Synairgen Regulatory News (SNG)

23 Feb 2006 07:01

Synairgen plc23 February 2006 23 February 2006 Synairgen plc ('Synairgen' or the 'Company') Interim Results for the six months ended 31 December 2005 Synairgen plc (LSE: SNG), the drug discovery company focused on identifying andout-licensing new pharmaceutical products which address the underlying causes ofasthma and chronic obstructive pulmonary disease ('COPD'), today announces itsinterim results for the six months ended 31 December 2005. Operational highlights • Interferon beta ('IFN beta') for asthma: commencement of inhaled IFN beta Phase I clinical trial; initial results expected mid 2006 • IFN beta for COPD: in vitro proof of concept studies underway • Recruitment of scientific team complete Financial highlights • Turnover was £77k (six months ended 31 December 2004: £58k) • Operating loss for the period was £742k (six months ended 31 December 2004: loss of £390k) in line with management expectations • Cash outflow for the period was £438k (six months ended 31 December 2004: £283k) • Net funds at 31 December 2005 of £8.2 million (31 December 2004: £9.1 million) Commenting on the results, Simon Shaw, Chairman of Synairgen, said: "We are delighted to have seen our lead product enter the clinic during theperiod. This is a testament to Synairgen's ability to progress from discovery todevelopment. In 2006, we look forward to progressing the IFN beta development inasthma and advancing our other collaborative and proprietary researchprogrammes." -Ends- For further information, please contact: Synairgen Tel: 02380 512 800Richard Marsden, MDJohn Ward, FD Hogarth Partnership Tel: 020 7357 9477Melanie Toyne-Sewell / Georgina Briscoe CHAIRMAN'S STATEMENT INTRODUCTION Synairgen is a drug discovery company focused on researching treatments toaddress the causes of asthma and chronic obstructive pulmonary disease ('COPD')through both proprietary and collaborative programmes. During the six months ended 31 December 2005, Synairgen has continued to pursueits proprietary programmes and we are very pleased with our progress as ourfirst product, inhaled interferon beta ('IFN beta') for asthma, entered theclinical trial phase. In parallel, we have also continued to study IFN beta forits potential to protect COPD patients from the effects of the common cold.Within our other proprietary programmes we have continued to research intoimpaired epithelial barrier function in asthma and the restorative effects ofvarious growth factors. Analysis and interpretation of the data generatedthrough our collaboration with a significant undisclosed internationalbiotechnology company has now commenced. OPERATING REVIEW Proprietary Programmes Inhaled IFN beta • Asthma Inhaled IFN beta has the potential to prevent or alleviate rhinovirus (commoncold virus) induced asthma attacks (exacerbations) in patients with severeasthma, thereby reducing the frequency of hospitalisations and absenteeism fromwork and school. We believe that such a therapy could address a significantunmet clinical need and generate significant savings in healthcare costs. The clinical trials aimed at establishing the safety of IFN beta commenced inNovember 2005. The first trial is being conducted at the University ofSouthampton and will comprise 27 subjects. The first part of this trial has beencompleted and approved by the Ethics and Safety Panel, allowing progression tothe next two stages of the Phase I study. The outcome of this study willdetermine the extent of further safety studies needed and it is on schedule tocomplete by the summer 2006. • COPD As with asthma, Synairgen is using its in vitro models of COPD to establish thepotential efficacy of IFN beta. Rhinovirus infections are a significant cause ofCOPD exacerbations and are responsible for many hospitalisations. Initialfindings of our research will be presented at the American Thoracic SocietyMeeting in May 2006. Barrier Function/Growth Factors Synairgen holds patent rights to an in vitro model system used for testingproducts capable of restoring epithelial barrier function in asthma. The abilityof the epithelium to defend itself against inhaled 'challenges' such asallergens, pollution and cigarette smoke has been shown to be compromised inasthmatics. The first class of compounds that we are testing in this system is agroup of growth factors. Collaborations Samples generated from our in vitro experiments are being analysed by oursignificant international biotechnology collaborator and both parties are nowinterpreting the results. During the period, we have reviewed more opportunities than we have theresources to fulfil. Accordingly, we have refined our strategy for collaborationto pursue only those where there is scope for generating sole or jointintellectual property and have therefore ceased to undertake pure fee forservice work. Biobank