HALF-YEARLY REPORT JANUARY – JUNE 2016
· Net sales rose by about 31 percent to SEK 8,403k (6,412k).
· Expenses increased by SEK 6,610 to SEK -25,101k (-18,522k). The increase relates to the settled patent dispute in the US. Excluding legal fees, Genovis reduced its expenses during the six-month period by SEK 2,058k to SEK 13,462k (15,520k).
· Operating result was a loss of SEK 11,402k (loss: 10,260k). Excluding legal fees and reimbursement from the insurance company the operating result was a loss of SEK 4,861k (loss: 8,741k).
· Comprehensive income was a loss of SEK 11,574k (loss: 10,355k). Excluding legal fees and reimbursement from the insurance company, comprehensive income was a loss of SEK 5,033k (loss: 8,836k).
· Comprehensive income per share basic and diluted totaled SEK -0.31 (-0.45). Excluding legal fees and reimbursement from the insurance company, comprehensive income per share was a loss of SEK 0.13 (loss: 0.38).
· Cash flow from operating activities during the six-month period was SEK -10,997k (-9,478).
· Cash and cash equivalents including short-term investments amounted to SEK 10,011k (9,240k) at the end of the half-year.
April–June
· In June Genovis reached a settlement in the patent dispute with Promega Corporation and entered into a royalty-based global licensing agreement regarding the patent involved in the dispute.
· In May, Genovis carried out a rights issue that was oversubscribed by 10 percent. The rights issue raised about SEK 23 million before issue expenses for the company.
· Genovis launched a further development of FabULOUS®. The new product is being marketed under the name FabULOUS® kit.
· Genovis launched GingisREX®, a new enzyme aimed at customers throughout the proteomics market. The products that Genovis has launched to date have solely been used for modification of antibodies, while GingisREX can be used for proteins in general.
· Net sales rose by about 30 percent to SEK 4,595k (3,526k).
· Comprehensive income was a loss of SEK 8,121k (loss: 5,348k).
· Comprehensive income per share basic and diluted totaled SEK -0.21 (-0.22).
· Cash flow from operating activities was SEK -8,499k (-4,624k).
Comments from CEO Fredrik Olsson
The second quarter showed continued strong sales growth for the Company’s products and was the single best quarter in the history of the Company. Sales amounted to SEK 4.6 million, an increase of 30 percent year over year and 21 percent quarter over quarter. For the six-month period as a whole sales rose 31 percent, demonstrating stable organic growth in the product portfolio. It is particularly gratifying that we see growth in all product groups during the period.
At the end of the second quarter, we reached a settlement in the legal dispute that has been ongoing since 2014. We are pleased to have reached an agreement that gives us royalty income at good levels, but above all, the agreement is strategically important to increase the size of the market and to improve conditions for faster adoption of FabRICATOR in the production of antibody drugs. Now that there are two suppliers of the enzyme, the prospects have improved for the enzyme to be included in critical methods of analysis for the production of antibody-based drugs.
The market for antibody-based drugs is undergoing strong growth and there is a clear need to simplify and improve the analytical methods associated with production. We are now also seeing more requests for larger volumes for use specifically in quality control in the production of antibodies, for which reason I expect continued growth for FabRICATOR since we are still in an early stage.
While revenues from sales have increased sharply, the cost base–excluding the legal costs of the dispute with Promega–has declined 13 percent compared with the first half of 2015. However, the legal expenses associated with the dispute have had a negative impact on earnings for the period. As a result of the settlement, these expenses will end during the beginning of the third quarter.
It is worth noting that organic growth continues without any negative effect on gross margin, indicating efficient use of resources in the production of our products and that the price level remains at a satisfactory level.
As I look ahead to the rest of the year I expect continued good organic growth. We will increase our efforts in sales and marketing to further drive growth. A clearer presence in the Asian markets will be prioritized, while strengthening our own sales organization in North America and Europe. We will also continue to work to broaden the market for our existing product portfolio with new products aimed at new applications, at the same time that we follow the strategy of expanding the product portfolio by introducing new products. In line with this strategy, in the second quarter we launched two new products – GingisREX and FabULOUS Fab Kit. GingisREX opens a new market for us because the product can not only be used for antibodies, but also within general protein analysis. FabULOUS Fab Kit simplifies handling of antibody fragments for a certain type of antibody during production.
