Final Results
Evolutec Group PLC
02 March 2005
For immediate release 2 March 2005
EVOLUTEC GROUP PLC
('Evolutec' or 'the Company')
FINANCIAL RESULTS FOR THE PERIOD ENDED 31 DECEMBER 2004
Evolutec Group plc (AIM: EVC), a biopharmaceutical company engaged in developing
novel products for the treatment of allergic, inflammatory and autoimmune
diseases, is pleased to announce its financial results for the 18 month period
ended 31 December 2004.
The results cover an 18 month period because the Company changed its year end
from 30 June to 31 December on admission to AIM last year.
Highlights to date
Development
• rEV131 - Rhinitis clinical programme on-track
- Investigational New Drug ('IND') submitted 14 February 2005
- 112 patient dose ranging proof of concept study planned for 2005
- Nasal safety programme completed and device selected
• rEV131 - Post-cataract surgery clinical programme on-track
- Positive preclinical result confirms potential
- IND submission in preparation
• rEV131 - Dry eye selected as third indication
• Other programmes with rEV576 and rEV598 underway
Commercial
• Balanced commercial strategy for rEV131
- License marketing rights in respiratory indications
- Retain marketing rights in ophthalmic indications
• Cambrex Bio Science Baltimore ('Cambrex') selected for current Good
Manufacturing Practice ('cGMP') manufacture of rEV131
Financial
• AIM listed - raised £5.1m (net of expenses) at 125p in August 2004
• Operating loss for 18 month period £2.5m (12 months to 30 June 2003:
operating loss of £1.1m)
• Cash and short-term investments of £3.9m at 31 December 2004 (2003: £0.2m)
R&D Review Day
• The meeting will take place on Wednesday 23 March at Buchanan
Communications, 107 Cheapside, London, EC2V 6DN
• Focus will be on Evolutec's clinical development programmes
Mark Carnegie Brown, Evolutec's Chief Executive, said: 'I am pleased to report
that Evolutec is on track to deliver the strategy outlined when we joined AIM
last year. Our progress to date demonstrates our ability to implement clinical
and manufacturing plans and develop the business model. Clinical trial results
expected during 2005 have the potential to drive the Company's growth and to
mitigate risk in our portfolio.'
For further information:
Evolutec 01865 784070
Mark Carnegie Brown, Chief Executive Officer
Nicholas Badman, Chief Financial Officer
www.evolutec.co.uk
Collins Stewart 020 7523 8350
Chris Howard
Buchanan Communications 020 7466 5000
Mark Court/Tim Anderson/Mary-Jane Johnson
Notes for Editors
About Evolutec
Evolutec, which is based in Oxford, UK, is a clinical stage biopharmaceutical
company with a focus on allergy, inflammation and auto-immune diseases.
The Company's lead product, rEV131, is a histamine-binding protein that has
progressed to phase II trials in allergic conjunctivitis, rhinitis and ocular
inflammation. Positive pre-clinical data has also been generated in asthma.
rEV131 is understood to be the only product currently in clinical trials that
impacts the recently discovered H4 receptor, a receptor implicated in many forms
of inflammatory disease. The Company intends to carryout proof of concept phase
II clinical trials with rEV131 in allergic rhinitis and post-cataract surgery in
2005.
The Company has a further two products in pre-clinical development, rEV598 which
is being evaluated in carcinoid syndrome and CINV (chemotherapy-induced nausea
and vomiting), and rEV576, a complement inhibitor.
Evolutec was founded in 1998 to exploit research carried out by the Natural
Environment Research Council. Evolutec's drugs were first isolated from the
saliva of ticks. The tick remains undetected by its hosts, including humans, by
injecting an array of molecules into the skin that suppresses normal defence
mechanisms. These stealth molecules have evolved over millions of years to
enable the tick to take a blood meal from its host. Evolutec employs the tick's
evolutionary stealth technology to offer the potential of treating human
diseases.
Safe Harbour statement: this news release may contain forward-looking
statements that reflect the current expectations of the Company regarding future
events. Forward-looking statements involve risks and uncertainties. Actual
events could differ materially from those projected herein and depend on a
number of factors including the success of the Company's research strategies,
the applicability of the discoveries made therein, the successful and timely
completion of clinical studies, the uncertainties related to the regulatory
process, the successful integration of completed mergers and acquisitions and
achievement of expected synergies from such transactions, and the ability of the
Company to identify and consummate suitable strategic and business combination
transactions.
