4SC AG has announced the financial results of the Group managed by 4SC AG (4SC) in accordance with International Financial Reporting Standards (IFRS) for the financial year ended 31 December 2012.
As a result of substantially increased revenue and reduced operating expenses, the Company, which is currently still recording losses according to plan, has improved its operating result considerably.
In the 2012 financial year, 4SC reduced its operating loss by 29% year on year, to EUR 13.37 million. In comparison to 2011, revenue showed a fivefold increase, rising to EUR 4.35 million in 2012.
The main driver here was the launch of the Company’s early-stage research marketing subsidiary 4SC Discovery GmbH at the beginning of 2012.
4SC had funds of EUR 12.06 million at the end of the 2012 financial year. These funds, however, did not yet include the cash inflow of EUR 2.5 million from BioNTech AG in connection with a licensing agreement concluded in December 2012.
The existing funds in connection with the current forecast of further expense and revenue planning will ensure the Company’s financing into the third quarter of 2014.
Key events in the 4SC Group in 2012 and the first months of 2013
In drug development (Development segment):
• Publication of excellent clinical data from the Phase II SHELTER study with the anti-cancer drug resminostat in advanced hepatocellular carcinoma (HCC): The combination therapy of resminostat and sorafenib achieves a median overall survival of eight months. To the best of 4SC’s knowledge this is the highest value recorded to date in comparable second-line therapy studies in HCC (January, May and September 2012).
• Clinical development of resminostat starts in Japan with a Phase I trial in Japanese cancer patients, conducted by 4SC’s development partner Yakult Honsha (May 2012).
• Publication of positive interim results from the clinical phase I/II SHORE trial with resminostat in combination therapy with FOLFIRI chemotherapy in patients with advanced colon cancer: The results prove the safety and tolerability of combined administration (December 2012).
• Publication of positive clinical results from the Phase I AEGIS trial with the anti-cancer compound 4SC-205 in tumour patients: All primary trial objectives are achieved; a comprehensive safety and tolerability profile is established; and a study amendment is initiated in order to further investigate the compound (December 2012).
• Publication of positive preclinical data for vidofludimus as proof of the broad potential of the compound regarding autoimmune diseases (February and June 2012).
In early-stage research conducted by the Group subsidiary 4SC Discovery GmbH (Discovery & Collaborative Business segment):
• Start of service provision partnerships in the field of drug discovery and optimization with Henkel KGaA (April 2012), Ribological GmbH (July 2012) and BioNTech AG (February 2013).
• Receipt of a milestone payment from an earlier joint research venture with pharmaceutical company Sanwa Kagaku Kenkyusho Co., Ltd., Japan (April 2012).
• Receipt of a research grant of EUR 600,000 from the m4 biotech cluster in Munich for the development of personalized cancer drugs (October 2012).
• Conclusion of an exclusive licensing agreement with Mainz-based biopharmaceutical company BioNTech AG in the field of cancer immunotherapy: 4SC Discovery receives an upfront payment of EUR 2.5 million and is entitled to possible future milestone and royalty payments (December 2012).
• Signing of an exclusive research and license agreement with the Danish pharmaceutical company LEO Pharma A/S for the joint research, development and commercialization of a new therapy option for the treatment of psoriasis: 4SC Discovery receives an upfront payment of EUR 1 million and is entitled to possible future milestone payments of up to EUR 95 million as well as royalties (February 2013).
In the Group’s development:
• Successful capital increase with gross proceeds of around EUR 12.6 million and expansion of shareholder base to include institutional investors from France, Scandinavia and the Benelux countries. This lifts the free float of 4SC’s shares to 30% (July 2012).
• Strengthening the capabilities of 4SC AG’s Supervisory Board by the appointment of two new members: the experienced pharma managers Dr Irina Antonijevic (Genzyme-Sanofi) and Klaus Kühn, former CFO at Bayer AG (August 2012).
• Dr Ulrich Dauer steps down from his position on the Management Board and as CEO effective 31 March 2013; he will be succeeded by CFO Enno Spillner effective 1 April 2013 (March 2013).
Dr. Ulrich Dauer, CEO of 4SC AG, commented: “For 4SC, 2012 was a highly successful year. Completing the Phase II trial of resminostat in liver cancer with such outstanding results strengthens our chances for further development on the path to market maturity and our company’s profile as a global leader in the market for epigenetic cancer compounds. In addition, other innovative substances from our pipeline also delivered positive results in clinical trials. We are especially pleased that our subsidiary 4SC Discovery GmbH has managed to establish itself so well in the market for pharmaceutical early-stage research.”
Enno Spillner, CFO of 4SC AG, continued: “The positive start made by 4SC Discovery GmbH gives us cause to hope that we can generate a balanced cash flow from operations in our ‘Discovery & Collaborative Business’ segment represented by 4SC Discovery as early as 2013. In the medium term, this should mean 4SC can cover part of its capital requirements from its own business. In 2012, we managed to quintuple consolidated revenue - due in large part to the efforts of our subsidiary. In addition, we succeeded in lowering our operating expenses by 9% and improve our operating result by more than EUR 5 million. Due to the July 2012 capital increase and the pleasing developments on the financial side of business operations, we have a solid financial basis and are well prepared for the future.”
