Synairgen Regulatory News (SNG)

19 Mar 2007 07:01

Synairgen plc19 March 2007 19 March 2007 Synairgen plc ('Synairgen' or the 'Company') Interim Results for the six months ended 31 December 2006 Synairgen plc (LSE: SNG), the drug discovery company focused on asthma andchronic obstructive pulmonary disease ('COPD'), today announces its interimresults for the six months ended 31 December 2006. Financial highlights • Turnover for the period: £54k (2005: £77k); • Research and development expenditure for the period: £682k (2005: £494k); • Retained loss for the period: £746k (2005: loss of £558k); and • Net funds at 31 December 2006 of £6.7 million (2005: £8.2 million). Operational highlights • Phase I clinical trial of inhaled interferon beta for asthma progressing in the clinic in line with expectations; • Validation of in vitro data supporting use of Inhaled interferon beta in treatment of COPD complete; • Exclusive rights to a novel peptide which inhibits IL-4 and IL-13 signalling in-licensed from the University of Southampton. Validation programme is underway; • Development programme commenced for growth factor with potential for restoration of barrier function in asthma; and • Collaboration with undisclosed North American biotechnology company extended. Commenting on the results Simon Shaw, Chairman of Synairgen, said: "We have madegreat progress in our primary research and development programmes. We lookforward to completing the first safety study of inhaled Inhaled interferon beta,and the commencement of the first study in asthma. We also anticipate progressrelating to a lead growth factor compound, and the results of the IL-4 and IL-13inhibiting experiments which validate the recently licensed peptide. We havefocused on assembling a strong intellectual property portfolio in our core areasand we continue to discuss potentially attractive out-licensing opportunities." -Ends- For further information, please contact: Synairgen Tel: + 44 (0) 2380 512 800Richard Marsden, Managing DirectorJohn Ward, Finance Director Hogarth Partnership Tel: + 44 (0) 20 7357 9477Georgina Briscoe / Sarah MacLeod CHAIRMAN'S STATEMENT INTRODUCTION The first six months of the financial year have seen considerable progress onall fronts. We now have four valuable proprietary programmes underway as well as ourproteomics pipeline technology and barrier function screening assay. Candidate Indication Programme status Lead Selection Preclinical Clinical Development Phase IInterferon beta Asthma XInterferon beta COPD XGrowth Factor Asthma XIL-13R alpha 2 Asthma XPeptide During the period, we were delighted to introduce two new proprietary programmesto our research portfolio: a growth factor (borne out of the barrier functionprogramme) and a novel peptide inhibitor of IL-4 and IL-13. Both of theseprogrammes are focused exclusively on asthma. The interferon beta programme for asthma has been progressed in the clinic andSynairgen has completed successful validation of the COPD data presented at theAmerican Thoracic Society meeting in May 2006. In addition, we have also extended the collaboration with our unnamed NorthAmerican biotechnology research partner, and we maintain a dialogue withpotential licensees for our programmes. OPERATING REVIEW Proprietary programmes Inhaled interferon beta for asthma Synairgen's lead programme is the development of inhaled Interferon beta as atherapy to prevent and treat asthma exacerbations caused by the common cold. Ouraim remains to progress the programme to a proof of concept Phase IIa clinicaltrial. During the period under review, we have continued our Phase I safetystudy in allergic individuals without asthma and the last volunteer was enrolledinto the study on 6 February 2007. Our next study, the first in asthmatics, isanticipated to commence in the autumn. Interferon beta for COPD COPD patients consume approximately twice as much healthcare resource as asthmapatients, primarily due to unplanned hospitalisations caused by exacerbations.Up to 60% of all COPD exacerbations are preceded by the common cold. In May 2006, we presented preliminary data at the American Thoracic Societyconference, indicating that Interferon beta may have a place in the treatment ofCOPD. During the period, these data have been validated, showing that thesusceptibility of COPD epithelial cells to the common cold virus is between 10and 100 times greater than cells from non-smoking healthy control subjects. Theaddition of low levels of Interferon beta