Final Results

RNS Number : 3736M

Redx Pharma plc

20 January 2016

 

AIM: REDX

REDX PHARMA PLC

("Redx" or "the Group")

Final Results for the year ended 30 September 2015

Redx (AIM: REDX), the drug discovery and development company, is pleased to announce its maiden results for the year ended 30 September 2015.

HIGHLIGHTS

·   Strong progress with drug discovery programs having achieved in vivo proof of concept in a further two programs and the progression of three drug candidates into formal pre-clinical development;

Oncology pipeline

-         development candidate selected in SMO program for skin cancer

-        development candidate selected in BTK program for blood cancers and autoimmune diseases

-         in vivo proof of concept secured in cFMS program for auto-immune diseases

-         in vivo proof of concept established in Porcupine program for hard-to-treat cancers

Post-period

-         development candidate selected in Porcupine program

Anti-infectives pipeline

-        continued expansion of novel lead series in MRSA program

-        development candidate selected in MRSA program

·     Launch of immunology research division in May 2015 - focused on developing new therapies for disorders of the immune system

·   Cancer research collaboration with Horizon Discovery Group plc, ("Horizon"), the international life science group, focusing on Redx's existing pan-RAF inhibitor program, which treats colorectal cancer, in September 2015

·      Group's expenditure remains in line with budgets:

-        net cash at 30 September 2015: £9.4m (2014: £2.9m)

-        net loss of £8.2m (2014: £3.4m)

-        other operating income: £2.6m (2014: £6.2m)

·      Outlook remains positive

Neil Murray, Chief Executive of Redx Pharma Plc, said:

"I am delighted with the strong progress Redx has made in this transformational year. Joining AIM has helped us expand our operations, including into immunology research and opens up further opportunities for the business.

In our existing research areas in oncology and anti-infectives, we achieved in vivo proof of concept in a further two programs and progressed three drug candidates into formal pre-clinical development. We look forward to building on this success in 2016 as we also look to secure further commercial partnerships and broaden Redx's capability and asset base."

For further information, please contact:

Redx Pharma Plc	T: 0151 706 4747
Neil Murray, Chief Executive Company website: redxpharma.com
Shore Capital (Nomad and Broker)	T: 020 7408 4090
Bidhi Bhoma/ Edward Mansfield/ Patrick Castle
KTZ Communications	T: 020 3178 6378
Katie Tzouliadis

About Redx Pharma Plc

www.redxpharma.com

Redx is focused on the discovery and development of proprietary, small molecule therapeutics to address areas of high, unmet medical need, principally in cancer, infection and immunology, providing a pipeline of assets to larger and emerging companies. By improving the characteristics of existing drug classes to create highly differentiated, novel, best-in-class drugs, Redx has already established a portfolio of 14 proprietary (patent‑protected) drug programs. Five programs have now achieved pre-clinical proof of concept, with relevance for respective therapies to treat MRSA, bone tumours, skin, brain, breast, pancreatic and blood cancers.

Chairman's Statement

Overview

It has been a transformational year for Redx and I am pleased to report the Group's first set of annual results as a publicly listed company. Redx's admission to AIM and £15m (gross) share placing at the end of March 2015 has opened up greater opportunities for the Group and marks a step change in the development of the business. 

Redx has made significant progress with its proprietary research programs over the year. We identified three drug development candidates, two in oncology, in our Smoothened and BTK programs, and the third in infection in our MRSA program. We also achieved our fifth pre-clinical proof of concept, with our Porcupine program in oncology. In May 2015, as planned we broadened our research activities into the area of immunology. 

Our immunology research team strongly complements our activities in oncology where we are already focused on tumour immunology. In developing new therapies, we will focus on targets which are both commercially attractive and scientifically validated, replicating the approach we have taken in oncology and infection. Our objective is to create commercially attractive, novel drug candidates that we can progress into development ourselves or in partnership with large pharmaceutical companies or well-financed emerging players. 

The business has made substantial progress in the last three years. We now have a broad portfolio of 14 research programs in commercially attractive areas including tumour immunology, cancer stem cells, autoimmune disease and anti-microbial resistance. Our model of positioning Redx to produce new best-in-class drug candidates in areas where there is strong market demand has already been validated - as evidenced by the excellent commercial collaborations we have secured to date. 

As we move forward with our research programs, the business is now better positioned to both secure additional commercial deals for assets in our pipeline and take assets further along the development path before entering into a partnership. 

Our Team

We have established an outstanding scientific and management team, with breadth and depth of experience. The success we have achieved so far reflects the talent and ambition within the business and on behalf of the Board, I would like to thank everyone for their hard work and commitment over the year.

In January 2016, we were delighted to further strengthen our Board of Directors with the appointment of Dr Bernhard Kirschbaum as a Non-Executive Director. Dr Kirschbaum has over 25 years' experience in pharmaceutical research and drug development and an outstanding track record, predominantly at global pharmaceutical companies. We have no doubt that Redx will benefit from his significant commercial and scientific expertise. 

Outlook

We continue to view prospects for the business very positively. We are strongly encouraged by the Group's progress across its research programs and by the exciting new drug development candidates that are progressing towards first-in-human clinical studies. 

