Final Results

RNS Number : 9250W

Syntopix Group plc

29 November 2010

 



Press Release

29 November 2010

Syntopix Group plc

("Syntopix" or "the Group")

Final Results for the year ended 31 July 2010

Syntopix Group plc (AIM: SYN), the speciality research group focused on topical antimicrobial innovations for products in the medicinal and consumer healthcare markets, is pleased to announce its audited final results for the year ended 31 July 2010.

Financial Highlights:

·	New commercial agreements signed generating revenues of £151,000 (2009: £190,000)
·	Reported operating loss reduced to £1.11m (2009: £1.29m)
·	Year end cash balance of £1,737,000  (2009: £894,000)
·	Loss per share reduced to 11.4p (2009: 14.5p)
·	Successful placing of new equity shares raising £2.01m proceeds (£1.92m after expenses)

Operational Highlights

·	Increased number of revenue-generating partners
·	Proprietary database grown to over 3,000 antimicrobial compounds, the majority of which have been extensively characterised
·	Expanded screening programmes to identify compounds for use in consumer healthcare applications including oral care, body odour and fungal infections
·	Considerable progress in optimising compound delivery systems, resulting in several patent filings

Post year end

·	Second development contract signed with Sinclair Pharma

Dr Stephen Jones, Chief Executive Officer, commented:

"Syntopix's ongoing strategy and approach to identifying new antimicrobial compounds places the Group in a strong commercial position.  The acne, oral hygiene, hair care and deodorant markets are all multi-billion pound global opportunities. We have selectively added to our compound library over the year and have expanded our screening programmes to encompass a wider range of potential applications. Our library ensures we are in a strong position to work with the multiple brands and companies competing within each sector to address market demand.

The Group has signed a number of commercial contracts during the period which reflect the value our partners see in our library and clinical studies are currently underway for the most promising compounds. The Board is confident that these studies will deliver convincing data for existing and potential partners, establishing that Syntopix's compounds have a commercial future in the treatment of dermatological and consumer healthcare conditions."

- Ends -

Enquiries:

Syntopix Group plc	Tel: [phone]
Stephen Jones, Chief Executive Officer	www.syntopix.com
Broker: XCAP Securities plc	Tel: [phone]
John Grant / Karen Kelly
NOMAD: Zeus Capital Ltd	Tel: [phone]
Alex Clarkson / Tom Rowley
Media Enquiries: Abchurch Communications	Tel: [phone]
Simone Elviss / Sarah Hollins

The Group's Final Results are available on its website www.syntopix.com

Notes to editors

Syntopix is a specialised research and development company, focusing on topical antimicrobial innovations for the cosmetic, consumer healthcare and pharmaceutical markets. The Group was founded in 2003 as a spin-out from the University of Leeds by Dr Jon Cove and Dr Anne Eady, two of the world's leading experts in skin microbiology.

Syntopix combines scientific excellence with an understanding of consumer need to identify and develop innovative compounds which have clinical efficacy and proven benefits for the treatment of acne, gingivitis and body odour. 

The Group has a robust research pipeline, with a growing library of over 2,700 compounds (with established safety profiles) profiled both individually and in combination for their antimicrobial activity. The Group, which currently has 12 granted UK patent applications, raised £2 million in March 2010, to undertake clinical studies with its lead compounds and to further develop the pipeline.

The Group's development activities centre on several lead compounds which have multiple potential uses across a number of large consumer healthcare markets including skincare, body odour and oral health. The lead compound, SYN1113, a naturally derived cosmetic ingredient and lead acne treatment candidate, has been shown in the laboratory to be as potent as the market leader (benzoyl peroxide) and will be trialled in volunteers soon. The Group is actively seeking to out-licence its technologies to commercial partners.

Syntopix' shareholders include IP Group plc, The Wellcome Trust Limited, The University of Leeds and Ridings Early Growth Investment Company Limited.  Syntopix joined the AIM market of the London Stock Exchange in March 2006. For more information, please visit our website at www.syntopix.com.

