ISR Immune System Regulation : Holding Annual Report and Consolidated Accounts 2021 (eng) (PDF)

Annual Report &

Consolidated Accounts

2021

ISR Immune System

Regulation Holding AB (publ)

559026-7828

ISR Immune System Regulation Holding AB (publ) | 03

Annual Report &

Consolidated Accounts

Table of Contents

About ISR	05
CEO letter	07
Therapeutic areas in focus	08
Overview of therapeutic areas	11
Market overview	12
Intellectual property rights	16
Members of the Board and Management	18
Ownership	22
Board of Directors' Report	23
Significant events during the year	23
Liquidity situation and financing	24
Significant events after the end of the financial year	25
Operational and industry-related risk	26
Income statement - consolidated	31
Balance sheet - consolidated	32
Cash flow statement - consolidated	34
Income statement - parent company	35
Balance sheet - parent company	36
Cash flow statement - parent company	38
Notes	39
Signatures	46
Auditors' report	48

04 | ISR Immune System Regulation Holding AB (publ)

Årsredovisning och koncernredovisning

Styrelsen och verkställande direktören för

ISR Immune System Regulation Holding AB (publ) Org nr 559026-7828 får härmed avge Årsredovisning och koncernredovisning för räkenskapsåret 2021-01-01 - 2021-12-31

Annual Report & Consolidated Accounts 2021 | 05

About ISR

Immune System Regulation Holding AB is a spin-off from Karolinska Institutet that conducts research and development in the Life science sector to develop immunostimulatory drugs for the commercial market.

THE COMPANY'S CORE competence and business concept have a focus on developing the drugs of the future within immunology, with a focus on prevention and treatment of chronic infectious diseases, autoimmune and degenerative diseases, and specific cancers. ISR conducts research and development from pre-clinical phase to clinical phase, where the most advanced development project is our HIV project, which currently is in phase II clinical trial.

The project in HIV, based on the technology for a previously approved drug in another indication, provides the opportunity to shorten the time to market approval significantly, as well as to ensure commercial collaborations in a way that is very attractive to the company and its share- holders.

The majority of the antiviral drugs in HIV treatment today

have the side effect to suppress activity in the immune system. ISR´ immunostimulatory drug candidates, instead focus on strengthening the immune system to create effective treatment - or a prevention - with more effective vaccines, within our focus areas for immunology.

The group includes the four subsidiaries ISR Immune System Regulation AB, ISR Oncology AB, ISR HBV Technology AB and ISR Vaccine AB.

The company values are based on the equal value of all people. No discrimination may take place based on gender, ethnicity, beliefs, disabilities, sexual orientation or age. The company does not conduct notifiable activities in accordance with the Environmental Code.

The company is headquartered in Solna and is listed on the Nasdaq First North Growth Market.

Fastställelseintyg

UNDERTECKNAD VERKSTÄLLANDE direktör i ISR Immune System Regulation Holding AB (publ) intygar härmed dels att denna kopia av årsredovisningen överensstämmer med originalet, dels att resultat- och balansräkningen samt koncernresultat- och koncernbalansräkningen fastställts på ordinarie årsstämma 2022-05-03.Stämman beslöt också att godkänna styrelsens förslag till resultatdisposition i moderföretaget

STOCKHOLM 2022-05-03

Ola Winqvist

Verkställande direktör

ISR Immune System

Regulation Holding AB (Publ)

org nr: 559026-7828

ISR Vaccine AB		ISR Immune System		ISR Oncology AB		ISR HBV
org nr: 559329-6147		Regulation AB		org nr: 559157-3760		Technology AB
		org nr: 556736-8690				org nr: 559195-0935
Respiratory borne Vaccine,		Immunorelated HIV treatment	Immuno-Oncology		Virus Immunology
Covid, Influenca

06 | ISR Immune System Regulation Holding AB (publ)	Annual Report & Consolidated Accounts 2021 | 07

CEO Letter

ISR is an innovation-driven research company focused on the immune system, originating from Karolinska In- stitutet in Stockholm. The company develops immunos- timulatory drugs to treat chronic infectious diseases and cancer by affecting the body's own immune system.

IT´S BEEN a busy year: ISR has accelerated the level of activity over the past 12-months, in strategic collaborations for both clinical development programmes, product supply, and a greatly intensified effort in partnering for future commercial markets. This places new and expanded demands on the organisation and structure in terms of skills resour- ces, which has led to the recruitment of several new staff or consultants to achieve successful production, development, and commercialisation.

The Company is conducting development for drugs within in two platform programmes: with immunostimula- tory peptides (Immunorhelins) that can activate GnRH receptors when administered to animal or human patients or cells in the initial indication of HIV and immunostimulatory macrolides, (Immunolides), where the initial indications will be certain solid tumors in cancer, and hepatitis B (HBV).

In addition, ISR, now has a protein-based vaccine for nasal inhalation with initial indication of SARS-CoV-2.

