Interim / Quarterly Report • Aug 21, 2014
Interim / Quarterly Report
Open in ViewerOpens in native device viewer
Corporate Identity Number 556707-5048
The ongoing efforts to partner Axelar's drug candidate AXL1717 following the results presented in December last year from the Phase II study in non-small cell lung cancer has so far not met our expectations. The timeline and near-term commercial value of the company has therefore been adjusted. As a consequence, the fair value of Axelar for the second quarter has therefore been written down, which has a significant effect on the interim fair value and net profit. Axelar remains active in finding a partner in order to move the project into the next clinical development steps.
During the second quarter, study results were reported in three of our portfolio companies' drug development projects and another important clinical trial was initiated.
Our portfolio company Aprea has developed substances that can that can restore normal function to the p53 protein, which plays a decisive role in cancer cells' programmed death (apoptosis). In around half of all tumor cells, p53 has mutated and no longer functions normally. As a result, the cancer cells survive, leading to rapid tumor growth. In April, Aprea initiated a clinical trial with its substance APR-246 in patients with relapsed platinum sensitive ovarian cancer, a disease with a very poor prognosis. About 60% of all ovarian cancer patients have mutated p53 and the survival of these patients is lower than those with wild type p53.
Dilaforette took a step forward during the quarter in the development of an effective treatment for malaria. The results of an exploratory Phase I/II clinical trial with the drug candidate sevuparin found it to be safe and well tolerated. Due to problems recruiting a sufficient number of patients, however, the study was prematurely terminated. No statistical significance was found between sevuparin and the current standard treatment with regards to the appearance of mature parasitized red blood cells in circulation, which was the primary end-point of the study. The results however, indicate that sevuparin can produce better blood circulation and hence an improved clinical effect. Based on these findings, Dilaforette intend to approach relevant stakeholders in the malaria community with the aim to progress the program into the intended patient group, patients with severe malaria.
Protein kinase inhibitors (PKI) are a class of drug that plays an important role in the treatment of various types of cancer and inflammation. Unfortunately, many PKIs have properties that make treatment unnecessarily complicated and in the worst cases can lead to a suboptimal effect or serious side-effects. Based on its proprietary HyNap drug delivery technology, XSpray Microparticles AB is developing a new formulation of the PKI nilotinib. The goal is to provide patients with a simpler and safer treatment. In May, the company presented study results clearly indicating that HyNap nilotinib has a better uptake in the body than the formulation of nilotinib used today. The results of the study also indicate that HyNap nilotinib uptake is not affected by food intake, one of the problems with current therapies. After these promising data, XSpray is evaluating strategies to fully capture the potential in the HyNap technology.
Premenstrual dysphoric disorder (PMDD) is a condition with a debilitating effect on the quality of life of about five percent of all women of child-bearing age. Umecrine Mood is the first company to develop substances that inhibit the metabolites believed to cause PMDD. In June, it reported data from an exploratory clinical trial that show positive treatment effects among patients with severe symptoms. While the primary end point in the study was not reached, the substance was well tolerated and further analyses will now be conducted before a decision is made whether to continue development.
We are continuously evaluating and developing the portfolio through our clearly defined selection criteria with the aim to develop differentiated pharmaceutical and technology products based on prominent research. Our efforts continue to invest in our portfolio companies and their further efforts to address major medical needs and thereby build significant value for patients and shareholders.
Torbjörn Bjerke Chief Executive Officer
There were no significant events after the reporting period.
| 2014 | 2013 | 2014 | 2013 | |
|---|---|---|---|---|
| Investment entity | Apr-Jun | Apr-Jun | Jan-Jun | Jan-Jun |
| Amounts in SEKm | (restated) | (restated) | ||
| Condensed Income statement | ||||
| Change in fair value of portfolio companies | -177.3 | 49.8 | -183.4 | 64.0 |
| Net profit/loss | -189.5 | 35.8 | -207.9 | 33.5 |
| Condensed Balance sheet | ||||
| Cash and cash equivalents | 29.8 | 156.1 | ||
| Short-term investments | 99.1 | 91.3 | ||
| Total cash, cash equivalents and short-term investments | 128.9 | 247.4 | ||
| Share information | ||||
| Earnings per share, weighted average, before and after dilution | ||||
| (SEK) | -3.92 | 0.74 | -4.31 | 0.69 |
| Net asset value per share (SEK) (Note 1) | 36.4 | 44.5 | ||
| Equity per share (SEK) (Note 1) | 36.3 | 44.4 | ||
| Share price, last trading day in the reporting period (SEK) | 22.0 | 27.2 | ||
| Portfolio information | ||||
| Portfolio companies' net cash¹ | 51.6 | 186.9 | ||
| Investments in portfolio companies | 33.8 | 158.8 | 49.3 | 174.4 |
| Of which investments not affecting cash flow | 6.7 | 0.0 | 6.7 | 3.8 |
| Fair value of portfolio holdings | 1,595.4 | 1,845.9 |
¹Portfolio companies' net cash is comprised of the sum of cash, cash equivalents and short-term investments less external loans in portfolio companies regardless of Karolinska Development's ownership interest
*For comments on the financial development, please refer to page 5
Aprea AB announced that dosing has begun in the Phase I/II proof-of-concept clinical trial of APR-246 in combination with chemotherapy in patients with relapsed platinum sensitive high grade serous ovarian cancer. The cancer develops and spreads due to the malfunction of the cells' normal growth control mechanisms. One of the best-known cancer genes that can trigger the cellular suicide program to eliminate cancer cells is the protein p53. In about half of all tumors, p53 is mutated and no longer functions normally. This allows cancer cell survival and rapid tumor growth. About 60% of all ovarian cancer patients have mutated p53 and the survival of these patients who are treated with platinum-based chemotherapy is lower than those with wild type p53. Aprea has successfully developed substances that can restore normal function to the p53 protein and thereby induce efficient cancer cell death and overcome resistance to antitumoral therapy. To the company's knowledge, APR-246 is the only compound with this mechanism of action in clinical development.
Based on prominent research on the tumor suppressor protein p53 at Karolinska Institutet, Aprea was founded in 2003. The discoveries by the founders Professor Klas Wiman, Professor Galina Selivanova, Associate Professor Vladimir Bykov, Professor Staffan Strömblad, Wenjie Bao and Natalia Issaeva regarding the restoration of function of defective p53 led to the identification of the lead drug candidate APR-246 that is now in Phase I/II clinical development.
XSpray Microparticles AB announced that its proprietary HyNap™ formulation of nilotinib demonstrated significantly improved uptake and reduced food interaction in a Phase I clinical trial compared to previously reported data for the commercial available formulation of nilotinib. Protein kinase inhibitors (PKIs) are used in the treatment of cancer and inflammation. Food interaction is a common problem with this class of drugs, and to have control of the uptake from the gastrointestinal tract into the blood stream patients are often restricted to fasting in connection with administration. Several PKIs are also associated with pH dependent absorption, which means that patients cannot use acid reducing agents together with the PKI treatment.
