9th May 2006 07:00
VASTox plc09 May 2006 VASTOX PLC ("VASTox" or "the Company") PRELIMINARY RESULTS FOR THE YEAR ENDED 31 JANUARY 2006 Oxford, UK, 9 May 2006 - VASTox plc (AIM: VOX), a leading chemical genomicscompany, today announces its preliminary results for the year ended 31 January2006. Operational Highlights • Lead series of compounds selected that demonstrate in vivo efficacy in Duchenne muscular dystrophy (DMD) models • Two new drug discovery programmes initiated in spinal muscular atrophy and osteoarthritis Financial Highlights • Revenues up from £113,000 to £531,000 for the full year • R&D investment up from £268,000 to £1.0 million for the full year • Cash and short term deposits at year-end of £12.6 million (prior year: £14.2 million) Post Year-end Events • £10.5 million (gross) raised in secondary placing to accelerate DMD programme • Appointment of Richard Storer, DPhil FRSC as director and Chief Scientific Officer • Initiation of fifth proprietary drug discovery programme in cancer Announced today • Appointment of Darren Millington, ACMA as director and Chief Financial Officer (see separate announcement) Commenting on the results, Steven Lee, CEO of VASTox plc, said: "We have madegreat strides in our first full year as a public company. In addition to theachievements highlighted above in terms of commercial and technical successes,we have established real corporate strength and a reputation in thepharmaceutical industry as leading the way in chemical genomics for drugdiscovery. Strengthening of the management team will enable us to deliverfurther success in the coming year." For more information please contact: VASToxSteven Lee, PhD, Chief Executive Officer Tel: +44 (0)1235 443910Darren Millington, Chief Financial Officer Citigate Dewe RogersonDavid Dible / Mark Swallow / Valerie Auffray Tel: +44 (0)207 638 9571 Chairman's Statement Review Our first full year as a public company has seen VASTox make great strides inall areas of the business. Our chemical genomics services business is growingrapidly and we are finding increasing industry acceptance of the use ofzebrafish and fruitflies in early drug discovery. Our proprietary drug researchprogrammes are also progressing well. In January 2006 we announced a breakthrough in our lead programme for Duchennemuscular dystrophy (DMD). This devastating genetic disease affects over 30,000patients in the developed world and is generally fatal by the age of 30. Weannounced that VASTox had identified a series of small molecules that induce theproduction of increased amounts of utrophin in a validated in vivo model forDMD. Utrophin is a naturally-produced protein that can compensate for a lack ofdystrophin observed in DMD patients and has been the focus of co-founderProfessor Kay Davies' academic research for over 15 years. VASTox has broughtcommercial skills and resources to accelerate this programme, focusing on thosesteps that bring us closer to finding an effective drug; in vivo proof ofprinciple of utrophin up-regulation is an important first step. Thesignificance of our results is that this is the first time up-regulation ofutrophin has been shown using drug-like compounds. These compounds offer themost promising starting points to create a safe and efficacious medicine.VASTox retains all relevant intellectual property, including patents andexclusive licences. In February 2006, VASTox announced a successful secondary placing of shares.The Company raised £10 million net of expenses and has pledged to use thiscapital to accelerate our DMD programme. We are committed to begin Phase Iclinical trials as soon as possible. Chemical genomics Our services business continues to expand well, and I am delighted to see VASToxdevelop the chemical genomics platform for customers and our own programmes.When I founded the Company in 2003, I recognised that effective drug discoverywill always require a rigorous understanding of both the biology and chemistryof living systems. My belief that chemical genomics is the most promisingbridge between these two disciplines is now being realised. VASTox is nowdemonstrating the value of this approach in using zebrafish and fruitflies topredict, with a high level of accuracy, the potential efficacy and side effectsof drugs in people. We and our customers recognise that getting safer drugs tomarket faster makes both commercial and ethical sense. Our chemical genomicsplatform will help achieve this. Board and employees The Company made two Board changes during the year as we reviewed the skillsnecessary to lead a dynamic and fast-growing company. Sir Brian Richards wasappointed as Non-executive Director on 7 October 2005 and brings to VASTox adistinguished track record in the life sciences industry. Dr Andrew Mulvaneystepped down as Operations Director on 7 October 2005 to focus full-time onbusiness development. On behalf of the Board I would like to thank Andy for hisvaluable contribution to VASTox to date. After the year end we announced two further appointments to the Board; RichardStorer, DPhil FRSC as Chief Scientific Officer and Darren Millington, ACMA asChief Financial Officer. Richard will bring to the Company vast experience indrug discovery and a track record of developing successful drugs. Darren hasmade a significant contribution to the Company's growth to date and will now addhis financial expertise to the Board. I would like to warmly welcome both tothe Board. The success of any company relies on the quality of its employees, and VASTox isno exception. On behalf of the Board, I