RNS No 3977x
CHIROSCIENCE GROUP PLC
29 April 1999
CHIROSCIENCE GROUP PLC
PRELIMINARY RESULTS
For the year ended 28 February 1999
Highlights
Financial
Feb 1999 Feb 1998 Improvement
#m #m #m
Revenues 41.2 26.2 15.0
R&D Investment (29.2) (36.4) 7.2
Operating Loss (17.5) (25.7) 8.2
Net Loss (17.2)* (23.3) 6.1
Loss per share (15.8p) (22.3p) 6.5p
+ Continued strong revenue growth, up 57%, and reduced operating loss, down
32%, demonstrate the path to profitability.
+ Chirocaine gains product licence in Sweden and is granted approvable
status by the US FDA for anaesthesia and pain management. Product rights
returned by Zeneca following its merger with Astra, with a compensation
payment to Chiroscience of #10m plus a commitment to fund further elements
of Chirocaine's commercialisation.
+ Excellent progress with MMP inhibitors for cancer and inflammatory
diseases, with the lead drug in trials in cancer patients; PDE4 inhibitors
for asthma and the Needle-free lidocaine injector in pain management
continue to advance.
+ Gene discoveries from Seattle genome science in osteoporosis and auto-
immune disease provide Chiroscience with new proprietary targets for drug
discovery.
+ ChiroTech continues excellent progress with sales up 88% to #30.1m and
pre-tax profits up 76% to #12.5m. Ascot PLC invests #30m to acquire 30%
stake in ChiroTech.
+ Rapigene receives notice of approval in Europe for three key patents
related to the Masscode system.
* In accordance with FRS4, no gain has been recognised at this time on
the net #29.1m received from Ascot in respect of the 1 September 1998
sale of 30% of ChiroTech .
Hugh Collum, Chairman of Chiroscience commented:
"I am delighted to have been invited to become Chiroscience's Chairman and
have been impressed by the quality of the Company and the commitment of the
team on both sides of the Atlantic.
Chiroscience has demonstrated excellent progress across a number of fronts
during the last year but towards the end of 1998 was impacted by the merger
of Astra with Zeneca, the marketing partner for its lead product Chirocaine.
The Group has handled this potentially difficult situation well and has
successfully negotiated the return of the Chirocaine product rights on
attractive terms. Negotiations with potential partners are being pursued
vigorously and I am in no doubt that certainty over the future
commercialisation of Chirocaine will allow investors to assess the
significant additional value that lies within the Group."
Dr John Padfield, Chief Executive of Chiroscience, commented:
"We have continued to build a soundly based pharmaceuticals business and I
believe that these results highlight the financial strength which also
underpins the Group.
I am excited by the progress we have made in MMP inhibitors particularly for
cancer with Bristol-Myers Squibb, and in PDE4 inhibitors with Schering-
Plough. Due to the Zeneca and Astra situation we faced a challenging end to
the year, but we were encouraged by the competition authorities' support for
Chirocaine. As we finalise our commercialisation strategy for Chirocaine,
the Group looks forward to moving towards profitability".
This document is intended to provide information on Chiroscience to
interested members of the public and not to provide product information to
health professionals.
For further information contact:
Dr John Padfield, Chief Executive Giles Sanderson/Victoria
Christine Soden, Finance Director Springett
David Dible, Head of Media and Financial Dynamics
Investor Relations Tel: +44 (0)171 831 3113
Chiroscience Group plc
Tel: +44 (0)1223 420430
Http://www.chiroscience.com
NOTES FOR EDITORS
Chiroscience is an emerging pharmaceutical company with two distinct parts;
Chiroscience R&D, the company's core pharmaceutical products business, and
the specialist service businesses, ChiroTech and Rapigene. Chiroscience R&D
uses its 'gene-to-drug' skills base to discover and develop innovative small-
molecule pharmaceuticals for the treatment of inflammation, pain, cancer,
osteoporosis and auto-immune disease. Chirocaine, its long-acting local
anaesthetic is close to market. ChiroTech is a profitable business that is
a world leader in the provision of specialist chiral chemistry services and
products. Its customer base of major pharmaceutical companies is growing
rapidly. Strategic alliances with a number of global partners have
broadened the range of products and services that ChiroTech can offer.
