Biovitrum develops and sells specialist pharmaceuticals that give people a better life

Biovitrum develops and sells

A n n u A l r e p o r t 2 0 0 8

02 CEO’s comments – a year of exciting changes 04 This is Biovitrum

05 Totalry of financial year 2008

13 Biovitrum – a Swedish specialist pharmaceutical company in the world

11 Our world offers opportunities and challenges 12 Biologics offer new opportunities

14 Specialist pharmaceuticals give people a better life 19 Three unique new products under the Biovitrum name pave

the way for future growth

22 Development of specialist pharmaceuticals – Biovitrum’s specialty

24 Pharmaceutical proteins manufactured in Biovitrum’s biotech production facility

25 Responsibility, commitment and sustainable development 31 The Biovitrum share

32 Corporate governance report 36 Operational risk management 38 Financial information 82 Board of Directors 84 Senior Management 87 Glossary

38 Financial information 39 Directors’ Report 50 Income Statement – Group 51 Balance Sheet – Group

52 Changes in shareholders equity – Group

53 Cash flow statement and supplementary disclosure – Group 54 Income statement – Parent Company

55 Balance sheet – Parent Company

56 Changes in Shareholders' equity – Parent Company 57 Cash flow statement and supplementary disclosure –

Parent Company 58 Notes

Presentation of the annual rePort 2008

This is Biovitrum´s Annual Report 2008. It contains a presentation of the company and its operations during the year, focusing on activities that create and drive values. The Biovitrum share, listed on the OMX Nordic Exchange in Stockholm since September 2006, is also presented. The Annual Report 2008 can be down loaded from www.biovitrum.com and can also be retrieved from the company head office.

Biovitrum is a Swedish corporation governed by Swedish laws. All values are expressed in Swedish kronor. Million kronor is abbreviated SEK M.

Numerical data within parenthesis refer to 2007 if not stated otherwise.

Data on market and competition situations are Biovitrum´s own estimate if not a specific source of information is given. These estimates are based on best and latest available facts from published sources within the financial business and among competitors

a year of large and exciting changes

the past year has been extremely eventful for Biovitrum, which went through an extensive change completely in line with the business strategy we launched in late 2007. we acquired new marketed products with interesting potential, thereby expanding commercial operations geographically and establishing an inter- national distribution chain. we also restructured and reduced the size of our research organization. the manufacturing agreement with wyeth for reFacto

was extended to the December 31, 2015.

in addition, we downsized corporate management while reinforc- ing it with people who are highly experienced in the industry.

i look forward to 2009 with confidence, when we will foc us on ensuring that as many patients as possible gain access to, and benefit from, our new drugs. more- over, we will do everything we can to ensure that the special- ist pharma ceuticals in our research portfolio will con- tinue to develop optimally in

order to benefit patients as quickly as possible. we will also con- tinue to focus on removing of those portions of our research operations that are no longer in line with our strategy, while we continue to identify new attractive acquisitions.

acquisition of new commercial products creates a base for growth

During 2008 we successfully built an organization and structure for distribution and commercial operations in europe, north America and Australia/new zealand. moreover, we reregistered our new recombinant protein products Kineret

, Kepivance

and stemgen

in Biovitrum’s name and built healthy relationships with various drug regulatory authorities. we have resources in place to take care of new clinical trials for these products, general product support and management of drug safety issues internationally.

we have also taken over manufacturing technology and cell banks.

Biovitrum has also continued to build good relations to different regulatory authorities.

in a short time, Biovitrum´s knowledge, experience and resources have vastly improved thanks to efforts from every corner of our company. i am convinced that these measures have increased our appeal for potential new alliances and transactions in the field of specialist drugs.

r&d focus on specialist drugs and biotech expertise many patients, especially those who suffer from uncommon dis- eases, still have significant medical need. Biovitrum has extensive experience and excellence in biotech development and produc-

tion, as well as in specialist drugs. taken together, it implies that we now concentrate our in-house r&D on developing biopharma- ceuticals and focus on specialist drugs, which offer opportunities to contribute with new innovative treatments, that are of great value to patients.

in order to maximize the value of our new products and our drug portfolio aimed at indications requiring specialist care, we will devote more resources to clinical development. At the same time, we must reduce our total r&D expenses. consequently, during the year we decided to discontinue development of pri- mary care drugs and discontinue all small molecule research.

unfortunately, this has led to redundancy within the re- search organization, but we have high hopes that the extrem ely talented individu- als who successfully worked in this part of the organiza- tion will find attractive new jobs with other companies, institutions and authorities.

overall costs will be lower in 2009 as a result of this radical transformation of the research organization.

international marketing resources and distribution network starting point for more products

we are now applying our experience from the successful market strategy for specialist pharmaceuticals in the nordic countries on an international basis. we will gradually expand our commercial organization in order to flexibly cover the other parts of the world where our new products are approved. we now also have ware- houses and distributors on contract in europe, Australia/new zealand and usA/canada. several of them have already handled Kineret

, Kepivance

and stemgen

, which has greatly facilitated the transfer of these products to us. with this we are well prepared to launch our own products in the future.

strong operational results 2008

Apart from non-recurring revenues total revenues from reFacto

were at similar level as in 2007. the reduction on the total revenue side was expected since contract manufacturing, except reFacto manufacturing, essentially ceased as well as licensing revenues that now completely come to an end. the fact that we made a loss for the full-year corresponding to seK 335 m is explained by non- recurring restructuring costs associated with r&D, as well as acquisition of the new products. it is reassuring to note that we have been able to carry out these radical changes whilst maintain- ing a strong position in liquid funds and short term investments of seK 460 m at the end of 2008.