Chairman's review
I am pleased to produce the first annual report of Evolutec Group plc (the '
Company' or 'Evolutec') following its listing on the Alternative Investment
Market of the London Stock Exchange ('AIM') on 2 August 2004. It is a pleasure
to thank both new and existing shareholders for their support of the Company.
The Company raised some £5.1 million net of expenses at listing and this
provides adequate finance to support two key Phase II clinical trials in 2005 as
well as allowing some continued development of infrastructure.
Evolutec is an emerging biopharmaceutical company focused on the development of
biopharmaceutical products for the treatment of disease. The Company expects to
develop a portfolio of products in a variety of different clinical indications.
Depending on analysis of individual product opportunities the Company intends to
retain marketing rights to some products in Europe and the USA, but will rely on
partnership to ensure world-wide development and marketing.
Analysis of the development of new therapeutic products shows that the greatest
value is delivered to shareholders by companies that retain direct marketing
rights, particularly in the USA the world's largest pharmaceutical market. The
development of new products to marketing authorisation incurs significant risks
predominantly due to lack of desired efficacy or poor tolerance of novel
entities. Evolutec has sought to mitigate these risks in a number of ways.
First, and most importantly, Evolutec selects its development candidates from
biological sources (currently blood sucking arthropods, ticks) where the
function of the novel molecule is closely linked to the evolutionary survival of
the species. In the case of ticks, they must avoid detec-tion by mammalian
immune systems to take a blood meal in order for the species to survive. Ticks
have evolved a system to suppress inflammatory and immune responses (stealth
technology), both of which are common components of many human diseases.
Evolutec utilises modern recombinant production techniques whereby the
individual genes that code the molecules are transferred to bacteria. The
bacteria can be used for large scale commercial production of the products
overcoming the problem of the limited material available directly from ticks.
Secondly, Evolutec intends to develop a number of different molecules in diverse
therapeutic indications to create a portfolio of opportunities. Currently two
development candidates (a histacalin and a protein derived from tick cement
antigen), are undergoing key trials in human and animal diseases and these
results will be reported in 2005. The Company has identified two further
molecules (a serocalin and a complement inhibitor) that will be taken into
development as soon as resources allow us to make this investment. Evolutec has
identified a number of additional recombinant molecules that could produce
further development candidates although this will require additional research
prior to development. Because Evolutec was one of the first companies to exploit
ticks as a source of therapeutic molecules the Company has the advantage that
its filed patents are amongst the first in the area. Therefore we expect to
receive grants covering broad claims. In the past reporting period we were
delighted that our first patent was granted in the United States and Europe and
the Company received notice of a grant in respect of a second patent. A strong
patent position is an essential asset for an emerging biopharmaceutical company.
The Company has now gained considerable clinical and experimental experience
with its lead clinical candidate, rEV131. The safety profile in clinical trials
of this molecule is good and bears out the prediction that tick derived proteins
would not produce adverse effects because this would negatively impact their
survival.
In addition, rEV131 has powerful effects on white cell migration into sites of
inflammation both in humans and animals. Since white cells are one of the key
mediators of inflammation in human defence and disease, again this result was
predicted as a component of species survival. The Company is planning two Phase
II studies for 2005 involving a total of about 250 patients. The data from these
trials will determine the future value of the Company. A positive outcome should
enhance the Company valuation and will present the management with a number of
options to continue to enhance share-holder value. The Company has held numerous
confidential discussions with regard to rEV131 with major pharma-ceutical
companies and believes that it will be able to enter substantial partnering
arrangements for this product once positive clinical data are obtained.
Merial Inc ('Merial') has begun the clinical evaluation of a tick derived cement
antigen as an anti-tick vaccine in cattle. Initially these studies are being
conducted in South America, probably the most important commercial market for
this type of vaccine. It is expected that these trials will also report in 2005.
In the event that the result is positive then it is anticipated that trials will
be expanded to include companion animals (pets) and to block tick borne
diseases. The Company will also be able to exploit the asset to develop vaccines
to tick born diseases in humans (e.g. Lyme disease). Evolutec is pleased to be
able to collaborate with Merial in this development programme since it is a
leading animal health company with expertise in vaccine development and
commercialisation. This is essential for vaccine development which is a
specialised business.
