Interim / Quarterly Report • Oct 21, 2014
Interim / Quarterly Report
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Interim Report January – September 2014 Q3
Karolinska Development AB (publ) Corporate Identity Number 556707-5048
For more information, please contact:
Bruno Lucidi, Chief Executive Officer +46 72 245 98 92
Christan Tange, Chief Financial Officer +46 73 712 14 30
| 2013 | 2013 | ||||
|---|---|---|---|---|---|
| 2014 | Jul-Sep | 2014 | Jan-Sep | 2013 | |
| SEKm | Jul-Sep | (restated) | Jan-Sep | (restated) | (restated) |
| Condensed Income Statement | |||||
| Change in fair value of portfolio companies | -107.7 | -80.6 | -291.1 | -16.6 | -140.0 |
| Net profit/loss | -128.1 | -91.6 | -336.0 | -58.1 | -157.3 |
| Condensed Balance sheet | |||||
| Cash, cash equivalents and short-term | |||||
| investments | 112.3 | 232.1 | 200.7 | ||
| Share information | |||||
| Earnings per share, weighted average, before | |||||
| and after dilution (SEK) | -2.65 | -1.90 | -6.96 | -1.20 | -3.25 |
| Net asset value per share (SEK) (Note 1) | 33.9 | 42.6 | 40.7 | ||
| Equity per share (SEK) (Note 1) | 33.6 | 42.6 | 40.5 | ||
| Share price, last trading day in the reporting | |||||
| period (SEK) | 13.0 | 31.0 | 30.9 | ||
| Portfolio information | |||||
| Portfolio companies´net cash¹) | -2.8 | 186.9 | 111.6 | ||
| Investments in portfolio companies | 7.2 | 2.7 | 56.5 | 176.9 | 266.2 |
| Of which investments not affecting cash flow | 0.0 | 0.0 | 6.7 | 3.8 | 68.1 |
| Fair value of portfolio holdings | 1,494.0 | 1,767.8 | 1,729.5 |
¹ ) Portfolio companies' net cash is comprised of sum of cash, cash equivalents and short-term investments less external loans in portfolio companies regardless of Karolinska Development's ownership interest (cash, cash equivalents and short-term investments amounting to SEK 92.7m less external loans amounting to SEK -95.5m)
Bruno Lucidi, CEO
My appointment as CEO of Karolinska Development coincides with the announcement of a new strategy for the future investments in our portfolio. I am convinced that these strategic measures will be a good foundation for our continued efforts to realize value in the portfolio.
Our portfolio companies have been selected into a Strategic and an Opportunistic Portfolio that we further specify in this report. We will focus our financial and managerial efforts in the Strategic Portfolio and develop those towards important near-to mid-term value inflection point within specialized care areas and orphan diseases such as Dilaforette's program in sickle-cell disease or OssDsign's advanced implant technology. At the same time we will utilize a more differentiated investment strategy depending on the properties of the programs within the portfolio. In order to maximize value and future returns, the investment horizon for each asset will for example vary depending on the optimal exit strategy within the specific therapeutic fields.
We were pleased to announce Forendo Pharma's licensing agreement granting Apricus Bioscience US development and commercialization rights for fispemifene after the reporting period. The agreement does not only signify the Forendo team's expert abilities in developing drug candidates that targets organ specific hormone mechanisms, but also exemplifies the value potential in our portfolio of carefully selected innovations based on outstanding science. According to the deal terms, Forendo is entitled to a total of USD 310 million in milestone and upfront payments, common shares in Apricus and tiered double-digit royalties on US net sales. The fispemifene development program will focus on hypogonadism, a condition that results in low testosterone levels in men, where two Phase II studies has shown therapeutic potential. In addition, Apricus will expand the development into other urological conditions where the fispemifene mode of action is believed to able to ameliorate symptoms.
It is important to emphasize that the Opportunistic Portfolio also hold a considerable value potential. During the third quarter, Umecrine Mood presented final data from the company's exploratory Phase I/II study in patients with premenstrual dysphoric disorder (PMDD). While the study's primary endpoint was not met, as we announced during the summer, post-hoc analyses correcting for some important issues identified in the study, shows significant reductions in symptoms compared to placebo. Should these data be confirmed in new studies, UC1010 could make a profound difference to the millions of women who suffer from PMDD. Based on these data, Umecrine Mood are now in the process of finding a partner to continue the clinical development of UC1010.
In October, Athera Biotechnologies passed an important milestone in the development of PC-mAb for the treatment of cardiovascular disease when the first patients were dosed in a Phase I study. In addition, Clanotech received orphan drug designation in the EU for the development of the company's lead candidate within glaucoma surgery. Furthermore, OssDsign received 510(k) clearance by the US FDA for the burr hole plug Cranioplug.
In our continuous effort to evaluate the portfolio, the fair value of Biosergen has written down as the company has not been able to secure external financing to the systemic fungal infection in preclinical development.
I am looking forward to leading Karolinska Development in this decisive period for the company. With a new strategy in place, we will move forward determinately to unlock the value in our portfolio. Our belief that investing in outstanding life science innovations will shape future treatments for patients that today are not offered adequate treatment options. The management in our portfolio companies are key to the success of our ambitions. The new strategy will also take into consideration the specific needs within the portfolio of accountable and experienced leadership.
Bruno Lucidi Chief Executive Officer
Karolinska Development invests in medical innovations that addresses unmet medical needs and develop them to the phase when the highest return on investments may be generated by IPO, trade sale of companies or licensing of projects. Karolinska Development intends to finance its investments through capital injections from its shareholders, proceeds from trade sales of shares in its portfolio companies, and dividends from its portfolio companies. Karolinska Development holds a number of portfolio companies at varying degrees of ownership in the form of subsidiaries, joint ventures, associates, as well as other long term securities holdings. The holdings are valued at fair value.
After the end of the quarter, Karolinska Development's Board and management have decided on a new and more focused strategy to optimize and unlock the value in the existing portfolio.
Firstly, Karolinska Development will focus on company programs with drug candidates, which address relevant unmet medical needs of patients with serious debilitating and/or lifethreatening diseases, so-called orphan diseases. This Strategic Portfolio will contain companies with scientifically and commercially attractive programs with significant near- to mid-term value inflection points.
The strategic portfolio will be supported by a second portfolio, an Opportunistic Portfolio, with a number of company programs that have entered into third party development agreements or already have products on the market. Through pay-offs from near- to midterm exits in the opportunistic portfolio, Karolinska Development will have further investment capabilities to invest in the Strategic Portfolio.
Secondly, Karolinska Development will enforce and reward strong leadership at portfolio company level by requiring management in portfolio companies to have a strong focus on deal flow and return on investments. Karolinska Development will strengthen its active ownership approach and remain actively engaged as a committed investor, e.g. via its representation on the boards, either directly or via experienced professional independent board directors, and will provide the right incentives for management to be responsible and accountable for running and developing their respective companies
Thirdly, Karolinska Development will maximize value creation in the company programs through a differentiated asset-centric and patient-focused investment approach. This means that Karolinska Development - as part of every investment decision – will consider significant valueinflection points, exit scenarios and capital requirements to be reached. As a consequence, company programs may be supported throughout development, if relevant from a value inflection point of view.
Finally, Karolinska Development will broaden the portfolio companies' access to capital by building strong investor relations and by proactively seeking syndicated financing together with other specialized life science investors. The proactive syndication strategy enables Karolinska Development to strengthens governance, not only by its own representation in the company boards, but also to add to the boards further committed and experienced life science expertise from co-investors or its network of specialized investors.
Karolinska Development's Board and management are convinced this new strategy will put Karolinska Development in a stronger position to take advantage of the business opportunities that the portfolio companies offer.
| Karolinska Development | KDEV Investments (KDEV Investments owned 87% by KD and 13% by Rosetta Capital) |
|
|---|---|---|
| Strategic portfolio |
Forendo Pharma OssDsign ۰ Pharmanest ٠ Umecrine Cognition ٠ XSpray ۰ Net Asset Value: MSEK 343 Investment Strategy: Proceeds from exits/new funds, existing KD funds and co-investors |
Aprea ٠ Akinion Clanotech Dilaforette ٠ Net Asset Value: MSEK 573 Investment Strategy: Primarily existing KD and Rosetta Capital funds combined with co-investors |
| Opportunistic portfolio |
Athera BioArctic Lipidor Net Asset Value: MSEK128 Investment Strategy: Limited investments required, co-investors. |
- Axelar · NovaSaid - BioSergen · Pergamum Dilafor · Promimic m. · Umecrine Mood $-$ ISS · NeoDynamics Net Asset Value: MSEK 450 Investment Strategy: Rosetta Capital, license deals, co-development, co-investors. |
-
Bruno Lucidi was appointed Chief Executive Officer of the wholly owned subsidiary KDev Oncology and the portfolio companies Aprea and Akinion Pharmaceuticals. KDev Oncology assists the clinical portfolio companies in developing cancer drugs and attracting strategic partners and co-investors.
In an exploratory double blind, randomized multicenter study, 120 patients with PMDD received placebo or one of two doses of UC1010 during one menstrual cycle. The objectives of the trial were to study the safety and efficacy of UC1010. The primary efficacy end-point was assessed using a validated daily rating scale (DRSP), to measure the average late luteal phase symptoms in patients treated with UC1010 vs. those given placebo. As previously reported in June 2014, the primary efficacy end-point of the study was not met.