to the COPD epithelial cell models wasprotective against the common cold virus. The opportunity for Interferon beta in COPD is a very significant addition tothe Company's portfolio as there have been relatively few successfuldevelopments for COPD, despite it being the fifth leading cause of deathworldwide and a great consumer of healthcare resource. We are continuing todiscuss the Interferon beta programme with potential out-licensing partners. During the period, Synairgen in-licensed intellectual property from ImperialInnovations Ltd relating to the use of interferon lambda, which appears tofunction in a similar manner to Interferon beta. Barrier Function - Growth Factors One of Synairgen's pipeline platforms is borne out of an observation that theasthmatic epithelium is 'leaky' due to the poor formation of tight junctionproteins between cells. This defect in barrier function may be a key contributorto asthma susceptibility to environmental insults enabling pro-inflammatoryallergens, pollutants and viruses to penetrate through the epithelium to theunderlying tissue. Synairgen uses this patented observation as a platform totest for products which might restore tight junction integrity in asthma. Todate, we have identified two growth factors selective for epithelial cells thatcould be developed as potential therapies. We are reviewing manufacture andfurther development of one of these growth factors, with a view to commencingclinical studies during 2009. 'Natural' inhibitor of IL-4 and IL-13 As announced in November 2006, we have in-licensed exclusive rights to a novelpeptide which mimics the body's own intracellular inhibition of IL-4 and IL-13signalling. The peptide was discovered at the University of Southampton by DrAllison Lynn Andrews, Dr John Holloway and Professor Donna Davies (a co-founderof Synairgen) and the in-licensing of this programme to Synairgen is anotherexample of the strong collaborative relationship between Synairgen and theUniversity. A number of large pharmaceutical and biotechnology companies areknown to be developing therapies designed to counter the adverse effects ofthese cytokines, which are considered central to the development of allergicasthma. Synairgen's peptide potentially has a number of advantages, such asbeing easier to manufacture, being deliverable by aerosol, and most importantly,the ability to inhibit both IL-4 and IL-13 signalling. In January 2007, wecommenced a validation programme, which will take approximately six months. Pipeline platform technology Synairgen uses its in vitro models to screen for new compounds and targets whichreverse poor barrier function in asthma. We also continue to make progress inour proteomics programme, where we have observed a number of secreted proteinswhich are altered at baseline in asthma. By focussing on secreted proteins weincrease the relative drugability of the targets. These proteins will beidentified during the next year and will be evaluated as drug targets forfurther development. Collaborative programmes Further to an interim analysis of data in the programme we were delighted tohave extended the collaboration with our target discovery programme with ourunnamed North American biotechnology partner. Staff During the period, we announced the appointment of Dr Phillip Monk fromCambridge Antibody Technology ('CAT') as Head of Bioscience Development. Phillwas previously Director of the Respiratory and Inflammation Biology group at CATand led the scientific development of CAT-354, an anti-IL-13 antibody beingdeveloped for the treatment of severe asthma. In addition to Phill's appointment, we continue to strengthen our research andclinical resource to meet the needs of our proprietary and collaborativeprogrammes. FINANCIAL REVIEW Profit and loss account Revenue for the six months to 31 December 2006 was £54k (six months ended 31December 2005: £77k) and was primarily generated from the extended discoverycollaboration with our unidentified international biotechnology partner. Theoperating loss for the period was £1,011k (2005: loss of £756k). Research anddevelopment expenditure increased from £494k to £682k as the Company increasedits number of proprietary research programmes to four. Our R&D expenditure willcontinue to increase further as we progress the Interferon beta programmes andscale up the level of activity on the growth factor and peptide projects. Otheradministrative costs increased from £325k to £368k. Interest receivabledecreased from £198k to £174k on account of lower deposit balances. Followingthe receipt of our first research and development tax credit in respect of theyear ended June 2005, a tax credit of £91k for the period (2005: £nil) has beenaccounted for. The retained loss was £746k (2005: loss of £558k) and the lossper share was 3.4p (2005: loss of 2.6p). Balance sheet and cash flow At 31 December 2006, net assets amounted to £7.1 million (31 December 2005: £8.3million), including net funds of £6.7 million (2005: £8.2 million). Cash outflow for the six months to 31 December 2006 was £746k (six months ended31 December 2005: £438k), underpinned by the increase in operating loss from£756k to £1,011k. Adoption of Financial Reporting Standard 20 ('FRS 20') As of 1 July 2006, the Company 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 17 November 2002 which have not vested by 30June 2006. In accordance with standard practice, prior period results arerestated as if the standard had always been in force. For the period up to 30June 2006 the additional charge booked to the Profit and Loss Account followingthe adoption of FRS 20 amounted to £41,000. The FRS 20 charge for the six monthsended 31 December 2006 was £33,000. Adoption of International Financial Reporting Standards ('IFRS') The Company will adopt IFRS on 1 July 2007 and has commenced a project tofacilitate conversion from UK GAAP. Disclosure will be made in the annualaccounts of the likely impact of conversion. OUTLOOK We have made great progress in our primary research and development programmes.We look forward to completing the first safety study of inhaled Interferon beta,and the commencement of the first study in asthma. We also anticipate progressrelating to a lead growth factor compound, and the results of the IL-4 and IL-13inhibiting experiments which validate the recently licensed peptide. We havefocused on assembling a strong intellectual property portfolio in our core areasand we continue to discuss potentially attractive out-licensing opportunities. Simon Shaw Chairman Unaudited Consolidated Profit and Loss Account for the six months ended 31 December 2006 Restated Restated (See Note 1) (See Note 1) Six months Six months Year ended ended ended 31 December 31 December 30 June 2006 2005 2006 Notes £000 £000 £000 Turnover 54 77 82Cost of sales (15) (14) (15) --------- --------- -------- Gross profit 39 63 67 --------- --------- -------- Administrative expenses--------------------- ------ --------- --------- --------Research and development (682) (494) (1,083)expenditureOther (368) (325) (664)--------------------- ------ --------- --------- --------Total (1,050) (819) (1,747) --------- --------- -------- Operating loss (1,011) (756) (1,680)Interest receivable 174 198 376 --------- --------- -------- Loss on ordinary activitiesbefore (837) (558) (1,304)taxationTax on loss on ordinary 2 91 - 255activities --------- --------- -------- Loss on ordinary activitiesaftertaxation and retained loss for (746) (558) (1,049)the ========= ========= ========period Loss per ordinary shareBasic and diluted loss pershare 3 (3.44)p (2.57)p (4.84)p(pence) All amounts relate to continuing activities. There were no other recognisedgains and losses during any of the periods presented.Unaudited Consolidated Balance Sheet as at 31 December 2006 Restated Restated (See Note 1) (See Note 1) 31 December 31 December 30 June 2006 2005 2006 Notes £000 £000 £000Fixed assetsIntangible assets 91 26 36Tangible assets 143 157 157 --------- --------- -------- 234 183 193Current assetsStocks 85 88 68Debtors 421 211 423Investments: short-term deposits 6,624 8,165 7,464Cash at bank and in hand 127 80 33 --------- --------- -------- 7,257 8,544 7,988Creditors: amounts falling duewithin (359) (421) (334)one year --------- --------- -------- Net current assets 6,898 8,123 7,654 --------- --------- -------- Total assets less current 7,132 8,306 7,847liabilities Creditors: amounts falling dueafter (8) - (10)more than one year --------- --------- -------- Net assets 7,124 8,306 7,837 ========= ========= ======== Capital and reservesCalled up share capital 217 217 217Share premium account 8,903 8,903 8,903Merger reserve 483 483 483Share-based payment reserve 113 58 80Profit and loss account (2,592) (1,355) (1,846) --------- --------- -------- Shareholders' funds 4 7,124 8,306 7,837 ========= ========= ======== Unaudited Consolidated Cash Flow Statement for the six months ended 31 December 2006 Six months Six months Year ended ended ended 31 