In the completed cross-over Phase I clinical trial, XSpray measured the exposure of its proprietary HyNap™ formulation of nilotinib in healthy individuals. When administered in the fasting state, a HyNap™ nilotinib dose of 150 mg produced the same AUC (area under the curve) values as those reported for a dose of 400 mg of the marketed product. The study also showed an increase in drug exposure of 25 percent for HyNap™ nilotinib after a high-fat meal, measured both as peak concentration (Cmax) and AUC. For the marketed product the corresponding reported increases after a high-fat meal are 112 percent and 82 percent, respectively.
In addition to the clinical results obtained for HyNap™ nilotinib, XSpray has in a number of comparative in vivo preclinical studies showed improved results for both exposure and reduced pH dependency for a number of other marketed PKIs.
XSpray Microparticles is a drug delivery company working to overcome the significant problem of variable bioavailability due to pH dependent absorption, food effect and poor solubility in gastric fluid. XSpray formulates compounds as HyNap™ – hybrid nanoparticles that are stable amorphous solid dispersions, which can be formed using a wide range of excipients. The technology is used both to improve and enhance the product profile of currently marketed drugs and to speed up the development of new drugs for the future.
Karolinska Development's Annual General Meeting on May 14 elected Robert Holland, Henrijette Richter and Carl Johan Sundberg as new members of the Board of Directors. The Annual General Meeting re-elected Bo Jesper Hansen (Chairman), Vlad Artamonov, Charlotte Edenius, Hans Wigzell and Klaus Wilgenbus. Rune Fransson and Per-Olof Edin declined re-election.
Dilaforette AB announced the results from an exploratory Phase I/II clinical trial in malaria with its candidate drug sevuparin. The effects of adjunct treatment with sevuparin were studied in adult patients with uncomplicated falciparum malaria as adjunct treatment and found to be safe and well tolerated. The study results indicate important early anti-adhesive effects with a potential to improve the outcome for patients with severe malaria, even though the primary efficacy endpoint was not met.
The aim of the trial was to study sevuparin in adult patients with uncomplicated falciparum malaria prior to studies in patients with severe malaria. Due to slow recruitment and in order to progress the program into severe malaria, it was decided to prematurely terminate the study when a total of 53 of the planned 89 patients had been treated. Among the 53 patients that were treated, 23 patients received standard-of-care (SoC), atovaquone/proguanil, and 30 patients received SoC plus sevuparin. The study results showed that sevuparin is safe and well-tolerated in adult patients with uncomplicated falciparum malaria. The study did not reach statistical significance on its primary efficacy endpoint, i.e. an increase in appearance of mature parasitized red blood cells into the blood circulation over the first 11 hours after start of sevuparin treatment. However, due to the premature termination of the trial, the results do not suffice as the basis for conclusive determination of the effect of sevuparin.
Exploratory analyses indicate a higher number of mature parasites in the circulating blood already one hour after the first dose of sevuparin. This observation is consistent with the intended effect of sevuparin, which is to reverse blockage of blood vessels by mature parasitized red blood cells which normally stick to the vessel wall and obstruct the blood flow. In addition, the number of young parasitized cells consistently decreased over the early time period after the initial sevuparin injection, in line with the assumed capacity of sevuparin to block parasite invasion into red blood cells. As patients with uncomplicated malaria have a much lower parasite load than patients with severe disease, the exploratory analysis supports further clinical studies in severe malaria with the aim to show that sevuparin can reverse the binding, which should improve blood flow and clinical outcome.
Dilaforette is a Swedish drug development company developing sevuparin, a heparan sulfate mimetic, for the treatment of severe malaria and vasoocclusive crisis in sickle cell disease.
Umecrine Mood AB reported data from an exploratory Phase II study with its candidate drug UC1010 in patients with PMDD. The primary end point was not met in the study, but a post hoc analysis indicated positive treatment effects in a subgroup of patients with the most severe problems. UC1010 was well tolerated and there were no safety concerns.
Most women experience some form of premenstrual symptoms, but in about five percent of young and middle-aged women that have PMDD, the symptoms are so severe that they in a debilitating way affect daily life and relationships to other people. The severity of the symptoms confers huge costs on society.
In an exploratory double blind, randomized multicenter study, 120 patients with PMDD received, during one menstrual cycle, either placebo or one of two different doses of the drug candidate UC1010, a GABA-A modulating steroid antagonist (GAMSA). The objective of the trial was to study the safety and effect of UC1010. The primary end point in the study was to assess symptoms using a validated daily rating scale (DRSP) containing the sum of the four cardinal symptoms for diagnosis of PMDD measured as the average score during the late luteal phase (the premenstrual week) in the active dose arms combined vs. placebo.
The outcome of the study shows a reduction in the average late luteal phase score after treatment vs. before treatment of 61% in the active group and 55% in the placebo group. The difference between the active group and placebo was not statistically significant and the primary end-point of the study was thus not met. In a post hoc analysis there was a statistically significant difference (p<0.05) between active treatment and placebo in patients with severe problems during a week or more per cycle. Moreover, differences were observed in the PMDD symptoms that are clinically most relevant. There were no safety concerns with UC1010 and it was well tolerated.
Based on research performed at Umeå University, Umecrine Mood specializes in the development of drugs to mitigate the negative effects of endogenous sex and stress hormones on the brain in patients with premenstrual dysphoric disorder. The company has a unique development program that could result in first-in-class products. In addition to the drug candidate UC1010, Umecrine Mood also has substances in early preclinical development. Its goal, after obtaining positive Phase II results, is to find a partner for further development.
The ongoing efforts to partner Axelar's drug candidate AXL1717 following the results presented in December last year from the Phase II study in non-small cell lung cancer has so far not met our expectations. The timeline and near-term commercial value of the company has therefore been adjusted. As a consequence, the fair value of Axelar for the second quarter has therefore been written down, which has a significant effect on the interim fair value and net profit. Axelar remains active in finding a partner in order to move the project into the next clinical development steps.
No significant events occurred after the reporting period.
During the second quarter, XSpray reported positive Phase I data for HyNap™ nilotinib, Dilaforette presented the results of an exploratory Phase I/II clinical trial in uncomplicated malaria, and Umecrine Mood reported preliminary data from an exploratory Phase II study in premenstrual dysphoric disorder (PMDD). Moreover, dosing was initiated in a Phase I/II clinical trial with Aprea's drug candidate APR-246 in ovarian cancer. The portfolio currently consists of 33 projects (see below), of which 16 pharmaceutical projects are in clinical development.
