Affitech A/S reports research & development progress and financial results for the third quarter of 2011

Transcription

1 Release no. 23/2011 Affitech A/S reports research & development progress and financial results for the third quarter of 2011 Completion of preclinical development of anti-vegf antibody AT001/r84 Anti-CCR4 antibody selected as first development candidate from anti-gpcr antibody research program Estimated net loss for 2011 of DKK million, changed from DKK million previously announced Cash reserves of DKK 12.8 million as per 30 th September 2011 Net loss for the first nine months DKK 51.1 million In addition the Company reports key events following the end of the quarter: Development milestone payment for AT001/r84 of EUR 2.5 million received from IBC Generium New focus on product development resulting in staff reduction Voluntary conditional public purchase offer to Affitech s shareholders from Trans Nova Investments Limited of DKK 0.22 per share Copenhagen and Oslo, 24 th November, 2011 Affitech A/S, (NASDAQ OMX: AFFI), the antibody medicines company, today reported the financial result of the third quarter of Affitech generated a loss for the first nine months of 2011 of DKK 51.1 million and had cash of DKK 12.8 million as of 30 th September Highlights of the third quarter of 2011 Fully human antibody AT001/r84, an anti angiogenesis development compound, completed pre-clinical testing satisfactorily and is ready for human clinical testing. Details provided in the section Progress with AT001/r84 below. Affitech s first anti-gpcr antibody program AT008, designed to block the binding of chemokine ligands to its cell surface receptor CCR4, is in preclinical pharmacology testing. The program includes several different antibodies with multiple potential mechanisms of action targeting hematological cancers and solid tumors, either directly, through metastatic 1

2 lesions and/or regulatory T cells. It also has potential utility in some immunological diseases such as severe asthma. o Preliminary proof of concept has been demonstrated in a T cell lymphoma xenograph model. o A development candidate has been identified. o Development of an AT008 manufacturing cell line is ongoing Six other chemokine receptor programs are being produced and profiled. Affitech continued the development of its own in-house bi-specific antibody program. On 14 th July, 2011, Affitech A/S announced two major shareholder transactions agreements: o Trans Nova Investments Ltd. reduced the number of shares in Affitech A/S from 260,187,010 shares of each DKK 0.50/number of voting rights (equal to 53.34% of Affitech A/S total share capital /number of voting rights) to 195,140,258 shares of each DKK 0.50 equal to 40% of Affitech A/S total share capital/number of voting rights. o Krosalter Enterprises Ltd. Cyprus acquired 65,046,752 shares in Affitech A/S of a nominal value of 0.50 DKK each equal to 13.34% of the total share capital/number of voting rights. On 30 th September, 2011, Affitech A/S announced that Dr Martin Welschof, its Managing Director, would leave his position at the end of the year. The Board of Directors accepted his resignation with effect from 31 st December, Progress with AT001/r84 AT001/r84 is a fully human antibody that binds to vascular endothelial growth factor A (VEGF- A), a drug target validated clinically and commercially by bevacizumab (Avastin ). Bevacizumab is a humanized monoclonal mouse antibody whereas the Affitech product is a fully human antibody with more selective binding site properties than bevacizumab and different affinity to VEGF-A. Higher selectivity and altered affinity offer potential for an increased safety/efficacy profile when compared to the bevacizumab in the treatment of human cancer. Manufacturing AT001/r84 is a recombinant human antibody and produced as a biological using large scale cultured mammalian cells. Several manufacturing runs under Good Manufacturing Practice (GMP) standards have been completed this year and multi-kilogram amounts of the antibody have been produced as active pharmaceutical ingredient. Analytical methods have been developed and the GMP antibody has passed a variety of required quality and stability tests. Drug product in sterile vials has been released and is ready for human administration. A new production cell line has been developed that is expected to result in improved production efficiency at larger scales and discussions with contract manufacturing companies to scale up manufacturing are ongoing. 2

