Chiroscience Group - Interim Results
24 Settembre 1998 - 9:30AM
UK Regulatory
RNS No 4008v
CHIROSCIENCE GROUP PLC
24th September 1998
INTERIM RESULTS
for the six months to 31 August 1998
Chiroscience Group plc, the emerging pharmaceutical company, announces its
interim results for the six months to 31 August 1998 after a period of
further significant progress.
Highlights:
- Revenues
- ChiroTech contributes
- Investment in research and development decreases
- Levobupivacaine (ChirocaineT)
- Revenues increase - to #11.4m (6 months to 31.8.97: #9.2m)
- Losses reduce - by 21% to #11.4m (31.8.97: # 14.4m) as external R&D
spend diminishes
- Chirocaine marketing position complete - Zeneca have worldwide rights,
excluding Japan; Maruishi licensed to develop and market the product in
Japan
- Chirocaine regulatory progress - Final negotiations ongoing with Swedish
authorities. Application for other European licences via the mutual
recognition process will follow Swedish approval and should begin in the 4th
quarter of this year
- ChiroTech - manufacturing position secured through sale of 30% of
ChiroTech to Ascot plc for #30m and agreement for future manufacturing at
Mitchell Cotts. Increased first half performance and excellent prospects
for the second half, particularly from (-) lactam sales
- R&D Progress - further details of progress in drug discovery and the
development pipeline to be given on 29 September 1998
- Strong cash position - #28.8m in cash at period end and a further #30m
received from Ascot on 1 September 1998. Reduced cashburn as development
expenditures are assumed by partners
Dr John Padfield, chief executive of Chiroscience, commented:
"The period has once again resulted in significant achievements. In
particular we concluded our strategic reviews for the marketing of
Chirocaine and for the realisation of shareholder value in ChiroTech.
Zeneca and Maruishi have been appointed to market Chirocaine and we raised
#30 million from the sale of 30% of ChiroTech.
With the success of our commercial partnerships with the leading world
players in their fields, namely Zeneca, Bristol-Myers Squibb and Schering-
Plough, and the forthcoming regulatory approval for Chirocaine we are very
optimistic for the future of the Group. In addition, our reduced cash burn
and secure cash position ensure that we are well placed to capitalise on
opportunities to secure the future of the Group".
For further information contact:
Dr John Padfield, Chief Executive Giles Sanderson/Victoria
Christine Soden, Finance Director Springett
Rebecca Iveson, Investor and Media Financial Dynamics
Relations Tel: +44 (0)171 831 3113
Tel: +44 (0)1223 420430
Http://www.chiroscience.com
Notes For Editors:
Chiroscience Group plc
Chiroscience Group plc is an emerging pharmaceutical company which uses its
diverse technology platform to discover, develop and bring to market novel
medicines for improved healthcare. It has three businesses: Chiroscience
R&D, Rapigene and ChiroTech.
Chiroscience R&D's focus is on innovative small molecule drugs and related
diagnostics in the therapeutic areas of inflammatory disease, pain,
osteoporosis, cancer and autoimmune diseases. Its technology platform
allows the conception and development of receptor-based and enzyme-
inhibiting small molecule drugs with high selectivity of action. Rapigene
is involved in the creation of genomic technologies and services, which it
provides to Chiroscience R&D and partner companies' drug discovery
programmes. ChiroTech provides chiral technology services to
pharmaceutical and related industries, including Chiroscience R&D.
Chiroscience Group plc is listed on the London Stock Exchange and is based
in Cambridge and Stevenage, UK, and Seattle, Washington, USA.
OPERATING & FINANCIAL REVIEW
Overview
Chiroscience has demonstrated further significant progress in the last six
months. The Group has secured its financial position through Chirocaine
licensing deals with Zeneca in March and Maruishi in September, raising
#18m, and the sale of a 30% stake in its ChiroTech business which raised a
further #30m, effective 1st September 1998. The Group's cash position is
very strong with #598m in its reserves at a time when a return to the
markets for additional funding would be both unwelcome and highly dilutive.
Results
The Group achieved revenues of #11.43m in the first half of 1998 (6 months
to 31.8.97: #9.2m, year to 28.2.98: #26.2m). Of these #6.8m were earned by
ChiroTech (31.8.97: #5.9m), #4.5m by Chiroscience R&D's operations
(31.8.97: #3.3m) and Rapigene recognised its first revenues of #0.1m. The
revenues of the R&D operations related primarily to development funding
from partners such as Schering-Plough, Bristol-Myers Squibb and Zeneca.