| PHARMACEUTICALS | Indication | Ownership* | Research Phase |
Lead Optimization |
Preclinical Development |
Phase I | Phase II |
|---|---|---|---|---|---|---|---|
| ONCOLOGY | |||||||
| Axelar AB AXL1717 | Non-small cell lung cancer | 43% | |||||
| Aprea AB APR-246 | Ovarian cancer | 62% | |||||
| Akinion Pharmaceuticals AB AKN-028 | Acute myeloid leukemia | 81% | |||||
| INFECTIONS AND WOUND HEALING | |||||||
| Dilaforette AB Sevuparin | Malaria | 63% | |||||
| Pergamum AB DPK-060 | Infected eczema | 56% | |||||
| Pergamum AB DPK-060 | External otitis | 56% | |||||
| Pergamum AB PXL01 | Surgical adhesions | 56% | |||||
| Pergamum AB LL-37 | Venous leg ulcers | 56% | |||||
| Biosergen AS BSG005 | Systemic fungal infection | 60% | |||||
| Pergamum AB PXL181 | Skin infection | 56% | |||||
| WOMEN'S HEALTH | |||||||
| Dilafor AB Tafoxiparin | Protracted labor | 49% | |||||
| Pharmanest AB SHACT | Pain at IUD-insertions | 63% | |||||
| Umecrine Mood AB UC1010 | PMDD and severe PMS | 38% | |||||
| Pharmanest AB SHACT | Pain at hysteroscopies | 63% | |||||
| Forendo Pharma Oy | Endometriosis | 21% | |||||
| ENDOCRINOLOGY | |||||||
| Forendo Pharma Oy Fispemifene | Hypogonadism | 21% | |||||
| CARDIOVASCULAR AND HEMATOLOGY | |||||||
| Athera Biotechnologies AB PC-mAb | Acute coronary syndrome | 65% | |||||
| Dilaforette AB Sevuparin | Sickle-cell disease | 63% | |||||
| OPHTHALMOLOGY | |||||||
| Clanotech AB CLT28643 | Glaucoma surgery | 80% | |||||
| CNS | |||||||
| Umecrine Cognition AB | Hepatic encephalopathy | 66% | |||||
| INFLAMMATION | |||||||
| NovaSAID AB | Inflammatory pain | 77% | |||||
| TECHNOLOGY | Indication | Ownership* | Concept development |
Prototype | Development | Product | Launch |
| IMPLANTS | |||||||
| Promimic AB HAnano SurfaceTM | Bone implant surface | 30% | |||||
| OssDsign AB Cranio PSI | Cranial implants | 26% | |||||
| DIAGNOSTICS | |||||||
| Athera Biotechnologies AB CVDefine® | Cardiovascular diagnostic kit | 65% | |||||
| PHARMACEUTICAL FORMULATION | |||||||
| Inhalation Sciences Sweden AB PreciseInhale™ Respiratory precision dosing system | 68% | ||||||
| Lipidor AB AKVANO™ | Topical drug delivery | 51% | |||||
| XSpray Microparticles AB RightSize™ | Drug formulation technology | 63% | |||||
| MEDICAL EQUIPMENT NeoDynamics AB Fourier |
Fine needle biopsy | 18% | |||||
| NeoDynamics AB PRFA | Tumor ablation | 18% | |||||
| PHARMACEUTICALS | Indication | Ownership* | Research Phase |
Lead optimization |
Preclinical development |
Phase I | Phase II |
|---|---|---|---|---|---|---|---|
| BioArctic Neuroscience AB BAN2401 | Alzheimer's | 3% | |||||
| Pergamum AB Herantis Pharma Plc, cis-UCA | Atopic dermatitis | 1% | |||||
| Pergamum AB Herantis Pharma Plc, cis-UCA | Dry Eye | 1% | |||||
| Pergamum AB Herantis Pharma Plc, Lymfactin | Lymph edemas | 1% | |||||
*Includes indirect ownership Status as per August 20, 2014 Solid color = Completed phase Shaded color = Current phase
During the six month period ended 30 June 2014, the effect of the change in fair value of portfolio investments amounted to SEK - 183.4m (SEK 64.0m).
During the second quarter ended 30 June 2014, the effect of the change in fair value of portfolio investments amounted to SEK - 177.3m (SEK 49.8m).
During the six month period, the Investment Entity's operating loss amounted to SEK -207.5m (SEK 32.7m), a change of SEK -241.0m compared with the same period in 2013. During the six month period, several projects in the portfolio met development milestones, which had a positive effect on 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 six month period was affected by a change in fair value of the holding by KDev Investments AB in Axelar AB amounting to SEK -220.7m due to the partnering progress not reaching expectations. During the six month period, the fair value was affected positively by adjustments of the discount rates (WACC) (see 'Information on fair value measurement in level 3' on page 19). Other external expenses have decreased by SEK 5.7m year-over-year, of which SEK 3.5m is due to one-time expenses in the first quarter 2013 related to the Rosetta transaction. The portion of the change in fair value of shares in portfolio companies during the six month period amounted to SEK -183.4m (SEK 64.0m).
During the second quarter, the Investment Entity's operating loss amounted to SEK -188.9m (SEK 34.5m), a change of SEK -223.4m compared with the same period in 2013. The portion of the change in fair value of shares in portfolio companies during the second quarter amounted to SEK -177.3m (SEK 49.8m). The change in fair value of the holding by KDev Investments AB in Axelar AB amounted to SEK -205.7m during the second quarter due to the partnering progress not reaching expectations. The fair value per the report date was affected by adjustments of the discount rates (WACC) (see 'Information on fair value measurement in level 3' on page 19). The effect of the WACC adjustments on fair value amounted to SEK 151.4m compared to the valuation based on the WACC applied during the previous period.
The Investment Entity's loss before tax during the six month period amounted to SEK -207.9m (SEK 33.5m).
The Investment Entity's loss before tax during the second quarter amounted to SEK -189.5m (SEK 35.8m).
Investments in portfolio companies
Investments in portfolio companies during the six month period amounted to SEK 49.3m (SEK 174.4m).
During the six month period investments were made in KDev Investments' portfolio at SEK 27.0m (Dilaforette Holding AB, SEK 10.7m; Dilafor AB, SEK 6.0m, Umecrine Mood AB, SEK 4.8m; Clanotech AB, SEK 2.8m; Promimic AB, SEK 1.8m; and Inhalation Sciences Sweden AB, SEK 0.9m) as well as in Umecrine Cognition AB, SEK 11.0m; 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 second quarter amounted to SEK 33.8m (SEK 158.8m).
During the second quarter investments were made in KDev Investments' portfolio at SEK 18.7m (Dilaforette Holding AB, SEK 8.1m; Dilafor AB, SEK 6.0m; Clanotech AB, SEK 2.8m; and Promimic AB, SEK 1.8m) as well as in Umecrine Cognition AB, SEK 5.0m; XSpray Microparticles AB, SEK 4.9m; Pharmanest AB, SEK 4.1m; and KCIF Co-Investment Fund KB, SEK 1.1m.
Financial position (comparative figures refer to 31 December 2013)
The Investment Entity's equity to total assets ratio was 99% (99%) on 30 June 2014 and equity amounted to SEK 1,750.7 (SEK 1,957.6m).
Cash, cash equivalents and short-term investments in the Investment Entity amounted to SEK 128.9m (SEK 200.7m), of which SEK 76.9m is provisionally allocated for anticipated follow-on investments in the KDev Investments portfolio. In addition, SEK 75.0m will be allocated to these portfolio companies as additional liquidity becomes accessible to Karolinska Development. Total assets amounted to SEK 1,772.0 (SEK 1,979.6m).
Karolinska Development is an investment entity in accordance with IFRS 10 Consolidated Financial Statements. Karolinska Development has implemented the amended accounting principle retroactively in accordance with IFRS 10 and IAS 8. Note 3 shows the effects of the amended accounting principle on the comparative figures for 2013 and 2012.