Ceo’s Comments

About development from research company to international pharmaceutical company in one year

»in 2008 Biovitrum completed an extensive

transformation that was completely in line

with the business strategy launched in late

2007. i am extremely proud that we suc-

ceeded in carrying out this change, which

facilitates strong growth«

Value in our new products and in our research portfolio

we began 2009 as a new Biovitrum. one important task will be to further develop the use of our newly acquired pharmaceuticals.

in addition, our project portfolio is expected to advance another step closer to the market. we have hopes of having projects in phase iii by the end of 2009. we will also continue to look for opportunities to strengthen our commercial product portfolio through additional acquisitions.

i would like to close by thanking all of our employees for a valiant effort during the past year. we have undergone these changes together to achieve a unique situation. our organiza- tion, and our business have dramatically changed and we are well equipped to deliver worthwhile and innovative pharmaceuticals to people with significant medical need. i am proud to lead a company that has come so far in achieving the objectives we set over one year ago. together we are creating a new Biovitrum and a platform on which to build a successful international pharma- ceutical company.

martin nicklasson, ceo

name: martin nicklasson Born: 1955

interests: All types of sports, especially golf. enjoys cooking and spending time with his family with the mutual interest in water sports.

education: holds a degree in Pharmacy and a Ph.D. in Pharmaceu- tical science. Associate professor at the Faculty of Pharmacy, upp- sala university, since 1985.

career: Former member of executive management at Astrazeneca Plc. executive vice President and head of global marketing and ceo of Astrazeneca AB. has previously held a number of leader- ship positions within Astra and Astrazeneca, including ceo of Astra Pain control AB, ceo of Astra hässle AB, head of gastrointestinal Franchise in Astra and Astrazeneca and in addition executive vice President for global Drug development in Astrazeneca. martin has also held research leadership positions at Kabi Pharmacia.

heart issue: member of the swedish heart-lung foundation board of directors since 2008.

Biovitrum’s Core ConCePt

is to develop and sell specialist pharma ceuticals that give people a better life. our business goal is to create a long-term profitable pharmaceutical company through international launch and sales of in-house developed and desirable products. in 2008 a large step in that direction was taken.

through the acquisition of three unique biotechnological prod- ucts, Biovitrum has developed into an international company. From having previously been successful in the nordic countries, our presence has expanded to include europe, north America and Australia/new zealand.

Biovitrum has all of the expertise and experience needed to take scientific innovation all the way to the market; in other words, from drug discovery and development to registration, production and sales. with protein-based drugs as a top priority field, Biovitrum develops medications for an international market. the basis for all work is the patient’s need for better medications and a balance between risks and opportunities in our investments.

specialist pharmaceuticals

target small patient groups and are mainly prescribed by medical specialists. treatment is usually provided at facilities providing such specialist care. medical need in this field is hugh and specialist drugs therefore have significant market potential.

Biopharmaceuticals

are recombinant proteins produced using biotechnological processes and that are very close to the body’s own substances. Factor viii is one such protein that is used in the

treatment of hemophilia. unlike many other drugs, protein-based drugs are not taken in tablet form but are usually administered by injection.

Biovitrum’s mission

is to develop and sell specialist pharmaceu- ticals that give people a better life.

Biovitrum’s vision

for five years from now is to continue to be a successful and profitable company, which also has launched its own desirable specialist pharmaceuticals internationally.

Biovitrum’s business model

is based on research & development, production, and sales & marketing. the company generates today revenues through:

●

Production of the active pharmaceutical ingredient in reFacto

; royalties from wyeth’s global sales of reFacto and co-promo- tion revenues from the sale of reFacto in the nordic region

●

sales of Kineret

, Kepivance

in europe, north America, Aus- tralia and new zealand, as well as stemgen

in three coun- tries

●

co-promotion or exclusive distribution agreements for the nordic market

Biovitrum develops its portfolio of specialist care projects internally or together with partners to be able to generate future revenues.

this is Biovitrum

Biovitrum is a swedish Biopharmaceutical company that develops, manufactures, and sells specialist pharmaceuticals internationally. With our expertise, experience and engagement we take scientific innovation all the way to the market and thus offer patients new treatment alternatives.

our therapeutic focus is within hemophilia, supportive cancer care, inflammation/autoimmune diseases and malabsorption. Biovitrum had during 2008 revenues of approximately seK 1.1 billion and approximately 400 employees in the beginning of 2009.

A well-founded growth strategy has largely already been implemented

Strategy

» ₁

expand product portfolio

and geographic spread 2

focus on specialist

indications 3

fully develop and use biotech expertise

Implementation

»

Acquisition of three products from Amgen

»

Distribution and marketing established with presence in europe, north America, Australia/new zealand

»

8 specialist care products marketed

»

6 specialist care projects in r&D portfolio

»

Primary care projects ended or outlicensed

»

contract operations ended

»

Biotechnological development included in r&D

»

small-molecule r&D ended

continued stable financial position

●

net revenues amounted to seK 1,140.6 m (1,256.4) and the profit for the year before non-recurring costs was seK 60.4 m (79.0), which represents earnings per share of seK 1.31 (1.73).

results including non-recurring costs were seK -335.5 m, representing earnings per share of seK -7.28 (1.73).

●

cash flow from operations was seK -506.5 m (-25.4). Before acquisition and restructuring costs cash flow was seK 164.8 m.

cash and cash equivalents and short-term investments as of December 31 amounted to seK 460.1 m (760.4).

financial overwiev 2008

amounts in seK million full year

2008 full year 2007 full year

2006

total revenues 1,140.6 1,256.4 1,201.1

whereof:

revenues from product sales 38.2 4.7 3.2

Co-promotion revenues 174.7 149.1 126.1

revenues from contract manufacturing 619.0 741.0 689.9

royalty revenues 176.2 165.5 160.6

licencing and milstone revenues 132.5 196.2 176.6

other 44.7

Proifit/loss before restructuring and other one-time expenses

operating profit/loss 40.1 55.1 54.6

profit/loss after financial items 60.3 79.0 168.2

profit/loss for the period 60.4 79.0 166.7

Profit/loss including restructuring and other one-time expenses

operating profit/loss -386.3 55.1 54.6

profit/loss after financial items -366.1 79.0 94.2 profit/loss for the period -335.5 79.0 92.7

earnings/loss per share before dilution

(SeK) -7.28 1.73 2.00

earnings/loss per share after dilution

(SeK) -7.28 1.69 1.86

research and development expenses 670.6 694.3 650.4 liquid funds and short-term

inverstments 460.1 760.4 903.8

totalry of 2008:

A year with extensive strategic changes

total revenues for the period were seK 1,141 m, a decrease of 9 percent. revenues from milestones and

contract development and manufacturing fell. operating profit before restructuring and non-recurring costs

totaled seK 40 m. several projects advanced to late development

the new business strategy designed for sustainability and growth

● the following decisions were carried out in accordance with the long-range strategy:

»

the commercial product portfolio was broadened and the mar- ket presence geographically expanded

»

All activities are now focused on specialist pharmaceuticals for diseases with unmet medical needs

»

Biovitrum will take its own research projects all the way to the market on its own or in cooperation with strategic business partners

●

a clear refocusing of operations within the r&d organization were made:

»

in line with the new business strategy to focus on protein drugs within specialist indications, the number of employees working in research and development will be reduced. the final parts of the restructuring process will be implemented during 2009 after which the number of employees within r&D will be reduced from 353 at the end of 2007 to 170.

