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Lipoxen PLC (XEN)

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Wednesday 24 August, 2011

Lipoxen PLC

Half Yearly Report

RNS Number : 9150M
Lipoxen PLC
24 August 2011
 



Lipoxen plc

('Lipoxen' or the 'Company')

 

Interim results for 6 months to 30 June 2011

 

Lipoxen (AIM: LPX.L), the bio-pharmaceutical company specialising in the development of high-value differentiated biologic drugs and vaccines, announces its financial results for the six months ended 30 June 2011.

 

Financial Highlights

-      Revenue of £0.64m (2010: £0.76m)

-      Losses before tax reduced to £1.28m (2010: £1.54m)

-      Loss per share down to 0.72p (2010: 0.94p)

-      Cash balances at 30 June 2011 of £0.32m (2010: £0.95m)

 

These results must be read in conjunction with a transformational set of development proposals ("the Proposals") that were announced post-period end and which will be put to shareholders at a General Meeting to be held on 1 September 2011. Highlights of the Proposals are given below with more detail in the Chairman's statement. Full details of the Proposals can be found in the Shareholder Circular already sent to shareholders and can be downloaded from the Company's website: www.lipoxen.com

 

The Proposals

-      Funds of £14.4m (before expenses) to be raised via a Placing with SynBio LLC, a subscription for shares by Serum Institute of India Limited ("SIIL") and an Open Offer to existing shareholders at 11 pence per share being a premium of  more than 44% over the mid-market closing price on 23 August 2011

-      Acquisition of SymbioTec GmbH for £8.8m settled entirely in shares (at 11 pence per share). This is the acquisition of a complementary natural platform technology with two lead product candidates focused on orphan drug applications.  The platform has the potential to be applied across a broad spectrum of cancer therapies.

-      Co-development agreement with SynBio to license into Russia six product candidates

-      Master Agreement to consolidate and refine Lipoxen's commercial arrangements with SIIL

-      Change of name to Xenetic Biosciences plc.

 

Commenting on the Proposals, M. Scott Maguire, CEO of Lipoxen, said:

 

""We are pleased that in the current market environment we have secured the Company's capital needs for at least two years and further delighted that the Placing will be conducted at a substantial premium. The Board is confident that the Proposals being presented to shareholders will be utterly transformational for Lipoxen as they will reduce our dependence on third parties, allow us to control our destiny through proprietary drug development, allow the acquisition of complementary natural platform technologies, and new orphan drug candidates with near-term commercialisation potential.  Given the transformational nature of the Proposals, the Board has determined that a change in the Company's name is appropriate. Xenetic Biosciences will allow greater strategic flexibility by lessening the focus on liposomes, our secondary platform technology."

 

Enquiries:

 

Lipoxen plc

+44 (0)20 7389 5015

M. Scott Maguire, Chief Executive Officer




Singer Capital Markets (NOMAD & Broker)

+44 (0)20 3205 7500

Jeff Keating / Claes Spång




Walbrook PR

+44 (0)20 7933 8780 

Paul McManus

paul.mcmanus@walbrookpr.com

Paul Cornelius

paul.cornelius@walbrookir.com

CHAIRMAN'S STATEMENT          

 

It has only been around 6 weeks since the company's Annual General Meeting (28th June) and barely over 2 months since we published our full year results for FY2010 on 3rd June 2011. Consequently, I believe that it is appropriate that my report made alongside these Interim results for the 6 months to 30th June 2011 can be briefer than usual, the more so as the Company was absolutely delighted on 4th August to announce to shareholders and to the market a transformational set of development proposals ("the Proposals") to be put to a General Meeting of the company being held on 1st September. The only sadness was that Lipoxen made possibly the most positive announcement in its history on the day that saw what continues to look like the genesis of another period of uncertainty in the global financial markets.

 

That said, the nature of this Company's business is one of longer term investment in the development and commercialisation of a substantial intellectual property portfolio, and shareholders should be reassured that short term market instabilities bear very much less on Lipoxen than on enterprises in other sectors;  ultimately shareholder value will be generated from clinical success across our product portfolio and it is upon that target that the Board and executive management team are closely focussed.

