Earnings Release • Nov 18, 2021
Earnings Release
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Karolinska Development (Nasdaq Stockholm: KDEV) is an investment company which offers a unique opportunity to participate in the growth in value of a number of Nordic life sciences companies with substantial commercial opportunities. All of the portfolio companies are developing potentially groundbreaking treatments for medical conditions with a substantial need for improved therapies, including leukaemia, endometriosis, serious viral infections, sepsis and systemic inflammation, bone defects, and hepatic encephalopathy. To date, two of the companies have launched their first products.
For further information, see www.karolinskadevelopment.com
"The portfolio companies' progress and the positive value development of our holdings increases the potential for securing additional financial resources to support Karolinska Development's development going forward. The latest example of our ability to contribute to value creation is the divestment of Forendo Pharma to the global pharmaceutical company Organon in a deal that could result in up to USD 945 million in proceeds for Forendo Pharma's shareholders".
For further information, please contact:
Viktor Drvota, Chief Executive Officer +46 73 982 52 02 [email protected]
Per Aniansson, Chief Financial Officer CEO +46 70 866 04 29 [email protected]
Several of our portfolio companies have recently made considerable progress in their operations. The most prominent example of value creation is the successful divestment of Forendo Pharma to the global pharmaceutical company Organon in a deal that could result in up to USD 945 million in proceeds for Forendo Pharma's shareholders, which underpins the potential in Karolinska Develoments long-term business strategy.
Karolinska Development handpicks most of its investments from the enormous flow of medical innovations from prestigious universities and research institutions in the Nordic region. We invest in pharmaceutical projects and medicotechnical products with the potential to revolutionise the treatment of diseases with a substantial need for new therapies. We become involved in the projects at an early stage in their progress and are thereby able to take significant ownership shares and ensure that the projects develop in a way that optimises their attractiveness for commercial partners and new investors at a later stage. We have a long investment horizon and add value during every stage of the portfolio companies' development by means of our wide-ranging expertise in company building in general and the development of life science projects in particular. The portfolio companies' maturity levels can, from a purely schematic viewpoint, be divided into three phases: 1) establishment of a new company based on ground-breaking research; 2) development of the project to proof of concept; and 3) stock market flotations or company divestments that enable us to secure a good return on our investment. It is worth noting, in this context, that Karolinska Development often continues its involvement in the companies, long after their flotations.
The composition of our current investment portfolio is good, with portfolio companies in all of these three phases, and I will describe some of the progress made by these companies in their respective categories over and after the past quarter below.
Karolinska Development recently acquired a 21% holding in AnaCardio, an unlisted company which, based on research by the Karolinska Institute, is developing a completely new type of treatment for heart failure. The past quarter saw the recruitment of Patrik Strömberg as AnaCardio's new CEO and of Alan Gordon as its Medical Director. Patrik has extensive experience of drug development, including the past 14 years at Sobi, where he was the VP for External Innovation, and held other roles in business development and preclinical research prior to that. Alan is a cardiologist specialising in heart failure who has worked in San Francisco for nearly 20 years as the Medical Director of a number of pharmaceutical and biotech companies, focusing mainly on cardiovascular indications. The next milestone for AnaCardio is to launch a clinical study with a drug candidate based on the new pharmaceutical concept, which is expected to yield a substantially better safety profile than the current standard treatment.
Svenska Vaccinfabriken is using advanced technology to develop therapeutic vaccines which, unlike those that are simply preventative, also have the potential to cure already infected patients. The company is currently completing development of its first candidate vaccine against hepatitis B and D before moving on to the clinical trials phase. Karolinska Development has a 31% share in the company.
In the light of the positive results of the Dilafor portfolio company's phase 2b study of tafoxiparin, where the candidate drug was shown to increase cervical ripening in first-time mothers, the company is now further
developing the project. Market analyses show that a drug that effectively promotes cervical ripening, and which can thereby reduce the risk of complications during deliveries, has the potential to achieve annual sales in excess of USD 1 billion in the US market alone. The company recently successfully raised SEK 65 million in new capital, divided into two tranches, with SEK 24 million and SEK 2 million coming from Karolinska Development and KDev Investments (which is jointly owned with Rosetta Capital), respectively. Dilafor has initiated a comprehensive programme of business development work with the aim of either floating or selling the company in 2022.
The increasing maturity of our portfolio companies opens up opportunities for stock market flotations that can facilitate the financing of their future value creation and increase exposure for their delivered progress. Two portfolio companies have been floated this year, and at the time of writing, four of our 10 holdings are listed. An additional two companies have, furthermore, announced that they are preparing to enter the public market. Stock market flotations help increase the liquidity of our assets, increasing our opportunities to realise increases in the value of the holdings and thereby, in the longer term, our ability to finance new investments.
Modus Therapeutics, which was listed on the NASDAQ First North Growth Market in July, established a scientific council during the quarter, which will provide absolutely critical support in planning impending clinical studies of their candidate drug, sevuparin, in patients with sepsis/septic shock. The experts engaged – Professors Lennart Lindbom, Eddie Weitzberg, and Mats Wahlgren – are all influential in disciplines of relevance to the development of sevuparin and have valuable contact networks in large parts of both the research community and the global pharmaceutical industry.
In July, the Umecrine Cognition portfolio company carried out a successful directed new share issue of SEK 35.1 million. The aim was to broaden the ownership base ahead of a potential stock market flotation and secure financing of the continued clinical development of the company's candidate drug, golexanolone, which is being developed to offer patients with neurocognitive conditions a completely new type of treatment. Promimic is also preparing for a stock market flotation, and during the past quarter, its partner company, Oncos Surgical, received market clearance in the USA for its BioGrip® Modular Porous Collars product, which has been coated with Promimic's HAnano Surface in order to treat orthopaedic implant loosening and thereby reduce the need for complex revision surgery. OssDsign – another of our portfolio companies focusing on orthopaedics – simultaneously launched its unique synthetic bone graft, OssDsign Catalyst, in the US market.
After the end of the reporting period, our portfolio company Forendo Pharma was acquired by Organon & Co., one of the world's leading pharmaceutical companies in the field of women's health. The transaction is one of the largest ever in the Nordic biotech industry and demonstrates the strength of Karolinska Development's long-term strategy for value creation. We have contributed for many years to Forendo Pharma's successful development of drug candidates that have the potential to improve the lives of millions of women worldwide, efforts that is now proving to result in a very good financial return on invested capital. Forendo's shareholders will receive an initial payment of USD 75 million and are also eligible for contingent earn-out payments totalling USD 870 million. Karolinska Development's total ownership of the company, including indirect ownership through the KCIF Co-Investment Fund, is 9.7 percent.
The portfolio companies' progress and the positive value development of our holdings increases the potential for securing additional financial resources to support Karolinska Development's development
going forward. Our hope, through our ongoing efforts to identify interesting new investment opportunities and to support the companies in their development and the commercialisation of new pharmaceutical and medicotechnical products, is that the lives of millions of patients worldwide will be both enhanced and extended.
Solna, 18 November 2021
Viktor Drvota Chief Executive Officer
Karolinska Development's investments in therapeutic companies are conducted in syndicates with other professional life science investors, normally until proof-of-concept is demonstrated in phase 2 trials, at which point different exit options are evaluated. For medtech companies, the business model is to finance the companies beyond break-even before realizing the investments.
Karolinska Development has a focused portfolio of therapeutic and medtech companies with significant value-generating 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 years, Karolinska Development has optimized the clinical programs of the portfolio companies to reach clinically meaningful value-inflection points. The majority of Karolinska Development's portfolio companies are well-financed for their ongoing development and commercialisation work and are well-positioned to meet decisive value-generating milestones over the next two years. The ongoing pandemic has affected the portfolio companies to varying degrees, but the majority have been able to develop in accordance with previously set timetables.
In addition to its active value creation in nine portfolio companies, Karolinska Development has passive investments in one portfolio company.
Project (First-in class) APR-246
Primary indication MDS
Development phase Phase 3
Holding in company* KDev Investments 6.5%
HealthCap, Consonance Capital, Versant Ventures, Redmile Group, Fidelity Management & Research Co
Origin Karolinska Institutet
More information aprea.com
* Fully-diluted ownership based on current investment plans.
Aprea Therapeutics (Boston, USA and Stockholm, Sweden) develops novel anticancer drugs targeting the tumour suppressor protein, p53. Mutations of the p53 gene occur in around 50% of all human tumours and are associated with poor overall survival. Aprea's candidate drug, eprenetapopt (APR-246), has shown an ability to reactivate mutant p53 protein, inducing programmed cell death in many cancer cells. The company has received a breakthrough therapy and orphan drug designation from the American Food and Drugs Administration, the FDA for eprenetapopt.
