Interim report January 1-June 30, 2014: Pharmaceutical

Highlights in January-June 2014: * Herantis Pharma Group was formed through the merger of two Finnish pharmaceutical development companies on April 29, 2014 when Hermo Pharma Oy acquired 99.0% of the shares of Laurantis Pharma Oy in a stock swap and changed its name to Herantis Pharma Plc. * Herantis was listed on the First North Finland marketplace of NASDAQ OMX Helsinki stock exchange, with trading starting on June 11, 2014. An Initial Public Offering produced a total of €14.3 million before share issue expenses * Tekes, the Finnish Funding Agency for Innovation, granted the company a new product development loan in the amount of €0.5 million for preparations for clinical research on the CDNF protein in Parkinson's disease * Herantis had no revenue during the review period. The Group's financial result for the period was €-2.4 million (parent company's H1/2013 result €- 0.5 million) * The clinical drug development programs advanced as planned * Herantis' cash and cash equivalents amounted to €14.2 (0.0) million on June 30, 2014 Key figures +--------------------------------------+------------+-----------+ |€ thousands | 1-6/2014¹|1-6/2013(2)| +--------------------------------------+------------+-----------+ |  |Consolidated| Parent| +--------------------------------------+------------+-----------+ |Revenue | 0.0| 0.0| +--------------------------------------+------------+-----------+ |Personnel expenses | -355.0| -183.2| +--------------------------------------+------------+-----------+ |Depreciation and amortization | -455.7| -151.3| +--------------------------------------+------------+-----------+ |Other expenses for business operations| -831.0| -161.1| +--------------------------------------+------------+-----------+ |Profit for the period | -2,445.2| -514.5| +--------------------------------------+------------+-----------+ |Cash flow from operations | -2,409.0| -407.0| +--------------------------------------+------------+-----------+ +-------------------------+-------------+---------------+ |€ thousands |Jun 30, 2014¹|Dec 31, 2013(2)| +-------------------------+-------------+---------------+ |  | Consolidated| Parent| +-------------------------+-------------+---------------+ |Cash and cash equivalents| 14,241.7| 17.7| +-------------------------+-------------+---------------+ |Equity | 26,861.3| 120.0| +-------------------------+-------------+---------------+ |Balance sheet total | 33,658.4| 2,640.9| +-------------------------+-------------+---------------+ +------------------------------------+------------+-----------+ |  | 1-6/2014¹|1-6/2013(2)| +------------------------------------+------------+-----------+ |  |Consolidated| Parent| +------------------------------------+------------+-----------+ |Equity ratio % | 79.8| 4.5| +------------------------------------+------------+-----------+ |Earnings per share € | -2.21| n/a| +------------------------------------+------------+-----------+ |Number of shares at end of period(3)| 4,058,214| n/a| +------------------------------------+------------+-----------+ |Average number of shares(3) | 1,107,739| n/a| +------------------------------------+------------+-----------+ (1) Herantis Pharma Group was formed on April 29, 2014 through merger of Herantis Pharma Plc and Laurantis Pharma (2) Comparison period figures from parent company of Herantis Pharma Plc (3  )See section Acquisitions and directed share issues Pro Forma information The pro forma information on the merger of business operations illustrates the financial effects of the merger. The information is prepared based on the assumption that the merger took place on January 1, 2013. The combination of business operations was completed on April 29, 2014. The pro forma information is given for the periods 1-6/2014 and 1-6/2013. The accounting principles for the pro forma information are detailed in Herantis' IPO and listing prospectus of May 12, 2014. +------------------------------+--------+--------+ |€ thousands |1-6/2014|1-6/2013| +------------------------------+--------+--------+ |Personnel expenses | -508.2| -357.1| +------------------------------+--------+--------+ |Depreciation and amortization |-1,064.7|-1,064.7| +------------------------------+--------+--------+ |Other operational expenses |-1,361.8| -736.3| +------------------------------+--------+--------+ |Profit (-loss) from operations|-2,934.8|-2,158.1| +------------------------------+--------+--------+ Formulae used in calculating key figures Equity ratio = Equity / balance sheet total Earnings per share = Profit for period / average number of shares Average number of shares = Weighted average number of shares. The number of shares is weighted by the number of days each share has been outstanding during the review period Pekka Simula, CEO: Pharmaceutical development programs advancing as planned - successful share issue enables progress according to strategy "I am extremely satisfied with the positive reception of our listing on the First North Finland marketplace and our share issue. The new funding of approximately €14.3 million before expenses enables us to develop our business according to our strategy. The minimum target of our listing issue was oversubscribed by 40%. In my opinion, this illustrates the strong faith of investors in the high quality of Finnish drug development. The funds obtained through the share issue will be mainly used to finance our product development development projects, in particular the clinical trials of our three most important product candidates: Cis-UCA eye drops for the treatment of dry eye, neuro-protective CDNF for the treatment of Parkinson's disease, and Lymfactin for the treatment of secondary lymphedema caused by breast cancer treatment. Our drug development program focuses on diseases with a clear unmet clinical need. Our objective for the next three years is to reach a clinical proof-of-concept of three of our most important drugs. One of our goals is also at least one commercialization agreement by the end of 2017. In practice, this means collaboration with a Finnish or foreign pharmaceutical company, covering the late-stage clinical development of the drug, as well as its sales and marketing." Income from business operations, R&D expenses Herantis had no revenue during the review period. The parent company had no revenue in the corresponding period in the previous year. The review period's R&D expenses were €0.6 million, recorded in the profit and loss statement as expense for the period. The R&D expenses mainly comprised preparation expenses for CDNF Phase 1 clinical trials. The R&D expenses for the parent company, €0.4 million for the comparison period, were capitalized. The profit for the review period was €-2.4 million. This includes listing- related expenses in the amount of €0.8 million, recorded as part of financing expenses. The parent company's profit for the comparison period was €-0.5 million. Comparison of pro forma figures Herantis in its combined form did not have Pro forma revenue in the review period or in the corresponding period in the previous year. The Pro forma personnel expenses for the review period were €0.5 (0.4) million. Pro forma amortization for the review period amounted to €1.1 (1.1) million, out of which the allocation of amortization on goodwill to product development projects in connection with the acquisition of Laurantis was €0.8 (0.8) million. The review period's Pro forma loss from business operations was €2.9 (2.2) million. Financing and capital expenditure The company's cash and cash equivalents on June 30, 2014 amounted to €14.2 (0.0) million. In connection with its listing on First North Finland, Herantis launched an Initial Public Offering. The issuance of 1,364,770 shares produced funds in the amount of €14.3 million before share issue expenses. The review period's cash flow from operations was €-2.4 million. The parent company's cash flow from operations for the corresponding period in the previous year was €-0.4 million. Acquisitions and directed share issues In accordance with the decision by the extraordinary general meeting of shareholders on November 14, 2013, Herantis completed a share issue in February 2014, in which 567 new shares were issued to the company's existing shareholders and a limited number of new shareholders. The number of the company's shares rose to 6,606. The extraordinary meeting of shareholders of April 29, 2014 decided on a split, in which 199 new shares were issued for each of the company's shares, bringing the total number of shares to 1,321,200. In addition, the extraordinary general meeting on April 29, 2014 decided on a stock swap with the shareholders of Laurantis Pharma, whose shareholders received a total of 1,372,244 shares as consideration for 99 percent of Laurantis Pharma stock. This brought the total number of shares to 2,693,444 prior to the IPO. Balance sheet As the result of the merger of Herantis and Laurantis Pharma, the consideration for the shares of Laurantis Pharma that exceeds the company's equity has been capitalized and allocated to R&D expenses and consolidated goodwill in the consolidated balance sheet. Following the acquisition and the IPO, the consolidated balance sheet on June 30, 2014 stood at approximately €33.7 million. The parent company's balance sheet total on December 31, 2013 was approximately €2.6 million. Equity Consolidated equity on June 30, 2014 was €26.9 (0.4) million. The parent company's equity was €0.1 million on December 31, 2013. Personnel, management and administration Herantis Pharma was formed through the merger of Hermo Pharma and Laurantis Pharma on April 29, 2014. Through the merger, the number of personnel increased to six people as the employees of both companies were transferred to Herantis' payroll. Working with academic and industrial partners, Herantis aims at keeping its own organization cost-efficient and agile, thereby enabling the allocation of the majority of its funds to drug development. In connection with the merger, the composition of the company's Board of Directors changed. Pekka Mattila continues as the Chairman, with the earlier members of the Board of