SOURCE: Biotie Therapies Oyj

May 13, 2011 04:08 ET

Biotie Therapies Corp. Interim Report 1 January - 31 March 2011

Acquisition of Synosia Therapeutics, Positive Results From Nalmefene Studies Being Conducted by Lundbeck and Completion of Share Offering

TURKU, FINLAND--(Marketwire - May 13, 2011) - Biotie has undergone significant changes during the first quarter that have transformed the nature of its operations and its financial status. Most notably, in February 2011, Biotie acquired Synosia Therapeutics, a drug development specialist with key operations in the US and a strategic alliance with UCB Pharma. In January 2011 Biotie was informed by its licensing partner H. Lundbeck A/S of positive phase 3 results with nalmefene, its lead product for the treatment of alcohol dependence. In March 2011 Biotie raised EUR 27 million in a directed share issue to institutional and strategic investors, strengthening its financial position. The company now employs approximately 40 people, has operations in Finland, the United States and Switzerland and is exclusively focused on the development of its promising pipeline of clinical-stage drug candidates.

Financial review Q1 2011

Financial statements for the Q1 2011 are not directly comparable to the same period in 2010 due to the Synosia Therapeutics acquisition and the consolidation of the new subsidiaries' results into the Biotie group's consolidated financial statements from the acquisition date 1 February onwards.

Revenues in January - March 2011 amounted to EUR 0.5 million (EUR 1.2 million in the same period in 2010). Net loss in January - March was EUR 7.7 million (EUR 3.7 million in the same period in 2010). Total comprehensive income including the currency translation differences amounted to EUR -9.5 million (EUR -3.7 million in the same period 2010). Basic earnings per share amounted to EUR -0.03 (EUR -0.02 for the same period 2010).

Cash flow from operating activities in January - March amounted to EUR -4.2 million for continuing operations (EUR -4.4 million in the same period in 2010) and EUR -1.2 million for discontinued operations (no discontinued operations reported in Q1 2010).

As of 31 March 2011, liquid assets amounted to EUR 46.8 million (EUR 15.2 million as of 31 March 2010).

Timo Veromaa, Biotie's President and CEO:

"We have had a very successful first quarter, which was underpinned by positive data from the first set of phase 3 nalmefene studies from Lundbeck, the transformational merger with Synosia and our directed share offer. We have made rapid progress with integration activities and have continued to advance our newly enlarged pipeline which now includes nine clinical development candidates. In the coming months, we expect to receive important data from Lundbeck for nalmefene in alcohol dependence and for our Parkinson's disease product SYN118, for which UCB Pharma has an option to license. These are exciting times for Biotie and we believe that with our broad pipeline, strong balance sheet and experienced management team, we are well positioned to drive long-term growth and shareholder value".

Key events after the reporting period

Start of a Phase 2b trial of SYN115 in Parkinson's disease: As announced on 7 April 2011, the phase 2b trial is a randomized, double-blind, placebo-controlled study that will evaluate four doses of SYN115 versus placebo as adjunctive therapy in 400 levodopa-treated Parkinson's disease (PD) patients with end of dose wearing off. In these patients, treatment with levodopa is insufficient to control PD symptoms until their next dose, resulting in an 'off' period when symptoms reappear. The aim of the phase 2b study is to determine the efficacy and safety of SYN115 in reducing the mean time spent in the 'off' state over a 12 week treatment period. The trial will also assess the impact of SYN115 on various measures of motor symptom severity, dyskinesia and non-motor symptoms. Results from the study are expected in H1 2013.

Re-election of Board members: All existing board members, Bradley J. Bolzon, William M. Burns, Peter Fellner, Merja Karhapää, Bernd Kastler, Ismail Kola, Guido Magni, Andrew J. Schwab, Piet Serrure and James S. Shannon were re-appointed at Biotie's Annual General Meeting on 6 May 2011. At the organization meeting of the re-appointed Board of Directors, which convened immediately after the Annual General Meeting on 6 May 2011, Peter Fellner was re-elected as the Chairman of the Board of Directors and Bradley J. Bolzon was re-elected as the deputy chairman.

Outlook for 2011

Biotie will continue to support its licensing partner Lundbeck in the development of nalmefene for the treatment of alcohol dependence. Final clinical data from the ongoing phase 3 study is expected Q2 2011; a possible marketing authorization submission in the EU is anticipated H2 2011.

SYN118, for the treatment of Parkinson's disease, is currently in a phase 2a study and data from this trial is expected to become available Q2 2011. UCB Pharma has an option to license this product after the clinical data is available for their review.

SYN120, for the treatment of cognitive disorders associated with Alzheimer's disease and schizophrenia, is expected to enter a phase 1 PET ("positron emission tomography") imaging study during Q2 2011. The study is scheduled to be completed H1 2012. Roche has an option to license this compound from Biotie.

Biotie will announce development plans for its proprietary VAP-1 antibody later this year. While the rights to the product in Japan, Taiwan, Singapore, Australia and New Zealand have been granted to Seikagaku, Biotie retains ownership in the rest of the world and will be looking for additional collaboration opportunities.

Biotie will announce development plans for ronomilast for the treatment of COPD later this year. Biotie will be looking for potential collaboration opportunities for this product.

Biotie is currently assessing options for evaluating rufinamide (SYN115) in the treatment of bipolar disorder.

Financial calendar 2011

Interim Report for January - June 5 August 2011

Interim Report for January - September November 2011

Conference call

An analyst and media conference call will take place on 13 May 2011 at 2.00 p.m. Central European Time. The conference call will be held in English.

