Interim Results
Sareum Holdings PLC
06 March 2008
For immediate release 6 March 2008
SAREUM HOLDINGS PLC
("Sareum" or "the Company")
FINANCIAL RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2007
Sareum Holdings plc (AIM: SAR), the specialist structure-based drug discovery
business, is pleased to announce its financial results for the six month period
ended 31 December 2007.
Financial highlights during period 1 July to 31 December 2007:
• Revenues of £1,096,000 (2006: £1,205,000)
• Loss on ordinary activities (after taxation) of £674,000 (2006: £208,000)
• Cash in bank £920,000 (2006: £767,000)
• Placing of £1,250,000 (gross) to advance in-house cancer drug pipeline
• No significant financial impact on adopting IFRS
Business highlights during period 1 July to 31 December 2007:
• Strengthened in-house drug discovery pipeline with the commencement of
two further oncology drug discovery programs
• Significant increase in patent application filings
• Additional repeat business with H. Lundbeck A/S
• Extension of research services agreement with Genentech, Inc.
• Mr Giorgio Reggiani and Dr Alastair Riddell appointed to the Board
Post-period end highlights:
• Additional in-house cancer research program and associated patent filings
Dr Tim Mitchell, CEO of Sareum Holdings plc, said: "We believe shareholder value
can be maximised from our in-house cancer programmes and are pleased to report a
productive research period where we have significantly progressed our internal
pipeline. Sareum has managed to maintain its level of fee for service work and
we continue to focus on the development and commercialisation of our internal
programmes."
Sareum Holdings plc 01223 497700
Tim Mitchell, Chief Executive Officer
Buchanan Communications 020 7466 5000
Tim Anderson, Mary-Jane Johnson
Grant Thornton Corporate Finance 020 7383 5100
Philip Secrett, Colin Aaronson
Interim Results for the six months ended 31 December 2007
Chairman's Statement
Sareum Holdings plc has continued to make significant advances in its in-house
cancer drug discovery programmes and, despite tight trading conditions made more
difficult by the level of merger and acquisition activity among our key customer
group, it has managed to largely maintain the overall level of
revenue-generating business. We made an important decision in early 2007 to add
to our in-house pipeline and to increase the resources devoted to in-house
programmes. This has resulted in considerable progress being made in these
programmes which are the key value drivers of the business, and is reflected in
the frequency with which new patent applications are being made.
Sareum has an integrated drug discovery platform that is capable of delivering
high quality novel drug leads quickly and effectively, delivering solid IP
results with great efficiency and flexibility for both the Company and its
collaborators.
The key value creator for Sareum's shareholders is in the development and future
licensing of drugs from the Company's in-house drug development pipeline.
Notable progress in Sareum's programmes, which focus on novel treatments for
cancer, has led to a decision to increase investment in the drug discovery
activity, adding new programmes and increasing the resource applied to existing
programmes. We are expecting to be able to nominate a compound to enter
pre-clinical development in the next six months.
Our most advanced in-house programme is carried out in conjunction with The
Institute of Cancer Research, one of the world's leading cancer research
organisations. Additionally, we are developing five further quality cancer drug
discovery targets through our in-house programmes. We have so far generated a
total of seven drug compound patent applications including the filing of four
patent applications during this period and one post-period end. Significantly,
we have obtained positive results from initial pre-clinical experiments to
understand the behaviour of our drug leads following systemic administration,
including experiments to determine the response of a tumour upon exposure to
these compounds. Based on these results, we expect to commence detailed efficacy
model studies in early Q2 2008.
We have received expressions of interest from pharmaceutical and biotechnology
companies in three of these programmes and early stage licensing discussions are
taking place. This supports our belief that our technology platform and
expertise can generate valuable drug discovery assets.
Additions to the Board
Mr Giorgio Reggiani, who joined Sareum as Finance Director and Company Secretary
in June 2007, was appointed to the Board of the Company in September. Mr.
Reggiani is a Chartered Management Accountant with 17 years of senior financial
experience in companies including Esprit Capital Partners LLP, Vidus Limited and
Mobile Systems International plc. Giorgio has brought a wealth of corporate and
financial skills to our strategic management of the Company.
