MAPA DE RECURSOS ECONÓMICOS POTENCIALES DE LA PROVINCIA LAURICOCHA
CRECIMIENTO DEL PBI DEPARTAMENTAL
Board and Chief executive Officers 1) 5,093 3,804 5,093 3,804
Lars Adlersson (CEO) 3,353 2,203 3,353 2,203 Anders Vedin (Chairman of the Board) 553 526 553 526 Alf Lindberg (Board member) 145 201 145 201 Lars-Göran Andrén (Board member) 238 163 238 163 Anna Malm Bernsten (Board member) 218 101 218 101 Magnus Falk (Board member) 283 240 283 240 Zsolt Lavotha (Board member) 55 242 55 242 Anders Wiklund (Board member) 0 128 0 128 Bo Öberg (Board member) 0 0 0 0 Donna Janson (Board member) 123 0 123 0 Ron Long (Board member) 123 0 123 0 Senior executives 2) 10,539 8,121 8,877 5,310
Other employees 3) 56,839 62,611 54,767 33,466
Total 72,471 74,536 68,737 42,581 Statutory and contracted social security costs 4) 22,565 20,833 22,378 18,267
Pension costs 5)
of which for CEO of the group 669 (591)
and parent company SEK 669 (591) 9,063 9,988 8,876 8,183 Total salaries, benefits, social security costs
N O T E S
Remuneration in the financial year Board
During the financial year, 1,740 (1,601) fees were paid to the Board of Directors of Medivir, 553 (526) of which to the Chairman of the Board. In addition, reimbursement of travel expenses to board meetings, etc was paid to the board members. No remuneration was paid for specific consulting assignments, and there is no pension scheme for board members.
Remuneration policy
The AGM 2007 resolved that the company would offer total compensation on market terms that will enable the hiring and reten- tion of skilled senior executives. Remuneration to senior executives will consist of fixed salary, potential performance-related pay, staff stock options pursuant to the staff stock option plan 2007/2012 resolved by the AGM, pensions and other benefits. Fixed salary would consider the individual areas of responsibility and experience. Performance-related pay – which at present, and where applicable, is payable as a discretionary individual bonus – will be a maximum of 50% of fixed salary.
President
Salary of 2,336 (2,188) was paid to the President in 2007, plus a bonus of 734 (15) and other benefits of 282 (0), thus total remunera- tion was 3,353 (2,203). A resolution at the AGM in 2007 allocated 46,000 staff stock options from the 2007/2012 stock option plan. The theoretically calculated market value of these stock options, pursuant to the Black & Scholes model, was SEK 14.4 (0) per option at the grant date, corresponding to a value of 662 (0). For other holdings, please refer to page 55.
The President’s pension plan is pursuant to the ITP (supplementary pensions for salaried employees) scheme (see below), plus 15% of the President’s fixed monthly salary excluding bonus and benefits. The pension provision for the year was 669 (591). However, the provision never exceeds the fully tax-deductible pension premium payments for the company. The President’s pensionable age is 60, and his notice period is six months from either party’s side. Coincident with termination initiated by the company, or due to considerable changes to the company’s ownership structure, the President possesses the right to severance pay, or remuneration, corresponding to a maximum of 18 months’ salary.
Other senior executives
The group of other senior executives comprised 7 people, of which 1 resident in the UK at the end of 2007. This group comprises 6 men and 1 woman. Salary of 6,769 (7,887) was paid to other senior executives and a bonus of 3,190 (30,) and other benefits of 581 (204), thus total remuneration was 10,539 (8,121). In the first quarter of the year, 1 of the 2 management team members resident in the UK terminated employment with Medivir as part of the focus of research operations on Huddinge, Sweden. Pursuant to a resolution by the AGM 2007, the team was granted 104,000 staff stock options from the 2007/2012 option plan. The theoretically calculated market value of these options, pursuant to the Black & Scholes model, amounted to SEK 14.4 (0) per option at the grant
date, corresponding to a value of 1,498 (0). For other holdings, see page 55.
Pension schemes for other senior executives are pursuant to the ITP (supplementary pensions for salaried employees) scheme, and individual pension schemes in the UK (see below). Pension provisions of 1,939 (2,026) were made in the year. None of the other senior executives are subject to notice periods exceeding six months from either party’s side. Coincident with termination initiated by the company, or due to considerable changes to the company’s ownership structure, other senior executives possess the right to severance pay, or remuneration, corresponding to a maximum of 6 months’ salary.
