Annual Report • Mar 20, 2009
Annual Report
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for research, development and commercialisation
| Portfolio | 1 |
|---|---|
| From research to marketing | 2 |
| REDECTANE® – non-invasive diagnosis of clear cell renal cell cancer | 4 |
| RENCAREX® – prevention of cancer recurrence | 5 |
| MESUPRON® – prevention of metastasis | 6 |
| Preclinical portfolio | 7 |
| Strong partners for research, development and commercialisation | 8 |
| Foreword of the Executive Management Board | 10 |
| Report of the Supervisory Board | 12 |
|---|---|
| Corporate governance report | 14 |
| Investor relations | 18 |
| Corporate structure and business activities | 22 |
|---|---|
| Value-oriented corporate strategy | 27 |
| Economic conditions | 29 |
| Research and development | 30 |
| Earnings, fi nancial position and net assets | 32 |
| Employees | 36 |
| Events after the balance sheet date | 37 |
| Report on risks and opportunities | 38 |
| Anticipated developments | 43 |
| Disclosures under Section 289 Sub-section 4 HGB (German Commercial Code) | 45 |
| Income statement | 50 |
|---|---|
| Balance sheet | 51 |
| Statement of changes in equity | 52 |
| Cash fl ow statement | 53 |
| Notes | 54 |
| Responsibility statement of the Executive Management Board | 96 |
|---|---|
| Auditors' report | 97 |
| Glossary | 98 |
| Publishing information | 100 |
= Internet reference
| 2008 € '000 |
2007 € '000 |
Change % |
|
|---|---|---|---|
| Earnings | |||
| Other income | 3,208 | 2,583 | 24.2 |
| Other expenses | (24,601) | (26,510) | (7.2) |
| of which research and development costs | (20,157) | (22,999) | (12.4) |
| Operating result | (21,394) | (23,927) | (10.6) |
| Earnings before tax | (20,433) | (22,234) | (8.1) |
| Net loss for the period | (20,448) | (22,258) | (8.1) |
| Earnings per share in € | (1.71) | (1.86) | (8.1) |
| Balance sheet as at 30.11. | |||
| Total assets | 15,327 | 37,627 | (59.3) |
| Cash and cash equivalents | 12,137 | 34,170 1 | (64.5) |
| Equity | 5,790 | 25,951 | (77.7) |
| Equity ratio 2 in % |
37.8 | 69.0 | (45.2) |
| Cash fl ow statement | |||
| Cash fl ow from operating activities | (22,830) | (22,659) | 0.8 |
| Cash fl ow from investing activities | 14,932 | (15,599) | (195.7) |
| Cash fl ow from fi nancing activities | (89) | (960) | (90.7) |
| Employees (number) | |||
| Employees as at 30.11. 3 | 66 | 57 | 15.8 |
| Employees – average for the reporting period 3 | 62 | 51 | 22.0 |
1 including fi nancial assets
2 equity/total assets
3 including members of the Executive Management Board
WILEX published the interim analysis for futility of its Phase III ARISER trial with RENCAREX®. The Independent Data Monitoring Committee determined that the trial will probably deliver a signifi cant result.
The US Food and Drug Administration (FDA) granted WILEX a Special Protocol Assessment (SPA) for the Phase III registration trial of REDECTANE®. An SPA documents that the FDA considers the design and planned analysis of the clinical trial to be appropriate for the submission of an application for approval. The FDA considers itself to be bound by the SPA in connection with the approval process as long as the trial is conducted in accordance with the design stipulated in the SPA.
WILEX commenced patient recruitment for its Phase III trial of REDECTANE®. The trial is being conducted in accordance with the design set out in the SPA.
WILEX entered into an exclusive worldwide marketing and sales agreement for REDECTANE® with the Belgian company Ion Beam Applications S.A. (IBA). The agreement gives IBA the rights and licences required for manufacturing and marketing the product.
WILEX enrolled the fi rst patient into its second clinical Phase II trial with MESUPRON®. The drug is being administered in combination with Capecitabine, a chemotherapeutic agent, as a fi rst-line treatment of 114 patients with metastatic HER2 receptor negative breast cancer.
WILEX's mission is to develop drugs with a low side effect profi le (targeted therapy) as well as diagnostic agents for the specifi c detection of different types of cancer.
WILEX has a broad product pipeline consisting of two candidates in Phase III registration trials and one Phase II programme in two indications. WILEX entered into an agreement with UCB in January 2009 to acquire fi ve preclinical oncology projects.
WILEX aims within a few years to be able to fi nance its research and development programmes from its operating cash fl ow.
| Product | Indication | Preclinical phase |
Phase I | Phase II | Phase III | Approval |
|---|---|---|---|---|---|---|
| RENCAREX® | Non-metastatic renal cell cancer |
|||||
| REDECTANE® | Renal mass | |||||
| MESUPRON® | Pancreatic cancer Breast cancer |
|||||
| MEK inhibitor* (WX-554) |
Cancer | |||||
| PI3K inhibitor* | Cancer | |||||
| 3 antibody programmes* |
Cancer |
* UCB programmes
1. Drug discovery
2. Preclinical development
Objective: Identify biologically active compounds. The selection is performed by means of automated experiments or molecular design. Subsequently, the structure is modifi ed to optimise the desired properties.
WILEX works with research institutes and universities or obtains licences for lead compounds. In order to protect a drug at a later stage against imitation, all of WILEX's products and procedures are subject to early and comprehensive patent protection.
Objective: Determine, test and optimise the properties of the compounds. Substances that may be intoler able for humans are excluded and the drug's pharmaceutical dosage form (e. g. capsule or injection) is fi xed. The drug should have the following properties: good potency, clear difference between therapeutic effects and potential side effects, good absorption and good retention in the body.
Preclinical tests are legally required before a drug may be applied in humans. WILEX establishes strict criteria and requirements, discusses them with the authorities and coordinates the execution of the trials by contract research institutes. Subsequently, the Company examines the fi nished drug in the labora tory as to its quality before being released for human use.
In order to fi le for approval for a new drug, three clinical trial phases (I, II and III) are usually required.
Phase I: About 12 to 36 patients or healthy volunteers; duration: approx. 1 year
Objective: Provide evidence of safety and tolerance in healthy volunteers or patients. The absorption, distribution and conversion of the drug in the body and its elimination as well as possible side effects are examined.
WILEX has completed more than 11 Phase I trials involving more than 190 patients to date. In these trials, all of its substances have been shown to be safe and well tolerated.
Developing a cancer drug in the pharmaceutical industry generally takes up to 15 years and requires an average expenditure of € 500 million. This process entails the following stages: drug discovery, preclinical development, clinical development, approval and marketing. WILEX focuses on its core expertise: preclinical research, clinical trials and regulatory affairs.
Phase II: About 30 to 200 selected patients; duration: approx. 2 years Objective: Provide evidence of effi cacy in patients. The effective dose, the fi nal dosage form and the safety and tolerance are also determined.
WILEX has started or successfully completed fi ve Phase II trials involving more than 300 patients.
Phase III: About 200 to 1,000 patients; duration: approx. 3 years
Objective: Provide evidence of effi cacy in a large patient population and benefi ts in comparison to standard of care. Interactions with other drugs and safety and tolerance in case of prolonged application are determined.
WILEX is currently carrying out two Phase III registration trials involving 864 and 166 patients respectively. An Independent Data Monitoring Committee (IDMC) verifi es the drug's safety and tolerance during the trial and oversees effi cacy analyses.
Before conducting a clinical trial an application with the relevant regu latory authority has to be fi led. A study protocol is prepared and all details and questions are discussed with the regulatory authorities before the trial is fi nally carried out. All fi ndings and data from all phases of the research and development process must be compiled in the application for marketing approval of product candidates. The applications are extensive and can contain more than 100,000 pages. The approv al procedure can take between six and 24 months.
To date WILEX has fi led applications for all of its clinical trials and started or completed 18 trials. The Company will compose the approval applications for its product candidates and submit them to the appropriate authorities, e. g. the European Medicines Evaluations Agency (EMEA) in Europe and the Food and Drug Administration (FDA) in the USA. An EMEA approval automatically applies to all EU member states.
Target-group specifi c marketing and sales activities provide customers (doctors, pharmacists, nursing staff etc.) with information on the drug and its application before and after market launch. Negotiations for reimbursement are increasingly required on a regional, national and international level with health insurance funds and public reimbursement authorities.
For the commercialisation of its products, WILEX also enters into production, marketing and distribution partnerships.
worldwide are newly diagnosed with kidney cancer each year
The WX-G250 antibody binds to the CA IX antigen on the surface of clear cell renal cell carcinoma. Like RENCAREX®, REDECTANE® also consists of the WX-G250 antibody, but is radiolabelled with iodine124 for diagnostic purposes. The substance is intended to make a malignant tumour and metastases visible by means of a PET/CT.
In 2005/2006, the Ludwig Institute for Cancer Research, New York, successfully conducted a proof of concept study in collaboration with New York's Memorial Sloane-Kettering Cancer Center. The registration trial for REDECTANE® started in the United States in 2008.
Completion of patient recruitment and results are planned for 2009.
The peak sales potential of this imaging agent for the diagnosis of clear cell renal cell carcinoma is approximately USD 100 million.
I have never seen a test that delivered such clear fi ndings."
Professor Chaitanya Divgi, University of Pennsylvania
Each year approximately 70 % of newly diagnosed kidney tumours are clear cell renal cell carcinomas. Patients with aggressive clear cell renal cell carcinoma have a poor prognosis for survival and low quality of life. To date, the diagnosis of this type of cancer is possible only through pathology once the renal mass has been surgically removed. REDECTANE® aims to determine for the very fi rst time whether or not clear cell renal cell carcinoma is present – without surgery. This could not only help improve the treatment planning for patients but also avoid surgery. No diagnostic agent for clear cell renal cell carcinoma exists comparable to REDECTANE®.
The drug candidate RENCAREX® could be used to combat clear cell renal carcinoma. This particularly aggressive tumour is usually surgically removed. However, up to 40 % of patients are at high risk of relapse (metastasis) resulting in a high mortality rate. No drug has been approved by the FDA or EMEA to date for the adjuvant therapy of patients with this type of cancer to prevent metastases or inhibit their spread after surgery.
The chimeric antibody WX-G250 (RENCAREX®) binds to the CA IX antigen on the surface of clear cell renal cell carcinoma; it rarely binds to healthy tissue or benign tumours. WX-G250 also binds to the cells of the immune system, which triggers a process that can destroy tumour cells.
To date, RENCAREX® has shown good safety and tolerance in six Phase I and Phase II trials with more than 140 patients. The recruitment of 864 patients for the Phase III registration trial was completed in 2008.
An interim analysis for effi cacy is planned to commence in 2009.
The peak sales potential for the indication of clear cell renal cell carcinoma is approximately USD 500 million.
Breast cancer is the most frequent form of cancer affecting women worldwide. According to the American Cancer Society, in 2007 approximately 1.3 million women were newly diagnosed with breast cancer. The uPA enzyme system (Urokinase Plasminogen Activator) might play a central role in the spread of breast cancer. A high uPA level in a tumour predicts poor survival. The current treatment guidelines of the American Society for Clinical Oncology (ASCO) recommend measuring the uPA level in breast cancer patients. MESUPRON® contains the fi rst substance worldwide in advanced clinical development that aims to inhibit the uPA system.
The uPA system presumably plays an important role in the growth, spread and metastasis of various malignant tumours. MESUPRON® is designed to inhibit the system, thus preventing possible metastasis.
MESUPRON® and its intravenously administered substance WX-UK1 was successfully tested in eight Phase I trials with more than 150 patients. The substances were shown to be safe and well tolerated. Phase II trials are currently being conducted to evaluate effi cacy in pancreatic and breast cancer patients.
Initial data from the Phase II trial with pancreatic cancer patients are expected to be published in 2009.
The peak sales potential for use of the drug in various indications is more than USD one billion.
Further successful clinical development could lead to the uPA programme being of major relevance for the long-term control of numerous types of cancer."
Roger B. Cohen, MD, Fox Chase Cancer Center, Philadelphia
WILEX and UCB agreed in January 2009 that WILEX will acquire and further develop UCB's fi ve preclinical oncology projects. UCB's innovative oncology portfolio ideally complements and expands WILEX's advanced clinical pipeline and is a perfect fi t for the Company's focus and expertise – small-molecules and antibodies for oncology. It also gives WILEX access to UCB's broad antibody technology platform. WILEX has in UCB an important development partner at its side. These fi ve projects have reached different development stages; the two small molecules are the most advanced. WILEX plans to fi le an application for a clinical Phase I trial and the fi rst dose in man within the next 12 months.
The orally available, small-molecule MEK inhibitor is in preclinical development.
The mitogen-activated protein kinase (MEK) has been shown to play a central role in signal transduction. MEK has been linked to a multitude of biological processes such as cell division, cell differentiation and cell death. The MEK signalling pathway is overexpressed in more than 30 % of cancers, resulting in uncontrolled cell growth and pro liferation. Inhibition of MEK could have signifi cant therapeutic potential.
The second small-molecule substance, a PI3K inhibitor, is in the fi nal phase of lead optimisation. In this phase, a lead compound is defi ned and prepared for preclinical development.
The phosphatidylinositol-3-kinase/ pro teine-kinase-B signalling pathway – PI3K in short – sends a "growth" signal to the nucleus of a tumour cell. It has been shown that abnormal mutations of the PI3K-B signalling pathway are present in most types of cancer. Identifying an inhibitor for the PI3K-B signalling pathway is thus of therapeutic interest.
The three antibody-based projects are currently in the research phase. The aim is to identify a specifi c antibody that binds to each new target structure. These molecular targets of the antibodies play different roles in spreading cancer or are present on tumour cells.
WILEX is the ideal partner for developing our promising oncology portfolio because we benefi t from WILEX's comprehensive oncology expertise, focus and know-how."
Dr Melanie Lee, Executive Vice-President UCB and President UCB NewMedicines
IBA develops and markets state-of-the-art technologies, drugs and solutions tailored to customers' needs in the health care sector with a focus on cancer diagnosis and treatment. The company also utilises its scientifi c expertise for activities related to industrial sterilisation and ionisation.
Ongoing technical innovations as well as the company's existing international distribution network for radiopharmaceutical products enable IBA to continuously expand its leading position in the fi eld of molecular imaging. Thanks to its growing network of business locations in North America, Europe and Asia, IBA can rapidly and reliably make radiopharmaceutical products available to hospitals and medical imaging centres worldwide. Radiopharmaceutical products such as FDG – a radioactive fl uorodeoxyglucose used in medical diagnostics for imaging metabolic processes in the body – have a very short half-life and must be made available quickly to medical centres.
Hence IBA possesses not only the production know-how but also the infrastructure required to develop the market for REDECTANE® rapidly and comprehensively once the drug has been approved. IBA already markets its products worldwide to radiologists and specialists in nuclear medicine, both also potential customers of REDECTANE®.
WILEX and IBA have been collaborating since 2006 under a manufacturing agreement for the ongoing Phase III registration trial of REDECTANE®. The companies' partnership was expanded in 2008. It thus grants IBA the exclusive and worldwide rights and licences for manufacturing and marketing the product while WILEX retains the co-promotion rights to introduce REDECTANE® to urologists and oncologists.
Pursuant to the agreement, WILEX will be responsible for the production and clinical development of the antibody. IBA in turn will be responsible for the radioactive labelling of the antibody as well as the marketing and distribution of REDECTANE®.
WILEX received upfront payments, and will receive milestone payments as well as contributions in kind under the agreement. Following marketing approval, WILEX will re ceive 20 % up to an initial sales volume ex factory of € 7 million and 45 % thereafter.
We entered into two important cooperation agreements in the past 12 months, one with the Belgian company, Ion Beam Applications S.A. (IBA), and the other with the Brussels-based global biopharmaceutical company, UCB Pharma S.A. (UCB). IBA were granted the worldwide rights for distribution, marketing and sale of REDECTANE® in June 2008. In January 2009, WILEX and UCB agreed to enter into a strategic alliance for the development of UCB's preclinical oncology portfolio.
UCB is a global biopharmaceutical company engaged in the research, development and commercialisation of innovative pharmaceutical and biotechnological products for dis orders of the central nervous system as well as immunology. Specifi cally, "biopharma" refers to the linking of classical pharmaceutical disciplines with the opportunities of biotechnology.
In UCB, WILEX has not only found an important development partner but also an important strategic investor for the Company's future development.
Under the terms of this partnership, WILEX will acquire the worldwide rights to UCB's entire preclinical oncology portfolio, which comprises two small-molecule programmes and three antibody programmes.
UCB will retain the exclusive right to buy back each one of the fi ve programmes following the completion of initial proof of concept studies and to develop and market them itself. In this case WILEX is eligible for milestone payments from UCB for development and commercialisation as well as royalties for commercialisation. WILEX will retain the right to continue developing and to commercialise the programmes on its own if UCB does not exercise its buyback right for each programme. In this case UCB will receive milestone payments and royalties from WILEX. Furthermore, the two partners may jointly develop the programmes after the successful completion of the proof of concept studies.
Under the agreement, UCB has granted the rights to the fi ve preclinical programmes to a subsidiary wholly-owned by UCB. In addition, the company will be funded by UCB with € 10 million in cash. WILEX will acquire this company using newly issued shares from authorised capital of WILEX AG subject to the exclusion of shareholders' subscription rights. Hence UCB will acquire an interest of 13.19 % in WILEX AG as a result of this transaction. UCB will also make two milestone payments of € 5 million each. The milestones defi ned are: submission of an application to conduct a clinical Phase I trial and fi rst dose in man. They are expected to be achieved approximately 12 months after the closing of the agreement.
In the financial year 2008, we focused on product development and partnerships. The development of WILEX's clinical product candidates is in an advanced stage: RENCAREX® and REDECTANE® are in Phase III registration trials; MESUPRON® is in Phase II trials in two indications.
Recruitment for the Phase III ARISER trial with RENCAREX® was completed in July 2008. The 343 relapses necessary for the next milestone – at which point we will perform an interim analysis for efficacy of RENCAREX® – will probably be reached in the second quarter of 2009, at the earliest; this analysis could provide the basis for filing for approval in the European Union.
Recruitment of 166 patients for the Phase III registration trial of REDECTANE® will likely be completed in the first quarter of 2009. We anticipate the results three to six months later. In February 2008, prior to the start of the Phase III trial, WILEX obtained the requested special protocol assessment (SPA) from the FDA. As far as we know, this is the first time an SPA has been issued for a diagnostic agent. The SPA documents that the FDA considers the design and planned analysis of the trial to be appropriate for the filing of a marketing application, if the applicant adheres to the trial's design. WILEX is currently conducting the trial in accordance with the SPA. The FDA considers itself bound to this protocol assessment as part of the marketing approval process.
Patient recruitment for the clinical Phase II trial of the orally administered drug candidate MESUPRON® in combination with the chemotherapeutic agent Gemcitabine for pancreatic cancer patients was completed as planned in July 2008. In December 2008 WILEX performed an independent radiological analysis, which shows that the disease has not yet progressed radiologically in a sufficient number of patients.
We will focus in 2009 on pursuing our marketing strategy and preparing for market launch of our products. We will enter into further alliances and partnerships and support them through our own marketing concepts. We entered into an agreement with Ion Beam Applications S.A. (IBA) in 2008 for the worldwide marketing and distribution of REDECTANE®. Under this agreement, WILEX retains the co-promotion rights to introduce REDECTANE® to urologists and oncologists.
The strategic alliance with UCB, which we announced at the beginning of 2009, was another important step for us. UCB, one of Europe's largest biopharmaceuticals groups, represents not only an important development partner for WILEX but also an important strategic investor in the Company's future development. Under the terms of this partnership, WILEX will acquire the worldwide rights to develop UCB's preclinical oncology portfolio, which comprises two small molecule programmes and three antibody programmes. As a result of this transaction and a planned capital increase in kind from authorised capital, UCB will acquire a shareholding of 13.19% in WILEX AG.
As a strategic investor, UCB will invest €10 million and also make two milestone payments of € 5 million. The milestones defined are: submission of an application to conduct a clinical Phase I trial and first dose in man. We expect both to occur approximately within 12 months after closing.
Changes in health care systems worldwide will trigger radical shifts in the pharmaceuticals market, opening up opportunities particularly for specialised companies." Professor Olaf G. Wilhelm
The imminent changes in health care systems – such as the expected health care reforms in the USA – will have a fundamental impact on the health care market and thus also on the oncology market. Not only biotech companies but also pharmaceutical companies will have to adjust to new market constellations and fragmented markets, requiring new structures and marketing concepts.
This shift in the market will open up new opportunities for small and specialised companies such as WILEX. We feel very well positioned to take advantage of these changes, given our highly advanced product portfolio, for high and unmet medical need.
WILEX aims within a few years to be able to fi nance its research and development programmes from its operating cash fl ow. In order to achieve this goal, the Executive Management Board pursues a commercialisation strategy for all products.
Both the Company and its shareholders will benefi t from this development.
We wish to thank all our shareholders for their support and the trust they placed in us.
Munich, 19 February 2009
The Executive Management Board
Professor Olaf G. Wilhelm Peter Llewellyn-Davies Dr Paul Bevan Dr Thomas Borcholte
In the 2008 fi nancial year, the Supervisory Board continued its close cooperation with the Executive Management Board. The Supervisory Board regularly advised and monitored the Executive Management Board with regard to the management of the Company.
The Supervisory Board comprehensively fulfi lled all duties as stipulated in legal provisions and the Articles of Association of WILEX AG.
The Executive Management Board presented all signifi cant strategic and operational measures to the Supervisory Board and agreed their implementation in advance with the Supervisory Board. The Supervisory Board obtained regular reports on the situation and development of the Company. The Supervisory Board also received regular, comprehensive and timely information on all major business developments and basic issues relating to business policy, corporate management and planning. Without exception, all documents submitted to the Supervisory Board were examined. The parties providing the information, in particular the members of the Executive Management Board, were consulted on signifi cant matters.
The Supervisory Board also obtained information about all signifi cant events that were particularly important for the assessment of the situation, strategy implementation and target achievement, development and management of WILEX AG. The Chairman of the Supervisory Board, in particular, regularly discussed the strategy and reviewed the progress of business with the Chairman of the Executive Management Board. The Chairman of the Supervisory Board was advised promptly of all important resolutions taken by the Executive Management Board and, when necessary, arranged for the discussion of important issues by the Supervisory Board or the Supervisory Board committees.
In the 2008 fi nancial year (1 December 2007 to 30 November 2008), the Supervisory Board met for eight regular meetings. All members of the Supervisory Board attended at least half of the meetings. In addition, numerous conference calls were conducted as part of the regular monitoring and advisory activities with regard to the Executive Management Board.
The discussions focused mainly on the Company's strategy in regards to the commercialisation of the product candidates it is developing, especially the licence agreement with Ion Beam Applications S.A., Brussels, Belgium (IBA). WILEX granted IBA the worldwide marketing rights for its diagnostic candidate REDECTANE® in the 2008 fi nancial year. The Supervisory Board approved the agreement.
The Supervisory Board also informed itself, regularly and comprehensively, of the Company's fi nancial situation and risk management and discussed the Company's future strategy with the Executive Management Board. After extensive discussions, the Supervisory Board approved the budget and the corporate goals of the Executive Management Board for the 2008 fi nancial year.
In addition, the Supervisory Board stayed abreast of WILEX AG's research and development projects and its clinical programmes. It paid particular attention to the progress of the Phase III registration trial with RENCAREX®, the execution of the Phase II trials with MESUPRON® as well as the progress of the Phase III registration trial with REDECTANE®.
At our meeting on 18 February 2009, we extensively discussed with the Executive Management Board the new recommendations and suggestions in the German Corporate Governance Code (GCGC) as amended on 6 June 2008 and decided to implement these in part. The new joint declaration of compliance by the Executive Management Board and the Supervisory Board of WILEX AG was adopted at the meeting on 18 February 2009. It is made available on the Company's website at www.wilex.com/IR/Corporate_Governance.php. For more details please see the joint corporate governance report by the Executive Management Board and the Supervisory Board.
For reasons of effi ciency, a joint Compensation and Nomination Committee was established, which covers both areas in its meetings. The Compensation Committee (a decision-making committee) met for two meetings in the 2008 fi nancial year.
www.wilex.com
The main focus of these meetings related to determining performance targets for bonuses for the members of the Executive Management Board in the 2008 fi nancial year, as well as target achievement for the 2007 fi nancial year. In addition, a contract extension for the Executive Management Board member, Dr Thomas Borcholte, was prepared. The Nomin ation Committee (a preparatory committee) has not yet held any meetings.
The Audit Committee (a preparatory committee) met four times in the year under review. The focus of its discussions included the selection of the auditor of the fi nancial statements, who was then appointed by the Annual General Meeting on 3 June 2008 at the recommendation of the Supervisory Board and subsequently engaged by the Supervisory Board to audit the annual fi nancial statements for 2008. The Supervisory Board obtained a declaration of the auditor's independence in advance in accordance with Section 7.2.1 of the German Corporate Governance Code. The Audit Committee also discussed the 2008 half-yearly report with the auditor.
The Supervisory Board did not establish any other committees.
The Supervisory Board discussed in several sessions the preparation of the strategic partnership agreement between UCB and WILEX. At its meeting on 8 January 2009, the Supervisory Board approved this transaction.
The auditors, KPMG AG Wirtschaftsprüfungsgesellschaft, Munich, have audited the annual fi nancial statements and the management report of WILEX AG prepared by the Executive Management Board in accordance with German GAAP (HGB) and IFRS, including the accounts for the 2008 fi nancial year on which these are based, and issued an unqualifi ed audit certifi cate. The documentation relating to both sets of annual fi nancial statements and the auditors' reports was made available to all Supervisory Board members in good time. The auditors attended the meeting of the Audit Committee on 5 February 2009 as well as the Supervisory Board meeting on 18 February 2009, which focused on the adoption of the annual fi nancial statements, and reported on the signifi cant results of the audit. The Audit Committee discussed the result in detail and proposed that the Supervisory Board approve both sets of annual fi nancial statements.
