Quarterly Report • Nov 15, 2018
Quarterly Report
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Cantargia AB | 556791-6019
• In August, Cantargia presented an update on its CANFOUR clinical trial and phase IIa preparations. Patents
Change of list
| Financial summary | |||||||
|---|---|---|---|---|---|---|---|
| ( KSEK) |
2018 Jul-Sep |
2017 Jul-Sep |
2018 Jan-Sep |
2017 Jan-Sep |
2017 Jan-Dec |
||
| Net sales | - | - | - | - | - | ||
| Operating profit | -21 412 | -11 306 | -65 225 | -45 597 | -60 009 | ||
| Loss for the period | -21 456 | -11 306 | -63 302 | -45 586 | -60 253 | ||
| Earnings per share before and after dilution (SEK) based on average number of shares |
-0,32 | -0,35 | -0,96 | -1,48 | -1,86 | ||
| Change in cash and cash equivalents | -21 944 | -14 093 | -70 662 | 6 481 | 124 202 | ||
| Cash and cash equivalents | 80 691 | 32 385 | 80 691 | 32 385 | 149 781 | ||
| Short-term investments | 110 000 | 20 000 | 110 000 | 20 000 | 120 000 | ||
| Equity end of period | 182 903 | 51 389 | 182 903 | 51 389 | 246 120 | ||
| Equity/assets ratio, % | 93% | 90% | 93% | 90% | 90% | ||
| Average number of employees | 6 | 5 | 6 | 5 | 5 |
In the third quarter, Cantargia took the important step up to the main list of the stock exchange. This will significantly increase our exposure, which will benefit us in several ways. It enables new investors to discover Cantargia and it will increase our visibility to other players, which in turn could lead to new and value-creating partnerships. It also means that independent parties have examined our internal processes and confirmed that our activities are of a high standard. We have an experienced organisation which in all areas of the company is living up to the stock market requirements. This enabled us to achieve this interim objective smoothly and effectively in 2018, as planned. I would like to say a big thank you to the team that made this move possible.
Yet it is not just our move to the main list that has been a success. Our main project, CAN04 (nidanilimab), has also advanced, and I am hopeful that we during the fourth quarter will finalize the safety evaluation in phase I and start phase IIa of the clinical development. Throughout the period and above all else, during the major ESMO cancer conference, which was concluded recently, we have reported interim data from our phase I study indicating that CAN04 treatment is associated with good safety. The first studies of effects in terms of tumour size as well as biomarkers are also encouraging. So far, the phase I study has been conducted in patients who had been treated with several types of cancer therapies before receiving CAN04, but as we now move further into the phase IIa stage our goal is to be able to treat patients at earlier disease stages, where the likelihood of responding to a treatment is higher We will also initiate studies using CAN04 in combination with chemotherapy. This type of combination has generated good results in preclinical studies, in terms of enhanced therapy effect but also in the form of reduced side effects of certain chemotherapies. Combination therapies are used frequently in modern cancer care and our data strongly indicates that CAN04 could be integrated into such a strategy.
I can therefore conclude by saying that Cantargia is continuing to perform very well in relation to the goals that we have set. Our financial situation is stable, and our pace of development follows plan. I look forward to the conclusion of the year and the coming milestones.
Göran Forsberg CEO, Cantargia AB
Established in 2010, listed on Nasdaq First North in 2015 and approved for listing at Nasdaq Stockholm's main market 2018. Cantargia is a biotechnology company that is engaged in research and development of antibodybased therapies for serious diseases. The company has specialised in antibody-based treatment aimed at the target molecule Interleukin-1 Receptor Accessory Protein ("IL1RAP"), which has the potential to be used against a number of different forms of cancer as well as for autoimmune and inflammatory diseases. In its most advanced project, Cantargia is developing the CAN04 antibody, which is double-acting. This means that it fights cancer both by activating the immune system and by blocking signals that drive tumour growth.
The original discovery made by the research team behind Cantargia was that the specific target molecule, IL1RAP, was found on cancer cells from patients with leukemia but not on normal stem cells in the bone marrow. In subsequent research, Cantargia has shown that IL1RAP is also expressed on cancer cells in a large number of cancer diseases.
Cantargia's CAN04 antibody is being studied in the CANFOUR clinical phase I/IIa study. In the second project, CANxx, new antibodies against IL1RAP are being developed that are designed for treatment of autoimmune and inflammatory diseases with the objective of selecting a product candidate in 2019. That project is being conducted in partnership with Panorama Research Inc. in California.
Cantargia's CAN04 antibody treatment fights cancer both by activating the immune system's killer cells (illus. 2 below) and by blocking signals which stimulate tumour growth (illus.1 below). CAN04 is designed to block the cancer cell's signalling via the interleukin-1 system, which can limit the inflammation that the tumour uses for growth and as a defensive strategy. CAN04 thus has a double-acting effect against cancer. In addition, CAN04 can suppress metastasis.
The IL1RAP molecule, the target for Cantargia's treatment, is found in most common forms of cancer, which means that there is significant treatment potential for different cancer diseases. While the CAN04 antibody could thus potentially be used for treating several different forms of cancer, in its initial development activities Cantargia has focused on non-small cell lung cancer and pancreatic cancer in its CANFOUR phase I/IIa study. In the initial stage (phase I) of the study, CAN04 is being given to a limited number of patients with the aim of gradually increasing the dose and studying the safety profile of the drug and its metabolism in the body, in order to determine an appropriate dose to use in the second stage. Interim data from the phase 1 section were recently presented and demonstrated good safety, effect on biomarkers and disease stabilization in a number of patients. In the second stage of the study (phase IIa), CAN04 will be given to a larger number of patients in order to evaluate indications of therapeutic effect and to gather more information on the safety of the drug at the chosen dose. CAN04 will be studied both as an individual drug and in combination with the standard treatment for each indication.
