MPM.L Regulatory News (MPM)

20 Sep 2006 07:02

Minster Pharmaceuticals PLC20 September 2006 For immediate release 20 September 2006 MINSTER PHARMACEUTICALS PLC ("Minster" or "the Company") Preliminary Results for the year ended 31 March 2006 Minster Pharmaceuticals plc (AIM: MPM), the drug development companyspecialising in neurological and psychiatric disorders, is pleased to announceits preliminary results for the year ended 31 March 2006. Highlights in the year and post the year end • Commencement of two Phase II trials of tonabersat in the preventive treatment of migraine and migraine with aura • Extension of tonabersat commercialisation rights from GlaxoSmithKline to include epilepsy and other neurological indications • Progress with strategy for clinical development of sabcomeline in treatment of cognitive decline in schizophrenia • Plans to raise further funds in advanced stage to accelerate the Company's development Paul Sharpe, Minster Pharmaceuticals' Chief Executive, said: "During the yearunder review we laid the foundations for the future development of our twocompounds, tonabersat and sabcomeline, and therefore of the Company. Our twodevelopment compounds address substantial markets and our progress to date,combined with the recent growth of the migraine prevention market, give meconfidence for the future. We are well advanced with plans to raise furtherfunds to accelerate the Company's development and look forward to updatingshareholders in due course." - ENDS - For further information: Minster Pharmaceuticals plc Tel: +44 (0) 1799 506623Paul Sharpe, Chief Executive OfficerRobert Aubrey, Chief Financial Officer Buchanan Communications Tel: +44 (0) 20 7466 5000Mark Court/ Rebecca Skye Dietrich/ Catherine Breen CHAIRMAN AND CHIEF EXECUTIVE'S REVIEW I am pleased to report on progress during the financial year ended 31 March2006, which represents the first full year since the acquisition of MinsterResearch. During the year under review we have made progress in developing our pipeline oftwo compounds in terms of the selection of indications, trial design,establishing the outsourced infrastructure for the management of the trials andin further developing our formal and informal collaborations with researchinstitutes, key opinion leaders and government and other funding organisations. Shortly before the year end, Minster recruited the first patients into amulti-national phase II study of tonabersat in the prevention of migraine. Sincethe year end, a second phase II study of tonabersat in the treatment of migrainewith aura has been initiated. The preventive treatment of migraine is a new and fast growing market,highlighted by the growth from launch of Topamax, a Johnson & Johnson drugapproved in the US for migraine prophylaxis in 2004. Sales of Topamax in themigraine prophylaxis indication in 2005 were estimated to be in the region ofUS$560 million. The market performance of Topamax reinforces our confidence inour choice of migraine prophylaxis as the lead indication for tonabersat. Earlier this month, we were pleased to extend further our worldwide developmentand commercialisation rights to tonabersat, as announced on 7 September 2006.GlaxoSmithKline, from whom the compound was originally licensed in 2001 in theprevention and treatment of migraine, agreed to worldwide rights in theadditional indications of epilepsy, pain and other neurological conditions wherecurrent treatments are inadequate. These additional indications represent a major new opportunity for Minsterthough it will take some time for us to develop our strategy for progressingtonabersat in multiple indications. We have also made progress with our other compound, sabcomeline, which webelieve offers a new approach to the treatment of cognitive decline inschizophrenia. During the year we began discussions with several leading USinstitutions to progress the development of sabcomeline in schizophrenia. Clinical trials Phase II study of tonabersat in migraine prophylaxis This trial is being led by Professor Peter Goadsby, Professor of Neurology atthe Institute of Neurology in London, and carried out to the standards of theInternational Headache Society. Quintiles, a leading contract researchorganisation, is managing the trial. The first patients were recruited in March2006 to this multi-national phase II study of tonabersat in the prevention ofmigraine. The study is being conducted at centres in the UK, Denmark, Hungaryand South Africa. It is anticipated that around 120 patients in total will berecruited into the trial, which will involve patients taking either tonabersator a placebo on a once-daily basis for three months. The primary endpoint