Alliance Pharma Regulatory News (APH)

3 Nov 2005 07:02

Alliance Pharma PLC03 November 2005 FOR IMMEDIATE RELEASE 3 NOVEMBER 2005 ALLIANCE PHARMA PLC ("Alliance Pharma" or "the Company") Interim Results for the six month period ended 31 Augst 2005 Alliance Pharma plc (AIM: APH), an emerging speciality pharmaceutical company,is pleased to announce its interim results for the half year ended 31 August2005. Financial Highlights • Sales up 35.5% to £7.5m • Profit after tax, on an IFRS basis was £385K • Gross margin improvement of 53.6% • Operating cashflow remains strong at £1.6m • Basic earnings per share of 0.26p • Financial year changing to December 31st - commencing December 2005 Operational Highlights • Phase III clinical trials on Isprelor(TM), (induction of labour) - trials expected to complete the middle of 2006 • Phase III trials on Posidorm(TM), (melatonin for sleeping disorders), - on track for introduction in 2007 • Selective acquisition of reputable prescription brands under discussion Commenting on the results, Michael Gatenby, Alliance Pharma's Chairman, said:"Our interim results for the 6 months to August 2005 represent another period ofgood, on-target, performance from the current business with solid progress alsobeing made on the development projects. Significant progress has also been madein building and strengthening the managerial team...... We look forward to thenext half year with continued optimism." For further information: Alliance Pharma plc + 44 (0) 1249 466966John Dawson, Chief ExecutiveMaddy Scott, Finance Directorwww.alliancepharma.co.uk Buchanan Communications + 44 (0) 20 7466 5000Mark Court/Lisa Baderoon Notes to editors About Alliance PharmaAlliance Pharma, founded in 1996, is an AIM listed emerging specialitypharmaceutical company based in Chippenham, Wiltshire, UK. The company has astrong track record of acquiring the rights to established niche brands andowns, or shares, the rights to 30 branded pharmaceutical products and continuesto explore opportunities to expand the range. Alliance Pharma's products are prescribed in the treatment of a wide range ofconditions and include brands used in periodontitis (a serious gum disease), theprevention of heart disease, in Parkinson's disease, in nutrition, in nasalinfections, in the treatment of dermatological conditions and in childbirth.Alliance Pharma's sales are mainly prescription driven. Its products aredistributed to hospitals directly and to pharmaceutical wholesalers whichservice both hospital and retail pharmacies with their prescriptionrequirements. Alliance Pharma is also developing novel products for sleep disorders and theinduction of labour. Alliance Pharma joined the AIM market of the London Stock Exchange in December2003 and trades under the symbol APH. Chairman's statement Our Interim Results for the 6 months to August 2005 represent another period ofgood, on-target, performance from the current business with solid progress alsobeing made on the development projects. Significant progress has also been madein building and strengthening the managerial team. Sales were £7.5m having grown by 35.5%, compared to the same period last year,5.8% being like for like and 29.7% arising from the acquisitions of Periostatand Forceval in November 2004. Profit after tax, on an IFRS basis was £385k corresponding to £206k for the sameperiod last year, representing an increase of 86.7%. This was after P&L costsfor the pre-marketing activities on the development projects of £301k.Development costs, per se, of £724k were capitalised, bringing the totalexpenditure on development projects to £1,025k in the period. IFRS adjustments amounted to (£113k), the most significant of which was (£115k)for the change in the fair value of interest rate swaps which provide us withinterest rate stability until 2008. This revaluation is a non-cash item whichcould move around from period to period. Excluding the IFRS adjustments, profit after tax was £498k. Looking forward tothe full year results, we expect minor phasing differences on expenses,particularly on the development projects, to reduce slightly the pro-rataaccumulation of profit compared to the first six months, but nevertheless thefull year result is expected to be within the range of market forecasts. We have taken the decision to change our financial year end to December 31stcommencing in December 2005 in order to align ourselves with most companies inour sector. This means that the period to December 2005 will contain 10 monthstrading. Trading to the end of October was on plan and therefore we expect theresult in December