Preliminary results for the year ended 31 Janua...

Preliminary results for the year ended 31 January 2013

e-Therapeutics plc

e-Therapeutics’ preliminary results for the year ended 31 January 2013

14 May 2013 - e-Therapeutics plc (“e-Therapeutics”; AIM: ETX), the drug discovery and development company, today announces its preliminary results for the year ended 31 January 2013.

Highlights of 2012/13

(* = events after the 31 January 2013 year end; **announced today)

Lead cancer drug ETS2101 enters clinic
•	US phase I trial started in patients with brain cancer
•	UK phase I trial begun in patients with solid tumours
•	First findings reported from phase I programme**
•	Key phase I results expected in Q4 2013 (brain cancer) and Q1 2014 (solid tumours)
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Pipeline refined and advanced
•	ETS6103: application filed with UK regulator for phase IIb trial in major depressive disorder**
•	ETX1153a for MRSA infection: preclinical development discontinued
•	ETX1153c for C. difficile infection: preclinical work progressing
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Major focus on drug discovery
•	Network Pharmacology Centre opened near Oxford
•	Multiple discovery programmes advancing in oncology and central nervous system disorders
•	Further strengthening of platform approach and intellectual property position
•	New candidate expected to progress to development by end of 2013
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Significant equity raise supports growth plans*
•	Year-end cash and liquid resources of £9.8 million (31 January 2012: £13.9 million) boosted to £48 million pro-forma following equity placing in March 2013*
•	Post-placing cash sufficient to fund business into calendar 2017, complete key efficacy trials of ETS2101 and broaden portfolio through new drug discovery programmes*
•	Full-year net loss of £4.2 million (2012: loss of £3.2 million) reflects increasing investment in drug discovery and development programmes

Commenting on the results, Professor Malcolm Young, CEO of e-Therapeutics, said: “We have growing momentum in the key areas of our business. Use of our innovative network pharmacology platform to discover new drugs is on track while our most significant product candidate, the cancer drug ETS2101, is making good progress in the clinic.”

Dr Daniel Elger, CFO of e-Therapeutics, added: “We are increasing investment in R&D as we seek to make the most of the opportunities in our platform and pipeline. Our recent £40 million fundraising leaves us even better placed to pursue our goals, with a cash runway that now extends to a potential partnering deal for our lead cancer drug and resources sufficient to generate a diversified portfolio of assets over the next 3-4 years.”

For more information, please contact:

e-Therapeutics plc

Malcolm Young, CEO / Daniel Elger, CFO

Tel: [phone]

www.etherapeutics.co.uk

Panmure Gordon (UK) Limited

Fred Walsh / Hannah Woodley / Grishma Patel

Tel: [phone]

www.panmure.com

College Hill

Melanie Toyne Sewell / Stefanie Bacher / Rebecca Caygill / Donia Al Saffar

Tel: [phone]

Email: [e-mail]

ComStrat Group (US)

Ted Agne

Tel: [phone]

Email: [e-mail]

Chairman’s statement

Overview

Our business is built around a distinctive new approach to the discovery of medicines called network pharmacology. We have formulated this approach as a patented platform technology, which we are using to seek novel treatments for cancer and disorders of the nervous system. Our strategy is to take promising drug candidates from discovery through clinical trials to a point when they can be licensed on attractive terms to larger companies. We expect this to provide revenues in the form of upfront payments, progress-based milestone payments and royalties on any sales. During the year we advanced our most important candidate, the cancer drug ETS2101, into two phase I trials. We also continued to build a broad portfolio through work to discover more new drugs at our Network Pharmacology Centre near Oxford and by selectively advancing other candidates alongside ETS2101. Since the year end, we have raised significant additional capital to further our drug discovery and development plans.

Cancer drug enters trials

Our top priority in 2012 was to move our cancer drug ETS2101 into clinical trials. Accordingly, we initiated two phase I studies during the period: an investigator-led trial in brain cancer, which is taking place at the UC San Diego Moores Cancer Center in La Jolla, California, and a company-sponsored study that is enrolling patients with a variety of solid tumours at hospitals in Newcastle and Leeds, UK. Both trials have a dose-escalating design, in which successive groups of patients receive increasing doses of ETS2101. The aim is to establish an appropriate dose for phase II development, assess safety and tolerability and identify any initial signs of anti-cancer activity.

