Active Biotech — Annual Report 2012

May 1, 2012

Annual Report 2011

Contents

Active Biotech in brief	3
Comments from the CEO	4
Directors' report	6
THE GROUP
Income statement	13
Cash flows	13
Comprehensive income	13
Financial position	13
Changes in shareholders' equity	14
THE PARENT COMPANY
Income statement	14
Cash-flow statement	14
Statement of comprehensive
income	14
Balance sheet	15
Changes in shareholders' equity	15
Notes to the financial
statements	16
Audit report	35
Financial development	36
The share	37
Intellectual property rights	40
Corporate Governance Report 2011 41
Board of Directors and Auditors	44
Management Group	45
Glossary	46

Financial information

Interim report (Q1)	April 26, 2012
Annual General Meeting May 10, 2012
Interim report (Q2)	Aug 10, 2012
Interim report (Q3)	Nov 9, 2012
Year-end report for 2012 Feb 14, 2013

Financial information can be requested from Active Biotech AB, PO Box 724, SE-220 07 Lund, Sweden. Telephone +46 (0)46-19 20 00, fax +46 (0)46-19 11 00. Information can also be obtained from the company's website www.activebiotech.com.

This Annual Report contains forward-looking information regarding Active Biotech. Although we believe that our expectations are based on reasonable assumptions, forward-looking statements could be affected by factors causing the actual outcome and trend to differ materially from the forecast. The forward-looking statements comprise various risks and uncertainties. There are significant factors that could cause the actual outcome to differ from that implied by these forward-looking statements, some of which are beyond our control. These include the risk that patent rights might expire or be lost, exchange-rate movements, the risk that research and development operations do not result in commercially successful new products, competition effects, tax risks, effects resulting from the failure of a third party to deliver products or services, difficulties in obtaining and maintaining official approval for products, and environmental responsibility risks

Annual General Meeting

The Annual General Meeting of Active Biotech AB (publ) is to be held on Thursday, May 10, 2012 at 5:00 p.m. at Edison Park, Emdalavägen 16, Lund, Sweden. Shareholders who wish to participate in the Meeting must (a) be recorded in the register of shareholders maintained by Euroclear Sweden AB (formerly VPC AB) on Friday, May 4, 2012, and (b) notify the company of their intention to participate in the Meeting not later than Monday, May 7, 2012.

Shareholders who have trustee-registered shares must temporarily re-register the shares in their own name with Euroclear Sweden to be entitled to participate in the Meeting. This registration must be completed not later than Friday, May 4, 2012. Accordingly, shareholders must inform the trustee of this request in ample time prior to this date.

Notice of participation

Notice of participation can be made in writing to Active Biotech AB (publ), Attn. Susanne Jönsson, PO Box 724, SE-220 07 Lund, Sweden, by fax on +46 (0)46-19 20 50, by telephone on +46 (0)46-19 20 00 or by e-mail to susanne.jonsson@activebiotech.com. The notice shall include name, personal/corporate registration number, number of shares held, daytime telephone number and, if applicable, the number of advisors (two at the most) that will accompany the shareholder at the Meeting.

The notice of the Annual General Meeting is available in its entirety on the company's website www.activebiotech.com.

Active Biotech in brief

Active Biotech currently has five projects in clinical phase, three of which are outlicensed. Three of the projects relate to drugs for the treatment of autoimmune diseases such as multiple sclerosis (MS), Crohn's disease, systemic sclerosis and rheumatoid arthritis (RA), and two of the projects focus on drugs for the treatment of cancer, mainly prostate cancer and renal cell cancer. In addition, Active Biotech is pursuing a preclinical project, ISI.

• Laquinimod is an orally administered compound under development for the treatment of autoimmune diseases, primarily MS. Active Biotech has an agreement with the Israeli pharmaceutical company Teva for the development and commercialization of laquinimod. In 2011, the findings were presented from two Phase III studies, ALLEGRO and BRAVO, supporting the direct effect of laquinimod in the central nervous system (CNS). Submission of a marketing authorization application (MAA) in the EU is expected to take place in the second half of 2012. One additional clinical study will be completed prior to filing a new drug application (NDA) in the US. ●
• The development of TASQ is mainly focused on the treatment of prostate cancer. In April 2011, Active Biotech entered a broad partnership with the French pharmaceutical company Ipsen for the co-development and commercialization of TASQ. The agreement grants exclusive rights to Ipsen to commercialize TASQ worldwide, except for North and South America and Japan, where Active Biotech retains all commercial and marketing rights. Pivotal Phase III trials encompassing 1,200 prostate cancer patients are under way. The results from these studies are expected at the end of 2013. ●
• ANYARA is a protein drug that makes the treatment of cancer tumor-specific. The development of ANYARA is primarily focused on renal cell cancer, but the compound has also demonstrated favorable results in the treatment of, for example, non-small cell lung cancer. ANYARA has been granted orphan medicinal product status by the EMA for the indication renal cell cancer. The compound is currently undergoing pivotal Phase III trials encompassing just over 500 renal cell cancer patients. The results from the study are expected to be presented in 2012. ●
• 57-57 is a quinoline compound under development for treatment of systemic sclerosis/scleroderma. This rare disease is an orphan drug indication. In February 2011, the 57-57 project was granted orphan medicinal product status for the indication systemic sclerosis (SSc). An explorative study into this indication is in progress. ●
• ISI is a preclinical project aimed at utilizing the company's own results that were generated around a target molecule, S100A9, for the quinoline compounds and their biological mode of action. The objective of the project it to produce new, patentable chemical compounds that interact with S100A9. The selection of a candidate drug is expected to take place in 2013/2014. ●
• RhuDex® is a compound that is primarily intended to be used as a drug for the treatment of RA. Active Biotech has entered into a licensing agreement with the German pharmaceutical company MediGene AG, which grants MediGene the exclusive right to further develop and market the product. A clinical Phase II trial was completed earlier. In January 2012, a clinical study was initiated with the objective of establishing the optimized formulation for the treatment of chronic diseases. ●

PROJECT	PRIMARY INDIC ATION			DISCOVERY PHASE PRECLINICAL DE V. CLINICAL PHASE I CLINICAL PHASE II CLINICAL PHASE III		PA R T N E R
	MS
Laquinimod	Crohn's Lupus		Selection of candidate drug (CD)
TASQ	Prostate cancer
TASQ + cabazitaxel	Prostate cancer
ANYARA	Renal cell cancer
57-57	Systemic sclerosis
ISI
RhuDex®	RA
Autoimmunity/inflammation		Cancer		Striped = Ongoing

brief

2011 – A trying year

The year 2011 was a trying one for Active Biotech's shareholders. Just prior to year-end 2010, we made a joint announcement with our partner Teva that the first Phase III trial of laquinimod in MS patients (Allegro) had been successful, resulting in the company's market capitalization peaking at over SEK 11 billion. During the spring, positive results from competing drugs were presented, the most notable of which was BG12 from Biogen-Idec, and the complete results from the Allegro study were made public. Overall, these news events were interpreted as being negative for laquinimod, and this debate entirely overshadowed the fact

that we had finalized our second major partnership agreement. After mid-year, the unexpected news came that the second Phase III study in laquinimod (BRAVO) did not meet its primary endpoint and, a few months later, our partner Teva deferred filing of the new drug application (NDA) in the US. Coupled with the widespread pessimism on the stock exchange, this resulted in the company being valued at under SEK 1 billion at its lowest point. What constitutes a correct valuation is not for me to say, but the past year is a striking illustration of the risks and the potential value in our industry.

Successful new share issue

In terms of the company's own internal operations, we have been more successful. We have leased premises and sold research services for about SEK 11 million. At the end of January 2011, we announced that we had completed a private placement generating proceeds of SEK 375 million for the company. The reasons for the issue were to broaden our shareholder base and to enable us to initiate Phase III trials in TASQ without the need to first enter a partnership agreement. Naturally, by strengthening our finances we also bolstered our negotiating position in ongoing partnership discussions.

New partnership agreement

As a result of these negotiations, we could announce in mid-April that we had entered a partnership agreement with the French pharmaceutical company Ipsen. Under the terms of the agreement, Active Biotech received an upfront payment of EUR 25 million on signing and could receive up to approximately EUR 175 million in additional upfront payments contingent upon achievement of clinical, regulatory and commercial milestones. In addition, Active Biotech will receive double-digit royalties on Ipsen's sales. Ipsen has exclusive rights to TASQ worldwide, except in North and South America, as well as Japan, where Active Biotech has retained all commercial rights. Active Biotech is funding and conducting the ongoing Phase III study but receives milestone payments from Ipsen on the achievement of clinical goals, making the funding of the study cash-neutral for Active Biotech over the study period. Ipsen will also launch and fund an additional clinical study in prostate cancer patients.

We are very pleased to have reached this agreement with Ipsen, which adds complementary expertise to the project in the areas of clinical development and commercialization, marketing and sales. In respect of the territories where Active Biotech has retained all commercial rights, we will initiate partner discussions in 2012 with the aim of having commercial partners in place when the ongoing Phase III study is completed.

Stable finances

Unlike last year, the laquinimod project is now delayed and the best we can hope for is the receipt of royalty revenues in 2014. We had, however, some SEK 465 million in cash and bank balances at year-end thanks to the agreement with Ipsen and the private placement. We also anticipate further revenues for the company in 2012. As I write this, I therefore do not believe that Active Biotech will require any

further funding under the current business plan.

New faces and new responsibilities

In 2011, the company was also strengthened at a management and Board level. The addition of Mef Nilbert to the Board significantly strengthens our expertise in the field of oncology. This is highly positive for Active Biotech in view of the company's current status with respect to the TASQ project , the Phase III studies of ANYARA, and the development of our ISI project in the indication area oncology. Other new faces on the Board are Peter Thelin and Peter Hofvenstam, who strengthen the company's competence in respect of financing and the stock market. During the year,

Helén Tuvesson took over as Chief Scientific Officer (CSO). Helén has worked extensively within the company and has indepth and broad expertise with regard to our projects and our competence base. These changes also mean that the allocation of responsibility among company management is more distinct and balanced.

Laquinimod

As I mentioned above, the laquinimod project had a very turbulent year. The complete scientific results were presented from the ALLEGRO study at the Annual Meeting of the American Academy of Neurology (AAN). Laquinimod demonstrates a unique profile. While the effect on the primary efficacy parameter, to reduce the relapse rate over a two-year period, was significant, it was moderate in magnitude (23 percent) compared with many other drugs. Nevertheless, patients treated with laquinimod demonstrated a significant reduction in the risk of confirmed disability progression, as measured by the Expanded Disability Status Scale (EDSS) (36 percent), compared with placebo. Furthermore, a significant reduction was observed in brain tissue loss (brain atrophy) in connection with treatment with laquinimod (33 percent). This result was surprising insofar as its has often been assumed that to achieve an effect on disability progression and brain atrophy this must be associated with a significant effect on the reduction of the relapse rate. The new hypothesis that can now be discerned is that the pathological process that leads to relapse is to a certain extent independent of, and in parallel with, that which causes disability progression and brain atrophy. Interestingly, this explanation was also exemplified in the competing preparation BG12's second Phase III study, the CONFIRM study. This study had a very similar design to the ALLEGRO study, and while BG12 demonstrated good

5

efficacy in relation to reducing the relapse rate (44 percent), it showed a modest effect with regard to reducing disability progression (21 percent), that is, the inverse of the ALLEGRO result. Data on the effect on brain atrophy for BG12 was not made available. The result from our second Phase III study, BRAVO, was a negative surprise for us all. The fact that the trial did not achieve the primary efficacy endpoint, a reduction in the relapse rate, was due to an imbalance that arose between the various patient groups at the beginning of the study. A number of parameters that forecast the risk of relapse were skewed to the laquinimod group's disadvantage. Following adjustment to this parameter using a predefined statistical procedure, the BRAVO study achieved statistical significance with respect to the reduction in the relapse rate and disability progression. The reduction in brain atrophy was significant both before and after the correction. If the magnitude of the efficacy parameters are examined, the BRAVO results were quite similar to the observations made in the ALLEGRO study – the BRAVO study was thus not negative in respect of the pharmacological effect. It should also be noted that the BRAVO study included fewer patients in each treatment arm, making it more difficult to achieve statistical significance. Finally, it is worth highlighting that both the ALLEGRO and BRAVO studies have underlined laquinimod's superior safety profile. At the beginning of November, Teva announced its decision, following a meeting with the FDA, to not file an NDA in the US. Teva will instead cooperate with the FDA to design an additional study for laquinimod in MS patients. When this study can be initiated and its design is something we will have to come back to when the regulatory process has been completed. For territories outside the US, Teva will submit a marketing authorization application (MAA) for the EU in the second half of 2012. In conclusion, it should also be noted that while Laquinimod's substance patent expires in 2019, the expectation is that laquinimod, like other drugs, will receive market exclusivity – typically ten years in the Europe and seven years in the US – as long as the substance is registered within the term of the patent. Aside from these clinical events, Teva and its scientific partners published a large number of abstracts and articles during the year based on preclinical models. These studies underline laquinimod's mechanical characteristics and demonstrate significant congruence with effects observed in clinical studies.

TASQ

The most significant event during the year for TASQ was of course our launch of a Phase III study. I have already commented on our agreement with Ipsen above. This Phase III study will encompass 1,200 patients across the globe and is the biggest project ever undertaken by Active Biotech. Although this is naturally a major challenge and one that should be approached with a great deal of humility, it is also extremely stimulating for us. Enrolment of patients to the study is proceeding according to plan and this process is expected to be concluded by about year-end 2012. This means that we can expect results at the end of 2013. While the primary efficacy parameter for the study is progression-free survival (PFS), the study will enroll a sufficient number of patients to enable evaluation of the effect on overall survival (OS). Data from a number of preclinical studies in TASQ were published during the year strengthening the view of its unique mode of action. The complete results from the Phase II trial were also published in the Journal of Clinical Oncology in September 2011. Finally, an investigator-sponsored clinical trial was initiated at Duke University Hospital with TASQ in combination with the recently drug preparation cabazitaxel (CATCH trial).

ANYARA

The ongoing Phase II/III trial proceeded as planned during the year and we are expecting to be able to present the results in the second half of 2012. We should keep in mind that ANYARA as a project has a higher level of risk than TASQ since we do not have access to well-controlled Phase II data. ANYARA, however, is also a unique project in mechanical terms and we have high hopes for its commercial potential. We will also initiate partner discussions for ANYARA in 2012.

57-57

Active Biotech has decided to change the indication for the 57-57 project to systemic sclerosis/scleroderma. This is a rare autoimmune disease with a significant medical need and Active Biotech received orphan medicinal product status in Europe in 2011. Assuming successful clinical development, this provides market exclusivity for ten years while requiring a smaller amount of patient material as a basis for registration of the drug. We also initiated an explorative study in scleroderma patients during the year. If this study is successful, it will also be possible to initiate a pivotal study, which is planned for 2013/2014. At present, Active Biotech is not planning to initiate such a study without first identifying a partner for the project.

During the year, we jointly published a number of scientific articles and abstracts with our scientific partners describing 57-57's effects on various immunological model systems and in SLE patients.

RhuDex

Our partner MediGene resumed the clinical development of RhuDex in 2012.

ISI

Our preclinical project "Inhibition of S100-Interactions" (ISI) displayed favorable progression during the year. S100 proteins are part of a protein family with more than ten members, including S100A9, to which our quinoline compounds have been shown to bind. We have leveraged our superior expertise by developing new substances that bind to S100A9 and, in a similar manner to the quinolines, block interactions with proinflammatory receptors. During the year, we have elected to defer selection of a candidate drug to instead prioritize building strong patent protection around our new substances. Our aim is to submit a first patent application in 2012.

Organizational changes

In February, Active Biotech announced a change in its organization that involves a staff reduction of about 25. This is never an easy decision, but the most recent review of resources took place in 2004 and we are living in a changing world. Active Biotech stands on the threshold of the second phase in its development. Our quinoline project and ANYARA technology have reached their mature phases and the projects are expected to be out-licensed by 2013 at the latest. New projects, such as the ISI program, will take their place. We must therefore adapt our organization to this reality. I should also add that the outsourcing opportunities for a company such as Active Biotech are extremely favorable within the fields of expertise we are phasing out. Such as strategy provides us with greater flexibility and a more balanced allocation of resources.

Closing words

All that remains for me is to thank all of our loyal, and new, shareholders for the support we have received during the year. I would also like to thank all of our employees who have maintained their enthusiasm for our projects over the past year. As all scouts, hunters and golfers know, it is coldest at sunrise. I am convinced that the dawn of Active Biotech is behind us.

March 2012 Tomas Leanderson, President & CEO

Directors' Report

The Board of Directors and President & CEO of Active Biotech AB (publ), Swedish corporate registration number 556223-9227, hereby submit their Annual Report and consolidated financial statements for the fiscal year January 1, 2011 to December 31, 2011. Active Biotech conducts operations as a limited liability company and has its registered office in Lund, Sweden.

Operations

Active Biotech is a company that focuses on pharmaceutical research and development in medical fields in which the immune system plays a central role. The company's research portfolio primarily includes projects for the development of drugs for the treatment of autoimmune/ inflammatory diseases and cancer.

The Group

The Group's legal structure is built around the Parent Company Active Biotech AB, whose operations comprise pharmaceutical development, Group-wide functions and asset management. In addition, the Group includes the wholly owned subsidiary Active Forskaren 1 KB, Lund, Sweden, which owns the property in which operations are pursued.

Active Biotech's research operations

Active Biotech's field of expertise mainly comprises the human immune system. This knowledge is used to develop drugs for the treatment of autoimmune/inflammatory diseases and cancer.

The company currently has five projects in clinical development. Three of these projects involve the development of potential drugs intended for the treatment of autoimmune/ inflammatory diseases. In the laquinimod project, the Group is developing a drug to address the indications multiple sclerosis (MS), Crohn's disease and Lupus. In the 57-57 project, the company is developing a drug to address systemic sclerosis (SSc) and, in the RhuDex project, a drug to address rheumatoid arthritis (RA). The project portfolio also includes two potential drugs for treatment of the indications renal cell cancer (ANYARA) and prostate cancer (TASQ).

In addition to these five clinical projects, the company is pursuing one preclinical project, called ISI, aimed at exploring the company's own preclinical results generated around a target molecule for quinoline (Q) compounds and their biological mode of action. The project aims to produce new, patentable chemical substances that interact with the target molecule of the Q compounds.

Progress in brief for each project

Laquinimod

Laquinimod is the project that has progressed furthest in the clinical development process. It is a new, immunomodulatory, disease-modifying oral drug for the treatment of MS. Following the completion of Phase I and Phase II trials by Active Biotech on a proprietary basis, an agreement was signed with Teva Pharmaceutical Industries Ltd (Teva) in June 2004 covering the development and commercialization of laquinimod. According

to the agreement, Teva performs and funds the clinical development of laquinimod. If all the clinical and commercial milestones are achieved, Teva will pay USD 92 million to Active Biotech, USD 17 million of which has been received to date. In addition to milestone payments, Active Biotech will also receive tiered royalty payments on sales. These will start just above 10 percent and end just below 20 percent, with the exception of sales of laquinimod in the Nordic/Baltic regions, where Active Biotech will receive a fixed royalty rate that is more than double that of the highest level in the global agreement.

In September 2006, Teva successfully concluded an additional Phase II trial ahead of pivotal Phase III trials. In 2007, the first clinical Phase III study ALLEGRO (assessment of oral laquinimod in preventing progression of multiple sclerosis) commenced, which was a global, pivotal, 24-month, double-blind trial. The purpose was to evaluate the efficacy, safety and tolerability of laquinimod versus placebo in the treatment of relapsing-remitting multiple sclerosis (RRMS). In December 2010, Teva announced that the ALLEGRO study, encompassing about 1,100 patients, had achieved its primary endpoint at the same time as a highly favorable safety profile was preserved.

Furthermore, new detailed mode of action data was presented in 2010 demonstrating that laquinimod has both neuroprotective and anti-inflammatory properties. Among other results, the study showed that laquinimod treatment is associated with an increase in brain-derived neurotrophic factor (BDNF), a pivotal factor in the development and maintenance of the central nervous system. On August 1, 2011, the initial results were announced from the Phase III study BRAVO (benefit-risk assessment of Avonex® and laquinimod), which was designed to evaluate the efficacy, safety and tolerability of laquinimod compared with placebo and to provide a benefit-risk assessment comparing oral laquinimod and a reference arm of injectable Interferon-1a (Avonex®). The BRAVO trial was a 24-month, global, multi-center, randomized, placebo-controlled trial with parallel groups, in which the effects of laquinimod were compared with placebo.

The BRAVO findings support the direct effect of laquinimod in the central nervous system (CNS) and are in line with the results of the first laquinimod Phase III trial, ALLEGRO. The BRAVO study demonstrated a trend of reducing the annualized relapse rate in laquinimodtreated patients compared to placebo, the primary endpoint of the study, but did not reach statistical significance (p=0.075). The reduction of disability progression measured by EDSS also showed a trend in favor of laquinimod without reaching statistical significance. Furthermore, a significant reduction was observed in brain tissue loss in connection with treatment with laquinimod compared to placebo.

The randomization process for BRAVO was adequately performed and according to the study protocol; however, placebo and treatment study groups showed dissimilarity in two baseline magnetic resonance imaging (MRI) characteristics. When this imbalance was corrected

according to a standard and pre-specified sensitivity analysis included within the original statistical analysis plan, laquinimod demonstrated a significant reduction in the annualized relapse rate (21.3 percent, p=0.026), as well as a significant reduction in the risk of disability progression measured by EDSS (33.5 percent, p=0.044). Also in this analysis, laquinimod demonstrated a significant reduction of brain atrophy (27.5 percent, p<0.0001). Additionally, as in ALLEGRO, the BRAVO study showed that laquinimod has a very favorable safety and tolerability profile.