Chairman's and Chief Executive Officer's Statement

Introduction

The Group's strategy remains consistent and is to deliver compounds in clinically proven formulations to the cosmetic and consumer markets, enabling Syntopix to gain early revenue streams whilst providing 'ownable technologies' to our partners. 

The Board is pleased to report that the Group has achieved revenues of £151,000 (2009: £190,000) following entry into further commercial agreements with new and existing partners.  The Group continues to strengthen its relationships with potential partners and its key customers. 

Following close control of overheads, operating costs have been reduced, resulting in a lower operating loss this year of £1,106,000 (2009: £1,292,000).

Fund raise

In March 2010, the Group announced a successful fund raise of £2,008,000 (approximately £1,920,000 net of expenses) pursuant to a placing of 2,997,013 ordinary shares of 10 pence each in Syntopix Group plc, at an issue price of 67 pence per share. 

The purpose of this fund raise was to enable the Group to undertake further human-use studies with its lead compounds during 2010 and 2011, and to continue its development programme.  Both new and existing shareholders participated in the placing.

Commercial agreements

In April 2010, the Group announced an agreement with Sinclair Pharma plc ("Sinclair") to work together on the identification of an anti-microbial compound to synergise and augment the activity of a key product for Sinclair.  This was followed up with a second agreement in October 2010, building on the success of the first one. 

Sinclair has contracted with the Group to further the development of combination formulations using Sinclair's ingredients and some potentially synergistic anti-microbial compounds owned by Syntopix.  The Group will receive royalty revenues if any of the resulting formulations for oral health and other medical applications are commercialised.

In August 2010, Syntopix entered into an exclusive agreement with a world leading company in marketing home, health and personal care brands.  Syntopix has granted the rights of first refusal to this company to negotiate a separate agreement for further development and eventual commercialisation of a compound currently undergoing clinical evaluation.  Syntopix expects to receive payments throughout this clinical phase.

Markets and opportunities

The Group's opportunities are principally in the areas of acne, oral hygiene (for the treatment of gingivitis), hair care (dandruff) and deodorants (body odour), targeting both the medicinal and, principally, consumer healthcare markets.

The Group believes that there is a major global demand for antimicrobial compounds in the consumer healthcare market.  The acne, oral hygiene, hair care and deodorant markets are all multi-billion pound global opportunities, with multiple brands and companies competing within each sector.  The Group is committed to discovering, developing and delivering antimicrobial compounds for the treatment of these conditions to take advantage of these large market opportunities.

Syntopix now has a proprietary database of over 3,000 compounds, the majority of which have been extensively characterised for their antimicrobial properties.  A variety of both microbes and screening methods have been employed in-house to generate the data that populate this database, which the Group believes has significant potential for identifying new antimicrobial compounds that could be of use in the market sectors of interest. 

Strategy
The global markets that the Group has identified are significant but, due to the restrictive cost of discovering safe compounds, there has historically been a lack of innovation. In addition, some of the antimicrobial compounds presently in use are increasingly linked to concerns about environmental toxicity and / or bacterial resistance. 

Syntopix's approach is to identify and develop cost-effective alternative compounds and methodologies which overcome these issues and which reduce the high risks and costs of early compound discovery.  At the same time, the Group aims to reduce the lead-time to market normally associated with conventional product development.

The Group is developing antimicrobial compounds and discovering synergistic combinations of those compounds that already have a history of use in man.  This reduces much of the risk associated with developing new compounds and speeds up the process of getting the compounds to market.  Therefore these types of compounds are an attractive commercial proposition for the Group's key customers and potential partners.

The strategy therefore continues to focus upon leveraging the Group's antimicrobial compound library and intellectual property portfolio and expanding its opportunities into broader areas within dermatological and consumer healthcare markets, thereby offering a much faster route to market than developing prescription medicines.

Product development

During the year Syntopix has added selectively to its library of potential development candidates, which is now in excess of 3,000 compounds.  The Group's screening process has shown that approximately 30% of these compounds exhibit antimicrobial activity against the key organism which causes acne, Propionibacterium acnes (P. acnes).