Dr Alastair Riddell joined the Board in November 2007 as a non-executive
director. Alastair is CEO of Stem Cell Sciences plc and was previously CEO of
Paradigm Therapeutics Limited, the drug target discovery and development company
that was acquired by Takeda Pharmaceutical Company in March 2007. Prior to that,
he was Chairman of Surface Therapeutics Ltd and CEO of Pharmagene plc, now named
Asterand. He has held senior positions in international marketing, sales and
general management in Amersham International and Centocor. Alistair's extensive
knowledge of and experience in the biotech sector will be valuable as the
Company moves towards its strategic goals.
Financial review
During this period, revenues of £1,096,000 were recognised, £222,000 of which
came from success milestone payments. We have experienced difficult trading
conditions, especially in the USA where there is a reticence to use cash
reserves to sponsor new research activities until financial conditions improve.
There has also been an unusually high level of M & A activity among our key
customer group and this has tended to interfere with decision-making on
investment in new programmes.
We ended the half year with net current assets of £1,112,000 including £920,000
cash in bank. A placing of £1,250,000 (£1,203,000 net of issue costs) in October
was made to augment the cash available from our own activities and to fund the
progress of our internal drug discovery pipeline. The Company's funding
requirements depend on the timing of fee for service contracts which are, by
their nature, difficult to predict. However, the Sareum board currently believes
it will need to seek further funding before the end of its financial year.
The decision to increase activity on our internal pipeline has been combined
with careful management of costs, resulting in a loss on ordinary activities
(after taxation) of £674,000. Although this is an increase over the prior
interim period, we believe this level of R&D spend is crucial to increasing the
value of our business.
International Financial Reporting Standards ("IFRS")
This is the first period for which the Group has prepared the financial
statements under International Financial Reporting Standards ('IFRS') and it
should be emphasised that the amended presentation of financial statements under
IFRS has no impact on the financials of the Company. Previously Sareum has
prepared its financial statements under UK Generally Accepted Accounting
Principles ("UK GAAP"). The financial statements presented below are therefore,
for the first time, presented in accordance with the Group's accounting policies
based on IFRS as adopted by the European Union. The unaudited financial
statements for the six months ended 31 December 2007 are prepared in accordance
with the IFRS accounting policies that are expected to apply as of 30 June 2008.
The comparative financial statements for the six months ended 31 December 2006
and the year ended 30 June 2007 have been restated under IFRS.
Outlook
Our primary objective remains to advance our in-house drug discovery pipeline,
which is focused on cancer, to deliver drug candidates such that they are
positioned to attract lucrative partnering deals with pharmaceutical companies.
We will continue to advance these programmes and file further drug patent
applications during the year to protect our Intellectual Property portfolio. We
expect to develop drug candidates for pre-clinical studies during the current
financial year and are actively seeking licensing partners with the aim of
achieving a licensing deal on at least one of our six current in-house
programmes.
Fee-for-service activities continue to be an important side of our business and
we look forward to securing additional contracts and receiving future success
milestone payments and repeat business from existing programmes.
Dr Paul Harper
Chairman
Sareum Holdings plc
Sareum Holdings plc
Consolidated Income Statement for the six months ended
31 December 2007
Unaudited Unaudited Audited
Half Year to Half Year to Year ended
31 Dec 07 31 Dec 06 30 Jun 07
£'000 £'000 £'000
Revenue 1,096 1,205 2,471
Cost of Sales (1,168) (833) (1,853)
Gross (Loss)/Profit (72) 372 618
Administrative expenses (731) (671) (1,352)
Operating Loss (803) (299) (734)
Interest receivable and similar income 9 5 29
Interest payable and similar charges (3) (5) (17)
Loss on ordinary activities before taxation (797) (299) (722)
Tax on loss on ordinary activities 123 91 195
Loss on ordinary activities after taxation (674) (208) (527)
Loss per share (pence)
Basic and diluted (0.13)p (0.05)p (0.12)p
Sareum Holdings plc
Consolidated Balance Sheet as at 31 December 2007
Unaudited Unaudited Audited
Half Year to Half Year to Year ended
31 Dec 07 31 Dec 06 30 Jun 07
£'000 £'000 £'000
Non-current assets
Intangible assets 32 14 31