We continue to seek further opportunities to develop the business, including new commercial partnerships and look forward with confidence to new developments during 2016.

Operational Review

We are pleased to report the significant progress Redx has made in this transformational year, which has seen the Company join AIM, expand its operations and achieve a number of scientific milestones.

Our successful flotation on AIM and share placing in late March 2015 has established firm foundations for on-going growth and consolidates the work we have done since establishing Redx in 2010. Since the IPO, where we raised £15m (gross), we have made significant progress with our existing research programs across oncology and infectious disease, and, in May, launched our third area of research, in immunology.

Looking forward, Redx's focus on commercially "hot" areas of demand with critical unmet need, including tumour immunology, cancer stem cells, autoimmune disease and anti-microbial resistance leaves the Group well placed for on-going development. Our research programs continue to progress well and we remain confident of further momentum as we progress our assets towards clinic in 2016.

Key Performance Indicators

The Group's key performance indicators include a range of financial and non-financial measures. Details about the progress of our research programs (non-financial measures) are included elsewhere in this Operational Review, and below are the other indicators (financial) considered pertinent to the business.

Year end cash held - £9.4m

2014: £2.9m

Increase in year end cash held following an equity placing in March 2015.

Other operating income - £2.6m

2014: £6.2m

Reflecting the completion of RGF 3 funding, and milestone payments on the MRSA program.

Cash Flows - Net inflow of £6.5m

2014:  net inflow of £1.9m

Reflecting the successful equity placing.

Pipeline Progress

The Redx pipeline has advanced significantly over the last 12 months. During the period, we achieved in vivo proof of concept in a further two programs, taking the total to five, and announced the progression of our first three drug candidates into formal pre-clinical development. The pace at which our teams have achieved this is notable and provides significant technical validation of Redx's approach and capabilities.

Oncology

Within our oncology research activity, two programs, Smoothened Hedgehog ("SMO") and Bruton's Tyrosine Kinase ("BTK") reached candidate nomination stage. The respective compounds are now in formal development studies in preparation for progress into first-in-human clinical studies. We also secured proof of concept in our Porcupine program and, following the year-end, we nominated a development candidate from this program, again demonstrating Redx's capability to accelerate timelines by taking a compound from discovery to development in less than two years.

Smoothened Hedgehog program

The Smoothened receptor is a promising target linked to the activation of the Hedgehog pathway, which is implicated in the tumourigenesis of several cancer types including basal cell carcinoma ("BCC"), the most common skin cancer, as well as rhabdomyosarcoma, cancer of the supporting tissues of the body, and medulloblastoma, the most common malignant brain tumour in children.

Our SMO candidate, RDX001, has the potential to be a first-in-class product for topical treatment of BCC. There are more than 2.5 million cases of BCC annually in the US alone and the current treatment is mainly through surgical excision of tumours, which can be disfiguring for patients. There is therefore a strong market pull for a topical agent such as ours that can be used to reduce the impact of surgery or eradicate its need altogether.

Bruton's Tyrosine Kinase program

Bruton's Tyrosine Kinase is a key biological enzyme target in the treatment of a range of blood cancers and autoimmune diseases including rheumatoid arthritis and lupus. Our irreversible BTK inhibitor candidate, RDX002, which we identified in May, has an improved selectivity profile compared to first generation BTK inhibitors, which we believe will lead to a better tolerated oral medicine with fewer side-effects.

Porcupine program

Porcupine is a key enzyme in the oncogenic Wnt signalling pathway. This pathway is implicated in a range of hard-to-treat cancers with poor prognosis such as pancreatic, triple negative breast and head & neck tumours. Our most recent development candidate, RDX004, nominated after the year end, is a potent inhibitor of this enzyme and pathway, leading to strong tumour growth inhibitory effects in pancreatic cancer models. We aim to progress our once-a-day oral dosing candidate through regulatory pre-clinical tests towards patient studies in the next 12 months.

Colony Stimulating Factor-1 receptor ("CSF-1" or "cFMS") program

The cFMS program is progressing well. As previously reported, we have established in vivo proof of concept with our lead series of cFMS inhibitors and are continuing to work to further optimise these compounds to support the selection of a development candidate which can be progressed towards clinical studies. We believe that our small molecule inhibitors have the potential to treat cancers by modulating the tumour micro-environment and reducing bone metabolism to ameliorate fractures caused by cancer metastases.

Immune modulation is a validated strategy in oncology with a growing focus on combination approaches. The importance of cFMS as a target was highlighted through the collaboration between Merck & Co and Plexxikon in May 2015 regarding Keytruda and PLX3397.

Anti-infectives

The lack of new drugs to target drug-resistant infections is a critical issue, and our collaboration with The Royal Liverpool and Broadgreen University Hospitals Trust ("the Trust") on new drugs to tackle drug-resistant bacteria including Methicillin-Resistant Staphylococcus Aureus ("MRSA") is unique in the field. During the year, we reached the pre-clinical development stage with the selection of a novel candidate compound, RDX003, for progression.

RDX003 is the first development candidate from our anti-infective research activities and potentially represents the first new class of antibiotics in a generation, a critical achievement given the ever-increasing rise of global resistance to antibiotics.

