Interim Results

Synairgen plc 09 March 2005 9 March 2005 Interim Results for the six months ended 31 December 2004 Synairgen plc ('Synairgen' or the 'Company'), the drug discovery company focused on identifying the underlying causes and discovering new treatments for asthma and chronic obstructive pulmonary disease ('COPD'), today announces its Interim Results for the six months ended 31 December 2004. Financial highlights • Successful flotation in October 2004 on the Alternative Investment Market which raised £10.0 million for the Company (£9.0 million net of expenses) • Turnover was £58k (29 weeks ended 31 December 2003: £nil) • Operating loss for the period was £390k (29 weeks ended 31 December 2003: loss of £67k) in line with management expectations • Net funds at 31 December 2004 of £9.1 million (31 December 2003: £0.6 million) Operational highlights • Collaboration signed with an undisclosed North American biotechnology company in July 2004 • Patent application for growth factor filed by University of Southampton in September 2004 and exclusively licensed to Synairgen • Executive management appointments and recruitment of scientific staff to meet partnership and proprietary programme demands • Post period-end, collaboration agreement signed with Centocor, a subsidiary of Johnson & Johnson (see separate announcement) Commenting on the results, Simon Shaw, Chairman of Synairgen, said: 'Our priority, since IPO, has been to pursue our proprietary research programmes and build on our partnerships and collaborative programmes. We are making good progress in all areas at this early stage and look forward to accelerating through 2005.' -Ends- For further information, please contact: Synairgen Tel: 02380 512 800 Richard Marsden Hogarth Partnership Tel: 020 7357 9477 Melanie Toyne-Sewell / Georgina Briscoe CHAIRMAN'S STATEMENT INTRODUCTION This is Synairgen's first set of Interim Results following its initial public offering ('IPO') on the Alternative Investment Market ('AIM') on 26 October 2004. As part of the IPO, Synairgen raised £9.0 million net of expenses which we intend to use on enhancing the Company's research capabilities, investing in our current proprietary programmes and developing our Biobank of disease specific samples. Our focus is on identifying and out-licensing new pharmaceutical products for asthma and chronic obstructive pulmonary disease ('COPD'). Over the first six months of the financial year, we have focused on progressing our proprietary and collaborative programmes. Proprietary Programmes • Interferon Beta ('IFN') Following the patent filing in March 2004 describing a novel use of IFN in protecting severe asthmatics from exacerbations induced by the common cold virus, we have built on our research work. We have mapped out a clinical trial programme, culminating in a proof of concept clinical trial. A UK Clinical Trial Authorisation application for inhaled IFNss will be made during the summer of 2005. • Growth Factor In September 2004, we completed initial research and managed the filing of a patent describing a novel growth factor with potential utility in asthma. We continue to research the product with a view to establishing an appropriate development path during 2005. Collaborations Synairgen started the period under review with collaboration agreements in place with Merck Frosst Canada & Co and Cambridge Antibody Technology Limited. In July 2004, the Company entered into a third agreement with a major unnamed US biotechnology company. Post period-end, in March 2005, Synairgen announced a new collaboration with Centocor, Inc. (a subsidiary of Johnson & Johnson). Synairgen continues to discuss possible collaborations with both existing collaborators and new potential partners. Biobank In order to recreate the asthmatic and COPD lung in the laboratory, we are building a Biobank comprising samples of tissue from volunteers who are screened and characterised prior to donating samples. The extent of work on the Biobank - collecting and storing samples and developing further our in vitro models using disease-derived cells - has increased significantly as a result of the funds raised at flotation. To underpin our projects, collaborations and Biobank, and to aid future growth, we have recruited additional personnel - both at the executive and the scientific levels, whilst retaining our 'lean' operating philosophy. FINANCIAL REVIEW Flotation on AIM The IPO raised £10 million (£9.0 million after expenses) through the issue of 7,692,308 shares at a placing price of 130p. 400,000 shares were also placed on behalf of Southampton Asset Management Ltd to meet institutional demand for the shares. The market capitalisation of the Company at the placing price amounted to £28.2 million. Profit and loss account Revenue for the six months to 31 December 2004 was £58k (29 weeks