Interim Results
Allergy Therapeutics PLC
08 March 2005
8th March 2005
Allergy Therapeutics plc
Interim Results for the six months ended 31 December 2004
Allergy Therapeutics plc (LSE:AGY), the specialty pharmaceuticals company
focused on allergy vaccines, today announced its maiden interim results for the
six months ended 31 December 2004.
Highlights
• Allergy Therapeutics shares admitted to trading on AIM on 11th October
at a price of 73 pence per share
• Fully-subscribed placing raised £15million of new capital, net of
expenses
• Gross sales up 13% to £14.1million (HY 2003: £12.1)
• UK patent granted for sublingual (under the tongue) use of MPL(R) as an
adjuvant to immunological therapies
• Pollinex(R) Quattro awarded prestigious German MMW Arzneimittelpreis for
pharmaceutical innovation, previously dominated by major pharmaceutical
companies
• Tom Holdich appointed as R&D director from Shire Pharmaceuticals
Allergy Therapeutics has continued to make progress since the period end. In
January, the Company announced agreements with Allied Research International and
Allerpharma to develop and commercialise Pollinex(R) Quattro for the Canadian
market. Under the terms of the agreement Allergy Therapeutics will receive
milestone payments totalling £8million during the period of development and
registration of the products.
Commenting on the results, Keith Carter, CEO of Allergy Therapeutics, said:
"Allergy Therapeutics has made a strong start in its life as a public company.
Trading in the core business has been strong and the development programme is on
track to deliver the targets set out at flotation."
For further information:
Allergy Therapeutics 01903 844720
Keith Carter, Chief Executive
Ian Postlethwaite, Finance Director
Grandfield 020 7417 4170
Samantha Robbins / Charles Cook
Chairman & Chief Executive's Statement
Allergy Therapeutics continued to pursue its strategy as an integrated,
Europe-based, specialty pharmaceutical company, looking to build its EU sales
and marketing infrastructure and to progress its development pipeline of
innovative, short-course allergy vaccines based on the immunostimulatory
adjuvant MPL(R). The guiding principle of the development pipeline is to create
efficacious and safe allergy vaccines, which can be administered over a short
period of time, with few injections or injection-free. The Company made great
progress on many fronts during the six months to 31 December 2004.
Financial independence
In October 2004, the company completed a successful IPO, listing the ordinary
shares on the Alternative Investment Market of the London Stock Exchange and
raising its target of £15m of new capital, net of expenses. In combination with
the Company's operating cash flows, this funding allows Allergy Therapeutics to
pursue an independent strategy for the development of its pipeline and its
business.
Market and professional validation
In September 2004, our MPL(R)-adjuvanted new product, Pollinex(R) Quattro, was
awarded the prestigious MMW Arzneimittelpreis by an independent panel of
experts. This award is made for pharmaceutical innovation and has, in the past,
always been won by major pharmaceutical companies. We are particularly pleased
that Pollinex(R) Quattro was selected, as it is our flagship development
product.
Allergy Therapeutics is fortunate to have the technology and infrastructure to
sell unregistered Named Patient Products ('NPPs'). Pollinex(R) Quattro is
currently marketed on this basis in Germany, Italy and Spain by the Company's
own sales forces; sales were up by over 40% on the equivalent period in the
previous year, taking the total sold to date on a NPP basis to well over 100,000
units. This extensive practical clinical experience with the product
contributes greatly to our confidence in the ultimate success of the
registration efforts with this family of products.
In January 2005, we entered into agreements with Allied Research International
and Allerpharma to develop and commercialise Pollinex(R) Quattro in Canada;
terms include upfront and milestone payments, linked to clinical development,
totalling £8m, a supply agreement for the manufactured product and royalties on
sales. This is the first out-licensing of the Pollinex(R) Quattro product line.
Consistent with the Company's strategy of retaining rights for the EU,
discussions regarding other markets have commenced and will be progressed;
however, Allergy Therapeutics is a financially strong business, not dependent on
the further partnering of its pipeline, and so will only enter agreements highly
selectively.
Development
In August 2004, we were very pleased to announce the recruitment of Dr Tom
Holdich as R&D Director. Previously, Tom was Head of Clinical Research at Shire
Pharmaceuticals plc and he has a wide experience of clinical development and
pharmaceutical registration. Under Tom's leadership, with the financial and
development resources in place, we are now positioned to complete the clinical
development of our novel MPL(R)-based vaccine pipeline, in which we believe much
of the potential value of the company lies.
