25 Sep 2012 07:00
SILENCE THERAPEUTICS plc ("Silence Therapeutics", "Silence" or "the Group") INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2012
London, 25 September 2012 - Silence Therapeutics Plc (AIM: SLN), a leading international RNAi therapeutics company, today provides a corporate update and announces its interim results for the six months ended 30 June 2012.
Ali Mortazavi, Director of Corporate Strategy, said: "These results, including the writedown of our Intradigm investment, mark the end of a very difficult period for Silence Therapeutics. However, post this period, the Company has been refinanced and is uniquely positioned to take advantage of the enormous potential of RNAi-based therapeutics. Significant recent developments in the industry also give us confidence that RNAi is finally poised to make the breakthroughs that it has long promised. With its strong patent position, drugs in the clinic, unique delivery systems and exciting pre-clinical data, we believe that the Company will be at the forefront of the new RNAi wave."
Operational Highlights
* In June 2012, Silence published interim data from Atu027 Phase I ascending dose trial at the American Society of Clinical Oncology (`ASCO') annual meeting. Results demonstrated that Atu027 was safe and well tolerated. * Silence's partner Quark Pharmaceutical Inc. (`Quark') initiated the MATISSE trial, a large Phase IIb trial exploring PF-4523655 for the treatment of diabetic macular oedema, a leading cause of blindness in the elderly. * Quark also announced plans to expand development of PF-4523655 in glaucoma increasing the potential milestones payable to Silence on this program by US$24.8m. * Scientific advisory board established with two key opinion leaders in area of liver disease. * Collaboration deal signed with micro-RNAi partner, Miragen Inc. to explore the delivery of microRNA-based therapeutics with Silence's liver delivery system, DBTC.
Financial Highlights
* Revenue for the six months ended 30 June 2012 was £0.04m (six months ended 30 June 2011: £0.35m). * Research and development costs increased to £1.89m (six months ended 30 June 2011: £1.82m) reflecting continued investment in the development of Atu027. * Administrative expenses decreased to £1.13m (six months ended 30 June 2011: £1.56m) reflecting the closure of the US operations in August 2011. * Loss for the six months ended 30 June 2012 was £23.53m (six months ended 30 June 2011: loss of £3.43m) after impairment charges totalling £20.57m (six months ended 30 June 2011: £nil).
Post-Period Events
* In August 2012, Silence raised £5.20m (net of expenses). The cash position as of 30 June 2012 was £0.95m (at 31 December 2011: £3.69m). Cash usage in operating and investing activities in the half year amounted to £2.72m (six months ended 30 June 2011: £2.59m). * Atu027 Phase I ascending dose trial successfully completed demonstrating excellent safety. Plans to initiate a new study of Atu027 in combination with chemotherapy are now well advanced. * Collaborative deal signed with another micro-RNAi partner, MirEven PTY Ltd to explore the delivery of miR-7 microRNA with all three of Silence's three delivery systems. * Jerry Randall expanded his role to Executive Chairman (previously Non-Executive Chairman) following the resignation of Dr Tony Sedgwick and Max Herrmann. Ali Mortazavi appointed Director of Corporate Strategy. * Reported encouraging pre-clinical proof-of-concept results in acute lung injury with Atu111. These results were supported by research at Hannover Medical School using Atu111 in murine septic shock. * Appointed Dr Michael Khan as chief medical adviser. He is an associate professor of medicine at the University of Warwick and is a highly cited researcher and experienced clinician.
Jerry Randall, Executive Chairman of Silence Therapeutics, commented: "The completion of the Phase I trial of Atu027 in patients with solid tumours represents a major milestone for the Company. The strong safety profile and encouraging signs of stable disease that Atu027 has demonstrated in the trial give us confidence to progress Atu027 to the next stage of development. Plans for a trial combining Atu027 with chemotherapy are now well advanced. The promising prospects for Atu027 were a major reason we were able to raise £5.45m shortly after the end of the period. This fundraise is expected to support the further development of Atu027 and Silence's other programmes into the second half of 2014. "
For further information, please contact:
Silence Therapeutics Singer Capital Markets Jerry Randall / Ali Mortazavi Shaun Dobson T: +44 20 7491 6520 T: +44 20 3205 7500 j.randall@silence-therapeutics.com shaun.dobson@singercm.com a.mortazavi@silence-therapeutics.com jenny.wyllie@singercm.com M:Communications Mary-Jane Elliott / Sarah Macleod / Claire Dickinson T: +44 20 7920 2333 silencetherapeutics@mcomgroup.com
CHAIRMAN'S STATEMENT
Silence Therapeutics is prominent in an exciting new sector in the drug development arena known as RNA interference (`RNAi'). The last few years have been particularly challenging for companies working in the field as initial optimism about the technology's ability to transform the drug discovery and pharmaceutical process gave way to increasing scepticism by the pharmaceutical industry and investors alike. This experience is normal in the evolution of a new technology because our greater understanding of a field uncovers new hurdles that need to be overcome. We believe that with continued perseverance these hurdles will be surpassed. It is therefore gratifying to see that over the last few months there are now real signs that the perseverance shown by Silence, our partners and our peers is starting to deliver results.
