Interim Report January-September 2009
• Net sales 508 (275)
• Operating earnings -9,226 (-13,970)
• Net profit/loss for the period -9,390 (-10,134)
• Earnings per share SEK -0.7 (-1)
• Comprehensive income -9,395 (-10,013)
• Comprehensive Income per share SEK -0.7 (-0.98)
• Cash flow from current operations -16,742 (-13,568)
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.
Genovis signs agreement with QED Bioscience for distribution of the protein products
The agreement means that QED Bioscience, www.qedbio.com, will sell all products for the modification of antibodies (Antibody Tools) in the US and through its 17 distributors in Europe and Asia, which will give Genovis a stable platform to increase visibility and customer contacts. QED is located in California (San Diego), USA, which is the single most important market for Antibody Engineering in preclinical research.
– The Genovis protein products are derived from enzymes that make up efficient tools for the modification of antibodies. QED Bioscience has customers that in one way or the other have antibodies as a focus for their activities; be it for research, diagnostics or drug development, this is a group of customers that we are very eager to reach. I look forward to working with the experienced and competent team at QED Bioscience, with the aim to increase global sales of our unique protein products, says Sarah Fredriksson, CEO Genovis.
QED Bioscience develops new antibody-based products for academia and for the biotech, diagnostic and pharmaceutical industry. The company produces and markets more than 1500 different antibodies. The manufacturing follows cGMP and in addition to catalogue products, QED Bioscience offers a variety of services to help customers design and develop completely new antibodies as well as produce and modify them according to specific customer requirements.
– QED Bioscience is proud to have been selected as a distributor for Genovis AB’s Antibody Tools. These innovative research tools simplify procedures which, until now, have often yielded unpredictable and inconsistent results. Genovis AB’s Antibody Tools eliminate these problems, and we are grateful for the opportunity to present these products to our customers, says Dr Eileen Skaletsky
GENOVIS: THE NEW SHARE ISSUE WAS OVERSUBSCRIBED BY 102%
14.2 million shares was subscribed for in the new share issue that closed on September 30. In the new share issuing of 7,033,233 shares, 61 % was subscribed with preferential rights. Allotment of shares subscribed without subscription rights shall first hand go to those who subscribed with preferential rights proportional to their subscription for shares with preferential rights, and at second hand to those who subscribed without preferential rights proportional to their subscription.
The issuing ensures Genovis approximately 7 MSEK before issue expenses. The number of shares increased from 14,066,466 to 21,099,699 and the share capital increased from 5,626,586.40 to 8,439,879.60.
Contract note and notification of allotment of shares subscribed without subscription rights is estimated to be sent out Tuesday October 6, 2009.
As of October 1 Thenberg & Kinde Fondkommission is our certified advisor
Genovis expands its US operation and signs distribution agreement with BulldogBio Inc.
Genovis provides novel technical solutions for Transfection, RNAi, Imaging and Antibody Engineering for customers involved in sophisticated research in the pharmaceutical industry and in the academic research community.
BulldogBio, www.bulldog-bio.com, is committed to the US market and can provide an exciting range of scientifically challenging products for Life Science research. The company’s business model is to assist its partners with sales and marketing by focusing in particular on the building of trademark awareness on the market, and to sell products using in-house technical competence combined with immediate support. BulldogBio employees have broad competence in Genovis’ business areas and give priority to efficient service.
”This distribution agreement is another important step for Genovis as we expand on the North American market. The agreement broadens our presence and increases the exposure of our trademark. I am pleased with the opportunities this represents and I look forward to working with BulldogBio with their efficient and experienced team”, says Sarah Fredriksson, CEO Genovis AB.
For almost two years the fully owned subsidiary Genovis Inc. has been involved in the building of sales channels in USA. During this period a number of distribution agreements have been entered. Genovis took the decision not to build a sales organization in the US subsidiary, so Genovis Inc. has primarily been focusing on defining key reference customers on the crucially important US market. Since the sales activities are now handled through distributors, Genovis has decided to close down the US subsidiary.