Other Staff
Current stock option plans are reviewed on page 8. Pursuant to a resolution by the AGM 2007, this group was granted 21,000 staff stock options from the 2007/2012 option plan. The theoretical market value of these options, calculated according to the Black & Scholes model, was 302 (0) at the grant date. In addition, a few individuals receive bonuses in accordance with a fixed bonus program. The group has defined-benefit pension schemes via Alecta and defined-contribution pension schemes through alterna- tive solutions. Employees resident in the UK have defined-contribution pension schemes exclusively.
Closely Related Parties
Among other senior executives there are agreements with Medivir as well as agreements between companies owned by other senior executives and Medivir, that confer rights to royalties on products Medivir may develop based on patent-pending inventions which Medivir has acquired from these senior executives before and during their time as researchers with Medivir. Through the contracts Medivir signed in late November 2004 relating to the HCV PI project and in June 2006 relating to the HIV PI project with Tibotec, one such company received royalties of 1.95% of remuneration received of EUR 19.5 (2.5) m relating to the HCV PI project
and royalty of 2% of EUR 0.0 (2.0) m relating to the HIV PI project. Additionally, pursuant to the HCV PI agreement, two compa- nies belonging to other employees will receive royalties totaling 1.3% of the received remuneration of EUR 19.5 (2.5) m. In 2006, SEK 1,031,000 (604,000) was paid out relating to the agreement with a senior executive of Medivir UK Ltd. which was converted to
a bonus payment in 2005 that was charged to personnel costs in its entirety in the financial year 2005. Note 3, cont.
Average number of employees, salaries, other remuneration and social security costs (SEK 000)
Note 4
Depreciation and amortization (SEK 000)
Group Parent company
2007 2006 2007 2006
Amortization of intangible fixed assets 454 2,160 454 446 Depreciation of tangible fixed assets 10,299 15,368 10,299 8,410 Total 10,753 17,528 10,753 8,856
N O T E S
Note 5
Impairment losses (SEK 000)Note 7
Profit on participations in group companies (SEK 000)Note 6
Research costs (MSEK)Medivir pursued research operations exclusively in the financial year. The cost of research including depreciation according to plan but less administrative costs, was approximately -279.4 (-292.8) in Medivir AB and Medivir UK Ltd. Research costs include non-recurring costs associated with the relocation of significant parts of the operations of Medivir UK Ltd. to Medivir AB totaling -8.6 (-7.9). Research costs in the parent company amounted to approximately -260.7 (-255.9) of which approximately -9.0 (-46.0) related to purchases from Medivir UK Ltd. Operating profit for the research segment, i.e. Medivir AB and Medivir UK Ltd., was -37.3 (-201.6).
Note 8
Financial risks (SEK 000)
The main financial risks that arise as a consequence of managing financial instruments consist of market risk (interest risk, currency risk and share price risk) credit risk, liquidity and cash flow risk. The financial risks are managed pursuant to a policy determined by the Board. This policy means that investments in liquid assets will be conducted in such a manner that the invested assets generate secure and stable returns. The underlying instruments will be subject to low risk, and when investing liquid assets, the diversification of risk will be pursued. To attain the best possible returns for the lowest possible risk level in the parent company or group, the company will invest its liquid assets with recognized bodies, such as banks.
The link between IAS 39 categories and Medivir’s balance sheet items in the Balance Sheet
Medivir’s financial instruments are recognized at fair value in the Income Statement. When an exact fair value cannot be deter- mined on the balance sheet date, the carrying amount is based on an approximation. For information on leases, see Note 25. Market risks
Interest risk
Interest risk is their risk of a negative impact on cash flow or financial assets or liabilities resulting from changes in market rates of interest.