MRSA

Our candidate compound is an exciting potential antibiotic that has been developed to treat a range of Gram-positive bacterial infections, including resistant strains such as MRSA. MRSA can cause a variety of debilitating diseases such as skin and tissue infection, pneumonia and blood infections, especially in the hospital setting. RDX003 is a new class of antibiotic acting via the type II bacterial topoisomerases. It has a novel binding mode of action which allows it to remain effective against a range of resistant strains of bacteria, and it also has a low propensity for bacteria to become resistant to its action. RDX003 has the potential to represent the first new class of antibiotics in a generation - a critical step forwards in the global fight against anti microbial resistance ("AMR").

Launch of immunology research

In May 2015, we announced the launch of a third area of research in immunology. The establishment of this activity was a logical step for the business, and allows our team to build upon the successes that we have already seen in our oncology and anti-infectives research programs, where immunological approaches have been at the heart of therapies for cancer and Hepatitis B infection.  As with our oncology and anti-infectives programs, Redx's approach in immunology is to focus on drug targets with strong commercial appeal and create novel, highly-differentiated, best-in-class drugs.

Our immunology group is based at Alderley Park and is supported by a grant of £4.2m from the UK Government's Regional Growth Fund. We have now completed the recruitment of key personnel and identified initial research areas.

Industry Overview

Throughout the past year we have continued to see change and evolution in the pharma industry with further consolidation of companies and refocusing of R&D and commercialisation on core therapeutic franchises.

Whilst they continue to acquire early-stage assets - particularly in key therapeutic areas such as oncology - pharmaceutical companies face increasingly difficult choices in the allocation of internal resources across their drug development programs. With significant P&L constraints and rich pipelines it has become increasingly difficult for many companies to fully fund and develop every drug candidate. In the past 12 months several deals have been concluded that demonstrate how pharma companies are now seeking to tap into the expertise of biotechs to help progress assets more efficiently. High profile examples of this strategy include agreements between Novartis/Mereo Biopharma and Lilly/Ignyta.

Drug pricing is an issue that is gaining more and more attention globally. As the cost of new therapies - particularly in cancer - continues to rise, there has been increasing evidence that payers are seeking better value for their drug spend. This has been brought into sharper focus by the rise of combination therapy approaches in oncology, where companies are combining two or more, often expensive, drugs from different classes. This issue looks set to dominate the agenda over the next few years as the understanding of cancer biology continues to improve and diagnosis becomes available to identify specific biological markers that highlight those patients who are more likely to respond to therapy. The most likely outcome is that companies will seek to license in programs in order that they own all components of a particular combination therapy and have full control over pricing strategies. This complements Redx's strategy of creating best in class therapeutics that can ultimately be partnered for commercialisation. 

Collaborations and Partnerships

To date, Redx has signed five deals and collaborations with:

-       AstraZeneca for an undisclosed oncology target;

-       the RLBUHT (Royal Liverpool & Broadgreen University Hospital Trust) for MRSA,

-       Pierre Fabre, for skin cancer,

-       the European Innovative Medicines Initiative ENABLE project (a pharma consortium led by GlaxoSmithKline) on Gram-negative microbial infection, and

-       National Institute of Allergy and Infectious Diseases, for influenza-related drug programs.

In September 2015, we announced a collaboration with Horizon Discovery Group plc. It focuses on our pan-RAF inhibitor program which is targeting colorectal cancer, the fourth most common cancer and the second most common cause of cancer death in the UK. The collaboration will enable us to better understand the underlying biology of our compounds at a molecular level and will support future licensing efforts.

We continue to have encouraging discussions with a number of parties regarding future commercial collaborations across our pipeline.

Strategy

Since its inception, Redx has established a strong base from which the Group is seeking to leverage value. This base is founded on five pillars - Capability, Pipeline, Capacity, Commercial Relationships and Capital.

·   Capability: Redx has a world-class capability in small-molecule drug discovery and development with particular expertise in immuno-oncology, cancer stem cells, anti-microbial resistance and auto-immune diseases.

·     Pipeline: Redx has established a pipeline of exciting assets across cancer, infection and immunology that are rapidly progressing towards clinical evaluation.

·   Capacity: The Group's highly qualified scientific team of more than 120 scientists provides a strong R&D engine delivering innovative, commercially relevant drug assets.

·  Commercial Relationships: From the outset, Redx has worked hard to establish strong commercial relationships across the industry enabling the Group to secure innovative deals and partnerships for its assets.

·     Capital: As a public company, Redx has access to the capital markets to support its ambitious growth plans.

The Board has adopted a strategy that will see Redx continue to grow significantly over the short to medium term, with organic growth supplemented by selective acquisitions:

·     Organic Growth

We will continue to drive our pipeline programs towards clinical development in order to maximise their individual value. In parallel, we will continue to seek collaboration and licensing deals for our assets that will lift the value of the overall pipeline.

·     Inorganic Growth

At the same time as driving organic growth, Redx is actively seeking complementary assets and capabilities that can accelerate the Group's growth and development.

Properly executed, we anticipate that this strategy will result in significant value growth for investors.

Senior Management Team

Shortly after the financial year end, we were delighted to announce two senior management appointments, with Nicholas Adams joining as Chief Business Officer and Dr Matilda Bingham promoted to Executive Director of Redx's oncology subsidiary. Both appointments reflect the strides the business has made over the last year and help to support the Group's next phase of growth. 

