SUMM.L Regulatory News (SUMM)

26 Sep 2006 07:00

VASTox plc26 September 2006 VASTox plc ("VASTox" or "the Company") INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 JULY 2006 Oxford, UK, 26 September 2006 - VASTox plc (AIM: VOX), a leading UKbiotechnology company, announces its interim results for the six months ended 31July 2006. Financial Highlights • Turnover increased 133% to £468,591 (H1 2005/06: £201,156) as a result of 15 new chemical genomics service contracts • R&D expenditure increased in-line with expectations to £1.28 million (H1 2005/06: £0.16 million) primarily to accelerate development of the lead neuromuscular drug discovery programme in Duchenne muscular dystrophy (DMD), and to fund two new programmes initiated during the period • In-line with expectations, pre-tax losses up to £1.31 million (H1 2005 /06: £0.13 million) with the increased investment in proprietary drug discovery programmes • Strengthened cash position following successful placing in February 2006 which raised £10.45 million (gross) - cash and short-term investments up to £20.2 million at period end (H1 2005/06: £12.9 million) Operational Highlights • Orphan drug designation awarded by European Medicines Agency (EMEA) for the Company's initial compound for the treatment of DMD following positive preclinical studies • Fifth and sixth drug discovery programmes initiated in cancer and stem cell therapy, respectively, the latter will be funded with a UK Department of Trade & Industry grant • Board of Directors and Senior Management strengthened: o Richard Storer, DPhil appointed Chief Scientific Officer o Darren Millington, ACMA appointed Chief Financial Officer o James Taylor appointed Chief Commercial Officer Today VASTox announces two further Board changes (see separate press release): o Barry Price, PhD appointed as Non-executive Chairman to replace Professor Stephen Davies who steps down to Non-executive Director o Colin Wall appointed Non-executive Director to replace John Montgomery who has resigned as Non-executive Director Steven Lee, PhD, CEO of VASTox said: "VASTox has made excellent progress in allareas of its business to date in 2006. Our internal drug discovery programmesare advancing rapidly, our services business has grown significantly, and wehave added senior R&D and commercial experience to the management team andboard. Overall, our operations are now well positioned to enable us to deliverthe key elements of our corporate strategy." Analysts' R&D day VASTox will be hosting an R&D day for analysts and investors at the Company'smain site in Milton Science Park, Oxfordshire on 6 October 2006. Please contactMark Swallow or Valerie Auffray at Citigate Dewe Rogerson on 020 7638 9571 forfurther details. -ends- For more information please contact: VASTox Steven Lee, PhD, Chief Executive Officer Tel: +44 (0)1235 443910Darren Millington, ACMA, Chief Financial Officer Citigate Dewe RogersonDavid Dible / Mark Swallow / Valerie Auffray Tel: +44 (0)207 638 9571 About VASTox plc VASTox is a chemical genomics technology company that discovers and developsproprietary novel drugs and provides services to the pharmaceutical industry.The company's most advanced drug development programme is focused on developinga new treatment for Duchenne muscular dystrophy based on the up-regulation ofutrophin. A second drug development programme for spinal muscular atrophy isalso progressing rapidly. VASTox has four additional programmes focused onosteoarthritis, cancer, tuberculosis and stem cell therapies, which are expectedto be out-licensed prior to entering the clinic. The company's technology platform, which uses zebrafish and fruitflies, has thepotential to dramatically decrease the time and cost of drug discovery anddevelopment. This is because using whole organisms allows it to carry out highvolume, high content screening, which delivers data that are highly predictiveof the efficacy and toxicity of potential drug compounds in humans. VASTox isgrowing revenues based on marketing its unique technology platform and itschemistry expertise. The company listed on the AIM market of the London StockExchange in October 2004. Further information about the company is available at www.vastox.com This document contains "forward-looking statements" within the meaning of theU.S. Private Securities Litigation Reform Act of 1995. Forward-lookingstatements can be identified by words such as "anticipates", "intends", "plans","seeks", "believes", "estimates", "expects" and similar references to futureperiods, or by the inclusion of forecasts or projections. Forward-looking statements are based on the Company's current expectations andassumptions regarding our business, the