The Supervisory Board also took notice of the audit result and itself examined both sets of annual fi nancial statements and the management report as well as the proposed appropriation of accumulated loss (HGB) in accordance with legal provisions. The Supervisory Board had no objections and therefore approved the annual fi nancial statements in its meeting today. As a result, the annual fi nancial statements in accordance with HGB for the 2008 fi nancial year have been adopted.
The auditors have also concluded that the management report presents a true and fair view of the risks and rewards and that the measures taken by the Executive Management Board in accordance with Section 91 Sub-section 2 of the German Stock Corporation Act (AktG) are suitable for identifying at an early stage any developments which may jeopardise the Company's existence.
The Supervisory Board would like to take this opportunity to thank the Executive Management Board and all employees of WILEX AG for the impressive commitment they showed in the 2008 fi nancial year. It is due to their commitment that the portfolio of WILEX has matured further and that key milestones were reached.
Munich, 18 February 2009
The Supervisory Board
Dr David Ebsworth Chairman
The German Corporate Governance Code (GCGC) is intended to enhance the trust in the management of listed companies and disclose the rules of corporate governance. Both the Executive Management Board and the Supervisory Board of WILEX AG expressly endorse the Code and have implemented it with exceptions.
The Executive Management Board and the Supervisory Board declare that WILEX AG has been in compliance with all recommendations of the Government Commission on the German Corporate Governance Code as published by the Federal Ministry of Justice in the offi cial section of the electronic Federal Gazette from 19 February 2008, the date of its last declaration of compliance, to the Supervisory Board meeting on 18 February 2009 (Code as amended on 14 June 2007), and that the Company is and will be in compliance with said recommendations from the Supervisory Board meeting on 18 February 2009 (Code as amended on 6 June 2008), in each case with the exception of the following:
Section 3.8 Clause 4 GCGC: No suitable deductible has been agreed in the D&O insurance for the Executive Management Board and the Supervisory Board. Both the Executive Management Board and the Supervisory Board of WILEX AG believe that a deductible would not impact the sense of responsibility and the loyalty with which the members of corporate bodies carry out the tasks and duties assigned to them. In addition, a signifi cant deductible, which – for reasons of equality – would have to be the same for each member of the relevant body, would affect the members of the Executive Management Board and the Supervisory Board very differently, depending on their private income and fi nancial circumstances.
Section 4.2.2 Clause 1 GCGC: The Compensation Committee of the Supervisory Board deals with the Executive Management Board contracts and determines the structure of the compensation system. The full Supervisory Board is kept informed by the Compensation Committee. However, the full Supervisory Board does not discuss or resolve the structure of the compensation system for the Executive Management Board including its main contract elements and its regular review. The Executive Management Board and the Supervisory Board of WILEX AG believe that these issues should be discussed by the Compensation Committee, which has been set up for this purpose and which has the required specialist expertise. According to the Supervisory Board and the Executive Management Board, this system has proved successful in the past.
Section 4.2.3 Sub-section 3 Clause 2 GCGC: The stock option plan launched in 2005 prior to the stock exchange listing of WILEX AG does not relate to comparison parameters, such as a share index. With regard to future stock option plans and similar systems, we will discuss whether and to what extent these should be based on relevant comparison parameters which have been established beforehand.
Section 4.2.3 Sub-section 3 Clause 4 GCGC: The Supervisory Board has not agreed a cap on the stock option plan in the event of extraordinary and unforeseen developments. A decision as to whether such a cap will be introduced in connection with future stock option plans or similar programmes will be made at the appropriate time.
Section 4.2.5 Clause 1 GCGC: The total compensation of each member of the Executive Management Board is disclosed in the notes to the annual fi nancial statements (26. Corporate bodies and compensation report). It is no longer part of the corporate governance report because the Executive Management Board and the Supervisory Board believe that disclosing identical information twice does not provide any additional information.
Section 5.1.2 Clause 6 GCGC: No age restriction has been or will be specifi ed for members of the Executive Management Board. WILEX AG believes that such a regulation would not be in the best interest of its shareholders, as rigid regulations on the retirement age may result in the Company having to forego the expertise of key staff.
Section 5.4.1 Clause 2 GCGC: No age restriction has been or will be specifi ed for members of the Supervisory Board. WILEX AG believes that such a regulation would not be in the best interest of its shareholders, as rigid regulations on the retirement age may result in the Company having to forego the expertise of key staff. In addition, an age limit for Super-
visory Board members would also restrict the rights of the Company's shareholders to elect their representatives to the Supervisory Board.
Section 5.4.3 Clause 1 GCGC: Elections to the Supervisory Board are not carried out on an individual basis. Due to the overall responsibility of this body and the current shareholder structure, WILEX AG does not consider this recommendation appropriate.
Section 5.4.6 Sub-section 2 Clause 1 GCGC: The members of the Supervisory Board do not receive performance-related compensation. Both the Executive Management Board and the Supervisory Board of WILEX AG believe that performancerelated compensation would not give Supervisory Board members additional incentives to carry out their Supervisory Board activities effi ciently.
Section 5.4.6 Sub-section 3 Clause 1 GCGC: The total compensation of each member of the Supervisory Board is disclosed in the notes to the annual fi nancial statements (26. Corporate bodies and compensation report). It is no longer part of the corporate governance report because the Executive Management Board and the Supervisory Board believe that disclosing identical information twice does not provide any additional information.
Section 7.1.3 GCGC: Specifi c information on the Company's stock option plans and similar securities-based incentive systems is disclosed in the notes to the annual fi nancial statements (19. Staff costs, 26. Corporate bodies and compensation report). It is no longer part of the corporate governance report because the Executive Management Board and the Supervisory Board believe that disclosing identical information twice does not provide any additional information.
WILEX AG furthermore complies with the majority of the suggestions contained in the German Corporate Governance Code (provisions containing terms such as "should" or "can").
The next declaration of compliance of WILEX AG is scheduled to be published at the beginning of 2010.
This declaration of compliance in accordance with Section 161 of the German Stock Corporation Act is available on the Internet at www.wilex.com/IR/Corporate_Governance.php. All of WILEX AG's declarations of compliance are published on the Company's website for at least fi ve years.
Munich, 18 February 2009
WILEX AG Executive Management Board and Supervisory Board
Refl ecting the Company's international strategic orientation, the Executive Management Board currently comprises four members of different nationalities. The Executive Management Board determines the Company's strategic orientation. Its tasks include managing, planning, establishing and monitoring a risk management system. The work of the Executive Management Board is coordinated by its Chairman.
page 86
The Executive Management Board and the Supervisory Board of WILEX AG work with each other in a trustful and effi cient manner. The Executive Management Board regularly provides comprehensive and timely information to the Supervisory Board regarding the Company's strategy, the development of its business, planning, existing risks and risk management as well as compliance in order to enable the Supervisory Board to effi ciently exercise its advisory and control functions. Signifi cant decisions made by the Executive Management Board require the consent of the Supervisory Board.
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www.wilex.com
The Supervisory Board currently is comprised of six members, who are appointed by the Company's Annual General Meeting. The Supervisory Board monitors and advises the Executive Management Board of WILEX AG in the management of the Company's business. In addition, the Supervisory Board is responsible, amongst other things, for appointing the members of the Executive Management Board and for examining the annual fi nancial statements. Please see the notes to the annual fi nancial statements for more details on the Supervisory Board.
Working in committees is an integral part of the work of the Supervisory Board. The Supervisory Board of WILEX AG has established two committees: the Audit Committee (two members) and the joint Compensation and Nomination Committee (three members). The Audit Committee is responsible for, amongst other things, the preparation of the annual fi nancial statements including the management report and the proposal for the appropriation of profi t or loss for approval by the Supervisory Board. The Supervisory Board appoints the auditor of the annual fi nancial statements after being briefed by the Executive Management Board and the Audit Committee.
Furthermore, Section 7.1.2 of the German Corporate Governance Code as amended in June 2008 states that the Supervisory Board or its Audit Committee should discuss half-yearly reports and quarterly reports, if any, with the Executive Management Board prior to publication. WILEX AG will abide by this recommendation as of the 2009 fi nancial year and has assigned this task to the Audit Committee. The Audit Committee is chaired by Dr Georg F. Baur. He has specialist knowledge and experience in the application of accounting principles and internal control processes, as required by the German Corporate Governance Code.
The joint Compensation and Nomination Committee makes decisions concerning staff matters, including the compensation of members of the Executive Management Board. It also proposes suitable candidates to the Supervisory Board for recommendation to the Annual General Meeting and prepares the appointment of new members of the Executive Management Board. Dr David Ebsworth is the Chairman of the joint Compensation and Nomination Committee.
The Supervisory Board regularly performs an effi ciency review in accordance with Section 5.6 of the German Corporate Governance Code. The fi rst effi ciency review was carried out during the 2008 fi nancial year and it shall be performed every two years thereafter. It demonstrated that the Supervisory Board is effi ciently organised and that the collaboration between the Executive Management Board and the Supervisory Board functions smoothly.
Detailed disclosures regarding the stock option plans and the compensation of both the Executive Management Board and the members of the Supervisory Board are made in the notes to the annual fi nancial statements (26. Corporate bodies and compensation report).
Ethical standards, professionalism and compliance with statutory requirements are among the key ingredients of WILEX AG's corporate philosophy. In the 2008 fi nancial year, there were no deviations from the declaration of compliance applicable to this period. Care was taken to ensure that no confl icts of interest would arise among members of the Executive Management Board or the Supervisory Board pursuant to Sections 4.3 and 5.5 of the German Corporate Governance Code. The Supervisory Board member, Dr Friedrich von Bohlen und Halbach, did not participate in one Supervisory Board meeting due to a potential confl ict of interest. The Supervisory Board member, Professor Iris Löw-Friedrich, did not participate in the deliberations of or votes by the Supervisory Board in connection with the Company's strategic alliance with UCB Pharma S.A.
While some Supervisory Board members also hold positions on supervisory boards of other companies in the pharmaceutical and biopharmaceutical sectors, none of these companies can be considered major competitors of WILEX AG, which complies with GCGC requirements. WILEX AG has explained the legal regulations on insider trading to all members of its corporate bodies and employees and pointed out the need to handle sensitive information at WILEX in a responsible manner.
WILEX AG satisfi es all requirements under the transparency guidelines of the German Corporate Governance Code. It publishes all important documents on its website – www.wilex.com – in order to ensure that all market participants receive comprehensive, equitable and timely information concerning the Company's situation and any signifi cant changes. On this website, all information relevant for the capital market is available in German and English, including annual and interim reports, ad hoc releases, press releases, transactions requiring disclosure (directors' dealings) and presentations as well as corporate governance information and the declaration of compliance. The fi nancial calendar contains the dates that are relevant for the capital market. Analyst and media conferences are organised at least once per year.
As at 30 November 2008, the Executive Management Board held 120,331 shares (representing 1.01 % of the Company's share capital). As at 30 November 2008, the Supervisory Board held 101,147 shares (representing 0.85 % of the Company's share capital).
| Name | Function | Number |
|---|---|---|
| Dr David Ebsworth | Chairman of the Supervisory Board | 30,000 |
| Dr Georg F. Baur | Deputy Chairman of the Supervisory Board | 70,347 |
| Dr Rüdiger Hauffe | Member of the Supervisory Board | 800 |
| Professor Olaf G. Wilhelm* | Chairman of the Executive Management Board | 120,331 |
* The wife of Professor Olaf G. Wilhelm, Dr Sabine Wilhelm, holds a further 120,331 shares.
In the 2008 fi nancial year, no purchases and sales requiring disclosure were made by members of the corporate bodies or other members of management of WILEX AG.
After the balance sheet date, the following purchases requiring disclosure were made by members of the corporate bodies of WILEX AG:
| Name | Date | Trans action |
Market place |
Price € |
Number | Volume € |
|---|---|---|---|---|---|---|
| Dr David Ebsworth, Chairman of the Supervisory Board |
09.01.2009 | Purchase | XETRA, Frankfurt |
3.99 | 10,000 | 39,900.00 |
| Dr Georg F. Baur, Deputy Chairman of the Supervisory Board |
09.01.2009 | Purchase | XETRA | 4.00 | 30,000 | 120,000.00 |
| Dr Rüdiger Hauffe, Member of the Supervisory Board |
09.01.2009 | Purchase | XETRA | 4.00 | 4,000 | 16,000.00 |
Investor relations activities aim to provide a fair market valuation of the Company, attract the attention of analysts and investors and, as a result, both increase the liquidity of WILEX's share and improve the Company's access to the capital markets. Corporate communications at WILEX are thus guided by timeliness and transparency. We publish our annual fi nancial statements and all interim reports within the deadlines recommended by the German Corporate Governance Code. All corporate reports, presentations and other information for investors are available on the Company's website.
| The share | |
|---|---|
| WKN | 661472 |
| ISIN | DE0006614720 |
| Stock exchange symbol | WL6/ WL6G.DE/ WL6.GR |
| Class of shares | Bearer shares |
| Market segment | Regulated Market (Prime Standard) |
| Stock exchanges | Berlin, Düsseldorf, Frankfurt/Main, Munich, Stuttgart, XETRA |
| Designated sponsors | Sal. Oppenheim, WestLB |
| First day of trading | 13.11.2006 |
| Issue price | € 13.80 |
The crisis in the international mortgage and fi nance markets has sent stock markets reeling. The DAX – Germany's leading stock index – lost approximately 45 % of its value in the past 14 months (1 December 2007 to 30 January 2009) while the Prime Technology Index lost more than 72 %. Biotechnology stocks in contrast managed to maintain their position fairly well. Both the NASDAQ Biotechnology Index in the United States and the Prime Biotechnology Index in Germany followed relatively similar and steady trends over the year. Starting at the end of September 2008 both of these indices, however, experienced strong downward corrections by up to 25 %, causing them to close the end of January 2009 with a loss of about 16 % and 14 %, respectively. Especially the takeover bid for Jerini and the strength of Morphosys's stock had a positive effect on the German peer group (12 biotech stocks excluding BBBiotech, Eurofi ns and Qiagen), which closed a mere 2 % below its level on 1 December 2007.
WILEX's share started the fi nancial year on 1 December 2007 at a share price of € 5.11 and posted strong gains in mid-December 2007 following the positive outcome of the interim analysis for futility for the Phase III ARISER trial. However, the share declined in the fi rst three months of 2008, reaching a low of € 5.25 at the end of March 2008. It started to recover continually in May and reached the year's high of € 8.53 in early July 2008. At the end of July, the share settled on a relatively stable level of € 7.35. From early October, the Company's share suffered a steep decline comparable to that of biotech indices. The typical year-end portfolio adjustments were particularly fi erce in 2008, given the preceding months' developments. By the close of the year, WILEX's share had lost more than 65 % of its value, falling to € 2.10 – its lowest level ever. The stock markets recovered slightly at the start of the year. WILEX's share made substantial gains on 8 and 9 January 2009 following the announcement of the Company's strategic alliance with UCB.
While the year-on-year trading volume grew markedly by 45 % in the 2008 reporting period, in WILEX's view it still remained unsatisfactory. On average 7,351 WILEX shares were traded per day on all stock exchanges (2007: 3,325 shares). Rela tively small trading volumes still trigger considerable price volatility. The volatility of WILEX's share (on the basis of 260 days; XETRA) has risen to 63.7 % (previous year: 45.8 %).
| Key share fi gures as at the end of the reporting period |
2008 | 2007 | |
|---|---|---|---|
| Number of shares issued | Number | 11,962,754 | 11,962,754 |
| Number of shares listed | Number | 13,251,911 | 11,962,754 |
| Market capitalisation | € million | 45.10 | 65.32 |
| Closing price (XETRA) | € | 3.77 | 5.46 |
| High (all stock exchanges) | € | 8.53 (on 09.07.08) |
16.00 (on 06.02.07) |
| Low (all stock exchanges) | € | 3.77 (on 28.11.08) |
4.25 (on 22.11.07) |
| Volatility (260 days; XETRA) | % | 63.65 | 45.78 |
| Average daily trading volume (all stock exchanges) | Shares | 7,351 | 3,325 |
| Average daily trading volume (all stock exchanges) | € | 47,309 | 34,054 |
| Earnings per share | € | (1.71) | (1.86) |
Source: Bloomberg
Shareholders with more than 3 % of the voting shares did not fi le any reports in the 2008 fi nancial year that their holdings had changed. Following the announcement of the Company's strategic alliance with UCB on 9 January 2009, three members of the Supervisory Board increased their holdings of WILEX shares.
Upon application by WILEX AG, on 11 June 2008 the Frankfurt/Main Stock Exchange admitted up to 1,289,157 ordinary bearer shares in the form of no par value bearer shares with a pro-rata interest in capital of € 1.00 each for trading on the Regulated Market as well as in the Prime Standard. The shares from this Contingent Capital II, which was approved at the Annual General Meeting on 8 September 2005, serve to secure options under the 2005 Stock Option Plan that participate in profi ts from the start of the fi nancial year in which they are issued to legal effect. The Company's share capital is modifi ed only upon exercise of the options and registration of the new shares in the Commercial Register. No stock options were exercised in the 2008 fi nancial year.
WILEX continued to cultivate its contacts to analysts and investors alike in the 2008 fi nancial year, carrying out three roadshows in Europe and participating in 20 international investor conferences during the year. The Company engaged in more than 20 discussions with analysts and almost 80 discussions with existing and potential investors. Growing numbers of private shareholders have also been contacting the Company with requests for information. The Annual General Meeting of WILEX AG took place on 3 June 2008 in Munich. WILEX's fi nancial calendar is available on its website.
www.wilex.com
www.wilex.com
page 100
The analysts of Sal. Oppenheim Research and WestLB regularly prepare research reports on WILEX. Their most recent assessments were published in January 2009.
Katja Arnold (CIRO) Tel. + 49 (0) 89 – 41 31 38 – 126 E-mail: [email protected]
WILEX is a biopharmaceutical company that develops patient-focused drugs and highly-specifi c diagnostic agents. They are designed to detect cancer, prevent metastases and treat malignant tumours. WILEX's products are intended to control cancer like a chronic disease.
The Company was founded in 1997 by a team of physicians and cancer research specialists from the Technical University of Munich. In 2001, WILEX was converted into a stock corporation (Aktiengesellschaft) under German law. Since November 2006, WILEX has been listed in the Regulated Market (Prime Standard segment) of the Frankfurt/Main stock exchange.
Glossary
Glossary
Glossary
The objectives of the Company are the research, development, production, approval and marketing of medical products and diagnostic agents, preferably in the fi eld of oncology, as well as the respective in-licensing and out-licensing of intellectual property rights. WILEX's therapeutic product candidates comprise antibodies and small-molecules. These form the basis of patient-tailored, highly-specifi c therapies which the Company aims to develop clinically for subsequent marketing approval.
WILEX's therapeutic antibody WX-G250 (RENCAREX®) binds to the tumour-specifi c antigen CA IX on the surface of clear cell renal cell carcinoma. This makes the tumour cell visible to the body's own immune system, which can then send out natural killer cells that attack and destroy the tumour cells. This mode of action is known as antibody-dependent cellular cytotoxicity (ADCC).
WILEX has radiolabelled the WX-G250 antibody and is developing this diagnostic agent under the name REDECTANE® for the detection of malignant kidney tumours.
The small-molecule drug candidate MESUPRON® is designed to inhibit the biological functions of cancer cells that would otherwise allow them to migrate into the surrounding tissue. This should prevent both primary growth of the tumour and inhibit metastasis.
The development of WILEX's clinical product candidates is at an advanced stage. RENCAREX® and REDECTANE® are in Phase III registration trials. MESUPRON® is in a Phase II trial in two indications (breast and pancreatic cancer). WILEX expects its products to be used for the treatment of patients with renal, bladder, breast, pancreatic, ovarian, gastric and colon cancer after successful completion of the registration trials and subsequent marketing authorisation.
Commercial opportunities for this attractive pipeline will be exploited through alliances and partnerships to ensure that maximum value can be created by the Company. In the 2008 fi nancial year, WILEX granted the worldwide marketing rights for its diagnostic candidate REDECTANE® to Ion Beam Applications S.A., Brussels, Belgium (IBA). The rights to market its drug candidate RENCAREX® in certain Southern European countries were granted in 2004 to the Company's cooperation partner, Laboratorios del Dr. Esteve S.A., Barcelona, Spain (Esteve).
WILEX is headquartered in Munich, Germany. The Company does not own property. Its offi ces and laboratories are located in rented premises.
In keeping with the dual management structure codifi ed in German law, WILEX is managed and controlled by both an Executive Management Board and a Supervisory Board. Under the Company's Articles of Association, the Executive Management Board may comprise one or more individuals. Our Executive Management Board currently has four members.
The Company's Executive Management Board and Supervisory Board cooperate closely. The Supervisory Board regularly advises and monitors the Executive Management Board with respect to its management of the Company. The Supervisory Board for WILEX is comprised of six members, in accordance with the Company's Articles of Association. Two committees have been established to enhance the Supervisory Board's effi ciency: a joint Compensation and Nomination Committee and an Audit Committee.
The compensation of the Executive Management Board comprises three components: In addition to the annual salary paid over twelve months, the fi xed compensation component comprises non-cash benefi ts. Variable compensation is contingent on the achievement of personal targets and the Company's performance targets. The performance targets of WILEX in the 2008 fi nancial year included milestones in clinical development and the successful completion of a commercialisation agreement. The compensation component with incentive and risk features is based on the 2005 stock option plan adopted by the Annual General Meeting on 8 September 2005. The option terms are described in detail in the notes to the annual fi nancial statements.
In accordance with the Articles of Association, the members of the Supervisory Board receive a fi xed compensation in addition to reimbursement of their expenses. The members of the Supervisory Board also receive fees for attending meetings. Supervisory Board members who belong to or chair Supervisory Board committees receive additional, separate compensation. The Supervisory Board members do not receive variable compensation.
The compensation of the Company's boards in the 2008 fi nancial year is described in detail in the notes to the annual fi nancial statements (26. Corporate bodies and compensation report).
Pursuant to Section 325 Sub-section 2a HGB (German Commercial Code), WILEX submits its annual fi nancial statements in accordance with the International Financial Reporting Standards (IFRS) of the EU.
WILEX has a pipeline of advanced drug and diagnostic candidates. Three candidates are currently undergoing clinical development: RENCAREX®, REDECTANE® and MESUPRON®. WILEX announced after the balance sheet date (30 November 2008) that it had reached agreement on a strategic alliance with the pharmaceutical group UCB Pharma S.A., Brussels, Belgium (UCB), and that it would take over UCB's preclinical oncological portfolio for further development. For details, please see the section entitled "Events after the balance sheet date".
WX-G250 is a monoclonal antibody made from human and murine genetic sequences that binds to a tumour-specifi c antigen (CA IX). This antigen is present in high concentrations on the surface of renal cell carcinomas, for example, whilst it is rarely found in healthy tissue. This antigen binding makes the tumour visible to the endogenous immune system such that it can send out natural killer cells to destroy the tumour. As CA IX is also present in bladder and colon cancer, developing the drug in these indications could also be considered.
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page 37
Glossary
Our product candidate RENCAREX® is currently in a Phase III registration trial for the adjuvant therapy of patients with clear cell renal cell carcinoma following total or partial resection of the affected kidney and with no detectable metastases. RENCAREX® has been granted orphan drug status in the European Union and the USA. This status is awarded by the US Food and Drug Administration (FDA) and the European Medicines Evaluation Agency (EMEA) for the research of drugs for rare diseases. This gives WILEX ten years of exclusive marketing rights in the EU and seven years in the USA after marketing approval is granted.
According to the GLOBOCAN database, an estimated 210,000 people worldwide were newly diagnosed with renal cancer in 2002. Assuming a 2 % annual increase in renal cancer, this fi gure will have risen to about 236,000 new cases in 2008, with approximately 64 – 77 % being identifi ed as clear cell renal cell carcinomas. About 50 % of these cases occur in the EU and North America. At the time of initial diagnosis, 70 – 80 % of patients have non-metastatic renal cell carcinoma. 20 – 40 % of these patients display risk factors which would qualify them for inclusion in the current Phase III trial of RENCAREX®.
Currently no drug has been approved for the adjuvant therapy of clear cell renal cell carcinoma in either the USA or Europe. Some drug candidates recently approved for the treatment of metastatic renal cell carcinoma are also being tested for adjuvant treatment.
Even modern imaging procedures such as computer tomography or MRI scans are currently unable to provide a clear indication of whether a tumour is benign or represents clear cell renal cell carcinoma. Whether a tumour is benign or malignant can usually be determined only by means of a histological examination following partial or complete surgical removal of the kidney. In WILEX's view, the ability to diagnose aggressive clear cell renal cell carcinoma prior to surgery represents a signifi cant medical need.
REDECTANE® is a radioactively-labelled form of the antibody WX-G250, which, like RENCAREX®, also binds to the antigen CA IX on clear cell renal cell carcinoma. Uptake of this antibody in tumour tissue can be visualised by positron emission tomography (PET). Additional information provided by computer tomography (CT) can be used to localise accumulation of the antibody. REDECTANE® is currently being tested in a Phase III registration trial.
The antibody-based radiopharmaceutical REDECTANE® is designed to support physicians in diagnosing renal cancers. This could fundamentally change therapy planning for renal cancer patients. Furthermore, REDECTANE® may also prove suitable for monitoring response to treatment and for diagnosing other kinds of tumours.
The urokinase-specifi c plasminogen activator (uPA) system, which is inhibited by MESUPRON®, is believed to play an important role in cancer cell metastasis, and so may represent a key therapeutic target in cancer therapy. The uPA content en ables doctors to predict the statistical likelihood of a patient's survival: people whose tumours exhibit high uPA levels have a statistically lower chance of surviving than people whose tumours exhibit low uPA levels. This conclusion resulted from a meta-analysis of 18 different European studies involving 8,377 patients which examined survival times relative to the uPA level in a tumour. uPA and its inhibitor PAI-1 are the only tumour biological factors that have reached the highest "level of evidence" (LOE1) in terms of their prognostic signifi cance.
