BIOTIE THERAPIES CORP. STOCK EXCHANGE RELEASE January 25, 2008 BIOTIE THERAPIES CORP. FINANCIAL STATEMENTS RELEASE JANUARY 1 - DECEMBER 31, 2007 The year 2007 in brief - In May, the licensing agreement with H. Lundbeck A/S entered into force on worldwide rights for nalmefene, excluding North America, Mexico, UK, Ireland, Turkey, and South-Korea. - In June, Biotie withdrew the UK national marketing authorisation application on nalmefene in its alcoholism indication to enable a centralised EU-wide registration procedure in due course. - In September, Biotie started the first phase I clinical trial with its fully human VAP-1 monoclonal antibody. - The net loss in financial year 2007 decreased to -1.7 EUR million (in 2006 EUR -9.0 million). Cash flow from operating activities was EUR -5.3 million (EUR 5.4 million positive in 2006). - Revenues in financial year 2007 increased to EUR 7.9 million (in 2006, EUR 1.1 million). - The company's liquid assets amounted to EUR 28.2 million (in 2006, EUR 31.8 million) as at December 31, 2007. - The 2007 financial statements release has been prepared in accordance with IFRS recognition and measurement principles, and applying the same accounting policy as for the 2006 financial statements. The figures presented in this financial statements release have not been audited. Review of the financial year General: Biotie is a drug development company focusing on dependence disorders, inflammatory diseases and thrombosis. Drug development projects: Nalmefene program In May 2007 the licensing agreement with H. Lundbeck A/S entered into force on worldwide rights for nalmefene, excluding North America, Mexico, UK, Ireland, Turkey, and South-Korea. In June 2007 Biotie withdrew the UK national marketing authorisation application on nalmefene in its alcoholism indication to enable a centralised EU-wide registration procedure in due course. To maximise nalmefene's potential in the treatment of alcoholism Biotie and Lundbeck have jointly decided to seek marketing authorisation simultaneously in all 27 EU member states via the centralized procedure. To this end, Lundbeck plans to further strengthen the existing nalmefene registration dossier in its alcoholism indication with additional phase III clinical studies before submitting the marketing authorisation application. The studies are expected to start in 2008. Subsequent to the Biotie clinical program for nalmefene in alcoholism being completed, there is currently a regulatory requirement for an electrocardiogram (ECG) study in healthy volunteers. In October 2007 Biotie started a clinical trial with nalmefene evaluating the potential cardiac effects on healthy volunteers measured using an electrocardiogram. The study is expected to enroll 240 healthy volunteers and to be completed in 2008 and included in the eventual registration dossier. After the reporting period in January 2008 Lundbeck acquired the United Kingdom and Ireland rights for nalmefene from Britannia Pharmaceuticals (now part of STADA Group, headquartered in Germany). Following the new agreement Lundbeck has worldwide rights for nalmefene, excluding North America, Mexico, Turkey, and South-Korea. After the reporting period in January 2008 Biotie-Lundbeck license agreement terms were amended due to Lundbeck acquiring the United Kingdom and Ireland rights. Under the terms of the amended agreement, Biotie is now eligible for up to EUR 82 million in upfront and milestone payments (previously up to EUR 80 million) plus royalty on sales. Of the EUR 82 million, Biotie has already received from Lundbeck an execution fee of EUR 12 million, of which EUR 10 million was paid on signing in November 2006 and EUR 2 million was paid on the license entering into force in May 2007. Biotie will participate in financing some of the clinical development costs. VAP-1 antibody program In September 2007 Biotie started the first phase I clinical trial with its fully human VAP-1 monoclonal antibody. This first-in-man study evaluates the safety, tolerability, and pharmacokinetics of intravenously administered antibody in healthy volunteers. Results are expected during the second quarter of 2008. In November 2006, Biotie and Roche signed an option agreement for Biotie's fully human antibody program targeting Vascular Adhesion Protein-1 (VAP-1) in inflammatory diseases. Under the terms of the agreement, Roche will pay an option initiation fee of EUR 5 million, which grants Roche an