Medivir — Audit Report / Information 2010

Feb 22, 2011

Press Release, 22 February 2011

Financial Statement, 1 January – 31 December 2010

Medivir AB (OMX: MVIR), a research-based specialty pharmaceutical company focused on infectious diseases, is publishing its Financial Statement today for the period 1 January – 31 December 2010 and a business update for the fourth quarter 2010.

Major advances in hepatitis C create the prospects for a dynamic 2011

"Medivir took several very important developmental steps in 2010 and made significant advances in its important hepatitis C projects. The recently commenced global pivotal phase 3 trials on TMC435 for treating chronic hepatitis C virus infection is the most important development to date. Medivir also made several advances in other research projects, in tandem with Xerclear® /Xerese™ now approaching its launch on the major markets, which means the company making further progress towards its goal of being a profitable specialty pharmaceutical company. There has been very positive progress for our early stage hepatitis C projects and we have also strengthened our infectious diseases portfolio. In future, we also intend to retain more of the commercial value of our projects. The agreement on dengue fever based on co-development with Janssen Pharmaceutica N.V. is a recent example of this. We have extended our shareholder base internationally, while retaining strong relations with the shareholders that have supported Medivir for many years," commented CEO Ron Long.

Financial highlights 2010

• Consolidated net sales were SEK 57.3 (25.7) m.
• The consolidated profit/loss after tax for the period was SEK -134.2 (135.4) m.
• Earnings per share for the period were SEK -5.43 (-6.49).
• Cash flow from operating activities was SEK -76.9 (-135.1) m.
• Cash and cash equivalents and investments in securities etc. at the end of the period were SEK 647.2 (143.6) m.
• A rights issue raised SEK 325.1 m before issue costs
• A private placement raised SEK 281.3 m before issue costs

Fourth quarter operational highlights

• Medivir published further positive data for TMC435 in November. Interim data after 24 weeks' treatment in the ASPIRE trial (C206), a phase 2b trial on non responders, demonstrated highly potent anti-viral efficacy and a very positive safety profile. These characteristics make TMC435 potentially the leading protease inhibitor in development for treating HCV.
• In December, Medivir implemented a private placement of 2,250,000 shares, which raised SEK 280 m (EU 30.8 m). 30 institutional investors and professional investors in Sweden participated in the accelerated book-building process at a price of SEK 125 per share. Of these over two-thirds of the new shares were subscribed by international investors. The purpose of this capital raising was to provide Medivir with the possibility of realizing its R&D strategy and the build-up of its commercial organization.
• In December, the Medivir share qualified for the Nasdaq OMX Stockholm Exchange Midcap List, which it will join from January 2011.

Post period-end highlights

• As of today, Medivir reported positive 48-week interim data (SVR24) from the PILLAR trial (C205), a phase 2b trial on TMC435 on treatment-naive patients. TMC435 demonstrated potent and consistent anti-viral efficacy with SVR24 of up to 84%. According to international standards, these patients are classified as cured.
• The global phase 3 trials on TMC435 started in February, which triggered a milestone payment of EUR 5 m, whose revenue will be recognized in the first quarter 2011.
• A clinical phase 1a trial on TMC649128 (HCV POL) started in February, which entitles Medivir to a EUR 7 m milestone payment.
• In February, Medivir started a new collaboration with Janssen Pharmaceutica (Johnson & Johnson group) to jointly develop a pharmaceutical that can prevent and treat dengue virus infections.
• The BACE project has been discontinued in favor of increased focus on infectious disease projects in the development portfolio.

For more information, please contact

Rein Piir, CFO and VP, Investor Relations, mobile: +46 (0)70 853 7292. Ron Long, CEO, phone: +46 (0)8 546 83113.

Conference call for analysts and investors:

There will be a conference call today, February 22 2011, for investors and sell-side analysts at 09:00 (EDT) / 14:00 (GMT) / 15:00 (CET) to discuss this report. To dial-in to the conference call please use the following numbers:

Participant Telephone Numbers:	+1 718 354 1385 +46 (0)8 5352 6408 +44 (0)20 7806 1951	USA Sweden UK

Confirmation Code: 6641746

Alternatively, please contact Lindsey Neville at M:Communications on Tel: +44 (0) 207 920 2333, Email: Neville@mcomgroup.com.

Financial information in 2011

The Three-month Interim Report will be published on 5 May. The AGM will be held at 3 p.m. on 5 May at IVA's conference centre, Grev Turegatan 16, Stockholm, Sweden. The Six-month Interim Report will be published on 8 July.

Additional information on Medivir's operations is available on the company's website, www.medivir.se.

CEO's statement

Hepatitis C

Our hepatitis C portfolio is progressing well with our partnership projects and in-house projects making very positive advances. The primary project in Medivir's HCV portfolio, TMC435, a second-generation protease inhibitor that requires only a single daily dose, has the potential to be a blockbuster product thanks to its strong therapeutic profile. TMC435 will be able to offer an excellent safety profile, broader and superior efficacy, and simpler dosing for patients.

In 2010, Medivir reported positive data for TMC435, which demonstrated excellent safety and efficacy data in several phase 2b trials. Interim data from a 24-week phase 2b trial on non

responders was presented in the fourth quarter. This trial showed that TMC435 had a very attractive safety profile and therapeutic efficacy. These results are also supported by interim data from the recently completed 48-week phase 2b trial for treatment-naive patients, published today. Medivir reached a major milestone in February 2011 with the start of global phase 3 trials on TMC435. These clinical trials are being conducted in the US, Europe and Japan on treatmentnaive and treatment-experienced patient groups.