In December we announced that the two trials had enrolled a total of 12 patients at relatively low dose levels and that no serious drug-related adverse events had been observed. Since then, more patients have been treated with higher doses of ETS2101. The additional patients have all been in the UK because recruitment paused for a time in the US pending approval of a protocol amendment. Eleven patients have now been treated in the UK trial. No serious adverse events have been attributed to ETS2101, although one patient had severe fatigue after receiving the drug and continued treatment at a lower dose. A patient with oesophageal cancer has experienced a partial response according to RECIST, a standard method for assessing the impact of treatments on tumour burden (see Notes below). Both the UK and US studies continue to recruit patients and we expect key data from the brain cancer trial in Q4 2013 and from the solid tumour trial in Q1 2014.

ETS2101 represents a significant commercial opportunity because it could address unmet needs in multiple high-value oncology market segments. If key data on dosing and safety from the phase I programme are supportive we intend to advance the drug rapidly into the next phase of its clinical development. We expect this to include a randomised phase II trial in brain cancer (glioma) and a phase Ib/II trial that will explore the drug’s activity in four to six other cancer indications. We indicated with the announcement of our share placing in February 2013 that we expect to spend around £25 million on completion of phase I trials and the efficacy trials that follow, with the intention to finish the studies in time to conclude a licensing deal or deals during 2017 if the data are positive.

Pipeline continues to evolve

We announce today that we have filed a Clinical Trial Application (“CTA”) with the UK’s Medicines and Healthcare Products Regulatory Agency (“MHRA”) for a phase IIb trial of ETS6103 in major depressive disorder. We anticipate that we will start enrolling patients at or around the end of Q2 2013. The trial will build on an earlier, small phase IIa study that produced encouraging results with ETS6103 in comparison with the approved tricyclic anti-depressant amitriptyline. It will include more patients and a longer period of treatment than we had originally planned, so we now expect to report results in the second half of 2014. We regard ETS6103 as a smaller commercial opportunity than ETS2101 but one that justifies the limited further investment needed to complete a proof-of-concept trial designed to demonstrate the product’s value to potential partners.

In May we announced that we would perform further preclinical work with our drug for the treatment of C. difficile infection, ETX1153c, before taking a decision on whether it should progress into clinical trials. This work is nearing completion, and we expect to make a go/no-go decision on the programme in Q3 2013. In October, we decided to cease development of our preclinical anti-MRSA drug ETX1153a because we considered other programmes likely to provide a better return on investment.

Discovery – fuelling future growth

Our new drug discovery hub near Oxford was opened in February 2012 by the UK’s Prime Minister, David Cameron. Scientists there are generating a pool of new drug candidates, from which we will select the best to advance into the clinic based on technical, clinical and commercial criteria. Work is concentrated in complex diseases in which we believe our technology has particular strengths, principally cancer and nervous system disorders. We remain on track to advance a new candidate from discovery into development by the end of 2013.

We continue to invest in improvements to our discovery platform and to gain additional intellectual property protection for our approach; we were granted further patents in the US and Europe during the period. We also remain active in exploring opportunities to collaborate with other companies on discovery programmes.

Strong balance sheet supports investment

Increasing investment in discovery and development drove an increase in our operating expenses from £4.0 million last year to £5.2 million for the year ended 31 January 2013. We had no revenues in the period (2012: nil), but recognition of R&D tax credits of £0.8 million (2012: £0.6 million) and net interest income of £0.2 million (2012: £0.2 million) reduced our net loss to £4.2 million (2012: £3.2 million).

At 31 January 2013 we had cash and short-term investments of £9.8 million (31 January 2012: £13.9 million). These resources were expanded significantly by a share placing to existing and new investors in March 2013; this raised £40.0 million (£38.8 million net of expenses) through the issue of 125 million new shares at 32p per share, leaving the Company with pro-forma cash and short-term investments of approximately £48 million on the close of the transaction.

