Final Results

RNS Number : 3381I

Ark Therapeutics Group PLC

10 March 2010

 

Ark Therapeutics Group plc

 

Preliminary results for the year ended 31 December 2009

London, UK, 10 March 2010 - Ark Therapeutics Group plc today announces its unaudited preliminary results for the year ended 31 December 2009.

 

HIGHLIGHTS

 

Cerepro®	·; Named Patient Supply approval for Cerepro® in France and Finland ·; First annual update of Cerepro® Phase III trial showed results strengthened in Cerepro®'s favour ·; Updated Cerepro® Phase III results presented by Investigators at Society of Neuro-Oncology Conference in New Orleans ·; EMA adopts negative opinion on Cerepro® MAA
Trinam®	·; Trinam® awarded Fast Track status by FDA ·; First patient enrolled into US Phase III Study for Trinam®
EG011 (refractory angina)	·; Commencement of Phase I/IIa refractory angina trial with AIV Institute
Pre-clinical	·; Three further gene-based programmes approaching Phase I clinical development ·; Positive feedback from MHRA scientific advice meeting on EG013 for foetal growth restriction Phase I/IIa ·; Achieved optimised molecule in NP-1 antagonist programme (EG014)
Woundcare	·; International medical device sales collaboration on Kerraboot® signed with AOTI Ltd ·; Kerraglove® woundcare device for burns on the hand launched ·; Revenues to 31 December 2009 grew at 70% year-on-year
Manufacturing	·; Major advance in commercial-scale adenoviral gene-based medicine production using suspension process in single use systems ·; Commencement of contract manufacture for Oy Lx Therapies Ltd VEGF-C gene medicine programme ·; Commencement of contract manufacturing process development work for a second company
Corporate/ Commercial	·; VEGF-C and -D gene and technologies for lymphatic disease licensed to Oy Lx Therapies Ltd in Finland ·; Multiple gene regulation technology patent filed ·; Prestigious European R&D prize won by Ark founder ·; Commercialisation activities accelerated relating to ACE stroke patent ·; Dennis Turner, Chairman since September 1999, retired on 30 June 2009; Andrew Christie appointed Chairman from 1 July 2009 ·; Cash, cash equivalents and money market investments of £21.5m at 31 December 2009 (£40.6m at 31 December 2008)
Post-period events	·; Cerepro® MAA withdrawn from EMA after committee advises confirmatory trial needed ·; Re-prioritisation of R and D programmes with Vitor™ put on hold ·; Strategic review initiated following implementation of restructuring and cost reduction measures ·; First refractory angina patient treated with VEGF-D shortform (EG011) in Phase I/IIa trial with AIV Institute

 

Dr Nigel Parker, CEO of Ark, commented:

 

"We have continued to build on our strengths in the gene therapy area and whilst outstanding clinical issues were a barrier to Cerepro® approval, our adenoviral gene delivery platform has been fully established during the EMA review process. We are now focussed on building our product portfolio using this platform and are considering the next steps with Cerepro®. Ark will continue to look to create value from its complete range of business assets and we will maintain our focus on cash utilisation as we progress the business in 2010."

 

 

For further information:

 

Ark Therapeutics Group plc	Tel: + 44 (0)20 7388 7722
Dr Nigel Parker, CEO
Martyn Williams, CFO
Financial Dynamics	Tel: +44 (0)20 7831 3113
Ben Atwell
Susan Quigley

 

 

Notes to Editors

 

Ark Therapeutics Group plc

 

Ark Therapeutics Group plc is a specialist healthcare group (the "Group") addressing high value areas of unmet medical need within vascular disease, wound care and cancer. These are large and growing markets, where opportunities exist for effective new products to generate significant revenues. With six marketed devices, Kerraboot®, Kerraped®, Flaminal®, Neuropad®, KerraMax® and Kerraglove®, three further lead pharmaceutical products in late stage clinical development: Cerepro®, Vitor™, and Trinam® and two in Phase I/IIa trials, EG011 and EG016 the Group is transitioning from an R&D company to a commercial, revenue generating business.

 

Ark's own products are sourced from related but largely non-dependent technologies within the Group and have been selected to enable them to be taken through development within the Group's own means and to benefit from Orphan Drug Status and/or Fast Track Designation, as appropriate. This strategy has allowed the Group to retain greater value and greater control of clinical development timelines, and to mitigate the risks of dependency on any one particular programme or development partner. Ark has secured patents or has patent applications pending for all its lead products in principal pharmaceutical markets.

 

Ark has its origins in businesses established in the mid-1990s by Professor John Martin and Mr Stephen Barker of University College London and Professor Seppo Yla-Herttuala of the AI Virtanen Institute at the University of Kuopio, Finland, all of whom play leading roles in the Company's research and development programmes.

 

Ark's shares were first listed on the London Stock Exchange in March 2004 (AKT.L).