The FDA approved an Investigational New Drug (IND) application for APR-548 – a next generation candidate drug being developed for oral administration – during 2020. The company is now initiating a clinical development programme for APR-548 in the treatment of TP53-mutated MDS.
Recently, positive results were reported from a phase 2 study of eprenetapopt in combination with azacitidine as post-transplant maintenance therapy in patients with p53-mutated MDS and acute myeloid leukaemia (AML). The relapse free survival at 1-year post-transplant was 58% and the overall survival was 79% (July 2021).
The FDA has issued a clinical hold for Aprea Therapeutics clinical program. Aprea Therapeutics intends to work in close dialogue with the FDA to clarify and address the agency's concerns in order to resume activity in the clinical trial program as soon as possible.
Aprea has been listed on the NASDAQ Global Select Market in the USA since October 2019.
Eprenetapopt has the potential for use in many different types of cancer as mutations in p53 are found in around 50% of all diagnosed cancers. The lead target indications thus far include blood tumours such as MDS and AML. MDS is an orphan disease and represents a spectrum of hematopoietic stem cell malignancies. Approximately 30-40% of MDS patients progress to AML and mutations in p53 are found in up to 20% of MDS and AML patients, which is associated with poor overall prognosis.
The results from the phase 1 study of APR 548 are expected in the second half of 2021.
Project (First-in-class) Sevuparin
Primary indication Sepsis/Septic shock
Development phase Phase 2
Holding in company* Karolinska Development 38% KDev Investments 17%
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 as a treatment of sepsis/septic shock, a potentially life-threatening condition that is currently lacking efficient pharmaceutical therapies. Patients that are affected by sepsis are exposed to a risk of developing multi-organ failure and – in severe cases – decease. Sevuparin is a polysaccharide drug candidate with a multimodal mechanism of action, including anti-inflammatory, anti-adhesive and anti-aggregate effects. It acts by interfering with the harmful agents generated by white blood cells during systemic inflammation. This interference could potentially break the molecular chain of events that lead to vascular damage and plasma leakage in patients with sepsis/septic shock and other systemic inflammatory manifestations. Data from pre-clinical animal as well as in vitro human cell models has revealed that sevuparin was able to protect blood vessels and counteract lung plasma leakage during systemic inflammation.
Previous clinical trials in other patient groups have shown that sevuparin is well tolerated and has a favourable safety profile. In March 2021, Modus Therapeutics announced its intention to initiate a clinical development program in sepsis/septic shock. Sevuparin is believed to have a beneficial effect on the severe systemic inflammation that characterizes this condition. The company intends to finance the development within the new indication through a rights issue in connection with the listing at the Nasdaq First North Growth Market. Modus also continues to collaborate with academic partners to identify additional indications where sevuparin has potential to create substantial therapeutic value.
Septic shock is a leading cause of death in intensive care units, with mortality rates typically exceeding 30 percent. There is currently no specific pharmaceutical treatment available for the treatment of sepsis. As a result, it is one of the costliest conditions to treat in the hospital care setting. In 2019, US in-patient care costs for patients with sepsis was estimated to USD 23 billion. Sepsis/septic shock is triggered by an infection and causes the same form of severe uncontrolled inflammation that can occur in conjunction with extensive surgery, trauma, burns and autoimmunity.
Project (First-in-class) Tafoxiparin
Primary indication Labor induction
Development phase Phase 2b
Holding in company* Karolinska Development 1% KDev Investments 30%
Other investors The Foundation for Baltic and East European Studies, Opocrin, Praktikerinvest, Rosetta Capital, Lee's Pharmaceutical
Origin Karolinska Institutet
More information dilafor.com
* Fully-diluted ownership based on current investment plans.
USD 397 million Velo Bio (seller) & AMAG Pharmaceuticals (buyer) 2018
USD 465 million Palatin Technologies (licensor) & AMAG Pharmaceuticals (licensee) 2017
Dilafor (Solna, Sweden) is developing tafoxiparin for obstetric indications, with particular reference to protracted labor and associated complications.
About one quarter of all pregnant women undergo induction in labor. In just over half of all cases, the induction fails, leading to protracted labor that entails an increased risk for both mother and child due to medical complications. Between 25 and 40% of women who experience protracted labor eventually require an emergency caesarean section. Surgical intervention always entails not only a risk to the patient, but substantial health care costs. Tafoxiparin could eliminate patient suffering and save valuable health care resources.
Subcutaneous administration of tafoxiparin in an earlier phase 2a study showed a significantly positive effect with a shortened time to delivery and an enhanced ripening of the cervix in patients delivered after induction. A soft and ripe cervix is a prerequisite of successful labor induction.
Approximately one quarter of all pregnant women require labor induction. The current standard treatment includes administration of prostaglandins and oxytocin, but in over 50% of cases, the induction fails, leading to protracted labour, emergency caesarean sections, or other maternal and foetal complications.
Continued phase 2b study with lower dosage according to plan.
Project (First-in-class) GR3027
Primary indications Hepatic encephalopathy Idiopathic hypersomnia
Development phase Phase 2a
Holding in company* Karolinska Development 70%
Other investors Norrlandsfonden, Fort Knox Förvaring AB, PartnerInvest
Origin Umeå University
More information umecrinecognition.com
* Fully-diluted ownership based on current investment plans.
Umecrine Cognition (Solna, Sweden) is developing golexanolone (GR3207) – a candidate drug in a new class of pharmaceuticals that affect the GABA system. An over-activation of the inhibitory GABA system in the CNS is suspected in conjunction with liver failure, causing very serious clinical symptoms. The overactivation is also thought to lay behind certain cognitive impairments and sleep disturbances. GABAreceptor modulating steroid antagonists, such as golexanolone, counter the increased activation of the GABA system and hence constitute a promising group of candidate drugs.
Golexanolone GR3027 has been shown to restore different types of neurological impairments in experimental models. The candidate drug enters the brain and works by reversing the inhibitory effects of the neurosteroid allopregnanolone on brain function in humans.
A clinical phase 2a study of golexanolone in patients with hepatic encephalopathy (HE) – a serious neuropsychiatric and neurocognitive condition that occurs in conjunction with acute and chronic hepatic damage with underlying cirrhosis – was conducted during the last year. The results showed that the candidate drug was well-tolerated, that the safety profile was good, and that the pharmacokinetic profile was favourable. One of the effect parameters – a well-established and sensitive form of EEG study – demonstrates that the candidate drug has a significant effect on brain signalling, with a correlated positive effect on extreme daytime fatigue. There was no significant effect, however, on other secondary outcome measures. In December, the company announced that, based on these study results, it had established a plan for the further development of the candidate drug.
HE is a serious disease with a large unmet need that affects up to 1% of the population in the USA and EU. 180,000-290,000 patients are hospitalised every year in the USA due to complications of HE. Once HE develops, mortality reaches 22-35% after five years. HE is also associated with substantial societal costs.
Planned listing in Q4 2021.
Project (First-in-class) FOR-6219
Primary indication Endometriosis
Development phase Phase 1b
Holding in company* Karolinska Development 9.7%**
Other investors Novo Seeds, Novartis Venture Fund, Merck Ventures, Vesalius Biocapital, Innovestor, Novartis
Origin University of Turku, Finland
More information forendo.com
* Fully-diluted ownership based on current investment plans
** Includes indirect holdings through KCIF Co-Investment Fund
Forendo Pharma (Turku and Oulu, Finland) is developing a new treatment for eliminating endometriosis while at the same time maintaining normal hormonal cycles. The company is also active in the field of hepatic disease.
Endometriosis is an oestrogen dependent disease that affects women in reproductive age and is caused by cells normally lining the uterus being present outside of the uterine cavity, which induces chronic inflammation in the surrounding tissue. The disease is manifested in many diverse ways and it often causes particularly painful menstruations and chronic pelvic pain. The existing drug therapies ameliorate the symptoms by supressing oestrogen synthesis, but one clear disadvantage of these types of treatment is that they disrupt the systemic oestrogen balance, giving rise to osteoporosis and other serious side effects that hinder their longterm usage.
