Medivir — Earnings Release 2011

Feb 23, 2012

Press release, 23 February 2012

Financial Statement, 1 January – 31 December 2011

Operating profit of SEK 111.9 m

Huddinge, Sweden—Today, Medivir AB (OMX: MVIR), a research-based specialty pharmaceutical company focused on infectious diseases, is publishing its Interim Report for the period 1 January – 31 December and its operational report for the fourth quarter of 2011.

Summary of the financial year (January – December)

• Net sales were SEK 698.6 (54.9) m
• Profit/loss after tax amounted to SEK 113.8 (-134.2) m
• Basic and diluted earnings per share were SEK 3.80 (-5.43)
• Cash flow from operating activities amounted to SEK 57.3 (-76.9) m; cash and cash equivalents and investments in securities etc. amounted to SEK 536.3 (647.2) m at the end of the period
• Positive results progressively reported through the year from phase IIb trials on TMC435 intreatment of hepatitis C
• Global clinical phase III program commences on TMC435, simultaneous with TMC435 participating in two planned phase II combination trials with compounds from BMS and Gilead/Pharmasset
• Medivir's organization and commercial presence in the Nordics strengthened through the acquisition of BioPhausia
• Completion of phase Ib trial on polymerase inhibitor TMC649128 against hepatitis C. However, the antiviral efficacy goal was not achieved, and clinical development was discontinued. The focus in the polymerase partnership with Janssen Pharmaceuticals on HCV is now on nucleotide polymerase inhibitors, where a CD was designated. This project is heading towards clinical trials
• Medivir received USD 45 m (SEK 279 m) from Meda, which acquired the North American rights to Xerese®
• Maris Hartmanis appointed as Medivir's new CEO in September, the company's management was also strengthened.

Financial summary of the fourth quarter (October – December)

• Net sales were SEK 131.8 (1.3) m
• Profit/loss after tax amounted to SEK -53.1 (-56.6) m
• Basic and diluted earnings per share were SEK -1.70 (-2.05)

Post balance sheet events

• Phase II combination trial on TMC435 and Gilead's compound GS7977 commences
• GSK initiates OTC launch of Xerclear® in Europe branded Zoviduo and Zovirax Duo

CONSOLIDATED PROFIT PERFORMANCE	2011	2010	2011	2010
SUMMARY, SEK m	Oct-Dec	Oct-Dec	Jan-Dec	Jan-Dec
Net sales	131.8	1.3	698.6	54.9
Gross profit/loss	35.1	1.2	458.0	54.1
EBITDA	-35.7	-55.3	135.3	-128.8
EBIT	-44.1	-56.9	111.9	-136.7
Profit/loss before tax	-47.5	-56.6	111.2	-134.2
Profit/loss after tax	-53.1	-56.6	113.8	-134.2
Operating margin, %	-33.6%	-4,282.7%	16.0%	-249.0%
Basic and diluted earnings per share, SEK	-1.70	-2.05	3.80	-5.43

CEO's comment on 2011

"We're continuing to strengthen our positions"

Medivir now enjoys a solid base to manage and keep developing the assets in its project portfolio, and to continue the build-up of its commercial platform. The acquisition of BioPhausia during the year was a clear and conscious step on the road towards Medivir's expressed goal of becoming a research-based and profitable specialty pharmaceutical company. This acquisition brought yearly sales of prescription pharmaceuticals on the Nordic market of just over SEK 500 m, and also gave us an all-new organization, which contributed to the company now having the breadth of know-how and operations extending from research and development to the marketing and sale of prescription pharmaceuticals. Medivir also possesses attractive projects in development phases, with TMC 435 being the most advanced, which is in clinical phase III. In combination with our ambition to identify new business opportunities in the Nordics, these factors are the foundation of our continued work to develop Medivir towards profitability.

The company's business operations

The Pharmaceuticals business area

The Pharmaceuticals business area includes the group's research and development portfolio and the original pharmaceuticals owned by BioPhausia, as well as our self-developed cold sore pharmaceutical Xerclear® . This product was launched under the Xerese® brand by Meda in the US in the spring, and in summer, the American rights were sold for a one-off payment of USD 45 m (SEK 279 m). In the first quarter of 2012, our partner, GSK, commenced its launch of this cold sore compound on its first five European OTC markets, under the brands Zoviduo and Zovirax Duo.

Since Medivir's acquisition of BioPhausia in June, sales of original pharmaceuticals remained stable, with an unchanged positive EBITDA margin. Net sales for the fourth quarter from pharmaceutical sales were SEK 47.5 (0.0) m, and SEK 0.0 (0.0) m from outlicensing and partnership agreements. EBITDA for the fourth quarter amounted to SEK -36.3 (-55.3) m. EBITDA includes research and development costs of SEK -48.0 (-48.2) m.

Parallel imports in Cross Pharma

Net sales for the fourth quarter were SEK 84.7 m, which means that this business area achieved increased growth for the fifth consecutive quarter. EBITDA for the period was SEK 0.6 m. To exploit new business opportunities, which are expected to have a positive impact in 2012, Cross increased its employee headcount. This means that fixed costs increased in the final quarter, thus negatively affecting operating margins. We are convinced that through its preparations in the fourth quarter, Cross will be able to return to historically strong earnings levels.

R&D

Hepatitis C in the world around us

Future treatment of patients infected with hepatitis C of different genotypes will be based on combinations of pharmaceuticals with different action mechanisms, such as protease and polymerase inhibitors. The development of pharmaceuticals against hepatitis C is also heading towards attempting to remove interferon, and in the next stage, also ribavirin, from current standard of care (SoC). It is likely that this will only be achievable with two or more direct-acting antiviral compounds being combined in one therapy. The results from different small-scale, conceptual combination therapy without interferon, and in some cases, also without ribavirin, were also presented in the year. In late-2011 and early-2012, several corporate acquisitions were conducted with the aim of supplementing the buyers' proprietary development portfolios in this segment and this has resulted in a significant sharpening of competition in the development of new anti-hepatitis C pharmaceuticals. We also expect new combination trials to be conducted through the coming years, and that different partnership structures will be tested.

