Orexo

Interim / Quarterly Report • Aug 10, 2011

Interim report January-June 2011

STRONG SALES INCREASE FOR ABSTRAL®

References made in this interim report relate to the Group unless otherwise stated. Figures in parentheses relate to the corresponding period in 2010.

For the period

• Royalty revenues from Abstral® sales in Europe rose to MSEK 30.4 (19.5).
• Introduction of Abstral in the US and Canada.
• Subsequent study of OX219 initiated, with the results expected during the third quarter of 2011.
• Positive data from the first clinical study for OX27 for the treatment of breakthrough pain in cancer patients.
• Successful completion of a new share issue of approximately MSEK 245 (before transaction costs).
• Net revenues totaled MSEK 96.7 (65.5).
• Loss after tax was MSEK 65.1 (loss: 62.9).
• Cash flow from operating activities amounted to MSEK -31.2 (11.2).
• Loss per share was SEK 2.66 (2.69).
• Cash and cash equivalents totaled MSEK 242.5 at the end of the period (excluding final proceeds from the new share issue that amounted to MSEK 102, received after the period) compared with MSEK 135.8 at year-end.

After the close of the period

• The insomnia tablet Sublinox (Edluar) licensed to Meda, received marketing approval in Canada.
• Via its subsidiary Kibion AB, Orexo acquired Wagner Analysen Technik GmbH in Germany.

Second quarter

• Net revenues totaled MSEK 55.2 (29.1).
• Cash flow from operating activities was MSEK -47.5 (27.7)
• Loss after tax was MSEK 26.0 (35.3).
• Loss per share was MSEK 1.02 (1.51).

Key figures

MSEK	3 months 2011 Apr-June	3 months 2010 Apr-June	6 months 2011 Jan-June	6 months 2010 Jan-June	12 months 2010 Jan-Dec
Net revenues	55.2	29.1	96.7	65.5	210.5
Operating loss	-23.6	-32.0	-60.2	-58.7	-81.7
Net loss for the period	-26.0	-35.3	-65.1	-62.9	-89.2
Earnings/loss per share, SEK	-1.02	-1.51	-2.66	-2.69	-3.81
Cash flow from operating activities	-47.5	27.7	-31.2	11.2	-43.0
Cash and cash equivalents	242.5	190.9	242.5	190.9	135.8

Audiocast

CEO Anders Lundström will present the report at an audiocast today at 10:00 am CET. The audiocast with presentation slides can be followed through www.orexo.com and http://www.financialhearings.nu/110810/orexo/ and by telephone +46 (0)8 5352 6439 or +44 (0)20 7136 2051 (confirmation code: 3060498).

CEO's comments

"Sales of Abstral® in Europe continued to rise sharply during the second quarter of the year. The product showed a 66 percent sales increase in the first six months of 2011 compared to the corresponding period in 2010, mainly based on a continued increase in market share in most European markets.

The second quarter marked the introduction of Abstral in two key markets, the US (April) and Canada (June). In the US, the implementation of Abstral's Risk Evaluation and Mitigation Strategy (REMS) is currently proceeding. We do not expect a fully effective in-market launch of Abstral until the REMS situation is leveled across all rapid onset fentanyl products. Consequently it is today difficult to forecast near term sales trends for Abstral in the US. We anticipate a common REMS program to be in place during the Q1 of 2012. With the program in place, Abstral will be able to compete on equal terms, as it has so successfully done in Europe.

In late June, our new share issue with gross proceeds of approximately MSEK 245 was completed and fully subscribed. The new share issue offers us the potential to continue the development of all three key programs without having to wait for milestone payments from business partners. Our three proprietary programs continued to progress according to plan. The next study for the OX219 program commenced in June, with the results expected during the third quarter of 2011.

The proprietary programs are pivotal for the development of Orexo into a specialty pharmacy company based on its own products. This will enable us to retain a larger share of the products' value generation in the company.

In connection with the new share issue we noted considerable interest, shown most clearly by the fact that we received cost-free underwriting covering almost 90 percent of the share issue. Novo A/S increased its shareholding to 24.1 percent from its previous 16.6 percent. We also gained two strong institutional shareholders in Abingworth and Arbejdsmarkedets Tillaegspension, ATP.

We are eagerly looking forward to the second half of 2011 when we expect to see additional sales success for Abstral and the results from the next clinical study for OX27 and OX219. Moreover, we will also complete the planning for the initial patient study for OX51."

Anders Lundström President and CEO

Key events for the period

Abstral®

o Continued strong sales growth in Europe

Abstral shows strong volume growth in Europe and continues to increase its market shares. Today, Abstral is the leading modern rapid-acting fentanyl product in the five largest European markets.

o US introduction in April

In early April, Orexo's partner, ProStrakan, made Abstral available for sale in the US and commenced stocking the product in pharmacies approved in accordance with the Abstral Risk Evaluation and Mitigation Strategy (REMS). Implementation of Abstral´s REMS by ProStrakan is proceeding in the US with wholesalers, pharmacies and physicians being trained and brought on to the system. We do not expect a fully effective in-market launch of Abstral in US to occur until the REMS situation is leveled across all rapid onset fentanyl products. It was announced as late as July 21 this year that the market leading rapid onset fentanyl products will be under a REMS system that is to be in place during the Q1 of 2012. With the REMS system in place, Abstral will be able to compete on equal terms, as it has so successfully done in Europe.

o Canada introduction in June

Abstral was approved in February 2011 by the Canadian Department of National Health and Welfare and ProStrakan's partner Paladin Labs launched the product in June on the Canadian market, one of the ten largest pharmaceutical markets worldwide.

Initiation of new studies of OX219

June marked the start of the next study of OX219 in the US. The program is being developed for the treatment of opioid dependence. Results from the study are expected during the third quarter of 2011, which will lay the basis for our formulation selection.