For Silence, the first half of 2012 saw the achievement of some significant events. In particular, we not only presented interim Phase I data from our lead programme Atu027 at the ASCO annual meeting confirming the drug's safety and encouraging signs of efficacy, but also completed enrolment of patients into the study during the period. This trial has taken three years to complete and I would like to take this opportunity to thank the staff at Silence and our clinical partners without whose dedication this milestone would not have been achieved.
Our partner Quark has also made good progress over the period with its two lead programmes, which are both based on Silence's AtuRNAi technology. In February 2012, Quark initiated a 264 patient Phase IIb trial of PF-`655 in diabetic macular oedema, a leading cause of blindness in the elderly. In addition, Quark now plans to initiate a further Phase II trial with the drug in glaucoma. Quark is also close to completion of a 366 patient Phase II trial of QPI-1002 in prevention of delayed graft function in kidney transplant patients.
2012 has seen significant Board and management changes at Silence. In February 2012, Dr Tony Sedgwick was appointed Chief Executive Officer following the departure of Thomas Christely. However, following the recently completed fundraising Dr Sedgwick, Annette Clancy and Max Herrmann have decided to leave the Company. I have therefore been asked to take on the role of Executive Chairman, which I am pleased to accept. In addition, we have appointed Ali Mortazavi as Director of Corporate Strategy. I would like to thank Annette, Max and Tony for their dedication and hard work and wish them well in the future.
Finally, in July this year we raised £5.45m before expenses from existing and new investors. The proceeds of the fundraising have significantly enhanced the Group's financial position and provides it with sufficient cash resources to fund the business until 2014. The injection of funding is expected to extend the existing window of opportunity for exploitation of the RNAi platform and the Company's lead development candidate Atu027. In particular, it should enable the Company to conduct a small Phase Ib trial and a subsequent small Phase IIa trial of Atu027. It should also enable the Company, and its Shareholders, to benefit from potential milestone payments which may arise from existing licensing agreements and licences which may arise from recently announced research collaborations.
OPERATIONAL REVIEW
Advancements with Internal Pipeline Products
Atu027
Atu027, for the treatment of solid tumours, is Silence Therapeutics' most advanced internal product candidate. Atu027, which combines our proprietary drug delivery system, AtuPLEXâ„¢, with AtuRNAi, the Company's proprietary RNAi chemistry, specifically targets PKN3, a protein implicated in cancer growth and metastases.
During the first half of 2012, we not only completed patient enrolment into our Phase I clinical trial of Atu027 but also announced interim results at the prestigious American Society of Clinical Oncology (`ASCO') meeting in June.
The Phase I clinical trial of Atu027 was an open label, single-centre, dose-finding study in subjects with advanced solid cancer. It was designed to evaluate up to a total of 11 escalating doses of Atu027. The enrolment of patients in the last cohort in dose level 10 has now been completed. Atu027 was very well tolerated and safe up to the 10th dose level. No premedication was needed in support of Atu027 treatment. The prospective recommended maximum tolerated dose is 0.336 mg/kg. "Stable disease" response for three and six months after treatment was observed in 10 and 3 patients, respectively, of the 33 evaluable patients. Two patients with neuroendocrine cancer had disease stabilisation for 9 and 12 months. Partial regression of pulmonary metastases was found in another patient. A further patient with breast cancer showed regression of liver metastases.