Glossary
The determination of the uPA content in a breast cancer patient's primary tumour was incorporated into the treatment guidelines of the American Society of Clinical Oncology (ASCO) in 2007. The uPA test is used to support therapy planning for lymph node negative patients newly diagnosed with breast cancer.
With WX-UK1, WILEX has developed a serine protease inhibitor that is designed to block the activity of tumour-relevant serine proteases such as uPA, plasmin and thrombin. It is administered intravenously and is supposed to inhibit the spread of metastases. WX-UK1 reduced the formation of metastases and inhibited the growth of primary tumours in a number of preclinical trials.
Orally-administered MESUPRON® is converted in the body into WX-UK1, and therefore has the same mode of action. A Phase Ib dose escalation trial of MESUPRON® has been successfully completed in patients with head and neck tumours. MESUPRON® again demonstrated good safety and tolerability in this trial, which also succeeded in confi rming that the active compound accumulates in tumour tissue.
MESUPRON® is currently being tested in two Phase II trials in pancreatic cancer and breast cancer.
To our knowledge, there are no other active compounds currently in clinical trials that specifi cally inhibit metastasis by inhibition of the uPA system.
WILEX holds drug manufacturing permits for RENCAREX® and MESUPRON® under Section 13 of the German Medicines Act. The production, formulation and fi lling of drug candidates is carried out by certifi ed subcontractors, including companies such as Avid BioServices, Inc., Tustin, CA, USA; Bayer AG, Leverkusen, Germany; as well as Rentschler Biotechnologie GmbH and RIEMSER Specialty Production GmbH (previously: Rentschler Pharma GmbH), both Laupheim, Germany. IBA is responsible for the production (radioactive labelling), formulation and vialing of the diagnostic candidate REDECTANE®.
WILEX's laboratories are certifi ed in accordance with the principles of Good Laboratory Practice (GLP). Such certifi cation is a prerequisite for recognition of preclinical and clinical data by national and international regulatory authorities. The Company is also certifi ed in accordance with the principles of Good Manufacturing Practice (GMP), permitting it to test and release drugs for clinical trials according to the relevant analytical methods.
WILEX maintains excellent relationships with scientists, hospitals and research facilities. The Company has undertaken a number of long-term research and development cooperation projects with various academic and clinical institutes in Europe and the USA, including the Department of Urology at the David Geffen School of Medicine at UCLA (University of California, Los Angeles, CA, USA); the FCCC in Philadelphia, PA, USA; the Slovak Academy of Sciences in Bratislava, Slovakia; the Erasmus Medical Center in Rotterdam, The Netherlands; the Department of Oncology at the University of Nijmegen, The Netherlands; and the Ludwig Institute for Cancer Research (LICR) in New York, NY, USA.
The Company's products are protected against imitation by a portfolio of 50 patents and 140 patent applications, which are spread across more than 35 patent families and mostly involve proprietary products. Whilst more than 140 patents and patent applications are related to various uPA inhibitors, more than 25 concern the WX-G250 antibody. WILEX also possesses numerous trademarks and has fi led numerous trademark applications for both the corporate name and the planned product designations.
Glossary
WILEX has signed several exclusive licence agreements that are essential to the Company's business activities.
Several of these agreements concern the development and future commercial use of the WX-G250 antibody on which both RENCAREX® and REDECTANE® are based. The Company licensed the antibody in 1999 from Centocor Inc., Malvern, PA, USA, and Leiden University, The Netherlands. A further licence for the target antigen has been granted by the Bayer Corpor ation Business Group Diagnostics, Tarrytown, NY, USA. To exclude possible patent violations, WILEX also acquired a non-exclusive licence to the Cabilly II patent from Genentech Inc., San Francisco, CA, USA. However, in February 2007, the US Patent Offi ce declared this patent to be neither new nor inventive. The procedure has not yet reached its fi nal conclusion and Genentech has appealed the decision of the US Patent Offi ce. If the patent is ultimately declared void, the Company would have to recognise an impairment loss on this intangible asset.
An exclusive sales and marketing agreement for marketing RENCAREX®, as well as an option regarding future WX-G250 products in certain southern European countries has been in place with the Spanish pharmaceutical company Esteve since 2004. We have granted Esteve the marketing rights for Spain, Italy, Portugal, Greece and Andorra, as well as an option for the Turkish market in return for milestone and licence payments.
WILEX signed a licence agreement for REDECTANE® with IBA in June 2008. IBA obtained the exclusive worldwide rights and licences required for marketing, distributing and selling this product. WILEX will receive milestone and royalty payments from IBA as well. WILEX has secured the right to co-promote REDECTANE® worldwide.
In 2006 WILEX acquired fi ve patent families and patent applications for its uPA programmes from Pentapharm AG, Basel, Switzerland, that are related to the active substances, WX-UK1 and MESUPRON®. In 2007, WILEX also acquired a portfolio from the Dendreon Corporation, Seattle, WA, USA, which comprises all of their proprietary patents and patent applications for uPA inhibitors. In addition to these patents directly held by the Company, this patent portfolio provides protection against third parties copying the composition of our drugs or the therapeutic use of the relevant serine protease inhibitors.
After the balance sheet date, WILEX and UCB agreed on 8 January 2009 to enter into a strategic alliance. Under this agreement, WILEX will acquire UCB's entire preclinical oncology portfolio comprising two small-molecule programmes and three antibody programmes, along with all attendant rights and licences for further development. For details, please see the section entitled "Events after the balance sheet date".
page 37
Glossary
As a biopharmaceutical company, WILEX operates in highly regulated markets. Drugs are subject to approval by the FDA in the USA and the EMEA in the European Union, and by other national regulatory and supervisory authorities. Glossary
Before marketing approval for a drug is granted, the regulatory authorities require comprehensive preclinical and clinical trials (subject to strict criteria) be conducted for each indication. In the USA, a clinical trial can only be conducted after the FDA has issued an Investigational New Drug (IND) status. In the European Union, an Investigational Medicinal Product Dossier (IMPD) for the drug must be submitted in accordance with the guidelines for clinical studies to obtain approval for clinical trials (Clinical Trial Application, CTA). The manufacturer and the supplier of the substances must be GMP-certifi ed.
For a new drug to be granted marketing approval, an application must be compiled containing the results of all preclinical and clinical trials as well as other information pertaining to the drug.
WILEX is committed to the interests of all signifi cant parties that are associated with the Company. Patients, physicians, employees and shareholders are the central focus of the Company's strategic, value-driven management.
WILEX's business activities are focused on clinical indications for which there is high unmet medical need and which could provide great benefi t for patients. Each of the product candidates undergoing research and development at WILEX is designed to enable targeted and specifi c treatment and detection of various types of cancer. The Company focuses on three steps that create value – preclinical research, clinical trials and regulatory affairs. Our aim is to quickly maximise shareholder value.
WILEX aims within a few years to be able to fi nance its research and development programmes from its operating cash fl ow. In order to achieve this goal, the Executive Management Board pursues a commercialisation strategy for all products. Signifi cant milestones of this strategy have already been achieved, others are to follow.
WILEX wants to invest part of the income generated by implementing this strategy in new research and development programmes.
The Company does not yet generate signifi cant income. Hence its cash burn remains a key fi nancial indicator. The cash burn is defi ned as the average monthly net cash fl ow from operating and investing activities during a fi nancial year. The average monthly cash burn in the fi nancial year just ended was € 1.80 million (previous year: € 1.91 million). The ratio of liquid funds to cash burn shows the number of months for which suffi cient cash will be available. Individual project development costs constitute another important measure of performance; they are tracked using a balanced scorecard and reviewed on a monthly basis.
Additional non-fi nancial performance indicators are used to manage the Company. Patient-related indicators include clinical fi ndings regarding the safety, tolerance and effi cacy of the drug and diagnostic candidates being developed. WILEX uses adherence to clinical trial schedules to measure the effi ciency of its internal processes.
WILEX largely achieved or surpassed the project goals it set for itself at the start of the 2008 fi nancial year. The Company succeeded in substantially reducing its funding requirements for 2008 as a result of the commercialisation agreement with IBA as well as cost-sensitive management policies. Implementing these measures increased income and lowered costs.
| Non-fi nancial targets | Target 2008 | Actual 2008 | Target achieved? |
|---|---|---|---|
| RENCAREX® | Completion of patient recruitment |
Completed in July 2008 |
Yes |
| REDECTANE® | Obtain SPA | Obtained in February 2008 |
Yes |
| Start patient recruitment in registration trial |
Started in May 2008 |
Yes | |
| MESUPRON® | Phase II trial pancreatic cancer: Complete patient recruitment |
Patient recruitment for pancreatic cancer trial com pleted in July 2008 |
Yes |
| Publish initial data |
No | ||
| Phase II trial breast cancer: Start patient recruitment |
Patient recruitment for breast cancer trial started in August 2008 |
Yes | |
| Commercialisation | Sign commer cialisation agreement |
Agreement for REDECTANE® was signed in June 2008 |
Yes |
Comparison of target and actual performance in relation to certain goals and key indicators in the 2008 fi nancial year:
| Financial targets | Target 2008 € '000 |
Actual 2008 € '000 |
Target achieved? |
|---|---|---|---|
| Other income | 3,700 – 4,200 | 3,208 | No |
| Other expenses | 27,000 – 32,000 | 24,601 | Surpassed |
| Of which: research and development costs | 23,000 – 27,000 | 20,157 | Surpassed |
| Funding requirement from operating, investing and fi nancing activities |
21,000 – 25,000 | 21,659 | Yes |
Funding requirements are below both the initial and the adjusted July 2008 estimates, primarily due to lower expenditures. The contract with IBA reduced the Company's cost base and increased income. The advance payments from IBA, as well as the payments from Esteve, are deferred and recognised in other income at the time the relevant services are provided.
The strategic alliance with UCB will signifi cantly improve WILEX's equity and liquidity situation after the balance sheet date. The Company now assumes that as a result of UCB's € 10 million investment and provided that the two milestones with UCB are reached and the related payments of € 5 million for each milestone are made its liquidity is suffi cient until the fi rst quarter of 2010. WILEX's three advanced programmes, as well as the new preclinical development programmes, will be continued as planned.
Following several years of economic growth, the consequences of the global crisis in both the fi nancial and the property markets in the fi nancial year just ended have substantially undermined and dampened economic development.
According to a study by the American Cancer Society, in 2007 more than 12 million people worldwide were newly diagnosed with cancer; 5.4 million of this total lived in industrialised countries. In these countries, cancer is the second most frequent cause of death, claiming 2.9 million lives in 2007 alone. The American Cancer Society expects the number of new cases to rise to 27 million people annually by 2050 just due to general growth and rising average age of the population. The need for effective and at the same time well tolerated cancer therapies will therefore continue to grow.
According to Datamonitor's market survey, "Monoclonal Antibodies: Update 2008", therapeutic monoclonal antibodies generated total sales revenue of USD 26.3 billion in 2007. Datamonitor expects total sales revenue to rise to USD 49.1 billion by 2013. The market for therapeutic agents in oncology will account for more than USD 20 billion of this amount in 2013, says the study. Hence the oncology market will remain the largest market segment within the overall market for monoclonal antibodies.
Drugs such as Torisel® from Wyeth, Sutent® from Pfi zer and Nexavar® from Bayer/Onyx have been approved for the treatment of advanced, metastatic renal cell carcinoma. However, no drug has been approved by the FDA or EMEA for the adjuvant medicinal therapy of non-metastatic clear cell renal cell carcinoma in 2008. As a result, the medical need for RENCAREX® is very high.
Glossary
The growing number of people with cancer affects the growth prospects of the diagnostic market. In the Company's view, using REDECTANE® and PET/CT for diagnostics could greatly enhance the precision of renal cancer diagnosis and thus bring about crucial changes in therapy monitoring. As far as WILEX knows, no imaging procedure existing today provides such a degree of specifi city and sensitivity.
According to the Datamonitor study mentioned above, small-molecule drugs will, with 76 %, continue to take the lion's share of the market segment of highly innovative therapeutic agents. To the Company's knowledge, the small-molecule active compound in MESUPRON® is the fi rst uPA inhibitor worldwide that is in a clinical Phase II programme involving both pancreatic and breast cancer patients.
In addition to effi cacy and tolerance, today and in future any therapy must also be measured in terms of its cost-effi ciency. WILEX is convinced that targeted therapies can also contribute to cost reductions in health care.
WILEX pursued three projects in the 2008 fi nancial year, all of which have made signifi cant progress.
The major events in the Phase III ARISER (Adjuvant RENCAREX® Immunotherapy trial to Study Effi cacy in non-metastatic Renal cell carcinoma) trial with RENCAREX® in the 2008 fi nancial year were the announcement of the positive result of the interim analysis for futility and the completion of patient recruitment. The trial enrolled patients who had an affected kidney either partially or completely removed and who had no detectable metastases. They also had to meet previously set criteria specifying a high risk of recurrence. More than 140 centres in 14 countries are involved in the trial. The last of the 856 patients planned was enrolled in July 2008. Other patients who were undergoing the pre-enrolment screening process at that time were also allowed to participate in the trial if they qualifi ed for inclusion. As a result, the fi nal number of patients in the trial increased to 864. Of these, 584 patients were recruited in Europe and 280 in North and South America. The trial design is multicentred, randomised and double-blind.
The trial will have achieved its objective when the disease-free survival time of the patients in the group treated with RENCAREX® shows a statistically signifi cant increase compared to the placebo group. Glossary
The fi ndings of the interim analysis for futility by the Independent Data Monitoring Committee (IDMC) after 100 relapses were published in December 2007. The IDMC, an independent control committee, recommended that WILEX continue the trial based on these statistical analyses because the trial will probably deliver a signifi cant result. The data of all patients analysed after 343 relapses have been reported; subsequently, an independent analysis of the effi cacy of RENCAREX® will be initiated. Whilst the data remain blinded for WILEX, they will nonetheless provide critical information regarding the endpoint of the trial – disease-free survival and overall survival. Glossary
The time for patients to relapse is taking longer than expected. WILEX announced in its 9-month fi nancial report that the Company does not expect the 343rd relapse to occur before the second quarter of 2009, at the earliest.
In 2008, WILEX launched a Phase III registration trial with the diagnostic candidate REDECTANE®. In total, 166 patients with suspected renal cancer are to be included in the trial. They are to be given a PET/CT scan prior to surgery, using the imaging agent REDECTANE®, in order to establish whether this procedure facilitates better diagnosis than the standard of care, CT.
Glossary
Glossary
Prior to the start of the Phase III trial, WILEX had applied for a special protocol assessment (SPA) with the FDA, which it obtained in February 2008. The FDA uses an SPA to document the fact that, following evaluation of the protocol and the planned analysis, it considers the clinical trial suitable and appropriate for approval. WILEX will conduct the trial in accordance with the design specifi ed in the SPA. The Company began opening study centres after obtaining the SPA; the fi rst patients were enrolled in the trial in May 2008. If the trial is conducted in accordance with the SPA; the FDA is considered bound by this protocol assessment as part of the marketing application process. Obtaining early approval of the trial protocol design can generally signifi cantly reduce approval time.
In October 2008, leading specialists in nuclear medicine met for the annual conference of the European Association of Nuclear Medicine (EANM) in Munich. WILEX's cooperation partner IBA organised a satellite symposium in connection with the conference, entitled "124I-cG250: A PET Breakthrough in Renal Cancer Diagnosis". At this event, which drew a large audience, renowned experts presented on the current clinical standard in the management of renal cancer, shed light on the possibilities of labelling tumours using the CA IX antigen and discussed the potential of REDECTANE® for clinical practice. These discussions emphasised, for example, that REDECTANE® is likely to be superior to conventional procedures in obtaining an unequivocal diagnosis of clear cell renal cell carcinoma.
In January 2008 WILEX published the fi ndings of a Phase I trial with WX-UK1, the intravenously administered active compound in its drug candidate MESUPRON®. As well as confi rming that the drug is safe and well tolerated, the fi ndings also presented the fi rst promising evidence of its effi cacy as several patients exhibited prolonged stable disease.
In January 2008, WILEX also obtained approval to commence a second Phase II trial with MESUPRON® in patients with metastatic, HER2 receptor negative breast cancer. This randomised double-blind Phase II trial involves 114 patients. It is designed to examine the effi cacy of combination therapy of MESUPRON® and Capecitabine (Xeloda®, Hoffmann-La Roche AG, Basel, Switzerland) compared to monotherapy with Capecitabine. The trial's primary endpoint is progression-free survival , i. e. the length of time patients survive without further development of the disease. The patients receive the drugs in fi rst-line treatment, i. e. the fi rst treatment following a relapse. Patient recruitment for this trial began in August 2008.
Glossary
We completed the recruitment of 90 patients with locally advanced, inoperable, non-metastatic pancreatic cancer for the second Phase II trial with MESUPRON® in July 2008. The randomised, open, three-arm Phase II trial investigates the antimetastatic effect of MESUPRON® in combination with the chemotherapeutic agent Gemcitabine (Gemzar®, Eli Lilly and Company, Indianapolis, IN, USA). The trial examines different parameters, including progression-free survival and the time it takes for the fi rst metastases to occur.
WILEX held a satellite symposium on the state of uPA research at the 6th European Breast Cancer Conference (EBCC 6) in Berlin on 18 April 2008. International experts discussed topics including the scientifi c and clinical potential of the small molecule in detail and impressively described the opportunities that uPA inhibitors offer for treating cancer patients. The symposium's proceedings have been published in Breast Care under the title of "The Role of uPA and uPA Inhibitors in Breast Cancer".
In connection with the strategic partnership that was agreed with UCB, the Executive Management Board has decided not to continue the WX-77x cancer research programme for the time being.
available at www.karger.com
In the 2008 fi nancial year (1 December 2007 to 30 November 2008), WILEX posted earnings before tax of € – 20.43 million (previous year: € – 22.23 million). The net loss for the year decreased by 8.1 % to € 20.45 million (previous year: € 22.26 million). This corresponds to earnings per share of € – 1.71 (previous year: € – 1.86). As in previous years, WILEX did not generate sales revenue in the 2008 fi nancial year since all its products are still in clinical development phases. As expected, expenditures were higher than other income. Earnings developed according to plan.
At € 3.21 million, other income rose by 24.2 % over the previous year's € 2.58 million. This increase was due primarily to the realisation of income from licence agreements as well as to the reversal of provisions. Overall income from licence agreements rose from € 1.76 million in the previous year to € 1.94 million in 2008. Whilst in the 2007 fi nancial year income still resulted mainly from the exclusive licence agreement with our cooperation partner Esteve, in the reporting year income was mainly due to the licence agreement signed with IBA in June 2008. Prepayments received for research projects are accrued and recognised as other income in line with project costs. Both the reversal of provisions and other income related to other periods resulted in income of € 1.06 million (previous year: € 0.25 million). In the reporting period, provisions for outstanding invoices pertaining to clinical trials were adjusted primarily in terms of the amounts using the most recent information available. The other income also contained € 0.22 million in development funds from the US Department of Defense for the uPA programme (previous year: € 0.57 million).
Other expenses including depreciation, amortisation and impairment losses fell by approximately 7.2 % to € 24.60 million (previous year: € 26.51 million). This was primarily a result of the year-on-year decline in research and development costs, which totalled € 20.16 million in 2008 (previous year: € 23.00 million). Whilst manufacturing costs were comparable to the previous year, especially those related to the antibody, the costs for patient recruitment in the ARISER trial fell as planned below the previous year's level. Completion of patient recruitment at the start of the year in Europe and in July in the USA entailed a corresponding decline in payments to trial centres and contract research organisations.
In 2008, the ongoing clinical development of the monoclonal antibody cG250 for RENCAREX® and REDECTANE® accounted for 66.2 % (previous year: 60.8 %) of our research and development costs. Approximately 32.4 % (previous year: 34.6 %) were attributable to the uPA programme, which includes the small-molecule drug candidate MESUPRON®, and 1.4 % (previous year: 4.6 %) to other projects.
Administrative costs accounted for 18.1 % of other expenses. At € 4.44 million, the administrative costs exceeded the previous year's level of € 3.51 million due to the increase in staff costs resulting from the expansion of personnel, business development costs as well as consulting fees related to the commercialisation agreements and the strategic alliance. Administrative costs also contain the pro-rata measurement of the stock option plan in the amount of € 0.29 million (previous year: € 0.47 million).
The net fi nancial result fell from € 1.69 million to € 0.96 million due to the use of cash as planned and the resulting decrease in interest income. Finance income arose solely from interest on bank credit balances and/or fi xed-term deposits. During the fi nancial year, WILEX invested a large portion of the IPO proceeds that were not yet required for clinical development in fi xed deposits, term deposits and overnight deposits with varying maturities. At no time did WILEX invest cash and cash equivalents in stock or share-based fi nancial instruments. Finance costs declined by € 0.02 million to € 0.01 million.
The Company had cash and cash equivalents of € 12.14 million (previous year: € 34.17 million) at the close of the fi nancial year just ended. The Company's liquidity ratio (cash positions plus bank credit balances divided by current liabilities) was 131.0 % as at 30 November 2008 (30 November 2007: 307.2 %).
The net cash fl ow from operating activities during the reporting year was € – 21.50 million (previous year: € – 21.35 million). Net cash provided by investing activities in the 2008 fi nancial year amounted to € 14.93 million (previous year: € – 15.60 million). This increase results mainly from the expiration of a € 15.00 million investment in a fi xed-term deposit. Net cash used for fi nancing activities amounted to € 0.09 million. Supplementary payments related to the November 2006 IPO accounted in large part for the € 0.96 million in net cash outfl ows in the previous year. The net cash and cash equivalents used, not including the repayment of the € 15.00 million fi xed-term deposit totalled € 21.66 million. This corresponds to an average cash burn of € 1.80 million per month in 2008 (previous year: € 1.91 million).
Total assets declined from € 37.63 million as at 30 November 2007 by € 22.30 million to € 15.33 million as at 30 November 2008. This decline in total assets results mainly from the cash used and the investments made in clinical development. Equity decreased correspondingly.
The cash used for the ongoing development of the Company's products caused current assets to drop from € 35.55 million year on year by € 22.13 million to € 13.42 million in the reporting year. In contrast to the previous year's reporting date they do not contain fi nancial investments; a fi xed-term deposit of € 15.00 million was repaid. Total cash and cash equivalents (without fi nancial assets) declined from € 18.80 million as at 30 November 2007 to € 12.14 million as at 30 November 2008.
Prepayments in the amount of € 1.07 million (previous year: € 1.24 million) essentially comprise payments to service providers for implementing clinical trials.
At € 1.91 million, non-current assets as at 30 November 2008 were lower year on year (30 November 2007: € 2.08 million). Intangible assets of € 1.43 million (previous year: € 1.56 million) comprise licence fees and royalties from various cooperation agreements. Property, plant and equipment in the amount of € 0.46 million (previous year: € 0.52 million) primarily concerns laboratory and offi ce equipment. The asset value of reinsurance was recognised under non-current assets in the amount of € 0.23 million. This item had been classifi ed under current assets with a carrying amount of € 0.22 million in the previous year.
As in recent years, non-current assets were relatively low as the funds used for development projects and related depreciation, amortisation and impairment losses are not capitalised in accordance with IFRS but expensed almost in full as current research and development costs. Overall, investments in property, plant and equipment and intangible assets were € 0.06 million.
The additions to property, plant and equipment amounted to € 0.05 million (previous year: € 0.15 million). They were offset by depreciation, amortisation and impairment losses of € 0.12 million (previous year: € 0.13 million). At € 0.01 million, additions to intangible assets were lower year on year (€ 0.40 million). Amortisation of intangible assets was € 0.14 million (previous year: € 0.12 million).
Non-current liabilities declined from € 0.55 million to € 0.27 million in the reporting year. Liabilities to third parties primarily in connection with external research and development orders are recognised based on their contractually stipulated terms and reclassifi ed to current liabilities if their residual terms fall below 12 months.
Current liabilities declined from € 11.12 million to € 9.26 million primarily as a result of the reversal of provisions and lower other non-current liabilities of € 7.46 million (previous year: € 9.30 million).
As at 30 November 2008, equity pursuant to IFRS was € 5.79 million (previous year: € 25.95 million). While the subscribed capital remained constant at € 11.96 million, measurement of the stock options caused the capital reserve to rise to € 105.20 million (previous year: € 104.91 million). The accumulated losses rose by the net loss of € 20.45 million for the year to a total of € 111.37 million (previous year: € 90.93 million). The equity ratio fell correspondingly to 37.8 % (previous year: 69.0 %).
WILEX issued a total of 1,076,424 subscription rights to employees and members of the Executive Management Board in connection with its Employee Stock Option Plan (ESOP). Of the 905,834 options outstanding at the end of the fi nancial year, 729,335 were attributable to current and former members of the Executive Management Board and 176,499 were attributable to employees. As at the balance sheet date, a total of 383,323 subscription rights were available for issuance to employees and to members of the Executive Management Board. From 1 December 2007 to 30 November 2008, no new stock options were issued, and 1,750 options were returned by an employee who left the Company. No stock options could be exercised to date.
Employees are WILEX's most important asset. Their know-how and scientifi c expertise are decisive for the development of a new generation of cancer drugs and diagnostic agents. The positive relationships that WILEX maintains with scientists and potential cooperation partners are just as critical to the commercial exploitation of our product portfolio and the Company's future enterprise value.
WILEX AG developed a performance-related compensation system for its employees. Employee inventions that lead to patent applications are compensated under the Patent Incentive Programme. In addition, the stock option plan gives employees a stake in the Company's performance. In the reporting year just ended, 45 (previous year: 47) employees participated in the stock option plan. As at the balance sheet date, a maximum of 383,323 stock options were available for issuance to employees and to members of the Executive Management Board.