Positive clinical data for OX27

In June, positive results were reported from the first pharmacokinetic study for the OX27 project, which is aimed at developing the treatment of breakthrough pain among cancer patients.

Completion of new share issue

The new share issue providing approximately MSEK 245, excluding transaction costs MSEK 13.1, was completed in June 2011.The share issue was fully subscribed by existing shareholders and new investors, with new institutional investors accounting for 41 percent. As a result of the new share issue, the number of shares and voting rights in the company rose by 6,438,188 to 29,850,940, with the share capital increasing by SEK 2,575,275.20 to SEK 11,940,376.

Kyowa Hakko Kirin acquired ProStrakan

As a result of the acquisition by Kyowa Hakko Kirin of ProStrakan Group plc., Orexo gained a very solid partner for the sale of Abstral.

Key events after the close of the period

Via its subsidiary, Kibion AB, Orexo acquired Wagner Analysen Technik GmbH (WAT) The acquisition strengthens Kibion's operations and creates considerable potential for future growth and thus a stronger independent unit. The purchase price was MEUR 1.4 and was financed entirely by bank loans. If well-defined sales targets are attained, a supplementary purchase price will be paid. The acquisition is expected to provide a positive contribution to Orexo's earnings already within 12 months.

The insomnia tablet Sublinox (Edluar) approved in Canada

Meda and its partner Valeant expects to launch the product in the fourth quarter 2011. Orexo, who has developed the drug, is entitled to royalties on sales.

Operations

Products launched

Revenues from product sales rose 37 percent during the first half of 2011 to MSEK 61.8 (45.1). Royalty revenues from Abstral® increased during the first half by 72 percent to MSEK 33.6, compared with the year-earlier period.

Sales volumes of Abstral in Europe rose 66 percent between the first half of 2010 and first half of 2011. The increase was primarily attributable to continued progress in most European markets and the continued rise in market shares.

Abstral sales volumes increased more than 66 percent

The bars refer to invoiced sales from our partner ProStrakan Group plc to wholesalers.

Royalty revenues from Edluar™ amounted to MSEK 1.3 for the period.

In the U.S., there is a second so-called paragraph IV process ongoing, where patent protection for Edluar is challenged by Mylan Pharmaceuticals Inc. Orexo has filed a lawsuit claiming patent infringement and intends to defend the IP-protection for Edluar.

Sales of Diabact® UBT and Heliprobe® System totaled MSEK 19.3 (19.7) during the period. The currency effect is negative with about MSEK 0.5.

In the first half of 2011, Diabact was registered in Mexico and Heliprobe System in Nigeria, Jordan and South Korea. The sales impact of new registrations is expected to occur in fourth quarter 2011.

In total, ProStrakan AB's sales during the first half of 2011 increased by 28 percent. Orexo's share amounted to MSEK 7.6 (5.9). Sales of Abstral via ProStrakan AB rose 69 percent to MSEK 6.1 (3.6) during the same period.

Collaboration projects

Revenues from new and existing licensing agreements amounted during the interim period to MSEK 18.3 (8.4). These comprise mainly a recognized portion of the nonrecurring payment made by Ortho-McNeil-Janssen Pharmaceuticals, Inc. and Janssen Pharmaceutica NV (OMJ).

Refer to page 7 for information on partner-financed R&D costs in respect of collaborative projects.

Proprietary development programs

During the second quarter, approval was received from the FDA to initiate the next clinical study of OX219. The results from the study are expected during the third quarter of the year and will lay the basis for our formulation selection. This clinical study, which will be conducted in the US, is the next stage in the development process for final approval. OX219 is planned to compete in the market for the treatment of opiate dependence, which is valued globally at about USD 1.4 billion, of which the US market represents about USD 1 billion. Suboxone (Reckitt Benckiser) currently dominates the market.

Positive clinical data was reported in March for OX51, a new sublingual formulation of an existing treatment for acute intensive pain episodes in conjunction with care-related, diagnostic or therapeutic surgery among patients who today do not receive sufficient pain-alleviation drugs. Planning of the initial patient study for the program was completed during the second half of the year. The project has the potential to address a market with an estimated 130 million pain episodes annually in the US and EU.

In June, positive results were reported from the initial pharmacokinetic study of the OX27 project. The program involves a fast-acting sublingual formulation for an existing drug and is designed for optimal treatment of breakthrough pain episodes than can affect cancer patients. The subsequent clinical study was initiated in June and the results are expected during the second half of 2011.

The period in figures

MSEK	3 months	3 months	6 months	6 months	12 months
	2011	2010	2011	2010	2010
	Apr-June	Apr-June	Jan-June	Jan-June	Jan-Dec
Net revenues	55.2	29.1	96.7	65.5	210.5
Cost of goods sold	-6.9	-6.9	-13.3	-13.3	-26.3
Gross profit	48.3	22.2	83.3	52.2	184.2
Selling expenses	-11.4	-8.8	-23.6	-16.2	-35.2
Administrative expenses	-13.7	-10.5	-25.9	-19.3	-46.8
Research and
development costs	-48.0	-36.3	-95.4	-78.1	-186.9
Other operating income
and expenses	1.2	1.4	1.4	2.7	3.0
Operating loss*	-23.6	-32.0	-60.2	-58.7	-81.7
Net financial items	-2.4	-3.3	-5.0	-4.2	-7.5
Loss after financial items	-26.0	-35.3	-65.2	-62.9	-89.2
Tax	0.0	0.0	0.0	0.0	0.0
Net loss for the period	-26.0	-35.3	-65.2	-62.9	-89.2

Condensed consolidated income statement

* Includes costs of MSEK 1.4 for employee stock options for the period January-June 2011 (MSEK 1.8 January to June 2010).