Evolutec's business model is based upon tight control of its cost base in order
to minimise its need to raise equity capital. The Company operates with a small
permanent work-force and subcontracts virtually all its activities to specialist
contract research organisations. Because Evolutec accesses these services on a
world-wide basis it can obtain competitive prices and this allows clinical
development to proceed on a cost effective basis compared to the industry which
generally has a higher fixed cost base and incurs substantial discovery costs in
research. Our model places great emphasis on the efforts of a small group of
Evolutec employees both in terms of their expertise and energy. It is a pleasure
to be able to thank all the Evolutec staff for their efforts over the past
eighteen months. The Company has built a reward system for them which is closely
linked to increasing shareholder value and feels that this closely allies the
interests of shareholders and management. Evolutec has been well served by its
academic collaborators over the reporting period and is particularly grateful to
the efforts of scientists at the Natural Environment Research Council, Oxford
and the Centre National de la Recherche Scientifique, France.
Under AIM rules, the Group is not required to comply with the Combined Code
2003. However, management has taken steps to comply with the Combined Code 2003
in so far as it can be applied practically, given the size of the Group.
2005 will be an important year in the evolution of Evolutec because of the
generation of such important clinical data and for the potential opportunities
that this will create. Our workforce approaches these tasks with great
enthusiasm and a commitment to produce the best return for our shareholders.
David P Bloxham
Chairman
1 March 2005
Chief Executive's review of operations
I was delighted to join Evolutec as Chief Executive in August 2003 and was drawn
to the Company by the opportunity to build a substantial biopharmaceutical
business on the basis of novel technology and an outsourced business model.
It seemed to me that accessing sufficient funding to prove Evolutec's technology
in the clinic would begin this process. The selection of appropriate clinical
indications and the flotation of the Company on AIM have created a platform for
future growth.
The last eighteen months have seen strong progress in the growth and development
of your Company. Within this period we have restructured the Board, completed
two fundraisings - including listing on AIM and partnered our animal vaccines.
The product pipeline has developed and clinical progress has been made with
rEV131 and early preclinical results generated with rEV576 and rEV598. The Group
had net cash and short-term investments of £3.9 million as at 31 December 2004.
This will fund the Phase II clinical trials in allergic rhinitis and
post-operative cataract surgery and enable investment in the manufac-turing
process of rEV131, required for Phase III clinical trials and commercial
production.
Strategy
The Company's protein technology offers broad utility and development potential
in both major and specialist human therapeutic markets and in animal health
markets. While the focus of the Company is in the allergy, inflammation and
auto-immune markets the vaccines offer another string to our bow and potential
in the animal health market. To exploit its technology Evolutec will seek
licensing partners after clinical proof of concept in the major markets e.g.
respiratory, but intends to retain territorial marketing rights in the
specialist markets e.g. ophthalmology. This will enable Evolutec to generate
both licensing and operational revenues. Partnering is a key element of the
strategy as Evolutec develops its pipeline. Appropriate partners will be sought
to deliver the above goals, to accelerate development and mitigate risk within
the portfolio. The potential market for licensing partners is currently viewed
as strong because the major pharmaceutical companies need to build their
pipeline to meet market expectations.
Business model
The Evolutec business model is based on a small number of skilled staff who can
lead and source preclinical, clinical and manufacturing programmes cost
effectively on a global basis. This model enables cost effective drug
development and is focused on preclinical and clinical activities. In the
future, as the Company grows, this flexible model can be applied to additional
products and therapeutic areas. Evolutec has become a publicly listed clinical
stage biopharmaceutical company with its immediate product focus on development
in the respiratory and ophthalmology arenas. Looking to the future the Company
will retain its focus on biopharmaceuticals, seek to diversify and mitigate risk
within its portfolio and prime its research pipeline.
Product pipeline
The three small protein therapeutics in Evolutec's pipeline are sourced from
tick saliva. Since mammalian hosts, including humans, suffer few ill effects
from the feeding of these tick species this source of molecules conveys the
potential advantage of a favourable safety profile. Furthermore, because these
proteins have been conserved by evolution, nature has already selected the most
efficient mechanism for modulating the immune response system. This 'stealth'
technology enables the tick to remain undetected by its host and complete its
blood meal. rEV131, rEV598 and rEV576 together with the animal vaccines provide
Evolutec with an opportunity for multiple therapeutic targets and return on
shareholder investment. The Company has a further 12 recombinant proteins which
have been isolated from the same source.
