DDDD.L Regulatory News (DDDD)

31 March 2016

4D PHARMA PLC

("4D", the "Company" or, together with its subsidiaries, the "Group")

Final Results for the year ended 31 December 2015

4D pharma plc (AIM: DDDD), a world leader in live biotherapeutics, a novel class of therapeutic using commensal bacteria, rather than chemicals or engineered biologics, as a "drug", is pleased to announce its final results for the year ended 31 December 2015.

Financial highlights for the period:

· Completed two placings to raise, in aggregate, £64.8 million (before expenses)

· cash, cash equivalents, deposits and short-term investments increased to £85.4 million (2014: £31.8 million)

· loss before tax of £10.1 million (2014: £2.4 million)

· basic loss per share of 12.6 pence (2014: 4.8 pence)

Business highlights for the period:

· commenced first trial in patients with irritable bowel syndrome

· gained approval to start trial in paediatric patients with Crohn's Disease

· initiated a research programme in conjunction with University College Cork to look at the potential effect of bacteria on conditions such as autism, depression and anxiety

· announced our first live therapeutic oncology candidate

Following the period end:

· 4D acquired Tucana Health Limited, a start-up company from University College Cork, founded to investigate the use of microbiome signatures to aid the diagnosis and treatment of diseases.

The Annual Report will be posted to shareholders and made available on the Company's website www.4dpharmaplc.com at a later date and will contain a notice of the Company's Annual General Meeting.

Duncan Peyton, Chief Executive Officer of 4D, commented: "We are delighted to release our annual results for the year, which has seen the evolution of the Group's discovery projects and research methodology. We now have 15 therapeutic programmes in development covering the areas of autoimmunity, central nervous system (CNS) disorders and cancer as well as a number of candidates progressing through clinical trials. We remain excited by the prospects for the coming period."

For further information please contact:

4D pharma plc + 44 (0)113 895 0130

Duncan Peyton (Chief Executive Officer)

Zeus Capital Limited

Dan Bate +44 (0) 161 831 1512Dominic Wilson +44 (0) 0203 829 5000

Information on 4D

www.4dpharmaplc.com

Chairman's and Chief Executive Officer's Joint Review

4D is a Group based on nearly two decades of research into bacteria that could be considered to have a profound effect on disease pathways. During 2014 the Group developed this research to build MicroRx; a discovery methodology that is able to rationally select those bacteria that have a precise and evolved therapeutic effect.

Over the last twelve months, our MicroRx methodology has allowed 4D to expand its live biotherapeutics pipeline from two discovery projects to a pipeline of 15 therapeutic programmes covering autoimmune diseases, CNS disorders and cancer. Utilising MicroRx, 4D is able to rapidly develop its programmes into the clinic, currently having two programmes in patient trials, with the expectation to initiate another three programmes over the coming twelve months.

In line with industry standard policies for research and development the Group will continue to expense the costs for this work until regulatory approval is achieved for candidates; only once this milestone is reached will the costs be capitalised.

Bacteria, drugs and the regulators

It is widely understood that bacteria within our gut, referred to as the microbiome, play a key role in the development and regulation of our immune systems. Building on this fact, it has been shown that bacteria not only play a crucial role in the regulation of diseases of the gut such as Crohn's and irritable bowel syndrome, but also potentially those immune diseases that affect other parts of the body, such as rheumatoid arthritis, asthma and multiple sclerosis.

Research into the microbiome and live biotherapeutics is an exciting area of development. There is intense interest as we begin to unravel the impact that the genes in our microbiome may have on our genes and also how the microbiome can impact the response to therapeutic regimes. The thinking within this area of research has moved swiftly from the role of bacteria in diseases of the gut to leading us towards trying to understand the link between the microbiome and diseases such as cancer and autism.

Live biotherapeutics are drugs that build on the understanding of the microbiome and how bacteria can affect disease pathways. They are a class of drugs, regulated and defined by the FDA as "a biological product that contains live organisms, such as bacteria, applicable to the prevention, treatment or cure of a disease and are not vaccines". The rationale for the regulators establishing this new class is based on the compelling scientific evidence provided by several leading academic groups, but also the advances made by companies, such as 4D, in bringing this new class of therapeutics to patients.

