Earnings Release • Aug 29, 2017
Earnings Release
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Karolinska Development AB (Nasdaq Stockholm: KDEV) is a Nordic life sciences investment company. The company focuses on identifying breakthrough medical innovations in the Nordic region that are developed by entrepreneurs and leadership teams. The Company invests in the creation and growth of companies that advance these assets into commercial products that are designed to make a difference to patients' lives while providing an attractive return on investment to shareholders.
Karolinska Development has access to world-class medical innovations at the Karolinska Institutet and other leading universities and research institutes in the Nordic region. The Company aims to build companies around scientists who are leaders in their fields, supported by experienced management teams and advisers, and co-funded by specialist international investors, to provide the greatest chance of success.
Karolinska Development has established a portfolio of nine companies targeting opportunities in innovative treatment for life-threatening or serious debilitating diseases.
The Company is led by an entrepreneurial team of investment professionals with a proven track record as company builders and with access to a strong global network.
"I am very pleased to present my first set of interim results as CEO of Karolinska Development. With our portfolio companies progressing according to their development plans, we are working closely with the management teams to ensure they are well prepared and well positioned to capture the value that we anticipate being created from a series of important commercial and clinical milestones in the next 12-18 months. These events also present multiple opportunities for Karolinska Development to crystallize value and generate return on investment for our investors."
For more information please contact:
Viktor Drvota, Chief Executive Officer
+46 73 982 52 02
Christian Tange Chief Financial Officer
+46 73 712 14 30
Karolinska Development's strategy and efforts over the past two years have focused on ensuring its portfolio companies are equipped with strong, experienced leadership and the necessary funding to reach defined value-inflection points, either commercial or clinical. The Company believes that its companies are now well positioned to reach these crucial milestones in the next 12-18 months, at which point multiple opportunities for value creation and value crystallization are expected (e.g. via further financings, licensing agreements, acquisition, or public flotations).
The next priority for Karolinska Development therefore, and an area of increasing focus and activity in recent months, is to work closely with its portfolio company management teams to prepare them for these milestones and ensure they are best placed to capitalize on them when they occur.
Karolinska Development's portfolio companies are in good shape and making steady progress according to their development plans, which are designed to:
Longer term, Karolinska Development aims to identify new investment opportunities across the Nordic region, to expand and diversify its portfolio into broader areas of life sciences with near-term value-inflection points, such as medical technologies, diagnostics or digital health. The Company will also seek to make investments in under-valued companies on the public markets in the region and in more mature investments, where returns may be realized more quickly than from early stage companies. Karolinska Development will look to syndicate investments with experienced life science investors.
In addition, the Company continues to believe it can generate value from divested companies through its earn-out agreements.
In April 2017 Karolinska Development announced the results of the set-off issue aimed at strengthening the Company's equity position and improving the Company's overall financial risk profile. The offered subscription price for the issue was SEK 6.17 per new B share and convertible holders accepted to offset SEK 67 million of the Company's SEK 451 million convertible debt. As a result, 10,871,698 new B shares were issued.
During the second quarter, Karolinska Development announced changes to its executive leadership and board of directors. In April, the Company's Chief Investment Officer and Deputy CEO Viktor Drvota was promoted to Chief Executive Officer and formally took over as CEO on 1 June 2017. He replaces Jim Van heusden, who decided to step down and is leaving on terms in line with his employment agreement and the Guidelines for compensation for senior executives.
Also in April, Chairman Bo Jesper Hansen decided not to stand for re-election, and board member Niclas Adler was elected as new chairman at the General Meeting in May 2017. In addition, Khalid Islam, Carl Johan Sundberg and Henrijette Richter all left the board at the General Meeting and were replaced by Hans-Olov Olsson, Anders Härfstrand and Magnus Persson, who together bring significant board, executive and investment experience from the biopharmaceutical and other global industries.
Hans-Olov Olsson is the former Chairman of Volvo Cars and Senior Vice President of Ford Motor Company, and is on the board a several Swedish companies and industry organizations.
Anders Härfstrand has significant experience in the biopharmaceutical sector. He was a senior commercial advisor to HBM Partners, a global leader in healthcare-focused investing, and has held CEO roles at a number of biotech companies, including BBB Therapeutics BV, Humabs BioMed SA and Nitec Pharma AG. Mr. Härfstrand also worked previously in various executive and management roles at pharmaceutical companies Serono, Pfizer and Pharmacia.
Magnus Persson is a former Partner at Healthcap, a leading European venture capital firm based in Sweden and investing exclusively and globally in life sciences. He is also chairman of Galecto Biotech AS, SLS Invest AB, Health Innovation Platform AB, Cantargia AB and Inititator Pharma; and a board member of Albumedix AS, Immunicum AB and Medical Prognosis Institute AS.
At the end of June 2017, Karolinska Development's portfolio comprised nine companies. These companies are developing highly differentiated and commercially attractive products that have the potential to deliver compelling clinical and health economic benefits, as well as attractive returns on investment.
Important commercialization or clinical development milestones are expected for these companies during the next 12-18 months, which if positive would create significant value that we are focused on realizing for Karolinska Development and its shareholders. These are:
A key objective for Karolinska Development is to ensure that its companies are financed to achieve these value-inflection points, and new funds have been raised through the syndication of deals with experienced international life sciences investors.
In April, Umecrine Cognition presented positive clinical results from a Phase I study investigating GR3027 for the treatment of hepatic encephalopathy (HE) demonstrating safety, tolerability and target engagement. HE is a serious complication in acute and chronic liver disease, including cirrhosis, and there are no treatments available today that directly target the brain abnormalities in HE.
Also in April, Dr. Ellen Donnelly was appointed as CEO of Modus Therapeutics. Dr. Donnelly previously held numerous leadership positions at Pfizer in Clinical Operations; Project and Portfolio Management; and Research. Most recently she was responsible for Clinical Operations for Pfizer's Neuroscience and Pain therapeutic area. Dr. Donnelly also brings biotech and consulting experience to the CEO role, having worked in positions within U.S. biotech and management consulting prior to her time at Pfizer.
Karolinska Development's portfolio companies are in good shape and making steady progress according to their development plans. Karolinska Development is focusing on supporting and preparing these companies to capture the maximum value from a series of important milestones they are poised to deliver over the next 12-18 months. Achieving these milestones is expected to generate multiple opportunities for value creation and value crystallization, through further financings, licensing agreements, acquisition, or public flotations. Given the strength of its investee portfolio and the progress it is making, the Company is enthusiastic and optimistic about its future.
Karolinska Development has a focused portfolio of nine therapeutic and medtech companies with exciting potential. The portfolio companies are developing highly differentiated and commercially attractive products that have the potential to deliver compelling clinical and health economic benefits, as well as attractive returns on investment.
During the past year, Karolinska Development has optimized the clinical programs of the portfolio companies to reach clinical meaningful value inflection points in 2018. Experienced leadership has been attracted to the management and board of the portfolio companies. Furthermore, Karolinska Development has supported the financing of the portfolio companies through syndication with experienced international and domestic professional life science investors. As a result, the majority of the companies in the portfolio are now wellfinanced and in a good position to deliver key value-generating clinical or commercial milestones over the next 12-18 months.
The illustration below gives an overview of the portfolio. The therapeutics companies' next key value-generating milestones are expected in 2018, when the majority of the companies are expected to obtain Phase II proof-ofconcept data. The medtech companies OssDsign and Promimic are revenue generating and have significant milestones mapped out in 2017/2018 regarding execution of their commercial strategies.
Karolinska Development's investment model for its therapeutic companies is to invest in syndicates with other professional life science investors until proof-of-concept is demonstrated in Phase II trials, at which point the investor syndicate will look at options such as trade sales, IPOs or licensing deals with potential buyers to monetize the investments. For medtech companies, the aim is to finance the companies until break-even and then look at options such as trade sales, IPOs or licensing deals with potential buyers to monetize the investments.
Project APR-246
Primary indication Ovarian cancer
Development Phase Phase IIa
Holding in company* Karolinska Development 1%** KDev Investments 17%
Versant Ventures (US), 5AM Ventures (US), HealthCap (Sweden), Sectoral Asset Management (Canada), KCIF Co-Investment Fund KB
Origin Karolinska Institutet
More information aprea.com
* Fully-diluted ownership based on current investment plans.
** Includes indirect holdings through KCIF Co-Investment Fund
Aprea Therapeutics (Stockholm, Sweden and Boston, US) is a biotech company developing novel anticancer compounds targeting the tumor suppressor protein p53. Mutations of the p53 gene occur in around 50% of all human tumors. These mutations are often associated with resistance to anticancer drugs and poor overall survival, representing a major unmet medical need in the treatment of cancer. Aprea's lead drug candidate APR-246 is a first-in-class compound that reactivates mutant p53 protein, inducing programmed cell death in human cancer cells.
