DDDD.L Regulatory News (DDDD)

This announcement contains inside information

27 APRIL 2017

4D PHARMA PLC

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

Final Results for the year ended 31 December 2016

4D pharma plc (AIM: DDDD), a pharmaceutical company focusing on the development of live biotherapeutics, is pleased to announce the final results for the Company and its subsidiaries (together "the Group") for the year ended 31 December 2016. 

Financial highlights for the year:

· Net assets of £86.5 million (2015: £92.7 million)

· Cash and cash equivalents (including cash on deposit) of £68.8 million (2015: £85.4 million)

· Loss after tax of £9.9 million (2015: £7.7 million)

· Loss per share (basic and diluted) of 15.2 pence (2015: 12.6 pence)

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Operational highlights for the year:

· Successful phase 1 clinical trial in respect of Blautix, 4D's proprietary programme for the treatment of Irritable Bowel Syndrome, achieving the primary objective of establishing safety and tolerability

· Analysis of patient data from phase 1 clinical trial showing a positive improvement in patient symptoms over placebo

· Analysis of IBS patient microbiome showing Blautix both stabilises and increases diversity of the microbiome

· Commencement of the phase 1 clinical trial in respect of Thetanix, 4D's proprietary programme for the treatment of Paediatric Crohn's Disease

· Acquisition of 4D Pharma Cork Limited (formerly 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 year has also seen the successful development of its proprietary diagnostic platform, MicroDx, which uses microbiome signatures to allow patient stratification

· Acquisition of the production assets of Instituto Biomar, S.A. via a newly incorporated Spanish subsidiary, 4D Pharma León, S.L.U., establishing 4D's own development and manufacturing facility in León, Spain

Following the year end:

· Interim analysis of data generated in the MicroDx clinical trial showing: significant differences between the microbiota profiles of IBS patients and healthy subjects; that microbiota of IBS clinical subtypes are not significantly different (supporting the rationale for Blautix as a therapy for all IBS subtypes); and that MicroDx is able to differentiate IBS patients from healthy subjects based on metabolite profiles

The Annual Report, together with a notice of the Company's Annual General Meeting, will be posted to shareholders and made available on the Company's website www.4dpharmaplc.com at a later date. The Annual General Meeting will be held on Friday 26 May 2017 at 1 p.m. at the Gridiron Building, 1 Pancras Square, London N1C 4AG.

David Norwood, Chairman of 4D, commented: "I am pleased to be able to announce the Group's final results for the year ended 31 December 2016. The year has seen substantial and critical advances towards our goal of producing Live Biotherapeutics as safe and effective therapies: successfully concluding our first clinical trial; generating supportive clinical data; establishing our proprietary diagnostic platform; and acquiring our own development and manufacturing facility. I would like thank everyone in the Group for their contribution to the advances we have made in 2016."

For further information please contact:

Information on 4D

www.4dpharmaplc.com

Chairman's Statement

David Norwood, Non-executive Chairman

2016 has seen 4D move into clinical trials in patients, and the results reinforce our belief that Live Biotherapeutics will bring safer, more effective treatments to the market.

Strategic objectives

All drug companies want to provide drugs that are safe and effective; they want to do so rapidly and cost-effectively. With the completion of our trial in patients with Irritable Bowel Syndrome (or IBS), and commencement of our trial in Paediatric Crohn's Disease, 4D is doing just that.

The clinical progression has been made without losing focus on expanding and broadening our research base. The year saw major advances in the Group's continuing goal to grow its knowledge and understanding of the microbiome.

In February we acquired 4D Pharma Cork Limited and with it established MicroDx, our proprietary diagnostic platform using microbiome signatures allowing stratification and diagnosis of patient populations. Since then we have swiftly developed the platform, setting up its first clinical trial (also in IBS), whose initial results point for the first time towards a biomarker for IBS.

The year also saw the Group acquire its development facility in León, Spain. Securing this dedicated facility is a vital part of being able to move our programmes through the clinic, and from there to plan for manufacture.

