Interim Results
Phytopharm PLC
05 May 2004
5 May 2004
Phytopharm plc
Interim results for the period to 29 February 2004
Phytopharm plc today announces interim results for the six-month period to 29
February 2004.
Highlights
• Commencement of Phase II study of novel Alzheimer's disease treatment
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)
• Agreement with Genitrix to launch canine joint disorders product
(Programme P54v)
• Successful placing of new shares to raise £6.3 million after expenses
• Successful completion of Phase I study of novel motor neurone disease
treatment under US Investigational New Drug application (Programme P59)
Dr Richard Dixey, Chief Executive of Phytopharm, said: 'Phytopharm is now in a
position to benefit from income arising from both licensees and product sales.
With a stronger balance sheet and major products in the clinic, we look forward
to the next period with confidence.'
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. A recording of the
analyst presentation will be available from 5pm on 5 May 2004, please call Mo
Noonan on 020 7269 7116 for further details.
www.phytopharm.co.uk
Operational Review
Phytopharm is focused on developing novel pharmaceutical products based on
clinical data generated from medicinal plant extracts. Such research can
identify important and innovative platforms for drug discovery that include
libraries of compounds, biological targets and associated clinical and
pre-clinical data. These platforms create drug development programmes aimed at
target diseases, leading to multiple licensing opportunities for specific
compounds within those programmes. The current status of the four platforms
within Phytopharm, each at different stages of development, is described below.
Neurodegeneration
The neurodegeneration platform includes programmes for Alzheimer's disease
(P58), Parkinson's disease (P63) and amyotrophic lateral sclerosis (P59), a
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. These molecules, which have a novel mechanism of action, are potential
disease modifiers and are expected to offer a real therapeutic advance in these
conditions, where there is a high unmet medical need.
The lead compound from the Alzheimer's and Parkinson's disease programmes is
coded PYM50028. In pre-clinical studies, PYM50028 has been shown to be
neuroprotective and to reverse both the decrease of neuronal growth factors 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 PYM50028 after once daily oral administration over
three months. The effects of PYM50028 on memory, concentration and executive
function will be evaluated during the study. The study is expected to report in
Q1 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 the P58 programme. This milestone was
paid following receipt by Yamanouchi of the results of the Phase Ib study of
PYM50028.
The lead compound arising from the motor neurone disease programme (P59), which
targets amyotrophic lateral sclerosis (ALS), is coded PYM50018. Pre-clinical
work has demonstrated that PYM50018 is a potent neuroprotective agent, reverses
neurodegeneration in spinal motor neurones and improves survival and muscle
strength to a greater extent than standard treatment in superoxide dismutase 1
(SOD1) mice, a model of ALS.
In December 2003, we announced that we had been granted clearance by the US Food
and Drug Administration to commence a Phase I clinical study under an
investigational new drug (IND) application to evaluate the safety, tolerability
and pharmacokinetic profile of PYM50018 for amyotrophic lateral sclerosis. The
results of this study were reported in April 2004 and confirmed that the product
was well absorbed with a good safety profile. Work is now underway in
preparation for a Phase Ib clinical study with this product, which should
commence in Q4 2004.
Metabolic disease
The metabolic disease platform is focused on obesity, obese-onset diabetes and
metabolic disease. This platform comprises the patented use of three plant
species, their mode of action and related active molecules. Programme P57
contains a novel appetite suppressant product that has been shown to reduce
calorific intake in overweight subjects, as demonstrated in a double-blind,
placebo-controlled clinical study that was announced by Phytopharm in December
2001. Since August 2003, Phytopharm has focussed on the development of P57 for
use as a product for the dietary control of obesity. Active discussions are
underway with a number of potential licensing partners in this area. Following
the successful raising of £6.3 million through the issuing of new shares in
February 2004, Phytopharm has initiated a substantial increase in its agronomy
programme for cultivating the raw material and has optimised product
characteristics, which should enable the company to be able to produce an
estimated 200 million product units in 2007.