The rationale is simple: If we want to generate a sustai- nable, long-lasting immune response, we want to vaccinate locally. When we get a jab in the arm, we are inducing immunity on a systemic, body-wide scale where our antibodies and T-cells will distribute themselves around the blood vessels.

While that might sound good, this approach is "sub-opti- mal" in SARS-CoV-2 because the immune cells are "distrac- ted" and not focused on a location where the virus enters the body.

A nasal vaccine, provides a start of the immunity response in the nose and upper respiratory tract and potentially the lungs, eliciting a local antibody response and T-cell response.

Within HIV, the Company is in the final stages of enrolment for its Phase II efficacy and safety trial, ISR 048, which is expected to be fully enrolled by the second half of 2022.

Since the inception of the Covid-19 pandemic, the

Company has increased its focus on the development of ISR 052, which is a dry powder-based nasal self-administered vaccine against Covid-19, based on the entire spike extracellular protein chain of the virus. ISR is now in the preparatory phase for the start of a Phase I/II trial in Bang- ladesh for ISR 052 in 2022.

Within cancer, ISR has in preclinical phase shown increased efficacy of ISR 050 in combination with checkpoint inhibitors in two animal models. In animal models for malignant melanoma and colon cancer where ISR 050 is combined with check-point inhibitors, the response is doubled compared to check-point blockade as the sole treatment. This demonstrates a potentiating effect when the innate immune system is also engaged with ISR 050 in the response against cancer cells.

The Company is now proceeding with toxicology studies, whereafter which ISR will decide on a pathway for further clinical development based on the data produced.

ISR is now working to make strategic and tactical decisions on clinical development and partnering for future commercial markets. Based on the preclinical data produced in combination with strategic choices based on medical needs, geographic focus, and regulatory and commercial conditions, the way forward will be determined.

1. WOULD LIKE to extend my sincerest thanks to the ISR team in regards to their hard work during the year, and to our shareholders for their trust.

Ola Winqvist

CEO ISR Holding AB (publ)

08 | ISR Immune System Regulation Holding AB (publ)

Therapeutic Areas in focus

Annual Report & Consolidated Accounts 2021 | 09

HIV

COVID-19

HIV

Hepatitis B

Oncology

HIV, HUMAN IMMUNODEFICIENCY VIRUS, is virus that destroys the white blood cells CD4+T-cells(helper T-cells)and so weakens the body's resistance to infections such as pneumocystis carinii (PCP), tuberculosis and AIDS-relatedcancers.

When an infected person has fewer than 200 helper T-cells left, the infection is instead called AIDS, Acquired Immunodeficiency Syndrome.

Over the past decade, the world has witnessed an unprecedented increase in the use of antiretroviral therapy (ART), which has saved the lives of tens of millions of people living with HIV/AIDS.

At the end of 2020, 27.5 million HIV-infected people were receiving ART globally, out of an estimated 37.7 million people living with HIV.

Increased use of HIV medicines has been accompanied by the emergence of HIV drug resistance, the levels of which have steadily increased in recent years.

Based on surveys conducted in 10 countries in sub-Sa- haran Africa (2012-2020), nearly one half of infants newly diagnosed with HIV have NNRTI resistant virus before initiating treatment.

Acquired HIV drug resistance

Viral load suppression - the goal of HIV treatment - is the prevention of HIV drug resistance.

When viral load suppression is achieved and maintained, drug-resistant HIV is less likely to emerge.

In 14 nationally representative surveys implemented by WHO between 2015 and 2020, the level of viral load suppression among adults receiving ART was generally high. The pooled results for viral load suppression in Africa were 94% (95% CI 92-96%) among adults receiving first-line ART and 84% (95% CI 79-88%) among adults receiving second-line ART. In the Americas, the pooled results for viral load suppression were 81% (95% CI 75-87%) among adults

COVID-19

COVID-19IS AN infectious disease caused by the SARS- CoV-2 virus. Most people who become ill from Covid-19 will experience mild to moderate symptoms and recover with self-medication and time.

However, some become seriously ill, and require significant medical attention that may be insufficient for their survival or may experience long term adverse effects "long COVID". The virus spreads from an infected person's mouth or nose in small liquid particles when they cough, sneeze, speak, sing, or breathe. These particles range from larger respiratory droplets to smaller aerosols.

Although most SARS-CoV-2 vaccines that have been approved, have a mitigating effect on the spread of the disease, and a reduction in the severity of illness. Several of these vaccines have shown a lower protective effect against Delta and the Omicron BA.1 and a genetically distinct sub- variant of Omicron (or BA.2).

All so far show a gradual decline in immune response.

Vaccines based on an amino acid sequence, are at most risk of losing their protective effect.

The currently available intramuscularly injected vaccines against Covid-19 require the assurance of an unbroken cold chain, which imposes limitations on the ability to offer vaccines in parts of the world. Frozen and cold-chains consumes large amounts of power, and all injected products produce hazardous medical waste.