to be proportionate to our expectation for the full 12 monthperiod. Regarding segmental analysis, sales for our Growth Brands grew from £2.9m (atAugust 2004) to £3.6m and the Growth Brands Result grew from £1.5m to £2.0m.Nu-Seals and Symmetrel continue to perform well. Since the acquisition ofPeriostat in November 2004, great progress has been made on its integration. InApril 2004 a Head of the Dental Business Unit took office; in May a co-promotiondeal was signed with Oraldent; and by August the OralDent sales team had beenexpanded in number and trained on the technical aspects of Periostat enablingpromotion of Periostat to commence. As yet, it is thus too soon to see theimpact. In the Core Brands segment which does not receive promotional support, salesgrew from £2.7m to £4.0m, principally due to acquisition of Forceval in November2004. It was however affected by the one-off 7% price decrease imposed on salesto the UK NHS in January 2005 as part of the industry-wide renegotiation of thePPRS (Pharmaceutical Price Regulation Scheme) for the period 2005 - 2011. Whilstthis has been a bitter pill to swallow, it does provide price stability for theperiod up to 2011. Growth due to acquisitions was 27.4%. The Core Brands Resultgrew from £0.75m to £1.2m. Our Phase III clinical trials on Isprelor(TM), our intra-vaginal misoprostol forinduction of labour, opened in January with the expectation that they would befinished this year. Site set-ups were prolonged and patient recruitment has beenslower than planned. To compensate for this, the number of sites is currentlybeing expanded and the trials are now expected to complete around the middle of2006, with the introduction being delayed into 2007. Nevertheless interest inthe product is keen and an Alliance sponsored symposium on the use ofmisoprostol in obstetrics at the 6th International Scientific Meeting of theRoyal College of Obstetricians and Gynaecologists in Cairo in September was verywell attended and provoked much positive contribution during discussion. Our Phase III trials on Posidorm(TM), our medical development of melatonin forsleeping disorders, commenced in July and progress is going well with theproject remaining on track for an introduction in 2007. Posidorm is a verysubstantial market opportunity for the Company as it addresses a marketcurrently estimated at £0.5 billion but which is expected to treble in the nextdecade. Out-licensing discussions on Posidorm are ongoing. Selective acquisition of reputable prescription brands remains an essential partof our strategy for building the business base and we have several projectsunder discussion. As can be seen from the accompanying announcement we have just divested for thesum of £0.5m the rights to Uniflu, an OTC cold and 'flu preparation, to G R LaneHealth Products Ltd for the UK and various other territories. This product hadbeen acquired along with Forceval in a package of assets from the Administratorsof Unigreg Ltd in November 2004. Uniflu, which has undeveloped potential in theUK, was non-core to Alliance, although, via overseas distributors, we retain ourinternational sales of around £400k and we are pleased with the sum achieved. Michael GatenbyChairman Consolidated interim income statementFor the six months ended 31 August 2005 6 months 6 months 12 months to 31 Aug to 31 Aug to 28 Feb 2005 2004 2005 Note £ £ £ Sales revenue 4 7,545,724 5,568,333 11,826,292 Cost of sales (3,501,628) (2,658,048) (5,624,857) --------- --------- ---------- Gross profit 4,044,096 2,910,285 6,201,435 Operating expensesOther operating expenses (2,629,096) (1,801,822) (3,832,893) --------- --------- ---------- (2,629,096) (1,801,822) (3,832,893)------------------- --------- --------- ----------Operating profitPre exceptional items 1,415,000 1,108,463 2,368,542Exceptional items - (109,504) (109,504)Operating profit before finance costs 1,415,000 998,959 2,259,038----------------------- --------- --------- ---------- Finance costsInterest paid (906,300) (717,880) (1,661,487)Other finance costs (20,806) (76,689) (191,715)Change in fair value ofderivativefinancial instruments (115,263) - - --------- --------- ---------- (1,042,369) (794,569) (1,853,202) --------- --------- ---------- Profit for the period beforetaxation 372,631 204,390 405,836 Taxation 12,497 1,864 - --------- --------- ---------- Profit for the financial 5 385,128 206,254 405,836period ========= ========= ========== Earnings per shareBasic (pence) 6 0.26 0.19 0.33 ========= ========= ==========Diluted (pence) 6 0.46 0.46 0.81 ========= ========= ========== Consolidated balance sheetAt 31 