Synairgen Regulatory News (SNG)

12 Mar 2008 07:01

Synairgen plc12 March 2008 12 March 2008 Synairgen plc ('Synairgen' or the 'Company') Interim Results for the six months ended 31 December 2007 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 2007. Operational Highlights • September 2007, exclusive licence and supply agreement signed with Rentschler Group for supply of novel formulation of interferon beta ('IFN-beta'); • Progression of preclinical and regulatory work on Rentschler IFN-beta formulation and delivery system in preparation for dual-centre Phase I safety study (SG004) in moderate asthmatics, anticipated commencement Q2 2008; • SG004 designed to provide evidence that anti-viral system can be activated in asthma by delivery of inhaled IFN-beta; and • Advancement of SNG-3, a biological designed to restore barrier function in asthma. Manufacturing process development commenced. Collaboration initiated with Wayne State University to test efficacy of the protein in an asthma-like in vivo model. Financial highlights • Research and development expenditure for the period: £1.02 million (2006: £0.67 million); • Post tax loss for the period: £1.09 million (2006: loss of £0.73 million); and • Net funds at 31 December 2007 of £5.13 million (31 December 2006: £6.74 million). Commenting on the results, Simon Shaw, Chairman of Synairgen, said: "This periodhas seen us continue to develop our novel lead programmes efficiently and at alevel of cost which belies their enormous market potential. Our leanorganisation enables us to devote maximum resources to the delivery of theseprojects whilst retaining a relatively low cash burn for this industry. We lookforward, regulatory approval permitting, to commencing the next stage of ourexciting interferon programme this year." -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 9477Melanie Toyne-Sewell Mobile: +44 (0) 7767 66 00 40Simon Hockridge CHAIRMAN'S STATEMENT OPERATING REVIEW The first six months of the year have seen considerable operational progressparticularly on our three lead programmes: IFN-beta to prevent commoncold-induced exacerbations of asthma and COPD, and SNG-3, our protein designedto restore the lung's epithelial barrier function in asthma. Candidate Indication Programme status Discovery Preclinical Clinical phase development Phase IIFN-beta (SNG-1) Asthma -IFN-beta (SNG-2) COPD -Barrier function protein Asthma -(SNG-3)Proteomics Asthma -Barrier function screen Asthma -and lesionPeptide delivery Asthma -Collaboration Asthma - IFN-beta for asthma and COPD There is a great need for products that can help patients with lung diseasedefend themselves against viruses such as the common cold and influenza. Thecommon cold virus is considered to be the greatest cause of hospitalisations forasthma, and has been similarly implicated in COPD. The anti-viral defence inasthmatic and COPD patients is recognised as deficient with particularlydifficult consequences for the lungs. Research shows that low doses of IFN-betasignificantly boost the anti-viral defences in asthmatic and COPD airway cellcultures. Synairgen is developing an inhaled formulation of IFN-beta for asthmaand COPD. Synairgen is working with an expert group of clinical teams around the world tocommence proof of concept studies in asthma and COPD in late 2009 (SG005 andSG006 respectively). In these studies, asthmatics and 'healthy' smokers will begiven a common cold and will be treated with either inhaled placebo or IFN-beta.During summer 2008 a clinical trial (SG007), in partnership with members of ourexpert group, will commence, which will further characterise/progress the commoncold model in asthma - required for SG005. Also in 2008, in collaboration withthe University of Southampton and the University of Athens, a study (SG008) willbe initiated to investigate asthmatic patients admitted into hospital forvirally-induced exacerbations. These patients are Synairgen's target market forthe IFN-beta product. From late 2006, it became clear that securing an exclusive patent-protectedsource of IFN-beta would enhance the attractiveness of the programme and expandthe universe of potential partners. In September 2007, a significant milestonewas achieved through our exclusive licence agreement with the Rentschler Groupof Germany. Rentschler is a specialist international developer and manufacturerof biopharmaceuticals. It is collaborating with Synairgen to provide its