Date of event requiring this shell company
report. Not applicable
(Name, Telephone, E-mail and/or Facsimile
number and Address of Company Contact Person)
Securities registered
or to be registered pursuant to Section 12(b) of the Act.
* Not for trading, but only in connection with
the registration of the American Depositary Shares pursuant to requirements of the Securities and Exchange Commission.
Securities registered
or to be registered pursuant to Section 12(g) of the Act.
Securities for which
there is a reporting obligation pursuant to Section 15(d) of the Act.
Indicate the number
of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual
report.
Indicate by check
mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
If this report is
an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934.
Note—Checking
the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 from their obligations under those Sections.
Indicate by check
mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check
mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant was required to submit and post such files).
Indicate by check
mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth
company. See definition of “large accelerated filer,” “accelerated filer,” and "emerging growth company"
in Rule 12b-2 of the Exchange Act.
Indicate by check
mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
If "Other"
has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has
elected to follow.
If this is an annual
report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
This document contains information required
for the annual report on Form 20-F for the fiscal year ended April 30, 2018 of Oasmia Pharmaceutical AB (the “Form 20-F”).
Unless the context specifically indicates otherwise, references in this Form 20-F to “Oasmia Pharmaceutical AB”, “Oasmia
Pharmaceutical”, “Oasmia”, “we”, “our”, “ours”, “us”, the “Company”
or similar terms refer to Oasmia Pharmaceutical AB.
All references in this annual report to “$”
are to U.S. dollars, all references to “SEK” are to Swedish krona and all references to “TSEK” are to Swedish
krona in thousands. Solely for the convenience of the reader some, but not all, Swedish krona and Euro amounts have been translated
into U.S. dollars at the relevant exchange rate posted by the Federal Reserve Bank. These translations should not be considered
representations that any such amounts have been, could have been or could be converted into U.S. dollars at that or any other exchange
rate as of that or any other date.
This annual report contains estimates and forward-looking
statements, principally in “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition
and Results of Operations” and “Business.” Some of the matters discussed concerning our operations and financial
performance include estimates and forward-looking statements within the meaning of the Securities Act and the Exchange Act.
These forward-looking statements are subject
to known and unknown risks, uncertainties, assumptions and other factors that could cause our actual results of operations, financial
condition, liquidity, performance, prospects, opportunities, achievements or industry results, as well as those of the markets
we serve or intend to serve, to differ materially from those expressed in, or suggested by, these forward-looking statements. These
forward-looking statements are based on assumptions regarding our present and future business strategies and the environment in
which we expect to operate in the future. Important factors that could cause those differences include, but are not limited to:
Additional factors that could cause actual
results, financial condition, liquidity, performance, prospects, opportunities, achievements or industry results to differ materially
include, but are not limited to, those discussed under “Risk Factors” in this annual report. Additional risks that
we may currently deem immaterial or that are not presently known to us could also cause the forward-looking events discussed in
this annual report not to occur. The words “believe,” “may,” “will,” “estimate,”
“continue,” “anticipate,” “intend,” “expect” and similar words are intended to
identify estimates and forward-looking statements. Estimates and forward-looking statements speak only at the date they were made,
and we undertake no obligation to update or to review any estimate and/or forward-looking statement because of new information,
future events or other factors. Estimates and forward-looking statements involve risks and uncertainties and are not guarantees
of future performance. Our future results may differ materially from those expressed in these estimates and forward-looking statements.
In light of the risks and uncertainties described above, the estimates and forward-looking statements discussed in this annual
report might not occur and our future results and our performance may differ materially from those expressed in these forward-looking
statements due to, inclusive of, but not limited to, the factors mentioned above. Because of these uncertainties, you should not
make any investment decision based solely on these estimates and forward-looking statements.
PART I
ITEM 1. IDENTITY
OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
Not applicable.
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
Not applicable.
ITEM 3. KEY INFORMATION
A.
|
Selected financial information
|
You should read the following selected financial
data in conjunction with our financial statements and the related notes thereto appearing elsewhere in this annual report and in
the section of this annual report entitled “Item 5. Operating and financial review.”
The following table summarizes our consolidated
financial data as of the dates and for the periods indicated. The selected consolidated financial data for the fiscal years presented
have been derived from our consolidated financial statements, which have been prepared in accordance with International Financial
Reporting Standards (“IFRS”) issued by the International Accounting Standards Board (“IASB”). Furthermore,
the recommendation RFR 1, Supplementary accounting regulations for Groups, issued by the Swedish Financial Reporting Board, has
been applied. We have prepared the consolidated financial information set forth below on the same basis as our audited consolidated
financial statements.
Our consolidated financial statements are prepared
and presented in Swedish krona “SEK”, which is our functional currency. All tables, if not expressly otherwise stated,
in this annual report are therefore in Swedish krona.
Our historical results are not necessarily
indicative of the results that may be expected in the future. The following summary consolidated financial data should be read
in conjunction with the section “Item 5. Operating and financial review” and our consolidated financial statements
included elsewhere in this annual report, including our discussions therein regarding the material weakness in our internal control
over financial reporting identified by our independent registered public accounting firm and the Company’s future financing
and going concern.
Key figures are translated into USD as
additional information as a service to readers of this annual report in the US. The US Dollar is not the functional currency of
Oasmia, which is SEK. The conversion of currency has been made by use of a convenience rate for all figures including those from
previous periods. This rate is the closing rate as per September 7, 2018 which was 9.0813 SEK per one USD.
Consolidated income statement data:
|
|
2018
|
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|
|
(TUSD)
|
|
|
(TSEK)
|
|
|
(TSEK)
|
|
|
(TSEK)
|
|
|
(TSEK)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
349
|
|
|
|
3,169
|
|
|
|
172
|
|
|
|
6,373
|
|
|
|
2,070
|
|
Change in inventories of products in progress and finished goods
|
|
|
(160
|
)
|
|
|
(1,450
|
)
|
|
|
(1,405
|
|
|
|
9,509
|
|
|
|
-
|
|
Capitalized development cost
|
|
|
1,008
|
|
|
|
9,157
|
|
|
|
7,023
|
|
|
|
16,727
|
|
|
|
16,797
|
|
Other operating income
|
|
|
193
|
|
|
|
1,753
|
|
|
|
420
|
|
|
|
2
|
|
|
|
221
|
|
Raw materials, consumables and goods for resale
|
|
|
(325
|
)
|
|
|
(2,953
|
)
|
|
|
(2,984
|
)
|
|
|
(4,733
|
)
|
|
|
(10,062
|
)
|
Other external expenses
|
|
|
(6,633
|
)
|
|
|
(60,235
|
)
|
|
|
(79,904
|
)
|
|
|
(98,104
|
)
|
|
|
(60,740
|
)
|
Employee benefit expenses
|
|
|
(5,326
|
)
|
|
|
(48,371
|
)
|
|
|
(59,295
|
)
|
|
|
(57,661
|
)
|
|
|
(50,530
|
)
|
Depreciation, amortization and impairment
|
|
|
(528
|
)
|
|
|
(4,794
|
)
|
|
|
(4,508
|
)
|
|
|
(4,804
|
)
|
|
|
(5,190
|
)
|
Other operating expenses
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(792
|
)
|
Operating income (loss)
|
|
|
(11,422
|
)
|
|
|
(103,724
|
)
|
|
|
(140,481
|
)
|
|
|
(132,691
|
)
|
|
|
(108,225
|
)
|
Financial income
|
|
|
11
|
|
|
|
101
|
|
|
|
85
|
|
|
|
786
|
|
|
|
210
|
|
Financial expenses
|
|
|
(1,585
|
)
|
|
|
(14,390
|
)
|
|
|
(19,847
|
)
|
|
|
(9,634
|
)
|
|
|
(9,482
|
)
|
Financial income and expenses - net
|
|
|
(1,573
|
)
|
|
|
(14,289
|
)
|
|
|
(19,762
|
)
|
|
|
(8,848
|
)
|
|
|
(9,272
|
)
|
Income (loss) before taxes
|
|
|
(12,995
|
)
|
|
|
(118,013
|
)
|
|
|
(160,243
|
)
|
|
|
(141,539
|
)
|
|
|
(117,497
|
)
|
Income taxes
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Income (loss) for the period
|
|
|
(12,995
|
)
|
|
|
(118,013
|
)
|
|
|
(160,243
|
)
|
|
|
(141,539
|
)
|
|
|
(117,497
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share, before and after dilution, SEK
(1)
|
|
|
(0.08
|
)
|
|
|
(0.71
|
)
|
|
|
(1.39
|
)
|
|
|
(1.36
|
)
|
|
|
(1.26
|
)
|
Weighted average number of shares, in thousands before and after dilution
(1)
|
|
|
166,196
|
|
|
|
166,196
|
|
|
|
112,994
|
|
|
|
101,753
|
|
|
|
91,655
|
|
(1)
Recalculation of historical
figures has been performed with regards to capitalization issue components in the preferential rights share issue carried out in
the fiscal quarters July 31, 2017 and January 31, 2015.
Consolidated statement of financial position data:
|
|
2018
|
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|
|
(TUSD)
|
|
|
(TSEK)
|
|
|
(TSEK)
|
|
|
(TSEK)
|
|
|
(TSEK)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-current assets
|
|
|
53,689
|
|
|
|
487,565
|
|
|
|
471,464
|
|
|
|
443,010
|
|
|
|
427,879
|
|
Liquid assets
|
|
|
1,716
|
|
|
|
15,580
|
|
|
|
28,001
|
|
|
|
46,214
|
|
|
|
76,990
|
|
Total current assets
|
|
|
8,865
|
|
|
|
80,509
|
|
|
|
50,119
|
|
|
|
72,570
|
|
|
|
86,690
|
|
Total assets
|
|
|
62,554
|
|
|
|
568,075
|
|
|
|
521,583
|
|
|
|
515,579
|
|
|
|
514,569
|
|
Total equity
|
|
|
37,994
|
|
|
|
345,036
|
|
|
|
300,371
|
|
|
|
326,053
|
|
|
|
375,710
|
|
Total non-current liabilities
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Total current liabilities
|
|
|
24,560
|
|
|
|
223,039
|
|
|
|
221,212
|
|
|
|
189,527
|
|
|
|
138,858
|
|
Total liabilities
|
|
|
24,560
|
|
|
|
223,039
|
|
|
|
221,212
|
|
|
|
189,527
|
|
|
|
138,858
|
|
Consolidated cash flow statement data:
|
|
2018
|
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|
|
(TUSD)
|
|
|
(TSEK)
|
|
|
(TSEK)
|
|
|
(TSEK)
|
|
|
(TSEK)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow from operating activities
|
|
|
(13,614
|
)
|
|
|
(123,634
|
)
|
|
|
(133,011
|
)
|
|
|
(128,126
|
)
|
|
|
(107,666
|
)
|
Cash flow from investing activities
|
|
|
(2,362
|
)
|
|
|
(21,452
|
)
|
|
|
12,039
|
|
|
|
10,066
|
|
|
|
(69,755
|
)
|
Cash flow from financing activities
|
|
|
14,608
|
|
|
|
132,656
|
|
|
|
122,755
|
|
|
|
117,449
|
|
|
|
156,017
|
|
EXCHANGE RATE INFORMATION
Fluctuations in the
exchange rate between the Swedish krona and the U.S. dollar will affect the U.S. dollar amounts received by owners of the ADSs
on conversion of dividends, if any, paid in krona on the Ordinary Shares and will affect the U.S. dollar price of the ADSs on NASDAQ.
The table below shows the period end, average, high and low exchange rates of kronor per U.S. dollar for the periods shown. Average
rates are computed by using the noon buying rate of the Federal Reserve Bank of New York for the U.S. dollar on the last business
day of each month during the relevant year indicated or each business day during the relevant month indicated. The rates set forth
below are provided solely for your convenience and may differ from the actual rates used in the preparation of our consolidated
financial statements included in this annual report and other financial data appearing in this annual report
|
|
Period End
|
|
|
Average
|
|
|
High
|
|
|
Low
|
|
Year Ended April 30:
|
|
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
|
6.5049
|
|
|
|
6.5244
|
|
|
|
6.8171
|
|
|
|
6.3237
|
|
2015
|
|
|
8.3778
|
|
|
|
7.5000
|
|
|
|
8.8180
|
|
|
|
6.4864
|
|
2016
|
|
|
8.0267
|
|
|
|
8.4162
|
|
|
|
8.7679
|
|
|
|
8.0267
|
|
2017
|
|
|
8.8635
|
|
|
|
8.7399
|
|
|
|
9.4207
|
|
|
|
7.9761
|
|
2018
|
|
|
8.7630
|
|
|
|
8.3062
|
|
|
|
8.9130
|
|
|
|
7.8549
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Month Ended:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 2018
|
|
|
8.3619
|
|
|
|
8.2406
|
|
|
|
8.3619
|
|
|
|
8.1707
|
|
April 2018
|
|
|
8.7630
|
|
|
|
8.4596
|
|
|
|
8.7630
|
|
|
|
8.3157
|
|
May 2018
|
|
|
8.8233
|
|
|
|
8.7555
|
|
|
|
8.9564
|
|
|
|
8.5912
|
|
June 2018
|
|
|
8.9511
|
|
|
|
8.8010
|
|
|
|
9.0091
|
|
|
|
8.6059
|
|
July 2018
|
|
|
8.7521
|
|
|
|
8.8225
|
|
|
|
8.9900
|
|
|
|
8.7038
|
|
August 2018
|
|
|
9.1566
|
|
|
|
9.0690
|
|
|
|
9.2228
|
|
|
|
8.8083
|
|
September 2018 (through September 7, 2018)
|
|
|
9.0813
|
|
|
|
9.0833
|
|
|
|
9.1118
|
|
|
|
9.0697
|
|
B. Capitalization and indebtedness
Not applicable
C. Reason for the Offer and Use of Proceeds
Not applicable
D. Risk factors.
Our business faces significant risks and
uncertainties. You should carefully consider the following risk factors and all other information set forth in this Annual Report
on Form 20-F, including our consolidated financial statements, before making an investment decision regarding our securities. The
risks and uncertainties described below are those significant risk factors, currently known and specific to us, which we believe
are relevant to an investment in our securities. The risk factors are not placed in order of priority and should not be construed
as comprehensive. Additional risks and uncertainties not currently known to us or those we now deem immaterial may also harm us
and adversely affect your investment in the ADSs. If any of these risks materialize, our business, results of operations, financial
condition and future prospects could suffer and the price of the ADSs could decline and you could lose part or all of your investment.
In addition to the information disclosed in this annual report, investors should make their own assessment of each risk factor
and its potential impact on our future development as well as an assessment of the impact of general conditions, including market
conditions and world events.
Risks Related to Our Product and Product
Candidates
We are substantially dependent on the
success of our product and product candidates, none of which may receive full regulatory approval or be successfully commercialized.
Up until today, we have invested nearly all
of our resources in the research and development of our product candidates, which consist of Paccal Vet (“Paccal Vet”)
for cancer in dogs, Paclical or Apealea for ovarian cancer and other cancers in humans, Docecal for breast cancer in humans, Doxophos
Vet for lymphoma in dogs, Doxophos for breast cancer and other cancers in humans, and OAS-19 for various cancers in humans. Two
of product candidates, Paclical and Doxophos, have been approved for full commercial distribution in Russia. Another of our product
candidates, Paccal Vet-CA1 (“Paccal Vet”) was previously conditionally approved by FDA. However this conditional approval
was withdrawn by the Company in January 2017. Our near-term prospects, including our ability to finance our company and to enter
into strategic collaborations and generate revenue, are directly dependent upon the successful development and commercialization
of our product and product candidates, particularly Paclical, Doxophos, Doxophos Vet and Paccal Vet.
Paclical is the name used in Russia and Kazakhstan
hence the name Apealea will be used in Europe and in the U.S.
The development and commercial success of our
product and product candidates will depend on a number of factors, including, without limitation, the following:
|
•
|
timely initiation and successful completion of preclinical studies and clinical trials for our product candidates;
|
|
•
|
demonstration to the satisfaction of the United States Food and Drug Administration (“FDA”) and other applicable regulatory authorities of the safety and efficacy of our product and product candidates, as well as to obtain regulatory and marketing approval for our product and product candidates in the U.S. and elsewhere;
|
|
•
|
continued compliance with all clinical and regulatory requirements applicable to our product and product candidates;
|
|
•
|
maintenance of an acceptable safety profile of our products following regulatory approval;
|
|
•
|
competition with other treatments;
|
|
•
|
creation, maintenance and protection of our intellectual property portfolio, including patents and trade secrets, and regulatory exclusivity for our product and product candidates;
|
|
•
|
effectiveness of our and our partners’ marketing, sales and distribution strategy and operations;
|
|
•
|
ability of our third-party manufacturers to manufacture supplies of our product and product candidates and to develop, validate and maintain commercially viable manufacturing processes;
|
|
•
|
ability to launch commercial sales of our product and product candidates following regulatory approval, whether alone or in collaboration with others;
|
|
•
|
acceptance of our animal health product and product candidates by veterinarians, pet owners and the animal health community; and
|
|
•
|
acceptance of our human health product candidates from physicians, health care payers, patients and the medical community.
|
Since many of these factors are beyond our
control, we cannot assure you that we will ever be able to generate sufficient revenue or any revenue from the sale of our product
and product candidates. Our failure in any of the above-mentioned factors or in successfully commercializing one or more of our
product and product candidates, or any significant delay in doing so, could have a material adverse effect on our business, results
of operations and financial condition, and the value of your investment could substantially decline.
Our product and product candidates may
not achieve market acceptance, which could limit our ability to generate revenue from new products.
Even if we develop our product and product
candidates and gain regulatory approvals for our products, unless veterinarians, physicians, and patients accept our products,
we may not be able to sell our products and generate significant revenue. We cannot assure you that our current product and product
candidates or any other planned products will achieve market acceptance and revenue if and when they obtain the requisite regulatory
approvals. Market acceptance of any product depends on a number of factors, including but not limited to:
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the indication and warnings approved by regulatory authorities in the product label;
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continued demonstration of efficacy and safety in commercial use;
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physicians’ or veterinarians’ willingness to prescribe the product;
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reimbursement from third-party payors such as government health care systems and insurance companies;
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the price of the product, including pet owners’ willingness to pay for treatment;
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the nature of any post-approval risk management plans mandated by regulatory authorities;
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the effectiveness of marketing and distribution support.
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Any failure by our product and product candidates
to achieve market acceptance or commercial success could have a material adverse effect on our business, results of operations
and financial condition.
Problems in our manufacturing process,
failure to comply with manufacturing regulations or unexpected increases in our manufacturing costs could harm our business, results
of operations and financial condition.
We are responsible for the manufacture and
supply of Apealea, Doxophos and our other product candidates for our commercial partners and for use in clinical trials. The manufacturing
of our product and product candidates necessitates compliance with the US FDA, EU EMA and international current Good Manufacturing
Practice (“cGMP”) and other international regulatory requirements. Although we contract with third parties such as
Baxter Oncology GmbH for a certain amount of the manufacturing of Apealea, Paccal Vet and our other product candidates, the market
authorization for Apealea and Doxophos remains with us. As such, even if we could potentially have a claim against one or more
third parties, we are legally liable for any noncompliance related to Apealea and Doxophos and we expect to retain legal responsibility
for future product candidates as well.
If we are unable to manufacture, or contract
to manufacture, our product and product candidates in accordance with regulatory specifications, or if there are disruptions in
the manufacturing process due to damage, loss or failure to pass regulatory inspections of manufacturing facilities, we may not
be able to meet the demand for our products or supply sufficient product for use in clinical trials, and this may harm our ability
to commercialize Apealea, Doxophos and our other product candidates on a timely or cost-competitive basis, or preclude us from
doing so at all. In addition, we are in the process of expanding and changing parts of our manufacturing facilities in order to
meet future demand and FDA requirements, a program which requires significant time and resources. We also expect to expand and
upgrade other parts of our manufacturing facilities in the future. These activities may lead to delays, interruptions in supply,
or may prove to be more costly than we currently anticipate. Any problems in our manufacturing process could have a material adverse
effect on our business, results of operations and financial condition.
In addition, under our license agreements,
we expect to generate revenue from the supply of commercial products to our partners at a fixed percentage of our cost of goods
sold, and thus any increases in our manufacturing costs could materially and adversely affect our margins and our financial condition.
Before we can begin commercial manufacture
of Paccal Vet, Apealea or our other product candidates for sale in the U.S., we must obtain FDA regulatory approval for the product,
which requires a successful FDA inspection of our manufacturing facilities, processes and quality systems in addition to other
product-related approvals. Although we successfully passed an FDA Pre-Approval Inspection and a FDA routine GMP inspection of our
manufacturing facility in Uppsala, Sweden, our pharmaceutical facilities are continuously subject to inspection by the FDA and
foreign (EMA) regulatory authorities, even after product approval. Due to the complexity of the processes used to manufacture our
product and product candidates, we may be unable to pass federal, state or international regulatory inspections in a cost effective
manner, whether initially on at any time thereafter. If we are unable to comply with manufacturing regulations, we may be subject
to fines, unanticipated compliance expenses, recall or seizure of any approved products, or legal actions such as injunctions or
criminal or civil prosecution. These possible sanctions could materially and adversely affect our business, results of operations
and financial condition. See also “— Risks Related to Development and Regulatory Approval of Our Product and Product
Candidates — The regulatory approval process is uncertain, requires us to utilize significant resources, and may
prevent us or our commercial partners from obtaining approvals for the commercialization of some or all of our drug candidates.”
We expect to face substantial competition,
which may result in others discovering, developing or commercializing products before, or more successfully than, we do.
The development and commercialization of new
drug products is highly competitive. We face competition with respect to our current product and product candidates, and will face
competition with respect to any product candidates that we may seek to develop or commercialize in the future, from major pharmaceutical
companies, specialty pharmaceutical companies and biotechnology companies worldwide. In addition to existing therapeutic treatments
for the indications we are targeting with our product and product candidates, we also face potential competition from other drug
candidates in development by other companies. Our potential competitors include large health care companies, such as Celgene, Merck
& Co., Inc., Sanofi S.A., Eli Lilly and Company, Roche, Bayer AG, Novartis AG and Boehringer Ingelheim GmbH. Several of these
companies also has a presence in animal health. We also know of several smaller early stage companies that are developing products
for use in the animal or human health products market. We expect that Paccal Vet and Doxophos Vet will face competition from Palladia,
made by Zoetis. We may also face competition from generic medicines and products approved for use in humans that are used off-label
for pets. Some of the potential competitive compounds referred to above are being developed by large, well-financed and experienced
pharmaceutical and biotechnology companies or have been partnered with such companies, which may give them development, regulatory
and marketing advantages over our products.
Our commercial opportunity could be reduced
or eliminated if our competitors develop and commercialize products that are safer, more effective, have fewer or less severe side
effects, are more convenient or are less expensive than any products that we may develop. Our competitors also may obtain FDA or
other regulatory approval for their products more rapidly than we may obtain approval for ours, which could result in our competitors
establishing a strong market position before we are able to enter the market. In addition, our ability to compete may be affected
in many cases by insurers or other third-party payers seeking to encourage the use of generic products. Generic products are currently
on the market for the indications that we are pursuing. If our product candidates achieve marketing approval, we expect that they
will be priced at a significant premium over competing generic products.
Some of the companies against which we are
competing or against which we may compete in the future have significantly greater financial resources and expertise in research
and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approved
products than we do. Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources
being concentrated among a smaller number of our competitors. Smaller and other early stage companies may also prove to be significant
competitors, particularly through collaborative arrangements with large and established companies. These third parties compete
with us in recruiting and retaining qualified scientific and management personnel, establishing clinical trial sites and patient
registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs.
If we are unable to compete successfully, we
may be unable to grow and sustain our revenue, which could materially and adversely affect our business, results of operations
and financial condition.
Generic products may be more cost-effective
than our products.
In addition to the competition that we may
face from products produced by other companies in general, we may also face competition from generic alternatives to our products.
For example, Apealea is expected to compete with the generic form of Taxol. Generic alternatives are generally less expensive,
and competitors who market generic drugs are becoming more aggressive in terms of pricing. Consequently, generic products constitute
an increasing percentage of both overall human and animal health sales in certain regions. If human and animal health care customers
increase their use of new or existing generic products, or if we are unable to compete with existing generic products, our business,
results of operations and financial condition could be materially and adversely affected.
Serious adverse events or other safety
risks could require us to abandon development and preclude, delay or limit approval of our product and product candidates, or limit
the scope of any approved label or market acceptance.
If any of Apealea, Doxophos, or any of our
other product candidates, prior to or after any approval for commercial sale, causes serious or unexpected side effects, or become
associated with other safety risks such as misuse, abuse or diversion, a number of potentially significant negative consequences
could result, including, without limitation:
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regulatory authorities may interrupt, delay or halt clinical trials;
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regulatory authorities may deny regulatory approval of our product candidates;
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regulatory authorities may require certain labeling statements, such as warnings or contraindications or limitations on the indications for use, or impose restrictions on distribution in the form of a Risk Evaluation and Mitigation Strategy (“REMS”), in connection with approval, if any;
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regulatory authorities may withdraw their approval, require more onerous labeling statements or impose a more restrictive REMS of any product that is approved;
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we may be required to change the way the product is administered or conduct additional clinical trials;
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our relationships with our commercial partners may suffer;
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we could be sued and held liable for harm caused to patients; and
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our reputation may suffer.
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We may voluntarily suspend or terminate our
clinical trials if at any time we believe that they present an unacceptable risk to participants or if preliminary data demonstrate
that our product and product candidates are unlikely to receive regulatory approval or are unlikely to be successfully commercialized.
In addition, regulatory agencies, an Institutional Review Board (“IRB”), or data safety monitoring boards may at any
time recommend the temporary or permanent discontinuation of our clinical trials or request that we cease using investigators in
the clinical trials if they believe that the clinical trials are not being conducted in accordance with applicable regulatory requirements,
or that they present an unacceptable safety risk to participants. Although we have never been asked by a regulatory agency, IRB
or data safety monitoring board to temporarily or permanently discontinue a clinical trial, if we elect or are forced to suspend
or terminate a clinical trial of Apealea, Doxophos or any of our other product candidates, the commercial prospects for that product
may be harmed and our ability to generate product revenue from that product may be delayed or eliminated. Furthermore, any of these
events could prevent us or our partners from achieving or maintaining market acceptance of the affected product and could substantially
increase the costs of commercializing our product and product candidates and materially impair our ability to generate revenue
from the commercialization of these products either by us or by our commercial partners and could have a material adverse effect
on our reputation, business, results of operations and financial condition.
If we fail to obtain and sustain an adequate
level of reimbursement for our products by third-party payers, sales and profitability will be adversely affected.
The course of medical treatment for human patients
is, and will continue to be, expensive. We expect that most patients and their families will not be capable of paying for our products
themselves. Accordingly, it is unlikely that there will be a commercially viable market for Apealea or our other human health care
product candidates without reimbursement from third-party payors. Additionally, even if there is a commercially viable market,
if the level of third-party reimbursement is insufficient from the patient’s perspective, our revenue and gross margins will
be materially and adversely affected.
A current trend in the U.S. health care industry,
as well as in other countries around the world, is towards cost containment. Large public and private payers, managed care organizations,
group purchasing organizations and similar organizations are exerting increasing influence on decisions regarding the use of, and
reimbursement levels for, particular treatments. Third-party payors, such as government programs, including Medicare in the U.S.
and private health care insurers, carefully review and have increasingly been challenging the coverage of, and prices charged for,
medical products and services. Many third-party payers limit coverage of or reimbursement for newly-approved health care products.
Reimbursement rates from private health insurance companies vary depending on the company, the insurance plan and other factors.
Cost-control initiatives could decrease the price we or our partners establish for products, which could result in lower product
revenue and profitability.
Reimbursement systems in international markets
vary significantly by country and by region, and reimbursement approvals must be obtained on a country-by-country basis. Our partners
may elect to reduce the price of our products in order to increase the likelihood of obtaining reimbursement approvals. In many
countries, products cannot be commercially launched until reimbursement is approved and the negotiation process in some countries
can exceed 12 months. In addition, pricing and reimbursement decisions in certain countries can be affected by decisions taken
in other countries, which can lead to mandatory price reductions and/or additional reimbursement restrictions across a number of
other countries, which may thereby adversely affect our sales and profitability. If countries set prices that are not sufficient
to allow us or our partners to generate a profit, our partners may refuse to launch the product in such countries or withdraw the
product from the market, which would adversely affect our sales and profitability and could materially and adversely affect our
business, results of operations and financial condition.
We may not be successful in our efforts
to expand our pipeline of product candidates.
One element of our strategy is to expand our
pipeline of pharmaceuticals based on our XR17 technology and advance these product candidates through clinical development for
the treatment of a variety of indications. Although our research and development efforts to date have resulted in a number of development
programs based on XR17 technology, we may not ultimately be able to develop product candidates that are safe and effective. Even
if we are successful in continuing to expand our pipeline, the potential product candidates that we identify may not be suitable
for clinical development, including as a result of being shown to have harmful side effects or other characteristics that indicate
that they are unlikely to receive marketing approval and achieve market acceptance. In addition, if we attempt to apply XR17 technology
to develop product candidates for indications outside of cancer, we will need to conduct genotoxicity, carcinogenicity and immunotoxicity
trials, in which the results may be uncertain. If we do not successfully develop and commercialize product candidates based upon
our technological approach, we will not be able to obtain product revenue in future periods, which would make it unlikely that
we would ever achieve profitability.
The veterinary market we are seeking
to enter with Paccal Vet and Doxophos Vet is untested.
The market for cancer drugs for dogs is nascent
and changing. Consequently, it is difficult to assess to what extent cancer drugs might be accepted by veterinarians, which complicates
both the estimate of the market size as well as our share thereof, if any. If a market does not develop, or our share thereof is
not meaningful, it could have a material adverse effect on our business, results of operations and financial condition.
For our animal health products, changes
in distribution channels could negatively impact our market share and distribution of our animal health products.
Since our animal health product and product
candidates are designed to be given intravenously by veterinarians, pet owners will not be able to obtain our products over-the-counter
or via the internet. Increasingly, pet owners purchase animal health products from sources other than veterinarians, such as internet-based
retailers, “big-box” retail stores or other over-the-counter distribution channels. This trend has been demonstrated
by the significant shift away from the veterinarian distribution channel in the sale of parasiticides and vaccines in recent years.
Pet owners also could decrease their reliance on, and visits to, veterinarians as they rely more on internet-based animal health
information. Since we market our animal health products through the veterinarian distribution channel, any decrease in visits to
veterinarians by pet owners could reduce our market share for such products and materially and adversely affect our operating results
and financial condition.
Business interruptions could delay us
in the process of developing our product and product candidates and could disrupt our product sales.
Loss of our manufacturing facilities, stored
inventory or laboratory facilities through accidents, fire or other causes could have a materially adverse effect on our ability
to meet demand for our products, to continue product development activities and to conduct our business. Failure to supply our
partners with commercial products may lead to adverse consequences, including the right of certain partners to take over responsibility
for product supply. We have insurance coverage to compensate us for such business interruptions, but should such coverage prove
insufficient to fully compensate us for damage to our business resulting from any significant property or casualty loss to our
inventory or facilities, it could have a material adverse effect on our business, results of operations and financial condition.
Product recalls or inventory losses caused
by unforeseen events, cold chain interruption and testing difficulties may adversely affect our operating results and financial
condition.
Apealea, Doxophos and our other product candidates
are manufactured and distributed using technically complex processes requiring specialized facilities, highly specific raw materials
and other production constraints. The complexity of these processes, as well as the strict company and government standards for
the manufacture of our products, subjects us to production risks. While product batches released for use in clinical trials or
for commercialization undergo sample testing, some defects may only be identified following product release. In addition, process
deviations or unanticipated effects of approved process changes may result in these intermediate products not complying with stability
requirements or specifications. Most of our products must be stored and transported at temperatures within a certain range, which
is known as “strict cold chain” storage and transportation. If these environmental conditions deviate, our products’
remaining shelf lives could be impaired or their efficacy and safety could become adversely affected, making them no longer suitable
for use. The occurrence or suspected occurrence of production and distribution difficulties can lead to lost inventories, and in
some cases product recalls, with consequential reputational damage and the risk of product liability. The investigation and remediation
of any identified problems can cause production delays, substantial expense, lost sales and delays of new product launches, any
of which could have a material adverse effect on our business, results of operations and financial condition.
Risks Related to Our Financial Position
and Capital Needs
Our independent registered public accounting
firm included an explanatory paragraph relating to our ability to continue as a going concern in its report on our audited consolidated
financial statements included in this annual report.
Our audited consolidated financial statements
were prepared assuming that we will continue as a going concern. However, the report of our independent registered public accounting
firm included elsewhere in this annual report contains an explanatory paragraph on our consolidated financial statements casting
substantial doubt about our ability to continue as a going concern, meaning that we may not be able to continue in operation for
the foreseeable future or be able to realize assets and discharge liabilities in the ordinary course of operations. Such an opinion
could materially limit our ability to raise additional funds through the issuance of new debt or equity securities or otherwise.
There is no assurance that sufficient financing will be available when needed to allow us to continue as a going concern.
Oasmia has two products approved, but they
do not yet create a sufficient cash flow for its business. Consequently, Oasmia continuously pursues various financing alternatives.
This work includes the fact that the Company is in discussions with potential partners for licensing of distribution and sales
rights, negotiations with new and existing investors, financiers and lenders and that the Company ensures enough resources to secure
that forecasted future revenue streams from regions where the company's products registered, are realized.
Available consolidated liquid assets and unutilized
credit facilities as of April 30, 2018 are not sufficient to provide the required capital to pursue the planned activities during
the next 12 months. In light of available financing alternatives and the recent developments in the Company, the Board of Directors
assesses that the prospects for financing of the Company´s operations in the coming year are good. Should funding not be
obtained in sufficient quantities there is a risk that the conditions for continued operation do not exist.
Our independent registered public accounting
firm has advised us that it has identified a material weakness in our internal control over financial reporting relating to revenue
recognition from profit sharing agreements and inadequate financial statement preparation and review procedures.
In connection with the audit of our financial
statements as of and for the fiscal year ended April 30, 2018 our independent registered public accounting firm reported to our
audit committee that it had identified a material weakness in our internal control over financial reporting related to internal
controls designed to ensure that profit-sharing revenue is properly recognized were not carried out effectively. Although management
corrected the misstatement for the year ended April 30, 2018, we concur with our independent registered public accounting firm
that a material weakness exists in our internal control over financial reporting as of April 30, 2018.
Also, in connection with the audit of our financial
statements as of and for the fiscal year ended April 30, 2017 our independent registered public accounting firm reported to our
audit committee that it had identified a material weakness in our internal control over financial reporting related to inadequate
financial statement preparation and review procedures. During the year ended April 30, 2018, we have performed the remedial activities
described below to address the material weakness identified by our independent registered public accounting firm. However due to
lack of resources there has not yet been a sufficient time period to allow management to assess whether these actions have been
implemented successfully, and determine that the newly-designed controls will operate as designed, both routinely and effectively.
Accordingly, we cannot yet conclude that the material weakness previously identified has been fully remediated. Under standards
established by the Public Company Accounting Oversight Board (United States), a material weakness is a deficiency or combination
of deficiencies in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement
of our annual or interim financial statements will not be prevented or detected and corrected on a timely basis. Specifically,
our independent registered public accounting firm determined that we did not have adequate procedures and controls to ensure that
accurate financial statements could be prepared and reviewed on a timely basis, including:
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sufficient
resources and processes in place, including controls in the finance and accounting department, to adequately perform a timely
financial statement close process resulting in errors in period-end accruals related to capitalized research and development expenses.
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adequate
internal review processes in place over critical accounting areas including timely operation whereby management identifies and
resolves significant or complex accounting matters.
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sufficient
resources and processes in place, including controls in the sales/finance and accounting department, to ensure that profit-sharing
revenue is properly recognized were not carried out effectively.
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To remediate the material weaknesses in our
internal control over financial reporting described above, we are implementing new control procedures to provide reasonable assurance
that transactions are recorded as necessary to permit preparation of financial statements in accordance with IFRS. The changes
to the control environment include, but are not limited to, the following:
• For future assurance
that transactions are recorded as necessary to permit preparation of financial statements in accordance with IFRS, we intend to
retain third-party specialists and utilize additional internal resources to update internal control procedures, including having
all changes in writing regarding 20-F confirmed by two senior managers before filing the financial statements with the SEC. Such
resources will be retained by management at the direction of the audit committee.
• For future assurance
that transactions are recorded as necessary to permit preparation of financial statements in accordance with IFRS, we intend to
prepare an accounting and internal control memorandum to address the matter as necessary, as well as further educate our management
regarding internal control and accounting through related accounting literature, which will be reviewed by the Chief Financial
Officer and presented to the audit committee.
These remediation initiatives are intended
to enhance our ability to provide accurate and timely internal control by establishing a formal process and specific control activities.
Management believes that these measures, which are currently being implemented, will remediate the identified weakness. Other than
as noted above, other changes may be implemented in the future to enhance and improve our internal control over financial reporting
measures to prevent this weakness from recurring.
We concurred with the findings from our independent
registered public accounting firm. We have been working to remediate the material weaknesses. However, the material weakness will
not be considered remediated until the applicable remedial controls operate for a sufficient period and management has concluded,
through testing, that these controls are operating effectively.
We will be required to disclose changes made
in our internal control over financial reporting and procedures on a semi-annual basis and our management will be required to assess
the effectiveness of these controls annually. However, for as long as we are an “emerging growth company” under the
JOBS Act, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal
control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act. We could be an “emerging growth company”
for up to five years. An independent assessment of the effectiveness of our internal control over financial reporting could detect
problems that our management’s assessment might not. Additional undetected material weaknesses in our internal control over
financial reporting could lead to financial statement restatements and require us to incur additional expenses of remediation,
and adversely affect our reputation, financial condition and operating results.
We face litigation risks as a result
of the material weakness in our internal control over financial reporting identified by our independent registered public accounting
firm.
In connection with the audit of our financial
statements as of and for the fiscal years ended April 30, 2018 and April 30, 2017 our independent registered public accounting
firm reported to our audit committee that it had identified material weaknesses in internal control over financial reporting related
to inadequate financial statement preparation and review procedures. See “— Our independent registered public
accounting firm has advised us that it has identified a material weakness in our internal control over financial reporting relating
to revenue recognition from profit sharing agreements and inadequate financial statement preparation and review procedures.”
As a result of such material weaknesses and
our disclosure thereof, we face the potential for litigation by current or former shareholders based on their purported inability
to accurately evaluate our financial performance from reviewing our audited financial statements, based on an alleged material
statement or omission contained in our audited financial statements or based on other claims arising from our inadequate financial
statement preparation and review procedures. As of the date of this annual report, we have no knowledge of any such shareholder
litigation. However, we can provide no assurance that such shareholder litigation will not arise in the future. Any such shareholder
litigation, whether successful or not, could have a material adverse effect on our business, results of operations and financial
condition.
Our concentration of ownership could
be disadvantageous to shareholders.
Alceco International S.A. (“Alceco”)
owned approximately 10.8 percent of our shares as of July 31, 2018. Per Arwidsson, through Arwidsro Investment AB and in his own
name, owned approximately 16.9 percent of our shares as of July 31, 2018. Alceco and Per Arwidsson can thus exercise significant
influence over all matters requiring shareholder approval, and may be able to prevent a change in control or preclude Oasmia from
taking other measures that may benefit other shareholders. Moreover, the sale of a substantial number of our shares by Alceco and/or
Mr. Arwidsson within a short period of time could cause our share price to decrease, making it more difficult for us to raise funds
through future offerings of our shares or acquire other businesses using our shares as currency. Additionally, Alceco and Mr. Arwidsson
may have interests that conflict with ours and/or our unaffiliated shareholders. See “— There are relationships
among our directors and our largest shareholders that could pose a conflict of interest.”
There are relationships among our directors
and our largest shareholders that could pose a conflict of interest.
There are relationships among some of the members
of our board of directors with each other that could pose a conflict of interest. Two of our directors, our Executive Chairman
Julian Aleksov and Bo Cederstrand are co-owners of Alceco, a holding company based in Luxembourg that conducts no business and
exists only for financial management. Alceco owns 19,417,801 of the Ordinary Shares as of July 31, 2018 and is our second largest
shareholder. In addition to being partners in Alceco, Messrs. Aleksov and Cederstrand also have a familial relationship. Mr. Aleksov
is the father of two of Mr. Cederstrand’s grandchildren. Alceco has also extended a credit facility of SEK 40 million to
the Company, which as of the date of this annual report has not been drawn upon.
These directors may have actual or apparent
conflicts of interest with respect to matters involving or affecting us and Alceco. Examples of possible conflicts include:
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issues or disputes could arise under the commercial agreements that exist between us and Alceco;
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under the terms of Alceco’s loan agreements, one or more Alceco creditors could become shareholders and could exercise their voting rights in a manner that could conflict with your interests; and
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given the close relationship between Messrs. Cederstrand and Aleksov, Mr. Cederstrand could be conflicted as to any board decision on the compensation and employment status of Mr. Aleksov.
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See also “Related Party Transactions.”
Apart from the conflicts of interest policy
contained in our Code of Ethics and Business Conduct, we and Alceco and Arwidsro Investment AB have not established any formal
procedures for us, Alceco and Arwidsro Investment AB to resolve potential or actual conflicts of interest between us. There can
be no assurance that any of the foregoing conflicts will be resolved in a manner that does not adversely affect our business, financial
condition or results of operations.
U.S. investors may have difficulty enforcing
civil liabilities against us, our directors or members of senior management and the experts named in this annual report.
With one exception are all our directors and
officers named in this annual report are non-residents of the U.S., and all or a substantial portion of the assets of such persons
are located outside the U.S. As a result, it may not be possible to serve process on such persons or our company in the U.S. or
to enforce judgments obtained in U.S. courts against them or us based on civil liability provisions of the securities laws of the
U.S. There is doubt as to whether Swedish courts would enforce certain civil liabilities under U.S. securities laws in original
actions or judgments of U.S. courts based upon these civil liability provisions. In addition, awards of punitive damages in actions
brought in the U.S. or elsewhere may be unenforceable in Sweden. An award for monetary damages under the U.S. securities laws would
be considered punitive if it does not seek to compensate the claimant for loss or damage suffered and is intended to punish the
defendant. The enforceability of any judgment in Sweden will depend on the particular facts of the case as well as the laws and
treaties in effect at the time. The U.S. and Sweden do not currently have a treaty providing for recognition and enforcement of
judgments (other than arbitration awards) in civil and commercial matters.
We have incurred significant losses since
our inception. We expect to incur losses over the next several years and may never achieve or maintain profitability.
Since our inception on April 15, 1988, we have
incurred significant operating losses. We incurred net losses of SEK 118.01 million, SEK 160.24 million and SEK 141.54 million
for the fiscal years ended April 30, 2018, April 30, 2017 and April 30, 2016. To date, we have financed our operations primarily
through private placements of shares in our company, through loans (including convertible debt instruments) and through one-time
milestone payments from our commercial partners. We have devoted substantially all of our financial resources and efforts to research
and development, including preclinical studies and clinical trials. We expect to continue to incur significant expenses and operating
losses over the next few years. Our net losses may fluctuate significantly from quarter to quarter and year to year. We anticipate
that our expenses will increase substantially as we:
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finalize a Phase I/II program for Docecal for the treatment of breast cancer;
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conduct additional efficacy studies in dogs to collect all the necessary efficacy data for full FDA approval of Doxophos Vet and Paccal Vet;
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continue research and development for and commence pre-clinical and clinical trials of Apealea, Docecal, Doxophos and OAS-19;
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seek to discover and develop additional product candidates;
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seek regulatory approvals for any product candidates that successfully complete clinical trials;
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ultimately establish a sales, marketing and distribution infrastructure and scale up external manufacturing capabilities to commercialize any products that we choose not to license to a third party and for which we may obtain regulatory approval;
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maintain, expand and protect our intellectual property portfolio;
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hire additional clinical and scientific personnel; and
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add operational, financial and management information systems and personnel, including personnel to support our product development and planned future commercialization efforts.
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To become and remain profitable, we must succeed
in developing and eventually commercializing products that generate significant revenue. This will require us to be successful
in a range of challenging activities, including completing preclinical testing and clinical trials of our product candidates, discovering
additional product candidates, potentially entering into collaboration and license agreements, obtaining regulatory approval for
product candidates and manufacturing, marketing and selling any products for which we may obtain regulatory approval. We are only
in the preliminary stages of most of these activities. We may never succeed in these activities and, even if we do, may never achieve
profitability.
Because of the numerous risks and uncertainties
associated with pharmaceutical product development, we are unable to accurately predict the timing or amount of increased expenses
or when, or if, we will be able to achieve profitability. If we are required by the FDA or by other regulatory authorities outside
of the U.S. to perform studies in addition to those currently expected, or if there are any delays in completing our clinical trials
or the development of any of our product candidates, our expenses could increase.
Even if we do achieve profitability, we may
not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable would
depress the value of our company and could impair our ability to raise capital, expand our business, maintain our research and
development efforts, diversify our product offerings or even continue our operations. A decline in the value of our company could
also cause you to lose all or part of your investment.
We may need substantial additional funding,
which may not be available to us on acceptable terms, or at all. If we are unable to raise capital when needed, we could be forced
to delay, reduce or eliminate our product development programs or our commercialization efforts.
Our operations have consumed substantial cash
since inception. Excluding receipts from milestone fees, our cash flow used for operating activities for the fiscal years ended
April 30, 2018, 2017 and 2016 was SEK 123.63 million, SEK 133.01 million and SEK 128.13 million respectively, with development
costs, which are capitalized, for those years totaling SEK 9.16 million, SEK 7.02 million and SEK 16.73 million respectively. We
expect our operating and management and administrative expenses and cash used for operations to continue to be significant and
to increase substantially in connection with our planned research, development and continued product commercialization efforts.
We may need to raise additional capital to fund our operations and continue to conduct clinical trials to support potential regulatory
approval of marketing applications. If we are unable to raise capital when needed or on attractive terms, we could be forced to:
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delay, reduce or eliminate our research and development programs or any future commercialization efforts;
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relinquish or license on unfavorable terms our rights to technologies, our product, or product candidates that we otherwise would seek to develop or commercialize ourselves;
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seek collaborators for our product or one or more of our product candidates at an earlier stage than otherwise would be desirable or on terms that are less favorable than might otherwise be available; or
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cease operations altogether.
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We do not expect our existing capital resources
to enable us to conduct Phase II development of Apealea for the treatment of metastatic breast cancer, continue research and development
for and commence clinical trials of Docecal, Doxophos Vet, Paccal Vet, Doxophos and OAS-19. Accordingly, we expect that we will
need to raise substantial additional funds in the future. Our future capital requirements will depend on many factors, including:
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the revenue, if any, related to commercial sales of our product and product candidates for which we receive marketing approval;
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the Phase II clinical program for Paclical for the treatment metastatic breast cancer;
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the scope, progress, results and costs of preclinical development, laboratory testing and clinical trials for our other product candidates, including those of Docecal, Doxophos Vet, Doxophos and OAS-19;
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our ability to enter into collaborative agreements for the development and commercialization of our product candidates;
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the number and development requirements of other product candidates that we pursue;
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the costs, timing and outcome of regulatory review of our product candidates or any future product candidates, both in the U.S. and outside the U.S.;
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the costs and timing of future commercialization activities, including product manufacturing, marketing, sales and distribution, for our product or any of our product candidates for which we receive marketing approval;
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any product liability or other lawsuits related to our products;
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the expenses needed to attract and retain skilled personnel; and
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the costs involved in preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending any intellectual property-related claims, both in the U.S. and outside the U.S.
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Identifying potential product candidates and
conducting preclinical testing and clinical trials is a time-consuming, expensive and uncertain process that takes years to complete,
and we may never generate the necessary data or results required to obtain regulatory approval and achieve product sales. In addition,
our product and our product candidates, if approved, may not achieve commercial success. Our commercial revenue, if any, will be
derived from sales of products that we do not expect to be commercially available for several months, if at all. Accordingly, we
will need to continue to rely on additional financing to achieve our business objectives. Adequate additional financing may not
be available to us on acceptable terms, or at all. In addition, we may seek additional capital due to favorable market conditions
or strategic considerations, even if we believe we have sufficient funds for our current or future operating plans.
The Company may need substantial additional
funding, which may not be available to the Company on acceptable terms, or at all. If the Company is unable to raise capital when
needed, or to extend or replace current credits, the Company could be forced to delay, reduce or eliminate its product development
programs or its commercialization efforts.
Our operations have consumed substantial cash
since inception. Excluding receipts from milestone fees, our cash flow used for operating activities for the fiscal years ended
April 30, 2018, 2017 and 2016 was SEK 123.63 million, SEK 133.01 million and SEK 128.13 million respectively, with development
costs, which are capitalized, for those years totaling SEK 9.16 million, SEK 7.02 million and SEK 16.73 million respectively.
The Company’s cash flow, excluding revenue
from milestone payments, which are used for operating activities, for the year ended 30 April 2018, amounted to approximately SEK
(123.63) million, with capitalized development costs for the period totaling approximately SEK 9.16 million. The Company expects
the operating, management and administrative expenses of the business to remain significant and even to increase sharply as a result
of the Company’s planned research and development and continued product commercialization. Even if the proceeds from the
Rights Issue is received as planned, Oasmia will have limited financial resources. The Company may need to raise additional capital,
including by extending existing or replacing credits following this Offer to obtain financing for continued clinical trials in
support of potential marketing approvals. If the Company is unable to raise capital when needed or on beneficial terms, or to extend
or replace current credits, the Company could be forced to:
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delay, reduce or eliminate its research and development programs or any future commercialization efforts;
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relinquish or license on unfavorable terms the Company’s rights to technologies, products, or product candidates that the Company otherwise would seek to develop or commercialize itself;
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seek collaborators for the Company’s product or one or more of its product candidates at an earlier stage than otherwise would be desirable or on terms that are less favorable than might otherwise be available; or
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cease operations altogether, in which case all shareholders would lose their entire investment in us.
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In view of the current liquidity position,
the Company’s current credit facilities, the proceeds from the Rights Issue in July 2017 of SEK 147.9 million net after issue
expenses cash outflow, the Company’s loan from Nexttobe AB, the Company’s debt in the form of non-negotiable promissory
notes and convertible loans, the Board of Directors believe that the Company is not sufficiently funded and able to carry out its
operating plan for the coming twelve months. The Company could be required to expend its capital resources sooner than the Company
currently expects. The Company does not expect its presently available capital resources to be sufficient to fully commercialize
its products and product candidates. The Company therefore expects it will have to raise further capital in the future. The Company’s
future capital requirements depend on many factors, including:
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potential revenue relating to commercial sales of the Company’s products and product candidates for which the Company has received marketing approval, including royalties and milestone payments from existing and future commercial partners;
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the scope, progress, results and costs of preclinical development, laboratory testing and clinical trials for the Company’s other product candidates, including Docecal, Doxophos, OAS-19 and KB 9520;
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the Company’s ability to enter into collaborative agreements for the development and commercialization of the Company’s product candidates;
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the number of product candidates, and their development requirements, that the Company is trying to develop;
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the costs, timing and outcome of regulatory review of the Company’s product candidates or any future product candidates;
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the costs and timing of future commercialization activities including manufacturing, marketing, sales and distribution of the Company’s products or any of its product candidates for which the Company receives marketing approval;
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any product liability or other legal proceedings relating to the Company’s products;
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the expenses necessary to attract and retain skilled personnel; and ·
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the costs involved in preparing, filing and prosecuting patent applications, maintaining and enforcing the Company’s intellectual property rights and defending any intellectual property-related claims, both in the the U.S. and outside the U.S..
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Identifying potential product candidates and
conducting preclinical testing and clinical trials is a time-consuming, expensive and uncertain process that takes years to complete.
The Company may never generate the necessary data or results required to obtain regulatory approval and achieve product sales.
In addition, the Company’s products and its product candidates, if approved, may not achieve commercial success. The Company’s
potential commercial revenues will come from future sales of products and these can be difficult to predict. Therefore, the Company
must continue to rely on additional funding to achieve its business goals. Adequate additional financing may not be available to
the Company on acceptable terms, or at all. In addition, the Company may seek additional capital due to favorable market conditions
or strategic considerations, even if the Company believes it has sufficient funds for its current or future operating plans.
We do not currently intend to pay dividends
on the Ordinary Shares or make any other distribution of earnings to holders of the Ordinary Shares.
Since our inception, we have not declared or
paid any dividends on the Ordinary Shares. We intend to retain any earnings for use in our business and do not currently intend
to pay dividends on the Ordinary Shares. The declaration and payment of any future dividends will be at the discretion of our board
of directors and will depend upon our results of operations, cash requirements, financial condition, contractual restrictions,
restrictions imposed by our indebtedness, any future debt agreements or applicable laws and other factors that our board of directors
may deem relevant. This policy may have a material adverse effect on the value of your Ordinary Shares. See “Dividend Policy.”
The milestone payments we receive are not reliable sources
of income and in some cases may be required to be returned at a later date.
Much of our income has consisted of, and may
in the future take the form of, milestone payments, which are contractual one-time payments from our partners as we reach certain
targets. There have been cases in which we have not reached the targets and there is no guarantee that we will be able to reach
such targets in the future. We may also be required to repay already obtained milestone payments if the agreed upon schedules are
not kept or if the required marketing approvals are not obtained. Further, milestone payments often occur irregularly over time,
causing fluctuations in our sales and earnings. Milestone payments are not sustainable earnings and any dependence on milestone
payments could have a material adverse effect on our business, results of operations and financial condition. See also “Business — Strategic
Alliances and Collaborations.”
Our limited operating history may make
it difficult for you to evaluate the success of our business to date and to assess our future viability.
We commenced active operations in 1999, and
our operations thus far have been limited to organizing and staffing our company, business planning, raising capital, identifying
potential product candidates, undertaking preclinical studies and conducting clinical trials. To date we have had no commercial
operations. All but three of our product candidates are still in preclinical development. We have not yet demonstrated our ability
to successfully complete later stage clinical trials, obtain full regulatory approvals, manufacture a commercial scale product,
or arrange for a third party to do so on our behalf, or conduct sales and marketing activities necessary for successful product
commercialization. Consequently, any predictions you make about our future success or viability may not be as accurate as they
could be if we had a longer operating history.
In addition, as a business with a limited operating
history, we may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown factors. We will
need to expand our capabilities to support commercial activities. We may not be successful in adding such capabilities.
We expect our financial condition and operating
results to continue to fluctuate significantly from quarter to quarter and year to year due to a variety of factors, many of which
are beyond our control. Accordingly, you should not rely upon the results of any past annual or interim periods as indications
of future operating performance.
Risks Related to Development and Regulatory
Approval of Our Product and Product Candidates
There is a high rate of failure for drug
candidates proceeding through clinical trials.
Generally, there is a high rate of failure
for drug candidates proceeding through clinical trials. We may suffer significant setbacks in our later stage clinical trials similar
to the experience of a number of other companies in the pharmaceutical and biotechnology industries, even after receiving promising
results in earlier trials. Further, even if we view the results of a clinical trial to be positive, the FDA or other regulatory
authorities may disagree with our interpretation of the data. For instance, because a large percentage of subjects in our pivotal
trials for Apealea and our other product candidates in cancer treatment, are being enrolled at sites outside the U.S., differences
in efficacy results between U.S. and non-U.S. sites could cause the FDA to require additional trials. In the event that:
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we obtain negative results from the Docecal and/or Doxophos Vet trials,
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we receive poor clinical results for our other product candidates,
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the FDA places a clinical hold on our Phase III trials due to potential chemistry, manufacturing and controls issues or other hurdles, or
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the FDA does not approve our New Animal Drug Application (“NADA”) for Paccal Vet or our New Drug Application (“NDA”) for Apealea or for our other product candidates,
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then:
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we may not be able to generate sufficient revenue or obtain financing to continue our operations,
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our ability to execute our current business plan will be materially impaired,
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our reputation in the industry and in the investment community would likely be significantly damaged, and
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the price of the Ordinary Shares would likely decrease significantly.
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Any of these results could materially and adversely
affect our business, results of operations or financial condition.
Clinical trials for our product candidates
are expensive, time consuming, uncertain and susceptible to change, delay or termination.
Clinical trials are expensive, time consuming
and difficult to design and implement. The result of a clinical trial may be undesirable and can result in a clinical trial cancellation
or the need for re-evaluation and supplementation. Even if the results of our clinical trials are favorable, the clinical trials
for several of our product candidates are expected to continue for several years and may even take significantly longer to complete.
In addition, we, the FDA, other regulatory authorities or ethical review boards in the U.S., EU or elsewhere, may suspend, delay
or terminate our clinical trials at any time, for various reasons, including:
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lack of effectiveness of any product candidate during clinical trials;
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discovery of serious or unexpected toxicities or side effects experienced by trial participants or other safety issues;
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slower than expected rates of subject recruitment and enrollment rates in clinical trials;
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difficulty in retaining subjects who have initiated a clinical trial but may have withdrawn due to adverse side effects from the therapy, insufficient efficacy, fatigue with the clinical trial process or for any other reason;
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delays or inability in manufacturing or obtaining sufficient quantities of materials for use in clinical trials due to manufacturing or regulatory constraints;
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inadequacy of or changes in our manufacturing process or product formulation;
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delays in obtaining regulatory authorization to commence a trial, including experiencing “clinical holds” or delays requiring suspension or termination of a trial by a regulatory agency, such as the FDA, before or after a trial is commenced;
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changes in applicable regulatory policies and regulations;
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delays or failure in reaching agreement on acceptable terms in clinical trial contracts or protocols with prospective clinical trial sites;
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delay or failure to supply product for use in clinical trials which conforms to regulatory specification;
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unfavorable results from ongoing pre-clinical studies and clinical trials;
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failure of our contract research organizations (“CROs”), or other third-party contractors to comply with all contractual requirements or to perform their services in a timely or acceptable manner;
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failure by us, our employees, our CROs or their employees to comply with all applicable FDA or other regulatory requirements relating to the conduct of clinical trials;
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scheduling conflicts with participating clinicians and clinical institutions;
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failure to design appropriate clinical trial protocols; or
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regulatory concerns with pharmaceutical products generally and the potential for abuse.
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Any of the foregoing could have a material
adverse effect on our business, results of operations and financial condition.
The regulatory approval process is uncertain,
requires us to utilize significant resources, and may prevent us or our commercial partners from obtaining approvals for the commercialization
of some or all of our drug candidates.
The research, testing, manufacturing, labeling,
approval, sale, marketing and testing of our product and product candidates are subject to extensive regulation by regulatory authorities
in the U.S. and Europe, and regulatory requirements applicable to our product and product candidates differ from country to country.
Neither we nor any commercial partner is permitted to market any of our current or future product candidates in the U.S. until
we receive approval from the FDA of a NADA for our animal health products or an NDA for our human health products. We received
conditional approval for Paccal Vet from the FDA in February 2014, with the condition to perform additional follow-up efficacy
studies for full approval. However, this conditional approval was withdrawn in in January 2017 in order to investigate another
dosage regimen. We have not yet received any type of approval for any of our other current product candidates. Obtaining approval
of either an NADA or an NDA can be an uncertain process that requires us to utilize significant resources. Furthermore, regulatory
authorities possess broad discretion regarding processing time and usually request additional information and raise questions,
which have to be answered. There is considerable uncertainty regarding the times at which products may be approved. In addition,
failure to comply with FDA and other applicable U.S. and foreign regulatory requirements may subject us to administrative or judicially
imposed sanctions including; warning letters, civil and criminal penalties, injunctions, withdrawal of approved products from the
market, product seizure or detention, product recalls, total or partial suspension of production, and refusal to approve pending
applications or supplements to approved applications.