Callers may access the conference directly at the following telephone numbers: US: +1 212 444 0481, UK: +44 (0)20 7138 0825 and Finland: +358 (0)9 2319 4344 access code 4052511. Lines are to be reserved ten minutes before the start of conference call. The event can also be viewed as a live webcast at www.biotie.com. An on demand version of the conference will be published on Biotie's website later during the day. In case you need additional information or assistance, please contact: Virve Nurmi, IR Manager Biotie Therapies, Tel +358 2 2748 911

About Biotie

Biotie is a specialized drug development company focused on the development of drugs for neurodegenerative and psychiatric disorders (Parkinson's disease, Alzheimer's disease and other cognitive disorders, bipolar disorder, and alcohol and drug dependence) and inflammatory diseases (rheumatoid arthritis, psoriasis, chronic obstructive pulmonary disease and others). It has several innovative small molecule and biological drug candidates at different stages of clinical development. Biotie's products address diseases with high unmet medical need and significant market potential.

Partnerships with top tier pharmaceutical partners are in place for several programs as well as a strategic collaboration with UCB Pharma S.A. Biotie's most advanced product, nalmefene for alcohol dependence, is currently in Phase 3 clinical development by licensing partner H. Lundbeck A/S.

Drug development projects:

Nalmefene, a new treatment paradigm for alcohol dependence. Nalmefene builds on a novel principle of treating alcohol dependence. Unlike existing therapies, the treatment with Nalmefene is not aimed at keeping the patients from drinking. Nalmefene instead removes the desire to drink, thereby controlling and limiting the intake of alcohol. Nalmefene distinguishes itself by being available as an oral tablet formulation to be taken on an as needed basis.

Biotie's partner Lundbeck announced in January 2011 that it had completed two phase 3 clinical trials evaluating nalmefene for the treatment of alcohol dependence (ESENSE1, SENSE). The data from these studies was consistent with the profile of nalmefene observed in previous clinical studies and demonstrated that nalmefene was safe and efficacious in helping patients to reduce drinking. Lundbeck expects to complete a further efficacy study (ESENSE2) in Q2 2011 and is on track to file a marketing authorization application (MAA) in Europe in H2 2011, depending on the outcome of the final study. Lundbeck plans to submit detailed efficacy and safety data for presentation at scientific and medical meetings after all three trials have been completed. Launch of the product in the EU is expected H2 2012. Biotie is participating in financing some of the clinical development costs. Biotie has granted worldwide rights for nalmefene to Lundbeck.

SYN115 is an orally bioavailable, potent and selective adenosine A2a receptor antagonist in development for Parkinson's disease (PD). Adenosine A2a inhibition with SYN115 has been shown in preclinical studies to reverse motor deficits and enhance the effect of current PD therapies, e.g. levodopa and dopamine agonists, without inducing troublesome dyskinesia (involuntary movements). In addition, SYN115 also displays activity in preclinical models on non-motor symptoms of PD including depression, cognition and anxiety.

After the reporting period, Biotie announced the start of a phase 2b trial evaluating SYN115 in PD. The trial is a randomized, double-blind, placebo-controlled study that will evaluate four doses of SYN115 versus placebo as adjunctive therapy in 400 levodopa-treated PD patients with end of dose wearing off. In these patients, treatment with levodopa is insufficient to control PD symptoms until their next dose, resulting in an 'off' period when symptoms reappear. The aim of the trial is to determine the efficacy and safety of SYN115 in reducing the mean time spent in the 'off' state over a 12 week treatment period. The study will also assess the impact of SYN115 on various measures of motor symptom severity, dyskinesia and non-motor symptoms. Results from the phase 2b trial are expected H1 2013.

Biotie has granted UCB Pharma S.A. a license for exclusive, worldwide rights to SYN115. UCB will be responsible for phase 3 development and commercialization.

Nitisinone (SYN118) is a potent and selective inhibitor of hydroxyphenylpyruvate dioxygenase (HPPD), an enzyme responsible for the catabolism of tyrosine, the precursor of the neurotransmitter dopamine. Preclinical studies have shown that nitisinone is active in animal models of PD. Clinical studies and patient experience with nitisinone have shown pronounced and predictable elevations in the circulating concentrations of tyrosine. The company has completed an open label, proof-of-mechanism study with nitisinone for PD and a proof-of-concept trial in restless leg syndrome, both of which demonstrated encouraging efficacy and safety. A randomized, placebo controlled phase 2a study in PD patients is currently ongoing and data are expected in Q2 2011. UCB has an option to obtain an exclusive license to this product.

SYN120 is an orally bioavailable, potent and selective antagonist of the 5-HT6 receptor. The 5-HT6 receptors are exclusively located in the brain and antagonism of these receptors modulates the release of acetylcholine and glutamate, two neurotransmitters known to be involved with memory function. Cognitive deficits are an important component of many CNS diseases, especially Alzheimer's and schizophrenia. SYN120 has completed single and multiple ascending dose phase 1 clinical studies. Biotie plans to initiate a PET imaging study for SYN120 in Q2 2011. The compound was originally licensed from Roche and Roche has an option to reacquire this program after the results of the planned study have been obtained.

VAP-1 antibody. VAP-1 (vascular adhesion protein-1) has been shown to play a key role in chronic inflammatory diseases such as COPD, rheumatoid arthritis, psoriasis and diabetes. Biotie has significant know-how and a strong intellectual property position around this target and is developing a fully human monoclonal antibody, BTT-1023, which blocks VAP-1 function. In 2010 Biotie reported the successful completion of phase 1b clinical trials with BTT-1023 in 24 rheumatoid arthritis and 26 psoriasis patients. The compound has demonstrated a favorable safety profile in a total of 83 study subjects and has shown promising signals of clinical activity, especially with higher doses in the rheumatoid arthritis study. These data support further clinical development of the product, plans for which will be announced later this year. Biotie has granted a license to Seikagaku Corporation for the commercial rights to the product in Japan, Taiwan, Singapore, New Zealand, and Australia, and is seeking additional collaboration partners.