Cantargia's initial clinical phase I/IIa study covers both monotherapy and combination therapy, where CAN04 is combined with the existing standard treatments for non-small cell lung cancer (Cisplatin/Gemcitabine) and pancreatic cancer (Gemcitabine/Nab-paclitaxel). This will result in additional data, which will accelerate the overall development of CAN04.
CAN04, Cantargia's first product candidate, has been designed for treatment of various forms of cancer. Yet Cantargia's platform offers the potential to develop further antibodies against the IL1RAP target molecule that are designed to treat additional, life-threatening diseases. Cantargia is currently working on developing new antibodies that are designed for treatment of autoimmune and inflammatory diseases.
The company's second project, CANxx, is aimed at developing an antibody with properties that are optimised for treatment of autoimmune and inflammatory diseases. Viewed from a functional biological perspective, IL1RAP transfers signals from the cytokines IL-1 and IL-33, which play a role in several serious autoimmune and inflammatory diseases.
The CANxx project was launched in 2017 with the objective of identifying a clinical candidate that can move on to the development phase in 2019. The project is being conducted in partnership with Panorama Research Inc. in California. Panorama is contributing by conducting the early stages of the development at its own expense in exchange for a share of future revenues.
The company had no income during the period January to September 2018.
The company reports an after-tax loss of kSEK -21,456 (-11,306) for the third quarter and an after-tax loss of kSEK -63,302 (-45,586) for the January to September period.
The loss is essentially related to the company's costs for developing its CAN04 and CANxx product candidates. Project costs were kSEK -13,866 (-7,629) in the third quarter and kSEK -44,746 (-34,662) for the nine-month period. The increase compared with 2017 is mainly related to the ongoing CANFOUR clinical trial.
Other external expenses were kSEK -4,441 (-1,910) in the third quarter and kSEK -13,044 (-5,060) for the January to September period. The increase compared with the previous year is mainly related to the relisting project, which was completed in September. Staff costs were kSEK -2,944 (-1,811) in the third quarter and kSEK -7,020 (-5,796) for the January to September period. Other operating expenses, which comprise foreign exchange differences on trade payables, were kSEK -162 (-) in the third quarter and kSEK -415 (-79) for the January to September period.
Net financial income/expense consists largely of foreign exchange differences on the company's EUR account. Net financial income/expense was kSEK -44 (-) for the third quarter and kSEK 1,923 (11) for the January to September period.
The equity/assets ratio at 30 September 2018 was 93 (90) per cent and equity was kSEK 182,903 (51,389). The company's cash and cash equivalents, which consist of cash and available deposits with banks and other credit institutions, were kSEK 80,691 (32,385) at the balance sheet date. Of total cash and cash equivalents, kSEK 14,290 (0) is in invested in euro in currency accounts. In addition to cash and cash equivalents, the company has shortterm investments with banks and in fixed income funds in a total amount of kSEK 110,000 (20,000). The increase in cash and cash equivalents and short-term investments is wholly related to the share offerings that were completed in 2017. Total assets at the end of the period were kSEK 195,875 (57,220).
Cash flow from operating activities was kSEK -21,944 (-14,166) in the third quarter and kSEK -80,746 (-49,101) in the first nine months. The change in cash flow from operating activities is partly related to increased costs in the company but also reflects a change in trade payables to a more normal level than that which prevailed at 31 December 2017. Cash flow from investing activities was kSEK 0 (0) in the third quarter and kSEK 10,000 (- 11,358) for the January to September period. The net change in cash flow from investing activities during the year refers entirely to changes in short-term investments. The total change in cash and cash equivalents was kSEK -21,944 (-14,903) for the third quarter and kSEK -70,662 (6,481) for the January to September period.
Cantargia has a research agreement with Lund University, where Thoas Fioretos, one of Cantargia's founders and a Director of Cantargia, is engaged in research. Under the agreement, Thoas Fioretos has undertaken, as part of his employment at Lund University, to conduct projects which are aimed at obtaining more knowledge about IL1RAP. Cantargia has the right under the agreement to use and, where applicable, take over any and all research results from the two projects at no cost. During the period January to September 2018, the company made payments of approximately SEK 0.2 (0.2) million to Lund University in accordance with the agreement.
From May 2017 until 31 August 2018, Cantargia had a consulting agreement with Jöndell Consulting AB, a company that is wholly owned by the company's CFO. During this period, the CFO was not employed by Cantargia but worked on a consultancy basis in accordance with the agreement. In the first nine months of 2018, Cantargia paid approximately SEK 1.5 (0.3) million for the consulting services provided. An employment contract between the company and the CFO, effective from 1 September, has been concluded, as a result of which the consulting agreement has ceased to apply.
The Board considers that the above agreements have been concluded on commercial terms.
The average number of employees during the period January to September 2018 was 6 (5), of whom 3 (2) were women, and the number of employees at 30 September 2018 was 7 (5), of whom 3 (2) were women. Cantargia operates to a large extent through external partners.
