Synairgen Regulatory News (SNG)

18 Sep 2006 07:01

Synairgen plc18 September 2006 For Immediate Release 18 September 2006 Synairgen plc Preliminary Results for the year ended 30 June 2006 Synairgen plc ('Synairgen' or the 'Company'), the drug discovery company focusedon identifying and out-licensing new pharmaceutical products which address theunderlying causes of asthma and chronic obstructive pulmonary disease ('COPD'),today announces its Preliminary Results for the year ended 30 June 2006. Financial highlights • Turnover for the year: £82k (2005: £202k) • Research and development expenditure for the year: £1,069k (2005: £557k) • Retained loss for the year: £1,042k (2005: loss of £610k) • Cash at 30 June 2006 of £7.5 million (2005: £8.7 million) Operational highlights • Commencement of Phase I clinical trial in lead proprietary programme in inhaled interferon beta • Second indication for interferon beta in COPD identified • Proteomics research programme commenced • Collaboration extended with undisclosed North American biotechnology company (post period-end) • In-licensing of interferon lambda intellectual property (post period-end) Commenting on the results Simon Shaw, Chairman of Synairgen, said: "The last year has seen Synairgen add significantly to its intellectual propertyportfolio. The opportunities we have created so far have significant potentialvalue over the coming years and the progress of our focused research programmesis promising." -Ends- For further information please call: Synairgen Tel: 02380 512 800Simon Shaw, ChairmanRichard Marsden, Managing Director Hogarth Partnership Tel: 020 7357 9477Georgina Briscoe / Charlie Field CHAIRMAN'S STATEMENT Overview In a year in which we have seen the pharmaceutical industry continuing to boostits pipelines through selective licensing and acquisition of promising earlystage programmes, Synairgen has continued to make strong progress in its fieldof respiratory drug discovery. During the year we have made good progress. Our lead proprietary programme forinhaled interferon beta has progressed well into its Phase I clinical trial. Wehave signalled a second indication for our interferon programme in the treatmentof COPD, the fourth leading cause of death worldwide. Post period-end, we havefurther strengthened our interferon programme by in-licensing relatedintellectual property regarding a related interferon from Imperial Innovations.We have established discussions with potentially interested partners for thisimportant programme. Our research into the failure of the lung's self defence mechanism ("barrierfunction") and the associated proteomics research has continued to yieldpromising opportunities which will be pursued in subsequent periods, some bySynairgen alone and others in collaboration with research partners. To this end,we are delighted to have extended our initial programme with one significantunnamed collaboration partner with whom we have been working for some two yearsand uncovered potentially significant avenues for further research. Board In April 2006 David Norwood resigned as a non-executive director in order todevote more time to IP Group plc and the Board appointed Dr Bruce Campbell ashis replacement. On behalf of the Board I would like to thank David for his helpand the enthusiastic support he has shown for Synairgen since its formation inlate 2003. Bruce is non-executive Chairman of Proximagen Neuroscience plc andChief Scientific Officer of IP Group plc. He has significant internationalexperience in pharmaceutical drug development. Outlook The last year has seen Synairgen add significantly to its intellectual propertyportfolio. The opportunities we have created so far have significant potentialvalue over the coming years and the progress of our focused research programmesis promising. Simon ShawChairman MANAGING DIRECTOR'S REPORT This has been a year of good progress for Synairgen in our mission to generateout-licensable drug discoveries in the fields of asthma and COPD. Synairgen'sbusiness model is to research these areas, add value to our discoveries byutilising our in vitro testing platform of human disease, or by conducting earlystage clinical trials, and ultimately out-license them to pharmaceutical orbiotechnology companies. During the year we progressed our inhaled interferon beta programme into theclinic and produced preliminary data suggesting there is a place for inhaledinterferon beta for the treatment of COPD. We have continued to evaluate twocandidate growth factors capable of improving the lung's "barrier function" inasthma and in December 2005 we commenced our proteomics programme. After the year-end, in July 2006, we in-licensed intellectual property relatingto interferon lambda from Imperial Innovations, further enhancing our interferonprogramme. Following successful completion of the first phase of our jointdiscovery collaboration with the undisclosed North American biotechnologycompany, we have extended this programme. Proprietary Programmes Inhaled interferon beta • Asthma Synairgen is developing inhaled interferon beta as a therapy to prevent or treatexacerbations of asthma caused by the common cold, principally the rhinovirus('RV'). RVs cause up to 80% of asthma exacerbations. Severe asthma exacerbations willoften lead to unscheduled use of healthcare resources. In the United States,there are 1.9 million emergency department visits due to asthma per year and$4.1billion is spent every year on unplanned physician visits andhospitalisations. Current treatments depend on the use of steroids andbeta-agonist bronchodilators with actions on the symptoms of worsening asthma asopposed to the underlying causes. These treatments are inadequate, particularlyin the severe asthmatic population and there is a large unmet and costlyclinical need for an effective therapy. Using human in vitro models, interferon beta has been shown to return to normalthe asthmatic epithelium's protective response against RVs, by significantlylowering the amount of virus replication and ensuing tissue damage, therebyhelping to fight infection in the lungs. Synairgen is developing an inhaledformulation for use in asthma. Synairgen intends to progress this opportunity inthe clinic towards a proof of concept Phase IIa clinical trial. We commenced aPhase I study in November designed to establish safety in allergic individualswithout asthma and this study has now been extended to optimise aerosoldelivery. Injectable interferon beta is already a well-established multiplesclerosis therapy marketed by Biogen Idec, Schering AG and Serono/Pfizer. • COPD In our view, the common cold could potentially pose a greater risk to COPDpatients than influenza, and is reported to be a major factor behind theworsening of COPD symptoms and resultant hospitalisations. At the AmericanThoracic Society meeting in May, we presented preliminary data showing that RVis 100 times more toxic to epithelial cells from smokers than non-smokers, whichmay help explain the occupancy of hospital beds by COPD patients during thecommon cold season. Our studies showed that COPD cells were able to eliminate RVwhen interferon beta was applied to the cultures in vitro. In August 2006 Prof. Johnston of Imperial College, and consultant to Synairgen,published a paper in Nature Medicine describing a deficiency of interferonlambda when cells from asthmatics were exposed to RV. Synairgen has licensedintellectual property relating to interferon lambda from Imperial Innovations,adding to our IP coverage in this area. Synairgen is seeking to out-license its interferon beta programmes for both COPDand asthma any time up to or around completion of the Phase IIa proof of conceptstudy and we have begun actively to engage with a number of potentiallyinterested parties. Barrier Function The epithelial cellular barrier in the lungs of asthma sufferers has beenlikened to a chronic wound and is known to be 'leaky'. This failure in barrierfunction may allow allergens, pollutants and viruses to penetrate through theepithelium into the underlying tissue. Synairgen scientists have been testingvarious growth factors to see if they can restore this protective barrierfunction. Two lead compounds have been identified; one is manufactured as amedicinal product and the other is a proprietary product for Synairgen. Proteomics Proteomics is a technology being applied by Synairgen to identify individualprotein differences between non-asthmatic and asthmatic cell populations. Theproteomics programme commenced in December 2005 and although this is a newresearch programme, it has already identified several asthma-related candidateproteins. Over the next year Synairgen will identify and validate which of theseindividual proteins may constitute 'drugable', patentable targets fordevelopment and out-licensing. Staff In order to meet the needs of our proprietary and collaborative programmes wehave increased our number of research and clinical staff from 10 to 16 duringthe year. Post year-end As announced in August 2006, we have in-licensed intellectual property relatingto interferon lambda. In addition, the drug discovery collaboration with ourunidentified biotechnology partner has been extended to enhance the power of thefirst round of experiments. We continue to develop new opportunities through ourlinks to the research capability of the Company's Founders and have identifiedand assisted the University of Southampton with some early research into newdiscoveries in our field. Some of these appear very promising at this earlystage. Financial Review The financial information comprises the consolidated results of the Company andSynairgen Research Limited (together the 'Group'), prepared in accordance withUK Generally Accepted Accounting Principles ('GAAP'). Profit and loss account Revenue for the year ended 30 June 2006 was £82k (year ended 30 June 2005:£202k). The reduction in revenue from the prior year follows the Group'sdecision to cease undertaking pure fee for service activity which does not offerintellectual property upside and