Quarterly Report • Nov 10, 2010
Quarterly Report
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Orexo AB, Box 303, SE-751 05 Uppsala, Sweden Tel: +46 (0)18-780 88 00, Fax: +46 (0)18-780 88 88, E-mail: [email protected] Internet: www.orexo.com Corp. Reg. No. 556500-0600
Uppsala, November 10, 2010
1) References made in this interim report are to the Group unless otherwise stated. Figures in parentheses relate to the year-earlier period.
To optimize execution of this strategy, the company is seeking a Chief Executive Officer who has a broad international commercial experience. The search for a new Chief Executive Officer is in its late stage.
• In August, Orexo reported that it had appointed Robin Wright as its new EVP Head of Finance and Strategy.
Petter Bäckgren was appointed the new President of the diagnostics subsidiary Kibion. Petter has solid sales, marketing and corporate management experience from the pharmaceuticals and diagnostics sector, both in the Nordic region and internationally.
"During the third quarter, Abstral™ sales were 480% higher than in the same period last year. Sales of Edluar™, Orexo's sublingual zolpidem treatment for insomnia, continue to grow more strongly from a low base, with new stock being ordered for the first time since launch and generating royalty income for Orexo.
The decision of the US Food & Drug Administration ("FDA") was delayed beyond the expected Prescription Drug User Fee Act ("PDUFA") date in early September. The FDA review is currently in the final stage, and a decision is expected shortly.
During the period, Orexo signed a new license and distribution agreement for Abstral™ in most of the Middle East and African countries. Terms were not disclosed. The agreement with NewBridge enables Abstral™ to be sold in even more geographic markets and marks another step in the company's efforts to develop a global product. Our alliance with NewBridge will make Abstral™ available to thousands of additional physicians and assist them in the treatment of cancer patients suffering from severe pain.
In August, Orexo launched the next step in its strategy to focus its business model on deploying its well-established and proven reformulation technologies to develop new proprietary products targeted at the Specialty Pharmaceutical market. As part of this strategy, Orexo has initiated the first three proprietary development programs. The company intends to commercialize these products through an Orexo-owned marketing and sales organization, starting in one of the major markets EU or USA.
A Phase I clinical study with OX219, directed towards treatment of opioid addiction, was initiated. OX219 is an improved version of the program originally acquired with the PharmaKodex transaction now using Orexo proprietary technologies. This product will compete in the opioid addiction market, which is today worth an estimated USD 1.4 billion globally, and is currently dominated by Suboxone®. Results from the initial study will be communicated during the fourth quarter.
The clinical trials for the next two proprietary programs, OX51 and OX27 will be performed by Q1, 2011.
Meda AB has informed Orexo that it will further develop the nasal cetirizine NLA product to complement Meda's allergy product portfolio. The next stage of development of NLA is a clinical phase III program, for which the full cost will be carried by Meda AB.
As previously announced, the total cost base for 2010 is estimated at MSEK 200-220, excluding the new work on the OX-CLI and OX-ESI programs within the framework of the agreement with Ortho McNeil Janssen and Janssen Pharmaceutica for which research funding is received from the partner", says Torbjörn Bjerke, President and CEO.
| 3 months | 3 months | 9 months | 9 months | 12 months | |
|---|---|---|---|---|---|
| 2010 | 2009 | 2010 | 2009 | 2009 | |
| July-Sept | July-Sept | Jan-Sept | Jan-Sept | Jan-Dec | |
| MSEK | |||||
| Net revenues | 35.9 | 63.7 | 101.4 | 208.2 | 236.1 |
| Cost of goods sold | -5.6 | -5.2 | -18.9 | -17.3 | -23.6 |
| Gross profit | 30.3 | 58.5 | 82.5 | 190.9 | 212.5 |
| Selling expenses | -6.6 | -6.5 | -22.8 | -25.3 | -39.3 |
| Administrative expenses |
-17.4 | -10.1 | -36.7 | -32.3 | -46.3 |
| Research and | -33.0 | -47.3 | -111.1 | -172.3 | -224.2 |
| development costs Other operating |
0.9 | -0.4 | 3.6 | -2.1 | -1.8 |
| income and expenses | |||||
| Operating loss* | -25.8 | -5.8 | -84.5 | -41.1 | -99.1 |
| Net financial items | -2.7 | -2.4 | -6.9 | 2.2 | 2.1 |
| Loss after | -28.5 | -8.2 | -91.4 | -38.9 | -96.9 |
| financial items | |||||
| Tax | 0.0 | -1.4 | 0.0 | -1.1 | -1.1 |
| Net loss for the period |
-28.5 | -9.5 | -91.4 | -40.1 | -98.1 |
* Includes the costs of employee stock options in the amount of MSEK 2.5 for the period January-September 2010 (MSEK 5.5 January-September 2009).
Consolidated net revenues for the period January-September 2010 amounted to MSEK 101.4 (208.2). Higher revenues in the year-earlier period derived primarily from the partnership with Meda and non-recurring compensation for the approval of Edluar™ in the USA in the first quarter of 2009.
