BIOTIE THERAPIES CORP. STOCK EXCHANGE RELEASE October 26, 2007 BIOTIE THERAPIES CORP. STOCK EXCHANGE RELEASE October 26, 2007 INTERIM REPORT ON BIOTIE THERAPIES CORP. JANUARY 1 - SEPTEMBER 30, 2007 January - September 2007 in brief In September 2007 Biotie started the first phase I clinical trial with its fully human VAP-1 monoclonal antibody. The net income in January - September, 2007 was EUR 0.6 million positive (in 2006 EUR -5.5 million). Cash flow from operating activities was EUR -4.1 million (EUR -4.9 million in 2006). The company's liquid assets amounted to EUR 29.3 million as at September 30, 2007 (at September 30, 2006, EUR 3.8 million). Drug development programs Nalmefene program Biotie announced on May 23, 2007 that the licensing agreement entered into force on H. Lundbeck A/S 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. As previously announced, 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. After the reporting period in October 2007 Biotie has started such a clinical trial with nalmefene evaluating the cardiac effects on healthy volunteers measured using an electrocardiogram. The study is expected to enrol 240 healthy volunteers and to be completed in 2008 and included in the eventual registration dossier. Biotie has 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. In total, Biotie is eligible for up to EUR 80 million in upfront and milestone payments plus royalty on sales. 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. The study start triggers a EUR 2 million payment from Roche. 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 will pay the second instalment of EUR 2 million in 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. Pre-clinical programs Pre-clinical programs (VAP-1 SSAO small molecule inhibitor program and alfa2beta1 integrin inhibitor program) progressed as planned. In the recombinant heparin program the company continued to look for a partner to finance the future development of the program. Revenue Revenue for the reporting period January - September 2007 consists of periodization of the signing fee of the licensing agreement signed with Seikagaku Corporation in 2003, periodization of the signing fee of the licensing agreement signed 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. EUR 4 million was booked as revenue in the second quarter of 2007 of the execution fee of EUR 12 million paid by Lundbeck to Biotie. The rest of the EUR 12 million is expected to be recognized as revenue against clinical development costs in 2007-2009. Of the 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. The revenue for the reporting period January - September, 2007 was in total EUR 6.7 million. Revenue for the period January - September, 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 lisensing agreement signed with Somaxon Pharmaceuticals in 2004. The revenue was in total EUR 0.7 million. No new milestone or signing fees were received during the period. Financial results The net profit for the reporting period January - September 2007 was EUR 0.6 million. The comparable loss for the previous year was EUR 5.5 million. Research and development costs for the period amounted to EUR 5.8 million (in 2006 EUR 4.1 million). Patent costs have been booked as expenses. Financing Biotie's equity ratio was -29.5 % on September 30, 2007 (-474.0 % in 2006). Cash and cash equivalents totaled EUR 29.3 million on September 30, 2007 (EUR 3.8 million in 2006). Equity A total of 231,200 new shares in Biotie Therapies Corp. have been subscribed for by exercising the series A option rights of the company's option scheme issued on March 30, 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 April 30, 2007. Following the increase, the total number of shares in Biotie Therapies Corp. was 90,031,860, and the subscription price has been recorded in the reserve for invested unrestricted equity. So far, a total of 231,200 new shares have been subscribed for pursuant to the series A option rights of the company's option scheme issued by the company on March 30, 2006. Pursuant to the convertible capital loan issued on March 25, 2004, a total of 450,000 new shares has been subscribed for. The new shares have been entered in the Finnish Trade