ProStrakan Group plc
23 March 2006
ProStrakan Group plc
Preliminary Results for the Year Ended 31 December 2005
23 March 2006: ProStrakan Group plc, the European specialty pharmaceutical
company, today announces its preliminary results for the year ended 31 December
2005.
Operating Highlights
• Successful IPO in June, raising £40 million
• Rectogesic(TM) (for anal fissures) launched in UK
• Re-negotation of Rectogesic(TM) EU licensing and distribution agreement
• EU MRP for Rectogesic(TM) successfully concluded (see separate press
release)
• Tostrex(TM) (for testosterone deficiency) launched in Sweden
• EU MRP for Tostrex(TM) commenced
• Acquisition of the EU rights to Rapinyl(TM) (for cancer breakthrough
pain)
• Acquisition of APS Pharma in Germany
• Salesforce growth in UK, France, Germany and Scandinavia
• Start of a Phase III study for our lead pipeline drug candidate,
Sancuso(TM)
• In-licensing of Tabphyn(R) (for benign prostatic hyperplasia)
announced today (See separate press release)
Financial Highlights
• Revenues up 47% to £31.6 m
• Sales of lead product, Adcal D3(TM) (for osteoporosis), up 47% to £10.1m
(2004: £6.8m)
• Gross profit rises 69% to £16.7m
• Retained loss of £33.8m; IFRS basic loss per share of 21.5p
• Net cash at period end of £38.7m
Commenting on the results, Dr Wilson Totten, Chief Executive of ProStrakan,
said:
'During an active and successful 2005, ProStrakan achieved substantial growth in
revenues from its marketed products, expanded its commercial operations through
organic and M&A activity and advanced the leading projects in its R&D pipeline.
These remain our priorities in the year ahead as we implement our strategy to
build value for shareholders and move the business towards profitability.'
Enquiries:
ProStrakan
Wilson Totten, Chief Executive Officer Today: 020 7831 3113
Adrian Gardner, Chief Financial Officer Thereafter: 01896 668060
David Watt, Corp Comms 01896 664103
Financial Dynamics
David Yates / Sarah Macleod Tel: 020 7831 3113
A presentation and conference call for analysts will be held today at 9.30am at
the offices of Financial Dynamics, Holborn Gate, 26 Southampton Buildings,
London WC2A 1PB. Please call Mo Noonan for further details on 020 7269 7116.
ProStrakan Preliminary Results
23 March 2006
Introduction
In 2005, ProStrakan achieved substantial growth, delivering on promises to grow
turnover, expand our commercial operations through organic and M&A activity and
advance the leading projects in our R&D pipeline. Total revenues from product
sales rose by 47% to £31.6 million, continuing a five year trend which marks us
out as one of the fastest growing healthcare companies in Europe.
Our future growth trajectory is mapped out through a strategy which has clearly
identified approaches to building value in the short, mid and long term. Our
business model, exemplified by the successes of Adcal D3(TM) and Isotard XL(TM),
adds real value to the company's current range of in-market products by
significantly increasing sales and using the revenue generated to invest in even
higher value products for the mid-term, both through in-licensing and through
our own R&D pipeline. In turn, this drives longer term growth and expansion
through future, high value licensing and R&D activity. The recent acquisitions
of pan-EU products such as Tostrex(TM), Rectogesic(TM) and Rapinyl(TM) - and the
2005 market launches of the first two - clearly demonstrate the model in
practice. In March 2006, we significantly expanded our range of UK marketed
products with the acquisition of Tabphyn, a near term source of further revenue
and cash generation. We are gaining momentum, consistently delivering against
our targets for accelerated growth in the near, mid and long term.
ProStrakan's concept of 'active management', whereby people at all levels of the
business are challenged proactively to seek out prospects for further growth as
well as vigorously exploiting current opportunities, underpins the success of
our business model. Increasingly, as a result, we are gaining a reputation as
EU marketing partner of choice.
Key milestones in 2005
Our aim is to continue our growth in the years ahead, in the process creating a
significant, self-sustaining, international specialty pharmaceutical company.
In pursuit of that aim, key milestones achieved in 2005 included:
• Successful IPO in June, raising £40 million;
• Rectogesic(TM) launched in UK;
• Re-negotation of Rectogesic(TM) EU licensing and distribution agreement;
• EU MRP for Rectogesic(TM) successfully concluded;
• Tostrex(TM) launched in Sweden;
• EU MRP for Tostrex(TM) commenced;
• In-licensing of the EU rights to Rapinyl(TM);
• Acquisition of APS Pharma in Germany;
• Salesforce growth in UK, France, Germany and Scandinavia;
• Start of a Phase III study for our lead pipeline drug candidate,
Sancuso(TM).
Strategy: adding value through growth
At the core of our strategy is the continued growth of revenues. In the near to
mid-term, we will continue to build a targeted sales and marketing
infrastructure across Europe, growing our current portfolio of branded products
and progressively launching further high potential, high value, pan-European
specialist care products.
To expand our established presence in the oncology supportive care arena, we
in-licensed the EU rights to Rapinyl(TM), a breakthrough cancer pain therapy.
This is central to our strategy of leveraging the effectiveness of our existing
European sales network by supplying it with attractive, new, IP-protected
products in relevant specialist therapeutic areas.
In the mid-term, this strategy will deliver value to the business by driving us
into profitability. We continue to invest in the selective development of our
pipeline projects, such as Sancuso(TM), and in parallel will continue targeted
product in-licensing, both of which will drive additional sales growth in future
years. Driven by the global rights within our pipeline, in the mid-term we will
also seek to establish a commercial presence in the United States.
To manage our cost base and retain future revenue streams, we will continue our
policy of out-licensing non-core products or projects. Longer term, as further
in-licensing activity and continued commercial growth in Europe and North
America permit, we can look forward to carrying out higher value research and
development work on our own proprietary pipeline, the results further feeding
the sales network and boosting sustained profitability.
A key priority is always to add value to each strategic move we make. In
addition, the timing of our licensing and M&A activities is carefully judged.
It makes sense to in-license near-to-market products such as Rectogesic(TM),
Rapinyl(TM) and Tostrex(TM) whilst at the same time expanding our European sales
capabilities. This creates substantial opportunities for efficient growth in
addition to our existing pipeline of products.
Commercial
During the year, we successfully broadened our commercial presence across the EU
by acquiring APS Pharma GmbH in Germany and substantially adding to our
salesforces in the UK, France and Scandinavia. The launches of Rectogesic(TM)
in the UK in June, and Tostrex(TM) in Sweden in September, and the subsequent
start of EU Mutual Recognition Procedures (MRP) mean that we are on track to
deliver additional attractive, high potential products to our EU salesforces.