For the period July-September 2010, consolidated net revenues totaled MSEK 35.9 (63.7). This difference was mainly due to the higher level of license deal milestone revenue including country launches and US filing of Abstral™ in the same period for 2009, but royalty revenue continued to increase.
During the second quarter, Orexo entered into an alliance and license agreement with Ortho-McNeil-Janssen Pharmaceuticals Inc. which will initially extend over a three-year period. The non-recurring upfront of MUSD 10 (MSEK 77.8) received on signing of the agreement will be distributed on a straight line basis over the three-year period. In addition, Orexo will receive and recognize funding for the research alliance on a continuous basis over the agreement period.
IMS refers to IMS audited sales data, which are statistical estimates of actual in-market sales of the product to pharmacies and hospitals. Invoiced refers to sales invoiced by ProStrakan Group plc to wholesalers.
Royalty revenues from Abstral™ during the January-September period amounted to MSEK 30.3, compared with MSEK 6.3 in the year-earlier period. Royalty revenues for the period July-September 2010 totaled MSEK 10,8 (3.3), an increase of 227%.
Kibion AB's sales amounted to MSEK 27.7 (30.4), with the difference due to the significant weakening of the Euro in 2010 compared with the same period in 2009.
ProStrakan AB's sales rose to MSEK 17.2 (16.2), of which 50 percent was recognized in Orexo's sales. Abstral's sales through ProStrakan AB grew to MSEK 2.7 (1.3).
License revenues amounted to MSEK 16.2 (119.3) and pertained to the approval of Abstral™ in Italy and Moldova, an upfront payment concerning the signing of an agreement with NewBridge Pharmaceuticals and the portion of the nonrecurring compensation received by Ortho-McNeil-Janssen Pharmaceuticals Inc. that was recognized as revenue. License revenues from the year-earlier period primarily pertained to outlicensing of the insomnia drug Edluar™ to Meda and compensation for the approval of Edluar™ in the USA.
Royalty revenues from Edluar™ resumed in the period, once the initial launch stock was exhausted by orders from pharmacies and wholesalers. Edluar™ royalties for the period were MSEK 0.4, compared with nil last quarter, and sales of Edluar™ were again up more than 45% on the previous quarter at just under MUSD 1.5.
In September Edict Pharmaceuticals filed a "Paragraph IV-Certification" in the US claiming that their sublingual dosage form containing zolpidem can be marketed without infringing Orexo's patent protecting Edluar™. Orexo has filed a lawsuit claiming patent infringement and intends to defend the IP-protection for Edluar™.
| Net sales were distributed as follows: | |
|---|---|
| ---------------------------------------- | -- |
| MSEK | July-Sept | July-Sept | Jan-Sept | Jan-Sept | Jan-Dec |
|---|---|---|---|---|---|
| 2010 | 2009 | 2010 | 2009 | 2009 | |
| Abstral™- royalty | 10.8 | 3.3 | 30.3 | 6.3 | 16.2 |
| Edluar™ - royalty | 0.4 | 2.2 | 0.4 | 2.2 | 2.3 |
| ProStrakan AB J/V 50% | 2.7 | 2.6 | 8.6 | 8.1 | 10.8 |
| Kibion AB | 8.0 | 8.9 | 27.7 | 30.4 | 40.7 |
| Total revenue from launched | 21.9 | 17.0 | 67.0 | 47.0 | 70.0 |
| products | |||||
| Partner funded R&D costs | 6.0 | 16.6 | 17.9 | 41.8 | 46.4 |
| License revenues | 7.8 | 30.1 | 16.2 | 119.3 | 119.5 |
| Other | 0.0 | 0.0 | 0.1 | 0.0 | 0.2 |
| Total | 35.9 | 63.7 | 101.4 | 208.2 | 236.1 |
Selling expenses for the period January-September 2010 amounted to MSEK 22.8 (25.3) and for the period July-September 2010 to MSEK 6.6 (6.5).
Selling expenses included business development expenses relating to the out-licensing of Orexo's projects, phase IV studies, and operations in Kibion AB and the joint venture company ProStrakan AB.
Administrative expenses for the period January-June 2010 amounted to MSEK 36.7 (32.3). Higher expenses were related to the provision of costs related to severance pay for the CEO and CFO. For the July-September 2010 period, administrative expenses amounted to MSEK 17.4 (10.1).
Research and development costs for the period January-September 2010 amounted to MSEK 111.1 (172.3). MSEK 17.9 (41.8) of these costs was funded by partners during the period. Research and development costs for the period July-September 2010 amounted to MSEK 33.0 (47.3).
The lower costs were primarily related to the development of our product portfolio, which thus required less external research activities, but also to the cost cuts that were implemented in 2009 and that achieved full effect as of January 1, 2010.
The company's expenses for the employee stock options program for the period January-September 2010 totaled MSEK 2.5, compared with MSEK 5.5 for the year-earlier period.
For the period January-September 2010, other revenues and expenses, primarily consisting of exchangerate gains/losses, amounted to revenue of MSEK 3.6 (loss: 2.1) and for the period July-September 2010 to revenue of MSEK 0.9 (loss: 0.4).