The net loss for the six months was #11.4 m (31.8.97: # 14.4m, year to
28.2.98: #23.3m) and was comprised of the following:
6 months 6 months
to to
31.8.98 31.8.97
#m #m
ChiroTech 2.5 2.3
Drug discovery & (11.2) (16.4)
development
Rapigene ( 1.0) ( - )
Central activities ( 2.9) ( 1.7 )
Operating loss (12.6) (15.8 )
Interest income 1.2 1.4
Net loss (11.4) (14.4)
ChiroTech's profits in the first half do not fully reflect the potential
for that business for the remainder of this year. As at 31.8.98 ChiroTech
had sales orders on hand in excess of #35m, much of which is scheduled to
be filled this financial year. Accordingly, the business is expected to
show a profit for the year well in excess of the #7.1m achieved in the year
to 28.2.98.
Chiroscience R&D's operations are showing the anticipated decline in
expenses as a result of the Chirocaine clinical and regulatory programme
coming to a close and the adoption of development costs on the MMP and PDE4
programmes by our partners. The Rapigene business was only separately
identified this year and these costs reflect the work undertaken to bring
the technologies from prototypes to commercially viable systems.
The central activities expense increased this half year largely as a result
of the #1.4m exceptional costs arising from the settlement of the dispute
with Dr.Stebbing, a former director of the company. Settlement with Dr
Stebbing was reached at #3.2m and was funded through a cash payment of
#1.2m and the transfer of 800,000 shares from the Group's ESOP. The charge
to the current year's profits in this respect, after taking into account
the costs of the litigation and provisions made in prior years, was #1.4m.
On 1st September the sale to Ascot plc of 30% of ChiroTech was completed
for #30m in cash. The costs of this transaction were #1m and as a result
the Group will record net proceeds of #29m and an accounting gain of #28m
in the second half of the year. Following this transaction, the Group had
cash reserves of #59m. The net cashflow in the six months to 31.8.98 was
an inflow of #2m, being receipts of #15.4m from the issue of shares (#15m
from Zeneca and #0.4m on the exercise of share options) and net expenditure
of #13.3m including capital expenditure of #3.1m (31.8.97: #0.9m). The
issued share capital increased from 107.6m at 1 March 1998 to 111.8m shares
at 31.8.98 as a result of issuing 3.5m shares to Zeneca and share option
exercises.
Chirocaine
Chiroscience will be one of the first of the UK biotechnology companies to
have developed a major product and brought it to full registration.
Chirocaine, the long-acting local anaesthetic which was licensed to Zeneca
earlier this year, should be launched by them later this year. The
registration of the product throughout the European member states through
the mutual recognition procedure will progress under the sponsorship of the
Swedish authorities who are in the final stages of the product review and
should grant the first registration shortly. The US regulatory authority,
the FDA, is reviewing the application to register the drug for that market
and the timing of this process remains on track for product approval in
1999.
Chiroscience will earn significant royalties on all sales of Chirocaine by
Zeneca throughout the territory of the licence, which is worldwide,
excluding Japan. The Japanese rights to the product were licensed to
Maruishi Pharmaceutical Co Ltd earlier this month. Maruishi will pay #3m
in upfront license fees together with further, undisclosed, milestone
payments. Thereafter Chiroscience will earn a royalty on sales of
Chirocaine in Japan by Maruishi, who will fund and conduct all further
development work.
Development Programmes
The Group is conducting various development programmes with a series of
collaborative partners. The development of a needleless, painfree
lignocaine anaesthetic injector product with PowderJect is progressing well
with clinical trials underway. The programme to research and develop
inhibitors of the MMP families of enzymes for cancer in collaboration with
Bristol-Myers Squibb is in clinical trials and shows great promise. The
programme to develop oral treatments for asthma through inhibitors of the
PDE4 enzymes with our partner Schering-Plough continues to meet its
targets, with the discovery of compounds from which a development candidate
could be selected later this year. Medeva plan to file a regulatory
submission for d-threo-methylphenidate for Attention Deficit Disorder at
the end of 1999.
As the workload on Chirocaine diminishes, Chiroscience is actively seeking
new niche development programmes, originated in-house or in-licensed from
other parties. This will enhance the current pipeline and ensure our
skilled development scientists continue to be used to their maximum
capability.