TMC435—Medivir's protease inhibitors

Like ourselves, several external commentators regard TMC435 as the best protease inhibitor currently, because in clinical phase IIb trials, it has demonstrated at least equal efficacy, a significantly superior safety profile, and is more easily dosed, i.e. once daily, than those protease inhibitors approved in 2011. In the year, our collaboration partner, Janssen Pharmaceuticals, commenced two clinical collaboration projects for combination therapy, the first with BMS and the second with Pharmasset, now taken over by Gilead. These companies have CDs in phase II, which have different mechanism of action to TMC435, and the aim is to evaluate efficacy and safety in combination therapy with each compound. Through these partnerships, TMC435 is well positioned in the front line of new alternatives for treating hepatitis C, without both interferon and ribavirin. The combination trials are about to be conducted for treating HCV genotype 1 infections, the most common and hardest-to-treat type of hepatitis C infection.

Several trials on TMC 435 were also reported in the year, on treatment-naïve and treatment-experienced patients. Global phase III trials are currently ongoing, and we expect our partner to file a global new drug application (NDA) in the first half-year 2013.

Development program for polymerase inhibitors in partnership with Janssen Pharmaceuticals

TMC649128, a nucleoside NS5B polymerase inhibitor, was produced in a development program in partnership with Janssen. However, its antiviral efficacy did not achieve the predetermined target, and this clinical phase Ib trial was discontinued in the fourth quarter. Parallel work on developing a nucleotidebased polymerase inhibitor has been ongoing in this project. The CD has been designated, and this project is in preclinical development ahead of clinical trials.

Hepatitis C in-house

The company has two proprietary hepatitis C projects, one a nucleotide-based polymerase inhibitor and one NS5A replication complex inhibitor. Both are in preclinical optimization. In the former project, new and highly potent nucleotides have been identified, with profiles comparable to the most advanced compounds in clinical development phases. Patent applications have been filed, and work is focused on the selection of clinical development candidates. The program with the NS5A replication complex inhibitor is to develop the next generation of pharmaceutical with this action mechanism and the objective of treating a broader patient group than is possible with those CDs currently in clinical development.

Other projects

On the Cathepsin K project, for treating skeletal disorders, several preclinical trials were concluded in the year that are currently being evaluated. Assuming a positive outcome, this project is scheduled to enter clinical phase I trials in the first half-year 2012.

Maris Hartmanis CEO and President

For more information, please contact:

Rein Piir, EVP Corporate Affairs & IR, +46 (0) 70 537292 Maris Hartmanis, CEO, +46 (0)8 5468 3113

Conference call for investors, analysts and the media

The Interim Report for the fourth quarter 2011 will be presented by the CEO, Maris Hartmanis, and members of Medivir's management.

Time: 2 p.m. (CET) on Thursday, 23 February 2012.

	The conference call will also be streamed via a link from the website www.medivir.com
USA	+1 866 966 5335
Europe	+44 (0) 20 3003 2666
Participant telephone numbers: Sweden	+46 (0)8 505 204 24

Financial information in 2012

The Interim Report for January-March will be published on 10 May The Annual General Meeting will be held on 10 May The Interim Report for January-June will be published on 23 August The Interim Report for January-September will be published on 20 November

Highlights of the fourth quarter 2011

Janssen Pharmaceuticals and BMS entered an agreement to evaluate TMC435 and BMS's compound daclatasvir (BMS-790052) in a phase II combination trial on patients infected with HCV genotype 1

The purpose of the study is to evaluate sustained viral response (SVR) after 12 and 24 week's therapy. This will be conducted by evaluating TMC435 and daclatasvir as adjuvant to pegylated interferon and ribavirin, without interferon, and finally, also without ribavirin. This study is scheduled to start in the first half-year 2012 and will be conducted on previous null responders to treatment with pegylated interferon and ribavirin.

Both TMC435, which is an NS3/4A protease inhibitor (PI) and BMS's CD daclatasvir, which is an NS5A replication complex inhibitor, are administered in a single daily dose, which is important for being able to develop different combination options in a single tablet dose once daily in the future.

SVR12—new primary endpoint for TMC435 in ongoing phase III trials

In the ongoing phase III trials on treatment-naive patients and relapses, a new primary endpoint, SVR12 instead of SVR24, has been set in a new agreement with the FDA. This means that the clinical treatment duration will reduce by 12 weeks. Enrolment to these trials (QUEST 1 & 2 and PROMISE) was completed in August, and these trials are scheduled to be ready for evaluation during the fourth quarter 2012.

HCV—TMC649128 a nucleoside NS5B polymerase inhibitor, did not achieve its antiviral efficacy goal and clinical development was discontinued

TMC649128 was the first CD in the polymerase partnership with Janssen Pharmaceuticals and entered clinical development in the first quarter of 2011. It was safe and well tolerated for all doses studied for up to 14 days. Because its antiviral efficacy did not satisfy the goal of the product profile, clinical development was discontinued.

This part of the HCV collaboration has now directed it's focus to the nucleotide polymerase inhibitor program. A CD has been designated, and this project is now in preclinical development ahead of clinical trials.

Positive final result from phase IIb trial on treatment-experienced patients (ASPIRE C206) published

Final results from the ASPIRE trial where TMC 435 was dosed as an adjuvant to interferon and ribavirin showed a significant increase in viral cure rates on previous null responders to hepatitis C therapy. All TMC 435 sub-groups achieved significantly higher cure rates (SVR24) than the control group (only pegylated interferon and ribavirin):

• 85% against 37% for prior relapsers
• 75% against 9% for prior partial responders
• 51% against 19% for prior null responders

TMC435 was generally safe and well tolerated in all patient groups, and treatment durations, as was also demonstrated in previous clinical trials. These results also confirm that TMC435 has a clean safety profile and good efficacy in this hard-to-treat patient group with chronic hepatitis C genotype 1, with dosing of one tablet once daily at a low dose of 150 mg.

