Interim Report for Kancera AB (publ) Q3 2014

The third quarter 2014 in brief

• R&D expenses for the period totaled SEK 9.6m (SEK 5.4m) of which the third quarter constitute SEK 2.7m (SEK 1.8m).

• Operating income for the period totaled SEK -11.0m (SEK -8.3m) of which the third quarter constitute SEK -3.1m (SEK -2.7m).

• Income after financial items for the period totaled SEK -10.9m (SEK -5.3m) of which the third quarter constitute SEK -3.0m (SEK -2.7m).

• Earnings per share for the period were SEK -0.13 (SEK -0.16) of which the third quarter constitute SEK -0.03 (SEK -0.08).

• Cash flow from operating activities for the period totaled SEK -11.6m (SEK -9.0m) of which the third quarter constitute SEK -4.4m (SEK -1.9m).

• Equity as of September 30, 2014 totaled SEK 31.6m (SEK 9.4m) or SEK 0.32 (SEK 0.29) per share. The equity/assets ratio as of September 30, 2014 was 77 percent (72 percent).

• Cash and cash equivalents as of September 30, 2014 totaled SEK 27.5m (SEK 2.1m).

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 (CLL) 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 Euro 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.

  Significant events after the end of the reporting period

• Kancera has 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 has 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.

Statement from the CEO

In November, we announced that KAN0439834 has been selected as the first candidate drug in the ROR project by virtue of results from animal studies showing that treatment with the drug candidate gave a desired anti-cancer effect in animals carrying human leukemia cells in the lymphatic system. A seven-day oral treatment with KAN0439834 reduced the number of leukemia cells in the spleen (part of the lymphatic system) by about 75% compared to a control group treated with placebo. In future studies, we will examine whether the effect of KAN0439834 can be further increased by extending the duration of treatment and by ensuring that the ROR inhibitor stays for longer time in the cancer cell. The KAN0439834 supply used in the studies has been produced by Kancera with a high level of purity and in a manner that, with a continued development process, most likely can be adapted to commercial production. The next step in the ROR project will be to test the drug candidate against several cancer forms and to follow biomarkers for both efficacy and safety.

The PFKFB3 project, thanks to a recently received grant from Vinnova, has a good potential to be further developed through the collaboration between Kancera and Professor Thomas Helleday at SciLifeLab at Karolinska Institutet. The joint research is still focused on understanding how Kancera´s PFKFB3 inhibitors affect cells and which diseases that are most appropriate to attack with a PFKFB3 inhibitor.

During the autumn, Kancera´s business development consisted primarily of business meetings during the Biotech Industry conferences in Stockholm and Frankfurt, as well as visits to Kancera. As part of the Scandinavian Initiative CANCER IMMUNOTHERAPY PARTNERING MISSION 2014 (CIPM) Kancera presented the ROR project in Boston, New York, Princeton and Baltimore to both universities and pharmaceutical companies. The overall impression from the meetings during the CIPM was that one is working boldly and purposefully in interdisciplinary teams in the USA to find new ways to treat cancer, this includes attacking ROR1. The business meetings this autumn has strengthened Kancera’s network before the initiation of dialogues with potential partners to the ROR project.

Thomas Olin
CEO Kancera