Orexo

Quarterly Report • Aug 14, 2007

Orexo AB (publ.) - Interim Report January - June 2007

Orexo AB, P.O. Box 303, 751 05 Uppsala, Sweden Tel: +46 (0)18-780 88 00, Fax: +46 (0)18-780 88 88, E-mail: info@orexo.com Internet: www.orexo.com Corporate registration no 556500-0600

Uppsala, August 14, 2007

$O$ rexo AB (publ) – Interim report January - June 2007

Key events during the period

• Net revenues amounted to MSEK 15.2 $(55.4)$
• The loss after tax was MSEK 94.5 (loss: 9.3)
• Earnings per share amounted to a loss of SEK 6.80 (loss: 0.70)
• Orexo's Annual General Meeting was held on April 23 the Board was reelected
• A patent for OX 17 was approved in Europe $\bullet$

Second quarter 2007

• Net revenues amounted to MSEK 8.8 $(5.1)$
• The loss after tax was MSEK 56.5 (loss: 24.6) $\bullet$
• Earnings per share amounted to a loss of SEK 4.06 (loss: 1.85) $\bullet$

Key events after the period

Orexo establishes sales force in Nordic markets, by entering into a joint venture $\bullet$ with ProStrakan

Income statement in brief¹

MSEK	3 months	3 months	6 months	6 months	12 months
	2007	2006	2007	2006	2006
	Apr.-Jun.	Apr.-Jun.	Jan.-Jun.	Jan.-Jun.	Jan.-Dec.
Net revenues	8.8	5.1	15.2	$55-4$	132.0
Profit/loss after	$-56.6$	$-24.6$	$-94.5$	$-9.3$	$-33.0$
tax
Earnings per	$-4.06$	$-1.85$	$-6.80$	$-0.70$	$-2.46$
share
before dilution
(SEK)
Earnings per	$-4.06$	$-1.85$	$-6.80$	$-0.70$	$-2.46$
share
after dilution
$(SEK)^2$

1) Refers to the Group, unless stated otherwise in this interim report. Figures in parentheses are for the corresponding period of the preceding year.

$\frac{1}{2}$ ) Since earnings are negative, the same earnings per share are reported before and after dilution.

Key events during the period

Orexo receives European patent approval for OX 17

The European patent authority has approved Orexo's patent for a combination concept for the treatment of GERD - gastroesophageal reflux disease. The patent protects the combination of any H2-receptor blocker and proton pump inhibitor (PPI). The patent has previously been approved in China, Australia and New Zealand, and is pending in the North-American market.

Orexo held its Annual General Meeting on April 23 – the Board of Directors was reelected

At Orexo's Annual General Meeting on April 23, it was resolved to re-elect Monica Caneman, Johan Christenson, Hans Peter Hasler, Zsolt Lavotha, Staffan Lindstrand, John Sjögren and Kjell Strandberg as members of the Board of Directors and to re-elect Håkan Åström as Chairman of the Board of Directors for the period until the end of the next Annual General Meeting.

The Meeting authorized the Board of Directors to issue not more than 1,380,000 new shares with payment in kind.

The Meeting resolved to adopt a new employee stock option plan including the issuance of warrants and approval of the disposal of the warrants under the employee stock option plan. The employee stock option plan consists of 372,000 employee stock options, of which 38,025 refer to previously authorized but, not allotted, employee stock options. Each employee stock option can be exercised to acquire one share in Orexo against payment of an exercise price determined as the market value of the Orexo share at the time of allocation. The total number of outstanding options on the last day of June (934,775) corresponds, at full utilization, to approximately 6.3% of share capital and votes in the company.

Key events after the close of the period

Orexo establishes sales force in Nordic markets, by entering into a joint venture with ProStrakan

Orexo (OMX Midcap:ORX.) has embarked on the next phase of its growth strategy by entering into a joint venture agreement with ProStrakan in the Nordic territories. Together Orexo and ProStrakan are establishing a sales operation, which will be owned equally. The new entity will have Nordic sales rights for both Orexo's and ProStrakan's portfolio which will cover currently marketed and future products including Tostrex^®. Rectogesic® and Droperidol®. Rapinyl and Sancuso, which are both in the European regulatory process will also be included in the portfolio following approval. Rapinyl is Orexo's patented product for the treatment of cancer breakthrough pain for which ProStrakan holds the European distribution rights and ProStrakan's Sancuso® is for the prevention of chemotherapy-induced nausea and vomiting.

ProStrakan's Swedish affiliate, ProStrakan AB, will be used as the joint venture company. Orexo is investing $£1.3$ million (SEK 17.9 million), through a directed share issue, to acquire 50% of the business. The joint venture company will initially trade as ProStrakan AB from its offices located at Malmo, Sweden.

Operations

Orexo in brief

Orexo is a pharmaceutical company developing new pharmaceutical drugs for areas of unmet medical needs. Orexo applies its broad expertise in medicine and pharmaceuticals to the further development of existing pharmaceutical substances. By combining well-documented compounds with its own patented drug delivery methods and its unique expertise in "dry formulations" (for example, tablets), Orexo is able to develop new patented pharmaceuticals.

Orexo's drug development activities are commercially driven and, to date, the company has elected to focus on tablet-based, fast-dissolving formulations – designed to be absorbed via the mucous membrane in the mouth, for example - a patented method that enables a rapid and effective uptake of pharmaceutical substances with minimal swallowing of the active substance. This approach enables effective new pharmaceutical drugs to be developed in such therapy areas as acute pain and sleep disorders.

