Interim report for the second quarter 2020. January 1st – June 30th, 2020

Second quarter in brief

and the period 1 January – 30 June 2020

Net sales for the period (January to June) amounted to SEK 2,6 million (3,1 million), of which the second quarter contributed SEK 2,6 million (0).

R&D costs for the period amounted to SEK 19,3 million (20,3 million), of which the second quarter contributed SEK 9,6 million (10,1 million).

Operating profit for the period amounted to SEK -25,0 million (-20,6 million), of which the second quarter contributed SEK -13,9 million (-12,7 million).

Profit after financial items for the period amounted to SEK -25,5 million (-20,8 million), of which the second quarter contributed SEK -13,8 million (-12,0 million).

Earnings per share for the period amounted to -0,09 kr (-0,11 kr), of which the second quarter contributed -0,04 kr (-0,06 kr).

Cash flow from operating activities for the period amounted to SEK -24,1 million (-21,0), of which the second quarter contributed SEK -15,4 million (-13,7 million).

Equity amounted on 30 June 2020 to SEK 77,3 million (19,3 million) or 0,18 kr (0,10 kr) per share.

The equity/assets ratio amounted on 30 June 2020 to 84 percent (53 percent).

Cash and cash equivalents amounted on 30 June 2020 to SEK 56,4 million (8,9 million).

Significant events during the second quarter

• Kancera announced that the new issue of 157 369 119 units consisting of one share and two warrants has been completed. The issue, which was decided at the Extraordinary General Meeting on January 13, 2020, was fully subscribed through a guarantee of SEK 61.4 million. Of these, as of March 31, SEK 19.3 million was received by shareholders with preferential rights. Cash issue costs are estimated at approximately SEK 4.8 million. In addition, guarantors and advisers are reimbursed through 22 000 203 Units. In total, the number of shares increases to 389 194 814 shares, which corresponds to a dilution of 85%. The share capital increases to SEK 32 432 901.

• An Extraordinary General Meeting on April 9, 2020 decided in accordance with the Board’s proposal to extend the subscription period for TO4 until the end of September 2020.
• Kancera decided to focus its operations on the continued clinical development of the drug candidate KAND567. Against this background, the company plans to reduce the workforce in the preclinical research organization. After the organizational change has been implemented, the cost reduction on an annual basis is expected to amount to approximately SEK 8 million annually. In addition to KAND567, the company’s resources will primarily be concentrated on bringing the preclinical drug candidate KAND145 into the clinical phase.
• Kancera filed a patent application regarding the drug candidates KAND567 and KAND145. The new patent application concerns the treatment and prevention of hyper-inflammation in viral infections, a condition that is seen in severely ill patients in the ongoing covid-19 pandemic.
• Kancera submitted an application to the Medical Products Agency for approval to carry out a clinical phase II study of the drug candidate KAND567 in covid-19 patients. The ultimate goal of clinical development is to slow down hyperinflammation and thus avoid intensive care and long-term rehabilitation for patients with covid-19. The study is intended to be carried out in collaboration with Capio St. Göran’s Hospital and Science for Life Laboratory.
• The Annual General Meeting resolved to i) authorize the Board of Directors to decide on a new issue of shares against cash payment and/or with a provision for non-cash or offset and to deviate from the shareholders’ preferential rights in order to raise working capital up to a maximum of 20 percent of the company’s shares. ii) amendment of the Articles of Association’s provision on the number of outstanding shares and amendment of the Articles of Association’s rules regarding share capital limits iii) a merger (so-called reverse split) whereby ten shares are merged into one share (1:10) and iv) reduction of the company’s share capital capital.
• Kancera announced that an independent research group has published results that show that the company’s drug candidate KAND567 has a protective effect on nerve tissue and its function in a preclinical disease model of spinal cord injury. These new research findings underscore the potential of KAND567 to protect vital organs by blocking hyperinflammation in a variety of disease states.
• Kancera AB announced that the first redemption opportunity for TO4 provided Kancera with approximately SEK 22 million, which the Board considers will provide funding for the planned phase IIa study of KAND567 in myocardial infarction patients. Priority partners for the study are the R & D Foundation Newcastle NHS Foundation Trust and Freeman Hospital, UK. Recruitment of patients for the study is planned to start in early 2021.
• Kancera announced the transfer of its laboratory to Oncopeptides AB in order to optimize the conditions for clinical development of the Fraktalkine project. The agreement between the companies gives Kancera the opportunity to maintain necessary capacity in connection with the company’s biobank and to strengthen the company’s cash flow by approximately SEK 7 million compared with if the company would retain the laboratory by 2021.

