Final Results
Phytopharm PLC
05 December 2002
5 December 2002
Preliminary results for the year ended 31 August 2002
Phytopharm plc (PYM: London Stock Exchange) ('Phytopharm or the 'Group') today
announces its preliminary results for the year ended 31 August 2002.
Period highlights
- Future development programme agreed with Pfizer on obesity
and metabolic syndrome (P57)
- Opening of a new botanical supplies unit in South Africa
to expand manufacturing capacity (P57)
- Phytopharm's own novel synthetic programme for obesity initiated (P64)
- Successful completion of 28 day Phase I repeat dose study
in age-related cognitive impairment (P58)
- Evidence of neuroprotective effect in pre-clinical models
of Parkinson's disease (P63)
- Survival benefit demonstrated in pre-clinical models of
motor neurone disease (P59)
- Completion of Phase II study in inflammatory bowel disease (P54)
- Commencement of European multi-centre study in canine atopic dermatitis
(P7v)
Dr Richard Dixey, Chief Executive of Phytopharm, said:
'Phytopharm's focus on its four key platforms has allowed the Group to generate
strong intellectual property and to move into related disease processes with new
chemical forms. In addition to the eight products we had in development at the
beginning of the year, two further projects have entered full development during
2002. We continue to generate strong product progress within tightly controlled
operational costs and are on target to meet all our deliverables during 2003.'
Enquiries:
Phytopharm plc Today: 07867 782000
Dr Richard Dixey, Chief Executive Thereafter: 01480 437697
Mobile: 07867 782000
Financial Dynamics Tel: 0207 831 3113
David Yates / Ben Atwell
Phytopharm has updated its website from 5 December 2002; www.phytopharm.co.uk
Business Model
Phytopharm develops a portfolio of products that have emerged from a
well-established research base. Its expertise in manufacturing controlled plant
extracts (botanicals) enables it to initiate early clinical evaluations and base
substantial research platforms on the emergent clinical data. These platforms
are not only novel, but allow the Group to generate strong intellectual property
and to move into related disease processes with new chemical forms.
Phytopharm invests shareholders' funds in developing its portfolio, and remains
a well-funded Group with over two years working capital at current burn rates.
Once product development programmes have reached a substantive stage, the Group
seeks pharmaceutical partners who pay for options to market products based on
intellectual property owned by Phytopharm. These option agreements involve
substantial payments to the Group, comprising the reimbursement of further
development costs, the payment of milestones as key phases are completed, and
royalties on eventual product sales. These payments are negotiated by reference
to the size of the eventual market, the stage of development of the product
concerned and the strength of the data generated.
With its small central overhead, Phytopharm offers the potential of sustained
profitability once its main products have been licensed in this manner, even if
royalty income arising from sales of such products is some years off.
Furthermore, the botanical approach also enables the parallel development of
products for early marketing in the companion animal market, thereby balancing
early revenue generators with major pharmaceutical products.
Operational Review
The metabolic disorders platform is focussed on obesity, obese onset diabetes
and metabolic syndrome. Licensed to Pfizer Inc in 1998, the P57 platform
comprises the patented use of three plant species, their mode of action and 17
related active molecules.
In March 2002, Phytopharm announced the opening of a new botanical supplies unit
in South Africa to substantially expand the manufacturing capacity for P57 in
support of the further development of the product. The new facility expands the
capacity for processing the raw materials by 300 per cent and a programme to
process substantial quantities of plant material has been successfully
undertaken.
In July 2002, Phytopharm announced the future development programme with Pfizer.
The agreement followed the successful demonstration of proof of principle in
man that was announced in December 2001. Pfizer will now progress the P57
development programme concerning extracts of medicinal plants under the ongoing
terms of the Licence and Royalty Agreement announced between Pfizer and
Phytopharm in 1998. This programme is intended to result in the development of
a botanical prescription pharmaceutical for the treatment of obesity and
metabolic syndrome.
