DGAP-IRE: IINTERIM REPORT BY MANAGEMENT FOR THE SECOND HALF

PAION AG / Release of an announcement according to Article 37x of the WpHG [the German Securities Trading Act] 06.11.2013 07:30 Interim report according to Article 37x of the WpHG, transmitted by DGAP - a company of EQS Group AG. The issuer is solely responsible for the content of this announcement. --------------------------------------------------------------------------- INTERIM REPORT BY MANAGEMENT FOR THE SECOND HALF OF THE YEAR 2013 ACCORDING TO § 37X WPHG FOR THE PERIOD FROM 1 JANUARY TO 30 SEPTEMBER 2013 - Exclusive licence agreements with Hana Pharm for Remimazolam in South Korea and R-Pharm in Russia were signed shortly after the reporting period - Start of Phase II trial for Remimazolam in General Anaesthesia at Leipzig Heart Centre - Increase of revenue forecast for 2013 from EUR 1.5 million to EUR 3.2 million Aachen (Germany), 06 November 2013 - The biopharmaceutical company PAION AG (ISIN DE000A0B65S3; Frankfurt Stock Exchange, General Standard: PA8) today reports its consolidated financial results according to International Financial Reporting Standards (IFRS) for the period from 1 January to 30 September 2013. Revenues in the first nine months 2013 amounted to EUR 1.5 million and decreased by EUR 22.9 million compared to the prior-year period. The revenues in the amount of EUR 1.2 million relate to a milestone payment from Yichang Humanwell after completion of technology transfer and to the option agreement with Hana Pharm for the amount of EUR 0.3 million. In total a net loss of EUR -3.5 million has been incurred compared to a net income of EUR 15.8 million in the prior-year period. The prior-year period was marked by the sale of Desmoteplase to Lundbeck in the amount of EUR 20.1 million. Dr Wolfgang Söhngen, CEO of PAION commented: 'We are very satisfied with the commercial and clinical development progress in 2013. The agreements with Hana Pharm and R-Pharm are important steps in our 'String of Pearls' partnering strategy in which we license out Remimazolam in selective regional markets. The on target recruitment of the Phase II anaesthesia study at the heart center Leipzig will allow us to achieve a sound basis for our Phase III plans in the EU. Together with the rapid development progress by Ono this underscores the potential of Remimazolam. We expect the results of our Phase II and Ono's Phase III in General Anesthesia in the first half of 2014.' Development and Commercial Activities Remimazolam In 2013 PAION focussed on the development and partnering of Remimazolam. In July 2012 PAION signed an exclusive license agreement with Yichang Humanwell for Remimazolam in China. The technology transfer was completed in March 2013 and triggered a payment of EUR 1.2 million. In October 2013 PAION signed an exclusive licence agreement with Hana Pharm for Remimazolam in South Korea against an upfront payment of EUR 1 million. In addition, potential milestone payments of up to EUR 2 million and 10% royalties on sales in the South Korean market have been agreed. Hana Pharm will manage and finance the development and marketing approval process in South Korea. Also in October 2013 an exclusive licence agreement with R-Pharm for Remimazolam in Russia and other CIS has been signed. PAION will receive an upfront payment in the amount of EUR 1 million, potential milestone payments of up to EUR 3 million and low double digit royalties on net sales in the CIS. R-Pharm will manage the development and marketing approval process in the CIS. R-Pharm intends to market Remimazolam in all indications with the lead indication anaesthesia and plans to start a bridging study in anaesthesia as soon as possible. PAION's goal is to add further cooperation's for the markets outside of China, Japan, South Korea and Russia. However PAION will give no specific forecast for the timing of additional partnerships. PAION's partner Ono Pharmaceutical is currently developing Remimazolam in anaesthesia for the Japanese market as the lead indication. A Phase II/III trial of Remimazolam in General Anaesthesia was started by Ono in November 2012. The recruitment of the study was completed already in May 2013 significantly earlier than originally planned. The recruitment of the second study in the Phase III program (American Society of Anesthesiologists classification III or higher) in more severely sick patients and the hepatic impairment study have also been completed. No significant adverse events have been reported. The Japanese development program for the indication of induction and maintenance of general