INTERIM REPORT JANUARY – MARCH 2011

First quarter in brief

• Net sales rose to SEK 455k (240k).
• Loss after financial items was SEK 3,469k (loss: SEK 2,382k).
• Loss after tax was SEK 3,458k (loss: 2,327k).
• Earnings per share totaled SEK -0.08 (-0.10).
• Cash and cash equivalents at the end of the period amounted to SEK 1,008k (1,037k).

• Genovis acquired an exclusive license for a new technology that uses so-called upconverting nanoparticles as contrast agents in optical biomedical imaging. Genovis acquired the license from Luminab, a LUAB company, including the option to acquire the technology in its entirety.
• The extraordinary general meeting held March 28 resolved to increase share capital by a maximum of SEK 12,336,562.80 through the issue of a maximum of 30,841,407 shares. The meeting also resolved to provide an oversubscription option for 13,000,000 shares, which will be decided by the Board of Directors if the offering is oversubscribed. Following the completed share issue, share capital will amount to a maximum of SEK 28,785,313.60 and the number of shares to 71,963,284. The Company will raise about SEK 20 million before issue expenses. If the oversubscription option is exercised the share capital will amount to a maximum of SEK 33,985,313.60 and the number of shares to 84,963,284. In that case the Company will raise an additional approximately SEK 8 million.

ABOUT GENOVIS

Genovis develops and sells innovative technologies that will facilitate its customers’ preclinical* research. The products launched to date consist of nanostructures and enzymes (proteins). The company conducts research and development projects focused on design, production, and characterization of nanostructures for medical imaging, diagnostics, and delivery. The nanostructures and methods that Genovis focuses on can be used as contrast in medical imaging and as carriers of various substances in the development of new drug delivery methods. Customers are primarily found within the life sciences industry and academic research. The operation largely consists of research and development of new technology, though the company has initiated some sales over the past two years.

* Preclinical studies refer to the pharmaceutical research that takes place before the product is sufficiently documented to be studied in humans.

CEO COMMENTS

The market for biomedical imaging in preclinical research is growing. The driving force comes from a need to understand the biological processes underlying disease and to better analyze how different drug candidates affect the body all the way down to the cellular level. Based on our patent-protected nanoparticle technology we have focused so far on developing multimodal nanoparticles as contrast agents, mainly for magnetic resonance imaging combined with PET. The technique that is currently the largest on the preclinical market in number of users is optical imaging and in my opinion the new technology we acquired earlier this year represents an important strategic step that will enable us to become competitive on this market. We have included this new technology in the development process and we can already see excellent results. During the period we have worked intensively with preparing this year’s product launches from the nano portfolio.

With respect to sale of products from the protein engineering portfolio, we continue to see a clear increase in demand with distribution to even more customers. Although sales began with extremely small volumes, we see a steady increase and have now posted good sales growth for the tenth consecutive quarter. We are working purposefully with various strategies to increase sales volumes, in part by offering complementary products that we know are in demand from existing customers, in part by developing new applications aimed at new customer groups. Our increased marketing activities throughout the process are producing immediate results. After the product launches last December we added new customers and in several cases our existing customers switched to the application-specific added-value products. For example, during the period we received the first orders from two new customer groups: contract manufacturers of therapeutic antibody molecules and service companies that carry out quality control and technical analyses for biotech and pharmaceutical companies. We are about to launch another product that will enable customers to scale up volumes with high yields and shorter process times.

Since we are in the midst of an intensive phase of both product development and marketing, stable financing is essential, which is the main reason for the current rights issue. 

Sarah Fredriksson, CEO

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YEAR-END REPORT JANUARY-DECEMBER 2010

2010 in brief

• Total revenues rose to SEK 3,963k (1,178k). Net sales climbed to SEK 1,595k (986k), with SEK 630k (478k) in the fourth quarter
• Loss after financial items fell to SEK 11,334k (loss: 12,768k), with a loss of SEK 3,311k (loss: 3,378k) in the fourth quarter
• Net loss declined to SEK 11,292k (loss: 17,558k), with a loss of SEK 3,301k (loss: 8,168k) in the fourth quarter
• Earnings per share increased to SEK -0.27 (-0.71), with -0.08 (-0.40) in the fourth quarter.
• Cash and cash equivalents at end of period amounted to SEK 4,073k (416k).
• During the fourth quarter Genovis launched the FragIT™ and deGlycIT™ product concepts.
• In December Genovis signed an exclusive distribution agreement with ADVANCYS Technologies for Life Ltd. for the Israeli market.
• At the international Immunology 2010 conference in the United States, Genovis presented new findings that facilitate and improve production and quality control of substances such as antibody-based drugs. The results, which are based on a study carried out in cooperation with Lund University, show that the combination of two unique products from Genovis’ protein engineering portfolio is highly advantageous in mass spectroscopy of antibody molecules.
• Genovis received SEK 600,000 from LMK Industri AB in research support for the Sentinel node project. The funding will be used to develop nanostructures for use in medical imaging to identify very small tumors that can rapidly arise in the lymph nodes of patients with conditions such as breast cancer or malignant melanoma.
• Genovis is participating in two research projects that were granted external research support in 2010: the EU LUPAS project and the Sentinel node project. The company received SEK 1.7 million from the EU for the first initiatives in the LUPAS project, which means that so far this year Genovis received SEK 2.4 million for the two projects.
•  In April Genovis carried out a rights issue, which raised SEK 15.7 million after issue expenses.

Events after the end of the period

Genovis acquired an exclusive license for a new technology that uses so-called upconverting nanoparticles as contrast agents in optical biomedical imaging. Genovis is acquiring the license from Lumito, a LUAB company, including an option to acquire the technology as a whole. The license grants exclusive rights to upconverting nanoparticles and to the technology required to detect particles in biological material. Genovis has already developed a technique for coating nanoparticles with a nontoxic surface that provides stability and good distribution in various organs and biological tissues. By combining Genovis’ technology with the acquired license Genovis will soon be able to offer a product on the technology front. The goal is to commercialize the technology within one year primarily for the preclinical market and ultimately to evaluate the clinical potential of this technology. 

ABOUT GENOVIS

Genovis develops and sells innovative technologies that will facilitate its customers’ preclinical* research. The products launched to date consist of nanostructures and enzymes (proteins). The company conducts research and development projects focused on design, production, and characterization of nanostructures for medical imaging, diagnostics, and delivery. The nanostructures and methods that Genovis focuses on can be used as contrast in medical imaging and as carriers of various substances in the development of new drug delivery methods. Customers are primarily found within the life sciences industry and academic research. The operation largely consists of research and development of new technology, though the company has initiated some sales over the past two years.

* Preclinical studies refer to the pharmaceutical research that takes place before the product is sufficiently documented to be studied in humans.

CEO comments 2010

The final quarter of 2010 was a clear validation that our overall strategy for 2010 – 2011 is starting to deliver. We achieved our best performance ever in terms of sales and it was particularly gratifying that our product development resulted in three new products that were launched at the European Antibody Congress in Geneva in December. We developed these products to provide our customers with time-saving, easy to use products, applying a scalable technology suitable for both laboratory scale and large-scale processes. We received direct orders for the new products and my assessment is that our product development is now more effective, resulting in targeted launches that reach both existing and new customers. Of course much remains to be done, but an analysis of our performance over the twelve-month period shows a stable trend. This trend is reflected in our customer list, which has grown dramatically over the year.

Looking back at the year as a whole, I can conclude that we vigilantly followed our plan. We wanted to achieve two main goals. The first was to increase sales from the protein engineering portfolio by working with more resources in relation to our customers, launching product improvements, and clarifying applications. The second was to develop our nano portfolio in the same way, so that we can carry out a similar targeted campaign in 2011 to sell products and applications in preclinical imaging. Consequently we chose during the year to use our subsidiary Eijdo almost exclusively for internal product development together with the parent company’s development group. This strategy, coupled with our Sentinel node research project, has given good results and concrete product concepts and applications. We will not know until 2011 whether we succeeded in achieving our goal, but currently the project is making good progress and looks promising. In addition, we have actively looked at several different types of nanoparticles that could further strengthen our line of imaging products for the preclinical market. We chose “upconverting nanoparticles,” which are used in optical biomedical imaging. It is both exciting and gratifying that we have now acquired the IP rights to such a technology and product development is in full swing in this project as well.

