Interim results

RNS Number : 6492K

C4X Discovery Holdings PLC

12 April 2018

 

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF REGULATION 2014/596/EU.

C4X Discovery Holdings plc

("C4XD", "C4X Discovery" or the "Company")

Interim results for the six months ended 31 January 2018

12 April 2018 - C4X Discovery Holdings plc (AIM: C4XD), a pioneering drug discovery company, today announces its interim results for the six months ended 31 January 2018.

Corporate highlights:

Deal update

·     On 29 March 2018, post-period end, C4XD announced a licensing deal with Indivior worth up to $294 million for C4XD's oral Orexin-1 receptor antagonist for the treatment of addiction, receiving $10 million upfront. The treatment of addiction represents a substantial area of unmet medical need, forecast to be worth an estimated $13 billion per annum in 2018¹.

Discovery Engine progress

·     Following the out-licensing of C4XD's IND-ready Orexin-1 programme to Indivior, the Company now has three lead drug discovery programmes showing in vivo activity, opening up a path to candidate selection and opportunity to progress to partnering discussions.

·     C4XD's proprietary drug asset portfolio of ten programmes across a number of therapeutic areas, including inflammation, neurodegeneration, immuno-oncology, addiction and diabetes, has progressed towards revenue generation.

Innovative technologies to advance drug development

·     A new version of the Taxonomy3® software was released in late 2017 which has doubled the analysis speed for gene-gene interaction and continued investment in the software will result in C4XD being capable of analysing six disease datasets per annum.

·     C4XD has initiated the creation of a specialised visualiser ("4Sight") to allow the viewing of C4XD's proprietary 4D molecular data to provide a revolutionary way of viewing and comparing molecules in a virtual world utilising the latest VR technology.

·     4Sight has been chosen as a case study for Immerse UK which is supporting the UK in becoming the global leader in the application of immersive technologies.

Financial highlights:

·     Investment in R&D was £3.4 million in the six months ending 31 January 2018, up £0.4 million from the £3.0 million in the six months ended 31 January 2017 reflecting progress across the portfolio.

·     Cash, cash equivalents, short-term investments and deposits at 31 January 2018 of £1.4 million (31 July 2017: £2.2 million and 31 January 2017: £6.0 million).

·     Net assets at 31 January 2018 of £6.2 million (31 July 2017: £10.1 million and 31 January 2017: £6.9 million).

Post-period end

·     Post-period end an R&D tax credit of £1.7 million and the upfront payment from Indivior of £7.1 million ($10.0 million) have been received.

Dr Clive Dix, CEO of C4X Discovery, said: "The recent period has seen C4XD make significant progress towards our goal of becoming the world's most productive, self-sustaining drug discovery engine. We have strengthened our portfolio of pre-clinical assets aimed at meeting the pharma industry's increasing demand for high quality early-stage drug candidates and now have a number maturing towards potential out-licensing discussions, with three in particular gaining momentum and commercial interest. The post period completion of the deal with Indivior validates our business model and serves as a solid foundation on which to build towards additional high-value licensing agreements for our portfolio, existing and future."

1. Source: GBI Research 2012

Analyst conference call today

Clive Dix (Chief Executive Officer), Brad Hoy (Chief Financial Officer) and Craig Fox (Chief Scientific Officer) will present the results at 10:00am BST on 12 April 2018 during a live conference call and webcast. A copy of the final results presentation will be released later this morning on the Company's website at www.c4xdiscovery.com.

Dial-in details are:

Participant local dial-in: [phone]

Participant free phone dial-in: 0800 279 7204

Participant code: 2785155

To access the audio webcast, please follow this link.

An audio replay file will be made available shortly afterwards via the Company website: www.c4xdiscovery.com.

--ENDS-

For further information, please contact:

C4X Discovery Holdings plc

Clive Dix, Chief Executive Officer                                                                                                          07801 865 803

Panmure Gordon (UK) Limited (NOMAD and Broker)                                                                   020 7886 2500

Freddy Crossley, Emma Earl (Corporate Finance)                                                                                             

Tom Salvesen (Corporate Broking)                                                                                                                         

Consilium Strategic Communications

Mary-Jane Elliott, Chris Gardner, Matthew Neal                                                                             0203 709 5700

About C4X Discovery

C4X Discovery aims to become the world's most productive drug discovery engine by exploiting cutting edge technologies to design and create best-in-class small-molecule candidates targeting a range of high value therapeutic areas. The company's goal is to drive returns through early-stage revenue-generating deals with the pharmaceutical industry.