 

This announcement includes "forward-looking statements" which include all statements other than statements of historical facts, including, without limitation, those regarding the Group's financial position, business strategy, plans and objectives of management for future operations (including development plans and objectives relating to the Group's products and services), and any statements preceded by, followed by or that include forward-looking terminology such as the words "targets", "believes", "estimates", "expects", "aims", "intends", "will", "can", "may", "anticipates", "would", "should", "could" or similar expressions or the negative thereof. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors beyond the Group's control that could cause the actual results, performance or achievements of the Group to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding the Group's present and future business strategies and the environment in which the Group will operate in the future. Among the important factors that could cause the Group's actual results, performance or achievements to differ materially from those in forward-looking statements include those relating to Ark's funding requirements, regulatory approvals, clinical trials, reliance on third parties, intellectual property, key personnel and other factors. These forward-looking statements speak only as at the date of this announcement. The Group expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained in this announcement to reflect any change in the Group's expectations with regard thereto or any change in events, conditions or circumstances on which any such statements are based. As a result of these factors, readers are cautioned not to rely on any forward-looking statement.

 

 

Chairman and Chief Executive's Review

 

PIONEERING ESSENTIAL BIOMEDICINES

 

During 2009 Ark made important progress in pioneering its DNA-based medicine capabilities. As with all pioneering science, however, there are inevitable setbacks and having seen the data from the Cerepro® (brain cancer) pivotal trial strengthen considerably during the year and Named Patient Supply ("NPS") commence, we were disappointed that in late December the European Medicines Agency ("EMA") gave a negative opinion on the Marketing Authorisation Application ("MAA"). Post period, following a presentation to the oncology Scientific Advisory Group as part of the re-examination process, we have withdrawn the Cerepro® MAA as it is clear that a clinical efficacy issue remains outstanding which can only be resolved to the regulators' satisfaction with a further trial. Despite this setback, in 2009 we have announced a number of "world firsts" in gene therapy, the most notable being that our adenoviral gene delivery platform cleared all regulatory barriers to approval. To build on this breakthrough, we are now focussing our future product development on leveraging our adenoviral gene delivery platform initially with the vascular endothelial growth factor ("VEGF") genes which we secured in the Lymphatix Oy acquisition. Having cleared all Investigational New Drug ("IND") application requirements and opened the Phase III Trinam® (haemodialysis access) study for recruitment as well as being awarded Fast Track Status by the US Food and Drug Administration ("FDA"), recruitment was initially impacted by late arising stability issues with clinical supplies until these were resolved late in the year. In our earlier clinical portfolio, the Phase I/IIa refractory angina trial opened for recruitment in collaboration with the AI Virtanen Institute in Finland and we made regulatory progress with the EMA with our foetal growth restriction ("FGR") programme, agreeing all final toxicology requirements and the Phase I/IIa development pathway.

 

Following our decision to license VEGF-C and D to Oy Lx Therapies Ltd for diseases of the lymphatic system we are pleased that they placed the contract manufacturing of their adenoviral C construct with the Group. We announced a second third party manufacturing contract in late December. Our plant continues to operate to the highest standards, being validated uniquely to both EU and USA standards and we are pleased to be receiving further enquiries for manufacturing of viral-based medicines.

 

Our woundcare product sales continued to exhibit the very strong growth we reported mid year with continued acceptance of all our key products on the UK regional formularies. Mid year we announced an international deal with Advanced Oxygen Therapy Inc. ("AOTI") for use of Kerraboot® in combination with their two2™ oxygen device for leg ulcers and the preliminary order from AOTI was placed in the second half of the year.

 

In summary, whilst the Cerepro® EMA decision is a setback, we are taking the appropriate cash conservation measures to ensure our cash runway is extended so we can continue to progress Cerepro® in the EU and the USA and hit key milestones in our other programmes as we pioneer this area of medicine, commercialise our IP and drive sales of our woundcare products.

 

Pipeline Review

 

Cerepro® - Cerepro® is our novel gene-based medicine for the treatment of operable glioblastoma (brain cancer). We started 2009 by announcing that the EMA had commenced review of the MAA. The first Named Patient Supply ("NPS") was approved in France in February and in May Finland also approved NPS. In Q2 we reported that, in the annual study update, the Cerepro® pivotal study (Study 904) results had strengthened in the product's favour and details of this results update were presented by the principal investigators in New Orleans in early Q4. Ongoing interactions took place with the EMA and rapporteurs throughout 2009 as part of the MAA review process and in late December the EMA notified the Company that, whilst all the pre-clinical, manufacturing and environmental sections of the filing were approvable, it was adopting a negative opinion due to outstanding clinical issues. Post period, the Company filed a request for re-examination with supporting data relevant to the outstanding issues, and has recently withdrawn the MAA as it is evident the outstanding clinical concern can only be resolved with a further trial.