Securing growing revenues from an expanding product portfolio remains key.
Across our marketed products portfolio, good progress has been maintained in the
period under review, the performance of our principal products all demonstrating
significant progress. Of particular note was the success of the UK salesforce
in establishing Adcal D3(TM) as the market leader in the highly competitive
calcium/vitamin D supplement market, both in terms of volume and cash sales.
Research & Development
In Research and Development, ProStrakan continues to invest for long-term growth
and to provide significant upside potential. We have a broad pipeline of
projects, offering the prospect of sizeable commercial opportunities in the
future. Particularly exciting is the progress made with our lead project, the
anti-emetic Sancuso(TM), which advanced into Phase III trials at the end of the
year. A novel, transdermal granisetron patch for chemotherapy-induced nausea
and vomiting (CINV), I believe this product candidate has the potential to be
the first such product to market, offering ProStrakan, with our worldwide rights
to the product, the possibility of significant commercial advantage.
IPO & future
The prevailing sentiments of the market at the time of the IPO meant that the
Group was valued more for its demonstrable near-term commercial success. We
remain convinced that long-term growth and sustainability will be achieved
through commercialisation of the valuable and important projects emerging from
our pipeline, supplemented by our continuing focus on licensing and M&A.
Future value creation will come from controlled expansion of the European
commercial operation and maximising its contribution to the business by ensuring
it has an attractive range of high value products at its disposal. Value will
also come, of course, from moving our internal R&D pipeline forward including
taking Sancuso(TM) forward towards a market launch as soon as possible, a move
which may also coincide with the fulfilment of our ambitions to establish a
commercial presence in the US.
I am confident we have the right strategy in place and the means to achieve our
goals year by year. Led by a talented and experienced management team, we have
an outstanding group of people in place in all our locations to whom go my
thanks for their tireless dedication and expertise.
Dr Wilson Totten
CEO
Operating Review
Investing in the business
During the course of 2004, the Group had concluded six significant M&A and
in-licensing deals, expanding the commercial business into Europe and
introducing the prospect of pan-European products to add to its portfolio of
marketed goods. In 2005 and into 2006, we have continued to build on this
record with three further deals as well as investment across the range of our
key value drivers and a concerted effort to add value to the acquisitions we
have made.
Commercial
The Group currently markets 17 principal products in 13 European markets and has
5 products in registration. A network of highly experienced Country General
Managers leads a specialty sales infrastructure of about 180 people, mainly
located in the UK, Germany, France and Spain. In addition, the Group has a
limited commercial presence in Sweden, Belgium, the Netherlands and Greece and
sells to certain other countries, such as Italy, on an export basis. The UK
salesforce principally targets high-prescribing general practitioners and
specialists, while in the rest of Europe our sales and marketing activities are
mainly aimed at specialist physicians. It is a salesforce well placed and ready
to handle further pan-European product launches and we intend to expand it
further in 2006, in addition to exploring opportunities to expand our operations
into Italy.
The 47% increase in revenues in 2005 over the previous year reflects an
impressive performance across the range of our marketed product portfolio. The
increase in sales of our currently-marketed products was 21%, representing
significant organic growth, with the balance of growth coming from products or
companies acquired since the beginning of the comparative period. I believe
there is significant growth potential arising from both our existing and
recently in-licensed products.
Adcal D3(TM)
Adcal D3(TM), the Group's current top selling medicine, is a branded calcium and
vitamin D3 oral supplement, used as an adjunct to specific therapy for the
treatment of osteoporosis. The Group licensed the UK rights to the product in
1997, both sales and market share growing strongly ever since its launch in
1999. With sales of £10.1 million in the year under review, Adcal D3(TM) grew
by 47% over 2004 and has now overtaken its main competitors to become the single
product UK leader in its market segment, both in cash and volume terms. The
current run rate of sales is some 25 fold larger than 5 years ago. This is
testimony not only to the strategic vision we have always had for the product,
but to the skills of our UK salesforce. Adcal D3(TM)'s annual revenue is now
greater than the entire calcium/vitamin D3 supplement market of ten years ago.
It is a product which has done much to drive the growth and success of our UK
sales operation.
Rectogesic(TM)
Rectogesic(TM), a 0.4% topical nitroglycerin ointment indicated for the
treatment of pain associated with chronic anal fissures, was launched on to the
UK market in May and delighted us with its very rapid sales uptake, both in
terms of initial and repeat prescriptions and adoption on to hospital
formularies. The only prescription medicine licensed specifically for the
relief of this condition, sales since its launch in June 2005 of £0.6 million
were ahead of forecast, supported by a powerful and award-winning,
direct-to-physician advertising campaign.
The Group initially acquired certain EU commercialisation rights to
Rectogesic(TM) from Cellegy Pharmaceuticals in December 2004. In November 2005,
the Group acquired additional rights to manufacture the product, significantly
improving our gross margin. Following successful conclusion of the EU Mutual
Recognition Procedure in March 2006, we will now apply for local marketing
authorisations. We expect to launch the product in certain other European
territories by the first half of 2007. Rectogesic(TM) works by relaxing the
vascular smooth muscle around the anal canal leading to the dilation of
peripheral arteries and veins, aiding the healing of the fissure. This offers
patients a simple and effective way of managing the discomfort while healing is
awaited, which in turn may help avoid painful and expensive surgery. It is
estimated that up to 800,000 individuals suffer from anal fissures in the EU.
Rectogesic(TM) can be seen as the first of a new breed of prescription medicines
for ProStrakan - drugs for which we have in-licensed the pan-European rights,
offering us the economic benefits of providing our growing salesforces with an
attractive, high value addition to their portfolio and the prospect of
significant returns in the near future. It is an excellent example of our
business model in practice.
Tostrex(TM)
Tostrex(TM) is a 2% testosterone gel product indicated for the treatment of male
hypogonadism, the European rights to which we in-licensed from Cellegy in July
2004. In January 2006, the Group acquired additional rights to manufacture the
product. Having received its Swedish marketing authorisation in January 2005, we
launched the product in that country in the following September. Although
Sweden is a small market in terms of size and a product of this type takes some
time to escalate sales, there is an early demonstration of the product's
potential to be a significant near-term revenue driver for the business. As
with Rectogesic(TM), we have initiated the EU Mutual Recognition Procedure and,
subject to receiving further marketing authorisations, we hope to launch
Tostrex(TM) in other European countries during the course of 2007, further
leveraging our expanding salesforce infrastructure.
The European androgen deficiency market is still relatively underdeveloped.