The process required by the FDA and most foreign
regulatory authorities before human health care pharmaceuticals may be marketed generally involves nonclinical laboratory and animal
tests; submission of an Investigational New Drug (“IND”) application, which must become effective before clinical trials
may begin; adequate and well-controlled human clinical trials to establish the safety and efficacy of the proposed drug for its
intended use or uses; pre-approval inspection of manufacturing facilities and clinical trial sites; and FDA approval of an NDA,
which must occur before a drug can be marketed or sold.
In order to gain approval to market a veterinary
drug product for a particular animal species, we must provide the FDA and foreign regulatory authorities with acceptable data from
animal safety and efficacy studies in the target animal for the intended indication applied for in the NADA or other regulatory
filing. Conditional approval is available under the FDA Minor Use and Minor Species (“MUMS”) designation, which gives
the sponsor the right to promote a product before all the efficacy data necessary for full approval are available. If approved,
this provides the sponsor with seven years of market exclusivity. Even for conditional approval, the development of animal health
products is a lengthy, expensive and uncertain process, and delay or failure can occur at any stage of any of our development efforts.
Success in prior target animal studies or even in the treatment of humans with a product candidate does not ensure that our studies
will be successful and the results of development efforts by other parties may not be indicative of the results of our studies
and other development efforts.
Regulatory approval of a NADA or an NDA, or
any supplements of either, is not guaranteed, and the approval process requires us to utilize significant resources, could take
several years, and is subject to the substantial discretion of the FDA. Despite the time and expense exerted, failure can occur
at any stage, and we could encounter problems that cause us to abandon or have to repeat or perform additional studies. If our
product or any of our current or future product candidates fails to demonstrate safety and efficacy in our studies, or for any
other reason does not gain regulatory approval, our business and results of operations will be materially and adversely harmed.
In addition, separate regulatory approvals
are required in order to market any product in many jurisdictions, including the U.S., the European Economic Area, which consists
of the 28 Member States of the European Union plus Norway, Iceland and Liechtenstein, and many others. Approval procedures vary
among countries and can involve additional studies and testing, and the time required to obtain approval may differ from that required
to obtain FDA approval. Studies conducted in one country may not be accepted by regulatory authorities in other countries. Approval
by the FDA does not ensure approval by regulatory authorities in other countries, and approval by one or more foreign regulatory
authorities does not ensure approval by regulatory authorities in other foreign countries or by the FDA. However, a failure or
delay in obtaining regulatory approval in one country may have a negative effect on the regulatory process in others. The foreign
regulatory approval process may include all of the risks associated with obtaining FDA approval. We may be unable to file for regulatory
approvals or do so on a timely basis and, even if we were able to, we may not receive necessary approvals to commercialize our
products in any market. Any of these results could have a material adverse effect on our business, results of operations and financial
condition.
Even if we receive regulatory approval
for any of our current or future product candidates, we will be subject to ongoing FDA and other regulatory body obligations and
continued regulatory review, which may result in significant additional expense. Additionally, our product and any product candidates,
if approved, will be subject to labeling and manufacturing requirements and could be subject to other restrictions. Failure to
comply with these regulatory requirements or the occurrence of unanticipated problems with our products could result in significant
penalties.
Any regulatory approvals that we or any of
our collaborators receive for any of our current or future product candidates may be subject to conditions of approval or limitations
on the approved indicated uses for which the product may be marketed, or may contain requirements for potentially costly surveillance
to monitor the safety and efficacy of the product candidate. In addition, our product and any of our current or future product
candidates, if approved by the FDA or other regulatory bodies, will be subject to extensive and ongoing regulatory requirements
regarding the manufacturing processes, labeling, packaging, distribution, adverse event reporting, storage, advertising, promotion
and recordkeeping. These requirements will include submissions of safety and other post-marketing information and reports, registration,
as well as continued compliance with cGMP, Good Laboratory Practice and Good Clinical Practice for any studies that we conduct
post-approval. Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity
or frequency, or with our third-party manufacturers or manufacturing processes, or failure to comply with regulatory requirements,
may result in, among other things:
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restrictions on the marketing or manufacturing of the product, withdrawal of the product from the market, or voluntary or mandatory product recalls;
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fines, warning letters or holds on target studies;
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refusal by the FDA or other applicable regulatory body to approve pending applications or supplements to approved applications filed by us or our strategic collaborators, or suspension or revocation of product license approvals;
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product seizure or detention, or refusal to permit the import or export of products; and
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injunctions or the imposition of civil or criminal penalties
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The policies of the FDA and other regulatory
bodies may change, and additional government regulations may be promulgated that could prevent, limit or delay regulatory approval
of our product candidates. We cannot predict the likelihood, nature or extent of government regulation that may arise from future
legislation or administrative action, either in the U.S. or elsewhere. If we are slow or unable to adapt to changes in or the adoption
of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that
we may have obtained and we may not achieve or sustain profitability, which would materially and adversely affect our business,
results of operations and financial condition.
Our product and any of our current or
future product candidates, if approved, may cause or contribute to adverse medical events that we are required to report to the
FDA and regulatory authorities in other countries and, if we fail to do so, we could be subject to sanctions that would materially
harm our business.
If we are successful in commercializing our
product and any of our current or future product candidates, regulations of the FDA and of the regulatory authorities in other
countries require that we report certain information about adverse medical events if those products may have caused or contributed
to those adverse events. The timing of our obligation to report would be triggered by the date we become aware of the adverse event
as well as the nature of the event. We may fail to report adverse events we become aware of within the prescribed timeframe. We
may also fail to appreciate that we have become aware of a reportable adverse event, especially if it is not reported to us as
an adverse event or if it is an adverse event that is unexpected or removed in time from the use of our products. If we fail to
comply with our reporting obligations, the FDA and regulatory authorities in other countries could take action including criminal
prosecution, the imposition of civil monetary penalties, seizure of our products, or delay in approval or clearance of future products,
which could have a material adverse effect on our business, results of operations and financial condition.
Legislative or regulatory reforms with
respect to human or animal health products may make it more difficult and costly for us to obtain regulatory clearance or approval
of any of our current or future product candidates and to produce, market, and distribute our products after clearance or approval
is obtained.
From time to time, new legislation is drafted
and introduced in the U.S. Congress and lawmaking bodies in other countries that could significantly change the statutory provisions
governing the testing, regulatory clearance or approval, manufacture, and marketing of regulated products. In addition, FDA regulations
and guidance are often revised or reinterpreted by the FDA in ways that may significantly affect our business and our products.
Similar changes in laws or regulations can occur in other countries Any new regulations or revisions or reinterpretations of existing
regulations in the U.S. or in other countries may impose additional costs or lengthen review times of our product applications
and any of our current or future product candidates. We cannot determine what effect changes in regulations, statutes, legal interpretation
or policies, when and if promulgated, enacted or adopted may have on our business in the future. Such changes could, among other
things, require:
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requests for additional endpoints or studies;
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changes to manufacturing methods;
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recall, replacement, or discontinuance of certain products; and
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additional record keeping.
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Each of these would likely entail substantial
time and cost and could have a material adverse effect on our financial results. In addition, delays in receipt of or failure to
receive regulatory clearances or approvals for any future products could materially and adversely affect our business, results
of operations and financial condition.
Our ability to market our product and
product candidates in the U.S., if approved, will be limited to use for the treatment of the indications for which they are approved,
and if we want to expand the indications for which we may market our product and product candidates, we will need to obtain additional
FDA approvals, which may not be granted.
We plan to seek full FDA approval in the U.S.
for Paccal Vet for mastocytoma, Apealea for ovarian cancer in humans, Docecal for breast cancer in humans, Doxophos Vet for lymphoma
in dogs, and OAS-19 for various cancers in humans. If our product candidates are approved, the FDA will restrict our ability to
market or advertise them for anything other than the indications for which they are approved, which could limit their use. If we
decide to attempt to develop, promote and commercialize new treatment indications and protocols for our product and product candidates
in the future, we could not predict when, or if, we would ever receive the approvals required to do so. We would be required to
conduct additional studies to support such applications for additional use, which would consume additional resources and may produce
results that do not result in FDA approvals. If we do not obtain additional FDA approvals, our ability to expand our business in
the U.S. would be adversely affected, which could materially and adversely affect our business, results of operations and financial
condition.
The anticipated development of a Risk
Evaluation and Mitigation Strategy (REMS) for Apealea and our other human health product candidates could cause delays in the approval
process and would add additional layers of regulatory requirements that could impact our ability to commercialize our human health
product candidates in the U.S. and reduce their market potential.
As a condition of approval of an NDA, the FDA
may require a REMS to ensure that the benefits of the drug outweigh the potential risks. REMS elements can include medication guides,
communication plans for health care professionals, and elements to assure safe use (“ETASU”). ETASU can include, but
are not limited to, special training or certification for prescribing or dispensing, dispensing only under certain circumstances,
special monitoring, and the use of patient registries. Moreover, product approval may require substantial post-approval testing
and surveillance to monitor the drug’s safety or efficacy. We may be required to adopt a REMS for Apealea and our other human
health product candidates to ensure that the benefits outweigh the risks of abuse, misuse, diversion and other potential safety
concerns. Even if the risk of abuse, misuse or diversion are not as high as for some other products, there can be no assurance
that the FDA will approve a manageable REMS for Apealea and our other human health product candidates, which could create material
and significant limits on our ability to successfully commercialize our human health product candidates in the U.S. Delays in the
REMS approval process could result in delays in the NDA approval process. In addition, as part of the REMS, the FDA could require
significant restrictions, such as restrictions on the prescription, distribution and patient use of the product, which could significantly
impact our ability to effectively commercialize Apealea and our other human health candidates, and dramatically reduce their market
potential thereby adversely impacting our business, financial condition and results of operations. Even if initial REMS are not
highly restrictive, if, after launch, Apealea or our other human health product candidates were to be subject to significant abuse/non-medical
use or diversion from licit channels, this could lead to negative regulatory consequences, including a more restrictive REMS, which
could materially and adversely affect our business, results of operations and financial condition.
If we are found in violation of “fraud
and abuse” laws, we may be required to pay a penalty and/or be suspended from participation in government-run health care
programs, which may adversely affect our business, financial condition and results of operations.
If we are successful in obtaining marketing
approval for our products in the U.S. and elsewhere, we will be subject to various health care “fraud and abuse” laws,
including anti-kickback laws, false claims laws and other laws intended to reduce fraud and abuse in government-run health care
programs, which could affect us, particularly upon successful commercialization of our products in the U.S. For example, the Medicare
and Medicaid Patient Protection Act of 1987 (otherwise known as the federal “Anti-Kickback Statute”) makes it illegal
for any person, including a prescription drug manufacturer (or a party acting on its behalf), to knowingly and willfully solicit,
receive, offer or pay any remuneration that is intended to induce the referral of business, including the purchase, order or prescription
of a particular drug for which payment may be made under a U.S. health care program such as Medicare or Medicaid. Under U.S. federal
government regulations, some arrangements, known as safe harbors, are deemed not to violate the Anti-Kickback Statute. Although
we seek to structure our business arrangements in compliance with all applicable requirements, these laws are broadly written,
and it is often difficult to determine precisely how the law will be applied in specific circumstances. Accordingly, it is possible
that our practices may be challenged under the Anti-Kickback Statute and similar laws in other jurisdictions. False claims laws
prohibit anyone from knowingly and willfully presenting or causing to be presented for payment to third-party payers, including
government payers, reimbursement claims for drugs or services that are false or fraudulent, claims for items or services that were
not provided as claimed, or claims for medically unnecessary items or services. Cases have been brought under false claims laws
alleging that off-label promotion of pharmaceutical products or the payment of kickbacks to pharmaceutical providers has resulted
in the submission of false claims to governmental health care programs. Under laws such as the Health Insurance Portability and
Accountability Act of 1996 in the U.S., we are prohibited from knowingly and willfully executing a plan to defraud any health care
benefit program, including private payers, or knowingly and willfully falsifying, concealing or covering up a material fact or
making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for health care benefits,
items or services. Violations of fraud and abuse laws may be punishable by criminal and/or civil sanctions, including fines and/or
exemption or suspension from government-run health care programs such as Medicare and Medicaid and debarment from contracting with
the U.S. and other governments. In addition, in the U.S. individuals have the ability to bring actions on behalf of the government
under the federal False Claims Act as well as under state false claims laws.
Many states in the U.S. have adopted laws similar
to the Anti-Kickback Statute, some of which apply to the referral of patients for health care services reimbursed by any source,
not just governmental payers. In addition, California and a few other states in the U.S. have passed laws that require pharmaceutical
companies to comply with the April 2003 Office of Inspector General Compliance Program Guidance for Pharmaceutical Manufacturers
and/or the Pharmaceutical Research and Manufacturers of America Code on Interactions with Health Care Professionals. In addition,
several states impose other marketing restrictions or require pharmaceutical companies to make marketing or price disclosures to
the state. There are ambiguities as to what is required to comply with these state requirements and if we fail to comply with an
applicable state law requirement we could be subject to penalties.
We have yet to receive definitive guidance
on the application of fraud and abuse laws to our business. Law enforcement authorities are increasingly focused on enforcing these
laws, and it is possible that some of our practices may be challenged under these laws. While we believe we have structured our
business arrangements to comply with these laws, it is possible that the government could allege violations of, or convict us of
violating, these laws. If we are found in violation of one of these laws, we could be required to pay a penalty and could be suspended
or excluded from participation in certain government-run health care programs, and our business, results of operations and financial
condition may be materially and adversely affected.
Risks Related to Our Business and Industry
If we fail to attract and keep senior
management and key scientific personnel, we may be unable to successfully develop our product or our current or future product
candidates, conduct our in-licensing and development efforts or commercialize our product or any of our current or future product
candidates.
Our future growth and success depends in part
on our continued ability to attract, retain and motivate highly qualified management and scientific personnel. We are highly dependent
upon our senior management, particularly Julian Aleksov, our Executive Chairman, as well as our senior scientists and other members
of our senior management team. The loss of services of any of these individuals could delay or prevent the successful development
of our current or future product pipeline, completion of our planned development efforts or the commercialization of our product
and product candidates. Although we have entered into an employment agreement with Julian Aleksov, the agreement does not provide
for a fixed term of service, and does not contain any competition or non-solicitation clauses after the termination of employment.
It is possible that current or former employees of Oasmia could put forward claims for an alleged right to our patents and demand
compensation therefor. However, all our employees have signed an agreement where they assign all their inventions and intellectual
property rights generated by them in their work to us. In addition, there is a law in Sweden that regulates the right to patentable
inventions made by employees which gives the employer the rights to the inventions if they are invented in the course of the employees
work. If one or more of the key personnel were to leave us and engage in competing operations, our business, results of operations
and financial condition could be materially and adversely affected. To date, none of our key personnel has left us or, to our knowledge,
engaged in competing operations, nor has any departure of key personnel had any material effect on Oasmia.
We may have trouble hiring additional
qualified personnel.
As we expand our development and commercial
activities, we will need to hire additional personnel and could experience difficulties attracting and retaining qualified employees.
Competition for qualified personnel in the biopharmaceutical field is intense due to the limited number of individuals who possess
the skills and experience required by that industry. We may not be able to attract and retain quality personnel on favorable terms,
or at all. In addition, to the extent we hire personnel from competitors, we may be subject to allegations that such personnel
have been improperly solicited or that they have divulged proprietary or other confidential information, or that their former employers
own their research output. Any of these difficulties could have a material adverse effect on our business, results of operations
and financial condition.
Incentive program.
Oasmia’s Extraordinary General Meeting
in November 2016 passed a resolution on an incentive plan, under which options will be issued to the Company’s senior management
and Board members. These incentive plans were replaced by the incentive plans approved by an Extraordinary General Meeting in June
2017; see “ITEM 6 B. Compensation.”
The purpose of the Company’s incentive
s plan is to encourage employees and Board members to dedicate their best efforts to the interests of the Company in order to be
able to share in and help promote positive value growth in the Company’s share price in the period covered by the plan, and
to enable Oasmia to retain and recruit competent and committed employees. There is a risk that these goals will not be achieved,
however, which could result in the participants in incentive plans performing their work less efficiently than expected. There
is also a risk that Oasmia and the participants in the incentive plans may interpret the terms and conditions of the plans in different
ways, or that other disputes concerning the incentive plan could arise, which could add to the expense and reduce or completely
counteract the effectiveness of the plan. Further, share-based incentive plan is always associated with an element of tax risk,
since the Company’s assessment of applicable tax legislation may prove to be incorrect, which could lead to a higher tax
burden in the future and in Oasmia being subject to tax-related penalties. In addition, other unforeseen costs related to incentive
programs may arise.
We are subject to risks relating to legal
proceedings.
We are subject to various claims and legal
actions arising in the ordinary course of its business. Any such litigation could be very costly and could distract our management
from focusing on operating our business. The existence of any such litigation could harm our business, results of operations and
financial condition. Results of actual and potential litigation are inherently uncertain. Additionally, in the past we have been
subject to fines by a foreign exchange relating to our disclosures. See “Business — Foreign Exchanges.”
An unfavorable result in a legal proceeding could adversely affect our reputation, financial condition and operating results.
If product liability lawsuits are successfully
brought against us, we will incur substantial liabilities and may be required to limit the commercialization of Paccal Vet, Apealea
and our other product candidates.
We and our partners face potential product
liability exposure related to the testing of our product and product candidates in human and animal clinical trials. We will face
exposure to claims by an even greater number of persons if we begin to market and distribute our products commercially in the U.S.
and elsewhere, including those relating to misuse of Paccal Vet, Apealea and our other product candidates. Now, and in the future,
an individual may bring a liability claim against us alleging that our product or one of our product candidates caused an injury.
While we continue to take what we believe to be appropriate precautions including SEK 20 million, approximately $2.19 million,
in product liability insurance coverage as of the date of this annual report), we may be unable to avoid significant liability
if any product liability lawsuit is brought against us. It should be noted that the amount of the product liability insurance is
revised continuously of the insurance broker. If we cannot successfully defend ourselves against product liability claims, we will
incur substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in:
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decreased demand for Doxophos, Apealea and our other product candidates, if such product candidates are approved;
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injury to our reputation;
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withdrawal of clinical trial participants;
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costs of related litigation;
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substantial monetary awards to patients, pet owners and others;
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increased cost of liability insurance;
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our inability to successfully commercialize our products.
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Furthermore, in the future there may be a need
to expand the scope of our insurance coverage, which could result in significantly increased costs or the inability to obtain sufficient
insurance coverage. Any of these occurrences could have a material adverse effect on our business, results of operations and financial
condition.
Failure of our information technology
systems could significantly disrupt the operation of our business.
Our ability to execute our business plan and
to comply with regulatory requirements with respect to data control and data integrity depends, in part, on the continued and uninterrupted
performance of our information technology systems (“IT systems”). These systems are vulnerable to damage from a variety
of sources, including telecommunications or network failures, malicious human acts and natural disasters. Moreover, despite network
security and back-up measures, some of our servers are potentially vulnerable to physical or electronic break-ins, computer viruses
and similar disruptive problems. Despite the precautionary measures we have taken to prevent unanticipated problems that could
affect our IT systems, there are no assurances that electronic break-ins, computer viruses and similar disruptive problems, and/or
sustained or repeated system failures or problems arising during the upgrade of any of our IT systems that interrupt our ability
to generate and maintain data will not occur. The occurrence of any of the foregoing with respect to our IT systems could have
a material adverse effect on our business, results of operations or financial condition.
We are subject to the U.S. Foreign Corrupt
Practices Act and other anti-corruption laws, as well as export control laws, customs laws, sanctions laws and other laws governing
our operations. If we fail to comply with these laws, we could be subject to civil or criminal penalties, other remedial measures,
and legal expenses, which could adversely affect our business, results of operations and financial condition.
Our operations are subject to certain anti-corruption
laws, including the U.S. Foreign Corrupt Practices Act (“FCPA”), and other anti-corruption laws that apply in countries
where we do business. The FCPA and other anti-corruption laws generally prohibit us and our employees and intermediaries from bribing,
being bribed or making other prohibited payments to government officials or other persons to obtain or retain business or gain
some other business advantage. We and our commercial partners operate in a number of jurisdictions that pose a high risk of potential
FCPA violations and we participate in collaborations and relationships with third parties whose actions could potentially subject
us to liability under the FCPA or local anti-corruption laws. In addition, we cannot predict the nature, scope or effect of future
regulatory requirements to which our international operations might be subject or the manner in which existing laws might be administered
or interpreted.
We are also subject to other laws and regulations
governing our international operations, including regulations administered in the U.S. and in the EU, including applicable export
control regulations, economic sanctions on countries and persons, customs requirements and currency exchange regulations (collectively,
“Trade Control Laws”).
There can be no assurance that we will be completely
effective in ensuring our compliance with all applicable anticorruption laws, including the FCPA or other legal requirements, such
as Trade Control Laws. Any investigation of potential violations of the FCPA, other anti-corruption laws or Trade Control Laws
by U.S., EU or other authorities could have an adverse impact on our reputation, our business, results of operations and financial
condition. Furthermore, should we be found not to be in compliance with the FCPA, other anti-corruption laws or Trade Control Laws,
we may be subject to criminal and civil penalties, disgorgement and other sanctions and remedial measures, as well as the accompanying
legal expenses, any of which could have a material adverse effect on our reputation and liquidity, as well as on our business,
results of operations and financial condition.
We are exposed to risks related to currency
exchange rates.
Currency risks arise when future commercial
transactions or reported assets or liabilities are denominated in a currency other than our functional currency, the Swedish krona.
Our primary contract manufacturer and all of our clinical trials are located outside of Sweden. Because our financial statements
are presented in kronor, changes in currency exchange rates have had and could continue to have a significant effect on our operating
results. Exchange rate fluctuations between local currencies and the krona create risk in several ways, including the following:
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weakening of the krona may increase the krona cost of overseas research and development expenses and the cost of sourced product components outside Sweden;
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strengthening of the krona may decrease the value of our revenues denominated in other currencies;
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the exchange rates on non-kronor transactions and cash deposits can distort our financial results; and
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the pricing and profit margins of Paccal Vet, Apealea and our other product candidates may be affected by currency fluctuations.
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In addition, to the extent our need for contract
manufacturing increases once our products reach the commercial market, our exposure to currency risks will increase proportionally.
We do not engage in regular hedging transactions, since to date our currency exposure has been mostly related to purchased services
for product development, which has been irregular and difficult to anticipate. It is possible that fluctuations in currency exchange
rates could have a material adverse effect on our business, results of operations and financial condition.
If we are unable to use our net operating
loss and tax credit carryforwards and certain built-in losses to reduce future tax payments or benefit from favorable tax legislation,
our business, results of operations and financial condition may be adversely affected.
As a Swedish resident trading entity, we are
subject to Swedish corporate taxation. As of April 30, 2018, we had cumulative carry forward tax losses of SEK 1,009.35 million,
as of April 30, 2017, we had cumulative carry forward tax losses of SEK 877.18 million and as of April 30, 2016 we had cumulative
carry forward tax losses of SEK 720.58 million. Due to a decision by the Swedish tax authority in the financial year, the carry
forward tax losses for previous years 2016 and 2015 have been decreased by SEK 2.65 million for each year respectively. These losses
are available to carry forward and offset against future operating profits, unlimited in time. If, however, there are unexpected
adverse changes to the Swedish tax law, our business, results of operations and financial condition may be adversely affected.
Risks Related to Our Reliance upon Third
Parties
We depend substantially on the commercial
expertise of our commercial partners.
We do not have a sales and marketing operation
and expect to rely, in certain geographical areas such as Japan and the CIS, on the expertise and commercial skills of our commercial
partners to sell Paccal Vet, Apealea, Doxophos, Doxophos Vet, and our other product candidates in selected territories. We have
entered into agreements for the commercialization of Paccal Vet in Japan, where Paccal Vet is licensed to Nippon Zenyaku Kogyo.
We have entered into agreements for the commercialization of Apealea with Medison Pharma in Israel and Turkey and with Hetero Group
in Russia and the CIS, as well as Ukraine, Georgia and Turkmenistan. The commercial success of Apealea and our other product candidates
in each of these markets will depend entirely on the expertise and commercial skills of our commercial partners, whereas we will
be responsible for the distribution and sales of Paccal Vet and Doxophos Vet. In addition, it is customary in these types of commercial
agreements that our partners are entitled to price our products, which means that much of our financial performance will be dependent
on our partners’ decision-making. Our partners also have the right, under certain circumstances, to terminate their agreements
with us. See “Business — Strategic Alliances and Collaborations” for descriptions of the agreements
with our commercial partners. A failure by our partners to successfully market Paccal Vet, Apealea, Doxophos Vet and our other
product candidates, or the termination of agreements with our partners, would have a material adverse effect on our business, results
of operations and financial condition.
We currently have no sales and marketing
organization for the distribution of Paccal Vet or Doxophos Vet as a result of the termination of the Distribution Agreement with
Zoetis. If we are unable to establish a direct sales force in the U.S. to promote our products, the commercial opportunity for
our products may be diminished if not vitiated.
We currently have no sales and marketing organization
for the distribution of Paccal Vet or Doxophos Vet as a result of the termination of the Distribution Agreement with Zoetis, which
covered the entire world except for Japan. While we have established an entity through which Oasmia intends to distribute these
products in the United States, the Company currently has no sales and marketing organization for these products. The Company will
incur significant additional expenses and commit significant additional management resources to establish our sales force. The
Company may not be able to establish these capabilities despite these additional expenditures. The Company will also have to compete
with other pharmaceutical and biotechnology companies to recruit, hire and train sales and marketing personnel.
If the Company elects to rely on third parties
to sell these products in the U.S., it may receive less revenue than the Company we sold our products directly. In addition, while
the Company anticipates using due diligence in monitoring their activities, it may have little or no control over the sales efforts
of those third parties. In the event the Company is unable to develop its own sales force or collaborate with a third party to
sell these products, the Company may not be able to commercialize these products which would negatively impact its ability to generate
revenue.
We depend on the financial ability of
our commercial partners.
We have few customers, each representing a
large part of sales and also of accounts receivable. If one customer fails to satisfy its liability to us we will have to
book a credit loss in our income statement which might represent a large part of the accounts receivable.
To a certain extent we build up our inventory
based on forecasts for special geographical markets or from specific customers. If the customers fail to purchase according to
this forecast there is a risk that we will not be able to sell these products to other customers before they expire or before the
expiry date is so close that the products are unattractive for a customer. In that case we might have to write down the inventory
value over the income statement.
We rely on contract manufacturers for
the production of our products, which can create production uncertainties.
Our own production facility has the technical
capacity for production of our finished products up to a limited commercial scale. We produced the launch supply of Apealea but
we do not have adequate capacity to supply the product in the long term. As such, full-scale production of our products for commercial
use will be carried out by contract manufacturers. Production at our primary contract manufacturer is expected to commence shortly.
If it proves difficult for contract manufacturers to scale-up production, full-scale production may be delayed, which could then
delay the product launch schedule.
We will also be required to validate full-scale
production and submit documentation to the relevant health authorities in connection with the scaling-up of the production to full-scale
production. These agencies must approve the production at the manufacturers we select. We will be relying upon the contract manufacturers
to provide us with the appropriate information for the regulators, and if the documentation is incomplete or incorrect there is
a risk that the product launch will be delayed, which may have a material adverse effect on our financial position and performance.
We depend on a limited number of suppliers
for materials and components required to manufacture Paccal Vet, Apealea and our other product candidates. The loss of these suppliers,
or their failure to supply us on a timely basis, could cause delays in our current and future capacity and adversely affect our
business.
The majority of the raw materials used in the
production of our pharmaceuticals are purchased from a limited number of suppliers. As a result, we may not be able to obtain sufficient
quantities of critical materials and components in the future. A delay or interruption by our suppliers may harm our business,
results of operations and financial condition. In addition, the lead time needed to establish a relationship with a new supplier
can be lengthy, and we may experience delays in meeting demand in the event we must switch to a new supplier. The time and effort
to qualify for and, in some cases, obtain regulatory approval for a new supplier could result in additional costs, diversion of
resources or reduced manufacturing yields, any of which would negatively impact our operating results. Our dependence on a limited
number of suppliers exposes us to numerous risks, including:
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our suppliers could cease or reduce production or deliveries, raise prices or renegotiate terms;
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we may be unable to locate a suitable replacement suppliers on acceptable terms or on a timely basis, or at all; and
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delays caused by supply issues may harm our reputation, frustrate our customers and cause them to turn to our competitors for future needs.
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Any one of these occurrences could have a material
adverse effect on our business, results of operations and financial condition.
Risks Related to Our Intellectual Property
We may be forced to litigate to enforce
or defend our intellectual property rights, or the intellectual property rights of our licensors.
We may be forced to litigate to enforce or
defend our intellectual property rights against infringement and unauthorized use by competitors. In so doing, we may place our
intellectual property at risk of being invalidated, held unenforceable, or narrowed in scope. Further, an adverse result in any
litigation or defense proceedings may place pending applications at risk of non-issuance. In addition, if any licensor fails to
enforce or defend its intellectual property rights, this may adversely affect our ability to develop and commercialize our product
and product candidates as well as our ability to prevent competitors from making, using, and selling competing products. Any such
litigation could be very costly and could distract our management from focusing on operating our business. The existence or outcome
of any such litigation could harm our business, results of operations and financial condition.
Furthermore, because of the substantial amount
of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential and proprietary
information could be compromised by disclosure during this type of litigation. In addition, there could be public announcements
of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive
these results to be negative, it could have a material adverse effect on the price of the Ordinary Shares.
We may be unable to adequately prevent
disclosure of trade secrets and other proprietary information.
We rely on trade secrets to protect our proprietary
know-how and technological advances, especially where we do not believe patent protection is appropriate or obtainable. However,
trade secrets are difficult to protect. We rely in part on confidentiality agreements with our employees, consultants, outside
scientific collaborators, sponsored researchers and other advisors to protect our trade secrets and other proprietary information.
These agreements may not effectively prevent disclosure of confidential information and may not provide an adequate remedy in the
event of unauthorized disclosure of confidential information. In addition, others may independently discover our trade secrets
and proprietary information. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our
proprietary rights. Failure to obtain or maintain trade secret protection or failure to adequately protect our intellectual property
could enable competitors to develop generic products or use our proprietary information to develop other products that compete
with our products or cause additional, material adverse effects upon our business, results of operations and financial condition.
The transfer of technology and knowledge to
contract manufacturers pursuant to the production of our products also creates a risk of uncontrolled distribution and copying
of concepts, methods and processes relating to our products. Such uncontrolled distribution and copying could have a material adverse
effect on the value of our products if used for the production of competing drugs or otherwise used commercially without our obtaining
financial compensation.
We may become subject to third parties’
claims alleging infringement of patents and proprietary rights or seeking to invalidate our patents or proprietary rights, which
would be costly, time-consuming and, if successfully asserted against us, delay or prevent the development and commercialization
of our product and our current or future product candidates.
There has been substantial litigation and other
proceedings regarding patent and other intellectual property rights in the pharmaceutical industry, as well as patent challenge
proceedings, including interference and administrative law proceedings before the U.S. Patent and Trademark Office (“U.S.
PTO”) and the European Patent Office (“EPO”), and oppositions and other comparable proceedings in other jurisdictions.
Recently, under U.S. patent reform laws, new procedures including
inter partes
review and post grant review have been implemented.
As stated below, the novel implementation of such reform laws presents uncertainty regarding the outcome of challenges to our patents
in the future.
We cannot assure you that our product or any
of our current or future product candidates will not infringe existing or future patents. We may be unaware of patents that have
already issued that a third party might assert are infringed by our product or one of our current or future product candidates.
Because patent applications can take many years to issue and may be confidential for eighteen months or more after filing, there
may be applications now pending of which we are unaware and which may later result in issued patents that we may infringe by commercializing
our product or any of our current or future product candidates. In addition, third parties may obtain patents in the future and
claim that use of our technologies infringes upon these patents. Moreover, we may face claims from non-practicing entities (commonly
referred to as “patent trolls”), which have no relevant product revenue and against whom our own patent portfolio may
thus have no deterrent effect.
We may be subject to third-party claims in
the future against us or our collaborators that would cause us to incur substantial expenses and, if successful against us, could
cause us to pay substantial damages, including treble damages and attorney’s fees if we are found to be willfully infringing
a third party’s patents. If a patent infringement suit were brought against us or our collaborators, we or our collaborators
could be forced to stop or delay research, development, manufacturing or sales of the product candidate that is the subject of
the suit. As a result of patent infringement claims, or in order to avoid potential claims, we or our collaborators may choose
to seek, or be required to seek, a license from the third party and would most likely be required to pay license fees or royalties
or both. These licenses may not be available on acceptable terms, or at all. Even if we or our collaborators were able to obtain
a license, the rights may be nonexclusive, which would give our competitors access to the same intellectual property. Ultimately,
we could be prevented from commercializing a product, or forced to redesign it, or to cease some aspect of our business operations
if, as a result of actual or threatened patent infringement claims, we or our collaborators are unable to enter into licenses on
acceptable terms. Even if we are successful in defending such claims, infringement and other intellectual property litigation can
be expensive and time-consuming to litigate and divert management’s attention from our core business. Any of these events
could harm our business significantly.
In addition to infringement claims against
us, if third parties have prepared and filed patent applications in the U.S. that also claim technology to which we have rights,
we may have to participate in interference proceedings in the U.S. PTO to determine the priority of invention. Third parties may
also attempt to initiate reexamination, post grant review or
inter partes
review of our patents in the U.S. PTO. We may
also become involved in similar opposition proceedings in the EPO or comparable offices in other jurisdictions regarding our intellectual
property rights with respect to our products and technology. Any of these claims could have a material adverse effect on our business,
results of operations and financial condition.
If our efforts to protect the proprietary
nature of the intellectual property related to our product or any of our current or future product candidates are not adequate,
we may not be able to compete effectively in our market.
We rely upon a combination of patents, trade
secret protection as well as confidentiality and license agreements to protect the intellectual property related to our product
and our current product candidates and our development programs.
Composition-of-matter patents on an active
pharmaceutical ingredient are generally considered to be the strongest form of intellectual property protection for pharmaceutical
products, as such patents provide protection without regard to any particular method of use or manufacture. We cannot be certain
that the claims in our patent application covering composition-of-matter of our product and our product candidates will be considered
patentable by the U.S. PTO and courts in the U.S., or by the patent offices and courts in foreign countries. Method-of-use patents
protect the use of a product for the specified method. This type of patent does not prevent a competitor from making and marketing
a product that is identical to our product for an indication that is outside the scope of the patented method. Moreover, for our
animal health products particularly, even if competitors do not actively promote their products for our targeted indications, veterinarians
may recommend that pet owners use these products off label, or pet owners may do so themselves. Although off-label use may infringe
or contribute to the infringement of method-of-use patents, we believe the practice is common and such infringement is difficult
to prevent or prosecute.
The strength of patents in the field of human
and animal health products involves complex legal and scientific questions and can be uncertain. The patent applications that we
own or license may fail to result in issued patents in the U.S. or in other foreign countries. Even if the patents do successfully
issue, third parties may challenge the validity, enforceability or scope thereof, which may result in such patents being narrowed,
invalidated or held unenforceable. Furthermore, even if they are unchallenged, our patents and patent applications may not adequately
protect our intellectual property or prevent others from designing around our claims. If the breadth or strength of protection
provided by the patent applications we own, in-license or pursue with respect to our product or any of our current or future product
candidates is threatened, it could threaten our ability to commercialize our product or any of our current or future product candidates.
Further, if we encounter delays in our development efforts, the period of time during which we could market our product or any
of our current or future product candidates under patent protection would be reduced. Since patent applications in the U.S. and
most other countries are confidential for a period of time after filing, we cannot be certain that we were the first to file any
patent application related to our product and product candidates. Furthermore, for patent applications in which claims are entitled
to a priority date before March 16, 2013, an interference proceeding can be initiated by a third party or instituted by the U.S.
PTO to determine who was the first to invent any of the subject matter covered by the patent claims of our applications. For patent
applications containing a claim not entitled to a priority date before March 16, 2013, there is a greater level of uncertainty
in the patent law with the passage of the America Invents Act, some provisions of which went into effect on that date whereas the
America Invents Act itself first went into effect on September 16, 2011 and brought about significant changes to the U.S. patent
laws that have yet to be well defined, and which introduces new procedures for challenging pending patent applications and issued
patents. A primary change under this reform is creating a “first to file” system in the U.S., which requires us to
minimize the time from invention to filing of a patent application.
Even where laws provide protection, costly
and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights, and the outcome
of such litigation would be uncertain. Moreover, any actions we may bring to enforce our intellectual property against our competitors
could provoke them to bring counterclaims against us, and some of our competitors have substantially greater intellectual property
portfolios than we have.
We also rely on trade secret protection and
confidentiality agreements to protect proprietary know-how that is not patentable, processes for which patents are difficult to
enforce and any other elements of our product development processes that involve proprietary know-how, information or technology
that is not covered by patents. Although we endeavor to execute confidentiality agreements with all of our employees, consultants,
advisors and any third parties who have access to our proprietary know-how, information or technology, we cannot be certain that
we have executed such agreements with all parties who may have helped to develop our intellectual property or had access to our
proprietary information, nor that our agreements will not be breached. We cannot guarantee that our trade secrets and other confidential
proprietary information will not be disclosed or that competitors will not otherwise gain access to our trade secrets or independently
develop substantially equivalent information and techniques. Further, the laws of some foreign countries do not protect proprietary
rights to the same extent or in the same manner as the laws of the EU or the U.S. As a result, we may encounter significant problems
in protecting and defending our intellectual property both in the U.S. and elsewhere. If we are unable to prevent material disclosure
of the intellectual property related to our technologies to third parties, we will not be able to establish or maintain a competitive
advantage in our market, which could materially and adversely affect our business, results of operations and financial condition.
Any disclosure to or misappropriation by third
parties of our confidential proprietary information could enable competitors to quickly duplicate or surpass our technological
achievements, thus eroding our competitive position in our market.
Changes in patent law could diminish
the value of patents in general, thereby impairing our ability to protect our products.
As is the case with other biopharmaceutical
companies, our success is heavily dependent on intellectual property, particularly patents. Obtaining and enforcing patents in
the biopharmaceutical industry involves both technological and legal complexity. Therefore, obtaining and enforcing biopharmaceutical
patents is costly, time-consuming and inherently uncertain. In addition, the U.S. has recently enacted and is currently implementing
wide-ranging patent reform legislation. The U.S. Supreme Court has ruled on several patent cases in recent years, either narrowing
the scope of patent protection available in certain circumstances or weakening the rights of patent owners in other situations.
In addition to increasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has
created uncertainty with respect to the value of patents, once obtained. Depending on decisions by the U.S. Congress, the federal
courts, and the U.S. PTO, the laws and regulations governing patents could change in ways that would weaken our ability to obtain
new patents or to enforce our existing licensed patents and patents that we might obtain in the future. Similarly, changes in EU
patent law and elsewhere could negatively affect the value of our patents registered outside of the U.S.
Obtaining and maintaining our patent
protection depends on compliance with various procedural, documentary, fee payment and other requirements imposed by governmental
patent agencies, and our patent protection could be reduced or eliminated for non-compliance with any of these requirements.
The U.S. PTO and various foreign governmental
patent agencies require compliance with a number of procedural, documentary, fee payment and other provisions during the patent
process. There are situations in which noncompliance can result in abandonment or lapse of a patent or patent application, resulting
in partial or complete loss of patent rights in the relevant jurisdiction. In such an event, competitors might be able to enter
the market earlier than would otherwise have been the case, which could have a material adverse effect on our business, results
of operations and financial condition.
We may not be able to protect our intellectual
property rights throughout the world.
Filing, prosecuting and defending patents on
product and product candidates throughout the world is prohibitively expensive. Competitors may use our technologies in jurisdictions
where we have not obtained patent protection to develop their own products and, further, may export otherwise infringing products
to territories where we have patent protection, but where enforcement is not as strong as that in the U.S. These products may compete
with our products in jurisdictions where we do not have any issued or licensed patents and our patent claims or other intellectual
property rights may not be effective or sufficient to prevent them from so competing.
Many companies have encountered significant
problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries,
particularly certain developing countries, do not favor the enforcement of patents and other intellectual property protection,
particularly those relating to biopharmaceuticals, which could make it difficult for us to stop the infringement of our patents
or marketing of competing products in violation of our proprietary rights generally. Proceedings to enforce our patent rights in
foreign jurisdictions could result in substantial cost and divert our efforts and attention from other aspects of our business.
Risks Related to the ADSs and the Warrants
A trading market for the ADSs was relatively
recently established.
In connection with our initial public offering,
we listed the ADSs on the NASDAQ Capital Market (“Nasdaq”) and trading commenced on October 23, 2015. No public market
for the ADSs existed prior to that offering.
There can be no assurance that an active trading
market for the ADSs will develop or, if developed, be sustained in the future. The initial offering price was determined by negotiations
among the lead underwriters and us. Among the factors considered in determining the initial offering price were our future prospects
and the prospects of our industry in general, our revenue, net income and certain other financial and operating information in
recent periods, and the financial ratios, market prices of securities and certain financial and operating information of companies
engaged in activities similar to ours. The price of the ADSs has decreased markedly since the initial public offering and there
can be no assurance that the ADSs will ever trade at a price equal to or greater than the offering price.
In addition, the market price of the ADSs may
be volatile. Many factors may have a material adverse effect on the market price of the ADSs, including, but not limited to:
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announcements of the failure to obtain regulatory approvals or receipt of a “complete response letter” from the FDA;
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announcements of restricted label indications or patient populations, or changes or delays in regulatory review processes;
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announcements of therapeutic innovations or new products by us or our competitors;
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adverse actions taken by regulatory agencies with respect to our clinical trials, manufacturing supply chain or sales and marketing activities;
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changes or developments in laws or regulations applicable to Paccal Vet, Paclical, or our other product candidates;
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the failure of our testing and clinical trials;
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product liability claims, other litigation or public concern about the safety of our product, product candidates or future products;
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any adverse changes to our relationship with licensors, manufacturers or suppliers;
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the loss of any of our key scientific or management personnel;
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any major changes in our board of directors or management;
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the failure to retain our existing, or obtain new, commercial partners;
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announcements concerning our competitors or the pharmaceutical industry in general;
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the achievement of expected product sales and profitability;
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the failure to obtain reimbursements for our products or price reductions;
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manufacture, supply or distribution shortages;
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actual or anticipated fluctuations in our cash position or operating results;
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manufacturing and supply issues related to our product or our current or future product candidates for our development programs and commercialization;
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changes in financial estimates or recommendations by securities analysts;
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the termination of any of our existing license agreements;
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announcements relating to future licensing or development agreements;
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potential acquisitions;
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the trading volume of ADSs on Nasdaq and of the Ordinary Shares on NASDAQ Stockholm;
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sales of the ADSs or Ordinary Shares by us, our executive officers or directors or our shareholders;
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fluctuations in the U.S. equity markets;
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changes in accounting principles;
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market conditions in the human and animal health sectors; and
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general economic conditions in the U.S. and elsewhere.
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In addition, the stock market in general, and
Nasdaq in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate
to the operating performance of these companies. Broad market and industry factors may negatively affect the market price of the
ADSs, regardless of our actual operating performance.
The multiple listing of the Ordinary
Shares and the ADSs may adversely affect the liquidity and value of the ADSs.
The Ordinary Shares will continue to be listed
on NASDAQ Stockholm, and the ADSs trade on the NASDAQ Capital Market. We cannot predict the effect of this multiple listing on
the value of the Ordinary Shares and the ADSs. However, it is possible the multiple listing of the Ordinary Shares and ADSs may
dilute the liquidity of these securities in one or all two markets and may adversely affect the development of an active trading
market for the ADSs in the U.S. The price of the ADSs could also be adversely affected by trading in the Ordinary Shares on NASDAQ
Stockholm. Although currently we have no plans to do so, we may decide to delist the Ordinary Shares from either exchange in the
future. We cannot predict the effect such delisting of the Ordinary Shares would have on the market price of the ADSs on Nasdaq.
If securities or industry analysts do
not publish research or reports about our business, or if they issue an adverse or misleading opinion regarding the ADSs or the
Ordinary Shares, the price of these securities and their trading volume could decline.
The trading market for the ADSs and the Ordinary
Shares will be influenced by the research and reports that industry or securities analysts publish about us or our business. We
do not currently have and may never obtain research coverage by securities and industry analysts. If we do not obtain adequate
securities or industry analyst coverage, the trading price for the ADSs and the Ordinary Shares may be negatively impacted. In
the event we obtain securities or industry analyst coverage, if any of the analysts who cover us issue an adverse or misleading
opinion regarding us, our business model, our products, our intellectual property or the ADSs or our ordinary share performance,
or if our target studies and operating results fail to meet the expectations of analysts, the prices of the ADSs and the Ordinary
Shares may decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, we could
lose visibility in the financial markets, which in turn could cause the prices of the ADSs and the Ordinary Shares, as well as
their respective trading volume to decline.
Substantial future sales of the Ordinary
Shares or the ADSs in the public market, or the perception that these sales could occur, could cause the price of the ADSs to decline.
Additional sales of the Ordinary Shares in
the public market, or the perception that such sales could occur, could cause the market price of the Ordinary Shares to decline.
As of the date of this annual report, we had 179,309,596 Ordinary Shares issued and outstanding, including those underlying presently
issued and outstanding ADS but excluding all such Ordinary Shares underlying the ADSs issuable upon exercise of the Warrants and
excluding any exercise by the underwriters of the option to purchase Ordinary Shares. All ADSs are freely transferable without
restriction or additional registration under the Securities Act. The Ordinary Shares held by our directors, officers, and large
institutional shareholders are available for sale since the expiration of the lock-up period has occurred. The remaining Ordinary
Shares are also available for sale since they are not subject to contractual and legal restrictions on resale. To the extent shares
are sold into the market, the market price of the ADSs could decline.
There is presently no public market for
the Warrants to purchase ADSs and none is expected to develop.
There is presently no established public trading
market for the Warrants and we do not expect a market to develop. Without an active market, the liquidity of the Warrants will
be limited. Further, the existence of the Warrants may act to reduce both the trading volume and the trading price of our common
stock.
Speculative nature of Warrants.
The Warrants do not confer any rights of ownership
of ADSs on their holders, such as voting rights or the right to receive dividends, but rather merely represent the right to acquire
ADSs at a fixed price for a limited period of time. Specifically, holders of the Warrants may exercise their right to acquire ADSs
and pay an initial exercise price of $4.06, subject to adjustment, during the ten (10) years from the date of issuance, after which
date any unexercised Warrants will expire and have no further value. There can be no assurance that the market price of the ADSs
will ever equal or exceed the exercise price of the Warrants, and consequently, whether it will ever be profitable for holders
of the Warrants to exercise them.
You may not have the same voting rights
as the holders of the Ordinary Shares and may not receive voting materials in time to be able to exercise your right to vote.
Holders of ADSs are not shareholders of our
company and therefore do not have direct voting rights or the right to attend shareholders’ meetings. ADS holders do have
the right to instruct the depositary how to vote the Ordinary Shares underlying their ADSs, but the depositary will only send voting
materials to ADS holders if we ask it to. Therefore, you may not receive voting materials or you may not receive voting materials
in time to instruct the depositary to vote, and it is possible that you, or persons who hold their ADSs through brokers or other
securities intermediaries, will not have the opportunity to exercise a right to vote. The Warrants confer no equity ownership in
our company, nor do they provide voting rights.
You may not receive distributions on
the Ordinary Shares represented by the ADSs or any value for them if it is illegal or impractical to make them available to holders
of ADSs.
The depositary for the ADSs has agreed to pay
to you the cash dividends or other distributions it or the custodian receives on the Ordinary Shares or other deposited securities
after deducting its fees and expenses. You will receive these distributions in proportion to the number of the Ordinary Shares
your ADSs represent. However, in accordance with the limitations set forth in the deposit agreement, it may be unlawful or impractical
to make a distribution available to holders of ADSs. We have no obligation to take any other action to permit the distribution
of the ADSs, Ordinary Shares, rights or anything else to holders of the ADSs. This means that you may not receive the distributions
we make on the Ordinary Shares or any value from them if it is unlawful or impractical to make them available to you. These restrictions
may have a material adverse effect on the value of your ADSs.
As a foreign private issuer, we are exempt
from a number of U.S. securities laws and rules promulgated thereunder and are permitted to file less information with the SEC
than U.S. companies must. This will limit the information available to holders of the ADSs.
We currently qualify as a “foreign private
issuer,” as defined in the SEC’s rules and regulations and, consequently, we are not subject to all of the disclosure
requirements applicable to companies organized within the U.S. For example, we are exempt from certain rules under the U.S. Securities
Exchange Act of 1934, as amended (the “Exchange Act”), that regulate disclosure obligations and procedural requirements
related to the solicitation of proxies, consents or authorizations applicable to a security registered under the Exchange Act.
In addition, our officers and directors are exempt from the reporting and “short-swing” profit recovery provisions
of Section 16 of the Exchange Act and related rules with respect to their purchases and sales of our securities. Moreover, we are
not required to file periodic reports and financial statements with the SEC as frequently or as promptly as U.S. public companies.
We are also not subject to Regulation FD under the Exchange Act, which would prohibit us from selectively disclosing material nonpublic
information to certain persons without concurrently making a widespread public disclosure of such information. Accordingly, there
may be less publicly available information concerning our company than there is for U.S. public companies.
As a foreign private issuer, we will file an
annual report on Form 20-F within four months of the close of each fiscal year ended April 30 and reports on Form 6-K relating
to certain material events promptly after we publicly announce these events. However, because of the above exemptions for foreign
private issuers, our shareholders will not be afforded the same protections or information generally available to investors holding
shares in public companies organized in the U.S.
As a foreign private issuer, we are not
subject to certain Nasdaq corporate governance rules applicable to U.S. listed companies.
We rely on a provision in Nasdaq’s Listed
Company Manual that allows us to follow Swedish corporate law and the Swedish Companies Act (SFS 2005:551) (the “Swedish
Companies Act”) with regard to certain aspects of corporate governance. This allows us to follow certain corporate governance
practices that differ in significant respects from the corporate governance requirements applicable to U.S. companies listed on
Nasdaq.
For example, we are exempt from Nasdaq regulations
that require a listed U.S. company to:
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have a majority of the board of directors consist of independent directors;
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require non-executive directors to meet on a regular basis without management present;
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promptly disclose any waivers of the code of ethics for directors or executive officers that should address certain specified items;
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have an independent nominating committee;
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solicit proxies and provide proxy statements for all shareholder meetings; and
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seek shareholder approval for the implementation of certain equity compensation plans and issuances of Ordinary Shares.
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As a foreign private issuer, we are permitted
to, and we will, follow home country practice in lieu of the above requirements. The determination of foreign private issuer is
made annually on the last business day of an issuer’s most recently completed second fiscal quarter, and, accordingly, the
next determination will be made with respect to us as of the end of our second quarter of the current fiscal year. If we do not
meet the SEC’s requirements for foreign private issuer, we will be subject to a number of additional rules and regulations,
including those identified above, and as a result we may incur significant regulatory compliance costs.
In accordance with our Nasdaq listing, our
audit committee is required to comply with the provisions of Section 301 of the Sarbanes-Oxley Act, and Rule 10A-3 of the Exchange
Act, both of which are also applicable to Nasdaq-listed U.S. companies. Because we are a foreign private issuer, however, our audit
committee is not subject to additional Nasdaq requirements applicable to listed U.S. companies, including an affirmative determination
that all members of the audit committee are “independent,” using more stringent criteria than those applicable to us
as a foreign private issuer.
We are an “emerging growth company,”
as defined in the JOBS Act, and as a result of the reduced disclosure and governance requirements applicable to emerging growth
companies, the ADS and Ordinary Shares may be less attractive to investors.
We are an “emerging growth company,”
as defined in the JOBS Act, and we intend to take advantage of certain exemptions from various reporting requirements that are
applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to
comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act. We cannot predict whether, or ascertain
if, investors will or do find the ADSs or the Ordinary Shares less attractive because we will rely on these exemptions. If some
investors find the ADSs or the Ordinary Shares less attractive as a result, there may be a less active trading market for the ADSs
or the Ordinary Shares and the price of the ADSs may be more volatile. We may take advantage of these reporting exemptions until
we are no longer an emerging growth company. We will remain an emerging growth company until the earlier of (1) the last day of
the fiscal year: (a) following the fifth anniversary of the completion of the initial public offering, 2020, (b) in which we have
total annual gross revenue of at least USD$1.0 billion, or (c) in which we are deemed to be a large accelerated filer, which means
the market value of the Ordinary Shares that is held by non-affiliates exceeds USD$700 million as of the prior October 31; and
(2) the date on which we have issued more than USD$1.0 billion in non-convertible debt during the prior three-year period.
If we fail to establish and maintain
proper internal controls, our ability to produce accurate financial statements or comply with applicable regulations could be impaired.
Section 404(a) of the Sarbanes-Oxley Act requires
that beginning with our annual report for the year ending April 30, 2017, management must assess and report annually on the effectiveness
of our internal control over financial reporting and identify any material weaknesses in our internal controls over financial reporting.
Although Section 404(b) of the Sarbanes-Oxley Act requires our independent registered public accounting firm to issue an annual
report that addresses the effectiveness of our internal control over financial reporting, we have opted to rely on the exemptions
provided in the JOBS Act, and consequently will not be required to comply with SEC rules that implement Section 404(b) of the Sarbanes-Oxley
Act until such time as we are no longer an emerging growth company.
Our first Section 404(a) assessment occurred
beginning with our annual report for the year ending April 30, 2017. Although remedial activities to address the material weakness
identified by our independent registered public accounting firm have been carried out, the presence of a material weakness
in previous year could result in financial statement errors which, in turn, could lead to errors in our financial reports or delays
in our financial reporting, and could require us to restate our operating results or require our auditors to issue a qualified
audit report.
If we are unable to conclude that we have effective
internal control over financial reporting or, at the appropriate time, our independent auditors are unwilling or unable to provide
us with an unqualified report on the effectiveness of our internal control over financial reporting as required by Section 404(b)
of the Sarbanes-Oxley Act, investors may lose confidence in our operating results, the price of the Ordinary Shares could decline
and we may be subject to litigation or regulatory enforcement actions. In addition, if we are unable to meet the requirements of
Section 404 of the Sarbanes-Oxley Act, we may not be able to remain listed on Nasdaq.
We incur significant increased costs
as a result of operating as a company whose ADSs are publicly traded in the U.S., and our management is required to devote substantial
time to new compliance initiatives.
As a company with publicly traded ADSs in the
U.S., we incur significant legal, accounting, insurance and other expenses that we have not incurred prior to our initial public
offering. In addition, the Sarbanes-Oxley Act, Dodd-Frank Wall Street Reform Act, Consumer Protection Act and related rules implemented
by the SEC and Nasdaq have imposed various requirements on public companies, including requiring establishment and maintenance
of effective disclosure and financial controls. Our management and other personnel need to devote a substantial amount of time
to these compliance initiatives. Moreover, these rules and regulations have increased our legal and financial compliance costs
and made some activities more time-consuming and costly. We estimate that our annual compliance expenses will be approximately
SEK 3 million in each of the next two fiscal years. Among other matters, these rules and regulations have made it more difficult
and more expensive for us to obtain director and officer liability insurance, and we may be required to incur substantial costs
to maintain the same or similar coverage. These laws and regulations have also made it more difficult and expensive for us to attract
and retain qualified persons to serve on our board of directors, our board committees or as our executive officers. Furthermore,
if we are unable to satisfy our obligations as a public company, we could be subject to delisting of the ADSs, fines, sanctions
and other regulatory action and potentially civil litigation.
The rights of our shareholders may differ
from the rights typically offered to shareholders of a U.S. corporation.
We are incorporated under Swedish law. The
rights of holders of Ordinary Shares and, therefore, certain of the rights of holders of ADSs, are governed by Swedish law, including
the provisions of the Swedish Companies Act, and by our Articles of Association. These rights differ in certain respects from the
rights of shareholders in typical U.S. corporations.
We may be or may become a passive foreign
investment company (“PFIC”) for U.S. federal income tax purposes.
Whether we are or may be a PFIC is a complex
determination based on the classification of various assets and income under the PFIC rules. Further, a determination as to whether
or not we are a PFIC must be made annually and our circumstances may change in any given year. We do not intend to make decisions
regarding our business operations with the specific purpose of reducing the likelihood of our becoming a PFIC. Accordingly, our
business plan may result in our engaging in activities that could cause us to become a PFIC. If we are or become a PFIC, U.S. Holders
may be subject to increased U.S. federal income taxes on a sale or other disposition of our ADSs and on the receipt of certain
distributions and will be subject to increased U.S. federal income tax reporting requirements. Moreover, we may not decide to provide
the information that would enable U.S. Holders to make an election to treat us as a “qualified electing fund” (a “QEF”),
which election could mitigate the adverse U.S. federal income tax consequences of us being classified as a PFIC if we were so classified.
See “Taxation — Passive Foreign Investment Company Status” for a more detailed discussion of the consequences
if we are treated as a PFIC.
ITEM 4. INFORMATION ON THE COMPANY
A. History and Development of the Company
Oasmia Pharmaceutical AB is a pharmaceutical
company which develops, manufactures, markets and sells a new generation of drugs within human and veterinary oncology. The product
development aims to manufacture novel formulations based on well-established cytostatic which, in comparison with current alternatives,
show improved properties, a reduced side-effect profile and an expanded therapeutic area. The product development is based on in-house
research within nanotechnology and company patents. The Company’s shares are listed on NASDAQ Stockholm and the NASDAQ Capital
Markets.
We are a Swedish public company. Our principal
executive offices are located in Uppsala, Sweden.
Company information
Company name: OASMIA PHARMACEUTICAL AB
Address: Vallongatan 1, 752 28 Uppsala, Sweden
Contact information: +46 18 50 54 40
Fax: +46 18 51 08 73
Email address: info@oasmia.com
Website: www.oasmia.com
B. Business
overview.
We are a pharmaceutical company focused on
innovative treatments within human and animal oncology. Our product and product candidates utilize a proprietary, nanoparticle
formulation technology that is designed to facilitate the administration of intravenously-delivered active pharmaceutical ingredients,
without the addition of toxic solvents. We believe our formulation may result in improved safety, efficacy and ease of administration
over existing drugs. Our initial development and commercialization efforts are focused on creating novel formulations of well-established
chemotherapeutic drugs that can be used for the treatment of cancer in both humans and companion animals. We have four human oncology
product candidates in pre-clinical and/or clinical development, and two veterinary oncology product candidates. We disclosed top
line Phase III data for our lead human oncology product candidate in the fourth quarter of 2014 and positive overall survival data
in April 2016. In February 2014, we received conditional approval by the United States Food and Drug Administration (“FDA”)
for our initial veterinary oncology product, which made us eligible for royalties and potential milestone payments from Abbott
Animal Health, the animal health division of Abbott Laboratories. Our lead products utilize paclitaxel, the active ingredient of
Taxol and Abraxane, two widely used cancer drugs marketed by Bristol-Myers Squibb and Celgene, respectively. Based on the potential
benefits of our proprietary formulation technology, we are pursuing a strategy to replace the use of existing paclitaxel-based
products in multiple cancers with our novel formulations. Our formulation is currently called Paclical or Apealea, depending on
market, for human indications. We own the global commercial rights to Apealea, excluding Israel, Turkey, Russia, the Commonwealth
of Independent States (“CIS”), Ukraine, Georgia and Turkmenistan. The Company has received marketing approval
of Paclical in Russia and Kazakhstan and Doxophos in Russia, a key milestone following the recently established relationship with
Hetero Group, its new marketing and distribution partner.