August 2005 At At At 31 Aug 31 Aug 28 Feb 2005 2004 2005 £ £ £ AssetsNon-current assetsGoodwill 1,128,973 1,128,740 1,128,973Other intangible fixed assets 27,692,227 17,033,810 26,966,042Property, plant and equipment 299,048 201,352 306,573Deferred tax assets 12,497 1,864 - ---------- --------- ---------- 29,132,745 18,365,766 28,401,588 ---------- --------- ---------- Current assetsInventories 2,351,889 1,847,401 2,469,363Trade and other receivables 3,377,500 1,752,514 2,149,613Cash and cash equivalents 267,853 3,679,696 1,367,271 ---------- --------- ---------- 5,997,242 7,279,611 5,986,247 ---------- --------- ---------- Total assets 35,129,987 25,645,377 34,387,835 ========== ========= ========== EquityOrdinary Share capital 1,473,559 1,107,939 1,473,559Share premium 9,030,959 5,221,761 9,030,959Fair value of share options 22,610 2,119 12,423Reserves (329,349) (329,349) (329,349)Retained earnings (2,978,159) (3,562,869) (3,363,286) ---------- --------- ---------- Total equity 7,219,620 2,439,601 6,824,306 ---------- --------- ---------- LiabilitiesNon-currentLong term financial liabilities 12,789,901 10,375,627 14,293,913Convertible debt 7,153,229 7,111,617 7,132,423Other liabilities 163,889 200,000 177,778 ---------- --------- ---------- 20,107,019 17,687,244 21,604,114 ---------- --------- ----------CurrentFinancial liabilities 3,016,827 1,925,101 2,551,721Derivative financial instruments 115,263 - -Trade and other payables andprovisions 4,671,258 3,593,431 3,407,694 ---------- --------- ---------- 7,803,348 5,518,532 5,959,415 ---------- --------- ---------- Total liabilities 27,910,367 23,205,776 27,563,529 ---------- --------- ---------- Total equity and liabilities 35,129,987 25,645,377 34,387,835 ========== ========= ========== Consolidated interim statement of cash flowsFor the six months ended 31 August 2005 6 months 6 months 12 months to 31 Aug to 31 Aug to 28 Feb 2005 2004 2005 £ £ £ Operating activitiesResult for the year before taxand finance costs 1,415,000 998,959 2,259,038Depreciation of property,plant and equipment 65,526 43,691 115,229Change in inventories 117,474 (107,885) (729,847)Change in trade and other (1,227,887) 238,702 (165,521)receivablesChange in trade and other 1,279,892 (233,611) 93,882payablesTax paid (1,420) - (12,747)Share options charges 10,187 2,119 12,423 ---------- --------- ---------- Cash flows from operating 1,658,772 941,975 1,572,457activities ========== ========= ========== Investing activitiesInterest received 51,621 101,703 161,726Interest paid and similar (956,719) (543,341) (1,820,209)chargesOther finance charges paid (1,202) (1,607) (3,004)Payment of deferred (13,889) - (128,399)considerationPurchase of subsidiary - (112,401) -undertakingFinance issue costs paid - (53,549) -Development costs capitalised (724,630) - (858,499)Purchase of tangible assets (58,001) (69,190) (245,948)Purchase of other intangible (1,555) (170,572) (9,248,913)assets ---------- --------- ---------- Net cash used in investing (1,704,375) (848,957) (12,143,246)activities ---------- --------- ---------- Financing activitiesNet proceeds from the issue of - - 4,181,941sharesReceipt from borrowings - - 6,875,000Repayment of borrowings (1,115,514) (978,526) (3,763,859)Finance lease payments (10,378) (13,992) (26,031) ---------- --------- ---------- Net cash used in financing (1,125,892) (992,518) 7,267,051activities ---------- --------- ---------- Net movement in cash andcash equivalents (1,171,495) (899,500) (3,303,738) Cash and cash equivalentsat 1 March 2005 1,275,459 4,579,197 4,579,197 ---------- --------- ---------- Cash and cash equivalentsat 31 August 2005 103,964 3,679,697 1,275,459 ========== ========= ========== Consolidated interim statement of changes in equityAt 31 August 2005 Equity attributable to equity holders of Alliance Pharma plc Shares Share Share to be Reserves Retained Total Capital Premium issued earnings Equity £ £ £ £ £ £ Balance1 March 2004 1,107,939 5,214,638 - (329,349) (3,769,123) 2,224,105 Costs of share issuereclaimed - 7,123 - - - 7,123Employeebenefits - - 2,119 - - 2,119Profit for theperiod - - - - 206,254 206,254 ------- -------- ------- ------- -------- -------- Balance31 August 2004 1,107,939 5,221,761 2,119 (329,349) (3,562,869) 2,439,601 ------- -------- ------- ------- -------- -------- Balance1 September2004 1,107,939 5,221,761 2,119 (329,349) (3,562,869) 2,439,601 Issue ofshares 365,620 - - - - 365,620Premium onshares issued - 3,809,198 - - - 3,809,198Employeebenefits - - 10,304 - - 10,304Profit for theperiod - - - - 199,582 199,582 ------- -------- ------- ------- -------- -------- Balance28 