novelpatent-protected formulation of IFN-beta, analytical and regulatory services,and data to support use of its IFN-beta compound. This agreement also commitsfuture supply of product on an exclusive basis. Prior to commencing the proof of concept studies, we have to demonstrate thesafety of inhaled IFN-beta. During the period, we have completed the analysis ofthe first single dose safety study of inhaled IFN-beta (SG003) and have preparedfor our second study: a multiple dose study in moderate asthmatics (SG004). Thispreparation has included completion of a local tolerance study of the Rentschlerformulation, optimisation of the Rentschler formulation with the deliverydevice, biomarker identification, and compilation of an IMPD (InvestigationalMedicinal Product Dossier). In SG004 we will also seek to demonstrate, through the measurement ofbiomarkers, that we are successfully 'switching on' the anti-viral defence whichis considered to be defective in asthma. SG004 will be conducted at two sites in order to expedite the study timeline.The data from SG004 will be used to support the two proof of concept studies inasthma and COPD (SG005 and SG006). It is Synairgen's intention to partner the IFN-beta programme with one of themajor pharmaceutical companies that can complete the development of, andultimately market, a product which represents a breakthrough, first-in-classcompound. We have an ongoing dialogue with several large pharmaceuticalcompanies in respect of the IFN-beta opportunity and keep them appraised of thestatus of the programme as we take it through the important early milestones. Barrier function in asthma The cells that line the lungs form a barrier that prevents unwanted particles inthe air that we breathe from aggravating the sensitive underlying tissue. Usingour models of human airway cultures we have shown this barrier to be defectivein asthma. In particular, 'tight junction' proteins that normally 'knit' thesecells together are poorly organised in asthma, making this barrier 'leaky'. Using a patented screening assay (US patent granted February 2008), we haveidentified a protein (SNG-3) that reorganises and re-establishes the barrierwithout promoting unwanted structural changes in the lung. We have initiated thecGMP manufacturing steps for SNG-3 with Alpha Biologics, in preparation for aninhaled toxicology programme. In parallel, we are collaborating with Professor David Bassett at Wayne StateUniversity (US) to test the protein in a murine model of poor barrier function,with results expected later this year. We hope to initiate a proof of mechanismclinical trial within two years. Other activity Synairgen's other programmes are designed to provide future candidates fordevelopment and these are progressing according to timescales and are achievingtheir objectives; not least of which is the discovery programme in conjunctionwith an unnamed biotechnology partner. Our research is dependent upon the airway models of asthma and COPD whichrequire a constant supply of fresh cells collected from the airways of ourvolunteers. During the period, we conducted our 200th bronchoscopy; anachievement made possible through the hard work of the Synairgen team. FINANCIAL REVIEW Income statement The operating loss for the six months ended 31 December 2007 was £1.42 million(2006: loss of £1.00 million). Research and development expenditure increasedfrom £0.67 million to £1.02 million as the Company prepares for the forthcomingIFN-beta safety study in asthmatics using the Rentschler formulation and scalesup its barrier function protein programme. Administrative costs increased from£0.37 million to £0.40 million. Interest receivable decreased from £0.17 millionto £0.16 million on account of lower deposit balances. The increase in the taxcredit from £0.09 million to £0.17 million reflects the higher level ofexpenditure that qualifies for UK research and development tax credits. The lossafter tax was £1.09 million (2006: loss of £0.73 million) and the loss per sharewas 5.0p (2006: loss of 3.4p). Balance sheet and cash flow At 31 December 2007, net assets amounted to £5.20 million (31 December 2006:£7.11 million), including net funds of £5.13 million (2006: £6.74 million). Cash outflow for the six months to 31 December 2007 was £0.89 million (sixmonths ended 31 December 2006: £0.75 million). Adoption of International Financial Reporting Standards ('IFRS') The Company has adopted IFRS as adopted for use