Following final analysis of the study data, post hoc analysis revealed that two key variables that impacted the study outcome: (i) despite patient randomization, the baseline follicular phase symptoms showed a skewed distribution between study groups. Correcting for individual follicular symptoms indicate a statistically significant improvement of symptoms by UC1010 compared to placebo in the total study population (p<0.05 for the total premenstrual symptom score). (ii) due to inconsistencies in the assessment of ovulation, 32% of patients did not receive treatment as intended according to the protocol. Inclusion only of patients treated as intended results in significant beneficial effects of UC1010 (both doses) compared to placebo, both for the cardinal PMDD symptoms (p=0.003) and total premenstrual symptom scores (p=0.006) as well as for the impairment score (p=0.01), which specifically measures the impact of symptoms on daily life in the week prior to menstruation. There were no safety concerns with UC1010 and it was well tolerated. These encouraging data based on post hoc analysis needs to be confirmed in future trial.
Torbjörn Bjerke left his position as CEO on September 30 and Klaus Wilgenbus was appointed acting CEO until the appointment of a new permanent CEO. Klaus Wilgenbus simultaneously left his directorship at the Karolinska Development Board.
Bruno Lucidi was appointed CEO of Karolinska Development on October 15. Bruno Lucidi has extensive international experience in the pharmaceutical, biotechnology and financial industry. In his previous positions as founding CEO of Idenix and Chairman of Pharmasset, he has contributed to maturing the companies to a level that eventually resulted in both companies being acquired by multinational pharmaceutical companies. He has also held senior positions within Bristol-Myers Squibb, Johnson & Johnson and at GlaxoSmithKline. Since September 8, 2014, Bruno Lucidi is CEO of the Karolinska Development's wholly owned subsidiary KDev Oncology as well as of the portfolio companies Aprea and Akinion. Bruno will keep these positions and will assume his new role as CEO of Karolinska Development.
Forendo Pharma's development programs are based on research conducted at Turku University, Oulu University and Åbo Akademi. The company is specialized in pharmaceutical development within tissue specific hormone mechanisms.
The mission of OssDsign is advancing bone repair based on its innovative bioceramics technology platform. OssDsign has started sales in selected EU countries of lead product OssDsign® Craniomosaic, a next generation patient-specific implant for cranial repair. OssDsign was founded by researchers at the Karolinska University Hospital and Uppsala University.
Clanotech is a Swedish biotech company active in ophthalmology and based on research conducted at Karolinska Institutet. Clanotech's lead candidate is an inhibitor of the α5β1-integrin receptor which is present in fibroblast and on vascular endothelial cells. α5β1-integrin is strongly up-regulated in fibroblast when switching to the fibrotic state and in scars after glaucoma surgery , which is the company's primary therapeutic focus.
Athera is a pharmaceutical company focused on development of drugs and diagnostics around antiinflammatory targets. The company's current programs were initiated in 2005 and are based on innovative research at Karolinska Institutet.
Forendo Pharma announced today that it has entered into a definitive agreement to out-license the US development and commercialization rights for fispemifene to Apricus Biosciences Inc. Under the terms of the agreement, Apricus will make a \$5 million upfront cash payment to Forendo, and will transfer approximately 3.6 million Apricus common shares, representing \$7.5 million in value based on the 360-day average market price of the Apricus stock. The agreement includes additional potential clinical and regulatory milestones payments to Forendo for up to \$45 million, including FDA approval, as well as commercial milestone payments totaling up to \$260 million based on achieving specified annual net sales of fispemifene levels up to \$1 billion in the US. Apricus will also pay tiered double-digit royalties based on net sales once the product is commercialized. Apricus will be responsible for the clinical development and costs of the program, as well as all future commercialization in the US. Apricus anticipates to commence a Phase IIb clinical trial during the first half of 2015 to confirm the optimal fispemifene doses to treat men with secondary hypogonadism, and provide proof-of-concept data to evaluate the antiestrogenic and anti-inflammatory effects on the lower urinary tract and prostate in aging men.
OssDsign AB today that its bioceramic burr hole plug - Cranioplug - had received 510(k) clearance by the US Food and Drug Administration (FDA). In the 500,000 open brain surgeries carried out annually worldwide, burr holes and circular cuts between the burr holes are made to allow the surgeon to remove a piece of the skull - the bone flap - and thereby access the brain for the intended intervention. The bone flap is then re-anchored to the surrounding skull bone after the procedure is completed. Cranial fixation today uses metal-based devices that anchor the bone flap to the skull. These devices typically leave the burr hole open, to the cosmetic and psychological detriment of patients. Cranioplug, based on bone-like ceramic materials, in contrast to metal-based competitors, has the potential of integrating with surrounding bone.
Clanotech AB received orphan drug designation by the European Medicines Agency (EMA) for prevention of scarring post glaucoma filtration surgery. Clanotech's lead substance, an α5β1 integrin antagonist, has anti-angiogenic, anti-fibrotic and anti-inflammatory properties that are expected to benefit the wound healing processes following glaucoma surgery. The orphan drug designation will significantly shorten a future market approval process and reinforce market exclusivity for a launched product.
Athera Biotechnologies AB announced that first dosing of healthy volunteers has been done in a Phase I study of its fully human antibody PC-mAb. Athera's fully human monoclonal antibody PCmAb is intended for the treatment of patients with cardiovascular disease, who are at an increased risk of secondary events and death. It is known from previous published studies that low plasma levels of endogenous antibodies against phosphorylcholine (anti-PC) are linked to poor prognosis in acute heart attack patients, as well as in patients with peripheral arterial disease undergoing vein graft surgery. The current Phase I study will include up to 48 healthy volunteers in a single ascending dose protocol with safety outcome measures.
Danske Bank has been appointed as financial advisor to Karolinska Development and will assist in the evaluation of upcoming financing alternatives.
As a part of Karolinska Development's strategy, the portfolio is divided into a Strategic Portfolio and an Opportunistic Portfolio, as below. During the third quarter Umecrine Mood announced final results from a Phase I/II study in premenstrual dysphoric disorder, Forendo Pharma selected a drug candidate for the company's planned clinical studies in endometriosis and OssDsign has initiated a wider market launch of its implant product and also received FDA approval for a follow-up product to the company's cranial implant. After the end of the third quarter, Athera initiated a Phase I study with PC-mAb
| PHARMACEUTICALS | Indication | Owner ship* |
Research Phase |
Preclinical Development |
Phase I | Phase II |
|---|---|---|---|---|---|---|
| Pharmanest AB SHACT | Pain at IUD-insertions | 63% | ||||
| Aprea AB APR-246 | Ovarian cancer | 62% | ||||
| Akinion Pharmaceuticals AB AKN-028 | Acute myeloid leukemia | 81% | ||||
| Pharmanest AB SHACT | Pain at hysteroscopies | 63% | ||||
| Forendo Pharma Oy FP-5677 | Endometriosis | 21% | ||||
| Dilaforette AB Sevuparin | Sickle-cell disease | 64% | ||||
| Clanotech AB CLT28643 | Glaucoma surgery | 80% | ||||
| Umecrine Cognition AB | Hepatic encephalopathy | 67% | ||||
| TECHNOLOGY | Application | Owner ship* |
Concept Development |
Prototype | Development | Product | Launch |
|---|---|---|---|---|---|---|---|
| OssDsign AB Cranio PSI | Cranial implants | 26% | |||||
| XSpray Microparticles AB RightSize™ | Drug formulation technology | 63% |
| PHARMACEUTICALS | Indication | Owner ship* |
Research Phase |
Preclinical Development |
Phase I | Phase II |
|---|---|---|---|---|---|---|
| Axelar AB AXL1717 | Non-small cell lung cancer | 43% | ||||
| BioArctic Neuroscience AB BAN2401 | Alzheimer's | 3% | ||||
| Dilafor AB Tafoxiparin | Protracted labor | 49% | ||||
| Dilaforette AB Sevuparin | Malaria | 64% | ||||
| Forendo Pharma Oy Fispemifene | Hypogonadism | 21% | ||||
| Pergamum AB DPK-060 | Infected eczema | 56% | ||||
| Pergamum AB DPK-060 | External otitis | 56% | ||||
| Pergamum AB PXL01 | Surgical adhesions | 56% | ||||
| Umecrine Mood AB UC1010 | PMDD and severe PMS | 38% | ||||
| Pergamum AB LL-37 | Venous leg ulcers | 56% | ||||
| Athera Biotechnologies AB PC-mAb | Acute coronary syndrome | 65% | ||||
| Biosergen AS BSG005 | Systemic fungal infection | 60% | ||||
| Pergamum AB PXL181 | Skin infection | 56% | ||||
| NovaSAID AB | Inflammatory pain | 77% |
| TECHNOLOGY | Application | Owner ship* |
Concept Development |
Prototype | Development | Product | Launch |
|---|---|---|---|---|---|---|---|
| Promimic AB HAnano SurfaceTM | Bone implant surface | 31% | |||||
| Athera Biotechnologies AB CVDefine® | Cardiovascular diagnostic kit | 65% | |||||
| Inhalation Sciences Sweden AB PreciseInhale™ Respiratory precision dosing |
68% | ||||||
| Lipidor AB AKVANO™ | Topical drug delivery | 51% | |||||
| NeoDynamics AB Fourier | Fine needle biopsy | 18% | |||||
| NeoDynamics AB PRFA | Tumor ablation | 18% |
*Includes indirect ownership Status as per October 20, 2014 Solid color = Completed phase Shaded color = Current phase
During the nine-month period ended 30 September 2014, the effect of the change in fair value of portfolio investments amounted to SEK -291.1m (SEK -16.6m).
