Sareum Regulatory News (SAR)

6 Mar 2008 07:00

Sareum Holdings PLC06 March 2008 For immediate release 6 March 2008 SAREUM HOLDINGS PLC ("Sareum" or "the Company") FINANCIAL RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2007 Sareum Holdings plc (AIM: SAR), the specialist structure-based drug discoverybusiness, is pleased to announce its financial results for the six month periodended 31 December 2007. Financial highlights during period 1 July to 31 December 2007: • Revenues of £1,096,000 (2006: £1,205,000)• Loss on ordinary activities (after taxation) of £674,000 (2006: £208,000)• Cash in bank £920,000 (2006: £767,000)• Placing of £1,250,000 (gross) to advance in-house cancer drug pipeline• No significant financial impact on adopting IFRS Business highlights during period 1 July to 31 December 2007: • Strengthened in-house drug discovery pipeline with the commencement of two further oncology drug discovery programs• Significant increase in patent application filings• Additional repeat business with H. Lundbeck A/S• Extension of research services agreement with Genentech, Inc.• Mr Giorgio Reggiani and Dr Alastair Riddell appointed to the Board Post-period end highlights: • Additional in-house cancer research program and associated patent filings Dr Tim Mitchell, CEO of Sareum Holdings plc, said: "We believe shareholder valuecan be maximised from our in-house cancer programmes and are pleased to report aproductive research period where we have significantly progressed our internalpipeline. Sareum has managed to maintain its level of fee for service work andwe continue to focus on the development and commercialisation of our internalprogrammes." Sareum Holdings plc 01223 497700 Tim Mitchell, Chief Executive Officer Buchanan Communications 020 7466 5000 Tim Anderson, Mary-Jane Johnson Grant Thornton Corporate Finance 020 7383 5100 Philip Secrett, Colin Aaronson Interim Results for the six months ended 31 December 2007 Chairman's Statement Sareum Holdings plc has continued to make significant advances in its in-housecancer drug discovery programmes and, despite tight trading conditions made moredifficult by the level of merger and acquisition activity among our key customergroup, it has managed to largely maintain the overall level ofrevenue-generating business. We made an important decision in early 2007 to addto our in-house pipeline and to increase the resources devoted to in-houseprogrammes. This has resulted in considerable progress being made in theseprogrammes which are the key value drivers of the business, and is reflected inthe frequency with which new patent applications are being made. Sareum has an integrated drug discovery platform that is capable of deliveringhigh quality novel drug leads quickly and effectively, delivering solid IPresults with great efficiency and flexibility for both the Company and itscollaborators. The key value creator for Sareum's shareholders is in the development and futurelicensing of drugs from the Company's in-house drug development pipeline.Notable progress in Sareum's programmes, which focus on novel treatments forcancer, has led to a decision to increase investment in the drug discoveryactivity, adding new programmes and increasing the resource applied to existingprogrammes. We are expecting to be able to nominate a compound to enterpre-clinical development in the next six months. Our most advanced in-house programme is carried out in conjunction with TheInstitute of Cancer Research, one of the world's leading cancer researchorganisations. Additionally, we are developing five further quality cancer drugdiscovery targets through our in-house programmes. We have so far generated atotal of seven drug compound patent applications including the filing of fourpatent applications during this period and one post-period end. Significantly,we have obtained positive results from initial pre-clinical experiments tounderstand the behaviour of our drug leads following systemic administration,including experiments to determine the response of a tumour upon exposure tothese compounds. Based on these results, we expect to commence detailed efficacymodel studies in early Q2 2008. We have received expressions of interest from pharmaceutical and biotechnologycompanies in three of these programmes and early stage licensing discussions aretaking place. This supports our belief that our technology platform andexpertise can generate valuable drug discovery assets. Additions to the Board Mr Giorgio Reggiani, who joined Sareum as Finance Director and Company Secretaryin June 2007, was appointed to the Board of the Company in September. Mr.Reggiani is a Chartered Management Accountant with 17 years of senior financialexperience in companies including Esprit Capital Partners LLP, Vidus Limited andMobile Systems International plc. Giorgio has brought a wealth of corporate andfinancial skills to our strategic management of the Company. Dr Alastair Riddell joined the Board in November 2007 as a non-executivedirector. Alastair is CEO of Stem Cell Sciences plc and was