25th May 2006 07:02
Vectura Group PLC25 May 2006 Vectura Group plc Preliminary Results for the Year Ended 31 March 2006 Chippenham, UK, 25 May 2006 - Vectura Group plc (LSE: VEC), the drug developmentcompany, today announces its financial results for the year ended 31 March 2006. OPERATING HIGHLIGHTS • NVA237 for Chronic Obstructive Pulmonary Disease (COPD) • $375 million global licensing agreement with Novartis for NVA237 signed in April 2005 • Start of NVA237 Phase IIb clinical trial • VR315 for Asthma • European collaboration, development and licence agreement signed in March 2006 with leading international pharmaceutical company • In addition to attractive royalties, Vectura could receive up to €22.5 million in milestones and development funding, of which €5.6 million was received in April 2006 • VR040 for Parkinson's disease • Receipt of EU Orphan Medicinal Product designation • Start of Phase IIa study • VR776 for premature ejaculation (PE) • Successful completion of VR776 first clinical trial in man • VR496 for cystic fibrosis (CF) • Receipt of EU Orphan Medicinal Product designation and US Orphan Drug designation FINANCIAL HIGHLIGHTS • Total revenues up by 88% to £8.4 million (2004/05 £4.5m) • Gross profit up by 114% to £6.4 million (2004/05 £3.0m) • Loss after tax down to £6.5 million (2004/05 loss of £7.8 million) • Loss per share down 31% to 6.0p (2004/05 loss of 8.7p) • Net cash outflow from operating activities down to £1.6 million (2004/05 net cash outflow £5.0 million) DEVELOPMENTS SINCE YEAR END • Signed a collaboration agreement in April 2006 with Boehringer Ingelheim International GmbH to develop a dry powder inhaler ("DPI"). Under the terms of the agreement, Vectura received an initial payment of €5 million and a €10 million equity investment • In May 2006 announced the spin-out of PharmaKodex Limited a new speciality pharmaceutical company jointly established with Unilever Ventures Limited • Cash and cash equivalents as at 12 May 2006 were over £29 million Commenting on the results, Dr. Chris Blackwell, Chief Executive of Vectura,said: "This has been an extremely successful 12 months in which we havedemonstrated our ability to deliver on the objectives set out at IPO by takingthe key products in our pipeline to the next stages of development andestablishing three major licensing deals with international pharmaceuticalcompanies. "With the advancement of our product pipeline and the continued interest in ourtechnologies from potential licensing partners, we look forward to the yearahead with confidence." - Ends - Enquiries:Vectura Group plcChris Blackwell, Chief Executive On 25/05/06 +44 (0) 207 831 3113Anne Hyland, Chief Financial Officer Thereafter +44 (0) 1249 667 700 Financial DynamicsDavid Yates/Sarah McLeod/John Gilbert +44 (0) 207 831 3113 There will be an analyst presentation today, for further details please callClaire Rowell on +44(0)207 269 7285. Notes to Editors: Vectura's principal focus is to develop a range of inhaled drugs for treatingmedical conditions where optimised delivery to the lungs provides significantbenefits, such as fast action, improved efficacy and tolerability compared withother therapies. Vectura's products combine its proprietary, innovative, pulmonary formulationand device technologies (GyroHaler(R), PowderHale(R), and Aspirair(R)) withexisting, off-patent drugs either for use in new indications or to provideinhalation as an improved route of administration. Using drugs that have alreadybeen approved in some form in at least one major pharmaceutical market lowersthe risk of product development failure compared to new chemical entities.Vectura is able to secure patent protection for its portfolio by identifying newindications for off-patent compounds and applying the Company's proprietarydelivery technologies to create new methods of administration. The Company has development collaborations with Boehringer Ingelheim, Novartis,GSK, Chiesi and one other undisclosed international pharmaceutical company. For further information, please visit Vectura's website at www.vectura.com This press release contains "forward-looking statements," including statementsabout the discovery, development and commercialisation of products. Variousrisks may cause Vectura's actual results to differ materially from thoseexpressed or implied by the forward-looking statements, including adverseresults in clinical development programs; failure to obtain patent protectionfor discoveries; commercial limitations imposed by patents owned or controlledby third parties; dependence upon strategic alliance partners to develop andcommercialise products and services; difficulties or delays in obtainingregulatory approvals to market products and services resulting from developmentefforts; the requirement for substantial