Synairgen Regulatory News (SNG)

26 Sep 2007 07:01

Synairgen plc26 September 2007 26 September 2007 Synairgen plc Preliminary Results for the year ended 30 June 2007 Synairgen plc ('Synairgen' or the 'Company'), the drug discovery company focusedon discovering novel therapies which address the causes, rather than thesymptoms, of respiratory disease, today announces its Preliminary Results forthe year ended 30 June 2007. Operational highlights • Successful completion of Phase I safety study in healthy volunteers; follow-on safety study anticipated to start early 2008; • US patent filed to protect discovery of IFN-beta potential impact against rhinovirus in the elderly; and • Growth factor development programme progressing to plan. Financial highlights • Research and development expenditure for the year: £1.5 million (2006: £1.1 million); • Retained loss for the year: £1.6 million (2006: loss of £1.0 million); and • Cash at 30 June 2007 of £6.0 million (2006: £7.5 million). Commenting on the results, Simon Shaw, Chairman of Synairgen, said: "The last year has seen Synairgen grow its intellectual property portfolioconsiderably. The opportunities we have created so far have given the Companysignificant potential value over the coming years, which, coupled with theprogress of our focused research programmes, provides a promising outlook forthe future of the business." -Ends- For further information please call: Synairgen Tel: 02380 512 800Simon Shaw, ChairmanRichard Marsden, Managing Director Hogarth Partnership Tel: 020 7357 9477 or 07767 66 00 40Melanie Toyne-Sewell CHAIRMAN'S STATEMENT Synairgen is committed to discovering novel therapies which address the causes,rather than the symptoms, of respiratory disease. In combination with theUniversity of Southampton, our research has yielded two potentially significantdevelopment programmes, interferon-beta (IFN-beta) against viral infection inasthma and COPD, and a proprietary growth factor in asthma. In addition we havea developing pipeline of potentially significant opportunities such as the novelpeptide IL-13/IL-4 inhibitor in asthma. In recent times it has become ever clearer both to industry participants andinvestors that long term drug pipelines are increasingly being filled throughcollaboration and licensing relationships with discoverers and early stagedevelopers of novel therapies. Synairgen's business model is to develop eachopportunity to a stage where it becomes a marketable development programme tothe pharmaceutical and biotechnology industry. We believe that collaboratingwith a significant industry participant at an early stage, under appropriatelicence terms, improves the probability of bringing a novel medicine to marketquickly through the combination of development, regulatory, market positioningand financial resources that a partner can bring to the programme. It isgratifying to see that the quantity and quality of our discussions withpharmaceutical and biotechnology companies, has stepped up a gear in the pastyear. This reflects the fact that we have successfully completed our first PhaseI trial in the Company's lead programme. During the forthcoming year, we will continue to add value to our portfolio ofdevelopment and discovery programmes and to market our lead programmes with aview to collaborating on the next stages of their development. Simon Shaw Chairman MANAGING DIRECTOR'S REPORT Synairgen discovers and develops novel patent-protected drug therapies forasthma and Chronic Obstructive Pulmonary Disease (COPD). Both specialistrespiratory physicians and the industry recognise the need for new ways ofmeeting the clinical need which is not adequately met by currently availabletherapeutics in these substantial markets. Synairgen's model is to engage with its potential partners in out-licensingdiscussions at an early stage in the development programme to maximise thechances of candidates advancing through Phase II and III clinical trials asrapidly as possible, and ultimately reaching the market. In our IFN-beta and growth factor programmes, Synairgen has two novel programmesthat have reached the stage where they can sensibly be out-licensed. We haveongoing contact with a number of the top 30 pharmaceutical and biotechnologycompanies worldwide to explore the potential for partnering these programmes. Development programmes IFN-beta programme Synairgen is seeking to develop an inhaled interferon product which enablesasthmatics and COPD patients overcome the seriously debilitating effect of themain common cold virus (rhinovirus) on their condition. The cost of the common cold The common cold is the probable cause of 50-80% of all hospitalisations ofasthmatic and COPD patients. Accordingly, the health economic impact of thecommon cold in these prevalent diseases is high, with hospitalisations in the USfor asthma and COPD costing $4.7 billion and $11.3 billion per annumrespectively. IFN-beta in asthma Scientists in Southampton, using a biobank of cells from asthmatic patients andproprietary in vitro lung models, discovered a deficiency in asthmatics' abilityto produce