Sarah Fredriksson, CEO

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Interim Report January-September 2010

Comments from the CEO

During the quarter we continued to work toward two of our short-term goals: to increase sales of products from the protein engineering portfolio and to intensify product development of multimodal nanoparticles. We’ve seen a clear increase in both the number of customers and sales during the year and we want to further accelerate the pace. To achieve this objective, during the third quarter we strengthened our sales organization and we chose to focus on new and existing customers among biotech and pharmaceutical companies. This category of customers primarily works with characterization of antibody molecules. They have relatively recently begun testing our enzymes from the protein engineering portfolio and they use them primarily for analysis at the discovery level. To increase volumes within this target group we are working with customer meetings and marketing with the aim of ensuring that our enzymes and methods will become the obvious choice. This standard will not only apply for early research projects, but continue as quality control during clinical trials, and later even in production of antibody-based drugs. One way to achieve this objective is to work on product development in close consultation with our customers. Such feedback has resulted in a new product, FragIT, which we are launching in November.
 
In September we presented the first results from the Sentinel node project at the World Molecular Imaging Congress (WMIC) in Kyoto, Japan. The need for new imaging technologies at the preclinical level is growing and it is encouraging to see that multimodal nanoparticles have the potential to contribute improved performance, higher resolution, and more reliable analysis. Genovis’ product development of nanoparticles for multimodal imaging is progressing according to plan and is now in a phase when we are focusing on optimization of modalities, image interpretation, and targeting using antibody molecules. We have also expanded our partnership with Lund Bioimaging Center, our partner that we’ve been working with on the Sentinel node research project.
 
Lund in November
Sarah Fredriksson

Overview of Operations

Genovis develops and sells innovative technologies that will facilitate our customers’ preclinical* research. The products we have launched to date consist of nanostructures and enzymes (proteins). We conduct research and development projects that focus on design, production, and characterization of nanostructures. The nanostructures and methods that Genovis focuses on can be used as contrast in medical imaging and as carriers of various substances in the development of new drug delivery methods. Our customers are primarily within the life sciences industry and academic research. The Genovis operation largely consists of research and development of new technology, though we have initiated some sales over the past two years.  

* “Preclinical studies” refers to pharmaceutical research carried out before a product is sufficiently documented to be studied in humans.

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Interim Report January-June 2010

Second quarter highlights

In May Genovis’ rights issue closed, with a subscription rate of 68% and existing shareholders subscribing to 88% of the total proceeds.  The rights issue raised SEK 16.5m for Genovis before issue expenses, which means an increase in the number of shares from 24,589,839 to 41,121,877 and an increase in share capital from SEK 9,835,935.5 to SEK 16,448,750.8.

In April Genovis received SEK 600,000 in research support for the Sentinel Node project from LMK Industri AB. The Sentinel Node project, a collaborative effort with the Department of Radiophysics at Lund University Hospital, is based on a brand new generation of nanoparticles with combined magnetic, radioactive, and fluorescent properties for MRI/PET imaging. The Swedish Research Council previously granted Genovis a four-year position for an industry-based doctoral student for the Sentinel Node project.

In June Genovis launched a new product, Mass Spec Kit. The product, which is a combination of the enzymes IgGZERO and FabRICATOR, is mainly used in the development and production of antibody-based drugs. The Mass Spec Kit provides customers with improved, more cost-effective quality control. The product is also faster and safer than existing technologies. The launch of the Mass Spec Kit is primarily aimed at R&D operations and quality control at biotech and pharmaceutical companies that develop and produce antibody-based drugs.

Comments from the CEO

At the end of the period, net sales per rolling 12 months increased by approximately 150% compared with the same time last year and revenues for the period increased by 110% compared with the same period in 2009. I am cautious about placing too much value on percentages when volumes are low, but I can conclude that this growth represents a stable trend. It is gratifying that our products are appreciated and that the proceeds in the form of research grant support for our development in imaging has increased considerably. The customer base is growing and currently consists of four of the top ten pharmaceutical companies, several biotech companies, and academic clients.

I presented our product Mass Spec Kit at two conferences in the United States: Immunology 2010 in Baltimore and Antibody Engineering and Design in Boston.  At the conference in Boston Centorcore, part of global Johnson & Johnson, presented studies in which they used FabRICATOR as research reagent. It was especially rewarding that the results showed that the enzyme FabRICATOR (IdeS) is specific with high enzymatic activity which is in line with our studies. The response to the presentations has been positive and the launch of the product is now underway in cooperation with our distributors. The product was developed in conjunction with specialists in mass spectrometry (MS) at Lund University and is a direct result of requests from our customers. Development of additional products in Genovis’ protein engineering portfolio proceeded according to plan during the period and will be launched in the autumn.

In late April I participated at the first consortium meeting in the EU-funded LUPAS project. Genovis’ role in the project is to help create nanostructures and to analyze and project future market potential and commercial opportunities. Initial results and future research strategy were discussed at the meeting. Genovis’ Sentinel Node research project is also proceeding according to plan. Optimization of the nanostructures’ various functions and dosing for detection of lymph nodes in the preclinical phase is underway. It is gratifying to note that we received additional financial support for the project in the spring.

Sarah Fredriksson, CEO 

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Interim Report January-March 2010

First quarter highlights

•Net sales during the first quarter increased by100 % compared to the same period 2009. Although the turnover is still low the number of cutomers increased.

•Genovis is participating in the LUPAS project, where the EU is investing almost SEK 50 million in research to diagnose and treat Alzheimer’s disease and prion diseases (e.g., Creutzfeldt-Jakob disease). Underpinning the project, which is an EU seventh framework programme, is the discovery of a luminescent molecule that signals when it encounters the disease-causing plaque in the brain. Linköping University is coordinating the project and to date Genovis has received SEK 1.4 million for the initial efforts. Part of Genovis turnover is research support and will be distributed over the year.
LUPAS (Luminescent Polymers for in vivo imaging of Amyloid Signatures), www.lupas-amyloid.eu

Important recent events

•The subscription rate for Genovis’ rights issue was 68% and existing shareholders subscribed to 88% of the total proceeds. The rights issue raised SEK 16.7m for Genovis before issue expenses, which means an increase in the number of shares from 24,589,839 to 41,337,227 and an increase in share capital from SEK 9,835,935.6 to SEK 16,534,890.8. The capital provided by the new share issue shall be used for the Company’s business operation and will primarily be invested to reinforce the Company’s sales organization, to launch new products from the protein portfolio, and in infrastructure for the production of nanoparticles.

•Genovis received SEK 600,000 from LMK Industri AB in research support for the Sentinel node project. The Sentinel node project, a collaborative effort with the Department of Radiophysics at Lund University Hospital, is based on a brand new generation of nanoparticles with combined magnetic, radioactive, and fluorescent properties for MRI/PET imaging. The Swedish Research Council previously granted Genovis a four-year position for an industry-based doctoral student for the Sentinel node project, which for 2010 entails approximately SEK 400,000 over the course of the year.

•At the Immunology 2010 conference in the United States Genovis presented new findings that facilitate and improve production and quality control of substances such as antibody-based drugs. The results are based on a study carried out in cooperation with Lund University. The study shows that the combination of two unique products from Genovis’ protein engineering portfolio is highly advantageous in mass spectroscopy of antibody molecules. The new method is faster, more reliable, and improves the analysis compared with existing technology.

CEO comments

In March we signed an agreement for the EU LUPAS project, marking the formal kickoff for a project that began some time ago with the actual application process. It was truly rewarding that these efforts were successful. Working with a strong research team is extremely stimulating. The same applies to the Sentinel Node project, a unique interdisciplinary project. We will have the opportunity to learn as well as an outstanding opportunity to market our nanostructures directly to the various partners we meet in the project and via the scientific articles generated during the course of the project. Full financing for the projects also reduces our costs for research projects.
During the period we continued to work with our subsidiary, Eijdo Research, on development of products and services within the multimodal nanoparticles product group and contract services within preclinical imaging. The products in the protein portfolio have expanded with a brand new application that we recently presented at a scientific conference together with our American distributor Bulldog Bio. The application is aimed at a new customer group and we are looking forward to the launch. Sales of all products in the protein portfolio continue to increase, though volumes are still modest. This trend has been stable over the past twelve months and we plan to intensify our efforts to continue to increase the sales rate. With respect to nanoparticles, we will primarily market them to academic customers and research projects in 2010 and subsequently complement them with new applications and services. Sales of nanoparticles will mainly occur via direct selling to end customers.
Although the rights issue carried out in April was not fully subscribed it brought the company financial stability. Now we can focus our full attention on operational activities and our targets for at least 18 months moving forward and I am very pleased by the support from our shareholders.

Lund May,18
Sarah Fredriksson

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Year-End Report January ̶ December 2009

Important event during the fourth quarter

• Genovis completed a new share issue with preferential rights to existing shareholders. The share issue was oversubscribed by 102% and in response to the great interest the company followed up with a directed placement of 1,8 million shares.
• Genovis entered agreement with QED Bioscience, USA, for distribution of protein portfolio products.