Counting the members of its Executive Management Board, WILEX had 66 employees at the close of the fi nancial year (2007: 57). Hence a net total of nine new jobs were created as at 30 November 2008 compared to the previous year. According to the defi nition in place since 2007, 45 employees worked in research & development (previous year: 41) while 21 (previous year: 16) worked in administration and business development.
| Employees | 30.11.2008 | 30.11.2007 | 30.11.2006 |
|---|---|---|---|
| Administration and business development | 21 | 16 | 15 |
| Research and development | 45 | 41 | 31 |
| Total | 66 | 57 | 46 |
The biopharmaceutical company UCB Pharma S.A., Brussels, Belgium, and WILEX AG agreed on 8 January 2009 to enter into a comprehensive strategic alliance. WILEX will acquire the worldwide rights to continue developing UCB's entire preclinical oncological portfolio, which comprises two small-molecule programmes and three antibody programmes.
UCB will retain the exclusive right to buy back each of the fi ve programmes following completion of initial clinical proof of concept studies and to develop and market them itself. In this case WILEX will receive milestone payments from UCB for development and commercialisation as well as royalties for commercialisation.
WILEX will retain the right to continue developing and to commercialise each programme itself if UCB does not exercise its buyback right. In this case UCB will receive milestone and royalties from WILEX.
Furthermore, the two partners may jointly develop the programmes after the successful completion of the proof of concept studies.
Under the agreement, UCB has made an in-kind contribution comprising the rights to the fi ve preclinical programmes to a wholly-owned subsidiary of UCB. In addition, the company will be funded by UCB with € 10.00 million in cash. WILEX will acquire the company for 1,818,181 newly issued shares from Authorised Capital subject to the exclusion of shareholders' subscription rights. As a result of this transaction, UCB will acquire 13.19 % of the shares in WILEX AG (new share capital of WILEX: 13,780,935 shares). Initially, 50 % of the shares are to be listed; under the terms of the strategic alliance, the other half of the shares will be subject to a lock-up period through 9 January 2011.
UCB will also make two milestone payments of € 5.00 million each to the company, which will be a limited liability company under German law (GmbH). The milestones defi ned are: submission of an application to conduct a clinical Phase I trial and fi rst dose in man. They are expected to occur approximately within 12 months from the closing of the agreement.
The strategic alliance has been approved by the corporate bodies of both UCB and WILEX. However, the relevant capital increase of WILEX AG must still be approved by its Executive Management Board and its Supervisory Board; the capital increase will take effect at the time it is recorded in the appropriate Commercial Register.
The strategic alliance with UCB constitutes an important step in the history of WILEX. UCB's innovative oncology portfolio ideally supplements and expands WILEX's advanced clinical pipeline and provides access to UCB's broad antibody technology. In UCB, WILEX has gained not only an important development partner but also a strong strategic investor to support the Company's further development.
In December 2008 WILEX performed an independent radiological analysis of patients with pancreatic cancer in connection with the Phase II trial of MESUPRON®. At the time of preparing this Annual Report, no meaningful data were available to the Company since the disease had not yet progressed radiologically in a suffi cient number of patients.
Managing and controlling risk is important to the management of WILEX. The tasks involved include the recording and assessment of risk, as well as the effi cient controlling of operational and strategic risk. All potential risks with substantial ramifi cations and a reasonable probability of occurring are closely monitored at regular intervals. All overriding entrepreneurial decisions are made after a comprehensive assessment of all related risks.
The Company's risk strategy is defi ned by the Executive Management Board and coordinated with the Supervisory Board. The Chief Financial Offi cer at WILEX is responsible for risk management and control. The Controlling department regularly reports the current status of risk management to the full Executive Management Board.
WILEX is exposed to relatively high risks, since it is engaged in research and development in the biopharmaceutical industry and has not yet achieved substantial earnings. Such risks may affect various operational functions and have a signifi cant negative impact on profi t and loss, net assets and fi nancial position, as well as on the Company's enterprise value.
WILEX uses an IT-based risk management system for purposes of early risk identifi cation; the system complies with the requirements of the German Control and Transparency in Business Act (Gesetz zur Kontrolle und Transparenz im Unternehmensbereich). WILEX uses this system to identify and assess risks as well as to monitor the measures aimed at minimising risk. A total of 16 risk areas are subject to comprehensive early control of potential risks. All material risks are addressed in a risk report that is made available to the Executive Management Board fortnightly; shorter intervals are adopted to report on material risks should the need arise. The risk management system is described in detail in both a Risk Manual and an internal Standard Operating Procedure (SOP). These documents are regularly updated and are available to all employees.
WILEX is exposed to the risks typical for a biotechnology company, namely those arising from the development and production of drugs used in cancer therapies. The time between the commencement of drug development and marketing approval can span many years. Even though our portfolio matured further in the 2008 fi nancial year, there is a continued risk that none of the drug and diagnostic candidates in our current product pipeline will receive marketing approval.
Although health care costs are generally less exposed to economic fl uctuations, pursuant to a study published in November 2008 the analysts of WestLB expect the failing global economy to exert increased pressure on health care budgets and thus on the pharmaceuticals market. The study expects the key pharmaceuticals markets to grow by 4 % in 2009. In recent years these markets were growing by 6 % or more. Overall, this situation could cause potential cooperation partners or investors to refrain from making new commitments. This could also pose a risk for WILEX.
The development of our core drug and diagnostic candidates – either by WILEX alone or in cooperation with partners – could fail for a variety of reasons. These include diffi culties related to patient recruitment or involving cooperation with clinical study sites or contract research organisations. To date, none of the product candidates have successfully completed all clinical trials and also achieved regulatory approval. It is impossible to make any predictions based on preclinical and early clinical trials and such trials do not offer any certainty in regard to issues of safety and effi cacy in a later trial. We cannot eliminate the possibility that the approval of a drug candidate might be delayed or rejected even after a successful registration trial, for instance if the documentation concerning the manufacturing process, quality control or methods of analysis does not satisfy regulatory requirements.
WILEX does not maintain its own production facilities and thus obtains all material for its clinical trials from subcontractors. This situation involves risks, including potential problems concerning quality or capacity, or problems arising from the interruptions of supplies in the event of the termination of a contract.
Those in competition with WILEX include pharmaceutical, chemical and biotechnology companies that have access to greater fi nancial, technological and sales resources than WILEX. Some biotechnology companies have also set up alliances with established companies with the aim of intensifying the research, development and marketing of competitive products. Likewise, various research and scientifi c institutes operate in areas similar to those in which WILEX is active. The fi rst product that is marketed generally has a considerable advantage over products that are launched at a later date, since subsequent market players must prove that their products possess improved features when compared to established products. Like other pharmaceutical and biotechnology companies, WILEX operates with the risk that competing technologies could turn out to be safer, more economical and more effective than its own technologies. In addition, there is the risk that the technology could be used to produce products that reach the market earlier and might be more successful than the drugs developed by WILEX. Additional risks arise from the fact that competitors might offer their technology to cooperation partners at a lower cost, with the intention of gaining market share.
The marketing and sale of pharmaceuticals and services for specifi c indications is subject to product liability risks. We cannot exclude product liability actions against WILEX at a later stage. In connection with this, there is no guarantee that we would be able to purchase insurance coverage at both a reasonable cost and acceptable terms or that such insurance would be suffi cient to protect WILEX from lawsuits or a loss.
WILEX is dependent on various sources of income, in particular, licence fees and milestone payments from licensees and cooperation partners. The framework within which public health authorities, research institutes, private health insurance providers and other organisations operate also impacts our business activities. Many cooperation and out-licensing agreements provide for milestone payments that are due upon fulfi lment of specifi c criteria. WILEX has no infl uence over the achievement of these milestones by cooperation partners or licensees, or over the decision of Company partners to even continue to develop a particular product. Competitors may also attempt in-licensing of products that have progressed further than products from WILEX. As a result, product candidates in the pipeline at WILEX may not reach a suffi ciently advanced development stage to be of interest for a certain period of time. There is no guarantee that stable sales revenue can be generated from existing or future partnerships.
WILEX uses hazardous substances in its research and development programmes, one example being the use of radioactive material. These activities are subject to health and environmental laws and regulations; non-compliance with these may result in fi nancial losses.
No litigation is pending at present.
It is possible that WILEX will continue to have a considerable capital requirement in the future. This depends on numerous factors, which include the Company's ability to fi nd licensees and conclude cooperation agreements as well as the success of such cooperative ventures in terms of sales revenue – resulting from licence fees and milestone payments, for example. Costs incurred by research and development and by product approval and the enforcement of patent rights may exceed returns from these products. Hence it may also be necessary to raise additional fi nancing in future years. However, there is no guarantee that suffi cient funds would be available if required. Should this event occur, WILEX will have to reduce expenditure on R&D, production or marketing. Any of these developments could in turn have an adverse effect on the Company's fi nancial position, net assets and profi t and loss.
Halving of the Company's share capital through rising losses carried forward
WILEX is not yet a profi table company and has posted operating losses in all of its past fi nancial years. Given the scope of its research and development expenses, over time these losses have accumulated into large losses carried forward that are offset against equity. Although it is unlikely given the Company's current equity situation, we cannot preclude that the Company might have to fi le a report that its share capital has been halved. Pursuant to Section 92 para. 1 German Stock Corporation Act, this would immediately require us to convene an extraordinary General Meeting. Such a meeting would entail both organisational and fi nancial costs for WILEX and might also have a negative impact on the Company's share price.
By notice of assessment dated 12 November 2008, the appropriate tax offi ce assessed the losses carried forward until 31 December 2007, which comprise losses carried forward of € 91.63 million (corporation tax) and € 89.32 million (municipal trade tax). The tax offi ce has reserved the right to review its assessment.
The Company has not been subject to a tax audit since it was established. Due to the capital increases as part of the fourth fi nancing round in April 2005 and the IPO in November 2006, the Company may have lost its losses carried forward accumulated until the end of 2006, which amount to € 67.24 million (corporation tax) and € 64.95 million (municipal trade tax).
Section 8c German Corporation Tax Act (Körperschaftsteuergesetz), which was added in connection with the German Business Tax Reform Act 2008, replaces the provisions of Section 8 Sub-section 4 German Corporation Tax Act, which had been applicable until the end of 2007; it is binding on transfers of shares effective 1 January 2008 or later. Accordingly, transferring 25 % to 50 % of the subscribed capital already leads to the pro-rated elimination of tax losses carried forward whilst any transfer of more than 50 % of the subscribed capital results in the complete elimination thereof. In contrast to the previous regulation, the infusion of mostly new operating assets is no longer relevant. This could result in the elimination of tax losses carried forward accumulated until that time and thus have a negative impact on the after-tax results and equity of WILEX in future, particularly in connection with further capital measures.
WILEX works with several service providers worldwide and is thus exposed to currency risks, particularly in connection with currency positions in US dollars and Swiss francs. Any appreciation of the US dollar or the Swiss franc against the euro could increase expenses reported in euros. In the future, WILEX expects an increasing proportion of revenue and costs to be denominated in US dollars or Swiss francs. This proportion will include a share of the revenue from R&D cooperation agreements. The effects of exchange rate fl uctuations on the Company's earnings and fi nancial position may increase as a result. WILEX does not currently engage in hedging transactions because it is able to process foreign currency payments using corresponding accounts and thus offset incoming and outgoing payments in matching currencies.
The Company mainly employs experts in clinical development, quality assurance and regulatory affairs. To date, WILEX has not had any problems recruiting suitable executives and research staff. However, in terms of recruitment effort, WILEX must succeed in the face of competition from other companies, universities, public and private sector research institutes and other organisations. Success in recruiting employees and maintaining low employee turnover also depends on total compensation, including stock options. If the share price falls, WILEX could become less attractive for both potential and existing employees. Any failure on the part of WILEX in recruiting qualifi ed staff in the future could delay implementation of the Company's business strategy and considerably impair its business prospects.
From the current perspective, there are no discernible fi nancing risks that could jeopardise the Company as a going concern in the 2009 fi nancial year. Based on current planning and provided the planned milestones will in fact be reached, cash and cash equivalents will be suffi cient until at least the fi rst quarter of 2010. The Executive Management Board assumes that additional infl ows of capital will be generated by this date through partnerships or cooperation agreements. However, if it is not possible to generate new cash infl ows in accordance with this planning, the Company would have to look to the capital market to raise funds in order to secure its existence as a going concern over the medium to long term.
According to the American Cancer Society, in 2007 more than 12 million people worldwide were newly diagnosed with cancer. Tumour diseases are amongst the most frequent causes of death in industrialised countries. Experts believe that the number of cancer diagnoses will continue to rise as a result of numerous factors such as higher life expectancy or changes in the environment. Accordingly, there is an urgent medical need for cancer therapies that are both effective and well tolerated.
WILEX has specialised in the development of drugs and diagnostic agents for cancer diseases. Two product candidates in the WILEX portfolio are currently in a Phase III registration trial, one candidate is in two Phase II trials. The Company focuses on two therapeutic approaches with its drug candidates: On the one hand, WILEX is developing cancer therapies that attack tumour cells without having a non-specifi c cytotoxic effect – unlike certain conventional treatments such as chemo therapy. On the other hand, WILEX is concentrating on therapies that are designed to inhibit the further progression of cancer through metastasis. The diagnostic agent REDECTANE®, which is currently under development, is intended to improve tumour detection and post-treatment therapy monitoring.
The comprehensive strategic alliance with UCB in January 2009 will enable WILEX to take over UCB's entire pre clinical oncological portfolio for purposes of ongoing development. These promising candidates complement and expand the Company's own advanced oncological pipeline. In UCB, WILEX has gained not only an important partner but also a strong strategic investor to support the Company's successful future development.
UCB retains exclusive rights to buy back each of the fi ve programmes, following completion of initial clinical proof of concept studies for each drug, and assume the responsibility for further development and commercialisation of each product. In this case, WILEX will receive development and commercialisation milestone payments and royalties from UCB. Alternatively, in the event UCB does not exercise its buyback right for each programme, WILEX will retain rights to develop as well as commercialise each programme and UCB will receive milestone and royalty payments from WILEX. Furthermore, the two partners may jointly develop the programmes after the successful completion of the proof of concept studies.
In the 2009 fi nancial year, we will again focus on commercialising our product portfolio, in addition to our continued development of drug candidates. WILEX will continue discussions with pharmaceutical companies on the out-licensing of RENCAREX® and the conclusion of sales partnerships.
WILEX does not anticipate any major changes in its competitive environment: No adjuvant drug therapy for non-metastatic clear cell renal cell carcinoma competing with RENCAREX® has been approved by the FDA or by EMEA. To the knowledge of WILEX no diagnostic procedure has been approved that is comparable to the one using REDECTANE® for the specifi c detection of clear cell renal cell carcinoma.
Patient recruitment for the Phase III ARISER trial with RENCAREX® was completed in July 2008. The 343 relapses required for the next milestone will probably be reached in the second quarter of 2009 at the earliest. The study protocol specifi es an interim analysis for effi cacy of the antibody, which could be the basis for fi ling for approval in the European Union.
We have started a Phase III registration trial with REDECTANE® in a design confi rmed by the SPA. The SPA documents that the FDA considers the design and planned analysis of the trial to be suitable and appropriate to obtain marketing approval if the results are positive. In total, 166 patients with suspected cancer of the kidney are to be included in about 15 centres in the USA. Patient recruitment is anticipated to be completed in the fi rst quarter of 2009; analysis of the data will then take approximately another three to six months.
We are expecting initial preliminary results from the Phase II trial of our uPA inhibitor MESUPRON® involving patients with pancreatic cancer. We hope that these results will confi rm the mechanism of action of MESUPRON® and demonstrate its clinical benefi t.
In 2009 we will continue patient recruitment in the trial centres for the MESUPRON® Phase II trial involving breast cancer patients.
Taking WILEX's strategic alliance with UCB into account, we believe that the Company's earnings will substantially improve compared to the 2008 fi nancial year. We should post sales revenue of € 10 million for the very fi rst time given the anticipated milestone payments which, as far as we know at the present time, need not be accrued and thus need not be posted as other income. Based on our medium-term plans, we expect other income of between € 3.0 million and € 3.5 million, which would roughly be at the previous year's level (€ 3.21 million) if projects proceed as planned. Other income will continue to be based primarily on licence payment realisation from our cooperation partners Esteve and IBA, as well as on grants from the US Department of Defense.
Other expenses should range from € 25 million to € 29 million in 2009, which would be above those for the reporting period (€ 24.60 million). This is due to the expected increase in R&D costs from € 20.16 million in 2008 to between € 21 million and € 24 million. The expected cost increase will result mainly from the two registration trials with RENCAREX® and REDECTANE® and the related production of the monoclonal antibody cG250. The expected expenses for the development of the preclinical programmes acquired from UCB are also refl ected in this fi gure.
The Executive Management Board also anticipates that while research expenses in the 2010 fi nancial year will be lower than in 2009, they will remain higher than revenue and other income.
Net funding requirements are likely to be between € 5 million and € 7 million until the end of the 2009 fi nancial year if revenue, income and expenses develop as expected. Given the Company's current planning, WILEX will thus be fi nanced until the fi rst quarter of 2010. Equity could further decrease as a result of the loss expected in the 2009 fi nancial year.
As pointed out in our previously communicated strategic plans, we will out-license products and/or enter into additional research collaboration agreements to cover our planned funding requirements beyond 2009. The Executive Management Board expects the realisation of these goals to bring about a sustained increase in shareholder value. WILEX would have to obtain new funding either through alternative fi nancing or on the capital market if cash fl ows to the Company were insuffi cient in the medium term.
The Company's subscribed capital amounted to € 11,962,754.00 at the end of the fi nancial year. It is composed of 11,962,754 no par value bearer shares. These shares are fully paid in. The Company does not hold any treasury shares.
Pursuant to the authorisation of the Annual General Meeting on 29 April 2005, the Executive Management Board intends to resolve, with the Supervisory Board's approval, to increase the Company's share capital using authorised Capital from currently € 11,962,754.00 by € 1,818,181.00 to € 13,780,935.00 in return for contributions in kind and subject to the exclusion of shareholders' statutory subscription rights. The new shares will be subscribed by UCB in return for its contribution of all shares in a UCB subsidiary. Furthermore, the Supervisory Board intends to revise Article 5 (1) and (2) of the Articles of Association as follows:
The planned capital increase, along with the amendment of the Company's Articles of Association, has not yet been resolved and has therefore not yet been recorded in the appropriate Commercial Register.
The rights and duties related to the shares arise, in particular, from Sections 12, 53a ff, 118 ff and 186 of the German Stock Corporation Act (Aktiengesetz) and the Company's Articles of Association. There are no restrictions on voting rights or on the transfer of shares. Each share entitles the holder to one vote at the Annual General Meeting and is determinant for the proportion of the Company's profi ts the shareholder will receive.
UCB Pharma S.A. will hold 1,818,181 shares in WILEX AG, which corresponds to a share of 13.19 %. Subject to an approval order regarding partial listing from Deutsche Börse AG, 50 % of the shares are to be listed at the Frankfurt/Main stock exchange. Under the terms of the strategic alliance, the other half of the shares will be subject to a lock-up period until 9 January 2011.
In addition to this, no shareholder is prohibited from selling, pledging or otherwise disposing of the Company's securities (shares and options).
The German Securities Trading Act (Wertpapierhandelsgesetz) sets out that any investor whose shareholding in the Company reaches, exceeds or falls below certain percentages of the Company's voting rights through acquisition, sale or other means must notify the Company and the Federal Financial Supervisory Authority (BaFin). The thresholds requiring such disclosure are 3, 5, 10, 15, 20, 25, 30, 50 and 75 %. Section 289 Sub-section 4 HGB requires any direct or indirect interest in a Company's capital in excess of ten percent of the voting rights to be disclosed.
| Percentage of voting rights | |||||
|---|---|---|---|---|---|
| Entity with disclosure requirement |
Location | Voting rights | Direct | Assigned | Notifi cation dated |
| dievini Hopp BioTech holding GmbH & Co. KG |
Walldorf, Germany | 3,411,953 | 28.52 % | 28.12.2007 | |
| OH-Capital GmbH & Co. KG |
Heidelberg, Germany | 3,411,953 | 28.52 % | 22.12.2007 | |
| Golf-Club St. Leon-Rot Betriebsgesellschaft mbH & Co. KG |
St. Leon-Rot, Germany | 3,411,953 | 28.52 % | 22.12.2007 | |
| Verwaltungsgesellschaft des Golf Club St. Leon Rot mbH |
St. Leon-Rot, Germany | 3,411,953 | 28.52 % | 22.12.2007 | |
| DH-Capital GmbH & Co. KG |
Heidelberg, Germany | 3,411,953 | 28.52 % | 18.12.2007 | |
| OH Beteiligungen GmbH & Co. KG |
Heidelberg, Germany | 3,411,953 | 28.52 % | 18.12.2007 | |
| BW Verwaltungs GmbH | Heidelberg, Germany | 3,411,953 | 28.52 % | 18.12.2007 | |
| Berthold Wipfl er | Germany | 3,411,953 | 28.52 % | 18.12.2007 | |
| Dietmar Hopp | Germany | 3,411,953 | 28.52 % | 18.12.2007 | |
| Apax Europe IV – A, L.P. | St. Peter Port, Guernsey, Channel Islands |
1,687,185 | 14.1 % | 17.11.2006 | |
| Apax Europe IV GP Co. Limited |
St. Peter Port, Guernsey, Channel Islands |
1,687,185 | 14.1 % | 17.11.2006 | |
| Apax Europe IV GP, L.P. | St. Peter Port, Guernsey, Channel Islands |
1,687,185 | 14.1 % | 17.11.2006 | |
| The Hirzell Trust | St. Peter Port, Guernsey, Channel Islands |
1,687,185 | 14.1 % | 17.11.2006 |
The following shareholders held equity interests in WILEX AG, directly or indirectly, in excess of 10 %:
None of the shareholders have shares with special rights conferring powers of control. In particular, no individual may claim a right to be appointed to the Supervisory Board pursuant to Section 101 Sub-section 2 of the German Stock Corporation Act.
Any employees of WILEX AG who hold an equity interest in the Company exercise their voting rights directly.
The members of the Executive Management Board are appointed for a maximum of fi ve years by the Supervisory Board in accordance with Section 84 of the German Stock Corporation Act and Articles 7– 9 of the Articles of Association. The appointment of members of the Executive Management Board may be renewed, or the term of offi ce extended, provided that the term of each such renewal or extension does not exceed fi ve years. The Supervisory Board may revoke appointments to the Executive Management Board for good cause as defi ned by Section 84 Sub-section 3 of the German Stock Corporation Act.
If the Executive Management Board does not have the required number of members, a court shall make the necessary appointment in urgent cases in accordance with Section 85 of the German Stock Corporation Act.
Pursuant to Section 179 Sub-section 1 of the German Stock Corporation Act, any amendment to the Articles of Association requires a resolution by the Annual General Meeting to be passed with a majority of at least three-quarters of the share capital represented at the adoption of the resolution.
In accordance with Article 5 (3) of the Articles of Association, the share capital is contingently increased by up to € 198,000.00 through the issue of up to 198,000 no par value bearer shares (Contingent Capital). The contingent capital increase serves to grant options to the Company's employees and members of its Executive Management Board as resolved by the Annual General Meeting on 20 July 2001 (Item 6 on the agenda). The contingent capital increase will only be implemented to the extent that the holders of options make use of their option rights. The shares participate in profi ts for the fi rst time in the fi nancial year for which – at the time of the effective submission of the option exercise notice – the Company's Annual General Meeting had yet to adopt a resolution concerning the allocation of net retained profi ts. The Company's Executive Management Board is authorised, subject to the approval of the Supervisory Board, to determine any other details concerning the implementation of the contingent capital increase unless options are to be granted to members of the Company's Executive Management Board. In such cases, the Supervisory Board determines any other details concerning the implementation of the contingent capital increase. The Supervisory Board is authorised to change the wording of the Articles of Association to refl ect the scope of the capital increase from Contingent Capital.
In accordance with Article 5 (4) of the Articles of Association, the Company's share capital is contingently increased by a further € 1,289,157.00 through the issue of up to 1,289,157 new no par value bearer shares (Contingent Capital II). The contingent capital increase will only be implemented to the extent that holders of the stock options issued by the Company on the basis of and subject to the terms and conditions of the authorisation by the Annual General Meeting on 8 September 2005 (resolution in accordance with item 9.1) make use of their stock options. In accordance with item 9.1 (5) of the abovementioned resolution by the Annual General Meeting, the shares will be issued at the exercise price set in each case as the issue price and also at the specifi c terms and conditions determined in this resolution. The new shares participate in profi ts from the start of the fi nancial year in which they are issued. The Executive Management Board, with the approval of the Supervisory Board, and – to the extent that members of Executive Management Board are affected – the Supervisory Board are authorised to determine any other details concerning the contingent capital increase and its implementation. The Supervisory Board is authorised to change the wording of the Articles of Association to refl ect the scope of the capital increase from Contingent Capital II.
According to Article 5 (5) of the Company's Articles of Association, the Executive Management Board is authorised to increase the Company's share capital, with the approval of the Supervisory Board, by up to € 5,426,129.00 by issuing up to 5,426,129 new no par value bearer shares in return for cash contributions or contributions in kind on one or several occasions up to and including 28 April 2010 (Authorised Capital).
The Executive Management Board intends to resolve, with the approval of the Supervisory Board, to utilise this authorisation to some extent. Furthermore, the Supervisory Board intends to revise Article 5 (5) of the Articles of Association as follows:
5) The Executive Management Board is authorised to increase the Company's share capital, with the approval of the Supervisory Board, by up to € 3,607,948.00 by issuing up to 3,607,948 new no par value bearer shares in return for cash contributions or contributions in kind on one or several occasions up to and including 28 April 2010 (Authorised Capital). "
The Executive Management Board is further authorised to exclude shareholders' statutory subscription rights with the approval of the Supervisory Board in the following cases:
• for a portion of the Authorised Capital in the total amount of up to € 3,500,000.00 to the extent that this is required to cover over-allotments in connection with the placement of shares of the Company within the framework of the listing of the Company's shares on a German stock exchange;
page 37
The Executive Management Board resolves on the content of the rights inherent in the relevant shares and the other terms of the share issue with the approval of the Supervisory Board. The Supervisory Board is authorised to amend the wording of the Articles of Association to refl ect the scope of the capital increase from Authorised Capital."