in the European Union on 1 July2007. Comparative numbers in the financial information have been restated and areconciliation of the previously reported UK GAAP information to that compiledunder IFRS is shown in note 4 to the financial information. OUTLOOK Over the course of 2008 we expect to attain some significant milestones on ourlead projects. Pending clinical trial approval for SG004, we will be commencingthe first clinical trial of our lead compound in its target asthma population.In addition, through our collaboration with Wayne State University, we expect tosee the first in vivo results of our barrier function-restoring protein SNG-3. Simon ShawChairman Consolidated Income Statement (unaudited)for the six months ended 31 December 2007 Six months Six months Year ended ended ended 31 December 31 December 30 June 2007 2006 2007 Notes £000 £000 £000 Revenue - 54 78Cost of sales - (15) (33) --------- --------- ---------Gross profit - 39 45--------------------- ------- --------- --------- ---------Research and development (1,016) (671) (1,523)expenditureOther administrative expenses (402) (366) (750)--------------------- ------- --------- --------- ---------Total administrative expenses (1,418) (1,037) (2,273) --------- --------- ---------Operating loss (1,418) (998) (2,228) Finance income 159 174 342Finance expense - - (1) --------- --------- ---------Loss before tax (1,259) (824) (1,887) Tax 2 165 91 247Loss for the period attributable to --------- --------- ---------equity holders of the parent (1,094) (733) (1,640) ========= ========= ========= Loss per ordinary shareBasic and diluted loss per share(pence) 3 (5.04)p (3.38)p (7.56)p Consolidated Balance Sheet (unaudited)as at 31 December 2007 31 December 31 December 30 June 2007 2006 2007 £000 £000 £000AssetsNon-current assetsIntangible assets 107 91 99Property, plant and equipment 131 143 146 --------- ---------- --------- 238 234 245 --------- ---------- ---------Current assetsInventories 90 85 96Current tax receivable 150 257 235Trade and other receivables 150 164 132Other financial assets 4,359 6,225 4,998Cash and cash equivalents 774 526 1,020 --------- ---------- --------- 5,523 7,257 6,481 --------- ---------- ---------Total assets 5,761 7,491 6,726 --------- ---------- --------- LiabilitiesCurrent liabilitiesTrade and other payables (555) (369) (462)Obligations under finance leases (2) (3) (2) --------- ---------- --------- (557) (372) (464) --------- ---------- --------- Non-current liabilities --------- ---------- ---------Obligations under finance leases (6) (8) (8) --------- ---------- --------- --------- ---------- ---------Total liabilities (563) (380) (472) --------- ---------- --------- Total net assets 5,198 7,111 6,254 ========= ========== ========= EquityCapital and reserves attributable toequity holders of the parentShare capital 217 217 217Share premium 8,903 8,903 8,903Merger reserve 483 483 483Retained deficit (4,405) (2,492) (3,349) --------- ---------- ---------Total equity 5,198 7,111 6,254 ========= ========== ========= Consolidated Cash Flow Statement (unaudited) for the six months ended 31 December 2007 Six months Six months Year ended ended ended 31 December 31 December 30 June 2007 2006 2007 £000 £000 £000 Cash flows from operating activitiesLoss before tax (1,259) (824) (1,887)Adjustments for:Finance income (159) (174) (342)Finance expense - - 1Depreciation 35 28 60Amortisation 9 4 14Share-based payment 38 33 83 ---------- ---------- ---------Cash flows from operations beforechanges in working capital (1,336) (933) (2,071)Decrease/(Increase) in inventories 6 (17) (28)(Increase)/Decrease in trade and otherreceivables (28) (2) 20Increase in trade and other payables 92 12 105 ---------- ---------- ---------Cash used in operations (1,266) (940) (1,974)Interest paid - - (1)Tax credit received 250 89 267 ---------- ---------- ---------Net cash used in operating activities (1,016) (851) (1,708) ---------- ---------- --------- Cash flows from investing activitiesInterest received 170 180 358Purchase of property, plant andequipment (20) (14) (49)Purchase of intangible assets (17) (59) (77)Decrease in other financial assets 639 938 2,165 ---------- ---------- ---------Net cash generated from investingactivities 772 1,045 2,397 ---------- ---------- --------- Cash flows from financing activities ---------- ---------- ---------Repayments of obligations under financeleases (2) (2) (3) ---------- ---------- --------- (Decrease)/Increase