Final Results
Phytopharm PLC
03 December 2004
3rd December 2004
Preliminary results for the year ended 31 August 2004
Phytopharm plc (PYM: London Stock Exchange) ('Phytopharm' or the 'Group') today
announces its preliminary results for the year ended 31 August 2004.
Highlights
• Commencement of Phase II study of novel Alzheimer's disease treatment,
CoganeTM, under a UK Clinical Trial Exemption certificate (Programme P58)
• Second milestone received from Yamanouchi Pharmaceutical Co., Ltd.
(Yamanouchi) following evaluation of Phase I data (Programme P58)
• Positive results from European multi-centre study in canine atopic
dermatitis (Programme P7v)
• UK launch of PhytopicaTM for canine skin disorders (Programme P7v) with
marketing partner
• UK launch of ZanthofenTM with marketing partner for canine joint disorders
(Programme P54v)
• Successful placing of new shares to raise £6.3 million after expenses
• Successful completion of Phase I study for novel motor neurone disease
(ALS) treatment, MyoganeTM, under US Investigational New Drug application
(Programme P59)
• Completion of level I ADR programme and stated intention to list on NASDAQ
• Orphan drug designation granted by the U.S. Food and Drug Administration
(FDA) for MyoganeTM (Programme P59)
• Fast Track designation granted by the FDA for MyoganeTM (Programme P59)
Dr Richard Dixey, Chief Executive of Phytopharm, said: 'Phytopharm has made
excellent progress in its development of novel therapeutics, as evidenced by the
achievement of so many of our goals during the past financial year. We are
confident that the year ahead will hold many more achievements.'
Enquiries:
Phytopharm plc Today: 07867 782000
Dr Richard Dixey, Chief Executive Thereafter: 01480 437697
Mobile: 07867 782000
Dr Wang Chong, Chief Financial Officer Tel: 01480 437697
Mobile: 07876 684223
Financial Dynamics Tel: 0207 831 3113
David Yates / Ben Atwell
A presentation for analysts will be held at Financial Dynamics, Holborn Gate, 26
Southampton Buildings London WC2A 1PB at 9:30am today.
www.phytopharm.com
Operational Review
Phytopharm is a pharmaceutical company specialising in the discovery and
development of novel therapeutic agents for neurodegeneration, obesity and
metabolic disease, dermatology and inflammation. The Company's strategy is to
develop first-in-class products through Phase II clinical testing and then
secure pharmaceutical partners for late stage development, sales and marketing.
The current status of our products, each at different stages of development, is
described below.
Neurodegeneration
The neurodegeneration programmes include Alzheimer's disease (P58), Parkinson's
disease (P63) and amyotrophic lateral sclerosis (P59), a motor neurone disease.
Our lead product, CoganeTM (coded PYM50028) is being developed for Alzheimer's
and Parkinson's disease. In pre-clinical studies, PYM50028 was shown to be
neuroprotective and reverse both the decrease of a neuronal growth factor and
the neuronal degeneration observed in the ageing brain. Importantly, this
product has also been shown to restore levels of proteins that are altered in
the ageing brain, returning them to levels observed in the young, causing
beneficial outgrowth and branching of neurites.
In December 2003, we announced that we had been granted clearance by the
Medicines and Healthcare Products Regulatory Agency (MHRA) to commence a Phase
II 'proof of concept' clinical study in Alzheimer's disease under a clinical
trial exemption (CTX) certificate. The Phase II study utilises a randomised,
double-blind, placebo-controlled design to evaluate the safety, efficacy and
pharmacokinetic profile of CoganeTM after once-daily oral administration over
three months. The effects of CoganeTM on memory, concentration and executive
function will be evaluated during the study, which is expected to report at the
end of 2005.
In January 2004, we announced that we had received a milestone of approximately
$2 million from Yamanouchi Pharmaceutical Co., Ltd., a leading Japanese
pharmaceutical company and our partner for CoganeTM. This milestone was paid
following receipt by Yamanouchi of the results of the Phase Ib study of
CoganeTM.
Our second lead product, MyoganeTM (coded PYM50018) is being developed for
amyotrophic lateral sclerosis (ALS; also known as Lou Gehrig's disease). ALS is
the most common motor neurone disease and results from progressive degeneration
of both upper and lower motor neurones and is usually fatal within five years.