A Phase III study with our lead human oncology
product candidate, Apealea, for the treatment of epithelial ovarian cancer has been completed. We have received orphan designation
for Apealea in the U.S. Results regarding progression free survival are available and we filed an MAA in the EU based upon these
results in February 2016. We obtained overall survival, OS, data in April 2016 and we intend to file with the FDA in 2018. We are
also conducting and planning additional clinical trials to evaluate Apealea in other cancer types.
For the veterinary products, the Board of Directors
made a decision in May 2017 to spin off the veterinary assets off to our fully owned US subsidiary AdvaVet, Inc. The assets were
spun off in May 2018.
The Company withdrew the conditional approval
for Paccal Vet-CA1 in January 2017 in order to change treatment regime. Through our subsidiary, AdvaVet, Inc., we owe the global
commercial rights of Paccal Vet, excluding Japan. Paccal Vet is the first injectable chemotherapeutic agent authorized for marketing
for the treatment of squamous cell carcinoma and mammary carcinoma in dogs. We obtained conditional approval by the FDA for Paccal
Vet for the treatment of mammary carcinoma and squamous cell carcinoma under the Minor Use and Minor Species (“MUMS”)
designation in the U.S. MUMS designation is a status similar to orphan designation for human drugs, making the sponsor eligible
for incentives to support the approval or conditional approval of the designated drug, including seven years of market exclusivity
in the U.S, during which period a different drug company cannot pursue full or conditional approval of a generic version or another
brand name version of the drug in the same form for the same intended use. The Company withdrew its current label and plans to
initiate a new study confirming changed dosing regimen.
In order to receive the MUMS designation in
the U.S. for Paccal Vet, we were required to show that squamous cell carcinoma and mammary carcinoma, the drug’s two indications,
occur infrequently and in less than 70,000 dogs in the U.S. each year. To receive conditional approval pursuant to the MUMS designation,
we were also required to show (i) that our manufacturing process for Paccal Vet satisfied certain criteria, including purity and
stability (see “Government Regulation — Requirements for Approval of Veterinary Pharmaceuticals for Pets — Defined
Manufacturing Process”); (ii) that the production and use of Paccal Vet satisfied certain human and environmental safety
criteria (see “Government Regulation — Requirements for Approval of Veterinary Pharmaceuticals for Pets — Safe
for Humans and the Environment”); and (iii) a reasonable expectation of effectiveness in treating mammary carcinoma and squamous
cell carcinoma. To receive full approval, we will need to show that the manufacturing and safety criteria described above remain
satisfied.
“[The] FDA’s Center for Veterinary
Medicine determined that the drug’s two indications fit the ‘minor use in a major species’ category. Both mammary
carcinoma and squamous cell carcinoma — within the limitations described on the label — occur infrequently
and in a small number of dogs each year (fewer than 70,000 dogs in the U.S. in one year).”
Reference: FDA
http://www.fda.gov/animalveterinary/resourcesforyou/ucm402476.htm
“[The] FDA’s Center for Veterinary
Medicine granted Oasmia Pharmaceutical AB’s request to declare the drug a “designated” animal drug for its two
label indications. This designation status qualifies the company to receive financial incentives. First, it gives Oasmia Pharmaceutical
AB seven years of exclusive marketing rights, beginning on February 27, 2014, the date that FDA conditionally approved PACCAL VET-CA1.
During this 7-year period, a different drug company cannot pursue approval or conditional approval of a generic copy or another
pioneer (brand name) version of the same drug in the same form for the same intended use.”
Reference to FDA (quotes):
http://www.fda.gov/animalveterinary/resourcesforyou/ucm402476.htm
In Europe, we intend to submit a Marketing
Authorization Application (“MAA”) to the European Medicines Agency (“EMA”) for Paccal Vet for the treatment
of squamous cell carcinoma, mammary carcinoma and mast cell tumors (mast cells develop in bone marrow and are found in connective
tissue throughout the body. Mast cells are, among other items, involved in the defense against parasitic infestations and infections.
They contain histamine and are associated with allergic reactions based on data from the ongoing phase III studies.
In addition to Paccal Vet and Apealea, we have
five additional product candidates:
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Docecal is a proprietary, patented formulation of docetaxel. Docetaxel is the active ingredient in Taxotere®, a product marketed by Sanofi. Taxotere, one of the most commercially successful and widely used chemotherapeutic medications, generated annual worldwide sales of more than $2.8 billion in 2010, the year its patent expired. We have completed a number of pre-clinical studies and are performing a clinical phase I study as well as a safety and tolerance study. Both studies are expected to be finalized during 2018. We retain global rights to Docecal.
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Doxophos Vet and Doxophos are a proprietary, patented formulation of doxorubicin, one of the most effective and commonly used substances for the treatment of cancer. Doxorubicin is the active ingredient in Doxil and Adriamycin. Our product candidate is called Doxophos Vet for veterinary indications and Doxophos for human indications. Doxophos Vet is being developed for the treatment of lymphoma, one of the most common cancers in dogs. A Phase I dose-finding clinical trial with Doxophos Vet was completed during the fourth quarter of 2014 and the study report was completed in June of 2015. We have completed a number of pre-clinical studies of Doxophos. In December 2015 we submitted a request for market authorization of Doxophos in Russia. Oasmia received market approval in Russia in August 2017.
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OAS-19 is a proprietary combination of two widely used chemotherapeutic agents in a single formulation that can be administered in a single dose. In the past, cancers were often treated with a single chemotherapeutic agent but combination therapies have become more prevalent in clinical practice, including the combined use of multiple traditional chemotherapeutic agents and the combined use of newer cancer therapies in conjunction with traditional chemotherapeutic agents, which often require multiple infusions that can be time consuming and costly. By combining two chemotherapeutic agents in a single formulation, we believe that OAS-19 could offer physicians the ability to dose chemotherapy in a single infusion instead of two sequential infusions, which we believe decreases infusion times, the number of clinical visits, and associated treatment costs. We are currently evaluating OAS-19 in preclinical studies. We retain global rights to OAS-19.
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KB9520 is a substance acquired from Karo Pharma in November 2016. In pre-clinical studies, the substance has shown that it contributes to reduced side effects of treatment with cytostatics when intake of KB9520 and cytostatic treatment are combined. KB9520 has also demonstrated good efficacy for several types of cancer in pre-clinical models. In these disease models, treatment has shown a significant reduction in tumor size by stimulating apoptosis (programmed cell death) and inhibiting cell growth. The Company has created an internal project group for the continued development of this substance. In parallel, the company is also looking for a partner with whom Oasmia can drive this forward.
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We believe that our strategy of applying our
formulation technology to existing chemotherapeutic drugs will allow us to use the 505(b)(2) regulatory pathway in the United States
to obtain regulatory approval for our human product candidates. The 505(b)(2) regulatory pathway permits the filing of a New Drug
Application (“NDA”) where at least some of the information required for approval comes from studies not conducted by
or for the applicant and for which the applicant has not obtained a right of reference. We believe this pathway is attractive as
it has the potential to prevent the need for costly and time consuming clinical trials. We believe we will first be able to apply
this to Paclical in the United States referencing Taxol.
Our Product and Product Candidates
The following tables summarize key information about our product
and our most advanced product candidates:
Product
Candidate
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Commercial Rights
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Stage of Development & Anticipated Milestones
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Paclitaxel
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Apealea/Paclical
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Oasmia:
Global (excluding Israel, Turkey, Russia/CIS, Ukraine,
Georgia and Turkmenistan)
Medison Pharma:
Israel and Turkey
Hetero Group:
Russia/CIS, Ukraine, Georgia and Turkmenistan
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·
Final results, overall survival data, from Phase
III trial vs. Taxol was disclosed in April 2016
·
Expecting opinion from EMA regarding marketing authorization
in EU in September 2018
·
Received for marketing authorization in Russia
in April of 2015
·
Aim to apply in the U.S. in 2018
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Paccal Vet
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Oasmia through AdvaVet:
Global (excluding Japan)
Nippon Zenyaku Kogyo:
Japan
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·
Conditional U.S. approval received in February 2014,
withdrawn in January 2017
·
Conduct studies to support a new dosing regimen
·
Asset moved to subsidiary AdvaVet Inc in May 2018
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Docetaxel
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Docecal
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Oasmia:
Global (excluding Russia/CIS)
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·
Phase I pharmacokinetic clinical trial in metastatic
breast cancer is ongoing, all 28 patients treated
·
Phase II safety and tolerance clinical trial in metastatic
breast cancer is ongoing, all 200 patients treated
·
Aim to apply for marketing authorization in Russia during
2018
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Doxorubicin
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Doxophos Vet
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Oasmia through AdvaVet:
Global
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·
Proof of Concept study is will be finalized
in 2018
·
Aim to apply in to US FDA for conditional approval in 2018
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Doxophos
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Oasmia:
Global (excluding Russia/CIS)
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·
Pre-clinical studies ongoing
·
Received market authorization in August
2017 in Russia
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Combination
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OAS-19
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Oasmia:
Global
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·
Currently in pre-clinical development
·
Initiate a Phase I dose-finding clinical
trial
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Definitions
The following definitions are used throughout
this document;
·
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—
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Phase I: The first clinical study initiated with a compound. This can be either a dose-finding study or a PK-study.
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·
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—
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Phase II: A clinical study to assess safety and efficacy in a smaller study in the intended indication.
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·
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—
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Phase III: A clinical study to show efficacy and safety and to be used as a basis for an application to obtain marketing authorization.
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The label phase I is also used for veterinary
studies although the nomenclature of the Center for Veterinary Medicine at the FDA (“CVM”) is “Dose characterization
study” for phase I. Phase II is referred to herein as “Dose confirmation study” and phase III “field study”.
Apealea, Our Lead Human Oncology Candidate
Apealea Overview
Apealea is our XR17 formulation of paclitaxel
for human use. Our XR17 technology increases the solubility of paclitaxel without the use of toxic solvents, which we believe facilitates
the ease of administration and allows for higher doses than some of the other existing products on the market (250 mg/m
2
compared to 175 mg/m
2
).
Based on the potential benefits of XR17, we
are pursuing a strategy to replace the use of existing paclitaxel-based products in treating multiple types of cancer. Our initial
focus is to obtain regulatory approval for the treatment of ovarian cancer and expand use through additional regulatory approvals,
starting with breast cancer. Since we are not conducting any human clinical studies in the U.S. we are not required to file an
IND.
We have obtained orphan designation for epithelial
ovarian cancer in the EU and in the U.S. based on the hypothesis that Apealea provides potential benefits to safety and tolerability
compared to Taxol, which is currently used as a treatment for epithelial ovarian cancer. Both Apealea and Taxol are being administered
in combination with carboplatin, a platinum-based chemotherapeutic that is the current standard of care for ovarian cancer. Carboplatin
has historically been given as a monotherapy for the treatment of ovarian cancer, an incremental survival benefit by adding Taxol.
On June 16, 2014, Oasmia announced that the primary endpoint for the Phase III study with Apealea for treatment of ovarian cancer
had been met. The endpoint was to demonstrate that Apealea and Taxol, both in combination with carboplatin, have the same progression-free
survival time. Further, we disclosed final results which showed a positive risk/benefit profile in the fourth quarter of 2014.
This data served as the basis for an MAA to the EMA, which we submitted in February 2016.
We continued to follow patients from the Phase
III clinical trial to measure overall survival and received final data in April 2016. We expect to be able to utilize the Section
505(b)(2) regulatory pathway for Apealea in the United States. We do not currently plan to conduct any other pivotal studies of
Apealea for epithelial ovarian cancer at this time since only one study is needed for submission to the FDA and EMA, although we
intend to include other supportive studies in our Section 505(b)(2) application to the FDA.
In addition to the development of Apealea in
ovarian cancer, we intend to enhance the commercial potential of Apealea by demonstrating the potential safety, efficacy, and convenience
advantages of Apealea over other paclitaxel-based therapies in additional clinical trials. For example, we have recently completed
a pharmacokinetic study to compare Apealea with Abraxane. In addition, this data can be used in our discussions with payor organizations
and physicians to help drive market acceptance of Apealea. We are currently also initiating an additional pivotal trial with Apealea
in Russia in the indication breast cancer.
In addition to our efforts in the EU and the
U.S., we submitted an application for marketing authorization for Apealea with the name Paclical in Russia in September 2012 and
received approval in April of 2015 and we were approved with respect to their reimbursement system in January 2016. In December
2017 we also received market authorization in Kazakhstan.
Apealea Market
The two leading paclitaxel-based products on
the market are Taxol and Abraxane, two widely used cancer drugs. Taxol generated $1.6 billion in sales in 2000 alone, prior to
losing its patent protection in 2001. In 2013, Taxol generated $92 million in post-patent sales. Abraxane, which received FDA approval
in 2005 for metastatic breast cancer, followed by approvals for lung (in 2012) and pancreatic cancer (in 2013), generated $992
million in worldwide annual sales outside Japan in 2017. Abraxane is sold by Celgene worldwide except in Japan where Otsuka Holdings
Co., Ltd. owns the rights. In order to deliver paclitaxel, Taxol contains the solvent Cremophor EL. The toxicity of Cremophor EL
limits the dose of Taxol that can be administered during a reasonable time, potentially limiting the efficacy of the drug. In addition,
patients receiving Taxol require pre-medication with steroids and antihistamines to prevent the toxic side effects associated with
the combination of paclitaxel and Cremophor EL. Abraxane was developed as a Cremophor-free product containing paclitaxel suspended
in human albumin. Because Abraxane contains no Cremophor EL solvent, Abraxane’s recommended dosing enables the delivery of
50% more paclitaxel while maintaining a similar safety profile, and requires no routine pre-medication to prevent hypersensitivity
reactions or the immediate allergic effects that often prevent or limit treatment. Like Abraxane, Apealea is free of Cremophor
EL, but unlike Abraxane, Apealea does not contain human albumin.
Our initial indication for Apealea is epithelial
ovarian cancer, which is the fifth leading cause of cancer death among American women, and an indication for which Abraxane has
no approval. There are clinical studies and case reports that indicate that Abraxane is used off-label by oncologists to treat
certain types of epithelial ovarian cancer, but we cannot estimate how frequently they do so or whether Abraxane is used off-label
to treat second line epithelial ovarian cancer. It is easier to find publications on platinum resistant epithelial ovarian cancer
and first line epithelial ovarian cancer than on second line epithelial ovarian cancer (Apealea’s intended indication), but
it is not possible to say if that reflects the usage. Epithelial ovarian cancers account for about 85% to 90% of ovarian cancers,
and are the most aggressive and dangerous sub-type. According to the National Cancer Institute, in 2014, the most recent year in
which data are available, there were over 222,000 women living with ovarian cancer in the U.S. The five year survival rate for
ovarian cancer from 2007 to 2013 was 46.5%, and it is estimated that 22,440 women will develop and 14,080 women will die from ovarian
cancer in 2017. In the EU, the five year survival rate for ovarian cancer was 37.6% from 2000 – 2007 according
to a study published in
The Lancet
. In 2012, there were 44,149 diagnosed cases of ovarian cancer in the EU, according to
the European Cancer Observatory/International Agency for Research on Cancer, while 29,758 women died of ovarian cancer. In the
U.S., 51% of women with ovarian cancer are diagnosed with stage III cancer, characterized by microscopically confirmed peritoneal
metastasis outside the pelvis and/or regional lymph node metastasis. Common chemotherapy drugs used for the treatment for ovarian
cancer include cisplatin or carboplatin, and paclitaxel or docetaxel, which are most often given in combination.
Although we may choose to license Apealea to
a commercial partner, we also believe we could successfully market and sell the product ourselves. There have been numerous examples
of successful oncology drugs, including Abraxane, launched by small companies.
Apealea Phase III Clinical Trial
We have completed a Phase III open, randomized,
multi-center trial in patients with recurrent epithelial ovarian cancer, primary peritoneal cancer or fallopian tube cancer to
compare the efficacy and safety of Apealea to Taxol, both in combination with carboplatin. Carboplatin was historically given as
a monotherapy for the treatment of ovarian cancer but some studies have demonstrated an incremental survival benefit from adding
Taxol, which has increased the use of the two drugs in combination. Top-line progression free survival results were disclosed in
the second quarter of 2014. Since there are no human clinical studies in the U.S. we are not required to file an IND.
The study was designed to achieve the following
primary objectives:
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•
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For progression free survival, to show non-inferiority of Apealea (250 mg/m
2
) versus Taxol (175 mg/m
2
) using computed tomography (“CT”) scans, as assessed according to RECIST by central review.
|
|
•
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For overall survival, to show non-inferiority of Apealea (250 mg/m
2
) versus Taxol (175 mg/m
2
).
|
Inclusion criteria included patients, in total
789 patients, who relapsed at least six months after ending the first line or second line treatment including platinum based therapy.
Apealea was administered as a one-hour intravenous infusion at its recommended dose of 250 mg/m
2
to 391 patients. Taxol
was administered as a three-hour intravenous infusion at its recommended dose of 175 mg/m
2
to 391 patients. Both drugs
were dosed in six three-week cycles, which is consistent with clinical practice. After completing the treatment cycles, patients
were managed by their respective physicians and tracked for certain measures, including progression free survival and overall survival.
Tumor response was evaluated with a biomarker,
CA 125, and through CT scans. CA 125 is used in clinical practice to assess when to re-treat a patient, as it is generally accepted
as a sign of disease progression. We received guidance from Russian regulators that CA 125 would be an acceptable endpoint for
regulatory submission. In an interim analysis we assessed the response to Apealea and to Taxol with regard to concentration average
of CA 125 during the treatment period. The objective to show non-inferiority of the two treatments was met. The results of the
interim analysis were used in a submission for marketing authorization to Russian authorities. Beyond the Russian market, we believe
the use of both CA 125 and CT scan data in one study will give us the opportunity to include a comparison of progression free survival
based on CA 125 and based on CT evaluation in the final analysis.
On June 16, 2014, we announced the results
of this trial. The primary end-point has been analyzed and it shows a progression free survival of 10.3 months in the Apealea +
carboplatin group and 10.1 months in the control group (Taxol + carboplatin). The protocol objective to show non-inferiority (or
similar efficacy) was thus met (p-value of 0.09).
A protocol amendment increased the frequency
of CT scans to be performed every three months after end of treatment. An analysis of the Progression Free Survival rate (“PFS”)
in this subset of patients showed a PFS for Apealea of 12.2 month and 10.2 months for Taxol. The non-inferiority criteria were
met also regarding the secondary efficacy variables. Even though the data on efficacy were not significantly different, PFS tended
to be better in the Apealea group regardless of patient population; more frequent CTs showed the most pronounced differences.
The safety profile of Apealea active substance
dose of 250 mg/m
2
is rather similar to the safety profile of Taxol, active substance of 175 mg/m
2
. The number
of patients with serious myelosuppression is substantial, but many of them were detected in the hematology analyses and were without
clinical signs. Further, when needed, myelosuppression is easily managed in the clinic.
Considering both efficacy and safety of Apealea,
including a comparatively short infusion time and less frequent use of pre-medications, we believe that the benefits of Apealea
outweigh the potential risks of the treatment.
Apealea Phase I and Phase I/II Clinical
Trials
Apealea Phase I/II Dose Escalation Trial
We evaluated Apealea in a dose escalating Phase
I/II trial to define the maximum tolerated dose and desired dose to use in clinical trials of Apealea. Thirty-four patients with
different kinds of cancers were included in the trial. Patients received escalating doses (90 – 275 mg/m
2
)
of Apealea, until the dose-limiting toxicity was noted. Dose-limiting toxicity (“DLT”) is the emergence of side effects
during treatment that are severe enough to prevent further increases in dosage of the treatment. Apealea was given as a one-hour
intravenous infusion every 21 day for three cycles. No premedication was administered prior to Apealea administration.
Eight patients experienced at least one adverse
event classified as DLT. The first occurred at 225 mg/m
2
and consisted of fatigue, skin reaction, and stomatitis. The
following 4 patients experiencing DLT occurred at 250 mg/m
2
where one patient experienced myalgia, arthralgia and leukopenia
classified as DLT during both first and second treatment cycle. Additional three patients experienced neuropathy whereof one also
experienced stomatitis and febrile neutropenia at this dose. Three patients experienced DLTs at the 275 mg/m
2
dose level;
all three experienced fatigue, one in combination with small intestinal obstruction and one in combination with peripheral sensory
neuropathy.
Stomatitis (at 250 mg/m
2
), myalgia,
arthralgia (at 250 mg/m
2
), and small intestinal obstruction (at 270 mg/m
2
) fulfilled the criteria of serious
adverse event. Other serious adverse events considered related to Apealea were pyrexia (2 patients) and hemoglobin decrease (2
patients).
The maximum tolerated dose was established
at 250 mg/m
2
, which is 75 mg/m
2
greater than the recommended dose for Taxol of 175 mg/m
2
and similar
to the recommended dose for Abraxane of 260 mg/m
2
. No hypersensitivity reactions were reported despite the fact that
no premedication was given before the administration of Apealea. In addition to the foregoing results, this trial indicated that
Apealea was effective when administered with a one hour infusion period, while Taxol requires three hours.
The patient population consisted of terminally
ill patients for whom no further treatment was available. Further, no patient received more than 3 cycles. Considering these circumstances,
we consider the efficacy results, 10 patients with stable disease, to be promising.
The most important result from this trial,
in our view, was that Apealea can be given without pre-treatment, the maximum tolerated dose is 250 mg/m
2
and the infusion
period is one hour. This demonstrates that there are benefits associated with Apealea compared to Taxol since Taxol requires pre-treatment,
the maximum tolerated dose is 175 mg/m
2
and the infusion for Taxol is three hours.
Pharmacokinetic Comparison with Taxol
The pharmacokinetic properties of paclitaxel
following an intravenous infusion of Apealea at a dose of 175 mg/m
2
were evaluated in a Phase I crossover pharmacokinetic
study comparing the pharmacokinetics of Apealea and Taxol in humans. The mean unbound plasma concentrations, which indicate the
levels of paclitaxel in the bloodstream that are not bound to common blood proteins and therefore can readily cross cell membranes,
were similar for the two formulations (see Figure 2). We believe that this supports the thesis that the paclitaxel-related effects
for Apealea and Taxol when given at the same dose and during the same infusion time should be comparable and should have the same
temporal course of action. We believe that this trial supports the pursuit of the 505(b)(2) regulatory path in the U.S.
Figure 2: Mean curves of unbound plasma concentration
of paclitaxel after identical doses of Apealea and Taxol, 175 mg/m
2
over 3 hours.
Paclitaxel Mean Cu after Apealea
1
and Taxol
Pharmacokinetic Comparison with Abraxane
The pharmacokinetic properties of paclitaxel
have also been evaluated following an intravenous infusion of Apealea or Abraxane at a dose of 260 mg/m
2
in order to
compare the pharmacokinetics of Apealea and Abraxane in humans. The study was a cross-over study and both the mean total plasma
concentrations and the mean unbound plasma concentrations were compared, and both were similar for the two formulations (see Figure
X and Y). We interpret these findings as an indication of similar paclitaxel related effects of the two compounds.
1
Apealea was referred to as Paclical
in this study.
Figure X Mean (±SD) Total Plasma Paclitaxel
Concentrations Following IV Administration of Apealea or Abraxane — All Patients
Figure Y Mean (±SD) Unbound Plasma Paclitaxel
Concentrations Following IV Administration of Apealea or Abraxane — All Patients
The results from the above described study
of a head-to-head pharmacokinetic comparison between Apealea and Abraxane, announced on August 4, 2015, found that the concentration
of both total and unbound paclitaxel in plasma was similar.
Our formulation is currently called Apealea
for human indications, and Paccal Vet (“Paccal Vet”) for veterinary indications. We own the global commercial rights
to Apealea, excluding Israel, Turkey, Russia, the Commonwealth of Independent States (“CIS”), Ukraine, Georgia and
Turkmenistan. We have licensed the global commercial rights to Paccal Vet for sale in Japan, Russia and the CIS. Apealea received
marketing approval in Russia in April 2015, in Kazakhstan in November 2017.
Apealea Phase I
A phase I study exploring the dose of weekly
administration of Apealea in patients with metastatic breast cancer have been finalized during 2016. By looking at all events,
not only those occurring following the first treatment, a suggested dose for further development of weekly Apealea was identified
to 170 mg/m
2
. However, the main object of the follow-up study intended to explore the number of cycles for weekly Apealea
treatment was not obtained.
XR17 Phase I Clinical Trial
A phase I clinical study to investigate the
pharmacokinetics and safety and tolerability of three doses of our patented excipient XR 17 and XMeNa in healthy subjects were
finalized during 2016. The conclusion of the study is that the half time of the excipients is short, 2-3h and that it is well tolerated
and safe. Adverse events were seen occasionally and a dose dependent relationship were noted with infusion site reactions.
Paccal Vet
Paccal Vet Overview
Paccal Vet is a novel XR17 based formulation
of paclitaxel. Paclitaxel is a well-established, widely used chemotherapeutic that on its own is practically insoluble in water.
Paccal Vet is our initial product in veterinary oncology. Our former commercial partner, Abbott Animal Health, a leading animal
health company, launched the product in mid-2014, at which time we were eligible to receive royalties that start at a minimum approximately
one third of net sales. The Investigative New Animal Drug (“INAD”) number for Paccal Vet is 011609, which we requested
on March 20, 2007.
In February 2014, we received conditional approval
from the FDA for Paccal Vet for the treatment of nonresectable stage III, IV or V mammary carcinoma and resectable and nonresectable
squamous-cell carcinoma, both for dogs that have not received previous chemotherapy or radiotherapy. The conditional approval was
withdrawn in January 2017 in order to redesign the dose regimen allowing treatment in less specialized veterinarian clinics.
To receive conditional approval pursuant to
the MUMS designation, we were also required to (i) show that our manufacturing process for Paccal Vet satisfied certain criteria,
including purity and stability (see “Government Regulation — Requirements for Approval of Veterinary Pharmaceuticals
for Pets — Defined Manufacturing Process”); (ii) show that the production and use of Paccal Vet satisfied
certain human and environmental safety criteria (see “Government Regulation — Requirements for Approval of
Veterinary Pharmaceuticals for Pets — Safe for Humans and the Environment”); and (iii) provide a reasonable
expectation of effectiveness in treating mammary carcinoma and squamous cell carcinoma.
Conditional approval allows veterinarians to
treat dogs with Paccal Vet in the approved indications. Conditional approval grants Paccal Vet seven years of market exclusivity,
and gives us the right to promote the product before all of the efficacy data necessary for a full approval are available. Conditional
approval also allows us to keep the product on the market for up to five years, through annual renewals, while collecting the remaining
required efficacy data.
“[The] FDA’s Center for Veterinary
Medicine determined that the drug’s two indications fit the ‘minor use in a major species’ category. Both mammary
carcinoma and squamous cell carcinoma — within the limitations described on the label occur infrequently and in
a small number of dogs each year (fewer than 70,000 dogs in the U.S. in one year).”
“The company has shown that, when used
according to the label, PACCAL VET is safe and has a ‘reasonable expectation of effectiveness.’”
Reference: FDA
http://www.fda.gov/animalveterinary/resourcesforyou/ucm402476.htm
The study
Paccal Vet Prospective Single-Arm
Trial in Mast Cell Tumors in Dogs
was a single-arm study. This was because the comparator used in clinical trials is the standard
of care, the most commonly used treatment for the indication. When we started to develop Paccal Vet there were no chemotherapeutics
approved for dogs. One can of course always compare to no treatment or the vehicle (“placebo”). With a disease such
as cancer, it is not ethical not to treat, and that was the reason for the single arm study.
When it was possible for us to apply for conditional
approval, discussions were held with CVM/FDA and it was concluded that data from a comparative study were not needed to obtain
the conditional approval. However, according to CVM/FDA, the number of dogs with the specific indications treated in the study
Paccal Vet in Malignant High-Grade Solid Tumors in Dogs,
was too low to meet requirements of reasonable expectation of effectiveness.
Therefore, it was decided through discussions with CVM/FDA, to include dogs from a study not done by Oasmia (mammary carcinoma)
and to conduct a small study (squamous cell carcinoma) in order to meet the requirements of a conditional approval.
EMA CVMP Scientific Advice and FDA protocol
concurrence were requested and received for the pivotal clinical study protocol(s) for full approval. The study protocol was submitted
to EMA for scientific advice. An answer was obtained on July 12, 2012 (EMA/CVMP/SAWP/296308/2012). The questions asked by Oasmia
referred to study design, primary objective/end-point, the use of placebo as comparator, sample size calculations, quality of life
scale, the use of anti-emetics, and the possibility to use safety data from previous studies. The answers to some of the questions
were ambiguous and clarifications were requested on August 10, 2012, and answered on September 13, 2012 (EMA/CVMP/SAWP/548291/2012).
EMA’s comments were addressed in the final study protocol.
The Clinical Study Protocol(s) have received
FDA “concurrence” which means FDA agrees with the design of the clinical protocol(s), and as such also agrees with
the numbers of dogs to be in the study(s). FDA as a status quo requires a minimum of 150 dogs. EMA does not generally require a
specific minimum number of dogs such as 150 dogs, but the numbers should be based on a hypothesis that is statistically valid.
Oasmia asked in scientific advice to EMA CVMP October 2013 specifically, “Does the CVMP agree that this number of dogs is
sufficient?” EMA CVMP Answer (excerpted) “As outlined in the CVMP GL on statistical principles for clinical trials
for veterinary medicinal products (EMA/CVMP/EWP/81976/2010) ‘the number of animals in a clinical trial should always be large
enough to provide reliable answers to the questions addressed. This number is usually determined by the primary objective of the
trial’. Thus, a formal sample size calculation is considered necessary in the planned confirmatory clinical trial. Based
on the treatment effects specified in the company’s position, the planned sample size initially appears reasonable.”
Paccal Vet Market
According to the Animal Cancer Foundation,
approximately six million dogs per year are diagnosed with cancer in the U.S., slightly less than 10% of the population. Based
on a population of 60 million dogs in the EU, we estimate almost six million dogs per year are diagnosed with cancer in Europe.
We estimate that between 36,000 and 41,250 dogs are treated annually for mammary carcinoma, while the number of positive diagnoses
for squamous cell carcinoma in dogs is less than 10,000 annually. This is the reason Paccal Vet was eligible for conditional approval;
the drug’s two indications fit the “minor use in a minor species” category. As mentioned earlier, both mammary
carcinoma and squamous cell carcinoma occur infrequently and in a small number of dogs each year (fewer than 70,000 dogs in the
U.S. each year).
Based on the referenced sources for the U.S.
and Europe, we believe that the incidence rates and overall prevalence of cancer in dogs is similar for cats. Solid tumors, with
or without metastatic disease, are one of the most common forms of cancer in dogs and cats. Aside from Paccal Vet, there is currently
no injectable chemotherapeutic drug specifically approved for use in pets in the U.S., though, as an alternative, human drugs are
often used off-label. Taxol and Abraxane, both of which deliver paclitaxel, cannot safely be used in dogs. Taxol has toxicity associated
with Cremophor El (polyoxyethylated castor oil) (“Cremophor”), and dogs have a resistance to human albumin, which is
found in Abraxane.
The first drug to be approved specifically
for the treatment of cancer in dogs was Zoetis’ Palladia, a toceranib phosphate tablet, which is indicated for the treatment
of mast cell tumors and launched in 2009. While Zoetis does not disclose sales of Palladia, we believe the product is well known
to veterinarians.
Mammary carcinoma and squamous-cell carcinoma
are two of the most common types of solid tumors in dogs. Skin cancers, which include squamous-cell carcinomas, comprise one third
of all canine cancers. Mammary tumors are the most common type of cancer in female dogs, accounting for about half of all tumors
and affecting up to 25% of female dogs that are not spayed.
Paccal Vet in Malignant High-Grade Solid
Tumors in Dogs
We evaluated Paccal Vet in an open-label, single
arm, dose-escalating clinical field study to determine a clinically safe and effective dose and to evaluate single-dose pharmacokinetics
in tumor-bearing dogs. This was our first clinical report of a Cremophor-free formulation of paclitaxel, suggesting successful
administration without premedication in dogs. We ran this study as a single-arm study because the objective of this study, and
other early phase studies, was to assess appropriate dosage and to assess certain particular safety aspects of Paccal Vet, for
which a control group was not required.
The study included 27 dogs, with one-quarter
of the dogs diagnosed with mast cell tumors, another quarter diagnosed with mammary tumors, and the others diagnosed with lymphoma,
squamous cell carcinoma and other types of tumors. The dogs were treated with Paccal Vet for at least three cycles and up to five
cycles, with each treatment cycle consisting of separate infusions approximately 21 days apart. The majority of dogs were treated
with 150 mg/m
2
, which was the dose of Paccal Vet used in subsequent studies. We used data from this study to receive
conditional approval in mammary carcinoma and squamous cell carcinoma from the FDA.
Paccal Vet in Mast Cell Tumors in Dogs
The safety and efficacy of Paclical for the
treatment of grade II or III mast cell tumors in dogs that cannot be safely removed surgically were evaluated in a randomized,
masked, controlled, multinational 14-week clinical field study. The objective was to demonstrate clinical superiority of Paccal
Vet compared to active control lomustine, an oral chemotherapeutic commonly used for dogs. Efficacy was evaluated by the portion
of dogs with a confirmed overall response, defined as complete response or partial response, 14 weeks after four consecutive three-week
treatment cycles.
Paccal Vet in Mammary Carcinoma
We received conditional approval for mammary
carcinoma indication from the FDA in February 2014. This approval was based on safety data for Paccal Vet and the limited efficacy
data for the indication.
Efficacy data relating to mammary carcinoma
were obtained from the study with Paccal Vet on malignant high-grade solid tumors. In that study, seven dogs with mammary carcinoma
were treated, four of which responded to treatment (one complete response and three partial responses). Furthermore, two of the
seven dogs survived over a year after the treatment was completed. In addition to the dogs from the previous study, literature
data on three dogs previously treated at University of Wisconsin was added, for a total of 10 cases of mammary carcinoma, of which
six responded.
Paccal Vet in Squamous Cell Carcinoma
We also received conditional approval for squamous
cell carcinoma indication for Paccal Vet from the FDA in February 2014. This approval was likewise based on safety data for Paccal
Vet and limited efficacy data for the indication.
The study of Paccal Vet in malignant high-grade
solid tumors included only three cases of squamous cell carcinoma, and as this was not enough to show reasonable expectation of
efficacy, we conducted a small, exploratory study in dogs with this indication. In this study, 14 dogs with various types of squamous
cell carcinoma were treated with Paccal Vet for four cycles. Two of the dogs responded to treatment and another two dogs had prolonged
stable disease, which, according to the protocol, was considered a response to treatment. A dog with squamous cell carcinoma had
also been treated in a compassionate use program in the U.S., and this dog was also included in the efficacy analysis, which consisted
of a total of 18 dogs, with six dogs showing Best Overall Response Rate (“BORR”) and two dogs having prolonged periods
of stable disease.
Paccal Vet Single-Arm Trial in Mast Cell
Tumors in Dogs
We conducted a single-arm, open-label, multi-center,
clinical trial to determine the efficacy and safety of Paccal Vet in client-owned dogs with grade II or III mast cell tumors. Mast
cell tumors are graded histologically from I to III: grade I tumors are benign and local, curable with surgery alone; grade II
tumors are intermediate and approximately 25% of these metastasize; and grade III tumors are advanced with high metastatic potential
and short overall survival despite aggressive treatment.
Dogs that received at least one dose of treatment
(29 dogs) were included in the analysis of safety, and 28 of those dogs had tumor measurements and were included in an efficacy
analysis. The dogs were administered an intravenous dose of 150 mg/m
2
of Paccal Vet once every 21 days for three cycles.
Clinical safety was assessed by clinicopathological analyses and recording of adverse events. Following the end of the study, the
owners were contacted to provide information used to assess progression free survival.
BORR at any time during treatment was seen
in 54% of dogs whereas complete or partial response was observed in 31% of dogs at the end of the study. It took an average of
247 days from the start of the treatment until the cancer reappeared in the dog. Adverse events were reductions in the number of
two types of white blood cells, neutrophils and leucophils. These events, which are common with chemotherapy, were short lasting
and seen only sub-clinically (i.e., the dogs did not display any evidence of fever or other symptoms, other than in the blood sample
analyses).
The difference between this study and the one
including 249 dogs called Paccal Vet in Mast Cell Tumors in Dogs consists of the response rate, BORR. In this study of 29 dogs,
the BORR is assessed at any time during the treatment period. In the study of 249 dogs the BORR was assessed after 4 treatment
cycles.
Paccal Vet Planned Clinical Studies
We will perform a dose characterization study
in order to ascertain a lower yet viable dose of Paccal Vet. We have applied for MUMS-designation in several indications and are
expecting a positive opinion from FDA with respect to at least one indication, which will be the target for the next clinical program.
We intend to initiate the dose characterization study before the end of the calendar year 2018.
When the results from the dose characterization
study are available we will discuss the updated clinical program for Paccal Vet with the FDA and EMA. A dose confirmation study
will commence immediately after these discussions.
Paclical & Paccal Vet Preclinical
Data including data in healthy dogs
We conducted a comprehensive program of preclinical
testing of Paclical, including several
in vitro
and
in vivo
studies. Key findings from our preclinical program include:
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In vitro
studies in ten different human tumor cell lines showed that the cytotoxic activity of Paclical was somewhat more effective than Taxol in the more sensitive cell lines whereas the activity of Taxol was more active in three of the six investigated resistant cell lines. A comparison of the cytotoxicity of Paclical and Taxol was also made in vivo in rats. The tumor density of living tumor cells five days after drug administration, showed no difference between the two paclitaxel formulations but there was a considerably lower cell survival than that for placebo treated rats.
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In a comparative pharmacokinetic study of paclitaxel in rats receiving either Taxol or Paclical, higher concentrations of total paclitaxel were observed after dosing with Taxol compared to dosing with the same dose of Paclical. However, when studying the unbound concentrations, no obvious difference between the two formulations could be seen.
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The hematological toxicity of Paclical was studied in rats and found to be similar to Taxol in terms of extent and duration. A strong rebound in the white blood cell count followed the initial decrease, and at days 16 to 17 following a single dose, the white blood cell counts were stabilized at the baseline level. Since efficacy and hematological toxicity were similar in rats being dosed with identical doses of Paclical and Taxol, it would appear that the unbound drug is the determining factor in the efficacy and safety of paclitaxel.
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Repeat dose toxicity studies were performed in rats. The mortality rate at 10 mg/kg Taxol was high and the dose in the 10 mg/kg group was reduced to 5 mg/kg. All animals that received 10 mg/kg of Paclical survived.
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The pharmacokinetic profile of Paclical was evaluated in a repeat dose toxicity study in healthy dogs (n=21). Following a 30 minute intravenous infusion of 100-150 mg/m
2
of paclitaxel (Paclical), the distribution of paclitaxel into the tissue was rapid and the distribution phase ended within one hour after the start of infusion.
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The toxicity profile of Paclical in dogs has been shown to be consistent with the pharmacological action i.e., bone marrow suppression evincing the most apparent toxicity. Gastrointestinal disorders such as diarrhea and vomiting have also been commonly observed. None of the severe hypersensitivity reactions that have been reported in dogs with Cremophor EL based vehicles was observed with Paclical.
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Toxicity investigations conducted with the excipient XR17 showed increases in liver enzymes, bile acids and total bilirubin as well as the presence of pigmented Kupffer cells at high doses. The exposure in dogs was 8.3- and 12-fold at doses of 75 and 108 mg/kg, respectively compared to the mean AUC following a clinical dose of 166 mg/m
2
in humans. No histological findings of significance were observed in low dose animals. Major toxic reactions were not seen until doses reached almost five times higher than the doses given to Paclical patients.
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Docecal
Overview
Docecal is our patented formulation of docetaxel,
the active ingredient in Taxotere, a widely used chemotherapeutic medication that generated annual worldwide sales of more than
$2.8 billion in 2010, when its patent expired. Taxotere contains the solvent polysorbate 80, which is potentially linked to adverse
side effects such as acute hypersensitivity and edema. To minimize these effects, patients typically undergo premedication with
steroids. Like Paclical, Docecal is free of toxic solvents. We believe Docecal may be able to deliver equal, or potentially greater,
amounts of docetaxel as Taxotere without the effects of polysorbate 80 and, if approved, compete with Taxotere and generic versions
thereof. Since there are no human clinical studies in the U.S. we are not required to file an IND.
Docecal Preclinical Studies
The anti-proliferative effects of Docecal were
investigated in a panel of six human cancer cell lines and compared with the effects of commercially available Taxotere using a
standard cell proliferation assay. For all of the tested cell-lines, Docecal was as effective as Taxotere in inhibiting cell growth.
Rats were injected with Docecal once weekly
for 28 days with doses of 4.2 mg/kg or 6.0 mg/kg or with Taxotere 4.2 mg/kg. The Docecal group showed Docecal-related signs such
as erythema, paleness, wounds on the tails, limpness and local skin reactions seen as dry skin with scale formations in both sexes
following both treatments. The effects were most pronounced in the 6 mg/kg group. Changes in hematology, clinical chemistry, organ
mass, macroscopic and microscopic findings were seen in both sexes. In the absence of any histological examination in the Docecal
4.2 mg/kg group, the significance of these differences cannot be assessed.
A no-observed-adverse-effect level, or the
highest exposure of docetaxel having no adverse effect, was not established in this study with Docecal. However, we believe that
the failure to establish a no-observed-adverse-effect level has not hindered the approval process for other APIs used in the treatment
of cancer and will not hinder the Docecal approval process.
Docecal Clinical Studies
Docecal is an XR17 based formulation of docetaxel
intended for treatment of metastatic breast cancer. A clinical phase I pharmacokinetic study and a phase II safety and tolerance
study are ongoing and all patients have been treated. The pharmacokinetic phase I study, comparing Docecal with Taxotere is ongoing
in three countries and the recruitment of patients started in September 2016. The safety and tolerance study is a randomized trial
also comparing Docecal and Taxotere started recruitment of patients in March 2016 and has approval to be run in three countries.
If successful, we plan to discuss the results
and a proposed clinical development plan with both the EMA and the FDA.
We enrolled the first patient in a study in
March 2016 to assess the need for pre-medication and possibly to fulfill the requirements of the Russian authorities in order to
obtain market authorization in Russia and the CIS. All patients in the studies were treated in February 2018.
Doxophos Vet
Doxophos Vet Overview
Doxophos Vet is a patented formulation of doxorubicin,
one of the most effective and commonly used chemotherapeutic agents for the treatment of cancer, which we are developing for the
treatment of lymphoma in dogs. Lymphoma is the most common cancer in dogs, and the FDA has granted MUMS designation for Doxophos
Vet for lymphoma. We completed a dose-finding study in the fourth quarter of 2014 and the results were obtained in June of 2015.
The INAD number for Doxophos Vet is 011910, which we requested on March 10, 2010.
Doxophos Vet Clinical Trials
Upon determining the dose in the dose ranging
study, a proof of concept study in dogs with lymphoma was started during the first quarter of 2015 which, as a result of the MUMS
designation, enables us to apply for a conditional approval. The aim of the study is to assess the response rate in dogs with lymphoma,
but also to monitor progression to estimate progression free survival.
A large field study with Doxophos Vet is needed
to obtain full approval, and this study is planned to start following completion of the proof of concept study and discussions
with FDA and EMA.
Doxophos Vet Preclinical Data including
data from healthy dogs
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A preclinical study using six human cancer cell lines was conducted in rats where the activity Doxophos was compared to standard doxorubicin. Doxophos was as effective in inhibiting cell growth as standard doxorubicin in all of the tested cell lines and had a comparable pharmacokinetic profile in rats.
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The tissue distribution of doxorubicin was compared following a single intravenous injection of Doxophos or standard doxorubicin in mice. There were no major differences between the two formulations indicating that existing toxicity data from the literature for doxorubicin also would be applicable for Doxophos. At 30 min following administration, the organs that showed the highest radioactivity was the kidney and liver followed by the spleen. At 6 h the highest level was found in the feces and high levels were found in the kidney medulla and spleen.
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Repeat dose toxicity in rats showed that the incidence and severity of the clinical effects were similar in the Doxophos and standard doxorubicin exposed rats (6 mg/kg) and less frequent or less severe in rats receiving the lower dose of Doxophos (4 mg/kg). Expected changes were observed in most hematology parameters and were similar for Doxophos and standard doxorubicin treated rats.
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Rats treated with standard doxorubicin had a higher incidence of fluid-filled abdomens (ascites), which could be a sign of (right sided) heart failure. However, histopathological examination failed to show any differences between the two treatments and a lower cardiotoxicity potential of Doxophos compared to standard doxorubicin was thus not seen in this study.
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A dose-finding study in healthy dogs was conducted where the maximum tolerated dose was determined to 35 mg/m
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A pivotal target animal safety study in dogs with intravenous dosing of Doxophos Vet at 25, 30 and 35 mg/m
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(4 dogs per sex and dose group), showed dose-dependent toxicities known to be associated with doxorubicin namely; cardiotoxicity, gastrointestinal toxicity, bone marrow suppression, whisker loss etc.
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Doxophos
Doxophos Overview
Doxophos is a proprietary formulation of doxorubicin.
Despite the efficacy of doxorubicin, significant cardiovascular toxicity, including irreversible cardiomyopathy, has been observed
and the cumulative dose should not exceed 550 mg/m
2
. We obtained market approval for Doxophos in Russia in August 2017.
Doxophos was approved for use in the treatment of acute lymphoblastic leukemia, acute myeloblastic leukemia, chronic leukemia,
Hodgkin’s disease and non-Hodgkin’s lymphoma, multiple myeloma, osteogenic sarcoma, Ewing’s sarcoma, soft tissue
sarcoma, neuroblastoma, rhabdomyosarcoma, Wilms’ tumor, breast carcinoma, endometrial cancer, ovarian carcinoma, germ cell
tumors, prostatic carcinoma, lung cancer, gastric carcinoma, head and neck cancer and thyroid carcinoma. As is its current practice
with Paclical, Oasmia’s leading and previously commercialized cancer treatment product, Hetero Group will be responsible
for the marketing and distribution of Doxophos in Russia.
Doxophos Market
The two leading doxorubicin-based products
are Adriamycin and Doxil, or Caelyx when marketed outside of the U.S. Doxil is a lipid, or fat, encapsulation of doxorubicin introduced
as a replacement for Adriamycin.
OAS-19
OAS-19 Overview
Historically, chemotherapeutic agents were
used as single agents. However, combination therapies have become standard treatment for a number of cancers, such as ovarian cancer,
first line breast cancer, prostate cancer and lung cancer. OAS-19 is an XR17 based combination of two widely-used chemotherapy
drugs in a single micelle. OAS-19 applies a dual chemotherapeutic agent encapsulation and release mechanism in one infusion and
may provide us with a new platform for further product candidate development. Since there are no human clinical studies in the
U.S. we are not required to file an IND.
OAS-19 Preclinical Studies
Male and female rats received four intravenous
administrations of OAS-19, one week apart, at the doses of 0 (micelle excipient only), 4.2, 6 and 8.5 mg/kg/week. Mortality was
noted in highly-dosed males only, while effects on food consumption and body weight gain were observed at all doses and in both
genders, with a dose-dependent relationship. Treatment-related changes were noted almost at all doses, albeit without a clear dose-dependent
relationship, in organs/tissues of the hemolymphoietic, gastrointestinal, urinary, genital, musculoskeletal, nervous and integumentary
systems. The toxic effects observed in target organs were those expected to occur after administration of the underlying agents
included in OAS-19.
Under the applied conditions, 6 mg/kg was considered
the maximum tolerated dose, while the lowest observed adverse effect level (LOAEL) was the lowest tested dose of 4.2 mg/kg/week.
The dose to be used in humans will be established
in the first clinical trial, but it is estimated that 6 mg/kg corresponds to six to eight times the human dose.
OAS-19 Planned Studies
We plan to develop a clinical program for this
product candidate.
Market Overview
Our initial development efforts are focused
on the fields of human and veterinary oncology. We believe that our XR17 technology can be applied to address commercially attractive
opportunities in these two markets based on the limitations of existing therapies.
Human Oncology Market Opportunity
Cancer is a serious, widespread and expanding
disease. According to the World Health Organization (“WHO”), approximately 8.8 million people died of cancer in 2015,
and it is expected to rise by 70% over the next two decades.
Despite the development and introduction of
new drugs to treat cancer, chemotherapeutic agents, used in combination with other treatments such as surgery or radiation, remain
the primary treatment of cancer worldwide. Chemotherapeutic agents generally work by blocking cell division, thereby inhibiting
the reproduction of cancer cells and suppressing tumor growth. Many new drugs that have obtained marketing approval for the treatment
of cancer are used in combination with chemotherapeutic agents. In addition, many drug candidates in development across the industry,
like most chemotherapeutics, are not water soluble and will require innovative formulations to enable intravenous use. We believe
that the widespread use of chemotherapeutic agents worldwide and the potential use of our formulation technology with new drug
candidates present a large commercial opportunity.
Animal Health Market Opportunity
The U.S. is the single largest pet market,
with 87 million pet dogs and 94 million pet cats, according to the American Pet Products Association (“APPA”) 2017–2018
National Pet Owners Survey. According to the same survey, 60 million households own a dog in the U.S. According to The European
Pet Food Industry Federation’s 2016 Facts & Figures, there are approximately 63 million pet dogs in the EU and 82 million
in total Europe. The number of cats is 74 million in the EU and 102 million in all of Europe.
Pet owners also spend an increasing amount
of money on their pets. Total expenditures have risen to $66.8 billion in 2016 and are expected to grow by 4.1% in 2017. The APPA
estimates that $16.6 billion of that amount will be spent on veterinary care.
Dogs in particular are receiving increased
amounts of veterinary care. According to APPA, approximately 78% of dog owners in the U.S. treated their dogs with medications
in 2010, as compared to 50% in 1998. The increased spending is largely due to a changing attitude of owners toward their pets,
as they increasingly view pets as family members. Accordingly, owners are willing to seek quality medical care for their pets.
While the actual number of dogs in need of chemotherapy that actually received such treatment is unknown, one study estimated the
number of dogs receiving cancer treatment in 2008 in the United States to be over one million, and that the average age of the
dog when cancer is detected is eight years. Also, in Sweden pet insurance is becoming more widespread. It is estimated that eighty
to ninety percent of dogs are covered by medical insurance, and approximately eighty percent of such insurance policies includes
coverage for chemotherapy. The approximate life expectancy of dogs that do not receive treatment could be one to two months after
the diagnosis, whereas for a dog that is treated with chemotherapy it could be one year from the diagnosis. It should be noted
that this is a hypothetical statement given that it is impossible to generalize the life expectancy of the dog, since it depends
on the type of tumor and treatment, among other factors.
Due to the limited number of registered available
oncology treatments for companion animals, we believe that there is a significant commercial opportunity to apply our formulation
technology within veterinary oncology. According to the Center for Cancer Research and CanineCancer.com, approximately six million
dogs in the U.S. are diagnosed with cancer each year, of which approximately one third have cutaneous, or skin, cancers. Current
treatments consist largely of surgery, chemotherapy, and radiation therapy. For dogs in need of chemotherapy, the standard of care
has largely been the off-label use of injectable human chemotherapeutic agents such as cisplatin, doxorubicin, carboplatin and
vincristine. Due to the fact that existing injectable chemotherapeutic agents have been formulated for humans and have not been
optimized for animals, combined with broad acceptance of their anti-cancer effect, we believe that our intravenous chemotherapy
labeled specifically for use in dogs will be viewed favorably by the veterinary community.
Based on the attributes of XR17, we believe
that there is a significant commercial opportunity to apply our proprietary formulation technology within veterinary oncology to
enable the safe delivery of well-established chemotherapeutics, approved for the first time specifically for animal use.
Competition
Our industry is highly competitive and subject
to rapid and significant technological change. While we have significant development experience and scientific knowledge, we may
face competition from both large and small pharmaceutical and biotechnology companies, including specialty pharmaceutical and veterinary
pharmaceutical companies and generic drug companies, as well as academic institutions, government agencies and research institutions,
among others.
Our competition will be determined in part
by the potential indications for which our products are developed and ultimately approved by regulatory authorities. It is likely
that the timing of market introductions of some of our potential products or our competitors’ products will be an important
competitive factor. Accordingly, the speed with which we can develop our compounds, conduct preclinical studies and clinical trials
to obtain approval and manufacture or obtain supplies of commercial quantities of any approved products should also be important
competitive factors. We expect that competition among products approved for sale will be based on additional factors, such as product
efficacy, safety, reliability, availability, price and patent position.
Human Health
We believe that Apealea will compete, directly
or indirectly, with Bristol-Myers Squibb’s Taxol and its generic equivalents, Celgene’s Abraxane and other cancer therapies,
including alternative formulations of paclitaxel, or other chemotherapeutic agents, that have been or are being developed by other
pharmaceutical and biotechnology companies.
Animal Health
We expect that Doxophos Vet will face competition
from Tanovea™-CA1 (Rabacfosadine) by VetDC, a novel acyclic nucleotide analog conditionally approved for naïve and relapsed/refractory
lymphoma could be a potential competitor to Doxophos Vet.
We believe Paccal Vet will face competition
from Palladia, made by Zoetis, Inc., and Masivet, made by AB Science S.A. Masivet was conditionally approved by the FDA but lost
its approval in December 2015; nonetheless, Masivet might return to the market.
Since the development and commercialization
of new veterinary medicines is highly competitive, we expect considerable competition from major pharmaceutical, biotechnology
and specialty animal health companies. We are also aware of several smaller early stage companies that are developing products
for use in the pet therapeutics market.
Strategic Alliances and Collaborations
We have entered into three separate agreements
with established pharmaceutical companies for our products. Each agreement provides the pharmaceutical company with an exclusive
right in a defined geographic territory to market one or more products in all indications. In return, we receive royalty payments
or a profit participation, as well as milestone payments, and we retain the exclusive right with respect to the manufacture and
supply of the product during the commercial life of the product. The various agreements generally are terminable upon a material
breach or insolvency of either of the parties. Under all of the agreements, we supply the products at an agreed upon formula related
to our production cost (subject to annual adjustment) and the pharmaceutical company establishes the price at which the products
are sold in the territory.
Nippon Zenyaku Kogyo, Japan
We entered into a development, supply and exclusive
license agreement with Nippon Zenyaku Kogyo, Co. Ltd. (“Nippon”) in April 2010 (the “Nippon Agreement”).
The Nippon Agreement grants Nippon the exclusive right to market Paccal Vet in Japan. The initial term of the Nippon Agreement
is the later to occur of (i) 10 years from the date of the Nippon Agreement, or (ii) upon the expiration of the patent rights granted
under the Nippon Agreement. Nippon is solely responsible for all sales and marketing costs as well as the requisite clinical trials
in order to obtain marketing approval for Paccal Vet in Japan.
We receive royalties of (i) 27% of Nippon’s
gross profits for net sales up to $7.5 million and (ii) 36% of Nippon’s gross profits for net sales above $7.5 million. The
Nippon Agreement also includes various milestone payments, the first of which, €0.55 million, we received upon entering into
the Nippon Agreement. The remaining milestone payments are payable upon our achieving certain marketing approvals and net sales
thresholds, including €0.7 million upon marketing authorization, €1.0 million when annual net sales reach $7.5 million
and €1.0 million when annual net sales reach $12.5 million. We may be required to repay the first milestone payment if marketing
approval cannot be obtained or if we are guilty of a breach of contract that results in the termination of the Nippon Agreement
or the withdrawal of the product from the market. We may also be liable to compensate Nippon for costs incurred in relation to
obtaining marketing approval.
We are responsible to Nippon for maintaining
the quality of the product, but Nippon is solely responsible for pharmacovigilance. The Nippon Agreement may be terminated by either
party if the other party commits a material breach or becomes insolvent. In the event that the Nippon Agreement is terminated,
regardless of which party terminates the agreement and the grounds for termination, the marketing approval, if received in Japan,
will be transferred to us.
Medison Pharma, Israel
We entered into a supply and exclusive license
agreement with Medison Pharma, Ltd. (“Medison”) in May 2011 (the “Medison Agreement”). The Medison Agreement
grants Medison exclusive license and distribution rights for Apealea in Israel and Turkey. The initial term of the Medison Agreement
is (i) ten years from the first commercial sale of Apealea in Israel or Turkey, or (ii) the expiration of our patent rights granted
under the Medison Agreement, whichever occurs later. The Medison Agreement provides that Medison will use its commercially reasonable
best efforts to launch Apealea in Israel and Turkey within six months of Apealea obtaining marketing authorization, and will assume
sole responsibility for sales and marketing costs. We are responsible under the Medison Agreement for obtaining marketing approval
for Apealea in Israel and Turkey, while Medison is responsible for obtaining reimbursement approval.
Medison has agreed to purchase specified, minimum
quantities of Apealea once all approvals have been obtained. Should the minimum purchase requirements not be met, we have the right
to terminate exclusivity. We receive royalties of (i) 25% of Medison’s net sales for net sales up to €7.5 million and
(ii) 30% of Medison’s net sales for net sales above €7.5 million. The Medison Agreement also includes milestone payments,
the first of which, €0.2 million, we received upon entering into the Medison Agreement, and the second of which, €0.1
million, we are entitled to receive upon the grant of marketing authorization by the European Commission.
We are responsible under the Medison Agreement
to maintain the quality of the product, but Medison is solely responsible for pharmacovigilance. The Medison Agreement may be terminated
by us if Medison fails to launch Apealea in Israel and Turkey within six months of Apealea obtaining marketing authorization. The
Medison Agreement may also be terminated by either party if the other party fails to remedy a material breach or becomes insolvent.
Hetero Group, Russia and CIS
We entered into a supply and exclusive marketing,
sales and distribution agreement with the Indian generic pharmaceutical company Hetero Labs LTD in June 2017 (the “Hetero
Agreement”), which is substantially similar to the previous Pharmasyntez Agreement which was replaced by the Hetero Agreement.
The Hetero Agreement grants Hetero exclusive license and distribution rights for Paclical (Apealea) in Russia and the CIS, as well
as Ukraine, Georgia and Turkmenistan. The initial term of the Hetero Agreement expires after five (5) years from its inception,
with an opportunity to agree on a two (2) year prolongation twelve (12) months before expiration. Hetero has sole responsibility
under the Hetero Agreement for sales and marketing costs in Russia and the CIS. We are responsible for obtaining registration approval
in Russia, including performing any clinical research required to market Paclical. The agreement also contains an option for Hetero
Group that the products Doxophos and Docecal shall be encompassed by the agreement. Hetero Group is responsible for the costs of
marketing approval and sales.
Hetero has agreed to purchase specified minimum
quantities of Paclical, and should the minimum purchase requirements not be met, we have the right to terminate exclusivity. The
Hetero Agreement contains rights to milestone payments for Oasmia in the amount of maximum $300,000 and Oasmia also has the right
to a certain share of the net profit from sales made under the Agreement. The Company is also responsible for ensuring that the
product meets the agreed quality level and pharmacovigilance.
