Herantis Pharma Plc’s Financial Statements Release January 1 – December 31, 2017
Clinical development progressed as planned
Highlights in January-December 2017:
Phase 1 clinical study of Herantis Pharma ("Herantis") with Lymfactin® advanced to high dose level in March, and to its final patient cohort in June. The company announced in June having started planning a Phase 2 clinical study with Lymfactin®.
Sweden's medicines agency MPA approved Herantis' first-in-human clinical study with CDNF in Parkinson's disease (PD) in March. Finland's medicines agency Fimea approved the same study in June.
The United States Patent and Trademark Office USPTO issued a patent to Herantis in May for the therapeutic use of MANF.
In September the first patient was consented in the clinical study with CDNF in Parkinson's disease.
Authorized by the Extraordinary General Meeting, the company issued 800.000 new shares for the subscription price of 5.85 euros per share in a directed issue in November.
In December, the company expanded on the plans of its Lymfactin® development. Results of the Phase 1 study have met expectations and the study's patient recruitment is expected to be completed in the first quarter of 2018, during which period the company also intends to submit its application for a Phase 2 study.
Earnings per share were -0.51 (1-12/2016: -1.07) euros.
Cash flow from operations during the review period was -2.6 (-3.0) million euros.
Cash and cash equivalents on December 31, 2017 amounted to 5.4 (2.8) million euros.
The company's financial position in the last half-year period is as estimated and there have not been any exceptional events.
Key figures (consolidated)
|Depreciation and amortization||606.4||604.0||1,217.6||1,202.9|
|Other expenses for business operations||1,037.0||846.1||1,928.1||2,273.3|
|Profit for the period||-136.7||-1,827.0||-2,164.5||-4,424.5|
|Cash flow from operations||-1,649.5||-922.6||-2,599.0||-3,035.7|
|Equity ratio %||35.3||15.4||35.3||15.4|
|Earnings per share €||-0.03||-0.44||-0.51||-1.07|
|Number of shares at end of period||4,918,305||4,118,305||4,918,305||4,118,305|
|Average number of shares||4,322,653||4,118,305||4,221,319||4,117,331|
|€ thousands||31 Dec 2017||31 Dec 2016|
|Cash and cash equivalents||5,402.0||2,829.5|
|Balance sheet total||11,572.6||10,205.5|
Formulae used in calculating key figures
Equity ratio = Equity / balance sheet total
Earnings per share = Profit for period / average number of shares
Average number of shares = Weighted average number of shares. The number of shares is weighted by the number of days each share has been outstanding during the review period.
Herantis' subsidiary BioCis Pharma Ltd was declared bankrupt on December 1, 2017 after its partnering negotiations related to the company's ophthalmology drug candidate Cis-UCA were concluded unsuccessfully. The group's internal receivables from BioCis Pharma Ltd as well as the development programs of BioCis Pharma Ltd have been written off already in 2015, and the bankruptcy of BioCis Pharma does not have material impact on the operations of the parent company or the group.
Guidance for 2018
Herantis does not expect essential revenues in 2018. The company continues to invest in its ongoing development programs in secondary lymphedema and Parkinson's disease. The company's current financing is expected to be sufficient for completing the first placebo-controlled clinical studies with both CDNF and Lymfactin® drug candidates.
Outlook for 2018
Herantis' long-term goal is to significantly increase its business through commercialization agreements for its drug candidates. The company continues discussing collaboration possibilities with potential partners for its drug development programs. Thanks to its financing situation, the company can continue its drug development through end of the first placebo-controlled studies before entering into any collaboration agreements, if considered appropriate for shareholder value.
The main objectives for 2018 are launching a Phase 2 clinical study with the company's drug candidate Lymfactin® and completing patient recruitment in the Phase 1-2 clinical study with CDNF. Both of these drug candidates are based on leading science in their fields and aim at a breakthrough in the treatment of severe diseases.
Pekka Simula, CEO:
2017 was an important year for both Herantis and its home country Finland, celebrating its hundred years of independence. Our team paid tribute to Finland with Finnish drug development: At the end of 2017 we were conducting two first-in-human studies with biological drug candidates developed in Finland, based on leading Finnish research. In 2017 Herantis was also recognized with the Nordic Star award in life sciences thanks to strong Finnish know-how. In addition to our international network we benefit from strong national collaboration for instance in the cities of Helsinki, Tampere, Turku, Kuopio, and Oulu.