The Biobank of well-characterised, disease-specific tissue and samples continuesto grow, and this provides our scientists with high quality materials from whichto generate our proprietary in vitro models and potential new discoveries. Inaddition, we have collated approximately 750 samples which are currently beingprepared for proteomic analysis within Synairgen to establish potential newareas for drug discovery. Recruitment We have continued to enhance our research capability. During the period, wecompleted the recruitment of our core scientific team, which is focused on ourthree proprietary programmes: IFN beta in COPD; Barrier Function (and therelated Growth Factors); and Proteomics. FINANCIAL REVIEW Profit and loss account Revenue for the six months to 31 December 2005 was £77k (six months ended 31December 2004: £58k) and was primarily generated from the two contracts withCentocor and our undisclosed international biotechnology collaborator. Theoperating loss for the period was £742k (2004: loss of £390k), which was in linewith our expectations. Research and development expenditure increased from £194kto £486k as the Company commenced the IFN beta Phase I clinical trial, recruitedadditional staff and broadened its research portfolio. Our R&D expenditure willcontinue to increase further as we progress through the IFN beta programme. Theincrease in other administrative costs from £204k to £319k reflects the plannedscaling-up of activities, including the rental of additional space within theUniversity of Southampton. Interest receivable increased from £83k to £198k onaccount of the IPO funds raised in October 2004. The retained loss was £544k(2004: loss of £307k) and the loss per share was 2.5p (2004: loss of 1.9p). Balance Sheet At 31 December 2005, net assets amounted to £8.3 million (31 December 2004: £9.1million), including cash and deposit balances of £8.2 million (2004: £9.1million). OUTLOOK In the next six months we anticipate progressing the IFN beta clinical trial forasthma and determining the extent of any further Phase I trials that may berequired. We expect to see exciting developments in our collaborations and ourproprietary programmes. We also look forward to updating shareholders on theresults of our in vitro work on IFN beta in the field of COPD. Simon Shaw Chairman Unaudited Consolidated Profit and Loss Account for the six months ended 31 December 2005 Proforma Proforma Six months Six months Year ended ended ended 31 December 31 December 30 June 2005 2004 2005 Notes £000 £000 £000 Turnover 77 58 202Cost of sales (14) (50) (135) --------- --------- ------- Gross profit 63 8 67 --------- --------- ------- Administrative expenses--------------------- ------ --------- --------- -------Research and development expenditure (486) (194) (557)Other (319) (204) (418)--------------------- ------ --------- --------- ------- Total (805) (398) (975) --------- --------- ------- Operating loss (742) (390) (908)Interest receivable 198 83 298 --------- --------- ------- Loss on ordinary activities beforetaxation (544) (307) (610)Tax on loss on ordinary activities - - - --------- --------- ------- Loss on ordinary activities aftertaxation and retained loss for theperiod (544) (307) (610) ========= ========= ======= Loss per ordinary shareBasic and diluted loss per share(pence) 2 (2.51)p (1.94)p (3.26)p 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 2005 31 December 31 December 30 June 2005 2004 2005 Notes £000 £000 £000Fixed assetsIntangible assets 26 7 21Tangible assets 157 135 154 --------- --------- -------- 183 142 175Current assetsStocks 88 - 55Debtors 211 162 325Investments: short-term deposits 8,165 9,046 8,605Cash at bank and in hand 80 48 78 --------- --------- -------- 8,544 9,256 9,063Creditors: amounts falling due withinone year (421) (265) (398) --------- --------- -------- Net current assets 8,123 8,991 8,665 --------- --------- -------- Total assets less current liabilities 8,306 9,133 8,840 ========= ========= ======== Capital and reservesCalled up share capital 217 217 217Share premium account 8,903 8,893 8,903Merger reserve 483 483 483Profit and loss account (1,297) (460) (763) --------- --------- -------- Shareholders' funds 3 8,306 9,133 8,840 ========= ========= ======== Unaudited Consolidated Cash Flow Statement for the six months ended 31 December 2005 Proforma Proforma Six months Six months Year ended ended ended 31 December 31 December 30 June 2005 2004 2005 Notes £000 £000 £000 Net cash outflow from operatingactivities 4 (621) (290) (840) Returns on investments and servicingof financeInterest received 213 16 196 Capital expenditure and financialinvestmentPurchase of intangible fixed assets (6) (4) (18)Purchase of tangible fixed assets (24) (5) (42) --------- --------- ------- Net cash outflow from capitalexpenditure (30) (9) (60) --------- --------- ------- Net