Janssen Pharmaceuticals presents final results from the phase IIb trial on treatment-naive patients PILLAR (C205) at the AASLD meeting

A summary of these results was reported by Medivir earlier in the year. Safety data shows that TMC435 is also safe and well tolerated in this patient group. In terms of efficacy, it showed that 83% of patients were able to discontinue all treatment after 24 weeks.

Patients were treated with TMC435 as an adjuvant to pegylated interferon and ribavirin, either 12 or 24 weeks. The SVR was in the 81-86% range depending on treatment duration, which confirms that TMC435 is the best protease inhibitor currently in development.

Post-period end highlights

Phase II combination trial on TMC435 and GS7977 starts in January

This phase II trial, conducted by Tibotec Pharmaceuticals, will study the efficacy and safety of 12 and 24 week treatment with TMC435 at 150 mg per day in combination with GS7977, 400 mg per day with or without ribavirin, for people with chronic hepatitis C infections of genotype 1 that were previous null responders to peginterferon/ribavirin treatment. The primary endpoint of this trial will be sustained viral response 12 weeks after end of treatment (SVR12). TMC435 is an NS3/4A protease inhibitor, and Pharmasset's GS7977 is a nucleotide NS5B polymerase inhibitor.

GSK initiates European OTC launch of Xerclear under the Zoviduo and Zovirax Duo brands

In June 2010, Medivir reached an agreement with GSK, which received exclusive rights to market and distribute Xerclear® for OTC sale on several markets, including Europe, Russia, Japan, India, Australia and New Zealand. GSK has now commenced the first wave of OTC launches involving the five countries where Zoviduo and Zovirax Duo are so far approved for OTC sale: Denmark, the Czech Republic, Slovakia, Portugal and Poland. These launches will be conducted through the spring, starting February. GSK's objective is to launch the product on the remaining markets as each regulatory authority approves it for OTC sale. For its exclusive rights, GSK will pay Medivir up to double-digit royalties on sales.

Project portfolio

Medivir has a broad-based product portfolio for treating a range of infectious diseases. The company will continue to focus on progressing this pipeline in addition to looking for new potential opportunities through acquisition or licensing. Medivir will continue to seek future partnerships on product development, but intends to retain commercial rights for its projects in the Nordic region.

Medivir's project portfolio is summarized in the figure below. For more information please visit www.medivir.com.

Consolidated earnings and financial position

Turnover, 1 January – 31 December 2011

Net sales were SEK 698.6 (54.9) m, an increase of SEK 643.7 m year on year. Turnover for the period mainly consisted of a one-off payment for Xerclear® /Xerese® of SEK 278.9 m for the sale of the American rights. According to the terms, Meda receives all rights to the product in North America. Turnover in the period from the sale of original pharmaceuticals was SEK 111.2 (0.1) m and turnover from parallel imports was SEK 185.9 (-) m. Turnover in the period was also sourced from two milestone payments from Medivir's partner Tibotec totaling SEK 122.3 m. These related to the start of phase III trials on TMC435 against hepatitis C of SEK 51.8 m and the start of phase Ia on TMC649128 against hepatitis C of SEK 70.5 m. In the same period of the previous year, turnover primarily consisted of one-off payments of SEK 45.3 m for a licensing agreement for Xerclear® /Xerese® .

Net sales split	2011	2010	2011	2010
(SEK m)	Oct-Dec	Oct-Dec	Jan-Dec	Jan-Dec
Outlicensing and partnership agreements
One-off payments	0.0	-	401.2	47.1
Pharmaceutical sales	47.5	-	111.2	0.1
Parallel imports	84.7	-	185.9	-
Other services	-0.4	1.3	0.3	7.7
Total	131.8	1.3	698.6	54.9

Costs and results of operations, 1 January - 31 December 2011

Cost of goods sold was SEK -240.6 (-0.8) m, a SEK 239.8 m increase. Gross profit was SEK 458.0 (54.1) m. Operating expenses were SEK -346.1 (-190.8) m, a SEK 155.3 m increase year on year. Operating expenses were divided between cost of sales of SEK -95.2 (-9.5) m, administrative expenses of SEK -47.2 (-29.5) m, research and development costs of SEK -184.1 (-153.4) m and other operating expenses/income of SEK -19.7 (1.6) m. Cost of sales increased by SEK 85.7 m and costs for administration increased by SEK 17.7 m mainly because of costs in the commercial operations of BioPhausia and higher royalty costs to third parties. Research and development costs increased by SEK 30.7 m mainly because of higher external project costs and increased royalty costs to third parties. Other operating income/expenses increased by SEK 21.2 m mainly due to transaction costs for the acquisition of BioPhausia.

The operating profit/loss was SEK 111.9 (-136.7) m, a positive change of SEK 248.5 m year on year.

The profit/loss from financial income/expense was SEK -0.7 (2.5) m. The profit/loss from financial income/expense includes impairment on shares of Epiphany Biosciences Inc. of SEK 7.8 m and an impairment of shares in Presidio of SEK 1.3 m because permanent value impairment is judged to have occurred in the period. Tax for the period was SEK 2.5 (0.0) m, and is tax on temporary differences, i.e. the difference between carrying amounts and taxable values.

100% of the shares of generics company BMM Pharma AB were divested in the third quarter 2011. The purchase price, including the value of inventories on the date of sale, was SEK 32.2 m. The divestment affected net profit for the period negatively by SEK -0.5 m. The criteria for recognition as a discontinued operation have not been satisfied because BMM Pharma AB was neither an independent segment nor a significant part of operations.

Net profit/loss for the period was SEK 113.8 (-134.2) m.

Turnover and results of operations, 1 October - 31 December 2011

Net sales for the period amounted to SEK 131.8 (1.3) m, a SEK 130.5 m increase year on year. Turnover from sales of original pharmaceuticals was SEK 47.1 (0.0) m in the period and remained stable with an unchanged healthy EBITDA margin. Turnover from parallel imports was SEK 84.7 (-) m which means returning increased growth for the fifth consecutive quarter.