* The Investment Entity refers to the parent company, Karolinska Development AB, and its subsidiaries, joint ventures, associated companies and other long-term securities holdings.
During the six month period ended 30 June 2014, the Parent Company's operating loss amounted to SEK -24.5m (SEK 78.4m), a change of SEK -102.9m 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 as part of the Rosetta transaction. Other external expenses have decreased by SEK 5.7m year-over-year, of which SEK 3.5m is due to one-time expenses in the first quarter 2013 related to the Rosetta transaction.
During the second quarter, the Parent Company's operating loss amounted to SEK -11.9m (SEK -24.4m), a change of SEK 12.5m compared with the same period in 2013 mainly due to lower write-downs of shares in portfolio companies.
The Parent Company's net loss during the six month period amounted to SEK -23.3m (SEK 78.2m).
The Parent Company's net loss during the second quarter amounted to SEK -11.4m (SEK -22.6m).
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 of inputs used 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 valuation.
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 capital. Investments in portfolio companies will decrease compared to the prior year due to license agreements that several portfolio companies have entered into with partners, expected increases in EU subsidies and increased share of third party financing. The portfolio company projects are continuously evaluated and prioritizations are made in order to assure that investments are made with the intention of increasing the long term value of the portfolio. However, as an investor, 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. If the projects within the portfolio cannot be funded as planned, this can also have a significant negative impact on the valuation of the portfolio companies.
No new risk areas have been identified since 31 December 2013. For a detailed description of risks and uncertainties, see the 2013 annual report.
No significant events occurred after the reporting period.
Karolinska Development AB (publ) CIN 556707-5048
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 August 2014
Bo Jesper Hansen Klaus Wilgenbus Charlotte Edenius Chairman
Vlad Artamonov Hans Wigzell Carl Johan Sundberg
Henrijette Richter Robert Holland Torbjörn Bjerke
CEO
Interim report January-September 2014 20 November 2014 Year-end report January-December 2014 February 2015 Annual report 2014 April 2015
Karolinska Development is required by law to publish the information in this interim report. The information was published on 21 August 2014.
This interim report, together with additional information, is available on Karolinska Development's website, www.karolinskadevelopment.com
For further information, please contact: Torbjörn Bjerke, CEO +46 72 744 41 23
Christian 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) as per 30 June 2014 and the six-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 Swedish Standard on Review Engagements SÖG 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 Group 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 August 2014 Deloitte AB
Thomas Strömberg Authorized Public Accountant
| 2014 | 2013 Apr-Jun |
2014 | 2013 Jan-Jun |
2013 Full-year |
||
|---|---|---|---|---|---|---|
| Amounts in SEK 000 | Note | Apr-Jun | (restated) | Jan-Jun | (restated) | (restated) |
| Revenue | 1,107 | 1,184 | 2,356 | 2,436 | 4,948 | |
| Other external expenses | -4,837 | -7,118 | -8,505 | -14,246 | -25,292 | |
| Personnel costs | -8,982 | -9,390 | -19,392 | -19,407 | -38,290 | |
| Depreciation of tangible non-current assets | -53 | -3 | -106 | -5 | -114 | |
| Change in fair value of shares in portfolio companies | 2 | -177,271 | 49,815 | -183,359 | 63,952 | -139,996 |
| Result from sale of shares in portfolio companies | 1,184 | 0 | 1,531 | 0 | 0 | |
| Operating profit/loss | -188,852 | 34,488 | -207,475 | 32,730 | -198,744 | |
| Financial net | -666 | 1,313 | -413 | 774 | 41,429 | |
| Profit/loss before tax | -189,518 | 35,081 | -207,888 | 33,504 | -157,315 | |
| Deferred taxes | 0 | 0 | 0 | 0 | 0 | |
| Current taxes | 0 | 0 | 0 | 0 | 0 | |
| NET PROFIT/LOSS FOR THE PERIOD | -189,518 | 35,801 | -207,888 | 33,504 | -157,315 |
| 2014 | 2013 | 2014 | 2013 | 2013 | |
|---|---|---|---|---|---|
| Apr-Jun | Jan-Jun | Full-year | |||
| Amounts in SEK Note |
Apr-Jun | (restated) | Jan-Jun | (restated) | (restated) |
| Earnings per share, weighted average, before and after dilution |
-3.92 | 0.74 | -4.31 | 0.69 | -3.25 |
| Number of shares, weighted average | 48,287,132 | 48,380,817 | 48,287,132 | 48,380,817 | 48,350,016 |
| 2014 | 2013 | 2014 | 2013 | 2013 | ||
|---|---|---|---|---|---|---|
| Apr-Jun | Jan-Jun | Full-year | ||||
| Amounts in SEK 000 | Note | Apr-Jun | (restated) | Jan-Jun | (restated) | (restated) |
| Net profit/loss for the period | -189,518 | 35,801 | -207,888 | 33,504 | -157,315 | |
| Total comprehensive income for the period | -189,518 | 35,801 | -207,888 | 33,504 | -157,315 |
| 30 June 2014 30 June 2013 31 Dec 2013 31 Dec 2012 | |||||
|---|---|---|---|---|---|
| Amounts in SEK 000 | Note | (restated) | (restated) | (restated) | |
| Assets | |||||
| Non-current assets | |||||
| Tangible non-current assets | 423 | 4 | 529 | 9 | |
| Shares in portfolio companies, at fair value through profit or loss | 1,595,433 | 1,845,873 | 1,729,465 | 1,827,190 | |
| Loans receivable from portfolio companies | 5,190 | 29,715 | 5,894 | 12,856 | |
| Other financial assets | 38,113 | 38,113 | 38,113 | 8,907 | |
| Total non-current assets | 1,639,159 | 1,913,705 | 1,774,001 | 1,848,962 | |
| Current assets | |||||
| Accounts receivable | 0 | 0 | 3 | 106 | |
| Receivables from portfolio companies | 366 | 1,112 | 254 | 563 | |
| Other short-term receivables | 1,938 | 3,094 | 3,225 | 2,476 | |
| Prepaid expenses and accrued income | 1,595 | 3,329 | 1,477 | 2,463 | |
| Short-term investments, at fair value through profit or loss | 99,114 | 91,315 | 165,334 | 174,160 | |
| Cash and cash equivalents | 29,778 | 156,128 | 35,323 | 108,680 | |
| Total current assets | 132,791 | 254,978 | 205,616 | 288,448 | |
