Ixico Regulatory News (IXI)

2 Nov 2005 07:00

Phytopharm PLC02 November 2005 2nd November 2005 Preliminary results for the year ended 31 August 2005 Phytopharm plc (PYM: London Stock Exchange) ("Phytopharm" or the "Company", orthe "Group") today announces its preliminary results for the year ended 31August 2005. Key Points - Operational • Completion of a Licence and Joint Development Agreement with Unilever for Hoodia gordonii extract • Successful interim data review for Phase II proof of principle study in Alzheimer's disease (Cogane(TM)) • Receipt of £4 million milestone in February 2005 (£3.6 million net received in March 2005) from Yamanouchi Pharmaceutical Co., Ltd following evaluation of interim Phase II Alzheimer's disease data (Cogane(TM)), confirming that the data had met the criteria in the licensing agreement • Termination of Cogane(TM) licensing agreement by Yamanouchi in March 2005, following Yamanouchi's post-merger portfolio review • Completion of subject dosing and follow-up in Phase II proof of principle study in Alzheimer's disease (Cogane(TM)) Key Points - Financial • Turnover increased to £7.4 million (2004 £1.1 million) • Loss reduced to £2.7 million (2004 £6.2 million) • Cash balance increased to £11.6 million (2004 £5.4 million) • Placing of new shares announced in May raised £9.0 million after expenses Dr Richard Dixey, Chief Executive of Phytopharm, said: "The highlight of the year was the signing of a worldwide licence agreement withUnilever, a global leader in weight management products, for our Hoodia gordoniiextract. We will be seeking further licensing deals over next year including ourveterinary portfolio and our Alzheimer's product Cogane(TM), following analysisof the data emerging from the proof of principle study at the end of thisquarter. " Enquiries: Phytopharm plc Today: 07867 782000Dr Richard Dixey, Chief Executive Thereafter: 01480 437697 Mobile: 07867 782000Dr Wang Chong, Chief Financial Officer Tel: 01480 437697 Mobile: 07876 684223 Financial DynamicsDavid Yates / Ben Atwell Tel: 0207 831 3113 A presentation for analysts will be held at Financial Dynamics, Holborn Gate, 26Southampton Buildings, London WC2A 1PB at 9:30am today. www.phytopharm.com Introduction Phytopharm is a dedicated pharmaceutical company specialising in the discoveryand development of novel pharmaceutical and functional food products forneurodegeneration, obesity and metabolic disease, dermatology and inflammation.The Company's strategy is to develop first-in-class products through 'proof ofprinciple' clinical testing, and then secure pharmaceutical partners for latestage development, sales and marketing. The business model of Phytopharm is to identify plant extracts with someevidence of clinical efficacy and to isolate, derivatise and develop novelpharmaceutical agents from these plant extracts. During the development of suchethical pharmaceutical products additional income may be derived from the salesof the plant extracts themselves in the veterinary and functional food markets.This business model generates a lean cash burn, and the Company is configured ina semi-virtual manner with low staff overheads to capitalise on this advantage.As the greatest part of the cash burn occurs during the later phases of productdevelopment, by which time substantial income from plant extract sales will notyet have been achieved, Phytopharm will seek to finance the further developmentof its lead neuroprotective and neurotrophic products, Cogane(TM) andMyogane(TM), through licensing or partnering arrangements with third parties. Operational review The progress of our products over the year, each at different stages ofdevelopment, is described below. Neurodegeneration The neurodegeneration programmes include Alzheimer's disease, Parkinson'sdisease and amyotrophic lateral sclerosis, a motor neurone disease. A library ofactive molecules has been developed by Phytopharm, and nine patent familiesprotecting this library have been filed world-wide. Our lead product, Cogane(TM) (coded PYM50028) is being developed for Alzheimer'sand Parkinson's disease. In pre-clinical studies, PYM50028 has been shown to beneuroprotective and neurotrophic, reversing both the decrease of neuronal growthfactors and neuronal degeneration that are observed in the ageing brain.Importantly, this product has also been shown to restore levels of proteins thatare altered in the ageing brain, returning them to levels observed in the young,causing beneficial outgrowth and branching of neurites. In January 2005, we announced the successful outcome of a scheduled interim datareview for the ongoing Phase II 'proof of principle' clinical study withPYM50028 in Alzheimer's disease. This study is being conducted under a clinicaltrial authorisation (CTA) from the UK Medicines and Healthcare ProductsRegulatory Agency (MHRA). The Phase II study utilises a randomised, double-blind, placebo-controlled