Phytopharm has now developed screens that are predictive of appetite suppressant
activity. This has enabled the development of synthetic molecules that will
form the basis of a further licensing opportunity. This programme (P64) is
intended to result in the development of a pharmaceutical prescription product
for the treatment of obesity and metabolic syndrome.
The neurodegeneration platform has been extended to include Alzheimer's,
Parkinson's and motor neurone disease. Phytopharm has now developed a total of
nine patent families to protect the large group of related chemical compounds
within this platform that share this activity. These molecules are actively
neuroprotective and stimulate the release of neuronal growth factors. Several
lines of research are now progressing in parallel, indicating that these
molecules actively reverse the neurodegenerative process. This novel mode of
action has established a platform for the development of a number of potentially
important therapeutic approaches to diseases including those associated with
ageing, such as memory impairment and dementia. This work has enabled
Phytopharm to develop a series of screening models that mimic these important
observations, and has guided the development of semi-synthetic analogues of the
original plant based materials.
A series of preclinical toxicology studies has now been completed on a compound
arising from the P58 programme, for age-related cognitive impairment, including
memory loss, dementia and Alzheimer's disease. In April 2002 Phytopharm
announced the completion of a 7-day clinical programme of repeat dosing in the
elderly. The successful completion of the final stage of a 28-day repeat dose
clinical study was announced in October 2002. The results indicated that the
product was well tolerated with a good emergent safety profile. A battery of 10
computerised cognitive function tests was also performed on days 1, 14 and 28 to
optimise the cognitive endpoints for further clinical studies. These data have
been evaluated for subject variability and consistency and have led to a study
design, which centres on verbal memory performance including delayed word recall
and overall quality of memory. These parameters will be the focus of the
cognitive assessments to be conducted in the forthcoming phase II clinical study
in 2003.
Manufacture of a compound from the programme for Parkinson's disease (P63) has
been successfully completed to GMP in multi-kilogram quantities. This product is
planned to enter the clinical phase in Q1 2003. Pre-clinical work has
demonstrated that P63 is a potent protective agent against neurodegeneration in
vitro and stimulates the release of neurotrophic factors, which have been shown
to reverse Parkinson's disease. Furthermore, we have shown that P63 derived
products reverse the loss of dopamine receptors in the brain and have powerful
neuroprotective effects in models of Parkinson's disease in vivo.
The programme for motor neurone disease (P59) has progressed well. Pre-clinical
work has demonstrated that P59 improves survival to a greater extent than
standard treatment in Progressive Motor Neuropathy (pmn) mice, a model of motor
neurone disease (amyotrophic lateral sclerosis; ALS).
The inflammation platform consists of a patented combination of two medicinal
plants (P54), and includes a family of novel, third generation non steroidal
anti-inflammatory drugs ('NSAID') characterised by their inhibition of a wide
range of enzymes central to chronic inflammation (P61).
In August 2002 Phytopharm announced the results of a Phase IIa study
investigating the safety and efficacy of the oral product, P54, in inflammatory
bowel disease. The study was conducted at Addenbrooke's Hospital, Cambridge, UK
and utilised a double-blind placebo-controlled design. All twenty-seven
patients had clinically stable disease, but were dependent on chronic treatment
with oral prednisolone (5 - 30 mg / day). Faecal calprotectin (a biomarker of
disease activity released by inflammatory cells into the bowel) was determined
in each subject at the start of the study. For patients with a baseline
calprotectin level below 450 milligrammes per litre, all the patients in the P54
group were able to withdraw from steroid therapy. By contrast, in the placebo
group less than half of the patients in this category were able to discontinue
steroids without relapse. The study indicated that the P54 product, which is
derived from the turmeric family, may play a role in reducing steroid dependency
in patients with less severe forms of bowel disease. Treatment with P54 was
generally very well tolerated and there were no safety concerns that caused any
changes of dosing regimen.
There is also potential for the use of compounds that reduce the expression of
inflammatory enzymes in the companion animal market. The results last year of
our double-blind placebo controlled trial using P54v in canine osteoarthritis
have enabled the Group to actively pursue commercialisation of P54v in the
veterinary market. Large-scale manufacture of P54 is currently ongoing with a
view to commercialisation.