Ronomilast is a once-daily, oral phosphodiesterase 4 (PDE4) inhibitor with therapeutic potential in chronic inflammatory disorders, particularly in chronic obstructive pulmonary disease (COPD), a serious respiratory disorder with major unmet medical need. In three clinical studies with a total of 126 study subjects ronomilast has been demonstrated to be safe and well tolerated at all tested doses up to 100mg once daily. No serious or severe adverse events were reported in any of the study subjects. Robust and statistically highly significant biomarker responses confirmed the pharmacological activity of well tolerated doses of ronomilast in man. These data support further clinical development, plans for which will be announced later this year. Biotie will be looking for potential collaboration opportunities for this product.

Nepicastat (SYN117) is a potent, competitive, and selective inhibitor of the enzyme dopamine beta-hydroxylase. The inhibition of this enzyme has been shown to raise dopamine levels in the central nervous system (CNS). Nepicastat is available as an oral treatment and has been well-tolerated in preclinical models at doses significantly above the expected therapeutic range for the current CNS indications under investigation. A phase 2 study of nepicastat in post traumatic stress disorder is ongoing, funded by the US Department of Defense. No data from this study is expected to become available before 2013.

Rufinamide (SYN111) is a potent, specific, and orally bioavailable sodium channel blocker with proven anti-epileptic activity. The compound is marketed in the EU and the US as adjunctive therapy in Lennox Gastaut Syndrome (LGS), a severe form of epilepsy. Biotie holds rights to rufinamide in medical indications outside of LGS and is currently assessing options for evaluating this product in the treatment of bipolar disorder.

Financial review for reporting period January - March 2011

Biotie acquired Synosia Therapeutics Holding AG in February 2011. The acquisition and its impacts on consolidated financial statements are described in more detail in the notes of this financial statements (see acquisition of Synosia Therapeutics Holding AG),

Financial statements for the Q1 2011 are not directly comparable to the same period in 2010 due to the Synosia Therapeutics acquisition and the consolidation of the new subsidiaries' results into the Biotie group's consolidated financial statements from the acquisition date 1 February onwards.

Revenues: Revenues for the reporting period Q1 2011 amounted to EUR 0.5 million (EUR 1.2 million in the same period in 2010). Revenues consisted of periodization of previously received upfront payments from licensing agreements.

Financial result: Net loss for the reporting period 2011 was EUR 7.7 million (EUR 3.7 million in the same period in 2010). Total comprehensive income including the currency translation differences amounted to EUR -9.5 million (EUR -3.7 million in the same period 2010). Research and development costs for the reporting period amounted to EUR 4.9 million (EUR 3.8 million in the same period in 2010).

Financing: Cash and cash equivalents and short term investments totaled EUR 46.8 million on 31 March 2011 (EUR 15.2 million on 31 March 2010).

Biotie announced in March 11 execution of a private placement of shares in the amount of EUR 27 million. The shares were allocated to Finnish and international institutional and strategic investors. A total of 35,230,000 newly issued and 14,747,084 treasury shares were offered at a subscription price of EUR 0.54 per share.

Biotie has a standby equity distribution agreement (SEDA) in place with US fund Yorkville. Yorkville is obliged to subscribe and pay for ordinary no-par Biotie shares up to a total value of EUR 20 million during the period until September 2012 at Biotie's discretion (Biotie option). The purpose of this arrangement is to have an option to secure the financing of Biotie's working capital in the short and medium term. Biotie has made use of this arrangement three times since August 2010 and has raised a total amount of EUR 1.1 million.

Shareholder's equity: The shareholders' equity of the group amounted to EUR 87.7 million (IFRS) on 31 March 2011. Biotie's equity ratio was 62.4% on 31 March 2011 (-46.2% on 31 March 2010).

Investments and cash flow: Cash flow from operating activities in January - March amounted to EUR -4.2 million for continuing operations (EUR -4.4 million in the same period in 2010) and EUR -1.2 million for discontinued operations (no discontinued operations reported in Q1 2010). The group's investments during the reporting period amounted to EUR 20 thousand (EUR 80 thousand in the same period in 2010).

Personnel

During the reporting period January - March 2011, the average number of employees amounted to 41 (82 during January - March 2010) and at the end of the reporting period, after the restructuring in Q4 2010 and acquisition of Synosia in Q1 2011, Biotie employed 40 people (83 on 31 March 2010).

Changes in the management team

In connection with the acquisition of Synosia Therapeutics, Steve Bandak replaced Antero Kallio as Chief Medical Officer and Ian Massey joined as Chief Operating Officer and President of US Operations in February 2011. Antero Kallio now reports to Steve Bandak. In January 2011, Biotie announced that its Chief Financial Officer Thomas Taapken would leave the company as of 31 March 2011. He has been replaced ad interim by Biotie's VP Finance & Administration Ms. Ulla Sjöblom.

Changes in the Board of Directors

Composition of the Board of Directors elected at the Extraordinary General Meeting 1 February 2011

The number of the members of the Board of Directors was resolved to be ten. Bradley J. Bolzon, William M. Burns, Peter Fellner, Merja Karhapää, Bernd Kastler, Ismail Kola, Guido Magni, Andrew J. Schwab, Piet Serrure and James S. Shannon, were elected as the members of the Board of Directors.