APR-246 is currently in a Phase IIa trial of a combined Phase Ib/IIa clinical study (the PiSARRO study), investigating the drug candidate's safety and efficacy in combination with chemotherapy in second-line treatment of patients with platinum-sensitive high-grade serous ovarian cancer (HGSOC). The Phase Ib component is complete and has established safety, tolerability and pharmacokinetics of APR-246 in combination with standard chemotherapy. The Phase IIa portion of the PiSARRO study will enrol 250 up to 400 relapsed platinum-sensitive HGSOC patients in Europe and the US. Patients will be randomized between carboplatin and pegylated liposomal doxorubicin with or without APR-246; the primary endpoint for the study is progression-free survival.
In addition to the ongoing Phase IIa clinical trial in platinum-sensitive HGSOC, Aprea is enrolling a Phase Ib/II study in myelodysplastic syndrome, a Phase Ib/II study in platinum-resistant HGSOC and is expecting to initiate additional clinical studies of APR-246 in other indications in 2017.
The lead target indication for APR-246 is ovarian cancer. As the 6th most common cancer in women, over 60,000 new patients are diagnosed worldwide each year. High-grade serous ovarian cancer (HGSOC) accounts for 70-80% of all deaths from ovarian cancer. Over 90% of these patients are Stage III/IV and median survival is less than 4 years. Approximately 60% of ovarian cancer patients, and ≥95% of HGSOC patients, have p53 mutations at diagnosis. Therefore, combination treatment of APR-246 with chemotherapy could provide significant benefit.
Project Sevuparin
Primary indication Sickle cell disease (SCD)
Development Phase Phase II
Holding in company* KDev Investments 73%
Other investors The Foundation for Baltic and East European Studies, Praktikerinvest
Origin Karolinska Institutet, Uppsala University
More information modustx.com
*Fully-diluted ownership based on current investment plans
Modus Therapeutics (Stockholm, Sweden) is developing sevuparin, an innovative, disease-modifying drug which has potential to become the best-in-class treatment for sickle cell disease (SCD).
Sevuparin's anti-adhesive mechanism means it has the potential to prevent and resolve the microvascular obstructions experienced by SCD patients. These obstructions cause the severe pain experienced by patients during Vaso-Occlusive Crises (VOCs) and result in high morbidity through organ damage as well the risk of premature death.
Modus is conducting a Phase II study of sevapurin in hospitalized SCD patients experiencing VOC, the results of which are expected in 2018. The trial is targeting 150 evaluable patients who will have been randomized to receive either an intravenous infusion of sevuparin or placebo on top of standard pain medication. This proof-of-concept study is designed to demonstrate reduced time to resolution of VOC, defined as freedom from parenteral opioid use and readiness for discharge from hospital. Secondary endpoints include pharmacokinetics and safety. The study is taking place in Europe and the Middle East under a co-development deal with Ergomed, which co-invests into the trial in return for an equity stake in Modus.
Modus is also aiming to develop a presentation of sevuparin that could be self-administered by SCD patients in a timely manner to prevent VOCs developing.
SCD is an orphan disease with approximately 100,000 patients in the US and 35,000 patients in Europe. In addition to this, there is a large patient pool in the Middle East, India, South America and Africa. The average number of VOCs per patient seeking hospital care is in the order of one VOC per year. The commercial impact of a SCD treatment that reduces hospital stay and the use of opioid analgesics is expected to be substantial. A label expansion to include also the preventive treatment would expand the market size significantly.
Project GR3027
Primary indication Hepatic encephalopathy
Development Phase Phase Ib/IIa
Holding in company* Karolinska Development 68%
Other investors Norrlandsfonden, Fort knox förvaring AB, Partnerinvest
Origin Umeå University
More information umecrine cognition.com
* Fully-diluted ownership based on current investment plans.
Umecrine Cognition (Solna, Sweden) is developing a therapy that represents a new target class for several major CNS-related disorders. The primary focus is on hepatic encephalopathy (HE), which is a serious neuropsychiatric and neurocognitive complication in acute and chronic liver disease (including cirrhosis). The disorder has detrimental effects on health-related quality of life as a consequence of diverse and debilitating symptoms. An increase in the inhibitory GABA (a neurotransmitter) system in the CNS is believed to be a main driver for the clinical signs and symptoms. Certain neuroactive steroids are key drivers of this increased GABA signaling, causing impaired cognitive and motor function. This makes neurosteroid-antagonists as developed by Umecrine Cognition, a credible therapeutic class to explore for novel treatments in HE.
Umecrine Cognition's exciting drug candidate GR3027 is a first-in-class drug to treat acute life-threatening HE and long-term maintenance in minimal HE caused by endogenous GABA-steroids. In 2016, the company announced positive data from a Phase Ia trial with the drug candidate, demonstrating safety, tolerability and CNS target engagement. GR3027 is now undergoing a combined Phase Ib/IIa clinical study aiming to evaluate the safety and pharmacokinetics in healthy adults and patients with cirrhosis, assess the potential efficacy of the GR3027 on cognitive function in patients with cirrhosis and HE, and determine the Phase IIb dose.
HE is a severe disorder with a large unmet need. In total, liver cirrhosis affects up to 1% of US and EU populations. Between 125,000 and 200,000 patients with cirrhosis in the US are hospitalized due to complications of HE. Once HE develops, mortality reaches 22-35% after five years. HE is also associated with large societal and individual costs. The total cost for hospitalizations with HE in the US is estimated to around USD 2 billion.
Project Tafoxiparin
Primary indication Protracted labor
Development Phase Phase II
Holding in company* KDev Investments 35%
Other investors The Foundation for Baltic and East European Studies, Praktikerinvest, Rosetta Capital, Lee's Pharma
Origin Karolinska Institutet
More information Dilafor.com
* Fully-diluted ownership based on current investment plans.
Dilafor (Stockholm, Sweden) is a drug development company focusing on developing tafoxiparin for obstetric indications. The company's primary goal with tafoxiparin is to decrease the incidence of slow progress of labor both after induction of labor and after spontaneous onset of labor. Tafoxiparin has shown in a Phase II clinical trial encouraging evidence that it can decrease the proportion of women with labor more than 12 hours. A Phase IIb dose-finding study is underway.
Protracted labor (i.e. labor that lasts more than 12 hours) is the main cause of emergency surgical deliveries, such as caesarian section. The condition is often associated with complications for both mother and child, which lead to serious short and long-term consequences and substantial health care costs.
The Phase IIb study aims to test tafoxiparin/placebo in addition to standard care (oxytocin infusion) in term-pregnant first-time mothers that, after spontaneous onset of labor, require labor augmentation due to primary slow progress or labor arrest. The target is to enroll 360 pregnant women into the study in Europe.
Dilafor has a license and partnership agreement with Lee's Pharmaceutical, which will conduct and finance clinical Phase II and Phase III programs of tafoxiparin in China.
It has been estimated that up to 40% of pregnant women run into complications during childbirth in the form of protracted labor, where pharmaceutical therapy is relevant. This number represents the primary target population for tafoxiparin, which indicate a substantial market potential. Existing pharmacological therapies that improve uterine contractions are usually insufficient, as they are not working well enough in up to 50% of cases. Consequently, there is strong interest in better treatments such as tafoxiparin, which has "first-in-class" potential.
• Initiated a Phase IIb dose-finding study with tafoxiparin in Europe (Jan 2017).
Project OSSDSIGN® Cranial and OSSDSIGN® Facial
Primary indication Cranial implants
Development Phase Marketed
Holding in company* Karolinska Development 20%**
Other investors SEB Venture Capital, Fouriertransform
Origin Karolinska University Hospital, Uppsala University
More information ossdsign.com
* Fully-diluted ownership based on current investment plans
** Includes indirect holdings through KCIF Co-Investment Fund
OssDsign (Uppsala, Sweden) is an innovator, designer and manufacturer of implants and material technology for bone regeneration. Its lead products – OSSDSIGN® Cranial and OSSDSIGN® Facial – are already being sold in several European markets including Germany, the UK and the Nordic region, as well as selected non-European markets including Singapore and Israel. The Company is commercializing its cranial implant in the US, and is also undertaking regulatory and commercial activities in Japan.
OssDsign's commercial strategy is focused on building sales of its innovative products through a combination of its internal sales organization and distribution partnerships, and the Company is well-funded to support this strategy.
OssDsign's personalized bone regeneration technology provides improved healing properties that are clinically proven to enhance patient outcomes. By combining a regenerative ceramic material reinforced with titanium, with tailored patient-specific designs enabled by state-of-the-art computer-aided design, 3D printing and moulding techniques, the technology platform aims to contribute to the permanent healing of a range of bone defects. Enhanced healing means a better implant solution for patients and cost savings for hospitals.