Forendo Pharma's candidate drug, FOR-6219, inhibits the HSD17B1 enzyme – a previously unresearched but powerful drug target for tissue-specific regulation of hormone activity. Forendo has demonstrated proof of mechanism in preclinical models in which the candidate drug has been shown to block the local formation of oestrogen in the endometrium (the uterus' surface tissue). This may enable a regression of the endometriosis and relief in the associated inflammatory pain without impacting systemic oestrogen levels. Forendo announced in March 2021 the successfully completed phase 1 program for FOR-6219 – a candidate drug aimed for the treatment of endometriosis. Based on the positive results generated in this program, Forendo Pharma is now preparing a phase 2 study in the US.
It is estimated that 10% of all fertile women are affected by endometriosis. This corresponds to a total of 176 million women in the world. Endometriosis has a detrimental effect on the well-being of the women affected and the socio-economic burden of the disease from e.g. sick leaves is profound due to the lack of safe and effective treatment. Forendo's approach to treat endometriosis therefore has a high potential to substantially impact future treatment regimens.
Project OSSDSIGN® Cranial and OSSDSIGN® Facial
Primary indication Cranial implants
Development phase Marketed
Holding in company* Karolinska Development 10%**
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 innovative company that designs and manufactures 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. The company is commercialising its cranial implant in the USA and is currently preparing commercial activities in Japan after the approval of the company's OSSDSIGN® Cranial PSI product. OssDsign acquired Sirakoss Ltd, a company operating in the field of bone graft substitutes. This strategic acquisition means a fivefold increase in the company's addressable market.
During the year, the company worked intensively to increase sales. The US subsidiary has been actively working since 2019 on strengthening the company's position in the USA through long-term, sound customer relationships. A recent patent application from the US Patent Office further enhances OssDsign's potential for future growth in the USA.
OssDsign's clinically proven bone regeneration technology has better healing properties than similar products. The company uses cutting edge 3D printing, moulding, and regenerative medicine technology to customise solutions for individual patients. The result is a patient-specific, titanium-reinforced implant made from a ceramic material with regenerative properties that accelerates the natural tissue formation and enables permanent healing of a bone defects. The regenerative effect of the ceramic material helps ensure a shorter healing process and entails both reduced suffering for the patient and cost savings for hospitals.
OssDsign focuses on the market for craniomaxillofacial (CMF) implants. The total market size was estimated to USD 1.8 billion in 2016 and is expected to grow at an CAGR of 5-9% worldwide over the next five years. The market for OssDsign's lead product in cranioplasty alone is estimated to approximately USD 200 million. OssDsign's products target a well-defined patient population – the relevant type of operation is performed at a limited – and easily identifiable – number of hospitals worldwide. The price sensitivity is low, and the products are relatively easy to register in multiple markets.
Financing for continued roll-out of the product internationally and market introduction of the Sirakoss product.
Project HAnano Surface
Primary indication Implant surface coatings
Development phase Marketed
Holding in company* KDev Investments 20%
Other investors K-Svets Ventures, ALMI Invest, 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.
HAnano Surface is a sustainable, nanometre-thin coating that helps preserve the surface structure of the implant by reducing the risks of cracking. The coating is unique because it can be applied to any implant geometry and material, including porous materials and 3D structures. The technology on which HAnano is based is FDA-approved, which means that a new implant coated with HAnano Surface can receive marketing approval through the 510(k) route and reach a new market quickly. The coating process is easy to implement in the industrial scale production of implants.
Promimic has an established sales operation in the USA and a series of development and commercial partnerships, including one with Sistema de Implante Nacional (S.I.N), a leading provider of dental implants in Brazil, which is commercialising dental implants coated with HAnano Surface, and one with Danco Anodizing, which has established a manufacturing facility for implants with HAnano Surface, targeting the US and Chinese markets. Promimic strengthened its position in the orthopaedic market in 2019 and 2020 by entering into partnerships with Onkos Surgical and INNOVASIS Inc. The partnership with Onkos Surgical includes the development and commercialisation of products treated with the HAnano Surface technology for limb salvage surgery. INNOVASIS Inc. manufactures and sells 3D-printed spinal implants treated with HAnano Surface® in order to improve osseointegration and stimulate new bone formation and bone growth on the implant surface.
Promimic is focusing on the markets for dental and orthopaedic implants, which collectively represent a worldwide market opportunity of USD 600 - 800 million. The competition amongst implant manufacturers is fierce and each market segment is dominated by four to eight global companies. Promimic's business model is centred on out-licensing the HAnano Surface technology to leading implant manufacturers.
Project (First-in-class)
SVF-001 Primary indication Hepatit B och D SARS-CoV-2 and other Corona virus
Development phase Preclinical
Holding in company* Karolinska Development 31%
Origin Karolinska Institutet
More information
svenskavaccinfabriken.se
*Fully-diluted ownership based on current investment plans
Svenska Vaccinfabriken Produktion AB ("SVF") develops therapeutic proteins and DNA vaccines against hepatitis B and hepatitis D, as well as vaccines to prevent infections by SARS-CoV-2 and potential future Coronaviruses. Therapeutic vaccines, unlike preventative vaccines, have the potential to cure already infected patients.
Despite the availability of preventative vaccines and antiviral treatments, over 250 million people live with a chronic hepatitis B infection. One million chronic carriers die each year due to complications caused by the virus, such as liver cirrhosis and liver cancer. The closely related hepatitis D virus infects 15-25 million hepatitis B carriers and exacerbates the progression of the disease.
Svenska Vaccinfabriken is using an in-house developed vaccine platform to produce a specific form of antibodies that blocks the ability of the hepatitis virus to invade human cells. The company has generated promising efficacy data in a preclinical animal model and is now continuing its preclinical development with the goal of enabling a phase 1 study to be initiated in 2022/2023.
Although Coronavirus infections are usually mild, some virus types can lead to life-threatening conditions. This has been the case in the outbreaks of SARS-CoV in 2003, MERS-CoV in 2012, and during the ongoing Covid-19 pandemic. SVF has also developed a platform to address and prevent severe infections of this kind and which is expected to afford the potential for quickly developing and producing vaccines against both existing and new forms of Coronaviruses. The company submitted a patent application specifically linked to a potential Covid-19 vaccine during the year.
Svenska Vaccinfabriken is currently focusing its innovative vaccine platform on the market for therapeutic vaccines for hepatitis B and D, and preventative vaccines for respiratory viral diseases, such as Covid-19. The 2017 KuicK research report, "Global Hepatitis Drug Market & Clinical Trials Insight 2023" estimated the value of the annual global market for hepatitis B at between USD 4 and 5 billion, growing to USD 5-6 billion by 2023. The annual global market for hepatitis D, by contrast, is estimated at around USD 1 billion. There is substantial competition between vaccine developers, who comprise both smaller biotech companies and international pharmaceutical companies. Svenska Vaccinfabriken's business model is based on guiding their vaccine projects to the clinical development phase and then licensing them out global pharmaceutical companies with established distribution networks. Investors' interest in early vaccine companies and platforms similar to Svenska Vaccinfabriken's has increased markedly in recent years. This is thought to be due to an increased awareness of the potential for the commercialisation of vaccines based on next generation technology, such as RNA vaccines and DNA vaccines. Interest in therapies to treat hepatitis B and D has further intensified – two areas in which the unmet medical need is still significant.
Project (First-in-class) Peptid
Primary indication Heart failure
Development phase Phase 2a
Holding in company' Karolinska Development 21%
Origin Karolinska Institutet Karolinska universitetssjukhuset
*Fully-diluted ownership based on current investment plans
AnaCardio (Stockholm, Sweden) is developing a new form of peptide drug that protects cardiac tissue in conjunction with heart failure.
Heart failure occurs when the heart's ability to pump sufficient blood to meet the body's needs has deteriorated. The underlying condition often involves a weakening of the heart's musculature, resulting in an inability to pump the blood out of the heart's chambers. The condition arises as a sequela of previous cardiovascular complications, such as high blood pressure or vasoconstriction. Chronic heart failure often presents with diffuse symptoms, such as tiredness or breathlessness, and delayed diagnosis is consequently a common problem. Acute heart failure results in an individual's health status becoming critical, necessitating hospitalisation. One of the major issues with existing pharmaceuticals is that they are not designed for long-term treatment, due to a degree of toxicity that results in the breakdown of cardiac tissue and consequent side effects, such as arrythmia, low blood pressure, ischemia, and an increased risk of premature mortality.