of the trial is the reduction in the number of days thatpatients suffer a migraine. Patient recruitment is on schedule and the trialresults are expected during the first quarter of calendar year 2007. Phase II trial of tonabersat in migraine with aura prophylaxis A phase II study of tonabersat in prophylactic treatment of migraine with aurais underway at the Danish Headache Centre in Copenhagen. This study is beingconducted by Professor Jesper Olesen, a past President of the InternationalHeadache Society and Professor of Neurology at the University of Copenhagen,which is contributing grants to co-fund the study with Minster. Financials The financial performance of the Company in the year to 31 March 2006 was inline with management expectations. The pre-tax loss for the year was £1.81million, compared with a loss of £0.25 million in the year to 31 March 2005. Thefully diluted loss per share was 0.07p, compared with a loss of 0.03p in 2005.Net cash as at 31 March 2006 was £1.76 million, compared with £2.79 million at31 March 2005. The Company is well advanced with plans to raise further funds. People I would like to thank all of Minster's staff and Directors for their valuablecontribution to the development of the Company during the year. Outlook During the year under review we laid the foundations for the future developmentof our two compounds, tonabersat and sabcomeline, and therefore of the Company.Our two development compounds address substantial markets and our progress todate, combined with the recent growth of the migraine prevention market, give meconfidence for the future. As outlined above, we are well advanced with plans toraise further funds to accelerate the Company's development and look forward toupdating shareholders in due course. Paul SharpeChairman and Chief Executive19 September 2006 Consolidated Profit and Loss AccountYear ending 31 March 2006 2006 2005 Note £ £Turnover - -Research and development expenses (720,880) (15,026)Administrative expenses (1,186,953) (262,356) Operating loss 3 (1,907,833) (277,382) Interest receivable 6 100,819 29,579 Loss on ordinary activities before taxation (1,807,014) (247,803)Taxation credit on the results for the year 7 125,752 - Loss on ordinary activities after taxation 15 (1,681,262) (247,803) Loss per share 19Basic per share £0.0011 £0.0009Fully diluted per share £0.0007 £0.0003 All the activities of the Group are classed as continuing. Statement of total recognised gains and losses There were no recognised gains or losses other than the loss for the financialyear. Consolidated Balance SheetAt 31 March 2006 Note 2006 2005 £ £Fixed assetsIntangible asset 8 11,720,588 12,340,051Tangible assets 9 2,058 1,060 11,722,646 12,341,111 Current assetsDebtors 11 313,196 245,403Bank and cash 1,766,726 2,791,710 2,079,922 3,037,113 Creditors: amounts falling due within one year 12 (214,830) (122,559) Net current assets 1,865,092 2,914,554 Total assets less current liabilities 13,587,738 15,255,665Creditors: amounts falling due afterone year 13 (90,000) (90,000) Net assets 13,497,738 15,165,665 Capital and reservesShare capital 14 1,563,286 1,563,286Share premium 15 10,797,155 10,797,155Capital reserve 15 4,837,500 4,837,500Special reserve 15 54,572 41,237Profit and loss account 15 (3,754,775) (2,073,513) Shareholders' funds 16 13,497,738 15,165,665 Company Balance SheetAt 31 March 2006 Note 2006 2005 £ £Fixed assetInvestment in subsidiary 10 12,097,500 12,097,500 Current assetsDebtors 11 3,144,822 3,339,606 3,144,822 3,339,606Creditors: amounts falling due within one year 12 (38,561) (74,150) Net current assets 3,106,261 3,265,456 Total assets less current liabilities 15,203,761 15,362,956Creditors: amounts falling due after one year 13 (90,000) (90,000) Net assets 15,113,761 15,272,956 Capital and reservesShare capital 14 1,563,286 1,563,286Share premium 15 10,797,155 10,797,155Capital reserve 15 4,837,500 4,837,500Special reserve 15 54,572 41,237Profit and loss account 15 (2,138,752) (1,966,222) Shareholders' funds 16 15,113,761 15,272,956 Consolidated Cash Flow StatementYear ending 31 March 2006 Note 2006 2005 £ £Reconciliation of operating loss to net cash outflow fromoperating activitiesOperating loss (1,907,833) (277,382)Professional fees settled by issue of ordinary shares - 180,000Professional fees written off against share premium - (429,683)Depreciation charges 872 76Amortisation of goodwill 619,463 57,703Charges to profit and loss account in respect of the granting - 48,100of warrants below market valuePotential national insurance liability on warrants and share 13,335 18,665options granted in schemes not subject to HM Revenue & CustomsapprovalNational