OssDsign is focusing on the market for craniomaxillofacial (CMF) implants. The total market size was estimated to USD 1,8 billon in 2016 and is expected to grow at an CAGR of 5-9% worldwide over the five next years. The market for OssDsign´s lead product in cranioplasty alone is estimated to amount to approximately to USD 200 million. OssDsign pursues a focused business strategy on a well-defined patient population. The advantages are that the targeted procedures are carried out in a limited number of easily identifiable hospitals around the world. The indications are relatively price insensitive and easy to access on many markets from a regulatory perspective.
• Launch of OSSDSIGN® Cranial and OSSDSIGN® Facial on new EU markets and selected markets outside of Europe during 2017.
Project HAnano Surface
Primary indication Implant surface
Development Phase Marketed
Holding in company* KDev Investments 35%
Other investors ALMI Invest, K-Svets Venture, Chalmers Ventures
Origin Chalmers University of Technology
More information Promimic.com
*Fully-diluted ownership based on current investment plans
Promimic (Gothenburg, Sweden) is a biomaterials company that develops and markets a unique coating for medical implants called HAnano Surface, which increases their integration into bone and anchoring strength.
The HAnano Surface is nanometer thin, which helps preserve the micro-structure of the implant and reduces the risk of cracks in the coating. Furthermore, the coating improves the hydrophilicity of the implant, which increases the possibility for bone cells to attach to the surface. The HAnano Surface has been evaluated in both in vitro and in vivo studies, which have shown that it can reduce healing times. The coating process is easy to implement in the industrial scale production of implants.
Promimic has established a sales operation in the US and a series of development and commercial partnerships, including with Sistema de Implante Nacional (S.I.N), a leading provider of dental implants in Brazil, which launched the first product using Promimic's technology in January 2016. Promimic has also signed an agreement with Amendia Inc. (US) which allows Amendia to develop the HAnano Surface technology for use with Amendia's patient-focused spinal implants.
A manufacturing facility for HAnano coated implants to supply the US and Chinese markets has been established by the Company's partner, Danco Anodizing.
Promimic is focusing on the markets for dental and orthopedic implants, which collectively represents a worldwide market opportunity for Promimic of USD 600 - 800 million. The implant industry is a large, high-growth market which delivers high profit margins. The competition amongst implant manufacturers is fierce and each market segment is dominated by four-to-eight global companies. The strategies of many of these companies rely on in-licensing new technologies in order to differentiate their products and strengthen their market position. Promimic has a business model designed to meet these needs. It is centered on out-licensing its HAnano Surface technology to leading implant manufacturers so that they can incorporate it into their products.
• Magnus Larsson appointed as Chief Executive Officer, replacing Ulf Brogren, who relocated to the US to lead Promimic Inc. as Head of Sales (Jan 2017).
• Further product launches and license agreements with major manufacturers during 2017.
The following financial reporting is divided into one financial reporting for The Parent Company and one for The Investment Entity. The Parent Company and The Investment Entity is the same legal entity but the reporting is divided in order to meet legal reporting requirements.
The Parent Company is reporting in accordance with the guidelines under the Swedish Annual Accounting Act and Swedish Financial Accounting Standards Council, RFR 2. The Investment Entity is required to meet the reporting requirements of listed companies and thus in accordance with IFRS adopted by the EU and the Swedish Annual Accounts Act. The financial reporting for the Parent company and the Investment Entity has been equated in the second quarter 2017 by the Parent company´s voluntary change of accounting principles to valuation at fair value through profit or loss.
The change has been implemented in order to make the accounting more efficient and promote transparency by improving correspondence with the financial reporting in the Investment Entity. Restated comparative figures in note 5.
Amounts with brackets in refer to the corresponding period during the prior year unless otherwise stated.
| SEK000 | 2017 Apr-Jun |
2016 Apr-Jun |
2017 Jan-Jun |
2016 Jan-Jun |
2016 Full year |
|---|---|---|---|---|---|
| Condensed income statement | |||||
| Result of change in fair value in portfolio companies | -3.5 | -58.9 | -9.2 | -141.1 | -147.0 |
| Net profit/loss | -21.3 | -75.8 | -46.4 | -175.9 | -216.8 |
| Balance sheet information | |||||
| Cash, cash equivalents and short-term investments Share information |
189.1 | 268.4 | 189.1 | 268.4 | 248.1 |
| Earnings per share, weighted average, before and after dilution (SEK) |
-0.3 | -1.4 | -0.8 | -3.3 | -4.1 |
| Net asset value per share (SEK) (Note 1) | 0.7 | 1.4 | 0.7 | ||
| Equity per share (SEK) (Note 1) | 0.6 | 1.3 | 0.6 | ||
| Share price, last trading day in the reporting period (SEK) |
4.9 | 7.3 | 6.0 | ||
| Portfolio information | |||||
| Investments in portfolio companies | 11.8 | 9.4 | 40.7 | 17.2 | 28.9 |
| Of which investments not affecting cash flow | 1.1 | 0.4 | 1.8 | 0.8 | 1.9 |
| Fair value of portfolio holdings | 180.9 | 143.7 | 180.9 | 143.7 | 149.4 |
Investments in the portfolio in second quarter 2017 by external investors and Karolinska Development amounted to SEK 21.4 million, whereof 45% by external investors.
Karolinska Development invested SEK 11.8 million, of which SEK 10.7 million was cash investments and SEK 1.1 million was non-cash investments (accrued interest on loans). Investments by external investors amounted to SEK 9.6 million.
Karolinska Development's cash investments were made one portfolio company: Modus Therapeutics SEK 10.7 million.
External investors invested in two portfolio companies: Biosergen SEK 3.3 million and Modus Therapeutics SEK 6.3 million.
During the year, Karolinska Development and external investors have made investments in the portfolio companies as follows:
| SEK 000 | Karolinska Development |
External Investors | Total Invested Q1-Q2 2017 |
|---|---|---|---|
| Umecrine Cognition | 12.3 | 4.2 | 16.5 |
| OssDsign | 10.2 | 27.5 | 37.7 |
| Modus Therapeutics | 17.9 | 9.2 | 27.1 |
| KCIF | 0.3 | 0.8 | 1.1 |
| Dilafor | 0.0 | 13.7 | 13.7 |
| Lipidor | 0.0 | 2.4 | 2.4 |
| Biosergen | 0.0 | 3.3 | 3.3 |
| Total | 40.7 | 61.1 | 101.8 |
Fair Value of the portfolio companies owned directly via Karolinska Development increased by SEK 1.3 million during second quarter 2017. The main reason for the increase was interest on loans in Umecrine Cognition and OssDsign.
Fair Value of the portfolio companies owned via KDev Investments increased by SEK 12.1 million during second quarter 2017, due to the investments in Modus Therapeutics.
Total Fair Value from portfolio companies owned directly by Karolinska Development and via KDev Investments increase by SEK 13.3 million in second quarter 2017.
As a consequence of the increase in Fair Value of the part of the portfolio owned via KDev Investments, the potential distribution to Rosetta Capital was increased by SEK 5.1 million, resulting in Net Portfolio Fair Value increasing by SEK 8.3 million in second quarter 2017.
| SEK 000 | 2017-06-30 | 2017-03-31 | Q2 vs Q1 2017 |
|---|---|---|---|
| Karolinska Development Portfolio Fair Value | 163.8 | 162.6 | 1.3 |
| KDev Investments Portfoilio Fair Value | 281.2 | 269.1 | 12.1 |
| Total Portfoilio Fair Value | 445.0 | 431.7 | 13.3 |
| Potential distribution to Rosetta Capital of fair value of KDev Investments |
264.1 | 259.0 | 5.1 |
| Net Portfolio Fair Value (after potential distribution to Rosetta Capital) |
180.9 | 172.6 | 8.3 |
Total Portfolio Fair Value at 30 June 2017 amounted to SEK 445.0 million and the potential distribution to Rosetta Capital amounted to SEK 264.1 million. Net Portfolio Fair Value at 30 June 2017 amounted to SEK 180.9 million.
During second quarter 2017 Karolinska Development's revenue remained at the same level as in second quarter 2016 – SEK 0.6 million. The revenue primarily consists of services provided to portfolio companies. Revenue for the period January – June 2017 amounted to SEK 1.2 million.
Other expenses decreased with SEK 0.8 million in second quarter 2017 compared to second quarter 2016. A significant part of the reduced costs was, as previous quarter, decreased costs for premises. Other expenses for the period January – June 2017 amounted to SEK 5.7 million.