3 Preclinical development Pre-clinical testing of AT001/r84 has been completed which is expected to enable IBC Generium to submit a Clinical Trial Application for phase I clinical trials in Russia. The preclinical information package included satisfactory pharmacokinetic, pharmacological and immunological assay results, as well as the data from 28 day rat and non-human primate toxicological studies performed to Good Laboratory practice (GLP) standards. Results from these GLP toxicology studies showed that high doses of AT001/r84 antibody were well tolerated. A number of animal model efficacy studies have also been conducted that confirm the antiangiogenic properties of the drug and support entry of AT001/r84 into human phase 1 clinical trial. Long term GLP toxicology and stability studies will be required for phase II clinical trials and these have recently been initiated. Clinical The clinical strategy for AT001/r84 is to develop the product for improved treatment of patients with various cancer sub-types known to be susceptible to anti-angiogenesis therapy, such as metastatic colorectal cancer, including co-administration with chemotherapy and other anticancer treatments. The first human clinical study will involve administration of single doses of the antibody to cancer patients to assess human safety and dosage levelling and Affitech s Russian development partner, IBC Generium, has informed the Company that it is preparing an application to the Russian health authorities for regulatory approval to conduct such a phase 1 study. Commercial The pharmaceutical anti-angiogenesis market is large with world wide sales approaching $15 billion and revenues from bevacizumab (Avastin ) in of approximately $7 billion. AT001/r84 has the potential to have similar efficacy to bevacizumab with an improved safety profile. However, the properties and potential of AT001/r84 have yet to be confirmed through human clinical studies and until such data is available, it is not possible to make meaningful estimates for the probability of achieving marketing approval in different territories nor potential market size or share. Nevertheless, the validity of the anti-angiogenic approach for treating human cancers and certain other conditions is well recognised. Several new antiangiogenic drugs have recently been approved for human use, while others are in late stage clinical development by a variety of pharmaceutical and biopharmaceutical companies. Subsequent events after the end of the reporting period 30 th September, 2011 On 12 th October, 2011 Affitech A/S announced that the U.S. Patent and Trademark Office (USPTO) has granted Affitech U.S. patent (no. 8,034,905) covering the Company s leading anti-vegf antibody drug candidate AT001/r84. This US patent is the first patent grant Affitech has received for this compound in a major territory and it considerably strengthens Affitech's IP position regarding this drug candidate. The patent is co-owned by Affitech and its collaboration partner Peregrine Pharmaceuticals. On 17 th October 2011 Affitech A/S announced that GE Healthcare Life Sciences has executed an exclusive license for the worldwide marketing and sales of products containing recombinant Protein L, granted by Affitech in a patent and know-how license agreement. Under 3

4 the terms of the agreement, GE Healthcare Life Sciences agrees to pay Affitech a royalty on net sales of all related products sold by GE Healthcare Life Sciences. On 20 th October, 2011 Affitech A/S announced that the Company had received 2.5 million Euro in milestone payment from IBC Generium. The payment is related to the delivery of the preclinical package for Affitech s anti VEGF antibody AT001/r84 to its Russian collaboration partner IBC Generium, who will use the package for the filing of a Clinical Trial Application (CTA) in Russia. AT001/r84 is a novel patented human monoclonal antibody to human vascular endothelial growth factor (VEGF), and is being developed as a potential treatment of cancer. The collaboration agreement with IBC Generium comprises two development projects and is worth up to 23 million in fees and advanced royalties to Affitech. On 17 th November, 2011 Affitech announced a restructuring of the Company resulting in a staff reduction of about 24 people at the Company s subsidiary, Affitech Research AS in Oslo, where its main Research and Development operations take place. The reasons for this restructuring exercise are (i) to focus more of its spending on development of its lead antibody products and (ii) to extend the period available to the Company for raising fresh capital. On 21 st November, 2011, Affitech s shareholders received a voluntary conditional public purchase offer of DKK 0.22 per share from Trans Nova Investments Limited. For information on the offer, see the Company s announcement of 21 st November 2011 and the Offer Document available via the Affitech A/S website, Outlook for 2011 The financial outlook for 2011 is changed to an estimated loss of DKK million compared to a loss of DKK million as previously announced. This includes restructuring expenses of up to DKK 5 million offset by a general lower operating cost level than previously expected in Q3 and Q4 and the initial impact of the cost saving measures taken. The cash position at year end 2011 is expected to be in the range of DKK 25 million. The annual cost saving effects of the announced restructuring is estimated to be DKK 18 million. As of 30 th September 2011 Affitech has made payments of DKK 28 million to outsourced contract manufacturing companies for supplies of AT001/ r84 drug material made to Good Manufacturing Practice (GMP) standards for use in pre-clinical and clinical trials. This amount is included in the balance sheet under Other Current Assets. IBC Generium will use the main part of this GMP drug product in long term toxicology investigations, stability studies and human clinical trials in Russia and is committed to reimburse Affitech for the fully burdened manufacturing costs of their share of the material during 2011 and During the fourth quarter of 2011, Affitech expects to: Confirm that IBC Generium has filed a regulatory application in Russia for approval for the first clinical trial with AT001/r84, expected to commence in Expand pharmacological testing of potential drug candidates in the AT008 program targeting CCR4 to models of solid tumors and metastatic diseases. Continue optimization of the proprietary CBAS TM technology platform through advances in quality control and improved new antibody libraries. 4

