Interim Report Q1 2013

Transcription

1 Interim Report Q1 2013

2 Private placement raising NOK 30 million completed, full focus on Alzheimer s disease product portfolio development Highlights Highlights ÂÂ ÂÂ On 7 March 2013 DiaGenic raised NOK 30 million in gross proceeds through a private placement of 50 million new shares at a price of NOK 0.60 per share. Registration of the private placement took place after the end of the quarter and the cash balance at the end of March was NOK 9.5 million Q pre-tax earnings were NOK -9.7 million compared with NOK -9.0 million in Q1 2012, in line with estimates 2 ÂÂ Technical verification studies and calibration trials for MCItect and ADtect have progressed according to plans. Patient recruitment for AMYtect study is on track ÂÂ In February, the FDA issued new draft industry guidelines regarding drug development for Alzheimer s disease (AD). The FDA emphasizes the value of identifying and studying patients with early stage AD, and highlights the need for biomarkers to identify AD patients in the mild cognitive impairment (MCI) pre-dementia stage of the disease ÂÂ DiaGenic s study on the Prediction of Mild Cognitive Impairment that Evolves into Alzheimer s Disease Dementia within Two Years using a Gene Expression Signature in Blood: A Pilot Study was accepted for publication in the Journal of Alzheimer s Disease ÂÂ DiaGenic signed an agreement with a major U.S. university that provides access to additional U.S. patient samples and clinical data enabling validation of DiaGenic s MCItect product ÂÂ As a consequence of the strategic decision to focus on product development targeting Alzheimer s disease, DiaGenic has terminated certain research activities and related employment positions outside of this focus. These measures will reduce the Company s cost base by approximately NOK 3 million in 2013

3 3 Significant events after the end of the period ÂÂ On 2 April 2013 the Extraordinary General Meeting of DiaGenic resolved the private placement of 50 million new shares at a price of NOK 0.60 per share and the subsequent offering for the shareholders that did not participate in the private placement, at equal terms. A total of 4,575,078 new shares have been issued in the subsequent offering which brings total share capital up to NOK 40,799,365 divided into 81,598,730 shares Significant events after the end of the period

4 Comments from the CEO 4 DiaGenic s portfolio of diagnostic products in development for Alzheimer s disease is aimed to support patient diagnosis across the progression of the disease, as well as to potentially be part of a diagnostic work-up together with other diagnostic tools. ADtect is developed to detect mild to moderate AD in the dementia stage and to differentiate AD from other neurodegenerative disorders. To also enable earlier diagnosis in the pre-dementia stage of the disease, MCItect is developed to aid in the diagnostic work-up of Mild Cognitive Impairment especially in the identification of individuals who are at risk of developing Alzheimer s disease dementia within two years. DiaGenic s third product, still in the exploratory stage of development, is AMYtect. This product aims to detect patients with brain amyloid, where the test result correlates with brain amyloid PET imaging. If successfully developed, AMYtect may be used to identify patients eligible for brain amyloid PET imaging, as well as to facilitate the development of new pharmaceutical drugs targeting the amyloid pathway. During Q1, the technical verification studies and calibration trials for MCItect and ADtect have progressed according to plans. The patient recruitment in the study conducted by Lund University together with GE Healthcare that will provide patient data for the AMYtect development is also on track. We are also pleased to have concluded a successful private placement providing funds to the company that will allow us time and resources to deliver on the near term product portfolio milestones and to take the next step of DiaGenic s strategic development. Alzheimer s disease Pre-clinical asymptomatic Mild Cognitive Impairment, MCI AD dementia Brain PET imaging to estimate β-amyloid neuritic plaque density

5 Outlook DiaGenic s goals for the next 6 months include: ÂÂ To deliver on the near-term milestones related to product development: ÂÂ CE marking of new ADtect and MCItect in Europe ÂÂ Present interim results for a blood-based test correlating with brain PET imaging ÂÂ Conduct a pre-submission meeting with the FDA to confirm the requirements for U.S. regulatory clearance of MCItect ÂÂ Proactively and in parallel evaluate alternatives for strategic development providing optimal shareholder value, including strategic collaborations, asset sale or trade sale ÂÂ To enter into additional collaborative agreements related to Alzheimer s disease with major pharmaceutical companies 5 Oslo, 14th of May 2013 Outlook

