Interim Results
Allergy Therapeutics PLC
27 March 2006
Allergy Therapeutics plc
Interim Results for the six months ended 31 December 2005
Allergy Therapeutics plc ("Allergy Therapeutics" or "the Company"), the
specialty pharmaceuticals Company focused on allergy vaccines, today announces
interim results for the six months ended 31 December 2005.
Highlights
• Significant progress in the clinical development programmes:
- Positive outcome of Pollinex(R) Quattro Ragweed pivotal study in
Canada, paving the way for registration in Canada
- 6 Phase I and II studies completed
• 10% growth in Pollinex(R) Quattro sales
• German rebates lower at £0.5m (6 months to 31 December 2004 (H1) 2004:
£2.0m), net sales up 17% to £14.2m (H1 2004: £12.1m)
• Operating profit, before development costs, up 23% to £4.8m (H1 2004,
pre-exceptional costs: £3.9m)
• Expansion of EU sales and marketing infrastructure in Poland, Austria,
the UK, and the Czech and Slovak Republics
• Board and senior management team strengthened with three key
appointments
• New bank facilities agreed for £4m
• Extensive manufacturing upgrade commenced
Commenting on the results, Keith Carter, CEO of Allergy Therapeutics, said:
"I am pleased to report that Allergy Therapeutics has made such an excellent
start to the financial year. The Company is making good clinical progress as
well as continuing to deliver strong financial results.
"The positive outcome of several of our clinical studies has been particularly
pleasing and we continue to progress our strategy to become a mainstream
provider of novel therapies for the prevention and treatment of allergy.
"Allergy Therapeutics has made significant strides in the first half of the
financial year and the Company can look forward to the opportunities that the
second half of the year will present with confidence."
- ends -
For further information:
Allergy Therapeutics 01903 844720
Keith Carter, Chief Executive
Bell Pottinger 020 7861 3232
Dan de Belder / Emma Charlton
Joint Statement from the Chairman and CEO
We are pleased to report that the Company has made substantial progress in the
six months ended 31 December 2005 ("the Period") and that it has continued to
accomplish its financial and business objectives.
Allergy Therapeutics continued to pursue its strategy as a fully integrated
specialist pharmaceutical company based in Europe, building its EU sales and
marketing infrastructure, progressing its development pipeline of innovative
ultra-short course allergy vaccines and strengthening its UK manufacturing base.
With significant investments of energy, time and money in executing its plans,
the Company made progress on many fronts during the Period.
Development
The Period saw significant progress in the clinical development programmes. Ten
pre-Phase III studies were undertaken with a total of 636 subjects, representing
an overall investment of £5.6m in the Period and, by the end of the Period, six
studies had completed their clinical phases and are currently under evaluation.
All these studies are designed to provide answers to the questions posed by the
US Food and Drug Administration (FDA). The next phase will entail presenting the
comprehensive data to the FDA and discussing our Phase III plans for 2006-2007
which are already well advanced. The initial results of the recent studies are
expected in the second half of the financial year. Three studies are of special
note:
* The Grass 203 study, part of the Company's development of ultra-short- course
allergy vaccines, under the brand name Pollinex(R) Quattro, relates specifically
to the treatment of patients allergic to grass pollen. The successful results of
this study were announced on 6 March 2006 and demonstrate that Pollinex(R)
Quattro Grass - Grass M.A.T.A. (Modified Allergen Tyrosine Adsorbate) with MPL
(R) (Monophosphoryl Lipid A) - was safe and well tolerated at all dosing
regimens and increased antibody levels compared to placebo in a dose-dependent
manner. MPL(R) is the Company's innovative TLR4-agonist which acts as an
efficient allergy vaccine adjuvant. This study will form an important part of
the submissions to the FDA leading up to the Phase III programme for Pollinex(R)
Quattro.
* The pivotal Ragweed 204 study, the results of which were announced on 24 March
2006, utilised a pollen challenge chamber and demonstrated significant
statistical and clinical benefit of the new vaccine. This study is particularly
important as, with this positive outcome, we are planning to submit a dossier
for registration for an MPL(R)-based vaccine for allergy to Ragweed pollen in
Canada. It is therefore our first pivotal clinical trial with the 4-injection
MPL(R)-containing vaccines. Ragweed pollen is one of the most important causes
of allergy across the whole of North America, a target market of approximately
50 million sufferers.