IFN-beta, which is one of the human's primary defence mechanismsagainst viral attack. Simulated delivery of inhaled delivery of IFN-betanormalised the asthmatic cells' response to the common cold virus. Thispioneering series of experiments was the catalyst for Synairgen's inhaledIFN-beta programme. IFN-beta is currently approved for administration byinjection to treat multiple sclerosis patients; thus its systemic safety profileis well understood. Synairgen has needed to optimise and establish the safety ofinhaled IFN-beta for use in asthma. IFN-beta - safety study successfully completed During the year under review, Synairgen successfully completed the importantmilestone of a Phase I safety study in healthy volunteers, and is expecting tostart a follow-on safety study in early 2008. Phase II studies are expected tostart in 2009. IFN-beta in COPD During this period, Synairgen also generated compelling data showing that thecommon cold virus is more destructive to cells from the lungs of smokers. Thisfits well with the impact of the common cold on the COPD population during thewinter months. IFN-beta in the elderly The common cold virus can have a devastating effect on vulnerable groups otherthan asthmatic and COPD patients. One report has linked rhinovirus to the deathof nursing home residents. Whilst demonstrating the therapeutic potential ofIFN-beta in COPD, Synairgen scientists observed a deficiency in the oldercontrol subjects' cells' ability to defend themselves against RV when comparedto younger controls. IFN-beta significantly improved these cells' response toRV, limiting cell death. Synairgen has filed a patent in the US to protect thisdiscovery. Business Development activity The market opportunity for a breakthrough product in asthma, COPD and other atrisk groups, such as the elderly, is substantial. Synairgen is seeking toout-license its IFN-beta programme at an early stage to a large Pharma/Biotechpartner and has several ongoing confidential dialogues at various stages of theprocess with suitable partners. Growth factors to restore Barrier Function in asthma The second licensable programme arose from our work showing that, in common withdiseases of the gut and the skin, the cells that line the airways (theepithelium) of asthmatics form a poor barrier to the external environment. The"leaky" epithelium of asthmatics may be allowing the ingress of aggravatinginhaled particles such as pollen, cigarette smoke or infectious agents which cantrigger and maintain the asthma response. Using epithelial cells from asthmatics, Synairgen has shown that a panel ofgrowth factors can restore Barrier Function. Within the last year a therapeuticcandidate has been selected, which can restore Barrier Function withoutpromoting the unwanted structural changes in the lung that may be promoted byother growth factors. Manufacture of this lead candidate is being scaled-up tosupport preclinical safety and ultimately clinical studies. Synairgen has commenced discussions regarding the out-licensing of its growthfactor programme. IL-4/IL-13 Inhibiting Peptide Synairgen's earliest stage development programme is for the development of anovel peptide that has been shown to inhibit the two cytokines IL-4 and IL-13;both cytokines are the target of considerable industry interest in this field ofallergy and asthma. During the year under review, Synairgen in-licensed from theUniversity of Southampton a patent protecting the peptide. Synairgen is seekingto validate these early findings over the coming year. Discovery programmes Our proteomics programme, which is designed to identify potential new targets ormarkers in asthma, has uncovered approximately 80 proteins which differsignificantly between asthmatic and normal subjects. In the coming year thesewill be identified and the list rationalised to generate between two and fivepossible targets for subsequent research. In addition we have continued toinvestigate the nature of the barrier function deficiency, which adds to ourunderstanding of the underlying defect; a necessary precursor to discovering atreatment for the potential cause(s). During the period we also extended our target discovery partnership with theunnamed North American Biotechnology company partner; data is currently beinganalysed. 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 Turnover for the year ended 30 June 2007 was £78,000 (year ended 30 June 2006:£82,000) and arose primarily from the ongoing collaboration with the unnamedNorth American biotechnology company. The operating loss for the year was £2.23million (2006: loss of £1.68 million), in line with our expectations. Researchand development expenditure increased from £1.08 million to £1.53 million as theGroup progressed its four development programmes and broadened the number ofdiscovery projects. During the year the number of research and clinical staffhas increased from 16 to 18. Other administrative costs increased from £0.67million to £0.75 million. Interest receivable decreased from £0.38 million to£0.34 million. The tax credit of £0.25 million comprises the research