E-therapeutics Regulatory News (ETX)

e-Therapeutics plc

(e-Therapeutics or the Company)

Four Clinical Trials and Striking Results from Discovery Engine

31 March 2015:  e-Therapeutics plc (AIM: ETX), the drug discovery and development company, today announces its full year results for the year ended 31 January 2015.

Operational highlights

· ETS2101 currently in three separate clinical studies, internationally

o UK Phase Ia study in cancer established maximum tolerated dose, safe and tolerated

o US brain cancer trial ongoing and preliminary results anticipated in Q2 2015

o UK Phase Ib study in pancreatic and hepatocellular cancers to start mid-April 2015 across 15 locations in four countries

· ETS6103 Phase IIb trial for major depressive disorder; completion expected in H2 2015

· ETX1153c Potential opportunities being explored

· Discovery platform achieving striking productivity

o Molecule selection and testing, up to 2,200 molecules across six discovery projects(31 January 2014: 100 molecules)

o Data suggesting circa 20% of screened compounds are active

o Yields three orders of magnitude better than published rates for conventional drug discovery 

o Intention for 2015, to analyse ten or more discovery projects and undertake in vitro testing of many thousand molecules

· Directorate changes: Chairman, Professor Oliver James retired, Steve Medlicott appointed CFO and Sean Nicolson appointed as Executive Director. Malcolm Young took on the role of acting Chairman

Financial highlights

· Cash and liquid resources at £33.8 million (31 January 2014: £43.1 million) reflecting increasing levels of research spend

· Loss before tax of £9.8 million (31 January 2014: loss £6.1 million)

· Anticipated R&D tax credit worth £2.0 million (31 January 2014: £1.1 million), due to increases in both R&D spend and the claimable rate of the R&D tax credit

Professor Malcolm Young, CEO of e-Therapeutics, said:

"The past 12 months have seen a strong acceleration of progress, both clinically and in discovery.

"In the clinic, we have had four clinical trials ongoing in Europe and the US. We have had positive dosing and safety results for our lead product, ETS2101 and we are moving into the next phase of testing in two cancer indications. We have also seen good progress with ETS6103 and anticipate the completion of its phase IIb later this year.

"Most exciting has been the striking productivity of our drug discovery engine. The investment and enhancements we have made over the past two years are paying dividends, not only with the number of molecules we can now screen, but in the groundbreaking yields we are observing. We have a wealth of active molecules to choose from to take forward into development.

"The combination of these successes in 2014/15 with a strong balance sheet heralds another twelve months of major advancement and progress."

-Ends-

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About e-Therapeutics

e-Therapeutics is an AIM-quoted biotechnology company with a proprietary platform in network pharmacology, an innovative new approach to drug discovery based on advances in network science and chemical biology. The Company's discovery and development activity is focused in cancer and disorders of the nervous system. e-Therapeutics is based at sites in Oxford and Newcastle, UK. For more information about the Company please visit www.etherapeutics.co.uk.

Chairman's Statement

Overview

e-Therapeutics discovers and develops promising drug compounds for out-licensing, with a focus on age-related diseases including cancer and central nervous system disorders.

Our drug discovery process uses network science and chemical biology to identify compounds. It is often called "network pharmacology", an area that we pioneered in the early 2000s, in recognition of the need to address the many molecular and cellular interactions involved in healthy and diseased systems. e-Therapeutics' processes are backed by a strong patent portfolio. Network pharmacology considers the biocomplexity of diseases and selects molecules taking the complexities of disease networks specifically into account.

These processes are mostly carried out with the aid of our informatics-based platform. This platform has been re-engineered over recent years following investment into the Company in 2011 and 2013. The quality of molecules selected in discovery projects will determine the value of the platform in the longer term. This quality and value will be determined in part by the quantity and quality of the molecules we discover in the early stages of each project. Analysis of the recent record of the platform in its new form is of some merit as a guide to the potential return on investment made to date.