December 31 December 30 June 2006 2005 2006 Notes £000 £000 £000 Net cash outflow from operatingactivities 5 (940) (621) (1,530) Returns on investments and servicingof financeInterest received 180 213 397 TaxationResearch and development tax creditreceived 89 - - Capital expenditure and financialinvestmentPurchase of intangible fixed assets (59) (6) (17)Purchase of tangible fixed assets (14) (24) (35) --------- --------- ------- Net cash outflow from capitalexpenditure (73) (30) (52) --------- --------- ------- Net cash outflow before management ofliquid resources and financing (744) (438) (1,185) Management of liquid resourcesDecrease in short-term deposits 840 440 1,141 FinancingRepayment of capital element offinance leases and hire purchasecontracts (2) - (1) --------- --------- ------- Increase/(Decrease) in cash in period 6 94 2 (45) ========= ========= ======= Notes to the Financial Statements for the six months ended 31 December 2006 1. Basis of preparation The accounting policies and presentation applied to half-yearly figures areconsistent with those applied in the last published accounts except where theaccounting policies and presentation are to be changed in the next annualfinancial statements (see below re FRS 20), in which case the new accountingpolicies and presentation are followed. All AIM-quoted companies are required to implement Financial Reporting Standard("FRS") 20 "Share-based Payment" for accounting periods beginning on or after 1January 2006. Adoption of FRS 20 supersedes UITF Abstract 17 (revised 2003)"Employee Share Schemes", under which the Company had previously accounted forshares and share options awarded to employees. FRS 20 requires that optionsawards and awards made under the Company's Long-Term Incentive Plan ("LTIP")granted after 7 November 2002 which had not vested by 1 July 2006 be fair valuedand charged to the profit and loss account over the period from grant tovesting. The Company has valued option awards using the Black-Scholes model andawards under the LTIP using the Stochastic model. In common with theimplementation of all accounting standards, prior year results must be restatedas if the accounting standard has always been in force. This change inaccounting policy does not result in any change to the Profit and Loss chargefor the six months ended 31 December 2006 (six months ended 31 December 2005:increase of £15,000; year ended 30 June 2006: increase of £8,000). Under UITF17, the credit for the charge was taken to the Profit and Loss reserve andreported in the reconciliation of movements in shareholders' funds. Under FRS 20the credit for the charge is taken to the Share-based payment reserve. Therestatement has no impact on net assets in the periods presented in theseinterim results. The Interim Report was approved by the Board of Directors on 16 March 2007. Thefinancial information for the six months ended 31 December 2006 is unaudited,but has been reviewed in accordance with Auditing Practices Board guidance byBDO Stoy Hayward LLP. The interim results do not constitute statutory financialstatements within the meaning of Section 240(5) of the Companies Act 1985. The comparatives for the full year ended 30 June 2006 are not the Company's fullstatutory accounts for that year. A copy of the statutory accounts for that yearhas been delivered to the Registrar of Companies. The auditors' report on thoseaccounts was unqualified and did not contain a statement under section 237(2)-(3) of the Companies Act 1985. 2. Taxation The credit of £91,000 represents an estimate of the research and development taxcredit receivable in respect of the six months ended 31 December 2006. 3. Loss per ordinary share Restated Restated Six months Six months Year ended ended ended 31 December 31 December 30 June 2006 2005 2006 Loss on ordinary activities aftertaxation (£000) (746) (558) (1,049)Weighted average number of ordinaryshares in issue 21,692,308 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 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. 