Final Results - Year Ended 31 August 1999
Phytopharm PLC
30 November 1999
Preliminary Results for the Year Ended 31 August 1999
Phytopharm plc ('Phytopharm') today announces its preliminary results for the
year ended 31 August 1999.
Highlights:
- First milestone payment from Pfizer triggered on Appetite Suppressant
(P57)
- Completion of derivatisation programme on Alzheimer's disease product
with eight further patents submitted (P58)
- Commencement of Phase IIa trial in Colon Cancer (P54)
- Commencement of clinical evaluation in Canine Eczema (P7) and Canine
Arthritis (P54)
- In-licence of Hepatitis treatment (P56)
- Successful £4.27m placing with institutional investors at a nominal
discount announced today
Dr Richard Dixey, Chief Executive of Phytopharm, said:
'We are now entering a key phase in the development of our portfolio, where
our understanding of the clinical activity and mode of action of our products
has enabled us to target specific market segments. With controlled cultivation
now operational in three continents and scale manufacturing operations in
place for three of our products, we are in a good position to prepare for
early product launches in the veterinary sector in support of our longer term
pharmaceutical development programmes.'
Enquiries:
Phytopharm plc Today: 0207 638 4010
Dr Richard Dixey, Chief Executive Thereafter: 01480 437697
Mobile: 0498 583754
Financial Dynamics Tel: 0207 831 3113
David Yates or Sophie Pender-Cudlip
Phytopharm has a new website from 6 December 1999 at www.phytopharm.co.uk.
Introduction
Over the past ten years, we have pioneered the development of extracts from
medicinal plants (Botanicals) as candidates for mainstream drug development.
Having clarified the regulatory requirements for such extracts, we have
established long term partnerships to manage controlled horticulture and
manufacture in their countries of origin, and have used our expertise in
clinical and scientific management to carry out these development programmes.
We are now in the third phase of this process, whereby key insights generated
by our development programmes are leading to an understanding of both the
active constituents and modes of action of our products.
Our main thrust has always been to develop plant extracts and their related
chemical forms to the highest quality standards, and offer these to
international licensing partners for the prescription market in man. In all
cases, such products are protected by intellectual property rights, whether on
the use of the plant extracts, their constituents, or their mode of action.
Development cycles are necessarily long term, however, and can only be
supported by milestone payments and reimbursed research and development
expenses until sales are generated.
As we have been developing our prescription medicine portfolio however, the
market for Botanical products has been expanding dramatically. Public interest
is high, and major growth potential in both the licensed market in man and the
veterinary market is now becoming widely recognised. The response to this has
been two-fold: multinational pharmaceutical companies have been moving into
these markets through their specialised divisions, and the major regulatory
authorities have been stressing the importance of fully controlled manufacture
and development.
These developments in the market place have allowed a further expansion of our
strategy into areas outside our primary focus of licensed pharmaceuticals.
With the emergence of veterinary and unlicensed market opportunities, we have
conducted a portfolio review over the past year and have identified two
product areas where we can use our know-how and intellectual property to
potentially achieve good returns, while developing products over a far shorter
development cycle. If launched, we are hopeful that sales from these products
could generate sufficient cash to fund our research and development
expenditure.
Operating Review
1999 has been a year of continued success for Phytopharm. We have increased
our clinical portfolio to nine projects with the initiation of a trial in
colon cancer and a programme of veterinary research in eczema and arthritis.
This clinical data set not only supports development programmes but also
enables us to use the data so generated to add further to our understanding of
the mode of action of our products. This parallel development and discovery
cycle lies at the core of the Botanical medicine drug development pathway.
Our intellectual property portfolio continues to grow and we are now
developing 20 patent families in 125 countries with 67 patents successfully
granted. Of particular importance is the emergence of mode of action patents
in two key disease areas.
Furthermore, our strategy of exploiting the multiple market opportunities for
Botanical products has enabled a stratification of our products, with some now
configured for early sales generation, and others the subject of longer term
drug discovery and development programmes.
