Interim Results
Phytopharm PLC
9 May 2002
9 May 2002
Interim results for the period to 28 February 2002
Phytopharm plc today announces interim results for the six month period to 28
February 2002.
Highlights
• Opening of a new botanical supplies unit in South Africa to expand
manufacturing capacity (P57)
• Discussions with Pfizer continue on obesity and metabolic syndrome
(P57)
• Completion of 7 day repeat dose study in age related cognitive
impairment (P58)
• Initiation of 28 day repeat dose study in age related cognitive
impairment (P58)
• Evidence of neuroprotective effect in pre-clinical models of
Parkinson's disease (P63)
• Establishment of large scale manufacture for inflammatory bowel disease
(P54)
• Commencement of European multi-centre study in canine atopic dermatitis
(P7v)
Dr Richard Dixey, Chief Executive of Phytopharm, said:
'This has been a successful half year for Phytopharm. Sustained clinical
progress has been underpinned by a strong performance in both preclinical
evaluation and manufacture.'
Enquiries:
Phytopharm plc Today: 0207 831 3113
Dr Richard Dixey, Chief Executive Thereafter: 01480 437697
Mobile 07867 782000
Financial Dynamics Tel: 0207 831 3113
David Yates / Ben Atwell
www.phytopharm.co.uk
Operational Review
The obesity platform, which encompasses metabolic syndrome, gives rise to
programme P57 which is focussed on obesity, obese onset diabetes and metabolic
disorders. The platform comprises the patented use of three plant species,
their mode of action and 17 related active molecules.
Licensed to Pfizer Inc in 1998, we remain in discussions with Pfizer concerning
the future development plans for this novel appetite suppressant. This follows
the successful completion of the 'proof of principle' clinical study for this
orally administered agent that demonstrated a statistically significant
reduction in the average daily calorie intake and reduction in body fat content
of the treatment group compared with the placebo group at the completion of 15
day dosing.
In March 2002 we 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 will expand the
capacity for processing the raw materials by 300 percent and a programme to
process substantial quantities of plant material is now underway.
The neural and muscular degeneration platform, which includes Alzheimer's and
Parkinson's disease, involves the patented use of four plant species, their mode
of action, drug screens and a library of 7 families of novel semi-synthetic
compounds. Several lines of research are now progressing in parallel, indicating
that these molecules are disease modifying agents with a similar profile to
oestrogen. 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 with the
potential for manufacture at a large scale. These modified oestrogen molecules
(MOMs) are devoid of adverse feminising and cell proliferative effects but act
by reversing the age related decline in neuronal receptor expression in the
brain as well as producing powerful protective effects on these cells.
Three separate programmes coded P58, P59 and P63 are in development focussed on
the reversal of age related cognitive impairment and Alzheimer's disease,
neuromuscular degeneration and Parkinson's disease respectively.
Manufacture of a compound arising from P58, the programme for age related
cognitive impairment and Alzheimer's disease, has been successfully completed to
GMP in kilogram quantities. A series of pre-clinical toxicology studies has now
been completed, and we announced the completion of a 7 day clinical programme of
repeat dosing in the elderly in April 2002. The results enabled the
commencement of a one-month placebo controlled study in elderly subjects also
announced in April 2002. This stage of the study will utilise a randomised,
double-blind, placebo controlled design, and will enrol 30 healthy subjects aged
55 years and older. Results will be reported during the third quarter of 2002,
and will be used to determine the design for a three-month, phase II study that
will commence during Q1, 2003. In the meantime, a product from the programme
for Parkinson's disease (P63) should enter the clinical phase in Q4 2002.
Pre-clinical work has demonstrated that P63 is a potent protective agent against
neurodegeneration in vitro and stimulates the release of brain-derived
neurotrophic factor (BDNF). Furthermore, 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 inflammation platform includes a family of novel, third generation non
steroidal anti- inflammatory drugs (NSAID) characterised by their potent
inhibition of NFkB, the gene activator for a wide range of enzymes central to
chronic inflammation. The lead candidate, a patented formulation with a novel
mode of action, is in clinical evaluation for the treatment of inflammatory
bowel diseases such as Crohn's disease and ulcerative colitis. The ongoing
phase II study to evaluate the safety and efficacy of P54 for the treatment of
steroid dependent inflammatory bowel disease is due to complete in June 2002.
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 us actively to pursue commercialisation of P54v in the veterinary
market. Large scale manufacture of P54 is currently ongoing in preparation for
commercialisation.