AnaCardio's clinical candidate drug is being developed to restore the heart's normal muscular function and blood circulation, without causing tissue breakdown. The candidate drug works by increasing the cardiac muscle's sensitivity to calcium – one of the most important signal molecules in normal muscular functioning. 30 heart failure patients were treated with an infusion of AnaCardio's candidate drug as part of an earlier clinical phase 2a study whose results showed a robust safety profile and a favourable pharmacological effect on cardiac function. The company is now preparing a clinical phase 2a study of a peroral treatment in order to increase the candidate drug's user-friendliness and, hence, its commercial potential.
Heart failure is a global disease with a substantial unmet medical need for safe, effective drugs. Cardiovascular diseases are becoming more widespread as a result of the sedentary lifestyle and growing problems with obesity that are following in the wake of increasing global affluence. An estimated 20 million people suffer from chronic heart failure and around 3 million people are hospitalised to treat it every year. The risk of developing cardiovascular disease increases with age, and 10-20% of the elderly population is now estimated to suffer from chronic heart failure, which is now the most common reason for hospitalisation amongst the elderly. Heart failure not only causes considerable individual suffering, it also has significant economic consequences for society in the form both of direct costs from in-patient care and of indirect costs in the form of productivity losses and reductions in tax revenues. The increased medical need is reflected in the sales value of heart failure treatments, which is expected to increase from USD 3.8 billion to USD 16.1 billion by 2026 in the world's seven largest pharmaceutical markets.
In the coming quarters, the company's clinical program is expected to be established.
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 are 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
Amounts with brackets refer to the corresponding period previous year unless otherwise stated.
| SEKm | 2021 | 2020 | 2021 | 2020 | 2020 |
|---|---|---|---|---|---|
| Jul-Sep | Jul-Sep | Jan-Sep | Jan-Sep | Full-year | |
| Condensed income statement | |||||
| Change in fair value of shares in portfolio | |||||
| companies | 27.5 | -173.9 | 240.0 | -289.2 | -215.4 |
| Net profit/loss | -1.2 | -169.4 | 190.3 | -293.4 | -207.5 |
| Balance sheet information | |||||
| Cash and cash equivalents | 45.3 | 71.1 | 45.3 | 71.1 | 75.9 |
| Net asset value (Note 1) | 995.2 | 718.9 | 995.2 | 718.9 | 805.8 |
| Net debt (Note 1) | -77.3 | -3.3 | -77.3 | -3.3 | 0.0 |
| Share information | |||||
| Earnings per share, weighted average | |||||
| before dilution (SEK) | 0.0 | -1.0 | 1.1 | -1.7 | -1.2 |
| Earnings per share, weighted average after dilution (SEK) |
0.0 | -1.0 | 1.1 | -1.7 | -1.2 |
| Net asset value per share (SEK) (Note 1) | 5.7 | 4.1 | 5.7 | 4.1 | 4.6 |
| Equity per share (SEK) (Note 1) | 5.6 | 4.1 | 5.6 | 4.1 | 4.6 |
| Share price, last trading day in the | |||||
| reporting period (SEK) | 3.7 | 2.7 | 3.7 | 2.7 | 1.8 |
| Portfolio information | |||||
| Investments in portfolio companies | 21.1 | 4.0 | 69.2 | 19.3 | 40.0 |
| Of which investments not affecting cash flow | 5.6 | 0.1 | 16.4 | 0.7 | 0.9 |
| Portfolio companies at fair value through | |||||
| profit or loss | 1,075.5 | 675.8 | 1,075.5 | 675.8 | 770.3 |
Investments in the portfolio in the third quarter 2021 by external investors and Karolinska Development together amounted to SEK 106.1 (29.1) million, whereof 80% (86%) by external investors.
Karolinska Development invested during the third quarter SEK 21.1 (4.0) million, of which SEK 15.5 (3.9) million was cash investments. Investments were made in Dilafor SEK 12.9 million, Modus Therapeutics SEK 2.6 million and Umecrine Cognition SEK 5.6 million (accrued interest on loans). Non-cash investments (accrued interest on loans) amounted to SEK 5.6 (0.1) million.
Investments by external investors in the portfolio companies during the third quarter amounted to SEK 85.0 (25.1) million and were made in Dilafor SEK 19.5 million, Modus Therapeutics SEK 30.4 million and Umecrine Cognition SEK 35.0 million.
During the year, Karolinska Development and external investors have made investments in the portfolio companies as follows:
| SEKm | Karolinska Development |
External Investors | Total Invested Q1-Q3 2021 |
|---|---|---|---|
| OssDsign | 28.4 | 242.2 | 270.5 |
| Dilafor | 15.8 | 25.7 | 41.5 |
| Modus Therapeutics | 12.6 | 30.4 | 43.0 |
| Umecrine Cognition | 6.4 | 35.0 | 41.4 |
| AnaCardio | 3.0 | 3.0 | 6.0 |
| Svenska Vaccinfabriken Produktion | 3.0 | 0.0 | 3.0 |
| Biosergen | 0.0 | 50.0 | 50.0 |
| Total | 69.2 | 386.3 | 455.5 |
Fair Value of the portfolio companies owned directly by Karolinska Development increased by SEK 47.5 million during the third quarter 2021. The main reasons for the increase in Fair value of the portfolio companies were the increase in Fair Value of Forendo Pharma which was confirmed in the acquisition agreement by Organon in November 2021 and through the investments by Karolinska Development's investments in Dilafor and Modus Therapeutics. The Fair Value decreased due to the downturn in share price in the listed holdings Modus Therapeutics and OssDsign. Fair Value also decreased due to the dilution as an effect of the directed new share issue conducted in Umecrine Cognition in July 2021 and through the sale of Lipidor.
Fair Value of the portfolio companies owned indirectly via KDev Investments decreased by SEK 4.4 million during the third quarter 2021.The main reasons for the decrease in Fair value of the portfolio companies was the downturn in share price in the listed holding Modus Therapeutics but also through the partial sale of shares in Aprea Therapeutics.
Total Fair Value from portfolio companies owned directly by Karolinska Development and indirectly via KDev Investments increased by SEK 43.0 million in the third quarter 2021.
As a consequence of the decrease in Fair Value of the part of the portfolio owned via KDev Investments, the potential distribution to Rosetta Capital decreased by SEK 1.6 million, resulting in Net Portfolio Fair Value increasing by SEK 44.6 million in the third quarter 2021.
| SEKm | 30 Sep 2021 | 30 Jun 2021 | Q3 2021 vs Q2 2021 |
|---|---|---|---|
| Karolinska Development Portfolio Fair Value (unlisted companies) | 760.1 | 731.8 | 28.3 |
| Karolinska Development Portfolio Fair Value (listed companies) | 74.6 | 55.4 | 19.2 |
| KDev Investments Portfolio Fair Value | 606.0 | 610.4 | -4.4 |
| Total Portfolio Fair Value | 1,440.6 | 1,397.5 | 43.0 |
| Potential distribution to Rosetta Capital of fair value of KDev Investments |
-365.1 | -366.7 | 1.6 |
| Net Portfolio Fair Value (after potential distribution to Rosetta Capital) | 1,075.5 | 1,030.8 | 44.6 |
During the third quarter 2021, Karolinska Development's revenue amounted to SEK 0.5 (0.4) million and consists primarily of services provided to portfolio companies.
Change in fair value of shares in portfolio companies of in total SEK 27.5 (-173.9) million includes the difference between the change in Net Portfolio Fair Value during the third quarter 2021 with SEK 44.6 million and the net of investments in the portfolio companies of SEK 21.1 million and divestments of portfolio companies of SEK 3.9 million. Change in fair value of other financial assets and liabilities amounted to SEK -25.6 (14.5) million and are the consequence of changes in valuation of earn-out deals. For the period January - September 2021, the change in fair value of shares in portfolio companies amounted to SEK 240.0 (-289.2) million and the change in fair value of other financial assets amounted to SEK -40.8 (23.8) million.
During the third quarter 2021 other expenses amounted to SEK 2.2 (1.1) million and personnel costs amounted to SEK 5.5 (7.8) million. The main reason for the decrease in personnel costs compared to the third quarter 2020 is the outcome of bonus scheme related to exit of portfolio companies. For the period January – September 2021 other expenses amounted to SEK 5.6 (6.4) million and personnel cost amounted to 16.5 (19.3) million.
The operating profit/loss in the third quarter 2021 amounted to SEK -5.3 million compared to SEK -168.0 million in the third quarter 2020. The operating profit/loss for the period January - September 2021 amounted to 178.2 (-289.6) million.