Medivir has continued to advance its positioning in the hepatitis C segment with TMC649128 (its HCV POL project), jointly developed with Tibotec now starting clinical phase 1 trials in February. This is a major step for Medivir's overall HCV strategy, where our view is that we have excellent prospects of being a leading future player in treating patients infected with HCV alongside our partner Tibotec.

More value to come

As Medivir continues to progress positively and make advances in its current project portfolio, the company will seek the opportunity to take a more prominent role in their future development. This will enable the company to retain a higher share of future commercial values in partnerships and alliances. This progressive change is part of Medivir's ambition to develop its positioning as a growing research-based specialty pharmaceutical company, and thus create more value for Medivir's shareholders. The recently entered collaboration agreement with Janssen Pharmaceutica to develop protease-based pharmaceuticals to prevent dengue fever is an example of this strategy. Medivir and Janssen are meeting equal shares of the research costs, giving Medivir a higher share of future revenues. This initiative is also consistent with Medivir's renewed focus in infectious diseases.

Medivir has also discontinued its BACE project for treating Alzheimer's disease because this project is no longer part of the core business focus and also has a much higher risk profile than its infectious disease portfolio projects.

Further advances for Xerese™

Xerese™ , our innovative cold sore treatment, is approaching launch in the US through our partner Meda AB in March. We also expect our partner GlaxoSmithKline to start its launch on the first OTC markets in Europe in the fourth quarter of 2011.

A stronger financial position

The private placement completed late in the year, and the rights issue in May, means that we are now running our business with a much stronger financial position and with a broader and extended international share holder base. Our ambition is to continue transforming Medivir into a successful research-based specialty pharmaceutical company and create substantial value for shareholders in 2011 and beyond.

Ron Long CEO

Highlights of the fourth quarter 2010

TMC435—more positive data reported from the phase 2 trial ASPIRE (C206)

Medivir's confidence in the company's protease inhibitor for treating HCV infections, TMC435, was further corroborated by positive data reported from the ASPIRE trial. TMC435 is being developed in partnership with Tibotec.

Data—efficacy

The data showed potent and sustained viral response for TMC435 in patients where previous treatment with Peg-IFN and ribavirin (standard of care, SoC) had been unsuccessful. Treatment with TMC435 was safe and well tolerated. These results are consistent with previously reported data for treatment-naive patients in the phase 2b trial PILLAR (C205) of July 2010.

Trial design

The ASPIRE trial studied the efficacy of TMC435 in combination with SoC in 462 patients that were infected with the hard-to-treat genotype 1 hepatitis C virus in patients that had previously taken SoC with negative results. This trial enrolled relapsers, partial responders and null responders to SoC. TMC435 was administered once daily in doses of 100 mg or 150 mg for 12, 24 or 48 weeks in combination with SoC. SoC continues until the trial concludes after 48 weeks in mid-2011.

The following table states all the TMC435 data with aggregated dose groups for the specific timepoint.

	Relapser*		Partial responder**		Null responder**
(%)	TMC435 N = 158	Placebo N = 27	TMC435 N = 138	Placebo N = 23	TMC435 N = 100	Placebo N = 16
RVR WEEK 4	81	4	62	0	38	0
cEVR WEEK 12	92	31	84	10	64	21
WEEK 24	94	83	86	19	78	44

An intention-to-treat analysis of viral response: HCV RNA<25IU/mL undetectable levels

*Relapser: undetectable levels at EoT (End of Treatment) but detectable at 24-week follow-up

**Partial responder: >2 log reduction in week 12 but not un-detectable levels at EoT

***Null responder: <2 log reduction in HCV RNA at week 12

Data—safety and tolerability

An ITT analysis, intention-to-treat was conducted on all patients that had received at least one dose of TMC435. Treatment with TMC435 was safe and well tolerated, and the data is consistent with the previously reported phase 2b trial PILLAR (C205). Significant reduction of transaminases (ALT and AST) was observed in all the TMC435 treatment groups.

The most frequently reported adverse events were tiredness and headache, the frequency in all dose groups was comparable with the placebo group.

%	All TMC435 N = 396	Placebo N = 66
Fatigue	41	42
Headache	33	33

Medivir's private placement

In December, Medivir implemented a private placement that raised the company SEK 280 m before deducting for transaction costs. Some 30 international investors acquired 2,250,000 new class B shares at a price of SEK 125 per share.

The proceeds from this private placement will be used for up scaled R&D activities mostly in infectious diseases by taking projects closer to commercialization and to improve Medivir's prospects of starting and advancing new projects. The funds will also be used to build an organization for commercializing TMC435. Medivir's stronger financial position provides the company with further support in its pursuit of strategic alliances and partnerships.

Charlotte Edenius appointed as Vice President, Research & Development Projects

Charlotte Edenius was hired as Vice President, Research & Development Projects in November. This newly created position, heading up Medivir's project portfolio, is another step in the direction of strengthening Medivir's R&D organization. Charlotte will become a member of management. Charlotte is a qualified physician and holds a Ph.D. from the Karolinska Institute. She joins Medivir from her former position as Senior Vice President and Chief Scientific Officer of Swedish pharmaceutical company Orexo AB.

Subsequent events after the end of the reporting period

Positive results continue for TMC435—up to 84% SVR reported in phase 2b trial PILLAR (C205)

Today, Medivir reported interim results from completed 48-week treatment in the responseguided phase 2b trial PILLAR, in rolling 386 treatment-naive patients infected with genotype 1 HCV, including SVR24 data (sustained viral response) for patients treated with TMC435. The SVR24 data is produced after 24 weeks after planned end of treatment, and accordingly, is not yet available for patients in the placebo group.