5 Identify the next anti-gpcr program likely to result in the Company s third development candidate. Implement the restructuring program to reduce internal and external expenses. Receive additional license fee revenues from IBC Generium of EUR 2.0 million, in addition to the EUR 2.5 million milestone payment received on 20 th October, 2011, resulting in total license and milestone revenues from IBC Generium in the 4 th Quarter of EUR 4.5 million. Financial Considerations related to the restructuring announced 17 h November, 2011 Affitech announced in its Q report that the Company would require further financing by the end of Q in order to pursue its present activities. Trans Nova Investments has indicated to Affitech s Board of Directors that they do not intend to solely fund Affitech s further activities at the present rate of cash utilization. As a result, the Company has investigated potential co-investor leads for financing, and this process will continue for the coming months. The Board of Affitech views the quality of the Company s technology and new product opportunities as very strong and believes that the company has the basis and the competitive edge for further financing its Research and Development. However, due to the currently difficult financial market, a new financing process is likely to take time and cannot be guaranteed. The Board of Affitech has therefore decided to reduce expenses and cash utilization in order to extend the period during which the Company can continue its operations while seeking new investment on an international basis. By implementing the staff reductions announced on 17 th November, 2011 and other cost cutting measures and focusing its activities on the development programs, the Board of Directors expects the Company to have sufficient funds until at least the end of Q Comments from the Board to the offer from Trans Nova Investments Limited The Board of Directors has been fully informed of the details of Trans Nova s voluntary conditional public purchase offer to shareholders announced on 21 st November, However, no discussion has been held with Trans Nova concerning the price of the Offer and no advice in relation to the Offer has been sought from Affitech s Board of Directors. Shareholders must come to their own decision as to whether or not to accept the Offer and the Board of Directors does not intend to give an opinion. Contact: Randi Krogsgaard, Director IR & Corporate Communications Tel # , ir@affitech.com 5

6 About Affitech Affitech A/S is a publicly traded (NASDAQ OMX Copenhagen) human therapeutic antibody company based in Copenhagen, Denmark with R&D facilities in Oslo, Norway. The company utilizes a range of proprietary antibody technologies for the discovery of fully human antibodies for application in oncology, inflammation and other disease areas. CBAS (Cell Based Antibody Selection) is Affitech s premier discovery engine for the isolation of lead antibodies to cell surface molecules. Affitech co-develops its two lead antibody drug programs AT001/r84 and AT008/CCR4 with Russian partner IBC Generium. The Company s initial focus is on rapid and cost effective development by partnering clinical trials in emerging markets. Further information is available at Disclaimer This announcement may contain forward-looking statements including statements about Affitech s expectations of the progression of its pipeline including the timing for commencement and completion of clinical trials and with respect to cash burn guidance. Such statements are based on management's current expectations and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Affitech cautions investors that there can be no assurance that actual results or business conditions will not differ materially from those projected or suggested in such forward-looking statements as a result of various factors, including, but not limited to, the following: risks associated with technological development, the risk that research & development will not yield new products that achieve commercial success, the impact of competition, the ability to transact viable and profitable commercial deals, the risk of nonapproval of patents not yet granted, and difficulties of obtaining relevant governmental approvals for new products. No expressed or implied representations or warranties are given concerning Affitech A/S or the accuracy or completeness of the information provided herein, and no claims shall be made by the recipient of this news release by virtue of the information contained herein. 6