As of 25 September 2018, Cantargia's shares have been listed on the main list of Nasdaq Stockholm, under the stock symbol "CANTA". At 30 September 2018, the number of shares was 66,185,811 (32,075,508). At the closing date, the outstanding warrant schemes comprised 85,000 warrants, which after restatement for the rights issue registered on 8 January 2018 entitle the holders to subscribe for 86,700 shares at an exercise price of SEK 11.18 per share. If all outstanding warrants are exercised, the share capital will increase by SEK 6,936. In other respects, the terms are the same as those described in the annual report for 2017.
| • | Year-end report for 2018 | 27 February 2019 |
|---|---|---|
| • | The Annual Report 2018 will be published in | May 2019 |
| • | Interim report 1 2019 | 27 May 2019 |
| • | Annual General Meeting 2019 | 27 May 2019 |
Interim reports and the annual report are available at www.cantargia.com.
A number of risk factors can have a negative impact on the operations of Cantargia. The company's overall risk management is aimed at minimising adverse effects on the company's results and financial position. The company's commercial risks are described in detail in the annual report for 2017. No significant events occurred during the year which affect or change these descriptions of the company's risks.
See Note 1.
See Note 2.
See Note 3.
The interim report has been reviewed by Cantargia's auditors.
Cantargia is a limited company with registered office in the municipality of Lund, Sweden. The address is Medicon Village, Scheelevägen 2, SE-223 81 Lund, Sweden.
This interim report has been approved for publication by the Board of Directors and Chief Executive Officer. This constitutes information which Cantargia is required to publish under the EU's Market Abuse Regulation. The information was submitted for publication through the below contact person on 15 November, at 8:30 a.m.
Lund, 15 November 2018 Cantargia AB
Magnus Persson Claus Asbjørn Andersson Thoas Fioretos Chairman Director Director
Karin Leandersson Anders Martin-Löf Patricia Delaite Director Director Director
Director CEO
Corinne Savill Göran Forsberg
For further information, please contact:
Göran Forsberg, CEO of Cantargia AB Telephone: +46 (0)46-275 62 60 E-post: goran.forsberg@cantargia.com
We have reviewed the condensed interim financial information (interim report) of Cantargia AB (publ) as of 30 September 2018 and the nine-month period then ended. The board of directors and the CEO are responsible for the preparation and presentation of the interim financial information in accordance with RFR 2 and the Swedish Annual Accounts Act. Our responsibility is to express a conclusion on this interim report based on our review.
We conducted our review in accordance with the International Standard on Review Engagements ISRE 2410, Review of Interim Report Performed by the Independent Auditor of the Entity. A review consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing, ISA, and other generally accepted auditing standards in Sweden. The procedures performed in a review do not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Based on our review, nothing has come to our attention that causes us to believe that the interim report is not prepared, in all material respects, in accordance with RFR 2 and the Swedish Annual Accounts Act.
Lund, November 15 2018
PricewaterhouseCoopers AB
Ola Bjärehäll Authorized Public Accountant Auditor in charge
| STATEMENT OF COMPREHENSIVE INCOME | |||||||
|---|---|---|---|---|---|---|---|
| ( kSEK) |
2018 Jul-Sep |
2017 Jul-Sep |
2018 Jan-Sep |
2017 Jan-Sep |
2017 Jan-Dec |
||
| Operating incom e |
|||||||
| Net sales | - | - | - | - | - | ||
| Other operating income | - | 44 | - | - | - | ||
| Operating expenses | |||||||
| Project costs | -13 866 | -7 629 | -44 746 | -34 662 | -44 819 | ||
| Other external expenses | -4 441 | -1 910 | -13 044 | -5 060 | -6 917 | ||
| Personnel expenses | -2 944 | -1 811 | -7 020 | -5 796 | -8 064 | ||
| Other operating expenses | -162 | - | -415 | -79 | -210 | ||
| -21 412 | -11 350 | -65 225 | -45 597 | -60 009 | |||
| Operating prof it |
-21 412 | -11 306 | -65 225 | -45 597 | -60 009 | ||
| F inancial incom e and expense |
|||||||
| Interest income and similar items | - | - | 1 924 | 16 | 86 | ||
| Interest expense and similar items | -44 | - | - 1 |
- 5 |
-329 | ||
| -44 | - | 1 923 | 1 1 |
-243 | |||
| Prof it bef ore taxes |
-21 456 | -11 306 | -63 302 | -45 586 | -60 253 | ||
| Loss f or the period *) |
-21 456 | -11 306 | -63 302 | -45 586 | -60 253 | ||
| Earnings per share before and after dilution (SEK) based on average number of shares |
-0,32 | -0,35 | -0,96 | -1,48 | -1,86 |
*) No items are reported in other comprehensive income, meaning total comprehensive income is consistent with the loss for the period.