In pre-clinical models, PYM50018 was seen to protect against neuronal damage,
increase neurite outgrowth, and reverse oxidative damage and neuronal apoptosis
in vitro. When administered orally in a transgenic pre-clinical model of ALS,
PYM50018 also delayed the loss of muscle strength and extended survival time.
In April 2004, Phytopharm announced the successful completion of a Phase I
clinical study to evaluate the safety, tolerability and pharmacokinetic profile
of MyoganeTM. This study was conducted under an investigational new drug (IND)
application filed with the United States Food and Drug Administration (FDA) and
confirmed that the product was well absorbed with a good safety profile. A
repeat dose Phase Ib clinical study to evaluate the safety, tolerability and
pharmacokinetic profile of MyoganeTM in healthy volunteers is expected to
commence in the Q2 2005.
In July 2004, we announced that the FDA had granted orphan drug designation to
MyoganeTM for the treatment of ALS. Orphan drug designation can be granted by
the FDA for treatments that may provide significant benefit to patients with
serious, life-threatening diseases that affect less than 200,000 people in the
United States. The Orphan Drug Act was created by the United States Congress to
provide assistance and incentives for sponsors to develop drugs judged to be of
potential benefit for a qualifying disease. Orphan drug designation qualifies a
product for possible financial incentives, including seven years of marketing
exclusivity upon FDA approval, and the potential of an expedited approval. In
addition to market exclusivity, orphan drug status provides possible tax
incentives for a company's investment in US clinical research.
In November 2004, Phytopharm announced that the FDA had granted Fast Track
designation to MyoganeTM for the treatment of ALS. The Fast Track programme is
designed to expedite the review of drug candidates for the treatment of patients
with serious or life-threatening diseases where there is an unmet medical need
for new therapeutic approaches. Having a Fast Track designation allows a
company to file a New Drug Application (NDA) on a rolling basis as data becomes
available. This enables the FDA to review the filing as it is received, rather
than waiting for the entire document prior to commencing the review process.
With a Fast Track designation, there is often the opportunity for more frequent
interactions with the FDA and the option of requesting evaluation of studies
using surrogate endpoints. In addition, there may be the possibility of a
priority review, which could decrease the typical review period.
Obesity and metabolic disease
Our obesity programme (P57) includes an extract of Hoodia gordonii for the
dietary control of obesity, which contains a novel appetite suppressant that
reduces caloric intake in overweight subjects, as demonstrated in our
double-blind, placebo-controlled clinical study announced in December 2001. In
June 2004, Phytopharm initiated a substantial increase in its agronomy programme
for the cultivation of the raw material and optimised the process for making
extracts from the plant, with emphasis on the inclusion of the material into
products including meal replacement products for controlling obesity. The US
market for meal replacement products was estimated to be worth in excess of $1.2
billion in 2002. As advanced discussions are on-going with a licensing partner
in this area, the Company can make no further comment.
Phytopharm has also developed screens that appear to be predictive of appetite
suppressant activity to evaluate pharmaceutical development candidates in our
metabolic disease programme (P64).
Dermatology
The dermatology programmes include products for canine skin disorders (P7v) and
human eczema (P55). These products have a dual mode of action that targets both
the allergic and inflammatory components of skin disorders.
In February 2004, we announced positive results from a European multi-centre
study in canine atopic dermatitis with our three-plant product, coded PYM00217.
This randomised, double-blind, placebo-controlled study in 120 dogs was
conducted by 14 veterinary dermatologists in the UK and France. The study
confirmed that the optimal daily dose of PYM00217 is 200 mg/kg and that the
product is palatable, well tolerated and has a good overall safety profile. By
the end of the 12-week dosing period there was a statistically significant
reduction (-23%) in the mean Canine Atopic Dermatitis Extent and Severity Index
(CADESI) score for the 200 mg/kg group (p<0.01). This study also demonstrated
that the benefit of PYM00217 was most evident in the more severe cases (i.e.,
baseline CADESI greater than 50). A greater than 20% reduction in baseline
score was observed for 64% of the dogs in the 200 mg/kg group compared with only
25% of cases in the placebo group (p<0.05).