Research Programmes
The Group's research focus is on bone disease, inflammatory and auto-immune
diseases. A considerable amount of work continues on the applications for
MMP inhibitors which fall outside the BMS collaboration in cancer, in
particular inflammatory bowel disease and rheumatoid arthritis. Further
research targets will arise both from the gene-based discovery work in
Seattle and from programmes developed in Cambridge.
Whilst Chiroscience has the capability to move from gene discovery to
registration of drugs, it is inevitable that certain specialist skills will
be accessed from external sources. In particular, some specialist
biological target validation work will be accessed from third parties and
the Group continues to build its network of collaborations with
Universities, specialist medical research centres, sister biotechnology
companies and major pharmaceutical companies.
ChiroTech
ChiroTech continues to establish itself as a leader in the provision of
specialist chiral chemistry services and is expanding its range of products
and customers. Whilst pharmaceutical companies remain its major source of
revenue, ChiroTech's market has expanded into biotechnology and flavours
and fragrances businesses.
As presaged in the last interim and annual reports to shareholders, the
Board of Chiroscience undertook a review of the optimal development and
exploitation of ChiroTech. The aims of this review were three-fold; to
secure a quality manufacturing partner for ChiroTech in order to facilitate
its future growth; to secure financing for the Group as a whole; and to
retain access to the current profits and cashflow of the business, enabling
the Group to participate in its future growth. As a result, a 30%
shareholding in ChiroTech was sold to Ascot plc, a UK-based business with
interests in chemicals and engineering, for #30m. This transaction
completed on 1st September 1998. Most importantly, Ascot own Mitchell
Cotts Chemicals Ltd, a fine chemicals manufacturer based in Yorkshire,
England. Mitchell Cotts have worked with ChiroTech for many years and in
particular have been one of the manufacturers of (-) lactam, ChiroTech's
leading product. Together with the investment, the parties have entered
into a manufacturing alliance whereby Mitchell Cotts will be the
manufacturer of choice for all new ChiroTech projects.
ChiroTech's business continues to flourish, led by the success of (-)
lactam but bolstered by a growing range of new product groups and
customers. The principal customer for (-) lactam is Glaxo Wellcome who are
developing a new anti-viral drug, abacavir for which (-) lactam is a key
intermediate. Abacavir is in fast-track registration with the regulatory
authorities and approval and launch of the product is widely expected for
later this year. As Glaxo Wellcome are preparing for the product launch
they have placed significant orders for the product, already in excess of
the #25m two-year supply agreement announced in May of this year. Sales of
(-) lactam in the first six months were #4.7m out of the total #6.8m
revenues and the business now has a current order book of #35m the majority
of which should be filled in the next 6 months.
Rapigene
Rapigene was formed in order to exploit the commercial opportunities
arising from the discovery and development of a number of genetic analysis
technologies. Leading amongst these is the Group's proprietary cleavable
mass-spec tag, or CMST, technology which, when coupled with appropriate
HPLC and mass-spectrometry technologies, offers a quantum leap forward in
the speed, accuracy and quality of DNA analysis systems. The detection of
single-nucleotide polymorphisms (SNPs), single mutations in genes, is of
very great significance in the discovery of new drug targets and in the
creation of improved clinical trial and disease treatment protocols.
Rapigene's systems are of interest to a number of potential commercial
partners and it is likely that this interest will crystallise into one or
more agreements later this year.
People
It was announced in August that Mr Hugh Collum, Executive Vice-President
and Chief Financial Officer of SmithKline Beecham, is to be appointed as
the new Chairman of the Group with effect from 1st October 1998. He
succeeds Lord Henry Chilver who has served the company as Chairman over the
last three and a half years with considerable commitment. Hugh brings a
wealth of experience and insight to Chiroscience to help it attain its goal
of becoming a significant, world-class drug discovery company.
It was further announced in August that Dr Bob Jackson has now taken
overall responsibility for the Group's R&D operations, covering both the
target discovery and drug and diagnostic development programmes of the
Group. This follows the resignation of Dr David Galas as an Executive
Director of Chiroscience in order to pursue a dual role: firstly as a
scientific adviser to the Chiroscience R&D and Rapigene; and secondly to
take up a prestigious academic appointment at a new post-graduate school in
California. David's contribution to the development of Darwin Molecular
prior to its acquisition by Chiroscience and to the integration of the
enlarged Group's drug discovery operations cannot be underestimated and it
is fortunate that his unique skills can continue to be accessed in an
active advisory role.
