16 Sep 2014 07:00
16 September 2014
Silence Therapeutics plc
Half year results
Silence Therapeutics plc, AIM: SLN ('Silence' or 'the Company'), a leader in the discovery, development and delivery of novel RNA interference (RNAi) therapeutics for the treatment of serious diseases, announces its half year results for the six months ended 30 June 2014.
Summary
· Raised £11.4m (gross) through an equity placing
· Confirmed gene knockdown using proprietary DACC delivery system in non-human primates
· Recruited staff in key disciplines, expanding capabilities and capacity
· Formed translational medicine unit to channel technology into drug candidates
· Encouraging early stage progress with microRNA and messenger RNA
· Maintained strict cost controls, with net cash of £21.3m and £5.0m on deposit at 30 June 2014
Post period end
· Achieved key milestone by completing recruitment for Phase 2a trial for Atu027 in combination with gemcitabine for pancreatic cancer
· Licensee Quark Pharmaceuticals Inc. reported favourable Phase 2b results in delayed kidney graft function using AtuRNAi - clinical utility also confirmed
· Over 400 patients now dosed with AtuRNAi - safety profile and data enhanced
· Chief Operating Officer Annie Cheng stepped down from the Board due to family commitments
Ali Mortazavi, CEO of Silence Therapeutics, said:
"Proving our lung delivery in non-human primates was a landmark for the Company, and underlined our powerful position in RNA interference. With multiple payloads and one of the broadest delivery capabilities in RNA therapeutics, we are well positioned to translate our technology toolkit into meaningful clinical products."
Enquiries:
Silence Therapeutics plc | +44 (0)20 3700 9711 |
Ali Mortazavi, CEO | |
Timothy Freeborn, Finance Director | |
Rozi Morris, Communications Manager | |
Canaccord Genuity Limited | +44 (0)20 7523 8350 |
Lucy Tilley/Dr Julian Feneley/Henry Fitzgerald-O'Connor |
About Silence Therapeutics plc (www.silence-therapeutics.com)
Silence Therapeutics is a leading RNA interference (RNAi) or 'gene silencing' platform technology company which has proprietary delivery systems. Combined, the RNAi and delivery platforms enable the development of multiple products to multiple drug targets allowing the development of novel therapeutics for diseases with high unmet medical need.
Silence is one of only a handful of listed companies globally which has human validated RNA delivery technology. Its platform is one of the safest and most widely tested, with over 400 patients dosed and no immune response observed so far. Silence's RNAi platform has been used in three Phase 2 clinical trials, two of which are awaiting results. It also has a robust IP estate protecting its proprietary technology.
Overview
Silence has continued to make progress over the period, both in its pre-clinical and clinical programmes. The fundraising completed in April provides funding to support existing clinical projects and also to expand pre-clinical capabilities and capacity. The momentum from the first half of this year is expected to be maintained.
Business review
A key target was achieved in April 2014 when Silence confirmed successful gene knockdown in non-human primates using its RNAi lung delivery system, DACC. Both target messenger RNAs and proteins saw a knockdown effect. This demonstrates the Company's broad delivery capability in RNA therapeutics, with validated delivery systems in the lung, the vasculature and liver in vitro, in rodents and in non-human primates.
Since the period end, another key milestone has been achieved with recruitment completed on schedule for the Phase 2a trial of Atu027 in pancreatic cancer. Atu027 is Silence's leading short-interfering RNA (siRNA) therapy. It uses the Company's proprietary AtuPLEX® and AtuRNAi® technologies to broadly deliver siRNA to the endothelial cells of the vascular system, targeting the expression of the protein PKN3, a key factor in cancer progression and metastasis.
Silence enrolled its target number of 24 patients for the study, at clinics across Germany. The primary objective is to evaluate the safety and pharmacokinetics of Atu027 when used in combination with standard chemotherapy treatment, gemcitabine, in subjects with locally advanced or metastatic pancreatic adenocarcinoma. Follow up analysis is expected in mid-2015.
Silence's partner, Quark Pharmaceuticals Inc. ('Quark') announced favourable results in its Phase 2 trial of QPI-1002 RNAi in the prevention of delayed graft function for kidney transplant patients. Quark is the exclusive worldwide licence holder for certain of Silence's IP used in QPI-1002.
The study dosed an additional 160 patients with Silence's RNAi platform, providing the Company with further valuable safety data. Some clinical activity and efficacy was also seen in this study, confirming the clinical utility of the technology platform.