Phytopharm has also developed screens that are predictive of appetite
suppressant activity that can be used to evaluate other compounds. Good progress
has been made in understanding the structural activity relationships of our
compounds and in the development of synthetic molecules that will form the basis
of a further licensing opportunity. This programme (P64) is focused on the
development of pharmaceutical prescription products for the treatment of obesity
and metabolic disease, both of which are recognised as high risk factors for
cardiovascular disease.
Dermatology
The dermatology platform includes a programme concerning the use of plant
extracts with a novel mode of action for the treatment of canine skin disorders
(P7v). A programme aimed at human eczema is also emerging from this platform.
Coded P55, steady progress has been made in developing a dosage form suitable
for use in man. These products have a dual mode of action that targets both the
allergic and inflammatory components of eczema.
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 31st March 31st, after the period end 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 900,000
affected animals in the UK, the canine dermatology market is estimated to be
potentially worth £10 million in the UK and £100 million worldwide.
As the company's first product launch, this is a landmark event for Phytopharm.
PhytopicaTM is recognised by consultant veterinarians as a potential first line,
premium price product. Following this UK launch to registered veterinary
dermatologists, Phytopharm is now seeking global partners to market PhytopicaTM
in other territories.
Inflammation
Finally, the inflammation platform includes a programme containing a family of
novel, third generation, non-steroidal anti-inflammatory drugs ('NSAIDs')
characterised by their inhibition of a wide range of enzymes central to chronic
inflammation (P54v). The lead product, coded PYM50014, is manufactured from two
related Asian plant species.
In November 2003, we entered into a distribution, sales and marketing agreement
with Genitrix Ltd, one of the UK's fastest growing veterinary products
companies, to launch PYM50014 for canine joint disorders. Under the terms of the
agreement, Phytopharm and Genitrix will each receive 50% of the total sales
revenues of PYM50014 after deduction of manufacturing costs. Genitrix will be
responsible for distribution, sales and marketing, but no deductions from the
total sales revenues will be made for these activities. Phytopharm has also
retained the right to co-market the product with Genitrix.
Large-scale manufacture of PYM50014 has been completed to GMP standards and the
product launch to veterinarians across the UK is anticipated in Q2 2004.
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 has
given rise to a new programme (P61) that is intended to result in a
pharmaceutical prescription medicine for the treatment of inflammatory
disorders, including asthma. We anticipate the lead candidate will be ready to
enter development at the end of 2004.
Statement of Prospects
In our Annual Report 2003, we wrote that Phytopharm had reached a turning point,
and that the challenges that began in 2003 should bear demonstrable fruit in
2004 in terms of income from both licensing and product sales. We have now
achieved two cash positive events. We received a milestone from Yamanouchi
Pharmaceutical Co. concerning our P58 programme in Alzheimer's disease and after
the end of the period launched our first product, PhytopicaTM (P7v), for canine
skin disorders. In addition, to strengthen our balance sheet further, we
successfully raised £6.5 million from shareholders. Our portfolio continues to
mature, such that we have two additional programmes, P57 for the dietary control
of obesity and P59 for motor neurone disease, that are attracting substantial
interest from potential licensees. We also anticipate that our other veterinary
product for canine joint disorders (P54v) will be launched in the coming weeks.
Progress so far has been very satisfying, and we look forward to a period of
sustained corporate development and financial progress.
Dr Richard Dixey
Chief Executive
4 May 2004
Financial review
Six months ended Six months ended Six months ended 28 Year ended
29 February 2004 31 August 2003 February 2003 31 August
2003
£m £m £m £m
Turnover 1.05 2.01 0.42 2.43
Research & development 2.59 4.00 3.23 7.23
Administrative Costs 0.59 0.65 0.51 1.15
Interest income 0.07 0.12 0.16 0.27
Net tax recoverable 0.21 0.11 0.27 0.38
Loss for period (1.86) (2.42) (2.88) (5.30)
Loss per share (p) (4.8) (6.2) (7.5) (13.7)
Working Capital 9.45 4.93 7.24 4.93
Summary
Financial performance for the first six months to 29 February 2004 has been
influenced by two main events: the second milestone payment from Yamanouchi for
PYM50028 in January 2004 and the successful fund raising of a net total of £6.3
million in February 2004. The Group's investment in research and development
continues to grow in line with the progress of our four development platforms,
in particular, programmes P58, P59, P57, P7v and P54v, resulting in the
consumption of significant cash resources.