* The oral Grass 103 study is a Phase I/II trial, incorporating elements of
dose-ranging as well as tolerability, and is the first sublingual use of the
adjuvant MPL(R). Being injection-free efficacious and well-tolerated allergy
vaccines by this route of administration would have considerable commercial
potential. Results are expected in the second half of this financial year.
Operations
In January 2006 the MHRA inspectorate conducted a Good Manufacturing Practice
(GMP) audit of the existing facility. There were no critical findings in the
audit, a testimony to the integrity of the Company's quality systems.
As part of the plan for preparing for the FDA requirements, new premises were
leased in December neighbouring the current facility in Worthing. This new
facility will be devoted to the production of named-patient products and
warehousing, creating the flexibility in the main plant to upgrade and
refurbish. Competing demands on manufacturing resources from markets and the
clinical development programme caused some supply issues during the last six
months. The new facility, due to be operational over the summer of 2006, will
permit clearer segregation in these functions.
Board and Senior Management
A key component in achieving the Company's strategy is to recruit and retain the
right people. Consequently we were delighted that, during the period, Dr.
Virinder Nohria agreed to join the Board as a Non-Executive Director. His
expertise in drug development and dealing with the FDA will be an invaluable
support to our excellent and growing internal R&D team as our new MPL(R)-based
vaccines move through the late phases of clinical trials. Dr. Nohria works as a
strategic consultant in international drug development and has led teams in many
successful interactions with regulatory bodies in several countries,
particularly in the US .
Two further key positions were filled in November 2005, strengthening the senior
management team: Ray Keeling, 46, an experienced pharmaceutical manufacturing
and supply executive with particular expertise in sterile manufacture and
meeting the requirements of the US FDA, joined as Head of Supply Operations.
Prior to joining the Company, Ray held senior supply operations positions at
Aventis. Dr. Manjit Rahelu, 38, who has a PhD in immunology and over seven
years' experience in business development in the pharmaceutical industry, joined
the Company as Head of Business Development. Prior to joining the Company,
Manjit was a senior business development executive at UCB.
Including these key appointments, the headcount across the Company increased to
279 by the end of the period (H1 2004: 226) reflecting the significant
investment required in building the commercialisation infrastructure, upgrading
manufacturing and preparing for initiation of the Phase III development
programme during 2006 and for potential commercial launches.
Financial Review
The results for the six months to 31 December 2005 have been very encouraging
and have continued the progress shown in previous years.
At present, approximately 77% of Allergy Therapeutics' sales are generated in
Germany, so the reduction of the compulsory rebate from 16% to 6% in January
2005 was beneficial to the company with a reduction in the charge to £0.5m (H1
2004: £2m) in the period. Consequently, after the rebate, group net sales
increased by 17% to £14.2 (H1 2004: £12.1m). Gross sales (before the rebate in
Germany) for the period were £14.7m (H1 2004: £14.1m). This represents an
increase of 4% over the previous period, driven primarily by growth of 10% in
named-patient sales of Pollinex(R) Quattro, the Group's four-shot allergy
vaccine. Year-on-year improvement in operating profit was inhibited by some
manufacturing issues, resulting primarily from the demands made on all
manufacturing resources in meeting the needs of both the markets and the
clinical trials. We are confident that the investments and actions initiated
over the period will prevent a recurrence of these problems.
Owing to the seasonality of the allergy market, some 60-70% of Allergy
Therapeutics' sales are generated in the first half of the Company's financial
year and as a consequence the interim results give a better indication than
normal for the full year performance.
Gross profit grew by 21% to £11.4m, representing a gross margin of 80% of sales,
compared with £9.4m and 78% in the same period last year. This was an expected
trend because of the decrease in German rebates. The initiation of the
investment programme in the manufacturing facility and further investment in
manufacturing headcount to maintain compliance with good manufacturing
compliance will reduce the gross margin in the short term.
Marketing expenses, the major component of distribution costs, have increased in
line with our budgets as we have set up new markets in Poland, Austria, the UK
and the Czech and Slovak Republics and intensified the promotional spend on our
high margin products. Costs increased to £5.0m (H1 2004: £3.8m), an increase of
33% over the previous period. Returns on these revenue investments are
anticipated in coming years. Administration costs of £1.7m (H1 2004: £2.0m) were
lower by 13%, benefiting by the release in the period of a bad debt provision.
Research and development expenditure increased during the period to £5.5m (H1
2004: £0.7m) as the development activity for the MPL(R)-based vaccine range was
progressed.
The operating loss for the period was £0.7m (H1 2004 profit: £2.6m) but before
development costs, the operating profit was £4.8m (H1 2004, pre-exceptional
costs: £3.9m).
