Annual Report 2009
Genovis AB (publ)
Annual Report 2009
Glossary ... 3
CEO commemts ... 4
Business Concept, ………6
Goals and Strategy ... 6
Genovis business ... 7
Product and Services ... 8
Research & Development ... 10
Market ... 11
Organisation and Employees ... 14
The Share ... 16
Ownership ... 17
Board of Directors ... 18
Group management and Auditor ... 20
Corporate Governance Report ... 21
Formal Annual Report Administration Report ... 25
Financial Statement ... 33
Notes ... 38
Audit Report ... 54
Financial Calendar
Annual General Meeting ... …...March 30, 2010 Interim report january-March ... …...May 18, 2010 Interim report January-June ... …...August 20, 2010 Interim report January-September…..August 20, 2010 Annual General Meeting ... …...April 28, 2011
Glossary
Biotechnology
Interdisciplinary science combining medicine, technology and biology, thereby transforming biological findings into technological applications. Biotechnology is usually di- vided into five areas: green (agriculture), red (drug devel- opment), blue (aquatic organisms), white (industry), and grey (waste management). In addition thereto food science, in particular functional foods, and bioinformatics belong to biotechnology. Closely related areas are biomaterials, medical techniques and gene technology.
Nanotechnology
Pertains to a technology that can be measured in nano- metres. Can be utilized in electronics and materials tech- nology, but also in chemical and biologic applications.
Nano
Nano- is a prefix, also written as 10-9, which means bil- lionth; and as in e.g. nanometre.
Proteins
Proteins are the principal components in all living.
DNA
A chemical compound that is the carrier of the hereditary information, the genome, found in all cells of the body.
The molecule describes how proteins should be built.
siRNA
siRNA are specific for each gene and have the ability to silence (break down) the molecule that describes how the protein should be built.
Antibody
Y-shaped proteins used by the body’s immune system to detect and identify foreign substances such as virus, bacte- ria, and parasites. There is intensive research into the use of antibodies as pharmaceuticals.
In vivo
Describes processes in living cells and tissues that are used in scientific experiments and clinical trials, e.g. in mouse models.
In vitro
“Latin = in the glass tube”
Describes a process, e.g. in a test tube, in the laboratory setting.
Imaging
Means to visualize and to make something visible.
MRT or MRI
Magnetic Resonance Tomography (MRT) or Magnetic Resonance Imaging (MRI) is a medical technique for diag- nostic imaging using a magnetic camera (MR camera). The technique is used in patients to discover, position and clas- sify diseases and injuries that are latent or difficult to de- tect by the use X-ray or Computer Tomography. Examples are tumors, aneurysm, eye diseases, diseases of the cere- bral blood vessels, but also different organs, soft tissue and certain skeletal diseases.
CEO comments
One objective for 2009 was to sign distribution agreements for the US market, with the aim to transfer the sales operation from our own subsidiary, Genovis Inc., to several distribution channels. During the year three separate agreements were signed, which of the last one in the fourth quarter, for non exclusive sales of Genovis products in the US. I am happy that we have found partners with solid experience and ability to de- velop sales on the American market. Even though just a few months have passed since we signed the agree- ments, it is clearly noticeable that this has an immediate impact on sales; 65 % of our sales is generated in the US, which is a higher percentage than before and this proves that we have not lost sales through the transfer from our subsidiary to distribution partners. During 2010 we will intensify our work through the distri- bution partners to increase the growth rate in the US, and we will adopt a similar work mode in Europe.
During the year the R&D operation has primarily been focusing on medical imaging, i.e. the use of nanoparti- cles as contrast agents in different medical imaging techniques, e.g. MRT (Magnetic Resonance Tomography).
We have collaborated with Eijdo research throughout the year, and during this last quarter the collaborative efforts have been very intense, in the sense that Eijdo committed their resources exclusively to product de- velopment and research of mutual corporate interest. This line of work will continue to be intensive during most part of 2010. We are focusing on three projects; imaging of tumor growth, imaging of natural migration of stem cells in the brain, and imaging of lymph nodes. The latter project is performed in collaboration with Lund University. In 2009 we were able to demonstrate, for the first time, that we can design, produce, and evaluate biocompatible and injectable nano structures for use in several applications in the area of preclini- cal medical imaging. We aim to enlarge research and development collaborations in Sweden and in Europe during 2010.
Genovis has, since a few years back, two product lines as development areas; proteins used as technical tools for development of antibody based pharmaceuticals and diagnostics, and nanoparticles in biomedical applica- tions. In 2009 we have seen an increasing demand for the products in our protein portfolio, and as a result of our product development efforts we have come up with applications that, to our great satisfaction, attract completely new customer groups. To be able to produce the proteins in bigger quantities it seems more cost- effective to sub-contract the production to a partner that already has an established large scale production of proteins. During the second half of 2009 we decided to maintain and further develop the intellectual property regarding the protein portfolio, and to subcontract production and global sales to one or several actors. The two protein products FabRICATOR® and IgGZERO™ made up some 85 % of our sales in 2009. During 2010 we aim to conclude agreement for external production of the protein products and to fully launch the third port- folio product, FcDOCKER™.
The nanoparticle portfolio has been under continuous development since Genovis was founded, and we have to date built a unique know-how regarding design, production, and evaluation of biocompatible properties that can be used in numerous applications. The very first product we launched was a so called transfection reagent. Transfection means the transfer of a new gene in to a cell or a molecule in order to alter the generic composition of the cell. In 2009 we were able to demonstrate that we can add several properties (or modali- ties) to one and the same nanoparticle, in addition to its transfection properties. In clinical medical imaging as well as in the laboratory setting such particles are in high demand due to their contrasting properties. The
market for contrast agents used for preclinical imaging performed with MRT, gamma camera, PET, fluores- cence microscope, optical measurement and ultrasound is expected to grow by 20-30% annually in the next five years. The force stimulating such a growth is the development of new hardware introduced in new equip- ment, and that software for visual interpretation is in rapid development which in turn creates demand for new contrast agents. In 2010 we will commence marketing of Genovis multimodal nanoparticles, and the know-how related thereto, for use in the preclinical market. We will target those customers who are actively working with medical imaging. There is also among these customers the need to perform transfection, e.g. in connection with stem cell research and when performing cell transplantations. By focusing more on specific customer groups we aim to work more effectively and increase sales of this product group.
