Half Yearly Report

RNS Number : 4070A

Synairgen plc

01 February 2011

 



PRESS RELEASE

Synairgen plc

('Synairgen' or the 'Company')

 

Interim Results for the six months ended 31 December 2010

Southampton, UK - 1 February 2011: Synairgen plc (LSE: SNG), the respiratory drug discovery and development company with a particular focus on viral defence, today announces its interimresults for the six months ended 31 December 2010. 

 

Operational highlights

·     Phase II study of inhaled interferon beta ('IFN-beta') in exacerbation-prone asthmatics (SG005) progressing well: 10 sites now initiated, with recruitment scheduled to complete in Autumn 2011

·      Influenza pre-clinical programme commenced, with results expected late Summer 2011

·      Patent for the use of inhaled IFN-beta in the elderly (aged over 40 years) granted in US

·      Process of identification and selection of a long-term development and licensing partner for the IFN-beta programme well under way

 

Financial highlights

·      Research and development expenditure for the period: £1.28 million (six months ended 31 December 2009: £1.04 million)

·      Post-tax loss for the period: £1.41 million (six months ended 31 December 2009: loss of £1.21 million)

·      Cash outflow for the period: £1.14 million (six months ended 31 December 2009: £1.10 million)

·      Net funds at 31 December 2010: £3.88 million (31 December 2009: £6.84 million)

Commenting on the results, Simon Shaw, Chairman of Synairgen, said:

"I am delighted with our progress in the period and look forward to the results, initially from our influenza programme, and later in the year from our asthma Phase II proof of concept study. In terms of business development, I am hopeful that the quality of interest in our IFN-beta development programme positions us well to establish a partnership this year to bolster the next stage of development of our potentially important antiviral therapy. "

-Ends-

For further information, please contact:

Synairgen plc Tel: [phone] Richard Marsden, Chief Executive Officer John Ward, Finance Director Matrix Corporate Capital LLP Tel: [phone] Stephen Mischler Nick Stone Threadneedle Communications Tel: [phone] Graham Herring Josh Royston

Chairman's and Chief Executive Officer's Review

OPERATING REVIEW

During the first six months of the financial year Synairgen has made good progress advancing its lead programme, inhaled IFN-beta, across three substantial potential therapeutic applications: asthma, COPD, and influenza. Synairgen is developing inhaled IFN-beta, which is a well-recognised antiviral, to help people with existing lung diseases such as those with asthma and COPD, defend themselves against pulmonary complications caused by respiratory viruses such as the common cold and influenza. Respiratory viruses are understood to cause the majority of hospitalisations in these patient populations. Synairgen is also developing inhaled IFN-beta as a hospital-based treatment for any patient with severe viral lung infections. 

Asthma

It is normal to develop upper respiratory tract symptoms such as blocked/runny nose, sore throat and sometimes a fever when we become infected with cold or influenza viruses. These viruses can spread to the lungs. Whilst people with healthy lungs are able to mount an antiviral defence, which is capable of preventing the virus infection from taking significant hold in the lungs, asthma sufferers have a deficiency in the antiviral protein IFN-beta, and this appears to enable the virus to establish itself in the their lungs. Viral infection in the lungs can cause an increase in the level of asthma symptoms, known as an exacerbation. Asthma exacerbations lead to an increase in the use of existing therapies and compromise the patient's ability to function normally. 80% of exacerbations that necessitate a hospitalisation are caused by common respiratory viruses, of which the common cold virus (rhinovirus) is the most prevalent.

Synairgen is developing inhaled IFN-beta to correct the deficiency in IFN-beta in asthmatic lungs at the first sign of viral symptoms in the upper respiratory tract.

Synairgen has already conducted a Phase I safety study in moderate asthmatics, in which inhaled IFN-beta was well-tolerated and lung cells responded to IFN-beta by generating antiviral proteins (even in the absence of a virus). Phase II is somewhat de-risked for this programme because IFN-beta is already an accepted medication by injection for multiple sclerosis with a known pharmacological profile, which at the doses being administered means that any drug which passes through the lung and into the blood stream is unlikely to cause any unforeseen adverse effects. 

During the first half of 2010, Synairgen commenced a Phase II proof of concept trial in exacerbation-prone asthmatics who have a history of respiratory problems caused by viruses. This trial is progressing well: 10 sites have been initiated (including 4 in Australia) and are recruiting patients; and we are currently initiating several additional sites. At 31 December 2010, 82 patients have been screened successfully, and of these 35 have been treated with either the study medication or placebo. This study is scheduled to complete in the autumn, although we will carry out an interim statistical review of the sample size in Q2 2011.