Plans are now well underway to initiate a Phase Ib clinical study of Atu027 in combination with chemotherapy. The trial is expected to start patient recruitment in late 2012 or early 2013. The Company believes that this encouraging Phase I data and the important validation of our AtuPLEXâ„¢ delivery system on which Atu027 is based, are important factors in realising value for Shareholders.
Partnered ProgramsPF-04523655 (PF-`655)
In March 2011, our partner, Quark Pharmaceuticals, announced the completion of the DEGAS study, a Phase II clinical trial of PF-04523655 for the treatment of diabetic macular oedema. PF-04523655, which incorporates Silence's AtuRNAi technology and is sublicensed to Pfizer by Quark, was shown to be more effective than laser therapy.
Based on this encouraging data, in February 2012, Quark initiated a 264 patient Phase IIb trial of PF-'655 in patients with diabetic macular oedema. The trial is designed to compare the efficacy of PF-'655 when used alone or in combination with Lucentis (Novartis/Roche) against Lucentis alone in patients with diabetic macular oedema. The trial is expected to complete in the middle of 2014.
In May 2012, Quark also announced it had amended its agreement with Pfizer to enable it to initiate a 108 patient Phase IIa trial of PF-'655 in patients with open-angle glaucoma (the most common type of glaucoma). Quark and Pfizer have also conducted a Phase II trial of PF-'655 in age-related macular degeneration, the leading cause of blindness in the elderly. In addition to royalties on product sales, milestones from these programmes could now total up to US$120 million of which US$6 million has been received to date. A further milestone of almost US$4 million is due to Silence on initiation by Pfizer of a Phase III trial.
QPI-1002
In addition to PF-'655, Quark is also developing QPI-1002 for the prevention of delayed graft function in kidney transplant patients and for the prevention of acute kidney injury. QPI-1002 is based on Silence AtuRNAi technology. In August 2010, Quark signed an option and licence agreement for QPI-1002 with Novartis for an upfront payment of US$10 million. Quark is currently conducting a 366 patient Phase II trial of QPI-1002 in prevention of delayed graft function in kidney transplant patients. The trial is due to be completed before the end of 2012. Based on the results of this study, Novartis may decide to exercise its option to license QPI-1002. Quark also plans to initiate a Phase II trial of QPI-1002 in acute kidney injury. In addition to royalties on product sales, milestones to Silence from these programmes could total up to US$100 million.
Other Research Collaborations
During the last 12 months, Silence has signed a number of delivery collaborations to evaluate the Company's three RNAi delivery systems including agreements with InteRNA Technologies BV, miRagen Inc., Mireven PTY Ltd and Mirna Inc. If successful, these collaborations could lead to these parties taking a licence to Silence delivery technologies.
Continued Intellectual Property Strength
Our broad and diverse intellectual property portfolio continues to provide us with a competitive advantage and a strong proprietary position in the RNAi therapeutics space. We believe that we have been successful in aggressively building one of the world's most comprehensive RNAi patent estates and expect that this asset will continue to offer significant support for our ongoing partnering activities. Importantly, we have achieved significant successes in establishing key levels of patent protection for our technologies in Europe, the USA and Japan, offering opportunities in all of these important markets.
Silence remains committed to the expansion and strengthening of its intellectual property portfolio in target markets around the globe. So far this year we have strengthened our intellectual property portfolio via the following:
* Notice of allowance of a US patent that covers certain siRNA molecules specifically designed to silence PKN-3, the target of Atu027. * Issuance of a new European patent that covers so-called `Blunt-Ended' siRNA molecules. Notice of allowance of this patent has also been received in the US.
Looking forward, the Company will continue to expand and strengthen our intellectual property portfolio in target markets around the globe. However, it is important to actively manage a patent estate and therefore where necessary we will review and cease patent prosecution where the cost of such action is deemed to outweigh the benefits. As an example of such, following a review of the Company's Zamore Design Rules licences, Silence has now decided that their high cost of maintenance is not warranted and has entered into an agreement with the University of Massachusetts to terminate these licences. This led to an impairment charge of £0.17m in the first half of 2012.