| TOTAL ASSETS | 1,771,950 | 2,168,683 | 1,979,617 | 2,137,410 | |
| Equity and liabilities | |||||
| Equity and liabilities | |||||
| 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 | -41,714 | 357,242 | 165,159 | 323,060 | |
| Total equity | 1,750,731 | 2,149,687 | 1,957,604 | 2,115,505 | |
| Long-term liabilities | |||||
| Other financial liabilities | 11,032 | 9,878 | 9,438 | 10,889 | |
| Total long-term liabilities | 11,032 | 9,878 | 9,438 | 10,889 | |
| Current liabilties | |||||
| Accounts payable | 1,185 | 885 | 2,426 | 2,510 | |
| Liabilities to portfolio companies | 442 | 453 | 442 | 473 | |
| Other current liabilities | 1,597 | 1,496 | 1,593 | 1,512 | |
| Accrued expenses and prepaid income | 6,963 | 6,284 | 8,114 | 6,521 | |
| Total current liabilities | 10,187 | 9,118 | 12,575 | 11,016 | |
| Total liabilities | 21,219 | 18,996 | 22,013 | 21,905 | |
| TOTAL EQUITY AND LIABILITIES | 1,771,950 | 2,168,683 | 1,979,617 | 2,137,410 |
| Non | |||||||
|---|---|---|---|---|---|---|---|
| Share | Share | Retained | Controlling | Total | |||
| Amounts in SEK 000 | Note | capital | premium | earnings | Total | interests | equity |
| Opening equity at 1 Jan 2014 (restated) | 24,266 | 1,768,179 | 165,159 | 1,957,604 | 0 | 1,957,604 | |
| Net profit/loss for the period | -207,888 | -207,888 | 0 | -207,888 | |||
| Total comprehensive income for the period | 0 | 0 | -207,888 | -207,888 | 0 | -207,888 | |
| Effect of incentive programs | 1,015 | 1,015 | 1,015 | ||||
| Closing equity at 30 June 2014 | 24,266 | 1,768,179 | -41,714 | 1750,731 | 0 | 1,750,731 | |
| Opening equity at 1 Jan 2013 | 24,266 | 1,768,179 | -122,547 | 1,669,898 | 354,294 | 2,024,192 | |
| Effect of change in accounting principle to | |||||||
| investment entity | 3 | 445,607 | 445,607 | -354,294 | 91,313 | ||
| Adjusted opening equity at 1 Jan 2013 (restated) |
24,266 | 1,768,179 | 323,060 | 2,115,505 | 0 | 2,115,505 | |
| Net profit/loss for the period | 33,504 | 33,504 | 0 | 33,504 | |||
| Total comprehensive income for the period | 0 | 0 | 33,504 | 33,504 | 0 | 33,504 | |
| Effect of incentive programs | 678 | 678 | 678 | ||||
| Closing equity at 30 June 2013 (restated) | 24,266 | 1,768,179 | 357,242 | 2,149,687 | 0 | 2,149,687 | |
| Opening equity at 1 Jan 2013 | 24,266 | 1,768,179 | -122,547 | 1,669,898 | 354,294 | 2,024,192 | |
| Effect of change in accounting principle to | |||||||
| investment entity | 3 | 445,607 | 445,607 | -354,294 | 91,313 | ||
| Adjusted opening equity at 1 Jan 2013 (restated) |
24,266 | 1,768,179 | 323,060 | 2,115,505 | 0 | 2,115,505 | |
| Net profit/loss for the year | -157,315 | -157,315 | 0 | 157,315 | |||
| Total comprehensive income for the year | 0 | 0 | -157,315 | -157,315 | 0 | -157,315 | |
| Effect of incentive programs | 1,897 | 1,897 | 1,897 | ||||
| Share repurchase | -2,483 | -2,483 | -2,483 | ||||
| Closing equity at 31 Dec 2013 (restated) | 24,266 | 1,768,179 | 165,159 | 1,957,604 | 0 | 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 principle to investment entity |
3 | 404,640 | 404,640 | -354,294 | 50,346 | ||
| Adjusted opening equity at 1 Jan 2012 | |||||||
| (restated) | 24,266 | 1,768,179 | 282,093 | 2,074,538 | 0 | 2,074,538 | |
| Net profit/loss for the year | 43,210 | 43,210 | 0 | 43,210 | |||
| Total comprehensive income for the year | 0 | 0 | 43,210 | 43,210 | 0 | 43,210 | |
| Share repurchase | -2,243 | -2,243 | -2,243 |
| 2014 | 2013 | ||
|---|---|---|---|
| Amounts in SEK 000 | Note | Jan-Jun | Jan-Jun (restated) |
| Operating activities | |||
| Operating profit/loss | -207,475 | 32,730 | |
| Adjustments for depreciation and amortization | 106 | 5 | |
| Adjustments for changes in fair value | 2 | 183,359 | -63,952 |
| Result from sale of portfolio companies | -1,531 | 0 | |
| Realized change in value of short-term investments | 836 | 1,057 | |
| Interest paid | -4 | -3 | |
| Interest received | 151 | 947 | |
| Investments in shares in portfolio companies | -42,677 | -170,656 | |
| Sale of shares in portfolio companies | 1,240 | 190,793 | |
| Loans provided to portfolio companies | -5,190 | -25,144 | |
| Change in short-term investments | 67,131 | 84,851 | |
| Cash flow from operating activities before changes in working capital |
-4,054 | 50,628 | |
| Cash flow from changes in working capital | |||
| Increase (-)/Decrease (+) in operating receivables | 897 | -2,298 | |
| Increase (+)/Decrease (-) in operating liabilities | -2,388 | -882 | |
| Cash flow from operating activities | -5,545 | 47,448 | |
| Cash flow for the period | -5,545 | 47,448 | |
| Cash and cash equivalents at beginning of the year | 35,323 | 108,680 | |
| CASH AND CASH EQUIVALENTS AT END OF PERIOD | 29,778 | 156,128 | |
| CASH AND CASH EQUIVALENTS AT END OF PERIOD | 29,778 | 156,128 |
|---|---|---|
| Short-term investments, market value at closing date | 99,114 | 91,315 |
| CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS AT END OF PERIOD | 128,892 | 247,443 |
| 2014 | 2013 | 2014 | 2013 | 2013 | |
|---|---|---|---|---|---|
| Amounts in SEK 000 Note |
Apr-Jun | Apr-Jun | Jan-Jun | Jan-Jun | Full-year |
| Net sales | 1,107 | 1,184 | 2,356 | 2,436 | 4,948 |
| Revenue | 1,107 | 1,184 | 2,356 | 2,436 | 4,948 |
| Other expenses | -4,837 | -7,118 | -8,505 | -14,246 | -25,293 |
| Personnel costs | -8,982 | -9,390 | -19,392 | -19,407 | -38,290 |
| Depreciation of tangible non-current assets | -53 | -3 | -106 | -5 | -114 |
| Impairment losses on shares in subsidiaries, joint ventures, associated companies and other long-term |
|||||
| securities holdings | -300 | -9,044 | -369 | -14,031 | -24,701 |
| Result from sale of shares in portfolio companies | 1,184 | 0 | 1,531 | 123,678 | 90,909 |
| Operating profit/loss | -11,881 | -24,371 | -24,485 | 78,425 | 7,459 |
| Financial net | 471 | 1,768 | 1,182 | -238 | 39,855 |
| NET PROFIT/LOSS FOR THE PERIOD | -11,410 | -22,603 | -23,303 | 78,187 | 47,314 |
| 2014 | 2013 | 2014 | 2013 | 2013 | |
|---|---|---|---|---|---|
| Amounts in SEK 000 Note |
Apr-Jun | Apr-Jun | Jan-Jun | Jan-Jun | Full-year |
| Net profit/loss for the period | -11,410 | -22,603 | -23,303 | 78,187 | 47,314 |
| Total comprehensive income for the period | -11,410 | -22,603 | -23,303 | 78,187 | 47,314 |