 

The key issue for any biotech company is the quantum of available capital to sustain its product development efforts, and the proposed share placing and subscription, if approved by shareholders, will serve to underpin operations for at least 2 years while also funding early stage EMA/FDA clinical trials on at least three product candidates.

 

I will therefore largely limit my report this time to a reiteration of the Proposals being put to shareholders on 1st September:

 

·     Strategic Investment - Placing with SynBio LLC ("SynBio") of 110.8 million ordinary shares in the capital of the Company at an issue price of 11 pence per share, to raise £12.19 million (before expenses). SynBio will also be granted five-year warrants over shares in the capital of the Company representing up to 11,080,000 ordinary shares at a price of 33 pence per share, representing a premium of 256% over the closing mid-market price on 3rd August 2011.

 

·     Placing at a substantial premium- The Placing is being carried out at a premium of 18.9% over the closing mid-market price of an ordinary share on 3rd August 2011.

 

·     Sovereign fund major investment partner - SynBio LLC is a newly-formed Russian company whose majority shareholder will be the multi-billion dollar Russian state-owned nanotechnology investment company, Russian Corporation of Nanotechnologies ("Rusnano") (www.Rusnano.com).

 

·     Co-Development Agreement- Lipoxen will enter into a comprehensive Co-Development Agreement with SynBio. Through this agreement Lipoxen will license into Russia six product candidates to efficiently exploit its technologies and establish human proof of concept in advance of initiating EMA/FDA clinical trials. The Directors believe that this strategy will mitigate the technical and commercial risks of future drug development.

 

·     Acquisition - The Company intends to acquire the entire issued share capital of SymbioTec GmbH ("SymbioTec") for a total consideration of £8.8 million, which is to be satisfied by the issue of 80 million new ordinary shares in the capital of the Company at the Placing Price of 11 pence per share.

 

·     Orphan drug candidates and new technology platform - SymbioTec is a company registered in Germany and has a portfolio of patents around a naturally occurring platform technology, histone, which has potential application across a broad spectrum of cancers. SymbioTec is in clinical development for its patent-protected lead drug candidate, OncoHist™, a treatment for acute lymphocytic leukaemia ("ALL") and acute myeloid leukaemia ("AML"), which has been granted orphan drug status by both the FDA and the EMA. SymbioTec's license partner is currently conducting a Phase IIb clinical trial in Russia involving up to 120 patients in late stage relapsed or resistant AML. The Company hopes that Phase IIb clinical trials will be completed by the end of 2013. Upon completion of Phase IIb clinical trials, Lipoxen's license partner plans to file for market launch in Russia and the former CIS. 

 

·     Agreement with Serum Institute of India Limited ("SIIL") - Lipoxen has entered into a Master Agreement to consolidate and refine the Company's commercial arrangements with SIIL. This will include the surrender back to the Company of the development rights of up to 14 drug candidates, and uplift the Company's economic interests in ErepoXen®.

 

·     New share subscription by SIIL - SIIL is subscribing for 2.5 million new ordinary shares in the capital of the Company at an issue price of 11 pence per share and will be granted two-year warrants over the shares in the capital of the Company representing up to 7.5 million shares at an average exercise price of 20 pence per share.

 

·     Open offer - Following completion of the Placing and Acquisition, the Company is proposing to raise up to approximately £1.95 million (before expenses) through a proposed Open Offer to existing shareholders. Further details of the Open Offer, detailed timetable and an Application Form will be posted to Qualifying Shareholders in due course.

 

·     Substantial funding for future clinical and operational development - Funds from the Placing, SIIL Subscription and Open Offer are expected to raise up to £14.4 million (before expenses) and are expected to be sufficient to fund the Company's drug development initiatives and operational requirements for two years following implementation of the Proposals.

 

·     Change of Name - The Directors believe that the Proposals represent a transformational step forward for Lipoxen and, as such, the Company proposes to change its name to "Xenetic Biosciences plc". 

 

·     Notice of General Meeting - Lipoxen will hold a General Meeting at the offices of Pinsent Masons LLP, 30 Crown Place, London, EC2A 4ES at 11:00 a.m. on Thursday 1st September 2011.