Progress has been made towards conducting Phase III programmes during 2006 for
the lead subcutaneous products of Grass, Tree & Ragweed. Interactions with the
US Food and Drug Administration (FDA) have clarified where any additional
pre-Phase III information is needed. The proposed design of further studies has
been accepted and, through our partnership with Allied Research Inc, these
studies have been scheduled through 2005. Allergy Therapeutics plans to
initiate the Phase III programme for the Pollinex(R) Quattro family of vaccines,
starting in Q4 2005. An advantage of Allergy Therapeutics' pipeline is the
degree of commonality between the individual vaccine product development plans;
the path to registration for Grasses will inform the process for other allergens
- Trees, Ragweed, House Dust Mite - hence the agreement of the first
Investigational New Drug application for Pollinex(R) Quattro Grasses, received
on 18 February 2005, will allow the efficient progress of the whole portfolio of
injected vaccines.
Intellectual Property
In November 2004, the UK Patent Office granted our patent for the sublingual
(under the tongue) use of MPL(R) as an adjuvant to immunological therapies,
including allergy vaccines. This was the first grant for this family of patent
applications. The patent is very broad, covering all antigens, and therefore
could cover vaccines for many diseases as well as allergy. For Allergy
Therapeutics, the immediate benefit is that we can now commence proof of concept
clinical studies on a sublingual, MPL(R)-containing allergy vaccine with
confidence regarding the protection of the intellectual property we will
generate. It is thought that such injection-free products would have
significant commercial potential.
In February 2005, GSK announced that it has been granted EU regulatory approval
for Fendrix, a vaccine for hepatitis B containing the adjuvant MPL(R). This is
the first MPL(R)-containing product to receive a major market approval and
further confirms the wide acceptance and efficacy of the adjuvant.
Financial Review
Our results for the six months to 31 December 2004 have been very encouraging
and have continued the progress shown in previous years.
We are pleased to report that the Group's sales for the six month period to 31
December 2004 are in line with the Board's expectations. Gross sales for the
period (before the statutory rebate in Germany) were £14.1m, compared with
£12.5m in the same period in 2003. This represents an increase of 13%, driven
primarily by a 42% growth in sales of Pollinex(R) Quattro, the Group's
award-winning, four shot allergy vaccine.
Owing to the seasonality of the allergy market, some 70% of Allergy
Therapeutics' sales are made in the first half of the Company's financial year
and, as a consequence, the first half results give a better than normal
indication of full year performance.
At present, approximately 70% of Allergy Therapeutics' sales are generated in
Germany, so the increase of the compulsory rebate from 6% to 16% in January 2004
has been costly to the Company, with a charge of £2m in the period to 31
December 2004, compared with £0.4m in the same period in 2003. Despite the
rebate, net sales were maintained at £12.1m. As from 1 January 2005, the rebate
has reverted to 6% and is now calculated using current list prices, instead of
the previously used October 2002 prices.
Gross profit of £9.4m represents a margin of 78% of sales, compared with £9.1m
and 75% in the same period last year. This encouraging trend, especially after
taking into account the increase in German rebates, is as a result of the
increasing proportion of Pollinex(R) Quattro sales and is helped further in the
period by the release of a stock obsolescence provision of £0.3m.
Marketing expenses, the major component of distribution costs, have increased in
line with expectation as we have intensified the promotional spend on our high
margin products. Administration costs of £2.0m remain broadly in line with the
previous period.
Research and development expenditure increased during the period to £0.7m (H1
2003: £0.1m) as the development activity for the Pollinex(R) Quattro vaccine
range was initiated. In the future this spend will increase markedly as the
development programme progresses.
The operating profit for the period was £2.6m (H1 2003: £3.7m). However, before
development costs, German rebate and an exceptional charge crystallised by the
placing, the operating profit was £5.9m (H1 2003: £4.3m), which allows for a
more reasonable comparison of performance and highlights the strong performance
from the core business in this period. Interest receivable was significantly
higher at £163,000 (H1 2003: £11,000), as a result of higher cash balances
following the IPO in October 2004.
Capital expenditure for the period was £0.5m (H1 2003: £0.2m) and mainly
represents upgrades to plant and machinery and the introduction of a new ERP
system, allowing for better gross margin analysis.
Net current assets, excluding cash, increased to £2.2m (H1 2003: £1.1m)
reflecting higher gross sales.
When comparing the balance sheet to the position as at 30 June 2004, debtors of
£3.8m are significantly higher than as at 30 June 2004 (£2.1m), due to the
highly seasonal pattern of sales, which normally peak in October or November
each year as patients are treated pre-seasonally and fall to a year low in the
summer. For the same reason, creditors falling due within 1 year, at £3.8m, are
higher than as at 30 June 2004 (£3.3m), due to increased trading activity, most
notably due to higher rebate accruals in the German market, linked to higher
sales.
