Final Results

RNS Number : 3383X

ReNeuron Group plc

24 June 2008

 



Guildford, UK: 24 June 2008

ReNeuron Group plc

Preliminary Results for the Year Ended 31 March 2008

Operational Highlights 

• ReN001 stem cell therapy for stroke

  • Discussions held with UK and Australian regulatory authorities ahead of initial clinical trial applications for ReN001 in those territories

  • Studies ongoing in support of IND application to commence initial clinical trial in the US with ReN001

  • Approval to commence initial clinical trial expected within 6 to 9 months

  • Pre-clinical studies underway to enhance method of administration of ReN001 therapy in broader stroke patient populations

• Other therapeutic programmes re-prioritised to enable at least two further clinical trial applications over the next two years

  • Positive early pre-clinical data announced for ReN002 (diabetes), ReN003 (retinal) and ReN005 (Huntington's disease) programmes

  • ReN001 cortical cell line to be tested in other conditions beyond stroke

• Business restructured to substantially reduce underlying cost base

Financial Highlights

• Share placing to raise £1.5 million before expenses in the period, and £2.5 million convertible loan facility secured post-year-end

• Loss for the year of £6.6 million (2007 restated: £5.2 million)

• Net cash outflow from operating activities £6.1 million (2007: £5.5 million)

• Cash and cash equivalents at 31 March 2008 of £2.8 million (2007: £7.7 million)

Commenting on the results, Professor Trevor Jones, Chairman, said:

'During the period under review, we have continued to build what was already an extremely comprehensive pre-clinical data package for our ReN001 stroke therapy. We have accelerated our interactions with regulatory authorities beyond the USA to ensure that we have the best possible chance of securing clinical trial approval for ReN001 in an appropriately regulated territory. We have re-prioritised our other therapeutic programmes to focus resources on those that provide the greatest chance of reaching the clinic in the quickest possible time. We have restructured and taken significant cost out of the business and we have secured interim finance to provide the financial resources necessary to achieve our near-term objectives.  

'We believe ReNeuron has some of the strongest technology and therapeutic programme offerings in the cell therapy field, protected by a very broad and multi-layered patent estate. We remain determined to see ReNeuron realise the full potential of these assets.'

For further information:

ReNeuron
Michael Hunt, Chief Executive Officer	Tel: [phone]
Dr John Sinden, Chief Scientific Officer

Financial Dynamics
Europe
David Yates	Tel: [phone]
Lara Mott
US
Robert Stanislaro	Tel : [phone]

Collins Stewart
Tim Mickley	Tel: [phone]

Chairman's and Chief Executive Officer's Joint Statement

Review of Operations

ReN001 stem cell therapy for stroke

During the period, we have continued the process of seeking regulatory approval to commence an initial clinical trial for ReN001, ReNeuron's cell therapy programme targeting disabled stroke patients. Our Investigational New Drug (IND) application to the US Food and Drug Administration (FDA) remains on clinical hold. In February of this year, we met with the FDA to discuss and clarify the necessary steps to enable approval of the IND to commence initial clinical trials in the US with ReN001. Subsequent to that meeting, we are progressing a number of additional studies that we believe will satisfactorily address the FDA's requirements.  

In the meantime, we have accelerated our pre-existing strategy to make clinical trial applications for ReN001 in certain other territories beyond the US with established and recognised regulatory frameworks. Specifically, we have in recent weeks taken further encouraging pre-application meetings with regulatory authorities in the UK and Australia, following meetings held with these authorities in the latter part of 2007. Principal Investigators and hospitals to undertake the initial clinical study with ReN001 have been identified in these territories, and the required respective technology transfer processes are underway to enable local preparation of the ReN001 cells prior to administration to patients. 

Over the last couple of years, we have learnt much about the respective approaches and attitudes of various regulators to reviewing pioneering stem cell therapy programmes such as our ReN001 therapy. We have identified clear differences in the way that these regulators view such programmes and their specific areas of comfort and concern often vary quite considerably. We have drawn significant encouragement from these observations in terms of our ability to obtain regulatory approval to take ReN001 into the clinic, especially given the extremely comprehensive pre-clinical safety, efficacy and manufacturing data package we have continued to build for ReN001 over this period. It is important to reiterate, however, that we are operating in a very exciting but largely unproven field of medicine at the clinical level, and we must therefore expect the regulatory authorities to take a particularly cautious view, reflected in the time taken for them to ultimately give approval for commencement of clinical trials.

On this basis of the above and subject to successful completion of all remaining studies and local cell preparation processes, we intend to make further clinical trial applications beyond the US for ReN001 during the remainder of this year. Subject to the precise review process and timings to be adopted for ReN001 by the regulators concerned, we expect to gain regulatory approval to commence an initial clinical study with ReN001 in at least one of the targeted territories (UK, US or Australia) within the next six to nine months. 

