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Lipoxen PLC (XEN)

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Thursday 28 September, 2006

Lipoxen PLC

Interim Results

Lipoxen PLC
28 September 2006

                                  LIPOXEN PLC

                                 INTERIM REPORT

                            FOR THE SIX MONTHS ENDED

                                 30TH JUNE 2006




CHAIRMAN'S STATEMENT


Dear Shareholder,


I am pleased to report upon the unaudited results for the six months ended 30th
June 2006.


Financial Results

The unaudited consolidated financial results, prepared under United Kingdom
generally accepted accounting principles, for the 6 months to 30th June 2006 are
summarised as follows:
                                                                                30th June 2006      30th June 2005

Pre-tax loss (£)                                                                  (£1,019,570)           (£14,497)
Shareholders' funds (£)                                                           £11,397,198              £1,500
Net cash (£)                                                                       £2,006,815              £1,312


Earnings per share (EPS) (basic - loss in pence per ordinary share)                    (1.05p)             (0.44p)
EPS (fully diluted - loss in pence per ordinary share)                                 (0.97p)             (0.44p)
Net assets per share (basic - pence per ordinary share)                                 10.94p               0.05p
Net assets per share (fully diluted - pence per ordinary share)                         10.06p               0.05p


History and Technology


The present Lipoxen plc group was established in January 2006 following the
successful reverse takeover of Lipoxen Technologies Limited, a UK-based
biopharmaceutical company, by Greenchip Investments plc. The shares of Lipoxen
plc ('the Company') were admitted to trading on AIM (LSE:LPX) on 16th January
2006 following a Placing of 28 million new ordinary shares at 13.5 pence,
raising a net £3.062 million.


The Company's value proposition is based on novel drug and vaccine delivery
technologies, which have the potential to greatly improve the performance of
high value differentiated biologicals, vaccines and oncology drugs by optimising
their performance and extending patent-life. The Company's technologies are as
follows:



•   PolyXen(R) protein drug delivery technology links therapeutic
    proteins or peptides to the naturally occurring polymer polysialic acid 
    ('PSA') to prolong their stability, biological half-life, solubility and 
    immunologic characteristics while maintaining their biological activity and 
    minimising toxicity. The Company believes PolyXen(R) offers many advantages 
    over PEGylation, which is currently widely used in the pharmaceutical and
    biotechnology industries.


•   ImuXen(R) is based on the administration of vaccines via liposomes.
    Vaccine materials are protected by the liposomal vehicle enhancing their
    delivery to the immune system. This leads to protective immune responses 
    which are much stronger and more rapid than those observed with vaccine 
    materials delivered by conventional means. Moreover, liposomal formulation 
    is well known to minimize the side effects of vaccination as a result of 
    entrapment and also slow release of the active materials.


•   A related liposomal technology is being developed for the
    formulation of cytotoxic oncology drugs and a number of anti-cancer agents, 
    such as paclitaxel.


Operations

To capture the potential that the Company's technologies offer, a two-pronged
strategy is being adopted. The Company is developing its own product portfolio
based on its proprietary PolyXen(R), ImuXen(R) and related liposomal
technologies. In addition, the Company is working with a range of partners in
order to assist them both in developing new products as well as optimising the
performance and extending the patent-life of their current drugs.



The Company's current R&D portfolio includes 12 programmes across a range of
therapeutics and vaccines, the majority of which are being co-developed with the
Serum Institute of India Limited.



In addition, the Company's technologies are being evaluated for the enhanced
delivery of new and second-generation biotherapeutics by five of the world's
leading biopharmaceutical companies, Baxter, Genentech, Amgen, Genzyme and Teva.


CHAIRMAN'S STATEMENT (continued)


Relationship with Serum Institute of India Limited ('SIIL')

A strong relationship has been built with SIIL, India's largest biotechnology
company and one of the world's largest vaccine companies. To date, this
collaboration covers the development of some 10 product candidates, including
three protein drugs, four vaccines and three liposomal formulations of oncology
drug candidates. SIIL has exclusive rights to these candidates in the developing
world and, together with the Company, jointly owns rights to certain candidates
in the developed world.