design to evaluate the safety, efficacy andpharmacokinetic profile of PYM50028 after once daily oral administration overthree months. The effects of PYM50028 on memory, concentration and executivefunction are being evaluated during the study. In accordance with the protocol,an interim review was conducted after the first 60 subjects completed the study.The objectives of this review were to evaluate the emergent safety profile ofthe product and to re-estimate the total number of subjects required to measurethe efficacy of PYM50028 on cognitive performance. The sample size re-assessment was conducted by an independent statistician, whoreported that due to slightly increased variability between subjects the samplesize for the study should be increased from 200 to 238 subjects. Phytopharmsubsequently received regulatory and ethics approval for this amendment. The safety review was conducted by an independent consultant physician, who wasprovided with blinded data for each of the two treatment groups. He concludedthat "the data obtained to date indicate that the study medication is notassociated with any safety concerns." Therefore, the study continued with nochanges to the safety monitoring. These safety data from 60 patients wereforwarded to Yamanouchi Pharmaceutical Co. Ltd ("Yamanouchi") in February 2005and this triggered the milestone payment received in March 2005 of £4 million(£3.6 million net). This payment confirmed that the data met the criteria setout in the licensing agreement. In March 2005, Phytopharm received confirmation from Yamanouchi that, as aresult of a portfolio review arising out of the merger of Yamanouchi withFujisawa Pharmaceutical Co, Yamanouchi was terminating the licensing agreement,covering Japan and some other Asian countries, in connection with PYM50028.Phytopharm had previously announced in February 2005 that it had been informedby Yamanouchi that it was likely to terminate this agreement. In September 2005, we announced that a total of 256 subjects had completed theirparticipation into this study, including a 6 week monitoring period to assessany changes following cessation of dosing. During the study the safety,efficacy and pharmacokinetic profile of PYM50028 was compared to placebotreatment. These data are now being analysed and it is anticipated that theresults of the study will be announced early in December 2005. Followinganalysis of the results we will be seeking further global licensing partners forthis product and preliminary discussions have commenced with potentiallicensees. Our second lead product Myogane(TM) (coded PYM50018) is being developed foramyotrophic lateral sclerosis (ALS; also known as Lou Gehrig's disease). ALS isthe most common motor neurone disease and results from progressive degenerationof both upper and lower motor neurones. In pre-clinical models, PYM50018protects against neuronal damage, increases neurite outgrowth, reversesoxidative damage and reverses neuronal apoptosis in vitro. When administeredorally to a transgenic pre-clinical model of ALS, PYM50018 delays the loss ofmuscle strength and extends survival time. Last year, we successfully completed a Phase Ia clinical study to evaluate thesafety, tolerability and pharmacokinetic profile of PYM50018. This residentialclinical study was conducted under an investigational new drug (IND) applicationfiled with the United States Food and Drug Administration (FDA) and confirmedthat the product was well absorbed with a good safety profile. We also announcedlast year that the FDA had granted Orphan Drug and Fast Track designation toPYM50018 for the treatment of ALS. Building on this success we are nowdeveloping the manufacturing process and new formulations to support furtherclinical studies with PYM50018 for ALS. Obesity and metabolic disease Our obesity programme includes an extract of Hoodia gordonii for the dietarycontrol of obesity. This extract contains a novel appetite suppressant thatreduces caloric intake in overweight subjects, as demonstrated in ourdouble-blind, placebo-controlled clinical study announced in December 2001.Extracts of Hoodia gordonii and the active molecules therein are the subject ofa global patenting programme, with major patents granted in the US, UK and Japanand pending in Europe and all other major territories. In December 2004, we announced that we had granted an exclusive global licencefor our Hoodia gordonii extract to Unilever plc. As part of the agreement,Unilever committed to initial payments totalling approximately £6.5 million($12.5 million) out of a potential total of £21 million ($40 million) inpayments to us. In addition, we will receive a royalty on sales of allproducts, including globally recognised brands, containing the extract. We arecollaborating with Unilever on a five stage research and development programmeof safety and efficacy studies with a view to bringing new products to market.Unilever will