During the third quarter ended 30 September 2014, the effect of the change in fair value of portfolio investments amounted to SEK -107.7m (SEK -80.6m).
During the nine-month period, the Investment Entity's operating loss amounted to SEK -331.9m (SEK -60.1m), a change of SEK -271.8m compared with the same period in 2013. During the ninemonth period, several projects in the portfolio met development milestones, which had a positive effect on the fair values of these portfolio companies. At the same time a number of projects in the portfolio developed at a slower rate than previously projected, which resulted in negative changes in fair values. Operating loss during the nine-month period was affected by a change in fair value of the holding by KDev Investments in Axelar AB amounting to -220.7 due to the partnering progress not reaching expectations, and in Biosergen AS amounting to -28.3m due to lack of financing for future development. During the nine-month period, the fair value was affected positively by adjustments of the discount rates (WACC) (see 'Information on fair value measurement in level 3' in note 2). Other expenses have decreased by SEK 8.1m year-over-year. Expenses for legal services, consultants and travel have decreased year-over-year, and the comparative period's operating result was charged with one-off expenses of SEK 3.5m related to the Rosetta transaction. During the period, personnel costs were charged with severance provisions for the former CEO of SEK 8.7m, including pension and social security expenses.
The portion of the change in fair value affecting income related to portfolio holdings amounted to SEK -291.1m (SEK -16.6m) during the nine-month period.
During the third quarter, the Investment Entity's operating loss amounted to SEK -124.4m (SEK -92.8m), a change of SEK -31.6m compared with the same period in 2013. The portion of the change in fair value affecting income related to portfolio holdings amounted to SEK -107.7m (SEK -80.6m) during the third quarter. The change in fair value of the holding by KDev Investments in Biosergen AS amounted to -28.3m during the third quarter. Other expenses have decreased by SEK 2.4m year-over-year due to lower expenses for legal services, consultants and travel. During the quarter, personnel costs were charged with severance provisions for the former CEO of SEK 8.7m, including pension and social security expenses.
The Investment Entity's loss before tax during the nine-month period amounted to SEK -336.0m (SEK -58.1m).
The Investment Entity's loss before tax during the third quarter amounted to SEK -128.1m (SEK -91.6m).
Investments in portfolio companies during the nine-month period amounted to SEK 56.5m (SEK 176.9m).
During the nine-month period investments were made in KDev Investments' portfolio at SEK 33.4m (Dilaforette Holding AB, SEK 10.7m; Dilafor AB, SEK 6.0m, Umecrine Mood AB, SEK 4.8m; Aprea AB, SEK 4.6m; Clanotech AB, SEK 2.8m; Pergamum AB, SEK 1.8m; Promimic AB, SEK 1.8m; and Inhalation Sciences Sweden AB, SEK 0.9m) as well as in Umecrine Cognition AB, SEK 11.8m; XSpray Microparticles AB, SEK 4.9m; Pharmanest AB, SEK 4.1m; and KCIF Co-Investment Fund KB, SEK 2.3m.
Investments in portfolio companies during the third quarter amounted to SEK 7.2m (SEK 2.7m).During the third quarter investments were made in KDev Investments' portfolio at SEK 6.4m (Aprea AB, SEK 4.6m and Pergamum AB, SEK 1.8m) as well as in Umecrine Cognition AB, SEK 0.8m.
* The Investment Entity refers to the Parent Company, Karolinska Development AB, and all subsidiaries, joint ventures, associated companies and other long-term securities holdings which are all recognized at fair value.
The Investment Entity's equity to total assets ratio was 98% (99%) on 30 September 2014 and equity amounted to SEK 1,621.9m (SEK 1,957.6m).
Cash, cash equivalents and short-term investments in the Investment Entity amounted to SEK 112.3m (SEK 200.7m), of which SEK 69.8m is provisionally allocated for anticipated follow-on investments in the KDev Investments portfolio. In addition, up to SEK 75.0m will be allocated to these portfolio companies as additional liquidity becomes accessible to Karolinska Development. Total assets amounted to SEK 1,651.3m (SEK 1,979.6m).
Karolinska Development is an Investment Entity in accordance with IFRS 10 Consolidated Financial Statements. Karolinska Development has retroactively changed its accounting policy in accordance with IFRS 10 and IAS 8. Note 3 shows effects of the change in accounting policy for the comparative periods.
During the nine-month period ended 30 September 2014, the Parent Company's operating loss amounted to SEK -55.4m (SEK 61.1m), a change of SEK -116.5m compared with the same period in 2013. Operating profit for the comparative period includes a capital gain of SEK 123.7m on the sale of shares in KDev Investments AB to Rosetta. The operating result for the nine-month period was charged with write-downs of shares in portfolio companies of SEK -14.5m. Other expenses have decreased by SEK 8.1m year-over-year. Expenses for legal services, consultants and travel have decreased year-over-year, and the comparative period's operating result was charged with one-off expenses of SEK 3.5m related to the Rosetta transaction. During the period, personnel costs were charged with severance provisions for the former CEO of SEK 8.7m, including pension and social security expenses.
During the third quarter, the Parent Company's operating loss amounted to SEK -30.9m (SEK - 17.4m), a change of SEK -13.5m compared with the same period in 2013. The operating result for the third quarter was charged with write-downs of share in portfolio companies of SEK -14.2m. Other expenses have decreased by SEK 2.4m year-over-year due to lower expenses for legal services, consultants and travel. During the quarter, personnel costs were charged with severance provisions for the former CEO of SEK 8.7m, including pension and social security expenses.
The Parent Company's net loss during the nine-month period amounted to SEK -57.6m (SEK 62.0m).
The Parent Company's net loss during the third quarter amounted to SEK -34.3m (SEK -16.2m).
Companies active in pharmaceutical development and medical technology at an early phase are, by their very nature, difficult to value, as lead times are very long and development risks are high. Due to the uncertainty and subjectivity in these assessments, the estimated value of the portfolio may deviate substantially from future generated value. This is largely due to sensitivities in the valuation calculations to movement of expected milestone or exit dates, costs of trials and similar assumptions, which are not necessarily accounted for in arriving at an actual deal value in negotiations with partners. Decisions about investment strategies may also have an impact on the valuations.
Risks and uncertainties are primarily associated with investments in portfolio companies and the development of projects in these companies. The operations of the portfolio companies consist of the development of early stage pharmaceutical projects. By their very nature such operations are distinguished by very high risk and uncertainty in terms of results.
Financial risks consist of investments in portfolio companies as well as risks in the management of liquid assets.
Future investments in new and current portfolio companies will require additional capital in order for Karolinska Development to maintain or increase its share of the value in these companies. As an investor, however, we can make no guarantees that the necessary capital to fund the projects can be obtained on favorable terms or that such capital can be obtained at all. Investments in portfolio companies will decrease compared to the prior year due to license agreements that several portfolio companies have entered into licensing agreements with partners, expected increases in EU subsidies and an increased share of third party financing. However, the value of the portfolio companies in general assumes additional future investments to be made in order to materialize the values in the portfolio companies. If Karolinska Development does not invest as planned, this could have a negative impact on Karolinska Development's valuation of the portfolio companies.
As of September 30, 2014, it is the board's view that the liquidity available to the Karolinska Development AB is sufficient for the parent company's current operations before investments for a period of at least 12 months from the balance sheet date. Consequently the report has been prepared under the assumption of going concern.
No new risk areas have been identified since 31 December 2013. For a detailed description of risks and uncertainties, see the annual report 2013.
The Board of Directors and the CEO hereby certify that this interim report gives a true and fair view of the operations, financial position and results of operations of the Parent Company and the Investment Entity and describes the material risks and uncertainties faced by the company.
Solna, 21 October 2014
Chairman
Bo Jesper Hansen Charlotte Edenius Vlad Artamonov
Hans Wigzell Carl Johan Sundberg Henrijette Richter
Robert Holland Bruno Lucidi
CEO
Year-end report January-December 2014 18 February 2015 Annual report 2014 10 April 2015 Interim report January-March 2015 6 May 2015 Annual General Meeting 20 May 2015 Interim report January-June 2015 26 August 2015 Interim report January-September 2015 25 November 2015
Karolinska Development is required by law to publish the information in this interim report. The information was published on 21 October 2014.
This interim report, together with additional information, is available on Karolinska Development's website, www.karolinskadevelopment.com.
For further information, please contact: Bruno Lucidi, CEO +46 72 245 98 92
Christan Tange, CFO +46 73 712 14 30
See also www.karolinskadevelopment.com
Karolinska Development AB (publ) Tomtebodavägen 23A SE-171 65 Solna, Sweden
Note: This report is a translation of the Swedish year-end report. In case of any discrepancies, the Swedish version shall prevail.
We have reviewed the condensed financial information (interim report) for Karolinska Development AB (publ) (the "Investment Entity")as per 30 September 2014 and the nine-month period ended on this date. The Board of Directors and the CEO are responsible for the preparation and presentation of this financial information in accordance with IAS 34 and the Swedish Annual Accounts Act. Our responsibility is to express a conclusion on this financial information based on our review.
We conducted our review in accordance with the International Standard on Review Engagements ISRE 2410, Review of Interim Report Performed by the Independent Auditor of the Entity. A review consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (ISA) and other generally accepted auditing standards. The procedures performed in a review do not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Therefore, the conclusion expressed based on a review does not give the same level of assurance as a conclusion based on an audit.
