARATION AND SIGNATURES | 68 |
| AUDITOR'S REPORT | 69 |
| GLOSSARY | 72 |
| ALTERNATIVE PERFORMANCE MEASURES | 73 |
6 MAY 2020 Annual General Meeting 2020 13 MAY 2020 Interim Report January-March 2020 (Q1) 20 AUGUST 2020 Half-year Report January-June (H1) 5 NOVEMBER 2020 Interim Report January-September 2020 (Q3) 16 FEBRUARY 2021 Full-year Report January-December 2020
Mangoral is our novel non-gadolinium contrast agent used in MRI-scans of the liver. Mangoral is developed to improve the visualisation of focal liver lesions (liver metastases) in patients with impaired kidneys that are at risk of severe side-effects from the gadolinium contrast agents currently on the market. Mangoral characteristics:
Oncoral is our novel oral chemotherapy tablet ready for Phase 2 clinical studies for the treatment of gastric cancer. Oncoral characteristics:
could be delayed in a prolonged Corona situation
The COVID-19 pandemic has impacted almost every person on our planet and has profound consequences for many industries, including the life science sector. At Ascelia Pharma, we are fortunate to be well financed for our clinical Phase 3 studies of Mangoral. Furthermore, the patients we seek to help will continue to need Mangoral or
Oncoral and it is not expected to affect the commercial opportunity for our products. We have also taken operational steps to protect our employees and our communities, whilst ensuring we can still meet our short- and long-term business objectives.
Should we face a scenario with a prolonged Corona situation, it will influence almost all clinical studies across the life science sector including our clinical studies, which in a such scenario could be delayed and face increased costs. This would impact our projected timelines.
Advancing our clinical portfolio. We made significant progress in 2019 on our mission to help people with rare cancers, as we continued the development of our proprietary clinical stage portfolio for our two lead candidate drugs, Mangoral and Oncoral. Most importantly, we made detailed preparations for the pivotal Phase 3 clinical study SPARKLE with Mangoral. Enrolling is now ongoing after the first patient was entered the study in February 2020. Mangoral has the potential to be the only non-gadolinium based contrast agent on the market for liver MRI scans and the only standard of care for its target patient population. The start of the study also transforms us into an established Phase 3 company and is an important step towards becoming a commercial stage company when Mangoral becomes available to the patients for whom there is currently no safe contrast agent available.
Five sites opened for patient enrolment. During December 2019 and January 2020, we opened five sites for enrolment of patients to the SPARKLE study in the US and Europe. These are Yale University School of Medicine in Connecticut, University of Wisconsin and Southwest Medical Imaging in Arizona in the US, as well as Karolinska University Hospital in Sweden and Universitätsmedizin Göttingen in Germany. Additional sites are expected to be opened shortly.
First patient enrolled in February 2020. The first patient was enrolled in the SPARKLE study shortly after the sites opened. The interest from leading hospitals and world-class radiologists to participate in the study stands as a testimony to the large unmet medical need of these patients and the unique value proposition offered by Mangoral. Assuming we do not face a prolonged Corona scenario, the full study report is expected in H1 2021, which means that SPARKLE is a relatively short study compared to typical major Phase 3 studies. This adds extra momentum to our development program and subsequent commercialisation plans.
Recruitment of Chief Commercial Officer. As an important part of our commercial preparations, we appointed Julie Waras Brogren as Chief Commercial Officer and member of the Executive Management. Julie joined us formally in January 2020. We are extremely pleased to add her to our team. With her long experience and excellent track record in global product launches and launch preparations, including highly successful multi-billion products such as Novo Nordisk's Victoza®, Julie will be instrumental in leading our commercial preparations for the launch of Mangoral, which is planned for 2022.
Preparing for Oncoral Phase 2. We continued our preparations for the Phase 2 clinical study of Oncoral throughout the reporting period. We are working with key opinion leaders and world-class oncologists in the field to further develop the positioning of Oncoral in the treatment of patients with gastric cancer, as well as the clinical development strategy and design of the upcoming Phase 2 study.
Oncoral is our novel oral chemotherapy tablet based on irinotecan for the treatment of gastric cancer. In our completed Phase 1 program, we demonstrated, among other things, reassuring bioavailability and tolerability of Oncoral administered both as monotherapy and in combination with an add-on oral compound, which could enable attractive all-oral chemo combinations. Oral chemotherapeutic drugs potentially offer a wide number of advantages for patients, including greater convenience, fewer hospital/doctor's office visits, better safety profile and the avoidance of problems related to venous access. It also, importantly, saves hospital bills with fewer patient visits.
Looking ahead, our focus for 2020 is the ongoing SPARKLE study and preparations for a commercial launch of Mangoral. The initiation of the SPARKLE study secures our position as a Phase 3 company and represents a significant milestone in our preparations for market launch in 2022. I look forward to updating you on our progress on these exciting projects as they advance through the development process, and ultimately to reach those patients who need better options for managing their cancer disease.
CEO Ascelia Pharma AB (publ)
• Preparing for the start of the global registration-enabling Phase 3 study for Mangoral
Our mission is to improve life expectancy and the quality of life for people diagnosed with cancer and other cancer related conditions
IDENTIFY & ACQUIRE DRUGS
STRICT SELECTION CRITERIA Our criteria for targeted drugs:
Fill a clear unmet medical
Understand mode of action
Aspire for global leadership
Have a de-risked development path
Potential for orphan drug designation
DEVELOP
VALUE CREATION Resources and Assets
Unique pipeline and drug development expertise. We leverage our unique portfolio of drugs through our senior staff's extensive drug development experience supplemented by our strong network of Key Opinion Leaders (KOL)
US Orphan Drug Designation for Mangoral with potential to extend IP rights to year 2040 with a new patent. Oncoral protected by patent to year 2035
Solid financial position Well-financed with SEK 184 million in liquid assets per 31 Dec 2019
Create value for patients and hospitals as well as shareholders through bringing our drug candidates to the market by ourselves and/or together with partners
Exepected development timeline (timelines could be delayed in a prolonged Corona situation)
Phase 3 liver contrast agent
One of the reasons that cancer is a serious disease is its ability to spread to other parts of the body than the location of the primary tumour (i.e. where the first tumour formed). When cancer cells spread to distant lymph nodes, tissues or organs, it is called metastatic cancer. Cancer can spread to any part of the body, but certain areas such as the liver are more prone to metastases than others
The liver is the second most common organ for metastasis after the lymph nodes. Up to 50-70 percent of patients with colorectal cancer develop liver metastases, and liver metastases seem to play a significant role in the cause of death of patients who die with breast or colorectal cancer.
Correct diagnosis is critical for management of patients with liver metastases, and imaging plays an essential role in both initial
staging, pre-operative planning, monitoring of treatment effect and surveillance for recurrence of disease. If liver metastases are correctly detected and deemed eligible for surgical removal, the survival rate can be significantly improved, and sometimes full recovery is possible. The five-year overall survival rate for patients undergoing resection for colorectal liver metastases has been reported to be 46 percent compared to only 6 percent for patients who were not subjected to surgical treatment of their liver metastases.
Magnetic Resonance Imaging (MRI) is considered the preferred imaging modality for both initial cancer disease staging and monitoring of liver metastases. MRI is an imaging method that uses non-ionizing radiation to create useful diagnostic images. MRI scans use radio waves and strong magnets, and unlike CT and PET-CT, MRI gives no radiation to the patient. An MRI scanner consists of a large, powerful magnet in which the patient lies. Signals are sent to the body by a radio wave antenna, which in turn receives signals back. The returning signal patterns are converted by a computer into very detailed images of parts of the body. To enhance the quality of the MRI, patients are given contrast agents prior to the procedure.
Contrast agents improve the MRI-scans. A contrast agent is a substance that make abnormalities, such as metastases, appear clearer due to the special magnetic properties of the elements in the contrast agent and thereby increase the sensitivity and/or specificity of the image.
1) Albiin N et al. Manganese chloride tetrahydrate (CMC-001) enhanced liver MRI: evaluation of efficacy and safety in healthy volunteers. MAGMA. 2012 Mar 8 2) Clinical Colorectal Cancer, Vol. 15, No. 4, Dec 2016, e183-192
The contrast agent assists in diagnosis and staging and helps to guide treatment decisions and planning. MRI with contrast is a very sensitive and useful imaging method to assess and select patients eligible for metastatic resection or locally directed non-surgical treatment. MRI with contrast is also used to determine if a given treatment has been effective, and/or for surveillance of possible recurrence of disease.
Patients with impaired renal function, i.e. impaired kidney function, cannot tolerate the currently available contrast agents on the market. All contrast agents today are based on the heavy metal Gadolinium and for patients with impaired renal function these contrast agents increase the risk of Nephrogenic Systemic Fibrosis (NSF). NSF is a rare, but serious and life-threatening condition causing extensive waxy thickening and hardening of the skin. The skin can become hyperpigmented and take on a "wooden texture". It can lead to joint contractures, as well as muscle and fascial fibrosis, which may lead to severe immobility. Fibrosis can also develop in the diaphragm, muscles in the thigh and lower abdomen, and the lung vessels. NSF worsens over time and can cause death, as a result from multi-system failure due to sclerotic transformation of organ systems.
Black-box warnings. Current contrast agents are contraindicated for patients with severely impaired kidneys and carry black box warnings. Regulatory agencies such as FDA and EMA has published guidelines for the use of Gadolinium-Based-Contrast Agents (GBCAs) in MRI with restrictions on the use of GBCAs on patients with severely reduced renal function.
Mangoral is the only available solution. The only MR-scan patient with severely impaired kidneys can have today is an MR- scan without a contrast agent, which reduce the ability to find and treat liver metastases and consequently patients chances of survival. Mangoral will be the only solution available for patients with severely impaired kidneys.
Recent Gadolinium concerns also for patient with normal kidney function. In addition to the association with NSF, there have been recent reports of accumulation of Gadolinium in the brain. Although the side-effects of brain accumulation of Gadolinium is yet to be determined, the European Regulatory Authority EMA suspended three Gadolinium-based products in November 2017. In December 2017, the FDA warned that Gadolinium based contrast agents are retained in the body and required new class warnings.
WARNING: NEPHROGENIC SYSTEMIC FIBROSIS (NSF) See full prescribing information for complete boxed warning. Gadolinium-based contrast agents (GBCAs) increase the risk for NSF among patients with impaired elimination of the drugs. Avoid use of GBCAs in these patients unless the diagnostic information is essential and not available with non-contrasted MRI or other modalities.
280,000 patients with impaired kidney function in major markets Patients referred for liver MRI scan NORMAL KIDNEY FUNCTION Gadolinium imaging drug POOR KIDNEY FUNCTION NO imaging drug
Mangoral aims to be the MRI imaging drug for patients with impaired kidney function
The liver is the second most common organ for metastasis after the lymph nodes. Many solid cancers originating e.g. from the lungs, breasts, colon, stomach or pancreas metastasize to the liver, and very often the liver is the first and only site of metastatic disease. If liver metastases from, for instance, a primary colorectal cancer are correctly detected and deemed eligible for surgical resection, the prognosis for the patient can be markedly improved, and sometimes full recovery is possible.
It is well established that liver MRI with a contrast agent is superior to an examination without contrast when it comes to information value. This is important for management planning, for example to assess and select patients eligible for metastatic resection or locally directed non-surgical treatment. MRI with contrast is also used to determine if a given treatment has been effective, and/or for surveillance of possible recurrence of disease.
Early detection and localization of liver metastases is critical for optimal patient management. However, in patients with poor kidney function, the use of gadolinium-based contrast agents, which is standard today, may be medically inadvisable or even contraindicated. There is therefore a specific unmet medical need for a contrast agent that is not gadolinium-based for this group of patients.
If a gadolinium-based contrast agent is deemed contraindicated, the alternatives for these patients today is an MRI or CT examination without any contrast agent, which could mean that liver metastases go undetected and/or management decisions are made based on suboptimal information.
The importance of the SPARKLE study is to demonstrate the clinical utility of an oral, manganese-based, contrast agent that is safe and effective in this subgroup of patients with impaired renal function. In that sense, the study is addressing a very specific medical unmet need.
How does the scanning procedure with an oral contrast agent differ from the procedure with an intravenous agent, from a practical perspective?
The MRI procedure with an oral contrast agent is potentially quicker and more convenient for both the patient and the staff involved. Firstly, in a clinical setting the patient may take the contrast agent at home, before going to the hospital for the actual scan, which means a shorter stay in the clinic. Secondly, not all patients prefer intravenous procedures, so from a convenience perspective, an oral contrast agent could be advantageous.
If you take into consideration what today's alternatives are for patients with poor kidney function, there is a well-defined unmet medical need. But if you look beyond this and consider all liver MRI examinations that are performed, a novel, oral manganese-based contrast agent will definitely play an important, broader role in
future clinical practice. Kohkan Shamsi, MD, PhD, Radiologist
Mangoral is an orally administrated contrast agent used in MRI of the liver. It is based on the chemical element manganese, which is a natural trace element in the body. Mangoral also contains L-Alanine and Vitamin D3 to increase the absorption of manganese from the small intestine into the portal liver vein. From there the manganese is transported to the liver where it is taken up by and retained in the normal liver cells, also known as the hepatocytes.
The high manganese uptake causes the liver parenchyma to appear bright on MR images. As liver metastases are not liver cells, they do not take up manganese and consequently metastases appear dark on MR images. With Mangoral, liver metastases are consequently easier to identify due to this contrast effect.
When administered orally, manganese is absorbed from the gastro-intestinal tract, taken up in the liver and excreted via the bile. Due to the high pre-systemic first pass effect only minimal amounts reach the blood stream, so the systemic exposure is very low. The mean manganese blood concentration values were within the normal range at all dose levels tested in the performed clinical studies on Mangoral.
(standard of care today in target patient population)
Mangoral enhanced liver MRI
No metastasis visible
Metastasis becomes visible
Potential to be the first and only non-Gadolinium contrast agent for liver MRI
Based on manganese – a natural trace element in the body – with no risk of NSF
Strong enhancement of liver on MRI – metastases do not take up manganese and appear darker on the MRI
No competing drugs
Limited systemic exposure and good safety profile
Large and flexible time window for MRI since patients can be scanned 2-6 hours after ingestion – reduced scanner occupancy time at the clinics
Provides ease of use for patients and clinicians alike (oral administration)
FDA Orphan Drug Designation
The strong contrast effect with Mangoral makes it an appropriate liver contrast agent for patients where the use of Gadolinium-Based Contrast Agents may be medically inadvisable or cannot be administered. Mangoral offers a significantly better alternative than unenhanced MRI (i.e. MRI with no medical contrast agent), which is the current gold standard for these patients. Mangoral's patient segment comprises mainly patients with severe renal insufficiency who have an estimated eGFR below 30, i.e. patients with chronic kidney disease stages 4 and 5 as well as patients with Acute Kidney Injury (AKI).
In summary, there is a large medical need since the current gold standard diagnostic modality for this patient population is an MRI scan without any contrast agent. Mangoral enhanced MRI will lead to earlier detection of metastases and detection of smaller metastases. This will improve the possibilities of optimal management of the liver metastases and ultimately positively impact quality of life of the patients and lead to higher survival rates.
6 phase 1 and 2 clinical studies completed. To date, the clinical development of Mangoral comprises a total number of six completed clinical phase 1 and 2 studies in healthy volunteers and patients with known liver metastases or suspected liver lesions. In total, 127 persons have participated in the completed Phase 1 and Phase 2 clinical studies.
Consistent strong efficacy readout and safety profile. The re-
sults of the safety assessments from the six clinical studies show that Mangoral is safe and well tolerated with observed adverse events being mostly mild and transient (diarrhea and nausea were most frequently reported). Overall, the results from the efficacy analyses show that diagnostic quality scores improved after use of Mangoral and provide strong support that Mangoral is an effective liver specific non-gadolinium liver MRI contrast agent.
Study results in summary Blind read study of all imaging data confirming the strong efficacy data. In order to further validate the results of the individual clinical studies and also provide guidance for the design of the Phase 3 program, Ascelia Pharma has performed a re- evaluation of all the available imaging data, in a so-called " blinded read" study. The results of this blinded read study have been presented at large radiology conferences.
The blinded study with 178 persons underlined that Mangoral significantly improves MRI performance. Compared to unenhanced MRI, 33% more lesions were detected after Mangoral enhanced MRI. Mangoral also improved MRI performance in terms of lesion visualisation (conspicuity; p-value <0.0001) and delineation (p-value <0.0001), and quantitative parameters like lesion to liver contrast ratio was significantly improved on Mangoral enhanced MRI compared to unenhanced MRI
Mangoral® improved the performance of liver MRI compared to MRI without the use of a contrast agent
The completed studies did not identify any safety concerns and Mangoral was regarded as safe
The Phase 3 study, named SPARKLE, is a multicentre study in up to 200 patients. The first patient was enrolled in February 2020. Final study report from SPARKLE is expected in H1-2021 (assuming that we do not face a prolonged Corona situation that delays patient enrolment). The strong results in the Phase 1 and Phase 2 studies support our belief that the likelihood of success in Phase 3 is significantly larger than the average oncology drug in Phase 3. This is due to the known mode of action of Mangoral and a high degree of similarity between Phase 2 and Phase 3 primary endpoints for Mangoral and since the planned Phase 3 study comparator for Mangoral is MRI with no contrast agent. In addition, the follow-up time is only a few days, compared to months or years for the typical Phase 3 oncology study.
| NUMBER OF PATIENTS | Global study in up to 200 patients |
|---|---|
| ENDPOINT | Lesion visualisation • Lesions border delineation • Conspicuity (lesion contrast compared to liver background) |
| COMPARATOR | Unenhanced MRI + Mangoral MRI vs. Unenhanced MRI |
| EVALUATION | Centralised evaluation by 3 radiologists |
| RANDOMISATION | No – each patient at his/her own control |
| FOLLOW-UP | 72 hours |
The completed Phase 1 and Phase 2 studies have shown strong efficacy results regarding the endpoints that will be evaluated in the Phase 3 study. The completed studies, involving 178 persons in total1, have showed a highly significant improvement compared to unenhanced MRI in:
Results from both variables underpin that Mangoral significantly improves MRI performance.
1 The above mentioned results stem from of a blinded-read study, which comprised all imaging data including Phase 1 and Phase 2 data. The blinded-read results have been presented at major radiology conferences
As there are no MRI liver contrast agents serving Mangoral's patient population, there is no published data available on the market size. Ascelia Pharma has estimated the addressable market size based on thorough analyses, which has been supported by third party market research.
The addressable patient population is based on detailed epidemiology analysis by geography, age groups and primary disease and therein the estimated prevalence of CKD and projected incidence and prevalence of relevant solid cancers. Ascelia Pharma estimates the addressable population to around 280,000 patients in major markets.
The pricing of Mangoral will be value based, and Ascelia Pharma has conducted more than 25 interviews with healthcare payer representatives to assess the accessibility to reimbursement, separate reimbursement coding and pricing. The feedback from the payer interviews have been used in the price assessment. Pricing of other relevant high value diagnostics has also been reviewed as part of the price assessment. Based on this and the potential for Mangoral to provide overall cost savings to the health care system, the estimated cost per dose of Mangoral is USD 1,500 – 3,000.
Combining the patient population, number of scans and pricing, Ascelia Pharma estimates an addressable annual market size for Mangoral to be USD 350–500 million.