| Amounts in SEK 000 | Note | 30 Jun 2014 | 30 Jun 2013 | 31 Dec 2013 |
|---|---|---|---|---|
| Assets | ||||
| Non-current assets | ||||
| Tangible non-current assets | 423 | 6 | 529 | |
| Shares in subsidiaries, joint ventures, associated companies and other | ||||
| long-term securities holdings | 1,119,555 | 1,026,620 | 1,070,597 | |
| Loans receivable from portfolio companies | 5,190 | 29,715 | 5,894 | |
| Other financial assets | 32,672 | 31,968 | 32,522 | |
| Total non-current assets | 1,157,840 | 1,088,309 | 1,109,542 | |
| Current assets | ||||
| Accounts receivable | 350 | 950 | 202 | |
| Receivables from subsidiaries | 16 | 162 | 55 | |
| Other receivables | 1,938 | 3,094 | 3,225 | |
| Prepaid expenses and accrued income | 1,595 | 3,329 | 1,477 | |
| Short-term investments | 99,114 | 91,315 | 165,334 | |
| Cash and cash equivalents | 29,778 | 156,128 | 35,323 | |
| Total current assets | 132,791 | 254,978 | 205,616 | |
| TOTAL ASSETS | 1,290,631 | 1,343,287 | 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 | |
| Retained earnings | -502,237 | -549,302 | -550,566 | |
| Net profit/loss for the period | -23,303 | 78,187 | 47,314 | |
| Total equity | 1,276,979 | 1,331,404 | 1,299,267 | |
| Long-term liabilities | ||||
| Pension obligations | 3,465 | 2,762 | 3,315 | |
| Total long-term liabilities | 3,465 | 2,762 | 3,315 | |
| Current liabilities | ||||
| Accounts payable | 1,185 | 885 | 2,426 | |
| Liabilities to subsidiaries | 442 | 453 | 442 | |
| Other current liabilities | 1,597 | 1,498 | 1,594 | |
| Accrued expenses and prepaid income | 6,963 | 6,285 | 8,114 | |
| Total current liabilities | 10,187 | 9,121 | 12,576 | |
| Total liabilities | 13,652 | 11,883 | 15,891 | |
| TOTAL EQUITY AND LIABILITIES | 1,290,631 | 1,343,287 | 1,315,158 | |
| Amounts in SEK 000 | Note | 30 Jun 2014 | 30 Jun 2013 | 31 Dec 2013 |
|---|---|---|---|---|
| Pledged assets | 3,465 | 2,762 | 3,315 | |
| Total | 3,465 | 2,762 | 3,315 |
| Restricted equity | Unrestricted equity | |||||
|---|---|---|---|---|---|---|
| Share | Net | |||||
| premium | Retained | profit/loss for | ||||
| Amounts in SEK 000 | Note | Share capital | reserve | earnings | the period | Total 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 | 0 | |||
| Net profit/loss for the period | -23,303 | -23,303 | ||||
| Total | 24,266 | 1,778,253 | -503,252 | -23,303 | 1,275,964 | |
| Effect of incentive programs | 1,015 | 1,015 | ||||
| Closing equity at 30 Jun 2014 | 24,266 | 1,778,253 | -502,237 | -23,303 | 1,276,979 | |
| 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 | 0 | |||
| Net profit/loss for the period | 78,187 | 78,187 | ||||
| Total | 24,266 | 1,778,253 | -549,980 | 78,187 | 1,330,726 | |
| Effect of incentive programs | 678 | 678 | ||||
| Closing equity at 30 Jun 2013 | 24,266 | 1,778,253 | -549,302 | 78,187 | 1,331,404 | |
| 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 | 0 | |||
| Net profit/loss for the period | 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 principles applied to the Investment Entity and the Parent Company correspond, unless otherwise stated below, to the accounting principles 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 six month period ended 30 June 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 do 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 principles 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 OMX regulations for issuers require companies listed on NASDAQ OMX to 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 adhere 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, cash and cash equivalents, and financial assets less interestbearing 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 share 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 unobservable data
The carrying amounts of financial assets and liabilities recorded at amortized cost approximates their fair value.
| Amounts in SEK 000 | Level 1 | Level 2 | Level 3 | Total |
|---|---|---|---|---|
| Financial assets | ||||
| Shares in portfolio companies | 0 | 0 | 1,595,433 | 1,595,433 |
| Loans receivable from portfolio companies | 0 | 5,190 | 0 | 5,190 |
| Other financial receivables | 0 | 0 | 38,113 | 38,113 |
| Receivables from portfolio companies | 0 | 366 | 0 | 366 |
| Short-term investments | 99,114 | 0 | 0 | 99,114 |
| Cash and cash equivalents | 29,778 | 0 | 0 | 29,778 |
| Total | 128,892 | 5,556 | 1,633,546 | 1,767,994 |
| Financial liabilities | ||||
| Other financial liabilities | 0 | 0 | 11,032 | 11,032 |
| Accounts payable | 0 | 1,185 | 0 | 1,185 |
| Liabilities to portfolio companies | 0 | 442 | 0 | 442 |
| Total | 0 | 1,627 | 11,032 | 12,659 |
| Amounts in SEK 000 | Level 1 | Level 2 | Level 3 | Total |
|---|---|---|---|---|
| Financial assets | ||||
| Shares in portfolio companies | 0 | 0 | 1,845,873 | 1,845,873 |
| Loans receivable from portfolio companies | 0 | 29,715 | 0 | 29,715 |
| Other financial receivables | 0 | 0 | 38,113 | 38,113 |
| Receivables from portfolio companies | 0 | 1,112 | 0 | 1,112 |
| Short-term investments | 91,315 | 0 | 0 | 91,315 |
| Cash and cash equivalents | 156,128 | 0 | 0 | 156,128 |
| Total | 247,443 | 30,827 | 1,883,986 | 2,162,256 |
| Financial liabilities | ||||
| Other financial liabilities | 0 | 0 | 9,878 | 9,878 |
| Accounts payable | 0 | 885 | 0 | 885 |
| Liabilities to portfolio companies | 0 | 453 | 0 | 453 |
| Total | 0 | 1,338 | 9,878 | 11,216 |
| Shares in | Other | Other | |
|---|---|---|---|
| Amounts in SEK 000 | portfolio companies |
financial assets |
financial liabilities |
| At beginning of the year | 1,729,465 | 38,113 | 9,438 |
| Transfers to and from level 3 | - | - | - |
|---|---|---|---|
| Acquisitions | 49,335 | 0 | 0 |
| Disposals | -8 | 0 | 0 |
| Gains and losses recognized through profit or loss | -183,359 | 0 | 1,594 |
| Closing balance 30 Jun 2014 | 1,595,433 | 38,113 | 11,032 |
| Total unrealized gains and losses for the period included in profit/loss |
-183,359 | 0 | -1,594 |
| Gains and losses in profit/loss for the period for assets and liabilities included in the closing balance |
-183,359 | 0 | -1,594 |
There were no transfers between level 1 and 2 during the six month period ended 30 June 2014.
