Interim Results
Synairgen plc
19 March 2007
19 March 2007
Synairgen plc
('Synairgen' or the 'Company')
Interim Results for the six months ended 31 December 2006
Synairgen plc (LSE: SNG), the drug discovery company focused on asthma and
chronic obstructive pulmonary disease ('COPD'), today announces its interim
results for the six months ended 31 December 2006.
Financial highlights
• Turnover for the period: £54k (2005: £77k);
• Research and development expenditure for the period: £682k (2005:
£494k);
• Retained loss for the period: £746k (2005: loss of £558k); and
• Net funds at 31 December 2006 of £6.7 million (2005: £8.2 million).
Operational highlights
• Phase I clinical trial of inhaled interferon beta for asthma progressing
in the clinic in line with expectations;
• Validation of in vitro data supporting use of Inhaled interferon beta in
treatment of COPD complete;
• Exclusive rights to a novel peptide which inhibits IL-4 and IL-13
signalling in-licensed from the University of Southampton. Validation
programme is underway;
• Development programme commenced for growth factor with potential for
restoration of barrier function in asthma; and
• Collaboration with undisclosed North American biotechnology company
extended.
Commenting on the results Simon Shaw, Chairman of Synairgen, said: 'We have made
great progress in our primary research and development programmes. We look
forward to completing the first safety study of inhaled Inhaled interferon beta,
and the commencement of the first study in asthma. We also anticipate progress
relating to a lead growth factor compound, and the results of the IL-4 and IL-13
inhibiting experiments which validate the recently licensed peptide. We have
focused on assembling a strong intellectual property portfolio in our core areas
and we continue to discuss potentially attractive out-licensing opportunities.'
-Ends-
For further information, please contact:
Synairgen Tel: + 44 (0) 2380 512 800
Richard Marsden, Managing Director
John Ward, Finance Director
Hogarth Partnership Tel: + 44 (0) 20 7357 9477
Georgina Briscoe / Sarah MacLeod
CHAIRMAN'S STATEMENT
INTRODUCTION
The first six months of the financial year have seen considerable progress on
all fronts.
We now have four valuable proprietary programmes underway as well as our
proteomics pipeline technology and barrier function screening assay.
Candidate Indication Programme status
Lead Selection Preclinical Clinical
Development Phase I
Interferon beta Asthma X
Interferon beta COPD X
Growth Factor Asthma X
IL-13R alpha 2 Asthma X
Peptide
During the period, we were delighted to introduce two new proprietary programmes
to our research portfolio: a growth factor (borne out of the barrier function
programme) and a novel peptide inhibitor of IL-4 and IL-13. Both of these
programmes are focused exclusively on asthma.
The interferon beta programme for asthma has been progressed in the clinic and
Synairgen has completed successful validation of the COPD data presented at the
American Thoracic Society meeting in May 2006.
In addition, we have also extended the collaboration with our unnamed North
American biotechnology research partner, and we maintain a dialogue with
potential licensees for our programmes.
OPERATING REVIEW
Proprietary programmes
Inhaled interferon beta for asthma
Synairgen's lead programme is the development of inhaled Interferon beta as a
therapy to prevent and treat asthma exacerbations caused by the common cold. Our
aim remains to progress the programme to a proof of concept Phase IIa clinical
trial. During the period under review, we have continued our Phase I safety
study in allergic individuals without asthma and the last volunteer was enrolled
into the study on 6 February 2007. Our next study, the first in asthmatics, is
anticipated to commence in the autumn.
Interferon beta for COPD
COPD patients consume approximately twice as much healthcare resource as asthma
patients, primarily due to unplanned hospitalisations caused by exacerbations.
Up to 60% of all COPD exacerbations are preceded by the common cold.
In May 2006, we presented preliminary data at the American Thoracic Society
conference, indicating that Interferon beta may have a place in the treatment of
COPD. During the period, these data have been validated, showing that the
susceptibility of COPD epithelial cells to the common cold virus is between 10
and 100 times greater than cells from non-smoking healthy control subjects. The
addition of low levels of Interferon beta to the COPD epithelial cell models was
protective against the common cold virus.
The opportunity for Interferon beta in COPD is a very significant addition to
the Company's portfolio as there have been relatively few successful
developments for COPD, despite it being the fifth leading cause of death
worldwide and a great consumer of healthcare resource. We are continuing to
discuss the Interferon beta programme with potential out-licensing partners.
During the period, Synairgen in-licensed intellectual property from Imperial
Innovations Ltd relating to the use of interferon lambda, which appears to
function in a similar manner to Interferon beta.