Based on our review, nothing has come to our attention that causes us to believe that the interim report for the Investment Entity is not prepared, in all material respects, in accordance with IAS 34 and the Swedish Annual Accounts Act, and for the Parent Company in accordance with the Swedish Annual Accounts Act.
Stockholm, 21 October 2014 Deloitte AB
Thomas Strömberg Authorized Public Accountant
| SEK 000 | Note | 2014 Jul-Sep |
2013 Jul-Sep (restated) |
2014 Jan-Sep |
2013 Jan-Sep (restated) |
2013 Full year (restated) |
|---|---|---|---|---|---|---|
| Revenue | 1,094 | 1,567 | 3,450 | 4,003 | 4,948 | |
| Other expenses | -3,174 | -5,572 | -11,679 | -19,818 | -25,292 | |
| Personnel costs | -14,759 | -8,230 | -34,151 | -27,637 | -38,290 | |
| Depreciation of tangible non-current assets | -53 | -2 | -159 | -7 | -114 | |
| Change in fair value of shares in portfolio companies | 2 | -107,739 | -80,571 | -291,098 | -16,619 | -139,996 |
| Result from sale of shares in portfolio companies | 205 | - | 1,736 | - | - | |
| Operating profit/loss | -124,426 | -92,808 | -331,901 | -60,078 | -198,744 | |
| Financial net | -3,700 | 1,179 | -4,113 | 1,953 | 41,429 | |
| Profit/loss before tax | -128,126 | -91,629 | -336,014 | -58,125 | -157,315 | |
| Deferred taxes | - | - | - | - | - | |
| Curren taxes | - | - | - | - | - | |
| NET PROFIT/LOSS FOR THE PERIOD | -128,126 | -91,629 | -336,014 | -58,125 | -157,315 |
| SEK 000 | Note | 2014 Jul-Sep |
2013 Jul-Sep (restated) |
2014 Jan-Sep |
2013 Jan-Sep (restated) |
2013 Full year (restated) |
|---|---|---|---|---|---|---|
| Earnings per share, weighted average, before and after dilution |
-2.65 | -1.90 | -6.96 | -1.20 | -3.25 | |
| Number of shares, weighted average | 48,287,132 | 48,352,304 | 48,287,132 | 48,371,208 | 48,350,016 |
| SEK 000 | Note | 2014 Jul-Sep |
2013 Jul-Sep (restated) |
2014 Jan-Sep |
2013 Jan-Sep (restated) |
2013 Full year (restated) |
|---|---|---|---|---|---|---|
| Net/profit loss for the period | -128,126 | -91,629 | -336,014 | -58,125 | -157,315 | |
| Total comprehensive income for the period | -128,126 | -91,629 | -336,014 | -58,125 | -157,315 |
| SEK 000 | Note | 30 Sep 2014 | 30 Sep 2013 (restated) |
31 Dec 2013 (restated) |
31 Dec 2012 (restated) |
|---|---|---|---|---|---|
| ASSETS | |||||
| Non-current assets | |||||
| Tangible non-current assets | 370 | 1 | 529 | 9 | |
| Shares in portfolio companies, at fair value through profit or loss |
1,494,027 | 1,767,772 | 1,729,465 | 1,827,190 | |
| Loans receivable from portfolio companies | 2,744 | 30,152 | 5,894 | 12,856 | |
| Other financial assets | 38,113 | 38,113 | 38,113 | 8,907 | |
| Total non-current assets | 1,535,254 | 1,836,038 | 1,774,001 | 1,848,962 | |
| Current assets | |||||
| Accounts receivable | 1 | 12 | 3 | 106 | |
| Receivables from portfolio companies | 600 | 698 | 254 | 563 | |
| Other short-term receivables | 1,819 | 3,795 | 3,225 | 2,476 | |
| Prepaid expenses and accrued income | 1,295 | 2,995 | 1,477 | 2,463 | |
| Short-term investments, at fair value through profit or loss | 104,416 | 167,174 | 165,334 | 174,160 | |
| Cash and cash equivalents | 7,915 | 64,908 | 35,323 | 108,680 | |
| Total current assets | 116,046 | 239,582 | 205,616 | 288,448 | |
| TOTAL ASSETS | 1,651,300 | 2,075,620 | 1,979,617 | 2,137,410 | |
| EQUITY AND LIABILITIES | |||||
| Equity | |||||
| Share capital | 24,266 | 24,266 | 24,266 | 24,266 | |
| Share premium | 1,768,179 | 1,768,179 | 1,768,179 | 1,768,179 | |
| Retained earnings | -170,592 | 263,589 | 165,159 | 323,060 | |
| Total equity | 1,621,853 | 2,056,034 | 1,957,604 | 2,115,505 | |
| Long-term liabilities | |||||
| Other financial liabilities | 11,373 | 9,878 | 9,438 | 10,889 | |
| Total long-term liabilities | 11,373 | 9,878 | 9,438 | 10,889 | |
| Current liabilities | |||||
| Accounts payable | 3,115 | 1,391 | 2,426 | 2,510 | |
| Liabilities to portfolio companies | 442 | 453 | 442 | 473 | |
| Other current liabilities | 1,162 | 1,566 | 1,593 | 1,512 | |
| Accrued expenses and prepaid income | 13,355 | 6,298 | 8,114 | 6,521 | |
| Total current liabilities | 18,074 | 9,708 | 12,575 | 11,016 | |
| Total liabilities | 29,447 | 19,586 | 22,013 | 21,905 | |
| TOTAL EQUITY AND LIABILITIES | 1,651,300 | 2,075,620 | 1,979,617 | 2,137,410 |
| Equity attributable to Parent Company's shareholder | |||||||
|---|---|---|---|---|---|---|---|
| SEK 000 | Note | Share capital | Share premium |
Retained earnings |
Total | Non controlling interests |
Total equity |
| Opening equity at 1 Jan 2014 | 24,266 | 1,768,179 | 165,159 | 1,957,604 | 1,957,604 | ||
| Net profit/loss for the period | -336,014 | -336,014 | -336,014 | ||||
| Total comprehensive income for the period | -336,014 | -336,014 | -336,014 | ||||
| Effect of incentive programs | 263 | 263 | 263 | ||||
| Closing equity at 30 Sep 2014 | 24,266 | 1,768,179 | -170,592 | 1,621,853 | 1,621,853 | ||
| Opening equity at 1 Jan 2013 (restated) | 24,266 | 1,768,179 | 323,060 | 2,115,505 | - | 2,115,505 | |
| Net profit/loss for the period | -58,125 | -58,125 | -58,125 | ||||
| Total comprehensive income for the period | -58,125 | -58,125 | -58,125 | ||||
| Effect of incentive programs | 1,137 | 1,137 | 1,137 | ||||
| Share repurchase | -2,483 | -2,483 | -2,483 | ||||
| Closing equity at 30 Sep 2013 (restated) | 24,266 | 1,768,179 | 263,589 | 2,056,034 | - | 2,056,034 | |
| Opening equity at 1 Jan 2013 (restated) | 24,266 | 1,768,179 | 323,060 | 2,115,505 | - | 2,115,505 | |
| Net profit/loss for the year | -157,315 | -157,315 | -157,315 | ||||
| Total comprehensive income for the year | -157,315 | -157,315 | -157,315 | ||||
| Effect of incentive programs | 1,897 | 1,897 | 1,897 | ||||
| Share repurchase | -2,483 | -2,483 | -2,483 | ||||
| Closing equity at 30 Dec 2013 (restated) | 24 266 | 1,768,179 | 165,159 | 1,957,604 | - | 1,957,604 | |
| Opening equity at 1 Jan 2012 | 24,266 | 1,768,179 | -122,547 | 1,669,898 | 354,294 | 2,024,192 | |
| Effect of change in accounting policy to Investment Entity |
3 | 404,640 | 404,640 | -354,294 | 50,346 | ||
| Adjusted opening equity at 1 Jan 2012 | 24,266 | 1,768,179 | 282,093 | 2,074,538 | - | 2,074,538 | |
| Net profit/loss for the year | 43,210 | 43,210 | 43,210 | ||||
| Total comprehensive income for the year | 43,210 | 43,210 | 43,210 | ||||
| Share repurchase | -2,243 | -2,243 | -2,243 | ||||
| Closing equity at 31 Dec 2012 (restated) | 24,266 | 1,768,179 | 323,060 | 2,115,505 | - | 2,115,505 |
| 2014 | 2013 Jan-Sep |
2013 Full year |
||
|---|---|---|---|---|
| SEK 000 | Note | Jan-Sep | (restated) | (restated) |
| Operating activities | ||||
| Operating profit/loss | -331,901 | -60,078 | -198,744 | |
| Adjustments for items not affecting cash flow | ||||
| Depreciation | 159 | 7 | 114 | |
| Change in fair value | 2 | 291,098 | 16,619 | 139,996 |
| Result from sale of shares in portfolio companies | -1,736 | - | - | |
| Other items | 9,017 | 2,245 | 2,171 | |
| Proceeds from short-term investments | 946 | 1,072 | 1,062 | |
| Interest paid/received | 334 | 1,753 | 5,312 | |
| Cash flow from operating activities before changes in working capital and operating investments |
-32,083 | -38,382 | -50,089 | |
| Cash flow from changes in working capital | ||||
| Increase (-)/Decrease (+) in operating receivables | 397 | -2,051 | 1,116 | |
| Increase (+)/Decrease (-) in operating liabilities | -3,256 | -292 | 2,575 | |
| Operating investments | ||||
| Proceeds from sales of shares in portfolio companies | 1,923 | 190,793 | 194,924 | |
| Acquisitions of shares in portfolio companies | -49,866 | -173,126 | -198,120 | |
| Loans provided to portfolio companies | -6,394 | -25,581 | -27,750 | |
| Proceeds from sales of short-term investments¹) | 61,871 | 7,350 | 7,105 | |
| Investments in tangible non-current assets | - | - | -635 | |
| Cash flow from operating activities | -27,408 | -41,289 | -70,874 | |
| Financing activities | ||||
| Repurchased shares | - | -2,483 | -2,483 | |
| Cash flow from financing activities | - | -2,483 | -2,483 | |
| Cash flow for the period | -27,408 | -43,772 | -73,357 | |
| Cash and cash equivalents at the beginning of the year | 35,323 | 108,680 | 108,680 | |
| CASH AND CASH EQUIVALENTS AT THE END OF PERIOD | 7,915 | 64,908 | 35,323 |
| CASH AND CASH EQUIVALENTS AT THE END OF PERIOD | 7,915 | 64,908 | 35,323 |
|---|---|---|---|
| Short-term investments, market value at closing date | 104,416 | 167,174 | 165,334 |
| CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTSAT THE END OF PERIOD | 112,331 | 232,082 | 200,657 |
1) Surplus liquidity in the investment entity is invested in interest-bearing instruments and is recognized as short-term investments with a maturity exceeding three months. These investments are consequently not reported as cash and cash equivalents and are therefore included in the statements of cash flows from operating activities. The supplemental disclosure is presented to provide a total overview of the investment entity's available funds including cash, cash equivalents and short-term investments described here.