Cost of goods sold was SEK -96.7 (-0.1) m, a SEK 96.6 m increase. Gross profit was SEK 35.1 (1.2) m. Operating expenses were SEK -79.0 (-58.2) m, a SEK 20.9 m increase year on year. Operating expenses were divided between selling expenses of SEK -18.4 (-2.4) m, administrative expenses of SEK -13.9 (-9.0) m, research and development costs of SEK -48.0 (-48.2) m and other operating expenses/income of SEK 1.2 (1.5) m. Cost of sales increased by SEK 16.0 m due to expenses in the commercial operations of BioPhausia.

The operating profit/loss was SEK -44.0 (-56.9) m. The profit/loss from financial investments was SEK -3.4 (0.4) m. Tax for the period was SEK -5.7 (0.0) m. The net profit/loss was SEK -53.1 (-56.5) m.

Segment information

Prior to the acquisition of BioPhausia, Medivir was organized into a single integrated operating segment. After the acquisition of BioPhausia, Medivir is organized into two operating segments. The core of the business operations consists of the Pharmaceuticals operating segment. The Pharmaceuticals segment comprises research and development of new products, as well as manufacturing, marketing and sales of pharmaceuticals. The Pharmaceuticals segment includes the group's research portfolio, our selfdeveloped cold sore pharmaceutical Xerclear® and original pharmaceuticals that BioPhausia has unlimited ownership of including the generic products where BioPhausia's ownership is limited. BioPhausia divested the company's generics business in the third quarter 2011. The second operating segment consists of the Parallel Import business operation in BioPhausia subsidiary Cross Pharma, which imports original pharmaceuticals from EU countries where pricing is lower than in Sweden. When pharmaceuticals are sold on the market, pharmacies are offered a price that is lower than the original producers' in these countries.

Pharmaceuticals segment	2011	2010	2011	2010
(SEK m)	Oct-Dec	Oct-Dec	Jan-Dec	Jan-Dec
Net sales	47.1	1.3	512.7	54.9
EBITDA	-36.3	-55.3	137.6	-128.8
EBITDA %	-77.0%	-4253.8%	26.8%	-234.6%

Turnover and results of operations, 1 January-31 December 2011

Net sales were SEK 512.7 (54.9) m, a SEK 457.8 m increase year on year. Turnover in the period primarily consisted of a one-off payment of SEK 278.9 m (USD 45.0 m) for Xerclear® for sale of the North American rights and two milestone payments from Medivir's partner Tibotec of SEK 122.3 m. Turnover in the period from sales of original pharmaceuticals remained stable with an unchanged healthy EBITDA margin. Of total net sales, 78 (86)% consisted of one-off payments for outlicensing and partnership agreements and 22 (0)% of pharmaceutical sales.

EBITDA for the period was SEK 137.6 (-128.9) m, equating to a margin of 26.8 (-234.8)%. EBITDA includes research and development costs of SEK -184.1 (-153.4) m. EBITDA for the period, without adjusting for surplus values on consolidation of inventories from the acquisition of BioPhausia amounted to SEK 164.0 m, equating to a margin of 32.0%.

Turnover and results of operations, 1 October-31 December 2011

Net sales for the period were SEK 47.1 (1.3) m, a SEK 45.8 m increase year on year. Of total net sales, 100 (0)% consists of pharmaceuticals sales, 0 (0)% consist of one-off payments for outlicensing and collaboration agreements and 0 (100)% of other sales.

EBITDA for the period was SEK -36.3 (-55.3) m, equating to a margin of -77.0 (-4,253.8)%. EBITDA includes research and development costs of SEK -48.0 (-48.2) m.

Parallel Import segment	2011	2010	2011	2010
(SEK m)	Oct-Dec	Oct-Dec	Jan-Dec	Jan-Dec
Net sales	84.7	-	185.9	-
EBITDA	0.6	-	-2.3	-
EBITDA %	0.7%	-	-1.2%	-

Turnover and results of operations, 1 January-31 December 2011

Net sales for the period amounted to SEK 185.9 m. EBITDA for the period was SEK -2.3 m, equating to a margin of -1.2%. A number of products with insufficient market potential were identified in the period, which resulted in inventory impairment of SEK 5.8 m. EBITDA for the period without inventory impairment and adjusting for surplus values on consolidation from the acquisition of BioPhausia amounted to SEK 6.4 m, equating to a margin of 3.4%.

Turnover and results of operations, 1 October-31 December 2011

Net sales for the period amounted to SEK 84.7 m, which means the segment is returning increased growth for the fifth consecutive quarter. EBITDA for the period was SEK 0.6 m, equating to a margin of 0.7%. The segment is continuing to achieve year-on-year growth. To exploit new business opportunities, the employee headcount has been increased. This means that fixed costs increased in the final quarter of the year, and thus affected operating margin negatively.

Cash flow and financial position

Cash flow from operating activities was SEK 57.3 (-76.9) m. The American rights for Xerclear® /Xerese® were sold in the second quarter, which affected cash flow from operating activities for the period by SEK 278.9 m.

Cash flow from investing activities was SEK -184.8 (-5.8) m. In the second quarter of 2011, Medivir acquired BioPhausia, which affected investing activities by SEK -191.7 m after bank balances taken over. The generics company BMM Pharma AB was divested in the third quarter of 2011, which had a positive effect on cash flow from investing activities in the period of SEK 24.0 m. Cash flow from financing activities was SEK 16.5 (586.5) m.

At the beginning of 2011, cash and cash equivalents including investments in securities, etc. with a maximum maturity of three months were SEK 647.2 (143.6) m and SEK 536.3 (647.2) m at the end of the period, a change of SEK -110.9 (503.6) m. At the end of the period, assets pledged amounted to SEK 162.2 (0.0) m. In accordance with Medivir's financial policy, Medivir invests its funds in low-risk interest-bearing securities. The company judges that current financial assets will secure the funding of operations.

Investments, depreciation and amortization

Investments in intangible fixed assets in the period were SEK 559.4 (0.3) m, which related to the acquisition of BioPhausia. Of this acquisition, SEK 351.9 m was product rights, SEK 19.2 m trademarks and brands and SEK 188.3 m goodwill.