Other therapeutic and non-therapeutic programmes

During the period under review, and subsequent to it, we have undertaken a full review of the Company's activities. We are clearly mindful of the increasingly difficult funding environment for companies such as ours, and the need to reassess project priorities and objectives to take account of these conditions. As a result of this review, we have refocused the business, reset our project objectives and taken steps to conserve the cash resources available to us. These initiatives can be summarised as follows:

• For the time being, we will continue to pursue all of our existing therapeutic programmes beyond ReN001 that involve distinct cell lines; notably ReN002 for diabetes, ReN003 for retinal diseases, ReN004 for Parkinson's disease and ReN005 for Huntington's disease. During the period under review, and subsequently, we announced early positive pre-clinical data in the ReN002, ReN003 and ReN005 programmes and we will shortly announce recent data regarding the ReN004 programme. However, the ongoing resources to be made available to each of these programmes will vary, depending on their stage of development and speed to the clinic. Programmes which entail a longer pre-clinical pathway, and which cannot otherwise be funded through grants and/or collaborations with academic or corporate partners, will be de-emphasised or suspended. We are in the process of discussing certain of these programmes with existing and potential collaborators, and we will make further decisions regarding the programmes based on the results of these discussions.

• Given the significant investment already made in the pre-clinical development of the ReN001 cortical cell line for stroke, we are evaluating the potential of this cell line in other conditions such as traumatic brain injury, Alzheimer's disease and peripheral ischaemia. We believe the cortical cell line may have potential utility in these other conditions and its utilisation in this way will accelerate the time to clinic due to the extensive manufacturing scale-up work and safety profile already generated for this cell line. Again, we are currently in discussions with clinicians and potential scientific collaborators who have experience in the respective conditions we are targeting.  

• Also building on the investment made in ReN001, and in collaboration with US researchers at the University of South Florida, we are exploring more straightforward modes of administration for the ReN001 stroke therapy in other categories of stroke patient. Pre-clinical studies are in progress examining ReN001 administered intravenously (rather than by direct injection into the brain) in models of sub-acute stroke (that is, treatment administered a number of days after the stroke event but before a steady-state behavioural deficit has been reached).

• We acquired alginate-based cell encapsulation technology as part of ReNeuron's acquisition of the AmCyte, Inc. technology in August 2007. Although this technology is being used primarily in our ReN002 programme for Type 1 diabetes (the potential of the capsules has already been clinically tested by AmCyte in early trials in two diabetes patients), we are also exploring the potential of the technology in other settings, including the brain. There are potential advantages to the use of encapsulated cells when delivered into the brain, and we are therefore testing the compatibility of a range of our neural cell lines with the encapsulation technology.

• We have out-licensed a range of neural stem cell lines for non-therapeutic applications, our ReNcell® range of cell lines, to US-based Millipore Corporation for world-wide distribution through that company's catalogue. However, the non-therapeutic use of our cell lines is peripheral to our core therapeutic objectives. Consequently, we have suspended development of any further non-therapeutic cell lines. 

• We have initiated steps to reduce our headcount by approximately 60 per cent, including the closure of our US facility. On completion of this process in August of this year, we will employ 17 full time equivalents operating from the Surrey laboratories.

As a result of the above initiatives, we have set a key objective (beyond our lead ReN001 stroke programme) to file at least two further clinical trial applications across these other programmes within the next two years. We are also actively exploring opportunities to bring external cell therapy programmes into the business on a fully-funded basis that complement ReNeuron's existing programmes, that are in or near the clinic, and that, by virtue of target indication or cell type, carry an acceptable risk profile from both a regulatory and investment standpoint.

Funding

We have separately announced today that we have secured interim funding from our existing principal investors in the form of a £2.5 million convertible loan facility. Given current market sentiment and ReNeuron's relatively low share price at the current time, our objective was to secure a modest and minimally dilutive interim financing that provided sufficient funds to allow us, first and foremost, to secure regulatory approval to commence initial clinical trials with our ReN001 stroke therapy over the coming months. We believe that the size and structure of the loan facility meets this financing objective. Once we have secured regulatory approval to commence clinical studies with ReN001, we will look to complete a larger fundraising sufficient to take ReN001 through an initial clinical trial and to achieve our key objective for ReNeuron's other therapeutic programmes, as described above.

Summary of results

The Group's full year financial statements have been prepared under International Financial Reporting Standards (IFRS) for the first time, the transition date for IFRS being 1 April 2006. The comparative results for the year to 31 March 2007 have been restated accordingly. The impact of IFRS on the Group's accounting policies and financial statements are detailed in the notes to these results.

In the year ended 31 March 2008, turnover was £27,000 (2007: £49,000), representing income from the Group's non-therapeutic licensing activities.

Net operating expenses increased in the period to £7.2 million (2007 restated: £6.3 million). Of the total increase of £0.9 million in the period, £0.7 million relates to an increase in research and development expenditure, the balance of the increase relating to general and administrative costs. These increases, which are in line with internal forecasts, are principally accounted for by the addition of the Group's US operation, included in the consolidated accounts from 1 August 2007. The Group has subsequently taken steps to reduce its overall cost base, including the closure of its US operation. Consequently, total operating expenses for the year to 31 March 2009 are forecast to be significantly lower that that for the year to 31 March 2008. 

Other operating income increased slightly in the period to £309,000 (2007: £263,000) and interest received increased to £0.3 million (2007: £0.2 million), reflecting higher average cash balances over the period.

The Group has not booked a research and development tax credit in the period (2007: £0.5 million). The current share ownership of the Company may preclude the Group from being able to make such a claim. It is therefore deemed appropriate not to accrue a tax credit in the period, subject to confirmation as to the Group's entitlement to claim. The resulting net loss for the period increased to £6.6 million (2007 restated: £5.2 million).