Financial Review

Other operating income

The Group generated other operating income of £2.6 million during the year ended 30 September 2015 (2014: £6.2 million). This comprised £1.3 million in respect of income recognised from the RLBUHT in support of the MRSA program and £1.3 million recognised in respect of Regional Growth Fund grants administered by the Department of Business, Innovation and Skills of the UK Government. RGF funding for anti-infectives research was completed during the year.

There were no new sources of other operating income during the year.

Share based compensation

As part of the IPO process, a number of options were awarded to Directors and key personnel. This had no cash impact on the results for the year, however accounting standards required this share based compensation to be recognised in the Consolidated Statement of Comprehensive Income, resulting in a charge of £0.6m (2014: £0.01m).

Taxation

Our tax credit reduced by £0.2 million to £0.7 million for the year (2014: £0.9 million). The credit this year has two components for the first time, £0.5m in respect of R&D tax credits, and £0.3m in respect of Research and Development Expenditure credit. In addition the provision for amounts receivable for prior years has been reduced by £0.2m. This was as a result of on-going discussions with HMRC regarding the interaction between tax credits and RGF funding.

Disposal of Redx Crop Protection Ltd

In October 2014 the Group completed the successful disposal of Redx Crop Protection Ltd. leading to a gain of £0.895m being recognised in the Consolidated Statement of Comprehensive income.

Losses

Loss before income tax was £8.8 million (2014: £4.3 million). Net loss for the year was £8.2 million (2014: £3.4 million), representing a loss per share of 14.1 pence per share,  (2014: loss per share of 7.6 pence, adjusted for the changes in share capital).

Cash Flows

The Group had a net cash inflow of £6.5 million for the year ended 30 September 2015 as compared to a net cash inflow of £1.9 million for the previous year.

Cash used by operating activities increased by £4.1 million to £6.7 million for the year compared to £2.6 million for the year ended 30 September 2014. This was driven by an increase in research and development investment, as well as an overall increase in general and administration costs.

Research and development tax credits received during the year reduced by £0.3 million to £0.1 million.

Net cash inflow from financing activities increased by £9.3 million to £13.4 million for the year due to the receipt of net proceeds of £13.4 million from an equity placing completed in March 2015.

Financial Position

As at 30 September 2015, total cash and cash equivalents held were £9.4 million (2014: £2.9 million).

Headcount

Average headcount of the Group for the year was 145 (2014: 159). The reduction in headcount is attributable to a reduction in the number of industrial placement students on fixed term contracts.

Share Capital

On 13 March 2015, pursuant to the exercise of an option agreement dated 12 December 2012, 20,516 Ordinary C shares were issued.

On 16 March 2015 the B Ordinary shares were reclassified as 9 Ordinary shares and 9 Deferred B Shares. In addition the C Ordinary shares were reclassified as 16,233 Ordinary shares and 16,233 Deferred C shares.

On 17 March 2015 the 9 B Deferred shares and 16,233 C Deferred shares were cancelled and the Company reduced its issued share capital from £6,981.27 to £6,311.22. At the same date 74 Ordinary shares were allotted by way of bonus issue to each shareholder for every 1 Ordinary share issued, resulting in an issued share capital of £473,341.50.

On 27 March 2015 the Company issued a further 17,647,059 Ordinary shares at £0.85 each pursuant to a placing and admission to trading on AIM. The gross proceeds of the issue were £15m.

Outlook

We anticipate that there will be further development in the Redx pipeline throughout the 2016 financial year, with our first programs being prepared for entry to first-in-human clinical studies in the following financial year.

A number of commercial discussions are underway across our pipeline assets and the Board is confident that we will secure further partnerships in due course.

We are also exploring options to broaden Redx's capability and asset base as we seek to further increase the growth capacity for the business. We are confident that Redx will continue to grow during 2016 and provide strong returns for our shareholders.

Porcupine

Redx Oncology's Porcupine ("PORCN") program is targeting some of the most hard-to-treat cancers including pancreatic, triple negative breast, and head and neck cancers.

The Group's novel, potent small molecule Porcupine inhibitor targets the Wnt pathway, which plays a crucial role in the regulation of a number of processes, including cell proliferation, survival, and self-renewal in stem cells. Scientists have discovered a potential link between abnormal Wnt signalling in adults and disease origination, including cancer⁵.

Despite the importance of Wnt biology, there are no currently approved drugs which target this pathway and there are only two other porcupine inhibitor candidates in clinical trials. A key challenge in developing a drug to target such an important pathway in humans is the safety of such therapies. Researchers have struggled to identify a receptor in the pathway that can provide a therapeutic effect in cancer before any toxicity associated with hitting that receptor in healthy cells occurs. Several companies have looked unsuccessfully at different targets in the Wnt signalling pathway, for example tankyrases, but have failed to demonstrate a suitable therapeutic window - the gap between the dose needed for efficacy and that at which toxicity occurs. Consequently, for some time it was felt that this critical pathway may be unsuitable for drug therapy.