Other events during 2009

• Genovis achieved an increase of 150 % in sales and a reduction of operational costs parallel to 50 %.
• Genovis entered non exclusive distribution agreements with:
 Finnzymes Inc. for USA
 Bulldog Bio Inc. for USA
 Biozym Scientific GmbH for Germany and Austria.
• Genovis nanoparticles generated very satisfying results in studies using Magnetic Resonance Tomography, MRT. The nanoparticles have unique properties that are extremely useful in the development of new medicinal products, for example in diagnostics and therapeutics used in the neuro and cancer areas.
• Genovis acquired Eijdo research AB; a CRO company specialized in imaging (Medical Imaging and/or MRT) using a magnetic camera. The purchase price SEK 4.7 million was paid through a non-cash issue of Genovis AB shares amounting to SEK 4.5 million, and a cash consideration of SEK 200,000.
• Genovis completed a new share issue during January that was subscribed at 90.5 %.

Important recent events

• The Board of Directors has decided to move the Annual General Meeting (AGM).
New date for the Annual general Meeting is the 30th of March 2010.

• The Board of Directors proposes that the AGM decides on a new share issue.
The Board proposes that the AGM decides on a new share issue giving preferential rights to existing shareholders, so that one existing share entitles to the subscription of one new share at issues price SEK 1. This decision would mean that the share capital is increased up to a maximum total of SEK 9,835,935.6 through the issuing of a maximum total of 24,589,839 shares at full subscription. After completed new share issue the share capital will amount to a maximum total of SEK 19,671,871.2 and the number of shares will amount to 49,179,678. The company will receive approx. SEK 24.5 million before issue expenses. Shareholders who do not participate in the new share issue will have their Genovis AB shareholding diluted with 50 %.

CEO comments

Sales
One objective for 2009 was to sign distribution agreements for the US market, with the aim to transfer the sales operation from our own subsidiary, Genovis Inc., to several distribution channels. During the year three separate agreements were signed, which of the last one in the fourth quarter, for non exclusive sales of Genovis products in the US. I am happy that we have found partners with solid experience and ability to develop sales on the American market. Even though just a few months have passed since we signed the agreements, it is clearly noticeable that this has an immediate impact on sales; 65 % of our sales is generated in the US, which is a higher percentage than before and this proves that we have not lost sales through the transfer from our subsidiary to distribution partners. During 2010 we will intensify our work through the distribution partners to increase the growth rate in the US, and we will adopt a similar work mode in Europe.
Product development and research
During the year the R&D operation has primarily been focusing on medical imaging, i.e. the use of nanoparticles as contrast agents in different medical imaging techniques, e.g. MRT (Magnetic Resonance Tomography). We have collaborated with Eijdo research throughout the year, and during this last quarter the collaborative efforts have been very intense, in the sense that Eijdo committed their resources exclusively to product development and research of mutual corporate interest. This line of work will continue to be intensive during most part of 2010. We are focusing on three projects; imaging of tumor growth, imaging of natural migration of stem cells in the brain, and imaging of lymph nodes. The latter project is performed in collaboration with Lund University. In 2009 we were able to demonstrate, for the first time, that we can design, produce, and evaluate biocompatible and injectable nano structures for use in several applications in the area of preclinical medical imaging. We aim to enlarge research and development collaborations in Sweden and in Europe during 2010.

Two product groups
Genovis has, since a few years back, two product lines as development areas; proteins used as technical tools for development of antibody based pharmaceuticals and diagnostics, and nanoparticles in biomedical applications.
In 2009 we have seen an increasing demand for the products in our protein portfolio, and as a result of our product development efforts we have come up with applications that, to our great satisfaction, attract completely new customer groups. To be able to produce the proteins in bigger quantities it seems more cost-effective to sub-contract the production to a partner that already has an established large scale production of proteins. During the second half of 2009 we decided to maintain and further develop the intellectual property regarding the protein portfolio, and to subcontract production and global sales to one or several actors. The two protein products FabRICATOR® and IgGZERO™ made up some 85 % of our sales in 2009. During 2010 we aim to conclude agreement for external production of the protein products and to fully launch the third portfolio product, FcDOCKER™.
The nanoparticle portfolio has been under continuous development since Genovis was founded, and we have to date built a unique know-how regarding design, production, and evaluation of biocompatible properties that can be used in numerous applications. The very first product we launched was a so called transfection reagent. Transfection means the transfer of a new gene in to a cell or a molecule in order to alter the generic composition of the cell. In 2009 we were able to demonstrate that we can add several properties (or modalities) to one and the same nanoparticle, in addition to its transfection properties. In clinical medical imaging as well as in the laboratory setting such particles are in high demand due to their contrasting properties. The market for contrast agents used for preclinical imaging performed with MRT, gamma camera, PET, fluorescence microscope, optical measurement and ultrasound is expected to grow by 20-30% annually in the next five years. The force stimulating such a growth is the development of new hardware introduced in new equipment, and that software for visual interpretation is in rapid development which in turn creates demand for new contrast agents. In 2010 we will commence marketing of Genovis multimodal nanoparticles, and the know-how related thereto, for use in the preclinical market. We will target those customers who are actively working with medical imaging. There is also among these customers the need to perform transfection, e.g. in connection with stem cell research and when performing cell transplantations. By focusing more on specific customer groups we aim to work more effectively and increase sales of this product group.
In contrast to the production of our protein products, the production methods for our nanoparticles is an important part of the Genovis first-rate competence, and we aim to further develop this concept for contract production ordered by external partners. Our strategy is on the one hand, to continue to develop, launch, and sell nanoparticles as what we call multimodal particles, and on the other hand, to build what we refer to as a nanohouse, which means that we will also offer a platform for the design, production, and verification of nanoparticles for those customers who need the support from the expertise in the area to be able to develop/sell nanostructures of kinds for biomedical applications. This is a cost-effective way to use all our generated know-how and invested capital. The work with multimodal nanoparticles was started in 2009. Our objective is that by the end of 2011 we will have launched both these concepts fully out, and that Genovis shall deliver multimodal nanostructures for use, at the minimum, in one project in clinical diagnostics or as medical-technical tools in clinical use.

Financing
In 2008 Genovis refrained from carrying out a new financial round, with the consequence that in the beginning of 2009 we had to complete a new share issue that covered 50% of the bridge financing we had carried during 2008. This meant in turn that the company needed additional capital to complete the acquisition of Eijdo research AB. The overall financial situation at the time impacted on our financing strategy, and we decided in connection with the Eijdo acquisition to complete a share issue to cover only our short term capital need. We did so partly to secure the acquisition, partly to execute the short term plan for integrating Eijdo research into the corporation. To successfully reach the objectives we have set for the operation in the coming two years, we aim to finance the whole plan in order to give the organization the possibility to focus on the set goals.
As I look back at 2009, I can see that it was a financially bumpy and unsecure year, but to Genovis it turned out to be a year during which we thanks to our restructuring work and our consistent and dedicated product development took a great leap forward. To develop a company such as Genovis demands a long term vision and we are grateful to our shareholders for the patience they have shown so far, and we can only hope that there is confidence in our offensive approach over the next two years.

Sarah Fredriksson
CEO Genovis

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Interim Report January-September 2009

Important events during the quarter

•Genovis’ board and management have decided to halt the planned divestment of the so called protein portfolio, and will instead collaborate with partners for production and gobal sales of products derived from antibody modifying enzymes.

•Genovis has a distribution agreement with Bulldog Bio Inc. Bulldog Bio is focusing on selling products using their own technical expertise combined with instant support, and to build new trademarks on the American market.

•Genovis has completed negotiations regarding shortage of labour in accordance with the Swedish MBL Act, which means that three individuals leave their positions at Genovis. Through this action the staff costs are expected to be reduced with approx. 37%.

•Genovis’ new share issue closed on the 30th of September and was over-subscribed with 102%. The directed share issue of 7 033 233 shares was subscribed at 61% based on subscription rights. Through this share issue Genovis received approx. MSEK 7 before the costs of the share issue, the number of shares increased from 14 066 466 to 21 099 699 and the share capital from SEK 5 626 586,40 to SEK 8 439 879,60.

Events after Q3

•Genovis has as of October 30 acquired all shares in Eijdo research AB. The acquisition is an essential step in Genovis’ strategy and it strengthens the company’s opportunities to build a market for its nanoparticles in medical research. The capital contributed in kind the company received against payment of partly SEK thousand 200, and partly newly issued shares, has an estimated value of SEK million 4,7 and will be entered at that value in the balance sheet of Genovis AB. The non-cash issue of 1,690,140 shares related to the acquisition of Eijdo research AB is has been registered at the Swedish Companies Registration Office. This non-cash issue means that the number of shares increases from 21,099,699 to 22,789,839 and the share capital increases from SEK 8,439,879.6 to SEK 9,115,935.6.