Turnover
Revenues of £1.05 million for the first six months of FY2004 (H1 2003: £0.42
million, H2 2003: £2.01 million) comprised principally a £1 million milestone
payment from Yamanouchi Pharmaceutical Co., Ltd., following receipt by
Yamanouchi of the results of the Phase Ib study of PYM50028.
Expenses
Research and development remained our most significant investment, totalling
£2.59 million or 82% of total operating costs, a decrease of 19% (H1 2003: £3.23
million, H2 2003: £4.00 million). This expenditure is mainly attributable to the
successful progress of the P58 programme which is in clinical trials and to a
lesser extent the now successfully completed PYM00217 (P7v) clinical trial. The
research and development activity required administrative support of £0.59
million (H1 2003: £0.51 million, H2 2003: £0.65 million). This period's total
operating expenses were £3.18 million, a decrease of 15% (H1 2003: £3.74
million, H2 2003: £4.65 million), in line with the budget.
Interest and Tax
Interest income of £0.07 million was lower this period (H1 2003: £0.16 million,
H2 2003: £0.12 million), due to a combination of lower average cash balances and
lower interest rates, and represents an average return of 2.1% on the cash
balances throughout the period. The net tax recoverable of £0.21 million was
also lower this period (H1 2003: £0.27 million, H2 2003: £0.11 million), despite
a similar research and development corporation tax credit to the previous
period, due to the payment of a 10% Japanese withholding tax deducted from the
Yamanouchi income earlier in the year.
Liquidity and Capital Resources
At 29 February 2004 the Group had cash and liquid resources of £9.07 million,
£3.45 million higher than at the start of the financial year, following the
successful fund raising in February 2004.
The fixed asset base remained low at £0.17 million from the start of the six
month period as research and development activities are contracted out so that
the Group does not need to finance its own laboratory facilities. Debtors of
£1.12 million are 2.6% higher than at the start of the period, comprising
principally research and development tax credits. Creditors of £0.94 million
are 48% lower than at the start of the period, comprising mainly trade creditors
and accruals.
Working capital at 29 February 2004 was £9.4 million. The Group utilised £1.8
million of working capital during H1 2004, excluding the fundraising which
occurred at the end of the period, which is equivalent to around £301,000 per
month. This expenditure is in line with the Group's business plan and is a
consequence of the P58 programme maturing.
The loss for the period was £1.86 million, which is a reduction of £1.02 million
from the loss reported in H1 2003. This improvement was a result of a
combination of an increase in turnover of £0.63 million and decreases in net tax
recoverable of £0.06 million, interest income of £0.09 million and operating
expenses of £0.55 million. Overall the results for the period were very
gratifying and within budget.
Dr Wang Chong
4 May 2004
Independent review report to Phytopharm plc
Introduction
We have been instructed by the company to review the financial information which
comprises the consolidated profit and loss account, the consolidated balance
sheet, the reconciliation of movements in group shareholders' funds and the
consolidated cashflow statement and the related notes. 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 company 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. This report, including the
conclusion, has been prepared for and only for the company for the purpose of
the Listing Rules of the Financial Services Authority and for no other purpose.
We do not, in producing this report, accept or assume responsibility for any
other purpose or to any other person to whom this report is shown or into whose
hands it may come save where expressly agreed by our prior consent in writing.
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 29 February 2004.