| BALANCE SHEET | |||
|---|---|---|---|
| ( kSEK) |
30-09-2018 30-09-2017 31-12-2017 | ||
| ASSETS | |||
| F ixed assets |
|||
| F inancial assets |
|||
| Other securities held as non-current asset | 2 957 | 2 957 | 2 957 |
| 2 957 | 2 957 | 2 957 | |
| Total f ixed assets |
2 957 | 2 957 | 2 957 |
| Current assets | |||
| Other receivables | 1 091 | 706 | 1 345 |
| Prepaid expenses and accrued income | 1 136 | 1 172 | 370 |
| 2 227 | 1 878 | 1 715 | |
| Short-term investm ents |
|||
| Other short-term investments | 110 000 | 20 000 | 120 000 |
| 110 000 | 20 000 | 120 000 | |
| Cash and bank balances | |||
| Cash and bank balances | 80 691 | 32 385 | 149 781 |
| 80 691 | 32 385 | 149 781 | |
| Total current assets | 192 918 | 54 263 | 271 496 |
| TOTAL ASSETS | 195 875 | 57 220 | 274 453 |
| EQU ITY AN D LIABILITIES |
|||
| Equity | |||
| Restricted equity | |||
| Share capital Share capital not yet registered |
5 295 - |
2 566 - |
3 755 1 540 |
| 5 295 | 2 566 | 5 295 | |
| Non-restricted equity Share premium account |
390 765 | 184 010 | 390 680 |
| Retained earnings | -149 855 | -89 602 | -89 602 |
| Loss for the period | -63 302 | -45 585 | -60 253 |
| 177 608 | 48 823 | 240 825 | |
| Total equity | 182 903 | 51 389 | 246 120 |
| Short-term liabilities | |||
| Trade payables | 5 175 | 2 964 | 20 619 |
| Tax liabilities | 127 | 355 | 377 |
| Other liabilities | 363 | 226 | 221 |
| Accrued expenses and deferred income | 7 306 | 2 286 | 7 117 |
| 12 971 | 5 831 | 28 333 | |
| TOTAL EQU ITY AN D LIABILITIES |
195 875 | 57 220 | 274 453 |
| STATEMENT OF CHANGES IN EQUITY | |||||||
|---|---|---|---|---|---|---|---|
| ( kSEK) |
Restricted equity | Non-restricted equity | |||||
| 1 July 2018 - 30 Septem ber 2018 |
Share capital |
Paid not reg istered share capital |
Share prem ium account |
Retained earning s incl Loss f or the year |
Total equity | ||
| Opening balance 1 July 2018 |
5 295 | - | 390 765 | -191 701 | 204 359 | ||
| Loss f or the period |
- | - | - | -21 456 | -21 456 | ||
| Closing balance 30 Septem ber 2018 |
5 295 | - | 390 765 | -213 157 | 182 903 | ||
| 1 July 2017 - 30 Septem ber 2017 |
|||||||
| Opening balance 1 July 2017 |
2 566 | - | 183 938 | -123 882 | 62 622 | ||
| Loss f or the period |
- | - | - | -11 306 | -11 306 | ||
| Transactions with shareholders | |||||||
| Capital acquisition cost | - - |
72 - |
- - |
- - |
72 72 |
||
| Closing balance 30 Septem ber 2017 |
2 566 | 7 2 |
183 938 | -135 188 | 51 389 | ||
| Reclassification warrant programme *) | - | -72 | 72 | - | - | ||
| Closing balance 30 Septem ber 2017 |
2 566 | - | 184 010 | -135 188 | 51 389 | ||
| 1 January 2018 - 30 Septem ber 2018 |
|||||||
| Opening balance 1 January 2018 |
3 755 | 1 540 | 390 680 | -149 855 | 246 120 | ||
| Loss f or the period |
- | - | - | -63 302 | -63 302 | ||
| Transactions with shareholders Issue of new shares for the year |
1 540 | -1 540 | - | - | - | ||
| Capital acquisition cost | - | - | 85 | - | 85 | ||
| 1 540 | -1 540 | 85 | - | 85 | |||
| Closing balance 30 Septem ber 2018 |
5 295 | - | 390 765 | -213 157 | 182 903 | ||
| 1 January 2017 - 30 Septem ber 2017 Opening balance 1 January 2017 |
1 673 | - | 117 964 | -89 602 | 30 035 | ||
| Loss f or the period |
- | - | - | -45 586 | -45 586 | ||
| Transactions with shareholders Warrant programme |
- | 72 | - | - | 72 | ||
| Issue of new shares for the year | 893 | - | 71 636 | - | 72 529 | ||
| Capital acquisition cost | - | - | -5 662 | - | -5 662 | ||
| 893 | 72 | 65 974 | - | 66 939 | |||
| Closing balance 30 Septem ber 2017 |
2 566 | 7 2 |
183 938 | -135 188 | 51 389 | ||
| Reclassification warrant programme *) | - | -72 | 72 | - | - | ||
| Closing balance 30 Septem ber 2017 |
2 566 | - | 184 010 | -135 188 | 51 389 | ||
| 1 January 2017 - 31 Decem ber 2017 |
|||||||
| Opening balance 1 January 2017 |
1 673 | - | 117 964 | -89 602 | 30 035 | ||
| Loss f or the period |
- | - | - | -60 253 | -60 253 | ||
| Transactions with shareholders Warrant programme |
- | 72 | - | - | 72 | ||
| Issue of new shares for the year | 2 082 | 1 540 | 300 857 | - | 304 479 | ||
| Capital acquisition cost | - | - | -28 213 | - | -28 213 | ||
| 2 082 | 1 612 | 272 644 | - | 276 338 | |||
| Closing balance 31 Decem ber 2017 |
3 755 | 1 612 | 390 608 | -149 855 | 246 120 | ||
| Reclassification warrant programme *) | - | -72 12 |
72 | - | - | ||
| Closing balance 31 Decem ber 2017 |
3 755 | 1 540 | 390 680 | -149 855 | 246 120 |
*) Paid remuneration for warrants has been reclassified from paid not unregistered share capital to share premium.