Net assets of £24.8m (H1 2003: £9.4m) show a net increase of £15.4m, due
primarily to the £15m net proceeds from the IPO in October 2004.
Net cash inflow before financing for the six month period to 31 December 2004
was £1.7m, £0.7m lower than in the same period in 2003, due to a higher
investment in R&D and a benefit in the previous period of £0.4m from the
surrender of tax losses to a shareholder under consortium loss relief
legislation.
Outlook
For our core marketed products 2005 got off to a good start and we anticipate an
excellent full year of trading. Our strategy is, where possible, to establish
our own sales and marketing infrastructure in the EU, and we are continually
assessing our sales and marketing activities in this light; we hope to make
further progress in this regard in the coming 6 - 12 months.
Outside the EU we are expecting to gain our first experience with the Japanese
regulatory authorities (MHLW), as we proceed with plans to meet the regulatory
requirements for Pollinex(R) Quattro Japanese Cedar. Partnership discussions
regarding Pollinex(R) Quattro for the USA and Japan continue, but we cannot
currently predict the outcome; meanwhile we continue the product development
process as planned.
On the product development front, we anticipate the commencement of pivotal
Phase III studies on the Pollinex(R) Quattro family of products towards the end
of this calendar year, and are in the clinic currently with precursor work as
requested by the FDA. We will shortly commence our 'first in man' proof of
concept study of MPL(R) delivered sublingually; this will provide first
indications of how this adjuvant reacts when delivered without injection and
hence the prospects for an efficacious sublingual allergy vaccine.
We are entering an exciting and active period at Allergy Therapeutics.
Ignace Goethals Keith Carter
Chairman Chief Executive Officer
8th March 2005 8th March 2005
Consolidated profit and loss account
for the six month period ended 31 December 2004
6 months 6 months Year ended
to to
31 Dec 31 Dec 30 June
2004 2003 2004
Note £'000 £'000 £'000
Turnover 2 12,140 12,105 18,001
Cost of sales (2,709) (3,031) (5,513)
Gross profit 9,431 9,074 12,488
Distribution costs (3,750) (3,456) (6,569)
--------- -------- ---------
Administrative expenses- other (1,978) (2,051) (4,335)
Research and development costs (665) (141) (451)
Exceptional costs 6 (614) - -
--------- -------- ---------
Administrative expenses (3,257) (2,192) (4,786)
Other operating income 160 195 423
Operating profit 2,584 3,621 1,556
Interest receivable and similar 163 11 60
income
Interest payable on loans and (39) (14) (26)
overdrafts
Profit on ordinary activities before 2,708 3,618 1,590
tax
Tax on profit on ordinary - (372) (372)
activities
Retained profit for the financial 2,708 3,246 1,218
period
Basic earnings per share 3 5.2p 7.9p 3.0p
Diluted earnings per share 3 4.5p 6.1p 2.5p
All amounts relate to continuing
activities
Consolidated balance sheet
at 31 December 2004
Note 31 Dec 31 Dec 30 June
2004 2003 2004
£'000 £'000 £'000
Fixed assets
Intangible assets
Goodwill 2,850 3,173 2,945
Other intangible assets 1,013 1,152 1,072
3,863 4,325 4,017
Tangible assets 1,926 1,293 1,650
5,789 5,618 5,667
Current assets
Stocks 2,185 1,723 1,825
Debtors: amounts falling due within one 3,832 3,699 2,062
year
Debtors: amounts falling due after one - - 223
year
Cash at bank and in hand 17,234 3,165 1,457
23,251 8,587 5,567
Creditors: amounts falling due within (3,801) (4,319) (3,277)
one year
Net current assets 19,450 4,268 2,290
Total assets less current liabilities 25,239 9,886 7,957
Creditors: amounts falling due after one (459) (460) (881)
year
Net assets 4 24,780 9,426 7,076
Capital and reserves
Called up share capital 73 51 51
Share premium account 14,945 - -
Profit and loss account (30,020) (30,753) (32,730)
Other reserves - share premium on shares 40,128 40,128 40,128
issued by subsidiary
Other reserves - shares held in Employee (346) - (373)
Benefit Trust
Shareholders' funds 24,780 9,426 7,076
Equity 24,770 9,416 7,066
Non-equity 10 10 10
24,780 9,426 7,076
Consolidated cash flow statement
for the six month period ended 31 December 2004
6 months 6 months Year
to to ended
31 Dec 31 Dec 30 June
2004 2003 2004
Note £'000 £'000 £'000
Cash inflow from operating activities 5 2,057 2,359 1,508
Returns on investment and servicing of
finance
Interest received 163 11 60
Interest paid (39) (14) (26)
124 (3) 34
Taxation - 364 364
Capital expenditure and financial
investment
Purchase of fixed assets and (456) (320) (760)
intellectual property
Sale of tangible fixed assets 3 - -
(453) (320) (760)
Cash inflow before financing 1,728 2,400 1,146
Acquisitions and disposals
Deferred consideration - (32) (308)
Financing
Net funds raised on AIM 14,967
Bank loans repaid (945) (500) (305)
Sale/(purchase) of EBT shares 27 - (373)
Premium on shares issued by - 30 30
subsidiary
14,049 (502) (956)
Increase in cash in period 15,777 1,898 190
Reconciliation of net cash flow to movement in net funds
6 months to 6 months to Year ended
31 Dec 2004 31 Dec 2003 30 June 2004
£'000 £'000 £'000
Increase in cash in the period 15,777 1,898 190
Net loans repaid 945 500 305
Movement in net funds in period 16,722 2,398 495
Net funds at beginning of period 512 17 17
Net funds at end of period 17,234 2,415 512
Notes to the interim reports
For the six month period ended 31 December 2004
1 Basis of preparation
The interim financial statements have been prepared in accordance with
applicable accounting standards and under the historical cost convention. The
principal accounting policies of the Group have remained unchanged from those
set out in the Group's June 2004 annual report and financial statements. The
financial information set out in this interim report is unaudited and does not
constitute statutory accounts as defined in section 240 of the Companies Act
1985.