 

Previous statements have expressed Management's active pursuit of opportunities that have the over-arching objectives of:

 

(a) reducing Lipoxen's dependence on third parties for primary clinical development efforts;

(b) allowing the Company to control the clinical development of its proprietary product pipeline;

(c) acquiring complementary natural platform technologies, and,

(d) acquiring new product candidates with near-term commercialisation potential.

 

The Board is therefore delighted that the Management team has been able to put together these Proposals as, in a single series of deals, all of these objectives can be seen to be satisfied as to:

 

Availability of new equity capital

Up to £14.4 million (before expenses) to directly control the funding of clinical trials of three of the Company's proprietary product candidates while also sustaining current levels of effort in our own laboratories.

 

The funds being raised are a testament to the support from collaborative partners, be they existing - in the shape of SIIL with its long-standing relationship with the Company - or from SynBio as a new partner, itself funded by the leading Russian sovereign fund, Rusnano, that group's involvement lying at the heart of Russia's unambiguously stated intention to develop a vibrant home-grown nanotechnology sector, in this case in pharmaceutical product development, manufacture and distribution.

 

Acquisition of SymbioTec GmbH

This brings two EMA/FDA-recognised orphan drug candidates (OncoHist™) into Lipoxen's proprietary product portfolio which the Company will be able to take into EMA/FDA clinical trials using its own capital.

 

SymbioTec's underlying histone technology sits alongside the Company's extant PolyXen® and ImuXen® IP portfolio as a naturally-occurring platform with extended clinical application potential.

 

Concomitant product development

The Co-Development agreement with SynBio further extends the principle first established in 2009 with Pharmsynthez in St Petersburg by licensing Lipoxen's technology to a second development partner able to propel multiple products through pre-clinical and Phase I clinical trials on accelerated timelines thereby demonstrating human proof of concept as the basis on which Lipoxen can initiate clinical trials in Europe and/or the USA.

 

This strategy de-risks the Company's drug development programme and is designed to be a substantial aid to making its capital go further, faster and to greater effect in creating shareholder value in a business that is otherwise characterised by high capital risk and extended timelines.

 

The Board was, therefore, delighted to announce these proposals to shareholders on 4th August 2011 as it believes that this series of transformational transactions will afford the Company independence as a specialty drug developer with a clinical development pipeline in not only potentially blockbuster indications (with their associated costs and timelines) but also in the orphan drug sector where our technologies can be brought to bear more quickly, at lesser cost and with greater short term market potential.

 

Financial Review

The financial results in the period under review were:


6 months to

30/06/11

6 months to 30/06/10

12 months to 31/12/10


Unaudited

Unaudited

Audited


£'000

£'000

£'000

Turnover

64

76

1,566

Total pre-tax losses for period

1,283

1,539

1,934

Non-cash component of total pre-tax loss

116

232

755

Net cash at end of period

320

946

851

Net asset value at the end of the period

712

1,989

1,987

 

Loss per share - basic and fully diluted

0.72

0.94

1.13

Net asset value per share - basic

0.40

1.12

1.12

Net asset value per share - fully diluted

0.40

1.11

1.11

Non-cash component of total pre-tax losses:

£'000

£'000

£'000

Depreciation of owned assets

107

124

253

Share option expense - equity settled

9

108

135

Share based payment - Baxter warrants

0

0

367


---------

--------

----------

Total principal non-cash items

116

232

755


=======

======

=======

Research and development - cash settled


Note (1)

522

751

1,467

Other expenses - cash settled

Note (2)

706

633

1,280



----------

----------

----------

Total expenses - cash settled


1,228

1,384

2,747

Total non-cash items



116

232

755




----------

----------

----------

Total expenses


1,344

1,616

3,502


=======

=======

=======




%

%

%

Research and development - cash settled



42.5

54.3

53.4

Other expenses - cash settled


57.5

45.7

46.6



---------

----------

---------

Total expenses - cash settled


100.0

100.0

100.0


=======

=======

=======

 

NOTES

1.     The year-on-year reduction reflects, inter alia, the full benefits derived from the FY2010 restructuring programme.