In August 2006, SIIL's commitment to its strategic collaboration with the
Company was further enhanced when it subscribed for 10 million new ordinary
shares in the Company at 26 pence per share for a total of £2.6 million, thereby
increasing its holding to 15.28%. Concomitant with this placing, the Company
entered into a warrant agreement with SIIL pursuant to which SIIL is entitled to
subscribe for a further 2.7 million ordinary shares in the Company at a price of
35 pence per ordinary share, which would, if fully exercised, increase its
holding to approximately 17%.


In August 2006, SIIL and the Company entered into a Development and
Manufacturing Agreement under which SIIL has agreed to provide the Company with
a unique source of PSA in accordance with Good Manufacturing Practice standards.
PSA is a key component of the Company's PolyXen(R) protein drug delivery
technology. This agreement represents a substantial milestone in the Company's
development as it will facilitate the Company's ongoing development programmes
and provide a continuous supply of PSA to the Company's current and future
collaborative partners.


Bio-Entrepreneur of the Year Award

In July 2006, the Company was honoured with a Bio-Entrepreneur of the Year award
from UK Trade & Investment in recognition of its development efforts in India
with SIIL.


Outlook

The Board is satisfied with the progress made in the period under review and
believes that the Company is well positioned to deliver significant progress in
the upcoming months. Continuing positive results from pre-clinical trials will
enable the Company to initiate clinical trials using our innovative drug and
vaccine delivery technologies for a number of candidates currently under
development. The continuing commitment of our strategic partner, SIIL, will
enhance the development of additional vaccine, biotherapeutic and oncology drugs
in order to develop a balanced and sustainable clinical pipeline for the future.


Finally, I wish to thank the Company's management and staff whose efforts
continue to sustain the Company's progress towards achieving its short and
longer term commercial objectives.


Brian Richards, CBE
Non-Executive Chairman



London: 28th September 2006


CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE SIX MONTHS TO 30TH JUNE 2006
Unaudited Interim Results for the six months to 30th June 2006





                                   Six months     Six months           Year to
                                  to 30/06/06    to 30/06/05          31/12/05
                                    Unaudited      Unaudited           Audited
                                       £              £                  £
                                    Acquired
                                    Operations

TURNOVER                             298,880               -                 -
                                 ____________    ____________      ____________

Research and development             546,346               -                 -
Administrative expenses              408,063          14,547           114,201
                                 ____________    ____________      ____________

                                     954,409          14,547           114,201
                                 ____________    ____________      ____________

Non-cash items:
Equity-settled share options         230,806               -                 -
Amortisation of goodwill             164,141               -                 -
                                 ____________    ____________      ____________

                                     394,947               -                 -
                                 ____________    ___________       ____________

Total operating expenses           1,349,356          14,547           114,201
                                 ____________    ___________       ____________

OPERATING LOSS                    (1,050,476)        (14,547)         (114,201)

Interest receivable                   40,274              50             2,258

Interest payable                      (9,368)              -                 -
                                 ____________    ___________       ____________

LOSS ON ORDINARY ACTIVITIES
BEFORE TAXATION                   (1,019,570)        (14,497)          (111,943)

Taxation credit                       20,000               -                  -
                                ____________     ___________       ____________

LOSS ON ORDINARY ACTIVITIES
AFTER TAXATION                      (999,570)        (14,497)          (111,943)

                                ============     ===========       ============

Loss per ordinary share  - basic    (1.05)p          (0.44)p           (2.06)p

                                ============     ===========       ============

                  fully diluted     (0.97)p          (0.44)p           (2.06)p

                                ===========      ===========       ============


The group has no recognised gains or losses other than the results for each
period as set out above.