Tangible assets 917 720 1,015
949 734 1,046
Current assets
Debtors 722 997 837
Cash at bank and in hand 920 767 660
1,642 1,764 1,497
Creditors: amounts due within one year (530) (768) (1,017)
Net current assets 1,112 996 480
Total assets less current liabilities 2,061 1,730 1,526
Creditors: amounts due in over one year (165) (45) (160)
Net assets 1,896 1,685 1,366
Equity
Called up share capital 150 112 115
Share premium account 4,933 3,767 3,764
Merger reserve - - -
Profit and loss account (3,187) (2,194) (2,513)
Total equity 1,896 1,685 1,366
Sareum Holdings plc
Consolidated Statement of changes in equity for the six months ended
31 December 2007
Share Capital Share Premium Retained Loss Total
Unaudited Unaudited
Unaudited £'000 £'000 Unaudited
£'000 £'000
At 1 July 2006 93 3,088 (1,985) 1,196
Issue of share capital (net) 22 676 - 698
Loss for the period - - (208) (208)
At 31 December 2006 115 3,764 (2,193) 1,686
Loss for the period - - (320) (320)
As at 30 June 2007 115 3,764 (2,513) 1,366
Issue of share capital (net) 35 1,169 - 1,204
Loss for the period - - (674) (674)
As at 31 December 2008 150 4,933 (3,187) (1,896)
Sareum Holdings plc
Consolidated Cash Flow Statement for the six months ended
31 December 2007
Unaudited Unaudited Audited
Six Months to Six Months to Year ended
31 Dec 07 31 Dec 06 30 Jun 07
£'000 £'000 £'000
Operating activities
Cash outflow from operating activities (930) (415) (370)
Research and Development tax credit 123 128 128
(807) (287) (242)
Net cash used in operating activities
Investing activities
Acquisition of fixed assets (84) (54) (518)
Interest received 6 - 12
(78) (54) (506)
Net cash used by investing activities
Financing activities
Net proceeds from ordinary shares issued 1,203 698 698
Increase/(Repayment) of loans (58) (118) 182
Net increase/(decrease) in cash and equivalents 260 239 132
Cash and equivalents at start of period 660 528 528
Cash and equivalents at end of period 920 767 660
SAREUM HOLDINGS PLC
NOTES TO THE UNAUDITED RESULTS FOR THE SIX MONTHS ENDED
31 DECEMBER 2007
1. FINANCIAL INFORMATION
These interim statements do not constitute statutory financial statements within
the meaning of Section 240 of the Companies Act 1985. The 30 June 2007 Annual
Report and Accounts are available from Sareum's web site, www.sareum.co.uk.
2. BASIS OF ACCOUNTING
The interim financial statements have been prepared in accordance with the IFRS
accounting policies that are expected to apply for the 30 June 2008 annual
financial statements. No changes have arisen due to the transition from
reporting under UK GAAP to reporting under IFRS and therefore no reconciliations
are required or provided.
Please refer to the appendix below for further information.
3. TAXATION
No liability arises for corporation tax for the period ended 31 December 2007.
Research and Development tax credits receivable as cash are estimated to be
£123,000 for the period.
4. DIVIDENDS
The directors do not propose the payment of a dividend in respect of the six
months ended 31 December 2007.
5. LOSS PER SHARE
Basic and diluted loss per share is 0.13p (2006: 0.05p). The basic loss per
ordinary share is based on the Group's loss for the six months of £674,000
(2006: £208,000) divided by the weighted average number of shares in issue
during the period of 506,105,121 (2006: 388,662,000).
6. DEFERRED INCOME
Deferred income arises when sales invoices have been issued to clients but the
work covered by the invoices has not been completed at the end of the accounting
period. Deferred income will be credited to turnover once the invoiced work is
complete. There was £10,000 of deferred income during the period (2006:
401,000).
Appendix
Reporting under International Financial Reporting Standards (IFRS)
From June 2008 Sareum Holdings plc will produce its consolidated report and
accounts in accordance with IFRS. This financial information has been prepared
on the basis of the IFRS expected to be applicable at 30 June 2008. These
standards are subject to ongoing review and endorsement by the EU or possible
amendment by interpretive guidance from the IASB and are therefore still subject
to change. We will update our restated information for any such changes as and
when they are made.
No changes have arisen due to the transition from reporting under UK GAAP to
reporting under IFRS and therefore no reconciliations are required or provided.
The Group's date of transition to IFRS is 1 January 2007, which is the beginning
of the comparative period for the 2008 financial year.
The UK GAAP financial information contained in this document does not constitute
statutory accounts as defined in Section 240 of the Companies Act 1985. The
auditors have issued unqualified opinions on the Group's UK GAAP financial
statements for the years ended 30 June 2006 and 30 June 2007.