In contrast to the production of our protein products, the production methods for our nanoparticles is an im- portant part of the Genovis first-rate competence, and we aim to further develop this concept for contract production ordered by external partners. Our strategy is on the one hand, to continue to develop, launch, and sell nanoparticles as what we call multimodal particles, and on the other hand, to build what we refer to as a nanohouse, which means that we will also offer a platform for the design, production, and verification of nanoparticles for those customers who need the support from the expertise in the area to be able to develop/
sell nanostructures of kinds for biomedical applications. This is a cost-effective way to use all our generated know-how and invested capital. The work with multimodal nanoparticles was started in 2009. Our objective is that by the end of 2011 we will have launched both these concepts fully out, and that Genovis shall deliver multimodal nanostructures for use, at the minimum, in one project in clinical diagnostics or as medical- technical tools in clinical use.
As I look back at 2009, I can see that it was a financially bumpy and unsecure year, but to Genovis it turned out to be a year during which we through restructuring and maintained dedicated product development took a great leap forward. Genovis is by and large the result of genuine teamwork. I am proud to be working to- gether with an outstanding team of colleagues, and they deserve my special thanks for the energy and force they contributed to the operation during 2009. To develop a company like Genovis requires a long-term vi- sion, and we are grateful for the patience our shareholders have shown so far and we look forward to taking the next steps in our development together.
Our Business Concept, Goals and Strategy
Business concept
Genovis’ business concept is to develop, produce and market innovative technologies based on unique nanos- tructures that can facilitate, enable and accelerate new discoveries in the hands of researchers within the global Life Science industry.
Our goals
To offer nanoparticles and unique enzymes from the platform of products and knowledge developed in the company for customers having their base in medical imaging and preclinical research.
To become a world-class actor in the market for the design and production of nanostructures for use in biomedical applications
To launch Genovis multifunctional nanostructures as contrast agents for medical imaging in MRT, PET, SPECT, fluorescence and ultrasound.
Goals for 2010/2011
To accomplish increased sales of the protein portfolio products in the US And in Europe.
To secure efficient large-scale production of the protein products.
To launch three new products from the protein portfolio.
To introduce especially designed nanostructures in accordance with a custom-made model.
To increase pace and volume in the sales of nanoparticles and services for medical imaging, and for delivery of siRNA for preclinical purposes.
To expand our platform for production of nanoparticles partly through internal efforts, partly through extenal partners.
Demonstrate Proof-of-Concept for the EU project ”Sentinel node”.
Our strategy is to
Work through an effective internal organization together with partners, distributors and a global net work in order to reach the objectives we have set.
Maintain a strong and innovative product development programme focused on products that strengthen the customer’s business model.
Genovis Business
The company exploits two different business models
The one is flexible business model for OEM type of sales, or sales through licensing, where either Genovis or a con- tracted partner is responsible for production of nanostructures sold under the trademark of Genovis or that of a partner. In either case the partner is responsible for marketing and sales activities, and this is also the business model Genovis will strive to apply long-term for all of its standard products. This business model is primarily in- tended for the antibody engineering products since they require global distribution and marketing capacity to reach high sales volumes.
The other model is that the company produces and sells nanostructures either directly to end-users or through a net- work of retailers and distributors. As regards sales of custom made particles for above all in-vivo studies, the com- pany will itself handle production and delivery to either customer or retailer also in the future. The company has so far sold and marketed all products on its own according to this business model, but has the ambition to gradually commence to do business according to the previously described model.
Cost structure
The variable costs for Genovis products are low already at relatively small production volumes, and can be further reduced at bigger volumes without an increase in fixed costs. Development and launch of new product groups do not lead to any significant increase of the fixed costs, since Genovis technology platform is well established and gives the company sufficient capacity to adjust to new production demands. Fixed costs for the products are primarily pertaining to staff costs, product support and marketing as well as costs for maintaining and enlarging the Genovis patent portfolio.
Research and development of new products constitutes a great part of the operation, and costs such as staff and material related thereto are predominantly financed through equity. In 2009 Genovis received a research grant from the Swedish Research Council for the project “Sentinel node”. The grant is especially intended to finance an indus- trial PhD-student during four years. The project is conducted in collaboration with the Institute of Medical Radiation Physics at Lund University.
Customers
Genovis customers are found among pharmaceutical and diagnostic companies, contract research companies and academic research groups. A common denominator is that they all pursue research and development work in the area of Life Science. Genovis is currently selling products to customers in Europe, North America and Asia which of USA is the single most important market.
Product and Services
Genovis is marketing both services and products. The products can be divided into two categories:
Nanoparticles (NIMT®) for biomedical uses.
Proteins (Antibody Engineering) for antibody fragmentation and modification.
Nanoparticles (NIMT®) for biomedical uses
Genovis multimodal nanoparticles (meaning that there are several modalities, or properties, in one and the same nanoparticle) are efficient and cost-effective tools in preclinical research studies. The nanoparticles combined with methods that analyse their contrast acting properties when used in MRT (Magnetic Resonance Tomography) gives Genovis a competitive advantage in preclinical medical imaging and in so called molecular imaging. The company has through the acquisition of Eijdo research full MRT equipment as well as the special competence required to con- duct preclinical contract research.
Imaging products
In order to visualize what happens inside a cell, and to monitor a cell well inside an animal model the cell must be marked. Genovis first imaging product, NIMT®FeOlabel, marks cells efficiently so that they following transfection can be monitored with MRT.
