4SC's Successful Development Continues in Third Quarter of 2012

4SC AG has announced that it has further continued its successful development in the 2012 financial year.

The consolidated financial results according to IFRS published by the Company for both the third quarter and the first nine months of 2012 show substantial year-on-year improvements.

The most important event during the third quarter was the publication of excellent clinical data for 4SC's lead anti-cancer compound resminostat in liver cancer.

As a result of increased revenue and reduced operating expenses, the Company, which is currently still recording losses according to plan, has improved its operating result.

In the first nine months of 2012, 4SC reduced its operating loss by 14% year on year, to EUR 12.32 million. Revenue development in the first nine months - which shows a year-on-year increase of 134% to EUR 1.03 million - was boosted by the launch of the early-stage research commercialization business at the beginning of the year by the Company's subsidiary 4SC Discovery GmbH.

The decline in operating expenses by 10% to EUR 13.38 million in the first nine months of 2012 is in particular attributable to the fall in research and development costs compared with the previous year due to the successful conclusion of a number of clinical trials and the reduction of administrative costs.

As at 30 September 2012 the Company had funds of EUR 15.8 million. Based on the forecast of further expense and revenue planning, this will ensure the Company's financing until the end of 2013.

In the third quarter, 4SC has achieved decisive milestones in its operational drug research and development activities.

Operating highlights in the 4SC Group in the third quarter of 2012
The operating highlight in the third quarter of 2012 was the publication in September of excellent Phase II trial data on 4SC's anti-cancer compound resminostat in second-line therapy of liver cancer (HCC).

In this difficult-to-treat patient group, for which no therapy option is currently available, the combination therapy of resminostat with the cancer drug sorafenib achieved a median overall survival of 8.0 months.

To the best of the Company's knowledge, this is the highest figure so far achieved in clinical trials in comparable liver cancer patient groups.

Another significant development in the field of drug development was the strengthening of patent protection for resminostat in China. Due to the high incidence of liver cancer, this country has strategic importance for the future marketing of resminostat.

In the field of early-stage research, work started on a research partnership between 4SC Discovery GmbH and the Mainz-based biotech company Ribological GmbH for the discovery of new anti-cancer compounds.

Shortly after the end of the reporting period, 4SC Discovery GmbH was also granted research funding of EUR 600,000 for the development of personalized cancer drugs.

Important strategic decisions were also made and implemented at Group level. A capital increase with gross proceeds of around EUR 12.6 million was successfully completed at the beginning of the quarter.

4SC AG's Supervisory Board was further strengthened by the appointment of two new members: the experienced pharma managers Dr Irina Antonijevic (Sanofi) and Mr Klaus Kühn (former CFO at Bayer AG).

Dr Ulrich Dauer, CEO of 4SC commented: 'We are very satisfied with our third-quarter performance. The outstanding clinical trial results with resminostat in liver cancer were especially pleasing. This improves our position in the ongoing talks with potential pharma partners and regulatory agencies for our planned Phase III registration trial in this indication. The marketing of our early-stage research by 4SC Discovery GmbH is also proceeding along positive lines. This can be seen in the new collaboration with Ribological and the research grant of EUR 600,000 received from the Munich m4 biotech cluster. As a result of the excellent clinical data from our lead compound resminostat, the promising development of 4SC Discovery GmbH and our stronger financial foundation due to the successful capital increase completed in summer of 2012, we believe we are well prepared for the upcoming developments.'

Financial results and cash flows in the third quarter and first nine months of 2012
The 4SC Group, comprising 4SC AG and its wholly-owned subsidiary 4SC Discovery GmbH, reports consolidated figures according to International Financial Reporting Standards (IFRS) for the first nine months and the third quarter of the 2012 financial year from two operating segments.

The Development segment comprises the drug development programmes for resminostat, vidofludimus, 4SC-202, 4SC-203, 4SC-205 and 4SC-207.

The Discovery & Collaborative Business segment comprises the activities involved in drug discovery and early-stage research plus subsequent commercialization, and, in particular, service business related to drug discovery and optimization.

Consolidated revenue amounted to EUR 0.29 million in the third quarter of 2012 and EUR 1.03 million in the first nine months of 2012. It is composed of revenue from research collaborations and the pro rata reversal of the deferred income item for resminostat in connection with the partnership with Japanese pharmaceutical company Yakult Honsha from the previous year.