In November 2011, Teva announced that, following discussions with the FDA, it had decided to carry out one additional clinical study prior to filing an NDA in the US. The FDA has offered its assistance to cooperate with Teva to identify the optimal design for this study.

The clinical Phase II trials for the treatment of Crohn's disease and Lupus are continuing according to plan.

TASQ

In the TASQ (Tumor Angiogenesis Suppression by Quinolines) project, Active Biotech is developing an immunomodulatory anti-metastatic substance that attacks the tumor's growth through, for example by, inhibiting the formation of blood vessels in the tumor. TASQ is intended to be administered in tablet form for the treatment of prostate cancer.

Following the conclusion of an initial clinical Phase I trial involving healthy volunteers in February 2004, a clinical Phase I dose-escalation program with prostate cancer patients commenced in the latter part of the same year, with the objective of studying the safety of TASQ. Patients continued treatment in a follow-up study that aimed to document long-term tolerance and safety. In September 2009, the results from the Phase I trial were published in the British Journal of Cancer.

The FDA's review of the IND (Investigational New Drug) application was completed in August 2007 and a Phase II proof of concept study was initiated later in the same year. This study was a 2:1 randomized, placebocontrolled, double-blind Phase II study of 1 mg/day of TASQ versus placebo.

It comprised 206 symptom-free patients in the US, Canada and Sweden with metastatic, hormone-resistant, prostate cancer. The primary endpoint of this study was to demonstrate a lower fraction of patients displaying disease progression after six months of TASQ therapy compared with placebo. A secondary clinical endpoint of importance for this group of patients included time to clinical progression. It was announced in December 2009 that this endpoint had been achieved. The results from the trial were presented at the 46th Annual Meeting of the American Society of Clinical Oncology (ASCO) held on June 4-8, 2010.

A pivotal Phase III trial involving about 1,200 patients in more than 250 clinics in 40 countries was initiated in March 2011. The study is a global, randomized, doubleblind, placebo-controlled Phase III trial in patients with metastatic castrate-resistant prostate cancer (CRPC). The aim of the study is to confirm TASQ's effect on the disease, with radiological progression-free survival (PFS) as the primary endpoint and survival as secondary endpoint.

On April 18, 2011, it was announced that Active Biotech had entered into a broad partnership with Ipsen Pharma (Ipsen) to co-develop and commercialize TASQ. Under the terms of the agreement, Active Biotech granted Ipsen exclusive rights to commercialize TASQ in Europe and Asia, excluding Japan. Active Biotech retains all commercial and marketing rights in other territories.

Both companies will co-develop TASQ for the treatment of prostate cancer, with the possibility of also developing TASQ in other cancer indications. Active Biotech is responsible for conducting and funding the pivotal Phase III study. Aside from the initial payment of EUR 25 million, Active Biotech could receive EUR 175 million linked to clinical, regulatory and commercial milestones. In addition, Ipsen will pay Active Biotech tiered double-digit royalties on net sales and conduct and finance a supporting European study in prostate cancer patients. The cost of developing TASQ in other cancer indications, if pursued, will be shared equally between the companies.

In September 2011, the Journal of Clinical Oncology published the complete results from the Phase II study of TASQ. TASQ significantly slows disease progression and improves progression free survival (PFS) in patients with metastatic castrate-resistant prostate cancer (CRPC), alongside a retained favorable side effect profile. Of 201 evaluable patients, the six-month progression-free proportion for TASQ and placebo treatment groups were 69% and 37%, respectively (p<0.0001), with a median PFS of 7.6 vs. 3.3 months (p=0.0042).

ANYARA

In the ANYARA project, Active Biotech is developing an immunological targeted treatment of cancer that stimulates the immune system to eradicate tumor cells. In 2006, three clinical Phase I studies of ANYARA for the treatment of advanced non-small cell lung cancer, renal cell carcinoma and pancreatic cancer were successfully concluded. The median survival of 26.2 months observed for patients with advanced renal cell cancer and treated with ANYARA was longer than expected. Results from two Phase I studies of ANYARA were published in the Journal of Clinical Oncology, where ANYARA was studied both as a single agent (monotherapy) and in combination with an established tumor therapy – docetaxel (Taxotere). The results showed that ANYARA was well tolerated both as monotherapy and in combination with docetaxel.

In July 2007, ANYARA was granted orphan medicinal product status, for the indication renal cell cancer, by the EMA's (European Medicines Agency) expert committee. The EMA's decision was an important step in the development of ANYARA and provides a variety of incentives, including market exclusivity for up to ten years following registration approval.

A combined Phase II/III trial for the treatment of renal cell cancer was initiated at the end of 2006 at about 50 clinics in Europe. The trial is a randomized study of ANYARA in combination with interferon-alpha, compared with only interferon-alpha, in patients with advanced renal cell cancer. The primary endpoint for this study is prolonged overall survival and it includes just over 500 patients. In May 2008, following the enrolment of approximately 250 patients in the trial, an interim analysis was conducted with positive results. The ongoing, pivotal, Phase II/III trial of ANYARA has been fully enrolled since June 2009. The length of the trial depends on disease progression in patients and results are expected to be presented in the latter half of 2012.

57-57

In the 57-57 project, Active Biotech is developing a novel immunomodulatory compound for the treatment of systemic sclerosis/scleroderma. The first clinical Phase I dose-escalation study, comprising 30 healthy volunteers, was started at the Karolinska University Hospital in Stockholm, Sweden, at the end of 2004 and was successfully completed in 2005. The results showed that 57-57 is well tolerated at all of the tested dosage levels in single and multiple doses and that the compound is suitable to be administered as an oral, daily treatment. The clinical development program continued with a Phase Ib trial of SLE patients, which commenced in December 2005. The study primarily documented safety and pharmacokinetic properties, but also monitored a number of biological markers to determine the effect of 57-57 on disease progression. The study was concluded in 2008 and data from the trial confirmed the previously exhibited favorable safety profile, and demonstrated effects on markers for the SLE disease.

During 2008 and 2009, follow-up data from the concluded Phase Ib trial was presented at scientific conferences. The results show that by treating patients with 57-57, it is possible to affect signaling pathways that are essential for the progression of SLE. The explorative clinical study that commenced in 2009 comprising 13 SLE patients in Sweden and Denmark was concluded in 2010 and, in November 2011, the article "Pharmacokinetics, tolerability, and preliminary efficacy of ABR-215757, a new quinoline-3-carboxamide derivative, in murine and human SLE" was published in the web edition of the Arthritis & Rheumatism journal.

In 2010, Active Biotech decided to initiate development of 57-57 to address the indication systemic sclerosis/ scleroderma, a rare autoimmune disease for which Active Biotech was granted orphan medicinal product status in February 2011.

An explorative clinical study in systemic sclerosis/scleroderma was initiated in December 2011 and will include 10-20 patients. The primary endpoint of the study is safety, with the secondary endpoints including the effect on selected biomarkers. The purpose of the study is to examine the effect of 57-57 on parameters that correlate with disease activity.

RhuDex®

RhuDex is an orally active compound for the treatment of RA and originates from Active Biotech's patented CD80 antagonists, out-licensed in 2002 to MediGene AG (MediGene). MediGene is responsible for the development and carries the related costs of the clinical program. Following successful preclinical development work, a candidate drug was selected in 2004 under the name of RhuDex, an orally administered small molecule primarily intended for the treatment of RA. Phase I studies of RhuDex commenced during the spring of 2005, yielding a small milestone payment for Active Biotech. In March 2006, the company could report that MediGene had successfully concluded two Phase I studies in which safety, tolerability and pharmacokinetic properties had been studied in healthy volunteers. A Phase IIa doseescalation study in 35 RA patients was initiated in 2007 and, in 2008, positive data from the trial was reported. Further preclinical trials were completed in 2010. MediGene intends to conclude the clinical development

plan for RhuDex when the preclinical results have been analyzed. If the project continues to market launch, milestone revenues could total GBP 5.8 million. In addition, Active Biotech will receive royalties on future sales.

The ISI project

Active Biotech's ISI project was initiated in 2008. Previous work has shown that quinoline compounds inhibit the interaction between a defined target, S100A9, and at least two endogenous, pro-inflammatory receptors. An in-house library and commercially available libraries of compounds have been screened for binding to the target molecule. New, interesting, potential compounds in several different, non-quinoline chemical classes of compounds have been identified. The objective of the ISI project is to define new, patentable target-binding small molecule compounds that bind to the same target molecule but with superior pharmacological properties compared to the existing quinolines. The target for filing a first patent and the selection of a first candidate drug is during 2013/2014.

Comments on the income statement

The Group's net sales amounted to SEK 234.6 million (11.4) and comprised an upfront payment of SEK 223.2 million from Ipsen for the commercial rights to TASQ in Europe and Asia, excluding Japan, rental revenues of SEK 7.8 million (7.8) and SEK 3.7 million (3.6) in other revenues. Operating expenses amounted to SEK 335.5 million (240.3), of which research and administrative costs increased by SEK 101.3 million from SEK 217.3 million to SEK 318.6 million. The increase in expenses is attributable in full to higher costs for the clinical development program for the TASQ project, for which a comprehensive Phase III trial was initiated in 2011. Costs for the ANYARA project were significantly lower in 2011 compared with 2010 since patients in the ongoing renal cell cancer study with ANYARA have completed treatment and have entered the evaluation phase. The lower cost outcome for the 57-57 project was the result of the initiation of a small-scale explorative study in 2011 compared with a more comprehensive clinical program and thus higher cost outcome in 2010. At yearend, the clinical development program comprised a total of five projects, of which laquinimod and RhuDex were fully financed by partners, while TASQ, ANYARA and 57-57 were financed by Active Biotech. In addition to the clinical development program, the company also pursues the preclinical research project ISI, the aim of which is to utilize Active Biotech's own research results generated around a target molecule for the quinoline compounds and their biological mode of action. Administrative costs decreased from SEK 23.1 million to SEK 16.9 million. The decline in costs is primarily attributable to lower costs for the employee stock option program. The cost outcome for 2011 was impacted positively by the strong SEK, since about 61 percent (41) of research costs comprise research services purchased abroad, mainly in the areas of clinical development and manufacturing of clinical material.

The consolidated operating loss amounted to SEK 100.9 million (loss: 229.0). The smaller loss is attributable to the collaboration agreement entered into with Ipsen in 2011, entailing an upfront payment of SEK 223.2 million. Consolidated net financial items amounted to an expense of SEK 2.6 million (expense: 4.7). Financial income

9

amounted to SEK 12.0 million (1.9). Financial expenses amounted to SEK 14.6 million (6.5). Financial expenses in 2011 included a gain of SEK 5.3 million related to the revaluation of agreed interest-rate swaps to fair value. In addition, exchange-rate differences amounted to SEK 1.5 million (0.5). The revaluation of interest-rate swaps at market value does not give rise to any effects on cash flow. In 2010, the corresponding effect on earnings of the revaluation amounted to SEK 0.4 million. The consolidated loss after tax amounted to SEK 94.5 million (loss: 221.1).

Comments on the balance sheet

The Group's total assets amounted to SEK 858.5 million (503.1), of which tangible fixed assets accounted for SEK 382.7 million (358.5). The carrying amount of land and buildings, following the revaluation of the company's property Forskaren 1, amounted to SEK 375.0 million (350.0), and equipment, tools, fixtures and fittings totaled SEK 7.7 million (8.5). At year-end, cash and cash equivalents and financial investments totaled SEK 465.2 million (131.1).

Comments on the cash-flow statement

The Group's cash flow for full-year 2011 was SEK 334.0 million (neg: 24.9). The negative cash flow from operating activities amounted to SEK 47.0 million (neg: 196.3). Cash flow from investing activities amounted to a negative SEK 0.5 million (neg: 0.1) and the cash flow from financing activities amounted to a positive SEK 381.5 million (pos: 171.5). Investments in tangible fixed assets amounted to SEK 1.9 million (1.6), of which SEK 1.4 million (1.5) was financed through financial leasing agreements.

Cash and cash equivalents and financial position

At year-end, cash and cash equivalents amounted to SEK 465.2 million (131.1). In January 2011, Active Biotech carried out a private placement to international institutional investors and qualified investors in Sweden. The issue provided the company with a capital infusion of SEK 361.2 million after issue expenses. In addition, the exercise of employee stock options generated about SEK 28.4 million for the company. The Board of Active Biotech has established a policy for the investment of the Group's cash and cash equivalents, which stipulates that these be invested at low credit risk, primarily in short-term Swedish securities, commercial papers and fixed-income and bond funds with high liquidity. At year-end, cash and cash equivalents were invested in short-term Swedish securities. Interest-bearing liabilities amounted to SEK 242.8 million (249.5), of which SEK 236.8 million (241.1) is represented by a property loan and SEK 6.0 million (8.4) by liabilities to leasing companies. At yearend, consolidated shareholders' equity amounted to SEK 502.0 million (181.8). The Group's equity/assets ratio was 58.5 percent at year-end 2011, compared with 36.1 percent at year-end 2010.

The Active Biotech share

Share capital and ownership structure At year-end 2011, Active Biotech AB's share capital amounted to SEK 259.8 million distributed among 68,923,582 shares. The company has one class of share. All shares carry equal rights to participation in the company's assets and dividends. For further information regarding shareholders, see page 38.

Corporate governance

Active Biotech AB's Articles of Association stipulate that the election of the Board shall always take place at the Annual General Meeting. Apart from this, the Articles of Association do not contain any stipulations governing how Board members are to be appointed or dismissed, or regarding changes to the Articles of Association. A shareholder can vote for the full number of shares he or she holds or represents at General Meetings of Active Biotech. Shares that have been issued are freely transferable without restrictions pursuant to legislation or Active Biotech's Articles of Association. The company is not aware of any agreements among shareholders that can entail restrictions on the entitlement to transfer shares in the company. For a more detailed description of how Active Biotechmanages corporate governance issues, refer to the Corporate Governance Report on pages 41–43.

Parent Company

The operations of the Parent Company Active Biotech AB comprise the Group's research operations, Group coordinative administrative functions and asset management. The Parent Company's net sales for the year amounted to SEK 244.3 million (23.2). Operating expenses for the year amounted to SEK 369.4 million (257.6). Investments in tangible fixed assets amounted to SEK 0.5 million for the year. At year-end, the Parent Company's cash and cash equivalents, including short-term investments, amounted to SEK 456.6 million, compared with SEK 125.4 million at the beginning of the year. The loss after tax was SEK 113.3 million (loss: 232.7).

Risk factors

A research company such as Active Biotech is characterized by a high operational and financial risk, since the projects in which the company is involved are at the clinical phase, and there are a number of factors that have an impact on the likelihood of commercial success. The earlier in the development chain the project is, the higher the risk, while the risk decreases and the likelihood of reaching the market increases as each project completes the various specified development phases. The risk level of projects must be weighed against the potential that the projects will result in the development of a drug in the major indication areas that they aim to address.

Active Biotech specializes in the development of pharmaceuticals. However, none of the company's products have yet been approved for sale, and operations to date have therefore been loss-making. The Active Biotech projects that have advanced the furthest in terms of development into a finished drug entered Phase III trials in 2007, which means it could take until 2013 before any of these products are registered and approved for sale. As a result, Active Biotech might continue to recognize operating losses for several years to come, and there is a risk that the company may never report a profit.

Risks in operations

Although preclinical and clinical studies conducted for Active Biotech's candidate drugs to date have produced positive outcomes, there are no guarantees that the

continued requisite clinical studies will produce results that are sufficiently positive to secure approval. Neither are there any guarantees that the company will find necessary partners or that these partnerships will achieve the planned outcome. If approval is obtained, there is no guarantee that the approved product will achieve sales success. Competing products with better properties could be launched in the market or the company may prove incapable of marketing its product, either by itself or via partners.

While Active Biotech is constantly working to improve patent protection for its compounds, methods and applications, there is no guarantee that the patents will in fact provide the necessary protection or that competitors will not somehow circumvent the patents or in some other manner use the research findings or other intellectual rights that the company has built up. Both the extent and timing of the Group's future capital requirements will depend on a number of factors, such as possibilities to enter into partnership agreements and the degree of success for development projects.

Official requirements

Active Biotech currently holds all the permits required to conduct its operations. Operations are conducted in accordance with applicable legislation, and also meet high environmental and ethical standards. However, there is no guarantee that new requirements introduced by authorities will not make it more difficult to conduct operations. Neither is there any guarantee that the currently applicable permits will be renewed on the same terms or that the company's insurance cover, which is deemed adequate today, will prove adequate.

Financial risks

The Group has a currency exposure since operations are conducted in Sweden and research services are purchased internationally. Earnings are exposed to exchange-rate fluctuations with regard to the procurement of clinical trial services, research services and production of clinical materials. Operating costs amounted to SEK 335.5 million during the fiscal year, of which about 61 percent corresponded to costs in foreign currencies. The proportion of costs in foreign currencies, principally in USD and EUR, may fluctuate as projects enter later phases of clinical development with more clinical studies potentially being conducted abroad. Since the Group does not make use of forward contracts or options to hedge foreign-exchange risk, exchange-rate effects may impact the income statement. The company's credit risks are marginal, since its operations are only subject to low invoicing levels by virtue of the fact that it currently engages primarily in research and development. For further information on financial risks, see Note 17 on pages 31-32.

The organization

The average number of employees in the Group amounted to 80 (87), of whom 46 (51) were women. The average age of the employees was 49 (49) with an average employment period of 17.6 years (16.6). The education level of the personnel is high; 21 hold a PhD and 38 have university/ college education. During the year, the Group incurred average education costs of SEK 4,356 per employee. At year-end 2011, the number of employees was 79 (83), of whom 67 (71) were active in research and development operations.

Incentive programs

An Extraordinary General Meeting on December 8, 2003 resolved to implement a free employee stock options program comprising a total of 1,000,000 shares for all employees of the Active Biotech Group. In 2011, the remaining options were redeemed and the incentive program was discontinued. The incentive program is described in greater detail in Note 5 on pages 20-23.

Environmental information

Active Biotech conducts its operations in accordance with the permits issued for the company by the authorities. The company has, for example, a permit from the Swedish Radiation Protection Institute for the handling of radioactive materials, and from the Swedish Board of Agriculture and the Swedish Work Environment Authority regarding genetically modified organisms. In accordance with the Swedish Environmental Code, the company has registered its operations with the County Administrative Board. Inspections by the Swedish Work Environment Authority, the Lund Municipal Environmental Administration and the Swedish Radiation Protection Institute all achieved satisfactory results. Active Biotech has a well-developed program for the sorting of waste at source and for the destruction of environmentally hazardous waste, and works actively to minimize energy consumption and the use of environmentally hazardous substances. Active Biotech is not involved in any environmental disputes.

Proposed appropriation of accumulated earnings

The Board of Directors and the President & CEO propose that no dividend be paid for the 2011 fiscal year. The proposed appropriation of the company's accumulated earnings is detailed on page 12.

Report on the work of the Board

The Board decides on the Group's overall strategy, the Group's organization and management in accordance with the Swedish Companies Act. At year-end, the Board comprised seven members elected by the Annual General Meeting, two employee representatives and two deputy employee representatives. Other white-collar employees in the company participate in Board meetings in a reporting capacity or in administrative functions.

During the year, nine meetings were held at which minutes were taken. The President & CEO continuously informed the Chairman of the Board and the other Board members of developments in the company.

Important issues addressed by the Board included:

• Financing of the operation ●
• Development of research projects ●
• Business development projects ●
• Strategic focus ●
• Information concerning financial statements ●
• Budgets and forecasts for the operation ●

● Partnership strategy and partnership discussions The work of the Board and governance of Active Biotech is described in detail in the "Corporate Governance Report" section on pages 41-43. With regard to the Group's and Parent Company's results and financial position, reference is made to the subsequent income statements and balance sheets with the accompanying notes to the financial statements. ●

' R eport

11

The Board's proposed guidelines for remuneration of senior executives

The Board proposes that the Annual General Meeting to be held on May 10, 2012 decides on the following guidelines for remuneration of senior executives. These guidelines essentially conform to those applied to date within the company. Senior executives are defined as the President & CEO and other members of Group management. The guidelines shall apply to employment contracts entered into subsequent to the Board's decision on guidelines and in those instances amendments are made in existing terms and conditions following the Board's decision. Active Biotech shall offer total remuneration on market terms, facilitating the recruitment and retention of competent senior executives. Remuneration to senior executives may comprise fixed salary, any variable salary, pensions and other benefits. If the Board also determines that new share-based incentives should be introduced (e.g. employee options), a proposal concerning this shall be submitted to the Annual General Meeting for approval. The guidelines applied in 2011 and the remuneration paid are described in Note 5 on pages 23.

Fixed salary

The fixed salary shall take into consideration the individuals' area of responsibility and experience. This shall be reviewed on an annual basis.

Variable salary

Where applicable, the variable salary shall depend on the individuals' fulfillment of quantitative and qualitative goals. For the President & CEO, the variable salary shall amount to not more than 50 percent of the fixed salary. For other senior executives, the variable salary shall amount to not more than 25 percent of fixed salary, whereby the highest level should be based on such factors as the position held by the specific individual.

Pension

Pension benefits shall comprise defined-contribution schemes. For senior executives encompassed by the ITP scheme, pension premiums shall correspond to that applicable under the ITP scheme. For other senior executives, pension premiums shall correspond to not more than 25 percent of fixed salary.