Depreciation/amortization for the period January-September 2010 amounted to MSEK 5.9 (6.6) and for the period July-September 2010 to MSEK 1.9 (1.9).
Net financial items for the period January-September 2010 totaled an expense of MSEK 6.9 (income: 2.2). Net financial items included interest expenses of MSEK 5.8 related to the convertible loan, and unrealized exchange-rate and other credit expenses. Net financial items for the year-earlier period included income of MSEK 3.9 that was attributable to second installment payment received in conjunction with the acquisition of PharmaKodex entailing that this be categorized as an embedded derivative, resulting in a positive earnings effect from a declining stock market price.
The operating loss for the period January-September 2010 was MSEK 84.5 (loss: 41.1). The loss after net financial items was MSEK 91.4 (loss: 38.9) and the loss after tax was MSEK 91.4 (loss: 40.1).
For the period July-September 2010, the operating loss totaled MSEK 25.8 (loss: 5.8). The loss after net financial items amounted to MSEK 28.5 (loss: 8.2) and the loss after tax to MSEK 28.5 (loss: 9.5).
At September 30, 2010, cash and cash equivalents amounted to MSEK 165.6 (107.1), while the corresponding figure at June 30, 2010 was MSEK 190.9.
The convertible bond issue, which took place on April 7, has been recognized in the form of a liability share and an equity share, based on the fair value of the liability share. The division into these two components was based on market interest rates of 10.5 percent. Related transaction expenses were allocated proportionally to both of these components in relation to how the issue proceeds were distributed. The convertible bond has a conversion rate of SEK 47.50, entailing a premium of about 25 percent compared with the closing price on March 12, 2010 of SEK 37.90, and is connected to an option that entitles Orexo AB to convert the loan when the share price exceeds the conversion price by 50 percent during a certain period. The convertible bond bears an annual rate of interest of 8 percent. If the loan is not converted to shares, it shall be repaid no later than March 31, 2015.
Cash flow from operating activities for the period January-September 2010 was a negative MSEK 13.7 (neg: 117.7). Cash flow after financing was MSEK 79.7 (neg: 79.4).
Cash flow from operating activities for the period July-September 2010 was a negative MSEK 25.0 (neg: 43.2). Cash flow after financing was a negative MSEK 24.6 (neg: 28.7).
At September 30, 2010, shareholders' equity totaled MSEK 466.2 (601.4). The equity/assets ratio was 66 percent (88).
Current financing is sufficient to pursue all projects described below through clinical phase I, and also to advance at least one of these projects to the approval stage without the need for further milestone payments from out-licensed research and development projects. Consequently, the Board believes that the company's current financial position is sufficient for continued operations.
Gross investments in tangible fixed assets during the period January-September 2010 amounted to MSEK 2.3 (1.7) and for the period July-September 2010 to MSEK 0.2 (0.6).
A clinical phase I study for OX219 has commenced. An additional two new development programs, OX51 and OX27, which focus on various pain indications, have been initiated and clinical studies will begin in Q4 2010 and Q1 2011, respectively. Further information is presented in a separate press release - visit www.orexo.com.
Most of the Group's business is carried out in the Parent Company, Orexo AB. Net revenues for the period January-September 2010 totaled MSEK 61.5 (159.2), with the loss after financial items amounting to MSEK 97.8 (loss: 25.1). Investments amounted to MSEK 2.3 (1.7). Cash and cash equivalents in the Parent Company at September 30, 2010 totaled MSEK 130.5 (13.5), with current investments amounting to MSEK 0.0 (0.0).
Significant risks and uncertainties are detailed in the 2009 Annual Report. Since the Annual Report was published, significant changes occurred as described below.
As a result of the implementation of the issue of convertibles, which generated proceeds of MSEK 111 before expenses, and revenues in conjunction with the out-licensing of the OX-CLI and OX-ESI projects to Ortho-McNeil-Janssen Pharmaceuticals, Inc. and Janssen Pharmaceutica NV (collectively "OMJ"), Orexo's financial risks have decreased significantly.
Orexo's share traded at SEK 42.20 at September 30, 2010. The company's market capitalization, based on the number of shares outstanding on September 30, 2010, amounted to MSEK 987.6.
| Year-end report for 2010 _______ February 16, 2011 | |
|---|---|
| Annual General Meeting 2011________ April 7, 2011 | |
| Interim report, January-March 2011__________ May 4, 2011 | |
| Interim report, January-June 2011_________ August 10, 2011 | |
| Interim report, January-September 2011__________November 9, 2011 |
Uppsala, November 10, 2010
Orexo AB (publ)
Torbjörn Bjerke President and CEO
For further information, please contact:
Torbjörn Bjerke, President and CEO, Phone: +46 708 66 19 90, e-mail: [email protected] Robin Wright, EVP Head of Finance, Phone: +44 7720 30 00 25, e-mail: [email protected]
| ABG Sundal Collier | Erik Hultgård |
|---|---|
| Carnegie | Camilla Oxhamre |
| Handelsbanken Markets | New analyst being appointed |
| Nordea | Patrik Ling |
| Pharmium Securities | Frédéric Gomez |
| Redeye | Klas Palin and Björn Fahlén |
| Rodman & Renshaw | Michael Higgins |
| SEB Enskilda | Gustaf Vahlne |
We have reviewed the appended report for the period January 1 to September 30, 2010 for Orexo AB (publ). The Board of Directors is responsible for the preparation and fair presentation of this interim report in accordance with the Annual Accounts Act and IAS 34. Our responsibility is to express an opinion on this interim report based on our review.