The Company’s strategy is to license its products to pharmaceutical companies for late-stage development and commercialisation. The Company may also enter discovery collaborations with selected partners. We anticipate continuing losses until revenues from these sources exceed investment in R&D. Following our recent placing, we expect to be able to support our discovery and development plans into calendar 2017 even in the absence of any income from partners. Over that period we plan to complete mid-stage trials of our lead cancer drug ETS2101 and conclude a licensing deal for the product if the data are supportive. We also expect to add newly discovered candidates to our pipeline and advance a number of these through preclinical and early clinical development, giving us a broader portfolio in which risk is diversified and there are multiple sources of potential upside.

Board enhanced by new appointment

In February 2012 we appointed Dr Rajesh Chopra, a senior executive at Celgene Corporation, as a Non-Executive Director. Dr Chopra is bringing a great deal of relevant R&D and clinical experience to our Board.

Outlook

We look forward to reporting key results from our phase I trials of ETS2101 over the next year. We have clear plans in place to take this drug rapidly into efficacy trials if data continue to be supportive, and following our recent share placing we have the resources on hand to do this. In the meantime, during the remainder of this year we expect progress announcements on other clinical and preclinical candidates and to adopt the first of a new wave of candidates from our discovery work into formal development, an important landmark following the renewal of investment in our network pharmacology platform that began in 2011.

Professor Oliver James

14 May 2013

Notes

About the RECIST criteria used to assess tumour responses

RECIST (Response Evaluation Criteria in Solid Tumours) provide a standardised way of assessing the response of solid tumours to treatment. Under the criteria, a partial response is recorded when the linear dimensions of the tumour lesions selected for measurement at the start of the study reduce by at least 30% from baseline and no new lesions appear.

Consolidated income statement

For the year ended 31 January 2013

	Â	2013	Â	2012
Â	Â	£000		£000
Revenue		—		—
Cost of sales	Â	—		—
Gross profit		—		—
Research and Development expenditure		(4,093)		(2,898)
Administrative expenses	Â	(1,154)		(1,130)
Operating loss		(5,247)		(4,028)
Financial income		223		191
Financial expense	Â	—		(26)
Loss before tax		(5,024)		(3,863)
Taxation	Â	846		621
Loss for the year	Â	(4,178)		(3,242)
Loss for the year attributable to equity holders of the Company	Â	(4,178)		(3,242)
Loss per share – basic and diluted	Â	(3.02)p		(2.47)p

Consolidated statement of comprehensive income

For the year ended 31 January 2013

	Â	2013	Â	2012
Â		£000		£000
Loss for the financial year		(4,178)		(3,242)
Other comprehensive income		—		—
Total comprehensive income for the financial year		(4,178)		(3,242)

Consolidated statement of changes in equity

For the year ended 31 January 2013

	Â	Share	Â	Share	Â	Warrant	Â	Retained	Â
		capital		premium		reserve		earnings		Total
Â		£000		£000		£000		£000		£000
As at 1 February 2011		66		7,654		420		(7,867)		273
Total comprehensive income for year
Loss for the financial year		—		—		—		(3,242)		(3,242)
Total comprehensive income for year		—		—		—		(3,242)		(3,242)
Transactions with owners, recorded directly in equity
Issue of ordinary shares		72		17,610		—		—		17,682
Issue and exercise of warrants		—		288		(288)		—		—
Equity-settled share-based payment transactions		—		—		—		11		11
Total contributions by and distribution to owners		72		17,898		(288)		11		17,693
As at 31 January 2012		138		25,552		132		(11,098)		14,724
As at 1 February 2012		138		25,552		132		(11,098)		14,724
Total comprehensive income for year
Loss for the financial year		—		—		—		(4,178)		(4,178)
Total comprehensive income for year		—		—		—		(4,178)		(4,178)
Transactions with owners, recorded directly in equity
Issue of ordinary shares		—		15		—		—		15
Equity-settled share-based payment transactions		—		—		—		19		19
Total contributions by and distribution to owners		—		15		—		19		34
As at 31 January 2013		138		25,567		132		(15,257)		10,580