Review of the portfolio
Metabolic diseases
Development of our appetite suppressant, P57, has progressed well this year,
and we have announced today the completion of the milestone-triggering repeat
dose Phase I study in man. A good overall safety profile is emerging from this
fourth Phase I trial and we are now preparing for further dosing studies with
the material. In parallel with these activities, we are carrying out the
strategy agreed with Pfizer and the CSIR (Council for Scientific and
Industrial Research), and have designed and opened a clinical supplies unit in
South Africa to manufacture product to be used in the clinical trials
programme. This first ever GMP (Good Manufacturing Practice) suite dedicated
to the production of Botanical extracts was formally opened by the South
African Minister of Technology earlier this year. Two plantations for the
controlled production of the raw material have been established in South
Africa with over a million plants in the growing cycle, and two further sites
are being established world-wide.
We have carried out a further series of pre-clinical evaluations on our
diabetes product, P30. We have continued to see activity in the material but
we have been unable to isolate a stable fraction to date. We have one further
set of studies to carry out in the hope that a workable extract will yet
emerge to enable us to build on our anecdotal evidence concerning the efficacy
of the material.
Anti-inflammatory treatments
This year has also seen the reporting of the results of our Phase II study on
P54 in the treatment of the symptoms associated with osteoarthritis. The
results of this study did not detect a statistically significant difference
between the placebo and active groups. However, the results, with 47% of the
treatment group reported as either improved or markedly improved compared with
a 40% score for the placebo group, continue to support the anti-inflammatory
profile of the product. Such large placebo responses are not uncommon in
arthritis research, and graphically illustrate the difficulties of work in
this area where analgesic effects are as important as anti-inflammatory
activity in controlling disease symptoms.
In response to this result, we have carried out a programme of re-formulation
of the product, and have produced a new formulation with a substantial
increase in the bioavailabilty of the active materials. In collaboration with
the MRC (Medical Research Council), we have been able to further demonstrate
the effects of P54 in reducing the production of inflammatory enzymes such as
cyclo-oxygenase II (COX II) in response to stress in a number of model systems
and have commenced a trial in colon cancer that is described below.
P54 also has substantial attractions in the veterinary anti-inflammatory
market where early product launches are possible, and we have initiated a
study in canine arthritis designated as P54v to confirm the evidence of
efficacy of the material in this important indication. To support these
clinical activities, we have established plantations in both Indonesia and
India to supply raw materials and expect fully compliant manufacturing
facilities to become operational during the course of next year.
Dermatological portfolio
This year has seen substantial progress in the understanding of our eczema
family of products. Using information gained from clinical programmes, we
have begun scaled-up manufacture of the drug substance for P55 in order to
increase the yields of active material. Alongside this formulation work,
further studies to explore the mode of action of the product are well
advanced, and we are close to the isolation of the active molecules contained
in the material.
We have also begun work on our third trial evaluating the effects of our
product P7 as a treatment for canine eczema. Building on the successful
outcome of the first two studies, we are anticipating that the completion of
this third trial in dogs will enable a launch of the product in the veterinary
market later next year.
Following the successful demonstration of the activity of P53 in the reduction
of pruritis (itch) secondary to psoriasis last year, we have been guided
towards a mode of action that is currently under investigation. Subject to
completion of these studies, we will start a pivotal Phase II study during the
course of the year.
Our Phase II double blind placebo controlled evaluation of P45, our treatment
for alopecia, will reach the interim analysis point before the end of the
year. Subject to the results of this analysis, we will either examine the
effects of the active material in more detail or continue treatment for a
further six months.
We have not been successful in establishing a window between toxicity and
efficacy for our topical treatment for psoriasis P37 this year, and have
therefore taken the decision to abandon the project.
Cancer and infectious disease
Given the substantial evidence for the role of COX II in the spread of cancers
of the colon and its importance in inflammatory bowel disease, we commenced a
study in collaboration with the MRC earlier this year on P54 for the treatment
of colon cancer. This first study is to a dose escalating design, and should
report next year.
We also announced the in-licence of P56, an important new treatment for
hepatitis during the course of the year. Based on a South Indian plant that
has been the subject of a programme of controlled cultivation over the past
two years, we have now isolated five separable modes of action of the extract
against hepatitis viruses. We plan to start an initial evaluation of the
product as a treatment for hepatitis C early next year.
Neurological disorders
We have made considerable progress in our development of P58, our treatment
for Alzheimer's disease during the past twelve months. We have developed and
patented a predictive laboratory model based on the original data in animals
and man to explore the mode of action of the product, and have completed an
extensive derivatisation programme. This has enabled us to establish structure
function relationships for a large number of molecular forms related to the
original phytochemical. We have now submitted a further eight patent
applications alongside the original mother patent for the product, and we
remain extremely excited about this plant medicine as an important and novel
method for the treatment of age-related dementias in general as well as
Alzheimer's disease in particular. We are currently scaling up manufacture in
order to support a Phase I programme later next year.
