1 January–30 June 2005 

q  Clinical phase I/IIa studies have been started for the drug candidate BI-201 against HIV infection.

q  Preclinical data further supports the claim that BI-201 minimises the risk of resistance development.  Extended in vitro tests show that BI-201 did not allow resistance to develop after having inhibited the virus for 30 weeks.

q  Through a licensing agreement with Cambridge Antibody Technology, BioInvent has secured the right to use phage display technology to develop products from n-CoDeR. 

q  Production of material for the toxicology programme within the thrombosis project has started.  

q  Net revenues for January-June 2005: SEK 14.8 million (29.0).

q  Cash flow from current operations and investment activities for January – June 2005: SEK -52.3 million (-54.1). Liquid funds at the end of the period: SEK 122.7 million (214.6).

q  Loss after tax for January – June 2005 amounted to SEK -78.4 million (-44.7) and the loss after tax per share was SEK -2.66 (-1.52). 

Comments by the CEO

We have reported several important events during this period; each of them representing important milestones for the Company. In June the first patients received the first dose of BI-201 for the treatment of HIV infection. This phase I/IIa study encompasses HIV infected individuals that have not yet received any other form of treatment. The primary objective is to study the safety of the drug candidate BI-201, how well it is tolerated and its pharmacokinetic properties. Another important objective of the tests is to study the effects of BI-201 on the level of the virus in the patients’ blood. We expect the results of the studies to be presented during the second quarter next year. Through the design of the study we may within a year, at a cost manageable for the Company, have an important indication of how effective BI-201 may be. There is a great need for new approaches to effectively meet the challenge that HIV represents. BI-201 has the potential to be developed into just such an alternative.

To avoid the Company becoming too dependent on the success of any one individual project, we have deliberately moved our other projects forward in the value chain. We are currently running six projects based on various biological mechanisms. Apart from BI-201, drug candidates have been selected for the toxicology programmes in two other projects. Within the thrombosis project the development of the cell line that will produce the material is complete and production of the material for the toxicology programme has begun. We are sticking to our plan of initiating these studies during the second half of the year.

Through the licensing agreement we entered into in June with Cambridge Antibody Technology combined with the licenses we acquired earlier, we have secured the right to use all relevant parts of phage display technology to develop products from n-CoDeR. These agreements mean that we have eliminated the risk that could have arisen if the objections we raised at the European Patent Office against the patents licensed at this time had not had a successful outcome. We can now focus all of our resources on the commercialisation of our products and technology. With the terms we managed to negotiate, this alternative proved to be very attractive.

Moving our projects forward in the value chain will have a negative impact on our results in the short term due to the increased costs associated with our development activities. The result in the second quarter is also affected by a success-related milestone payment to the originator of the patents that protect BI-201.

Operations

BioInvent develops antibody-based drugs against diseases where there is a significant unmet medical need. The antibody field is a strongly growing segment in the pharmaceutical market.

BioInvent focuses on discovery and development of proprietary antibody-based drugs and to document their effect in pre-clinical and early clinical trials. Clinical development, marketing and distribution are conducted in cooperation with pharmaceutical companies. Today BioInvent conducts innovative proprietary drug projects in the areas of HIV-infection, thrombosis, cancer, atherosclerosis, and diseases of the joints.

The scope and strength of BioInvent’s technology platform is also utilized by partners in the development of new drugs. BioInvent’s partners include ALK-Abelló, Antisoma, Celltech, GlaxoSmithKline, Igeneon, ImmunoGen, Orbus and XOMA.

HIV-infection/AIDS

Background:

HIV infection is one of the most serious epidemics of our time. HIV has a high degree of variability and adaptability. When a new treatment is introduced, the virus usually changes quickly and develops resistance to the treatment, making it ineffective.

The Tat protein is vital for HIV’s ability to replicate itself and spread to new cells. Antibody-based drugs against the Tat protein are expected to be able to neutralise its activity so that the level of HIV particles in the patient’s blood is reduced to such an extent that the development of the disease will be arrested. The antibody that BioInvent develops is targeted to a part of the Tat protein that is unchanged (conserved) between different virus strains. The target protein circulates freely in the blood and is not directly connected to a virus particle. Thus, the virus’s capacity to change and adapt to avoid the effect of the antibodies is eliminated. Based on the characteristics of the unique target protein, the Company expects that the antibodies against these conserved parts of the Tat protein will avoid the development of resistance and will therefore have a lasting effect. The project is based on patent rights licensed in July 2002 from Thymon, USA.