Chiroscience Group plc
Unaudited Consolidated Profit and Loss Account
6 months 6 months 12 months
to to to
31/8/98 31/8/97 28/2/98
#m's #m's #m's
Revenues 11.4 9.2 26.2
Cost of sales (6.2) (3.3) (9.4)
Gross profit 5.2 5.9 16.8
Research and development (13.5) (19.0) (36.4)
costs
Selling, general and (2.9) (2.7) (6.1)
administrative expenses
Exceptional administrative (1.4) - -
expense (note 3)
Operating loss (12.6) (15.8) (25.7)
Net interest receivable 1.2 1.4 2.4
Loss on ordinary activities (11.4) (14.4) (23.3)
before taxation
Tax on loss on ordinary - - -
activities
Retained loss (11.4) (14.4) (23.3)
Loss per share - basic (note 4)(10.3p) (13.6p) (21.6p)
Statement of Total Recognised Gains and Losses
6 months 6 months 12 months
to to to
31/8/98 31/8/97 28/2/98
#m's #m's #m's
Consolidated loss for the (11.4) (14.4) (23.3)
period
Discount on share options 0.1 0.2 0.3
Exchange adjustments on 0.1 0.1 (0.1)
foreign currency investments
Total recognised gains and (11.2) (14.1) (23.1)
losses for period
Chiroscience Group plc
Unaudited Consolidated Balance Sheet
31/8/98 31/8/97 28/2/98
#m's #m's #m's
Fixed assets
Tangible assets 9.7 8.5 8.1
Investments (note 6) 2.7 3.9 3.9
12.4 12.4 12.0
Current assets
Stock 3.9 1.0 1.3
Debtors 5.5 4.0 8.9
Investments in short term 28.0 36.7 21.8
securities
Cash at bank and in hand 0.8 0.7 4.9
Total current assets 38.2 42.4 36.9
Creditors: amounts due (9.2) (9.1) (11.7)
within one year
Net current assets 29.0 33.3 25.2
Net assets 41.4 45.7 37.2
Capital and reserves
Called up share capital 5.6 5.4 5.4
Share premium account 91.2 75.6 76.0
Other reserves 23.7 23.6 23.6
Profit and loss account (79.1) (58.9) (67.8)
Shareholders' funds 41.4 45.7 37.2
Reconciliation of Movement in Shareholders' Funds
6 months 6 months 12 months
to to to
31/8/98 31/8/97 28/2/98
#m's #m's #m's
Total recognised gains and (11.2) (14.1) (23.1)
losses for period
Share capital issued 15.4 0.4 0.9
Net change in 4.2 (13.7) (22.2)
shareholders' funds
Shareholders' funds at 37.2 59.4 59.4
start of period
Shareholders' funds at end 41.4 45.7 37.2
of period
Chiroscience Group plc
Unaudited Consolidated Cash Flow Statement
6 6 months 12 months
months to to
to 31/8/97 28/2/98
31/8/98 #m's #m's
#m's
Cashflow from operating (11.5) (15.0) (25.8)
activities (note 5)
Returns on investments and
servicing of finance
Interest received 1.2 1.4 2.3
Capital expenditure and
financial investments
Fixed assets acquired (net) (3.1) (0.9) (2.1)
Cash outflow before management
of liquid resources and (13.4) (14.5) (25.6)
financing
Financing
Shared issued, net of expenses 15.4 0.4 0.9
Change in net funds from 2.0 (14.1) (24.7)
cashflows
Exchange gain 0.1 0.1 0.0
Movement in net funds in period 2.1 (14.0) (24.7)
(see below)
Net funds at start of period 26.7 51.4 51.4
Net funds at end of period 28.8 37.4 26.7
Change in cash in the period (4.1) 0.1 4.3
Net transfers between cash and 6.2 (14.1) (29.0)
investments
Movement in net funds in period 2.1 (14.0) (24.7)
Chiroscience Group plc
Notes to the Financial Statements
at 31 August 1998
1. BASIS OF PREPARATION
The financial information contained in this report has been prepared in
accordance with the accounting policies set out in the Group's Annual Report
for the year ended 28 February 1998 and two new UK reporting standards,
FRS10 and FRS11, adopted by the Group since that date. FRS 10, issued on 4th
December 1997, requires purchased goodwill to be capitalised and amortised
through the profit and loss account. In accordance with the transitional
rules contained in the standard, the Group has elected not to capitalise
goodwill previously written off to reserves. FRS11,issued on 2nd July 1998
sets out the principals and methodology for accounting for impairment of
fixed assets and capitalised goodwill. The adoption of these standards has
not resulted in any material changes or effects on the results reported
herein.