 

Trinam® - Trinam® is Ark's novel gene-based therapy being developed under US Special Protocol Assessment ("SPA") for the treatment of haemodialysis access graft blocking. The product uses the same "approvable" adenovirus technology developed for Cerepro®. At the start of the period we filed the updated IND application with the FDA and completed set up of the first study centres at the end of Q1. In May, the first patient was recruited into the study. Mid year an unforeseen stability issue was observed in relation to the formation of particles in the US clinical product in storage and the Company did not recruit further patients into the study until this was explored and resolved. Recruitment re-started at the end of the year and the Company is accelerating centre set up and focussing now on enrolment in the most influential US centres.

 

VitorTM - VitorTM is a small molecule under development for the treatment of cachexia, a form of involuntary weight loss that occurs in terminal cancer. Following consultation with the FDA in 2008 on study design, the Company opened a pilot study as a preliminary to full Phase III development. We reported slower than expected enrolment during H1 2009. Despite various initiatives, the rate of recruitment remained slow in the second half of the year. Immediately post period the first interim report showed that, as currently designed, the study population were in a stable period in their cancer with neither placebo controls nor treated patients exhibiting weight loss during the three month study period. Thus, it was not possible to determine any therapeutic effect of VitorTM and the Company has since taken measures to halt the pilot study and put the programme on hold. We will investigate the results further and then decide whether or not to continue the development with a different study architecture after consultation with experts and the regulators.

 

EG011 - EG011 is being developed for treating refractory angina patients. It contains the shortform VEGF-D gene in Ark's established adenoviral platform. In 2008 we decided to accelerate our research-based programmes to leverage our approvable adenoviral technology and manufacturing and this is the first of our next generation gene-based medicines to move into clinical development. Final pre-clinical work was completed in the first half of the year and the study opened for recruitment in Q3. Post period we have announced the first patient has been treated with no evident adverse consequences post treatment, and screening and recruitment of further patients into the study is now accelerating. The study is being run in collaboration with the AI Virtanen Institute in Finland.

 

Pre-clinical

 

During the period, progress towards first human trials was made with two further gene medicine programmes both based on our adenoviral technology and the VEGF-D genes secured through our acquisition of Lymphatix Oy in 2008. EG016, for peripheral vascular disease, moved into the later stages of regulatory clearance in collaboration with the AI Virtanen Institute in Finland and enrolment of its first patient is expected in early 2010. We will commence treatment with longform VEGF-D as used in Trinam® and then use shortform D to compare the two genes which have marginally different receptor binding properties and hence different effects on the blood and lymphatic vasculature. The adenoviral shortform D gene construct has also progressed in pre-clinical development in EG013 for foetal growth restriction. The toxicology work has continued uneventfully and thus successfully through the year and we received positive advice from the UK Medicines and Healthcare products Regulatory Agency (MHRA) with respect to finalising pre-clinical work and entering Phase I/IIa development. This is planned for the second half of 2010.

 

A number of promising pre-clinical programmes have moved forward in research including long and shortform VEFG-D in wound healing, epigenomic technology and a unique VEGF gene related small molecule initiative, which blocks the neuropilin-1 receptor. The latter first pilot molecules have already demonstrated a therapeutic effect in in vitro cancer models halting angiogenesis, killing cancer cells directly and inhibiting cancer cell migration, and in 2009 we have successfully synthesised a number of optimised leads with nanomolar potency scheduled to enter first proof-of-principle studies in early 2010.

 

Manufacturing

 

Our manufacturing facilities in Kuopio, Finland have continued to operate successfully and consistently at the certified good manufacturing practice ("cGMP") Biosafety level 2. Our licence for commercial supply has been renewed and the plant is validated to EU and USA standards. The quality and competency of our staff and cGMP facility has been increasingly recognised during 2009 and we have announced significant technology advances in our ability to produce high volumes of adenoviral products for commercial supply. During the year we announced two third-party manufacturing contracts. We are encouraged by the interest in our expertise in this area as we continue to respond to enquiries from other companies for third-party manufacturing. We are confident we can work with others in our field without detracting from our own product focus. Our new GMP3 facility is moving through late stage validation and we plan for it to be fully operational for GMP manufacture later in 2010.

 

Woundcare Products

 

Sales of our woundcare products have been very successful this year. The sales growth we reported in the first half of the year continued to gain momentum and we ended 2009 showing 70% growth compared with the 2008 calendar year. KerraMax®, a super-absorbent dressing has, in particular, proved to be highly promotionally responsive, with Flaminal® and Kerraped® also maintaining growth over the previous year. Early in H2 we launched Kerraglove® for hand burns and whilst being a small product in the UK, it has good international potential. In late H1 we commenced an international collaboration with a USA company AOTI, for the distribution of Kerraboot® alongside its own two2™ in-patient oxygen pressure treatment. AOTI have placed their first order and market feedback from the initial use of Kerraboot® between two2™ hospital treatment has been positive. Despite the strong growth which, post period, is continuing at a similar rate, we will continue to source and introduce new products to expand our range. We believe our woundcare product sales are now some of the fastest growing in the UK and we are optimistic that they will achieve sustained profitability as we go forward.