exclusive option right to an exclusive, worldwide license agreement for Biotie's fully human antibody targeting VAP-1, excluding Japan, Taiwan, Singapore, New Zealand, and Australia. The option initiation fee will be paid in two instalments. Biotie received the first instalment of EUR 3 million in 2006 and Roche paid the second instalment of EUR 2 million in November 2007 triggered by the study start. The initial option right will end upon completion of Phase I. Roche may extend the option right to later development points by paying additional fees. Biotie will retain all rights to the program until a license is granted to Roche. Inhibiting VAP-1 reduces inflammation by regulating the migration of leukocytes, or white blood cells, to inflamed tissues. Pathological accumulation of white blood cells in tissue is a common feature in many autoimmune diseases, such as rheumatoid arthritis, ulcerative colitis, and psoriasis. Co-operation with Seikagaku Corporation proceeded as planned. Pre-clinical programs Pre-clinical programs (VAP-1 SSAO small molecule inhibitor program and alfa2beta1 integrin inhibitor program) progressed as planned. In the bioheparin program the company continued to look for a partner to finance the future development of the program. To date, partnering efforts have not been successful. Revenues Revenue for the financial year 2007 was 7.9 million euros. Revenue consisted of periodization of the signing fees of the licensing agreements signed with Seikagaku Corporation in 2003 and with Somaxon Pharmaceuticals in 2004, periodization of the option fee of the option agreement signed with Roche in 2006 as well as periodization of the execution fee of the licensing agreement signed with Lundbeck that entered into force in May 2007. During the financial year 2007 the company received in total 4 million euros from partnering agreements. Of the total, Biotie received EUR 2 million from Luncbeck and EUR 2 million from Roche. Of the Lundbeck execution fee of EUR 12 million, EUR 10 million was paid on signing in November 2006 and EUR 2 million was paid on the license entering into force in May 2007. EUR 4 million was booked as revenue in the second quarter of 2007, and the remaining EUR 8 million will be recognized as revenue against clinical development costs in 2007-2009. Total revenue recognized based on the Lundbeck agreement in 2007 was EUR 5.4 million. Revenue for the financial year 2006 consisted of periodization of the signing fee of the licensing agreement signed with Seikagaku Corporation in 2003 and periodization of the signing fee of the licensing agreement in nalmefene project signed with Somaxon Pharmaceuticals in 2004 and periodization of the option fee of the option agreement signed with Roche in 2006. The revenue was in total 1.1 million euros. During the financial year 2006 the company received in total 13.1 million euros from new partnering agreements. Of the total, Biotie received 10 million euros from Lundbeck. Financial results The net loss for the financial year was EUR -1.7 million. The corresponding figure for the previous year was EUR -9.0 million. Research and development costs for the period amounted to EUR 9.1 million (in 2006 EUR 8.0 million). Patent costs have been booked as expenses. Financing Biotie's equity ratio was -37.0 % on December 31, 2007(-46.5 % in 2006). Cash and cash equivalents totaled EUR 28.2 million on December 31, 2007 (EUR 31.8 million in 2006). Equity Pursuant to the convertible capital loan issued on March 25, 2004, a total of 450,000 new shares have been subscribed for. The new shares have been entered in the Finnish Trade Register on April 2, 2007 and May 11, 2007. The loan capital converted in connection with the subscription amounts to EUR 840,939.62. During the financial year 2007 a total of 231,200 new shares in Biotie Therapies Corp. were subscribed for by exercising the series A option rights of the company's option scheme determined on 30 March 2006. The subscription price of the shares was EUR 0.60 per share. The new shares have been entered in the Finnish Trade Register on 30 April 2007. Following the increase in the number of shares based on subscriptions with convertible capital loans and option rights, the total number of shares in Biotie Therapies Corp. is 90.211.860. The subscription price paid has been recorded in the reserve for invested unrestricted equity. The company has in its possession 819.000 of its own