Net cash outflow from operating activities increased in the period to £6.1 million (2007: £5.5 million). This increase was largely due to the increase in operating expenses in the period, partially offset by the effect of a £0.5 million decrease in creditor balances in the prior period compared with a £0.1 million decrease in creditor balances in the year to 31 March 2008. During the period, the Group acquired the business assets of AmCyte Inc., financed by a placing of new Ordinary shares raising US$4.0 million for the AmCyte vendors. In conjunction with the acquisition, the Group raised a further £1.5 million before expenses, by way of a placing of new Ordinary shares. As a result of the above operational and financing activities, cash and cash equivalents decreased by £4.9 million in the period (2007: £2.5 million increase).

The cell encapsulation technology acquired from Amcyte is to be transferred to the Group's UK operation for subsequent development. Consequently, the fair value of this intangible asset has been retained at £2.1 million in the balance sheet at 31 March 2008.

As at 31 March 2008, the Group had cash and cash equivalents totalling £2.8 million (2007: £7.7 million). Subsequent to the year-end, the Group has secured a £2.5 million convertible loan facility with certain of its existing investors. The directors estimate that the Group's current cash resources, taking into account the convertible loan facility, are sufficient to meet expenditure requirements into the first quarter of 2009, by which time approval to commence an initial clinical trial for ReN001 is expected to have been received and the Company will be better placed to raise further funds. The directors are confident of raising further funds sufficient for the needs of the business from equity issues and other sources. Consequently, the going concern basis has been adopted in the preparation of these financial statements.  

Summary and outlook

Our principal objective remains to obtain regulatory approval to commence an initial clinical trial with our ReN001 stroke therapy. During the period under review, we have continued to build what was already an extremely comprehensive pre-clinical data package for this therapy, demonstrating its safety, efficacy and manufacturing quality characteristics. However, being mindful of the unique regulatory challenges a therapy such as ReN001 raises, we have accelerated our interactions with regulatory authorities beyond the USA during the period to ensure that we have the best possible chance of securing clinical trial approval for ReN001 in an appropriately regulated territory.

Beyond ReN001, our other therapeutic programmes continue to make progress and we have re-prioritised these programmes to focus resources on those that provide the greatest chance of reaching the clinic in the quickest possible time. We have also restructured and taken significant cost out of the business during the period, and subsequently, to ensure we can make the requisite progress in what remains an extremely challenging investment environment for relatively early-stage biotechnology businesses such as ours. We have secured interim finance for the business to provide the financial resources necessary to achieve our near-term objectives.  

We believe ReNeuron has some of the strongest technology and therapeutic programme offerings in the cell therapy field, protected by a very broad and multi-layered patent estate. We remain determined to see ReNeuron realise the full potential of these assets.  

Professor Trevor Jones	Michael Hunt
Chairman	Chief Executive Officer

24 June 2008

ReNeuron Group plc consolidated income statement for the year ended 31 March 2008

	Note	Year ended 31 March 2008 Unaudited £'000	Year ended 31 March 2007 £'000
Revenue		27	49
Research and development costs	4	(5,166)	(4,418)
General and administrative costs		(2,059)	(1,858)
Other operating income: grants receivable		309 ______	263 ______
Operating loss		(6,889)	(5,964)
Finance income		318	192
Finance costs		(1) ______	- ______
Loss before income taxes		(6,572)	(5,772)
Tax credit on loss on ordinary activities		- ______	523 ______
Loss for the financial year		(6,572) ______	(5,249) ______
Loss per ordinary share
Basic and diluted	5	(4.4p)	(4.9p)

All revenues and expenses above were generated from continuing operations.

ReNeuron Group plc consolidated balance sheet as at 31 March 2008

		Group
		31 March	31 March
		2008	2007
		Unaudited
	Note	£'000	£'000
Non-current assets
Property, plant and equipment		1,003	1,044
Intangible assets	6	3,419	1,272
Financial assets: rent deposit		135 ______	125 ______
		4,557	2,441
Current assets
Trade and other receivables		411	879
Cash and cash equivalents		2,791 ______	7,676 ______
		3,202 ______	8,555 ______
Current liabilities
Trade and other payables		(765)	(813)
Financial liabilities: finance leases		(54) ______	(2) ______
		(819) ______	(815) ______
Net current assets		2,383 ______	7,740 ______
Net assets		6,940 ______	10,181 ______
Shareholders' equity
Ordinary shares		1,542	1,377
Share premium		14,358	13,213
Capital redemption reserve		8,964	8,964
Merger reserve		2,223	365
Warrant reserve		113	113
Share-based credit reserve		329	166
Retained deficit		(20,589) ______	(14,017) ______
Capital and reserves attributable to the Group's equity shareholders		6,940 ______	10,181 ______

ReNeuron Group plc consolidated statement of changes in equity

Group
	Share Capital	Share premium account	Capital redemption reserve	Merger Reserve
	£'000	£'000	£'000	£'000
As at 1 April 2006	9,355	5,472	-	365
Issue of new ordinary shares	986	7,498	-	-
Costs of share issue	-	(193)	-	-
Sub-division of ordinary shares	(8,964)	-	8,964	-
Exercise of warrants	-	436	-	-
Issue of warrants	-	-	-	-
Share-based credit	-	-	-	-
Loss for the year	- ______	- ______	- ______	- ______
As at 31 March 2007	1,377	13,213	8,964	365
Shares issued for acquisition	93	-	-	1,858
Issue of new ordinary shares	72	1,437	-	-
Costs of share issue	-	(292)	-	-
Share-based credit	-	-	-	-
Loss for the year	-	-	-	-
As at 31 March 2008	1,542 ______	14,358 ______	8,964 ______	2,223 ______

