q  Loss after tax for January – June 2006 amounted to SEK 62.2 million (-78.4) and the loss after tax per share was SEK –1.32 (-2.66). 

BioInvent is a research-based pharmaceutical company that focuses on developing antibody drugs. The Company is currently running innovative drug projects within the areas of HIV infection, thrombosis, cancer and atherosclerosis. 

Comments by the CEO

Over the course of the quarter we have experienced both negative and positive events. The fact that the phase I/IIa clinical trials for our BI-201 drug candidate did not result in any reduction in HIV levels demonstrates the risks and challenges associated with all drug development. There is always a risk that a single project doesn’t come up to expectations. The best way for us to handle this risk is to ensure that we always have a number of potentially high-yield drug projects. BioInvent has therefore always placed great emphasis on having a broad and innovative product platform. 

It is therefore gratifying to be able to report important progress in the development of these drug candidates. We expect our next clinical study to begin in the second half of the year. This study will involve our TB-402 drug candidate, which aims to prevent blood clots from forming in connection with a number of disease conditions. The results of the toxicology programme shows that the product candidate can be given to humans. An additional two projects, for the treatment of atherosclerosis and cancer, are progressing according to plan towards the clinical phase.  

Our partnership with the US company Immusol in April add another project to our drug project portfolio. The project aims to develop a new treatment for age-related macular degeneration, a disease of the eye that affects a large number of people every year. Our partnership with Immusol is another example of our strategy and ability to gain access to innovative projects and target proteins in cooperation with well-reputed external research groups and companies.  

Development projects

BioInvent is currently running three projects in the development phase. The development phase commences when a product candidate has been selected based on in vitro tests and tests on animals. In the development phase the safety profile of the product candidate is tested in animal models, before testing safety and efficacy of the product candidate in several clinical phases. 

Thrombosis (TB-402)

The experimental part of the toxicology programme has been concluded. Data from the study shows that TB-402 fulfils the safety requirements. Material for the first phase I clinical study is expected to be released in August, with start of the phase I study this year. Following the phase I study, a phase IIa programme is planned involving patients who have undergone hip replacement surgery. Blood clot formation in connection with certain types of heart arrhythmia, such as atrial fibrillation, also represents a growing problem, and TB-402 is expected to be a future treatment alternative in this area. 

TB-402 is a human antibody binding to Factor VIII, which plays a crucial role in the coagulation of the blood. The antibody has shown a beneficial partial inhibition of Factor VIII, even when applied in excess dosage. Extensive testing in several animal models has shown that TB-402 strongly reduces the risk of thrombosis without increasing the risk of bleeding. The project is being developed within the framework of the alliance with ThromboGenics. 

Cancer (TB-403)

A product candidate (TB-403) has been selected and has undergone extensive preclinical studies. Several in vitro and in vivo studies have demonstrated good specificity for the relevant target protein PlGF and inhibition of PlGF-associated angiogenesis and tumour growth in animal models. Next planned milestone is commencing the toxicology program. 

The PlGF growth factor is secreted by tumours and is specifically expressed in cancer and chronic inflammatory conditions. It affects the formation of new vessels in tissue that is under stress. Unlike VEGF, which is targeted by the drug Avastin, PlGF does not seem to affect normal, physiological angiogenesis. This characteristic is important because it means that the inhibition of PlGF is not expected to cause any significant side effects, but will still have the desired effect on various diseases. The project is being developed within the framework of the alliance with ThromboGenics. 

Atherosclerosis (BI-204)

BI-204, the selected drug candidate, is aimed at oxidized forms of the bad LDL cholesterol. Strong links have been shown between oxidized forms of certain lipoproteins and the inflammatory processes that lead to plaque formation in the vessel walls. In several animal tests, BI-204 has been shown to reduce inflammatory processes and, in a number of animal models, it has been able to reduce plaque formation very significantly. The results also show a considerable reduction in the size of existing plaques in animals treated with BI-204. Further tests have shown a reduction in the content of pro-inflammatory cells in the treated plaques, and new results obtained during the period provide a greater understanding of the mechanisms of action. These results reinforce the earlier hypothesis that BI-204 modifies the inflammatory processes in the plaques, which in turn leads to a reduction in new plaque formation and the regression of existing plaques.   

