This is a translation of the Year End Report in Swedish published February 20th 2019.

FOURTH QUARTER 1st OCTOBER – 31st DECEMBER IN BRIEF

• Net sales for the period (January to December) amounted to SEK 0.4 million (SEK 0.1 million), of which the fourth quarter amounted to SEK 0.3 million (SEK 0.0 million).

• R&D expenses for the period amounted to SEK 45.2 million (SEK 55.8 million), of which the fourth quarter amounted to SEK 14.0 million (SEK 16.0 million).

• Operating profit for the period amounted to SEK -45.9 million (SEK -56.1 million), of which the fourth quarter amounted to SEK -12.4 million (SEK -11.9 million).

• Profit after financial items for the period amounted to SEK -45.9 million (SEK -56.2 million), of which the fourth quarter amounted to SEK -12.1 million (SEK -12.0 million).

• Earnings per share for the period amounted to SEK -0.26 (SEK -0.39), of which the fourth quarter amounted to SEK -0.06 (SEK -0.09).

• Cash flow from operating activities for the period amounted to SEK -47.3 million (SEK -53.5 million), of which the fourth quarter amounted to SEK –13.8 million (SEK -18.6 million).

• Shareholders' equity at December 31, 2018 amounted to SEK 33.4 million (SEK 38.7 million) or SEK 0.18 (SEK 0.26) per share.

• The equity/assets ratio as of December 31, 2018 was 73 percent (76 percent).

• Cash and cash equivalents amounted to SEK 21.0 M (27.8) on December 31, 2018. Cash and cash equivalents exclude payment from Grünenthal of EUR 324 164 according to the agreement on the HDAC project. This payment was made in January 2019.

SIGNIFICANT EVENTS DURING THE FOURTH QUARTER

• Kancera reported that the company has registered a patent application (EP18205819.8) for a third series of new substances that selectively inhibit the enzyme HDAC6 for the treatment of inflammation and cancer.

• Kancera was awarded a research grant, within the framework of the EU research program Horizon 2020, totaling approximately 260,000 Euro for the funding of a doctoral student in order to explore the role of the Fractalkine system in the emergence of pain during joint inflammation.

• Kancera announced the intention to enter into agreement with Global Corporate Finance (GCF), New York for an investment of a maximum of SEK 60 million. Authorization to conclude this agreement and new issue of shares for cash payment was approved by the Extraordinary General Meeting on December 13, 2018. The purpose of the authorization is to enable Kancera to raise working capital for the development of the Fractalkine project.

• Kancera reported that a new efficacy study in animal model of myocardial infarction showed that lower doses than expected give a significant cardioprotective effect.

• Kancera AB announced that the company has entered into a research and option agreement with Grünenthal, a leading pharmaceutical company within pain research and treatment. According to this agreement, Grünenthal is responsible for all preclinical research to develop drug candidates from Kancera's series of HDAC inhibitors and is entitled to acquire these substances. According to the agreement, Kancera receives an advance payment of approximately SEK 3 million. In the implementation of development and commercialization, milestone payments amounting to a total of approximately SEK 340 million are made, and in addition payment in the form of sales-related royalties.

SIGNIFICANT EVENTS AFTER THE END OF THE FOURTH QUARTER

• Kancera has announced that two interim goals have been achieved prior to the planned start of clinical studies with the drug candidate KAND567 to show reduced tissue damage in connection with myocardial infarction. In a recent preclinical toxicological study, KAND567 has demonstrated a favorable safety profile for intravenous administration, while significant progress has been made in the development of a large-scale production method.

• Kancera has reported that the results of a study of lymphoma patients' immune cells show that the Fractalkine system is activated in the cancers forms chronic lymphocytic leukemia, diffuse large cell B cell lymphoma and Hodgkin's lymphoma. In view of this discovery, the company will now deepen the studies of how drug candidates that interact with the Fractaline system, such as KAND567, may play a role in future treatments of these diseases.

• Kancera has now announced that the previously announced financing agreement with US Global Corporate Finance (GCF) has been signed – this in accordance with authorization from an extraordinary general meeting on December 13, 2018. The agreement gives Kancera the right to receive up to SEK 60 million over 30 months in exchange against newly issued shares. In connection with the signing, Kancera pays a one-time payment through a directed new issue of shares to GCF at a value corresponding to 3.5% of the investment range (SEK 2.1 million).

STATEMENT FROM THE CEO

Currently, there is a lack of effective drugs to minimize the acute tissue damage that occurs in the heart during a heart attack. Relatively new knowledge shows that a large part of the injury is caused by an inflammatory process in connection with the blood beginning to flow into the heart’s blood vessels again after the patient has undergone life-saving balloon expansion. This knowledge provides completely new opportunities to develop drugs that protect the heart tissue. The goal is to save lives and reduce the long-term damage that contributes to both new infarcts and chronic heart failure. 