7 Directors and Executive Management s statement on the interim report The Board of Directors and the Executive Management have today considered and adopted the Interim Report for the period 1 st January 30 th September, The interim report is prepared in accordance with IAS 34 Interim Financial Reporting, as approved by the EU and any additional Danish disclosure requirements for the presentation of financial statements by listed companies. The interim report is not reviewed or audited. We consider the accounting policies to be appropriate, the practiced accounting estimates to be reasonable and the complete presentation of the interim report to meet the requirements, so that the interim report, in our opinion, gives a true and fair view of the assets, liabilities, financial position, and results of operations and cash flows of the Company for the period 1 st January 30 th September, We further consider that the Executive Management s review contains a fair account of the development in the Group s activities and affairs, the loss for the period and the Group s financial position as a whole, and a description of the most significant risks and uncertainties to which the Group is subject. Copenhagen, 24 th November, 2011 Executive Management Martin Welschof Alexander Duncan Stig Jarle Pettersen Board of Directors Aleksandr Shuster Keith McCullagh Andrei Petrov Chairman Vice Chairman Igor Fisch Steven Morrell Yegor S. Vassetzky 7

8 Summary financial figures (unaudited) (DKK'000 except key figures) 3rd quarter rd quarter 9 months months Full year Group Group Group Group Group Condensed income statement Net revenues Royalty expenses Research costs Development costs Administrative expenses Loss before other operating income/expenses Other operating items Operating loss Share of loss of associated company Net financials Profit/loss before tax Net loss Depreciations and write-down on non current assets Current EPS and diluted EPS (DKK 0.5 per share) -0,04-0,04-0,10-0,13-0,2 Statement of comprehensive income Net loss Exchange adjustments, presentation currency Exchange adjustments, foreign subsidiaries Total comprehensive income

9 Summary financial figures (continued) (DKK'000) 30th September th September Full year Condensed balance sheet Group Group Group Intangible assets Tangible fixed assets Financial fixed assets Other current assets Cash and cash equivalents Assets Equity Non-current liabilities Current liabilities Equity and Liabilities (DKK'000) 9 months months Group Group Group Condensed cash flow statement Cash flow from operating activities before net financials From operating activities From investing activities herof invested in tangible fixed assets and intangible assets From financing activities Change in cash and cash equivalents Cash and cash equivalents at the beginning of the period Exchange rate adjustments Cash and cash equivalents at the end of the period

10 Summary financial figures (continued) (DKK'000 except key figures) 3rd quarter rd quarter 9 months months Full year Group Group Group Group Group Key figures Current EPS and diluted EPS (DKK 0.5 per share) Average number of shares (0.04) 487,721, ,721,539 (0.10) 487,721, ,931, ,774,469 Number of shares, end of period 487,721, ,721, ,721, ,721, ,721,539 Net asset value per share (DKK 0.5 per share) Share-price, end of period Price/net asset value per share Assets/equity Number of employees (full-time equivalents), end of period Number of employees (full-time equivalents), average The ratios have been calculated in accordance with "Recommendations & Ratios issued by the Danish Society of Investment Professionals, dated June Development in shareholders equity Share capital Share premium Profit and loss account Other equity Total DKK'000 DKK'000 DKK'000 DKK'000 DKK'000 Equity as of January 1, Comprehensive income Exchange rate adjustments Equity as of September 30, Equity as of January 1, Comprehensive income Capital increase, share issue Shareholders contribution Warrants Exchange rate adjustments Equity as of September 30,