(continued from table above)

Group
	Warrant reserve	Share-based credit reserve	Retained deficit	Total Equity
	£'000	£'000	£'000	£'000
As at 1 April 2006	436	56	(8,768)	6,916
Issue of new ordinary shares	-	-	-	8,484
Costs of share issue	-	-	-	(193)
Sub-division of ordinary shares	-	-	-	-
Exercise of warrants	(436)	-	-	-
Issue of warrants	113	-	-	113
Share-based credit	-	110	-	110
Loss for the year	-	-	(5,249)	(5,249)
As at 31 March 2007	113	166	(14,017)	10,181
Shares issued for acquisition	-	-	-	1,951
Issue of new ordinary shares	-	-	-	1,509
Costs of share issue	-	-	-	(292)
Share-based credit	-	163	-	163
Loss for the year	- ______	- ______	(6,572) ______	(6,572) ______
As at 31 March 2008	113 ______	329 ______	(20,589) ______	6,940 ______

ReNeuron Group plc consolidated cash flow statement for the year ended 31 March 2008

		Group
	Note	Year ended 31 March 2008 Unaudited £'000	Year ended 31 March 2007  £'000
Cash consumed by operations	7	(6,598)	(6,032)
Interest paid		(1)
Income tax credit received		522 ______	503 ______
Cash flow from operating activities		(6,077)	(5,529)
Cash flows from investing activities
Capital expenditure		(120)	(32)
Purchase of business	6	(217)	-
Loans with subsidiaries		-	-
Interest received		318 ______	192 ______
Net cash (used)/generated in investing activities		(19)	160
Cash flows from financing activities
Finance lease principal payments		(4)	(2)
Proceeds from issuance of share capital		1,215 ______	7,913 ______
Net cash generated by financing activities		1,211 ______	7,911 ______
Net (decrease)/increase in cash and cash equivalents		(4,885)	2,542
Cash and cash equivalents at the beginning of the year		7,676 ______	5,134 ______
Cash and cash equivalents at the end of year		2,791 ______	7,676 ______

Notes to the interim financial statements

for the year ended 31 March 2008.

1.    General information

ReNeuron Group plc ('the Company') and its subsidiaries (together 'the Group') research and develop therapies using stem cells. The Company is a public limited company incorporated and domiciled in England with registered number 05474163 and its shares are listed on the AIM stock market. 

2.    Accounting policies and basis of preparation

The principal accounting policies adopted in the preparation of these statements are set out below. These policies have been consistently applied to all of the financial years presented, unless otherwise stated.

2.1     Basis of preparation

These financial statements have been prepared in accordance with the European Union endorsed International Financial Reporting Standards (IFRS), the interpretations of International Financial Reporting Interpretations Committee (IFRIC) and the Companies Act 1985 applicable to companies reporting under IFRS. 

These financial statements have been prepared on a historical cost basis.

Whilst the financial information included in this preliminary announcement has been prepared in accordance with IFRS adopted for use in the European Union, this announcement does not itself contain sufficient information to comply with IFRS. 

The preliminary financial information has not been audited and does not constitute statutory accounts within the meaning of Section 240 of the Companies Act 1985. The Company's statutory accounts for the year ended 31 March 2007, prepared under UK GAAP, have been delivered to the Registrar of Companies; the report of the auditors on these accounts was unqualified and did not contain a statement under Section 237 (2) or (3) of the Companies Act 1985.

2.2    New accounting policies on adoption of IFRS

These consolidated financial statements for ReNeuron Group plc have been prepared in accordance with International Accounting Standards and are covered by IFRS 1, 'First-time Adoption of IFRS'.

The accounting policies have changed from the previous year when the financial statements were prepared under applicable United Kingdom Generally Accepted Accounting Principles (UK GAAP). The comparative information has been adjusted in line with IFRS. The new accounting policies are set out in full below. An analysis and reconciliation of the effects of the transition to IFRS are provided in note 8.

The accounting policies that have been applied in the opening balance sheet have also been applied throughout all periods presented in these financial statements.

 When preparing the Group's IFRS balance sheet at 1 April 2006, the date of transition, the following optional exemption from full retrospective application of IFRS accounting policies has been adopted:

IFRS 3, 'Business combinations'.

The accounting policies following adoption of IFRS are set out below:

Basis of consolidation

The consolidated financial statements include the financial statements of the Company and its subsidiary undertakings, made up to 31 March 2008.  

The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the Group's share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the income statement.

Inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated but considered an impairment indicator of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

The Group have elected not to apply IFRS 3 'Business combinations' retrospectively to business combinations which took place prior to 1 April 2006 that have been accounted for by the merger accounting method.

Significant accounting judgements, estimates and assumptions

The key areas that require management to make difficult, subjective or complex judgements about matters that are inherently uncertain are:

Impairment of non-financial assets: The Group has significant intangible assets arising as a result of acquisitions of businesses. Under IFRS, intangible assets, other than goodwill, that are in use are amortised over their estimated useful life and charged to cost of sales in the income statement and are only tested for impairment when there is an indication of the balance sheet carrying value not being recoverable. Intangible assets that are not yet in use are not amortised, but are tested annually for impairment. 

The determination relating to the recoverability of intangible assets is subjective and requires the exercise of considerable judgement. Any changes in key assumptions about the Group's business and prospects, including those arising from measures taken by the directors to conserve cash resources, or changes in market conditions, could result in a future impairment charge.