shares. Relating to the company's option programs, the company has signed a stock lending agreement with EVLI Bank in January, 2007. Pursuant to this program, the number of the company's own shares in its possession may be temporarily less than 819,000. Investments and cash flow The cash flow from operations was -5.3 million euros (in 2006 5.4 million euros). During the financial year the company received in total 4.0 million euros from partnering agreements. The company's investments during the financial year amounted to EUR 0.3 million (EUR 0.8 million in 2006). Personnel During the financial period, the company's personnel was on average 36 (37 in 2006, 47 in 2005) and at the end of the financial year 37 (35 on 31.12.2006, 45 on 31.12.2005). Changes in Management Team Ulla Sjöblom, M.Sc. (econ), was nominated Corporate Controller and member of the management team in July 2007. Kai Lähdesmäki, VP Business Development, turned 62 in 2007 whereby he retired from the Company. Lähdesmäki was, however, engaged as a consultant for the Company from April, 2007 onwards. Group structure The parent company of the group is Biotie Therapies Corp. The group has a subsidiary named Biotie Therapies International Oy, which was not operational during the financial year. The Company has also a passive subsidiary in the United States called Contral America. Shareholders' meetings held during the financial year The Annual General Meeting of Biotie Therapies Corp. was held on 28 March 2007. The General Meeting of Shareholders adopted the income statement and balance sheet including the consolidated income statement and balance sheet for the financial year 1 January 2006-31 December 2006. The General Meeting of Shareholders resolved pursuant to the proposal of the Board of Directors that the loss of the financial year, EUR 8,021,000, shall be transferred to the company's equity. The Board of Directors, management and auditors The number of the members of the Board of Directors was resolved to be four. Juha Jouhki, Pauli Marttila, Riku Rautsola and Piet Serrure were re-elected as the members of the Board of Directors. Janne Rajalahti, Authorized Public Accountant, and PricewaterhouseCoopers Oy, Authorized Public Accountants, were elected as auditors of Biotie Therapies Corp. Timo Veromaa has been President and CEO of Biotie Therapies Corp. At the organization meeting of the Board of Directors, convened immediately after the Annual General Meeting, Juha Jouhki was elected as the Chairman of the Board of Directors and Pauli Marttila as the deputy chairman. The General Meeting resolved pursuant to the proposal of the Board of Directors to amend the Articles of Association to better correspond to the new Companies Act entered into force on 1 September 2006. The General Meeting resolved pursuant to the proposal of the Board of Directors to amend the terms and conditions of the company's convertible capital loan of 2004. Further, the General Meeting resolved to amend and update the terms and conditions of the 2004 and 2006 option programmes due to the new Companies Act. The General Meeting authorised the Board of Directors to make other corresponding amendments to the terms and conditions of the convertible capital loan and option programmes without changing the number of shares to be subscribed for pursuant to the convertible capital loans or option rights or any other material terms and conditions. The General Meeting authorised the Board of Directors to resolve on the issuance of the maximum of 18,000,000 new shares in one or several instalments in a share issue or on the issuance of options or other special rights to the shares. The authorisation entitles the Board of Directors to deviate from the shareholders' pre-emptive subscription right. The authorisation is effective until 30 June 2008. Option programs Biotie Therapies Corp. has issued option rights by 31.12.2007 pursuant to two different option programs. At the beginning of the financial year the number of 2004 option rights was 2,000,000 and 2006 option rights was 3,000,000. During the financial year 2007 a total of 231,200 new shares in Biotie Therapies Corp. were subscribed for by exercising the 2006 series A option rights of the company's option scheme determined on 30 March 2006. The subscription price of the shares was EUR 0.60 per share. The new shares have been entered in the Finnish Trade Register on 30 April 2007. Subscription price has been