Orexo has grown into an organization with 71 full-time employees, most of whom are focused in research and development, clinical development and pharmaceutical registration. At present, the company has two products on the market, three in late clinical development phase - one of which has been outlicensed in the US, Europe and Japan and submitted for registration in Europe - and two projects in pharmaceutical formulation phase. Orexo has adopted an active intellectual property rights strategy and has, since its inception, built up an extensive patent portfolio to protect its products and technologies.

Market for drug delivery

The science of drug delivery can be summarized as the process of ensuring that the active substance in a pharmaceutical product is optimally delivered to the site of action. The demand for drug-delivery products is increasing rapidly due to the fact that these new pharmaceuticals can, for example, offer shorter time to onset of effect or improved safety profiles.

Many pharmaceutical products on the market today have shortcomings – for example, they may be slow-acting, have side effects, need to be administered frequently or perhaps can only be injected. This is why demand for technologies that can improve the efficiency of existing products is rapidly increasing.

Orexo's product portfolio

Diabact^® UBT/Heliprobe^™ System – Diabact® UBT is Orexo's first commercialized product. Like the Heliprobe^TM System, Diabact^® UBT is a breath test used to diagnose the presence of Helicobacter pylori, the bacteria that cause gastric ulcers. Breath tests are recommended by expert groups for Helicobacter pylori in Europe as the primary choice and the most reliable noninvasive test to diagnose active infection. Its advantages include the fact that it prevents the patient having to undergo a gastroscopy examination, which many consider unpleasant. Among its benefits to payors, medical professionals and patients are that the examination is fast, easy and less expensive than gastroscopy.

Distribution and marketing agreements for Diabact® UBT have been signed for Austria, Finland, Germany, Hong Kong, Ireland, Serbia, Sweden and the UK. In Japan, a licensing agreement was signed with Kyowa Hakko Kogyo Co. Ltd. The Heliprobe™ System has distribution and marketing agreements in approximately twenty countries in the Middle East, Asia and Eastern Europe.

Rapinyl^TM – for the treatment of acute pain is in Phase III in the US and in registration phase in Europe. Rapiny ^{$\mathbb{M}^M$} was developed for the treatment of cancer-related breakthrough pain as its primary indication. Orexo's principal technology, the sublingual dosage method whereby a fastdissolving tablet is placed under the tongue, enables a quicker onset of action and more

predictable effects. Licensing agreements for Rapinyl™ have been signed with Endo Pharmaceuticals for the North American market, ProStrakan Group plc for the European market and Kyowa Hakko Kogyo Ltd for the Japanese market. Distribution agreements for Russia, Bulgaria and Romania have been signed with Gedeon Richter Ltd.

In December 2005, Endo Pharmaceuticals launched Phase III studies on Rapinyl™. Endo Pharmaceuticals has announced that it intends to submit a registration application for the North American market during the first half of 2008.

ProStrakan has submitted a registration application for Rapinyl™, to the EMEA, the European registration authority, and continue to work towards approvals in EU to support launch in 2008.

Sublinox^TM (OX 22) – for the treatment of sleep disturbances, is in Phase III development. Sublinox ^$TM$ (OX 22) is based on Orexo's sublingual tablet technology. In 2006, the US insomnia market amounted to SEK 3.3 billion (according to IMS sales data).

Phase I and II studies were carried out with favorable results, indicating the medical potential of Sublinox ^$TM$ (OX 22) for on-demand treatment of sleep disturbances. Given the large market and its continuing strong growth, the niche profile that Sublinox^TM (OX 22) is aimed at is considered advantageous. Against this background, Orexo initiated a Phase III program during the year to strengthen the documentation of the pharmacological profile of Sublinox^™ (OX 22) in preparation for registration and out-licensing. The aim of these studies is to further document the product's on-demand characteristics.

$OX₁₇$ – for the treatment of GERD (gastro esophageal reflux disease), a disorder that gives the patient recurrent heartburn, involving acidic regurgitation linked to stomach ache, discomfort and sharp pains in the esophagus. $\overline{OX}$ 17 is a patent-pending fixed combination of two wellproven active substances that each inhibits acid secretion in the stomach; an H2-receptor blocker and a proton pump inhibitor (PPI). To date, patents have been granted in Europe, China, Australia and New Zealand.

The clinical trial program confirms that effective inhibition of acid secretion is rapidly achieved after taking the first dose. Effective acid inhibition can be maintained as long as the symptoms persist. This is a favorable and unique clinical profile for a drug intended for the treatment of GERD. The clinical results were presented at the "Digestive Disease Week" conference in Los Angeles, California, in the US on May 21, 2006. Orexo initiated a Phase III study program during 2006 to further document the broader characteristics of the product and further strengthen the product profile and its competitiveness.

Discussions with the registration authorities in the US and Europe indicate that OX 17 can be approved either as a prescription drug or as a prescription-free OTC drug for treatment of GERD. The possibility of registering $OX$ 17 as an OTC drug opens up a broader position for $OX$ 17. The possibility of positioning OX 17 within the vast and commercially attractive OTC segment has prompted Orexo to further investigate this as a commercial strategy and to invite additional companies to licensing discussions with regard to the global OTC market.