thank our staff for their hard work anddedication over the past year. We have achieved a great deal since ourflotation in October 2004. I believe our shareholders can have confidence thatwe are building a team of scientists and managers that will create bothsignificant value for investors and effective treatments for patients. Professor Stephen DaviesChairman Chief Executive Officer's Review Introduction Since our listing on AIM in October 2004 we have been focused on achieving rapidprogress in our chemical genomics services business and our in-house drugdiscovery programmes. Our financial and operational results to date prove that we are delivering onour targets to both grow profitable revenues and make breakthroughs in our drugprogrammes. Drug programmes VASTox currently runs in-house drug discovery programmes in Duchenne musculardystrophy (DMD), Spinal muscular atrophy (SMA), multi-drug resistant infection,osteoarthritis and cancer. We began our SMA and osteoarthritis programmes in the year after rigorousassessment of both the commercial opportunities and the ability of our chemicalgenomics platform to add value. The Company's strategy is to distinguish our drug discovery programmes as either'niche' or 'large patient population' diseases. DMD and SMA are both nichediseases each affecting 30,000 and 50,000 patients respectively. Thisrelatively small population size makes them unattractive research areas forlarge pharmaceutical companies but allows smaller drug discovery and developmentcompanies such as VASTox the opportunity to aggressively develop a treatmentwhere there is currently no effective therapy. We will work towards orphan drugdesignation for these programmes, giving the Company regulatory and financialincentives to develop a marketable drug. Following the Company's successfulsecondary placing announced in February 2006, we now have the resources toprogress our DMD programme to phase II trials. We look to generate income from our 'large patient population' programmes at anearlier stage of development. Our programmes in multi-drug resistant infectionand osteoarthritis will be of interest to large pharma and we would look toout-license these therapies as we produce promising chemical leads. Chemical genomics services Our services business generated revenues of £531,361 (2005: £112,718) during theperiod. VASTox has worked with nine customers during the financial year and oursales pipeline for the 2006/07 financial year is already looking healthy. As we increase our sales and marketing efforts, we find a wider acceptance ofthe chemical genomics concept and, in particular, the value of using zebrafishand fruitflies in early drug discovery. Using zebrafish and fruitfly models atthe earliest stages of drug discovery allows customers to discard toxic drugcandidates promptly and focus energies on their safest compounds. Not only doesthis approach make economic sense for the drug industry, it also helps theindustry in its aim to implement the '3 Rs' in pharmaceutical research; that is,to Reduce, Refine and Replace the use of higher animals in drug research. During the coming financial year we look to increase both the level of revenuesand the range of customers we work with. Outlook VASTox is now maturing into an exciting drug discovery and development companythat offers the prospect of rapidly developing successful drugs for currentlyincurable diseases, whilst remaining disciplined in its use of capital. Ibelieve that VASTox now has the facilities, the people and the investors tobring significant rewards for both patients and the Company's stakeholders. Steven Lee, PhDChief Executive Officer 9 May 2006 Consolidated Profit and Loss AccountFor the year ended 31 January 2006 Restated 2006 2005 Note £ £Turnover 531,361 112,718Cost of sales (233,444) (90,200)Gross profit 297,917 22,518 Research and development (1,025,683) (267,533)General, management and administration (1,005,366) (40,348)Total administrative costs (2,031,049) (307,881) Operating loss (1,733,132) (285,363) Interest receivable 582,868 215,368 Loss on ordinary activities before taxation (1,150,264) (69,995) Tax on loss on ordinary activities 155,437 24,321 Loss on ordinary activities after taxation (994,827) (45,674) Basic and diluted loss per ordinary share 3 3.18p 0.19p All amounts relate to continuing activities. Statement of recognised gains and losses There were no recognised gains and losses other than the losses above, andtherefore no separate statement of total recognised gains and losses ispresented. A prior year adjustment to exclude the non-cash charge of £453,351for expensing of share options in 2005 has increased the opening balance of theprofit and loss account reserve by the same amount. Consolidated Balance SheetAt 31 January 2006 Restated 31 January 31 January Note 2006 2005 £ £Fixed assetsIntangible assets 28,016 20,000Tangible assets 1,261,082 1,353 1,289,098 21,353Current assetsStock 27,000 -Debtors 541,300 93,140Cash on short term deposits 11,593,626 13,800,000Cash at bank 1,039,690 361,252 13,201,616 14,254,392 Creditors: amounts falling due within one year (704,833) (185,849) Net current assets 12,496,783 14,068,543 Creditors: amounts falling due after more than (690,812) -one year Net assets 13,095,069 14,089,896 Capital and reservesCalled up share capital 3,131,311 3,131,311Share premium account 12,946,848 12,946,848Other reserves (1,942,589) (1,942,589)Profit and loss account (1,040,501) (45,674)Equity shareholders' funds 4 13,095,069 14,089,896 Company Balance SheetAt 31 January 2006 