Capital expenditure for the period was £0.6m (H1 2004: £0.5m) and mainly
represents upgrades to plant and machinery. Net current assets excluding cash
were up to £3.2m (H1 2004: £2.2m) reflecting higher activity levels.
Net assets of £19.7m (H1 2004: £24.8m) show a net decrease of £5.1m against the
previous period end, due primarily to the investment in R&D over the period.
Net cash outflow before financing for the period was £4.2m (H1 2004 inflow:
£1.7m), less than the previous period by £5.9m due principally to the
accelerated investment in R&D in the period.
Funding
New funding lines were agreed in March 2006 with the Company's bank, RBOS, to
provide a facility of £4m. This facility will be used to fund the investment
required to prepare the production facilities for the US launch of its products
and to support working capital requirements as the Company grows.
Outlook
Trading remains on track with market expectation and excellent opportunities lie
ahead for the Company in the second half of the financial year with the
successful outcome of Ragweed 204. The next target is a successful outcome of
the oral Grass 103 trials as well as the continued marketing and expansion of
existing products into the European markets. The most exciting phase of growth,
however, will come when regulatory clearance is achieved to sell Pollinex(R)
Quattro in the chosen markets and the Company's efforts and resources are
focused on this objective.
Allergy Therapeutics plc
Consolidated interim statements
Consolidated profit and loss account
for the six month period ended 31 December 2005
6 months 6 months Year ended
to to 30 June
31 Dec 31 Dec 2005
2005 2004
Note £'000 £'000 £'000
Turnover 2 14,200 12,140 20,606
Cost of sales (2,807) (2,709) (4,853)
--------- -------- ---------
Gross profit 11,393 9,431 15,753
Distribution costs (4,974) (3,750) (8,012)
--------- -------- ---------
Administrative expenses- other (1,729) (1,978) (4,303)
Research and development costs (5,493) (665) (5,620)
Exceptional costs - (614) (614)
--------- -------- ---------
Administrative expenses (7,222) (3,257) (10,537)
Other operating income 133 160 378
--------- -------- ---------
Operating (loss)/ profit (670) 2,584 (2,418)
Interest receivable and similar
income 245 163 531
Interest payable on loans and
overdrafts - (39) (42)
--------- -------- ---------
(Loss)/profit on ordinary
activities before tax (425) 2,708 (1,929)
Tax on (loss)/profit on ordinary
activities - - -
--------- -------- ---------
Retained (loss)/profit for the
financial period (425) 2,708 (1,929)
--------- -------- ---------
Basic (loss)/earnings per share 3 (0.7p) 5.2p (3.4p)
Diluted (loss)/earnings per
share 3 (0.7p) 4.5p (3.4p)
All amounts relate to continuing activities
Consolidated balance sheet
at 31 December 2005
Note 31 Dec 31 Dec 30 June
2005 2004 2005
£'000 £'000 £'000
Fixed assets
Intangible assets
Goodwill 2,484 2,850 2,617
Other intangible assets 893 1,013 951
--------- -------- ---------
3,377 3,863 3,568
Tangible assets 2,414 1,926 2,111
--------- -------- ---------
5,791 5,789 5,679
Current assets
Stocks 3,242 2,185 2,741
Debtors: amounts falling due
within one year 4,023 3,832 3,160
Cash at bank and in hand 10,912 17,234 15,080
--------- -------- ---------
18,177 23,251 20,981
Creditors: amounts falling
due within one year (4,011) (3,801) (6,121)
--------- -------- ---------
Net current assets 14,166 19,450 14,860
--------- -------- ---------
Total assets less current
liabilities 19,957 25,239 20,539
Creditors: amounts falling
due after one year (226) (459) (455)
--------- -------- ---------
Net assets 4 19,731 24,780 20,084
--------- -------- ---------
Capital and reserves
Called up share capital 73 73 73
Share premium account 14,924 14,945 14,924
Other reserves - share
premium on shares issued by
subsidiary 40,128 40,128 40,128
Other reserves - shares held
in Employee Benefit Trust (296) (346) (322)
Profit and loss account (35,098) (30,020) (34,719)
--------- -------- ---------
Shareholders' funds - equity 19,731 24,780 20,084
--------- -------- ---------
Consolidated cash flow statement
for the six month period ended 31 December 2005
6 months to 6 months to Year ended
31 Dec 2005 31 Dec 2004 30 June 2005