Personnel Costs amounted to SEK 5.3 million in second quarter 2017. The SEK 2.7 million increase compared to same period 2016 was due to extraordinary low cost in 2016 as the costs for the 2013 share program (PSP2013) was lower than original accrued for. Personnel cost during second quarter 2017 was at the same level as the first quarter 2017. The personnel cost for the period January – June amounted to SEK 11.0.
As Net Portfolio Fair Value increased with SEK 8.3 million when investments in the portfolio amounted to SEK 11.8 million the Result of Change in Portfolio Fair Value in the profit and loss statement amounted to SEK -3.5 million in second quarter 2017. The main reason for this was the increased potential distribution to Rosetta Capital due to the investment in Modus Therapeutics.
The Operational profit/loss for second quarter 2017 amounted to SEK -11.4 million which was in line with expectations. The Operational profit/loss for the period January – June amounted to SEK -24.7 million.
Financial costs decreased in second quarter 2017 compared to first quarter 2017. This was a consequence of a part of the convertibles being set-off to shares at the set-off offering in first quarter 2017.
With Operational profit/loss of SEK -11.4 million (SEK -64.9 million) and Financial net of SEK -9.8 million (SEK -10.9 million), the Investment Entity's Profit/loss before tax amounted to SEK -21.3 million in second quarter 2017 (loss of SEK -75.8 million). The Profit/loss before tax for the period January – June amounted to SEK - 46.4 million.
The Investment Entity's equity amounted to SEK 41.2 million at 30 June 2017 compared to SEK 29.8 million on 31 December 2016.The increase was a combination of the SEK -21.3 million Profit/Loss and the increase in equity from the set-off issue.
The Investment Entity's equity to total assets ratio was 10% on 30 June 2017 compared to 7% on 31 December 2016.
After paying operational costs and investments in second quarter 2017 cash and cash equivalents together with short-term investments 30 June 2017 amounted to SEK 189.1 million.
The Parent Company refers to Karolinska Development AB (comparable numbers second quarter 2016).
During the second quarter, a voluntary change of accounting principle has been made for the Parent company due to that investments in portfolio companies, loan and equity, and other financial assets and liabilities are now valuated at fair value through profit or loss. The impact of the Net profit/ loss is SEK 16.3 million, of which SEK 15.5 million on Retained earnings and SEK 0.8 million on the Profit/loss for this year. In the balance sheet, this leads to an increase in the fair value of the portfolio with SEK 12.2 million and an increase of other financial assets with SEK 8.9 million, but also a decrease of financial liabilities with SEK 4.8 million. Comparable numbers are restated, see below.
During second quarter 2017, the Parent Company's Net profit/loss amounted to SEK -21.3 million (SEK -66.8 million), a change of SEK 45.5 million compared to second quarter 2016. Accumulated for the year, Net profit/loss amounted to SEK -46.4 million.
The result in second quarter 2017 and the effect of accounting principles being equated to the Investment Entity's accounting principles decreased equity from SEK 46.5 million 31 March 2017 to SEK 41.2 million 30 June 2017.
On 6 February 2017 Karolinska Development announced that it had to strengthen its equity position, thereby reducing its overall financial risk profile and ensure the requirements regarding the size of the equity in the Swedish Companies Act (Aktiebolagslagen). Therefore, Karolinska Development launched a set-off issue of B-shares, with approval from shareholders granted at an Extraordinary General Meeting held on 8 March 2017. Convertible holders accepted to offset SEK 67 million of the company's convertible debt, and as a result equity in the Parent Company increased from SEK 14.3 million end of December 2016 to SEK 46.5 million end of March 2017. The reduction in risk was less than anticipated,
No new risk areas have been identified since 31 December 2016. For a detailed description of risks and uncertainties, see the annual report 2016.
The Board of Directors and the CEO hereby certify that this interim report gives a true and fair view of the operations, financial position and results of operations of the Parent Company and the Investment Entity and describes the material risks and uncertainties faced by the company.
This report has not been reviewed by the Company's auditors.
Solna, 29 August 2017
Chairman
Niclas Adler Tse Ping Vlad Artamonov
Anders Härfstrand Hans-Olov Olsson Magnus Persson
Hans Wigzell Viktor Drvota CEO
Interim Report January-September 2017 31 October 2017 (new date)
Karolinska Development is required by law to publish the information in this interim report. The information was published on 29 August 2017.
This interim report, together with additional information, is available on Karolinska Development's website: www.karolinskadevelopment.com
Note: This report is a translation of the Swedish interim report. In case of any discrepancies, the Swedish version shall prevail.
| SEK 000 | Note | 2017 Apr-Jun |
2016 Apr-Jun |
2017 Jan-Jun |
2016 Jan-Jun |
2016 Full-year |
|---|---|---|---|---|---|---|
| Dividend1 | - | - | - | - | 3,333 | |
| Other revenue | 560 | 607 | 1,176 | 1,215 | 2,027 | |
| Revenue | 560 | 607 | 1,176 | 1,215 | 5,360 | |
| Other expenses | -3,185 | -3,995 | -5,650 | -7,425 | -15,415 | |
| Personnel costs Depreciation of tangible non-current |
-5,291 | -2,613 | -11,003 | -7,555 | -17,344 | |
| assets | - | -53 | - | -106 | -106 | |
| Result of change in fair value of shares in portfolio companies Result from sale of shares in portfolio companies |
2 | -3,497 - |
-58,894 - |
-9,222 - |
-141,146 - |
-146,988 444 |
| Operating profit/loss | -11,413 | -64,948 | -24,699 | -155,017 | -174,049 | |
| Financial net | -9,837 | -10,893 | -21,740 | -20,923 | -42,783 | |
| Profit/loss before tax | -21,250 | -75,841 | -46,439 | -175,940 | -216,832 | |
| Taxes | - | - | - | - | - | |
| NET PROFIT/LOSS FOR THE PERIOD |
-21,250 | -75,841 | -46,439 | -175,940 | -216,832 |
| SEK 000 | Note | 2017 Apr-Jun |
2016 Apr-Jun |
2017 Jan-Jun |
2016 Jan-Jun |
2016 Full-year |
|---|---|---|---|---|---|---|
| Net/profit loss for the period |
-21,250 | -75,841 | -46,439 | -175,940 | -216,832 | |
| Total comprehensive income/loss for the period |
-21,250 | -75,841 | -46,439 | -175,940 | -216,832 |
| SEK | Note | 2017 Apr-Jun |
2016 Apr-Jun |
2017 Jan-Jun |
2016 Jan-Jun |
2016 Full-year |
|---|---|---|---|---|---|---|
| Earnings per share, weighted average, before and after dilution |
-0.34 | -1.43 | -0.80 | -3.31 | -4.08 | |
| Number of shares, weighted average |
63,375,596 | 53,205,335 | 58,326,207 | 53,205,335 | 53,210,223 |
1 Dividend from BioArctic
| SEK 000 | Note | 30 Jun 2017 | 30 Jun 2016 | 31 Dec 2016 |
|---|---|---|---|---|
| ASSETS | ||||
| Tangible assets | ||||
| Tangible non-current assets | - | - | - | |
| Financial assets | ||||
| Shares in portfolio companies at fair value | ||||
| through profit or loss | 2 | 180,899 | 143,690 | 149,408 |
| Loans receivable from portfolio companies | 967 | 951 | 957 | |
| Other financial assets | 38,113 | 38,113 | 38,113 | |
| Total non-current assets | 219,979 | 182,754 | 188,478 | |
| Current assets | ||||
| Receivables from portfolio companies | 778 | 1,287 | 229 | |
| Other current receivables | 242 | 1,025 | 660 | |
| Prepaid expenses and accrued income | 903 | 612 | 806 | |
| Short-term investments, at fair value through | ||||
| profit or loss | 177,506 | 257,761 | 237,545 | |
| Cash and cash equivalents | 11,621 | 10,613 | 10,602 | |
| Total current assets | 191,050 | 271,298 | 249,842 | |
| TOTAL ASSETS | 411,029 | 454,052 | 438,320 | |
| EQUITY AND LIABILITIES | ||||
| Total equity | 41,180 | 70,660 | 29,815 | |
| Long-term liabilities | ||||
| Convertible loan | 3 | 357,550 | 371,821 | 394,438 |
| Other financial liabilities | 4,807 | 4,798 | 4,798 | |
| Total long-term liabilities | 362,357 | 376,619 | 399,236 | |
| Current liabilities | ||||
| Accounts payable | 950 | 974 | 1,460 | |
| Liabilities to portfolio companies | - | 513 | - | |
| Other current liabilities | 767 | 552 | 960 | |
| Accrued expenses and prepaid income | 5,775 | 4,734 | 6,849 | |
| Total current liabilities | 7,492 | 6,773 | 9,269 | |
| Total liabilities | 369,849 | 383,392 | 408,505 | |
| TOTAL EQUITY AND LIABILITIES | 411,029 | 454,052 | 438,320 |
| SEK 000 | Note | 2017-06-30 | 2016-06-30 | 2016-12-31 |
|---|---|---|---|---|
| restated | restated | |||
| Share capital | 26,732 | 26,725 | 26,725 | |
| Share premium1 | 1 | 1,884,310 | 1,884,310 | 1,884,310 |
| Retained earnings1 | 1 | -1,881,227 | -1,663,154 | -1,663,154 |
| Opening balance, equity | 29,815 | 247,881 | 247,881 | |
| Net profit/ loss for the period | -46,439 | -175,940 | -216,832 | |
| Effect of incentive programs | -123 | -1,281 | -1,241 | |
| Set-off issue2 | 57,927 | - | - | |
| Reduction of share capital3 | - | - | - | |
| Share issue | - | - | 7 | |
| Share capital | 643 | 26,725 | 26,732 | |
| Share premium | 1,970,736 | 1,884,310 | 1,884,310 | |
| Retained earnings | -1,930,199 | -1,840,375 | -1,881,227 | |
| Closing balance, equity | 41,180 | 70,660 | 29,815 |
1 Correction of error has been made between Share premium (+) and Retained earnings (-) in June 2017 with SEK 10.1 million, recalculated 2016. See note 1.