| Fair value (level 3) as of 30 June 2013 | ||
|---|---|---|
| -- | -- | ----------------------------------------- |
| Amounts in SEK 000 | Shares in portfolio companies |
Other financial assets |
Other financial liabilities |
|---|---|---|---|
| At beginning of the year | 1,773,675 | 8,907 | 10,889 |
| Transfers to and from level 3 | - | - | - |
| Acquisitions | 174,441 | 29,206 | 0 |
| Disposals | -219,710 | 0 | 0 |
| Gains and losses recognized through profit or loss | 117,467 | 0 | -1,011 |
| Closing balance 30 Jun 2013 | 1,845,873 | 38,113 | 9 878 |
| Total unrealized gains and losses for the period included in profit/loss |
49,235 | 0 | -1,011 |
| Gains and losses in profit/loss for the period for assets and liabilities included in the closing balance |
49,235 | 0 | -1,011 |
There were no transfers between level 1 and 2 during the six month period ended 30 June 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:
On 30 June 2014, the Biotechnology WACC was 11.02% (11.90%) and the Pharma WACC was 7.32% (8.20%). The adjustments of the WACC for the second quarter portfolio valuation was due to changes in the risk-free interest of -0.48% and the market risk premium of -0.4% compared to the previous WACC adjustment on 30 June 2013.
To estimate the effect of changes in the discount rate on the portfolio valuation, WACC has been adjusted by –1 percent and +1 percent.
| Sensitivity analysis WACC | WACC adjustment –1% | 30 June 2014 Biotech WACC: 11.02% Pharma WACC: 7.32% |
WACC adjustment +1% | ||
|---|---|---|---|---|---|
| Amounts in SEKm | Fair value | Change | Fair value | Fair value | Change |
| Fair value difference for shares in portfolio | |||||
| companies | 1,784.5 | 189.0 | 1,595.4 | 1,430.4 | -165.1 |
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 IFRSs 10, 11 and 12, all effective 1 January 2013. Karolinska Development has early adopted the Investment Entities 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 to it 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 exception 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 changed its accounting policy with respect to its investment in its subsidiaries. The subsidiaries, which was previously consolidated, is now accounted for at fair value through profit or loss. This change in accounting policy has been applied retrospectively in accordance with the transition provisions of IFRS 10 and the Amendments to IFRS 10. The transition provisions require retrospective 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 requires 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), Separate financial statements, including the amendments to it 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 the case 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 early adopted, however, 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 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 six month period ended 30 June 2013 are reported in the following tables (see also the annual report for 2013).
| 2013 | 2013 | 2013 | 2013 | |||
|---|---|---|---|---|---|---|
| Apr-Jun (as previously |
Change in accounting |
Apr-Jun | Jan-Jun (as previously |
Change in accounting |
Jan-Jun | |
| Amounts in SEK 000 | reported) | policy | (restated) | reported | policy | (restated) |
| Revenue | 2,642 | -1,458 | 1,184 | 4,577 | -2,141 | 2,436 |
| Other external expenses | -11,907 | 4,789 | -7,118 | -35,015 | 20,769 | -14,246 |
| Personnel costs Depreciation and amortization of tangible and |
-14,592 | 5,202 | -9,390 | -31,977 | 12,570 | -19,407 |
| intangible non-current assets Change in fair value of shares |
-603 | 600 | -3 | -1,612 | 1,607 | -5 |
| in portfolio companies Change in fair value of shares in joint ventures and |
0 | 49,815 | 49,815 | 0 | 63,952 | 63,952 |
| associated companies | 27,535 | -27,535 | 0 | 45,977 | -45,977 | 0 |
| Change in fair value of other long-term securities holdings |
-1,940 | 1,940 | 0 | 2,025 | -2,025 | 0 |
| Result from sale of subsidiary Result from transaction with |
0 | 0 | 0 | 0 | ||
| Rosetta Capital IV LP | 0 | 0 | 404,646 | -404,646 | 0 | |
| Operating profit/loss | 1,135 | 33,353 | 34,488 | 388,621 | -355,891 | 32,730 |
| Financial net | 1,315 | -2 | 1,313 | 316 | 458 | 774 |
| Profit/loss before tax | 2,450 | 33,351 | 35,801 | 388,937 | -355,433 | 33,504 |
| Deferred taxes | 0 | 0 | 0 | 2,926 | -2,926 | 0 |
| Current taxes | 0 | 0 | 0 | 0 | 0 | 0 |
| NET PROFIT/LOSS FOR THE | ||||||
| PERIOD | 2,450 | 33,351 | 35,801 | 391,863 | -358,359 | 33,504 |
| Attributable to: | ||||||
| Parent Company's | ||||||
| shareholders | 3,642 | 32,159 | 35,801 | 398,347 | -364,843 | 33,504 |
| Non-controlling interests | -1,192 | 1,192 | 0 | -6,484 | 6,484 | 0 |
| TOTAL | 2,450 | 33,351 | 35,801 | 391,863 | -358,359 | 33,504 |
| 2013 Apr-Jun (as previously |
Change in accounting |
2013 Apr-Jun |
2013 Jan-Jun (as previously |
Change in accounting |
2013 Jan-Jun |
|
|---|---|---|---|---|---|---|
| Amounts in SEK | reported | policy | (restated) | reported | policy | (restated) |
| Earnings per share attributable to Parent Company's shareholders, weighted average, before and after dilution Number of shares, weighted |
0.08 | 0.66 | 0.74 | 8.23 | -7.54 | 0.69 |
| average | 48,380,817 | 48,380,817 | 48,380,817 | 48,380,817 |
| 2013 | Change in | 2013 | 2013 | Change in | 2013 | |
|---|---|---|---|---|---|---|
| Apr-Jun | accountin | Apr-Jun | Jan-Jun | accountin | Jan-Jun | |
| (as previously | g | (restate | (as previously | g | (restate | |
| Amounts in SEK 000 | reported | policy | d) | reported | policy | d) |
| Net profit/loss for the period | 2,450 | 33,351 | 35,801 | 391,863 | -358,359 | 33,504 |
| Total comprehensive income for the | ||||||
| period | 2,450 | 33,351 | 35,801 | 391,863 | -358,359 | 33,504 |
| Attributable to: | ||||||
| Parent Company's shareholders | 3,642 | 32,159 | 35,801 | 398,347 | -364,843 | 33,504 |
| Non-controlling interests | -1,192 | 1,192 | 0 | -6,484 | 6,484 | 0 |
| TOTAL | 2,450 | 33,351 | 35,801 | 391,863 | -358,359 | 33,504 |
| 31 Dec | ||||||
|---|---|---|---|---|---|---|
| 30 Jun 2013 (as |
Change in | 2013 (as |
Change in | 31 Dec | ||
| previously | accounting | 30 Jun 2013 | previously | accounting | 2013 | |
| Amounts in SEK 000 | reported | policy | (restated) | reported | policy | (restated) |
| Assets | ||||||
| Non-current assets | ||||||