insurance liability crystallised from the above on - (1,478)exercise of warrantsChange in debtors 57,959 (215,231)Change in creditors 92,271 107,756Net cash outflow from operating activities (1,123,933) (511,474) Cash flow statementNet cash outflow from operating activities (1,123,933) (511,474)Returns on investments 17 100,819 29,579Acquisition of fixed assets 9 (1,870) -Taxation - -Acquisition 17 - (301,390) (1,024,984) (783,285) Financing 17 - 3,453,450 Increase/(decrease) in cash (1,024,984) 2,670,165 Reconciliation of net cashflow to movement in net debtIncrease/(decrease) in liquid resources (1,024,984) 2,670,165 Change in net debt (1,024,984) 2,670,165 Net funds at 1 April 2005 in the Group (2004 in the Company) 2,791,710 121,545 Net funds at 31 March 2006 in the Group 1,766,726 2,791,710 Notes to the financial statements 1. Accounting Policies The group financial statements have been prepared under the historical costconvention and in accordance with applicable accounting standards. Basis of consolidation The financial statements consolidate the financial statements of MinsterPharmaceuticals plc and its subsidiary from the date it was acquired, 25February 2005. Tangible fixed assets and depreciation Tangible fixed assets are included at cost, net of depreciation and anyprovision for impairment. Depreciation has been provided on the straight-line basis on all tangible fixedassets in order to write off the assets over their estimated useful lives, whichare: Computer equipment 3 years Other office equipment 4 years Intangible fixed assets and goodwill Goodwill arising on consolidation, representing the excess of the fair value ofthe consideration given over the fair value of the net assets acquired, iscapitalised as an intangible fixed asset and amortised on a straight line basisover its estimated useful economic life, which is estimated to be 20 years. Thecarrying value of goodwill is subject to an impairment test at the end of thefirst full year following acquisition and in any other periods if events orchanges in circumstances indicate that the carrying value may not ultimately berecoverable. Fixed asset investments Investments in subsidiaries are stated at cost, less provision for permanentimpairment. Deferred taxation Full provision is made for deferred taxation arising from timing differencesbetween the recognition of gains and losses in the financial statements andtheir recognition for tax purposes. Deferred tax assets are recognised to theextent that it is more likely than not that they will be recovered. Research and development Research and development costs are charged to the profit and loss account in theyear in which they occur. Foreign currencies Transactions in foreign currencies are recorded at the rate ruling at the dateof the transaction. Monetary assets and liabilities denominated in foreigncurrencies are translated at the rate of exchange ruling at the balance sheetdate. All differences are taken to the profit and loss account. Pensions Pension contributions to a group stakeholder pension plan in respect of certainDirectors and employees are charged to profit and loss account as incurred. Operating leases Rentals applicable to operating leases, where substantially all the benefits andrisks of ownership remain with the lessor, are charged to profit and lossaccount as incurred. 2. Going concern In common with other development and early stage companies, the Group is relianton funding from shareholders or other investors before it can reach a breakeventrading cash flow on a long term basis. The Group incurred a loss for the year ended 31 March 2006 of £1,681,262 and, atthat date had remaining cash resources of £1,766,726. As detailed in theDirectors' Report, the Group is at an advanced stage of negotiating furtherfunding to enable it to continue its development programme. The Directors are confident that sufficient funding will be secured to enablethe Group to continue to meet its obligations as they fall due. Consequently theaccounts are prepared on the going concern basis and do not include anyadjustments that might arise from an inability to obtain further funding. 3. Operating loss The operating loss is stated after charging: 2006 2005 £ £Depreciation of owned fixed assets 872 684Amortisation of goodwill on consolidation 619,463 57,703Research and development 720,880 15,026Auditors' remuneration - audit 8,000 5,000Auditors' remuneration - other services 3,000 1,575Directors' remuneration 267,368 23,195NIC on share options granted below market value 12,567 15,709Warrants issued below market value 768 51,056Operating lease rentals 8,921 584 Auditors' fees for the Company were £4,500 (2005 £3,500). The Company made aloss before and after taxation of £172,530 (2005 £62,471). The subsidiarycompany, in its first full year as part of the group, made an operating lossbefore taxation of £1,115,840, received interest of £100,819 and a tax credit of£125,752, resulting in a net loss after taxation of £889,269. The group loss forthe year comprises the loss of the Company, the subsidiary company and goodwillamortised of £619,463 (2005 £57,703). 