| STATEMENT OF CASH FLOWS | |||||
|---|---|---|---|---|---|
| 2018 | 2017 | 2018 | 2017 | 2017 | |
| ( kSEK) |
Jul-Sep | Jul-Sep | Jan-Sep | Jan-Sep | Jan-Dec |
| Operating activities | |||||
| Operating loss | -21 412 | -11 306 | -65 225 | -45 597 | -60 009 |
| Interest received etc. | 107 | - | 353 | 16 | 86 |
| Interest paid etc. | - | - | - 1 |
- 5 |
- 4 |
| Cash f low f rom operating activities |
|||||
| bef ore changes in working capital |
-21 305 | -11 306 | -64 873 | -45 586 | -59 928 |
| Changes in working capital | |||||
| Change in receivables | 1 071 | -679 | -511 | 334 | 497 |
| Change in trade payables | -2 781 | -2 032 | -15 443 | -4 455 | 13 200 |
| Changes in other current liabilities | 1 070 | -149 | 82 | 606 | 5 453 |
| -639 | -2 860 | -15 873 | -3 515 | 19 150 | |
| Cash f low f rom operating activities |
-21 944 | -14 166 | -80 746 | -49 101 | -40 778 |
| Investing activities | |||||
| Acquisition of other long-term securities | - | - | - | -295 | -295 |
| Increase in other short-term investments | - | - | -40 000 | -20 000 | -120 000 |
| Decrease in other short-term investments | - | - | 50 000 | 8 937 | 8 937 |
| 0 | 0 | 10 000 | -11 358 | -111 358 | |
| F inancing activities |
|||||
| Issue of new shares for the year | - | - | - | 72 529 | 304 479 |
| Capital acquisition cost | - | - | 85 | -5 662 | -28 213 |
| Warrant programme | - | 72 | - | 72 | 72 |
| 0 | 7 2 |
8 5 |
66 939 | 276 338 | |
| Change in cash and cash equivalents | -21 944 | -14 093 | -70 662 | 6 481 | 124 202 |
| Cash and cash equivalents at beginning of period |
102 786 | 46 478 | 149 781 | 25 904 | 25 904 |
| Exchange rate difference in cash equivalents | -151 | - | 1 571 | - | -325 |
| Cash and cash equivalents at end of period *) |
80 691 | 32 385 | 80 691 | 32 385 | 149 781 |
*) The company's cash and cash equivalents consist of cash and disposable balances with banks and other credit institutions
Significant accounting policies applied in preparing this interim report are described in the following. Unless otherwise stated, these policies have been applied consistently for all the periods presented.
This interim report for Cantargia AB ("Cantargia") has been prepared in accordance with the Swedish Annual Accounts Act, Recommendation RFR 2 Financial Reporting for Legal Entities of the Swedish Financial Reporting Board and IAS 34 Interim Financial Reporting. RFR 2 states that a legal entity is required to apply the International Financial Reporting Standards (IFRS), as adopted by the EU, insofar as this is possible under the Swedish Annual Accounts Act and Pension Obligations Vesting Act and with regard to the relationship between accounting and taxation. The recommendation specifies the exemptions from and the additional disclosures that are required in relation to IFRS. The accounting policies applied in preparing this interim report are consistent with those used in preparing the annual report for 2017. In addition, the new financial reporting standards IFRS 9 and IFRS 15 became effective on 1 January 2018. As previously noted, the transition has not had any impact on Cantargia's financial statements. A full description of Cantargia's accounting policies will be given in the annual report for 2018.
The interim report has been prepared using the cost method.
The interim report for the fourth quarter 2017 is Cantargia's first report to be prepared in accordance with the Swedish Annual Accounts Act and RFR 2. Cantargia has previously applied the Annual Accounts Act and General Recommendation BFNAR 2012:1 Annual Accounts and Consolidated Financial Statements (K3) of the Swedish Accounting Standards Board. Historical financial information has been restated as of 1 January 2016, which is the date of transition to RFR 2.
Explanations concerning the transition from the previously applied accounting policies to RFR 2 and a description of the effects of the restatement on the closing balance as at 30 September 2017, and on comprehensive income for the third quarter of 2017 and the first nine months of 2017 are provided in Note 2.
The preparation of financial statements in compliance with the applied regulations requires the use of critical accounting estimates. Management is also required to make certain judgements in applying the company's accounting policies. Areas which involve a high degree of judgement, are complex or where assumptions and estimates have a material impact on the interim report are described in Note 3.
IFRS 16 Leases will replace IAS 17 Leases and the related interpretations IFRIC 4, SIC-15 and SIC-27. The standard requires that assets and liabilities attributable to all leases, with a few exceptions, be recognised in the balance sheet. The standard is applicable for financial years beginning on or after 1 January 2019. Early application is permitted. Cantargia does not expect that it will be affected by the new lease standard, as the company is likely to apply the exemption from IFRS 16 in RFR 2 and will continue to account for all leases in accordance with a model that is similar to the model for operating leases in IAS 17, i.e. lease payments will be expensed on a straightline basis over the term of the lease.
No other IFRS or IFRIC interpretations that have not yet become effective are expected to have a material impact on the company.
The format prescribed in the Swedish Annual Accounts Act is used for the income statement and balance sheet. The statement of changes in equity is presented in the format prescribed in IAS 1 Presentation of Financial Statements but must contain the columns indicated in the Annual Accounts Act.
Cantargia's chief operating decision maker is the company's Chief Executive Officer (CEO), as it is primarily he who is responsible for the allocation of resources and evaluation of results. The CEO receives reports containing financial information for the company as a whole. Cantargia has not yet commercialised any of the development projects in which it is engaged, and the company is not yet generating and income. All activities of Cantargia are considered to constitute a single segment.
Cantargia is a research-based biotech company that is engaged in research and development of antibody-based therapy for serious diseases. All expenditure directly attributable to the development and testing of identifiable and unique products which are controlled by Cantargia is accounted for as an intangible asset when the following criteria are met:
The overall risk in ongoing development projects is high. The risk includes safety and efficacy risks that can arise in clinical studies, regulatory risks related to applications and approval for clinical studies and marketing authorisation, as well as IP risks related to approval of patent applications and the maintenance of patents. All development work is therefore deemed to be research, as the work does not meet the criteria listed below. As at 30 September 2018 no development costs had been recognised as intangible assets in the balance sheet, as it was not considered that all of the above criteria for capitalisation had been met for any of the development projects in which the company is engaged.