Severance pay, etc.

Senior executives shall observe a termination period of not more than 12 months. No severance pay will be issued. However, the President & CEO shall be entitled to extra remuneration corresponding to four annual salaries in the event of an ownership change that entails that the company in its entirety is acquired or taken over by another party.

Other benefits

Senior executives may be awarded other customary benefits, such as a company car, company healthcare, etc.

Drafting and approval

The President & CEO's remuneration shall be drafted and approved by the Board of Directors. Other senior executives' remuneration shall be drafted by the President & CEO, who shall submit a proposal to the Board for approval. The Board of Directors is entitled to deviate from the above principles if it deems that there are particular grounds for doing so in individual cases.

Earlier adopted remuneration packages

The President & CEO is entitled to extra remuneration such as that referred to above under the heading Severance pay, etc. In other respects, there are no earlier adopted remuneration packages that have not fallen due for payment.

Events after the balance-sheet date TASQ

In January 2012, a Phase I investigator-sponsored clinical trial was initiated under the leadership of Principal Investigator Dr. Andrew Armstrong at Duke University Hospital. The primary objective for the CATCH trial (Cabazitaxel (Jevtana) And Tasquinimod in Men with Castration-Resistant Heavily pre-treated Prostate Cancer) is to determine the recommended dose of TASQ in combination with cabazitaxel based on safety and tolerability in men with chemorefractory metastatic castration-resistant prostate cancer (CRPC). Secondary objectives include efficacy as measured by progression-free survival (PFS), and overall survival (OS). The study will include about 30 patients. For further information about the study, refer to www.clinicaltrials.gov.

Organization

As research projects progress to later development phases, project activities will increasingly be handled by strategic partners. A comprehensive overview of the organization has been performed to determine the optimal manner to satisfy the future needs of the projects. Following the outlicensing of the ANYARA, 57-57 and TASQ projects, operations will focus on pursuing the Phase III TASQ study and the development of the ISI platform. As a result, the company has provided notice of termination of employment to 25 staff members.

NASDAQ OMX Disciplinary Committee

On February 13, 2012, the Disciplinary Committee of NASDAQ OMX Stockholm announced that a warning had been issued to Active Biotech originating in two information events regarding the company's MS project laquinimod. For more detailed information, see www.nasdaqomx.com.

Laquinimod

On March 15, 2012, Active Biotech and Teva announced that the companies intend to file a marketing authorization application (MAA) for laquinimod in the EU in the second half of 2012.

Outlook for 2012

Against the background of the positive development of the project portfolio, including the initiation of Phase III development and out-licensing of TASQ to Ipsen in 2011, the start of an explorative study in the 57-57 project, the Phase III results for ANYARA expected in 2012, Teva's decision to submit a marketing authorization application in the EU in 2012 and the anticipated revenues from Ipsen in 2012, the Board of Directors has determined that available liquidity and revenues from existing and anticipated partnership agreements will provide sufficient financial resources to fund the company's operations under the current business plan. Since the timing for the signing of additional partnership agreements and the receipt of milestone payments from existing agreements is uncertain, no earnings forecast is being issued for the 2012 fiscal year.

Proposed appropriation of the company's accumulated earnings

The following amount stated in SEK is at the disposal of the Annual General Meeting:

Share premium reserve	378 568 970
Accumulated loss	-241 078 293
Loss for the year	-113 304 986
Total	24 185 691

The Board of Directors proposes that the above accumulated earnings totaling SEK 24,185,691 at the disposal of the Annual General Meeting be carried forward to a new account in the company's share premium reserve.

Approval and adoption

The Annual Report and the consolidated financial statements were approved for issue on April 2, 2012. The consolidated income statement, statement of comprehensive income and statement of financial position and the Parent Company's income statement and balance sheet will be subject for adoption by the Annual General Meeting on May 10, 2012.

Statement by the Board of Directors

The Board of Directors and the President & CEO affirm that the Annual Report was prepared in accordance with generally accepted accounting principles in Sweden and that the consolidated accounts were prepared in accordance with the international accounting standards referred to in regulation (EC) No. 1606/2002 of the European Parliament and the Council dated July 19, 2002 governing the application of international accounting standards. The annual accounts and the consolidated accounts provide a true and fair view of the Group's and Parent Company's financial position and results of operations. The Directors' Report for the Group and the Parent Company provides a true and fair view of the Group's and the Parent Company's operations, position and results, and describes significant risks and uncertainties that the Parent Company and Group companies face.

Lund, April 2, 2012 The Board of Directors of Active Biotech AB (publ)

mats arnhög Chairman

peter hofvenstam Board member klas kärre Board member mef nilbert Board member

magnhild sandberg-wollheim Board member

karin hallbeck

Employee representative

Peter Sjöstrand Board member peter thelin Board member

anette sundstedt Employee representative

tomas leanderson President & CEO

We submitted our Audit Report on April 2, 2012

KPMG AB

david olow Authorized Public Accountant

eport

Consolidated income statement

JANUARY 1 – DECEMBER 31
SEK thousands	note	2011	2010
Net sales	2	234 593	11 356
Administrative expenses	3,4	-16 944	-23 061
Research and development expenses	3	-318 573	-217 260
Operating loss	5	-100 924	-228 965
Financial income		12 013	1 861
Financial expenses		-14 629	-6 518
Net financial expense	6	-2 616	-4 657
Loss before tax		-103 540	-233 622
Tax	7	8 990	12 557
Loss for the year		-94 550	-221 065
Loss for the year attributable to:
Parent Company's shareholders		-94 550	-221 065
Non-controlling interests		–	–
Earnings per share	12
before dilution (SEK		-1.38	-3.38
after dilution (SEK		-1.38	-3.38

Statement of consolidated comprehensive income

JANUARY 1 – DECEMBER 31

SEK thousands	2011	2010
Loss for the year	-94 550	-221 065
Other comprehensive income
Change in the revaluation reserve	32 179	46 431
Tax attributable to other comprehensive income	-8 463	-12 211
Other comprehensive income for the year	23 716	34 220
Comprehensive loss for the year	-70 834	-186 845
Other comprehensive loss for the year attributable to:
Parent Company's shareholders	-70 834	-186 845
Non-controlling interests	–	–

Consolidated statement of cash flows

JANUARY 1 – DECEMBER 31
SEK thousands	note 20	2011	2010
Operating activities
Loss before tax		-103 539	-233 622
Adjustments for non-cash items		11 966	9 772
Cash flow from operating activities
before changes in working capital		-91 573	-223 850
Cash flow from changes in working capital
Increase(-)/Reduction(+) in operating receivables		2 759	10 033
Increase(+)/Reduction(-) in operating liabilities		41 843	17 497
Cash flow from operating activities		-46 971	-196 320
Investing activities
Acquisition of tangible fixed assets		-527	-91
Cash flow from investing activities		-527	-91
Financing activities
New share issue		403 597	179 831
Issue expenses		-14 007	-837
Amortization of loan		-4 243	-5 191
Amortization of leasing liabilities		-3 817	-2 286
Cash flow from financing activities		381 530	171 517
Cash flow for the year		334 032	-24 894
Cash and cash equivalents, January 1		131 141	156 035
CASH AND CASH EQUIVALENTS AT YEAR-END		465 173	131 141

Consolidated statement of financial position

AT D E C E M B E R 3 1
SEK thousands	note	2011	2010
ASSETS
Land and buildings	9	375 000	350 000
Equipment, tools, fixtures and fittings	9	7 663	8 515
Long-term receivables		1	1
Total fixed assets		382 664	358 516
Accounts receivable		766	42
Tax receivables		1 638	3 882
Other receivables		1 795	2 687
Prepaid expenses
and accrued income	10	6 480	6 827
Cash and cash equivalents	20	465 173	131 141
Total current assets		475 852	144 579
TOTAL ASSETS		858 516	503 095

AT D E C E M B E R 3 1
SEK thousands note	2011	2010
SHAREHOLDERS' EQUITY
Share capital	259 797	248 776
Other capital contributed	2 823 131	2 444 562
Reserves	91 737	68 021
Loss carryforwards including loss for the year	-2 672 675	-2 579 601
Total shareholders' equity 11	501 990	181 758
LIABILITIES
Liabilities to credit institutions 13	231 167	235 410
Other long-term interest-bearing liabilities 13	3 629	6 260
Total long-term liabilities	234 796	241 670
Short-term interest-bearing liabilities 13	8 010	7 791
Accounts payable	27 807	27 454
Tax liabilities	684	34
Other liabilities 14	11 288	7 767
Accrued expenses and
deferred income 15	73 941	36 621
Total short-term liabilities	121 730	79 667
TOTAL LIABILITIES	356 526	321 337
TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES	858 516	503 095

For information pertaining to pledged assets and contingent liabilities, see note 18.

Statement of changes in consolidated equity

SEK thousands	note 11	Share capital	Other capital contributions	Revaluation reserve	Profit/loss brought forward incl. profit/loss for the year	Total shareholders' equity
Opening shareholders' equity, January 1, 2010		241 435	2 272 909	33 801	-2 359 504	188 641
Comprehensive income/loss for the year Transfer to revaluation reserve New share issue1)		– – 7 341	– – 171 653	34 220 – –	-221 065 968 –	-186 845 968 178 994
Closing shareholders' equity, December 31, 2010		248 776	2 444 562	68 021	-2 579 601	181 758
Opening shareholders' equity, January 1, 2011		248 776	2 444 562	68 021	-2 579 601	181 758
Comprehensive income/loss for the year		–	–	23 716	-94 550	-70 834
Transfer to revaluation reserve		–	–	–	1 476	1 476
New share issue1)		11 021	378 569	–	–	389 590
Closing shareholders' equity, December 31, 2011		259 797	2 823 131	91 737	-2 672 675	501 990

1) The new share issue amount was recognized net after deductions for transaction costs of SEK 14,007 thousand (837).

Parent Company income statement

JANUARY 1 – DECEMBER 31
SEK thousands	note	2011	2010
Net sales	2	244 295	23 214
Administrative expenses	3,4	-25 800	-24 162
Research and development expenses	3	-343 595	-233 484
Operating loss	5	-125 100	-234 432
Profit/loss from financial items:
Interest income and similar items	6	11 797	1 739
Interest expense and similar items	6	-2	-7
Loss after financial items		-113 305	-232 700
Loss before tax		-113 305	-232 700
Tax	7	–	–
Loss for the year		-113 305	-232 700

Statement of comprehensive income, Parent Company

2011	2010
-113 305	-232 700
–	–
-113 305	-232 700

Cash flow statement for the Parent Company

JANUARY 1 – DECEMBER 31
SEK thousands	note 20	2011	2010
Operating activities
Loss after financial items		-113 305	-232 700
Adjustments for non-cash items		16 428	196 417
Cash flow from operating activities
before changes in working capital		-96 877	-36 283
Cash flow from changes in working capital
Increase(-)/Reduction(+) in operating receivables		3 259	-179 609
Increase(+)/Reduction(-) in operating liabilities		35 709	7 184
Cash flow from operating activities		-57 909	-208 708
Investing activities
Acquisition of tangible fixed assets		-527	-315
Merger of subsidiary, impact on cash and cash equivalents		–	11 284
Cash flow from investing activities		-527	10 969
Financing activities
New share issue		403 597	179 831
Issue expenses		-14 007	-837
Cash flow from financing activities		389 590	178 994
Cash flow for the year		331 154	-18 745
Cash and cash equivalents, January 1		124 414	144 159
CASH AND CASH EQUIVALENTS AT YEAR-END		456 568	125 414

Parent Company balance sheet

AT D E C E M B E R 3 1

SEK thousands	note	2011	2010
ASSETS
Fixed assets
Intangible fixed assets
Goodwill	8	145 347	161 497
Total intangible fixed assets		145 347	161 497
Tangible fixed assets
Land and buildings	9	266	294
Equipment, tools, fixtures and fittings	9	1 014	737
Total tangible fixed assets		1 280	1 031
Financial fixed assets
Participations in Group companies	19	40 550	40 550
Other long-term receivables		1	1
Total financial fixed assets		40 551	40 551
Total fixed assets		187 178	203 079
Current assets
Short-term receivables
Accounts receivable		766	42
Receivables from Group companies		11 935	12 435
Tax receivables		1 638	3 882
Other receivables		1 795	2 687
Prepaid expenses and
accrued income	10	6 480	6 827
Total short-term receivables		22 614	25 873
Short-term investments	20	313 658	100 382
Cash and bank balances	20	142 910	25 032
Total current assets		479 182	151 287
TOTAL ASSETS		666 360	354 366

AT D E C E M B E R 3 1
SEK thousands	note	2011	2010
SHAREHOLDERS' EQUITY AND LIABILITIES
Shareholders' equity
Restricted equity
Share capital		259 797	248 776
Write-up reserve		161 497	161 497
Statutory reserve		118 871	118 871
Unrestricted equity
Share premium reserve		378 569	171 653
Loss carryforwards		-241 079	-180 032
Loss for the year		-113 305	-232 700
Total shareholders' equity	11	564 350	288 065
Short-term liabilities
Accounts payable		27 807	27 453
Tax liability		649	–
Other liabilities	14	1 175	2 944
Accrued expenses
and deferred income	15	72 379	35 904
Total short-term liabilities		102 010	66 301
TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES		666 360	354 366

Pledged assets and contingent liabilities for the Parent Company AT DECEMBER 31

SEK thousands	Note	2011	2010
Assets pledged	18	16 975	9 490
Contingent liabilities	18	236 825	241 068

Statement of changes in Parent Company's equity

		Restricted equity				Unrestricted equity
	Share	Write-up	Statutory	Share premium	Profit/loss	Profit/loss	Total shareholders'
SEK thousands	note 11 capital	reserve	reserve	reserve	brought forward	for the year	equity
Opening shareholders' equity, January 1, 2010	241 435	–	118 871	339 715	-341 915	-16 335	341 771
Comprehensive loss for the year	–	–	–	–	–	-232 700	-232 700
Treatment of profit/loss in preceding year	–	–	–	-339 715	323 380	16 335	–
Merger of subsidiary	–	161 497	–	–	-161 497	–	–
New share issue1)	7 341	–	–	171 653	–	–	178 994
Closing shareholders' equity, December 31, 2010	248 776	161 497	118 871	171 653	-180 032	-232 700	288 065
Opening shareholders' equity, January 1, 2011	248 776	161 497	118 871	171 653	-180 032	-232 700	288 065
Comprehensive loss for the year	–	–	–	–	–	-113 305	-113 305
Treatment of profit/loss in preceding year	–	–	–	-171 653	-61 047	232 700	–
New share issue1)	11 021	–	–	378 569	–	–	389 590
Closing shareholders' equity, December 31, 2011	259 797	161 497	118 871	378 569	-241 079	-113 305	564 350

1) The new share issue amount was recognized net after deductions for transaction costs of SEK 14,007 thousand (837).

y

Notes to the financial statements

Note 1 Accounting policies ●

Conformity with standards and legislation

The consolidated financial statements were prepared in accordance with the International Financial Reporting Standards (IFRS) published by the International Accounting Standards Board (IASB), as adopted by the European Union. In addition, the Group applied the recommendation of the Swedish Financial Accounting Standards Council RFR 1.2 Supplementary Accounting Rules for Groups.

The Parent Company applies the same accounting policies as the Group, except in the instances specified below in the section "Accounting policies of the Parent Company."

The Annual Report and the consolidated accounts were approved for issue by the Board and the President on April 2, 2012. The consolidated income statement and statement of financial position and the Parent Company's income statement and balance sheet will be subject for adoption by the Annual General Meeting on May 10, 2012.

Conditions for preparing the Parent Company's and Group's financial statements

The Parent Company's functional currency is Swedish kronor, which is also the reporting currency for the Parent Company and the Group. Accordingly, the financial statements are presented in Swedish kronor, SEK. All amounts, unless otherwise stated, are rounded off to the nearest thousand. Assets and liabilities are recognized at historical acquisition value (cost), except for the Group's property Forskaren 1, and certain financial assets and liabilities, which are measured at fair value. Financial assets and liabilities measured at fair value comprise derivatives and short-term investments.

The preparation of financial statements in accordance with IFRS requires company management to make assessments and evaluations that affect the application of the accounting policies and the recognized amounts of assets, liabilities, revenues and expenses. The actual outcome may deviate from these evaluations and assessments. The evaluations and assumptions are reviewed regularly. Changes to the assessments are recognized in the period in which the change is made if it is the only period affected by the change, but if it also affects future periods, it is recognized in the period the change is made and in future periods.

Assessments made by company management when applying IFRS that may considerably influence the financial statements together with estimates made that may entail significant adjustments to financial statements in forthcoming years are described in more detail in Note 21.

The accounting policies for the Group detailed below were applied consistently in all periods presented in the consolidated financial statements, unless otherwise specified below. The Group's accounting policies were applied consistently in the reporting and consolidation of the Parent Company and subsidiaries.

Changed accounting policies

In 2011, no revisions of IFRS with application as of 2011 had any material impact on the Group's reporting. A number of new or revised IFRS will come into effect in forthcoming fiscal years but were not applied in advance when preparing these financial statements. The Group does not plan to prematurely apply new standards or amendments to standards with prospective application. The company's assessment is that published new or revised standards with prospective application will not have any material impact on the Group's reporting.

Segment reporting

An operating segment is a part of the Group that conducts operations from which it can generate revenues and incur costs and from which independent financial information is available. In addition, an operating segment's results are followed up by the company's chief operating decision-maker to assess earnings and to be able to allocate resources to the operating segment. Since operations within the Active Biotech Group are organized as a cohesive unit, with similar risks and opportunities for the products and services produced, the Group's entire operation comprises a single operating segment. All operations are conducted in Sweden.

Classification, etc.

Fixed assets and long-term liabilities in the Parent Company and Group essentially consist of amounts that are expected to be recovered or paid more than 12 months after the balance-sheet date. Current assets and liabilities in the Parent Company and Group primarily consist of amounts that are expected to be recovered or paid within 12 months from the balance-sheet date.

Consolidation principles and business combinations Subsidiaries

A subsidiary is a company in which Active Biotech AB has a controlling influence. Controlling influence entails a direct or indirect right to formulate a company's financial and operative strategies with the aim of obtaining financial benefits. When determining if a controlling influence exists, consideration is given to potential shares that carry voting rights, which can be utilized or converted without delay.

Acquisitions on January 1, 2010 or later

Subsidiaries are recognized in accordance with the purchase method. The method entails that the acquisition of a subsidiary is regarded as a transaction through which the Group indirectly acquires the subsidiary's assets and assumes its liabilities. The acquisition analysis determines the fair value on the acquisition date of acquired identifiable assets and assumed liabilities and any non-controlling interests. Transaction expenses, with the exception of transaction expenses included in the issue of equity or debt instruments, are recognized immediately in profit or loss for the year.

For business combinations in which the consideration transferred, any non-controlling interests and the fair value of previously held equity interests (for step acquisitions) exceeds the fair value of separately recognized acquired assets and assumed liabilities, the difference is recognized as goodwill. When the difference is negative, known as a bargain purchase, it is directly recognized in profit or loss for the year.

Consideration transferred in conjunction with the acquisition does not include payments pertaining to the settlement of previous business connections, which is instead recognized in profit or loss. Contingent considerations are recognized at fair value on the acquisition date. Contingent consideration classified as an equity instrument is not remeasured and its settlement takes place within equity. Other types of contingent considerations are remeasured at each reporting date with any change recognized in profit or loss for the year.

For acquisitions achieved in steps, goodwill is determined on the date on which the noncontrolling interest arises. Former interests are measured at fair value and the change in value recognized in profit or loss for the year.

In conjunction with divestments resulting in the loss of a non-controlling interest but where a residual interest exists, this holding is measured at fair value and the change in value recognized in profit or loss for the year.

Acquisitions carried out prior to January 1, 2004 (IFRS transition date)

For acquisitions completed prior to January 1, 2004, goodwill, after impairment testing, is recognized at a cost that corresponds to the carrying amount in accordance with the previously applied accounting policies. The classification and the manner in which business combinations completed prior to January 1, 2004 were treated for accounting purposes had not been reconsidered in accordance with IFRS 3 when the opening balance in the consolidated financial statements was established pursuant to IFRS on January 1, 2004. The subsidiaries' financial statements are included in the consolidated financial statements from the date of acquisition until the date the controlling influence ceases.

If the subsidiaries' accounting policies do not agree with the Group's accounting policies, adjustments have been made to the Group's accounting policies. Losses attributable to noncontrolling interests are allocated to non-controlling interests although non-controlling interests will be recognized as a debit item under equity.

Transactions to be eliminated at consolidation

Intra-Group receivables and liabilities, revenues and expenses and unrealized gains or losses that arise from transactions between Group companies are eliminated in their entirety when preparing the consolidated financial statements.

Foreign currency

Transactions in foreign currency

Transactions in foreign currency are translated to the functional currency at the exchange rate prevailing on the transaction date. Monetary assets and liabilities in foreign currencies are translated to the functional currency at the exchange rate prevailing on the balancesheet date. Exchange-rate differences that arise in translation are recognized in profit and loss. Non-monetary assets and liabilities that are recognized at historical cost are translated at the exchange rate prevailing at the date of the transaction. Non-monetary assets and liabilities that are recognized at fair value are translated to the functional currency at the exchange rate that prevails at the date of measurement at fair value.

Recognition of revenues

Active Biotech currently receives revenues for out-licensing of research projects, for performing research services and from rental income.