Overview of Mangoral's addressable market
280,000 patients having risk of cancer in the liver and poor kidney function
Mangoral useful for diagnosis, monitoring and surveillance
USD 1,500 - USD 3,000 per dose of Mangoral based on Value-based-pricing
USD 350-500 million annual addressable market for Mangoral
| Only liver MRI contrast agent for patients with poor kidney function or acute kidney failure2 (~280.000 patients in major markets) |
~280.000 |
|---|---|
| Improved visualisation of focal liver lesions (incl. metastases) compared to unenhanced MRI. (+33% more lesions in phase 1&2 studies) |
+33% |
| Early detection of focal lesions and metastases allows early intervention and higher survival rate (94% of clinicians confirm3) |
94% |
1Source: Market research by Back Bay Life Science Advisors with interview of 84 radiologists across the US regarding clinical practices in liver MRI scanning, the use of gadolinium and mangoral product profile. Notes: 1) Survey answers to question: 'What is your overall opinion of this product for its target population of patients with known or suspected liver metastases and severe renal insufficiency or acute kidney injury?' 2) Based on regulatory drug class warning on use of gadolinium-based contract agents in patients with renal impairment (an eGFR <30 ml/min/1.73 m2) or acute kidney failure. 3) Survey answers to 'Using contrast MRI is important for early intervention, to detect small lesions, which if removed can be curative e.g. colorectal cancer metastases?'
MANGORAL
(TIMELINE BELOW CAN BE ALTERED IN A PROLONGED CORONA SITUATION)
Phase 2 ready tablet chemotherapy for gastric cancer
Gastric cancer is a disease in which cancer cells form in the lining of the stomach. Almost all gastric cancers are adenocarcinomas (i.e. a cancer that begins in glandular tissue) and some gastric cancers over-express the molecule HER2. Gastric cancer is often in an advanced stage when it is diagnosed. At this stage it can often be treated, but rarely cured
Gastric cancer is serious disease. In fact, is the third most deadly cancer form and the five-year survival rate is only 20%. While gastric cancer is considered an orphan indication by the FDA and EMA, it has an addressable global market of USD 2 billion which is expected to surpass USD 4 billion in 2022.
Chemotherapy is the backbone treatment. The current backbone of first-line treatment of advanced gastric cancer is chemotherapy, either as double or triple combinations. Chemotherapeutic drugs (cytotoxics) stop the growth of cancer cells, either by killing the cells or by stopping them from dividing.
Irinotecan is an established and effective chemotherapy. There are a number of chemotherapeutic drugs on the market and one well-established and effective molecule is irinotecan. Irinotecan has a proven anti-tumour effect and is approved for combination use in a number of solid cancer indications. In the United States and Europe, irinotecan is currently mainly used for treating metastasised colorectal cancer. Although irinotecan is currently not approved for treating gastric cancer in the United States and in the EU, there is off-label use and included in recognised clinical guidelines (ESMO, ASCO, NCCN) in monotherapeutic or combination treatment regimens for advanced gastric cancer.
Untapped market for oral formulations of irinotecan. Today,
irinotecan is only available intravenously and still not for gastric cancer in Europe and the US. Ascelia Pharma consequently sees a significant an unmet medical need for new treatments that improve the life expectancy and quality of life for patients with advanced gastric cancer. In particular, HER2-negative advanced gastric cancer patients. This is exactly the role that Oncoral attempts to fill.
Oncoral is an oral tablet formulation of irinotecan intended for combination use as a chemotherapeutic treatment of unresectable and metastatic gastric cancer. Irinotecan has already demonstrated safety and efficacy and is currently used intravenously for the treatment of colorectal and pancreatic cancer. Having an oral tablet formulation of irinotecan, Oncoral will provide gastric cancer patients with the opportunity to take part of their chemotherapy at home and at the same time it will save hospital bills
Anti-cancer effect is proven. The active pharmaceutical ingredient (API) in Oncoral is irinotecan, which has an established and proven effect in killing cancer cells. Irinotecan is an antineoplastic agent that after metabolic activation inhibits Topoisomerase 1 and exerts it cytotoxic effect via prevention of DNA replication. Irinotecan is converted by carboxylesterases primarily in the liver to the active metabolite SN-38 which is approximately 100–1,000 more cytotoxic than irinotecan in human and rodent tumour cell lines.
Oncoral can be first oral version of irinotecan. Oncoral is a new proprietary and patented oral gastro-resistant tablet of irinotecan. Oncoral enables a secure and efficient release and absorption of irinotecan from the gastro-intestinal tract after peroral administration with a high conversion rate of irinotecan to the active metabolite SN-38 which has a high anti-tumour activity.
All-oral chemo combination. Oncoral has the potential to be combined with other chemotherapies and targeted cancer drugs and Oncoral enables an all oral combination chemotherapy option with health-economic benefits.
Oncoral has completed an investigator sponsored Phase 1 trial at Herlev Hospital, Denmark. The objectives of the study were to determine safety, tolerability and maximum tolerated dose of Oncoral given as single agent and when administered in combination with the oral chemotherapeutic drug capecitabine. Additional objectives were to describe the pharmacokinetics of Oncoral given as single agent, and to determine any objective tumour response or stable disease. Twenty-five patients were enrolled in the part of the study with Oncoral given as single agent and 12 additional patient were enrolled in the second part of the study where Oncoral was given in combination with capecitabine
ONCORAL
With promising Phase 1 results, we are now planning for Oncoral's Phase 2 program. The clinical development strategy for Oncoral is to obtain Phase 2 data and then to partner for the further development to market. The plan is to design and conduct a Phase 2 study on Oncoral in combination with capecitabine and a selected targeted anti-cancer agent, in irinotecan naive, HER2 negative patients with unresectable or metastatic gastric cancer. Preliminary plans for the Phase 2 study involve a dose-escalation part with Oncoral, capecitabine and the selected targeted agent in order to determine safety and tolerability and define doses for the extension part of the Phase 2 study. The extension part of the study aims at establishing proof of clinical concept based on relevant safety and efficacy parameters.
Planning for Phase II is ongoing with preparatory work including clinical strategy, study design and protocol. Phase II is expected to start in 2021 and be completed in 2023 (Oncoral's Phase II study will, however, require that Ascelia Pharma obtains additional financing).
Ascelia Pharma was listed on Nasdaq Stockholm Small-cap on 13 March 2019, under the ticker ACE. Through the IPO, Ascelia Pharma raised gross proceeds of SEK 200 million plus SEK 22 million through the overallotment option. At 31 December 2019, Ascelia Pharma had 23,488,908 registered ordinary shares, corresponding to 23,488,908 votes. Each share in Ascelia Pharma provides an equal participation in the company's capital and earnings.
The IPO in 2019 provided Ascelia Pharma with capital for the Phase 3 program for the lead drug candidate Mangoral. Proceeds from the IPO will also be used for commercial planning for Mangoral and preparations for Oncoral's Phase 2 study.
In the current fiscal year from 1 July to 31 December 2019, Ascelia Pharma's share price increased by 19% from 19.80 SEK to 23.60 SEK per share. In the corresponding period, Nasdaq Stockholm increased by 10%. The market value of Ascelia Pharma at 31 December 2019 was SEK 554 million.
The five largest shareholders as of 31 December 2019 had a total of 50% of the capital and votes.
Ascelia Pharma publishes four interim reports and an annual report. The reports are available to read and download from the website of Ascelia Pharma, www.ascelia.com.
The AGM of Ascelia Pharma AB (publ) will be held on 6th of May 2020 in Malmö, Sweden
Ascelia Pharma was in February 2020 awarded the price for best Life Science company in Malmö at the city's prestigious annual corporate awards (Malmö Näringslivsgala). The award follows Ascelia Pharma's work on developing novel drug candidates that fill a unmet medical need. (CFO Kristian Borbos and CEO Magnus Corfitzen seen on the picture receiving the award)
Ascelia Pharma is covered by Analysguiden, Redeye and Vator Securities
| 10 LARGEST SHAREHOLDERS | No. of shares | % of capital | % of votes |
|---|---|---|---|
| Sunstone Life Science Ventures Fund II K/S | 4,497,699 | 19.1% | 19.1% |
| CMC SPV of 3 April 2017 | 2,937,606 | 12.5% | 12.5% |
| Öresund-Healthcare Capital K/S | 2,020,490 | 8.6% | 8.6% |
| Alto invest | 1,175,184 | 5.0% | 5.0% |
| Handelsbanken Småbolagsfond | 1,050,000 | 4.5% | 4.5% |
| Fourth Swedish National Pension Fund (AP4) | 986,841 | 4.2% | 4.2% |
| Styrelsen for Institutioner og Uddannelsesstøtte (SIU) | 512,014 | 2.2% | 2.2% |
| Spogard Holding ApS | 454,388 | 1.9% | 1.9% |
| Helida Invest APS | 384,501 | 1.6% | 1.6% |
| Alvina Invest ApS | 288,377 | 1.2% | 1.2% |
| Other shareholders | 9,191,808 | 39.1% | 39.1% |
| TOTAL | 23,488,908 | 100% | 100% |
Share development during the financial year (1 Jul-31 Dec 2019)
The board and the CEO of Ascelia Pharma AB (publ), (Ascelia Pharma), based in Malmö, Sweden corporate ID no. 556571-8797 hereby submit the annual report and consolidated financial statements for the fiscal year 2019-07-01 – 2019-12-31 for the Group and the Parent company.
Ascelia Pharma (publ) is listed on Nasdaq Stockholm. The largest shareholders per 31 December 2019 were Sunstone Life Science Ventures Fund II K/S with 4,497,699 shares (19.1% of total) followed by CMC SPV of 3 April 2017 AB with 2,937,606 shares (12.5% of total) and Øresund Healthcare Capital K/S with 2,020,490 shares (8.6% of total). Sunstone Life Science Ventures Fund II K/S and Øresund Healthcare Capital K/S also own 13% and 5% respectively, of the shares in CMC SPV of 3 April 2017 AB.
Ascelia Pharma is an oncology-dedicated orphan drug development company located in Malmö, Sweden, focused on the development of novel drugs with an established mode of action. Ascelia Pharma's strategy is to develop and make available to patients a portfolio of differentiated and de-risked drug candidates addressing unmet medical needs with potential for orphan drug designation in cancer and cancer-related diseases.
Ascelia Pharma currently has two clinical stage drug candidates under development. Ascelia Pharma's lead candidate, Mangoral, in Phase 3 of clinical studies, is a contrast agent to facilitate the visualisation of focal liver lesions in patients with known or suspected focal liver lesions and severe renal insufficiency (impaired kidney function). The second candidate, Oncoral, is a Phase 2-ready novel tablet formulation of the well-known chemotherapeutic agent irinotecan. Mangoral has received orphan drug designation by the FDA and Oncoral targets gastric cancer which is considered an orphan drug indication by the FDA and EMA.
| October 2019 | Dorthe da Graça Thrige resigned as Chief Operating Officer |
|---|---|
| December 2019 | Appointment of Julie Waras Borgren as Chief Commercial Officer |
| December 2019 | Four sites opened in December for patient enrollment in Mangoral's pivotal |
| Phase 3 study |
| Financials key ratios for the Group | |||
|---|---|---|---|
| SEK in thousands | Jul-Dec 2019 | Jul 2018-Jun 2019 | Jul 2017-Jun2018 |
| Net sales | - | - | - |
| Operating results | -36,821 | -37,392 | -24,713 |
| Net results | -39,905 | -37,134 | -24,392 |
| Earnings per share (SEK) | -1.70 | -2.16 | -2.12 |
| R&D costs/operating costs (%) | 73% | 61% | 36% |
| Cash flow from operations | -36,918 | -30,333 | -20,958 |
| Equity | 237,062 | 276,075 | 111,730 |
| Liquid assets incl. marketable securities | 184,227 | 225,048 | 55,063 |
At the Annual General Meeting on 14 November 2019, a resolution was passed to change Ascelia Pharma Group's fiscal year to comprise the period 1 January – 31 December instead of the period 1 July – 30 June. It was also decided to shorten the current fiscal year to the period 1 July 2019 – 31 December 2019. Consequently, the interim report for January 2020 – March 2020 will be the Q1 interim report.
The Group's net sales in Jul–Dec 2019 amounted to SEK 0 (SEK 0). Ascelia Pharma does not expect to recognise revenue before products have been launched on the market (sales launch expeted in 2022). Other operating income totalled SEK 277 thousand (SEK 46 thousand).
R&D costs for the Group in Jul-Dec 2019 were SEK 26.9 million (SEK 6.4 million). The cost increase of SEK 20.6 million underlines an overall higher activity level in Ascelia Pharma in the current quarter vis-à-vis corresponding quarter last year. This was especially pertinent for Mangoral's Phase III clinical study including preparing and opening of clinical study sites, manufacturing preparations and regulatory work.
Administration costs for the Group in Jul-Dec 2019 amounted to SEK 8.4 million (SEK 4.8 million). The increase in adminstration costs y/y of SEK 3.6 million mainly reflects higher ongoing costs as a listed company (IR, media, travel).
Operating results in Jul-Dec 2019 amounted to SEK -36.8 million (SEK -11.2 million). The cost increase mainly reflects the overall higher level of R&D activities in the current period.
The Group's net loss in Jul-Dec 2019 amounted to SEK -39.9 million (SEK -11.0 million). The increased net loss mirrors the development in EBIT and corresponds to a loss per share, before and after dilution, of SEK -1.70 (SEK -0.75).
Cash flow from operating activities before changes in working capital in Jul-Dec 2019 amounted to SEK -34.1 million (SEK -11.4 million). The increased outflow primarily reflects the higher level of R&D activities in the current period. Changes in working capital in the current period totalled an outflow of SEK 2.9 million (outflow of SEK 1.6 million). The outflow in Jul-Dec 2019 this year mainly reflects pre-payments to vendors. In total, cash flow from operating activities after changes in working capital amounted to SEK -36.9 million (SEK -13.0 million).
Cash flow from investing activities amounted to SEK 0 (SEK 0). Cash flow from financing activities totalled SEK -60 thousand (SEK 0) and reflects amortization of loan (car leasing).
On the closing date, equity stood at SEK 237.1 million, compared with SEK 101.0 million per 31 December 2018. The increase since 31 December 2018 reflects the issuance of new shares in connection with the IPO in spring 2019. Liquid assets including marketable securities on the closing date amounted to SEK 184.2 million compared with SEK 42.1 million as of 31 December 2018. The increase in liquid assets since 31 December 2018 reflects proceeds from the issuance of new shares in the IPO.
Ascelia Pharma's activities and markets are exposed to a number for risks and uncertainties which impact, or could impact, the company's business, financial position and result. The risks and uncertainties, which Ascelia Pharma considers to have the largest impact on its results are:
These factors are described in more detail below The Group's overall strategy for risk management is to limit undesirable impact on its result and financial position, to the extent it is possible.
The general demand for pharmaceuticals is affected by various macroeconomic factors and trends, including inflation, deflation, recession, trade barriers, currency fluctuations and changes in the purchasing power of healthcare payers. An economic downturn in the United States, the EU/EEA or other relevant markets, or any other uncertainty regarding the economic development and outlook, could for example put pressure on healthcare payers resulting in a lower willingness to pay for pharmaceutical products.
The COVID-19 outbreak influences many sectors and companies, including the healthcare industry and Ascelia Pharma. For most biotech companies in clinical development, the main operational impact is potential delays in clinical trials as sites reduce or stop of patient enrollment. Patients could also be hesitant to visit clinical sites for the tests. In addition to the operational impact, the funding environment is negatively influenced by COVID-19 pandemic, causing constraints to capital access.
Any negative development in economic, financial or political conditions could have material adverse effects on the company's operation, financial position and earnings.
Ascelia Pharma is solely focused on development of clinical stage drugs that satisfy medical needs within oncology. The company´s ability to successfully develop clinical stage drugs as well as the ability to identify new drug candidates is of great importance for the long term results and ability to generate a return for the shareholders.
Ascelia Pharma's drug candidate Mangoral is currently in Phase 3 studies and Oncoral is being prepared for Phase 2 studies. The continued development of both Mangoral and Oncoral will entail significant costs for Ascelia Pharma also in the future and are subject to several risks including development delays, cost overruns and non satisfactory results from clinical studies. The Group's research and development expenses are related to the development of its product candidates. Ascelia Pharma's research and development expenses for Jul-Dec 2019 amounted to SEK 26.9 million, which corresponds to 73% of the operating costs.
The total costs for completing the development programs of Mangoral and Oncoral is dependent on several factors, including Ascelia Pharma's ability to operate the development program forward according to plan and to obtain necessary approvals from relevant medical authorities. The actual costs can be unevenly distributed over its lifetime and could exceed the estimated costs. It is common that a development program for drugs is affected by delays and cost overruns. Consequently, the inherent risk should be considered high.
Ascelia Pharma operates in the pharmaceutical industry, which is subject to strict laws, rules and regulations. The regulatory framework entails high requirements with respect to e g clinical studies, sales permits, production, marketing, distribution, packaging, labelling, security, efficacy and quality. Ascelia Pharma believes that it will incur significant costs in the future for regulatory compliance, e g through consultancy services within relevant areas. If Ascelia Pharma does not meet the legal obligations it could have a materially negative affect on future revenue and earnings.
Ascelia Pharma plans to strengthen its operations through recruitments, i.a. for developing a commercialisation organisation. The company considers this strategy necessary both for the commercialisation of Mangoral and Oncoral as well as from a negotiation point of view, where a clear strategy for the commercialisation is considered to be an advantage in a negotiation with potential business partners. There is no guarantee that Ascelia Pharma will find suitable business partners for commercialisation or that the terms for cooperation will be satisfying. If the company chooses to establish an own sales and market division, there is a risk that this division will not be satisfactory or that the work to establish such an operation is more costly and time consuming.
Ascelia Pharma´s operations are dependent on its ability to protect its products and innovations. Thus, it is crucial for the company to maintain patents and other intellectual property rights. Monitoring and maintaining of intellectual property is costly and time consuming and Ascelia Pharma expects such costs to increase in the future if it expands its intellectual property portfolio, e.g. through additional patents or trademarks. If Mangoral obtains market approval, the product candidate could be covered by data protection and market exclusivity in the United States for 7 years, in Japan for 10 years (if orphan drug designation is obtained) and in the EU for 8+2 years alternatively 10+2 years if orphan drug designation is obtained in the region. Ascelia Pharma has also obtained orphan drug designation for Mangoral in the United States, which could mean market exclusivity in the United States if market approval is received.
Oncoral has obtained patent protection in the US and Europe and Ascelia Pharma believes that the product candidate has potential to obtain both orphan drug designation and data exclusivity in relevant markets. Efforts with regards to applications and managing orphan drug designation and other interactions with medical authorities are costly and time consuming and are expected to continue in the future.
Drug development is in general costly and since Ascelia Pharma has still not reached a stage where revenue is generated, the business is dependent on external capital. There is a risk that future financing cannot be obtained or only at unattractive terms, which could have a material adverse effect on the company's operations, financial position and earnings. Ascelia Pharma is proactively working to ensure sufficient funds for its drug development programs. This was underlined by the completed IPO in spring 2019 where gross proceeds of SEK 222 million were raised.
Ascelia Pharma is headquartered in Sweden and the presentation currency in the company´s accounting is Swedish crowns (SEK). The company has costs related to its operations in foreign currencies, mainly in EUR, and USD. Fluctuations in these currencies against SEK can affect the company's financial position and result negatively. With the current non-revenue state of the company with no matching incoming funds in EUR and USD, an appreciation of these costs towards SEK would mean increased costs to the Group. Currency risks is described further in the Notes of this Annual Report. The Group is through the acquisition of Oncoral Pharma ApS exposed to the conversion risk that emerges from the translation of the subsidiary´s income statement and balance sheet from DKK to SEK. Ascelia Pharma has not used financial derivatives in order to hedge currency risk.