 

Patent Portfolio Update

 

At the close of 2009 we have 173 patents granted and 116 applications pending and we have been consistently successful in overcoming the objections and oppositions that occur in the normal course of prosecution and maintenance. In February we filed an application covering a breakthrough in gene regulation technology, both turning down and turning up functional genes. This has the potential to supersede existing gene silencing technology particularly as the construct can be delivered as a therapeutic with existing viral vector technologies.

 

Late in the period we made further progress with advancing the commercialisation of our IP in the stroke area and, having had preliminary negotiations with one company in Europe, the first patent infringement hearing is scheduled to take place in mid 2010, shortly after the European Patent Office ("EPO") hearing to consider the objections raised by potentially infringing companies to Ark's granted patent in the EU. Ark has continued to make progress with the prosecution of the US patent: we have successfully overcome the various prior art and other objections raised to date, and post period we prevailed in various procedural actions at the US Patent Office. Whilst we cannot predict with certainty the US Patent Office's future actions we hope to have a final resolution of our stroke application by mid 2010. We remain optimistic as to the commercial value of this intellectual property.

 

Corporate Activities

 

Having completed the acquisition of Lymphatix Oy in 2008 securing gene therapy rights to VEGF-C and D, early in 2009 we granted a licence to Oy Lx Therapies Ltd to exploit VEGF-C in lymphatic disease. They have progressed the project rapidly in proof-of-principle models and in July we were selected by them to undertake manufacturing development and produce clinical grade product on a third party contract basis. Late in the period we were notified that an Australian company, Vegenics Ltd, had initiated arbitral proceedings in Finland regarding the interpretation of the wording in the licence originally granted to Lymphatix in relation to VEGF-D. Having sought legal advice, the Company is strongly of the view that neither it nor any of its subsidiaries are conducting activities in breach of any patents and our international and Finnish lawyers strongly support the Company's interpretation of the licence. The Lymphatix business has been operating under the terms of the licence since its inception.

 

Strategic Review

 

During the year we continued to receive interest from companies as our gene therapies make development progress. Our focus to date on specialist areas of clinical need and Orphan Drug or Fast Track indications has so far allowed us to retain the full value of our products and assets in-house.

 

Following the withdrawal of the Cerepro® MAA, Ark has initiated a full review of its significant range of assets, their potential and alternative strategies and funding options to optimise shareholder value. The review will also consider strategic alternatives in light of approaches that have already been received, as announced by the Company on 9 March 2010.

 

Summary and Outlook

 

During 2009 Ark has focussed on building the strength of its successful adenoviral technology and gene-based medicine portfolio, moving its woundcare products towards sustained profitability and leveraging its unique manufacturing capability.

 

In Q1 2010 we expect to see the first patients enrolled and treated with high dose VEGF-D longform for peripheral vascular disease and to see recruitment accelerate in EG011 refractory angina with a read out of the low dose cohort after the middle of the year. Again in Q1 2010 we expect to see the results of the potentially high value neuropilin research programme in the first in vivo cancer models, after which we will look to conclude a partnership deal. Trinam® recruitment is expected to accelerate during the year and the potential for an interim read out on the more rapid primary endpoint exists in H2 2010. The foetal growth restriction programme will report on a series of key toxicology experiments to conclude pre-clinical development and enter Phase I/II development at the end of 2010. Having established our unique adenovirus platform is approvable and with next generation of our gene therapies addressing far larger non-orphan markets, we will be selectively looking for development partners where appropriate.

 

In Q2 2010 the outcome of the EPO decision on the stroke patent objections will be reported and we expect to get a first legal hearing on infringement in Europe. In H1 2010 we expect the US patent office to identify if there are any remaining impediments to the grant of our US stroke patent allowing us to enter commercial negotiations in the largest market.

 

We ended the year with £21.5m of cash and, following the initial Cerepro® MAA decision in December 2009, we have taken rapid cash conservation and restructuring measures which should mean that the Company's current cash will fund its operations until the second half of 2011. Our success on the technical aspects of the MAA filing has partly allowed us to take these cost reduction measures but in any event we have also reduced our activity on non-core R&D programmes and in early research to ensure we can focus and continue to build on our strengths specifically in gene-based medicine.

 

As of 1 July 2009, Mr Andrew Christie took over as Chairman of the Board of Directors replacing Mr Dennis Turner whose guidance and contribution towards building the Company in the previous ten years has been very significant.

 

2009 was a year of progress for Ark in many areas, despite the disappointment of the EMA's negative opinion on Cerepro®. This has only been possible due to the hard work and commitment of all Ark's employees and advisors for which we offer our sincere thanks.

 

In summary, we have continued to build on the strength of our gene therapy expertise and, whilst outstanding clinical issues were a barrier to Cerepro® approval this year, the clearance of all other hurdles to approval in December has seen Ark finally prove beyond doubt that its adenoviral gene delivery platform is an approvable technology and is the first new major biologics technology platform to achieve this status for many years. We will now consider the next steps with Cerepro®, including a pre filing meeting with the FDA, partnering and ways of financing a further trial. We will continue to look to realise value from our range of assets and to maintain our focus on cash utilisation as we progress through 2010.