Services
Genovis and its subsidiary Eijdo research can together offer customers different types of imaging services. To the customer the end result could be the basis for a decision to embark on enlarged studies, and it can increase accu- racy and reduce costs for the customers’ preclinical research projects. Following the initial test studies Genovis can continue to deliver nanostructures and relevant support or, alternatively, scale up the project commitment of Geno- vis/Eijdo to the level of contract research and development on behalf of the customer.
Transfection Tools in vitro/in vivo
NIMT®FeOfection comprises two different products for which the technical language is transfection reagents.
NIMT®FeOfection delivers molecules (e.g. DNA or genes) into cells that are stimulated to grow and divide in test tubes or in animal models. The product is highly efficacious and has low toxicity when compared with competitive products. There is a demand for techniques that can interfere with the activities of genes and thereby offer the fu- ture treatments for virus infections, cardiovascular diseases, cancer and metabolic diseases. With its high efficiency
Antibody Engineering Tools
To able to construct pharmaceuticals that can target a specific site, it is often used antibodies having the ability to detect any relevant detail on a cell surface or a part of a structure in the body. It is sometimes not possible to use the whole antibody, but only a part or section thereof. To modify and cleave antibodies is referred to as antibody engineering, and it requires dif- ferent tools. In the spring of 2007 Genovis took the opportunity to acquire the patent rights to such a tool. During 2008-2009 the company has increased this patent portfolio so that it now contains three different products for an- tibody engineering, namely FabRICATOR®, FabRICATOR®KIT, and IgGZERO™.
All products launched by Genovis are used by researchers in pharma compa- nies, biotech companies or the academic research community.
FabRICATOR
FabRICATOR® is a genetically modified enzyme that cleaves antibodies into two parts; a Fab fragment and a Fc frag- ment. In contrast to other techniques in the market place, FabRICATOR® cleaves all antibodies at exactly the same site in a very short time, and each antibody is cleaved only once. FabRICATOR is also sold as a kit that gives custom- ers the possibility to cleave and isolate pure Fab fragments in less than an hour, unlike other methods that can re- quire up to 24 hours achieving the same result.
IgGZERO
IgGZERO™ is a truly unique protein that specifically cleaves off the naturally occurring sugar molecules on antibod- ies. By removing the sugar molecules, the capability of the antibody can be increased and adjusted to different ap- plications. Another example is that with the use of IgGZERO™ you can wash out antibody molecules from primary cells.
FcDOCKER
FcDOCKER™ binds specifically to the antibody. This protein is very useful in antibody manufacturing processes. Using FcDOCKER™ in manufacturing gives a milder process, which is of great technical and economical advantage com- pared with competing methods.
Product launches
In the spring of 2010 Genovis will launch a combined IgGZERO™/FabRICATOR® kit especially suited for Mass Spectros- copy customers. The product offers customers a fast, easy-to-use, and unique procedure for pre-treatment of the IgG molecule in one single step to guarantee correct identification when used in Mass Spectrometry, which is a tech- nique used, among others, as quality control in the production of monoclonal antibodies.
Later in 2010 the plan is to launch two new products derived from the protein FcDOCKER™ as well as a combination kit with FabRICATOR® and FcDOCKER™.
The development projects pursued by the company have since a year ago been directed mainly towards the use of magnetic nanoparticles for so called medical imaging in preclinical development. Magnetic nanostructures make up an ideal platform when the aim is to perform multimodal imaging. First, the iron oxide core with its magnetic prop- erties is highly visible with MRT; second, the magnetic core of the particle can be furnished with different biocom-
Research & Development
Medical imaging
Medical imaging is in many cases a prerequisite for the diagnosis of disease and adequate treatment. Rarely has a medical discovery meant more to mankind than the Röntgen or X-ray technology. This fact attracted the attention of the Nobel Committee already in 1901 when the very first Nobel Prize in Medicine was awarded to Conrad Röntgen. Today techniques such as Computer Tomography have replaced the use of X-ray, but also ultrasound and MRT can be used when studying the different parts of the human body. To make a specific part or section of the body more visible during a medical imaging procedure, it is accepted practice to admin- ister contrast agents. The nano technology will come useful in medical diagnostics and medical imaging, and Genovis is conducting two projects on its own. In the first project Genovis monitors tumor growth using can- cer cells that are marked with nanoparticles. The growth of the tumor is monitored with both MRT and fluo- rescence. In the second project nanoparticles are used as markers in cells that are reproduced in the brain.
Since the nanoparticles make the cells detectable with MRT it is possible to monitor their natural migration in
the brain. Genovis also supports several customer projects in which the customer either uses Genovis prod- ucts to perform medical imaging or to trace stem cells. Genovis is also conducting an in vivo/imaging project together with Lund University. It relates to the development of nanostructures to be used in the diagnosis (medical imaging) of extremely small tumors that can occur rapidly in lymph nodes of breast cancer patients.
Every year some 6800 women in Sweden face the diagnosis breast cancer. It used to be that the whole breast was surgically removed, but nowadays only the section where the tumor is located is removed. It also used to be that several lymph nodes in the axilla were surgically removed, which meant increased risk of all kinds of complications. Lately a new breast cancer surgery method has been introduced. The method has brought more secure diagnostics and reduced risk of complications. Tumor cells are spread through the lymph accord- ing to a certain pattern and they first reach a specific lymph gland. This gland acts gatekeeper and if it does not contain any tumor cells and is thus healthy, there is minimal risk that the disease has spread elsewhere in the body. This new treatment method means that during surgery it is possible to locate the”gatekeeper gland” using a radioactive isotope and a blue compound. The gland is removed and examined. In most cases, 65 per cent, no metastases are found and there is no need to remove the lymph nodes. The international name used for the ”gatekeeper gland” is Sentinel node, and this is also the working name of the development project Genovis is pursuing together with the Institute of Medical Radiation Physics at Lund University. The project crosses the scientific disciplines and the objective for Genovis is to come up with a multimodal parti- cle that can guide the surgeon, facilitate diagnosis prior to surgery by separating tumor cells from healthy
Market
Nanotechnology is already used in many different industries and the technology is beginning to move from the research labs to the market place. The global market for nanotechnology is expected to grow by 20% (CAGR) until 2013 according to”Nanotechnology Market Forecast to 2013”, which was published in May 2009 by RNCOS. There are several market reports that estimate that the market for products in which nano compo- nents of kinds are ingredients is a USD multi-billion market. As far as Genovis is concerned it is of relevance to look closer at nanotechnology in the Life Science industry.