•Genovis has signed an agreement with QED Bioscience for distribution of products from the protein portfolio. The agreement means that QED Bioscience will sell all products for modifying antibodies in the US and through 17 distributors in Europe and Asia, which gives Genovis a broad base to increase visibility and customer contacts. QED is based in California, USA, which is the single most important market for Antibody Engineering in preclinical research. QED Bioscience is expected to generate sales in during 2010.

CEO comments

During the period we have executed the organizational changes required following our resolved cost reductions and the strategic decisions. We have also looked ahead through by integrating Eijdo research AB into our operation, so that we can, as of 1st October; function as one team within the business areas where we see distinct synergy advantages.
As regards sales during the period, which is still at a modest level, we gave priority to increasing distribution of all our products on the American market through our partners, Bulldog Bio and Finnzymes, while we at the same time decided not to operate through a subsidiary of our own in the US. In Q309 Genovis management took the strategic decision not to divest the rights to the so called protein portfolio. This decision has led to, among other things, a newly signed agreement with QED Bioscience regarding non-exclusive global distribution of these products which offers a focused effort to reach the defined customer group and to increase sales, while we at the same time maintain the rights to the products and to their development potential.
During the period we also carried out a new share issue which was heavily over-subscribed, and I am very happy to have received that support from our shareholders. It means a lot in times when it’s has been difficult to finance the business and I hope that Genovis will have the same support in the future.

Lund, 12th November 2009
Sarah Fredriksson

Business operation

Genovis is a nanobiotechnology company that both develops and markets novel technologies functioning as efficient tools in medical research and development. The products marketed by the company today can be divided into two main groups; proteins for antibody fragmentation and antibody modification (Antibody Engineering), and nanoparticles (NIMT®) for medical imaging and transfection/delivery.

Business Development and sales

Genovis has pursued the objective to find partners for production and non-exclusive distribution of the product group Antibody Tools (the protein portfolio). As a first step the company has entered an agreement with QED Bioscience Inc., which will sell all products for the modification of antibodies in the US and through 17 distributors in Europe and Asia. QED Bioscience develops novel antibody products for use in academia and in biotech, diagnostic and pharmaceutical companies. The company produces and markets more than 1500 different antibodies. The company produces under cGMP and in addition to catalogue products QED Bioscience offers a range of services in the design of completely new antibodies as well as the production and modification of the antibodies according to specific customer needs.
The acquisition of Eijdo research AB opens up a new business area; preclinical feasibility tests. All knowledge and experience possessed by Eijdo research in the area of magnetic resonance will together with Genovis’ nanostructures offer customers new dimensions in preclinical testing and the possibility to perform longer projects in animal models. Genovis designs nanostructures and Eijdo performes studies combined with interpretation of the images. Together the companies offer a completely new approach having its starting-point in the needs of customers. For the customer it may be the basis for a decision on an extended study, and Genovis contribution can increase the accuracy and reduce the costs of the customers’ preclinical research. Following the initial study, Genovis can deliver nanostructures and support; alternatively, the project work can be extended and Genovis/Eijdo performs contract research and development for the customer in question.

Research and Development

The development projects pursued by the company have over the last year been directed mainly towards the use of magnetic nanoparticles for so called medical imaging for preclinical purposes. Magnetic nanostructures make up an ideal platform for performing multimodal imaging. First of all, the iron oxide core with its magnetic properties is easily made visible with MRT (Magnetic Resonance Tomography); secondly, to the magnetic core can be added different biocompatible surfaces which each one can be used with techniques, or
modalities, such as PET, SPECT, fluorescence and others.

Today Genovis is working with two in vivo/imaging projects together with Lund University. The one is the development of nanostructures for use in diagnostics (medical imaging) of very small tumours that can appear in lymph nodes in breast cancer patients. The other project concerns nanoparticles as delivery vehicles of small molecules to cells in the brain. Genovis also supports several customer projects in which the customer either uses Genovis’ products for either medical imaging or for tracing stem cells.

The Product Porfolio

Imaging
Imaging is a rapidly growing market segment and a technique used by researchers for in vivo and ex vivo studies. To visualize what is happening within a cell and to trace a cell in an animal model, the cell must be labelled in one way or the other. By introducing magnetic nanoparticles in the cell, NIMT®FeOlabel, it is possible to detect and fo0llow the cell using MRT (Magnetic Resonance Tomography).

Transfection/Delivery
There is a big market for techniques to deliver molecules (e.g. DNA or genes) into cells; NIMT®FeOfection is such a technique showing high efficiency and low toxicity compared to competitive products. RNAi is another segment that is growing rapidly and where researchers among other things are interested in techniques that silence the activities of genes, aiming at future treatments of virus infections, cardio-vascular disease, cancer and metabolic disease. NIMT®FeOfection is very useful in such studies, with its high efficiency and low toxicity.

Antibody Tools
In the design of targeting drugs and nanostructures are often used antibodies that can detect a detail on a cell surface or some other small structure in the body. At times the whole antibody cannot be used, but only parts thereof. To modify and cleave antibodies is called antibody engineering, and it requires various tools. In the spring of 2007 Genovis captured the opportunity to acquire patent rights to such a tool. In 2008-2009 the company extended its patent portfolio and can now offer four different products for antibody engineering – FabRICATOR®, FabRICATOR®KIT, IgGZERO™ och FcDOCKER™. These products launched by Genovis are used by researchers at pharmaceutical and biotech companies or in the academic research community.

Geographic markets and marketing strategy
Genovis sells to distributors and retailers who in turn sell to companies and/or end-users in different regional markets. The distributors have good knowledge about the business opportunities for Genovis’ nanostructures in their respective regions, and today the revenues are mainly derived from sales of proteins and nanoparticles as consumables. The company has currently distributors in thirteen countries with geographic coverage from the US to Europe and to the Far East. To a certain extent Genovis sell directly to end-users in those countries where there are no appointed distributors.

Today revenues are generated from sales of nanoparticles and proteins as consumables, but there are also revenues generated from consultancy services combining sales of nanoparticles for applications that do not belong to Genovis’ standard product sortiment. During 2009-2010 one objective is also to generate revenues through OEM like sales or sales of licenses, where either Genovis is responsible for production but sales are performed under the trademark of a partner or the contracted partner takes on responsibility for production as well. In the latter case the revenues could be split between advance payment and royalty per unit sold. In both these cases the partner assumes responsibility for all marketing and sales activities, and this is the business model Genovis aims to pursue in the coming 2-3 years. As regards sales of custom-made nanoparticles for primarily in vivo studies and imaging the company will itself handle design, production and delivery to end-users and/or distributors also in the future.

Sales

Q3
Orders received during the third quarter were SEK thousand 238 (SEK thousand 124). The company has noted a marked increase in sales of above all its antibody modifying enzymes, for which several customers are found among the bigger pharmaceutical companies.
In the consolidated income statement for the third quarter of 2008, the two items Net sales and Raw materials and consumables have been adjusted owing to a classification error, but this does not have any influence on the result.
January – September
Net sales during the period were SEK thousand 508 (SEK thousand 275).

Net Result

Q3
The operating loss during the first quarter of the year was SEK thousand 3,010 (loss: SEK thousand 4,257). Genovis is carrying out a cost savings programme by which the operative costs of the company will be further reduced during the fourth quarter, and the full effect of the programme is expected during the first quarter of 2010.
Depreciation and amortization during the quarter were SEK thousand -260 (SEK thousand -229) including SEK thousand -182 (SEK thousand -136) for tangible assets and SEK –78 (SEK thousand -93) for intangible assets.
The loss after financial items was SEK thousand 3,050 (loss: SEK thousand 4,271). Deferred tax during the quarter was SEK 0 (SEK thousand 1,226).

January – September
The operating loss during the period of the year was SEK thousand 9,266 (LOSS: SEK thousand 13,970).
Depreciation and amortization during the quarter were SEK thousand -776 (-666) including SEK thousand -419 (SEK thousand -433) for tangible assets and SEK –357 (SEK thousand -233) for intangible assets.
The loss after financial items was SEK thousand 9,390 (loss: SEK thousand 14,080. Deferred tax during the quarter was SEK 0 (SEK thousand 3,946).

Cash Flow and Financial Position

Q3
Cash flow from operating activities was SEK thousand –9,260 (SEK thousand -3,738). Cash flow from change in working capital totaled SEK thousand –7,758 (SEK thousand 273). This includes the non registered new share issuing of 7,035 million SEK .
At the end of the period cash and cash equivalents amounted to SEK thousand 12. The Group’s net investments during the period totaled SEK 25 (6).

January – September
Cash flow from operating activities was SEK thousand –16,742 (SEK thousand -13,538). Cash flow from change in working capital totaled SEK thousand –8,128 (SEK thousand -154).
The Group’s net investments during the period totaled SEK 72 (SEK 6). Net investments included SEK 47 (6) for tangible assets.
The new share issue that was closed on 30th September brought in approx. MSEK 7. In the share issue were submitted cover notes at a total value of MSEK 14.