recorded in the reserve for invested unrestricted equity. The remaining Biotie 2004 and 2006 option rights entitle the holders to subscribe for a total of 4,768,800 shares. Share capital and Shares Biotie's shares are quoted on the OMX Nordic Exchange Helsinki (Small cap, Health care). Biotie Therapies has 90,211,860 shares and the share capital is EUR 19,849,778.31. All the company's shares are of the same series and have equal rights. All the shares are freely transferable and contain one voting right. At the end of the financial year the share price was EUR 0.76 The highest price for Biotie's share during the year was EUR 1.22 and the lowest was EUR 0.75. The average share price was EUR 0.98. Biotie's market capitalization at beginning of the financial year was EUR 105.65 million and at the end of the financial year EUR 68.56 million. The average monthly trading during 1.1.-31.12.2007 was 2,924,478 shares. The value of shares traded during 2007 was EUR 34.15 million. At the end of the financial year the company had 6,340 shareholders compared to 6,181 at the end of 2006. The ten biggest shareholders of Biotie on 31 December, 2007 Number of shares % Pequot group: 21 925 024 24.51 - Pequot Healthcare Fund, L.P. (7 765 345) - Pequot Healthcare Offshore Fund, Inc. (5 937 983) - Premium Series PCC Limited (998 490) - Pequot Diversified Master Fund Ltd. (1 201 800) - Pequot Healthcare Institutional Fund, L.P (1 521 406) - Pequot Healthcare Emerging Markets Fund, Ltd. (4 500 000) Finnish Innovation Fund (Sitra) 14 585 350 16.30 Finnish Industry Investment Ltd 6 778 592 7.58 Juha Jouhki and his controlled companies 6 537 672 7.31 - Dreadnought Finance Oy (2 098 416) - Jouhki Juha (1 501 356) - Thominvest Oy (2 937 900) Funds administered by BioFund Management Oy: 2 519 775 2.82 - BioFund Ventures III Ky (2 485 715) - BioFund Ventures I Ky (34 060) Harri Markkula and his controlled company: 1 283 045 1.43 - Tilator Oy (654 00) - Markkula Harri (629 045) Oy H. Kuningas & Co AB 1 058 371 1.18 Oksanen Markku 575 000 0.64 Siven Pertti 355 000 0.40 Funds administered by Aboa Venture Management Oy: 344 618 0.39 - Aboa Venture Ky II (336 747) - Karhu Pääomarahasto Ky (7 871) 55 962 447 62.56 Nominee registered shares total 7 519 274 8.40 Other shareholders 25 981 139 29.04 Outstanding shares 89 462 860 100.00 The number of the company's own shares held by Biotie Therapies 749 000*) Total 90 211 860 *) The company has in its possession 819.000 of its own shares. Relating to the company's option programs, the company has signed a stock lending agreement with EVLI Bank in January, 2007. Pursuant to this program, the number of the company's own shares in its possession may be temporarily less than 819,000. Risks and Risk Management Biotie's strategic risks are related to the technical success of the drug development programs, regulatory issues, the strategic decisions of its commercial partners, ability to obtain and maintain intellectual property rights for its products, validity of its patents, launch of competitive products and the development of the sales of its products. For example, even though the commercialisation and collaboration agreements on the company's product development projects have been concluded, there can be no assurance that the contracting partner will act in accordance with the agreement, the authorities will approve the product under development or the approved product will be commercialised. The development and success of the company's products depends on third parties. The operational risks include dependency of key personnel, assets and dependency on partners' decisions. Events after the Financial Period In January, 2008 Lundbeck acquired the United Kingdom and Ireland rights for nalmefene from Britannia Pharmaceuticals (now part ofSTADA Group, headquartered in Germany). Following the new agreement Lundbeck has worldwide rights for nalmefene, excluding North America, Mexico, Turkey, and South-Korea. Biotie-Lundbeck license agreement terms were amended due to Lundbeck acquiring the United Kingdom and Ireland rights. Under the terms of the amended agreement, Biotie is now eligible for up to EUR 82 million in upfront and milestone payments (previously up to EUR 80 million) plus royalty on sales. Of the EUR 82 million, Biotie has already received an execution fee of EUR 12 million from Lundbeck. In January, 2008 Finnish Funding Agency for Technology and Innovation (Tekes) granted