Revenues

Net revenues

Net revenues for January–June 2011 totaled MSEK 96.7 (65.5). The increase was attributable primarily to higher royalty revenues from Abstral® and higher license revenues from collaboration projects.

During the period April–June 2011, net revenues totaled MSEK 55.2 (29.1).

Net revenues were distributed as follows:

MSEK	Apr–June 2011	Apr–June 2010	Jan–June 2011	Jan–June 2010	Jan–Dec 2010
Abstral - royalty	19.6	11.0	33.6	19.5	42.2
Edluar - royalty	0.6	0.0	1.3	0.0	1.3
ProStrakan AB J/V 50 %	4.0	3.0	7.6	5.9	12.3
Diabact® UBT / Heliprobe® System	10.6	9.8	19.3	19.7	39.9
Total revenues from products
launched	34.8	23.8	61.8	45.1	95.7
Partner-financed R&D costs	9.4	3.1	16.6	11.9	33.8
License revenues for development
projects	10.9	2.1	18.3	8.4	81.1
Other	0.1	0.1	0.0	0.1	-0.1
Total	55.2	29.1	96.7	65.5	210.5

Expenses and earnings

Selling expenses

Selling expenses during January–June 2011 totaled MSEK 23.6 (16.2) and amounted to MSEK 11.4 (8.8) for the period April–June 2011. The increase was due mainly to higher costs for ongoing Phase IV studies for Abstral, market-support activities for Orexo's project portfolio and higher selling expenses in the subsidiary Kibion AB and the joint venture, ProStrakan AB.

Administrative expenses

Administrative expenses for January–June 2011 totaled MSEK 25.9 (19.3). The increase was primarily due to the recruitment of new senior executives, implementation of long-term incentive programs for the period 2011/2021 and legal costs relating to the company's patent portfolio. For the period April–June, administrative expenses totaled MSEK 13.7 (10.5).

Research and development costs

Research and development costs for January–June 2011 totaled MSEK 95.4 (78.1), of which MSEK 16.6 (11.9) was covered mainly by the business partner Ortho-McNeil-Janssen Pharmaceuticals, Inc. and Janssen Pharmaceutica NV (OMJ). The increase pertained primarily to activities relating to Phase I studies for proprietary programs. For the period April–June 2011, research and developments costs amounted to MSEK 48.0 (36.3).

Expenses for long-term incentive program

The Group's expenses for its employee stock options program for the period January–June 2011 totaled MSEK 1.4, excluding implementation costs, compared with MSEK 1.8 for the corresponding period a year earlier. The declining share price during the quarter resulted in a reduction in the provision for social security expenses.

Other revenues and expenses

Other revenues and expenses consist primarily of exchange rate gains/losses, which totaled MSEK 1.4 (2.7) for the period and MSEK 1.2 (1.4) for the period April–June 2011.

Depreciation/amortization

Depreciation/amortization amounted to MSEK 3.9 (4.0) for period January–June 2011 and to MSEK 2.0 (2.0) for April–June 2011.

Net financial items

Net financial items for the period January–June 2011 amounted to an expense of MSEK 5.0 (expense: 4.2). Net financial items consist primarily of interest expenses of MSEK 5.9 in respect of the convertible loan.

Earnings

The operating loss for the period January–June 2011 totaled MSEK 60.2 (loss: 58.7).

Financial position

As of 30 June 2011, cash and cash equivalents totaled MSEK 242.5 (190.9). During the second quarter, the proceeds of MSEK 143 from the rights issue were received. The remaining final amount of the proceeds, totaling MSEK 102 was received in July, and have thus not affected cash flow for the period. Approximately MSEK 11.5 of the transaction costs for the issue totaling of approximately MSEK 13 will be paid in the third quarter.

Cash flow from operating activities for the period January–June 2011 was a negative MSEK 31.2 (11.2). Cash flow for the period was positively affected by a nonrecurring payment of MSEK 56.3 from Boehringer Ingelheim, where revenue was recognized in 2010 but paid in 2011.

At June 30, shareholders' equity totaled MSEK 634.8 (498.8). The equity/assets ratio was 73 (65) percent.

Following the completion of the share issue, the company has the potential to pursue all projects in its proprietary development portfolio through launch, even without additional milestone payments from already out-licensed research and development projects.

Investments

Gross investments in tangible fixed assets amounted to MSEK 3.6 (2.1) for the period January–June 2011 and MSEK 1.8 (0.8) for April–June 2011.

Seasonal variations

Orexo's operations are not affected by seasonal variations. However, sales of pharmaceuticals in new markets can be affected by stockpiling, particularly in the launch phase.

Parent Company

Most of the Group's business is carried out in the Parent Company, Orexo AB. Net revenue for the period January–June 2011 totaled MSEK 57.8 (39.9), and the loss after financial items was MSEK 87.8 (loss: 59.5). Investments totaled MSEK 3.6 (2.1). At June 30, 2011, cash and cash equivalents in the Parent Company amounted to MSEK 220.0 (161.0).

Significant risks and uncertainties

Significant risks and uncertainties are disclosed in the Annual Report for 2010. No significant changes in terms of business risks and uncertainties have occurred since the publication of Annual Report.

Financial risks

The successful completion of the rights issued has reduced Orexo's financial risks.

Share and market value

Orexo's share traded at SEK 36.40 on June 30, 2011. The company's market capitalization, based on the number of shares outstanding on June 30, 2011, was MSEK 852. Market capitalization does not include the shares registered in July.

Analysts covering Orexo

ABG Sundal Collier	Erik Hultgård
Carnegie	Camilla Oxhamre
Nordea	Olle Sjölin
Pharmium Securities	Frédéric Gomez
Redeye	Klas Palin and Peter Östling
Rodman & Renshaw	Michael Higgins
SEB Enskilda	Gustaf Vahlne

Future reporting dates

Interim report, January–September 2011	November 9, 2011
----------------------------------------	------------------

Interim reports will be covered in a conference call on the date of the publication. Details on the calls will be given in each report.