The Hetero Agreement provides that all profits
from the sale of Paclical in Russia and the CIS be split evenly between us and Hetero. The Hetero Agreement defines profits as
net sales minus (i) our supply price (which are our production costs, subject to annual adjustment) and (ii) Hetero’s distribution
costs. We are liable to Hetero for maintaining the quality of the product and for pharmacovigilance.
The Hetero Agreement may be terminated by either
party if the other party commits a material breach, becomes insolvent or files for bankruptcy. In the event the Hetero Agreement
is terminated, regardless the reason therefor and regardless of which party terminates the agreement and the grounds for termination,
the marketing approvals obtained in any of the marketing areas shall be transferred to us.
Sales- and marketing approval was obtained
in Russia in April 2015. The first shipment of products to the previous license and distributor Pharmasyntez was delivered at the
end of the same year. Paclical was entered into the Russian reimbursement system in January 2016. Russia is divided into more than
50 hospital regions. Purchases of pharmaceuticals in the Russian hospital regions are carried out through tender offers annually
or on half-year basis depending on the region.
Acquisition of KB9520 from Karo Pharma
In November 2016, the Company acquired the
substance KB9520 from Karo Pharma for SEK 25 million. The purchase price was paid with 3,080,000 newly issued shares at a price
of approximately SEK 8.12 per share. According to the acquisition agreement, in addition to the purchase price, the Company will
pay a future royalty payment of 20 per cent of all of its future revenue generated from the product.
Intellectual Property
Our success depends in significant part on
our ability to protect the proprietary nature of XR17, our product and product candidates, technology and know-how, to operate
without infringing on the proprietary rights of others, and to prevent others from infringing on our proprietary rights. We have
sought, and plan to continue to seek, patent protection in the U.S., the EU and other countries for our proprietary technologies.
Our intellectual property portfolio consists of our trademark-protected product Paccal Vet and our product candidates Paclical,
Paccal Vet, Docecal, Doxophos Vet, Doxophos and KB9520. All of these drugs (except for KB9520) are based on our excipient model
developed with nanotechnology and are protected by patents in all countries which we consider to be of commercial interest. In
the U.S., we already have 13 issued patents with one further pending patent application under active prosecution. All of our patents
are part of one or more of twelve different patent families. A patent family is a collection of patents and patent applications,
regional and national, which cover an invention or a group of related inventions.
See below for information regarding the patent
families currently used in our product and product candidates.
Patent family
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Products
patent family
applies to
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Status
(US)
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Status
(EU
1
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Status
(Japan)
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Status
(Israel)
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Status
(Eurasia)
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Expiration
date
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Taxol containing compositions
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Paccal Vet, Paclical
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Granted
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Granted
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Granted
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2022
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Anticancer compositions
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Paccal Vet, Paclical, Docecal, Doxophos
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Granted
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Granted
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—
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|
—
|
|
2022
|
Water insoluble
|
|
Paccal Vet, Paclical, Docecal
|
|
Granted
|
|
Pending
|
|
Granted
|
|
—
|
|
Granted
|
|
2028
|
Water soluble
|
|
Doxophos Vet, Doxophos
|
|
Granted
|
|
Granted
|
|
Granted
|
|
—
|
|
Granted
|
|
2028
|
Tax-Dox-Mix
|
|
OAS-19
|
|
Granted
|
|
Pending
|
|
Granted
|
|
—
|
|
Granted
|
|
2028
|
XMeNa Process
2
|
|
Paccal Vet, Paclical, Docecal, Doxophos
|
|
Pending
|
|
Pending
|
|
Pending
|
|
—
|
|
Pending
|
|
2036
|
KB9520 substance
|
|
KB9520
|
|
Granted
|
|
Granted
|
|
Granted
|
|
—
|
|
Granted
3
|
|
2029
|
KB9520 in mesothelioma
|
|
KB9520
|
|
Granted
|
|
—
|
|
—
|
|
—
|
|
—
|
|
2034
|
1
: European
patent nationalized at least in Germany, France and the UK
2
: PCT application
granted; nationalizations pending or in preparation
3
: Russia
only
Our strategy for intellectual property rights
is intended to protect our core technologies and their application. Our protection for intellectual property rights is continually
monitored and is currently considered to be satisfactory. We are to a large extent dependent on our patents.
The term of individual patents depends upon
the countries in which they are obtained. In most countries in which we have filed, the patent term is 20 years from the date of
filing. In the U.S., a patent’s term may be lengthened by patent term adjustment, which compensates a patentee for administrative
delays by the U.S. Patent & Trademark Office (“PTO”) in granting a patent, or shortened if a patent is terminally
disclaimed over another patent.
The term of a patent that covers an FDA-approved
drug may also be eligible for extension, which permits term restoration as compensation for the time period lost during the FDA
regulatory review process. The Drug Price Competition and Patent Term Restoration Act of 1984, also known as the Hatch-Waxman Act,
permit an extension of up to five years beyond the expiration of the patent. See “— Regulatory.” The length
of the patent term extension is related to the length of time the drug is under regulatory review. Extensions cannot extend the
remaining term of a patent beyond 14 years from the date of product approval and only one patent applicable to an approved drug
may be extended. Similar provisions to extend the term of a patent that covers an approved drug are available in Europe and other
non-U.S. jurisdictions. In the future, if and when our pharmaceutical product candidates receive FDA approval, we may apply for
extensions on patents covering those products.
To protect our rights to any of our issued
patents and proprietary information, we may need to litigate against infringing third parties, avail ourselves of the courts or
participate in hearings to determine the scope and validity of those patents or other proprietary rights. For a more comprehensive
summary of the risks related to our intellectual property, see “Risk Factors — Risks Related to Our Intellectual
Property.”
We require our employees, consultants, outside
scientific collaborators, researchers and other advisors to execute confidentiality agreements upon the commencement of employment
or consulting relationships with us. In addition, our employment agreements with all of our employees expressly grant us the exclusive
rights to any inventions or other patentable material they produce in connection with their employment with us. Swedish law provides
that (i) we own the exclusive intellectual property rights to any inventions or other patentable material produced by any of our
research and development employees in connection with their employment, and (ii) we own non-exclusive rights to use any inventions
or other patentable material produced by any of our other employees in connection with their employment, along with a right of
first refusal if the employee were to attempt to sell exclusive rights to the invention or other patentable material. Accordingly,
if an employee were to seek to enforce a claim to any of our patents, we would either own the exclusive rights in the patent already
or have the right to purchase such rights from the employee. We also rely on trademarks, trade secrets, know-how and continuing
innovation to develop our competitive position. In addition, we have a number of domain names registered, including oasmia.se and
oasmia.com.
Manufacturing and Supplies
We are responsible for the manufacture and
supply of our products for commercial and clinical trial purposes. On December 3, 2013, we announced that we have successfully
passed an FDA Pre-Approval Inspection of our manufacturing facility in Uppsala, Sweden. We have entered into agreements with contract
manufacturers, to help us meet the anticipated demand for our products and XR17 excipient.
On May 14, 2014, the Swedish Medicinal Products
Agency had approved Oasmia’s production facility concerning manufacture for sales of human pharmaceuticals in the EU. Oasmia
has previously a GMP license for veterinary pharmaceuticals. Thus, Oasmia presently has a fully approved production facility for
manufacture of cytostatics for the EU market.
In May 2018 the facilities were inspected with
no major remarks by the Ministry of Industry and Trade of the Russian Federation.
Baxter Oncology GmbH
We entered into a non-exclusive commercial
manufacturing and supply agreement with Baxter Oncology GmbH (“Baxter Oncology”) in February 2011 (the “Baxter
Agreement”) which we expect to utilize as manufacturing requirements increase. The Baxter Agreement provides that Baxter
Oncology will be responsible for the production of Paccal Vet and Apealea once the commercial demand reaches a specific level.
Baxter will perform complete analytical testing and release of semi-finished product. Final labeling, packaging and product release
for the market will be performed by Oasmia. The Baxter Agreement was expanded in June 2014 to enable inclusion of other product
candidates from our product portfolio. The Baxter Agreement’s initial term is for five years, with automatic one-year renewals.
The Baxter Agreement may be terminated by either
party if the other party commits a material breach or becomes insolvent.
Syntagon
We entered into a non-exclusive manufacturing
agreement with Syntagon AB (“Syntagon”) in August 2013 (the “Syntagon Agreement”). The Syntagon Agreement
provides that Syntagon will undertake process development and production for the manufacturing of technical batches of XR17. The
manufacturing will be performed with certain process adaptations due to the increased scale. Syntagon may not sub-contract any
activities it is to perform pursuant to the Syntagon Agreement without our prior written approval. Syntagon indemnifies us against
any liability, claim, lawsuit or judgment that we incur due to any defective product or any other breach of the agreement by Syntagon.
The Syntagon Agreement’s initial term
is until December 31, 2018, with automatic one-year renewals. The Syntagon Agreement may be terminated by either party if the other
party fails to cure a breach or becomes insolvent.
Raw Materials
Our most important raw materials are two different
types of retinoic acids, 13 Cis Retinoid Acid and AllTrans Retinoid Acid, and a third compound known as L-Cysteic acid methyl ester.
Both of the retinoic acids are commercially available from numerous suppliers that meet our demands for quality and documentation.
Sigma-Aldrich Production GmbH manufactures L-Cysteic acid methyl ester specifically for us. Prices for the raw materials have not
been affected thus far by any political, environmental, or economic crises.
Commercialization
Human Oncology
We entered into a supply and exclusive marketing,
sales and distribution agreement with the Indian generic pharmaceutical company Hetero in June 2017 (the “Hetero Agreement”).
The Hetero Agreement granted Hetero exclusive license and distribution rights for Paclical (Apealea) in Russia and the CIS, as
well as Ukraine, Georgia and Turkmenistan We may retain some rights to commercialize our product candidates in the U.S. or the
EU, if we receive marketing approval for our product candidates in markets which we believe it is possible to access through a
focused, specialized field force. Outside of the U.S. and Europe, we expect to enter into distribution and other marketing arrangements
with third parties for any of our product candidates that receive marketing approval.
Subject to receiving marketing approvals, we
expect to commence commercialization activities by either entering into regional or global license and commercialization agreements,
or by directly commercializing Apealea ourselves using a targeted sales force to identify key cancer centers to support the launch
of the product. These activities could form the basis of a sales and marketing organization that we will use to market our other
products as they may receive marketing approval.
We have entered into a collaboration agreement
with Medison Pharma for the distribution of Apealea in Israel and Turkey.
Veterinary Oncology
We have entered into commercialization agreements
with Nippon Zenyaku Kogyu, granting commercial rights to Paccal Vet in Japan. We believe that the value of our veterinary oncology
candidates will be enhanced by having at least one large commercial partner, given the nature of the animal health market and the
broad distribution of veterinarians, as well as the fact that there are only a limited number of experienced sales professionals
available, and we have limited experience in developing a sales force.
Facilities
Our office is located in Uppsala, Sweden, where
we lease and occupy six floors of a seven-floor building that encompasses approximately 43,000 square feet. Each floor is leased
separately. The lease for the second floor expires on December 31, 2018, for the fifth floor expires March 31, 2020 and the leases
for the remaining floors expire on December 31, 2019. The leases can be terminated by either party with nine months’ notice,
and any leases that are not terminated are automatically extended for an additional term of three years. The building currently
contains our entire business, including our research, laboratory and cGMP production facilities, as well as our administrative
offices. We also have storage premises in Fyrislund, Uppsala with a lease period until January 31, 2021 and December 31, 2023 respectively.
We believe that our facilities are sufficient to meet our current needs.
Legal Proceedings
We are not a party to any material legal proceedings.
Government Regulation
Clinical trials, the pharmaceutical approval
process, and the marketing of pharmaceutical products, both for animals and for humans, is intensively regulated in the U.S. and
in all major foreign countries.
Human Health Product Regulation in the
U.S.
In the U.S., the FDA regulates pharmaceuticals
under the Federal Food, Drug, and Cosmetic Act (“FDCA”) and related regulations. Pharmaceuticals are also subject to
other federal, state, and local statutes, regulations and ordinances. Failure to comply with applicable U.S. regulatory requirements
at any time during the product development process, approval process or after approval may subject an applicant to administrative
or judicial sanctions. These sanctions could include the imposition by the FDA of an Institutional Review Board (“IRB”),
a clinical hold on trials, a refusal to approve pending applications or supplements, withdrawal of an approval, warning letters,
product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, civil penalties
or criminal prosecution. Any agency or judicial enforcement action could have a material adverse effect on us.
The FDA and comparable regulatory agencies
in state and local jurisdictions impose substantial requirements upon the clinical development, manufacture and marketing of pharmaceutical
products. These agencies and other federal, state and local entities regulate research and development activities and the testing,
manufacture, quality control, safety, effectiveness, labeling, storage, distribution, record keeping, approval, advertising and
promotion of our human and animal health products.
The FDA’s policies may change and additional
government regulations may be enacted that could prevent or delay regulatory approval of Paclical or our other future human health
product candidates or approval of new disease indications or label changes. We cannot predict the likelihood, nature or extent
of adverse governmental regulation that might arise from future legislative or administrative action, either in the U.S. or elsewhere.
Marketing Approval
The process required by the FDA before human
health care pharmaceuticals may be marketed in the U.S. generally involves the following:
|
•
|
nonclinical
laboratory and animal tests;
|
|
•
|
submission
of an IND application which must become effective before clinical trials may begin;
|
|
•
|
adequate
and well-controlled human clinical trials to establish the safety and efficacy of the proposed drug for its intended use or uses;
|
|
•
|
pre-approval
inspection of manufacturing facilities and clinical trial sites; and
|
|
•
|
FDA
approval of an NDA, which must occur before a drug can be marketed or sold.
|
We will need to successfully complete extensive
additional clinical trials in order to be in a position to submit an NDA to the FDA. We must reach agreement with the FDA on the
proposed protocols for our future clinical trials in the U.S. A separate submission to the FDA must be made for each successive
clinical trial to be conducted during product development. Further, an independent IRB for each site proposing to conduct the clinical
trial must review and approve the plan for any clinical trial before it commences at that site, and an informed consent must also
be obtained from each study subject. Regulatory authorities, a data safety monitoring board or the sponsor, may suspend or terminate
a clinical trial at any time on numerous grounds.
Our objective is to conduct additional clinical
trials for Paclical and, if those trials are successful, seek marketing approval from the FDA and other worldwide regulatory bodies.
To achieve this objective, we have completed a Phase III clinical trial of Paclical for the treatment of ovarian cancer, and are
compiling the data from it. If it is successful, we expect to file for marketing approval first in the EU and then in the U.S.
We plan to follow this process also with respect to the other indications that we discuss in this annual report, such as metastatic
breast cancer.
For purposes of NDA approval for human health
products, human clinical trials are typically conducted in phases that may overlap.
|
•
|
Phase I.
The drug is initially introduced into healthy human subjects and tested for safety, dosage tolerance, absorption, metabolism, distribution and excretion. In the case of some products for severe or life-threatening diseases, especially when the product may be too inherently toxic to ethically administer to healthy volunteers, the initial human testing is often conducted in patients.
|
|
•
|
Phase II.
This phase involves trials in a limited subject population to identify possible adverse effects and safety risks conducted in order to preliminarily evaluate the efficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal dosage. Phase II studies may be sub-categorized to Phase IIa studies which are smaller, pilot studies to evaluate limited drug exposure and efficacy signals, and Phase IIb studies which are larger studies testing more rigorously both safety and efficacy.
|
|
•
|
Phase III.
This phase involves trials undertaken to further evaluate dosage, clinical efficacy and safety in an expanded subject population, often at geographically dispersed clinical trial sites. These trials are intended to establish the overall risk/benefit ratio of the product and provide an adequate basis for product labeling.
|
All of these trials must be conducted in accordance
with Good Clinical Practice (“GCP”) requirements in order for the data to be considered reliable for regulatory purposes.
New Drug Applications
In order to obtain approval to market a pharmaceutical
in the U.S., a marketing application must be submitted to the FDA that provides data establishing the safety and effectiveness
of the investigational drug for the proposed indication to the FDA’s satisfaction. Each NDA submission requires a substantial
user fee payment unless a waiver or exemption applies (such as with the Orphan Drug Designation discussed below). The NDA submission
fee for 2017 was $2,038,100, and the manufacturer and/or sponsor under an approved NDA are also subject to annual product and establishment
user fees, currently $97,750 per product and $512,200 per establishment. For 2017 these fees were lowered compared to the previous
two years. The NDA includes all relevant data available from pertinent non-clinical studies and clinical trials, including negative
or ambiguous results as well as positive findings, together with detailed information relating to the product’s chemistry,
manufacturing, controls and proposed labeling, among other things. Data can come from company-sponsored clinical trials intended
to test the safety and effectiveness of a use of a product, or from a number of alternative sources, including studies initiated
by investigators.
The FDA will initially review the NDA for completeness
before it accepts it for filing. The FDA has 60 days from its receipt of an NDA to determine whether the application will be accepted
for filing based on the agency’s threshold determination that the application is sufficiently complete to permit substantive
review. After the NDA submission is accepted for filing, the FDA reviews the NDA to determine, among other things, whether the
proposed product is safe and effective for its intended use, and whether the product is being manufactured in accordance with cGMP
to assure and preserve the product’s identity, strength, quality and purity. The FDA may refer applications for novel drug
products or drug products that present difficult questions of safety or efficacy to an advisory committee, typically a panel that
includes clinicians and other experts, for review, evaluation and a recommendation as to whether the application should be approved
and, if so, under what conditions. The FDA is not bound by the recommendations of an advisory committee, but it considers such
recommendations carefully when making decisions.
Based on pivotal Phase III trial results submitted
in an NDA, upon the request of an applicant, the FDA may grant a Priority Review designation to a product, which sets the target
date for FDA action on the application at six to eight months, rather than the standard ten to twelve months. The FDA can extend
these reviews by three months. Priority review is given where preliminary estimates indicate that a product, if approved, has the
potential to provide a significant improvement compared to marketed products or offers a therapy where no satisfactory alternative
therapy exists. Priority Review designation does not change the scientific/medical standard for approval or the quality of evidence
necessary to support approval.
After the FDA completes its initial review
of an NDA, it will communicate to the sponsor either that the drug will be approved, or that it will issue a complete response
letter to communicate that the NDA will not be approved in its current form and inform the sponsor of changes that must be made
or additional clinical, nonclinical or manufacturing data that must be received before the application can be approved, with no
implication regarding the ultimate approvability of the application.
Before approving an NDA, the FDA will inspect
the facilities at which the product is manufactured, even if such facilities are located overseas. The FDA will not approve the
product unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate
to assure consistent production of the product within required specifications.
Additionally, before approving an NDA, the
FDA may inspect one or more clinical sites to assure compliance with GCP. If the FDA determines that any of the application, manufacturing
process or manufacturing facilities is not acceptable, it typically will outline the deficiencies and often will request additional
testing or information. This may significantly delay further review of the application. If the FDA finds that a clinical site did
not conduct the clinical trial in accordance with GCP, the FDA may determine that if the data generated by the clinical site should
be excluded from the primary efficacy analyses provided in the NDA. Additionally, notwithstanding the submission of any requested
additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval.
The testing and approval process for a drug
requires substantial time, effort and financial resources, and this process may take several years to complete. Data obtained from
clinical activities are not always conclusive and may be susceptible to varying interpretations, which could delay, limit or prevent
regulatory approval. The FDA may not grant approval on a timely basis, or at all. We may encounter difficulties or unanticipated
costs in our efforts to secure necessary governmental approvals, which could delay or preclude us from marketing our products.
The FDA may require, or companies may pursue,
additional clinical trials after a product is approved. These so-called Phase IV studies may be made a condition to be satisfied
for continuing drug approval. The results of Phase IV studies can confirm the effectiveness of a product candidate and can provide
important safety information. In addition, the FDA now has express statutory authority to require sponsors to conduct post-market
studies to specifically address safety issues identified by the agency.
Any approvals that we may ultimately receive
could be withdrawn if required post-marketing trials or analyses do not meet the FDA requirements, which could materially harm
the commercial prospects for Apealea or Paccal Vet.
The FDA also has authority to require a Risk
Evaluation and Mitigation Strategy (“REMS”) from manufacturers to ensure that the benefits of a drug or biological
product outweigh its risks. A sponsor may also voluntarily propose a REMS as part of the NDA submission. The need for a REMS is
determined as part of the review of the NDA. Based on statutory standards, elements of a REMS may include “dear doctor letters,”
a medication guide, more elaborate targeted educational programs, and in some cases restrictions on distribution. These elements
are negotiated as part of the NDA approval, and in some cases if consensus is not obtained until after the Prescription Drug User
Fee Act review cycle, the approval date may be delayed. Once adopted, REMSs are subject to periodic assessment and modification.
Even if a product candidate receives regulatory
approval, the approval may be limited to specific disease states, patient populations and dosages, or might contain significant
limitations on use in the form of warnings, precautions or contraindications, or in the form of onerous risk management plans,
restrictions on distribution, or post-marketing study requirements. Further, even after regulatory approval is obtained, later
discovery of previously unknown problems with a product may result in restrictions on the product or even complete withdrawal of
the product from the market. Delay in obtaining, or failure to obtain, regulatory approval for Apealea, or obtaining approval but
for significantly limited use, would harm our business. In addition, we cannot predict what adverse governmental regulations may
arise from future U.S. or foreign governmental action.
Section 505(b)(2) New Drug Applications
Most drug products obtain FDA marketing approval
pursuant to an NDA or an Abbreviated New Drug Application (“ANDA,” described below under “— The Drug
Price Competition and Patent Term Restoration Act — Orange Book Listing”). A third alternative is a special
type of NDA, commonly referred to as a Section 505(b)(2) NDA, which enables the applicant to rely, in part, on the FDA’s
previous approval of a similar product, or published literature, in support of its application.
Section 505(b)(2) NDAs often provide an alternate
path to FDA approval for new or improved formulations or new uses of previously approved products. Section 505(b)(2) permits the
filing of an NDA where at least some of the information required for approval comes from studies not conducted by or for the applicant
and for which the applicant has not obtained a right of reference. If the Section 505(b)(2) applicant can establish that reliance
on the FDA’s previous approval is scientifically appropriate, it may eliminate the need to conduct certain preclinical or
clinical studies of the new product. The FDA may also require companies to perform additional studies or measurements to support
the change from the approved product. The FDA may then approve the new product candidate for all or some of the label indications
for which the referenced product has been approved, as well as for any new indication sought by the Section 505(b)(2) applicant.
To the extent that the Section 505(b)(2) applicant
relies on studies conducted for an already approved product, the applicant must certify to the FDA concerning any patents listed
for the approved product in the Orange Book to the same extent that an ANDA applicant would. As a result, approval of a Section
505(b)(2) NDA can be delayed until all the listed patents claiming the referenced product have expired, until any non-patent exclusivity,
such as exclusivity for obtaining approval of a new chemical entity, listed in the Orange Book for the referenced product has expired,
and, in the case of a Paragraph IV certification and subsequent patent infringement suit, until the earlier of 30 months, settlement
of the lawsuit or a decision in the infringement case that is favorable to the Section 505(b)(2) applicant.
Disclosure of Clinical Trial Information
Sponsors of clinical trials of certain FDA-regulated
products, including prescription drugs, are required to register and disclose certain clinical trial information on a public website
maintained by the U.S. National Institutes of Health. Although we are not required to register, since our studies are outside of
the U.S., we do so voluntarily. Information related to the product, patient population, phase of investigation, study sites and
investigator, and other aspects of the clinical trial is made public as part of the registration. Sponsors are also obligated to
disclose the results of these trials after completion. Disclosure of the results of these trials can be delayed until the product
or new indication being studied has been approved. Competitors may use this publicly-available information to gain knowledge regarding
the design and progress of our development programs.
Orphan Drug Designation
Under the Orphan Drug Act, the FDA may grant
orphan designation to a drug or biological product intended to treat a rare disease or condition, which is generally a disease
or condition that affects fewer than 200,000 individuals in the U.S., or more than 200,000 individuals in the U.S. and for which
there is no reasonable expectation that the cost of developing and making a drug or biological product available in the U.S. for
this type of disease or condition will be recovered from sales of the product. Orphan Drug Designation is intended to assist and
encourage companies to develop safe and effective therapies for the treatment of rare diseases and disorders. In addition to providing
a seven-year term of market exclusivity upon final FDA approval, Orphan Drug Designation also positions a company to be able to
leverage a wide range of financial and regulatory benefits, including government grants for conducting clinical trials, waiver
of expensive FDA user fees for the potential submission of an NDA, and certain tax credits. Orphan product designation must be
requested before submitting an NDA. After the FDA grants orphan product designation, the identity of the therapeutic agent and
its potential orphan use are disclosed publicly by the FDA. Orphan product designation does not convey any advantage in or shorten
the duration of the regulatory review and approval process.
If a product that has orphan designation subsequently
receives the first FDA approval for the disease or condition for which it has such designation, the product is entitled to orphan
product exclusivity, which means that the FDA may not approve any other applications to market the same drug or biological product
for the same indication for seven years, except in limited circumstances, such as a showing of clinical superiority to the product
with orphan exclusivity. Competitors, however, may receive approval of different products for the indication for which the orphan
product has exclusivity or obtain approval for the same product but for a different indication for which the orphan product has
exclusivity. Orphan product exclusivity also could block the approval of a product for seven years if a competitor obtains approval
of the same drug or biological product as defined by the FDA or if the drug or biological candidate is determined to be contained
within the competitor’s product for the same indication or disease. If a drug or biological product designated as an orphan
product receives marketing approval for an indication broader than what is designated, it may not be entitled to orphan product
exclusivity. Orphan drug status in the EU has similar but not identical benefits in the EU.
We have been granted Orphan Drug Designation
for Apealea for the treatment of epithelial ovarian cancer in the U.S.
The Drug Price Competition and Patent Term
Restoration Act
The Drug Price Competition and Patent Term
Restoration Act, also known as the Hatch-Waxman Act, requires pharmaceutical companies to divulge certain information regarding
their products which have the effect of making it easier for other companies to manufacture generic drugs to compete with those
products.
Orange Book Listing.
In
seeking approval for a drug through an NDA, applicants are required to list with the FDA each patent whose claims cover the applicant’s
product. Upon approval of a drug, each of the patents listed in the application for the drug is then published in the FDA’s
Approved Drug Products with Therapeutic Equivalence Evaluations, commonly known as the Orange Book. Drugs listed in the Orange
Book can, in turn, be cited by potential generic competitors in support of approval of an ANDA. An ANDA provides for marketing
of a drug product that has the same active ingredients in the same strengths and dosage form as the listed drug and has been shown
through bioequivalence testing to be therapeutically equivalent to the listed drug. Other than the requirement for bioequivalence
testing, ANDA applicants are not required to conduct, or submit results of pre-clinical or clinical tests to prove the safety or
effectiveness of their drug product. Drugs approved in this way are commonly referred to as “generic equivalents” to
the listed drug, and can often be substituted by pharmacists under prescriptions written for the original listed drug.
The ANDA applicant is required to certify to
the FDA any patents listed for the approved product in the FDA’s Orange Book. Specifically, the applicant must certify that:
(i) the required patent information has not been filed; (ii) the listed patent has expired; (iii) the listed patent has not expired,
but will expire on a particular date and approval is sought after patent expiration; or (iv) the listed patent is invalid or will
not be infringed by the new product. The ANDA applicant may also elect to submit a section viii statement, certifying that its
proposed ANDA label does not contain (or carves out) any language regarding the patented method-of-use, rather than certify to
a listed method-of-use patent.
If the applicant does not challenge the listed
patents, the ANDA application will not be approved until all the listed patents claiming the referenced product have expired.
A certification that the new product will not
infringe on the already approved product’s listed patents, or that such patents are invalid, is called a Paragraph IV certification.
If the ANDA applicant has provided a Paragraph IV certification to the FDA, the applicant must also send notice of the Paragraph
IV certification to the NDA and patent holders once the ANDA has been accepted for filing by the FDA. The NDA and patent holders
may then initiate a patent infringement lawsuit in response to the notice of the Paragraph IV certification. The filing of a patent
infringement lawsuit within 45 days of the receipt of a Paragraph IV certification automatically prevents the FDA from approving
the ANDA until the earlier of 30 months, expiration of the patent, settlement of the lawsuit, or a decision in the infringement
case that is favorable to the ANDA applicant.
The ANDA application also will not be approved
until any applicable non-patent exclusivity listed in the Orange Book for the referenced product has expired.
Exclusivity.
Upon NDA approval
of a New Chemical Entity (“NCE”), which is a drug that contains no active moiety that has been approved by the FDA
in any other NDA, that drug receives five years of marketing exclusivity during which time the FDA cannot receive any ANDA seeking
approval of a generic version of that drug. Certain changes to a drug, such as the addition of a new indication to the package
insert, are associated with a three-year period of exclusivity during which the FDA cannot approval an ANDA for a generic drug
that includes the change.
An ANDA may be submitted one year before NCE
exclusivity expires if a Paragraph IV certification is filed. If there is no listed patent in the Orange Book, there may not be
a Paragraph IV certification, and, thus, no ANDA may be filed before the expiration of the exclusivity period.
Patent Term Extension.
After
NDA approval, owners of relevant drug patents may apply for up to a five-year patent extension. The allowable patent term extension
is calculated as half of the drug’s testing phase — the time between IND submission and NDA submission — and
all of the review phase — the time between NDA submission and approval up to a maximum of five years. The time
can be shortened if FDA determines that the applicant did not pursue approval with due diligence. The total patent term after the
extension may not exceed 14 years.
For patents that might expire during the application
phase, the patent owner may request an interim patent extension. An interim patent extension increases the patent term by one year
and may be renewed up to four times. For each interim patent extension granted, the post-approval patent extension is reduced by
one year. The director of the PTO must determine that approval of the drug covered by the patent for which a patent extension is
being sought is likely. Interim patent extensions are not available for a drug for which an NDA has not been submitted.
Environmental Regulations.
The
U.S. generally requires an environmental assessment, which discusses a company’s proposed action, possible alternatives to
the action, and whether the further analysis of an environmental impact statement is necessary. Certain exemptions are available
from the requirement to perform an environmental assessment and an environmental impact statement. Once an exemption is claimed,
a company must state to the FDA that no extraordinary circumstances exist that may significantly affect the environment. We will
claim an exemption, under the category for biologic products, from the requirement to provide an environmental assessment and an
environmental impact statement for Apealea, and will furthermore state to the FDA that to our knowledge, no extraordinary circumstances
exist that may significantly affect the environment.
FDA Post-Approval Requirements
Following the approval of an NDA, the FDA continues
to require adverse event reporting and submission of periodic reports. The FDA also may require post-marketing testing, known as
Phase IV testing, REMS, and surveillance to monitor the effects of an approved product, or the FDA may place conditions on an approval
that could restrict the distribution or use of the product. In addition, quality control, drug manufacture, packaging, and labeling
procedures must continue to conform to cGMP after approval. Drug manufacturers and certain of their subcontractors are required
to register their establishments with FDA and certain state agencies. Registration with the FDA subjects entities to periodic unannounced
inspections by the FDA, during which the agency inspects manufacturing facilities to assess compliance with cGMP. Accordingly,
manufacturers must continue to expend time, money and effort in the areas of production and quality control to maintain compliance
with cGMP. Regulatory authorities may withdraw product approvals or request product recalls if a company fails to comply with regulatory
standards, if it encounters problems following initial marketing, or if previously unrecognized problems are subsequently discovered.
Patient Protection and Affordable Health
Care Act
In March 2010, the Patient Protection and Affordable
Health Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively, “PPACA”), was
enacted, which includes measures that have or will significantly change the way health care is financed by both governmental and
private insurers. The fees, discounts and other provisions of this law have a significant negative effect on the profitability
of pharmaceuticals.
Human Health Product Regulation in the
European Union
In addition to regulations in the U.S., we
are and will be subject, either directly or through our distribution partners, to a variety of regulations in other jurisdictions
governing, among other things, clinical trials and any commercial sales and distribution of our products, if approved.
Whether or not we obtain FDA approval for a
product, we must obtain the requisite approvals from regulatory authorities in non-U.S. countries prior to the commencement of
clinical trials or marketing of the product in those countries. Certain countries outside of the U.S. have a process that requires
the submission of a clinical trial application prior to the commencement of human clinical trials. In Europe, for example, a Clinical
Trial Application (“CTA”) must be submitted to the competent national health authority and to independent ethics committees
in each country in which a company intends to conduct clinical trials. Once the CTA is approved in accordance with a country’s
requirements, clinical trial development may proceed in that country.
The requirements and process governing the
conduct of clinical trials, product licensing, pricing and reimbursement vary from country to country, even though there is already
some degree of legal harmonization in the EU Member States resulting from the national implementation of underlying EU legislation.
In all cases, the clinical trials are conducted in accordance with GCP and other applicable regulatory requirements.
To obtain regulatory approval of an investigational
drug under EU regulatory systems, we must submit a marketing authorization application. This application is similar to the NDA
in the U.S., with the exception of, among other things, country-specific document requirements. Drugs can be authorized in the
EU by using (i) the centralized authorization procedure, (ii) the mutual recognition procedure, (iii) the decentralized procedure
or (iv) national authorization procedures.
The EMA implemented the centralized procedure
for the approval of human drugs to facilitate marketing authorizations that are valid throughout the EU. This procedure results
in a single marketing authorization granted by the European Commission that is valid across the EU, as well as in Iceland, Liechtenstein
and Norway (the “European Community”). The centralized procedure is compulsory for human drugs that are: (i) derived
from biotechnology processes, such as genetic engineering, (ii) contain a new active substance indicated for the treatment of certain
diseases, such as HIV/AIDS, cancer, diabetes, neurodegenerative diseases, autoimmune and other immune dysfunctions and viral diseases,
(iii) officially designated orphan drugs, and (iv) advanced-therapy medicines, such as gene-therapy, somatic cell-therapy or tissue-engineered
medicines. The centralized procedure may at the request of the applicant also be used for human drugs which do not fall within
the above mentioned categories if the human drug (a) contains a new active substance which, on the date of entry into force of
Regulation (EC) No. 726/2004, was not authorized in the European Community; or (b) the applicant shows that the medicinal product
constitutes a significant therapeutic, scientific or technical innovation or that the granting of authorization in the centralized
procedure is in the interests of patients or animal health at European Community level.
Under the centralized procedure in the EU,
the maximum timeframe for the evaluation of a MAA by the EMA is 210 days, though the date count stops whenever the Committee for
Medicinal Products for Human Use (“CHMP”) asks the applicant for additional written or oral information, with adoption
of the actual marketing authorization by the European Commission thereafter. Accelerated evaluation might be granted by the CHMP
in exceptional cases, as when a medicinal product is expected to be of a major public health interest from the point of view of
therapeutic innovation, defined by three cumulative criteria: (i) the seriousness of the disease to be treated; (ii) the absence
of an appropriate alternative therapeutic approach; and (iii) anticipation of exceptional high therapeutic benefit. In this circumstance,
EMA ensures that the evaluation for the opinion of the CHMP is completed within 150 days and the opinion issued thereafter. We
submitted an application for marketing authorization for Apealea in the first half of 2016.
The Mutual Recognition Procedure (“MRP”),
for the approval of human drugs is an alternative approach to facilitate individual national marketing authorizations within the
EU. Basically, the MRP may be applied for all human drugs for which the centralized procedure is not obligatory. The MRP is applicable
to the majority of conventional medicinal products, and is based on the principle of recognition of an already existing national
marketing authorization by one or more Member States.
The characteristic of the MRP is that the procedure
builds on an already existing marketing authorization in a Member State of the EU that is used as reference in order to obtain
marketing authorizations in other EU Member States. In the MRP, a marketing authorization for a drug already exists in one or more
Member States of the EU and subsequently marketing authorization applications are made in other EU Member States by referring to
the initial marketing authorization. The Member State in which the marketing authorization was first granted will then act as the
reference Member State. The Member States where the marketing authorization is subsequently applied for act as concerned Member
States.
The MRP is based on the principle of the mutual
recognition by EU Member States of their respective national marketing authorizations. Based on a marketing authorization in the
reference Member State, the applicant may apply for marketing authorizations in other Member States. In such case, the reference
Member State shall update its existing assessment report about the drug in 90 days. After the assessment is completed, copies of
the report are sent to all Member States, together with the approved summary of product characteristics, labeling and package leaflet.
The concerned Member States then have 90 days to recognize the decision of the reference Member State and the summary of product
characteristics, labeling and package leaflet. National marketing authorizations shall be granted within 30 days after acknowledgement
of the agreement.
Should any Member State refuse to recognize
the marketing authorization by the reference Member State, on the grounds of potential serious risk to public health, the issue
will be referred to a coordination group. Within a timeframe of 60 days, Member States shall, within the coordination group, make
all efforts to reach a consensus. If this fails, the procedure is submitted to an EMA scientific committee for arbitration. The
opinion of this EMA Committee is then forwarded to the Commission for the start of the decision making process. As in the centralized
procedure, this process entails consulting various European Commission Directorates General and the Standing Committee on Human
Medicinal Products or Veterinary Medicinal Products, as appropriate.
Human Health Product Regulation in the
Rest of World
For other countries outside of the EU, such
as countries in Eastern Europe or Asia, the requirements governing the conduct of clinical trials, product licensing, pricing and
reimbursement vary from country to country. In all cases, again, the clinical trials are conducted in accordance with GCP and the
other applicable regulatory requirements. We submitted an application for marketing approval for Paclical in Russia, and received
approval on April 20, 2015.
After up-coming discussions with FDA and EMA,
we might initiate a new Phase III clinical trial of Docecal for the treatment of metastatic breast cancer. Based on existing pivotal
trials, we expect to file for marketing approval in Russia in 2018.
If we fail to comply with applicable foreign
regulatory requirements, we may be subject to, among other things, fines, suspension of clinical trials, suspension or withdrawal
of regulatory approvals, product recalls, seizure of products, operating restrictions and criminal prosecution.
Animal Health Product Regulation in the
U.S.
Three federal regulatory agencies regulate
the health aspects of animal health products in the U.S.: the FDA, the United States Department of Agriculture (the “USDA”)
and the Environmental Protection Agency (the “EPA”).
The Center for Veterinary Medicine at the FDA
(“CVM”) regulates animal pharmaceuticals under the Food, Drug and Cosmetics Act. The USDA Center for Veterinary Biologics
regulates veterinary vaccines and some biologics pursuant to the Virus, Serum, Toxin Act. The EPA regulates veterinary pesticides
under the Federal Insecticide, Fungicide and Rodenticide Act. Many topical products used for treatment of flea and tick infestations
are regulated by the EPA.
Our product and all of our current animal health
product candidates are animal pharmaceuticals regulated by the CVM. Manufacturers of animal health pharmaceuticals, including us,
must show their products to be safe, effective and produced by a consistent method of manufacture. The CVM’s basis for approving
a drug application is documented in a Freedom of Information Summary. We will be required to conduct post-approval monitoring of
products and to submit reports of product quality defects, adverse events or unexpected results to the CVM’s Surveillance
and Compliance group.
To begin the development process for our products
in the U.S., we will establish an INAD file with the CVM. We will then hold a pre-development meeting with the CVM to reach a general
agreement on the plans for providing the data necessary to fulfill requirements for a New Animal Drug Application (“NADA”).
During development, we will submit pivotal protocols to the CVM for review and concurrence prior to conducting the required studies.
We will gather and submit data on manufacturing, safety and effectiveness to the CVM for review, and this review will be conducted
according to timelines specified in the Animal Drug User Fee Act. Once all data have been submitted and reviewed for each technical
section — safety, effectiveness and Chemistry, Manufacturing and Controls (“CMC”) — the
CVM will issue to us a technical section complete letter as each section review is completed, and when all three letters have been
issued, we will compile the Freedom of Information Summary, the proposed labeling, and all other relevant information, and submit
these as an administrative NADA for CVM review. Generally, if there are no deficiencies in the submission, the NADA will be issued
within four to six months after the submission of the administrative NADA. After approval, we will be required to collect reports
of any adverse events and submit them to the CVM on a regular basis.
Animal Health Product Regulation in the
European Union
The EMA regulates the scientific evaluation
of medicines developed by pharmaceutical companies for use in the EU. Its veterinary review section is distinct from the review
section for human pharmaceuticals mentioned previously. The Committee for Medicinal Products for Veterinary Use (the “CVMP”),
is responsible for scientific review of the submissions for animal pharmaceuticals and vaccines but the EMA makes the final decision
on the approval of products. Once a centralized marketing authorization is granted by the EMA, it is valid in all EU and European
Economic Area-European Free Trade Association states. In general, the requirements for regulatory approval of an animal health
product in the EU are similar to those in the U.S., requiring demonstrated evidence of purity, safety, efficacy and consistency
of manufacturing processes.
The EMA is responsible for coordinating scientific
evaluation of applications for marketing approval for pet therapeutics in the EU. To perform these evaluations the EMA established
a specific scientific committee called the CVMP, which considers applications submitted by companies for the marketing approval
of individual pet therapeutics and evaluates whether or not the medicines meet the necessary quality, safety and efficacy requirements.
Assessments conducted by the CVMP are based on scientific criteria and are intended to ensure that pet therapeutics reaching the
marketplace have a positive benefit-risk balance in favor of the pet population for which they are intended. Based on the CVMP’s
recommendation, a centralized marketing authorization is granted by the EMA, which allows the product to be marketed in any of
the EU states. The CVMP is also responsible for various post-authorization and maintenance activities, including the assessment
of modifications or extensions to an existing marketing authorization.
To obtain authorization from the EMA, we must
submit a marketing authorization application called a dossier. The dossier is the EMA’s equivalent of the FDA’s NADA
and includes data from studies showing the quality, safety and efficacy of the product. The CVMP reviews and evaluates the dossier.
For any dossier, a rapporteur and co-rapporteur are appointed from the members of the CVMP. Their role is to lead the scientific
evaluation and prepare the assessment report. The rapporteur can utilize experts to assist it in performing its assessment. The
report is critiqued by the co-rapporteur and other members of the CVMP before the CVMP makes its determination. The final opinion
of the CVMP is generally given within 210 days of the submission of a dossier.
Animal Health Product Regulation in the
Rest of World
Each other country has its own regulatory requirements
for approving and marketing veterinary pharmaceuticals. Many country-specific regulatory laws contain provisions that include requirements
for labeling, safety, efficacy and manufacturers’ quality control procedures to assure the consistency of the products, as
well as company records and reports. With the exception of the EU, the regulatory agencies of most other countries generally refer
to the FDA, USDA, EMA, and other international animal health entities, including the World Organization for Animal Health and the
Codex Alimentarius Commission, in establishing standards and regulations for veterinary pharmaceuticals and vaccines.
Requirements for Approval of Veterinary
Pharmaceuticals for Pets
As a condition to regulatory approval for sale
of animal products, regulatory agencies worldwide require that a product used for pets is demonstrated to be:
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•
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be safe for the intended use in the intended species;
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•
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have substantial evidence of effectiveness for the intended use;
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•
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have a defined manufacturing process that ensures that the product can be made with high quality consistency; and
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•
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be safe for humans handling the product and for the environment.
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Safe for the intended use.
To
determine whether a new veterinary drug is safe for use, regulatory bodies will require us to provide data from a safety study
generated in laboratory dogs and cats tested at doses higher than the intended label dose, over a period of time determined by
the intended length of dosing of the product. In the case of the CVM, the design and review of the safety study and the study protocol
are completed prior to initiation of the study to help assure that the data generated will meet FDA requirements. These studies
are conducted under rigorous quality control, including Good Laboratory Practice, to assure integrity of the data. They are designed
to clearly define a safety margin, identify any potential safety concerns, and establish a safe dose for the product. This dose
and effectiveness is then evaluated in the pivotal field effectiveness study where the product is studied in the animal patient
population in which the product is intended to be used. Field safety data, obtained in a variety of breeds and animals kept under
various conditions, are evaluated to assure that the product will be safe in the target population. Safety studies are governed
by regulations and regulatory pronouncements that provide the parameters of required safety studies and are utilized by regulatory
bodies in the U.S., the EU and Japan.
Effectiveness for the intended use.
Early pilot studies may be done in laboratory dogs or cats to establish effectiveness and the dose range for each product.
Data on how well the drug is absorbed when dosed by different routes and the relationship of the dose to the effectiveness are
studied. When an effective dose is established, a study protocol to test the product in real world conditions is developed prior
to beginning the study. In the case of the CVM, the pivotal effectiveness field study protocol is submitted for review and concurrence
prior to study initiation, to help assure that the data generated will meet requirements.
The pivotal field effectiveness study must
be conducted with the formulation of the product that is intended to be commercialized, and is a multi-site, randomized, controlled
study, generally with a placebo control. To reduce bias in the study, the individuals conducting the assessment are not told which
group is the test group and which is the placebo group. In both the U.S. and the EU, the number of patients enrolled in the pivotal
field effectiveness studies is required to be at least 100 animal subjects treated with the test product and a comparable number
of subjects in the control group that receive the placebo. In many cases, a pivotal field study may be designed with clinical sites
in both the EU and the U.S., and this single study may satisfy regulatory requirements in both the EU and the U.S.
Defined Manufacturing Process.
To
assure that the product can be manufactured consistently, regulatory agencies will require us to provide documentation of the process
by which the API is made and the controls applicable to that process that assure the API and the formulation of the final commercial
product meet certain criteria, including purity and stability. The drug development process is known as Chemistry, Manufacturing
and Controls, or CMC. After a product is approved, we will be required to communicate with the regulatory bodies any changes in
the procedures or manufacturing site. Both API and commercial formulations are required to be manufactured at facilities that practice
cGMP.
Safe for Humans and the Environment.
Certain exemptions are available from the requirement to provide an environmental impact statement for animal health
products. Similar to the process for human health products, once an exemption is claimed, a company must state to the FDA that
no extraordinary circumstances exist that may significantly affect the environment. We have claimed an exemption, under the category
for drugs intended for nonfood animals, from the requirement to provide an environmental impact statement for Paccal Vet, and have
stated to the FDA that to our knowledge, no extraordinary circumstances exist that may significantly affect the human environment.
The FDA agrees with us that the proposed uses of our drug fall within the claimed categorical exemption and it is not aware of
any extraordinary circumstances. Thus, in the U.S. we are not required to perform either an environmental assessment or an environmental
impact statement. For approval in the EU, a risk assessment for potential human exposure will be required.
Labeling, All Other Information, and Freedom
of Information Summary.
We also will be required to submit the intended label for the product, and also any information
regarding additional research that has been conducted with the drug, to the CVM and other regulatory bodies for review. We will
draft, and submit for regulatory review, the Freedom of Information Summary for use in the U.S. This summary outlines the studies
and provides substantial information that CVM uses to assess the drug’s safety and effectiveness and then publishes on its
website.
C. Organizational Structure
As per April 30, 2018, the Group consists of
the parent company Oasmia Pharmaceutical AB and the subsidiaries Oasmia Incentive AB, Qdoxx Pharma AB, AdvaVet, Inc., Oasmia Pharmaceutical
Asia Pacific Limited and Oasmia Rus, Ltd.
Subsidiaries
|
|
Country of
incorporation
|
|
Ownership
|
|
|
Votes
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Qdoxx Pharma AB
|
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Sweden
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|
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100
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%
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|
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100
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%
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Oasmia Incentive AB
*
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Sweden
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|
|
100
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%
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|
|
100
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%
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AdvaVet, Inc.
**
|
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USA
|
|
|
100
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%
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|
|
100
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%
|
Oasmia Pharmaceutical Asia Pacific Limited
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|
Hong Kong
|
|
|
100
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%
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|
|
100
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%
|
Oasmia Rus, Ltd.
|
|
Russia
|
|
|
80
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%
|
|
|
80
|
%
|
*
name changed from Oasmia Animal Health AB
**
name changed from Oasmia Pharmaceutical Inc.
D. Property, Plant and Equipment
See "—B.
Business Overview—Facilities" for a description of our leased premises. Our equipment includes computers, office equipment,
furniture and manufacturing equipment with a net book value at April 30, 2018 and 2017 of TSEK 15,528 and TSEK 18,368, respectively.
Our manufacturing equipment is owned by the Company and placed in Uppsala and in Germany for the use by a Company vendor who provides
contract manufacturing services to the Company. The net book value of our manufacturing equipment at April 30, 2018 was TSEK 13,331
compared to TSEK 15,776 at April 30, 2017. None of our research and manufacturing equipment is leased and there are no liens or
encumbrances on our equipment.
We currently do not
have any material commitments to acquire tangible fixed assets; however, it is possible that we may need to acquire additional
manufacturing equipment in the near-term. It is uncertain at this time what, if any, additional manufacturing equipment we may
need to acquire. The timing and amount of any manufacturing equipment purchases we make in the future will be determined based
on the terms and conditions and Company needs.
ITEM 4A. UNRESOLVED STAFF COMMENTS
Not applicable
ITEM 5. OPERATING AND FINACIAL REVIEW AND PROSPECTS
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
You should read the following discussion
and analysis of our financial condition and results of operations together with our financial statements and the related notes
and other financial information included elsewhere in this annual report. Some of the information contained in this discussion
and analysis or set forth elsewhere in this annual report, including information with respect to our plans and strategy for our
business, includes forward-looking statements that involve risks and uncertainties. You should review the “Risk Factors”
section of this annual report for a discussion of important factors that could cause our actual results to differ materially from
the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
A . Operating Results Overview
Overview
We are a pharmaceutical company focused on
innovative treatments within human and animal oncology. Our product and product candidates utilize a proprietary, nanoparticle
formulation technology that is designed to facilitate the administration of intravenously-delivered active pharmaceutical ingredients,
without the addition of toxic solvents. We believe our formulation may result in improved safety, efficacy and ease of administration
over existing drugs. Our initial development and commercialization efforts are focused on creating novel formulations of well-established
chemotherapeutic drugs that can be used for the treatment of cancer in both humans and companion animals. We have five human oncology
product candidates in pre-clinical and/or clinical development, and two veterinary oncology product candidates. In October 2016,
Oasmia acquired a cancer project from Karo Pharma with promising results in pre-clinical models for a number of different types
of cancer. We disclosed positive Overall Survival results from Phase III study of or lead human product for treatment of ovarian
cancer in the April, 2016. In February 2014, we received conditional approval by the FDA for our initial veterinary oncology product.
However, this conditional approval was withdrawn in in January 2017 in order to investigate another dosage regimen.
Our lead products utilize paclitaxel, the active
ingredient of Taxol and Abraxane, two widely used cancer drugs marketed by Bristol-Myers Squibb and Celgene, respectively. Based
on the potential benefits of our proprietary formulation technology, we are pursuing a strategy to replace the use of existing
paclitaxel-based products in multiple cancers with our novel formulations. Our formulation is currently called Paclical for human
indications, and Paccal Vet for veterinary indications. In the submission of a marketing authorization application (“MAA”)
to the EMA, the name Apealea is used instead of Paclical. We own the global commercial rights to Paclical, excluding Israel, Turkey,
Russia, the Commonwealth of Independent States (“CIS”), Ukraine, Georgia and Turkmenistan. We have licensed the commercial
rights to Paccal Vet for sale in Japan. Paclical received marketing approval in Russia in April 2015, in Kazakhstan in January
2018 and in EU in July 2018. Doxophos received marketing approval in Russia in August 2017.
Since we do not have sales and marketing operations,
we have entered into various licensing and distribution agreements with established pharmaceutical companies to sell Apealea, Paccal
Vet, and our other product candidates. We have entered into an agreement with Hetero Group for the commercialization of Paclical
in Russia and the CIS, as well as Ukraine, Georgia and Turkmenistan, and a separate agreement with Medison Pharma for the commercialization
of Paclical in Israel and Turkey. Furthermore, we have moved all rights for Paccal Vet and Doxophos Vet to our subsidiary in the
USA, AdvaVet Inc. Oasmia has entered into an agreement with Nippon Zenyaku Kogyo for the commercialization of Paccal Vet in Japan.
Paccal Vet is the first injectable chemotherapeutic
agent authorized for marketing for the treatment of squamous cell carcinoma (a cancer occurring in certain cells in the skin and
the lining of other organs) and mammary carcinoma (a cancer occurring in the lining of the milk ducts of the mammary glands) in
dogs. We received conditional approval by the FDA for Paccal Vet for the treatment of mammary carcinoma and squamous cell carcinoma
under the Minor Use and Minor Species (“MUMS”) designation in the U.S. MUMS designation is a status similar to orphan
designation for human drugs, making the sponsor eligible for incentives to support the approval or conditional approval of the
designated drug, including seven years of market exclusivity in the U.S. For a description of the qualifications for Paccal Vet
to receive the MUMS designation, conditional approval and full approval for dogs, see “Business — Overview.”
We withdrew the conditional approval in January 2017 and plan to investigate another dosage regimen.
From our inception through April 30, 2018,
marketing and distribution agreements have yielded net cash of SEK 86.96 million in upfront fees and milestone payments and SEK107.14
million in royalties and sales revenue.
In addition to these partnerships, we will
eventually directly commercialize Paclical ourselves using a targeted sales strategy or find a collaboration partner depending
on our possibility to negotiate satisfactory terms for Oasmia. Currently we retain the rights to commercialize Paclical outside
of Russia, CIS, Turkey and Israel. On November 5, 2015, we announced the final results of a study of a head-to-head pharmacokinetic
comparison between Paclical and Abraxane, which found that the concentration of both total and unbound paclitaxel in plasma was
similar.
We are a newly-commercial stage company with
one product for human use approved for marketing and sale, and given our recent change from development stage to commercial stage,
we have not generated any significant revenue other than milestone payments from our commercial partners. We have incurred significant
net losses since our inception on April 15, 1988. We incurred net losses of SEK 118.01 million, SEK 160.24 million and SEK 141.54
million for the fiscal years ended April 30, 2018, April 30, 2017 and April 30, 2016. These losses have resulted principally from
costs incurred in connection with research and development activities and general and administrative costs associated with our
operations. As of April 30, 2018, we had a deficit accumulated during development stage of SEK 1,009.35 million and cash and cash
equivalents of SEK 15.58 million. We expect to continue to incur operating losses in the near future as we continue our clinical
and preclinical development programs, apply for marketing approval for our product candidates and, subject to obtaining regulatory
approval of our product candidates, establish sales and marketing partnerships in preparation for the potential commercialization
of our product candidates.
Oasmia has two products approved in Russia,
Paclical and Doxophos. These approvals do not yet create a sufficient cash flow for its business. Accordingly, Oasmia continuously
works with various financing alternatives. This work includes entering into discussions with potential partners for licensing of
distribution and sales rights, negotiations with new and existing investors, financiers and lenders and that the Company obtains
enough resources to assure it that forecasted future revenue streams from regions where the Company's products registered are realized.
Available consolidated liquid assets and unutilized
credit facilities as of April 30, 2018 are not sufficient to provide the required capital to pursue the planned activities during
the next 12 months. In light of available financing alternatives and the recent developments in the Company, the Board of Directors
assesses that the prospects for financing of the Company´s operations in the coming year are good. Should funding not be
obtained in sufficient quantities there is a risk that the conditions for continued operation do not exist.
Other than what is disclosed in this annual
report, there are at present no significant trends known to us that are reasonably likely to have a material effect on our financial
situation.
Events after balance sheet date of April
30, 2018
Sale of veterinary business to AdvaVet completed
All veterinary assets have now been sold to
the US-based AdvaVet, Inc. AdvaVet has recruited management and its board of directors is working with several American advisors
to ensure financing, development and commercialization.
Adjustment of terms of loan
The Company, Arwidsro Investment and MGC Capital
have agreed on an extension until September 30, 2018 for payment of the loan made on January 2, 2018. This is so that the Company
will be given time to complete ongoing activities. In all other respects the same terms apply to the loan.
Results from Oasmia Pharmaceutical’s
Phase III study was presented at ASCO annual meeting
Oasmia presented the follow-up results from
the study including 789 patients with platinum-sensitive recurrent ovarian cancer. Patients with disease relapse constitute a group
that could benefit from further treatment options. The study results show that Apealea in combination with carboplatin has a similar
effect as standard treatment with regard to overall survival. The patients in the Apealea group survived for an average of 25.7
months and the patients with standard treatment survived 24.8 months from study start. Also, the time to progression was similar
between the Apealea group and standard treatment group (hazard ratio 0.86 (95% confidence interval: 0.72-1.03) in favor of Apealea).
The results are further strengthened by sub-group analyses in the study showing similar effects.
Orphan Status within the EU
Oasmia withdrew its orphan designation for
Apealea in the EU considering among other facts that the prevalence of the indication ovarian cancer, several times exceed the
limitation which EMA has as a threshold for approving orphan status of pharmaceuticals.
EMA
The Committee for Medicinal Products for Human
Use (CHMP) asked Oasmia to respond to remaining outstanding issues in written form within the standard procedure timeline. Oasmia
responded to these remaining issues on August 21, 2018.
Financial development after balance sheet day
Short-term loans of SEK 26,000 thousand matured on May 31, 2018.
Of this sum, SEK 17,000 thousand has been repaid up until the day of the signing of this Annual Report. The remaining SEK 9,000
thousand has been extended after closing day to September 30, 2018.
Short-term loans of SEK 6,000 thousand matured on June 30, 2018.
These have been extended after closing day to September 30, 2018.
On July 31, 2018 the loan from Nexttobe including interest and
totaling SEK 109,699 thousand matured. This loan has in August 2018 been replaced by loans from a consortium according to previous
communication. These new loans mature on September 30, 2019. Beginning of September 2018, one of the lenders, and warrant holder,
has utilized 8,064,516 warrants for the issue of 8,064,516 new shares, each with a subscription of SEK 3.10 per share, totaling
SEK 25,000 thousand, which will be set off against the loan.
During July 2018 SEK 9,000 thousand of the convertible loan
issued in November 2017 was converted into 2,903,224 new shares. In September 2018 2,857,142 new shares will be issued following
the conversion of convertible instruments from the convertible loan issued in April 2018.
On September 7, 2018 a convertible loan of 32 convertible instruments
at a nominal value of SEK 1,100,000 per instrument, totaling SEK 35,200 thousand, was issued. The conversion rate is SEK 7.70 and
if the loan is fully converted 4,571,424 new shares will be issued. The convertible loan bears an interest of 8 per cent and matures
on September 6, 2019, if not converted earlier.
Trend information
We are currently in an early stage to commercialize
products on the market. Accordingly, any trends within the markets in which we operate are expected to have more direct impact
on our business in the event that we are successful in commercializing Paclical/Apealea and Doxophos.
Over the past few years, there has been increasing
pressure to reduce drug prices in the developed markets as a consequence of political initiatives and regulations aiming to curb
continuous increases in healthcare spending. We expect this trend to continue in the years ahead and accordingly any revenue we
may earn in the future will likely be negatively affected by such political initiatives and regulations. However, we believe spending
in the healthcare industry, as compared to many other industries, is less linked to economic trends. Furthermore, while falling
drug prices in the mature drug markets such as the U.S. and the EU are having a negative impact on general sales growth levels
for the biopharmaceutical industry as a whole in those markets, we expect such sales growth to continue at higher levels in emerging
markets. We also expect that demographic developments, increased treatment penetration, especially in newly established drug markets,
and better diagnostic tools will result in continuing growth in overall global drug sales.
Financial Operations Overview
Net sales.
We generate net
sales pursuant to agreements with our commercial partners. These agreements generally include some of the following sources of
revenue: an initial payment, additional milestone payments dependent upon the achievement of certain clinical, regulatory or commercial
milestones, invoiced supply price for products delivered to commercial partners and royalties on product sales of licensed products
when such product sales occur. Net sales also include amounts earned from the sale of miscellaneous supplies, such as sterile water.