previously CEO ofParadigm Therapeutics Limited, the drug target discovery and development companythat was acquired by Takeda Pharmaceutical Company in March 2007. Prior to that,he was Chairman of Surface Therapeutics Ltd and CEO of Pharmagene plc, now namedAsterand. He has held senior positions in international marketing, sales andgeneral management in Amersham International and Centocor. Alistair's extensiveknowledge of and experience in the biotech sector will be valuable as theCompany moves towards its strategic goals. Financial review During this period, revenues of £1,096,000 were recognised, £222,000 of whichcame from success milestone payments. We have experienced difficult tradingconditions, especially in the USA where there is a reticence to use cashreserves to sponsor new research activities until financial conditions improve.There has also been an unusually high level of M & A activity among our keycustomer group and this has tended to interfere with decision-making oninvestment in new programmes. We ended the half year with net current assets of £1,112,000 including £920,000cash in bank. A placing of £1,250,000 (£1,203,000 net of issue costs) in Octoberwas made to augment the cash available from our own activities and to fund theprogress of our internal drug discovery pipeline. The Company's fundingrequirements depend on the timing of fee for service contracts which are, bytheir nature, difficult to predict. However, the Sareum board currently believesit will need to seek further funding before the end of its financial year. The decision to increase activity on our internal pipeline has been combinedwith careful management of costs, resulting in a loss on ordinary activities(after taxation) of £674,000. Although this is an increase over the priorinterim period, we believe this level of R&D spend is crucial to increasing thevalue of our business. International Financial Reporting Standards ("IFRS") This is the first period for which the Group has prepared the financialstatements under International Financial Reporting Standards ('IFRS') and itshould be emphasised that the amended presentation of financial statements underIFRS has no impact on the financials of the Company. Previously Sareum hasprepared its financial statements under UK Generally Accepted AccountingPrinciples ("UK GAAP"). The financial statements presented below are therefore,for the first time, presented in accordance with the Group's accounting policiesbased on IFRS as adopted by the European Union. The unaudited financialstatements for the six months ended 31 December 2007 are prepared in accordancewith the IFRS accounting policies that are expected to apply as of 30 June 2008.The comparative financial statements for the six months ended 31 December 2006and the year ended 30 June 2007 have been restated under IFRS. Outlook Our primary objective remains to advance our in-house drug discovery pipeline,which is focused on cancer, to deliver drug candidates such that they arepositioned to attract lucrative partnering deals with pharmaceutical companies.We will continue to advance these programmes and file further drug patentapplications during the year to protect our Intellectual Property portfolio. Weexpect to develop drug candidates for pre-clinical studies during the currentfinancial year and are actively seeking licensing partners with the aim ofachieving a licensing deal on at least one of our six current in-houseprogrammes. Fee-for-service activities continue to be an important side of our business andwe look forward to securing additional contracts and receiving future successmilestone payments and repeat business from existing programmes. Dr Paul HarperChairmanSareum Holdings plc Sareum Holdings plcConsolidated Income Statement for the six months ended31 December 2007 Unaudited Unaudited Audited Half Year to Half Year to Year ended 31 Dec 07 31 Dec 06 30 Jun 07 £'000 £'000 £'000 Revenue 1,096 1,205 2,471 Cost of Sales (1,168) (833) (1,853) Gross (Loss)/Profit (72) 372 618 Administrative expenses (731) (671) (1,352) Operating Loss (803) (299) (734) Interest receivable and similar income 9 5 29 Interest payable and similar charges (3) (5) (17) Loss on ordinary activities before taxation (797) (299) (722) Tax on loss on ordinary activities 123 91 195 Loss on ordinary activities after taxation (674) (208) (527)Loss per share (pence)Basic and diluted (0.13)p (0.05)p (0.12)p Sareum Holdings plcConsolidated Balance Sheet as at 31 December 2007 Unaudited Unaudited Audited Half Year to Half Year to Year ended 31 Dec 07 31 Dec 06 30 Jun 07 £'000 £'000 £'000 Non-current assetsIntangible assets 32 14 31Tangible assets 917 720 1,015 949 734 1,046 Current assetsDebtors 722 997 837Cash at bank and in hand 920 767 660 1,642 1,764 1,497 Creditors: amounts due within one year (530) (768) (1,017) Net current assets 1,112 996 480 Total assets less current liabilities 2,061 1,730 1,526 Creditors: amounts due in over one year (165) (45) (160) Net assets 1,896 1,685 1,366 EquityCalled up share capital 150 112 115Share premium account 