For further information, please contact: Anders Lundström, President and CEO, Tel: +46 (0)706 67 22 66, e-mail: anders.lundstrom@orexo.com

About Orexo

Orexo has four products on the market, several significant partnerships and three proprietary development projects. Orexo's launched pharmaceuticals are Abstral™, for the treatment of breakthrough pain in cancer patients which is sold by Kyowa Hakko Kirin/ ProStrakan Group plc. in Europe and the US, insomnia tablet Edluar™ which is sold by Meda in the US, and two products, Diabact® UBT/Heliprobe® System, for diagnosing the gastric ulcer bacterium, Helicobacter pylori, through its subsidiary Kibion AB.

Objective, business concept and strategy

Orexo's objective is to build a portfolio of proprietary products, which are to be marketed and sold through the company's own organization in Europe or in the US. Orexo will become a fully integrated profitable specialist pharmaceutical company.

In the proprietary development projects, all in the clinical phase, Orexo focuses not only on pain relief and anti-inflammatory pharmaceuticals, but also on the treatment of opiate addiction. The company combines well-known substances with innovative drug-delivery technologies to create new patented pharmaceuticals that provide improved or new treatments. These pharmaceuticals can often be developed at lower risk and in shorter time spans than new drug molecules. Orexo also has partnerships in this area.

Existing partnerships are key strategic assets, from both a financial and competence perspective. Three of the out-licensed projects are based on Orexo's knowledge in the arachidonic acid cascade. The aim is to develop completely new drugs for the treatment of major diseases, including inflammatory pain and respiratory diseases such as asthma and COPD. Orexo's partners in this area are Boehringer Ingelheim, Ortho-McNeil-Janssen Pharmaceuticals, Inc. and Janssen Pharmaceutica NV (OMJ).

Product/project	Indication
Abstral®	Breakthrough pain in cancer patients
Edluar™	Sleeping disorders
Diabact® UBT	Exhalation test, Helicobacter pylori
Heliprobe® System	Test, Helicobacter pylori
OX17	GERD (gastroesophageal reflux)
OX27	Breakthrough pain in cancer patients
OX51	Acute intense pain episodes
OX219	Opiate addiction
OX-NLA	Rhinitis
OX-MPI	Inflammatory pain
OX-CLI	Asthma/COPD

Orexo product and project portfolio

Assurance by the Board of Directors

The Board of Directors and President give their assurance that the six-month report provides a fair and accurate view of the company's and the Group's operations, financial position and earnings and describes the significant risks and uncertainties facing the company and the companies included in the Group.

Uppsala, August 10, 2011

Orexo AB (publ)

Håkan Åström Raymond Hill Staffan Lindstrand Chairman of the Board Board member Board member

Bengt Samuelsson Michael Shalmi Kjell Strandberg Board member Board member Board member

Anders Lundström President and CEO

Review report

We have reviewed this report for the period January 1 to June 30, 2011 for Orexo AB (publ). The board of directors and the CEO are responsible for the preparation and presentation of this interim report in accordance with IAS 34 and the Swedish Annual Accounts Act. Our responsibility is to express a conclusion on this interim report 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 in Sweden. 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. Accordingly, we do not express an audit opinion.

Based on our review, nothing has come to our attention that causes us to believe that the interim report is not prepared, in all material respects, in accordance with IAS 34 and the Swedish Annual Accounts Act, regarding the Group, and with the Swedish Annual Accounts Act, regarding the Parent Company.

Uppsala, August 10, 2011

PricewaterhouseCoopers

Leonard Daun Authorized Public Accountant

Consolidated statement of operations

KSEK	Notes	3 months 2011	3months 2010	6 months 2011	6 months 2010	12 months 2010
		Apr-June	Apr-June	Jan-June	Jan-June	Jan-Dec
Net revenues		55,202	29,071	96,663	65,508	210,499
Cost of goods sold	2	-6,884	-6,881	-13,335	-13,281	-26,321
Gross profit		48,318	22,190	83,328	52,227	184,178
Selling expenses	2	-11,361	-8,778	-23,596	-16,217	-35,223
Administrative expenses	2	-13,702	-10,488	-25,935	-19,273	-46,819
Research and development costs	2	-47,963	-36,330	-95,382	-78,170	-186,914
Other operating income		1,630	1,876	3,393	3,924	7,746
Other operating expenses	2	-509	-487	-1,996	-1,196	-4,741
Operating loss		-23,587	-32,017	-60,188	-58,705	-81,773
Financial income		420	42	950	64	1,456
Financial expense		-2,861	-3,333	-5,942	-4,237	-8,942
Financial items – net		-2,441	-3,291	-4,992	-4,173	-7,486
Pre-tax loss		-26,028	-35,308	-65,180	-62,878	-89,259
Income tax		41	-	32	5	13
Net loss for the period		-25,987	-35,308	-65,148	-62,873	-89,246
Loss for the period attributable to:
Parent Company shareholders Non-controlling interests		-25,987	-35,308	-65,148	-62,873	-89,246
		-	-	-	-	-
Loss per share, attributable to Parent Company shareholders during the period (SEK per share):
Loss per share, before dilution, SEK		-1.02	-1.51	-2.66	-2.69	-3.81
Loss per share, after dilution, SEK		-1.06	-1.51	-2.66	-2.69	-3.81

Consolidated statement of comprehensive income

KSEK	3 months 2011 Apr-June	3 months 2010 Apr-June	6 months 2011 Jan-June	6 months 2010 Jan-June	12 months 2010 Jan-Dec
Net loss for the period	-25,987	-35,308	-65,148	-62,873	-89,246
Other comprehensive income
Exchange-rate differences	-136	4,333	-1,794	1,774	-3,524
Other comprehensive income for the
period, net after tax	-136	4,333	-1,794	1,774	-3,524
Total comprehensive income for the
period	-26,123	-30,975	-66,942	-61,099	-92,770
Total comprehensive income
attributable to:
Parent Company's shareholders	-26,123	-30,975	-66,942	-61,099	-92,770