The lead development candidate rEV131 is intended to target the
anti-inflammatory and anti-allergy markets with a profile similar to that of
combining a corticosteroid and an anti-histamine. This would offer patient
convenience and potentially address clinical concerns associated with the
long-term use of steroids. The most promising areas for clinical evaluation
include rhinitis, post-operative cataract surgery, dry eye, asthma, chronic
obstructive pulmonary disease ('COPD') and adult respiratory distress syndrome
('ARDS'). Through its binding of histamine the effect of rEV131 is equivalent to
a functional antagonist of histamine receptors, of which H1 and H4 are most
important to acute and chronic inflammation respectively. However, rEV131 does
not directly impact the histamine receptors. rEV598 is a preclinical stage
molecule which through its binding of serotonin and histamine offers a potential
therapy in carcinoid syndrome and chemotherapy induced nausea and vomiting ('
CINV'). rEV576 is a preclinical stage molecule which impacts the complement
cascade and from this mechanism of action is considered to have potential in
rheumatoid arthritis and stroke.
Evolutec has pursued comprehensive patent protection for the novel technology it
develops. The Company holds 14 patents covering all the families of molecules in
the key pharmaceutical territories. Because Evolutec has been one of the first
companies to research this area there are no known freedom to operate issues
associated with its intellectual property. Evolutec's broad patent covering the
vaso-amines (6617312) has been granted in the US and Europe and its patents
covering the use of rEV131 in rhinitis (1207899) and conjunctivitis (1207898)
have been granted in Europe. In addition Evolutec's screening patent has been
approved for grant in Europe (application number 00985700.4).
Clinical studies with rEV131, conducted under a US FDA approved Investigational
New Drug ('IND'), have shown activity in rhinitis, ocular inflammation and
conjunctivitis. Over ninety patients have received ocular dosing with the lead
development candidate. Good safety and comfort have been demonstrated without
increase in intraocular pressure. There is now substantial evidence to show that
rEV131 impacts the movement of both neutrophils and eosinophils suggesting
potential breadth of utility. These blood cells are important to the
inflammatory process and the potential to limit their influx is a significant
feature of potential therapies. Examples of neutrophil mediated diseases
include rheumatoid arthritis and COPD and examples of eosinphil medicated
diseases include rhinitis and asthma.
In an ocular dosing and challenge regime rEV131 showed an improvement in all the
recorded symptoms of rhinitis in the clinic. When data was summed in an overall
scoring system, these improvements were statistically significant. The results
are compelling because the drug was administered to the eye and rhinitis
symptoms are in the nose. Clinical results in ocular inflammation have shown a
dose dependant reduction of neutrophils in the tear fluid. Preclinical studies
where rEV131 was at least as effective as the corticosteroid prednisolone, have
further emphasised the potential of rEV131 in ocular inflammation. This study is
considered an effective surrogate for post-operative cataract surgery and
represents an important step in Evolutec's development programme in the
ophthalmic area. While clinical improvement in the symptoms of conjunctivitis
were observed these were not consistent enough across the patients to deliver
the trial endpoint. Further studies would be needed to optimise the dose and,
possibly, the formulation for this indication.
The effect of rEV131 on acute and chronic allergy/ inflammation is unusual.
This is considered to be an unmet medical need in this market. The effects on
eosinophils and neutrophils, as well as the clinical efficacy in rhinitis and
ocular inflammation are considered important in proving Evolutec's technology in
the short-term and establishing a platform for development in longer term
indications. On the basis of the encouraging clinical results in rhinitis and
ocular inflammation the two immediate indications chosen are allergic rhinitis
and post-operative cataract surgery. Rhinitis is an eosinophil mediated
condition and post-operative cataract surgery a neutrophil mediated condition.
These indications are not mutually interdependent and mitigate risk since one
indication should not affect success in the other. Rhinitis, a severe
inflammation of the nasal air passage, is a major market with global sales
estimated to be $6.6 billion. The target population for rEV131 is the severe
congestion segment represented by steroid sales valued in excess of $2 billion.
There are some 1.4 million cataract surgery operations performed per annum in
the USA and the market is estimated at $500 million. The overall ophthalmic
prescription market is valued at $2.8 billion. The safety profile of rEV131 is
in line with that predicted from the origins of the molecule. No abnormalities
have been observed in a range of preclinical studies including nasal work
undertaken for the rhinitis programme. An additional attractive feature of the
molecule is that it has proved to be active when delivered by a range of
different routes including inhaled, injected (sub-cutaneous, intravenous,
intraperitoneal) and topical.