In conclusion, Dr Ulrich Dauer added, “As announced previously, I decided to resign for personal reasons effective at the end of March 2013 after serving as the CEO of 4SC AG for 13 years. I regard it as a privilege to have shaped 4SC over such a long period of time together with our unique team of employees and my colleagues on the Management Board. I am convinced that 4SC will continue its successful development in the future and I will remain on amicable terms with the Company.”
Financial performance and cash flows in 2012
The 4SC Group, comprising 4SC AG and its wholly-owned subsidiary 4SC Discovery GmbH, reports consolidated figures for the 2012 financial year from two operating segments in accordance with International Financial Reporting Standards (IFRS). The Development segment comprises the clinical drug development programmes. The Drug Discovery & Collaborative segment comprises the activities collectively handled by 4SC Discovery GmbH, namely drug discovery and early-stage research plus subsequent commercialization.
In 2012, consolidated revenue rose to EUR 4.35 million, representing more than a fivefold increase year-on-year (2011: EUR 0.78 million). Revenue in the Development segment amounted to EUR 1.4 million and comprised the pro rata reversal of the deferred income item for the partnership agreed in 2011 for resminostat with Yakult Honsha Co., Ltd., plus costs charged on to 4SC’s cooperation partners. In the first year of business operations for 4SC Discovery GmbH, the Discovery & Collaborative Business segment contributed 68% (EUR 2.96 million) to consolidated revenue. This contribution was made up of an advance payment of EUR 2.5 million from a license agreement with BioNTech AG, plus income from several collaborative service and research ventures.
Operating expenses fell by 9% year-on-year to EUR 17.75 million (2011: EUR 19.58 million). In 2012, research and development costs were lowered by 14% to EUR 12.91 million (2011: EUR 15.01 million). Alongside targeted reductions of costs, one key factor for the year-on-year decrease here was the smaller number of ongoing clinical trials.
At 73% (2011: 77%), the costs for research and development continue to account for the lion’s share of operating expenses. Compared to the previous year, administrative costs decreased by 1% to EUR 3.92 million (2011: EUR 3.96 million).
Bolstered by gains in revenue with simultaneous reductions of costs, the consolidated operating result improved markedly, rising by 29% to EUR -13.37 million (2011: EUR -18.79 million). Accordingly, the consolidated net loss for the year decreased in 2012 by 31% to EUR 13.22 million (2011: EUR 19.07 million).
The loss per share fell to EUR 0.29 (2011: loss of EUR 0.46). As a result of the capital increase completed in 2012, the average number of outstanding shares in the reporting year rose to 46,170,059 shares (2011: 41,455,379 shares).
In the 2012 financial year, the average operating cash burn rate was EUR 1.26 million per month. In the previous year, the operating cash burn rate (2011: EUR 1.07 million) had been positively influenced by the upfront payment of EUR 6 million received from Yakult Honsha in April 2011 under the terms of the license agreement for resminostat in Japan.
The 4SC Group had funds of EUR 12.06 million at the end of the 2012 financial year (31 Dec 2011: EUR 15.82 million).
4SC Group outlook
4SC is issuing the following outlook as regards subsequent operational and financial business development in 2013 and beyond.
• In the advanced liver cancer (HCC) indication, 4SC is pursuing a Phase III registration trial with the anti-cancer compound resminostat. Assuming a successful outcome to ongoing talks with potential partners and the completion of other trial preparations, the aim is to start this study jointly with a pharmaceutical partner in the second half of 2013.
• 4SC aims to start a Phase IIb trial with vidofludimus in the Crohn's disease indication. Activities are currently focusing on the search for a suitable partner with whose support the trial can be conducted.
• In the ongoing Phase I/II SHORE trial, in which resminostat in combination with FOLFIRI chemotherapy is being studied in the colorectal cancer indication, 4SC expects the clinical efficacy data to be available in the next 12-18 months. Initial interim results on efficacy might be available as early as the end of 2013.
• 4SC aims to wrap up the Phase I dose escalation study with the anti-cancer compound 4SC-202 (TOPAS trial) in the second half of 2013.
• 4SC expects results from the extended Phase I trial with the 4SC-205 anti-cancer compound (AEGIS trial) by mid-2013.
• In 2013, 4SC expects to see a continued improvement in the consolidated operating result, driven by a further decrease in operating expenses - especially from reductions to research and development costs - and the anticipated revenue generated from activities involving 4SC Discovery GmbH.
• Based on the strong performance of 4SC Discovery GmbH during the current year, 4SC expects 4SC Discovery GmbH to be able to achieve a balanced cash flow from operating activities as early as 2013.
• These existing funds in connection with the current forecast of further expense and revenue planning will ensure the Company’s financing into the third quarter of 2014. This forecast is based on the assumption that the average monthly operating cash burn rate in 2013 will be approximately EUR 0.6 million and that the Company’s research and development programmes will run according to plan.