manage the agronomy programme and will support the internationalpatent programme for the products. During the course of this year the programme has made good progress and clinicalstudies are planned for H1 2006. Phytopharm and Unilever have also become aware of many companies that areselling products over the Internet claiming to contain Hoodia and causing weightloss. Phytopharm and Unilever are in discussion with the relevant authoritiesconcerning this development. Phytopharm has also developed screens that are predictive of appetitesuppressant activity to develop and evaluate prescription product candidatesfrom our obesity and metabolic disease programme. Dermatology The dermatology programmes include products for canine skin disorders and humaneczema. These products have a dual mode of action that targets both the allergicand inflammatory components of skin disorders. Following the success last year of the three-plant product, coded PYM00217, inour European multi-centre study in canine atopic dermatitis, we launchedPYM00217 as a complementary pet food with the brand name Phytopica(TM) . Followingthe successful UK launch to veterinary dermatologists in 2004, the averageweekly sales have grown 101% during the year. Further sales growth will requirea dedicated sales force to target all veterinary practitioners throughout the UKand also expand into international markets. We have enjoyed considerableinterest from potential licensing partners and are in on-going discussions withmultinational companies. Inflammation The inflammation programmes include products for canine joint disorders andhuman inflammatory disorders, including asthma. These products are characterisedby their inhibition of a wide range of enzymes central to chronic inflammation. Last year, we announced the launch of Zanthofen(TM) (coded PYM50014) for themaintenance of canine joint mobility. Pre-clinical studies have demonstratedthat the components of Zanthofen(TM) maintain normal white cell function and haveanti-oxidant properties that help maintain joint mobility. Zanthofen(TM) isavailable to veterinary practitioners across the UK and is marketed byPhytopharm's marketing partner, Genitrix Ltd, a UK based veterinary productcompany. Further sales growth will require expansion into international marketsand discussions with interested parties are ongoing. Steady progress has been made in identifying novel synthetic molecules that canbe developed as a prescription medicine for the treatment of asthma and otherinflammatory disorders. Pre-clinical studies have demonstrated anti-inflammatoryand anti-spasmodic activity in several models of asthma and inflammation. Weanticipate that further proof of concept studies will be investigated during2006 using these compounds in pre-clinical models of asthma. Other events This year has also been marked by the resignation of our broker CanaccordCapital. Whilst we have received expressions of interest from a number ofbrokerage houses to take on this important role, we have decided to wait untilthe results of the Cogane(TM) study become available in December before making afinal decision. Financial Review Turnover Revenues for the year ended 31 August 2005 were £7.38 million (2004: £1.07million). The revenues for 2005 comprised principally £3.2 million in paymentsreceived from Unilever, for the exclusive licence to develop, manufacture andmarket Hoodia gordonii extract for the dietary control of obesity on a globalbasis, and a £4 million (£3.6 million net of Japanese withholding tax) milestonepayment from Yamanouchi, following acknowledgement by Yamanouchi that the safetydata in relation to 60 patients treated with PYM50028 had fulfilled the criteriain the licensing agreement. The significant increase in revenues for the periodreflects the intermittent timing of milestone payments. Operating expenses Research and development expenses Phytopharm subcontracts all laboratory work to third party specialists. Theresearch and development expenses include the reimbursement of the costsincurred by the third party subcontractors and the overhead of Phytopharmarising from research and development activities. Research and developmentexpenses were £8.46 million (2004: £6.35 million). Expenditure was dominated bythe ongoing PYM50028 Phase IIa clinical trial in Alzheimer's disease and thecommencement of development and agronomy work on Hoodia gordonii extract for thedietary control of obesity; the latter programme is now fully funded byUnilever. Expenses were also incurred on work to secure a robust supply chainfor PYM50018 for motor neurone disease. Administrative expenses Administrative expenses comprised mainly the costs incurred in respect of theemployees in the finance, business development and secretarial departments.Administrative expenses were £1.81 million (2004: £1.71 million). The increasedcosts reflect the additional one-off costs of an aborted £23.9 