Medivir’s investment policy stipulates the company achieving the best possible returns for the lowest possible risk level by investing its liquid funds with recognized institutions such as banks. Medivir manages and evaluates its short-term investments on the basis of actual value and accounts them at actual value in the Income Statement. Instruments such as bank and corpo- rate commercial paper, fixed-income and bond funds, fixed bank investments and special deposits are used to avoid risking
Group Parent company
2007 2006 2007 2006
Impairment losses of intangible fixed assets 0 5,571 0 0 Impairment losses of tangible fixed assets 12,923 23,972 0 0
Total 12,923 29,543 0 0
Group Parent company
2007 2006 2007 2006
Impairment losses on shares in subsidiary Medivir UK Ltd.
(see also note 15, Participations in group companies) – – 18,880 94,089 Dividends from Medivir Personal AB - 400 0
Total 18,480 94,089
Group
Financial assets recognized at fair value in the Income
Statement Accounts receivable Borrowings and accounts payable Financial assets held
for sale Total
2007 2006 2007 2006 2007 2006 2007 2006 2007 2006
Financial assets
held for sale 18,793 0 18,793 0 Accounts receivable 64,685 22,672 64,685 22,672 Other short-term
investments 311,501 172,117 311,501 172,117 Cash and bank
balances 17,829 22,949 17,829 22,949 Accounts payable - 11,254 - 22,886 - 11,254 - 22,886 Bank loans 0 - 6,875 0 - 6,875 Total 329,330 195,066 64,685 22,672 - 11,254 - 29,761 18,793 0 401,554 187,977
N O T E S
Note 8, cont. Financial risks (SEK 000)
As of 31 December 2007, the group’s liquid assets including short-term investments with maximum maturities of three months were 329,330 (195,066). 177,090 (142,117) of this total was invested in fixed-income funds with discretionary man- agement, and 134,411 (30,000) was invested in certificates of deposit at fixed interest.
In 2007, Medivir received interest of approximately 3.5-4.3%. Based on an average of existing short-term investments in the year, and if interest levels had been 1% higher or lower, this would have had an annualized positive or negative profit impact of some 2,600. In 2008, a 1% change in interest rates would theoretically be able to affect net interest income by some 2,000. At year-end 2007, the company had no interest-bearing liabilities, and accordingly, no other interest risks apply.
Currency risk
Currency risk is the risk of negative cash flow effects resulting from exchange rate changes. • Profit is affected when costs and revenues in foreign currencies are translated into Swedish kronor.
• The Balance Sheet is effected when assets and liabilities in foreign currencies are translated into Swedish kronor. Medivir did not use currency hedging in 2007; future turnover and cost will be exposed to foreign currency fluctuations. The company’s operating profit experienced a 1,615 (-337) net influence in exchange rate gains in the financial year, with the net financial position influenced by -192 (-3,620) in exchange rate losses. Sterling fluctuated between SEK 13.99 and SEK 12.91 in
the year, with an average of SEK 13.53 for the year. The funding of Medivir UK Ltd.’s operations in the UK was at the best ster- ling exchange rate possible and Medivir UK Ltd. primarily purchased its goods and equipment on the UK market. In the year, the dollar exchange rate fluctuated between SEK 7.11 and SEK 6.25, with an average of SEK 6.76. In the same period, the euro exchange rate fluctuated between SEK 9.02 and SEK 9.48 with an average rate of SEK 9.25. All trading in foreign currency was
conducted at the best rate of exchange attainable at the point of exchange. Many of Medivir’s contracts involve payments in EUR and USD, implying that accounts payable and accounts receivable have exposure.
The table illustrates the currency-exposed operating income and operating costs as net amounts per currency.
Share price risk
Medivir received shares from a new issue conducted by Epiphany Biosciences, Medivir’s licensing partner on the shingles project MIV-606 and received shares from a new issue conducted by Presidio Pharmaceuticals Inc., Medivir’s licensing partner on the compound MIV-410. The total value of the shares amounted to 18,793 (0). No net gains or net losses have arisen as a result of these investments in 2007. Medivir classifies the shares as financial assets held for sale pursuant to IAS 39, and the shares are reported in the Balance Sheet under the “financial fixed assets” item. Because there is no active market for the shares on US stock markets, no ongoing value changes of the balance sheet item are reported, unless a reliable estimate of the changed actual value through a valuation conducted gives reason to report a value change. Medivir does not have any investments in listed shares, hence there is no share price risk.
Credit risk (counterparty risk)
Credit risk is the risk that a counterparty is unable to fulfill its contracted commitment to Medivir, thus causing a financial loss for the company.