2.     The increase compared to the comparable period last year is driven mainly from, (a), adverse foreign exchange costs, and, (b), an increase in PR costs arising from the production costs of the Company's animated DVD. 

 



 

The Shareholder Circular referred to above is deemed to be included herein by reference, and shareholders are invited to fully familiarise themselves with its contents.  While a copy of the Circular has already been sent to all shareholders of record as of close of business on 3rd August 2011 (and copies will sent to all those who have come on the register in the meantime), copies can also be downloaded from the Company's website at www.lipoxen.com, or a hard copy obtained either by telephoning +44 (0)20 7389 5015 or by making an email request to info@lipoxen.com.

 

The upcoming period for the Company promises to be truly transformational and so I look forward to welcoming as many shareholders as possible to the General Meeting in order to share with them the full import of the Proposals and the resulting shareholder resolutions being put before them.

 

Brian Richards

Non-Executive Chairman

London:   24th August 2011

 


INDEPENDENT REVIEW REPORT TO LIPOXEN PLC

 

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30th June 2011 which comprises the condensed consolidated statement of comprehensive income, the condensed consolidated balance sheet, the condensed consolidated cash flow statement, the condensed consolidated statement of changes in net equity and the related notes.  We have read the other information contained in the half-yearly financial report and have considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

 

This report is made solely to the Company in accordance with the terms of our engagement. Our review has been undertaken so that we might state to the Company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company for our review work, for this report, or for the conclusions we have reached.

 

Directors' responsibilities

 

The half-yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half-yearly financial report in accordance with the AIM Rules of the London Stock Exchange.

 

As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with International Financial Reporting Standards ("IFRSs") as adopted by the European Union.  The condensed set of financial statements included in this half-yearly report has been prepared in accordance with IAS 34, Interim Financial Reporting ("IAS 34"), as adopted by the European Union.

 

Our responsibility

 

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

 

Scope of review

 

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity ("ISRE  2410") issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

 

Conclusion

 

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30th June 2011 is not prepared, in all material respects, in accordance with the AIM Rules of the London Stock Exchange and IAS 34 as adopted by the European Union.

 

Emphasis of matter - going concern

 

In forming our conclusion on the condensed set of financial statements we have considered the adequacy of the disclosures in Note 2 Fundamental accounting concept - going concern ("Note 2"). This notes that in order to maintain the level of scientific effort required to develop the Group's technologies and to commercialise them to such degree as will be necessary to become a cash-generative business, the Group will need to access new cash in addition to that available to it at the period end; such new cash will either be generated internally from, as yet, non-contractual feasibility and licensing sources and/or from the raising of new capital.

 

These conditions, along with the other matters explained in Note 2 to the financial statements, indicate the existence of a material uncertainty which may cast significant doubt about the Group's ability to continue as a going concern.  However, on 4th August 2011 (and as fully set out in the Shareholder Circular issued by the Company on that date) the Company entered into a set of legally binding contractual arrangements which at legal completion, in the opinion of the directors, should result in the injection of a material sum of new equity capital into the Company.

 

Consequently,  the condensed set of financial statements do not reflect any adjustments that would be required to be made if they were to be prepared on a basis other than the going concern basis.

 

 

 

 

PKF (UK) LLP

London, UK

24th August 2011

 

 

 

 


CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE SIX MONTHS ENDED 30th JUNE 2011            

                                                                                                                                                                                                                   

                                                                                                                                                                                                                               



6 months to 30/06/11

6 months to 30/06/10

12 months to 31/12/10


Note

Unaudited

Unaudited

Audited    



£

£

£    






REVENUE

4

64,411

76,011

1,566,261    



---------------------

---------------------

----------------------   

Cost of goods sold

13,735

-

-    

Research and development expenditure

522,455

750,766

1,466,887    

Administrative expenses

808,062

865,566

2,035,412    



---------------------

---------------------

----------------------   

Total


1,344,252

1,616,332

3,502,299    



---------------------

---------------------

----------------------    

OPERATING LOSS


(1,279,841)

(1,540,321)

(1,936,038)    





Finance income

885

1,338

1,761    

Finance costs

(4,376)