The planned capital increase, along with the amendment of the Company's Articles of Association, has not yet been resolved and has therefore not yet been recorded in the appropriate Commercial Register.
The Company is not authorised at present to acquire treasury shares pursuant to Section 71 Sub-section 1 No. 8 of the German Stock Corporation Act.
After the balance sheet date, WILEX and UCB agreed on 8 January 2009 to enter into a strategic alliance. Under this agreement, WILEX AG will take over a UCB subsidiary, which is a limited liability company under German law ("GmbH"). If WILEX or the GmbH which is being acquired is subject to a change of control following a takeover bid, UCB is entitled but not obligated to make use of its buyback option (so-called opt-in right) prematurely, or, in case of a change of control taking place at the GmbH, to terminate the collaboration agreement, unless all rights and obligations under the collaboration agreement have previously been transferred to WILEX.
Initially, a change of control is deemed to have taken place in particular if a party holds at least 50 % of the shares in WILEX AG. The requirements of the German Stock Corporation Act regarding the allocation of voting shares shall apply. In the event of a takeover bid as defi ned in the German Securities Acquisition and Takeover Act (Wertpapiererwerbs- und Übernahmegesetz – WpÜG), acceptance of an offer for 50 % or more of the voting shares suffi ces. Furthermore, the acquisition of an interest in or voting shares of the GmbH, the transfer to a third party of all or essentially all assets of WILEX AG or the GmbH (also relative to an individual development programme of the GmbH) as well as the acquisition of the right to appoint or dismiss 50 % or more of the members of the Supervisory Board of WILEX AG are considered a change of control.
In particular, the parties also stipulated that if 50 % or more of the Company's Executive Management Board members and second management tier (vice presidents or higher) leave the Company within a period of three years from the closing of the strategic alliance, UCB may exercise the change of control provision inasmuch as these persons occupy key positions in regards to the expertise of WILEX, i. e. to develop and market drug candidates for oncological indications.
All stock options issued to employees and the Executive Management Board vest at the time of the change of control and may be exercised immediately without regard for any waiting period.
WILEX AG has not entered into any compensation agreements that provide for compensation to members of the Executive Management Board or employees in the event of a takeover bid.
| Contents | Page |
|---|---|
| Income statement | 50 |
| Balance sheet | 51 |
| Statement of changes in equity | 52 |
| Cash fl ow statement | 53 |
| Notes | |
| 1. General | 54 |
| 2. Summary of signifi cant accounting policies | 54 |
| 3. Financial risk management | 62 |
| 4. Critical estimates and discretionary decisions | 63 |
| 5. Property, plant and equipment | 64 |
| 6. Intangible assets | 65 |
| 7. Other non-current assets | 66 |
| 8. Inventories | 67 |
| 9. Other assets, prepayments and other receivables | 67 |
| 10. Cash, cash equivalents and fi nancial investments | 68 |
| 11. Equity | 68 |
| 12. Grant from the US Department of Defense | 69 |
| 13. Pension obligations | 69 |
| 14. Other non-current liabilities | 69 |
| 15. Trade payables and other current liabilities | 70 |
| 16. Other disclosures on fi nancial instruments | 72 |
| 17. Other income 18. Types of expenses |
73 74 |
| 19. Staff costs | 74 |
| 20. Net currency gains/losses | 80 |
| 21. Net fi nancial result | 81 |
| 22. Cash fl ow from operating activities | 82 |
| 23. Income tax expense | 83 |
| 24. Earnings per share | 84 |
| 25. Leases, guarantees and obligations | 85 |
| 26. Corporate bodies and compensation report | 86 |
| 27. Related-party transactions | 93 |
| 28. Expenses for the auditors | 94 |
| 29. Declaration of compliance with the | |
| German Corporate Governance Code in accordance | |
| with Section 161 German Stock Corporation Act | 94 |
| 30. Events after the balance sheet date | 95 |
of WILEX AG in accordance with IFRS for the fi nancial year from 1 December 2007 to 30 November 2008
| 2008 | 2007 | ||
|---|---|---|---|
| Note | € | € | |
| Revenue | 0 | 0 | |
| Other income | 17 | 3,207,707 | 2,583,374 |
| Income | 3,207,707 | 2,583,374 | |
| Research and development costs | 18 | (20,156,595) | (22,999,254) |
| Administrative costs | 18 | (4,444,659) | (3,510,786) |
| Other expenses (incl. depreciation/amortisation) | (24,601,254) | (26,510,040) | |
| Operating result | (21,393,547) | (23,926,666) | |
| Finance income | 21 | 972,292 | 1,714,785 |
| Finance costs | 21 | (11,624) | (21,973) |
| Net fi nancial result | 960,667 | 1,692,811 | |
| Earnings before tax | (20,432,880) | (22,233,854) | |
| Income tax | 23 | (14,785) | (23,656) |
| Net loss for the year | (20,447,665) | (22,257,510) | |
| Earnings per share | |||
| Basic and diluted earnings per share | (1.71) | (1.86) | |
| Average number of shares issued | 11,962,754 | 11,962,754 |
of WILEX AG in accordance with IFRS as at 30 November 2008
| Assets | Note | 30.11.2008 € |
30.11.2007 € |
|---|---|---|---|
| Property, plant and equipment | 5 | 461,713 | 523,843 |
| Intangible assets | 6 | 1,426,564 | 1,557,092 |
| Other non-current assets | 7 | 22,689 | 0 |
| Non-current assets | 1,910,966 | 2,080,935 | |
| Inventories | 8 | 22,200 | 22,200 |
| Other assets and prepayments | 9 | 1,072,248 | 1,242,720 |
| Other receivables | 9 | 184,888 | 111,011 |
| Financial investments | 10 | 0 | 15,374,513 |
| Cash and cash equivalents | 10 | 12,136,987 | 18,795,851 |
| Current assets | 13,416,323 | 35,546,295 | |
| Total assets | 15,327,289 | 37,627,230 |
| Equity and liabilities | Note | 30.11.2008 € |
30.11.2007 € |
|---|---|---|---|
| Subscribed capital | 11 | 11,962,754 | 11,962,754 |
| Capital reserve | 11 | 105,201,252 | 104,914,715 |
| Accumulated losses | 11 | (111,374,454) | (90,926,789) |
| Equity | 5,789,552 | 25,950,680 | |
| Pension provisions | 13 | 22,689 | 21,877 |
| Liabilities arising from leases | 25 | 0 | 22,977 |
| Other non-current liabilities | 14 | 251,755 | 506,974 |
| Non-current liabilities | 274,444 | 551,828 | |
| Trade payables | 15 | 1,787,991 | 1,747,900 |
| Liabilities arising from leases | 25 | 15,357 | 81,275 |
| Other current liabilities | 15 | 7,459,944 | 9,295,547 |
| Current liabilities | 9,263,293 | 11,124,722 | |
| Total equity and liabilities | 15,327,289 | 37,627,230 |
of WILEX AG in accordance with IFRS for the fi nancial year from 1 December 2007 to 30 November 2008
| Capital reserve | |||||||
|---|---|---|---|---|---|---|---|
| Note | Shares | Subscribed capital € |
Capital measures/ premium € |
Measurement of stock options € |
Accumulated losses € |
Total € |
|
| 103,116,770 | 1,309,883 | ||||||
| As at 1 December 2006 | 11,962,754 | 11,962,754 | 104,426,653 | (68,669,279) | 47,720,128 | ||
| Capital procurement costs IPO |
14,282 | 14,282 | |||||
| Measurement of stock options |
473,781 | 473,781 | |||||
| Net loss for the year | (22,257,510) | (22,257,510) | |||||
| Net change in equity | (21,769,448) | ||||||
| 103,131,052 | 1,783,664 | ||||||
| As at 30 November 2007 | 11,962,754 | 11,962,754 | 104,914,715 | (90,926,789) | 25,950,680 | ||
| As at 1 December 2007 | 11,962,754 | 11,962,754 | 104,914,715 | (90,926,789) | 25,950,680 | ||
| Measurement of stock options |
11 | 286,537 | 286,537 | ||||
| Net loss for the year | (20,447,665) | (20,447,665) | |||||
| Net change in equity | (20,161,128) | ||||||
| 103,131,052 | 2,070,200 | ||||||
| As at 30 November 2008 | 11,962,754 | 11,962,754 | 105,201,252 | (111,374,454) | 5,789,552 |
of WILEX AG in accordance with IFRS for the fi nancial year from 1 December 2007 to 30 November 2008
| Note | 2008 € |
2007 € |
|
|---|---|---|---|
| Net loss for the year | (20,447,665) | (22,257,510) | |
| Adjustment for income statement items | |||
| Measurement of stock options | 286,537 | 473,781 | |
| Depreciation/amortisation | 252,707 | 257,770 | |
| Increase in pension obligations | 812 | 783 | |
| Finance costs | 11,624 | 21,973 | |
| Finance income | (972,292) | (1,714,785) | |
| Tax expense | 14,785 | 23,656 | |
| (405,827) | (936,822) | ||
| Changes in net working capital | |||
| Inventories | 0 | 0 | |
| Other receivables | (73,877) | 1,206 | |
| Prepayments | 170,472 | (173,082) | |
| Other non-current assets | (22,689) | 0 | |
| Trade payables | 40,091 | 644,379 | |
| Other liabilities | (2,090,822) | 63,065 | |
| (1,976,824) | 535,568 | ||
| Cash fl ow from operating activities | (22,830,316) | (22,658,764) | |
| Finance costs paid | 21 | (7,855) | (13,790) |
| Finance income received | 21 | 1,335,938 | 1,318,465 |
| Net cash fl ow from operating activities | 22 | (21,502,233) | (21,354,090) |
| Cash fl ow from investing activities | |||
| Purchase of property, plant and equipment | 5 | (55,905) | (146,230) |
| Purchase of intangible assets | 6 | (11,831) | (452,417) |
| Sale/purchase of fi nancial investments | 10 | 15,000,000 | (15,000,000) |
| Net cash fl ow from investing activities | 14,932,264 | (15,598,647) | |
| Cash fl ow from fi nancing activities | |||
| Capital increase costs | 0 | (833,413) | |
| Redemption of silent partnership loans (total investments/interest) | 0 | (42,964) | |
| Repayment fi nance leases | 25 | (88,895) | (83,567) |
| Net cash fl ow from fi nancing activities | (88,895) | (959,944) | |
| Net change in cash and cash equivalents | (6,658,863) | (37,912,681) | |
| Cash and cash equivalents | |||
| at beginning of period | 18,795,851 | 56,708,532 |
WILEX AG (hereafter also referred to as "the Company" or "WILEX") was established in 1997 in Munich, Germany, as WILEX Biotechnology GmbH by a team of doctors and cancer researchers at the Technical University of Munich. In accordance with the shareholders' resolution of 14 December 2000, amended on 28 February 2001, the Company changed its legal form to become a stock corporation called WILEX AG. The change of name was entered into the commercial register at the district court in Munich on 9 April 2001, under registration number HRB 136670. The Company's registered offi ce is Grillparzerstr. 10, 81675 Munich, Germany. Since 13 November 2006, WILEX shares have been listed in the Regulated Market/ Prime Standard of the Frankfurt stock exchange.
WILEX is a biopharmaceutical research company that focuses on the research and development of new drugs and technologies in cancer therapy. The Company has a balanced product pipeline of attractive cancer drug candidates that cover all stages, from research to advanced clinical trials. WILEX aims to develop new compounds for cancer therapy that are not cytotoxic, but instead target tumour-specifi c features which play a role in the formation and development of cancer. The Company's goal is to develop innovative cancer therapies which are more effective, better tolerated and more cost- effective than traditional therapies. WILEX aims to market and sell the drugs and diagnostic agents after they have been approved.
These fi nancial statements were prepared by the Executive Management Board on 2 February 2009 and released for publication in accordance with IAS 10. The reporting period begins on 1 December 2007 and ends on 30 November 2008. It is referred to as "the 2008 fi nancial year" or "fi nancial year 2008" ("2007 fi nancial year" or "fi nancial year 2007" for the previous period).
The fi nancial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU. IFRS 7 Financial Instruments: Disclosures has been applied for the fi rst time. This entailed extended disclosures in the notes. The amendments to IAS 1 Presentation of Financial Statements were also implemented.
Furthermore, the following interpretations have been applied for the fi rst time, but without having an impact on the fi nancial statements:
IFRIC 11 IFRS 2 – Group and Treasury Share Transactions
The following standard has not been applied voluntarily in advance. Its application is not required for fi nancial years commencing before 1 January 2009:
IFRS 8 Operating Segments
The following standards and interpretations have been adopted by the IASB and the EU:
| Amendments to IAS 1: | Presentation of Financial Statements |
|---|---|
| Amendments to IAS 23: | Borrowing Costs |
| Amendments to IAS 32: | Financial Instruments: Presentation |
| Amendments to IFRS 2: | Share-based Payment |
| IFRIC 13: | Customer Loyalty Programmes |
| IFRIC 14: | IAS 19 – The Limit on a Defi ned Benefi t Asset, Minimum Funding Requirements and their Inter |
| action |
The following standards and interpretations have been adopted by the IASB. However, they have not yet been adopted by the EU:
| Amendments to IFRS 3: | Business Combinations |
|---|---|
| Amendments to IAS 27: | Consolidated and Separate Financial Statements |
| Amendments to IAS 39: | Financial Instruments: Recognition and Measurement |
| Various: | Improvements of IFRS |
| IFRIC 12: | Service Concession Arrangements |
| IFRIC 15: | Agreements for the Construction of Real Estate |
| IFRIC 16: | Hedges of a Net Investment in a Foreign Operation |
Early application of the above standards and interpretations would not signifi cantly affect recognition and measurement, but would require additional or more extensive disclosures in the notes.
The preparation of the fi nancial statements is based on historical cost, reduced by the revaluation of available-for-sale fi nancial assets and fi nancial assets and liabilities recognised at fair value. Assuming continuing operations, the Company realises its assets and liabilities in the normal course of business.
When preparing fi nancial statements in accordance with IFRS, certain critical estimates need to be made with regard to the accounting policies. The application of the accounting policies calls for management to use discretion. Note 4 explains which areas require a higher degree of assessment or complexity and which assumptions and estimates are relevant to the fi nancial statements.
In accordance with Section 325 (2a) HGB (German Commercial Code), the Company publishes these IFRS single-entity fi nancial statements in the electronic Bundesanzeiger (Federal Gazette).
The Company has no subsidiaries or affi liated companies. All business activities are carried out by WILEX AG.
Based on its internal management and organisational structure, the business activities carried out by WILEX do not differ signifi cantly in their risk/reward profi les. Accordingly, the Company operates in one segment only and does not prepare a segment report.
The annual fi nancial statements have been prepared in euros (€), the Company's functional and reporting currency.
Foreign currency transactions are translated into the functional currency using the exchange rates at the transaction date. Gains and losses from the settlement of such transactions as well as from the translation of monetary assets and liabilities reported in a foreign currency at end of period exchange rates are recognised in the income statement.
The Company's functional currency is the euro (€). In addition, the Company also carries out transactions in US dollars (USD), Swiss francs (CHF), pound sterling (GBP) and, to a smaller extent, in other foreign currencies as well.
Differences may result from commercial rounding of exact fi gures.
The Company does not own plots of land or buildings. All offi ce and laboratory premises used at present are rented. Property, plant and equipment consists mainly of laboratory and offi ce equipment, which is recognised at historical cost less depreciation. Depreciation is on a straight-line basis, applying the following expected useful lives, which are reviewed annually and adjusted where necessary:
Laboratory equipment 6 to 14 years Other offi ce equipment 3 to 23 years
Expenses for repairs and maintenance and the replacement of subordinate items are recognised in income at the time they arise. Extensive replacements and new fi xtures and fi ttings are capitalised where they create a future economic benefi t. Replacements are also depreciated over the above useful lives. In the event of disposal, the cost and associated accumulated depreciation are derecognised. Any gains or losses resulting from such disposal are recognised in income in the fi nancial year.
WILEX subjects property, plant and equipment to an annual impairment review. An impairment loss is recognised if the carry ing amount of the asset exceeds its recoverable amount. If there is a change in the estimates on the basis of which the recoverable amount was determined, the impairment loss is reversed. WILEX has not ascertained any indication of impairment.
The Company has not pledged any property, plant or equipment as collateral for contingent liabilities.
Licences are initially recorded at cost. They have specifi c useful lives and are reported at cost less accumulated amortisation. They are amortised on a straight-line basis to distribute the licence costs over the expected useful life (12.5 to 20 years).
Software licences acquired are capitalised on the basis of the costs incurred in connection with their acquisition and installation. These costs are amortised over the expected useful life of three years.
In accordance with IFRS, the costs incurred for a drug during its development stage are only recognised if the Company can substantiate all of the following:
At present, all research and development costs are recognised in the income statement for the fi nancial year in which they arise.
WILEX has not pledged any intangible assets as collateral for contingent liabilities. The Company has no contractual obligations for the acquisition of intangible assets.
WILEX subjects intangible assets to an annual impairment review. An impairment loss is recognised if the carrying amount of the asset exceeds its recoverable amount. If there is a change in the estimates on the basis of which the recoverable amount was determined, the impairment loss is reversed. WILEX has not ascertained any indication of impairment.
In 1999, the Company granted a pension commitment to a managing director (the current chairman of the Executive Management Board) as part of a deferred benefi t. This pension obligation is recognised in the amount of the asset value of the related reinsurance policy. In the Company's view, no additional payments to the plan will be necessary. Since no pension payments are expected in the next fi ve years, this asset value was recognised under other non-current assets, in contrast to previous reporting periods.
Inventories are measured at the lower of cost or net realisable value. Costs are determined on the basis of the fi rst-in fi rst-out (FIFO) method and comprise the purchase price and any ancillary costs. Inventories comprise raw materials for research and development, mainly chemical substances and laboratory materials.
The other assets and prepayments, e. g. to service providers or insurers, are either recognised in income in accordance with progress on the relevant order or offset against the fi nal supplier invoice.
Receivables are initially recognised at fair value and subsequently at amortised cost using the effective interest method, less any impairment losses. An impairment of trade receivables is recognised if there is an objective, substantial indication that not all of the amounts due according to the original contractual terms and conditions are recoverable. The impairment corresponds to the difference between the carrying amount of the asset and the present value of the expected future cash fl ows, discounted at the current market interest rate. The impairment is recognised in income.
Financial investments include fi xed-interest bank credit balances with agreed terms of more than three months (fi xed deposits). Two such investments of € 15.0 million each were made during the 2007 fi nancial year; one of these did not expire until 2008. No fi nancial investments were recognised as at the 30 November 2008 reporting date because no new fi nancial investments had been made. All fi nancial investments were solely made with major banks that belong to the German Deposit Insurance Fund and/or the deposit assurance fund of the German Savings Banks Organisation (Sparkassen-Finanzgruppe).
Cash and cash equivalents comprise credit balances with banks with a remaining term of no more than three months at the date of acquisition as well as cash positions. WILEX maintains credit balances only with major banks that belong to the German Deposit Insurance Fund and/or the German Savings Banks Organisation's deposit assurance fund. Hence there are no default risks.
Pledged accounts are classifi ed as cash equivalents. As at the reporting date, WILEX had pledged two bank accounts with the following credit balances as security deposits: € 129 thousand to the landlord and € 100 thousand to a lessor of laboratory equipment.
page 54
Under IAS 39/IFRS 7 (see note 2.1), fi nancial instruments are classifi ed according to type:
Financial instruments designated at fair value through profi t or loss (AFVPL-Des.): Under the fair value option, fi nancial instruments may be subjected to a voluntary fair value measurement, including recognition of remeasurement gains or losses in the income statement. The irrevocable decision to use the fair value option must be made on initial recognition of the fi nancial instrument. The fair value option may be applied to a fi nancial instrument for example if it eliminates or signifi cantly reduces a measurement or recognition inconsistency. No such assets or liabilities were recognised in the period under review.
Available-for-sale fi nancial assets: In particular, this concerns interest-bearing securities, shares and equity interests. They are measured at the fair value. Equity instruments shall be measured at amortised cost if their fair value cannot be reliably determined. No such assets or liabilities were recognised in the period under review.
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page 95
These fi nancial assets are classifi ed on initial recognition.
In addition, fi nancial instruments are divided into current or non-current assets or liabilities as at the balance sheet date depending on their remaining life. Financial instruments with a remaining life of more than one year at the reporting date are recognised as non-current fi nancial instruments while those with a remaining life of less than one year are recognised as current assets or liabilities.
The Company's equity consists of bearer shares of common stock. Additional costs directly attributable to the issue of new shares and the IPO are recognised under equity as a deduction from the proceeds.
According to its current level of planning, the Company's Executive Management Board assumes that it will be able to generate cash fl ows in the coming fi nancial year through cooperation and/or out-licensing in addition to its strategic alliance with the pharmaceutical group UCB Pharma S.A., Brussels, Belgium (UCB) (see note 30). In 2009 these cash fl ows might be lower than the other expenses incurred in the same period, which could reduce equity further at the next reporting date.
If the Company is unable to enter into additional cooperation and out-licensing agreements, WILEX would have to pursue other funding opportunities and/or a capital increase.
Furthermore, the current drug and diagnostic candidates are to be developed for marketing in the medium term, which means that sales revenues could also be generated in the future. This would improve WILEX's capitalisation in the long term and enable the Company to generate profi ts and fi nance itself from its cash fl ows from operating activities without having to take capital measures of any nature.
In principle, WILEX is interested in furthering its constructive, trustful and, in most cases, long-standing cooperation with its providers of equity.
The Company's goal is still to allow its employees and Executive Management Board a large share in the Company's success as shareholders. To this end, Contingent Capital was created in connection with the issue of stock options (see note 2.17.1).
Deferred income taxes are recognised by applying the liability method for temporary differences which arise between the tax base of the assets and liabilities and their carrying amounts in the fi nancial statements according to IFRS. Deferred income taxes are to be measured in accordance with the tax rates (and tax regulations) that are applicable as at the reporting date or that have essentially been passed as law and are expected to be applicable during the period in which an asset is realised or a debt is settled.
Deferred tax assets are recognised to the extent it is probable that a taxable profi t will be available against which the temporary differences can be applied. Deferred tax assets for tax loss carryforwards are recognised to the extent it is probable that the benefi t arising will be realised in future.
Undiluted earnings per share are calculated as that proportion of net profi t or loss for the year available to common shareholders, divided by the weighted average number of shares outstanding during the period under review. The Treasury Stock Method is used to calculate the effect of subscription rights. The proceeds assumed from the issue of potential common shares with dilutive effect must be calculated as if they had been used to repurchase shares at fair value. The difference between the number of shares issued and the number of shares which would have been issued at fair value must be treated as an issue of common shares for no consideration and is refl ected in the denominator when calculating diluted earnings per share. The profi t or loss is not adjusted for the effects of stock subscription rights. The calculation of diluted earnings per share is not carried out on the assumption that potential common shares are exercised which are protected against dilution in relation to earnings per share.
In the 2008 fi nancial year, WILEX's liabilities towards employees resulting from the issue of stock options were reported pursuant to IFRS 2. These liabilities are calculated using a binomial model (see note 19). The fair value of the work provided by the employees in return for the options granted to them is expensed. The total expense to be recognised until the time at which the options become vested is determined by the fair value of the options granted, excluding effects of exercise thresholds that are not based on capital market parameters (e. g. profi t and sales growth targets). Such non-capital-market exercise thresholds are considered in the assumptions regarding the number of options that are expected to become exercisable. The estimate of the number of options expected to become exercisable is reviewed on every reporting date. The effects of any adjustments that have to be considered with regard to initial estimates are recognised in the income statement as well as by adjusting equity accordingly.
In the reporting period no options have been issued or have expired. 1,750 options were returned because an employee left the Company. This means that 905,834 options – 729,335 for existing or former members of the Executive Management Board and 176,499 for employees – had been issued as at 30 November 2007, such that in future no more than 383,323 stock options can be issued from Contingent Capital.
The Company recognises both a liability and an expense for bonus entitlements of both Executive Management Board members and employees. A liability is recognised if there is a contractual obligation or if an obligation is assumed to have arisen as a result of past business practice.
The lease of equipment for which essentially all opportunities and risks associated with ownership are transferred to the Company is deemed to represent a fi nance lease under IAS 17. Finance leases are recognised at the beginning of the lease at the lower of fair value or present value of the minimum lease payments. Each lease payment is split into an interest and repayment portion so as to produce a constant interest rate on the remaining balance of the liability. The relevant lease liabilities are contained in liabilities arising from leases. The interest portion of the fi nancing costs is recognised in income over the term of the lease using the effective interest method. If there is suffi cient certainty that ownership will transfer to the lessee at the end of the term of the lease, the asset acquired under a fi nance lease is depreciated over its expected useful life. Otherwise, the asset is depreciated over the shorter of its useful life or the term of the lease.
Leases, where the risks and benefi ts associated with ownership remain essentially with the lessor, are deemed to be operating leases. Any payments made under operating leases are recognised in income on a straight-line basis over the term of the lease.
The Company recognises revenue measured at the fair value of the services rendered by the Company less VAT, discounts and rebates. The consideration received is usually cash. If rendering of the underlying services is deferred to the receipt of the cash, the cash amount received in advance is recognised according to the stage-of-completion method of the underlying service period.
Non-refundable prepayments and other non-refundable time-based payments received in connection with specifi c research and development activities are recognised as other income over the period of the underlying activities in the proportion of costs incurred to date to the total expected cost of the activities. Interest income is reported in income pro rata temporis using the effective interest method.
Research and development activities comprise all associated costs, including staff costs, consulting costs, material and production costs, third party services, laboratory costs and fees for legal advice. They are recognised as expenses in the period in which they are incurred. Research and development equipment is capitalised and depreciated over its expected useful life.
Given its business activities, the Company is exposed to certain risks, in particular market risks (including currency risks, interest and price risks), liquidity risks and, to a smaller extent, credit and default risks. The Company's risk management focuses on the unpredictability of the fi nancial markets and aims to minimise any potential adverse effects on the Company's ability to fi nance its business activities. The Company does not use embedded derivatives or other derivative fi nancial instruments to hedge against risks.
