Medivir — Interim / Quarterly Report 2009

Apr 23, 2009

Press Release, 23 April 2009

Medivir, Interim Report, 1 January – 31 March 2009

• Net sales were SEK 17.5 (4.2) m.
• The loss after tax was SEK -30.2 (-41.2) m.
• Earnings per share were SEK -1.45 (-1.98).
• Cash flow from operating activities was SEK -41.2 (-5.5) m.
• Liquid assets as of 31 March were SEK 243.1 (323.5) m.

First quarter in brief

Several significant corporate and project events were reported in the quarter.

The highlights can be summarized as follows:

• New data from the phase IIa trial on TMC435 (HCV) will be presented at the EASL's (European Association for the Study of the Liver) Annual Meeting on 22-26 April.
• The cost review initiated in February is now complete. The target of achieving a cost base of SEK 150 m by the beginning of 2010 will be achievable.
• Another candidate drug (CD) on the cathepsin K project was designated in February, and work on compiling data for forthcoming outlicensing was completed. The process of identifying a partner has begun.

Ron Long CEO

Huddinge, Sweden, 23 April 2009

For more information, please contact:

Rein Piir, CFO and VP, Investor Relations: +46 (0)70 853 7292 or +46 (0)8 546 83123.

FORTHCOMING FINANCIAL INFORMATION

The AGM will be held today at the Polstjärnan Conference Center, starting at 3 p.m. The Six-month Interim Report will be published on 9 July 2009. The Nine-month Interim Report will be published on 21 October 2009.

The Reports will be available at Medivir's Website, www.medivir.se from this date under the 'Investor/Media' heading.

Highlights in the first quarter 2009

Medivir appoints a new CEO

In January, Medivir's Board of Directors appointed Ron Long as CEO of Medivir AB, effective 1 February 2009. Mr. Long was elected to Medivir's Board in 2007. He has extensive and long-term experience of the pharmaceutical and life science industries.

Medivir designates MIV-710, a CD for osteoporosis and osteoarthritis

Medivir's pipeline includes selective inhibitors of cathepsin K for the treatment of osteoporosis and osteoarthritis. In February, Medivir designated a highly active and selective small molecule inhibitor of cathepsin K, MIV-710, as a CD.

MIV-710 shows very pronounced efficacy, based on biomarkers for osteoporosis in preclinical models, with a long duration of effect after once-daily dosing. MIV-710 dose-dependently attenuates the breakdown of bone, the hallmark of osteoporosis, whilst maintaining the beneficial bone formation. MIV-710 is expected to be dosed conveniently once daily as a tablet and at a low dose due to its favorable potency and pharmacokinetic properties. The CD has strong prospects of becoming a first-in-class treatment option in this important disease area.

Medivir has started the process of identifying a partner for the cathepsin K project including MIV-710 and MIV-701.

Strategic focus and overhaul of cost structure

On 19 February, Medivir decided to reduce the company's cost structure. The goal is to achieve a cost base of SEK 150 m by the beginning of 2010. Savings will be made in three areas: personnel costs, external research costs and project costs.

Consultations with trade unions have been completed, and the total headcount will be reduced by approximately 25 people. Restructuring costs of SEK 7.7 m were charged to profits in the first quarter 2009 on a non-recurring basis, SEK 6.8 m of which related to staff reductions. The savings will be achieved progressively through the year, with a full-year effect starting in 2010.

New positive phase IIa data from hepatitis C patients treated with TMC435 to be presented at the EASL Annual Meeting today

TMC435 is a protease inhibitor jointly developed by Medivir and Tibotec to treat hepatitis C virus infections (HCV). Alongside its collaboration partner Tibotec, Medivir has previously presented data from the first two dose groups (25 mg and 75 mg) of treatment-naïve patients from the phase IIa trial with TMC435 at the AASLD (American Association for the Study of Liver Diseases) Annual Meeting in November 2008.