Investments in tangible fixed assets in the period were SEK 17.2 (5.8) m, and mainly consisted of research equipment.

Depreciation of tangible fixed assets of SEK -9.4 (-7.3) m was charged to profit/loss in the period. Amortization of intangible fixed assets of SEK -14.0 (-0.6) m was charged to profit/loss for the period.

Employees

Medivir had 168 (80) employees at the end of the period, 63 (53)% of which were women. Accordingly, the number of employees increased by 88 in the period, mainly because of the acquisition of BioPhausia, whose subsidiary Cross Pharma has a packaging unit in Poland with 51 employees.

Royalty obligations

A major part of Medivir's research and development projects were generated entirely in-house and Medivir is thus entitled to all revenues from such inventions. Other projects have their genesis at Swedish universities, which entitle Medivir to the rights to turnover generated in return for making royalty payments. In addition, some of Medivir's projects have previously been licensed to third parties, but have reverted to Medivir, and Medivir has undertaken to pay a royalty to the former licensee. In the period, total royalty costs to third parties were SEK 50.6 (0.0) m of which SEK 37.7 m to AstraZeneca is included in selling expenses and SEK 12.9 m to other licensees is included in research costs.

Parent company, 1 January - 31 December 2011

Medivir AB (publ), corporate identity no. 556238-4361, is the parent company of the group. Operations primarily consist of research and development, and administrative functions.

Parent company net sales were SEK 432.3 (72.3) m. Operating expenses were SEK -265.1 (-190.8) m, up SEK 74.3 m year on year. Operating expenses were divided between selling expenses of SEK -45.5 (-9.5) m, administrative expenses of SEK -36.4 (-28.7) m, research and development costs of SEK -184.1 (-152.1) m and other operating expenses/income of SEK 0.9 (-0.5) m. The operating profit/loss was SEK 167.0 (-119.2) m. The profit/loss from financial income/expense was SEK -13.4 (-16.5) m. The net profit/loss for the period was SEK 153.6 (-135.7) m.

Investments in tangible and intangible fixed assets were SEK 15.7 (5.8) m.

Investments in financial fixed assets were SEK 604.1 (0.0) m, relating to the acquisition of BioPhausia. The acquisition cost includes SEK 17.6 m of transaction costs. Cash and cash equivalents including investments in securities, etc. with a maximum maturity of three months amounted to SEK 516.3 (644.6) 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 156.3 (143.0) m and equity was SEK 1,095.6 (607.3) m. At the end of the period, the number of shares of Medivir AB was 31,253,827 (28,593,229), of which 660,000 (660,000) were class A and 30,593,827 (27,993,229) class B shares with a nominal value of SEK 5. The average number of shares in the period was 29,923,528 (24,718,388). The increase of 2,660,598 shares in the period mainly relates to new shares issued as payment for the acquisition of BioPhausia.

Share structure, 31 December 2011

Share class	Number of shares	Number of votes	% of capital	% of votes	Shares after full exercise of options
A 10 votes	660,000	6,600,000	2.1%	17.7%	660,000
B 1 vote	30,593,827	30,593,827	97.9%	82.3%	31,370,460
Total	31,253,827	37,193,827	100.0%	100.0%	32,030,460

Basic and diluted earnings per share, based on a weighted average number of outstanding shares, was SEK 3.80 (-5.43). Equity per share was SEK 35.05 (21.24). The equity ratio was 80.7 (83.7)%.

Shareholders

As of 31 December 2011, Medivir AB had 10,635 shareholders. The circumstances in the following table illustrate the situation as of this date according to the share register maintained by Euroclear Sweden AB.

Name	A shares	B shares	% votes	% capital
Bo Öberg	284,000	262,475	8.3%	1.8%
Nils Gunnar Johansson	284,000	76,575	7.9%	1.2%
Staffan Rasjö	0	2,282,582	6.1%	7.3%
Skandia Fonder	0	1,485,480	4.0%	4.8%
Tredje AP-fonden	0	1,200,660	3.2%	3.8%
AFA Försäkring	0	1,128,959	3.0%	3.6%
Fidelity Funds Northern Trust	0	1,054,439	2.8%	3.4%
Alecta Pensionsförsäkring	0	1,000,000	2.7%	3.2%
Länsförsäkringar Fonder	0	970,372	2.6%	3.1%
Christer Sahlberg	92,000	29,881	2.6%	0.4%
Pictet & Cie	0	898,469	2.4%	2.9%
DnB Carlsson Fonder	0	798,637	2.2%	2.6%
Unionen	0	704,200	1.9%	2.3%
Banque Carnegie Luxembourg	0	663,679	1.8%	2.1%
Handelsbanken Fonder	0	599,177	1.6%	1.9%
Total, 15 largest shareholders	660,000	13,155,585	53.1%	44.2%
Total, other shareholders		17,438,242	46.9%	55.8%
TOTAL	660,000	30,593,827	100%	100%

Outlook

Medivir is a research-based specialty pharmaceutical company focused on infectious diseases whose goal is to be a profitable Nordic specialty pharmaceutical company in strong growth. Medivir is working on a goal-oriented and strategic footing to create the best possible prospects of developing the company quickly and with balanced risks. The company has a solid financial position.

The acquisition of BioPhausia brought yearly sales of prescription pharmaceuticals on the Nordic market of just over SEK 500 m, as well as an all-new organization. Medivir now possesses the breadth of knowhow and operations extending from research and development to the marketing and sale of prescription pharmaceuticals. Medivir also possesses attractive projects in development phases, with TMC435 being the most advanced, which is in clinical phase III. In combination with the ambition of identifying new business opportunities in the Nordics, these factors are the foundation of the continued work to develop Medivir towards profitability.

Dividend

The Board of Directors is proposing no dividend for the financial year 2011.

