Interim Report for Kancera AB (publ) Q1 2016, January 1 – March 31, 2016

The period January to March 2016 in brief

• R&D expenses for the period amounted to SEK 4.2m (SEK 4.2m).
• Operating income for the period amounted to SEK -5.1m (SEK 4.9m).
• Income after financial items for the period amounted to SEK -5.0m (SEK -4.9m).
• Earnings per share for the period were SEK -0.05 (SEK -0.05).
• Cash flow from operating activities for the period amounted to SEK -6.3m (SEK -5.1m).
• Equity as of March 31, 2016 amounted to SEK 17.0m (SEK 22.6m) or SEK 0.16 (SEK 0.22) per share. The equity/assets ratio as of March 31, 2016 was 70 percent (71 percent).
• Cash and cash equivalents as of March 31, 2016 amounted to SEK 12.1m (SEK 17.8m).

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.

Significant events after the end of the reporting period

• Kancera announced that the Extraordinary General Meeting of Kancera AB approved the Board’s decision of 6 April 2016 to issue new shares and warrants in the form of units. The decision includes a preferential rights issue of shares and warrants (units) (“New Share Issue”), which upon full subscription brings Kancera about SEK 52 million before issue expenses and with a full exercise of the warrants brings Kancera an additional SEK 52-62 million. 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 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.

Statement from the CEO

In 2016, we have reported progress in the development of a new generation of ROR inhibitors with properties that we expect will enable effect against both lymphoma and solid tumors. A first study where human triple negative breast cancer was transplanted into zebra fish, shows that ROR inhibitors are able to both inhibit tumor growth and prevent spread. Further, we have been able to validate that Kancera PFKFB3 inhibitor is able to inhibit tumor growth in the same model.

On the patent side, we have completed an international patent application in the ROR project with the addition of approximately 100 selected potent compounds. Also, a patent application covering PFKFB3 substances has been approved in the United States and a new application covering the discovery that Kancera’s PFKFB3 inhibitor counteract cancer by enhancing the effect of radiation treatment has been submitted. An additional patent application has been filed in the HDAC6 project covering a new class of active substances which together with the first patent application in the project, broadens the protection around our unique selective and effective compounds against myeloma.

Furthermore, due to positive efficacy data in disease models of cancer and pain, the Kancera Board has decided to exercise the exclusive option to acquire the Fractalkine project.

The goal for the next 18-24 months is to take at least one of Kancera’s drug candidates from the Fractalkine and ROR projects to clinical trials and thus first clinical use (chronic lymphocytic leukemia/ pancreas cancer). In parallel, we also complete the evaluation of a broader use of the drug candidates from these projects in order to reduce the risk in the product development and to identify full commercial potential of the projects. The operational objectives also include delivering drug candidates from the HDAC6 and PFKFB3 projects.

Given these ambitious goals, Kancera’s Board supported by the decision of the Extraordinary General Meeting on April 22, 2016, decided to launch a new share issue. The decision includes a preferential rights issue of shares and warrants (units) which upon full subscription brings Kancera about SEK 52 million before issue costs.

With eight patent families, which together make up the intellectual property protection for four small-molecule cancer projects, we expect that Kancera has good opportunities to translate scientific results into commercially attractive new drugs against cancer. However, the development of new drugs is biologically and technically risky and challenged by international competition.

This share issue aims to push Kancera’s cancer project from a promising development phase to completion in order to be tested in cancer patients. I am convinced that we will succeed in this work.

Thomas Olin
CEO Kancera