$OX₁₉$ – for the treatment of daytime and nocturnal urinary incontinence. In addition to the treatment of nocturia, OX 19 also focuses on the short-term, on-demand treatment of urinary incontinence in women suffering from an overactive bladder. OX 19 is in the formulation phase. A lead formulation has been identified and clinical studies will be initiated in 2007.

$\overline{OX}$ 40 – for the acute treatment of moderate and severe migraine. Orexo's ambition is to formulate OX 40 to provide a fast and predictable onset of effect, which is an essential characteristic for effective on-demand medication. OX 40 is in formulation phase.

New technology platform and new product for pain – Orexo has initiated a collaboration with the medical technology company Doxa, to develop new, innovative pharmaceuticals based on

a unique drug delivery technology, which will be designed for slow and controlled release of the active ingredient. The primary objective is to develop a new, improved pharmaceutical for pain treatment.

The period in figures; January $1 -$ June 30, 2007

			3 months 3 months 6 months 6 months 12 months
	2007	2006	2007	2006	2006
MSEK			Apr.-Jun. Apr.-Jun. Jan.-Jun. Jan.-Jun. Jan.-Dec.
Net revenue	8.8	5.1	15.2	55.4	132.0
Cost of goods sold	$-4.1$	$-2.1$	$-6.8$	$-3.2$	$-11.1$
Gross profit	4.7	3.1	8.4	52.3	120.8
Selling costs	$-1.8$	$-1.6$	$-3.5$	$-2.8$	$-7.8$
General and administrative expenses	$-19.6$	$-10.8$	$-32.9$	$-23.7$	$-57.5$
Research and development costs	$-41.6$	$-17.4$	$-70.4$	$-38.4$	$-94.5$
Other operating income and expenses	$-0.2$	0.1	$-0.2$	$-0.2$	$-1.6$
Operating profit/loss	$-58.5$	$-26.6$	$-98.6$	$-12.8$	$-40.6$
Net financial items	1.9	2.0	4.1	3.5	7.6
Tax	0.0		0.0		0.0
Net result of the period	$-56.6$	$-24.6$	$-94.5$	$-9.3$	$-33.0$

Condensed statement of operations

Revenue

Net revenue

Consolidated net revenue for the period January–June 2007 amounted to MSEK 15.2 (55.4). The decrease compared with the year-earlier period is explained by the licensing revenues received from ProStrakan during that period.

Sales were distributed as follows:

MSEK	Jan.-Jun. 2007	Jan.-Jun. 2006	Jan.-Dec. 2006
Kibion AB	12.7	4.7	17.3
Licensing revenues, Rapinyl TM	0.0	47.9	106.5
Other revenue	2.5	2.8	8.2
Total	15.2	55.4	132.0

For the April-June 2007 period, net revenue was MSEK 8.8 (5.1). The increase is attributable to sales of Heliprobe™ System, a product that the company obtained in connection with the acquisition of Noster System AB June 1, 2006.

Expenses and earnings

Selling expenses

Consolidated selling expenses amounted to MSEK 3.5 (2.8) for the period January-June 2007 and to MSEK 1.8 (1.6) for the period April-June 2007.

The expenses are attributable to sales of the Kibion subsidiary's Diabact® UBT and Heliprobe™ System. The increase in selling expenses between the corresponding periods of 2006 and 2007 is an effect of increased investments in these activities, including continuing developing of Kibion AB and the acquisition of Noster System AB.

Administrative expenses

Administrative expenses for the period January–June 2007 amounted to MSEK 32.9 (23.7). For the period April–June 2007, administrative expenses were MSEK 19.6 (10.8).

The increase with respect to the year-earlier period is partly attributable to the further strengthening of the company's organization and infrastructure, partly as a consequence of the company's listing on the stock exchange, but primarily due to investments in various businessdevelopment projects.

Expenses for the company's employee stock option program

For the period April-June 2007, the company's total cost for the employee stock option program amounted to MSEK 2.0 $(+0.9)$ . The increased costs during the quarter are explained by the new employee stock option program granted to employees in February and the accord options during that period.

For the period January-June 2007, costs for the employee stock option program amounted to MSEK 3.5 (4.2), of which MSEK 1.6 (2.7) were attributable to administration-related employees and MSEK 1.9 (1.5) to research and development-related personnel.

The program expenses refer to both the estimated cost of the value of the employees' service during the period and the portion of the estimated social security fees during the period. The company will need to pay social security fees on the gain that may result from the exercise of the employee stock options, estimated as the difference between the strike price of the employee stock option and the market value of the shares.

The social security fees that may arise due to the employee stock option program have been largely hedged – financially and therefore in cash-flow terms – through the issue of warrants to one of Orexo's subsidiaries. This hedging does not qualify for hedge accounting according to IFRS.

Research and development expenses

Research and development expenses amounted to MSEK 70.4 (38.4) for the period January–June 2007 and to MSEK $41.6(17.4)$ for the period April–June 2007.

This increase compared with the corresponding period in the preceding year was attributable to increased investment in the company's development projects, which will continue, partly due to the hiring of additional employees, and partly due to Phase III studies for Sublinox^TM (OX 22) and for the OX 17 program carried out during the year.