We conducted our review in accordance with the Standard on Review Engagements SÖG 2410, Review of Interim Financial Information Performed by the Independent Auditor of the Entity, as issued by FAR. A review consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review has a different direction and is substantially more restricted in scope than an audit conducted in accordance with Standards on Auditing in Sweden RS and other generally accepted auditing practices. The procedures performed in a review do not enable us to obtain a level of assurance that would make us 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 expressed based on an audit.
Based on our review, nothing has come to our attention that causes us to believe that the appended interim report has not in all significant respects been compiled in accordance with the Annual Accounts Act and IAS 34 and for the Parent Company in accordance with the Annual Accounts Act.
Uppsala, November 10, 2010 PricewaterhouseCoopers AB
Leonard Daun Authorized Public Accountant
| 3 months | 3 months | 9 months | 9 months | 12 months | ||
|---|---|---|---|---|---|---|
| Notes | 2010 | 2009 | 2010 | 2009 | 2009 | |
| Jul-Sept | Jul-Sept | Jan-Sept | Jan-Sept | Jan-Dec | ||
| Net revenues | 35,854 | 63,676 | 101,362 | 208,247 | 236,104 | |
| Cost of goods sold | 2 | -5,577 | -5,149 | -18,858 | -17,351 | -23,650 |
| Gross profit | 30,277 | 58,527 | 82,504 | 190,896 | 212,454 | |
| Selling expenses | 2 | -6,607 | -6,458 | -22,824 | -25,277 | -39,261 |
| Administrative expenses | 2 | -17,394 | -10,131 | -36,667 | -32,261 | -46,308 |
| Research and development costs | 2 | -32,919 | -47,310 | -111,089 | -172,303 | -224,216 |
| Other operating income | 2,521 | 1,456 | 6,445 | 6,501 | 8,239 | |
| Other operating expenses | 2 | -1,688 | -1,893 | -2,884 | -8,681 | -9,991 |
| Operating loss | -25,810 | -5,809 | -84,515 | -41,125 | -99,083 | |
| Financial income | 200 | 195 | 264 | 4,823 | 4,868 | |
| Financial expense | -2,902 | -2,564 | -7,139 | -2,606 | -2,726 | |
| Financial items – net | -2,702 | -2,369 | -6,875 | 2,217 | 2,142 | |
| Pre-tax loss | -28,512 | -8,178 | -91,390 | -38,908 | -96,941 | |
| Income tax | 9 | -1,358 | 14 | -1,143 | -1,138 | |
| Net loss for the period | -28,503 | -9,536 | -91,376 | -40,051 | -98,079 | |
| Loss for the period attributable | ||||||
| to: | ||||||
| Parent Company shareholders Minority interests |
-28,503 - |
-9,536 - |
-91,376 - |
-40,051 - |
-98,079 - |
|
| Loss per share attributable to Parent Company shareholders during the period (SEK per share): |
||||||
| Loss per share, before dilution, SEK | -1.22 | -0.41 | -3.90 | -1.78 | -4.32 |
Loss per share, after dilution, SEK -1.22 -0.41 -3.90 -1.78 -4.32
| 3 months | 3 months | 9 months | 9 months | 12 months | |
|---|---|---|---|---|---|
| 2010 | 2009 | 2010 | 2009 | 2009 | |
| July-Sept | July-Sept | Jan-Sept | Jan-Sept | Jan-Dec | |
| Loss for the period | -28,503 | -9,536 | -91,376 | -40,051 | -98,079 |
| Other comprehensive income | |||||
| Hedging of net investments | - | 2,111 | - | 2,329 | 2,329 |
| Exchange-rate differences | -2,465 | -6,949 | -2,972 | -9,539 | -7,574 |
| Other comprehensive income for the period, net after tax |
-2,465 | -4,838 | -2,972 | -7,210 | -5,245 |
| Total comprehensive income for the period |
-30,968 | -14,374 | -94,348 | -47,261 | -103,324 |
| Total comprehensive income attributable to: |
|||||
| Parent Company shareholders | -30,968 | -14,374 | -94,348 | -47,261 | -103,324 |
| Share capital |
Other capital contributed |
Accumulated loss |
Translation differences |
Total | Total shareholders' equity |
|
|---|---|---|---|---|---|---|
| Opening balance, January 1, 2009 |
8,647 | 1,012,964 | -451,828 | - | 569,783 | 569,783 |
| Total comprehensive income for the period |
- | - | -40,051 | -7,210 | -47,261 | -47,261 |