The Group assesses whether there are any indicators of impairment for all non-financial assets at each reporting date. Other non-financial assets are tested for impairment when there are indicators that the carrying amounts may not be recoverable.

The stage of development of the technologies used in the Group is early enough for there to be little data on the value in use of the intangible assets. Management has reviewed the carrying value of assets exchanged at fair values, and has not found any indications of impairment.

Foreign currency transactions

The consolidated financial statements are presented in pounds sterling ('£'), which is the company's functional and presentational currency. Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement. 

Revenue

Revenue is measured at the fair value of the consideration received from the provision of services net of Value Added Tax. Revenue from services is recognised as revenue when the conditions in the contract for services have been satisfied. Revenue also includes income received under licensing and from collaborations with third parties. Differences between cash received and amounts recognised are included as deferred revenue where cash received exceeds revenue recognised and as accrued revenue where revenue has yet to be billed to the customer.

Development expenditure

Expenditure on product development is capitalised as an intangible asset and amortised over the expected useful life of the product concerned. Capitalisation commences from the point at which technical feasibility and commercial viability of the product can be demonstrated and the Group is satisfied that it is probable that future economic benefits will result from the product once completed. Capitalisation ceases when the product receives regulatory approval for launch. No such costs have been capitalised to date.

Expenditure on research activities and development activities that do not meet the above criteria, including ongoing costs associated with acquired intellectual property rights and intellectual property rights generated internally by the Group, is charged to the income statement as incurred.

Employee Benefits

The Group operates a defined contribution pension scheme. Contributions payable for the year are charged to the income statement. Differences between contributions payable in the year and contributions actually paid are shown as either accruals or prepayments in the balance sheet.

Leases

Leasing arrangements which transfer to the Group substantially all the benefits and risks of ownership of assets are treated as finance leases, as if the asset had been purchased outright. The assets are included within the relevant category of fixed assets and the capital elements of the leasing commitments are shown as obligations under finance leases. Assets held under finance leases are depreciated on a basis consistent with similar owned assets or the lease term if shorter. The interest element of the lease rental is included in the income statement.

All other leases are considered operating leases, the costs of which are charged to the profit and loss account on a straight-line basis over the lease term. Benefits such as rent-free periods, and amounts received or receivable as incentives to take on operating leases, are spread on a straight-line basis over the lease term.  

Government and other grants

Revenue grants are credited to the profit and loss account on a case-by-case basis, assessed by the level of expenditure incurred on the specific grant project, when it is reasonably certain that amounts will not need to be repaid. 

Share-based payments

The Group has applied the requirements of IFRS 2 'Share-based Payment'. In accordance with the transitional provisions, IFRS 2 has been applied to all grants of equity-settled awards after 7 November 2002 that were unvested at 1 April 2006.

The Group operates a number of equity-settled, share-based compensation plans. The fair value of share-based payments under such schemes is expensed on a straight-line basis over the vesting period, based on the Group's estimate of shares that will eventually vest and adjusted for the effect of non market-based vesting conditions. Fair value is determined by use of the Black Scholes Option Pricing Model at the date of grant, as adjusted based on management's best estimate for the effects of share liquidity and behavioural considerations.

For equity settled share based payments where employees of subsidiary undertakings are rewarded with shares issued by the parent company, the expense associated with the services provided is recognised in the employing company's accounts and a capital contribution is made in the Company's accounts.

Warrants

Where warrants have been issued together with ordinary shares, the proportion of the proceeds received that relates to the warrants is determined by reference to the relative market values of the warrants. The proportion of the proceeds that relates to the warrants is credited to a warrant reserve within shareholders' funds. 

Where warrants have been issued as recompense for services supplied these are considered equity settled share based payments and are accounted for in accordance with IFRS 2. The fair value of warrants, calculated using the Black-Scholes model, is charged to the profit and loss account and corresponding credit is made to the warrant reserve.

Intangible assets 

Intangible fixed assets, relating to intellectual property rights acquired through licensing or assigning patents and know-how are carried at historic cost less accumulated amortisation, where the useful life of the asset is finite and the asset is likely to generate economic benefits exceeding costs. Where a finite useful life of the acquired intangible asset cannot be determined, the asset is not subject to amortisation but is tested annually for impairment. No amortisation has been charged to date, as the products underpinned by the intellectual property rights are not yet available for commercial use.

Property, plant and equipment

Property, plant and equipment is stated as cost, net of depreciation and any provision for impairment. Depreciation is calculated so as to write off the cost less their estimated residual values, on a straight-line basis over the expected useful economic lives of the assets concerned. The principal annual rates used for this purpose are:

Leasehold improvements	Term of the lease
Plant and equipment	3-8 years
Computers	5 years
Computer software	3 years

Capital work in progress

Expenditure on projects related to property, plant and equipment which has not been commissioned at the year end is identified as capital work in progess. Depreciation is not charged until the asset is brought into use.

Investments

Investments are shown at cost less any provision for impairment.

Goodwill

Purchased goodwill (representing the excess of the fair value of the consideration given over the fair value of the separable net assets acquired) is not amortised, but is regularly reviewed for impairment. Determining whether goodwill is impaired requires an estimation of the value in use, which is calculated by estimating the future cash flow expected to arise from the cash generating unit, discounted by a suitable discount rate in order to calculate the present value. No provision for impairment was made in the period.