Organization and staff

Third quarter
Genovis’ organization consists of Genovis AB and the fully owned suibsidiary Eijdo research AB. The operation in Genovis Inc., USA, has been phased out and the company is legally dismantled.
All activities are handled by Genovis AB in Lund, having responsibility for the centrally coordinated functions of economy and finance, production, research and development, marketing/customer support and sales support. The CEO and the COO have the comprehensive responsibility for the corporate operation.
On the 30th of September the number of employees were nine; 6 employed by the mother company and 3 by Eijdo research, to be compared with 11 in the mother company and 1 in the US during the same period last year.

Other information

Debts to related parties
Genovis AB was financed through a bridging credit arranged as loans from the major owners Farstorp Invest AB and Sarah Fredriksson. On the 30th of September the debts amounted to SEK 920 000. No securities were provided for the loans. The credit has been fully repaid after the period closed and there are no remaining transactions involving related parties.

Risks and uncertainties
Genovis general view on the financial risks that may influence the business operation has not changed compared to the description given in the latest Annual Report. The assessment of the board is that despite the

executed and ongoing cost savings and the authorization to issue new shares, there is uncertainty whether the company has sufficient liquid means to pursue the company projects. There is no guarantee that new capital can be raised, as mandated by the General Annual Meeting, if there is the need arises or that such new capital can be raised on favourable terms. For a detailed review of the company’s financial risks is referred to Genovis Annual Report 2008, page 28.

Stock option program
The company has 187,000 warrants issued. The warrants may be exercised for subscription of shares between February 28, 2012 and May 31, 2012. When all warrants are fully exercised the company’s share capital will increase by a total of SEK 74,800 through the issue of 187,000 shares, each with a par value of SEK 0.40.
The Genovis share is traded on First North, part of the OMX Nordic Exchange. is the Company’s Certified Adviser is Thenberg & Kinde Fondkommission AB and Mangold Fondkommission is the liquidity guarantor.

wkr0011.pdf

Interim Report January-June 2009

First quarter highlights

•Genovis signs Letter of Intent for the acquisition of CRO company. Eijdo is a contract research company specialized in imaging using magnetic camera; MRT (magnetic resonance tomography).

•Genovis nano products show promising results in magnetic resonance studies. The nanoparticles possess unique properties that are very useful in the development of new medical products, such as diagnostics and therapeutics in the areas of cancer and neuro.

Significant events after the end of the quarter

•Genovis has signed an agreement for the acquisition of all shares in Eijdo research AB. The acquisition is an important step in Genovis’ strategy, and strengthens the company’s opportunities to create a market for its nanoparticles in medical research and development. The nanoparticles combined with methods to analyse their contrasting effect using MRT, will give Genovis a distinct competitive advantage during the market introduction of products and services for medical imaging and for so called molecular imaging.

•Genovis’ board and management have decided to abandon the intended divestment of the so called protein portfolio, and instead collaborate with partners for production and global sales of products derived from the antibody modifying enzymes. Despite a genuine interest from several companies, the planned divestment could not be completed at a level that met with expected revenues. It therefore appears to be more financially advantageous alternative for the company to maintain and further develop all its IP.

•Genovis has requested negotiations regarding staff reductions in accordance with the Swedish MBL law, following the decision not to continue production and marketing of antibody modifying enzymes on its own. Through staff reductions the overall costs are expected to be reduced with approx. 37%.

•The board has decided to call an extraordinary General Meeting on 8th September 2009, and proposes that the meeting decides on a new share issue with preferential rights to existing shareholders.

Comments from the CEO

A year ago we decided to divest our protein products portfolio as a means to finance the further focusing on our nanoparticle business area. As things turned out we learned that the timing was not right for this divestment, but Genovis is therefore lacking capital. The conclusion is that we must make substantial cost reductions and at the same time turn to our shareholders for new capital.

There are long-term trends indicating that it was a wise decision not to go through with our divestment strategy and to sell off the protein portfolio at too a low price. The customers who have tested the products are satisfied and come back; there is now discussions about these products at conferences and in scientific publications, and we notice a marked increase in sales. Even though the volumes still are low, we doubled sales during the six months this year, and during the second quarter of sales increased further compared to the same period last year. This trend remains the same throughout July this year. To further increase volumes we need a stronger market presence, which we will improve by collaborating with one or a few well established partners who efficiently can handle global marketing and sales to our qualified cuistomers.

Our development projects, in which nanoparticles are tested as contrast agents for different medical imaging techniques, have progressed successfully during the spring. Through the acquisition of Eijdo research AB we have a fantastic opportunity to generate business based on both our know-how and our nanoparticles, and thus be able to offer customer fitted products. Genovis and Eijdo research is a truly unique combination that gives us a strong competitive advantage, and it adds strength as we develop the company business.

It is extremely difficult and very painful to give notice about termination of employment to competent colleagues but it can not be allowed to paralyse the organization. Instead we will capture the unique knowledge base of Genovis , and with a dedicated focus on sales activities we will make the company grow again. It is my sincere hope that our shareholders will support this plan by participating in the forthcoming new share issue.

Sarah Fredriksson, CEO of Genovis

Operations

Genovis develops and markets nanostructures that can be divided into two groups: Proteins (Antibody Tools) for antibody fragmentation/ –modification and nanoparticles (NIMT®) for medical imaging (early trials) and transfection/delivery.

Business development and sales
During the spring we conducted discussions with selected partners for the out-licensing of the intellectual property rights behind the products based on the antibody modifying enzymes, which make up the lion part of Genovis’ protein based product portfolio. It appears to be a genuine interest for the protein products from several parties while we at the same time realize that Genovis will not receive the cash compensation we aimed for to go through with the divestment. We have therefore decided to reach agreement on production and non-exclusive distribution of this product group with one or a few partners who in return can offer a global sales organization. Genovis will thus maintain, strengthen and control all intellectual property, and it means a better business deal long-term despite the fact that revenues are generated over a longer time period.

Research and development
The development projects in Genovis have over the last year primarily been directed towards the use of nanoparticles for so called medical imaging for preclinical purposes. We have developed a new category of nanoparticles that generate a contrast effect in more than one type of medical imaging technique. We run our projects partly in-house, and partly in collaboration with research groups at Lund University. To be able to transfer the very promising results and knowledge into a new product offering, we have decided to acquire Eijdo research AB. The intention is that Genovis will be in a position to offer customer made nanoparticles which besides the particles per se also include method development and services in the form of pre-studies that are specifically adapted to the individual needs of the customer. Through the acquisition it will be possible to strengthen our offer to the customer and to launch new products and services.

Product portfolio
Imaging
Imaging, a market segment undergoing strong growth, is used by researchers for in vivo and ex vivo studies. In order to see what happens in a cell and to be able to follow the cell inside an animal model, the cell must be marked in some way. One method is to introduce magnetic nanoparticles into the cell, NIMT® FeOlabel, and then follow the cell using magnetic resonance imaging (MRI).
Today Genovis is working on two in vivo imaging projects in cooperation with Lund University. One project involves development of nanostructures for use in diagnostics (medical imaging) of extremely small tumors that can rapidly occur in lymph glands among patients with breast cancer. The project recently received funds from the Swedish Research Council to finance an industrial doctoral student for four years. The other project involves nanoparticles as carriers of small molecules to cells in the brain. Genovis also supports several customer projects in which the customer either uses Genovis’ products for medical imaging or to track stem cells.

Transfection/Delivery
There is a large market for technologies that deliver molecules (e.g., DNA or genes) into cells. One such technology is NIMT®FeOfection, which offers high efficiency and low toxicity compared with rival products. RNAi is another field undergoing dramatic growth, where researchers are interested in technologies to silence gene activity in order to treat conditions such as viral infections, cardiovascular diseases, cancer, and metabolic diseases. With its high efficiency and low toxicity, Genovis’ NIMT®FeOfection is also extremely suitable for these studies.

Antibody Tools
FabRICATOR® is a genetically modified enzyme that cleaves antibodies into two parts, a Fab fragment and an Fc fragment. Unlike other technologies on the market, FabRICATOR® cleaves all antibodies in a very short time in exactly the same place, and each antibody is only cleaved once. FabRICATOR is also sold as a kit that allows customers to cleave and isolate pure Fab fragments in less than one hour, unlike other methods which may take up to twenty-four hours to achieve the same results. IgGZERO™ is a unique protein that can specifically cleave sugar molecules that are found naturally on antibodies. Removing the sugar molecules can improve the performance of the antibody in various applications. IgGZERO™ can also help wash away antibody molecules

from primary cells. FcDOCKER™ binds specifically to the antibody. This protein is very useful in the antibody production process. Using FcDOCKER™ entails a gentler production process than competing methods and offers great technical and economic advantage.