Company statement of changes in equity

For the year ended 31 January 2013

	Â	Share	Â	Share	Â	Warrant	Â	Retained	Â
		capital		premium		reserve		earnings		Total
Â		£000		£000		£000		£000		£000
As at 1 February 2011		66		7,654		420		(5,043)		3,097
Total comprehensive income for year
Loss for the financial year		—		—		—		(3,242)		(3,242)
Total comprehensive income for year		—		—		—		(3,242)		(3,242)
Transactions with owners, recorded directly in equity
Issue of ordinary shares		72		17,610		—		—		17,682
Issue and exercise of warrants		—		288		(288)		—		—
Equity-settled share-based payment transactions		—		—		—		11		11
Total contributions by and distribution to owners		72		17,898		(288)		11		17,693
As at 31 January 2012		138		25,552		132		(8,274)		17,548
As at 1 February 2012		138		25,552		132		(8,274)		17,548
Total comprehensive income for year
Loss for the financial year		—		—		—		(4,178)		(4,178)
Total comprehensive income for year		—		—		—		(4,178)		(4,178)
Transactions with owners, recorded directly in equity
Issue of ordinary shares		—		15		—		—		15
Equity-settled share-based payment transactions		—		—		—		19		19
Total contributions by and distribution to owners		—		15		—		19		34
As at 31 January 2013		138		25,567		132		(12,433)		13,404

Balance Sheets

As at 31 January 2013

	Â		Â	Group			Â	Company
				2013	Â	2012		2013	Â	2012
Â		Notes		£000		£000		£000		£000
Non-current assets
Property, plant and equipment		2		150		137		150		137
Intangibles		3		378		337		3,202		3,161
Investments		Â		—		—		—		—
Â		Â		528		474		3,352		3,298
Current assets
Tax receivable				845		577		845		577
Trade and other receivables				320		311		320		311
Fixed-term deposits				5,550		7,750		5,550		7,750
Cash and cash equivalents		Â		4,225		6,156		4,225		6,156
Â		Â		10,940		14,794		10,940		14,794
Total assets		Â		11,468		15,268		14,292		18,092
Current liabilities
Trade and other payables		Â		888		544		888		544
Â		Â		888		544		888		544
Total liabilities		Â		888		544		888		544
Net assets		Â		10,580		14,724		13,404		17,548
Equity
Share capital		4		138		138		138		138
Share premium		4		25,567		25,552		25,567		25,552
Warrant reserve		4		132		132		132		132
Retained earnings		4		(15,257)		(11,098)		(12,433)		(8,274)
Total equity attributable to equity holders of the Company				10,580		14,724		13,404		17,548

Statements of cash flow

For the year ended 31 January 2013

	Â		Â	Group			Â	Company
				2013	Â	2012		2013	Â	2012
		Notes		£000		£000		£000		£000
Cash flows from operating activities
Loss for the year				(4,178)		(3,242)		(4,178)		(3,242)
Adjustments for:
Depreciation, amortisation and impairment		2,3		194		81		194		81
Loss on disposal of fixed assets				1		—		1		—
Financial income				(223)		(191)		(223)		(191)
Financial expenses				—		26		—		26
Equity-settled share-based payment expenses				19		11		19		11
Taxation		Â		(846)		(621)		(846)		(621)
				(5,033)		(3,936)		(5,033)		(3,936)
Increase in trade and other receivables				(52)		(116)		(52)		(116)
Increase in trade and other payables				344		429		344		429
Tax received		Â		578		386		578		386
Net cash from operating activities		Â		(4,163)		(3,237)		(4,163)		(3,237)
Cash flows from investing activities
Interest received				266		99		266		99
Acquisition of property, plant and equipment		2		(60)		(139)		(60)		(139)
Acquisition of other intangible assets		3		(189)		(128)		(189)		(128)
Decrease / (increase) in fixed-term deposits		Â		2,200		(7,750)		2,200		(7,750)
Net cash from investing activities		Â		2,217		(7,918)		2,217		(7,918)
Cash flows from financing activities
Net proceeds from issue of share capital		4		15		17,682		15		17,682
Repayment of loan notes				—		(1,049)		—		(1,049)
Loan notes interest paid		Â		—		(249)		—		(249)
Net cash from financing activities		Â		15		16,384		15		16,384
Net (decrease)/increase in cash and cash equivalents				(1,931)		5,229		(1,931)		5,229
Cash and cash equivalents at 1 February		Â		6,156		927		6,156		927
Cash and cash equivalents at 31 January		Â		4,225		6,156		4,225		6,156

