News Release

Forward Pharma Reports Full-Year 2017 Financial and Operational Results

COPENHAGEN, Denmark, April 30, 2018 (GLOBE NEWSWIRE) -- Forward Pharma A/S (Nasdaq:FWP) (“We” or “Forward” or the “Company”), today reported financial results for the year ended December 31, 2017. Net income for the year ended December 31, 2017 was $917.1 million, or $2.30 per diluted share, versus net loss of $(33.3) million, or $(0.06) per share for the year ended December 31, 2016. As of December 31, 2017, the Company had $109.6 million in cash and cash equivalents, with no debt outstanding.

“We are pleased to announce our full-year results for 2017. We are an entirely different company than a year ago. The Settlement and License Agreement with Biogen has given us a renewed focus and sufficient capital to execute on our strategy bringing additional value to our shareholders beyond the large shareholder distribution that was completed in 2017,” said Dr. Claus Bo Svendsen, Chief Executive Officer of Forward.

Year Ended December 31, 2017 Financial and Operational Results

During the year ended December 31, 2017, the Company recognized as revenue the $1.25 billion nonrecurring non-refundable fee that was received during February 2017 in connection with the Settlement and License Agreement (“License Agreement”) entered into with two wholly owned subsidiaries of Biogen, Inc. (collectively “Biogen”). Prior to entering into the License Agreement, the Company did not have contracts with customers and, accordingly, there was no revenue recognized during the year ended December 31, 2016 or since the Company was founded in 2005.

Share Split and Shareholder Distribution

On August 2, 2017, the Company’s shareholders approved 10 for 1 share split and a capital reduction of 917.7 million EUR, or $1.1 billion (the “Capital Reduction”). The Capital Reduction was effected by a distribution to shareholders in September 2017 (the “Shareholder Distribution”). The Capital Reduction was executed through the annulment of 80% of the ordinary shares outstanding post Share Split. Following the Share Split and the Capital Reduction, each ADS was modified to represent two ordinary shares with a nominal value of 0.01 DKK.

In November 2017, the shareholders of the Company approved an amendment to the Company’s articles of association, which modified the terms of certain outstanding options and warrants granted by the Company to mitigate the dilution to such awards caused by the Shareholder Distribution. In November 2017, a similar amendment was approved by the board of directors of the Company in respect of certain deferred share awards granted by the Company (the amended options, warrants and deferred shares are collectively referred to as the “Awards” and the amendments of the Awards are collectively referred to as the “Amendment”). The overall effect of the Amendment provided for cash payments to Award holders of 36.2 million EUR ($43.4 million based on the December 31, 2017 exchange rate) and a reduction in the number of outstanding Awards by 28.8 million. As a result of the Amendment, the Company recognized compensation expense of $11.7 million and a reduction to shareholder equity of $32.2 million.

Cost to Aditech Pharma AG agreement for the years ended December 31, 2017 and 2016

The terms of the agreement between Aditech Pharma AG (“Aditech”) and the Company, including the addendum to the agreement executed in January 2017, provided for Aditech to receive a payment equal to 2% of the Non-refundable Fee, or $25 million, during the year ended December 31, 2017. During the year ended December 31, 2016, there were no amounts due Aditech.

Research and development costs for the years ended December 31, 2017 and 2016

Research and development costs for the years ended December 31, 2017 and 2016 were $20.5 million and $41.1 million, respectively. The decrease in research and development costs for the year ended December 31, 2017 of $20.6 million is the result of lower costs incurred in connection with the Patent Interference No. 106,023 (“Interference Proceeding”) between the U.S. Patent Application No. 11/567,871 associated with the Company and U.S. Patent No. 8,399,514 held by a subsidiary of Biogen, lower share-based compensation and the winding down of our development efforts of FP187®. The decrease was offset by $13.0 million of additional compensation expense recognized during the year ended December 31, 2017 in connection with the Amendment of Awards as discussed above. Fees to patent advisors and other patent-related costs decreased from $16.3 million in the year ended December 31, 2016 to $2.7 million in the year ended December 31, 2017. Fees to patent advisors and other patent-related costs include the cost to conduct the Interference Proceeding. The decrease is the result of reduced activities subsequent to the oral argument on November 30, 2016 for the Interference Proceeding and the United States Patent Trial and Appeal Board’s (the “PTAB”) issuance of the decision in the Interference Proceeding in favor of Biogen on March 31, 2017. Share-based compensation decreased from $8.0 million in the year ended December 31, 2016 to $4.9 million in the year ended December 31, 2017 in connection with the vesting of equity awards issued during the years ended December 31, 2016 and 2015 that included graded vesting provisions resulting in expense recognition that decreases in the latter years of vesting combined with the favorable effect related to the benefit recognized during the year ended December 31, 2017 in connection with equity awards that were forfeited as the result of employee terminations where the forfeited equity awards were initially expected to vest in full. The balance of the decrease in research and development cost during the year ended December 31, 2017 is the result of winding down FP187® development costs including all preclinical, clinical and contract manufacturing efforts that were in process prior to the effective date of the License Agreement. We currently expect our research and development costs will continue to decline in 2018. However, if we decide to reinitiate development of FP187® or another DMF-containing formulation (collectively, a “DMF Formulation”) for sale in the U.S., our research and development expenses will likely increase. At this time, we cannot estimate whether or when we will reinitiate development of a DMF Formulation and, if reinitiated, the level of expenditure that will be required to fully develop and commercialize a DMF Formulation (whether on our own or through any assignee of our U.S. co-exclusive license rights).