In the previous year, revenue was EUR 0.22 million (Q3 2011) and EUR 0.44 million (9M 2011), respectively. The Development segment accounted for EUR 0.22 million (Q3 2012) and EUR 0.67 million (9M 2012) of total revenue, while the Discovery & Collaborative Business segment already generated revenue of EUR 0.07 million (Q3 2012) and EUR 0.36 million (9M 2012) in the relatively short period of time since 4SC Discovery GmbH commenced operations at the beginning of the year.

Operating expenses in the third quarter of 2012 were EUR 4.80 million, down 5% compared with the prior-year quarter (Q3 2011: EUR 5.07 million). Operating expenses in the first nine months of 2012 totalled EUR 13.38 million, a year-on-year decrease of 10% (9M 2011: EUR 14.83 million).

On account of the lower number of clinical trials compared to the prior-year period, 4SC managed to reduce research and development costs by 12.4% to EUR 9.93 million in the first nine months of 2012 (9M 2011: EUR 11,331 million). At 74%, they continue to account for the lion's share of operating expenses.

In the quarterly comparison, research and development costs slightly rose, from EUR 3.79 million (Q3 2011) to EUR 3.86 million (Q3 2012). This is mainly due to the increased preparatory expenditure for the advanced trials planned with resminostat (Phase III trial in liver cancer) and vidofludimus (Phase IIb trial in inflammatory bowel disease).

Administrative costs in the third quarter of 2012 decreased by 27.4% to EUR 0.82 million, mainly due to lower consulting costs (Q3 2011: EUR 1.13 million). Administration costs in the first nine months of 2012 amounted to EUR 2.85 million, a year-on-year reduction of 8% (9M 2011: EUR 3.1 million).

Increased revenue and lower operating expenses triggered a substantial year-on-year improvement of the result from operating activities. In the first nine months of 2012, the Company reduced its operating loss by 14% year-on-year to EUR 12.32 million (9M 2011: EUR 14.39 million).

The net loss in the first nine months of 2012 improved by no less than 17% to EUR 12.14 million (9M 2011: EUR 14.68 million). In the third quarter of 2012, the year-on-year figure for operating loss improved by 7% to EUR 4.5 million (Q3 2011: EUR 4.85 million). The net loss in the third quarter amounted to EUR 4.46 million (Q3 2011: EUR 4.75 million).

In the first nine months of 2012, the average operating cash burn rate was EUR 1.31 million. In the prior-year period, the operating cash burn rate (9M 2011: EUR 0.94 million) was 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.

Funds as at 30 September 2012 were EUR 15.8 million and therefore at the same level as at the end of the previous year (31 Dec. 2011: EUR 15.8 million), mainly due to the successful capital increase in summer 2012.

4SC Group outlook
4SC is issuing the following outlook with regard to the subsequent financial and operational business development in 2012 and beyond:
• In the indication of advanced liver cancer (HCC), 4SC is focusing efforts on securing a Phase III registration trial with the anti-cancer compound resminostat. If the outcome of the talks with the authorities and potential partners is successful, this study could be initiated in the first half of 2013 together with a pharmaceutical partner.
• 4SC is preparing a Phase IIb trial with vidofludimus in inflammatory bowel disease (Crohn's disease indication). This study is to be initiated together with a partner after the successful conclusion of negotiations with potential partners and further preparatory work required for the trial.
• 4SC expects to receive interim results before the end of 2012 from the clinical Phase I/II SHORE trial with resminostat in colon cancer. Data from the Phase I trial with the anti-cancer compound 4SC-205 (AEGIS study) are also scheduled to be published in the course of the year. Completion of the dose escalation study with the anti-cancer compound 4SC-202 (Phase I TOPAS trial) has been postponed to 2013, since the very high tolerability of the compound means that further, additional dosages can be investigated to determine the optimum therapeutic dose.
• 4SC Discovery GmbH: It is the company's continued goal to generate additional revenue in the collaboration and services business with pharmaceutical companies and through the marketing of the Group's own drug programmes in early research phases.
• 4SC is looking to enter into further licensing partnerships with pharmaceutical and biotechnology companies. Under the umbrella of such partnerships, the company aims at developing its lead compounds, resminostat and vidofludimus, into marketable products and generate cash inflows to finance 4SC's operating business.
• According to current planning, the average monthly operating cash burn rate in 2012 will be around EUR 1.40 million. Assuming that the monthly operating cash burn rate in 2013 will be significantly lower, the Company's existing funds in connection with the current forecast of further expense and revenue planning will ensure its financing until the end of 2013.