Interim Report for Kancera AB (publ) Q3 2012

January – September and Q3 2012 in brief

• R&D expenses for the period totaled SEK 19.6m (SEK 18.4m), of which Q3 expenses accounted for SEK 5.7m (SEK 4.5m).
• Net sales of external contract research for the period totaled SEK 2.2m (SEK 3.8m), of which the Q3 sales accounted for SEK 1.0m (SEK 1.6m).
• Operating income for the period totaled SEK -22.8m (SEK ‑13.2m after release of negative goodwill of SEK 7.0m), of which Q3 income accounted for SEK -6.3 (SEK ‑5.3m).
• Income after financial items for the period totaled SEK -22.8m (SEK 13.3m after release of negative goodwill of SEK 7.0m), of which Q3 income accounted for SEK -6.4m (SEK -5.2m).
• Earnings per share for the period were SEK -1.50 (SEK -1.02), and for Q3 were SEK -0.42 (SEK -0.35).
• Cash flow from operating activities for the period totaled SEK -23.5m (SEK -18.9m), of which Q3 accounted for SEK -7.9m (SEK -6.3m).
• Equity as of September 30, 2012 totaled SEK 11.2m (SEK 30.9m) or SEK 0.74 (SEK 2.35) per share. The equity/assets ratio on the reporting date was 51 percent (67 percent).
• Cash and cash equivalents totaled SEK 5.4m (SEK 26.5m) on September 30, 2012 and SEK 2.2m (SEK 21.6m) for the Parent Company.

Significant events during the period

• In collaboration with Professor Matthias Löhr of the Karolinska Institute, Kancera demonstrated that its ROR inhibitors are effective at killing cells in a challenging human pancreatic cancer model. Efficacy is significantly superior to that of gemcitabine, today’s standard treatment. Kancera presented these results at Bio Europe Spring in Amsterdam.
• Kancera presented its structure-based design of active compounds targeting cancer metabolism at the World Cancer Metabolism Summit in Washington.
• Kancera presented results from its ROR project which demonstrates that the company’s active compounds are significantly more specific than four competing kinase inhibitors that are being developed to target chronic lymphocytic leukemia. The results were achieved in collaboration with Professor Håkan Mellstedt and his research team at the Karolinska Cancer Center.
• Kancera filed a patent application for a chemical series of small molecular ROR inhibitors with pharmaceutical properties.
• iNovacia AB reported that it had entered into a collaboration with Boston-based Agios Pharmaceuticals relating to the identification of chemical starting points for a project using iNovacia’s high-speed screening and chemical library.
• Kancera announced that its ROR inhibitors have the capacity to kill leukemia cells from 50 percent of patients who are no longer benefiting from the drugs currently available for chronic lymphocytic leukemia, opening the way for a possible breakthrough in the treatment of the most common form of chronic leukemia. The studies were carried out in collaboration with Professor Håkan Mellstedt and his research team at the Karolinska Cancer Center.
• Kancera announced that, in cooperation with Professor Håkan Mellstedt and his research team at the Karolinska Institute, it had developed antibodies that allow the development of a diagnostic tool for the identification of patients and for follow-up of individual patient response to treatment with ROR inhibitors.
• Kancera’s cancer projects were presented at a seminar on “Lead Generation and Structure-Based Drug Design in Cancer Research” at the Cambridge Innovation Center in Boston, USA, in April 2012.
• Following authorization by the Extraordinary General Meeting held on November 10, 2011, Kancera implemented a new share issue with preferential rights for existing shareholders. The issue was 95 percent subscribed and involved the issue of 3,608,208 shares at an issue price of SEK 2.30 per share, which raised SEK 8.3m for Kancera AB before issue costs and represents dilution of 19.2 percent based on a total of 18,756,208 shares.
• Om May 28, 2012 the Annual General Meeting approved the Board’s proposal that the Board be authorized to decide to issue new shares on one or more occasions during the period up to the next Annual General Meeting against payment in cash and/or in kind or by set-off. The total number of shares which may be issued under this authority shall not exceed 20 percent of the total number of shares.
• Kancera announced that Professor Carl-Henrik Heldin had been appointed to the Board of Kancera. Professor Heldin has been director of the Ludwig Institute for Cancer Research in Uppsala since 1986 and a professor of molecular cell biology at Uppsala University since 1992. He has a solid reputation and an extensive network from assignments as advisor to several academic institutions and among successful biotech entrepreneurs, and thus brings an international view of how Kancera´s projects are valued scientifically and industrially.
• Professor Håkan Mellstedt presented Kancera’s ROR project under the title “Effect of ROR1 targeting small molecules on chronic lymphocytic leukemia cells” at the American Society of Clinical Oncology (ASCO) in Chicago, USA, in June 2012.
• In June 2012, Kancera presented the company’s cancer projects at the BIO International Convention in Boston, USA, which attracted corporate leaders and business developers from more than 2,500 companies.
• Kancera announced that it had strengthened its patent rights for biological drugs targeting ROR-1 through the acquisition of BioInvent’s share of the rights to patent application WO 2011/079902. The acquisition is based on an agreement that imposes no financial burden on Kancera until revenue is generated. Through the company’s co-founder, Professor Håkan Mellstedt, Kancera already had an interest in patent application WO 2011/079902 covering therapeutic antibodies targeting ROR for treatment of cancer. This patent application was developed in collaboration with BioInvent and other members of the research team at the Karolinska Cancer Center. Kancera aims to develop these ROR antibodies in partnership with a company specializing in biological drugs.
• Kancera announced that its PFKFB3 inhibitors targeting colon cancer are now entering preclinical efficacy studies in animals. This first generation of Kancera PFKFB3 inhibitors has been selected following two animal studies that have shown satisfactory distribution and tolerance. Following the Board’s decision on October 16 (see press release summarized below), no further significant investments will be made in the PFKFB3 project, which will be the subject of more detailed assessment at a later date.
• Kancera announced that its wholly-owned subsidiary iNovacia AB had entered into an agreement with Intellect Neurosciences New York, USA, for contract research services. The agreement relates to the evaluation of preclinical compounds for the optimization of Intellect’s antibody drug conjugate.