Project status:

We have initiated clinical phase I/IIa studies. The studies cover 36 HIV infected individuals who have not yet received any other form of treatment. The primary objective is to study the safety of the drug candidate BI-201, how well it is tolerated and its pharmacokinetic properties. Another important objective of these tests is to study the effects of BI-201 on the level of the virus in the patients’ blood and thereby get an initial indication of how effective BI-201 may be. The studies are being carried out at the Chelsea & Westminster Hospital in London and we expect the results to be presented during the second quarter of 2006.

BI-201 has in several pre-clinical tests carried out at the Karolinska Institute and Smittskyddsinstitutet, proved to effectively prevent the spread of the virus between human cells in vitro and to inhibit viruses with different Tat sequences in a similar way.

Extended resistance tests carried out at Smittskyddsinstitutet in Stockholm have shown that BI-201 retained its efficacy and no development of resistance was identified after having inhibited the virus for 30 weeks. Another recently launched drug against HIV was tested under the same conditions. Resistance to this drug developed after six weeks, which is in line with previous experiences.

Thrombosis

Background:

Thrombosis is a serious complication in connection with certain types of heart arrhythmia, e.g. atrial fibrillation, and in surgical procedures as hip surgery. In the US and the five largest pharmaceutical markets in Western Europe alone, more than 6 million people suffer from atrial fibrillation, while the number of surgeries where knees and hips are replaced by artificial joints is around 1.4 million a year.

Factor VIII plays a crucial role in the coagulation of the blood. Inhibiting Factor VIII is therefore an approach of great interest in the prevention of thrombosis. The challenge is to inhibit coagulation without increasing the risk of spontaneous bleeding.

BioInvent’s partner, ThromboGenics, has developed a human antibody against Factor VIII. The anti-Factor VIII lead candidate has shown a beneficial partial inhibition of the blood coagulation Factor VIII, even when applied in excess dosage.  These characteristics indicate a well-controlled inhibition of Factor VIII activity with low risk of spontaneous bleeding, reduced risk of overdose and reduced need for patient monitoring. Results from animal models makes it likely that a drug can be developed that can be given one time for treatment of acute indications, or once-a-month for chronic indications such as atrial fibrillation. All available anticoagulants require daily drug administration. This suggests that a product with a favourable safety profile, with ease of administration, can be developed.

The project is progressing within the framework of the alliance with ThromboGenics and is based on research on inhibiting the Factor VIII coagulation factor. The project is headed by Professor Marc Jacquemin of Flanders Interuniversity Institute of Biotechnology (VIB) and the university in Leuven, Belgium in cooperation with ThromboGenics.

Project status:

The parties have selected a drug candidate for toxicology studies. Extensive testing in several animal models has shown that the selected antibody strongly reduces the risk of thrombosis without increasing the risk of spontaneous bleeding. The cell line that will be used to produce material for the toxicology and clinical programme has been successfully developed and production of material for the toxicology programme has begun.

Cancer

General background:

Cancer is a heterogeneous disease, which makes it more difficult to develop drugs aimed directly at tumour cells for the purpose of killing them. A new and interesting strategy is to attack the tumour’s blood supply by blocking the growth of new blood vessels to the tumour – so-called angiogenesis. BioInvent is conducting two projects using this strategy, one of which is a joint project with ThromboGenics.

Angiomotin:

Background:

BioInvent’s initial angiogenesis project is based on the discovery of a new and central receptor called angiomotin. This is only expressed on normal cells in new blood vessels that are developing and is believed to be crucial to the growth of new blood vessels. Targeting antibodies to the relevant target protein prevents tumours growth through blocking the formation of new blood vessels.

The project is based on patent rights acquired in April 2003 from a research group at the Karolinska Institute.

Project status:

A large number of antibodies with specificity for the relevant target protein have been selected from BioInvent’s n-CoDeR^® antibody library. Tests on animals have shown that these antibodies are capable of blocking unwanted angiogenesis. The Company is currently conducting testing in animal models at the Karolinska Institute to study the effect of the antibodies on tumour growth.

As an additional project opportunity the Company has also initiated studies in animal models to evaluate the antibodies’ effects on harmful vessel growth in the eye. Such vessel growth frequently results in considerable medical complications, for example among diabetes patients, and there is a great need for new, effective drugs for the treatment of this condition.