Important events after the end of the second quarter

• Kancera has announced that approval has been obtained from the Medical Products Agency for the planned clinical phase II study of the drug candidate KAND567 in covid-19 patients. In consultation with the Medical Products Agency, the company has decided to expand the study with a placebo group. Kancera has further announced that a new application has been submitted to the Ethics Committee for priority treatment on a permit for the same study and that this, following a decision from the EPM, can start August – September 2020.

• Kancera has announced that independent researchers have published results that show that the Fractalkine system is activated in covid-19 and that increased levels of Fractalkine are linked to more severe disease. The results mean that the probability increases that the company’s drug candidate KAND567 will be able to counteract serious complications as a result of covid-19.
• Kancera has announced that a new complementary patent application has been filed as part of the Grünenthal collaboration to cover a chemical series of HDAC-inhibitors intended for development of a new treatment of neuroinflammation and pain.
• Kancera has announced that appproval has been obtained from the Ethics committee (Etikprövningsmyndigheten) for a Phase II-study of KAND567 in covid-19-patients. This means that all approvals required for start of the study have been obtained as the Medical Products Agency already have provided a positive decision. Kancera plans to start the study September 2020.
• The Board has assessed that the covid-19 pandemic may have a negative effect on the company’s operations in 2020, but the Board cannot currently assess how large that effect may be. However, up to the date of publication of this report, no significant adverse effect of the covid-19 pandemic has been noted.

CEO statement

Kancera has secured financial resources for two patient studies of KAND567

During the past quarter, Kancera decided to focus its operations on the clinical development of the drug candidate KAND567. The background to the decision is the convincing data generated for KAND567 in the recently completed phase Ib program and that new research findings support the use of Fractalkine inhibitors in more and more inflammatory diseases. In addition, the focus will lead to a reduction in our costs by approximately SEK 12 million through 2021.

At the same time, our financial situation has been significantly strengthened through a successful rights issue and redemption of warrants, which in total provided the company with approximately SEK 76 million after issue costs. Thus, we have now secured sufficient resources to conduct a phase II study of KAND567 in patients undergoing treatment for acute myocardial infarction and also a phase II study in patients affected by covid-19 – two very different patient groups but with hyperinflammation as a common denominator.

The focus on our Fractalkine projects also generated a need for complementary new recruitments, and we are pleased to have been able to welcome Torbjörn Lundström as the new Chief Medical Officer during the quarter. Torbjörn is a doctor of medicine and a clinician with extensive experience in clinical cardiology and internal medicine, and he has worked with clinical drug development within AstraZeneca for 20 years. Our team is now working intensively to prepare for the initiation of the two planned phase II studies with KAND567.

One study of KAND567 will be performed in patients with acute myocardial infarction, in order to continue to evaluate the safety profile of the drug candidate and hopefully also be able to document a cardio-protective effect of the treatment. The study is planned to be carried out at one of the world’s most reputable university hospitals, Freeman Hospital in the UK, and is expected to begin in early 2021.

The second planned study will explore the potential of KAND567 to protect patients with covid-19 from life-threatening hyperinflammation. Approvals have been obtained by the Medical Products Agency and the Ethics Committee. The study is expected to start at St. Göran’s Hospital, Stockholm, in September 2020, with the aim of slowing down hyperinflammation through treatment with KAND567 and thereby avoiding intensive care and long-term rehabilitation for patients with covid-19. The rationale for this treatment concept was recently strengthened, when independent researchers published results showing that the Fractalkine system is activated in covid-19 and that increased levels of Fractalkine are linked to more severe disease.

The Covid-19 pandemic has not had any significant negative consequences for our operations, although it has led to some changes in the way we work – we have, for example, increased the proportion of digital meetings. We see it as a sign of strength that in the midst of the pandemic we were able to successfully carry out both a rights issue and the redemption of outstanding warrants. The concept of counteracting hyperinflammation with the help of Fractalkine inhibitors is growing stronger, at the same time as the potential areas of use are broadening as new research findings are presented. Uncontrolled immune reactions in severe viral infections are one example, use in connection with spinal cord injuries another. Our main focus is still to reduce tissue and vital organ damage in connection with myocardial infarction, but the results from the upcoming phase II studies may open up opportunities in even more areas of use.

Solna, 21 August 2020
Kancera AB
Thomas Olin, CEO