| SEK 000 Note |
2014 Jul-Sep |
2013 Jul-Sep |
2014 Jan-Sep |
2013 Jan-Sep |
2013 Full year |
|---|---|---|---|---|---|
| Net sales | 1,094 | 1,567 | 3,450 | 4,003 | 4,948 |
| Revenue | 1,094 | 1,567 | 3,450 | 4,003 | 4,948 |
| Other expenses | -3,174 | -5,570 | -11,679 | -19,816 | -25,293 |
| Personnel costs | -14,759 | -8,230 | -34,151 | -27,637 | -38,290 |
| Depreciation of tangible non-current assets | -53 | -2 | -159 | -7 | -114 |
| Impairment losses on shares in subsidiaries, joint ventures, associated companies and other long-term |
|||||
| securities holdings | -14,154 | -5,131 | -14,523 | -19,162 | -24,701 |
| Result from sale of shares in portfolio companies | 154 | 0 | 1,685 | 123,678 | 90,909 |
| Operating profit/loss | -30,892 | -17,366 | -55,377 | 61,059 | 7,459 |
| Financial net | -3,360 | 1,179 | -2,178 | 941 | 39,855 |
| NET PROFIT/LOSS FOR THE PERIOD | -34,252 | -16,187 | -57,555 | 62,000 | 47,314 |
| SEK 000 | Note | 2014 Jul-Sep |
2013 Jul-Sep |
2014 Jan-Sep |
2013 Jan-Sep |
2013 Full year |
|---|---|---|---|---|---|---|
| Net profit/loss for the period | -34,252 | -16,187 | -57,555 | 62,000 | 47,314 | |
| Total comprehensive income for the period | -34,252 | -16,187 | -57,555 | 62,000 | 47,314 |
| SEK 000 | Note | 30 Sep 2014 | 30 Sep 2013 | 31 Dec 2013 |
|---|---|---|---|---|
| ASSETS | ||||
| Non-current assets | ||||
| Tangible non-current assets | 370 | 1 | 529 | |
| Shares in subsidiaries, joint ventures, associated companies | ||||
| and other long-term securities holdings | 1,111,683 | 1,023,959 | 1,070,597 | |
| Loans receivable on portfolio companies | 2,744 | 30,152 | 5,894 | |
| Other financial assets | 32,746 | 32,038 | 32,522 | |
| Total non-current assets | 1,147,543 | 1,086,150 | 1,109,542 | |
| Current assets | ||||
| Accounts receivable | 576 | 562 | 202 | |
| Receivables from subsidiaries | 25 | 148 | 55 | |
| Other receivables | 1,819 | 3,795 | 3,225 | |
| Prepaid expenses and accrued income | 1,295 | 2,995 | 1,477 | |
| Short-term investments | 104,416 | 167,174 | 165,334 | |
| Cash and cash equivalents | 7,915 | 64,908 | 35,323 | |
| Total current assets | 116,046 | 239,582 | 205,616 | |
| TOTAL ASSETS | 1,263,589 | 1,325,732 | 1,315,158 | |
| EQUITY AND LIABILITIES Equity |
||||
| Restricted equity | ||||
| Share capital | 24,266 | 24,266 | 24,266 | |
| Unrestricted equity | ||||
| Share premium reserve | 1,778,253 | 1,778,253 | 1,778,253 | |
| Accumulated losses | -502,989 | -551,326 | -550,566 | |
| Net profit/loss for the period | -57,555 | 62,000 | 47,314 | |
| Total equity | 1,241,975 | 1,313,193 | 1,299,267 | |
| Long-term liabilities | ||||
| Pension obligations | 3,540 | 2,831 | 3,315 | |
| Total long-term liabilities | 3,540 | 2,831 | 3,315 | |
| Current liabilities | ||||
| Accounts payable | 3,115 | 1,391 | 2,426 | |
| Liabilities to subsidiaries | 442 | 453 | 442 | |
| Other current liabilities | 1,162 | 1,566 | 1,594 | |
| Accrued expenses and prepaid income | 13,355 | 6,298 | 8,114 | |
| Total current liabilities | 18,074 | 9,708 | 12,576 | |
| Total liabilities | 21,614 | 12,539 | 15,891 | |
| TOTAL EQUITY AND LIABILITIES | 1,263,589 | 1,325,732 | 1,315,158 |
| SEK 000 | Note | 30 Sep 2014 | 30 Sep 2013 | 31 Dec 2013 |
|---|---|---|---|---|
| Pledged assets | 3,540 | 2,831 | 3,315 | |
| Total | 3,540 | 2,831 | 3,315 |
| Restricted | ||||||
|---|---|---|---|---|---|---|
| equity | Unrestricted equity | |||||
| Share | Share | Accumulated | Net profit/loss | Total | ||
| SEK 000 | Note | capital | premium reserve |
losses | for the period | equity |
| Opening equity at 1 Jan 2014 | 24,266 | 1,778,253 | -550,566 | 47,314 | 1,299,267 | |
| Appropriation of loss | 47,314 | -47,314 | ||||
| Net profit/loss for the period | -57,555 | -57,555 | ||||
| Total | 24,266 | 1,778,253 | -503,252 | -57,555 | 1,241,712 | |
| Effect of incentive programs | 263 | 263 | ||||
| Closing equity at 30 Sep 2014 | 24,266 | 1,778,253 | -502,989 | -57,555 | 1,241,975 | |
| Opening equity at 1 Jan 2013 | 24,266 | 1,778,253 | -397,269 | -152,711 | 1,252,539 | |
| Appropriation of profit | -152,711 | 152,711 | ||||
| Net profit/loss for the period | 62,000 | 62,000 | ||||
| Total | 24,266 | 1,778,253 | -549,980 | 62,000 | 1,314,539 | |
| Effect of incentive programs | 1,137 | 1,137 | ||||
| Share repurchase | -2,483 | -2,483 | ||||
| Closing equity at 30 Sep 2013 | 24, 266 | 1,778,253 | -551,326 | 62,000 | 1,313,193 | |
| Opening equity at 1 Jan 2013 | 24,266 | 1,778,253 | -397,269 | -152,711 | 1,252,539 | |
| Appropriation of profit | -152,711 | 152,711 | ||||
| Net profit/loss for the year | 47,314 | 47,314 | ||||
| Total | 24,266 | 1,778,253 | -549,980 | 47,314 | 1,299,853 | |
| Effect of incentive programs | 1,897 | 1,897 | ||||
| Share repurchase | -2,483 | -2,483 | ||||
| Closing equity at 31 Dec 2013 | 24,266 | 1,778,253 | -550,566 | 47,314 | 1,299,267 |
This report has been prepared in accordance with the International Accounting Standard (IAS) 34 Interim Financial Reporting and the Annual Accounts Act. The accounting policies applied to the Investment Entity and the Parent Company correspond, unless otherwise stated below, to the accounting policies and valuation methods used in the preparation of the most recent annual report.
Karolinska Development AB (publ), Corporate identity Number 556707-5048, is a limited liability company with its registered office in Solna, Sweden. Karolinska Development AB aims to create value for investors, patients and researchers by developing innovations from world-class science into products that can be sold or out-licensed with high returns. The business model is to select the most commercially attractive medical innovations, develop innovations to the stage where the greatest return on investment can be achieved, and commercialize the innovations through the sale of companies or out-licensing of products. At the end of the nine-month period ended 30 September 2014 the portfolio consisted of 33 projects, of which 16 are in clinical development.