Funding
Evolutec was admitted to AIM in August 2004 and raised £5.1 million net. This
success was achieved against a back drop of difficult market conditions. In 2003
the Company completed a private funding round and raised £0.7 million net. The
bulk of these proceeds are being invested in rEV131 and will be used to fund
clinical studies in rhinitis and post-operative cataract surgery and invest in
manufacturing process development. In addition Evolutec intends to progress the
preclinical programmes with rEV598 and rEV576 during 2005 and select clinical
indications for these development candidates in the next 12-18 months.
Partnering
In September 2003 the Company partnered its animal vaccines with Merial. This
deal was important because it validated Evolutec's technology, provided for
potential milestones and enabled the Company to focus on the development of
human therapies. Merial's cattle evaluation programme was initially delayed
because it took longer than anticipated to demonstrate that the vaccines met
Brazilian import requirements. A positive outcome to Merial's evaluation and the
resulting milestones will contribute to the cost base of Evolutec going forwards
and trigger work in the substantial companion animal market. Positive results
would also enable Evolutec to pursue the potential of the same technology in the
human vaccine area where preclinical work has shown potential against Borrelia
the causal agent of Lyme disease and tick borne encephalitis.
Management has attended and presented at several bio-partnering conferences to
raise Evolutec's profile in Europe and the US. Management has met with a number
of pharma-ceutical companies in order to position the Company for licensing
discussions following the results of its clinical trials in 2005. The US
represents the single most important pharmaceutical market and the home of many
major pharmaceutical and biotechnology companies.
Preclinical
The preclinical development candidates rEV598 and rEV576 have also moved
forwards. rEV598 has shown promising results in its binding of serotonin in
human carcinoid cell culture. It showed a dose dependant reduction in serotonin
levels and the potential for additive effects when used in combination with the
commercial standard lanreotide.
Potential indications for this molecule include CINV and carcinoid syndrome.
The latter is considered likely to qualify for orphan drug status and an
effective new treatment would attract regulatory benefits and marketing
exclusivity - so reducing the cost of clinical studies and accelerating
potential timelines. Annual sales of existing therapies into the CINV market are
valued at $1.8 billion.
rEV576 acts on the final step of the complement system is associated with the
production of the membrane attack complex. The complement system is associated
with the identification of invading micro-organisms and the marshalling of
appropriate defence systems including the attraction of neutrophils and
eosinophils. However, in patients with rheumatoid arthritis and certain types of
stroke the membrane attack complex is over stimulated and causes damage to joint
surfaces and heart muscle. rEV576 has shown activity against neutrophils in
preclinical complement models and appears to have a very different profile to
rEV131. Further preclinical work is planned 2005.
Management
The Evolutec team has grown and changed over the last 18 months. In April 2004,
David Bloxham was appointed as Executive Chairman and Graeme Hart was appointed
as a Non-Executive Director. Nicholas Badman joined the Board in July 2004 as
Chief Financial Officer. Nicholas has 10 years' experience in corporate finance
and investment banking. Nicholas was appointed as Company Secretary in November
2004. The Company wishes to thank David White for his contribution to this area
for the last 5 years. In 2005, the operational team was strengthened with the
appointment of John Hamer as Development Director. John brings with him a
wealth of experience gained in a career with Upjohn, Fisons, Johnson & Johnson
and INYX pharma. Evolutec has outgrown its current office space and needs
improved connections to airports and the City of London. The Company is moving
its operational headquarters to Green Park, Reading in April 2005.
Clinical Plans
Clinical trial plans for allergic rhinitis are developing as intended and
Evolutec is in dialogue with the FDA on this matter. Evolutec has sought
statistical and development advice in the design of this study and investigated
a number of clinical centres. The Company has submitted for an IND in rhinitis
in February 2005 and intends to undertake a 112 patient, dose ranging nasal
allergen challenge study. This will be multi-site, to ease patient recruitment
and based in San Antonio, Texas under the direction of Dr. Paul Ratner as
principal investigator. Paul is a fellow of the American Academy of Allergy and
a past president of the Society of Principal Investigators. He has an excellent
track record in this field, has worked with many of the pharmaceutical companies
active in this area and is enthusiastic about the prospects for rEV131.