Rapigene is commercialising its Masscode system for high-throughput genetic
measurement and analysis. Rapigene intends to use Masscode systems to offer
a rapid, cost-effective analytical service to life science customers
Chiroscience Group plc is listed on the London Stock Exchange and is based
in Cambridge and Stevenage, UK, and Seattle, Washington, USA.
Trademarks
Chirocaine, ChiroTech, Rapigene, Masscode, ChiroCats, ChiroChem and
ChiroSure are registered trademarks and tradenames of Chiroscience Group plc
or its subsidiary undertakings. Enantyum is a trademark of Laboratories
Menarini SA and Ziagen is a trademark of Glaxo Wellcome plc.
INTRODUCTION
Chiroscience is an emerging pharmaceutical company with two distinct parts;
Chiroscience R&D, the company's core pharmaceutical products business and
its specialist service businesses, ChiroTech and Rapigene.
CHIROSCIENCE R&D
Pharmaceutical research and development is Chiroscience's core activity. It
operates as a single integrated unit from its two key sites Cambridge, UK
and Seattle, USA. Chiroscience R&D employs some 280 staff, 200 in the UK
and 80 in the US. Chiroscience has built a "gene to drug" skills base
within its research and development activities which the Group believes is
necessary to succeed in today's competitive environment.
Chirocaine
Chiroscience R&D's flagship product, Chirocaine, the long-acting local
anaesthetic and pain management product, has been the Group's main area of
focus.
The Group put in place its partnering strategy for Chirocaine in the form of
licensing agreements with Zeneca, in March 1998, for all markets excluding
Japan and with Maruishi, in September 1998, for the Japanese market. The
product is due to begin clinical trials in Japan later in 1999.
The first European licence was obtained in Sweden in December 1998 giving
claims for safety and efficacy in a broad range of indications. Discussions
are underway with the Swedish authorities to see how the marketability of
the product could be further enhanced through amended or additional claims.
The product files are now being updated ready to commence the Mutual
Recognition process in mid-year. This timeline should lead to national
licences for the product towards the turn of year, with first launches
expected in 1H 2000. Approval through the European Mutual recognition
process will facilitate Chirocaine gaining product licences in other
countries.
The product was deemed 'approvable' for the US market by the FDA in February
1999 and the final decision on approval is awaited. The review process in
the US proceeded faster than anticipated and the Advisory Committee of the
Food and Drug Administration ('FDA') sought only to clarify the Group's
approach in defining the safety benefits of the product and the relative
warnings to be applied to long-acting local anaesthetics. The endorsement
of this approach has set the scene for the product labelling discussions to
be concluded so that the product can be launched later this year.
This progress with Chirocaine has to some extent been overshadowed by the
earlier announcement in December 1998 of the merger of Zeneca with Astra.
The European and US competition authorities determined that AstraZeneca
would have too strong a market position in long-acting local anaesthetics.
As a result, Zeneca's rights to Chirocaine have now been returned to
Chiroscience.
The Group was able to negotiate a very favourable conclusion to its
licensing agreement with Zeneca, which is designed to ensure that
Chirocaine's competitive position in the marketplace is maintained. Zeneca
has paid Chiroscience #10m compensation for the loss of earnings that might
result from any delay in the launch of Chirocaine. Additionally, Zeneca is
funding and resourcing most of the ongoing marketing, clinical,
manufacturing, product development and regulatory filing activities in order
to ensure that the progress of Chirocaine will not be slowed.
Chirocaine represents a very important opportunity for the Group and is
expected to provide significant income for Chiroscience starting next year.
Chiroscience's confidence in Chirocaine is based on the product's distinct
clinical characteristics that should allow it to gain a major share of the
growing long acting local anaesthetics market in both surgery and pain
management. Chiroscience believes that other products with which Chirocaine
will compete have either efficacy or safety limitations which restrict their
ability to capitalise on the growing use of local anaesthetics in pain
management. Chirocaine's suitability for use in pain management is
extremely important commercially given the greater quantities used per
patient and the greater pricing flexibility that exists in this market.
Discussions are well advanced with potential new marketing partners and it
remains the target to launch the product in the USA before the end of 1999.
Chirocaine's commercial opportunity is safeguarded by a strong patent estate
that extends for a further 15 years. The optimal commercialisation strategy
will maximise the range of opportunities for Chirocaine, particularly in the
areas where Chiroscience believes its benefits are greatest. These include
surgery, where it has both potency and safety benefits and, particularly, in
pain management where its breadth of claims give it a competitive advantage.