Key accounting policy changes are included within this report. A full set of
IFRS accounting policies will be published in the Group's report and accounts
for the year to 30 June 2008.
First time adoption
IFRS 1 "First Time Adoption of International Financial Reporting Standards" sets
out the approach to be followed when IFRS are applied for the first time. As a
general principle, IFRS 1 requires that accounting policies are to be applied
retrospectively although IFRS 1 provides a number of optional exceptions where
the cost of compliance is deemed to exceed the benefits to users of the
financial statements. Where applicable, the options selected by management under
IFRS 1 are set out in the explanatory notes below.
Summary of significant accounting policies
The significant accounting policies adopted in the preparation of the Group's
IFRS statements are set out below:
Basis of preparation
Results for the six month periods ended 30 June 2007 and 30 June 2006 have not
been audited. Subject to EU endorsement of outstanding standards and no further
changes from the IASB this information is expected to form the basis for
comparatives when reporting financial results for 2007, and for subsequent
reporting periods.
The financial statements have been prepared on the historical cost basis except
for certain financial assets and liabilities, which are measured at fair value.
Intangible assets
Purchased licenses are recognised at cost on acquisition and are subject to
amortisation over their useful life from the point at which the asset is
available for use. The amortisation charge is calculated on a straight-line
basis over their estimated useful lives.
Research and development expenditure
The Group considers that the regulatory, technical and market uncertainties
inherent in the development of new products mean that internal development costs
should not be capitalised as intangible fixed assets until commercial viability
of a product is demonstrable and appropriate resource is in place to launch the
product. Except in those circumstances, research and development expenditure is
expensed as incurred.
Property, plant and equipment
Property, plant and equipment is stated at cost, net of depreciation and any
provision for impairment. Depreciation is provided on all property, plant and
equipment at rates calculated to write off the cost, less estimated residual
value, of each asset on a straight line basis over its expected useful life as
follows:
Leasehold improvements - remaining lease term
Fixtures and fittings - four years, straight-line basis
Laboratory equipment - four years, straight-line basis
Computer equipment - three years, straight-line basis
Foreign currencies
Transactions in foreign currencies are recorded at the rate of exchange at the
date of the transaction. Monetary assets and liabilities denominated in foreign
currencies at the balance sheet date are reported at the rate of exchange
prevailing at that date. All exchange gains arising on the retranslation of
assets and liabilities are dealt with in the income statement.
Leases
Rentals under operating leases are charged on a straight-line basis over the
lease term, even if the payments are not made on such a basis. Provisions are
made in respect of onerous leases to the extent that the Directors believe that
costs will be incurred under the terms of the lease with no benefit to the
Group.
Taxation
Current UK corporation tax is provided at amounts expected to be paid (or
recovered) using the tax rates and laws that have been enacted or substantively
enacted by the balance sheet date.
Deferred tax is accounted for using the balance sheet liability method in
respect of temporary timing differences arising from differences between the
carrying amount of assets and liabilities in the financial statements and the
corresponding tax bases used in the computation of taxable profit. Deferred tax
assets are recognised to the extent that it is probable that future taxable
profit will be available against which the temporary difference can be utilised.
Their carrying amount is reviewed at each balance sheet date on the same basis.
Deferred tax is measured on an undiscounted basis, and at the tax rates that are
expected to apply in the period in which the asset or liability is settled. It
is recognised in the income statement except when it relates to items credited
or charged directly to equity, in which case the deferred tax is also dealt with
in equity.
Revenue recognition
Revenue consists of income received, in the normal course of business, from
licence and development agreements and is stated net of any trade discounts, VAT
and other sales related taxes. Income from these agreements is typically in the
form of fees on signature, milestone receipts on achievement of predetermined
events, and royalties on the sale of the product once marketed.
Revenue is recognised when licence rights are granted to the extent that the
Company has performed its contractual obligations, based on the fair value of
the right to consideration for each component of the agreement.
Post-retirement benefits
The Group makes defined contributions to personal pension arrangements of its
executive directors and employees. The amount charged to the income statement in
respect of pension costs is the contribution payable in the period. Differences
between contributions payable in the period and contributions actually paid are
shown either as accruals or prepayments in the balance sheet.
Share-based payments
The Group operates an employee share option scheme. For all grants of share
options and awards, the fair value as at the date of grant is calculated using
the Black-Scholes option pricing model and any corresponding expense is
recognised over the vesting period.
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