Financial net improved during the third quarter 2021 compared to the third quarter 2021 due an adjusted interest income from portfolio company Umecrine Cognition of SEK 5.6 million. The financial net during the third quarter amounted to SEK 4.1 (-1.3) million. For the period January - September 2021 the financial net amounted to SEK 12.1 (-3.8) million.
The Investment Entity's Net profit/loss amounted to SEK -1.2 (-169.4) million in the third quarter 2021. Net profit/loss for the period January - September 2021 amounted to SEK 190.3 (-293.4) million.
The Investment Entity's equity to total assets ratio amounted to 88% on 30 September 2021, compared to 87% on 30 September 2020.
The net profit/loss of SEK -1.2 million for the third quarter resulted in the equity on 30 September 2021 decreasing to SEK 990.6 million compared to SEK 991.8 million on 30 June 2021.
Interest-bearing liabilities consisted of bridge loans including accrued interest amounting to SEK 122.6 million on 30 September 2021, after the credit facility of SEK 42.5 million has been utilized (which matures on 31 December 2022 together with 5% interest due at the same time), compared to SEK 73,0 million on 30 September 2020.
After paying operational costs and investments for the third quarter 2021, cash and cash equivalents amounted to SEK 45.3 million on 30 September 2021 compared to SEK 71.1 million on 30 September 2021. Net debt amounted to SEK 77.3 million on 30 September 2021 compared to SEK 3.3 million on 30 September 2020.
The company is going concern. The company's ability to continue operations (going concern) was strengthened not only with the credit facility that the company has with its main owner invoX Pharma of EUR 8.5 million but also with the expected initial payments from the sale of Forendo Pharma that will be paid out after the transaction is closed. The date for closing of the transaction is expected to take place during December 2021 or in the early part of 2022.
The Parent Company refers to Karolinska Development AB (comparable numbers 2020).
During the third quarter 2021, the Parent Company's Net profit/loss amounted to SEK -1.2 (169.4) million. Net profit/loss for the period January - September 2021 amounted to SEK 190.3 (-293.4) million.
Due to the negative result for the third quarter 2021, the equity decreased from SEK 991.8 million as of 30 June 2021 to SEK 990.6 million 30 September 2021.
Trade in the Karolinska Development share takes place on Nasdaq Stockholm under the ticker symbol "KDEV". The last price paid for the listed B share on 30 September 2021 was SEK 3.7, and the market capitalization amounted to SEK 657 million.
The share capital of Karolinska Development on 30 September 2021 amounted to SEK 1.8 million divided into 1,503,098 A shares, each with ten votes (15,030,980 votes) and 174,162,311 B shares, each with one vote (174,162,311 votes). The total number of shares and votes in Karolinska Development on 30 September 2021 amounted to 175,665,409 shares and 189,193,291 votes.
On September 30, 2021, Karolinska Development had 11,342 shareholders.
| Shareholder | A-Shares | B-Shares | Cap % | Vote % |
|---|---|---|---|---|
| invoX Pharma Ltd1 | 0 | 75,727,285 | 43.11% | 40.03% |
| Worldwide International Investments Ltd | 0 | 32,276,620 | 18.37% | 17.06% |
| Stift För Främjande & Utveckling | 1,503,098 | 2,641,389 | 2.36% | 9.34% |
| Östersjöstiftelsen | 0 | 3,889,166 | 2.21% | 2.06% |
| Coastal Investment Management LLC | 0 | 2,470,541 | 1.41% | 1.31% |
| Adis Holding AB | 0 | 700,000 | 0.40% | 0.37% |
| Gålöstiftelsen | 0 | 668,661 | 0.38% | 0.35% |
| Zhang, Qiuyue | 0 | 654,000 | 0.37% | 0.35% |
| Karolinska Institutet Holding AB | 0 | 525,000 | 0.30% | 0.28% |
| Synskadades riksförbund | 0 | 494,939 | 0.28% | 0.26% |
| Sum Top 10 Shareholders | 1,503,098 | 120,047,601 | 69.19% | 71.40% |
| Sum Other Shareholders | 0 | 54,114,710 | 30.81% | 28.60% |
| Sum All Shareholders | 1,503,098 | 174,162,311 | 100.00% | 100.00% |
1On October 4, 2021, Sino Biopharmaceutical transferred its holding in Karolinska Development to the wholly owned subsidiary invoX Pharma Ltd
Coronavirus's global spread affects the economy and society as a whole, including Karolinska Development and its portfolio companies. The value of listed companies can decline, delays in clinical trial programs may occur and that the opportunities for refinancing can be hampered. The Board monitors the evolvement of the crisis closely and Karolinska Development is working intensively to minimize the impact on the value of our investments and continues with different financing alternatives to secure the long-term capital requirement and thereby increase the degree of strategic and operational headroom for the future. The short-term financial risk has decreased with the credit facility of EUR 8.5 million secured and the expected initial payments for the sale of Forendo Pharma after the transaction is closed.
For a detailed description of other risks and uncertainties, see the Annual report 2020.
Solna, 18 November 2021
Viktor Drvota CEO
Karolinska Development AB, corporate identity number 556707-5048
We have reviewed the condensed interim report for Karolinska Development AB, the Investment Entity, as at September 30, 2021 and for the nine months period then ended. The Board of Directors and the Managing Director are responsible for the preparation and presentation of this interim report in accordance with IAS 34 and the Swedish Annual Accounts Act. Our responsibility is to express a conclusion on this interim report based on our review.
We conducted our review in accordance with the International Standard on Review Engagements, ISRE 2410 Review of Interim Financial Statements Performed by the Independent Auditor of the Entity. A review consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and other generally accepted auditing standards in Sweden. The procedures performed in a review do not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Based on our review, nothing has come to our attention that causes us to believe that the interim report is not prepared, in all material respects, in accordance with IAS 34 and the Swedish Annual Accounts Act regarding the Investment Entity, and in accordance with the Swedish Annual Accounts Act regarding the Parent Company.
Solna, 18 November 2021
Ernst & Young AB
Oskar Wall
Authorized Public Accountant
| Year-end report January – December 2021 | 11 February 2022 |
|---|---|
| Annual Report 2021 | 25 March 2022 |
| Interim Report January – March 2022 | 29 April 2022 |
| Annual meeting 2022 | 12 May 2022 |
| Interim Report January – June 2022 | 19 August 2022 |
| Interim Report January – September 2022 | 18 November 2022 |
Karolinska Development is required by law to publish the information in this interim report. The information was published on 18 November 2021.
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 official Swedish version shall prevail.