4. Directors emoluments, share options and warrants Emoluments: The directors were paid salaries and benefits through the subsidiary, MinsterResearch Limited, as follows: 2006 2005 £ £Salaries 255,368 22,264Pension contributions paid in respect of one director 12,000 931 267,368 23,195 The highest paid director received a salary of £120,000 (2005: £11,178) andpension contributions of £12,000 (2005: £931). Directors' share options and warrants: Options, which can be exercised at any time between 11 May 2007 and 10 May 2015,were granted on 14 April 2005 to a director as follows: Number of ordinary shares subject Exercise price of each to each option option in pence per shareJohn Russell 1,000,000 1.4p There is a charge for the employer's national insurance that would becomepayable on exercise of share options that do not qualify for relief under UKEnterprise Management Incentive legislation. At 31 March 2006 the amount payablewould be £28,276 (2005 £15,709), based on the market value of 2.1p per share atthat date (2005 1.5p) and the current employer's national insurance rate of12.8%. This amount has been added to the special reserve (note 15). 5. Staff numbers and costs Staff numbers and costs for the year, including Directors, were as follows: 2006 2005Average number 7 2 2006 2005 £ £Salaries 345,524 26,264Social security costs 39,893 3,000Pensions 13,800 1,081 399,217 30,345 The Group operates a stakeholder pension plan for certain Directors andemployees. The assets of the plan are held separately from those of the Group.The pension cost charged in the profit and loss account represents payments madein the year and amounted to £13,800 (2005 £1,081). 6. Interest receivable 2006 2005 £ £On bank deposits 100,819 29,579 7. Taxation No UK Corporation Tax is payable on the results for the year due to losses. Thesubsidiary will be claiming an enhanced research and development tax allowanceand will request a tax repayment in accordance with the regulations up to thelimit allowed under the Finance Act 2000. Factors affecting the tax charge for the period: The difference between the tax assessed for the period and the standard rate ofcorporation tax is explained as follows: 2006 2005 £ £Loss on ordinary activities before tax 1,807,014 247,803Standard rate of corporation tax in the UK 30% 30%Loss on ordinary activities multiplied by thestandard rate of corporation tax 542,104 74,341 Effects of: 2006 2005 £ £Amortisation of goodwill on consolidation 185,839 17,311Expenses not deductible for tax purposes 1,359 2,144Timing differences 30 19,590Used to generate R&D tax credit refund 173,616 -Losses carried forward to future years 181,260 35,296 As above 542,104 74,341 Hence there is no tax charge in either 2006 or 2005. There are tax lossescarried forward in the group of approximately £1.87 million (2005 £1.2 million). 8. Intangible Fixed Assets - goodwill arising on consolidation Group 2006 £Cost 1 April 2005 12,397,754Addition during the year - Cost 31 March 2006 12,397,754 Amortisation 1 April 2005 57,703Amortisation for the year 619,463 Amortisation 31 March 2006 677,166 Net book value 31 March 2006 11,720,588 Net book value 31 March 2005 12,340,051 9. Tangible Fixed Assets - computers and office equipment Group 2006 £Cost 1 April 2005 2,194Additions 1,870 Cost 31 March 2006 4,064 Depreciation 1 April 2005 1,134Charge for the year 872 Depreciation 31 March 2006 2,006 Net book value 31 March 2006 2,058 Net book value 31 March 2005 1,060 The tangible fixed assets were all held by the subsidiary. The Company held nofixed assets at any point in the year. 10. Investments Company Company 2006 2005 £ £Investment in subsidiary undertakingAt 1 April 2005 12,097,500 -Addition in the year - 12,097,500 At 31 March 2006 12,097,500 12,097,500 The Company owns 100% of the issued ordinary share capital of shares of 10p eachof Minster Research Limited, which it acquired on 25 February 2005. MinsterResearch Limited is incorporated in England and Wales and its principal activityconsists of the development of pharmaceutical compounds under licence from thepatent holders. 