2 Increase of Share capital with SEK 5.4 million and share premium with SEK 54.9 million, decrease of retained earnings with SEK 2,4 million.
3 Reduction of Share capital has been made with SEK 31.5 million towards Share premium.
| SEK 000 | Note | 2017 Apr-Jun |
2016 Apr-Jun |
|---|---|---|---|
| Operating activities | |||
| Operating profit/loss | -24 699 | -155 017 | |
| Adjustments for items not affecting cash flow | |||
| Depreciation | - | 106 | |
| Change in fair value | 2 | 9 222 | 141 146 |
| Other items | 126 | -1 683 | |
| Proceeds from short-term investments | -200 | 181 | |
| Interest paid/received | 12 | -1 | |
| Cash flow from operating activities before changes in | |||
| working capital and operating investments | -15 539 | -15 268 | |
| Cash flow from changes in working capital | |||
| Increase (-)/Decrease (+) in operating receivables | -1 047 | 6 263 | |
| Increase (+)/Decrease (-) in operating liabilities | -1 777 | -5 162 | |
| Operating investments | |||
| Acquisitions of shares in portfolio companies | -37 779 | -16 219 | |
| Proceeds from sale of short-term investments¹ | 59 571 | 21 410 | |
| Investments in short-term investments¹ | - | ||
| Cash flow from operating activities | 3 429 | -8 976 | |
| Financing activities | |||
| Share issue | - | - | |
| Convertible debentures issue | -2 410 | ||
| Issue costs | - | ||
| Cash flow from financing activities | -2 410 | 0 | |
| Cash flow for the period | 1 019 | -8 976 | |
| Cash and cash equivalents at the beginning of the year | 10 602 | 19 589 | |
| CASH AND CASH EQUIVALENTS AT THE END OF | |||
| THE PERIOD | 11 621 | 10 613 | |
| Supplemental disclosure¹ | |||
| CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD |
11 621 | 10 613 | |
| Short-term investments, market value at closing date | 177 506 | 257 761 | |
| CASH, CASH EQUIVALENTS AND SHORT-TERM | |||
| 189 127 | 268 374 | ||
| INVESTMENTS AT THE END OF THE PERIOD |
term investments described here.
| SEK 000 | Note | 2017 Apr-Jun |
2016 Apr-Jun restated |
2017 Jan-Jun |
2016 Jan-Jun restated |
2016 Full-year restated |
|---|---|---|---|---|---|---|
| Dividend1 | - | - | - | - | 3,333 | |
| Other revenue | 560 | 607 | 1,176 | 1,215 | 2,027 | |
| Revenue | 560 | 607 | 1,176 | 1,215 | 5,360 | |
| Other expenses | -3,185 | -3,995 | -5,650 | -7,425 | -15,415 | |
| Personnel costs | -5,291 | -2,614 | -11,003 | -7,555 | -17,344 | |
| Depreciation of tangible non current assets |
- | -53 | - | -106 | -106 | |
| Result of change in fair value of shares in portfolio companies |
5 | -3,497 | -58,894 | -9,222 | -141,146 | -146,988 |
| Result from sale of shares in portfolio companies |
- | - | - | - | 444 | |
| Operating profit/loss | -11,413 | -64,949 | -24,699 | -155,017 | -174,049 | |
| Financial net | 5 | -9,837 | -10,893 | -21,740 | -20,923 | -42,783 |
| NET PROFIT/LOSS FOR THE PERIOD |
5 | -21,250 | -75,842 | -46,439 | -175,940 | -216,832 |
| SEK 000 | Note | 2017 Apr-Jun |
2016 Apr-Jun restated |
2017 Jan-Jun |
2016 Jan-Jun restated |
2016 Full-year restated |
|---|---|---|---|---|---|---|
| Net profit/loss for the period | 5 | -21,250 | -75,842 | -46,439 | -175,940 | -216,832 |
| Total comprehensive income/loss for the period |
5 | -21,250 | -75,842 | -46,439 | -175,940 | -216,832 |
1 Dividend from BioArctic
| SEK 000 | Note | 30 Jun 2017 | 30 Jun 2016 | 31 Dec 2016 |
|---|---|---|---|---|
| restated | restated | |||
| ASSETS | ||||
| Tangible assets | ||||
| Machinery and equipment | - | - | - | |
| Financial assets | ||||
| Shares in portfolio companies at fair value | ||||
| through profit or loss | 2,5 | 180,899 | 143,690 | 149,408 |
| Loans receivable from portfolio companies | 5 | 967 | 951 | 957 |
| Other financial assets | 5 | 38,113 | 38,113 | 38,113 |
| Total non-current assets | 219,979 | 182,754 | 188,478 | |
| Current assets | ||||
| Receivables from portfolio companies | 778 | 1,287 | 229 | |
| Other current receivables | 242 | 1,025 | 660 | |
| Prepaid expenses and accrued income | 5 | 903 | 612 | 806 |
| Short-term investments at fair value through | ||||
| profit or loss | 177,506 | 257,761 | 237,545 | |
| Cash and cash equivalents | 11,621 | 10,613 | 10,602 | |
| Total current assets | 191,050 | 271,298 | 249,842 | |
| TOTAL ASSETS | 411,029 | 454,052 | 438,320 | |
| EQUITY AND LIABILITIES | ||||
| Total equity | 5 | 41,180 | 70,660 | 29,815 |
| Long-term liabilities | ||||
| Convertible loan | 3 | 357,550 | 371,821 | 394,438 |
| Other financial liabilities | 5 | 4,807 | 4,798 | 4,798 |
| Total long-term liabilities | 362,357 | 376,619 | 399,236 | |
| Current liabilities | ||||
| Accounts payable | 950 | 974 | 1,461 | |
| Liabilities to portfolio companies | - | 513 | - | |
| Other current liabilities | 767 | 552 | 959 | |
| Accrued expenses and prepaid income | 5,775 | 4,734 | 6,849 | |
| Total current liabilities | 7,492 | 6,773 | 9,269 | |
| Total liabilities | 369,849 | 383,392 | 408,505 | |
| TOTAL EQUITY AND LIABILITIES | 411,029 | 454,052 | 438,320 |
| SEK 000 | Not | 30 Jun 2017 | 30 Jun 2016 | 31 Dec 2016 |
|---|---|---|---|---|
| restated | restated | |||
| Share capital | 26,732 | 26,725 | 26,725 | |
| Share premium reserve | 5 | 1,884,310 | 1,884,310 | 1,884,310 |
| Reratined earnings | 5 | -1,881,227 | -1,676,548 | -1,676,548 |
| Opening balance, equity | 29,815 | 234,487 | 234,487 | |
| Net profit/ loss for the period | 5 | -46,439 | -160,320 | -218,926 |
| Effect of incentive programs | -123 | -1,282 | -1,241 | |
| Set-off issue1 | 57,927 | - | - | |
| Reduction of share capital2 Effect off voluntary change of |
0 | - | - | |
| accounting principle | 5 | 0 | -2,225 | 15,488 |
| Share issue | - | - | 7 | |
| Share capital | 643 | 26,725 | 26,732 | |
| Share premium reserve | 1,970,736 | 1,884,310 | 1,884,310 | |
| Reratined earnings | -1,930,199 | -1,840,375 | -1,881,227 | |
| Closing balance, equity | 5 | 41,180 | 70,660 | 29,815 |
1 Increase of Share capital with SEK 5.4 million and Share premium with SEK 54.9 million, decrease of Retained earnings with SEK 2,4 million.