millionfundraising, US financial compliance costs and the share option compensationcharge. Net interest receivable Net interest receivable comprises mainly the interest income generated from cashinvested in short-term deposits. Net interest income was £0.34 million (2004:£0.24 million). The change over the year was due to changing short-term depositsas the Company utilised the cash of £6.3 million raised from the equityfinancing in February 2004, and £9.0 million, net of issue costs, raised from anadditional equity financing in April 2005, as well as changing interest ratesduring the year. Taxation There were no corporation tax charges for the period under review due to theincidence of tax losses. The tax credit on the loss on ordinary activities was£0.28 million (2004: £0.53 million). The tax credit is net of a 10% withholdingtax on the income from Yamanouchi. Liquidity and capital resources Since Phytopharm's initial public offering, cash expenditures have exceededrevenues. Phytopharm has financed its research and development operationsprimarily through: • an initial public offering of ordinary shares in 1996 • ordinary share offerings in November 1998, October 2000, December 2001, February 2004 and May 2005 • revenue generated from collaborative arrangements. The net cash used by operating activities for the year ended 31 August 2005 was£4.02 million (2004: £6.83 million) resulting principally from the decrease inoperating losses incurred by the Company during the year. Phytopharm's net cash outflow for capital expenditure was £54,000 (2004:£103,000). The capital expenditure is primarily for office and administrativefacilities. The net cash inflow of £614,000 from the repayment of advances tosuppliers arises from the repayment by Unilever of advances made to certainsuppliers in 2004. There was no cash outflow for acquisitions during theseperiods. Phytopharm's net cash inflow from financing activities was £9.11 million (2004:£6.37 million). The net cash inflow in 2005 primarily resulted from an equityfinancing in May 2005 and the proceeds from the exercise of the share options. Phytopharm had cash and short-term deposits of £11.64 million at 31 August 2005(2004: £5.43 million). The increase in cash and short-term deposits mainlyreflected the payments received from licensing partners and also the fundraising in May 2005. Phytopharm invested funds that were surplus to itsrequirements in highly liquid short-term deposits and has not borrowed fundsduring the financial year. Phytopharm had working capital of £11.68 million at31 August 2005 (2004: £5.11 million). Overall the results for the year werewithin the budget. Consolidated Profit and Loss Account for the year ended 31 August 2005 Notes 2005 2004 Unaudited Audited £'000 £'000 Turnover 2 7,378 1,072Cost of sales (400) (10) __________ __________ Gross profit 6,978 1,062 Net operating expenses 3 (10,271) (8,058) __________ __________ Operating loss (3,293) (6,996) Interest receivable and similar income 338 239 __________ __________ Loss on ordinary activities before taxation (2,955) (6,757) __________ __________ Tax on loss on ordinary activities 4 274 531 __________ __________ Loss for the year 6 (2,681) (6,226) ========= ========= Basic and fully diluted loss per ordinary share (pence) 5 (5.9) (15.3) All revenue and expenses shown above were generated from continuing operations. The Group has no recognised gains or losses for the financial year other thanthose disclosed above. Consolidated Balance Sheet at 31 August 2005 Notes 2005 2004 Unaudited Audited £'000 £'000Fixed assetsTangible assets 146 178 Current assetsStocks 947 350Debtors falling due after one year - 614Debtors falling due within one year 1,340 978Cash held on deposit as short term investments 11,600 5,237Cash at bank and in hand 40 194 __________ __________ 13,927 7,373 Creditors: amounts falling due within one year (2,244) (2,259) __________ __________ Net current assets 11,683 5,114 __________ __________ Total assets less current liabilities 11,829 5,292 __________ __________ Net assets 11,829 5,292 ========= ========= Capital and reservesCalled up share capital 512 427Share premium account 6 47,157 38,135Merger reserve 6 (204) (204)Profit and loss account 6 (35,636) (33,066) __________ __________Equity shareholders' funds 11,829 5,292 ========= ========= Consolidated Cash Flow Statement for the year ended 31 August 2005 Notes 2005 2004 Unaudited Audited £'000 £'000Net cash outflow from continuing operating activities 7 (4,024) (6,826) _________ _________Returns on investment and servicing of financeInterest received 338 239 _________ _________ TaxationUK corporation tax received 630 856Foreign taxation paid (400) (100) _________ _________ Net cash inflow from taxation 230 756 _________ _________ Capital expenditure and financial investmentPurchase of tangible fixed assets (64) (117)Sale of tangible fixed assets 9 14Repayment of advances