Negative goodwill arose on the acquisition of ReNeuron (UK) Limited as the cost of the acquisition was less than the fair value of the identifiable assets and liabilities of the acquired entities. In accordance with IFRS3, negative goodwill is recognised in the profit and loss account in the period in which it occurs.

Deferred tax

Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.

Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

Deferred tax is provided on temporary differences arising on investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.

Cash and cash equivalents

Cash and cash equivalents in the balance sheet comprise cash at bank and in hand and deposits with immediate access.

Segment reporting

A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different from those of other business segments. A geographical business segment is engaged in providing goods or services within an economic environment that are subject to risks and returns that are different from those of segments operating in other operating environments.

Standards, amendments and interpretations effective to 31 March 2008

IFRS 7, 'Financial instruments: Disclosures', and the complementary amendment to IAS 1, 'Presentation of financial statements - Capital disclosures', introduces new disclosures relating to financial instruments and does not have any impact on the classification and valuation of the Group's financial instruments, or the disclosures relating to taxation and trade and other payables.

IFRIC 8, 'Scope of IFRS 2', requires consideration of transactions involving the issuance of equity instruments, where the identifiable consideration received is less than the fair value of the equity instruments issued in order to establish whether or not they fall within the scope of IFRS 2. This standard does not have any impact on the Group's financial statements.

IFRIC 10, 'Interim financial reporting and impairment', prohibits the impairment losses recognised in an interim period on goodwill and investments in equity instruments and in financial assets carried at cost to be reversed at a subsequent balance sheet date. This standard does not have any impact on the Group's financial statements.

IFRIC 11, 'IFRS 2 - Group and treasury share transactions', was early adopted in 2007. IFRIC 11 provides guidance on whether share-based transactions involving treasury shares or involving group entities (for example, options over a parent's shares) should be accounted for as equity settled or cash-settled share-based payment transactions in the stand-alone accounts of the parent and Group companies. This interpretation does not have an impact on the Group's financial statements.

Standards, amendments and interpretations effective to 31 March 2008 but not relevant

The following standards, amendments and interpretations to published standards are mandatory for accounting periods beginning on or after 1 January 2007 but they are not relevant to the Group's operations:

IFRS 4, 'Insurance contracts';

IFRIC 7, 'Applying the restatement approach under IAS 29, Financial reporting in hyperinflationary economies'; and

IFRIC 9, 'Re-assessment of embedded derivatives'.

Standards, amendments and interpretations to existing standards that are not yet effective and have not been early adopted by the Group

The following standards, amendments and interpretations to existing standards have been published and are mandatory for the group's accounting periods beginning on or after 1 April 2008 or later periods, but the group has not early adopted them:

IAS 23 (Amendment), 'Borrowing costs' (effective from 1 January 2009). The amendment to the standard is still subject to endorsement by the European Union. It requires an entity to capitalise borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset (one that takes a substantial period of time to get ready for use or sale) as part of the cost of that asset. The option of immediately expensing those borrowing costs will be removed. The Group will apply IAS 23 (Amended) from 1 April 2009 if the amendment is endorsed but it is currently not applicable to the Group as there are no qualifying assets.

IFRS 8, 'Operating segments' (effective from 1 January 2009). IFRS 8 replaces IAS 14 and aligns segment reporting with the requirements of

the US standard SFAS 131, 'Disclosure about segments of an enterprise and related information'. The new standard requires a 'management

approach', under which segment information is presented on the same basis as that used for internal reporting purposes. The Group will apply IFRS 8

from 1 April 2009. The expected impact is still being assessed in detail by management, but it appears likely that there will be some changes to the

manner in which reportable segments are reported, which will be consistent with the internal reporting provided to the chief operating decision-maker.

As goodwill is allocated to groups of cash-generating units based on segment level, the change will also require management to reallocate goodwill to

the newly identified operating segments. Management does not anticipate that this will result in any material impairment to the goodwill balance.

IFRS 3 (Revised) - Business combinations. The IASB published a revised IFRS 3, 'Business combinations', on 10 January 2008. The standard

continues to apply the acquisition method to business combinations, with some significant changes. The standard is applicable to business

combinations occurring in accounting periods beginning on or after 1 July 2009, with earlier application permitted.

IAS27 (Revised) - Consolidated and Separate Financial Statements. The standard addresses the accounting for subsidiaries in consolidated financial statements and in accounting for investments in the separate financial statements of a parent, venturer or investor. The amended standard must be applied for annual periods beginning on or after 1 July 2009. Earlier application is permitted. However, an entity must not apply the amendments for annual periods beginning before 1 July 2009 unless it also applies IFRS 3 (as revised in 2008).

Interpretations to existing standards that are not yet effective and not relevant for the Group's operations

The following interpretations to existing standards have been published and are mandatory for the Group's accounting periods beginning on or after 1 January 2008 or later periods but are not relevant for the Group's operations:

IFRIC 12, 'Service concession arrangements' (effective from 1 January 2008). 

IFRIC 13, 'Customer loyalty programmes' (effective from 1 July 2008). 

IFRIC 14, 'IAS 19 - The limit on a defined benefit asset, minimum funding requirements and their interaction' (effective from 1 January 2008).