»

small molecule drug discovery was discontinued

»

A process was initiated to outlicense primary care-related research projects

●

Biovitrum entered into important commercial contracts for long-term financial growth and sustainability:

»

Kepivance

and stemgen

were acquired from Amgen and an agreement to obtain an exclusive license for Kineret

were reached; Biovitrum thus expanded its commercial presence and established an international distribution chain

»

Biovitrum strengthened its partnership with wyeth by extending the global manufacturing agreement for reFacto

until Decem- ber 31, 2015

●

the clinical project portfolio developed positively

»

A phase i/ii-study with the factor ixFc protein was initiated in patients with hemophilia B. Factor ixFc received orphan drug status in the us

»

in the Kiobrina™ project, a Phase ii clinical trial was initiated in premature infants

»

A clinical trial was initiated with exinalda™ for the treatment of fat malabsorption in patients with cystic fibrosis

»

A phase i study in the sym001 project showed that the drug candidate was safe and well-tolerated

»

A second clinical study showed that the drug candidate sym001 eliminates rhD positive red blood cells from circulation

»

A phase ii trial of sym001 was initiated to study the safety, effi- cacy and dosage in patients with immune thrombocytopenia purpura (itP)

significant events in 2009

● reFacto AF™ was approved for sale in europe

● Biovitrum decided to sell its British research unit, cambridge

Biotechnology (cBt)

● Biovitrum entered into an agreement with Karolinska Develop-

ment to pursue leukemia project (Flt3) in a jointly owned

project company

sales and marketing

amounts in seK million 2008 2007 2006

Kineret^® 25.8 – –

Kepivance^® 5.7 – –

Stemgen^® 0.6 – –

Aloxi^® 5.3 3.2 0.1

novastan^® 0.8 1.5 0.1

total 38.2 4.7 0.2

At the end of 2008 Biovitrum acquired the global rights for two products, Kepivance

and stemgen

, as well as a global license for production and sales of Kineret

from Amgen. the acquisition included an extensive inventory of goods. Product sales increased by seK 33 m to seK 38 m mainly as a result of the product acqui- sitions. sales during second half of December amounted to seK 32 m for Kineret, Kepivance and stemgen.

Kineret^®

is a recombinant protein drug for use by patients with rheumatoid arthritis to reduce joint pain and swelling.

Kepivance^®

is a recombinant protein drug used to prevent inflam- mation (mucositis) and the development of severe ulcers in the oral mucosa among patients suffering from hematologic malignan- cies who are undergoing chemotherapy and radiation prior to bone marrow transplantation.

stemgen^®

is a growth factor used in connection with blood pro- genitor cell transplants for the treatment of leukemia.

Co-promotion revenues

amounts in seK million 2008 2007 2006

reFacto^® 80.2 72.7 71.4

BeneFIX^® 10.4 2.2 –

Mimpara^® 22.7 17.5 7.9

Kineret^® 61.2 56.1 49.5

Kepivance^® 0.2 0.6 0.3

total 174.7 149.1 129.1

co-promotion revenues from reFacto climbed 10% to seK 80 m (73). After taking over sales of reFacto June 1, 2004 Biovitrum has doubled product revenues by increasing its market shares in the nordic area.

Also other co-promotion revenues showed a substantial increase.

the increase is mainly attributed to the recently implemented relaunch of BeneFix

when Biovitrum took over marketing rights in the nordic countries. mimpara

was recently approved in europe for the treatment of overproduction of parathyroid hormone (PhPt). Biovitrum holds the marketing and sales rights for mimpara in the nordic countries even in this new indication.

Research and Development

Biovitrum decided to further sharpen the focus of the company’s research and Development. consequently, Biovitrum has ceased all early research relating to small-molecules and is instead con- centrating resources on drug discovery based on biotechnology.

Biovitrum develops drugs for the treatment of diseases that affect small patient groups with significant medical need, such as patients with hemophilia and premature infants with fat malabsorption.

the project portfolio achieved good growth during the year and Biovitrum currently (April 2009) has six specialist care proj- ects in clinical development (see table on page 23). Biovitrum’s total r&D budget for 2008 was seK 671 m (694). outlicensing and milestone revenues during the year were seK 132 m (196).

Manufacturing and contract development

amounts in seK million 2008 2007 2006

reFacto^® 569.3 677.2 536.0

of which validation batches 47.0 93.1 –

Contract development 49.7 63.8 153.9

total 619.0 741.0 689.9

Biovitrum manufactures the active ingredient for reFacto and reFacto AF™ (xyntha

) for wyeth. For xyntha/reFacto AF Biovit- rum manufactures the pharmaceutical substance in an advanced production process without the addition of any human or animal components. As expected, manufacturing revenues declined and were seK 595 m (677).

other contract development revenues have continued to decline to seK 50 m during 2008 as a consequence of the strate- gic decision to make use of the competence within biopharma- ceuticals to develop in-house projects and products.

refacto nordic market sales Development 2000–2008, mseK

Biovitrum takes over nordic marketing of reFacto

120 140 160 180 200 220 240 260

only a limiteD numBer of PeoPle

suffer from any of the approx- imately 7,000 uncommon diseases found in today’s world. even if they are relatively few in number, those affected are not at all less important. these diseases are often life-threatening or cause chronic disability and therefore have a severe impact on patients and their families. these patients therefore require specialist care.

the more unusual diseases are largely neglected because of inadequate diagnostics; moreover, many of them still lack satisfac- tory treatments.

Biovitrum is a pharmaceutical company focused completely on developing and marketing specialist drugs with a focus on biotechnologically-produced products. Biovitrum’s vision is to help to people to achieve a better life by offering its own and inlicensed products for new innovative treatments on a global market for specialist drugs.