Karolinska Development AB ("Karolinska Development" or the "Company"), together with its subsidiaries, is an investment entity according to IFRS 10 Consolidated Financial Statements, which took effect for financial years beginning on 1 January 2014, with early adoption permitted. Pursuant to the rules for investment entities, Karolinska Development does not consolidate its wholly owned subsidiaries. Separate financial statements are instead prepared for Karolinska Development AB and its subsidiaries (the "Investment Entity" or the "Group"), where subsidiaries, joint ventures, associated companies and other financial investments are measured at fair value in the statement of financial position with changes in value in profit or loss in accordance with IAS 39 Financial Instruments: Recognition and Measurement. According to the Swedish Financial Reporting Board, these separate financial statements meet the requirements for consolidated financial statements according to the Annual Accounts Act. Karolinska Development has also adopted the other new and amended consolidation standards in the "package of five" as of 1 January 2014: IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements, IFRS 12, Disclosure of Interests in Other Entities, IAS 27 Separate Financial Statements, and IAS 28 Investments in Associates and Joint Ventures. Karolinska Development has implemented the amended accounting policies retroactively in accordance with the transition rules of IFRS 10 Consolidated Financial Statements and IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors. Note 3 shows the effects of the changed accounting principle on the comparative figures for 2013.
Other new or revised IFRS standards and interpretations by IFRIC have had no impact on the Investment Entity or, to the extent that these recommendations are applied to legal entities, on the Parent Company's income or financial position.
Portfolio companies: Companies owned fully or in part by Karolinska Development (subsidiaries, joint ventures, associated companies and other long-term securities holdings) which are active in pharmaceuticals, medtech, theranostics and formulation technology.
Fair value: The NASDAQ Stockholm regulations for issuers require companies listed on NASDAQ Stockholmto apply the International Financial Reporting Standards, IFRS, in their consolidated financial statements. The application of the standards allows groups of an investment company nature to apply so-called fair value in the calculation of the carrying amount of certain assets. These calculations are made on the basis of established principles and are not included in the opening accounts of the Group's legal entity, nor do they affect cash flows
Fair value is estimated according to the International Private Equity and Venture Capital Valuation Guidelines and adheres to the guidance of IFRS 13 Fair Value Measurement. Based on the valuation criteria provided by these rules, an assessment is made of each company to determine a valuation method. This takes into account whether the companies have recently been financed or involved with a transaction that includes an independent third party. If there is no valuation available based on a similar transaction, risk adjusted net present value (rNPV) calculations are made of the portfolio companies whose projects are suitable for this type of calculation. In other cases, Karolinska Development's total investment is used as the best estimation of fair value. In one other case, the valuation at the time of the last capital contribution is used.
Net asset value per share: Estimated fair value of the total portfolio, loans receivable from portfolio companies, shortterm investments, cash and cash equivalents, and financial assets less interest-bearing liabilities in relation to the number of shares outstanding on the closing date.
Equity per share: Equity on the closing date in relation to the number of shares outstanding on the closing date.
Interim period: The period from the beginning of the financial year through the closing date.
Reporting period: Current quarter.
The table below shows financial instruments measured at fair value based on the classification in the fair value hierarchy. The various levels are defined as follows:
Level 1- Fair value determined on the basis of observed (unadjusted) quoted prices in an active market for identical assets and liabilities
Level 2- Fair value determined based on inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly
Level 3- Fair value determined based on valuation models where significant inputs are based on non‐observable data
The carrying amounts of financial assets and liabilities recorded at amortized cost approximate their fair value.
| SEK 000 | Level 1 | Level 2 | Level 3 | Total |
|---|---|---|---|---|
| Financial assets | ||||
| Shares in portfolio companies, at fair value through profit or loss | - | - | 1,494,027 | 1,494,027 |
| Loans receivable from portfolio companies | - | 2,744 | - | 2,744 |
| Other financial assets | - | - | 38,113 | 38,113 |
| Accounts receivable | - | 1 | - | 1 |
| Receivables from portfolio companies | - | 600 | - | 600 |
| Short-term investments, at fair value through profit or loss | 104,416 | - | - | 104,416 |
| Cash and cash equivalents | 7,915 | - | - | 7,915 |
| Total | 112,331 | 3,345 | 1,532,140 | 1,647,816 |
| Financial liabilities | ||||
| Other financial liabilities | - | - | 11,373 | 11,373 |
| Accounts payable | - | 3,115 | - | 3,115 |
| Liabilities to portfolio companies | - | 442 | - | 442 |
| Total | - | 3,557 | 11,373 | 14,930 |
| SEK 000 | Level 1 | Level 2 | Level 3 | Total |
|---|---|---|---|---|
| Financial assets | ||||
| Shares in portfolio companies, at fair value through profit or loss | - | - | 1,767,772 | 1,767,772 |
| Loans receivable from portfolio companies | - | 30,152 | - | 30,152 |
| Other financial receivables | - | - | 38,113 | 38,113 |
| Accounts receivable | - | 12 | - | 12 |
| Receivables from portfolio companies | - | 698 | - | 698 |
| Short-term investments, at fair value through profit or loss | 167,174 | - | - | 167,174 |
| Cash and cash equivalents | 64,908 | - | - | 64,908 |
| Total | 232,082 | 30,862 | 1,805,885 | 2,068,829 |
| Financial liabilities | ||||
| Other financial liabilities | - | - | 9,878 | 9,878 |
| Accounts payable | - | 1,391 | - | 1,391 |
| Liabilities to portfolio companies | - | 453 | - | 453 |
| Total | - | 1,844 | 9,878 | 11,722 |
| SEK 000 | Shares in portfolio companies |
Other financial assets |
Other financial liabilities |
|---|---|---|---|
| At the beginning of the year | 1,729,465 | 38,113 | 9,438 |
| Transfers to and from level 3 | - | - | - |
| Acquisitions | 56,524 | - | - |
| Disposals | -864 | - | - |
| Gains and losses recognized through profit or loss | -291,098 | - | 1,935 |
| Closing balance 30 September 2014 | 1,494,027 | 38,113 | 11,373 |
| Total unrealized gains and losses for the period included in profit or loss | -291,098 | - | -1,935 |
| Gains and losses in profit or loss for the period for assets and liabilities included in the closing balance |
-291,098 | - | -1,935 |
There were no transfers between level 1 and 2 during the nine-month period ended 30 September 2014.
| Shares in portfolio |
Other financial | Other financial | |
|---|---|---|---|
| SEK 000 | companies | assets | liabilities |
| At beginning of the year | 1,827,190 | 8,907 | 10,889 |
| Transfers to and from level 3 | - | - | - |
| Acquisitions | 176,911 | 29,206 | - |
| Disposals | -219,710 | - | - |
| Gains and losses recognized through profit or loss | -16,619 | - | -1,011 |
| Closing balance 30 September 2013 | 1,767,772 | 38,113 | 9,878 |
| Total unrealized gains and losses for the period included in profit/loss | -16,619 | - | 1,011 |
| Gains and losses in profit/loss for the period for assets and liabilities included in the | |||
| closing balance | -16,619 | - | 1,011 |
There were no transfers between level 1 and 2 during the nine-month period ended 30 September 2013.
The Group recognizes transfers between levels in the fair value hierarchy on the date when an event or changes occur that give rise to the transfer.
The valuation of the company's portfolio is based on the International Private Equity and Venture Capital Valuation Guidelines (IPEV) and IFRS 13 Fair Value Measurement. Based on the valuation criteria provided by these rules, an assessment is made of each company to determine a valuation method. This takes into account whether the companies have recently been financed or involved with a transaction that includes an independent third party. If there is no valuation available based on a similar transaction, risk adjusted net present value (rNPV) calculations are made of the portfolio companies whose projects are suitable for this type of calculation. Present value calculations are made with discounted cash flows which comprise:
Estimates are made regarding product launch year and time of exit based on development plans. Drug licensing is usually assumed to be carried out after Phase II. For medical technology companies, an exit is usually assumed after launch of the product. Sales are then based on these estimated times together with the product's expected patent expiry, after which sales are assumed to decrease sharply.
Estimates are made of the cost of each phase of development based either on the companies' forecasts or according to industry standards.
To estimate the effect of changes in the discount rate on the portfolio valuation, WACC has been adjusted by –1 percent and +1 percent.
| WACC adjustment –1% | 30 September 2014 Biotech WACC: 11.90% Pharma WACC: 8.20% |
WACC adjustment +1% | |||
|---|---|---|---|---|---|
| SEKm | Fair value | Change | Fair value | Fair value | Change |
| Fair value difference for shares in portfolio |
|||||
| companies | 1,664.9 | 170.8 | 1,494.0 | 1,347.7 | -146.3 |
Current tax rates are used and exchange rates calculated according to historical averages.
A change in any of these assumptions affects the valuation and may if significant have a material effect on the Group's results.
The Group has a team responsible for the fair value measurements of the portfolio company holdings required for the financial reporting according to IPEV, including Level 3 fair values. All valuations in Level 3 are based on assumptions and judgments that management considers reasonable under current circumstances. This team reports directly to the Chief Financial Officer. Significant events that have occurred since the above-mentioned time of measurement have been taken into account in the measurement to the extent they would have affected the value on the closing date. Companies that have not been valued after transactions that have included third parties or present value calculations have been valued either at (i) net asset value or (ii) for early-stage development projects; the amount invested by Karolinska Development.
Karolinska Development has adopted IFRS 10, Consolidated Financial Statements, IFRS 11, Joint Arrangements, IFRS 12, Disclosure of Interests In Other Entities, IAS 27 (revised 2011), Separate Financial Statements and IAS 28, Investments in Associates and Joint Ventures, and has applied the transition guidance amendments to IFRS 10, 11 and 12, all effective 1 January 2013. Karolinska Development has early adopted the investment entity amendments to IFRS 10, IFRS 12 and IAS 27 (the "Amendments"), which are effective 1 January 2014, with early adoption permitted.