Nanotechnology opens up for innovations in all health care areas, and there are great expectations that this new technology can help improve both diagnostics and treatment. Research reports indicate that use of nanotechnology in the areas of drug development and health care in particular will increase exceptionally in the next five years. This will be reflected in these industries combined share of the total market for
nanotechnology based products, and there is an anticipated change in market shares between 2008 and 2015.
Sours: Business Insight 2008
Key areas in which the technology will have the greatest impact in Life Science are delivery (drug formula- tion), diagnostics and monitoring/imaging, and also as research tool. Genovis nanostructures have applica- tions in more than one of these areas. Some of the company’s products are under development while others have reached the selling phase. To present the market Genovis will serve, we need to give an overview of the individual market segments.
0,0 10,0 20,0 30,0 40,0 50,0 60,0
% 2008
2015
Market by line of business
Market
Medical imaging
The medical imaging market can be divided into two segments. The segment Genovis will service primarily is the preclinical market, which is estimated to reach 300 MUSD in 2011, which of sales of contrast agents is estimated at 120 MUSD. The process for taking a new pharmaceutical to the market is long. As soon as a sub- stance has been identified and tested in the lab, and seems to be a drug candidate, it is necessary to decide on further development of this substance as pharmaceutical. It is a long and expensive venture that normally requires an investment in the region of 800 million USD and takes approx. 12 years to complete. Effective use of time is critical to the development process and to the overall project costs. One way to achieve this is to early on in the process improve the methods through which a drug candidate is evaluated. The new imaging techniques have the potential to increase the efficacy in the early stage of drug development, and they can facilitate the translation between preclinical testing and clinical evaluation. This is a driving force that com- bined with the fact that imaging techniques are available for preclinical testing, means that the market is growing strongly. Genovis has introduced a first product in this area, and has the ambition to launch new products both as services and as new nanoparticles in the next two years. Through the introduction of nanos- tructures as contrast agents, new markets will open up and projections for the next five to ten years indicate a strong growth rate of 20-30% per year.
New imaging techniques will be used in clinical situations to a larger extent. Genovis has no intention to aim for the clinical market today, except for the early stage Sentinel node project for which the aim is to arrive at a method that is approved for clinical use; further reading under section Research and Development.
Transfection techniques
Genovis is targeting the market for transfection techniques/reagents, which is a market currently estimated at a sales value of approx. 500 MUSD. Genovis existing products have the potential to compete in one of the three segments of this market, and that segment represents 40% of the total market. The marketing strategy of the company for this product group is to focus on a narrow customer group, and to be very focused on those customers who work with cell transplantation. Among these customers there is a great need to com- plete studies with the use of imaging techniques, and for these applications Genovis products are unique. In this case the potential market is lower, but the opportunities to direct the marketing efforts are so much greater, and this benefits a small company such as Genovis when competing with the global companies.
Therapeutic use of RNA interference
This product group is under development, and is today a project in the Genovis R&D portfolio and a logical extension of the current product lines. The market for therapeutic use of siRNA is also early stage, and there are some twenty projects in clinical development. Small biologic molecules such as siRNA molecules require completely new drug formulations. For this product group Genovis has the intention to provide nanostructures that fulfil new demands regarding the efficient combination of imaging and drug formulation. The nanostruc- ture shall deliver the drug to the intended site in the body, and the physician shall be able to monitor dosage and treatment using different imaging methods. The market for therapeutic use of RNA interference is rela- tively immature and the first products are likely to be launched within two years. Already by 2015 this market
Antibody Engineering
The market for this type of products is propelled by the ambition shared by researchers and drug compa- nies to find new biological pharmaceuticals for the treatment of many different diseases. Pharmaceuti- cals, diagnostics, and research tools derived from antibodies of kinds have been established as”state of the art” technologies and the market are growing at stable rates. Genovese estimates that the market for products used for antibody engineering in research and development has a value of some 10 million USD. The market for this type of products is growing at the same pace as the overall market for antibod- ies. For some of Genovese products there is additional considerable potential should they be introduced as ingredients in biologic manufacturing processes.
Marketing strategy
The company will use the following strategies when approaching the market:
Genovis shall communicate the trademarks of company and products through distributors and re- tailers in contracted countries and elsewhere through its own activities.
Genovis shall facilitate effective product launches by continuously educating distributors/
partners.
Genovis will continually follow up and analyse the selling process.
Genovis will publish results from both its in-house development work as well as from collabora- tions with reference customers, preferably in scientific journals.
Genovis will present at conferences and meetings of importance to the industry both commer- cially and scientifically.
Organisation and employees
Genovis organization consists of Genovis AB and the fully owned subsidiary Eijdo research AB, which was ac- quired in 2009. All operations are now handled from Genovis AB in Lund, which means responsibility for the coordinated functions economy and finance, production, research & development, marketing/customer sup- port, and sales support. The CEO and the COO of Genovis AB share the overall responsibility for all corporate activities. Genovis Inc. in the US was dismantled in 2009 and the company has been legally deregistered.