C4X Discovery has a state-of-the-art suite of proprietary technologies across the drug discovery process. The company's innovative DNA-based target identification platform (Taxonomy3®) utilises human genetic datasets to identify novel patient-specific targets leading to greater discovery productivity and increased probability of clinical success. This is complemented by C4XD's novel drug design platform which comprises two innovative chemistry technologies, Conformetrix and Molplex, that combine 4D molecular shape analyses (based on experimental data) with best-in-class computational chemistry. This provides new and unprecedented insight into the behaviour of drug molecules, enabling the production of potent selective compounds faster and more cost effectively than the industry standard.

C4X Discovery is advancing its in-house pipeline in inflammation, neurodegeneration, immuno-oncology, addiction, and diabetes with a number of new drug candidates identified and further progress made towards the pre-clinical licensing discussions. In selecting new targets C4X Discovery will focus on the high-value disease areas and will continue to maximise value from opportunistic areas, for example, immuno-oncology, addiction, and diabetes.

The Company was founded as a spin-out from the University of Manchester. It has a highly experienced management team and Board who have delivered significant value creation within the healthcare sector historically and have enabled C4XD to reach multiple value inflexion points since IPO. For additional information please go to: www.c4xdiscovery.com

 

INTERIM CHAIRMAN AND CEO'S STATEMENT:

We remain committed and confident in our ability to capture the increasing value associated with pre-clinical licensing deals by generating a high-value asset portfolio focussed in disease areas with high partnering interest. Our previously-stated goal, once at 'steady state', remains to produce four or more assets suitable for partnering each year. We were delighted in keeping to our target of completing at least one revenue-generating deal by the time of this interim results statement, by announcing on 29 March 2018 the completion of the licensing agreement worth up to $294 million with Indivior for our Orexin-1 programme for the treatment of addiction.

During the interim period, we have focussed on completing the work required to successfully deliver the Indivior deal as well as continuing to build our unique drug discovery engine capabilities to achieve our aim of becoming the world's most productive, self-sustaining drug discovery company. Our ongoing disease areas of focus are inflammation, neurodegeneration, immuno-oncology, addiction and diabetes.

Discovery Engine and portfolio progress

In addition to completing our first licensing deal, we have made significant progress growing our discovery portfolio

Key highlights

·     C4XD's proprietary drug asset portfolio of ten programmes across a number of therapeutic areas including inflammation, neurodegeneration, immuno-oncology, addiction, and diabetes has progressed towards revenue generation.

·     Three programmes in particular (NRF-2 activator, IL-17 inhibitor and GPR142 agonist) have made significant progress during the last six months to a point where commercial interest is gaining momentum.

o  C4XD has designed and discovered novel potent activators of the NRF-2 pathway, which is important in mediating lung diseases such as chronic obstructive pulmonary disease ("COPD"), pulmonary arterial hypertension ("PAH") and other chronic inflammatory diseases as well as metabolic diseases. COPD represents an area of substantial unmet medical need and a $41 billion market¹ and, therefore, oral activators of NRF-2 are the subject of considerable interest to the pharmaceutical industry. The leader in this field GSK has filed further patents on their molecules against this target in the last year and are likely to be close to clinical development. C4XD's newly identified lead compound has excellent cell potency in vitro (<200 pM) and significantly increases NRF-2 activation in the lungs in pre-clinical studies following oral administration at low dose. C4XD's studies continue to further optimise the series to enable the selection of a pre-clinical candidate.

o  Our small molecule programme against Interleukin-17 ("IL-17"), a high value clinically validated target for inflammation and autoimmune diseases such as psoriasis (estimated to be worth $9 billion per annum²), has identified molecules that can selectively block IL-17 activity whilst keeping the molecular size of the molecule in the traditional "drug-like" range. To date, the identification of orally available small molecules has proved extremely challenging, but they are highly sought after by the pharmaceutical industry. Very recently we have identified several potent inhibitors suitable for oral delivery that have been shown to block IL-17 induced cytokine release in vivo which is a significant milestone towards the development of an oral medication targeting this pathway.