in cash and cashequivalents (246) 192 686Cash and cash equivalents atbeginning of period 1,020 334 334 ---------- ---------- ---------Cash and cash equivalents at end ofperiod 774 526 1,020 ========== ========== ========= Consolidated Statement of Changes in Equity (unaudited) Share capital Share premium Merger reserve Retained Total deficit £000 £000 £000 £000 £000 At 1 July 2006 217 8,903 483 (1,792) 7,811 ------ ------- ------ ------- ------Loss for theperiod - - - (733) (733) ------ ------- ------ ------- ------Total recognisedincome andexpense for theperiod - - - (733) (733)Recognition ofshare-basedpayments - - - 33 33 ------ ------- ------ ------- ------At 31 December2006 217 8,903 483 (2,492) 7,111 ------ ------- ------ ------- ------Loss for theperiod - - - (907) (907) ------ ------- ------ ------- ------Total recognisedincome andexpense for theperiod - - - (907) (907)Recognition ofshare-basedpayments - - - 50 50 ------ ------- ------ ------- ------At 30 June 217 8,903 483 (3,349) 6,2542007 ------ ------- ------ ------- ------Loss for theperiod - - - (1,094) (1,094) ------ ------- ------ ------- ------Total recognisedincome andexpense for theperiod - - - (1,094) (1,094)Recognition ofshare-basedpayments - - - 38 38 ------ ------- ------ ------- ------At 31 December2007 217 8,903 483 (4,405) 5,198 ====== ======= ====== ======= ====== Notes to the Financial Statementsfor the six months ended 31 December 2007 1. Basis of preparation Basis of accounting The interim financial statements, which are unaudited, have been prepared inaccordance with International Financial Reporting Standards (IFRSs and IFRICinterpretations) as adopted by the European Union and also in accordance withthe Companies Act 1985. The interim financial statements do not include all of the information requiredfor full annual financial statements and, accordingly, whilst the interimstatements have been prepared in accordance with the transitional rulesgoverning the move from UK GAAP to IFRS, they cannot be construed as being infull compliance with IFRSs. Reconciliations between previously reported financial statements prepared underUK GAAP and on the basis as stated above are presented in note 4 to this InterimStatement in respect of the consolidated income statements for the year ended 30June 2007 and the six months ended 31 December 2006, and for the consolidatedbalance sheets as at 1 July 2006, 31 December 2006 and 30 June 2007. Noadjustments have been made for any changes in estimates made at the time ofapproval of the UK GAAP financial statements for the year ended 30 June 2007, orthe interim statements for the period ended 31 December 2006, on which the IFRSfinancial information is based, as required by IFRS 1. In addition, restatedfigures in note 4 are based on current interpretations of IFRSs. The Group financial statements are presented in Sterling. The comparative figures for the twelve months ended 30 June 2007 do notconstitute statutory accounts for the purposes of Section 240 of the CompaniesAct 1985. The results for the year ended 30 June 2007 and the balance sheet asat that date are abridged from the Company's Annual Report and FinancialStatements 2007 (after adjustment for IFRS conversion), which have beendelivered to the Registrar of Companies. The auditors' report on those accountswas unqualified, did not include references to any matters to which the auditorsdrew attention by way of emphasis without qualifying their report and did notcontain a statement under section 237(2) or 237(3) of the Companies Act 1985.The 31 December 2007 statements were approved by a duly appointed and authorisedcommittee of the Board of Directors on 11 March 2008. All financial informationpresented in these interim financial statements is unaudited. A summary of the principal accounting policies is set out below: Basis of consolidation The consolidated financial statements incorporate the financial statements ofthe Company and entities controlled by the Company made up to the reportingdate. Control is achieved where the Company has the power to govern thefinancial and operating policies of an investee entity so as to obtain benefitsfrom its activities. All intra-group transactions, balances, income and expensesare eliminated on consolidation. Business combinations that took place prior to1 July 2006, the date of transition to IFRS, have not been restated as permittedby IFRS 1 "First-time