London, UK, 24 August 2011 - Ark Therapeutics Group plc today announces its interim results for the six months ended 30 June 2011.
· Completion of the disposal of the Group's woundcare business for up to £2.7 million
· Dr David Bloxham appointed as a Non-Executive Director
· Russell Banks appointed as Chief Financial Officer
· Key US renin-angiotensin system patents granted triggering significant milestone payments to Ark under the licence agreement with Boehringer Ingelheim
· Ark receives €0.6 million Finnish grants for development of lentiviral production platform using baculoviruses and validation of its GMP3 manufacturing facility
· Ark led consortium wins €5.3 million EU Framework Programme 7 Grant
· €3.0m working capital loan negotiated in Finland, to be accessed as manufacturing contracts secured
Martyn Williams, CEO of Ark, commented:
"We are pleased to report on a period of real progress in the Company during which we have not deviated from our previously expressed mantra - focus, realism and results. By focusing on our core assets and capabilities and maintaining a realistic approach to managing costs and deploying resources, we have begun to deliver results across the business. The sale of the woundcare business, the late stage discussions with a number of manufacturing partners, the triggering of the milestone payments from Boehringer Ingelheim and the award of substantial research grant funding all reflect the developing strength and momentum now being generated in the Company."
For further information please contact:
Ark Therapeutics Group plc
Tel: + 44 (0)20 7388 7722
Martyn Williams, CEO
Iain Ross, Chairman
Tel: +44 (0)20 7831 3113
Ark Therapeutics Group plc
Ark Therapeutics Group plc is a specialist healthcare group (the "Group") addressing high value areas of unmet medical need within vascular disease and cancer. These are large and growing markets, where opportunities exist for effective new products to generate significant revenues.
Ark has an early stage pipeline emanating from collaborations with University College, London and the AI Virtanen Institute in Kuopio, Finland, the development of which it intends to progress in collaboration with pharmaceutical and biotech partners.
In addition Ark has the ability to off-set a proportion of its R&D costs and to generate sustainable revenues through the exploitation of its proprietary technology platform, process development, scale-up and manufacturing capabilities on behalf of third parties.
Ark has its origins in businesses established in the mid-1990s by Professor John Martin and Mr Stephen Barker of University College London and Professor Seppo Ylä-Herttuala of the AI Virtanen Institute at the University of Kuopio, Finland, all of whom remain consultants on the Company's research and development programmes.
Ark's shares were first listed on the London Stock Exchange in March 2004 (AKT.L).
This announcement includes "forward-looking statements" which include all statements other than statements of historical facts, including, without limitation, those regarding the Group's financial position, business strategy, plans and objectives of management for future operations (including development plans and objectives relating to the Group's products and services), and any statements preceded by, followed by or that include forward-looking terminology such as the words "targets", "believes", "estimates", "expects", "aims", "intends", "will", "can", "may", "anticipates", "would", "should", "could" or similar expressions or the negative thereof. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors beyond the Group's control that could cause the actual results, performance or achievements of the Group to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding the Group's present and future business strategies and the environment in which the Group will operate in the future. Among the important factors that could cause the Group's actual results, performance or achievements to differ materially from those in forward-looking statements include those relating to Ark's funding requirements, regulatory approvals, clinical trials, reliance on third parties, intellectual property, key personnel and other factors. These forward-looking statements speak only as at the date of this announcement. The Group expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained in this announcement to reflect any change in the Group's expectations with regard thereto or any change in events, conditions or circumstances on which any such statements are based. As a result of these factors, readers are cautioned not to rely on any forward-looking statement.
INTERIM MANAGEMENT REPORT
Chairman and Chief Executive's Review
We are pleased to report on a period of real progress in the Company in the first half of this year, following the strategic review and restructuring which took place in 2010. In the 2010 Annual Report to shareholders we emphasised that our mantra going forward would be Focus, Realism and Results. Accordingly, during the period:
· We have focused on developing and monetising our core assets namely our therapeutic development programmes, intellectual property base and our state of the art viral manufacturing assets.
· We have taken a realistic and pragmatic approach to a reduction in our overall cost base and deployment of key resources.
· We have achieved results on all fronts, both technical and commercial, but in particular we have generated significant income during the period through the sale of our woundcare business. In the period since the end of June substantial revenues and other income have been generated from licence agreements and grant awards.
"Enhancing our financial position and building sustainable value through the first half of the year"
In February we announced the sale of the woundcare business to Crawford Healthcare Ltd, delivering on the first of the short-term objectives we have identified and providing further cash to enable the Company to meet its goals. A further objective is to exploit our live viral manufacturing expertise and we have seen a significant increase in the number of companies considering Ark as their manufacturer of choice. Certain of these discussions are now at an advanced stage.