-

-    


---------------------

---------------------

----------------------  

LOSS BEFORE TAXATION

(1,283,332)

(1,538,983)

(1,934,277)    





Income tax credit


-

-

-    








---------------------

---------------------

----------------------    

LOSS AND TOTAL COMPREHENSIVE INCOME FOR THE PERIOD ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT


(1,283,332)

(1,538,983)

(1,934,277)    



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

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

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





Loss per share pence - basic and fully diluted

6

0.72p

0.94p

1.13p    



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

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

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

 

 

                                                                                               


CONDENSED CONSOLIDATED BALANCE SHEET AS AT 30th JUNE 2011

 

 

 

 



As at

As at

As at    



30/06/11

30/06/10

        31/12/10


Note

Unaudited

Unaudited

Audited    



£

£

£    





NON-CURRENT ASSETS




Property, plant and equipment


153,679

367,536

256,208    

Goodwill


1,061,476

1,061,476

1,061,476    



---------------------

---------------------

---------------------     



1,215,155

1,429,012

1,317,684    



---------------------

---------------------

---------------------     

CURRENT ASSETS





Inventories


13,902

-

-    

Trade and other receivables


182,955

205,025

344,027    

Cash and cash equivalents


319,935

946,213

850,804    



---------------------

---------------------

---------------------   



516,792

1,151,238

1,194,831    

CURRENT LIABILITIES





Trade and other payables


(1,019,677)

(591,580)

(525,700)    



---------------------

---------------------

---------------------   

NET CURRENT (LIABILITIES)/ASSETS


(502,885)

559,658

669,131    



---------------------

---------------------

---------------------     

NET ASSETS


712,270

1,988,670

1,986,815    



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

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

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






EQUITY ATTRIBUTABLE TO EQUITY





HOLDERS OF THE PARENT





Share capital


2,519,661

2,519,661

2,519,661    

Share premium account


26,521,349

26,521,349

26,521,349    

JSOP shares


(405,694)

(405,694)

(405,694)    

Reverse acquisition reserve


(8,252,127)

(8,252,127)

(8,252,127)    

Accumulated losses


(19,670,919)

(18,394,519)

(18,396,374)    



---------------------

---------------------

---------------------    

TOTAL EQUITY


712,270

1,988,670

1,986,815    



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

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

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






Net assets per share - basic

7

0.40p

1.12p

1.12p    



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

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

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






Net assets per share - fully diluted

7

0.40p

1.11p

1.11p    



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

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

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


CONDENSED CONSOLIDATED CASH FLOW STATEMENT

FOR THE SIX MONTHS TO 30th JUNE 2011

 

 

 



6 months to 30/06/11

6 months to 30/06/10

12 months to 31/12/10


Note 

Unaudited

Unaudited

Audited



£

£

£






Cash flows from operating activities

5

(931,031)

(1,233,629)

(1,313,416)

Interest received


885

1,338

1,761

Interest paid


(4,376)

-

-



---------------------

---------------------

---------------------

Net cash outflow from operating activities 


(934,522)

(1,232,291)

(1,311,655)



---------------------

---------------------

---------------------

Cash flows from investing activities





Purchase of property, plant and equipment


(4,960)

(11,516)

(29,161)

Sale of property, plant and equipment


-

-

1,600

Loan to related party


(90,838)

-

-



---------------------

---------------------

---------------------

Net cash outflow from investing activities


(95,798)

(11,516)

(27,561)



---------------------

---------------------

---------------------

Cash flows from financing activities





Issue of equity share capital


-

1,172,130

1,172,130

Loan from related party


499,451

-

-



---------------------

---------------------

---------------------

Net cash inflow from financing activities


499,451

1,172,130

1,172,130



---------------------

---------------------

---------------------






Net decrease in cash and cash equivalents 


(530,869)

(71,677)

(167,086)






Cash and cash equivalents at beginning of year


850,804

1,017,890

1,017,890



---------------------

---------------------

---------------------

Cash and cash equivalents at end of year


319,935

946,213

850,804



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

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

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





 

 


CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN NET EQUITY

FOR THE SIX MONTHS TO 30th JUNE 2011

 