At the organization meeting, which convened after the Extraordinary General Meeting in February 2011, Peter Fellner was elected as the Chairman of the Board of Directors and Bradley J. Bolzon was elected as the Deputy Chairman.

Option rights

Biotie has issued option rights to certain of its employees and managers pursuant to two different option programs in 2006 and 2009. Each option right granted based on these two option programs entitle to subscribe one share in the company.

The Swiss company Synosia Therapeutics Holding AG (currently Biotie Therapies Holding AG) acquired by Biotie in February 2011 also has a stock option plan based on which stock options have been granted to employees, directors and consultants. In connection with the completion of the acquisition of Synosia, the option plan was amended so that instead of shares in former Synosia Therapeutics Holding AG an aggregate maximum of 14,912,155 shares in Biotie Therapies Corp. may be subscribed based on the plan. Biotie Therapies Corp. issued these 14,912,155 shares to its current subsidiary Biotie Therapies Holding AG in connection with the acquisition to be further conveyed to the option holders when they potentially exercise their option rights in accordance with the terms and conditions of the option rights. At the end of the reporting period, on 31 March 2011, the total number of shares which can be subscribed by virtue of these option rights deriving from Synosia Therapeutics Holding AG amounts to 14,912,155, which represents 3.8% of the total amount of shares in the company as of 31 March 2011.

Share capital and shares

Biotie shares are all of the same class and have equal rights. Each share entitles the holder to one vote at the general meeting of shareholders. All shares are quoted on NASDAQ OMX Helsinki Ltd (Small cap, Healthcare).

As described in more detail in Biotie's stock exchange releases issued on 1 and 2 February 2011, resolutions necessary for the completion of the acquisition of Synosia Therapeutics Holding AG (currently Biotie Therapies Holding AG) were passed at the Extraordinary General Meeting held on 1 February 2011 and, as a result, Biotie issued 161,448,371 shares to the shareholders and warrant holders of Synosia as consideration for the entire issued share capital and outstanding warrants of Synosia. In connection with this transaction, the company also issued 14,912,155 new shares to Synosia to be held in treasury and used to fulfill the requirements of future potential exercise of Synosia's options. The new shares were registered on 3 February 2011.

Furthermore, Biotie announced on 11 March 2011 the successful placement of 35,230,000 new shares and 14,747,084 treasury shares to institutional and strategic investors.

On 31 March 2011 the registered number of shares in Biotie Therapies Corp. was 387,594,457. Of these shares 14,912,155 were held by the company or its group companies. The registered share capital of Biotie was EUR 165,919,181.95

Market capitalization and trading

At the end of the reporting period the share price was EUR 0.56, the highest price during the reporting period January - March 2011 was EUR 0.82, the lowest was EUR 0.49, and the average price was EUR 0.61. Biotie's market capitalization at the end of the reporting period was EUR 217.1 million.

The trading volume on NASDAQ OMX Helsinki during the reporting period was 121,439,322 shares, corresponding to a turnover of EUR 72,874,030.

Changes in ownership

During the reporting period, January - March 2011, Biotie made eleven announcements according to Chapter 2, Section 10 of the Finnish Securities Market Act.

Information on notices of changes in ownership and a monthly updated list of Biotie's major shareholders is available on the company's website at www.biotie.com/investors.

Group structure

The parent company of the group is Biotie Therapies Corp. The domicile of the company is Turku, Finland. The company has two non-operational subsidiaries named Biotie Therapies GmbH, located in Radebeul, Germany and Biotie Therapies International Ltd in Finland.

The company now also has a holding subsidiary, Biotie Therapies Holding AG, located in Basel, Switzerland, which has two operative subsidiaries, Biotie Therapies AG, located in Basel, Switzerland and Biotie Therapies, Inc. located in South San Francisco, California.

Shareholders' meetings

Extraordinary General meeting held on 1 February:

On 1 February 2011, the Extraordinary General Meeting of Biotie passed resolutions necessary for the completion of the acquisition of Synosia Therapeutics Holding AG ("Synosia"), deciding on the issue of 161,448,371 new Biotie shares to the shareholders and warrant holders of privately-owned Synosia in exchange for the entire issued share capital and outstanding warrants of Synosia.

The stock exchange release regarding the resolutions of the Extraordinary General Meeting of Biotie Therapies Corp. was published on 1 February 2011.

After the reporting period, on 6 May 2011, the Annual General Meeting was held and resolved the following items:

- The financial statements 2010 were adopted

- It was resolved to transfer of loss of the financial year 2010 to the unrestricted equity and that no dividend shall be paid

- Discharge from liability was granted for the members of the Board of Directors and the Managing Director

- It was resolved that the remuneration payable to the members of the Board of Directors will be as follows: EUR 4,000 per month for the Chairman and EUR 3,000 per month for other Board members. In addition, it is proposed that reasonable travelling expenses for the meetings would be compensated.

- The number of members of the Board of Directors will be ten (10)

- Peter Fellner, Bradley J. Bolzon, William M. Burns, Merja Karhapää, Bernd Kastler, Ismail Kola, Guido Magni, Andrew J. Schwab, Piet Serrure and James S. Shannon were re-elected as members of the Board of Directors for the term expiring at the end of the following Annual General Meeting.

- The auditors' fees will be paid pursuant to a reasonable invoice

- PricewaterhouseCoopers Oy, a firm of auditors approved by the Central Chamber of Commerce, and Mr. Janne Rajalahti, Authorized Public Accountant, were elected as the auditors of the company

- The Board of Directors was authorized to resolve on one or more issues, containing the right to issue new shares or dispose of the shares in the possession of the company and to issue options or other rights to the shares pursuant to chapter 10 of the Companies Act. The authorization consists of up to 115,000,000 shares in aggregate, is effective until 30 June 2012 and supersedes earlier authorizations.