Moreover, the investment made by Chiroscience in developing Chirocaine has
already been fully recouped prior to the product's launch. This has arisen
through a combination of the #15m equity injection from Zeneca in March
1998, the recent #10m compensation payment from Zeneca and the #3m licensing
payments from Maruishi.
MMPi Programmes
Chiroscience has made significant investment in developing its leading
position in the field of matrix metalloproteinase inhibitors (MMPi's).
MMP's are implicated in cell and tissue growth and remodelling and therefore
inhibitors of these enzymes could have utility in treating cancer, arthritis
and a number of other important diseases. Their use in blocking
angiogenesis -the growth of new blood vessels to tumours- is considered to
be of particular importance. Chiroscience believes that it has a
significant competitive advantage in the field of MMPi's through a
combination of:
- strong medicinal chemistry skills to generate highly selective
inhibitors
- a very strong patent portfolio across a broad range of chemical types,
comprising 4 patents which have been granted and 25 patent applications,
- a growing understanding of the underlying cause of the joint pain seen
with some MMP inhibitors. Chiroscience's scientists have recently validated
a second animal model, which shows a clear difference between our second
generation MMP inhibitors, and several of the first generation MMP
inhibitors in their potential to cause joint pain.
Cancer - D2163 (now BMS 275291)
Early in 1998 Bristol-Myers Squibb ("BMS") licensed the oncology rights to
Chiroscience's MMP programme, including the lead compound D2163.
BMS 275291 has been through a rigorous pre-clinical research and Phase I
safety programme in human subjects up to doses of 1200mg per day and it has
now entered initial studies in cancer patients in two centres in the USA.
If these trials are successful, the compound will move into combined Phase
II/III trials. BMS now fund all of the development work on this product,
including certain internal costs of Chiroscience. Milestone payments are
due upon the achievement of development goals.
Inflammation - D1927 and Follow-On Candidate
The MMP inhibitor D1927 was originally part of the oncology deal with BMS.
However, given the excellent progress being made with BMS 275291 and the
structural similarity of the two compounds, BMS elected to develop only the
former compound for cancer and the rights to D1927 have now reverted to
Chiroscience for all fields outside oncology.
In Phase I clinical trials, the compound is well absorbed and well-tolerated
and is being progressed through repeat-dosing Phase I clinical trials which
started in April 1999. D1927 has shown excellent activity in key arthritis
models. The likely end-points for the drug are either rheumatoid arthritis
or the related diseases of psoriasis and inflammatory bowel disease.
A further development programme will commence on a selective third-
generation inhibitor of MMP's later this year.
PDE 4 Programme
The research and development collaboration with Schering-Plough (S-P) set
out to use Chiroscience's medicinal chemistry skills to design selective
inhibitors of the PDE 4 enzyme. This collaboration continues to make good
progress. S-P has all rights to compounds in this programme, which are of
value in the treatment of asthma and other inflammatory endpoints. As part
of the collaboration S-P has funded a major chemistry effort within
Chiroscience for the last 18 months and this has been extended through 1999.
One of these PDE 4 inhibitors (D4396) has already completed a number of pre-
clinical studies and, on successful completion of the pre-clinical phase, is
projected to enter clinical trials next year. In addition S-P will pay
Chiroscience development milestones and royalties as products move through
the clinic and on to the market.
Needle-free Lidocaine
The development of the short-acting local anaesthetic, lidocaine, in the
needle-free injector invented by Powderject continues to progress.
Chiroscience is responsible for the clinical development and regulatory
filings for the product, whilst Powderject is responsible for the design and
manufacture of the injector and formulation of the drug itself. The parties
share all financial returns from the product equally, and partnering
discussions are in progress.
Powderject is currently fine-tuning the commercial device and when this is
complete pivotal Phase III trials will commence in adults in the UK.
Paediatric trials are timed for later in 1999 following the completion of
the current Phase II programme.
Other Development Programmes
Dexketoprofen, the quick-onset analgesic invented by the Group and developed
and sold by Menarini , has now been launched in Italy and the UK as well as
the original Spanish market. Chiroscience earns a small manufacturing return
on this product.