During the year, around 2,200 molecules selected by our platform have been evaluated in vitro. A surprisingly high proportion of these molecules were highly active in in vitro screens, in which we tested for the biological activity indicated by the platform. These results are unusual when compared to conventional drug discovery; the hit rate being about 5,000 times higher than those published for conventional discovery. We see this as encouraging evidence that the investment in the platform and in our concepts is bearing fruit. Another consequence of this unusually high yield is that we are presently examining more than 450 active molecules across the six discovery projects screened last year, with more to come from at least four further projects started more recently.

We have two compounds undergoing development in clinical trials: ETS2101 is in phase I trials for various forms of cancer, and ETS6103 is in a phase IIb trial for major depressive disorder. Our clinical assets have this year been the subject of four clinical trials in the UK/Europe and US.

Our cash resources remain strong with £33.8m of net cash at the year end. In addition, the Company is anticipating receipt of an R&D tax credit worth £2.0m shortly. Cash burn during the last financial year was £9.3m after receipt of interest of £0.6m and £1.1m R&D tax credit relating to spend in the previous financial year. Whilst this rate of cash burn is expected to increase in the current year, we remain well funded to deliver the Company's objectives.

Overall the Company continues to make significant progress and we anticipate a highly productive year. In drug discovery, we are seeing striking yields of highly active molecules in a variety of discovery projects; the next steps are to prioritise those which we wish to progress internally and to explore our options for other strong candidates, in each case on the back of further data and analysis. In drug development, ETS2101 is moving into phase Ib testing, and the completion of the phase IIb trials for ETS6103 are expected toward the end of the current financial year.

Development Programme - Clinical Highlights

ETS2101 - maximum tolerated dose (MTD) established in the UK

During the year, our phase I programme for ETS2101 included a UK trial for solid tumours, a US trial in brain cancer and a UK oral bioavailability study. All the trials pursued a dose-escalating design, with the primary objective being to demonstrate the safety and tolerability of the drug and to establish its pharmacokinetic profile.

In the UK phase Ia solid tumour trial, we enrolled 40 patients, including three at the final dose level of 36 mg/kg. At this final dose level there were two dose-limiting toxicities, which were characterised as somnolence events. The Cohort Review Committee considered that these side effects constituted a non- tolerated dose. In December 2014, we therefore reported that the MTD for the UK solid tumour trial was established as 30mg/kg. We have previously reported one partial response as defined by RECIST and the possible retarding of tumour progression, with a number of patients remaining stable for prolonged periods. One patient with pancreatic cancer remained on study for 42 weeks.

As highlighted in December, the drug concentrations in circulating plasma at the established MTD are at a level that is typically much higher than those that were highly effective in killing cancer cells in vitro. These pharmacokinetic (PK) data indicate that the primary objective of this phase Ia study to demonstrate safety and tolerability of ETS2101 at doses which may be effective has been met.

Having established the MTD for the UK trial, we have finalised the protocol design and obtained the first of the regulatory approvals for the commencement the first of the phase Ib studies. This study will concentrate on specific solid tumours, the first two being hepatocellular carcinoma (HCC) and pancreatic cancer. The study is expected to be conducted in 15 locations, spread across four countries (UK, Spain, Germany and Poland) and will involve both monotherapy with ETS2101, and combination therapy of ETS2101 in conjunction with standard of care treatments. Each of the cohorts is expected to include approximately 25 patients in monotherapy with approximately 30 patients in the combination arm, including a dose escalation phase. The first of these patients is expected to be dosed in April 2015.

The US brain cancer trial is ongoing and has enrolled 24 patients in seven cohorts to date, including four at the current dosage of 36 mg/kg; two patients remain on study. Unlike the UK trial, there have been no dose-limiting toxicities in this trial at the current dosage, although the patients have experienced similar short-term side effects to those observed in the UK trial. We anticipate reporting preliminary results on the current cohort in Q2 2015.