Adoption of International Financial Reporting". Theconsolidated financial statements have been prepared using the merger method ofaccounting. Revenue Revenue is stated net of value added tax and is recognised when products orservices are supplied, except in respect of long-term contracts where revenuerepresents the sales value of work done in the year and is calculated as thatproportion of total contact value which costs incurred to date bear to totalexpected costs for that contract. Research and development All ongoing research expenditure is currently expensed in the period in which itis incurred. Due to the regulatory and other uncertainties inherent in thedevelopment of the Group's products, the criteria for development costs to berecognised as an asset, as set out in IAS 38 "Intangible Assets", are not metuntil a product has been submitted for regulatory approval and it is probablethat future economic benefit will flow to the Group. The Group currently has nosuch qualifying expenditure. Employee benefits All employee benefit costs, notably holiday pay, bonuses and contributions toGroup stakeholder or personal defined contribution pension schemes are chargedto the consolidated income statement on an accruals basis. Share-based payments In accordance with IFRS 2 "Share-based Payment", option awards and awards madeunder the Group's Long-Term Incentive Plan ('LTIP') granted after 7 November2002 which had not vested by 1 July 2006 are fair valued and charged to theconsolidated income statement over the period from grant to vesting. The Grouphas valued option and LTIP awards using appropriate share valuation models.Options granted to non-employees are measured at the fair value of the goods orservices received, except where the fair value cannot be estimated reliably, inwhich case they are measured at the fair value of the equity instrument granted.At each balance sheet date, the Group revises its estimate of the number ofoptions that are expected to become exercisable. The credit for any charge istaken to equity. Intangible assets Intangible assets are stated at cost less any accumulated amortisation and anyaccumulated impairment losses. Patent and licence costs are amortised over tenyears on a straight-line basis. Property, plant and equipment Property, plant and equipment are stated at cost less any accumulateddepreciation and any accumulated impairment losses. Depreciation is provided ona straight-line basis at rates calculated to write off the cost of property,plant and equipment, less their estimated residual value over their expecteduseful lives, which are as follows: Computer equipment 3 yearsLaboratory and clinical equipment 5 years The carrying values of property, plant and equipment are reviewed for impairmentif events or changes in circumstances indicate that the carrying value may notbe recoverable. Inventories Inventories are stated at the lower of cost and net realisable value. Financial instruments Financial assets and financial liabilities are recognised on the Group's balancesheet when the Group becomes a party to the contractual provisions of theinstrument. Financial assets Trade and other receivables Trade receivables are recognised and carried at original invoiced amount lessprovision for impairment. Other financial assets Other financial assets comprise short-term deposits not meeting the IAS 7definition of a cash equivalent and are treated as loans and receivables and aremeasured at amortised cost. Cash and cash equivalents Cash and cash equivalents includes cash in hand, deposits held at call withbanks and other short-term bank deposits with a maturity period of three monthsor less from the date of initial deposit. Financial liabilities Trade payables Trade payables are not interest-bearing and are recognised and carried atamortised cost. Leased assets Where substantially all of the risks and rewards incidental to ownership of aleased asset have transferred to the Group (a 'finance lease'), the asset istreated as if it had been purchased outright. The amount initially recognised asan asset is the lower of the fair value of the leased property and the presentvalue of the minimum lease payments payable over the term of the lease. Thecorresponding commitment is shown as a liability. Lease payments are analysedbetween capital and interest. The interest element is charged to theconsolidated income statement over the period of the lease and is calculated sothat it