| Employee stock options, vested amount |
- | 4,394 | - | - | 4,394 | 4,394 |
| New share issues | 713 | 73,733 | - | - | 74,446 | 74,446 |
| Closing balance, September 30, 2009 |
9,360 | 1,091,091 | -491,879 | -7,210 | 601,362 | 601,362 |
| Opening balance, January 1, 2010 |
9,360 | 1,094,453 | -549,907 | -5,245 | 548,661 | 548,661 |
| Total comprehensive income for the period |
- | - | -91,376 | -2,972 | -94,348 | -94,348 |
| Employee stock options, vested amount |
- | 1,823 | - | - | 1,823 | 1,823 |
| Convertible bond – equity share |
- | 10,005 | - | - | 10,005 | 10,005 |
| New share issues | 1 | 43 | - | - | 44 | 44 |
| Closing balance, September 30, 2010 |
9,361 | 1,106,324 | -641,283 | -8,217 | 466,185 | 466,185 |
1) There are no minority interests
| 2010 | 2009 | 2009 | ||
|---|---|---|---|---|
| Notes | 30 Sep | 30 Sep | 31 Dec | |
| Assets | ||||
| Fixed assets | ||||
| Tangible fixed assets | 42,602 | 46,219 | 45,814 | |
| Goodwill | 17,800 | 16,030 | 17,987 | |
| Acquired R&D | 422,332 | 424,836 | 427,030 | |
| Other intangible fixed assets | 1,420 | 2,117 | 1,982 | |
| Total fixed assets | 484,154 | 489,202 | 492,813 | |
| Current assets | ||||
| Inventories | 9,577 | 9,172 | 8,440 | |
| Accounts receivable and other receivables | 40,887 | 74,231 | 59,622 | |
| Tax receivables | 7,983 | 3,487 | 1,045 | |
| Cash and cash equivalents | 165,645 | 107,061 | 87,414 | |
| Total current assets | 224,092 | 193,951 | 156,521 | |
| Total assets | 708,246 | 683,153 | 649,334 | |
| SHAREHOLDERS' EQUITY & LIABILITIES | 3 | |||
| Share capital | 9,361 | 9,360 | 9,360 | |
| Capital contributions | 1,106,324 | 1,091,091 | 1,094,453 | |
| Accumulated losses | -641,283 | -491,879 | -549,907 | |
| Translation difference | -8,217 | ,-7,210 | -5,245 | |
| Total shareholders' equity | 466,185 | 601,362 | 548,661 | |
| Long-term liabilities | ||||
| Provisions | 10,798 | 1,337 | 11,114 | |
| Long-term liabilities, interest-bearing | 91,510 | 16,000 | 12,800 | |
| Long-term liabilities, non-interest-bearing | - | 9,805 | - | |
| Deferred tax liability | 9,036 | 9,449 | 9,791 | |
| Total long-term liabilities | 111,344 | 36,591 | 33,705 | |
| Current liabilities | ||||
| Current liabilities, non-interest-bearing* | 121,238 | 45,200 | 63,768 | |
| Current liabilities, interest-bearing | 9,479 | - | 3,200 | |
| Total liabilities | 242,061 | 81,791 | 100,673 | |
| Total shareholders' equity and liabilities |
708,246 | 683,153 | 649,334 |
* includes the unrecognized portion of the OX-CLI deal upfront funding of MSEK 69.3
| 3 months | 3 months | 9 months | 9 months | 12 months | ||
|---|---|---|---|---|---|---|
| Notes | 2010 | 2009 | 2010 | 2009 | 2009 | |
| July-Sept | July-Sept | Jan-Sept | Jan-Sept | Jan-Dec | ||
| Operations | ||||||
| Operating loss before interest | ||||||
| expense and interest income | -25,810 | -5,809 | -84,515 | -41,125 | -99,083 | |
| Interest income | 200 | 11 | 264 | 714 | 759 | |
| Interest expense | -2,902 | -235 | -6,030 | -277 | -397 | |
| Tax paid | - | -1,389 | - | -1,389 | -1,389 | |
| Other financial expenses | - | - | -1,109 | - | - | |
| Adjustment for non-cash items | 4 | 7,156 | 3,672 | 9,890 | 14,108 | 20,834 |
| Cash flow from operations | ||||||
| before changes in working capital |
-21,356 | -3,750 | -81,500 | -27,969 | -79,276 | |
| Changes in working capital Accounts receivable |
6,461 | -22,813 | 2,760 | -16,966 | -2,963 | |
| Other current receivables | 19,446 | -6,209 | 9,037 | 3,095 | 6,143 | |
| Inventories | -2,050 | -988 | -1,137 | 4,810 | 5,542 | |
| Current liabilities | -25,284 | -9,882 | 58,191 | -81,791 | -64,487 | |
| Provisions | -1,288 | 655 | -316 | 847 | 1,114 | |
| Long-term provisions | -881 | -248 | -755 | 295 | - | |
| Cash flow from | -24,952 | -43,235 | -13,720 | -117,679 | -133,927 | |
| operations | ||||||
| Investing activities | ||||||