The development of d-threo-methylphenidate by Medeva, for attention deficit
disorder, continues although the product will only now be developed in a
timed-release form rather than an immediate release form as originally
intended. The regulatory filing for this product is likely to be made in
2002. Chiroscience will receive royalties if the product launches.
A number of other drug development opportunities are being pursued. One is
in conjunction with the drug-delivery company, Penwest. This project could
represent a rapid and valuable addition to the pipeline. Additional
information about this programme will be provided once proof-of-principle is
confirmed.
CHIROTECH TECHNOLOGY LIMITED
ChiroTech is an acknowledged leader in the provision of specialist chiral
chemistry services and products worldwide. It was established as a separate
company in March 1998 after trading as a division of Chiroscience for some
years. ChiroTech employs 55 people, principally research scientists
supported by marketing, operations and logistics specialists. In order to
meet growing customer demand for its products the company expects its
headcount to rise to 80 in 1999. ChiroTech operates from laboratories and
offices on the Cambridge Science Park and a pilot plant nearby.
Trading
ChiroTech had an exceptional year in 1998/99. Sales rose 88% to #30.1m.
The average growth in revenues over the last four years has been almost 100%
pa. Operating profits of #12.5m were achieved - a 76% increase over the
#7.1m recorded in the previous year. Almost all sales were to
pharmaceutical customers, with a small amount to flavours & fragrance
businesses.
ChiroTech's major source of revenues was the sale of multi-tonne quantities
of (-) lactam for #24.4m. These sales included #5m in respect of raw
materials which were not included in the prior year's sales of #12.4m which
were on a turnkey basis. (-) Lactam is a key intermediate used in the
manufacture of Ziagen, Glaxo-Wellcome's recently launched reverse
transcriptase inhibitor for the treatment of AIDS. Sales of (-) lactam to
February 1999 reflected the preparations for Ziagen's launch. We understand
that the market acceptance of Ziagen has been positive. Future sales of (-)
lactam depend on Ziagen's success.
ChiroTech increased sales in other business areas from #3.6m in 1998 to
#5.7m with the best performance coming from bulk chiral intermediates in the
Advanced Chiral Products product group.
Partnering
ChiroTech aims to be able to provide chemistry services to meet all stages
of a product's life cycle. In the case of pharmaceutical research and
development, this encompasses discovering new compounds, developing product
scale-up processes, manufacturing clinical trial materials, and once the
product is on the market, bulk drug supply. During 1998 ChiroTech took two
significant steps towards achieving its aims.
In September Chiroscience sold 30% of ChiroTech's issued share capital to
Ascot plc for #30m. A crucial element of this transaction was a long-term
manufacturing agreement between ChiroTech and Mitchell Cotts, Ascot's fine-
chemicals business. ChiroTech can now offer customers a valid 'one-stop
shop' approach including a credible large-scale manufacturing facility to
handle development programmes once they grow beyond laboratory or pilot
plant scale.
The second deal was the establishment of Chirochem Discovery Services LLC
("Chirochem"), a joint venture with the California-based computational
chemistry company, CombiChem Inc. Chirochem intends to design, synthesise
and market targeted chiral chemistry libraries of chemical compounds for use
by medicinal chemists or research scientists in the pharmaceutical and other
sectors. Chirochem is a 50:50 joint venture with costs, revenues and
financing being provided equally to and by the parties.
Chirochem intends to produce libraries of compounds which are ready to use
as a starting point for drug development. The first libraries will be
launched this summer.
Technologies
ChiroTech constantly seeks to keep ahead of its competitors in terms of its
technology. A research group is dedicated to developing and in-licensing
new techniques. Recently, ChiroTech licensed new asymmetric catalysts from
Stanford University and negotiations continue over the acquisition of three
other catalyst or ligand systems. These proprietary technologies will be
used across the product groups and allow ChiroTech to gain long-term revenue
streams either through royalty agreements or product supply.
RAPIGENE
Seattle-based Rapigene is the company formed to further develop and
commercialise the proprietary genetic analysis technologies acquired as part
of the purchase of Darwin Molecular in 1996 - the bulk of Darwin is now
integrated within the Chiroscience R&D business. Rapigene's primary focus
is on providing genotyping services to a range of life science based
customers. The company plans to open a highly automated facility dedicated
to providing these genotyping services in mid-1999 and as a result Rapigene
expects to increase its number of employees during the course of this year.