| SEK 000 | Note | 2021 Jul-Sep |
2020 Jul-Sep |
2021 Jan-Sep |
2020 Jan-Sep |
2020 Full-year |
|---|---|---|---|---|---|---|
| Revenue | 497 | 430 | 1,701 | 2,123 | 2,651 | |
| Change in fair value of shares in portfolio companies |
2,3 | 27,548 | -173,868 | 239,973 | -289,210 | -215,378 |
| Change in fair value of other financial assets and liabilities |
-25,567 | 14,499 | -40,845 | 23,757 | 43,077 | |
| Other expenses | -2,179 | -1,133 | -5,596 | -6,427 | -8,466 | |
| Personnel costs | -5,448 | -7,768 | -16,519 | -19,354 | -23,620 | |
| Depreciation of right-of use assets |
-172 | -176 | -517 | -528 | -690 | |
| Operating profit/loss | -5,321 | -168,016 | 178,197 | -289,639 | -202,426 | |
| Financial net | 4,126 | -1,346 | 12,116 | -3,767 | -5,061 | |
| Profit/loss before tax | -1,195 | -169,362 | 190,313 | -293,406 | -207,487 | |
| Taxes | - | - | - | - | - | |
| NET PROFIT/LOSS FOR THE PERIOD |
-1,195 | -169,362 | 190,313 | -293,406 | -207,487 |
| SEK 000 | Note | 2021 Jul-Sep |
2020 Jul-Sep |
2021 Jan-Sep |
2020 Jan-Sep |
2020 Full-year |
|---|---|---|---|---|---|---|
| Net profit/loss for the period |
-1,195 | -169,362 | 190,313 | -293,406 | -207,487 | |
| Total comprehensive income/loss for the period |
-1,195 | -169,362 | 190,313 | -293,406 | -207,487 |
| SEK | Note | 2021 Jul-Sep |
2020 Jul-Sep |
2021 Jan-Sep |
2020 Jan-Sep |
2020 Full-year |
|---|---|---|---|---|---|---|
| Earnings per share, weighted average before dilution Number of shares, |
-0.01 | -0.97 | 1.08 | -1.67 | -1.18 | |
| weighted average before dilution Earnings per share, |
175,421,124 175,421,124 175,421,124 175,421,124 175,421,124 | |||||
| weighted average after dilution Number of shares, weighted average after |
-0.01 | -0.97 | 1.08 | -1.67 | -1.18 | |
| dilution | 175,421,124 175,421,124 175,421,124 175,421,124 175,421,124 |
| SEK 000 | Note | 30 Sep 2021 | 30 Sep 2020 | 31 Dec 2020 |
|---|---|---|---|---|
| ASSETS | ||||
| Tangible assets | ||||
| Right-of-use assets | 862 | 858 | 690 | |
| Financial assets | ||||
| Shares in portfolio companies at fair value through profit or loss |
2,3 | 1,075,495 | 675,825 | 770,320 |
| Loans receivable from portfolio companies | - | 1,779 | - | |
| Total non-current assets | 1,076,357 | 678,462 | 771,010 | |
| Current assets | ||||
| Accounts receivable | - | 31 | 3 | |
| Receivables from group company | - | - | 80 | |
| Receivables from portfolio companies | 2,510 | 1,866 | 243 | |
| Other financial assets | 722 | 64,774 | 41,181 | |
| Other current receivables | 1,224 | 1,224 | 768 | |
| Prepaid expenses and accrued income | 895 | 700 | 929 | |
| Cash and cash equivalents | 45,320 | 71,098 | 75,869 | |
| Total current assets | 50,671 | 139,693 | 119,073 | |
| TOTAL ASSETS | 1,127,028 | 818,155 | 890,083 | |
| EQUITY AND LIABILITIES | ||||
| Total equity | 990,601 | 714,337 | 800,267 | |
| Long-term liabilities | ||||
| Long-term liabilities to related parties | 4 | 122,611 | 74,433 | - |
| Total long-term liabilities | 122,611 | 74,433 | 0 | |
| Current liabilities | ||||
| Current interest liabilities to related parties | 4 | - | - | 75,864 |
| Other financial liabilities | 3,742 | 20,155 | 5,726 | |
| Accounts payable | 690 | 685 | 617 | |
| Liability to make lease payment | 880 | 898 | 711 | |
| Other current liabilities | 1,343 | 1,538 | 1,373 | |
| Accrued expenses and prepaid income | 7,161 | 6,109 | 5,525 | |
| Total current liabilities | 13,816 | 29,385 | 89,816 | |
| Total liabilities | 136,427 | 103,818 | 89,816 | |
| TOTAL EQUITY AND LIABILITIES | 1,127,028 | 818,155 | 890,083 |
| SEK 000 | Not | 2021-09-30 | 2020-09-30 | 2020-12-31 |
|---|---|---|---|---|
| Opening balance, equity | 800,267 | 1,007,732 | 1,007,732 | |
| Net profit/ loss for the period | 190,313 | -293,406 | -207,487 | |
| Closing balance, equity | 990,601 | 714,337 | 800,267 |
| SEK 000 Note |
2021 Jan-Sep |
2020 Jan-Sep |
|---|---|---|
| Operating activities | ||
| Operating profit/loss | 178,197 | -289,639 |
| Adjustments for items not affecting cash flow | ||
| Depreciation | 517 | 528 |
| Change in fair value | -199,128 | 265,453 |
| Other items | - | -536 |
| Cash flow from operating activities before changes in working capital and operating investments |
-20,414 | -24,194 |
| Cash flow from changes in working capital | ||
| Increase (-)/Decrease (+) in operating receivables | -2,590 | -1,949 |
| Increase (+)/Decrease (-) in operating liabilities | 44,179 | -33,063 |
| Cash flow from operating activities | 21,175 | -59,206 |
| Investment activities | ||
| Part payment from earn-out deal | -2,370 | -5,092 |
| Proceeds from sale of shares in portfolio companies | 3,941 | 101,853 |
| Acquisitions of shares in portfolio companies | -52,759 | -18,590 |
| Cash flow from investment activities | -51,188 | 78,171 |
| Financing activities | ||
| Amortization of lease liabilities | -536 | - |
| Cash flow from financing activities | -536 | 0 |
| Cash flow for the period | -30,549 | 18,966 |
| Cash and cash equivalents at the beginning of the year | 75,869 | 52,132 |
| CASH AND CASH EQUIVALENTS AT THE END OF | ||
| THE PERIOD | 45,320 | 71,098 |
| SEK 000 | Note | 2021 Jul-Sep |
2020 Jul-Sep |
2021 Jan-Sep |
2020 Jan-Sep |
2020 Full-year |
|---|---|---|---|---|---|---|
| Revenue | 497 | 430 | 1,701 | 2,123 | 2,651 | |
| Change in fair value of shares in portfolio companies Change in fair value of other financial assets and |
27,548 | -173,868 | 239,973 | -289,210 | -215,378 | |
| liabilities | -25,567 | 14,499 | -40,845 | 23,757 | 43,077 | |
| Other expenses | -2,357 | -1,312 | -6,131 | -6,963 | -9,180 | |
| Personnel costs | -5,448 | -7,768 | -16,519 | -19,354 | -23,620 | |
| Operating profit/loss | -5,327 | -168,019 | 178,179 | -289,647 | -202,450 | |
| Financial net | 4,136 | -1,335 | 12,152 | -3,729 | -5,016 | |
| Profit/loss before tax | -1,191 | -169,354 | 190,331 | -293,376 | -207,466 | |
| Tax | - | - | - | - | - | |
| NET PROFIT/LOSS FOR THE PERIOD |
-1,191 | -169,354 | 190,331 | -293,376 | -207,466 |
| SEK 000 | Note | 2021 Jul-Sep |
2020 Jul-Sep |
2021 Jan-Sep |
2020 Jan-Sep |
2020 Full-year |
|---|---|---|---|---|---|---|
| Net profit/loss for the period | -1,191 | -169,354 | 190,331 | -293,376 | -207,466 | |
| Total comprehensive income/loss for the |
||||||
| period | -1,191 | -169,354 | 190,331 | -293,376 | -207,466 |
| SEK 000 | Note | 30 Sep 2021 | 30 Sep 2020 | 31 Dec 2020 |
|---|---|---|---|---|
| ASSETS | ||||
| Financial assets | ||||
| Shares in portfolio companies at fair value | ||||
| through profit or loss | 2,3 | 1,075,495 | 675,825 | 770,320 |
| Loans receivable from portfolio companies | - | 1,779 | - | |
| Total non-current assets | 1,075,495 | 677,604 | 770,320 | |
| Current assets | ||||
| Accounts receivable | - | 31 | 3 | |
| Receivables from group companies | - | - | 80 | |
| Receivables from portfolio companies | 2,510 | 1,866 | 243 | |
| Other financial assets | 722 | 64,774 | 41,181 | |
| Other current receivables | 1,224 | 1,224 | 768 | |
| Prepaid expenses and accrued income | 895 | 700 | 929 | |
| Cash and cash equivalents | 45,320 | 71,098 | 75,869 | |
| Total current assets | 50,671 | 139,693 | 119,073 | |
| TOTAL ASSETS | 1,126,166 | 817,297 | 889,393 | |
| EQUITY AND LIABILITIES | ||||
| Total equity | 990,619 | 714,377 | 800,288 | |
| Long-term liabilities | ||||
| Long-term liabilities to related parties | 4 | 122,611 | 74,433 | - |
| Total long-term liabilities | 122,611 | 74,433 | 0 | |
| Current liabilities | ||||
| Current interest liabilities | 4 | - | - | 75,864 |
| Other financial liabilities | 3,742 | 20,155 | 5,726 | |
| Accounts payable | 690 | 685 | 617 | |
| Other current liabilities | 1,343 | 1,538 | 1,373 | |
| Accrued expenses and prepaid income | 7,161 | 6,109 | 5,525 | |
| Total current liabilities | 12,936 | 28,487 | 89,105 | |
| Total liabilities | 135,547 | 102,920 | 89,105 | |
| TOTAL EQUITY AND LIABILITIES | 1,126,166 | 817,297 | 889,393 |
| SEK 000 | Not | 30 Sep 2021 | 30 Sep 2020 | 31 Dec 2020 |
|---|---|---|---|---|
| Opening balance, equity | 800,288 | 1,007,753 | 1,007,753 | |
| Net profit/ loss for the period | 190,331 | -293,376 | -207,466 | |
| Closing balance, equity | 990,619 | 714,377 | 800,288 |
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, with Corporate Identity Number 556707-5048, is a limited liability company with its registered office in Solna, Sweden. 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.