Trial design

In the PILLAR trial, 75 mg or 150 mg of TMC435 was administered for 12 or 24 weeks in combination with ribavirin and peg-IFN alpha-2A, the current SoC, for 24 weeks. All treatment of patients concluded in week 24 if predefined, response-guided criteria were satisfied. Patients that did not satisfy the above criteria continued SoC until week 48. In those groups treated with TMC435, 83% of patients were able to discontinue all treatment after week 24. Analysis of the results is based on the ITT (Intention To Treat) population, which encompasses all patients that received at least one dose of TMC435.

Evaluation criteria

A interim analysis, protocol-defined in advance, was conducted when all patients concluded 48 week treatment, or discontinued treatment earlier. Final SVR24 data was available for all TMC435-treated patients that discontinued all treatment before or after week 24 and had completed all follow-up visits.

Data—efficacy

TMC435 demonstrated potent and consistent anti-viral efficacy with SVR24 of up to 84%, meaning that patients are considered as free of virus and cured. The data also showed excellent safety and tolerability. There were no clinically relevant differences in terms of adverse events between the group treated with TMC435 and those that underwent SoC.

Undiminished viral response for 4 and 24 weeks after planned EoT
% (n/N)	TMC435 12PR24 75 mg q.d. N=78	TMC435 24PR24 75 mg q.d. N=75	TMC435 12PR24 150 mg q.d. N=77	TMC435 24PR24 150 mg q.d. N=79	Placebo N=77
SVR4	87.2 (68/78)	86.5 (64/74)	84.9 (62/73)	88.5 (69/78)	71.2 (42/59)
SVR24	83.6 (61/73)	76.1 (51/67)	83.1 (59/71)	84.4 (65/77)	N/A

* < 25 log10 IU/mL undetectable levels

EoT: End of Treatment, q.d.: once daily, PR: pegIFN alpha-2A an ribavirin.

SVR24: patients with undetectable levels of HCV RNA 24 weeks after planned EoT.

NB: patients in the control arm continued SOC until week 48 and SVR24 data was not available.

Global phase 3 trials on TMC435 for treating HCV starts in February

Our collaboration partner Tibotec Pharmaceuticals recently commenced global phase 3 trials on TMC435 in treatment-naive patients and patients that have relapsed after previous interferonbased treatment (SoC).

Two trials will study treatment with TMC435, one tablet (150 mg) administered orally once-daily compared to placebo in treatment-naïve patients with HCV infection. The first trial, TMC435- C208, also called QUEST-1, and the second, TMC435-C216, or QUEST-2, each enroll some 375 treatment-naïve patients.

The third trial, TMC435-C3007, also called PROMISE, will enroll some 375 patients that have relapsed into viral disease after previous interferon-based SoC.

The total treatment time for all three trials will be 24 or 48 weeks, depending on patient response. Phase 3 trials also started recently in Japan.

Revenue from the milestone payment of EUR 5 m for these phase 3 trials, which Medivir received in February 2010, will now be recognized in the first quarter of 2011.

TMC649128 (HCV POL)

In May 2008, Medivir entered an agreement on research and development work in the hepatitis C (HCV) polymerase segment with Ortho Biotech Products LP and Tibotec BVBA in Mechelen.

A clinical phase 1a trial on TMC 649128 started in February, a double-blind randomized and placebo-controlled trial on healthy individuals. The trial will be conducted in Belgium.

TMC649128 is a nucleoside NS5B polymerase inhibitor with a promising preclinical profile, focused on future combinations of direct-acting HCV antivirals. TMC649128 has demonstrated biological efficacy on several HCV genotypes in vitro and a high genetic barrier to resistance development, which is superior to other classes of HCV small molecules in development. In addition, TMC649128 has demonstrated positive preclinical characteristics in terms of safety and pharmacokinetics, indicating potential for oral administration once daily.

The primary aim of this trial is to study pharmacokinetics, safety and tolerability of oral single doses of TMC649128 on healthy volunteers. These studies will indicate how the pharmaceutical is absorbed, distributed, metabolized and excreted by the body.

The start of phase 1a entitles Medivir to a EUR 7 m milestone payment.

Medivir starts a new development collaboration in dengue virus

Medivir initiated collaboration with Janssen Pharmaceutica N.V. in February 2011 on the development of pharmaceuticals to prevent and treat dengue virus infections. This collaboration further extends Medivir's operations in infectious diseases and utilizes the company's extensive knowledge of the development of new protease-inhibiting pharmaceuticals. This collaboration is also an example of how Medivir will assume a greater role in future strategic alliances and partnerships, which will bring Medivir and its shareholders more values.

The basis of this agreement lies in both companies' core competencies in developing protease inhibitors, and will be focusing on co-development of pharmaceuticals that inhibit NS3 protease activity in dengue infections. Both parties will contribute resources equally on the research project and Medivir has an option to keep contributing an equal share of funding during the preclinical and clinical development phases.

Dengue fever is a viral infection spread by mosquitoes that causes severe fever, skin rashes, muscle and joint pain. There are an estimated 50 million cases each year in over 100 endemic countries, and because the disease is continuing to spread, about one-third of the global population is in the risk zone.

The agreement terms formalized preclinical and clinical development and commercialization of potential pharmaceuticals that result from this agreement. Depending on funding, at predetermined decision-points, both parties are entitled to take products from research projects through development phases to commercialization. If both parties continue collaboration and until product approval, Janssen will be responsible for commercialization. Medivir will receive contracted royalties on net sales of future products pro rata to its contribution to product development.