COPD

COPD patients are also vulnerable to the complications of usually benign respiratory viruses. A COPD patient who develops cold symptoms has a 50% chance of developing an exacerbation.  Research groups have shown that cells from smokers are more susceptible to virus infections and that these cells also have an impaired IFN-beta response to virus infection. During the past six months, Synairgen has secured UK regulatory (MHRA) and Ethics Committee approval, thereby preparing the ground to enable the commencement of a Phase II proof of concept study in COPD patients during the winter of 2011-2012 (SG006).

Influenza-like-illness - a third indication for inhaled IFN-beta

Every year, influenza epidemics (seasonal influenza) claim the lives of thousands of people. This is despite the use of vaccines and products such as Tamiflu® and Relenza®. Beyond seasonal influenza there is the fear that a new strain of influenza will emerge that is both highly transmissible and pathogenic. In 2009 we saw the emergence of H1N1 (swine flu) in Mexico.  While H1N1 is transmissible, it has hereto shown not to be particularly pathogenic. A further round of infection and associated mortality has been experienced this winter and governments continue to prepare for future threats. Such threats could be in the form of a re-emergence of swine flu, a more transmissible form of H5N1 (bird flu) which is highly pathogenic, or the emergence of non-influenza respiratory viruses such as SARS. It is worth noting that as many as a half of viral infections believed to be caused by influenza are caused by other respiratory viruses such as rhinovirus, adenovirus, corona virus, RSV, or parainfluenza virus. Inhaled IFN-beta has the potential to be efficacious against all of these viruses, which would provide a competitive advantage to existing therapies.

Patients who are hospitalised with influenza infection generally have a persistent viral infection in the lungs, sometimes even after the virus has cleared from the nose and throat. These patients can vary in age from the very young, to the very old with or without pre-existing chronic conditions (eg heart disease).

Synairgen is developing inhaled IFN-beta to treat patients who have been hospitalised as a result of this persistent viral infection of the lungs. The rationale for this programme has been provided by in vitro experiments conducted by Synairgen, where the introduction of IFN-beta was shown to alter the course of persistent and established respiratory virus infection.

Synairgen is developing and conducting a series of experiments with the first significant results anticipated during late summer 2011.

IFN-beta intellectual property

In addition to patents granted in the US and EU to treat asthmatic and COPD patients with inhaled IFN-beta to prevent rhinovirus induced exacerbations, during the period Synairgen has also received grant of a similar patent in the US to treat the elderly (aged over 40 years) irrespective of co-existing medical conditions, which greatly expands the Company's IP coverage. 

IFN-beta partnering strategy

In 2010 we embarked upon a formal process to identify and select a long term development and licensing partner for the IFN-beta programme. Deloitte LLP's Licensing team was selected to manage this exercise with a view to providing Synairgen with a high quality partnering option between now and the commencement of the next phase of development in asthma (Phase IIb in 2012) and the Phase IIa study in COPD. Since the summer we have had a gratifyingly high level of interest in the development opportunity, and both the number and the quality of the interested parties suggest that we should satisfactorily meet this goal.

FINANCIAL REVIEW

Statement of Comprehensive Income

The loss from operations for the six months ended 31 December 2010 was £1.67 million (six months ended 31 December 2009: loss of £1.44 million). Revenue and gross profit arose from service work undertaken for Pfizer Limited and it is anticipated that this project will be completed during the first half of 2011. Research and development expenditure was £1.28 million (2009: £1.04 million) and has been focussed on the progression of SG005, securing ethical and regulatory approval for SG006, and preparation for the pre-clinical influenza programme. Other administrative costs increased to £0.47 million (2009: £0.40 million). Research and development tax credits increased to £0.24 million (2009: £0.18 million) in line with the higher level of research and development expenditure. The loss after tax was £1.41 million (2009: loss of £1.21 million) and the loss per share was 2.36p (2009: loss of 2.02p).

Statement of Financial Position and cash flows

At 31 December 2010, net assets amounted to £4.23 million (31 December 2009: £6.85 million), including cash and bank deposit balances of £3.88 million (2009: £6.84 million).

Cash outflow (including movements in bank deposits) for the six months to 31 December 2010 was £1.14 million (six months ended 31 December 2009: £1.10 million).

OUTLOOK 

The coming 12 months will be transformational for Synairgen. Operationally we are focusing on the Phase II proof of concept trial in asthma, recruitment for which is scheduled to complete in the autumn 2011. We also look forward to significant developments in the summer as we progress the influenza programme towards the clinic. Finally, the continuation of the licensing programme should see Synairgen well-positioned to support the next phase of development of the IFN-beta programmes.