Research and development expenses include expenses for employees, employee stock options, premises, external costs for clinical trials, drug registration and laboratory services, as well as depreciation of equipment and amortization of acquired patents and other intangible assets. Orexo has no capitalized research and development costs. The company has several development projects in advanced phases, including Rapinyl^TM for the treatment of acute pain, Sublinox^TM (OX 22) for the treatment of sleep disturbances, OX 17 for GERD, OX 19 for the treatment of daytime and nocturnal incontinence and OX 40 for acute treatment of moderate to severe migraine.

Other income and expenses

Included under the item other income and expenses are reinvoiced expenses relating to the remodeling of leased premises totaling MSEK 9.3, which had no net effect on income.

Depreciation/amortization

Depreciation/amortization amounted to MSEK 2.1 (1.5) for the period January-June 2007 and to $MSEK 1.0 (0.8)$ for the period April–June 2007.

$Tay$

Tax expenses during the period January–June 2007 amounted to MSEK 0.0 (0.0).

Net result

The operating loss for the period January–June 2007 amounted to MSEK 98.6 (loss: 12.8). The loss after net financial items was MSEK 94.5 (loss: 9.3), and the loss after tax was MSEK 94.5 (loss: 9.3). Revenues decreased sharply compared with the year-earlier period due to licensing revenues from ProStrakan, which was acquired in 2006. At the same time, Orexo has continued expanding its operations, which has entailed increased operational expenses.

The operating loss for the period April–June 2007 amounted to MSEK 58.5 (loss: 26.6). The loss after net financial items was MSEK 56.6 (loss: 24.6), and the loss after tax was MSEK 56.6 (loss: 24.6). Increased investments in research and development entailed increased expenses that are reflected in the operating loss.

Financial position

The Group's cash and cash equivalents plus current investments amounted to MSEK 218.7 $(330.2)$ at June 30, 2007.

Cash flow from operating activities for the period January–June 2007 was negative in an amount of MSEK 97.5 (neg: 9.3). Cash flow after financing was negative at MSEK 91.4 (neg: 31.8).

Cash flow from operating activities for the period April–June 2007 was negative in an amount of MSEK 48.6 (neg: 22.5). Cash flow after financing was negative in an amount of MSEK 15.8 (neg: 86.4). During the period, short-term investments of MSEK 45.5 were liquidated and transferred to cash and cash equivalents. SEK 53.9 M was invested in short-term positions during the yearearlier period.

According to the finance policy, liquidity is defined as the cash and cash equivalents required for the company's commercial obligations. All other liquidity is classed as surplus liquidity. At midyear, the Group's surplus liquidity was invested in the following instruments: state and municipalities, banking and real estate (minimum rating A), corporate and institutional (minimum rating BBB) and with maturities of up to November 2007.

Shareholders' equity amounted to MSEK 235.3 (332.8). The equity/assets ratio was 80 percent $(qo)$ .

Investments

Gross investments in tangible fixed assets amounted to MSEK 19.1 $(2.4)$ for the period January-June 2007 and to MSEK $12.7(1.9)$ for the period April–June 2007. These investments primarily involved the remodeling of the new premises and investments in production and research equipment.

Parent Company

The majority of the Group's business is carried out in the Parent Company, Orexo AB. Net revenues for the period January–June 2007 amounted to MSEK 5.5 (52.7) and the loss after net financial items amounted to MSEK 95.8 (loss: 8.0). Investments amounted to MSEK 19.1 (2.4). The Parent Company's cash and cash equivalents and current investments totaled MSEK 217.2 $(329.3).$

Pledged assets and contingent liabilities

The acquisition of Noster System AB involved an agreement on a supplemental purchase price of not more than MSEK 7.2, which would become payable if the growth of Heliprobe™ System achieves pre-determined sales targets over the next few years. The amount was reported under contingent liabilities. Otherwise, no significant changes in contingent liabilities or pledged assets occurred during the period.

Drexo

Key risks and uncertainty factors

At present, Orexo has two products already on the market and three under clinical development – one of which is in the process of being registered in Europe and out-licensed in the US, Europe and Japan and two are in the formulation phase.

If Orexo's clinical trials do not succeed, Orexo may lack options for successfully developing and out-licensing or commercializing its products. There is also a risk that regulatory authorities may require further clinical studies as a condition of approving the company's products, which would significantly increase Orexo's costs. Orexo may need additional capital to achieve profitability.

For a further description of risk factors affecting Orexo see Report of the Board of Directors in the Orexo Annual Report for 2006.

The share

Orexo's share was introduced on November 9, 2005, at the price of SEK 90, and traded on June 30, 2007, at SEK 121. The company's market capitalization, based on the number of shares outstanding on June 30, 2007, amounted to MSEK 1,689.

Analysts who follow Orexo

ABG Sundal Collier Carnegie AB Handelsbanken Markets Kaupthing Bank Redeve Remium Securities

Alexander Lindström Kristofer Liljeberg-Svensson and Camilla Oxhamre Hans Mähler Erik Hultgård Biörn Andersson Johan Isaksson

Future reporting dates

Interim report July-September 2007	November 6
Year-end report for fiscal year 2007	No later than February 29, 2008

Board assurance

The Board of Directors and the CEO certify that the half - yearly financial report gives a fair review of the performance of the business, position and profit or loss of the Company and the Group, and describes the principal risk and uncertainties that the Company and companies in the Group face.