concentrate its resources on proprietaryprojects. The operating loss for the year was £1,673k (2005: loss of £908k), inline with our expectations. Research and development expenditure increased from£557k to £1,069k as the Group commenced its Phase I clinical trial on theInterferon beta project and broadened its investment into the barrier functionand proteomic programmes. The increase in other administrative costs from £418kto £671k reflects the full-year effect of both the additional senior managementpersonnel recruited at the time of the IPO in October 2004 and the ongoing costsof being an AIM-quoted company. Interest receivable increased from £298k to£376k on account of the IPO funds raised. In July 2006, post year-end, the Groupreceived a payment of £89k in full settlement of its research and developmenttax credit claim in respect of the year ended 30 June 2005. This amount and anamount of £166k in respect of the year ended 30 June 2006 have been recognisedin this year's profit and loss account. The retained loss for the year was£1,042k (2005: loss of £610k) and the loss per share was 4.80p (2005: loss of3.26p). Balance sheet and cash flow At 30 June 2006, net assets amounted to £7.8 million (30 June 2005: £8.8million) including cash and deposit balances of £7.5 million (2005: £8.7million). The principal elements of the £1.2 million decrease (2005: £8.3 millionincrease) in cash and deposit balances were: • operating cash outflow of £1,530k (2005: £840k outflow); • capital expenditure of £52k (2005: £60k); • interest received of £397k (2005: £196k) and • share issues (net of expenses) £nil (2005: £8,980k) Capital expenditure comprised investment of £35k in laboratory and IT equipmentand £17k on patent and licence costs. Adoption of International Financial Reporting Standards ('IFRS') IFRS adoption becomes mandatory for AIM-quoted companies for periods beginningon or after 1 January 2007. The Company has reviewed as to when it should adoptIFRS and has decided to defer adoption until 1 July 2007 when accountingpractice under certain standards has become clearer and custom and practiceamongst smaller quoted companies in respect of the adoption of IFRS has emerged. Outlook Over the next six to twelve months, we look forward to updating the market as toour progress in our interferon beta clinical programme as well as developmentsin respect of potential partners. We anticipate that our growth factor compoundwill be validated in vitro and prepared for pre-clinical development. We willalso continue to liaise with potential out-licensing partners for all of ourprogrammes. Richard MarsdenManaging Director Consolidated Profit and Loss Accountfor the year ended 30 June 2006 Proforma Year Year ended ended 30 June 30 June 2006 2005 Notes £000 £000 Turnover 82 202Cost of sales (15) (135) ------- -------Gross profit 67 67 ------- ------- Administrative expenses---------------------------- ------- ------- -------Research and development expenditure (1,069) (557)Other (671) (418)---------------------------- ------- ------- -------Total (1,740) (975) ------- -------Operating loss (1,673) (908)Bank interest receivable 376 298 ------- ------- Loss on ordinary activities before taxation (1,297) (610)Tax on loss on ordinary activities 2 255 - ------- -------Loss on ordinary activities after taxation andretained loss for the year (1,042) (610) ======= ======= Loss per ordinary shareBasic and diluted loss per share (pence) 3 (4.80)p (3.26)p ======= ======= There are no recognised gains and losses other than the loss above and thereforeno separate statement of total recognised gains and losses has been presented. All amounts relate to continuing activities. Consolidated Balance Sheetas at 30 June 2006 30 June 30 June 2006 2005 Notes £000 £000 Fixed assetsIntangible assets 36 21Tangible assets 157 154 ------- ------- 193 175Current assetsStocks 68 55Debtors 423 325Investments: short-term deposits 7,464 8,605Cash at bank and in hand 33 78 ------- ------- 7,988 9,063Creditors: amounts falling due within one year (334) (398) ------- -------Net current assets 7,654 8,665 ------- ------- Total assets less current liabilities 7,847 8,840Creditors: amounts falling due within one year (10) - ------- -------Net assets 7,837 8,840 ======= ======= Capital and reservesCalled up share capital 217 217Share premium account 8,903 8,903Merger reserve 483 483Profit and loss account (1,766) (763) ------- -------Equity shareholders' funds 4 7,837 8,840 ======= ======= Consolidated Cash Flow Statementfor the year ended 30 June 2006 Proforma Year Year ended ended 30 June 30 June 2006 2005 Notes £000 £000 Net cash outflow from operating activities 5 (1,530) (840) Returns on investments and servicing of financeInterest received 397 196 Capital expenditure and financial investmentPurchase of intangible fixed assets (17) (18)Purchase of tangible fixed assets (35) (42) ------- -------Net cash outflow from capital expenditure (52) (60) ------- ------- Net cash outflow before management of liquidresources and