During the EASL Annual Meeting in Copenhagen on 22-26 April new data from the phase IIa trial will be presented. These data include results from patients that failed previous IFN-based treatment and also data from the highest dose group (200mg) in naïve patients.

Phase IIb trials on TMC435 will start in the second quarter 2009.

Project portfolio

The largest preclinical project at present in terms of allocation of human resources is a project in Alzheimer's disease (BACE).

Furthermore two preclinical projects, HCV-Pol and HIV-PI, are being progressed in partnership with Tibotec. Work in 2009 is focused on designating more drugable compounds for potential future needs.

In the HCV-Pol partnership, Medivir is receiving research funding until mid-May this year. This project designated a CD in December 2008. On the cathepsin K project, a CD was designated in February 2009.

		Partners/- date of			Explorative	Optimiz	Preclinic		Phase	Phase
Project	Indication(s)	agreement	Terms	Medivir's markets	phase	ation		al dev.* Phase I	II	III
Lipsovir® (ME-609)	Labial herpes	In-house
TMC435 (HCV PI)	Hepatitis C		Tibotec / 2004 EUR 80.5 m + royalties FTE funding	Nordic region
MIV-701 (Cath K)	Osteoporosis, osteoarthritis, bone metastases	In-house
HCV POL	Hepatitis C		Tibotec / 2008 EUR 142-272 m + royalties, FTE funding	Nordic region
MIV-710 (Cath K)	Osteoporosis, osteoarthritis, bone metastases	In-house
HIV PI	HIV		Tibotec / 2006 EUR 64 m + royalties, FTE funding	Nordic region
BACE	Alzheimer's	In-house
	Cathepsin S Rheumatoid artritis, In-house multiple sclerosis
COPD PI	COPD	In-house		World exc. China
Renin	Hypertension	In-house
Protease inhibitor	Polymerase inhibitor		Polymerase inhibitor/hydrocortisone

Medivir HIV Franchise AB administers the polymerase-based projects against HIV, HBV, shingles and glandular fever.

		Partners/- date of			Explorative	Optimiz	Preclinic		Phase	Phase
Project	Indication(s)	agreement	Terms	Medivir's markets	phase	ation		al dev.* Phase I	II	III
(ME-606)	Valomaciclovir Shingles, mono- nucleosis	Epiphany Bio-	USD 24.5m + royalties sciences /2006 Epiphany shares	Nordic region
Alovudine (MIV-310)	HIV	Mefuvir/2007	Royalties	World exc. Asia
Lagociclovir (MIV-210)	Hepatitis B, HIV	Hainan Noken	USD 7 m + royalties	World exc. Asia
MIV-150	HIV	Population Council / 2003		Option of 50% of Western world
MIV-160	HIV	Mefuvir	Mefuvir shares and royalties	World exc. China, Taiwan and Macao
MIV-410	HIV, CMV	Presidio/2006	USD 52.25m + royalties Nordic region and UK Presidio shares	Option on Europe
Polymerase inhibitor

For a detailed description of all projects, please see Medivir's website www.medivir.se under Research & Development.

Consolidated earnings and financial position

Turnover and earnings, 1 January - 31 March 2009

Net sales were SEK 17.5 (4.2) m for the period. Net sales included remuneration for research collaboration on hepatitis C of SEK 5.9 m and an allocated one-off payment of SEK 11.6 m from Tibotec Pharmaceuticals Ltd. In the corresponding period of the previous year, net sales were SEK 4.2 m, for research collaboration funding on HIV protease inhibitors from Tibotec Pharmaceuticals Ltd.

Operating costs were SEK -50.5 (-49.6) m, comprising external costs of SEK -20.5 (-23.4) m, personnel costs of SEK -27.3 (-23.6) m and depreciation and amortization of SEK -2.7 (-2.6) m. The reduced external costs are mainly due to lower project costs. Restructuring costs of SEK 7.7 m were charged to profit in the first quarter 2009 as a non-recurring cost. SEK 6.8 m of these costs relate to staff reductions.