Ascelia Pharma AB is reliant on key individuals in its operational and development activities. The ability to recruit and retain qualified co-workers is of material importance to ensure the level of expertise in the company. The number of full-time employees as of 31 December 2019, incl. Head of IR employed as consultant, amounted to eight (six) for both the Group and the Parent company (average seven employees for Jul-Dec 2019 and five employees for 2018/2019). Furthermore, in addition to the employees, Ascelia Pharma utilises consultants and experts for clinical trials, regulatory affairs, manufacturing, IP rights as well as support functions.
Ascelia Pharma AB (publ) fully owns all the companies in the Group. The equity/assets ratio on the closing date was 96% (96%). Equity amounted to SEK 240.9 million (279.2 million). Liquid assets including marketable securities amounted to SEK 183.1 million (223.8 million). The company had eight employees on the closing date, including Head of IR and communications (through consultancy agreement).
The total number of outstanding shares as of 31 December 2019 was 23,488,908.
Ascelia Pharma works to evolve as a sustainable company. The company has not yet reached a state with revenue generation and consequently the company's products have a very limited impact on the environment. The environmental impact stems from purchasing of products and services, energy consumption and travel. Ascelia Pharma has the ambition to contribute to a sustainable development and improve its environmental impact as far as it is economically viable. Given the
The Board has adopted a set of working procedures, instructions and a number of policies that define the allocation of responsibilities between the Board, the President and CEO, committees appointed by the Board and Group management. The Board has ultimate responsibility for the Group's operations and organisation and ensures that the duties of the President and CEO as well as financial operations are carried out in compliance with established principles. The Board held four minuted meetings during the year (Jul-Dec 2019). From its membership, the Board has appointed an audit committee and a remuneration committee. During the year, the audit committee held three meetings and the remuneration committee held one meeting.
The Board proposes updated guidelines for remuneration to senior management, which is described in the Corporate Governance section in this Annual Report. For information about the guidelines applicable up until the 2020 Annual General Meeting, refer to note 4 in this Annual Report.
The following amounts (SEK) in the Parent Company are at the disposal of the AGM:
| SEK | |
|---|---|
| Share premium reserve | 405,060,843 |
| Retained earnings | -148,533,828 |
| Net income (loss) for the period | -39,076,659 |
| Total | 217,450,356 |
Board of Directors proposes that SEK 217,450,356 is carried forward.
Up to now, Ascelia Pharma has not paid any dividends and Ascelia Pharma's intention is to continue to focus on further development and expansion of the company's project portfolio. In accordance with the dividend policy adopted by the Board of Directors, available financial resources and any reported results shall therefore be reinvested in the business to finance the company's long-term strategy. Hence, the Board of Directors' intention is not to propose a dividend to shareholders before the company is able to generate a long-term sustainable profitability and a long-term sustainable positive cash flow. Any future dividends and the size thereof will be determined on the basis of the company's long-term growth, earnings trend and capital requirements, taking into account, at all times applicable, objectives and strategies. Dividends shall, in so far as dividends are proposed, be well-balanced with respect to the company's objectives, scope and risk.
Ascelia Pharma is a Swedish public limited liability company with its registered office in Malmö, Sweden. The company's corporate governance is based on Swedish law and internal rules and instructions. Ascelia Pharma also follows Nasdaq Stockholm's Rule Book for Issuers and apply the Swedish Corporate Governance Code (the "Code"). The Code applies to all Swedish companies with shares listed on a regulated market in Sweden. The Code is based on the so-called "comply or explain" principle. This means that a company that applies the Code may choose to deviate from certain rules of the Code, but must then describe its alternative solution and explain the reason for the deviation in its annual corporate governance report. This corporate governance report has been drawn up in accordance with the rules in the Annual Accounts Act and in the Code.
According to the Swedish Companies Act (2005:551), the general meeting is the company's highest decision-making body. At the general meeting, the shareholders exercise their voting rights in key issues, such as changes to the articles of association, the election of the board of directors and auditors, adoption of the income statement and balance sheet, discharge from liability of the board of directors and the CEO, the appropriation of profit or loss and the principles for the appointment of the nomination committee. The Annual General Meeting (AGM) must be held within six months from the end of the financial year.
In addition to the annual general meeting, extraordinary general meetings may be convened. According to the articles of association, notices convening the general meetings are to be published in the Swedish National Gazette (Sw. Post- och Inrikes Tidningar) and by making the notice available on the company's website. Information regarding the notice shall at the same time be advertised in Svenska Dagbladet. General meetings in Ascelia Pharma are held in Malmö.
To attend and vote at the general meeting, either in person or through a proxy, shareholders must be registered in the share register kept by Euroclear Sweden AB five business days prior to the meeting and also register their participation to the company no later than on the date specified in the notice convening the meeting. This date cannot be a Sunday, other public holiday, Saturday, Midsummer Eve, Christmas Eve or New Year's Eve and not fall earlier than the fifth business day prior to the meeting. Shareholders who wish to have a specified matter brought before the general meeting must submit a written request to the company's board of directors. Such request must normally have been received by the board of directors no later than seven weeks before the general meeting.
At the Annual General Meeting held on 14 November 2019, Peter Benson was re-elected as Chairman of the Board and Niels Mengel, Bo Jesper Hansen, René Spogárd, Helena Wennerström and Hans Maier were re-elected as board members. Furthermore, Öhrlings PricewaterhouseCoopers AB was re-elected as auditor.
The Annual General Meeting resolved on fees to the board of directors and guidelines for remuneration to the CEO and other senior executives. The Annual General Meeting further approved the instructions and rules of procedure for the nomination committee. The Annual General Meeting finally also resolved on an authorization for the board of directors to issue shares and on an share-based incentive program for employees.
The Annual General Meeting (AGM) of Ascelia Pharma AB (publ) will be held on 6 May 2020 in Malmö, Sweden.
At 31 December 2019, the five largest shareholders controlled around 50% of capital and votes. The largest shareholders controlling more than 10% of the capital and votes were Sunstone Life Science Ventures Fund II K/S (19.1%) and CMC SPV of 3 April 2017 AB (12.5%). At 31 December 2019, the number of shares was 23,488,908 and only one class of share and all shares have equal rights to the company's assets and profits. Each share entitles the holder to one vote and there are no limitations as to the number of votes each shareholder can cast at a general meeting.
The duties of the nomination committee include the preparation and drafting of proposals regarding the election of members of the board of directors, the chairman of the board of directors, the chairman of the general meeting and auditors. The nomination committee shall also propose fees for board members and the auditor. The composition of the nomination committee is publicly announced at least six months ahead of the AGM.
At the annual general meeting held on 14 November 2019, it was resolved to adopt instructions and rules of procedure for the nomination committee according to which the nomination committee shall consist of four members representing the three largest shareholders per the end of November, together with the chairman of the board of directors. The three largest shareholders are considered to be the three largest shareholders as registered with Euroclear Sweden AB.
In accordance with the adopted instructions, the nomination committee in front of the 2020 Annual General meeting is comprised of the following persons:
After the general meeting, the board of directors is the highest decision-making body. According to the Swedish Companies Act, the board of directors is responsible for the organisation and management of the company's affairs, which means that the board of directors is responsible for, among other things, establishing targets and strategies, securing procedures and systems for monitoring of set targets, continuously assessing the company's financial position and evaluating the operational management. Furthermore, the board of directors is responsible for ensuring that proper information is given to the company's shareholders, that the company complies with laws and regulations and that the company develops and implements internal policies and ethical guidelines. Moreover, the board of directors is responsible for ensuring that annual reports and interim reports are prepared in a timely matter. The board of directors also appoints the company's CEO.
The members of the board of directors are elected annually at the annual general meeting for the period until the end of the next annual general meeting. According to the Ascelia Pharma's articles of association, the board of directors shall consist of no less than three and no more than eight board members without any deputy board members. The articles of association do not include any separate provisions regarding appointment or dismissal of board members. Currently, the board of directors consists of six ordinary board members elected by the general meeting, who are presented in the section Board of directors, and Executive Management.
According to the Code, the chairman of the board of directors is to be elected by the general meeting. The role of the chairman is to lead the board of directors' work and to ensure that the work is carried out efficiently, and that the board of directors fulfils its obligations.
The board of directors adheres to written rules of procedure which are revised annually and adopted at the constituent board meeting. The rules of procedure regulate, among other things, the practice of the board of directors, tasks, decision-making within the company, the board of directors' meeting agenda, the chairman's duties and allocation of responsibilities between the board of directors and the CEO. Instruction for financial reporting and instructions for the CEO are also adopted in connection with the constituent board meeting. The board of directors' work is also carried out based on an annual briefing plan which fulfils the board of directors' need for information. The chairman and the CEO maintain, alongside the board meetings, an ongoing dialogue on the management of the company.
The board of directors meets according to a pre-determined annual schedule and in addition to the constituent board meeting, at least six ordinary board meetings shall be held between each annual general meeting. In addition to these meetings, extra meetings can be arranged for processing matters which cannot be referred to any of the ordinary meetings.
The board of director's had four meetings in the period Jul-Dec 2019. In addition to decisions concerning external financial reporting, budget and financial forecasts, the board's work during Jul-Dec 2019 have primarily comprised matters related to the preparation of the Phase 3 trial for Mangoral, and planning for Oncoral Phase II trial. The board has evaluated its work to improve the work procedures and enhance efficiency. Conclusions of the work are presented to the nomination committee.
The board of directors has set up two committees: the audit committee and the remuneration committee. The board of directors has adopted rules of procedure for both committees.
Audit Committee
| Independent in relation to Remuneration (half-year), SEK thousand |
Attendance1) | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Board member | Function | The company and its management |
Major shareholders |
Board fees |
Audit Committee |
Remuneration Committee |
Total | Board of Directors |
Audit Committee |
Remuneration Committee |
| Peter Benson | Chairman | Yes | No | 200 | 15 | - | 215 | 4/4 | 3/3 | 1/1 |
| Bo Jesper Hansen | Board member | Yes | Yes | 100 | - | - | 100 | 4/4 | - | 1/1 |
| Hans Maier | Board member | No | No | 100 | - | - | 100 | 4/4 | - | - |
| Niels Mengel | Board member | Yes | No | 100 | 15 | - | 115 | 3/4 | 3/3 | - |
| René Spogárd | Board member | Yes | No | 100 | - | - | 100 | 4/4 | - | 1/1 |
| Helena Wennerström | Board member | Yes | Yes | 100 | 120 | - | 220 | 4/4 | 3/3 | - |
| Total | 700 | 150 | - | 850 |
1) Figures in table show the total number of meetings attended/total number of meetings
The audit committee is comprised of Helena Wennerström (chairman), Peter Benson and Niels Mengel. The audit committee's role is mainly to monitor the company's financial position, to monitor the effectiveness of the company's internal control and risk management, to be informed about the audit of the annual report and consolidated financial statements, and to review and monitor the auditor's impartiality and independence. The audit committee shall also assist the nomination committee in proposals for decisions on the election and remuneration of the auditor. The audit committee had three meetings in the period Jul-Dec 2019.
The remuneration committee is comprised of Bo Jesper Hansen (chairman), Peter Benson and René Spogárd. The remuneration committee's role is primarily to prepare matters regarding remuneration and other terms of employment for the CEO and other senior executives. The remuneration committee shall also monitor and evaluate ongoing and completed programs for variable remuneration to the company's management and to monitor and evaluate the implementation of the guidelines for remuneration to senior executives which the annual general meeting has adopted. The remuneration committee had one meeting in the period Jul-Dec 2019. All board members as well as the executive management members are presented in more detail on pages 37-40.
The role of the CEO is subordinate to the board of directors and the CEO's main task is to carry out the company's ongoing management and the daily activities of the company. The rules of procedure of the board of directors and the instructions for the CEO stipulate which matters the board of directors shall resolve upon, and which matters that fall within the CEO's area of responsibility. Furthermore, the CEO is responsible for preparing reports and necessary information for decision-making prior to board meetings and presents the material at board meetings.
Ascelia Pharma has a management team consisting of five people which in addition to the CEO is comprised of the CFO, the Chief Medical Officer, the Chief Commercial Officer and the Head of IR & Communications. The CEO and the senior executives are presented in the section Board of directors, and Executive Management.
Fees to board members elected by the general meeting are resolved by the annual general meeting. At the annual general meeting held on 14 November 2019, it was resolved in accordance with the proposal from the Nomination Committee that board remuneration for the period until the annual general meeting 2020 (i.e. a 6 month period) shall be paid with SEK 200,000 to the chairman of the board and with SEK 100,000 to each of the other board members who are not employed by the company. The meeting further resolved in accordance with the proposal from the Nomination Committee that remuneration for committee work shall be paid with SEK 50,000 to the chairman of the Audit Committee, and with SEK 12,500 to each of the other members of the Audit Committee. The meeting resolved in accordance with the proposal from the Nomination Committee that an additional remuneration of SEK 70,000 shall be paid to Helena Wennerström as remuneration for her work as chairman of the Audit Committee related to the company's initial public offering for the period since the annual general meeting 2018.
These guidelines comprise the persons who are part of Ascelia Pharma AB's group management, currently the CEO, CFO, CMO, CCO and Head of IR & Communication. The guidelines also encompass any remuneration to members of the board of directors, in addition to board remuneration.
These guidelines are applicable to remuneration agreed, and amendments to remuneration already agreed, after adoption of the guidelines by the annual general meeting 2020. These guidelines do not apply to any remuneration resolved by the general meeting, such as e.g. board remuneration and share-based incentive programs.
A successful implementation of Ascelia Pharma's business strategy and safeguarding of Ascelia Pharma's long-term interests, including its sustainability, require that the company is able to recruit and retain highly competent senior executives with a capacity to achieve set goals. In order to achieve this, Ascelia Pharma must offer a competitive total remuneration on market terms, which these guidelines enable.
Long-term share-based incentive programs have been implemented in Ascelia Pharma. For further information about these programs, see note 4 in this Annual Report. The share-based incentive programs have been approved by the general meeting and are therefore not covered by these guidelines.
The remuneration shall be on market terms and be competitive, and may consist of the following components: fixed salary, variable cash remuneration, pension benefits and other benefits. For the individual senior executive, the level of remuneration shall be based on factors such as competence, area of responsibility and performance. Additionally, the general meeting may – irrespective of these guidelines – resolve on, e.g. share and share price-related remuneration.
For employments governed by rules other than Swedish, pension benefits and other benefits may be duly adjusted for compliance with mandatory rules or established local practice, taking into account, to the extent possible, the overall purpose of these guidelines.
Fixed salary
The CEO and other senior executives shall be offered a fixed annual cash salary. The fixed salary shall as a starting point be determined per calendar year with salary revision on an annual basis.
In addition to fixed salary, the CEO and other senior executives may, according to separate agreements, receive variable cash remuneration. Variable cash remuneration covered by these guidelines is intended to promote Ascelia Pharma's business strategy and long-term interests, including its sustainability.
The satisfaction of criteria for awarding variable cash remuneration shall be measured over a period of one or several years. Variable cash remuneration may, for the CEO, amount to a maximum of 40 percent of the fixed annual salary, and for other senior executives, and a maximum of 20 percent of the fixed annual salary. Variable cash remuneration shall not qualify for pension benefits, save as required by mandatory collective bargaining agreements.
The variable cash remuneration shall be linked to one or several predetermined and measurable criteria, which can be financial, such as revenue targets, EBITDA/EBIT targets and budget adherence, or non-financial, such as clinical trial milestones and manufacturing milestones. By linking the goals in a clear and measurable way to the remuneration of the senior executives to Ascelia Pharma's financial and operational development, they contribute to the implementation of the company's business strategy, long-term interests and sustainability.
To which extent the criteria for awarding variable cash remuneration has been satisfied shall be evaluated and determined when the measurement period has ended. The Remuneration Committee is responsible for the evaluation. For financial objectives, the evaluation shall be based on the latest financial information made public by the company.
The board of directors shall have the possibility to, in whole or in part, reclaim variable cash remuneration paid on incorrect grounds.
Additional variable cash remuneration may be awarded in extraordinary circumstances, provided that such extraordinary arrangements are only made on an individual basis, either for the purpose of recruiting or retaining senior executives, or as remuneration for extraordinary performance beyond the individual's ordinary tasks. Such remuneration may not exceed an amount corresponding to 30 percent of the fixed annual salary and may not be paid more than once each year per individual. Any resolution on such remuneration shall be made by the board of directors based on a proposal from the Remuneration Committee.
Pension benefits, including health insurance, shall be defined contribution, insofar as the senior executive is not covered by defined benefit pension under mandatory collective bar-gaining agreements. Pension premiums for defined contribution pensions may amount to a maximum of 30 percent of the fixed annual salary.
Other benefits may include life insurance, medical insurance and a company car. Premiums and other costs relating to such benefits may amount to a total of not more than 20 percent of the fixed annual salary.
Senior executives shall be employed until further notice or for a specified period of time. Upon termination of an employment by Ascelia Pharma, the notice period may not exceed 12 months. Fixed salary and other remuneration during the notice period and severance pay may not together exceed an amount corresponding to the fixed annual salary for 18 months. Upon termination by the senior executive, the notice period may not exceed six months, without any right to severance pay.
In addition to fixed salary during the period of notice and severance pay, additional remuneration may be paid for non-compete undertakings. Such remuneration shall compensate for loss of income and shall only be paid in so far as the previously employed senior executive is not entitled to severance pay for the period for which the non-compete undertaking applies. The remuneration shall be based on the fixed annual salary at the time of termination of employment and amount to not more than 60 percent of the fixed annual salary at the time of termination of employment, save as otherwise provided by mandatory collective bargaining agreements, and shall be paid during the time as the non-compete under-taking applies, however not for more than 12 months following termination of employment.
In the preparation of the board of directors' proposal for these remuneration guidelines, salary and employment conditions for employees of Ascelia Pharma have been taken into consideration by including information on the employees' total income, the components of the remuneration and increase and growth rate over time, in the Remuneration Committee's and the board of directors' basis of decision when evaluating whether the guidelines and the limitations set out herein are reasonable.
To the extent a member of the board of directors renders services for the company, in addition to his or her assignment as a member of the board of directors, an additional consultancy fee on market terms may be paid to the member of the board of directors, or to a company controlled by such member of the board of directors, provided that such services contribute to the implementation of Ascelia Pharma's business strategy and the safeguarding of Ascelia Pharma's long-term interests, including its sustainability.
The board of directors has established a Remuneration Committee. The Remuneration Committee's duties include i.a. preparing the board of directors' resolution to propose guidelines for remuneration to senior executives. The board of directors shall prepare a proposal for new guidelines at least every fourth year and submit it to the general meeting. The guidelines shall be in force until new guidelines have been adopted by the general meeting. The Remuneration Committee shall also monitor and evaluate programs for variable remuneration for the senior executives as well as the current remuneration structures and compensation levels in the company. The members of the Remuneration Committee are independent in relation to the company and its senior management. The CEO and other members of the senior management do not participate in the board of directors' processing of and resolutions regarding remuneration-related matters in so far as they are affected by such matters.
The board of directors may temporarily resolve to deviate from these guidelines, in whole or in part, if in a specific case there is special cause for the deviation and a deviation is necessary to serve the company's long-term interests, including its sustainability, or to ensure the company's financial viability. As set out above, the Remuneration Committee's tasks include preparing the board of directors' resolutions in remuneration-related matters, which include any resolutions to deviate from these guidelines.
Apart from the commitments to pay ongoing remuneration such as salary, pension and other benefits, there are no previously resolved remuneration to any senior executives that have not yet fallen due. For further information on remuneration to senior executives including share-based incentive programmes, please see note 4 in this annual report.