Following the success of this study, we launched PYM00217 with the brand name
PhytopicaTM for the UK market on 31 March, at a special symposium at the British
Veterinary Dermatology Study Group's Spring meeting in Birmingham. Canine
dermatological disorders are well recognised by veterinarians to be a major
problem in small animal practice, with an estimated 15% of the global dog
population affected by skin conditions due to allergy (Muller & Kirk's Small
Animal Dermatology, 6th Ed, 2000). With around 90,000 affected animals in the
UK, the canine dermatology market is estimated to be potentially worth £10
million in the UK and £100 million worldwide. PhytopicaTM is recognised by
consultant veterinarians as a potential first line, premium price product.
Following the UK launch to registered veterinary dermatologists, Phytopharm is
now seeking global partners to market PhytopicaTM in other territories.
Inflammation
Finally, the inflammation programmes include products for canine joint disorders
(P54v) and human inflammatory disorders, including asthma (P61). These products
are characterised by their inhibition of a wide range of enzymes central to
chronic inflammation.
In June 2004, we announced the UK launch of ZanthofenTM (coded PYM50014) for the
maintenance of canine joint mobility. Pre-clinical studies have demonstrated
that the components of ZanthofenTM have beneficial properties that help maintain
joint mobility. In our previously reported placebo-controlled clinical study,
two months' administration of ZanthofenTM components demonstrated a
statistically significant improvement in canine joint mobility as determined by
veterinarians and this was associated with a good safety profile. ZanthofenTM
is now available to veterinarians across the UK and distributed and marketed by
Genitrix Ltd, a UK based veterinary product company.
Good progress has been made in developing novel synthetic molecules intended to
result in a pharmaceutical prescription medicine for the treatment of
inflammatory disorders, including asthma (P61). Pre-clinical work has
demonstrated that these molecules have anti-inflammatory and antispasmodic
effects. We anticipate that further proof of concept studies using these
compounds in pre-clinical models of asthma will be investigated in 2005.
Financial Review
Phytopharm has core expertise in all aspects of drug development and
subcontracts all laboratory work to specialists in the field all over the world,
while retaining full control over the direction of the pharmaceutical
development process. As a result, Phytopharm has lower fixed overheads, access
to the latest research techniques and a lower development cost structure.
Following 'proof of principle' or Phase II clinical evaluation, Phytopharm seeks
licensing partners for the development and commercialisation of its products.
Multinational partners are sought, with milestones receivable on completion of
agreed targets, submission of regulatory documents and royalties receivable on
sales. Agreements are negotiated by reference to each product's market
potential, stage of development, and the robustness of the data generated.
Phytopharm's current commercialisation partners are Yamanouchi Pharmaceutical
Co. Ltd for PYM50028 and Genitrix Limited for ZanthofenTM.
Phytopharm aims to reduce investors' risk by the parallel development of the
original plant-based products for early marketing; for example, Hoodia extract
as a human functional food and PhytopicaTM as a companion animal health product
to generate early revenue that can assist in funding the development of the
Group's major pharmaceutical products.
The Group's principal activity since the foundation of its predecessor
(Phytopharm Limited) in 1990 has been pharmaceutical research and product
development. The Group has made losses since its initial public offering in
1996. As at 31 August 2004, Phytopharm's accumulated losses were £33 million
(2003: £27 million).
The Group's losses fluctuate from year to year principally due to the
commencement or termination of collaborative research and development
agreements, the timing of milestone payments, the level of interest income and
variations in the level of expenditures relating to research and clinical
development programmes. Phytopharm expects to incur continued losses and not to
achieve sustainable profitability while its lead pharmaceutical products are
still in development, subject to the terms of any product licensing agreements
in the intervening years. Phytopharm continues to incur the greater part of its
costs on personnel and external contract costs needed to support the research
and development of pharmaceutical products, including expenses related to the
filing, defence and enforcement of patent and other intellectual property
rights.
Turnover
Revenues for the year ended 31 August 2004 were £1.07 million (2003: £2.43
million). The revenues for 2004 result from and include a milestone payment of
£1 million, on which £0.1 million has been paid in respect of Japanese
withholding taxes, derived from the licence agreement on PYM50028 with
Yamanouchi (signed May 2003), revenue of £0.05 million from the development work
conducted for Yamanouchi and £0.02 million from the sales of PhytopicaTM and
Zanthofen.TM All revenues derived from Yamanouchi referred to in this document
are subject to 10% withholding tax, so that the cash received is 90% of the
revenue. This will continue until Phytopharm is profitable, when the Group
expects to be able to recover the withholding tax.