Revenues for out-licensing of research projects comprise a licensing fee, milestone payments and royalties from the sale of the pharmaceuticals. An up-front payment is received when the partnership agreement is entered into. This payment is recognized in full at the date of entering into the agreement on condition that the company has fulfilled all commitments under the agreement. Any milestone payments are recognized as revenue if and when the parties to the agreement meet the agreed criteria and agreement has been reached with the counterparty. Any future royalty revenues are recognized as revenue in accordance with the financial content of the agreement.

Research services are recognized as revenue in the accounting period during which the work was performed.

Rental revenues are recognized in accordance with the terms of the rental agreement.

Operating expenses and financial revenues and expenses

Operational leasing agreements

Costs pertaining to operational leasing agreements are recognized straight-line in profit or loss over the leasing period.

Financial leasing agreements

Minimum lease payments are divided between interest expenses and amortization of the outstanding liability. The interest expense is divided over the leasing period so that each accounting period is charged with an amount that corresponds to a fixed interest rate for the recognized liability in each period. Variable fees are expensed in the periods in which they arise.

Financial income and expenses

Financial income and expenses include interest income on bank deposits and receivables, interest expense on loans, exchange-rate differences and unrealized and realized profits on financial investments and value changes in derivatives.

Interest income on receivables and interest expenses on liabilities are calculated using the effective interest method. Effective interest is the interest that discounts estimated future receipts and payments during a financial instrument's anticipated duration to the financial asset's or liability's recognized net value. The interest component in financial leasing payments is recognized in profit and loss through the application of the effective interest method. Interest income includes the allocated amounts of transaction expenses and any discounts, premiums and other differences between the original value of the receivable and the amount received at maturity.

Exchange-rate gains and losses are netted.

Financial instruments

Financial instruments recognized in the asset side of the statement of financial position include cash and cash equivalents, accounts receivable, shares and other equity instruments, loan receivables and bond receivables. Liabilities include accounts payable, loan liabilities and derivatives with a negative fair value.

Recognition in, and derecognition from, the statement of financial position

A financial asset or financial liability is recognized in the statement of financial position when the company is party to the contractual conditions of the instrument. Accounts receivable are recognized in the statement of financial position when the invoice has been sent. Liabilities are recognized when the other contracting party has fulfilled its obligations and payment is due, although the invoice has not yet been received. Accounts payable are recognized when the invoice is received.

A financial asset is derecognized from the statement of financial position when the contractual rights are realized, mature or the company loses control over them. The same applies to parts of financial assets. A financial liability is derecognized from the statement of financial position when the contractual obligation is met. This also applies to parts of financial liabilities. Acquisition and divestment of financial assets are recognized on the transaction date, which is the date the company commits to the acquisition or divestment of the asset.

Cash and cash equivalents comprise liquid funds and immediately accessible balances in banks and corresponding institutes, as well as short-term liquid investments that have a maturity of three months or less from the acquisition date, which are exposed to only an insignificant risk of fluctuation in value.

Classification and measurement

Financial instruments are initially recognized at cost representing the fair value of the instrument, with transaction costs added for all financial instruments, except those defined as financial assets and recognized at fair value in profit or loss, which are recognized at fair value excluding transaction expenses. Accordingly, the recognition of financial instruments depends on the manner in which they have been classified, which is specified below.

Loan and accounts receivables

Loan and accounts receivables are financial assets, which do not comprise derivatives, with fixed or determinable payments that are not quoted in an active market. Assets in this category are measured at amortized cost. Amortized cost is based on the effective interest calculated at the date of acquisition. Assets with a short duration are not discounted. This category comprises accounts receivable, long-term receivables, other receivables, and cash and bank. Accounts receivable are recognized at the amount that is expected to be received, that is, after the deduction of doubtful receivables, which are determined individually. Impairment of accounts receivable is recognized in operating expenses. Other receivables are classified as long-term receivables if the duration is longer than one year, and if it is shorter, as other receivables. Any impairment of longterm receivables is recognized as a financial item.

Investments held to maturity

Investments held to maturity comprise financial assets that encompass interest-bearing securities with fixed or determinable payments and fixed maturities that the company has an express intention and ability to hold to maturity. Assets in this category are measured at amortized cost.

Financial assets and liabilities at fair value in profit or loss

This category consists of the sub-group Financial assets and liabilities held for trading and contains the Group's derivatives with positive or negative fair values and other financial instruments continuously measured at fair value with the changes in the value recognized in profit/loss for the year.

Other financial liabilities

Loans and other financial liabilities, such as accounts payable, are included in this category. Liabilities are measured at amortized cost. Accounts payable have a short expected duration and are measured without discounting to the nominal amount. Long-term liabilities have an expected duration of more than one year, while shortterm liabilities have a duration of less than one year.

Derivatives and hedge accounting

The Group's derivative instruments have been acquired to financially hedge the risk of interest-rate exposure experienced by the Group. To hedge the risk in highly probable forecast interest-rate flows of loans with floating interest rates, interest-rate swaps are used in which the company receives floating interest-rate payments and pays fixed-interest rates. Derivatives are initially measured at fair value, meaning that the transaction costs are charged to earnings for the period. The Group has chosen not to apply hedge accounting, which means that current changes in the fair value of derivatives are recognized in profit/loss for the year. Interest coupons on interest swaps are recognized as interest and other value changes of interest swaps are recognized as other financial income or other financial expense.

Tangible fixed assets

Assets owned

The Group measures tangible fixed assets using the acquisition method, with the exception of the company's property, which is measured using the revaluation method. Tangible fixed assets that are recognized using the cost method are recognized in the consolidated accounts at cost, less a deduction for accumulated depreciation and any impairment losses. The cost includes the purchase price and expenses directly attributable to the asset to bring the asset to the site and in the working condition for its intended use. Examples of directly attributable expenses included in the cost are delivery and handling costs, installation, acquisition registration, consultancy services and legal services.

The Group's property is recognized at fair value less deductions for accumulated depreciation and adjustments due to revaluation. Revaluation is conducted with the regularity that is required to ensure that the carrying amount shall not significantly deviate from what is established as the fair value on the balance-sheet date. The fair value of the property is based on the valuation conducted by independent external appraisers.

When an asset's carrying amount increases, the appreciation is recognized directly in other comprehensive income and accumulated in a separate component in equity termed "Revaluation reserve." If the increase entails a reversal of the previously recognized value impairment with regard to the same asset, the reduction is recognized as a reduced expense in profit or loss. When the carrying amount of an asset is reduced as a result of a revaluation, the reduction is recognized as an expense in profit or loss. If there is a balance in the revaluation reserve attributable to the asset, the value decline is recognized in other comprehensive income as a reduction in the revaluation reserve.

The difference between depreciation based on the revaluation value and depreciation using the original cost is transferred from the revaluation reserve to profit/loss brought forward.

Accumulated depreciation at the time of revaluation is eliminated against the asset's cost (or, where appropriate, in the revalued cost) after which the remaining net amount is adjusted to achieve conformity with the amount to which the asset was revalued (the asset's fair value).

When an asset is divested, the revaluation reserve is transferred to profit/loss brought forward with no impact on profit or loss or other comprehensive income.

Tangible fixed assets comprising components with varying useful lifetimes are treated as separate components of tangible fixed assets.

The carrying amount of a tangible fixed asset is derecognized from the statement of financial position when it is disposed of, divested, or when no future financial benefits are expected from the disposal/divestment of the asset. Profit or loss arising from divestment or disposal comprises the difference between the sale price and the asset's carrying amount, less deductions for direct sales expenses. Profit or loss is recognized as other operating revenues/expenses.

Leased assets

Leases are classified in the consolidated financial statements as either financial leases or operational leases. Financial leases exist when the financial risks and benefits associated with ownership are essentially transferred to the lessee. If this is not the case, the lease is considered to be an operational lease.

Assets leased through financial leasing agreements are recognized as assets in the consolidated statement of financial position. The commitment to pay future leasing fees is recognized as long-term and short-term liabilities. These assets are depreciated over the contractual leasing period while leasing fees are recognized as interest and amortization of liabilities.

Leasing fees for operational leases are expensed straight-line over the term of the lease based on the value in use, which may differ from that which has actually been paid as a leasing fee during the year.

Additional expenses

Additional expenses are added to the cost only if it is probable that the company will recover the future economic benefits associated with the assets and the cost can be calculated in a reliable manner. All other additional expenses are recognized as expenses in the period in which they arise.

Pivotal in the assessments of when an additional expense is added to the cost is whether the expense refers to the replacement of identifiable components or parts thereof, which is when such expenses are capitalized. Expenses are also added to cost when new components are created. Any undepreciated carrying amounts of replacement components, or parts of components, are disposed of and expensed in connection with the replacement. Repairs are expensed on an ongoing basis.

Depreciation principals

Depreciation is calculated using the straight-line method over the estimated useful life of the assets. The Group applies component depreciation, which means that the estimated useful life of the components is the basis for depreciation. Estimated useful life of:

– Buildings, operating properties	35 –100 years
– Equipment, tools, fixtures and fittings	3 –10 years

The operating properties comprise a number of components, whose useful life varies. The main category is land and buildings. No depreciation is recognized for the component land, since its useful life has been determined as unlimited. However, a building comprises a number of components whose useful life varies.

The useful life of these components has been estimated to vary between 35 and 100 years.

The following main categories of components have been identified and form the basis for the depreciation of buildings:

– Framework	100 years
– Non-structural elements, interior walls, etc.	50 years
– Glass roof	40 years
– Fire seal	40 years
– Installations; heating, electricity, plumbing, ventilation, etc.	50 years
– Elevators	35 years

Assessment of an asset's residual value, useful life and depreciation method is conducted annually.

Intangible assets

Research and development

Expenses for research with the purpose of acquiring new scientific or technical knowledge are expensed when they arise.

Expenses for developments, in which the research result or other knowledge is applied to produce new or improved products or processes, is recognized as an asset in the statement of financial position, if the product or process is technically and commercially useful and the company has adequate resources to pursue development and thereafter use and sell the intangible asset. Other expenses for development are recognized in profit or loss as a cost as they arise.

Since the period in which the company's research and development projects are expected to be registered is some way off in the future, there is considerable uncertainty as to when any financial benefits will accrue to the company. Development expenses are capitalized only on the condition that it is technically and financially possible to complete the asset, that the intention is, and the conditions exist, for the asset to be used in operations or sold and that it can be valued in a reliable manner. Expenses pertaining to patents, technology and trademark rights and other similar assets are not capitalized, but are offset against earnings on an ongoing basis.

No assets of this character were acquired.

Impairment

Carrying amounts of Group assets are tested at each balance-sheet date to establish whether there are any impairment indicators.

Impairment testing of tangible and intangible assets and participations in subsidiaries and associated companies

If there is an indication that an impairment requirement exists, the asset's recoverable amount (see below) is calculated in accordance with IAS 36. If it is not possible to establish fundamentally independent cash flows attributable to a specific asset, when testing for impairment, the assets shall be grouped at the lowest level whereby it is possible to identify fundamentally independent cash flows — a so-called cashgenerating unit.

An impairment loss is recognized when an asset's or cash-generating unit's (group of units) carrying amount exceeds the recoverable amount. An impairment loss is charged to profit or loss. Impairment loss in assets attributable to a cash-generating unit (group of units) is first allocated to goodwill. Thereafter, a proportional impairment is conducted of other assets included in the cash-generating unit (group of units).

The recoverable amount is the highest of fair value less selling costs and value in use. In calculating value in use, future cash flows are discounted at an interest rate that takes into account the market's assessment of risk-free interest and risk related to the specific asset.

Impairment testing of financial assets

At each reporting occasion, the company assesses if there is objective evidence that an impairment requirement exists for a financial asset or group of financial assets. Objective evidence comprises observable events that have taken place that have had a negative impact on the prospect of recovering the cost.

The recoverable amount for assets included in the loans receivable and accounts receivable category, which are recognized at amortized cost, is calculated as the present value of future cash flows discounted by the effective interest rate that applied when the asset was initially recognized. Assets with a short duration are not discounted. Impairment losses are charged to profit or loss.

Reversal of impairment

An impairment loss is reversed if there is both an indication that the impairment requirement no longer exists and if there has been a change in the assumptions that formed the basis for the calculation of the recoverable amount. However, impairment of goodwill is never reversed. Reversal of impairment is only conducted to the extent that the asset's carrying amount after the reversal does not exceed the carrying amount that would have been recognized, less depreciation, where applicable, had no impairment taken place.

Impairment of investments held to maturity or loan receivables and accounts receivable that are recognized at amortized cost is reversed if a later increase of the recoverable amount can be attributed to an event that occurred after the impairment was conducted.

Employee remuneration

Post-retirement benefits

Both defined-benefit and defined-contribution pension plans exist within the Group. For defined-benefit plans, remuneration of current and former employees is based on their salary at the time of retirement as well as the number of years of service. The Group assumes responsibility for ensuring that promised remuneration is paid. For defined- contribution plans, the company pays pension premiums to separate legal entities and has no legal commitment or informal obligation to pay further premiums (if these should lack the assets necessary to provide the promised benefits). The company's obligations relating to fees for defined contribution pension plans are expensed in profit or loss as they are accrued due to the employee performing services for the company over a period.

All defined-benefit pension plans are secured through insurance with Alecta, which is a multi-employer defined-benefit plan. For the 2010 and 2011 fiscal years, the company did not have access to information that would make it possible to recognize this plan as a defined-benefit plan. The pension plan conforming to ITP and secured through an Alecta insurance policy is therefore recognized as a defined-contribution plan.

Severance pay

An expense for remuneration in connection with termination of employment of personnel is recognized only if the company is unquestionably obligated, without any realistic possibility of withdrawal, by a formal detailed plan to eliminate a position in advance of when that position would normally expire. When remuneration is paid as an offer to encourage voluntary termination of employment, a cost for this is recognized if it is probable that the offer will be accepted and the number of employees that will accept the offer can be reliably estimated.

Current employee remuneration

Current remuneration to employees is calculated without discounting and is recognized as an expense when the related services are received.

A provision is recognized for the anticipated cost for bonus payments when the Group has an applicable legal or informal obligation to make such payments, as a result of services received from employees, and the obligation can be reliably estimated.

Share-based payments

At an Extraordinary General Meeting on December 8, 2003, an employee stock options program was implemented, with allocations in 2003, 2005 and 2006, through which all Active Biotech Group employees were offered the opportunity to acquire shares in the company. Employee stock options are allocated without payment. The stock options program was recognized in accordance with IFRS 2 and UFR 7.

A stock options program permits the employees to acquire shares in the company. The fair value of allotted options is recognized as a personnel cost with a corresponding increase in the shareholders' equity. The fair value is calculated at the time of the allocation and is distributed across the period of service. The fair value of the allocated options is calculated using the Black & Scholes model, taking into account the terms and conditions that applied at the time of allotment. The amount that is recognized as an expense is adjusted to reflect the actual number of earned options.

Social-security costs attributable to share-based instruments for employees as remuneration for purchased services are expensed over the periods in which the services were performed. Provisions for social-security costs are based on the fair value of the options at the time of recognition. The fair value is calculated with the same valuation model used when the options were allocated.

Recognition of earnings per share

The calculation of earnings per share is based on profit/loss for the year in the Group attributable to the Parent Company's shareholders and on the weighted average number of shares outstanding during the year. When calculating earnings per share after dilution, earnings and the average number of shares are adjusted to take into account the effects of dilutive potential ordinary shares, which during the reported periods, were derived from options issued to employees. Dilution only occurs when the exercise rate is lower than the trading price, and grows in pace with the increase of the difference between the exercise rate and the trading price. The exercise rate is adjusted by adding the value of future services connected to the equity-settled employee options program, which was recognized as share-based remuneration in accordance with IFRS 2.

Provisions

A provision is recognized in the statement of financial position when the Group has an existing legal or constructive obligation resulting from past events and it is probable that an outflow of financial resources will be required to settle the obligation and the amount can be reliably estimated. When the effect of the timing of when the payment will be made is significant, provisions are calculated by discounting the anticipated future cash flows to an interest rate before tax that reflects the actual market estimate of the money's value over time and, if applicable, the risks that are associated with the liability.

Taxes

Income taxes comprise current tax and deferred tax. Income taxes are recognized in profit or loss for the year except where the underlying transaction is recognized in other comprehensive income or in shareholders' equity, whereby the associated tax effect is recognized in other comprehensive income or shareholders' equity.

Current tax is tax that is to be paid or recovered in relation to the current year, applying tax rates determined or announced at the balance-sheet date. Adjustment to current tax relating to previous periods is also recognized here.

Deferred tax is calculated using the balance-sheet method based on the temporary differences between the carrying amount and the value for tax purposes of assets and liabilities. The following temporary differences are not recognized: temporary differences are not recognized in consolidated goodwill or for the difference that arises during initial recognition of assets and liabilities that do not constitute a business combination which, at the time of the transaction, do not have an impact on recognized or taxable earnings. Furthermore, temporary differences are not recognized that are attributable to shares in subsidiaries and participations in associated companies that are not expected to be reversed in the foreseeable future. Estimates of deferred tax are based on how carrying amounts of assets and liabilities are expected to be realized or settled. Deferred tax is calculated applying tax rates and legislation determined or announced at the balance-sheet date.

Deferred tax receivables pertaining to deductible temporary differences and loss carryforwards are recognized to the extent that it is probable that they will be utilized. The carrying amount of deferred tax receivables is reduced when it is no longer judged probable that they will be utilized.

Any additional income tax arising from dividends is recognized at the same date as when the dividend was recognized as a liability.

Contingent liabilities

A contingent liability is recognized when a possible commitment exists arising from events that have occurred, the validity of which can only be confirmed by the occurrence or absence of one or more future events, or where there is a commitment not recognized as a liability or provision due to the low probability that an outflow of resources will be required.

Parent Company's accounting policies

The Parent Company prepared its annual financial statements in accordance with the Annual Accounts Act (1995:1554) and the recommendations of the Swedish Financial Reporting Board RFR 2, Accounting for Legal Entities. Statements issued by the Swedish Financial Reporting Board concerning listed companies were also applied. RFR 2 entails that in the annual accounts for a legal entity, the Parent Company shall apply all of the IFRS regulations and statements approved by the European Union to the greatest possible extent, within the framework of the Annual Accounts Act, the Pension Obligations Vesting Act and with consideration given to the relationship between accounting and taxation. The recommendation stipulates what exceptions and additions shall be made to IFRS.

Changed accounting policies

The Parent Company's accounting policies for 2011 were unchanged compared with the preceding year.

Differences between the Group's and the Parent Company's accounting policies The differences between the Group's and the Parent Company's accounting policies are presented below. The accounting policies presented below for the Parent Company were applied consistently in all periods presented in the Parent Company's financial statements.

Classification and presentation forms

The presentation of the Parent Company's income statement and balance sheet is in line with the arrangement specified in the Annual Accounts Act. The difference in relation to IAS 1 Presentation of financial statement, which is applied in the preparation of the consolidated financial statements, is primarily the recognition of financial income and expenses shareholders' equity and the occurrence of provisions as a separate heading in the balance sheet.

Subsidiaries

Participations in subsidiaries are recognized by the Parent Company using the cost method. This implies that transaction costs are included in the carrying amount of participations in subsidiaries. In the consolidated accounts, transaction expenses attributable to subsidiaries are recognized immediately in profit/loss when these arise.

The Parent Company always recognizes dividends from subsidiaries as income in profit/loss for the year.

Financial guarantee contracts

The Parent Company's financial guarantee contracts mainly comprise guarantees for the benefit of subsidiaries. Financial guarantees mean that the company has an obligation to compensate the holder of a promissory instrument for losses that it incurs because a specific debtor fails to pay by the due date in accordance with the terms and conditions of the agreement. For recognition of financial guarantee contracts, the Parent Company applies one of the regulations permitted by the Swedish Financial Reporting Board that entails a relaxation compared with IAS 39 as regards financial guarantee contracts issued for the benefit of subsidiaries. The Parent Company records financial guarantee contracts as a provision in the balance sheet when the company has an obligation for which it is probable that payment will be required to settle the obligation.

Tangible fixed assets

Owned assets

Tangible fixed assets in the Parent Company are recognized at cost less deductions for accumulated depreciation and any impairment losses in the same manner as for the Group, but with the addition of any write-ups.

Leased assets

In the Parent Company, all leasing agreements are recognized in accordance with the regulations for operational leasing.

Intangible fixed assets

Research and development

In the Parent Company, all expenses for development are recognized as expenses in profit or loss.

Depreciation principles

Depreciation is conducted on a straight-line basis over the estimated useful life of the asset, which corresponds to the period during which it will be used. For goodwill, the useful life is ten years.

Taxes

Untaxed reserves include deferred tax liabilities when recognized in the Parent Company. However, in the consolidated financial statements, untaxed reserves are divided into deferred tax liability and shareholders' equity.

Note 2 Distribution of Sales ●

SEK thousands		Group
	2011	2010	2011	2010
License fees	223 175	–	223 175	-
Research services	2 648	2 610	2 648	2 610
Rental and service revenue	8 740	8 746	972	948
Property services	–	–	17 470	19 656
Other	30	–	30	–
Total	234 593	11 356	244 295	23 214

Note 3 Operating expenses distributed by type of cost ●

SEK thousands	Group	Parent Company
	2011	2010	2011	2010
Personnel costs1)	70 044	89 604	70 044	89 604
Depreciation	11 965	9 774	16 428	347
Operating expenses	13 151	14 115	13 148	14 112
Property expenses	14 722	18 928	44 140	45 683
Administrative expenses	1 953	1 545	1 953	1 545
External R&D services	220 744	103 659	220 744	103 659
Other external services	2 938	2 696	2 938	2 696
Total	335 517	240 321	369 395	257 646

1) Personnel costs include costs of SEK - 3,814 thousand (8,259) pertaining to the employee stock options program.