economy and other future conditions.Because forward-looking statements relate to the future, by their nature, theyare subject to inherent uncertainties, risks and changes in circumstances thatare difficult to predict. The Company's actual results may differ materiallyfrom those contemplated by the forward-looking statements. The Company cautionsyou therefore that you should not rely on any of these forward-lookingstatements as statements of historical fact or as guarantees or assurances offuture performance. Important factors that could cause actual results to differmaterially from those in the forward-looking statements include (factorsincluded in this presentation) and regional, national, global political,economic, business, competitive, market and regulatory conditions. Chief Executive's statement Introduction In the year to date we have continued to make excellent progress in all areas ofthe business. Our own drug discovery programmes are advancing rapidly, ourservices business has grown significantly, and we have added senior R&D andcommercial experience to the management team and board. Overall, our operationsare now well positioned to enable us to deliver the key elements of ourcorporate strategy. Our expenditure and R&D investment for the first six months of the year is inline with our budget and the Company's cash position remains strong having beenbolstered significantly by the successful placing undertaken in February 2006,which raised £10.45 million in gross proceeds. This money has been ring-fencedspecifically to accelerate our lead drug discovery programme: the development ofinnovative and effective new products to treat Duchenne muscular dystrophy(DMD). Operational Highlights Lead programme in Duchenne Muscular Dystrophy accelerated Considerable progress has been made in our lead drug discovery programme during2006. The exciting progress we made in preclinical studies enabled us to raisemore than £10 million in a secondary placing with new and existing investors toaccelerate the development of this programme. The preclinical studies, announcedin January 2006, resulted in the identification of a novel lead series ofcompounds that up-regulate utrophin production to reverse the effects of thedefective dystrophin production mechanism that causes DMD. Preliminarytoxicology assessment of this lead series of compounds has also been conductedusing our proprietary zebrafish models. Both this progress and the clear medical need for an effective treatment for DMDhave supported our application for orphan drug designation for clinicalcandidates that emerge from the programme. Consequently, in June 2006, VASToxwas awarded orphan drug status by the European Medicines Agency (EMEA) for theCompany's initial compound. This designation provides an important validation of VASTox's approach to thetreatment of DMD. From a commercial perspective, orphan status provides aquicker and cheaper route to market as the drug's development is fast-trackedthrough the EU's regulatory stages. During the first half of 2006, VASTox also became a key commercial partner in afive-year, EU-wide network of leading researchers, clinicians and charitiesinvolved in the development of new treatments for neuromuscular dystrophies(NMD). The TREAT-NMD network, as it is called, involves 21 organisations from 11countries and is funded by a €10 million grant from the EU. Two new drug discovery programmes initiated VASTox's approach for identifying new drug discovery programmes aims tocapitalise on attractive academic research programmes where a clear rationalefor the treatment of a particular disease has already been developed. To date in2006, we have initiated two new drug discovery programmes in the areas of cancerand stem cell therapy based on this approach. The Company now has six drugdiscovery programmes in both niche neuromuscular diseases, such as DMD andspinal muscular atrophy, as well as more common diseases such as tuberculosis,osteoarthritis and cancer. The fifth programme initiated in April 2006 in cancer is focused on the Wntsignalling pathway. This pathway is active during embryonic development andinactive in adults. It appears to be re-activated in certain types of cancer andleads to uncontrolled cell growth. VASTox has developed a whole organismscreening programme in fruitflies in order to model the Wnt pathway andpotentially identify compounds that can affect the pathway safely andeffectively for development into therapeutics. The sixth drug discovery programme, announced in September 2006, is focused onstem cell therapies and, initially, is part of a £910,000 collaborativeprogramme that will be jointly funded by VASTox, the UK Department of Trade &Industry and the Medical Research Council. As part of the programme, entitledUnderstanding Molecular Activation of Stem Cells ('UNMASC'), VASTox will screensmall molecules in zebrafish and fruitfly models to identify compounds thataffect stem cell behaviour. Promising compounds can then be developed for use ina wide range of regenerative therapies for diseases. Any intellectual propertygenerated that relates to potential drugs will reside exclusively with VASTox. VASTox continues to deliver on its commitments to progress all of its drugprogrammes using its in-house drug discovery expertise. The Company has now putin place an enlarged team of medicinal chemists and biologists who can useVASTox's unique chemical genomics platform to produce good quality drugcandidates. Services business continues to grow During the first six months of this financial year VASTox has worked with 20life sciences organisations, 15 of which are new. Each contract is profitable,increases our expertise in chemical genomics and makes our service offeringsmore valuable both for customers and our own drug programmes. We havepro-actively managed the services division to ensure that we can increase thesize of customer contracts that we sign as well as to increase the gross marginthat we earn. Furthermore, our services offering, particularly in carbohydrate chemistry wasenhanced during 2006 by the appointment of Professor George Fleet as specialistconsultant. Professor Fleet is at the University of Oxford and is widelyacknowledged as one of the world's foremost experts on carbohydrate chemistryand has consulted for many of the leading pharmaceutical and biotechnologycompanies. New appointments strengthen development and commercial capabilities VASTox has made positive steps forward during the first half of 2006 to bring inexperienced industry professionals to its senior management team and board inorder to maximise the potential of both its drug discovery and development, andits commercial capabilities. Today, VASTox is very pleased to announce the appointment of Barry Price, PhD asNon-executive Chairman. Barry brings a wealth of industry experience and iscurrently Chairman of the Boards of Biowisdom Limited and Antisoma plc, and aNon-executive Director of Shire plc, one of the UK's largest life sciencescompanies. Professor Stephen Davies will step down as Chairman and remain as aNon-executive Director. Professor Davies has been Chairman since he foundedVASTox in January 2003 and has guided the Company through a successful flotationin October 2004 and a growth phase that sees it now employing 50 scientists andmanagers. Professor Davies is stepping down as Chairman to focus more time onhis new role as Waynflete Professor and Chairman of Chemistry at the Universityof Oxford, one of the most prestigious academic posts in UK science. We thankSteve for his contribution as Chairman and look forward to his continuinginvolvement as a Non-executive Director. The Company also announces today the appointment of Colin Wall as Non-executiveDirector. Colin has significant public company experience and will act as theCompany's senior independent Non-executive Director. He replaces John Montgomeryas Non-executive Director. John is a co-founder of the Company and has been adirector since its formation in 2003. We would like to thank John for hiscontributions to VASTox during his time as a director and at the same timewelcome Barry and Colin to the board. Earlier in 2006, VASTox added significant R&D and commercial experience to theexecutive management team. In April, Richard Storer, DPhil joined the board asChief Scientific Officer. Richard has more than 30 years' R&D experience withinthe pharmaceutical industry and will oversee the development of VASTox'spreclinical programmes with a key objective of advancing the most promisingcandidates into clinical trials. A major focus will be to accelerate theCompany's DMD programme, from which we anticipate advancing a compound inclinical development during early 2007. In May, Darren Millington, ACMA was appointed to the Board as Chief FinancialOfficer and Company Secretary. Darren has eight years' of financial andconsulting experience and previously worked with IP2IPO Group plc (now IP Groupplc), Arthur Andersen and Deloitte & Touche. Darren has worked with VASToxsince the Company's successful flotation in October 2004. In July, VASTox appointed James Taylor to the board as Chief Commercial Officerwith responsibility to grow the services business and to lay the platform forcommercial progress with our own proprietary drug programmes. James has morethan 20 years' business experience in the life science industry with a trackrecord of delivering