Governance and Board

Ever since the Company's initial public offering, as the Company and the Group have grown, the Board has maintained a regular review and evaluation of its effectiveness, and that of the wider governance structure of the Group.

As an AIM-quoted company, the Company is not required to comply with the UK Corporate Governance Code. The Board has nevertheless always sought to apply policies and procedures which reflect the principles of good governance and best practice reflected in the Code, as appropriate to the size, nature and stage of development of the Company.

We believe the Company's governance structure has facilitated the growth and development of the Group. However, as set out in the Corporate Governance Statement, as the Group continues to grow, we will maintain this evaluation and take the governance steps necessary to support the Group's development.

Our people

Both a significant cause and effect of our continued successful development is our greater ability to recruit high quality people, across all aspects of the Group. We now employ 85 people over five sites across Europe. I would like to thank everyone in 4D for their contribution to the advances we made in 2016.

The steps we have taken in the year give us huge confidence in our strategy and in our long-term future.

David Norwood

Non-executive Chairman

26 April 2017

Chief Executive Officer's Report

Duncan Peyton, Chief Executive Officer

In 2016, 4D continued to build its world-leading position in Live Biotherapeutics through its understanding of the microbiome, the role of the microbiome in disease, and the development of Live Biotherapeutics as a potential cure.

What 4D is about

In 2014, 4D was set up to investigate the potential of two bacteria that showed promise in modulating the immune system and therefore had potential as a drug. The simple questions 4D asked:

· Do bacteria act like a drug?

· Are they safe?

· Can they be delivered simply?

· If so, are there further bacteria (in addition to the two original bacteria that had been isolated) that could have therapeutic effect in other diseases?

If the answers to the above questions were yes, then 4D had the potential for what could be called a "perfect" drug, a drug that is safe and effective, and easy to deliver; that has a rapid development pathway; and that is capable of reliable and cost-effective production.

Moving through 2016, 4D has a lot of the answers to the above questions.

Our work in understanding how our Live Biotherapeutics function as drugs has made significant progress; we understand not only the pathways and mechanisms our Live Biotherapeutics leverage, but in some instances we also understand and have patented the agent the bacteria produce to exert its effect.

From a safety perspective 4D has worked with the regulators since the Company's inception to understand the potential of Live Biotherapeutics as a drug free from the significant side effects or toxicity normally associated with pharmaceuticals. In 2016, Blautix was shown to be safe and well tolerated in IBS patients.

With the acquisition of our development facility in León, 4D has now manufactured five different Live Biotherapeutics at a clinical scale. We have also worked with our encapsulation partners to bring a new delivery technology to the market enabling simple oral delivery of our drugs to patients participating in our IBS and Paediatric Crohn's trials.

4D also understands that there are additional bacteria that have the potential to impact disease as a Live Biotherapeutic. Our proprietary platform, MicroRx, has identified Live Biotherapeutics that in industry standard models demonstrate therapeutically relevant effects in diseases such as cancer and asthma and autoimmune conditions such as Rheumatoid Arthritis and Multiple Sclerosis.

The questions originally asked in 2014 are just as relevant in 2016; however, the research and development 4D has undertaken have raised more.

Understanding disease - targeting cures

IBS is not a well understood disease, with calls for better diagnostics and more targeted drugs.

It is a functional bowel disorder characterised by discomfort, pain and changes in bowel habits. Symptoms can be mild, moderate or severe. Mild symptoms, which occur infrequently, can sometimes interfere with normal daily functioning. Moderate symptoms are more intense, occur more frequently, and often interfere with daily functioning. Severe symptoms chronically interfere with daily functioning.

The disease is characterised according to symptoms into three subtypes: constipation (IBS-C), diarrhoea (IBS-D) and mixed (IBS-M). The treatments are directed at only one of the symptoms, and are not able to address the root cause of the disease. Furthermore, as no biomarker for IBS exists, current treatment protocols are heavily dependent on patient reported symptoms, with clinicians having difficulty in addressing and prescribing adequate treatment.