anddevelopment tax credit claim in respect of this year (£0.24 million) and amountsin respect of prior years. The prior year tax credit comprised claims relatingto the years ending 30 June 2005 (£0.09 million) and 30 June 2006 (£0.17million). The retained loss for the year was £1.64 million (2006: loss of £1.05million) and the loss per share was 7.58p (2006: loss of 4.84p). Balance sheet and cash flow At 30 June 2007, net assets amounted to £6.28 million (30 June 2006: £7.84million) including cash and deposit balances of £6.01 million (2006: £7.48million). The principal elements of the £1.48 million decrease (2006: £1.20 milliondecrease) in cash and deposit balances were: •operating cash outflow of £1.97 million (2006: £1.53 million outflow); •capital expenditure of £0.13 million (2006: £0.05 million); •interest received of £0.36 million (2006: £0.40 million) and •research and development tax credits received of £0.27 million (2006: £nil). Capital expenditure comprised investment into patent and licence costs andequipment. Adoption of Financial Reporting Standard 20 ('FRS 20') As of 1 July 2006, the Group has adopted FRS 20 "Share-based Payment" in placeof UITF 17 "Employee Share Schemes". FRS 20 requires fair value accounting foroptions and LTIPs granted after 7 November 2002 which have not vested by 1 July2006. In accordance with standard practice, prior year results are restated. Forthe period up to 30 June 2006 the additional charge booked to the Profit andLoss Account following the adoption of FRS 20 amounted to £41k. The FRS 20charge for the year ended 30 June 2007 was £83k. Adoption of International Financial Reporting Standards ('IFRS') The Group has adopted IFRS, as adapted for use in the European Union, on 1 July2007. Summary The year has been one of considerable progress with our teams performing wellacross all our programmes. We have added significant value to our two leadprogrammes and brought them to a position where we are able to discuss themseriously with potential licensing partners. We look forward to furtherdevelopments in the coming year. Richard Marsden Managing Director Consolidated Profit and Loss Accountfor the year ended 30 June Restated 2007 2006 Notes £000 £000 Turnover 78 82Cost of sales (33) (15) -------- -------Gross profit 45 67 -------- ------- Administrative expenses---------------------------- -------- -------Research and development expenditure (1,527) (1,083)Other (750) (664)---------------------------- -------- -------Total administrative expenses (2,277) (1,747) -------- -------Operating loss (2,232) (1,680)Bank interest receivable 342 376Finance lease interest payable (1) - -------- ------- Loss on ordinary activities before taxation (1,891) (1,304)Tax on loss on ordinary activities 2 247 255 -------- -------Loss on ordinary activities after taxation andretained loss for the year (1,644) (1,049) ======== ======= Loss per ordinary share -------- -------Basic and diluted loss per share (pence) 3 (7.58)p (4.84)p ======== ======= There are no recognised gains and losses other than the loss above and, in thecurrent year, the cumulative loss from the prior year adjustment on the adoptionof FRS 20 (£41,000) as detailed in Notes 1 and 4. All amounts relate to continuing activities. Consolidated Balance Sheetas at 30 June Restated 2007 2006 Notes £000 £000Fixed assetsIntangible assets 99 36Tangible assets 146 157 -------- ------- 245 193Current assetsStocks 96 68Debtors 367 423Investments: short-term deposits 5,903 7,464Cash at bank and in hand 115 33 -------- ------- 6,481 7,988Creditors: amounts falling due within one year (442) (334) -------- -------Net current assets 6,039 7,654 -------- ------- Total assets less current liabilities 6,284 7,847 Creditors: amounts falling due after more than one (8) (10)year -------- ------- Net assets 6,276 7,837 ======== ======= Capital and reservesCalled up share capital 217 217Share premium account 8,903 8,903Merger reserve 483 483Share-based payment reserve 163 80Profit and loss account (3,490) (1,846) -------- -------Shareholders' funds 4 6,276 7,837 ======== ======= Consolidated Cash Flow Statementfor the year ended 30 June 2007 2006 Notes £000 £000 Net cash outflow from operating activities 5 (1,974) (1,530) Returns on investments and servicing of financeBank interest received 358 397Finance lease interest paid (1) - -------- -------Net cash inflow from returns on investments andservicing of finance 357 397 TaxationResearch and development tax credits received 267 - Capital expenditure and financial investmentPurchase of intangible fixed assets (77) (17)Purchase of tangible fixed assets (49) (35) -------- -------Net cash outflow from capital expenditure (126) (52) -------- -------Net cash outflow before management of liquidresources (1,476) (1,185)and financing Management of liquid resourcesDecrease in short-term deposits 1,561 1,141 FinancingRepayment of capital element of finance leases andhire (3) (1)purchase contracts -------- -------Increase/(Decrease) in cash 82 (45) ======== ======= 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 2007 has beenextracted