Full Year Report for Kancera AB (publ) Q4 2014 January 1 – December 31, 2014

The period January to December 2014 and the fourth quarter 2014 in brief

• R&D expenses for the period totaled SEK 13.1m (SEK 7.5m) of which the fourth quarter constitute SEK 3.6m (SEK 2.1m).

• Operating income for the period totaled SEK -15.2m (SEK -7.4m) of which the fourth quarter constitute SEK -4.1m (SEK -2.1m).

• Income after financial items for the period totaled SEK -15.1m (SEK -7.4m) of which the fourth quarter constitute SEK -4.1m (SEK -2.1m).

• Earnings per share for the period were SEK -0.17 (SEK -0.22) of which the fourth quarter constitute SEK -0.04 (SEK -0.05).

• Cash flow from operating activities for the period totaled SEK -18.9m (SEK -6.6m) of which the fourth quarter constitute SEK -4.5m (SEK 0.4m).

• Equity as of December 31, 2014 totaled SEK 27.5m (SEK 19.0m) or SEK 0.28 (SEK 0.56) per share. The equity/assets ratio as of December 31, 2014 was 76 percent (74 percent).

• Cash and cash equivalents as of December 31, 2014 totaled SEK 23.0m (SEK 14.1m).

Significant events during the period

• Kancera reports that the company is initiating the development of a vaccine directed against ROR. This initiative is motivated by the residual disease in the form of a small number of cancer cells that remain in some patients despite treatment. These cancer cells are difficult to detect and are expected to contribute to relapse of cancer disease. In the most common form of leukemia (chronic lymphocytic leukemia) these remaining cancer cells often express ROR. A vaccine can teach the patient’s own immune system to recognize and destroy these ROR-expressing cancer cells. Thus it is expected that a vaccine will add to the suppression of the disease leading to a longer and healthier life for the patient compared to what is possible today. Kancera´s strategy is to use its future small-molecule ROR inhibitors as a first line treatment for the disease to remove the main part of the tumor and the symptoms, and thereafter follow with a prophylactic ROR vaccine to prevent relapse. Thus, there are possible synergies between Kancera´s small molecule products and the vaccine against ROR.

• Kancera announced that the company has received a first payment from the EU of € 523,655 for the execution of the A-PARADDISE project and that the project thus has started. In August 2013 Kancera announced that the company together with international research groups in the project A-PARADDISE has been awarded a grant from the European Union Seventh Framework Programme to develop drugs to combat severe parasitic diseases including malaria, schistosomiasis, leishmaniasis and Chagas disease. The total three-year project budget is 6 M€ where the Kancera part of about € 950,000 is the largest.

• Kancera has reported results from the collaboration on PFKFB3 inhibitors with Professor Thomas Helleday at the Science for Life Laboratory which was initiated in 2013. Within the framework of the collaboration a large-scale laboratory evaluation of synergistic effects between Kancera’s PFKFB3 inhibitors and a large number of approved drugs has been performed. The results show that synergistic effect against cancer cells can be achieved by combining PFKFB3 inhibitors and some defined classes of approved drugs. In light of the present results, new experiments are planned using preclinical disease models to verify whether PFKFB3 inhibitors can improve the treatment of advanced lung cancer and metastatic breast cancer.

• Kancera reports that the company has registered a patent application (EP14167988.6) for new compounds against cancer that selectively inhibit the enzyme HDAC6. The new patent application is based on the ability of HDAC6 inhibitors to influence mechanisms both inside and outside of the cell nucleus. It has been shown that the major biological role of HDAC6 is in the regulation of the cancer cell´s ability to migrate and form metastases.

• Kancera´s Annual General Meeting on May 26, 2014 decided to implement an incentive program for the employees and corresponding executives and board members (for further information, see Note 3). Further, the Annual General Meeting authorized the Board to issue new shares, on one or several occasions until the next Annual General Meeting. New shares may be issued with or without preferential rights and payment in cash and/or in kind or set-off. If a new issue is made against cash payment and without preferential rights for the shareholders, the number of shares issued may not exceed ten percent of the total number of shares outstanding at the time the authorization is exercised.