Partial Androgen Deficiency in the Ageing Male (PADAM) prevalence is known to
increase with age, some estimates suggesting one in five men under 49 years of
age suffer from the condition, rising steeply to 91% in men over 80 (1). As the
population grows and demographics shift towards an ageing population, a higher
proportion of the population is forecast to be affected by hypogonadism. Given
the association between low testosterone and type 2 diabetes and cardiovascular
disease, and the fact that growth in the circa $500 million testosterone
replacement market in the USA has predominantly arisen from the growth in sales
of gels, Tostrex(TM) represents an exceptionally attractive opportunity for
significant revenue growth in the near-term.
(1: Harman SM, Metter EJ, Tobin JD et al. Longitudinal effects of ageing on
serum total and free testosterone levels in healthy men. J Clin Endocrinol
Metab; 86(2): 724-731.)
In January this year, we commenced a Phase IIIb/IV study (known as TIMES2) into
the effects of Tostrex(TM) gel in hypogonadal men with decreased insulin
sensitivity. Studies have shown that testosterone replacement may improve
insulin sensitivity, thereby possibly improving treatment of diseases associated
with the condition such as diabetes, metabolic syndrome and coronary artery
disease. This study offers us the potential to add value to an important
product by exploring opportunities for it in additional therapeutic indications.
Isotard XL(TM)
Sales of our UK-only branded cardiovascular oral drug for the treatment of
angina declined by 3% to £4.2 million, reflecting the price sensitivity of this
market segment. In volume terms, units sold increased by 16%, continuing a
strong volume growth trend which has been evident since we in-licensed the
product in 2001. In response to the new 2005 Pharmaceutical Price Regulation
Scheme launched in the UK in January which, amongst other things, required a
price cut of 7% across the range of companies' UK prescription medicines, we
reduced the price of Isotard XL(TM) by more than the minimum in order to
compensate for smaller price cuts on other products.
Tebetane(TM)
Our branded oral treatment for mild benign prostatic hyperplasia (BPH) recorded
sales of £3.2 million for the year, some 1% lower than the in-market figure for
2004. The product was added to ProStrakan's range of marketed products through
the November 2004 acquisition of Madrid-based Elfar SA. It is currently
marketed only in Spain where it is the Group's largest product by sales.
Droperidol
Droperidol is a branded injectable drug indicated for the treatment of
post-operative nausea and vomiting (PONV) in hospitals. The main EU market for
this product is France but ProStrakan also supplies it to certain other European
countries. In-market sales in 2005 increased by 17% to £3.3 million. In the
course of 2006, we will seek expanded EU approvals for Droperidol to enable more
widespread direct marketing.
Sandoglobuline
A treatment for immunodeficiency, this product had been marketed by our French
commercial subsidiary (acquired by ProStrakan in January 2004) under a
distribution agreement with a third party which expired, in accordance with its
terms, at the end of June. Consequently, no further sales have been or will be
recorded by the Group since that time in relation to this product. For the
first six months of 2005, however, Sandoglobuline made a contribution of £3.7
million to Company turnover.
Other products
ProStrakan sells a number of other mainly country-specific products throughout
many of the major markets in Europe. These have been added to our portfolio of
marketed products through our acquisition of certain companies since the
beginning of 2004. Taken together, they achieved sales of £6.0 million in 2005.
Growth opportunities
ProStrakan's international commercial operations form one of the two central
pillars of the business. The contribution from sales and out-licensing goes
directly towards the funding of the second - research & development - from which
further important and strategic commercial opportunities will arise in future.
In addition to organic growth, however, we continuously assess other product
in-licensing and acquisition opportunities for the value they may add to the
Company. We have the necessary business development infrastructure to act
swiftly if a potential transaction offers additional revenue generation or if we
are able to take a clinical project further along the development pipeline. The
December 2005 in-licensing of the European rights to Rapinyl(TM) is good
example. And in March 2006, beyond the year under review, we began the
commercialisation of Tabphyn(TM), having acquired the UK marketing rights from
Genus Pharmaceuticals earlier in the month. Tabphyn(TM) is a branded generic
tamsulosin therapy for the treatment of benign prostatic hyperplasia. Its
acquisition exemplifies ProStrakan's business model.
Research & Development
One of the differentiating features of our business model is that we have world
class R&D capabilities in areas of our therapeutic focus. We are not,
therefore, solely reliant on in-licensing for future step-change growth, but can
look forward to realising value from our pipeline of product candidates.
Currently, we have about 100 people with an optimal mix of global R&D expertise
covering skeletal disease, ageing male and female health and oncology supportive
care.
The Group's clinical development projects offer the prospect of aggregate
potential peak sales that are materially higher than the Group's currently
marketed products and benefit from substantial intellectual property protection
and worldwide commercialisation rights. In order to manage the overall risk
profile of the Group, these product candidates typically utilise novel delivery
systems, reformulations or alternative therapeutic indications of known active
pharmaceutical ingredients, thereby reducing the risk of failure to complete the
development of such product candidates.
Rectogesic(TM)
Following the first successful approval for Rectogesic(TM), the MRP was
initiated in order to seek licences across the EU. The MRP was successfully
concluded in March 2006 and receipt of further EU marketing authorisations is
expected later in the current year.
Tostrex(TM)
Following its first approval in Sweden, the EU MRP for Tostrex(TM) has been
initiated.
Siklos(TM)
In October 2005, an application was made to the EMEA, the European medicines
agency, seeking approval to market Siklos, our hydroxyurea product, for the
prevention of vaso-occlusive crises of sickle-cell disease. If approved, the
product could be available for marketing in late 2006 or early 2007. Siklos has
orphan designation.
Rapinyl(TM)
The in-licensing in December 2005 of the European rights to Rapinyl(TM) from
Orexo Pharma AB represented a major step towards the achievement of our goals.
Currently in late stage clinical development, Rapinyl(TM) is a fast melt tablet
formulation of fentanyl, a long established opioid drug for the management of
the sudden surges of pain (referred to as breakthrough pain) often experienced
by patients suffering from cancer. It builds, therefore, on our already
established oncology supportive care sales franchise in Europe, an expertise we
hope to extend yet further in due course with Sancuso(TM), our novel anti-emetic
patch product (see below). Estimates put the number of people with cancer in
Europe at over 5 million. Of these, some 30% suffer pain as a result, of whom
65% suffer breakthrough pain. It is a very significant market but one which is
currently underserved. We are confident that Rapinyl(TM), with its user-
friendly fast-dissolving, fast-acting, sub-lingual formulation and IP
protection, offers an important long-term commercial opportunity for the Group.
We are in discussion with EU Regulatory Agencies with the intention of
submitting Rapinyl(TM) for marketing approval before the end of the current year.