Anti-PlGF

Background:

The PIGF 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, PIGF does not seem to affect normal, physiological angiogenesis. This characteristic is important because it means that the inhibition of PIGF is not expected to cause any significant side effects, but will still have the desired effect on various diseases. This hypothesis is strongly supported by animal tests published in Nature Medicine by Professor Peter Carmeliet at the University of Leuven, Belgium. The project is being developed within the framework of the alliance with ThromboGenics.

Project status:

A product candidate has been selected and has undergone extensive pre-clinical studies that have demonstrated good specificity for the relevant target protein and inhibition of PIGF-associated angiogenesis in several in vitro and in vivo studies. Development of the cell line that will be used for production of the drug candidate has begun and is progressing. The next stage is to manufacture material for the toxicology programme. The product candidate is a humanised antibody. 

Atherosclerosis

Background:

Atherosclerosis can lead to blood clot formation and infarction. In the industrialised world infarction is the main cause of death. Atherosclerosis develops as a result of plaque formation in the blood vessels. There is a risk that these plaques will be pulled apart by the blood flow, which may lead to infarction.

New research has shown strong links between oxidized forms of certain lipoproteins and the inflammatory processes that lead to plaque formation in the vessel walls. Antibodies aimed at these oxidized lipoproteins are expected to be able to stabilise plaque formation and possibly also reduce it.

The patent rights for the project are the result of research at the MAS University Hospital in Malmö and Cedars-Sinai in Los Angeles. The rights were licensed in December 2002.

Project status:

The product candidates identified by the Company have been shown to reduce plaque formation significantly in a number of animal models in experiments conducted at MAS University Hospital in Malmö. Further animal experiments are being carried out in order to select the final product candidate. These experiments are expected to be concluded in the third quarter 2005.

Osteoarthritis

Background:

Osteoarthritis is a disease of the joints caused by an imbalance in the formation of cartilage. The disease leads to stiffness, poor function and pain in joints in the fingers, knees and hips etc. The only treatment alternatives today for osteoarthritis are pain medication and surgery in which the affected joints are replaced by artificial ones.

Osteoarthritis is very widespread, and in the US alone, an estimated 40 million people suffer from the disease. The activity level of seven million of these people is limited by the disease, which causes costs for society of over USD 60 billion.

New research has shown that a specific protein, belonging to a class of receptors called integrins, is found on the cells that are responsible for synthesis of new cartilage tissue. Data from this research provides strong indications that this target protein can be linked to regulation and control of the cartilage tissue in the joints. BioInvent intends to develop a therapeutic antibody that will bind to the protein in question. The antibody is expected to be able to stimulate the synthesis of new cartilage tissue and thereby slowing the progression of osteoarthritis.

The rights to develop antibody-based drugs against the specific integrin were licensed in October 2003 from Cartela AB.

Project status:

A large number of antibodies with specificity for the target proteins in question have been identified. Several of the antibodies that have been developed have been shown to be able to modulate collagen synthesis in tests carried out in vitro, which means that the target protein is capable of mediating the relevant signals induced by the antibodies. The concept is thereby validated in vitro.

Antibodies that have shown an effect in vitro are currently being evaluated in animal models in order to establish an effect on collagen synthesis and cartilage formation.

Organisation

As of 30 June, BioInvent had 93 employees, compared to 102 at the same time the previous year. 76 (86) of these work in research and development.

Revenues and result

Net revenues for the January – June period amounted to SEK 14.8 million (29.0). The corresponding amount for the April – June period was SEK 5.2 million (12.8). In accordance with the strategy a larger proportion of the development capacity is gradually used for the Company’s proprietary drug projects. This results in reduced possibilities for revenues from development assignments. These revenues are also expected to fluctuate. Such fluctuation has been reinforced during the period, as a result of an assignment that was expected did not materialise.

The Company’s total costs for the January – June period amounted to SEK 94.9 million (76.9). Operating costs are divided between external costs of SEK 47.9 million (30.3), personnel costs of SEK 37.1 million (36.3) and depreciation of SEK 9.9 million (10.3). The increase in external costs is mainly explained by the milestone payments made to the originator of the patents that protect BI-201 and under a couple of the Company’s technology licenses. Also, costs increased as the Company’s projects were moved forward in the value chain.

Research and development costs for January – June amounted to SEK 79.9 million (60.5). The research and development costs have increased for the same reason as the external costs. Depreciation according to plan lowered the operating result for the period by SEK 9.9 million (10.3), of which depreciation of intangible fixed assets amounts to SEK 4.5 million (4.2).

The loss after tax for January – June amounted to SEK -78.4 million (-44.7). The increased loss is related to lower revenues and increased external costs as described above. The loss after tax for April – June amounted to SEK -52.4 million (-24.6).