At the annual general meeting held on 14 November 2019, it was resolved to authorise the board of directors to, at one or several occasions, during the time up until the next annual general meeting, with or without deviation from the shareholders' preferential rights, and with or without provisions regarding payment in kind or through set-off or other provisions, resolve to issue shares. The reason for that deviation from the shareholders' preferential rights shall be permitted is to enable Ascelia Pharma to raise working capital, to execute acquisitions of companies or operating assets as well as to enable new share issues to industrial partners within the framework of partnerships and alliances. The total number of shares that can be issued could not exceed 5,872,227, which corresponds to a dilution of approximately 20 percent calculated on the current number of outstanding shares in Ascelia Pharma. To the extent a new share issue is made with deviation from the shareholders' preferential rights, the new issue should be made on market terms.
The overall purpose of the internal control is to ensure that the Ascelia Pharma's strategies and objectives can be implemented within the business and to ensure that the financial reporting has been prepared in accordance with applicable laws, accounting standards and other requirements imposed on listed companies. The board of directors' reswponsibility for the internal control is governed by the Swedish Companies Act, the Swedish Annual Reports' Act and the Code.
In the rules of procedure for the board of directors, the instructions for the CEO and the instructions for financial reporting, all of which have been adopted by the board of directors, the allocation of the roles and responsibilities have been stated to contribute to an effective management of the company's risks.
The board of directors has also established an audit committee whose tasks mainly include to monitor the effectiveness of the company's internal control, internal audit and risk management, to be informed about the audit of the annual report and consolidated financial statements, and to review and monitor the auditor's impartiality and independence. In addition to the abovementioned controls, the Ascelia Pharma has standard operating procedures that govern the control and quality of its drug development (including requirement to its partners participating in drug development).
With regards to risk assessments, these are carried out in connection with strategic planning and forecasting work and specific risk sessions are held to identify and quantify as well as evaluate and decide how the identified risks can be managed and, if possible, be eliminated. The presentation of the identified risks shall, as a minimum, be submitted to the board of directors once per year. Within the board of directors, the Audit Committee is responsible for continuously assessing the company's risks.
The board of directors bears the overall responsibility for internal control over financial reporting. To create and maintain a functioning control environment, the board of directors has adopted a number of policies governing financial reporting. These mainly comprise the rules of procedure for the board of directors, the instructions for the CEO and the instructions for financial reporting. The board of directors has also adopted a special set of signatory rules and a financial policy. Ascelia Pharma also has a manual containing principles, guidelines and process specifications for accounting and financial reporting.
The audit committee within the board of directors ensures that the approved principles for financial reporting and internal control are complied with and that regular contact with the company's auditor is maintained. The responsibility for maintaining an effective control environment and for the day-to-day work on internal control over financial reporting rests with the CEO with assistance from the CFO. The CEO and CFO reports to the board of directors on a regular basis in accordance with the instruction to the CEO and the terms of reference for financial reporting. The board of directors also receives reports from the company's auditor. Based on Ascelia Pharma's current size and operations, the board of directors has decided not to set up a separate internal audit function.
Ascelia Pharma's management has regular discussions to identify and evaluate the risks arising in the company's operations and to assess how these risks can be managed. Once a year, these risks are presented to the board of directors in a risk session accompanied by a risk assessment memo, which include a heat map quantifying the impact and likelihood of identified risks. The risk assessment work also includes identification of risks that may impact the basic requirements for the financial reporting of the company. The risk assessment results in a number of control targets supporting the basic requirements for financial reporting. These control targets aim to ensure that Ascelia Pharma meets its objectives for financial reporting. The financial reporting shall be correct and complete, and meet all applicable laws, rules and recommendations, provide a fair description of the company's business and support a rational and informed valuation of the business. In addition to these three objectives, internal financial reporting shall support proper business decision-making at all levels.
Control activities limit the identified risks and ensure correct and reliable financial reporting. The CFO plays a key role in analysing and following up the Group's financial reporting and results. There are functions for the analysis and follow-up of the financial reporting of the Group and subsidiaries. Control activities also comprise a review and follow-up of Ascelia Pharma's governing documents relating to risk management and analysing complex transactions or valuation of assets or liabilities encompassing a significant element of judgement.
The board of directors is responsible for internal control and monitoring of the company's management. This is done primarily by examining the company's steering documents and identified risk factors.
Ascelia Pharma has information and communication channels intended to promote the accuracy of financial reporting and to facilitate reporting and feedback from operations to the board of directors and the management, for example by making corporate governance documents such as internal policies, guidelines and instructions regarding the financial reporting available and known for employees. The board of directors has also adopted an information policy that governs Ascelia harma's provision of information.
The compliance and effectiveness of internal controls are monitored regularly. The CEO ensures that the board of directors receives continuous reports on the development of Ascelia Pharma's activities, including the development of Ascelia Pharma's results and financial position, and information about important events, such as operational events of the drug development and major agreements and contracts. The CEO also reports on these issues at each board meeting. The audit committee supports the board of directors by preparing activities that assure the quality of the company's financial reporting. This is partly achieved by the audit committee checking the financial information and the Ascelia Pharma's financial controls. The Board considers that the internal controls are effective in all material respects and, on back of this, has deemed that there is no need to establish a special internal audit function.
Ascelia Pharma's auditor is appointed by the annual general meeting for the period until the end of the next annual general meeting. The auditor examines the annual report and accounts as well as the management performed by the board of directors and the CEO. Following each financial year, the auditor shall submit an audit report to the annual general meeting. The company's auditor reports its observations from the audit and its assessment of the company's internal control to the board of directors.
At the Annual General Meeting held on 14 November 2019, Öhrlings PricewaterhouseCoopers AB (PwC) was re-elected as the company's auditor with Carl Fogelberg being the certified public accountant in charge of the audit. PwC audits Ascelia Pharma AB (publ) and all subsidiaries.
At the annual general meeting, it was also resolved that the fees to the auditor should be paid in accordance with normal charging standards and approved invoice. Further information about fees to the auditor can be found in note 6.
Born 1955. Chairman of the board of directors since 2017. Member of Audit Committee and Remuneration Committee
Professional background Peter Benson is Chairman and co-founder of Sunstone Capital Life
Science Ventures and chairman of Alligator Bioscience AB, which is listed on Nasdaq Stockholm. Peter Benson has extensive experience from the Life Science sector as an investor, board member and in senior management positions, including in several listed companies. Peter Benson was vice chairman of Zealand Pharma during its IPO and has previously inter alia been Head of Life Science Ventures at Vækstfonden (the Danish Growth Fund), President of Hospital Care and Senior Vice President at Pharmacia AB as well as Executive Vice President Marketing & Sales at Kabi Pharmacia Parenterals.
Graduate in business administration from Lund University, Sweden. MA in Economics from the University of California, US.
Chairman of Alligator Bioscience AB (publ), Ascelia Incentive AB and Sunstone LSV Partners Holding ApS. Board member Arcoma Aktiebolag, CMC SPV of 3 April 2017 AB and Sunstone Capital A/S (and subsidiaries within the Sunstone Capital A/S sphere).
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Independent in relation to the company and its management, but not in relation to major shareholders. Managing Partner of Sunstone Life Science Venture A/S and board member of CMC SPV of 3 April 2017 AB
Born 1958. Member of the board of directors since 2010. Chairman of Remuneration Committee
Bo Jesper Hansen has extensive experience from orphan drug research
and development, international marketing and business development. Bo Jesper Hansen is and has previously been chairman and member of the board of directors in a number of biotech and pharma companies, including executive chairman of Swedish Orphan Biovitrum AB (publ), Topotarget A/S (publ) and Karolinska Development AB (publ) and chairman of Ablynx nv (publ).
M.D. and Ph.D. from University of Copenhagen, Denmark.
Chairman of Karo Pharma AB, Innoventa Medica ApS, Karo Pharma and Laborie Inc. Board member of Azanta A/S and vice-chairman of Orphazyme ApS.
250,164 shares in Ascelia Pharma AB. Bo Jesper Hansen also holds approximately 4 per cent of the shares in CMC SPV of 3 April 2017 AB that holds 2,937,606 shares in Ascelia Pharma AB.
Independent in relation to the company and its management, and in relation to major shareholders. Shareholder in CMC SPV of 3 April 2017 AB.
Born 1955. Member of the board of directors since 2017.
Hans Maier is Managing Partner and co-founder of the Healthcare
and Life Science Strategy and Transaction Advisor BGM Associates GmbH, Berlin Germany. In his career as a biopharma executive, Hans Maier has held executive positions within Schering AG and Bayer AG, inter alia as Managing Director of Schering's subsidiaries in Japan and Korea, Managing Director of Schering Dermatology, Head of Corporate Strategy and Business Development of Schering AG and President of the Global Business Unit Diagnostic Imaging in both Schering AG and Bayer AG. He also served on the Executive Committee of Bayer-Schering Pharma AG.
Ph.D.in Economics and Diploma in Political Science from Freie Universität Berlin, Germany.
President of the Board of Trustees of the German Heart Center Berlin, Chairman of the Advisory Board of the Fraunhofer Mevis Institute for Digital Medicine, Professor of International Strategic Management at Berlin School of Economics and Law.
20,000 shares in Ascelia Pharma AB.
Not independent in relation to the company and its management, but independent in relation to major shareholders.
Born 1948. Member of the board of directors since 2000. Member of Audit Committee
Professional background Niels Mengel is Founding Partner, board member and CEO of Øresund-Healthcare Capital. Niels
Mengel has extensive experience from the healthcare industry as an investor. Niels Mengel has previously inter alia been Executive Vice President at ISS World Services A/S and Director at PA Consulting Group.
M.B.A. from London Business School, England. M.Sc. in Macro Economy and Finance from University of Copenhagen, Denmark.
Board member of Dansk Aktionærforening. Board member of Better Finance (The European Federation of Investors and Financial Services Users), Black Swan Strategy A/S and Upstream Invest A/S. Board member and managing partner of Øresund-Healthcare Management A/S. Limited partner of Øresund-Healthcare Capital K/S. Partner of ØHM Exit I I/S and ØHM Exit II I/S. Member of management (executive) in Kibegeon ApS.
15,300 shares in Ascelia Pharma AB. Niels Mengel, has also directly and indirectly, invested in Øresund-Healthcare Capital K/S that holds (i) 2,020,490 shares in Ascelia Pharma AB and (ii) approximately 5 per cent of the shares in CMC SPV of 3 April 2017 AB that holds 2,937,606 shares in Ascelia Pharma AB. Through the agreements governing Niels Mengel's investments in Øresund-Healthcare Capital K/S, Niels Mengel has a financial interest corresponding to (a) approximately 50 per cent of the shares in Ascelia Pharma AB held by Øresund-Healthcare Capital K/S and (b) 100 per cent of the shares in CMC SPV of 3 April 2017 AB held by Øresund-Healthcare Capital K/S.
Independent in relation to the company and management, but not in relation to major shareholders. Founding partner of Øresund-Healthcare Capital K/S.
Born 1954. Member of the board of directors since 2017. Member of Remuneration Committee
René Spogárd is chairman and investor in a number of companies incl. JEKA Fish A/S, Bollerup Jensen A/S
and Flex Funding A/S. René Spogárd has extensive experience from investing in the healthcare sector and board positions in a public environment. René Spogárd has previously inter alia been owner and Managing Director at TNS Gallup A/S and Director at TNS plc (listed on London Stock Exchange).
H.D. in Marketing from Copenhagen Business School, Denmark.
Chairman of Ambrox Property Invest III A/S, Bollerup Jensen A/S, Bollerup Jensen Adhesives ApS, Bollerup Jensen Water Holding ApS, CMC SPV of 3 April 2017 AB, Cimbric A/S, Deltaq Portefølje Holding 104 ApS, Deltaq Portefølje Holding II ApS, Deltaq Portefølje Holding IV ApS, Deltaq Portefølje Holding VI ApS, Flex Funding A/S, Jeka Fish A/S, Jeka Fish Holding ApS, Jeka Fish Holding 2 ApS, Jysk Industri Holding A/S and Preservation Technologies I/S. Deputy chairman of Nordisk Krabbe Kompagni A/S. Board member of Ambrox Capital A/S, Ambrox Korsør A/S, Bollerup Jensen Adhesives Holding ApS, Bollerup Jensen Water ApS, Bollerup Jensen Wood ApS and Flex Funding Fintech ApS. Member of management (executive) and partner of Dadephi ApS, René Spogárds familieanpartsselskab, Spogárd Holding ApS, Spogárd Invest ApS and Spogárd Invest 3 ApS.
454,418 shares in Ascelia Pharma AB indirectly through company. René Spogárd also indirectly holds approximately 24 per cent of the shares in CMC SPV of 3 April 2017 AB that holds 2,937,606 shares in Ascelia Pharma AB.
Independent in relation to the company and its management, but not in relation to major shareholders. Shareholder in and chairman of the board of directors of CMC SPV of 3 April 2017 AB.
Born 1965. Member of the board of directors since 2017. Chairman of Audit Committee
Helena Wennerström has been Executive Vice President of Bulten AB (publ) since 2014 and has been
its Chief Financial Officer since 2006. Helena Wennerström's work within Bulten AB also includes the Investor Relations and Communications activities and IT. Helena Wennerström has earlier served finance roles at Digitalfabriken and Topcon.
Master of Science in Business Administration and Economics from Örebro University.
Chairman of Bulten Fasteners AB. Board member of Bulten Fasteners Tianjin Co. LTD, Bulten Hallstahammar AB, Bulten North America LLC, Bulten Polska S.A., Bulten Sweden AB, Bulten Fasteners (China) Co Ltd., and BBB Services Ltd. Deputy board member of Bulten Industrifastighet AB, Finnveden Micro Fasteners AB and Finnveden Trading Aktiebolag. Deputy Managing Director of Bulten AB.
8,000 shares in Ascelia Pharma AB.
Independent in relation to the company and its management, and in relation to major shareholders.
Magnus Corfitzen
Born 1975. Chief Executive Officer since 2014.
Magnus Corfitzen has extensive experience from investing, building and growing Life Science companies in various roles including operational activities or investment respon-
sibilities for public and private biotech and medtech companies. Magnus Corfitzen also has board experience from a number of Life Science companies. Magnus Corfitzen has previously inter alia been Investment Director at Sunstone Capital A/S and Investment Director at Vækstfonden (the Danish Growth Fund). Prior to entering the healthcare venture capital field he was a Portfolio Manager at Danske Capital with responsibility for investments into listed biotech and medtech companies and he started his career at McKinsey & Company.
M.Sc. in Mathematical Economics from the University of Aarhus, Denmark, which included studies at Harvard University, US.
Board member of Ascelia Inventive AB. CEO of Oncoral Pharma ApS.
51,680 shares and 458,856 employee stock options in Ascelia Pharma AB. Magnus Corfitzen also holds approximately 2 per cent of the shares in CMC SPV of 3 April 2017 AB that holds 2,937,606 shares in Ascelia Pharma AB.
Born 1963. Chief Medical Officer since 2018.
Carl Bjartmar has a long and solid track record in late-stage orphan drug development. He has previously served in senior roles at large international pharma companies such
as Lundbeck, Sanofi and Genzyme, where he gained extensive experience in clinical development, in particular the development of novel therapies for rare diseases. Carl was most recently before joining Ascelia, Chief Medical Officer for the Swedish biotech company Wilson Therapeutics.
Education
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M.D. and Ph.D. from the University of Linköping.
Holdings in Ascelia
35,000 shares and 153,059 employee stock options in Ascelia Pharma AB.
Kristian Borbos
Born 1978. Chief Financial Officer since 2017.
Kristian Borbos has extensive banking and finance experience from large listed companies as Sell-side Analyst and other advisory roles in banking to various financial positions
in large corporates including treasury, financial reporting and planning and IR activities. Kristian Borbos has previously inter alia been Business Finance Manager at Novozymes, Lead Investor Relations Manager at DONG Energy and senior analyst at Danske Bank and Danske Markets.
M.Sc. in Business Administration from Lund University, Sweden.
Deputy board member of Ascelia Incentive AB.
12,530 shares and 153,059 employee stock options in Ascelia Pharma AB.
Julie Waras Brogren
Born 1972. Chief Commercial Officer since 2020.
Julie Waras Brogren has extensive experience from life science leadership and commercialization, including cross-functional drug launches and medical devices. Julie
Waras Brogren was previously President of BresoTEC, Canada and has held various leadership positions at Novo Nordisk in Denmark and Brazil, including as Senior Director of the Launch Office for the Victoza® GLP-a and Degludec® insulin launches. Julie Waras Brogren also has board experience from life science companies. Julie Waras Brogren started her career at Accenture.
M.Sc. in International Business from Copenhagen Business School and Diplome ESC, EM Lyon France, including studies at Chinese University of Hong Kong.
Board member of Particle3D.
7,700 shares.
Born 1958. Head of IR & Communication since 2018.
Mikael Widell has more than 30 years' experience within communications, including journalism with 14 years within financial media, e.g. Dagens Industri, and has had diffe-
rent positions within in-house corporate communications, e.g. AstraZeneca, Biovitrum (Sobi) and Nordic Capital as well as strategic work as a communications advisor within financial PR and IR. Mikael is a partner and co-founder of the IR/PR firm Cord Communications and is Head of Communication & IR at the main market listed company Calliditas Therapeutics.
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M.A. in English from Lund University and studies in Economics at Lund University.
Board member of CordCom Consultants AB. General partner of WZ Kommunikation Kommanditbolag.
Holdings in Ascelia Pharma
| CONSOLIDATED INCOME STATEMENT | 42 |
|---|---|
| CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME | 42 |
| CONSOLIDATED BALANCE SHEET | 43 |
| CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY | 44 |
| CONSOLIDATED CASH FLOW STATEMENT | 45 |
| PARENT COMPANY – INCOME STATEMENT | 46 |
| PARENT COMPANY – STATEMENT OF COMPREHENSIVE INCOME | 46 |
| PARENT COMPANY – STATEMENTS OF CHANGES IN EQUITY | 48 |
| PARENT COMPANY – CASH FLOW STATEMENT | 49 |
| NOTES | 50 |
| DECLARATION AND SIGNATURES | 68 |
| AUDITOR'S REPORT | 69 |
| GLOSSARY | 72 |
| ALTERNATIVE PERFORMANCE MEASURES | 73 |
| SEK in thousand (unless otherwise stated)* | Note | Jul-Dec 2019 | Jul 2018-Jun 2019 |
|---|---|---|---|
| Net sales | – | – | |
| Gross profit/loss | – | – | |
| Other operating income | 277 | 203 | |
| Administrative costs | 4-6 | -8,378 | -14,406 |
| Research and development costs | 4-5 | -26,920 | -22,923 |
| Other operating costs incl. commercial preparations | 5 | -1,801 | -265 |
| Operating result | -36,821 | -37,392 | |
| Financial income | 7 | 1,507 | 76 |
| Financial costs | 7 | -4,680 | -236 |
| Net financial items | -3,174 | -160 | |
| Loss before tax | -39,995 | -37,552 | |
| Tax | 8 | 90 | 417 |
| Loss for the period | -39,905 | -37,134 | |
| Attributable to: | |||
| Owners of the Parent Company | -39,905 | -37,134 | |
| Non-controlling interest | – | – | |
| Earnings per share | 9 | ||
| Before and after dilution (SEK) | -1.70 | -2.16 |
| SEK in thousand* Note |
Jul-Dec 2019 | Jul 2018-Jun 2019 |
|---|---|---|
| Loss for the period | -39,905 | -37,134 |
| Other comprehensive income | ||
| Currency translation of subsidiaries** | 55 | 15 |
| Other comprehensive income for the period | 55 | 15 |
| Total comprehensive income for the period | -39,850 | -37,119 |
* Some figures are rounded, so amounts might not always appear to match when added up.