Medivir invests its liquid assets with Swedish fund managers with high credit ratings, P-1 from Moody’s.
In the year, these investments did not experience any value changes resulting from changes to asset managers’ credit risk. The most significant risks to Medivir relate to accounts receivable. As of the balance sheet date, Medivir has only one coun- terparty for accounts receivable, which is a risk per se, but this is a part of a large and well-recognized group, and accordingly the credit risk is considered limited. Medivir has several partnerships with established pharmaceuticals companies and smaller biotechnology enterprises. This secures Medivir’s positioning, creating stability and opportunities.
Initially, Medivir’s accounts receivable are reported at fair value in the Income Statement, please see the section on accounting principles for more detail. No provision for depreciation is made until there are unequivocal indications that the group will not receive full payment pursuant to the original terms of the receivables, please see the section on accounting principles. This whole item has a single counterparty as of the balance sheet date. Medivir has never had any need to depreciate accounts receivable throughout its history.
A one percentage point change in the krona against any of the above currencies would affect parent company operating income and operating costs by a total of +/- 3,496 (1,964). The corresponding effect on the group would imply a change of +/- 3,500 (1,968).
Group Parent company
2007 2006 2007 2006
EUR 261,675 141,148 261,566 141,109 GBP 20,664 10,365 20,664 10,365 USD 67,620 45,338 67,410 44,941 Total 349,959 196,851 349,640 196,415
N O T E S
Note 10
Other interest costs and similar profit/loss items (SEK 000) Note 8, cont. Financial risks (SEK 000)
Other receivables amount to 1,052 (2,441) of which 0 (0) was due on the balance sheet date.
The group’s liquid assets are invested in liquid assets with low credit risk such as certificates of deposit, fixed income and bond funds subject to low risk (P-1, Moody’s) through discretionary management. No credit risks are considered to apply to the above investments.
Liquidity and cash flow risk
Liquidity risk is the risk of future difficulties for Medivir to fulfill its commitments associated with financial liabilities. A financial liability is each liability in the form of a contracted commitment to submit cash or other financial assets to another company, or to exchange a financial asset or financial liability with another company subject to terms that may be disadvantageous for the company.
Maturity analysis
Medivir’s contracted financial liabilities divided by time remaining to contracted maturity as of the balance sheet date amount to 11,254 (29,761). Amounts maturing within 12 months are 11,254 (29,761) and were wholly accounts payable and other liabilities. Amounts maturing later than 12 months are 0 (0). The amounts maturing within 12 months are consistent with book value, because the discounting effect is insignificant.
Equity
Consolidated shareholders’ equity is 383,979 (186,306) and is the company’s solid base for financing operating activities. A more detailed specification is on page 34. While Medivir does not have any autonomous long-term earnings capacity with sustainable profitability, the company will retain low debt gearing and a high equity ratio. Proposals regarding dividends will not be made until long-term profitability can be predicted through product launches on the market. Accordingly, no dividends will be considered for the forthcoming years.
Medivir’s objective is to attain profitability by receiving income from licensing agreements with partners on its own research, receiving income on sales of specialist pharmaceuticals, and by bringing proprietary compounds to market registra- tion. Medivir’s research partners are responsible for funding outlicensed projects, and Medivir receives income in the form of upfront and milestone payments as projects progress towards the market. These revenues contribute to funding other parts of operations. Other ways of managing liquidity and cash flow risks are through new share issues and a continuous review of Medivir’s cost structure.
Medivir’s management and Board maintain continuous access to information on the company’s liquid assets. Liquidity and cash flow forecasts for a minimum of 12 months are prepared on an ongoing basis to monitor liquidity status. Medivir’s cur- rent cash reserves and short-term investments totaling SEK 329,330,000 are estimated to more than cover all expected costs, liabilities and investment needs for the forthcoming 12-month period. Medivir has no borrowings at variable interest.