The Company also intends to submit an IND in post--operative cataract surgery in
the first half of 2005. Again, this will be a substantial multi-site study.
Current thinking is that this will be an enriched population, so increasing the
chance of demonstrating a drug effect. Dr. Mark Abelson of Ophthalmic Research
Associates, Boston will be the principal investigator. Mark is a leading
clinician in the area of ophthalmology and has undertaken previous work for
Evolutec.
Cambrex has been selected to manufacture rEV131, Evolutec's lead compound, for
Phase III clinical trials and planned marketing. rEV131 has been manufactured
to date according to Good Laboratory Practice ('GLP') standards for the Phase II
clinical trials planned for 2005 in allergic rhinitis and post-operative
cataract surgery. The current GLP process produces good yields of rEV131. The
agreement with Cambrex covers process development work, during which Cambrex
will develop a robust, scaleable, current cGMP process for purified rEV131, with
a goal of optimising the process yield. The agreement then provides for Cambrex
to scale-up the cGMP process.
In summary, Evolutec's AIM listing has benefited the Company in terms of
funding, capability and profile. The assets of the Company have developed as
planned and partnering remains key to the ongoing strategy. Progress with the
implementation of the business plan and associated clinical programmes is on
schedule.
Looking to the future, the delivery of positive clinical results in allergic
rhinitis and post-operative cataract surgery with rEV131 is intended to drive
further fund raising, partnering and significant growth at Evolutec. Results in
the eye suggest that several neutrophil related conditions could be pursued with
rEV131 in due course. These include dry eye, contact lens associated marginal
neutrophil infiltration and vernal keratocon-junctivitis in the specialist
ophthalmic market. Substantial indications which could be considered for the
development of rEV131 with an appropriate partner include COPD and asthma.
Mark Carnegie Brown
Chief Executive Officer
1 March 2005
Financial review
The reported results are for the 18 month period to 31 December reflecting the
Group's new financial year end. The Company raised £5.1 million (net) and was
admitted to AIM in August 2004. The Company also raised £0.7 million (net) in a
private placing in August 2003.
Financial and operating strategy
The Group's financial and operating strategy is to maintain a small number of
employees providing core skills and to sub-contract the clinical and preclinical
development, research and manufacturing work. As of 1 March 2005, Evolutec had 7
full-time employees. This outsourcing strategy means that Evolutec can be more
efficient as it has lower in-house operating costs and is able to leverage world
class expertise and services at the most competitive market rates globally.
Capital structure
Share capital
The Company had 10.2 million 10p ordinary shares and 48.0 million 10p deferred
shares outstanding at 31 December 2004. The deferred shares arose on a share
consolidation during the preparation for the AIM listing, carry no voting or
equity participation rights, and are the subject of a resolution to authorise
the Company to buy back these shares at the Company's AGM on 4 May 2005.
Net cash position and funding
The Group had net cash and short-term investments of £3.9 million as at 31
December 2004 compared with £0.2 million at 30 June 2003. The increase in cash
and cash equivalents reflects a £0.7 million (net) private placing in August
2003 and a £5.1 million (net) placing upon the Company's admission to AIM in
August 2004. The net cash outflow before the management of liquid resources and
financing was £2.1 million (June 2003: £1.4 million) reflecting the Group's
expenditure for the period.
The Group had no borrowings during the period (June 2003: £nil).
Treasury
As at 31 December 2004 the Group had £3.8 million on treasury deposit. The
Group's treasury policy is to split its deposits between at least two banks each
with a minimum credit rating of F1/A. The objective is to derive the maximum
interest consistent with flexibility to undertake ongoing activity and
safeguarding the asset.
The Group does not engage in speculative transactions or derivatives trading in
respect of cash balances held.
The Group is exposed to US dollar and Euro currency exchange rate movements.
The Group monitors these exposures on a frequent basis and has taken appropriate
steps to mitigate large exposures. Evolutec has benefited from the increase in
the value of sterling versus the US dollar in recent months as a significant
portion of the development and manufacturing expenditure is US dollar dominated.
Cash flow
Net cash outflow from operating activities in the period was £2.3 million (June
2003: £1.6 million). This included a milestone payment of £0.2 million to the
Natural Environment Research Council, the originator of certain of the Group's
intellectual property and technology.
The other significant cash flow item during the period was the cash expenses
relating to the two share issues which totalled £0.6 million. The cash inflow
from interest and the research and development tax credit was £0.2 million.