Nomination Committee 2011-2012

The Nomination Committee 2011-2012 consists of representatives of at least the three largest shareholders at the end of the third quarter of 2011 and the Chairman of the Board. The members of the Nomination Committee are

• Anders Algotsson, Chairman and representative of AFA Försäkring
• Caroline af Ugglas, representative of Skandia Liv
• Bo Öberg, representative of class A shareholders
• Göran Pettersson, Chairman of Medivir's Board

The Nomination Committee is proposing that the AGM 2012 appoints a new Board of Directors through the re-election of the Board's four members Göran Pettersson (Chairman), Björn C. Andersson, Anna Malm Bernsten and Ingemar Kihlström and the election of two new members, Anders Hallberg and Rolf A Classon.

Shareholders can submit proposals to the Nomination Committee up to and including 2 April at the following address: Blasieholmsgatan 2, 111 48 Stockholm, Sweden, or by e-mail to: valberedning@medivir.se.

A complete statement of the Nomination Committee's proposals will be in the forthcoming notice convening the AGM 2012.

AGM 2012

The Annual General Meeting will be held at 2 p.m. on Thursday, 10 May at Polstjärnan Conference Centre, Sveavägen 77, 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 4 May and secondly notify the company at the address Medivir AB, Blasieholmsgatan 2, 111 48 Stockholm, Sweden or by telephone on + 46(0) 8 407 6430. The company shall have received this notification by no later than Friday 4 May. 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 on the company's website, www.medivir.se, from 10 April 2011. Printed copies of the Annual Report will be distributed to those shareholders that have requested it.

CONSOLIDATED INCOME STATEMENT SUMMARY	2011	2010	2011	2010
(SEK m)	Oct-Dec	Oct-Dec	Jan-Dec	Jan-Dec
Net sales	131.8	1.3	698.6	54.9
Cost of goods sold	-96.7	-0.1	-240.6	-0.8
Gross profit/loss	35.1	1.2	458.0	54.1
Selling expenses	-18.4	-2.4	-95.2	-9.5
Administrative expenses	-13.9	-9.0	-47.2	-29.5
Research and development costs	-48.0	-48.2	-184.1	-153.4
Other operating income/expenses	1.2	1.5	-19.7	1.6
Operating profit/loss	-44.0	-56.9	111.9	-136.7
Net financial income/expense	-3.4	0.4	-0.7	2.5
Profit/loss after financial items	-47.4	-56.5	111.2	-134.2
Tax	-5.7	0.0	2.5	0.0
Net profit/loss	-53.1	-56.5	113.8	-134.2
Net profit/loss attributable to:
Equity holders of the parent	-53.1	-56.5	113.8	-134.2
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)	-1.70	-2.05	3.80	-5.43
Average number of shares, 000	31,254	27,509	29,924	24,718
Number of shares at end of period, 000	31,254	28,593	31,254	28,593

CONSOLIDATED STATEMENT OF COMPREHENSIVE
INCOME	2011	2010	2011	2010
(SEK m)	Oct-Dec	Oct-Dec	Jan-Dec	Jan-Dec
Net profit/loss	-53.1	-56.5	113.8	-134.2
Other comprehensive income
Exchange rate differences	0.4	1.0	0.0	1.0
Other comprehensive income for the period, net after
tax	0.4	1.0	0.0	1.0
Total comprehensive income for the period	-52.7	-55.5	113.8	-133.2
Total comprehensive income attributable to:
Equity holders of the parent	-52.7	-55.5	113.8	-133.2

CONSOLIDATED BALANCE SHEET SUMMARY	2011	2010
(SEK m)	31 Dec	31 Dec
Assets
Intangible fixed assets	529.0	4.3
Tangible fixed assets	35.6	24.8
Financial fixed assets	9.7	18.8
Deferred tax asset	78.4	0.0
Inventories	74.0	0.1
Current receivables	93.9	30.2
Investments in securities, etc.	425.3	418.6
Cash and bank balances	110.9	228.7
Total assets	1,356.8	725.5
Liabilities and equity
Equity	1,095.6	607.3
Long-term liabilities	70.7	0.1
Current liabilities	190.5	118.1
Total liabilities and equity	1,356.8	725.5

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (SEK m)	Share capital	Other paid-up capital	Exchange rate difference	Deficit brought forward	Total equity
Opening balance, 1 Jan. 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 Dec. 2010	143.0	1,396.0	5.8	-937.6	607.3
Opening balance, 1 Jan. 2011	143.0	1,396.0	5.8	-937.6	607.3
Total comprehensive income for the period			0.0	113.8	113.8
Conversion of options	0.5	5.6			6.1
Acquisition of options		0.2			0.2
New share issues	12.8	354.4			367.2
Staff stock option plans: value of
employee service		1.0			1.0
Closing balance, 31 Dec. 2010	156.3	1,757.3	5.8	-823.8	1,095.6

Financial Statement, Medivir AB, 1 January – 31 December 2011

CONSOLIDATED CASH FLOW STATEMENT SUMMARY	2011	2010
(SEK m)	Jan-Dec	Jan-Dec
Cash flow from operating activities before changes in working capital	92.1	-141.5
Changes in working capital	-34.9	64.7
Cash flow from operating activities	57.3	-76.9
Investing activities
Purchase/sale of fixed assets	-17.2	-5.8
Sale of operations	24.0	0.0
Purchase of operations	-191.7	-
Cash flow from investing activities	-184.8	-5.8
Financing activities
New share issues	0.0	606.4
Issue costs Conversion of options	-0.4 6.1	-38.2 16.7
Acquisition of options	0.2	1.6
Borrowings	100.0	-
Repayment of debt	-90.0	-
Other changes in long-term liabilities	0.5	-
Cash flow from financing activities	16.5	586.5
Cash flow for the period
Cash and cash equivalents, at beginning of period	647.2	143.6
Change in cash and cash equivalents	-111.0	503.9
Exchange rate difference in cash and cash equivalents	0.1	-0.3
Cash and cash equivalents, at end of period	536.3	647.2