Hermo Pharma, Jonathan Knowles and Timo Veromaa, as well as the earlier members of the Board of Laurantis Pharma, Aki Prihti, Frans Wuite and James Phillips, as ordinary members. Risks and uncertainties The most significant risks and uncertainties in Herantis' business operations are detailed in the IPO prospectus dated May 12, 2014 (available in Finnish). No changes in the risks and uncertainties have taken place after the publication of the prospectus. Shares and shareholders Trading with Herantis shares began on the First North Finland marketplace on June 11, 2014. The share subscription price in the IPO was €10.50 per share. Herantis' market capitalization at the end of the review period was €40.8 million. The closing price of the share on June 30, 2014 was €10.05, with the highest price during the review period being €11.00, lowest €9.00 and average €10.27. According to Herantis' shareholder register on June 30, 2014, the company had 450 registered shareholders. The members of Herantis' Board of Directors and the CEO held a total of 36,606 shares, equaling 0.9% of the company's total stock. Annual General Meeting The 2014 ordinary Annual General Meeting of Herantis was held on March 20, 2014. In addition, the company convened an extraordinary General Meeting in connection with the merger and IPO on April 29, 2014. The Annual General Meeting decided to initiate a new stock option program, authorize the Board of Directors to grant a maximum of 117 options in the initiated program to the members of the Board of Directors in accordance with the terms and conditions of the program, and grant 213 options in the initiated program to the CEO. At the same time, the AGM decided to annul 40 unused options from the 2010 stock option program. After the share split (see Acquisitions and directed share issues above), each of the old options entitles the holder to subscribe to 200 shares in the company. The AGM decided that the members of the Board of Directors be paid a monthly fee of €1,000, and the Chairman a monthly fee of €2,000. Authorized Public Accountants PricewaterhouseCoopers Oy was elected the company's auditor, with Martin Grandell, APA, as the responsible auditor. Outlook for 2014 After its listing on First North Finland, Herantis focuses on the clinical development of three of its most important drugs, all of which are still at the development stage. The outlook for 2014 remains unchanged from the information published in the listing and IPO prospectus of May 12, 2014. The main objective in 2014 is to start a Phase 2 clinical trial as proof of efficacy of the cis-UCA eye drop for dry eye in comparison with a placebo, by the end of the year. The long-term target of Herantis is to significantly grow its business by entering commercialization agreements for its drugs and by allocating funds thus received to the development of new drugs. No commercialization agreements exist as of yet. Instead, the company's present operation is focused on the clinical development of the drugs. The objective is to have a commercialization agreement for at least one of the most important drugs with a Finnish or foreign pharmaceutical company by the end of 2017. The company does not expect any revenues prior to that. In pharmaceutical development, the speed of the research work defines the time when expenses incur. Accounting principles for the half-year report This half-year interim report is prepared in accordance with good accounting practices, local legislation and the rules of the First North Finland marketplace. The figures in this report are not audited. The figures are independently rounded. Financial reporting Financial reports are published on the company's website www.herantis.com. This report is published in Finnish and in English. In case of any discrepancies between the language versions, the Finnish version shall prevail. The financial statements report for 2014 will be published on February 27, 2015. The schedule for other financial information for 2015 will be published by the end of 2014. Herantis Pharma Plc Board of Directors APPENDICES Profit & loss statement and balance sheet January 1-June 30, 2014 Cash flow statement January 1-June 30, 2014 Changes in equity Distribution: NASDAQ OMX, principal media For more information, please contact: Pekka Simula, CEO Telephone: +358 40 730 0445 www.herantis.com Certified Advisor: UB Capital Oy, telephone +358 9 2538 0225 Herantis Pharma in brief: Herantis is a pharmaceutical development company based in Finland, researching and developing drugs particularly for inflammatory, central nervous system and lymphatic system diseases. Our core expertise is translating drug candidates from academic research to clinical development. Herantis has three drugs under development that are focused on diseases with a clear unmet clinical need. We believe our drugs are the first or best in their class and have the potential to change treatment strategies of diseases. The shares of Herantis Pharma Plc are listed on the First North Finland marketplace run by NASDAQ OMX Helsinki stock exchange. [HUG#1848914]