Droperidol
A regulatory application is expected to be made this year seeking to obtain
licences for Droperidol in key countries where the product is not currently
licensed.
Sancuso(TM)
Our lead clinical development programme is Sancuso(TM), a novel transdermal
patch formulation of granisetron to treat chemotherapy-induced nausea and
vomiting (CINV). Many patients undergoing chemotherapy experience acute emesis
either immediately after chemotherapy or for up to five days thereafter. Some
patients even suffer in the period leading up to chemotherapy in anticipation of
what is to come. 5-HT3 receptor antagonists are used extensively to treat this
distressing side-effect.
ProStrakan's transdermal patch delivers granisetron, an established 5-HT3
receptor antagonist, steadily into the bloodstream without the need for
injection or having to swallow pills. Encouraging data emerged from the Phase
II proof-of-concept study in May and has supported the commencement of a Phase
III study. This study is being conducted under an Investigational New Drug
(IND) application, approved in February 2006, in the US and in ten other
countries worldwide.
The current global market size for 5-HT3 receptor antagonist anti-emetics is
estimated at over €2.8 billion per annum (source: IMS Health). We are on course
with the development of this strategically important project, one that has the
potential to add significant value to ProStrakan.
Topical Nitric Oxide
This product candidate is intended for use as a topical treatment for
onychomycosis, a chronic fungal condition of the nail and nail bed. Currently
available treatments for the condition include oral and topical therapies. The
leading oral therapies carry the risk of unwanted side-effects. Existing
topical therapies can have limited efficacy, chiefly due to the difficulty in
getting the therapeutically active drug through the nail to the source of the
fungus beneath. Thanks to its anti-microbial effect, ProStrakan's topical
nitric oxide (TNO) technology gets around this problem by releasing nitric oxide
at the time of topical application and through its subsequent interaction with
the nail. In late 2004, the Company completed a Phase IIa clinical trial which
indicated that TNO is effective in inhibiting fungal growth. We are conducting
further development work and are in discussion with potential out-licensing
parties for this drug.
The market for prescription onychomycosis therapies has grown in recent years
with some estimates putting it at around £820 million per annum in 2004. Oral
treatments dominate but we believe there is an unmet need for a topical product
offering greater efficacy than existing topical treatments together with a good
safety and tolerability profile.
Testosterone-glucoside
Testosterone-glucoside is a patented molecule being developed as an oral
testosterone replacement therapy for hypogonadal men. The target is to deliver
testosterone without high systemic exposure or associated safety concerns when
compared to other oral delivery systems. Currently in Phase I, this project
could present significant commercial opportunities for a safe, effective and
convenient oral testosterone replacement therapy.
Oestradiol-glucoside
Intended for use as an oral therapy in the treatment of symptoms of the female
menopause, oestradiol-glucoside offers the possibility of achieving therapeutic
levels of oestradiol with lower overall systemic exposure. The hormone
replacement therapy (HRT) market has been depressed since the 2002 publication
of the Women's Health Initiative study in the US, though there are signs of some
recovery and it will remain a very significant worldwide market. Not containing
progesterone, as the subject therapy of the study did, we believe that oral
oestrogen-only therapies will continue to account for a significant proportion
of the market. The product has completed a Phase IIa clinical trial in the US
which showed that this product could be clinically effective in the management
of post-menopausal symptoms in women. We continue to review how best to secure
value from this project.
Topical anti-androgen
Our topical, non-steroidal, anti-androgen formulation for the treatment of
alopecia, including male pattern baldness, completed a Phase IIa study in 2005.
Existing therapies include topical and oral products which can have limited
efficacy. The global market for alopecia products is significant and is
expected to grow with the general ageing of the population. We consider that
there is a commercial opportunity for a new and effective topical product and
will continue to seek a cost-effective means of exploring this opportunity
further.
Trimegestone patch
This product candidate is a transdermal patch formulation either consisting of
trimegestone (a progestin) and oestradiol intended for use in HRT or
trimegestone alone, or with a suitable oestrogen, intended for use as a
contraceptive. Transdermal administration of oestradiol is known to be safer
than oral and our patch is intended to deliver the active drug into systemic
circulation using lower doses of oestrogen. We believe that a trimegestone
patch product that is safe, effective and well tolerated offers the prospect of
potentially significant commercial opportunities. A Phase II proof-of-concept
clinical trial has been conducted for the patch in the treatment of HRT. Given
overall market conditions, the timing and manner of any further development work
on this product for use in HRT are being reviewed. In September, we announced
an agreement with Duramed Pharmaceuticals Inc, a subsidiary of Barr
Pharmaceuticals Inc, for the marketing of the patch for contraception in the USA
and Canada. Under the terms of this agreement, Duramed will fund the next stage
of clinical development, possibly leading to a formal development and
commercialisation licence for North America.
Discovery
ProStrakan has modern R&D facilities situated near Paris where the Group carries
out pre-clinical research into discovering new compounds with potential
therapeutic effect in the fields of bone biology and medicinal and steroid
chemistry, particularly for the ageing female and male. Pre-clinical projects
and discovery programmes have identified novel chemical classes for the
prevention and treatment of osteoporosis, bone metastases, hyperparathyroidism
as well as bone formation or bone anti-resorptive agents. Many of these
programmes are leading the way in their fields with novel approaches to treating
disease. This has led to an encouraging level of interest from potential
partners and we continue to pursue a number of discussions on the most efficient
way to progress them. Notwithstanding the level of this interest and the
significant potential of individual projects and programmes, it is the view of
the Directors that no significant value has been attributed by external
investors to this activity and the carrying value of this activity reflects
this. During 2005 we tailored the structure and head-count levels in Discovery
to best suit our future needs in this activity.
R&D conclusion
Our strategy is to build value into our R&D pipeline whilst carefully managing R
&D spend as we progress towards profitability. The pipeline is regularly
reviewed to identify potential for partnering and cost-sharing so as to maximise
the upside potential of the projects in the clinic whilst minimising their
impact on profitability.
Board
As from the Company's Annual General Meeting on 10th May 2006, Executive
Chairman Harry Stratford will be moving to a Non-executive Chairman role.
Outlook
We continue to focus on building our commercial business, rapidly executing
licensing and M&A activity and prudently investing in our own R&D. Looking to
the year ahead, these remain our priorities. On the commercial front, we will
pursue further regulatory approvals for Tostrex(TM), Droperidol, Rapinyl(TM) and
Siklos - and, following its recent MRP completion, we will receive additional
EU marketing authorisations for Rectogesic(TM) - in preparation for European
launches through 2007. In R&D, the priority is to complete the Sancuso(TM)
Phase III study. Success in these areas in 2006 will see ProStrakan optimally
positioned for further rapid growth in 2007 and beyond. We are, therefore,
confident in our ability to implement our stated strategy in the coming years in
order to build value for our shareholders.