Business
The pharmaceutical and agricultural industries are undergoing a genomics
revolution requiring an increasing understanding of genetic variation,
particularly individual variations known as Single Nucleotide Polymorphisms
(SNP's). This means that growing volumes of genetic material will have to
be analysed more precisely and at lower cost. The ability to perform assays
on genetic material, such as the analysis of gene expression and the
genotyping of clinical trial patients, both rapidly and economically, opens
up a considerable business opportunity.
Technology
Rapigene's principal technology is its proprietary Masscode analytical
system based on a unique technique which uses small molecules specifically
tagged to DNA to provide quantitative analysis in a mass spectrometer. DNA
variations can then be measured down to the level of a single base-pair
change - a SNP. The Masscode system offers great benefits over rival
systems, such as fluorescent tagging (which has low throughput and is
difficult to analyse with precision) or so called "gene-chips" (which are
expensive for each sample measured). The Masscode system encompasses
technology for controlling and measuring multiple parallel DNA assays using
100 or more proprietary small-molecule tags and offers speed, precision and
the ability to analyse material in a multi-dimensional fashion.
Chiroscience's collaboration with BMS in the oncology area was the first
commercial use of these technologies.
Rapigene's other proprietary technologies include DNA arrays, tips and
buffers which offer improvements over other similar array systems and these,
together with certain other technologies, are likely to be commercialised by
potential partners.
Intellectual Property
A range of patents and patent applications protects Rapigene's technologies.
Three of the Masscode system patents have received notice of allowance in
Europe and Rapigene believes it has a level of protection for its
technologies that will allow it to compete successfully in a rapidly
evolving marketplace.
OPERATING AND FINANCIAL REVIEW
With effect from March 1998 the Group's structure was revised to mirror its
actual operating activities. ChiroTech and Rapigene have each been
established as standalone subsidiaries with their own assets and staffing.
The core Chiroscience R&D business has been brought together in a structure
aimed to facilitate an integrated R&D effort between the US and the UK.
Changes of accounting policy
The Group adopted several new accounting standards during the year,
including those affecting the treatment of goodwill on acquisitions, the
earnings per share calculation, disclosures on foreign currency and
derivative exposures and the carrying value of fixed assets. The only
changes to prior year figures resulting from the adoption of these new
accounting standards are in the EPS calculations where those shown for prior
years have been restated.
Profit & Loss Account
Revenues
Revenues for the year increased by 57% to #41.2m (1998: #26.2m). ChiroTech
generated revenues of #30.1m (1998: #16.0m). Rapigene earned its first
revenues of #0.2m and the Chiroscience R&D business increased its revenues
to #10.9m from #10.2m in 1998. These revenues arose from milestones and
access fees (#3.3m, principally from Maruishi), product sales (#3.0m being
dexketoprofen and contract revenues from the Stevenage pilot plant) and
#4.6m of funded research from collaborative partners such as Bristol-Myers
Squibb, Schering-Plough and Zeneca.
Expenses
Expenses in the year decreased by 10% to #38.0m (1998: #42.5m) largely as a
result of lower external costs and increased collaborative funding.
Research and development expenses decreased to #29.2m (1998: #36.4m), with
#2.1m arising in ChiroTech, #1.7m in Rapigene and the remainder in
Chiroscience R&D. Of this expenditure #7.2m related to expenditure on
external work such as clinical trials (1998: #15.4m).
Sales, marketing, operating and administration costs were #8.8m (1998:
#6.1m) including an exceptional charge in the year in respect of settling a
claim with a former director.
Operating Results
The consolidated operating loss for the Group was #17.5m, a decrease of
#8.2m from 1998 levels. Excluding the exceptional charge described above,
this operating loss reduced by 37%. This consolidated loss is comprised of
an operating profit from ChiroTech of #12.5m (1998: #7.1m), a loss of #23.1m
from the Chiroscience R&D operations (1998: #29.5m), a loss of #2.2m in
Rapigene and the #4.7m cost of central activities (1998: #3.3m), including
the #1.4m to a former director.
Investment income earned on cash reserves and short term investments was
#3.0m, compared to #2.4m in the prior year. An interest payable expense of
#1.5m arose, being the dividend payable by ChiroTech to Ascot for the
period.
