Biotie Therapies detailed interim report
About Biotie
Biotie is a drug discovery and development company focused on central nervous system and inflammatory diseases. It has a broad range of innovative small molecule and biological drug candidates at different stages of clinical and pre-clinical development. Biotie's products address diseases with high unmet medical need and significant market potential, including addiction and psychotic disorders, rheumatoid arthritis, psoriasis and chronic obstructive pulmonary disease (COPD).
Drug development projects and operations:
Nalmefene, a new treatment paradigm for alcohol dependence. Nalmefene builds on a novel principle of treating alcohol dependence. Unlike existing therapies, the treatment with Nalmefene is not aimed at keeping the patients from drinking. Nalmefene instead removes the desire to drink, thereby controlling and limiting the intake of alcohol. Nalmefene distinguishes itself by being available as an oral tablet formulation to be taken on an as needed basis.
Biotie has granted worldwide rights (excluding Korea) for Nalmefene to Lundbeck. Currently, Lundbeck is undertaking three phase III clinical trials with Nalmefene for the treatment of alcohol dependence. We expect top-line data from the ongoing clinical trials to become available towards the end of 2010. Biotie is participating in financing some of the clinical development costs.
ELB353, an oral PDE4 inhibitor for COPD in clinical development. ELB353 is a once-daily, oral phosphodiesterase 4 (PDE4) inhibitor with therapeutic potential in chronic inflammatory disorders, particularly in chronic obstructive pulmonary disease (COPD), a serious disorder with major unmet medical need.
After the reporting period, Biotie reported that it has successfully completed a Phase I trial with its orally administered PDE4 inhibitor ELB353. The study evaluated the safety, tolerability, pharmacokinetic characteristics and pharmacodynamic effects of repeated oral doses of ELB353 in 48 healthy male volunteers. ELB353 was generally well tolerated, and no serious or severe adverse events were reported in any of the study subjects. The pharmacokinetic characteristics of ELB353 demonstrated its suitability for a once daily dosing regimen. Robust and statistically highly significant biomarker responses confirmed the pharmacological activity of well tolerated doses of ELB353 in man.
Vascular Adhesion Protein-1 (VAP-1), a key inflammation receptor. VAP-1 has been shown to play a key role in inflammatory chronic diseases such as rheumatoid arthritis, psoriasis and diabetes. Potentially it also plays a role in other chronic inflammatory diseases for which there is a clear unmet medical need. Biotie has a vast knowledge and strong intellectual property position around this target.
VAP-1 function can be blocked by either antibody (biologic) drugs or small molecule drugs which target the enzyme (SSAO) domain of the receptor. Both approaches are being pursued by Biotie for various therapeutic indications.
VAP-1 antibody, a high value biologic for inflammatory diseases in clinical development. Biotie is developing a fully human monoclonal antibody which blocks VAP-1 function. In January 2010 Biotie reported that it has successfully completed a clinical trial with the product in rheumatoid arthritis patients, demonstrating the safety, tolerability, and pharmacokinetics of repeated doses of intravenously administered antibody in 24 rheumatoid arthritis patients. Although the study was not designed to enable formal statistical evaluation of therapeutic activity, in several assessments of treatment effect such as Disease Activity Score based on 28 joint assessment (DAS28) criteria, American College of Rheumatology (ACR) criteria, physician's global assessment and erythrocyte sedimentation rate, responses in higher dose groups were greater than in the placebo group. Several patients receiving higher doses of BTT-1023 reached an ACR50 response (i.e. a 50% reduction in their ACR score) during treatment whereas none of the placebo patients reached an ACR50 response.
A similarly designed clinical study initiated in March 2009 in psoriasis patients is currently ongoing and results from this study are expected in the second quarter of 2010.
Biotie has granted a license to Seikagaku Corporation to the rights for the product for Japan, Taiwan, Singapore, New Zealand, and Australia against up to USD 16.7 million in milestone payments plus royalties on sales in the territory.
After the reporting period, Biotie announced that it regains all commercial rights to the VAP-1 antibody except in certain territories in which the product is licensed to Seikagaku. Roche informed Biotie that it does not intend to exercise its option to in-license the VAP-1 antibody product for its own strategic portfolio related reasons. Biotie will continue own development efforts and seek partners in addition to Seikagaku.
VAP-1 SSAO inhibitors. Biotie is pursuing the development of small molecule inhibitors of VAP-1 SSAO. Currently the program is at pre-clinical stage. Biotie has granted options to the program to Roche and Seikagaku (for Japan, Taiwan, Singapore, Australia and New Zealand). Under the terms of the option agreements, the parties carry their own costs, but Biotie retains ownership of the developed compounds until Roche chooses to exercise its option for in-licensing.
Phosphodiesterase 10 (PDE10) inhibitors, a novel treatment paradigm for schizophrenia. PDE10 is a novel molecular drug target in schizophrenia and Biotie has shown antipsychotic activity of PDE10 inhibitors in animal models. Biotie's PDE10 inhibitors are believed to serve the unmet medical need for novel anti-psychotic drugs with an improved side effect profile and improved efficacy in schizophrenia.
Biotie and Pfizer are in a discovery alliance to jointly identify novel PDE10 inhibitors. This alliance will end in June 2010. After that, Pfizer retains the commercial rights for all product candidates discovered until then. So far, the program has advanced one compound into preclinical development.
Financial review
Revenues: Revenue for the reporting period amounted to EUR 1.2 million (EUR 1.4 million in Q1 2009) and consisted of income from the ongoing research collaboration with Pfizer as well as periodization of previously received up-front payments from the licensing agreements the company has in place with several licensing partners.
In addition, Biotie received EUR 0.2 million (EUR 0.3 million in Q1 2009) non-dilutive funding under a grant from the central development agency for the state of Saxony (Sächsische Aufbaubank, SAB).