from the Group's audited consolidated financial statements, which willbe delivered to the Registrar of Companies for England and Wales in due course.The report of the auditors on these financial statements was unqualified, didnot include references to any matters to which the auditors drew attention byway of emphasis without qualifying their report and did not contain a statementunder Section 237 (2) or (3) of the Companies Act 1985. The annual report will be posted to shareholders in October 2007 and will belaid before shareholders at the Annual General Meeting on 14 November 2007. The consolidated financial statements have been prepared under the historicalcost convention, in accordance with the Companies Act 1985 and applicable UKaccounting standards, using the merger method of accounting. The accounting policies used in preparing the financial statements have beenapplied consistently throughout all periods presented with the exception ofFinancial Reporting Standard 20 "Share-based Payment" ('FRS 20'). All AIM-quoted companies are required to implement FRS 20 for accounting periodsbeginning on or after 1 January 2006 and the Group has adopted FRS 20 for thefirst time for the year ended 30 June 2007. Adoption of FRS 20 supersedes UITFAbstract 17 (revised 2003) "Employee Share Schemes" ('UITF 17'), under which theGroup had previously accounted for shares and share options awarded toemployees. FRS 20 requires that options awards and awards made under theCompany's Long-Term Incentive Plan ('LTIP') granted after 7 November 2002 whichhad not vested by 1 July 2006 be fair valued and charged to the profit and lossaccount over the period from grant to vesting. The Group has valued optionawards using the Black-Scholes model and awards under the LTIP using theStochastic model. As required by FRS 20 prior year results have been restated.This change in accounting policy, after the reversal of the UITF 17 chargeincluded in the prior year financial statements, results in a credit of £11,000for the year ended 30 June 2007 (year ended 30 June 2006: charge of £7,000).Under UITF 17, the credit for the charge was taken to the Profit and Lossreserve and reported in the reconciliation of movements in shareholders' funds.Under FRS 20 the credit for the charge is taken to reserves. The restatement hasno impact on net assets in the periods presented in the financial information. 2. Tax on loss on ordinary activities The tax credit of £247,000 (2005: £255,000) relates to research and developmenttax credits in respect of the years ended 30 June 2007 (£235,000) and 2006(£12,000). 3. Loss per ordinary share Restated Year Year ended ended 30 June 30 June 2007 2006 Loss on ordinary activities after taxation (£000) (1,644) (1,049)Weighted average number of ordinary shares in issue 21,692,308 21,692,308 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 because the exercise of shareoptions would have the effect of reducing the loss per ordinary share and is therefore notdilutive under the terms of Financial Reporting Standard 22. At 30 June 2007there were 2,404,939 options outstanding (30 June 2006: 1,946,594 optionsoutstanding). 4. Reconciliation of movements in reserves and shareholders'funds Share Share Merger Share-based Profit Shareholders' capital premium reserve payment and loss funds account reserve account £000 £000 £000 £000 £000 £000 At 30 June 2005 (asoriginally stated) 217 8,903 483 - (763) 8,840Prior year adjustmentfor FRS 20 charge - - - 34 (34) - ------ ------- ------ ------- ------- ---------At 30 June 2005 (restated) 217 8,903 483 34 (797) 8,840Loss for the year (restated) - - - - (1,049) (1,049)Share-based payment - - - 46 - 46 ------ ------- ------ ------- ------- ---------At 30 June 2006 (restated) 217 8,903 483 80 (1,846) 7,837Loss for the year - - - - (1,644) (1,644)Share-based payment - - - 83 - 83 ------ ------- ------ ------- ------- ---------At 30 June 2007 217 8,903 483 163 (3,490) 6,276 ====== ======= ====== ======= ======= ========= 5. Reconciliation of operating loss to net cash outflow from operating activities Restated Year Year ended ended 30 June 30 June 2007 2006 £000 £000 Operating loss (2,232) (1,680)Depreciation & amortisation 74 48FRS 20 charge 83 46Increase in stocks (28) (13)Decrease in debtors 20 136Increase/(Decrease) in creditors 109 (67) -------- ---------Net cash outflow from operating activities (1,974) (1,530) ======== ========= 6. Reconciliation of net cash flow to movement in net funds Year Year ended ended 30 June 30 June 2007 2006 £000 £000 Increase/(Decrease) in cash in year 82 (45)Decrease in short-term deposits (1,561) (1,141)Cash used to repay capital element of finance leases andhire purchase contracts 3 1 -------- --------- Change in net funds resulting from cash flows (1,476) (1,185)New finance leases and hire purchase contracts - (14) -------- ---------Movement in net funds (1,476) (1,199)Net funds at start of year 7,484 8,683 -------- ---------Net funds at end of year 6,008 7,484 ======== ========= This information is provided by RNS The company news service from the London Stock Exchange