6 Condensed Financial Statements and Notes - Q1 2013

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8 Financial review 8 Raised NOK 30 million through a private placement in the quarter. Pre-tax earnings of NOK -9.7 million compared with NOK -9 million in Q Comparative figures from the corresponding period last year are shown in parentheses. DiaGenic raised NOK 30 million in a private placement on 7 March In the first quarter DiaGenic had NOK 69k (NOK 23k) in operating revenue from pilot sales of ADtect in Spain. Research grants are entered as a reduction of other operating costs and totaled NOK 325k (NOK 785k) in the quarter. Operating costs after deducting research grants were NOK 9,825k (NOK 9,426k) for the first quarter. The main business activities during the quarter have been focused on financing of the Company, continued product development and clinical studies related to Alzheimer s disease and discussions for potential new R&D collaborations with industry players. Events after the end of the quarter NOK 325k (NOK 785k). The main drivers for reduced grants this quarter is the SPIDIA research grant that was fully utilized in the third quarter 2012, and a Skattefunn project which was completed in December As a consequence of the strategic decision to focus on product development targeting Alzheimer s disease, DiaGenic has terminated certain research activities and related employment positions outside of this focus in the first quarter. The decision will have a direct impact on the costs and research grants for those projects affected and are expected to lead to reduced cost and research grants going forward. The estimated net effect is that the measures will reduce the Company s cost base by approximately NOK 3 million in Operating costs Total operating costs after deducting research grants were NOK 9,825k (NOK 9,426k) for the first quarter. Salaries and personnel expenses amounted to NOK 5,747k (NOK 5,959k) for the first quarter. Other operating costs less salaries and personnel expenses reached NOK 3,684k (NOK 3,147k) for the quarter, an increase mainly caused by purchases of clinical samples and third party lab services in the first quarter 2013, in addition to reduced research grants which is entered as a reduction of other operating cost. On 2 April 2013 the Extraordinary General Meeting of DiaGenic resolved the private placement of 50 million new shares at a price of NOK 0.60 per share and the subsequent offering for the shareholders that did not participate in the private placement, at equal terms. A total of 4,575,078 new shares have been issued in the subsequent offering which brings total share capital up to NOK 40,799,365 divided into 81,598,730 shares. Gross proceeds from the private placement and subsequent offering were NOK 30 million and approx. NOK 2.8 million respectively. The net proceeds from the private placement and the subsequent offering, at the current cost level, are expected to provide cash for planned activities into April Comprehensive income Revenues and research grants DiaGenic had NOK 69k (NOK 23k) in operating revenues in the first quarter Operating revenue both in the first quarter 2013 and in the first quarter 2012 relates to pilot sales of ADtect in Spain. Research grants are entered net into the accounts as a reduction of other operating costs. Research grants for the first quarter 2013 was Other comprehensive income After implementation of changes in IAS 19 Employee benefits, estimate deviations in DiaGenic s defined benefit pension plan are recognized in full in the statement of comprehensive income. Other comprehensive income for the full year 2012 of NOK 4,974k relates to actuarial gains from re-measurement of the Company s defined benefit pension plan. Financial position After including the net proceeds from the private placement and subsequent offering as approved by the general meeting on 2 April, and which per the signature date of this report is fully paid and registered, the Company does have sufficient working capital for its planned business activities over the next twelve month period. After including the net proceeds from the private placement and the subsequent offering as approved by the general meeting on 2 April, the Company estimates that it will run out of working capital in April 2014.