CONSOLIDATED BALANCE SHEET AS AT 30TH JUNE 2006
Unaudited Interim Results for the six months to 30th June 2006



                                        As at            As at           As at
                                     30/06/06         30/06/05        31/12/05
                                    Unaudited        Unaudited         Audited
                                        £                £                £


FIXED ASSETS
Intangible   - Goodwill             6,401,511                -               -
             - Development costs    3,032,719                -               -
                                  ____________       ____________   ___________
                                                                  
                                    9,434,230                -               -

Tangible                              115,484                -               -
                                  ____________      _____________   ___________

                                    9,549,714                -               -
                                  ____________      _____________   ___________

CURRENT ASSETS
Debtors                               186,599            9,686          82,936
Cash at bank and in hand            2,006,815            1,312         142,613
                                 ____________       _____________   ___________

                                    2,193,414           10,998         225,549

CREDITORS: Amounts falling
due within one year                  (345,930)          (9,498)       (121,495)
                                 ____________       _____________   ___________

NET CURRENT ASSETS                  1,847,484            1,500         104,054
                                 ____________       _____________   ___________


TOTAL ASSETS LESS CURRENT
LIABILITIES                        11,397,198            1,500         104,054
                                 =============      =============   ===========

CAPITAL AND RESERVES

Called up share capital             2,154,233        1,650,000       1,675,000
Share premium account              18,893,840        7,136,165       7,311,165
Profit and loss account            (9,650,875)      (8,784,665)     (8,882,111)
                                ______________     ____________    ____________

SHAREHOLDERS' FUNDS                11,397,198            1,500         104,054
                                ==============     ============    ============



Net assets per share - basic        10.94p               0.05p         1.25p
                                    ======               =====         =====
             - fully diluted        10.06p               0.05p         1.25p
                                    ======               =====         =====




CONSOLIDATED CASH FLOW STATEMENT FOR THE SIX MONTHS TO 30TH JUNE 2006
Unaudited Interim Results for the six months to 30th June 2006



                                   Six months          Six months      Year to
                                  to 30/06/06         to 30/06/05     31/12/05
                                    Unaudited           Unaudited      Audited
                                       £                   £              £


Net cash outflow from 
  operating activities            (1,156,578)            (14,541)      (75,448)
                                  __________            __________    _________


Returns on investments and 
  servicing of finance
Bank interest received                40,274                  50         2,258
Bank interest paid                    (9,368)                  -             -
                                  __________            __________    _________

Net cash inflow from returns on 
  investments and servicing 
    of finance                        30,906                  50         2,258
                                  __________            __________    _________

Taxation received                     47,029                   -             -
                                  __________            __________    _________

Capital expenditure
Purchase of tangible fixed assets   (106,955)                  -             -
                                  __________            __________   __________

Net cash outflow from capital 
  expenditure                       (106,955)                  -             -
                                  __________            __________   __________

Acquisitions and disposals
Purchase of subsidiary               (45,560)                  -             -
Less: cash balance acquired 
  with subsidiary                     33,452                   -             -
                                  __________            __________    _________

Net cash outflow for acquisitions 
  and disposals                      (12,108)                  -             -
                                  __________            __________    _________


Net cash flow before financing    (1,197,706)            (14,491)      (73,190)

Financing
Issue of equity shares             3,061,908              14,872       214,872
                                 ____________          ____________  __________


Increase in cash in the period     1,864,202                 381       141,682

                                 ===========           ===========   ==========


NOTES TO THE FINANCIAL STATEMENTS FOR THE SIX MONTHS TO 30TH JUNE 2006


1.   The interim financial statements for the six months ended 30th June 2006
are unaudited and were approved by the directors of the Company on 28th
September 2006. The financial information set out above does not constitute
statutory accounts within the meaning of Section 240 of the Companies Act 1985.
The information given as comparative figures for the year ended 31st December
2005 was extracted from the Company's audited statutory accounts for that
financial year.


2.  ACCOUNTING POLICIES


The principal accounting policies of the Company have remained unchanged from
those set out in the Company's 2005 accounts, except that the following
additional accounting policies have been adopted following the acquisition of
Lipoxen Technologies Limited.


