Financial report January – December 1998
FINANCIAL REPORT JANUARY – DECEMBER 1998
* Income for the Group was SEK 62.9.million. Down payments were received from
Bristol-Myers Squibb and Merck & Co. in 1997 when the collaborations were
commenced, which brought reported net sales to SEK 75 million.
* Net loss after financial items was -SEK 24.3 million (-7.7).
* Liquid funds and short-term investments amounted to SEK 209.1 million
(127.0).
* The collaboration projects with Bristol-Myers Squibb and Merck & Co. are
progressing positively and according to plan.
* Compounds for the treatment of type 2 diabetes have shown favorable results
in animal trials.
COLLABORATIVE PROJECTS
Merck & Co. (Merck) – Estrogen receptors
The company began a three-year collaboration with Merck & Co. in the autumn of
1997, aimed at developing drugs to treat diseases that are responsive to the
Alpha and Beta estrogen receptors. The collaboration is comprehensive and may
result in several different kinds of products. It has developed positively and
according to plan.
Bristol-Myers Squibb (BMS) – Thyroid hormone receptors
This three-year collaboration also began in the autumn of 1997. It is aimed at
developing new pharma-ceuticals for treatment of “metabolic syndrome”.
Receptor-specific compounds with relevant pharmaco-logical properties have
been tested in various animal models. There is much that indicates that
compounds belonging to this class can also be used to treat other diseases.
Novo Nordisk A/S – estrogen receptors
The collaboration with Novo Nordisk which concluded in 1997 resulted in a
preclinical lead candidate with very promising properties, NNC 45-0781. Since
Novo Nordisk has discontinued further development of an earlier licensed
compound, levormeloxifene, a decision has been made to out-license NNC 45-
0781.
INTERNAL PROJECTS
Cardiac arrhythmia
Development of the pharmaceutical compound KB 130 015, as well as the design
and synthesis of new compounds, is being done within the cardiac arrhythmia
project. Karo Bio is presently evaluating the suitability of the compound for
the treatment of atrial fibrillation, which may constitute a major
application.
Skin disorders
Promising animal trials have been completed within the skin project. A human
pilot study for a selected indication has recently begun at a dermatological
institute in Germany. The study is expected to be completed in the spring of
1999.
Type 2 diabetes
The liver is the most important glucose-producing organ in the body. Together
with the Karolinska Institute, Karo Bio is developing a new concept for
treatment of type 2 diabetes. During the year Karo Bio has been able to show
that proprietary liverselective glucocorticoid antagonists significantly lower
glucose levels in animal models. Significant effects have also been achieved
in animals with severe diabetes where other pharmaceuticals have not proven
effective.
OTHER RESEARCH AND DEVELOPMENT
During the year the Company identified potential clinical applications for
some of the orphan receptors. These receptors are included in the evaluation
currently being done by the Company with the objective
of starting new research programmes.
In pace with the progress of the projects and the collaborations that began
during 1997, Karo Bio has strongly expanded its chemistry-related activities.
Two new chemistry laboratories were completed during the year and about ten
chemists have been recruited.
There were 74 employees at the end of the year, which may be compared to 60 at
the end of 1997. Sixty-six
of the staff work with R&D. The average number of employees in the Group was
72 (58)
RESULTS AND FINANCIAL POSITION
Net sales for the year for the Group and the Parent Company amounted to SEK
62.9 million and were made
up of revenues from Merck and BMS according to plan. During 1997, Karo Bio
also received down payments when the collaborations with these companies
started, which brought combined net sales to SEK 75.0 million, including
revenues from Novo Nordisk and the Swedish Industrial Development Fund.
The research collaborations and additional resources allocated to internal
programmes have increased the Group’s costs by SEK 6.6 million compared to
1997 and by SEK 14.5 million if non-recurring costs during 1997 are excluded.
