Medivir reports net sales of SEK 698.6M for fiscal 2011

Today, Medivir AB (OMX: MVIR), a research-based specialty pharmaceutical company focused on infectious diseases, is publishing its Interim Report for the period 1 January - 31 December and its operational report for the fourth quarter of 2011.

Summary of the financial year (January - December)

• Net sales were SEK 698.6 (54.9) m
• Profit/loss after tax amounted to SEK 113.8 (-134.2) m
• Basic and diluted earnings per share were SEK 3.80 (-5.43)
• Cash flow from operating activities amounted to SEK 57.3 (-76.9) m; cash and cash equivalents and investments in securities etc. amounted to SEK 536.3 (647.2) m at the end of the period
• Positive results progressively reported through the year from phase IIb trials on TMC435 intreatment of hepatitis C
• Global clinical phase III program commences on TMC435, simultaneous with TMC435 participating in two planned phase II combination trials with compounds from BMS and Gilead/Pharmasset
• Medivir's organization and commercial presence in the Nordics strengthened through the acquisition of BioPhausia
• Completion of phase Ib trial on polymerase inhibitor TMC649128 against hepatitis C. However, the antiviral efficacy goal was not achieved, and clinical development was discontinued. The focus in the polymerase partnership with Janssen Pharmaceuticals on HCV is now on nucleotide polymerase inhibitors, where a CD was designated. This project is heading towards clinical trials
• Medivir received USD 45 m (SEK 279 m) from Meda, which acquired the North American rights to Xerese®
• Maris Hartmanis appointed as Medivir's new CEO in September, the company's management was also strengthened.

Financial summary of the fourth quarter (October - December)

• Net sales were SEK 131.8 (1.3) m
• Profit/loss after tax amounted to SEK -53.1 (-56.6) m
• Basic and diluted earnings per share were SEK -1.70 (-2.05)

Post balance sheet events

• Phase II combination trial on TMC435 and Gilead's compound GS7977 commences
• GSK initiates OTC launch of Xerclear® in Europe branded Zoviduo and Zovirax Duo

CEO's comment on 2011

"We're continuing to strengthen our positions

Medivir now enjoys a solid base to manage and keep developing the assets in its project portfolio, and to continue the build-up of its commercial platform. The acquisition of BioPhausia during the year was a clear and conscious step on the road towards Medivir's expressed goal of becoming a research-based and profitable specialty pharmaceutical company. This acquisition brought yearly sales of prescription pharmaceuticals on the Nordic market of just over SEK 500 m, and also gave us an all-new organization, which contributed to the company now having the breadth of know-how and operations extending from research and development to the marketing and sale of prescription pharmaceuticals. Medivir also possesses attractive projects in development phases, with TMC 435 being the most advanced, which is in clinical phase III. In combination with our ambition to identify new business opportunities in the Nordics, these factors are the foundation of our continued work to develop Medivir towards profitability.

The company's business operations

The Pharmaceuticals business area The Pharmaceuticals business area includes the group's research and development portfolio and the original pharmaceuticals owned by BioPhausia, as well as our self-developed cold sore pharmaceutical Xerclear®. This product was launched under the Xerese® brand by Meda in the US in the spring, and in summer, the American rights were sold for a one-off payment of USD 45 m (SEK 279 m). In the first quarter of 2012, our partner, GSK, commenced its launch of this cold sore compound on its first five European OTC markets, under the brands Zoviduo and Zovirax Duo.

Since Medivir's acquisition of BioPhausia in June, sales of original pharmaceuticals remained stable, with an unchanged positive EBITDA margin. Net sales for the fourth quarter from pharmaceutical sales were SEK 47.5 (0.0) m, and SEK 0.0 (0.0) m from outlicensing and partnership agreements. EBITDA for the fourth quarter amounted to SEK -36.3 (-55.3) m. EBITDA includes research and development costs of SEK -48.0 (-48.2) m.

Parallel imports in Cross Pharma

Net sales for the fourth quarter were SEK 84.7 m, which means that this business area achieved increased growth for the fifth consecutive quarter. EBITDA for the period was SEK 0.6 m. To exploit new business opportunities, which are expected to have a positive impact in 2012, Cross increased its employee headcount. This means that fixed costs increased in the final quarter, thus negatively affecting operating margins. We are convinced that through its preparations in the fourth quarter, Cross will be able to return to historically strong earnings levels.

R&DHepatitis C in the world around us

Future treatment of patients infected with hepatitis C of different genotypes will be based on combinations of pharmaceuticals with different action mechanisms, such as protease and polymerase inhibitors. The development of pharmaceuticals against hepatitis C is also heading towards attempting to remove interferon, and in the next stage, also ribavirin, from current standard of care (SoC). It is likely that this will only be achievable with two or more direct-acting antiviral compounds being combined in one therapy. The results from different small-scale, conceptual combination therapy without interferon, and in some cases, also without ribavirin, were also presented in the year. In late-2011 and early-2012, several corporate acquisitions were conducted with the aim of supplementing the buyers' proprietary development portfolios in this segment and this has resulted in a significant sharpening of competition in the development of new anti-hepatitis C pharmaceuticals. We also expect new combination trials to be conducted through the coming years, and that different partnership structures will be tested.

TMC435—Medivir's protease inhibitors

Like ourselves, several external commentators regard TMC435 as the best protease inhibitor currently, because in clinical phase IIb trials, it has demonstrated at least equal efficacy, a significantly superior safety profile, and is more easily dosed, i.e. once daily, than those protease inhibitors approved in 2011. In the year, our collaboration partner, Janssen Pharmaceuticals, commenced two clinical collaboration projects for combination therapy, the first with BMS and the second with Pharmasset, now taken over by Gilead. These companies have CDs in phase II, which have different mechanism of action to TMC435, and the aim is to evaluate efficacy and safety in combination therapy with each compound. Through these partnerships, TMC435 is well positioned in the front line of new alternatives for treating hepatitis C, without both interferon and ribavirin. The combination trials are about to be conducted for treating HCV genotype 1 infections, the most common and hardest-to-treat type of hepatitis C infection. Several trials on TMC 435 were also reported in the year, on treatment-naïve and treatment-experienced patients. Global phase III trials are currently ongoing, and we expect our partner to file a global new drug application (NDA) in the first half-year 2013.

Development program for polymerase inhibitors in partnership with Janssen Pharmaceuticals

TMC649128, a nucleoside NS5B polymerase inhibitor, was produced in a development program in partnership with Janssen. However, its antiviral efficacy did not achieve the predetermined target, and this clinical phase Ib trial was discontinued in the fourth quarter. Parallel work on developing a nucleotide-based polymerase inhibitor has been ongoing in this project. The CD has been designated, and this project is in preclinical development ahead of clinical trials.

Hepatitis C in-house

The company has two proprietary hepatitis C projects, one a nucleotide-based polymerase inhibitor and one NS5A replication complex inhibitor. Both are in preclinical optimization. In the former project, new and highly potent nucleotides have been identified, with profiles comparable to the most advanced compounds in clinical development phases. Patent applications have been filed, and work is focused on the selection of clinical development candidates. The program with the NS5A replication complex inhibitor is to develop the next generation of pharmaceutical with this action mechanism and the objective of treating a broader patient group than is possible with those CDs currently in clinical development.

Other projects

On the Cathepsin K project, for treating skeletal disorders, several preclinical trials were concluded in the year that are currently being evaluated. Assuming a positive outcome, this project is scheduled to enter clinical phase I trials in the first half-year 2012.

Maris Hartmanis CEO and President