3.    Going concern

The Company is developing its technologies for the marketplace and as such consumes cash until sufficient funds from either licensing or products sold are generated. The directors estimate that the cash held by the Company will not be sufficient to support the current level of activities for the next twelve months. However, the directors are confident of raising further funds by the issue of equity or other financial instruments. Consequently, the directors have adopted the going concern basis in the preparation of the financial statements. If further funds were not to be raised, adjustments would have to be made to revise the balance sheet value of assets to their realisable amounts and to provide for further liabilities that may arise.

4.    Net operating expenses 

All research and development costs incurred in the year have been charged directly to the income statement.

5.    Basic and diluted loss per ordinary share  

The basic and diluted loss per share is calculated by dividing the loss for the financial period of £6,572,000 (2007: £5,249,000) by 148,675,471 shares (2007: 106,455,554 shares), being the weighted average number of ordinary 10p or 1p shares in issue during the period.  

Potential ordinary shares are not treated as dilutive as the entity is loss-making.

6.    Acquisition

On 27 July 2007, the Group entered into arrangements to purchase the business assets of AmCyte, Inc. and AmCyte Diabetes, Inc. (together 'AmCyte'), based in Santa Monica, California. This was effected by the transfer of the assets into a new company, ReNeuron, Inc., a company registered in Delaware, USA in consideration of the issue of shares in ReNeuron, Inc. to AmCyte. ReNeuron Group plc then acquired 100% of the share capital of ReNeuron, Inc. from AmCyte in consideration of the issue of 9,291,521 ordinary shares in ReNeuron Group plc, which shares were placed with investors raising $4.0 million for the AmCyte vendors.

The acquired business contributed no revenue and a loss of £672,000 in the period from 1 August 2007 to 31 March 2008. There is no information available to quantify the effect on the Group's results of the acquisition occurring on 1 April 2007.

Details of net assets acquired and goodwill as in the Group accounts are as follows:

	£'000
Purchase consideration:
Shares issued	1,951
Direct costs relating to the acquisition	217 ______
Total purchase consideration	2,168 ______
Fair value of assets acquired:
Property, plant and equipment	21
Intangible assets	2,147 ______
	2,168 ______
Goodwill	Nil

No goodwill has been recognised on the acquisition of the AmCyte business assets. 

The transaction was not settled in cash and no cash was received into the Group as a result of the acquisition.

The value of the acquired assets, as stated in the accounts of ReNeuron, Inc., were as follows:

		£'000
Property, plant and equipment		21              ______

7.    Cash from operations

	Group
	Year ended 31 March 2008 £'000	Year ended 31 March 2007 £'000
Operating loss	(6,889)	(5,964)
Adjusted for
Depreciation	181	200
Provisions	53	-
Share-based payment charge	163	223
Loss on sale of fixed assets	1
Changes in working capital
Receivables	(117)	43
Payables	10	(534)
Cash consumed by operations	(6,598) ______	(6,032) ______

8.     Impact of conversion to IFRS

The adjustments necessary to comply with IFRS 1, 'First-time adoption of IFRS', are set out below.

Reconciliation of Equity at Transition Date, 1 April 2006

		UK GAAP	IFRS Adjustments	IFRS
	Note	£'000	£'000	£'000
Non-current assets
Negative goodwill	a	(1,421)	1,421	-
Intangible fixed assets	b	-	894	894
Property, plant and equipment	c	1,208	4	1,212
Financial assets	d	- ______	81 ______	81 ______
		(213)	2,400	2,187
Current assets
Debtors - due after more than one year	d	81	(81)	-
Trade and other receivables		946	-	946
Cash and cash equivalents		5,134 ______	- ______	5,134 ______
		6,161	(81)	6,080
Current Liabilities
Trade and other payables	e, f	(1,320)	(27)	(1,347)
Financial liabilities	c	- ______	(2) ______	(2) ______
		(1,320) ______	(29) ______	(1,349) ______
Net current assets		4,841 ______	(110) ______	4,731 ______
Non current liabilities
Financial liabilities	c	- ______	(2) ______	(2) ______
Net assets		4,628 ______	2,288 ______	6,916 ______
Shareholders' equity
Ordinary shares		9,355	-	9,355
Share premium account		5,472	-	5,472
Capital redemption reserve		-	-	-
Merger reserve		365	-	365
Warrant reserve		436	-	436
Share-based credit reserve	g	-	56	56
Retained deficit	a, b, e, g	(11,000) ______	2,232 ______	(8,768) ______
Capital and reserves attributable to the Group's equity shareholders		4,628 ______	2,288 ______	6,916 ______

Reconciliation of Income Statement for year ended 31 March 2007

		UK GAAP	IFRS Adjustments	IFRS
	Note	£'000	£'000	£'000
Revenue		49	-	49
Net operating expenses	a, b, e, f	(6,223)	(53)	(6,276)
Other operating income		263 ______	- ______	263 ______
Operating loss		(5,911)	(53)	(5,964)
Finance income		192 ______	- ______	192 ______
Loss before income taxes		(5,719)	(53)	(5,772)
Tax credit on loss on ordinary activities		523 ______	- ______	523 ______
Loss for the period		(5,196) ______	(53) ______	(5,249) ______