Geographic markets and market strategy

Genovis sells to dealers and distributors, who in turn conduct marketing campaigns in different regional markets. The distributors have a good understanding of the business opportunities for Genovis’ nanostructures in each region. The company currently has distributors who cover thirteen countries and are geographically scattered from North America across Europe and beyond to the Far East. Sales also take place to some extent directly to end customers in countries where Genovis does not have distributors. Revenues are currently mainly generated from sales of nanoparticles and proteins as consumables, though they are also generated by consulting services combined with the sale of nanoparticles for applications that do not fall within Genovis’ standard line of products.

One of the objectives for 2009 is to begin generating revenues through OEM sales or the sale of licenses, where either Genovis is responsible for production of the product, which is then sold under a partner’s brand, or the partner assumes responsibility even for this portion. In the latter case, revenues can involve both advance payment and royalties per unit sold. In both cases, the counterparty would be responsible for all marketing and sales and the Company has decided to work according to this model for the next two to three years.
With respect to sales of custom-made particles mainly for in-vivo studies and imaging, the Company will continue to handle production and delivery to customers or resellers in the future.

Sales
Q2
Orders received during the second quarter were SEK thousand 144 (SEK thousand 37). The revenues are predominantly derived from sales of proteins, KSEK 111. The revenues from sales of nanoparticles amount to KSEK 33. The company can notice a clear increase in sales of, above all, the antibody modifying enzymes for which several customers are big pharmas.

January – June
Net sales during the period were SEK thousand 270 (SEK thousand 143).

Net Result
Q2
The operating loss during the first quarter of the year was SEK thousand 2,842 (loss: SEK thousand 4,864). Genovis is carrying out a cost-cutting program that will achieve full impact during the third quarter. In addition to the current cost savings programme, the company will go through with further savings that are expected to have effect during the first quarter of 2010.

Depreciation and amortization during the quarter were SEK thousand -260 (-258) including SEK thousand -182 (SEK thousand -155) for tangible assets and SEK –78 (SEK thousand -103) for intangible assets.
The loss after financial items was SEK thousand 3,466 (loss: SEK thousand 4,882. Deferred tax during the quarter was SEK 0 (SEK thousand 1,335).

January – June
The operating loss during the period of the year was SEK thousand 6,215 (LOSS: SEK thousand 9,703).
Depreciation and amortization during the quarter were SEK thousand -516 (-450) including SEK thousand -273 (SEK thousand -297) for tangible assets and SEK –243 (SEK thousand -153) for intangible assets.
The loss after financial items was SEK thousand 6,340 (loss: SEK thousand 9,793. Deferred tax during the quarter was SEK 0 (SEK thousand 2,713).

Cash Flow and Financial Position
Q2
Cash flow from operating activities was SEK thousand –2,984 (SEK thousand -5,533). Cash flow from change in working capital totaled SEK thousand –370 (SEK thousand -909). At the end of the period cash and cash equivalents amounted to SEK thousand 70. Genovis plans to carry out a new share issue in September, and will be bridge financed until the share issue is completed.
The Group’s net investments during the period totaled SEK 47 (6).

January – June
Cash flow from operating activities was SEK thousand –7,482 (SEK thousand -9,770). Cash flow from change in working capital totaled SEK thousand –1,658 (SEK thousand -427).
The Group’s net investments during the period totaled SEK 47 (SEK 6). Net investments included SEK 47 (SEK 6) for tangible assets.

Organization and Personnel

Genovis’ Lund division is responsible for centrally coordinated business and financial functions, as well as production, research and development, marketing, customer support and sales support. The CEO and COO have overall responsibility for the group’s business. Genovis Inc. mainly focuses on strategic business development.

June 30, 2009, the Group had nine employees, including nine at the Parent Company and no employees in the United States, compared with eleven people at the Parent Company and one in the United States during
the same period last year. The Chairman of the Board of Genovis Inc. is paid a consulting fee when working on projects.

Additional information

Debt to closely related
Genovis AB is financed through bridge financing arranged with a credit from the major owner, Farstorp Invest. As per 20th August the debt amounts to SEK 229 309. No collateral is n place for this credit.

Acquisition of Eijdo research AB
The purchase price amounts to SEK 4,7 million and will be paid in the form of non-cash issued shares in Genovis AB corresponding to SEK 4,5 million, and a cash consideration of KSEK 200. The non-cash issued shares can not be traded for 2 years. The financial impact of the acquisition is marginal.

Non-cash share issue
As authorized by the General Annual Meeting on 2nd June 2009, the board has decided to issue 1 690 140 shares to the owners of Eijdo research AB, thereby bypassing the rights of the shareholders. The subscription shall be at issue price SEK 2,66, which has been established to be the average trading price during the 20 trading days immediately proceeding the day of signing the agreement, the 20th of August 2009. The trading price for each day has been calculated as the average of the highest and lowest price paid. In case no price paid was recorded, the latest price paid was included in the calculation. Day without recorded trading price has not been included in the calculation. Through this decision the share capital will increase with SEK 676 056. The shares are issued in connection with taking possession, however no later than 30th September 2009. The share issue results in a dilution of 11%.

Proposed new share issue with preferential rights
The board proposes that the extraordinary General Meeting decides on a new share issue with preferential rights for existing shareholders, at which two existing shares give right to the subscription of one new share at issue price of SEK 1 per share. The decision means that the share capital can be increased with altogether SEK 2 813 293,2 through the issuing of 7 033 233 new shares. Following the completed share issue the share capital will amount to, at the maximum, SEK 8 439 879,6, and the number of shares to 21 099 699. The company receives approx. SEK 7 million before costs for the share issue. Shareholders who do not participate in the new share issue will see their share holding diluted with 33%.

Risks and uncertainties
Genovis’ general view of the financial risks that could affect operations has not changed since the description published in the most recent annual report. For a detailed overview of the company’s financial risks please refer to page 28 of Genovis’ 2008 annual report.

Stock option program
The company has 187,000 warrants issued. The warrants may be exercised for subscription of shares between February 28, 2012 and May 31, 2012. When all warrants are fully exercised the company’s share capital will increase by a total of SEK 74,800 through the issue of 187,000 shares, each with a par value of SEK 0.40. If the warrants are fully exercised the new shares will constitute 1.7% of capital and votes.
The Genovis share is traded on First North, part of the OMX Nordic Exchange. Mangold Fondkommission is the Company’s Certified Adviser and liquidity guarantor.

wkr0011.pdf

Interim Report January-March 2009

Operations

Genovis develops and markets nanostructures that can be divided into two groups: nanoparticles (NIMT®) for medical imaging (early trials) and transfection/delivery and proteins (Antibody Tools) for antibody fragmentation and -modification. In 2009 the Company will sell or license out the protein engineering portfolio in order to focus on nanoparticles (NIMT®), which are the Company’s core business. Research and Development will focus on preclinical medical imaging. In 2008 Genovis began to introduce its first product in the area and expects to launch a group of products in 2009.

Genovis has signed a distribution agreement with Biozym Scientific, which is well known in the Life Science market in Germany and Austria. Genovis has also expanded its US operations with a local distributor, Finnzymes Inc., and transferred all logistics and marketing activities in the US to Finnzymes. Finnzymes Inc. is a wholly owned subsidiary of Finnzymes Oy and distributor of Finnzymes products in North America. As a result the Genovis brand will achieve substantially broader distribution in the US.
In January Genovis carried out a new issue with preferential rights for existing shareholders. A total of 87.6% of shares were subscribed, with about 82.2% subscribed by existing shareholders and with preferential rights. The rest of the shares were subscribed without preferential rights within the frame of the highest amount of the issuing. The issue provides Genovis with about SEK 8.7 million after issue expenses. The number of shares increased from 10,886,233 to 14,066,466.

Product portfolio

Imaging
Imaging, a market segment undergoing strong growth, is used by researchers for in vivo and ex vivo studies. In order to see what happens in a cell and to be able to follow the cell inside an animal model, the cell must be marked in some way. One method is to introduce magnetic nanoparticles into the cell, NIMT® FeOlabel, and then follow the cell using magnetic resonance imaging (MRI).
Today Genovis is working on two in vivo imaging projects in cooperation with Lund University. One project involves development of nanostructures for use in diagnostics (medical imaging) of extremely small tumors that can rapidly occur in lymph glands among patients with breast cancer. The project recently received funds from the Swedish Research Council to finance an industrial doctoral student for four years. The other project involves nanoparticles as carriers of small molecules to cells in the brain. Genovis also supports several customer projects in which the customer either uses Genovis’ products for medical imaging or to track stem cells.