 

 

Andrew Christie, Chairman

Nigel Parker, Chief Executive Officer

 

10 March 2010

 

 

Financial Review

 

Overview

 

The operating loss before other income and expenses decreased in the year primarily as a result of increased revenue, £3.0m in 2009 compared to £0.9m for 2008, and of reduced clinical trial expenditure following the completion of the Cerepro® 904 study. The net loss of £19.9m for the year ended 31 December 2009 (2008: £15.9m) was higher principally because of unrealised exchange losses on inter-company loans between Ark Therapeutics Limited and Ark Therapeutics Oy of £1.0m compared with gains of £2.6m in 2008 and lower interest income from cash balances.

 

Cash and money market investments at 31 December 2009 totalled £21.5m (2008: £40.6m).

 

Results of Operations

 

Years ended 31 December 2009 and 2008

 

Revenue

 

Revenue of £3.0m was recorded in 2009 (2008: £0.9m). Sales in the UK of woundcare products were £1.6m (2008: £0.9m), the increase in the year reflecting higher KerraMax® sales following the launch late in 2008, together with increased Flaminal® and Kerraped® sales. A further £1.2m arose from a milestone receipt due under the licensing agreement with Boehringer Ingelheim and the balance of revenue recorded in the year comprised contract manufacturing and sales of Cerepro® under the named patient programme. The revenue recorded in 2008 wholly comprised woundcare product sales. In future years an increasing proportion of revenues is expected to come from the products now in late stage clinical development, together with further out-licensing receipts.

 

Research and development expenses

 

Ark conducts research at its facilities in Kuopio, Finland, at University College London and through a specialist chemistry sub-contractor. Clinical studies are carried out by approved clinical research organisations within Europe and North America under the close supervision of senior project managers employed by the Group. Research and development expenditure in 2009 was £15.6m (2008: £16.5m), the decrease reflecting the completion of the Cerepro® study 904 during 2008 offset partially by the additional depreciation following the opening of the GMP3 biologics manufacturing facility in Finland. Research and development expenses comprise clinical development costs, manufacturing development costs and research costs and are detailed below.

 

Clinical development costs

 

Major expenditures during the year were the costs of commencement of recruitment into the Trinam® Phase III study and the Vitor™ Phase III pilot study. It is anticipated that 2010 will see the continued recruitment into the Trinam® Phase III study and further expenditure on the late-stage pre-clinical programmes, including initial clinical work.

 

Manufacturing development costs

 

Manufacturing development costs increased during 2009 primarily due to the commencement of depreciation of the new biologics manufacturing facility in Finland. Other significant expenditure included the manufacture and testing of GMP material for the prioritised pre-clinical programmes.

 

Research costs

 

Research costs in the period totalled £3.8m (2008: £3.8m), reflecting continued investment in the promising early stage pipeline.

 

Sales and marketing expenses

 

Selling, marketing and distribution costs for the period were £1.7m (2008: £1.7m). These costs related largely to UK woundcare products sales force expenses and marketing activities for these products.

 

Other administrative expenses

 

Other administrative expenses for the period were £5.3m (2008: £5.3m). These administrative expenses consist primarily of remuneration for employees in executive and operational functions (including finance, commercial development, legal and IT), facilities costs and professional fees.

 

Share-based compensation

 

Share-based compensation charges for the period were £0.4m (2008: £1.0m). The large decrease in the charge arose from a reassessment of the probability of certain performance criteria being achieved on outstanding options and LTIPs and it also reflects a reduction in headcount in 2009.

 

Other income and expenses

 

Other income and expenses comprised exchange differences, fair value gains and losses on hedging arrangements, the cost of foreign currency options and income from EU and Government grants. During the year the Group recognised other expenses of £0.7m compared with other income of £3.5m in 2008. Most of this movement arose from unrealised exchange differences on inter-company loans, with a loss of £1.0m recorded in the current period versus a gain of £2.6m in 2008. These Euro denominated loans were granted to the Finnish subsidiary, Ark Therapeutics Oy by Ark Therapeutics Limited, in order to finance the new biologics manufacturing facility. In addition, EU and government grant income during the year totalled £0.5m (2008: £0.1m).

 

Investment income

 

The Group invests its surplus cash in bank deposits of up to one year in accordance with the terms of the Investment Policy approved by the Board. This policy has as its principal aim the security of the Group's cash balances and contains strict criteria on minimum credit ratings and maximum deposit size. Net interest receivable comprises the interest income generated from cash invested in term and overnight deposits. In the year ended 31 December 2009 the Group earned investment income of £0.6m (2008: £2.9m) on cash deposits. The decrease was due to the significant fall in interest rates achievable as well as the lower cash and money market investments.

 

Taxation

 

There were no UK corporation tax charges for the year under review due to the incidence of tax losses. We continue the policy of surrendering tax losses for cash by making research and development tax claims to the tax authorities and anticipate a tax credit receivable of £1.3m in respect of the year ended 31 December 2009 (2008: £1.7m), the decrease resulting from the lower level of qualifying research and development expenditure in the year.