Note 4 Auditors' remuneration ●

	Group and Parent Company
SEK thousands	2011	2010
KPMG
Auditing assignments	436	621
Audit activities other than auditing assignment	–	8
Tax consultancy services	108	198
Other assignments	128	56

Auditing assignments relate to the auditing of the annual report and accounts, including the Board's and the President & CEO's administration, and other assignments that the company's auditors are required to perform (including reviews of interim reports).

Note 5 Employee and personnel costs, and remuneration of senior executives ●

Costs for remuneration of employees		Group		Parent Company
SEK thousands	2011	2010	2011	2010
Salaries and remuneration, etc.	43 286	47 337	43 286	47 337
Share-based payment1) (see below)	-3 814	8 259	-3 814	8 259
Pension costs, defined-benefit plans (see below)	–	–	–	–
Pension costs, defined-contribution plans 2) 3) (see below)	10 316	10 665	10 316	10 665
Social-security costs	16 090	19 657	16 090	19 657
Non-monetary remuneration	2 388	2 322
Total	68 266	88 240	65 878	85 918

1) Of which, social-security costs totaled SEK - 3,814 thousand (8,259).

2) Of the Parent Company's pension costs, SEK 2,052 thousand (1,994) pertains to the Board of Directors and President & CEO.

3) The Group's pension costs include SEK 3.1 million (3.0) pertaining to the ITP plan financed in Alecta. See the section "Remuneration of employees after the termination of employment" for further information.

Average number of employees		2011		2010
	No. of employees	Of whom, women	No. of employees	Of whom, women
Parent Company
Sweden	80	46 (58%)	87	51 (59%)
Total, Parent Company	80	46 (58%)	87	51 (59%)
Subsidiaries
Sweden	0	0 (0%)	0	0 (0%)
Group total	80	46 (58%)	87	51 (59%)

Gender distribution in management	2011	2010
		Of whom, women
Parent Company
Board of Directors	44%	38%
Other senior executives	25%	25%
Group total
Board of Directors	44%	38%
Other senior executives	25%	25%

Salaries and other remuneration subdivided by country

and between senior executives and other employees,

and social-security costs in the Parent Company		2011			2010
	Senior executives	Other		Senior executives	Other
SEK thousands	(11 individuals)	employees	Total	( Ten individuals)	employees	Total
Salaries and other remuneration
Sweden	7 606	35 088	42 694	7 337	40 000	47 337
(of which, bonus and similar)	–	–	–	–	–	–
Parent Company, total	7 606	35 088	42 694	7 337	40 000	47 337
(of which, bonus and similar)	–	–	–	–	–	–
Social-security costs1)	7 013	15 579	22 592	7 913	30 668	38 581
1) of which, pension costs	3 638	6 678	10 316	3 234	7 431	10 665

Salaries and other remuneration, pension costs for

senior executives in the Group	2011	2010
Group	Senior executives	Senior executives
SEK thousands	(11 individuals)	( Ten individuals)
Salaries and other remuneration (of which, bonus and similar)	7 606 –	7 337 –
Pension costs	3 638	3 234

Severance pay and loans to senior executives and other terms and conditions No agreement exists covering severance pay or loans to Board members. The company and the President are subject to a mutual period of termination notice of 12 months. No severance pay will be issued and no loans exist. The company and other senior executives shall be subject to a mutual period of termination notice of not more than

12 months. No severance pay will be issued and no loans exist. However, the President & CEO is entitled to extra remuneration of not more than four annual salaries in the event of an ownership change that entails that the company, in its entirety, is acquired or taken over by another party.

Post-retirement benefits

Defined-benefit plans

Retirement pension and family pension obligations for salaried workers in Sweden are secured through insurance with Alecta, which is a multi-employer, defined-benefit plan. For the 2010 and 2011 fiscal years, the company did not have access to information that would make it possible to recognize this plan as a defined-benefit plan. Accordingly, pension plans conforming to ITP and secured through an Alecta insurance policy are recognized as a defined-contribution plan. The year's fees for pension insurance subscribed to in Alecta totaled SEK 3.1 million (3.0). Alecta's surplus can be allocated to the policyholders and/or the insured. At year-end 2011, Alecta's surplus at the collective funding ratio amounted to 113 percent (146). The collective funding ratio comprises the market value of Alecta's assets as a percentage of insurance obligations based on Alecta's actuarial calculations, which do not conform to IAS 19.

Defined-contribution plans

In Sweden, the Group has defined-contribution plans for the employees that are fully paid by the company. Payment to these plans is conducted on an ongoing basis and in accordance with the regulations for each plan.

Share-based payments

The Extraordinary General Meeting of December 8, 2003 resolved to introduce an employee stock options program, according to which employees of the Active Biotech Group will be offered the opportunity to jointly acquire not more than 1,000,000 shares in the company. It was also decided, in connection with the commitments entailed by the employee stock options program, to issue a total of not more than 1,330,000 options for subscription for new shares to a wholly owned subsidiary on the same conditions as those applicable to the employee stock options program.

The principal conditions for the employee stock options are as follows:

Series 1 employee stock options were issued in December 2003 and grant employees the opportunity to acquire at most 330,000 shares during the period June 1, 2006 to May 31, 2009. Series 2 employee stock options were issued in June 2005 and granted the employees the opportunity to acquire at most 330,000 shares during the period June 1, 2007 to May 31, 2010. Series 3 employee stock options were issued in June 2006 and granted the employees the opportunity to acquire at most 340,000 shares during the period June 1, 2008 to May 31, 2011. Series 1 employee stock options expired on May 31, 2009 without any exercise having taken place. Series 2 and 3 employee stock options expired on May 31, 2010 and May 31, 2011, respectively, and exercise of these took place as presented in the table below. The employee stock options are allotted free of charge. The options shall not be considered securities and are not transferable to a third party. The exercise of the options primarily requires that the holder is employed by the Active Biotech Group at the time of exercise. The Board may, pending a special decision, permit holders to exercise their options even after their employment has terminated.

The estates of option holders have the right to exercise the options on condition that the holder remained in the employment of the Active Biotech Group at the time of his/ her death or was granted right of exercise through a special decision by the Board.

Issue of debentures linked to options to subscribe for new shares and disposition of options

Connected to the commitments entailed by the employee stock options program described above, debentures have been issued linked to options to subscribe for new shares on the following principal conditions:

Debentures of a nominal amount not exceeding SEK 1,330 associated with at most 438,900 Series 1 options, 1,438,900 Series 2 options and 452,200 Series 3 options for subscription for new shares were issued to a wholly owned subsidiary of Active Biotech AB (publ), waiving the preferential rights of existing shareholders. The debentures were issued at a price corresponding to their nominal value without interest and matured for payment on March 31, 2004.

Series 1 options have expired.

• Series 2 options have expired and exercise took place in accordance with
• the table below Series 3 options have expired and exercise took place in accordance with

the table below In the event that the Articles of Association permit the issue of different classes of shares at the time at which the subscription price and the exercise of the options are determined, the subscription price and the shares purchased using the options shall be Class B shares.

After having subscribed for debentures with options, the subsidiary has detached the options and held them in order to meet the commitments under the employee stock options program described above.

Dilution effect and costs for the program

The dilution effect for options subscribed for during the year corresponds to about 0.6 percent. The proposed options give rise to costs, partly in the form of social-security costs (UFR7), of which SEK - 3,814 thousand was charged against consolidated earnings in 2011 and SEK 17,378 thousand in previous years, and partly accounting costs in accordance with IFRS 2, which did not impact consolidated earnings in 2011, but were charged in the amount of SEK 13,889 thousand to consolidated earnings in previous years.

Date of allocation/personnel category	Series 1	Series 2	Series 3		Total Conditions of entitlement	Duration
Allocation, Dec. 2003/President	11 200	–	–	11 200	Remains in service	3 years
Allocation, Dec. 2003/Other senior executives	22 500	–	–	22 500	Remains in service	3 years
Allocation, Dec. 2003/Other employees	296 125	–	–	296 125	Remains in service	3 years
Outstanding at Dec. 31, 2003	329 825	–	–	329 825
Forfeited 2004/Other employees	-10 375	–	–	-10 375
Outstanding at Dec. 31, 2004	319 450	–	–	319 450
Allocation, June 2005/President	–	11 200	–	11 200	Remains in service	3 years
Allocation, June 2005/Other senior executives	–	60 500	–	60 500	Remains in service	3 years
Allocation, June 2005/Other employees	–	167 375	–	167 375	Remains in service	3 years
Forfeited 2005/Other employees	-7 000	-1 500	–	-8 500
Outstanding at Dec. 31, 2005	312 450	237 575	–	550 025
Allocation, June 2006/President	–	–	11 200	11 200	Remains in service	3 years
Allocation, June 2006/Other senior executives	–	–	41 100	41 100	Remains in service	3 years
Allocation, June 2006/Other employees	–	–	287 700	287 700	Remains in service	3 years
Outstanding at Dec. 31, 2006	312 450	237 575	340 000	890 025
Forfeited 2007/Other employees	-3 375	-3 875	-9 225	-16 475
Outstanding at Dec. 31, 2007	309 075	233 700	330 775	873 550
Forfeited 2008/Other employees	-2 000	-2 000	-2 315	-6 315
Outstanding at Dec. 31, 2008	307 075	231 700	328 460	867 235
Expired 2009/President	-11 200	–	–	-11 200
Expired 2009/Other senior executives	-22 500	–	–	-22 500
Expired 2009/Other employees	-273 375	–	–	-273 375
Forfeited 2009/Other employees	–	–	-3 075	-3 075
Outstanding at Dec. 31, 2009	–	231 700	325 385	557 085
Exercised 2010/President	–	-42 500	–	-42 500
Exercised 2010/Other senior executives	–	-17 000	–	-17 000
Exercised 2010/Other employees	–	-172 200	-89 551	-261 751
Outstanding at Dec. 31, 2010	–	–	235 834	235 834
Exercised 2011/President	–	–	-25 000	-25 000
Exercised 2011/Other senior executives	–	–	-17 290	-17 290
Exercised 2011/Other employees	–	–	-190 469	-190 469
Forfeited 2011/Other employees	–	–	-3 075	-3 075
Outstanding at Dec. 31, 2011	–	–	–	–

Remuneration of senior executives

Guidelines adopted at the Annual General Meeting on May 5, 2011

Active Biotech shall offer total remuneration on market terms, facilitating the recruitment and retention of competent senior executives. Remuneration of senior executives shall comprise fixed salary, any variable salary, pensions and other benefits. If the Board also determines that new share-based incentives should be introduced (e.g. employee options), a motion concerning this shall be submitted to the Annual General Meeting for resolution.

Fixed salary

The fixed salary shall take into consideration the individuals' area of responsibility and experience. This shall be reviewed on an annual basis.

Variable salary

The variable salary shall, where applicable, depend on the individuals' fulfillment of quantitative and qualitative goals. Variable salary may not exceed 50 percent of fixed salary for the President & CEO. For other senior executives, the variable salary shall amount to not more than 25 percent of fixed salary, whereby the highest level should be based on such factors as the position held by the specific individual.

Pension

Pension benefits shall comprise defined-contribution schemes. For senior executives covered by the ITP plan, the pension premium is to correspond to the stipulations of the ITP plan. For other senior executives, the pension premium shall not exceed 25 percent of fixed salary.

Severance pay, etc.

The period of termination notice for senior executives shall not exceed 12 months. No severance amounts will be payable. However, the President & CEO shall be entitled to extra remuneration corresponding to four annual salaries in the event of an ownership change that entails that the company, in its entirety, is acquired or taken over by another party.

Other benefits

Senior executives may be awarded otherwise customary benefits, such as a company car, company healthcare, etc.

Preparation and approval

The President & CEO's remuneration shall be prepared and approved by the Board. Other senior executive's remuneration shall be prepared by the President & CEO, who shall submit a proposal to the Board for approval. The Board is entitled to deviate from the above principles if it deems that there are particular grounds for doing so in individual cases.

Previously approved remuneration

The President & CEO is entitled to extra remuneration as specified above under the heading in the Severance pay, etc. No other previously approved remuneration otherwise exists that has not fallen due for payment. However, the company's outstanding stock options may entails costs for the company (social-security costs) in accordance with that specified in the Annual Report.

Remuneration and other benefits during 2011

SEK thousands	Basic salary/	Variable	Salary	Pension	Share-based	Other
	Board fee	remuneration	exchange	costs	remuneration	remuneration	Total
Chairman of the Board; Mats Arnhög1)	250	–	–	–	–	–	250
Board member; Magnhild Sandberg-Wollheim1)	125	–	–	–	–	–	125
Board member; Klas Kärre1)	125	–	–	–	–	–	125
Board member; Peter Sjöstrand1)	125	–	–	–	–	–	125
Board member; Mef Nilbert1)	83	–	–	–	–	–	83
Board member; Peter Hofvenstam1)	83	–	–	–	–	–	83
Board member; Peter Thelin1)	83	–	–	–	–	–	83
President & CEO Tomas Leanderson	3 244	–	1 020	1 032	–	–	5 296
Other senior executives (3 individuals)	3 488	–	504	1 082	–	–	5 074
Total	7 606	–	1 524	2 114	–	–	11 244

1) Apart from Board fees, no additional remuneration was paid to Board members.

Remuneration and other benefits during 2010

SEK thousands	Basic salary/	Variable	Salary	Pension	Share-based	Other
	Board fee	remuneration	exchange	costs	remuneration	remuneration	Total
Chairman of the Board; Mats Arnhög1)	250	–	–	–	–	–	250
Board member; Magnhild Sandberg-Wollheim1)	125	–	–	–	–	–	125
Board member; Klas Kärre1)	125	–	–	–	–	–	125
Board member; Peter Sjöstrand1)	125	–	–	–	–	–	125
Board member; Peter Ström1)	125	–	–	–	–	–	125
Board member; Tomas Nicolin1)	125	–	–	–	–	–	125
President & CEO Tomas Leanderson	3 050	–	978	1 016	–	–	5 044
Other senior executives (3 individuals)	3 412	–	360	880	–	–	4 652
Total	7 337	–	1 338	1 896	–	–	10 571

1) Apart from Board fees, no additional remuneration was paid to Board members.

Note 6 Net financial items ●

Group
SEK thousands	2011	2010
Accounts and loans receivable
- Interest income from bank balances	1 678	132
Other interest income	26	11
Assets and liabilities at fair value
- Held for trading: derivatives	92	96
- Held for trading: short-term investments	8 276	1 061
Investments held to maturity	462	107
Exchange-rate movements	1 479	454
Financial income	12 013	1 861
Financial liabilities measured at amortized cost
- Interest expenses relating to bank loans	-8 979	-5 846
- Other interest expenses	-392	-249
Assets and liabilities at fair value
- Held for trading: derivatives	-5 258	-423
Financial expense	-14 629	-6 518
Capital gain upon divestment of associated company	–	–
Net financial items	-2 616	-4 657
Of which:
Interest income from instruments
measured at amortized cost	2 141	239
Interest expense from instruments
measured at amortized cost	-9 371	-6 095

Parent Company		Interest income and similar items
SEK thousands		2011		2010
Interest income on investments held to maturity		462		107
Net gain on financial instruments at fair value
through profit or loss		8 276		1 061
Interest income, bank balances		1 554		106
Other interest income		26		11
Exchange-rate differences		1 479		454
Total		11 797		1 739
Parent Company		Interest expense and similar items
SEK thousands		2011		2010
Interest expenses, other		-2		-7
Total		-2		-7
Exchange-rate differences
affecting earnings		Group	Parent Company
SEK thousands	2011	2010	2011	2010
Exchange-rate differences
affecting operating profit/loss	94	100	94	100
Financial exchange-rate differences	1 479	454	1 479	454
Total	1 573	554	1 573	554

Note 7 Taxes ●

Recognized in profit and loss		Group	Parent Company
SEK thousands	2011	2010	2011	2010
Current tax expense (-)/tax income (+)
Tax expense/tax income for the period	–	–	–	–
Tax adjustments brought forward from earlier years	–	–	–	–
Deffered tax expense (-)/tax income (+)
Deferred tax expense as a result of utilization
of loss carryforwards previously capitalized	-527	-346	–	–
Deferred tax income in tax loss carryforwards
capitalized during the year	8 990	12 557	–	–
Deferred tax income attributable to depreciation
of revaluation of property	527	346	–	–
Total recognized tax expense/income	8 990	12 557	–	–

		Group		Parent Company
SEK thousands	2011	2010	2011	2010
Reconciliation of effective tax
Loss before tax	-103 539	-233 622	-113 305	-232 700
Tax on the Parent Company according to current rates 26.3%	27 231	61 443	29 799	61 200
Non-deductible expenses	-600	-1 237	-600	-1 237
Non-taxable revenues	176	355	176	355
Increase in loss carryforwards without equivalent
capitalization of deferred taxes	-30 901	-16 403	-30 901	-16 403
Deductible expenses/taxable revenues
not recognized in earnings	5 839	-43 754	1 526	-43 915
Increase/decrease in temporary differences
for which deferred tax is not recognized	-1 745	-404	–	–
Revaluation of deferred tax	8 990	12 557	–	–
Recognized effective tax	8 990	12 557	–	–
Tax items recognized directly in other comprehensive income		Group		Parent Company
SEK thousands	2011	2010	2011	2010
Tax attributable to change in revaluation reserve	-8 463	-12 211	–	–
Tax items recognized directly in equity		Group		Parent Company
SEK thousands	2011	2010	2011	2010
Tax attributable to change in revaluation reserve	-527	-346	–	–

the

financial

statements

Recognized in the statement of financial position Deferred tax receivable Deferred tax receivables and liabilities	Group		Deferred tax liability Group			Net Group
SEK thousands	2011	2010	2011	2010	2011	2010
Tangible fixed assets	–	–	-32 736	-24 273	-32 736	-24 273
Loss carryforwards	32 736	24 273	–	–	32 736	24 273
Tax receivables/liabilities	32 736	24 273	-32 736	-24 273	–	–
Offsetting	-32 736	-24 273	32 736	24 273	–	–
Tax receivables/liabilities, net	–	–	–	–	–	–

Change in deferred tax in temporary differences and loss carryforwards

SEK thousands	Balance at	Recognized in	Recognized in other	Recognized	Balance at
	Jan 1, 2011	profit and loss	comprehensive income	in equity	Dec 31, 2011
Tangible fixed assets	-24 273	527	-8 463	-527	-32 736
Loss carryforwards	24 273	8 463	–	–	32 736
	–	8 990	-8 463	-527	–
SEK thousands	Balance at	Recognized in	Recognized in other	Recognized	Balance at
	Jan 1, 2010	profit and loss	comprehensive income	in equity	Dec 31, 2010
Tangible fixed assets	-12 062	346	-12 211	-346	-24 273
Loss carryforwards	12 062	12 211	–	–	24 273
	–	12 557	-12 211	-346	–

Due to the Group's activities with considerable research and development costs, it is not liable for tax. At the end of 2011, the Group's accumulated loss carryforwards amounted to SEK 2,274 million and was attributable to the Group's Swedish companies. The Parent Company's loss carryforwards amounted to SEK 2,274 million. Since the time at which the Parent Company and the Swedish subsidiaries may be expected to generate revenues can not yet be specified, only the portion of the taxable effects of the loss carryforwards corresponding to the deferred tax liability was recognized.

Note 8 ● Intangible fixed assets

Parent Company
SEK thousands	Goodwill	Total
Cost Opening balance, January 1, 2010	–	–
Acquisitions in conjunction with merger	161 497	161 497
Closing balance, December 31, 2010	161 497	161 497
Opening balance, January 1, 2011 Other acquisitions	161 497 –	161 497 –
Closing balance, December 31, 2011	161 497	161 497

Parent Company
SEK thousands	Goodwill	Total
Depreciation and impairment losses Opening balance, January 1, 2010	–	–
Closing balance, December 31, 2010	–	–
Opening balance, January 1, 2011 Depreciation for the year	– -16 150	– -16 150
Closing balance, December 31, 2011	-16 150	-16 150
Carrying amounts January 1, 2010 December 31, 2010	– 161 497	– 161 497
January 1, 2011 December 31, 2011	161 497 145 347	161 497 145 347

Note 9 Tangible fixed assets ●

Group
SEK thousands	Buildings and land Recognition based on revaluation method	Equipment, tools, fixtures and fittings Recognition based on purchase method	Total
Cost
Opening balance, January 1, 2010	341 202	135 557	476 759
Other acquisitions	–	1 551	1 551
Revaluation	53 897	–	53 897
Closing balance, December 31, 2010	395 099	137 108	532 207
Opening balance, January 1, 2011	395 099	137 108	532 207
Other acquisitions	-	1 931	1 931
Revaluation	34 182	–	34 182
Closing balance, December 31, 2011	429 281	139 039	568 320
Depreciation and impairment losses
Opening balance, January 1, 2010	-31 768	-125 999	-157 767
Depreciation for the year	-7 179	-2 594	-9 773
Revaluation	-6 152	–	-6 152
Closing balance, December 31, 2010	-45 099	-128 593	-173 692
Opening balance, January 1, 2011	-45 099	-128 593	-173 692
Depreciation for the year	-7 179	-2 783	-9 962
Revaluation	-2 003	–	-2 003
Closing balance, December 31, 2011	-54 281	-131 376	185 657
Carrying amounts
January 1, 2010	309 434	9 558	318 992
December 31, 2010	350 000	8 515	358 515
January 1, 2011	350 000	8 515	358 515
December 31, 2011	375 000	7 663	382 663

Tax assessment value

	Dec. 31, 2010
	74 000
8 191	8 191
	Dec. 31, 2011 74 000

Buildings and land recognized in acc. with revaluation method	Historical carrying amount Dec. 31, 2011	Carrying amount after revaluations Dec. 31, 2011	Historical carrying amount Dec. 31, 2010	Carrying amount after revaluations Dec. 31, 2010
Cost	296 461	429 281	296 461	395 099
Accumulated depreciation	-45 935	-54 281	-38 755	-45 099
Carrying amount	250 526	375 000	257 706	350 000

Valuation of the Forskaren 1 property

The Group recognizes the property at market value. At December 31, 2011, the property was valued by PwC Sweden at SEK 375 million. The value assessment assumes that Active Biotech utilizes approximately 80 percent of the premises for its own operations with the remaining 20 percent leased to external tenants. The value of the laboratory equipment and other special equipment was not considered in the valuation. The value assessment was conducted using a market simulation via yield-based market value assessment and via the local market price method.