Despite the relatively small patient groups and limited number of prescriptions, specialist drugs have significant market potential. regulatory authorities have adapted the requirements for documentation of these type of products with small patient populations and huge medi- cal need, which means fewer resources are required to develop these drugs than drugs for the treatment of the major, so called common diseases. consequently there is good reason for a com- pany with our size and expertise to focus on specialist drugs aimed at small patient groups.

each year Biovitrum dedicates a large share of its resources to the development of new specialist drugs. the company is unique for its size in that it has everything needed to develop new drugs and launch them on the market. Added to this unique expertise is a long successful tradition of developing high-tech biologic processes for manufacturing new protein-based drugs.

objectives and strategies

the goal is to become a market-leading international pharmaceu- tical company with a focus on protein-based drugs for specialist care. Biovitrum will foster an environment that nurtures new ideas and cost-effectively carries out drug development. innovation, knowledge and collaboration will help turn creative new internal and external ideas into new drugs that can help improve patients’

lives.

Biovitrum’s long-term growth rests on three cornerstones:

concentrating development on projects related to diseases treated by specialists, taking drug projects all the way to market and expanding the portfolio of marketed drugs. in the short run, we intend to buy product rights from other companies. in the longer term, we will also market the products resulting from in-

house development. since it presented the new business strat- egy in the autumn of 2007, company management has taken step-by-step measures that are in line with this strategy. these measures include a new focus with restructuring of the r&D organization, initiation of outlicensing of primary care projects as well as acquisition of product rights, and international market expansion.

focus on protein-based drugs for specialist care through the acquisition of three protein-based drugs from leading American biotech company Amgen, Biovitrum has substantially strengthened its position as a specialist pharmaceutical company.

Biovitrum thus expanded its commercial presence from having been limited to the nordic region to also include europe, the united states, canada, Australia and new zealand. this expansion paves the way for a future international launch of the pharma- ceuticals that we develop in-house. in addition, an international presence makes Biovitrum more attractive as a partner and there- fore increases the potential for new projects and inlicensing of products, as well as for acquisitions.

we have more than 30 years of experience of biotechnologi- cal process development and production. this unique expertise and capacity is used both to develop and carry out projects in- house, as well as for projects conducted in cooperation with other companies. our long-term collaboration with us pharma- ceutical company wyeth is a clear acknowledgment of this ability.

For years, the most important source of income for Biovitrum has been drugs to treat hemophilia. in hemophilia, the blood lacks one of the coagulation factors, which means that the blood does not clot. consequently patients with hemophilia, almost always males, need injections of a coagulation factor to prevent and stop bleeding. these bleedings can otherwise lead to severe pain and lasting joint injury; sometimes they can even become life-threatening.

Biovitrum markets and sells medications to treat the two most common types of hemophilia in the nordic market (hemophilia A and hemophilia B). one of these drugs, reFacto

(for the treat-

A Swedish specialist pharmaceutical company with a global presence

the lack of satisfactory treatments for uncommon diseases increases the need for specialist drugs. Biovitrum’s goal is to become the international market leader in protein-based drugs for patients receiving specialist care.

»there are approximately 7,000 less common diseases

that require specialist care. these diseases are to a large

extent neglected and many of them lack adequate treat-

ment.«

ment of hemophilia A), has captured more than 30 percent of the market. Biovitrum works on a contract basis and is the exclusive manufacturer of the active protein that is part of reFacto and also receives royalties on wyeth’s global sales, providing Biovit- rum with a good source of income. Biovitrum markets the other medication, BeneFix

(for the treatment of hemophilia B) in the nordic region through a cooperation agreement with wyeth.

Biovitrum is also developing the next generation of long- acting medications, which will simplify treatment for patients with hemophilia. in addition, Biovitrum engages in extensive initiatives providing materials and training to different groups of patients to help provide even better care of patients, aimed at enabling them to “live an inordinately ordinary life.”

By acquiring products in a broad international market, Biovit- rum has created a healthy balance in its product portfolio. As a result of strengthening the treatment and sales areas of rheuma- tology and oncology, the company’s primary revenues now come from more sources than in the past, increasing risk spreading in a positive way.

Path to success

since its inception, Biovitrum has gradually undergone a substan- tial and exciting conversion. when the company was founded in 2001 the focus was on drug discovery and development. today Biovitrum is an international pharmaceutical company with several

specialist medication projects in clinical development, as well as sales of specialist drugs on the global market. guided by strategic decisions, management has accelerated this transformation over the past year. strongly contributing factors to the change process include the outstanding opportunities resulting from the Amgen agreement, which provided a global presence. these events have culminated in several necessary changes within the company, including terminating research on small-molecule chemical sub- stances, while the marketing organization and clinical research and development department have expanded.

By concentrating operations to the development, production and sale of protein-based drugs for illnesses requiring specialist care, Biovitrum is applying its expertise, experience, engage- ment and resources in a more efficient way.

Biovitrum’s location on the Karolinska institutet campus in stockholm provides ample opportunity for new ideas and advan- tageous partnerships with the university, as well as with other innovative companies. Partnering with other companies for development projects reduces costs and spreads risk.

through the coordinated application of all of our know-how and experience and a clear focus on products for specialist care, we are laying the foundation for continued expansion with the goal of becoming a market-leading international pharmaceutical company.

From Nordic to international precense n Before Amgen agreement n n After Amgen agreement

on september 12 Biovitrum and Amgen signed the agreement that gave Biovitrum the opportunity to acquire the drugs Kepivance^® and stemgen^®, as well as an exclusive global license for Kineret^®. on December 15 the product acquisition agreement was concluded and since December 16 Biovitrum sells and distributes the products in north America, europe, Australia and new zealand.

the pharmaceutical industry faces major challenges…

today it is possible to identify the underlying mechanisms for more and more diseases, which is incredibly encouraging for patients and poses new challenges for the pharmaceutical industry with respect to alleviating and curing these diseases. At the same time conditions are changing due to factors such as increased cost controls from regulatory authorities, competition from less expen- sive copies (generics), and the ability of the public to obtain medical information on the internet.

Another aspect of the competition situation involves the problems with counterfeit drugs, often marketed online. through their accentuated or incorrect effect or lack of effect they pose an obvious threat to patient health. the eu commission recently proposed measures against counterfeit drugs, along with mea- sures to increase information for patients about medications and increased patient safety. such efforts are necessary to preserve the credibility of the serious pharmaceutical industry in relation to the patient.

the situation is also affected by the decrease in productivity within the r&D departments at big pharma companies. in addi- tion, the patents for many of the best-selling traditional drugs will soon expire, thus opening the field for rival generics. ever- more stringent safety requirements make it increasingly difficult and expensive to launch new products on the market. mean- while, an increasingly informed and well-educated public ques- tions pharmaceutical research and places new demands on care providers. Payers not only place higher demands on new prod- ucts, but also expect to pay less.

