Toleranzia AB: Interim report second quarter 2023

Three months, April 1 – June 30
·         Net sales amounted to — KSEK (–)
·         Profit after financial items amounted to KSEK -2 503 (-2 218).
·         Cash flow from operating activities amounted to SEK -1 238 thousand (-1 699).
·         Investments in intangible assets amounted to SEK 19 659 thousand (11 577).
·         Earnings per share amounted to SEK -0,02 (-0,02).

Six months, January 1 – June 30
·         Net sales amounted to — KSEK (–)
·         Profit after financial items amounted to KSEK -4 450 (-4 290)
·         Cash flow from operating activities amounted to KSEK -3 442 (-4 095)
·         Investments in intangible assets amounted to KSEK 29 792 (19 655)
·         Earnings per share amounted to SEK -0,04 (-0,04)

The “Company” or “Toleranzia” refers to Toleranzia AB with organization number 556877-2866.
 
Significant events in the second quarter of 2023

• Preparatory work for GMP manufacturing and GLP toxicology studies of the drug candidate TOL2

Significant events after the reporting period

• Decision to carry out an issue of units of approximately SEK 55 million
• Manufacturing steps of the GMP process for the drug substance TOL2 successfully completed
• Development of freeze-drying formulation of TOL2 drug candidate successfully completed

Key financial data

Comments from the CEO
Intensive work to reach key milestones

Production of GMP materials for clinical studies
There has been a high level of activity and work pace behind the scenes in Toleranzia during the second quarter of the year and the summer months. Recently, we were able to announce that we have completed the production of a large-scale GMP batch together with our contract manufacturer and I am very pleased to note that the entire development process has run very smoothly and efficiently, completely according to our plans and requirements. The GMP batch will be used in our first clinical study with TOL2 in patients with myasthenia gravis.

New freeze-dried formulation
After the end of the period, we have also completed the development of a new optimized drug formulation of TOL2. The new formulation, which consists of a freeze-dried drug product with excellent properties, can be stably stored and reconstituted to a high concentration of active drug.

Tox study to start shortly
In mid-September, we start the important GLP toxicology study of TOL2 with a batch of the drug candidate manufactured with the new freeze-drying formulation. Charles River Laboratories in France, which has significant expertise and extensive experience in regulatory toxicology studies related to immunomodulatory drug candidates, is a key partner for this step in documenting TOL2’s safety profile for future clinical studies.

Rights issue strengthens cash position
The capital raise in the form of a rights issue of units of approximately SEK 55 million that we are currently carrying out will strengthen the cash position to complete all preclinical activities and documentation of our drug candidate TOL2 and take it into clinical studies in patients with the nerve-muscle disease myasthenia gravis. The rights issue is covered to approximately 47 percent by subscription commitments. The preliminary subscription period is set to August 30 – September 13 and the outcome of the issue is expected to be presented on September 15.

Ever closer to the clinical development phase
We look forward with confidence to the results from the GLP toxicology study and upcoming interactions with regulatory authorities – two important milestones in the development program of TOL2 as they represent the final steps before the submission of the clinical trial application. Recent progress brings us ever closer to our goal – to offer a completely new type of treatment for this rare but serious disease that currently lacks a safe, disease-specific and effective therapy.

Charlotte Fribert
Executive Director
Gothenburg, August 25, 2023

About Toleranzia

General information about the business
Toleranzia AB (556877-2866) is a Swedish biotechnology company listed on Nasdaq First North. The Company develops drugs that harness the power of the immune system for the treatment of autoimmune orphan diseases (rare diseases). The drugs, which target the cause of the disease, can alleviate or cure the disease and not, like current treatments, merely reduce the symptoms. They have the potential to be the first long-acting or curative therapies that act specifically on the underlying cause of the autoimmune orphan disease for which they are being developed. Toleranzia’s main focus is the autoimmune nerve and muscle disease myasthenia gravis, for which the Company is developing the drug candidate TOL2. In addition, Toleranzia is working on the autoimmune blood vessel disease ANCA-vasculitis, for which the Company is developing the drug candidate TOL3. Both diseases are so-called orphan diseases and there is a great medical need and market potential for both. For further information, please visit: www.toleranzia.com.

Company structure and shareholding
Toleranzia was founded by researchers at the University of Gothenburg. The company operates at the Biotech Center in Gothenburg. Toleranzia has no subsidiaries and is not part of any group. Nor does the company have any shareholdings in other companies.

Financial development and position

Period April – June
Net sales amounted to — KSEK (–) during the quarter.

Other income amounted to KSEK 2 (–) during the quarter and consists mainly of currency exchange rate gains.

The company’s operating expenses amounted to KSEK 22 150 (13 826) for the quarter, of which KSEK 1 505 (1 399) relates to personnel costs.