An effective risk management system has been implemented at the Company and compliance in accordance with the principles approved by the Supervisory Board is monitored by the Controlling department. The Executive Management Board specifi es written principles for all risk management aspects. The Risk Offi cer identifi es, assesses and communicates fi nancial and corporate risks in close cooperation with the Executive Management Board. Moreover, all potential risks, particularly fi nancial risks with substantial ramifi cations and a reasonable probability of occurring are closely monitored and discussed by the Company's Executive Management and Supervisory Boards at every quarterly reporting date.
The Company cooperates with several service providers worldwide and is therefore exposed to currency risks in connection with currency positions, mainly in US dollars (USD), Swiss francs (CHF), pound sterling (GBP) and, to a lesser extent, in other foreign currencies. Currency risks arise as a result of future transactions and assets and liabilities recognised. Currency risks arise when future transactions and assets and liabilities recognised are denominated in a currency other than the functional currency of the Company.
As the currency risk is limited overall, the Company has not yet concluded any hedging transactions but is attempting to achieve fi nancial hedging by matching cash infl ows and outfl ows in the same currency.
The Company is not exposed to risks from share price fl uctuations relating to equity securities, since all funds are invested either in fi xed-interest bank balances or fi xed-interest fi nancial investments. The Company is not exposed to commodity price risks.
Prudent liquidity risk management implies maintaining suffi cient cash and marketable securities to fi nance the Company's business activities. The Company has no obligations under long-term fi nancial investments. The Company has a detailed cash planning system, which is updated regularly. It serves to ensure that WILEX has suffi cient cash and cash equivalents on hand at any time in order to be able to pay liabilities as they fall due.
WILEX is exposed to non-payment risks in connection with both loans and receivables. As at the reporting date, trade receivables that are not overdue are recognised under other receivables from cooperation partners. They might be delayed or not paid at all. Credit and default risks were perceived as a potential risk in the course of the Company's develop ment and included in its risk management system.
(d) Cash fl ow and fair value interest rate risk from fi nancial instruments
The Company invests its liquid funds only in fi xed-interest bank accounts or short-term fi xed deposits. Market interest rate fl uctuations may therefore affect the Company's ability to generate suffi cient interest income from these fi nancial instruments. This conservative investment approach ensures that there is no non-payment risk (see notes 2.11 and 2.12).
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As a result of the Company's successful IPO in 2006 and the income and revenue arising from its agreements with Ion Beam Applications S.A., Brussels, Belgium (IBA) and UCB, it is now in a position to drive forward research and development, particularly in connection with its two most advanced clinical Phase III product candidates – RENCAREX® and REDECTANE®. Based on current planning, cash and cash equivalents will be suffi cient until the fi rst quarter of the 2010 fi nancial year. The Executive Management Board assumes that additional infl ows of capital will be generated by this date through partnerships and/or cooperation agreements.
The fair value of fi nancial instruments traded in active markets is based on quoted market prices at the reporting date. The fair value of fi nancial instruments that are not traded in an active market is determined by using measurement methods, i. e. methods and assumptions that are based on market conditions existing at each reporting date. The fair value must be determined using complex measurement models such as the discounted cash fl ow method if stock exchange or market prices cannot be used for that purpose.
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The Company makes estimates and assumptions concerning the future. By their nature, the resulting estimates rarely refl ect the exact subsequent circumstances. The estimates and assumptions that have a signifi cant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next fi nancial year are discussed below.
The Company recognises other income resulting from the prepayments received from the companies, Laboratorios del Dr. Esteve S.A., Barcelona, Spain (Esteve) and IBA as well as for cost reimbursement for the clinical Phase III trials with RENCAREX® and REDECTANE® (see note 17). The prepayment and the reimbursement of costs are recognised as other income refl ecting the proportion of expenses accrued until the reporting date relative to the overall expected expenses for the Phase III trials (percentage-of-completion method). Should the expected expense level change over such period, then WILEX would have to account for this change in future periods.
The Company recognises expenses from the measurement of stock options under staff costs. For this purpose, future assumptions need to be made regarding the calculation parameters, such as the expected volatility of the share price, the expected dividend payment, the risk-free interest rate during option terms and staff and Executive Management Board turnover. Should these assumptions change, WILEX would need to adjust the relevant parameters, change its calculations accordingly and correct the staff costs (see note 19).
page 73
As at 30 November 2008 and 2007, property, plant and equipment comprised the following:
| Laboratory equipment (owned) € '000 |
Laboratory equipment (leased) € '000 |
Other offi ce equipment € '000 |
Total € '000 |
|
|---|---|---|---|---|
| 2006 fi nancial year | ||||
| Cost | 868 | 255 | 246 | 1,368 |
| Accumulated depreciation | (647) | (16) | (196) | (858) |
| Net carrying amount as at 30.11.2006 | 221 | 239 | 50 | 510 |
| 2007 fi nancial year | ||||
| Opening carrying amount | 221 | 239 | 50 | 510 |
| Additions | 62 | 0 | 87 | 149 |
| Depreciation | (58) | (20) | (57) | (135) |
| Net carrying amount as at 30.11.2007 | 225 | 219 | 80 | 524 |
| As at 30.11.2007 | ||||
| Cost | 929 | 255 | 333 | 1,517 |
| Accumulated depreciation | (704) | (36) | (253) | (993) |
| Net carrying amount as at 30.11.2007 | 225 | 219 | 80 | 524 |
| 2008 fi nancial year | ||||
| Opening carrying amount | 225 | 219 | 80 | 524 |
| Additions | 7 | 0 | 46 | 53 |
| Depreciation | (50) | (20) | (46) | (115) |
| Net carrying amount as at 30.11.2008 | 183 | 199 | 80 | 462 |
| As at 30.11.2008 | ||||
| Cost | 937 | 255 | 379 | 1,570 |
| Accumulated depreciation | (754) | (55) | (299) | (1,108) |
| Net carrying amount as at 30.11.2008 | 183 | 199 | 80 | 462 |
Depreciation amounting to € 115 thousand (2007: € 135 thousand) is recognised in income as research and development costs (2008: € 69 thousand; 2007: € 78 thousand) and as general and administrative expenses (2008: € 46 thousand; 2007: € 57 thousand). Capital outfl ow from the purchase of property and equipment in the fi nancial year amounted to € 56 thousand (2007: € 146 thousand).
As at 30 November 2008 and 2007, intangible assets comprised the following:
| Software € '000 |
Licences € '000 |
Total € '000 |
|
|---|---|---|---|
| 2006 fi nancial year | |||
| Cost | 82 | 1,436 | 1,518 |
| Accumulated amortisation | (76) | (157) | (234) |
| Net carrying amount as at 30.11.2006 | 6 | 1,279 | 1,284 |
| 2007 fi nancial year | |||
| Opening carrying amount | 6 | 1,279 | 1,284 |
| Additions | 36 | 360 | 396 |
| Amortisation | (7) | (116) | (123) |
| Net carrying amount as at 30.11.2007 | 34 | 1,523 | 1,557 |
| As at 30.11.2007 | |||
| Cost | 118 | 1,795 | 1,914 |
| Accumulated amortisation | (84) | (273) | (357) |
| Net carrying amount as at 30.11.2007 | 34 | 1,523 | 1,557 |
| 2008 fi nancial year | |||
| Opening carrying amount | 34 | 1,523 | 1,557 |
| Additions | 7 | 0 | 7 |
| Amortisation | (15) | (122) | (137) |
| Net carrying amount as at 30.11.2008 | 26 | 1,401 | 1,427 |
| As at 30.11.2008 | |||
| Cost | 125 | 1,795 | 1,921 |
| Accumulated amortisation | (99) | (395) | (494) |
| Net carrying amount as at 30.11.2008 | 26 | 1,401 | 1,427 |
Amortisation amounting to € 137 thousand (2007: € 123 thousand) is recognised in income as research and development costs (2008: € 122 thousand; 2007: € 116 thousand) and as general and administrative expenses (2008: € 15 thousand; 2007: € 7 thousand). Capital outfl ow for the purchase intangible assets in the fi nancial year totalled € 12 thousand (2007: € 452 thousand).
WILEX signed a licence, sub-licence and option agreement in 2001 with Bayer Corporation Business Group Diagnostics, Tarrytown, NY, USA, for the acquisition of certain rights relating to the MN patent portfolio of Bayer. "MN" (also known as CA IX) is a tumour-associated antigen which is expressed in a large number of cancers, including virtually all clear cell renal cell carcinomas. The agreement grants WILEX specifi c property rights for its G250 antibody. WILEX capitalised the costs for acquiring the licence from Bayer Corporation and is amortising the licence over the period of use of the underlying MN patents.
In October 2004, WILEX capitalised the costs for acquiring an option agreement with Centocor Inc., Malvern, PA, USA. Under this option agreement, which WILEX may exercise until the date of fi ling for approval of RENCAREX® in the USA, the Company acquired an option to the exclusive US marketing rights for the G250 antibody (RENCAREX®). In 1999, WILEX acquired an exclusive licence for the G250 antibody from Centocor for worldwide development and marketing outside the USA. At that time, Centocor retained an option to the marketing rights in the USA, exercisable until the date of fi ling for approval of RENCAREX® in the USA. Under this option agreement, Centocor received an upfront payment and is entitled to future milestone payments and licence fees from the sale of the drug in the USA, should WILEX exercise the option. The option agreement is recognised at cost and will be amortised over the useful life of the underlying patent for the G250 antibody.
In June 2006, a new licence agreement was signed by WILEX and Genentech Inc., San Francisco, CA, USA. Genentech holds a patent protecting, along with other aspects, a process that is essential for the subsequent manufacturing of RENCAREX®. WILEX has therefore acquired a non-exclusive licence for the RENCAREX® antibody relating to the Cabilly II Patent, together with the right to issue sub-licences.
The licence fee was recognised at present value as an intangible asset in June 2006 and will be amortised on a straight-line basis until December 2018, which is when the underlying patent (US Patent No. 6,331,415, dated 18 December 2001) expires. The amortisation is included in research and development costs. The licence fee is payable in several tranches. The payment obligations relating to the outstanding tranche are reported under the balance sheet item, "other current liabilities" (see note 15).
A further obligation in the form of a milestone payment will arise once market approval in the USA has been granted by the FDA. This amount will increase the cost of the licence at the time of market approval and will be amortised over the remaining useful life. In addition, there are agreements in place for royalty payments based on the annual net sales of RENCAREX®. In the meantime, the US Patent Offi ce in February 2007 has declared the Cabilly II Patent from Genentech to be neither new nor inventive. The process has not yet reached its fi nal conclusion. Genentech has appealed the decision of the US Patent Offi ce. If the patent is ultimately declared void, WILEX might not have to make any future payments. In this case, the Company would have to recognise an impairment loss on this intangible asset.
In February 2007, WILEX exercised the option regarding the acquisition of a patent portfolio from Dendreon Corporation, Seattle, WA, USA. The portfolio includes all of the patents and patent applications for uPA inhibitors owned by Dendreon. This enables WILEX to provide a more comprehensive framework for the subsequent clinical development of the second generation of uPA inhibitors, which are still being researched. The patent fee was recognised at present value as an intangible asset in February 2007 and will be amortised on a straight-line basis until December 2020, which is when the underlying patent expires. The amortisation is included in research and development costs. The licence fee is payable in two tranches. The payment obligations relating to the outstanding tranche are reported under balance sheet item, "other current liabilities" (see note 15). Further milestone payments will be due if the programmes enter the clinical development stage.
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page 70
The asset value of the reinsurance policy related to a pension obligation (€ 23 thousand) is recognised in other non-current assets (see note 2.7). The Company is under no obligation to make further payments to the plan. This balance sheet item was reclassifi ed from other receivables (2007: € 22 thousand) because no additional pension payments or retirements are anticipated in the next fi ve years.
Inventories (2008: € 22 thousand; 2007: € 22 thousand) comprise raw materials for research and development, mainly chemical substances and laboratory materials.
Other receivables are comprised as follows:
| 30.11.2008 € '000 |
30.11.2007 € '000 |
|
|---|---|---|
| Insurance | 97 | 168 |
| Prepayments to service providers | 951 | 1,036 |
| Deferred withholding tax | 23 | 38 |
| Other | 1 | 1 |
| Other assets and prepayments | 1,072 | 1,243 |
Prepayments to service providers include, in particular, payments to service providers in clinical development and subcontractors.
In 2008 and 2007, WILEX recognised deferred withholding tax. In April 2004, WILEX received a prepayment from the Spanish pharmaceutical company Esteve, a certain percentage of which was withheld by the Spanish authorities. This tax deferral was accounted for at cost and is recognised as a tax expense in accordance with the recognition of income from the underlying prepayment.
Other receivables are comprised as follows:
| 30.11.2008 € '000 |
30.11.2007 € '000 |
|
|---|---|---|
| VAT claim | 45 | 83 |
| Withholding tax refund | 96 | 5 |
| Asset value of reinsurance | 0 | 22 |
| Trade receivables | 42 | 0 |
| Other assets | 2 | 1 |
| Other receivables | 185 | 111 |
Since the Company has incurred only operating losses, the withholding tax was refunded. The asset value of the insurance policy concerns the reinsurance contract for the pension obligation toward Professor Olaf G. Wilhelm, which was recognised in the other receivables in 2007 (see note 2.7). The licencing contract with IBA gave rise to trade receivables. page 57
| 30.11.2008 € '000 |
30.11.2007 € '000 |
|
|---|---|---|
| Cash and cash equivalents | 12,137 | 18,796 |
| Financial investments with a remaining maturity < 1 year | 0 | 15,375 |
| Total | 12,137 | 34,170 |
The decrease in cash and cash equivalents and fi nancial investments compared to the 2007 fi nancial year is due to the use of cash, most of which from the IPO, for clinical development. An investment in a one-year fi xed deposit, which was made in 2007 and expired in 2008, was classifi ed as a fi nancial investment (see note 2.11).
As at 30 November 2008, the share capital consisted of 11,962,754 (30 November 2007: 11,962,754) no par value bearer shares with an arithmetical proportion in the share capital of € 1.00 per share. The arithmetical nominal amount and any premium on the issue of shares are reported under "subscribed capital" and "capital reserve" respectively.
The following shares have been issued since the Company was established:
| Issue date | Entry in the commercial register | Number of shares | € |
|---|---|---|---|
| On 30.11.2003 * | 10,845,000 | 10,870,000 | |
| On 30.11.2004 * | 10,845,000 | 10,870,000 | |
| 29.04.2005 | 31.05.2005 | 6,521,598 | 6,521,598 |
| 08.09.2005 | 10.11.2005 | — | (25,000) |
| 08.09.2005 | 10.11.2005 | 51 | 51 |
| 08.09.2005 | 10.11.2005 | (11,577,766) | (11,577,766) |
| On 30.11.2005 | 5,788,883 | 5,788,883 | |
| 03.11.2005 | 21.12.2005 | 2,173,871 | 2,173,871 |
| 10.11.2006 | 10.11.2006 | 4,000,000 | 4,000,000 |
| On 30.11.2006 | 11,962,754 | 11,962,754 | |
| On 30.11.2007 | 11,962,754 | 11,962,754 | |
| On 30.11.2008 | 11,962,754 | 11,962,754 |
* WILEX AG held an additional 25,000 no par value shares without voting rights as treasury shares.
The share capital of WILEX remained unchanged in the 2008 fi nancial year as no capital measures were taken.
Since the mandatory application of IFRS 2 Share-based Payment, the value of the capital reserve is adjusted every quarter in line with the additional expenses resulting from the share-based model. A total of € 286,537 was recognised in this context in the period under review (see note 19).
As at the reporting date of 30 November 2008, the capital reserve amounted to € 105,201,252. The accumulated losses since the start of the Company's business activities in 1997 totalled € 111,374,454 as at the end of the fi nancial year.
At the end of 2003, the Company received the fi rst Clinical Partnership Award of the breast cancer research programme sponsored by the US Department of Defense. WILEX will use the grant amounting to USD 4.0 million to fi nance the clinical development of WX-UK1 in two clinical trials carried out at the Fox Chase Cancer Center Philadelphia, PA, USA. The US Department of Defense also made a commitment in 2006 to pay a further USD 1.0 million for subsequent research projects relating to WX-671 (MESUPRON®), in order to promote the development of the serine protease inhibitor. Payments to WILEX are to be made in quarterly instalments until 2009. As long as costs for the WX-UK1 and MESUPRON® (breast cancer) trials are not expensed, payments to WILEX are recognised under liabilities. Cost reimbursements are recognised in other income (see note 17).
In 1999, the Company granted a one-off pension commitment of € 15 thousand to Professor Olaf G. Wilhelm, the current chairman of the Executive Management Board and Managing Director at the time, as part of a deferred benefi t. The pension obligation is reported at the asset value of the associated reinsurance policy and covered in full by this at the reporting date (see note 2.7). The Company is under no obligation to make further payments to the plan. No pension payments are ex pected in the coming fi ve years.
Liabilities are recognised if a legal or constructive obligation exists towards third parties. Liabilities are recognised at nominal value or present value where they represent non-current liabilities. All liabilities that fall due within at least one year are recognised as non-current liabilities. They are comprised as follows:
| 30.11.2008 € '000 |
30.11.2007 € '000 |
|
|---|---|---|
| Accruals Esteve/IBA | 157 | 507 |
| Provision for rent (IFRS) | 43 | 0 |
| Provision for anniversary payment | 52 | 0 |
| Other non-current liabilities | 252 | 507 |
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page 73
As clinical Phase III trials progress, the portion of milestone payments received that is accrued next year or later decreases. A provision for one month's rent must be recognised under IFRS because the Company does not pay rent for one month each year through 2009. A 10-year service anniversary bonus that was resolved and introduced for all employees in 2008 was recognised for the fi rst time as of WILEX AG's tenth anniversary. These staff costs were classifi ed as current or non-current provisions depending on the length of the given staff member's employment with the Company. The actuarial report necessary for the measurement is based on various assumptions (e. g. fl uctuation and development of interest rates) and must be adjusted to these parameters annually as at the reporting date.
Current trade payables rose from € 1,748 thousand in the 2007 fi nancial year to € 1,788 thousand in the 2008 fi nancial year as a result of an expansion of the Company's operating activities.
Other current liabilities are comprised as follows:
| 30.11.2008 € '000 |
30.11.2007 € '000 |
|
|---|---|---|
| Accruals for holidays not taken | 293 | 262 |
| Accruals US Department of Defense | 1,095 | 962 |
| Accruals Esteve/IBA | 3,304 | 1,387 |
| Social security and other taxes | 107 | 93 |
| Other deferred income | 0 | 4 |
| Payment obligations under licence acquisitions | 0 | 356 |
| Accrued liabilities | 2,660 | 6,232 |
| Other current liabilities | 7,460 | 9,296 |
page 69
The increase in deferred income related to the US Department of Defense arises from payments received in connection with the expanded grants (see note 12). Prepayments that were received from cooperation partners and thus were treated as deferred income increased in the reporting period as a result of the new licensing agreement with IBA. Current liabilities in connection with social security and other taxes rose due to the increase in the number of employees. There were no current payment obligations under licence acquisitions which are explained in greater detail in note 6.
The accrued liabilities are composed as follows:
| 30.11.2008 € '000 |
30.11.2007 € '000 |
|
|---|---|---|
| Invoices outstanding | 1,499 | 5,246 |
| Employee bonuses and profi t-sharing bonuses | 920 | 743 |
| Legal and consulting costs | 179 | 176 |
| Other | 62 | 67 |
| Total | 2,660 | 6,232 |
WILEX recognises accruals for invoices outstanding where the Company has a current obligation arising from the supply of goods and services received. Accruals were recognised in the amount of the best possible estimate of the payment outfl ow required to fulfi l the current obligation. Most obligations in this category comprise external research and development costs of service providers in connection with preclinical and clinical trials and activities, as well as the cost of production for the basic material. The signifi cant reduction in invoices outstanding is due to the large number of invoices received related to patients and trial centres in connection with various clinical trials in the fi nancial year just ended.
Employee bonuses are granted depending on the performance of the Company and of individual employees and are due for payment in the following fi nancial year.
page 58
Carrying amounts and fair values follow from the table below. In addition, the fi nancial instruments were broken down into categories pursuant to IAS 39 (see note 2.13):
| Measurement as at 30.11.2008 |
Measurement as at 30.11.2007 |
||||
|---|---|---|---|---|---|
| Measurement category according to IAS 39 |
Carrying amount € '000 |
Fair value € '000 |
Carrying amount € '000 |
Fair value € '000 |
|
| Other non-current assets | Loans and receivables | 23 | 23 | 0 | 0 |
| Other receivables | Loans and receivables | 185 | 185 | 111 | 111 |
| Financial investments | Held-to-maturity | 0 | 0 | 15,375 | 15,375 |
| Other non-current liabilities | Loans and receivables | (252) | (252) | (507) | (507) |
| Trade receivables | Loans and receivables | (1,788) | (1,788) | (1,748) | (1,748) |
| Lease liabilities | Financial liabilities Amortised costs |
(15) | (15) | (81) | (81) |
| Other current liabilities | Loans and receivables | (7,460) | (7,460) | (9,296) | (9,296) |
| Total | (9,307) | (9,307) | 3,854 | 3,854 | |
| Aggregation after measurement criteria |
|||||
| Loans and receivables | (9,292) | (9,292) | (11,440) | (11,440) | |
| Held-to-maturity | 0 | 0 | 15,375 | 15,375 | |
| Financial liabilities Amortised costs |
(15) | (15) | (81) | (81) |
page 57
The other receivables all have remaining maturities of substantially less than one year and do not entail discernible default risks; the other non-current assets (see note 2.7) are recognised in an amount corresponding to the asset value of a reinsurance policy. The fi nancial investment of € 15.0 million earned interest at a fi xed rate and was held until maturity; insofar the carrying amount and the fair value of all balance sheet asset items correspond to each other.
Most of the other current liabilities as well as trade payables have short remaining maturities, with the result that the carrying amounts also correspond to the fair value as at the reporting date. Lease liabilities are measured based on a payment plan and are due in the short term. Insofar the carrying amount and the fair value are identical in this case too.
Other income comprises the following items:
| 2008 € '000 |
2007 € '000 |
|
|---|---|---|
| Grant provided by the US Department of Defense | 218 | 574 |
| Income realisation licence agreements | 1,935 | 1,760 |
| Reversal of other liabilities | 1,055 | 250 |
| Other income | 3,208 | 2,583 |
On 14 April 2004, WILEX and Esteve signed an exclusive licence agreement for WILEX's chimeric antibody RENCAREX® for Southern Europe. Esteve was granted the marketing rights for RENCAREX® in Spain, Italy, Portugal, Greece, Andorra and, optionally, Turkey. WILEX is responsible for the clinical development and manufacture of RENCAREX® and the worldwide regulatory approval process. Since 2004, WILEX has received milestone payments under this agreement totalling € 5.0 million. These payments are recognised in income under other income according to the percentage of completion. The percentage of completion is determined by calculating the proportion of the actual research and development costs incurred for the clinical Phase III trial for RENCAREX® in relation to the underlying budget for the total clinical costs. WILEX also has the right to receive further performance-related milestone payments and licence fees on sales revenue.
On 6 June 2008 WILEX signed an exclusive worldwide licence agreement with IBA that provides for the marketing, distribution and sales as well as radioactive labelling of the Company's diagnostic product candidate REDECTANE® (formerly CA9-SCAN). The agreement guarantees WILEX various payments and contributions in kind as well as a share of future net sales revenue of 45 %. WILEX will receive 20 % of sales revenue until a sales volume of € 7 million is reached for the fi rst time. Under this agreement, WILEX will receive contributions in kind and prepayments which will also be recognised in other income according to the degree of completion.
WILEX received a grant from the US Department of Defense, which covers some of the clinical development costs for WX-UK1 and MESUPRON® in Phases I and II (see note 12). The payments to WILEX are made in quarterly instalments until 2009. As long as trial costs are not expensed, payments are recognised under liabilities. The reduction in these liabilities is shown in the income statement under other income.
page 69
The item, reversal of other liabilities includes, in particular, services and deliveries not billed or billed partly as well as employee and Executive Management Board bonuses not paid out from previous years.
The following expenses are recognised in the income statement:
| 2008 € '000 |
2007 € '000 |
|
|---|---|---|
| Staff costs | 6,368 | 5,269 |
| Travel costs | 466 | 485 |
| Rental expenses | 653 | 597 |
| Laboratory and other internal costs | 1,918 | 1,522 |
| External research and development costs | 13,512 | 16,230 |
| Legal and consulting costs | 1,432 | 2,149 |
| Depreciation/amortisation | 253 | 258 |
| Total | 24,601 | 26,510 |
Laboratory and other internal costs include expenses for raw materials, consumables and supplies as well as other purchased merchandise of € 183 thousand (2007: € 224 thousand). External research and development costs comprise the cost of purchased services, especially from service providers in the area of clinical development. They fell in the 2008 fi nancial year as various clinical trials progressed because costs are usually higher in the early stages due to prepayments to service providers and the inclusion of patients.
Staff costs are comprised as follows:
| 2008 € '000 |
2007 € '000 |
|
|---|---|---|
| Wages and salaries | 4,406 | 3,427 |
| Social security | 575 | 452 |
| Bonuses | 875 | 743 |
| Expense from the measurement of stock options | 287 | 474 |
| Expense from the measurement of service anniversaries | 59 | 0 |
| Other staff costs | 167 | 173 |
| Total staff costs | 6,368 | 5,269 |
The increase in the items wages and salaries as well as social security and bonuses results from a higher number of employees compared with 2007 as well as salary rises and the promotion of employees with the associated higher levels of bonuses.
page 69 Expenses for a 10-year service anniversary were recognised for the fi rst time (see note 14).
In the comparative periods, WILEX employed on average the following number of staff:
| 2008 | 2007 | |
|---|---|---|
| Administration | 19 | 15 |
| Research and development | 43 | 36 |
| Average number of employees | 62 | 51 |
* including the Executive Management Board
Remeasurement of the options under IFRS 2 Share-based payments at € 287 thousand (see note 2.17.1) resulted in lower staff costs year on year (2007: € 474 thousand). For one this is because most of the options have already vested and thus were already recognised in prior periods, for another because no stock options were issued in the fi nancial year just ended.