Development of the cell line to be used in the production of BI-204 is finished and manufacturing of material for the toxicology program is in progress. 

Research projects

To ensure sustainable development of the portfolio of development projects, BioInvent is running a number of projects in the research phase i.e. the stage prior to selection of a product candidate for safety tests in animal models with the intention of initiating clinical trials. Eight of these have the treatment of cancer as the primary indication. Five of these are collaboration projects with the Belgian company UCB as the commercialising partner. BioInvent’s proprietary projects include a second angiogenesis project (anti-angiomotin) and two projects in which the selected antibodies have been shown in vitro to kill tumour cells effectively through a process called apoptosis or programmed cell death.   

The anti-angiomotin project to treat tumours has been expanded to include another approach. Antibodies against angiomotin have the potential to inhibit undesired angiogenesis. BioInvent has already reported that the antibodies being developed by the Company prevent angiogenesis in vitro and in vivo in various relevant model systems. For about a year now BioInvent has been working in cooperation with the Department of Oncology-Pathology at the Karolinska Institute on a vaccine project based on angiomotin. Briefly, the idea behind this project is that vaccination with angiomotin will produce a specific immune response and thereby prevent the growth of vessels in pathological conditions. The results from such vaccination tests were published in April in the well-reputed scientific journal Proceedings of the National Academy of Sciences (PNAS). The results show that vaccination with angiomotin dramatically reduces tumour-induced angiogenesis and significantly inhibits the growth of tumour mass in animal models. These results confirm the results obtained earlier with antibodies developed by the Company and further validate angiomotin as a promising target protein for immunotherapy. Patent applications covering vaccination with angiomotin have been acquired by BioInvent.  

In the beginning of April BioInvent initiated a collaboration with Immusol, Inc. for the development of a fully human n-CoDeR antibody for the treatment of age related macular degeneration (AMD) and other ophthalmic disorders. Macular degeneration is the most common cause of vision loss in people over 60, affecting 20 - 25 million people worldwide. It is characterised by abnormal and uncontrolled vessel growth in the eye.  

Within the framework of the partnership, Immusol is providing expertise in ophthalmology and intellectual property rights covering the use of antagonists against a biological target identified to play an important role in the underlying pathological process of AMD. BioInvent will contribute its knowledge and experience in angiogenesis, immunology and therapeutic antibody discovery and development. Under the terms of the collaboration, the parties will share costs and revenues in further development and commercialisation.  

Since the project started, BioInvent has selected antibodies with high binding affinity against the target protein. These antibodies have been shown to have the ability to inhibit the biological activity of the target protein in in vitro tests. In the next stage, more antibodies will be tested to identify a smaller number of antibodies with high affinity and activity, and these will then be tested in animal models.  

Harmful angiogenesis in the eye is also a potential indication for the TB-403 product candidate, aimed at the target protein PlGF, and the anti-angiomotin research project, both of which act in different ways to prevent the undesired vessel formation. Animal data for both of the projects is available to support the possibility within ophthalmology. 

HIV-infection/AIDS

At the end of May BioInvent reported the results from the phase I/IIa clinical study of BI-201. The drug was well tolerated, but showed no reduction of HIV levels with the investigated doses.  

Thorough analyses of data from the phase I/IIa study showed a too short half-life of the antibody. The antibody contains several carbohydrate chains that might contribute to the fast elimination of the same from circulation. In parallel to the development of BI-201 BioInvent has within a back-up program developed antibodies that lack the particular carbohydrate chains in BI-201. Pharmacokinetic data from animals indicates on a more favourable half-life in human. 

Based on the dosing expected to be required to obtain an anti-viral effect the back-up program is judged to represent a better commercial opportunity than BI-201. BioInvent has therefore decided not to continue the phase I/IIa study of BI-201. The company will instead continue the pre-clinical evaluation of the back-up antibodies.  