Uppsala, August 14, 2007

Orexo AB (publ)

Håkan Åström Chairman of the Board

Monica Caneman Board member

Johan Christenson Board member

Hans Peter Hasler Board member

Staffan Lindstrand Board member

John Sjögren Board member

Kjell Strandberg Board member

Zsolt Lavotha Board member and CEO

For further information, please contact

Zsolt Lavotha, President & CEO, tel +46(0)18-780 88 12, e-mail: zsolt.lavotha@orexo.se Claes Wenthzel, Executive Vice President & CFO, tel +46(0)18-780 88 44, e-mail: claes.wenthzel@orexo.se

Review report

We have reviewed the appended interim report for the period January 1 to June 30, 2007. The Board of Directors is responsible for the preparation and fair presentation of this interim report in accordance with the Annual Accounts Act. Our responsibility is to express an opinion on this interim report based on our review.

We conducted our review in accordance with the Standard on Review Engagements SÖG 2410. Review of Interim Financial Information Performed by the Independent Auditor of the Entity, issued by FAR. A review consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Standards on Auditing in Sweden RS and other generally accepted auditing practices. The procedures performed in a review do not enable us to obtain a level of assurance that would make us aware of all significant matters that might be identified in an audit. Therefore, the conclusion expressed based on a review does not give the same level of assurance as a conclusion expressed based on an audit.

Based on our review, nothing has come to our attention that causes us to believe that the appended interim report has not in all significant respects been compiled in accordance with the Annual Accounts Act and IAS 34.

Uppsala, August 14, 2007

Öhrlings PricewaterhouseCoopers

Leonard Daun Authorized Public Accountant

CONSOLIDATED BALANCE SHEETS

	Notes	Jun. 30, 2007	Jun. 30, 2006	Dec. 31, 2006
ASSETS
Fixed assets
Tangible fixed assets		23,696	5,080	6,392
Goodwill		8,988	8,988	8,988
Other intangible assets		1,629	3,078	1,974
Total fixed assets		34,313	17,146	17,354
Current assets
Inventories		10,437	6,589	9,234
Current receivables		31,559	16,676	20,810
Current investments		30,929	101,468	56,126
Cash and bank balances		187,778	228,691	276,408
Total current assets		260,703	353,424	362,578
Total assets		295,016	370,570	379,932
SHAREHOLDERS' EQUITY AND
LIABILITIES	3
Share capital		5,584	5,317	5,554
Capital contribution		361,640	336,688	351,633
Accumulated losses		$-131,967$	$-9,196$	$-32,837$
Total shareholders' equity		235, 257	332,809	324,350
Long-term liabilities
Provisions		5,226	6,370	4,819
Deferred tax liability		317	396	356
Total long-term liabilities		5,543	6,766	5,175
Current liabilities, non-interest-bearing		54,216	30,995	50,407
Total liabilities		59,759	37,761	55,582

Total shareholders' equity and liabilities	295,016	370,570	379,932
Pledged assets	2,500	2,500	3,500
Contingent liabilities	7,250	7,250	7,250

CONSOLIDATED STATEMENT OF OPERATIONS

(SEK 000s)

	Notes	3 months		3 months 6 months 6 months		12 months
		2007 Apr.-Jun.	2006 Apr.-Jun.	2007	2006 Jan.-Jun. Jan.-Jun.	2006 Jan.-Dec.
Net sales		8,806	5,128	15,208	55,424	131,956
Cost of goods sold	$\overline{2}$	$-4,130$	$-2,068$	$-6,811$	$-3,170$	$-11,151$
Gross profit		4,676	3,060	8,397	52,254	120,805
Selling expenses	$\mathbf{2}$	$-1,836$	$-1,584$	$-3,546$	$-2,781$	$-7,849$
General and administrative expenses	$\mathbf{2}$	$-19,591$	$-10,806$	$-32,931$	$-23,723$	$-57,437$
Research and development costs	$\mathbf{2}$	$-41,584$	$-17,394$	$-70,441$	$-38,373$	$-94,512$
Other operating income		6,757	431	9,596	478	678
Other operating expenses	$\overline{2}$	$-6,887$	$-270$	$-9,757$	$-675$	$-2,275$
Operating profit/loss		$-58,465$	$-26,563$	$-98,682$	$-12,820$	$-40,590$
Earnings from financial investments
Interest income and similar items		1,846	1,898	4,135	3,433	7,516
Interest expenses and similar items		$-1$	$-28$	$-18$	$-30$	$-24$
Other financial expences		$\mathbf 0$	108		115	115
Total earnings from financial
investments		$-56,620$	$-24,585$	$-94,565$	$-9,302$	$-32,983$
Tax on the year's income		20	$\mathbf 0$	40	$\mathbf 0$	40
Net profit/loss for the period		$-56,600$	$-24,585$	$-94,525$	$-9,302$	$-32,943$
Profit/loss per share, before dilution,
SEK Profit/loss per share, after dilution,		$-4.06$	$-1.85$	$-6.80$	$-0.70$	$-2.46$
SEK Average number of shares, before		$-4.06$	$-1,85$	$-6.80$	$-0.70$	$-2.46$
dilution Average number of shares, after		13,928,161	13,292,500		13,907,393 13,292,500	13,390,854
dilution		14,187,810	14,127,695	14, 167, 042	14,127,695	13,605,404
Number of shares, before dilution		13,961,250	13 292,500		13,961,250 13,292,500	13,884,750
Number of shares, after dilution		14,220,899	14, 127, 695	14,220,899	14,127,695	14,099,300

CONSOLIDATED CASH-FLOW STATEMENTS (SEK 000s)