The increased costs are in line with the Company’s plan and expectations linked to the long-term strategy. The cost of personnel has increased compared to the previous year, as a result of an increase in the number of human resources compared to previous quarters.

Of the total cost, KSEK 19 659 (11 577) relates to the development of the company’s project portfolio in myasthenia gravis and ANCA vasculitis, where the costs incurred are capitalized on an ongoing basis as own-account work.

The operating result during the quarter amounted to KSEK -2 489 (-2 249).

The period January – June
Net sales amounted to — KSEK (–) during the period.

Other income amounted to 49 KSEK (1) during the period and consists mainly of currency exchange rate gains.

Operating expenses for the Company amounted to 34 319 KSEK (23978) during the period, of which 2 859 KSEK (2 436) are costs for personnel.

The costs for the Company’s development work represent 86% (82%) of the total operating costs. The cost of development work for the Company’s project portfolio in myasthenia gravis and ANCA vasculitis amounted to KSEK 29,792 (19,656). The costs incurred are capitalized on an ongoing basis as own-account work.
Operating profit/loss for the period amounted to -4 478 KSEK (-4 321).

Cash flow and liquidity
For the period April – June, cash flow from operating activities amounted to KSEK -1 238 (-1 699). For the period January – June cash flow from operating activities amounted to -3 442 KSEK (-4 095).

As of June 30, the Company’s cash and bank balance amounted to KSEK 703 (52 528).

Investments
Total investments in intangible assets amounted to KSEK 19 659 (11 577) for the period April – June. Total investments in intangible assets amounted to KSEK 29 792 (19 655) for the period January – June.

The investments relate to the development of the Company’s project portfolio within myasthenia gravis and ANCA vasculitis and the costs are capitalized on an ongoing basis as own-account work.

Human resources
Toleranzia is a development company where dedicated employees with solid experience and expertise are a prerequisite for commercial success and for achieving the Company’s vision. The Company had 14 full-time equivalent employees or contracted consultants as of June 30, 2023.

Financing
Toleranzia has decided to carry out an issue of units of approximately MSEK 55, consisting of shares and warrants with preferential rights for existing shareholders.
The Rights Issue in brief

• The Board of Directors of Toleranzia has, with authorization from the general meeting on 7 June 2023, resolved to carry out the Rights Issue of a maximum 110,315,231 units, corresponding to 110,315,231 shares and 110,315,231 warrants of series TO4.
• If fully subscribed, the Rights Issue would provide Toleranzia with approximately SEK 55 million before issue costs.
• In the event of full subscription and full exercise of all warrants of series TO4 in conjunction with offered units, the Company may be provided with an additional maximum of approximately SEK 55 million.
• The Rights Issue is covered to approximately 47 per cent by subscription commitments.
• All existing shareholders will receive one (1) unit right for each one (1) share owned on the record date, 25 August 2023. One (1) unit right gives the right to subscribe for one (1) unit. One (1) unit consists of one (1) newly issued share and one (1) warrant of series TO4. The subscription price per unit is SEK 0.50, corresponding to SEK 0.50 per share. The warrants are issued free of charge.
• The subscription period for the Rights Issue will run from 30 August 2023 until 13 September 2023.
• In addition, the board may decide on an over-allotment issue in the form of a directed new issue of a maximum 11,031,523 units, provided that the Rights Issue is fully subscribed. (“The Overallotment Issue”)

Related party transactions
The company has related party transactions regarding the purchase of services from the company NorthX Biologics Matfors AB in Matfors. Purchased services have been made on market terms.

Ongoing unrest in Europe
There is a general uncertainty in the market caused by the ongoing conflict in Ukraine. The uncertainty has so far not affected the company’s operations and is not expected to affect operations in the coming months. Toleranzia has no operations in either the Russian or Ukrainian market. Raw materials and expertise are sourced from neither Russia nor Ukraine.
 
Shares
Toleranzia’s shares are traded on Nasdaq First North Growth Market since October 15, 2020. The number of shares in Toleranzia amounted to 110,315,231 as of March 31, 2023. The share capital amounted to SEK 13,789,404 as of March 31, 2023. The Company has one class of shares, of which each share has a quota value of SEK 0.125 (SEK 0.125) and carries equal rights to participate in the Company’s assets and earnings.

There are no ongoing option programs at the time of publication of this interim report.

Mangold Fondkommission AB is the Company’s Certified Adviser and can be reached at: ca@mangold.se.

Ownership June 30, 2023

Review by the auditor
This interim report has not been reviewed by the Company’s auditors.

Financial calendar
Interim report Q3 2023: 2023-10-27
Year-end report 2023: 2024-02-23

The Board of Directors and the CEO hereby certify that the interim report gives a true and fair view of the Company’s operations and financial position.

Gothenburg, August 25, 2023
Toleranzia AB
The Board of Directors and CEO

The English version of the interim report is an internal translation. In case of discrepancies, the Swedish text applies.