The stock exchange release regarding the resolutions of the Annual General Meeting of Biotie Therapies Corp. was published on 6 May 2011.

Short-term risks and uncertainties

Biotie's strategic risks are predominantly related to the technical success of the drug development programs, regulatory issues, strategic decisions of its commercial partners, ability to obtain and maintain intellectual property rights for its products, launch of competitive products and the development of the sales of its products. The development and success of Biotie's products depends to a large extent on third parties. Any adverse circumstance in relation to any of its R&D programs might impair the value of the asset and thus, represent a severe risk to the company. Such adverse events could happen on a short term notice and are not possible to foresee.

The key operational risks of Biotie's activities include the dependency on key personnel, assets (especially in relation to intellectual property rights) and dependency on its license partners' decisions.

Furthermore, significant financial resources are required to advance the drug development programs into commercialized pharmaceutical products. To fund the operations, Biotie relies on financing from two major sources: income from its license partners and raising equity financing in the capital markets.

The company relies on capital markets to raise equity financing from time to time. There can be no assurance that sufficient funds can be secured in order to permit the company to carry out its planned activities. Current capital market conditions are very volatile. While in March 2011 the company was able to raise a significant amount of cash from a share issue to fund its operations in the mid-term future, there can be no assurance that the company can secure equity financing in the future if and when it needs it.

Although Biotie has currently active license agreements in place, the termination of any such agreement would have a negative effect on the short to medium term access to liquidity for the company. While income generated from commercial agreements with third parties relating to its clinical programs might significantly improve Biotie's financial position, a forecast on possible income from future licensing arrangements cannot be provided reliably. Therefore it is possible that Biotie will need to secure additional financing from share issues in the future.

The group can influence the amount of capital used in its operations by adapting its cost base according to the financing available. The restructuring measures announced in Q4 2010 highlight such an approach. Management monitors the capital and liquidity on the basis of the amount of equity and cash funds. These are reported to the Board on a monthly basis.

IFRS and accounting principles

This interim financial report has been prepared in accordance with IFRS recognition and measurement principles, and applying the same accounting policies as for the 2010 financial statements. The interim report has not been prepared in accordance with IAS 34, Interim Financial Reporting.

In addition, as a result of the acquisition of Synosia Therapeutics, Biotie has applied the following principle in its Q1 2011 financial statements:

The results and financial position of all the group entities that have a currency different from the presentation currency are translated into the presentation currency as follows:

a. Assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet.

b. Income and expenses for each income statement are translated at average exchange rates.

c. All resulting exchange differences are recognised in the income statement as part of the gain or loss on sale.

On consolidation, exchange differences arising from the translation of the net investment in foreign operations, and of inter-company borrowings that are considered of being part of the net investment, are taken to other comprehensive income. When a foreign operation is disposed of or sold (either partially or as a whole), exchange differences that were recorded in equity are recognised in the income statement as part of the gain or loss on sale.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.

This interim report is unaudited.

Turku, 13 May 2011

Biotie Therapies Corp.

Board of Directors



CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (IFRS)

                                               1.1.-     1.1.-      1.1.-
                                             31.3.2011 31.3.2010 31.12.2010
EUR 1,000                                    3 months  3 months  12 months
                                             --------- --------- ---------

Continuing operations
Revenue                                            473     1,201     1,955

Research and development expenses               -4,928    -3,769    -5,538
General and administrative expenses             -3,072    -1,045    -4,216
Other operating income                             258        95       166
                                             --------- --------- ---------
Operating profit/loss                           -7,268    -3,518    -7,633

Financial income                                    18        45       101
Financial expenses                                -460      -213      -930
                                             --------- --------- ---------
Profit/loss before taxes                        -7,711    -3,687    -8,462
Taxes                                                0         0         0
                                             --------- --------- ---------
Net income/loss, continuing operations          -7,711    -3,687    -8,462
Net income/loss, discontinued operations             0         0   -13,111
                                             --------- --------- ---------
Net income/loss                                 -7,711    -3,687   -21,573
Other comprehensive income:
Currency translation differences                -1,831         0         0
                                             --------- --------- ---------
Total comprehensive income of the period        -9,542    -3,687   -21,573
Net income/loss attributable to
  Parent company shareholders                   -7,711    -3,687   -21,573
Total comprehensive income attributable to:
  Parent company shareholders                   -9,542    -3,687   -21,573

Earnings per share (EPS)
 basic & diluted, EUR, continuing operations     -0.03     -0.02     -0.06
Earnings per share (EPS)
 basic & diluted, EUR, discontinued
 operations                                          -         -     -0.09



CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(IFRS) EUR 1,000

                                             31.3.2011 31.3.2010 31.12.2010
                                             --------- --------- ---------
Assets

Non-current assets
Intangible assets                               84,773     7,204     4,042
Goodwill                                         5,100       379         0
Property, plant and equipment                      394     2,588       365
Investment property                              1,466         0     1,468
Other shares                                        10        10        10
                                             --------- --------- ---------
                                                91,743    10,181     5,885
Current assets
Available for sale investment                        0        34         0
Investments held to maturity                    19,000         0         0
Accounts receivables and other receivables       2,008     1,761     1,261
Financial assets at fair value through
 profit or loss                                  6,786     8,881         0
Cash and cash equivalents                       21,005     6,351     4,059
                                             --------- --------- ---------
                                                48,799    17,028     5,320