to/(advances to) suppliers 614 (614) _________ _________ Net cash inflow/(outflow) for capital expenditure and 559 (717)financial investment _________ _________ Cash outflow before use of liquid resources and financing (2,897) (6,548) _________ _________Management of liquid resourcesIncrease in cash held on short term deposit (6,362) (106) _________ _________ FinancingProceeds from exercise of share options 158 37Proceeds from issue of share capital 10,101 6,483Expenses of issue of share capital (1,153) (154)Repayment of principal under finance leases (1) - _________ _________Net cash inflow from financing 9,105 6,366 _________ _________ Decrease in cash in the year (154) (288) ======== ======== Notes to the preliminary announcement 1. Basis of preparation The financial information for the year ended 31 August 2005 is unaudited and hasbeen prepared in accordance with the accounting policies set out in the AnnualReport for the year ended 31 August 2004. The financial information relating tothe years ended 31 August 2005 and 31 August 2004 does not constitute statutoryaccounts within the meaning of Section 240 of the Companies Act 1985. The datarelating to the year ended 31 August 2004 has been extracted from the fullreport for that year which has been filed with the Registrar of Companies. Thereport of the auditors on these accounts was unqualified. Statutory accounts forthe year ended 31 August 2005 will be delivered to the Registrar of Companiesfor England and Wales in due course. The report of the auditors on the 2005accounts has yet to be signed. 2. Turnover 2005 2004 Unaudited Audited £'000 £'000 Licensing and development 7,249 1,052Product sales 129 20 _________ _________ 7,378 1,072 ======== ======== 3. Other operating expenses 2005 2004 Unaudited Audited £'000 £'000 Research and development:Funded 1,606 -Unfunded 6,856 6,347 _________ _________ 8,462 6,347 Administrative expenses 1,809 1,711 _________ _________ 10,271 8,058 ======== ======== 4. Tax on loss on ordinary activities 2005 2004 Unaudited Audited £'000 £'000United KingdomCorporation tax credit 674 631Foreign TaxationWithholding tax suffered (400) (100) _________ _________ 274 531 ======== ======== The Group has taken advantage of the Research and Development corporation taxcredits introduced in the Finance Act 2000 whereby the Group may surrendercorporation tax losses incurred on research and development expenditure for acorporation tax refund at the rate of 24 pence in the pound. 5. Loss per share The basic undiluted loss per share is based on the loss for the year of£2,680,457 (2004: loss of £6,226,130) and on 45,623,780 (2004: 40,820,636)ordinary shares, being the weighted average number of shares in issue during theperiod. The Company has no dilutive potential ordinary shares in issue because it isloss making. A further measure of earnings per share has been recommended by the Institute ofInvestment Management and Research (the 'IIMR') for adoption by financialanalysts. This measure, known as headline earnings, adjusts standard earningsper share to eliminate capital items only. There are no material adjustments inrespect of this measure 6. Share premium account and reserves Share Profit premium Merger and loss account reserve account Unaudited Unaudited Unaudited £'000 £'000 £'000 At 1 September 2004 38,135 (204) (33,066)Premium on issue of shares 10,175 - -Expenses of new share issue (1,153) - -Loss for the year - - (2,681)Share option compensation charge - - 111 _________ _________ _________At 31 August 2005 47,157 (204) (35,636) ======== ======== ======== 7. Reconciliation of operating loss to net cash outflow from operating activities 2005 2004 Unaudited Audited £'000 £'000Continuing activitiesOperating loss (3,293) (6,996)Depreciation on tangible fixed assets 90 93Gain on disposal of fixed assets (1) (6)Increase in stocks (597) (308)Increase in debtors (318) (108)(Decrease)/increase in creditors (16) 444Increase in provision for share option compensation charge 111 55 _________ _________Net cash outflow from continuing operating activities (4,024) (6,826) ======== ======== 8. Related party transactions The Group was obliged during the year to pay to the Inland Revenue £157,731 inrespect of personal tax arising on the exercise by the Chief Executive Officerof 288,889 share options on 3 December 2004, near the end of the exerciseperiod. Dr Dixey is accordingly obliged to reimburse such amount to the Companyincluding interest charges at 5%, being the Inland Revenue Approved Rate. Thebalance outstanding at 31 August 2005 is £161,616, the maximum liability duringthe year, including £3,885 accrued interest. No provision for this debt has beenmade and there are no security or guarantee arrangements in place. The totalamount, including interest, is included in other debtors due within one year. This information is provided by RNS The company news service from the London Stock Exchange