Genedrive Regulatory News (GDR)

28 Feb 2008 07:30

EpiStem Holdings plc28 February 2008 For release: 28th February 2008 Epistem Plc (LSE: EHP), the UK epithelial stem cell company, announced today itsinterim results for the period to 31st December 2007. Epistem is a biotechnology company commercialising its expertise in tissuerenewal in the areas of oncology, gastrointestinal diseases and dermatology.They provide specialised preclinical efficacy testing, biomarker services anddevelop proprietary novel therapeutics for partnership and co-development withdrug development companies. Located in purpose built office and laboratory facilities adjacent to theUniversity of Manchester, UK, Epistem maintain close links with drug companies,clinicians and academics in the field, ensuring that the company remains at theforefront of stem cell science and technology. During the year, the Group made significant progress on a number of key fronts: Highlights: • 66% growth in Interim year on year sales • Novel Therapeutics accelerating development of selected therapeutic lead candidates • £1.1m fundraising in November 2007 for newly emerging biomarker business • Epistem Biomarker technology wins Bionow 2007 'Biomedical Project of The Year' award • Strong customer interest in new product developments including cancer stem cells and wound healing • Healthy balance sheet with £2.6m of cash at period end • 20% increase in share price post April 2007 admission, set against downturn in financial markets and market segment Commenting on the Interim results, Matthew Walls, CEO of Epistem commented: "Following a very successful first half of this financial year, the Board ofEpistem remain convinced that in the medium term there will be substantialuplift in the value of the Company based on its current performance and thevalue opportunities now beginning to emerge" For further details, please contact: Matthew Walls 0161 606 7258CEOEpistem Plc Mike Wort / Anna Dunphy 0207 861 3838De Facto Communications Thilo Hoffmann / Gareth Price 020 7426 9000Landsbanki Securities Chairman and Chief Executive Officer Statement Following the April 2007 admission, we are pleased to report to shareholdersthat the Company continues to make excellent progress across its core businessareas. This Interim Report covers the six month period from 1st July 2007 to 31December 2007. Overview Results for the first six months showed a 66% year on year growth in revenuesfor the Company, primarily from the Company's Contract Research Servicesdivision. This growth represents a significant uplift in the first half businessperformance over last year and further evidence of the growing interest in theCompany's stem cell services and expertise. The Novel Therapies division has selected a small group of proteins from its 250protein asset for accelerated development. The early characterisation andefficacy results for these lead candidate proteins are very encouraging. Biomarker developments have also accelerated with the initial feasibilitystudies undertaken with AstraZeneca Plc proving successful. The Company alsocompleted a £1.1m placement in November 2007 to fund further development of itsBiomarker business and received the 2007 North West Regional Development Agency'Bionow' award for Biomedical Project of The Year. Against the backdrop of the volatile financial markets, the combination of arevenue-generating and profitable Contract Research Services division coupledwith an investment-driven Novel Therapies division continues to provide abalanced risk profile for our ongoing business model. This position has beenfurther recognised by our shareholders with the stock price now 20% above itsadmission price in April 2007. Cash reserves in the Company are healthy at £2.6m with the monthly cash burn(£0.1m/month) primarily related to investment in our Novel Therapies division. Financial Review Sales revenue from business operations for the first six months of thisfinancial year was £1.1m, an increase of £0.4m. The revenue growth was driven byincreased 'fee for service' business generated by the Contract Research Servicesdivision. Interim Operating Profits for The Contract Research Services Divisionincreased by £0.3m over the previous year. Cost increases over the period wereprimarily in relation to new staff and expertise, with other costs remainingunder tight control. The net loss for the period amounted to £0.5m compared witha loss of £0.5m over the same period last year. The corresponding Earnings PerShare figure for the Interim period was (6)p against (10)p for the previousyear. At the time of writing there is a high degree of uncertainty in the financialmarkets. The