Research expenditure is expensed as incurred.
Capitalised development costs are recognised as intangible assets and amortised from the date when the asset is ready for use.
Intangible assets which are not ready for use (capitalised development costs) are not amortised but are tested annually for impairment. However, no capitalised development costs are currently recognised in Cantargia's balance sheet.
Cantargia is a lessee only under operating leases for office premises.
Leases in which a significant share of the risks and benefits of ownership are retained by the lessor are classified as operating leases. Payments made during the lease term (after deducting for any incentives from the lessor) are recognised as an expense in the statement of comprehensive income on a straight-line basis over the lease term.
Transactions in foreign currency are translated to the functional currency at the exchange rates applying at the transaction date or the date when the items were restated. Foreign exchange gains and losses are recognised in the statement of comprehensive income in other operating expenses, foreign exchange differences trade payables, and in net financial income/expense, foreign exchange differences currency accounts.
Recognition and derecognition in the balance sheet
A financial asset or financial liability is recognised in the balance sheet when the company becomes a party to the contractual terms and conditions of the instrument. A financial asset is derecognised in the balance sheet when the contractual right to the cash flow from the asset expires or is settled. The same applies when the risks and benefits of ownership of the asset have essentially been transferred to another party and the company no longer has control over the financial asset. A financial liability is derecognised in the balance sheet when the contractual obligation is fulfilled or extinguished.
Cantargia applies the exemption in RFR 2 under which IFRS 9 Financial Instruments: Recognition and Measurement is not applied for recognition and measurement of financial instruments. Instead, cost is applied in accordance with the Annual Accounts Act.
Financial assets are initially measured at cost including any transaction costs directly attributable to the acquisition of the asset.
After initial recognition, current financial assets are measured at the lower of cost and net realisable value at the balance sheet date.
Trade receivables and other receivables classified as current assets are measured individually at the amounts expected to be paid.
Interest-bearing financial assets are measured at amortised cost using the effective interest method.
Measurement of financial liabilities
Short-term trade payables are recognised at cost.
Cantargia has both defined contribution and defined benefit pension plans. Defined contribution pension plans are post-employment benefit plans under which the company pays fixed contributions into a separate legal entity. Cantargia has no legal or constructive obligations to pay further contributions if this legal entity does not hold sufficient assets to pay all employee benefits relating to employee service in the current and prior periods. The contributions are recognised as personnel expenses when they fall due.
Cantargia's defined benefit pension plans consist of the ITP 2 plan's defined benefit pension obligations. The ITP 2 plan's defined benefit pension obligations for retirement and family pensions are secured through an insurance policy with Alecta. According to a statement from the Swedish Financial Reporting Board, UFR 10 Recognition of the ITP 2 Plan that is funded through an insurance policy with Alecta, this is a defined benefit plan covering several employers. For the financial year 2017 the company has not had access to information that would enable it to account for its proportionate share of the plan's obligations, assets and expenses. It has therefore not been possible to recognise the plan as a defined benefit plan. The ITP 2 pension plan secured through an insurance policy with Alecta is therefore accounted for as a defined contribution plan. The contribution for defined benefit retirement and family pensions is calculated individually and depends on factors such as salary, previously earned pension and expected remaining period of service. The collective funding ratio is defined as the market value of Alecta's assets as a percentage of its commitments to policyholders calculated using Alecta's actuarial methods and assumptions, which do not comply with IAS 19. The collective funding ratio should normally be permitted to vary within a range of 125 and 155 per cent. If Alecta's collective funding ratio were to fall below 125 per cent or exceed 155 per cent, it would be necessary to take measures that will enable the ratio return to the normal range. In case of a low funding ratio, one measure that can be taken is to raise the agreed price for new policies and the expansion of existing benefits. If the funding ratio is high, contributions can be reduced. At the end of the financial year 2017, Alecta's surplus, as defined by the collective funding ratio, was 154 per cent (2016: 149 per cent) on a preliminary basis.
In addition to the above, Cantargia has made pension promises to two employees and in connection therewith purchased endowment policies which have been posted as collateral for the employees' pensions. RFR 2 does not indicate how pension obligations that are secured through an endowment policy, or "direct pension," should be recognised. Companies therefore need to rely on IAS 19 for guidance on how to account for these obligations. Under IAS 19, a pension plan should be classified based on the economic substance of the plan. Under the concluded salary exchange agreements, Cantargia's direct pension obligation is limited to paying defined premiums to the insurance company. Cantargia does not bear any risk related to the change in value of the endowment policy, as this risk is borne by the employee. In accordance with RFR 2/IAS 19, the pension is therefore classified and accounted for as a defined contribution pension plan.
Short-term benefits are employee benefits which are payable within twelve months of the balance sheet date in the year in which the employee earned the benefit, with the exception of post-employment benefits and termination benefits.
Short-term benefits for paid leave that can be saved should be accounted for as an expense and current liability when the employees have performed the services which entitle them to future paid leave.
Short-term benefits for paid leave that are not saved should be recognised as an expense when the leave is taken.
The expected expense for profit sharing and bonuses should be recognised only if
The tax on the profit for the year in the income statement consists of current tax and deferred tax. Current tax is calculated on the taxable profit the period at the applicable tax rate. The actual tax expense is calculated based on the tax rules that have been enacted or substantively enacted by the balance sheet date.