Profit & loss
Revenue
Evolutec is a clinical stage biopharmaceutical company and as such has no source
of direct revenue. The revenue for the period of £28,000 (June 2003: £nil)
relates to payments for materials supplied for testing under an option agreement
with Merial over rights to the animal vaccine uses of proteins derived from tick
cement antigen.
Research and development
Research and development expenditure of £1.0 million (June 2003: £0.7 million)
is up on a like for like basis due to the increased level of development
activity, including the rhinitis and post-operative cataract surgery development
programmes as well as the commencement of work on developing a cGMP
manufacturing process with Cambrex.
Administrative expenses
Administrative expenses of £1.5 million (June 2003: £0.5 million) are up on a
like for like basis primarily due to the recruitment of additional staff and the
increased professional fees resulting from the Company's admission to AIM.
Taxation
The Group's research and development tax credit of £0.2 million (June 2003: £0.1
million) is higher on a like for like basis reflecting the increased level of
qualifying research and development expenditure.
International Financial Reporting Standards
International Financial Reporting Standards ('IFRS') are mandatory for all fully
listed companies within the European Union for years commencing on or after 1
January 2005. As an AIM listed company, this requirement does not currently
apply to Evolutec until the financial year ended 31 December 2007 at the
earliest.
However, the Group will consider early adoption once there is greater clarity
and guidance in relation to the practical application of IFRS and, in particular
from the Inland Revenue as to the tax treatment of research and development
expenditure under IFRS and subsequent effect on research and development tax
credits.
Re-location to Green Park
The Group is relocating its operational headquarters to Green Park, a business
park close to Reading and Junction 11 of the M4.
The move reflects the Group's strategy to
. expand headcount in key areas
. take advantage of Green Park's excellent communication links via road and
rail as well as its proximity to Heathrow Airport; and
. emphasise the increasing importance of the commercial side of Evolutec's
business
The Group negotiated attractive terms for the new office facility and the added
space provides flexibility for expansion.
Nicholas Badman
Chief Financial Officer
1 March 2005
CONSOLIDATED PROFIT AND LOSS ACCOUNT
For eighteen-month period ended 31 December 2004
Notes Eighteen months ended
31 December 2004 Year ended
30 June 2003
£000 £000
Turnover 28 -
Cost of sales - -
Gross profit 28 -
Research and development expenditure (993) (660)
Other administrative costs (1,543) (453)
Total administrative costs (2,536) (1,113)
Operating loss on ordinary activities before (2,508) (1,113)
interest and taxation
Interest receivable and similar income 94 19
Loss on ordinary activities before taxation (2,414) (1,094)
Tax credit on loss on ordinary activities 177 89
Loss for period (2,237) (1,005)
Basic and diluted loss per share - pence 2 (33.6)
(21.6)
Continuing operations
All the activities of the Group are classed as continuing operations.
Statement of recognised gains and losses
There are no recognised gains and losses other than the losses above, and
therefore no separate statement of total recognised gains and losses has been
presented.
BALANCE SHEETS
As at 31 December 2004
Notes Group Group
31 December 2004 30 June 2003
£000 £000
Fixed assets
Tangible assets 11 14
Investments - -
11 14
Current assets
Debtors 255 95
Short-term deposits and investments 3,761 175
Cash 113 52
4,129 322
Current liabilities
Creditors: amounts falling due within one year (367) (106)
Net current assets 3,762 216
Net assets 3,773 230
Capital and reserves
Share capital 3 5,824 4,826
Share premium account 3 4,622 2,034
Other reserves 3 3,734 1,540
Profit and loss account 3 (10,407) 8,170
Total shareholders' funds 3 3,773 230
Evolutec Group plc was incorporated on 9 March 2004, therefore no comparative
figure is shown for the Company's balance sheet.