Note £'000 £'000 £'000
Cash (outflow)/ inflow from
operating activities 5 (3,857) 2,057 (15)
Returns on investment and servicing of
finance
Interest received 245 163 531
Interest paid - (39) (42)
--------- -------- ---------
245 124 489
--------- -------- ---------
Capital expenditure and financial
investment
Purchase of fixed assets (582) (456) (903)
Sale of tangible fixed assets - 3 -
--------- -------- ---------
(582) (453) (903)
--------- -------- ---------
Cash (outflow)/ inflow before
financing (4,194) 1,728 (429)
Financing
Gross funds raised on AIM - 16,000 16,000
Bank loans repaid - (945) (945)
Sale of EBT shares 26 27 51
Expenses paid in connection with
issue of shares - (1,033) (1,054)
--------- -------- ---------
26 14,049 14,052
--------- -------- ---------
(Decrease)/increase in cash in
period (4,168) 15,777 13,623
Reconciliation of net cash flow to movement in net funds
6 months to 6 months to Year ended
31 Dec 2005 31 Dec 30 June 2005
2004
£'000 £'000 £'000
(Decrease)/increase in cash in the
period (4,168) 15,777 13,623
Net loans repaid - 945 945
--------- -------- ---------
Movement in net funds in period (4,168) 16,722 14,568
Net funds at beginning of period 15,080 512 512
--------- -------- ---------
Net funds at end of period 10,912 17,234 15,080
--------- -------- ---------
Notes to the interim reports
For the six month period ended 31 December 2005
1 Basis of preparation
The interim financial statements have been prepared in accordance with
applicable accounting standards and under the historical cost convention. The
principal accounting policies of the Group have remained unchanged from those
set out in the Group's June 2005 annual report and financial statements. The
financial information set out in this interim report is unaudited and does not
constitute statutory accounts as defined in section 240 of the Companies Act
1985.
2 Analysis of turnover
6 months to 6 months to Year ended
31 Dec 2005 31 Dec 2004 30 June 2005
£'000 £'000 £'000
Turnover by destination
Germany 10,956 9,017 14,175
Rest of Europe 3,056 2,939 4,714
North America 39 12 1,371
Asia 149 172 346
----------- ----------- -----------
14,200 12,140 20,606
----------- ----------- -----------
Turnover by origin
Germany 10,963 9,017 14,175
Rest of Europe 2,039 1,861 3,481
UK 1,198 1,262 2,950
----------- ----------- -----------
14,200 12,140 20,606
----------- ----------- -----------
3 (Loss)/earnings per share
6 months to 6 months to Year ended
31 Dec 2005 31 Dec 2004 30 June 2005
(Loss)/earnings for the period
(£'000) (425) 2,708 (1,929)
Weighted number of shares in issue 62,950,632 51,991,728 57,471,180
Diluted weighted number of shares
in issue n/a 60,787,224 n/a
Basic (loss)/earnings per share
(pence) (0.7) 5.2 (3.4)
Diluted (loss)/earnings per share
(pence) (0.7) 4.5 (3.4)
4 Reconciliation of movement in shareholders' funds
6 months to 6 months to Year ended
31 Dec 2005 31 Dec 30 June
2004 2005
£'000 £'000 £'000
(Loss)/profit for the financial
period (425) 2,708 (1,929)
Other recognised gains and losses
relating to the period (net) 46 2 (60)
Issue of shares - 16,000 16,000
Sale of shares by EBT 26 27 51
Expenses paid in connection with
issue of shares - (1,033) (1,054)
----------- ----------- -----------
Net (decrease)/increase in
shareholders' funds (353) 17,704 13,008
Opening shareholders' funds 20,084 7,076 7,076
----------- ----------- -----------
Closing shareholders' funds 19,731 24,780 20,084
----------- ----------- -----------
5 Reconciliation of operating (loss)/ profit to operating cash flow
6 months to 6 months to Year ended
31 Dec 2005 31 Dec 30 June
2004 2005
£'000 £'000 £'000
Operating (loss)/ profit (670) 2,584 (2,418)
Depreciation 287 203 436
Amortisation of intangibles 225 228 448
(Gain)/loss on disposal of fixed
assets 5 (3) 5
Effect of foreign exchange rate
changes (1) (95) (58)
(Increase) / decrease in stocks (501) (360) (916)
Increase in debtors (863) (1,547) (875)
Increase/ (decrease) in creditors (2,339) 1,047 3,363
----------- ----------- -----------
Net cash (outflow)/inflow from
continuing activities (3,857) 2,057 (15)
----------- ----------- -----------
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