Taxation
There was a charge to taxation for the year of #1m, relating to the Ascot
holding in ChiroTech and unrelieved withholding taxes. Tax losses available
to offset future profits increased by #2.5m to #89.6m at the year end. The
Group will continue to show a charge to taxation, since neither group relief
nor consortium relief can be applied against Ascot's share of ChiroTech's
profits.
Loss per share & share capital
The loss per share for the year was 15.8p compared to 22.3p in 1998. Losses
decreased by 26% and the average number of shares rose by 4.6m or 4% to
108.9m.
The issued share capital of Chiroscience Group plc increased by 5.3m shares
in the year to 112.9m issued shares at the year-end. 1.8m shares were
issued in the year to meet the exercise of share options, generating cash
proceeds of #2.2m.and 3.5m shares were issued to Zeneca PLC for cash
proceeds of #15m.
Balance Sheet
The net assets of the Group were almost unchanged over the year, reflecting
the net loss of #17.2m balanced by receipts from share issues.
The Group's principal long-term assets - the intangible assets representing
the future value of the discovery pipeline and related intellectual property
- are not valued or included in the net assets.
Cash Balances & Cashflow
Cash and investments at the year-end were #55.1m, an increase of #28.4m in
the year. This increase was a result of share issues (#17.2m), the sale of
ChiroTech shares (#29.1m) offset by net capital acquisitions (#6.9m) and
operating outflows of #11.0m. The 'burn-rate', being the net cash used by
the business, was approximately #1.5m per month (1998: #2.1m). The
termination payment from Zeneca of #10m was received in April which has
subsequently further strengthened the cash position.
THE OUTLOOK FOR 1999/2000
The current financial year is expected to see further progress across all
segments of Chiroscience's activities.
Chiroscience R&D
The key focus for Chiroscience R&D will be to conclude successfully the
partnering discussions for Chirocaine in order to commercialise the product.
The Group hopes to receive final regulatory approval for Chirocaine from the
FDA around the middle of the year and towards the end of the year to gain
further approvals in Europe through Mutual Recognition.
Clinical progress is expected from the D1927 and follow-on MMPi projects and
from both of the Group's major funded programmes. The collaboration with
BMS developing MMPi's for cancer should see BMS275291 make further progress
in the clinic. In the asthma field S-P is expected to start clinical work
with the collaboration's lead product, an inhibitor of PDE 4 enzymes, next
year. The clinical development team anticipates commencing the pivotal
Phase III clinical trials with needle-free lidocaine.
Two new drug discovery programmes in inflammation will be initiated and the
key bone and immune gene discoveries will be the subject of further research
to elucidate and validate the biological pathways they control. This in
turn will lead to the generation of drugs designed to interact with these
pathways.
ChiroTech
ChiroTech will continue to strengthen its position, taking advantage of its
existing and extended proprietary technology base. The progress of Ziagen,
in which ChiroTech's (-) lactam product is a key intermediate, will be
monitored carefully. ChiroTech is now diversifying beyond its dependence on
Glaxo Wellcome with a number of strong customer orders and new
relationships. This trend is expected to gather further momentum during the
current financial year. The forecast growth in ChiroTech's business means
that investment in improved pilot plant facilities will be needed.
Rapigene
The next twelve months will be an important period for Rapigene. During
this period the company will start its genotyping services business. In
addition it is expected that the value of its proprietary technology can be
leveraged further through partnership agreements. Licences to
pharmaceutical companies and partnerships with equipment manufacturers are
all seen as additional potential sources of revenue for Rapigene. In order
to build a sustainable service business, Rapigene may need to consider
partnering with complementary companies.
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 28 FEBRUARY 1999
1999 1998
#m #m
Revenues 41.2 26.2
Cost of sales (20.7) (9.4)
Gross profit 20.5 16.8
Research and development expenses (29.2) (36.4)
Selling, general and administrative (8.8) (6.1)
expenses
Operating loss (17.5) (25.7)
Share of operating loss in joint venture (0.1) -
Loss on ordinary activities before (17.6) (25.7)
interest and taxation
Interest receivable 2.9 2.4
Interest payable and similar charges (1.5) -
Loss on ordinary activities before (16.2) (23.3)
taxation
Tax on loss on ordinary activities (1.0) -
Retained loss for the financial year
attributable to Members of Chiroscience (17.2) (23.3)
Group plc
Loss per share* - basic (15.8)p (22.3)p
- diluted (15.6)p (21.8)p
*The loss per share has been calculated in accordance with FRS14 and
comparative numbers have been restated.