Our drug candidate CDNF aims at stopping progression of Parkinson's disease; our Lymfactin® aims at curing lymphedema. Known therapies can only alleviate the symptoms of those diseases. Since drug pricing was one of the hot topics of 2017 one should keep in mind that for instance in the USA, a therapeutic that could stop the progression of Parkinson's disease would save the society over 400.000 dollars per patient. And the cost of lymphedema amounts to over 10.000 dollars per patient per year. If we succeeded in our development and CDNF and Lymfactin® were proven as efficacious as suggested by leading scientific research, they would not only alleviate the suffering of countless patients but also reduce the associated societal costs.
The first clinical study with Lymfactin® has advanced well in the past year and the drug candidate has been safe and well tolerated. Thanks to the initial results matching expectations we were able to prepare a Phase 2 study and secure funding for it. The Phase 2 study intends to establish the efficacy of Lymfactin® by comparing it to placebo.
We also recruited the first patients in the first clinical study in the world with CDNF. This Phase 1-2 study will immediately compare CDNF to placebo in the treatment of Parkinson's disease. This clinical study is funded by the European Union: According to EU's independent review it is based on leading scientific research and has the potential to significantly improve the treatment of Parkinson's disease.
In 2018 we shall do our best to ensure progress toward establishing the efficacy of our drug candidates. We will obviously continue other national collaboration and e.g. participate in the International Vascular Biology Meeting (IVBM), which will be held in Finland under the supervision of Professor Alitalo, the inventor of our Lymfactin. I am very confident that 2018 will move us significantly forward in this challenging field, which requires a lot of patience - and is extremely motivating.
REVIEW OF OPERATIONS JANUARY 1 - DECEMBER 31, 2017
Herantis' drug development
Herantis develops drugs based on leading scientific research, aiming at breakthrough in the treatment of severe diseases. The company's objective is to translate drug candidates in clinical development and establish their safety in the first clinical studies. According to Herantis' strategy it plans to then negotiate commercialization agreements with larger pharmaceutical companies on the late stage development and marketing of its assets.
Establishing the possible efficacy of CDNF and Lymfactin® in placebo-controlled clinical studies may significantly increase their value before entering into commercialization agreements.
In 2017 the drug development of Herantis proceeded favorably with the first placebo-controlled clinical study of CDNF launched, and a placebo-controlled study of Lymfactin® under planning thanks to the initial results of its first clinical study meeting expectations.
CDNF for the treatment of Parkinson's disease
Herantis develops its drug candidate CDNF for the treatment of Parkinson's disease. Parkinson's disease is a slowly progressing neurodegenerative disease that cannot be cured. Estimated 7 million people worldwide have Parkinson's disease. Known treatments only alleviate the motor symptoms of the disease and their effect is typically reduced with disease progression. Herantis aims at significant improvement to current treatments.
CDNF, a naturally present protein in humans discovered by Professor Mart Saarma's group at the University of Helsinki, has been proven a promising neuroprotective drug candidate by scientific research. In disease models of Parkinson's disease it has efficiently protected dopaminergic neurons, restored the function of already degenerated neurons, and efficaciously treated both motor and non-motor symptoms of Parkinson's disease and disease progression. Herantis has patented CDNF internationally.
In 2017 Herantis launched the first-in-human clinical study with CDNF. This Phase 1-2, randomized, placebo-controlled clinical study assesses the safety and initial efficacy of CDNF compared to placebo in 18 patients with Parkinson's disease. The study is conducted at three university hospitals in Finland and Sweden and its patient recruitment is intended to be completed in 2018.
Lymfactin® for the treatment of breast cancer associated lymphedema
Damages of the lymphatic system caused e.g. by an accident, surgery, or illness can lead to secondary lymphedema. Its common symptoms are persistent swelling of the affected limb, thickening and hardening of skin, limited limb mobility, pain, and increased sensitivity to infections. Secondary lymphedema is a chronic, progressive disease that often severely decreases the patient's quality of life. Known therapies such as compression garments, special massage, and exercise may relieve symptoms but do not repair the damage of to the lymphatic system that cause the disease.