Brief comment on Eijdo research AB
Eijdo is a CRO company (Contract Research Organisation), which in this case means selling preclinical studies involving the use of MR (Magnetic Resonance). The studies may involve the measurement of materials ex vivo, for example relaxation times for magnetic contrast agents in cell cultivations or in animal models. The com- pany has access to MRT equipment, a so called magnetic camera, which is intended for research use. The company personnel have vast competence and experience in MR physics, biochemistry, and cell biology, as well as how to handle IP issues during different project development phases.
Employees
The knowledge base represented in Genovis is highly competitive and all employees are provided the opportu- nity for continuing education; 50 percent of employees have PhDs. Gender equality is integral to our daily operations and the Company also strives to facilitate the integration of career with parental responsibilities and to offer both men and women the same opportunities for parental leave. On December 31, 2009, the Group had nine employees, including six at the Parent Company and three employees in Eijdo research AB, compared with ten people at the Parent Company the same period last year.
Occupational health and safety
Research places high demands on the work environment and safety is therefore of the utmost importance for laboratory operations. Occupational health and safety are integrated into the daily routine. A risk assessment is conducted prior to laboratory projects and procedures are in place for high-risk work. The Company continuously strives to reduce environmental risks. In addition the Company carries out safety rounds, as well as regular inspections of the ventilation system, safety ventilation and other technical equipment. Occupatio- nal health and safety policies at Genovis comply with the requirements of the Swedish Work Environment Act to achieve a good workplace environment. A good work environment provides job satisfaction while sti- mulating efficiency and continuous growth, and should be viewed by employees as being natural, on a par with other workplace issues. All activities should be geared to promoting health.
Fitness and health
All employees have access to a doctor, nurse and physical therapist and are offered physical examinations every other year. The Company provides lunch and snack facilities in a common area. The Company complies with all recommendations of The National Swedish Tax Board with respect to taxable benefits.
The Share
Capital stock in Genovis AB (publ) on December 31, 2009, was SEK 9,835,935.6 made up of a total of 24,589,839 shares, with a par value of SEK 0.40. All shares carry equal rights to a part of the company’s as- sets and profit. Cash dividends are paid through Euroclear Sweden AB (formerly VPC AB). To date, Genovis has not paid any dividend. Each share in the company carries one (1) vote at the shareholders’ meeting.
Each owner of shares in the company is entitled to vote for the full amount of such shares at a shareholders’
meeting, without any voting limitation.
Capital Stock Development, SEK
Outstanding warrants
In 2008 Genovis issued 187,000 warrants, each of which entitled the holder to subscribe for one new share in the Company at an issue price equivalent to SEK 17.40. The CEO and other employees subscribed to the war- rants on equal terms The warrants may be exercised for subscription of shares between February 28, 2012 and May 31, 2012. This means that if the warrants are fully exercised the new shares will constitute 1.7 percent of outstanding shares.
Dividend policy
To date Genovis has not paid any dividend.
Year Transaction Increase in capital stock
Increase in Class A- shares
Increase in Class B-shares
Increase in shares
Total number
of shares Capital stock
Share’s par - value
Issue price 1999 Formation of the
company 100,000 1,000,000 0 1,000,000 100,000 0.1
2000 New issue 25,600 0 256,000 1,256,000 125,600 0.1 4.8
2001 Stock dividend 376,800 0 0 1,256,000 502,400 0.4
2001 Stock convert (200,000) 200,000 1,256,000 502,400 0.4
2001 New issue 12,456 0 313,640 1,569,640 627,856 0.4 9.5
2002 New issue 99,100 0 247,750 1,817,390 726,956 0.4 11
2003 New issue 74,400 0 186,000 2,003,390 801,356 0.4 11
2005 New issue 360,000 0 900,000 2,903,390 1,161,356 0.4 6
2006 New issue 1,161,060 0 2,902,650 5,806,040 2,322,416 0.4 3.5
2006 New issue 1,161,179 0 2,902,947 8,708,987 3,483,595 0.4 7
2008 Stock convert (2,000) 2,000 8,708,987 3,483,595 0.4
2008 New issue 870,898.4 0 2,177, 246 10,886,233 4,354,493.20 0.4 7 2008 Stock convert (796,000) (10,090,233) 10,886,233 4,354,493.20 0.4 2009 New issue 1,272,093.20 3,180,233 14,066,466 5,626,586.40 0.4 3 2009 New issue 2,813,293.2 7,033,233 21,099,699 8,439,879.60 0.4 1 2009 Non cash issue 676,056 1,690,140 22,789,839 9,115,935.60 0.4 2.66
2009 New issue 720,000 1,800,000 24,589,839 9,835,935.60 0.4 1
Ownership
On December 31, 2009 Genovis had a total of 1,938 stockholders. Major stockholders as of December 31, 2009 are presented in the following table.
The Genovis Share
Genovis shares have been traded since September 14, 2006, on the Nasdaq OMX First North stock exchange under the name GENO in trading blocks of 200 shares. Thenberg & Kinde is the Company’s Certified Adviser. The market value of all listed Genovis shares on December 31, 2009, was about SEK 30 milli- on.
Class sizes Number of
stockholders Number of shares Holdings %
1-1000 589 305,323 1.24
1001-5000 762 1,889,017 7.68
5001-20 000 420 4,254,239 17.30
20 001-100 000 147 5,917,427 24.06
100001 - 20 12,223,833 49.71
Name Shares Warrents Holdings %
Bo Håkansson med bolag 4,404,266 17.91
Sarah Fredriksson 1,254,780 20,000 5.10
Henricus In't Zandt 845,070 3.44
Anna Gisselsson 845,070 3.44
Nordnet Pensionsförsäkring AB 631,667 2.57
Thorbjörn Fridh 507,202 2.06
Roine Svärling 500,000 2.03
Stefan Palmkvist 415,942 1.69
Nicklas Johansson 400,598 1.63
Martin Tisell 400,000 1.63
Övriga 14,385,244 167,000 58.5
Totalt 24,589,839 187,000 100
Board of Directors
Hans Göran Arlock (b 1938)
Chairman of the board - MS in Business Administration and Economics
Ordinary board member of Genovis since 2004. Management consultant, previ- ously active as CEO of Securitas AB; also performs assignments for Teknopol, Teknikbrostiftelsen and TeknoSeed AB. Hans Göran Arlock has years of experi- ence in management positions with Svenska Handelsbanken including as con- troller for Regionbanken för Södra Skåne and as a member of the management of foreign operations at Regionbanken. Chairman of the board of Promava AB.