CONSOLIDATED BALANCE SHEET
AS AT 28 FEBRUARY 1999
1999 1999 1998 1998
#m #m #m #m
Fixed assets
Tangible assets 11.7 8.1
Investments
Investment in joint venture
Share of gross assets 0.4 -
Share of gross liabilities (0.2) -
0.2 -
Other investment 2.4 3.9
2.6 3.9
14.3 12.0
Current assets
Stock 4.4 1.3
Debtors 6.5 8.9
Investments 44.8 21.8
Cash at bank and in hand 10.3 4.9
66.0 36.9
Creditors: amounts falling due (14.0) (11.7)
within one year
Net current assets 52.0 25.2
Total assets less current 66.3 37.2
liabilities
Creditors: amounts falling due after more (29.2) -
than one year
37.1 37.2
Capital and reserves
Called up share capital 5.6 5.4
Share premium account 92.6 76.0
Other reserves 23.7 23.6
Profit and loss account (84.8) (67.8)
Equity shareholders' funds 37.1 37.2
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 28 FEBRUARY 1999
1999 1998
#m #m
Cashflow from operating activities (13.7) (25.8)
Returns on investments and servicing of
finance
Interest received 3.0 2.3
Taxation paid (0.3) -
Capital expenditure and financial
investments
Fixed assets acquired (6.5) (2.1)
Acquisitions
Investment in joint venture (0.4) -
Management of liquid resources
Net transfer between cash and (23.0) 29.0
investments
Cash (outflow)/inflow before financing (40.9) 3.4
Financing
Receipts from sale of investment in 29.1 -
subsidiary
Share issues 15.0 -
Exercise of share options 2.2 0.9
46.3 0.9
Increase in cash in the year 5.4 4.3
Increase in cash in the year as above 5.4 4.3
Increase/(decrease) in short-term 23.0 (29.0)
investments
Movement in net funds in year 28.4 (24.7)
Net funds at start of year 26.7 51.4
Net funds at end of year 55.1 26.7
NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT
(a) Reconciliation of operating loss to net cash flows from operating
activities
1999 1998
#m #m
Operating loss (17.5) (25.7)
Depreciation 2.9 3.0
Non-cash element of exceptional expense (note 1.2 -
3)
Discount on share options 0.2 0.3
Provision of free of charge services - (0.5)
Increase in stocks (3.1) (0.3)
Decrease/(increase) in debtors 2.4 (5.3)
Increase in creditors 0.2 2.7
Net cash outflow from operating activities (13.7) (25.8)
(b) Analysis of changes in net funds
At 1 March Cashflow At 28 Feb
1998 1999
#m #m #m
Cash at bank and in hand 4.9 5.4 10.3
Current asset investments 21.8 23.0 44.8
Total 26.7 28.4 55.1
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
FOR THE YEAR ENDED 28 FEBRUARY 1999
1999 1998
#m #m
Consolidated loss for the year (17.2) (23.3)
Discount on share options 0.2 0.3
Exchange adjustments on foreign currency - (0.1)
investments
Total recognised gains and losses for the (17.0) (23.1)
year
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
FOR THE YEAR ENDED 28 FEBRUARY 1999
1999 1998
#m #m
Total recognised gains and losses for the (17.0) (23.1)
year
Share capital issued 16.9 0.9
Net decrease in shareholders' funds (0.1) (22.2)
Shareholders' funds at start of year 37.2 59.4
Shareholders' funds at end of year 37.1 37.2
NOTES TO THE ACCOUNTS
1. ANALYSIS OF REVENUES, OPERATING LOSS AND NET ASSETS
(a) An analysis of revenues is given by location of the customer:
1999 1998
#m #m
United Kingdom 27.2 14.5
Rest of Europe 3.1 3.7
United States of America 7.4 7.3
Rest of World 3.5 0.7
41.2 26.2
(b) Segmental analysis by business:
Net
Revenues Operating Loss Assets
1999 1998 1999 1998 1999 1998
#m #m #m #m #m #m
Chiroscience 10.9 10.2 (23.1) (29.5) 16.3 7.2
R&D
ChiroTech 30.1 16.0 12.5 7.1 2.0 28
Rapigene 0.2 - (2.2) - (2.2) -
41.2 26.2 (12.8) (22.4) 16.1 10.0
Central (4.7) (3.3) 21.0 27.2
Activities
(17.5) (25.7) 37.1 37.2
Group net funds are not allocated and are included in net assets relating to
central activities. Central activities represent the cost of the Group's
central management activities and include an exceptional cost of #1.4m being
the charge for settling a dispute with a former director.