ended 31 December 2003: £nil) and was generated from three contracts, two of which will generate further revenue in the second half of the financial year. The operating loss for the period was £390k (2003: loss of £67k), in line with our expectations. Research and development expenditure increased from £38k to £194k as the Company built its scientific team up to eight staff and progressed a wider portfolio of research projects. The increase in other administrative costs from £29k to £204k reflects the recruitment of additional senior management personnel and the scaling up of the Company's activities. Interest receivable increased from £4k to £83k on account of the flotation funds raised. The retained loss was £307k (2003: loss of £63k) and the loss per share was 1.9p (2003: loss of 0.7p). Balance Sheet At 31 December 2004, net assets amounted to £9.1 million (31 December 2003: £0.6 million) including cash and deposit balances of £9.1 million (2003: £0.6 million). OUTLOOK Synairgen has made good early progress in the two months after its flotation and has continued to develop the business through the first quarter of 2005. We are particularly pleased to announce our fourth collaboration with a new partner, Centocor, since commencing operations in summer 2003. We look forward to making further planned progress on our collaborations and proprietary programmes through the rest of this year. Simon Shaw Chairman Unaudited Consolidated Profit and Loss Account for the six months ended 31 December 2004 Proforma Proforma Proforma Six months 29 weeks 55 weeks ended ended ended 31 December 31 December 30 June 2004 2003 2004 Notes £000 £000 £000 Turnover 58 - 82 Cost of sales (50) - (18) --------- --------- ------- Gross profit 8 - 64 --------- --------- ------- --------- --------- ------- Administrative expenses ---------------------- ------ --------- --------- ------- Research and development (194) (38) (123) expenditure Other (204) (29) (107) ---------------------- ------ --------- --------- ------- Total (398) (67) (230) --------- --------- ------- Operating loss (390) (67) (166) Interest receivable 83 4 13 --------- --------- ------- Loss on ordinary activities before taxation (307) (63) (153) Tax on loss on ordinary - - - activities --------- --------- ------- Loss on ordinary activities after taxation and retained loss for the period (307) (63) (153) ========= ========= ======= Loss per ordinary share Basic and diluted loss per share (pence) 2 (1.94)p (0.70)p (1.52)p Unaudited Consolidated Balance Sheet as at 31 December 2004 Proforma Proforma 31 December 31 December 30 June 2004 2003 2004 Notes £000 £000 £000 Fixed assets Intangible assets 7 - 4 Tangible assets 135 - 145 --------- -------- --------- 142 - 149 Current assets Debtors 162 5 77 Investments: short-term deposits 9,046 553 350 Cash at bank and in hand 48 36 57 --------- -------- --------- 9,256 594 484 Creditors: amounts falling due within (265) (34) (163) one year --------- -------- --------- Net current assets 8,991 560 321 --------- -------- --------- Total assets less current 9,133 560 470 liabilities ========= ======== ========= Capital and reserves Called up share capital 217 113 113 Share premium account 8,893 - - Merger reserve 483 510 510 Profit and loss account (460) (63) (153) --------- -------- --------- Equity shareholders' funds 3 9,133 560 470 ========= ======== ========= Unaudited Consolidated Cash Flow Statement for the six months ended 31 December 2004 Proforma Proforma Proforma Six months 29 weeks 55 weeks ended ended ended 31 December 31 December 30 June 2004 2003 2004 Notes £000 £000 £000 Net cash outflow from operating activities 4 (290) (38) (78) Returns on investments and servicing of finance Interest received 16 4 13 Capital expenditure and financial investment Purchase of intangible fixed (4) - (4) assets Purchase of tangible fixed assets (5) - (147) --------- --------- ------- Net cash outflow from capital expenditure (9) - (151) --------- --------- ------- Net cash outflow before management of (283) (34) (216) liquid resources and financing Management of liquid resources Increase in short-term deposits (8,696) (553) (350) Financing Issues of ordinary share capital 77 1 1 Share premium received on share issues 9,923 649 649 Share issue costs (1,030) (27) (27) --------- --------- ------- Cash inflow from financing 8,970 623 623 --------- --------- ------- (Decrease)/Increase in cash in 5 (9) 36 57 period ========= ========= ======= Notes to the Financial Statements for the six months ended 31 December 2004 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 current and prior periods. 