Financial Review
The Group recorded a loss for the year of £3.2m, a reduction of £0.4m on the
previous year. The cash balance at the end of the year was £2.8m compared to
£2.5m at the end of the previous year, with working capital of £1.9m compared
to the corresponding figure of £2.5m at the end of fiscal year 1998. The
Group's results and financial position were in line with internal forecasts.
Turnover for the year increased by £1.7m to £2.4m, reflecting the first full
year of reimbursed development income under the licence and development
agreement with Pfizer for the Group's appetite suppressant product, P57.
Overall operating expenses for the year increased by 26% over the previous
year. Within that total, expenditure on research and development also
increased by 26% over the previous year to £4.9m while administrative costs
increased by 2% to £0.8m, demonstrating the Group's continued commitment to
increasing expenditure on research and development while keeping tight control
over administrative costs. In the second half of the year the Group closed
its small quality control laboratory, incurring a one off cost of £0.2m, and
now outsources all its analytical work. The overhead expenditure of £2.9m in
the second half of the year was virtually the same as that reported for the
period to 28 February 1999, while turnover dropped by £0.3m to £1.1m in the
same period. The drop in turnover reflects the differing stages of the
development programme for P57. In the first half of the fiscal year, the
clinical trials supply unit in South Africa was substantially completed, while
activities in the second half of the year were concentrated on preparing for
the Phase I study in man which commenced just after the year end.
Interest income represents interest earned on deposits held during the year.
The decrease in net assets to £2.1m from £3.0m at the end of the previous year
represents the loss for the year of £3.2m partially offset by net proceeds of
£2.2m raised during the year by a share issue and a further £0.1m raised from
the exercise of share options. Debtors have also reduced to £0.2m at the end
of the year from £0.8m at the previous year end. The previous figure included
the initial reimbursed income under the development agreement. Creditors due
within one year have increased by £0.4m to £1.1m due principally to the
increased level of operating expenses incurred by the Group during the year.
Cash expended during the year on the Group's operations was £2.0m,
representing a reduction of £2.2m over the previous year as the increase in
turnover more than offset the increase in operating expenditure.
The Placing
Today, the Group raised £4.27m, net of expenses, through the placing of
1,643,200 Ordinary Shares for cash with institutional investors at a price of
£2.67 per share, being a nominal discount to the closing middle market
quotation on 29 November 1999 of 3.8%. The placing was arranged and fully
underwritten by the Company's broker, WestLB Panmure Limited. Application has
been made for the new shares, which represent 4.9% of the issued share capital
of the Company and which will rank pari passu in all respects with the
existing Ordinary Shares of 1p each, to be admitted to the Official List of
the London Stock Exchange. Dealings in the new shares are expected to begin
on 3 December 1999. This additional working capital has strengthened the
Group's balance sheet significantly. In the coming year, the Directors
anticipate maintaining the current momentum on the project development
programmes whilst continuing to make the most efficient use of the Group's
resources.
Management
There have been important changes on the Board concerning executive members.
Dr Ian Rubin, who has been with Phytopharm for four years as Medical Director
and Chief Operating Officer, has left the Board in order to become Chief
Executive Officer of a newly formed biotechnology company. We have been able
to recruit highly qualified and experienced replacements in Dr Daryl Rees as
our Chief Scientific Officer and Dr Rob Grover as our Medical Director. We
have also recently appointed Jayne Allan to the Board as Director of Resource
and Planning with responsibility for co-ordinating our research programmes and
personnel.
Outlook
Phytopharm remains the world leader in the development of Botanical medicines.
The Company continues to be focused on its core objective of developing
prescription medicines in man. It is our objective to have three such
products in late stage clinical development over the next three years. We
also have a significant opportunity to address the other market segments of
unlicensed pharmaceuticals and veterinary medicines. We believe that we may
be able to generate early sales revenues in these markets to set alongside the
income stream that we receive from our licensees, leading to a further
reduction in our cash burn.
We believe that Phytopharm is well set for another year of positive
development.
