As a consequence of the acquisition of the subsidiary Kancera Förvaltning AB on 2016-06-16, the present Interim Report, Q2 2016, is prepared in accordance with IAS 34 and related parts of the Annual Accounts Act. The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU and the Swedish Annual Accounts Act. The accounting of the parent company has been prepared in accordance with the Annual Accounts Act and the Swedish Financial Reporting Board's recommendation RFR 2, including a number of new or revised standards, interpretations and improvements adopted by the EU and apply from 1 January 2016. The transition to the new accounting standards was voluntary and did not affect the income statement or balance sheet for the period January 1 - March 31, 2016 accounted for using the previous principles, or the comparison figures used below in the comments from the previous year regarding the parent company Kancera AB (for comparison between the accounting policies, see Note 1).
The period January to March 2016 in brief
· R&D expenses for the period amounted to SEK 8.7m (SEK 8.8m) of which the second quarter constituted SEK 4.4m (SEK 4.6m).
· Operating income for the period amounted to SEK -10.5m (SEK -10.4m) of which the second quarter constituted SEK -5.5m (SEK -5.4m).
· Income after financial items for the period amounted to SEK -10.5m (SEK -10.3m) of which the second quarter constituted SEK -5.5m (SEK -5.4m).
· Earnings per share for the period were SEK -0.10 (SEK -0.10) of which the second quarter constituted SEK -0.05 (SEK -0.05).
· Cash flow from operating activities for the period amounted to SEK -9.4m (SEK -10.9m) of which the second quarter constituted SEK -3.1m (SEK -5.8m).
· Equity as of June 30, 2016 amounted to SEK 71.1m (SEK 31.2m) or SEK 0.68 (SEK 0.30) per share. The equity/assets ratio as of June 30, 2016 was 86 percent (76 percent).
· Cash and cash equivalents as of June 30, 2016 amounted to SEK 68.7m (SEK 25.4m). Unpaid share issue expenses amount to approximately SEK 2.2m.
Significant events during the period
· Kancera has from the 1st of January 2016 extended the lease of the company's laboratories within the Karolinska Science Park for three years through an agreement with Humlegården Fastigheter.
· Kancera has provided an update of the small molecule patent portfolio.
- A patent covering small molecule PFKFB3 inhibitors has been approved in the USA.
- A patent application covering new chemical series in the HDAC6 project has been filed.
- An international patent application covering ROR inhibitors has been strengthened by adding examples of additional highly potent ROR inhibitors.
· Kancera reported that the company has developed a new series of ROR inhibitors that show improved pharmaceutical properties which will allow preclinical studies of their effect on e.g. solid tumors. These results have prompted Kancera to concentrate the investments in the ROR project to small molecule inhibitors and terminate the product development of a ROR-based vaccine. Furthermore, Kancera reported results from the Fractalkine project showing that KAN0440567 after oral administration to mice effectively blocks the function of the Fractalkine receptor.
· Kancera announced that the company according to plan has received another payment of about SEK 2.8 million in January, 2016 from the EU for the A-PARADDISE project, which aims to develop drugs against parasitic diseases.
· Kancera reported that ROR inhibitors have been tested against human triple negative breast cancer transferred to zebra fish. The experiments showed that Kancera’s small molecule ROR inhibitors are able to both reduce tumor size and metastases (spread) of this aggressive tumor form. Further, Kancera reported that the company´s PFKFB3 inhibitors are active in the same model of triple negative breast cancer and that a patent application has been filed covering the discovery that PFKFB3 inhibitors enhance the effect of radiation treatment.
· Kancera reported that the Company due to positive efficacy data in disease models of cancer and pain has decided to exercise the exclusive option to acquire the Fractalkine project. The acquisition will be carried out in connection with the completion of the ongoing transfer of results and know-how from Acturum and AstraZeneca to Kancera. Payment for the project to Acturum Life Science AB will be made into three steps by a total of 6 million shares, of which the first payment is due at the submission of the application for authorization of a clinical trial after an approval by Kancera´s shareholders. In parallel, the company intends to validate a broader use of the drug candidate (KAN0440567) in order to demonstrate its full commercial potential.