A further programme arising out of this platform, codenamed P61, has continued
to generate novel semi-synthetic molecules for the treatment of disorders of the
digestive tract, in particular irritable bowel syndrome (IBS). Pre-clinical
work has demonstrated that these molecules have powerful inhibitory effects on
intestinal spasm in a model of irritable bowel syndrome in addition to their
anti-inflammatory effects. Importantly these molecules inhibit both histamine
and serotonin induced intestinal spasms. The lead candidate will enter
development in the second half of next year.
Finally, the dermatology platform comprises the patented use of five plants with
a novel mode of action for the treatment of eczema. In March we announced the
commencement of a European multi-centre study in canine atopic dermatitis (P7v).
This randomised, double-blind, placebo controlled study will be conducted by
specialist veterinary dermatologists located in France and the United Kingdom.
The study will determine the optimal dose for future commercialisation of the
product, which consists of granules presented in a foil sachet. The study is
expected to complete in Q4 2002 and will be reported in Q1 2003.
Mode of action work continues to demonstrate the dual mechanism of action of the
product targeting both the allergic and the inflammatory components of eczema to
alleviate the condition. Over the period we completed the pharmaceutical
development of the product and we are now able to manufacture tonne quantities
of material to GMP standards.
Discussions with potential partners are now advancing concerning the further
development and commercialisation of this product.
Efforts to develop a scalable version of the active compound emerging from this
programme, coded P55, are continuing. We hope to be able to announce the final
specification of a dosage form by the end of 2002.
Dr Richard Dixey
Chief Executive
9 May 2002
Financial review
Six months ended Year to
28 February 31 August 28 February 31 August
2002 2001 2001 2001
£000 £000 £000 £000
Turnover 1,087 789 682 1,471
Research & development (2,712) (2,150) (1,883) (4,033)
Administrative costs (486) (523) (450) (973)
Interest receivable 267 384 282 666
Corporation tax credit 278 195 29 224
Loss for period (1,568) (1,308) (1,345) (2,653)
Loss per share (p) (4.1) (3.4) (3.6) (7.1)
Working capital 11,744 12,845 14,111 12,845
Comparison between the six month periods ended February 2002 and August 2001
Turnover, representing development income under the Group's licence and
development agreement with Pfizer Inc for P57, increased by 38% to £1,087,000
for the six months to 28 February 2002 as P57 successfully completed the proof
of principle phase of clinical development.
Overall operating expenses for the first six months of financial year 2002 were
£3,198,000, an increase of 20% over the previous 6 months. Within operating
expenses research and development expenditure increased by 26%, due to a
combination of the increased expenditure on P57 noted above and also to
increased spend on the rest of the portfolio, most particularly on the P58
platform which entered the clinical phase in this last six months. Expenditure
on administrative costs declined by 7% to £486,000 for the six months to
February 2002 mainly because the previous six months included non recurring
costs such as relocation and year end costs such as the cost of production of
the annual report.
Interest receivable for the six months to February 2002 was £267,000, a fall of
30% on the previous 6 months due to the fall in interest rates and lower average
cash balances for the period. The research and development tax credit increased
by 43% to £278,000 for the period to February 2002 due to the increased level of
research and development.
The net effect of the above was an increase in the loss for the period of 20% to
£1,568,000, which was in line with expectations.
Comparison between the six month periods ended February 2002 and February 2001
Turnover for the six months to February 2002 has increased by 59% to £1,087,000
compared to the corresponding period last year due to increased activity on
project P57. This was mainly due to the proof of principle clinical phase which
was successfully completed and reported in the period.
Research and development costs for the period to February 2002 are 44% higher
than the corresponding period last year at £2,712,000 due to the increased
activity on project P57 noted above and also increased spend on the rest of the
portfolio. Administrative costs to February 2002 have increased by 8% to
£486,000 compared to the corresponding period last year. Overall overheads for
the period to February 2002 are 37% higher than for the corresponding period
last year.
Interest receivable for the six months to February 2002 is £267,000 and is 5%
less than the corresponding period last year. This is caused principally by
lower average interest rates over the current period. The research and
development tax credit available for the six months to February 2002 was
£278,000. The group was eligible for the research and development tax credit
from 1 February 2001, so the tax credit of £29,000 for the corresponding period
last year represented only one month.
The loss for the six months to February 2002 of £1,568,000 was 17% higher than
the loss for the six months to February 2001, which was in line with
expectations.
Balance sheet
The net assets of the group at 28 February 2002 were £11,958,000 and are
£1,134,000 lower than at the start of the period. This decrease comprises the
loss of £1,568,000 offset by an increase in share capital premium of £434,000
arising from the exercise of share options. Fixed assets remain relatively low
at £226,000, a reduction of £21,000 since August 2001, as the company
subcontracts out its research and development requirements to specialist
contractors and has no need to maintain its own laboratory facilities.