directors consider that the Group's cash reserves place thebusiness in a strong position which along with the Company's growth prospectswill allow the Company to take advantage of opportunities that may presentthemselves in such market conditions. Operational Review Over the first half, Contract Research Services has responded to an increaseddemand for its drug efficacy and skin testing models. This included an increasein the number of biodefence candidates tested under the US National Institutesof Health (NIH) contract for radiation sickness. We are also applying ourknowledge of the behaviour of normal epithelial stem cells to develop new modelsfor testing drugs in the area of cancer stem cells. With the pharmaceuticalindustry beginning to focus more closely on cancer stem cells and theirmicroenvironment the Company is well positioned to address this growing area ofoncology development. From our 250 genes used to identify candidate stem cell regulators, we are nowadvancing 4 leads in the therapeutic areas of oncology and wound healing. Earlycharacterisation and efficacy results have been very encouraging. Two of ouroncology leads have shown inhibition in our cancer stem cell models and we arecurrently characterising the nature of this inhibition. The Company anticipatesadditional leads emerging in the coming months from its protein asset. The earlycommercial contract for an off-patent molecule outlined in the October 2007Annual Report has been terminated and this molecule will be repositioned as abiodefence therapeutic lead. Biomarker developments have moved quickly over the first half, with the Companybeginning to put in place foundations for further development andcommercialization of its platform technology. The recent Biomarker feasibilitywork completed with AstraZeneca Plc provided the first independent validation ofthe technology platform. We are now undertaking other validation work with ourpharmaceutical partners. Strategy The Board believes that shareholder value can be best enhanced by maintainingand developing its combined business model and by growing, where appropriate bycomplementary acquisition. The combined business model offers a cornerstone of agrowing and profitable Contract Research Services operation. This business modelwill be further underpinned by developing the newly emerging Biomarker business.The investment based Novel Therapeutics division will continue to de-risk itsdrug development position with the advancement of its therapeutic leads. Outlook On a like for like basis, we anticipate continued growth in our ContractResearch Services business in the second half of the year over the comparativeperiod in 2007. Additional growth is also anticipated through our emergingBiomarker business validated by our pharmaceutical partners. The early characterisation results from our therapeutic leads are positive andwe expect to see further development of our therapeutic lead candidates over thesecond half. The Board of Epistem remain convinced that in the medium term there will besubstantial uplift in the value of the Company based on its current performanceand the value opportunities now beginning to emerge. David Evans Matthew WallsChairman Chief Executive OfficerFebruary 2008 Consolidated Income AccountSix months ended 31 December 2007 Restated Six months to Six months to Year ended 31 Dec 2007 31 Dec 2006 30 Jun 2007 (unaudited) (unaudited) (audited) £ £ £ Revenue 1,106,467 666,846 1,357,444 Contract research costs (725,506) (499,015) (1,112,093)Discovery and development costs (525,682) (484,159) (1,034,053) General administrative costs (416,601) (190,122) (452,708) Operating loss (561,322) (506,450) (1,241,410) Interest receivable 46,923 12,138 49,793 Interest payable and similar charges (6,799) (9,404) (5,276) Loss on ordinary activities before taxation (521,198) (503,716) (1,196,893) Tax credit on loss on ordinary activities (95,000) (100,173) (160,358) Loss for the financial period (426,198) (403,543) (1,036,535) Earnings per share (pence) (6)p (10)p (22)p Consolidated Statement of Changes in EquitySix months ended 31 December 2007 Share Share Reverse Profit and Share Premium Options Acquisitions Loss Capital Account Reserve Reserve Account Total £ £ £ £ £ £ Balance at 1 July 2006 202 2,531,968 398,812 - (1,835,964) 1,095,018 Recognition of equity settledshare-based payments in the period - - 22,187 - - 22,187 Loss for period - - - - (403,543) (403,543) At 31 December 2006 202 2,531,968 420,999 - (2,239,507) 713,662 IFRS 3 reserve acquisition 60,482 2,423,924 - (2,484,406) - -Allotment of ordinary shares 37,387 3,053,250 - - - 3,090,637Share issue costs - (607,542) - - - (607,542)Recognition