FINANCIAL REVIEW
Revenue in the first half of 2012 at £0.04m (six months ended 30 June 2011: £ 0.35m) was below that in the prior year reflecting lower income from licence partners. Research and development expenditure at £1.89m (six months ended 30 June 2011: £1.82m) was broadly in line with the prior year. This reflects continued investment in the Phase I trial of Atu027. Administrative expenses in the first half of 2012 decreased to £1.13m from £1.56m (£2.00m including restructuring of the US operations) in the first half of 2011. This reflects cost savings made as a result of the closure of the US Redwood City operations in August 2011
The net loss for the half-year before intangible assets impairment charges was £2.96m (six months ended 30 June 2011: £3.43m; full year 2011: £5.74m). The Zamore Design rules licences were the main asset held by Intradigm. The decision to terminate them therefore meant the £20.4m goodwill held on the balance sheet relating to Intradigm had to be written off. After reflecting these items, the net loss for the half year after taxation was £23.53m.
Cash used in operating and investing activities in the first half of the year amounted to £2.72m (six months ended 30 June 2011: £2.59m) which left the Group with cash at bank of £0.95m at the period end.
Following the period end, 2012 Silence raised £5.45m (£5.20m net of expenses) in a subscription and open offer of shares as well as the issuance of a £1.00m zero coupon convertible bond. This funding is expected to provide cash resources that will support the Company's operations into the second half of 2014.
RISKS AND UNCERTAINTIES
There are a number of potential risks and uncertainties that could have a material impact on the Group's performance over the remaining six months of the financial year and could cause actual results to differ materially from expected and historical results. The risks (identified and outlined in the Annual Report and Accounts 2011 in the Directors' Report on pages 18-20, which does not form part of this interim statement, include:
* Clinical and regulatory risk - our drug trials may not be successful. * Competition and intellectual property risk - several companies are developing RNAi technology. Intellectual property may expire before products are successful commercially. * Economic and financial risk - with no recurring revenue, the Group is reliant on receiving additional funds.
SUMMARY AND OUTLOOK
In the first half of 2012, we achieved the following milestones which we believe significantly strengthened our business and created value for Shareholders:
* Completed patient recruitment and announced further positive interim data from our Phase I clinical trial of Atu027. Based on the data from the Phase I trial, plans are now well advanced to initiate a trial of Atu027 in combination with chemotherapy. * Signed a collaboration deal with microRNA company Miragen Inc. for our DBTC delivery technology, our third such delivery collaboration. * Established a Scientific Advisory Board with key opinion leaders in the area of liver disease. * Expanded our already strong intellectual portfolio by receiving key patent issuances with global reach.
In light of the advances we have made in the first half of the year, we look ahead to the second half of 2012 with great optimism.
Thank you for your continued support of Silence Therapeutics.
Jerry RandallExecutive ChairmanSILENCE THERAPEUTICS PLCCONSOLIDATED INCOME STATEMENT
FOR THE SIX MONTHS ENDED 30 JUNE 2012
Note Six months Six months Year ended ended ended 31 December 30 June 2012 30 June 2011 2011 (Un-audited) (Un-audited) (Audited) £000s £000s £000s Revenue 3 37 354 694 Research and development (1,893) (1,819) (3,361)costs Impairment of intangible (20,565) - -assets Administrative expenses (1,128) (1,560) (2,647) Restructuring charge - (443) (472) Operating loss 3 (23,549) (3,468) (5,786) Finance and other income 9 38 57 Finance expense - - (13) Gain on sale of fixed assets 14 4 5 Loss for the period before 3 (23,526) (3,426) (5,737)taxation Taxation - - - Loss for the period (23,526) (3,426) (5,737)attributable to owners of the Parent Company Loss per ordinary equity (4.1p) (1.0p) (1.2p)share (basic and diluted)
All transactions, with the exception of the Restructuring charge and impairment of intangible assets relating to Intradigm Corporation, arose from continuing activities and there are no recognised gains or losses other than those presented above.