Financial result: The net loss for the reporting period amounted to EUR 3.7 million (EUR 2.9 million in Q1 2009). Research and development costs for the reporting period amounted to EUR 3.8 million (EUR 3.9 million in Q1 2009).
Financing: Cash and cash equivalents totaled EUR 15.2 million at the end of the reporting period (EUR 22.2 million).
The company has invested its liquid assets into bank deposits. Bank deposits with maturity more than 3 months are reported in "investments held to maturity" whereas deposits with maturity less than 3 months are reported in the "cash and cash equivalents".
Biotie has a standby distribution agreement with US fund Yorkville in place. Yorkville is obliged to subscribe and pay for ordinary no-par Biotie shares up to a total value of EUR 20 million during the period until September 2012 at Biotie's discretion (Biotie option). The purpose of this arrangement is to have an option to secure the financing of Biotie's working capital in the short and medium term.
Shareholder's equity: The shareholders' equity of the group amounts to EUR -12.6 million (IFRS). Biotie's equity ratio was -46.2 % on 31 March 2010 (-6.9 % on 31 March 2009).
Investments and cash flow: Cash flow from operations was EUR -4.4 million for January - March (EUR -3.3 million during Q1 2009). The group's investments during the reporting period amounted to EUR 0.1 million (EUR 0.0 million Q1 2009).
AGM decisions and corporate governance
The Annual General Meeting (AGM) of Biotie Therapies Corp. was held on15 April 2010 and resolved on the following items:
- Adoption of financial statements 2009
- Transfer of annual loss to unrestricted equity and no dividend paid
- Discharge from liability for the members of the Board of Directors and Managing Director
- Reduction of members of the Board of Directors to 7 (seven)
- Election of Ms. Merja Karhapää and Mr. James S. Shannon as new members to the Board of Directors; re-election of Messrs. Peter Fellner, Bernd Kastler, Pauli Marttila, Riku Rautsola, Piet Serrure.
- Resolution to adopt compensation to members of the Board to EUR 3000 per month and EUR 4000 per month to the chairman of the Board
- Renewed appointment of PricewaterhouseCoopers Oy and Mr. Janne Rajalahti as auditors
- Authorization to the Board of Directors to issue up to 80 million shares in one or more issues pursuant to chapter 10 of the Companies Act (effective until 30 June 2011 and superseding all earlier authorizations)
Organization of the Board of Directors
The Board of Directors elected Peter Fellner as new Chairman of the Board. Paul Marttila was elected as Deputy Chairman. Mr. Mikko Heinonen from the law firm Hannes Snellmann continues as secretary of the Board of Directors.
The Board of Directors decided that the Audit Committee and the Nomination and Remuneration Committee continue to assist the Board in its work. The Board of Directors elected among its members Merja Karhapää, Bernd Kastler (chairman), Riku Rautsola and Piet Serrure as members of the Audit Committee. Peter Fellner (chairman), Pauli Marttila and James S. Shannon were elected to the Nomination and Remuneration Committee.
Share capital and shares
Biotie shares are all of the same class and have equal rights. Each share entitles the holder to one vote at the general meeting of shareholders. All shares are freely transferable and are quoted on NASDAQ OMX Helsinki Ltd (Small cap, Healthcare).
Biotie´s share capital is EUR 51,506,678.10 (FAS), the total number of shares is 158,752,560. Of these shares, 463,255 are owned by Biotie Therapies Corp.
Changes in ownership
During the reporting period, the company became aware of one notice of change in ownership exceeding the disclosure threshold.
Information on notices of change in ownership and a monthly updated list of Biotie's major shareholders is available on the company's website at www.biotie.com/investors.
Short-term risks and uncertainties
Biotie's strategic risks are predominantly related to the technical success of the drug development programs, regulatory issues, strategic decisions of its commercial partners, ability to obtain and maintain intellectual property rights for its products, launch of competitive products and the development of the sales of its products. The development and success of Biotie's products depends to a large extent on third parties. Any adverse circumstance in relation to any of its R&D programs might impair the value of the asset and thus, represent a severe risk to the company. Such adverse events could happen on a short term notice and are not possible to foresee.
The key operational risks of Biotie's activities include the dependency on key personnel, assets (especially in relation to intellectual property rights) and dependency on its license partners' decisions.
Furthermore, significant financial resources are required to advance the drug development programs into commercialized pharmaceutical products. To fund the operations, Biotie relies on financing from three major sources: income from its license partners, grant income and raising equity financing in the capital markets.
Although Biotie has currently active license agreements in place, the termination of any such agreement would have a negative effect on the short to medium term access to liquidity for the company. Grants have been historically available to Biotie at substantial levels. Availability of grants in the future cannot be guaranteed and this thus poses a potential risk to the income situation of the group in the future. Currently ongoing grant programs are available until Q3 2010. The company relies on capital markets to raise equity financing from time to time. There can be no assurance that sufficient funds can be secured in order to permit the company to carry out its planned activities. Current capital market conditions are volatile and it is currently uncertain whether the company can secure equity financing if and when it needs it, even though it was successful at doing so in December 2009.
To protect the continuity of Biotie's operations, sufficient liquidity and capital has to be maintained in the company and its subsidiaries. The group aims to have cash funds to finance at least one year's operations at all times. The group can influence the amount of capital by adapting its cost basis according to the financing available. Management monitors the capital and liquidity on the basis of the amount of equity and cash funds. These are reported to the Board on a monthly basis.
IFRS and accounting principles
This interim financial report has been prepared in accordance with IFRS recognition and measurement principles, and applying the same accounting policy as for the 2009 financial statements. The interim report has not been prepared in accordance with IAS 34, Interim Financial Reporting.
This interim report is unaudited.