4,933 3,767 3,764Merger reserve - - -Profit and loss account (3,187) (2,194) (2,513) Total equity 1,896 1,685 1,366 Sareum Holdings plcConsolidated Statement of changes in equity for the six months ended31 December 2007 Share Capital Share Premium Retained Loss Total Unaudited Unaudited Unaudited £'000 £'000 Unaudited £'000 £'000 At 1 July 2006 93 3,088 (1,985) 1,196Issue of share capital (net) 22 676 - 698Loss for the period - - (208) (208) At 31 December 2006 115 3,764 (2,193) 1,686Loss for the period - - (320) (320) As at 30 June 2007 115 3,764 (2,513) 1,366Issue of share capital (net) 35 1,169 - 1,204Loss for the period - - (674) (674) As at 31 December 2008 150 4,933 (3,187) (1,896) Sareum Holdings plcConsolidated Cash Flow Statement for the six months ended31 December 2007 Unaudited Unaudited Audited Six Months to Six Months to Year ended 31 Dec 07 31 Dec 06 30 Jun 07 £'000 £'000 £'000Operating activitiesCash outflow from operating activities (930) (415) (370)Research and Development tax credit 123 128 128 (807) (287) (242) Net cash used in operating activitiesInvesting activitiesAcquisition of fixed assets (84) (54) (518)Interest received 6 - 12 (78) (54) (506) Net cash used by investing activitiesFinancing activitiesNet proceeds from ordinary shares issued 1,203 698 698Increase/(Repayment) of loans (58) (118) 182 Net increase/(decrease) in cash and equivalents 260 239 132 Cash and equivalents at start of period 660 528 528 Cash and equivalents at end of period 920 767 660 SAREUM HOLDINGS PLCNOTES TO THE UNAUDITED RESULTS FOR THE SIX MONTHS ENDED31 DECEMBER 2007 1. FINANCIAL INFORMATION These interim statements do not constitute statutory financial statements withinthe meaning of Section 240 of the Companies Act 1985. The 30 June 2007 AnnualReport and Accounts are available from Sareum's web site, www.sareum.co.uk. 2. BASIS OF ACCOUNTING The interim financial statements have been prepared in accordance with the IFRSaccounting policies that are expected to apply for the 30 June 2008 annualfinancial statements. No changes have arisen due to the transition fromreporting under UK GAAP to reporting under IFRS and therefore no reconciliationsare required or provided. Please refer to the appendix below for further information. 3. TAXATION No liability arises for corporation tax for the period ended 31 December 2007.Research and Development tax credits receivable as cash are estimated to be£123,000 for the period. 4. DIVIDENDS The directors do not propose the payment of a dividend in respect of the sixmonths ended 31 December 2007. 5. LOSS PER SHARE Basic and diluted loss per share is 0.13p (2006: 0.05p). The basic loss perordinary share is based on the Group's loss for the six months of £674,000(2006: £208,000) divided by the weighted average number of shares in issueduring the period of 506,105,121 (2006: 388,662,000). 6. DEFERRED INCOME Deferred income arises when sales invoices have been issued to clients but thework covered by the invoices has not been completed at the end of the accountingperiod. Deferred income will be credited to turnover once the invoiced work iscomplete. There was £10,000 of deferred income during the period (2006:401,000). Appendix Reporting under International Financial Reporting Standards (IFRS) From June 2008 Sareum Holdings plc will produce its consolidated report andaccounts in accordance with IFRS. This financial information has been preparedon the basis of the IFRS expected to be applicable at 30 June 2008. Thesestandards are subject to ongoing review and endorsement by the EU or possibleamendment by interpretive guidance from the IASB and are therefore still subjectto change. We will update our restated information for any such changes as andwhen they are made. No changes have arisen due to the transition from reporting under UK GAAP toreporting under IFRS and therefore no reconciliations are required or provided.The Group's date of transition to IFRS is 1 January 2007, which is the beginningof the comparative period for the 2008 financial year. The UK GAAP financial information contained in this document does not constitutestatutory accounts as defined in Section 240 of the Companies Act 1985. Theauditors have issued unqualified opinions on the Group's UK GAAP financialstatements for the years ended 30 June 2006 and 30 June 2007. Key accounting policy changes are included within this report. A full set ofIFRS accounting policies will be published in the Group's report and accountsfor the year to 30 June 2008. First time adoption IFRS 1 "First Time Adoption of International Financial Reporting Standards" setsout the approach to be followed when IFRS are applied for the first time. As ageneral principle, IFRS 1 requires that accounting policies are to be appliedretrospectively although IFRS 1 provides a number of optional exceptions wherethe cost of compliance is deemed to exceed the benefits to users of thefinancial statements. Where applicable, the options selected by management underIFRS 1 are set out in the explanatory notes below. Summary of