We recognize net sales when the amount earned can be measured in a reliable way and when we have determined it is likely that future
economic benefits will accrue to us and certain criteria have been met, which will vary based on specific contractual arrangements.
Revenue from licensing arrangements and product sales during the fiscal year ended April 30, 2018 amounted to SEK 3,007 thousand
for the fiscal year ended April 30, 2017 amounted to SEK 0 (zero) and for the fiscal year ended April 30, 2016 amounted to SEK
6,077 thousand.
Change in inventory of products in process
and finished goods
Change in inventory of products in process
and finished goods consists of the change in book value of products in process and finished goods and refers to manufacturing of
ordered products which are planned to be sold on the Russian market during the coming months.
Capitalized development cost.
Capitalized
development cost consists of expenditures for materials and services used in development of the intangible asset and employee benefit
expenses for staff engaged in developing the intangible asset. Expenditures for research and development operations are generally
expensed as they occur. Development costs which are attributable to clinical trials and registration are capitalized to the extent
that they are expected to generate future economic benefits. We have determined that the beginning of Phase III trials is the earliest
point for capitalization of development expense. This has been applied for Paccal Vet and Paclical, for which all conditions for
capitalization are fulfilled. These conditions are generally met when it is probable that expected future economic benefits attributable
to an asset will flow to us and the asset’s cost can be measured reliably. The disclosure of the development costs in Phase
III is accounted for gross, i.e., the costs are included in various operating expenses whereas the capitalized part is disclosed
on a specific line in the income statement.
Other operating income.
Other
operating income comprises revenues that are not generated in the ordinary course of business.
Operating expenses.
Operating
expenses includes four categories described below.
Raw materials, consumables and goods for
resale.
Raw materials, consumables and goods for resale consist of materials and consumables for manufacturing
of pharmaceuticals for sales, clinical trials, cost of analysis for such pharmaceuticals and handling of waste.
Other external expenses.
Other
external expenses consist mainly of external fees paid for clinical trials, fees paid for regulatory, administration and other
services such as rent of facility and cost for utilities.
Employee benefit expenses.
Employee
benefit expenses consist of salaries to employees, remuneration to board members, social security cost and other employee benefits
and expenses.
Depreciation and amortization.
Depreciation
consists of depreciation for machinery, equipment and patents. The capitalized development expense is not yet subject to amortization.
Financial income.
Financial
income consists primarily of interest earned by investing our cash reserves in short-term interest-bearing deposit accounts.
Financial expenses.
Financial
expenses consist primarily of interest expense on interest-bearing loans.
Income taxes.
As a Swedish
resident trading equity, we are subject to Swedish corporate taxation. Since we have been loss-making since inception, no corporate
taxes have been recorded.
Results of operations
Comparison of Fiscal Years Ended April
30, 2018 and April 30, 2017
|
|
Year Ended April 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
(in TSEK)
|
|
Net sales
|
|
|
3,169
|
|
|
|
172
|
|
Change in inventory of products in progress and finished goods
|
|
|
(1,450
|
)
|
|
|
(1,405
|
)
|
Capitalized development cost
|
|
|
9,157
|
|
|
|
7,023
|
|
Other operating income
|
|
|
1,753
|
|
|
|
420
|
|
Operating expenses
|
|
|
(116,353
|
)
|
|
|
(146,691
|
)
|
Financial income
|
|
|
101
|
|
|
|
85
|
|
Financial expense
|
|
|
14,390
|
)
|
|
|
(19,847
|
)
|
Income taxes
|
|
|
-
|
|
|
|
-
|
|
Income for the period
|
|
|
(118,013
|
)
|
|
|
(160,243
|
)
|
Net sales
|
|
Year Ended April 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
(in TSEK)
|
|
Net sales
|
|
|
3,169
|
|
|
|
172
|
|
Revenues from royalties
and sales of products were TSEK 3,007 in the year ended April 30, 2018 and TSEK nil in the year ended April 30, 2017. These consisted
of invoiced distribution rights of TSEK 1,595 in the year ended April 30, 2018 and TSEK nil in the year ended April 30, 2017 in
connection with the signing of an agreement with the Russian distributor, invoiced deliveries of goods to the tune of TSEK 630
in the year ended April 30, 2018 and TSEK nil in the year ended April 30, 2017 and a share of the profits to the tune of TSEK 783
stemming from sales of these goods. There were revenues from sales of water for injection amounting to SEK 162 thousand in the
year ended April 30, 2018 and SEK 172 thousand in 2017.
Change in inventory of products in progress
and finished goods
|
|
Year Ended April 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
(in TSEK)
|
|
Change in inventory of products in progress and finished goods
|
|
|
(1,450
|
)
|
|
|
(1,405
|
)
|
|
|
|
|
|
|
|
|
|
Change in inventories of products in progress
and finished goods amounted to TSEK (1,450) in the year ended April 30, 2018. This derives from the production of semi-finished
products to be included in the production of goods intended for sale. Change in inventory of products in progress, amounting to
SEK (1,405) thousand in the previous financial year, derives from the production of semi-finished products that will be included
in the production of goods for sale as well as from a write-down of inventories of finished goods that were intended for sale on
the Russian market of SEK 5,324 thousand. Change in inventories of products in progress and finished goods amounted to TSEK 9,509
in the previous financial year.
Capitalized development cost
|
|
Year Ended April 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
(in TSEK)
|
|
Capitalized development cost
|
|
|
9,157
|
|
|
|
7,023
|
|
|
|
|
|
|
|
|
|
|
Capitalized development cost increased by TSEK
2,134, or 30,4 %, from SEK 7.023 million in the year ended April 30, 2017 to SEK 9.157 million in the year ended April 30, 2018.
In both years there were two product candidates, Paccal Vet and Paclical, subject to capitalization. For Paclical, capitalization
increased by SEK 1,465 thousand, from SEK 7,559 thousand to SEK 9,024 thousand. For Paccal Vet, capitalization decreased by SEK
205 thousand from SEK 338 thousand to SEK 133 thousand in the year ending April 30, 2018. The increase in capitalized development
costs during the financial year is primarily because the increase in capitalized cost for Paclical mainly comprise of activities
related to the approval process in EMA. The Paccal Vet study for the treatment of mammary cancer in dogs had lower activity compared
to the previous year.
Other operating income
|
|
Year Ended April 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
(in TSEK)
|
|
Other operating income
|
|
|
1,753
|
|
|
|
420
|
|
For the year ended April 30, 2018, other operating
income increased to SEK 1,753 thousand, compared to SEK 420 thousand in the prior year. Oasmia has been involved in an ongoing
legal dispute for a number of years with a supplier concerning delivery of defective production equipment. This dispute was settled
in November 2017 by means of conciliation whereby Oasmia was awarded compensation of SEK 1,300 thousand, which has been recorded
as other operating income. Favorable exchange gains of SEK 157 thousand in the year ended April 30, 2018 compared to SEK 202 thousand
for the year ended April 30, 2017.
Operating expenses
|
|
Year Ended April 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
(in TSEK)
|
|
Raw materials, consumables and goods for resale
|
|
|
2,953
|
|
|
|
2,984
|
|
Other external expenses
|
|
|
60,235
|
|
|
|
79,904
|
|
Employee benefit expenses
|
|
|
48,371
|
|
|
|
59,295
|
|
Depreciation, amortization and impairment
|
|
|
4,794
|
|
|
|
4,508
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
116,353
|
|
|
|
146,691
|
|
Operating expenses including depreciation and
amortization decreased by SEK 30.34 million, or 20.7%, from SEK 146.7 million to SEK 116.4 million, for the year ended April 30,
2018 compared to the financial year before.
The decrease is mainly attributable to lower costs for clinical
studies during the period. The decrease is mainly attributable to lower costs for bad debt losses, clinical studies and employees.
The decrease in employee benefit expenses is largely due to the fact that the rationalization program which was started the previous
financial year has had an impact this year. The average number of employees decreased by 16 persons or 21% from 75 in April 30,
2017 to 59 in April 30, 2018 and resulted in lower employee benefit costs.
Financial income
|
|
Year Ended April 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
(in TSEK)
|
|
Financial income
|
|
|
101
|
|
|
|
85
|
|
Financial income in the year ended April 30,
2018 amounted to SEK 101 thousand, compared to SEK 85 thousand in previous year. The increase is mainly due to increased foreign
exchange gains related to bank balances in foreign currencies.
Financial expense
|
|
Year Ended April 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
(in TSEK)
|
|
Financial expense
|
|
|
14,390
|
|
|
|
19,847
|
|
Oasmia has a loan of SEK 102,419 thousand from Nexttobe AB, which
up until October 31, 2016 was Oasmia’s second largest shareholder. This loan carries interest of 8.5 percent. It matured
on July 31, 2018 and has in August 2018 been replaced by loans from a consortium according to previous communication. These new
loans mature on September 30, 2019.
These new loans base on a promise of credit
granted in December 2017. When this promise of credit was received, 34,838,709 warrants were issued to the parties who had granted
the promises of credit. Their market value has been calculated to be SEK 12,542 thousand, and this figure has been included in
equity. The warrants mature on August 15, 2019 and can be redeemed in exchange for 34,838,709 shares at a price of SEK 3.10 per
share.
In April 2017, a convertible loan comprising
26 convertible instruments was issued at a price of SEK 1,000 thousand each, in total SEK 26,000 thousand. These convertible debt
instruments carried interest of 8.5% and matured on April 18, 2018. Upon maturity accrued interest was paid while the principal
was replaced by short-term promissory notes which carry interest of 8.5% until maturity on May 31, 2018. Until signing of this
report SEK 17,000 thousand of these promissory notes have been paid and the remaining SEK 9,000 thousand have been renegotiated
and mature on September 30, 2018.
In June 2017 a convertible loan of SEK 42,000
thousand matured, and upon maturity was replaced by non-negotiable promissory notes. Of these promissory notes, SEK 39,000 thousand
was repaid during the year and new promissory notes of SEK 3,000 thousand were issued. At April 30, there were thus non-negotiable
promissory notes of SEK 6,000 thousand in total carrying 8.5 percent interest and maturing on September 30, 2018.
In order to replace repaid promissory notes,
a new convertible loan of SEK 28,000 thousand was issued in November 2017. This loan consists of 28 convertible instruments of
SEK 1,000 thousand each. The loan carries 8.0 percent interest and matures on November 30, 2018 unless there is prior conversion.
These convertible instruments can be converted at a price of SEK 3.10 per share. In the event of full conversion, 9,032,258 new
shares would be issued. SEK 21,000 thousand had been received for these instruments at April 30, 2018. The remaining SEK thousand
7,000 was received at the beginning of May 2018.
In April 2018, a convertible loan comprising
26 convertible instruments was issued at a price of SEK 1,000 thousand each, in total SEK 26,000 thousand. The loan carries 8 percent
interest and matures on April 22, 2019, unless there is prior conversion. These convertibles can be converted at a price of SEK
4.90 per share. Full conversion would entail the issue of 5,306,122 new shares. At April 30, 2018 the company had not yet received
funds for this loan.
Convertible loans financial liabilities
valued at amortized cost
In contrast to a bond loan, convertible debt
instruments provide both the right to carry interest and the opportunity to receive a certain number of shares instead of repayment
of the loan. This additional benefit means that the interest rate of the convertible debt instruments is lower than the market
interest rate for an equivalent bond loan. The fair value of the benefit Oasmia received due to the lower interest rate is recorded,
after a deduction for issuance expenses, directly against equity. The debt component of the convertibles, i.e., excluding the equity
component indicated above, is recorded after a deduction for issue expenses at its fair value as a liability in the balance sheet
the first time it is recorded. The interest expense is calculated thereafter according to the effective interest method and is
charged to the income statement.
Interest expense on above described convertible
loan programs and other borrowings amounts to SEK 12.31 million in the year ended April 30, 2018 compared to SEK 13.49 million
in the year ended April 30, 2017.
Financial expenses also consist of other financial
expenses related to convertible loans and exchange losses related to bank balances in foreign currencies. Exchange losses from
bank balances in foreign currencies decreased by SEK 4.28 million from SEK 6.36 million in the year ended April 30, 2017 to SEK
2.08 million in the year ended April 30, 2018.
Comparison of Fiscal Years Ended April
30, 2017 and April 30, 2016
|
|
Year Ended April 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
(in TSEK)
|
|
Net sales
|
|
|
172
|
|
|
|
6,373
|
|
Change in inventory of products in progress and finished goods
|
|
|
(1,405
|
)
|
|
|
9,509
|
|
Capitalized development cost
|
|
|
7,023
|
|
|
|
16,727
|
|
Other operating income
|
|
|
420
|
|
|
|
2
|
|
Operating expenses
|
|
|
(146,691
|
)
|
|
|
(165,302
|
)
|
Financial income
|
|
|
85
|
|
|
|
786
|
|
Financial expense
|
|
|
(19,847
|
)
|
|
|
(9,634
|
)
|
Income taxes
|
|
|
-
|
|
|
|
-
|
|
Income for the period
|
|
|
(160,243
|
)
|
|
|
(141,539
|
)
|
Net sales
|
|
Year Ended April 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
(in TSEK)
|
|
Net sales
|
|
|
173
|
|
|
|
6,373
|
|
Revenues from royalties and sales of products
were SEK 0 in the year ended April 30, 2017 and 6,077 in the year ended April 30, 2016.
Revenues from sales of research collaboration
amounted to SEK 200 thousand in the year ended April 30, 2016 and zero in the fiscal year ended April 30, 2017. There were revenues
from sales of water for injection amounting to SEK 172 thousand in the year ended April 30, 2017 and SEK 96 thousand in 2016.
Change in inventory of products in progress
and finished goods
|
|
Year Ended April 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
(in TSEK)
|
|
Change in inventory of products in progress and finished goods
|
|
|
(1,405
|
)
|
|
|
9,509
|
|
Change in inventory of products in progress,
amounting to SEK (1,405) thousand in the year ending April 30, 2017, derives from the production of semi-finished products that
will be included in the production of goods for sale as well as from a write-down of inventories of finished goods that were intended
for sale on the Russian market of SEK 5,324 thousand. Change in inventories of products in progress and finished goods amounted
to TSEK 9,509 in the previous financial year. The tender process in Russia has taken considerably more time than originally estimated.
This leads to obsolescence problems in the inventories produced for sale in Russia. Inventories of finished goods were therefore
written down during the financial year as described above.
Capitalized development cost
|
|
Year Ended April 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
(in TSEK)
|
|
Capitalized development cost
|
|
|
7,023
|
|
|
|
16,727
|
|
Capitalized development cost decreased by SEK
9,704 thousand, or 58,0 %, from SEK 16.73 million in the year ended April 30, 2016 to SEK 7.02 million in the year ended April
30, 2017. In both years there were two product candidates, Paccal Vet and Paclical, subject to capitalization. For Paclical, capitalization
decreased by SEK 2.42 million, from SEK 9.98 million to SEK 7.56 million. For Paccal Vet, capitalization decreased by SEK 7.28
million from SEK 6.75 million to SEK (0.54) million in the year ending April 30, 2016. The decrease in capitalized development
costs during the financial year is primarily because the Paccal Vet study for the treatment of mammary cancer in dogs had low activity
compared to the previous year. In addition, fewer costs have been capitalized for Paclical, mainly since the study on ovarian cancer
is completed and there has therefore been less activity.
Other operating income
|
|
Year Ended April 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
(in TSEK)
|
|
Other operating income
|
|
|
420
|
|
|
|
2
|
|
For the year ended April 30, 2017, other operating
income increased to SEK 420 thousand, compared to SEK 2 thousand in the prior year. The increase was primarily related to favorable
exchange gains of SEK 202 thousand in the year ended April 30, 2017 compared to SEK 2 thousand for the year ended April 30, 2016.
Operating expenses
|
|
Year Ended April 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
(in TSEK)
|
|
Raw materials, consumables and goods for resale
|
|
|
2,984
|
|
|
|
4,733
|
|
Other external expenses
|
|
|
79,904
|
|
|
|
98,104
|
|
Employee benefit expenses
|
|
|
59,295
|
|
|
|
57,661
|
|
Depreciation, amortization and impairment
|
|
|
4,508
|
|
|
|
4,804
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
146,691
|
|
|
|
165,302
|
|
Operating expenses including depreciation and
amortization decreased by SEK 18.61 million, or 11.3%, from SEK 165.3 million to SEK 146.7 million, for the year ended April 30,
2017 compared to the prior financial year.
The decrease is mainly attributable to lower
costs for clinical studies during the period. The Paclical Vet study for the treatment of mammary cancer in dogs has had lower
activity during the financial year compared to the previous year. Furthermore, the costs for production-related method development
and contract production were lower during the financial year compared to the previous year. These lower expenses are counteracted
by the bad debt loss of SEK 5,065 thousand and the write-down of SEK 5,324 thousand for inventories of finished goods that were
charged to the income statement during the financial year.
Financial income
|
|
Year Ended April 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
(in TSEK)
|
|
Financial income
|
|
|
85
|
|
|
|
786
|
|
Financial income in the year ended April 30,
2017 amounted to SEK 85 thousand, compared to SEK 786 thousand in previous year. The decrease is mainly due to decreased foreign
exchange gains related to bank balances in foreign currencies.
Financial expense
|
|
Year Ended April 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
(in TSEK)
|
|
Financial expense
|
|
|
19,847
|
|
|
|
9,634
|
|
Financial expense is primarily attributable
to interest on loans from Nexttobe AB and Convertible loans.
In December 30, 2016, Oasmia had a loan of
SEK 94.4 million from Nexttobe AB. This loan, including accrued interest of SEK 8,0 million was replaced with a new loan of SEK
102.4 million in the fiscal year ended April 30, 2017, which carries an interest rate of 3.5 percent and is due for payment on
September 30, 2017. Interest expense on the loan from Nexttobe, amounts to SEK 6.5 million in the year ended April 30, 2017 compared
to SEK 7.6 million in the year ended April 30, 2016.
At the end of the previous financial year,
in April 2016, a convertible loan comprising 28 convertible instruments was issued at a price of SEK 1,000,000 per convertible
instrument, totaling SEK 28,000 thousand. This convertible loan, which carried interest of 8.5%, fell due on April 14, 2017. Upon
maturity accrued interest of SEK 2.4 million was paid and 2 convertible instruments of SEK 1,000,000 were repaid. The remaining
convertible instruments were replaced by a new convertible loan comprising 26 convertible instruments at a price of SEK 1,000,000
per convertible instrument, in total SEK 26,000 thousand. This convertible loan falls due for payment on April 18, 2018, unless
there is prior conversion, and carries interest of 8.5 percent. These convertible instruments can be converted at a price of SEK
8.00 per share. Full conversion would entail the issue of 3,250,000 new shares.
In June 2016, a convertible loan comprising
42 convertible instruments was issued at a price of SEK 1,000,000 per convertible instrument. After a deduction for issue expenses
this generated TSEK 37,395 for the company. This convertible loan falls due for payment on June 9, 2017, unless there is prior
conversion, and carries interest of 8.5%. These convertible instruments can be converted at a price of SEK 12.00 per share. Full
conversion would entail the issue of 3,500,000 new shares.
On March 31, 2017, a convertible loan comprising
42 convertible instruments was issued at a price of SEK 1,000,000.60 per convertible instrument, in total TSEK 42,000. After a
deduction for issue expenses this generated TSEK 41,734 for the Company.
This convertible loan carried no interest and
was converted to 7,058,856 new shares on April 25, 2017 at a conversion price of SEK 5.95 per share. This conversion entailed dilution
of the Company’s shares of 5.6%.
Convertible loans financial liabilities
valued at amortized cost
In contrast to a bond loan, convertible debt
instruments provide both the right to carry interest and the opportunity to receive a certain number of shares instead of repayment
of the loan. This additional benefit means that the interest rate of the convertible debt instruments is lower than the market
interest rate for an equivalent bond loan. The fair value of the benefit Oasmia received due to the lower interest rate is recorded,
after a deduction for issue expenses, directly against equity. The debt component of the convertibles, i.e., excluding the equity
component indicated above, is recorded after a deduction for issue expenses at its fair value as a liability in the balance sheet
the first time it is recorded. The interest expense is calculated thereafter according to the effective interest method and is
charged to the income statement.
Interest expense on above described convertible
loan programs amounts to SEK 6.3 million in the year ended April 30, 2017 compared to SEK 0.1 million in the year ended April 30,
2016.
Furthermore, Oasmia had a bank loan from Nordea
amounting to SEK 20 million that was repaid on December 30, 2016. Interest expense for this loan was SEK 0.1 million in the fiscal
year ending April 30, 2017 and SEK 0.4 million 2016.
Financial expenses also consist of exchange
losses related to bank balances in foreign currencies. Exchange losses from bank balances in foreign currencies decreased by SEK
1.2 million in the year ended April 30, 2017 compared to the year ended April 30, 2016.
Jumpstart Our Business Startups Act (“JOBS
Act”)
On April 5, 2012, the JOBS Act was signed
into law in the United States. The JOBS Act permits an emerging growth company such as us to take advantage of relief from certain
regulatory burdens that are otherwise generally applicable to public companies. Among the otherwise applicable requirements is
an exemption from the auditor attestation requirement under Section 404 of the Sarbanes-Oxley Act in the assessment of an emerging
growth company’s internal control over financial reporting. We have elected to rely on this exemption and will not provide
such an attestation from our auditors. In addition, we are in the process of evaluating the benefits of relying on other exemptions
and reduced reporting requirements afforded by the JOBS Act, including the exemption from complying with any requirement that may
be adopted by PCAOB regarding mandatory audit firm rotation or requiring any supplement to the auditor’s report provide additional
information about the audit and the financial statements (auditor discussion and analysis).
We will remain an emerging growth company until
the earliest of (a) the last day of our fiscal year during which we have total annual gross revenue of at least $1.0 billion; (b)
the last day of our fiscal year following the fifth anniversary of the completion of our initial public offering; (c) the date
on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt; or (d) the date
on which we are deemed to be a “large accelerated filer” under the Exchange Act, which would occur if the market value
of our ADSs that are held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second
fiscal quarter. Once we cease to be an emerging growth company, we will not be entitled to the exemptions and other relief provided
in the JOBS Act.
B. Liquidity and Capital Resources.
Sources of funds
Our primary uses of cash are to fund research
and development expenses and capital expenditures. However, since we launched Paclical in Russia during 2015/2016 and entered into
a commercialization phase we have an increasing use of cash for production of commercial products.
In recent years, we have largely funded our
operations and growth from loans, share issuances and milestone payments from our partners and licensees. Our cash flows may fluctuate,
are difficult to forecast and will depend on many factors including:
|
•
|
the realization of revenue from our product and product
candidates, which will rely upon the timing of regulatory approvals, the marketing efforts of our commercial partners, and the
price levels achieved by our partners;
|
|
•
|
The need of additional funds in a period with increasing
commercial activities depending on increasing production and growing working capital;
|
|
•
|
the extent of success in our pre-clinical and clinical
stage research programs which will determine the amount of funding required to further the development of our product candidates;
|
|
•
|
the outcome, timing and cost of regulatory approvals of
Paccal Vet, Paclical/Apealea, Doxophos Vet and our other product candidates;
|
|
•
|
the timing of achievement of the milestones receivable
if Paccal Vet, Paclical/Apealea, Doxophos Vet and our other product candidates are approved and launched in the U.S. and elsewhere;
|
|
•
|
the extent to which we seek to retain development rights
to our pipeline of new product candidates or whether we seek to license such candidates to a partner who will fund future research
and development expenditure in return for a right to share in future commercial revenue;
|
|
•
|
the terms and timing of new strategic collaborations;
|
|
•
|
the number and characteristics of the product candidates
that we seek to develop;
|
|
•
|
the costs involved in filing and prosecuting patent applications
and enforcing and defending potential patent claims; and
|
|
•
|
the costs of hiring additional skilled employees to support
our continued growth.
|
Borrowing and unutilized credit facilities
On April 30, 2018 we had the following loans and credit lines: (i)
one loan from Nexttobe, amounting to SEK 102.4 million with a fixed annual interest rate of 8.5%. This loan matured on July 31,
2018 and has in August 2018 been replaced by loans from a consortium according to previous communication. These new loans mature
on September 30, 2019.
,
(ii) 28 convertible debt instruments (2017:3) of SEK 1 million each,
due November 30, 2018
*)
with an interest rate of 8 %, (iii) 26 convertible debt instruments (2018:1) of SEK 1 million
each, due in April 22, 2019
*)
with an interest rate of 8.0 %, (iv) Non-negotiable promissory notes of SEK 6.0 million
issued in June 2017 with an interest rate of 8.5% due in June 30, 2018. This loan has been prolonged and matures on September 30,
(v) Non-negotiable promissory notes of SEK 26.0 million issued in April 2018 with an interest rate of 8.5% due in May 31, 2018.
Of this loan SEK 17.0 million have been repaid until the day of signing this report and the remaining SEK 7.0 million have been
prolonged and matures on September 30, (vi) one unutilized SEK 5 million credit facility with Nordea with a variable interest rate
upon utilization, and (v) one unutilized credit facility of SEK 40 million with Alceco, with a fixed interest rate of 5% upon utilization.
*)
Of the
SEK 28.0 million convertible debt instrument (2017:3), SEK 7.0 million had not been paid in as per April 30, 2018, but were paid
in during May 2018. Of the SEK 26.0 million convertible debt instrument (2018:1), none have not been paid in as per April 30, 2018,
but were fully paid in at the time of signing this report.
Available consolidated liquid assets and unutilized
credit facilities as of April 30, 2018 are not sufficient to provide the required capital to pursue the planned activities during
the next 12 months. In light of available financing alternatives and the recent developments, the emergence of a new largest shareholder
and new market approval for Doxophos and also the new relationship with Hetero Group, its new marketing and distribution partner,
the Board of Directors assesses that the prospects for financing of the Company´s operations in the coming year are good.
However, should funding not be obtained in sufficient quantities there is a risk that we be required to curtail or cease operations.
Comparison of Fiscal Years Ended April
30, 2018 and April 30, 2017
Summary of cash flows
|
|
Year Ended April 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
(in TSEK)
|
|
Cash flow from operating activities
|
|
|
(123,634
|
)
|
|
|
(133,011
|
)
|
Cash flow from investing activities
|
|
|
(21,452
|
)
|
|
|
12,039
|
|
Cash flow from financing activities
|
|
|
132,656
|
|
|
|
122,755
|
|
Cash flow from operating activities
The negative cash flow from operating activities
for the fiscal year ended April 30, 2018, SEK 123.63 million, consists of the operating income loss, SEK 103.72 million, adjusted
for depreciation and amortization, SEK 6.42 million, unfavorable changes in working capital, SEK 16.31 million, plus interest received,
SEK 0.10 million, less interest paid, SEK 10.13 million. The significant items in the changes in working capital included a decrease
in accounts payable of SEK 11.76 million, a decrease in inventories of SEK 2.87 million, an increase in accounts receivable of
SEK 1.54 million, a decrease in other current liabilities of SEK 6.21 million and a decrease of other short term receivables of
SEK 0.34 million.
Cash flow from investing activities
For the fiscal year ended April 30, 2018, cash
flow used in investing activities amounted to SEK 21.45 million. Capital expenditure included intangible assets of SEK 21.04 million,
which consisted of capitalized development costs of SEK 9.16 million and patents of SEK 11.88 million. The majority, SEK 10.55
million, of this year’s investments in patents comprise acquisitions of new patent rights which extend protection of XR17
by a further 8 years up until 2036. Investments in tangible assets amounted to SEK 0.42 million, which primarily related to the
purchase of production equipment.
In the financial year ended 30 April 2017,
divestment of short term investments generated SEK 20 million in cash and therefore there was a cash inflow from investments then.
These short-term investments were frozen as security for a bank loan that was repaid when the investments were divested.
Cash flow from financing activities
For the fiscal year ended April 30, 2018, cash
flow provided by financing activities amounted to SEK 132.66 million compared to SEK 122.76 million in the previous financial year.
A new share issue generated a gross amount of SEK 159.28 million for the company while the outflow for issue expenses amounted
to SEK 11.36 million. A convertible loan of SEK 42.0 million matured during the year and was replaced at maturity by non-negotiable
promissory notes. Of this debt, SEK 39.0 million has been repaid while new loans of total SEK 3.0 million have been taken.
In November 2017 a convertible loan of SEK
28.0 million was issued, of which SEK 21.0 million had been paid to the company up until April 30, 2018. Issue expenses of SEK
0.47 million had been paid by the company at this date
Comparison of Fiscal Years Ended April
30, 2017 and April 30, 2016
Summary of cash flows
|
|
Year Ended April 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
(in TSEK)
|
|
Cash flow from operating activities
|
|
|
(133,011
|
)
|
|
|
(128,126
|
)
|
Cash flow from investing activities
|
|
|
12,039
|
|
|
|
10,066
|
|
Cash flow from financing activities
|
|
|
122,755
|
|
|
|
117,449
|
|
Cash flow from operating activities
The negative cash flow from operating activities
for the fiscal year ended April 30, 2017, SEK 133.01 million, consists of the operating income loss, SEK 140.48 million, adjusted
for depreciation and amortization, SEK 15.31 million, unfavorable changes in working capital, SEK 5.42 million, plus interest received,
SEK 0.09 million, less interest paid, SEK 2.52 million. The significant items in the changes in working capital included a decrease
in accounts payable of SEK 6.62 million, an increase in inventories of SEK 2.78 million, an increase in accounts receivable of
SEK 0.20 million, an increase in other current liabilities of SEK 7.76 million and an increase of other short term receivables
of SEK 3.58 million.
Cash flow from investing activities
For the fiscal year ended April 30, 2017, cash
flow provided in investing activities amounted to SEK 12.04 million. This amount included intangible assets of SEK 7.45 million,
which consisted of capitalized development costs of SEK 7.02 million and patents of SEK 0.42 million. Investments in tangible assets
amounted to SEK 0.52 million, which primarily related to the purchase of production equipment.
Disposal of short term investments generated
SEK 20 million in cash.
Cash flow from financing activities
For the fiscal year ended April 30, 2017, cash
flow provided by financing activities amounted to SEK 122.76 million compared to SEK 117.45 million in the previous financial year.
This amount mainly consisted of new private placement of SEK 70.0 million, issue of two convertible debt instruments totaling SEK
84.0 million and issue expenses of SEK 9.25 million and outflow of SEK 2.0 million for repayment of convertible debt instrument.
In April 2017, a private placement of 26 convertible
debt instruments (no. 2017:2) at a price of SEK 1,000,000 and a total amount of SEK 26.0 million were directed issued, by means
of partly set-off, to current holders of convertibles (2016:1) which matured on April 14, 2017. Accrued interest and repayment
of SEK 2.0 million were settled by the company. The convertible debt instruments are due on April 18, 2018 if conversion is not
made before then. The loan carries an interest of 8.5 % and can be converted to a price of SEK 8.00 per share. Full conversion
would entail that 3,250,000 new share were issued.
In March 2017, a private placement of 42 convertible
debt instruments (no 2017:1) at a price of SEK 1,000,004.60 each were issued, which provided the Company with SEK 42,000,193 in
gross proceeds. After deductions for issue expenses amounting to SEK 266 thousand the share issue and issue of convertible debt
instruments provided the company in April 2017 with SEK 41,734 thousand in liquidity. The loan was interest free the conversion
price was SEK 5.95 per share. The convertible debt instruments were converted into 7,058,856 of our ordinary shares on the maturity
date of April 25, 2017.
In November 2016, the former second largest
shareholder, Nexttobe AB, extended its loan to the company. The new loan includes accrued interest for 2016 and amounts to SEK
102.4 million and replaced the loan of SEK 94.4 million. The interest for the new loan is set to 3.5 % and the loan is due September
30, 2017.
In October 2016 a private placement was consummated
wherein 8,750,000 Ordinary Shares were issued. The issue price was SEK 8.00 per share and gross proceeds provided the Company with
SEK 70.0 million in proceeds.
In October 2016, an offset issue of 3,080,000
Ordinary Shares were issued in order to purchase, for SEK 25 million, a cancer project of Karo Pharma. The issue price was approximately
SEK 8.12 per share.
In June 2016, a private placement of 42 convertible
debt instruments (no 2016:2) at a price of SEK 1,000,000 each were issued, which provided the Company with SEK 42,000 thousand
in gross proceeds. After deductions for issue expenses amounting to SEK 4,605 thousand the issue of convertible debt instruments
provided the company in June and July 2016 with SEK 37,395 thousand in liquidity. The convertible debt instruments are due on June
9, 2017 if conversion is not made before then. The loan carries an interest of 8.5 % and can be converted at a price of SEK 12.00
per share. Full conversion would entail that 3,500,000 new shares be issued.
C. Research and Development, Patents and licenses, etc.
For a description of Oasmia’s Research
and Development projects and activities please see Item 4. B.
Research and Development Expenses
Research and development expenses are incurred
for the development of new products and processes and include conducting clinical trials, development materials, payroll, including
scientists and professionals for product registration and approval, external advisors and the allotted cost of manufacturing facility
for research and development purposes. Expenditures for research and development are expensed as they occur. Development costs
attributable to clinical trials and registration are capitalized to the extent that they are expected to generate future economic
benefits. We have determined the beginning of Phase III as the earliest point for capitalization of development expense. This has
been applied to two pharmaceutical candidates, for which all conditions for capitalization are fulfilled. Funds spent on research
and development as included in the income statement line items, is disclosed below.
Comparison of Fiscal Years Ended April
30, 2018 and April 30, 2017
|
|
Year Ended April 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
(in TSEK)
|
|
Raw materials, consumables
|
|
|
1,822
|
|
|
|
1,228
|
|
Other external expenses
|
|
|
31,568
|
|
|
|
50,048
|
|
Employee benefit expenses
|
|
|
29,220
|
|
|
|
43,408
|
|
Depreciation
|
|
|
2,937
|
|
|
|
3,178
|
|
Total spent on research and development activities
|
|
|
65,546
|
|
|
|
97,862
|
|
Comparison of Fiscal Years Ended April
30, 2017 and April 30, 2016
|
|
Year Ended April 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
(in TSEK)
|
|
Raw materials, consumables
|
|
|
1,228
|
|
|
|
1,208
|
|
Other external expenses
|
|
|
50,048
|
|
|
|
68,934
|
|
Employee benefit expenses
|
|
|
43,408
|
|
|
|
39,951
|
|
Depreciation
|
|
|
3,178
|
|
|
|
3,518
|
|
Total spent on research and development activities
|
|
|
97,862
|
|
|
|
113,611
|
|
The reason research and development expenses
are not disclosed separately for each product candidate is that all costs cannot be allocated to each product candidate separately.
Intangible assets; Amortization and impairment
tests
Amortization of the intangible assets is carried
out on a straight-line basis over the period that the expected benefits are expected to generate earnings for the company, which
is from the date that commercial sale to final customers is commenced. This point in time frequently occurs after receiving full
approval for the indication (e.g., a cancer-type) of a product candidate in a specific market.
At the end of each fiscal year, we perform
an assessment of whether there is a need for impairment of the capitalized development cost. The impairment test on intangible
assets is based on a discounted cash flow model per cash generating unit (“CGU”). The CGUs are the regional markets
for the two product candidates in Phase III. We have made the judgment that there is no need for impairment since of the two pharmaceutical
candidates that are capitalized one has already received conditional approval, and approval for the other lies, according to management
estimates, within the foreseeable future. We estimate that future profits motivate the value of the assets.
The impairment tests require us to use a number
of assumptions, including market factors specific to the pharmaceutical business, potential pricing for our product and product
candidates, the amount and timing of estimated future cash flows and the time value of money. In general, cost estimates (cash
outflows) can normally be estimated with a higher degree of accuracy than revenues (cash inflows). Some specific areas of uncertainty
are described below.
We have no history on which to base our forecasts.
The cytostatic market for dogs is completely new so for this segment there is no product on which to study volumes and prices.
The cytostatic market for human use is well known but there have been substantial changes in recent years as patents have expired
and generic products have been introduced. One product whose patent has not expired is Abraxane, which is commercially available
in many countries, with a higher price than that of generic products but with notable differences in price in those countries where
it is on the market.
One further market uncertainty is that we do
not yet have distributors or licensees for our human product candidates in the majority of countries and therefore have not received
any parameters by which to estimate our net sales.
Another uncertainty is cost of goods sold.
The only experience that we have with manufacturing is with small-scale production in our plant in Uppsala. We expect that large
scale production in Uppsala and elsewhere will reduce the cost of goods sold per unit over time.
Our estimates have been calculated by the following
procedures.
Animal Health
We have access to statistics for the number
of dogs in the U.S. and the rates of cancer incidence among dogs. We cannot be certain how many dogs with cancer will be treated
so we have estimated very small numbers of sales for the first few years. We also cannot be certain what revenue can be derived
per patient. We have received estimates from Abbott Animal Health for the amounts dog owners are willing to pay for treatment,
not specifically for cytostatic but for other treatments (as there have been no cytostatic for dogs available on any market before
we received conditional approval for Paccal Vet from the FDA). Cost of goods sold has been estimated by calculating all components
at our plant and at the plants of our sub-contractor.
Human Health
We have access to figures on populations per
country, cancer incidents per year, per cancer type and per country as well as net sales and prices for existing cytostatic. We
also have access to the number of patients treated with taxanes. Of this figure we have estimated very small numbers for the first
few years. Cost of goods sold has been estimated in the same way as in animal health above.
Since until just recently we had no product
approved, we have not been able to verify any of our estimates. There have been no major changes to any of our assumptions, other
than that we have had to move back our estimate of the first year of market approval per product due to the approval processes
with the relevant authorities taking more time than we had originally anticipated.
If our products are not approved, or the probability
of their approval is diminished, capitalized expenditures will be carried as expenses. We annually evaluate whether a need for
impairment exists for all intangible assets.
D. Trend information
See “Item 5.A Operating results”
E. Off-balance Sheet Arrangements.
As of April 30, 2018, we have no off-balance
sheet arrangements that have or are reasonably likely to have current or future material effect on our financial condition, changes
in financial condition, revenues or expenses, results of operations, liquidity or capital resources.
F. Tabular disclosure of contractual obligations.
The following table summarizes our contractual
commitments and obligations as of April 30, 2018.
|
|
Payments Due by Period
|
|
|
|
Total
|
|
|
Less than
1 year
|
|
|
1 – 3
years
|
|
|
3 – 5
years
|
|
|
More
than
5 years
|
|
|
|
(in TSEK)
|
|
Operating lease obligations
(1)
|
|
|
14,692
|
|
|
|
6,298
|
|
|
|
5,641
|
|
|
|
2,135
|
|
|
|
619
|
|
Purchase obligations
(2)
|
|
|
147,465
|
|
|
|
7,115
|
|
|
|
49,923
|
|
|
|
67,820
|
|
|
|
22,607
|
|
Interest Payments
|
|
|
12,818
|
|
|
|
12,818
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Short-term debt obligations
(3)
|
|
|
188,419
|
|
|
|
188,419
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total contractual cash obligations
|
|
|
363,394
|
|
|
|
214,649
|
|
|
|
55,564
|
|
|
|
69,955
|
|
|
|
23,225
|
|
|
(1)
|
Consists
of the leasing of premises and lease of office equipment. Leasing of premises amounts to SEK 6.3 million and lease of office equipment
SEK 0.1 million in the year ending April 30, 2018. The expiration dates for the leasing contracts regarding premises are December
31, 2019, March 31, 2020, January 31, 2021, December 31, 2021 and December 31, 2023. These leases automatically extend for an
additional 3 years if not terminated within 9 months’ notice.
|
|
(2)
|
Mainly
consists of a purchase contract with obligations for Oasmia to purchase a minimum number of product vials for each contract year.
|
|
(3)
|
Short-term
obligations include repayment of loan to Nexttobe AB of SEK 102.4 million, repayment of convertible debt instruments of SEK 54.0
million and repayment of non-negotiable promissory notes of SEK 32.0 million.
|
Contracts with our venders that allow us to
cancel the contract on short notice without financial penalty are excluded from the above table.
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
|
A.
|
Directors
and senior management.
|
The following table sets forth the names, ages
and positions of our executive officers and directors as of the date of this Annual Report:
Name
|
|
Age
|
|
Position
|
Executive Director:
|
|
|
|
|
Julian Aleksov
|
|
53
|
|
Executive Chairman of the Board
|
Executive Officers:
|
|
|
|
|
Mikael Asp
|
|
55
|
|
Chief Executive Officer and Head of Quality Assurance
|
Anders Blom
|
|
49
|
|
Executive Vice President and Chief Financial Officer
|
Non-Executive Directors:
|
|
|
|
|
Bo Cederstrand
|
|
79
|
|
Director
|
Alexander Kotsinas
|
|
50
|
|
Director
|
Lars Bergkvist
|
|
54
|
|
Director
|
Per G Langö
|
|
49
|
|
Director
|
The following is a brief summary of the business
experience of our executive officers and directors. The current business address for all of our executive officers and directors
is Vallongatan 1, 752 28, Uppsala, Sweden.
Executive Officers
Julian Aleksov
is a co-founder of Oasmia,
and has served as Chief Executive Officer and a director since 1999, though he was a director of Oasmia’s predecessor from
1998 to 1999. On May 28, 2015, he resigned as our Chief Executive Officer and was appointed as our Executive Chairman of the Board.
During the Extraordinary General Meeting held in November 2016 he was appointed Vice Executive Chairman, however in February 2017
he was re-appointed as Executive Chairman of the Board. He is an economist with extensive experience in coordinating research projects
and strategic development of global intellectual property assets. Prior to becoming the CEO, he oversaw our research and strategic
development within bio-organic chemistry, with a focus on retinoids and alpha-protein bindings, while also managing our global
intangible assets registrations and financing. He has been a partner and member of the board of Alceco, one of our principal stockholders,
since 2000. He attended the Deutsche Schule in Stockholm for his basic education, and thereafter studied economics on several levels.
Anders Blom
has served as Executive
Vice President since September 1, 2014 and is Chief Financial Officer since October 4, 2017. He has 20 years of experience from
international strategic business development and finance at Galderma (former Q-Med AB) and Pharmacia. Anders was previously CEO
of Nexttobe, a life science focused venture capital firm based in Uppsala. He has a Master of Business Administration degree from
Uppsala University.
Mikael Asp
has served as Head of Quality
Assurance since 2013. On May 28, 2015, he was appointed as our Chief Executive Officer. He has 25 years of experience with a variety
of companies in the international pharmaceutical sector including Xellia, Pfizer, Wyeth and Pharmacia in research and development,
production and quality assurance. He has been a Qualified Person since 2013. He has a Master’s degree in chemical engineering
from Royal Institute of Technology, Stockholm.
Non-Executive Directors
Bo Cederstrand
has been a director since
2000 and was Chairman of the Board from 2000 to 2011. He has approximately 40 years of experience as CEO and partner in a number
of small and medium-sized companies specializing in pets or pet products, most of which he founded. He has extensive experience
in international trade and production and has been very active within trade branch associations. He has been a partner and member
of the board of Alceco, one of our principal stockholders, since 2000. He is a deputy board member at Fruges Aktiebolag AB and
was a previous board member of Arkenbutikerna. He studied at the Stockholm School of Economics.
Alexander Kotsinas
has served on our
board of directors since September 2013. He is currently working as Director Finance at Lindorff AB. Alexander worked as an independent
consultant for Nexttobe AB from 2016 to 2017, and as a Partner at Nexttobe AB from 2011 to 2016. He has been Vice President at
Investor AB and has worked at Ericsson. He was the Vice President and CFO at Q-Med AB from 2008 to 2011, and was the CFO at Life
Europe AB in 2007 and at Tre-Hi3G Access AB from 2003 to 2006. He has a Master of Science degree in Applied Physics from the Royal
Institute of Technology, Stockholm and a Bachelor of Science Economics from the Stockholm School of Economics.
Lars Bergkvist
has served on our board
of directors since May 2015. From 2001 through 2011, he was the chief executive officer at Arken Zoo. Since 2012, he has acted
as the chairman of the board of Jaktia AB, Master Design AB and Chainformation AB, as a member of the board of directors of FDT
AB, a public company, and as a member of the advisory board of Skyltspektrum AB. He received a degree in Accounting and Finance
from Stockholm’s School of Economics in 1986.
Per Langö,
has served on our board
of directors since September 2017. Per Langö has extensive international and commercial experience in launching and establishing
global products in various therapeutic areas. During his career, he has been responsible for a large number of international business
development efforts, including major licensing and public transactions. At present Per Langö is employed by Nestlé
Skin Health. He holds a Masters Degree in Economics from Uppsala University.
B. Compensation
Compensation of Directors and Executive
Management Board
The following discussion provides the amount
of compensation paid, and benefits in kind granted, by us to our directors and executive officers for services in all capacities
to us for the year ended April 30, 2018.
Directors Compensation
For the year ended April 30, 2018, the table
below sets forth the compensation paid to our directors.
Year Ended April 30, 2018 Directors Compensation
Name
|
|
Base salary/
Board fees
|
|
|
Remuneration
upon
termination
of
employment
|
|
|
Variable
remuneration
|
|
|
Social
security incl.
special
employer´s
contribution
|
|
|
Pension/
sickness
benefit
|
|
|
Total
|
|
|
|
(In TSEK)
|
|
Julian Aleksov
(1)
Executive Chairman of the Board
|
|
|
1,702
|
|
|
|
-
|
|
|
|
30
|
|
|
|
650
|
|
|
|
456
|
|
|
|
2,838
|
|
Bo Cederstrand
Director
|
|
|
150
|
|
|
|
-
|
|
|
|
-
|
|
|
|
25
|
|
|
|
-
|
|
|
|
175
|
|
Alexander Kotsinas
Director
|
|
|
150
|
|
|
|
-
|
|
|
|
-
|
|
|
|
47
|
|
|
|
-
|
|
|
|
197
|
|
Per Langö
(2)
Director
|
|
|
88
|
|
|
|
-
|
|
|
|
-
|
|
|
|
27
|
|
|
|
-
|
|
|
|
115
|
|
Lars Bergkvist
Director
|
|
|
150
|
|
|
|
-
|
|
|
|
-
|
|
|
|
47
|
|
|
|
-
|
|
|
|
197
|
|
Mikael Asp
CEO
|
|
|
1,378
|
|
|
|
-
|
|
|
|
4
|
|
|
|
510
|
|
|
|
334
|
|
|
|
2,226
|
|
Other senior executives (1 people at end of year, 2 people on average during financial year)
(3)
|
|
|
2,787
|
|
|
|
202
|
|
|
|
15
|
|
|
|
1,107
|
|
|
|
675
|
|
|
|
4,786
|
|
Other senior executives in subsidiaries
|
|
|
326
|
|
|
|
-
|
|
|
|
-
|
|
|
|
7
|
|
|
|
78
|
|
|
|
411
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
6,732
|
|
|
|
202
|
|
|
|
48
|
|
|
|
2,421
|
|
|
|
1,543
|
|
|
|
10,946
|
|
|
(1)
|
Julian Aleksov is an employee of the company and receives
a monthly salary.
|
|
(2)
|
Mr. Langö was appointed in September, 2017.
|
|
(3)
|
One senior executive resigned during the fiscal year.
|
Remuneration of the Chairman of the Board and
members of the board of directors is decided at each annual general meeting. There is no remuneration for participation in the
nomination committee or any of the other committees. Upon special agreement, up until September 2017, we paid members of the board
of directors their compensation through a company wholly owned by the board member. In such cases, the invoice amount was increased
by social security and VAT. Accordingly, board member fees for Mr. Bergkvist were paid through Axli AB until September 2017 and
board member fees for Mr. Kotsinas was paid through Windride AB between April 2017 and September 2017. As from October 2017 all
Board members have their Board fees paid as earned income, which is subject to an employer´s contribution from Oasmia.
Executive Officers Compensation
Compensation for each executive officer is
comprised of base salary, pension allocation of base salary, directors’ and officers’ liability insurance, and the
medical benefits described below. Executive directors also receive private health insurance and health care insurance. The total
amount of compensation paid to executive officers, whether or not a director, for the year ended April 30, 2018 was SEK 10,946
thousand.
Bonus Plans
We do not currently pay bonuses to any director
or employee.
Options and Incentive Programs
Oasmia has introduced a share-based incentive
plan comprising options. The purpose of the incentive plans is to encourage Oasmia’s employees and Board members to invest
time and effort in the Company in order to be able to benefit from and help promote positive value growth in the Company’s
share in the period covered by the plans, and to enable Oasmia to retain and recruit competent and committed employees. The incentive
programs 2017:1 and 2017:2 were introduced following a resolution taken by an Extraordinary General Meeting on June 2, 2017. The
incentive plan 2017:2 applies to independent members of the Board, while 2017:1 is aimed at the Company’s independent senior
management team members. The same EGM also decided that options issued under the incentive plans 2016:1 and 2016:2, decided previously
by the Board, will be recalled and cancelled. Plan 2017:1 comprises 3,750,000 options, while plan 2017:2 comprises 3,000,000 options.
The options will be transferred to the participants of the plans at the market value of the options, calculated by using the Black
& Scholes valuation model. Each option in the plans 2017:1 and 2017:2 will entitle the holder to subscribe for one share in
the Company during the period June 16, 2019 to August 16, 2019. The subscription price per share should correspond to 175 per cent
of the volume-weighted average price of the Company’s shares according to the Nasdaq Stockholm official list in the period
June 9, 2017 to June 16, 2017. In the event that all outstanding options are exercised for shares, the number of shares will increase
by a total of 6,750,000, corresponding to dilution of around 5.4 per cent of the number of issued shares on April 30, 2017.
In accordance with the
resolution adopted at the Extraordinary General Meeting on June 2, 2017 concerning the issue of warrants, 5,543,182 warrants were
issued and paid as a shareholders’ contribution to Oasmia Incentive. These warrants were resold by Oasmia Incentive AB to
Oasmia Pharmaceutical AB’s Board and senior management for between SEK 0.17 and SEK 0.22 per warrant, depending on the market
value at the time of each individual issue. These warrants generated equity of SEK 1,171 thousand for Oasmia.
Health care and medical care
We offer our employees free medical care and
free medicine up to the Swedish high-cost protection ceilings of SEK 1,100 and SEK 2,250, respectively. We also have an agreement
with a provider of occupational health services.
Employment Agreements
Julian Aleksov
Mr. Aleksov signed an employment agreement
with us on January 1, 2000 to serve as our Chief Executive Officer but is presently our Executive Chairman of the Board; this change
in title had no impact on his compensation. The employment agreement is for an unspecified term. As of April 30, 2018, he receives
a base salary of SEK 1,701,600 per annum, reviewed annually, plus private health insurance and pension allocations. He does not
receive a bonus or any additional perquisites or other annual compensation. The health insurance and healthcare insurance he receives
is worth SEK 41,256 and SEK 3,768 annually respectively. His defined contribution pension plan is currently handled through Linder
& Partners AB, with an annual pension contribution of SEK 411,873 since the beginning of the last full fiscal year, compared
to SEK 405,000 as of the end of the previous fiscal year. He does not receive any additional compensation for serving as a director.
In the event Mr. Aleksov’s employment
is terminated by us, Mr. Aleksov shall be entitled to notice of 24 months. If he voluntarily decides to terminate his employment,
the notice shall be six months. There is no agreement or arrangement for Mr. Aleksov to receive any severance payments or any additional
payments should we undergo a change of control.
Anders Blom
Mr. Blom joined our company on September 1,
2014. As of April 30, 2018, he receives a base salary of SEK 1,602,900 per annum, reviewed annually. His pension plan follows a
staircase model whereas his pension allocation is based on his salary and the pension contribution was SEK 509,517 for the fiscal
year ended April 30, 2018. The health insurance and healthcare insurance he receives is worth SEK 25,590 and SEK 7,509 annually
respectively. He does not receive any other bonus, perquisites or any other annual compensation.
If we terminate Mr. Blom’s employment,
he shall be entitled to a notice period of six (6) months. If he voluntarily decides to terminate his employment, the notice period
shall be three (3) months. There is no agreement or arrangement for Mr. Blom to receive any severance payments or any additional
payments should we undergo a change of control.
Mikael Asp
Mr. Asp signed an employment agreement with
us on January 7, 2013. The employment agreement is for an unspecified term. As of April 30, 2018, he receives a base salary of
SEK 1,377,600 per annum, reviewed annually. His pension plan follows a staircase model whereas his pension allocation is based
on his salary and worth SEK 302,152 annually. The health insurance and healthcare insurance he receives is worth SEK 25,148 and
SEK 6,791 annually respectively. He does not receive any other bonus, perquisites or any other annual compensation.
If we terminate Mr. Asp’s employment,
he shall be entitled to a notice period of twelve (12) months. If he voluntarily decides to terminate his employment, the notice
period shall be three (3) months. There is no agreement or arrangement for Mr. Asp to receive any severance payments or any additional
payments should we undergo a change of control.
Limitations on Liability and Indemnification
Matters
Under the Swedish Income Tax Act, if a company
directly indemnifies a member of the board of directors or an executive officer or otherwise holds him or her harmless, the amount
expended will be regarded as salary upon which we must pay social security contributions, and the director or officer will also
be liable for income tax on any such expended amount. Therefore, we maintain directors and officer’s insurance through XL
Insurance Company SE and Navigators to insure our directors and executive officers against certain liabilities incurred based on
their capacity as a director or an executive officer.
C. Board practice
Board Composition
Our affairs are managed under the direction
of our board of directors, which is currently composed of five members. Three of our directors, i.e., Messrs. Kotsinas, Bergkvist
and Langö, qualify as independent directors under Rule 5605(a)(2) of the Nasdaq Marketplace Rules. Messrs. Aleksov and Cederstrand
are not considered independent under Nasdaq or SEC rules. Directors are elected at each annual general meeting for one-year terms.
None of our directors, or our executive officers, has any family relationship with any other director or executive officer, except
that Mr. Cederstrand is the grandfather of two of Mr. Aleksov’s children.
Tasks of the Board of Directors
The Board of Directors manages our affairs
on behalf of our shareholders. The Board of Directors acts in accordance with the Swedish Companies Act (SFS 2005:551) (“Swedish
Companies Act”), our Articles of Association, internal regulations and directions given by the general meeting. In addition,
the board of directors shall ensure that we comply with the Swedish Corporate Governance Code, NASDAQ Stockholm’s Rule Book
for Issuers, SEC regulations as well as other applicable laws and regulations. The principal tasks of the board of directors include
the following:
|
•
|
establishing
our overall operational goals and strategy;
|
|
•
|
appointing,
evaluating and, if necessary, dismissing the chief executive officer;
|
|
•
|
evaluating
our management and deciding if any significant changes in our organization and business need to be made;
|
|
•
|
analyzing
our financial situation;
|
|
•
|
ensuring
that there is an effective system for follow-up and control of our operations;
|
|
•
|
ensuring
that our internal control of the financial development is satisfactory and that information concerning the financial development
is correctly communicated in our financial reports;
|
|
•
|
ensuring
that there is a satisfactory process for monitoring our compliance with laws and other regulations relevant to our operations,
including applicable accounting standards and other requirements for listed companies;
|
|
•
|
defining
necessary guidelines to govern our ethical conduct; and
|
|
•
|
ensuring
that our external communications are transparent and that they are accurate, reliable and relevant.
|
Committees of the Board of Directors and
Corporate Governance
The committees of our board of directors consist
of an audit committee, a compensation committee and a nomination committee. Each of these committees has the responsibilities described
below. Our board of directors may also establish other committees from time to time to assist in the discharge of its responsibilities.
Subject to certain exceptions, the rules of
Nasdaq permit a foreign private issuer to follow its home country practice in lieu of certain Nasdaq listing requirements. The
Nasdaq listing requirements with respect to which we rely on this exemption, and the corresponding requirements imposed on us by
Swedish law and corporate governance guidelines and the listing requirements of NASDAQ Stockholm, are set forth in the table below.
Nasdaq Listing Requirement
|
|
Swedish requirements
|
A majority of the board of directors must consist of independent directors
|
|
Policy that an issuer must have (i) a majority of the board of directors be independent directors, (ii) only one director may also be an executive employee of the issuer, and (iii) two independent directors should also not be related to major shareholders (i.e., those who own 10% or more of the Ordinary Shares), or the issuer must explain why the board of directors did not comply with this policy.
|
Non-executive directors must meet on a regular basis without management present
|
|
Policy that the board of directors must meet at least once annually with the issuer’s auditors without management present or the issuer must explain why the board of directors did not comply with this policy.
|
All members of the nominating committee must be independent
|
|
Policy that (i) the nominating committee should consist of at least three members, two of which are independent directors, (ii) the CEO and other executive employees should not serve on the nominating committee, and (iii) one member of the nominating committee should not be related to major shareholders, or the issuer must explain why the board of directors did not comply with this policy.
|
Proxies must be solicited and proxy statements provided for all shareholder meetings
|
|
Mandatory requirement that notice of shareholder meeting must include information relating to the matters to be decided at the shareholder meeting, how to cast votes by proxy and where to find a proxy form.
|
|
|
Policy that (i) the notice of shareholder meeting should include the nomination committee’s suggestion for chairman of the issuer, and (ii) the nomination committee should issue a statement on the issuer’s website explaining its proposals regarding the board of directors, or the issuer must explain why the board of directors did not comply with this policy.
|
Shareholder approval must be sought for the implementation of certain equity compensation plans and issuances of ordinary shares
|
|
Mandatory provision applying certain supermajority shareholder approval thresholds for implementation of certain equity compensation plans and certain issuances of new shares that deviate from existing shareholders’ preferential rights.
|
We are not required to follow the Nasdaq listing
requirements set forth above with respect to having a majority of our board of directors be independent.
Audit Committee
The members of our audit committee are Mr.
Kotsinas, Mr. Lars Bergkvist and Mr. Per Langö (since September 25, 2017), all of whom qualify as an “independent director”
as such term is defined in Rule 10A-3 under the Exchange Act. Mr. Lars Bergkvist serves as chair of the audit committee. Our board
of directors has determined that Mr. Bergkvist is a financial expert as contemplated by the rules of the SEC implementing Section
407 of the Sarbanes Oxley Act of 2002. Our audit committee meets at least twice per year with the external auditors and our independent
registered public accounting firm without executive board members present and oversees the monitoring of our internal controls,
accounting policies and financial reporting and provides a forum through which our external auditors and independent registered
public accounting firm reports. The audit committee also oversees the activities of the external auditors and our independent registered
public accounting firm, including their appointment, reappointment, or removal as well as monitoring of their objectivity and independence.
In addition, the audit committee considers the fees paid to the external auditors and independent registered public accounting
firm and determines whether the fee levels for non-audit services, individually and in aggregate, relative to the audit fee are
appropriate so as not to undermine independence. During the year ended April 30, 2018, there were six meetings of the audit committee.
Compensation Committee
The members of the compensation committee are
Mr. Alexander Kotsinas, Mr. Lars Bergkvist and Mr. Per Langö (since September 25, 2017). Each of the members, qualifies as
an independent director under Rule 5605(a)(2) of the Nasdaq Marketplace Rules. Mr. Lars Bergkvist serves as chair of the compensation
committee. Our compensation committee reviews, among other things, the performance of our executive directors and sets the scale
and structure of their remuneration and the basis of their employment agreements with due regard to the interests of the shareholders.
No director has a service agreement with a notice period exceeding one year. During the year ended April 30, 2018, there was one
meeting of the compensation committee
Nomination Committee
The nomination committee consists of three
members. The first member, currently Mr. Bo Cederstrand, represents the second largest shareholder Alceco International S.A. The
second member, currently Mr. Per Arwidsson, represents the largest shareholder Arwidsro Investment AB. The third member is Mr.