Frequently discussed controversial issues include important questions as the ethics of animal experiments, the focus on life- style diseases and drug pricing. in addition, skyrocketing health- care costs around the world have resulted in more stringent regulation of prescriptions and sales. An increase in conventional medications and medications based on new technologies, along with strong pressure on the pharmaceutical industry to shorten drug development time, place higher demands on safety moni- toring of drugs. this places new and stringent demands on the ability of the pharmaceutical industry to achieve success.

… but also new opportunities…

more political interest in biopharmaceuticals and biotechnology has been noted in recent years. several projects at the eu level are aimed at increasing european competitiveness in these fields. the research community is working intently to make politicians aware that resources for biomedical research must be strengthened, especially with respect to clinical research. clear trends can be noted toward an increase in resources for development of biop- harmaceuticals along with increased interest in rare diseases.

meanwhile, a number of changes are also taking place in our world that create new opportunities and have a major impact on

biomedical research and the development of new medications.

these changes include advances in genomic and protein research, as well as the theoretical and technological achieve- ments that make it possible to store and process vast quantities of data. Developments in life science computing have also cre- ated opportunities for computerized optimization of biotechno- logical processes. certain studies that previously required living organisms can now be carried out using computer models with greater precision, in less time, and at a lower cost.

the four fastest growing markets – Brazil, russia, india and china (Bric) – are greatly improving their healthcare systems.

the Bric countries account for 25 percent of the earth’s land surface and 40 percent of its population. Developments in these countries are therefore vastly important to the future of the phar- maceutical market. in the future, more people and an increasing number of uncommon and neglected diseases will be subject to treatment.

in some parts of the world, people now live longer due to successful research and changed living standards. expectations and demands on quality of life are also increasing, accompanied by the increased need for new, safer and more effective medica- tions. in recent times attention has been focused on the inade- quacies of drug use by the elderly. while medications may help many older people lead an active lifestyle, extensive use of mul- tiple drugs simultaneously has been challenged. this trend pres- ents opportunities for new innovative therapeutic strategies.

… that pave the way for new ideas …

the global pharmaceutical companies are sized to develop and sell drugs to extremely large patient groups. however, medications can now be adapted to the unique needs of each patient and a growing trend toward individually tailored prescriptions is under- way. the concept of the future is increasingly becoming to develop medications for customized treatment.

… and open the door for protein-based medications for patients under specialist care.

the field of “rare and uncommon diseases” is attracting growing interest and receiving higher priority in both the eu and the us.

modern tools of genetic engineering and improved diagnostics have increased our understanding of these diseases, and once inexplicable symptoms can now be explained and treated. special- ists and specialist pharmaceuticals companies are now endowed with new possibilities for meeting these substantial medical needs.

Protein pharmaceuticals are becoming increasingly attractive for both industrial development and clinical use. thanks to advances in biotechnology and ancillary technologies, we have new protein-based drugs and many late-phase protein projects.

our world

the pharmaceutical industry faces major challenges. today’s genetic tools and better diagnostics create a brand

new framework. in the future we will see increased demand for drugs designed to meet the needs of the

individual patient.

Protein pharmaceuticals are based on the body’s own regulating substances

Proteins are large complex molecules that comprise and regulate most of the processes occurring in our bodies. with the informa- tion in our genetic material, DnA, as a template, our cells form all the different proteins that the body needs to be able to function.

mapping of human DnA has opened up opportunities to identify many new proteins that may have an influence on disease pro- cesses and could be of therapeutic value. through the use of recombinant DnA technology, genetic material is cut from one human cell and pasted into another cell that is suitable for produc- tion. through mass culture of these production cells, large quan- tities of the desired, recombinant protein are produced. the purified protein then serves as the desired pharmaceutical sub- stance. the process for manufacturing a protein-based drug therefore considerably differs from the process for small-molecule drugs.

Protein pharmaceuticals can also be produced from tissues, such as blood, from humans and animals. Although the technolo- gies currently used to trace infectious agents are very effective, patients perceive avoiding drugs based on proteins of human or animal origin to be a great advantage. in addition, biotechnology provides a continuous and unlimited source for the pharmaceuti- cal protein, thus eliminating the problem of access to tissues.

Biovitrum’s expertise spans just about the entire chain, from gene to completed pharmaceutical. we develop processes for preclinical, clinical and commercial use and our expertise encom- passes development of methods within all specialized fields for protein analysis and advanced characterization of proteins and protein variants.

favorable trend for biotech products

the biotech industry is considered one of the most important growth areas in the global pharmaceutical market. through pivotal advances such as the development of monoclonal antibodies and research on genes and proteins, the market for biopharmaceuticals has expanded enormously since its inception in the 1970s. over the past 30 years the biotech industry has delivered more than

200 substances that have reached the market. Analysts estimate that these drugs and vaccines have helped more than 350 million people worldwide. the global market for protein pharmaceuticals in 2007 was valued at about usD 80 billion, which represents 9.6 percent of total pharmaceutical sales in the world (epsicom, 2008).

Analysts forecast continued strong growth over the next 25 years in the biopharmaceutical market, with important new technological and commercial achievements. increased r&D ini- tiatives, shorter times to approval and innovative new treatments all contribute to the growing market. For protein pharmaceuticals based on the body’s own substances, the documentation require- ments for registration are clearer and, in some cases, simpler.

recombinant DnA-based products are one such group with a high percentage of approved drugs. the risk that a drug candi- date would lack a positive treatment effect in humans is smaller for the body’s own substances, at the same time that adverse effects are less common, which reduces the total cost of taking a substance all the way to market.

however, there are also threats. the biotech industry could run into financing problems, which could inhibit the flow of inno- vations. strategic partnerships will therefore also continue to be of great importance for biopharmaceutical drug development.

total global sales for biopharmaceuticals 1998 – 2007, billion usD

(Christel, 2008) 0

10 20 30 40 50 60 70 80

98 99 00 01 02 03 04 05 06 07

Biologics offer new opportunities

Biovitrum has more than 30 years of experience developing protein pharmaceuticals. Based on this experience,

we are developing protein pharmaceuticals to treat patients under the care of specialists. the focus on new

technologies provide us with opportunities to address more medical needs than previously.