significant accounting policies The significant accounting policies adopted in the preparation of the Group'sIFRS statements are set out below: Basis of preparation Results for the six month periods ended 30 June 2007 and 30 June 2006 have notbeen audited. Subject to EU endorsement of outstanding standards and no furtherchanges from the IASB this information is expected to form the basis forcomparatives when reporting financial results for 2007, and for subsequentreporting periods. The financial statements have been prepared on the historical cost basis exceptfor certain financial assets and liabilities, which are measured at fair value. Intangible assets Purchased licenses are recognised at cost on acquisition and are subject toamortisation over their useful life from the point at which the asset isavailable for use. The amortisation charge is calculated on a straight-linebasis over their estimated useful lives. Research and development expenditure The Group considers that the regulatory, technical and market uncertaintiesinherent in the development of new products mean that internal development costsshould not be capitalised as intangible fixed assets until commercial viabilityof a product is demonstrable and appropriate resource is in place to launch theproduct. Except in those circumstances, research and development expenditure isexpensed as incurred. Property, plant and equipment Property, plant and equipment is stated at cost, net of depreciation and anyprovision for impairment. Depreciation is provided on all property, plant andequipment at rates calculated to write off the cost, less estimated residualvalue, of each asset on a straight line basis over its expected useful life asfollows: Leasehold improvements - remaining lease termFixtures and fittings - four years, straight-line basisLaboratory equipment - four years, straight-line basisComputer equipment - three years, straight-line basis Foreign currencies Transactions in foreign currencies are recorded at the rate of exchange at thedate of the transaction. Monetary assets and liabilities denominated in foreigncurrencies at the balance sheet date are reported at the rate of exchangeprevailing at that date. All exchange gains arising on the retranslation ofassets and liabilities are dealt with in the income statement. Leases Rentals under operating leases are charged on a straight-line basis over thelease term, even if the payments are not made on such a basis. Provisions aremade in respect of onerous leases to the extent that the Directors believe thatcosts will be incurred under the terms of the lease with no benefit to theGroup. Taxation Current UK corporation tax is provided at amounts expected to be paid (orrecovered) using the tax rates and laws that have been enacted or substantivelyenacted by the balance sheet date. Deferred tax is accounted for using the balance sheet liability method inrespect of temporary timing differences arising from differences between thecarrying amount of assets and liabilities in the financial statements and thecorresponding tax bases used in the computation of taxable profit. Deferred taxassets are recognised to the extent that it is probable that future taxableprofit will be available against which the temporary difference can be utilised.Their carrying amount is reviewed at each balance sheet date on the same basis. Deferred tax is measured on an undiscounted basis, and at the tax rates that areexpected to apply in the period in which the asset or liability is settled. Itis recognised in the income statement except when it relates to items creditedor charged directly to equity, in which case the deferred tax is also dealt within equity. Revenue recognition Revenue consists of income received, in the normal course of business, fromlicence and development agreements and is stated net of any trade discounts, VATand other sales related taxes. Income from these agreements is typically in theform of fees on signature, milestone receipts on achievement of predeterminedevents, and royalties on the sale of the product once marketed. Revenue is recognised when licence rights are granted to the extent that theCompany has performed its contractual obligations, based on the fair value ofthe right to consideration for each component of the agreement. Post-retirement benefits The Group makes defined contributions to personal pension arrangements of itsexecutive directors and employees. The amount charged to the income statement inrespect of pension costs is the contribution payable in the period. Differencesbetween contributions payable in the period and contributions actually paid areshown either as accruals or prepayments in the balance sheet. Share-based payments The Group operates an employee share option scheme. For all grants of shareoptions and awards, the fair value as at the date of grant is calculated usingthe Black-Scholes option pricing model and any corresponding expense isrecognised over the vesting period. This information is provided by RNS The company news service from the London Stock Exchange