Aleksov. Mr. Cederstrand serves as chair of the nomination committee and oversees the evaluation of the board of directors’
performance. The primary task of the nomination committee is to present candidates for the board of directors and the Chairman
of the Board and to decide their compensation. The nomination committee also presents proposals to the annual general meeting of
possible remuneration for committee work and remuneration of external auditor. Proposals of the nomination committee are made public
no later than when notice of the annual general meeting is sent. The nomination committee’s mandate extends to when the next
nomination has been made public. The nomination committee meets at least once a year.
D. Employees
As of April 30, 2018, we had 58 employees,
whereof 56 of them are located in Sweden and 2 in Russia. We have never had a work stoppage and none of our employees is represented
by labor unions or covered by collective bargaining agreements. The competence and experience of our employees are among Oasmia’s
most important assets. Drug development is a complex process which requires many specialist competencies. A total of 76% of Oasmia’s
employees have a university degree and 26% these also have a Ph.D. Many nationalities are represented among the employees, creating
a positive, challenging and dynamic work environment. Oasmia strives to continually improve and ensure a healthy and safe work
environment. Oasmia will continue to be a safe, healthy and pleasant workplace.
The table below sets forth a breakdown of our employees as at end
of each of the past fiscal years by main category of activity.
|
|
As of April
30,
2018
|
|
|
As of April
30,
2017
|
|
|
As of April
30,
2016
|
|
Quality control, quality assurance and production
|
|
|
26
|
|
|
|
31
|
|
|
|
38
|
|
Finance, accounting, and administration
|
|
|
4
|
|
|
|
5
|
|
|
|
10
|
|
Human resource
|
|
|
1
|
|
|
|
2
|
|
|
|
2
|
|
Research and development
|
|
|
6
|
|
|
|
6
|
|
|
|
8
|
|
Clinical development
|
|
|
3
|
|
|
|
4
|
|
|
|
3
|
|
Regulatory affairs
|
|
|
6
|
|
|
|
6
|
|
|
|
5
|
|
Logistics, clinical supply and facility management
|
|
|
5
|
|
|
|
6
|
|
|
|
4
|
|
Public relations and communications, IT
|
|
|
1
|
|
|
|
2
|
|
|
|
2
|
|
Legal, Business Development
|
|
|
2
|
|
|
|
1
|
|
|
|
1
|
|
CEO, Executive Vice President, Executive chairman
|
|
|
4
|
|
|
|
3
|
|
|
|
2
|
|
Total
|
|
|
58
|
|
|
|
66
|
|
|
|
75
|
|
E. Share ownership
See "Item 7. MAJOR SHAREHOLDERS AND
RELATED PARTY TRANSACTIONS —A. Major Shareholders."
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
A. Major Shareholders
The following table and related footnotes set
forth information with respect to the beneficial ownership of the Ordinary Shares, as of July 31, 2018, by: (i) each of our directors
and executive officers, and (ii) each person known to us to own beneficially more than 5% of the Ordinary Shares as of July 31,
2018. As of July 31, 2018, we had 179,309,596 Ordinary Shares issued and outstanding.
Beneficial ownership is determined in accordance
with the rules and regulations of the SEC. In computing the number of Ordinary Shares owned by a person and the percentage ownership
of that person, we have included shares that the person has the right to acquire within 60 days, including through the exercise
of any option, warrant or other right or the conversion of any other security. These Ordinary Shares that the person has the right
to acquire within 60 days, however, are not included in the computation of the percentage ownership of any other person. Ownership
of the Ordinary Shares by the “principal shareholders” identified below has been determined by reference to our share
register, which provides us with information regarding the registered holders of the Ordinary Shares but generally provides limited,
or no, information regarding the ultimate beneficial owners of such Ordinary Shares. As a result, we may not be aware of each person
or group of affiliated persons who beneficially owns more than 5% of the Ordinary Shares.
Unless otherwise indicated, the business address
for each of the shareholders in the table below is c/o Oasmia Pharmaceutical AB, Vallongatan 1, 752 28, Uppsala, Sweden.
|
|
Ordinary Shares Beneficially
Owned
|
|
Name of Beneficial Owner
|
|
Number
|
|
|
Percent
|
|
Greater than 5% Shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per Arwidsson private and Arwidsro Investment AB
(1)
|
|
|
30,314,448
|
|
|
|
16.91
|
|
Alceco International S.A.
|
|
|
19,417,801
|
|
|
|
10.83
|
|
Försäkringsbolaget Avanza Pension
|
|
|
15,175,252
|
|
|
|
8.46
|
|
|
|
|
|
|
|
|
|
|
Directors and Executive Officers
|
|
|
|
|
|
|
|
|
Julian Aleksov
(2)
|
|
|
19,567,597
|
|
|
|
10.91
|
|
Bo Cederstrand
(3)
|
|
|
19,543,801
|
|
|
|
10.90
|
|
Mikael Asp
|
|
|
8,040
|
|
|
|
*
|
|
Anders Blom
|
|
|
116,850
|
|
|
|
*
|
|
Alexander Kotsinas
|
|
|
-
|
|
|
|
-
|
|
Lars Bergkvist
|
|
|
-
|
|
|
|
-
|
|
Per Langö
|
|
|
30,000
|
|
|
|
*
|
|
All Named Executive Officers and Directors as a Group (6 persons)
|
|
|
19,722,487
|
|
|
|
11.00
|
|
|
(1)
|
The
business address for Arwidsro Investment AB is Box 55938, SE-102 16, Stockholm, Sweden. Mr Arwidsson is the control person of
Arwidsro Investment AB
|
|
(2)
|
Consists
of 19,417,801 shares held through Alceco and 149,796 held by Mr. Aleksov separately. Messrs. Aleksov and Cederstrand are the control
persons of Alceco.
|
|
(3)
|
Consists
of 19,417,801 shares held through Alceco and 126,000 held by Mr. Cederstrand separately. Messrs. Aleksov and Cederstrand are the
control persons of Alceco.
|
Our shareholders do not have different voting
rights. We are not aware of any arrangement that may, at a subsequent date, result in a change of control of our company.
The following table sets forth information
with respect to the beneficial ownership of our ordinary shares by our major shareholders, which means shareholders that beneficially
own 5% or more of our ordinary shares, as of July 31, 2018, July 31, 2017 and July 31, 2016, each being the most recent
practicable date before reporting for the last three fiscal years.
|
|
2016
|
|
|
2017
|
|
|
2018
|
|
Name
|
|
# of
Shares
|
|
|
% of
issued
Shares*
|
|
|
# of
Shares
|
|
|
% of
issued
Shares*
|
|
|
# of
Shares
|
|
|
% of
issued
Shares*
|
|
Alceco International S.A.
(1)
|
|
|
25,536,445
|
|
|
|
23.82
|
%
|
|
|
21,648,765
|
|
|
|
12.52
|
%
|
|
|
19,417,801
|
|
|
|
10.83
|
%
|
Arwidsro Investment AB
(2)
|
|
|
-
|
|
|
|
-
|
|
|
|
22,667,856
|
|
|
|
13.11
|
%
|
|
|
30,314,448
|
|
|
|
16.91
|
%
|
|
(1)
|
Messrs.
Aleksov and Cederstrand are the control persons of Alceco.
|
|
(2)
|
Includes
the shares owned privately by Per Arwidsson. The business address for Arwidsro Investment AB is Box 55938, 102 16 Stockholm, Sweden.
Mr. Arwidsson is the control person of Arwidsro Investment AB.
|
B. Related Party Transactions
Transactions with major shareholders and companies controlled
by major shareholders
Alceco, Oasmia’s second largest shareholder,
see item 7 A Major Shareholders, has made a credit facility of SEK 40 million available to us. The credit facility is valid until
December 2018, and is renewed automatically for one-year terms, unless terminated by either party at least three months prior to
an expiration date. This credit facility was completely unused at April 30, 2018, as was the case at April 30, 2017. No other transactions
took place between Alceco and Oasmia.
After the rights issue carried out in July
2017, Arwidsro Investment AB is Oasmia’s largest shareholder. In connection with the share issue Arwidsro guaranteed a certain
amount and thus received a guarantee commission of SEK 4.49 million. During the year Arwidsro also received 24,193,548 warrants
with a carrying amount of SEK 8.71 million as compensation for a promise of credit.
Nexttobe, AB was Oasmia’s second largest
shareholder up until October 31, 2016, with a shareholding of 18.3 percent. However, this shareholding was divested as of November
1, 2016, which means that the relationship with Nexttobe is no longer a related party relationship. Nexttobe had the following
transactions with Oasmia during the last three fiscal years in million SEK:
in SEK million except Interest rate
|
|
April 30,
2018
|
|
|
April 30,
2017
|
|
|
April 30,
2016
|
|
Financial loan from Nexttobe, as per April 30
|
|
|
102.4
|
|
|
|
102.4
|
|
|
|
94.4
|
|
Accrued interest as per April 30
|
|
|
5.1
|
|
|
|
1.2
|
|
|
|
2.7
|
|
Interest rate, percent
|
|
|
8.5
|
|
|
|
3.5
|
|
|
|
8.5
|
|
Ardenia Investment Ltd, a company controlled
to equal parts by Oasmia’s founders Bo Cederstrand and Julian Aleksov, is registered as the applicant and holder of the patents
which forms the basis for Oasmia’s business. Through an agreement between Ardenia and Oasmia, the rights to these patents
have been transferred to Oasmia. Ardenia cross charges its administration costs for these patents. During the financial year 2017/2018,
Oasmia acquired new patent rights that extend the protection of XR17 for a further 8 years to 2036 for SEK 10.55 million.
Cross charged costs and Oasmia’s outstanding liability as
per April 30 for the last three fiscal years, million SEK:
|
|
May 1, 2016 –
April 30, 2018
|
|
|
May 1, 2015 –
April 30, 2017
|
|
|
May 1, 2014-
April 30, 2016
|
|
Cross charged administration costs
|
|
|
1.57
|
|
|
|
1.37
|
|
|
|
2.23
|
|
Acquisition of patent
|
|
|
10.55
|
|
|
|
-
|
|
|
|
|
|
Liability as per April 30
|
|
|
0.00
|
|
|
|
0.72
|
|
|
|
0.00
|
|
Transactions with Group companies
The Oasmia group consists of the parent company
Oasmia Pharmaceutical AB and the Swedish subsidiaries Oasmia Incentive AB (name changed from Oasmia Animal Health AB) and Qdoxx
Pharma AB, the Nevada-registered subsidiary AdvaVet, Inc. (name changed from Oasmia Pharmaceutical, Inc.), the Hong Kong-registered
subsidiary Oasmia Pharmaceutical Asia Pacific Limited and Moscow-registered subsidiary Oasmia RUS LLC. As per 30 April, 2018, all
subsidiaries are owned by Oasmia Pharmaceutical AB to 100%, except the Oasmia RUS, LLC which is owned by 80%. The subsidiaries
are thus under the control of Oasmia Pharmaceutical AB.
No sales of goods or services have taken place
between the parent company and the Swedish subsidiaries either during this year or the previous year.
The following table shows the loan transactions
during the year between the Parent Company and the Swedish subsidiaries and the opening and closing liabilities:
|
|
Qdoxx Pharma
|
|
|
Oasmia Incentive
|
|
in SEK thousand
|
|
2017/18
|
|
|
2016/17
|
|
|
2017/18
|
|
|
2016/17
|
|
Parent Company’s opening liabilities
|
|
|
62
|
|
|
|
99
|
|
|
|
1,601
|
|
|
|
204
|
|
Transactions during the year
|
|
|
(20
|
)
|
|
|
(37
|
)
|
|
|
1,140
|
|
|
|
1,397
|
|
Parent Company’s closing liabilities
|
|
|
42
|
|
|
|
62
|
|
|
|
2,741
|
|
|
|
1,601
|
|
The Parent Company made a shareholders’
cash contribution of SEK 50 thousand to Qdoxx during the year.
AdvaVet, Inc. (name changed from Oasmia Pharmaceutical,
Inc.), was founded in June 2015 by the parent company. The Parent Company paid a shareholders’ contribution of USD 17 thousand
during the year, which was reported in the Parent Company as Holdings in Group companies of SEK 145 thousand, and also issued a
loan of USD 70 thousand, of which USD 7 thousand has been repaid. The net amount of USD 63 thousand, the Parent Company’s
outstanding receivable at April 30, 2018, is reported as Receivables from Group companies of SEK 545 thousand. The Parent Company
recharged expenses of USD 40 thousand in total to AdvaVet during the year, corresponding to SEK 325 thousand, which had been paid
at April 30, 2018.
Oasmia Pharmaceutical Asia Pacific Limited
was founded in May 2016 by the parent company The Parent Company made a shareholders’ contribution of HKD 87 thousand to
Oasmia Pharmaceutical Asia Pacific during the year. This was initially reported in the Parent Company as Holdings in Group companies
of SEK 97 thousand but was written down by SEK 47 thousand to SEK 50 thousand at April 30, 2018. There were no dealings between
the companies at April 30, 2018.
The Russian subsidiary, which is 80 percent
owned, was founded during the year. The Parent Company purchased services from this subsidiary for EUR 60 thousand during the year,
which has been recorded as SEK 591 thousand. There were no dealings between the two companies at April 30, 2018.
Transactions with related individuals
For transactions with related individuals,
see item 6 B. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES Compensation
In accordance with a resolution adopted at
the Extraordinary General Meeting on June 2, 2017 concerning the issue of warrants, 5,543,182 warrants were issued and paid as
a shareholders’ contribution to Oasmia Incentive. These warrants were resold by Oasmia Incentive AB to Oasmia Pharmaceutical
AB’s Board and senior management for between SEK 0.17 and SEK 0.22 per warrant, depending on the market value at the time
of each individual issue. These warrants generated equity of SEK 1,171 thousand for Oasmia.
C. Interests of Experts and Counsel
Not Applicable
ITEM 8. FINANCIAL INFORMATION
A. Consolidated statements and other financial information
See Item 18. Financial Statements, which contains our financial
statements prepared in accordance with IFRS.
B. Significant Changes
Not applicable.
ITEM 9. THE OFFER AND LISTING
A. Offering and Listing Details
See "Item 9. C. Markets" for
information regarding the price history of our stock.
B. Plan of Distribution
Not Applicable.
C. Markets
The Ordinary Shares have been trading on NASDAQ
Stockholm under the symbol “OASM” since June 24, 2010 and on the Frankfurt Stock Exchange under the symbol “OMAX”
since January 24, 2011 and NASDAQ Capital Market under symbol “OASM” since October 23, 2015.
The following table sets forth, for the
periods indicated, the reported high and low closing sale prices of the Ordinary Shares on NASDAQ Stockholm and, the Frankfurt
Stock Exchange and ADSs on NASDAQ Capital Markets, in kronor and U.S. dollars, in Euros and U.S. dollars and U.S dollars, respectively.
U.S. dollar per ordinary share amounts have been translated into U.S. dollars at $1.00 = SEK 9.0813 and $1.00 = €0.8642 based
on the certified foreign exchange rates published by the Federal Reserve Bank of New York on September 7, 2018.
NASDAQ Stockholm
|
|
Swedish Krona
|
|
|
U.S. Dollar
|
|
|
|
Price Per Ordinary Share
|
|
|
Price Per Ordinary Share
|
|
|
|
High
|
|
|
Low
|
|
|
High
|
|
|
Low
|
|
Annual (Year Ended April 30):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
|
29.80
|
|
|
|
10.00
|
|
|
|
3.28
|
|
|
|
1.10
|
|
2015
|
|
|
23.00
|
|
|
|
18.30
|
|
|
|
2.53
|
|
|
|
2.02
|
|
2016
|
|
|
19.20
|
|
|
|
8.30
|
|
|
|
2.11
|
|
|
|
0.91
|
|
2017
|
|
|
13.75
|
|
|
|
5.00
|
|
|
|
1.51
|
|
|
|
0.55
|
|
2018
|
|
|
6.95
|
|
|
|
2.34
|
|
|
|
0.77
|
|
|
|
0.26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarterly (Fourth Quarter Ended April 30):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter 2016
|
|
|
18.30
|
|
|
|
11.25
|
|
|
|
2.02
|
|
|
|
1.24
|
|
Third Quarter 2016
|
|
|
12.65
|
|
|
|
10.15
|
|
|
|
1.39
|
|
|
|
1.12
|
|
Fourth Quarter 2016
|
|
|
13.20
|
|
|
|
8.30
|
|
|
|
1.45
|
|
|
|
0.91
|
|
First Quarter 2017
|
|
|
13.75
|
|
|
|
8.90
|
|
|
|
1.51
|
|
|
|
0.98
|
|
Second Quarter 2017
|
|
|
10.60
|
|
|
|
7.70
|
|
|
|
1.17
|
|
|
|
0.85
|
|
Third Quarter 2017
|
|
|
10.45
|
|
|
|
7.90
|
|
|
|
1.15
|
|
|
|
0.87
|
|
Fourth Quarter 2017
|
|
|
8.15
|
|
|
|
5.00
|
|
|
|
0.90
|
|
|
|
0.55
|
|
First Quarter 2018
|
|
|
6.95
|
|
|
|
2.92
|
|
|
|
0.77
|
|
|
|
0.32
|
|
Second Quarter 2018
|
|
|
3.13
|
|
|
|
2.34
|
|
|
|
0.34
|
|
|
|
0.26
|
|
Third Quarter 2018
|
|
|
4.21
|
|
|
|
2.42
|
|
|
|
0.46
|
|
|
|
0.27
|
|
Fourth Quarter 2018
|
|
|
5.63
|
|
|
|
3.71
|
|
|
|
0.62
|
|
|
|
0.41
|
|
First Quarter 2019
|
|
|
7.92
|
|
|
|
3.96
|
|
|
|
0.87
|
|
|
|
0.44
|
|
Second Quarter 2019 (through Aug 24, 2018)
|
|
|
5.99
|
|
|
|
4.25
|
|
|
|
0.66
|
|
|
|
0.47
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Most Recent Six Months:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 2018
|
|
|
4.05
|
|
|
|
3.81
|
|
|
|
0.45
|
|
|
|
0.42
|
|
April 2018
|
|
|
5.63
|
|
|
|
3.78
|
|
|
|
0.62
|
|
|
|
0.42
|
|
May 2018
|
|
|
5.04
|
|
|
|
3.97
|
|
|
|
0.55
|
|
|
|
0.44
|
|
June 2018
|
|
|
4.46
|
|
|
|
4.02
|
|
|
|
0.49
|
|
|
|
0.44
|
|
July 2018
|
|
|
7.92
|
|
|
|
4.00
|
|
|
|
0.87
|
|
|
|
0.44
|
|
August 2018 (through Aug 24, 2018)
|
|
|
5.99
|
|
|
|
4.25
|
|
|
|
0.66
|
|
|
|
0.47
|
|
Frankfurt Stock Exchange
|
|
Euro
|
|
|
U.S. Dollar
|
|
|
|
Price Per Ordinary Share
|
|
|
Price Per Ordinary Share
|
|
|
|
High
|
|
|
Low
|
|
|
High
|
|
|
Low
|
|
Annual (Year Ended April 30):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
|
3.31
|
|
|
|
1.13
|
|
|
|
3.83
|
|
|
|
1.31
|
|
2015
|
|
|
2.48
|
|
|
|
1.87
|
|
|
|
2.87
|
|
|
|
2.16
|
|
2016
|
|
|
2.10
|
|
|
|
0.89
|
|
|
|
2.43
|
|
|
|
1.03
|
|
2017 (through Aug 11, 2017 *)
|
|
|
1.44
|
|
|
|
0.52
|
|
|
|
1.67
|
|
|
|
0.60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarterly (Fourth Quarter Ended April 30):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter 2016
|
|
|
1.93
|
|
|
|
1.18
|
|
|
|
2.23
|
|
|
|
1.36
|
|
Third Quarter 2016
|
|
|
1.35
|
|
|
|
1.06
|
|
|
|
1.56
|
|
|
|
1.23
|
|
Fourth Quarter 2016
|
|
|
1.40
|
|
|
|
0.89
|
|
|
|
1.62
|
|
|
|
1.03
|
|
First Quarter 2017
|
|
|
1.44
|
|
|
|
0.94
|
|
|
|
1.67
|
|
|
|
1.09
|
|
Second Quarter 2017
|
|
|
1.09
|
|
|
|
0.77
|
|
|
|
1.26
|
|
|
|
0.89
|
|
Third Quarter 2017
|
|
|
1.04
|
|
|
|
0.79
|
|
|
|
1.20
|
|
|
|
0.91
|
|
Fourth Quarter 2017
|
|
|
0.86
|
|
|
|
0.52
|
|
|
|
1.00
|
|
|
|
0.60
|
|
First Quarter 2018
|
|
|
0.70
|
|
|
|
0.29
|
|
|
|
0.81
|
|
|
|
0.34
|
|
Second Quarter 2018 (through Aug 11, 2017 *)
|
|
|
0.30
|
|
|
|
0.29
|
|
|
|
0.35
|
|
|
|
0.34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Most Recent Six Months:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 2017
|
|
|
0.63
|
|
|
|
0.52
|
|
|
|
0.73
|
|
|
|
0.60
|
|
April 2017
|
|
|
0.70
|
|
|
|
0.62
|
|
|
|
0.81
|
|
|
|
0.72
|
|
May 2017
|
|
|
0.70
|
|
|
|
0.51
|
|
|
|
0.81
|
|
|
|
0.59
|
|
June 2017
|
|
|
0.54
|
|
|
|
0.30
|
|
|
|
0.62
|
|
|
|
0.35
|
|
July 2017
|
|
|
0.32
|
|
|
|
0.29
|
|
|
|
0.37
|
|
|
|
0.34
|
|
August 2017 (through Aug 11, 2017 *)
|
|
|
0.30
|
|
|
|
0.29
|
|
|
|
0.35
|
|
|
|
0.34
|
|
*) Oasmia has inadvertently failed to fulfil
one of the listing rules of the Frankfurt Stock Exchange. This was noted by the Frankfurt Stock Exchange during the period and
they thus temporarily suspended trading of the share as of August 11, 2017.
NASDAQ Capital Markets
|
|
U.S. Dollar
|
|
|
|
Price Per ADS (1)
|
|
|
|
High
|
|
|
Low
|
|
Annual (Year Ended April 30):
|
|
|
|
|
|
|
|
|
2016 (from listing October 23, 2015)
|
|
|
4.70
|
|
|
|
2.94
|
|
2017
|
|
|
4.87
|
|
|
|
4.17
|
|
2018
|
|
|
2.26
|
|
|
|
0.80
|
|
Quarterly (Fourth Quarter Ended April 30):
|
|
|
|
|
|
|
|
|
Second Quarter 2016 (from listing October 23, 2015)
|
|
|
4.29
|
|
|
|
3.70
|
|
Third Quarter 2016
|
|
|
4.29
|
|
|
|
3.26
|
|
Fourth Quarter 2016
|
|
|
4.70
|
|
|
|
2.94
|
|
First Quarter 2017
|
|
|
4.87
|
|
|
|
3.05
|
|
Second Quarter 2017
|
|
|
3.65
|
|
|
|
2.51
|
|
Third Quarter 2017
|
|
|
3.70
|
|
|
|
2.67
|
|
Fourth Quarter 2017
|
|
|
2.85
|
|
|
|
1.66
|
|
First Quarter 2018
|
|
|
2.26
|
|
|
|
0.96
|
|
Second Quarter 2018
|
|
|
1.13
|
|
|
|
0.80
|
|
Third Quarter 2018
|
|
|
1.75
|
|
|
|
0.86
|
|
Fourth Quarter 2018
|
|
|
1.91
|
|
|
|
1.24
|
|
First Quarter 2019
|
|
|
2.84
|
|
|
|
1.20
|
|
Second Quarter 2019 (through Aug 24, 2018)
|
|
|
1.97
|
|
|
|
1.38
|
|
|
|
|
|
|
|
|
|
|
Most Recent Six Months:
|
|
|
|
|
|
|
|
|
March 2018
|
|
|
1.47
|
|
|
|
1.24
|
|
April 2018
|
|
|
1.91
|
|
|
|
1.29
|
|
May 2018
|
|
|
1.66
|
|
|
|
1.23
|
|
June 2018
|
|
|
1.49
|
|
|
|
1.30
|
|
July 2018
|
|
|
2.84
|
|
|
|
1.20
|
|
August 2018 (through Aug 24, 2018)
|
|
|
1.97
|
|
|
|
1.38
|
|
|
(1)
|
Each
ADS represents three (3) Ordinary Shares.
|
D. Selling Shareholders
Not applicable.
E. Dilution
Not applicable
F. Expenses of the Issue
Not applicable.
ITEM 10. ADDITIONAL INFORMATION
A. Share capital.
Not applicable
B. Memorandum and articles of association
Our Articles of Association were amended on
September 25, 2017 to raise the range for share capital and number of authorized shares. The share capital shall be no less than
SEK 8,500,000 and not more than SEK 34,000,000 and the number of shares shall be no less than 85,000,000 and not more than 340,000,000.
Except as set forth above, we incorporate by
reference the description of our Articles of Association as in effect upon the closing of our IPO contained in the F-1 registration
statement (File No. 333-205515) originally filed with the SEC July 6, 2015, as amended.
C. Material contracts.
Except as otherwise disclosed in this annual
report (including the Exhibits) and in the F-1 registration statement (File No. 333-205515) originally filed with the SEC July
6, 2015, as amended., we are currently not, and have not been in the three years preceding publication of this annual report, party
to any material contract, other than contracts entered into in the ordinary course of business, fully described in the section
entitled “Item 4.B Business overview”.
D. Exchange controls
There is no Swedish legislation affecting a)
the import or export of capital or b) the remittance of dividends, interest or other payments to non-resident holders of our securities
except that, subject to the provisions in any tax treaty, dividends are subject to withholding tax.
E. Taxation
TAXATION
HOLDERS OF OUR ADSs ARE HEREBY NOTIFIED
THAT THEY SHOULD SEEK SPECIFIC ADVICE BASED ON THEIR PARTICULAR CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISOR WITH RESPECT TO THE
APPLICATION TO THEM OF U.S. FEDERAL INCOME TAX RULES, AS WELL AS ANY APPLICABLE STATE, LOCAL, NON-U.S. OR OTHER TAX CONSEQUENCES,
AS A RESULT OF THEIR PURCHASE, OWNERSHIP AND DISPOSITION OF THE ADSs.
Material U.S. Federal Income Tax Considerations
Subject to the limitations described below,
the following is a summary of the material U.S. federal income tax consequences of the purchase, ownership and disposition of ADSs
to a “U.S. Holder.” Non-U.S. Holders are urged to consult their own tax advisors regarding the U.S. federal income
tax consequences to them of the purchase, ownership and disposition of ADSs. For purposes of this discussion, a “U.S. Holder”
is a beneficial owner of ADSs that is, for U.S. federal income tax purposes:
|
•
|
an
individual who is a citizen or resident of the U.S.;
|
|
•
|
a
corporation (including any entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under
the laws of the U.S., any state thereof or the District of Columbia;
|
|
•
|
an
estate the income of which is subject to U.S. federal income tax purposes regardless of its source; or
|
|
•
|
a
trust (A) if a court within the U.S. is able to exercise primary jurisdiction over the trust’s administration and one or
more U.S. persons have the authority to control all its substantial decisions, or (B) if, in general, it was in existence on August
20, 1996, was treated as a U.S. person under the Code (as defined below) on the previous day and made a valid election to continue
to be so treated.
|
The term “Non-U.S. Holder” means
a beneficial owner of ADSs that, for U.S. federal income tax purposes, is or is treated as an individual, corporation, trust or
estate and is not a U.S. Holder. The term “Holder” means U.S. Holders and Non-U.S. Holders.
This discussion is based on current provisions
of the Internal Revenue Code of 1986 (the “Code”), applicable U.S. Treasury Regulations promulgated thereunder, and
administrative and judicial decisions as of the date hereof, all of which are subject to change, possibly on a retroactive basis
(and any such change could affect the continuing accuracy of this discussion). We will not seek a ruling from the Internal Revenue
Service (the “IRS”) with regard to the U.S. federal income tax treatment of the ADSs and, therefore, there can be no
assurance that the IRS will agree with the conclusions set forth below.
This summary does not purport to be a comprehensive
description of all of the tax considerations that may be relevant to each person’s decision to purchase ADSs. This discussion
does not address all aspects of U.S. federal income taxation that may be relevant to any particular U.S. Holder based on its particular
circumstances. In particular, this discussion considers only U.S. Holders that own or will own ADSs as capital assets within the
meaning of section 1221 of the Code and does not address the potential application of U.S. federal alternative minimum tax or the
U.S. federal income tax consequences to U.S. Holders that are subject to special treatment, including:
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broker
dealers or insurance companies;
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U.S.
Holders who have elected mark-to-market accounting;
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tax-exempt
organizations or pension funds;
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regulated
investment companies, real estate investment trusts, insurance companies, financial institutions or “financial services
entities”;
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U.S.
Holders who hold ADSs as part of a “straddle,” “hedge,” “constructive sale” or “conversion
transaction” or other integrated investment;
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U.S.
Holders who own or owned, directly, indirectly or by attribution, at least 10% of the voting power of our Ordinary Shares;
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U.S.
Holders whose functional currency is not the U.S. Dollar;
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persons
holding ADSs in connection with a trade or business outside of the United States; and
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certain
expatriates or former long-term residents of the United States.
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This discussion does not consider the tax treatment
of holders that are partnerships (including entities treated as partnerships for U.S. federal income tax purposes) or other pass-through
entities or persons who hold ADSs through a partnership or other pass-through entity. Partnerships or partners of a partnership
holding any ADSs should consult their own tax advisors regarding the tax considerations associated with holding ADSs. In addition,
this discussion does not address any aspect of state, local or non-U.S. tax laws, or the possible application of U.S. federal gift
or estate tax.
Taxation of Dividends Paid on ADSs
Assuming that we are not a PFIC (as discussed
below), a U.S. Holder will be required to include in gross income as a dividend the U.S. Dollar amount of any distribution paid
on ADSs, including the amount of non-U.S. taxes, if any, withheld from the amount paid, on the date the distribution is received
to the extent the distribution is paid out of our current or accumulated earnings and profits as determined for U.S. federal income
tax purposes. Distributions in excess of such earnings and profits will be applied against and will reduce the U.S. Holder’s
basis in its ADSs and, to the extent in excess of such basis, will be treated as gain from the sale or exchange of ADSs. We do
not intend to calculate our earnings and profits for U.S. federal income tax purposes. Therefore, a U.S. Holder should expect that
a distribution generally will be treated as a dividend even if that distribution would otherwise be treated as a non-taxable return
of capital under the rules set forth above.
Dividends are generally taxed at ordinary income
rates. However, a maximum U.S. federal income tax rate of 20% will apply to “qualified dividend income” received by
individuals (as well as certain trusts and estates), provided that certain eligibility requirements are met. In particular, a U.S.
Holder will not be entitled to this rate: (i) if the U.S. Holder has not held our ADSs for at least 61 days of the 121-day period
beginning on the date which is 60 days before the ex-dividend date; or (ii) to the extent the U.S. Holder is under an obligation
to make related payments on substantially similar or related property. Any days during which a U.S. Holder has diminished its risk
of loss on our ADSs are not counted towards meeting the 61-day holding period. “Qualified dividend income” includes
dividends paid on shares of “qualified foreign corporations” (which term excludes PFICs) if the foreign corporation
is eligible for the benefits of a comprehensive income tax treaty with the United States which contains an exchange of information
program (a “qualifying treaty”). If we are a PFIC in the year in which a dividend is paid or the preceding year, we
will not be a “qualified foreign corporation” and the dividend will not qualify for the reduced rate of tax (even assuming
that a reduced rate is available at such time). Because of the uncertainty of these matters, including whether or not we are or
will be a PFIC, there is no assurance that any dividends paid on the ADSs will be eligible for these preferential rates in the
hands of such a U.S. Holder, and any dividends paid on the ADSs that are not eligible for these preferential rates will be taxed
as ordinary income to U.S. Holders. Dividends received by corporate shareholders do not qualify for the preferential tax rate discussed
above; moreover, dividends from a non-U.S. corporation generally will not qualify for the dividends received deduction generally
available to U.S. corporate shareholders.
Distributions paid on our ADSs generally will
be foreign-source passive income for U.S. foreign tax credit purposes.
Taxation of the Sale or Exchange of ADSs
Unless a non-recognition rule applies, on a
sale, exchange or other disposition of ADSs, a U.S. Holder generally will recognize gain or loss in an amount equal to the difference
between the U.S. Dollar amount realized on such sale or exchange and the U.S. Holder’s adjusted tax basis in such ADSs determined
in U.S. Dollars. The initial tax basis of ADSs to a U.S. Holder will be the U.S. Holder’s U.S. Dollar cost for ADSs.
Subject to the application of the PFIC rules
discussed below, such gain or loss generally will be capital gain or loss and will be long-term capital gain or loss if the U.S.
Holder’s holding period of the ADSs exceeds one year at the time of the disposition. Individual U.S. Holders are generally
subject to a maximum tax rate of 20% on long-term capital gain. Corporate U.S. Holders do not have a preferential rate on capital
gains and their capital gain income generally is subject to U.S. federal income tax at the same rate as ordinary income. The deductibility
of capital losses is subject to limitations. Gain or loss recognized by a U.S. Holder on a sale or exchange of ADSs generally will
be treated as U.S.-source income or loss for U.S. foreign tax credit purposes.
Taxation on Exercise, Sale or Lapse of
Warrants
There are no tax consequences to U.S. Holders
on the exercise of the Warrants. A U.S. Holder’s tax basis in the ADSs acquired through the exercise of the Warrants is the
exercise price plus the cost of the warrants ($.01 per Warrant). A U.S. Holder’s holding period in shares acquired through
an exercise of the warrants commences on the date of exercise. The ADSs so acquired are then treated in the same manner as the
U.S. Holder’s other ADSs, discussed above (and are also subject to the PFIC rules discussed below).
If a U.S. Holder sells the Warrants, he will
recognize gain to the extent that the proceeds of the sale exceed his tax basis in the Warrants. For individual U.S. Holders this
gain will be long term capital gain if the Warrants have been held for more than a year at the time of sale, and short-term capital
gain if held for a year or less.
No gain is recognized by a U.S. Holder on the
expiration of the Warrants. A U.S. Holder would have a capital loss on the expiration of the Warrants equal to his tax basis in
the Warrants.
Foreign Tax Credit Considerations
We expect that we will be required to withhold
non-U.S. taxes upon payment to a U.S. Holder of a dividend. If any such withholding were required, a U.S. Holder will have the
option of claiming the amount of any non-U.S. income taxes withheld on a dividend distribution either as a deduction from gross
income or as a dollar-for-dollar credit against its U.S. federal income tax liability. The amount of foreign income taxes that
may be claimed as a credit in any year is subject to complex limitations, which must be determined on an individual basis by each
U.S. Holder.
Passive Foreign Investment Company Status
There may be adverse tax consequences to U.S.
Holders if we are determined to be a PFIC. We will be a PFIC if
(i) 75% or more of our gross income in any
taxable year is passive income. Passive income includes interest, dividends, certain royalties, certain rents and annuities, and
amounts derived by the investment of funds raised in our initial public offering of ADSs and other offerings. Passive income also
includes our pro rata share of the gross income of any company (U.S. or foreign) that is treated as a corporation for U.S. federal
income tax purposes and of which we are considered to own, directly or indirectly, 25% or more of the shares by value (a “25%
subsidiary”), or
(ii) the average value of our assets that are
held for the production of, or produce, passive income is 50% or more of the average value of our total assets during the taxable
year. In making this determination, according to the IRS, “the average value of [our] assets for the taxable year [is] the
average of the fair market values of [our] assets determined as of the end of each quarterly period during [our] taxable year.”
For purposes of determining whether we are a PFIC our assets include our pro rata share of the assets of any 25% subsidiary.
The determination of whether we are a PFIC
is thus made annually and is based upon the composition of our income and assets and the nature of our activities. Further, each
of our subsidiaries is separately tested to determine if it is a PFIC and, if we are a PFIC, any of our subsidiaries could also
be a PFIC with respect to a U.S. Holder.
Based on the Code, Treasury Regulations promulgated
under the Code and IRS guidance, there can be no assurance that we are not a PFIC now and, if not a PFIC now, that we will not
become a PFIC in the future. If we are a PFIC, and a U.S. Holder does not make an election to treat us as a “qualified electing
fund” (a “QEF”) or does not make a “mark-to-market election” (as described below) the following consequences
would arise:
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Excess distributions by us to such a U.S. Holder would be taxed in a special way. “Excess distributions” are amounts received by a U.S. Holder with respect to the ADSs in any taxable year that exceed 125% of the average distributions received by such U.S. Holder from us in the shorter of either the three previous years or such U.S. Holder’s holding period for ADSs before the current taxable year. Excess distributions must be allocated ratably to each day that a U.S. Holder has held the ADSs. A U.S. Holder must include amounts allocated to the current taxable year and amounts allocated to certain years prior to us being a PFIC in its gross income as ordinary income for that year. A U.S. Holder must pay tax on amounts allocated to each prior taxable year when we were a PFIC at the highest rate in effect for that year on ordinary income and the tax is subject to an interest charge at the rate applicable to deficiencies for income tax.
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A disposition of shares in, or a distribution by, one of our subsidiaries that is a PFIC will trigger the excess distributions rules described above.
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The entire amount of gain that is realized by a U.S. Holder upon the sale or other disposition of ADSs will also be considered an excess distribution and will be subject to tax as described above.
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A U.S. Holder’s tax basis in shares of the ADSs that were acquired from a decedent would not receive a step-up to fair market value as of the date of the decedent’s death but would instead be equal to the decedent’s basis, if lower.
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In addition, if we are a PFIC, the lower rate
of taxation applicable to qualified dividend income derived by certain non-corporate U.S. Holders, as discussed above, would not
apply to dividends paid with respect to our ADSs.
If a U.S. Holder of PFIC shares makes a timely
QEF election with respect to its PFIC shares, then in lieu of the consequences described above, the U.S. Holder would be required
to include in income each year its pro-rata share of the PFIC’s net capital gain and ordinary income. If we are a PFIC, we
would need to make available the information necessary in order for a U.S. Holder to make this election, but, assuming that we
were characterized as a PFIC, we have not made a decision as to whether or not we would make this information available. Therefore,
U.S. Holders should not assume that they would be able to make a QEF election with respect to the ADSs.
Alternatively, a U.S. Holder that holds “marketable
stock” in a PFIC may avoid the imposition of the additional tax and interest described above by making a mark-to-market election
in the first year of its holding period for its PFIC shares. We believe that the ADSs will be “marketable stock” for
purposes of the mark-to-market election. Generally, stock will be considered “marketable stock” if it is “regularly
traded” on a “qualified exchange” within the meaning of the applicable Treasury regulations. A class of stock
is regularly traded during any calendar year during which such class of stock is traded, other than in de minimis quantities, on
at least 15 days during each calendar quarter. However, there can be no certainty that the ADSs will continue to be sufficiently
traded such as to be treated as “regularly traded”. If a U.S. Holder were to make a timely mark-to-market election
with respect to ADSs that it will own at the close of its taxable year, such electing U.S. Holder would for the year of the election
and each subsequent taxable year include as ordinary income or, to the extent of prior ordinary income, ordinary loss based on
the increase or decrease in the market value of such U.S. Holder’s ADSs for such taxable year. An electing U.S. Holder’s
tax basis in its ADSs will be adjusted to reflect any such income or loss. Any gain or loss on the sale of ADSs will be ordinary
income or loss, except that any loss will be ordinary loss only to the extent of the previously included net mark-to-market gain.
An election to mark-to-market applies to the year for which the election is made and to subsequent years unless the IRS consents
to the revocation of the election. The election is terminated for any year in which the PFIC shares are not “marketable stock”.
If we were a PFIC and then were to cease being a PFIC, a U.S. Holder that marked its ADSs to market would not include mark-to-market
gain or loss with respect to its ADSs for any taxable year that we were no longer a PFIC. If we again were to become a PFIC in
a taxable year after a year in which we were not a PFIC, a U.S. Holder’s original mark-to-market election, unless revoked
or terminated, would continue to apply and such U.S. Holder would be required to include any mark-to-market gain or loss in such
year.
A mark-to-market election applies only to the
non-U.S. corporation for which it is made. If any of our subsidiaries were to be a PFIC, a U.S. Holder likely would remain subject
to the excess distribution rules with respect to its indirectly owned shares in any such subsidiary even if such U.S. Holder has
made a mark-to-market election in our respect.
If we are a PFIC for any year during which
a U.S. Holder holds ADSs we will generally continue to be treated as a PFIC with respect to the U.S. Holder for all succeeding
years during which the U.S. Holder holds ADSs, even if we cease to meet the threshold requirements for PFIC status. As noted above,
if a U.S. Holder was permitted to make a mark-to-market election and did so in a timely manner, we will not be treated as a PFIC
with respect to such U.S. Holder for any year in which we do not meet the threshold requirements for PFIC status. The same rule
appears to apply in the case of a U.S. Holder who was permitted to, and timely made, a QEF election, although the issue is not
entirely free from doubt.
A U.S. Holder that owns any shares of a foreign
corporation classified as a PFIC is generally required to file Form 8621 (Return by a Shareholder of a Passive Foreign Investment
Company or a Qualified Electing Fund) in each year that such shares are held.
U.S. Holders are urged to consult their tax
advisors about the PFIC rules and the related filing requirements. Our U.S. counsel expresses no opinion with respect to our PFIC
status in any prior taxable year or the current taxable year which ends April 30, 2018, and also expresses no opinion with respect
to any predictions regarding our PFIC status in the future.
Certain Reporting Obligations
Section 6038D of the Code generally requires
U.S. individuals (and possibly certain entities that have U.S. individual owners) to file IRS Form 8938 if they hold certain “specified
foreign financial assets,” the aggregate value of which exceeds $50,000 on the last day of the taxable year (or the aggregate
value of which exceeds $75,000 at any time during the taxable year). (Higher reporting thresholds apply to married taxpayers filing
joint returns and to taxpayers living outside the U.S.) The definition of specified foreign financial assets includes not only
financial accounts maintained in foreign financial institutions, but also, unless held in accounts maintained by a financial institution,
any stock or security issued by a non-U.S. person including the ADSs. In general, if we were to be treated as a PFIC, a U.S. Holder
would not be required to report ownership of the ADSs under Section 6038D of the Code if such ownership were reported on Form 8621
described above under “Passive Foreign Investment Company Status” and that fact is noted on the Form 8938. U.S. Holders
should consult their own tax advisors to determine whether they are subject to any Form 8938 filing requirements.
Foreign Account Tax Compliance Act
Under certain circumstances, we or our paying
agent may be required, pursuant to Sections 1471 through 1474 of the Code and the regulations promulgated thereunder, any agreement
entered into pursuant to Section 1472(b) of the Code, or any U.S. or non-U.S. fiscal or regulatory legislation, rules, guidance
notes or practices adopted pursuant to any intergovernmental agreement entered into in connection with the implementation of such
sections of the Code or analogous provisions of non-U.S. law (“FATCA”), to withhold U.S. tax at a rate of 30% on all
or a portion of payments of dividends or other corporate distributions which are treated as “foreign pass-thru payments”
made on or after January 1, 2017, if such payments are not in compliance with FATCA. Such payments can generally be made in compliance
with FATCA if the paying agent obtains from the payee a Form W-9 or other information establishing an exemption from such withholding.
The rules regarding FATCA and “foreign pass-thru payments,” including the treatment of proceeds from the disposition
of ADSs, are very complex and U.S. Holders are encouraged to consult their own tax advisors on the impact of the FATCA rules on
them.
Medicare Tax on Net Investment Income
A 3.8% tax is generally imposed on the net
investment income in excess of certain thresholds of certain individuals and on the undistributed net investment income of certain
estates and trusts. For these purposes, “net investment income” will generally include interest, dividends (including
dividends, if any, paid with respect to the ADSs), annuities, royalties, rent, net gain attributable to the disposition of property
not held in a trade or business (including net gain from the sale, exchange or other taxable disposition of ADSs) and certain other
income, but will be reduced by any deductions properly allocable to such income or net gain. U.S. Holders are advised to consult
their own tax advisors regarding additional taxation of net investment income.
U.S. Information Reporting and Backup
Withholding
A U.S. Holder is generally subject to information
reporting requirements with respect to dividends paid in the United States on ADSs and proceeds paid from the sale, exchange, redemption
or other disposition of ADSs. A U.S. Holder is subject to backup withholding (currently at 28%) on dividends paid in the United
States on ADSs and proceeds paid from the sale, exchange, redemption or other disposition of our ADSs unless the U.S. Holder is
a corporation, provides an IRS Form W-9 to the payor or the paying agent, or otherwise establishes a basis for exemption.
Backup withholding is not an additional tax.
Amounts withheld under the backup withholding rules may be credited against a U.S. Holder’s U.S. federal income tax liability,
and a U.S. Holder may obtain a refund from the IRS of any excess amount withheld under the backup withholding rules, provided that
certain information is timely furnished to the IRS. U.S. Holders are urged to consult their own tax advisors regarding the application
of backup withholding and the availability of and procedures for obtaining an exemption from backup withholding in their particular
circumstances.
The foregoing discussion of certain material
U.S. federal income tax considerations is for general information only and is not tax advice. Accordingly, each U.S. Holder should
consult with his, her or its own tax advisor regarding U.S. federal, state, local and non-U.S. income and other tax consequences
of the acquisition, holding and disposing of the ADSs.
F. Dividends and Paying Agents
Not applicable.
G. Statement by Experts
Not applicable.
H. Documents on Display
We are subject to the informational requirements
of the Exchange Act. Accordingly, we are required to file reports and other information with the SEC, including annual reports
on Form 20-F and reports on Form 6-K in limited circumstances; however, we may elect to make additional information available
on Form 6-K.
We are not required to disclose certain other
information that is required from U.S. domestic issuers, including but not limited to detailed executive compensation disclosure
and quarterly disclosure as to our assessment of our internal control over financial reporting. Also, as a foreign private issuer,
we are exempt from the rules of the Securities Exchange Act of 1934 prescribing the furnishing of proxy statements to shareholders
and our executive officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery
provisions contained in Section 16 of the Securities Exchange Act of 1934.
As a foreign private issuer, we are also exempt
from the requirements of Regulation FD (Fair Disclosure) that, generally, are meant to ensure that select groups of investors are
not privy to specific information about an issuer before other investors. We are, however, still subject to the anti-fraud and
anti-manipulation rules of the SEC, such as Rule 10b-5. Since many of the disclosure obligations required of us as a foreign private
issuer are different than those required by other U.S. domestic reporting companies, our shareholders, potential shareholders and
the investing public in general should not expect to receive information about us in the same amount and at the same time as information
is received from, or provided by, U.S. domestic reporting companies. We are liable for violations of the rules and regulations
of the SEC, which do apply to us as a foreign private issuer.
You may inspect and copy reports and other
information filed with the SEC at the Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Information on
the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330 free. In addition, the SEC
maintains an Internet website that contains reports and other information about issuers, like us, that file electronically with
the SEC. The address of that website is www.sec.gov.
I. Subsidiary Information
See “ITEM 4. INFORMATION ON THE COMPANY
- C. Organizational Structure” and “Exhibit F-8; Notes to the Consolidated Financial Statements - NOTE 26 HOLDINGS
IN GROUP COMPANIES”
ITEM 11 QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET
RISK
A. Quantitative and Qualitative Disclosures about Credit, Market
and Other Risk
We are exposed to market risks in the ordinary
course of our business. Market risk represents the risk of loss that may impact our financial position, results of operations or
cash flows due to adverse changes in financial market prices and rates, including interest rates, foreign exchange rates and market
prices, of financial instruments. Our market risk exposure is a result of interest rates, foreign currency exchange rates and market
prices.
Interest Rate Risk
Oasmia has on April 30, 2018 SEK 188.4 million
as interest-bearing loans, consisting of a loan from Nexttobe, AB of SEK 102.4 million, non-negotiable promissory notes issued
in June 2017 of SEK 6.0 million, non-negotiable promissory notes issued in April 2018 of SEK 26.0 million, one convertible loan
(2017:3) of SEK 28.0 million and one convertible loan (2018:1) of SEK 26.0 million.
The loan from Nexttobe AB plus accrued interest
amount to SEK 107.5 million and the fair value to SEK 107.3 million. This has been calculated as the net present value of the future
cash flow of the loan. A discount rate of 10 percent has been used, which is the assumed market rate for equivalent loans. The
loan had a fixed interest rate of 3,5 % until it was about to mature on September 30, 2017. The loan was then extended and at April
30, 2018 it had a maturity date of May 31, 2018. However, after balance sheet day the loan has been renegotiated and, during August
2018, replaced by other loans, please see “Events after balance sheet date of April 30, 2018” on
page
57
. The loan carried interest of 8.5% and during the financial year ending April 30, 2018, interest expenses for this loan
amount to SEK 6.56 million compared to SEK 6.55 million in the previous year and were recognized in the income statement as financial
expenses. As the interest rate up until maturity is pursuant to a written agreement, there is a liquidity risk but no interest-rate
risk.
The convertible loans fall due on November
30, 2018 and April 22, 2019 respectively, and the interest rate until then is fixed to 8.0 %. The interest rate up until maturity
is pursuant to a written agreement, and consequently there is a liquidity risk and a risk that these loans at maturity will be
prolonged or replaced by other loans to less favorable terms but no interest-rate risk.
The non-negotiable promissory notes issued
in June 2017.
When convertible loan 2016:2 of SEK 42.0 million
matured in June 2017, it was replaced by non-negotiable promissory notes in the same amount. Of these promissory notes, a net amount
of SEK 36.0 million was repaid during the year so that a liability of SEK 6.0 million remained on April 30, 2018. This liability
carries interest of 8.5% and matures on September 30, 2018. Its fair value amounted to SEK 6.4 million at April 30, 2018. Fair
value has been calculated as described regarding the loan from Nexttobe above. The interest rate up until maturity is pursuant
to a written agreement, and consequently there is a liquidity risk and a risk that these loans at maturity will be prolonged or
replaced by other loans to less favorable terms but no interest-rate risk..
Non-negotiable promissory notes issued in April
2018.
When convertible loan 2017:2 of SEK 26.0 million
matured in April 2018, it was replaced by non-negotiable promissory notes in the same amount. These carry interest of 8.5% and
mature on September 30, 2018. Their fair value was TSEK 26,033 at April 30, 2018. Fair value has been calculated as described regarding
the loan from Nexttobe above. The interest rate up until maturity is pursuant to a written agreement, and consequently there is
a liquidity risk and a risk that these loans at maturity will be prolonged or replaced by other loans to less favorable terms but
no interest-rate risk.
Both the convertible loan and the non-negotiable
promissory notes are thus independent from the short term development of the market interest rates, but there is a risk that these
loans at maturity will be prolonged or replaced by other loans to less favorable terms.
Foreign Currency Exchange Risk
Our foreign currency exposures give rise to
market risk associated with exchange rate movements of the SEK, our functional and reporting currency, mainly against the Euro
but also against USD and other currencies. Although the SEK is our functional currency, a certain portion of our expenses are denominated
in Euros. Our Euro expenses consist principally of payments made to sub-contractors and consultants for clinical trials and other
research and development activities as well as payments made to purchase raw material and to subcontractors for producing our products.
Our sales revenue is to the largest part denominated in EUR.
If the SEK fluctuates significantly against
the Euro, it may have a negative impact on our results of operations. To date, fluctuations in the exchange rates have not materially
affected our results of operations or financial condition for the periods under review.
We have not entered into any currency hedging
transactions to decrease the risk of financial exposure from fluctuations in the exchange.
Market Price Risk
Oasmia have historically invested liquidity
surplus in fixed income funds. These funds are traded in an active financial market and can be realized in one to two banking days.
An official market price is made public each trading day, and this constitutes the funds’ fair value. Fluctuations in the
market price of the funds might negatively affect our income statement. However, as these funds invest in short-term securities
from safe issuers, it is assessed that the market price risk is low. As at April 30, 2018, the Company has not invested in fixed
income funds and there is no such risk.
Item 11 D. Safe Harbor
Not applicable
ITEM 12. DESCRIPTION OF SECURITIES OTHER
THAN EQUITY SECURITIES
A. Debt Securities
Not applicable
B. Warrants and Rights
See Item 12 D
C. Other Securities
Not applicable.
D. American Depositary Shares
ADSs
The Bank of New York Mellon, as depositary,
has registered and delivered American Depositary Shares, also referred to as ADSs. Each ADS represents three (3) Ordinary Shares
(or a right to receive three (3) Ordinary Shares) deposited with the principal Stockholm office of Skandinaviska Enskilda Banken
AB, acting as custodian for the depositary (but see “Related Party Transactions — Stock Lending Agreement” for
the mechanics of closing and the timing of share issuances). Each ADS will also represent any other securities, cash or other property
which may be held by the depositary. The depositary’s office at which the ADSs will be administered is located at 101 Barclay
Street, New York, New York 10286. The Bank of New York Mellon’s principal executive office is located at One Wall Street,
New York, New York 10286.
You may hold ADSs either (A) directly (i) by
having an American Depositary Receipt, also referred to as an ADR, which is a certificate evidencing a specific number of ADSs,
registered in your name, or (ii) by having uncertificated ADSs registered in your name, or (B) indirectly by holding a security
entitlement in ADSs through your broker or other financial institution that is a direct or indirect participant in The Depository
Trust Company, also called DTC. If you hold ADSs directly, you are a registered ADS holder, also referred to as an ADS holder.
This description assumes you are an ADS holder. If you hold the ADSs indirectly, you must rely on the procedures of your broker
or other financial institution to assert the rights of ADS holders described in this section. You should consult with your broker
or financial institution to find out what those procedures are.
Registered holders of uncertificated ADSs will
receive statements from the depositary confirming their holdings.
As an ADS holder, we will not treat you as
one of our shareholders and you will not have shareholder rights. Swedish law governs shareholder rights. The depositary will be
the holder of the shares underlying your ADSs. As a registered holder of ADSs, you will have ADS holder rights. A deposit agreement
among us, the depositary, ADS holders and all other persons indirectly or beneficially holding ADSs sets out ADS holder rights
as well as the rights and obligations of the depositary. New York law governs the deposit agreement and the ADSs.
Dividends and Other Distributions
How will you receive dividends and other distributions
on the shares?
The depositary has agreed to pay or distribute
to ADS holders the cash dividends or other distributions it or the custodian receives on Ordinary Shares or other deposited securities,
upon payment or deduction of its fees and expenses. You will receive these distributions in proportion to the number of shares
your ADSs represent.
Cash.
The depositary will convert any cash dividend
or other cash distribution we pay on the Ordinary Shares into U.S. Dollars if it can do so on a reasonable basis and can transfer
the U.S. Dollars to the United States. If that is not possible or if any government approval is needed and cannot be obtained,
the deposit agreement allows the depositary to distribute the foreign currency only to those ADS holders to whom it is possible
to do so. The depositary will hold the foreign currency it cannot convert for the account of the ADS holders who have not been
paid. It will not invest the foreign currency and it will not be liable for any interest.
Before making a distribution, any withholding
taxes, or other governmental charges that must be paid will be deducted. See the heading “Taxation” appearing on
page
80
. The depositary will distribute only whole U.S. dollars and cents and will round fractional cents to the nearest whole
cent. If the exchange rates fluctuate during a time when the depositary cannot convert the foreign currency, you may lose some
of the value of the distribution.
Shares.
The depositary may distribute additional ADSs
representing any Ordinary Shares we distribute as a dividend or free distribution. The depositary will only distribute whole ADSs.
It will sell shares which would require it to deliver a fraction of an ADS (or ADSs representing those shares) and distribute the
net proceeds in the same way as it does with cash. If the depositary does not distribute additional ADSs, the outstanding ADSs
will also represent the new Ordinary Shares. The depositary may sell a portion of the distributed Ordinary Shares (or ADSs representing
those Ordinary Shares) sufficient to pay its fees and expenses in connection with that distribution.
Rights to purchase additional shares.
If we offer holders of our securities any rights
to subscribe for additional shares or any other rights, the depositary may (i) exercise those rights on behalf of ADS holders,
(ii) distribute those rights to ADS holders or (iii) sell those rights and distribute the net proceeds to ADS holders, in each
case after deduction or upon payment of its fees and expenses. To the extent the depositary does not do any of those things, it
will allow the rights to lapse. In that case, you will receive no value for them. The depositary will exercise or distribute rights
only if we ask it to and provide satisfactory assurances to the depositary that it is legal to do so. If the depositary will exercise
rights, it will purchase the securities to which the rights relate and distribute those securities or, in the case of shares, new
ADSs representing the new shares, to subscribing ADS holders, but only if ADS holders have paid the exercise price to the depositary.
U.S. securities laws may restrict the ability of the depositary to distribute rights or ADSs or other securities issued on exercise
of rights to all or certain ADS holders, and the securities distributed may be subject to restrictions on transfer.
Other Distributions.
The depositary will send to ADS holders anything
else we distribute on deposited securities by any means it thinks is legal, fair and practical. If it cannot make the distribution
in that way, the depositary has a choice. It may decide to sell what we distributed and distribute the net proceeds, in the same
way as it does with cash. Or, it may decide to hold what we distributed, in which case ADSs will also represent the newly distributed
property. However, the depositary is not required to distribute any securities (other than ADSs) to ADS holders unless it receives
satisfactory evidence from us that it is legal to make that distribution. The depositary may sell a portion of the distributed
securities or property sufficient to pay its fees and expenses in connection with that distribution. U.S. securities laws may restrict
the ability of the depositary to distribute securities to all or certain ADS holders, and the securities distributed may be subject
to restrictions on transfer.
The depositary is not responsible if it decides
that it is unlawful or impractical to make a distribution available to any ADS holders. We have no obligation to register Ordinary
Shares, rights or other securities under the Securities Act. We also have no obligation to take any other action to permit the
distribution of ADSs, shares, rights or anything else to ADS holders. This means that you may not receive the distributions we
make on our shares or any value for them if it is illegal or impractical for us to make them available to you.
Deposit, Withdrawal and Cancellation
How are ADSs issued?
The depositary will deliver ADSs if you or
your broker deposits shares or evidence of rights to receive Ordinary Shares with the custodian. Upon payment of its fees and expenses
and of any taxes or charges, such as stamp taxes or stock transfer taxes or fees, the depositary will register the appropriate
number of ADSs in the names you request and will deliver the ADSs to or upon the order of the person or persons that made the deposit.
How can ADS holders withdraw the deposited
securities?
You may surrender your ADSs for the purpose
of withdrawal at the depositary’s office. Upon payment of its fees and expenses and of any taxes or charges, such as stamp
taxes or stock transfer taxes or fees, the depositary will deliver the Ordinary Shares and any other deposited securities underlying
the ADSs to the ADS holder or a person the ADS holder designates at the office of the custodian. Or, at your request, risk and
expense, the depositary will deliver the deposited securities at its office, if feasible. The depositary may charge you a fee and
its expenses for instructing the custodian regarding delivery of deposited securities.
How do ADS holders interchange between certificated
ADSs and uncertificated ADSs?
You may surrender your ADR to the depositary
for the purpose of exchanging your ADR for uncertificated ADSs. The depositary will cancel that ADR and will send to the ADS holder
a statement confirming that the ADS holder is the registered holder of uncertificated ADSs. Alternatively, upon receipt by the
depositary of a proper instruction from a registered holder of uncertificated ADSs requesting the exchange of uncertificated ADSs
for certificated ADSs, the depositary will execute and deliver to the ADS holder an ADR evidencing those ADSs.