Financial Review
Results of operations
This year is the first year of adoption of IFRS under which the results of the
company are reported. As set out more fully in the notes to these results, this
adoption has required a number of changes from the previous presentation under
UK GAAP. Certain aspects are also different from the treatment proposed within
the interim results for the six months ended 30 June 2005 as it was indicated at
that time that information presented and accounting policies used may be subject
to change before their inclusion in these financial statements. Since the
interim results statement, the Group has refined its IFRS policies as the
practical application of IFRS has become clearer and generally accepted practice
has emerged.
The income statement, statement of changes in equity, cash flow statement and
related notes for the year ended 31 December 2005 and the balance sheet at that
date, are subject to completion of the audit and may also change should a
significant adjusting event occur before the approval of the Annual Report 2005
expected to be on 5th April 2006.
Figures in brackets refer to the results for the comparative year of 2004 on a
like-for-like IFRS basis.
Revenue
Revenue for the year was £31.6 million (£21.6 million), an increase of 47%. Of
this total, £31.1 million (£21.3 million) related to sales of pharmaceutical
products with the balance representing royalty, licensing or other income. The
sales of our key products, with associated growth over the previous year, are
set out in the table below. The Company markets a range of products. The sales
of the 5 largest selling products, at £24.5 million (£19.3 million), represented
79% (91%) of total revenues from product sales.
The product with the largest sales in the year was Adcal D3(TM). The market in
the UK for Calcium and Vitamin D3 oral supplements grew by 10.5% in cash terms
(23.6% in volume terms) and the market share of cash sales of Adcal D3(TM) grew
from 27.9% as at the end of 2004 to 34.6% as at the end of 2005. At the
beginning of 2005 the new 2005 Pharmaceutical Price Regulation Scheme (PPRS) was
introduced into the UK and this requires that prices of prescription medicines
sold by any company should in aggregate be reduced by 7%. This impacted both
Adcal D3TM, to a lesser extent, and our next largest product, Isotard (also sold
only in the UK) to a greater extent. Consequently the volume growth for both of
these products was substantially ahead of the growth in cash sales.
As expected, the right to distribute the Sandoglobulin product terminated in
accordance with the license terms (with the right to market the product
reverting to the licensor) with effect from 30 June 2005. Consequently, no
further revenues from that product will be recorded.
Sales of key products
Product Sales In market In market volume growth
(£m) cash sales growth
Adcal D3(TM) 10.1 +47% +51%
Isotard 4.2 -3% +16%
Droperidol 3.3 +17% +7%
Tebetane(TM) 3.2 -1% +2%
Sandoglobuline 3.7 N/A N/A
Rectogesic(TM) 0.6 N/A N/A
Cost of sales
Cost of sales substantially represents the cash cost of products sold and the
non-cash amortisation of the capitalised value of product rights either acquired
as part of company acquisitions or in-licensed as stand alone agreements. The
total gross margin percentage after allowing for cost of sales was 52.7%
(45.7%). As a result of having acquired a number of products through
in-licensing or from acquiring companies, the value of the product rights so
acquired has been capitalised and is being amortised over a period of years
through the income statement. The amortisation of product rights recorded in
cost of sales was £2.3 million (£2.2 million). The cash gross margin from
product sales alone increased to 60.0% (55.5%) of product sales. This increase
in gross margin arose from changes in the mix of products sold, certain price
cuts to meet regulatory or governmental requirements or otherwise and from
ceasing to sell Sandoglobuline(TM) which had a high cost of sales and
consequently low gross margin.
Operating expenses
Sales and marketing expenses in the year were £20.0 million (£8.8 million).
This increase resulted from having made various acquisitions during the prior
year (so that the sales and marketing expenses in the acquired companies were
only included for part of the prior year) and of APS during this year as well as
having prepared for the launch of certain new products and by increasing the
size of our sales forces in certain territories.
Research and development expenses were £22.4 million (£10.3 million). The
increase in research and development expenses is mainly attributable to
acquisitions in the prior year as ProSkelia, a research and development company,
was acquired in August 2004 and so its costs were included for only part of the
prior year.
General and Administrative expenses were £11.3 million (£6.8 million). This
substantially arose from the larger size of the Group throughout 2005.
Also included within Research and Development expenses and General and
Administrative expenses are restructuring costs of £2.9 million (£Nil) relating
to a reduction in headcount and associated measures within the Discovery
activity.
The non-cash charge for the impairment of goodwill of £Nil (£63.1 million) in
the prior year represents the appropriate IFRS treatment of goodwill that arose
on the acquisition of ProSkelia and reflects the Directors' view that no
significant value has been attributed by external investors to the Research Cash
Generating Unit (Research and Development being treated as two Cash Generating
Units, one for Research and one for Development). It was therefore appropriate
to write down the value of the assets thus acquired to the carrying values of
the other tangible and intangible assets.
As the company accounts under IFRS, it is required to expense the cost of share
options and share awards made to employees under IFRS 2. This cost, which is
not a cash cost, amounted to £2.1 million (£1.0 million).
Intangible assets
The increase in intangible assets to £38.6 million (£26.5 million) arose
primarily as a result of the inlicensing of the EU rights to Rapinyl(TM) and
also as a result of the re-negotiation of the EU license and distribution
agreement for Rectogesic(TM) and milestone payments and study costs on
Tostrex(TM).
Cashflow
During 2005, the cash consumed in operations was £27.8 million (£15.7 million).
Investing activities (including cash acquired in business combinations) consumed
a further £6.1 million (generation of £13.0 million). During the course of the
year financing activities (primarily as a result of the IPO on the London Stock
Exchange) raised net cash of £39.0 million (£26.6 million). As a result, the
net cash on hand at the end of 2005 was £38.7 million.