** Will be classified to profit and loss when specific conditions are met
| 31 Dec | 30 Jun | ||
|---|---|---|---|
| SEK in thousand* | Note | 2019 | 2019 |
| ASSETS | |||
| Intangible assets | 10 | 57,065 | 57,067 |
| Tangible assets | 11 | 212 | 275 |
| Financial investments | – | – | |
| Total non-current assets | 57,277 | 57,342 | |
| Income tax receivables | 736 | 765 | |
| Prepaid expenses and accrued income | 13 | 7,300 | 3,358 |
| Other receivables | 12 | 686 | 906 |
| Marketable securities | 15 | 75,711 | 75,076 |
| Cash and cash equivalents | 14 | 108,516 | 149,972 |
| Total current assets | 192,949 | 230,078 | |
| Total assets | 250,226 | 287,420 | |
| EQUITY | 16 | ||
| Share capital | 23,489 | 23,489 | |
| Other paid-in capital | 405,061 | 405,061 | |
| Loss brought forward | -191,488 | -152,475 | |
| Equity attributable to Parent Company shareholders | 237,062 | 276,075 | |
| Total equity | 237,062 | 276,075 | |
| LIABILITIES | |||
| Leasing | 20 | 96 | 146 |
| Total long-term liabilities | 96 | 146 | |
| Trade payables | 5,236 | 4,267 | |
| Other liabilities | 17 | 1,138 | 2,140 |
| Accrued expenses and deferred income | 18 | 6,695 | 4,793 |
| Total current liabilities | 13,069 | 11,199 | |
| Total liabilities | 13,164 | 11,345 | |
| Total equity and liabilities | 250,226 | 287,420 |
| SEK in thousand* | Note | Jul-Dec 2019 | Jul 2018-Jun 2019 |
|---|---|---|---|
| Equity at start of the period | 276,075 | 111,730 | |
| Comprehensive income | |||
| Profit/loss for the period | -39,905 | -37,134 | |
| Other comprehensive income | 55 | 15 | |
| Total comprehensive income | -39,850 | -37,119 | |
| Transactions with shareholders | |||
| New share issue with cash contribution | 16 | – | 222,050 |
| Issuance expenses | 16 | – | -21,807 |
| Share based remuneration to employees | 4 | 837 | 1,221 |
| Total transactions with shareholders | 837 | 201,464 | |
| Equity at end of the period | 237,062 | 276,075 |
| SEK in thousand* | Note | Jul-Dec 2019 | Jul 2018-Jun 2019 |
|---|---|---|---|
| Operating activities | |||
| Loss before tax | -39,995 | -37,552 | |
| Expensed share based remuneration | 4 | 1,719 | 2,258 |
| Adjustment for items not included in cash flow | 4,237 | -710 | |
| Income tax paid | – | – | |
| Cash flow from operating activities before changes in working capital | -34,039 | -36,003 | |
| Cash flow from changes in working capital | |||
| Increase (-)/Decrease (+) of operating receivables | -4,796 | -2,205 | |
| Increase (+)/Decrease (-) of trade payables | 902 | 3,813 | |
| Increase (+)/Decrease (-) of other liabilities | 1,015 | 4,062 | |
| Change in working capital | -2,879 | 5,670 | |
| Cash flow used in operating activities | -36,918 | -30,333 | |
| Investing activities | |||
| Investment in marketable securities | 15 | – | 75,000 |
| Cash flow from investing activities | – | 75,000 | |
| Financing activities | |||
| Amortisation of loans (leasing) | -60 | – | |
| Issuance proceeds | 16 | – | 222,050 |
| Issuance costs | 16 | – | -21,807 |
| Cash flow from financing activities | -60 | 200,243 | |
| Cash flow for the period | -36,978 | 94,909 | |
| Cash flow for the period | -36,978 | 94,909 | |
| Cash and cash equivalents at start of period | 149,972 | 55,063 | |
| Exchange rate differences in cash and cash equivalents | -4,477 | – | |
| Cash and cash equivalents at end of period | 14 | 108,516 | 149,972 |
| SEK in thousand* | Note | Jul-Dec 2019 | Jul 2018-Jun 2019 |
|---|---|---|---|
| Net sales | 229 | 194 | |
| Gross profit/loss | 229 | 194 | |
| Administrative costs | 4-6 | -8,309 | -14,162 |
| Research and development costs | 4-5 | -26,464 | -21,045 |
| Other operating income | 271 | 203 | |
| Other operating costs | 5 | -1,789 | -265 |
| Operating result | -36,062 | -35,076 | |
| Net financial items | |||
| Other interest income and similar profit | 7 | 1,663 | 377 |
| Interest costs and similar Profit/loss items | 7 | -4,678 | -311 |
| Loss after financial items | -39,077 | -35,010 | |
| Group contribution | – | -50 | |
| Tax | 8 | – | – |
| Loss for the period | -39,077 | -35,060 |
| SEK in thousand* Note |
Jul-Dec 2019 | Jul 2018-Jun 2019 |
|---|---|---|
| Loss for the period | -39,077 | -35,060 |
| Other comprehensive income | – | – |
| Other comprehensive income for the period | – | – |
| Total comprehensive income for the period | -39,077 | -35,060 |
| 31 Dec | 30 Jun | ||
|---|---|---|---|
| SEK in thousand* | Note | 2019 | 2019 |
| ASSETS | |||
| Non-current assets | |||
| Tangible assets | 11 | 212 | 275 |
| Financial assets | – | ||
| Participations in Group companies | 10 | 58,068 | 58,068 |
| Other securities held as non-current assets | – | – | |
| Other long-term receivables | 12 | 3,352 | 3,395 |
| Total non-current assets | 61,632 | 61,738 | |
| Current assets | |||
| Other receivables | 12 | 1,374 | 1,211 |
| Prepaid expenses and accrued income | 13 | 7,658 | 3,358 |
| Total current receivables | 9,032 | 4,569 | |
| Marketable securities | 15 | 75,711 | 75,076 |
| Cash and bank balances | 14 | 107,434 | 148,743 |
| Total current assets | 192,176 | 228,389 | |
| Total assets | 253,809 | 290,126 | |
| EQUITY | 16 | ||
| Restricted equity | |||
| Share capital | 23,489 | 23,489 | |
| Non-restricted equity | |||
| Share premium reserve | 405,061 | 405,061 | |
| Loss brought forward | -148,534 | -114,311 | |
| Loss for the period | -39,077 | -35,060 | |
| Total equity | 240,939 | 279,179 | |
| LIABILITIES | |||
| Non-current liabilities | |||
| Leasing | 20 | 96 | 146 |
| Total non-current liabilities | 96 | 146 | |
| Current liabilities | |||
| Trade payables | 5,104 | 3,847 | |
| Other liabilities | 17 | 1,163 | 2,140 |
| Accrued expenses and deferred income | 18 | 6,508 | 4,814 |
| Total current liabilities | 12,774 | 10,801 | |
| Total equity and liabilities | 253,809 | 290,126 |
| SEK in thousand* | Note | Jul-Dec 2019 | Jul 2018-Jun 2019 |
|---|---|---|---|
| Equity at start of the period | 279,179 | 112,775 | |
| Comprehensive income | |||
| Profit/loss for the period | -39,077 | -35,060 | |
| Other comprehensive income | – | – | |
| Total comprehensive income | -39,077 | -35,060 | |
| Transactions with shareholders | |||
| New share issue with cash contribution | 16 | – | 222,050 |
| Issuance costs | 16 | – | -21,807 |
| Share based remuneration to employees | 4 | 837 | 1,221 |
| Total transactions with shareholders | 837 | 201,464 | |
| Equity at end of the period | 240,939 | 279,179 |
| SEK in thousand* | Note | Jul-Dec 2019 | Jul 2018-Jun 2019 |
|---|---|---|---|
| Operating activities | |||
| Loss before tax | -39,077 | -35,010 | |
| Expensed share based remuneration | 4 | 1,719 | 2,258 |
| Adjustment for items not included in cash flow | 3,302 | -981 | |
| Income tax paid | – | – | |
| Cash flow from operating activities before changes in working capital | -34,056 | -33,733 | |
| Cash flow from changes in working capital | |||
| Increase (-)/Decrease (+) of operating receivables | -5,100 | -2,511 | |
| Increase (+)/Decrease (-) of trade payables | 1,130 | 3,361 | |
| Increase (+)/Decrease (-) of other liabilities | 565 | 3,997 | |
| Change in working capital | -3,405 | 4,847 | |
| Cash flow used in operating activities | -37,462 | -28,886 | |
| Investing activities | |||
| Intercompany loans | 12 | – | -1,405 |
| Investment in marketable securities | 15 | – | -75,000 |
| Cash flow from investing activities | – | -76,405 | |
| Financing activities | |||
| Amortisation of loans (leasing) | -60 | – | |
| Issuance proceeds | 16 | – | 222,050 |
| Issuance costs | 16 | – | -21,807 |
| Cash flow from financing activities | -60 | 200,243 | |
| Cash flow for the period | -37,522 | 94,952 | |
| Cash flow for the period | -37,522 | 94,952 | |
| Cash and cash equivalents at start of period | 148,743 | 53,792 | |
| Exchange rate differences in cash and cash equivalents | -3,788 | – | |
| Cash and cash equivalents at end of period | 14 | 107,434 | 148,743 |
Ascelia Pharma AB (publ) with corporate identity number 556571-8797 and its subsidiaries (jointly the Group) develop drugs within oncology. The Parent Company conducts operations in the legal form of a limited liability company, with its registered office in Malmö, Sweden. The company's postal address is Hyllie Boulevard 34, SE-215 32 Malmö, Sweden. The company's shares are since 13 March 2019 listed on Nasdaq Stockholm.
At the Annual General Meeting on 14 November 2019, a resolution was passed to change Ascelia Pharma Group's fiscal year to comprise the period 1 January – 31 December instead of the period 1 July – 30 June. It was also decided to shorten the current fiscal year to the period 1 July 2019 – 31 December 2019. Accordingly, the Annual Report, including these notes, for the 1 July – 31 December 2019 fiscal year (six months), will be compared with the last fiscal year which comprised the period 1 July 2018 – 30 June 2019.
This annual report and the consolidated financial statements were approved for publication by the Board on 1 April 2020 and will be presented to the Annual General Meeting of shareholders on 6 May 2020.
The most important accounting policies for the preparation of this year's consolidated financial statements are found below.
The consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) adopted by the EU. In addition, the recommendation RFR 1 Supplementary Accounting Rules for Groups, issued by the Swedish Financial Reporting Board, has been applied. The parent company has applied the same accounting policies as those applied in the consolidated financial statements except as set out below in the section Parent company's accounting principles.
Assets and liabilities are measured at their historical cost.
The parent company's functional currency is Swedish kronor (SEK), which is also the presentation currency of the parent company and the Group. Accordingly, the financial statements are presented in SEK. All amounts, unless otherwise stated, are rounded up to the nearest thousand.
Preparing the financial statements in accordance with IFRS requires that the management team make accounting estimates and judgements as well as assumptions that influence the application of the accounting principles and the carrying amounts of assets, liabilities, revenue, and expenses. Actual outcomes may differ from these estimates and judgements. The estimates and judgements are regularly reviewed. Changes in estimates are reported in the period in which the change is made if the change affects only that period, or in the period in which the change is made and future periods if the change affects both the current and future periods. Judgements made by the management team in the application of IFRS Standards that have a significant impact on the financial statements and estimates may also entail significant adjustments in the financial statements of subsequent years. These are described in further detail in note 25.
As of January 1, 2019, IFRS 16 Leases has replaced previous IFRS standards related to leases, such as IAS 17 Leases and IFRIC 4 Determining Whether an Arrangement Contains a Lease. Ascelia Pharma decided to early implement IFRS 16 rules on leases in the preceding financial year. IFRS 16 mainly affects leases, and the principal effect is that all leases recognised as operating leases are recognised in a manner that resembles the way finance leases are recognised. This means that assets and liabilities are recognised for operating leases with the relevant reporting of depreciation and interest costs. The financial impact on Ascelia Pharma is relatively limited as the operating leasing contracts are few and short at limited amount (only car leasing).
Non-current assets comprise amounts that are expected to be recovered or paid more than 12 months after the balance sheet date, whereas current assets comprise amounts expected to be recovered or paid within 12 months from the balance sheet date. Non-current liabilities comprise amounts that Ascelia Pharma, as per the end of the reporting period, has an unconditional right to decide to pay later than 12 months after the end of the reporting period. If there is no such right at the end of the reporting period or if there is a liability for trading or if a liability is expected to be settled within the normal business cycle – the liability amount is recognised as a current liability.
An operating segment is a part of the Group that conducts business operations from which it generates revenue and incurs expenses and for which independent financial information is available. Furthermore, the Company's chief operating decision maker monitors the earnings of an operating segment in order to evaluate performance and allocate resources to the operating segment. Ascelia Pharma has identified one operating segment, which is the Group in its entirety. This assessment is based on that the Group's chief decision maker, who is the CEO, monitors the Group in its entirety. The financial statements are based on a Group-wide functional organisational and management structure.
Subsidiaries are entities over which Ascelia Pharma AB has a controlling influence. Controlling influence exists if Ascelia Pharma AB has power over the investee, is exposed to or is entitled to variable return from its involvement and can, through its influence over the investment, affect returns. When assessing whether controlling influences exist, potential voting rights are
considered as well as whether there is de facto control.
Subsidiaries are reported in accordance with the acquisition method. Under this method, an acquisition of a subsidiary is treated as a transaction in which the Group indirectly acquires the assets and assumes the liabilities. The purchase price allocation determines the fair value of the acquired identifiable assets and assumed liabilities, as well as any non-controlling interests, on the acquisition date. Transaction fees that arise, with the exception of transaction fees attributable to equity instruments on issue or debt instruments, are recognized directly through the Income Statement. In the event of an acquisition of a subsidiary in which the transferred payment comprises own share, the payment's value in the purchase price allocation is based on the actual share value at the time of the acquisition.
When acquisitions of subsidiaries involve the acquisition of net assets that do not comprise operations, the acquisition cost of each identifiable asset and liability is allocated up based on its fair value at the time of acquisition. Transaction costs are added to the purchase price of the acquired net assets. When the consideration is paid by own shares the acquired assets and liabilities are measured at fair value based on the acquired assets and liabilities at the time of the acquisition, provided that the fair value of the acquired assets and liabilities (in rare cases) cannot be reliably estimated. In the latter case the acquired net assets are measured based on the fair value of the own shares.
Intra-group receivables and liabilities, income or expenses, and unrealized profits or losses that arise from intra-group transactions between companies within the Group are eliminated entirely when preparing the consolidated accounts. Unrealized losses are eliminated in the same way as unrealized profits but only to the extent that there is no impairment requirement.
Transactions in foreign currencies are translated into the functional currency at the exchange rate prevailing at the date of the transaction. The functional currency is the currency of the primary economic environment in which the Company operates. Monetary assets and liabilities denominated in foreign currencies at the
balance sheet date are translated to the functional currency at the exchange rate prevailing at the balance sheet date. Foreign exchange differences arising on translation are recognized in the Income Statement. Non-monetary assets and liabilities measured in terms of historical cost in a foreign currency are translated using the exchange rate prevailing at the date of the transaction. Non-monetary assets and liabilities that are measured at fair value are retranslated to the functional currency at the exchange rate prevailing at the date that the fair value was determined.
The assets and liabilities of foreign operations, including goodwill and other consolidated surplus and deficit values, are translated from the foreign operation's functional currency to the Group's presentation currency, SEK, at the existing exchange rate at the balance sheet date. Income and expenses of foreign operations are translated to SEK using an average rate that is an approximation of the exchange rate prevailing at each individual transaction date.
Translation differences that arise in currency translations of foreign operations are recognized in other comprehensive income and accrued in a separate component in equity – the translation reserve. When control of a foreign operation ceases, the accumulated translation differences attributable to the operation are realized, at which point they are reclassified in equity to profit/loss for the year. In the case of a sale where the controlling interest still exists, a proportional share of the cumulative translation differences is transferred from the translation reserve to non-controlling interests.
As a lessee, the Group has only lease contracts. Costs pertaining to lease contracts are recognized in the Income Statement on a straight-line basis over the period of the lease. Benefits obtained in connection with the signing of a lease are recognized in the Income Statement as a reduction in the leasing fees on a straightline basis over the term of the lease. Variable charges are recognized as an expense in the period that they are incurred.
Financial income consists of interest income on invested funds as well as exchange differences for monetary items. Interest revenues from financial instruments are recognized according to the effective interest method (see below). Dividend income is recognized when the right to receive dividends is established at an annual meeting of shareholders. The profit/loss from the disposal of a financial instrument is recognized once the risks and rewards that are linked to owning the instrument are transferred to the buyer and the Group no longer has control of the instrument. Financial expense consists of interest expense for operating liabilities as well as exchange differences. Exchange gains and exchange losses are offset, and the net amount is recognized. Effective interest is the rate that discounts the estimated future receipts and payments during a financial instrument's expected duration at the financial asset's or liability's recognized net value. The calculation includes all fees that are paid or received by the parties to the contract that are part of the effective interest, transaction expenses, and all premiums and discounts.
Income tax consists of current tax and deferred tax. Income tax is reported in the Income Statement except for when underlying transactions are recognized in other comprehensive income or in equity, in which case the associated tax effect is reported in other comprehensive income or in equity. Current tax is tax that must be paid or received for the current year in application of the tax rates that are enacted or substantially enacted as at the balance sheet date. Current tax also includes adjustment of the current tax attributable to previous periods.
Deferred tax is calculated according to the balance sheet method based on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Temporary differences do not take into account Group-related goodwill or the difference that arose at initial recognition of assets and liabilities that is not a business combination, which at the time of the transaction do not affect the reported or taxable results, such as in connection with asset purchases. In addition, temporary differences attributable to participations in subsidiaries that are not expected to be reversed within the foreseeable future are also not taken into account. The valuation of deferred tax is based on how underlying assets and liabilities are expected to be recovered or settled. Deferred tax is calculated by applying the tax rates and tax rules enacted or substantially enacted as at the balance sheet date. Deferred tax receivable relating to deductible temporary differences and loss carry-forwards are recognized only to the extent that it is probable that they will be utilized. The value of the deferred tax receivable is reduced when it is no longer probable that it can be used. When participating interests in subsidiaries are
acquired – asset purchases – no separate deferred tax is recognized at the time of acquisition; instead the asset is recognized at cost, which corresponds to the fair value of the asset. After the date of the acquisition, deferred tax is recognized only for the change in carrying amount and changes in the amount used for taxation purposes that rise after the time of acquisition.
Financial instruments recognized on the assets side of the balance sheet include cash and cash equivalents, receivables, and other receivables. On the liabilities side, there are trade payables and other liabilities.
A financial asset or a financial liability is recognised in the balance sheet when the company becomes party to the contractual provisions of the instrument. A receivable is recognised when the company has performed and the counterparty has a contractual obligation to pay, even if an invoice has not yet been sent. Accounts receivable are recognised when the invoice has been sent. A liability is included when the counterparty has performed and there is a contractual obligation to pay, even if an invoice has not yet been received.
Accounts payable are recognized when an invoice has been received. A financial asset is derecognised when the rights in the contract are realized or expired, or when control of the contractual rights is lost. The same applies to a portion of a financial asset. A financial liability is derecognized when the obligation in the contract is fulfilled or in some other way expires. The same applies to part of a financial liability.
IFRS 9 involves how financial assets are classified and measured and introduces an impairment model based on expected credit losses instead of actual losses and changes in principles for hedge accounting for the purpose, among other things, of simplifying and increasing concordance with a company's internal risk management strategies. Similar to IAS39, financial assets are classified in different categories. Some are being measured at amortised costs and others at fair value. Regarding the Group's financial liabilities, IFRS 9 is not materially different to IAS39. The impairment model for hedge accounting could lead to more financial hedging strategies being eligible for hedge accounting under IFRS 9 than IAS39.