of equity settledshare-based payments in the period - - 32,933 - - 32,933 Loss for period - - - - (632,992) (632,992) At 30 June 2007 98,071 7,401,600 453,932 (2,484,406) (2,872,499) 2,596,698 Allotment of ordinary shares 9,807 1,055,897 - - - 1,065,704Share issue costs - (20,295) - - - (20,295)Recognition of equity settledshare-based payments in the period - - 55,284 - - 55,284 Loss for period - - - - (426,198) (426,198) At 31 December 2007 107,878 8,437,202 509,216 (2,484,406) (3,298,697) 3,271,193 Consolidated Balance SheetAs at 31 December 2007 Restated 31 Dec 2007 31 Dec 2006 30 Jun 2007 (unaudited) (unaudited) (audited) £ £ £ Non-current assetsIntangible assets 56,894 60,758 58,826 Plant and equipment 347,775 375,977 368,099 404,669 436,735 426,925 Current assetsTrade and other receivables 516,370 332,853 357,089Tax receivables 255,358 230,700 160,358 Cash and cash equivalents 2,612,045 328,414 2,394,456 3,383,773 891,967 2,911,903 LiabilitiesCurrent liabilitiesTrade and other payables 347,305 356,106 394,994Obligations under finance leases 68,812 94,470 81,317 Bank overdrafts and loans - - 128,884 416,117 450,576 605,195 Net current assets 2,967,656 441,391 2,306,708 Total assets less current liabilities 3,372,325 878,126 2,733,633 Non-current liabilities Obligations under finance leases (101,132) (164,464) (136,935) Net assets 3,271,193 713,662 2,596,698 Capital and reservesCalled-up equity share capital 107,878 202 98,071Share premium account 8,437,202 2,531,968 7,401,600Share options reserve 509,216 420,999 453,932Reverse acquisition reserve (2,484,406) - (2,484,406) Profit and loss account (3,298,697) (2,239,507) (2,872,499) Total shareholders' equity 3,271,193 713,662 2,596,698 Consolidated Statement of Cash FlowsSix months ended 31 December 2007 Restated Six months to Six months to Year ended 31 Dec 2007 31 Dec 2006 30 Jun 2007 (unaudited) (unaudited) (audited) £ £ £ Cash flows from operating activitiesLoss for the period (561,322) (506,450) (1,241,410)Depreciation, amortisation and impairment 50,022 53,632 109,264 Share-based payment expense 55,284 22,187 55,120 Operating loss before changes inworking capital and provisions (456,016) (430,631) (1,077,026)(Increase)/decrease in trade and other receivables (159,281) (9,490) (33,726) (Decrease)/increase in trade and other payables (47,689) 142,068 180,956 Net cash outflow generated from operations (662,986) (298,053) (929,796)Interest paid (6,799) (9,404) (5,276)Interest received 46,923 12,138 49,793 Tax received - - 130,527 Net cash outflow from operating activities (622,862) (295,319) (754,752) Cash flows from investing activities Acquisition of property, plant and equipment (27,766) (17,370) (63,192) Net cash outflow from investing activities (27,766) (17,370) (63,192) Cash flows from financing activitiesProceeds from issue of share capital 1,065,704 - 3,090,637Expenses of share issue (20,295) - (607,542) Repayment of borrowings (48,308) (34,768) (75,450) Net cash inflow from financing activities 997,101 (34,768) 2,407,645 Net increase/(decrease) in cash equivalents 346,473 (347,457) 1,589,701 Cash and cash equivalents at beginning of period 2,265,572 675,871 675,871 Cash and cash equivalents at end of period 2,612,045 328,414 2,265,572 Analysis of Net Funds Cash at bank and in hand 2,612,045 328,414 2,394,456 Bank overdrafts - - (128,884) Net Funds 2,612,045 328,414 2,265,572 Notes to the Interim Financial StatementsSix months ended 31 December 2007 1. Significant accounting policies Basis of accounting The interim financial statements have been prepared under the historical costconvention, modified to include the revaluation of financial instruments and inaccordance with applicable accounting standards in particular InternationalFinancial Reporting Standards as adopted by the EU ("Adopted IFRSs"). Epistem Holdings Plc is a company incorporated in the UK. These interim financial statements have not been audited and do not constitutestatutory accounts within the meaning of section 240 of the Companies Act 1985. The comparative figures for the financial year ended 30 June 2007 are not thestatutory accounts for the financial year but are abridged from those accountswhich have been reported on by the Group's auditors and delivered to theRegistrar of Companies. The report of the auditors was unqualified. These interim financial statements were approved by the Board of Directors on 27February 2008. The accounting policies set out below have, unless otherwise stated, beenapplied consistently to all periods represented in these consolidated financialstatements. Basis of consolidation The consolidated financial statements consolidate