SLN.L Regulatory News (SLN)

Interim Statement 29th September 2015

Silence Therapeutics plc

Interim results for the six months ended 30 June 2015

Significant fundraising, encouraging clinical data and R&D progress

London, 29 September 2015 - Silence Therapeutics plc, AIM:SLN ("Silence" or the "the Company") a leader in the development and delivery of novel RNA therapeutics announces its unaudited interim results for the six months ended 30 June 2015.

Highlights

· Atu027 showed encouraging signs of a dose response effect on progression free survival in pancreatic cancer patients with metastatic disease.

· Completed a placing raising net proceeds of £38.9 million, including new investors Invesco Ltd and Woodford Investment Management LLP.

· The Board of Appeal at the European Patent Office upheld Silence's patent on RNA modification against an appeal by four parties including the industry leader.

FINANCIAL HIGHLIGHTS

· Loss after tax for the period of £4.1 million (2014: £5.6 million).

· Net cash of £55.8 million at 30 June 2015 (2014: £21.3 million).

Post period end

· Ali Mortazavi took compassionate leave due to a serious family illness and returned on 21 September 2015, as planned.

· Chairman Alastair Riddell retired from the board on Ali Mortazavi's return and Stephen Parker became Non-Executive Chairman.

· Progress continues in our siRNA-based preclinical programmes. Encouraging early results were obtained in pulmonary arterial hypertension.

· Successful and therapeutic protein production driven by messenger RNA (mRNA) delivery now in several species and a range of tissues.

· New R&D team dedicated to CRISPR/Cas9 gene editing technology.

· R&D expansion into non liposomal conjugation delivery systems.

Ali Mortazavi Chief Executive of Silence Therapeutics commented

"The first half of 2015 has been transformational for Silence Therapeutics. Not only have we made progress with our platform technology but have also made meaningful strides in the clinic. Separately, the quantum and profile of new and existing shareholders have enabled our company to begin to truly compete on a global stage. We are now perfectly positioned to tackle the most serious diseases using our genetic medicine toolkit."

Stephen Parker Non-Executive Chairman said

"I am pleased that Silence has continued to progress in the period, with a good clinical result and a highly successful fund raising through which we attracted the support of several major investors. I am confident that, with Ali Mortazavi returned to the Company, we will continue to further our ambition to create a world-class genetic medicine company."

Enquiries:

Notes to Editors

About Silence Therapeutics plc

Our technology harnesses the body's natural mechanisms to create therapeutic effects within its own cells. This technology can selectively silence or replace any gene in the genome, modulating gene expression up as well as down in a variety of organs and cell types, in vivo.

We have developed proprietary modifications to improve the robustness of RNA sequences, together with advanced liposomal chemistries to enhance the delivery of therapeutics. This allows the development of therapeutics for diseases with high unmet medical need. In 2015 Silence announced interim results from a Phase 2a pancreatic cancer trial using its compound, Atu027, in combination with gemcitabine.

Overview

Silence has continued to make progress over the period, both in its pre-clinical and clinical programmes. In April 2015 the Company raised £38.9 million net through a share issue that brought in major new investors, which will support our expanding R&D activities and enable us to capitalise on strategic in-licensing and acquisition opportunities. Furthermore, the Company will continue to invest in recruitment at senior and middle management levels to expand the Company's expertise and accelerate these strategic ambitions.

Licensing

We continue to work on broadening our IP estate in the US and to monitor the progress of the company that approached Silence regarding a potential AtuRNAi® licence, which is encouraging. We also await news of the licensing developments at Quark Pharmaceuticals, following the favourable Phase 2b results obtained for delayed kidney graft function.

Business review

The Company's lead product is Atu027. This uses the Company's proprietary AtuPLEX® and AtuRNAi® technologies to 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. The clinical trial results of Atu027 used in combination with gemcitabine, reported in the period, demonstrated the continuing safety profile of our delivery systems. Importantly, there was an encouraging indication of a dose response effect on progression free survival times in patients with advanced pancreatic cancer, with the effect being more marked in those with metastatic disease.

We are now looking to optimise the dosing schedule in combination with the newer chemotherapy regimes of gemcitabine and nab-paclitaxel in pre-clinical models ahead of further clinical development. In addition we are making improvements to our manufacturing processes and scaling up supplies to support our clinical trials.

The positive indications from the pancreatic study have led the Company to focus its clinical efforts on this indication and the proposed head and neck cancer study has been put on hold pending the completion of the dosing and manufacturing projects mentioned above.

We continue to develop our multiple pre-clinical siRNA programmes. In particular, animal studies in pulmonary arterial hypertension have been encouraging. In mRNA, we have now observed therapeutic protein production in non-human primates as well as in rodents.

In February, the Board of Appeal of the European Patent Office, upheld the key RNA interference (RNAi) trigger modification patent of the Company against challenges by four parties including Alnylam Pharmaceuticals Inc, its subsidiary Sirna Therapeutics Inc, Alcon Laboratories Inc, and an independent attorney. At the hearing, the Board of Appeal validated the Company's patent covering an alternating pattern of modified and unmodified nucleotides.