EUR 1.7 million additional funding for Biotie Therapies' integrin alpha2beta1 inhibitor program for thrombosis. The R&D funding granted covers drug development costs of the project from July 2007 to December 2009. The funding granted is in the form of loan and it covers 50 per cent of the costs of the project. The loan will be paid to Biotie against reported realised costs. In order to receive the full amount of granted financing, Biotie must show a total expenditure of EUR 3.4 million in the project. Future outlook - Results from the first phase I clinical trial with Biotie's VAP-1 fully human monoclonal antibody are expected during the second quarter of 2008. - Lundbeck is expected to start additional phase III studies with nalmefene in its alcohol indication in 2008. - Due to Biotie having two programs in the clinical development phase the operating costs are expected to increase to a somewhat higher level for 2008 than in 2007. - Revenue in 2008 is estimated to be approximately EUR 5 to 6 million and consists of periodization of already received payments based on established revenue recognition principles. The company is not expecting new milestone payments based on existing agreements in 2008. The Board of Directors proposal for handling of the loss The Board of Directors proposes that no dividend from the financial year 2007 will be paid, and that the loss of the parent company for the financial year EUR -1.6 (FAS) million will be transferred to shareholders' equity. Annual General Meeting Biotie Therapies's Annual General Meeting will be held at Mauno Koivisto Center in Turku on Friday, March 28, 2008 Annual Report 2007 will be published by March 14, 2008. In Turku, January 25, 2008 Biotie Therapies Corp. Board of Directors For further information, please contact: Timo Veromaa, President and CEO, Biotie Therapies Corp. tel. +358 2 274 8901, e-mail: timo.veromaa@biotie.com www.biotie.com Distribution: OMX Nordic Exchange Helsinki Main Media APPENDICES TO THE FINANCIAL STATEMENTS Income statement Balance sheet Statement of changes in shareholders' equity Cash flow statement Key figures FINANCIAL STATEMENT 1.10.- 1.10.- 1.1.- 1.1.- EUR 1,000 31.12.2007 31.12.2006 31.12.2007 31.12.2006 3 months 3 months 12 months 12 months Revenue 1,165 370 7,895 1,118 Research and -3,241 -3,831 -9,053 -7,970 Development expenses General and -379 -107 -1,655 -2,207 administrative expenses Other operating income 174 158 1,044 698 Operating profit/loss -2,281 -3,410 -1,769 -8,361 Financial income 132 115 860 215 Financial expenses -220 -210 -817 -812 Profit/loss before taxes -2,369 -3,505 -1,726 -8,958 Taxes 0 -7 0 -7 Net income/loss -2,369 -3,511 -1,726 -8,964 Distribution To parent company -2,369 -3,511 -1,726 -8,964 Shareholders Earnings per share (EPS) -0.03 -0.06 -0.02 -0.16 basic & diluted, EUR BALANCE SHEET EUR 1,000 31.12.2007 31.12.2006 Assets Non-current assets Intangible assets 747 801 Property, plant and equipment 332 109 Financial assets at fair value through 14,938 20,000 profit or loss 16,017 20,910 Current assets Current receivables 753 560 Financial assets at fair value through 13,000 7,878 profit or loss Cash and cash equivalents 305 3,886 14,058 12,323 Total 30,075 33,233 Equity and liabilities Shareholders' equity Share capital 19,850 19,850 Reserve for invested unrestricted equity 980 0 Retained earnigs -30,220 -21,692 Net income/loss -1,726 -8,964 Shareholders' equity total -11,117 -10,807 Long-term liabilities Provisions 14 27 Interest-bearing liabilities 23,603 23,508 Other long-term liabilities 10,098 6,528 33,715 30,063 Current liabilities Provisions 20 16 Interest-bearing liabilities 104 27 Accounts payable and other debts 7,353 13,934 7,477 13,977 Liabilities total 41,192 44,040 Total 30,075 33,233 STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY Parent company shareholders' equity EUR 1,000 Shares Share Reserve for Share Own Retained Share- (1000 Capital invested Premium Shares Earnings holders' pcs) unrestricted fund equity equity total Balance at 52,675 1,054 0 5,881 -15 -26,502 -19,583 1.1.2006 Net -8,964 -8,964 income/loss for the period Options 102 102 granted Transfer -5,881 5,881 0 from share premium fund Share issue 36,855 18,796 -1,157 17,639 36,855 18,796 0 -5,881 0 -4,139 8,776 BALANCE AT 89,531 19,850 0 0 -15 -30,641 -10,807 31.12.2006 Net -1,726 -1,726 income/loss for the period Options 437 437 granted Share 450 841 841 subscription with Convertible capital loans Share 231 139 139 subscription with option rights 681 0 980 0 0 -1,289 -310 BALANCE AT 90,212 19,850 980 0 -15 -31,930 -11,117 31.12.2007 CASH FLOW STATEMENT 1.1.