Inhibition of the dengue NS3 protease is a very attractive target for developing new, effective pharmaceuticals against the dengue infection due to this protease's important role in viral replication. CDs that inhibit the dengue NS3 protease enjoy the prospects of disease prevention and control of outbreaks in endemic regions. An NS3 protease inhibitor with positive therapeutic benefits could also be used to treat ongoing viral infections.

Project portfolio

Medivir has a broad-based product portfolio in several infectious disease indications, and the company will continue to develop this value. Future collaboration agreements on development will be entered at suitable times for projects, where Medivir intends to retain the commercial rights in certain geographical regions. For those projects lying outside the infectious diseases segment, individual risk and return profiles will be set against the prospects the company has in infectious diseases.

Against the background of our successful proprietary projects in hepatitis C, and the collaboration on dengue fever and the needs these projects have for resources, Medivir has decided to discontinue the BACE project for treating Alzheimer's disease.

Medivir's project portfolio is summarized in the figure below:

Project summaries

TMC435

Indication: Hepatitis C Mechanism: NS3/4 protease inhibitor Partner: Tibotec Ltd. Current activity: Start of global phase 3 trials on treatment-naive patients Forthcoming activity: Follow-up of SVR from phase 2B trials in treatmentexperienced patients

HCV POL

Indication: Hepatitis C Mechanism: Nucleoside NS5B polymerase inhibitor Partner: Tibotec Ltd. Current activity: Clinical phase 1a trials started Forthcoming activity: Start of clinical phase 1b trials

HCV project

Indication: Hepatitis C Mechanism: Several Partner: In-house Current activity: Preclinical optimization Forthcoming activity: Designating CD

Lagociklovir MIV-210

Indication: Hepatitis B Mechanism: Polymerase inhibitor Partner: Daewoong Pharmaceuticals Current activity: Preclinical long-term toxicology trials Forthcoming activity: Start of clinical phase 2a trials

MIV-410

Indication: HIV Mechanism: Polymerase inhibitor Partner: Presidio Current activity: Preclinical development phase Forthcoming activity: Preclinical development phase

HIV-PI

Indication: HIV Mechanism: Protease inhibitor Partner: Tibotec/J&J Current activity: Preclinical optimization Forthcoming activity: Designating CD

Valomaciklovir MIV-606

Indication: Shingles Mechanism: Polymerase inhibitor Partner: Epiphany Current activity: Planning for clinical phase 3 trials Forthcoming activity: Meeting with regulatory authorities ahead of phase 3

Dengue

Indication: Dengue fever Mechanism: Protease inhibitor Collaboration partner: Janssen Pharmaceutica N.V. Current activity: Preclinical research phase Forthcoming activity: Preclinical optimization

Cathepsin K (CD1, CD2)

Indication: Bone disorders Mechanism: Protease inhibitor Partner: In-house Current activity: Preclinical development phase Forthcoming activity: Start of clinical phase 1 trials

Cathepsin S

Indication: Neuralgia Mechanism: Protease inhibitor Partner: In-house Current activity: Preclinical optimization Forthcoming activity: Designating CD

Consolidated earnings and financial position

Turnover, 1 January – 31 December 2010

Net sales were SEK 57.3 (25.7) m and primarily consist of remuneration for a licensing agreement for Xerclear® /Xerese™.The first of two one-off payments of SEK 18.0 m (USD 2.5 m) from Meda, who will be launching Xerclear® in North America under the Xerese® brand. The second one-off payment from Meda of SEK 16.7 m (USD 2.5 m) was received in the third quarter, when the remaining agreement terms were satisfied. The first one-off payment of SEK 10.6 m (EUR 1.1 m) of a total of EUR 3 m from GSK for the global launch of Xerclear® for OTC sale under its own consumer brands, was received in the second quarter. Because the agreement terms for the remaining payments relating to sales of licensing rights from GSK have not been satisfied yet, these revenues have not been recognized. Revenues will be recognized when the terms are satisfied and the uncertainty factors are removed.

Net sales also include a one-off payment for a licensing agreement on Medivir's polymeraseinhibiting pharmaceutical against the hepatitis B virus (HBV), lagociclovir valactate (MIV-210) from Daewoong Pharmaceutical Co. Ltd. of SEK 1.4 m and a one-off payment for a distribution agreement for Xerclear® of SEK 0.4 m with Daewoong Pharmaceutical Co. Ltd.

Allocation of net sales	2010	2009	2010	2009
(MSEK)	Jan-Dec	Jan-Dec	Oct-Dec	Oct-Dec
One-off payments	47.1	15.4	-	-
Research collaborations	-	9.0	-	-
Pharmaceutical sales	0.1	-	-	-
Co-promotion services	2.8	1.1	-	1.0
Invoiced costs	4.2	0.0	1.0	-
Other	3.1	0.2	1.6	0.2
Total net sales	57.3	25.7	2.6	1.2

Other operating income primarily consists of EU subsidies and other research support. In the corresponding period of the previous year, net sales primarily consisted of remuneration for research collaboration on hepatitis C of SEK 8.9 m and an allocated one-off payment of SEK 15.4 m from Tibotec Pharmaceuticals Ltd.

Costs and results of operations, 1 January – 31 December 2010

Operating costs were SEK -198.3 (-175.3) m, comprising raw materials and consumables of SEK -0.8 (0.0) m, external costs of SEK -100.0 (-72.3) m, personnel costs of SEK -89.6 (-92.7) m and depreciation and amortization of SEK -7.9 (-10.4) m. Increased external costs are mainly due to higher outlicensing and research costs.