Transfection/Delivery
There is a large market for technologies that deliver molecules (e.g., DNA or genes) into cells. One such technology is NIMT®FeOfection, which offers high efficiency and low toxicity compared with rival products. RNAi is another field undergoing dramatic growth, where researchers are interested in technologies to silence gene activity in order to treat conditions such as viral infections, cardiovascular diseases, cancer, and metabolic diseases. With its high efficiency and low toxicity, Genovis’ NIMT®FeOfection is also extremely suitable for these studies.

Antibody Tools
FabRICATOR® is a genetically modified enzyme that cleaves antibodies into two parts, a Fab fragment and an Fc fragment. Unlike other technologies on the market, FabRICATOR® cleaves all antibodies in a very short time in exactly the same place, and each antibody is only cleaved once. FabRICATOR is also sold as a kit that allows customers to cleave and isolate pure Fab fragments in less than one hour, unlike other methods which may take up to twenty-four hours to achieve the same results. IgGZERO™ is a unique protein that can specifically cleave sugar molecules that are found naturally on antibodies. Removing the sugar molecules can improve the performance of the antibody in various applications. IgGZERO™ can also help wash away antibody molecules from primary cells. FcDOCKER™ binds specifically to the antibody. This protein is very useful in the antibody production process. Using FcDOCKER™ entails a gentler production process than competing methods and offers great technical and economic advantage.

Geographic markets and market strategy

Genovis sells to dealers and distributors, who in turn conduct marketing campaigns in different regional markets. The distributors have a good understanding of the business opportunities for Genovis’ nanostructures in each region. The company currently has distributors who cover thirteen countries and are geographically scattered from North America across Europe and beyond to the Far East. Sales also take place to some extent directly to end customers in countries where Genovis does not have distributors. Revenues are currently mainly generated from sales of nanoparticles and proteins as consumables, though they are also generated by consulting services combined with the sale of nanoparticles for applications that do not fall within Genovis’ standard line of products.
One of the objectives for 2009 is to begin generating revenues through OEM sales or the sale of licenses, where either Genovis is responsible for production of the product, which is then sold under a partner’s brand, or the partner assumes responsibility even for this portion. In the latter case, revenues can involve both advance payment and royalties per unit sold. In both cases, the counterparty would be responsible for all marketing and sales and the Company has decided to work according to this model for the next two to three years.
With respect to sales of custom-made particles mainly for in-vivo studies and imaging, the Company will continue to handle production and delivery to customers or resellers in the future.

Sales

Net sales during the first quarter were SEK thousand 120 (SEK thousand 106). Two distribution agreements were signed during the quarter, one with Finnzymes Inc. for the US and one with Biozym for Germany/Austria; both distributors have large customer lists that are well-suited for Genovis products.

Net Result

The operating loss during the first quarter of the year was SEK thousand 3,373 (LOSS: SEK thousand 4,869). Genovis is carrying out a cost-cutting program to reduce the Company’s operating costs by 30%. The cost-cutting program will achieve full impact during the third quarter. In contrast with personnel costs in Q 1 2008, Q1 2009 has a charge for accrued vacation pay liability of SEK thousand 174.
Depreciation and amortization during the quarter were SEK thousand -256 (-192) including SEK thousand -256 (SEK thousand -142) for tangible assets and SEK – 0 (50 (SEK thousand 50) for intangible assets.
The loss after financial items was SEK thousand 3,466 (loss: SEK thousand 4,941). Deferred tax during the quarter was SEK 0 (SEK thousand 1,378).

Cash Flow and Financial Position

Cash flow from operating activities was SEK thousand –4,498 (SEK thousand -4,262). Cash flow from change in working capital totaled SEK thousand –1,288 (SEK thousand 487). At the end of the period cash and cash equivalents amounted to SEK thousand 1,911.
The Group’s net investments during the period totaled SEK 0 (0). Net investments included SEK 0 (0) for tangible assets and SEK 0 (0) for intangible fixed assets.

Organization and Personnel

Genovis’ Lund division is responsible for centrally coordinated business and financial functions, as well as production, research and development, marketing, customer support and sales support. The CEO and COO have overall responsibility for the group’s business. Genovis Inc. mainly focuses on strategic business development.
On March 31, 2009, the Group had nine employees, including nine at the Parent Company and no employees in the United States, compared with eleven people at the Parent Company and one in the United States during
the same period last year. The Chairman of the Board of Genovis Inc. is paid a consulting fee when working on projects.

Other information

Risks and uncertainties
Genovis’ general view of the financial risks that could affect operations has not changed since the description published in the most recent annual report. For a detailed overview of the company’s financial risks please refer to page 41 of Genovis’ 2007 annual report.

Stock option program

The company has 187,000 warrants issued. The warrants may be exercised for subscription of shares between February 28, 2012 and May 31, 2012. When all warrants are fully exercised the company’s share capital will increase by a total of SEK 74,800 through the issue of 187,000 shares, each with a par value of SEK 0.40. If the warrants are fully exercised the new shares will constitute 1.7% of capital and votes.
The Genovis share is traded on First North, part of the OMX Nordic Exchange. Mangold Fondkommission is the Company’s Certified Adviser and liquidity guarantor.

wkr0012.pdf

Year-End Report January ̶ December 2008

Fourth Quarter Highlights

•Genovis launched two new Antibody Engineering products: IgGZERO™ and FcDOCKER™. The two new products strengthened Genovis and doubled its Antibody Engineering product area, a market undergoing strong growth.

•Genovis entered into a distribution agreement with Innovative Biotech Pte Ltd in Singapore for exclusive rights to sell and market Genovis’ products in Singapore.

•Genovis was granted a position for an industry-based doctoral student by the Swedish Research Council, which means one more person working with in vivo studies in which Genovis nanostructures serve as contrast media. The project is a collaborative effort with the Department of Radiophysics at Lund University Hospital.

Full Year 2008

•Genovis carried out a new issue of shares to build marketing and sales channels. The new share issue was oversubscribed at 98 percent with preferential rights.

•Genovis launched a new product, NIMT®FabRICATOR Kit, the most effective tool in the market for antibody fragmentation and isolation of pure Fab fragments. The product is a combination of a unique enzyme and nanostructures that Genovis developed in-house.

•Genovis entered into distribution agreements with:
Nordic Biolabs for exclusive rights to sell and market Genovis’ products on the Swedish and Danish markets.
DI Biotech for exclusive rights to sell and market Genovis’ products on the Korean market.
Stratech Scientific Ltd. for exclusive rights to sell and market Genovis’ products in the British and Irish markets.
Teknokroma for exclusive rights to sell and market Genovis’ products on the Spanish and Portuguese markets.
Biolegio for exclusive rights to sell and market Genovis’ products in the Netherlands and Belgium, as well as nonexclusive rights for Germany.

•Genovis initiated collaboration with Japanese company Magnabeat Inc., which opens commercial opportunities in Japan.

•Genovis implemented conversion to one class of shares and issued warrants to which the CEO,senior executives and other employees subscribed on equal terms.

Significant Events after the End of the Period

Genovis carried out an issue of new shares, which was 90.5% subscribed, of which about 79.5% was subscribed by existing shareholders, with preferential rights. The rest of the shares were subscribed without preferential rights within the frame of the highest amount of the issuing. The issue provides Genovis with about SEK 9 million after issue expenses. The number of shares increased from 10,886,233 to 14,172,066.
Genovis expanded its operations in the United States with a local distributor, Finnzymes Inc. The Company reorganized and transferred all logistics and marketing activities in the United States to Finnzymes Inc.

Comments from the CEO

In 2008 we developed three unique products in our Antibody Engineering protein portfolio, two of which were launched during the fourth quarter. We have introduced the products at scientific conferences and received a favorable response from both the pharmaceutical industry and academia. The introductory market launch has been a requirement to be able to present an attractive customer base to those parties that have shown interest in acquiring the protein portfolio. The protein portfolio is now ready to be sold. Introductory negotiations are in progress and the process initiated during the period is expected to be completed during the second quarter of 2009.

The liquidity of the company is considered satisfactory for Genovis operations in 2009, inclusive of continuing investment in those very interesting application areas for our nanoparticles we have defined as priority areas. This assessment has taken into account the effects of the cost-savings programme we have decided to execute and the liquid from the divestment of our protein products. The authorization we were granted at the extraordinary General Meeting on 17th December 2008, to issue an additional 5 443 116 new shares, gives us the flexibility to increase our liquidity if needed.

The result for the period is according to plan. The turnover for 2008 reflects a period dominated by the need to link distributors to Genovis. Our newly established distributorships are expected to contribute to the turnover in a higher degree during 2009. We are very pleased to have entered a distribution agreement with Finnzymes for the US market. The fact that we have now transferred logistics and marketing to Finnzymes means that the Genovis trademark should get a wider recognition in the US, and as a consequence Chris Wilkins has left his position as President. The remaining operation in Genovis Inc. is primarily focused on strategic business development, and is handled by Terry Mollan, who is Chairman Genovis Inc.