Quark is reviewing the next steps in this programme. Novartis holds an exclusive worldwide licence option for the development and commercialisation of QPI-1002. Silence is eligible to receive 15% of the proceeds of this option, should it be exercised.
The Phase 1b investigator-led study with the University of Birmingham using Atu027 in head and neck squamous cell carcinoma is in the advanced planning stages and is expected to commence recruitment towards the end of 2014.
The exploration of the potential of the Atu111 programme in acute lung injury continues. Pre-clinical research into the potential of Atu112 in sepsis, using the AtuPLEX® delivery system, did not yield satisfactory results and has now ceased.
Silence continues to invest in its infrastructure and recruitment as appropriate, bringing in key skills and capacity to both the pre-clinical and chemistry, manufacturing and control (CMC) teams. The research and development operation in Berlin now has a team of 40 staff. During the period, focus has also been on the translation of technology from research into drug candidates and a dedicated unit has been formed to accelerate this.
Financial review
During H1 2014 research and development expenses increased 86% to £3.9m (H1 2013: £2.1m). The increase reflects the rising spend on clinical and pre-clinical programmes.
Administrative expenses rose £0.4m to £1.8m, mainly due to the rise in the charge for share-based payments from £0.6m in H1 2013 to £0.8m in H1 2014, which is principally accounted for within administrative expenses. Other factors include higher rent paid for the newer London office as well as an increase in administrative salaries, reflecting the significant growth in the team during the year.
The Company remains confident that the remaining £7.2m of goodwill on the balance sheet does not exceed its recoverable amount.
There was a net cash inflow of £5.6m, versus a net cash inflow of £10.8m in H1 2013. The closing cash position at 30 June 2014 was £21.3m, up from £19.7m at 30 June 2013 and £15.9m at 31 December 2013, boosted by the £11.4m gross funds raised through an equity placing in April 2014.
£5.0m of cash remains on deposit until May 2015 with Investec Bank plc and is included within 'other financial assets'. The rate of interest on this deposit is linked to the sterling euro exchange rate. The Company's cash is banked with RBS in the UK and Commerzbank in Germany.
Outlook
Progress continues on selecting development targets from the Company's pre-clinical research engine. Early stage research is also showing encouraging results with payloads beyond siRNA, including microRNA (miRNA) and messenger RNA (mRNA).
mRNA has the potential to upregulate genes that are under-expressed, opening up new areas and indications for RNAi therapeutics. Early data shows in vivo expression of proteins directly from mRNAs in mouse models. These initial experiments are promising and Silence is currently evaluating delivery systems optimised for therapeutic mRNA expression.
Other developments include confirmed siRNA delivery and gene knockdown in macrophages - white blood cells which are key in the body's immune response to foreign substances. This could have potential applications in immune and inflammatory disorders as well as healing and muscle regeneration.
Silence continues to review its pipeline in order to focus on those projects with the strongest potential.
One of our licensees Quark is also expected to report the results of its Phase 2 trial of PF-655, using Silence's AtuRNAi, in diabetic macular edema during the second half of 2014.
Silence continues its discussions with a potential licensee of its IP and any update will be disclosed as appropriate in due course.
RISK FACTORS
The Company's principal activity is biotechnology research and development. As with any business in this sector, there are risks and uncertainties relevant to the Company's business. The Board has adopted a risk management strategy designed to identify, assess and manage the significant risks that it faces. While the Board aims to identify and manage such risks, no risk management strategy can provide absolute assurance against loss.
The management and mitigation of risks are a key focus for the Board. The Board has established a monthly agenda, including but not limited to a financial update, corporate development update and update on operations to oversee the management and mitigation of the principal risks faced by the Company, as set out below. The operational update includes a review of both pre‑clinical and clinical activities. The Board periodically reviews the significant risks facing the business; this review includes identifying operational risks, compliance risks and risks to the achievement of goals and objectives. Board review meetings occur monthly. Set out below are the key risk factors associated with the business that have been identified through the Company's approach to risk management. Some of these risk factors are specific to the Company, and others are more generally applicable to the biotechnology industry in which the Company operates. The Company considers that these risk factors apply equally and therefore all should be carefully considered before any investment is made in Silence.