Below is the calculation for the year under review:
| Share-based payment for the Executive Management Board, executives and employees | |||||||
|---|---|---|---|---|---|---|---|
| Type of agreement | Tranche 1 | Tranche 2 | Tranche 3 | Tranche 4 | Tranche 5 | Tranche 6 | Tranche 7 |
| Grant date | 30.12.2005 | 31.01.2006 | 28.02.2006 | 28.04.2006 | 30.09.2006 | 30.09.2007 | 31.10.2007 |
| Options outstanding at the beginning of the reporting period |
318,388 | 167,343 | 85,078 | 3,040 | 148,635 | 33,100 | 152,000 |
| Options granted during the reporting period |
0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Options forfeited in the reporting period |
0 | 0 | 0 | 0 | 0 | 1,750 | 0 |
| Options exercised during the reporting period |
0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Options expired in the reporting period |
0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Options outstanding at the end of the reporting period |
318,388 | 167,343 | 85,078 | 3,040 | 148,635 | 31,350 | 152,000 |
| Options exercisable as at 30.11.2008 |
0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Maximum term | 10 years | 10 years | 10 years | 10 years | 10 years | 10 years | 10 years |
The options were calculated using a binomial model, taking into account various exercise conditions pursuant to the underlying option terms (SOP 2005). Their values are illustrated in the following. Settlement is carried out in equity securities. While tranches 1 to 5 each have a term of 24 months and therefore one option value, there are nine different terms and nine option values for tranches 6 and 7 on account of the different vesting dates.
| Issue date | Vesting period |
Option value (rounded) € |
|
|---|---|---|---|
| Tranche 1 | 30.12.2005 | 24 months | 2.42 |
| Tranche 2 | 31.01.2006 | 24 months | 2.36 |
| Tranche 3 | 28.02.2006 | 25 months | 2.44 |
| Tranche 4 | 28.04.2006 | 24 months | 2.40 |
| Tranche 5 | 30.09.2006 | 24 months | 2.48 |
| Tranche 6 | Issue date | Vesting period |
Option value (rounded) € |
|---|---|---|---|
| Part 1 | 30.09.2007 | 24 months | 2.92 |
| Part 2 | 30.09.2007 | 27 months | 3.11 |
| Part 3 | 30.09.2007 | 30 months | 3.24 |
| Part 4 | 30.09.2007 | 33 months | 3.37 |
| Part 5 | 30.09.2007 | 36 months | 3.50 |
| Part 6 | 30.09.2007 | 39 months | 3.67 |
| Part 7 | 30.09.2007 | 42 months | 3.74 |
| Part 8 | 30.09.2007 | 45 months | 3.98 |
| Part 9 | 30.09.2007 | 48 months | 4.08 |
| Tranche 7 | Issue date | Vesting period |
Option value (rounded) € |
|---|---|---|---|
| Part 1 | 31.10.2007 | 24 months | 2.55 |
| Part 2 | 31.10.2007 | 26 months | 2.61 |
| Part 3 | 31.10.2007 | 29 months | 2.79 |
| Part 4 | 31.10.2007 | 32 months | 2.92 |
| Part 5 | 31.10.2007 | 35 months | 3.03 |
| Part 6 | 31.10.2007 | 38 months | 3.17 |
| Part 7 | 31.10.2007 | 41 months | 3.28 |
| Part 8 | 31.10.2007 | 44 months | 3.40 |
| Part 9 | 31.10.2007 | 47 months | 3.57 |
The following model parameters and the following fl uctuation values expected for the reporting date were used to calculate tranches 1 to 5.
| Model parameter | Tranche 1 | Tranche 2 | Tranche 3 | Tranche 4 | Tranche 5 |
|---|---|---|---|---|---|
| Share valuation on the issue date | 6.90 € | 6.90 € | 6.90 € | 6.90 € | 6.90 € |
| Maximum term to issue date | 10 years | 10 years | 10 years | 10 years | 10 years |
| Vesting period of the options in months | 24 | 24 | 25 | 24 | 24 |
| Exercise price at expected exercise date | 5.52 € | 5.52 € | 5.52 € | 5.52 € | 5.52 € |
| Expected dividend yield | 0 % | 0 % | 0 % | 0 % | 0 % |
| Risk-free interest rate for the term | 2.86 % | 2.97 % | 3.06 % | 3.44 % | 3.56 % |
| Expected volatility for the term | 42.54 % | 40.40 % | 41.69 % | 40.61 % | 43.25 % |
| Actual fl uctuation of option holders from reporting date |
28.57 % | 18.79 % | 3.16 % | 0.00 % | 0.00 % |
The vesting period of tranche 3 is one month longer than for the other tranches indicated, taking into account the blocking periods described in the following.
The exercise of stock options is excluded in the period between the 16th of the last month in every quarter (i. e. February, May, August and November) of each fi nancial year and the date of the subsequent publication of the preliminary quarterly results (inclusive in each case) and in the period between the date of notice of the Annual General Meeting and the date of the Annual General Meeting of the Company (inclusive in each case).
The following model parameters and the following fl uctuation values expected for the reporting date were used to calculate tranches 6 and 7, which were issued in the 2007 fi nancial year:
| Model parameter | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Tranche 6 | Part 1 | Part 2 | Part 3 | Part 4 | Part 5 | Part 6 | Part 7 | Part 8 | Part 9 |
| Share valuation on the issue date |
9.84 € | 9.84 € | 9.84 € | 9.84 € | 9.84 € | 9.84 € | 9.84 € | 9.84 € | 9.84 € |
| Maximum term to issue date | 10 years | 10 years | 10 years | 10 years | 10 years | 10 years | 10 years | 10 years | 10 years |
| Vesting period of the options in months |
24 | 27 | 30 | 33 | 36 | 39 | 42 | 45 | 48 |
| Exercise price at expected exercise date |
9.73 € | 9.73 € | 9.73 € | 9.73 € | 9.73 € | 9.73 € | 9.73 € | 9.73 € | 9.73 € |
| Expected dividend yield | 0 % | 0 % | 0 % | 0 % | 0 % | 0 % | 0 % | 0 % | 0 % |
| Risk-free interest rate for the term |
4.06 % | 4.07 % | 4.08 % | 4.09 % | 4.10 % | 4.11 % | 4.13 % | 4.14 % | 4.15 % |
| Expected volatility for the term |
47.40 % | 47.52 % | 46.82 % | 46.30 % | 45.95 % | 46.31 % | 45.25 % | 46.97 % | 46.48 % |
| Expected fl uctuation of option holders from reporting date |
5.50 % | 11.22 % | 12.52 % | 13.81 % | 15.11 % | 16.40 % | 17.70 % | 18.99 % | 20.28 % |
| Model parameter Tranche 7 |
Part 1 | Part 2 | Part 3 | Part 4 | Part 5 | Part 6 | Part 7 | Part 8 | Part 9 |
|---|---|---|---|---|---|---|---|---|---|
| Share valuation on the issue date |
9.02 € | 9.02 € | 9.02 € | 9.02 € | 9.02 € | 9.02 € | 9.02 € | 9.02 € | 9.02 € |
| Maximum term to issue date | 10 years | 10 years | 10 years | 10 years | 10 years | 10 years | 10 years | 10 years | 10 years |
| Vesting period of the options in months |
24 | 26 | 29 | 32 | 35 | 38 | 41 | 44 | 47 |
| Exercise price at expected exercise date |
9.62 € | 9.62 € | 9.62 € | 9.62 € | 9.62 € | 9.62 € | 9.62 € | 9.62 € | 9.62 € |
| Expected dividend yield | 0 % | 0 % | 0 % | 0 % | 0 % | 0 % | 0 % | 0 % | 0 % |
| Risk-free interest rate for the term |
4.07 % | 4.07 % | 4.07 % | 4.06 % | 4.06 % | 4.06 % | 4.07 % | 4.07 % | 4.08 % |
| Expected volatility for the term |
50.10 % | 48.96 % | 49.14 % | 48.68 % | 47.94 % | 47.94 % | 47.47 % | 47.44 % | 48.19 % |
| Expected fl uctuation of option holders from reporting date |
0.05 % | 0.13 % | 0.13 % | 0.13 % | 0.13 % | 0.13 % | 0.13 % | 0.13 % | 0.13 % |
The share valuation upon issue of the options of tranches 1 to 5 was carried out on the basis of the most recent Company valuation of WILEX AG available at this date and represents the best price estimate in the unanimous view of the Supervisory Board and Executive Management Board of the Company, as WILEX AG was not yet listed on the stock exchange at the time. The share valuation of € 6.90 for all tranches issued corresponds to the historical value from the fi nal fi nancing round of WILEX AG, which was implemented in 2005.
As WILEX AG has been listed on the stock exchange since 13 November 2006, the shares in tranches 6 and 7 were each measured on the basis of the share prices prevailing on the respective grant date. The share price for tranche 6 was € 9.84 as of 28 September 2007 and the share price for tranche 7 was € 9.02 as of 31 October 2007.
In accordance with the option terms, the exercise price for tranches 6 and 7 is calculated using the arithmetic mean of the closing prices for shares of WILEX AG on the last ten trading days of the stock exchange on which the shares are traded, prior to the date of issue of the stock options (date of acceptance by the benefi ciary of the Company's option offer). As the benefi ciaries accepted the option offer on different days, there are different exercise prices in tranches 6 and 7. Since the deviation of the exercise prices within the relevant tranche is insignifi cant, a weighted exercise price was taken as a basis for tranches 6 and 7.
Risk-free interest rates are calculated on the basis of the yield curve for listed Federal government securities issued by the German Bundesbank, which are calculated using the Svensson method.
The performance target of an increase in the share price of at least 10 % of the exercise price has not been taken into account for the valuation because the achievement of this target was expected by the Executive Management Board on the basis of detailed forecasts for the relevant issue dates. Stock options may only be exercised effectively if the Company's shares are traded on a stock exchange in or outside Germany. This is now the case.
Future volatility during the vesting period of the stock options was estimated on the basis of the historical volatility for matching maturities of a peer group of comparable companies in the biotechnology sector, taking into account the expected future share price performance of the Company. This method was used because the Company has only been listed since 13 November 2006 and no information about the historical volatility for stock options issued with matching maturities was available for the Company itself.
The expected fl uctuation is based on an estimate by the Executive Management Board and is adjusted on each reporting date on the basis of historical and current fl uctuation data.
The vesting period is the period until the individual options become vested. In accordance the regulations described in the exercise terms, within this four-year period stock options vest pro rata relative to the total number of stock options granted on the last calendar day of February as well as on 31 May, 31 August and 30 November of any given fi nancial year following the option issue date. In the case of stock options that were issued prior to the fi rst trading day, 50 % of all stock options issued at this time vested after the end of the fi rst trading day.
The stock options had the following maximum terms as at the reporting date:
| Issue date | 30.11.2008 years |
|
|---|---|---|
| Tranche 1 | 30.12.2005 | 7.08 |
| Tranche 2 | 31.01.2006 | 7.17 |
| Tranche 3 | 28.02.2006 | 7.24 |
| Tranche 4 | 28.04.2006 | 7.41 |
| Tranche 5 | 30.09.2006 | 7.83 |
| Tranche 6 | 30.09.2007 | 8.83 |
| Tranche 7 | 31.10.2007 | 8.92 |
As at the reporting date, WILEX incurred the following expenses in connection with the stock option plan:
| 2008 € '000 |
|
|---|---|
| Total expenses from equity-based compensation transactions settled with equity instruments | 2,070 |
| Expenses from equity-based compensation transactions in the 2007 period | 474 |
| Expenses from equity-based compensation transactions in the 2008 period | 287 |
In the 2008 fi nancial year, the Company incurred a currency loss of € 146 thousand (2007: currency gain of € 40 thousand) due to the relative weakness in the second half of the year of the euro vis-à-vis the operationally relevant US dollar and Swiss franc. There were no unrealised currency gains or losses in the fi nancial years ended on 30 November 2007 and 2008, respectively.
| 2008 € '000 |
2007 € '000 |
|
|---|---|---|
| Finance costs | ||
| Interest from lease obligations and current liabilities to banks | (10) | (19) |
| Interest from licensing obligations | (1) | (3) |
| (12) | (22) | |
| Finance income | ||
| Interest income from bank accounts/Other | 647 | 950 |
| Interest income from fi nancial investments | 326 | 765 |
| 972 | 1,715 | |
| Net fi nancial result | 961 | 1,693 |
The year-on-year decrease in the net fi nancial result is mainly due to lower interest income from bank accounts and fi nancial investments. The amount of cash used for our clinical development programmes substantially reduced the amount of funds available on average for generating fi nance income. Not even the general increase in interest rates for cash deposits in 2008 was able to offset this fact.
The table below shows the changes in cash fl ow from operating activities at WILEX:
| 2008 € |
2007 € |
|
|---|---|---|
| Net loss for the year | (20,447,665) | (22,257,510) |
| Adjustments for income statement items | ||
| Measurement of stock options | 286,537 | 473,781 |
| Depreciation/amortisation | 252,707 | 257,770 |
| Increase in pension obligations | 812 | 783 |
| Finance costs | 11,624 | 21,973 |
| Finance income | (972,292) | (1,714,785) |
| Tax expense | 14,785 | 23,656 |
| (405,827) | (936,822) | |
| Changes in balance sheet items | ||
| Other receivables | (73,877) | 1,206 |
| Prepayments | 170,472 | (173,082) |
| Other non-current assets | (22,689) | 0 |
| Trade payables | 40,091 | 644,379 |
| Other liabilities | (2,090,822) | 63,065 |
| (1,976,824) | 535,568 | |
| Cash fl ow from operating activities | (22,830,316) | (22,658,764) |
| Finance costs paid | (7,855) | (13,790) |
| Finance income received | 1,335,938 | 1,318,465 |
| Net cash fl ow from operating activities | (21,502,233) | (21,354,090) |
Due to operating losses, no income tax was payable in the 2008 and 2007 fi nancial years, with the exception of the following: the tax expense reported in the income statement for the fi nancial year (2008: € 15 thousand; 2007: € 24 thousand) relates to withholding tax. This withholding tax was payable on an up-front payment from Esteve in 2004. It has already been withheld and recognised as a prepayment. The tax has been recognised in income in line with the amount stated under other income from the Esteve agreement (see note 17).
The deferred taxes were calculated based on a composite tax rate of 32.98 % (previous year: 32.98 %), which is comprised of a corporation tax rate of 15 % (previous year: 15 %), solidarity surcharge of 5.5 % (previous year: 5.5 %) and municipal trade tax of 17.15 % (previous year: 17.15 %). The reported current tax expense deviates from the expected tax expense. Given the German 2008 Business Tax Reform Act (Unternehmensteuerreformgesetz), the nominal tax rate of 32.98 % (previous year: 40.86 %) applicable from 2008 must be applied to income in accordance with IFRS. Reconciliation of the differences is shown in the table below.
| 2008 € '000 |
2007 € '000 |
|
|---|---|---|
| Earnings before tax | (20,433) | (22,258) |
| Tax rate | 32.98 % | 40.86 % |
| Expected tax income | 6,739 | 9,095 |
| Non-capitalisable losses carried forward for the period | (6,955) | (10,310) |
| Reduction in non-capitalised temporary differences | 249 | 1,029 |
| Non-deductible operating expenses/Other | (48) | 162 |
| Reported tax expense | (15) | (24) |
The existing deferred tax assets and deferred tax liabilities as at 30 November are attributable as follows:
| 2008 € '000 |
2007 € '000 |
|
|---|---|---|
| Deferred tax assets | ||
| Unrealised income | 125 | 89 |
| 125 | 89 | |
| Deferred tax liabilities | ||
| Varying useful lives of property, plant and equipment | 1 | 2 |
| Capitalisation of acquired licences | 68 | 74 |
| Other provisions | 48 | 0 |
| Other | 8 | 13 |
| 125 | 89 |
Applying IAS 12.74, deferred tax assets and liabilities have been offset, since they exist vis-a-vis the same taxation authority and arise in the same periods.
As further losses can be expected in the foreseeable future, no deferred tax assets were recognised regarding the following:
| 30.11.2008 € '000 |
30.11.2007 € '000 |
|
|---|---|---|
| Losses carried forward | ||
| for corporation tax | 112,847 | 91,632 |
| for trade tax | 110,536 | 89,316 |
| Deductible temporary differences | 871 | 1,625 |
In accordance with the German Corporation Tax Act, tax losses may be carried forward indefi nitely. The deduction of existing losses carried forward is excluded if the Company carrying forward these losses loses its tax identity. In accordance with Section 8 Sub-section 4 German Corporation Tax Act (version applicable until 31 December 2007), a company is deemed to have lost its tax identify if the two following criteria are met cumulatively: (i) more than 50 % of the shares in the company have been transferred and (ii) the company continues or relaunches its operations mainly with new assets. The legal limit on deductibility of operating losses applies to corporation tax and municipal trade tax. The Company has not been subject to a tax audit since it was established. Due to the capital increases as part of the fourth fi nancing round in April 2005 and the IPO in November 2006, the Company may have lost its losses carried forward accumulated until the end of 2006, which amount to € 67.24 million (corporation tax) and € 64.95 million (municipal trade tax).
Basic earnings per share are calculated by dividing the net profi t for the year available to shareholders by the average number of shares issued during the fi nancial year, not taking into account treasury shares.
| 2008 | 2007 | |
|---|---|---|
| Net loss for the year available to shareholders (in € '000) | (20,448) | (22,258) |
| Weighted average number of shares issued (in thousands) | 11,963 | 11,963 |
| Basic earnings per share (in € per share) | (1.71) | (1.86) |
Basic and diluted earnings per share of WILEX are calculated based on the same number of shares because the conversion of common stock equivalents would be anti-dilutive.
The Company acquired one new piece of laboratory equipment in 2006 under a fi nance lease agreement with a term of 36 months. The acquisition value of € 255 thousand was capitalised and is depreciated continually under property, plant and equipment (see note 5). In the balance sheet, the outstanding repayment liabilities of € 15 thousand (2007: € 104 thousand) are reported under "non-current liabilities" (2008: € 0 thousand; 2007: € 23 thousand) if they are payable in more than one year and under "current liabilities" (2008: € 15 thousand; 2007: € 81 thousand) if they are payable within one year. The monthly interest portion is shown under "fi nance costs" in the income statement (2008: € 4 thousand; 2007: € 9 thousand). Depreciation in the fi nancial year just ended totalled € 20 thousand. As a result, the depreciated cost as at the reporting date was € 199 thousand (2007: € 219 thousand) and the reduction of the outstanding liability in 2008 was € 89 thousand (2007: € 84 thousand).
page 64
WILEX has pledged € 100 thousand as collateral for the lessor. No other guarantees exist.
WILEX will incur the following obligations in the next reporting periods under this fi nance lease agreement:
| Obligations under fi nance leases (laboratory equipment) |
up to 1 year € '000 |
1 – 5 years € '000 |
after 5 years € '000 |
Total € '000 |
|---|---|---|---|---|
| 30.11.2008 | 15 | 0 | 0 | 15 |
| 30.11.2007 | 81 | 23 | 0 | 104 |
The Company has also leased laboratory and offi ce equipment under operating leases, which will expire at different times until 2012. All offi ce and laboratory premises used at present are rented under leases expiring at the end of March 2012. The lease includes one month per year free of rental charges up to and including 2009. In accordance with IFRS, the total rental fee per fi nancial year is spread equally over 12 months. The cost of offi ce and laboratory equipment as well as offi ce and laboratory premises under the operating leases are reported as other expenses in the income statement, together with the obligations under lease agreements for company cars:
| Expenses from operating leases and tenancy agreements |
€ '000 |
|---|---|
| 2008 | 551 |
| 2007 | 516 |
WILEX has pledged a bank account with a balance of € 129 thousand as deposit for the landlord. No other guarantees exist.
The future minimum annual payments under tenancy agreements and leases are comprised as follows:
| Obligations as at 30.11.2008 |
up to 1 year € '000 |
1 – 5 years € '000 |
after 5 years € '000 |
Total € '000 |
|---|---|---|---|---|
| Rental obligations for laboratory and offi ce premises |
560 | 1,474 | 0 | 2,034 |
| Obligations under operating leases (laboratory and other offi ce equipment, |
||||
| vehicles) | 48 | 61 | 0 | 109 |
| 608 | 1,535 | 0 | 2,143 |
In addition, there are obligations from the acquisition of licences amounting to at least € 2.5 million that are due upon the achievement of certain milestones. Below are previous year's fi gures:
| Obligations as at 30.11.2007 |
up to 1 year € '000 |
1 – 5 years € '000 |
after 5 years € '000 |
Total € '000 |
|---|---|---|---|---|
| Rental obligations for laboratory and offi ce premises |
496 | 1,838 | 0 | 2,334 |
| Obligations under operating leases (laboratory and other offi ce equipment, |
||||
| vehicles) | 44 | 60 | 0 | 104 |
| 540 | 1,898 | 0 | 2,438 |
The current Executive Management Board members of WILEX AG are:
Professor Olaf G. Wilhelm, Chairman of the Executive Management Board Dr Paul Bevan, Head of Research and Development Peter Llewellyn-Davies, Chief Financial Offi cer Dr Thomas Borcholte, Chief Business Offi cer
Compensation of the Executive Management Board
The compensation of the Executive Management Board is determined by the Compensation Committee. It consists of a salary (fi xed compensation), other benefi ts (non-cash compensation), a variable compensation component and a shareholder programme with a long-term incentive and a risk element.
In the event of the termination of an Executive Management Board member's service for WILEX AG, there is no contractual entitlement to a settlement.
The annual salary of members of the Executive Management Board is determined for the term of offi ce and paid in equal amounts over twelve months. It depends on the fi nancial position of WILEX AG and the level of compensation paid by competitors.
In addition to their salaries, members of the Executive Management Board receive the following benefi ts:
A company car is in particular made available to Executive Management Board members Professor Olaf G. Wilhelm, Dr Paul Bevan and Peter Llewellyn-Davies. Executive Management Board member Dr Thomas Borcholte does not have a company car.
WILEX AG also pays the premiums for a personal pension plan up to the maximum amount permissible under Section 40b of the German Income Tax Act (EStG) and the premiums for an occupational disability insurance on behalf of Professor Olaf G. Wilhelm, Chairman of the Executive Management Board. A pension commitment as part of a deferred salary plan was also granted to Professor Wilhelm in 1999, and a provision has been recognised for this. The Company has no such obligations towards any other Executive Management Board members.
For the Executive Management Board member Dr Paul Bevan, the Company covers the costs of up to 24 economy class fl ights between Germany and the UK per calendar year (return fl ight).
Variable compensation is contingent on the achievement of personal targets and the Company's performance targets. The performance-based compensation of the members of the Company's Executive Management Board is primarily tied to the corporate goals of WILEX AG, i. e. the Company's development, the achievement of defi ned milestones in clinical development, execution of its commercialisation strategy and the performance of its shares.
The variable compensation of Professor Olaf G. Wilhelm amounts to a maximum of 75 % of his fi xed compensation. For Dr Paul Bevan and Peter Llewellyn-Davies, it amounts to a maximum of 33 % of their fi xed compensation, and for Dr Thomas Borcholte, it amounts to a maximum of 31.13 % of his fi xed compensation. On account of the adjustment of the fi xed salary of Peter Llewellyn-Davies during the fi nancial year, the maximum bonus in the 2008 fi nancial year slightly exceeded the given value because the increased maximum bonus resulting from the higher fi xed salary was granted for the full 2008 fi nancial year even though the salary adjustment did not take effect until September 2008.
The compensation component with incentive and risk features is based on the 2005 stock option plan adopted by the Annual General Meeting on 8 September 2005. A maximum of 900,000 stock options can be granted to the Executive Management Board members under the plan. No options were issued to members of the Executive Management Board in the 2008 fi nancial year. Including the options already issued to members of the Executive Management Board in fi nancial years 2006 and 2007, the active members of the Executive Management Board held a total of 719,335 options at the reporting date 30 November 2008. At the reporting date 30 November 2008, a former member of the Executive Management Board held a total of 10,000 options.
Each of these options entitles the holder to the acquisition of one new share in return for payment of the exercise price, which is € 5.52 per option for all options issued in the 2006 fi nancial year and € 9.62 for all options issued in the 2007 fi nancial year (tranche 7). No stock options were issued to the members of the Executive Management Board in 2008.
page 74
The stock options can be exercised after an initial waiting period of two years from the grant date (see note 19). The 579,335 options issued in the 2006 fi nancial year can only be exercised if the average closing price of WILEX shares during the preceding ten trading days prior to the expiry of the waiting period or for ten consecutive trading days at any other point in time following this date exceeds by a minimum of 10 % the purchase price achieved by WILEX shares at the time of the last capital increase prior to granting of the options of € 6.90 per share. The 150,000 options issued to the Executive Management Board in the 2007 fi nancial year can only be exercised if the average closing price of WILEX shares during the preceding ten trading days prior to the expiry of the waiting period or for ten consecutive trading days at any other point in time following this date exceeds by a minimum of 10 % the exercise price of € 9.62 per option.
Overall, the Executive Management Board members received the following fi xed and variable compensation components, non-cash compensation in the 2008 fi nancial year:
| Executive Management Board member |
Fixed compensation 2008 € |
Variable compensation1 2008 € |
Other compen sation (non-cash compensation) 2008 € |
Total compensation 2008 € |
|---|---|---|---|---|
| Professor Olaf G. Wilhelm | 260,000 | 135,000 | 10,904 | 405,904 |
| Dr Paul Bevan | 230,000 | 55,000 | 13,403 | 298,403 |
| Peter Llewellyn-Davies | 205,000 | 50,000 | 12,038 | 267,038 |
| Dr Thomas Borcholte 2 | 212,000 | 50,000 | 240 | 262,240 |
1 Paid in 2008 for the 2007 fi nancial year. The bonus for 2008 will be paid in the 2009 fi nancial year.
Dr Borcholte has waived his non-cash compensation in the form of a company car.