Reconciliation of Equity at 31 March 2007

		UK GAAP	IFRS Adjustments	IFRS
	Note	£'000	£'000	£'000
Non-current assets
Negative goodwill	a	(1,233)	1,233	-
Intangible fixed assets	b	-	1,272	1,272
Property, plant and equipment	c	1,042	2	1,044
Financial assets	d	- ______	125 ______	125 ______
		(191)	2,632	2,441
Current assets
Debtors - due after more than one year	d	125	(125)	-
Trade and other receivables		879	-	879
Cash and cash equivalents		7,676 ______	- ______	7,676 ______
		8,680	(125)	8,555
Current liabilities
Trade and other payables	e, f	(782)	(31)	(813)
Financial liabilities	c	- ______	(2) ______	(2) ______
		(782) ______	(33) ______	(815) ______
Net current assets		7,898 ______	(158) ______	7,740 ______
Non current liabilities
Financial liabilities	c	- ______	- ______	- ______
Net assets		7,707 ______	2,474 ______	10,181 ______
Shareholders' equity
Ordinary shares		1,377	-	1,377
Share premium account	b	12,974	239	13,213
Capital redemption reserve		8,964	-	8,964
Merger reserve		365	-	365
Warrant reserve		113	-	113
Share based credit reserve		-	166	166
Retained deficit	a, b ,e, f, g	(16,086) ______	2,069 ______	(14,017) ______
Capital and reserves attributable to the Group's equity shareholders		7,707 ______	2,474 ______	10,181 ______

Summary of notes to IFRS reconciliations

Note	Reason for adjustment	To Balance Sheet 1 April 2006	To Income Statement  12 months to  31 March 2007	To Balance Sheet 31 March 2007
		£'000	£'000	£'000
a	Negative goodwill release (see further comment below)	1,421	(188)	1,233
b	Share issues to StemCells, Inc. (see further comment below)
	Intangible assets	894		1,272
	Provision for intangibles		139
c	Restatement of an operating lease as a finance lease:
	Fixed assets - net book value	4		2
	Finance lease creditor	(4)		(2)
	Depreciation		(2)
	Rentals expense		2
d	Landlord deposit at fair value: Restated as a non-current financial asset (no change to total equity)
e	Accrual for holiday pay	(15)	(2)	(17)
f	Accrual for employee bonuses	(12)	(2)	(14)
g	Separate recognition of share-based credit reserve from retained deficit (no change to total equity)

Note a: Negative goodwill release

Negative goodwill was previously amortised in accordance with UK GAAP. Under IFRS, negative goodwill is not permitted to be held on the balance sheet but is recognised in the profit and loss account in the period it arises. The balance on the transition date and subsequent charges made under UK GAAP have therefore been reversed.

Note b: Share issues to StemCells, Inc.

Ordinary shares have been issued to StemCells, Inc. under licence and subscription and share exchange agreements. The shares issued were previously accounted for at a value of 10p. The underlying intangible asset created was previously provided for in full. Under IFRS, the shares issued have been recognised at fair value at the time of issue, being equivalent to the market value of the shares on the date of issue. The related intangible asset has been held on the balance sheet in accordance with IFRS, the previous provision against this intangible asset having been reversed.

Notes to Editors

ReNeuron is a leading, UK-based stem cell therapy business. It is applying its novel stem cell platform technologies in the development of ground-breaking stem cell therapies to serve significant and unmet or poorly-met clinical needs.  

ReNeuron has used its proprietary, patented cell expansion technology to generate genetically stable neural stem cell lines. This technology platform has multi-national patent protection and is fully regulated by means of a chemically-induced safety switch. Cell growth can therefore be completely arrested prior to in vivo implantation. ReNeuron's clinically-tested cell encapsulation technology provides a method of protecting cells when transplanted, as well as reducing or eliminating the host immune response that might otherwise occur post-transplantation.

ReNeuron has filed for approval to commence initial clinical studies with its lead ReN001 stem cell therapy for chronic stroke disability. There are an estimated 50 million stroke survivors worldwide, approximately one half of which are left with permanent disabilities. The annual health and social costs of caring for these patients is estimated to be in excess of £5 billion in the UK and in excess of US$50 billion in the US. In addition to its stroke programme, ReNeuron is developing stem cell therapies for a number of neurodegenerative diseases and other conditions, including Parkinson's disease, Type 1 diabetes and diseases of the retina.

ReNeuron has also leveraged its stem cell technologies into non-therapeutic areas - its ReNcell® range of cell lines for use in research and in drug discovery applications in the pharmaceutical industry. ReNeuron's ReNcell®CX and ReNcell®VM neural cell lines are marketed worldwide under license by Millipore Corporation.

ReNeuron's shares are traded on the London AIM market under the symbol RENE.L. Further information on ReNeuron and its products can be found at www.reneuron.com.

Data sources: UK Stroke Association; American Stroke Association.

This announcement contains forward-looking statements with respect to the financial condition, results of operations and business

achievements/performance of ReNeuron and certain of the plans and objectives of management of ReNeuron with respect thereto. These

statements may generally, but not always, be identified by the use of words such as 'should', 'expects', 'estimates', 'believes' or similar

expressions. This announcement also contains forward-looking statements attributed to certain third parties relating to their estimates regarding the

growth of markets and demand for products. By their nature, forward-looking statements involve risk and uncertainty because they reflect

ReNeuron's current expectations and assumptions as to future events and circumstances that may not prove accurate. A number of factors could

cause ReNeuron's actual financial condition, results of operations and business achievements/performance to differ materially from the estimates

made or implied in such forward-looking statements and, accordingly, reliance should not be placed on such statements.

The terms 'ReNeuron', 'the Company' or 'the Group' used in this statement refer to ReNeuron Group plc and/or its subsidiary undertakings,

depending on the context.

 

END

 

 

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