o  In late 2016, C4XD was awarded a ~£140k Biomedical Catalyst feasibility study award from InnovateUK to progress hits for the GPR142 agonist programme for diabetes. Type-2 diabetes ("T2D") affects over 420 million people worldwide, creating an enormous healthcare and socio-economic burden. The GPR142 receptor has been recently reported to be an exciting new target for the treatment of T2D with several advantages. Firstly, its activation results in insulin secretion but only in the presence of high blood sugar levels, avoiding the life-threatening side effect of low blood sugar associated with insulin-based therapies. Secondly, pre-clinical research suggests activation of GPR142 causes glucagon-like peptide-1 (GLP-1) release, and current GLP-1 based medicines show significant clinical benefit to diabetes patients by providing glucose control and induce weight loss.  These current GLP-1 based therapies are injectable and so the development of a GPR142 agonist could have similar clinical activity but would be orally administered, avoiding compliance issues. Eli Lilly is the leader in this area and announced it had initiated a Phase 1 clinical study with its GPR142 candidate in July 2017 with an extension in diabetes patients that is current recruiting.  Analysis of this patient arm of the study will determine whether the pre-clinical benefits of a GPR142 agonist translate to the clinic and should this be positive that will drive significant commercial interest in this target and C4XD's programme.  Very recently several C4XD lead GPR142 agonists were found to be active after oral administration in a pre-clinical oral glucose tolerance test establishing a path to candidate selection.

·     C4XD's proprietary target discovery technology Taxonomy3® has identified multiple novel disease associated genes in Parkinson's Disease (PD) in addition to the identification of discrete patient sub-groups that could potentially provide an opportunity in stratified medicine.  During 2017, we extended our original analysis using a second patient dataset from the US which replicated the presence of discrete patient sub-groups, resulting in a grand total of 180 novel genes being discovered that have not previously been associated with PD. The identification of these new genetic associations further confirms the power of Taxonomy3® to generate novel genetic insights into diseases with high unmet medical need. To put these findings into context, at the start of 2017 only 40 PD associated genes were known in the scientific literature, and in September, Genentech and 23andme published the results of their collaboration in the scientific journal Nature Genetics (Nature Genetics 49, 1511-1516, 2017), which identified a further 17 novel genetic variants representing 32 new PD associated genes.  Informatic analysis of proprietary genes discovered with Taxonomy3®, together with known genetic susceptibility genes, has flagged new pathways relevant to the disease aetiology.  We are now selecting the optimum drug targets from the genes we have discovered that map to these pathways, to progress these targets to drug discovery programmes, with the first programme very close to initiation.

1. Source Visiongain, Asthma and COPD Therapies: World Market 2013-2023.

2. Source:  Visiongain, Psoriasis Treatment:World Market 2013-2023.

Technology

Taxonomy3® platform development

In the last year C4XD has significantly invested in updating its Taxonomy3® software to enable the goal of being capable of analysing six disease datasets a year. A new version of the software was released in late 2017 which has doubled the analysis speed for gene-gene interaction analysis via refactoring the CPU code architecture. This will also facilitate a move to GPU analysis in the future should additional computational speed be required in the cloud environment.

Conformetrix data platform development including VR (virtual reality) visualisation

C4XD's novel drug design platform "Conformetrix" determines the 3D shapes of drug molecules from experimental data giving medicinal chemists new and unprecedented insights into the behaviour and physical properties of drug molecules. This enables the rapid design and discovery of better and safer drugs for diseases with high unmet medical need across broad therapeutic areas. During 2017, C4XD's proprietary database of conformational 3D data surpassed the milestone of 300 drug molecules providing a rich resource for new drug design underpinning our unique and differentiated approach.

One challenge with generating this data is that multiple 3D shape information is generated for each molecule (a "4D" ensemble of these individual 3D shapes) and scientific insights for design can be obtained from this data by comparing similar molecules that have different biological activity.