Specialist pharmaceuticals that give people a better life

Biovitrum develops, manufactures and sells medications within four specialties: hematology, rheumatology, oncology and endocrinology.

toDay We are aWare

of far more diseases than those for which we have cures. Biovitrum focuses on medications for patients with a large medical need. this category includes specialist drugs, which are mainly prescribed by clinical specialists and aimed at small well-defined patient groups. Development of such products does not require as extensive resources, relatively speaking, as medications aimed at larger patient groups. Biovitrum has also several specialist drugs that belong to this category in the devel- opment portfolio.

these often neglected and inadequately treated, less com- mon diseases are attracting growing interest, in part because these medications generate value for the patient. there are good reasons for a company with Biovitrum’s size and expertise to focus on specialist drugs and products aimed at smaller patient groups with specific medical needs.

in 2008 Biovitrum established its marketing organization in europe, usA, canada, Australia and new zealand through the acquisition of Kepivance

, stemgen

. and Kineret

. in addition, reFacto

and four additional niche products, Kineret, mimpara

, Aloxi

and BeneFix

, are all marketed in the nordic countries. the organization involves 22 people comprising a highly qualified sales force that works with a clear customer focus.

customers include patients, healthcare providers, purchasers and pharmacy staff. the goal is to create a constant dialogue with customers and decision-makers and work with customized messages about the products.

the product portfolio april 2009

area Product indication Partner/owner

hematology reFacto^® hemophilia A wyeth

BeneFix^® hemophilia B wyeth

novastan^® trombosis (hit ii) mitsubishi Pharma rheumatology Kineret^® rematoid arthritis

oncology Kepivance^® oral mucositis after chemotherapy and radition

Aloxi^® chemotherapy-induced nausea and vomiting helsinn stemgen^® Blood stem cell

transplantation endocrinology mimpara^® hypercalcemia in shPt

and PhPt Amgen

the eu commission has presented a pro- posal for a new strategy to focus on rare dis- eases. the proposal includes incentives for pharmaceutical companies to develop or- phan drugs in new areas.

the eu-commission wants each member country to formulate a national plan that guarantees treatment for people with rare diseases and to create a network of experts to ensure that patients receive good care.

the proposal includes a provision stating that the company that produces the first

medicinal product in a new field will have market exclusivity for ten years. the cost of registration of orphan drugs will also be waived.

the new strategy was presented at an eu conference on national plans for rare dis- eases in Paris on november 18, 2008.

eu Commission gives priority to orphan drugs for rare diseases

hematology

“Bleeding disorders” is the collective term for various diseases in which it is difficult for the blood to coagulate. From a treatment standpoint hemophilia is the most common type of bleeding disorder. over the past ten years research in this field has made important advances, resulting in both more effective and safer treatment for patients. As knowledge of the disease has increased, we have also improved information to both patients and the healthcare system.

Biovitrum has been extremely successful in the nordic hemo- philia market and we have increased our market share in this seg- ment during the year through increased sales of reFacto

for the treatment of hemophilia A and by initiating sales of BeneFix

for the treatment of hemophilia B. Biovitrum’s ventures involving future medications for hemophilia include agreements with syn- tonix/Biogen idec for the development of new protein pharma- ceuticals to treat hemophilia A and B which are expected to facilitate patient treatment.

Doctors use heparin to prevent the blood from clotting, but in certain rare cases it can have the opposite effect and cause what is known as heparin-induced thrombocytopenia type ii, or hit.

this serious complication is caused by an immunological reaction that leads to activation of platelets (thrombocytes) with blood clotting as a result and thereby also attendant risk for blood clots.

novastan

is a medication that effectively prevents blood clots in hit.

Biovitrum is working with symphogen to develop antibody- based protein pharmaceuticals to treat two additional blood dis- orders: immune thrombocytopenia purpura (itP) and rh-immu- nization.

rheumatology

inflammation is the body’s fundamental response to infection, irritation or injury. the typical inflammatory response involves local redness, heat, swelling, pain and loss of function. A chronic inflam- matory disease such as rheumatoid arthritis (rA) results when the immune system – which normally fights foreign proteins in the body – begins to react against the body’s own joints, which entails serious debilitating joint pain and stiffness. certain hereditary traits increase the risk of rheumatoid arthritis. the medication Kineret

is a recombinant protein used to treat a subgroup of patients with rA.

oncology

Patients under treatment for hematological cancer may suffer from severe ulceration, pain and inflammation of the oral mucosa (oral mucositis). Kepivance

is a recombinant protein drug with the ability to reduce the incidence and duration of oral mucositis.

nausea and vomiting are common side effects of cancer chemotherapy. some studies show that nausea and vomiting are the symptoms that have the greatest effect on quality of life for cancer patients undergoing chemotherapy. in addition, nausea is

difficult to endure. the degree of nausea also varies greatly among different individuals. it is therefore important to take indi- vidual risk factors into account in order for treatment of nausea to be as effective as possible. Aloxi

is a long-acting medication used to prevent nausea and vomiting in conjunction with chemo- therapy for oncological diseases. Biovitrum has worked with patient organizations to produce a brochure explaining what causes nausea and vomiting during chemotherapy, how to treat these side effects with different types of medication and what patients can do to reduce the risk of nausea during cancer treat- ment.

stemgen

is a recombinant growth factor used in connection with blood progenitor cell transplants for the treatment of leuke- mia.

endocrinology

hyperparathyroidism (hPt) is a common hormone-dependent disease and the primary form (PhPt) is seen in one to two percent of the population, twice as often in women as in men. the disease is due to over-production of parathyroid hormone by the parathy- roid glands, which leads to elevated blood calcium levels. Bone loss and nephrolithiasis are common complications of the disease.

many patients describe symptoms of fatigue, depression and muscle weakness. hypertension, cardiovascular disease and dia- betes are over-represented among PhPt patients. compared to the average population PhPt patients are on sick leave more often for several years before being diagnosed. secondary hyperpara- thyroidism (shPt) is caused by over-production of the parathyroid hormone in patients with renal disease undergoing dialysis and in patients with parathyroid cancer.

mimpara

is a medication intended for the treatment of both PhPt and shPt.

sales of specialist drugs in an international market one strategic objective for Biovitrum is to increase revenues and profits from product sales. By establishing an international pres- ence we have laid the foundation for global marketing of acquired products, in-licensed products, and products from our own proj- ect portfolio. Biovitrum has a seasoned and engaged marketing and sales organization with 22 employees.