Register on April 2, 2007 and May 11, 2007. Following the increase, the total number of shares in Biotie Therapies Corp. is 90.211.860. The loan capital converted in connection with the subscription amounts to EUR 840,939.62. The conversion price paid has been recorded in the reserve for invested unrestricted equity. Relating to the company's option programs, the company has signed a stock lending agreement with EVLI Bank in January, 2007. Investments and cash flow The company's investments during the reporting period amounted to EUR 15 thousand (EUR 57 thousand in 2006). The investments mainly comprised of equipment purchased for research and development operations. Cash flow from operating activities was EUR -4.1 million (EUR -4.9 million in 2006). Research and development expenses are booked as costs. Personnel During the reporting period, the company's personnel was on average 35 (38 in 2006) and at the end of the period 36 (36 on September 30, 2006). The ten biggest shareholders of Biotie on September 30, 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: 2 549 775 2.85 - BioFund Ventures III Ky (2 485 715) - BioFund Ventures I Ky (64 060) Harri Markkula and his controlled company: 1 298 813 1.45 - Tilator Oy (676 264) - Markkula Harri (622 549) Oy H. Kuningas & Co AB 1 058 371 1.18 Oksanen Markku 550 000 0.61 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) 55 983 215 62.58 Nominee registered shares total 6 986 337 7.81 Other shareholders 26 493 308 29.61 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 IFRS and Accounting principles The interim report does not comply with all requirements of IAS 34, Interim Financial Reporting. Biotie has applied the same accounting principles as in the closing of year 2006. This interim report is unaudited. 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. Future outlook The EUR 2 million option fee payment from Roche is expected during the fourth quarter of 2007. The company is not expecting additional new milestone payments based on other agreements in 2007. Biotie's total revenue in IFRS reporting for 2007 is expected to be approximately EUR 8-9 million, and the operating costs will increase to a somewhat higher level for 2007 than in 2006. Biotie 2007 financial result is expected to improve compared to year 2006, but the company expects to report a loss for the full year 2007. The operating costs are expected increase to a somewhat higher level for 2008 than in 2007. The company is not expecting new milestone payments based on existing agreements in 2008. In Turku, October 26, 2007 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 Oy Main Media APPENDICES TO THE INTERIM REPORT Income statement Balance sheet Statement of changes in shareholders' equity Cash flow statement Key figures Formulas for the calculation of the financial ratios FINANCIAL STATEMENT 1.7.- 1.7.- 1.1.- 1.1.- 1.1.- EUR 1,000 30.09.2007 30.09.2006 30.09.2007 30.09.2006 30.12.2006 3 months 3 months 9 months 9 months 12 months Revenue 1,520 250 6,730 748 1,118 Research and -2,263 -799 -5,812 -4,139 -7,970 Development expenses General and -313 -407 -1,276 -2,100 -2,207 administrative expenses Other 186 121 870 540 698 operating income Operating -871 -836 512 -4,952 -8,361 profit/loss Financial 127 30 728 100 215 income Financial -196 -208 -597 -602 -812 expenses Profit/loss -940 -1,013 643 -5,453 -8,958 before taxes Taxes 0 0 0 0 -7 Net -940 -1,013 643 -5,453 -8,964 income/loss Distribution To parent -940 -1,013 643 -5,453 -8,964 company Shareholders Earnings per -0.01 -0.02 0.01 -0.10 -0.16 share (EPS) basic and diluted, EUR BALANCE SHEET EUR 1,000 30.09.2007 30.09.2006 30.12.2006 Assets Non-current assets Intangible assets 760 819 801 Property, plant and equipment 78 131 109 Financial assets at fair value 16,621 20,000 through profit or loss 17,459 950 20,910 Current assets Current receivables 840 492 560 Financial assets at fair value 12,000 3,332 7,878 through profit or loss Cash and cash equivalents 642 491 3,886 13,482 4,316 12,323 Total 30,941 5,266 33,233 Equity and liabilities Shareholders' equity Share capital 19,850 1,054 19,850 Reserve for invested unrestricted 980 equity Retained earnigs -30,589 -20,559 -21,692 Net income/loss 643 -5,453 -8,964 Shareholders' equity total -9,117 -24,959 -10,807 Long-term liabilities Provisions 15 24 27 Interest-bearing liabilities 23,493 22,918 23,508 Non-interest-bearing liabilities 9,836 4,772 6,528 33,344 27,715 30,063 Current liabilities Provisions 16 16 16 Interest-bearing liabilities 11 33 27 Accounts payable and other debts 6,687 2,460 13,934 6,714 2,510 13,977 Liabilities total 40,058 30,224 44,040 Total 30,941 5,266 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 -5,453 -5,453 income/loss for the period Options 78 78 granted Transfer -5,881 5,881 0 from share premium fund 0 0 0 -5,881 0 505 -5,376 BALANCE AT 52,675 1,054 0 0 -15 -25,997 -24,959 30.09.2006 Net -3,511 -3,511 income/loss for the period Options 24 24 granted Share issue 36,855 18,796 -1,157 17,639 36,855 18,796 0 0 0 -4,645 14,151 BALANCE AT 89,531 19,850 0 0 -15 -30,641 -10,807 30.12.2006 Net 643 643 income/loss for the period Options 68 68 granted Share 450 139 139 subscription with convertible capital loans Share 231 841 841 subscription with option rights 681 0 980 0 0 711 1,690 BALANCE AT 90,212 19,850 980 0 -15 -29,930 -9,117 30.9.2007 CASH FLOW STATEMENT 1.1.- 1.1.- 1.1.- 30.09.2007 30.09.2006 30.12.2006 EUR 1,000 9 months 9 months 12 months Cash flow from operating Activities Net income/loss 643 -5,453 -8,964 Adjustments: Non-cash transactions 140 374 1,249 Addition/disposal due to -606 -19 -84 revaluation of financial assets at fair value through profit or loss Interest expenses and other 598 602 812 financial expenses Interest income -728 -100 -215 Taxes 7 Change in working capital: Change in trade and other -254 81 -19 receivables Change in trade creditors and -3,951 -489 12,535 other liabilities Change in mandatory provisions 12 -15 -12 Interests paid -15 -20 -25 Interests received 108 100 131 Taxes paid -7 Net cash from operating activities -4,053 -4,938 5,408 Cash flow from investing activities Change in financial assets at fair value through profit or loss Additions -3,000 -25,000 Disposals 2,952 3,450 4,000 Investments to tangible assets -15 -57 -819 Sale of associated companies 45 45 Net cash used in investing -63 3,438 -21,773 activities Cash flow from financing activities Payments from share issue 139 17,639 Proceeds from borrowings 786 1,642 2,232 Repayment of loans -40 Repayment of lease commitments -14 -47 -15 Net cash from financing 872 1,595 19,856 activities Net increase (+) or decrease (-) -3,244 96 3,490 in cash and cash equivalents Cash and cash equivalents in the 3,886 395 395 beginning of the period Cash and cash equivalents in the 642 491 3,886 end of the period KEY FIGURES 1.1.- 1.1.- 1.1.- 30.09.2007 30.09.2006 30.12.2006 EUR 1,000 9 months 9 months 12 months Business development Revenues 6,730 748 1,118 Personnel on average 35 38 37 Personnel at the end of period 36 36 35 Research and development costs 5,812 4,139 7,970 Capital expenditure 15 57 819 Profitability Operating profit/loss 512 -4,952 -8,361 as percentage of revenues, % 7.6 -662.4 -747.6 Profit/loss before taxes 643 -5,453 -8,958 as percentage of revenues, % 9.5 -729.5 -800.9 Balance sheet Cash and cash equivalents 29,263 3,824 31,763 Shareholders equity -9,117 -24,959 -10,807 Balance sheet total 30,941 5,266 33,233 Financial ratios Return on equity, % - - Return on capital employed, % 12.2 - -113.5 Equity ratio, % -29.5 -474.0 -46.5 Gearing, % 63.2 -76.6 76.1 Per share data Earnings per share (EPS), EUR 0.01 -0.10 -0.16 Shareholders'equity per share, EUR -0.10 -0.47 -0.12 Divided per share, EUR Pay-out ratio, % Effective dividend yield, % P/E-ratio Share price Lowest share price, EUR 0.83 0.49 0.49 Highest share price, EUR 1.22 0.91 2.39 Average share price, EUR 0.99 0.64 1.10 Share price at the end of period, 1.04 0.64 1.18 EUR Market capitalization at the end of 93.8 33.7 105.6 period MEUR Trading of shares Number of shares traded 31,727,304 9,659,876 32,470,230 As percentage of all 35.2 18.3 36.3 Adjusted weighted average 89,831,492 52,675,221 54,995,830 number of shares during the period Adjusted number of shares at the end 90,211,860 52,675,221 89,530,660 of the period Contingent liabilities EUR 1,000 30.09.2007 30.09.2006 30.12.2006 Lease commitments 120 70 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