SILENCE THERAPEUTICS PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED 30 JUNE 2012
Six months Six months Year ended ended ended 31 December 30 June 2012 30 June 2011 2011 (Un-audited) (Un-audited) (Audited) £000s £000s £000s Loss for the period after (23,526) (3,426) (5,737)taxation Other comprehensive income: Exchange differences arising (696) (63) 5on consolidation of foreign operations Total comprehensive income for (24,222) (3,489) (5,732)the period SILENCE THERAPEUTICS PLCCONSOLIDATED BALANCE SHEETAT 30 JUNE 2012 30 June 30 June 31 December 2012 2011 2011 (Un-audited) (Un-audited) (Audited) £000s £000s £000s Non-current assets Property, plant and 181 269 225 equipment Goodwill 7,289 28,211 28,342 Other intangible assets 513 1,048 971 7,983 29,528 29,538 Current assets Investments - 27 38 Trade and other 113 397 174 receivables Cash and cash equivalents 950 6,486 3,688 1,063 6,910 3,900 Current liabilities Trade and other payables (981) (2,073) (1,260) Net current assets 82 4,837 2,640 Net assets 8,065 34,365 32,178 Capital and Reserves attributable to the Company's Equity Holders Share capital 5,771 5,766 5,771 Capital reserves 80,981 82,886 81,141 Translation reserve 2,342 2,970 3,038 Profit and loss account (81,029) (57,257) (57,772) Equity Holders' funds 8,065 34,365 32,178 SILENCE THERAPEUTICS PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHS ENDED 30 JUNE 2012
(Un-audited) Profit Share Capital Translation and loss Capital Reserves Reserve Account Total £000s £000s £000s £000s £000s At 1 January 2012 5,771 81,141 3,038 (57,772) 32,178 Recognition of share-based - 109 - - 109payments Issuance of warrants - - - - - Transfer upon: -exercise of options in - - - - -period -lapse of vested options - (269) - 269 -in period Shares issued in period, - - - - -net of expenses Transactions with owners - (160) - 269 109 Loss for six months to 30 - - - (23,526) (23,526)June 2012 Other comprehensive income - Exchange differences - - (696) (696)arising on consolidation of foreign operations At 30 June 2012 5,771 80,981 2,342 (81,029) 8,065 SILENCE THERAPEUTICS PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (CONTINUED)
FOR THE SIX MONTHS ENDED 30 JUNE 2011
(Un-audited) Profit Share Capital Translation and loss Capital Reserves Reserve Account Total £000s £000s £000s £000s £000s At 1 January 2011 2,799 80,269 3,033 (53,831) 32,270 Recognition of share-based - 76 - - 76payments Issuance of warrants 1 1 Transfer upon: -exercise of options in - - - - -period -lapse of vested options - - - - -in period Shares issued in period, 2,967 2,540 - - 5,507net of expenses Transactions with owners 2,967 2,617 - - 5,584 Loss for six months to 30 - - - (3,426) (3,426)June 2011 Other comprehensive income Exchange differences - - (63) - (63)arising on consolidation of foreign operations At 30 June 2011 5,766 82,886 2,970 (57,257) 34,365 SILENCE THERAPEUTICS PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2011
(Audited) Profit Share Capital Translation and loss Capital Reserves Reserve Account Total £000s £000s £000s £000s £000s At 1 January 2011 2,799 80,269 3,033 (53,831) 32,270 Recognition of share-based - 120 - - 120payments Issue of warrants in - 1 - - 1period Transfer upon: -exercise of options in - - - - -period -lapse of vested options - (1,796) - 1,796 -in period Shares issued in year, net 2,972 2,547 - - 5,519of expenses Transactions with owners 2,972 872 - 1,796 5,640 Loss for the year ended 31 - - - (5,737) (5,737)December 2011 Other comprehensive income Exchange differences - - 5 - 5arising on consolidation of foreign operations At 31 December 2011 5,771 81,141 3,038 (57,772) 32,178 SILENCE THERAPEUTICS PLC
CONSOLIDATED CASH FLOW STATEMENT
FOR THE SIX MONTHS ENDED 30 JUNE 2012
Six months Six months Year ended to to 31 December 30 June 2012 30 June 2011 2011 (Un-audited) (Un-audited) (Audited) Cash flows from operating £000s £000s £000sactivities Loss before taxation (23,526) (3,426) (5,737) Adjustments for: Impairment of intangible assets 20,565 - - Depreciation charges 36 61 91 Amortisation charges 104 87 214 (Gain)/loss on sale of property, (14) (4) (5)plant and equipment Charge for the period in respect 109 77 121of share-based payments Foreign exchange movement 1 55 - Finance expense - - 13 Finance and other income (9) (39) (57) (2,734) (3,189) (5,360) Decrease in trade and other 53 360 667receivables Decrease in inventory - 27 27 Increase/(decrease) in trade 2 386 (431)payables Cash absorbed by operations (2,679) (2,416) (5,097) Taxation received - - - Interest paid - - (13) Net cash outflow from operating (2,679) (2,416) (5,110)activities Cash flows from investing activities Investment in assets held for sale - - (6) Proceeds from the sale of 16 8 10property, plant and equipment Interest received 6 18 27 Proceeds from sale of assets held 39 - -for sale Additions to property, plant and - (33) (27)equipment Additions to intangible assets (104) (163) (248) Net cash used in investing (43) (170) (244)activities Cash flows from financing activities Net proceeds from issue of share - 5,507 5,519capital Repayment of notes payable - - - Net cash generated from financing - 5,507 5,519activities Net (decrease)/increase in cash (2,722) 2,920 165and cash equivalents Cash and cash equivalents at 3,688 3,567 3,567beginning of period Net (decrease)/increase in cash (2,722) 2,920 165and cash equivalents Effect of exchange rate (16) (1) (44)fluctuations on cash held Cash and cash equivalents at end 950 6,486 3,688of period Cash and cash equivalents include Instant access bank accounts 950 6,486 3,688SILENCE THERAPEUTICS PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2012
1. Basis of Preparation and Accounting Policies
This condensed consolidated interim financial information for the six months ended 30 June 2012 has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34 - `Interim Financial Reporting' as adopted by the European Union.