	Notes		3 months 3 months	6 months		6 months 12 months
		2007	2006 Apr.-Jun. Apr.-Jun.	2007 Jan.-Jun.	2006 Jan.-Jun.	2006 Jan.-Dec.
Continuing operations
Loss before interest expense and
interest income		$-58,465$	$-26,563$	$-98,682$	$-12,820$	$-40,590$
Interest paid		$-1$	$-28$	$-18$	$-30$	$-24$
Interest received		1,846	1,898	4,135	3,433	7,631
Adjustment for items not included in
cash flow	$\overline{4}$	2,993	353	5,589	6,167	11,335
Cash flow from operating
activities
before changes in working capital		$-53,627$		$-88,976$		$-21,648$
			$-24,340$		$-3,250$
Cash flow from changes in working capital
Change in accounts receivable		$-5,640$	$-3,809$	$-935$	$-4,202$	$-10,282$
Change in other current receivables		$-1,119$	3,372	$-9,814$	$-2,315$	$-369$
Change in inventories		$-2,641$	$-2,335$	$-1,203$	$-3,561$	$-6,206$
Change in current liabilities		13,972	4,740	3,019	11,012	29,441
Change in long-term liabilities		495	$-93$	407	$-7,017$	$-8,608$
Cash flow from operating
activities		$-48,560$	$-22,465$	$-97,502$	$-9,333$	$-17,672$
Investing activities
Acquisition of patents		$\mathbf O$	$\mathbf 0$	$\mathbf 0$	$\mathbf 0$	-77
Acquisition of machinery and
equipment		$-12,671$	$-1,868$	$-19,051$	$-2,433$	$-4,613$
Change in short-term investments		45,473	$-53,868$	25,197	$-11,837$	33,505
Acquisition of subsidiary		$\mathbf 0$	$-8,195$	${\bf O}$	$-8,195$	$-8,195$
Total cash flow after investing
activities		$-15,758$	$-86,396$	$-91,356$	$-31,798$	2,948
Change in financing
Proceeds from new share issue		2,706	${\bf O}$	2,726	${\bf O}$	12,971
Cash flow after financing
activities		$-13,052$	$-86,396$	$-88,630$	$-31,798$	15,919

Cash flow for the year

Liquid funds, at end of period	187,778	228,691	187,778	228.691	276,408
Change in liquid funds	$-13,052$	$-86,396$	-88.630	$-31,798$	15,919
period	200,830	315,087	276,408	260.489	260,489
Liquid funds, at the beginning of

KEY FIGURES	3 months	3 months	6 months		6 months 12 months
(SEK 000s)	2007 Apr.-Jun.	2006 Apr.-Jun.	2007 Jan.-Jun.	2006 Jan.-Jun.	2006 Jan.-Dec.
Operating margin, %	$-664$	$-518$	$-649$	$-23$	$-31$
Profit margin, %	$-643$	$-479$	$-622$	$-17$	$-25$
Return on total capital, %	$-18$	$-7$	$-28$	$-2$	$-9$
Return on shareholders' equity, %	$-21$	$-7$	$-33$	$-3$	$-10$
Return on capital employed, %	$-21$	$-7$	$-33$	$-3$	$-10$
Debt/equity ratio, multiple	$\mathbf 0$	$\mathbf 0$	$\mathbf 0$	$\mathbf 0$	$\mathbf 0$
Equity/assets ratio, %	80	90	80	90	85
Current ratio, %	481	1,140	481	1,140	719
Acid test ratio, %	462	1,119	462	1,119	701
Average number of shares, before dilution	13,928,161	13,292,500	13,907,393		13,292,500 13,390,854
Average number of shares, after dilution	14,132,683	14,127,695	14,167,042		14, 127, 695 13, 605, 404
Number of shares after full dilution	14,896,025	14,434,000	14,896,025	14,434,000	14,319,750
Number of shares, before dilution	13,961,250	13,292,500	13,961,250		13,292,500 13,884,750
Number of shares, after dilution	14,220,899	14,127,695	14,220,899		14, 127, 695 14, 099, 300
Loss per share, before dilution, SEK	$-4.06$	$-1.85$	$-6.80$	$-0.70$	$-2.46$
Loss per share, after dilution, SEK	$-4.06$	$-1.85$	$-6.80$	$-0.70$	$-2.46$
Shareholders' equity per share, before
dilution, SEK	16.85	25.04	16.85	25.04	23.36
Shareholders' equity per share, after dilution,
SEK	16.54	23.56	16.54	23.56	23.00
Number of employees at the end of the period	71	47	71	47	61
Average number of employees	69	46	68	45	50
Shareholders' equity	235,257	332,809	235,257	332,809	324,350
Capital employed	235,257	332,809	235,257	332,809	324,350

DEFINITIONS

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

Profit margin: Profit/loss after financial items as a percentage of net sales.

Return on total capital: Operating profit/loss plus financial revenues as a percentage of average balance-sheet total.

Return on shareholders' equity: Profit/loss for the period as a percentage of average adjusted shareholders' equity.

Return on capital employed: Operating profit/loss plus financial revenues as a percentage of average capital employed.

Capital employed: Average of interest-bearing liabilities and shareholders' equity.

Debt/equity ratio: Interest-bearing liabilities divided by shareholders' equity.

Equity/assets ratio: Shareholders' equity in relation to total assets.