Barrier Function - Growth Factors
One of Synairgen's pipeline platforms is borne out of an observation that the
asthmatic epithelium is 'leaky' due to the poor formation of tight junction
proteins between cells. This defect in barrier function may be a key contributor
to asthma susceptibility to environmental insults enabling pro-inflammatory
allergens, pollutants and viruses to penetrate through the epithelium to the
underlying tissue. Synairgen uses this patented observation as a platform to
test for products which might restore tight junction integrity in asthma. To
date, we have identified two growth factors selective for epithelial cells that
could be developed as potential therapies. We are reviewing manufacture and
further development of one of these growth factors, with a view to commencing
clinical studies during 2009.
'Natural' inhibitor of IL-4 and IL-13
As announced in November 2006, we have in-licensed exclusive rights to a novel
peptide which mimics the body's own intracellular inhibition of IL-4 and IL-13
signalling. The peptide was discovered at the University of Southampton by Dr
Allison Lynn Andrews, Dr John Holloway and Professor Donna Davies (a co-founder
of Synairgen) and the in-licensing of this programme to Synairgen is another
example of the strong collaborative relationship between Synairgen and the
University. A number of large pharmaceutical and biotechnology companies are
known to be developing therapies designed to counter the adverse effects of
these cytokines, which are considered central to the development of allergic
asthma. Synairgen's peptide potentially has a number of advantages, such as
being easier to manufacture, being deliverable by aerosol, and most importantly,
the ability to inhibit both IL-4 and IL-13 signalling. In January 2007, we
commenced a validation programme, which will take approximately six months.
Pipeline platform technology
Synairgen uses its in vitro models to screen for new compounds and targets which
reverse poor barrier function in asthma. We also continue to make progress in
our proteomics programme, where we have observed a number of secreted proteins
which are altered at baseline in asthma. By focussing on secreted proteins we
increase the relative drugability of the targets. These proteins will be
identified during the next year and will be evaluated as drug targets for
further development.
Collaborative programmes
Further to an interim analysis of data in the programme we were delighted to
have extended the collaboration with our target discovery programme with our
unnamed North American biotechnology partner.
Staff
During the period, we announced the appointment of Dr Phillip Monk from
Cambridge Antibody Technology ('CAT') as Head of Bioscience Development. Phill
was previously Director of the Respiratory and Inflammation Biology group at CAT
and led the scientific development of CAT-354, an anti-IL-13 antibody being
developed for the treatment of severe asthma.
In addition to Phill's appointment, we continue to strengthen our research and
clinical resource to meet the needs of our proprietary and collaborative
programmes.
FINANCIAL REVIEW
Profit and loss account
Revenue for the six months to 31 December 2006 was £54k (six months ended 31
December 2005: £77k) and was primarily generated from the extended discovery
collaboration with our unidentified international biotechnology partner. The
operating loss for the period was £1,011k (2005: loss of £756k). Research and
development expenditure increased from £494k to £682k as the Company increased
its number of proprietary research programmes to four. Our R&D expenditure will
continue to increase further as we progress the Interferon beta programmes and
scale up the level of activity on the growth factor and peptide projects. Other
administrative costs increased from £325k to £368k. Interest receivable
decreased from £198k to £174k on account of lower deposit balances. Following
the receipt of our first research and development tax credit in respect of the
year ended June 2005, a tax credit of £91k for the period (2005: £nil) has been
accounted for. The retained loss was £746k (2005: loss of £558k) and the loss
per share was 3.4p (2005: loss of 2.6p).
Balance sheet and cash flow
At 31 December 2006, net assets amounted to £7.1 million (31 December 2005: £8.3
million), including net funds of £6.7 million (2005: £8.2 million).
Cash outflow for the six months to 31 December 2006 was £746k (six months ended
31 December 2005: £438k), underpinned by the increase in operating loss from
£756k to £1,011k.
Adoption of Financial Reporting Standard 20 ('FRS 20')
As of 1 July 2006, the Company has adopted FRS 20 'Share-based Payment' in place
of UITF 17 'Employee Share Schemes'. FRS 20 requires fair value accounting for
options and LTIPs granted after 17 November 2002 which have not vested by 30
June 2006. In accordance with standard practice, prior period results are
restated as if the standard had always been in force. For the period up to 30
June 2006 the additional charge booked to the Profit and Loss Account following
the adoption of FRS 20 amounted to £41,000. The FRS 20 charge for the six months
ended 31 December 2006 was £33,000.
Adoption of International Financial Reporting Standards ('IFRS')
The Company will adopt IFRS on 1 July 2007 and has commenced a project to
facilitate conversion from UK GAAP. Disclosure will be made in the annual
accounts of the likely impact of conversion.