- 1.1.- 31.12.2007 31.12.2006 EUR 1,000 12 months 12 months Cash flow from operating Activities Net income/loss -1,726 -8,964 Adjustments: Non-cash transactions 443 1,249 Addition/disposal due to -644 -84 revaluation of financial assets at fair value through profit or loss Interest expenses and other 817 812 financial expenses Interest income -216 -215 Taxes 0 7 Change in working capital: Change in trade and other -190 -19 receivables Change in trade creditors and -3,799 12,535 other liabilities Change in mandatory provisions 10 -12 Interests paid -40 -25 Interests received 57 131 Taxes paid 0 -7 Net cash from operating activities -5,288 5,408 Cash flow from investing activities Change in financial assets at fair value through profit or loss Additions -4,500 -25,000 Disposals 5,280 4,000 Investments to tangible assets -23 -819 Sale of associated companies 0 45 Net cash used in investing 757 -21,773 activities Cash flow from financing activities Payments from share issue 139 17,639 Proceeds from borrowings 874 2,232 Repayment of loans -40 0 Repayment of lease -23 -15 Commitments Net cash from financing 950 19,856 activities Net increase (+) or decrease (-) -3,581 3,490 in cash and cash equivalents Cash and cash equivalents in the 3,886 395 beginning of the period Cash and cash equivalents in the 305 3,886 end of the period KEY FIGURES 1.1.- 1.1.- 31.12.2007 31.12.2006 EUR 1,000 12 months 12 months Business development Revenues 7,895 1,118 Personnel on average 36 37 Personnel at the end of period 37 35 Research and development costs 9,053 7,970 Capital expenditure 287 819 Profitability Operating profit/loss -1,769 -8,361 as percentage of revenues, % -22.4 -747.6 Profit/loss before taxes -1,726 -8,958 as percentage of revenues, % -21.9 -800.9 Balance sheet Cash and cash equivalents 28,243 31,763 Shareholders equity -11,117 -10,807 Balance sheet total 30,075 33,233 Financial ratios Return on equity, % Return on capital employed, % -7.2 -113.5 Equity ratio, % -37.0 -46.5 Gearing, % 40.8 76.1 Per share data Earnings per share (EPS) basic & -0.02 -0.16 diluted, EUR Shareholders'equity per share, EUR -0.12 -0.12 Dividend per share, EUR Pay-out ratio, % Effective dividend yield, % P/E-ratio Share price Lowest share price, EUR 0.75 0.49 Highest share price, EUR 1.22 2.39 Average share price, EUR 0.98 1.10 31.12. share price, EUR 0.76 1.18 Market capitalization 68.6 105.6 at the end of period MEUR Trading of shares Number of shares traded 35,093,743 32,470,230 As percentage of all 38.9 36.3 Adjusted weighted average 90,003,192 54,995,830 number of shares during the period Adjusted number of shares 90,211,860 89,530,660 at the end of the period Related party transactions There have not been material changes within the related party transactions in 2007. Contingent liabilities EUR 1,000 31.12.2007 31.12.2006 Lease commitments 159 73 Formulas for the Calculation of the Financial Ratios In the following formulas capital loans are included in interest bearing liabilities and not in shareholders' equity. Return on equity, % Profit (loss) before extraordinary items - taxes --------------------------------------------------------------- x 100 Shareholders' equity Return on capital employed, % Profit (loss) before taxes + interest expenses and other financial expenses --------------------------------------------------------------- x 100 Balance sheet total - non-interest bearing liabilities Equity ratio, % Shareholders' equity --------------------------------------------------------------- x 100 Balance sheet total - advanced received Gearing, % Interest bearing liabilities - cash and cash equivalents -------------------------------------------------------------- x 100 Shareholders' equity Earnings per share (EPS) Profit before extraordinary items, appropriations and taxes - minority interest - taxes ------------------------------------------------------------------ Adjusted average number of outstanding shares during the period Shareholders' equity per share Shareholders' equity ------------------------------------------------------------------ Adjusted average number of shares at the end of the period
Biotie Therapies Corp. Financial Statements Release January 1 - December 31, 2007
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