Principal risks | Action taken to manage these risks | |
Economic and financial risk | · Very high costs of product development, where products have lead times to market of many years · Lack of substantial recurrent revenue stream · Small portfolio of products · Subject to foreign currency exchange fluctuations | · Accounts are reviewed on a monthly basis · Cash position reviewed regularly vs. the budget (budget approved by Board) · All payments handled within framework of authorisation limits |
Clinical and regulatory risk | · Drug candidates may not be successful due to an inability to demonstrate in a timely manner the necessary safety and efficacy in a clinical setting to satisfaction of regulatory bodies (BfArM in Germany, MHRA in the UK) · Reliance on third parties to conduct clinical trials | · Use of external third party regulatory experts · Use of the Scientific Advisory Board · No materials released unless approved by Qualified Person at the suppliers · The Company has taken out insurance against risks to patients |
Competition risk and intellectual property risk | · Intellectual property may expire before products are successful commercially · Increased interest and with that increased competition in the RNA technology sector | · Staff dedicated to monitoring market developments and providing competitor/peer analysis · Use of experienced IP advisers |
SILENCE THERAPEUTICS PLC
CONSOLIDATED INCOME STATEMENT
SIX MONTHS ENDED 30 JUNE 2014
Six months ended 30 June 2014 (un-audited) | Six months ended 30 June 2013 (un-audited) | Year ended 31 Dec 2013 (audited) | |
£000s | £000s | £000s | |
Revenue | 7 | 41 | 117 |
Research and development costs | (3,921) | (2,110) | (5,648) |
Gross Loss | (3,914) | (2,069) | (5,531) |
Administrative expenses | (1,797) | (1,382) | (3,541) |
Operating loss | (5,711) | (3,451) | (9,072) |
Finance income | 87 | 45 | 70 |
Loss for the period before taxation | (5,624) | (3,406) | (9,002) |
Taxation | - | - | - |
Retained loss for the period after taxation | (5,624) | (3,406) | (9,002) |
Loss per ordinary share (basic and diluted) | (11.5p) | (8.4p) | (20.0p) |
SILENCE THERAPEUTICS PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
SIX MONTHS ENDED 30 JUNE 2014
Six months ended 30 June 2014 (un-audited) | Six months ended 30 June 2013 (un-audited) | Year ended 31 Dec 2013 (audited) | |
£000s | £000s | £000s | |
Loss for the period after taxation | (5,624) | (3,406) | (9,002) |
Other comprehensive income: | |||
Exchange differences arising on consolidation of foreign operations | 432 | (456) | 292 |
Total comprehensive income for the period | (5,192) | (3,862) | (8,710) |
SILENCE THERAPEUTICS PLC
CONSOLIDATED BALANCE SHEET
AT 30 JUNE 2014
Six months ended 30 June 2014 (un-audited) | Six months ended 30 June 2013 (un-audited, restated) | Year ended 31 Dec 2013 (audited) | |
£000s | £000s | £000s | |
Non‑current assets | |||
Property, plant and equipment | 238 | 165 | 218 |
Goodwill | 7,245 | 7,733 | 7,549 |
Other intangible assets | 164 | 420 | 251 |
7,647 | 8,318 | 8,018 | |
Current assets | |||
Trade and other receivables | 705 | 354 | 390 |
Investments held for sale | 2 | 2 | 2 |
Other financial assets | 5,000 | 5,000 | 5,000 |
Cash and cash equivalents | 21,302 | 19,718 | 15,890 |
27,009 | 25,074 | 21,282 | |
Current liabilities | |||
Trade and other payables | (1,527) | (931) | (1,724) |
Net assets | 33,129 | 32,461 | 27,576 |
Capital and reserves attributable to the company's equity holders | |||
Share capital | 2,600 | 2,351 | 2,353 |
Capital reserves | 125,840 | 113,625 | 114,478 |
Translation reserve | 2,183 | 2,779 | 2,615 |
Retained loss | (97,494) | (86,294) | (91,870) |
Total equity | 33,129 | 32,461 | 27,576 |
SILENCE THERAPEUTICS PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
SIX MONTHS ENDED 30 JUNE 2014
(Un-audited) | Share Capital | Capital Reserves | Translation Reserve | Retained Loss | Total |
£000s | £000s | £000s | £000s | £000s | |
At 1 January 2014 | 2,353 | 114,478 | 2,615 | (91,870) | 27,576 |
Recognition of share-based payments | - | 771 | - | - | 771 |
Transfer upon: | - | ||||
Shares issued in period, net of expenses | 247 | 10,591 | - | - | 10,838 |
Transactions with owners | 247 | 11,362 | - | - | 11,609 |
Loss for six months to 30 June 2014 | - | - | - | (5,624) | (5,624) |
Other comprehensive income | |||||
Exchange differences arising on consolidation of foreign operations | - | - | (432) | - | (432) |