Total                                          140,542    27,209    11,205

Equity and liabilities

Shareholders' equity
Share capital                                  166,510    43,057    43,378
Share issue                                          0         0       500
Reserve for invested unrestricted equity         3,842     1,180     1,180
Cumulative translation adjustment               -1,831         0         0
Retained earnings                              -73,090   -53,130   -52,951
Net income/loss                                 -7,711    -3,687   -21,573
                                             --------- --------- ---------
Shareholders' equity total                      87,720   -12,580   -29,466

Non-current liabilities
Provisions                                           0       150         0
Non-current financial liabilities               25,623    25,552    25,640
Pension benefit obligation                         430       549       430
Other non-current liabilities                    9,673     6,913     7,442
Non-current deferred revenues                      338       902       368
Deferred tax liabilities                         9,929         0         0
                                             --------- --------- ---------
                                                45,993    34,066    33,880

Current liabilities
Provisions                                         582       597       589
Pension benefit obligation                          16        16        16
Current financial liabilities                      115       219       144
Current deferred revenues                          563     1,891     1,006
Accounts payable and other current
 liabilities                                     4,353     3,000     2,637
Liability related to discontinued operations     1,200         0     2,400
                                             --------- --------- ---------
                                                 6,830     5,723     6,791

Liabilities total                               52,822    39,789    40,671

Total                                          140,542    27,209    11,205



CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
Attributable to equity holders of the parent company

                                                                 Reserve
                                                              for invested
                          Shares       Share         Share    unrestricted
EUR 1,000               (1,000 pcs)    Capital       issue        equity
                        ------------ ------------ ------------ ------------
BALANCE AT 1.1.2010          158,753       43,057            0        1,180
                        ------------ ------------ ------------ ------------
Total comprehensive
 income for the period
Options granted
SEDA costs
Share issue to the
 company itself without
 consideration                17,251
Directed issue of
 treasury shares                              550          500
Cost of share issue                          -229
                        ------------ ------------ ------------ ------------
                              17,251          321          500            0
                        ------------ ------------ ------------ ------------
BALANCE AT 31.12.2010        176,004       43,378          500        1,180
                        ------------ ------------ ------------ ------------
Total comprehensive
 income for the period
Options granted                                                       2,662
Directed issue of
 treasury shares                              500         -500
Directed issues of new
 shares                      211,590      115,893
Directed offer of
 treasury shares                            7,964
Cost of share issue                        -1,224
                        ------------ ------------ ------------ ------------
                             211,590      123,133         -500        2,662
                        ------------ ------------ ------------ ------------
BALANCE AT 31.3.2011         387,594      166,511            0        3,842
                        ------------ ------------ ------------ ------------



                                     Own        Retained    Shareholders'
EUR 1,000                           Shares      Earnings    equity total
                                  ------------ ------------ ------------
BALANCE AT 1.1.2010                        -15      -53,160       -8,938
                                  ------------ ------------ ------------
Total comprehensive income for the
 period                                             -21,573      -21,573
Options granted                                         108          108
SEDA costs                                              116          116
Share issue to the company itself
 without consideration                                                 0
Directed issue of treasury shares                                  1,050
Cost of share issue                                                 -229
                                  ------------ ------------ ------------
                                             0      -21,349      -20,528
                                  ------------ ------------ ------------
BALANCE AT 31.12.2010                      -15      -74,509      -29,466
                                  ------------ ------------ ------------
Total comprehensive income for the 
 period                                              -9,542       -9,542
Options granted                                       1,434        4,096
Directed issue of treasury shares                                      0
Directed issues of new shares                                    115,893
Directed offer of treasury shares                                  7,964
Cost of share issue                                               -1,224
                                  ------------ ------------ ------------
                                             0       -8,108      117,187
                                  ------------ ------------ ------------
BALANCE AT 31.3.2011                       -15      -82,617       87,720
                                  ------------ ------------ ------------



CONSOLIDATED STATEMENT OF CASH FLOWS

                                               1.1.-      1.1.-     1.1.-
                                             31.3.2011 31.3.2010 31.12.2010
EUR 1,000                                    3 months  3 months  12 months
                                             --------- --------- ---------
Cash flow from operating activities
Continuing operations
Net income/loss                                 -7,711    -3,687    -8,462
Adjustments:
  Non-cash transactions                          3,136      -297    -1,287
  Acquisition related costs                        704         0         0
Addition/disposal due to revaluation of
 financial assets at fair value through
 profit or loss                                      0       -28         0
  Interest and other financial expenses            215       213       930
  Interest income                                  -15       -17      -101
Foreign exchange losses/gains on operating
 activities                                        -86         0         0
Change in working capital:
  Change in accounts receivables and other
   receivables                                     318      -196       626
  Change in accounts payable and other
   liabilities                                    -739      -305       436
  Change in mandatory provisions                    -6        -7       -25
Interests paid                                     -27       -46       -42
Interests received                                  15         3        68
Taxes paid                                           0       -49         0
                                             --------- --------- ---------
Net cash from operating activities,
 continuing operations                          -4,196    -4,416    -7,856
Net cash from operating activities,
 discontinued operations                        -1,200         0    -7,011
                                             --------- --------- ---------
Net cash from operating activities              -5,396    -4,416   -14,867

Cash flow from investing activities
Continuing operations
Acquisition of subsidiary, net of cash
 acquired                                       15,544         0         0
Change in financial assets at fair value
 through profit or loss
   Additions                                         0         0         0
   Disposals                                         0         0     8,886
Change in investments held to maturity
   Additions                                   -19,000         0         0
   Disposals                                         0         0         0
Investments to tangible assets                     -20       -80       -54
                                             --------- --------- ---------
Net cash used in investing activities,
 continuing operations                          -3,476       -80     8,832
Net cash used in investing activities,
 discontinued operations                             0         0    -1,587
                                             --------- --------- ---------
Net cash used in investing activities           -3,476       -80     7,245

