THIRD QUARTER, JULY 1 – SEPTEMBER 30, 2011
- Consolidated net sales totalled SEK 4.5 M (4.3)
- Operating result amounted to SEK -9.2 M (-5.1)
- Net result amounted to SEK -8.9 M (-5.2)
- Result per share before and after dilution was SEK -2.14 (-1.96)
- Cash flow from operating activities was SEK -10.5 M (-3.1)
FIRST NINE MONTHS, JANUARY 1 – SEPTEMBER 30, 2011
- Consolidated net sales amounted to SEK 12.7M (14.9)
- Operating result amounted to SEK -29.7 M (-19.0)
- Net result amounted to SEK -29.0 M (-20.9)
- Result per share before and after dilution was SEK -7.08 (-7.94)
- Cash flow from operating activities amounted to SEK -23.5 M (-20.0)
SIGNIFICANT EVENTS DURING THE THIRD QUARTER
- Russell G. Greig was appointed Acting CEO of Isconova
- Isconova expanded the cooperation with Genocea Biosciences
- Positive avian flu trial data with Matrix M™ was published
CEO’S COMMENTS
Isconova’s goal is to become the partner of choice for vaccine companies seeking a partner for efficient vaccine development using adjuvants. We also aim to increase the ownership share in the vaccine products. That is our stated goal, and during the past months we have taken several steps in this direction.
In late August, the journal Vaccine published the first article with data from PANFLUVAC’s avian influenza study with Isconova Matrix M™. The vaccine with Matrix M™ was shown to be well-tolerated and enhanced both the homologous and heterologous antibody responses against the pandemic influenza virus – further proof of the strength of our Matrix™ platform. In August, we expanded our existing agreement with Genocea Biosciences to include the use of our adjuvant Matrix M ™ in vaccines against two additional diseases. The hitherto most advanced of the projects is a vaccine against herpes simplex type-2 – a sexually transmitted disease that annually affects about 500 million people worldwide. Clinical studies in this program are planned for 2012.
After the end of the reporting period, Intervacc successfully completed a Strangvac® study, a vaccine under development against equine disease strangles, in which Isconova Matrix C™ adjuvant is used. Strangles is a serious infection in horses and the commercial potential is significant with currently no effective vaccine against strangles on the market. During the first nine months 2011, we reported lower sales compared with the same period last year due to an inventory optimization at our partner MSD Animal Health, as well as lower revenue from research co-operations. We estimate that the long-term demand for our products is favourable. Sales were positively impacted by a non-recurring revenue received from the new license agreement with Crucell in the second quarter. Costs also increased between the years as a result of our investments in proprietary clinical studies and the build up of our organization.
In recent years, the company has taken several important steps through the implemented strategy with increased focus on human vaccines, listing on First North as well as the concluded agreements in both human and veterinary vaccines areas. The Board has determined that the company now is in need of a management team with significant international experience and a strong track record in business development, and we are in the process of recruiting a CEO with these specific skills. Our assessment is that the recruitment process should be completed early 2012.
ABOUT ISCONOVA
Isconova is a research and development company specializing in the development and commercialization of adjuvants and vaccines through the company’s unique expertise in vaccine technology. The Company has a patented technology, a strong product platform, production and sales of adjuvants, and several partnerships with leading international vaccine and pharmaceutical companies.
Isconova has developed several adjuvants that are all based on Iscom, an immune-stimulating technological platform. Isconova has reported income for product deliveries in the veterinary field since 2005, and there are currently five veterinary vaccines in the market that use Isconova’s platform.
Isconova’s overall goal is to be the partner of choice for vaccine companies seeking a partner for effective development of adjuvant vaccines, and successively secure an increased ownership share in the vaccine products.
Isconova’s product portfolio
Isconova’s product portfolio consists of Matrix C? (used in vaccines for horses), Matrix M? (used in vaccines for humans, dogs and cats), as well as Matrix Q? (used in animal vaccines in addition to horses, dogs and cat vaccines). In addition, the Company sells the research reagents AbISCO® 100 and AbISCO® 300.
Isconova’s project portfolio
Isconova’s project portfolio consists of projects in human and veterinary vaccines and the Company has signed partnership agreements pertaining to indications aimed for both markets. In addition to the signed partnership agreement, Isconova also conducts several proprietary development projects.
In the human sector, Isconova has partnership agreements with several companies including the vaccine company Crucell (Johnson & Johnson Group), and the US research and development company Genocea Biosciences. Isconova has also cooperation with world leading institutes, for example, the Jenner Institute at Oxford University in the UK. In the veterinary field, Isconova has agreements with two major vaccine producers – Pfizer and MSD Animal Health – which market products that use Isconova’s product platform. Furthermore, Isconova has signed agreements with additional vaccine companies, where clinical studies are in progress. In addition to these projects, Isconova has signed more than ten Material Transfer Agreements (MTA) and is also involved in a number of EU projects.
SIGNIFICANT EVENTS, JULY-SEPTEMBER 2011
Russell Greig appointed Acting CEO for Isconova
Isconova has appointed Russell Greig, currently a member of its board, as Acting CEO for the company. He officially assumed the position on October 1st, 2011 to replace Lena Söderström, who left Isconova at the same time. The recruitment process to find a permanent replacement CEO has been initiated.
Isconova and Genocea expand collaboration
In August 2011, Isconova and Genocea Biosciences, Inc., a vaccine discovery and development company pioneering a new class of T cell-based vaccines, announced the expansion of their collaboration, granting Genocea the right to use Isconova’s Matrix M™ in vaccines targeting two additional diseases – malaria and gonorrhoea.