11 Comments on the interim report for the first nine months of 2011 Net revenues in the Affitech Group totaled DKK 19,493 thousand in the first nine months of 2011 compared to DKK 2,352 thousand in the same period in. The increase stems from the license revenue from IBC Generium of EUR 2.5 million (DKK 18,622 thousand) regarding AT001/r84. Royalty expenses of DKK 8,323 thousand is directly linked to the licensee fee revenues. According to the amended License agreement between Affitech A/S and Peregrine Pharmaceuticals Inc. which was announced on 30 th September,, Peregrine Pharmaceuticals, Inc has an obligation to reinvest their portion of the milestone payments for AT001/r84, which was received by Affitech in June 2011, into further development of AT001/r84. Affitech will include Peregrine s portion of the milestone payments as royalty expenses and the reinvestment as a conditional loan from which will be paid back to Peregrine if the Company enters into a licensing deal in a major pharmaceutical market. Research costs increased by 18% to DKK 40,343 thousand in the first nine months of 2011 compared to DKK 34,061 thousand in the same period in. The increase in research costs is due to increased activity level on external studies and increased staff. Development costs of DKK 7,307 thousand in the first nine months of 2011 includes the preclinical development costs of AT001/r84. There was no development costs recorded in the first nine months of. Administrative expenses decreased by 29% to DKK 14,022 thousand in the first nine months of 2011 compared to DKK 19,874 thousand in the same period in. The decrease is mainly due to reduced staff, lower consulting costs and extraordinary expenses in such as severance payment to former CEO. Other operating items in of DKK 5,898 thousand reflect the net profit from the divestment and restructuring of the Company s potential future milestone and royalty rights in connection with collaboration agreements with KAEL-GemVax Co Ltd. (DKK 3,150 thousand) and Omeros Corporation (DKK 2,748 thousand). Share of loss of associated company of DKK 729 thousand in the first nine months of 2011 represents the net result for the period in Expres2ion Biotechnologies ApS multiplied by Affitech s ownership share. Net financial loss amounted to DKK 377 thousand in the first nine months of Negative net financials is due to foreign exchange effects. Net financials decreased compared to the net financial loss of DKK 5,501 thousand in the first nine months of, which included costs of the bridge loan from three shareholders from 4th January,. The Company borrowed a total of DKK 9.33 million in three tranches in 1Q and the loan was fully repaid in May. The loan carried an underwriting fee of 60% of the loan amount and a monthly interest of 2%. 11

12 On 30 th September, 2011 the Affitech Group s total assets amounted to DKK 64,970 thousand and cash and cash equivalents amounted to DKK 12,834 thousand. Other current assets of DKK 35,773 thousand include prepaid expenses of DKK 32 million, mainly for GMP material for AT001/r84 of which the main part will be recharged to IBC Generium. Cash-flow from operating activities of DKK -64,109 thousand in the first nine months of 2011 is significantly higher than the net loss for of DKK -51,207 thousand for the period. The main reason for this deviation is the increase in prepaid expenses for GMP material for AT001/r84. Notes to the Interim Financial Statement Note 1 Accounting policies The interim financial statements of Affitech A/S for the nine months ended 30 th September, 2011 are presented in accordance with IAS 34 Interim Financial Reporting as adopted by the EU and additional Danish disclosure requirements for the presentation of interim financial statements by listed companies. Some new or amended Standards and Interpretations are effective for the financial year The assessment of the management is that these Standards and Interpretations do not have significant influence on the Interim financial statements and only has resulted in disclosure of additional financial information. Shares in Expres2ion Biotechnologies ApS are included as an associated company from 16 th September, and the share of loss is consolidated in one line using the equity method. Other accounting policies applied for the interim financial statements are consistent with those applied in the financial statements for. Note 2 Other information a) Related party transactions The milestone payment of EUR 2.5 million (DKK 18.6 million) was received from IBC Generium. IBC Generium is controlled by Aleksandr Shuster and Victor Kharitonin who through Trans Nova Investment Ltd. are major shareholders in Affitech A/S. Aleksandr Shuster is also chairman of the Board of Affitech A/S. Trans Nova Investments Ltd. reduced the number of shares in Affitech A/S from 260,187,010 shares of each DKK 0.50/number of voting rights (equal to 53.34% of Affitech A/S total share capital /number of voting rights) to 195,140,258 shares of each DKK 0.50 equal to 40% of Affitech A/S total share capital/number of voting rights. Krosalter Enterprises Ltd. Cyprus acquired 65,046,752 shares in Affitech A/S of a nominal value of DKK 0.50 each equal to 13.34% of the total share capital/number of voting rights. 12

13 b) Subsequent Events after the end of the reporting period to 30 th September, 2011 Reference is made to the text on page 3 in the report under the same heading. 13