OUTLOOK
We have made great progress in our primary research and development programmes.
We look forward to completing the first safety study of inhaled Interferon beta,
and the commencement of the first study in asthma. We also anticipate progress
relating to a lead growth factor compound, and the results of the IL-4 and IL-13
inhibiting experiments which validate the recently licensed peptide. We have
focused on assembling a strong intellectual property portfolio in our core areas
and we continue to discuss potentially attractive out-licensing opportunities.
Simon Shaw
Chairman
Unaudited Consolidated Profit and Loss Account
for the six months ended 31 December 2006
Restated Restated
(See Note 1) (See Note 1)
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2006 2005 2006
Notes £000 £000 £000
Turnover 54 77 82
Cost of sales (15) (14) (15)
--------- --------- --------
Gross profit 39 63 67
--------- --------- --------
Administrative expenses
--------------------- ------ --------- --------- --------
Research and development (682) (494) (1,083)
expenditure
Other (368) (325) (664)
--------------------- ------ --------- --------- --------
Total (1,050) (819) (1,747)
--------- --------- --------
Operating loss (1,011) (756) (1,680)
Interest receivable 174 198 376
--------- --------- --------
Loss on ordinary activities
before (837) (558) (1,304)
taxation
Tax on loss on ordinary 2 91 - 255
activities --------- --------- --------
Loss on ordinary activities
after
taxation and retained loss for (746) (558) (1,049)
the ========= ========= ========
period
Loss per ordinary share
Basic and diluted loss per
share 3 (3.44)p (2.57)p (4.84)p
(pence)
All amounts relate to continuing activities. There were no other recognised
gains and losses during any of the periods presented.
Unaudited Consolidated Balance Sheet
as at 31 December 2006
Restated Restated
(See Note 1) (See Note 1)
31 December 31 December 30 June
2006 2005 2006
Notes £000 £000 £000
Fixed assets
Intangible assets 91 26 36
Tangible assets 143 157 157
--------- --------- --------
234 183 193
Current assets
Stocks 85 88 68
Debtors 421 211 423
Investments: short-term deposits 6,624 8,165 7,464
Cash at bank and in hand 127 80 33
--------- --------- --------
7,257 8,544 7,988
Creditors: amounts falling due
within (359) (421) (334)
one year --------- --------- --------
Net current assets 6,898 8,123 7,654
--------- --------- --------
Total assets less current 7,132 8,306 7,847
liabilities
Creditors: amounts falling due
after (8) - (10)
more than one year --------- --------- --------
Net assets 7,124 8,306 7,837
========= ========= ========
Capital and reserves
Called up share capital 217 217 217
Share premium account 8,903 8,903 8,903
Merger reserve 483 483 483
Share-based payment reserve 113 58 80
Profit and loss account (2,592) (1,355) (1,846)
--------- --------- --------
Shareholders' funds 4 7,124 8,306 7,837
========= ========= ========
Unaudited Consolidated Cash Flow Statement
for the six months ended 31 December 2006
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2006 2005 2006
Notes £000 £000 £000
Net cash outflow from operating
activities 5 (940) (621) (1,530)
Returns on investments and servicing
of finance
Interest received 180 213 397
Taxation
Research and development tax credit
received 89 - -
Capital expenditure and financial
investment
Purchase of intangible fixed assets (59) (6) (17)
Purchase of tangible fixed assets (14) (24) (35)
--------- --------- -------
Net cash outflow from capital
expenditure (73) (30) (52)
--------- --------- -------
Net cash outflow before management of
liquid resources and financing (744) (438) (1,185)
Management of liquid resources
Decrease in short-term deposits 840 440 1,141
Financing
Repayment of capital element of
finance leases and hire purchase
contracts (2) - (1)
--------- --------- -------
Increase/(Decrease) in cash in period 6 94 2 (45)
========= ========= =======
Notes to the Financial Statements
for the six months ended 31 December 2006
1. Basis of preparation
The accounting policies and presentation applied to half-yearly figures are
consistent with those applied in the last published accounts except where the
accounting policies and presentation are to be changed in the next annual
financial statements (see below re FRS 20), in which case the new accounting
policies and presentation are followed.
