Interim Results

Synairgen plc 23 February 2006 23 February 2006 Synairgen plc ('Synairgen' or the 'Company') Interim Results for the six months ended 31 December 2005 Synairgen plc (LSE: SNG), the drug discovery company focused on identifying and out-licensing new pharmaceutical products which address the underlying causes of asthma and chronic obstructive pulmonary disease ('COPD'), today announces its interim results for the six months ended 31 December 2005. Operational highlights • Interferon beta ('IFN beta') for asthma: commencement of inhaled IFN beta Phase I clinical trial; initial results expected mid 2006 • IFN beta for COPD: in vitro proof of concept studies underway • Recruitment of scientific team complete Financial highlights • Turnover was £77k (six months ended 31 December 2004: £58k) • Operating loss for the period was £742k (six months ended 31 December 2004: loss of £390k) in line with management expectations • Cash outflow for the period was £438k (six months ended 31 December 2004: £283k) • Net funds at 31 December 2005 of £8.2 million (31 December 2004: £9.1 million) Commenting on the results, Simon Shaw, Chairman of Synairgen, said: 'We are delighted to have seen our lead product enter the clinic during the period. This is a testament to Synairgen's ability to progress from discovery to development. In 2006, we look forward to progressing the IFN beta development in asthma and advancing our other collaborative and proprietary research programmes.' -Ends- For further information, please contact: Synairgen Tel: 02380 512 800 Richard Marsden, MD John Ward, FD Hogarth Partnership Tel: 020 7357 9477 Melanie Toyne-Sewell / Georgina Briscoe CHAIRMAN'S STATEMENT INTRODUCTION Synairgen is a drug discovery company focused on researching treatments to address the causes of asthma and chronic obstructive pulmonary disease ('COPD') through both proprietary and collaborative programmes. During the six months ended 31 December 2005, Synairgen has continued to pursue its proprietary programmes and we are very pleased with our progress as our first product, inhaled interferon beta ('IFN beta') for asthma, entered the clinical trial phase. In parallel, we have also continued to study IFN beta for its potential to protect COPD patients from the effects of the common cold. Within our other proprietary programmes we have continued to research into impaired epithelial barrier function in asthma and the restorative effects of various growth factors. Analysis and interpretation of the data generated through our collaboration with a significant undisclosed international biotechnology company has now commenced. OPERATING REVIEW Proprietary Programmes Inhaled IFN beta • Asthma Inhaled IFN beta has the potential to prevent or alleviate rhinovirus (common cold virus) induced asthma attacks (exacerbations) in patients with severe asthma, thereby reducing the frequency of hospitalisations and absenteeism from work and school. We believe that such a therapy could address a significant unmet clinical need and generate significant savings in healthcare costs. The clinical trials aimed at establishing the safety of IFN beta commenced in November 2005. The first trial is being conducted at the University of Southampton and will comprise 27 subjects. The first part of this trial has been completed and approved by the Ethics and Safety Panel, allowing progression to the next two stages of the Phase I study. The outcome of this study will determine the extent of further safety studies needed and it is on schedule to complete by the summer 2006. • COPD As with asthma, Synairgen is using its in vitro models of COPD to establish the potential efficacy of IFN beta. Rhinovirus infections are a significant cause of COPD exacerbations and are responsible for many hospitalisations. Initial findings of our research will be presented at the American Thoracic Society Meeting in May 2006. Barrier Function/Growth Factors Synairgen holds patent rights to an in vitro model system used for testing products capable of restoring epithelial barrier function in asthma. The ability of the epithelium to defend itself against inhaled 'challenges' such as allergens, pollution and cigarette smoke has been shown to be compromised in asthmatics. The first class of compounds that we are testing in this system is a group of growth factors. Collaborations Samples generated from our in vitro experiments are being analysed by our significant international biotechnology collaborator and both parties are now interpreting the results. During the period, we have reviewed more opportunities than we have the resources to fulfil. Accordingly, we have refined our strategy for collaboration to pursue only those where there is scope for generating sole or joint intellectual property and have therefore ceased to undertake pure fee for service work. Biobank The Biobank of well-characterised, disease-specific tissue and samples continues to grow, and this provides our scientists with high quality materials from which to generate our proprietary in vitro models and potential new discoveries. In