Basis of consolidation


The group financial statements incorporate the financial statements of the
parent company and all of its subsidiary undertakings. The results of subsidiary
undertakings acquired or disposed of during the year are included in the group
financial statements from, or up to, the date of acquisition or disposal.


Turnover


The turnover shown in the profit and loss account represents the value of
services provided during the year, exclusive of Value Added Tax. For contracts
in progress at the balance sheet date, turnover is recognised based on the
degree of completion of the project and the agreed fee for the total project.


Intangible fixed assets


Intangible fixed assets acquired are capitalised at cost. Intangible assets
(excluding development costs) created within the business are not capitalised
and such expenditure is charged in the profit and loss account in the year in
which it is incurred.


Goodwill


Goodwill, being the difference between the consideration and the attributable
fair values of the net assets of the undertaking acquired, is amortised over its
useful economic life, which is presently estimated to be 20 years. Provision is
made for any impairment.


Tangible fixed assets and depreciation


Depreciation is provided to write off the cost less the estimated residual value
of tangible fixed assets on a straight line basis over their estimated useful
economic lives as follows:


Laboratory equipment  -  4 years
Plant and machinery   -  4 years
Computer equipment    -  4 years


Operating lease agreements


Operating lease rentals are charged in the profit and loss account on a straight
line basis over the lease term.


Research and development costs


Research and development costs are written off to the profit and loss account as
incurred, except that development expenditure incurred on an individual project
is carried forward when its future recoverability can be reasonably regarded as
assured. Any expenditure carried forward is amortised in line with the expected
future sales from the related project.


NOTES TO THE FINANCIAL STATEMENTS FOR THE SIX MONTHS TO 30TH JUNE 2006
(continued)


2. ACCOUNTING POLICIES (continued)


Foreign currencies


Assets and liabilities in foreign currencies are translated into sterling at the
rate ruling at the balance sheet date. Transactions in foreign currencies are
translated into sterling at the rate of exchange ruling at the date of the
transaction. Exchange differences are taken into account in arriving at the
operating profit.


Pension costs


Company contributions to personal pension schemes are written off to the profit
and loss account as incurred.


Share based payments


The Company has adopted FRS 20 'Share based payments' in respect of share
options granted to employees and also certain supplier contracts under which
services are provided as consideration for the issue of equity instruments.


Share options granted to employees since 7th November 2002 are valued at the
date of grant using an appropriate option pricing model and are charged to
operating profit over the vesting period of the option. This has given rise to a
charge to profits of £230,806 in the current period but has had no impact on
prior periods.


In October 2005, Lipoxen Technologies Limited entered into an agreement with FDS
Pharma under which 15,000,000 shares in Lipoxen Technologies Limited were
allotted in consideration for the provision by FDS Pharma of manufacturing and
clinical development services. The services to be provided by FDS Pharma have
now been valued at the fair value of the equity instruments issued of
£3,032,719. This amount has been included within intangible fixed assets as
development costs. No amortisation has been provided in the period as FDS Pharma
have not completed the development of the technology.


3. MOVEMENT IN SHAREHOLDERS' FUNDS


                                      Six months     Six months     Year to
                                     to 30/06/06    to 30/06/05    31/12/05
                                       Unaudited      Unaudited     Audited
                                            £              £           £

Opening shareholders' funds              104,054          9,938       9,938
Loss for period                         (999,570)       (14,497)   (111,943)
Issue of ordinary share capital       12,061,908         14,872     214,872
Decrease in shares to be issued                -         (8,813)     (8,813)
Share based payments                     230,806              -           -
                                    ______________    ___________ ___________

                                      11,397,198          1,500     104,054
                                    =============     =========== ===========


NOTES TO THE FINANCIAL STATEMENTS FOR THE SIX MONTHS TO 30TH JUNE 2006
(continued)