Cash flow from financing activities
Continuing operations
Proceeds from issuance of shares                26,988         0         0
Payments from share issue                            0         0     1,050
Share issue costs                               -1,125         0      -229
Proceeds from borrowings                             0         0         6
Repayment of loans                                   0         0       -40
Repayment of lease commitments                     -46       -43      -177
                                             --------- --------- ---------
Net cash from financing activities,
 continuing operations                          25,817       -43       610
Net cash from financing activities,
 discontinued operations                             0         0       180
                                             --------- --------- ---------
Net cash from financing activities              25,817       -43       791

Net increase (+) or decrease (-)
 in cash and cash equivalents                   16,946    -4,450    -6,832
Effect on changes in exchange rates on cash
 and cash equivalents                              -83         0         0
Cash and cash equivalents in the
 beginning of the period                         4,059    10,891    10,891
Cash and cash equivalents in the
 end of the period                              21,005     6,351     4,059



ACQUISITION OF SYNOSIA THERAPEUTICS HOLDING AG

Biotie entered into a combination agreement with Synosia Therapeutics Holding AG ("Synosia") on 10 January 2011. The acquisition was subject to the necessary resolutions passed by Biotie's shareholders at the Extraordinary General Meeting which was held on 1 February 2011. Biotie issued 161.448.371 new shares to the shareholders and warrant holders of Synosia to acquire the entire issued share capital and outstanding warrants of Synosia. In addition, 14.912.155 shares were issued to Synosia and are held in treasury to satisfy future potential exercise of Synosia's options in accordance with the terms of the existing option plans. The fair value of the shares issued as the consideration paid for Synosia is based on the published share price on 1 February 2011. Synosia is a biopharmaceutical company focused on developing and commercializing innovative and clinically differentiated products for neurodegenerative and psychiatric disorders. As a result of the combination, Synosia is a wholly-owned subsidiary of Biotie and is consolidated into Biotie's consolidated financial statements from the acquisition date 1 February 2011 onwards.



Details of net assets acquired and goodwill are as follows:

Purchase consideration
Shares related to the Transaction                               161.448.371
EUR per share                                                          0.60
Shares total (million EUR)                                             96.9

Consideration provided under Synosia option-plan                        2.7
Total consideration transferred (million EUR)                          99.5



Fair value of assets acquired (see below)

Goodwill

Direct cost relating to the acquisition - charged in P&L

The assets and liabilities arising from the acquisition, provisionally determined, are as follows:



                                                               Fair value
                                                             (million EUR)
In process research and development projects IPRD
 (Intangible assets)                                                   82,5
Property, plant and equipment                                           0,1
Investments held-to-maturity                                            0,0
Accounts receivables and other receivables                              1,1
Financial assets at fair value through profit and loss                  6,9
Cash and cash equivalents                                              16,3
Deferred tax liability (net)                                          -10,1
Accounts payable and other current liabilities                         -2,5
Net assets acquired                                                    94,3
Goodwill                                                                5,2



Fair values of net assets acquired are determined provisionally. Based on the preliminary fair valuation, in process research and development projects ("IPRD") have been valued at 82.5 million EUR. The development projects are not amortized until the start of commercialization and they are subject to an annual impairment test.

A preliminary goodwill, 5.2 million EUR, arises from expected synergy benefits in different areas of drug development as well as from the competent personnel and the integration of functions. Expected synergy benefits will be gained from the possibility to create new drug development projects corresponding to the needs of international pharmaceuticals companies and from the possibility to utilize new knowledge and new technologies for the development of the existing businesses. Furthermore, access to the very important US market and established relationships to the regulatory authorities (FDA) is gained through the existing operations of Synosia in the US.

Synosia's result is consolidated into Biotie's consolidated financial statements from the acquisition date of 1 February 2011. The total acquisition-related costs were EUR 1.1 million. Acquisition-related costs of EUR 0.7 million are included in general and administrative expenses in the consolidated income statements for the Q1 2011.

SYNOSIA OPTION PLAN

Biotie Therapies Corp. has issued 14,912,155 shares as a bonus issue to its subsidiary Biotie Therapies Holding AG to be held in treasury and to be used to satisfy future potential exercise of Biotie Therapies Holding AG (formerly Synosia Therapeutics Holding AG) options in accordance with the existing Biotie Therapies Holding AG option plans. Biotie Therapies Corp. was obliged in the combination agreement to issue 22.432 Biotie Therapies Corp shares in exchange for each share option granted to employees and service providers of the acquired Synosia companies (Biotie Therapies Holding AG, Biotie Therapies AG and Biotie Therapies, Inc). The fair value for these replacement awards has been included in measuring the consideration transferred in the business combination. In order to determine the portion of the replacement award that is part of the consideration for the Synosia acquisition and the portion that is remuneration for post-combination services, Biotie has measured both the value of the options on the acquisition date closing price (effectively the value of the replacement awards granted by Biotie) and the existing Synosia awards based on the consideration in the combination agreement in accordance with IFRS 2. The difference in the fair values of the replacement awards has been split between pre-combination and post-combination services based on the vesting periods of the awards. The amount of EUR 437 thousand of the excess that relates to pre-combination services is expensed immediately as no further employee services is required and is included in the consolidated comprehensive income statement line items Research and Development Expenses and General and Administrative Expenses. A total of EUR 2,662 thousand of the fair value relates to pre-combination services and has been accounted for as part of the purchase consideration, see note Acquisition of Synosia Therapeutics Holding AG. The remaining amount of EUR 3,576 thousand represents payment for employees for post-combination services and will be charged through the income statement over the remaining vesting periods of the options which extends through Q4 2014. The average vesting period for the options is 3.1 years. Of this amount, EUR 1,022 thousand has been recorded as post-combination compensation expense through the interim period comprehensive income statement for the period ended 31 March 2011 and is included in lines Research and Development expenses and General and Administrative expenses. The expense was recorded to retained earnings.