In May we carried out a rights issue that was oversubscribed. The additional capital, together with the strong growth we continue to demonstrate, will provide good conditions for further investments in market expansion and a continued positive trend for Genovis.
I would like to thank all of our engaged shareholders and dedicated employees for their efforts, which have resulted in yet another successful six months and created good prospects for a positive development moving forward.
Genovis and Promega sign global license agreement and settle litigation
The settlement ends all ongoing patent-infringement claims between the parties and Promega has agreed to a royalty bearing, worldwide license to the patents-in-suit, thereby ending the lawsuit between the parties. The specific terms of the contract are confidential.
“I am pleased we were able to reach a settlement with a favorable business solution that accommodates Genovis’ long term growth strategy,” says Fredrik Olsson, CEO of Genovis.
Genovis rights issue oversubscribed
Of the total issue volume of 18,431,387 shares, 93 % were subscribed for with preferential rights. The rights issue raised about SEK 23 million before issue expenses for Genovis. Statements of account will be sent on June 13, 2016, to allot shares subscribed for without preferential rights.
Genovis launches FabULOUS®Fab kit
Genovis’ products are marketed under the name SmartEnzymes and with FabULOUS®Fab kit Genovis can now offer customers who work with antibodies from mice a product that quickly and easily cleaves and purifies intact Fab fragments. Antibodies from mice are frequently used in preclinical research for various types of analysis.
“The FabULOUS® kit is yet another example of Genovis’ ambition to provide products that facilitate work and reduce time for users. Our offer is now further strengthened with a product that specifically targets those who work with antibodies from mice. Not only does the product improve the quality and yield of the fragments that the customer generates, but we have also simplified handling and significantly reduced the time compared with currently available technologies,” says Fredrik Olsson, CEO of Genovis.
For further information about the FabULOUS®Fab kit: http://www.genovis.com/fabulous-fabkit
Genovis publish a new share issue prospectus
Finansinspektionen (the Swedish Financial Supervisory Authority) approved on May 13 Genovis prospectus for a new share issue with preference for existing shareholders, the subscription period is May 23 – June 8, 2016.
Genovis AB (publ)
The Board of Directors
Press release from Genovis AB (publ) Annual General Meeting May 12, 2016
- The balance sheet and income statement were adopted after the Meeting resolved to reduce the statutory reserve to cover the loss so that SEK -471,037 is carried forward.
- The Board and the Chief Executive Officer were discharged from liability.
- The Board shall consist until the next AGM of five ordinary members without deputies.
- Ordinary members Kenth Petersson, Jacob Engellau, Mikael Lönn and Lena Mårtensson Wernrud were re-elected. Mårten Winge was elected to serve as a new Board member.
Mårten Winge was elected Chairperson of the Board. Sarah Fredriksson declined re-election.
- Remuneration will be paid to the Board of Directors in the amount of SEK 75,000 to Board members and SEK 150,000 to the Chairperson of the Board.
- Remuneration to the auditors will be paid on account.
- A Nomination Committee will be formed with representatives of the four largest shareholders at September 30, 2016
- Guidelines for remuneration to the Chief Executive Officer and other senior executives were adopted in accordance with the Board’s proposal.
- The Meeting resolved to approve the Board’s proposal to conduct a preferential rights issue in which two (2) existing shares entitle the holder to subscription for one (1) new shares at a subscription price of SEK 1.25. As a result of this decision share capital could increase by a maximum of SEK 4,607,846.75 through the issuance of up to 18,431,387 shares.
- The AGM resolved on the authorization to issue shares with or without preferential rights for existing shareholders. As a result of this resolution, share capital could increase by a maximum of SEK 3,500,000 through the issuance of a maximum of 14,000,000 shares.
CONTINUED SALES GROWTH
· Net sales rose by about 32% to SEK 3,808k (2,886k).