2 Reduction of Share capital has been made towards Share premium reserve with SEK 31.5 million.
This report has been prepared in accordance with the International Accounting Standard (IAS) 34 Interim Financial Reporting and the Annual Accounts Act. The accounting policies applied to the Investment Entity and the Parent Company correspond, unless otherwise stated below, to the accounting policies and valuation methods used in the preparation of the most recent annual report.
Karolinska Development AB (publ) ("Karolinska Development," "Investment Entity" or the "Company") is a Nordic life sciences investment company. The Company focuses on identifying medical innovations and investing in the creation and growth of companies developing these assets into differentiated products that will make a difference to patients' lives and provide an attractive return on investment to its shareholders. Investments are made in companies whose sole purpose is to generate a return through capital appreciation and investment income. These temporary investments, which are not investment entities, are designated "portfolio companies" below. The Company, with Corporate Identity Number 556707-5048, is a limited liability company with its registered office in Solna, Sweden. Future investments will be sourced via the deal flow agreement with Karolinska Institutet Innovations AB, through an extended network of contracts at research institutions across the Nordic region, and through relationships with other specialist life sciences investors.
No changes in accounting principles and information has been made for the Investment Company.
The accounting principles regarding investments in portfolio companies (subsidiaries, associate companies, joint ventures and other financial liabilities) has been changed for the parent company. All investments in portfolio companies are accounted at fair value through profit or loss both in the Investment Company and the Parent Company (previous at the lowest value of acquisitions cost or the fair value). The voluntary change has been made in order to make the financial reporting of the company's balance sheet as well as the profit and loss statement more efficient and promote transparency by improving correspondence with the financial reporting in the Investment Entity. The Parent Company has also changed accounting principles regarding pension obligations in accordance with the financial reporting in the Investment Entity that provides guarantee for the obligations. Comparable periods have been recalculated. See note 5.
No new or revised IFRS standards or recommendations from IFRS Interpretations Committee has had impact on the Investment Entity.
A correction of error has been made between Share premium and Retained earnings in the Investment Entity, see Condensed statement of changes in the Investment Entity's equity.
Portfolio companies: Companies where Karolinska Development has made investments (subsidiaries, joint ventures, associated companies and other long-term securities holdings) which are active in pharmaceuticals, medtech, theranostics and formulation technology.
Fair value: The NASDAQ Stockholm regulations for issuers require companies listed on NASDAQ Stockholm to apply the International Financial Reporting Standards, IFRS, in their consolidated financial statements. The application of the standards allows groups of an investment company nature to apply so-called fair value in the calculation of the carrying amount of certain assets. These calculations are made on the basis of established principles and are not included in the opening accounts of the Group's legal entities, nor do they affect cash flows.
Karolinska Development applies the accounting principles of fair value according to the International Private Equity and Venture Capital Valuation Guidelines and adheres to the guidance of IFRS 13 Fair Value Measurement and the Annual Accounts Act. Based on the valuation criteria provided by these rules, an assessment is made of each company to determine a valuation method. This takes into account whether the companies have recently been financed or involved with a transaction that includes an independent third party.
If there is no valuation available based on a similar transaction, risk adjusted net present value (rNPV) calculations are made of the portfolio companies whose projects are suitable for this type of calculation. In other cases, Karolinska Development's total investment is used as the best estimation of fair value.
The part of the Fair Value that is related to the value of Karolinska Development's portfolio companies is named Portfolio Fair Value or Fair Value of the portfolio. The calculation of the Portfolio Fair Value is based on IFRS 13 standards of deciding and reporting fair value and the International Private Equity and Venture Capital Valuation Guidelines (IPEV Valuation Guidelines) decided by the IPEV board that represent the current best practice, on the valuation of private equity investments.
The Portfolio Fair Value is divided into Total Portfolio Fair Value and Net Portfolio Fair Value.
Total Portfolio Fair Value: The aggregated proceeds that would be received by Karolinska Development and KDev Investments if the shares in their portfolio companies were sold in an orderly transaction between market participants at the measurement date.
Net Portfolio Fair Value (after potential distribution to Rosetta Capital) is the net aggregated proceeds that Karolinska Development will receive after KDev Investments' distribution of proceeds to Rosetta Capital (calculated as Total Portfolio Fair Value minus Potential Distribution to Rosetta Capital).
Net asset value per share: Fair value of the total portfolio (SEK 180,9 million), loans receivable from portfolio companies (SEK 1 million), short-term investments (SEK 177,5 million), cash and cash equivalents (SEK 11,6 million), and financial assets less interest-bearing liabilities (SEK 38,1 million minus SEK 362,4 million) in relation to the number of shares outstanding (64 092 411) on the closing date (30 June 2017).
Equity per share: Equity on the closing date in relation to the number of shares outstanding on the closing date.
Equity to total assets ratio: Equity divided by total assets.
Interim period: The period from the beginning of the financial year through the closing date.
Reporting period: January – June 2017.
The table below shows financial instruments measured at fair value based on the classification in the fair value hierarchy. The various levels are defined as follows:
| SEK 000 | Level 1 | Level 2 | Level 3 | Total |
|---|---|---|---|---|
| Financial assets | ||||
| Shares in portfolio companies, at fair value through profit or loss |
- | - | 180,899 | 180,899 |
| Loans receivable from portfolio companies | - | 967 | - | 967 |
| Other financial assets | - | - | 38,113 | 38,113 |
| Receivables from portfolio companies | - | 778 | - | 778 |
| Cash, cash equivalents and short-term investments |
189,127 | - | - | 189,127 |
| Total | 189,127 | 1,745 | 219,012 | 409,884 |
| Financial liabilities | ||||
| Other financial liabilities | - | - | 4,807 | 4,807 |
| Accounts payable | - | 950 | - | 950 |
| Total | - | 950 | 4,807 | 5,757 |
| Interim Report January – June 2017 | 26 | Karolinska Development AB (Publ) |
| SEK 000 | Level 1 | Level 2 | Level 3 | Total |
|---|---|---|---|---|
| Financial assets | ||||
| Shares in portfolio companies, at fair value through profit or loss |
- | - | 143,690 | 143,690 |
| Loans receivable from portfolio companies | 0 | 951 | - | 951 |
| Other financial assets | - | - | 38,113 | 38,113 |
| Receivables from portfolio companies | - | 1,287 | - | 1,287 |
| Cash, cash equivalents and short-term investments |
268,374 | - | - | 268,374 |
| Total | 268,374 | 2,238 | 181,803 | 452,415 |
| Financial liabilities | ||||
| Other financial liabilities | - | - | 4,798 | 4,798 |
| Accounts payable | - | 974 | - | 974 |
| Liabilities to portfolio companies | - | 513 | - | 513 |
| Total | - | 1,487 | 4,798 | 6,285 |
| SEK 000 | Shares in portfolio companies |
Other financial assets |
Other financial liabilities |
|---|---|---|---|
| At beginning of the year | 149,408 | 38,113 | 4,798 |
| Transfers to and from level 3 | - | - | 0 |
| Acquisitions | 40,712 | - | - |
| Gains and losses recognized through profit or loss | -9,222 | - | 9 |
| Closing balance 31 Mar 2017 | 180,898 | 38,113 | 4,807 |
| Realized gains and losses for the period included in profit or loss |
-48 | - | - |
| Unrealized gains and losses in profit or loss for the period included in profit or loss |
-9,174 | - | -9 |
| SEK 000 | Shares in portfolio companies |
Other financial assets |
Other financial liabilities |
|---|---|---|---|
| At beginning of the year | 267,651 | 38,113 | 4,798 |
| Acquisitions | 17,185 | - | - |
| Gains and losses recognized through profit or loss | -141,146 | - | - |
| Closing balance 31 Mar 2016 | 143,690 | 38,113 | 4,798 |
| Realized gains and losses for the period included in profit or loss |
-1,262 | - | - |
| Unrealized gains and losses in profit or loss for the period included in profit or loss |
-139,884 | - | - |
The Investment Entity recognizes transfers between levels in the fair value hierarchy on the date when an event or changes occur that give rise to the transfer.
In the table below, "Total Portfolio Fair Value" is as defined in Note 1.
"Potential distribution to Rosetta Capital" is the amount that KDev Investments according to the investment agreement between Karolinska Development and Rosetta Capital is obligated to distribute to Rosetta Capital from the proceeds received by KDev Investments (KDev Investments Fair Value). The amount includes repayment of SEK 34.7 million that Rosetta Capital currently has invested in KDev Investments' portfolio companies and the distribution of dividends from Rosetta Capital's common and preference shares. The distribution to Rosetta Capital will only happen when KDev Investments distribute dividends. KDev Investments will only distribute dividends after all eventual payables and outstanding debt has been repaid.