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 Interim Report was approved by the Board of Directors on 8 March 2005. The financial information for the six months ended 31 December 2004 is unaudited, but has been reviewed in accordance with Auditing Practices Board guidance by BDO Stoy Hayward LLP, whose report is included on page 9. The financial information for the period to 30 June 2004 contained in this Interim Report does not constitute statutory accounts of either Synairgen plc or Synairgen Research Limited within the meaning of Section 240(5) of the Companies Act 1985. The financial information for the 55 weeks ended 30 June 2004 is derived, on the basis described in detail above, from the financial statements of Synairgen Research Limited for the period 10 June 2003 (date of incorporation) to 30 June 2004 which will be filed with the Registrar of Companies. The auditors have reported on the financial statements of Synairgen Research Limited for the period to 30 June 2004; their report was unqualified and did not contain statements under the Companies Act 1985, s 237(2) or (3). 2. Loss per ordinary share Six months 29 weeks 55 weeks ended ended ended 31 December 31 December 30 June 2004 2003 2004 Loss on ordinary activities after taxation (£000) (307) (63) (153) Weighted average number of ordinary shares in issue 15,817,960 8,953,777 10,075,980 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 10 - - - - - June 2003 Issue of ordinary shares 113 - 510 - 623 Loss for the - - - (63) (63) period ------- ------- ------- ------- --------- At 31 December 113 - 510 (63) 560 2003 Loss for the - - - (90) (90) period ------- ------- ------- ------- --------- At 30 June 113 - 510 (153) 470 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 ======= ======= ======= ======= ========= 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 29 weeks 55 weeks ended ended ended 31 December 31 December 30 June 2004 2003 2004 £000 £000 £000 Operating loss (390) (67) (166) Depreciation & amortisation 16 - 2 Increase in debtors (18) (5) (77) Increase in creditors 102 34 163 --------- -------- --------- Net cash outflow from operating activities (290) (38) (78) ========= ======== ========= 5. Reconciliation of net cash flow to movement in net funds Six months 29 weeks 55 weeks ended ended ended 31 December 31 December 30 June 2004 2003 2004 £000 £000 £000 (Decrease)/Increase in cash in period (9) 36 57 Increase in short-term deposits 8,696 553 350 ---------- --------- -------- Change in net funds resulting from cash flows and movement in net funds 8,687 589 407 Net funds at start of period 407 - - ---------- --------- -------- Net funds at end of period 9,094 589 407 ========== ========= ======== Independent Review Report to Synairgen plc Introduction We have been instructed by the company to review the financial information for the six months ended 31 December 2004 on pages 3 to 8. We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information. Our report has been prepared in accordance with the terms of our engagement to assist the company in meeting the requirements of the rules of the London Stock Exchange for companies trading securities on the Alternative Investment Market and for no other purpose. No person is entitled to rely on this report unless such a person is a person entitled to rely upon this report by virtue of and for the purpose of our terms of engagement or has been expressly authorised to do so by our prior written consent. Save as above, we do not accept responsibility for this report to any other person or for any other purpose and we hereby expressly disclaim any and all such liability. Directors' responsibilities The interim report, including the financial information contained therein, is the responsibility of, and has been approved by the directors. The directors are responsible for preparing the interim report in accordance with the rules of the London Stock Exchange for companies trading securities on the Alternative Investment Market which require that the half-yearly report be presented and prepared in a form consistent with that which will be adopted in the company's annual accounts having regard to the accounting standards applicable to such annual accounts. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4 issued by the Auditing Practices Board for use in the United Kingdom by auditors of fully listed companies. A review consists principally of making enquiries of group management and applying analytical procedures to the financial information and underlying financial data and based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit performed in accordance with United Kingdom Auditing Standards and therefore provides a lower level of assurance than an audit. Accordingly we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 31 December 2004. BDO Stoy Hayward LLP Chartered Accountants Southampton 8 March 2005 This information is provided by RNS The company news service from the London Stock Exchange

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