The operating loss was SEK -136.7 (-139.8) m. Operating income increased by SEK 26.0 m, simultaneous with operating costs increasing by SEK 23.0 m. Profit from financial investments was SEK 2.5 (4.4) m. The lower profit from financial investments is mainly due to lower returns on investments in securities, etc. The net loss for the period was SEK -134.2 (-135.4) m.

Turnover and results of operations, 1 October – 31 December 2010

Net sales for the period were SEK 2.6 (1.2) m. Operating expenses were SEK -59.7 (-46.9) m, comprising raw materials and consumables of SEK -0.1 (0.0) m, external costs of SEK -29.1 (-17.4) m, personnel costs of SEK -29.0 (-27.0) m and depreciation and amortization of SEK -1.6 (-2.5 m. The operating profit/loss was SEK -57.0 (-42.5) m. The profit/loss from financial investments was SEK 0.4 (0.1) m. The net loss for the period was SEK -56.5 (-42.4) m.

Cash flow and financial position

Cash flow from operating activities for the period was SEK -76.9 (-135.1) m. The change of SEK 58.2 m is mainly due to an advance milestone payment of SEK 51.8 m (EUR 5.0 m) from Medivir's partner, Tibotec.

Cash flow from financing activities was SEK 586.5 (0.0) m. The SEK 325.1 m rights issue the company completed in the second quarter raised SEK 303.2 m after deducting for transaction costs. The private placement of SEK 281.3 m the company implemented in the fourth quarter raised SEK 265.0 m after deducting for transaction costs. Conversion and acquisition of options in the period raised SEK 18.3 (0.0) m.

As of 1 January, cash and cash equivalents including investments in securities, etc. with a maximum maturity of three months were SEK 143.6 (284.4) m and were SEK 647.2 (143.6) m at the end of the period, a change of SEK 503.9 (-140.8) m.

Investments, depreciation and amortization

Gross investments in tangible fixed assets in the period were SEK 5.5 (1.4) m; gross investments in intangible fixed assets were SEK 0.3 (4.7) m. Investments in tangible fixed assets are mainly for research equipment. Investments in intangible fixed assets are capitalized patent costs for Xerclear® . Depreciation of tangible fixed assets in the period of SEK -7.3 (-10.4) m was charged to profits. Amortization of intangible fixed assets in the period of SEK -0.6 (-0.0) m was charged to profit. Sales of fixed assets were SEK 0.0 (0.3) m.

Financial assets held for sale

The holding of shares in Medivir's license partners Presidio Pharmaceuticals Inc. and Epiphany Biosciences Inc. has been classified as a financial asset held for sale. Because these shares are not quoted, and accordingly not registered on an active marketplace, other data than market quotation is used as the basis for their valuation. Medivir judges that no value change occurred to these shares in the period.

Parent company, 1 January - 31 December 2010

Medivir AB (publ), corporate identity no. 556238-4361, is the parent company of the group. The group's operations are mainly conducted in the parent company, and consist of research operations and administrative functions. Parent company net sales for the period were SEK 74.7 (38.4) m. Operating costs were SEK -196.1 (-174.5) m, divided between raw materials and consumables of SEK -0.8 (0.0) m, external costs of SEK -97.8 (-71.4) m, personnel costs of SEK -89.6 (-92.7) m and depreciation and amortization of SEK -7.9 (-10.4) m. The operating loss was SEK -119.2 (-128.3) m. The loss from financial investments was SEK -16.5 (-6.7) m. The loss from financial investments included a cost for covering the losses of Medivir UK Ltd. of SEK -19.0 (-11.0) m. The net loss for the period was SEK -135.7 (-135.0) m.

Sales to Medivir UK Ltd. were SEK 20.0 (11.5) m. Sales to Medivir HIV Franchise AB were SEK 0.0 (1.3) m. Purchases from Medivir HIV Franchise AB were SEK 0.0 (1.3) m.

Gross investments in tangible and intangible fixed assets were SEK 5.8 (1.4) m. Cash and cash equivalents including investments in securities, etc. with a maximum maturity of three months amounted to SEK 664.6 (140.5) m. For comments on operations, please refer to the section on consolidated earnings and financial position.

Share structure, earnings per share and equity

Share capital at the end of the period was SEK 143.0 (104.2) m and equity was SEK 607.3 (153.9) m. At the end of the period, the number of shares of Medivir AB was 28,593,229 (20,843,547), of which 660,000 (660,000) were class A and 27,993,229 (20,183,547) class B shares with a nominal value of SEK 5. The average number of shares in the period was 27,718,388.

	Number of	Number of			Shares after full exercise of
Share class	shares	votes	% of capital	% of votes	options
A 10 votes	660,000	6,600,000	2.3%	19.1%	660,000
B 1 vote	27,933,229	27,933,229	97.7%	80.9%	28,809,204
Total	28,593,229	34,533,229	100.0%	100.0%	29,469,204

Share structure, 31 December 2010

Basic and diluted earnings per share, based on a weighted average number of outstanding shares, was SEK -5.43 (-6.49). Equity per share was SEK 21.24 (7.38). The equity ratio was 83.7 (75.0) %.

Option plans

The purpose of option plans is to promote the company's long-term interests by motivating and rewarding the company's senior management and other staff.