| Acquisition of machinery and | -170 | -636 | -2,286 | -1,688 | -2,588 | |
| equipment | ||||||
| Divestment of machinery and | - | - | - | 2 | 2 | |
| equipment | ||||||
| Acquisition of subsidiaries | - | - | - | 24,695 | 24,695 | |
| Cash flow after investments | -25,122 | -43,871 | -16,006 | -94,670 | -111,818 | |
| Change in financing | ||||||
| New share issue | 44 | -800 | 44 | -710 | 90 | |
| Proceeds from issue of | - | - | 111,150 | - | - | |
| convertible bond | ||||||
| Loans raised | 16,000 | - | 16,000 | 16,000 | ||
| Amortization of loans | - | - | -16,000 | - | - | |
| Cash flow from financing activities |
-25,078 | -28,671 | 79,188 | -79,380 | -95,728 |
| 3 months | 3 months | 9 months | 9 months | 12 months | ||
|---|---|---|---|---|---|---|
| Notes | 2010 | 2009 | 2010 | 2009 | 2009 | |
| July-Sept | July-Sept | Jan-Sept | Jan-Sept | Jan-Dec | ||
| Cash flow for the year | ||||||
| Cash and cash equivalents, | 190,853 | 137,178 | 87,414 | 188,220 | 188,220 | |
| beginning of period | ||||||
| Exchange-rate differences in | -130 | -1,446 | -957 | -1,779 | -5,078 | |
| cash and cash equivalents | ||||||
| Changes in cash and cash | -25,078 | -28,671 | 79,188 | -79,380 | -95,728 | |
| equivalents | ||||||
| Cash and cash equivalents, close of period |
165,645 | 107,061 | 165,645 | 107,061 | 87,414 |
| 3 months | 3 months | 9 months | 9 months | 12 months | |
|---|---|---|---|---|---|
| 2010 | 2009 | 2010 | 2009 | 2009 | |
| July-Sept | July-Sept | Jan-Sept | Jan-Sept | Jan-Dec | |
| Operating margin, % | -72 | -9 | -83 | -20 | -42 |
| Profit margin, % | -80 | -9 | -90 | -18 | -41 |
| -4 | 0 | -12 | -5 | -14 | |
| Return on total capital, % | |||||
| Return on equity, % | -6 | -1 | -18 | -6 | -17 |
| Return on capital | -5 | 0 | -15 | -7 | -16 |
| employed, % | |||||
| Debt/equity ratio, | 22 | 0 | 22 | 0 | 0 |
| multiple | |||||
| Equity/assets ratio, % | 66 | 88 | 66 | 88 | 85 |
| Current ratio, % | 171 | 429 | 171 | 429 | 234 |
| Acid ratio, % | 164 | 409 | 164 | 409 | 221 |
| Average number of | 23,403,752 | 22,778,731 | 23,402,085 | 22,485,961 | 22,714,784 |
| shares, before dilution | |||||
| Average number of | 25,942,413 | 23,881,183, | 25,353,390 | 23,588,413 | 23,801,489 |
| shares, after dilution | |||||
| Number of shares, after | 26,610,080 | 25,361,950 | 26,610,080 | 25,361,950 | 25,326,775 |
| full dilution | |||||
| Number of shares, before | 23,403,752 | 23,401,252 | 23,403,752 | 23,401,252 | 23,401,252 |
| dilution | |||||
| Number of shares, after | 25,945,232 | 24,503,704 | 25,945,232 | 24,503,704 | 24,487,957 |
| dilution | |||||
| Earnings/loss per share, | -1.22 | -0.41 | -3.90 | -1.78 | -4.32 |
| before dilution, SEK | |||||
| Earnings/loss per share, | -1.22 | -0.41 | -3.90 | -1.78 | -4.32 |
| after dilution, SEK | |||||
| Shareholders' equity per | 19,92 | 25.70 | 19,92 | 25 70 | 23.45 |
| share before dilution, SEK | |||||
| Shareholders' equity per | 17,97 | 24.54 | 17,97 | 24.54 | 22.41 |
| share after dilution, SEK | |||||
| Number of employees at | 106 | 126 | 106 | 126 | 108 |
| close of period | |||||
| Average number of | 105 | 126 | 105 | 126 | 124 |
| employees | |||||
| Shareholders' equity | 466,185 | 601,362 | 466,185 | 601,362 | 548,661 |
| Capital employed | 567,174 | 617,362 | 567,174 | 617,362 | 564,661 |
Refer to the Annual Report for 2009
| KSEK | 3 months 2010 |
3 months 2009 |
9 months 2010 |
9 months 2009 |
12 months 2009 |
|
|---|---|---|---|---|---|---|
| Notes | July-Sept | July-Sept | Jan-Sept | Jan-Sept | Jan-Dec | |
| Net revenues | 21,637 | 49,052 | 61,508 | 159,165 | 208,183 | |
| Cost of goods sold | - | - | - | - | - | |
| Gross profit | 21,637 | 49,052 | 61,508 | 159,165 | 208,183 | |
| Selling expenses | -1,480 | -2,985 | -11,387 | -10,486 | -16,588 | |
| Administrative expenses | -24,003 | -9,871 | -44,904 | -28,575 | -42,260 | |