 

Balance sheet

 

Total net assets (defined as total assets less total liabilities) have reduced from £55.1m at 31 December 2008 to £35.6m at 31 December 2009, principally as a result of the operating cash outflows during the period.

 

Cash flow

 

The net cash outflow from operating activities for the year was £19.5m (2008: £20.4m). Ark's net cash outflow from capital expenditure was £1.6m (2008: £8.9m), the decrease reflecting the lower expenditure on the biologics manufacturing facilities in Kuopio, Finland. Intangible capital expenditure included licence payments to access technology used in Ark's development programmes.

 

Ark's net cash inflow from financing activities was £0.3m (2008: £2.1m), the decrease reflecting the 2008 proceeds of the grant from the Employment and Economic development Centre of Finland for the GMP3 facility. Interest received from term and overnight deposits was £1.6m (2007: £2.7m).

 

The Board operates an Investment Policy governing the investment of the Group's cash resources, under which the primary objective is to invest in low risk cash or cash equivalent investments to safeguard the principal, ensuring that these resources remain available to fund the Group's operations.

 

Corporate restructure

 

In January we announced that, as a consequence of the negative EMA opinion and resulting longer Cerepro® MAA approval timeframe, we had begun a series of restructuring measures. These measures include headcount reductions in manufacturing, research and development and support staff, as well as reducing investment in non-core early stage research programmes. In addition, we have decided to put the development of Vitor™ on hold. As a result, the Company's operational focus will be on progressing its core gene-based portfolio. The measures currently being implemented should mean that the Company's current cash will fund its operations until the second half of 2011.

 

 

Martyn Williams

Chief Financial Officer

10 March 2010

 

 

Directors' Responsibility Statement

 

The responsibility statement below has been prepared in connection with the Company's full annual report for the year ended 31 December 2009. Certain parts thereof are not included within this announcement.

 

The Directors confirm to the best of their knowledge that:

 

(a) the financial statements, prepared in accordance with IFRSs as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and

 (b) the management report, which is incorporated in the Directors' report, includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

 

 

By order of the Board

 

 

Nigel Parker	Martyn Williams
Chief Executive Officer	Chief Financial Officer
10 March 2010	10 March 2010

 

 

Consolidated income statement

for the year ended 31 December 2009 (unaudited)

 

 

	Note	Year ended 31 December 2009 £'000	Year ended 31 December 2008 £'000
Revenue	2, 3	2,964	929
Cost of sales		(1,042)	(479)
Gross profit		1,922	450
Research and development expenses		(15,562)	(16,461)
Selling, marketing and distribution costs		(1,718)	(1,667)
Other administrative expenses		(5,256)	(5,275)
Share-based compensation charge		(437)	(980)
Administrative expenses		(5,693)	(6,255)
Other income		550	3,569
Other expenses		(1,262)	(97)
Operating loss		(21,763)	(20,461)
Investment income	2	641	2,896
Finance costs		(31)	(35)
Loss on ordinary activities before taxation		(21,153)	(17,600)
Taxation		1,287	1,715
Loss on ordinary activities after taxation, being retained loss for the year		(19,866)	(15,885)
Loss per share (basic and diluted)	4	10 pence	8 pence

 

 

Consolidated statement of comprehensive income

For the year ended 31 December 2009 (unaudited)

 

	Year ended 31 December 2009 £'000	Year ended 31 December 2008 £'000
Loss on ordinary activities after taxation, being retained loss for the year	(19,866)	(15,885)
Exchange differences on translating foreign operations recognised in equity	(124)	329
Total comprehensive income for the period	(19,990)	(15,556)

 

All results relate wholly to continuing activities. All results are attributable to equity holders of the parent.

 

 

Consolidated balance sheet

as at 31 December 2009 (unaudited)

 

		31 December 2009 £'000	31 December 2008 £'000
Non-current assets
Goodwill		2,522	2,622
Other intangible assets		992	1,812
Property, plant and equipment		12,115	15,120
		15,629	19,554
Current assets
Inventories		429	479
Derivative financial instruments		-	610
Trade and other receivables		2,678	2,098
Research and development tax credit receivable		1,302	1,713
Current tax receivable		17	50
Money market deposits		14,590	33,509
Cash and cash equivalents		6,866	7,137
		25,882	45,596
TOTAL ASSETS		41,511	65,150
Non-current liabilities
Deferred income		1,437	1,892
Obligations under finance leases		48	62
Loans		630	578
		2,115	2,532
Current liabilities
Trade creditors and accruals		3,320	7,109
Deferred income		440	321
Obligations under finance leases		36	32
Loans		54	58
		3,850	7,520
TOTAL LIABILITIES		5,965	10,052
Equity
Share capital		2,071	2,052
Share premium		118,630	117,899
Merger reserve		38,510	38,510
Foreign currency translation reserve		221	313
Share-based compensation reserve		4,422	4,017
Reserve for own shares		(2,023)	(1,274)
Retained loss		(126,285)	(106,419)
TOTAL EQUITY		35,546	55,098
TOTAL LIABILITIES AND EQUITY		41,511	65,150