· Comprehensive income improved by SEK 1,552k to SEK -3,454 (loss: 5,006k).
· Comprehensive income per share, basic and diluted, improved by SEK 0.14 to SEK -0.09 (-0.23).
· Cash flow from operating activities was SEK -2,498k (-4,854k).
· The Board of Directors of Genovis AB (publ) has resolved on a rights issue subject to approval by the Annual General Meeting on May 12, 2016
· Genovis signed a strategic cooperation agreement with Alphalyse A/S that will provide access to Alphalyse’s expertise in mass spectrometry, while Alphalyse will have the opportunity to offer its customers analyses based on Genovis’ unique enzymes for antibodies and other pharmaceutical proteins.
Comments from Fredrik Olsson, Chief Executive Officer
Once again it is extremely encouraging to report continued sales growth. The first quarter of 2016 is our single best quarter ever, and sales surged by 32 percent compared with the same period last year. This is the sixth consecutive quarter that we demonstrate continued strong growth. The investments we made in our sales organization, both in the US and Europe, continue to produce results and I am particularly pleased that sales for all enzyme lines are growing compared with the corresponding period last year. Gross margin remained at a satisfactory level of about 90 percent.
The number of new customers and orders increased during the quarter compared with the same period last year and I expect continued growth of the customer base in 2016 through increased sales and marketing initiatives.
We are also driving growth by broadening our product portfolio. We intend to continue expanding our product selection during the year and focus expansion of the product portfolio on our existing markets. We will also expand into new markets where our unique enzymes have not yet been used, but where we see clear potential.
In the first quarter, we signed a strategic cooperation agreement with Alphalyse, a company that specializes in protein analysis by mass spectrometry. The agreement enables us both to market our products and to receive information about new market opportunities for our enzymes. We will continue to build partnerships with more stakeholders in the markets where we are active to increase the exposure of our enzymes and thereby further increase sales.
In April, we launched a new product, GingisREX™, our first enzyme that is not limited to analysis of antibodies, but is also suitable for analysis of proteins in general. We received orders for the product right from the day of the launch and our extended distribution network enabled us to send the products to customers immediately after the launch.
Based on developments during the first quarter and the initiatives that we will implement during the year, I expect continued strong sales growth in 2016.
Genovis launches GingisREX™ and expands product portfolio
Genovis’ products are marketed under the name SmartEnzymes™ and are used in the biotech and pharmaceutical industries for characterization of biologics. What sets GingisREX apart from the other enzymes in the product portfolio is that the enzyme not only cleaves antibodies, it also cleaves other proteins specifically after the amino acid arginine. GingisREX is extremely reliable and more precise than similar enzymes on the market. It can be used alone or in combination with Genovis’ other enzymes to improve analysis results.
“With the launch of GingisREX we are now focusing on the entire proteomics market. Our customers currently use our enzymes for mass spec analysis and with GingisREX we have now expanded the range for this customer group, at the same time that we open up the available market. The product portfolio to date has only included enzymes for analysis of antibodies, but it is now expanding to include other proteins, and moving forward we intend to deliver several new enzymes for the entire proteomics market. This is both challenging and exciting,” says Fredrik Olsson, CEO of Genovis
For more information about GingisREX www.genovis.com/gingisrex
Notice of Annual General Meeting
4:30 p.m. – 4:50 p.m. Registration 5:00 pm Opening of the Annual General Meeting
Right to participate. Registration
Shareholders who are registered as in the shareholder register maintained by Euroclear Sweden AB on May 6, 2016 and who have notified the company of their intention to attend the Annual General Meeting by no later than May 6, 2016 , preferably before 3:00 p.m., have the right to attend the Annual General Meeting. Notification may be made by mail at Genovis AB (publ), Box 790, S-220 07 Lund, Sweden, by phone +46 (0)46-10 12 30, by fax +46 (0)46-12 80 20 or by email: info@genovis.com. Upon notification, shareholders must provide their name/company name, personal identity number/corporate identity number, address and phone number. Information about the number of assistants (maximum two) that the shareholder intends to bring to the meeting should also be included.