Simon Shaw                Richard Marsden        

Chairman                      Chief Executive Officer

31 January 2011

Consolidated Statement of Comprehensive Income

for the six months ended 31 December 2010

		Unaudited Six months ended 31 December 2010	Unaudited Six months ended 31 December 2009	Audited Year ended 30 June 2010
	Notes	£000	£000	£000
Revenue		115	-	-
Cost of sales		(29)	-	-
Gross profit		86	-	-
Research and development expenditure		(1,284)	(1,040)	(2,109)
Other administrative expenses		(470)	(397)	(880)
Total administrative expenses		(1,754)	(1,437)	(2,989)
Loss from operations		(1,668)	(1,437)	(2,989)
Finance income		20	46	71
Loss before tax		(1,648)	(1,391)	(2,918)
Tax credit	2	238	182	368
Loss and total comprehensive loss for the period attributable to equity holders of the parent		(1,410)	(1,209)	(2,550)
Loss per ordinary share
Basic and diluted loss per share (pence)	3	(2.36)p	(2.02)p	(4.27)p

Consolidated Statement of Changes in Equity (unaudited)

	Share Capital	Share premium	Merger reserve	Retained  deficit	Total
	£000	£000	£000	£000	£000
At 1 July 2009	597	14,725	483	(7,806)	7,999
Recognition of share-based payments	-	-	-	59	59
Total comprehensive loss for the period	-	-	-	(1,209)	(1,209)
At 31 December 2009	597	14,725	483	(8,956)	6,849
Recognition of share-based payments	-	-	-	56	56
Total comprehensive loss for the period	-	-	-	(1,341)	(1,341)
At 30 June 2010	597	14,725	483	(10,241)	5,564
Recognition of share-based payments	-	-	-	78	78
Total comprehensive loss for the period	-	-	-	(1,410)	(1,410)
At 31 December 2010	597	14,725	483	(11,573)	4,232

Consolidated Statement of Financial Position

as at 31 December 2010

		Unaudited  31 December 2010	Unaudited  31 December 2009	Audited  30 June 2010
	Notes	£000	£000	£000
Assets
Non-current assets
Intangible assets		241	205	252
Property, plant and equipment		74	89	81
		315	294	333
Current assets
Inventories		267	134	293
Current tax receivable		200	160	345
Trade and other receivables		179	136	106
Other financial assets - bank deposits	4	2,701	6,141	3,680
Cash and cash equivalents		1,178	704	1,334
		4,525	7,275	5,758
Total assets		4,840	7,569	6,091
Liabilities
Current liabilities
Trade and other payables		(607)	(716)	(525)
Obligations under finance leases		(1)	(3)	(2)
		(608)	(719)	(527)
Non-current liabilities
Obligations under finance leases		-	(1)	-
Total liabilities		(608)	(720)	(527)
Total net assets		4,232	6,849	5,564
Equity
Capital and reserves attributable to equity holders of the parent
Share capital		597	597	597
Share premium		14,725	14,725	14,725
Merger reserve		483	483	483
Retained deficit		(11,573)	(8,956)	(10,241)
Total equity		4,232	6,849	5,564

Consolidated Statement of Cash Flows

for the six months ended 31 December 2010

	Unaudited Six months ended 31 December 2010	Unaudited Six months ended 31 December 2009	Audited Year ended 30 June 2010
	£000	£000	£000
Cash flows from operating activities
Loss before tax	(1,648)	(1,391)	(2,918)
Adjustments for:
Finance income	(20)	(46)	(71)
Depreciation	16	16	34
Amortisation	15	10	23
Share-based payment charge	78	59	115
Cash flows from operations before changes in working capital	(1,559)	(1,352)	(2,817)
Decrease/(Increase) in inventories	26	(11)	(170)
Increase in trade and other receivables	(77)	(31)	(20)
Increase/(Decrease) in trade and other payables	82	54	(137)
Cash used in operations	(1,528)	(1,340)	(3,144)
Tax credit received	383	342	343
Net cash used in operating activities	(1,145)	(998)	(2,801)
Cash flows from investing activities
Interest received	24	16	60
Purchase of property, plant and equipment	(9)	(24)	(34)
Purchase of intangible assets	(4)	(88)	(148)
Decrease/(Increase) in other financial assets	979	(4,164)	(1,703)
Net cash generated from/(used in) investing activities	990	(4,260)	(1,825)
Cash flows from financing activities
Repayments of obligations under finance leases	(1)	(1)	(3)
Net cash used in financing activities	(1)	(1)	(3)
Decrease in cash and cash equivalents	(156)	(5,259)	(4,629)
Cash and cash equivalents at beginning of period	1,334	5,963	5,963
Cash and cash equivalents at end of period	1,178	704	1,334

Notes to the Financial Statements

for the six months ended 31 December 2010

1.         Basis of preparation

Basis of accounting

The interim financial statements, which are unaudited, have been prepared on the basis of the accounting policies expected to apply for the financial year to 30 June 2011 and in accordance with recognition and measurement principles of International Financial Reporting Standards (IFRSs) as endorsed by the European Union. The accounting policies applied in the preparation of these interim financial statements are consistent with those used in the financial statements for the year ended 30 June 2010.

