The mondoBIOTECH Group (the “Group”) has not generated revenue in the half year ending 30 June 2012 (as in 2011 1H), against ordinary operating expenses of CHF 3.2 million (2011: CHF 7.5 million). The significant cost reduction compared to the previous year (-57%) is even more relevant when taking into account the CHF 1.07 million cost – with no cash implication - attributable to the pro-rata impact of the stock option plan implemented in February 2012. Net of such effect, the operating expenses stood at CHF 2.13 million.
The loss for the period is CHF 3.2 million (2011: CHF 53.6 million), representing a basic and diluted loss per Common Share of CHF 0.047 (2011: basic and diluted loss of CHF 8.384).
The above figures clearly show how the management has successfully implemented the austerity plan, in line with what was announced in the last annual report, reducing the Company’s operating costs to a level which makes the Company’s business model sustainable in the mid-term, until recurring revenues from licensing activity eventually start to kick in.
As part of this effort to reduce costs, the Group corporate structure has been rationalized, by merging all the Swiss entities into only one Swiss operating company, mondoBIOTECH AG, directly controlled by mondoBIOTECH Holding AG, and liquidating the German company Theranostics AG.
The subordinated loan of up to CHF 2.5 million granted last year by its largest shareholder Biopharma Invest AG, drawn for CHF 2 million as of June 30th, has covered most of the operating expenses for the period. In addition, on 27th June 2012 Biopharma Invest AG has granted the Company the right to purchase from it up to 30 million mondoBIOTECH Holding AG ordinary shares, in monthly tranches of up to 2.5 million shares each, during the next three years, at a symbolic price.
On 17th July 2012, after the closing of these interim results, the Company has entered into an investment transaction with the alternative investment firm Global Emerging Markets Group (GEM), giving the Company the right to sell to GEM mondoBIOTECH ordinary shares, during the next three years, up to an amount of CHF 7.5 million, subject to certain conditions. Therefore, mondoBIOTECH will purchase over time its own shares from Biopharma Invest AG and resell such shares to GEM. The difference between the selling price and the purchase price will be used to finance the Company’s working capital needs for the next three years. In addition, GEM has been awarded warrants to buy up to 14 million ordinary shares of mondoBIOTECH Holding AG, at tiered strike prices up to CHF 0.38, adding additional CHF 3.5 million of potential capital raising.
The above transactions, in conjunction with the significantly reduced cost base, should grant the Company enough time to conclude one or more licensing agreements. Under these assumptions, the management believes it appropriate to disclose the interim financial information on a going concern basis.
Research and development
Research and Development expenses decreased from CHF 51.3 million in the first half of 2011 to CHF 1.39 million in the same period of 2012. Even considering that in 2011 the result was affected by impairment losses for CHF 46 million, the decrease still is quite significant. As mentioned above, the Company is focusing on leveraging the existing pipeline through licensing agreement and therefore R&D activities have been addressing the maintenance of such pipeline and the development of the Search & Match methodology.
Sales and marketing
Sales and marketing expenses decreased from CHF 1.02 million in the first half of 2011 to CHF 0.24 million in the first half of 2012. In this area, a number of initiatives pursued by the previous management, such as sponsorships, have been cut, while all the efforts have been entirely refocused onto licensing activities.
Management and administration
Management and administration expenses were CHF 1.59 million, against CHF 1.16 million in the first half of 2011. However, net of CHF 1.07 million charge of the period for the stock option plan, such costs have also been more than halved from 2011, to CHF 0.52 million.
The annual report 2012 is available here