KEY FIGURES, SHARE DATA, OPTIONS	2011	2010
	Jan-Dec	Jan-Dec
Return on:
- equity, %	13.4	-35.3
- capital employed, %	14.2	-35.2
- total assets, %	12.7	-28.8
Number of shares at beginning of period, 000	28,593	20,844
New share issues	2,661	7,749.7
Number of shares at end of period, 000	31,254	28,593
- of which class A shares	660	660
- of which class B shares	30,594	27,933
Average number of shares, 000	29,924	24,718
Outstanding warrants, 000	713	804
- entitlement to class B shares at conversion, 000	777	876
Share capital at end of period, SEK m	156.3	143.0
Equity at end of period, SEK m	1,095.6	607.3
Basic and diluted earnings per share, SEK	3.80	-5.43
Equity per share, SEK	35.05	21.24
Net worth per share, SEK	35.05	21.24
Cash flow per share after investments, SEK	-4.26	-3.34
Equity ratio, %	80.7	83.7
EBITDA	135.3	-128.9
EBIT	111.9	-136.7
Operating margin, %	16.0	-249.0

Definitions of key figures

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

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

Capital employed. Total assets less non interest-bearing liabilities including deferred tax liabilities. Cash flow per share after investments. Cash flow after investments divided by the average number of shares.

EBIT. (Earnings before interest and taxes) operating profit/loss after depreciation, amortization and impairment.

EBITDA. (Earnings before interest, taxes, depreciation and amortization) operating profit/loss before depreciation, amortization and impairment.

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

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.

Operating margin. Operating profit/loss as a percentage of net sales.

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

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

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

PARENT COMPANY INCOME STATEMENT (SEK m)	2011 Jan-Dec	2010 Jan-Dec
Net sales	432.3	72.3
Cost of goods sold	-0.2	-0.8
Gross profit/loss	432.1	71.5
Selling expenses	-45.5	-9.5
Administrative expenses	-36.4	-28.7
Research and development costs	-184.1	-152.1
Other operating income/expenses	0.9	-0.5
Operating profit/loss	167.0	-119.2
Net financial income/expense	-13.4	-16.5
Profit/loss after financial items	153.6	-135.7
Net profit/loss	153.6	-135.7
Net profit/loss attributable to:
Equity holders of the parent	153.6	-135.7
PARENT COMPANY STATEMENT OF COMPREHENSIVE INCOME	2011	2010
(SEK m)	Jan-Dec	Jan-Dec
Net profit/loss	153.6	-135.7
Other comprehensive income for the period, net after tax	153.6	-135.7
Total comprehensive income for the period	153.6	-135.7
Total comprehensive income attributable to:
Equity holders of the parent	153.6	-135.7
PARENT COMPANY BALANCE SHEET SUMMARY (SEK m)	2011	2010
	31 Dec	31 Dec
Assets Intangible fixed assets	3.8	4.3
Tangible fixed assets	33.2	24.8
Financial fixed assets	614.0	19.0
Inventories	0.3	0.1
Current receivables	13.7	27.4
Investments in securities, etc	425.3	418.6
Cash and bank balances	91.0	226.0
Total assets	1,181.3	720.2
Liabilities and equity
Equity	1,132.7	604.6
Long-term liabilities	0.0	0.1
Current liabilities	48.6	115.4
Total liabilities and equity	1,181.3	720.2

Accounting principles

Medivir applies International Financial Reporting Standards (IFRS) as endorsed by the European Union. The significant accounting and valuation principles are stated on pages 54-58 of the Annual Report 2010. The group's Interim Report has been prepared according to IAS 34. The parent company uses the policies recommended in RFR 2 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 2010 did not have any material effect on the group's or parent company's financial position or results of operations.

Presentation of the Income Statement

From 1 January 2011, Medivir has revised the Income Statement from classification by nature of expense to classification by function in accordance with IAS 1 Presentation of financial statements. Medivir's management expects classification by function to present a more accurate view of Medivir's financial outcome and will improve comparability with other companies active in the same sector. In order to improve comparability in Medivir's progress, comparative figures for 2010 have also been revised. The group's results of operations and financial position are not affected by the revised presentation. The costs of Medivir's operations are divided between Cost of Goods Sold, Marketing & Sales, Administration and Research & Development:

Marketing and sales

This function is responsible for the commercialization of research projects, product launches and sales of pharmaceuticals in-house and via partners.

Administration

This function comprises Medivir's administrative functions such as management, corporate development, IR and finance department.

Research and development

This function comprises Medivir's research and pharmaceuticals development in pre-clinical and clinical trials and regulatory operations.

Segment reporting

Reporting of operating
segments, (SEK m)	2011	2010	2011	2010	2011	2010
	Pharmaceuticals		Parallel Import		Total
Net sales	512.7	54.9	185.9	-	698.6	54.9
EBITDA	137.6	-128.8	-2.3	-	135.3	-128.8
Depreciation, amortization and
impairment	-22.2	-7.9	-1.2	-	-23.4	-7.9
Financial income/expense	-0.2	2.5	-0.5	-	-0.7	2.5
Profit/loss after financial items	115.2	-134.2	-4.0	-	111.2	-134.2

Transactions with related parties

Transactions with related parties are on an arm's length basis. Intragroup sales amounted to SEK 37.1 (20.0) m. Intragroup purchases amounted to SEK 36.5 (21.1) m.

There are agreements between companies owned by senior managers and Medivir conferring entitlement to royalties on products the company may develop based on patented inventions the company has purchased from the relevant people before and during their time as researchers at Medivir. Remuneration of SEK 0.9 (0.0) m occurred in the period.

In the period, Medivir AB purchased SEK 0.2 m of office services from Scicona Ltd., which is owned by Ron Long, and entered a SEK 0.5 m option agreement with PepTonic AB, of which Mr. Long is a minor owner. These payments were made in the period when Mr. Long was CEO and a Board member of Medivir AB.

Stock option plans

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

Outstanding options, redemption and forfeiture

At the beginning of 2011, Medivir had two outstanding option plans divided between a total of 803,647 outstanding options. In the period, 91,140 options in the 2007 plan were converted, increasing share capital by SEK 0.5 m and other paid-in capital by SEK 5.6 m. The number of outstanding options at the end of the period was 712,507, equating to 776,633 class B shares. Upon full conversion, the number of outstanding options corresponds to approximately 2.5% of capital and approximately 2.1% of the votes, and upon full exercise, could increase equity by SEK 78.1 m, and accordingly, the total number of shares could amount to 32,030,460. After the rights issue in the second quarter of 2010, the conversion terms for the option plans were restated. The options from the 2007 and 2010 programs confer entitlement to conversion of 1.09 shares per option. The exercise price for the option plans has also been restated.