CHANGES IN CONSOLIDATED SHAREHOLDERS' EQUITY

Attributable to the Parent Company's shareholders 1)

KSEK	Share capital	Other contributed capital	Accumulated loss	Translation differences	Total	Total shareholders' equity
Opening
balance, January
1, 2010	9,360	1,094,453	-549,907	-5,245	548,661	548,661
Total
comprehensive
income for the period	-	-	-62,873	1,774	-61,099	-61,099
Employee stock
options, vested
amount	-	1,230	-	-	1,230	1,230
Debenture loan
– equity portion	-	10,005	-	-	10,005	10,005
Closing balance,
June 30, 2010	9,360	1,105,688	-612,780	-3,741	498,797	498,797
Opening balance, January
1, 2011	9,361	1,106,798	-639,153	-8,769	468,237	468,237
Total
comprehensive
income for the
period	-	-	-65,148	-1,794	-66,942	-66,942
Employee stock
options, vested
amount		1,781	-	-	1,781	1,781
New issues	2,579*	229,176	-	-	231,755	231,755
Closing balance,
June 30, 2011	11,940	1,337,755	-704,301	-10,563	634,831	634,831

1) There are no non-controlling interests.

* This is an ongoing new issue and its shares had not yet been registered on June 30, 2011.

Consolidated balance sheet

KSEK		2011	2010	2010
	Notes	June 30	June 30	Dec 31
ASSETS
New issue subscribed but not paid in		102,042	-	-
Fixed assets
Tangible fixed assets		41,661	44,296	41,666
Goodwill		17,681	17,682	17,679
Acquired R&D		386,611	428,690	388,487
Other intangible fixed assets		931	1,680	1,251
Total fixed assets		446,884	492,348	449,083
Current assets
Inventories		11,865	7,527	7,965
Accounts receivable and other receivables		66,807	74,777	119,845
Cash and cash equivalents		242,497	190,853	135,798
Total current assets		321,169	273,157	236,608
Total assets		870,095	765,505	712,691
SHAREHOLDERS' EQUITY AND LIABILITIES	3
Share capital		11,940	9,360	9,361
Other capital contributions		1,337,755	1,105,688	1,106,798
Accumulated losses		-704,301	-612,780	-639,153
Translation differences		-10,563	-3,471	-8,769
Total shareholders' equity		634,831	498,797	468,237
Long-term liabilities
Provisions		605	12,086	1,112
Long-term liabilities, interest-bearing		93,930	88,599	94,421
Deferred tax liability		8,586	9,917	8,911
Total long-term liabilities		103,121	110,602	104,444
Current liabilities
Current liabilities, non-interest-bearing *		123,251	146,627	130,531
Current liabilities, interest-bearing		8,892	9,479	9,479
Total liabilities		235,264	266,708	244,454
Total shareholders' equity and liabilities		870,095	765,505	712,691

* Including advance payment of MSEK 49.7 from the OX-CLI cooperation.

Consolidated cash-flow statements

KSEK	Notes
		2011 Apr-June	2010 Apr-June	2011 Jan-June	2010 Jan-June	2010 Jan-Dec
Operating activities
Operating loss before interest expense
and interest income		-23,587	-32,017	-60,188	-58,705	-81,773
Interest income		420	42	950	64	550
Interest expense		-2,230	-2,930	-4,623	-3,128	-8,942
Other financial expenses		-	-403	-	-1,109	906
Adjustment for non-cash items	4	1,299	-898	3,942	2,734	39,825
Cash flow from operating activities
before changes in working capital		-24,098	-36,206	-59,919	-60,144	-49,434
Changes in working capital
Accounts receivables		-10,076	-7,961	56,599	-3,701	-67,453
Other current receivables		-2,553	-17,782	-3,562	-10,409	8,275
Inventories		544	1,254	-3,900	913	475
Current liabilities		-13,733	87,919	-19,108	83,475	65,751
Provisions		-538	-101	-507	972	299
Long-term provisions		2,960	583	-816	126	-880
Cash flow from operating activities		-47,494	27,706	-31,213	11,232	-42,967
Investing activities
Acquisition of machinery and equipment		-1,757	-785	-3,630	-2,116	-3,438
Cash flow after investments		-49,251	26,921	-34,843	9,116	-46,405
Change in financing
New issue		142,760	-	142,767	-	44
Issue expenses		-1,464	-	-1,464	-	-
Proceeds from the issue of convertible
debentures		-	111,150	-	111,150	111,150
Amortization of loans		-	-	-	-16,000	-16,000
Cash flow after financing activities		92,045	138,071	106,460	104,266	48,789
Cash flow for the year
Cash and cash equivalents at the
beginning of the period		150,320	50,432	135,798	87,414	87,414
Exchange-rate differences in cash and
cash equivalents		132	2,350	239	-827	-405
Changes in cash and cash equivalents		92,045	138,071	106,460	104,266	48,789
Cash and cash equivalents at the end of the period		242,497	190,853	242,497	190,853	135,798