PricewaterhouseCoopers LLP
Chartered Accountants
Cambridge
4 May 2004
Unaudited consolidated profit and loss account for six months ended 29 February
2004
Notes Unaudited Unaudited Audited
Six months Six months Year
Ended Ended Ended
29 Feb 2004 28 Feb 2003 31 Aug 2003
£ £ £
Turnover 2 1,052,360 420,000 2,426,654
Other operating expenses 3 (3,184,923) (3,735,536) (8,380,956)
_________ _________ _________
Operating loss (2,132,563) (3,315,536) (5,954,302)
Interest receivable and similar income 69,693 156,963 277,336
Interest payable and similar charges - (268) (4,451)
_________ _________ _________
Loss on ordinary activities before taxation (2,062,870) (3,158,841) (5,681,417)
Tax on loss on ordinary activities 4 205,434 274,341 378,099
_________ _________ _________
Loss for the period 6 (1,857,436) (2,884,500) (5,303,318)
_________ _________ _________
Basic and fully diluted loss per share 5 (4.8) (7.5) (13.7)
(pence)
IIMR loss per share (pence) 5 (4.8) (7.5) (13.7)
Unaudited reconciliation of movements in Group shareholders' funds for the six
months ended 29 February 2004
Notes Unaudited Unaudited Audited
Six months Six months Year
Ended Ended Ended
29 Feb 2004 28 Feb 2003 31 Aug 2003
£ £ £
Loss for the period (1,857,436) (2,884,500) (5,303,318)
New share capital issued 6,517,429 20,155 84,060
Expenses of share capital issued (163,721) - -
Share option compensation charge 27,340 10,000 31,470
_________ _________ _________
Net increase in shareholders' funds 4,523,612 (2,854,345) (5,187,788)
Opening shareholders' funds 5,096,884 10,284,672 10,284,672
_________ _________ _________
Closing shareholders' funds 9,620,496 7,430,327 5,096,884
_________ _________ _________
Unaudited consolidated balance sheet at 29 February 2004
Notes Unaudited Unaudited Audited
At At At
29 Feb 2004 28 Feb 2003 31 Aug 2003
£ £ £
Fixed assets
Tangible assets 171,675 190,415 161,925
__________ _________ _________
171,675 190,415 161,925
Current assets
Stocks 195,820 - 42,751
Debtors 1,122,908 1,801,726 1,094,549
Cash held on deposit as short term 2,541,243 6,524,725 5,131,552
investments
Cash at bank and in hand 6,526,875 60,406 481,603
__________ _________ _________
10,386,846 8,386,857 6,750,455
Creditors: amounts falling due within one (938,025) (1,146,945) (1,815,496)
year
__________ _________ _________
Net current assets 9,448,821 7,239,912 4,934,959
__________ _________ _________
Total assets less current liabilities 9,620,496 7,430,327 5,096,884
__________ _________ _________
Net assets 9,620,496 7,430,327 5,096,884
__________ _________ _________
Capital and reserves
Called up share capital 427,433 386,553 387,852
Share premium account 6 38,122,526 31,745,796 31,808,399
Merger reserve 6 (204,211) (204,211) (204,211)
Profit and loss account 6 (28,725,252) (24,497,811) (26,895,156)
__________ _________ _________
Equity shareholders' funds 9,620,496 7,430,327 5,096,884
__________ _________ _________
Unaudited consolidated cash flow statement for the six months ended 29 February
2004
Notes Unaudited Unaudited Audited
Six months Six months Year
Ended Ended Ended
29 Feb 2004 28 Feb 2003 31 Aug 2003
£ £ £
Net cash outflow from continuing operating (3,095,843) (2,748,491) (3,938,176)
activities
Returns on investment and servicing of
finance
Interest received 69,693 156,963 277,336
Interest paid on finance leases - (269) (321)
Other interest paid - - (4,130)
_________ _________ _________
Net cash inflow from returns on investment 69,693 156,694 272,885
and servicing of finance
Taxation
UK corporation tax credit received 277,600 - 276,954
Foreign taxation paid (100,000) - (200,000)
_________ _________ _________
Net cash inflow from taxation 177,600 - 76,954
Capital expenditure and financial
investment
Purchase of tangible fixed assets (59,945) (37,349) (85,547)
Proceeds on sale of tangible fixed assets 9,750 46,166 57,467