Post the capital raise which was consummated on 1 May 2015, we undertook a thorough review of our R&D operations and team structures. A new research and development plan proposed by Lars Karlsson, our Head of Research and Development, was approved by the Board in July. As previously stated, a cornerstone of this plan is a major expansion into conjugated delivery systems to complement our current liposomal systems.

Outlook 

Over the last six months, the Company has made a number of significant changes to facilitate our ambition of becoming a leader in the genetic medicines space. The strength of our balance sheet gives us the confidence to continue to expand the business whilst simultaneously investing in our R&D activities and evaluating complimentary M&A, in-licensing and partnering opportunities.

We expect to announce further senior management hires that will support the Company's strategic corporate development plans. These will include investments in our in-house IP protection and litigation capability, M&A expertise as well as additions to the Company Board.

Progress will continue on selecting development targets from the Company's pre-clinical research engine. Alongside our liposomal delivery, the siRNA programme will focus on tissue-specific delivery using targeting ligands.

We have produced encouraging results in generating protein expression via mRNA, and have demonstrated the utility of this technology across several species. We are also exploring the use of mRNA in gene editing (CRIPSR/Cas9), where we expect to begin filing our own IP shortly. In the coming year, we expect to further improve protein expression and profile therapeutic applications.

We believe that Silence now has the balance sheet and shareholder base to become a world leading genetic medicines company.

Financial review

During H1 2015 research and development costs were £3.2m, down from £3.9m in H1 2014 and £4.9m in H2 2014. This fall largely reflected the winding down of the Phase 2a clinical study and a planned reorientation of programmes under our new Head of Research & Development. The weakening of the euro to sterling also contributed, reflecting the Berlin location of most of our laboratories. At €1.36, the average rate was 10% lower during the half year compared to H1 2014.

Administrative expenses, which are mainly incurred in the UK, fell by £0.8m to £1.0m. This was due to a £0.5m reduction in share-based payment amortisation and associated provisions. Underlying administrative expenses rose 5%.

Headcount

Our average R&D headcount increased versus H1 2014, rising from 32 to 44 in full time equivalents. Hiring in Berlin focused on chemistry as we expanded our work with mRNA payloads and deliveries. The non-R&D headcount averaged 14, up from 13.

Cashflow

We have not received or recognised R&D tax credits in the period. At this point we are adopting a conservative accounting recognition until we have established a clear track record of recovery of claims submitted. The tax environment remains attractive in the UK, and we continue to adapt ourselves financially to take advantage of this. There was a net cash inflow of £39.3m, reflecting the £39.1m net proceeds from the placing and from an exercise of share options. The £4.8m operating outflow was balanced by the return of the £5m previously on long-term deposit.

Foreign exchange

Sterling continued to strengthen during H1 2015 and the Group increased its holdings of euros. Euros were bought at an average rate of €1.36 in the half year, compared to a closing rate of €1.42. This increase led to an adverse foreign exchange movement on cash holdings of £0.4m. In H1 the Berlin-based operations consumed €5.2m. At 30 June 2015 the Group held €16m within its total cash balance of £55.8m.

Principal risks and uncertainties

The principal risks and uncertainties facing the Group are set out in the 2014 Annual Report which is available on our website, silence-therapeutics.com. The Board does not believe that the risks and uncertainties set out in that Annual Report have changed.

SILENCE THERAPEUTICS PLC

CONSOLIDATED INCOME STATEMENT

SIX MONTHS ENDED 30 JUNE 2015

SILENCE THERAPEUTICS PLC

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

SIX MONTHS ENDED 30 JUNE 2015

SILENCE THERAPEUTICS PLC

CONSOLIDATED BALANCE SHEET

AT 30 JUNE 2015

SILENCE THERAPEUTICS PLC

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

SIX MONTHS ENDED 30 JUNE 2015

(Un-audited)

SILENCE THERAPEUTICS PLC

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

SIX MONTHS ENDED 30 JUNE 2014

(Un-audited)

SILENCE THERAPEUTICS PLC

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

YEAR ENDED 31 DECEMBER 2014

(Audited)

SILENCE THERAPEUTICS PLC

CONSOLIDATED CASH FLOW STATEMENT

SIX MONTHS ENDED 30 JUNE 2015

SILENCE THERAPEUTICS PLC

NOTES TO THE FINANCIAL STATEMENTS

SIX MONTHS ENDED 30 JUNE 2015

1. Basis of Preparation and Accounting Policies

This condensed consolidated interim financial information for the six months ended 30 June 2015 has been prepared in accordance 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 six months ended 30 June 2014 are not the Company's statutory accounts for that financial year. The 2014 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 2015 of £39.3m and at 30 June 2015 had cash balances of £55.8m. 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.

NOTES TO THE FINANCIAL STATEMENTS (continued)

SIX MONTHS ENDED 30 JUNE 2015

3. Segment Reporting

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 - RNA 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 RNA 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 £6.38 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 £4.14m (year ended 31 December 2014 - loss £11.98m; six months ended 30 June 2014 - loss £5.62m) and on the weighted average of 58,150,414 ordinary shares in issue during the period (year ended 31 December 2014 - 50,424,784; six months ended 30 June 2014 - 48,762,613).

The options outstanding at 30 June 2015, 31 December 2014 and 30 June 2014 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, and the last invoice was received in February 2015.