Kancera’s Fractalkine blocker KAND567 is developed to effectively and selectively reduce the inflammation of the heart and vessels after a heart attack. In several animal studies we have also been able to show that KAND567 reduces the injury area by up to 50 percent, and during the past year we have completed a phase I study in which the drug candidate showed a good safety profile at dose levels that are considered sufficient to achieve a pharmaco-logical effect. In addition, we have achieved significant progress in the development of a large-scale production method. The international interest in our project is increasing, and in conjunction with the annual JP Morgan Congress in San Fransisco in January, we had the opportunity to meet a number of global pharmaceutical companies that wanted to know more about KAND567 and our plans for the future.

The progress of recent years in the Fractalkine project, with KAND567 at the forefront, has led to the company for some time allocating virtually all its internal resources to this area. The next step is to evaluate intravenous dosage in a supplementary phase I study, in healthy subjects, after which the project is expected to enter phase II. In the first patient study, KAND567 will be administered intravenously to myocardial infarction patients. Results are expected to be available in the second half of 2020. In the long term, we see great opportunities for also developing the drug candidate against chronic inflammatory diseases and certain types of cancer. The cancer area is considered increasingly interesting. Recently we presented results from analyses of lymphoma patients' immune cells that show that the Fractalkine system is activated in chronic lymphocytic leukemia, diffuse large cell B cell lymphoma and Hodgkin's lymphoma.

The development of Kancera's other pipeline projects will depend on external collaborations. In December, we announced that Grünenthal – a leading pharmaceutical company in pain management – is taking over the responsibility for preclinical research on our HDAC inhibitors. Grünenthal is entitled to later acquire the HDAC substances, with the aim of developing one or more new and potentially disease-modified drugs for neuropathic pain. The total contract value amounts to approximately SEK 340 million. In addition, Kancera is entitled to sales-based royalties.

Our financial position was strengthened in 2018 through a new share issue and through an agreement with the American investor Global Corporate Finance (GCF) on future targeted new issues to a maximum amount of SEK 60 million. We believe that the agreement, which is free from stock loans and warrants, offers a cost-effective alternative to traditional issues. Capital contributions from GCF are intended to be used for clinical studies and for the company's operations.

The global market for drugs in acute myocardial infarction is estimated by Zion Market Research to be approximately SEK 12 billion, with an estimated growth of 40% by 2022, but currently there are no drugs that can counteract the inflammation-related damage to the heart in the acute phase. Such a drug would have the potential to significantly further expand the market. We look forward to launching a Phase II study of KAND567 in the second half of 2019 in myocardial infarction patients and the results are expected to be available about one year later. Positive study results would be transforming for Kancera. Not only for the continued development of our most advanced drug candidate in the heart attack area, but also for development in other commercially attractive areas where the need for improved treatments is great.

Thomas Olin,
CEO Kancera AB (publ)

THIS IS KANCERA

Kancera AB develops drugs for cancer and inflammatory diseases in laboratories at Karolinska Institutet Science Park in Stockholm and employs about 15 people.

The share is traded on NASDAQ First North Premier. The number of shareholders as of December 28, 2018 was approximately 7400. FNCA Sweden AB is the company's Certified Adviser. FNCA can be reached at info@fnca.se and on 08-528 00 399. MD PhD Charlotte Edenius, MD PhD Anders Gabrielsen, Professor Carl-Henrik Heldin and Professor Håkan Mellstedt are all scientific advisors and board members of Kancera AB.

Business model

 To develop patent-protected drugs, which can extend life and reduce healthcare costs, for sales to the international pharmaceutical industry and further clinical trials.

Out-licensing of drug candidates is expected to take place against partial payments at signature and milestones in product development (typically when initiating clinical phase I, II, III and when registering) as well as royalty income. 

History

In 2006, Pharmacia's and Biovitrum's unit for the development of drug candidates was spun-off to the company iNovacia. In 2008, iNovacia started drug development in collaboration with researchers at Karolinska Institutet. In May 2010, researchers from the cancer center Karolinska, iNovacia AB and a group of private investors formed Kancera AB through the addition of capital and two drug projects within cancer.

NASDAQ approved Kancera AB for admission to trading on First North with the first trading day on February 25, 2011. In March 2013, Kancera AB acquired a complete development laboratory for pharmaceuticals from its now discontinued subsidiary, iNovacia AB, and now runs its own drug development at Karolinska Institutet Science Park, Stockholm. Prior to the change of segment for listing from Nasdaq First North to Nasdaq First North Premier, which took place on 28 October 2016, the subsidiary Kancera Förvaltning AB was formed, after which Kancera, as of the second quarter of 2016, changed to accounting in accordance with IFRS in the Group and RFR2 in the Parent Company and in accordance with the Annual Accounts Act.