The financial information as set out in this report is unaudited and does
not comprise statutory accounts for the purposes of section 240 of the
Companies Act 1985.
The figures for the six months ended 31 August 1997 form part of the
results contained in the statutory accounts for the year ended 28 February
1998. The information for the year to 28 February 1998 has been extracted
from the same statutory accounts, which carry an unqualified report and
have been delivered to the Registrar of Companies. The Interim Report will
be posted to shareholders on 30th September 1998. Copies of the report
will be available from the Company's registered office: 283 Cambridge
Science Park, Milton Road, Cambridge CB4 4WE.
2. SEGMENTAL INFORMATION
6 months 6 months 12 months
to to to
31/8/98 31/8/97 28/2/98
#m's #m's #m's
Revenues by business
Drug discovery & development 4.5 3.3 10.2
ChiroTech 6.8 5.9 16.0
Rapigene 0.1 - -
11.4 9.2 26.2
Operating profit/(loss) by
division
Drug discovery & development (11.2) (16.4) (29.5)
ChiroTech 2.5 2.3 7.1
Rapigene (1.0) - -
(9.7) (14.1) (22.4)
Central activities (2.9) (1.7) (3.3)
Group operating loss (12.6) (15.8) (25.7)
3. EXCEPTIONAL EXPENSE
The expense of #1.4m represents the charge for settling a dispute with a
former director after taking into account the costs of litigation and
provisions made in prior years.
4. LOSS PER SHARE
The loss per share is based on losses of #11.4m (31.8.97: loss of #14.4m and
year to 28.2.98: loss of #23.3m), and on 110.8m Ordinary Shares (31.8.97:
106.4m Ordinary Shares, and 28.2.98: 106.9m Ordinary Shares), being the
weighted average number of shares in issue during the period. The Directors
do not recommend payment of a dividend.
5.RECONCILIATION OF OPERATING LOSS TO NET CASH OUTFLOW FROM OPERATING
ACTIVITIES
6 months 6 months 12 months
to to to
31/8/98 31/8/97 28/2/98
#m's #m's #m's
Operating loss (12.6) (15.8) (25.7)
Depreciation 1.5 1.5 3.1
Non-cash element of 1.2 0.0 0.0
exceptional expense
Provision of free of charge 0.0 (0.3) (0.5)
services
Discount on share options 0.1 0.2 0.3
Movements in:
Stocks (2.6) 0.0 (0.3)
Debtors 3.4 (0.4) (5.3)
Creditors (2.5) (0.2) 2.6
Net cash outflow from (11.5) (15.0) (25.8)
operating activities
6. FIXED ASSET INVESTMENTS
Represents the 1.8m shares (31.8.97 and 28.2.98: 2.6m shares) held by the
Chiroscience Employee Share Ownership Plan at cost. The market value of the
shares at 31.8.98 was #3.7m. During the period to 31.8.98 the ESOP sold 0.8m
of the shares held by the trust in order to meet a liability to a former
employee and director of the Group. As a result a provision of #1.2m has
been made against the amount receivable from the ESOP, being the value of
those #0.8m shares at cost of #1.50 per share.
7. POST-BALANCE SHEET EVENTS
On 1st September 1998 the Group sold a 30% stake in the shares of its'
subsidiary company, ChiroTech Technology Limited, to Ascot plc for #30m. The
proceeds were received in cash at completion. Costs relating to the
transaction amount to #1m and the net gain on the sale was #28m. It is
estimated that there will be no liability to pay tax on this transaction,
having taken into account the base cost in the ChiroTech assets in computing
the taxable gain arising and then using current year's trading losses to
offset the tax liability on that gain.
The net assets of ChiroTech at completion were #0.8m, with the profits of
ChiroTech prior to that date having been distributed to the parent company
by way of dividend.Ascot will receive a minimum dividend of #3m pa from
ChiroTech, payable six monthly. Chiroscience will receive dividends
dependent on the profitability and working capital needs of ChiroTech.
Chiroscience will consolidate the results, balance sheet and cashflows of
ChiroTech as it remains a 70% subsidiary of the Group.
In order to simplify the balance sheet of ChiroTech Technology Limited, the
Directors intend to apply to the Courts to cancel the share premium account
within that company, which currently stands at #13.9m, and seek to
distribute the funds in that account as a dividend to Chiroscience Group
plc.
On 7th September 1998 the Group licensed the Japanese rights to Chirocaine
to Maruishi for upfront fees of #3.3m, #0.8m of which was recognised in the
current period as an option fee.
END
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