CEO of Arlock Consulting AB and Akita Center in Sweden AB. Board member of Farstorp Invest AB, Exini Diagnostics AB (publ) and deputy board
member of H-I-C -European Management Syndicate AB and Maträtt and Gastro- nomi in Båstad AB.
Previous engagements: Innova Enterprice Service in Sweden AB, Ordio AB, Speedskills AB, Luvit AB (publ), Luvit Invest AB, Juridik & Managementkon- sulterna i Skåne AB, Bilmo i Lund AB, Micardo Consulting AB, Univa AB, Pronano AB, Prostalund AB och Roy Stanfors Consulting AB
Holdings: 390,001 shares
Ebba Åsly Fåhraeus (b 1963)
Board member – MBA
Ordinary board member since 2009. VP Sales & Marketing Anoto AB.
Has many years of experience in marketing and sales. Previous em- ployment as Strategic Business Development Manager with Raufoss United Group, Norway, International Product Manager with Johnson &
Johnson and Sales and Marketing Manager with Cederroth and Mölnly- cke.
Board Member of Apptix ASA, EQL Pharma
Previous engagements: None
Holdings: None
Nicklas Gerhardsson (b1965)
Board member – MS in Business Administration and Economics
Deputy board member of Genovis since 2001, ordinary board member since 2004. Partner at Fidens Partners AB. Previously CEO of Aimpoint AB. Has held various positions at Ericsson between 1995 and 2005 in product planning, pro- duct management and sales including head of product management in Japan and Sales Director of Ericsson Mobile Platforms in Lund. Has extensive experi- ence of international sales and business development
Holdings: 99,500 shares
Fredrik Lindgren (b 1971)
Board member – LL.M.
Ordinary board member since 2009. CEO of Biolin Scientific since 2005. 15 years experience from executive positions in listed compa- nies, among others, VP Active Biotech AB 1995-1997 and VP/CFO Midelfart Sonesson AB 2001-2005
• Board member of Biolin Scientific subsidiaries, ProstaLund AB, Con- nect Skåne, Mecena Foundation.
Previous engagement: Chairman of the board in MaxMedica AB, Bioglan AB, Bioglan Pharma AB, Ospol AB, Life Butiksdrift Sverige AB, Friggs AB och Hansa Medical AB (publ). Styrelseleda- mot i HKC Egenvård AB, Cavidi Tech AB, Vitamex International AB, Vitamex AB, Vitamex Production AB, Wilh. Sonesson AB, Max Medica Holding AB, HKC Holding AB, Hansa Medical Utvecklings AB and Ospol AB.
Holdings: None
Carina Schmidt (b 1958)
Board member - Master of Engineering
Ordinary board member since 2008. CEO of Athera Biotechnologies a com- pany within the Karolinska Development portfolio. She has experience from 25 years in industry, both as an employee and owner-manager mainly in business development, international marketing and product management within the Life Science area. Member of the investment committee, Innovationsbron Re- gion Mitt and speaker at University of Umeå “Entrepreneurship in Biotechnolo- gy”.
Previous engagement: Pharmacia Biotech, Amersham Biosciences, Grasp Bioscience and BioBusiness Partners Scandinavia
Holdings: None
Thomas Laurell (b 1961)
Board member - Master of Engineering, PhD in Engineering
Member of the board of Genovis since 2008. Professor in Medical and Chemical Microsensors at Lund Institute of Technology. Thomas Laurell has more than 25 years of experience in research and development with focus on nanobiomedi- cal and Lab-On-A-Chip technologies. Member of the board in Picology AB, ISET AB, ScandiCandy AB and Scandi Fastighet AB.
Name Rank
Year
of birth Elected Shares
Hans Göran Arlock and company Chairman 1938 2004 390,001
Nicklas Gerhardsson and company Member 1965 2001 99,500
Carina Schmidt Member 1958 2007 0
Thomas Laurell Member 1961 2007 0
Fredrik Lindgren Member 1971 2008 0
Ebba Åsley Fåhreus Member 1963 2008 0
Group Management and Auditor
Sarah Fredriksson (b 1968) CEO
Sarah Fredriksson completed her post graduate education in 1999 with the oral defense of her doctoral dissertation at the Department of Applied Biochemi- stry, Lund University. Through her postgraduate studies and in part while stu- dying engineering with a focus on biotechnology, Ms. Fredriksson has acquired extensive experience of laboratory work in the sector for which Genovis’ pro- ducts are mainly intended. She has published several scientific articles and is the author of several patent applications.
Holdings: 1,254,780 shares and 20,000 warrants.
Fredrik Olsson (b 1971) COO
Fredrik Olsson has an MS in Business Administration and Economics from the Faculty of Engineering at Lund University and since graduating in 2002 has been employed at Genovis AB.
• Holdings: 23 000 shares and 30,000 warrants
Auditors
PricewaterhouseCoopers AB
Magnus Willfors, Head Auditor Authorized Public Accountant
Sofia Götmar-Blomstedt Authorized Public Accountant
Corporate Governance Report
Swedish Code of Corporate Governance
Genovis does not belong to the group of companies required to comply with the Swedish Code of Corporate Governance as of July 1, 2008. The Board of Directors intends to gradually become compliant with the code.