Conditions and assumptions for valuation:

• Inflation assumption of 2.0 percent for the calculation period
• Rental increases for rented premises in accordance with agreed rental terms
• Rental increases for internal premises, 100 percent of CPI
• Annual increase of operation/maintenance, 100 percent of CPI
• Direct yield last year's net operating income, 8 percent
• Nominal cost of capital, total capital 10.16 percent

Financial leasing in the Group

The Group leases machines and other technical facilities under various financial leasing agreements in which the main terms of the agreement are as follows: rental period 36-60 months, final residual value 10 percent of the cost and an interest rate linked to a floating market rate. Property leased through the above-mentioned agreements is recognized in the consolidated balance sheet under equipment, tools, fixtures and fittings. At December 31, 2011, the carrying amount of property covered by financial leasing agreements was SEK 4,740 thousand. See also Note 13, Interest-bearing liabilities.

Operational leasing in the Group

The Group has operational leasing agreements for cars, telephone switchboard and photocopying machines. Payments pertaining to these operating agreements are due as follows: within one year SEK 860 thousand, between one and five years SEK 1,720 thousand, and after five years SEK 0.

Parent Company
SEK thousands	Buildings	Equipment, tools, fixtures
	and land	and fittings	Total
Cost
Opening balance, January 1, 2010	–	485	485
Acquisition in conjunction with merger	564	137 417	137 981
Closing balance, December 31, 2010	564	137 902	138 466
Opening balance, January 1, 2011	564	137 902	138 466
Other acquisitions	–	527	527
Closing balance, December 31, 2011	564	138 429	138 993
Depreciation and impairment losses
Opening balance, January 1, 2010	–	-134	-134
Acquisition in conjunction with merger	-242	-136 712	-136 954
Depreciation for the year	-28	-319	-347
Closing balance, December 31, 2010	-270	-137 165	-137 435
Opening balance, January 1, 2011	-270	-137 165	-137 435
Depreciation for the year	-28	-250	-278
Closing balance, December 31, 2011	-298	-137 415	-137 713
Carrying amounts
January 1, 2010	–	351	351
December 31, 2010	294	737	1 031
January 1, 2011	294	737	1 031
December 31, 2011	266	1 014	1 280

financial

statements

Note 10 Prepaid expenses and accrued income ●

SEK thousands	Group		Parent Company
	2011	2010	2011	2010
Interest	78	–	78	-
Prepaid rent	82	81	82	81
Prepaid insurance	1 140	990	1 140	990
Accrued revenues	144	189	144	189
Prepaid clinical trials	3 202	4 261	3 202	4 261
Other prepaid expenses and accrued income	1 834	1 306	1 834	1 306
Total	6 480	6 827	6 480	6 827

Note 11 Shareholders' equity ●

Consolidated shareholders' equity

Specification of shareholders' equity item Reserves

Revaluation reserve
SEK thousands	2011	2010
Revaluation reserve, January 1	68 021	33 801
Revaluation of property	34 182	47 745
Tax effect of property revaluation	- 8 990	-12 557
Transfer to loss carryforwards	-2 003	-1 314
Tax effect of transfer to loss carryforwards	527	346
Revaluation reserve, December 1	91 737	68 021

Share capital	Ordinary shares
Thousands of shares	2011	2010
Issued at January 1	66 000	64 052
Cash issue	2 924	1 948
Issued at December 31 – paid	68 924	66 000

At December 31, 2011, the registered share capital comprised 68,923,582 ordinary shares with a quotient value of SEK 3.77 issued in one series. Holders of ordinary shares are entitled to dividends determined successively and the shareholding entitles the holder to voting rights at the Annual General Meeting of one vote per share.

Other capital contributions

Refers to shareholders' equity contributed by the owners in addition to share capital. This includes the share premium reserves transferred to the statutory reserve at December 31, 2005. Effective January 1, 2006 and onward, allocations to the statutory reserve will also be recognized as contributed capital.

Reserves

Revaluation reserve

The revaluation reserve includes value changes attributable to tangible fixed assets.

Profit/loss brought forward including profit/loss for the year

Profit/loss brought forward including profit/loss for the year includes accumulated earnings/losses in the Parent Company and its subsidiaries and associated companies. Earlier provisions to statutory reserves, excluding transferred share premium reserves, are included in this equity item.

Dividend

The Board of Directors proposes that no dividend be paid for the 2011 fiscal year.

Capital management

In accordance with the Board's policy, the Group's financial objective is to maintain a solid capital structure and financial stability, thereby retaining the confidence of investors and credit providers in the market, and to function as a platform for the continued development of the business operation. Capital is defined as total equity. With reference to the focus of the operation, no specific target for debt/equity has been defined. Neither the Parent Company nor any of its subsidiaries are subject to any external capital requirements.

Parent Company's shareholders' equity

Restricted funds

Restricted funds may not be reduced through the distribution of profits.

Share premium reserve

The purpose of the statutory reserve is to retain a portion of net profit that is not used to cover losses brought forward. Amounts that were allocated to the share premium reserve before January 1, 2006 have been transferred and are now included in the statutory reserve.

Unrestricted equity

In addition to profit/loss for the year, the following funds comprise unrestricted equity, meaning the amount that is available for distribution to shareholders.

Share premium reserve

When shares are issued at a premium, that is, payment is required for the shares in excess of their quotient value, an amount corresponding to the proceeds received in excess of the shares' quotient value shall be transferred to the share premium reserve. Amounts allocated to the share premium reserve from January 1, 2006 are included in unrestricted equity.

Profit/loss brought forward

Profit/loss brought forward comprises the preceding year's profit/loss brought forward, less any dividends paid during the year.

Note 12 Earnings per share ●

SEK	Before dilution		After dilution
	2011	2010	2011	2010
Earnings per share	-1.38	-3.38	-1.38	-3.38

Calculation of the numerator and the denominator used in the above calculation of earnings per share is specified below.

Earnings per share before dilution

The calculation of earnings per share in 2011 was based on loss for the year attributable to the Parent Company's ordinary shareholders amounting to SEK 94,550 thousand (loss: 221,065) and on a weighted average number of shares outstanding during 2011 totaling 68,597,141 (65,465,469). The two components were calculated in the following manner:

Loss attributable to the Parent Company's shareholders, before dilution
SEK thousands	2011	2010
Loss for the year attributable to the Parent Company's shareholders	-94 550	-221 065
Weighted average number of outstanding common shares, before dilution
Thousands of shares	2011	2010
Total number of ordinary shares at January 1	66 000	64 052
Effect of rights issue	2 597	1 413
Weighted average number of ordinary shares during the year, before dilution	68 597	65 465

Earnings per share after dilution

The calculation of earnings per share after dilution in 2011 was based on loss for the year attributable to the Parent Company's ordinary shareholders amounting to SEK 94,550 thousand (loss: 221,065) and on a weighted average number of shares outstanding during 2011 totaling 68,597,141 (65,465,469). The two components were calculated in the following manner:

	Loss attributable to the Parent Company's shareholders, after dilution
--	------------------------------------------------------------------------

SEK thousands	2011	2010
Loss attributable to the Parent Company's ordinary shareholders	-94 550	-221 065
Effect of share warrants	–	–
Loss attributable to the Parent Company's ordinary shareholders, after dilution	-94 550	-221 065
Weighted average number of outstanding common shares, after dilution
Thousands of shares	2011	2010
Weighted average number of common shares during the year, before dilution	68 597	65 465
Effect of share warrants	–	–
Weighted average number of ordinary shares during the year, after dilution	68 597	65 465

Note 13 Interest-bearing liabilities ●

		Group
SEK thousands	2011	2010
Long-term liabilities
Bank loan	231 167	235 410
Financial leasing liabilities	3 629	6 260
Total	234 796	241 670
Current liabilities
Short-term portion of bank loan	5 658	5 658
Short-term portion of financial leasing liabilities	2 352	2 133
Total	8 010	7 791

Financial leasing

The portion of long-term interest-bearing liabilities that pertains to financial leasing in the Group comprises future leasing fees attributable to agreements under financial leasing. The obligations pertaining to financial leasing mature as follows:

SEK thousands	Amortization	Interest	Total payment
Within one year	2 352	370	2 722
Between one and five years	3 629	447	4 076
Later than five years	–	–	–
	5 981	817	6 798

Amortization due within one year is recognized as a short-term liability. Interest on financial leasing agreements is linked to the floating market interest rates. For further information concerning interest and maturity structures, see Note 17.

Note 14 Other short-term liabilities ●

SEK thousands	Group		Parent Company
	2011	2010	2011	2010
Personnel tax at source	1 175	1 286	1 175	1 286
VAT	961	929	–	–
Derivatives held for hedging purposes	9 152	3 894	–	–
Other personnel costs	–	1 065	–	1 065
Other short-term liabilities	–	593	–	593
Total	11 288	7 767	1 175	2 944

Note 15 Accrued expenses and deferred income ●

	Group		Parent Company
SEK thousands	2011	2010	2011	2010
Accrued vacation liability, including social-security costs	7 354	7 010	7 354	7 010
Accrued employer's contributions	1 082	1 491	1 082	1 491
Accrued employer's contributions for employee stock options program	–	9 291	–	9 291
Other accrued personnel costs	4 635	4 813	4 635	4 813
Accrued Board fees, including social-security costs	1 111	1 111	1 111	1 111
Accrued auditors' fees	300	300	300	300
Accrued fees for legal services	–	32	–	32
Accrued interest	850	717	–	–
Accrued expenses, clinical trials	55 239	8 827	55 239	8 827
Accrued property expenses	2 132	2 725	2 132	2 725
Prepaid rental income	712	–	–	–
Other items	526	304	526	304
Total	73 941	36 621	72 379	35 904

Note 16 Valuation of financial assets and liabilities at fair value ●

The fair values and carrying amounts are recognized in the balance sheet below:

Group 2011

SEK thousands		Financial assets/
		liabilities at		Other	Total
	Accounts and	fair value in	Investments held	financial	carrying	Fair
	loans receivable	profit or loss	to maturity	liabilities	amount	value
Other long-term receivables	1	–	–	–	1	1
Accounts receivable	766	–	–	–	766	766
Accrued income	78	–	–	–	78	78
Short-term investments	–	293 658	20 000	–	313 658	313 658
Cash and bank balances	151 515	–	–	–	151 515	151 515
Total	152 360	293 658	20 000	–	466 018	466 018
Long-term interest-bearing liabilities	–	–	–	234 796	234 796	234 796
Short-term interest-bearing liabilities	–	–	–	8 010	8 010	8 010
Accounts payable	–	–	–	27 807	27 807	27 807
Accrued expenses	–	–	–	850	850	850
Other liabilities	–	9 152	–	–	9 152	9 152
Total	–	9 152	–	271 463	280 615	280 615

Group 2010

SEK thousands		Financial assets/
		liabilities at		Other	Total
	Accounts and	fair value in	Investments held	financial	carrying	Fair
	loans receivable	profit or loss	to maturity	liabilities	amount	value
Other long-term receivables	1	–	–	–	1	1
Accounts receivable	42	–	–	–	42	42
Short-term investments	–	100 382	–	–	100 382	100 382
Cash and bank balances	30 759	–	–	–	30 759	30 759
Total	30 802	100 382	–	–	131 184	131 184
Long-term interest-bearing liabilities	–	–	–	241 670	241 670	241 670
Short-term interest-bearing liabilities	–	–	–	7 791	7 791	7 791
Accrued expenses	–	–	–	717	717	717
Accounts payable	–	–	–	27 454	27 454	27 454
Other liabilities	–	3 894	–	–	3 894	3 894
Total	–	3 894	–	277 632	281 526	281 526

Disclosure regarding the determination of fair value

Group 2011

Level 1	Level 2	Level 3	Total
	293 658		293 658
	9 152		9 152

Group 2010

Level 1	Level 2	Level 3	Total
	100 382		100 382
	3 894		3 894

Level 1: according to quoted prices on an active market for the same instrument

Level 2: based on directly or indirectly observable market inputs other than those included in Level 1

Level 3: according to inputs not based on observable market data

Parent Company 2011

SEK thousands		Financial assets/
		liabilities at fair		Other	Total
	Accounts and	value in	Investments held	financial	carrying	Fair
	loans receivable	profit or loss	to maturity	liabilities	amount	value
Long-term receivables	1	–	–	–	1	1
Accounts receivable	766	–	–	–	766	766
Accrued income	78	–	–	–	78	78
Short-term investments	–	293 658	20 000	–	-313 658	313 658
Cash and bank balances	142 910	–	–	–	-142 910	142 910
Total	143 755	293 658	20 000	–	457 413	457 413
Accounts payable	–	–	–	27 807	27 807	27 807
Total	–	–	–	27 807	27 807	27 807

Parent Company 2010

SEK thousands		Financial assets/
		liabilities at fair		Other	Total
	Accounts and	value in	Investments held	financial	carrying	Fair
	loans receivable	profit or loss	to maturity	liabilities	amount	value
Long-term receivables	1	–	–	–	1	1
Accounts receivable	42	–	–	–	42	42
Short-term investments	–	100 382	–	–	100 382	100 382
Cash and bank balances	25 032	–	–	–	25 032	25 032
Total	25 075	100 382	–	–	125 457	125 457
Accounts payable	–	–	–	27 454	27 454	27 454
Total	–	–	–	27 454	27 454	27 454

The following text summarizes the methods and assumptions primarily used to establish the fair value of the financial instruments entered in the table above.

Securities

For listed securities, the determination of fair value is based on the listed price of the asset on the balance-sheet date, excluding transaction expenses at the time of acquisition. Potential transaction expenses in connection with the divestment of an asset are also disregarded.

Derivative instruments

The fair value of interest-rate swaps is based on the valuation of the intermediary credit institution, the fairness of which is tested by discounting estimated future cash flows in accordance with the terms and maturities of the contract and based on the market interest rate for similar instruments on the balance-sheet date.

Note 17 Financial risks and financial policies ●

Through its operations, the Group is exposed to various forms of financial risk. Financial risk denotes fluctuations in the company's earnings and cash flow resulting from changes in exchange rates, interest rates, refinancing and credit risks.

The Group's financial policy for the management of financial risk has been formulated by the Board and acts as a framework of guidelines and regulations in the form of risk mandates and limits for financing activities. Responsibility for the Group's financial transactions and risks is managed centrally by the Parent Company's finance department. The overriding objective for the finance function is to provide cost-

Interest-bearing liabilities

The calculation of fair value of financial liabilities that do not constitute derivative instruments is based on future cash flows of principal and interest discounted to the prevailing market interest rate on the balance-sheet date.

Financial leasing liabilities

Fair value is based on the present value of future cash flows discounted to the market interest rate for similar leasing agreements.

Accounts receivable and accounts payable

For accounts receivable and accounts payable with a remaining economic life of less than six months, the carrying amount is deemed to reflect the fair value.

efficient financing and to minimize negative effects on the Group's earnings from market fluctuations. The Board of Active Biotech has established a policy for the investment of the Group's cash and cash equivalents, which, in view of the operational risks associated with the business, stipulates a conservative investment policy. The Group's cash and cash equivalents shall be invested in liquid assets with low credit risk, primarily in short-term Swedish securities, commercial papers and fixed-income and bond funds with high liquidity.

Interest-rate risk

Interest-rate risk relating to cash and cash equivalents

The Group's liquidity, which amounted to SEK 465,173 thousand (131,141) at December 31, was invested at a floating interest rate, which fluctuated between 1-2 percent (0-1) during the year. Liquidity risk is defined as the risk that the Group could experience problems in fulfilling its obligations associated with financial liabilities. For its short-term planning, the Group has a rolling 12-month liquidity plan that is regularly updated. For its medium-term planning, future revenue and cash flows are regularly forecast based on the anticipated development phase of the projects. In addition, a long-term liquidity forecast is presented to the Board on a regular basis. Interest-rate risk relating to borrowings

The interest-rate risk relates to the risk that Active Biotech's exposure to fluctuations in market interest rates can have a negative impact on net earnings. The fixed-interest term on the Group's financial assets and liabilities is the most significant factor that influences the interest-rate risk. Active Biotech's view is that a short fixed-interest term is, in terms of risk, consistent with the company's operative position. However, the Board can choose to extend the period of fixed interest with the aim of limiting the effect of any rise in interest rates. The company's loans have a fixed-interest period of three months.

The Group's financing sources mainly comprise shareholders' equity, bank loans for financing of property holdings and financial leasing commitments. Outstanding interestbearing liabilities are recognized in Note 13 and a term analysis for financial liabilities is presented below. Derivative instruments

Derivative instruments in the form of interest-rate swaps are used to control fixed interest without altering the underlying loan. The change in the value of interest-rate swaps is recognized in net financial items. Active Biotech has entered into a cancellable interest-swap agreement under which the company and Nordea Bank agree to pay (receive) a fixedinterest rate during a certain period in exchange for receipt (payment) of a floating interest rate in the same currency and during the same period.

Sensitivity analysis: A change in the interest rate of plus/minus 1 percentage point would impact net interest income in the amount of plus/minus SEK 8 million.

Financing risk

Financing risk relates to the risk that financing of Active Biotech's capital requirements and refinancing of loans outstanding may be made more difficult or more expensive. Since Active Biotech has loans that mature on different dates, the financing risk can be reduced.

The liabilities comprise a long-term property loan, financial leasing liabilities and a short-term derivative instrument, which comprises a cancellable interest-swap agreement. The company has no short-term loan financing in the form of overdraft facilities.

Active Biotech secures short-term access to funds by maintaining good access to liquid funds.

The term analysis below presents the agreed, undiscounted cash flows for the Group's financial liabilities divided among the stated time intervals. The term of the bank loan is until further notice, although the credit provider can terminate the agreement and demand payment with a two-month notice period. Pursuant to the requirements stipulated in IFRS 7, the liability has thus been assigned a time interval of one to three months. However, the company does not expect to be forced to repay the loan within this time frame.

Group 2011

	Nominal amount,		Within	1–3	3 months		5 years and
SEK thousands	original currency	Total	1 month	months	–1 year	1–5 years	longer
Bank loans, SEK		239 139	–	239 139	–	–	–
Financial leasing liabilities, SEK		6 798	196	588	1 568	4 446	–
Short-term liability, derivatives		9 108	–	487	2 576	6 045	–
Accounts payable, SEK		6 813	5 921	892	–	–	–
Accounts payable, DKK	11	13	13	–	–	–	–
Accounts payable, EUR	2119	18 951	18 916	35	–	–	–
Accounts payable, NOK	22	26	26	–	–	–	–
Accounts payable, USD	289	2 004	1 932	72	–	–	–
Total		282 852	27 004	241 213	4 144	10 491	–
Group 2010
Bank loans, SEK		243 381	–	243 381	–	–	–
Financial leasing liabilities, SEK		9 051	181	540	1 412	6 918	–
Short-term liability, derivatives		1 848	–	87	477	1 284	–
Accounts payable, SEK		8 352	8 202	150	–	–	–
Accounts payable, EUR	2101	18 913	17 558	1 355	–	–	–
Accounts payable, GBP	2	20	20	–	–	–	–
Accounts payable, NOK	44	51	51	–	–	–	–
Accounts payable, USD	17	118	117	1	–	–	–
Total		281 734	26 129	245 514	1 889	8 202	420 555

Currency risks

Currency risk comprises the risk that changes in exchange rates will have a negative impact on the Group's income statement, balance sheet and/or cash flow.

The Group has a currency exposure, since operations are primarily conducted in Sweden. Earnings are exposed to fluctuations in exchange rates since both revenues and costs largely comprise foreign currencies, primarily EUR and USD. In 2011, 95 percent of revenues comprised foreign currencies and the equivalent figure for the operation's costs was 61 percent. Sensitivity analysis: A change in exchange rates of plus/minus ten percent would impact the Group's earnings in the amount of plus/minus SEK 2 million.

Credit risks

The Group is exposed to the risk of not receiving payment from customers. The Group's credit risks are marginal, since operations have a low invoicing level, due to the fact that the business activities currently comprise mainly research and development. Credit losses or impairment of possible credit losses were charged against earnings in the amount of SEK 0.0 million.

Credit risks also arise when investing cash and cash equivalents. Cash and cash equivalents are principally invested in short-term Swedish securities, commercial papers and fixed-income and bond funds with high liquidity in well-established banks.