Additionally, the Group has expanded its screening programmes to include the identification of antimicrobial compounds for use in consumer healthcare applications including oral care, body odour (deodorants) and fungal infections such as dandruff.  The Group is also using more sophisticated screening processes to assess the fitness-for-purpose of candidate compounds for different applications. All of this data is being captured in a database, the commercial application of which is being assessed.

Key to the successful delivery of any compound is getting it to the required site of action.  For example, for acne the compound must be present in the follicular ducts of the skin where P.acnes reside.  For treating body odour, the compound should be retained for a period of time in the stratum corneum, in order to exert its effect.  Syntopix has made considerable progress in optimising the delivery systems that are used for our candidate compounds, which has resulted in several patent filings. 

It is anticipated that this technology will improve the efficacy of compounds when applied to human skin and will continue to be investigated, both for existing applications as well as for its wider application for the delivery of compounds for use in the consumer healthcare businesses that are of interest to the Group.

Syntopix continues to make good progress in moving its lead compounds from research into clinical development.  In the treatment of acne, SYN0126 in the presence of SYN0040 has previously been discussed as having a significant effect on both non-inflamed and total lesions after two weeks of treatment, which became highly significant after eight weeks. 

Additionally, the Group's proprietary laboratory screening techniques have identified a highly potent compound (SYN1113) that has great potential for the treatment of acne and because it is coloured green and is a 'natural' compound, the Board believes that it could offer significant consumer appeal.  Initial human-use studies have demonstrated significant killing of P.acnes, and Phase II studies are now underway, using a novel delivery system (patents applied for). This compound and its novel vehicle are the subjects of an exclusivity agreement with a world leader in personal care brands.

SYN0269 and SYN0129 have been shown to be synergistic against the key bacteria responsible for body odour and a patent application has been prepared.  It has attracted considerable interest from consumer healthcare companies which market deodorants and it is anticipated that this combination of compounds will be the subject of an agreement later in 2010 or in early 2011.

Intellectual property

The Group's intellectual property portfolio is critical for its success in licensing compounds and continues to grow and become more focused.  Currently our patent portfolio comprises 25 core patents/applications. Of these, 12 are granted in the UK, 4 are published applications and 8 are awaiting publication.  Overall, the Group's portfolio has a total of 44 patents/applications across key international territories.  Each case in the portfolio is continually evaluated for commercial opportunity.

Outlook

The Group is committed to developing safe and effective products for use in both medicinal and consumer healthcare markets by continuing to seek new uses for its antimicrobial expertise and through expansion of the commercial potential of its compounds.  Syntopix's strategy and approach to identifying new antimicrobial compounds has created innovative opportunities for its commercial partners in the global consumer healthcare market.

The Group continues to invest in its discovery pipeline to fuel its development programmes and to take the most promising candidates into human-use (clinical) studies.  To maximise the value of the Group's portfolio, it now needs to develop the most promising compounds into product candidates.  The Board is confident that these clinical studies will deliver data that will convince potential partners that Syntopix's compounds have a commercial future in the treatment of dermatological and consumer healthcare conditions. The funds raised from the recent issue of equity are being used to enable the Group to fulfil and deliver this strategy.

Additionally, the agreements that have been signed recently, together with the discussions we are having with other potential licensees, validate the Group's belief that the antimicrobial compounds within its portfolio have a broad range of applications in these very large commercial markets. 

The Group enters the current year with a cash balance of £1,737,000 and is optimistic that further beneficial commercial opportunities will result from the Syntopix programmes over the next twelve months.

Tom Bannatyne, Chairman

Stephen Jones, Chief Executive Officer

29 November 2010

Consolidated income statement for the year ended 31 July 2010

		2010	2009
	Note	£000	£000
Revenue	1	151	190
Other operating income		58	-
Administrative expenses:
Research and development costs		(757)	(861)
Other administrative expenses		(558)	(621)
Total administrative expenses		(1,315)	(1,482)
Operating loss before share-based payment charges		(1,059)	(1,171)
Share-based payment charges		(47)	(121)
Operating loss		(1,106)	(1,292)
Finance income		-	36
Loss before tax		(1,106)	(1,256)
Tax credit		110	141
Loss for the year attributable to equity shareholders		(996)	(1,115)
Loss per ordinary share
Basic and diluted (pence)	2	(11.4p)	(14.5p)

All of the above activities are continuing.