Shareholders who are represented by proxy shall issue a written, signed and dated power of attorney for the proxy. Shareholders should submit the power of attorney together with the notification of their intention to participate at the AGM. The expiry date of the proxy document may be no more than five years from its issue. Proxy forms are available on the company’s website, www.genovis.com. Representatives of legal entities must present a copy of the certificate of registration or equivalent authorization documents showing the authorized signatory.
Shareholders whose shares are registered in the name of a nominee must, in order to be entitled to attend the meeting, request that their nominee re-register their shares in their own name, so that the shareholder is registered in the shareholder register on May 6, 2016. Such registration may be temporary.
Proposed Agenda
- Opening of the Meeting.
- Election of Chairman of the Meeting.
- Preparation and approval of voting list.
- Approval of the agenda
- Election of individuals to verify the minutes.
- Consideration of whether the meeting had been duly convened.
- Presentation of the annual report and audit report, as well as the consolidated accounts and audit report for the Group.
- Speech by the Chief Executive Officer, after which shareholders will have the opportunity to ask questions of the CEO, the Chairman of the Board and the auditor.
- Resolutions on:
a) adoption of the Income Statement and the Balance Sheet, as well as the Consolidated Income Statement and the Consolidated Balance Sheet,
b) allocation of the Company’s result in accordance with the adopted balance sheet
c) on discharge from liability to the company of the Directors and the Chief Executive Officer.
10. Resolution regarding number members of the Board and deputy members.
11. Resolution regarding from directors’ fees.
12. Election of Directors and Chairman of the Board.
13. Resolution on fees to auditors.
14. Election of auditor
15. Appointment of members to the Nomination Committee and adoption of guidelines for the Nomination Committee
16. Resolution on the Board of Directors’ proposal for remuneration guidelines for senior executives
17. Approval of the Board’s resolution to issue new shares.
18. Resolution authorizing the Board of Directors to decide on the issuance of shares.
19. Authorization of the Chief Executive Officer to make such formal adjustments to the resolutions as may be necessary in conjunction with registration and implementation thereof.
20. Adjournment.
Item 2 Proposal to chair the meeting
The Nomination Committee proposes that attorney Arne Källén chair the meeting.
Item 9b Resolution on allocation of the Company’s result in accordance with the adopted balance sheet
The Board proposes that the statutory reserve be reduced to cover the loss so that SEK -471,037 is carried forward.
Item 13 Resolution on fees to auditors
The Nomination Committee proposes that remuneration to the auditors shall be paid on account.
Item 14 Election of auditor
The Nomination Committee proposes the registered auditing firm PricewaterhouseCoopers AB (“PWC”) to serve as auditor. PWC has announced that in the event that PWC is selected, Magnus Willfors will be appointed chief auditor.
Item 15 Appointment of members to the Nomination Committee and adoption of guidelines for the Nomination Committee
The Nomination Committee proposes that the Committee for the 2017 AGM will consist of representatives of the four largest shareholders as of September 30, 2016. The Nomination Committee shall appoint a chairman from among its members. It is incumbent upon the Chairman of the Board to convene the Nomination Committee. Should a shareholder decline to participate on the Nomination Committee, the right to appoint a representative shall be transferred to the next largest shareholder not represented in the committee. If deemed appropriate as a result of ownership changes, the Nomination Committee shall invite additional shareholders to join the Nomination Committee, though the total number of members may not exceed five. In the event a member of the Nomination Committee leaves the Committee before its work is completed, the Chairman of the Board, if the Nomination Committee deems necessary, shall invite the same shareholder or, if the latter is no longer one of the major shareholders, the shareholder next entitled, in terms of size of shareholding, to appoint a replacement. Such a change shall be announced on the company’s website.
The Nomination Committee will prepare proposals for the 2017 Annual General Meeting for resolution as regards chairman at the meeting, Chairman of the Board and other directors, remuneration of directors and auditors, and principles for appointing the Nomination Committee. The Nomination Committee mandate runs until a new committee is appointed.
The Nomination Committee proposes that remuneration will only be paid for direct costs associated with the assignment.