| Research & development expenses | -32,178 | -40,039 | -99,051 | -146,230 | -192,463 | |
| Other operating income | 888 | 298 | 3,214 | 2,567 | 3,574 | |
| Other operating expenses | -370 | -721 | -920 | -5,660 | -6,203 | |
| Operating loss | -35,506 | -4,266 | -91,540 | -29,219 | -45,757 | |
| Earnings from financial | ||||||
| investments | ||||||
| Interest income | 192 | 6,449 | 224 | ,6,661 | 230 | |
| Interest expenses | -2,983 | -2,435 | -6,163 | -2,589 | -2,543 | |
| Other financial income | - | - | - | - | 6,269 | |
| Other financial expenses | - | - | -295 | - | - | |
| Loss after financial items | -38,297 | -252 | -97,774 | -25,147 | -41,801 | |
| Tax | - | -1,389 | - | -1,389 | -1,390 | |
| Loss for the period | -38,297 | -1,641 | -97,774 | -26,536 | -43,191 |
| KSEK | Notes | 2010 30-Sep |
2009 30-Sep |
2009 31-Dec |
|---|---|---|---|---|
| ASSETS | ||||
| Fixed assets | ||||
| Tangible fixed assets | 42,465 | 45,877 | 45,523 | |
| Intangible fixed assets | 254 | 400 | 363 | |
| Shares in subsidiaries/joint ventures Total fixed assets |
604,763 647,482 |
606,414 652,691 |
606,414 652,300 |
|
| Current assets | ||||
| Inventories | 2,734 | 1,519 | 1,385 | |
| Accounts receivable and other receivables | 108,625 | 41,316 | 76,729 | |
| Tax receivables | 4,537 | 2,679 | 728 | |
| Cash and bank balances | 130,525 | 13,472 | 12,790 | |
| Total current assets | 246,421 | 58,986 | 91,632 | |
| Total assets | 893,903 | 711,677 | 743,932 | |
| SHAREHOLDERS' EQUITY, PROVISIONS & LIABILITIES |
5 | |||
| Restricted equity | 300,112 | 300,111 | 300,111 | |
| Non-restricted equity | 260,878 | 360,588 | 347,029 | |
| Total shareholders' equity | 560,990 | 660,699 | 647,140 | |
| Long-term liabilities | ||||
| Provisions | 929 | 1,337 | 813 | |
| Borrowings | 91,510 | 16,000 | 12,800 | |
| Total long-term liabilities | 92,439 | 17,337 | 13,613 | |
| Current liabilities, non-interest-bearing | 230,995 | 33,641 | 79,979 | |
| Current liabilities, interest-bearing | 9,479 | - | 3,200 | |
| Total liabilities | 240,474 | 50,978 | 83,179 | |
| Total shareholders' equity and liabilities |
893,903 | 711,677 | 743,932 | |
| Pledged assets | 16,000 | 16,000 | 16,000 | |
| Contingent liabilities | 6,050 | 11,050 | 6,050 |
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 2009 Annual Report.
During the period, Orexo issued a convertible bond. This compound financial instrument is initially recognized in the following manner: the liability share is measured at fair value and the equity share as the difference between the fair value of the entire convertible bond less the portion recognized as a liability. Transaction expenses have been allocated to the liability share and equity share in proportion to the value initially recognized.
The Parent Company's financial statements were prepared in accordance with RFR 2.2 (Swedish Financial Accounting Standards Council's recommendation) and Chapter 9 of the Swedish Annual Accounts Act.
No new or revised IFRS have come into effect that are expected to have any significant impact on the Group.
| 2010 | 2009 | 2010 | 2009 | 2009 | |
|---|---|---|---|---|---|
| July-Sept | July-Sept | Jan-Sept | Jan-Sept | Jan-Dec | |
| Raw materials and supplies | 8,570 | 9,560 | 25,744 | 32,681 | 41,503 |
| Other external costs | 21,531 | 35,902 | 71,644 | 120,338 | 162,469 |
| Personnel costs | 30,534 | 23,621 | 87,429 | 94,278 | 128,619 |
| Depreciation and impairment | 3,548 | 1,857 | 7,504 | 8,574 | 10,838 |
| TOTAL | 64,183 | 70,940 | 192,321 | 255,871 | 343,429 |
Research and development costs encompass costs for personnel, employee stock options, 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.
The number of shares outstanding at September 30, 2010, was 23,403,752, all of which were common shares. All shares carry entitlement to one vote each.