11. Debtors Group Company Group Company 2006 2006 2005 2005 £ £ £ £Amounts owed by group undertaking - 3,144,458 - 3,339,606Prepayments and otherdebtors 141,368 - 159,947 -VAT 24,916 364 64,295 -Corporation tax 146,912 - 21,161 - 313,196 3,144,822 245,403 3,339,606 Amounts due after more than one year included in: Group Company Group Company 2006 2006 2005 2005 £ £ £ £Prepayments and other debtors 114,488 - 135,788 - 12. Creditors: amounts falling due within one year Group Company Group Company 2006 2006 2005 2005 £ £ £ £Trade creditors 157,381 - 14,825 294Taxes and social security costs 12,779 1,478 14,758 1,478Other creditors - - 3,092 -Accruals 44,670 37,083 89,884 72,378 214,830 38,561 122,559 74,150 13. Creditors: amounts falling due in more than one year 2006 2005 £ £Unsecured convertible loan notes 90,000 90,000 On 6 April 2004, £355,000 of unsecured, zero coupon, seven year convertible loannotes were issued. These are convertible at any time up to the final redemptiondate of 6 April 2011 into approximately 290 ordinary shares of 0.1p each basedon a conversion price of 0.345 p per share. The loan notes may be redeemed bythe Company at any time after 14 April 2007. At the end of the year, loan notesto the value of £90,000 remained unconverted. 14. Share capital 2006 2005Authorised:Ordinary shares of 0.1p each Number 3,500,000,000 3,500,000,000 Value £3,500,000 £3,500,000 2006 2005Allotted, called up and fully paid:Ordinary shares of 0.1p each Number 1,563,286,348 1,563,286,348 Value £1,563,286 £1,563,286 During the year the Company made no issues of shares. At 31 March 2006 the following potential issues of ordinary shares of 0.1 p eachwere outstanding: (i) A further 645,000,000 shares are issuable as secondaryconsideration to the former shareholders of the subsidiary Minster ResearchLimited, on the acceptance by the Company of an arm's length written offer tolicense any part of the intellectual property of Minster Research Limited (seenote 15). (ii) 26,086,955 shares are issuable on conversion of the outstandingunsecured convertible loan notes (see note 13) (iii) 1,000,000 shares issuable under a warrant which are exercisable at0.345p per share before 6 April 2009. (iv) Options over ordinary shares granted are as follows: Granted February 2005:30,000,000 shares at 3.5p per share20,000,000 shares at 0.75p per shareThese options can be exercised before 25 February 2015. Granted May 2005:5,100,000 shares at 1.4p per shareThese options can be exercised before 10 May 2015. 15. Share premium and reserves The Group Share premium Capital reserve Special reserve Profit and loss account account £ £ £ £At 1 April 2005 10,797,155 4,837,500 41,237 (2,073,513)Retained loss for the year - - - (1,681,262)Adjustment to special reserve - - 13,335 - At 31 March 2006 10,797,155 4,837,500 54,572 (3,754,775) The Company Share premium Capital reserve Special reserve Profit and loss account account £ £ £ £At 1 April 2005 10,797,155 4,837,500 41,237 (1,966,222)Retained loss for the year - - - (172,530)Adjustment to special reserve - - 13,335 - At 31 March 2006 10,797,155 4,837,500 54,572 (2,138,752) The capital reserve arises as a result of a further 645,000,000 ordinary sharesto be issued at 0.75p per share as a secondary consideration to the formershareholders of the subsidiary Minster Research Limited, on the acceptance bythe Company of an arm's length written offer to license any part of theintellectual property of Minster Research Limited. The special reserve arises as a result of the granting of warrants and optionsto various directors in a previous financial year at prices below market valueon the date of grant, and includes employer's national insurance calculated atthe current rate and based on current market value of the shares included inwarrants and share options not exercised as at 31 March 2006 to the extent thatthey do not qualify for Enterprise Management Incentive relief in the UK. Theadjustment this year reflects the effect of the movement in the Company's shareprice between 31 March 2005 and 31 March 2006, which in turn affects the valueof national insurance payable on the potential gain on exercise of share optionsnot held under the terms of a government approved scheme. Options granted duringthe year were granted at the market value ruling on the date of the grant. 