The operating loss was SEK -32.5 (-44.9) m. The reduced loss is mainly a consequence of higher net sales. Profit from financial investments was SEK 2.3 (3.7) m. The net loss for the period was SEK -30.2 (-41.2) m.

Cash flow and financial position

Cash flow from operating activities was SEK -41.2 (-5.5) m, a change of SEK -35.7 m. Compared to the previous period, cash flow from operating activities was negatively affected by changes in working capital, mainly from reduced current liabilities. Liquid assets including short-term investments with a maximum maturity of three months were SEK 243.1 (323.5) m at the end of the period.

Investments, depreciation, amortization and impairment losses

Gross investments in tangible fixed assets were SEK 0.4 (0.4) m in the period, in research equipment. Sales of fixed assets were SEK 0.2 (0.2) m. Depreciation and amortization in the year of SEK -2.7 (-2.6) m was charged to profit.

Shareholders' equity, share data and stock options

The share capital at the end of the period was SEK 104.2 (104.2) m and shareholders' equity was SEK 257.8 (343.8) m. The number of shares was 20,843,547 (20,843,547), of which 660,000 (660,000) were class A and 20,183,547 (20,183,547) class B shares with a nominal value of SEK 5.

There were 970,000 outstanding options at the end of the period, corresponding to 1,102,300 class B shares. No options were converted or expired in the period. The number of outstanding options could increase shareholders' equity by SEK 82.9 m and upon full conversion, the total number of shares could amount to 21,945,847.

The equity ratio was 83.2 (86.3)%. Earnings per share, based on a weighted average number of outstanding shares, was SEK -1.45 (-1.98) and shareholders' equity per share was SEK 12.37 (16.49).

Employees

Medivir had 99 (98) employees at the end of the period, 49 (45)% of which were women.

Parent company

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 17.5 (4.2) m. Operating costs were SEK -50.0 (-48.6) m, divided between external costs of SEK -20.0 (-22.5) m, personnel costs of SEK -27.3 (-23.6) m and depreciation and amortization of SEK -2.7 (-2.6) m. The operating loss was SEK -32.5 (-44.4) m and the loss after financial items was SEK -30.3 (-40.7) m. The net loss for the period was SEK -30.3 (-40.7) m. No purchases from or sales to subsidiaries occurred in the period.

Gross investments in tangible fixed assets were SEK 0.4 (0.4) m. Liquid assets including shortterm investments with a maximum maturity of three months amounted to SEK 242.1 (322.6) m. For comments on operations, please refer to the section on consolidated earnings and financial position.

Outlook including significant risks and uncertainty factors

Developing new pharmaceuticals to approved registration and launch is a highly risky and capital intensive process. Medivir's business model is characterized by high risk and the majority of projects never reach market registration. There are primarily two types of risk to manage, operational, i.e. project specific, and financial. In recent years, Medivir has taken a goal-oriented and strategic approach to create the best possible prospects of running projects quickly and with balanced risks, but despite continued work on this, there are still factors the company cannot influence.

Medivir's ability to produce new CDs, to enter partnerships on its projects and to develop its projects successfully to market launch and sale, is decisive to its future. The progress of existing partnerships and securing new partnerships will exert a major influence on Medivir's revenues and cash position. However, it is not possible to specify the exact timing of revenue flows. We will continue to take the great care in prioritizing new business opportunities for our projects and managing our existing partnerships.

The recent deterioration of the global economy has created increased general uncertainty, which may affect Medivir's access to funding. For a more detailed review of Medivir's future outlook, including significant risks and uncertainty factors, the reader is referred to the Report of the Directors in the Annual Report 2008.

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 48-51 of the Annual Report 2008. The group's interim reports are prepared according to IAS 34. The parent company uses the terminology recommended in RFR 2.1 issued by RFR, the Swedish Financial Reporting Board.