• In accordance with the decision of the Board of Kancera AB (publ) November 7, 2013, and pursuant to the authorization of the Extraordinary General Meeting October 30, 2013, there was a share issue through the exercise of warrants TO 1 2013 for the subscription of new shares. A total of 21,603,424 shares were subscribed. This share issue was therefore subscribed to around 98 percent and brought Kancera AB approximately SEK 16.2m before issue costs.

• Kancera announced that the ROR project was awarded a grant for the last phase of a project co-funded by Vinnova. For the project Kancera has in total received SEK 1.5m from the grant which is directed to young innovative companies with growth potential.

• Kancera announced that animal studies are proceeding as planned and that the results so far support that an effective concentration of the ROR inhibitor can be achieved in cancer cells for a time sufficient to reach the desired anti-cancer effect.

• Kancera announced that the development of the HDAC6 inhibitors are progressing faster than previously estimated in the second quarter when HDAC6 inhibitors were developed that are more potent against cancer cells than Acetylon´s ACY-1215 and also better tolerated by healthy human blood cells. Kancera also announced that the development of an active immunotherapy against ROR in the form of a cancer vaccine has now reached a milestone since Kancera´s first series of vaccines results in an immune response in animals with antibodies that bind to ROR.

• Kancera announced that the co-operation project with the Science for Life Laboratory (SciLifeLab) around the PFKFB3 protein has been awarded a grant of 436 561 SEK from Vinnova. The grant is coordinated by the Innovation Office at Karolinska Institutet and funds research conducted by Professor Thomas Helledays research team at Karolinska Institutet and SciLifeLab.

• Kancera reported results from a detailed analysis of the preclinical efficacy study that was completed during the third quarter, as reported in a press release on October 3, 2014. The results confirm that the number of leukemic cells is significantly reduced in an animal model of chronic lymphocytic leukemia after 7 days of oral treatment with KAN0439834. The results of the efficacy and tolerance studies support the selection of KAN0439834 as the first drug candidate in the project, and also points to opportunities to further improve the efficacy profile by developing the technology for the delivery of the product.

  •     Kancera reports that an investigation of the mechanism of action of the company’s patent-pending HDAC6 inhibitors has demonstrated a unique profile that could strengthen the competitiveness of the project. In order to enable the development of a unique pharmaceutical drug Kancera has investigated possible mechanisms behind the high level of potency and selectivity of the company’s HDAC6 inhibitors against cancer cells. The investigation showed that Kancera´s HDAC6 inhibitors exhibited a remarkably high level of selectivity since no effect was detected against any of ca 50 known risk factors, but show a significant effect on one mechanism of action, in addition to HDAC6, which probably can be utilized to further enhance the competitive edge of the project in oncology. With adequate resources allocated to the HDAC6 project the company predicts that a candidate drug can be delivered in 18-24 months.

  Significant events after the end of the reporting period

• Kancera reported that a second efficacy study of the drug candidate KAN0439834 has been completed in an animal model of an advanced stage of chronic lymphocytic leukemia characterized by a genetic change which makes the disease more difficult to treat. The results show that KAN0439834 reduces the number of ROR expressing leukemia cells in the lymphatic system (spleen) after 14 days of treatment. Further, Kancera reported that a second patent application EP15153394.0 has been filed covering small-molecule ROR inhibitors, including the drug candidate KAN0439834.

• Kancera reports that the patent WO 2011/079902 concerning monoclonal antibodies against ROR1 has been approved in China. Kancera has acquired partial rights to this patent from Bioinvent under an agreement that does not involve any financial burden for Kancera (except patent expenses) before revenues are generated. Kancera through the company’s co-founder Professor Håkan Mellstedt has been involved in the development of these antibodies. These antibodies have mainly been used to identify and validate new indications for a future ROR-inhibiting drug. Any further development of the ROR-targeted monoclonal antibodies for therapeutic purposes will only be done in a partnership that provides funding and access to expertise in development of antibody-based drugs.