financing (1,185) (704) Management of liquid resourcesDecrease/(Increase) in short-term deposits 1,141 (8,255) FinancingRepayment of capital element of finance leases andhire purchase contracts (1) -Issues of ordinary share capital - 77Share premium received on share issues - 9,923Share issue costs - (1,020) ------- -------Cash (outflow)/inflow from financing (1) 8,980 ------- ------- (Decrease)/Increase in cash (45) 21 ======= ======= Notes 1. Basis of preparation The financial information on the Group set out above does not constitute"statutory accounts" within the meaning of section 240 of the Companies Act1985. The financial information for the year ended 30 June 2006 has beenextracted from the Group's audited consolidated statutory accounts, which willbe delivered to the Registrar of Companies for England and Wales in due course.The report of the auditors on these accounts was unqualified and did not containa statement under Section 237 (2) or (3) of the Companies Act 1985. The annual report will be posted to shareholders in October 2006 and will belaid before shareholders at the Annual General Meeting on 15 November 2006. The accounts have been prepared in accordance with UK generally acceptedaccounting principles. Comparative figures are for the year ended 30 June 2005on the basis set out in the following paragraph. Synairgen plc was incorporated on 16 September 2004 and 2 ordinary shares of 1peach were issued. On 11 October 2004 Synairgen plc acquired the entire issuedshare capital of Synairgen Research Limited by issuing 13,999,998 ordinaryshares of 1p each on the basis of issuing 100 shares for each ordinary share of1p each held in Synairgen Research Limited. The directors have accounted forthis group reconstruction using the merger accounting principles as set out inFinancial Reporting Standard 6. Accordingly proforma financial information hasbeen prepared to show the position as if Synairgen plc had been in existence andthe parent of Synairgen Research Limited throughout the prior period. Theproforma information has been compiled by taking the results of SynairgenResearch Limited before the restructuring and adjusting for the capitalstructure of the new group. 2. Tax on loss on ordinary activities The tax credit of £255,000 (2005: £nil) relates to research and development taxcredits in respect of the years ended 30 June 2005 and 2006. 3. Loss per ordinary share Proforma Year Year ended ended 30 June 30 June 2006 2005 Loss on ordinary activities after taxation (£000) (1,042) (610)Weighted average number of ordinary shares in issue 21,692,308 18,730,993 The loss attributable to ordinary shareholders and weighted average number ofordinary shares for the purpose of calculating the diluted earnings per ordinaryshare are identical to those used for basic earnings per share. This is becausethe exercise of share options would have the effect of reducing the loss perordinary share and is therefore not dilutive under the terms of FinancialReporting Standard 22. At 30 June 2006 there were 1,946,594 options outstanding(30 June 2005: 1,813,500 options outstanding). The comparative figures areproforma based on the number of shares that would have been in issue had thecapital structure of the new parent company always been in place. 4. Reconciliation of movements in reserves and shareholders' funds Share Profit and Share premium Merger loss Shareholders' capital account reserve account funds £000 £000 £000 £000 £000 At 1 July 2004 113 - 510 (153) 470Issue of ordinary shares 104 9,923 (27) - 10,000Share issue costs - (1,020) - - (1,020)Loss for the year - - - (610) (610) ------ ------- ------ -------- ---------At 30 June 2005 217 8,903 483 (763) 8,840Loss for the year - - - (1,042) (1,042)Reversal of UITF 17 charge - - - 39 39 ------ ------- ------ -------- ---------At 30 June 2006 217 8,903 483 (1,766) 7,837 ====== ======= ====== ======== ========= 5. Reconciliation of operating loss to net cash outflow from operating activities Year Year ended ended 30 June 30 June 2006 2005 £000 £000Operating loss (1,673) (908)Depreciation & amortisation 48 34UITF 17 charge 39 -Increase in stocks (13) (55)Decrease/(Increase) in debtors 136 (146)(Decrease)/Increase in creditors (67) 235 -------- ---------Net cash outflow from operating activities (1,530) (840) ======== ========= 6. Reconciliation of net cash flow to movement in net funds Year Year ended ended 30 June 30 June 2006 2005 £000 £000(Decrease)/Increase in cash in year (45) 21(Decrease)/Increase in short-term deposits (1,141) 8,255Cash used to repay capital element of finance leases andhire purchase contracts 1 - -------- --------- Change in net funds resulting from cash flows and movementin net funds (1,185) 8,276New finance leases and hire purchase contracts (14) - -------- ---------Movement in net funds (1,199) 8,276Net funds at start of year 8,683 407 -------- ---------Net funds at end of year 7,484 8,683 ======== ========= This information is provided by RNS The company news service from the London Stock Exchange