 

Share capital

 

Share premium

 

JSOP shares

Reverse acquisition reserve

 

Accumulated losses

 

 

Total


£

£

£

£

£

£








At 1st January 2010

2,405,486

25,057,700

-

(8,252,127)

(16,963,336)

2,247,723

Loss and total comprehensive income for six months ended 30th June 2010

 

-

 

-

 

-

 

-

 

(1,538,983)

 

(1,538,983)

Shares issued for cash

87,583

1,138,576

-

-

-

1,226,159

Shares issued under JSOP

26,592

385,590

-

-

-

412,182

Own shares held by JSOP

-

-

(405,694)

-

-

(405,694)

Share issue expenses

-

(60,517)

-

-

-

(60,517)

Share-based payments

-

-

-

-

107,800

107,800


---------------

-----------------

-----------------

-------------------

---------------------

-----------------

At 30th June 2010

2,519,661

26,521,349

(405,694)

(8,252,127)

(18,394,519)

1,988,670

Loss and total comprehensive income for six months ended 31st December 2010

 

-

 

-

 

-

 

-

 

(395,294)

 

(395,294)

Share-based payments

-

-

-

-

393,439

393,439


---------------

-----------------

-----------------

-------------------

---------------------

-----------------

At 31st December 2010

2,519,661

26,521,349

(405,694)

(8,252,127)

(18,396,374)

1,986,815

Loss and total comprehensive income for six months ended 30th June 2011

 

-

 

-

 

-

 

-

 

(1,283,332)

 

(1,283,332)

Share-based payments

-

-

-

-

8,787

8,787


---------------

-----------------

-----------------

-------------------

---------------------

-----------------

At 30th June 2011

2,519,661

26,521,349

(405,694)

(8,252,127)

(19,670,919)

712,270


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

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

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

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

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

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

 

               


NOTES TO THE CONDENSED FINANCIAL STATEMENTS

FOR THE SIX MONTHS TO 30th JUNE 2011

 

1. GENERAL INFORMATION

 

The interim financial statements for the six months ended 30th June 2011 are unaudited and were approved by the Directors of the Company on 24th August 2011. The condensed financial information set out above does not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006. The comparative figures for the year ended 31st December 2010 were derived from the statutory accounts for that year which have been delivered to the Registrar of Companies. Those accounts received an unqualified audit report, which included a reference by way of emphasis without modifying the report to the preparation of the accounts on the going concern basis of accounting. The audit report contained no statements under sections 498(2) or 498(3) (accounting records or returns inadequate, accounts not agreeing with records and returns, or failure to obtain necessary information and explanations) of the Companies Act 2006.

 

The financial information has been prepared in accordance with the accounting policies set out below. The accounts are drawn up in compliance with IAS 34 and the AIM Rules of the London Stock Exchange.  The annual financial statements are prepared in accordance with IFRSs as adopted by the European Union and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS and in accordance with the AIM Rules of the London Stock Exchange.

       

2. ACCOUNTING POLICIES

 

The principal accounting policies of the Group have remained unchanged from those set out in the Group's 2010 financial statements.

 

Fundamental accounting concept - going concern

 

As an early-stage development life sciences business, the Group has incurred operating losses in the period under review, notwithstanding that substantial clinical and technical progress was also made in the continuing successful development of its proprietary technologies; consequently, the Group was a net consumer of cash.

 

In order to maintain the level of scientific effort required to develop the Group's technologies and to commercialise them to such degree as will be necessary to become a cash-generative business, the Group will need to access new cash in addition to that available to it at the period end; such new cash will either be generated internally from, as yet, non-contractual feasibility and licensing sources and/or from the raising of new capital.

 

The Directors have prepared a financial forecast for the period through to 31st December 2012. The forecast includes assumptions that the Group will generate cash inflows in this period from:

 

(a) the ongoing roll-out and licensing of the Group's technologies with its existing collaborative partners;

(b)  the roll-out and licensing of the Group's technologies with new collaborative partners; and

(c)   the raising of new capital.