Operating expenses
Research and development expenses
Phytopharm subcontracts all laboratory work to third party specialists. The
research and development expenses include the reimbursement of the costs
incurred by the third party subcontractors and the overhead (including the
relevant staff costs) of Phytopharm allocated to research and development
activities.
Research and development expenses were £6.35 million (2003: £7.23 million).
Expenditure was dominated by the commencement of the PYM50028 Phase IIa clinical
trial in Alzheimer's disease. Expenses were also incurred by the successful
completion of the PYM50018 Phase Ia clinical trial in motor neurone disease and
the PYM00217 Phase IIb clinical trial in canine atopic dermatitis. Additional
expenses included the commencement of the agronomy programme for the dietary
control of obesity product and the marketing of Phytopica.TM
Administrative expenses
Administrative expenses comprised mainly the costs incurred in respect of the
employees in the finance, business development and secretarial departments.
Administrative expenses were £1.71 million (2003: £1.15 million). The increased
costs reflect the additional administrative support required for the growing
research and development activity, the share option compensation charge and US
financial compliance costs.
Net interest receivable
Net interest receivable comprises mainly the interest income generated from cash
invested in short-term deposits. Net interest income was £0.24 million (2003:
£0.28 million). The change over the year was due to changing short-term
deposits as the Group utilised the cash of £10.8 million raised from the equity
financing in November 2000, and £6.3 million raised from another equity
financing in February 2004, and also changing interest rates during the year.
Taxation
There were no corporation tax charges for the period under review due to the
incidence of tax losses. The tax credit on the loss on ordinary activities was
£0.53 million (2003: £0.38 million). The tax credit has been offset by a 10%
withholding tax on the income from Yamanouchi.
Liquidity and capital resources
Since Phytopharm's initial public offering, cash expenditures have exceeded
revenues. Phytopharm has financed its research and development operations
primarily through:
• an initial public offering of ordinary shares in 1996
• ordinary share offerings in November 1998, October 2000, December 2001
and February 2004
• revenue generated from collaborative arrangements.
The net cash outflow from operating activities for the year ended 31 August 2004
was £6.83 million (2003: £3.94 million) resulting principally from the operating
losses incurred by the Group during the year. The increase in net cash used by
operating activities compared to the previous year reflects the significant
expenses incurred in conducting a Phase IIa clinical trial in Alzheimer's
disease. Phytopharm incurred operating losses of £7.00 million (2003: £5.95
million), principally as a result of costs incurred in performing research and
development and from general and administrative costs associated with the
Group's operations.
Phytopharm's net cash outflow for capital expenditure was £103,000 (2003:
£28,000). The capital expenditure is primarily for office and administrative
facilities. There was no cash outflow for acquisitions during these periods.
Phytopharm's net cash inflow from financing activities was £6.37 million (2003:
£75,000) following the equity financing in February 2004. The net cash inflow
in 2003 primarily resulted from the proceeds from the exercise of the share
options.
Phytopharm had cash and short-term deposits of £5.43 million at 31 August 2004
(2003: £5.61 million). The decrease in cash and short term deposits mainly
reflected the net cash used by operating activities. Phytopharm invested funds
that were surplus to its requirements in highly liquid short-term deposits and
has not borrowed funds during the financial year. Phytopharm had working
capital of £5.11 million at 31 August 2004 (2003: £4.94 million). The Group
utilised £6.15 million of working capital during 2004, which is equivalent to
£512,000 per month. This expenditure is in line with the Group's business plan.
Overall the results for the year were within the budget. Phytopharm has raised
a net total of £33 million since the float in 1996. As at 31 August 2004, a net
total of £28 million has been invested by shareholders in developing Phytopharm
and its product opportunities.