represents a constant proportion of the lease liability. The capitalelement reduces the balance owed to the lessor. Where substantially all of the risks and rewards incidental to ownership are nottransferred to the Group (an 'operating lease'), the total rentals payable underthe lease are charged to the consolidated income statement on a straight-linebasis over the lease term. Deferred taxation Deferred tax balances are recognised in respect of all temporary differencesthat have originated but not reversed by the balance sheet date except fordifferences arising on: •investments in subsidiaries where the Group is able to control the timing of the reversal of the difference and it is probable that the difference could not reverse in the foreseeable future; and •the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction affects neither accounting or taxable profit. The amount of the asset or liability is determined using tax rates that havebeen enacted or substantially enacted by the balance sheet date and are expectedto apply when the deferred tax liabilities/(assets) are settled/(recovered). Recognition of deferred tax assets is limited to the extent that the Groupanticipates making sufficient taxable profits in the future to absorb thereversal of the underlying timing differences. Deferred tax balances are notdiscounted. Foreign currencies Foreign currency transactions are translated at the rates ruling when theyoccurred. Foreign currency monetary assets and liabilities are translated at therate of exchange ruling at the balance sheet date. Any differences are taken tothe consolidated income statement. 2. Tax The tax credit of £165,000 (six months ended 31 December 2006: £91,000; yearended 30 June 2007: £247,000) is an estimate of the research and development taxcredit receivable in respect of the period. 3. Loss per ordinary share Six months Six months Year ended ended ended 31 December 31 December 30 June 2007 2006 2007 Loss attributable to equity holders ofthe Company (£000) (1,094) (733) (1,640)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 IAS 33. At 31December 2007 there were 2,836,738 options outstanding (31 December 2006:2,411,371 options outstanding; 30 June 2007: 2,404,939 options outstanding). 4. Reconciliation of UK GAAP to IFRS The tables of the following pages show the reconciliations of the consolidatedincome statements for the six months ended 31 December 2006 and the year ended30 June 2007, and the consolidated balance sheets as at 31 December 2006, 30June 2007 and 1 July 2006 (opening balances as at date of transition). Consolidated Income Statements UK GAAP IFRS UK GAAP IFRS Six months Six months Year Year ended ended ended ended 31 Dec 31 Dec 30 Jun 30 Jun 2006 Adj. 2006 2007 Adj. 2007 Ref £000 £000 £000 £000 £000 £000 Revenue 54 - 54 78 - 78Cost of sales (15) - (15) (33) - (33) -------- ------- -------- ------- ------ ------Gross profit 39 - 39 45 - 45 ---------------- ----- -------- ------- -------- ------- ------ ------Research anddevelopment (i) (682) 11 (671) (1,527) 4 (1,523)expenditureOther (i) (368) 2 (366) (750) - (750)administrative ----- -------- ------- -------- ------- ------ ------expenses----------------Total (1,050) 13 (1,037) (2,277) 4 (2,273)administrative -------- ------- -------- ------- ------ ------expensesOperating loss (1,011) 13 (998) (2,232) 4 (2,228) Finance income 174 - 174 342 - 342Finance expense - - - (1) - (1) -------- ------- -------- ------- ------ ------Loss before tax (837) 13 (824) (1,891) 4 (1,887) Tax 91 - 91 247 - 247 -------- ------- -------- ------- ------ ------Loss for theperiodattributable toequity holdersof the parent (746) 13 (733) (1,644) 4 (1,640) ======== ======= ======== ======= ====== ====== (i) Movement on holiday pay accrual as established under IAS 19. Consolidated Balance Sheets UK GAAP IFRS UK GAAP IFRS UK GAAP IFRS 31 Dec 31 Dec 30 Jun 30 Jun 30 Jun 30 Jun 2006 Adj. 2006 2007 Adj. 2007 2006 Adj. 2006 Ref £000 £000 £000 £000 £000 £000 £000 £000 £000AssetsNon-currentassetsIntangibleassets 91 - 91 99 - 99 36 - 36Property,plant andequipment 143 - 143 146 - 146 157 - 157 ------ ----- ------ ------ ----- ------ ------ ----- ------ 234 - 234 245 - 245 193 - 193 ------ ----- ------ ------ ----- ------ ------ ----- ------CurrentassetsInventories 85 - 85 96 - 96 68 - 68Current taxreceivable 257 - 257 235 - 235 255 - 255Trade andotherreceivables 164 - 164 132 - 132 168 - 168Otherfinancialassets (i) 6,624 (399) 6,225 5,903 (905) 4,998 7,464 (301) 7,163Cash andcashequivalents (i) 127 399 526 115 905 1,020 33 301 334 ------ ----- ------ ------ ----- ------ ------ ----- ------ 7,257 - 7,257 6,481 - 6,481 7,988 - 7,988 ------ ----- ------ ------ ----- ------ ------ ----- ------Total assets 7,491 - 7,491 6,726 - 6,726 8,181 - 8,181 ------ ----- ------ ------ ----- ------ ------ ----- ------ LiabilitiesCurrentliabilitiesTrade andotherpayables (ii) (356) (13) (369) (440) (22) (462) (331) (26) (357)Obligationsunderfinance (3) - (3) (2) - (2) (3) - (3)leases ------ ----- ------ ------ ----- ------ ------ ----- ------ (359) (13) (372) (442) (22) (464) (334) (26) (360) ------ ----- ------ ------ ----- ------ ------ ----- ------Non-currentliabilities ------ ----- ------ ------ ----- ------ ------ ----- ------Obligationsunderfinance (8) - (8) (8) - (8) (10) - (10)leases ------ ----- ------ ------ ----- ------ ------ ----- ------Totalliabilities (367) (13) (380) (450) (22) (472) (344) (26) (370) ------ ----- ------ ------ ----- ------ ------ ----- ------ ------ ----- ------ ------ ----- ------ ------ ----- ------Total netassets 7,124 (13) 7,111 6,276 (22) 6,254 7,837 (26) 7,811 ====== ===== ====== ====== ===== ====== ====== ===== ====== EquityCapital andreservesattributableto equityholders ofthe parentShare 217 - 217 217 - 217 217 - 217capitalShare 8,903 - 8,903 8,903 - 8,903 8,903 - 8,903premiumMerger 483 - 483 483 - 483 483 - 483reserveShare-basedpaymentreserve (iii) 113 (113) - 163 (163) - 80 (80) -Retaineddeficit (iv) (2,592) 100 (2,492) (3,490) 141 (3,349) (1,846) 54 (1,792) ------ ----- ------ ------ ----- ------ ------ ----- ------Total equity 7,124 (13) 7,111 6,276 (22) 6,254 7,837 (26) 7,811 ====== ===== ====== ====== ===== ====== ====== ===== ====== (i) Other financial assets excludes short-term deposits with a maturity periodof three months or less from the date of initial deposit, which in accordancewith IAS 7 are included within cash and cash equivalents. (ii) Accrual for holiday entitlement not yet taken established under IAS 19. (iii) Transfer of share-based payment reserve into retained deficit. (iv) The combined effect of (ii) and (iii) above. INDEPENDENT REVIEW REPORT TO SYNAIRGEN PLC Introduction We have been engaged by the company to review the condensed set of financialstatements in the half-yearly financial report for the six months ended 31December 2007 which comprises the Consolidated Income Statement, theConsolidated Balance Sheet, the Consolidated Cash Flow Statement, theConsolidated Statement of Changes in Equity and the related notes 1 to 4. We have read the other information contained in the half-yearly financial reportand considered whether it contains any apparent misstatements or materialinconsistencies with the information in the condensed set of financialstatements. 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. Our responsibility Our responsibility is to express to the company a conclusion on the condensedset of financial statements in the half-yearly financial report based on ourreview. 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. Scope of review We conducted our review in accordance with International Standard on ReviewEngagements (UK and Ireland) 2410, ''Review of Interim Financial InformationPerformed by the Independent Auditor of the Entity'', issued by the AuditingPractices Board for use in the United Kingdom. A review of interim financialinformation consists of making enquiries, primarily of persons responsible forfinancial and accounting matters, and applying analytical and other reviewprocedures. A review is substantially less in scope than an audit conducted inaccordance with International Standards on Auditing (UK and Ireland) andconsequently does not enable us to obtain assurance that we would become awareof all significant matters that might be identified in an audit. Accordingly, wedo not express an audit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believethat the condensed set of financial statements in the half-yearly financialreport for the six months ended 31 December 2007 is not prepared, in allmaterial respects, in accordance with the rules of the London Stock Exchange forcompanies trading securities on the Alternative Investment Market. BDO Stoy Hayward LLP Chartered Accountants and Registered Auditors Southampton 11 March 2008 This information is provided by RNS The company news service from the London Stock Exchange