General and administrative costs for the years ended December 31, 2017 and 2016

General and administrative costs for the years ended December 31, 2017 and 2016 were $17.1 million and $14.4 million, respectively. The increase in general and administrative costs in the year ended December 31, 2017 of $2.7 million resulted from increased legal and accounting costs, compensation expense and costs related to the restructuring of the Company’s operations. A decrease in share-based compensation offset these increases. Legal and accounting fees were $6.9 million in the year ended December 31, 2017 compared to $4.4 million in the year ended December 31, 2016. The increase in legal and accounting fees is related to the License Agreement and the restructuring of the Company’s operations. During the year ended December 31, 2017, the Company recognized $4.1 million of additional compensation expense in connection with the Amendment of Awards and $759,000 in connection with the formation FWP Fonden, and the sale of FWP IP ApS. Share-based compensation decreased from $6.3 million in the year ended December 31, 2016 to $2.2 million in the year ended December 31, 2017. The favorable change was related to the benefit recognized during the year ended December 31, 2017 in connection with equity awards that were forfeited as the result of employee terminations where the forfeited equity awards were initially expected to vest in full. We expect our general and administrative costs will remain at current levels; however, considering the high level of uncertainty associated with the Interference Proceeding and the opposition proceeding regarding the EP2801355 patent with several opponents including Biogen, including any appeals, it is possible that unforeseen events could occur that could have a material effect on our estimated expenditures.

Update on Intellectual Property Proceedings

On March 31, 2017, the PTAB issued a decision in the Interference Proceeding in favor of Biogen. The PTAB ruled that the claims of the '871 application are not patentable due to a lack of adequate written description. The Company has appealed the decision to the Federal Circuit, where the appeal will be heard at an oral hearing on June 4, 2018. The appeal is expected to be decided in the second half of 2018. If the Company prevails in this appeal, we expect the Federal Circuit to remand the case to the PTAB, in order for the PTAB to resolve both parties' other outstanding motions, including Biogen's priority motion.

On January 29, 2018, the Opposition Division of the European Patent Office concluded the oral proceedings concerning the ‘355 patent and issued an initial decision in the Opposition Proceedings. The Opposition Division revoked the ‘355 patent after considering third-party oppositions from several opponents. On March 22, 2018, the Opposition Division issued its written decision with detailed reasons for the decision, and following review of these, the Company plans to appeal the Opposition Division’s decision to the Technical Board of Appeal, with an expected duration of the appeal process of an additional two to three years. The Company has until June 2, 2018 to submit its notice of appeal, and the deadline for submitting the detailed grounds of appeal is August 2, 2018. If the Company prevails in such appeal, we expect the Technical Board of Appeal to remand the case to the Opposition Division, in order for the Opposition Division to resolve the remaining elements of the original opposition.

 
Forward Pharma A/S
Condensed Consolidated Statement of Profit or Loss*
(USD in thousands, except per share amounts)
       
   Year Ended
  December 31,
  2017   2016
Revenue from settlement and license agreement $ 1,250,000       -  
Royalty cost Aditech Pharma AG   (25,000 )     -  
Research and development   (20,496 )     (41,052 )
General and administrative   (17,107 )     (14,382 )
Total operating income (loss)   1,187,397       (55,434 )
       
Other   (2,909 )     895  
Income (loss) before taxes   1,184,488       (54,539 )
       
Income tax (expense) benefit   (267,395 )     21,203  
Net income (loss) $ 917,093     $ (33,336 )
       
Net income (loss) per share, basic (1) $ 2.41     $ (0.06 )
Net income (loss) per share, diluted (1) $ 2.30     $ (0.06 )
       
Weighted average shares used to compute net income (loss) per share basic (1)   380,133       540,650  
       
Weighted average shares used to compute net income (loss) per share diluted (1)   398,943       540,650  


(1)  During August 2017, the Company’s shareholders approved a 10 for 1 share split, or Share Split.  All share and per share information disclosed above has been adjusted to reflect the Share Split as if it had occurred at the beginning of the earliest period presented. In addition, there was a capital reduction that was effected by the annulment of 80% of the ordinary shares outstanding and was deemed, for financial reporting purposes, to have been at a 15% premium or 15% Premium. For purposes of computing the per share amounts only, the 15% Premium has been accounted for in a manner similar to the Share Split and reflected in the above per share amounts as if it had occurred at the beginning of the earliest period presented. The combined effect of the Share Split and the 15% Premium is as if a 11.5 for 1 share split had occurred at the beginning of the earliest period presented. Accordingly, share and per share information previously reported will be different from the information reported herein. Following the Share Split, the nominal value of an ordinary share of the Company is 0.01 DKK.
   