Shareholders’ Meeting
The 2009 Annual General Meeting will be held on March 30 in Lund. Shareholders who are listed in a printout of the shareholders’ register produced by Euroclear Sweden AB (formerly VPC AB) on Mach 24 2010, and have notified Genovis AB of their intention to attend the Annual General Meeting by Mach 24 2010 at the latest are entitled to participate in the Annual General Meeting. It is not possible to participate by teleconference. Sha- reholders who wish to vote at the meeting but who are not able to personally attend may designate an alter- nate by authorization in writing. Each qualified voter may vote for all owned and represented shares at the meeting without limitation on the number of votes. The principle shareholders of Genovis are Farstorps Gård Förvaltnings AB and Sarah Fredriksson, whose holdings as of December 31, 2009, totalled 23 percent of capital and votes in the Company. A list of the largest shareholders can be found on page 17. The agenda will appear in the summons which will be issued six weeks before the Annual General Meeting at the earliest and four weeks before the meeting at the latest. The general meeting will be held in Swedish. All board members and auditors will participate at the general meeting unless they are unable to attend.
Nomination Committee
At the 2009 Annual General Meeting, it was resolved that the election committee for the 2010 Annual General Meeting would be composed of representatives for the four shareholders having the most votes in the com- pany at the end of the third quarter of 2009 and not being members of the board. Together with the chairman of the board they shall be members of the nominating committee in respect of the 2010 annual general meet- ing. The nominating committee shall appoint a chairman among the members. where the chairman of the board of directors shall not be chairman of the committee. Should a shareholder decline to participate in the nominating committee or leave the nominating committee before its work is completed, the right to appoint a representative shall turn to the next largest shareholder not represented in the nominating committee.
Should the ownership structure significantly change subsequent to the establishment of the nominating com- mittee, the composition of the nominating committee shall be changed in accordance with the above princi- ples. The Nomination Committee before the 2010 Annual General Meeting comprises:
Bo Håkansson, Sarah Fredriksson represented by Stina Gestrelius, Anna Gisselsson, Henricus in ’t Zandt and Hans Göran Arlock.
Work of the Board of Directors
Genovis’ Board of Directors was composed to be able to effectively support and supervise the work of compa- ny management. The members of the Board of Directors are elected by the Annual General Meeting. During the year there were six directors. Other officers participate as needed during board meetings as reporters or in administrative roles. The Board of Directors held 14 ordinary meetings during the year. The Company audi- tor reports to the Board of Directors every year based on an examination of accounts, and provides an assess- ment of internal controls. The Company’s auditor participated at two board meeting during the year. The
guidelines for the work of the Board of Directors are based on the rules of procedure, which also regulate the allocation of work between the Board of Directors, the Chairman of the Board and the CEO, whose powers are clarified in a special CEO briefing. The rules of procedure contain regulations for the number of ordinary Di- rectors’ Meetings and which issues will be dealt with at the ordinary Directors’ Meetings. In addition to follow -up and reporting on ongoing business and profitability, the work of the Board has included questions of stra- tegic development and direction, investments in research and development as well as financial issues, among others.
At the annual meeting the Board of Directors will propose the following remunera- tion guidelines for senior executives.
These guidelines are valid for employment agreements entered into after the guidelines are approved by the Annual General Meeting, and for amendments made afterward to existing employment agreements.
The basic principle is that remuneration and other terms of employment for the management and CEO will be competitive to ensure that Genovis AB can attract and retain senior executives.
Policy for fixed remuneration
The fixed remuneration to the management and the Chief Executive Officer should be competitive and be based on the individual areas of responsibility and performance.
Principles for variable compensation
No one will receive variable compensation. The Board will consider on a yearly basis whether or not to propo- se a share-related or market value-related incentive program to the Annual General Meeting. The Annual Ge- neral Meeting makes the decision regarding such incentive programs. Conditions for non-monetary benefits, pensions, termination and severance pay.
Pensions
Management and the CEO are entitled to a pension corresponding to the ITP plan.
Termination and severance pay
For management personnel and the CEO the notice period is 12 months for the Company and 6 months for the individual. In addition in certain cases, assuming that it is the Company that gave notice of termination, ma- nagement and the CEO may the offered 12 months’ severance pay. The Board of Directors may depart from these guidelines if there are particular reasons in an individual case. Assuming that the Group maintains the current number of senior executives in 2009, the Company’s obligation to the senior executives and CEO is estimated to cost the Group a total of SEK 2,110 000.
Audit committee
Genovis does not have an audit committee; these issues are decided ultimately by the entire Board of Direc- tors. An evaluation of the Board’s work has been performed in the form of a survey answered by Board mem- bers. The evaluation has served as a foundation for the work of the Nomination Committee.
Executive team
The CEO is responsible for the company’s strategic and business development, and directs and coordinates daily ope- rations. The CEO has a brief approved by the Board of Directors; this brief regulates the CEO’s tasks and duty to rep- ort to the Board. The CEO appoints managers of the operations areas and group functions. The executive team con- sists of CEO Sarah Fredriksson, and COO Fredrik Olsson. Executive meetings normally take place once a month and are led by the CEO. Decisions are made at the meetings regarding matters pertaining to the entire Group, and mis- sion-critical areas, strategies and business plans are followed up.
Internal control
The Board of Directors has the ultimate responsibility to implement an effective system for internal control and risk management at Genovis. The operations managers, at the direction of the CEO, are responsible for ensuring that risk management, management and control function according to the Board of Directors’ guidelines. Responsibilities and powers are defined at all units and levels in the brief concerning signatory authority. Operating units are fixed and documented flow-charts are available for all important processes. The Group has a reporting system that is used by the entire Group. The group of regulations described, together with laws and other external regulations, constitute the control environment and provide the basis for the Group’s internal control and risk management. Every year a detailed timeline is adopted for reporting on budget and results, including the executive team’s review of budget and results with the operating units. The budget process is conducted in the fall. At the beginning of each new quar- ter, a new updated quarterly forecast is drawn up. Every month the Board of Directors receives a written report about the company’s earnings and financial position. In addition, legal reporting is conducted every quarter.