ISR 052 is a covalent vaccine, in dry powder form for nasal self-administration. While other Covid-19 vaccines rely on nucleotide sequences, that encode portions of the virus spike protein. ISR has chosen to include the entire extracel- lular portion of the correctly formatted spike protein - with the ambition to reduce the risk of, and/or extend the time until, mutations of the virus cause resistance to the vaccine.

Vaccines, in general, consist of a combination of the viral protein antigen which together with an immunostimulato- ry adjuvant, stimulate the immune system to form antigen -specific antibodies and elicit robust T-cell responses.

The ISR 052 vaccine, consisting of spike protein and an adjuvant, poly-ICLC. The spike protein is recognised by the immune system which together with the adjuvant provides an interferon alfa activation - exactly what is sought for the normal response in the course of the infection. This by applying the vaccine into the nasal mucosa to get the immune response in the mucosal lining activated.

The pre-clinical studies, ISR 052 has shown a rapid and strong antibody response, T-cell response in mucosa, in lung as well as in blood.

In a so-called challenge study, when vaccinated trans- genic mice are exposed to a lethal dose of SARS-CoV-2, two nasal vaccine doses provide protection, measured by animal survival.

The vaccine candidate has undergone a thorough toxicology program and has shown no evidence of adverse effects.

ISR is now, fast moving forward into clinical trials in hu- mans, with healthy volunteers who are non-vaccinated and have no prior SARS-CoV-2 infection. This Phase I/II study in key centers in Bangladesh will assess safety, tolerability, and immunogenicity in 120 healthy volunteers aged 18 to 59.

If successful, the Phase I/II safety study will be followed by trials determining (showing) efficacy and safety, that will form the basis for registration of ISR 052, as a needle-free and self-inhaled dry powder vaccine for effective vaccination in Covid-19, both primary vaccination in regions of low vaccination rate, and most importantly now as a booster when antibody levels decline after primary vaccination.

The nasal inhaled vaccine eliminates the current need for personnel with skilled expertise in intramuscular injections and eliminates the requirement for an unbroken cold chain in distribution and storage. An additional benefit is that the ISR 052 greatly reduces hazardous waste management by eliminating the need for needles to inject the vaccine.

HIV drug resistance is caused by changes in the genetic structure of HIV that affect the ability of medicines to block the replication of the virus.

All antiretroviral drugs, including those from newer drug classes, are at risk of becoming partially or fully inactive due to the emergence of drug-resistant virus.

HIV drug resistance jeopardizes the efficacy of medicines used to treat HIV, resulting in increased numbers of HIV infections and HIV-associated morbidity and mortality.

Scope of the problem

Surveillance of HIV drug resistance provides countries with evidence that can be used to optimize patient and population -level treatment outcomes.

WHO's Report on HIV drug resistance 2021 shows substantial progress in the development of national action plans to prevent, monitor and respond to HIV drug resistance and the implementation of nationally representative surveys in low- and middle-income countries.

As of 2021, 64% of countries with a high burden of HIV have developed national action plans.

Between 2004 and 2021, 66 countries implemented surveys of HIV drug resistance using WHO-recommended standard methods, and 34 countries plan to conduct HIV drug resistance surveys within the next two years.

Pre-treatment HIV drug resistance

Drug resistance can be found in some people before they begin treatment. This resistance can either be transmitted at the time of infection or acquired during previous treatments, for example in women given antiretroviral medicine to prevent mother-to-child transmission of HIV.

Up to 10% of adults starting HIV treatment may experience drug resistance to the NNRTI (Non-nucleoside reverse transcriptase inhibitors) at the core of usual ART treatment regimens.

Pre-treatment NNRTI resistance is up to three- times more common in people with previous exposure to antiretroviral drugs. The prevalence of drug-resistant HIV is high in children under 18 months of age and newly diagnosed with HIV.

receiving first-line ART and 70% (95% CI 67-72%) among adults receiving second-line ART.

ISR in HIV

Despite treatment with potent medicines and even when adherence to treatment is supported, some HIV drug resistance is expected to emerge.

Surveillance of acquired HIV drug resistance in populations receiving ART provides valuable information for the optimal selection and management of ART regimens. Among populations failing NNRTI-based ART, the levels of resistance to commonly used NNRTI ranged from 50% to 97%.

The high levels of HIV drug resistance to NNRTI among individuals with treatment failure emphasize the need to scale up viral load testing and enhanced adherence counselling, and promptly switch individuals with treatment failure. In addition, to work to reduce the reservoir level of HIV even further hence the approach of ISR.

ISR 048

ISR 048 involves a new and patented treatment principle for HIV-infected patients, whereby helper T cells carrying HIV are stimulated with ISR 048 so that HIV peptides appear to CD8+T-cells (killer T-cells), which thereby eliminate the HIV-infected helper T-cells.

ISR 048 consists of a GnRH agonist that has been on the market since the early 1980's for the treatment of prostate cancer, endometriosis, and precocious puberty in children, among other conditions.