Redx Oncology's scientists have taken on this difficult challenge and, in contrast to competitor drugs looking at other targets on the pathway, Redx has been able to establish a favourable therapeutic window for the pivotal PORCN target.  We have identified two novel chemical series that were then further profiled in in vivo proof of concept ("POC") studies designed to assess the effects of these compounds in pancreatic cancer disease models.

As well as our PORCN compounds showing activity in tackling cancer stem cells, it is particularly exciting that recent developments show that the Wnt pathway may have a role in the field of immuno-oncology.

In December 2015 Redx Oncology nominated a novel PORCN inhibitor drug candidate to progress into pre-clinical development with a view to starting clinical trials in financial year 2017.  The commercial potential for this new drug candidate is particularly attractive and we believe that the superior characteristics of Redx's compound could result in a best-in-class drug that provides new hope to patients that suffer from these challenging cancers.

The success to date of the Porcupine program has positioned Redx Oncology to be a key player in exploiting the emerging therapeutic and commercial potential in this field.  The PORCN program provides Redx Oncology with an excellent opportunity to tap into two of its areas of its expertise: cancer stem cells (CSCs) and immuno-oncology.

The Wnt pathway is implicated in the maintenance of cancer stem cells (CSCs). CSCs are a tiny population of cells that chemotherapy leaves behind which allow the cancer to come back at a later date. Similar to normal stem cells, CSCs undergo a process of self-renewal and are therefore associated with tumorigenesis, metastasis, recurrence and resistance in cancer.

Redx is currently conducting experiments to see if the PORCN inhibitor could also stimulate the immune system to fight the cancer while, at the same time, killing any left-over CSCs

Pancreatic cancer

Redx Oncology's scientists believe the Wnt pathway could hold the key to unlocking an effective treatment for some of the deadliest cancers, such as pancreatic cancer.

·     Nearly 24 people a day and nearly one person an hour will die from pancreatic cancer in the UK.

(Pancreatic Cancer Action)

·     While cancer survival rates have doubled in the last 40 years, pancreatic cancer remains an exception - 3% of people diagnosed with pancreatic cancer survived five years or more, exactly the same number as forty years ago.

(Pancreatic Cancer Research Fund)

·     Pancreatic cancer is the tenth most prevalent cancer in the UK

(Cancer Research UK)

·    The number of people diagnosed with pancreatic cancer in the UK has been steadily rising: in 2012, 8,888 people were newly diagnosed with pancreatic cancer in the UK, an increase of 1.3% on 2011. In 2012, the number of deaths due to pancreatic cancer in the UK rose to 8,662, an increase of 4% on 2011.

(Cancer Research UK)

To date, treatment for pancreatic cancer is usually a combination of surgery, chemotherapy and radiation. Redx Oncology's new approach to tackling this deadly disease through immuno-oncology and targeting cancer stem cells could be the breakthrough pancreatic cancer patients have been waiting for.

MRSA

The discovery of penicillin was a pivotal moment in human history. But the ease with which antibiotics have been able to treat infection since then has resulted in an epidemic of overuse, allowing certain strains of bacteria to become resistant to the biocidal action of these critical drugs. The problem of anti-microbial resistance (AMR) has become increasingly urgent because antibiotic use is rising globally and the discovery of new antibiotics has slowed dramatically. 

Without the development of new antibiotics that kill drug-resistant bacteria, resistant infections will cost the world 10 million extra deaths a year and up to $100 trillion USD by 2050, according to recent findings from the Review on Antimicrobial Resistance, a UK Government initiative.

To address this urgent area of unmet medical need, Redx's Anti-Infectives division has applied its expertise in antibacterial research to identify novel topoisomerase inhibitors, which work as antibiotics against these resistant 'superbugs'. Redx is researching compounds which can act against both Gram-positive bacteria, such as MRSA and Streptococcus, and Gram-negative bacteria, such as E.coli and Pseudomonas.

Infections caused by Methicillin-resistant Staphylococcus aureus ("MRSA") pose a major burden on healthcare systems across the world; specifically, MRSA infections kill approximately 19,000 hospitalised US patients annually¹ and in the European Union, MRSA accounts for 44% of all healthcare-associated infections ("HAIs"), 22% of attributable extra deaths, and 41% of extra days of hospitalisation associated with HAIs² . In 2014, there were a total of 797,883 hospitalised incident cases of MRSA in the developed world and this number is still increasing despite all efforts to combat MRSA. In fact, the number of cases (of hospitalisation) is forecast to increase to 884,727 by 2024³.

The Group's pioneering partnership with the RLBUHT is focused on finding new drugs to treat MRSA and other drug-resistant bacteria.  Excitingly, in June 2015 Redx Anti-Infectives nominated a novel antibiotic compound to progress into pre-clinical development with a view to commencing clinical trials in financial year 2017.  Drugs from this compound series have the potential to provide the first new class of antibiotics in a generation - a major breakthrough in the fight against AMR.  Our candidate has promising commercial potential, having demonstrated excellent oral and in vivo efficacy in animal models of bacterial infection. Importantly, as an oral drug, the compound has the potential to be easily administered in both the wider community and in a hospital setting.  This contrasts to current treatment for MRSA, which typically requires in-hospital treatment with antibiotics available only in an injectable form. 