Consolidated balance sheet (unaudited)
Group
31 December 31 December
Note 2005 2004
£'000 £'000
Assets
Non-current assets
Intangible assets 38,642 26,488
Property, plant and equipment 6,381 6,972
Trade and other receivables - 70
Research and development tax credits receivable 6,252 6,315
_____ _____
51,275 39,845
_____ _____
Current assets
Inventories 3,463 3,232
Trade and other receivables 6,412 8,758
Income tax receivable 233 24
Research and development tax credits receivable 1,435 473
Investments available for sale - 95
Cash and cash equivalents 38,730 34,028
_____ _____
50,273 46,610
_____ _____
Liabilities
Current liabilities
Trade and other payables 19,147 16,835
Retirement benefit obligations - 24
Provisions for other liabilities and charges 2,143 26
_____ _____
21,290 16,885
_____ _____
Net current assets 28,983 29,725
_____ _____
Non-current liabilities
Retirement benefit obligations 323 345
Other non-current liabilities 8,517 2,891
Provisions for other liabilities and charges 2,103 383
_____ _____
10,943 3,619
_____ _____
Net assets 69,315 65,951
_____ _____
EQUITY
Capital and reserves attributable to the Company's equity
holders
Share capital 4 158,786 122,648
Other reserves 77,911 76,905
Retained earnings (167,382) (133,602)
_____ _____
Total equity 69,315 65,951
_____ _____
Consolidated income statement (unaudited)
Group
Note Year ended Year ended
31 December 31 December
2005 2004
£'000 £'000
Sales 31,637 21,592
Cost of goods sold (14,949) (11,715)
_____ _____
Gross profit 16,688 9,877
Distribution costs (19,970) (8,829)
Research and development (22,429) (10,261)
Administrative expenses (11,307) (6,779)
Impairment of goodwill - (63,125)
Excess of acquirer's interest in the fair value of net assets - 3,015
over cost
Other gains - net 206 200
_____ _____
Operating loss (36,812) (75,902)
Finance costs - net 1,432 300
_____ _____
Loss before income tax (35,380) (75,602)
Taxation 1,615 1,881
_____ _____
Loss for the year (33,765) (73,721)
_____ _____
Attributable to equity holders of the Company
Loss per share for loss attributable to the equity holders of
the Company during the year (shares outstanding at 31 December
2005) (expressed in pence per share)
- basic 5 (21.5) (98.7)
- diluted 5 (20.7) (95.6)
Consolidated statement of changes in equity (unaudited)
Attributable to equity
Holders of the Company
Note Share Other Retained Total
capital reserves earnings equity
£'000 £'000 £'000 £'000
Balance at 1 January 2004 64,728 3,965 (59,881) 8,812
_____ _____ _____ _____
Currency translation differences - being net income - 3,741 - 3,741
recognised directly in equity
Loss for the year - - (73,721) (73,721)
_____ _____ _____ _____
Total recognised income for 2004 - 3,741 (73,721) (69,980)
_____ _____ _____ _____
Employee share option scheme:
- value of employee services - 958 - 958
- proceeds from shares issued 45 - - 45
Other share based payments 82 - - 82
Issue of share capital 22,803 - - 22,803
Issue of share capital- business combinations 35,099 58,503 - 93,602
Shares to be issued- business combinations - 462 - 462
Issue of warrants- business combinations - 5,894 - 5,894
Options issued and assumed- business combinations - 3,382 - 3,382
Purchase of own shares by ESOP (200) - - (200)
Sale of own shares by ESOP 91 - - 91
_____ _____ _____ _____
57,920 69,199 - 127,119
_____ _____ _____ _____
Balance at 31 December 2004 122,648 76,905 (133,602) 65,951
_____ _____ _____ _____
Balance at 1 January 2005 122,648 76,905 (133,602) 65,951
_____ _____ _____ _____
Currency translation differences - being net income - (1,127) - (1,127)
recognised directly in equity
Loss for the year - (33,765) (33,765)
_____ _____ _____ _____
Total recognised income for 2005 - (1,127) (33,765) (34,892)
_____ _____ _____ _____
Employee share option scheme:
- value of employee services - 2,133 - 2,133
- proceeds from shares issued 4 130 - - 130
Other share based payments 4 32 - - 32
Issue of share capital 4 40,200 - - 40,200
Cost of issue of share capital 4 (4,667) - - (4,667)
Purchase of own shares by ESOP 4 (200) - - (200)
Sale of own shares by ESOP 4 630 - (2) 628
Revaluation of own shares held by ESOP 4 13 - (13) -
_____ _____ _____ _____
36,138 2,133 (15) 38,256
_____ _____ _____ _____
Balance at 31 December 2005 158,786 77,911 (167,382) 69,315
_____ _____ _____ _____
Consolidated cash flow statement (unaudited)
Group
Note Year ended Year ended
31 December 31 December
2005 2004
£'000 £'000
Cash flows from operating activities
Cash used in operations 6 (29,612) (16,466)
Interest received 1,474 331
Interest paid (42) (31)
R&D tax credits received 473 500
Income tax paid (62) (56)
_____ _____
Net cash used in operating activities (27,769) (15,722)
_____ _____
Cash flows from investing activities
Acquisition of subsidiaries, net of cash acquired (2,133) (9,932)
Sale of money market instruments (acquired in business 93 25,741
combination)
Purchases of intangible assets (2,602) (1,834)
Purchases of property, plant and equipment (PPE) (1,447) (1,057)
Proceeds from sale of PPE 6 13 94
_____ _____
Net cash generated by investing activities (6,076) 13,012
_____ _____
Cash flows from financing activities
Net proceeds of accounts receivable factoring 6 2,899 3,871
Proceeds from issuance of ordinary shares (net of own shares 4 35,462 22,602
purchased by ESOP)
Sale of own shares by ESOP 4 630 91
_____ _____
Net cash generated by financing activities 38,991 26,564
_____ _____
Net increase in cash and bank overdrafts 5,146 23,854
Cash and bank overdrafts at beginning of the year 34,028 8,763
Exchange (losses)/gains on cash and bank overdrafts (444) 1,411
_____ _____
Cash and bank overdrafts at end of the year 38,730 34,028
_____ _____
Notes to the consolidated financial statements
1. General information
ProStrakan Group plc (the 'Company') and its subsidiaries (together the 'Group')
are engaged directly and indirectly in the research, development, registration,
manufacture, distribution and sale of pharmaceuticals and other similar products
and related services.
On 29 April 2005, the Group completed the corporate acquisition of APS Pharma
GmbH, a pharmaceutical marketing company incorporated in Germany. During 2004
the Group completed four corporate acquisitions: OTL Pharma SA, a pharmaceutical
marketing company incorporated in France, was acquired on 26 January 2004;
Proskelia BV, a pharmaceutical research and development company incorporated in
the Netherlands, was acquired on 26 August 2004: and two pharmaceutical
marketing companies incorporated in Spain, Devon Farmaceutica SLU and Elfar SA,
were acquired on 2 September and 30 November 2004 (respectively).
The Company reregistered as a public company on 2 March 2005 and was admitted to
the London Stock Exchange on 16 June 2005. The Company is incorporated and
domiciled in the United Kingdom, with its registered office at Galabank Business
Park, Galashiels, TD1 1QH, Scotland.