Positive avian flu trial data using Isconova’s Matrix M™ published
At the end of August 2011, the scientific journal Vaccine published the first article presenting data from the human PANFLUVAC trial. The phase I clinical study evaluated the safety and the immunogenicity of an avian flu vaccine adjuvanted with Matrix M™. Isconovas Matrix M™ showed excellent results in the study.
SIGNIFICANT EVENTS AFTER THE PERIOD
No significant events were reported after the period
Net sales
Net sales for January – September 2011 amounted to SEK 12.7 M (14.9). The sales decline was due to an inventory optimization at our partner MSD Animal Health, as well as lower revenue from research co-operations. A non-recurring revenue from a new license agreement with Crucell was received during the second quarter of 2011. Other revenue pertains to net totals of exchange-rate gains and losses in the operations.
Net sales for the July – September 2011 period amounted to SEK 4.5 M (4.3).
Costs and results
Total Operating expenses for January – September 2011 amounted to SEK 42.7 M (33.3). Costs for July – September were SEK 14.0 M (8.8).
The increase in expenses during the first nine months of 2011 are primarily attributable to the company’s investment in the human vaccine field with a proprietary clinical phase I study of influenza vaccine, as well as the expansion of the organization. During the first nine month period of 2010, costs for research partnerships were comparatively higher and also related to corresponding revenue.
The cost increase during the third quarter compared to the third quarter previous year is explained by costs for a proprietary clinical phase I study of influenza vaccine and expansion of the organization. In addition, costs for the change of CEO were recorded in the third quarter 2011.
During the period January – September 2011, the operating loss was SEK -29.7 M (-19.0). The decline was mainly due to costs from the implementation of the proprietary clinical phase I study on influenza and the expansion of the organization, but also due to a decrease in sales.
The operating loss for July – September 2011 was SEK -9.2 M (-5.1).
Net financial items for January – September 2011 amounted to SEK 0.7 M (-1.9). The net financial items included interest expense for the year-earlier period as a result of a bridge loan that was offset in shares in conjunction with a new share issue in June 2010. Net financial items for July – September 2011 amounted to SEK -0.3 M (-0.1)
The loss after financial items for January – September 2011 amounted to SEK -29.0 M (-20.9) and the loss after tax was SEK -29.0 M (-20.9). The corresponding loss for July – September 2011 was SEK -8.9 M (-5.2) and SEK -8.9 M (-5.2), respectively.
Cash flow and financial position
Cash flow from operating activities before changes in working capital for January – September 2011 amounted to SEK -28.5 M (-17.6). The decline was primarily due to lower operating profit attributable to increased costs due to the proprietary clinical phase I study, organization build-up and to lower sales compared with the corresponding period 2010. Cash flow from investment activities amounted to SEK -0.9 M (-1.1) for January – September 2011. Investments are primarily attributable development of proprietary patents.
Cash flow from financing activities amounted to SEK 0.2 M (11.8). In June 2010 a new share issue contributed with SEK 12.1 M in cash.
Cash flow was SEK 5.4 M higher than the results for January – September 2011. The increased difference between results and cash flow for this period was mainly due to EU grants received, which were recognized as current liabilities in the balance sheet. The grants will impact results when the projects are implemented. Advance payments from customers also increased during the period. Some advance payments relate to compensation for research collaborations that will be deducted from future milestones and royalties.
Cash flow for the third quarter 2011 amounted to SEK -10.9 (-3.8). The change is mainly explained by a decreased operating profit.
Consolidated cash and cash equivalents at September 30, 2011, amounted to SEK 43.4 M (1.9).
Equity by September 30, 2011, amounted to SEK 37.3 M (-4.0). The equity/assets ratio was 59 percent (neg).
Investments
Gross investments in intangible and tangible assets for the period January – September 2011 amounted to SEK 4,9 M (1.0) and SEK 0.0 M (0.0), respectively. Investments during the year are primarily attributable to the acquisition of the assets in Nordic Vaccine in May.
Personnel
The average number of employees for January – September 2011 was 24 (27). In addition, there were contracted consultants corresponding to 3 (6) employees.
Parent Company
All operating activities are conducted in the Parent Company with the exception of royalty income derived from license agreements and are recognized in Advet AB, a wholly owned subsidiary. The Parent Company’s net sales for the January – September 2011 period totalled SEK 8.9 M (13.5) and the loss after financial items amounted to SEK -32.4 M (-22.1).
Accounting policies
This interim report was prepared based on the Swedish Annual Accounts Act and general advice and guidelines from the Swedish Accounting Standards Board. The accounting policies are unchanged compared with the preceding year. Refer to the 2010 Annual Report for further information.
Significant risks and uncertainties
Significant risks and uncertainties are stated in the 2010 Annual Report. No significant changes have occurred since the Annual Report was published.
Financial risks
In its current form, Isconova’s operations are deemed to have financing for 9-12 months in the future. For further financing of the operations, and unless a substantial license- agreement is concluded, it is the view of the company that external financing may need to be realized.
Share and market capitalization
The company’s market capitalization at September 30, 2011 amounted to approximately SEK 109 M, based on the total shares outstanding at that time at the closing price of SEK 26.2 per share.
The Isconova’s share has been listed on NASDAQ OMX First North since November 10, 2010.
The company’s Certified Adviser is E. Öhman J:or Fondkommission AB.
For further information, please contact:
Russell G. Greig, Acting CEO, Tel: +46 18-16 17 45,
E-mail: russell.g.greig@isconova.com
Erik Bergman, CFO, Tel: +46 18-16 17 29,
E-mail: erik.bergman@isconova.com