addition, we have collated approximately 750 samples which are currently being prepared for proteomic analysis within Synairgen to establish potential new areas for drug discovery. Recruitment We have continued to enhance our research capability. During the period, we completed the recruitment of our core scientific team, which is focused on our three proprietary programmes: IFN beta in COPD; Barrier Function (and the related Growth Factors); and Proteomics. FINANCIAL REVIEW Profit and loss account Revenue for the six months to 31 December 2005 was £77k (six months ended 31 December 2004: £58k) and was primarily generated from the two contracts with Centocor and our undisclosed international biotechnology collaborator. The operating loss for the period was £742k (2004: loss of £390k), which was in line with our expectations. Research and development expenditure increased from £194k to £486k as the Company commenced the IFN beta Phase I clinical trial, recruited additional staff and broadened its research portfolio. Our R&D expenditure will continue to increase further as we progress through the IFN beta programme. The increase in other administrative costs from £204k to £319k reflects the planned scaling-up of activities, including the rental of additional space within the University of Southampton. Interest receivable increased from £83k to £198k on account of the IPO funds raised in October 2004. The retained loss was £544k (2004: loss of £307k) and the loss per share was 2.5p (2004: loss of 1.9p). Balance Sheet At 31 December 2005, net assets amounted to £8.3 million (31 December 2004: £9.1 million), including cash and deposit balances of £8.2 million (2004: £9.1 million). OUTLOOK In the next six months we anticipate progressing the IFN beta clinical trial for asthma and determining the extent of any further Phase I trials that may be required. We expect to see exciting developments in our collaborations and our proprietary programmes. We also look forward to updating shareholders on the results of our in vitro work on IFN beta in the field of COPD. Simon Shaw Chairman Unaudited Consolidated Profit and Loss Account for the six months ended 31 December 2005 Proforma Proforma Six months Six months Year ended ended ended 31 December 31 December 30 June 2005 2004 2005 Notes £000 £000 £000 Turnover 77 58 202 Cost of sales (14) (50) (135) --------- --------- ------- Gross profit 63 8 67 --------- --------- ------- Administrative expenses --------------------- ------ --------- --------- ------- Research and development expenditure (486) (194) (557) Other (319) (204) (418) --------------------- ------ --------- --------- ------- Total (805) (398) (975) --------- --------- ------- Operating loss (742) (390) (908) Interest receivable 198 83 298 --------- --------- ------- Loss on ordinary activities before taxation (544) (307) (610) Tax on loss on ordinary activities - - - --------- --------- ------- Loss on ordinary activities after taxation and retained loss for the period (544) (307) (610) ========= ========= ======= Loss per ordinary share Basic and diluted loss per share (pence) 2 (2.51)p (1.94)p (3.26)p All amounts relate to continuing activities. There were no other recognised gains and losses during any of the periods presented. Unaudited Consolidated Balance Sheet as at 31 December 2005 31 December 31 December 30 June 2005 2004 2005 Notes £000 £000 £000 Fixed assets Intangible assets 26 7 21 Tangible assets 157 135 154 --------- --------- -------- 183 142 175 Current assets Stocks 88 - 55 Debtors 211 162 325 Investments: short-term deposits 8,165 9,046 8,605 Cash at bank and in hand 80 48 78 --------- --------- -------- 8,544 9,256 9,063 Creditors: amounts falling due within one year (421) (265) (398) --------- --------- -------- Net current assets 8,123 8,991 8,665 --------- --------- -------- Total assets less current liabilities 8,306 9,133 8,840 ========= ========= ======== Capital and reserves Called up share capital 217 217 217 Share premium account 8,903 8,893 8,903 Merger reserve 483 483 483 Profit and loss account (1,297) (460) (763) --------- --------- -------- Shareholders' funds 3 8,306 9,133 8,840 ========= ========= ======== Unaudited Consolidated Cash Flow Statement for the six months ended 31 December 2005 Proforma Proforma Six months Six months Year ended ended ended 31 December 31 December 30 June 2005 2004 2005 Notes £000 £000 £000 Net cash outflow from operating activities 4 (621) (290) (840) Returns on investments and servicing of finance Interest received 213 16 196 Capital expenditure and financial investment Purchase of intangible fixed assets (6) (4) (18) Purchase of tangible fixed assets (24) (5) (42) --------- --------- ------- Net cash outflow from capital expenditure (30) (9) (60) --------- --------- ------- Net cash outflow before management of liquid resources and financing (438) (283) (704) Management of liquid resources Decrease/(Increase) in short-term deposits 440 (8,696) (8,255) Financing Issues of ordinary share capital - 77 77 Share premium received on share issues - 9,923 9,923 Share issue