 

 

Consolidated cash flow statement

for the year ended 31 December 2009 (unaudited)

 

		Year ended 31 December 2009 £'000	Year ended 31 December 2008 £'000
Operating loss		(21,763)	(20,461)
Adjustments for non-cash items
Depreciation and amortisation		3,060	1,518
Fair value gain on cash flow hedge		610	(610)
Share-based compensation		437	980
EU and Government grants		(550)	(95)
Unrealised exchange gains/(losses)		1,033	(2,450)
Changes in working capital
(Increase)/decrease in receivables		(1,500)	331
Decrease/(increase) in inventories		50	(98)
Decrease in payables		(2,582)	(1,595)
Net cash used in operations		(21,205)	(22,480)
Research and development tax credit received		1,725	2,058
Income taxes paid		2	(25)
Net cash used in operating activities		(19,478)	(20,447)
Investing activities
Acquisition of Lymphatix Oy net of cash acquired		-	34
Interest received		1,561	2,663
Net maturities of money market investments		18,919	12,491
Purchases of property, plant and equipment		(1,364)	(7,944)
Purchases of intangible assets		(213)	(957)
Net cash from investing activities		18,903	6,287
Financing activities
Repayments of borrowings		(69)	(166)
Proceeds from borrowings		151	58
Grants received		214	2,171
Proceeds on issue of shares		1	69
Finance costs		(20)	(17)
Net cash from financing activities		277	2,115
Net decrease in cash and cash equivalents		(298)	(12,045)
Cash and cash equivalents at beginning of year		7,137	19,067
Effect of exchange rate changes		27	115
Cash and cash equivalents at end of year		6,866	7,137

 

 

Condensed statement of changes in equity for the year ended 31 December 2009 (unaudited)

 

	Year ended 31 December 2009 £'000	Year ended 31 December 2008 £'000
Equity at 1 January	55,098	68,066
Total comprehensive income for the period	(19,990)	(15,556)
Share-based compensation	437	980
Equity share options exercised	-	69
Share issue	750	2,813
Purchase of shares by Family Benefit Trust	(749)	(1,274)
Equity at 31 December	35,546	55,098

 

Selected notes to the financial information (unaudited)

 

 

1. Presentation of financial information

 

The financial information set out in this unaudited preliminary statement does not comprise Ark's statutory accounts within the meaning of section 435 of the Companies Act 2006. The statutory accounts of Ark Therapeutics Group plc for the year ended 31 December 2009, currently unaudited and to be published in due course, will be finalised on the basis of the financial information presented by the Directors in this unaudited preliminary statement and will be delivered to the Registrar of Companies for England and Wales in due course and will also be sent to shareholders.

 

Whilst the financial information included in this unaudited preliminary announcement has been computed in accordance with International Financial Reporting Standards (IFRSs), this announcement does not itself contain sufficient information to comply with IFRSs. The Company expects to publish full financial statements that comply with IFRSs in March 2010.

 

The financial information set out in this unaudited preliminary statement includes comparative figures that have been prepared on the same basis. The financial information for the year ended 31 December 2008 is derived from the statutory accounts for that year which have been delivered to the Registrar of Companies. The Auditors have reported on the financial statements for the year ended 31 December 2008 which were prepared under IFRSs. Their report was unqualified, did not draw attention to any matters by way of emphasis without qualifying their report and did not contain any statements under s237(2) or (3) Companies Act 1985.

 

Going Concern

 

In determining the appropriate basis of preparation of the financial statements, the Directors are required to consider whether the Group can continue in operational existence for the foreseeable future, being a period of not less than twelve months from the date of the approval of the annual report.

 

As at 31 December 2009, the Group had cash and money market investments of £21.5m and net assets of £35.5m.

 

During the year there has been a continuing focus on the management of costs within the Group and, subsequent to the year end, the Group implemented a restructuring plan which is expected to further reduce the cost base of the Group. In March 2010 the Group withdrew the MAA for Cerepro®.

 

Management prepares detailed cash flow forecasts which are reviewed by the Board on a regular basis. The forecasts include assumptions regarding future income and expenditure together with various scenarios which reflect opportunities, risks and appropriate mitigating actions. These scenarios recognise the current regulatory and commercial status of the Group's product portfolio, including the decision to withdraw the Group's MAA for Cerepro®, and consider the range of outcomes which may arise and resulting actions available to the Group, taking into account existing cash resources. Whilst there are inherent uncertainties regarding the cash flows associated with product development and commercialisation, the Directors are satisfied that there is sufficient discretion and control as to the timing and quantum of cash outflows to ensure that the Group is able to meet its liabilities as they fall due for the foreseeable future.

 

Therefore, having made relevant enquiries, including consideration of the Group's current cash resources and the cash flow forecasts, the Board has a reasonable expectation that, at the time of approving the annual report, the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, the Board continues to adopt the going concern basis in preparing the annual report.