In recognition of the growing threat of resistance to antibiotics, in 2014, the UK Government commissioned the leading economist, Lord Jim O'Neill, to conduct an independent review to explore the economic issues surrounding antimicrobial resistance.  The review is co-funded and hosted by the Wellcome Trust, the world's second largest medical research foundation.

Before the discovery of penicillin and subsequent development of antibiotics, bacterial infections most often had devastating consequences. After a simple cut or scrape, if the tell-tale red stripes appeared on a patient's skin, amputation would occur to stop the spread of the infection - and even this did not guarantee survival. But with the introduction of antibiotics, these infections could easily be treated.

Alarmingly, infections that were so deadly before the discovery of penicillin are on the verge of once again becoming fatal. MRSA is a form of bacterial infection which can be carried on the skin, and can enter the body through open wounds or other entries to cause blood poisoning and other serious infections. More importantly, currently available antibiotics are ineffective against MRSA, resulting in costly and challenging treatment.

·     It has been 25 years since any new class of antibiotic has become available

·     70% of bacteria are resistant to at least one antibiotic

·     Drug-resistant infections are already responsible for more than half a million deaths globally each year and this number is expected to increase.

·     Without new antibiotics, these infections could kill an extra 10 million people across the world every year by 2050⁴

¹Boucher HW and Corey GR (2008). Epidemiology of methicillin-resistant Staphylococcus aureus. Clinical Infectious Diseases; 46(Suppl 5): S344-S349.

¹Chu V, et al. (2005). Staphylococcus aureus bacteremia in patients with prosthetic devices: costs and outcomes. The American Journal of Medicine; 118(12): 1416e19-1416e24.

¹Klevens R, et al. (2007a). Invasive methicillin-resistant Staphylococcus aureus infections in the United States. Journal of the American Medical Association; 298(15): 1763-1771.

 ²Köck R, et al. (2010). Methicillin-resistant Staphylococcus aureus (MRSA): burden of disease and control challenges in Europe. Eurosurveillance; 15(41): 19688-19697.

³ Globaldata EpiCast Report: Methicillin-Resistant Staphylococcus Aureus (MRSA) - Epidemiology Forecast to 2024

⁴Source Review on Antimicrobial Resistance

⁵Merchant, A.A. & Matsui, W. Targeting Hedgehog--a cancer stem cell pathway. Clin Cancer Res 16, 3130-40 (2010).

Consolidated Statement of Comprehensive Income

For the year ended 30 September 2015

	Note		Year ended 30 September 2015 £'000		Year ended 30 September 2014 £'000
Continuing operations
Operating expenses			(11,471)		(10,157)
Share based compensation			(608)		(14)
Other operating income			2,648		6,157
Loss from operations			(9,431)		(4,014)
Gain on disposal of subsidiary undertaking			895		-
Finance costs			(348)		(249)
Finance income			59		-
Loss before taxation			(8,825)		(4,263)
Income tax			650		910
Total comprehensive loss for the year attributable to owners of Redx Pharma plc			(8,175)		(3,353)
Loss  per share (pence)
From continuing operations
Basic & diluted	4		(14.1)		(7.6)

Consolidated Statement of Financial Position

At 30 September 2015                                                                                                     

	Note	2015 £'000	2014 £'000	As at 1 October 2013 £'000
Assets
Non-current assets
Property, plant and equipment		353	130	328
Intangible assets		309	309	309
Other receivables		750	-	-
Total non-current assets		1,412	439	637
Current assets
Trade and other receivables		1,407	2,597	3,504
Cash and cash equivalents		9,436	2,892	1,028
Current tax		1,501	948	389
Total current assets		12,344	6,437	4,921
Assets held for sale		-	183	78
Total assets		13,756	7,059	5,636
Liabilities
Current liabilities
Trade and other payables		4,056	3,077	2,698
Borrowings		-	2,000	2,000
Total current liabilities		4,056	5,077	4,698
Liabilities re items held for sale		-	162	162
Non-current liabilities
Non-current borrowings		2,000	-	-
Total liabilities		6,056	5,239	4,860
Net assets		7,700	1,820	776
Equity
Share capital	5	650	7	6
Share premium	6	13,516	12,313	7,931
Share-based compensation		622	152	138
Capital redemption reserve		1	-	-
Retained deficit		(7,089)	(10,652)	(7,299)
Equity attributable to shareholders		7,700	1,820	776

Consolidated Statement of Changes in Equity

For the year ended 30 September 2015

	Share capital £'000	Share premium £'000	Share based payment £'000	Capital Redemption Reserve £'000	Retained Deficit £'000	Total Equity £'000
At 1 October 2013	6	7,931	138	-	(7,299)	776
Share issue	1	4,693	-	-	-	4,694
Share issue costs	-	(311)	-	-	-	(311)
Transactions with owners in their capacity as owners	1	4,382	-	-	-	4,383
Loss and total comprehensive income for the period	-	-	-	-	(3,353)	(3,353)
Share based compensation	-	-	14	-	-	14
Movement in year	1	4,382	14	-	(3,353)	1,044
At 30 September 2014	7	12,313	152	-	(10,652)	1,820
Share issue	177	14,823	-	-	-	15,000
Exercise of share options	-	14	(138)	-	138	14
Share issue costs	-	(1,567)	-	-	-	(1,567)
Cancellation of share premium	-	(11,600)	-	-	11,600	-
Creation of capital redemption reserve	(1)	-	-	1	-	-
Bonus issue	467	(467)	-	-	-	-
Transactions with owners in their capacity as owners	643	1,203	(138)	1	11,738	13,447
Loss and total comprehensive income for the year	-	-	-	-	(8,175)	(8,175)
Share based compensation	-	-	608	-	-	608
Movement in year	643	1,203	470	1	3,563	5,880
At 30 September 2015	650	13,516	622	1	(7,089)	7,700