Outstanding options, redemption and forfeiture

At the beginning of the year, there were 760,000 outstanding options. In the period, 140,265 options were converted from the 2005 program and the remaining 139,735 options in this plan were forfeited through the expiry of their term on 31 December 2010. In the period, 70,753 options in the 2007 plan were converted and 131,600 options were acquired in the 2010 plan. Conversion and acquisition of options in the period increased share capital by SEK 1.3 m and other paid-in capital by SEK 15.4 m. The number of outstanding options at the end of the period was 803,647, equivalent to 875,975 class B shares. Upon full conversion, the number of outstanding shares could increase equity by SEK 84.2 m, and accordingly, the total number of shares could amount to 29,469,204.

Outstanding option plans, 31 December 2010

Type	Term	Number	Entitlement to no. of shares	Exercise price, SEK	Outstanding shares at present and upon full exercise
					28,593,229
Staff stock options	2007-2012	409,247	446,079	61.20	29,039,308
Staff stock options
and warrants	2010-2013	394,400	429,896	132.30	29,469,204
Total		803,647	875,975

Restatement

After the rights issue in the second quarter 2010, the conversion terms for the option plans were restated. Options from the 2005 plan entitled holders to convert 1.38 shares per option. Options from the 2007 and 2010 plans entitle holders to convert 1.09 shares per option. The exercise prices of the different stock option plans were also restated.

Option plan 2005-2010

The AGM 2005 approved a staff stock option plan of 280,000 options, of which some 215,000 staff stock options were granted to employees of the group and the remainder were retained to cover social security expenses. The term of this plan was 1 July 2005 to 31 December 2010, and after vesting, holders were entitled to exercise each option to subscribe for a new class B share against payment of an exercise price.

Option plan 2007-2012

The AGM 2007 approved a staff stock option plan of 480,000 options, of which some 360,000 staff stock options were granted to employees of the group and the remainder were retained to cover social security expenses. The term of this plan is 18 July 2007 to 30 April 2012, and after vesting, holders are entitled to exercise each option to subscribe for a new class B share against payment of an exercise price.

Option plan 2010-2013

The AGM 2010 approved a staff stock option plan of 394,400 options, of which some 343,000 options were granted to employees of the group and the remainder were retained to cover social security expenses. According to the terms of this plan, all employees are offered the opportunity to acquire warrants on market terms. In addition, for each warrant an employee acquires, they receive a staff stock option free of charge. The term of this plan is 30 April 2010 to 31 May 2013, and after vesting, holders are entitled to exercise each option to subscribe for a new class B share against payment of an exercise price.

Employees

Medivir had 80 (79) permanent employees at the end of the period, 53 (48)% of which were women.

Royalty obligations

A significant proportion of Medivir's research and development projects have been developed exclusively within Medivir, which means that Medivir holds the rights to all revenues related to these inventions. A minority of Medivir's projects have their origins in Swedish universities, which means that Medivir is entitled to revenues against smaller-scale royalty compensation. In addition, there are some projects that were previously outlicensed to third parties, but have been returned, and Medivir has undertaken to pay royalties to former licensees. No royalty compensation became due for payment in 2010 or 2009.

Transactions with related parties

No transactions occurred between Medivir and related parties that significantly affected the company's financial position and results of operations.

Significant risks and uncertainty factors

Pharmaceutical research and development to approved registration and launch is a highly risky and capital-intensive process. The majority of projects that are started never reach market registration. Medivir's ability to produce new CDs, enter partnerships on its projects and successfully develop its projects to market launch and sale, and to secure funding of its operations, are decisive to its future.

Medivir is exposed to three main categories of risk:

• Exogenous risks such as competition and patent protection. If competing products with superior efficacy reach the market faster than Medivir's products, the future value of Medivir's products will be less than originally expected;
• Operating risks such as dependency on external parties in partnerships and dependency on regulatory approvals;
• Financial risks such as liquidity, interest, currency and credit risk.

A more detailed description of exposure to risk and how Medivir manages it is provided in the Annual Report 2009.

Outlook

Medivir is a research-based specialty pharmaceutical company focused on infectious diseases and has the ambition to be, within a few years, a profitable midsized specialty pharmaceutical company in high growth. Medivir is working on a goal-oriented and strategic footing to create the best possible prospects of running projects quickly and with balanced risks and is positioned uniquely among specialty pharmaceutical companies with a potential blockbuster hepatitis C therapy in late-stage development, a marketed product, Xerclear® /Xerese™ , approaching international launch, a broad earlier pipeline and a solid financial position. Medivir will now remain focused on creating further shareholder value and continues to gain momentum in its strategic goal to become a profitable specialty pharmaceutical company.

Nomination Committee 2010-2011

The Nomination Committee 2010-2011 consists of representatives of at least the three largest shareholders at the end of the third quarter of 2010 and the Chairman of the Board. The members of the Nomination Committee are Maria Wikström (Chairman and representative of Länsförsäkringar Fonder), Frank Larsson (representative of Handelsbanken Kapitalförvaltning), Bo Öberg (representative of class A shareholders) and the Chairman of Medivir's Board, Göran Pettersson.

The Nomination Committee is proposing that the AGM 2011 appoints a new Board of Directors through the re-election of the five Board members Göran Pettersson (Chairman of the Board), Björn C. Andersson, Anna Malm Bernsten, Ingemar Kihlström and Ron Long (CEO)

Dividend

The Board of Directors is proposing no dividend for the financial year 2010.

AGM 2011

The Annual General Meeting will be held at 3 p.m. on Thursday, 5 May at IVA's Conference Centre, Grev Turegatan 16, Stockholm, Sweden. Shareholders wishing to participate should firstly be included in the share register maintained by Euroclear Sweden AB (formerly VPC) by no later than Friday 29 April and secondly notify the company at the address Medivir AB, Box 1086, 141 22 Huddinge Sweden or by fax to + 46(0)8 546 83195. The company shall have received this notification by no later than Friday 29 April. Updated information on the AGM is available at the company's website, www.medivir.se.