cash outflow before management ofliquid resources and financing (438) (283) (704) Management of liquid resourcesDecrease/(Increase) in short-termdeposits 440 (8,696) (8,255) FinancingIssues of ordinary share capital - 77 77Share premium received on shareissues - 9,923 9,923Share issue costs - (1,030) (1,020) --------- --------- ------- Cash inflow from financing - 8,970 8,980 --------- --------- ------- Increase/(Decrease) in cash in period 5 2 (9) 21 ========= ========= ======= Notes to the Financial Statements for the six months ended 31 December 2005 1. Basis of preparation Synairgen plc was incorporated on 16 September 2004. On 11 October 2004Synairgen plc acquired the entire issued share capital of Synairgen ResearchLimited by issuing 14,000,000 ordinary shares of 1p each on the basis of issuing100 shares for each ordinary share of 1p each held in Synairgen ResearchLimited. The Directors have accounted for this group reconstruction using themerger accounting principles as set out in Financial Reporting Standard 6.Accordingly proforma financial information has been prepared to show theposition as if Synairgen plc had been in existence and the parent of SynairgenResearch Limited throughout the prior period. The proforma information has beencompiled by taking the results of the group before the group reconstruction andadjusting for the capital structure of the new group. 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, in which case the new accounting policies and presentationare followed. The Interim Report was approved by the Board of Directors on 22 February 2006.The financial information for the six months ended 31 December 2005 isunaudited, but has been reviewed in accordance with Auditing Practices Boardguidance by BDO Stoy Hayward LLP. The interim results do not constitutestatutory financial statements within the meaning of Section 240(5) of theCompanies Act 1985. The comparatives for the full year ended 30 June 2005 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. Loss per ordinary share Six months Six months Year ended ended ended 31 December 31 December 30 June 2005 2004 2005 Loss on ordinary activities aftertaxation (£000) (544) (307) (610)Weighted average number of ordinaryshares in issue 21,692,308 15,817,960 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 14. The comparative figures are proforma based on the numberof shares that would have been in issue had the capital structure of the newparent company always been in place. 3. Reconciliation of movements in shareholders' funds Share capital Share premium Merger reserve Profit and loss Shareholders' account account funds £000 £000 £000 £000 £000 At 30 113 - 510 (153) 470June2004Issue ofordinaryshares 104 9,923 (27) - 10,000Shareissue - (1,030) - - (1,030)costsLoss forthe - - - (307) (307)period ------ ------- ------ -------- --------- At 31December 217 8,893 483 (460) 9,1332004Shareissue - 10 - - 10costsLoss forthe - - - (303) (303)period ------ ------- ------ -------- --------- At 30 217 8,903 483 (763) 8,840June2005Loss forthe - - - (544) (544)periodReversalof - - - 10 10UITF 17charge ------ ------- ------ -------- ---------At 31December 217 8,903 483 (1,297) 8,3062005 ====== ======= ====== ======== ========= The issue of 140,000 1p ordinary shares by Synairgen Research Limited prior toits acquisition by Synairgen plc has been restated to reflect the 100 for 1share for share exchange which was effected in October 2004. In accordance withthe principles of merger accounting the difference between the nominal value ofthe shares issued in the share exchange and sum of the amounts standing to theissued share capital and share premium accounts has been taken to a mergerreserve. 4. Reconciliation of operating loss to net cash outflow from operatingactivities Six months Six months Year ended ended ended 31 December 31 December 30 June 2005 2004 2005 £000 £000 £000 Operating loss (742) (390) (908)Depreciation & amortisation 22 16 34UITF 17 charge 10 - -Increase in stocks (33) - (55)Decrease/(Increase) in debtors 99 (18) (146)Increase in creditors 23 102 235 ---------- --------- ------- Net cash outflow from operatingactivities (621) (290) (840) ========== ========= ======= 5. Reconciliation of net cash flow to movement in net funds Six months Six months Year ended ended ended 31 December 31 December 30 June 2005 2004 2005 £000 £000 £000 Increase/(Decrease) in cash in period 2 (9) 21(Decrease)/Increase in short-termdeposits (440) 8,696 8,255 ---------- --------- ------- Change in net funds resulting from cashflows and movement in net funds (438) 8,687 8,276Net funds at start of period 8,683 407 407 ---------- --------- ------- Net funds at end of period 8,245 9,094 8,683 ========== ========= ======= This information is provided by RNS The company news service from the London Stock Exchange