anaesthesia is completed and filing is expected in 2014. Furthermore, Ono initiated a Phase II trial in ICU sedation in September 2012. Due to an unclear pharmacokinetic result in long-term administration in the study, Ono has decided to discontinue the study in August 2013. Overall all patients were sedated successfully and no significant adverse events were reported. The planned pre-clinical experiments and additional PK modelling based on the plasma samples is underway. The results will be the basis for a dose adjustment, if necessary, for new studies. In February 2013, PAION held a formal scientific advice meeting with the German regulatory authority BfArM on the European clinical development program for Remimazolam in General Anaesthesia. After approval through the BfArM the European Phase II trial with Remimazolam in General Anaesthesia in cardiovascular surgery was started in September 2013. Results of the study are expected in the first half of 2014. Pending the outcome of the planned and ongoing trials, PAION assumes that one Phase II and one Phase III trial in General Anaesthesia in addition to the Japanese development program will be sufficient for EU approval. In preparation for the European Phase III trial, further scientific advice meetings are planned with European regulatory authorities. To finance the future development program PAION is working on additional license agreements and is evaluating other funding options. PAION expects results of the Phase II (PAION) and Phase III (Ono) in General Anaesthesia in the first half of 2014. Solulin/PN13 In July 2012 it was announced, that PAION has received a grant worth EUR 0.7 million from the federal ministry of education and research (BMBF) for research in the area of thrombomodulin - mutants (PN13). The project was supposed to run until 2014. The project is in a very early stage of development. The resulting Solulin mutants could not be tested using the standard methods. Therefore, further research will require a higher financial expenditure than expected, which is not covered by the current funding. As PAION focuses all resources on Remimazolam, the project will only be continued with third party funding. GGF2 Beginning of March 2013, Acorda announced positive results of the Phase I trial with GGF2. The study identified a maximum tolerated dose of GGF2 and the preliminary efficacy measures showed that GGF2 improves heart function. Acorda has discussed the findings from the study with the FDA and has reached agreement on the next clinical study of GGF2 in heart failure. This Phase Ib study will primarily investigate further the safety profile of GGF2 across a range of doses, will continue to explore efficacy outcomes and the start of the study was announced by Acorda on 8 October 2013. The FDA has granted Fast Track designation for GGF2 for the treatment of heart failure. In total, further milestone payments of USD 2.5 million prior to market approval and an additional milestone payment of USD 5 million are due upon market authorisation; after that PAION will receive revenue dependent royalties. Finances Revenues Revenues in the first nine months 2013 amounted to EUR 1.5 million and decreased by EUR 22.9 million compared to the prior-year period. The revenues in the amount of EUR 1.2 million relate to a milestone payment from Yichang for technology transfer which has been completed in the reporting period and to the option agreement with Hana Pharm for the amount of EUR 0.3 million. The prior-year period was marked by the sale of Desmoteplase to Lundbeck for the amount of EUR 20.1 million. Net result The net loss for the first nine months 2013 amounted to EUR -3.5 million. In the prior-year period a net income of EUR 15.8 million has been reported. This means a decrease of the net result of EUR 19.3 million compared to the prior-year period. Development of costs Research and development expenses amounted to EUR 3.2 million in the first nine months 2013 and relate mainly to Remimazolam. This means an increase of EUR 0.8 million compared to the prior-year period. The increase is due to increased development activities, in particular the Phase II study with Remimazolam and further production development to prepare the Phase III program and commercial supply of Remimazolam. General administrative and selling expenses in the first nine months 2013 declined by EUR 1.0 million to EUR 2.5 million. Administrative expenses decreased compared to the prior-year period by EUR 0.2 million to EUR 1.7 million. Selling expenses decreased compared to the prior-year period by EUR 0.8 million to EUR 0.8 