Furthermore, we were able to announce in July that the US Patent Office had issued Notices of Allowance for two renin-angiotensin system patents, formal grant of which triggers significant milestone payments to Ark under the licence agreement between the Company and Boehringer Ingelheim. As well as validating the strength and utility of our intellectual property, these milestone payments are an important contribution to our achieving our short and medium term objectives. Further acknowledgement of the value of the Company's assets and expertise has come in the award of €0.6 million Finnish grants for the development of our lentiviral production platform using baculoviruses and for the validation of our GMP3 manufacturing facility. This was closely followed by the news that a consortium led by Ark had received notice of award of a €5.3 million EU Framework Programme 7 Grant to apply cutting edge biotechnology in the coronary stent area over four years.
In order to underpin further the business we have secured a €3m working capital loan in Finland to support the anticipated growth of our third party manufacturing business. This cash is currently restricted but will be made available as we secure additional contracts.
"Monetising our Manufacturing assets by establishing long-term manufacturing relationships"
As we have previously stated, a major focus of the Company is to exploit our world leading cGMP Biosafety level 2 certified manufacturing facilities in Kuopio Finland. In the first half of this year, we have seen a rapid increase in the number of companies approaching Ark, who are interested in using the Company's bio-manufacturing capability. These relationships take a period of time to come to fruition whilst the parties concerned consult with the Ark team on the appropriate process development and regulatory requirements of their prospective project. As a consequence at the time of writing, Ark is in discussion with a diverse range of pharma and biotech companies regarding specific process development and manufacturing contracts. A number of these discussions are at an advanced stage. Ark has also established relationships with selected relevant service providers with a view to co-marketing and referral of leads.
"Nurturing and developing our early stage product pipeline"
Neuropilin-1 Receptor Antagonists (EG014) - progress has continued on optimisation of Ark's small molecule antagonists of VEGF binding to neuropilin-1 (NRP-1), for development as anti-cancer therapeutics. The chemistry has achieved improvements in pharmacokinetics and physicochemical properties, ease and robustness of scaled synthesis and other drug-like properties. New characterisation assays have been implemented and specificity of binding to NRP-1 has been demonstrated. Structure-aided design has been assisted by X-ray crystallographic elucidation of new structures of antagonists bound to NRP-1. In vivo efficacy has been observed with different antagonists and tumour models. Academic collaborators have similarly seen functional effects of Ark's NRP-1 antagonists in their ex vivo tumour and vascular endothelial cell model systems. Ark has demonstrated that antagonism of the NRP-1 receptor brings about anti-cancer activity by three mechanisms: directly impairing tumour cell growth, inhibiting the development of new blood vessels which sustain tumours, and reducing cancer cell motility. As part of the continuing development of this programme, post-period Ark has signed an MTA with AstraZeneca who will provide access to a range of pre-clinical cancer screening models.
Refractory Angina (EG011) - this programme delivers an adenovirus encoding VEGF-D to the areas of diseased heart muscle in order to promote tissue repair through improved perfusion in patients suffering from refractory angina. An initial academic clinical study in Finland for safety and proof-of-concept is progressing well. It is envisaged that the dose-ranging part of the study will be completed during 2011. The results will be used in partnering discussions.
Peripheral Vascular Disease (EG016) - this product also uses Ark's established adenoviral platform to deliver VEGF-D and is designed to improve the outcome for people undergoing bypass procedures to overcome blockage of the main blood vessel to the lower leg. A number of patients have been recruited into an initial academic clinical study using long form VEGF-D. A regulatory submission is being prepared to change to Ark's proprietary short form VEGF-D before completing this study in 2012, the results from which will be used to form the basis of formal development programmes with partners.
Foetal Growth Restriction (FGR)(EG013) - this programme utilises Ark's adenoviral gene therapy platform to deliver a vascular growth factor to the maternal uterine artery to stimulate increased blood supply to the otherwise undernourished growth restricted foetus. Excellent proof-of-concept has been obtained in a pre-clinical model of the condition. Recently further data from this model have continued to support these conclusions of efficacy and clinical potential for the treatment. Ark is investigating ways to fund the progression of the therapy through full toxicology to initial clinical trials.
"The Ark patent portfolio has intrinsic value, which will be realised over time"
Ark continues working towards extended granted patent protection on its therapeutic products, including those that are priorities for partnering, and is preparing new patent filings in relation to its core adenoviral, gene regulation and NRP-1 antagonist programmes.