It is estimated that 10-15% of the population have IBS, with only 30-35% of subjects seeking medical attention, the majority of which have persistent symptoms.

We believe 4D has taken significant steps in moving a misunderstood disease forward.

In 2014 with our Blautix programme, a drug targeting IBS, 4D pioneered the use of germ-free models to study the effects of human microbiota. This involved the transplantation of IBS patient microbiome to study the effects in a germ-free environment. The results of this work showed that the translation of IBS patient microbiome led to the development of IBS symptoms, pointing towards the microbiome as potentially being the root cause of the disease.

Moving forward to 2016, we conducted a safety and tolerability placebo controlled trial in IBS patients and healthy volunteers (the "Blautix Trial"). As part of that trial 4D also took the opportunity to look, as a secondary measure, at the changes in the microbiome before, during and after dosing and also for any improvement in patient symptoms.

In addition, 4D recognised that diagnosis of IBS is difficult for clinicians; with no recognised biomarker, clinicians are left to make therapeutic decisions on symptoms reported by patients, which may not always be clear or accurate.

In early 2016, 4D began a separate study (the "Diagnostic Study") looking at the difference between IBS patients and healthy volunteers. The aim of this study was to understand if there were differences between the microbiome of these two groups, and whether 4D could exploit this difference as a diagnostic tool.

The results of the above trials conducted with IBS patients showed:

· the microbiome of patients and healthy volunteers is significantly different;

· the microbiome of the subtypes of IBS patients (IBS-C, IBS-D and IBS-M) is not significantly different;

· those IBS patients on Blautix showed an increased diversity and stability of microbiome compared to placebo;

· Blautix to be safe and well tolerated, meeting the primary endpoint of the Blautix Trial; and

· those patients on Blautix showed a greater improvement in symptoms than those on placebo.

The above results suggest:

· the microbiome is potentially the root cause of the disease, as shown in the pre-clinical models;

· there are significant differences seen between healthy volunteer and patient microbiomes, further suggesting that the microbiome is potentially the root cause of the disease;

· the difference between the microbiome of healthy volunteers and patients points to a biomarker based on metabolites that could aid diagnosis of IBS; and

· analysis of IBS patient microbiota showed no significant difference between any of the subtypes, suggesting that all subtypes of IBS could potentially be treated by a Live Biotherapeutic intervention, and current characterisation of subtypes is not a true representation of the disease, but rather of the treatments currently available.

We are progressing with our Blautix programme through 2017 with even greater confidence; later in 2017, 4D will begin a larger, multi-centre phase 2 trial.

Building development - delivering drugs

An issue seen with any new breakthrough technology are the questions concerning whether it can be manufactured repeatedly and reliably, and whether it is easy to deliver.

We do not use consortia of bacteria, where multiple different types of bacteria are used in combination to try to recreate a "healthy gut"; it is clear every person has a different "healthy gut" and isolates of the same strains from different people can have very different functionality.

The Live Biotherapeutics developed by 4D are single strain; they are selected on the basis of their functionality and potential to impact a specific disease pathway. Using single strains allows for a simpler more straightforward manufacturing process.

From the perspective of delivery, 4D has worked with its partners to develop and (through our trials) prove encapsulation technology that is viable both scientifically and commercially.

The key issue for the emerging microbiome field is to understand development and manufacturing.

At 4D the process of manufacture is straightforward: fermentation, separation, lyophilisation and encapsulation. Whilst the core process remains constant, the conditions for each of the programmes is different, requiring different media, processing times, etc. However, to date we have successfully been able to manufacture all of our Live Biotherapeutics that 4D has so far chosen to take in to the clinic. With patient trials completed and several in planning, 4D has addressed the issues surrounding manufacture and delivery; the issue for 4D is flexibility and recognising a lack of pharmaceutical grade facilities capable of producing Live Biotherapeutics at development and commercial scale.