 

Whilst the Group has made further clinical progress in the period under review and will continue to actively pursue all opportunities arising in connection with (a) and (b) above, important new capital raising arrangements have been entered into which should result in the injection into the Group of substantial new equity funding.  Legally binding contracts have been entered into and the full set of proposals being put to shareholders in a General Meeting being held on 1st September 2011 is fully set out in a Circular sent to shareholders on 4th August 2011.

 

The arrangements are fully supported by all of the Group's Directors and principal shareholders, all of whom have given their irrevocable undertaking to vote in favour of all resolutions in which they can participate.


Page 20 of the Circular sets out the "Recommendation" from the Board which states, inter alia:

 

"Accordingly, the Independent Directors unanimously recommend that Shareholders vote in favour of the Resolutions to be proposed at the General Meeting, as they have irrevocably undertaken to do in respect of their own beneficial and connected shareholdings, which amount in total to 11,264,595 Ordinary Shares representing approximately 6.35 per cent. of the current issued share capital of the Company.        

 

Due to the interests of the Concert Party in the matters dealt with by the Independent Shareholder Resolution, those members of the Concert Party who are currently Shareholders have undertaken not to vote on such Independent Shareholder Resolution, though they have irrevocably undertaken to vote in favour of the remaining Resolutions in respect of their shareholdings which amount to 41,440,050 Ordinary Shares in aggregate representing approximately 23.36 per cent. of the current issued share capital of the Company.

 

Accordingly, the Company has received irrevocable undertakings to vote in favour of the Independent Shareholder Resolution in respect of 59,648,181 existing Ordinary Shares in aggregate representing 43.86 per cent. of the existing enfranchised issued share capital of the Company and has received irrevocable undertakings to vote in favour of the remaining Resolutions in respect of 101,088,231 existing Ordinary Shares, in aggregate representing 56.97 per cent. of the existing issued share capital of the Company."

 

As a consequence of the nature of the Proposals being positively transformational for the future of the Group and in consideration of the above-noted undertakings, the Directors are confident that the resolutions being put to shareholders on 1st September 2011 will be duly approved, and that the parties will move with all possible expedition to legal completion of all matters, and, in particular, the injection into the Company of new equity capital of a quantum up to £14.4 million (before expenses).

 

The Directors therefore believe that the Company will have adequate resources to continue in operational existence for the foreseeable future.  They have therefore prepared the financial information contained herein on a going concern basis.  Consequently, the financial information does not reflect any adjustments that would be required to be made if they were prepared on a basis other than the going concern basis.

 

3. SEGMENTAL ANALYSIS

 

The revenue and loss before taxation are attributable to the one principal activity of the Group. The net assets of the Group at 30th June 2011, 31st December 2010 and 30th June 2010 are wholly attributable to the principal activity. The Group comprises one operating segment for reporting purposes. Management measures performance and allocates resources based on the results of this one segment only.

 

4. REVENUE

 

         An analysis of revenue (by location of customer) is given below:


6 months to

30/06/11

6 months to

30/06/10

12 months to

31/12/10


Unaudited

Unaudited

Audited


£

£

£





United States

46,711

18,653

1,442,152

UK

-

57,358

124,109

Europe

17,700

-

-


---------------------

---------------------

---------------------


64,411

76,011

1,566,261


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

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

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

 

5.      RECONCILIATION OF LOSS BEFORE TAXATION TO

         CASH OUTFLOWS FROM OPERATING ACTIVITIES


6 months to

30/06/11

6 months to

30/06/10

12 months to

31/12/10


Unaudited

Unaudited

Audited


£

£

£





Loss before taxation

(1,283,332)

(1,538,983)

(1,934,277)

Adjustments for:




Equity-settled share options

8,787

107,800

134,726

Share based payment expense - Baxter warrants

-

-

 

366,513

Depreciation

107,489

124,562

253,535

Profit on disposal of property, plant and equipment

-

-

(1,600)

Investment income

(885)

(1,338)

(1,761)

Finance costs

4,376

-

-


---------------------

---------------------

---------------------


(1,163,565)

(1,307,959)

(1,182,864)

Increase in inventories

(13,902)

-

-

Decrease/(increase) in receivables

251,910

30,467

(108,535)