No new or revised IFRS standards or recommendations from IFRS Interpretations Committee has had significant impact on the Investment Entity.
The credit facility from Sino Biopharmaceutical of SEK 42.5 million was utilized during the third quarter. Sino Biopharmaceutical has transferred the credit facility and the bridge loan of SEK 70 million (plus accrued interest) to the subsidiary invoX Pharma in September 2021. The new bridge loan from invoX Pharma of SEK 42.5 million has an interest rate of 5% which matures at the same time as the loan, December 31, 2022.
The bridge loans from invoX Pharma (subsidiary of Sino Biopharmaceutical) total SEK 112.5 million plus interest and fall due on 31 December 2022.
Karolinska Development has the opportunity to utilize a credit facility from invoX Pharma of up to approximately SEK 85 million (EUR 8.5 million), interest rate of 5% on utilized amount and falls due on 31 December 2022, to cover a possible short-term liquidity need.
On October 4, 2021, Sino Biopharmaceutical transferred its entire holding in Karolinska Development to the wholly owned subsidiary invoX Pharma Ltd.
Interim period: The period from the beginning of the financial year through the closing date.
Reporting period: January – September 2021.
The Company presents certain financial measures in the interim report that are not defined under IFRS. The Company believes that these measures provide useful supplemental information to investors and the company's management as they allow for the evaluation of the company's performance. Because not all companies calculate the financial measures in the same way, these are not always comparable to measures used by other companies. Therefore, these financial measures should not be considered as substitutes for measures as defined under IFRS.
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.
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.
rNPV: "risk-adjusted net present value" is a method to value risky future cash flows. rNPV is the standard valuation method in the drug development industry, where sufficient data exists to estimate success rates for all R&D phases.
Equity per share: Equity on the closing date in relation to the number of shares outstanding on the closing date.
Net debt: Interest-bearing liabilities (SEK 122.6 million) reduced with cash and cash equivalents (SEK 45.3 million).
Equity to total assets ratio: Equity divided by total assets.
| Number of shares |
Fair value | Part of Karolinska Developments' |
||
|---|---|---|---|---|
| SEK 000 | net asset value SEK per share3 |
Percentage | ||
| Listed assets | ||||
| Modus Therapeutics | 6,144,821 | 25,194 | 0.14 | 2.7% |
| OssDsign | 5,812,638 | 49,407 | 0.28 | 5.3% |
| Total listed assets | 74,601 | 0.43 | 8.1% | |
| Unlisted assets | ||||
| AnaCardio | 3,000 | 0.02 | 0.3% | |
| Dilafor | 12,014 | 0.07 | 1.3% | |
| Forendo | 104,117 | 0.23 | 4.4% | |
| Svenska Vaccinfabriken Produktion | 6,827 | 0.04 | 0.7% | |
| Umecrine Cognition | 623,041 | 3.55 | 67.3% | |
| KCIF Co-Investment Fund KB1 | 11,052 | 0.03 | 0.5% | |
| KDev Investments1 | 240,843 | 1.37 | 26.0% | |
| Total unlisted assets | 931,185 | 5.31 | 100.6% | |
| Net of other liabilities and debts2 | -80,311 | -0.46 | -8.7% | |
| Total net asset value | 995,184 | 5.28 | 100.0% |
1The companies have both listed and unlisted assets.
2 Includes SEK 45.3 million cash and cash equivalents.
3In relation to the number of shares outstanding (175,421,124) on the closing date.
| 2021 | 2020 | 2020 | |
|---|---|---|---|
| SEK 000 | Jan-Sep | Jan-Sep | Full-year |
| Result level 1 | |||
| Listed companies, realized | -433 | -12,110 | -12,109 |
| Listed companies, unrealized | -26,479 | -23,596 | -24,542 |
| Total level 1 | -26,912 | -35,706 | -36,651 |
| Result level 3 | |||
| Unlisted companies, realized | -936 | 8,289 | 8,215 |
| Unlisted companies, unrealized | 267,821 | -261,793 | -186,942 |
| Total level 3 | 266,885 | -253,504 | -178,727 |
| Total | 239,973 | -289,210 | -215,378 |
| SEK 000 | 2021-09-30 | 2020-09-30 | 2020-12-31 |
|---|---|---|---|
| Accumulated acquisition cost | |||
| At the beginning of the year | 770,320 | 1,047,600 | 1,047,600 |
| Investments during the year | 69,154 | 19,290 | 39,954 |
| Sales during the year | -3,952 | -101,854 | -101,856 |
| Changes in fair value in net profit/loss for the | |||
| year | 239,973 | -289,210 | -215,378 |
| Closing balance | 1,075,495 | 675,825 | 770,320 |
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:
Level 1- Fair value determined on the basis of observed (unadjusted) quoted prices in an active market for identical assets and liabilities
Level 2- Fair value determined based on inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly
Level 3- Fair value determined based on valuation models where significant inputs are based on non‐ observable data
| SEK 000 | Level 1 | Level 2 | Level 3 | Total |
|---|---|---|---|---|
| Financial assets | ||||
| Shares in portfolio companies, at fair value through profit or loss |
74,601 | - | 1,000,894 | 1,075,495 |
| Loans receivable from portfolio companies | - | 2,510 | - | 2,510 |
| Other financial assets | - | - | 722 | 722 |
| Cash and cash equivalents | 45,320 | - | - | 45,320 |
| Total | 119,921 | 2,510 | 1,001,616 | 1,124,047 |
| Financial liabilities | ||||
| Other financial liabilities | - | - | 3,742 | 3,742 |
| Total | - | 0 | 3,742 | 3,742 |
| SEK 000 | Level 1 | Level 2 | Level 3 | Total |
|---|---|---|---|---|
| Financial assets | ||||
| Shares in portfolio companies, at fair value through profit or loss |
38,710 | - | 637,115 | 675,825 |
| Loans receivable from portfolio companies | - | 1,779 | - | 1,779 |
| Other financial assets | - | - | 64,774 | 64,774 |
| Accounts receivable | - | 31 | - | 31 |
| Receivables from portfolio companies | - | 1,866 | - | 1,866 |
| Cash, cash equivalents and short-term | ||||
| investments | 71,098 | - | - | 71,098 |
| Total | 109,808 | 3,676 | 701,889 | 815,373 |
| Financial liabilities | ||||
| Other financial liabilities | - | - | 20,155 | 20,155 |
| Accounts payable | - | 685 | - | 685 |
| Total | - | 685 | 20,155 | 20,840 |
| SEK 000 | Shares in portfolio companies |
Other financial assets |
Other financial liabilities |
|---|---|---|---|
| At beginning of the year | 732,554 | 41,181 | 5,726 |
| Transfers from level 31 | -36,752 | - | 0 |
| Acquisitions | 38,207 | - | - |
| Compensations | - | - | -2,370 |
| Gains and losses recognized through profit or loss | 266,885 | -40,459 | 386 |
| Closing balance 30 September 2021 | 1,000,894 | 722 | 3,742 |
| Realized gains and losses for the period included in profit or loss |
-1,369 | 0 | 0 |
| Unrealized gains and losses in profit or loss for the period included in profit or loss |
268,254 | -40,459 | 386 |
1Refers to portfolio company, which was listed during the period.
| SEK 000 | Shares in portfolio companies |
Other financial assets |
Other financial liabilities |
|---|---|---|---|
| At beginning of the year | 884,830 | 62,620 | 46,851 |
| Acquisitions | 19,290 | - | - |
| Compensations | -13,500 | - | -5,094 |
| Gains and losses recognized through profit or loss | -253,504 | 2,154 | -21,603 |
| Closing balance 30 September 2020 | 637,115 | 64,774 | 20,154 |
| Realized gains and losses for the period included in profit or loss |
8,289 | - | - |
| Unrealized gains and losses in profit or loss for the period included in profit or loss |
-261,793 | 2,154 | 21,603 |
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.
| SEK000 | Ownership | Fair value SEK000 |
Valuation model1 |
|---|---|---|---|
| AnaCardio | 21.4% | 3,000 | Last post money |
| Dilafor | 0.8% | 12,014 | Last post money |
| Forendo Pharma | 9.6% | 104,117 | A combination of last post money and external valuation2 |
| Svenska Vaccinfabriken Produktion | 30.8% | 6,827 | Last post money |
| Umecrine Cognition | 74.5% | 623,040 | External valuation3 |
| KCIF Co-Investment Fund KB | 26.0% | 11,052 | A combination of last post money and share price listed company4 |
| KDev Investments | 90.1% | 240,843 | A combination of last post money and share price listed company5 |
| Total level 3 | 1,000,894, |
1See The Annual Report 2020 Valuation of portfolio companies at fair value, for a description of valuation models. 2External risk adjusted net present value (rNPV) calculation of the transaction value, including additional purchase
considerations, confirmed in the agreement to divest the company to Organon in November 2021. 3Risk adjusted external valuation by an independent valuation institute in December 2020. The external valuation resulted in
an rNPV value which has been risk adjusted to reflect an assumed pricing in conjunction with an IPO and the need to secure development financing.