The net financial items amounted to SEK 1.7 million (3.2). The reduction is the result of reduced liquid funds and lower market interest. The loss per share after tax, January – June, amounted to SEK -2.66 (-1.52).

Financial position and cash flow

As of 30 June 2005, the Group’s liquid funds amounted to SEK 122.7 million (214.6). The cash flow from current operations and investment activity for January – June amounted to SEK -52.3 million

(-54.1). The cash flow from current operations and investment activity for April - June amounted to SEK -33.3 million (-25.9). The fact that the cash flow has not declined with the increase of losses and investments is partly due to the fact that payments for considerable investment in intellectual property were not due as of 30 June and partly due to other working capital fluctuations.

The shareholders’ equity amounted to SEK 134.4 million at the end of the period. The Company’s share capital was SEK 14.7 million, and the equity/assets ratio at the end of the period was 74.6 (90.5) per cent. Shareholders’ equity per share amounted to SEK 4.56 SEK (8.84). The Group had no interest-bearing liabilities.

Investments

The Group’s investments in intangible fixed assets amounted to SEK 11.2 million (5.4) and relate to the acquisition of technology licenses. Investments in tangible fixed assets amounted to SEK 0.1 million (0.1).

The parent company

Net revenues for January – June amounted to SEK 14.8 million (29.0). The loss after tax amounted to SEK -78.4 million (-44.7). The cash flow from current operations and investment activity amounted to SEK -52.3 million (-54.1).

Warrant programme

At the end of the period, warrants equivalent to 300,000 shares had been issued. The warrant programme was issued in April 2003 and is aimed at senior executives and key individuals, not in possession of large holdings of shares. So far, 211,000 warrants have been acquired by the employees at market terms. The remaining 89,000 warrants are reserved for future recruitments. The subscription period for the warrants is 1 January – 30 April 2007 and the subscription price is SEK 23. The warrant programme could provide a maximum dilution of 1.0 per cent.

Accounting principles

This consolidated interim report has been prepared in accordance with IAS 34 Interim Reporting, which is in accordance with the stipulations in the Swedish Financial Accounting Standards Council’s recommendation RR 31 Consolidated Interim Reports.

The accounting principles used for this interim report are those described in the consolidated report for 2004 where it is stated, among other things, that the International Financial Reporting Standards (IFRS) shall be applied starting on 1 January 2005 and the comparative information for 2004 shall be re-stated in accordance with the new principles, with the exception of figures for financial instruments. According to the rules for the transition to IFRS, the new principles shall be applied for financial instruments only in the sections where the accounts refer to 2005. The loss reported for 2004 and the shareholders’ equity as of 31 December 2004 is not affected by the standards that have been published to date.

The most significant impact on the Group of the transition to IFRS is related to reporting of financial instruments. From 2005, the Company is applying IAS 32 and 39 on financial instruments and the comparative figures for 2004 have, in compliance with the transition rules, not been re-stated. The application of IAS 32 upon its introduction on 1 January 2005, is not expected to have any impact on the shareholders’ equity. The effects on the shareholders’ equity on 1 January 2005 of the application of IAS 39 were minimal, SEK 22k. A more detailed account is provided in BioInvent’s 2004 annual report.

Lund, 14 July 2005

Svein Mathisen, President and CEO

We have briefly examined this interim report for the period 1 January 2005 – 30 June 2005 in accordance with the recommendation issued by the Swedish Institute of Authorised Public Accountants (FAR). A brief examination is very limited compared to a full audit. We have found nothing to indicate that this interim report does not meet the requirements of the stock exchange and annual accounts laws.

Lund, 14 July 2005

ERNST & YOUNG AB, Åke Stenmo, Authorised Public Accountant

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, +46 (0)46 286 85 51, mobile +46 (0)708 16 85 70.

Northbank Communications

Katja Stout/Emma Palmer, tel +44 (0)20 7886 8150   

The report is also available at www.bioinvent.com

BioInvent International AB (publ.)

Co. reg. no. 556537-7263, Address: Sölvegatan 41, 223 70 Lund, Tel.: +46 (0)46 286 85 50

Legal disclaimer

This press release contains statements about the future, consisting of subjective assumptions and forecasts for future scenarios. Predictions for the future only apply as of the date they are made and are, by their very nature, in the same way as research and development work in the biotech segment, associated with risk and uncertainty. With this in mind, the actual out-come may deviate significantly from the scenarios described in this press release.