Group Parent company
2007 2006 2007 2006
Not due 53,525 22,671 50,762 22,671 Due for payment 61-90 days 10,566 – 10,566 –
Exchange gain 594 – 594 –
Total 64,685 22,671 61,922 22,671
Note 9
Other interest income and similar profit/loss items (SEK 000)
Group Parent company
2007 2006 2007 2006
Interest income, bank 618 155 487 130 Interest income from fixed-income investments 4,413 334 4,413 334 Interest income, group companies 0 – 0 1,629 Dividends from fixed-income fund 3,332 870 3,332 870 Fair value change on fixed-income fund, unrealized 1,963 4,108 1,963 4,108 Total 10,325 5,467 10,194 7,071
Group Parent company
2007 2006 2007 2006
Interest costs - 177 - 689 - 169 - 562 Exchange rate differences, intra-group transactions - 1,468 - 3,137 - 1,468 - 3,137 Exchange rate differences, other - 192 - 496 -192 - 483 Total - 1,836 - 4,323 -1,828 - 4,182
The group has estimated accumulated deductible deficits amounting to SEK 800 m until 2007 inclusive. No related income tax receivables are reported because the group does not consider that it will account taxable income exceeding costs within the foreseeable future. The deductible deficits of Medivir AB and Medivir UK Ltd. have no expiry.
The temporary differences that arise from non-deductible impairment losses (due to impairment losses on Medivir UK Ltd.’s equities in 2007 and 2006 in Medivir AB and non-recurring impairment losses of fixed assets in the group) do not give rise to any deferred tax asset in the Balance Sheet because Medivir does not capitalize the total deductible deficits, pursuant to the above. The group also had a temporary difference in the form of the intangible asset acquired research and develop- ment, which amounted to SEK 0 (0). There are no other temporary differences in the group. There are no temporary differ-
ences in the parent company.
N O T E S
Note 12
Earnings per share
Note 11
Tax on net profit (SEK 000)
1) The tax credits apply to Medivir UK Ltd., ensuing from UK legislated research support, implying the definitive relinquishment of income tax receivables on Medivir’s part. The tax credit for the year is an adjustment of the previous year’s tax credit. No new tax credits were provisioned in the year.
2) Deferred tax receivables on acquired research and development for 2006 related to the dissolution of a deferred tax liability that arose in connection with the intangible item being impaired.
3) Tax effects on non-deductible personnel costs for stock option plans, pursuant to IFRS 2 have been calculated for 2007 and 2006. Group Parent company
2007 2006 2007 2006
Tax credit 1) - 487 2,837 0 0
Deferred tax asset on acquired research and development 2) 0 2,039 0 0
Tax on net profit, according to Income Statement - 487 4,876 0 0 Applicable tax rates
Sweden 28% 28% 28% 28%
UK 30% 30% – –
Difference between consolidated tax cost reported in the Income Statement and tax cost based on applicable tax rate
Profit before tax - 28,832 - 200,455 - 27,210 - 219,023 Tax at applicable tax rates 8,073 56,127 7,619 61,326 Tax effect of non-deductible estimated personnel costs
for stock option plans, value of staff service 3) 0 - 433 - 602 - 305
Tax effect of other non-deductible items - 130 - 105 - 125 - 92 Tax effect of non-deductible impairment losses - 411 - 6,748 - 5,697 - 26,345 Effect of foreign tax rates 410, 1,364 – – Tax credit received, Medivir UK Ltd. - 487 2,837 – – Tax effect of deficits for which income tax receivables
are not considered - 7,942 - 48,167 - 1,195 - 34,585 Tax on net profit - 487 4,876 0 0
Group
2007 2006
Earnings per share before and after dilution, SEK1) - 1.74 - 15.16
Net profit for the year - 29,318 - 195,580 Average no. of shares, 000 16,873 12,903 The calculation of earnings per share is based on net profit for the year divided by average number of shares for the year.
1) Pursuant to IAS 33, potential ordinary shares do not cause any dilution effect if their conversion to ordinary shares results in increased earnings per share. This would be the case upon the conversion of Medivir’s outstanding options.
N O T E S
Note 13
Intangible fixed assets (SEK 000)
1) Other intangible assets relate to capitalized development costs for ERP systems. The useful life is estimated at 5 years, whereupon the reported asset is amortized in accordance with this estimate.
Note 14
Fixed assets (SEK 000)
Group Parent company
Other intangible assets1) 2007 2006 2007 2006
Acquisition value, opening balance 2,270 2,201 2,270 2,201
Capitalization 0 69 0 69