Biovitrum plans to continue its geographical expansion and

to increase the number of products marketed. expansion will

take place through additional marketing and distribution agree-

ments, as well as through selective acquisition of product rights

or of companies with product portfolios and commercial infra-

structure. this strategy will make Biovitrum an even more attrac-

tive partner for in-licensing of r&D projects in clinical develop-

ment and for marketed products. our expanded line of products

combined with geographic expansion will make it possible to

develop the necessary processes and expertise to successfully

achieve our long-term goal of becoming a strong international

player in the field of specialist drugs.

ReFacto^® och Benefix^®

in hemophilia, the blood does not clot due to a deficit or complete lack of a coagulation factor. therefore patients with hemophilia A require injections of coagulation factor to stop and prevent frequent bleeding that of- ten leads to permanent joint injury and pos- sibly to life-threatening hemorrhage. the most common forms of hemophilia are called A and B dependent on which coagulation fac- tor the patient is lacking. in hemophilia A there is a shortage of factor viii and in hemo- philia B there is a shortage of factor ix.

hemophilia A is the most common. only one in five hemophiliacs has the B form. it is a genetic disease which with few exceptions mainly afflicts males. in the nordic countries, about 2,000 men (and a few women) currently suffer from this disease. hemophilia is a high priority area at Biovitrum and our products for hemophilia include both factor viii and ix concentrate.

Biovitrum originally developed the factor viii concentrate reFacto when we were part of Pharmacia. today we produce reFacto to meet global needs for wyeth and markets reFacto in the nordic countries based on a cooperation agreement with wyeth. reFacto is a recombinant coagulation factor viii con- centrate used in patients with hemophilia A.

in 1997 the medication was sold to wyeth and marketed and sold in both europe and the us.

the pharmaceutical substance in reFacto AF™ is the same as found in reFacto, but Biovitrum manufactures it through an ad- vanced production process completely free of any human or animal components. the process is therefore cleaner with respect to foreign proteins, which both doctors and pa- tients perceive to be a major safety advan- tage. reFacto AF is approved for sale in the

united states and canada under the xyntha™

brand name and was also recently approved in the eu.

Biovitrum also markets BeneFix. the active ingredient in BeneFix is coagulation factor ix, developed with recombinant technology and produced without additives of either hu- man or animal proteins. BeneFix is used to treat acute hemorrhage and to prevent bleed- ing in patients with hemophilia B. hemophilia B is a bleeding disorder caused by congenital coagulation factor ix deficiency. BeneFix is the only available recombinant factor ix product in the market. All other treatment alternatives are based on purification of products from human blood. Biovitrum has marketed BeneFix^® in the nordic region since 2007 under a collaborative agreement with wyeth.

What is the treatment for hemophilia?

hemophilia is treated by injecting the patient with the missing substance. treatment may be either prophylactic (preventive) or given as needed. treatment is administered at different intervals, depending on disease severity and whether hemophilia A or B is involved. reports have shown that even with correct treatment, life expectancy for patients with hemophilia is about ten years shorter than for persons without hemophilia. it is becoming increasingly common to treat young patients prophylactically with two or three injections per week to maintain a better blood coagulation factor level. long-term studies show that this form of treatment sharply reduces, but does not completely eliminate, the gradual deterioration of joints. Biovitrum manufactures and mar- kets reFacto

, a highly purified recombinant type of human coagulation factor viii. Biovitrum also markets BeneFix

a highly purified recombinant type of human coagulation factor ix for wyeth in the nordic countries.

What is the importance of medical developments for hemophilia?

originally, people with hemophilia were treated with regular blood transfusions when acutely injured – no preventive treatment was available at that time. in the 1960s researchers began to extract concentrated coagulation factors from the blood, which revolution- ized life for people with hemophilia in the 1970s. however, during

the 1980s it was found that many patients with hemophilia became infected with diseases such as hepatitis c and hiv from contami- nated blood product. this resulted in improved testing and safer purification methods for these medications, which at the time were manufactured from blood. in the 1990s, the first synthetic medica- tions for hemophilia arrived on the scene. these are produced using genetic engineering and are also known as recombinant products. this advance meant yet another step in the right direc- tion for safety. nowadays, recombinant medications are the most common type of treatment.

How common is hemophilia?

hemophilia is an uncommon disease afflicting about one in 5,000 males. in sweden about 850 people suffer from hemophilia. About 2,000 people have hemophilia in the nordic region and about 400,000 worldwide.

Are there different types of hemophilia?

the two most common types of hemophilia are called A and B, depending on the type of deficiency that impairs blood clotting.

in medical terms, we refer to a coagulation factor deficiency.

hemophilia A is associated with deficiency of factor viii and hemo- philia B, a deficiency of factor ix. hemophilia A is more common.

only one in five hemophiliacs is afflicted with hemophilia B.

Four questions about hemophilia

Bild: monica

Monica’s rheumatoid arthritis caused crippling fatigue and chronic pain: “It felt like walking on broken glass for ten years”

Fifteen years ago monica nodhäll was diagnosed with rheumatoid arthritis, a disease that affects 90,000 swedes. it took ten years and fifteen different medications before an effective treatment was found. “At its worst i couldn’t even pull up the blanket to cover myself when i got cold because it was too heavy,” says monica.

today monica is back at work and also able to enjoy her garden.

Just going out the door seemed insurmountable

monica had constant joint pain, especially in her hands and feet.

treatment for rheumatoid arthritis is

highly individualized – what one patient responds to may be inef- fective in another. monica worked her way through the entire list to find a treatment that worked. At most she took four drugs simultaneously and she tried about fifteen in all. “sometimes i had so much pain in my feet that it felt like walking on broken glass,”

she says. But what may have been worst of all was the crippling fatigue caused by inflammation in the body. “on some days, just going out the door posed an insurmountable obstacle. it took all my effort to drag myself to the store. shopping for food required every ounce of energy in my body. it felt completely absurd.”