Key figures

	3 months 2011 Apr-June	3 months 2010 Apr-June	6 months 2011 Jan-June	6 months 2010 Jan-June	12 months 2010 Jan-Dec
Operating margin, %	-42	-1	-62	-90	-39
Profit margin, %	-47	-1	-67	-96	-42
Return on total capital, %	-3	-5	-8	-9	-12
Return on equity, %	-5	-7	-14	-12	-18
Return on capital employed, %	-4	-5	-10	-10	-14
Debt/equity ratio, %	16	20	16	20	22
Equity/assets ratio, %	73	65	73	65	66
Current ratio, %	320	175	320	175	188
Acid ratio, %	311	170	311	170	183
Average number of shares, before dilution	25,553,315	23,401,252	24,478,658	23,401,252	23,402,502
Average number of shares, after dilution	28,105,702	25,931,333	27,037,577	25,058,878	25,500,884
Number of shares, after full dilution	33,666,834	26,707,433	33,666,834	26,707,433	26,609,081
Number of shares, before dilution	29,850,940	23,401,252	29,850,940	23,401,252	23,403,752
Number of shares, after dilution	32,392,148	25,939,748	32,392,148	25,939,748	25,943,070
Loss per share, before dilution, SEK	-1.02	-1.51	-2.66	-2.69	-3.81
Loss per share, after dilution, SEK	-1.02	-1.51	-2.66	-2.69	-3.81
Shareholders' equity per share, before
dilution, SEK	21.27	21.31	21.27	21.31	20.01
Shareholders' equity per share, after
dilution, SEK	19.60	19.12	19.60	19.12	18.05
Number of employees at the end of the
period	107	100	107	100	105
Average number of employees	105	99	105	102	105
Shareholders' equity, KSEK	634,831	498,797	634,831	498,797	468,237
Capital employed, KSEK	737,653	596,875	737,653	596,875	572,137

Definitions of key figures are presented on the final page of this report.

Share-related key figures have been calculated retroactively based on the so-called bond issue element in the implemented preferential issue in June 2011.

Parent Company statement of operations

KSEK	Notes	3 months 2011 Apr-June	3 months 2010 Apr-June	6 months 2011 Jan-June	6 months 2010 Jan-June	12 months 2010 Jan-Dec
Net revenues		35,259	15,199	57,815	39,871	112,951
Cost of goods sold		-	-	-	-	-
Gross profit		35,259	15,199	57,815	39,871	112,951
Selling expenses		-5,080	-3,767	-11,597	-7,614	-16,533
Administrative expenses		-20,349	-12,605	-39,035	-20,901	-61,605
Research and development costs		-45,678	-32,135	-89,456	-69,166	-147,046
Other operating income		788	1,345	1,686	2,326	4,136
Other operating expenses		-203	-263	-517	-550	-1,347
Operating loss		-35,263	-32,226	-81,104	-56,034	-109,444
Earnings from financial investments
Interest income		161	23	467	32	506
Interest expense		-3,415	-2,983	-7,105	-3,180	-9,399
Other financial costs		-	-	-	-295	-295
Loss after financial items		-38,517	-35,186	-87,742	-59,477	-118,632
Tax		-	-	-	-	-
Loss for the period		-38,517	-35,186	-87,742	-59,477	-118,632

Parent company balance sheet

KSEK	Notes	2011 June 30	2010 June 30	2010 Dec 31
ASSETS
New issue subscribed but not paid in		102,042	-	-
Fixed assets
Tangible fixed assets		41,594	44,102	41,566
Intangible fixed assets		145	291	218
Shares in subsidiaries/joint ventures		604,763	606,414	604,763
Total fixed assets		646,502	650,807	646,547
Current assets
Inventories		4,248	1,755	2,529
Accounts receivable and other receivables		108,104	141,355	133,986
Cash and bank balances		219,777	160,989	101,400
Total current assets		332,129	304,099	237,915
Total assets		1,080,673	954,906	884,462
SHAREHOLDERS' EQUITY, PROVISIONS AND LIABILITIES	5
Restricted equity		302,691	300,111	300,112
Non-restricted equity		383,628	298,621	240,414
Total shareholders' equity		686,319	598,732	540,526
Long-term liabilities
Provisions		627	971	1,135
Loans		93,930	88,599	94,421
Total long-term liabilities		94,557	89,570	95,556
Current liabilities, non-interest-bearing		290,905	257,125	238,901
Current liabilities, interest-bearing		8,892	9,479	9,479
Total current liabilities		299,797	266,604	248,380
Total liabilities		394,354	356,174	343,936
Total shareholders' equity and liabilities		1,080,673	954,906	884,462
Pledged assets		44,000	44,000	44,000
Contingent liabilities		1,000	6,050	6,050

Notes

1. Accounting policies

• This interim report was prepared pursuant to IAS 34. Orexo applies IFRS as approved by the EU.
• The accounting policies stated below are identical to those applied in the preparation of the 2010 Annual Report.
• The Parent Company's financial statements were prepared in accordance with RFR 2, (Swedish Financial Accounting Standards Council's recommendation) and Chapter 9 of the Swedish Annual Accounts Act.

New and amended accounting policies as of 2011

No new or amended International Financial Reporting Standards have come into effect that are expected to have any significant impact on the Group.

2. Costs distributed by type of cost

	2011	2010	2011	2010	2010
	Apr-June	Apr-June	Jan-June	Jan-June	Jan-Dec
Raw materials and supplies	10,471	8,563	19,252	17,174	35,306
Other external costs	38,842	22,838	80,723	50,113	114,821
Personnel costs	29,123	29,559	56,342	56,895	116,126
Depreciation and impairment	1,983	2,006	3,928	3,956	33,764
TOTAL	80,419	62,966	160,245	128,138	300,017

Research and development costs encompass costs for personnel, premises, external costs for clinical trials, pharmaceutical registration and laboratory services, the depreciation/amortization of equipment, and the acquisition of patents and other intangible assets. All development costs recognized in the balance sheet pertain to assets that were acquired through business combinations.

3. Shareholders' equity

Shares outstanding

The number of shares outstanding at June 30, 2011 was 29,850,940, all of which were common shares. All shares carry entitlement to one vote each. The new issue was registered at the Swedish Companies Registration Office on July 7, 2011.

The number of shares outstanding increased through the new issue; refer to the table below. At June 30, 2011, these shares had not been registered at Euroclear.