Report from the extraordinary general meeting of Genovis AB (publ) September 8, 2009
Time plan for the share issue
8 September 2009 Last trading day for the Genovis share day to be able to participate in the new share issue.
11 September 2009 Record day for participation in the new share issue, i.e. the shareholders registered in the Genovis shareholder’s register as on this day receive subscription rights for the new share issue.
16-30 September 2009 Subscription period. Subscription with preferential rights trough cash payment during the subscription period. Intention to subscribe can be made throughout the whole subscription period.
There will be no trading in subscription rights.
Notice of Annual General Meeting of Genovis AB (publ)
Participation
To be entitled to participate in the business of the Meeting, shareholders must be recorded in the register of shareholders maintained by Euroclear Sweden AB (former VPC AB, the Swedish Securities Register Center) on September 2, 2009, and must notify Genovis of their intention to attend the Meeting no later than September 2, 2009.
Nominee-registered shares
Shareholders whose shares are registered in the name of a nominee through the trust department of a bank or similar institution must, in order to be entitled to participate in the Meeting, request that their shares are temporarily re-registered in their own names in the register of shareholders maintained by Euroclear Sweden AB. Such registration must be effected, September 2, 2009.
Shareholders are requested to inform their nominees well in advance of this date.
Notification
• mail to GENOVIS AB (publ), Box 270, 220 07 Lund
• telephone +46 (0)46-10 12 38
• fax +46 (0)46-12 80 20
• e-mail: info@genovis.com
When registering, shareholders should state their:
• name/company name
• personal identification or corporate identity number
• address, telephone number
• name and personal identification number of any representatives
• name of the attendance of any assistants
Agenda
1. Opening of the meeting.
2. Election of chairman for the meeting.
3. Preparation and approval of voting list.
4. Approval of the agenda.
5. Election of two persons to attest to the accuracy of the minutes.
6. Decision on whether proper notice of the Meeting has been made.
7. The Board of Director’s proposal for resolutions regarding a new share issue.
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. The share issue results in a dilution effect of 33%.
8. Conclusion of the Meeting
Documents
The Board of Directors’ complete proposals will be made available at Genovis and on Genovis website, www.genovis.com, no later than September 25, 2009 and will be sent to shareholders that request the Company to do so.
Lund August, 2009
Board of Directors
Interim Report January-June 2009
Net sales amounted to SEK thousand 270 (SEK thousand 143)
Operating earnings amounted to SEK thousand -6 215 (SEK thousand -9 703)
Net profit/loss for the period amounted to SEK thousand -6 340 (SEK thousand -7 080)
Cash flow from current operations amounted to SEK thousand -7 482 (SEK thousand -9 770)
Cash flow for the period amounted to SEK thousand -7 695 KSEK (SEK thousand -10 437 KSEK)
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.
Genovis carries out new share issue
•Two (2) shares give right to subscribe to one (1) new share at issue price of SEK 1.
•Subscription period 16-30 September.
•The company anticipates issue guarantees amounting to SEK 2.5 million.
Background and motive
The Genovis research and development programme has during 2008 and 2009 given priority to projects focusing on medical-technical use of nanoparticles. The projects have progressed according to plan. To strengthen the accumulated know-how concerning design of nanoparticles, and to transfer the know-how into revenues, Genovis recently signed an agreement for the acquisition of Eijdo research AB. Eijdo research is a contract research company specialized in imaging using magnetic camera; MRT (magnetic resonance tomography). Genovis needs additional capital to fully capture the opportunities generated by this acquisition.
During 2008 the company attempted to divest all products and intellectual property rights related to its antibody modifying enzymes (the protein portfolio) against compensation in cash. Negotiations with interested parties were conducted throughout the year, and there has been a generally high interest. It has however, turned out to be more advantageous to Genovis to maintain and further develop the intellectual property in-house, and to place production and global sales with one or a few selected partners. The cash consideration that Genovis expected from the divestment of the protein portfolio will not be materialized, but there will instead be revenues generated over a longer period. Long-term this business model is expected to generate bigger revenues for the company. As a consequence of not having divested the protein portfolio, the company now lacks the capital needed to finance the operation and to pursue the business development plan.
The fact that the company has chosen not produce and market products related to the antibody modifying enzymes means that a number of positions will disappear. As a consequence Genovis has demanded negotiations regarding staff reductions under the Swedish MBL law. Through staff reductions, Genovis expects to reduce its overall costs with approx. 37%.