This condensed consolidated interim financial information has been neither reviewed nor audited. 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 financial year ended 31 December 2012 are not the Company's statutory accounts for that financial year. Those 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. However, the report of the auditors did contain an emphasis of matter paragraph in relation to the receipt of sufficient additional funds, including the successful completion of an equity fundraising.
2. Going concern
The financial statements have been prepared on a going concern basis that assumes that the Group will continue in operational existence for the foreseeable future.
During the period the Group met its day-to-day working capital requirements through existing cash resources. The Group had a net cash outflow in the six months ended 30 June 2012 of £2.72m and at 30 June 2012 had cash balances of £ 0.95m. However, the Group raised £5.45m before expenses in August 2012. The directors have reviewed the working capital requirements of the Group for the next 12 months from the date of the approval of these interim financial statements and are confident that these can be met.
Given the continued efforts noted above, the directors consider that the continued adoption of the going concern basis is appropriate and the accounts do not reflect any adjustments that would be required if they were to be prepared on any other basis.
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE SIX MONTHS ENDED 30 JUNE 2012
3. Segment Reporting
For the Six Months Ended 30 June 2012
Business Segments RNAi Immunotherapy Unallocated Consolidated Therapeutics Corporate items £000s £000s £000s £000s Revenue 37 - - 37 Operating results (22,691) - (858) (23,549) Finance and other income 16 - 7 23(net) Net loss for the period (22,675) - (851) (23,526) Segment assets 8,356 - 690 9,046 Segment liabilities (808) - (173) (981) Costs to acquire - - - -property, plant and equipment Costs to acquire other 104 - - 104intangible assets Depreciation and 139 - 1 140amortisation Charge for non-cash 20,565 - - 20,565expenses
In accordance with IFRS 8 `Operating Segments', the identification of the Group'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 Group is managed on a business segment basis - RNAi Therapeutics, Immunotherapy 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 operations segment assets and liabilities of the remaining two segments are located in the United Kingdom and the USA.
In accordance with IAS 36 Impairment of Assets, the carrying value of goodwill is assessed comparing its carrying value to its net 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 area, the cash generating unit that encompasses Silence Therapeutics AG and Intradigm Corporation. Following a review of the Company's portfolio during the period, the Group decided that the high cost of maintenance of the Zamore Design Rules licences (Intradigm Corporation) was no longer warranted and decided to terminate these licenses with the University of Massachusetts. This led to an impairment charge of £0.17m in the first half of 2012 and triggered a test of the goodwill for impairment.
Given the Group plans to fully exit the Intradigm business, the goodwill that arose from acquisition was fully impaired and a charge of £20.4 million was recorded for the first half year. The impairment loss has been recognised in Research and development costs.
The remaining goodwill in the the RNAi therapeutics business area, which totals £7.3 million, is supported by the value in use of the on-going business.