At 4D we develop bacteria that are isolated from healthy humans. We believe these bacteria are safe and have no toxic effects. The lack of toxicity or side effects brings a significant advantage over existing therapies for diseases such as rheumatoid arthritis, Crohn's or multiple sclerosis that are aggressive and can cause serious life-threatening conditions as a result of treatment.

In allowing 4D to take its proprietary candidates into clinical trials in patients directly, the FDA and EMA concur with our views regarding the lack of toxicity and reduced side effects of the live biotherapeutics developed by 4D. 4D continues to work with the regulatory bodies to help determine the regulatory agenda and develop live biotherapeutics in the safest and most efficient route.

From research to patients

During 2014 the challenge for 4D was: could we rationally identify bacteria that were therapeutically relevant? With the aid of the MicroRx methodology, 4D showed we could identify bacteria that had effect in pharmaceutical standard models of rheumatoid arthritis, multiple sclerosis and asthma.

The challenge in 2015 was: could 4D take the research and move this towards the clinic? Towards the end of 2015, we commenced our first trial in patients with irritable bowel syndrome and gained approval to start a trial in paediatric Crohn's disease.

We believe we are the first company to address an immune disease using live biotherapeutics delivered by an oral capsule.

In simple terms this means we have addressed the development, optimisation, manufacturing, stability, encapsulation, dosing and regulatory challenges over the last twelve months which, under normal circumstances, we believe would take the pharmaceutical industry up to six years. 4D is pioneering in its approach which aims to take a novel pure piece of research into patient trails within an 18-month timeframe. This has been a huge achievement requiring considerable effort across the organisation. 

It has also been a significant learning process. As we continue to focus and refine these processes, we believe 4D will be able to increase the efficiency in taking our research into the clinic.

New areas of research and future developments

4D chose to initially focus on immune conditions associated with the gut. It was a logical step to look at the bacteria in the gut and look for a local effect. This research gave 4D programmes in paediatric Crohn's, paediatric colitis and irritable bowel syndrome.

All the above are immune-related disorders. As we began to understand the potential of bacteria in the pathways associated with these diseases, we focused on other immune pathways using the Micro Rx methodology to rationally select bacteria that could have a therapeutic effect in diseases such as rheumatoid arthritis, asthma and multiple sclerosis.

Our research, understanding and ambition has moved on further.

In August we initiated a research programme in conjunction with University College Cork to look at the potential effect of bacteria on conditions such as autism, depression and anxiety. This research will bring together the world-leading research at UCC in the gut-brain axis with the power of the MicroRx methodology, identifying those bacteria that have a disease-modifying effect.

In late November, two publications in Science discussed the interaction of the microbiome in cancer: a paper by Sivian discussed the potential of constituents of microbiome to promote antitumor activity; and a paper by Vetizou highlighted that the patient's microbiome could play a significant role in the response to treatment by a checkpoint inhibitor.

Also in November, 4D announced its first live therapeutic oncology candidate, being the first company to do so globally. Both these programmes further demonstrate that 4D continues to lead in the research and development of live biotherapeutics into new areas and MicroRx can rapidly and efficiently build a pipeline that now covers diseases in CNS, cancer and autoimmunity.

On 9 February 2016, 4D purchased the entire issued share capital of Tucana Health Limited, a company based in Cork in Ireland. Tucana, a start-up company from University College Cork, was founded by Prof Fergus Shanahan and Prof Paul O'Toole to investigate the use of microbiome signatures to aid the diagnosis and treatment of diseases, including those targeted by 4D. Following the acquisition, 4D will continue to build on this research, investing in the platform and building further research capability based at the APC Microbiome Institute at UCC. Initially, the focus will be on work on the diagnosis and patient stratification for Irritable Bowel Syndrome. Longer term the Company will focus on building a diagnostic platform across multiple disease areas mirroring the programmes developed by MicroRx, 4D's therapeutic methodology. This work will be led by Prof Fergus Shanahan and Prof Paul O'Toole, the founders of Tucana.