(c) Geographical analysis by country of origin:
Revenues Operating Loss Net Assets
1999 1998 1999 1998 1999 1998
#m #m #m #m #m #m
UK 41.0 25.7 (11.2) (14.7) 9.6 7.4
US 0.2 0.5 (1.6) (7.7) 6.5 2.6
41.2 26.2 (12.8) (22.4) 16.1 10.0
Central (4.7) (3.3) 21.0 27.2
activities
(17.5) (25.7) 37.1 37.2
2. INTEREST RECEIVABLE AND PAYABLE
1999 1998
#m #m
Interest receivable on bank deposits and money 2.9 2.4
market instruments
Preferential dividend paid by subsidiary (note (1.5) -
5)
3. TAX ON LOSS ON ORDINARY ACTIVITIES
The taxation charge is made up as follows:
1999 1998
#m #m
Corporation tax charge in subsidiary undertaking 0.7 -
Withholding tax suffered on overseas receipts 0.3 -
1.0 -
4. LOSS PER SHARE
The calculation of basic loss per share is based on a loss for the year of
#17.2m (1998: #23.3m) and on 108.9m Ordinary Shares (1998: 104.3m Ordinary
Shares) being weighted average number of shares in issue during the year.
The weighted average number of shares in 1998 has be restated to exclude
shares held by the Employee's Share Ownership Plan, in accordance with
FRS14.
The diluted loss per share is based on a loss for the year of #17.2m (1998:
#23.3m) and on 110.5m ordinary shares (1998: 106.7m ordinary shares)
calculated as follows:
1999 1998
Number Number
Basic weighted average number of shares 108.9 104.3
Dilutive potential ordinary shares:
Employee share options 1.6 2.4
110.5 106.7
5. CREDITORS: amounts falling due after more than one year
On 1 September 1998 the Group disposed of 30% of its interest in Chirotech
Technology Limited to Ascot plc for #30m in cash.
The terms for the sale were such that the shares acquired by Ascot were
attributed with certain additional rights, including the right to receive a
minimum dividend of #3m pa. These additional rights cause the transaction
to be subject to the accounting standard, FRS4 and to be technically treated
as the issue of non-equity shares rather than the sale of equity shares. As
a result the #30m received from Ascot, less associated costs of #0.8m, is
accounted for as a liability rather than part of shareholders' equity. The
#28.4m surplus of these proceeds over the asset value of the ChiroTech
shares sold is not yet recognisable as a gain in the income statement.
Ascot has no right to call in this liability.
A further consequence of accounting for this transaction as non-equity
shares is that the income statement and balance sheet show no deductions or
liabilities for minority interests. Moreover, the dividends payable to
Ascot are disclosed as an interest expense in the income statement.
6. POST BALANCE SHEET EVENTS
In March 1999 the Group concluded an agreement with Zeneca Group plc
whereby, as a result of the competitive threat to Chirocaine posed by the
merger of Zeneca with Astra AB, Zeneca have returned all rights to
Chirocaine to Chiroscience. Inter alia, the agreement provided for an
immediate payment to Chiroscience of #10m in compensation for lost profits
and for Zeneca to provide ongoing funding of the product's technical and
commercial development.
7. STATUTORY ACCOUNTS
The preceding information does not constitute the Company's statutory
accounts for the years ended 28 February 1999 or 28 February 1998 but is
derived from those accounts. This announcement was approved by the Board on
29th April 1998. 1999 statutory accounts will be posted to shareholders on
or before 16th May 1999 and will be available from the Company Secretary,
Chiroscience Group plc, 283 Cambridge Science Park, Milton Road, Cambridge
CB4 0WE, telephone 01223 420 430 shortly thereafter. Statutory accounts for
1998 have been delivered to the Registrar of Companies, and those for 1999
will be delivered following the Company's Annual General Meeting.
END
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