Quarterly financial statements include more comprehensive reporting to the Board of Directors.
Compensation of the Board of Directors and senior executives
Remuneration to the Board of Directors
Compensation for the Board of Directors amounts to SEK 80,000 to the Chairman of the Board, and SEK 50,000 to the remaining Board members who are not employed at Genovis. No special pension costs have been paid out to the Board of Directors.
Compensation of senior executives
Sarah Fredriksson has an annual salary of SEK 696,000 and is entitled to a pension corresponding to the ITP plan. Her contract can be terminated with 12 months’ notice from the Company and 6 months’ notice from Sarah Fredriksson.
In case of termination of the employment contract by the Company, Sara Fredriksson is entitled to severance pay corresponding to 12 months’ salary. In addition, the employment contract contains a non-compete clause. Fredrik Olsson has an annual salary of SEK 564,000, and is entitled to a pension corresponding to the ITP plan. In case of termination by either the Company or Fredrik Olsson, the notice period is regulated according to the Employment Protection Act. The employment contract contains a non-compete clause.
Formal Annual Report
Administration Report ... 34 Financial Statement ... 35 Notes ... 42 Audit Report ... 44
Administration Report
The Board of Directors and CEO of Genovis AB (publ), corporate identity number 556574-5345, based in Lund, hereby submits a report on the annual financial statement and group financial statement for the parent company and the Group for the fiscal year January 1, 2009 - December 31, 2009.
Operations
Genovis is a nanobiotech company that provides services and products for medical research and development. The products are highly efficient tools that can be divided into two groups:
Proteins (Antibody Engineering) for antibody fragmentation and antibody modification.
Nanoparticles (NIMT®) for biomedical use.
Genovis multimodal nanoparticles (meaning that in one and the same nanoparticle you find several modalities or properties) are efficient and cost-effective tools in preclinical research studies. The nanoparticles combined with methods for the analysis of their contrast yielding effect in MRT, give the company a competitive edge in the area of medical imaging and so called molecular imaging. Genovis has through the acquisition of Eijdo research full-scale MRT equipment (Magnetic Resonance Tomography) as well as the specialist competence needed to perform pre- clinical contract research.
Research and development
The development projects pursued by the company have since a year ago been directed mainly towards the use of magnetic nanoparticles for so called medical imaging in preclinical development. Magnetic nanostructures make up an ideal platform when the aim is to perform multimodal imaging. First, the iron oxide core with its magnetic prop- erties is highly visible with MRT; second, the magnetic core of the particle can be furnished with different biocom- patible coatings that each one is suitable for use in techniques such as PET, SPECT, fluorescence and more.
Today Genovis is engaged in an in vivo/imaging project in collaboration with Lund University. The project will use nano structures in diagnostics (in medical imaging) with the aim to identify the very small tumors that can occur
Genovis monitors tumor growth using cancer cells that are marked with nanoparticles. The growth process is made visible with both MRT and fluorescence. In the second project nanoparticles are used as markers in newly formed cells in the brain. By the use of the nanoparticles the cells become detectable with MRT and their natural migration in the brain can be visualized. Genovis also supports several customer projects in which researchers either use Geno- vis products in medical imaging or to be able to trace stem cells.
The Product portfolio
The Protein portfolio
To construct pharmaceuticals that can target a specific site, it is often used antibodies having the ability to detect any relevant detail on a cell surface or a part of a structure in the body. It is often not possible to use the whole antibody in such work, but only a part or section thereof. To modify and cleave antibodies is referred to as antibody engineering, and it requires different tools. In the spring of 2007 Genovis took the opportunity to acquire the patent rights to such tools. During 2008-2009 the company has increased this patent portfolio so that it now contains three different products for antibody engineering, namely FabRICATOR®, FabRICATOR®KIT, and IgGZERO™. All products launched by Genovis are used by researchers in pharma companies, biotech companies or the academic research community.
NIMT® nanoparticles
Imaging is a rapidly growing market segment, and a technique used by researchers in in vivo and ex vivo studies. To visualize what is happening inside a cell and to monitor a cell inside an animal model, the cell needs some kind of labelling. Through the introduction of magnetic nanoparticles into the cell, NIMT®FeOlabel, it is possible to monitor the cell using MRT. There is big market for techniques that can deliver molecules (e.g. DNA or genes) into cells, so called transfection. NIMT®FeOfection is such a technique, showing high efficiency and low toxicity compared to com- petitive products. NIMT®FeOfection has the inherent extra quality that it generates a contrasting effect when used in MRT, which means that also the movements of transfected cells can be made visible in preclinical animal models.
Geographic markets and marketing strategy
Genovis is selling to retailers and distributors who in turn work on companies in different regional markets. The dis- tributors have solid knowledge of the business opportunities open to Genovis products in each individual region, and today the revenues are foremost generated from sales of proteins and nanoparticles as consumables. The company currently has distributors covering thirteen countries with a geographic spread from North America over to Europe and all the way to the Far East. There are also sales directly to end customers in countries where Genovis does not have distributors.
Today the revenues are primarily generated through sales of proteins and nanoparticles as consumables, but there are also revenues from consultancy services combined with sales of nanoparticles for applications that do not fit with Genovis main product lines.
In 2010 one additional objective for our protein sales is to generate revenues through OEM agreements or under li- censes, which could mean either that Genovis takes on production but the products are sold a contracted partners trademark or that the partner takes full responsibility for the product. In the latter case our revenues are likely bro- ken into an advance payment combined with royalty income per unit sold. In either case the contracted partner will be responsible for all marketing and sales activities, and this is the business model Genovis has decided to pursue in