The amendment of IAS 1, Presentation of Financial Statements, is applied from 1 January 2009. This amendment has affected Medivir's reporting retroactively from 31 December 2007. The amendment has implications including revenue and costs previously reported directly in shareholders' equity now being reported in a separate statement directly after the Income Statement. Another change is that new terminology in financial statements can be used, although this is not mandatory. Medivir has chosen to retain its previous terminology.

Other new or revised IFRS and interpretation statements from IFRIC that came into effect after 31 December 2008 did not have any material effect on the group's or parent company's financial position or results of operations.

CONSOLIDATED INCOME STATEMENT	2009 Jan-Mar	2008 Jan-Mar	2008 Jan-Dec
(SEK m)
Turnover, etc.
Net sales	17.5	4.2	97.2
Other revenue	0.5	0.5	4.8
Total	18.0	4.7	102.0
Operating costs
Other external costs	-20.5	-23.4	-101.6
Personnel costs	-27.3	-23.6	-103.8
Depreciation and amortization	-2.7	-2.6	-10.3
Total	-50.5	-49.6	-215.7
Operating profit/loss	-32.5	-44.9	-113.7
Profit/loss from financial investments	2.3	3.7	13.7
Profit/loss after financial items	-30.2	-41.2	-100.0
Tax	0.0	0.0	0.8
Net profit/loss	-30.2	-41.2	-99.2
Net profit/loss attributable to:
Equity holders of the parent	-30.2	-41.2	-99.2
Basic and diluted earnings per share, SEK	-1.45
Average number of shares, 000	20,844	-1.98	-4.76
Number of shares at end of period, 000	20,844	20,844	20,844

CONSOLIDATED STATEMENT OF TOTAL RECOGNIZED GAINS AND LOSSES	2009	2008	2008
(SEK m)	Jan-Mar	Jan-Mar	Jan-Dec
Net profit/loss	-30.2	-41.2	-99.2
Other total gains and losses Exchange rate differences	0.0	0.2	0.6
Other total gains and losses for the period, net after tax	0.0	0.2	0.6
Total gains and losses for the period	-30.2	-41.0	-98.6
Total gains and losses attributable to: Equity holders of the parent	-30.2	-41.0	-98.6

CONSOLIDATED BALANCE SHEET	2009	2008	2008
SUMMARY (SEK m)	31 Mar	31 Mar	31 Dec
Assets
Intangible fixed assets	0.4	0.8	0.5
Tangible fixed assets	33.3	33.6	35.8
Financial fixed assets	18.8	18.8	18.8
Current receivables	14.3	21.6	32.0
Short-term investments	211.0	315.3	227.8
Cash and bank balances	32.1	8.2	56.6
Total assets	309.9	398.3	371.5
Liabilities and shareholders' equity
Shareholders' equity	257.8	343.8	287.6
Current liabilities, non interest-bearing	52.1	54.5	83.9
Total liabilities and shareholders' equity	309.9	398.3	371.5

STATEMENT OF CHANGES TO SHAREHOLDERS' EQUITY (SEK m)	Share capital	Other paidup capital	Exchange rate difference	Deficit brought forward	Total shareholders' equity
Opening balance, 1 January 2008	104.2	844.8	3.7	-568.8	384.0
Total gains and losses for the period			0.6	-99.2	-98.6
Staff stock option plans: value of employee
service		2.2			2.2
Closing balance, 31 December 2008	104.2	847.0	4.3	-668.0	287.6
Opening balance, 1 January 2008	104.2	844.8	3.7	-568.8	384.0
Total gains and losses for the period			0.2	-41.2	-41.0
Staff stock option plans: value of employee
service		0.8			0.8
Closing balance, 31 March 2008	104.2	845.6	3.9	-610.0	343.8
Opening balance, 1 January 2009	104.2	847.0	4.3	-668.0	287.6
Total gains and losses for the period			0.0	-30.2	-30.2
Staff stock option plans: value of employee
service		0.4			0.4
Closing balance, 31 March 2009	104.2	847.5	4.3	-698.2	257.8