February2005 1,473,559 9,030,959 12,423 (329,349) (3,363,287) 6,824,305 (1) ------- -------- ------- ------- -------- -------- Balance1 March 2005 1,473,559 9,030,959 12,423 (329,349) (3,363,287) 6,824,305 Employeebenefits - - 10,187 - - 10,187Profit for theperiod - - - - 385,128 385,128 ------- -------- ------- ------- -------- -------- Balance31 August 2005 1,473,559 9,030,959 22,610 (329,349) (2,978,159) 7,219,620 - ------- -------- ------- ------- -------- -------- Notes to the interim reportFor the six months ended 31 August 2005 1. Nature of operations Alliance Pharma plc and its subsidiaries' ("Alliance" or "The Group") principalactivities comprise the development, marketing and distribution ofpharmaceutical products. The principal activity of the Company is to act as aholding company. 2. General information The information for the year ended 28 February 2005 does not constitutestatutory accounts as defined in section 240 of the Companies Act 1985. A copyof the statutory accounts for that year, prepared under UK GAAP, has beendelivered to the Registrar of Companies. The auditors' report on those accountswas unqualified. The interim financial report for the six month period ended 31 August 2005(including comparatives for the six months ended 31 August 2004) were approvedby the board of directors on 3 November 2005. 3. Accounting policies The interim financial report has been prepared in accordance with InternationalAccounting Standard 34 Interim Financial Reporting and the requirements ofInternational Financial Reporting Standard 1 First-time adoption ofInternational Financial Reporting Standards relevant to interim reports. The same accounting policies and methods of computation are followed in theinterim financial report as published by the company in the "additionalunaudited information" contained within its February 2005 Annual Report, whichis available on the company's website on www.alliancepharma.co.uk. 4. Segmental information The business is split between those brands which are invested in for growth,core brands which have no promotional investment and development projects whichare non-revenue-generating. Growth Core Development Central & Total Brands Brands Projects Unallocated Group £ £ £ £ £For the halfyear ended 31 August2005 Segmentrevenue 3,586,822 3,958,904 - - 7,545,725 - 1 ======== ======== ========== ========= ========Segmentresult 2,019,031 1,202,794 (301,009) (1,505,817) 1,415,000 - - ======== ======== ========== ========= ======== For thehalf yearended 31August2004 Segmentrevenue 2,882,919 2,685,414 - - 5,568,333 - 0 ======== ======== ========== ========= ======== Segmentresult 1,515,295 753,131 - (1,159,963) 1,108,463 - - ======== ======== ========== ========= ======== For theyear ended28 February2005 Segmentrevenue 6,072,302 5,753,990 - - 11,826,292 - 0 ======== ======== ========== ========= ======== Segment ======== ======== ========== ========= =========result 3,454,484 1,421,245 (51,103) (2,456,084) 2,368,542 - (0) ======== ======== ========== ========= ========= 5. Transition to International Financial Reporting Standards The transition from UK GAAP to IFRS has been made in accordance with IFRS 1(First Time Adoption of International Financial Reporting Standards). IFRS 1, permits those companies adopting IFRS for the first time to take someexemptions from the full requirements of IFRS. Alliance Pharma plc has taken thefollowing exemptions: • business combinations prior to the transition date (1 March 2004) have not been restated onto an IFRS basis. • The comparative information presented in the Group's first full set of IFRS financial statements need not comply with IAS 32 and IAS 39. Therefore the group has: (a) applied UK GAAP in the comparative information to financial instrumentswithin the scope of IAS 32 and IAS 39. (b) the main adjustments that would make the opening balance sheet comply withIAS 32 and IAS 39 are: 1) that the interest rate swaps are considered a derivative financialinstrument, under IAS 39, 'financial instruments; recognition and measurement',and would be originally recognised in the balance sheet at cost and thenre-measured at subsequent reporting dates to fair value. Changes in the fairvalue of derivatives financial instruments are recorded in the income statement.Under UK GAAP these financial instruments are recorded at cost. The fair valueof the interest rate swap at 1 March 2005, the beginning of the period in whichIAS 32 and IAS 39 has been applied, was £3,000. This amount is not consideredmaterial to make any adjustment for a change in accounting policy as required byIAS 8; and 2) under UK GAAP the convertible loan stock is accounted for withincreditors falling due within one year and creditors falling due after one year.In accordance with IAS 32, financial instruments; disclosure and presentation,the convertible loan stock is considered a compound financial instrument. Thecomponents of the financial instrument would have been separated and theliability recorded within creditors and equity element within shareholdersfunds. The fair value of the equity element of all loan stock currently in issue wasnil at the date of issue. 