Visualising comparisons such as these is difficult with current molecular software as data of this complexity is proprietary to C4XD. C4XD has initiated the creation of a specialised visualiser ("4Sight") to allow the viewing of C4XD's proprietary 4D molecular data to provide a revolutionary way of viewing and comparing molecules and collaborating with multiple users from both a 2D desktop environment and in a virtual world utilising the latest VR technology. C4XD has harnessed the "Unreal Engine" from the computer gaming firm Epic Games as a technological foundation for this visualiser. The choice was made to use this engine to provide a cutting-edge render originally built for the high-end gaming industry but applied to C4XD's proprietary data. This project has progressed well with the first release of this platform being deployed late 2017.

Following the successful deployment of "4Sight", this project has been chosen as a case study for Immerse UK, which brings together industry, researchers and research organisations, the public sector, entrepreneurs, innovators and end users to support the UK in becoming the global leader in applications of immersive technologies.  This case study can be viewed at http://www.immerseuk.org/case-study/c4x-discovery/ 

Financial review

Revenue for the six months ended 31 January 2018 at nil was lower than the equivalent prior period (six month period ended 31 January 2017: £0.1 million) reflecting the successful discontinuation of fee-for-service agreements. C4XD expects future revenues to be derived from licensing and other income from commercial agreements with industry partners relating to C4XD's pre-clinical drug assets such as that signed with Indivior post-period and the £7.1 million ($10 million) upfront payment associated with it.

Investment in research and development at £3.4 million for the six months ended 31 January 2018 showed an increase compared to the equivalent prior period (six month period ended 31 January 2017: £3.0 million), reflecting both increase in activity in final preparation of Orexin-1 for out-licensing and progress being made across our in-house pipeline.

At £1.2 million, administrative expenses for the six months ended 31 January 2018 have increased compared to those reported in the equivalent prior period (six month period ended 31 January 2017: £1.0 million) due mainly to increases in expenses related to commercialization activities.

The net loss for the six months ended 31 January 2018 amounted to £3.7 million or a loss of 7.85 pence per Ordinary Share (six month period ended 31 January 2017: £3.0 million or loss of 8.34 pence per Ordinary Share).

C4XD had net assets at 31 January 2018 of £6.2 million (31 July 2017: £10.1 million and 31 January 2017: £6.9 million) and cash, cash equivalents, short-term investments and deposits of £1.4 million (31 July 2017: £2.2 million and 31 January 2017: £6.0 million). Post-period end an R&D tax credit of £1.7 million and the upfront payment from Indivior of £7.1 million ($10.0 million) have been received.

Outlook

C4XD's combination of state-of-the-art proprietary technologies, highly experienced scientific team and industry experience, now coupled with experience in completing commercial licensing transactions, uniquely positions the Company to fulfil the pharmaceutical industry's demand for high quality early-stage drug candidates. As the Company accelerates towards its goal of becoming the world's most productive, self-sustaining drug discovery engine, it aims to build on its commercial experience and to continue building a portfolio of commercially attractive pre-clinical assets.

Following the out-licensing of C4XD's Ox-1 programme the Company now has three lead drug discovery programmes compounds showing in vivo activity, opening up a path to candidate selection and opportunity to progress to partnering discussions.

Interim consolidated statement of comprehensive income

For the six months ended 31 January 2018

		Six months to 31 January 2018	Six months to 31 January 2017	Year to  31 July  2017
		(Unaudited)	(Unaudited)	(Audited)
		£000	£000	£000
	Notes
Revenue	3	-	78	143
Cost of sales		-	(2)	(3)
Gross profit		-	76	140
Research and development expenses		(3,357)	(3,013)	(6,100)
Administrative expenses		(1,177)	(951)	(2,533)
Operating loss		(4,534)	(3,888)	(8,493)
Finance income		3	1	3
Loss before taxation		(4,531)	(3,887)	(8,490)
Taxation	4	875	850	1,708
Loss for the period and total comprehensive loss for the period		(3,656)	(3,037)	(6,782)
Loss per share :
Basic and diluted loss for the period	5	(7.85)p	(8.34)p	(16.88)p

 