(n) Tangible assets
Tangible assets are recognized in the Group at acquisition cost less accumulated depreciation and any impairments. The acquisition cost consists of the purchase price as well as costs directly related to bringing the asset to the necessary place and condition for its use in accordance with the purpose of the acquisition.
The carrying value of a tangible asset is derecognized when the asset is sold or disposed of, or when no further financial rewards are expected to be received from the use or disposal/sale of the asset. Gains or losses arising from the sale or disposal of an asset are calculated as the difference between the sale price and the asset's carrying value, less expenses directly related to the sale. Gains and losses are reported under other income/expenses. Tangible assets are depreciated on a straight-line basis over the estimated useful life of the asset.
Estimated useful life of the asset: Equipment 3–5 years
Expenditure on research activities related to the obtaining of new scientific or technical knowledge is expensed as incurred, except for when the research activities are acquired in a business combination; see below. Expenditure on development activities, whereby the research results or other knowledge is applied to accomplish new or improved products or processes, is recognized as an asset in the balance sheet, provided that the product or process is technically and commercially feasible and Ascelia Pharma has sufficient resources to complete development, and is subsequently able to use or sell the intangible asset.
Other development expenses are expensed as incurred with the exception of acquired development. Research and development acquired through a business combination are stated at the fair value at the date of the acquisition. After the acquisition date, acquired research and development are stated on a historical cost basis and are tested for impairment as described below. Amortization of acquired research and development is recognized first when the project is considered complete. Amortization is then undertaken on a straight-line basis over the expected economic life; for patents, this does not however exceed the remaining period of patent protection.
The Group's recognised assets are assessed at the end of every reporting period to determine if there is any indication that impairment is required. IAS 36 is applied to the impairment of assets other than financial assets, which are reported in accordance with IFRS 9.
For intangible assets not yet subject to amortisation, the recoverable amount is calculated annually. The recoverable amount is the higher value of the fair value minus the cost of sale and the value in use. When calculating the value in use, the future cash flow is discounted by a discount factor, which takes into account risk-free interest and the risk associated with the specific asset.
Upon every reporting occasion, the Company examines whether there is objective evidence that a financial asset or group of assets requires impairment. Objective evidence consists of observable conditions that have occurred and have a negative impact on the possibility to recover the acquisition value.
An impairment of assets, as included in the application of IAS 36, is reversed if there is both an indication that there is no longer an impairment requirement and that a change has been made in the assumptions that formed the basis of the calculation of the recoverable amount. However, impairment of goodwill is never reversed. A reversal is made only to the extent that the asset's carrying value after the reversal does not exceed the carrying value that would have been recognized, with a deduction for depreciation if applicable, had no impairment been made. Impairment of loans and receivables that are recognized at amortised cost are reversed if the previous reasons for impairment no longer exist and full payment can be expected to be obtained from the customer.
The calculation of basic earnings per share is based on the profit or loss attributable to ordinary equity holders of the parent company and the weighted average number of common shares outstanding during the year. When calculating diluted earnings per share, the weighted average number of shares outstanding is adjusted for the effects of all dilutive potential common shares. Potential common shares are considered diluted only during periods when it leads to lower profit or bigger loss per share.
Current benefits to employees are calculated without discounting and recognised as costs when the related services are received.
The Group has only defined-contribution pension plans. Pension plans classified as defined-contribution plans are those where the company's obligation is limited to the contributions the company has undertaken to pay. In such cases, the size of the employee's pension is dependent on the contributions paid by the company to the plan or to an insurance company and the return on capital yielded by the contributions. Consequently, it is the employee who bears the actuarial risk (that the pension payment will be lower than expected) and the investment risk (that the invested assets will be insufficient to provide the expected payments). The company's obligations with regard to payments to defined-contribution plans are recognised in the Income Statement as they are earned by the employee's performance of services for the company during a period.
Ascelia Pharma's employees are invited to participate in share-based incentive programs. If the terms of the programs are met at the time for utilisation, these employees have the right to purchase shares at a pre-determined price (the employee option programmes) and receive matching and performance shares (share saving programme). The Group recognises share-based remuneration, which is personnel may receive. A personnel cost is recognized, together with a corresponding increase in equity, distributed over the period in which the vesting conditions are met, which is the date on which the relevant employees become fully entitled to the compensation.
Social security costs attributable to share-based remuneration are expensed in the periods in which the programs are provided. The liability for social security costs arising is re-evaluated at each reporting date based on a new calculation of the fees expected to be paid when the programmes are utlised. This means that a new market valuation of the incentive programmes is made at each balance sheet date, which is the basis for the calculation of the liability for social security charges.
Refer to note 4 for further details of share based remuneration.
Information on a contingent liability is provided when there is a possible obligation originating from past events and whose occurrence is confirmed only by one or more uncertain future events outside the Group's control or when there is an obligation that is not reported as a liability or provision because it is unlikely that an outflow of resources will be needed or it cannot be calculated with sufficient reliability.
The parent company has prepared the historical financial information according to the Annual Accounts Act (1995:1554) and the Swedish Financial Reporting Board's recommendation RFR 2 Accounting for Legal Entities. In addition, the Swedish Financial Reporting Board's issued statements applicable to listed companies are applied. The application of RFR 2 means that the parent company in the historical financial information for the legal entity shall apply all of the IFRS Standards and statements adopted by the EU to the extent allowed according to the Swedish Annual Accounts Act, the Act on Safeguarding of Pension Commitments, and with respect to the link between accounting and taxation. The recommendation states exceptions from and additions to IFRS Standards that shall be made.
The accounting principles of the parent company are consistent in all material respects with the accounting principles of the Group. The differences between the Group's and the parent company's accounting principles are described below. The accounting principles given below for the parent company have been consistently applied for all periods as presented in the parent company's financial statements.
The parent company's income statement and balance sheet are prepared in accordance with the model detailed in the Annual Accounts Act, while the statement of profit or loss and other comprehensive income, the statement of changes in equity, and the statement of cash flows are based on IAS 1 Presentation of
Financial Statements and IAS 7 Statement of Cash Flows respectively. The differences in the income statement and balance sheet of the parent company compared with the consolidated accounts mainly involve the reporting of financial income and expenses, assets, and equity.
Participations in subsidiaries are recognized in the parent company in accordance with the cost method. Thus, transaction expenses are included in the carrying amount of holdings in subsidiaries. In the consolidated accounts, transaction expenses attributable to subsidiaries are directly recognized in the profit/loss when they are incurred.
Due to the link between accounting and taxation, the regulations pertaining to the financial instruments in IFRS 9 are not applied to the parent company as a legal entity. Within the parent company, financial assets are measured at their acquisition values less any impairment and financial current assets according to the lower of cost and net realizable value.
The Ascelia Pharma Group's operations consist of research and development for the development of pharmaceuticals. As follow-ups are conducted and resources are distributed in a joint manner for all research and development projects, the Group's operations are considered to comprise one operating segment. The Group has operations in Sweden (where the parent company has its registered office) and in Denmark. The tangible assets in Sweden and in Denmark are fully depreciated. The consolidated intangible assets are in their entirety related to Denmark and the acquisition of Oncoral Pharma ApS (see note 10).
| 2019-07-01- 2019-12-31 |
of which are men |
2018-07-01- 2019-06-30 |
of which are men |
|
|---|---|---|---|---|
| Group Sweden Group total |
7 | 57% | 5 | 80% |
| at the balance sheet date |
7 | 57% | 5 | 80% |
| Parent company Sweden |
7 | 57% | 5 | 80% |
| Total at the balance sheet date |
7 | 57% | 5 | 80% |
Figures above include Head of IR and Communications (employed through consultancy agreement). There are no employees in the subsidiaries.
| 31 Dec 2019 Percentage of women |
30 June 2019 Percentage of women |
|
|---|---|---|
| Group | ||
| Board of Directors | 17% | 17% |
| Other senior executives | 0% | 20% |
| Parent company | ||
| Board of Directors | 17% | 17% |
| Other senior executives | 0% | 20% |
| Group | ||
|---|---|---|
| 2019-07-01- | 2018-07-01- | |
| SEK in thousands | 2019-12-31 | 2019-06-30 |
| Chief Executive Officer (Magnus Corfitzen) |
||
| Base salary (inclusive holiday pay) | 992 | 1,410 |
| Pension** | 270 | 17 |
| Variable remuneration | – | 451 |
| Share based remuneration | 326 | 529 |
| Other benefits | 46 | 172 |
| Total | 1,633 | 2,579 |
| 2019-07-01- | 2018-07-01- | |
| SEK in thousands | 2019-12-31 | 2019-06-30 |
| Other senior executives* | ||
| Base salary (inclusive holiday pay) | 2,345 | 3,267 |
| Pension** | 305 | 693 |
| Variable remuneration | – | 565 |
| Share based remuneration | 467 | 692 |
| Other benefits | 16 | 135 |
| Total | 3,133 | 5,352 |
| SEK in thousands | 2019-07-01- 2019-12-31 |
2018-07-01- 2019-06-30 |
|---|---|---|
| Chief Executive Officer | ||
| (Magnus Corfitzen) | ||
| Base salary (inclusive holiday pay) | 992 | 1,410 |
| Pension** | 270 | 17 |
| Variable remuneration | – | 451 |
| Share based remuneration | 326 | 529 |
| Other benefits | 46 | 172 |
| Total | 1,633 | 2,579 |
| SEK in thousands | 2019-07-01- 2019-12-31 |
2018-07-01- 2019-06-30 |
|---|---|---|
| Other senior executives* Base salary (inclusive holiday pay) |
2,345 | 3,267 |
| Pension** | 305 | 693 |
| Variable remuneration | – | 565 |
| Share based remuneration | 467 | 692 |
| Other benefits | 16 | 135 |
| Total | 3,133 | 5,352 |
* Senior executives constituted four persons in Jul-Dec 2019 plus Head of IR and Communications employed through consultancy agreement (four persons in the financial year 2018/2019).
** The Parent company has a defined-contribution pension plan. Under the plan, some employees can decide whether the company should, instead of making pension contributions, pay the equivalent amount out as salary. In Jul-Dec 2019, two employees opted to receive salary instead of pension (2 persons in the financial year 2018/2019).
Total remuneration to all employees (salary, pension, variable remuneration, share based remuneration and other benefits) for the Group and the Parent company amounted to SEK 5.9 million in the period Jul-Dec 2019 (SEK 8.4 million for Jul 2018-Jun 2019). Social charges and insurances (all employees) for the Group and the Parent company amounted to SEK 2.1 millon in the period Jul-Dec 2019 (SEK 2.9 million for Jul 2018-Jun 2019). Information about remuneration paid to the Board of Directors is found in the Corporate Governance section.
Guidelines for remuneration to CEO and other senior executives for the period Jul-Dec 2019
Ascelia Pharma shall offer remuneration levels and employment terms at market terms, aimed at facilitating the recruitment and retention of senior executives with high competence and capacity, in order to achieve established targets. The guidelines shall apply to employment agreements entered into after the adoption of these guidelines by the shareholders' meeting or amendments to existing agreements made after the adoption of the guidelines.
The remuneration to the CEO and other senior executives can be comprised of fixed salary, variable remuneration, pension benefits, share-based incentive programs resolved by the shareholders' meeting and other benefits. Senior executives refer to the CEO and the other persons forming part of Ascelia Pharma's management team.
Remuneration and other employment terms for the CEO and other senior executives are prepared by the Remuneration Committee and resolved by the board of directors.
The fixed salary shall take into consideration the individual's competence, area of responsibility and performance. A review should generally be made annually.
The variable remuneration is to be based on the outcome of predetermined well defined objectives. The variable consideration is to be limited and may not exceed 40 per cent of the fixed annual salary for the CEO and 20 per cent of the fixed annual salary for other senior executives, whereby the individual highest level should be based on factors such as the position held by the specific individual.
Ascelia Pharma's commitments in reference to variable remuneration for the CEO and other senior executives who can be entitled to variable remuneration targets are for the financial year 2019 calculated to amount to, if all targets are met in full, at the highest approximately SEK 1.5 million (excluding social charges). The calculation is based on the persons currently being senior executives and who can be entitled to variable remuneration.
In addition to what follows from law or collective bargain
agreements or other agreements, the CEO and other senior executives may be entitled to arrange individual pension schemes. Refrained salaries and variable remuneration can be used for increased pension contributions, provided that the total cost for Ascelia Pharma is unchanged over time.
Share-based incentive programs shall, where applicable, be resolved by the shareholders' meeting.
The senior executives may be awarded other customary benefits, such as a company car, occupational health services, etc.
In case of termination of the CEO's employment by the company, the notice period should not exceed 6 months. In case the company terminates the CEO's employment, the CEO shall, in addition to salary during the notice period, be entitled to severance payment corresponding to 6 months' base salary. The notice period for other senior executives shall not exceed 6 months. The employment agreements with senior executives may also include provisions regarding right for the senior executive to receive customary compensation for non-compete undertakings following the termination of the employment.
In addition to the severance pay for the CEO, in case the company would be subject to a change of control resulting in that more than 50 percent of the shares are held by one shareholder and provided that neither the company nor the CEO has given notice of termination or has otherwise brought the agreement to terminate within a period of six months after the change of control, the CEO is entitled to a retention bonus of six times the monthly gross salary.
The company's Head of IR & Communications acts as a consultant and the consultancy agreement has a fixed term of 12 months from the date of listing on Nasdaq Stockholm in March 2019 and runs thereafter for an indefinate term with a mutual notice period of three months.
Ascelia Pharma has two active employee options programs that include members of the management team and a share-saving programme for employees. If the terms of the option programs are met at the time for utilisation, these employees have the right to purchase shares at a pre-determined price. For the share-saving programme, employees are entitled to receive matching and performance shares according to terms of the programme. The Group recognises share-based remuneration, which personnel may receive. A personnel cost is recognised, together with a corresponding increase in equity, distributed over the vesting period. Social security costs are revalued at fair value.
In case all outstanding incentive programmes are exercised in full, 1.8 million shares will be issued (incl. hedge for future payment of social security charges). This corresponds to an aggregate dilution of around 7.1% of Ascelia Pharma's share capital after full dilution (calculated on the number of shares that will be added upon full exercise of all outstanding incentive programmes).
At the Extraordinary General Meeting held on 26 April 2018, it was resolved to implement an employee option program comprised by a maximum of 550,369 employee options. The employee options have been allotted free of charge to the Chief Executive Officer, the former Chief Medical Officer and the Chief Operating Officer. The allotted employee options vest with 50 percent on the allotment and the remaining employee options will vest with 25 percent on 31 October 2018 and with 25 percent on 31 October 2019. Vesting is conditional upon that the participant is still employed by the company and that the employee has not terminated the employment as of the date when the respective vesting occurs. If the participant ceases to be employed or terminates the employment before a vesting date, the already vested employee options can be utilized during the ordinary time for utilization in accordance with the below, but further vesting will not take place. The company's former Chief Medical Officer left the company in the summer of 2018, after which the maximum number of employee options that can be vested was reduced to 481,573. Each vested employee option entitles a right to acquire one new share in the company against cash consideration at a subscription price of SEK 8 per share.
Vested employee options can be utilised during month 24 – 27 after the listing (i.e. 13 March 2021 to 13 June 2021) and in connection with a trade sale. Vested employee options can be utilised immediately in connection with the trade sale. Vested
Change in holdings of employee options for CEO and other senior executives (Programme 1 and 2 combined)
| No. of alloted options per 1 July 2019 |
Change | No. of alloted options per 31 Dec 2019 |
|
|---|---|---|---|
| CEO | 458,856 | – | 458,856 |
| Other senior executives* | 527,812 | – | 527,812 |
| Total | 986,668 | – | 986,668 |
* All alloted options (to both current and former employed senior exectives)
employee options that are not exercised in the relevant exercise windows will automatically lapse.
Trade sale is defined as:
At the annual general meeting held on 23 November 2018, it was resolved to implement an additional employee option program comprised by a maximum of 505,095 employee options. The employee options have been allotted free of charge to the Chief Executive Officer, Chief Financial Officer, Chief Operating Officer and Chief Medical Officer. The allotted employee options will vest with 25 percent on each of 31 October 2019, 31 October 2020, 31 October 2021 and 31 October 2022.
Vesting is conditional upon that the participant is still employed by the company and that the employee has not terminated the employment as of the date when the respective vesting occurs. If the participant ceases to be employed or terminates the employment before a vesting date, the already vested employee
can be utilised during the ordinary time for utilisation, but further vesting will not take place.
Each vested employee option entitles a right to acquire one new share in the company against cash consideration at a subscription price of SEK 22.50 per share. Vested employee options can be utilised during the period 1 November 2022 – 31 January 2023 and in connection with a trade sale. Vested employee options can be utilised immediately in connection with the trade sale. Vested employee options that are not exercised in the relevant exercise windows will automatically lapse.
The calculated value of the options at the time of allotment for the first program was approximately SEK 10 per option and SEK 10 per option for the second program. The value of the options was calculated with an adjusted Black-Scholes model, which takes into consideration the exercise price, the term of the options, share price on the allotment date and expected volatility in the share price, and risk-free interest for the term of the options. In the calculation of the option value at allotment, assumptions were also made for the likelihood that an IPO or a trade sale to occur prior to the last day for exercise of the options. Assumptions were also made regarding the number of employees to remain in the company once the programmes are fully completed.
Since no listed prices were available prior to the IPO in March 2019, the share prices on allotment dates have been based on previous share transactions including the acquisition of Oncoral Pharma ApS (acquired with own shares) and new share issues with cash contribution. All transaction have time-wise been conducted in close proximity to the introduction of each option program. The value of the options are furthermore based on the following data:
The estimated volatility in the share price is based on comparable companies in the same sector.
Refer to note 25 for a description of important estimations and judgements.
At the Annual General Meeting on 14 November 2019, a resolution was passed to implement a long-term incentive programme for employees in the form of a performance-based share saving programme. In the programme, participants have
invested in ordinary shares in Ascelia Pharma ("Saving Shares"). The total amount of Saving Shares invested in this programme amount to 67,030.
For each Saving Share, the participants is entitled to receive 1 Matching Share. In addition, for each Saving Share, the participant shall have the possibility to receive up to 5 Performance Shares for each Saving Share. Receipt of both Matching Shares and Performance Shares are conditional upon the fulfilment of the following conditions: (a) that the participant has retained all Saving Shares during the period from the expiration of the Investment Period to 31 December 2022 (the "Saving Period"); and (b) that the participant has continued to be employed by the company (or another company in its group) throughout the Saving Period.
Receipt of Performance Shares is further conditional upon that the requirement related to the development of the company's share price from the date of the annual general meeting on 14 November 2019 to and including 31 December 2022 (the "Performance Target") is fulfilled. The Performance Target will be measured based on the volume weighted average share price 30 trading days immediately following the annual general meeting on 14 November 2019 and 30 trading days immediately preceding 31 December 2022. An increase in the share price with less than 20 per cent does not entitle to any vesting of any of the Performance Shares, an increase in the share price with 20 per cent entitles to vesting of 1 Performance Share per Saving Share and an increase in the share price with 80 per cent or more entitles to vesting of all the 5 Performance Shares per Saving Share. In the event of an increase in the share price of between 20 and 80 per cent, vesting of the Performance Shares will occur linearly between 1 and 5.
The parameter, which have the largest impact on the value of the programme, is the publicly traded share price. The fair value of the share saving programme is estimated on the issue date using a generally accepted modelling technique, Monte Carlo simulation, to simulate the future share price development.
The total recognised costs for the option programs and the share saving programme in the period July- December 2019 were SEK 1.4 million and SEK 0.3 million, respectively.