those of the Company and itssubsidiary (together referred to as the "Group"). Subsidiaries are entities controlled by the Group. The financial statements ofsubsidiaries are included in the consolidated financial statements from the datethat control commences until the date that control ceases. Transactions betweenGroup companies are eliminated on consolidation. On 16 March 2007 Epistem Holdings Plc merged with Epistem Limited, when theshareholders of Epistem Limited exchanged their shares for equivalent shares inEpistem Holdings Plc. As Epistem Holdings Plc was newly incorporated at the timeof the transaction under the terms of IFRS 3 'Business Combinations' thistransaction has been accounted for as a reverse acquisition, on the basis thatthe shareholders of Epistem Limited gained a controlling interest in the Group.The financial statements therefore represent a continuation of the financialstatements of Epistem Limited. Revenue recognition The company generally invoices and reports as sales, 50% of the value of a newcontract on signature. This policy is designed to recognise that, in negotiatingcontracts for new studies, the company performs specific pre-contract work toestablish the parameters of the study work. When the final report is issued tothe client the remainder of the contract is invoiced and recognised as income,at that date. In other cases where the contract does not provide for incomerecognition on signature revenue is recognised as the work is invoiced. Segment reporting A segment is a group of assets, liabilities and operations engaged in providingproducts or services that are subject to risks and returns that are differentfrom those of other parts of the business. The group's primary format forsegment reporting is based on business segments. Research and development Research and development expenditure is written off in the year in which it isincurred. Share-based payments The group issues equity-settled and cash-settled share-based payments to certainemployees (including directors). Equity-settled share-based payments aremeasured at fair value at the date of grant. The fair value determined at thegrant date of the equity-settled share-based payments is expensed on astraight-line basis over the vesting period, together with a correspondingincrease in equity, based upon the group's estimate of the shares that willeventually vest. Fair value is measured using the Black-Scholes pricing model. The expected lifeused in the model has been adjusted, based on management's best estimate, forthe effects of non-transferability, exercise restrictions and behaviouralconsiderations. Where the terms of an equity-settled transaction are modified, as a minimum anexpense is recognised as if the terms had not been modified. In addition, anexpense is recognised for any increase in the value of the transaction as aresult of the modification, as measured at the date of modification. Where an equity-settled transaction is cancelled, it is treated as if it hadvested on the date of the cancellation, and any expense not yet recognised forthe transaction is recognised immediately. However, if a new transaction issubstituted for the cancelled transaction, and designated as a replacementtransaction on the date that it is granted, the cancelled and new transactionsare treated as if they were a modification of the original transaction, asdescribed in the previous paragraph. 2. Segment information Contract Research Novel Unallocated Services Therapies Expenses Total £ £ £ £ Six months ended 31 December, 2007Revenue 1,106,467 - - 1,106,467Segment result 394,999 (506,238) (394,799) (506,038) Less equity settled share-based payments (IFRS 2) (14,038) (19,444) (21,802) (55,284) Operating Profit/Loss 380,961 (525,682) (416,601) (561,322) Six months ended 31 December, 2006Revenue 666,846 - - 666,846Segment result 167,831 (461,972) (190,122) (484,263) Less equity settled share-based payments (IFRS 2) - (22,187) - (22,187) Operating Profit/Loss 167,831 (484,159) (190,122) (506,450) Twelve months ended 30 June, 2007Revenue 1,357,444 - - 1,357,444Segment result 245,351 (989,678) (441,963) (1,186,290) Less equity settled share-based payments (IFRS 2) - (44,375) (10,745) (55,120) Operating Profit/Loss 245,351 (1,034,053) (452,708) (1,241,410) Registered Office48 Grafton StreetManchester M13 9XXUnited Kingdom Nominated Adviser & BrokerLandsbanki Securities (UK) LimitedBeaufort House15 St Botolph StreetLondon EC3A 7QR Epistem Plc48 Grafton StreetManchesterM13 9XXUnited Kingdom T +44 (0)161 606 7258F +44 (0)161 606 7348 www.epistem.co.uk This information is provided by RNS The company news service from the London Stock Exchange