Interim consolidated statement of changes in equity

For the six months ended 31 January 2018

	Issued equity	Share	Share based payment	Merger	Capital contribution	Revenue
	capital	premium	reserve	reserve	reserve	reserve	Total
	£000	£000	£000	£000	£000	£000	£000
At 1 August 2016
	2,350	11,597	110	920	195	(10,867)	4,305
Loss for the six months to 31 January 2017
	-	-	-	-	-	(3,037)	(3,037)
Issue of share capital	49	4,951	-	-	-	-	5,000
Expenses of placing	-	(285)	-	-	-	-	(285)
Share-based payments	-	-	67	-	-	-	67
At 31 January 2017
	2,399	16,263	177	920	195	(13,904)	6,050

Loss for the six months to 31 July 2017
	-	-	-	-	-	(3,745)	(3,745)
Issue of share capital	91	6,988	-	-	-	-	7,079
Expenses of placing	-	(407)	-	-	-	-	(407)
Share-based payments	-	-	83	-	-	-	83
At 31 July 2017
	2,490	22,844	260	920	195	(17,649)	9,060
Loss for the six months to 31 January 2018
	-	-	-	-	-	(3,656)	(3,656)
Share-based payments	-	-	124	-	-	-	124
At 31 January 2018
	2,490	22,844	384	920	195	(21,305)	5,528

Interim consolidated statement of financial position

As at 31 January 2018

	31 January     2018	31 January  2017	31 July     2017
	(Unaudited)	(Unaudited)	(Audited)
Notes	£000	£000	£000
Assets
Non-current assets
Property, plant and equipment	76	100	90
Intangible assets	503	587	570
Goodwill	1,192	1,192	1,192
	1,771	1,879	1,852
Current assets
Trade and other receivables	497	547	548
Income tax asset	2,575	2,250	1,700
Cash and cash equivalents	1,390	2,194	6,031
	4,462	4,991	8,279
Total assets	6,233	6,870	10,131
Liabilities
Current liabilities
Trade and other payables	(705)	(820)	(1,071)
	(705)	(820)	(1,071)
Total liabilities	(705)	(820)	(1,071)
Net assets	5,528	6,050	9,060
Capital and reserves
Issued equity capital                                        6	2,490	2,399	2,490
Share premium                                                   6	22,844	16,263	22,844
Share-based payment reserve	384	177	260
Merger reserve	920	920	920
Capital contribution reserve	195	195	195
Revenue reserve	(21,305)	(13,904)	(17,649)
Total equity	5,528	6,050	9,060

Approved by the Board and authorised for issue on 12 April 2018

Brad Hoy

Chief Financial Officer

12 April 2018

 

Interim consolidated cash flow statement

For the six months ended 31 January 2018

	Six months to	Six months  to	Year to
	31 January 2018	31 January 2017	31 July 2017
	(Unaudited)	(Unaudited)	(Audited)
	£000	£000	£000
Loss after tax and interest	(3,656)	(3,037)	(6,782)
Adjustments for:
Depreciation of property, plant and equipment	27	21	44
Amortisation of intangible assets	67	67	135
Share-based payments	124	67	150
Taxation	(875)	(850)	(1,708)
Changes in working capital
Decrease/(increase) in trade and other receivables	51	(118)	(119)
(Decrease)/increase in trade and other payables	(366)	68	392
Decrease in deferred revenue	-	(40)	(83)
Cash outflow from operating activities	(4,628)	(3,822)	(7,971)
Research and development tax credit received	-	-	1,408
Net cash outflow from operating activities	(4,628)	(3,822)	(6,563)
Cash flows from investing activities:
Purchases of property, plant and equipment	(13)	(27)	(40)
Purchases of intangible fixed assets	-	-	(51)
Net cash outflow from investing activities	(13)	(27)	(91)
Cash flows from financing activities:
Proceeds from the issue of ordinary share capital	-	5,000	12,049
Expenses of placing	-	(285)	(692)
Net cash inflow from financing activities	-	4,715	11,357
(Decrease)/increase in cash and cash equivalents	(4,641)	866	4,703
Cash and cash equivalents at the start of period	6,031	1,328	1,328
Cash, cash equivalents and deposits at the end of the period	1,390	2,194	6,031

 

Notes to the interim financial report

For the six months ended 31 January 2018

1.            Corporate information

         The principal activity of the C4X Discovery Holdings plc is research and development, a review of which is included in the Interim Chairman's and CEO's Joint Review.