successful commercial deals. The majority of his careerwas spent at AstraZeneca and most recently, he was Vice President of BusinessDevelopment at Cellzome, where he was responsible for commercialising itscomplex drug discovery technology as well as licensing early-stage drugprogrammes. These significant appointments complete the senior management team and willprovide VASTox with the experience needed to accelerate the growth of thebusiness. Financial Review Turnover during the first half of 2006 increased 133% to £468,591 (H1 2005/06:£201,156) as a result of 15 new chemical genomics service contracts. Inaddition to revenue growth, the gross margins of the services business haveincreased to 67% (H1 2005/06: 62%). R&D expenditure increased in line with budget to £1.28 million (H1 2005/06:£0.16 million) primarily to accelerate development of our DMD drug discoveryprogramme, and to fund additional programmes initiated during period in cancerand stem cell therapy. Pre-tax losses during the period were £1.31 million, up from £0.13 million in H12005/06, as we continued to increase investment in advancing our drug discoveryprogrammes. Recognising an R&D tax credit for the period has resulted in apost-tax loss of £1,143,290 (loss of £128,920 for H1 2005/06). In February 2006, the Company raised £10m after expenses by issuing a further5,903,955 ordinary shares in a successful secondary placing. This fund-raisingwas supported by existing and new investors and the money has been ring-fencedfor the DMD programme, for which it is expected to fund development untilmid-2008. The Company continues to make careful use of investors' funds and at 31 July2006, VASTox had a strong cash position of £20.2m, compared to £12.9m on 31 July2005 and £12.6m on 31 January 2006). FRS 20 Restatement All quoted UK companies are required to implement accounting standard FRS 20 - 'Share based payment' for financial periods commencing on or after 1 January2006. This standard requires recognition of the fair value of issued shareoptions and is made retrospectively, leading to a restatement in prior periods.It is important to note that in the six month period to 31 July 2006, the chargedue to the implementation of FRS 20 is £155,588; this compares to a charge of£7,200 for the six month period to 31 July 2005. Summary and outlook In the remainder of the current financial year, we expect to continue makinggood progress with our in-house drug programmes and remain on track to selectour first clinical candidate from our lead DMD programme early in 2007. In addition, we expect our services business to continue growing as our chemicalgenomics capabilities improve and expand, and our reputation for high qualityand value-creating services is enhanced. We believe that VASTox has had a strong first half of 2006/07 and through thedevelopment of its management and business is well placed to build on its rapidgrowth and deliver value for investors. None of this progress is possiblewithout a team of committed scientists and managers; we thank them for theirhard work and dedication. Steven Lee, PhD Chief Executive Officer Consolidated profit and loss account for the six months ended 31 July 2006 Unaudited Restated Restated Six months unaudited Year ended Six months ended 31 July ended 31 January 2006 31 July 2006 2005 £ £ £ Turnover 468,591 201,156 531,361Cost of sales ( 154,828 ) ( 75,894 ) ( 233,444 )Gross profit 313,763 125,262 297,917 Research and development ( 1,284,466 ) ( 159,069 ) ( 1,025,683 )Other ( 733,539 ) ( 400,435 ) ( 1,071,992 )Total administrative costs ( 2,018,005 ) ( 559,504 ) ( 2,097,675 ) Operating loss ( 1,704,242 ) ( 434,242 ) ( 1,799,758 )Interest receivable 414,324 305,322 582,868Interest payable ( 20,175 ) - - Loss on ordinary activities before ( 1,310,093 ) ( 128,920 ) ( 1,216,890 )taxation Tax on loss on ordinary activities 166,803 - 155,437 Loss on ordinary activities after ( 1,143,290 ) ( 128,920 ) ( 1,061,453 )taxation Basic loss per ordinary share 3.21p 0.41p 3.39p Consolidated balance sheet at 31 July 2006 Unaudited Restated Restated 31 July unaudited 31 January 2006 31 July 2006 2005 £ £ £Fixed assetsIntangible assets 57,977 35,000 28,016Tangible assets 1,847,593 1,139,645 1,261,082 1,905,570 1,174,645 1,289,098Current assetsStock 29,207 - 27,000Debtors 855,864 429,687 541,300Cash on short term deposits 16,700,796 12,900,000 11,593,626Cash at bank 3,512,585 19,730 1,039,690 21,098,452 13,349,417 13,201,616 Creditors: amounts falling due within one (315,269) (555,886) (704,833)year Net current assets 20,783,183 12,793,531 12,496,783 Creditors: amounts falling due after more (610,442) - (690,812)than one year Net assets 22,078,311 13,968,176 13,095,069 