All AIM-quoted companies are required to implement Financial Reporting Standard
('FRS') 20 'Share-based Payment' for accounting periods beginning on or after 1
January 2006. Adoption of FRS 20 supersedes UITF Abstract 17 (revised 2003)
'Employee Share Schemes', under which the Company had previously accounted for
shares and share options awarded to employees. FRS 20 requires that options
awards and awards made under the Company's Long-Term Incentive Plan ('LTIP')
granted after 7 November 2002 which had not vested by 1 July 2006 be fair valued
and charged to the profit and loss account over the period from grant to
vesting. The Company has valued option awards using the Black-Scholes model and
awards under the LTIP using the Stochastic model. In common with the
implementation of all accounting standards, prior year results must be restated
as if the accounting standard has always been in force. This change in
accounting policy does not result in any change to the Profit and Loss charge
for the six months ended 31 December 2006 (six months ended 31 December 2005:
increase of £15,000; year ended 30 June 2006: increase of £8,000). Under UITF
17, the credit for the charge was taken to the Profit and Loss reserve and
reported in the reconciliation of movements in shareholders' funds. Under FRS 20
the credit for the charge is taken to the Share-based payment reserve. The
restatement has no impact on net assets in the periods presented in these
interim results.
The Interim Report was approved by the Board of Directors on 16 March 2007. The
financial information for the six months ended 31 December 2006 is unaudited,
but has been reviewed in accordance with Auditing Practices Board guidance by
BDO Stoy Hayward LLP. The interim results do not constitute statutory financial
statements within the meaning of Section 240(5) of the Companies Act 1985.
The comparatives for the full year ended 30 June 2006 are not the Company's full
statutory accounts for that year. A copy of the statutory accounts for that year
has been delivered to the Registrar of Companies. The auditors' report on those
accounts was unqualified and did not contain a statement under section 237(2)-
(3) of the Companies Act 1985.
2. Taxation
The credit of £91,000 represents an estimate of the research and development tax
credit receivable in respect of the six months ended 31 December 2006.
3. Loss per ordinary share
Restated Restated
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2006 2005 2006
Loss on ordinary activities after
taxation (£000) (746) (558) (1,049)
Weighted average number of ordinary
shares in issue 21,692,308 21,692,308 21,692,308
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 22.
4. Reconciliation of movements in shareholders' funds
Share Share Merger Share-based Profit Shareholders'
capital premium reserve payment and loss funds
account reserve account
£000 £000 £000 £000 £000 £000
At 30 June
2005 (as
originally
stated) 217 8,903 483 - (763) 8,840
FRS 20 - - - 34 (34) -
charge ------ ------- ------ ------- ------ ---------
At 30 June
2005
(restated) 217 8,903 483 34 (797) 8,840
Loss for
the
period - - - - (558) (558)
(restated)
Reversal
of - - - 24 - 24
FRS 20 ------ ------- ------ ------- ------ ---------
charge
At 31
December
2005 217 8,903 483 58 (1,355) 8,306
(restated)
Loss for
the
period - - - - (491) (491)
(restated)
Reversal
of - - - 22 - 22
FRS 20 ------ ------- ----- ------- ------ ---------
charge
At 30 June
2006
(restated) 217 8,903 483 80 (1,846) 7,837
Loss for
the - - - - (746) (746)
period
Reversal
of - - - 33 - 33
FRS 20 ------ ------- ----- ------- ------ ---------
charge
At 31
December 217 8,903 483 113 (2,592) 7,124
2006 ====== ======= ===== ======= ====== =========
5. Reconciliation of operating loss to net cash outflow from operating
activities
Restated Restated
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2006 2005 2006
£000 £000 £000
Operating loss (1,011) (756) (1,680)
Depreciation & amortisation 32 22 48
FRS 20 charge 33 24 46
Increase in stocks (17) (33) (13)
(Increase)/Decrease in debtors (2) 99 136
Increase/(Decrease) in creditors 25 23 (67)
---------- --------- -------
Net cash outflow from operating
activities (940) (621) (1,530)
========== ========= =======
6. Reconciliation of net cash flow to movement in net funds
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2006 2005 2006
£000 £000 £000
Increase/(Decrease) in cash in period 94 2 (45)
Decrease in short-term deposits (840) (440) (1,141)
Cash use to repay capital element of
finance leases and hire purchase
contracts 2 - 1
---------- --------- -------
Change in net funds resulting from cash
flows (744) (438) (1,185)
New finance leases and hire purchase
contracts - - (14)
---------- --------- -------
Movement in net funds (744) (438) (1,199)
Net funds at start of period 7,484 8,683 8,683
---------- --------- -------
Net funds at end of period 6,740 8,245 7,484
========== ========= =======
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 2006 which comprises the unaudited group profit
and loss account for the six months ended 31 December 2006, the unaudited group
balance sheet as at 31 December 2006, the unaudited group cash flow statement
for the six months ended 31 December 2006 and the related notes. 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
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 International Standards on
Auditing (United Kingdom and Ireland) 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 2006.
BDO STOY HAYWARD LLP
Chartered Accountants
Southampton
16 March 2007
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