_________ _________ _________
Net cash (outflow)/inflow for capital (50,195) 8,817 (28,080)
expenditure
_________ _________ _________
Cash outflow before use of liquid resources (2,898,745) (2,582,980) (3,616,417)
_________ _________ _________
Management of liquid resources
Decrease in cash held on short term deposit 2,590,309 2,306,533 3,699,707
_________ _________ _________
Financing
Proceeds from exercise of share options 33,367 19,709 84,060
Proceeds from issue of share capital 6,484,062 448 -
Expenses of share capital issue (163,721) - -
Repayment of principal under finance leases - (5,829) (8,271)
_________ _________ _________
Net cash inflow from financing 6,353,708 14,328 75,789
_________ _________ _________
Increase/(decrease) in cash 6,045,272 (262,119) 159,079
_________ _________ _________
Reconciliation of operating loss to net cash outflow from operating activities
Unaudited Unaudited Audited
Six months Six months Year
Ended Ended Ended
29 Feb 2004 28 Feb 2003 31 Aug 2003
£ £ £
Continuing activities
Operating loss (2,132,563) (3,315,536) (5,954,302)
Depreciation on tangible fixed assets 45,168 56,875 105,978
(Profit)/loss on disposal of fixed assets (4,723) (15,132) 1,152
Increase in stocks (153,069) - (42,751)
(Increase)/decrease in debtors (525) 1,316,009 2,049,990
Decrease in creditors (877,471) (800,707) (129,713)
Share option compensation charge 27,340 10,000 31,470
_________ _________ _________
Net cash outflow from continuing operating (3,095,843) (2,748,491) (3,938,176)
activities
_________ _________ _________
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 2003 annual report and are unaudited. The
information set out in this interim report for the six months to 29 February
2004 does not comprise statutory accounts within the meaning of the Companies
Act 1985.
The figures for the year ended 31 August 2003 are abridged from the Group's
statutory accounts for that year, which received an unqualified auditors' report
and have been filed with the Registrar of Companies.
2. Turnover
Unaudited Unaudited Unaudited
Six months Six months Year
Ended Ended Ended
29 Feb 2004 28 Feb 2003 31 Aug 2003
£ £ £
By business activity
Licensing and development 1,052,360 420,000 2,426,654
_________ _______ _________
3. Other Operating Expenses
Other operating expenses comprise:
Unaudited Unaudited Unaudited
Six months Six months Year
Ended Ended Ended
29 Feb 2004 28 Feb 2003 31 Aug 2003
£ £ £
Research and development expenditure 2,597,986 3,226,908 7,227,930
Administrative expenditure 586,937 508,628 1,153,026
_________ _________ _________
3,184,923 3,735,536 8,380,956
_________ _________ _________
4. Tax on Loss on Ordinary Activities
Unaudited Unaudited Unaudited
Six months Six months Year
Ended Ended Ended
29 Feb 2004 28 Feb 2003 31 Aug 2003
£ £ £
Current tax
UK corporation tax credit on loss for period 305,434 274,341 578,099
Foreign tax (100,000) - (200,000)
_______ _______ _______
Corporation tax credit at 24% 205,434 274,341 378,099
_______ _______ _______
Foreign tax related to 10% Japanese withholding tax.
There is no corporation tax charge because of the incidence of tax losses. 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 of actual spend.
5. Loss Per Share
The loss per share is based on losses of £1,857,436 and 38,882,416 ordinary
shares, being the weighted average number of shares in issue during the period.
The Institute of Investment Management and Research (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 Merger Profit and
Premium Reserve Loss Account
Account
£ £ £
At 1 September 2003 31,808,399 (204,211) (26,895,156)
Premium on new share issue 6,477,848 - -
Expense of share issue (163,721) - -
Share option compensation charge - - 27,340
Loss for the period - - (1,857,436)
__________ _______ __________
At 29 February 2004 38,122,526 (204,211) (28,725,252)
__________ _______ __________
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