Debtors of £901,000 are £307,000 higher than at February 2001. This increase
comprises mainly the increase in the research and development tax credit
available of £249,000, with the balance representing research and development
income due under the licence and development agreement for P57. The debtors at
the end of August 2001 did not include any development income.
Short term creditors at the end of February 2002 were £1,414,000 and were
£296,000 higher than at the end of February 2001 which is as expected from the
higher levels of expenditure in the period. The provisions for liabilities and
charges represent the potential liability of the group to Employer's National
Insurance on the gains arising on the exercise of share options, which will
become exercisable in future.
Financing
At 28 February 2002 working capital was £11,744,000 and comprised 98% (28
February 2001: 98%) of net assets. During the six months to 28 February 2002
the group utilised £1,535,000 of working capital after allowing for the exercise
of share options, which equates to £256,000 per month. However, if the research
and development tax credit is excluded this increases to £270,000 per month.
The average working capital usage, excluding the tax credit, for the six months
to August 2001 was £248,000 while that for the six months to February 2001 was
£231,000. These increases in working capital usage are in line with the group's
forecasts and arise principally as the projects within the group's portfolio
develop towards the clinical phase, particularly the P58 platform for
neuromuscular degeneration.
The current level of working capital and expenditure rates provide the company
with over three years working capital and will, in line with current plans,
allow the group to complete the first phase IIa 'proof of concept' studies of
the P58 platform under its own resources in order to maximise value to the group
when the product is out licensed.
Independent review report to Phytopharm plc
Introduction
We have been instructed by the company to review the financial information set
out on pages 7 to 9. We have read the other information contained in the
interim report and considered whether it contains any apparent misstatements or
material inconsistencies with the financial information.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by the directors. The directors
are responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures should be consistent
with those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
issued by the Auditing Practices Board for use in the United Kingdom. A review
consists principally of making enquiries of group management and applying
analytical procedures to the financial information and underlying financial data
and, based thereon, assessing whether the accounting policies and presentation
have been consistently applied unless otherwise disclosed. A review excludes
audit procedures such as tests of controls and verification of assets,
liabilities and transactions. It is substantially less in scope than an audit
performed in accordance with United Kingdom Auditing Standards and therefore
provides a lower level of assurance than an audit. Accordingly we do not
express an audit opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 28 February 2002.
PricewaterhouseCoopers
Chartered Accountants
Cambridge
Date 8 May 2002
Notes:
(a) The maintenance and integrity of the Phytopharm plc website
is the responsibility of the directors; the work carried out by the auditors
does not involve consideration of these matters and, accordingly, the auditors
accept no responsibility for any changes that may have occurred to the interim
report since it was initially presented on the website.
(b) Legislation in the United Kingdom governing the preparation
and dissemination of financial information may differ from legislation in other
jurisdictions.
Unaudited consolidated profit and loss account for six months ended 28 February 2002
Notes Six months Six months Year
ended ended ended
28 Feb 2002 28 Feb 2001 31 Aug 2001
£000 £000 £000
Turnover 2 1,087 682 1,471
Other operating expenses 3 (3,198) (2,333) (5,006)
_____ _____ _____
Operating loss (2,111) (1,651) (3,535)
Interest receivable and similar income 267 282 666
Interest payable and similar charges (2) (5) (8)
_____ _____ _____
Loss on ordinary activities before taxation (1,846) (1,374) (2,877)
Tax on loss on ordinary activities 4 278 29 224
_____ _____ _____
Loss for the period 6 (1,568) (1,345) (2,653)
_____ _____ _____
Basic and fully diluted loss per share (pence) 5 (4.1) (3.6) (7.1)
IIMR loss per share (pence) 5 (4.1) (3.6) (7.1)
Unaudited consolidated balance sheets at 28 February 2002
Notes At At At
28 Feb 2002 28 Feb 2001 31 Aug 2001
£000 £000 £000
Fixed assets
Tangible assets 226 277 247
Investments 30 30 30