Deferred tax liabilities are recognised for all taxable temporary differences. However, deferred tax attributable to untaxed reserves is accounted for separately, as untaxed reserves are recognised as a separate item in the balance sheet. Deferred tax liabilities are recognised to the extent that it is probable that future taxable profits will be available against which the temporary differences can be wholly or partially offset.
Deferred tax is calculated by applying tax rates (and laws) which have been adopted or announced at the balance sheet date and are expected to apply when the deferred tax asset is realised or the deferred tax liability is settled.
Interest income
Interest income is recognised by applying the effective interest method.
The statement of cash flows is prepared using the indirect method. The reported cash flow only includes transactions involving incoming or outgoing payments. The company classifies cash, available deposits with banks and other credit institutions as cash and cash equivalents.
Ordinary shares are classified as equity.
Transaction costs which are directly attributable to the issuance of new shares or options are recognised, net of tax, in equity less a deduction from the proceeds of the issue.
The interim report for the first nine months of 2018 has been prepared in accordance with RFR 2.
The accounting policies presented in Note 1 have been applied in preparing the financial statements as at 30 September 2018 and for the comparative information presented as at 30 September 2017. For comparative information as at 1 January 2017 and for the full year 2017, see the year-end report for 2017. For comparative information as at 1 July 2017, see the interim report for the second quarter of 2018.
The preparation of financial statements in accordance with RFR 2 has been effected in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors. The change of accounting policy to RFR 2 must be applied retrospectively. This means that the opening balance of each affected component of equity should be adjusted for the earliest prior period presented and the other comparative amounts disclosed for each prior period presented as if RFR 2 had always been applied.
In preparing the balance sheet as at 30 September 2017 and the income statement and statement of cash flows for the third quarter of 2017 in accordance with RFR 2, adjustments were made to amounts which in previous interim reports had been reported in accordance with General Recommendation BFNAR 2012:1 Annual Accounts and Consolidated Financial Statements (K3) of the Swedish Accounting Standards Board. An explanation of how the transition from the previously applied accounting policies to RFR 2 has affected Cantargia's results and financial position is presented in the following tables and the related notes.
The following tables show, for each period, the reconciliation between the previously applied accounting policies and RFR 2 for the balance sheet and equity as well as total comprehensive income.
Under the previously applied accounting policies, Cantargia capitalised costs for patent agents and the registration of patents. In connection with the transition to RFR 2, Cantargia analysed the previously capitalised patent costs and concluded that the criteria for capitalisation of development costs in IAS 38 Intangible Assets had not been met. Cantargia has therefore adjusted this by derecognising all previously capitalised patent costs as at 30 September 2017 (kSEK 9,148). Increased project costs had a negative impact on comprehensive income of kSEK 248 for the third quarter of 2017 and a negative impact of kSEK 2,056 for the first nine months of 2017.
As Cantargia has adjusted all previously capitalised patent costs in connection with the transition to RFR 2, the previously recognised transfers to the reserve for development costs in equity have also been adjusted. The full amount previously recognised in reserve for development costs, kSEK 4,866, has been transferred to the item retained earnings as at 30 September 2017. The net effect of the reclassification in equity is kSEK 0.
Cantargia has made pension promises to two employees and in connection therewith purchased endowment policies which have been posted as collateral for the employees' pensions. Under the previously applied
accounting policies, the endowment policies and the liability were presented on a gross basis in the balance sheet. The asset was measured at cost and the liability was measured at the same amount as the asset. The pension solution constitutes a defined contribution plan and should, in accordance with IAS 19, be accounted for by charging to expense the amount that is paid into the pension plan in each period. Cantargia has adjusted this by derecognising the asset (the endowment policy) and the liability (the pension obligation) in the balance sheet. The net effect of this adjustment is kSEK 0, both in equity as at 30 September 2017 and in comprehensive income for the third quarter and first nine months of 2017.
| 30 September 2017 | |||||
|---|---|---|---|---|---|
| According to | |||||
| previous accounting |
Total ef f ect of transition |
According to | |||
| kSEK | Note | principles | to RF R 2 |
RF R 2 |
|
| ASSETS | |||||
| Im m ateriella anläggningstillgångar |
|||||
| Concessions, patents, licences and trademarks etc. | a ) |
9 148 | -9 148 | - | |
| F inancial assets |
|||||
| Other securities held as non-current asset | c) | 4 011 | -1 054 | 2 957 | |
| Total current assets | 54 262 | - | 54 262 | ||
| Total assets | 67 422 | -10 202 | 57 220 | ||
| EQUITY AND LIABILITIES | |||||
| Equity | |||||
| Restricted equity | |||||
| Share capital | 2 566 | - | 2 566 | ||
| Reserve for development costs | b ) |
4 866 | -4 866 | - | |
| Non-restricted equity | |||||
| Share premium account | 184 010 | - | 184 010 | ||
| Retained earnings | a) , b) |
-87 376 | -2 226 | -89 602 | |
| Loss for the period | a ) |
-43 529 | -2 056 | -45 585 | |
| Total Equity | 60 537 | -9 148 | 51 389 | ||
| Long-term liablities |
|||||
| Provisions | c ) |
1 054 | -1 054 | - | |
| Total short-term liabilities |
5 831 | - | 5 831 | ||
| Total Equity and Liabilities | 67 422 | -10 202 | 57 220 |
| 1 July 2017 - 30 September 2017 | ||||
|---|---|---|---|---|
| According to |
||||
| previous | Total ef f ect |
|||
| accounting | of transition |
According to |
||
| Note kSEK |
principles | to RF R 2 |
RF R 2 |
|
| Net sales | - | - | - | |
| Other operating income | - | 44 | 44 | |
| Project costs a) |
-7 381 | -248 | -7 629 | |
| Other external expenses | -1 910 | - | -1 910 | |
| Personnel expenses | -1 811 | - | -1 811 | |
| Other operating expenses | 44 | -44 | - | |
| Operating profit | -11 058 | -248 | -11 306 | |
| Interest income and similar items | - | - | - | |
| Interest expense and similar items | - | - | - | |
| Net financial items | - | - | - | |
| Loss for the period | -11 058 | -248 | -11 306 | |
| Total comprehensive income | -11 058 | -248 | -11 306 |
| 1 January 2017 - 30 September 2017 | ||||
|---|---|---|---|---|
| According to |
||||
| previous | Total ef f ect |
|||
| accounting | of transition |
According to |
||
| Note kSEK |
principles | to RF R 2 |
RF R 2 |
|
| Net sales | - | - | - | |
| Other operating income | - | - | - | |
| Project costs a) |
-32 606 | -2 056 | -34 662 | |
| Other external expenses | -5 060 | - | -5 060 | |
| Personnel expenses | -5 796 | - | -5 796 | |
| Other operating expenses | -79 | - | -79 | |
| Operating profit | -43 541 | -2 056 | -45 597 | |
| Interest income and similar items | 16 | - | 16 | |
| Interest expense and similar items | - 5 |
- | - 5 |
|
| Net financial items | 11 | - | 11 | |
| Loss for the period | -43 530 | -2 056 | -45 586 | |
| Total comprehensive income | -43 530 | -2 056 | -45 586 |
As a result of the adjustment of previously capitalised patent costs, a reclassification has been made in the statement of cash flows for the third quarter and first nine months of 2017, as described below.