IFRS 10 Consolidated Financial Statements, including the Amendments, establish principles for the presentation and preparation of consolidated financial statements. It sets out how to apply the principle of control to identify whether an investor controls an investee and therefore must consolidate the investee. It also sets out the accounting requirements for the preparation of consolidated financial statements. The amendments to IFRS 10 define an investment entity and introduce an exemption from the consolidation requirements for investment entities.
On adoption, Karolinska Development has determined that it meets the definition of an investment entity. As a result, Karolinska Development has amended its accounting policies with respect to its investments in subsidiaries. The subsidiaries, which were previously consolidated, are now measured at fair value through profit or loss. This change in accounting policy has been applied retroactively in accordance with the transition provisions of IFRS 10 and the Amendments to IFRS 10. The transition provisions require retroactive
application in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors. However, they specify that an entity needs only to present the quantitative information required by paragraph 28(f) of IAS 8 for the annual period immediately preceding the date of initial application.
IFRS 12, Disclosure of Interests in Other Entities and the amendments to it require entities to disclose significant judgments and assumptions made in determining whether the entity controls, jointly controls, significantly influences or has some other interests in other entities. Entities will also be required to provide more disclosures around certain 'structured entities'. The Amendments also introduce new disclosure requirements related to investment entities. Adoption of the standard has impacted the Karolinska Development's level of disclosures in certain of the above noted areas.
IAS 27 (revised 2011), Consolidated and Separate Financial Statements, including the Amendments, prescribe the accounting and disclosure requirements when an entity prepares separate financial statements. The Amendments require an investment entity as defined in IFRS 10 to present separate financial statements as its only financial statements in cases where it measures all of its subsidiaries at fair value through profit or loss and to disclose that fact.
IFRS 11, Joint Arrangements and IAS 28 (revised 2011), Associates and Joint Ventures and related amendments have also been adopted early, although these standards have had no impact on Karolinska Developments' financial statements.
Karolinska Development has multiple unrelated investors and indirectly holds multiple investments.
Karolinska Development has been deemed to meet the definition of an investment entity as per IFRS 10 as the following conditions exist:
Shares in portfolio companies are categorized as financial assets/liabilities at fair value in the condensed balance sheet for the Investment Entity. These assets and liabilities are
recognized at estimated fair value on each closing date, while changes in fair value are recognized in the condensed income statement. Transaction costs are recognized through profit or loss in the condensed income statement.
The largest effects of the change in accounting policy are that:
The effects of the change in accounting policies on the Group's financial position, comprehensive income and cash flow for the three- and nine-month periods ended 30 September 2013 are reported in the following tables (see also the annual report 2013).
| SEK 000 | 2013 Jul-Sep (as previously reported) |
Change in accounting policy |
2013 Jul-Sep (restated) |
2013 Jan-Sep (as previously reported) |
Change in accounting policy |
2013 Jan-Sep (restated) |
|---|---|---|---|---|---|---|
| Revenue | 2,759 | -1,192 | 1,567 | 7,336 | -3,333 | 4,003 |
| Other external expenses | -8,432 | 2,860 | -5,572 | -43,447 | 23,629 | -19,818 |
| Personnel costs | -13,530 | 5,300 | -8,230 | -45,507 | 17,870 | -27,637 |
| Depreciation and amortization of tangible and intangible non-current assets |
-716 | 714 | -2 | -2,328 | 2,321 | -7 |
| Change in fair value of shares in portfolio companies | - | -80,571 | -80,571 | - | -16,619 | -16,619 |
| Change in fair value of shares in joint ventures and associated companies |
-71,004 | 71,004 | - | -25,027 | 25,027 | - |
| Change in fair value of other long-term securities holdings |
-927 | 927 | - | 1,098 | -1,098 | - |
| Result from transaction with Rosetta Capital IV LP |
- | - | - | 404,646 | -404,646 | - |
| Operating profit/loss | -91,850 | -958 | -92,808 | 296,771 | -356,849 | -60,078 |
| Financial net | 1,180 | -1 | 1,179 | 1,496 | 457 | 1,953 |
| Profit/loss before tax | -90,670 | -959 | -91,629 | 298,267 | -356,392 | -58,125 |
| Deferred taxes | - | - | - | 2,926 | -2,926 | - |
| Current taxes | - | - | - | - | - | - |
| NET PROFIT/LOSS FOR THE PERIOD | -90,670 | -959 | -91,629 | 301,193 | -359,318 | -58,125 |
| Attributable to: | ||||||
| Parent Company's shareholders | -89,665 | -1,964 | -91,629 | 308,682 | -366,807 | -58,125 |
| Non-controlling interests | -1,005 | 1,005 | - | -7,489 | 7,489 | - |
| TOTAL | -90,670 | -959 | -91,629 | 301,193 | -359,318 | -58,125 |
| SEK 000 | 2013 Jul-Sep (as previously reported) |
Change in accounting policy |
2013 Jul-Sep (restated) |
2013 Jan-Sep (as previously reported) |
Change in accounting policy |
2013 Jan-Sep (restated) |
|---|---|---|---|---|---|---|
| Earnings per share attributable to Parent | ||||||
| Company's shareholders, weighted average, | ||||||
| before and after dilution | -1.85 | -0.04 | -1.90 | 6.38 | -7.58 | -1.20 |
| Number of shares, weighted average | 48,352,304 | 48,352,304 | 48,371,208 | 48,371,208 |
| Attributable to: Parent Company's shareholders Non-controlling interests |
-89,665 -1,005 |
-1,964 1,005 |
-91,629 - |
308,682 -7,489 |
-366,807 7,489 |
-58,125 - |
|---|---|---|---|---|---|---|
| Total comprehensive income for the period | -90,670 | -959 | -91,629 | 301,193 | -359,318 | -58,125 |
| Net profit/loss for the period | -90,670 | -959 | -91,629 | 301,193 | -359,318 | -58,125 |
| SEK 000 | 2013 Jul-Sep (as previously reported) |
Change in accounting policy |
2013 Jul-Sep (restated) |
2013 Jan-Sep (as previously reported) |
Change in accounting policy |
2013 Jan-Sep (restated) |
| SEK 000 | 30 Sep 2013 (as previously reported) |
Change in accounting policy |
30 Sep 2013 (restated) |
31 Dec 2013 (as previously reported) |
Change in accounting policy |
31 Dec 2013 (restated) |
|---|---|---|---|---|---|---|
| ASSETS | ||||||
| Non-current assets | ||||||
| Intangible non-current assets | 8,533 | -8,533 | - | 8,340 | -8,340 | - |
| Tangible non-current assets | 1 | - | 1 | 529 | - | 529 |
| Shares in joint ventures and associated companies | 1,644,964 | -1,644,964 | - | 1,605,469 | -1,605,469 | - |
| Other long-term securities holdings | 28,047 | -28,047 | - | 24,568 | -24,568 | - |
| Shares in portfolio companies, at fair value through profit or loss |
0 | 1,767,772 | 1,767,772 | - | 1,729,465 | 1,729,465 |
| Loans receivable from portfolio companies | 30,152 | - | 30,152 | 5,894 | - | 5,894 |
| Other financial assets | 38,113 | - | 38,113 | 38,113 | - | 38,113 |
| Total non-current assets | 1,749,810 | 86,228 | 1,836,038 | 1,682,913 | 91,088 | 1,774,001 |
| Current assets | ||||||
| Accounts receivable | 5,679 | -5,667 | 12 | 258 | -255 | 3 |
| Receivables from portfolio companies | - | 698 | 698 | - | 254 | 254 |
| Other short-term receivables | 4,644 | -849 | 3,795 | 3,803 | -578 | 3,225 |
| Prepaid expenses and accrued income | 4,126 | -1,131 | 2,995 | 1,767 | -290 | 1,477 |
| Short-term investments, at fair value through profit or loss |
167,174 | - | 167,174 | 165,334 | - | 165,334 |
| Cash and cash equivalents | 77,469 | -12,561 | 64,908 | 41,639 | -6,316 | 35,323 |
| Total current assets | 259,092 | -19,510 | 239,582 | 212,801 | -7,185 | 205,616 |
| TOTAL ASSETS | 2,008,902 | 66,718 | 2,075,620 | 1,895,714 | 83,903 | 1,979,617 |
| EQUITY AND LIABILITIES | ||||||
| Equity | ||||||
| Share capital | 24,266 | - | 24,266 | 24,266 | - | 24,266 |
| Share premium | 1,768,179 | - | 1,768,179 | 1,768,179 | - | 1,768,179 |
| Retained earnings | 184,541 | 79,048 | 263,589 | 74,380 | 90,779 | 165,159 |
| Equity attributable to Parent Company's shareholders |
1,976,986 | 79,048 | 2,056,034 | 1,866,825 | 90,779 | 1,957,604 |
| Non-controlling interests | 5,746 | -5,746 | - | 3,514 | -3,514 | 0 |
| Total equity | 1,982,732 | 73,302 | 2,056,034 | 1,870,339 | 87,265 | 1,957,604 |
| Long-term liabilities | ||||||
| Other financial liabilities | 9,878 | - | 9,878 | 9,438 | - | 9,438 |
| Total long-term liabilities | 9,878 | - | 9,878 | 9,438 | - | 9,438 |
| Current liabilities | ||||||
| Accounts payable | 3,135 | -1,744 | 1,391 | 3,779 | -1,353 | 2,426 |
| Liabilities to portfolio companies | - | 453 | 453 | - | 442 | 442 |