Professor Kari Alitalo's group at the University of Helsinki discovered the human growth factor VEGF-C, which is necessary for the development of lymphatic vessels. Herantis' drug candidate Lymfactin® is based on this scientific breakthrough and it is the first and only clinical stage gene therapy in the world repairing damages of the lymphatic system.
In the first, Phase 1 clinical study Lymfactin® is administered to a small group of patients with breast cancer associated lymphedema. The study has proceeded well and its patient recruitment is expected to be completed in the first quarter of 2018. Thanks to the initial results of the study meeting expectations a Phase 2 clinical study is already being planned and its clinical trial application is intended to be submitted also in the first quarter of 2018.
If Lymfactin® is established as an efficacious treatment of breast cancer associated lymphedema it is expected to be applicable also for the treatment of other secondary lymphedemas.
CDNF: Neuroprotective factor for the treatment of ALS
ALS (Amyotrophic Lateral Sclerosis) is a severe neurodegenerative disease. It cannot be cured and its cause is usually not known. ALS degenerates motor neurons and as the disease progresses the patient loses control of motion, speech, swallowing, and finally also breathing. Disease progression is very variable and estimated average survival from symptom onset is from two to five years. An estimated 140,000 people worldwide are annually diagnosed with ALS.
The European Medicines Agency EMA and the US Food and Drug Administration FDA have granted Orphan Designation for Herantis' CDNF for the treatment of ALS based on the preliminary preclinical results on its possible efficacy. The company is exploring possibilities to launch a clinical development program in ALS. Decisions on starting such a program have not been made and no funding is allocated.
MANF: Neuroprotective factor
MANF is the only known neuroprotective factor similar to Herantis' patented CDNF. CDNF and MANF for instance protect cells from endoplasmic reticulum stress (ER stress), a condition linked to several neurodegenerative and other chronic diseases. Herantis has been granted a patent in the USA for the use of MANF for the treatment of neurological diseases including Parkinson's disease, epilepsy, and ischemic brain injury. Herantis will inform separately if it launches formal drug development of MANF.
FINANCIAL REVIEW JANUARY 1 - DECEMBER 31, 2017
Income from business operations, R&D expenses
Herantis Group did not have essential revenues in 2017 or in the corresponding period in the previous year.
The R&D expenses for the review period were 1.4 million euros, recorded in the profit and loss statement as an expense for the period. The R&D expenses for the review period mainly comprised for the clinical trials of CDNF for the treatment of Parkinson's disease and Lymfactin® for the treatment of breast cancer associated lymphedema.
The Group's R&D expenses for the corresponding period in the previous year, 1.8 million euros, were recorded as the review period's expenses in the profit and loss statement.
The profit for the review period was -2.2 million euros. The consolidated profit for the comparison period was -4.4 million euros.
Financing and capital expenditure
The company's cash and cash equivalents on December 31, 2017 amounted to 5.4 (at the end of the previous reporting period on December 31, 2016: 2.8) million euros.
In addition the company has R&D loans previously granted by the Finnish Funding Agency for Innovation, Tekes (since Jan 2018: Business Finland), to be drawn in the amount of 1.3 million euros. During the review period Herantis drew about 0.5 (0.4) million euros in Tekes loans.
In addition the European Union has awarded a grant of about 6.0 million euros for the project TreatER. The TreatER project is essentially the Phase 1-2 clinical study of Herantis with CDNF for the treatment of Parkinson's disease.
The consolidated cash flow from operations in the review period was -2.6 (-3.0) euros.
Acquisitions and directed share issues
Herantis reported on November 9, 2017 that the Board of Directors of Herantis had decided on a directed share issue of 800,000 new shares at a per-share subscription price of EUR 5.85 to certain institutional investors and a limited number of qualified investors as well as certain directors of the Company.