Capital and reservesCalled up share capital 3,721,707 3,131,311 3,131,311 Share premium account 22,327,396 12,946,848 12,946,848Other reserves (1,942,589) (1,942,589) (1,942,589)Profit and loss account (2,028,203) (167,394) (1,040,501)Equity shareholders' funds 22,078,311 13,968,176 13,095,069 Consolidated cash flow statement for the six months ended 31 July 2006 Unaudited Unaudited Six months Six months Year ended ended ended 31 July 31 July 31 January 2006 2005 2006 £ £ £Net Cash flow from operating activities (1,934,163) (371,110) (1,447,680)Return on investments and servicing of finance 276,410 305,322 507,652Taxation: R&D tax credit received - - 29,041Capital expenditure (652,964) (1,175,734 (1,373,553) Cash outflow before management of liquid (2,310,717) (1,241,522) (2,284,540resources and financing Management of liquid resourcesDecrease (increase) in short term deposits (5,107,170) 900,000 2,206,374 FinancingIssue of share capital 9,970,944 - -(Repayment) increase in debt during the year (80,162) - 756,604 9,890,782 - 756,604 Increase (decrease) in cash in the period 2,472,895 (341,522) 678,438 Reconciliation of operating loss to net cash flow from operating activities Unaudited Unaudited Restated Six months Six months Year ended ended ended 31 July 31 July 31 January 2006 2005 2006 £ £ £Operating loss (1,704,242) (434,242) (1,799,758)Depreciation charge 108,771 18,645 127,520Amortisation of intangible fixed assets 4,409 3,797 7,767FRS 20 charge for fair value of share options 155,588 7,200 66,626Increase in debtors (30,022) (336,547) (246,547)Increase in stock (2,207) - (27,000)(Decrease) increase in creditors (466,460) 370,037 423,712Net cash outflow from operation (1,934,163) (371,110) (1,447,680)activities Notes to the interim results 1. Basis of preparation The results for the half-year are unaudited and do not constitute statutoryaccounts within the meaning of section 240 of the Companies Act 1985. They havebeen prepared on the basis of the accounting policies expected to apply for thefinancial year to 31 January 2007. The results shown for the full year ended 31 January 2006 are not the company'sfull statutory accounts for that year. A copy of the statutory accounts forthat year has been delivered to the Registrar of Companies. The auditors'report on those accounts was unqualified and did not contain a statement undersection 237 (2) - (3) of the Companies Act 1985. FRS 20 Restatement All quoted UK companies are required to implement accounting standard FRS 20 - 'Share based payment' for financial periods commencing on or after 1 January2006. This standard affects all companies that issue share options and resultsin a non-cash charge to the profit and loss statement to reflect the 'fairvalue' of issued share options. The fair value of VASTox share options iscalculated using the Black-Scholes formula. In common with the implementationof all accounting standards, prior year results must be restated as if theaccounting standard had always been in force. In the six month period to 31July 2006 the charge due to the implementation of FRS 20 is £155,588 (six monthperiod to 31 July 2005: £7,200; year to 31 January 2006: £66,626). Thisrestatement has had no impact on the net assets in the periods presented inthese interim results. 2. Loss per share calculation The loss per share has been calculated by dividing the loss for the period of£1,143,290 (for the period ended 31 July 2005: restated loss of £128,920; forthe year ended 31 January 2006: restated loss of £1,061,453) by the weightedaverage number of 35,577,079 shares in issue during the six month period to 31July 2006 (for the six month period ended 31 July 2005: 31,313,111; for the yearended 31 January 2006: 31,313,111). Since the group has reported a net loss, diluted loss per share is equal tobasic loss per share. 3. Analysis of changes in net funds Unaudited Unaudited Year Six months Six months ended ended ended 31 January 31 July 31 July 2006 2006 2005 £ £ £Increase (decrease) in cash in the period 2,472,895 (341,522) 678,438Increase (decrease) in short term deposits 5,107,170 (900,000) (2,206,374)Cash (inflow) outflow from loan finance 80,162 - (756,604)Opening net funds 11,876,712 14,161,252 14,161,252Closing net funds 19,536,939 12,919,730 11,876,712 4. Interim report Copies of this interim report are being sent to all shareholders. Copies arealso available at the Registered Office of the Company: VASTox plc, 91 MiltonPark, Abingdon, Oxfordshire, OX14 4RY and at the Company's website:www.vastox.com. The interim results were approved by the Board of Directors on 25 September2006. This information is provided by RNS The company news service from the London Stock Exchange