C4XD is incorporated and domiciled in the United Kingdom and its registered number is 09134041. The address of the registered office is Manchester One, 53 Portland Street, Manchester, M1 3LD.

The interim financial information was approved for issue on 12 April 2018.

2.    Accounting policies

Basis of preparation

The accounting policies adopted in this interim financial report are consistent with those followed in the preparation of the Group's annual report and accounts for the year to 31 July 2017, except for the following changes:

IFRS15: Revenue From Contracts with Customers has been early adopted. As the Group has no existing revenue streams, there is no impact on the numbers presented in this report as a result of adopting this standard.

The interim financial information for the six months ended 31 January 2018 and 31 January 2017 is unaudited and does not constitute statutory accounts as defined in the Companies Act 2006.  This interim financial report includes audited comparatives for the year to 31 July 2017.  The 2017 annual report and accounts received an unqualified audit opinion and has been filed with the Registrar of Companies.

These interim financial statements have been prepared in accordance with IAS34 Interim Financial Reporting.  They do not include all the information required for a complete set of IFRS financial statements.  However, selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the Group's financial position and performance since the last annual consolidated financial statements as at and for the year ended 31 July 2017.

Basis of consolidation

This interim financial report consolidates the financial statements of C4X Discovery Holdings plc and the entities it controls (its subsidiaries).

3.    Segmental information

         Operating segments

         At 31 January 2018, 31 July 2017 and 31 January 2017 the Group operated as one segment, being the provision of new technologies to improve the drug discovery process for novel small molecule therapies. 

         This is the level at which operating results are reviewed by the chief operating decision maker (i.e. the Chief Executive Officer) to make decisions about resources, and for which financial information is available.       

         All revenues have been generated from continuing operations and are from external customers.

3.    Segmental information (continued)

Operating segments (continued)

	Six months to	Six months to	Year to
	31 January 2018	31 January  2017	31 July   2017
	£'000	£'000	£'000
Analysis of revenue
Amounts earned under joint development agreements	-	78	143
	-	78	143

Geographical information

The Group operates in one main geographic area, which is managed in the UK. The Group's revenue per geographical segment based on customer's location, is as follows:

	Six months to	Six months to	Year to
	31 January       2018	31 January  2017	31 July  2017
	£'000	£'000	£'000
Analysis of revenue
UK	-	78	143
	-	78	143

All of the Group's assets are held in the UK and all of its capital expenditure arises in the UK.

4.    Taxation

The tax credit is made up as follows:

	Six months to	Six months to	Year to
	31 January  2018	31 January  2017	31 July  2017
	£'000	£'000	£'000
UK corporation tax losses in the period	-	-	-
Research and development income tax credit receivable	(850)	(850)	(1,700)
Adjustment in respect of prior periods	(25)	-	(8)
	(875)	(850)	(1,708)

5.    Loss per share

	31  January  2018	31 January 2017	31  July  2017
	£'000	£'000	£'000
Loss for the financial period attributable to equity shareholders	(3,656)	(3,037)	(6,782)
Weighted average number of shares:	No.	No.	No.
Ordinary shares in issue	46,555,087	36,412,279	40,171,732
Basic loss per share (pence)	(7.85)p	(8.34)p	(16.88)p

Diluted loss per share has not been presented above as the effect of share options issued is anti-dilutive.

6.    Issued share capital and share premium

	Deferred shares	Ordinary shares	Share capital	Deferred shares	Share premium	Total
	Number	Number	£000	£000	£000	£000
Ordinary and deferred shares as at 31 January 2017
	2,025,000	37,398,718	374	2,025	16,263	18,662
Issue of share capital	-	9,156,369	91	-	6,988	7,079
Expenses of placing	-	-	-	-	(407)	(407)
Ordinary and deferred shares as at 31 July 2017 and 31 January 2018	2,025,000	46,555,087	465	2,025	22,844	25,334

7.    Interim financial report

A copy of this interim condensed financial report is available on C4XD's website at www.c4xdiscovery.com.

 

END

 

 

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