Item 16 The Board of Directors’ proposal for a motion regarding remuneration guidelines for senior executives
The Board of Directors proposes that the AGM adopts the following guidelines for remuneration to senior executives. These guidelines are valid for employment agreements entered into after the guidelines are approved by the AGM, and for amendments made afterward to existing employment agreements. The basic principle is that remuneration and other terms of employment for the management and CEO will be competitive to ensure that Genovis AB can attract and retain senior executives.
Fixed remuneration policy
The fixed remuneration to the management and the Chief Executive Officer should be competitive and be based on the individual areas of responsibility and performance.
Variable remuneration policy
Variable compensation will be limited and linked to predetermined measurable criteria designed to promote long-term value creation for the company. Variable compensation may not exceed a maximum of 25% percent of the fixed salary and will be set per fiscal year.
The Board will consider on a yearly basis whether or not to propose a share-related or market value-related incentive program to the Annual General Meeting. The Annual General Meeting makes the decisions regarding such incentive programs.
Conditions for non-monetary benefits, pensions, termination, and severance pay
Pensions
Management and the CEO are entitled to a defined-contribution pension.
Termination and severance pay
For the CEO the notice period is 3 months for the company and 3 months for the individual. For management personnel the notice period is 6 months for the company and 3 months for the individual. Moreover, assuming that the company gave notice of termination, in certain cases the CEO may be offered severance pay equivalent to the CEO’s monthly pay for 12 months including benefits.
The Company’s undertaking in relation to senior executives and the chief executive may amount to a maximum of SEK 1,419,336.
The Board of Directors may depart from these guidelines if there are particular reasons in an individual case.
Item 17 Approval of the Board’s resolution to issue new shares.
The Board proposes that the Annual General Meeting approve the Board’s proposal to conduct a preferential rights issue of shares in which two (2) existing shares entitle the holder to subscription for one (1) new share at a subscription price of one Swedish krona and twenty-five öre (SEK 1.25). As a result of this resolution share capital could increase by a maximum of SEK 4,607,846.75 through the issuance of up to 18,431,387 shares.
In the event that all shares are not subscribed for on the basis of subscription rights, allocation of shares shall be made within the scope of the maximum amount of the share issue, The Board will allocate the shares firstly to those who have subscribed for shares on the basis of subscription rights, pro rata in relation to their subscription on the basis of subscription rights, secondly to those who have declared their interest to subscribe for shares without subscription rights, pro rata in relation to their declared interest and last to guarantors in proportion to their guarantee undertakings.
Following the completed rights issue, share capital will amount to a maximum of SEK 13,823,540.50and the number of shares to 55,294,162. The company will raise about SEK 23 million before issue expenses, which are expected to be SEK 1.3 million, including SEK 825,000 in guaranteed compensation to the underwriters. The issue will have a dilutive effect of 33 percent on the holdings of those who do not subscribe to the rights issue for their full stake.
Timetable for rights issue
Record date: May 19, 2016
Subscription period: May 23 – June 8, 2016
Last day of trading in the Genovis share
including subscription rights: May 17, 2016
First day of trading in the Genovis share
excluding subscription rights: May 18, 2016
Item 18 The Board’s proposal authorizing the Board of Directors to decide on the issuance of shares.
The Board proposes that the Meeting authorize the Board, on one or more occasions until the next annual meeting, with or without preferential rights for shareholders, to issue new shares, convertible bonds or warrants. New shares may be paid for in cash and/or in kind or set-off or on other terms. This decision would mean that the
share capital is increased up to a maximum total of SEK 3,500,000 through the issuance of a maximum total of 14,000,000 shares at full subscription. Upon full exercise of this authorization, share capital will amount to a maximum of SEK 17,323,540.50 with a maximum of 69,294,162 shares, which corresponds to approximately 20% dilution.
The reason for the possible deviation from shareholders’ preferential rights is to broaden the ownership group, acquire, or facilitate the raising of capital, increase the liquidity of shares, carry out acquisitions, or procure or permit the raising of capital for acquisitions. When deciding on issuances without preferential rights for shareholders, the subscription shall be market-based at the time of the issue resolution.