I had to ask for help like a child

in 2000 monica’s rheumatoid arthritis deteriorated and she felt worse than ever. she tried a few biologics without any significant effect on her condition and throughout this period she was on either part-time or full-time sick leave. she had about ten opera- tions and full disability pension was discussed as a permanent solution. Daily challenges involved successfully holding a cup of coffee without getting burned, opening a carton of milk and being able to receive a hug from a loved one.

“my disease involved constant pain in my hands as well as loss of all strength. i had to request help, just like a child, for many of the things that healthy people take for granted”, says monica. “i often had to ask my husband to cut up my food on the plate and i had to use assistive devices for buttons and zippers in order to dress myself.”

“it was a long ordeal for both me and my environment,” says monica. “my social life was severely affected by my disease, as were relationships with my family.”

But then came the turnaround…

ten years after monica received her diagnosis she tried yet another drug, Kineret

. “it was 030303 – i remember this date so well, because it completely changed my life,” says monica. Kineret is a protein-based drug, known as an il-1 blocker, to be taken in com- bination with another medication that she had already been taking for a while. the purpose was to reduce the harmful effects of regulatory substances that cause pain, swelling and inflammation of the joints. “After a couple of weeks i could feel that something had happened throughout my body,” says monica. “this was something different, something good.”

… and now Monica feels great

today, almost six years later, monica feels great and damage to her joints has come to a halt. she is not on disability pension; she works for the swedish rheumatism Association providing information about rheumatoid arthritis in primary care. “it is crucial to reduce the time to diagnosis so that patients can come under specialist care as soon as possible,” says monica. she now takes far fewer drugs than before, she still has her house and her garden, and she can pull up the blanket when she gets cold.

the story of moniCa anD Kineret^®

“It felt like walking on broken glass for ten years”

030303

Kineret^®

rheumatoid arthritis (rA) is a chronic joint disease affecting about one percent of the population. About two thirds of all patients are women. rA causes inflammation, primarily in small joints, and often causes excruciating, persistent pain as well as impaired function of the musculoskeletal system and other affected organs. in recent years researchers have learned that many rheumatologic diseases are due to immune system disorders. through an increasingly selective approach to the immune system, scientists have succeeded in slow- ing the disease process. the most successful principle to date has been to affect the inflammatory signal substance tnF-α, but at least one third of patients require other medications. Biovitrum markets Kineret, a biopharmaceutical that blocks the cytokine known as inter- leukin 1 (il-1) through a mechanism that is similar to the body’s own method of regulating il-1. For approximately every tenth patient with rA the inhibition of the action of il-1 is the right treatment. with suc- cessful treatment the patient avoids pain and regains joint mobility.

through its agreement

with Amgen, which provided Biovitrum with three unique new products for its portfolio, the company faced a challenge that most would consider impossible. in just three months Biovitrum was to transform from a research company with a small nordic marketing organiza- tion into a company capable of product registration, pricing and establishment of an infrastructure to handle production, distribution and marketing of pharmaceuticals on three continents.

on september 12 the journey began for what was known in- house as the triplet Project. that was when swedish Biovitrum and American giant Amgen signed the agreement that gave Bio- vitrum the opportunity to acquire the drugs Kepivance

and stemgen

, as well as an exclusive global license for Kineret

. on December 15 the product acquisition agreement was concluded and since December 16 Biovitrum sells and distributes the prod- ucts in north America, europe, Australia and new zealand.

new swedish player on the international market to ensure that the deal could be concluded before yearend, inten- sive efforts were underway in the organization to fit all of the pieces of the puzzle together, from registrations and price negotiations to inventory, distribution and marketing, as well as management of drug safety and clinical trials.

“we essentially built an international pharmaceutical com- pany in three months and it was only possible thanks to the extensive expertise of our project team. these people, with vast experience in global operations, now have the opportunity to apply their cutting edge expertise to an exciting new swedish pharmaceutical company and play a key role in its organization – who wouldn’t jump at the chance”? says marketing manager helena rudberg, who was project manager for the entire triplet Project.

the challenges were many, and frequently linked to the fact that Biovitrum did not have any legal entities in the markets where the products are now being marketed.

“we’ve discovered certain things the hard way,” says helena rudberg. “Despite all efforts at harmonization in europe, i don’t think there are two countries that are alike when it comes to regu- latory framework, vAt and tax rules. nevertheless, we were able to solve everything – essentially by being everywhere at the same time and by acquiring very good partners”.

“For example, we had to handle product-related phone calls running the gamut from pure factual questions about storage and distribution to adverse event reports from 32 countries,”

says helena. “the answer was our partner, Quintiles, which is also responsible – under Biovitrum’s scientific administration – for conducting the extensive clinical trial program that Biovitrum took over from Amgen.”

Biovitrum provides patients with medications on three conti- nents, which means that Biovitrum has signed a large number of agreements with distributors and wholesalers – ten of them just in europe. new experienced key individuals have been hired to market and sell the new products in europe. in north America, we signed an agreement with a sales organization, while we signed a distribution agreement with a company active in Austra- lia and new zealand.

invaluable assets moved

much of what has happened involved the transfer of information and technology from Amgen to Biovitrum. But inventories and the sensitive cell banks that produce the protein for the finished medication were also transferred. valuable goods had to be trans- ported at exact temperatures on a given number of occasions in order to spread the risk if anything should go wrong.

three products under Biovitrum’s own name

From swedish research company to international specialist pharmaceutical company in three months.

»these people, with vast experience in global operations, now have the oppor- tunity to apply their cutting edge exper- tise to an exciting new swedish pharma- ceutical company and play a key role in its organization.«

Helena Rudberg, Vice President Sales & Marketing, has managed the Amgen agreement implementation.

Information about the deal:

in 2007 Amgen received seK 580 m in revenues for the three new products. Biovitrum will work intensively to increase these reve- nues. By doing so the company spreads its risks and creates op- portunities to increase revenues in adjacent categories.

the conditions for the deal are favorable for Biovitrum. the com- pany paid Amgen usD 117 m, including usD 13 million paid at the time of signing of the agreement on september 12. the re- maining usD 104 million has been paid in cash (usD 34m in cash and usD 50 m from an external loan for a total of seK 600 m) and usD 20 m in new shares issued to Amgen (3,768,515 ordinary Biovitrum shares). in addition, when Kineret^® and Kepivance^® reach certain accumulated net sales levels Biovitrum will pay in- dividual milestone payments to Amgen.