At 30 June 2014 | 2,600 | 125,840 | 2,183 | (97,494) | 33,129 |
SILENCE THERAPEUTICS PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
SIX MONTHS ENDED 30 JUNE 2013
(Un-audited) | Share | Capital | Translation | Profit and | Total | |
Capital | Reserves | Reserve | loss account | |||
£000s | £000s | £000s | £000s | £000s | ||
At 1 January 2013 | 1,872 | 94,849 | 2,323 | (82,928) | 16,116 | |
Recognition of share-based payments | - | 574 | - | - | 574 | |
Transfer upon: | ||||||
- exercise of warrants in period | - | (32) | - | 34 | 2 | |
- lapse of vested options in period | - | (6) | - | 6 | - | |
Shares issued in period, net of expenses | 479 | 18,240 | - | - | 18,719 | |
Transactions with owners | 479 | 18,776 | - | 40 | 19,295 | |
Loss for six months to 30 June 2013 | - | - | - | (3,406) | (3,406) | |
Other comprehensive income | ||||||
Exchange differences on consolidation of foreign operations | - | - | 456 | - | 456 | |
At 30 June 2013 | 2,351 | 113,625 | 2,779 | (86,294) | 32,461 | |
SILENCE THERAPEUTICS PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
YEAR ENDED 31 DECEMBER 2013
(Audited) | Share Capital | Capital Reserves | Translation Reserve | Retained Loss | Total |
£000s | £000s | £000s | £000s | £000s | |
At 1 January 2013 | 1,872 | 94,849 | 2,323 | (82,928) | 16,116 |
Recognition of share-based payments | - | 1,386 | - | - | 1,386 |
Issuance of warrants | - | - | - | - | - |
Transfer upon: | - | - | - | - | - |
-exercise of warrants | - | (33) | - | 33 | - |
-lapse of vested options in period | - | (27) | - | 27 | - |
Shares issued in period, net of expenses | 481 | 18,303 | - | - | 18,784 |
Transactions with owners | 481 | 19,629 | - | 60 | 20,170 |
Loss for six months to 30 June 2013 | - | - | - | (9,002) | (9,002) |
Other comprehensive income | |||||
Exchange differences arising on consolidation of foreign operations | - | - | 292 | - | 292 |
At 31 Dec 2013 | 2,353 | 114,478 | 2,615 | (91,870) | 27,576 |
SILENCE THERAPEUTICS PLC
CONSOLIDATED CASH FLOW STATEMENT
SIX MONTHS ENDED 30 JUNE 2014
Six months ended 30 June 2014 (un-audited) | Six months ended 30 June 2013 (un-audited, restated) | Year ended 31 Dec 2013 (audited) | ||
£000s | £000s | £000s | ||
Cash flow from operating activities | ||||
Loss before tax | (5,624) | (3,406) | (9,002) | |
Depreciation charges | 31 | 27 | 64 | |
Amortisation charges | 80 | 152 | 233 | |
Loss on abandonment of patents | - | - | 80 | |
Charge for the period in respect of share-based payments | 771 | 574 | 1,386 | |
Charge for the period in respect of tax on potential exercise of share options | 139 | - | 200 | |
Foreign exchange movement | - | 11 | - | |
Finance income | (25) | (45) | (70) | |
Non-cash and other movements | 387 | - | 228 | |
(4,241) | (2,687) | (6,881) | ||
Increase in trade and other receivables | (496) | (169) | (212) | |
(Decrease)/increase in trade and other payables | (495) | (78) | 337 | |
Net cash outflow from operating activities | (5,232) | (2,934) | (6,756) | |
Cash flow from investing activities | ||||
Increase in other financial assets | - | (5,000) | (5,000) | |
Interest received | 19 | 15 | 40 | |
Addition to property, plant and equipment | (59) | (27) | (120) | |
Addition to intangible assets | (1) | (17) | (18) | |
Net cash used in investing activities | (41) | (5,029) | (5,098) | |
Cash flow from financing activities | ||||
Proceeds from issue of share capital | 10,838 | 18,719 | 18,784 | |
Increase in cash and cash equivalents | 5,565 | 10,756 | 6,930 | |
Cash and cash equivalent at start of period | 15,890 | 8,909 | 8,909 | |
Net increase in the period | 5,565 | 10,756 | 6,930 | |
Effect of exchange rate fluctuations on cash held | (153) | 53 | 51 | |
Cash and cash equivalents at end of period | 21,302 | 19,718 | 15,890 |
NOTES TO THE FINANCIAL STATEMENTS
SIX MONTHS ENDED 30 JUNE 2014
1. Basis of Preparation and Accounting Policies
This condensed consolidated interim financial information for the six months ended 30 June 2014 has been neither reviewed nor audited, and has been prepared in accordance with IAS 34 - "Interim Financial Reporting" as adopted by the EU. The interim financial statements do not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006. The comparative figures for the six months ended 30 June 2013 are not the Company's statutory accounts for that financial year, and have been restated to reflect a reclassification of the £5.0m Investec deposit from debtors to other financial assets.