Number of shares outstanding at January 1, 2011	23,403,752
Subscription of shares through exercise of employee stock options	9,000
New issue	6,438,188
Number of shares outstanding at June 30, 2011	29,850,940

Options

At June 30, 2011, a total of 2,911,398 options were outstanding that carry rights to new subscription of 2,744,052 shares in Orexo and to be exchanged for 167,346 options for shares in Orexo. Each option issued by Biolipox AB provides entitlement to the exchange of one share in Orexo AB, and a corresponding number of shares are held by the independent company Pyrinox AB.

The list below shows the change in the number of options during the period January 1, 2011 to June 30, 2011, distributed by category.

The terms and conditions of the options, such as the number of shares to which each option provides entitlement and the exercise price, will be converted due to the rights issue implemented in June 2011.

Employee-related options	Opening Jan 1, 2011	Change	Closing June 30, 2011
Of which: Decided and allocated employee stock options Expired Exercised Allotted	719,566	-140,075 -9,000 745,000	719,566 -140,075 -9,000 745,000
Total			1,315,491
Decided and allotted Board options	60,920	14,641	75,561
Total			75,561
Decided and allotted warrants	10,000		10,000
Total			10,000
Decided but not allotted employee stock options
Opening balance, as approved by the 2009 AGM Resolved at the Extraordinary General Meeting in	470,000		470,000
2011		795,000	795,000
Total			1,265,000
Warrants held by subsidiaries as cash-flow hedging for social security fees	78,000		78,000
Total			78,000
Total options to employees	1,338,486	1,405,566	2,744,052
Employee stock options from Biolipox AB (no dilution effect, including in newly issued shares in conjunction with acquisition of Biolipox) Expired	117,582	-3,267	117,582 -3,267
Exercised		-4,642	-4,642
Warrants assumed from Biolipox AB for cash-flow hedging of social security fees (no dilution effect)	61,873	-4,200	57,673
Total options from Biolipox	179,455	-12,109	167,346
Total options outstanding	1,517,941	1,393,457	2,911,398

All information regarding options issued by Orexo AB has been restated to take into account the 1:250 share split conducted in November 2005. The 2005 Annual Report states that older option certificates provide entitlement to subscribe to 250 shares after the split. The reported data regarding options issued by Orexo AB refer to the number of shares to which each option provides entitlement to subscribe for shares following the share split. All data regarding options issued by Biolipox AB are restated using a factor or 0.45854, which corresponds to the computed value of the options related to the share price for the Orexo share on the acquisition date. The

reported data regarding the options issued by Biolipox refers to the number of shares for which each option may be exchanged after recalculation.

During the January–June 2011 period, a total of 9,000 employee stock options from Orexo's options program were exercised, of which 8,250 were exercised during the April–June period. During the period January–June 2011, a total of 4,642 of Biolipox' employee stock options were exercised, entailing that holders exercised their options in exchange for 4,642 shares held by the independent company Pyrinox AB, of which 2,752 were exercised during the April–June period. This exercise did not entail the issue of any new shares by Orexo.

Costs for the program pertain to the expected cost of the value of employee earnings during the period, as measured at market value on the date of distribution, and to the portion of estimated social security expenses related to the increase in value that was vested during the period. The company will have to pay social security expenses on gains that may arise in connection with the exercise of employee stock options, calculated as the difference between the redemption price of the employee stock options and the market value of the share. All things being equal, this means that a drop in the share price during the quarter decreases the costs of the estimated social security fees.

The social security fees that could arise due to the employee stock option have been hedged financially and thus also in terms of cash flow through the issuance of warrants to a subsidiary of Orexo. This hedging does not qualify for hedge accounting in accordance with IFRS.

Allotment in March and April

During 2011, Orexo introduced a performance-based, long-term incentive program that prior to exercise comprises performance shares that provide entitlement to subscription of a total of 1,540,000 Orexo shares. A condition for entitlement to acquire new shares through the exercise of performance shares is that each employee fulfills certain vesting conditions. Of the total number of performance shares allotted, 50 percent are vested on the basis of time and internal operational goals ("time-based performance shares") and 50 percent is based on the share-price trend and the relative share performance ("share-price based performance shares"). Of these performance shares, 500,000 were allotted free of charge to the President on March 7, 2011 and 245,000 performance shares were allotted free of charge to senior executives on April 26. Of these performance shares, 372,500 are time-based and 372,500 are share-price based. The subscription price for the performance shares that were allotted on March 7 has been set at SEK 44.40 and the subscription price for the performance shares that were allotted on April 26 has been set at SEK 47.80. The final date for exercising the options is December 31, 2021.

For the time-based portion of the shares, the market capitalization is calculated according to the Black & Scholes method and for the share-price based portion, the Monte Carlo method is used. The market capitalization of the options allotted on March 7 is SEK 20.25 for the time-based portion and SEK 13.37 for the share-price based portion. For the options allotted on April 26, the market capitalization is SEK 19.19 for the time-based portion and SEK 12.41 for the share-price based portion.

Allotment of Board options in May 2011

In May 2011, 14,641 Board options were allotted, which carry the entitlement to subscription of a total of 14,641 shares in Orexo. These Board shares were allotted free of charge to Board members elected at the 2011 AGM. The Board shares will be allotted in a proportion of 25 percent the day after Orexo publishes its interim report for the first quarter and 25 percent after the publishing the interims for quarters two and four during the mandate period for the 2011 fiscal year. Board members' entitlement to redemption will come into effect two years after the 2011 AGM. The final date for exercising Board shares is December 31, 2018 and the share price is SEK 0.40 per share. The market capitalization, which is calculated according to the Black & Scholes method, was SEK 43.70 on the allotment date.