2. Summary of significant account policies
In 2004 ProStrakan Group plc prepared its consolidated financial statements
under UK Generally Accepted Accounting Practice (UK GAAP). Following European
Parliament legislation passed in 2002, all listed EU companies are required to
prepare consolidated financial statements in accordance with International
Financial Reporting Standards (IFRS) with effect from 1 January 2005.
ProStrakan Group plc has therefore prepared its first IFRS compliant Report and
Accounts for the year ended 31 December 2005. The Group presents comparative
IFRS financial information for the year ended 31 December 2004 and consequently
the date of transition to IFRS for the Group is 1 January 2004, being the first
day of the comparative period.
The financial information presented in these financial statements has been
prepared on the basis of those International Financial Reporting Standards,
International Accounting Standards, and International Financial Reporting
Interpretations Committee (IFRIC) and Standard Interpretation Committee (SIC)
interpretations that are applicable to 2005 financial reporting.
2.1 Segment reporting
The Group's primary segment for IFRS segment reporting is the business segment:
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. The Group operates in a single business segment, pharmaceuticals.
Geographical regions are the secondary reporting segments, where the Group is
engaged in providing products or services within a particular economic
environment that are subject to risks and returns that are different from those
of other economic environments.
2.2 Intangible assets
(a) Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value
of the group's share of the net identifiable assets of the acquired subsidiary
at the date of acquisition and is included in intangible assets. Goodwill is
tested annually for impairment and carried at cost less accumulated impairment
losses. Gains and losses on the disposal of an entity include the carrying
amount of goodwill relating to the entity sold.
Goodwill is allocated to cash-generating units (CGU) for the purpose of
impairment testing. Research and development are viewed as separate CGUs. Each
commercial territory under the control and guidance of a General Manager is a
CGU.
(b) In-process Research and development
Research expenditure is recognised as an expense as incurred. Costs incurred on
development projects (relating to the design and testing of new or improved
products) are recognised as intangible assets when it is probable that the
project will be a success considering its commercial and technological
feasibility, and costs can be measure reliably. Other development expenditures
are recognised as an expense as incurred. Development costs previously
recognised as an expense are not recognised as an asset in a subsequent period.
In-process R&D acquired in a business combination is recognised separately as
intangible assets if and only if they meet the definition of intangible assets
in IAS 38 and their fair value can be measured reliably.
All development costs with a finite useful life that have been capitalised are
amortised from the commencement of the commercial production of the product on a
straight-line basis over the period of its expected benefit. Prior to commercial
production of the product the asset is tested annually for impairment. Provision
is made for any impairment.
(c) Product rights
Product rights and other intangible assets are initially recorded at cost. Where
these assets have been acquired through a business combination, they are
recorded at fair value where they are separately identifiable and their value
can be readily ascertained. Product rights are amortised over their useful life
on a straight-line basis from the date of the first commercial launch. Estimated
useful life is the lower of legal duration and economic useful life, up to a
maximum of 10 years. Prior to their first commercial launch they are tested
annually for impairment. Provision is made for any impairment.
(d) Computer software
Acquired computer software licences are capitalised on the basis of the costs
incurred to acquire and bring to use the specific software. These costs are
amortised over their estimated useful lives (not exceeding 3 years).
Costs associated with developing or maintaining computer software programmes are
recognised as an expense as incurred. Costs that are directly associated with
the production of identifiable and unique software products controlled by the
group, and that will probably generate economic benefits exceeding costs beyond
one year, are recognised as intangible assets.
Computer software development costs recognised as assets are amortised over
their estimated useful lives (not exceeding 3 years).
(e) Chemical library
Early stage chemical libraries built up for use in research activities and
acquired in a business combination has been recognised separately as an
intangible asset. This is being amortised over its estimated useful life of 10
years.
2.3 Share capital
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options
are shown in equity as a deduction, net of tax, from the proceeds. Incremental
costs directly attributable to the issue of new shares or options, or for the
acquisition of a business, are included in the cost of acquisition as part of
the purchase consideration.
Where any Group company or employee share ownership plan (ESOP) purchases the
company's equity share capital, the consideration paid, including any directly
attributable incremental costs (net of income taxes,) is deducted from equity
attributable to the company's equity holders until the shares are cancelled,
reissued or disposed of. Where such shares are subsequently sold or reissued,
any consideration received, net of any directly attributable incremental
transaction costs and the related income tax effects, is included in equity
attributable to the company's equity holders.
2.4 Employee benefits
(a) Pension obligations
Group companies operate two defined benefit pension schemes. The schemes are
unfunded, and the obligations are determined by annual actuarial calculations.
The schemes are mandatory under the French Chemical and Pharmaceutical
Industries Collective Agreements and require the companies to pay retirement
lump-sum amounts depending on the employees' seniority as and when they retire
from the company with full pension as defined by the French Social Security
system.
The liability recognised in the balance sheet in respect of defined benefit
pension plans is the present value of the defined benefit obligation at the
balance sheet date, together with adjustments for unrecognised actuarial gains
or losses and past service costs. The defined benefit obligation is calculated
annually by independent actuaries using the projected unit credit method. The
present value of the defined benefit obligation is determined by discounting the
estimated future cash outflows using interest rates of high-quality corporate
bonds that are denominated in the currency in which the benefits will be paid,
and that have terms to maturity approximating to the terms of the related
pension liability.
Actuarial gains and losses arising from experience adjustments and changes in
actuarial assumptions are charged or credited to profit or loss over the
employees' expected average remaining working lives, only to the extent that
their net cumulative amount exceeds 10% of the greater of the present value of
the obligation or of the fair value of the plan assets at the end of the
previous year. The plan is unfunded, so there are no plan assets. Unrecognised
actuarial gains and losses are reflected on the balance sheet.
Past-service costs are recognised immediately in profit or loss, unless the
changes to the pension plan are conditional on the employees remaining in
service for a specified period of time (the vesting period). In this case, the
past-service costs are amortised on a straight-line basis over the vesting
period.
(b) Long service employee benefits
One of the Group's French subsidiaries operates a long service employment
benefit scheme, whereby employees are paid seniority bonuses upon reaching
certain anniversaries within the company. The liabilities are measured on an
actuarial basis using the projected unit credit method and are discounted at a
rate equivalent to the current rate of return on a high quality corporate bond
in France of equivalent term to the scheme liabilities. The actuarial valuations
are obtained annually. Service costs are included in staff costs and charged to
profit or loss in the period in which they become payable. The liability is
presented within provisions for liabilities and charges.