Biotie estimated the fair value of stock options using the Black-Scholes valuation model with the following assumptions:



Expected volatility                                                    50 %
Expected term                                                         5.74
Risk - free interest rate                                             2.0 %
Dividend rate                                                         0.0 %



The following table provides information on the number and pricing of options outstanding and exercisable at the acquisition date (February 1, 2011) and at March 31, 2011:



                        Options outstanding         Options exercisable
                                  Weighted                     Weighted
                      Options      average        Options       average
                      granted   exercise price  exercisable  exercise price
Acquisition date
 (February 1, 2011)  14,912,153       0.19 EUR   12,029,097        0.19 EUR
March 31, 2011       14,912,153       0.19 EUR   12,030,032        0.19 EUR



No options have been exercised during the period ending March 31, 2011.

DIRECTED SHARE ISSUE

In March 2011 Biotie executed a private placement of shares (the "Offering") in the amount of EUR 27 million that had been fully subscribed for. The shares were allocated to Finnish and international institutional and strategic investors. A total of 35 230 000 newly issued and 14 747 084 treasury shares were offered in the Offering at a subscription price of EUR 0.54 per share.

As a result of the issue of the new shares and the sale of the treasury shares, the share capital of Biotie was increased by EUR 26 987 625.36. After March 18, 2011 after the registration of the new shares with the Finnish Trade Register and the registration of the share capital increase related to the new shares and the sale of the treasury shares, the share capital of Biotie is EUR 165 919 181.95, the total number of shares amounts to 387 594 457, and the number of votes outstanding is 372 682 302 (taking into consideration the treasury shares held by Biotie and its subsidiaries).



Contingent liabilities



EUR 1,000                               31.3.2011   31.3.2010   31.12.2010
                                        ----------- ----------- -----------

Operating lease commitments                     143         125         159

Due within a year                                79          84          70
Due later                                        64          41          88

Rent commitments                                386         343         243

Due within a year                               316         237         243
Due later                                        71         106           0
                                        ----------- ----------- -----------
Total                                           529         468         402



The Group leases motor vehicles, machines and equipment with leases of 3 to 5 years. Rent commitments include subleased Pharmacity premises until 30 November 2011.

Commitments

On 31 March 2011 Biotie had purchase commitments, primarily for contract research work services, totaling EUR 9.9 million.



KEY FIGURES

The formulas for the calculation
of the key figures are presented
in the notes of the consolidated
financial statements 2010

Incl. both continuing and                   1.1.-        1.1.-        1.1.-
 discontinued operations                31.3.2011    31.3.2010   31.12.2010
EUR 1,000                                3 months     3 months    12 months
                                     ------------ ------------ ------------

Business development
Revenues                                      473        1,201        2,928
Personnel on average                           41           82           70
Personnel at the end of period                 40           83           23
Research and development costs              4,928        3,769       12,229
Capital expenditure                            20           80          270

Profitability
Operating profit/loss                      -7,268       -3,519      -20,720
as percentage of revenues, %             -1536.58       -292.9      -707.65
Profit/loss before taxes                   -7,711       -3,687      -21,573
as percentage of revenues, %             -1630.23       -307.0      -736.78

Balance sheet
Liquid assets                              46,791       15,232        4,059
Shareholders' equity                       87,720      -12,580      -29,466
Balance sheet total                       140,542       27,209       11,205

Financial ratios
Return on equity, %                             -            -            -
Return on capital employed, %               -14.7        -25.9       -341.5
Equity ratio, %                              62.4        -46.2       -263.0
Gearing, %                                    5.4        -83.8        -73.7

Per share data
Earnings per share (EPS) basic, EUR         -0.03        -0.02        -0.15
Earnings per share (EPS) diluted,
 EUR                                        -0.03        -0.02        -0.17
Shareholders' equity per share, EUR          0.23        -0.02            -
Dividend per share, EUR                         -            -            -
Pay-out ratio, %                                -            -            -
Effective dividend yield, %                     -            -            -
P/E-ratio                                       -            -            -

Share price
  Lowest share price, EUR                    0.49         0.53         0.30
  Highest share price, EUR                   0.82         0.65         0.65
  Average share price, EUR                   0.61         0.57         0.48
  End of period share price, EUR             0.56         0.55         0.50
Market capitalization at the end of
 period MEUR                                217.1         87.3         88.0

Trading of shares
Number of shares traded               121,439,322   24,649,500   90,049,678
As percentage of all                         31.3         15.5         51.2
Adjusted weighted average number of
 shares during the period             296,081,465  158,752,560  161,919,250
Adjusted number of shares at the end
 of the period                        387,594,457  158,752,560  176,003,931



Biotie_interim report Q1 2011

http://hugin.info/132030/R/1515600/451879.pdf

Contact Information

  • For further information, please contact:
    Virve Nurmi
    Investor Relations Manager
    tel. +358 2 274 8900
    e-mail: virve.nurmi@biotie.com

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    NASDAQ OMX Helsinki Ltd
    Main media
    www.biotie.com