Over the coming twelve months our aim is to further build and solidify our position; we will continue to develop our research and understanding of the microbiome, and expand our clinical programmes to rapidly bring safe, efficacious therapies to patients.

Financial results and finance review

Results

R&D expenses were £6.9 million for the year ended 31 December 2015 (period to 31 December 2014: £1.8 million), reflecting the increase in activity and headcount.

Administrative expenses were £3.6 million for the year ended 31 December 2015 (period to 31 December 2014: £1.7 million). The loss after tax for the year ended 31 December 2015 was £7.7 million or 12.62 pence per share (period to 31 December 2014: £2.4 million or 4.81 pence per share).

Total staff costs for the year were £1.1 million (period to 31 December 2014: £0.5 million), primarily driven by research and development through further studies using the MicroRx methodology which has identified candidates and on moving recognised candidates into the development phases.

Corporation tax reclaims on research and development equated to £2.3 million with £1.6 million relating to reclaims for the current year and £0.7 million for the prior year (period to 31 December 2014: £Nil).

Cash flow and balance sheet

The Group had net assets at 31 December 2015 of £92.7 million (period to 31 December 2014: £37.0 million) and cash, cash equivalents, short-term investments and deposits of £85.4 million (period to 31 December 2014: £31.8 million).

During the year 4D raised £64.8 million (before expenses) from existing and new shareholders. Funds were raised from two placings, the first in January 2015 to raise £34.8 million and the second in December 2015 to raise £30.0 million.

The cost of issuing new share capital for the additional placings which amounted to £976,000, has been charged against the share premium account.

During the year, the Company purchased the remaining non-controlling interest equating to 16.5% of the capital in 4D Pharma Research Limited at a cost of £0.4 million. In the period to 31 December 2014 83.5% of the capital was purchased for £1.730 million.

Treasury activities and policies

The Group manages its cash deposits prudently and invests its funds across a number of financial institutions which have investment-grade credit ratings. The deposits range from instant access to twelve-month term deposits and are regularly reviewed by the Board. Cash forecasts are updated monthly to ensure that there is sufficient cash available for the Group's foreseeable requirements. 

Foreign exchange management

The Group does not take out forward contracts against uncertain or forecast expenditure, as the timings and extent of future cash flow requirement denominated in foreign currencies are difficult to predict. Future currency needs are continually monitored and purchased when the extent and timings are known.

Group Statement of Total Comprehensive Income

For the year to 31 December 2015

The loss for the year arises from the Group's continuing operations and is attributable to the equity holders of the parent.

There were no other items of comprehensive income for the year and therefore the loss for the year is also the total comprehensive loss for the year.

The basic and diluted loss per share are the same as the effect of share options is anti-dilutive.

Group Statement of Financial Position

At 31 December 2015

Group Statement of Changes in Equity

For the year to 31 December 2015

Group Cash Flow Statement

For the Year to 31 December 2015

1. Basis of preparation

The financial information set out herein does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. The financial information for the year ended 31 December 2015 has been extracted from the Company's audited financial statements which were approved by the Board of Directors on 30 March 2016 and which, if adopted by the members at the Annual General Meeting, will be delivered to the Registrar of Companies for England and Wales.

The financial information for the period ended 31 December 2014 has been extracted from the Company's audited financial statements which were approved by the Board of Directors on 4 June 2015 and which have been delivered to the Registrar of Companies for England and Wales.

The reports of the auditor on both these financial statements were unqualified, did not include any references to any matters to which the auditors drew attention by way of emphasis without qualifying their report and did not contain a statement under Section 498(2) or Section 498(3) of the Companies Act 2006.

The information included in this preliminary announcement has been prepared on a going concern basis under the historical cost convention, and in accordance with International Financial Reporting Standards ("IFRSs") as adopted by the EU and the International Financial Reporting Interpretations Committee ("IFRIC") interpretations issued by the International Accounting Standards Board ("IASB") that are effective or issued and early adopted as at the date of this financial information and in accordance with the provisions of the Companies Act 2006.