Statement from the CEO

The biotech industry started the year with an intense January week in San Francisco where a large number of pharmaceutical and biotech companies gathered to kick-off a promising 2015 (the JP Morgan and Biotech Showcase conferences). The confidence in the industry, especially in the US, was high during the previous year which is reflected in a high level of investments in pharmaceutical projects, a rising valuation of the biotech companies and an increasing number of new drugs approved by the FDA and EMA. A clear trend in 2014 was the increased number of orphan drugs approved for market. Also, the interest in investing in new orphan products shows an upward trend which can be partly attributed to clinical studies that are focused on smaller and well-defined diseases (so-called orphan Indications), which in turn means smaller and less expensive studies, and partly to that the companies, in exchange for improved efficacy and safety, can count on a pricing of the product that creates good profitability.

In 2014, Kancera’s ROR project has made significant steps forward from displaying a potent effect in vitro on treatment-resistant cancer cells from severely ill patients to a product that is efficiently absorbed into an animal model of human cancer and reaches the cancer cells in the lymphatic system to eliminate these. The driving force behind this development is Kancera’s interdisciplinary team that designed and developed a new generation of ROR inhibitors for which a patent application was filed in February 2015 and a newly developed crystalline formulation of the drug candidate KAN0439834. The first two efficacy trials of the drug candidate in animal models targeted human chronic lymphocytic leukemia (CLL). In the autumn 2014, treatment with KAN0439834 gave good effects both in a disease model of progressive CLL and later in a model for an advanced phase of CLL that is refractory to treatment with the currently available drugs. New effective drugs to treat the today incurable disease chronic lymphocytic leukemia would qualify as an orphan drug.

Next in 2015 our work is directed towards assessing the ROR inhibitors for treatment of additional cancer forms, and advancing our still early but promising HDAC6 project to better understand how the HDAC6 inhibitors’ dual mechanism of action best can be utilized against intractable cancer. Also, the business development efforts progresses and is primarily aimed at finding the right partner for the ROR project. In 2015, in addition to company meetings in San Francisco, we have met with pharmaceutical companies in Zürich and presented the ROR project at the annual meeting of the Global CLL Research Foundation in Houston. Next in line are presentations of the company and new business meetings at the BIOEurope conference in Paris.

Thomas Olin

CEO Kancera

About Kancera AB (publ)
Kancera develops the basis for new therapeutics, starting with new treatment concepts and ending with the sale of a drug candidate to international pharmaceutical companies. Kancera is currently developing drugs for the treatment of leukemia and solid tumors, based partly on blocking survival signals in the cancer cell and partly on metabolic strangulation. Kancera’s operations are based in the Karolinska Institutet Science Park in Stockholm and the company employs around 10 people. The Kancera shares are traded on NASDAQ OMX First North and the number of share holders is ca 5400 as of January 31, 2014. Remium Nordic AB is Kancera’s Certified Adviser. Professor Carl-Henrik Heldin and Professor Håkan Mellstedt are Kancera´s scientific advisors.

Kancera’s history

In 2006, Pharmacia’s and Biovitrum’s unit for the development of drug candidates was spun-out to create iNovacia AB. In 2008, iNovacia started the development of the ROR project in collaboration with the Karolinska Institute. In May 2010, Kancera AB was formed by scientists from Cancer Center Karolinska, iNovacia AB and a group of private investors through capital contributions and two developed drug projects focusing on cancer: the ROR project and the PFKFB-project, the latter had been initiated by Biovitrum AB. NASDAQ OMX approved Kancera’s listing on First North with the first day of trading being February 25, 2011. In March 2013 Kancera acquired a complete drug development laboratory from its former subsidiary iNovacia AB and the drug development is since then performed within Kancera AB at the Karolinska Institutet Science Park, Stockholm.