9 The Company will, in line with its communicated strategy, pursue three parallel tracks to attain longer term working capital requirements: (i) achieve commercially meaningful partnership deals related to its validated products, which could provide working capital through up-front and milestone payments, (ii) attract additional equity financing for an in-house FDA clearance process with retained product rights, or (iii) consider a trade sale, at a valuation attractive to its shareholders, to a buyer providing required financing. Total assets at 31 March 2013 were NOK 15,965k (NOK 60,353k), of which current assets amounted to NOK 13,919k (NOK 56,908k). Cash accounted for the largest share of current assets with a balance of NOK 9,514k (NOK 48,091k) at the end of March Changes in other receivables of NOK 4,005k (NOK 7,462k) is mainly driven by changes in receivable balances for research grants and pre payments to suppliers. Equity at 31 March 2013 amounted to NOK 5,197k (NOK 44,075k). Current liabilities at the end of March 2013 was NOK 9,630k (NOK 7,223k) and pension liabilities totaled NOK 1,138k (NOK 6,139k). After changes in IAS 19 employee benefits, the corridor method for accounting of estimate deviations shall now be recognized in full in the statement of comprehensive income. The removal of the corridor method has increased the pension liability per 31 March 2012 by NOK 2,007k, offset by a reduction in equity. Unamortized estimate deviation per 31 December 2012 of NOK 4,974k is recognized in the financial statements as other comprehensive income. Other long term liabilities was NOK 0k (NOK 2,917k) at 31 March 2013, and relates to a loan from Innovation Norway with a principal of NOK 1,250k at the end of March The loan falls due in in less than 12 months and is consequently considered a current liability. Cash flows Net cash flow from operating activities for the first quarter 2013 was NOK -8,515k (NOK -10,277k). Changes in short-term receivables are the main driver for the differences in net cash flow from operating activities in the first quarter 2013 compared with first quarter Payment of short and long term liabilities relates to a loan from Innovation Norway with a payment of NOK 417k for both the first quarter 2013 and the first quarter The Company s cash balance is held in bank deposits and amounted to NOK 9,514k (NOK 48,091k) on 31 March Equity and number of shares Accrued transaction cost of NOK 1,735 for the Private Placement on 7 March 2013 is charged against equity in the first quarter After implementation of changes to IAS 19 where the corridor method is no longer allowed, equity has been reduced by the termination of the corridor which led to a NOK 2,007k hit to equity in the first quarter Risk factors The information contained in this report includes certain forward looking statements that address activities, events or developments that the Company expects, projects, believes in or anticipates will occur in the future. These statements are based on various assumptions made by the Company which are beyond the Company s control and subject to risk factors and uncertainties. The Company is exposed to a large number of risk factors including, but not limited to, financing risk, market acceptance of the Company s products, necessary approvals from the authorities and the clinical effectiveness of the Company s products, and the success of the pharma companies drug development programs. The Company may fail to raise capital on acceptable terms, or not raise capital at all, which may result in insolvency, bankruptcy or liquidation of the Company. Reference is made to the annual report for 2012 for further information relating to risk factors. As a result of the above-mentioned or other risk factors actual events and the actual result may differ significantly from that indicated in the forward looking statements. For the next 6 month period key risks are considered to evolve around progress in product development such as access to clinical samples and data, study results which falls within acceptance criteria and progress related to (i) achieving commercially meaningful partnership deals, (ii) attract additional financing for an in-house FDA clearance process with retained product rights, or (iii) trade sale of the Company. 9 Financial review

10 Statement of comprehensive income Condensed Financial Statements - Q Note (figures NOK thousands) Q1 Q1 1 Jan-31 Dec Operating Income Other operating income Total operating revenue Operating expenses Cost of goods sold Total cost of goods sold Operating costs Wages and social costs Depreciation Impairment of goodwill Other operating costs Total other operating costs Total operating costs Operating profit (loss) Financial income Financial expenses Net financial income/expense Pre-tax profit (loss) Income tax costs (benefits) Net profit (loss) Other comprehensive income Comprehensive income Net profit per share (figures in NOK) Net profit per share after dilution (figures in NOK)

11 Statement of financial position Note (figures NOK thousands) 31. March 31. March 31 Dec Assets Fixed assets Goodwill Software Fixed assets Total non-current assets Current assets Inventory Trade receivables Other receivables Cash and cash equivalents Total current assets Total assets Equity and liabilities Equity Share capital Paid in equity Retained earnings Total equity Provisions Pension liabilities Total provisions Other long term liabilities Other long term liabilities Total other long term liabilities Liabilities Accounts payable Social security, VAT etc. payable Other current liabilities Total current liabilities Condensed Financial Statements - Q Total equity and liabilities

12 Cash flow statements Condensed Financial Statements - Q Note (figures NOK thousands) Q1 Q Cash flow from operating activities Pre-tax profit (loss) Income taxes paid Ordinary depreciation Impairment of fixed assets Fair value granted option rights Loss on sale of fixed assets Change in pension scheme liabilities Change in inventories, accounts receiveable and accounts payable Change in other short-term receivables and other short-term liabilities Net cash flow from operating activities Cash flow from investment activities Proceeds from sale of fixed assets Acquisitions of fixed assets Net cash flow from investing activities Cash flow from financing activities Contribution of share capital/transaction cost Proceeds from new loan Payment of short/long term liabilities Net cash flow from financing activities Net change in cash and cash equivalents Cash and cash equivalents

13 Statement of changes in Equity and Number of Shares: (figures in NOK/numbers) Note Share capital Share prem reserve. Other reserves Other equity Total equity Number of shares As at 1st January Allocation of comprehensive loss Fair value granted option rights Transaction cost Princple change pension liabilities Comprehensive income As at 31st December Fair value granted option rights Transaction cost Comprehensive income As at 31st March Condensed Financial Statements - Q1 2013