4. RECONCILIATION OF OPERATING LOSS TO NET CASH OUTFLOW FROM OPERATING ACTIVITIES




                                      Six months     Six months     Year to
                                     to 30/06/06    to 30/06/05    31/12/05
                                       Unaudited      Unaudited     Audited
                                            £              £           £

Operating loss                        (1,050,476)       (14,547)   (114,201)
Amortisation of goodwill                 164,141              -           -
Depreciation                              16,667              -           -
Equity-settled share options             230,806              -           -
Decrease/(increase) in debtors           113,498            314     (72,936)
(Decrease)/increase in creditors        (631,214)          (308)    111,689
                                      ____________     ___________ ___________

Net cash outflow from operating 
  activities                          (1,156,578)       (14,541)    (75,448)
                                      ===========      =========== ===========


5. RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT


                                      Six months     Six months     Year to
                                     to 30/06/06    to 30/06/05    31/12/05
                                       Unaudited      Unaudited     Audited
                                            £              £           £

Opening net funds                        142,613            931         931

Increase in cash in period             1,864,202            381     141,682
                                     _____________   ___________  ___________

Closing net funds                      2,006,815          1,312     142,613
                                     =============   ===========  ===========


NOTES TO THE FINANCIAL STATEMENTS FOR THE SIX MONTHS TO 30TH JUNE 2006
(continued)


6. ACQUISITION OF SUBSIDIARY



On 16th January 2006, the Company acquired Lipoxen Technologies Limited
for a consideration principally satisfied by the issue of 66,666,665 new
ordinary shares of 0.5 pence each to the vendors valued at the placing price of
13.5 pence per share.



Net assets acquired:
                                              £
Goodwill                                  6,565,652
Development expenditure                   3,032,719
Tangible fixed assets                        25,196
Debtors                                     244,190
Bank and cash                                33,452
Creditors                                  (855,649)
                                        ____________

                                          9,045,560
                                        ============

Satisfied by:

Equity shares issued                      9,000,000
Costs of acquisition                         45,560
                                        ____________

                                          9,045,560
                                        ============ 


7. EARNINGS PER SHARE


                                        Six months     Six months     Year to
                                       to 30/06/06    to 30/06/05    31/12/05
                                         Unaudited      Unaudited     Audited
                                              £              £           £
Weighted average number of
ordinary shares in issue                95,211,159      3,277,323   5,440,743
                                     ______________   ____________  ____________

Dilutive effect of the weighted
average number of share options
in the period                            7,588,417              -           -
                                    ______________    ____________  ____________

Loss after taxation                       (999,570)       (14,497)    111,943)
                                    ______________    ____________  ____________

Basic loss per share - pence               (1.05)p         (0.44)p    (2.06)p
 
                                           ======          ======      ======

Fully diluted loss per share - pence       (0.97)p         (0.44)p    (2.06)p

                                           ======          ======      ======


NOTES TO THE FINANCIAL STATEMENTS FOR THE SIX MONTHS TO 30TH JUNE 2006
(continued)


8.     NET ASSET VALUE PER SHARE


The 'basic' net asset value per share figures are calculated on the
basis of the net assets attributable to equity shareholders divided by the
number of ordinary shares in issue at the relevant dates.


The 'fully diluted' net assets per share figures are calculated by
adjusting the number of ordinary shares on the assumption of the exercise in
full of all options and warrant instruments extant as at the relevant dates
where the exercise price of any such instrument is less than the 'basic' net
asset value per share.


9. EVENTS AFTER THE BALANCE SHEET DATE


In August 2006, the Company raised £2,600,000 by placing 10,000,000 new
ordinary shares in the Company at a subscription price of 26p per share, and
entered into a warrant agreement under which the warrant holder has the right to
subscribe for up to 2,700,000 ordinary shares in the Company for a period of two
years from 3rd August 2006 at a subscription price of 35 pence per share.


10.  Copies of the interim report are available to the public free of charge
from the Company at London Bioscience Innovation Centre, 2 Royal College Street,
London, NW1 0NH during normal office hours, Saturdays and Sundays excepted, for
14 days from today.





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