The IFRSs that will be effective in the financial statements for the year to 30 June 2011 are still subject to change and to the issue of additional interpretation(s) and therefore cannot be determined with certainty. Accordingly, the accounting policies for that annual period that are relevant to this interim financial information will be determined only when the IFRS financial statements are prepared at 30 June 2011.

The interim financial statements do not include all of the information required for full annual financial statements and do not comply with all the disclosures in IAS 34 'Interim Financial Reporting'. Accordingly, whilst the interim statements have been prepared in accordance with IFRSs, they cannot be construed as being in full compliance with IFRSs.

The financial information for the year ended 30 June 2010 does not constitute the full statutory accounts for that year. The Annual Report and Financial Statements for 2010 have been filed with the Registrar of Companies. The Independent Auditor's Report on the Annual Report and Financial Statements for 2010 was unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.

Going Concern

The directors have prepared financial forecasts to estimate the likely cash requirements of the Group over the next twelve months. In preparing these financial forecasts, the directors have had to make certain assumptions with regards to the timing and amount of future expenditure and other key factors. The directors have attempted to take a balanced and prudent view in preparing these forecasts, however their accuracy is uncertain.

After due consideration and review of these financial forecasts and current cash resources, the directors consider that the Group has adequate financial resources to continue in operational existence for the foreseeable future (being a period of at least twelve months from the date of this report), and for this reason the financial statements have been prepared on a going concern basis.

The 31 December 2010 interim financial statements were approved by a duly appointed and authorised committee of the Board of Directors on 31 January 2011.

2.         Tax credit

The tax credit of £238,000 (six months ended 31 December 2009: £182,000; year ended 30 June 2010: £368,000) includes £200,000 as an estimate of the research and development tax credit receivable in respect of the current period and £38,000 representing amounts unprovided for in previous periods.

3.         Loss per ordinary share

	Unaudited	Unaudited	Audited
	Six months	Six months	Year
	ended	ended	ended
	31 December	31 December	30 June
	2010	2009	2010
Loss attributable to equity holders of the Company (£000)	(1,410)	(1,209)	(2,550)
Weighted average number of ordinary shares in issue	59,745,249	59,745,249	59,745,249

The loss attributable to ordinary shareholders and weighted average number of ordinary shares for the purpose of calculating the diluted earnings per ordinary share are identical to those used for basic earnings per share. This is because the exercise of share options would have the effect of reducing the loss per ordinary share and is therefore not dilutive under the terms of IAS 33. At 31 December 2010 there were 6,283,487 options outstanding (31 December 2009: 4,592,361 options outstanding; 30 June 2010: 4,733,439 options outstanding).

4.         Other financial assets

Other financial assets comprise Sterling fixed rate bank deposits of greater than three months' maturity at time of deposit.

INDEPENDENT REVIEW REPORT TO SYNAIRGEN PLC

Introduction

We have been engaged by the company to review the interim set of financial statements in the half-yearly financial report for the six months ended 31 December 2010 which comprises the Consolidated Statement of Comprehensive Income, the Consolidated Statement of Changes in Equity, the Consolidated Statement of Financial Position, the Consolidated Statement of Cash Flows and the related notes 1 to 4.

We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim set of financial statements.

Directors' responsibilities

The interim report, including the financial information contained therein, is the responsibility of and has been approved by the directors. The directors are responsible for preparing the interim report in accordance with the rules of the London Stock Exchange for companies trading securities on the Alternative Investment Market which require that the half-yearly report be presented and prepared in a form consistent with that which will be adopted in the company's annual accounts having regard to the accounting standards applicable to such annual accounts.

Our responsibility

Our responsibility is to express to the company a conclusion on the interim set of financial statements in the half-yearly financial report based on our review.

Our report has been prepared in accordance with the terms of our engagement to assist the company in meeting the requirements of the rules of the London Stock Exchange for companies trading securities on the Alternative Investment Market and for no other purpose. No person is entitled to rely on this report unless such a person is a person entitled to rely upon this report by virtue of and for the purpose of our terms of engagement or has been expressly authorised to do so by our prior written consent. Save as above, we do not accept responsibility for this report to any other person or for any other purpose and we hereby expressly disclaim any and all such liability.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, ''Review of Interim Financial Information Performed by the Independent Auditor of the Entity'', issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit.  Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the interim set of financial statements in the half-yearly financial report for the six months ended 31 December 2010 is not prepared, in all material respects, in accordance with the rules of the London Stock Exchange for companies trading securities on the Alternative Investment Market.

BDO LLP

Chartered Accountants and Registered Auditors

Southampton

United Kingdom

31 January 2011

BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127)

 

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