The Company is a public limited company incorporated and domiciled in England & Wales and whose shares are quoted on AIM, a market operated by The London Stock Exchange. The Company is incorporated in England and Wales. The registered office is Third Floor, 9 Bond Court, Leeds LS1 2JZ

2. Going concern

Having prepared management forecasts and made appropriate enquiries, the Directors are satisfied that the Group has adequate resources for the foreseeable future as the Group is at the start-up stage of its business lifecycle. Accordingly they have continued to adopt the going concern basis in preparing the Group financial information.

3. Segmental reporting

An operating segment is a component of an entity that engages in business activities from which it may earn revenues and incur expenses, whose operating results are regularly reviewed by the Group's chief operating decision maker, being the chief executive officer, to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available. As at the reporting date the Group operated as a single segment.

4. Loss per share

The basic and diluted loss per share are the same as the effect of share options is anti-dilutive.

5. Share capital

5. Share capital continued

The balances classified as share capital and share premium include the total net proceeds (nominal value and share premium respectively) on issue of the Company's equity share capital, comprising 0.25 pence ordinary shares.

The Company issued in aggregate 20,000,000 ordinary shares of 0.25 pence at par value between 10 January 2014 and 18 January 2014.

The Company raised gross proceeds of £16,550,000 from a placing on 18 February 2014 through the issue of 16,550,000 new ordinary shares at an issue price of 100 pence per share. Issue costs associated with the placing totalled £503,212.

The Company raised gross proceeds of £21,500,000 from a placing on 14 July 2014 through the issue of 14,333,334 new ordinary shares at an issue price of 150 pence per share. Issue costs associated with the placing totalled £433,000.

The Company raised gross proceeds of £34,750,000 from a placing on 10 February 2015 through the issue of 8,475,610 new ordinary shares at an issue price of 410 pence per share. Issue costs associated with the placing totalled £487,000.

The Company raised gross proceeds of £30,000,000 from a placing on 11 December 2015 through the issue of 3,797,469 new ordinary shares at an issue price of 790 pence per share. Issue costs associated with the placing totalled £489,000.

6. Related party transactions

Group

During the year Aquarius Equity Partners Limited, an entity controlled by Duncan Peyton and Dr Alexander Stevenson, charged the Group £94,206 for consultancy and other office expenses (period to December 2014: £155,549) and were owed £Nil at 31 December 2015 (at 31 December 2014: £26,735).

During the year, Thomas Engelen charged the Group £9,210 for consultancy services (period to 31 December 2014: £15,015) and was owed £Nil at 31 December 2015 (31 December 2014: £Nil).

In November 2012, Thomas Engelen was issued with 6,372 nil-paid shares in 4D Pharma Research Limited. On purchase of the remaining non-controlling interest in 4D Pharma Research Limited in March 2015 by the Company, the valuation clause associated with these shares was triggered at £30 per share. This resulted in a payment from the Company to 4D Pharma Research Limited for the outstanding value on the shares of £191,160.

On 10 January 2014 a loan of £500,000 carrying an interest rate of 4% above Bank of England base rate was novated by agreement between David Norwood and Schosween 17 Limited (company registered number: 8795203) to the Company. This loan was repaid on 18 February 2014 by the Company and £5,178 interest was charged.

7. Subsequent events

On 9 February 2016, the Company purchased the entire issued share capital of Tucana Health Limited, a company based in Cork in Ireland. The consideration will be satisfied by the issue of up to 1,410,603 shares in the Company, with 410,603 shares to be issued upfront at a price of £7.55, being the average mid-market price of a 4D share for the five business days immediately preceding completion of the acquisition. The remaining consideration shares will be issued subject to the achievement of milestones. The directors recognise that this represents a potential contingent consideration in respect of the acquisition.

A fair value assessment of the acquired assets and liabilities has not yet been completed at the date of this financial information and so a full disclosure of the valuation of the acquired assets and liabilities has not been made.

8. Report and accounts

A copy of the Annual Report and Accounts will be sent to all shareholders with notice of the Annual General Meeting.