Voting Rights
How do you vote?
ADS holders may instruct the depositary how
to vote the number of deposited Ordinary Shares their ADSs represent. If we request the depositary to solicit your voting instructions
(and we are not required to do so), the depositary will notify you of a shareholders’ meeting and send or make voting materials
available to you. Those materials will describe the matters to be voted on and explain how ADS holders may instruct the depositary
how to vote. For instructions to be valid, they much reach the depositary by a date set by the depositary. The depositary will
try, as far as practical, subject to the laws of Sweden and the provisions of our articles of association or similar documents,
to vote or to have its agents vote the Ordinary Shares or other deposited securities as instructed by ADS holders. If we do not
request the depositary to solicit your voting instructions, you can still send voting instructions, and, in that case, the depositary
may try to vote as you instruct, but it is not required to do so.
Except by instructing the depositary as described
above, you won’t be able to exercise voting rights unless you surrender your ADSs and withdraw the Ordinary Shares. However,
you may not know about the meeting enough in advance to withdraw the Ordinary Shares. In any event, the depositary will not exercise
any discretion in voting deposited securities and it will only vote or attempt to vote as instructed.
We cannot assure you that you will receive
the voting materials in time to ensure that you can instruct the depositary to vote your Ordinary Shares. In addition, the depositary
and its agents are not responsible for failing to carry out voting instructions or for the manner of carrying out voting instructions.
This means that you may not be able to exercise voting rights and there may be nothing you can do if your Ordinary Shares are not
voted as you requested.
In order to give you a reasonable opportunity
to instruct the depositary as to the exercise of voting rights relating to Deposited Securities, if we request the Depositary to
act, we agree to give the depositary notice of any such meeting and details concerning the matters to be voted upon at least 45
days in advance of the meeting date.
Pursuant to the terms of the deposit agreement, the holders of ADSs
will be required to pay the following fees:
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a
fee of $5.00 or less per 100 American Depositary Shares (or portion thereof) for the delivery or cancellation of ADS.
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a
fee of $.05 or less per American Depositary Share (or portion thereof) for any cash distribution to you
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a
free of $.05 or less per ADS per annum for depositary services
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Registration
or transfer fees
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Expenses
of the depositary (costs for converting foreign currency to U.S. dollars and cost for cable, telex and facsimile transmissions)
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Taxes
and other governmental charges the depositary or the custodian have to pay on any ADS or share underlying an ADS, for example
share transfer, taxes, stamp duty or withholding taxes.
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The Depositary may collect any of its fees
by deduction from any cash distribution payable, or by selling a portion of any securities to be distributed, to owners that are
obligated to pay those fees.
The depositary collects its fees for delivery
and surrender of ADSs directly from investors depositing shares or surrendering ADSs for the purpose of withdrawal or from intermediaries
acting for them. The depositary collects fees for making distributions to investors by deducting those fees from the amounts distributed
or by selling a portion of distributable property to pay the fees. The depositary may collect its annual fee for depositary services
by deduction from cash distributions or by directly billing investors or by charging the book-entry system accounts of participants
acting for them. The depositary may collect any of its fees by deduction from any cash distribution payable (or by selling a portion
of securities or other property distributable) to ADS holders that are obligated to pay those fees. The depositary may generally
refuse to provide fee-attracting services until its fees for those services are paid.
From time to time, the depositary may make
payments to us to reimburse us for costs and expenses generally arising out of establishment and maintenance of the ADS program,
waive fees and expenses for services provided to us by the depositary or share revenue from the fees collected from ADS holders.
In performing its duties under the deposit agreement, the depositary may use brokers, dealers or other service providers that are
affiliates of the depositary and that may earn or share fees or commissions.
The depositary may convert currency itself
or through any of its affiliates and, in those cases, acts as principal for its own account and not as an agent, fiduciary or broker
on behalf of any other person and earns revenue, including, without limitation, fees and spreads that it will retain for its own
account. The depositary makes no representation that the exchange rate used or obtained in any currency conversion will be the
most favorable rate that could be obtained at the time or as to the method by which that rate will be determined, subject to its
obligations under the deposit agreement.
Payment of Taxes
You will be responsible for any taxes or other
governmental charges payable on your ADSs or on the deposited securities represented by any of your ADSs. The depositary may refuse
to register any transfer of your ADSs or allow you to withdraw the deposited securities represented by your ADSs until those taxes
or other charges are paid. It may apply payments owed to you or sell deposited securities represented by your American Depositary
Shares to pay any taxes owed and you will remain liable for any deficiency. If the depositary sells deposited securities, it will,
if appropriate, reduce the number of ADSs to reflect the sale and pay to ADS holders any proceeds, or send to ADS holders any property,
remaining after it has paid the taxes.
Tender and Exchange Offers; Redemption,
Replacement or Cancellation of Deposited Securities
The depositary will not tender deposited securities
in any voluntary tender or exchange offer unless instructed to do by an ADS holder surrendering ADSs and subject to any conditions
or procedures the depositary may establish.
If deposited securities are redeemed for cash
in a transaction that is mandatory for the depositary as a holder of deposited securities, the depositary will call for surrender
of a corresponding number of ADSs and distribute the net redemption money to the holders of called ADSs upon surrender of those
ADSs.
If there is any change in the deposited securities
such as a sub-division, combination or other reclassification, or any merger, consolidation, recapitalization or reorganization
affecting the issuer of deposited securities in which the depositary receives new securities in exchange for or in lieu of the
old deposited securities, the depositary will hold those replacement securities as deposited securities under the deposit agreement.
However, if the depositary decides it would not be lawful and to hold the replacement securities because those securities could
not be distributed to ADS holders or for any other reason, the depositary may instead sell the replacement securities and distribute
the net proceeds upon surrender of the ADSs.
If there is a replacement of the deposited
securities and the depositary will continue to hold the replacement securities, the depositary may distribute new ADSs representing
the new deposited securities or ask you to surrender your outstanding ADRs in exchange for new ADRs identifying the new deposited
securities.
If there are no deposited securities underlying
ADSs, including if the deposited securities are cancelled, or if the deposited securities underlying ADSs have become apparently
worthless, the depositary may call for surrender or of those ADSs or cancel those ADSs upon notice to the ADS holders.
Amendment and Termination
How may the deposit agreement be amended?
We may agree with the depositary to amend the
deposit agreement and the ADRs without your consent for any reason. If an amendment adds or increases fees or charges, except for
taxes and other governmental charges or expenses of the depositary for registration fees, facsimile costs, delivery charges or
similar items, or prejudices a substantial right of ADS holders, it will not become effective for outstanding ADSs until 30 days
after the depositary notifies ADS holders of the amendment.
At the time an amendment becomes effective, you are considered,
by continuing to hold your ADSs, to agree to the amendment and to be bound by the ADRs and the deposit agreement as amended
.
How may the deposit agreement be terminated?
The depositary will initiate termination of
the deposit agreement if we instruct it to do so. The depositary may initiate termination of the deposit agreement if
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60
days have passed since the depositary told us it wants to resign but a successor depositary has not been appointed and accepted
its appointment;
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we
delist our Ordinary Shares from an exchange on which they were listed and do not list the shares on another exchange;
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we
appear to be insolvent or enter insolvency proceedings;
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all
or substantially all the value of the deposited securities has been distributed either in cash or in the form of securities;
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there
are no deposited securities underlying the ADSs or the underlying deposited securities have become apparently worthless; or
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there
has been a replacement of deposited securities.
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If the deposit agreement is terminated, the
depositary will notify ADS holders at least 90 days before the termination date. At any time after the termination date, the depositary
may sell the deposited securities. After that, the depositary will hold the money it received on the sale, as well as any other
cash it is holding under the deposit agreement, unsegregated and without liability for interest, for the pro rata benefit of the
ADS holders that have not surrendered their ADSs. Normally, the depositary will sell as soon as practicable after the termination
date.
After the termination date and before the depositary
sells, ADS holders can still surrender their ADSs and receive delivery of deposited securities, except that the depositary may
refuse to accept a surrender for the purpose of withdrawing deposited securities if it would interfere with the selling process.
The depositary may refuse to accept a surrender for the purpose of withdrawing sale proceeds until all the deposited securities
have been sold. The depositary will continue to collect distributions on deposited securities, but, after the termination date,
the depositary is not required to register any transfer of ADSs or distribute any dividends or other distributions on deposited
securities to the ADSs holder (until they surrender their ADSs) or give any notices or perform any other duties under the deposit
agreement except as described in this paragraph.
Limitations on Obligations and Liability
Limits on our Obligations and the Obligations
of the Depositary; Limits on Liability to Holders of ADSs
The deposit agreement expressly limits our
obligations and the obligations of the depositary. It also limits our liability and the liability of the depositary. We and the
depositary:
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are
only obligated to take the actions specifically set forth in the deposit agreement without negligence or bad faith;
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are
not liable if we are or it is prevented or delayed by law or circumstances beyond our or its control from performing our or its
obligations under the deposit agreement;
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are
not liable if we or it exercises discretion permitted under the deposit agreement;
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are
not liable for the inability of any holder of ADSs to benefit from any distribution on deposited securities that is not made available
to holders of ADSs under the terms of the deposit agreement, or for any special, consequential or punitive damages for any breach
of the terms of the deposit agreement;
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have
no obligation to become involved in a lawsuit or other proceeding related to the ADSs or the deposit agreement on your behalf
or on behalf of any other person;
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are
not liable for the acts or omissions of any securities depository, clearing agency or settlement system; and
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may
rely upon any documents we believe or it believes in good faith to be genuine and to have been signed or presented by the proper
person.
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In the deposit agreement, we and the depositary
agree to indemnify each other under certain circumstances.
Requirements for Depositary Actions
Before the depositary will deliver or register
a transfer of ADSs, make a distribution on ADSs, or permit withdrawal of Ordinary Shares, the depositary may require:
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payment
of stock transfer or other taxes or other governmental charges and transfer or registration fees charged by third parties for
the transfer of any shares or other deposited securities;
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satisfactory
proof of the identity and genuineness of any signature or other information it deems necessary; and
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compliance
with regulations it may establish, from time to time, consistent with the deposit agreement, including presentation of transfer
documents.
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The depositary may refuse to deliver ADSs or
register transfers of ADSs when the transfer books of the depositary or our transfer books are closed or at any time if the depositary
or we think it advisable to do so.
Your Right to Receive the Shares Underlying
your ADSs
ADS holders have the right to cancel their
ADSs and withdraw the underlying Ordinary Shares at any time except:
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when
temporary delays arise because: (i) the depositary has closed its transfer books or we have closed our transfer books; (ii) the
transfer of shares is blocked to permit voting at a shareholders' meeting; or (iii) we are paying a dividend on our shares;
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when
you owe money to pay fees, taxes and similar charges; or
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when
it is necessary to prohibit withdrawals in order to comply with any laws or governmental regulations that apply to ADSs or to
the withdrawal of shares or other deposited securities.
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This right of withdrawal may not be limited
by any other provision of the deposit agreement.
Pre-release of ADSs
The deposit agreement permits the depositary
to deliver ADSs before deposit of the underlying Ordinary Shares. This is called a pre-release of the ADSs. The depositary may
also deliver Ordinary Shares upon cancellation of pre-released ADSs (even if the ADSs are canceled before the pre-release transaction
has been closed out). A pre-release is closed out as soon as the underlying Ordinary Shares are delivered to the depositary. The
depositary may receive ADSs instead of shares to close out a pre-release. The depositary may pre-release ADSs only under the following
conditions: (1) before or at the time of the pre-release, the person to whom the pre-release is being made represents to the depositary
in writing that it or its customer owns the shares or ADSs to be deposited; (2) the pre-release is fully collateralized with cash
or other collateral that the depositary considers appropriate; and (3) the depositary must be able to close out the pre-release
on not more than five business days' notice. In addition, the depositary will limit the number of ADSs that may be outstanding
at any time as a result of pre-release, although the depositary may disregard the limit from time to time if it thinks it is appropriate
to do so.
Direct Registration System
In the deposit agreement, all parties to the
deposit agreement acknowledge that the Direct Registration System, also referred to as DRS, and Profile Modification System, also
referred to as Profile, will apply to the ADSs. DRS is a system administered by DTC that facilitates interchange between registered
holding of uncertificated ADSs and holding of security entitlements in ADSs through DTC and a DTC participant. Profile is feature
of DRSs that allows a DTC participant, claiming to act on behalf of a registered holder of uncertificated ADSs, to direct the depositary
to register a transfer of those ADSs to DTC or its nominee and to deliver those ADSs to the DTC account of that DTC participant
without receipt by the depositary of prior authorization from the ADS holder to register that transfer.
In connection with and in accordance with the
arrangements and procedures relating to DRS/Profile, the parties to the deposit agreement understand that the depositary will not
determine whether the DTC participant that is claiming to be acting on behalf of an ADS holder in requesting registration of transfer
and delivery as described in the paragraph above has the actual authority to act on behalf of the ADS holder (notwithstanding any
requirements under the Uniform Commercial Code). In the deposit agreement, the parties agree that the depositary’s reliance
on and compliance with instructions received by the depositary through the DRS/Profile system and in accordance with the deposit
agreement will not constitute negligence or bad faith on the part of the depositary.
Shareholder communications; inspection of
register of holders of ADSs
The depositary will make available for your
inspection at its office all communications that it receives from us as a holder of deposited securities that we make generally
available to holders of deposited securities. The depositary will send you copies of those communications or otherwise make those
communications available to you if we ask it to. You have a right to inspect the register of holders of ADSs, but not for the purpose
of contacting those holders about a matter unrelated to our business or the ADSs.
Warrants
The following summary of certain terms and
provisions of the Warrants is not complete and is subject to, and qualified in its entirety by the provisions of the form of the
ADS Warrant Agreement, also referred to as the Warrant Agreement, under which the Warrants are issued and which governs the terms
and conditions of the Warrants and which is incorporated by reference herein.
Exercisability
For every two initial ADSs sold, we issued
one Warrant to purchase one ADS. The ADS and Warrants were separately issued. The Warrants are exercisable at any time up to the
date that is ten (10) years from the closing date of the offering. The Warrants are exercisable, at the option of each holder,
by delivering to the Warrant Agent a duly executed exercise notice together with the Warrants to be exercised and payment in full
of the exercise price for the number of ADS purchased upon such exercise, together with the ADS issuance fee of $0.05 per ADS and
other applicable charges and taxes. Unless otherwise provided in the Warrant Agreement, the holder will not have the right to exercise
Warrants to the extent that the holder (together with its affiliates), after giving effect to the exercise, would beneficially
own in excess of 4.99% of the outstanding ordinary shares outstanding, after giving effect to the exercise, as such percentage
ownership is determined in accordance with the Warrant Agreement. Currently there are 1,280,750 Warrants outstanding.
Exercise Price
The exercise price per ADS is $4.06 per ADSs.
The exercise price is subject to appropriate adjustment in the event of certain stock dividends and distributions, stock splits,
stock combinations, reclassifications or similar events affecting the ordinary shares or the ADSs and also upon any distributions
of assets, including cash, stock or other property to the holders of ordinary shares.
Rights as a Stockholder
Except as otherwise provided in the Warrant
Agreement, a holder of Warrants, as such, does not have the rights or privileges of a holder of the ADSs, including any voting
rights, until the holder exercises those Warrants and ADSs underlying the Warrants are issued.
The accompanying notes are an integral part
of these consolidated financial statements.
The accompanying notes are an integral part
of these consolidated financial statements.
The accompanying notes are an integral part
of these consolidated financial statements.
The accompanying notes are an integral part
of these consolidated financial statements.
The accompanying notes are an integral part
of these consolidated financial statements.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
APRIL 30, 2018
NOTE 1 GENERAL
INFORMATION
Oasmia Pharmaceutical
AB (Reg. No. 556332-6676 and the Parent Company of the Oasmia Group), referred to herein as the “Company,” is a limited
company domiciled in Stockholm, Sweden. The address of the company is Vallongatan 1, Uppsala, where the Company has its office,
manufacturing facility and conducts research. The company’s shares are listed on NASDAQ Stockholm, NASDAQ Capital Market
and on the Frankfurt Stock Exchange.
NOTE 2 ACCOUNTING
POLICIES
The principal accounting
policies applied in these financial statements are set out below.
Basis of preparation
The consolidated
financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) issued by the International
Accounting Standards Board (IASB) and interpretations issued by the International Financial Reporting Interpretations Committee
(IFRIC). Furthermore, the recommendation RFR 1, Supplementary accounting regulations for Groups, issued by the Swedish Financial
Reporting Board, has been applied.
The preparation
of financial statements in conformity with IFRS requires the use of certain critical estimates for accounting purposes. It also
requires management to exercise its judgment in applying the Group's accounting policies. The areas involving a higher degree
of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements
are disclosed in Note 3.
The Group’s
accounting policies
Changes in accounting
policies
New policies
2017/18
None of the standards
and interpretations required for the first time for the financial year that began on May 1, 2017 had a material impact on the
consolidated financial statements.
New IFRS standards
and interpretations effective financial year 2018/19 or later that may impact Oasmia’s financial reporting:
IFRS 15 Revenue
from Contracts with Customers
This standard comes
into force on January 1, 2018 and will thus be applied by Oasmia as from the financial year 2018/2019.
The standard first
and foremost replaces IAS 18 Revenue, which is the standard that has regulated the reporting of revenues so far. Under IFRS 15
the basic principle for when a revenue may be recognized is when the acquiring party can use a good or can draw benefit from a
service, while IAS 18 concentrates more on when risk is transferred from the vendor to the purchaser. IFRS 15 also requires considerably
more disclosures than IAS 18.
When it is introduced,
IFRS 15 shall also be applied retroactively to previous periods in accordance with one of the following methods:
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Complete
retroactive application to previous periods.
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The
combined effect of a first application is reported as an adjustment of the opening balance
of equity.
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Oasmia has applied
the second method, that is to only adjust the opening balance of equity. The impact of this adjustment on equity involves a decrease
in equity of approximately MSEK 1.5.
IFRS 9 Financial
instruments
This standard came
into force on January 1, 2018, which means it will be applied by Oasmia as from the financial year 2018/2019.
IFRS 9 Financial
Instruments replaces IAS 39 and concerns the reporting of financial assets and liabilities. As regards the classification and
measurement of financial instruments IFRS 9 involves simplifications compared to IAS 39. To assess how financial instruments are
to be reported under IFRS 9, the company shall take into account the contractual cash flows and the business model within which
the instrument is held.
One effect of IFRS
9, compared to IAS 39, is that credit losses will be reported earlier. The criteria for hedge accounting have also been changed.
The introduction
of this standard has not had any significant impact on Oasmia’s financial reports.
The accompanying
notes are an integral part of these consolidated financial statements.
OASMIA PHARMACEUTICAL
AB AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
APRIL 30, 2018
IFRS 16 Leases
This standard will
come into force on January 1, 2019, which means that it will be applied by Oasmia as from the financial year 2019/2020.
IFRS 16 states
that at the beginning of a leasing agreement the lessee shall recognize the right to use the leased assets in the balance sheet
and at the same time a leasing liability shall be recognized. As far as Oasmia is concerned, this will primarily mean that the
lease agreements that are now reported as operational lease agreements will be reported in the balance sheet. Depreciation will
be applied to the assets during the time they are used and leasing rates will be recognized as part-payment of the leasing liability
and as an interest expense in the income statement.
The leasing liability
may also be revalued during the duration of the contract depending on whether certain circumstances, such as new leasing terms
and conditions, are introduced.
However, there
will be two exceptions. Leased assets of a low value and short-term leasing (with a duration of no more than 12 months) will be
exempted from the obligation to capitalize the right to use an asset and to enter the expected leasing payments as a liability.
It is estimated
that the balance sheet total will consequently increase by approximately MSEK 20-25. It will also mean that expenses of approximately
MSEK 6-7 per year, which are now reported in the income statement under Other external expenses, will be recognized as depreciation
and as interest expenses.
None of the other
standards and interpretations which have not yet come into force are expected to have a material impact on the Group.
Subsidiaries
Subsidiaries are
companies where the Parent Company has a controlling interest. The Parent Company has a controlling interest in a company when
it is exposed to or is entitled to variable return from its holding in the company and is able to affect the return through its
controlling interest in the company.
Subsidiaries are
included in the consolidated accounts as from the day on which the controlling interest is transferred to the Group. They are
excluded from the consolidated accounts as from the day on which the controlling interest ends.
The acquisition
method is applied to the recognition of acquisitions of subsidiaries. This means that acquired assets and liabilities are initially
measured at fair value. If a deviation then arises against the acquisition cost, this is recognized as goodwill in the consolidated
balance sheet when the deviation is positive and in the income statement if it is negative.
Eliminations are
made for intra-Group transactions and balance-sheet items, and for unrealized gains on transactions between Group companies.
Translation
of foreign currencies
The Parent Company
uses SEK as its functional currency and reporting currency. Transactions in foreign currency are translated to the functional
currency according to the exchange rates on the transaction date. Translation profits or losses arising from payments for such
transactions and from translation of monetary assets and liabilities in foreign currency at closing day exchange rates are recognized
in operations. Currency gains and losses arising from the translation of bank accounts in foreign currencies are recognized under
Net financial items.
Individual subsidiaries
have another functional currency than SEK. In the presentation of the consolidated balance sheet the current rate method is used,
whereby assets and liabilities are translated to the closing day rate of exchange while revenues and expenses are translated using
the average exchange rate for the year. The translation differences that thus arise are recognized in other comprehensive income.
Segment reporting
An operating segment
is a part of a company that conducts business activities from which revenues can be generated and costs can be incurred, and for
which independent financial information is available. Furthermore, the operating results of the segment are reviewed on a regular
basis by the company’s chief operating decision maker as the basis for the decision on allocation of resources to the segment
and the evaluation of its result. The Group management has been identified as the chief operating decision maker. Group management
assesses the business as a whole, that is as one segment, and therefore does not include information by segment in the accounts.
Note 4 reports the division of revenues into product groups and geographic markets as well as the value of non-current assets
in Sweden and in other countries. Information is also provided about the customer structure in the same note.
Property, plant
and equipment
Property, plant
and equipment are recognized at acquisition cost, with deductions for depreciation. The acquisition cost includes expenses directly
attributable to the acquisition of the asset.
The accompanying
notes are an integral part of these consolidated financial statements.
OASMIA PHARMACEUTICAL
AB AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
APRIL 30, 2018
Additional expenses
are added to the carrying amount of the asset or are recognized as a separate asset, depending on what is most suitable, only
when it is probable that the future economic benefits connected with the asset will accrue to the Group and the acquisition cost
of the asset can be measured in a reliable way. The carrying amount of the replaced part will be removed from the balance sheet.
All other types of repairs and maintenance are recognized as expenses in the income statement in the period in which they arise.
Assets are depreciated
on a straight-line basis in order to distribute their acquisition cost to the calculated residual value over the calculated utilization
period, as follows:
• Vehicles
|
|
3-5
years
|
|
|
|
• Inventories and production
equipment
|
|
5-15
years
|
|
|
|
• Leasehold improvements
|
|
20
years
|
The residual values
and utilization period of the assets are reviewed at every closing day and are adjusted as required. A carrying amount of an asset
is immediately depreciated to its recoverable amount if the carrying amount exceeds its estimated recoverable amount. Profits
and losses from divestments are established by a comparison between the sales revenue and the carrying amount and are recognized
in Other operating income or Other operating expenses.
Intangible assets
Capitalized
development costs
Expenditures for
research are expensed immediately. Development costs which are attributable to production and tests of novel or improved products
are capitalized to the extent that they are expected to generate future economic benefits. Oasmia capitalizes development costs
consisting of the company’s work on clinical trials in phase III for the product candidates Paclical/Apealea and Paccal
Vet and for which all the preconditions for capitalization pursuant to IAS 38 have been met.
It is the assessment
of the company that it is technically possible to complete the product candidates and make them available for sale, and that the
beginning of a phase III study is the earliest time when all criteria for capitalization can be met. This assessment is made in
the light of several factors.
Both products are
based on a well-known and well-documented substance, paclitaxel, and Oasmia’s own excipient XR17. The Company can therefore
reuse data for both product candidates when applying for market approval and this can potentially lead to a shorter path to approval.
The company has
both the resources and the competence to itself produce these two products for the clinical studies preceding a phase III study.
Production takes place in approved premises with employed personnel.
The company both
intends and is able to sell these products in various markets, both through existing distributors or through its own sales channels.
The oncology markets
for both humans and pets are both large and growing, which means that the company assesses that it is possible that these products
will be able to generate considerable economic benefits in the future.
Other development
costs are recognized as an expense as and when they arise. Development costs previously recognized as an expense are not capitalized
as an asset in subsequent periods. Straight-line amortization is applied to capitalized development costs over the period in which
the expected benefits are expected to accrue to the company, and is begun when a normal level of commercial sales to end customers
has been achieved..
Acquired research
projects
The Group has acquired
a research project that is still in a pre-clinical phase. This has been capitalized at acquisition cost minus any impairment.
Other intangible
assets
The Group capitalizes
fees to authorities for patents to the extent they are expected to generate future economic benefits. They are recognized at acquisition
cost, reduced by the accumulated amortizations. Amortization is performed on a straight-line basis in order to distribute the
cost over the estimated utilization period. The estimated utilization period for patents is a maximum of 20 years.
The accompanying
notes are an integral part of these consolidated financial statements.
OASMIA PHARMACEUTICAL
AB AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
APRIL 30, 2018
The capitalized
patent expenses comprise registration costs such as initial expenses for e.g. authorities and legal fees. The gain or loss arising
when an intangible asset is divested or disposed of is determined as the difference between the settlements received and the carrying
amount and is recognized in Other operating income or Other operating expenses.
Inventories
Inventories are
recognized at the lowest of acquisition cost and net realizable value. The acquisition cost is established by using the first
in, first out method (FIFO).
The acquisition
cost for Raw materials and necessities consists of the purchase price invoiced by the supplier. The acquisition cost for Work
in progress and for Finished goods consists of the costs for the constituent raw materials, with a mark-up for manufacturing costs
and quality control costs.
The net realizable
value is the estimated sales price in the operating activities, with deductions for applicable variable selling expenses.
Impairment of
non-financial assets
The capitalized
development costs and the capitalized research projects which are not yet current are not amortized, but are instead evaluated
annually for any impairment needs. Group management performs an estimation of the expected utilization period of the assets at
every financial statement. If there are indications that an asset’s value has diminished, the recoverable amount of the
asset is determined. This amount is the highest net realizable value of the asset, with deductions for selling expenses and its
value in use. The asset is amortized down to the recoverable amount via the income statement. In order to establish the impairment
need, the assets are grouped into cash generating units, which is the smallest group of assets that enables positive cash flows
that are essentially independent of the cash flow from other assets or groups of assets. The Group presently has no assets with
indeterminable utilization periods.
Financial instruments
Financial instruments
are agreements that give rise to a financial asset or liability. Financial assets are cash, equity instruments in other companies
and such agreements that give entitlement to cash or other financial assets. Financial liabilities are agreements that oblige
the company to pay cash or other financial assets to another company.
This means that
there are several receivables and liabilities that are not financial instruments. For example receivables or liabilities that
can be expected to be settled other than in cash or through other financial assets are not dealt with in accordance with the accounting
principles that apply to financial instruments. The same applies to receivables or liabilities that are not based on agreements.
Financial instruments
are recognized in the statement of financial position when Oasmia is one of the parties in the conditions of the agreement governing
the instrument. A financial asset is removed from the statement of financial position when the rights in the agreement are terminated,
as they have been realized or Oasmia loses control of them. A financial liability is removed from the statement of financial position
when the obligation in the agreement has been fulfilled or in some other way ceases to apply.
Each time a report
is drawn up an assessment is made as to whether there are circumstances indicating that a financial asset needs to be written
down. If there is a need for impairment, the amount written down is identified in the income statement.
Oasmia’s
financial instruments are reported at fair value or at amortized cost:
|
•
|
Fair
value is the price that would be obtained if an asset were sold or paid in the settling
of a liability in an orderly transaction between knowledgeable and independent parties.
|
|
•
|
Amortized
cost is the value at which the asset or liability was valued when it was acquired plus
or minus certain adjustments in value.
|
Financial instruments
are divided into different categories depending on their nature and the method used in their valuation. Oasmia reports its financial
instruments in two such categories:
|
•
|
Loans
receivable and accounts receivable
|
This category includes:
–
Cash and cash equivalents valued at nominal value. Where they are denominated in a currency other than SEK, they are translated
at the closing day rate of exchange.
–
Accounts receivable, other current receivables and accrued revenues are valued at amortized cost.
The accompanying
notes are an integral part of these consolidated financial statements.
OASMIA PHARMACEUTICAL
AB AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
APRIL 30, 2018
|
•
|
Financial
liabilities valued at amortized cost
|
This category includes:
–
Borrowings which are valued at nominal value as they have a short duration.
– Convertible
loans.
–
Accounts payable and accrued expenses valued at the value they are expected to be paid at.
For further disclosures
on Oasmia’s financial instruments, please see Note 18 Financial instruments and financial risks.
Share capital
Common shares are
classified as equity. Transaction costs which can be attributed directly to new share issues or warrants are recognized, net after
tax, in equity as a deduction from the funds generated by the issue.
Relative to a bond
loan, a convertible loan provides both the right to receive interest and the opportunity to receive a certain number of shares
instead of repayment of the loan. This additional benefit means that the interest rate of the convertible loan is lower than the
market interest rate for an equivalent bond loan. The fair value of the benefit Oasmia receives due to the lower interest rate
is recorded, after a deduction for issue expenses, directly against equity.
Income tax
Tax revenues and
expenses are constituted by current and deferred tax. Current tax is the tax calculated on the taxable income of each legal entity
in the Group for the current or a previous period. Deferred tax is tax on temporary differences between assets’ and liabilities’
carrying amount and tax base. A deferred tax revenue also arises to the extent that the tax effect of loss carry-forward is entered
as a deferred tax asset. However, a deferred tax asset is only recognized to the extent that there are convincing reasons that
a future taxable surplus will be available, against which the deferred tax asset can be offset. As it is not yet possible to reliably
calculate when Oasmia will achieve such a surplus, no deferred tax assets have been recognized.
Employee benefits
Current remuneration
Current remuneration
to employees is calculated without discounting and is recognized as an expense when the services concerned are obtained.
Pension obligations
The Group has defined
contribution pension plans. A defined contribution plan is a pension plan under which the Group pays fixed contributions to a
separate legal entity. The Group has no legal or constructive obligations to pay further contributions if this legal entity does
not hold sufficient assets to pay all employee benefits relating to employee service in the current and prior periods. Defined
contribution pension plan obligations are recognized as employee benefits as and when they are earned by employees carrying out
services for the company in any given period. Prepaid contributions are recognized as an asset to the extent that a cash refund
or a reduction in future payments is available to the Group.
Severance pay
Severance pay is
awarded when notice is given to an employee by Oasmia before the normal pension date, or when an employee accepts voluntary resignation
in exchange for such payments. The Group recognizes severance pay when it is obliged either to give notice to the employee according
to a detailed formal plan without the possibility of recall, or to pay remuneration when notice is given as a result of an offer
made to encourage voluntary resignation. Benefits which are due more than 12 months after closing day are discounted to the present
value.
Revenue recognition
Revenues comprise
the fair value of what has been received or will be received for sold goods, services and necessities as a result of the Group’s
business operations. Revenue is recognized without value added tax, and after elimination of intra-Group sales. The Group recognizes
revenue when the amount can be measured in a reliable manner, it is likely that future economic benefits will accrue to the Group
and certain criteria have been fulfilled for each of the business activities of the Group described below.
a) Sales of
goods
Revenues from sales
of goods are recognized at the time when they are delivered to customers, licensees or distributors. This is the time when ownership
rights are transferred to the recipient of the goods.
Sales of goods
during the year have consisted of deliveries to Oasmia’s Russian partner, Hetero. These have been recognized as revenue
upon delivery, that is when ownership rights to and control over the goods have been transferred to Hetero, at a price corresponding
to Oasmia’s production costs.
The accompanying
notes are an integral part of these consolidated financial statements.
OASMIA PHARMACEUTICAL
AB AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
APRIL 30, 2018
(b) Distribution
rights and profit sharing
Hetero has acquired
from Oasmia the rights to sell some of Oasmia’s products in certain countries. Oasmia received a one-time payment for these
rights during the year. The one-time payment is recognized as royalty revenue in its entirety when it is assessed that the conditions
for receiving payment have been met.
When Hetero has
sold the goods, profits are shared, which means that the profit is first calculated according to a procedure specified in the
agreement with Hetero, whereby production and distribution costs are deducted from the net sales price. The profit thus calculated
is then equally divided between Hetero and Oasmia. This profit sharing is recognized in the income statement as royalty when ownership
rights have been transferred to a third party.
(c) Contract
assignments
Contract assignments
carried out are recognized as revenue to the extent that they have been completed at the end of the reporting period, that is
by gradual revenue recognition.
(d) Sale
of necessities
Oasmia sells necessities,
in the form of sterile water that has been produced in the company’s facility, to other companies. The resulting revenues
are recognized upon delivery.
Leasing
Leasing whereby
a significant part of the risks and benefits of ownership is retained by the lessor is classified as operational leasing. Payments
made during the lease term (after deduction of any incentives from the lessor) are carried as an expense in the income statement
on a straight-line basis over the term of the lease. Oasmia has no financial leasing.
Dividends
Dividends paid
to the Parent Company's shareholders are recognized as liabilities in the consolidated financial statements in the period in which
the dividends are approved by Parent Company shareholders.
Cash flow
Cash flow statements
are prepared using the indirect method.
NOTE 3 SIGNIFICANT
ESTIMATES AND ASSUMPTIONS FOR ACCOUNTING PURPOSES
Estimates and judgments
are continually evaluated and are based on historical experience and other factors, including expectations of future events that
are believed to be reasonable under the current circumstances.
Assumptions
and uncertainties related to continued operations
Oasmia has incurred
losses through and including its fiscal year ending April 30, 2018. As of April 30, 2018, Oasmia had an accumulated deficit of
SEK 1,009.35 million. The cash flow from operating activities has also been negative.
Oasmia has two
products approved, but this does not allow the company’s business operations to generate sufficient cash flow. Work is therefore
continuously conducted on finding other financing alternatives. This work includes the company engaging in discussions with potential
collaboration partners about the licensing of distribution and sales rights, negotiations with new and existing investors, financiers
and lenders, and the company securing resources so that future forecast revenue flows materialize in regions where the company’s
products are registered.
The Group’s
available cash and cash equivalents and unutilized credit facilities at April 30, 2018 do not provide the liquidity necessary
to run the planned business operations in the coming 12 months. In the light of the ongoing work on possible financing alternatives
and the recent development of the company, it is the Board’s assessment that the outlook is good for financing the company’s
business operations during the coming year. If sufficient financing is not obtained, there is a risk that it may not be possible
to continue operations.
Significant
estimates and assumptions for accounting purposes
Group management
makes estimates and assessments about the future. The resulting estimates for accounting purposes will by definition seldom correspond
to the actual outcome. The estimates and assessments that entail a considerable risk of significant adjustments in the carrying
amounts for assets and liabilities in the next financial year are listed below.
The accompanying
notes are an integral part of these consolidated financial statements.
OASMIA PHARMACEUTICAL
AB AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
APRIL 30, 2018
(a)
Impairment tests for intangible assets
The Group capitalizes
development costs for two drug candidates Paclical and Paccal Vet. The capitalized development costs for the financial year ending
April 30, 2018 amounted to TSEK 9,157 compared to TSEK 7,898 as per April 30, 2017 and TSEK 16,727 as per April 30, 2016. The
Group's accumulated capitalized development costs, as of April 30, 2018, amounted to SEK 426,079 thousand compared to SEK 416,922
thousand as of April 30, 2017. In addition there is an acquired research project which has been capitalized at acquisition cost.
An assessment is performed annually of whether there is a need for impairment of these assets. Oasmia’s impairment tests
show that there is no need for impairment. Market approval has been received for Paclical in Russia for the indication of ovarian
cancer in humans and market approval is expected within one to two years for Paccal Vet in the US for the indications of mastocytoma
in dogs. In Oasmia’s assessment, more market approvals can be expected in the foreseeable future and expected future profits
justify the value of the assets. If the other market approvals were not to be received, if a considerably lower price than expected
was received per treatment, if the market share was lower, or if the likelihood of receiving approval were to decrease, all or
parts of the capitalized expenditure would be carried as expenses. As of April 30, 2018 capitalized expenditure amounted to 123
% compared to 139 % as of April 30, 2017 of the equity at the same time.
(b) Income taxes
The Group is required
to pay tax in Sweden. The Group's companies have so far showed negative taxable income, and as a result significant taxable deficit
exist in the Group. There are at present no sufficiently convincing indications as to when loss carry-forward will be able to
be utilized against future profits, and thus no deferred tax asset has been taken into consideration in the balance sheet.
Accumulated taxable
deficits in the Group are described in Note 16.
(c) Contingent
liabilities
A contingent liability
is a possible liability whose occurrence will possibly be confirmed by future events which wholly or partly, are beyond Oasmia’s
control and whose probability of occurring is low or difficult to estimate. It may also be an existing liability, the size of
which cannot be calculated or the settlement of which is unlikely to result in any outflow of resources.
It is obviously
in the nature of contingent liabilities that their occurrence and size are particularly uncertain and therefore they are not recognized
in the balance sheet. Instead information is given about them in Note 24. If it is at all possible to state any amounts for these
contingent liabilities, they are, as can be seen above, largely dependent on management’s assessments.
Important judgements
when applying the company’s accounting policies
The Group capitalizes
development costs for two pharmaceutical candidates, Paclical/Apealea and Paccal Vet. The company assesses that the beginning
of a phase III study is the earliest time when all criteria for capitalization can be fulfilled. It is at this time that the company
can assess whether it is technically possible to complete the intangible asset so that it can be used or sold. If the Group should
make the judgment that all capitalization criteria are no longer fulfilled, these assets would be written off against Group income.
At least once a
year, normally when the annual financial statements are prepared, the Group’s property, plant and equipment and non-current
intangible assets are tested to see if there is a need for impairment. Tests may also be carried out if management assesses that
there have been significant changes in the assumptions that can affect the result of the tests. The question is whether the recoverable
amount of the asset is greater than its carrying amount. Usually these Group assets have no stated market value, and the company
therefore applies the value in use method. One of the important assets that are the subject of impairment testing is the item
capitalized development costs for Paccal Vet and Paclical/Apealea. The impairment testing is based on management’s forecasts
for the future economic development of the products Paccal Vet and Paclical/Apealea. These forecasts are partly based on available
statistics, primarily on the incidence of cancer per type of cancer, but also on management’s assessment of future development
that cannot be supported by external statistics or comparative data. The result of the impairment testing consists of seeing if
the value in use is greater than the carrying amount of the assets. If this is the case, no impairment is performed. If on the
other hand the value in use is less than the carrying amount, the asset is written down to its recoverable amount.
Bearing in mind
that Capitalized development costs in the consolidated statement of financial position as of April 30, 2018 constitute 75 percent
of total assets compared to 80 percent as of April 30, 2017, impairment of this asset may have considerable consequences for the
Group’s financial position.
The Group capitalizes
expenditures for patents because they are expected to generate future economic benefits. If the Group should make the judgment
that they will no longer generate future economic benefits, these assets would be written off against the Group's income.
NOTE 4 SEGMENT
INFORMATION
The Group currently
has only one segment and therefore reports no information by segment.
The accompanying
notes are an integral part of these consolidated financial statements.
OASMIA PHARMACEUTICAL
AB AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
APRIL 30, 2018
The Group has its
registered office in Sweden. All net sales derive from sales to external customers and are shown below divided up into product
categories and geographic area.
Net sales per
product category
|
|
MAY 1, 2017
|
|
|
MAY 1, 2016
|
|
|
MAY 1, 2015
|
|
TSEK
|
|
- APR 30,
2018
|
|
|
- APR 30,
2017
|
|
|
- APR 30,
2016
|
|
Sales of necessities
|
|
|
162
|
|
|
|
172
|
|
|
|
96
|
|
Royalty revenues
|
|
|
2,377
|
|
|
|
-
|
|
|
|
4,870
|
|
Sales of goods
|
|
|
630
|
|
|
|
-
|
|
|
|
1,207
|
|
Invoiced services
|
|
|
-
|
|
|
|
-
|
|
|
|
200
|
|
Total
|
|
|
3,169
|
|
|
|
172
|
|
|
|
6,373
|
|
Under the agreement
with Oasmia’s Russian partner, Oasmia is entitled to certain one-time payments as payment for the Russian partner’s
distribution rights. Such distribution rights were invoiced during the year in the amount of USD 200 thousand, which has been
reported as royalty revenues of SEK 1,595 thousand.
Sales to the Russian
partner are divided up into two parts. Upon delivery a sum is invoiced for the goods corresponding to Oasmia’s production
costs. This part has been reported as sales of goods of SEK 630 thousand. When the goods are then sold by the Russian partner,
profits are shared, whereby Oasmia and the Russian partner share profits equally. This part is also reported as royalty revenues
and amounts to SEK 782 thousand.
Net sales per
geographic area
Below allocation
of Net Sales per geographic area is based on the customer’s domicile.
|
|
MAY 1, 2017
|
|
|
MAY 1, 2016
|
|
|
MAY 1, 2015
|
|
TSEK
|
|
- APR 30,
2018
|
|
|
- APR 30,
2017
|
|
|
- APR 30,
2016
|
|
Russia
|
|
|
3,007
|
|
|
|
-
|
|
|
|
6,019
|
|
Sweden
|
|
|
162
|
|
|
|
172
|
|
|
|
125
|
|
Other countries
|
|
|
-
|
|
|
|
-
|
|
|
|
229
|
|
Total
|
|
|
3,169
|
|
|
|
172
|
|
|
|
6,373
|
|
Non-current assets
located in Sweden as per April 30, 2018 amount to SEK 483,297 thousand compared to SEK 466,474 thousand as of April 30, 2017 and
SEK 437,297 thousand as of April 30, 2016 and non-current assets located in another country as per April 30, 2018 amount to SEK
4,268 thousand compared to SEK 4,990 thousand as of April 30, 2017 and SEK 5,713 thousand as of April 30, 2016.
NOTE 5 CAPITALIZED
DEVELOPMENT COSTS
|
|
MAY 1, 2017
|
|
|
MAY 1, 2016
|
|
|
MAY 1, 2015
|
|
|
|
- APR 30,
2018
|
|
|
- APR 30,
2017
|
|
|
- APR 30,
2016
|
|
TSEK
|
|
Paclical
|
|
|
Paccal
Vet
|
|
|
Total
|
|
|
Paclical
|
|
|
Paccal
Vet
|
|
|
Total
|
|
|
Paclical
|
|
|
Paccal
Vet
|
|
|
Total
|
|
Opening acquisition cost
|
|
|
307,647
|
|
|
|
109,275
|
|
|
|
416,922
|
|
|
|
300,088
|
|
|
|
109,812
|
|
|
|
409,900
|
|
|
|
290,108
|
|
|
|
103,065
|
|
|
|
393,173
|
|
Adjustment
*)
|
|
|
-
|
|
|
|
-
|
|
|
|
0
|
|
|
|
-
|
|
|
|
(875
|
)
|
|
|
(875
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
0
|
|
Capitalized expenditure for the
year
|
|
|
9,024
|
|
|
|
133
|
|
|
|
9,157
|
|
|
|
7,559
|
|
|
|
338
|
|
|
|
7,897
|
|
|
|
9,980
|
|
|
|
6,747
|
|
|
|
16,727
|
|
Closing accumulated acquisition
cost
|
|
|
316,671
|
|
|
|
109,408
|
|
|
|
426,079
|
|
|
|
307,647
|
|
|
|
109,275
|
|
|
|
416,922
|
|
|
|
300,088
|
|
|
|
109,812
|
|
|
|
409,900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening accumulated amortization
|
|
|
-
|
|
|
|
-
|
|
|
|
0
|
|
|
|
-
|
|
|
|
-
|
|
|
|
0
|
|
|
|
-
|
|
|
|
-
|
|
|
|
0
|
|
Amortization for the year
|
|
|
-
|
|
|
|
-
|
|
|
|
0
|
|
|
|
-
|
|
|
|
-
|
|
|
|
0
|
|
|
|
-
|
|
|
|
-
|
|
|
|
0
|
|
Closing accumulated
amortization
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing carrying amount
|
|
|
316,671
|
|
|
|
109,408
|
|
|
|
426,079
|
|
|
|
307,647
|
|
|
|
109,275
|
|
|
|
416,922
|
|
|
|
300,088
|
|
|
|
109,812
|
|
|
|
409,900
|
|
*)
In some cases the capitalization of development costs is based on assessments, which may deviate from the actual outcome
and then has to be adjusted.
The accompanying
notes are an integral part of these consolidated financial statements.
OASMIA PHARMACEUTICAL
AB AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
APRIL 30, 2018
Capitalized development
costs amounted to TSEK 9,157 for the financial year ended April 30, 2018 compared to TSEK 7,898 as of April 30, 2017 and TSEK
16,727 as of April 30, 2016. Research and development costs which were not capitalized amounted to TSEK 56,389 for the financial
year ended April 30, 2018 compared to TSEK 89,964 in the financial year ending April 30, 2017 and TSEK 96,884 in the financial
year ending April 30, 2016. Total cost for research and development, capitalized and expensed, amounted TSEK 65,546 for the financial
year ended 30 April, 2018 compared to TSEK 97,862 as of April 30, 2017 and TSEK 113,611 as of April 30, 2016.
NOTE 6 OTHER
OPERATING INCOME
|
|
MAY 1, 2017
|
|
|
MAY 1, 2016
|
|
|
MAY 1, 2015
|
|
TSEK
|
|
- APR 30,
2018
|
|
|
- APR 30, 2017
|
|
|
- APR 30, 2016
|
|
Conciliation payment
|
|
|
1,300
|
|
|
|
-
|
|
|
|
-
|
|
Exchange-rate differences
|
|
|
157
|
|
|
|
202
|
|
|
|
2
|
|
Other
|
|
|
296
|
|
|
|
218
|
|
|
|
-
|
|
Total
|
|
|
1,753
|
|
|
|
420
|
|
|
|
2
|
|
In a legal dispute
with a supplier concerning defective production equipment, Oasmia has received a conciliation payment of SEK 1,300 thousand.
NOTE 7 INVENTORIES
TSEK
|
|
APR 30, 2018
|
|
|
APR 30, 2017
|
|
|
|
|
Raw materials and necessities
|
|
|
3,093
|
|
|
|
5,581
|
|
|
|
|
|
Work in progress
|
|
|
6,653
|
|
|
|
8,104
|
|
|
|
|
|
Total
|
|
|
9,746
|
|
|
|
13,685
|
|
|
|
|
|
During the financial
year ended April 30, 2018 goods of TSEK 0 compared to TSEK 0 as of April, 2017 and TSEK 2,383 as of April 30, 2016 were carried
as an expense and goods valued at TSEK 1,070 as of April 30, 2018 compared to TSEK 5,736 as of April 30, 2017 and TSEK 229 as
of April 30, 2016 have been written down, which mainly drives from finished goods intended for the Russian market.
The change in the
line item “Work in progress” during the year are recognized in the income statement in “Change in inventories
of products in progress and finished goods”.
NOTE 8 REMUNERATIONS
TO AUDITORS
|
|
MAY 1, 2017
|
|
|
MAY 1, 2016
|
|
|
MAY 1, 2015
|
|
TSEK
|
|
- APR 30,
2018
|
|
|
- APR 30, 2017
|
|
|
- APR 30, 2016
|
|
Ernst & Young AB
|
|
|
|
|
|
|
|
|
|
|
|
|
Auditing
|
|
|
1,733
|
|
|
|
1,729
|
|
|
|
1,390
|
|
Auditing activities in addition to auditing
|
|
|
1,200
|
|
|
|
800
|
|
|
|
2,459
|
|
Tax consulting
|
|
|
0
|
|
|
|
10
|
|
|
|
32
|
|
Other services
|
|
|
19
|
|
|
|
59
|
|
|
|
131
|
|
Total
|
|
|
2,952
|
|
|
|
2,598
|
|
|
|
4,012
|
|
Auditing involves
reviews of the Annual Report, of the accounting records, and of the management of the Board of Directors and CEO, and other tasks
that the company’s auditors are required to undertake. Auditing activities in addition to auditing include review of interim
reports and quality assurance services.
The accompanying
notes are an integral part of these consolidated financial statements.
OASMIA PHARMACEUTICAL
AB AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
APRIL 30, 2018
NOTE 9 LEASING
The Group has no
financial leasing agreements but has operational leasing agreements that primarily consist of leases for facilities. Leasing costs
were TSEK 6,370 for the financial year ended April 30, 2018 compared to TSEK 6,379 as of April 30, 2017 and TSEK 5,930 as of April
30, 2016. These consisted of minimum lease payments of TSEK 5,654 for the financial year ended April 30, 2018 compared to TSEK
5,678 as of April 30, 2017 and variable payments for the financial year ended April 30, 2018 of TSEK 716 compared to 701 as of
April 30, 2017. The future minimum lease payments for operational leases are as follows in (TSEK):
|
|
Operational leasing
|
|
Financial year
|
|
MAY 1, 2017
|
|
|
MAY 1, 2016
|
|
TSEK
|
|
-APR 30, 2018
|
|
|
-APR 30, 2017
|
|
Leasing expensed during the financial year
|
|
|
6,370
|
|
|
|
6,379
|
|
Nominal value of future minimum leasing payments is divided up as
follows:
|
|
|
|
|
|
|
|
|
Due for payment within a year
|
|
|
5,654
|
|
|
|
5,654
|
|
Due for payment later than a year but within five years
|
|
|
7,184
|
|
|
|
11,889
|
|
Due for payment later than five years
|
|
|
587
|
|
|
|
1,535
|
|
Total
|
|
|
13,424
|
|
|
|
19,078
|
|
NOTE 10 EMPLOYEES
AND REMUNERATION
Average number
of employees
|
|
MAY 1, 2017
|
|
|
MAY 1, 2016
|
|
|
MAY 1, 2015
|
|
|
|
-APR 30, 2018
|
|
|
- APR 30, 2017
|
|
|
- APR 30, 2016
|
|
Sweden
|
|
|
|
|
|
|
|
|
|
|
|
|
Women
|
|
|
27
|
|
|
|
37
|
|
|
|
35
|
|
Men
|
|
|
31
|
|
|
|
38
|
|
|
|
40
|
|
Total Sweden
|
|
|
58
|
|
|
|
75
|
|
|
|
75
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Russia
|
|
|
|
|
|
|
|
|
|
|
|
|
Women
|
|
|
1
|
|
|
|
-
|
|
|
|
-
|
|
Total Average number of employees
|
|
|
59
|
|
|
|
75
|
|
|
|
75
|
|
Salaries and
benefits
|
|
MAY 1, 2017
|
|
|
MAY 1, 2016
|
|
|
MAY 1, 2015
|
|
TSEK
|
|
-APR 30, 2018
|
|
|
- APR 30, 2017
|
|
|
- APR 30, 2016
|
|
Board
|
|
|
2,269
|
|
|
|
2,821
|
|
|
|
3,169
|
|
CEO and other senior executives
|
|
|
4,712
|
|
|
|
4,505
|
|
|
|
6,171
|
|
Other employees
|
|
|
27,001
|
|
|
|
35,150
|
|
|
|
32,160
|
|
Defined contribution pension plans
|
|
|
2,978
|
|
|
|
3,057
|
|
|
|
2,668
|
|
Defined medical benefits
|
|
|
343
|
|
|
|
356
|
|
|
|
276
|
|
Total salary and remuneration
|
|
|
37,302
|
|
|
|
45,890
|
|
|
|
44,445
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Social security contributions by law and agreement
|
|
|
9,551
|
|
|
|
12,076
|
|
|
|
11,677
|
|
Special employer’s contribution, pension
expenses
|
|
|
801
|
|
|
|
819
|
|
|
|
717
|
|
Total salaries, remuneration and social security
|
|
|
47,655
|
|
|
|
58,785
|
|
|
|
56,840
|
|
Health care
and medical care
Oasmia offers its
employees free medical care up to the cost ceiling and free medicines up to the cost cap. Oasmia has also signed an agreement
with a provider of occupational health services.
Benefits for
senior executives
Board of Directors
and Board committees
Remuneration of
the Chairman of the Board of Directors and Board members is decided by the Annual General Meeting. There is no remuneration for
participation in the Nomination Committee.
The Executive Chairman
of the Board, Julian Aleksov, is an employee of the company and receives a monthly salary. Remuneration is reviewed on April 1
each year. Under the terms of his employment contract he is entitled to pension insurance whereby the company annually pays an
amount corresponding to 25 percent of his pensionable salary to a company of his choice. The Executive Chairman of the Board is
also entitled to individual health insurance and medical insurance.
The accompanying
notes are an integral part of these consolidated financial statements.
OASMIA PHARMACEUTICAL
AB AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
APRIL 30, 2018
Board fees for
Lars Bergkvist were invoiced up until September 2017 through the company Axli AB, and Board fees for Alexander Kotsinas were invoiced
between April 2017 and September 2017 through the company Windride AB, in accordance with a resolution adopted at a general meeting
of shareholders and pursuant to a special agreement with Oasmia Pharmaceutical AB. As from October 2017 all Board members have
their Board fees paid as earned income, which is subject to an employer’s contribution from Oasmia.
Except for what
is described in Transactions with key people in senior positions in Note 26, no other remuneration such as salary, pension premiums
or other benefits has been paid.
CEO
Remuneration of
the CEO consists of a fixed salary. The remuneration is reviewed annually on April 1. According to the CEO's employment contract
he is entitled to pension insurance, whereby the company shall pay an annual amount corresponding to the ITP scale to a company
of his choice. The CEO is also entitled to individual health insurance and medical insurance. If notice of termination is given
by the employer, a 12-month term of notice applies. If notice of termination is given by the CEO, the term of notice is 3 months.
Terms of employment
for other senior executives
Remuneration to
other senior executives consists of a fixed salary. Salaries are reviewed annually on April 1. According to their employment contracts
other senior executives are entitled to pension insurance, whereby the company shall pay an annual amount corresponding to the
ITP scale. Other senior executives are also entitled to individual health insurance.
Remuneration to
Board and senior executives
|
|
|
|
|
MAY 1, 2017 – APR 30, 2018
|
|
|
|
|
TSEK
|
|
Base salary/
board Fees
|
|
|
Remuneration
upon
termination of
employment
|
|
|
Social security
incl. special
employer´s
contribution
|
|
|
Pension/Sickness
benefits
|
|
|
Variable
remuneration
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chairman of the
Board, Julian Aleksov
|
|
|
1,702
|
|
|
|
-
|
|
|
|
650
|
|
|
|
456
|
|
|
|
30
|
|
Board member, Bo Cederstrand
|
|
|
150
|
|
|
|
-
|
|
|
|
25
|
|
|
|
-
|
|
|
|
-
|
|
Board member, Alexander Kotsinas
|
|
|
150
|
|
|
|
-
|
|
|
|
47
|
|
|
|
-
|
|
|
|
-
|
|
Board
member, Per Langö
(1)
|
|
|
88
|
|
|
|
-
|
|
|
|
27
|
|
|
|
-
|
|
|
|
-
|
|
Board member, Lars Bergkvist
|
|
|
150
|
|
|
|
-
|
|
|
|
47
|
|
|
|
-
|
|
|
|
-
|
|
CEO, Mikael Asp
|
|
|
1,378
|
|
|
|
-
|
|
|
|
510
|
|
|
|
334
|
|
|
|
4
|
|
Other
senior executives (1 people at end of year, 2 people on average during financial year)
2)
|
|
|
2,787
|
|
|
|
202
|
|
|
|
1,107
|
|
|
|
675
|
|
|
|
15
|
|
Other senior
executives in subsidiaries
|
|
|
326
|
|
|
|
-
|
|
|
|
7
|
|
|
|
78
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
6,732
|
|
|
|
202
|
|
|
|
2,421
|
|
|
|
1,543
|
|
|
|
48
|
|
|
(1)
|
Mr.
Langö was appointed in September, 2017.
|
|
|
|
|
(2)
|
One
senior executive resigned during the year.
|
The accompanying
notes are an integral part of these consolidated financial statements.
OASMIA PHARMACEUTICAL
AB AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
APRIL 30, 2018
|
|
MAY 1, 2016 – APR 30, 2017
|
|
TSEK
|
|
Base salary/
board fees
|
|
|
Social
security incl.
special
employer’s
contribution
|
|
|
Pension/
sickness
benefits
|
|
|
Variable
remuneration
|
|
Chairman of the Board Anders Lönner
1)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Chairman
of the Board /Vice Chairman of the Board Julian Aleksov
2)
|
|
|
1,698
|
|
|
|
644
|
|
|
|
449
|
|
|
|
23
|
|
Board member, Bo Cederstrand
|
|
|
150
|
|
|
|
25
|
|
|
|
-
|
|
|
|
-
|
|
Board
member, Horst Domdey
3)
|
|
|
96
|
|
|
|
30
|
|
|
|
-
|
|
|
|
-
|
|
Board member, Alexander Kotsinas
|
|
|
89
|
|
|
|
28
|
|
|
|
-
|
|
|
|
-
|
|
Board
member, Hans Sundin
3)
|
|
|
537
|
|
|
|
88
|
|
|
|
-
|
|
|
|
16
|
|
Board
member, Hans Liljeblad
4)
|
|
|
63
|
|
|
|
19
|
|
|
|
-
|
|
|
|
-
|
|
Board member, Lars Bergkvist
|
|
|
150
|
|
|
|
47
|
|
|
|
-
|
|
|
|
-
|
|
CEO Mikael Asp
|
|
|
1,366
|
|
|
|
479
|
|
|
|
230
|
|
|
|
-
|
|
Other
senior executives (2 people at end of year, 2 people on average during financial year)
5)
|
|
|
3,127
|
|
|
|
1,134
|
|
|
|
621
|
|
|
|
13
|
|
Total
|
|
|
7,275
|
|
|
|
2,495
|
|
|
|
1,300
|
|
|
|
51
|
|
1)
Elected
Chairman of the Board in November 2016 and resigned in February 2017.
2)
Elected
Chairman of the Board in May 2015 and switched to Vice Chairman in November 21, 2016 to February 27, 2017. Julian Aleksov is the
Executive Chairman and receives a salary.
3)
Resigned
in November 2016.
4)
Resigned
in September 2016.
5)
In
November 2016 management team was increased by one person. One senior executive resigned in March 2017.
Gender
distribution on the Board and in management
|
|
APR
30, 2018
|
|
|
APR
30, 2017
|
|
|
APR
30, 2016
|
|
|
|
|
Number
on
closing
day
|
|
|
|
Number
of
men
|
|
|
|
Number
on
closing
day
|
|
|
|
Number
of
men
|
|
|
|
Number
on
closing
day
|
|
|
|
Number
of
men
|
|
Group (incl subsidiaries)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Board
members
*)
|
|
|
14
|
|
|
|
14
|
|
|
|
12
|
|
|
|
12
|
|
|
|
13
|
|
|
|
13
|
|
CEO and other senior executives
|
|
|
3
|
|
|
|
2
|
|
|
|
3
|
|
|
|
3
|
|
|
|
4
|
|
|
|
4
|
|
*)
The
comparative figure has been adjusted compared to 2016 Annual Report. The statement of gender distribution among Board members
in the Group as per April 30, 2016 has been adjusted from 7 (of which 7 men) to 13 (of which 13 men). This adjustment has been
made to show all Board seats as per April 30, 2016. In the event that the same person is present in the Boards of several companies
included in the Group, the person is now counted as a member of the Board of each company, which was not the case in the previous
year’s annual report.