CONSOLIDATED CASHFLOW STATEMENT
For the eighteen-month period ended 31 December 2004
Eighteen months Year
ended ended
Notes 31 December 30 June
2004 2003
£000 £000
Reconciliation of operating loss to operating cash flows (2,508) (1,113)
Operating loss
Depreciation 16 81
Loss on disposal of intangible fixed assets - 7
(Increase)/decrease in debtors (69) 25
Increase/(decrease) in creditors 261 (605)
Net cash outflow from operating activities (2,300) (1,605)
Cash flow statement (2,300) (1,605)
Net cash outflow from operating activities
Returns on investments and servicing of finance 94 19
Interest received
Net cash inflow from investments and servicing of finance 94 19
Taxation 86 157
Research and development tax credit received
Net cash inflow from taxation 86 157
Capital expenditure (13) -
Purchase of tangible fixed assets
Net cash outflow from capital expenditure (13) -
Net cash outflow before management of liquid resources
and financing (2,133) (1,429)
Management of liquid resources
Increase in short-term deposits with bank (3,586) (175)
Net cash outflow from management of liquid resources 4 (3,586) (175)
Financing 6,067 1,318
Issue of shares
Conversion of warrants 300 -
New loans - 400
Costs of share issue (587) (104)
Net cash inflow from financing 5,780 1,614
Increase in cash in the period 4 61 10
Reconciliation of net cash flow to movement in net cash /
(debt)
Increase in cash in the period 61 10
Cash outflow from decrease/(inflow from increase) in debt
and lease financing - (400)
Conversion of debt to equity - 750
Movement in net funds in the period 61 360
Net cash/(debt) at start of the period 52 (308)
Net cash at end of the period 113 52
Notes
1 Financial information
The financial information set out in the preliminary statement does not comprise
the Company's statutory accounts within the meaning of section 240(5) of the
Companies Act 1985.
The preliminary statement is prepared on the basis of the accounting policies as
stated in the financial statements for the period ended 31 December 2004.
The financial information for 2004 has been extracted from the statutory
accounts of the Company for the period ended 31 December 2004 which have been
audited by the Company's auditors Grant Thornton UK LLP and whose report thereon
is unqualified and did not contain any statement under section 237 of the
Companies Act 1985. The Company's statutory accounts will be delivered to the
Registrar of Companies for England and Wales in due course and will also be sent
to shareholders.
The financial information for 2003 has been extracted from the statutory
accounts for the year ended 31 June 2003, which have been delivered to the
Registrar of Companies. The auditors' report on those accounts was unqualified
and did not contain any statement under section 237 of the Companies Act 1985.
The preliminary statement was approved by the Board on 1 March 2005.
2 Loss per ordinary share
Eighteen months ended 31 Year Ended
December 2004 30 June 2003
£000 £000
Attributable loss (2,237) (1,005)
Weighted average number of shares in issue (000) 6,660 4,654
Loss per share (basic and diluted) pence (33.6) (21.6)
The calculation of loss per share is based on the weighted average number of
ordinary shares in issue during the period. The calculation of the weighted
average number of shares has been adjusted to take account of the one for ten
share consolidation which took place on 17 June 2004 as part of the preparation
for the Company's admission to AIM.
3 Reconciliation of movements in shareholders' funds
Share Profit and
premium loss
Called-up account Other account
share reserves
capital Total
£000 £000 £000 £000 £000
Group
Balance at 1 July 2003 4,826 2,034 1,540 (8,170) 230
Issue of ordinary shares on 8 August 2003 512 205 - - 717
Expenses of issue of ordinary shares on 8 August 2003 - (45) - - (45)
5,338 2,194 1,540 (8,170) 902
Restatement for pre-AIM listing and restructuring - (2,194) 2,194 - -
AIM listing 456 5,244 - - 5,700
Conversion of warrants 30 270 - - 300
Costs of share issues - AIM listing and warrants - (892) - - (892)
Loss for the period - - - (2,237) (2,237)
Balance at 31 December 2004 5,824 4,622 3,734 (10,407) 3,773
Company
Balance at 9 March 2004 (date of incorporation) - - - - -
Pre-AIM listing restructuring - share for share 5,338 - - - 5,338
exchange
AIM listing 456 5,244 - - 5,700
Conversion of warrants 30 270 - - 300
Costs of share issues - AIM listing and warrants - (892) - - (892)
Loss for the period - - - - -
Balance at 31 December 2004 5,824 4,622 - - 10,446
4 Analysis of movement in net funds
At 30 June 2003 Cash flows At 31 December 2004
£000 £000 £000
Analysis of net funds
Cash 52 61 113
Liquid resources 175 3,586 3,761
Net funds 227 3,647 3,874
Liquid resources comprised short-term deposits with banks which mature within 12
months of the date of deposition.
5 Notice of Annual General Meeting
The Annual General Meeting of the Company will be held at 100 Longwater Avenue,
Green Park, Reading RG2 6GP, on Wednesday 4 May 2005, at 11am.
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