The share capital was not increased but instead the entire subscription price of EUR 4,680,000.00 was recorded in the invested unrestricted equity reserve of the Company. As a result of the share subscriptions the number of shares in Herantis increased to 4,918,305 shares. The issued new shares were registered in the Trade Register on November 15, 2017, as of which date the new shares have carried shareholder rights. The issued new shares have been traded on Nasdaq Helsinki Ltd's First North marketplace together with the old shares as of November 16, 2017.
The consolidated balance sheet on December 31, 2017 stood at 11.6 (10.2) million euros.
At the end of the review period on December 31, 2017, the consolidated balance sheet included short-term debt in the amount of 1.5 (0.7) million euros, long-term loans in the amount of 6.0 (7.9) million euros, and capital loans in the amount of 0.0 (0.1) million euros. Financing earnings and expenses totaled 0.0 (0.0) million euros.
No R&D expenses were capitalized during the review period.
Consolidated equity on December 31, 2017 was 4.1 (1.6) million euros. The change is the result of the share issue and consolidated loss of the review period.
Personnel, management, and administration
The number of personnel at the end of the review period on December 31, 2017 was 7 (7) persons.
During the review period, the company's Board of Directors comprised Pekka Mattila (Chairman), Jim Phillips, Aki Prihti, Timo Veromaa, and Frans Wuite. The Managing Director for the company was Pekka Simula.
Ordinary Annual General Meeting 2017
Herantis' ordinary Annual General Meeting (AGM) was held in Helsinki, Finland on April 11, 2017.
The AGM adopted the annual accounts for financial year 2016 and resolved to discharge the members of the Board of Directors and the Managing Director from liability. In accordance with the proposal by the Board of Directors, the AGM resolved that no dividend shall be paid for the financial period January 1-December 31, 2016, and that the loss for the period shall be recorded on the profit and loss account.
The AGM resolved that the remuneration for the members of the Board of Directors shall be €1,000 per month, with the exception of its Chairman, whose remuneration shall be €2,000 per month. It was further resolved that the Board members shall be eligible to subscribe to stock options of option program 2014 I, according to the rules of which the Board members can be granted stock options for each full 12-month period as a Board member. Board members are also reimbursed reasonable travel expenses related to Board of Director's duties.
The AGM decided that the Auditor will be paid reasonable remuneration in accordance with its invoice approved by the company.
The firm of authorized public accountants PricewaterhouseCoopers Oy was appointed Herantis Pharma Plc's Auditor for the term ending at the closing of the next Annual General Meeting of shareholders, with Mr. Martin Grandell, APA, as the responsible auditor.
Share based incentive program
During the review period the company cancelled a total of 96,625 stock option rights that would have entitled to the subscription of 96,625 new shares in the company. The share subscription period of these stock option rights, which belonged to the stock option programs 2014 II and 2014 III had expired.
Herantis has three stock option programs: Stock option program 2010, Stock option program 2014 I, and Stock option program 2016 I, whereby stock options have been offered to senior employees of the company to increase their commitment toward long-term contribution to growing shareholder value. The main details of the stock option programs are listed in the table below. More detailed information is provided on the company's web site at www.herantis.com.
|Stock option program||Maximum number of shares¹||Per share subscription price||Decision on the stock option program made by|
|2010||37,600||€ 0.00005||General Meeting 26.8.2010|
|2014 I||50,800||€ 0.00005||General Meeting 20.3.2014|
|2016 I||70,000||€ 2.92||General Meeting 9.4.2015, Board Meeting 19.5.2016|
1 The maximum number of shares to be subscribed by stock options.
Risks and uncertainties
Herantis is a drug development company and the general risks and uncertainties present in drug development also apply to its operations. For instance, the production, stability, safety, efficacy, and regulatory aspects of drug candidates involve risks, the realization of which can render the commercialization of the drug candidate impossible or significantly delayed. One common challenge in drug development is that preclinical disease models may not accurately simulate the real disease. Promising preclinical results do therefore not guarantee that the drug candidate is efficacious in real patients.
Since Herantis develops biological drugs based on novel scientific research and their mechanisms differ from known drugs, the risks and uncertainties can be considered greater than in the development of conventional drugs. Further, the company has not commercialized any drug candidates, it does not have any history of profitable operations, and it has not so far closed any commercialization agreements pursuant to its strategy.