The phase I oral dosing study was carried out in the UK. It was a dose-escalating study, studying PK levels and bioavailability of ETS2101 in oral form. The fifth and final cohort was completed late last year, each cohort consisting of six active and two placebo doses in healthy volunteers. This study provided PK, absorption and bioavailability data via an oral route of administration. These data suggest an oral dose form of ETS2101 may indeed be possible, and we will undertake further preclinical investigation before deciding on whether to progress an oral formulation into clinical development.

ETS6103 - patient recruitment ongoing

ETS6103 is aimed at major depressive disorder that is refractory or relapsing from first-line treatment. The phase IIb trial commenced at the end of 2013 is designed to evaluate ETS6103 as a second-line therapy for patients who have not responded adequately to first-line treatment (of a selective serotonin reuptake inhibitor, or SSRI). The aim of the study is to establish whether ETS6103 has non-inferior antidepressant activity to that of amitriptyline and a better tolerance profile.

The trial is a randomised double-blind controlled study and is being conducted in a group of primary care centres in Glasgow, UK. The plan is to enrol 250 patients with expectations that around 160 patients who do not respond adequately to the first-line treatment to be randomised and enter the double blind controlled study. This randomised study includes two dose levels of ETS6103 and one of amitriptyline. To date, we have screened 320 patients and randomised 126 and unblinding of the trial is expected in H2 2015. If the results are positive, we will seek to out-license the drug.

ETX1153c - funding opportunities are being explored

ETX1153c is active against Clostridium difficile (C. difficile) and other resistant gram positive pathogens. Extensive testing suggests that it is very hard indeed for the bacteria to generate any resistance to the drug, and pathogenic strains that are resistant to existing antibiotics do not show resistance to ETX1153c. We continue to believe that ETX1153c potentially offers an attractive opportunity in this area, and we are actively looking at potential opportunities that would enable resumption of development on a commercially viable basis.

Discovery platform - higher rate of drug analysis

Discovery delivered a dramatic acceleration of molecule selection and testing during the year, with approximately 2,200 molecules, across six discovery projects, being tested in vitro. This compares to about 100 molecules that were tested in the previous year. Each of these molecules has a network pharmacology rationale as good as, or better than, any of the Company's current clinical development assets, as investment since ETS2101 and ETS6103 were discovered has greatly improved our discovery processes.

These important enhancements continue. We have made advances in functionality, network analysis processing speeds and internal database coverage of protein interaction and compound bioactivity data. The platform's processing speeds are now approximately 100 times faster than two years ago. In practice, this means that the analysis of a disease process that could have taken many weeks in the past can now be completed in hours. Our chemo-proteomic database has increased by a factor of four and our protein interaction database by an order of magnitude over the same period.

In terms of time, the initial stages of our discovery process - from disease selection through disease network specification and analysis to molecule selection - currently takes around two months. Empirical testing up to the first cell-based assays, including compound sourcing, CRO (clinical research organisation) selection and assay design typically takes an additional three to four months. Around ten projects are running currently, at varying stages.

Discovery projects - acceleration

In order to feed our internal development pipeline, we have accelerated discovery projects over the last twelve months. On this strategy, we intend to have analysed ten or more discovery projects by the end of the current financial year, and to have undertaken in vitro testing of many thousand molecules, each with a strong rationale from network pharmacology. We then aim to select the most promising of the compounds from the discovery process to enter pre-IND development and testing by the end of H1 2016, and intend that the most promising of these will be ready to enter clinical development in 2017.

We have been greatly encouraged by the 'hit rate' of active compounds identified in the discovery process. On 27 November 2014, in conjunction with the Analyst and Investor Day hosted at our Network Pharmacology Centre in Oxfordshire, we announced that the data indicated that 10% or more of the screened compounds were active, and that in some projects substantially higher yields were observed.

Since that time, we have been encouraged by data from ongoing projects that comfortably support this earlier observation. Discovery has seen yields in some projects above one in four of the compounds tested, which appears to be more than three orders of magnitude better than the published rates for conventional discovery R&D. This high yield has provided us with a much larger than expected choice of active molecules from which to select the best development candidates: more than 450 active molecules across six discovery projects at present.