Outstanding option plans, 31 December 2011
--------------------------------------------	--	--

				Entitlement	Outstanding
Type	Term	No.	Exercise price, SEK	to no. of shares	shares now and on full conversion
No. of shares 31 Dec. 2011					31,253,827
Staff stock options	2007-2012	318,107	61.20	346,737	346,737
Opt. plans	2010-2013	394,400	132.30	429,896	429,896
Total		712,507		776,633	32,030,460

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 costs. The term of this plan is 18 June 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 can be granted to employees of the group and the remainder retained to cover social security costs. 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 also 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.

Acquired operations

On 11 April 2011, Medivir publicized its offering to acquire all the shares and listed warrants of BioPhausia. This offering consisted of a combination of cash and new class B Medivir shares, with BioPhausia share valued at SEK 1.65 and each listed warrant at SEK 0.32, equating to the listed price at the acquisition date. An EGM (Extraordinary General Meeting) of Medivir on 5 May secured shareholder support to issue shares as payment. The Board decided to conduct the acquisition on 31 May 2011. The valuation of the new class B Medivir shares was based on the listed price of SEK 143.50 at the acquisition date. A total of 2,510,817 class B shares were issued, with an additional SEK 184.5 m paid in cash for the acquisition. This acquisition did not include any additional purchase price. At the end of the period, Medivir's holding was 100%.

BioPhausia complements Medivir's operations with its competence in regulatory work, logistics, distribution, marketing, sales and the quality-assurance of pharmaceuticals, as well as a local presence in Sweden, Denmark and Finland. This acquisition is also an important step ahead of the expected launch and commercialization of TMC435 in the Nordics, where Medivir holds the commercial rights. The transaction was based on commercial benefit and with this acquisition, Medivir has taken a step toward its goal of becoming an integrated and profitable Nordic specialty pharmaceutical company focusing on infectious diseases.

The revenue from BioPhausia recognized in the Consolidated Income Statement since 1 June 2011 amounts to SEK 293.8 m. BioPhausia also made a SEK -16.7 m contribution to net profit/loss. If BioPhausia had been consolidated from 1 January 2011, revenue would have been SEK 512.3 m and the contribution to net profit/loss SEK 10.3 m. Because inventories at the acquisition date are recognized at estimated net realizable value, BioPhausia's net profit/loss for the period was negatively affected by SEK 29.3 m.

The fair value of identifiable intangible assets amounted to SEK 371.1 m, of which product rights are SEK 351.9 m and trademarks and brands are SEK 19.2 m. Goodwill of SEK 188 m has been allocated as follows: SEK 151 m of product rights included in cash flow for the pharmaceutical segment and SEK 37 m of trademarks and brands included in the parallel import segment. Goodwill is recognized as an intangible asset and consists of the amount by which acquisition cost exceeds the fair value of the identifiable net assets at the acquisition date. No part of recognized goodwill is expected to be deductible for income tax purposes. Transaction expenses for the acquisition amount to SEK 20.5 m and are included in consolidated operating expenses.

An acquisition analysis for the purchase of BioPhausia, summarizing the purchase price paid and the fair value of acquired assets and liabilities taken over and reported on the acquisition date follows.

Statement of purchase price (SEK m)
Purchase price
Cash payment, shares	171.0
Fair value of issued shares	367.5
Cash payment, listed warrants	12.9
Cash payment, staff stock options	0.6
Cash settlement of compulsory redemption	33.7
Liability for compulsory redemption	0.7
Total purchase price	586.5
Assets and liabilities of the acquired operation measured at market value (SEK m)
Fixed assets
Intangible fixed assets	371.1
Tangible fixed assets	1.6
Deferred tax asset	82.2
Current assets
Inventories	113.2
Accounts receivable	56.7
Current tax receivables	5.6
Other receivables	0.7
Prepaid expenses and accrued income	9.4
Cash and bank balances	26.6
Total assets of acquired operation	667.0
Long-term liabilities
Subordinated loan	60.7
Current liabilities
Repayment of long-term debt	156.2
Accounts payable	18.6
Other liabilities	9.4
Accrued expenses and deferred income	23.8
Total liabilities in acquired operation	268.8
Acquired net assets	398.2
Goodwill	188.3
Total purchase price	586.5
Cash and cash equivalents (SEK m)
Cash and cash equivalents
Cash paid, purchase price	-218.2
Cash and cash equivalents in acquired operation	26.6
Effect on consolidated cash and cash equivalents	-191.7

Significant risks and uncertainty factors

An effective risk assessment reconciles Medivir's business opportunities and results of operations with shareholders' and other stakeholders' requirements for long-term value growth and control. Research and pharmaceutical development until approved registration is a highly risky and capital-intensive process. The majority of projects that are started never reach market registration. If competing products take market share or competing research projects achieve better effect and reach the market faster, the future value of Medivir's product and project portfolio may be lower than originally expected. Medivir's ability to produce new CDs (candidate drugs), enter partnerships on its projects and successfully develop its projects to market launch and continued sale, and to secure funding of its operations, are decisive to its future.

Medivir is exposed to the following main categories of risk:

• Exogenous risks such as regulatory approval, competition, price changes, external seasonality and patent protection;
• Operating risks such as integration risk, production risk and dependency on key employees and partnerships;
• Financial risks such as liquidity, interest, currency and credit risk.

A more detailed description of exposure to risk, and how Medivir and BioPhausia manage it, is provided in the Annual Report 2010.

Huddinge, Sweden, 23 February 2012

Göran Pettersson Björn C Andersson Chairman of the Board Board member

Board member Board member

Ingemar Kihlström Anna Malm Bernsten

Review report

We have conducted a limited review of the financial statement for Medivir AB (publ) for the period 1 January – 31 December 2011. 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, 23 February 2012