5. Transition to International Financial Reporting Standards (continued) The reconciliation of the Group's equity previously reported under UK GAAP toits equity under IFRSs may be summarised as follows: As at As at As at As at 31 Aug 31 Aug 28 Feb 28 Feb 2005 2004 2005 2004 £ £ £ £ **EquityEquity under UK GAAPpreviously reported 7,322,386 1,839,990 6,824,306 2,224,106Amortisation * - 597,747 - - -------- -------- -------- --------Revised equity under UKGAAP 7,322,386 2,437,737 6,824,306 2,224,106Interest rate swaps - fairvalue adjustment (115,263) - - -Employee benefits reserve 22,610 2,119 12,423 -Deferred tax adjustment 12,497 1,864 - -Employee benefits expense (22,610) (2,119) (12,423) - -------- -------- -------- --------Equity under IFRS 7,219,620 2,439,601 6,824,306 2,224,106 ======== ======== ======== ======== Profit and loss previously reported under UK GAAP can be reconciled to IFRS asfollows: 6 months 6 months 12 months to to to 31 Aug 31 Aug 28 Feb 2005 2004 2005 £ £ £ **Income statement(Loss)/profit for period underUK GAAP previously reported 498,081 (391,238) 418,259Amortisation - 597,747 - ---------- --------- ---------- Revised (loss)/profit forperiod under UK GAAP 498,081 206,509 418,259Interest-rate swaps - fair valueadjustment (115,263) - -Employee benefits expense (10,187) (2,119) (12,423)Deferred tax movement 12,497 1,864 - ---------- --------- ---------- Profit for period under IFRS 385,128 206,254 405,836 ========== ========= ========== * Amortisation of goodwill and intangible assets previously reported in the 31August 2004 interim financial report has been reversed to reflect a change inaccounting estimate that was applied in the annual report for the full year to28 February 2005. ** Reconciliations included above relating to the period ending 31 August 2005have been given for information purposes only and do not relate to previouslyreported numbers. 6. Earnings per share The basic earnings per share is based on equity profits of £385,128 (31 August2004: £206,254; 28 February2005: £405,836) and 147,355,891 (31 August 2004:110,793,903; 28 February 2005: 123,815,891) ordinary shares of 1p each, beingthe weighted average number of shares in issue in the period. An adjusted earnings per share has been disclosed in order to show performanceundistorted by exceptional items and one-off finance charges. The adjustedearnings per share is based on equity earnings of £385,128 (31 August 2004:£315,758; 28 February 2005: £633,067). 6 months 6 months 12 months to to to 31 Aug 31 Aug 28 Feb 2005 2004 2005 £ £ £Reconciliation of dilutedearningsEquity earnings 385,128 206,254 405,836Interest saved on convertibleloan stock 300,000 300,000 600,000 ---------- --------- ----------Diluted earnings 685,128 506,254 1,005,836 ========== ========= ========== Reconciliation of adjustedearningsEquity earnings 385,128 206,254 405,836Aborted acquisition costs - 109,504 109,504Other finance costs - - 117,727 ---------- --------- ----------Adjusted earnings 385,128 315,758 633,067 ========== ========= ========== Reconciliation of adjusteddiluted earningsEquity earnings 385,128 206,254 405,836Adjustments to diluted earnings 300,000 300,000 600,000Adjustments to adjusted - 109,504 227,231earnings ---------- --------- ---------- Adjusted diluted earnings 685,128 615,758 1,233,067 ========== ========= ========== Reconciliation of ordinarysharesBasic number of ordinary shares 147,355,891 110,793,903 123,815,981Conversion of convertible debt 340,630 338,648 339,639Exercise of options - - 204,686 ---------- --------- ---------- Diluted number of ordinary 147,696,521 111,132,551 124,360,306shares ========== ========= ========== Earnings per shareBasic (pence) 0.26 0.19 0.33 ========== ========= ========== Adjusted (pence) 0.26 0.28 0.51 ========== ========= ========== Diluted (pence) 0.46 0.46 0.81 ========== ========= ========== Adjusted diluted (pence) 0.46 0.55 0.99 ========== ========= ========== This information is provided by RNS The company news service from the London Stock Exchange