(Decrease)/increase in payables

(5,474)

43,863

(22,017)


---------------------

---------------------

---------------------

Net cash outflow from operating activities

(931,031)

(1,233,629)

(1,313,416)


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

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

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

 

 

6.    LOSS PER SHARE

 
 
6 months to
30/06/11
6 months to
30/06/10
12 months to
31/12/10
 
 
Unaudited
Unaudited
Audited
 
 
£
£
£
 
 
 
 
 
Weighted average number of ordinary shares in issue
 
177,232,254
163,820,952
170,581,718
 
 
 
 
 
 
 
Loss after taxation
 
1,283,332
1,538,983
1,934,277
 
 
 
 
 
 
 
Loss per share
 
0.72p
0.94p
1.13p
 
 
===============
===============
===============

 

        There is no dilutive effect of share options on the basic loss per share.

 

7.      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.

 

8.      POST BALANCE SHEET EVENT

 

On 4th August 2011, the Company issued a Circular to its shareholders setting out a comprehensive range of proposals ("the Proposals") to be put to them in a General Meeting to be held on 1st September 2011.  The Proposals can be summarised as follows:

 

1.            Includes two main provisions being:

-     Subscription of 110.8 million new ordinary shares by Synbio at a Placing Price of 11 pence per share to raise £12.19 million (together with 5-year Warrants rights over 11.08 million shares at an Exercise Price of 33 pence per share); and

-     the entering into a Co-Development Agreement by which Synbio will drive six new product candidates through human proof of concept trials in Russia.

2.            Acquisition of SymbioTec at a valuation of £8.8 million to be satisfied by the issue of 80 million new ordinary shares as fully paid.  The principal assets of Symbiotec are:

-     Intellectual Property and Patent Rights over a histone-based platform technology; and

-     two drug candidates with EMA and FDA recognised orphan drug status.

3.            Approval of waiver of the obligation (by Synbio and its associated Concert Party) to make an Offer under Rule 9 of The Takeover Code.  As Synbio will hold more than 30% of the Company's issued share capital this Proposal is aimed at satisfying an important regulatory provision.

4.            Agreement with SIIL which includes:

-     the issue to SIIL of 9 million new ordinary shares issued as fully paid in consideration for the surrender back to the Company of the development rights of up to 14 product candidates;

-     Beneficial changes to the economic interest of the Company in the jointly developed product "ErepoXen"®;

-     Changes in the commercial supply arrangements between the parties for the supply of Polysialic Acid ("PSA"); PSA is the principal component in the Company's patented PolyXen® platform technology;

-     Subscription by SIIL for 2.5 million new ordinary shares a the Placing Price together with Warrants rights over 7.5 million shares exercisable over a period of two years at an average Exercise Price of 20 pence per share.

5.            Proposed Change of Name and Articles of Association which the Directors believe will:

-        better reflect the scope and breadth of the Company's business;

-        bring the Articles of Association up to date in compliance with relevant provisions of the Companies Act 2006.

6.            Notice of General Meeting to consider all of the above matters.

Also included in the Circular is an intimation that the Company proposes to launch a 1-for-10 Open Offer at the Placing Price (11 pence) to raise up to £1.95 million, this in order to give existing shareholders the opportunity to participate in the capital raise alongside Synbio and SIIL (all values noted above made in connection with new share subscription are expressed before expenses).

 

While a full understanding of the Proposals can be gained only by a detailed review of the Circular, the Directors believe that this proposed series of transformational transactions will afford the Company financial independence as a specialty drug developer with a clinical development pipeline in not only potentially blockbuster indications (with their associated costs and timelines) but also in the orphan drug sector where our technologies can be brought to bear more quickly, at lesser cost and with greater short term market potential.

 

The Shareholder Circular is deemed to be included herein by reference and copies shall be available up to 1st September 2011.  Shareholders are invited to fully familiarise themselves with its contents. Copies can be downloaded from the Company's website at www.lipoxen.com, or a hard copy obtained either by telephoning +44 (0)20 7389 5015 or by making an email request to info@lipoxen.com.

 

9.      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.

 

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
END
 
 
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