Against this background the Board of Directors has decided to announce an extarordinary General Meeting on 8th September 2009, and proposes a new share issue with preferential rights to existing shareholders. The liquid funds will primarily be used for the running operation and for the acquisition of Eijdo research AB.
Proposed decision on new share issue
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. The share issue results in a dilution effect of 33%.
Time plan for the share issue
8 September 2009 Extraordinary general meeting to address approval of the board’s proposal on a new share issue.
8 September 2009 Last trading day for the Genovis share day to be able to participate in the new share issue.
11 September 2009 Record day for participation in the new share issue, i.e. the shareholders registered in the Genovis shareholder’s register as on this day receive subscription rights for the new share issue.
16-30 September 2009 Subscription period.
Subscription with preferential rights trough cash payment during the subscription period.
Intention to subscribe can be made throughout the whole subscription period.
There will be no trading in subscription rights.
Genovis to acquire Eijdo research AB through a directed share issue
The purchase price amounts to MSEK 4, 7 and is partly composed of a cash consideration 200 KSEK, and partly shares in Genovis AB. The non-cash issues shares are can not be traded for two years.
The acquisition shall be completed by the 30th of September, and it is an important strategic step for Genovis since it strengthens the opportunities to create a market for the company’s nanoparticles in medical research. 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.
– To Genovis the acquisition of Eijdo research is a prerequisite for our ambition to launch nanoparticles as tools in medical imaging. This acquisition will likely generate new discoveries and generate data that will strengthen our patent portfolio, says Sarah Fredriksson, CEO Genovis AB.
The financial impact following the acquisition is limited. Eijdo has been an acting and independent company for two months, and during this period the net turnover amounted to KSEK 134 according to non-audited financial reports. Through the acquisition Genovis increases its total assets with approx. SEK 5 million, and the solidity is marginally strengthend. The cashflow is primarily affected by the cash component of the purchase price.
Decision on non-cash share issue
Based on the authorization of the General Annual Meeting, as decided on the meeting the 2nd of June 2009, the Board of Directors has decided to bypass the rights of the shareholders and issue 1 690 140 shares to the owners of Eijdo research AB. The subscription will be at the issue price of SEK 2,66, which is the price determined by the average trading price during the 20 trading days on First North (at OMX, Stockholm) that ended on the 19th of August, which is the day before the acquisition agreement was signed. The trading price for each individual day is calculated as the average of the highest and lowest price paid. In case the price paid was not registered, the latest price paid was included. No days without a registered price paid have been included in the calculation. Following this decision the share capital is increased to SEK 676 056. The ahares will be issued in connection with taking possession, but at the latest by 30th September.
GENOVIS: COMMUNIQUÉ FROM ANNUAL GENERAL MEETING FOR GENOVIS AB (PUBL) June 2, 2009
The following decisions were adopted at the Annual General Meeting:
The balance sheet and income statement were ratified.
The Board of Directors and the CEO were discharged from liability.
The Board shall consist of six ordinary members with no alternates until the next Annual General Meeting.
Hans Göran Arlock was re-elected as Chairman of the Board.
Nicklas Gerhardsson, Thomas Laurell and Carina Schmidt were re-elected.
Two new board members were elected; Fredrik Lindgren and Ebba Åsly Fåhraeus.
A Nominating Committee shall be formed by 30 September 2009, and consist of representatives for the four biggest shareholders at the time, provided these shareholders are not board members.
Guidelines for remuneration for the CEO and other leading employees were ratified in accordance with the Board’s proposal.
The Annual General Meeting resolved to change sections 8 of the Articles of Association concerning time limits for notice of general meetings, since these limits are already regulated by law. In accordance with the Board’s proposal, the Annual General Meeting resolved to a conditional change regarding means of convening a general meeting.
Authorization for the board to decide upon a new share issue, up until the next Annual General Meeting, at one or more occasions with or without preemptive rights for current shareholders was approved by the Annual General Meeting. A new share issue based on the authorization will raise the share capital with at the maximum SEK 1,400,000 by the issuing of a maximum of 3,500,000 shares at market price at full subscription.