4. Reconciliation of movements in 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 June2005 (asoriginallystated) 217 8,903 483 - (763) 8,840FRS 20 - - - 34 (34) -charge ------ ------- ------ ------- ------ ---------At 30 June2005(restated) 217 8,903 483 34 (797) 8,840Loss fortheperiod - - - - (558) (558)(restated)Reversalof - - - 24 - 24FRS 20 ------ ------- ------ ------- ------ ---------chargeAt 31December2005 217 8,903 483 58 (1,355) 8,306(restated)Loss fortheperiod - - - - (491) (491)(restated)Reversalof - - - 22 - 22FRS 20 ------ ------- ----- ------- ------ ---------chargeAt 30 June2006(restated) 217 8,903 483 80 (1,846) 7,837Loss forthe - - - - (746) (746)periodReversalof - - - 33 - 33FRS 20 ------ ------- ----- ------- ------ ---------chargeAt 31December 217 8,903 483 113 (2,592) 7,1242006 ====== ======= ===== ======= ====== ========= 5. Reconciliation of operating loss to net cash outflow from operatingactivities Restated Restated Six months Six months Year ended ended ended 31 December 31 December 30 June 2006 2005 2006 £000 £000 £000 Operating loss (1,011) (756) (1,680)Depreciation & amortisation 32 22 48FRS 20 charge 33 24 46Increase in stocks (17) (33) (13)(Increase)/Decrease in debtors (2) 99 136Increase/(Decrease) in creditors 25 23 (67) ---------- --------- ------- Net cash outflow from operatingactivities (940) (621) (1,530) ========== ========= ======= 6. Reconciliation of net cash flow to movement in net funds Six months Six months Year ended ended ended 31 December 31 December 30 June 2006 2005 2006 £000 £000 £000 Increase/(Decrease) in cash in period 94 2 (45)Decrease in short-term deposits (840) (440) (1,141)Cash use to repay capital element offinance leases and hire purchasecontracts 2 - 1 ---------- --------- ------- Change in net funds resulting from cashflows (744) (438) (1,185)New finance leases and hire purchasecontracts - - (14) ---------- --------- -------Movement in net funds (744) (438) (1,199) Net funds at start of period 7,484 8,683 8,683 ---------- --------- ------- Net funds at end of period 6,740 8,245 7,484 ========== ========= ======= INDEPENDENT REVIEW REPORT TO SYNAIRGEN PLC Introduction We have been instructed by the company to review the financial information forthe six months ended 31 December 2006 which comprises the unaudited group profitand loss account for the six months ended 31 December 2006, the unaudited groupbalance sheet as at 31 December 2006, the unaudited group cash flow statementfor the six months ended 31 December 2006 and the related notes. We have readthe other information contained in the interim report and considered whether itcontains any apparent misstatements or material inconsistencies with thefinancial information. Our report has been prepared in accordance with the terms of our engagement toassist the company in meeting the requirements of the rules of the London StockExchange for companies trading securities on the Alternative Investment Marketand for no other purpose. No person is entitled to rely on this report unlesssuch a person is a person entitled to rely upon this report by virtue of and forthe purpose of our terms of engagement or has been expressly authorised to do soby our prior written consent. Save as above, we do not accept responsibility forthis report to any other person or for any other purpose and we hereby expresslydisclaim any and all such liability. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by the directors. The directors areresponsible for preparing the interim report in accordance with the rules of theLondon Stock Exchange for companies trading securities on the AlternativeInvestment Market which require that the half-yearly report be presented andprepared in a form consistent with that which will be adopted in the company'sannual accounts having regard to the accounting standards applicable to suchannual accounts. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4issued by the Auditing Practices Board for use in the United Kingdom by auditorsof fully listed companies. A review consists principally of making enquiries ofmanagement and applying analytical procedures to the financial information andunderlying financial data and based thereon, assessing whether the accountingpolicies and presentation have been consistently applied unless otherwisedisclosed. A review excludes audit procedures such as tests of controls andverification of assets, liabilities and transactions. It is substantially lessin scope than an audit performed in accordance with International Standards onAuditing (United Kingdom and Ireland) and therefore provides a lower level ofassurance than an audit. Accordingly we do not express an audit opinion on thefinancial information. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 31 December 2006. BDO STOY HAYWARD LLP Chartered Accountants Southampton 16 March 2007 This information is provided by RNS The company news service from the London Stock Exchange