The 2013 full year accounts have been reported on by the Company's auditors and delivered to the Registrar of companies. The report of the auditors was unqualified and did not contain a statement under section 498(2) or (3) of the Companies Act 2006.
2. Going concern
The financial statements have been prepared on a going concern basis that assumes that the Company will continue in operational existence for the foreseeable future.
During the period the Company met its day-to-day working capital requirements through existing cash resources. The Company had a net cash inflow in the six months ended 30 June 2014 of £5.6m and at 30 June 2014 had cash balances of £21.3m. There is also £5m held on deposit at Investec Bank plc which matures in May 2015. The directors have reviewed the working capital requirements of the Company for the next 12 months from the date of the approval of these interim financial statements and are confident that these can be met.
3. Segment Reporting
Six months ended 30 June 2014 | |||
RNAi therapeutics | Group unallocated | Consolidated | |
Business segments | £000s | £000s | £000s |
Revenue from external customers | 7 | - | 7 |
Operating loss | (3,914) | (1,797) | (5,711) |
Finance and other income (net) | 87 | - | 87 |
Segment loss for the period | (3,827) | (1,797) | (5,624) |
Segment assets | 7,628 | 27,028 | 34,656 |
Segment liabilities | (781) | (746) | (1,527) |
Costs to acquire property, plant and equipment | 43 | 16 | 59 |
Costs to acquire intangible assets | 1 | - | 1 |
Depreciation and amortisation | 108 | 3 | 111 |
Charge for non-cash expenses: share-based payments charge | - | 771 | 771 |
Six months ended 30 June 2013 | |||
RNAi therapeutics | Group unallocated | Consolidated | |
Business segments | £000s | £000s | £000s |
Revenue from external customers | 41 | - | 41 |
Operating loss | (2,397) | (1,054) | (3,451) |
Finance and other income (net) | - | 45 | 45 |
Segment net loss for the period | (2,397) | (1,009) | (3,406) |
Segment assets | 10,105 | 23,287 | 33,392 |
Segment liabilities | (784) | (147) | (931) |
Costs to acquire property, plant and equipment | (26) | (1) | (27) |
Costs to acquire intangible assets | (17) | - | (17) |
Depreciation and amortisation | 178 | 1 | 179 |
Charge for non-cash expenses: share-based payments charge | 504 | 70 | 574 |
In accordance with IFRS 8 'Operating Segments', the identification of the Company's operating segments is based on internal management reporting as reviewed by the senior management team in order to assess performance and allocate resources.
The Company is managed on a business segment basis - RNAi therapeutics and unallocated corporate items. Transfer prices between segments are set on an arm's length basis. Segment revenue and profit include transfers between segments, which are eliminated on consolidation. The operations, segment assets and liabilities of the RNAi therapeutics segment are located in Germany. The remaining operations segment assets and liabilities are located in the United Kingdom.
In accordance with IAS 36 Impairment of Assets, the carrying value of goodwill is assessed comparing its carrying value to its recoverable amount. The recoverable amount is calculated by the Directors as being the value in use. For the purpose of impairment testing of goodwill, the Directors perform risk adjusted discounted cash flow analysis of the RNAi Therapeutics business segment.
The goodwill in the RNAi Therapeutics segment, which totals £7.25 million, is supported by the value in use of the on-going business.
4. Loss per share
The loss per share is based on the loss for the period after taxation attributable to equity holders of £5.62m (year ended 31 December 2013 - loss £9.00m; six months ended 30 June 2013 - loss £3.41m) and on the weighted average of 48,762,613 ordinary shares in issue during the period (year ended 31 December 2013 -43,932,664; six months ended 30 June 2013 -40,766,920).
The options outstanding at 30 June 2014, 31 December 2013 and 30 June 2013 are considered to be non-dilutive in that their conversion into ordinary shares would decrease the net loss per share. Consequently, there is no diluted loss per share to report for the periods reported.
5. Related party transactions
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note.
Pharmalogos Limited, a company controlled by Dr Stella Khan, wife of Dr Michael Khan, supplies research services to Silence Therapeutics plc at an agreed price of £100,000 per annum. Under the specified terms of the contract, Silence gave Pharmalogos six month notice for termination of the agreement in August 2014.