The condensed consolidated information included herein has been derived from, and should be read in conjunction with, the Company’s audited consolidated financial statements included in the Company’s 2017 Annual Report on Form 20-F filed with the United States Securities and Exchange Commission on April 30, 2018.


 
Forward Pharma A/S
Condensed Consolidated Statement of Financial Position*
(USD in thousands)
       
  December 31,
    2017   2016
Assets      
Cash, cash equivalents and investments $ 109,554   $ 138,723
Other assets   1,454     24,420
Total assets $ 111,008   $ 163,143
       
Equity and Liabilities      
Shareholders' equity $ 89,680   $ 155,802
Liabilities   21,328     7,341
Total equity and liabilities $ 111,008   $ 163,143


The condensed consolidated information included herein has been derived from, and should be read in conjunction with, the Company’s audited consolidated financial statements included in the Company’s 2017 Annual Report on Form 20-F filed with the United States Securities and Exchange Commission on April 30, 2018.

About Forward Pharma:
Forward Pharma A/S is a Danish biopharmaceutical company that commenced development in 2005 of FP187®, a proprietary formulation of DMF for the treatment of inflammatory and neurological indications. The Company granted to Biogen an irrevocable license to all of its IP through the recent Settlement and License Agreement and received from Biogen a non-refundable cash fee of $1.25 billion in February 2017, with the return of EUR 917.7 million to shareholders through a capital reduction in September 2017. The Company has the opportunity to receive royalties from Biogen on sales of Tecfidera® or other DMF products for MS, dependent on, among other things, successfully appealing the U.S. interference and a favorable outcome in Europe with respect to the EP2801355 Opposition Proceedings, including any appeal thereto.

Publicly available information from the European Patent Office can be located at the European Patent Register at https://register.epo.org/regviewer.

Publicly available information from the U.S. Court of Appeals for the Federal Circuit can be located at https://ecf.cafc.uscourts.gov/.

The principal executive offices are located at Østergade 24A, 1st Floor, 1100 Copenhagen K, Denmark and our American Depositary Shares are publicly traded on Nasdaq Stock Market (FWP). For more information about the Company, please visit our website at http://www.forward-pharma.com.

Forward Pharma A/S Investor Relations Contact:

Forward Pharma A/S
Dr. Claus Bo Svendsen, Chief Executive Officer
Investor Relations
investors@forward-pharma.com 

The Trout Group
John Graziano
jgraziano@troutgroup.com 
+1 (646) 378 2942

Forward Looking Statements:
Certain statements in this press release may constitute “forward-looking statements” of Forward Pharma A/S within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, but are not limited to, statements which contain language such as “believe,” “expect,” “anticipate,” “estimate,” “would,” “may,” “plan,” and “potential.” Forward-looking statements are predictions only, which involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from those expressed in such statements. Many such risks, uncertainties and other factors are taken into account as part of our assumptions underlying these forward-looking statements and include, among others, risks related to the following: the satisfaction of certain conditions, and the accuracy of certain representations of the Company, in the Settlement and License Agreement entered into with subsidiaries of Biogen Inc. and certain other parties thereto; our ability to obtain, maintain, enforce and defend issued patents with royalty-bearing claims; our ability to prevail in the interference proceedings after all appeals and obtain issuance of the ’871 application; our ability to prevail in or obtain a favorable decision in the ‘355 patent European Opposition Proceedings, after all appeals; the expected timing for key activities and an ultimate ruling in such legal proceedings; the issuance and term of our patents; future sales of Tecfidera®, including impact on such sales from competition, generic challenges, regulatory involvement and pricing pressures; the scope, validity and enforceability of our intellectual property rights in general and the impact on us of patents and other intellectual property rights of third parties; our ability to generate revenue from product sales in the U.S. directly or through an assignee of our U.S. co-exclusive license rights in the event Biogen does not obtain an exclusive license from us in the U.S.; and the sufficiency of the company's cash resources. Certain of these and other risk factors are identified and described in detail in certain of our filings with the United States Securities and Exchange Commission, including our Annual Report on Form 20-F for the year ended December 31, 2017. We are providing this information as of the date of this release and do not undertake any obligation to update any forward-looking statements contained in this press release as a result of new information, future events or otherwise.

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