Group results after financial items were SEK -24.3 million (-7.7). The Parent
Company showed a net loss of SEK -19.8 (-54.9) million. The difference between
the Group and Parent Company is primarily made up of depreciation on goodwill
in the amount of SEK 5.2 million (5.2). A write-down of shares in Karo Bio
Inc.,
of SEK 52.3 million was included in the Parent Company’s net results for 1997.
Investments in equipment were made during the year in the amount of SEK 12.4
million (4.5) for the Group and the Parent Company. The largest items were for
the medicinal chemistry laboratory which was built in new adjacent premises in
Novum and for the combinational chemistry laboratory that was built within the
existing premises.
In connection with the Company’s listing on the Stockholm Stock Exchanges O-
list on 3 April 1998, two new share issues were carried out at a price of SEK
92 per share. The share capital now totals SEK 45,885,860 which corresponds to
9,177,172 shares.
Liquid funds and short-term investments amounted to SEK 209.1 million (127.0)
at year-end for the Group and 208.9 (125.6) for the Parent Company.
Earnings per share for the year amounted to SEK -2:74 (-1:07), calculated upon
the average number of shares. The group’s equity/assets ratio as of 31
December 1998 was 88% (84) and equity per share was 26:62 (20:00).
FUTURE DEVELOPMENT
The international pharmaceutical industry has a continuous demand for new
products for unmet medical needs, to compensate for declining sales of
products for which patent protection has expired, as well as to maintain
stable growth in sales and profit. Therefore there is a continuous strong
demand for research collaborations aimed at innovative pharmaceuticals.
Karo Bio’s projects are developing successfully, so conditions for entering
into new collaborations are favourable. In order to meet the needs of internal
projects and to prepare for new collaborations, about ten researchers will be
recruited during the first half of 1999.
ANNUAL GENERAL MEETING AND INFORMATION
The Board of Directors intends to convene the Annual General Meeting on
Thursday 22 April, 1999 at 4 p.m. Since there are no distributable profits,
the Board is recommending that no dividend be paid in 1998.
Karo Bio intends to distribute information as follows:
@
Annual Report, 26 March.
@
Quarterly Reports, 22 April, 12 July and 18 October.
@
Press release of unaudited financial information, 9 February, 2000.
@
This report has not been reviewed by the Company’s auditor.
ABRIDGED CONSOLIDATED INCOME STATEMENT (SEK M)
1998 1997
Operating income 62.9 75.0
*)
Operating expenses -96.2 -88.5
-33.3 -13.5
Financial income 9.1 5.9
Financial expenses -0.1 -0.1
Net financial items 9.0 5.8
Results after financial income and expenses -24.3 -7.7
Tax – –
NET LOSS FOR THE YEAR -24.3 -7.7
Earnings per share -2:74 -1:07
*)
of which depreciation 10.3 9.2
CONSOLIDATED BALANCE SHEET (SEK M)
1998 1997
Fixed assets 54.9 52.8
Current receivables 12.0 7.7
Liquid funds 209.1 127.0
TOTAL ASSETS 276.0 187.5
Equity 244.3 157.8
Current liabilities 31.7 29.7
TOTAL EQUITY AND LIABILITIES 276.0 187.5
1)
Number of shares outstanding, ‘000 9.177 7.886
1)
Adjusted for split 2:1 in 1998
CONSOLIDATED STATEMENT OF CHANGES IN FINANCIAL POSITION (SEK M)
1998 1997
Profit/loss after financial income and expenses -24.3 -7.7
Depreciation 10.3 9.2
Change in working capital -2.2 3.1
CASH FLOW BEFORE INVESTMENTS -16.2 4.6
Investments in equipment -12.4 -4.5
Sale of fixed assets – 1.2
CASH FLOW AFTER INVESTMENTS -28.6 1.3
New share issue 110.7 49.7
CHANGE IN LIQUID ASSETS 82.1 51.0
Huddinge 11 February, 1999
Per-Olof Mårtensson
President
For further information, please contact Per-Olof Mårtensson, phone +46 8 608
6020
or Håkan Hallberg, Vice President Finance & Administration, phone +46 8 608
6006.
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