16. Equity shareholders' funds Group 2006 2005 £ £At 1 April 2005 15,165,665 136,914Share capital subscribed, includingpremium, net of expenses of issue - 10,397,817Capital reserve - 4,837,500Special reserve 13,335 41,237 15,179,000 15,413,468Net loss for the year (1,681,262) (247,803) At 31 March 2006 13,497,738 15,165,665 Company 2006 2005 £ £At 1 April 2005 15,272,956 136,914Share capital subscribed, including premium, net of - 10,397,817expenses of issueCapital reserve - 4,837,500Special reserve 13,335 41,237 15,286,291 15,413,468Net loss for the year (172,530) (140,512) At 31 March 2006 15,113,761 15,272,956 17. Cash flows 2006 2005 £ £Returns on investmentsInterest received 100,819 29,579 100,819 29,579Capital expenditureNet current liabilities of Minster Research Limited acquired on acquisition - 301,390 - 301,390 FinancingIssues of share capital for cash - 3,098,450Issue of convertible unsecured loan stock for - 355,000cash - 3,453,450 18. Financial instruments The Group's financial instruments comprise cash and borrowings in the form ofunsecured convertible zero coupon loan notes together with trade creditors thatderive directly from its operations. There were no trade debtors. The purpose of these instruments is to provide finance for the Group'soperations. As permitted by FRS13, short-term creditors have been excluded. Foreign currencies There were no foreign currency risks at the year-end date. Interest rate The Group finances its operations principally through the cash reserves held,which have arisen as a result of shares being issued. Surplus funds are held onbanker's treasury deposits. The unsecured convertible zero coupon loan notescarry no interest charge. Liquidity risk The Group manages its liquidity risk through effective working capitalmanagement. Book value of financial instruments In the opinion of the directors, the book value of the financial instruments isnot materially different from their fair values. Financial assets and liabilities The financial assets are as follows: 2006 2005 £ £Cash at bank and in hand 81,726 41,710Bank treasury deposits 1,685,000 2,750,000 1,766,726 2,791,710 The bank treasury deposits accrue interest at the current money market rate. The financial liabilities were as follows: 2006 2005 £ £Unsecured convertible loan notes 90,000 90,000 No interest is due on the unsecured convertible loan note as explained in Note13. The maturity of the unsecured convertible loan notes is as described in note13. 19. Loss per share The calculation of loss per share is based on the following information: 2006 2005Loss attributable to shareholders £1,681,262 £247,803Weighted average number of shares (basic) 1,563,286,348 283,799,992Weighted average number of shares (diluted) 2,289,774,673 967,326,822 The calculation of the loss per share is based on the loss after taxation andthe weighted average of the ordinary shares of 0.1p in issue during the year. For the diluted loss per share, the weighted average number of ordinary sharesin issue is adjusted to assume conversion of all dilutive potential ordinaryshares. The Group has share options, warrants, convertible loan notes and sharesto be issued as secondary consideration in respect of the subsidiary acquiredduring the previous year as potentially dilutive. 20. Transactions with directors The Company entered into a contract on 27 January 2005 with Biophar ConsultingLimited, a company with which Peter Blower is associated. The contract providesfor the technical consultancy services of Peter Blower to be made available tothe Company on an arms length basis. During the year the amount charged to profit and loss under this contract was£40,018 (2005 Nil) and the balance outstanding at 31 March 2006 was £11,791(2005 Nil). 21. Commitments At 31 March 2006 the group had an operating lease commitment in respect of landand buildings of £775 (2005 £434), representing one month's rental of itsoffices. The directors have signed licensing agreements whereby payments become due onthe initiation of a first Phase III clinical trial and on the first commercialsale of product in a major market. As no liability arises unless and until theseevents occur, the directors believe that it is inappropriate to make aprovision. If these events do occur, the directors are confident that they willbe able to secure sufficient funds to make the payments. 22. Financial Information The financial information set out in this announcement does not constitute theCompany's statutory accounts for the year ended 31 March 2006. The auditor hasreported on the statutory accounts for the year ended 31 March 2006. Theirreport was unqualified and did not contain any statement under section 237 (2)or (3) of the Companies Act 1985. The statutory accounts for the year ended 31March 2006 will be sent to the Registrar of Companies and Shareholders in duecourse and copies will be available on request from the Company Secretary,Minster Pharmaceuticals plc, Audley End Business Centre, The Old Forge, LondonRoad, Wendens Ambo, Saffron Walden CB11 4JL. This information is provided by RNS The company news service from the London Stock Exchange