If Rosetta Capital has not received 2.5 times the amount invested in KDev Investments by Rosetta Capital by 7 March 2018, then Rosetta Capital may require within 60 days that Karolinska Development acquires Rosetta's shares in KDev Investments. The price payable for the KDev Investments shares is the fair market value of the shares, although capped at 10 % of the market capitalization of Karolinska Development at the time of the purchase, Karolinska Development can decide whether to pay the purchase price in cash or in the form of Karolinska Development shares. With the market capitalization of Karolinska Development at the end of the second quarter 2017 being SEK 309 million the price payable for the KDev Investments shares is capped to SEK 30.9 million.
"Net Portfolio Fair Value" is as defined in Note 1.
| SEK 000 | 30 Jun 2017 | 30 Jun 2016 | 31 Dec 2016 |
|---|---|---|---|
| Karolinska Development Portfolio Fair Value | 163,828 | 134,198 | 143,657 |
| KDev Investments Portfoilio Fair Value | 281,154 | 266,808 | 261,586 |
| Total Portfoilio Fair Value | 444,982 | 401,006 | 405,243 |
| Potential distribution to Rosetta Capital of fair value of KDev Investments |
264,083 | 257,431 | 255,837 |
| Net Portfolio Fair Value (after potential distribution to Rosetta Capital) |
180,899 | 143,575 | 149,406 |
* SEK 34.7 million repayment of investments in KDev Investments made by Rosetta Capital and SEK 229.4 million distribution of dividends to preference shares and common shares.
The valuation of the company's portfolio is based on the International Private Equity and Venture Capital Valuation Guidelines (IPEV) and IFRS 13 Fair Value Measurement. Based on the valuation criteria provided by these rules, an assessment is made of each company to determine a valuation method. This takes into account whether the companies have recently been financed or involved with a transaction that includes an independent third party. If there is no valuation available based on a similar transaction, discounted cash flow models (DCF) may be used.
For detailed description, see the annual report 2016.
Karolinska Development has issued convertible debentures, so called compound financial instruments, in which the holder has right to convert into shares, the number of shares to be issued are not affected by changes in fair value of the shares.
The debt portion of the compound financial instrument is initially recognized at fair value for a similar debt without a conversion right into shares. The equity portion is initially recognized as the difference between the total fair value of compound financial instrument and the fair value of the debt portion. Directly attributable transaction costs are allocated to the debt respectively equity portion based on their initial recognized values.
Post-acquisition the debt portion of the compound financial instrument is valued to amortized costs based on the effective interest method. The equity portion of the compound financial instrument is not revalued postacquisition, except at conversion or redemption.
Karolinska Development issued convertible debentures with a nominal amount of SEK 387 million on 2 January 2015 which have a nominal interest rate of 8 percent. The nominal amount was reduced to SEK 329 million after the set-off issue in March 2017. The convertible debentures will fall due for payment on 31 December 2019 at the amount of SEK 484 million (as accrued interest is interest bearing), the convertibles grant a right to convert into shares at a conversion rate of 22 SEK per series B share. The value of the debt and equity part (conversion right) was determined on the date of issuance.
The convertible debentures are presented in the balance sheet as shown in the below table.
| SEK 000 | 30 Jun 2017 | 30 Jun 2016 | 31 Dec 2016 |
|---|---|---|---|
| Nominal amount of convertible debentures | |||
| issued on 2 January 2015 | 386,859 | 386,859 | 386,859 |
| Issue costs | -28,171 | -28,171 | -28,171 |
| Equity portion | -49,528 | -49,528 | -49,528 |
| Debt at issuance date 2 January 2015 | 309,160 | 309,160 | 309,160 |
| Accrued interest costs | 85,278 | 62,662 | 85,278 |
| TOTAL | 394,438 | 371,822 | 394,438 |
| Set-off share issue 2017 | |||
| Converted nominal amount | -57,509 | - | - |
| Converted part of issue costs | 4,188 | - | - |
| Converted part of equity portion | 7,362 | - | - |
| Converted part of accrued interest costs | -12,677 | - | - |
| Debt prior this years interest | 335,802 | 371,822 | 394,438 |
| Accrued interes costs 2017 | 21,748 | - | - |
| Total | 357,550 | 371,822 | 394,438 |
Karolinska Development AB has entered into an agreement with a company related to the previous Chairman of the Board, OrfaCare Consulting GmbH, regarding consultations by the Chairman of the Board, Bo Jesper Hansen. The consultancy agreement covers other kind of consultancy services than what follows by his position as Chairman of the company. The agreement was in force from 1 March 2015 until the date of the Company´s Annual General Meeting 2017. The consultancy fee is market based and amounted during the period January – June 2017 to SEK 0.5 million (SEK 0.6 million same period 2016 and SEK 1.3 million for the full year 2016).
For the Parent company a voluntary change of accounting principle regarding investments in portfolio companies (subsidiaries, joint ventures, associated companies and other long-term securities holdings) and other financial assets and liabilities has been made. All investments in shares in portfolio companies are now valuated at fair value through profit or loss in the Parent company as well as in the Investment Entity (previously at the lowest of cost of acquisition and fair value). Comparable numbers are restated, see below.
| SEK000 | Note | 2016 Apr-Jun as previously reported |
Effect of changed principle |
2016 Apr-Jun restated |
2016 Jan-Jun as previously reported |
Effect of changed principle |
2016 Jan-Jun restated |
2016 Full-year as previously reported |
Effect of changed principle |
2016 Full-year restated |
|---|---|---|---|---|---|---|---|---|---|---|
| Dividend | - | - | - | - | 3,333 | 3,333 | ||||
| Net sales | 607 | 607 | 1,215 | 1,215 | 2,027 | 2,027 | ||||
| Revenue | 607 | 607 | 1,215 | 1,215 | 5,360 | 5,360 | ||||
| Other expenses | -3,995 | -3,995 | -7,425 | -7,425 | -15,415 | -15,415 | ||||
| Personal costs Depreciation of tangible |
-2,614 | 1 | -2,613 | -7,555 | -7,555 | -17,344 | -17,344 | |||
| non-current assets Impairment losses on shares in subsidiaries, joint ventures, associated companies and other long-term |
-53 | -53 | -106 | -106 | -106 | -106 | ||||
| securities holdings Result of change in fair value of shares in |
-49,879 | 49,879 | 0 | -124,885 | 124,885 | 0 | -148,440 | 148,440 | 0 | |
| portfolio companies Result from sale of shares in portfolio |
-58,894 | -58,894 | -141,146 | -141,146 | -146,988 | -146,988 | ||||
| companies | 0 | 0 | - | 0 | 444 | 444 | ||||
| Operating profit/loss | -55,934 | -9,014 | -64,948 | -138,756 | -16,261 | -155,017 | -175,501 | 1,452 | -174,049 | |
| Financial net | -10,892 | -1 | -10,893 | -21,564 | 641 | -20,923 | -43,425 | 642 | -42,783 | |
| NET PROFIT/LOSS FOR THE PERIOD |
-66,826 | -9,015 | -75,841 | -160,320 | -15,620 | -175,940 | -218,926 | 2,094 | -216,832 |
| SEK000 | Not | 2016 Apr-Jun as previously reported |
Effect of changed principle |
2016 Apr-Jun restated |
2016 Jan-Jun as previously reported |
Effect of changed principle |
2016 Jan-Jun restated |
2016 Full-year as previously reported |
Effect of changed principle |
2016 Full year restated |