Annual Report

Medivir's Annual Report is scheduled to be available from the company's website, www.medivir.se, from 29 March 2011. Printed copies of the Annual Report will be distributed to shareholders.

Accounting policies

Medivir applies International Financial Reporting Standards (IFRS) as endorsed by the European Union. The significant accounting and valuation principles are stated on pages 46-49 of the Annual Report 2009. The group's Interim Report has been prepared according to IAS 34. The parent company uses the policies recommended in RFR 2.3 issued by RFR, the Swedish Financial Reporting Board.

Other new or revised IFRS and interpretation statements from IFRIC that came into effect after 31 December 2009 did not have any material effect on the group's or parent company's financial position or results of operations.

CONSOLIDATED INCOME STATEMENT SUMMARY (SEK m)	2010 Jan-Dec	2009 Jan-Dec	2010 Oct-Dec	2009 Oct-Dec
Turnover, etc.
Net sales	57.3	25.7	2.6	1.2
Work performed by the company for its own use and
capitalized	0.3	4.1	0.0	1.9
Other revenue	3.9	5.7	0.2	1.3
Total	61.5	35.5	2.8	4.4
Operating costs
Raw materials and consumables	-0.8	0.0	-0.1	0.0
Other external costs	-100.0	-72.3	-29.1	-17.4
Personnel costs	-89.6	-92.7	-29.0	-27.0
Depreciation and amortization	-7.9	-10.4	-1.6	-2.5
Total	-198.3	-175.3	-59.7	-46.9
Operating profit/loss	-136.7	-139.8	-57.0	-42.5
Profit/loss from financial investments	2.5	4.4	0.4	0.1
Profit/loss after financial items	-134.2	-135.4	-56.5	-42.4
Net profit/loss	-134.2	-135.4	-56.5	-42.4
Net profit/loss attributable to:
Equity holders of the parent	-134.2	-135.4	-56.5	-42.4
Earnings per share, calculated on profit/loss
attributable to equity holders of the parent in the period
Basic and diluted earnings per share, (SEK per share)	-5.43	-6.49	-2.05	-2.03
Average number of shares, 000	24,718	20,844	27,509	20,844
Number of shares at end of period, 000	28,593	20,844	28,593	20,844
CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME	2010	2009	2010	2009

COMPREHENSIVE INCOME	2010	2009	2010	2009
(SEK m)	Jan-Dec	Jan-Dec	Oct-Dec	Oct-Dec
Net profit/loss	-134.2	-135.4	-56.5	-42.4
Other comprehensive income Exchange rate differences	1.0	0.4	1.0	0.5
Other comprehensive income for the period, net after tax	1.0	0.4	1.0	0.5
Total comprehensive income for the period	-133.2	-135.0	-55.4	-41.9
Total comprehensive income attributable to:
Equity holders of the parent	-133.2	-135.0	-55.4	-41.9

CONSOLIDATED BALANCE SHEET SUMMARY	2010	2009
(SEK m)	31 Dec	31 Dec
Assets
Intangible fixed assets	4.3	4.6
Tangible fixed assets	24.8	26.9
Financial fixed assets	18.8	18.8
Inventories	0.1	0.6
Current receivables	30.2	10.6
Investments in securities, etc.	418.6	130.4
Cash and bank balances	228.7	13.2
Total assets	725.5	205.2
Liabilities and equity
Equity	607.3	153.9
Long-term liabilities	0.1	0.2
Current liabilities	118.1	51.1
Total liabilities and equity	725.5	205.2

CONSOLIDATED STATEMENT OF CHANGES TO EQUITY

		Other	Exchange	Deficit
	Share	paid-up	rate	brought	Total
(SEK m)	capital	capital	difference	forward	equity
Opening balance, 1 January 2009	104.2	847.0	4.3	-668.0	287.6
Total comprehensive income for the period			0.4	-135.4	-135.0
Staff stock option plans: value of employee
service		1.2			1.2
Closing balance, 31 December 2009	104.2	848.2	4.8	-803.4	153.9
Opening balance, 1 January 2010	104.2	848.2	4.8	-803.4	153.9
Total comprehensive income for the period			1.0	-134.2	-133.2
Conversion of options	1.3	15.4			16.7
Acquisition of options		1.6			1.6
New share issues	37.5	530.7			568.2
Staff stock option plans: value of employee
service		0.1			0.1
Closing balance, 31 December 2010	143.0	1,396.0	5.8	-937.6	607.3

CONSOLIDATED CASH FLOW STATEMENT SUMMARY	2010	2009
(SEK m)	Jan-Dec	Jan-Dec
Operating activities
Operating profit/loss	-136.7	-139.8
Reversal of non-cash items
Depreciation and amortization	7.9	10.3
Other adjustments	-13.5	-0.4
	-142.3	-129.9
Received/paid interest, returns and dividends, etc.	0.8	6.8
Cash flow from operating activities before changes in working capital	-141.5	-123.1
Changes in working capital	64.7	-12.0
Cash flow from operating activities	-76.9	-135.1
Investing activities
Acquisition/divestment of fixed assets	-5.8	-5.8
Cash flow from investing activities	-4.7	-5.8
Financing activities
Rights issue	606.4	0.0
Issue costs	-38.2	0.0
Conversion of options	16.7	0.0
Acquisition of options	1.6	0.0
Cash flow from financing activities	586.5	0.0
Cash flow for the period
Cash and cash equivalents, at beginning of period	143.6	284.4
Change in cash and cash equivalents	503.9	-140.8
Exchange rate difference in cash and cash equivalents	-0.3	0.0
Cash and cash equivalents, at end of period	647.2	143.6