Later this year, once we have more complete data, we will consider our options in relation to strong candidate compounds that are surplus to the number than can be developed internally.

Increased investment is supported by a strong balance sheet

The Company's full year operating loss was £10.2 million (twelve months to 31 January 2014: loss of £6.7million). During the year spend increased in both the Discovery and Development activities of the business.

Net interest receivable was £0.4 million (twelve months to 31 January 2014: £0.6 million) reflecting both a lower average cash balance and a slightly lower interest rate resulting in a pre-tax loss of £9.8 million (twelve months to 31 January 2014: loss of £6.1 million). The increased spend in the period means that the anticipated R&D tax credit for the year was £2.0 million (twelve months to 31 January 2014: £1.1 million).

The Company's cash balance at the end of January 2015 remained strong at £33.8 million. This was a £9.3 million reduction from the January 2014 year-end level of £43.1 million and compares to the operating loss of £10.2 million. The difference between the cash reduction and operating loss relates to the cash inflows from the prior year R&D tax credit of £1.1 million and interest received of £0.6 million, offset to some extent by an increase in prepayments as we moved into the phase Ib programme of ETS2101 and incurred some upfront costs.

The Company is anticipating receipt of an increased R&D tax credit of £2.0 million over the coming few months relating to our spend over the last financial year. The almost doubling of this tax credit reflects the combination of increased R&D spend during the year and the welcome increase in the rate of R&D tax credit claimable. Further increases in spend within both Discovery and Development are anticipated, as the number and scope of the empirical discovery projects increases and as we move into phase Ib testing for ETS2101.

Organisational Changes

In April 2014, the Company appointed Steve Medlicott as Finance Director. Steve is a Chartered Accountant and held various executive and sell-side analyst roles with Peel Hunt, N+1 Singer, Altium Capital and Williams de Broe. In October 2014, the Company announced the appointment of Sean Nicolson to the Board as an Executive Director. Sean has previously served as the Company Secretary of e-Therapeutics and has been an advisor since the Company formed. His effective starting date is 1 April 2015. In January 2015, we announced the retirement of Professor Oliver James as Chairman and from the Board of Directors. I am enormously grateful to Oliver for his long and sterling service to the Company, and we all wish him a pleasant retirement.

Outlook

The Directors look forward to reporting results from the current ETS6103 trial towards the end of the current year, and around the same time the Company expects to issue an update on the phase Ib trials for ETS2101. In Discovery, the rate of compound testing has increased considerably, with rigorous and systematic review intended to yield candidates of the highest quality for selection and progression into clinical development in due course. We intend to provide further information on this as the year progresses.

The Board continues to believe that the increasing discovery output reflects the utility of using our proprietary approach to network science and chemical biology to enhance the selection of molecules likely to be attractive for further development.

With a strong balance sheet, e-Therapeutics remains fully funded for its current development plans into 2019.

Consolidated income statement

For the year ended 31 January 2015

Consolidated statement of comprehensive income

For the year ended 31 January 2015

Consolidated statement of changes in equity

For the year ended 31 January 2015

Company statement of changes in equity

For the year ended 31 January 2015

Balance sheets

As at 31 January 2015

Statements of cash flow

For the year ended 31 January 2015

Notes

1. Status of Audit

The financial information presented in this statement does not constitute the Company's statutory accounts for the year ended 31 January 2015 or the year ended 31 January 2014, but is derived from those accounts. Statutory accounts for the year ended 31 January 2014 have been delivered to the Registrar of Companies and those for the year ended 31 January 2015 will be delivered following the Company's annual general meeting. The auditors have reported on those accounts; their reports were unqualified, did not draw attention to any matters by way of emphasis without qualifying their reports, and did not contain statements under s498(2) or (3) of the Companies Act 2006.

2. Basis of preparation

This preliminary announcement has been prepared in accordance with the recognition and measurement principles of International Financial Reporting Standards as adopted by the EU ("adopted IFRSs"), IFRIC interpretations and the Companies Act 2006 applicable to companies reporting under IFRS. It does not include all the information required for full annual accounts.