· With the authorization of the extraordinary general meeting on 22 April 2016, Kancera AB carried out an issue of units with preferential rights for the shareholders, as well as an issue of units in the form of over-allotment space through a separate directed share issue without preferential rights. The rights issue, which was fully subscribed in May 2016, concerned 20,785,072 units and an over-allotment space of 4,000,000 units consisting of one share and one warrant at a price of SEK 2.50 per unit. On top of this compensation to underwriters and financial advisors was added. After registration of the issuance of the over-allotment option and compensation to underwriters and financial advisors, the number of shares in Kancera AB amounts to 131,486,720 and the number of warrants to 27 561 356. The new issue has brought Kancera AB approximately SEK 61.9 million before issue costs. The issue assets will be used for Kancera’s drug development, clinical studies and the further development of the Company's capacity to commercialize products. The majority of Kancera’s resources are now concentrated on taking at least one of Kancera’s drug candidates in the ROR and Fractalkine projects to clinical trial for chronic lymphocytic leukemia and pancreatic cancer, respectively. In parallel, the Company intends to validate a broader use of the drug candidates from these projects in order to demonstrate their full commercial potential.
· Kancera provided the following operational update of the fractalkine and ROR projects:
- the Fractalkine antagonist KAN0440567 is able to eliminate pain resulting from inflammation of the pancreas. This type of pain is similar to the pain resulting from cancer in the pancreas and therefore these results support the continued development of KAN0440567 towards clinical trials against cancer.
- the ROR inhibitor KAN0439834 has been shown to effectively kill resistant cancer cells from the bone marrow of multiple myeloma (MM) patients. MM originates in the bone marrow and is an incurable chronic disease today. Further studies are now focused on translating these findings to effects in animal models of MM which will provide a basis for decisions on future clinical trials evaluating Kancera’s ROR inhibitors.
· Kancera AB announced that VINNOVA has paid an additional SEK 358,451 to the HDAC6 project as part of the grant totaling SEK 2 million which has been designated by VINNOVA for the further development of Kancera’s HDAC6 inhibitors against cancer. This payment was made following the approval of Kancera’s third progress report for the project.
· Kancera AB hereby announces that its subsidiary Kancera Förvaltning AB has been formed. The operations of the subsidiary include mainly financial management including Kancera’s stock option plan.
Significant events after the end of the reporting period
Kancera AB has not reported any significant events after the end of the period.
Statement from the CEO
The oversubscribed issue in May showed support for Kancera’s new operational plan and resulted in a capital contribution of approximately SEK 60 million. Thus, we can now put the new plan into action which will influence both laboratory studies and the preparations for clinical trials. The goal is to take at least one of Kancera’s projects into clinical trials for cancer or cancer pain in the next 18-24 months. In parallel, we intend to validate a broader use of the drug candidates from the Fractalkine and ROR projects to demonstrate the projects’ full commercial potential and accelerate the HDAC6 and PFKFB3 projects towards selection of candidate drug.
During the summer, we have seen progress especially in the Fractalkine project where we are now well on the way to build the plan for the initial clinical study and compile the documentation required for an application for a clinical trial. In the HDAC6 project, studies show that Kancera now has developed highly potent and selective compounds that are efficiently taken up in the body following per-oral administration. Thus, the project takes steps towards the selection of a candidate drug according to plan.
In order to strengthen Kancera’s administrative structure Kancera Förvaltning AB (KFAB) has been formed. KFAB is a wholly owned subsidiary of Kancera AB, whose operations is focused mainly on the management of financial instruments, including for example, warrants. In connection with the formation of KFAB, Kancera chose to switch to the IFRS accounting system for groups which also facilitates a possible future listing on NASDAQ's other marketplaces.
CEO Kancera AB