The following fi gures apply to the previous reporting period:
2
| Executive Management Board member |
Fixed compensation 2007 € |
Variable compensation1 2007 € |
Other compen sation (non-cash compensation) 2007 € |
Total compensation 2007 € |
|---|---|---|---|---|
| Professor Olaf G. Wilhelm | 236,667 | 160,313 | 10,046 | 407,026 |
| Dr Paul Bevan | 212,500 | 61,050 | 6,562 | 280,112 |
| Peter Llewellyn-Davies | 200,000 | 50,000 | 9,153 | 259,153 |
| Dr Thomas Borcholte 2 3 | 31,501 | 0 | 0 | 31,501 |
1 Paid in 2007 for the 2006 fi nancial year. The bonus for 2007 was paid in the 2008 fi nancial year.
2 Dr Borcholte has been a member of the Company's Executive Management Board since 1 October 2007. He worked for WILEX AG
as a consultant from 25 June to 30 September 2007, during which period he was paid a total fee of € 43,260 plus expenses.
3 Dr Borcholte has waived his non-cash compensation in the form of a company car. The following overview shows the stock options held by members of the Executive Management Board during the year under review and changes in these holdings as well as the portion of staff costs per benefi ciary attributable to these stock options (see notes 2.17.1 and 19):
pages 60, 74
| Executive Management Board member |
01.12.2007 Number |
Additions Number |
Expiry Number |
Sales Number |
30.11.2008 Number |
|---|---|---|---|---|---|
| Professor Olaf G. Wilhelm | 262,770 | 0 | 0 | 0 | 262,770 |
| Dr Paul Bevan | 175,180 | 0 | 0 | 0 | 175,180 |
| Peter Llewellyn-Davies | 131,385 | 0 | 0 | 0 | 131,385 |
| Dr Thomas Borcholte | 150,000 | 0 | 0 | 0 | 150,000 |
| Executive Management Board member | Expense in the income statement € |
Fair value of the options1 € |
|---|---|---|
| Professor Olaf G. Wilhelm | 2,862 | 631,599 |
| Dr Paul Bevan | 1,908 | 421,066 |
| Peter Llewellyn-Davies | 21,163 | 325,835 |
| Dr Thomas Borcholte | 208,114 | 423,469 |
1 As at the respective issue date
The following fi gures apply to the previous reporting period:
| Executive Management Board member |
01.12.2006 Number |
Additions Number |
Expiry Number |
Sales Number |
30.11.2007 Number |
|---|---|---|---|---|---|
| Professor Olaf G. Wilhelm | 262,770 | 0 | 0 | 0 | 262,770 |
| Dr Paul Bevan | 175,180 | 0 | 0 | 0 | 175,180 |
| Peter Llewellyn-Davies | 131,385 | 0 | 0 | 0 | 131,385 |
| Dr Thomas Borcholte | 0 | 150,000 1 | 0 | 0 | 150,000 |
1 Issue on 17 October 2007
| Executive Management Board member | Expense in the income statement € |
Fair value of the options1 € |
|---|---|---|
| Professor Olaf G. Wilhelm | 110,136 | 631,599 |
| Dr Paul Bevan | 73,424 | 421,066 |
| Peter Llewellyn-Davies | 129,607 | 325,835 |
| Dr Thomas Borcholte | 48,044 | 423,469 |
1 As at the respective issue date Dr Thomas Borcholte is also the Chairman or a member of the following bodies:
| Company | Position |
|---|---|
| DETEK AG, Hanover | Chairman of the Supervisory Board |
| NextGen Sciences Ltd, Alconbury (UK) | Non-executive member of the Board of Directors |
No other member of the Executive Management Board holds a position on a control body.
The current Supervisory Board members of WILEX AG are:
Dr David Ebsworth, Consultant (Chairman of the Supervisory Board) Dr Georg F. Baur, Entrepreneur (Deputy Chairman of the Supervisory Board) Dr Alexandra Goll, General Partner, TVM Capital GmbH Dr Friedrich von Bohlen und Halbach, Managing Director, dievini Hopp BioTech holding GmbH & Co. KG Dr Rüdiger Hauffe, Consultant Professor Iris Löw-Friedrich, Chief Medical Offi cer and Executive Vice-President Global Projects and Development, UCB Pharma S.A.
In accordance with the Company's Articles of Association, the members of the Supervisory Board receive a fi xed compensation of € 15,000 for each full fi nancial year of service on the Supervisory Board. The Chairman of the Supervisory Board receives a fi xed compensation of € 35,000 and the Deputy Chairman € 25,000. The Supervisory Board compensation is paid in four equal instalments on the last day of February and on 31 May, 31 August and 30 November of each fi nancial year.
Members of a Supervisory Board committee are paid a fl at fee of € 3,000, while chairpersons of such committees are paid € 7,000 per fi nancial year and committee. In each case, compensation is limited to activities in a maximum of two committees. Over and above this individual limit, the Company does not pay more than € 39,000 per fi nancial year for committee activities. If this cap is not suffi cient to cover all memberships and chairmanships of Supervisory Board committees, it is distributed proportionally among all committee members and chairpersons in line with the above provisions, unless the Supervisory Board unanimously resolves a different regulation.
An additional allowance is paid for attendance at a maximum of six Supervisory Board meetings in each fi nancial year. Meeting chairpersons are paid a fl at fee of € 3,000 and all other members € 1,500 each per meeting. Supervisory Board members who attend meetings by telephone receive only half of the allowance. This fee must be paid with the Supervisory Board member's fi xed compensation. Members of Supervisory Board committees do not receive an attendance allowance for committee meetings.
The compensation paid to Supervisory Board members who were not in offi ce for a full fi nancial year is pro rated in accordance with the duration of their membership on the Supervisory Board.
The Supervisory Board members do not receive variable compensation, nor are they granted options or similar rights. Supervisory Board members are not entitled to a settlement if their membership ends.
The total compensation paid by WILEX AG to the Supervisory Board for the 2008 fi nancial year amounted to € 201,500 plus expenses (previous year: € 163,084). The table below shows the individual compensation.
| Supervisory Board member | Fixed compensation € |
Attendance allowance € |
Committee fee € |
|---|---|---|---|
| Dr David Ebsworth, Chairman | 35,000 | 18,000 | 7,000 |
| Dr Georg F. Baur, Deputy Chairman | 25,000 | 9,000 | 7,000 |
| Dr Alexandra Goll | 15,000 | 9,000 | 3,000 |
| Dr Friedrich von Bohlen und Halbach | 15,000 | 9,000 | 3,000 |
| Dr Rüdiger Hauffe | 15,000 | 9,000 | 3,000 |
| Professor Iris Löw-Friedrich | 15,000 | 8,250 | 0 |
The table below shows the individual compensation for the 2007 fi nancial year:
| Supervisory Board member | Fixed compensation1 € |
Attendance allowance1 € |
Committee fee1 € |
|---|---|---|---|
| Dr David Ebsworth, Chairman | 35,000 | 9,000 | 3,500 |
| Dr Georg F. Baur, Deputy Chairman | 25,000 | 4,500 | 3,500 |
| Dr Alexandra Goll | 15,000 | 4,500 | 1,500 |
| Dr Friedrich von Bohlen und Halbach | 15,000 | 4,500 | 1,500 |
| Dr Rüdiger Hauffe2 | 7,042 | 4,500 | 1,500 |
| Professor Iris Löw-Friedrich2 | 7,042 | 4,500 | 0 |
| Dr Jeremy Reffi n3 | 8,000 | 0 | 0 |
| Salvatore D'Orsa3 | 8,000 | 0 | 0 |
1 The fourth instalment for the 2007 fi nancial year was paid after the end of the 2007 fi nancial year.
2 Dr Hauffe and Professor Löw-Friedrich have been members of the Supervisory Board since 12 June 2007.
Dr Reffi n and Mr D'Orsa left the Supervisory Board effective at the end of the Annual General Meeting on 12 June 2007.
Dr Ebsworth is also the Chairman or a member of the following bodies:
| Company | Position |
|---|---|
| Atani Ltd., London (UK) | Non-executive Chairman of the Board of Directors |
| Intercell AG, Vienna (Austria) | Member of the Supervisory Board |
| Renovo Group PLC, Manchester (UK) | Non-executive member of the Board of Directors |
| Xention Ltd., Pampisford (UK) | Non-executive Chairman of the Board of Directors |
Dr Baur is also the Chairman or a member of the following bodies:
| Company | Position |
|---|---|
| Franz Haniel & Cie. GmbH, Duisburg | Member of the Supervisory Board |
| J.F. Müller & Sohn AG, Hamburg | Deputy Chairman of the Supervisory Board |
| LR HEALTH & BEAUTY SYSTEMS HOLDING | |
| GmbH, Ahlen | Chairman of the Advisory Board |
| Versatel AG, Berlin | Member of the Supervisory Board |
Dr Goll is also a member of the following bodies:
| Position |
|---|
| Member of the Supervisory Board |
| Member of the Supervisory Board |
| Non-executive member of the Board of Directors |
Dr von Bohlen und Halbach is also the Chairman or a member of the following bodies:
| Company | Position |
|---|---|
| Apogenix GmbH, Heidelberg | Chairman of the Advisory Board |
| Cosmo S.p.A., Lainate (Italy) | Non-executive member of the Board of Directors |
| Curacyte AG, Munich | Member of the Supervisory Board |
| CureVac GmbH, Tübingen | Chairman of the Advisory Board |
| Cytonet GmbH & Co. KG, Weinheim | Member of the Advisory Board |
| Heidelberg Pharma AG, Ladenburg | Member of the Supervisory Board |
| Immatics GmbH, Tübingen | Member of the Advisory Board |
| Life Biosystems AG, Basel (Switzerland) | Chairman of the Board of Directors |
| SYGNIS Pharma AG, Heidelberg | Chairman of the Supervisory Board |
Dr Hauffe is also a member of the following bodies:
| Company | Position |
|---|---|
| Accovion GmbH, Eschborn | Member of the Advisory Board |
| Haupt Pharma AG, Berlin | Member of the Supervisory Board |
Professor Löw-Friedrich is neither the Chairwoman nor a member of other control bodies as defi ned by Section 125 Subsection 1 Clause 3 German Stock Corporation Act.
Apart from the activities described above, the members of the Company's Supervisory Board were not members of an administrative, management or supervisory body or a partner in a company at the reporting date.
As at 30 November 2008, the Executive Management Board held 120,331 shares (representing 1.01 % of the Company's share capital). As at 30 November 2008, the Supervisory Board held 101,147 shares (representing 0.85 % of the Company's share capital). No active or former member of the Executive Management Board or the Supervisory Board held a signifi cant interest in the Company, i. e. a minimum of 5 % of the share capital (directly or indirectly), as at 30 November 2008.
| Name | Function | Number |
|---|---|---|
| Dr David Ebsworth | Chairman of the Supervisory Board | 30,000 |
| Dr Georg F. Baur | Deputy Chairman of the Supervisory Board | 70,347 |
| Dr Rüdiger Hauffe | Member of the Supervisory Board | 800 |
| Professor Olaf G. Wilhelm* | Chairman of the Executive Management Board | 120,331 |
* The wife of Professor Olaf G. Wilhelm, Dr Sabine Wilhelm, holds a further 120,331 shares.
The following table shows the shares held in 2007:
| Name | Function | Number |
|---|---|---|
| Dr David Ebsworth | Chairman of the Supervisory Board | 30,000 |
| Dr Georg F. Baur | Deputy Chairman of the Supervisory Board | 70,347 |
| Dr Rüdiger Hauffe | Member of the Supervisory Board | 800 |
| Professor Olaf G. Wilhelm* | Chairman of the Executive Management Board | 120,331 |
* The wife of Professor Olaf G. Wilhelm, Dr Sabine Wilhelm, holds a further 120,331 shares.
In the 2008 fi nancial year, no purchases and sales requiring disclosure were made by members of the corporate bodies or other members of management of WILEX AG.
The following purchases requiring disclosure were made by members of corporate bodies after the reporting date 30 November 2008:
| Name | Date | Trans action |
Market place |
Price € |
Number | Volume € |
|---|---|---|---|---|---|---|
| Dr David Ebsworth, Chairman of the Supervisory Board |
09.01.2009 | Purchase | XETRA, Frankfurt/M. |
3.99 | 10,000 | 39,900.00 |
| Dr Georg F. Baur, Deputy Chairman of the Supervisory Board |
09.01.2009 | Purchase | XETRA | 4.00 | 30,000 | 120,000.00 |
| Dr Rüdiger Hauffe, Member of the Supervisory Board |
09.01.2009 | Purchase | XETRA | 4.00 | 4,000 | 16,000.00 |
In the 2007 fi nancial year, the following purchases by members of the corporate bodies of WILEX AG took place and require disclosure:
| Name | Date | Trans action |
Market - place |
Price € |
Number | Volume € |
|---|---|---|---|---|---|---|
| Dr David Ebsworth, Chairman of the Supervisory Board |
14.06.2007 | Purchase | Stuttgart | 13.66 | 1,000 | 13,660.00 |
| Dr Rüdiger Hauffe, Member of the Supervisory Board |
20.06.2007 | Purchase | XETRA | 13.40 | 800 | 10,720.00 |
No other relationships to related parties exist.
KPMG Deutsche Treuhand-Gesellschaft Aktiengesellschaft Wirtschaftsprüfungsgesellschaft (since 1 October 2008: KPMG AG Wirtschaftsprüfungsgesellschaft) was appointed the auditor of the Company at its Annual General Meeting on 3 June 2008. The following fees for services were recorded as expenses in the periods reviewed:
| 2008 € '000 |
2007 € '000 |
|
|---|---|---|
| Audit of the annual fi nancial statements | 70 | 70 |
| Review | 0 | 10 |
| Total expenses for auditors | 70 | 80 |
In contrast to the period ended 30 June 2007, the Company did not undergo a voluntary review for the 2008 fi nancial year.
page 14
The Declaration of Compliance to be submitted annually in accordance with Section 161 of the German Stock Corporation Act was submitted by the Executive Management Board and the Supervisory Board in February 2008. It has been made permanently available to all shareholders and interested parties on the Company's website (www.wilex.com). www.wilex.com
The biopharmaceutical company UCB Pharma S.A., Brussels, Belgium, and WILEX AG agreed on 8 January 2009 to enter into a comprehensive strategic alliance. WILEX will acquire the worldwide rights to continue developing UCB's entire preclinical oncological portfolio, which comprises two small-molecule programmes and three antibody programmes.
UCB will retain the exclusive right to buy back each of the fi ve programmes following completion of initial clinical proof of concept studies and to develop and market them itself. In this case WILEX will receive milestone payments from UCB for development and commercialisation as well as royalties for commercialisation.
WILEX will retain the right to continue developing and to commercialise each programme itself if UCB does not exercise its buyback right. In this case UCB will receive milestone and royalties from WILEX.
Furthermore, the two partners may jointly develop the programmes after the successful completion of the proof of concept studies.
Under the agreement, UCB has made an in-kind contribution comprising the rights to the fi ve preclinical programmes to a wholly-owned subsidiary of UCB. In addition, the company will be funded by UCB with € 10.00 million in cash. WILEX will acquire the company for 1,818,181 newly issued shares from Authorised Capital subject to the exclusion of shareholders' subscription rights. As a result of this transaction, UCB will acquire 13.19 % of the shares in WILEX AG (new share capital of WILEX: 13,780,935 shares). Initially, 50 % of the shares are to be listed; under the terms of the strategic alliance, the other half of the shares will be subject to a lock-up period through 9 January 2011.
UCB will also make two milestone payments of € 5.00 million each to the company, which will be a limited liability company under German law (GmbH). The milestones defi ned are: submission of an application to conduct a clinical Phase I trial and fi rst dose in man. They are expected to occur approximately within 12 months from the closing of the agreement.
The strategic alliance has been approved by the corporate bodies of both UCB and WILEX. However, the relevant capital increase of WILEX AG must still be approved by its Executive Management Board and its Supervisory Board; the capital increase will take effect at the time it is recorded in the appropriate Commercial Register.
The strategic alliance with UCB constitutes an important step in the history of WILEX. UCB's innovative oncology portfolio ideally supplements and expands WILEX's advanced clinical pipeline and provides access to UCB's broad antibody technology. In UCB, WILEX has gained not only an important development partner but also a strong strategic investor to support the Company's further development.
In December 2008 WILEX performed an independent radiological analysis of patients with pancreatic cancer in connection with the Phase II trial of MESUPRON®. At the time of preparing this Annual Report, no meaningful data were available to the Company since the disease had not yet progressed radiologically in a suffi cient number of patients.
"To the best of our knowledge, and in accordance with the applicable reporting principles, the annual fi nancial statements give a true and fair view of the assets, liabilities, fi nancial position and profi t or loss of WILEX AG, and the management report includes a fair review of the development and performance of the business and the position of WILEX AG, together with a description of the principal opportunities and risks associated with the expected development of WILEX AG."
Munich, 2 February 2009
Executive Management Board
Professor Olaf G. Wilhelm Peter Llewellyn-Davies Dr Paul Bevan Dr Thomas Borcholte
We have audited the single-entity IFRS fi nancial statements, comprising the balance sheet, the income statement, statement of changes in equity, cash fl ow statement and the notes to the fi nancial statements, together with the bookkeeping system, and the management report of WILEX AG, Munich, for the fi nancial year from 1 December 2007 to 30 November 2008. The maintenance of the books and records and the preparation of the annual fi nancial statements and management report in accordance with IFRS, as adopted by the EU, and the additional requirements of German commercial law pursuant to Section 325 Sub-section 2a HGB [Handelsgesetzbuch: German Commercial Code] are the responsibility of the Company's management. Our responsibility is to express an opinion on the single-entity IFRS fi nancial statements, together with the bookkeeping system, and the management report based on our audit.
We conducted our audit in accordance with Section 317 HGB and German generally accepted standards for the audit of fi nancial statements promulgated by the Institut der Wirtschaftsprüfer [Institute of Public Auditors in Germany] (IDW). Those standards require that we plan and perform the audit such that misstatements materially affecting the presentation of the net assets, fi nancial position and results of operations in the single-entity IFRS fi nancial statements in accordance with the applicable fi nancial reporting framework and in the management report are detected with reasonable assurance. Knowledge of the business activities and the economic and legal environment of the Company and expectations as to possible misstatements are taken into account in the determination of audit procedures. The effectiveness of the accountingrelated internal control system and the evidence supporting the disclosures in the books and records, the single-entity IFRS fi nancial statements and the management report are examined primarily on a test basis within the framework of the audit. The audit includes assessing the accounting principles used and signifi cant estimates made by management, as well as evaluating the overall presentation of the separate IFRS fi nancial statements and management report. We believe that our audit provides a reasonable basis for our opinion.
Our audit has not led to any reservations.
In our opinion, based on the fi ndings of our audit, the single-entity IFRS fi nancial statements comply with IFRS, as adopted by the EU, the additional requirements of German commercial law pursuant to Section 325 Sub-section 2a HGB and give a true and fair view of the net assets, fi nancial position and results of operations of the Company in accordance with these requirements. The management report is consistent with the single-entity IFRS fi nancial statements and as a whole provides a suitable view of the Company's position and suitably presents the opportunities and risks of future development.
Without qualifying this opinion we refer to the discussion in the management report in the section "Report on risks and opportunities", Sub-section "Overall assessment of the risk situation". In this section it is disclosed that the Company's ability to continue as a going concern is at risk in the medium or long term, if the Company, in contrast to its planning, is unable to generate suffi cient cash and fails to acquire suffi cient funds via the capital market.
Munich, 3 February 2009
KPMG AG Wirtschaftsprüfungsgesellschaft (previously KPMG Deutsche Treuhand-Gesellschaft Aktiengesellschaft Wirtschaftsprüfungsgesellschaft)
Maurer Rahn Wirtschaftsprüfer Wirtschaftsprüfer [German Public Auditor] [German Public Auditor]
ADCC: Antibody Dependent Cellular Cytotoxicity – the destruction of target cells by immune cells mediated by antibodies
Adjuvant therapy: Supportive therapy
Antibody: Proteins which are produced by the immune system with the aim of identifying and destroying foreign substances that cause disease, such as viruses and bacteria
Antigen: Structure onto which an antibody specifi cally binds
ARISER: Adjuvant RENCAREX® Immunotherapy Phase III trial to Study Effi cacy in non-metastatic RCC. ARISER is a double-blind, placebo-controlled Phase III study to assess the effect of adjuvant treatment with RENCAREX® on disease-free survival and overall survival in RCC patients with a high risk of recurrence following surgery (nephrectomy)
Biopharmacy: The use of biological research methods to develop drugs
Chemotherapy: Destruction of tumour cells in the body by cytotoxins
Chimeric: Genetically composed from different species
Clinical Trial Authorisation (CTA): Approval of clinical trials in the EU
Combination therapy: Therapy with two or more substances
Cytotoxic: Poisonous to cells
Double-blind trial: Neither doctor nor patient knows whether the patient is receiving the new drug candidate or a placebo during a clinical trial
EMEA: European Medicines Evaluation Agency
FDA: Food and Drug Administration – regulatory authority in the USA
Futility analysis: Interim analysis to test if a clinical trial is likely to be negative, which is normally carried out by an independent body
Good Laboratory Practice (GLP): International regulations governing the conduct of tests in laboratories
Good Manufacturing Practice (GMP): International regulations governing the production of pharmaceutical products
HER 2: Human Epidermal Growth Factor Receptor Type 2 (HER2) is a protein that occurs on the surface of cells of numerous organs in the human body. In about 20 – 30% of women with breast cancer, the HER2 receptor is overexpressed, i. e. there are approximately 10 –100 times as many of these receptors on the cell surface. Over-expression of the receptors means that signal transduction is enhanced, which results in accelerated tumour cell division
HER2-Receptor negative: There is no over-expression of HER2 receptors
IDMC: Independent Data Monitoring Committee – responsible for interim analyses for futility and effi cacy
Inhibitor: Substance which reduces or inhibits specifi c biological activities
Intravenous: In a vein (for example, injection of a substance into a vein)
Investigational Medicinal Product Dossier (IMPD): Application for the implementation of clinical trials in the European Union
Investigational New Drug (IND) Application: Application for the implementation of clinical trials in the USA
Level of Evidence I: Evidence is obtained from metaanalysis of multiple, well-designed, controlled studies, usually randomised trials with low false-positive and low false-negative errors (high power)
Metastasis: The spread of malignant tumour cells in the body and the formation of secondary tumours
Monoclonal antibodies: Monoclonal antibodies are produced by cells which are created when an antibody producing cell (such as B lymphocytes) fuses with an immortalised cancer cell. This process takes place in the laboratory and results in a hybrid cell (hybridoma), which combines the features of both cells. These cells are all identical, as they originate from one and the same cell and are described as "monoclonal". They produce large amounts of a specifi c antibody, which binds to a specifi c antigen
Multicentre trial: A trial carried out in several places or at several centres
Oncology: The research fi eld which focuses on cancer studies
Oral: Taken by mouth
Orphan drug status: This status is awarded for drugs by the Food and Drug Administration (FDA) in the USA and by the European Medicines Evaluation Agency. It grants exclusive marketing rights for ten years from approval in the USA and seven years in the EU
Phase I: Clinical trial of a substance carried out on a low number of healthy subjects or patients, under strict supervision. It is used to determine toxicity, pharmacokinetics, form of administration and safe dosage of a substance
Phase II: Clinical trial with a low number of patients with the aim of testing the effi cacy of a substance for specifi c indications, identifying any side effects and safety risks and determining the tolerance and optimum dosage
Phase III: Clinical trial with a large number of patients (several hundred to several thousand) to ascertain the safety, tolerance and effi cacy as well as optimum dosage of a substance under real therapy condition
Placebo: Dummy drug with no active ingredients
Plasminogen: Precursor of plasmin, an enzyme that dissolves blood clots
Positron emission tomography (PET): Imaging procedure with the help of which the inside of the body can be visualised without the need for surgery
Preclinical: Comprises all in vitro and in vivo test systems for examining the features of a substance prior to the start of the clinical phases
Randomised trial: Clinical trial for which the subjects are divided into several groups according to the principle of random selection (randomised)
Receptor: A protein usually found on the surface of cells to which a specifi c chemical messenger, for example a hormone, binds
Serine protease: A type of peptidase (i. e. enzymes which catalyse the split of proteins and peptides)
Solid tumours: Solid growth of tissue
Special Protocol Assessment (SPA): The SPA documents that the FDA confi rms that the design and planned analysis of a clinical trial adequately address the requirements for a regulatory submission
uPA system: Urokinase-specifi c plasminogen activator (uPA) system. A protein lysing enzyme system which plays an important role in the growth, spread and metastasis of different malignant tumours
| Date | |
|---|---|
| 19 February 2009 | Annual Report 2008 |
| 19 February 2009 | Financial press conference and analysts' meeting |
| 8 April 2009 | 3-month Financial Report 2009 |
| 26 May 2009 | Annual General Meeting |
| 14 July 2009 | Half-yearly Financial Report 2009 |
| 13 October 2009 | 9-month Financial Report 2009 |
Grillparzerstr. 10 81675 Munich, Germany Tel. + 49 (0) 89 – 41 31 38 – 0 Fax + 49 (0) 89 – 41 31 38 – 99 www.wilex.com [email protected]
Chief Financial Offi cer Investor & Public Relations E-mail: [email protected] E-mail: [email protected]
Tel. + 49 (0) 89 – 41 31 38 – 20 Tel. + 49 (0) 89 – 41 31 38 – 126 Fax + 49 (0) 89 – 41 31 38 – 98 Fax + 49 (0) 89 – 41 31 38 – 99
Published by: WILEX AG, Grillparzerstr. 10, 81675 Munich, Germany Responsible for the project: Katja Arnold, WILEX AG Design by: Annika Müller, Artdirection und Design, Hamburg
The Annual Report is also published in German and is available for download from our website at www.wilex.com.
The English translation of the Annual Report is provided for convenience only. The German original is defi nitive.
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