Organisation

As of 30 June 2006, BioInvent had 99 (93) employees. 82 (76) of these work in research and development.

Revenues and result

Net revenues for the January – June period amounted to SEK 17.1 million (14.8). The corresponding amount for the April - June period was SEK 10.1 million (5.2). Net revenues for the period referred to remuneration from development projects on behalf of customers.  

The Company’s total costs for the January – June period amounted to SEK 80.8 million (94.9). Operating costs are divided between external costs of SEK 35.3 million (47.9), personnel costs of SEK 38.1 million (37.1) and depreciation of SEK 7.4 million (9.9). The decrease in external costs is mainly explained by the milestone payments made in June 2005 within the HIV project. 

Research and development costs for January – June amounted to SEK 66.4 million (79.9). The research and development costs have decreased for the same reason as the external costs. Depreciation according to plan lowered the operating result for the period by SEK 7.4 million (9.9), of which depreciation of intangible fixed assets amounts to SEK 3.8 million (4.5).  

The loss after tax for January – June amounted to SEK -62.2 million (-78.4). The change in result is mostly related to decreased external costs. The loss after tax for April - June amounted to SEK -32.1 million (-52.4). The net financial items, January – June, amounted to SEK 1.5 million (1.7). The loss per share after tax, January – June, amounted to SEK -1.32 (-2.66). 

Financial position and cash flow

As of 30 June 2006, the Group’s current investments together with cash and bank amounted to SEK 138.0 million (122.7). The cash flow from current operations and investment activities for January – June amounted to SEK -57.3 million (-52.3). The cash flow was affected, principally, by fluctuations in working capital, despite lower external costs and investments. The cash flow from current operations and investment activities for April - June amounted to SEK -26.6 million (-33.3). 

The shareholders’ equity amounted to SEK 156.9 million at the end of the period. The Company’s share capital was SEK 23.6 million. The equity/assets ratio at the end of the period was 77.2 (74.6) per cent. Shareholders’ equity per share amounted to SEK 3.33 SEK (4.56). The Group had no interest-bearing liabilities. 

Investments

Investments in tangible fixed assets amounted to SEK 3.7 million (0.1). 

The parent company

Net revenues for January – June amounted to SEK 17.1 million (14.8). The loss after tax amounted to SEK -62.2 million (-78.4). The cash flow from current operations and investment activities amounted to SEK -57.3 million (-52.3). 

Warrant programme

At the end of the period, there were outstanding warrants equivalent to a maximum of 312,000 shares after recalculation to take into account the implemented new share issue. The warrant program was issued in April 2003 and is aimed at senior executives and key individuals not in possession of large holdings of shares. So far, 219,440 warrants have been acquired by the employees at market terms. The remaining 92,560 warrants are reserved for future recruitments. The subscription period for the warrants is 1 January to 30 April, 2007 and the subscription price is SEK 22 after recalculation to take into account the implemented new share issue. The warrant program could provide a maximum dilution of 0.7%.  

Accounting principles

This consolidated interim report has been prepared in accordance with IAS 34 Interim Financial Reporting, which is in accordance with the stipulations in the Swedish Financial Accounting Standards Council’s recommendation RR 31 Consolidated Interim Reports. BioInvent International AB started applying the International Financial Reporting Standards (IFRS) from 1 January 2005 in accordance with an EU decree.  

Parent Company’s accounts have been prepared with application of the Swedish Accounting Standards Council’s recommendation RR 32, Reporting for Legal Entities. 

Upcoming financial reports

BioInvent will present the following financial reports: 

Interim report                                               12 October 2006

Financial statement for 2006                         15 February 2007

Contact:  

Any questions regarding this report will be answered by:  

BioInvent International AB (publ.)

Svein Mathisen, President & CEO, tel.+46 (0)46 286 85 67, mobile +46 (0)708 97 82 13

Cristina Glad, Executive Vice President, tel. +46 (0)46 286 85 51, mobile +46 (0)708 16 85 70. 

Northbank Communications

* The outstanding warrants lead to no dilution of earnings per share as a redemption