Annual Report 2012.pdf - Karo Bio

Administration Report
Between 2008 and the first quarter 2012, the project was conducted
in collaboration with the Indian pharmaceutical company
Zydus Cadila, under which the parties assumed their own costs
and share potential revenue. The parties preferred different paths
in the continued development and therefore decided to terminate
their joint research and development. Karo Bio continues to
develop the project on its own.
LXR inflammation – collaboration with Pfizer
The collaboration with Wyeth LCC, today a wholly owned subsidiary
of Pfizer Inc., was initiated in 2001 and is focused on the
development of pharmaceuticals for the treatment of inflammatory
diseases with the liver X receptor (LXR) as a target protein.
Since 2009, Wyeth (Pfizer) has taken on full responsibility for
financing as well as research and development of the project.
NURR1 – a new way to treat autoimmune diseases
In the spring of 2012, Karo Bio started preparatory development
work on the receptor NURR1. The receptor controls the development
of regulatory T-cells (Treg) that monitor and control
other T-cells activity. A low number of Treg-cells has been associated
with autoimmune diseases such as multiple sclerosis, rheumatoid
arthritis, type 1 diabetes and lupus. A drug that stimulates
the NURR1 receptor and therefore also regulatory T-cells can be
expected to have positive impact on autoimmune diseases.
There is a biological drug (antibody) under development in
clinical phase II by Biotest AG in collaboration with Abbott that
demonstrates the potential of activating regulatory T-cells for
patients with autoimmune diseases. Initial discussions with larger
pharmaceutical companies verify that there is a clear commercial
interest in NURR1 and Karo Bio’s assessment is that it may
have potential to develop into a so-called hot spot, creating an
opportunity to enter into a license agreement at an early stage.
The work on this receptor is at a very early stage.
RORgamma – a new opportunity to treat autoimmune diseases
New research reveals that the nuclear receptor RORgamma may
play a critical role in the development of autoimmune disease,
such as rheumatoid arthritis, inflammatory bowel disease and
psoriasis. In 2010, Karo Bio initiated a research program to develop
and evaluate compounds that inhibit RORgamma activity.
These compounds have potential as an innovative treatment
alternative for autoimmune diseases since RORgamma has been
shown to control the maturation of, and activity in, a certain type
of immune cell, believed to drive inflammatory and debilitating
processes in such diseases.
In December 2011, Karo Bio entered into a research collaboration
and licensing agreement with Pfizer for RORgamma
to discover and develop new compounds for the treatment of
autoimmune diseases. Pfizer is responsible for fully financing all
research for two years and will have exclusive rights for products
developed as a result of the collaboration. The development
project progressed in a positive direction in 2012.
The agreement is expected to provide Karo Bio with 10-12 million
USD in 2012 and 2013. In 2012, Karo Bio recognized revenue
of 5 million USD from the project. Pfizer has the right to extend
the research agreement until 2015, and can also withdraw from the
contract at the earliest during the second quarter of 2013.
TR / eprotirome – dyslipidemia (No longer active)
Eprotirome is a liver-selective thyroid hormone receptor (TR),
which was developed for the treatment of dyslipidemia. The
pharmaceutical project was canceled in February after an animal
study demonstrated adverse effects during long-term exposure.
The study showed changes in joint cartilage in dogs given eprotirome
for up to 12 months. The damage appeared only after 12
months of exposure, and not in control animals. This meant that
it could not be excluded that also people could suffer similar
damage. Chronic treatment with eprotirome was considered too
risky compared to the benefits of the lipid-lowering effect that
the phase III study would demonstrate. The findings also meant
that regulatory prerequisites were not fulfilled to enable the
continuation of the program as planned.
The total cost of the eprotirome Phase III program, which
was scheduled to run until 2014, was estimated at about MSEK
300. The total cost of the program amounted to approximately
MSEK 140, of which exit costs accounted for about MSEK 33.
KEY EVENTS AFTER THE END OF FISCAL YEAR 2012
No significant events have occurred after the end of fiscal year
2012.
ORGANIZATION
In addition to the parent company Karo Bio AB, the Group
consists of the wholly owned subsidiaries Karo Bio Research AB
and Karo Bio Discovery AB which are currently not conducting
any business. The head office is located in Huddinge, outside of
Stockholm, Sweden, also the site of the company’s operations.
The company management consists of five people: the President
and CEO, Chief Financial Officer, Director of Preclinical
Development, Director of Clinical Development, and Vice
President Business Development.
At the end of the year, Karo Bio had 43 (68) permanent
employees, of whom 37 (60) engaged in research and development,
1 (3) in business development and patents, and 5 (5) had
administrative roles.
RESULTS AND FINANCIAL POSITION
Results
Consolidated net sales increased to MSEK 33.2 (0.0). Operating
expenses decreased to MSEK 132.9 (231.2), of which 33.0 is directly
attributable to the divestment of the eprotirome program.
This year’s expenditure on research and development amounted
to MSEK 107.9 (189.3).
Administrative expenses decreased to MSEK 25.1 (40.8).
The administrative expenses for 2011 included severance cost of
MSEK 5.3. Operating loss improved to MSEK 99.7 (231.2). Net
financial items amounted to MSEK 1.5 (4.5). Net income for the
year improved to MSEK –98.3 (–226.6).
Investments
Investments amounted to MSEK 0.6 (3.4) and relate primarily to
laboratory and IT equipment.
Cash flow and financial position
Cash and cash equivalents amounted to MSEK 28.0 (43.8) at
year end. Including the short-term investments with a maturity
exceeding 90 days, the company’s financial assets amounted
to MSEK 54.1 (158.5). Cash flow from operating activities
amounted to MSEK –127.8 (–198.3).
The rights issue of MSEK 32.7, which was conducted in the
fourth quarter of 2012, brought in MSEK 28.3 to the company
after transaction costs. The rights issue of MSEK 325, which was
conducted in the fourth quarter of 2010, brought MSEK 291 to
the company after transaction costs.
Equity and share data
The registered share capital was MSEK 7.7 per December 31,
2012. The total number of shares was 387,063,972.
KARO BIO Annual Report 2012 15