For the Six Months Ended 30 June 2011
Business Segments RNAi Immunotherapy Unallocated Consolidated Therapeutics Corporate items £000s £000s £000s £000s Revenue 354 - - 354 Operating results (2,964) (1) (503) (3,468) Finance and other 33 - 9 42income (net) Net loss for the period (2,931) (1) (494) (3,426) Segment assets 30,219 6 6,213 36,438 Segment liabilities (1,869) (1) (203) (2,073) Costs to acquire 33 - - 33property, plant and equipment Costs to acquire other 163 - - 163intangible assets Depreciation and 147 - 1 148amortisation Charge for non-cash 72 - 5 77expenses 4. Earnings per share
The loss per share is based on the loss for the period after taxation attributable to equity holders of £23.53m (year ended 31 December 2011 - loss £ 5.74m; six months ended 30 June 2011 - loss £3.43m) and on the weighted average of 577,114,517 ordinary shares in issue during the period (year ended 31 December 2011 - 466,864,698; six months ended 30 June 2011 - 352,015,733).
The options outstanding at 30 June 2012, 31 December 2011 and 30 June 2011 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. On 2 August 2012 Robert Keith and ACP IV LP subscribed for £1m of loan notes as described in note 6. Before the issue they held 92,682,266 shares (16.06%) of the Company.
6. Post-balance sheet events
On 31 July 2012, Shareholders approved a share capital reorganisation whereby each existing ordinary share of 1 pence nominal value was converted into an ordinary share of 0.1 pence nominal value and one deferred share of 0.9 pence nominal value. The Company then purchased all of the issued deferred shares.
On 2 August 2012, the Company raised £5.45m in cash before expenses. The fundraising was conducted by way of a subscription and open offer of 889,088,220 new Ordinary shares of 0.1 pence each at a price of 0.5 pence per share as well as the issuance of a zero coupon convertible £1.00m loan note maturing on 1 August 2019. The nominal value of the shares issued was £ 889,088.22. The convertible loan note is convertible into shares by the bondholder at anytime at a conversion rate of 0.5 pence per share.
Notes for editors
About Silence Therapeutics plc (www.silence-therapeutics.com)
Silence Therapeutics plc (AIM: SLN) is a leading biotechnology company dedicated to the discovery, development and delivery of targeted, systemic RNA interference (RNAi) therapeutics for the treatment of serious diseases. Silence offers one of the most comprehensive short interfering RNA (siRNA) therapeutic platforms available today based on a strong intellectual property portfolio and large clinical safety database. Silence's clinical siRNA product pipeline is one of the broadest in the industry. The Company possesses multiple proprietary siRNA delivery technology platforms including AtuPLEXâ„¢, DACC and DBTC. AtuPLEX enables the broad functional delivery of siRNA molecules to targeted diseased tissues and cells, while increasing their bioavailability and intracellular uptake. The DACC delivery system allows functional delivery of siRNA molecules selectively to the lung endothelium with a long duration of target mRNA and protein knock-down. The DBTC delivery system enables functional delivery of siRNA molecules selectively to liver cells including hepatocytes. Additionally, the Company has a platform of novel siRNA molecules based around its AtuRNAi chemical modification technology, which provides a number of advantages over conventional siRNA molecules. Silence's unique RNAi assets also include structural features for RNAi molecules and specific design rules for increased potency and reduced off-target effects of siRNA sequences.
The Company's lead internal drug candidate is Atu027, a liposomal formulation in clinical development for systemic cancer indications and one of the most clinically advanced RNAi therapeutic candidates in the area of oncology. Atu027 incorporates two of the Company's technologies, AtuRNAi and AtuPLEXâ„¢. Silence is currently conducting an open-label, single-centre, dose-escalation Phase I study with Atu027 in patients with advanced solid tumors involving single, as well as repeated, intravenous administration. Encouraging interim safety and pharmacokinetic data were presented at the American Society of Clinical Oncology Annual Meeting in June 2012. The study was completed in July 2012 and results are due shortly.
The Company's RNAi therapeutic platform has received key validation through multiple partnerships with pharmaceutical companies including AstraZeneca, Dainippon Sumitomo, Pfizer/Quark, and Novartis/Quark. Silence is actively pursuing the establishment of additional partnerships. Silence Therapeutics has operations in both Berlin and London.
Forward-Looking Statements
This press release includes forward-looking statements that are subject to risks, uncertainties and other factors. These risks and uncertainties could cause actual results to differ materially from those referred to in the forward-looking statements. All forward-looking statements are based on information currently available to Silence Therapeutics and Silence Therapeutics assumes no obligation to update any such forward-looking statements.
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