Consolidated Statement of Cash Flows

For the year ended 30 September 2015

		Year ended 30 September 2015 £'000	Year ended 30 September 2014 £'000
Net cash flows from operating activities
Loss for the year		(8,175)	(3,353)
Adjustments for:
Income tax		(650)	(910)
Finance costs (net)		289	249
Gain on disposal of subsidiary undertaking		(895)	-
Depreciation and amortisation		139	252
Share based compensation		608	14
Movements in working capital
Decrease in trade and other receivables		1,194	985
Increase in trade and other payables		815	217
Decrease/(increase) in items held for sale		21	(21)
Cash used in operations		(6,654)	(2,567)
Tax credit received		97	351
Interest received		19	-
Net cash used in operations		(6,538)	(2,216)
Cash flows from investing activities
Purchase of property, plant and equipment		(362)	(54)
Net cash used in investing activities		(362)	(54)
Cash flows from financing activities
Proceeds from share issue less costs		13,447	4,383
Interest paid		(3)	(249)
Net cash from financing activities		13,444	4,134
Net increase in cash and cash equivalents		6,544	1,864
Cash and cash equivalents at beginning of the year		2,892	1,028
Cash and cash equivalents at end of the year		9,436	2,892

Notes to the financial information

1.      Basis of preparation

The financial information set out herein does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006.  The financial information for the year ended 30 September 2015 has been extracted from the Group's audited financial statements which were approved by the Board of Directors on 19 January 2016 and which, if adopted by the members at the Annual General Meeting, will be delivered to the Registrar of Companies for England and Wales. 

Statutory accounts for the year ended 30 September 2014, prepared under UK GAAP, were approved by the Board on 16 January 2015 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498(2) or section 498(3) of the Companies Act 2006.

The financial information for the year ended 30 September 2014 has been extracted from the Group's 2015 Interim Report. The financial information included in the Group's 2015 Interim Report, which is publicly available, are considered to be the first set of consolidated financial information prepared in accordance with IFRSs and, as such, the disclosures required by IFRS in respect of change in accounting framework from Financial Reporting Standards for Smaller Entities ('FRSSE') to IFRS are not included in this financial information.

The report of the auditor on the 30 September 2015 financial statements was unqualified, did not include any references to any matters to which the auditors drew attention by way of emphasis without qualifying their report and did not contain a statement under Section 498(2) or Section 498(3) of the Companies Act 2006.

The information included in this preliminary announcement has been prepared on a going concern basis under the historical cost convention, and in accordance with International Financial Reporting Standards (IFRSs) as adopted by the EU and the International Financial Reporting Interpretations Committee (IFRIC) interpretations issued by the International Accounting Standards Board ("IASB") that are effective or issued and early adopted as at the date of these financial statements and in accordance with the provisions of the Companies Act 2006.

The Company is a public limited company incorporated and domiciled in England & Wales and whose shares are listed on AIM, a market operated by The London Stock Exchange.

2.    Going concern

As part of their going concern review the Directors have followed the guidelines published by the Financial Reporting Council entitled ''Guidance on Risk Management and Internal Control and Related Financial and Business Reporting''.

The Group incurred a net loss of £8.2m during the year; however, the Directors are satisfied, based on detailed cash flow projections and after the consideration of reasonable sensitivities, that sufficient working capital is available to meet the Group's needs as they fall due for the foreseeable future and at  least 12 months from the date of signing the accounts.

The detailed cash flow assumptions are based on the Group's annual budget, prepared and approved by the Board, which reflects a number of key assumptions in addition to revenue forecasts, underpinned by the current pipeline.

Within the revenue forecasts, there are inherent judgements regarding the commercial and technical risk of programs. Whilst acknowledging the uncertainties in the operating environment and their resultant impact on revenues, the Directors have identified a number of opportunities to manage working capital, to mitigate against any deteriorations and uncertainties in trading conditions.

On the basis of the above review, the Directors are confident that the Group has sufficient working capital to honour all of its obligations to creditors as and when they fall due. Accordingly, the Directors continue to adopt the going concern basis in preparing the Financial Statements.

3.    Segmental information

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The Board of Directors and the Chief Financial Officer are together considered the chief operating decision-maker and as such are responsible for allocating resources and assessing performance of operating segments.

The Directors consider that there are no identifiable business segments that are subject to risks and returns different to the core business. The information reported to the Directors, for the purposes of resource allocation and assessment of performance is based wholly on the overall activities of the Group.

The Group has therefore determined that it has only one reportable segment under IFRS8.