Current ratio: Current assets as a percentage of current liabilities.

Acid test ratio: Current assets, excluding inventories, as a percentage of current liabilities.

Number of shares after full dilution: Total number of shares plus the maximum number of shares that can be subscribed through options outstanding.

Number of shares, after dilution: Calculation of the dilution from options issued by the company through 2005 was carried out in accordance with IAS 33.

Earnings per share before dilution: Profit/loss divided by the average number of shares outstanding before dilution.

Earnings per share after dilution: Profit/loss divided by the average number of shares outstanding after dilution.

Shareholders' equity per share, before dilution: Shareholders' equity divided by the number of shares before dilution at the close of the period.

Shareholders' equity per share, after dilution: Shareholders' equity divided by the number of shares after dilution at the close of the period.

PARENT COMPANY'S BALANCE SHEETS

(SEK 000s)

(SEK 000s)
	Notes	Jun. 30, 2007	Jun. 30, 2006	Dec. 31, 2006
ASSETS
Fixed assets
Tangible fixed assets		23,629	4,994	6,316
Financial fixed assets		436	1,587	633
Shares in subsidiaries		100	100	100
Total fixed assets		24,165	6,681	7,049
Current assets
Inventories		2,575	4,156	4,982
Current receivables		49,763	29,540	36,404
Cash, bank balance and current investments		217,190	329,306	329,147
Total current assets		269,528	363,002	370,533
Total assets		293,693	369,683	377,582
SHAREHOLDERS' EQUITY, PROVISIONS AND LIABILITIES	6
Restricted equity		364,402	343,835	340,870
Accumulated losses		$-126,346$	$-7,992$	$-12,464$
Total shareholders' equity		238,056	335,843	328,406
Long-term liabilities
Provisions		5,226	6,370	4,820
Total long-term liabilities		5,226	6,370	4,820
Current liabilities, non-interest-bearing		50,411	27,470	44,356
Total liabilities		55,637	33,840	49,176
Total shareholders' equity, provisions
and liabilities		293,693	369,683	377,582
Pledged assets		2,500	2,500	2,500
Contingent liabilities		11,050	11,050	11,050

PARENT COMPANY'S STATEMENT OF OPERATIONS

(SEK 000s)

	Notes	3 mos.	3 mos.	6 mos.	6 mos.	12 mos.
		2007 Apr.-Jun.	2006 Apr.-Jun.	2007 Jan.-Jun.	2006 Jan.-Jun.	2006 Jan.-Dec.
Net sales		2,447	3,677	5,509	52,653	118,217
Cost of goods sold	5	$-1,281$	$-905$	$-2,346$	$-963$	$-1,660$
Gross profit		1,166	2,772	3,163	51,690	116,557
Total overhead expenses	5	-61,444	-28,450	-103,506	$-62,852$	$-153,891$
Other operating income and expenses	5	$-38$	$-4$	$-83$	$-362$	$-1338$
Operating profit/loss		$-60,316$		$-25,682$ $-100,426$	$-11,524$	$-38,672$
Net financial income		2,368	1,997	4,646	3,532	$-5,894$
Tax on the year's income
Net profit/loss for the period		$-57,948$	$-23,685$	$-95,780$	$-7,992$	$-44,566$

Notes 1. Accounting principles

This interim report was prepared in accordance with IAS 34, Interim Financial Reporting, which complies with the requirements stipulated in the Swedish Financial Accounting Standards Council's recommendation RR 31, Interim Financial Reporting for Groups. As of 2005, Orexo has applied IFRS as approved by the EU. The accounting principles and calculation methods comply with those applied in preparing the 2006 Annual Report.

The Parent Company's accounting was prepared in accordance with RR32.

In other respects, the accounting principles applied in this interim report are described in greater detail in the notes to the 2006 Annual Report.

The amounts below are in SEK thousands, unless otherwise indicated.

2. The Group's costs distributed by type of cost

	2007 Apr.-Jun.	2006 Apr.-Jun.	2007 Jan.-Jun.	2006 Jan.-Jun.	2006 Jan.-Dec.
Raw materials and supplies	3,502	2,563	9,698	4,641	13,982
Other external costs	41,342	14,442	62,421	31,797	86,110
Personnel costs	21,526	14,338	39,974	30,762	69,687
Depreciation and write-downs	1,030	779	2,093	1,522	3,445
Reinvoiced of rebuilding costs	6,628	$\overline{\phantom{a}}$	9,300
TOTAL	74,028	32,122	123,486	68,722	173,224

3. Shareholders' equity

Changes in consolidated shareholders' equity

	2007	2006 Apr.-Jun. Apr.-Jun. Jan.-Jun. Jan.-Jun. Jan.-Dec.	2007	2006	2006
Shareholders' equity brought forward
according to balance sheet	287,655	355,612	324,350	338,909	338,909
Profit/loss for the period	$-56,600$	$-24,585$	$-94,525$	$-9,302$	$-32,943$
Exercised hedge warrants					4,607
Subscription of shares through the
exercise of warrants	2,706		2,726		8,364
Employees stock options, value of
employees' service	1,494	1,421	2,704	2,841	5,052
Recovered VAT on issuance expenses		361		361	361
Amount at close of period	235,255	332,809	235,255	332,809	324,350

Shares outstanding

The number of shares outstanding at June 30, 2007, was 13,961,250, all of which were common shares. All shares carry entitlement to one vote each. The number of outstanding shares has increased by exercising the corresponding stock options and warrants in Orexo's options program with 76,500 since December 31, 2007

Outstanding shares at January 1, 2007	13,884,750
Subscription of shares through exercise of employee stock options	$+38,500$
Subscription of shares through exercise of subscription warrants	$+38,000$
Subscription of shares through exercise of hedge warrants	0
Outstanding shares at June 30, 2007	13,961,250

Employee stock options and warrants

At June 30, there were options outstanding carrying subscription rights corresponding to 934,775 shares in Orexo³. The following table shows changes in the number of options during the January-June 2007 period.