After the end of the period, we were notified that the US Patent Office had issued Notices of Allowance in respect of two renin-angiotensin patents for Boehringer Ingelheim's compound, Telmisartan, for the prevention and treatment of stroke and the prevention of myocardial infarction related heart damage. Following formal grant which took place earlier this month, significant milestone payments are now due to Ark under the licence agreement concluded in 2005 with Boehringer Ingelheim. Prosecution of the wider stroke patent continues in the USA. In Europe, last year's opposition to this patent was upheld by the European Patent Office (EPO). The Company filed an expedited appeal and, at a hearing at the end of the first half, the EPO dismissed the Company's appeal. The Company is still to receive a written decision, explaining the reasons for the refusal to allow the appeal.
Board and Management
As announced in February, David Bloxham was appointed Non-Executive Director to the Board in March. Also in March we announced that Russell Banks had joined the Company as Chief Financial Officer.
Revenues from continuing operations totalled £0.4m for the six months ended 30 June 2011 (six months ended 30 June 2010: £0.4m) arising from our contract manufacturing operations. With a number of potential manufacturing contrats in late stage discussions, we expect revenues to increase accordingly.
Expenditure on research and development for the period totalled £4.3m (six months ended 30 June 2010: £6.1m). The decrease in the period was principally due to the cessation of clinical trial activity on Cerepro®, Trinam® and Vitor™ during 2010, and the reduction in headcount and operational support expenditure as a result of the restructuring measures announced last year. We have maintained, and in some cases increased, investment in our early-stage research programmes, as we recognise their vital importance to the future of the Company.
Selling, marketing and distribution costs for the period were negligible for the period compared to £0.1m for the six months ended 30 June 2010, due to the cessation of all pre-commercial activity relating to Cerepro® in early 2010.
Other administrative expenses for the period totalled £1.8m (six months ended 30 June 2010: £2.9m) reflecting the impact of restructuring efforts made in the last 12 months, and primarily due to the reduction in headcount, and the relocation of UK operations to more appropriate premises.
Share-based compensation charge for the period was £48,000 (six months ended 30 June 2010: £85,000). This decrease again reflects the overall reduction in headcount.
Other income comprising exchange differences and income recognised from EU and Government grants for the period to 30 June 2011 totalled £0.6m, compared to net expenses of £0.9m for the six months ended 30 June 2010.
The profit recognised from the sale of the woundcare business in March 2011 amounted to £0.4m and has been disclosed under discontinued operations. The operational loss for the woundcare business for the period to 30 June 2010 was £0.3m, and for the year to 31 December 2010 was also £0.3m. Please see note 5 for more detail on this disposal.
Total net assets decreased from £26.1m at 30 June 2010 to £14.6m at 30 June 2011, principally due to the decrease in cash and cash equivalents and money market investments (£5.4m at 30 June 2011 versus £14.1m at 30 June 2010). This cash and cash equivalents balance excludes the €3m restricted cash referred to above, which is disclosed under Trade and other receivables. Property, plant and equipment at 30 June 2011 totalled £8.4m (30 June 2010: £9.9m).
Net cash outflow from operating activities for the period was £5.7m (six months ended 30 June 2010: £7.4m).
Risks and Uncertainties
There are a number of potential risks and uncertainties that could have a material impact on the Group's performance over the remaining six months of the financial year and could cause actual results to differ materially from expected and historical results. The risks which were identified and outlined in the Annual Report and Accounts 2010 in the Directors' Report on pages 26 and 27, which does not form part of this interim statement, and which include industry risk, clinical and regulatory risk, competition and intellectual property risk, and economic, financial and counterparty risk, have not changed and therefore remain relevant for the remaining six months of 2011.
Summary and Outlook
In the first six months of 2011, intensive efforts were focused on implementing the new business strategy and tangible evidence that these efforts have begun to bear fruit has been produced with the disposal of the woundcare business and, after the end of the period, the allowance of the US patents and the grants awarded to the Company.
We hope to be able to report further success in securing third party partnerships in manufacturing in the second half of 2011, taking the Company a long way towards its goal of building a viable and cash-generative manufacturing business. We also look forward to being able to report on the conclusion of discussions to secure a collaboration on one of our in-house programmes and the completion of patient recruitment into the dose-ranging part of the initial academic study for Refractory Angina (EG011).
We ended the period with £5.4m of cash reserves (excluding €3m of restricted cash) but have maintained a very strong focus on the use of cash and have continued to reduce the cost base where this has been necessary. With the milestone payments now due from Boehringer Ingelheim we believe the Company has sufficient cash to be able to deliver its short term objectives. Even as we deliver on these objectives, we continue to assess opportunities to create value both through organic growth and relevant M&A opportunities.
Iain Ross, Chairman
Martyn Williams, Chief Executive Officer
24 August 2011
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