4.      Loss per share

Basic loss per share is calculated by dividing the net income for the period attributable to ordinary equity holders by the weighted average number of ordinary shares outstanding during the period.
In the case of diluted amounts, the denominator also includes ordinary shares that would be issued if any dilutive potential ordinary shares were issued following conversion of loans or exercise of share options.
The basic and diluted calculations are based on the following:
		Year to 30 September 2015	Year to 30 September 2014
		£000	£000
Loss for the period attributable to the owners of the Company		(8,175)	(3,353)
		Number	Number
Weighted average number of shares - basic and diluted		58,021,962	44,252,143
		Pence	Pence
Loss per share - basic and diluted		(14.1)	(7.6)
The loss and the weighted average number of shares used for calculating the diluted loss per share are identical to those for the basic loss per share. This is because the outstanding share options would have the effect of reducing the loss per share and would therefore not be dilutive under IAS 33 Earnings per Share. The number of shares included in the comparative figure for 2014 has been updated to give effect to the bonus issue and restructuring of the share capital which took place during the current year.

5.            Related parties

Balances and transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note. Transactions between the Group and other related parties are disclosed below:-

Trading transactions

The Group has purchased services in the normal course of business from the following companies related to individuals who are or were Directors of the Group:

                                Intelia Consulting Ltd - owned by P. Jackson.

                                Jadara Pharma Ltd - owned by P. L. Gould (formerly a Director) - Prior year only.

                                Yorkshire Process Technology Ltd - of which P. Jackson is a Director

                                Acceleris Capital Ltd - of which N. Molyneux is a Director

                                Norman Molyneux Consultancy Ltd - owned by N. Molyneux

                                Dr Frank M Armstrong Consulting Ltd - owned by F. Armstrong

The Group has provided services in the normal course of business to the following companies related to individuals who are or were Directors of the Group:

                Redag Crop Protection Ltd - of which N. Molyneux is a Director. A loan has also been granted as part of the sale of this company.

The Group has purchased arms length health & safety consultancy services from Mrs. R Jackson who is the wife of P. Jackson. The Group has purchased arms length administration services from Mrs. J. Murray, who is the wife of N. Murray.

The Group has purchased other services, and has paid deal fees and commissions, in connection with external fundraising from Acceleris Capital Ltd. These are also set out below, and were charged to the share premium account.

The amounts outstanding are unsecured.

The Group has a loan of £750,000 due from Redex Crop Protection Ltd. N. Molyneux, N. Murray, D. Lindsay, P. Jackson and P. McPartland are all shareholders in Redag Crop Protection Ltd, that company's parent undertaking.

Purchases from/(charges to) related parties	2015 £'000	2014 £'000
Intelia Consulting Ltd	84	100
Jadara Pharma Ltd	-	22
Yorkshire Process Technology Ltd	-	229
Redag Crop Protection Ltd	(91)	47
Acceleris Capital Ltd	59	95
Acceleris Capital Ltd (fundraising items)	295	200
Norman Molyneux Consultancy Ltd	18	-
Dr Frank M Armstrong Consulting Ltd	32	-
Mrs R Jackson	-	6
Mrs J Murray	18	18
	415	717

Amounts owed to/(by) related parties	2015 £'000	2014 £'000	As at 1 October 2013 £'000
Intelia Consulting Ltd	25	21	54
Jadara Pharma Ltd	-	-	1
Yorkshire Process Technology Ltd	-	98	118
Redag Crop Protection Ltd	(21)	47	-
Redag Crop Protection Ltd - loan	(750)	-	-
Acceleris Capital Ltd	3	231	444
Norman Molyneux Consultancy Ltd	6	-	-
Dr Frank M Armstrong Consulting Ltd	9	-	-
Mrs J Murray	-	2	2
	(728)	399	619

6.            Contingent liabilities

         The Group has continued to receive Regional Growth Fund grants administered by the Department of Business, Innovation and Skills of the UK Government in support of its research programs around early stage proprietary small molecule therapeutics. At the end of the year the Group had received total grants carried forward as follows:

	2015 £'000	2014 £'000
RGF 2	5,920	5,920
RGF 3	4,700	4,173
RGF 5	470	-
	11,090	10,093

Receipt of these grant monies is subject to various performance criteria, the most significant of which are the obligation to defray specific operational expenditure in relation to the research programs before the claims were made (considered to be the funded expenditure); and the requirement to confirm the reasonable belief that funded expenditure will lead to the creation or safeguarding of a specific average number of jobs connected with those programs to the end of the monitoring periods which are for RGF2 31 March 2017, for RGF3 17 April 2019 and 31 March 2020 for RGF5 (considered to be the long term results). If the Group fails to create or safeguard an average number of jobs connected with the research programs through to the end of the monitoring periods, which are 160 for RGF2, 99 for RGF3 and 110 for RGF5, it may be required to repay £37,000, £47,475 and £57,297 in relation to RGF2, RGF3 and RGF5 respectively for each job not created or safeguarded. The Group has never been asked to make any such repayment in the past and believes it has satisfied the Monitoring Officer appointed by the Department of Business, Innovation and Skills that it continues to be on track to meet the jobs target specified. The Group has therefore made no provision for such repayment. There were no other contingent liabilities at the year end.

7.            Report and accounts

A copy of the Annual Report and Accounts will be sent to all shareholders with notice of the Annual General Meeting shortly and will also be available to download from the Group's website at www.redxpharma.com.

 

END

 

 

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