Notes

1. Basis of preparation

The preliminary announcement has been prepared in accordance with the recognition and measurement principles of International Financial Reporting Standards as adopted by the EU (“adopted IFRSs”), IFRIC interpretations and the Companies Act 2006 applicable to companies reporting under IFRS. It does not include all the information required for full annual accounts.

The financial information set out above does not constitute the Company's statutory accounts for the years ended 31 January 2013 or 2012. The financial information for 2012 is derived from the statutory accounts for 2012 which have been delivered to the Registrar of Companies. The auditor has reported on the 2012 accounts; their report was (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006. The statutory accounts for 2013 will be finalised on the basis of the financial information presented by the Directors in this preliminary announcement and will be delivered to the Registrar of Companies in due course.

The preliminary announcement has been prepared using the accounting policies published in the Group’s accounts for the year ended 31 January 2012, which are available on the Company’s website at www.etherapeutics.co.uk, with the exception of the following amendment which became effective during the year and was adopted by the Group, albeit with no impact on the Group’s loss for the year or equity;

• ‘Deferred Tax: Recovery of Underlying Assets – Amendment to IAS 12’ introduces an exception to the current measurement principles of deferred tax assets and liabilities arising from investment property measured using the fair value model in accordance with IAS 40 Investment Property.

2 Property, plant and equipment

	Â	Plant and	Â	Fixtures	Â
		equipment		and fittings		Total
Group and Company		£000		£000		£000
Cost
Balance at 1 February 2011		115		40		155
Additions		45		94		139
Balance at 31 January 2012		160		134		294
Balance at 1 February 2012		160		134		294
Additions		29		31		60
Disposals		(90)		(29)		(119)
Balance at 31 January 2013		99		136		235
Depreciation
Balance at 1 February 2011		107		32		139
Depreciation charge for the year		10		8		18
Balance at 31 January 2012		117		40		157
Balance at 1 February 2012		117		40		157
Depreciation charge for the year		24		22		46
Eliminated on disposals		(90)		(28)		(118)
Balance at 31 January 2013		51		34		85
Net book value		Â		Â		Â
At 1 February 2011		8		8		16
At 1 February 2012		43		94		137
At 31 January 2013		48		102		150
							Â

3 Goodwill and intangible assets – Group and Company

	Â	Group					Â	Company
			Â	Patents and	Â				Â	Patents and	Â
		Goodwill		trademarks		Total		Goodwill		trademarks		Total
Â		£000		£000		£000		£000		£000		£000
Cost
Balance at 1 February 2011		—		389		389		2,824		389		3,213
Other acquisitions – internally developed		—		128		128		—		128		128
Balance at 31 January 2012		—		517		517		2,824		517		3,341
Balance at 1 February 2012		—		517		517		2,824		517		3,341
Other acquisitions – internally developed		—		189		189		—		189		189
Balance at 31 January 2013		—		706		706		2,824		706		3,530
Amortisation and impairment
Balance at 1 February 2011		—		117		117		—		117		117
Amortisation charge for the year		—		3		3		—		3		3
Impairment charge		—		60		60		—		60		60
Balance at 31 January 2012		—		180		180		—		180		180
Balance at 1 February 2012		—		180		180		—		180		180
Amortisation charge for the year		—		7		7		—		7		7
Impairment charge		—		141		141		—		141		141
Balance at 31 January 2013		—		328		328		—		328		328
Net book value
At 1 February 2011		—		272		272		2,824		272		3,096
At 1 February 2012		—		337		337		2,824		337		3,161
At 31 January 2013		—		378		378		2,824		378		3,202

Amortisation and impairment charge

Amortisation has been charged on patents for which the registration process is complete. Where the process is incomplete no charge has been raised.