Research into the mode of action of this platform has continued to generate
novel synthetic molecules. Pre-clinical work has demonstrated that these
molecules have powerful anti-inflammatory and antispasmodic effects. This
programme is intended to result in a pharmaceutical prescription medicine for
the treatment of inflammatory disorders and irritable bowel syndrome. The lead
candidate, P61, will enter development in the second half of 2003.
Finally, the dermatology platform comprises the patented use of five plants with
a novel mode of action for the treatment of eczema. These products have a dual
mode of action that targets both the allergic and the inflammatory components of
eczema.
In March 2002 Phytopharm announced the commencement of a European multi-centre
study in canine atopic dermatitis with P7v, a three plant botanical product.
This randomised, double blind, placebo controlled study is being conducted by
specialist veterinary dermatologists and will determine the optimal dose for
future commercialisation of the product. In total, one hundred and twenty dogs
with perennial atopic dermatitis are being randomly allocated to one of four
dose groups. The owners add the appropriate dose of either P7v or the matching
placebo product to their dogs' food once daily for 12 weeks. The response to
dosing will be assessed by changes in the canine atopic dermatitis extent and
severity index (CADESI), severity of pruritus, the incidence of secondary skin
infection and the overall response reported by both the veterinarians and dog
owners. The study is expected to report in Q4 2003.
Over the period Phytopharm completed the pharmaceutical development of the
product and is now able to manufacture tonne quantities of material to GMP
standards. Discussions with potential partners are now advancing with regard to
the further development and commercialisation of this product.
Methods to develop a scalable version of the active compound emerging from this
programme, coded P55, are being developed for use in the treatment of dermatitis
and eczema in humans.
Licensing progress
Discussions under confidentiality agreements are in progress on products from
all four platforms owned and developed by Phytopharm. Such discussions can be
lengthy, and involve substantial due diligence and assessment on the part of
potential licensees. Nonetheless, significant progress is being made on the
neurodegeneration platform (P58) and the opportunity presented by the new
chemical forms within the obesity platform (P64) is also generating substantial
interest. With Pfizer's stated intention to progress the P57 product and
commercial quantities of both veterinary products (P54v and P7v) becoming
available during 2003, Phytopharm looks forward to the coming year with
confidence.
Financial Review
Results of operations
Turnover of £2.7m for the year (2001: £1.5m) comprises development income under
the licence and development agreement with Pfizer Inc for P57, the Group's
appetite suppressant. The turnover is higher this year as it includes
reimbursement of the 'proof of concept' clinical study completed at the end of
2001 and further manufacturing and other work to prepare for the next clinical
study.
Overall operating expenses for the year of £7.03m are £2.02m higher than the
previous year, an increase of 40%. Within those totals expenditure on research
and development rose by 49% (£1.97m) to £6m, with administration costs also
increasing by 5% to £1.02m. The increase in research and development
expenditure is due to increased expenditure across the Group's portfolio of
products, particularly the P58 platform and P7v with the completion of the
multistage Phase I clinical study in P58 and the commencement of the multicentre
clinical study in P7v. Expenditure on P57 also increased this year with the
completion of the clinical study as noted above.
Interest income during the year of £0.48m is lower this year (2001: £0.67m) due
to a combination of lower average cash balances during the current year and
lower interest rates. The tax credit of £0.55m (2001: £0.22m) arose as the
Group has taken advantage of the Research and Development corporation tax
credits introduced in the Finance Act 2000 whereby the Group may surrender
corporation tax losses incurred on research and development expenditure for a
corporation tax refund. The increase in the tax credit is due in part to the
higher levels of research and development expenditure this year compared to last
and because the tax credit was limited to seven months research and development
expenditure in the previous year.
The increase in turnover of £1.24m and the increase in the tax credit this year
of £0.33m have partially offset the increase in research and development
expenditure of £1.97m to give a net increase in the loss for the year of £0.63m
or 24% to £3.29m. Overall the results for the year were as anticipated and were
within budget.