	Opening 1/12007	Other changes		Closing 30/62007
			┿
Total number of stock options and warrants	677,300	$-233,475$	490,950	934,775
Of which:
Decided and allotted
- employee stock options	329,800	$-38,500$	156,975	448,275
- warrants	74,500	$-38,000$		36,500
Warrants held by subsidiary for cash-
flow hedging of social security fees	78,000			78,000
Decided, but not allotted, employee
stock options for 2005, 2006 and
2007	195,000	$-156,975$	333,975	372,000

During the April – June 2007 period, 74,000 new shares were subscribed by exercising the corresponding warrants in Orexo's options program. These were distributed as follows (see also table above):

• Exercised employee stock options: 36,000 new shares
• Exercised subscription warrants: 38,000 new shares
• Exercised hedge warrants: none

The utilized employees stock options have been used during April and May to an average strike price of 36,50 SEK.

During February 2007, options were allocated that in total carry subscription rights to 156,975 new shares, 76,000 of which were distributed to company officers and 80,975 to other employees.

$^3$ ) All data is adjusted for the 1:250 share split carried out in November 2005. As shown in the 2005 Annual Report, each old option carries rights to subscribe for 250 shares after the split. The above information pertains in all respects to the number of shares each option is entitled to subscribe to.

The president was not allocated any options under this program. The subscription price is SEK 119 per share and the term of the options extends to and including December 31, 2016. One third of the total employee options allocated are earned on each of the three annual dates immediately following February 2, 2007. The market value as calculated according to the Black & Scholes method amounted to SEK 35.53 per option on the allocation date.

At Orexo's Annual General Meeting on April 23, 2007, it was resolved to adopt a new employee stock option plan including the issuance of subscription warrants and approval of disposition of subscription warrants within the framework of the employee stock option plan. The employee stock option plan consists of 372,000 employee stock options. Each employee stock option may be exercised to acquire one share in Orexo in exchange for payment of an exercise price established as the market value of the Orexo share on the date of allocation. A total of 333,975 subscription warrants were issued to the wholly owned subsidiary Pharmacall AB as a hedge for the program. Full exercise of the warrants will result in a dilution of about 2.2%.

4. Cash flow

Adjustment for items not included in cash flow

	2007 Apr.-Jun.	2006 Apr.-Jun.	2007 Jan.-Jun.	2006 Jan.-Jun.	2006 Jan.-Dec.
Depreciation/amortization and
impairments	1,030	780	2,093	1,523	3,444
Calculated costs for employee stock
option program	1,987	$-865$	3,494	4,206	7,413
Bad debt		193		193	193
Recovered VAT on issuance
expenses		361		361	361
Acquisition costs for subsidiaries		$-116$		$-116$
Miscellaneous	$-24$	7	$\mathbf{2}$		$-76$
Total	2,993	360	5,589	6,167	11,335

5. The Parent Company's costs distributed by type of cost

	2007 Apr.-Jun.	2006 Apr.-Jun.	2007 Jan.-Jun.	2006 Jan.-Jun.	2006 Jan.-Dec.
Raw materials and supplies	505	1,519	5,233	2,637	4,909
Other external costs	41,515	13,729	62,006	30,622	82,919
Personnel costs	19,933	13,479	36,957	29,564	66,081
Depreciation and impairment	948	772	1,934	1,515	3,278
Reinvoicing of rebuilding costs	6,628	$\Omega$	9,300
TOTAL	69,529	29,499	115,430	64,338	157,187

6. Shareholders' equity

Changes in the Parent Company's shareholders' equity

	2007 Apr.-Jun.	2006	2007	2006 Apr.-Jun. Jan.-Jun. Jan.-Jun. Jan.-Dec.	2006
Shareholders' equity brought forward
according to balance sheet	291,804	357,746	328,406	340,633	340,633
Profit/loss for the period	$-57,948$	$-23,685$	$-95,780$	$-7,992$	$-44,566$
Exercised hedge warrants					4,607
Subscription of shares through the
exercise of warrants	2,706		2,726		8,319
Employees stock options, value of
employees' service	1,494	1,421	2,704	2,841	5,052
Recovered VAT on issuance expenses		361		361	361
Group contributions received Amount at close of period	238,056	335,843	238,056	335,843	14,000 328,406

7. Events following the reporting date

Orexo AB invested MGBP 1.3 (17.9 MSEK) via a directed share issue in a jointly owned marketing company with ProStrakan Ltd on August 1, 2007. The funds will be used to develop the company's sales strength and marketing efforts. The marketing company will sell all of ProStrakan's and Orexo's parent company products in the Nordic market. The marketing company currently has three products on the market, Tostrex®, Rectogesic® and Droperidol®. The company is being consolidated not later than August 31, 2007. At the date of this interim report, work is still under way to finalize an acquisition balance.