4. Cash flow

Adjustment for non-cash items

KSEK	2011 Apr-June	2010 Apr-June	2011 Jan-June	2010 Jan-June	2010 Jan-Dec
Depreciation/amortization and impairment Estimated costs for employee stock	1,983	2,006	3,928	3,956	33,764
options program	47	164	1,433	1,846	3,309
Financial expenses, convertible bond	-731	-3,068	-1,419	-3,068	2,752
Total	1,299	-898	3,942	2,734	39,825

5. Shareholders' equity

Change in the Parent Company's shareholders' equity
KSEK	2011	2010	2011	2010	2010
	Apr-June	Apr-June	Jan-June	Jan-June	Jan-Dec
Opening shareholders' equity, balance sheet	491,703	623,455	540,526	647,140	647,140
Net loss for the period	-38,517	-35,186	-87,742	-59,477	-118,632
Subscription of shares through the exercise
of warrants	150	-	157	-	44
Employee stock options, vested value for
employees	1,386	458	1,781	1,064	1,969
Convertible bond – equity share	0	10,005	0	10,005	10,005
New issue	231,597	-	231,597	-	-
Closing amount	686,319	598,732	686,319	598,732	540,526

6. Pledged assets and contingent liabilities

During 2010, the Inflazyme project was discontinued, which entailed recognition of the entire supplementary purchase consideration, of MSEK 44.3, as a contingent liability.

As cash-flow hedging for social security fees pertaining to the employee stock options issued by Biolipox, warrants were issued to Pyrinox AB. Orexo has pledged to handle any deficits exceeding the cover provided by the warrants during their lifetime through December 31, 2016.

Orexo acquired the UK drug company PharmaKodex in February 2009. This acquisition includes conditional payments based on license revenues from the current PharmaKodex program and technologies, as well as on payments for certain milestones that are not recognized as a liability.

The overdraft facility of MSEK 35 that was secured from Nordea during the period led to a rise in chattel mortgages to MSEK 44 and pledging of all shares of Kibion AB.

7. Acquisition of Wagner Analysen Technik GmbH

The acquisition will not affect Orexo's financial position in the material level, therefore no additional information is provided in this report.

Glossary

Arachidonic Acid

A substance, which, through transformation to prostaglandins and leukotrienes, regulates a number of biological processes in the body.

Drug delivery

The process through which a pharmaceutical receives the composition and form that enables the active compound to function in an optimal way.

Phase I studies

Studies mainly of the safety of a drug. Performed on healthy human volunteers.

Phase II studies

Studies of the safety and efficacy of a drug and appropriate dosages. Performed on a limited number of patients.

Phase III studies

Studies of the safety and efficacy of a drug in a real clinical situation. Performed on a large number of patients.

Fentanyl

An opioid with similar effects on living organisms as morphine but with less hypnotic activity. Used mainly within anesthesia and analgesia.

Breakthrough pain

Short-lived and intense pain that occurs in addition to the otherwise well-controlled, long-term pain that is treated with opioid analgesics.

Helicobacter pylori

A bacterium that infects the mucous membrane of the stomach.

Clinical studies/Clinical testing

Studies of a drug's effect and safety in humans.

COPD

Chronic Obstructive Pulmonary Disease, also known as a "smoker's disease."

Opioid analgesics

Pain-killing opioid.

Preclinical development/preclinical studies

Studies of a drug's effect and safety before being evaluated in humans. Can be performed on animals or in various cell systems.

Sublingual

Under the tongue.

Transmucosal

Administered above the mucous membrane.

Definitions of key figures

Key figures and certain other operating information per share are defined as follows:

Acid test ratio, %	Current assets excluding inventories as a percentage of current liabilities.
Average number of employees	Average number of full-year employees for the period.
Capital turnover rate	Net revenues divided by average operating capital.
Capital employed	Interest-bearing liabilities and shareholders' equity.
Current ratio	Current assets as a percentage of current liabilities.
Debt/equity ratio	Interest-bearing liabilities divided by shareholders' equity.
Earnings per share after dilution	Profit/loss for the period after tax divided by the average number of shares outstanding after dilution during the period.
Earnings per share before dilution	Profit/loss for the period after tax divided by the average number of shares outstanding before dilution during the period.
Equity/assets ratio	Shareholders' equity as a percentage of total assets.
Gross margin	Gross profit divided by net revenues.
Interest coverage ratio	Profit/loss after net financial items plus interest expenses and similar items, divided by expenses and similar items.
Net interest-bearing liabilities	Current and long-term interest-bearing liabilities including pension liabilities, less cash and cash equivalents.
Number of shares after dilution	Calculation of dilution from options issued by the company up to and including 2005, carried out in accordance with IAS 33.
Number of shares after full dilution	Total number of shares plus the maximum number of shares that can be subscribed through options outstanding.
Operating capital	Total assets less interest-free liabilities and provisions less cash and cash equivalents.
Operating margin	Operating profit/loss as a percentage of net revenues.
Profit margin	Profit/loss after net financial items.
Return on capital employed	Operating profit/loss plus financial revenues as a percentage of average capital employed.
Return on shareholders' equity	Profit/loss for the year divided by average shareholders' equity.
Return on total capital	Operating profit/loss plus financial revenues as a percentage of average total assets.
Shareholders' equity per share, after dilution	Shareholders' equity divided by the number of shares outstanding after dilution at the end of the period.
Shareholders' equity per share, before dilution	Shareholders' equity divided by the number of shares outstanding before dilution at the end of the period.
Working capital, net	Interest-free current assets less interest-free current liabilities.
Working capital, net/net revenues	Average working capital, net, divided by net revenues.
Note

Orexo AB publ discloses the information provided herein pursuant to the Securities Markets Act. The information was provided for public release on August 10, 2011, at 8:00 a.m. This report has been prepared in both Swedish and English. In the event of any discrepancy in the content of the two versions, the Swedish version shall prevail.