Balance sheet
The net assets at the end of the year of £10.29m show a reduction of £2.81m over
the figure at the start of the year. This represents the loss for the year of
£3.29m offset by £0.48m arising from the exercise of share options. The net
asset level at the year-end was in line with expectations. The working capital
of the Group comprises 98% (2001: 98%) of the net asset value and the bulk of
this is held as cash, either on hand or on term deposits.
The fixed asset base of the Group remains low at £0.24m (2001: £0.25m) as the
Group contracts out its research requirements and therefore does not need to
finance its own laboratory facilities.
Debtors of £2.84m (2001: £0.37m) comprise principally income due under the
licence agreement with Pfizer for P57 and the research and development tax
credit. As announced on 30th July 2002 Pfizer will now progress the P57
development programme under the terms of the existing milestone and royalty
agreement, which includes up to $32m in milestone payments as well as royalties
on sales of P57 by Pfizer, and the debtor from Pfizer at the year end completes
reimbursement of this stage of the project. There was no income due under the
licence agreement for P57 at the end of the previous year as this fell between
the regular reimbursement dates.
Short-term creditors at the year-end were £1.95m and are 87% higher (£0.91m)
than the previous year. Included within this figure is an additional £0.31m of
deferred income with the balance comprising higher trade creditors and accruals.
The increase in trade creditors and accruals arises due to higher than average
monthly expenditure in July and August 2002.
Financing
Working capital at 31 August 2002 was £10.04m compared to £12.85m at the end of
the previous year. Overall, after allowing for the exercise of options during
the year, the Group utilised £3.28m of working capital during 2002 (2001:
£2.68m). This is equivalent to an average of £273,000 per month (2001:
£223,000) during the year. The average expenditure over the second half of the
year was £291,000 (2001: £220,000), which represents an increase of £35,000 per
month over the first six months of the year. Both the increase in expenditure
over the previous year and the increase in the second half of this year were in
accordance with the Group's plan and arise principally as the P58 platform
matures and moves through Phase I towards Phase II clinical studies which are
anticipated to start in 2003. The Group continues to maintain close control
over expenditure, particularly the administrative side of the business, while
continuing to develop a wide portfolio of products.
Consolidated Profit and Loss Account for the year ended 31 August 2002
Notes 2002 2001
Unaudited Audited
£'000 £'000
Turnover 2 2,714 1,471
__________ __________
Gross profit 2,714 1,471
Other operating expenses 3 (7,027) (5,006)
__________ __________
Operating loss (4,313) (3,535)
Interest receivable and similar income 478 666
Interest payable and similar charges (4) (8)
__________ __________
Loss on ordinary activities before taxation (3,839) (2,877)
__________ __________
Tax on loss on ordinary activities 4 554 224
__________ __________
Loss for the year (3,285) (2,653)
========= =========
Basic fully diluted loss per ordinary share (pence) 5 (8.5) (7.1)
IIMR loss per share (pence) 5 (8.4) (7.1)
All revenue and expenses shown above were generated from continuing operations.
The Group has no recognised gains or losses for the financial year other than
those disclosed above.