In 2016, 4D decided to delay the clinical development of Rosburix, our programme in Ulcerative Colitis, in favour of our cancer programme. The decision was strategic; it was important that 4D moved away from gastrointestinal disease to diseases not generally associated with the gut (such as cancer and Rheumatoid Arthritis), demonstrating the breadth of the our live programmes and development speed.

From a development pipeline perspective, in 2017 4D plans to have trials commencing in cancer and severe asthma, to have completed the phase 1 trial in Paediatric Crohn's Disease, and to have commenced a phase 2 trial in IBS. In 2018, 4D will potentially add an additional three new clinical programmes.

If 4D worked solely with contract providers, shifting programmes and timings would not have been possible due to capacity and scheduling constraints, nor would 4D be able to find sufficient capacity to address our need going forward.

The reason 4D is confident in meeting its development goals is due to the in-house development and manufacturing capability acquired by 4D during 2016.

In April 4D acquired the production assets of Instituto Biomar, S.A. (or "Biomar"), a Spanish-based contract research organisation specialising in microbial fermentation. (see note 6)

This facility gives the flexibility and scale to take all 4D's current research through the clinic, and gives the Company the capacity to manufacture enough active pharmaceutical ingredient for up to around 20 million capsules per annum.

Better diagnostics - improving patient outcomes

As 4D began to understand more about the therapeutic effect of Live Biotherapeutics and the impact on the microbiome, we recognised the potential in using the microbiome to aid the diagnosis and treatment of disease.

In February 2016 we acquired 4D Pharma Cork (then Tucana Health), a start-up company from University College Cork. (see note 6)

The concept at 4D Pharma Cork was initially to combine our understanding of Live Biotherapeutics (from the research generated by our MicroRx therapeutic platform) with the knowledge held within 4D Pharma Cork, to build a new diagnostic platform, called MicroDx, based around the microbiome.

The concept for MicroDx is the ability to identify "signatures" based on the functionality of the gut microbiome and also on metabolite profiles (small molecules produced by the microbiome). This could allow the development of rapid methods of diagnosis, which could be readily transferred into the clinical setting.

The Diagnostic Trial mentioned earlier was a completely stand-alone trial, independent from the Blautix Trial. The trial was set up to look at the microbiota of patients with IBS and that of healthy volunteers, and from that information investigate the potential for a marker that could distinguish between patients and healthy volunteers.

Whilst the trial is still continuing, interim analysis of data has demonstrated MicroDx is able to differentiate IBS patients from healthy subjects based on metabolite profile.

This work demonstrates the potential within the microbiome to provide markers capable of use in a point of care diagnostic.

4D intends to use the MicroDx IBS test in our Blautix phase 2 trial to help stratify patients and monitor progression, and will look to expand on and include it in its trials for cancer and asthma which start later in 2017.

Increased patent coverage

4D is breaking new ground on a number of fronts, use of bacteria as a drug and mechanisms associated, process development, diagnostics, etc., all of which creates intellectual property.

The development of our patent portfolio in some way reflects the pace of our development; from start up in 2014 we now have 85 granted patents and over 100 applications.

As we continue our understanding and progress in this emerging field, 4D will continue to develop its leading position in intellectual property coverage.

Financial summary

In the year to December 2016, our cash and cash equivalents and short-term deposits reduced from £85.4 million to £68.8 million, with a loss before tax of £11.7 million (compared with £10.1 million in the year to December 2015). Our claim for research and development tax credit was £1.8 million (compared with £1.4 million in the year to December 2015).

Our cash burn for the year was in line with expectation, and reflected among other things the increased costs of taking our most advanced programmes through phase 1 trials and preparing our next wave of programmes for upcoming phase 1 trials.

The Group continues to manage 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.

Outlook

In summary, 2016 saw 4D continue its successful development, building on its existing research and also making strategic acquisitions which we believe will play a vital role in the Company's goal to successfully develop Live Biotherapeutics as safe and effective drugs.