Drug development requires significant investments. Since Herantis is a pre-revenue company it must finance its drug development programs from external sources such as grants, R&D loans, or equity investments. Factors such as delays in the company's development programs or a weak financial market can impact the company's ability to raise funding and continue its operations.
Even if the safety and efficacy of a drug candidate was established in clinical studies its commercialization involves risks such as pricing or reimbursement, organizing a sales network, competition from other emerging treatments, unexpected adverse events in long-term use, strength of the company's patents, patent infringement claims raised against the company and other factors.
Usual business risks and uncertainties are also relevant to the operations of Herantis, such as data protection risks, dependencies on subcontractors and other third parties, and the ability to recruit and keep the necessary senior team and other employees.
Herantis has protected its operations against risks to its best ability and is not aware of any such risks or uncertainties, which would essentially differ from the usual risks and uncertainties in its business.
Shares and shareholders
The market capitalization of Herantis Pharma Plc at the end of the review period on December 31, 2017 was approximately 26 million euros. The closing price of the company's share on December 31, 2017 was 5.38 euros. The highest share price during the review period was 9.30 euros, lowest 2.66 euros, and average 5.29 euros.
The trading volume of the company's share in 2017 was 381.630 shares, corresponding to approximately 9.0% of all shares in the company. According to Herantis' shareholder register dated on December 31, 2017, the company had 896 registered shareholders.
On December 31, 2017 the members of Herantis' Board of Directors and the CEO held in aggregate 68,366 (53,366) shares including shares held through their controlled companies, or 1.4 (1.3) percent of the company's shares. Information on insider trading with the company's shares is published on the company's website.
Events after the review period
Herantis announced on 8 Feb 2018 having completed patient recruitment in its Phase 1 clinical study in secondary lymphedema, with its investigational gene therapy product Lymfactin®. The company also announced that it had submitted an application on a Phase 2 clinical study.
The company announced on 14 Feb 2018 that an independent Data Safety Monitoring Board (DSMB) had recommended continuing the company's clinical study in Parkinson's disease as planned. Patient recruitment was announced to start at two new study centers: University Hospitals in Helsinki, Finland and Skåne, Sweden.
The Board's proposal for the use of distributable funds
The parent company of Herantis Pharma group is Herantis Pharma Plc whose distributable equity was 9.2 million euros according to balance sheet December 31, 2017. Herantis Pharma Plc had no essential revenue in 2017. The financial result of the parent company for 2017 was -2.5 million euros.
The Board of Directors proposes to the Annual General Meeting convening on April 11, 2018 that no dividend shall be paid for the financial period January 1-December 31, 2017.
These financial statements have been prepared according to generally accepted accounting practices, local legislation, and the rules of the First North market. The figures in the financial statements are audited. The figures are individually rounded from exact figures.
Financial information 2018
This financial statements release and its appendices are published in Finnish and in English on March 2, 2018 at 9:00am on the company's website at www.herantis.com. In case of any discrepancies between the language versions, the Finnish version shall prevail.
The company's annual report will be released on the company's website latest by March 20, 2018.
A half-year interim report for January-June 2018 will be published on Wednesday, August 29, 2018. The ordinary Annual General Meeting of shareholders is scheduled for Wednesday, April 11, 2018.
Herantis Pharma Plc
Board of Directors
Profit and loss statement and Balance sheet January 1-December 31, 2017
Statement of cash flow January 1-December 31, 2017
Statement of changes in equity
Distribution: Nasdaq, principal media
Herantis Pharma Plc, Pekka Simula, CEO, telephone +358 40 7300 445
Company website: www.herantis.com
Certified Advisor: UB Securities Oy, telephone +358 9 25 380 225
Herantis Pharma in brief:
Herantis Pharma Plc is an innovative drug development company focused on regenerative medicine for breakthrough in unmet clinical needs. Our first-in-class assets are based on globally leading scientific research in their fields: CDNF for disease modification in neurodegenerative diseases, primarily Parkinson's and ALS; and Lymfactin® for breast cancer associated lymphedema, with potential also in other lymphedemas. The shares of Herantis are listed on the First North Finland marketplace run by Nasdaq Helsinki stock exchange.