million. Liquidity Cash and cash equivalents decreased after scheduled repayment of the subordinated loan (EUR 7 million) by EUR 9.3 million in the first nine months 2013. As of 30 September 2013 PAION's cash and cash equivalents amounted to EUR 13.0 million. After accounting for the costs for the ongoing Phase II study with Remimazolam the cash and cash equivalents alone secure a cash reach until end of Q1/2015 based on the current structure. The additional income from the agreements with Hana Pharm and R-Pharm will either be used to further invest in the development of Remimazolam or to extend PAION's cash reach. Business and Financial Outlook 2013 PAION updates its outlook for 2013 made on 13 March 2013 with the publication of the annual financial results of 2012 and increases the revenue forecast for 2013 to EUR 3.2 million. PAION continues to focus on the conduct of the Phase II study with Remimazolam, the production development for Remimazolam and the out-licensing of Remimazolam outside Japan, China, South Korea and Russia. Furthermore, PAION expects the continuation of the development activities by the cooperation partners Acorda (GGF2), Ono and Yichang Humanwell and the initiation of the know-how transfer to Hana Pharm and R-Pharm (all Remimazolam). The expected revenues of EUR 1.5 million for fiscal year 2013 will increase by EUR 1.7 million to EUR 3.2 million. These relate in the amount of EUR 1.2 million to the technology transfer with Yichang Humanwell which has been completed in March 2013 as well as to licensing agreements with Hana and R-Pharm Pharm concluded in October for EUR 1 million each. ### Key Consolidated Financial Figures, IFRS (not audited) <pre> (all figures in KEUR unless otherwise noted) Q3 2013 Q3 2012 Q1-Q3 2013 Q1-Q3 2012 Revenues 300 1,650 1,523 24,454 Research and development expenses -1,162 -590 -3,191 -2,376 General administrative and selling expenses -643 -1,017 -2,465 -3,479 Result for the period -1,311 -31 -3,501 15,847 Earnings per share in EUR for the period (basic) -0.05 -0.01 -0.14 0.62 Earnings per share in EUR for the period (diluted) -0.05 -0.01 -0.14 0.62 Q1-Q3 2013 Q1-Q3 2012 Cash flows from operating activities -2,056 13,055 Cash flows from investing activities 0 -4 Cash flows from financing activities -7,163 -442 Change in cash and cash equivalents -9,344 12,622 Average number of group employees 14 16 30 Sep. 31 Dec. 2013 2012 Intangible assets 3,548 3,848 Cash and cash equivalents 12,992 22,336 Equity 11,975 15,572 Non-current liabilities 782 1,016 Current liabilities 4,469 11,748 Balance sheet total 17,226 28,336 </pre> About PAION PAION AG is a publicly-listed biotech company headquartered in Aachen, Germany with a second site in Cambridge, UK. The company has a track record of developing hospital-based treatments for which there is substantial unmet medical need. PAION AG is transforming its business model from a pure development company to a specialty pharmaceutical company with a focus on anaesthesia products to take advantage of the unique profile of its main compound, Remimazolam. Contact Ralf Penner Director Investor Relations / Public Relations PAION AG Martinstrasse 10-12, 52062 Aachen - Germany Phone +49 241 4453-152 E-mail r.penner@paion.com http://www.paion.com Disclaimer: This release contains certain forward-looking statements concerning the future business of PAION AG. These forward-looking statements contained herein are based on the current expectations, estimates and projections of PAION AG's management as of the date of this release. They are subject to a number of assumptions and involve known and unknown risks, uncertainties and other factors. Should actual conditions differ from the Company's assumptions, actual results and actions may differ materially from any future results and developments expressed or implied by such forward-looking statements. Considering the risks, uncertainties and other factors involved, recipients should not rely unreasonably upon these forward-looking statements. PAION AG has no obligation to periodically update any such forward-looking statements to reflect future events or developments. 06.11.2013 DGAP's Distribution Services include Regulatory Announcements, Financial/Corporate News and Press Releases. Media archive at www.dgap-medientreff.de and www.dgap.de --------------------------------------------------------------------------- Language: English Company: PAION AG Martinstr. 10-12 52062 Aachen Germany Internet: www.paion.com End of Announcement DGAP News-Service ---------------------------------------------------------------------------