NOTE 11
PROPERTY, PLANT AND EQUIPMENT
Property, plant
and equipment consist of vehicles, inventory and production equipment, leasehold improvements, and construction in progress and
advance payments for machinery and equipment.
|
|
Group MAY 1, 2017 – APR 30, 2018
|
|
|
|
|
TSEK
|
|
Vehicles
|
|
|
Inventories
and
production
equipment
|
|
|
Leasehold
improvements
|
|
|
Construction in
progress and
advance
payments for
machinery and
equipment
|
|
|
Total
|
|
Opening acquisition cost
|
|
|
225
|
|
|
|
43,684
|
|
|
|
8,437
|
|
|
|
146
|
|
|
|
52,492
|
|
Investments for the year
|
|
|
-
|
|
|
|
415
|
|
|
|
-
|
|
|
|
-
|
|
|
|
415
|
|
Sales/disposals
|
|
|
-
|
|
|
|
(252
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(252
|
)
|
Closing accumulated acquisition cost
|
|
|
225
|
|
|
|
43,847
|
|
|
|
8,437
|
|
|
|
146
|
|
|
|
52,655
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening depreciation
|
|
|
(75
|
)
|
|
|
(30,712
|
)
|
|
|
(3,337
|
)
|
|
|
-
|
|
|
|
(34,124
|
)
|
Depreciation for the year
|
|
|
(75
|
)
|
|
|
(2,715
|
)
|
|
|
(440
|
)
|
|
|
-
|
|
|
|
(3,230
|
)
|
Sales/disposals
|
|
|
-
|
|
|
|
226
|
|
|
|
-
|
|
|
|
-
|
|
|
|
226
|
|
Closing accumulated depreciation
|
|
|
(150
|
)
|
|
|
(33,201
|
)
|
|
|
(3,777
|
)
|
|
|
0
|
|
|
|
(37,128
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing carrying amount
|
|
|
75
|
|
|
|
10,646
|
|
|
|
4,660
|
|
|
|
146
|
|
|
|
15,527
|
|
The accompanying
notes are an integral part of these consolidated financial statements.
OASMIA PHARMACEUTICAL
AB AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
APRIL 30, 2018
|
|
Group
MAY 1, 2016 – APR 30, 2017
|
|
|
|
|
TSEK
|
|
Vehicles
|
|
|
Inventories
and
production
equipment
|
|
|
Leasehold
improvements
|
|
|
Construction
in
progress and
advance
payments for
machinery and
equipment
|
|
|
Total
|
|
Opening acquisition cost
|
|
|
0
|
|
|
|
43,500
|
|
|
|
8,377
|
|
|
|
100
|
|
|
|
51,977
|
|
Investments for the year
|
|
|
225
|
|
|
|
184
|
|
|
|
60
|
|
|
|
46
|
|
|
|
515
|
|
Reclassifications
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
0
|
|
Sales/disposals
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
0
|
|
Closing accumulated acquisition cost
|
|
|
225
|
|
|
|
43,684
|
|
|
|
8,437
|
|
|
|
146
|
|
|
|
52,492
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening depreciation
|
|
|
0
|
|
|
|
(27,898
|
)
|
|
|
(2,907
|
)
|
|
|
0
|
|
|
|
(30,805
|
)
|
Depreciation for the year
|
|
|
(75
|
)
|
|
|
(2,814
|
)
|
|
|
(430
|
)
|
|
|
-
|
|
|
|
(3,319
|
)
|
Sales/disposals
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
0
|
|
Closing accumulated depreciation
|
|
|
(75
|
)
|
|
|
(30,712
|
)
|
|
|
(3,337
|
)
|
|
|
0
|
|
|
|
(34,124
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing carrying amount
|
|
|
150
|
|
|
|
12,972
|
|
|
|
5,100
|
|
|
|
146
|
|
|
|
18,368
|
|
NOTE 12 OTHER
INTANGIBLE ASSETS
Other intangible
assets consist of the costs of patents and of acquired research projects.
|
|
Group
MAY 1, 2017 – APR 30, 2018
|
|
|
Group
MAY 1, 2016 – APR 30, 2017
|
|
TSEK
|
|
Patents
|
|
|
Research
projects
|
|
|
Total
|
|
|
Patents
|
|
|
Research
projects
|
|
|
Total
|
|
Opening acquisition cost
|
|
|
24,038
|
|
|
|
25,000
|
|
|
|
49,038
|
|
|
|
23,615
|
|
|
|
0
|
|
|
|
23,615
|
|
Purchases for the year
|
|
|
11,881
|
|
|
|
-
|
|
|
|
11,881
|
|
|
|
423
|
|
|
|
25,000
|
|
|
|
25,423
|
|
Disposals
|
|
|
(894
|
)
|
|
|
-
|
|
|
|
(894
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
0
|
|
Closing accumulated acquisition cost
|
|
|
35,025
|
|
|
|
25,000
|
|
|
|
60,025
|
|
|
|
24,038
|
|
|
|
25,000
|
|
|
|
49,038
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening accumulated amortization
|
|
|
(12,867
|
)
|
|
|
-
|
|
|
|
(12,867
|
)
|
|
|
(11,679
|
)
|
|
|
0
|
|
|
|
(11,679
|
)
|
Amortization for the year
|
|
|
(1,538
|
)
|
|
|
-
|
|
|
|
(1,538
|
)
|
|
|
(1,188
|
)
|
|
|
-
|
|
|
|
(1,188
|
)
|
Disposals
|
|
|
338
|
|
|
|
-
|
|
|
|
338
|
|
|
|
-
|
|
|
|
-
|
|
|
|
0
|
|
Closing accumulated amortization
|
|
|
(14,067
|
)
|
|
|
0
|
|
|
|
(14,067
|
)
|
|
|
(12,867
|
)
|
|
|
0
|
|
|
|
(12,867
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing carrying amount
|
|
|
20,958
|
|
|
|
25,000
|
|
|
|
45,957
|
|
|
|
11,171
|
|
|
|
25,000
|
|
|
|
36,171
|
|
The accompanying
notes are an integral part of these consolidated financial statements.
OASMIA PHARMACEUTICAL
AB AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
APRIL 30, 2018
NOTE 13
CURRENCY DIFFERENCES – NET
Currency differences
are recognized in the income statement as follows:
|
|
MAY 1, 2017
|
|
|
MAY 1, 2016
|
|
|
MAY 1, 2015
|
|
TSEK
|
|
-
APR 30, 2018
|
|
|
-
APR 30, 2017
|
|
|
-
APR 30, 2016
|
|
Other operating income
|
|
|
157
|
|
|
|
202
|
|
|
|
2
|
|
Other external expenses
|
|
|
(640
|
)
|
|
|
(1,591
|
)
|
|
|
478
|
|
Financial items – net
|
|
|
(55
|
)
|
|
|
(44
|
)
|
|
|
(480
|
)
|
Total
|
|
|
(538
|
)
|
|
|
(1,433
|
)
|
|
|
0
|
|
NOTE 14 OPERATING
INCOME
Operating income
for the financial year ending April 30, 2018 was TSEK (103,724) compared to TSEK (140,481) for the financial year ending April
30, 2017 and TSEK (132,691) for the financial year ending April 30, 2016. Of the Group's recognized operating expenses of TSEK
116,352 in the financial year ending April 30, 2018, TSEK 146,691 in the financial year ending April 30, 2017 and TSEK 165,273
in the financial year ending April 30, 2016, TSEK 9,157 was recognized as capitalized development costs in the financial year
ending April 30, 2018 compared to TSEK 7,898 in the financial year ending April 30, 2017 and TSEK 16,727 in the financial year
ending April 30, 2016.
NOTE 15 FINANCIAL
INCOME AND EXPENSES
|
|
|
|
Group
|
|
|
|
|
|
MAY 1, 2017
|
|
|
MAY 1, 2016
|
|
|
MAY 1, 2015
|
|
TSEK
|
|
Category
|
|
-
APR 30, 2018
|
|
|
-
APR 30, 2017
|
|
|
-
APR 30, 2016
|
|
Financial income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank accounts
|
|
Loans receivable and accounts receivable
|
|
|
53
|
|
|
|
4
|
|
|
|
726
|
|
Short-term investments
|
|
Financial assets valued at fair value
|
|
|
-
|
|
|
|
30
|
|
|
|
-
|
|
Other
|
|
-
|
|
|
48
|
|
|
|
51
|
|
|
|
60
|
|
Total financial income
|
|
|
|
|
101
|
|
|
|
85
|
|
|
|
786
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities to credit institutions
|
|
Financial liabilities valued at amortized cost
|
|
|
(66
|
)
|
|
|
(194
|
)
|
|
|
(365
|
)
|
Convertible loans
|
|
Financial liabilities valued at amortized cost
|
|
|
(4,093
|
)
|
|
|
(6,728
|
)
|
|
|
(115
|
)
|
Other borrowings
|
|
Financial liabilities valued at amortized cost
|
|
|
(8,014
|
)
|
|
|
(6,549
|
)
|
|
|
(7,616
|
)
|
Accounts payable
|
|
Financial liabilities valued at amortized cost
|
|
|
(129
|
)
|
|
|
(6
|
)
|
|
|
(134
|
)
|
Other
|
|
-
|
|
|
(9
|
)
|
|
|
(13
|
)
|
|
|
(4
|
)
|
|
|
|
|
|
(12,311
|
)
|
|
|
(13,490
|
)
|
|
|
(8,234
|
)
|
Other financial expenses and exchange rate differences
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term investments
|
|
Financial assets valued at fair value
|
|
|
-
|
|
|
|
-
|
|
|
|
(49
|
)
|
Bank accounts
|
|
Loans receivable and accounts receivable
|
|
|
(47
|
)
|
|
|
(10
|
)
|
|
|
(1,216
|
)
|
Convertible loans
|
|
Financial liabilities valued at amortized cost
|
|
|
(1,923
|
)
|
|
|
(6,259
|
)
|
|
|
(86
|
)
|
Other
|
|
-
|
|
|
(109
|
)
|
|
|
(88
|
)
|
|
|
(49
|
)
|
|
|
|
|
|
(2,079
|
)
|
|
|
(6,357
|
)
|
|
|
(1,400
|
)
|
Total financial expenses
|
|
|
|
|
(14,390
|
)
|
|
|
(19,847
|
)
|
|
|
(9,634
|
)
|
NOTE 16 INCOME
TAXES
The Parent Company
and two subsidiaries have their fiscal domicile in Sweden, where the tax rate for the financial year ending April 30, 2018 is
22 % compared to 22 % for the financial years ending April 30, 2017 and 2016 respectively. In addition, a subsidiary has its fiscal
domicile in the USA, one in Hong Kong and one in Russia.
The accompanying
notes are an integral part of these consolidated financial statements.
OASMIA PHARMACEUTICAL
AB AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
APRIL 30, 2018
The income tax
on Group earnings before tax is shown in the table below:
|
|
MAY 1, 2017
|
|
|
MAY 1, 2016
|
|
|
MAY 1, 2015
|
|
TSEK
|
|
- APR
30, 2018
|
|
|
- APR
30, 2017
|
|
|
- APR
30, 2016
|
|
Income before taxes
|
|
|
(118,013
|
)
|
|
|
(160,243
|
)
|
|
|
(141,539
|
)
|
Issue expenses not included in earnings
|
|
|
(15,500
|
)
|
|
|
(3,605
|
)
|
|
|
(14,706
|
)
|
Non-taxable revenues
|
|
|
-
|
|
|
|
(1
|
)
|
|
|
0
|
|
Non-deductible expenses
|
|
|
1,351
|
|
|
|
6,087
|
|
|
|
607
|
|
Taxable income
|
|
|
(132,162
|
)
|
|
|
(157,762
|
)
|
|
|
(155,638
|
)
|
Income tax according to current tax rates in Sweden
|
|
|
29,076
|
|
|
|
34,708
|
|
|
|
34,240
|
|
Taxable deficits for which no deferred tax asset is recognized
|
|
|
(29,076
|
)
|
|
|
(34,708
|
)
|
|
|
(34,240
|
)
|
Tax expense
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
At April 30, 2018
the Group had accumulated loss carry-forward from previous years and from the financial year amounting to TSEK 1,009,345 compared
to TSEK 877,183 as of April 30, 2017 and TSEK 720,576 as of April 30, 2016. There are at present no sufficiently convincing reasons
to assume that loss carry-forward will be able to be utilized against future profits, and thus no deferred tax asset has been
recognized in the balance sheet.
NOTE 17 EARNINGS
PER SHARE
Earnings per share
are calculated by dividing earnings attributable to Parent Company shareholders by a weighted number of common shares outstanding
during the period.
|
|
MAY 1, 2017
|
|
|
MAY 1, 2016
|
|
|
MAY 1, 2015
|
|
|
|
- APR 30,
2018
|
|
|
- APR 30,
2017
|
|
|
- APR 30,
2016
|
|
Earnings attributable to Parent Company shareholders (TSEK)
|
|
|
(118,007
|
)
|
|
|
(160,243
|
)
|
|
|
(141,539
|
)
|
Weighted average number of common shares outstanding (thousands)
|
|
|
166,196
|
|
|
|
112,994
|
|
|
|
101,753
|
|
Earnings per share (SEK per share)
*)
|
|
|
(0.71
|
)
|
|
|
(1.39
|
)
|
|
|
(1.36
|
)
|
*)
Recalculation
of historical values has been made taking into account capitalization issue elements in the rights issue carried out in July 2017.
The following instruments
outstanding have not given rise to any dilution effect at April 30, 2018, but may do so in the future:
|
|
Number of
warrants
and
convertibles
|
|
|
Total
possible
number of
shares
|
|
Warrants that can be converted to 3 (three) shares
|
|
|
1,280,750
|
|
|
|
3,842,250
|
|
Warrants that can be converted to 1 (one) share, board and senior
executives
|
|
|
5,543,182
|
|
|
|
5,543,182
|
|
Warrants that can be converted to 1 (one) share, other
|
|
|
34,979,061
|
|
|
|
34,979,061
|
|
Convertible instruments
|
|
|
54
|
|
|
|
14,338,380
|
|
Total possible number of shares
|
|
|
|
|
|
|
58,702,873
|
|
NOTE 18 FINANCIAL
INSTRUMENTS AND FINANCIAL RISKS
Financial risks
Oasmia’s
business, like all business activities, is subjected to a large number of risks. In general, these may be divided into such risks
that directly affect the Group’s financial situation (financial risks) and such risks that only affect the financial situation
indirectly (operational risks). What operational risks Oasmia is subjected to and how these are managed is described in the sections
Management Discussion and Analysis and in Risk Factors.
Financial risks
can be divided up into such risks that affect the Group’s financial instruments and other financial risks. The latter affect
other assets and liabilities and equity.
The accompanying
notes are an integral part of these consolidated financial statements.
OASMIA PHARMACEUTICAL
AB AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
APRIL 30, 2018
The financial risks
that Oasmia’s financial instruments are to varying extents subjected to are primarily:
|
·
|
Credit
risk,
meaning the risk that a debtor does not pay its liability to Oasmia.
|
|
·
|
Liquidity
risk,
meaning the risk that Oasmia does not have sufficient funds to pay a liability when it falls due for payment
or that a lack of liquidity significantly limits Oasmia in its business operations.
In addition
to the liquidity risk associated with individual financial instruments, and which is described together with these in
this note, there is also a general liquidity risk. Oasmia does not yet find itself in a commercialization stage, which
means that revenues and cash flows generated from sales are not yet sufficient to cover the Group’s capital and
liquidity requirements. This means that there is a risk that Oasmia cannot manage to find existing and new owners who
are willing to contribute equity and creditors who are prepared to give loans to a sufficient extent until the company’s
own sales have reached a sufficient size. See also under the Management Discussion and Analysis and in Risk Factors.
|
|
|
|
|
·
|
Market
risk,
meaning the risk that values that are dependent on the development of the financial markets affect the value of
Oasmia’s financial instruments negatively.
|
The market risks
that affect Oasmia’s financial instruments are primarily:
– Currency
risk: exchange rates for the currencies that Oasmia’s financial instruments are denominated in.
– Interest-rate
risk: the interest rates that Oasmia’s financial instruments carry. However, as the interest rates of all financial instruments
outstanding at April 30, 2018 are fixed until maturity, there is no interest-rate risk in these.
The following sensitivity
analysis shows the effect in TSEK if each parameter were to change by 10 percent:
|
|
|
|
Currency
risk
|
|
Financial instrument
|
|
Currency
|
|
Apr
30, 2018
|
|
|
Apr
30, 2017
|
|
Accounts receivable – trade, accrued income and
cash and cash equivalents
|
|
USD
|
|
|
226
|
|
|
|
-
|
|
|
|
HKD
|
|
|
5
|
|
|
|
-
|
|
|
|
RUB
|
|
|
82
|
|
|
|
-
|
|
Total currency risk
|
|
|
|
|
313
|
|
|
|
-
|
|
|
|
|
|
|
Currency
risk
|
|
Financial instrument
|
|
Currency
|
|
|
Apr
30, 2018
|
|
|
|
Apr
30, 2017
|
|
Accounts payable and other current liabilities
|
|
EUR
|
|
|
375
|
|
|
|
1,507
|
|
|
|
USD
|
|
|
318
|
|
|
|
167
|
|
|
|
RUB
|
|
|
20
|
|
|
|
-
|
|
|
|
GBP
|
|
|
26
|
|
|
|
28
|
|
Total currency risk
|
|
|
|
|
739
|
|
|
|
1,702
|
|
These risks, how
they are managed and what financial instruments are affected by them are discussed further below in the sections “Financial
risk management” and “Financial instruments”.
Financial risk
management
The Group financial
policy determined by the Board regulates how management should identify financial risks and, when possible and necessary, take
measures to limit risk.
Risk consists of
two components:
|
·
|
The
probability of the adverse event occurring
|
|
·
|
The
materiality of the adverse event
|
A correct assessment
of risk, and thus a decision on appropriate risk management measures, is based on a true assessment of both these components.
Obviously, there can be situations where it is not profitable to actively take measures to prevent a negative event even if there
is a risk that it may occur, if at the same time the consequences of such a negative event are small. In such a case it is probably
best to accept the risk.
The accompanying
notes are an integral part of these consolidated financial statements.
OASMIA PHARMACEUTICAL
AB AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
APRIL 30, 2018
In other cases,
where the consequences of a negative event may be more extensive, risk management can consist of taking certain measures to try
to minimize both components. Depending on the nature of the risk, these measures can be directed more at one or the other of them.
In certain cases, above all where market risk is concerned, the individual company can often not influence the risk parameters
at all. In those cases risk management is directed entirely at reducing the consequences of negative events.
Credit and liquidity
risks are mainly largely governed by events that can be managed through active preventive work.
The dominant financial
risks for Oasmia are financing and consequently liquidity risks, as described above. This means that most of the financial risk
management work is directed at these two risks. In practice, this means that company management is constantly working on finding
and developing different financing opportunities, through both creditors and owners.
Capital management
The company is
still in a development phase and does not generate any profits or positive cash flow yet, which means that the company’s
capital management focuses exclusively on the external raising of capital. For the same reason, no dividend policy has been formulated
yet.
The overarching
objective of the company’s capital management is to provide the business with capital and liquidity until such a time as
profitability and a positive cash flow have been achieved. This is done by issuing new shares and convertible loans, supplemented
by external loans. This management and this objective have not changed compared to the previous year and there are no external
capital requirements that have to be taken into consideration.
Financial instruments
Oasmia’s
financial instruments can be divided into the following categories:
|
·
|
Loans
receivable and accounts receivable
|
|
·
|
Financial
liabilities valued at amortized cost
|
Oasmia has no financial
instruments measured at fair value.
Financial instruments
by category
April 30, 2018
TSEK
|
|
Loans receivable
and accounts
receivable
|
|
|
Financial
liabilities valued
at amortized cost
|
|
|
Total
|
|
Financial assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
1,578
|
|
|
|
-
|
|
|
|
1,578
|
|
Other current receivables
|
|
|
33,000
|
|
|
|
-
|
|
|
|
33,000
|
|
Accrued income
|
|
|
782
|
|
|
|
-
|
|
|
|
782
|
|
Cash and cash equivalents
|
|
|
15,580
|
|
|
|
-
|
|
|
|
15,580
|
|
Total financial assets
|
|
|
50,940
|
|
|
|
-
|
|
|
|
50,940
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible loan
|
|
|
-
|
|
|
|
52,841
|
|
|
|
52,841
|
|
Other borrowings
|
|
|
-
|
|
|
|
134,419
|
|
|
|
134,419
|
|
Accounts payable
|
|
|
-
|
|
|
|
9,256
|
|
|
|
9,256
|
|
Other current liabilities
|
|
|
-
|
|
|
|
169
|
|
|
|
169
|
|
Accrued expenses
|
|
|
-
|
|
|
|
16,020
|
|
|
|
16,020
|
|
Total financial liabilities
|
|
|
0
|
|
|
|
212,705
|
|
|
|
212,705
|
|
April
30, 2017
TSEK
|
|
Loans receivable
and accounts
receivable
|
|
|
Financial
liabilities valued
at amortized cost
|
|
|
Total
|
|
Financial assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
35
|
|
|
|
-
|
|
|
|
35
|
|
Other current receivables
|
|
|
14
|
|
|
|
-
|
|
|
|
14
|
|
Cash and cash equivalents
|
|
|
28,001
|
|
|
|
-
|
|
|
|
28,001
|
|
Total financial assets
|
|
|
28,050
|
|
|
|
0
|
|
|
|
28,050
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible loan
|
|
|
-
|
|
|
|
66,307
|
|
|
|
66,307
|
|
Other borrowings
|
|
|
-
|
|
|
|
102,419
|
|
|
|
102,419
|
|
Accounts payable
|
|
|
-
|
|
|
|
20,837
|
|
|
|
20,837
|
|
Other current liabilities
|
|
|
|
|
|
|
197
|
|
|
|
197
|
|
Accrued expenses
|
|
|
-
|
|
|
|
15,823
|
|
|
|
15,823
|
|
Total financial liabilities
|
|
|
0
|
|
|
|
205,583
|
|
|
|
205,583
|
|
The accompanying
notes are an integral part of these consolidated financial statements.
OASMIA PHARMACEUTICAL
AB AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
APRIL 30, 2018
Financial assets
valued at fair value
As of April 30,
2018, Oasmia has no financial instruments measured at fair value.
Financial instruments’
fair value can be calculated according to different measurement techniques, which in turn are based on different inputs. These
inputs may be observable to varying degrees. The calculated fair values are divided into three different levels, primarily depending
on how observable these inputs are.
Level 1: Listed
prices in an active market for identical assets or liabilities constitute the fair value of financial instruments at level 1.
Level 2: Inputs
for fair value calculations at level 2 are constituted by other directly or indirectly observable inputs than listed prices.
Level 3: When calculating
fair value at level 3, inputs are not observable but are based, for example, on reasonable estimates.
Loans receivable
and accounts receivable
|
·
|
Cash and
cash equivalents to the amount of TSEK 15,580 as of April 30, 2018 compared to TSEK 28,001 as of April 30, 2017 consist
of bank balances of TSEK 15,279 as of April 30, 2018 compared to TSEK 27,975 as of April 30, 2017 in Swedish commercial
banks. and of a bank balance of TSEK 301 as of April 30, 2018 compared to TSEK 26 as of April 30, 2017 in foreign commercial
banks. Of cash and cash equivalents, TSEK 794 as of April 30, 2018 compared to TSEK 47 as of April 30, 2017 is balances
in foreign currency. These have been translated using the Swedish Riksbank’s end-of-month quotation at closing day.
That part of the liquid assets which are in other currencies than SEK has an underlying currency risk, which means that
there is a risk that the exchange rates for these currencies develop negatively. As the absolute values are small, it
is assessed that this risk is negligible.
Accounts
receivable of TSEK 1,578 as of April 30, 2018 compared to TSEK 35 as of April 30, 2017.
Accounts
receivable divided up by currency:
|
|
|
APR 30, 2018
|
|
|
APR 30, 2017
|
|
Currency
|
|
Value in
currency
|
|
|
Recognized
in SEK
|
|
|
Value in
currency
|
|
|
Recognized
in SEK
|
|
EUR
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
USD
|
|
|
179
|
|
|
|
1,555
|
|
|
|
-
|
|
|
|
-
|
|
SEK
|
|
|
23
|
|
|
|
23
|
|
|
|
35
|
|
|
|
35
|
|
Total
|
|
|
|
|
|
|
1,578
|
|
|
|
|
|
|
|
35
|
|
Age of accounts
receivable relative to due date:
|
|
APR 30, 2018
|
|
|
APR 30, 2017
|
|
Not yet due
|
|
|
23
|
|
|
|
35
|
|
Past due date:
|
|
|
|
|
|
|
|
|
1- 30 days
|
|
|
502
|
|
|
|
-
|
|
31-60 days
|
|
|
186
|
|
|
|
-
|
|
Older than 60 days
|
|
|
867
|
|
|
|
|
|
Total
|
|
|
1,578
|
|
|
|
35
|
|
The accompanying
notes are an integral part of these consolidated financial statements.
OASMIA PHARMACEUTICAL
AB AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
APRIL 30, 2018
|
|
Accounts
receivable are recognized at the value at which they are estimated they will be received. Accounts receivable in foreign
currency have been translated at the closing day exchange rate. Accounts receivable include a credit risk and a currency
risk. No provisions have been made for bad debt losses as the amounts due are expected to be received shortly.
No bad debt loss
was recognized as of April 30, 2018, however bad loss of TSEK 5,066 was recognized as of April 30, 2017.
|
|
·
|
Other
current receivables and accrued income of TSEK 33,000 as of April 30, 2018 compared to TSEK 14 as of April 30, 2017.
|
TSEK
|
|
APR 30, 2018
|
|
|
APR 30, 2017
|
|
Portion of convertible loan 2017:3 not yet paid
|
|
|
7,000
|
|
|
|
-
|
|
Portion of convertible loan 2018:1 not yet paid
|
|
|
26,000
|
|
|
|
-
|
|
Other current receivables
|
|
|
-
|
|
|
|
14
|
|
Total
|
|
|
33,000
|
|
|
|
14
|
|
Accounts receivable
Of Other
current receivables, TSEK 33,000 as of April 30, 2018, compared to TSEK 14 as of April 30, 2017, was overdue at closing day. The
amount of TSEK 0 as of April 30, 2018 compared to TSEK 0 as of April 30, 2017, is denominated in foreign currency.
Convertible loan
2017:3 was issued in November 2017 to the tune of TSEK 28,000. Of this sum, TSEK 7,000 had not been paid as of April 30, 2018.
Convertible loan 2018:1 was issued on April 19, 2018 to the tune of TSEK 26,000 and as of April 30, 2018 had not been paid.
These financial
instruments are reported at amortized cost, which in this case means the value which it is estimated will be received. This value
equals the fair value of these financial instruments. They include both credit risk and currency risk, as of April 30, 2018.
Accrued income
TSEK 782 as of April 30, 2018 compared to TSEK 0 as of April 30, 2017. Profit sharing stemming from sales in Russia (see Note
4, Segment information) had not yet been invoiced at April 30, 2018. It has been recognized as accrued income. This accrued income
involves both a credit risk and a currency risk.
Financial liabilities
valued at amortized cost
Borrowings
to the tune of TSEK 134,419 as of April 30, 2018 compared to TSEK 102,419 as of April 30, 2017 comprise a loan from Nexttobe AB,
who previously were Oasmia’s second largest shareholder and non-negotiable promissory notes to the tune of TSEK 32,000,
as follows:
|
|
Group
|
|
TSEK
|
|
Apr
30, 2018
|
|
|
Apr
30, 2017
|
|
Loan from Nexttobe
|
|
|
102,419
|
|
|
|
102,419
|
|
Non-negotiable promissory notes issued in June 2017
|
|
|
6,000
|
|
|
|
-
|
|
Non-negotiable promissory notes issued in
April 2018
|
|
|
26,000
|
|
|
|
-
|
|
Total
|
|
|
134,419
|
|
|
|
102,419
|
|
Nexttobe AB: The
loan plus accrued interest amount to TSEK 107,475 and the fair value to TSEK 107,279 as of April 30, 2018 compared to TSEK 100,616
as of April 30,2017. This has been calculated as the net present value of the future cash flow of the loan. A discount rate of
10 percent has been used, which is the assumed market rate for equivalent loans. This involves measurement in accordance with
level 3, as described above.
The accompanying
notes are an integral part of these consolidated financial statements.
OASMIA PHARMACEUTICAL
AB AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
APRIL 30, 2018
This loan originally
matured on September 30, 2017 and carried interest of 3.5%. The loan was then extended and at April 30, 2018 it had a maturity
date of May 31, 2018. However, after closing day the maturity date has been extended until July 31, 2018. The loan carries interest
of 8.5%.
During the year
interest expenses for this loan amounting to TSEK 6,559 as of April 30, 2018 compared to TSEK 6,549 were recognized in the income
statement as financial expenses. As the interest rate up until maturity is pursuant to a written agreement, there is a liquidity
risk but no interest-rate risk.
Oasmia has obtained
promises of credit from another party to cover repayment of the loan from Nexttobe including accrued interest.
Non-negotiable
promissory notes issued in June 2017: When convertible loan 2016:2 of TSEK 42,000 matured in June 2017 (see below), it was replaced
by non-negotiable promissory notes in the same amount. Of these promissory notes, a net amount of TSEK 36,000 was repaid during
the year so that a liability of TSEK 6,000 remained on April 30, 2018. This liability carries interest of 8.5% and matures on
June 30, 2018. Its fair value amounted to TSEK 6,432 at April 30, 2018. Fair value has been calculated as described regarding
the loan from Nexttobe above. This therefore also involves measurement in accordance with level 3, as described above.
The interest rates
up until maturity is pursuant to a written agreement, and consequently there is a liquidity risk but no interest-rate risk.
Non-negotiable
promissory notes issued in April 2018: When convertible loan 2017:2 of TSEK 26,000 matured in April 2018 (see below), it was replaced
by non-negotiable promissory notes in the same amount. These carry interest of 8.5% and mature on May 31, 2018. Their fair value
was TSEK 26,033 at April 30, 2018. Fair value has been calculated as described regarding the loan from Nexttobe above. This therefore
also involves measurement in accordance with level 3, as described above.
The interest rate
up until maturity is pursuant to a written agreement, and consequently there is a liquidity risk but no interest-rate risk.
In addition to
this loan, Oasmia also has a promise of credit of TSEK 40,000 as of April 30, 2018 compared to TSEK 40,000 as of April 30, 2017
from the second largest shareholder, Alceco International S.A. and a granted but unutilized overdraft facility of TSEK 5,000 as
of April 30, 2018 compared to TSEK 5,000 as of April 30, 2017. None of the promise of credit from Alceco has been utilized. A
chattel mortgage has been taken out with the bank as collateral for the overdraft facility. See Note 24 “Contingent liabilities
and pledged assets”.
Convertible loans,
TSEK 52,841 as of April 30, 2018 compared to TSEK 66,307 as of April 30, 2017, comprise 2 convertible loans, as follows:
|
|
Group
|
|
TSEK
|
|
April
30, 2018
|
|
|
April
30, 2017
|
|
Convertible loans
|
|
|
52,841
|
|
|
|
66,307
|
|
Total
|
|
|
52,841
|
|
|
|
66,307
|
|
Divided up into the following convertible
loans
Designation
|
|
Number
|
|
|
Amount
per
convertible,
TSEK
|
|
|
Total
loan
amount,
TSEK
|
|
|
Recognized,
TSEK
|
|
|
Interest
|
|
|
Falls
due
|
|
Conversion
price,
SEK/share
|
|
|
Number
of
new
shares upon
full
conversion
|
|
2017:3
|
|
|
28
|
|
|
|
1,000
|
|
|
|
28,000
|
|
|
|
27,434
|
|
|
|
8.0
|
%
|
|
Nov 30, 2018
|
|
|
3.10
|
|
|
|
9,032,258
|
|
2018:1
|
|
|
26
|
|
|
|
1,000
|
|
|
|
26,000
|
|
|
|
25,407
|
|
|
|
8.0
|
%
|
|
April 22, 2019
|
|
|
4.90
|
|
|
|
5,306,122
|
|
Total
|
|
|
54
|
|
|
|
|
|
|
|
54,000
|
|
|
|
52,841
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,338,380
|
|
At April 30, 2018,
the fair value of the loan amounts to TSEK 54,159 compared to TSEK 65,253 as per April 30, 2017. This has been calculated as the
discounted present value of the loan’s future cash flow. In addition, a discount rate of 10 percent has been used, which
is an assumed market interest rate for corresponding loans. This means a value according to level 3, as described in section “Financial
assets valued at fair value”.
The accompanying
notes are an integral part of these consolidated financial statements.
OASMIA PHARMACEUTICAL
AB AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
APRIL 30, 2018
In addition to
these open convertible loans at April 30, 2017, there have been two further convertible loans during the year:
Designation
|
|
Due date
|
|
Total
loan
amount,
TSEK
|
|
|
|
2016:2
|
|
June 9, 2017
|
|
|
42,000
|
|
|
This loan was replaced by non-negotiable promissory notes
upon maturity, see above.
|
2017:2
|
|
June 18, 2018
|
|
|
26,000
|
|
|
This loan was replaced by non-negotiable promissory
notes upon maturity, see above.
|
Total
|
|
|
|
|
68,000
|
|
|
|
Compared to a bond
loan, a convertible loan includes not only an entitlement to receive interest but also the opportunity to receive a certain number
of shares instead of repayment of the loan. This additional advantage means that the rate of interest of the convertible loan
is lower than the market interest rate for a corresponding bond loan. The fair value of the benefit to Oasmia due to this lower
rate of interest is booked, after deductions for issue expenses, directly against equity. The pure loan part of the convertible
instruments, that is to say excluding the above-mentioned equity part, is recognized, with deductions for issue expenses, at its
fair value as a liability in the balance sheet when it is first booked. Interest expenses are subsequently calculated in accordance
with the effective interest method and are charged to the income statement.
As the interest
rate up until maturity is pursuant to a written agreement, there is a liquidity risk but no interest-rate risk.
Accounts payable
to the amount of TSEK 9,256 as of April 30, 2018 compared to TSEK 20,837 as of April 30, 2017, Accrued expenses of TSEK 16,020
as of April 30, 2018 compared to TSEK 15,823 as of April 30, 2017, and Other current liabilities of TSEK 169 as of April 30, 2018
compared to TSEK 197 as of April 30, 2017, in total TSEK 25,445 as per April 30, 2018 compared to TSEK 36,857 as of April 30,
2017, comprise small liabilities to a large number of suppliers and accrued interest for the above-mentioned loan. Amortized cost
equals fair value. Of this figure, TSEK 7,397 as of April 30, 2018 compared to TSEK 17,016 as of April 30, 2017 is liabilities
in a currency other than SEK. These involve a currency risk. In addition to this currency risk, there is also a liquidity risk
attached to these liabilities.
Remaining time
until maturity of financial liabilities
The Group as
per April 30, 2018
TSEK
|
|
<
3 months
|
|
|
3
-6 months
|
|
|
6-
12 months
|
|
|
More
than 1
year
|
|
Convertible loans including interest
|
|
|
-
|
|
|
|
-
|
|
|
|
58,337
|
|
|
|
-
|
|
Other borrowings including interest
|
|
|
108,191
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Accounts payable
|
|
|
9,256
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Other current liabilities
|
|
|
42
|
|
|
|
42
|
|
|
|
85
|
|
|
|
-
|
|
Accrued expenses
|
|
|
9,508
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
|
126,997
|
|
|
|
42
|
|
|
|
58,422
|
|
|
|
0
|
|
The Group as
per April 30, 2017
TSEK
|
|
<
3 months
|
|
|
3
-6 months
|
|
|
6-
12 months
|
|
|
More
than 1
year
|
|
Convertible loans including interest
|
|
|
45,580
|
|
|
|
-
|
|
|
|
28,210
|
|
|
|
-
|
|
Other borrowings including interest
|
|
|
-
|
|
|
|
105,107
|
|
|
|
-
|
|
|
|
-
|
|
Accounts payable
|
|
|
20,837
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Other current liabilities
|
|
|
49
|
|
|
|
49
|
|
|
|
99
|
|
|
|
-
|
|
Accrued expenses
|
|
|
11,392
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
|
77,858
|
|
|
|
105,157
|
|
|
|
28,309
|
|
|
|
0
|
|
The accompanying
notes are an integral part of these consolidated financial statements.
OASMIA PHARMACEUTICAL
AB AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
APRIL 30, 2018
NOTE 19 PREPAID
EXPENSES AND ACCRUED INCOME
TSEK
|
|
APR 30, 2018
|
|
|
APR 30, 2017
|
|
Prepaid interest expenses
|
|
|
12,542
|
|
|
|
-
|
|
Prepaid technical development expenses
|
|
|
2,562
|
|
|
|
-
|
|
Accrued income
|
|
|
782
|
|
|
|
-
|
|
Prepaid clinical studies
|
|
|
-
|
|
|
|
3,643
|
|
Prepaid rent
|
|
|
1,045
|
|
|
|
1,030
|
|
Prepaid insurance premiums
|
|
|
473
|
|
|
|
553
|
|
Other prepaid expenses
|
|
|
1,830
|
|
|
|
1,782
|
|
Total
|
|
|
19,234
|
|
|
|
7,008
|
|
NOTE 20 OTHER
CURRENT RECEIVABLES
TSEK
|
|
APR 30, 2018
|
|
|
APR 30, 2017
|
|
Short term financial receivable
|
|
|
33,000
|
|
|
|
-
|
|
VAT receivable
|
|
|
1,079
|
|
|
|
1,295
|
|
Other current receivables
|
|
|
292
|
|
|
|
95
|
|
Total
|
|
|
34,371
|
|
|
|
1,390
|
|
Current financial receivables consist
of convertible loans issued but for which payment had not yet been received as of April 30, 2018.
NOTE 21 SHARE
CAPITAL
Specifications
of changes in equity are presented in this report immediately after the statement of financial position. The total number of shares
as of April 30, 2018 was 176,406,372 type A compared to 126,098,166 as of April 30, 2017 and 107,209,310 as of April 30, 2016
with a quota value of SEK 0.10 per share. All issued shares have been fully paid for. The development of the number of shares
since May 1, 2016 is shown below.
|
|
Number of shares
|
|
|
Share capital, SEK
|
|
Opening balance, May 1, 2016
|
|
|
107,209,310
|
|
|
|
10,720,931
|
|
2016
Private placement
1)
|
|
|
8,750,000
|
|
|
|
875,000
|
|
2016
Offset issue
2)
|
|
|
3,080,000
|
|
|
|
308,000
|
|
2017 Conversion of convertible
loan
|
|
|
7,058,856
|
|
|
|
705,886
|
|
Closing balance, Apr 30, 2017
|
|
|
126,098,166
|
|
|
|
12,609,817
|
|
2017 Rights issue
|
|
|
50,308,206
|
|
|
|
5,030,821
|
|
Closing balance, Apr 30, 2018
|
|
|
176,406,372
|
|
|
|
17,640,638
|
|
1)
Private
placement to a limited number of investors.
2)
Offset
of liability deriving from acquisition of intangible assets.
NOTE 22 OTHER
CURRENT LIABILITIES
TSEK
|
|
APR 30, 2018
|
|
|
APR 30, 2017
|
|
Cash payments for warrants that proved to be invalid
|
|
|
1,480
|
|
|
|
3,053
|
|
Employee withholding tax/social security contributions
|
|
|
1,848
|
|
|
|
2,106
|
|
Other
|
|
|
176
|
|
|
|
197
|
|
Total
|
|
|
3,504
|
|
|
|
5,356
|
|
NOTE 23 ACCRUED
EXPENSES AND DEFERRED INCOME
TSEK
|
|
APR 30,
2018
|
|
|
APR 30,
2017
|
|
Accrued personnel costs
|
|
|
6,999
|
|
|
|
10,471
|
|
Accrued costs for clinical trials
|
|
|
5,057
|
|
|
|
7,747
|
|
Accrued interest expenses
|
|
|
6,579
|
|
|
|
4,431
|
|
Other accrued expenses
|
|
|
4,384
|
|
|
|
2,683
|
|
Deferred income
|
|
|
-
|
|
|
|
962
|
|
Total
|
|
|
23,019
|
|
|
|
26,294
|
|
The accompanying
notes are an integral part of these consolidated financial statements.
OASMIA PHARMACEUTICAL
AB AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
APRIL 30, 2018
NOTE 24 CONTINGENT
LIABILITIES AND PLEDGED ASSETS
Contingent liabilities
During the financial
year ending April 30, 2017, warrants were issued in programs for the Board and management. As these were invalid, however, an
Extraordinary General Meeting on June 2, 2017 adopted a resolution whereby these programs were cancelled. A possible consequence
of the programs being invalid and cancelled could be that the company’s income statement is negatively impacted. However,
it is difficult to estimate or determine the total sum of this eventuality. This disclosure is therefore made without specifying
any impact on the income statement.
The Parent Company
has given a guarantee to a former employee regarding any costs deriving from employment at Oasmia that might possibly affect this
former employee at a later date.
A claim has been
filed against Oasmia by one of its suppliers which the company has contested in its entirety. It is difficult to evaluate a likely
outcome or cost as a result of the claim. The best assessment of the Board and management is that the company might be impacted
by a cost amounting to approximately SEK 10 million in the event of a negative outcome of a potential legal dispute.
Pledged assets
The Parent Company
has taken out a chattel mortgage of TSEK 8,000 as of April 30, 2018 compared to TSEK 8,000 as of April 30, 2017, with a bank as
collateral for an overdraft facility of TSEK 5,000 as of April 30, 2018 compared to TSEK 5,000 as of April 30, 2017, and as the
limit for a foreign currency derivative of TSEK 3,000 as of April 30, 2018 compared to TSEK 3,000 as of April 30, 2017.
NOTE 25 CASH
FLOW ANALYSIS
Adjustments
for non-cash items
TSEK
|
|
Note
|
|
APR
30,
2018
|
|
|
APR
30,
2017
|
|
Depreciation, amortization and impairment: non-current
assets
|
|
11,12
|
|
|
5,350
|
|
|
|
4,508
|
|
Impairment of inventories
|
|
7
|
|
|
1,070
|
|
|
|
5,736
|
|
Bad debt loss
|
|
18
|
|
|
-
|
|
|
|
5,066
|
|
Total
|
|
|
|
|
6,420
|
|
|
|
15,310
|
|
Inflow from
convertible loans
TSEK
|
|
Note
|
|
APR
30,
2018
|
|
|
APR
30,
2017
|
|
Convertible loan 2016:2
|
|
18
|
|
|
-
|
|
|
|
42,000
|
|
Convertible loan 2017:1
|
|
18
|
|
|
-
|
|
|
|
42,000
|
|
Convertible loan 2017:3
|
|
18
|
|
|
21,000
|
|
|
|
-
|
|
Total
|
|
|
|
|
21,000
|
|
|
|
84,000
|
|
Inflow from
new share issues
TSEK
|
|
Number
of
shares
|
|
|
Note
|
|
APR
30,
2018
|
|
|
APR
30,
2017
|
|
Private placement in October 2016
|
|
|
8,750,000
|
|
|
21
|
|
|
-
|
|
|
|
70,000
|
|
Rights issue in July 2017
|
|
|
50,308,206
|
|
|
21
|
|
|
159,282
|
|
|
|
-
|
|
Total
|
|
|
|
|
|
|
|
|
159,282
|
|
|
|
70,000
|
|
NOTE 26 TRANSACTIONS
WITH RELATED PARTIES
Group companies
As per April 30,
2017, the Group consists of the Parent Company Oasmia Pharmaceutical AB, the Swedish subsidiaries Qdoxx Pharma AB and Oasmia Incentive
AB (formerly Oasmia Animal Health AB), AdvaVet, Inc. (formerly Oasmia Pharmaceutical, Inc.) in the US Oasmia Pharmaceutical Asian
Pacific, Ltd based in Hong Kong and Oasmia RUS, LLC based in Moscow, Russia. The subsidiaries are 100% except for Oasmia RUS,
LLC which 80% owned, and thus under the control of the Parent Company. For further information on the Group, please refer to Note
27 Holdings in Group companies.
The accompanying
notes are an integral part of these consolidated financial statements.
OASMIA PHARMACEUTICAL
AB AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
APRIL 30, 2018
Intra-Group
transactions
The following table
shows the transactions during the year between the Parent Company and the Swedish subsidiaries and the opening and closing liabilities:
|
|
Qdoxx
Pharma
|
|
|
Oasmia
Incentive
|
|
TSEK
|
|
MAY 1, 2017–
APR 30, 2018
|
|
|
MAY 1, 2016–
APR 30, 2017
|
|
|
MAY 1, 2017–
APR 30, 2018
|
|
|
MAY 1, 2016–
APR 30, 2017
|
|
Parent Company’s opening liabilities
|
|
|
62
|
|
|
|
99
|
|
|
|
1,601
|
|
|
|
204
|
|
Transactions during the year
|
|
|
(20
|
)
|
|
|
(37
|
)
|
|
|
1,140
|
|
|
|
1,397
|
|
Parent Company’s closing liabilities
|
|
|
42
|
|
|
|
62
|
|
|
|
2,741
|
|
|
|
1,601
|
|
The Parent Company
made a shareholders’ cash contribution of TSEK 50 to Qdoxx during the year.
A shareholders’
contribution was also made to Oasmia Incentive AB during the year. This consisted of 5,543,182 warrants with a value of TSEK 1,485.
These warrants have been resold by Oasmia Incentive AB to the Board and management of Oasmia Pharmaceutical AB (see also under
“Transactions with key people in senior positions”.
Transactions
between the Parent Company and AdvaVet, Inc, USA
The Parent Company
paid a shareholders’ contribution of TUSD 17 during the year, which was reported in the Parent Company as Holdings in Group
companies of TSEK 145, and also issued a loan of TUSD 70, of which TUSD 7 has been repaid. The net amount of TUSD 63, the Parent
Company’s outstanding receivable at April 30, 2018, is reported as Receivables from Group companies of TSEK 545.
The Parent Company
recharged expenses of TUSD 40 in total to AdvaVet during the year, corresponding to TSEK 325, which had been paid at April 30,
2018.
Transactions
between the Parent Company and Oasmia Pharmaceutical Asia Pacific, Ltd, Hong Kong
The Parent Company
made a shareholders’ contribution of THKD 87 to Oasmia Pharmaceutical Asia Pacific during the year. This was initially reported
in the Parent Company as Holdings in Group companies of TSEK 97 but was written down by TSEK 47 to TSEK 50 at April 30, 2018.
There were no dealings between the companies at April 30, 2018.
Transactions
between the Parent Company and Oasmia RUS, Russia
The Russian subsidiary,
which is 80 percent owned, was founded during the year. The Parent Company purchased services from this subsidiary for TEUR 60
during the year, which has been recorded as TSEK 591. There were no dealings between the two companies at April 30, 2018.
Transactions
with key people in senior positions
In accordance with
a resolution adopted at the Extraordinary General Meeting on June 2, 2017 concerning the issue of warrants, 5,543,182 warrants
were issued and paid as a shareholders’ contribution to Oasmia Incentive (see above). These warrants were resold by Oasmia
Incentive AB to Oasmia Pharmaceutical AB’s Board and senior management for between SEK 0.17 and SEK 0.22 per warrant, depending
on the market value at the time of each individual issue. These warrants generated equity of TSEK 1,171 for Oasmia.
There were no other
transactions with key persons.
Financial loan
transactions with related parties
On April 30, 2018
there was a credit facility of TSEK 40,000 compared to TSEK 40,000 as if April 30, 2017, available to Oasmia from Alceco International
S.A., the company’s second largest shareholder. If the facility is utilized the interest rate is 5%. This credit facility
was completely unused at April 30, 2018, as was the case at April 30, 2017.
After the rights
issue carried out in July 2017, Arwidsro Investment AB is Oasmia’s largest shareholder. In connection with the share issue
Arwidsro guaranteed a certain amount and thus received a guarantee commission of TSEK 4,490. During the year Arwidsro also received
24,193,548 warrants with a carrying amount of TSEK 8,710 as compensation for a promise of credit.
Nexttobe, AB was
Oasmia’s second largest shareholder up until October 31, 2016, with a shareholding of 18.3 percent. However, this shareholding
was divested as of November 1, 2016, which means that the relationship with Nexttobe, AB is no longer a related party relationship.
Other transactions
with related parties
Ardenia Investment
Ltd, which is equally controlled by Oasmia’s founders Bo Cederstrand and Julian Aleksov, is registered as the applicant
for and the holder of the underlying patents for Oasmia’s business. Pursuant to an agreement between Ardenia and Oasmia,
the rights to these patents have been transferred to Oasmia. Ardenia re-charged for administrative expenses for these patents
during the year. These invoices amounted to TSEK 1,524 in the financial year ending April 30, 2018 compared to TSEK 1,373 in the
financial year ending April 30, 2017. New patent rights extending protection of XR17 by a further 8 years until 2036 were acquired
during the year for TSEK 10,550. As per closing day April 30, 2018 Oasmia had unpaid invoices from Ardenia amounting to TSEK 0
compared to TSEK 721 as per April 30, 2017.
The accompanying
notes are an integral part of these consolidated financial statements.
OASMIA PHARMACEUTICAL
AB AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
APRIL 30, 2018
NOTE 27 HOLDINGS
IN GROUP COMPANIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Book value
|
|
|
Book value
|
|
Parent Company
|
|
Reg.
No.
|
|
|
Domicile
|
|
Owner-
ship %
|
|
|
Votes
%
|
|
|
APR
30,
2018
|
|
|
APR
30,
2017
|
|
Qdoxx Pharma AB
|
|
|
556609-0154
|
|
|
Uppsala
|
|
|
100
|
|
|
|
100
|
|
|
|
150
|
|
|
|
100
|
|
Oasmia Incentive AB
|
|
|
556519-8818
|
|
|
Uppsala
|
|
|
100
|
|
|
|
100
|
|
|
|
10
|
|
|
|
10
|
|
AdvaVet, Inc. (name changed from Oasmia Pharmaceutical, Inc.)
|
|
|
E0300362015-6
|
|
|
Nevada, USA
|
|
|
100
|
|
|
|
100
|
|
|
|
145
|
|
|
|
0
|
|
Oasmia Pharmaceutical Asian Pacific, Ltd
|
|
|
2383363
|
|
|
Hong Kong
|
|
|
100
|
|
|
|
100
|
|
|
|
50
|
|
|
|
0
|
|
Oasmia RUS, LLC
|
|
|
1177746442620
|
|
|
Moscow, Russia
|
|
|
80
|
|
|
|
80
|
|
|
|
0
|
|
|
|
0
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
355
|
|
|
|
110
|
|
NOTE 28 ALLOCATION
OF NON-RESTRICTED EQUITY
The following non-restricted
equity is available for distribution by the Annual General Meeting:
SEK
|
|
APR
30, 2018
|
|
|
APR
30, 2017
|
|
Share premium reserve
|
|
|
1,232,603,020
|
|
|
|
1,074,619,456
|
|
Retained earnings
|
|
|
(808,607,126
|
)
|
|
|
(639,377,516
|
)
|
Income for the year
|
|
|
(118,863,649
|
)
|
|
|
(160,072,959
|
)
|
Total
|
|
|
305,032,245
|
|
|
|
275,168,981
|
|
The Board proposes
that the 2018 Annual General Meeting adopts a resolution that the above amount available of SEK 305,032,245 as per April 30, 2018
compared to SEK 275,168,981 as per April 30, 2017 to be carried forward.
The accompanying
notes are an integral part of these consolidated financial statements.
OASMIA PHARMACEUTICAL
AB AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
APRIL 30, 2018
NOTE 29 EVENTS
AFTER BALANCE SHEET DATE OF APRIL 30, 2018
Spin-off of
veterinary business to AdvaVet completed
All veterinary
assets have now been spun off to the US-based AdvaVet Inc.
Adjustment of
terms of loan
The company, Arwidsro
Investment and MGC Capital have agreed on an extension until September 30 for payment of the loan communicated on January 2, 2018.
This is so that the company will be given time to complete ongoing activities. In all other respects the same terms apply to the
loan.
Nexttobe extended
loan to Oasmia
Nexttobe AB’s
loan to Oasmia which matured on May 30, 2018 was extended until July 31, 2018. The aim is that this loan will then be replaced
by a new loan from Arwidsro Investment and MGC Capital in accordance with what was communicated on January 2, 2018.
Results from Oasmia
Pharmaceutical’s phase III study have been presented at ASCO annual meeting
Oasmia
presented the follow-up results from the study including 789 patients with platinum-sensitive recurrent ovarian cancer.
Adjustment of loan
terms
The Company, Arwidsro
Investment and MGC Capital agreed to extend the payment of the loan, which was communicated January 2nd, until September
30th.
Application of orphan
designation of Apealea in the European Union was withdrawn
The company withdrew
its application for orphan medicine concerning Apealea based mainly on the fact that the prevalence for the indication
several times exceeded
the threshold sat by the authorities.
The market authorization
application of Apealea in the European Union is in final phase
European
Medicines Agency (EMA) who processes the market authorization application for Apealea came back after the July meeting by the
Committee for Medicinal Products for Human Use (CHMP), that the remaining list of outstanding issues should be responded to in
written form. The company responded to the questions in August.
Financial development
after closing day
Short-term
loans of TSEK 26,000 matured on May 31, 2018. Of this sum, TSEK 17,000 has been repaid up until the day of the signing of this
Annual Report. The remaining TSEK 9,000 has been extended after closing day to September 30, 2018.
Short-term loans of
TSEK 6,000 matured on June 30, 2018. These have been extended after closing day to September 30, 2018.
On
July 31, 2018 the loan from Nexttobe including interest and totalling TSEK 109,699 matured. This sum has not yet been paid. Negotiations
are being held with Nexttobe and the loan will be repaid no later than September 30, 2018. As has been communicated previously
as well as in this Annual Report (see note 18), Oasmia has promises of credit to cover repayment to Nexttobe. The prerequisites
for these promises of credit are that the normal conditions are met, including that at the time Oasmia has sufficient financial
means to conduct its business during the subsequent 12-month period (without taking the loans from Arwidsro and the other lender
MGC Capital into consideration) and that there is no reason to believe that Oasmia will not be able to meet its obligations under
the terms of the loan agreements.
NOTE 30 KEY
DEFINITIONS
In addition to
the key definitions presented in the financial statements, following key definitions are used in this annual report.
Equity per
share:
|
Equity as a
ratio of the number of shares at the end of the period.
|
Equity/assets ratio:
|
Equity as a ratio of total assets.
|
Net liability:
|
Total borrowings (comprising the
balance sheet items Liabilities to credit institutions, Convertible loans and Other borrowings) with deduction of cash and
cash equivalents and short-term investments.
|
Debt/equity ratio:
|
Net liability as a ratio of equity.
|
Return on total assets:
|
Operating income plus financial
income as a percentage of the average balance sheet total.
|
Return on equity:
|
Income before taxes as a ratio
of average equity.
|
The accompanying
notes are an integral part of these consolidated financial statements.
OASMIA PHARMACEUTICAL
AB AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
APRIL 30, 2018
The key definitions found above are
generic definitions often used in analyses and comparisons between different companies. They are therefore given to enable the
reader to rapidly and summarily evaluate Oasmia’s financial situation and possibly compare with other companies.
These have been calculated as follows:
|
|
MAY 1, 2017
|
|
|
MAY 1, 2016
|
|
|
MAY 1, 2015
|
|
|
|
- APR 30, 2018
|
|
|
- APR 30, 2017
|
|
|
- APR 30, 2016
|
|
Equity per share
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity at the end of the period, TSEK
|
|
|
345,036
|
|
|
|
300,371
|
|
|
|
326,053
|
|
Number of shares at the end of the period, thousand *
|
|
|
176,406
|
|
|
|
128,620
|
|
|
|
109,353
|
|
Equity per share, SEK
|
|
|
1,96
|
|
|
|
2.33
|
|
|
|
2.98
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity/Assets ratio
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity at the end of the period, TSEK
|
|
|
345,036
|
|
|
|
300,371
|
|
|
|
326,053
|
|
Total assets at the end of the period, TSEK
|
|
|
568,075
|
|
|
|
521,583
|
|
|
|
515,579
|
|
Equity/Assets ratio
|
|
|
61
|
%
|
|
|
58
|
%
|
|
|
63
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net liability, TSEK
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities to credit institutions
|
|
|
0
|
|
|
|
0
|
|
|
|
20,000
|
|
Convertible loans
|
|
|
52,841
|
|
|
|
66,307
|
|
|
|
25,549
|
|
Other borrowings
|
|
|
134,419
|
|
|
|
102,419
|
|
|
|
94,395
|
|
Total borrowings
|
|
|
187,260
|
|
|
|
168,726
|
|
|
|
139,944
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term investments
|
|
|
0
|
|
|
|
0
|
|
|
|
20,006
|
|
Cash and cash equivalents
|
|
|
15,580
|
|
|
|
28,001
|
|
|
|
26,208
|
|
Total cash and cash equivalents and short-term investments
|
|
|
15,580
|
|
|
|
28,001
|
|
|
|
46,214
|
|
Net liability
|
|
|
171,680
|
|
|
|
140,724
|
|
|
|
93,730
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt/equity ratio
|
|
|
|
|
|
|
|
|
|
|
|
|
Net liability, TSEK
|
|
|
171,680
|
|
|
|
140,724
|
|
|
|
93,730
|
|
Equity, TSEK
|
|
|
344,943
|
|
|
|
300,371
|
|
|
|
326,053
|
|
Debt/equity ratio
|
|
|
50
|
%
|
|
|
47
|
%
|
|
|
29
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on total assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income plus financial income, TSEK
|
|
|
(103,623
|
)
|
|
|
(140,396
|
)
|
|
|
(131,905
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets at the beginning of the period, TSEK
|
|
|
521,583
|
|
|
|
515,579
|
|
|
|
514,569
|
|
Total assets at the end of the period, TSEK
|
|
|
568,074
|
|
|
|
521,583
|
|
|
|
515,579
|
|
Average balance sheet total, TSEK
|
|
|
544,828
|
|
|
|
518,581
|
|
|
|
515,074
|
|
Return on total assets
|
|
|
(19
|
)%
|
|
|
(27
|
)%
|
|
|
(26
|
)%
|
Return on equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before taxes, TSEK
|
|
|
(118,013
|
)
|
|
|
(160,243
|
)
|
|
|
(141,539
|
)
|
Equity at beginning of period, TSEK
|
|
|
300,371
|
|
|
|
326,053
|
|
|
|
375,710
|
|
Equity at end of period, TSEK
|
|
|
345,036
|
|
|
|
300,371
|
|
|
|
326,053
|
|
Average equity, TSEK
|
|
|
322,706
|
|
|
|
313,212
|
|
|
|
350,882
|
|
Return on equity
|
|
|
(37
|
)%
|
|
|
(51
|
)%
|
|
|
(40
|
)%
|
* Recalculation of historical values
has been made taking into account capitalization issue elements in the rights issue carried out in July 2017.
The accompanying
notes are an integral part of these consolidated financial statements.