Duncan Peyton

Chief Executive Officer

26 April 2017

Group Statement of Total Comprehensive Income

For the year ended 31 December 2016

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

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 2016

Group Statement of Changes in Equity

For the year ended 31 December 2016

Group Cash Flow Statement

For the year ended 31 December 2016

Notes to the Financial Information

For the year ended 31 December 2016

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 2016 has been extracted from the Company's audited financial statements which were approved by the Board of Directors on 26 April 2017 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 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 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 3rd 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 development stage of its business lifecycle. Accordingly they have continued to adopt the going concern basis in preparing the 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. Reclassification

During the year the Group reviewed the basis of the disclosure of costs in the accounts relative to the expenses incurred and the nature of the expense. Although there was no net change in the reported loss following on from this review, the totals disclosed

6. Business combinations

Acquisition of 4D Pharma Cork Limited (formerly Tucana Health Limited)

On 10 February 2016 4D acquired 100% of the issued share capital of Tucana Health Limited ("Tucana") for an initial consideration of €4 million which was satisfied by the issue of 410,603 shares in 4D at a price per share of £7.55. Tucana is a start-up company investigating the use of the microbiome signatures to aid the diagnosis and treatment of diseases including those targeted by 4D. On completion of further technical and clinical milestones a further consideration of up to €8 million will become due which will be satisfied by the issue of up to 1 million additional shares in 4D.

For the 11 months to 31 December 2016 4D Pharma Cork Limited recorded a loss of £0.233 million after tax. On a pro-rata basis this equates to an annualised loss of £0.254 million.

Acquisition of 4D Pharma Leon, S.L.U.

On 8 April 2016 4D invested £2,000 into 4D Pharma Leon, S.L.U., a newly incorporated Spanish subsidiary, which in turn acquired the production assets of Biomar, S.A. ("Biomar"). The consideration for the production assets was an initial €3 million on completion of which €2 million was paid in cash and €1 million satisfied by the issue of 82,349 4D pharma plc shares at a price of £9.805. In addition a further €3 million will become payable in cash upon successful GMP certification in respect of the production of Live Biotherapeutics at the Leon premises which is accounted for under financial liabilities in the Statement of Financial Position as at 31 December 2016.

For the nine months to 31 December 2016, 4D Pharma Leon, S.L.U. recorded a loss of £0.039 million after tax. On a pro-rata basis this equates to an annualised loss of £0.052 million.

7. Related party transactions

Group

Transactions with Directors and related entities

During the year Aquarius Equity Partners Limited, an entity controlled by Duncan Peyton and Dr Alexander Stevenson, charged the Group £8,368 for other office expenses (31 December 2015: £94,206). As at 31 December 2016 £3,144 was due from Aquarius Equity Partners Limited (31 December 2015: £Nil).

During the year, Thomas Engelen charged the Group £Nil for consultancy services (31 December 2015: £9,210) and was owed £Nil at 31 December 2016 (31 December 2015: £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.

Transactions with key personnel and related entities

There were no trading transactions with Fommir Limited during the year, a company where Douglas Thomson was a director and majority shareholder. During the year to 31 December 2015 the company charged the Group £120,000 for consultancy services, £150,000 in performance-related bonuses and £5,197 for other costs. At the year end the Group owed Fommir Limited £Nil (31 December 2015: £102,229).

During the year summ.it assist llp, an entity in which Stephen Dunbar is a partner, recharged the Group £23,690 for IT equipment and software (31 December 2015: £14,158), £4,126 for IT support (31 December 2015: £7,650), £60,328 for accounting and bookkeeping services (31 December 2015: £94,755) and £3,199 for other costs (31 December 2015: £989). At the year end £6,766 was due to summ.it assist llp (31 December 2015: £7,402).

3C SAS, an entity owned by Christophe Carité, provided consultancy services to the Group of £182,324 (31 December 2015: £113,322) and recharged costs of £73,029 (31 December 2015: £63,805). At the year end £Nil was due to 3C SAS (31 December 2015: £Nil).

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.