| Intangible non-current assets | 8,725 | -8,725 | 0 | 8,340 | -8,340 | 0 |
| Tangible non-current assets | 3,424 | -3,420 | 4 | 529 | 529 | |
| Shares in joint ventures and associated companies | 1,713,748 | -1,713,748 | 0 | 1,605,469 | -1,605,469 | 0 |
| Other long-term securities holdings | 28,974 | -28,974 | 0 | 24,568 | -24,568 | 0 |
| Shares in portfolio companies | 0 | 1,845,873 | 1,845,873 | 0 | 1,729,465 | 1,729,465 |
| Loans receivable from portfolio companies | 29,715 | 29,715 | 5,894 | 5,894 | ||
| Other financial assets | 38,113 | 38,113 | 38,113 | 38,113 | ||
| Total non-current assets | 1,822,699 | 91,006 | 1,913,705 | 1,682,913 | 91,088 | 1,774,001 |
| Current assets | ||||||
| Accounts receivable | 1,215 | -1,215 | 0 | 258 | -255 | 3 |
| Receivables from portfolio companies | 0 | 1,112 | 1,112 | 0 | 254 | 254 |
| Other short-term receivables | 5,056 | -1,962 | 3,094 | 3,803 | -578 | 3,225 |
| Prepaid expenses and accrued income | 6,291 | -2,962 | 3,329 | 1,767 | -290 | 1,477 |
| Short-term investments | 91,315 | 91,315 | 165,334 | 165,334 | ||
| Cash and cash equivalents | 172,972 | -16,844 | 156,128 | 41,639 | -6,316 | 35,323 |
| Total current assets | 276,849 | -21,871 | 254,978 | 212,801 | -7,185 | 205,616 |
| TOTAL ASSETS | 2,099,548 | 69,135 | 2,168,683 | 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 | 276,293 | 80,949 | 357,242 | 74,380 | 90,779 | 165,159 |
| Equity attributable to Parent Company's shareholders | 2,068,738 | 80,949 | 2,149,687 | 1,866,825 | 90,779 | 1,957,604 |
| Non-controlling interests | 6,688 | -6,688 | 0 | 3,514 | -3,514 | 0 |
| Total equity | 2,075,426 | 74,261 | 2,149,687 | 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 | ||||||
| 2,372 | -1,487 | 885 | 3,779 | -1,353 | 2,426 | |
| Liabilities to portfolio companies | 0 | 453 | 453 | 0 | 442 | 442 |
| Other current liabilities | 2,781 | -1,285 | 1,496 | 2,636 | -1,043 | 1,593 |
| Accrued expenses and prepaid income | 9,091 | -2,807 | 6,284 | 9,522 | -1,408 | 8,114 |
| Total current liabilities | 14,244 | -5,126 | 9,118 | 15,937 | -3,362 | 12,575 |
| Total liabilities | 24,122 | -5,126 | 18,996 | 25,375 | -3,362 | 22,013 |
| 31 Dec 2012 (as | |||
|---|---|---|---|
| previously | Change in | 31 Dec 2012 | |
| Amounts in SEK 000 Assets |
reported) | accounting policy | (restated) |
| Non-current assets | |||
| Intangible non-current assets | 9,864 | -9,864 | 0 |
| Tangible non-current assets | 4,985 | -4,976 | 9 |
| Shares in joint ventures and associated companies | 219,173 | -219,173 | 0 |
| Othet long-term securities holdings | 26,949 | -26,949 | 0 |
| Shares in portfolio companies, at fair value through profit of loss | 0 | 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 | 0 | 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, at fair value through profit or loss | 174,160 | 174,160 | |
| Cash and cash equivalents | 117,033 | -8,353 | 108,680 |
| Total current assets | 300,239 | -11,791 | 288,448 |
| Assets which have been transferred to KDev Investments Group | 1,632,025 | -1,632,025 | 0 |
| 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 interest | 354,294 | -354,294 | 0 |
| 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 liabilties | |||
| Accounts payable | 4,215 | -1,705 | 2,510 |
| Liabilites to portfolio companies | 0 | 473 | 473 |
| Other current liabilities | 2,775 | -1,263 | 1,512 |
| Accrued expenses and prepaid income | 8,166 | -1,645 | 6,521 |
| Total current liabilties | 15,156 | -4,140 | 11,016 |
| Liabilities attributable to assets which have been transferred to KDev | |||
| Investments Group | 164,761 | -164,761 | 0 |
| Total liabilities | 190,806 | -168,901 | 21,905 |
| TOTAL EQUITY AND LIABILITIES | 2,214,998 | -77,588 | 2,137,410 |
| 2013 | 2013 | ||
|---|---|---|---|
| Jan-Jun | Change in | ||
| Amounts in SEK 000 | (as previously reported |
accounting policy |
Jan-Jun (restated) |
| Operating activities | |||
| Operating profit/loss | 388,621 | -355,891 | 32,730 |
| Adjustments for depreciation and amortization | 1,612 | -1,607 | 5 |
| Adjustments for changes in fair value | -48,002 | -15,950 | -63,952 |
| Result from transaction with Rosetta Capital IV LP | -404,646 | 404,646 | 0 |
| Realized change in value of short-term investments | 1,057 | 1,057 | |
| Interest paid | -70 | 67 | -3 |
| Interest received | 1,485 | -538 | 947 |
| Investments in intangible non-current assets | -722 | 722 | 0 |
| Investments in tangible non-current assets | -398 | 398 | 0 |
| Investments in shares in portfolio companies | 0 | -170,656 | -170,656 |
| Investments in shares in joint ventures and associated companies Cash and cash equivalents which have been transferred to KDev Investments |
-149,124 | 149,124 | 0 |
| Group | -51,723 | 51,723 | 0 |
| Change in short-term investments | 84,851 | 84,851 | |
| Sale of shares in portfolio companies | 190,793 | 190,793 | |
| Loans provided to associated companies | -25,144 | -25,144 | |
| Cash flow from operating activities before changes in | |||
| working capital | -11,410 | 62,038 | 50,628 |
| Cash flow from changes in working capital | |||
| Increase (-)/Decrease (+) in operating receivables | 2,919 | -5,217 | -2,298 |
| Increase (+)/Decrease (-) in operating liabilities | 1,087 | -1,969 | -882 |
| Cash flow from operating activities | -7,404 | 54,852 | 47,448 |
| Financing activities | |||
| Share of subsidiary issue for non-controlling interests | 3,757 | -3,757 | 0 |
| Cash flow from financing activities | 3,757 | -3,757 | 0 |
| Cash flow for the period | -3,647 | 51,095 | 47,448 |
| Cash and cash equivalents at beginning of the year | 176,619 | -67,939 | 108,680 |
| CASH AND CASH EQUIVALENTS AT END OF PERIOD | 172,972 | -16,844 | 156,128 |
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 June 2014 | 30 June 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 | 37.5% | 37.5% | 37.5% | 37.5% |
| 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 | - | 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 a majority interest, however non-controlling interest 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 June 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 Parent Company's' nor the Investment Entity's results or financial position as of 30 June 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.
Building tools?
Free accounts include 100 API calls/year for testing.
Have a question? We'll get back to you promptly.