Consolidated Balance Sheet at 31 August 2002
Notes 2002 2001
Unaudited Audited
£'000 £'000
Fixed assets
Tangible assets 241 247
Investments - 30
__________ __________
241 277
Current assets
Debtors 2,843 369
Cash held on deposit as short term investments 8,831 12,668
Cash at bank and in hand 323 854
__________ __________
11,997 13,891
Creditors: amounts falling due within one year (1,953) (1,046)
__________ __________
Net current assets 10,044 12,845
__________ __________
Total assets less current liabilities 10,285 13,122
__________ __________
Creditors: amounts falling due after more than one year - (14)
Provisions for liabilities and charges - (16)
__________ __________
Net assets 10,285 13,092
========= =========
Capital and reserves
Called up share capital 386 382
Share premium account 6 31,726 31,252
Merger reserve 6 (204) (204)
Profit and loss account 6 (21,623) (18,338)
__________ __________
Equity shareholders' funds 10,285 13,092
========= =========
Consolidated Cash Flow Statement for the year ended 31 August 2002
Notes 2002 2001
Unaudited Audited
£'000 £'000
Net cash outflow from continuing operating activities 7 (5,361) (3,273)
_________ _________
Returns on investment and servicing of finance
Interest received 478 666
Interest paid on finance leases (4) (8)
_________ _________
474 658
_________ _________
Taxation
UK corporation tax received 224 -
_________ _________
Capital expenditure and financial investment
Purchase of fixed asset investments - -
Purchase of tangible fixed assets (140) (128)
Proceeds on sale of tangible fixed assets 13 13
_________ _________
(127) (115)
_________ _________
Cash outflow before use of liquid resources and financing (4,790) (2,730)
_________ _________
Management of liquid resources
Decrease/(increase) in cash held on short term deposit 3,837 (8,140)
Financing
Proceeds from exercise of share options 478 183
Proceeds from issue of share capital - 11,030
Expenses of issue of share capital - (229)
Repayment of principal under finance leases (56) (52)
_________ _________
Net cash inflow from financing 422 10,932
_________ _________
(Decrease)/increase in cash in the year (531) 62
======== ========
Notes to the preliminary announcement
1. Basis of preparation
These financial statements have been prepared in accordance with the accounting
policies set out in the annual report of the Group for the year ended 31 August
2001, together with the following:
Basis of extraction
The figures shown for the year to 31 August 2002 represent unaudited abridged
financial statements and have not as yet been delivered to the Registrar of
Companies. The comparative figures for the year to 31 August 2001 have been
taken from, but do not constitute, the Group's financial statements for that
financial year. Those financial statements have been reported on by the Group's
auditors and delivered to the Registrar of Companies. The report of the
auditors was unqualified and did not contain a statement under s237 (2) or (3)
of the Companies Act 1985.
2. Turnover
2002 2001
Unaudited Audited
£'000 £'000
By business activity
Licensing and development 2,714 1,471
======= =======
All turnover arose in the United Kingdom.
3. Other operating expenses
Other operating expenses comprise:
2002 2001
Unaudited Audited
£'000 £'000
Continuing operations
Research and development 6,003 4,033
Administrative expenses 1,024 973
_________ _________
7,027 5,006
======== ========
4. Tax on loss on ordinary activities
2002 2001
Unaudited Audited
£'000 £'000
United Kingdom
Corporation tax credit at 24% 554 224
======= =======
The Group has taken advantage of the Research and Development corporation tax
credits introduced in the Finance Act 2000 whereby the Group may surrender
corporation tax losses incurred on research and development expenditure for a
corporation tax refund at the rate of 24 pence in the pound.
5. Loss per share
The basic undiluted loss per share is based on losses of £3,284,517 (2001: loss
of £2,653,147) and ordinary shares of 38,480,633 (2001: 37,609,090), being the
weighted average number of shares in issue during the period. The IIMR earnings
per share figure excludes gains and losses on disposals of fixed assets during
the year.
6. Share premium account and reserves
Share Profit
premium Merger and loss
account Reserve account
Unaudited Unaudited Unaudited
£'000 £'000 £'000
At 1 September 2001 31,252 (204) (18,338)
Premium on issue of shares 474 - -
Loss for the year - - (3,285)
__________ _________ ___________
At 31 August 2002 31,726 (204) (21,623)
========= ======== ==========
7. Reconciliation of operating loss to net cash outflow from operating activities
2002 2001
Unaudited Audited
£'000 £'000
Continuing activities
Operating loss (4,313) (3,535)
Depreciation on tangible fixed assets 124 132
Profit on disposal of fixed assets 9 (9)
(Increase)/decrease in debtors (2,144) (41)
Increase/(decrease) in creditors 949 195
Provision for impairment of value in fixed asset investments 30 -
(Decrease)/increase in provision for employer's national
insurance on share option gains (16) (15)
__________ __________
Net cash outflow from continuing activities (5,361) (3,273)
========= =========
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