4KCIF Co-Investment Fund KB holds both listed shares which are valued in accordance with the closing rate on the final trading day of the period, and unlisted shares which are valued in accordance with the most recent transaction, post-money valuation. 5KDev Investments AB holds both listed shares which are valued in accordance with the closing rate on the final trading day of the period, unlisted shares which are valued in accordance with the most recent transaction (post-money valuation) and unlisted shares valued in accordance with the most resent transaction (post-money valuation). After a new investment round in Dilafor, the company now is valued to last post money, the fair value is in line with the risk adjusted external valuation made by an independent valuation institute in June 2021. Dilafor still accounts for 80% of the total fair value in KDev Investments.
The Fair Value of the directly owned holding in Forendo Pharma, as of 30 September 2021, amounts to SEK 104.1 million (10% of the Net Portfolio Fair Value), as of 30 September 2020 SEK 41.9 million (6% of the Net Portfolio Fair Value). The Fair Value of the part of Forendo Pharma which Karolinska Development owns indirectly via KCIF Co-Investment Fund KB amounts to SEK 10.0 million (1% of the portfolio's net fair value).
The reason for the increase of the booked value of the holding of SEK 70.0 million is based on the rNPV calculation of the total transaction value, including conditional future payments, from the divestment of Forendo Pharma to Organon. Karolinska Development's total ownership in Forendo Pharma, including indirect holdings via KCIF Co-Investment Fund, amounts to 9.7%. The total transaction value for Karolinska Development amounts to USD 91.7 million and is calculated as 9.7% of the total transaction value of USD 945 million. Under the acquisition agreement, the shareholders of Forendo Pharma will receive an initial payment of USD 75 million. In addition, there are conditional payments totalling USD 270 million linked to milestones in the development and registration processes for the company's drug candidates, and additional payments totalling USD 600 million linked to commercial milestones. The completion of the transaction is subject to review by competition authorities and other customary conditions. The transaction is expected to close in December 2021.
Karolinska Development estimates the risk-adjusted net present value (rNPV) of future cash flows, including the initial payment, from the transaction at SEK 114 million, with a positive effect on net profit of SEK 70 million and a consequential increase in the portfolio company's fair value of SEK 70 million in the third quarter 2021. The additional purchase consideration is expected to be paid during the period 2024–2034, and renewed rNPV valuations will be performed continuously in connection with Karolinska Development's future quarterly reporting.
The parameters in the rNPV calculation with the largest impact on the rNPV valuation are the wacc (13%) and the compounded probability of success for fulfilling the conditions in the development, registration processes and commercial milestones for the company's drug candidates. The assumed compounded probabilities of success for the drug candidates FOR-6219 and FOR-7191 are 22,4% and 14,8% respectively. The additional purchase consideration is expected to be paid during the period 2024–2034.
The outcome relates to the Change in Fair Value of the portfolio company Forendo Pharma
Outcome from changing the assumed wacc +/-1% unit, i.e. setting the wacc at 12% and 14% respectively (13% is assumed in the rNPV valuation).
| 12% | 14% | |||
|---|---|---|---|---|
| Result/ equity | Result/ equity | |||
| MSEK | SEK/share | MSEK | SEK/share | |
| Effect of a change in the discount rate1 |
3,322 | 0.02 | -3,152 | -0.02 |
1Sensitivity of the impact on Fair Value (rNPV) in the external analysis by changing the wacc by +/- 1% respectively. The applied wacc in the rNPV valuation is 13%.
Outcome from changing the compounded probability of success for additional purchase considerations related to the drug candidate FOR-6219 to 17,4, 19,9, 24,9 and 27,4% respectively (22,4% is applied in the rNPV valuation)
| 17.4% | 19.9% | 24.9% | 27.4% | |||||
|---|---|---|---|---|---|---|---|---|
| Result/ equity | Result/ equity | Result/ equity | Result/ equity | |||||
| MSEK | SEK/share | MSEK | SEK/share | MSEK | SEK/share | MSEK | SEK/share | |
| Effect from a change in the compounded probability of success for the drug candidate2 |
-11,500 | -0.07 | -6,133 | -0.03 | 7,241 | 0.04 | 15,845 | 0.09 |
Outcome from changing the compounded probability of success for additional purchase considerations related to the drug candidate FOR-7191 to 9.8, 12.3, 17.3 and 19.8% respectively (14.8% is applied in the rNPV valuation)
| 9.8% | 12.3% | 17.3% | 19.8% | |||||
|---|---|---|---|---|---|---|---|---|
| Result/ equity | Result/ equity | Result/ equity | Result/ equity | |||||
| MSEK | SEK/share | MSEK | SEK/share | MSEK | SEK/share | MSEK | SEK/share | |
| Effect from a change in the compounded probability of success for the drug candidate2 |
-5,963 | -0.03 | -3,067 | -0.02 | 3,237 | 0.02 | 6,815 | 0.04 |
2Sensitivity of the impact on Fair Value (rNPV) in the external analysis by changing the probability of success in steps of 2.5% in the range +/- 5% units compared to the applied compounded probability of success in the rNPV valuation
In the table below, "Total Portfolio Fair Value" is as defined in Note 1.
"Potential distribution to Rosetta Capital", SEK 365.1 million, 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 15.6 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.
"Net Portfolio Fair Value (after potential distribution to Rosetta Capital)" is as defined in Note 1.
| SEK 000 | 30 Sep 2021 | 30 Sep 2020 | 31 Dec 2020 |
|---|---|---|---|
| Karolinska Development Portfolio Fair Value (unlisted companies) | 760,051 | 478,938 | 732,554 |
| Karolinska Development Portfolio Fair Value (listed companies) | 74,601 | 38,711 | 37,766 |
| KDev Investments Portfolio Fair Value | 605,988 | 506,490 | 162,916 |
| Total Portfolio Fair Value | 1,440,640 | 1,024,139 | 933,236 |
| Potential distribution to Rosetta Capital of fair value of KDev | |||
| Investments | -365,145 | -348,314 | -162,916 |
| Net Portfolio Fair Value (after potential distribution to Rosetta Capital) | 1,075,495 | 675,825 | 770,320 |
*SEK 15.6 million repayment of investments in KDev Investments made by Rosetta Capital and SEK 349.5 million distribution of dividends to preference shares and common shares.
| SEK 000 | 2021-09-30 | 2020-09-30 | 2020-12-31 |
|---|---|---|---|
| Long-term liabilities to related parties | |||
| InvoX Pharma Ltd1 | 70,000 | - | - |
| InvoX Pharma Ltd2 | 42,500 | 0 | 0 |
| Accrued interest Sino Biopharmaceutical | 10,111 | - | - |
| Current interest liabilities | |||
| Sino Biopharmaceutical1 | - | 70,000 | 70,000 |
| Accrued interest Sino Biopharmaceutical | - | 4,433 | 5,864 |
| Total | 122,611 | 74,433 | 75,864 |
1Bridge loan from Sino Biopharmaceutical has during September 2021 been transferred to the wholly owned subsidiary invoX Pharma Ltd (with the same conditions), expiry date is 31 December 2022. The interest rate amounts to 8% and falls due on 31 December 2022.
2Bridge loan from invoX Pharma Ltd (Sino Biopharmaceutical has transferred the credit facility to the wholly owned subsidiary invoX Pharma Ltd. Expiry date is 31 December 2022. The interest rate amounts to 5% and falls due on 31 December 2022.
| SEK 000 | 2021-09-30 | 2020-09-30 | 2020-12-31 |
|---|---|---|---|
| Pledge assets | |||
| Contingent liabilities | |||
| Investment agreement in portfolio company | 12,927 | 3,000 | - |
| Summa | 12,927 | 3,000 | 0 |
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