Consolidated statement of financial position as at 31 July 2010                                                                                  

		2010	2009
		£000	£000
Non-current assets
Property, plant and equipment		29	56
		29	56
Current assets
Trade and other receivables		60	58
Income tax receivable		110	141
Cash and cash equivalents		1,737	894
		1,907	1,093
Total assets		1,936	1,149
Current liabilities
Trade and other payables		(145)	(333)
		(145)	(333)
Total liabilities		(145)	(333)
TOTAL NET ASSETS		1,791	816
Equity attributable to equity holders of the company
Called up share capital		1,071	772
Share premium reserve		6,282	4,657
Share based payments reserve		225	178
Merger reserve		338	338
Retained earnings		(6,125)	(5,129)
TOTAL EQUITY		1,791	816

Consolidated statement of changes in equity as at 31 July 2010

		Share	Share-based
	Share	premium	payments	Merger	Retained
	capital	reserve	reserve	reserve	earnings	Total
	£000	£000	£000	£000	£000	£000
At 1 August 2008	573	3,379	226	338	(4,183)	333
Loss for the year	-	-	-	-	(1,115)	(1,115)
Total comprehensive income	-	-	-	-	(1,115)	(1,115)
Transactions with owners:
Share option charge	-	-	121	-	-	121
Share options lapsed	-	-	(169)	-	169	-
Issue of shares	199	1,290	-	-	-	1,489
Expenses of share issue	-	(12)	-	-	-	(12)
At 31 July 2009	772	4,657	178	338	(5,129)	816
At 1 August 2009	772	4,657	178	338	(5,129)	816
Loss for the year	-	-	-	-	(996)	(996)
Total comprehensive income	-	-	-	-	(996)	(996)
Transactions with owners:
Share option charge	-	-	47	-	-	47
Issue of shares	299	1,708	-	-	-	2,007
Expenses of share issue	-	(83)	-	-	-	(83)
At 31 July 2010	1,071	6,282	225	338	(6,125)	1,791

Consolidated statement of cash flows for the year ended 31 July 2010

		2010	2009
		£000	£000
Cash flow from operating activities
Loss before tax		(1,106)	(1,256)
Finance income		-	(36)
Depreciation		31	32
Share based payments		47	121
Operating cash outflow before changes in working capital		(1,028)	(1,139)
Movement in trade and other receivables		(2)	-
Movement in trade and other payables		(188)	(39)
Cash flow from operations		(1,218)	(1,178)
Tax received		141	131
Net cash flow from operating activities		(1,077)	(1,047)
Investing activities
Purchase of property, plant and equipment		(4)	(9)
Finance income		-	36
Net cash flow from investing activities		(4)	27
Financing activities
Issue of share capital		2,007	1,489
Expenses of share issue		(83)	(12)
Net cash flow from financing activities		1,924	1,477
Net increase in cash and cash equivalents		843	457
Cash and cash equivalents at the beginning of the year		894	437
Cash and cash equivalents at the end of the year		1,737	894

Notes

The financial information set out herein does not constitute the Group's statutory accounts for the year ended 31 July 2010 or the year ended 31 July 2009 within the meaning of section 435 of the Companies Act 2006, but is derived from those accounts.  The information has been derived from the audited statutory accounts for each or those years upon which an unqualified audit opinion was expressed and which did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.   Their report for 31 July 2009 included reference to the material uncertainty in respect of the ability to raise funding to which the auditors drew attention by way of emphasis of matter without qualifying their report.  No such reference is made in their report for 31 July 2010.

The audited accounts will be posted to all shareholders in due course and will be available upon request by contacting the Company Secretary at the Company's registered office.

Basis of preparation

The financial statements from which this information has been derived have been prepared in accordance with International Financial Reporting Standards ('IFRSs') as adopted by the EU and applicable law.