Consolidated Profit and Loss Account for the year ended 31 August 2004
Notes 2004 2003
Unaudited Audited
£'000 £'000
Turnover 2 1,072 2,427
Cost of sales (10) -
__________ __________
Gross profit 1,062 2,427
Other operating expenses 3 (8,058) (8,381)
__________ __________
Operating loss (6,996) (5,954)
Interest receivable and similar income 239 277
Interest payable and similar charges - (4)
__________ __________
Loss on ordinary activities before taxation (6,757) (5,681)
__________ __________
Tax on loss on ordinary activities 4 531 378
__________ __________
Loss for the year 6 (6,226) (5,303)
========= =========
Basic fully diluted loss per ordinary share (pence) 5 (15.3) (13.7)
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 2004
Notes 2004 2003
Unaudited Audited
£'000 £'000
Fixed assets
Tangible assets 178 162
Current assets
Stocks 350 43
Debtors falling due after one year 614 -
Debtors falling due within one year 978 1,094
Cash held on deposit as short term investments 5,237 5,131
Cash at bank and in hand 194 482
__________ __________
7,373 6,750
Creditors: amounts falling due within one year (2,259) (1,815)
__________ __________
Net current assets 5,114 4,935
__________ __________
Total assets less current liabilities 5,292 5,097
__________ __________
Net assets 5,292 5,097
========= =========
Capital and reserves
Called up share capital 427 388
Share premium account 6 38,135 31,808
Merger reserve 6 (204) (204)
Profit and loss account 6 (33,066) (26,895)
__________ __________
Equity shareholders' funds 5,292 5,097
========= =========
PHYTOPHARM PLC
Consolidated Cash Flow Statement for the year ended 31 August 2004
Notes 2004 2003
Unaudited Audited
£'000 £'000
Net cash outflow from continuing operating activities
7 (6,826) (3,938)
_________ _________
Returns on investment and servicing of finance
Interest received 239 277
Other interest paid - (4)
_________ _________
239 273
_________ _________
Taxation
UK corporation tax received 856 277
Foreign taxation paid (100) (200)
_________ _________
756 77
_________ _________
Capital expenditure and financial investment
Purchase of tangible fixed assets (117) (85)
Proceeds on sale of tangible fixed assets 14 57
Advances to suppliers (614) -
_________ _________
(717) (28)
_________ _________
Cash outflow before use of liquid resources and financing
(6,548) (3,616)
_________ _________
Management of liquid resources
Decrease in cash held on short term deposit (106) 3,700
_________ _________
Financing
Proceeds from exercise of share options 37 83
Proceeds from issue of share capital 6,483 -
Expenses of issue of share capital (154) -
Repayment of principal under finance leases - (8)
_________ _________
Net cash inflow from financing 6,366 75
_________ _________
(Decrease)/increase in cash in the year (288) 159
======== ========
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
2003.
The figures shown for the year to 31 August 2004 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 2003 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
2004 2003
Unaudited Audited
£'000 £'000
Licensing and development 1,052 2,427
Product sales 20 -
_________ _________
1,072 2,427
======== ========
3. Other operating expenses
2004 2003
Unaudited Audited
£'000 £'000
Research and development 6,347 7,228
Administrative expenses 1,711 1,153
_________ _________
8,058 8,381
======== ========
4. Tax on loss on ordinary activities
2004 2003
Unaudited Audited
£'000 £'000
United Kingdom
Corporation tax credit 631 578
Foreign Taxation
Witholding tax suffered (100) (200)
_________ _________
531 378
======== ========
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 the loss on ordinary activities
of £6,226,130 (2003: loss of £5,303,318) and on 40,820,636 (2003: 38,671,689)
ordinary shares, being the weighted average number of shares in issue during the
period
The Company has no dilutive potential ordinary shares in issue because it is
loss making.
A further measure of earnings per share has been recommended by the Institute of
Investment Management and Research (the 'IIMR') for adoption by financial
analysts. This measure, known as headline earnings, adjusts standard earnings
per share to eliminate capital items only. There are no material adjustments in
respect of this measure
6. Share premium account and reserves
Share Profit
premium Merger and loss
account reserve account
Unaudited Unaudited Unaudited
£'000 £'000 £'000
At 1 September 2003 31,808 (204) (26,895)
Premium on issue of shares 6,481 - -
Expenses of new share issue (154) - -
Loss for the year - - (6,226)
Share option compensation charge - - 55
_________ _________ _________
At 31 August 2004 38,135 (204) (33,066)
======== ======== ========
7. Reconciliation of operating loss to net cash outflow from
operating activities
2004 2003
Unaudited Audited
£'000 £'000
Continuing activities
Operating loss (6,996) (5,954)
Depreciation on tangible fixed assets 93 106
(Gain)/loss on disposal of fixed assets (6) 1
(Increase) in stocks (308) (43)
(Increase)/decrease in debtors (108) 2,051
Increase/(decrease) in creditors 444 (130)
Increase in provision for share option compensation charge 55 31
_________ _________
Net cash outflow from continuing operating activities (6,826) (3,938)
======== ========
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