Consolidated Profit and Loss Account for the year ended 31 August 1999
(unaudited)
Notes 1999 1998
£'000 £'000
Turnover 2 2,447 713
Cost of sales (8) (19)
__________ __________
Gross profit 2,439 694
Other operating expenses 3 (5,814) (4,616)
__________ __________
Operating loss (3,375) (3,922)
Interest receivable
and similar income 163 300
Interest payable and
similar charges (9) (12)
__________ __________
Loss on ordinary activities
before and after taxation (3,221) (3,634)
__________ __________
Loss for the year (3,221) (3,634)
========= =========
Basic fully diluted loss 4 (9.9) (11.7)
per ordinary share (pence)
IIMR loss per share (pence) 4 (9.5) (11.6)
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 1999 (unaudited)
Notes 1999 1998
£'000 £'000
Fixed assets
Tangible assets 210 455
__________ ________
Current assets
Stocks - 9
Debtors 163 806
Cash held on deposit
as short term investments 2,009 1,514
Cash at bank and in hand 818 941
__________ __________
2,990 3,270
Creditors: amounts falling
due within one year (1,084) (722)
__________ __________
Net current assets 1,906 2,548
__________ __________
Total assets less current 2,116 3,003
liabilities __________ __________
Creditors: amounts
falling due after
more than one year (55) (49)
__________ __________
Net assets 2,061 2,954
========= =========
Capital and reserves
Called up share capital 332 313
Share premium account 5 15,435 13,126
Merger reserve 5 (204) (204)
Profit and loss account 5 (13,502) (10,281)
__________ __________
Equity shareholders' funds 2,061 2,954
========= =========
Consolidated Cash Flow Statement for the year ended 31 August 1999 (unaudited)
1999 1998
£'000 £'000
Net cash outflow from
continuing operating
activities (1,979) (4,226)
_________ _________
Returns on investment and servicing of
finance
Interest received 163 300
Interest paid on loans
and overdraft - (1)
Interest paid on finance
leases (9) (11)
_________ _________
154 288
_________ _________
Taxation
UK corporation tax paid - -
_________ _________
Capital expenditure and financial
investment
Purchase of tangible
fixed assets (47) (92)
Proceeds on sale of
tangible fixed assets 34 9
_________ _________
(13) (83)
_________ _________
Cash outflow before
management of liquid
resources and financing (1,838) (4,021)
_________ _________
Management of liquid resources
Net movement of cash
held on deposit (495) 4,332
Financing
Proceeds from exercise
of share options 103 110
Proceeds from issue
of share capital 2,225 -
Repayment of principal
under finance leases (61) (56)
_________ _________
Net cash inflow from
financing 2,267 54
_________ _________
(Decrease)/increase in
cash in the year (66) 365
======== ========
Reconciliation of operating loss to net cash outflow from operating activities
1999 1998
£'000 £'000
Continuing activities
Operating loss (3,375) (3,922)
Depreciation on tangible fixed assets 206 200
Loss on disposal of fixed assets 124 18
Decrease in stocks 9 85
Decrease/(increase) in debtors 643 (620)
Increase in creditors 414 13
__________ __________
Net cash outflow from continuing
ACTIVITIES (1,979) (4,226)
========= =========
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 financial statements for the year ended 31
August 1998, together with the following:
Basis of extraction
The figures shown for the year to 31 August 1999 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 1998 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
1999 1998
£'000 £'000
By business activity
Licensing and development 2,427 666
Product sales 20 47
________ ________
2,447 713
======= =======
All turnover arose in the United Kingdom.
3. Other Operating Expenses
Other operating expenses comprise:
1999 1998
£'000 £'000
Continuing operations
Research and development 4,871 3,862
Administrative expenses 772 754
Laboratory closure costs 171 -
_________ _________
5,814 4,616
======== ========
4. Loss Per Share
The basic undiluted loss per share is based on losses of £3,221,178 (1998:
loss of £3,634,429) and 32,628,503 ordinary shares (1998: 31,156,845), 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.
5 Share Premium Account and Reserves
Share Profit
premium Merger and loss
account reserve account
£'000 £'000 £'000
At 1 September 1998 13,126 (204) (10,281)
Premium on issue of shares 2,341 - -
Expenses of share issue (32) - -
Loss for the year - - (3,221)
__________ _________ ___________
At 31 August 1999 15,435 (204) (13,502)
========= ======== ==========
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