Maturity analysis, accounts receivable that

have matured, but are unimpaired		2011		2010
SEK thousands	Carrying		Carrying
	amount,		amount,
	unimpaired		unimpaire
	receivable	Collateral	receivable	Collateral
Accounts receivable, not matured	197	–	42	–
Accounts receivable, matured 0 – 30 days	569	–	–	–
Accounts receivable, matured > 30 days – 90 days	–	–	–	–
Accounts receivable, matured > 90 days – 180 days	–	–	–	–
Accounts receivable, matured > 360 days	–	–	–	–
	766	–	42	–

Note 18 Pledged assets, contingent liabilities and contingent assets ●

Pledged assets		Group	Parent Company
SEK thousands	2011	2010	2011	2010
In the form of assets pledged for own liabilities and provisions
Property mortgage	260 000	260 000	–	–
Assets with ownership reservation	7 688	10 092	7 688	1 699
Total	267 688	270 092	7 688	1 699
Other collateral provided and pledged assets
Pension insurances	9 287	7 791	9 287	7 791
Total pledged assets	276 975	277 883	16 975	9 490
Contingent liabilities		Group		Parent Company
SEK thousands	2011	2010	2011	2010
Guarantees for the benefit of Group companies	–	–	236 825	241 068
Total contingent liabilities	–	–	236 825	241 068

Note 19 Group companies ●

Holdings in subsidiaries
(SEK thousands) )	Corp. Reg. No.	Registered	No. of shares/	Nominal value	Carrying amount	Carrying amount
		office	percentage		Dec 31, 2011	Dec 31, 2010
Active Forskaren 1 KB	969646-4677	Lund			40 000	40 000
Actinova AB	556532-8860	Lund	1 000 / 100%	100	100	100
Active Security Trading AB	556092-7096	Lund	400 / 100%	400	450	450
Total					40 550	40 550

Change in carrying amount of shares in subsidiaries

SEK thousands	2011	2010
Cost, January 1	40 550	202 450
Merger Active Biotech Research AB	–	-161 900
Accumulated cost, December 31	40 550	40 550
Carrying amount, December 31	40 550	40 550

Note 20 Supplementary data to the cash-flow statement ●

		Group		Parent Company
SEK thousands	2011	2010	2011	2010
Interest paid and dividends received
Interest received	10 457	1 312	10 241	1 286
Interest paid	-9 238	-5 727	-2	-7
Total	1 219	-4 415	10 239	1 279
Adjustments for non-cash items
Depreciation and impairment of assets	11 966	9 772	16 428	347
Earnings, merged company prior to merger	–	–	–	196 070
Total	11 966	9 772	16 428	196 417
Transactions not involving payment
Acquisition of assets through financial leasing	1 404	1 459
Cash and cash equivalents
Cash and cash equivalents consist of the following components:
Cash and bank balances	151 515	30 759	142 910	25 032
Short-term investments	313 658	100 392	313 658	100 382
Total	465 173	131 141	456 568	125 414

Note 21 Important estimates and assessments ●

Carrying amounts are based partly on assessments and estimates. The area in which estimates and assessments could imply adjustments to carrying amounts in forthcoming fiscal years is primarily the valuation of the Forskaren 1 property where the company's operations are conducted. On assignment from the company, PwC Sweden performed a valuation of the property at the end of 2011 (see Note 9). The estimated market value is based on assumptions on future revenues, expenses, vacancy levels and the value trend of similar properties. At December 31, 2011, the property's market value was estimated at SEK 375 million.

Note 22 Events after the balance-sheet date ●

Events after the end of the fiscal year

TASQ

In January 2012, a Phase I investigator-sponsored clinical trial was initiated under the leadership of Principal Investigator Dr. Andrew Armstrong at Duke University Hospital. The primary objective for the CATCH trial (Cabazitaxel (Jevtana) And Tasquinimod in Men with Castration-Resistant Heavily pre-treated Prostate Cancer) is to determine the recommended dose of TASQ in combination with cabazitaxel based on safety and tolerability in men with chemorefractory metastatic castration-resistant prostate cancer (CRPC). Secondary objectives include efficacy as measured by progression-free survival (PFS), and overall survival (OS). The study will include about 30 patients. For further information about the study, please see www.clinicaltrials.gov.

Organization

As research projects progress to later development phases, project activities will increasingly be handled by strategic partners. A comprehensive overview of the organization has been performed to determine the optimal manner to satisfy the future needs of the projects. Following the out-licensing of the ANYARA, 57-57 and TASQ projects, operations will focus on pursuing the Phase III TASQ study and the development of the ISI platform. As a result, the company has provided notice of termination of employment to 25 staff members.

NASDAQ OMX Disciplinary Committee

On February 13, The Disciplinary Committee of NASDAQ OMX Stockholm announced that a warning had been issued to Active Biotech originating in two information events regarding the company's MS project laquinimod. For more detailed information, see www.nasdaqomx.com.

Laquinimod

On March 15, 2012, Active Biotech and Teva announced that the companies intend to file a marketing authorization application (MAA) for laquinimod in the EU in the second half of 2012.

Note 23 Related-party transactions ●

Close relationships

With regard to the Group's and Parent Company's subsidiaries, see Note 19. The composition of the Board and information relating to senior executives is presented on pages 44 and 45.

Related-party transactions

During the year, no transactions with shareholders or members of the Board took place apart from the new share issue completed during the year and the remuneration concerning Board fees presented in Note 5.

For information concerning transactions with key individuals in managerial positions, see Note 5.

In 2011, the Parent Company's sales of services to Group companies totaled SEK 17,470 thousand (19,657). The Parent Company's purchases of services from subsidiaries amounted to SEK 25,621 thousand (25,119) in 2011. The Parent Company's receivables and liabilities relative to the subsidiaries as per December 31 are presented in the Parent Company's balance sheet.

Note 24 Information relating to the Parent Company ●

Active Biotech AB is a Swedish-registered limited liability company with its registered office in Lund, Sweden. The Parent Company's shares are listed on NASDAQ OMX Nordic Exchange Stockholm. The address to the head office is Scheelevägen 22, Lund, Sweden. The consolidated financial statements for the 2011 fiscal year comprise the Parent Company and its subsidiaries, referred to jointly as the Group.

³⁵ Auditors' report

To the annual meeting of the shareholders of Active Biotech AB, Corporate Registration Number 556223-9227

Report on the annual accounts and consolidated financial statements

We have audited the annual accounts and the consolidated financial statements of Active Biotech AB (publ) for the year 2011. The company's annual accounts and consolidated financial statements are included in the printed version of this document on pages 6–34

Responsibilities of the Board of Directors and the President & CEO for the annual accounts and consolidated financial statements The Board of Directors and the President & CEO are responsible for the preparation and fair presentation of these annual accounts and consolidated financial statements in accordance with International Financial Reporting Standards, as adopted by the EU, and the Annual Accounts Act, and for the internal control deemed necessary by the Board of Directors and the President & CEO for the preparation of annual accounts and consolidated financial statements that are free from material misstatement, whether such misstatement is due to fraud or error.

Auditors' responsibility

Our responsibility is to express an opinion on the annual accounts and consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing and generally accepted auditing standards in Sweden. These standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance that the annual accounts and consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the annual accounts and consolidated financial statements. The auditor chooses such procedures based on such assessments as the risk of material misstatement in the annual accounts and consolidated financial statements, whether such misstatement is due to fraud or error. In making these risk assessments, the auditor considers internal control measures relevant to the company's preparation and fair presentation of the annual accounts and consolidated financial statements in order to design audit procedures that are appropriate taking the circumstances into account, but not for the purpose of expressing an opinion on the effectiveness of the company's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Board of Directors and the President & CEO, as well as evaluating the overall presentation of the annual accounts and consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinions

In our opinion, the annual accounts have been prepared in accordance with the Annual Accounts Act and present fairly, in all material respects, the financial position of the Parent Company as of December 31, 2011 and its financial performance and cash flows for the year in accordance with the Annual Accounts Act, and the consolidated financial

statements have been prepared in accordance with the Annual Accounts Act and present fairly, in all material respects, the financial position of the group as of December 31, 2011 and its financial performance and cash flows in accordance with International Financial Reporting Standards, as adopted by the EU, and the Annual Accounts Act. The statutory Directors' Report and corporate governance report are consistent with the other parts of the annual accounts and consolidated financial statements.

We therefore recommend that the annual meeting of shareholders adopt the income statement and balance sheet for the Parent Company and the Group.

Report on other legal and regulatory requirements

In addition to our audit of the annual accounts and consolidated financial statements, we have examined the proposed appropriations of the company's profit or loss and the administration of the Board of Directors and the President & CEO of Active Biotech AB for the year 2011.

Responsibilities of the Board of Directors and the President & CEO The Board of Directors is responsible for the proposal concerning the appropriation of the company's profit or loss, and the Board of Directors and the President & CEO are responsible for administration under the Companies Act.

Auditors' responsibility

Our responsibility is to express an opinion with reasonable assurance on the proposed appropriations of the company's profit or loss and on the administration based on our audit. We conducted the audit in accordance with generally accepted auditing standards in Sweden.

As a basis for our opinion on the Board of Directors' proposed appropriations of the company's profit or loss, we examined whether the proposal complies with the Companies Act.

As a basis for our opinion concerning discharge from liability, in addition to our audit of the annual accounts and consolidated financial statements, we examined significant decisions, actions taken and circumstances of the company in order to determine whether any member of the Board of Directors or the President & CEO is liable to the company. We also examined whether any member of the Board of Directors or the President & CEO has, in any other way, acted in contravention of the Companies Act, the Annual Accounts Act or the Articles of Association.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Opinions

We recommend to the annual meeting of shareholders that the loss be dealt with in accordance with the proposal in the statutory Directors' Report and that the members of the Board of Directors and the President & CEO be discharged from liability for the fiscal year.

Malmö, April 2, 2012 KPMG AB

David Olow Authorized Public Accountant

Summary of financial development

SEK millions	2011	2010	2009	2008	2007
Income statement
Net sales	234.6	11.4	10.8	53.5	12.1
Operating expenses	-335.5	-240.3	-230.4	-238.1	-214.8
(of which, depreciation)	-12.0	-9.8	-9.6	-11.5	-18.9
Operating loss	-100.9	-228.9	-219.6	-184.6	-202.7
Net financial items	-2.6	-4.7	-4.4	4.0	-5.0
Loss before tax	-103.5	-233.6	-224.0	-180.6	-207.7
Tax	9.0	12.5	–	-1.0	–
Loss for the year	-94.5	-221.1	-224.0	-181.6	-207.7
Balance sheet
Tangible fixed assets	382.7	358.5	319.0	324.6	329.7
Financial fixed assets	0.0	0.0	0.0	0.0	2.5
Other current assets	10.6	13.5	23.5	9.6	18.7
Cash and cash equivalents	465.2	131.1	156.0	138.7	138.6
Total assets	858.5	503.1	498.5	472.9	489.5
Shareholders' equity	502.0	181.8	188.6	163.6	189.6
Interest-bearing provisions and liabilities	242.8	249.5	255.5	258.4	256.1
Non interest-bearing provisions and liabilities	113.7	71.8	54.4	50.9	43.8
Total shareholders' equity and liabilities	858.5	503.1	498.5	472.9	489.5
Condensed cash-flow statement
Cash flow from operating activities before changes in working capital	-91.6	-223.9	-214.4	-175.3	-184.2
Changes in working capital	44.6	27.6	-10.3	15.8	-2.5
Cash flow from investing activities	-0.5	-0.1	-0.1	7.0	0.2
Cash flow from financing activities	381.5	171.5	242.1	152.6	227.2
Cash flow for the year	334.0	-24.9	17.3	0.1	40.7
Key figures
Capital employed (SEK million)	744.8	431.3	441.1	422.0	445.7
Net indebtedness (SEK million)	-222.4	118.4	99.5	119.7	117.5
Surplus value in short-term investments (SEK million)	–	–	–	–	–
Return on shareholders' equity (%)	-28	-119	-127	-103	-166
Return on capital employed (%)	-15	-52	-49	-39	-45
Equity/assets ratio (%)	58	36	38	35	39
Proportion of risk-bearing capital (%)	58	36	38	35	39
Net debt/equity ratio (multiple)	neg	0,65	0,53	0,73	0,62
Interest-coverage ratio (multiple) Research and development expenses (SEK million)	neg -318.6	neg -217.3	neg -212.0	neg -207.4	neg -189.7
Average number of employees	80	87	90	90	89
Salary expenses, incl. social-security costs (SEK million)	-70.0	-89.6	-84.3	-88.9	-84.4
Data per share
Loss after tax (SEK)	-1.38	-3.38	-3.81	-3.66	-4.47
Shareholders' equity (SEK)	7.28	2.75	2.95	3.19	4.01
Net worth (SEK)	7.28	2.75	2.95	3.19	4.01
Unrestricted liquidity (SEK)	6.75	1.99	2.44	2.71	2.93
Market price of share at year-end (SEK)	22.10	169.00	100.75	31.00	58.40
Dividends (SEK)	0	0	0	0	0
Share price/shareholders' equity (%)	304	6 145	3 415	972	1 456
Share price/net worth (%)	304	6 145	3 415	972	1 456
Number of shares at end of period (thousands)	68 924	66 000	64 052	51 242	47 300
Weighted average number of ordinary shares before dilution (thousands)	68 597	65 465	58 753	49 605	46 427
Maximum number of shares upon exercise of outstanding warrants (thousands)	68 597	66 428	65 010	52 572	48 630

The Share

General information about the Active Biotech share

Shares in Active Biotech AB are listed on Nasdaq OMX Nordic Exchange Stockholm (Mid Cap). The share was originally listed on December 1, 1986, on what was then known as the O-list of the Stockholm Stock Exchange. The company was converted into a dedicated biotechnology company in 1997. The latest price information is available on NASDAQ OMX's website under the symbol ACTI. The Active Biotech share is included in NASDAQ OMX Nordic Exchange Stockholm's Pharmaceuticals, Biotech & Life Science index. The diagram in this section shows the price trend for the Active Biotech share for the period January 2007 – January 2012.

Share capital

The company's share capital is quoted in SEK and distributed among the shares issued by the company with a quotient value that is also expressed in SEK. At December 31, 2011, the share capital in Active Biotech amounted to approximately SEK 259,796,598 distributed among 68,923,582 shares. Accordingly, the share's quotient value is SEK 3.77.

³⁸ Share price development

On December 31, 2010, the share price was SEK 169.00, while at the same date in 2011, it was SEK 22.10. The highest price paid for the share during the year was SEK 172 (January 4, 2011).

Change in share capital

The table on the next page shows the changes in Active Biotech's share capital from 2000 to December 31, 2011.

Dividend policy

In view of Active Biotech's financial position and negative earnings, the Board of Directors does not intend to propose that any dividends be paid for the next few years. The company's financial assets will be principally used to finance existing and new research programs.

Swedish analysts covering Active Biotech

• ABG Sundal Collier ●
• Carnegie ●
• Danske Bank ●
• Nordea ●
• Redeye ●
• SEB Enskilda ●
• Pareto Securities ●

Shareholders

On February 29, 2012, the number of shareholders in Active Biotech amounted to 10,804.

Shareholders

The following reflects circumstances as known to the company at February 29, 2012.

Owner	No. of shares	Holding, %
MGA Holding AB	19 392 963	28.1
Nordstjernan AB	9 850 829	14.3
SIX SIS AG	2 563 952	3.7
JP Morgan Bank	1 912 248	2.8
Försäkringsaktiebolaget Avanza Pension 1 846 431		2.7
EFG Bank S.A	1 479 445	2.1
East Bay AB	1 100 000	1.6
JPM Chase	977 464	1.4
Robur försäkring	957 001	1.4
Futuris	769 091	1.1
Total, ten largest owners	40 849 424	59.3
Total	68 923 582	100

Shareholder statistics, February 29, 2012

Shareholding interval	No. of shareholders	% of all shareholders	No. of shares	% of share capital	Average per shareholder
1 – 1 000	8 574	79.4	2 360 144	3.4	275
1 001 – 10 000	1 897	17.6	5 664 615	8.2	2 986
10 001 – 100 000	280	2.6	7 818 859	11.3	27 924
100 001 –	53	0.5	53 079 964	77.0	1 001 509
Total	10 804	100.0	68 923 582	100.0	6 379

	Changes in share capital
								39

Year Transaction	Change in	Change in share		Total no. of shares	Total share	Quotient
	number of shares	capital, SEK	Class A shares	Class B shares	capital, SEK	value, SEK
Opening balance			1 963 745	9 282 547	281 157 300	25.00
2000 Reclassification A as B	0	0	1 287 531	9 958 761	281 157 300	25.00
2001 Reclassification A as B	0	0	1 169 691	10 076 601	281 157 300	25.00
2002 Reclassification A as B	0	0	1 145 024	10 101 268	281 157 300	25.00
2003 Reduction of share capital (June)	0	-168 694 380	1 145 024	10 101 268	112 462 920	10.00
2003 Rights issue (June)	22 492 584	224 925 840	1 145 024	32 593 852	337 388 760	10.00
2003 Reclassification A as B	0	0	1 128 174	32 610 702	337 388 760	10.00
2003 Reorganization as a single share class (Dec.)	0	0		33 738 876	337 388 760	10.00
2005 Conversion (Jan.-May)	1 681	16 810		33 740 557	337 405 570	10.00
2005 Rights issue (June/July)	5 623 426	56 234 260		39 363 983	393 639 830	10.00
2005 Conversion (Aug./Sept.)	228 241	2 282 410		39 592 224	395 922 240	10.00
2006 Conversion (Jan./May)	160 644	1 606 440		39 752 868	397 528 680	10.00
2006 Reduction of share capital (May)	0	-247 686 499		39 752 868	149 842 181	3.77
2006 Conversion (June-Dec.)	42 553	160 397		39 795 421	150 002 578	3.77
2007 Conversion (Jan.)	204 579	771 128		40 000 000	150 773 706	3.77
2007 Rights issue (Feb.)	4 000 000	15 077 371		44 000 000	165 851 077	3.77
2007 Conversion (Mar.)	3 300 115	12 439 264		47 300 115	178 290 341	3.77
2008 Rights issue (June)	3 941 676	14 857 527		51 241 791	193 147 869	3.77
2009 Rights issue (June)	12 810 447	48 286 964		64 052 238	241 434 833	3.77
2010 Private placement (Apr.)	1 418 000	5 344 928		65 470 238	246 779 761	3.77
2010 Employee stock options	529 682	1 996 553		65 999 920	248 776 314	3.77
2011 Private placement (Jan.)	2 500 000	9 423 357		68 499 920	258 199 670	3.77
2011 Employee stock options	423 662	1 596 927		68 923 582	259 796 598	3.77

Financial definitions

Capital employed: Total assets less non-interest bearing provisions and liabilities.

Earnings per share after tax: Recognized consolidated earnings, divided by the average number of shares.

Equity/assets ratio: Shareholders' equity plus minority interests, as a percentage of total assets.

Interest-coverage ratio: Operating profit/loss after financial items plus financial expenses, divided by financial expenses.

Net debt/equity ratio: Net interest-bearing liabilities divided by shareholders' equity, including minority interests.

Net indebtedness: Net interest-bearing liabilities, that is, interestbearing liabilities and provisions less cash and cash equivalents, short-term investments and other interest-bearing long-term holdings of securities.

Net worth per share: Shareholders' equity and surplus values in shortterm investments, divided by the number of shares at year-end.

Proportion of risk-bearing capital: Shareholders' equity plus minority interests and deferred tax liabilities as a percentage of the total assets.

Return on capital employed: Operating profit/loss after net financial items plus financial expenses, as a percentage of average capital employed.

Return on shareholders' equity: Profit/loss for the year as a percentage of average shareholders' equity.

Shareholders' equity per share: Recognized consolidated shareholders' equity, divided by the number of shares at year-end.

Surplus value in short-term investments: The difference between the market value of short-term investments and the carrying amount. Due to the Group's tax situation, no deduction was made for deferred tax.

Unrestricted liquidity per share: Cash and cash equivalents and shortterm investments, divided by the number of shares at year-end.

⁴⁰ Intellectual property rights

A key aspect of Active Biotech's strategy is to protect its knowledge through strong patents. The patent protection covers inventions of chemical compounds, biotechnological structures, target organs, methods and processes related to the company's operation in key markets.

Active Biotech has built up its position in the area of patents through strategically defined patent families, primarily in the areas of autoimmunity/inflammation and cancer. Patents and patent applications refer primarily to such commercially important markets as Europe, the US and Japan.

Number of patent families
Active Biotech holder of patent or patent application				Laquinimod, TASQ, 57-57, ANYARA, CD80/RhuDex® and ISI			19
Total							19
Of which, out-licensed Other			Laquinimod, CD80, TASQ1				9 0
Total							9
Active Biotech licensee Other			ANYARA				2 0
Total							2
Patent protection for laquinimod						Patent protection for TASQ (out-licensed to Ipsen1	)
(out-licensed to Teva) Patent family	Priority	Status	Year of	Patent family Type of protection area	Priority	Status	Year of expiry
Type of protection area "product"	Europe US	Granted Granted	expiry 2019 2019	"product"	Europe US Japan	Granted Granted Granted	2019 2019 2019
"method"	Japan Europe US	Granted Granted Granted	2019 2023 2023	"application"	Europe US Japan	Granted Granted Granted	2020 2020 2020
"product and method"	Japan Europe US	Granted Granted Granted	2023 2025 2027	"method"	Europe US Japan	Granted Granted Granted	2023 2023 2023
"product and	Japan Europe	Granted In progress	2025 2030	"product and method"	Europe US	In progress In progress	2030 2030
method" Patent protection for 57-57	US	In progress	2030	Patent protection for ANYARA
Patent family Type of protection area	Priority	Status	Year of expiry	Patent family Type of protection	Priority area	Status	Year of expiry
"product"	Europe	Granted	2019	"product"	US	Granted	2016
	US Japan	Granted Granted	2019 2019	"product"	Europe US	Granted Granted	2015 2024
"method"	Europe US Japan	Granted Granted Granted	2023 2023 2023	"product"	Japan Europe US	Granted Granted Granted	2015 2017 2016
"product and method"	Europe US Japan	Granted Granted Granted	2025 2027 2025	"product and method"	Japan Europe US	Granted Granted Granted	2018 2018 2017
"product and method"	Europe US	In progress In progress	2030 2030	"product"	Europe US Japan	In progress Granted Granted	2022 2022 2022
				"method"	Europe US	In progress Granted	2025 2024

1) Regionally out-licensed. For further information, see page 7.