Significant events after the end of the reporting period

• Kancera has announced that the company is to issue new shares, has modified its business model and is focusing on one drug project:
  –  Subject to the approval of the General Meeting, a new share issue will be effected with preferential rights for existing shareholders. Each existing share will entitle to holder to subscribe for one new share at a price of SEK 0.69. The new share issue will encompass up to 18,756,208 shares and if fully subscribed will raise SEK 12.9m for Kancera before issue costs.
  –  Since the company was formed, Kancera’s business model has been to conduct development of the projects using its own laboratory resources through its subsidiary iNovacia AB. Since conditions for financing biotech companies have changed radically, and demand for iNovacia’s services from external users has fallen, Kancera’s Board has decided to change its business model and instead conduct operations with a limited organization and a significant reduction in fixed costs. In parallel with this, Kancera will investigate opportunities to restructure iNovacia. If this cannot be done, iNovacia will be sold or wound up.
  –  Kancera is developing two preclinical drug candidates targeting cancer. Kancera’s Board has judged that the company’s limited financial and human resources require it to focus the business on one project, and has decided to continue investments focusing on the ROR project, which is judged to be the project with the greatest potential in both medical and commercial terms. The ROR project is developing small molecular and monoclonal antibodies for the treatment of leukemia and solid tumors.
• At an Extraordinary General Meeting held on November 1, Kancera approved the Board’s decision of October 15 on the issue of new shares.
• Kancera has announced that the company’s first generation of PFKFB3 inhibitors slows down the growth of pancreatic cancer in preclinical efficacy studies in animals. The slowdown effect of Kancera’s first generation PFKFB inhibitors was around 20 percent compared with placebo treatment. Pancreatic cancer affects more than 100,000 patients annually in Europe and the US. The survival rate among these patients five years after diagnosis is less than two percent, which underlines the fact that there is a great need for new drugs to treat pancreatic cancer. However, Kancera is standing by its previously announced decision to prioritize the company’s ROR project, and consequently further development of the PFKFB project will only be resumed once adequate financing has been secured.
• Kancera has announced that the company’s project portfolio was presented at the conference of the European Cancer Cluster in Hamburg and also at BioEurope 2012, which likewise took place in Hamburg, Germany.
• Kancera has reported results that suggest that cells from pancreatic cancer are dependent on ROR for their existence. The results that support this were generated in collaboration with Professor Håkan Mellstedt and his research team at the Karolinska Institute. The results thus provide increased support for Kancera’s ROR project, which aims to develop an effective drug to treat this serious form of cancer.

  About Kancera AB (publ)
  Kancera is engaged in drug development that takes its start in new treatment concepts and ends with a candidate drug. Kancera is currently developing medicines for the treatment of both leukemia and solid tumors that interferes with survival signaling and nutrient metabolism within the cancer cell. Kancera is also developing stem cell-based cancer models to study the candidate molecules before testing in humans. Kancera operates in Stockholm and employs approximately 20 people. The share is traded on the NASDAQ OMX First North and the number of shareholders is about 1500. Remium AB is Certified Adviser to Kancera.

  For additional information, please contact:

  Thomas Olin, CEO: Tel +46 735 20 40 01

  Address:
  Kancera AB
  Karolinska Institutet Science Park
  Banvaktsvägen 22
  SE 171 48 Solna
  Sweden

  Please visit the company’s web www.kancera.com