In accordance with RFR 2 (IFRS), a definition of cash and cash equivalents in which short-term investments are not included is applied. This means that the opening balance of cash and cash equivalents has been adjusted down to kSEK 46,478 as at 1 July 2017 and kSEK 25,904 as at 1 January 2017. Changes in short-term investments are accounted for in investing activities and were kSEK 0 for the third quarter and kSEK -11,063 for the first nine months of 2017.
Only those rows which have been reclassified are presented below.
| CASH FLOW | ||||||
|---|---|---|---|---|---|---|
| 1 July 2017 – 30 September 2017 | ||||||
| According to |
||||||
| previous | ||||||
| accounting | Total ef f ect of |
|||||
| kSEK | Note | principles | transition to RF | R 2 According to RF R 2 |
||
| Operating income | d ) |
-11 058 | -248 | -11 306 | ||
| Cash f low f rom operating activities bef ore |
||||||
| chang es in operating capital |
-11 058 | -248 | -11 306 | |||
| Cash f low f rom operating activities |
-13 838 | -248 | -14 086 | |||
| Acquisition of consessions, patents, licences, etc. | d ) |
-248 | 248 | - | ||
| Change in other short-term investments | e ) |
- | - | - | ||
| Cash f low f rom investing activities |
-248 | 248 | - | |||
| Change in cash and cash equivalents | -14 093 | - | -14 093 | |||
| Cash and cash equivalents at beg inning of period |
66 478 | -20 000 | 46 478 | |||
| Cash and cash equivalents at end of period *) |
e ) |
52 385 | 32 385 | |||
| 1 January 2017 – 30 September 2017 | ||||
|---|---|---|---|---|
| According to previous |
||||
| accounting | Total ef f ect of |
|||
| kSEK | Note | principles | transition to RF | R 2 According to RF R 2 |
| Operating income | d ) |
-43 541 | -2 056 | -45 597 |
| Cash f low f rom operating activities bef ore |
||||
| chang es in operating capital |
-43 530 | -2 056 | -45 586 | |
| Cash f low f rom operating activities |
-46 693 | -2 056 | -48 749 | |
| Acquisition of consessions, patents, licences, etc. | d ) |
-2 056 | 2 056 | - |
| Change in other short-term investments | e ) |
- | -11 063 | -11 063 |
| Cash f low f rom investing activities |
-2 701 | -9 007 | -11 708 | |
| Change in cash and cash equivalents | 17 544 | -11 063 | 6 481 | |
| Cash and cash equivalents at beg inning of period |
34 841 | -8 937 | 25 904 | |
| Cash and cash equivalents at end of period *) |
e ) |
52 385 | 32 385 | |
*) The company's cash and cash equivalents consist of cash and disposable balances with banks and other credit institutions.
The preparation of financial statements and application of accounting policies are often based on judgements, estimates and assumptions made by management which are deemed reasonable at the time when they are made. The estimates and assumptions applied are based on historical experience and other factors which are deemed reasonable under current circumstances. The results of these are then used to determine carrying amounts of assets and liabilities that are not readily apparent from other sources. Actual outcomes may differ from these estimates and assessments.
Estimates and assumptions are reviewed regularly. Any changes are recognised in the period in which the change is made if the change affects only that period, or in the period in which the change is made and future periods if the change affects both the current and future periods.
The most critical judgement in Cantargia's financial reporting refers to the date of capitalisation of development costs. Based on the accounting policies that are presented in Note 1, all development activities in which Cantargia is engaged are currently classified as research, for which costs should not be capitalised. The achievement of positive results in phase III clinical trials is the earliest point at which the criteria for capitalisation can be considered to be met.
There is no expiration date which limits the use of the company's tax losses. It is, however, uncertain at what point in time it will be possible to use these tax losses to offset taxable profits. The deferred tax asset arising from the tax loss has therefore not been assigned any value. Changes in ownership, historical and potential future capital acquisitions may limit the amount of tax losses that can be used in future.
Medicon Village | 223 81 Lund | www.cantargia.com
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