⁴¹ Corporate Governance Report 2011

Active Biotech is a Swedish public limited liability company whose shares are traded on the NASDAQ OMX Stockholm, Mid Cap. In accordance with its Articles of Association, Active Biotech shall engage in research, development, production, marketing and sales of medical, chemical and biotechnology products, conduct administrative services for the Group, own and manage properties, and undertake any other operations compatible therewith. This Corporate Governance Report describes Active Biotech's corporate governance, which includes the management and administration of the company's business and internal control of the financial reporting. Corporate Governance in Active Biotech is based on applicable rules (primarily the Swedish Companies Act and accounting rules and regulations), Articles of Association, NASDAQ OMX Stockholm's rules for issuers, internal guidelines and policies and the Swedish Corporate Governance Code.

Application of and deviations from the Code

Active Biotech applies the Swedish Corporate Governance Code (the Code). Information about the Code can be found at www.corporategovernanceboard.se. During the year, the company deviated from item 2.4, first paragraph, second sentence of the Code. The Election Committee appointed the Chairman of the Board to be the Chairman of the Election Committee. The motivation given by the Election Committee for this deviation is that it has deemed that it is natural that the person who is indirectly the largest owner of Active Biotech should also lead the work of the Election Committee.

Shareholders

At December 31, 2011, the number of shareholders in Active Biotech amounted to 10,893. For information concerning the shareholders and the ownership structure, see page 38 of this Annual Report.

Annual General Meeting

The Annual General Meeting (AGM) is Active Biotech's highest decision-making body. Shareholders who wish to participate in the Meeting must be recorded in the register of shareholders on the record date for the Meeting and notify the company of their intention to participate in the Meeting not later than 4:00 p.m. on the date stipulated in the notification. At the AGM, each share carries one vote. Each shareholder entitled to vote at the Meeting may vote for the full number of shares held. Each share offers equal entitlement to dividends and any surplus on liquidation of the company. At the AGM, which is held not more than six months after the close of the fiscal year, the annual accounts for the preceding year are adopted, the Board of Directors is elected, auditors are appointed when necessary and other statutory matters are addressed. Between AGMs, the Board of Directors is the company's highest decision-making body.

Election Committee

At the AGM on May 5, 2011, it was resolved that the company's Chairman, based on ownership at the end of September 2011, convene an Election Committee to prepare proposals for the 2012 AGM. According to the resolution, the Election Committee comprises representatives of each of the three largest shareholders in the company based on the ownership structure at September 30, 2011 as well as the Chairman of the Board. The members of the Election Committee receive no remuneration for their work. The Election Committee performs the tasks incumbent on the Election Committee under the Code, including:

• Evaluation of the Board's composition and work. ●
• Drafting of proposals to the AGM regarding election of Board members, Chairman of the Board and the Chairman of the Meeting. ●
• Drafting of proposals to the AGM concerning fees to Board members. ●

The composition of the Election Committee was announced on November 10, 2011. A meeting of the Election Committee was convened on one occasion ahead of the 2012 AGM, which was attended by all its members.

Represents	Board member or not
Chairman of the Board	Chairman
MGA Holding AB	Not a member
Nordstjernan AB	Not a member
East Bay AB	Not a member

Board of Directors

In accordance with Active Biotech's Articles of Association, the Board comprises between three and nine members with at most nine deputies. Each year, two employee representatives and two deputies are appointed prior to the AGM through decisions made by the trade-union organizations at the company. The 2011 AGM elected the current Board, which consists of seven ordinary members with no deputies. Mats Arnhög was elected Chairman of the Board. The AGM resolved that remuneration of the Board's ordinary members be paid in the amount of SEK 125,000 per member and year, and remuneration of the Chairman of the Board be paid in the amount of SEK 250,000 per year. For a more detailed presentation of the Board members, see page 44-45 of this Annual Report. Of the current Board members elected by the 2011 AGM, all are independent in relation to the company's major shareholders, the company and executive management, with the exception of the Chairman of the Board Mats Arnhög and Board member Peter Hofvenstam. Mats Arnhög is not independent of the shareholder MGA Holding AB, in which he is Chairman of the Board and owner. Furthermore, he is not independent of the shareholder Nordstjernan AB, in which he is a Board member. Peter Hofvenstam is also not independent of Nordstjernan AB, in which he is Executive Vice President.

Board	Attendance at Annual Board	remuneration,	Independent/dependent
member	meeting	SEK	Company	Owners
Mats Arnhög	9 out of 9	250 000	dependent	dependent
Peter Hofvenstam1)	4 out of 4	125 000	independent	dependent
Klas Kärre	7 out of 9	125 000	independent	independent
Tomas Nicolin2)	5 out of 5	125 000	independent	dependent
Mef Nilbert1)	3 out of 4	125 000	independent	independent
Magnhild Sandberg	9 out of 9	125 000	independent	independent
Peter Sjöstrand	9 out of 9	125 000	independent	independent
Peter Ström2)	5 out of 5	125 000	independent	independent
Peter Thelin1)	4 out of 4	125 000	independent	independent

1) Elected to the Board of Directors at the AGM on May 5, 2011

2) Stepped down from the Board of Directors at the AGM on May 5, 2011

The work of the Board and formal work plan

The Board works in accordance with an established formal work plan describing the minimum number of Board meetings to be held each year, routines for the preparation of the agenda and minutes of the meetings as well as the distribution of material. One section of the formal work plan regulates the division of duties in the Board and describes the responsibilities of the Board, the Chairman and the President & CEO. The Board principally devotes itself to general and long-term issues as well as to issues of an exceptional nature or of otherwise substantial importance. The Chairman directs the work of the Board and represents the Board both externally and internally. The formal work plan also identifies the Board members who, in accordance with specific decisions, have been appointed as the management's contacts in the event of a crisis. At each scheduled Board meeting, the President & CEO and senior management report on operations. The report comprises information on project development, plans and progress in research activities, financial reporting with forecasts as well as business development. The Board decides on issues in which the Swedish Companies Act and the Articles of Association require the Board's decision as well as on such issues as policy matters, strategy, business decisions (such as research plans), budget, business plans and key agreements. In 2011, nine meetings were held at which minutes were taken. Important issues addressed by the Board included development of research projects, business development projects, partner strategy, financial statements and budget and financing matters. Minutes were recorded by the Board's secretary, a role that was filled by the company's CFO Hans Kolam during the year. The Chairman of the Board ensures that an annual assessment of the Board's work is conducted that provides the Board members with the opportunity to present their views on work procedures, Board material, their own efforts and the efforts of other Board members and the scope of the task. The assessment is that the Board's collective expertise is favorably compatible with the company's strategic visions and goals. The Board functions well and all members make a constructive contribution to the strategic discussions and the governance of the company. The dialog conducted between the Board and management was also deemed to be productive.

Remuneration and Audit Committee

The company does not have separate committees for remuneration and audit matters. Instead, these matters are dealt with by the Board in its entirety. Salaries, remuneration, terms and conditions of employment and so forth, for the Board, President & CEO and company management are detailed in Note 5.

Organization and internal control

In accordance with the Companies Act and the Code, the Board of Directors is responsible for the company's internal control. Active Biotech's work on internal control is designed to provide a reasonable assurance that the company's goals are achieved in terms of an appropriate and efficient operation, reliable financial reporting and compliance with applicable legislation and regulations. Active Biotech's business is primarily operated at one site and is therefore deemed to be of limited complexity. In turn, this means that the organization is uncomplicated and it is easy to gain an overview of its structure. The internal control as regards financial reporting is based on how the operation is managed and how the organization is built up. Authorizations and responsibilities are documented, such as the division of work between the Board and the President, and instructions governing signing authority and accounting and reporting instructions. The above also helps to minimize the risk for irregularities and inappropriate benefiting of another party at the expense of the company. The risks identified by Active Biotech regarding the financial reporting are presented on a monthly/quarterly basis by the finance function to the President & CEO, who in turn reports to the Board. Active Biotech has no internal audit function. The Board has determined that no special circumstances or other conditions exist that motivate the introduction of such a function.

Financial reporting

In accordance with NASDAQ OMX Stockholm's Rule Book for Issuers and Active Biotech's Investor Relations Policy, as adopted by the Board, the company regularly presents information on its financial position. The information presented comprises quarterly interim reports, year-end reports and annual reports, as well as press releases in conjunction with important events. The company management meets analysts, investors and the media on a regular basis throughout the year. All information distributed via press releases is also available on the company's website, in addition to other information that is deemed to be valuable. The Board of Active Biotech ensures the quality of financial reporting by ensuring that the company has an appropriate organization combined with procedures and instructions for its work on financial reporting. Each month, the Board is presented with a report regarding such aspects as the company's earnings and financial position, including comments relating to its development. The Board reviews interim reports and annual reports prior to publication.

Auditors

The company has at least one and at most two auditors and at most two deputy auditors. At the AGM on May 7, 2009, KPMG AB was elected as the company's auditor for the period extending until the end of the AGM held in 2013. Authorized auditor David Olow is auditor-incharge. Information concerning auditors' fees is presented in Note 4 on page 20. The interim report for the third quarter of 2011 was the subject of review by the auditors.

Policies

Information policy

With the aim of determining principles for the company's communication, the Board has established an information policy. This summarizes overriding goals and responsibilities for the external publication of Active Biotech's information. The goal when providing information to the stock market is to achieve a correct valuation of the company's share that reflects the company's underlying values, growth and earnings capacity in as stable a manner as possible. An unconditional requirement is that the information to the stock market complies with NASDAQ OMX Stockholm's Rule Book for Issuers and applicable legislation and ordinances. The company's Board, management and personnel with operational responsibility must possess the requisite level of competence, and the company must have an organization in place that ensures the rapid and correct dissemination of stock market information.

Environmental policy

Within Active Biotech, environmental and safety work is important and the company has therefore established an environmental policy. Responsibility is decentralized in the various departments in the Group so that each manager and employee is responsible for meeting goals relating to both the internal and external environment, as well as safety. This applies to all areas from proprietary research to contract manufacturing of candidate drugs and production. In addition, Active Biotech places great importance to ensuring that external partners have their own environmental and safety requirements that conform to the company's values.

Responsible treatment of laboratory animals

Despite a rapid advance in non-animal based models for medical research, no alternative can yet entirely replace the complex system represented by a living organism. Accordingly, the responsible treatment of laboratory animals in scientific research is ethically justified. Active Biotech endeavors to replace, reduce and refine the use of laboratory animals to the greatest possible degree. When no alternative exists, testing is to be properly planned and take ethical requirements into consideration in the implementation phase. Pain, suffering and stress are to be minimized – and preferably eliminated. All who work with laboratory animals are trained and skilled in the area. Animals are treated with care and the greatest possible degree of consideration is given to their health and well-being in a careful balance between ethical and scientific requirements. Furthermore, animal keeping and management is conducted in a manner that maximizes well-being and prevents the spread of infection. All work involving animals complies with the applicable strict local procedures and national and international legislation. Legislation and other ethical considerations with respect to the care and well-being of laboratory animals are carefully monitored and continuously reviewed to harmonize laboratory animal operations in the company.

Auditor's statement on the Corporate Governance Report

To the Annual General Meeting of Active Biotech AB (Publ)

Corp. Reg. No. 556223-9227

The Board of Directors is responsible for the 2011 Corporate Governance Report on pages 41-43 and for ensuring that it has been prepared in accordance with the Annual Accounts Act.

As a basis for our opinion that the Corporate Governance Report has been prepared and is consistent with the other parts of the annual accounts and the consolidated accounts, we have read the Corporate Governance Report and assessed its statutory content based on our knowledge of the company.

In our opinion, a Corporate Governance Report has been prepared and its statutory content is consistent with the other parts of the annual accounts and the consolidated accounts.

Malmö, April 2, 2012 KPMG AB

David Olow Authorized Public Accountant

Board of Directors and Auditors

Mats Arnhög, Chairman of the Board

Born 1951, Board member since 2000, Chairman of the Board since 2003. Hon. PhD. in Economics, M.Sc. Stockholm School of Economics.

Other Board assignments: Chairman of MGA Holding AB with subsidiaries. Chairman of Rederi AB Sea-Link and Föreningen Carlssons Skola. Board member of Nordstjernan AB and Brofågel Support AB. Member of the Advisory Board of the Stockholm School of Economics and the Swedish Press Council.

Holding: 19,392,963 shares through MGA Holding AB.

Klas Kärre

Born 1954, Board member since 2003. Professor of Molecular Immunology at the Karolinska Institute in Stockholm, Medical Degree, Karolinska Institute in Stockholm.

Other Board assignments:

Board member of the Foundation Wenner-Grenska Samfundet, The Axel Wenner-Gren Foundation for International Exchange of Scientists, the Georg and Eva Klein Foundation, Nobelmuseum AB (since 2012) and a member of the Nobel Assembly at Karolinska Institute.

Holding: 22,801 shares.

Peter Thelin

Born 1956, Board member since 2011. Graduate of Stockholm School of Economics.

Other Board assignments: Board member of Brummer & Partners AB, Brummer Life Försäkringsaktiebolag East Bay AB, ELC Fastigheter AB, Henvålens Fjällgård AB and Sjunda gård AB.

Holding: 1,100,000 shares via East Bay AB .

Peter Hofvenstam

Born 1965, Board member since 2011. M.Sc. from Stockholm School of Economics. Executive Vice President of Nordstjernan AB.

Other Board assignments: Chairman of Ramirent Oyj and Exel Composites Oyj (both listed on the Finnish stock exchange).

Board member of Nordstjernan Investment AB, Rostistella AB and Rosti A/S.

Holding: None.

Magnhild Sandberg-Wollheim

Born 1937, Board member since 2007. Associate Professor of Neurology and Consultant at the neurological clinic at Lund University Hospital.

Other Board assignments:

Board member of Magnhild S. Wollheim AB, the European MS Foundation and the foundation Insamlingsstiftelsen för MS-forskning.

Holding: None.

Other Board assignments: Chairman of Byggnads AB S:t Erik and the Oscar Hirsch's Memory Foundation. Board member of Karolinska Development AB, Peter Sjöstrand AB, Ringens Varv AB, Calmark Sweden AB and the School of Technology and Health (Royal Institute

Born 1946, Board member since 2000. B.Sc. Stockholm School of Economics, Medical Degree, Karolinska Institute in

of Technology). Holding:

20,000 shares.

Peter Sjöstrand

Stockholm.

Mef Nilbert

Born 1967, Board member since 2011. Head of Oncology Clinic at Skåne University Hospital. Professor of Oncology at Lund University. Cancer research professorship at the University of Copenhagen.

Other Board assignments: None.

Holding: None.

and A

uditors

Management group

Anette Sundstedt

Born 1967, employee representative since 2008, employed in Active Biotech since 2001. Biologist, Doctor of Medical Science, Lund University. Has completed the Council for Negotiation and Co-operation's (PTK) training program for Board members.

Other Board assignments: None.

Holding: 1,627 shares.

President and CEO Born 1956. Tomas Leanderson has been employed at Active Biotech since 1999. He has held a number of academic research positions both in Sweden and internationally. Tomas Leanderson has held the position of Professor of Immunology at Lund University since 1990.

Holding: 86,025 shares. 45

45

M

Göran Forsberg

Vice President Investor Relations and Business Development Born 1963. Göran Forsberg has been employed at Active Biotech since 1998. He has worked in the pharmaceuticals industry for 20 years and held various positions at KabiGen, Pharmacia and the University of Adelaide in Australia.

Holding: 12,322 shares.

Karin Hallbeck

Born 1956, employee representative since 2008, employed in Active Biotech since 1998.

Laboratory engineer. Has completed the Council for Negotiation and Co-operation's (PTK) training program for Board members.

Other Board assignments: None.

Holding: 6,989 shares.

Holding: 33,411 shares.

Hans Kolam

Auditors KPMG AB with David Olow as auditor-in-charge. Born 1963 Company auditor at Active Biotech AB since 2009. Authorized Public Accountant KPMG.

Helén Tuvesson

Chief Scientific Officer Born 1962. Helén Tuvesson has been employed at Active Biotech since 1998. She has worked in the pharmaceutical industry for almost 20 years and held various positions at Pharmacia.

Holding: 6,135 shares.

Glossary

Angiogenesis: The formation of new blood vessels.

Autoimmunity: When the body's immune system reacts against structures in the body itself. Autoimmune diseases arise when the immune system combats the body itself, despite it being otherwise healthy.

Candidate Drug (CD): A specific substance selected during the preclinical phase. The candidate drug is the compound that will continue on to clinical testing in humans.

Clinical studies: Studies of the effects of a drug on human beings.

EDSS: Expanded Disability Status Scale, a rating scale for neurological disability progression.

EMA: European Medicines Agency.

FDA: Food and Drug Administration, the US pharmaceuticals authority.

IND: Investigational New Drug. The application, submitted to the pharmaceutical authority, for permission to commence pharmaceutical studies in humans.

Inflammation: The body's response to localized damage.

MediGene: MediGene AG, Active Biotech's partner for RhuDex®.

MS: Multiple sclerosis, a chronic autoimmune disease.

Orphan Medicinal Products Status: When achieved, this status can offer up to ten years of market exclusivity.

Patent: Exclusive rights to a discovery or invention.

PFS: Progression Free Survival.

Pharmacokinetics: Study of how drugs change in the body from absorption to excretion; studies how and when the drug is distributed to the target organ and how it is absorbed there.

Pharmacology: The study of pharmaceuticals.

Phase I studies: The first studies on humans are carried out on a small group, normally 20-80 healthy volunteers. The purpose of these studies is mainly to show that the compound is safe for humans.

Phase II studies: Phase II studies test the compound on patients suffering from the disease that the potential drug is designed to treat. Tests are normally conducted on 100-300 patients. The primary aim of a Phase II study is to show that the compound has the intended medical effect and determine an optimal dosage.

Phase III studies: In Phase III, the compound is tested on a large number of patients, often between 1,000 and 3,000 patients. The primary aim of Phase III studies is to show that a new drug is at least as good as, or better than, previously approved treatments for the specific disease.

Placebo: A substance with no effect, a "sugar pill". Used for comparative purposes, for example when studying the effect of a new drug.

Preclinical: The part of drug development that takes place prior to the drug being tested on human beings.

Proof of Concept: When a candidate drug has a proven biological effect in humans.

RA: Rheumatoid arthritis.

SLE: Systemic lupus erythematosus. A chronic autoimmune disease.

SSc: Systemic sclerosis/scleroderma. A chronic autoimmune disease.

TASQ: Tumor Angiogenesis Suppression by Quinolines. Active Biotech's prostate cancer project.

Teva: Teva Pharmaceutical Industries Ltd. Active Biotech's partner for laquinimod.

Tumor cell: A cell that divides uncontrollably.

Active Biotech's business concept is to utilize specialist knowledge of the immune defense system and cancer to develop pharmaceuticals in areas where medical needs are extensive.

Goal

Active Biotech's goal is to generate value for shareholders through the successful development of pharmaceutical products.

Business strategy

The key components of the company's business strategy are to:

• Progress the clinical development of the company's compounds that have advanced furthest.
• The company is pursuing the development of the ANYARA project, addressing renal cell cancer, and the 57-57 project, addressing scleroderma, on a proprietary basis.
• Achieve the greatest possible growth in value in each project and seek collaboration with strong partners for each project at the appropriate stage.

Active Biotech has secured development and commercialization partners for three of its five projects; Teva for laquinimod, currently in Phase III trials for the treatment of MS, Ipsen for TASQ, currently in Phase III trials for the treatment of prostate cancer and MediGene for RhuDex, currently in clinical studies for the treatment of RA. Active Biotech plans to selectively choose partners for the remaining projects at the optimal point in time for each project.

● Advance additional compounds into clinical development. Active Biotech has considerable potential to generate attractive candidate products for further development within the company's areas of focus.

Active Biotech will also:

• generate revenue through research collaboration, out-licensing, product sales and royalties.
• limit costs through the utilization of partnerships, outsourcing and external expertise.
• maintain market rights for future sales in selected markets.
• aim to achieve growth organically and through acquisitions and alliances.
• secure and strengthen expertise by being an attractive employer offering a creative atmosphere with opportunities for individual development.
• create an organization that, in addition to specialist medical expertise, is able to conduct research projects professionally from candidate drugs through to registration and market launch.
• protect its expertise through strong patents and an active patent strategy.
• create financial sustainability through well-established partnerships and strong and active owners.

Active Biotech AB (publ)

Address Scheelevägen 22 P.O. Box 724, SE-220 07 Lund, Sweden Telephone +46 (0)46-19 20 00 Fax +46 (0)46-19 11 00 Internet www.activebiotech.com