The Financial Reporting Council issued "Going Concern and Liquidity Risk: Guidance for Directors of UK Companies" in 2009 and the Directors have considered this when preparing the financial statements. The financial statements have been prepared on the going concern basis, notwithstanding the loss for the year ended 31 July 2010.  This basis assumes that the Group will have sufficient funds available to enable it to continue to trade for the foreseeable future and the Directors have taken steps to ensure that they believe that the going concern basis of preparation remains appropriate.  The Group's principal activity is the research, discovery and development of compounds for use in both medicinal and consumer healthcare markets in order to achieve licensing deals with companies in these markets.  Future sales revenues are expected to be derived from milestone payments on entering new commercial agreements, followed by royalty income from successful product launches by the Group's customers.  There is a time lag between the conclusion of each study or trial which the Group undertakes and the establishment of commercial deals from the data and results from those studies. 

During the next 12 months the Directors believe that new commercial deals will be agreed which will generate milestone revenues. For the purposes of considering the Group's working capital requirements and the going concern position, the Directors have also considered the action which the Group would need to take should it be unable to secure sufficient sales revenues within the next 12 to 18 months.  The Directors believe that, in the event that sales revenues take longer to achieve than anticipated, the Group would be able to scale down both the full planned development programme and the current cost base, in order that it will be able to use existing cash resources to ensure that the Group can continue to trade through to the point at which new milestone revenues are achieved and the Group becomes cash generative. 

Whilst there are inherent uncertainties regarding the timing and magnitude of future revenue streams, the Directors have a reasonable expectation that the Group has adequate resources to continue for the foreseeable future.  Therefore, they continue to adopt the going concern basis of accounting in preparing the financial statements.

The preparation of financial statements in conformity with IFRSs requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses.  The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources.  Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis.  Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision only affects that period, or in the period of the revision and future periods if the revision affects both current and future periods.

1. Segment information

The Group has adopted IFRS 8 - "Operating Segments" with effect from 1 August 2009.  IFRS 8 requires operating segments to be identified on the basis of internal reporting about components of the Group that are regularly reviewed by the chief operating decision maker to allocate resources to the segments and to assess their performance.  The chief operating decision maker has been identified as the executive directors.  The executive directors review the Group's internal reporting in order to assess performance and allocate resources.

The executive directors consider there to be one operating segment being Research and Development of Pharmaceutical Products in both the current and previous financial year.  There was no effect on the determination of the number of operating segments as a result of the hive up of the trade and assets of the subsidiary undertakings which took place on 1 August 2009. 

The executive directors assess the performance of the Group by reference to group-wide results.   The group-wide profit measures are operating loss and loss for the year, both disclosed on the face of the consolidated income statement.  No differences exist between the basis of preparation of the performance measures used by the chief operating decision makers and the figures presented in the Group financial statements.  There is no allocation of revenue, operating expenses, profit measures, assets or liabilities to individual commercial contracts.

All of the revenues generated relate to commercial contracts and are principally generated in the UK.  Accordingly there are no additional disclosures provided to the primary statements.

The Group's revenue for the year ended 31 July 2010 amounted to £151,000 (2009: £190,000).  Of this amount, £148,000 was derived from a single customer (2009: £190,000).

2. Loss per ordinary share

Basic loss per share is calculated by dividing the loss attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the year. 

Diluted loss per share is calculated by adjusting the weighted average number of ordinary shares in issue to assume the conversion of all dilutive potential ordinary shares. 

The Group has one class of potentially dilutive ordinary shares: those share options granted to employees where the exercise price is less than the average market price of the Company's ordinary shares during the year.  However, due to losses incurred in the year there is no dilutive effect from the potential exercise of these share options.

		Weighted
	Loss for the period	average number	Loss per share
Basic and diluted loss per share	£	of shares	(pence)
Year ended 31 July 2010	(996,000)	8,719,572	(11.4p)
Year ended 31 July 2009	(1,115,000)	7,690,636	(14.5p)

 

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