|---|---|---|---|---|---|---|---|---|---|---|
| Net profit/loss for the period |
-66,826 | -9,015 | -75,841 | -160,320 | -15,620 | -175,940 | -218,926 | 2,094 | -216,832 | |
| Total comprehensive income/loss for the period |
-66,826 | -9,015 | -75,841 | -160,320 | -15,620 | -175,940 | -218,926 | 2,094 | -216,832 |
| SEK000 | Note | 2016-06-30 as previously reported |
Effect of changed principle |
2016-06-30 restated |
2016-12-31 as previously reported |
Effect of changed principle |
2016-12-31 restated |
|---|---|---|---|---|---|---|---|
| ASSETS | |||||||
| Tangible assets | |||||||
| Machinary and equipment | - | 0 | - | 0 | |||
| Financial assets Shares in subsidiaries, joint ventures, associated companies and other long term-securities holdings Shares in portfolio companies at fair value |
111,509 | -111,509 | 0 | 107,610 | -107,610 | 0 | |
| through profit or loss | 143,690 | 143,690 | 149,408 | 149,408 | |||
| Loans receivable from portfolio companies | 37,780 | -36,829 | 951 | 28,734 | -27,777 | 957 | |
| Other financial assets | 33,159 | 4,954 | 38,113 | 33,010 | 5,103 | 38,113 | |
| Total non-current assets | 182,448 | 306 | 182,754 | 169,354 | 19,124 | 188,478 | |
| Current assets | |||||||
| Receivables from portfolio companies | 1,287 | 1,287 | 229 | 229 | |||
| Other current receivables | 1,025 | 1,025 | 660 | 660 | |||
| Prepaid expenses and accrued income | 2,299 | -1,687 | 612 | 3,448 | -2,642 | 806 | |
| Short-term investments at fair value through profit or loss |
257,761 | 257,761 | 237,545 | 237,545 | |||
| Cash and cash equivalents | 10,613 | 10,613 | 10,602 | 10,602 | |||
| Total current assets | 272,985 | -1,687 | 271,298 | 252,484 | -2,642 | 249,842 | |
| TOTAL ASSETS | 455,433 | -1,381 | 454,052 | 421,838 | 16,482 | 438,320 | |
| EQUITY AND LIABILITIES Equity Restricted equity |
|||||||
| Share capital | 26,725 | 26,725 | 26,732 | 26,732 | |||
| Unrestricted equity | |||||||
| Share premium reserv | 1,884,310 | 1,884,310 | 1,884,310 | 1,884,310 | |||
| Accumulated losses | -1,677,830 | 13,395 | -1,664,435 | -1,677,789 | 13,394 | -1,664,395 | |
| Net profit/loss for the period | -160,320 | -15,620 | -175,940 | -218,926 | 2,094 | -216,832 | |
| Total equity | 72,885 | -2,225 | 70,660 | 14,327 | 15,488 | 29,815 | |
| Long-term liabilities | |||||||
| Convertible loan | 3 | 371,822 | -1 | 371,821 | 394,438 | 394,438 | |
| Pension obligations | 3,953 | 845 | 4,798 | 3,804 | 994 | 4,798 | |
| Total long-term libilities | 375,775 | 844 | 376,619 | 398,242 | 994 | 399,236 | |
| Curret liabilities | |||||||
| Accounts payable | 974 | 974 | 1,461 | -1 | 1,460 | ||
| Liabilities to portfolio companies | 513 | 513 | - | 0 | |||
| Other current liabilities | 552 | 552 | 959 | 1 | 960 | ||
| Accrued expenses and prepaid income | 4,734 | 4,734 | 6,849 | 6,849 | |||
| Total current liabilities | 6,773 | 0 | 6,773 | 9,269 | 0 | 9,269 | |
| Total liabilities | 382,548 | 844 | 383,392 | 407,511 | 994 | 408,505 | |
| TOTAL EQUITY AND LIABILITIES | 455,433 | -1,381 | 454,052 | 421,838 | 16,482 | 438,320 |
Presentation of effect of change of accounting principle in profit/loss for first quarter 2016 and 2017 for the Parent company.
| SEK 000 | Note | 2017 Jan-Mar as previously reportee |
Effect of changed principle |
2017 Jan-Mar restated |
2016 Jan-Mar as previously reportee |
Effect of changed principle |
2016 Jan-Mar restated |
|---|---|---|---|---|---|---|---|
| Dividend | 0 | 0 | - | 0 | |||
| Other revenue | 616 | 616 | 608 | 608 | |||
| Revenue | 616 | 616 | 608 | 608 | |||
| Other expenses | -2,465 | -1,849 | -3,430 | -3,430 | |||
| Personal costs | -5,712 | -5,712 | -4,941 | -1 | -4,942 | ||
| Depreciation of tangible non current assets Impairment losses on shares in subsidiaries, joint ventures, associated companies and other long-term securities holdings Result of change in fair value of shares in portfolio companies |
0 -6,521 |
6,521 -5,725 |
0 0 -5,725 |
-53 -75,006 |
75,006 -82,252 |
-53 0 -82,252 |
|
| Result from sale of shares in portfolio companies |
0 | 0 | - | 0 | |||
| Operating profit/loss | -14,082 | 796 | -13,286 | -82,822 | -7,247 | -90,069 | |
| Financial net | -11,894 | -9 | -11,903 | -10,672 | 642 | -10,030 | |
| NET PROFIT/LOSS FOR THE PERIOD |
-25,976 | 787 | -25,189 | -93,494 | -6,605 | -100,099 |
| SEK000 | Note | 2017 Jan-Mar as previously reportee |
Effect of changed principle |
2017 Jan-Mar restated |
2016 Jan-Mar as previously reportee |
Effect of changed principle |
2016 Jan-Mar restated |
|---|---|---|---|---|---|---|---|
| Net profit/loss for the period | -25,976 | 787 | -25,189 | -93,494 | -6,605 | -100,099 | |
| Total comprehensive income/loss for the period |
-25,976 | 787 | -25,189 | -93,494 | -6,605 | -100,099 |
| SEK000 | Note | 31 Mar 2017 as previously reportee |
Effect of changed principle |
31 Mar 2017 restated |
31 Mar 2016 as previously reportee |
Effect of changed principle |
31 Mar 2016 restated |
|---|---|---|---|---|---|---|---|
| ASSETS | |||||||
| Tangible assets | |||||||
| Machinary and equipment | 0 | 0 | 53 | 53 | |||
| Financial assets Shares in subsidiaries, joint ventures, associated companies and other long term securities holdings |
|||||||
| Shares in portfolio companies at fair value through profit or loss |
102,257 | 70,371 | 172,628 | 161,388 | 31,764 | 193,152 | |
| Loans receivable from portfolio companies | 55,764 | -54,809 | 955 | 28,732 | -27,809 | 923 | |
| Other financial assets | 29,206 | 8,907 | 38,113 | 33,311 | 4,802 | 38,113 | |
| Total non-current assets | 187,227 | 24,469 | 211,696 | 223,484 | 8,757 | 232,241 | |
| Omsättningstillgångar | |||||||
| Receivables from portfolio companies | 341 | 341 | 1,157 | 1,157 | |||
| Other current receivables | 309 | 309 | 1,614 | 1 | 1,615 | ||
| Prepaid expenses and accrued income | 4,144 | -3,387 | 757 | 2,561 | -1,275 | 1,286 | |
| Short-term investments at fair value through profit or loss | 197,499 | 197,499 | 277,745 | 277,745 | |||
| Cash and cash equivalents | 13,819 | 13,819 | 9,834 | 9,834 | |||
| Total current assets | 216,112 | -3,387 | 212,725 | 292,911 | -1,274 | 291,637 | |
| TOTAL ASSETS | 403,339 | 21,082 | 424,421 | 516,395 | 7,483 | 523,878 | |
| EQUITY AND LIABILITIES Equity Restricted equity |
|||||||
| Share capital | 32,168 | 32,168 | 26,725 | 26,725 | |||
| Unrestricted equity | |||||||
| Share premium reserv | 1,939,212 | 1,939,212 | 1,884,310 | 1,884,310 | |||
| Accumulated losses | -1,898,876 | 15,488 | -1,883,388 | -1,676,062 | 13,394 | -1,662,668 | |
| Net profit/loss for the period | -25,976 | 787 | -25,189 | -93,494 | -6,605 | -100,099 | |
| Total equity | 46,528 | 16,275 | 62,803 | 141,479 | 6,789 | 148,268 | |
| Long-term liabilities Convertible loan |
3 | 346,676 | 346,676 | 360,514 | -1 | 360,513 | |
| Pension obligations | 0 | 0 | 4,106 | -4,106 | 0 | ||
| Other financial liabilities | 0 | 4,807 | 4,807 | 0 | 4,798 | 4,798 | |
| Total long-term liabilities | 346,676 | 4,807 | 351,483 | 364,620 | 691 | 365,311 | |
| Curret liabilities | |||||||
| Accounts payable | 1,542 | 1,542 | 1,232 | 1,232 | |||
| Liabilities to portfolio companies | - | 0 | 513 | 513 | |||
| Other current liabilities | 1,524 | 1,524 | 497 | 1 | 498 | ||
| Accrued expenses and prepaid income | 7,069 | 7,069 | 8,054 | 2 | 8,056 | ||
| Total current liabilities | 10,135 | 0 | 10,135 | 10,296 | 3 | 10,299 | |
| Total liabilities | 356,811 | 4,807 | 361,618 | 374,916 | 694 | 375,610 | |
| TOTAL EQUITY AND LIABILITIES | 403,339 | 21,082 | 424,421 | 516,395 | 7,483 | 523,878 |
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