At September 30, a total of 1,531,801 options were outstanding that carry rights to new subscription of 1,339,486 shares in Orexo and to be exchanged for 192,315 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.
| Opening Jan 1, 2010 |
Change | Closing Sept 30, 2010 |
|
|---|---|---|---|
| Employee-related options | |||
| Of which: | |||
| Decided and allocated employee stock options Expired |
876,316 | -,153,250 | 876,316 -153,250 |
| Exercised | -2,500 | -2,500 | |
| Total | 720,566 | ||
| Decided and allotted Board options | 35,207 | 35,207 | |
| Allotted | 25,713 | 25,713 | |
| Total | 60,920 | ||
| Decided and allotted warrants | 10,000 | 10,000 | |
| Total | 10,000 | ||
| Decided but not allotted employee stock options 2009 |
|||
| Opening balance, as approved by the 2009 AGM | 470,000 | 470,000 | |
| Total | 470,000 | ||
| Warrants held by subsidiaries as cash-flow hedging for social security fees |
78,000 | 78,000 | |
| Total | 78,000 | ||
| Total options to employees | 1,469,523 | -130,037 | 1,339,486 |
| Employee stock options utilized from Biolipox AB (no dilution effect, included in newly issued shares in conjunction with acquisition of Biolipox) |
196,107 | 130,192 | |
| Expired | -9,454 | -9,454 | |
| Exercised | -56,461 | -56,461 | |
| Warrants utilized from Biolipox AB for cash-flow hedging of social security fees (no |
|||
| dilution effect) | 80,323 | -18,200 | 62,123 |
| Total options from Biolipox | 276,430 | -84,115 | 192,315 |
| Total options to employees | 1,745,953 | -214,152 | 1,531,801 |
| Other options | |||
| Warrants related to supplemental payment in | |||
| conjunction with acquisition of Biolipox AB | 926,000 | -926,000 | - |
| Total options outstanding | 2,671,953 | -1,140,152 | 1,531,801 |
The list below shows the change in the number of options during the period January 1, 2010 to September 30, 2010 distributed by category.
1 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 for 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 of 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 refer to the number of shares for which each option may be exchanged after recalculation.
_______________________________________________________________________________________________
During the period January-September 2010, a total of 2,500 employee stock options from Orexo's options program were exercised, all during the period July-September. During the period January- September 2010, 56,461 of Biolipox' employee stock options were exercised, entailing that holders exercised their options in exchange for 56,461 shares held by the independent company Pyrinox AB. Of these employee stock options, none were exercised in the period July-September 2010. Exercise did not entail the issue of any new shares by Orexo.
On January 1, 2010, the 926,000 warrants pertaining to the additional purchase consideration for the Biolipox acquisition expired. They could have been exercised had certain events occurred before December 31, 2009, but since these events never occurred, the warrants expired.
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 rise in the share price during the quarter increases 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.
In May 2010, a total of 25,713 Board member options were allotted that provide entitlement to subscribe for a total of 25,713 shares in Orexo. These Board member options have been allotted free of charge to the Board members elected at the 2010 AGM. Vesting of the Board member options takes the form of 25 percent after the date for the publication of Orexo's interim report for the first quarter and 25 percent after the publication of the interim reports for quarters two to four during the mandate period for the 2010 financial year. The right of Board members to request exercise arises two years after the 2010 AGM. The final exercise date for Board member options is December 31, 2017 and the strike price is SEK 0.40 per share. The market value, calculated using the Black & Scholes method, was SEK 37.86 on the allotment date.
| 2010 | 2009 | 2010 | 2009 | 2009 | |
|---|---|---|---|---|---|
| July-Sept | July-Sept | Jan-Sept | Jan-Sept | Jan-Dec | |
| Depreciation/amortization and impairment |
3,548 | 1,857 | 7,504 | 8,574 | 10,503 |
| Estimated costs for employee stock options program Other |
698 | 1,815 - |
2,544 - |
5,534 - |
8,203 2,128 |
| Financial expenses, convertible bond | 2,910 | - | -158 | - | - |
| Total | 7,156 | 3,672 | 9,890 | 14,108 | 20,834 |
| 2010 July-Sept |
2009 July-Sept |
2010 Jan-Sept |
2009 Jan-Sept |
2009 Jan-Dec |
|
|---|---|---|---|---|---|
| Opening shareholders' equity, balance sheet |
598,732 | 626,462 | 647 140 | 609 194 | 609 194 |
| Net loss for the period Subscription for shares through the |
-38,297 | -1,641 | -97,774 | -26,536 | -43,191 |
| exercise of warrants | 44 | - | 44 | 90 | - |
| New share issues | - | 35,110 | - | 74,356 | 90 |
| New warrant issues Employee stock options, vested value for |
- | - | - | - | 74,356 |
| employees Convertible bond – |
511 | 768 | 1,575 | 3,595 | 6,691 |
| equity share | - | - | 10,005 | - | - |
| Closing amount | 560,990 | 660,699 | 560,990 | 660,699 | 647,140 |
In the acquisition of Inflazyme in November 2007, a supplemental payment was agreed contingent on certain goals being met. MSEK 9.9 of the supplemental payment was recognized as a provision and MSEK 34.3 was recognized as a contingent liability, since the latter is not assessed as a probable payment based on pharmaceutical development statistics. The supplemental payment was adjusted for changes in exchange rates during the year. 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 British drug company PharmaKodex in February 2009. This corporate 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 nonproperty mortgages to MSEK 44 and pledging of all shares of Kibion AB.
Note
Orexo AB publ. discloses the information provided herein pursuant to the Securities Markets Act. The information was provided for public release on November 10, 2010, at 8:00 a.m. CET. 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 take precedence.
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