_____ _____ _____
256 307 277
Current assets
Debtors 901 594 369
Cash held on deposit as short term investments 11,427 14,591 12,668
Cash at bank and in hand 830 44 854
_____ _____ _____
13,158 15,229 13,891
Creditors: amounts falling due within one year (1,414) (1,118) (1,046)
_____ _____ _____
Net current assets 11,744 14,111 12,845
_____ _____ _____
Total assets less current liabilities 12,000 14,418 13,122
_____ _____ _____
Creditors: amounts falling due after more than year (3) (42) (14)
Provision for liabilities and charges (39) (33) (16)
_____ _____ _____
Net assets 11,958 14,343 13,092
_____ _____ _____
Capital and reserves
Called up share capital 386 381 382
Share premium account 6 31,682 31,196 31,252
Merger reserve 6 (204) (204) (204)
Profit and loss account 6 (19,906) (17,030) (18,338)
_____ _____ _____
Equity shareholders' funds 11,958 14,343 13,092
_____ _____ _____
Unaudited consolidated cash flow statement for the six months ended 28 February 2002
Six months Six months Year
ended ended ended
28 Feb 2002 28 Feb 2001 31 Aug 2001
£000 £000 £000
Net cash outflow from continuing operating (2,124) (1,789) (3,273)
activities
_____ _____ _____
Returns on investment and servicing of finance
Interest received 267 296 666
Interest paid on finance leases (2) (5) (8)
_____ _____ _____
Net cash inflow from returns on investment and 265 291 658
servicing of finance
_____ _____ _____
Taxation
UK corporation tax credit 224 - -
_____ _____ _____
Capital expenditure and financial investment
Purchase of tangible fixed assets (43) (89) (128)
Proceeds on sale of tangible fixed assets - 4 13
_____ _____ _____
Net cash outflow for capital expenditure (43) (85) (115)
_____ _____ _____
Cash outflow before use of liquid resources (1,678) (1,583) (2,730)
_____ _____ _____
Management of liquid resources
Decrease/(increase) in cash held on short term 1,241 (10,063) (8,140)
deposit
_____ _____ _____
Financing
Proceeds from exercise of share options 434 127 183
Proceeds from issue of share capital - 11,030 11,030
Expenses of issue of share capital - (229) (229)
Repayment of principal under finance leases (21) (30) (52)
_____ _____ _____
Net cash inflow from financing 413 10,898 10,932
_____ _____ _____
(Decrease)/increase in cash (24) (748) 62
_____ _____ _____
Reconciliation of operating loss to net cash outflow from operating activities
Six months Six months Year
ended ended ended
28 Feb 2002 28 Feb 2001 31 Aug 2001
£000 £000 £000
Continuing activities
Operating loss (2,111) (1,651) (3,535)
Depreciation on tangible fixed assets 64 64 132
Profit on disposal of fixed assets - (1) (9)
Increase in debtors (478) (476) (41)
Increase in creditors 378 273 195
Increase/(decrease) in provision for employer's national 23 2 (15)
insurance on share option gains
_____ _____ _____
Net cash outflow from continuing operating activities (2,124) (1,789) (3,273)
_____ _____ _____
Notes to the interim report
1. Preparation of Interim Statements
The interim results have been prepared in accordance with the accounting
policies set out in the Group's 2001 annual report and are unaudited. The
information set out in this interim report for the six months to 28 February
2002 does not comprise statutory accounts within the meaning of the Companies
Act 1985.
The figures for the year ended 31 August 2001 are abridged from the Group's
statutory accounts for that year which received an unqualified auditor's report
and have been filed with the Registrar of Companies.
2. Turnover
Six months Six months Year
ended ended ended
28 Feb 2002 28 Feb 2001 31 Aug 2001
£000 £000 £000
By business activity
Licensing and development 1,087 682 1,471
_____ _____ _____
3. Other Operating Expenses
Other operating expenses comprise:
Six months Six months Year
ended ended ended
28 Feb 2002 28 Feb 2001 31 Aug 2001
£000 £000 £000
Research and development expenditure 2,712 1,883 4,033
Administrative expenditure 486 450 973
_____ _____ _____
3,198 2,333 5,006
_____ _____ _____
4. Tax on loss on ordinary activities
Six months Six months Year
ended ended ended
28 Feb 2002 28 Feb 2001 31 Aug 2001
£000 £000 £000
United Kingdom
Corporation tax credit at 24% 278 29 224
_____ _____ _____
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 loss per share is based on losses of £1,568,000 and 38,363,467 ordinary
shares, being the weighted average number of shares in issue during the period.
The IIMR earnings per share figures exclude gains and losses from disposals of
fixed assets during the period.
6. Share Premium Account and Reserves
Share premium Merger Profit and
account reserve loss account
£000 £000 £000
At 1 September 2001 31,252 (204) (18,338)
Premium on new share issue 430 - -
Loss for the period - - (1,568)
_____ _____ _____
At 28 February 2002 31,682 (204) (19,906)
_____ _____ _____
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