 

The longer term sustainability of the Group will be dependent upon generating cash flows from successful development and commercialisation of the Group's products. Until the point of sustainability is reached, the Group will be dependent upon existing cash resources and any additional funding, for example through completion of additional licensing deals or manufacturing contracts, or through the raising of additional capital.

 

Adoption of new and revised standards

 

In the current financial year, the Group has adopted IFRS 8 "Operating Segments", IAS 1 "Presentation of Financial Statements" (revised 2007) and amendments to IFRS 7 "Financial Instruments: Disclosures". There has been no impact on the reported results and financial position of the Group as a result of these adoptions.

 

IFRS 8 requires operating segments to be identified on the basis of, inter alia, internal reports about the components of the Group that are regularly reviewed by the chief operating decision maker to allocate resources to the segments and to assess their performance. The chief operating decision maker has been identified as both the Chief Executive Officer and the Chief Financial Officer combined. The previous standard, IAS 14 "Segment reporting", required the Group to identify both business and geographical segments based on a risks and rewards approach. The segmental information which is included in note 4 below is presented in accordance with IFRS 8. The comparatives have been represented accordingly. There has been no change to the calculation of the segmental information given.

 

IAS 1 (revised) requires the presentation of comprehensive income as a separate component, either within the income statement or within the statement of changes in equity. As a result, the statement of changes in equity has been reformatted to show a separate subtotal representing comprehensive income for the years ending 31 December 2009 and 2008.

 

At the date of authorisation of these financial statements, the following standards and interpretations which have not been applied in these financial statements were in issue but not effective:

 

IFRS 1 (additional amendments)	Additional exemptions for first time adopters
IFRS 2 (amendment)	Group cash settled share-based payment transactions
IFRS 9	Financial instruments (November 2009)
IAS 24 (revised)	Related party disclosures (November 2009)
IAS 27 (revised 2008)	Consolidated and Separate Financial Statements
IAS 28 (revised 2008)	Investments in Associates
IAS 39 (amendment)	Financial instruments - Recognition and Measurement
IFRIC 14 (amendment)	Prepayments of a minimum funding agreement (November 2009)
IFRIC 17	Distributions of Non-cash Assets to Owners
IFRIC 19	Extinguishing financial liabilities with equity instruments (November 2009)
Improvements to IFRSs (April 2009)

 

The Directors anticipate the adoption of these standards and interpretations will have no material impact on the financial statements of the Group.

 

This preliminary statement was approved by the Board on 9 March 2010.

 

2. Revenue

 

An analysis of the Group's revenue is as follows:

 

	Year ended 31 December 2009 £'000	Year ended 31 December 2008 £'000
Continuing operations
Sales of goods and services	1,797	929
Revenue from out-licensing deals	1,167	-
	2,964	929
Other operating income
Investment income	641	2,896
	3,605	3,825

 

Investment income consists of interest on money-market investments and cash and cash equivalents. Investment income is earned on financial assets categorised under IFRS7 as loans and receivables (including cash and cash equivalents).

 

3. Business and geographical segments

 

In accordance with IFRS 8, the Group is required to define its operating segments based on, inter alia, the internal reports presented to its chief operating decision maker in order to allocate resources and assess performance. These reports focus on the Group's only business activity, being the discovery, development and commercialisation of products in areas of specialist medicine, with particular focus on vascular disease and cancer, and therefore no segmental information has been shown.

 

The principal sources of revenue for the Group are as follows:

 

	Year ended 31 December 2009 £'000	Year ended 31 December 2008 £'000
UK
Sales of woundcare products	1,576	929
Rest of Europe
Revenue from out-licensing deals (Boehringer Ingelheim)	1,167	-
Other	221	-
Total Revenues	2,964	929

 

An analysis of the Group's geographical non-current assets is shown below:

 

UK	11,890	13,460
Finland	13,971	17,184
Inter-segment eliminations (being inter-company loans)	(10,232)	(11,090)
	15,629	19,554

 

 

4. Loss per share

 

International Accounting Standards require presentation of diluted earnings per share when a company could be called upon to issue shares that would decrease net profit per share or increase net loss per share. Since the Group is loss making, there is no such dilutive impact.

 

The calculation of basic and diluted loss per ordinary share is based on the loss attributable to the owners of the Company of £19,866,000 (2008: £15,885,000) and on 207,081,720 ordinary shares (2008: 205,077,342) being the weighted average number of ordinary shares in issue.

 

5. Dividends

 

The Group incurred a loss after taxation of £19.9m (2008: loss of £15.9 m). The Directors are unable to recommend a payment of a dividend (2008: £nil).

 

6. Events after the balance sheet date

 

In February 2010, the Group announced that it had filed documentation with the EMA in relation to its request for re-examination of the MAA for Cerepro®. As described in the Chairman and Chief Executive's review above, the MAA was withdrawn in March 2010.

 

 

This information is provided by RNS

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