(c) Share-based compensation
The Group operates an equity-settled, share-based compensation plan. The fair
value of the employee services received in exchange for the grant of the options
is recognised as an expense. The total amount to be expensed over the vesting
period is determined by reference to the fair value of the options granted,
excluding the impact of any non-market vesting conditions (for example,
profitability and sales growth targets). Non-market vesting conditions are
included in assumptions about the number of options that are expected to become
exercisable. At each balance sheet date, the entity revises its estimates of the
number of options that are expected to become exercisable. It recognises the
impact of the revision of original estimates, if any, in profit or loss, and a
corresponding adjustment to equity over the remaining vesting period.
The proceeds received net of any directly attributable transaction costs are
credited to share capital (nominal value) and share premium when the options are
exercised.
(d) Termination benefits
Termination benefits are payable when employment is terminated before the normal
retirement date, or whenever an employee accepts voluntary redundancy in
exchange for these benefits. The Group recognises termination benefits when it
is demonstrably committed to either: terminating the employment of current
employees according to a detailed formal plan without possibility of withdrawal;
or providing termination benefits as a result of an offer made to encourage
voluntary redundancy. Benefits falling due more than 12 months after balance
sheet date are discounted to present value.
(e) Bonus plans
The Group recognises a liability and an expense for bonuses, based upon agreed
bonus plans in place at the balance sheet date.
3. Segment information
Primary reporting format - business segments
Based on the risks and returns the directors consider that the primary reporting
format is by business segment. The directors consider that there is only one
business segment, being pharmaceuticals. The Group develops, registers,
internationally markets or outlicenses a range of pharmaceutical products. The
Group also generates limited revenues from other sources, mainly the sale of
development resources. Therefore the disclosures for the primary segment have
already been given in the financial statements.
Secondary reporting format - geographical segments
The Group is organized on a worldwide basis. The operations are based in three
main geographical areas. The United Kingdom is the home of the parent company.
There are no material inter-segment transfers.
Group 2005 2004
£'000 £'000
Sales
United Kingdom 15,518 11,741
European Union (excluding the UK) 15,777 9,512
Other countries 342 339
_____ _____
31,637 21,592
_____ _____
Sales are allocated based on the country in which the customer is located.
Total assets
United Kingdom 42,097 27,601
European Union (excluding the UK) 42,501 54,900
Other countries 16,950 3,954
_____ _____
101,548 86,455
_____ _____
Total assets are allocated based on where the assets are located.
Capital expenditure
United Kingdom 1,138 52
European Union (excluding the UK) 2,758 91,790
Other countries 11,905 3,961
_____ _____
15,801 95,803
_____ _____
Capital expenditure is allocated based on where the assets are located.
Analysis of sales by category
Sales of goods 31,106 21,288
Revenue from services 134 138
Licensing Income 330 101
Royalty income 67 65
_____ _____
31,637 21,592
_____ _____
4. Share capital
Total
'000
Authorised - shares of £0.05 each
31 December 2005 400,000
Issued and fully paid - shares of £0.05 each
In issue at 31 December 2005 186,792
Own shares held by ESOP (20)
_____
186,772
_____
Movements in the number of share options outstanding and their related weighted
average exercise prices are as follows:
2005
Average exercise Options ('000)
price per share
At 1 January 2005 1.3113 13,950
Granted 1.2036 2,222
Assumed on acquisition of ProSkelia BV - -
Exercised 0.9237 (140)
Lapsed/expired/surrendered 1.5346 (1,236)
_____ _____
At 31 December 2005 1.4200 14,796
_____ _____
Out of the 14,795,874 outstanding options, 9,355,513 options were exercisable.
Options exercised in 2005 resulted in 139,983 shares being issued at £0.9237
each.
5. Earnings per share
As required by IAS 33 the earnings per share figures reflect the shares
outstanding at 31 December 2004 and restated following the capital
reorganisation on admission.
Basic
Basic earnings per share is calculated by dividing the loss attributable to
ordinary shareholders by the weighted average number of ordinary shares in issue
during the year, excluding those held in the ESOP, which are treated as
cancelled.
As at As at
31 December 31 December
2005 2004
Loss attributable to equity holders of the Company (£'000) (33,765) (73,721)
Weighted average number of ordinary shares in issue ('000) 130,854 74,709
Basic loss per share (pence per share) (21.5) (98.7)
Diluted
For diluted earnings per share, the weighted average number of ordinary shares
in issue is adjusted to assume conversion of all dilutive potential ordinary
shares. The dilutive potential ordinary shares includes only in-the-money
options and PSP awards. For a loss making company with outstanding share options
and warrants, net loss per share would only be increased by the exercise of
out-of-the-money options and warrants (where the exercise price is above the
average share price during the year). Since it seems inappropriate to assume
that option and warrant holders would exercise out-of-the-money share options
and warrants, no adjustment has been made for these potential ordinary shares.
As at As at
31 December 31 December
2005 2004
Loss attributable to equity holders of the Company (£'000) (33,765) (73,721)
Weighted average number of ordinary shares in issue ('000) 157,001 74,709
Adjustment for - shares to be issued ('000) 6,378 2,424
_____ _____
Weighted average number of ordinary shares for diluted earning per 163,379 77,133
share ('000)
_____ _____
Diluted loss per share (pence per share) (20.7) (95.6)
6. Cash generated from operations
Group
2005 2004
£'000 £'000
Loss for the period (33,765) (73,721)
Adjustments for:
- Tax (1,615) (1,881)
- Depreciation 1,827 665
- Amortisation 2,700 2,482
- Impairment of Goodwill - 63,125
- Excess of acquirer's interest in the fair value of acquiree's - (3,015)
identifiable net assets over cost
- (Profit)/loss on sale of property, plant and equipment (see below) 5 2
- Net movement in pension liability (12) 21
- Net movement for provisions for liabilities and charges (16) 33
- Charges for share based employee benefits 2,162 1,034
- Gain/(loss) on short term investments (1) -
- Fair value gains (including profit on disposal) on other financial - (130)
assets at fair value through profit or loss
- Net proceeds from accounts receivable factoring (2,899) (3,871)
- Interest income (1,474) (331)
- Interest expense 42 31
- Changes in working capital (excluding the effects of acquisition and
exchange difference on Consolidation):
- Inventories (141) 50
- Trade and other receivables 2,675 (235)
- Trade and other payables 900 (725)
_____ _____
Cash generated from operations (29,612) (16,466)
_____ _____
In the cash flow statement, proceeds from sale of property, plant and
equipment comprise:
Net book amount 18 96
Profit/(loss) on sale of property, plant and equipment (5) (2)
_____ _____
Proceeds from sale of property, plant and equipment 13 94
_____ _____
Non-cash transactions
The principal non-cash transactions were the issue of equity instruments as
consideration for the acquisitions and issued to employees and directors.
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