costs - (1,030) (1,020) --------- --------- ------- Cash inflow from financing - 8,970 8,980 --------- --------- ------- Increase/(Decrease) in cash in period 5 2 (9) 21 ========= ========= ======= Notes to the Financial Statements for the six months ended 31 December 2005 1. Basis of preparation Synairgen plc was incorporated on 16 September 2004. On 11 October 2004 Synairgen plc acquired the entire issued share capital of Synairgen Research Limited by issuing 14,000,000 ordinary shares of 1p each on the basis of issuing 100 shares for each ordinary share of 1p each held in Synairgen Research Limited. The Directors have accounted for this group reconstruction using the merger accounting principles as set out in Financial Reporting Standard 6. Accordingly proforma financial information has been prepared to show the position as if Synairgen plc had been in existence and the parent of Synairgen Research Limited throughout the prior period. The proforma information has been compiled by taking the results of the group before the group reconstruction and adjusting for the capital structure of the new group. The accounting policies and presentation applied to half-yearly figures are consistent with those applied in the last published accounts except where the accounting policies and presentation are to be changed in the next annual financial statements, in which case the new accounting policies and presentation are followed. The Interim Report was approved by the Board of Directors on 22 February 2006. The financial information for the six months ended 31 December 2005 is unaudited, but has been reviewed in accordance with Auditing Practices Board guidance by BDO Stoy Hayward LLP. The interim results do not constitute statutory financial statements within the meaning of Section 240(5) of the Companies Act 1985. The comparatives for the full year ended 30 June 2005 are not the Company's full statutory accounts for that year. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The auditors' report on those accounts was unqualified and did not contain a statement under section 237(2)- (3) of the Companies Act 1985. 2. Loss per ordinary share Six months Six months Year ended ended ended 31 December 31 December 30 June 2005 2004 2005 Loss on ordinary activities after taxation (£000) (544) (307) (610) Weighted average number of ordinary shares in issue 21,692,308 15,817,960 18,730,993 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 Financial Reporting Standard 14. The comparative figures are proforma based on the number of shares that would have been in issue had the capital structure of the new parent company always been in place. 3. Reconciliation of movements in shareholders' funds Share capital Share premium Merger reserve Profit and loss Shareholders' account account funds £000 £000 £000 £000 £000 At 30 113 - 510 (153) 470 June 2004 Issue of ordinary shares 104 9,923 (27) - 10,000 Share issue - (1,030) - - (1,030) costs Loss for the - - - (307) (307) period ------ ------- ------ -------- --------- At 31 December 217 8,893 483 (460) 9,133 2004 Share issue - 10 - - 10 costs Loss for the - - - (303) (303) period ------ ------- ------ -------- --------- At 30 217 8,903 483 (763) 8,840 June 2005 Loss for the - - - (544) (544) period Reversal of - - - 10 10 UITF 17 charge ------ ------- ------ -------- --------- At 31 December 217 8,903 483 (1,297) 8,306 2005 ====== ======= ====== ======== ========= The issue of 140,000 1p ordinary shares by Synairgen Research Limited prior to its acquisition by Synairgen plc has been restated to reflect the 100 for 1 share for share exchange which was effected in October 2004. In accordance with the principles of merger accounting the difference between the nominal value of the shares issued in the share exchange and sum of the amounts standing to the issued share capital and share premium accounts has been taken to a merger reserve. 4. Reconciliation of operating loss to net cash outflow from operating activities Six months Six months Year ended ended ended 31 December 31 December 30 June 2005 2004 2005 £000 £000 £000 Operating loss (742) (390) (908) Depreciation & amortisation 22 16 34 UITF 17 charge 10 - - Increase in stocks (33) - (55) Decrease/(Increase) in debtors 99 (18) (146) Increase in creditors 23 102 235 ---------- --------- ------- Net cash outflow from operating activities (621) (290) (840) ========== ========= ======= 5. Reconciliation of net cash flow to movement in net funds Six months Six months Year ended ended ended 31 December 31 December 30 June 2005 2004 2005 £000 £000 £000 Increase/(Decrease) in cash in period 2 (9) 21 (Decrease)/Increase in short-term deposits (440) 8,696 8,255 ---------- --------- ------- Change in net funds resulting from cash flows and movement in net funds (438) 8,687 8,276 Net funds at start of period 8,683 407 407 ---------- --------- ------- Net funds at end of period 8,245 9,094 8,683 ========== ========= ======= This information is provided by RNS The company news service from the London Stock Exchange

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