CONSOLIDATED CASH FLOW STATEMENT	2009	2008	2008
SUMMARY (SEK m)	Jan-Mar	Jan-Mar	Jan-Dec
Cash flow from operating activities before
changes in working capital	-27.1	-37.5	-85.8
Changes in working capital	-14.1	32.0	51.0
Cash flow from operating activities	-41.2	-5.5	-34.8
Investment activity
Acquisition/divestment of fixed assets	-0.2	-0.2	-9.7
Cash flow from investment activity	-0.2	-0.2	-9.7
Cash flow for the period
Liquid assets, at beginning of period	284.4	329.3	329.3
Change in liquid assets	-41.3	-5.7	-44.7
Exchange rate difference in liquid assets	0.0	-0.1	-0.3
Liquid assets, at end of period	243.1	323.5	284.4

KEY FIGURES, SHARE DATA, OPTIONS	2009	2008	2008
	Jan-Mar	Jan-Mar	Jan-Dec
Return on:
- equity, %	-11.1	-11.3	-29.5
- capital employed, %	-11.1	-11.3	-29.6
- total capital, %	-8.9	-9.6	-23.9
Number of shares and options
Number of shares at beginning of period, 000	20,844	20,844	20,844
Issues	0	0	0
Number of shares at end of period, 000	20,844	20,844	20,844
- of which class A shares	660	660	660
- of which class B shares	20,184	20,184	20,184
Average number of shares, 000	20,844	20,844	20,844
Outstanding warrants, 000	970	970	970
- entitlement to class B shares at conversion, 000	1,102	1,102	1,102
Share data and other key figures
Share capital at end of period, SEK m	104.2	104.2	104.2
Shareholders' equity at end of period, SEK m	257.8	343.8	287.6
Basic and diluted earnings per share, SEK	-1.45	-1.98	-4.76
Shareholders' equity per share, SEK	12.37	16.49	13.80
Net worth per share, SEK	12.37	16.49	13.80
Cash flow per share after investments, SEK	-1.99	-0.27	-2.14
Equity ratio, %	83.2	86.3	77.4

PARENT COMPANY INCOME STATEMENT (SEK m)	2009 Jan-Mar	2008 Jan-Mar	2008 Jan-Dec
Turnover, etc.
Net sales	17.5	4.2	104.0
Other revenue	0.0	0.0	2.8
Total	17.5	4.2	106.8
Operating costs
Other external costs	-20.0	-22.5	-100.4
Personnel costs	-27.3	-23.6	-103.8
Depreciation and amortization	-2.7	-2.6	-10.3
Total	-50.0	-48.6	-214.5
Operating profit/loss	-32.5	-44.4	-107.7
Profit/loss from financial investments	2.2	3.7	8.9
Profit/loss after financial items	-30.3	-40.7	-98.8
Net profit/loss	-30.3	-40.7	-98.8

PARENT COMPANY BALANCE SHEET	2009	2008	2008
SUMMARY (SEK m)	31 Mar	31 Mar	31 Dec
Assets
Intangible fixed assets	0.4	0.8	0.5
Tangible fixed assets	33.3	33.6	35.8
Financial fixed assets	19.0	19.0	19.0
Current receivables	10.6	17.4	28.7
Short-term investments	211.0	315.3	227.8
Cash and bank balances	31.1	7.3	55.4
Total assets	305.4	393.4	367.2
Liabilities and shareholders' equity
Shareholders' equity	257.7	344.3	287.6
Long-term liabilities, non interest-bearing	1.9	1.4	1.7
Current liabilities, non interest-bearing	45.8	47.7	77.9
Total liabilities and shareholders' equity	305.4	393.4	367.2

Ron Long CEO/Board member

Huddinge, Sweden, 23 April 2009

Review report

We have conducted a limited review of the financial statement for Medivir AB (publ) for the period 1 January – 31 March 2009. 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 April 2009