The Group reports its income statement based on functions. The key cost items are presented below.
| Group | Parent company | |||
|---|---|---|---|---|
| 2019-07-01– | 2018-07-01– | 2019-07-01– | 2018-07-01– | |
| SEK in thousands | 2019-12-31 | 2019-06-30 | 2019-12-31 | 2019-06-30 |
| Research and Development costs | ||||
| Drug development costs | 20,561 | 15,574 | 20,105 | 13,695 |
| Cost of remuneration to employees | 4,492 | 4,844 | 4,492 | 4,844 |
| Manufacturing costs | 1,867 | 2,506 | 1,867 | 2,506 |
| Total | 26,920 | 22,923 | 26,464 | 21,045 |
| Administration costs | ||||
| Costs for remuneration to employees and board | 4,764 | 7,818 | 4,764 | 7,818 |
| Other administration costs | 3,614 | 6,588 | 3,545 | 6,344 |
| Total | 8,378 | 14,406 | 8,309 | 14,162 |
| Other operating expenses incl. commercial preparations | ||||
| Commercial preparations | 1,446 | – | 1,446 | – |
| Currency differences related to operations | 355 | 265 | 343 | 265 |
| Total | 1,801 | 265 | 1,789 | 265 |
| SEK in thousands | 2019-07-01– 2019-12-31 |
2018-07-01- 2019-06-30 |
|---|---|---|
| Group | ||
| PwC | ||
| Audit engagements (current year) | 349 | 512 |
| Other audit activities | – | 475 |
| Tax advice | – | – |
| Other services | – | 405 |
| Total | 349 | 1,392 |
| SEK in thousands | 2019-07-01– | |
| 2018-07-01- | ||
| Parent company | 2019-12-31 | 2019-06-30 |
| PwC Audit engagements (current year) |
289 | 444 |
| Other audit activities | – | 475 |
| Tax advice | – | – |
| Other services | – | 405 |
Audit engagements refer to statutory auditing of annual and consolidated financial statements as well as the Board's and CEO's administration of the company, along with audits and other reviews performed as agreed upon or contracted. This includes other tasks that are incumbent on the company's auditor to perform as well as consultancy or other assistance occasioned by observations during such reviews or the performance of such other tasks.
| Group | ||
|---|---|---|
| 2019-07-01– | 2018-07-01– | |
| SEK in thousands | 2019-12-31 | 2019-06-30 |
| Interest income and similar profit/loss items |
||
| Interest income and currency | ||
| adjustment | 1,507 | 76 |
| Total | 1,507 | 76 |
| Of which group companies | – | – |
| Interest expense and similar profit/loss items |
||
| Interest expense | –3 | –33 |
| Net exchange rate differences | –4,677 | –203 |
| Total | –4,680 | -236 |
| 2019-07-01– | 2018-07-01– | |
|---|---|---|
| SEK in thousands | 2019-12-31 | 2019-06-30 |
| Interest income and similar profit/loss items |
||
| Interest income and currency adjustment |
1,663 | 377 |
| Total | 1,663 | 377 |
| Of which group companies | 96 | 226 |
| Interest expense and similar profit/loss items |
||
| Interest expense | –1 | –29 |
| Net exchange rate differences | –4,677 | –282 |
| Total | –4,678 | –311 |
Recognised in the statement of profit or loss and other comprehensive income/income statement
| Group | Parent company | |||
|---|---|---|---|---|
| 2019-07-01– | 2018-07-01– | 2019-07-01– | 2018-07-01– | |
| SEK in thousands | 2019-12-31 | 2019-06-30 | 2019-12-31 | 2019-06-30 |
| Current tax expense (–)/tax income (+) | ||||
| Tax expense/income for the year | 90 | 417 | – | – |
| Total recognized tax expense/income for the year | 90 | 417 | – | – |
| Group | Parent company | |||
|---|---|---|---|---|
| SEK in thousands | 2019-07-01– 2019-12-31 |
2018-07-01– 2019-06-30 |
2019-07-01– 2019-12-31 |
2018-07-01– 2019-06-30 |
| Loss before tax | -39,995 | -37,552 | -39,077 | -35,060 |
| Tax rate for the parent company 21.4% |
8,559 | 8,261 | 8,362 | 7,713 |
| Effect of other tax rates for foreign subsidiaries 0.2% |
90 | -131 | – | – |
| Non-deductible expenses 0.0% |
-11 | -30 | -11 | -30 |
| Increase of losses carried forward without equivalent capitalization -21.4% |
-8,548 | -7,683 | -8,351 | -7,683 |
| Utilization of previously non-capitalized | ||||
| tax deductions 0.0% |
– | – | – | – |
| Recognized effective tax 0.2% |
90 | 417 | – | – |
Deductible temporary differences and tax losses for which deferred tax assets have not been recognized in the balance sheet (unrecognized deferred tax assets have no expiration date):
| Group | Parent company | |||
|---|---|---|---|---|
| 2019-07-01– | 2018-07-01– | 2019-07-01– | 2018-07-01– | |
| SEK in thousands | 2019-12-31 | 2019-06-30 | 2019-12-31 | 2019-06-30 |
| Deductible temporary differences | – | – | – | – |
| Losses related to issuance costs | – | 27,851 | – | 27,851 |
| Tax losses | 181,406 | 145,372 | 181,406 | 145,372 |
| Total | 181,406 | 173,223 | 181,406 | 173,223 |
Group
| Group | ||
|---|---|---|
| 2019-07-01– | 2018-07-01– | |
| 2019-12-31 | 2019-06-30 | |
| Result per share | ||
| (before and after dilution) | –1.70 | –2.16 |
| Average number of shares | 23,488,908 | 17,171,703 |
| Parent company | 2019-07-01– | 2018-07-01– |
| 2019-12-31 | 2019-06-30 | |
| Result per share | ||
| (before and after dilution) | ||
| –1.66 | –2.04 |
| SEK in thousands | 2019-12-31 | 2019-06-30 |
|---|---|---|
| Accumulated cost of acquisition | ||
| Opening balance | 57,067 | 57,066 |
| Acquisitions | – | – |
| Currency adjustment | -2 | 1 |
| Closing balance | 57,065 | 57,067 |
| Accumulated amortization and impairment losses | ||
| Opening balance | – | – |
| Impairment charge, current year | – | – |
| Amortization, current year | – | – |
| Closing balance | – | – |
| Carrying amount | 57,065 | 57,067 |
Each year, the Group tests whether there is an impairment requirement with regards to intangible assets. For Ascelia Pharma, the recognized intangible assets refer to the R&D project in progress (Oncoral), which was acquired through the subsidiary Oncoral Pharma ApS.
The consideration consisted of a new share issue in Ascelia Pharma. The project has completed the first development phase (Phase 1) at Herlev hospital in Denmark with promising results. Preparations are now being made for Phase 2 .The product candidate is a tablet formulation of irinotecan, which is a widely used chemotherapeutic agent with documented effects on selected solid tumors. The project is initially measured at fair value based on the discounted future net cash flow the project is deemed to generate and also considering the fair value of the consideration paid in a separate parallel transaction comprising a new share issue for cash in Ascelia Pharma at the same point in time.
The impairment test Oncoral is based on estimated risk adjusted future cash. Significant assumptions in the financial plans include projected revenue and operating margins. The forecasted risk adjusted cash flow has been calculated at present value using a discount rate of 12.0% before tax. The discount factor has been determined by considering the risk-free interest rate and the risk associated with the specific asset.
In the period July-December 2019, the estimated recoverable amount for Ascelia Pharma exceeded the book value, which is why no impairment requirement has been identified. Alternative calculations have been made by changing the assumptions concerning the discount rate. An increase of the discount rate by two percentage points would not result in any impairment requirement for intangible assets related to Ascelia Pharma.
| Group | Parent company | |||
|---|---|---|---|---|
| SEK in thousands | 2019-12-31 | 2019-06-30 | 2019-12-31 | 2019-06-30 |
| Opening balance | ||||
| Inventory | 167 | 167 | 75 | 75 |
| Other | 280 | – | 280 | – |
| Total | 447 | 167 | 355 | 75 |
| Closing balance | ||||
| Inventory | 167 | 167 | 75 | 75 |
| Currency adjustment | – | 1 | – | – |
| Other (car leasing) | 280 | 280 | 280 | 280 |
| Total | 447 | 448 | 355 | 355 |
| Depreciation | ||||
| Opening balance | ||||
| Inventory | -167 | -167 | -75 | -75 |
| Other | -5 | – | -5 | – |
| Total | -172 | -167 | -80 | -75 |
| Current year's depreciation inventory | – | – | – | – |
| Current year's depreciation other | -62 | -5 | -62 | -5 |
| Total current year's depreciation | -62 | -5 | -62 | -5 |
| Closing balance | ||||
| Inventory | -167 | -167 | -75 | -75 |
| Currency adjustment | – | -1 | – | – |
| Other | -68 | -5 | -68 | -5 |
| Total | -235 | -173 | -143 | -80 |
| Carrying amount | ||||
| Opening balance | ||||
| Inventory | – | – | – | – |
| Other | – | – | – | – |
| Total | – | – | – | – |
| Closing balance | ||||
| Inventory | – | – | – | |
| Leasing | 212 | 275 | 212 | 275 |
| Total | 212 | 275 | 212 | 275 |
| Group | ||
|---|---|---|
| SEK in thousands | 2019-12-31 | 2019-06-30 |
| Non-current receivables classified as non-current assets |
||
| Intra-company loans | – | – |
| Total | – | – |
| Other receivables classified as current assets |
||
| Recoverable VAT | 686 | 859 |
| Other items | – | 47 |
| Total | 686 | 906 |
| Parent company | ||
|---|---|---|
| SEK in thousands | 2019-12-31 | 2019-06-30 |
| Non-current receivables classified as non-current assets |
||
| Intra-company loans* | 3,352 | 3,395 |
| Total | 3,352 | 3,395 |
| Other receivables classified as current assets |
||
| Recoverable VAT | 589 | 620 |
| Other items | 785 | 591 |
| Total | 1,374 | 1,211 |
*The increase in intra-company loans reflects loans from Ascelia Pharma AB to Oncoral Pharma ApS. The loans are denominated in DKK with a fixed interest rate. A change in DKK against SEK of 10% would result in an increased loan receivable for the parent company of around SEK 335 thousand.
| Group | ||
|---|---|---|
| SEK in thousands | 2019-12-31 | 2019-06-30 |
| Prepaid trade payables | 4,017 | 1,058 |
| Prepaid issuance costs | – | – |
| Prepaid rent | 143 | 44 |
| Other items | 3,140 | 2,256 |
| Total | 7,300 | 3,358 |
| SEK in thousands | 2019-12-31 | 2019-06-30 |
|---|---|---|
| Prepaid trade payables | 4,017 | 1,058 |
| Prepaid issuance costs | – | – |
| Prepaid rent | 143 | 44 |
| Other items | 3,498 | 2,256 |
| Total | 7,658 | 3,358 |
| SEK in thousands | 2019-12-31 | 2019-06-30 |
|---|---|---|
| The following items are included in cash and cash equivalents |
||
| Bank balances | 108,516 | 149,972 |
| Total according to the statement | ||
| of financial position | 108,516 | 149,972 |
| SEK in thousands | 2019-12-31 | 2019-06-30 |
|---|---|---|
| The following items are included in cash and cash equivalents Bank balances |
107,434 | 148,743 |
| Total according to the statement of financial position |
107,434 | 148,743 |
| SEK in thousands | 2019-12-31 | 2019-06-30 |
|---|---|---|
| Fixed income fund | 75,711 | 75,076 |
| Total according to the statement | ||
| of financial position | 75,711 | 75,076 |
| Parent company | ||
| SEK in thousands | 2019-12-31 | 2019-06-30 |
| Fixed income fund | 75,711 | 75,076 |
| Total according to the statement |
IFRS 9 includes a valuation approach with three categories for valuation of financial assets: amortised costs, fair value via other comprehensive income or via the Income Statement. The fixed income fund has been valued and classified according to fair value via the Income Statement with level 1 in the valuation hierarchy based on listed prices on a traded market.
Within EU's classification system, the fixed income fund has the lowest risk category on a scale from 1-7.
| Number of shares | 2019-12-31 | 2019-06-30 |
|---|---|---|
| Issued per 1 July | 23,488,908 | 14,606,891 |
| New cash share issue | – | 8,882,017 |
| Issued end of period | 23,488,908 | 23,488,908 |
There is only one share class in Ascelia Pharma (common share). Holders of common share are entitled to a dividend that is determined in due course, and each share entitles the holder to one vote at the annual meeting of shareholders.
During the fiscal year 2018/2019 (July 2018-June 2019), a total number of 8,882,017 shares were issued in connection with the IPO on Nasdaq Stockholm (of which 882,017 shares were issued through the overallotment option in the IPO). Total gross proceeds raised in the IPO was SEK 222.1 million. Net of issuance expenses, the amount raised was SEK 200.2 million.
The translation reserve covers all exchange rate differences that arise in translating the financial statements of foreign entities whose financial statements were prepared in currencies other than the Group's presentation currency. The parent company and the Group present their financial statements in SEK. When control of a foreign operation ceases, the accumulated translation differences attributable to the operation are realised, at which point they are reclassified in equity to profit/loss for the year. In the case of a sale where the controlling interest still exists, a proportional share of the cumulative translation differences is transferred from the translation reserve to non-controlling interests.
Restricted reserves Restricted reserves cannot be reduced through distribution of profits.
Together with profit/loss for the year, the following funds make up non-restricted equity – that is, the amount available for dividends to the shareholders:
When shares are issued at a premium – that is, when the amount paid for shares exceeds their nominal price – an amount equivalent to the amount received in excess of the share's nominal value is transferred to the share premium reserve.
Profit/loss brought forward consists of the previous year's profit/ loss brought forward and profit after being reduced by paid-out dividends.
| Group | ||
|---|---|---|
| SEK in thousands | 2019-12-31 | 2019-06-30 |
| Other current liabilities | ||
| Liabilities to employees incl. | ||
| bonus provisions and social | ||
| charges | 50 | 1,432 |
| Other liabilities | 1,088 | 708 |
| Total | 1,138 | 2,140 |
| SEK in thousands | 2019-12-31 | 2019-06-30 |
|---|---|---|
| Other current liabilities Liabilities to employees incl. |
||
| bonus provisions and social charges |
50 | 1,432 |
| Other liabilities | 1,113 | 708 |
| Total | 1,163 | 2,140 |
| SEK in thousands | 2019-12-31 | 2019-06-30 |
|---|---|---|
| Vacation pay | 835 | 894 |
| Social charges | 232 | 234 |
| Other items | 5,628 | 3,665 |
| Total | 6,695 | 4,793 |
| SEK in thousands | 2019-12-31 | 2019-06-30 |
|---|---|---|
| Vacation pay | 835 | 894 |
| Social charges | 232 | 234 |
| Other items | 5,441 | 3,686 |
| Total | 6,508 | 4,814 |
The Group's operations expose it to a variety of financial risks. Ascelia Pharma is mainly exposed to liquidity risks and financing risks as well as currency risks.
Liquidity risks and financing risks are the risks that the Group will not have access to financing in order to fulfill its contractual obligations or that this can only be done at a significantly increased cost.
In March 2019, Ascelia Pharma completed an IPO on Nasdaq Stockholm. Net of issuance expenses and including the overallotment option, the IPO provided Ascelia Pharma with SEK 200.2 million in cash. The funds raised through the IPO together with already existing bank balances provided Ascelia Pharma with liquidity beyond 12 months. The available funds at 31 December 2019 provides Ascelia Pharma with liquidity beyond 12 months and is expected to be sufficient to complete the Phase 3 program for Mangoral, initiate commercial preparations for Mangoral and prepare for Phase II studies for Oncoral.
In accordance with Ascelia Pharma's financial policy, liquid funds are only to placed in bank balances or highly liquid fixed income funds or interest-bearing securities with low credit risk. The financial policy also stipulates that bank deposit shall only be with banks with a long-term credit rating of least BBB+ from Standard & Poor's or equivalent from Moody's and/or Fitch.
The Group has no interest-bearing or long-term liabilities. All trade payables and accrued expenses fall due within 12 months.
| Purchases in each currency | Cost increase with 10% depreciation of SEK |
|||
|---|---|---|---|---|
| SEK in thousands | 2019-07-01– 2019-12-31 |
2018-07-01– 2019-06-30 |
2019-07-01– 2019-12-31 |
2018-07-01– 2019-06-30 |
| DKK | 459 | 3,663 | 46 | 366 |
| EUR | 14,884 | 5,783 | 1,488 | 578 |
| USD | 9,338 | 8,890 | 934 | 889 |
| Total | 24,681 | 18,336 | 2,468 | 1,834 |
Transaction exposure
Ascelia Pharma purchases services related to drug develoment particularly in USD, EUR and DKK. The effect of a weakening of Swedish crown by 10% on each currency are described in the table above.
The currency risk management in Ascelia Pharma focuses on transaction risk. Managing translation currency exposure in equity is not deemed relevant to safeguard operations (changes in equity from currency movement is not foreseen to expose Ascelia to significant risks). According to Ascelia Pharma's financial policy, management of currency exposures shall be based on contracted orders/purchases and be highly probable forecasted cash flows. Transaction exposure is handled by exchanging bank balances in SEK into foreign currencies (mainly USD, EUR and DKK) to match upcoming cash outflow. Financial hedging instruments such as futures, forwards and options are not used.
Currency risk is also present in the parent company through intra-company loans from Ascelia Pharma AB to Oncoral Pharma ApS denominated in DKK. A weakening of SEK of 10% against DKK would result in an increased loan receivable for the parent company of around SEK 335 thousand.
The Group's credit risk is primarily attributable to bank deposits. This risk is considered to be low because the cash in bank accounts are in large Swedish and Danish banks with high credit ratings. Counterparty risk associated with customers or business partners is currently not applicable given the pre-revenue state of the company
The carrying value of financial assets and financial liabilities are due to its short-term maturity considered to be reasonable estimates of the fair value for each class of financial assets and financial liabilities.
Leases with the Company as lessee
Non-cancellable leasing payments amount to:
| SEK in thousands | 2019-07-01– 2019-12-31 |
2018-07-01– 2019-06-30 |
|---|---|---|
| Within 1 year | 122 | 131 |
| Between 2 to 5 years | 107 | 163 |
| Later than five years | – | – |
| Total | 229 | 294 |
| 2019-07-01– | 2018-07-01– | |
|---|---|---|
| SEK in thousands | 2019-12-31 | 2019-06-30 |
| Within 1 year | 122 | 131 |
| Between 2 to 5 years | 107 | 163 |
| Later than five years | – | – |
| Total | 229 | 294 |
The leases comprise lease of two company cars. These leases expire in October 2020 and June 2022, respectively. The present value of the leases amount to SEK 219 thousand (discount rate of 4% has been used).
Note 20, cont.
| SEK in thousands | 2019-07-01– 2019-12-31 |
2018-07-01– 2019-06-30 |
|---|---|---|
| Minimum lease payments | 117 | 199 |
| Total leasing costs | 117 | 199 |
Total leasing costs 117 199
| Parent company | ||
|---|---|---|
| 2019-07-01– | 2018-07-01– | |
| SEK in thousands | 2019-12-31 | 2019-06-30 |
| Minimum lease payments | 117 | 199 |
| SEK in thousands | 2019-12-31 | 2019-06-30 |
|---|---|---|
| Commitments* | 11,397 | 11,410 |
| Total | 11,397 | 11,410 |
| Parent company | ||
| SEK in thousands | 2019-12-31 | 2019-06-30 |
Commitments* 11,397 11,410 Total 11,397 11,410 *The commitments refer to potential bonus payment of SEK 10 million to Solural
Pharma ApS (refer to note 23) and potential payment to Herlev hospital of DKK 1 million in case of potential outlicensing of Oncoral or a sale of Oncoral.