Impairment testing

The goodwill in the Company balance sheet arose following the hive up of the trade and assets of InRotis Technologies Limited on 15 November 2007.

The goodwill is allocated to drug development activities of the Group. In assessing goodwill impairment, recoverable amount is based on fair value less costs to sell.

The Group carries out a review at each balance sheet date to establish the economic value of each drug in the patent portfolio. If the economic value of a patent is believed to be lower than the carrying value, the carrying value is reduced accordingly. The economic value is based on estimated future income potential taking into account technical and commercial risks and external information on the likely market demand and penetration for the drugs. The Directors also consider that the market capitalisation of the Group is a market indicator of the value of future income streams. There is a risk that should these estimations require significant downward revision there would be a material adverse impact on the income statement in any one year.

4 Capital and reserves

Reconciliation of movement in capital and reserves:

	Â	Share	Â	Share	Â	Warrant	Â	Retained	Â	Total
		capital		premium		reserve		earnings		equity
Group		£000		£000		£000		£000		£000
Balance at 1 February 2010		65		7,573		420		(5,572)		2,486
Total recognised income and expense		—		—		—		(2,313)		(2,313)
Issue of share capital		1		81		—		—		82
Equity-settled share-based payment transactions		—		—		—		18		18
Balance at 31 January 2011		66		7,654		420		(7,867)		273
Balance at 1 February 2011		66		7,654		420		(7,867)		273
Total recognised income and expense		—		—		—		(3,242)		(3,242)
Issue of share capital		72		17,610		—		—		17,682
Issue and exercise of warrants		—		288		(288)		—		—
Equity-settled share-based payment transactions		—		—		—		11		11
Balance at 31 January 2012		138		25,552		132		(11,098)		14,724
Balance at 1 February 2012		138		25,552		132		(11,098)		14,724
Total recognised income and expense		—		—		—		(4,178)		(4,178)
Issue of share capital		—		15		—		—		15
Equity-settled share-based payment transactions		—		—		—		19		19
Balance at 31 January 2013		138		25,567		132		(15,257)		10,580

	Â	No. of ordinary shares
		2013	Â	2012
Share capital		‘000		‘000
On issue at 1 February		138,126		66,008
Issued for cash		72		72,118
On issue at 31 January – fully paid		138,198		138,126

	Â	2013	Â	2012
Â		£000		£000
Allotted, called up and fully paid
138,198,359 (2012: 138,126,467) ordinary shares of £0.001 each		138		138
Â		138		138
Shares classified as liabilities		—		—
Shares classified in shareholders’ funds		138		138
Â		138		138

The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company.

During the period, exercise of options over 47,770 ordinary shares by staff and the issue of 24,122 ordinary shares to Non-Executive Directors in payment of their fees led to an increase of £72 in share capital and a credit of £15,252 to the share premium account.

The warrant reserve relates to the following warrants:

Issue date

Â

Exercise price £

Â

Expiry date

Â

No. of warrants outstanding at the beginning of the year

Â

No. of warrants issued during the year

Â

No. of warrants exercised during the year

Â

No. of warrants outstanding at the end of the year

March 2009

0.260

16 March 2014

198,332

—

—

198,332

March 2011

0.260

4 March 2014

677,409

—

—

677,409

5 Subsequent events

In March 2013, the Company raised £40.0m (£38.8m net of related expenses) through placings of 125,000,000 new ordinary shares of 0.1p. Shareholder approval was provided at a general meeting on 27 February; 4,750,000 shares were duly issued on that day, and a further 120,250,000 on 28 February, with all new shares admitted to trading on AIM by 1 March. All the new shares carry the same rights as the 138,198,359 ordinary shares in issue at the end of the year. The new shares represented 90.4% of the Company’s issued ordinary share capital immediately prior to the placings.