| Other current liabilities | 3,601 | -2,035 | 1,566 | 2,636 | -1,043 | 1,593 |
| Accrued expenses and prepaid income | 9,556 | -3,258 | 6,298 | 9,522 | -1,408 | 8,114 |
| Total current liabilities | 16,292 | -6,584 | 9,708 | 15,937 | -3,362 | 12,575 |
| Total liabilities | 26,170 | -6,584 | 19,586 | 25,375 | -3,362 | 22,013 |
| TOTAL EQUITY AND LIABILITIES | 2,008,902 | 66,718 | 2,075,620 | 1,895,714 | 83,903 | 1,979,617 |
| 31 Dec 2012 | |||
|---|---|---|---|
| (as previously | Change in | 31 Dec 2012 | |
| SEK 000 | reported) | accounting | (restated) |
| ASSETS | |||
| Non-current assets | |||
| Intangible non-current assets | 9,864 | -9,864 | - |
| Tangible non-current assets | 4,985 | -4,976 | 9 |
| Shares in joint ventures and associated companies | 219,173 | -219,173 | - |
| Other long-term securities holdings | 26,949 | -26,949 | - |
| Shares in portfolio companies | - | 1,827,190 | 1,827,190 |
| Loans receivable from portfolio companies | 12,856 | - | 12,856 |
| Other financial assets | 8,907 | - | 8,907 |
| Total non-current assets | 282,734 | 1,566,228 | 1,848,962 |
| Current assets | |||
| Accounts receivable | 513 | -407 | 106 |
| Receivables from portfolio companies | - | 563 | 563 |
| Other short-term receivables | 3,955 | -1,479 | 2,476 |
| Prepaid expenses and accrued income | 4,578 | -2,115 | 2,463 |
| Short-term investments | 174,160 | - | 174,160 |
| Cash and cash equivalents | 117,033 | -8,353 | 108,680 |
| Total current assets | 300,239 | -11,791 | 288,448 |
| Assets transferred to KDev Investments Group | 1,632,025 | -1,632,025 | - |
| TOTAL ASSETS | 2,214,998 | -77,588 | 2,137,410 |
| EQUITY AND LIABILITIES | |||
| Equity | |||
| Share capital | 24,266 | - | 24,266 |
| Share premium | 1,768,179 | - | 1,768,179 |
| Retained earnings | -122,547 | 445,607 | 323,060 |
| Equity attributable to Parent Company's shareholders | 1,669,898 | 445,607 | 2,115,505 |
| Non-controlling interests | 354,294 | -354,294 | - |
| Total equity | 2,024,192 | 91,313 | 2,115,505 |
| Long-term liabilities | |||
| Other financial liabilities | 10,889 | - | 10,889 |
| Total long-term liabilities | 10,889 | - | 10,889 |
| Current liabilities | |||
| Accounts payable | 4,215 | -1,705 | 2,510 |
| Liabilities to portfolio companies | - | 473 | 473 |
| Other current liabilities | 2,775 | -1,263 | 1,512 |
| Accrued expenses and prepaid income | 8,166 | -1,645 | 6,521 |
| Total current liabilities | 15,156 | -4,140 | 11,016 |
| Liabilities attributable to assets transferred to KDev Investments Group | 164,761 | -164,761 | - |
| Total liabilities | 190,806 | -168,901 | 21,905 |
| TOTAL EQUITY AND LIABILITIES | 2,214,998 | -77,588 | 2,137,410 |
| 2013 | |||
|---|---|---|---|
| Jan-Sep (as previously |
Change in accounting |
2013 Jan-Sep |
|
| SEK 000 | reported) | policy | (restated) |
| Operating activities | |||
| Operating profit/loss | 296,771 | -356,849 | -60,078 |
| Adjustments for non-cash items | |||
| Adjustment for depreciation and amortization | 2,328 | -2,321 | 7 |
| Adjustment for changes in fair value | 23,929 | -7,310 | 16,619 |
| Result from transaction with Rosetta Capital IV LP | -404,646 | 404,646 | - |
| Other non-cash items | 2,245 | - | 2,245 |
| Realized change in value of short-term investments | 1,072 | - | 1,072 |
| Interest paid | -70 | 66 | -4 |
| Interest received | 1,757 | - | 1,757 |
| Cash flow from operating activities before changes in working capital and operating investments | -76,614 | 38,232 | -38,382 |
| Cash flow from changes in working capital | |||
| Increase (-)/Decrease (+) in operating receivables | 4,681 | -6,732 | -2,051 |
| Increase (+)/Decrease (-) in operating liabilities | 3,134 | -3,426 | -292 |
| Operating investments | |||
| Investments in intangible non-current assets | -722 | 722 | - |
| Investments in tangible non-current assets | -398 | 398 | - |
| Investments in shares in portfolio companies | - | -173,126 | -173,126 |
| Investments in shares in joint ventures and associated companies | -151,344 | 151,344 | - |
| Cash and cash equivalents which have been transferred to KDev Investments Group | -51,723 | 51,723 | - |
| Change in short-term investments | 7,350 | - | 7,350 |
| Sale of shares in portfolio companies | 190,793 | - | 190,793 |
| Loans provided to associated companies | -25,581 | - | -25,581 |
| Cash flow from operating activities | -100,424 | 62,135 | -41,289 |
| Financing activities | |||
| Share of subsidiary issue for non-controlling interests | 3,757 | -3,757 | - |
| Share repurchase | -2,483 | - | -2,483 |
| Cash flow from financing activities | 1,274 | -3,757 | -2,483 |
| Cash flow for the period | -99,150 | 55,378 | -43,772 |
| Cash and cash equivalents at beginning of the year | 176,619 | -67,939 | 108,680 |
| CASH AND CASH EQUIVALENTS AT END OF PERIOD | 77,469 | -12,561 | 64,908 |
Karolinska Development is an investment entity according to IFRS 10. Subsidiaries are not consolidated in the Investment Entity's financial statements. The table below indicates all unconsolidated subsidiaries. Ownership interests include indirect ownership through portfolio companies. The ownership interest corresponds to formal voting rights through participating interests.
| Total holding | |||||
|---|---|---|---|---|---|
| Name | Registered office | 30 Sep 2014 | 30 Sep 2013 | 31 Dec 2013 | 31 Dec 2012 |
| Avaris AB (dormant) | Huddinge | 94.87% | 94.87% | 94.87% | 94.87% |
| HBV Theranostica AB (in liquidation) | Stockholm | - | 100.00% | 100.00% | 100.00% |
| KCIF Fund Management AB | Solna | 37.50% | 37.50% | 37.50% | 37.50% |
| KD Incentive AB | Solna | 100.00% | 100.00% | 100.00% | 100.00% |
| KDev Oncology AB | Solna | 100.00% | 100.00% | 100.00% | 100.00% |
| Gligene AB (in liquidation) | Solna | 100.00% | 34.65% | 100.00% | 34.65% |
| Limone AB (in liquidation) | Solna | - | 100.00% | 100.00% | 100.00% |
| Pharmanest AB | Solna | 63.09% | 62.99% | 62.99% | 60.24% |
In addition to the above named subsidiaries, Karolinska Development holds majority interests, though not controlling interests, in KDev Investments AB, Athera Biotechnologies AB, Lipidor AB, Umecrine Cognition AB and XSpray Microparticles AB.
Karolinska Development's ownership interests in these portfolio companies ranges from 50% up to nearly 90%. Karolinska Development has entered into shareholder agreements with other shareholders regarding these companies. The shareholder agreements ensure other investors or founders influence. Therefore, Karolinska Development is not considered to have controlling interest, even if its ownership interest formally exceeds 50%. Karolinska Development has concluded that in these situations the holdings should be accounted for as investments in associated companies or joint ventures, depending on the degree of influence.
On 14 May 2014, the Annual General Meeting adopted a new performance based share incentive program for employees where participants acquire shares ("Savings Shares") on the open market. Under certain conditions participants may receive, free of charge, a maximum of five Performance Shares and one Matching Share Right from the company for each Savings Share they purchase. Matching Share Rights and Performance Shares are allotted after three years. The maximum number of Performance Shares and Matching Share Rights is 761,350. The program comprises a maximum of fourteen participants.
Although there are no performance conditions for the Matching Share Rights, each participant must remain an employee during the vesting period. The Performance Shares have a target related to Karolinska Development's share price performance and a comparison between the so-called Start Price and End Price. The Start Price, measured as an average over ten trading days from 18 May 2014 through 28 May 2014, is SEK 24.45. The End Price is measured as the average over
ten trading days beginning on 2 May 2017. For an allotment, the share price must rise by a total of 30% above the Start Price. For a maximum allotment (five Performance Shares per Savings Share), the share price must rise by 75% above the Start Price. Within this band, allotments are made proportionately. Allotments are capped at 35 times the Start Price, after which the number of allotted Performance Shares is reduced. Participants will be compensated in cash for dividends paid during the period.
The company intends to cover social security contributions related to the program by acquiring and transferring a maximum of 182,000 of its own shares. As of 30 September 2014, no Savings Shares had been acquired and none of the company's own shares had been repurchased. The performance based share incentive program has not had any effect on the results or financial position of the Parent Company or the Investment Entity as of 30 September 2014.
No significant related party transactions have occurred since 31 December 2013. For a detailed description of related party transactions, see the 2013 annual report.
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