For a valid resolution under this item, the Meeting’s resolution must be supported by shareholders representing at least two thirds of both the voting rights and the shares represented at the Meeting.
Documents
The annual report, audit report, articles of association, proxy forms, and documents will be available, as stipulated in Chapter 13 sections 7 and 8 of the Swedish Companies Act, at the Company’s office at Scheelevägen 2, Box 790, S-220 07 Lund, Sweden, and on the Company’s website www.genovis.com as of April 21, 2016, and will be sent, upon request, to shareholders who provide their mailing address.
Number of shares and votes
At the time of issuance of this notice, the total number of shares and votes in the company is 36,862,775.
Information at the Annual General Meeting
Shareholders are reminded of their right to request information from the Board of Directors and the Chief Executive Officer pursuant to Chapter 7, sections 32 and 57 of the Swedish Companies Act.
Lund, April 2016
Genovis AB (publ.)
Board of Directors
The Board of Directors of Genovis AB (publ) has resolved on a rights issue subject to approval by the Annual General Meeting on May 12, 2016
Genovis has initiated the launch of products aimed at customers throughout the proteomics market, which will expand the Company’s product portfolio and significantly increase revenue in the long term. Several beta users have tested the product that will be launched first in April. The initial focus will be on the North American market. The Company will therefore invest in several sales representatives and improved logistics infrastructure in order to optimally handle the anticipated increase in sales. In 2016 the Company will also to begin establish contacts in priority markets in Asia, particularly South Korea, Japan and Singapore. Genovis will follow the same strategy in these markets that was so successfully implemented in the US. The first step will be to build a sales organization based on the same grounds as in the US, but also to expand the distribution network where it is more appropriate.
The proceeds from the rights issue will primarily be used for an offensive expansion of the sales organization in existing and new markets, including investments in improved infrastructure for electronic commerce and marketing. New markets and applications will drive sales further moving forward, including products in the pipeline, in-licensing of product technologies and product concepts shared with other companies. The proceeds from the rights issue will in addition be used for operating activities.
Subscription undertakings and underwriting commitments
Subscription undertakings and underwriting commitments have been obtained, corresponding to 100 percent of the total proceeds of the rights issue.
Timetable for the rights issue
Record date: May 19, 2016
Subscription period: May 23 – June 8, 2016
Last day of trading in the Genovis share
including subscription rights: May 17, 2016
First day of trading in the Genovis share
excluding subscription rights: May 18, 2016
Trading in subscription rights, Subscription rights may be traded on NASDAQ First North Stockholm during the period May 23 – June 3, 2016
Trading in paid subscribed shares, Trading in paid subscribed shares will take place on NASDAQ Stockholm First North as of May 23, 2016 until the rights issue is registered by the Swedish Companies Registration Office (Swedish Companies Registration Office (Bolagsverket).
For full terms and conditions, instructions and additional information on the rights issue and Genovis, please refer to the prospectus which will be sent to the Company’s shareholders. The prospectus will be available on the Company’s website www.genovis.com beginning on May 16, 2016.
GENOVIS IN BRIEF
Genovis is a global company that offers enzyme products that facilitate development and quality control of biologics to customers in the pharmaceutical and medical technology industries. The Company markets several enzyme products (“SmartEnzymes”) in innovative product formats all over the world.
The organization consists of Genovis AB and the wholly owned subsidiary Genovis Inc. in the US. Genovis Inc. handles all sales and marketing of enzyme products on the North American market and Genovis AB handles sales and marketing in the rest of the world. Genovis shares are listed on NASDAQ First North Stockholm and Consensus is the Company’s Certified Advisor, T: +46(0) 31 745 50 00
MORE ABOUT GENOVIS PRODUCTS
The enzyme products are marketed under the name “Smart Enzymes” and are used to process antibodies and split them into smaller fragments. To date, the products have been marketed primarily for characterization of biologics. Customers use small quantities of the products in a large number of samples to divide the drug candidate into smaller fragments, which are then analyzed. All of the products are also highly effective in production of large quantities of antibody fragments, which are required in several different studies in preclinical drug discovery.