This preliminary announcement has been prepared using the accounting policies published in the Group's accounts for the year ended 31 January 2014, which are available on the Company's website at www.etherapeutics.co.uk, with the exception of the following amendments which became effective during the year and were adopted by the Group, albeit with no impact on the Group's loss for the year or equity:

· IFRS 10 'Consolidated Financial Statements', which is mandatory for accounting periods commencing on or after 1 January 2014

· IAS 32 'Financial Instruments: Presentation' includes amendments to application guidance on, and presentation of the offsetting of, financial assets and financial liabilities

3. Staff numbers

The average number of persons employed by the Group and the Company (including Executive Directors and excluding Non-Executive Directors) during the year, analysed by category, was as follows:

4. Taxation

Recognised in the income statement:

Reconciliation of effective tax rate:

The tax receivable relates to Research and Development tax credits.

The Group has unrecognised deferred tax assets of £2,518,000 (2014: £1,950,000) and unused tax losses of £12,424,000 (2014: £9,201,000).

The deferred tax asset relates primarily to tax losses carried forward. It has not been recognised due to the uncertainty surrounding its future recovery against taxable profits.

Reductions in the UK corporation tax rate from 23% to 21% (effective from 1 April 2014) and from 21% to 20% (effective from 1 April 2015) were substantively enacted on 3 July 2013. This will reduce the Group's future current tax charge accordingly. The unrecognised deferred tax asset at 31 January 2015 has been calculated based on the rate of 20% substantively enacted at the balance sheet date.

5. Loss per share

The analysis of loss per share is as follows:

Basic EPS is calculated by dividing the loss for the year of £7,777,000 (2014: £5,039,000) by the weighted average number of 264,147,878 shares (2014: 254,398,237) in issue during the year.

Diluted EPS is calculated in the same way as basic EPS but also with reference to reflect the dilutive effect of share options in existence at the year end over 12,937,539 (2014: 5,808,266) and in the prior year of warrants over 875,741 (2015: nil) ordinary shares. The diluted loss per share is identical to the basic loss per share, as potential dilutive shares are not treated as dilutive since they would reduce the loss per share.

6. Goodwill and intangible assets - Group and Company

Amortisation and impairment charge

Amortisation has been charged on patents for which the registration process is complete. Where the process is incomplete no charge has been raised.

Impairment testing

The goodwill in the Company balance sheet arose following the hive up of the trade and assets of InRotis Technologies Limited on 15 November 2007. The goodwill is allocated to the drug discovery and development activities of the Group. In assessing goodwill impairment, recoverable amount is based on fair value less costs to sell. The Group carries out a review at each balance sheet date to establish the economic value of each asset in the patent portfolio. If the economic value of a patent is believed to be lower than the carrying value, the carrying value is reduced accordingly. The economic value is based on estimated future income potential taking into account technical and commercial risks and external information on the likely market demand and penetration for the drugs for which the Group has patents. There is a risk that should these estimations require significant downward revision there would be a material adverse impact on the income statement in any one year.

7. Property, plant and equipment

8. Capital and reserves

Reconciliation of movement in capital and reserves:

8. Capital and reserves (cont.)

The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company.

During the period, exercise of options over 409,690 ordinary shares by former staff and the issue of 71,688 ordinary shares to Non-Executive Directors in payment of their fees led to an increase of £481 in share capital and a credit of £76,294 to the share premium account.

In March 2013, the Company raised £40.0 million (£38.9 million net of related expenses) through placings of 125,000,000 new ordinary shares of 0.1 pence. Shareholder approval was provided at a general meeting on 27 February 2013; 4,750,000 shares were duly allotted on that day, and a further 120,250,000 on 28 February 2013, with all new shares admitted to trading on AIM by 1 March 2013. The new shares all carry the same rights as the shares in issue immediately prior to the placings. The new shares represented 90.4% of the Company's issued ordinary share capital immediately prior to the placings.

The warrant reserve related to the following warrants:

All warrants lapsed unexercised on the expiry dates noted above.