14 Note 1: Presentation The financial information is prepared in accordance with International Accounting Standard 34 Interim Financial Reporting ( IAS 34 ). This financial information should be read together with the financial statements for the year ended 31st of December 2012 prepared in accordance with International Financial Reporting Standards ( IFRS ). The accounting policies used and the presentation of the Interim Financial Statements are consistent with those used in the latest Annual Financial Statements, except for changes as described in note 5 below. Company estimates that it will run out of working capital in April The Company will, in line with its communicated strategy, pursue three parallel tracks to attain longer term working capital requirements: (i) achieve commercially meaningful partnership deals related to its validated products, which could provide working capital through up-front and milestone payments, (ii) attract additional equity financing for an in-house FDA clearance process with retained product rights, or (iii) consider a trade sale, at a valuation attractive to its shareholders, to a buyer providing required financing. The Board of Directors confirmed on this basis that the going concern assumption is valid, and that financial statements are prepared in accordance with this assumption. Notes 14 The preparation of the Interim Financial Statements requires management to make estimates and assumptions that affect the reported amounts of revenues, expenses, assets, liabilities and disclosure of contingent liabilities at the date of the Interim Financial Statements. If in the future such estimates and assumptions, which are based on management s best judgment at the date of the Interim Financial Statements, deviate from the actual circumstances, the original estimates and assumptions will be modified as appropriate in the period in which the circumstances change. Note 3: Inventory figures in thousand NOK Q Q Inventory 343 1,323 Inventory is valued at lower of cost and net selling price. Inventory is recorded at cost in the financial statements. Note 2: Going concern The financial statement is presented on the going concern assumption under International Financial Reporting Standards. Accordingly, the financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts, the amounts and classification of liabilities, or any other adjustments that might arise, should the Company be unable to continue as going concern. Tangible assets and software are recognized at cost price after deduction for accumulated depreciation and any write downs. Should the Company be unable to continue as going concern then the recoverability and classification of recorded asset amounts might have to be adjusted. After including the net proceeds from the private placement and subsequent offering as approved by the general meeting on 2 April, and which per the signature date of this report is fully paid and registered, the Company does have sufficient working capital for its planned business activities over the next twelve month. After including the net proceeds from the private placement and subsequent offering as approved by the general meeting on 2 April, the Note 4: Earnings per share - figures in NOK The following table shows the changes in number of shares in 2013: Ordinary shares Number of shares as of January Number of shares as of March Average number of shares per March Note 5: Accounting standards for pension The accounting standards adopted are consistent with those of the previous financial year except as described below. IAS 19 Employee benefits was amended in June 2011 and effective as of January The amendments eliminate the corridor approach and estimate deviations shall now be recognised in full in in the statement of comprehensive income. After

15 implementation of the revisions to IAS 19, there were no material effects on the Company s operating profit, however the unrecognised actuarial gains have been recognised in comparative figures: -- The removal of the corridor approach resulted in a NOK 2,007k increase in pension liability per 1 January 2012 and an equal reduction in equity. -- Actuarial gains per 31 December 2012 resulted in a NOK 4,974k reduction of the pension liability and a similar gain on other comprehensive income per 31 December The main driver behind actuarial gains per 31 December 2012 is the discount rate used for 2012 which was based on market interest rate for corporate bonds (OMF), whereas for 2011 the discount rate used was based on the interest rate on Norwegian government bonds. The change in actuarial gains will be recognised as part of other comprehensive income (OCI) going forward. The effect on comparative figures in OCI is a gain of NOK 4,974k in 2012, of which NOK 0.0 million in the first quarter. Actuarial calculations are performed during the fourth quarter of every financial year. 15 Note 6: Events after the balance sheet date At the date of this report, there are no events, except for the items listed below, after the balance sheet date that will affect the Company s position on the balance sheet date which is essential for the Company s future financial position: Notes On 2 April 2013 the Extraordinary General Meeting of DiaGenic resolved the private placement of 50 million new shares at a price of NOK 0.60 per share and the subsequent offering for the shareholders that did not participate in the private placement, at equal terms. A total of 4,575,078 new shares have been issued in the subsequent offering which brings total share capital up to NOK 40,799,365 divided into 81,598,730 shares. The private placement and the subsequent offering provide gross proceeds of NOK 30 million and approximately NOK 2.8 million respectively. The net proceeds from the private placement and the subsequent offering, at the current cost level, are expected to provide cash for planned activities into April 2014.

16 DiaGenic ASA Grenseveien 92 NO Oslo