KEY FIGURES, SHARE DATA, OPTIONS	2010	2009
	Jan-Dec	Jan-Dec
Return on:
- equity, %	-35.3	-61.3
- capital employed, %	-35.2	-61.2
- total assets, %	-28.8	-46.8
Number of shares at beginning of period, 000	20,844	20,844
New share issues	5,379	0
Number of shares at end of period, 000	28,593	20,844
- of which class A shares	660	660
- of which class B shares	27,933	20,184
Average number of shares, 000	24,718	20,844
Outstanding warrants, 000	804	760
- entitlement to class B shares at conversion, 000	876	836
Share capital at end of period, SEK m	143.0	104.2
Equity at end of period, SEK m	607.3	153.9
Basic and diluted earnings per share, SEK	-5.43	-6.49
Equity per share, SEK	21.24	7.38
Net worth per share, SEK	21.24	7.38
Cash flow per share after investments, SEK	-3.34	-6.76
Equity ratio, %	83.7	75.0

Definitions of key figures

Return on equity. Profit/loss after financial items as a percentage of average equity.

Return on capital employed. Profit/loss after financial items plus financial costs as a percentage of average capital employed.

Return on total assets. Profit/loss after financial items plus financial costs as a percentage of average total assets.

Equity per share. Equity divided by the number of shares at the end of the period.

Average number of shares. The unweighted average number of shares in the year.

Cash flow per share after investments. Cash flow after investments divided by the average number of shares.

Basic and diluted earnings per share. Profit/loss after financial items divided by the average number of shares.

Equity ratio. Equity in relation to total assets.

Net worth per share. Equity plus hidden assets in listed equities divided by number of shares at the end of the period.

Capital employed. Total assets less non interest-bearing liabilities including deferred tax liabilities.

PARENT COMPANY INCOME STATEMENT	2010	2009
(SEK m)	Jan-Dec	Jan-Dec
Turnover, etc.
Net sales	74.7	38.4
Work performed by the company for its own use and capitalized	0.3	4.1
Other operating income	1.9	3.7
Total	76.9	46.2
Operating costs
Raw materials and consumables	-0.8	0.0
Other external costs	-97.8	-71.4
Personnel costs	-89.6	-92.7
Depreciation and amortization	-7.9	-10.4
Total	-196.1	-174.5
Operating profit/loss	-119.2	-128.3
Profit/loss from financial investments	-16.5	-6.7
Profit/loss after financial items	-135.7	-135.0
Net profit/loss	-135.7	-135.0
Net profit/loss attributable to:
Equity holders of the parent	-135.7	-135.0

PARENT COMPANY STATEMENT OF COMPREHENSIVE INCOME	2010	2009
(SEK m)	Jan-Dec	Jan-Dec
Net profit/loss	-135.7	-135.0
Other comprehensive income for the period, net after tax	-135.7	-135.0
Total comprehensive income for the period	-135.7	-135.0
Total comprehensive income attributable to: Equity holders of the parent	-135.7	-135.0

PARENT COMPANY BALANCE SHEET SUMMARY	2010	2009
(SEK m)	31 Dec	31 Dec
Assets
Intangible fixed assets	4.3	4.6
Tangible fixed assets	24.8	26.9
Financial fixed assets	19.0	19.0
Inventories	0.1	0.6
Current receivables	27.4	9.2
Investments in securities, etc	418.6	130.4
Cash and bank balances	226.0	10.1
Total assets	720.2	201.0
Liabilities and equity
Equity	604.6	153.8
Long-term liabilities	0.1	1.8
Current liabilities	115.4	45.4
Total liabilities and equity	720.2	201.0

Chairman Board member Board member

Göran Pettersson Björn C Andersson Anna Malm Bernsten

Ingemar Kihlström Ron Long

Board member CEO/Board member

Huddinge, Sweden, 21 February 2011

Review report

We have conducted a limited review of the financial statement for Medivir AB (publ) for the period 1 January – 31 December 2010. The preparation and presentation of these interim financial statements pursuant to IAS 34 and the Swedish Annual Accounts Act are the responsibility of the Board of Directors and Chief Executive Officer. Our responsibility is to report our conclusions concerning these interim financial statements on the basis of our limited review.

We have conducted our limited review pursuant to the Standard for Limited Review (SÖG) 2410 "Limited review of interim financial information conducted by the company's appointed auditor." A limited review consists of making inquiries, primarily to individuals responsible for financial and accounting matters, as well as performing analytical procedures and taking other limited review measures. A limited review has a different focus and significantly less scope than an audit according to RS Auditing Standards in Sweden and generally accepted auditing practice. The review procedures undertaken in a limited review do not enable us to obtain a level of assurance where we would be aware of all important circumstances that would have been identified had an audit been conducted. Therefore, a conclusion reported on the basis of a limited review does not have the level of certainty of a conclusion reported on the basis of an audit.

Based on our limited review, no circumstances have come to our attention that would give us reason to believe that the interim financial statements have not been prepared pursuant to IAS 34 and the Swedish Annual Accounts Act for the group, and pursuant to the Swedish Annual Accounts Act for the parent company, in all material respects.

PricewaterhouseCoopers AB

Claes Dahlén Authorized Public Accountant Stockholm, Sweden, 21 February 2011