The following amounts in SEK are at the disposal of the annual meeting of shareholders:
| Total | 217,450,356 |
|---|---|
| Loss for the period | -39,076,658 |
| Loss brought forward | -148,533,828 |
| Share premium reserve | 405,060,843 |
| Carried forward | 217,450,356 |
|---|---|
| of which to share premium reserve | 405,060,843 |
Related parties with subsidiaries and senior executives The parent company has a close relationship with its subsidiary; see note 24. For remuneration to senior executives, see note 4.
Oncoral Pharma ApS has an agreement with Solural Pharma ApS according to which, Solural Pharma ApS provides development and manufacturing of clinical study material. The owners of Solural Pharma ApS are the founders of Oncoral Pharma ApS and are, after the sale of Oncoral Pharma ApS to Ascelia Pharma AB in 2017, shareholders in Ascelia Pharma AB. The owners of Solural ApS collectively own 4.1% of the shares in Ascelia Pharma AB. In addition to payment for services performed, Solural Pharma ApS has the right to receive a bonus of maximum SEK 10 million if commercialisation occurs through a sale or an outlicensing and SEK 12 million if commercialisation is carried out by Oncoral Pharma ApS or Ascelia Pharma AB itself.
Regardless the commercialisation method, Oncoral Pharma ApS has the right to, at any time, finally settle Solural Pharma ApS right for remuneration by payment of SEK 10 million.
In July-December 2019, services for a value of around SEK 0.4 million were acquired from Solural Pharma ApS.
In July-December 2019, consulting services for a total value of around SEK 1.5 million was acquired from BGM Associates where Ascelia Pharma's board member Hans Maier is Managing Director.
| Holdings in the subsidiary | Carrying amount | |||
|---|---|---|---|---|
| Subsidiary/Corporate identity number/ Registered office | Number of participation rights |
Participating interest in % |
2019-12-31 | 2019-06-30 |
| Oncoral Pharma Aps, CVR number 35 48 12 14 Ballerup, Denmark |
145,919 | 100 | 58,018 | 58,018 |
| Ascelia Incentive AB, Reg. No. 559129-4615 Malmö Sweden |
50,000 | 100 | 50 | 50 |
| Parent company Accumulated acquisition value |
||||
| Opening balance | 58,068 | 58,068 | ||
| Purchases | – | – | ||
| Closing balance | 58,068 | 58,068 | ||
| Carrying amount | 58,068 | 58,068 |
Asset acquisitions versus business combinations and deferred tax Acquisition of companies can be classified as business combinations or asset acquisitions in accordance to IFRS 3. Each individual acquisition is assessed individually. In the cases where the company acquisition only consists of a development project and does not include important processes, the acquisition is classified as an asset acquisition. If the acquisition contains strategic processes that are associated with operations, it is classified as a business combination. The acquisition of Oncoral in 2017 was considered to be an asset acquisition.
The recognised research and development project in progress is subject for management's impairment test. The most critical assumption, subject to evaluation by management, is whether the recognised intangible asset will generate future economic benefits that at a minimum correspond to the intangible asset's carrying amount. Management's assessment is that the expected future cash flows will be sufficient to cover the intangible asset's carrying amount and accordingly no impairment loss has been recognised.
For the period July-December 2019, the criteria for classifying R&D costs as an asset according to IAS 38 has not been met (capitalisation of development expenses is normally done in connection with final regulatory approval). Hence, all R&D costs related to the development of the product candidates have been expensed.
The new standards IFRS 15 on Revenue and IFRS 9 Financial instruments were implemented in the financial year 2018/2019. As the Group currently does not have revenue from contracts with customers, IFRS 15 does not presently impact the Group. Furthermore, IFRS 9 does not have any significant effect on the financial statements given the Group's current very limited exposure to credit risk as well as the absence of financial derivatives. Ascelia Pharma has chosen to early implement the new IFRS 16 rules on leases starting in the financial year 2018/2019. The net present value of the leases amounted to SEK 0.2 million per 31 December 2019 (only car leases).
Ascelia Pharma has implemented two employee option programs with individual terms and conditions. The parameter, which have the largest impact on the value of the options, is the publicly traded share price. The total recognised costs for the option programs in the period July- December 2019 were SEK 1.4 million.
At the Annual General Meeting on 14 November 2019, a resolution was passed to implement a long-term incentive programme for employees in the form of a performance-based share saving programme. The parameter, which have the largest impact on the value of the programme, is the publicly traded share price. The total recognised costs for the share saving program in the period July-December 2019 were SEK 0.3 million.
On 19 February 2020, the first patient was enrolled in pivotal Phase 3 clinical study SPARKLE with lead candidate Mangoral.
On 2 March 2020, issuance and repurchase of 510,545 series C shares for the share saving program were completed.
The COVID-19 outbreak influences many sectors and companies including the healthcare industry and Ascelia Pharma. The effect on Ascelia Pharma is described in the Risk and Risk management section in this Annual Report
The Board of Directors and the CEO confirm that the annual accounts have been prepared in accordance with accepted accounting standards in Sweden, and that the consolidated accounts have been prepared in accordance with the international accounting standards, IFRS, as adopted by EU. The annual accounts and the consolidated accounts give a true and fair view of the Group's and Parent Company's financial position and profit. The Board of Directors' Report for the Group and the Parent Company gives a true and fair view of the Group's and the Parent Company's operations, position and profit, and describes significant risks and uncertainty factors that the Parent Company and Group companies face.
Malmö, 1 April 2020
Peter Benson Chairman of the Board
Bo Jesper Hansen Director of the Board
Hans Maier Director of the Board
Niels Mengel Director of the Board
René Spogárd Director of the Board Helena Wennerström Director of the Board
Magnus Corfitzen Chief Executive Officer
Our auditors' report was submitted on 3 April 2020, Öhrlings PricewaterhouseCoopers AB
Carl Fogelberg Authorised Public Accountant
To the Board of Directors of Ascelia Pharma AB (publ), corporate identity number 556571-8797
We have audited the annual accounts and consolidated accounts of Ascelia Pharma AB (publ) for the financial year 1 July 2019 -31 December 2019 except for the corporate governance statement pages 30-40. The annual accounts and consolidated accounts of the company are included on pages 26-68 in this document.
In our opinion, the annual accounts have been prepared in accordance with the Annual Accounts Act and present fairly, in all material respects, the financial position of parent company as of 31 December 2019 and its financial performance and cash flow for the year then ended in accordance with the Annual Accounts Act. The consolidated accounts have been prepared in accordance with the Annual Accounts Act and present fairly, in all material respects, the financial position of the group as of 31 December 2019 and their financial performance and cash flow for the year then ended in accordance with International Financial Reporting Standards (IFRS), as adopted by the EU, and the Annual Accounts Act. Our opinions do not cover the corporate governance statement on pages 30-40. The statutory administration report is consistent with the other parts of the annual accounts and consolidated accounts.
We therefore recommend that the general meeting of shareholders adopts the income statement and balance sheet for the parent company and the group.
Our opinions in this report on the annual accounts and consolidated accounts are consistent with the content of the additional report that has been submitted to the parent company's audit committee in accordance with the Audit Regulation (537/2014) Article 11.
We conducted our audit in accordance with International Standards on Auditing (ISA) and generally accepted auditing standards in Sweden. Our responsibilities under those standards are further described in the Auditor's Responsibilities section. We are independent of the parent company and the group in accordance with professional ethics for accountants in Sweden and have otherwise fulfilled our ethical responsibilities in accordance with these requirements. This includes that, based on the best of our knowledge and belief, no prohibited services referred to in the Audit Regulation (537/2014) Article 5.1 have been provided to the audited company or, where applicable, its parent company or its controlled companies within the EU.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinions.
We designed our audit by determining materiality and assessing the risks of material misstatement in the consolidated financial statements. In particular, we considered where management made subjective judgements; for example, in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits, we also addressed the risk of management override of internal controls, including among other matters consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud.
We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the consolidated financial statements as a whole, taking into account the structure of the Group, the accounting processes and controls, and the industry in which the group operates.
The scope of our audit was influenced by our application of materiality. An audit is designed to obtain reasonable assurance whether the financial statements are free from material misstatement. Misstatements may arise due to fraud or error. They are considered material if individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the consolidated financial statements.
Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the overall group materiality for the consolidated financial statements as a whole. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually and in aggregate on the financial statements as a whole.
Key audit matters of the audit are those matters that, in our professional judgment, were of most significance in our audit of the annual accounts and consolidated accounts of the current period. These matters were addressed in the context of our audit of, and in forming our opinion thereon, the annual accounts and consolidated accounts as a whole, but we do not provide a separate opinion on these matters.
In June 2017, Ascelia acquired Pharma Oncoral Aps, which conducted research and the development project Oncoral. The research projects are not yet completed and depreciation has not begun.
As of December 31, 2019, the value of acquired development projects amounts to a total of SEK 57 million in the statement of financial position for the Group and the value of shares in subsidiaries in the parent company amounts to SEK 58 million in the balance sheet for the parent company.
According to IFRS, non-amortized fixed assets must be tested for impairment at least annually. The test means that the management needs to apply estimates and estimates of the future to ensure the book value.
The company conducts an annual impairment test for the acquired development expenses. In view of the size of the amounts and the impact of the management's assumptions on the result of this impairment test, we have determined that this is an important area.
A description of the company's impairment testing process can be found in the section "Important estimates and judgments" in Note 25. Note 10 contains further description of the impairment test for the year, including significant assumptions.
In our audit, we have the task of evaluating and reviewing the Company's application of the accounting principles and evaluating the basis on which the impairment test is based. Our review has included, but is not limited to,
-Review of the mathematical model used in the impairment test with regard to its theoretical and mathematical accuracy
-Challenged management in the assumptions made regarding, among other things, future sales levels and discount rates and probability weights -Compared management's assumption against comparable external data
We have also sought out the executive management's comments on the development of the research projects and the results presented through the company's press releases.
This document also contains other information than the annual accounts and consolidated accounts and is found on pages 1-25 and 72-73. The Board of Directors and the Managing Director are responsible for this other information.
Our opinion on the annual accounts and consolidated accounts does not cover this other information and we do not express any form of assurance conclusion regarding this other information.
In connection with our audit of the annual accounts and consolidated accounts, our responsibility is to read the information identified above and consider whether the information is materially inconsistent with the annual accounts and consolidated accounts. In this procedure we also take into account our knowledge otherwise obtained in the audit and assess whether the information otherwise appears to be materially misstated.
If we, based on the work performed concerning this information, conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
The Board of Directors and the Managing Director are responsible for the preparation of the annual accounts and consolidated accounts and that they give a fair presentation in accordance with the Annual Accounts Act and, concerning the consolidated accounts, in accordance with IFRS as adopted by the EU. The Board of Directors and the Managing Director are also responsible for such internal control as they determine is necessary to enable the preparation of annual accounts and consolidated accounts that are free from material misstatement, whether due to fraud or error.
In preparing the annual accounts and consolidated accounts, The Board of Directors and the Managing Director are responsible for the assessment of the company's and the group's ability to continue as a going concern. They disclose, as applicable, matters related to going concern and using the going concern basis of accounting. The going concern basis of accounting is however not applied if the Board of Directors and the Managing Director intends to liquidate the company, to cease operations, or has no realistic alternative but to do so.
The Audit Committee shall, without prejudice to the Board of Director's responsibilities and tasks in general, among other things oversee the company's financial reporting process.
Our objectives are to obtain reasonable assurance about whether the annual accounts and consolidated accounts as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinions. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs and generally accepted auditing standards in Sweden will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these annual accounts and consolidated accounts.
A further description of our responsibility for the audit of the annual accounts and consolidated accounts is available on Revisorsinspektionen's website www.revisorsinspektionen.se/revisornsansvar. This description is part of the auditor´s report.
In addition to our audit of the annual accounts and consolidated accounts, we have also audited the administration of the Board of Directors and the Managing Director of Ascelia Pharma AB (publ) for the financial year 1 July 2019 -31 December 2019 and the proposed appropriations of the company's profit or loss.
We recommend to the general meeting of shareholders that the profit be appropriated in accordance with the proposal in the statutory administration report and that the members of the Board of Directors and the Managing Director be discharged from liability for the financial year.
We conducted the audit in accordance with generally accepted auditing standards in Sweden. Our responsibilities under those standards are further described in the Auditor's Responsibilities section. We are independent of the parent company and the group in accordance with professional ethics for accountants in Sweden and have otherwise fulfilled our ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinions.
The Board of Directors is responsible for the proposal for appropriations of the company's profit or loss. At the proposal of a dividend, this includes an assessment of whether the dividend is justifiable considering the requirements which the company's and the group's type of operations, size and risks place on the size of the parent company's and the group's equity, consolidation requirements, liquidity and position in general.
The Board of Directors is responsible for the company's organization and the administration of the company's affairs. This includes among other things continuous assessment of the company's and the group's financial situation and ensuring that the company's organization is designed so that the accounting, management of assets and the company's financial affairs otherwise are controlled in a reassuring manner. The Managing Director shall manage the ongoing administration according to the Board of Directors' guidelines and instructions and among other matters take measures that are necessary to fulfill the company's accounting in accordance with law and handle the management of assets in a reassuring manner.
Our objective concerning the audit of the administration, and thereby our opinion about discharge from liability, is to obtain audit evidence to assess with a reasonable degree of assurance whether any member of the Board of Directors or the Managing Director in any material respect:
● has undertaken any action or been guilty of any omission which can give rise to liability to the company, or
● in any other way has acted in contravention of the Companies Act, the Annual Accounts Act or the Articles of Association.
Our objective concerning the audit of the proposed appropriations of the company's profit or loss, and thereby our opinion about this, is to assess with reasonable degree of assurance whether the proposal is in accordance with the Companies Act.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with generally accepted auditing standards in Sweden will always detect actions or omissions that can give rise to liability to the company, or that the proposed appropriations of the company's profit or loss are not in accordance with the Companies Act.
A further description of our responsibility for the audit of the administration is available on Revisorsinspektionen's website: www.revisorsinspektionen.se/revisornsansvar. This description is part of the auditor´s report.
The Board of Directors is responsible for that the corporate governance statement on pages 30-40 has been prepared in accordance with the Annual Accounts Act.
Our examination of the corporate governance statement is conducted in accordance with FAR's auditing standard RevU 16 The auditor's examination of the corporate governance statement. This means that our examination of the corporate governance statement is different and substantially less in scope than an audit conducted in accordance with International Standards on Auditing and generally accepted auditing standards in Sweden. We believe that the examination has provided us with sufficient basis for our opinions.
A corporate governance statement has been prepared. Disclosures in accordance with chapter 6 section 6 the second paragraph points 2-6 of the Annual Accounts Act and chapter 7 section 31 the second paragraph the same law are consistent with the other parts of the annual accounts and consolidated accounts and are in accordance with the Annual Accounts Act.
Öhrlings PricewaterhouseCoopers AB, box 4009, 203 11 Malmö, was re-appointed auditor of Ascelia Pharma AB (publ) by the general meeting of the shareholders on the 14 November 2019 and has been the company's auditor since the introduction on Nasdaq Stockholm, 13 March 2019.
Malmö 3 April 2020 Öhrlings PricewaterhouseCoopers AB
Authorized Public Accountant
An application submitted to the FDA for the review and potential approval of a generic drug product.
Destruction of a body part or tissue or its function. Ablation may be performed by surgery, hormones, drugs, radiofrequency, heat, or other methods.
The ingredient in a pharmaceutical drug that is biologically active used similar to "Active substance/ingredient" below.
Active substance/ingredient The ingredient in a pharmaceutical drug that is biologically active.
Acute kidney injury (AKI) An abrupt loss of kidney function.
Advanced cancer Cancer that has grown outside the organ it started in.
Studies to prove that a product is bioequivalent, i.e. pharmaceutically equivalent, to another drug. Bioequivalence studies are required in an ANDA.
A study in which information about the test is masked to reduce or eliminate bias.
A type of cancer treatment that uses one or more anti-cancer drugs.
A progressive loss in kidney function over a prolonged time period.
Studies on healthy or non-healthy individuals to study the effects of a drug or a treatment method.
Refers to cancer developing in the large intestine, usually in the rectum or colon.
A type of scanning method, in which many two-dimensional pictures are computer-processed to create a three-dimensional picture.
Contrast agent/imaging drug A substance used to enhance the contrast in medical imaging.
Cytotoxic drug A type of drug used within chemotherapy.
In this context a term to describe the time-period in which no ANDA can be approved based on the exclusive data for the drug.
Embolisation
A procedure using particles, such as tiny gelatin sponges or beads, to block a blood vessel. Embolisation may be used to stop bleeding or to block the flow of blood to a tumor or abnormal area of tissue.
European Medicines Agency (EMA) European agency responsible for evaluation of medicinal products.
Focal liver lesion Localized changes in liver tissue.
Food and Drug Administration (FDA) US federal agency responsible for evaluation of medicinal products.
Food effect bioavailability study A study with the objective to evaluate the effect of food on the bioavailability of a drug.
A heavy metal used as a contrast enhancer, see "Gadolinium-based contrast agent (GBCA)" below.
Gadolinium-based contrast agent (GBCA) A contrast agent based with gadolinium as a contrast enhancer.
A pharmaceutical that is equivalent to a brand-name product in dosage, strength, route of administration, quality, performance and intended use.
Good Clinical Practice (GCP)
An international quality standard for the performance of clinical studies.
A set of manufacturing guidelines set up by the authorization agency for medicinal products. GMP can differ depending on the authority.
HER2
A gene that can play a role in the development of certain cancer forms.
A measure of the probability of occurrence of a medical condition in a population.
Infusion A continuous injection of a substance into the body.
Studies performed outside of the normal biological context. Often used to refer to studies outside of the body.
In vivo studies Studies performed in a living organism, for example in humans.
Listed drug A new drug approved for sale (distinguished from generic drugs).
Magnetic resonance imaging (MRI) A medical imaging technique used in radiology.
In this context, the period following regulatory approval of an orphan drug in which no marketing authorization will be accepted for the same therapeutic indication.
The spread of a cancer to a different part of the body.
Nephrogenic systemic fibrosis (NSF) A serious condition involving fibrosis of skin, joints, eyes, and internal organs.
Orphan Drug A pharmaceutical agent that has been developed specifically to treat a rare medical condition.
Positron emission tomography (PET) An imaging technique used to observe metabolic processes in the body.
Prevalence
The proportion of a population suffering from a certain disease.
Primary tumor The first cancer tumor formed.
Studies within a certain population, such as the elderly, populations with certain impairments or diseases, etc.
Agents interfering with specific molecules that are part of the cancer growth.
| Alternative performance measures | Definition | Aim |
|---|---|---|
| Operating results (TSEK) | Profit before financial items and tax. | The performance measure shows the company´s operational performance. |
| Research and development costs/operating costs (%) | The research and development expenses in relation to total operating costs (consisting of the sum of administrative expenses, research and development as well as other operating expenses). |
The performance measure is useful in order to understand how much of the operating costs that are related to research and development expenses. |
| Jul-Dec 2019 | Jul 2018-Jun 2019 | |||
|---|---|---|---|---|
| R&D costs (SEK 000') | -26,920 | -22,923 | ||
| Administration costs (SEK 000') | -8,378 | -14,406 | ||
| Other operating costs including commercial preparations (SEK 000') | -1,801 | -265 | ||
| Total operating costs (SEK 000') | -37,098 | -37,595 | ||
| R&D costs/Operating costs (%) | 73% | 61% |
Interim report H1 (Jan-Jun 2020): 20 August 2020
[email protected] | +46 735 179 110
[email protected] | +46 735 179 113
ASCELIA PHARMA AB Hyllie Boulevard 34 SE-215 32 Malmö, Sweden
ascelia.com
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