On 11 October 2004 Allergy Therapeutics plc acquired, by way of a
share-for-share exchange, the whole of the issued share capital of Allergy
Therapeutics (Holdings) Ltd. Accordingly, as permitted by Financial Reporting
Standard no.6, the combination has been merger accounted for as if the Group as
currently constituted had been in place throughout the whole of the period
covered by these accounts.
The Group profit and loss account for the financial period and the comparatives
for the Group balance sheet and Group profit and loss account have been
presented as though they had always been part of Allergy Therapeutics plc,
despite the fact that the Company was only incorporated on 4 October 2004, in
order to compare meaningfully the performance of the underlying Group.
2 Analysis of turnover
6 months to 6 months to Year ended
31 Dec 2004 31 Dec 2003 30 June 2004
£'000 £'000 £'000
Turnover by destination
UK 58 45 101
Germany 9,017 8,327 11,715
Rest of Europe 2,881 3,543 5,197
Rest of World 184 190 988
----------- ----------- -----------
12,140 12,105 18,001
----------- ----------- -----------
Turnover by origin
UK 1,262 2,093 3,369
Germany 9,017 8,309 11,715
Rest of Europe 1,861 1,703 2,917
----------- ----------- -----------
12,140 12,105 18,001
----------- ----------- -----------
3 Earnings per share
6 months to 6 months to Year ended
31 Dec 2004 31 Dec 2003 30 June 2004
Earnings for the period (£'000) 2,708 3,246 1,218
Weighted number of shares in issue 51,991,728 40,838,342 40,935,583
Diluted weighted number of shares in 60,787,224 53,063,458 49,294,066
issue
Basic earnings per share (pence) 5.2 7.9 3.0
Diluted earnings per share (pence) 4.5 6.1 2.5
4 Reconciliation of movement in shareholders' funds
6 months 6 months Year
to to ended
31 Dec 31 Dec 30 June
2004 2003 2004
£'000 £'000 £'000
Profit for the financial period 2,708 3,246 1,218
Other recognised gains and losses relating to 2 (11) 40
the period (net)
Issue of shares (net of issue costs) 14,967 - -
Share premium on shares issued by subsidiary - 30 30
Purchase of shares by EBT - - (375)
Sale of shares by EBT 27 - 2
Net addition to shareholders' funds 17,704 3,265 915
Opening shareholders' funds 7,076 6,161 6,161
Closing shareholders' funds 24,780 9,426 7,076
5 Reconciliation of operating profit to operating cash flow
6 months 6 months Year ended
to to 30 June
31 Dec 31 Dec 2004
2004 2003
£'000 £'000 £'000
Operating profit 2,584 3,621 1,556
Depreciation 203 152 319
Amortisation of intangibles 228 228 333
Gain on disposal of fixed assets (3) - -
Effect of foreign exchange rate (95) (36) 109
changes
(Increase) / decrease in stocks (360) 192 90
(Increase) / decrease in debtors (1,547) (2,120) (682)
Increase/ (decrease) in creditors 1,047 322 (217)
Net cash inflow from continuing 2,057 2,359 1,508
activities
6 Exceptional costs
The Group incurred a cost of £614,000 in respect of consultancy services
provided in 2000, payable on an initial public offering (IPO) or 'exit'. This
was reported as a contingent liability, as defined by FRS 12, in the accounts
for the year ended June 2004.
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