Restated 31 January 31 January Note 2006 2005 £ £Fixed assetsInvestments 2,020,198 2,020,198 Current assetsDebtors - due after more than one year 14,225,887 423,662Debtors - due within one year - 17,056 14,225,887 440,718 Cash on short term deposits - 13,800,000 14,225,887 14,240,718 Creditors: amounts falling due within one year - (5,000) Net current assets 14,225,887 14,235,718 Net assets 16,246,085 16,255,916 Capital and reservesCalled up share capital 3,131,311 3,131,311Share premium account 12,946,848 12,946,848Profit and loss account 167,926 177,757Equity shareholders' funds 4 16,246,085 16,255,916 Consolidated Cash Flow StatementFor the year ended 31 January 2006 Restated 2006 2005 £ £ Net cash outflow from operating activities (1,447,680) (184,863) Returns on investments and servicing of financeInterest received 507,652 215,368 TaxationR&D tax credit received 29,041 - Capital expenditurePurchase of tangible fixed assets (1,357,770) (1,803)Purchase of intangible fixed assets (15,783) (5,000) (1,373,553) (6,803) Cash (outflow) inflow before management of liquid resources and (2,284,540) 23,702financing Management of liquid resourcesDecrease (increase) in short term deposits 2,206,374 (13,800,000) FinancingIssue of ordinary share capital (net of expenses) - 14,057,959Increase in debt during the year 756,604 - 756,604 14,057,959 Increase in cash 678,438 281,661 Reconciliation of operating loss to net cash outflow from operating activities Restated 2006 2005 £ £ Operating loss (1,733,132) (285,363)Depreciation charge 127,520 450Amortisation charge 7,767 5,000Increase in debtors (246,547) (68,615)Increase in stock (27,000) -Increase in creditors 423,712 163,665Net cash outflow from operating activities (1,447,680) (184,863) Notes 1. Accounting policies Basis of preparation The financial information has been prepared under the historic cost conventionand in accordance with applicable United Kingdom accounting standards. The accounting policies used in preparing the financial statements have beenapplied consistently throughout all periods presented. Basis of consolidation The consolidated accounts incorporate the financial statements of the Companyand its subsidiary. Following the group restructuring in the prior year, the Group prepareconsolidated accounts using merger accounting principles as set out in FinancialReporting Standard 6. No profit and loss account is presented for the Company as permitted by Section230 of the Companies Act 1985. The Company's loss for the year was £9,831(2005: profit of £177,757). Restatement The directors have reviewed the accounting treatment of share options in theaccounts for the year to 31 January 2005 in relation to UITF 17. The directorshave concurred that the share options were priced at the market value at thedate of grant. These accounts have therefore been restated to exclude thenon-cash charge of £453,351 for expensing of share options. This restatementhas had no effect on net assets or equity shareholders' funds. The directors have also reviewed the allocation of operating expenses betweencost of sales and research and development. After enquiries, the Board hasagreed to reallocate £189,021 from cost of sales for the year ended 31 January2005 to research and development. The Board agree that this allocation ofexpenditure more fairly reflects the level of activities during the prior year.This restatement has had no effect on operating profit. Statutory financial statements The financial information set out above does not constitute the Company'sstatutory accounts for the years ended 31 January 2006 or 2005, but is derivedfrom those accounts. Statutory accounts for 2005 have been delivered to theRegistrar of Companies and those for 2006 will be delivered following theCompany's annual general meeting. The auditors have reported on those accounts;their reports were unqualified and did not contain statements under theCompanies Act 1985, sections 237(2) or (3). 2. Fundraising On 27 February 2006 the Group announced an equity placing of 5,903,955 ordinaryshares at a price of 177 pence. These shares rank pari passu with the existingshares. The equity placing raised gross proceeds of £10.45 million (£9.97million net of expenses). 3. Earnings per ordinary share The basic and diluted earnings per share is based on a loss of £994,827 for theyear ended 31 January 2006 (Restated 2005: loss of £45,674 ) and the weightedaverage number of shares in issue during the year of 31,313,111 shares (2005:23,464,765 shares). 4. Reconciliation of movement in Group shareholders funds Restated 2006 2005 £ £GroupOpening shareholders' funds 14,089,896 -Shares issued during the year - 3,131,311Share premium on issued shares (net of expenses) - 12,946,848Merger reserve - (1,942,589)Loss for the financial year (994,827) (45,674)Closing shareholders' funds 13,095,069 14,089,896 CompanyOpening shareholders' funds 16,255,916 -Shares issued during the year - 3,131,311Share premium on issued shares (net of expenses) - 12,946,848(Loss) profit for the financial year (9,831) 177,757Closing shareholders' funds 16,246,085 16,255,916 5. Availability of information Copies of the Report and Accounts for the year ended 31 January 2006 will beposted to shareholders shortly and thereafter may be obtained from the company'swebsite: www.vastox.com. 6. Notice of Annual General Meeting The Annual General Meeting will be held at 9am on 9 June 2006 at the Company'sregistered office, 91 Milton Park, Abingdon, Oxfordshire, OX14 4RY. 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