To Genovis, the business model and the competitive strength is built on innovative capability. The strength in a creative organization becomes visible once we have a tool box plentiful of components and projects ready to be geared up to strengthen our business vision. The financial crisis force us however to set priorities among the projects, but the current turbulence also generates new business opportunities. I look forward to capture them in an optimal way.

Sarah Fredriksson, CEO

Sales

Net sales during the quarter were SEK 105 thousand (SEK 251 thousand). Net sales for the year were SEK 380 thousand (SEK 256 thousand). The items net sales and raw materials and consumables for the Group in Q3 were adjusted due to an incorrect classification; this adjustment has no effect on the results.

Net Result

The operating loss during the fourth quarter was SEK 11,449 thousand (loss: 4,025 thousand) and loss for the year was SEK 25,420 thousand (loss: 12,056 thousand). The operating loss has been charged with an one-off measure write-down of the intellectual property assets amounting to SEK 5,942 thousand. The increased operating expenses are mainly attributable to increased personnel and consultant expenses. During the fourth quarter, Genovis initiated a cost-cutting program that will continue in 2009 and is expected to achieve full impact during the third quarter. The cost savings measures comprise SEK 6 million in total, and are mainly pertaining to payroll and consultant costs.
Against the background of changes in corporate taxation as of the year 2009, the current financial situation and the increased insecurity regarding when to use fiscal deficits, a review of the postponed pre-paid tax was performed in Q4. In connection with this, the result of the period has been charged with taxes of SEK 5,523 thousand and with SEK 1, 577 thousands for the full year.

Cash Flow and Financial Position

Fourth Quarter
During the fourth quarter cash flow from operating activities was SEK –3,223 thousand (–2,499 thousand). Cash flow from change in working capital totaled SEK -1,942 thousand (-1,137 thousand).

January ̶ December
Cash flow from operating activities for the year was SEK –16,761 thousand (–12,448 thousand). Cash flow from change in working capital totaled SEK 1,681 thousand (-393 thousand). Shareholder’s equity at yearend was SEK 6,677 thousand (19,399 thousand).

Investments

Investments in tangible assets during the year amounted to SEK 6 thousand (1,015 thousand), while investments in intangible assets totaled SEK 922 thousand (4,415 thousand).

Operations

Genovis markets nanoparticles that are designed to handle different predetermined applications and procedures, and also provides particles directly as commissioned by the customer. Genovis delivers several products in two product areas, nanostructures and proteins. All products that Genovis launched are used by researchers at pharmaceutical companies, biotech companies or in the academic research community.

Genovis’ Nanostructures
Genovis designs and produces nanostructures that can be used as small carriers to deliver various molecules to cells. Since its inception in 1999, the Company has developed nanostructures under the NIMT® (NanoInduced-MagneticTransfer) brand. The nanostructures and the technology that uses them have mainly been developed to deliver biological molecules such as new genes (DNA molecules) and RNA molecules. RNA molecules are substances from the body that researchers currently use for purposes such as developing new cancer drugs. The Company’s goal for 2009 is to transform its experiences from delivering siRNA to cells in a laboratory environment into delivering siRNA in vivo. The RNAi market, which includes siRNA, is a relatively immature market which in 2006 amounted to about USD 447 million worldwide, with an annual growth rate of about 19%. Intensive research is also underway involving the use of RNAi as a medication; this market is expected to reach USD 580 million in the United States in 2012.

Genovis’ nanostructures also work well as contrast media thanks to their magnetic properties. By offering customers nanostructures that can be used as carriers of molecules such as siRNA, which can simultaneously be tracked by magnetic resonance imaging (MRI), Genovis’ nanostructures have a unique competitive advantage. Today Genovis is working on two in vivo imaging projects in cooperation with Lund University. One project involves development of nanostructures for use in diagnostics (medical imaging) of extremely small tumors that can rapidly occur in lymph glands among patients with breast cancer. The project recently received funds from the Swedish Research Council to finance an industrial doctoral student for four years. The other project involves nanoparticles as carriers of small molecules to cells in the brain. Genovis also supports several customer projects in which the customer either uses Genovis’ products for medical imaging or to track stem cells. The preclinical market for imaging, which Genovis is initially targeting in the United States and which represents about 45% of the market, is expected to grow to USD 600 million by 2010/2011.

Genovis’ Proteins
Antibodies that can recognize a detail on the cell membrane are often used to create targeted medications and nanostructures. Sometimes only part of the antibody can be used. Antibody Engineering involves fragmentation and division of antibodies, and requires various tools. In the spring of 2007 Genovis had the opportunity to acquire the patent rights for such a tool. In 2008 the Company expanded this patent portfolio and now has four different products in Antibody Engineering in addition to the Company’s line of products of nanostructures. During the fourth quarter Genovis began working on selling the protein portfolio and expects the process to be completed during the second quarter of 2009.

Product Launches

During the first quarter of 2008 Genovis launched its new FabRICATOR®Kit, a combination of a unique enzyme and nanostructures that Genovis developed in-house. The FabRICATOR®Kit cleaves and isolates pure Fab fragments in 30 minutes with perfect final results – unlike current methods, which can take as much as twenty-four hours to achieve the same results. With the launch of the new Genovis product the market has gained a new method that is both better and faster than any other method available on the market today.

During the fourth quarter IgGZERO™ was launched. This unique protein can wash away antibody molecules from primary cells and specifically cleave the sugar molecules that naturally exist on antibodies. Removing the sugar molecules can improve the performance of the antibody in various applications. Also launched this quarter was FcDOCKER™, which binds specifically to the antibody. This protein is very useful in the antibody production process. Using FcDOCKER™ entails a gentler production process than competing methods and offers great technical and economic advantage.

Geographic Markets and Market Strategy

Genovis sells to dealers and distributors, who in turn conduct marketing campaigns in different regional markets. The distributors have a good understanding of the business opportunities for Genovis’ nanostructures in each region. The Company currently has distributors who cover twelve countries and are geographically scattered from North America to Europe and beyond to the Far East. Sales also take place to some extent directly to end customers in countries where Genovis does not have distributors. Revenues are currently mainly generated from sales of nanoparticles and proteins as consumables, though they are also generated by consulting services combined with the sale of nanoparticles for applications that do not fall within Genovis’ standard line of products.

One of the objectives for 2009 is to begin generating revenues through OEM sales or the sale of licenses, where either Genovis is responsible for production of nanostructures which are then sold under a partner’s brand, or the partner assumes responsibility even for this portion. In the latter case, revenues can involve both advance payment and royalties per unit sold. In both cases, the counterparty would be responsible for all marketing and sales and the Company has decided to work according to this model for the next two to three years.

With respect to sales of custom-made particles mainly for in-vivo studies and imaging, the Company will continue to handle production and delivery to customers or resellers in the future.

Organization and Personnel

Genovis’ Lund division is responsible for centrally coordinated functions in the business and finance areas, as well as production, research and development, marketing, customer support and sales support. The CEO and COO have overall responsibility for the group’s business. Genovis Inc. mainly focuses on strategic business development.

On December 31, 2008, the number of employees in the Group was ten, including ten at the Parent Company and no employees in the United States, compared with eleven people at the Parent Company and one in the United States during the same period last year. The Chairman of the Board of Genovis Inc. is paid a consulting fee when working on projects.

Patents

Genovis’ nanostructures and their applications are described in several patent applications. The first application has been approved in Australia and in the EU and is being processed in several other countries. Follow-up patent applications are undergoing international review. In May 2007, Genovis acquired intellectual property rights for several proteins and applications in preclinical research, where these proteins have unique competitive advantages. The protein patent portfolio includes patents approved in the United States, selected European countries and Japan. There are also patent applications in the final phase of the international review process, which means that the Company’s patent portfolio will expand significantly over the next few years. Genovis owns all patent rights to its technology and products and has also registered several brands internationally.

Related Party Transactions

The Parent Company’s sales to the subsidiary amounted to SEK 115 thousand. Purchases from the subsidiary totaled SEK 339 thousand. Internal pricing within the Group is based on the sales price to external customers with a deduction for a reasonable profit to the subsidiary.

Genovis Share and Ownership

The Genovis Share
The Genovis share is traded on First North, part of the OMX Nordic Exchange, under the short name GENO B in trading blocks of 200 shares Mangold Fondkommission is the Company’s Certified Adviser and liquidity guarantor.
The number of shares at the beginning of the period was 8,708,987 and the number of outstanding shares at yearend was 10,886,233. All shares have a par value of SEK 0.40.

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