funding to conduct research anddevelopment and to expand commercialisation activities; and product initiativesby competitors. As a result of these factors, prospective investors arecautioned not to rely on any forward-looking statement. We disclaim anyintention or obligation to update or revise any forward-looking statements,whether as a result of new information, future events or otherwise. CHAIRMAN'S AND CHIEF EXECUTIVE'S REVIEW Overview This year has demonstrated the successful realisation of our evolving businessstrategy. We have continued to see positive progress on all fronts with solidadvances in the product pipeline, progress on technology out-licensing, and an88% increase in revenues to £8.4 million. The period started with our globallicensing agreement with Novartis, which was signed on 12 April 2005, providingconsiderable validation for our strategy of applying innovative inhalationtechnologies (in this case PowderHale(R)) to established, off-patent products,creating valuable new products for development and subsequent out-licensing. Theperiod concluded with our European licensing deal for VR315 which was signed on31 March 2006 and incorporates delivery of VR315 using our GyroHaler(R)technology. Importantly, we strengthened our product pipeline during 2005 by introducingthree promising new candidates. The Novartis agreement provided QVA149, thecombination of NVA237 and Novartis' QAB149, for the treatment of chronicobstructive pulmonary disease (COPD). VR040 for Parkinson's disease was added inearly 2005, and finally VR315 for asthma. Strategy Vectura currently has ten products in the development pipeline, three of whichare out-licensed. This portfolio focuses primarily on drugs for treatingrespiratory, neurological and sexual dysfunction disorders. We will be seekinglicensing partners from early 2007 for our sexual dysfunction products followingcompletion of their current Phase II clinical trial programmes. After this, wewill concentrate our product development activity on therapies for respiratoryand neurological disorders. We will continue to license our technologies on a non-exclusive basis in orderto continue to generate returns from a wide range of products. PRODUCT PIPELINE RESPIRATORY FRANCHISE We are currently developing five products in our respiratory franchise.Product Description Partner Status IndicationNVA237 Long-acting muscarinic antagonist Novartis Phase IIb COPD (LAMA)QVA149 Combination of NVA237 and a Novartis In preparation for Phase II COPD long-acting beta antagonist * (LABA) (QAB149)VR315 Generic combination product Undisclosed In preparation for Phase Asthma IIIVR496 Mucolytic/anti-inflammatory - In preparation for Phase CF/COPD IIaVR694 Anti-inflammatory - Exploratory development Asthma * QAB149 the Novartis product to be used in combination with NVA237 is inpreparation for Phase III studies. NVA237 for COPD deal signed with Novartis and Phase IIb commenced We announced in October 2005 that NVA237, a novel inhaled once-daily treatmentfor COPD, has entered a Phase IIb multiple dose-ranging clinical trial. NVA237is being developed and commercialised by Novartis both as a monotherapy and incombination with their once-daily bronchodilator (QAB149). The study is a randomised, double-blind, multi-centre, placebo-controlled trialdesigned to evaluate the efficacy, safety and dose response of NVA237 inpatients diagnosed with COPD over a four-week period and will report out in thesecond half of 2006. COPD, the world's fourth largest cause of death, is a chronic obstruction of theairways which is caused primarily by smoking. It is estimated that COPD occursin over 6% of the US population and that at least one in eight smokers suffersfrom it. The current market for COPD drug therapy is estimated to be worth $5billion a year and is predicted to grow to $11 billion by 2011. COPD is recognised as a common and costly disease with high unmet need. Thecommencement of the Phase IIb trial represents a further important step invalidating the clinical profile of NVA237, which we believe to be a verypromising product with the potential to improve upon existing therapies. Novartis' commitment to NVA237, and the beneficial combination of NVA237 withQAB149, make Novartis, a world leader in the treatment of respiratory diseases,an ideal licensing partner for Vectura. Under the terms of the Novartisagreement, Vectura and Arakis Limited (part of Sosei Co. Ltd.), our developmentpartner, each received an initial payment of $15 million (£7.9 million) in April2005. Clinical, regulatory and commercialisation milestones will be payable uponthe achievement of pre-agreed targets, which could reach $172.5 million for eachcompany for both monotherapy and combination products. The initial payment andpotential milestones therefore total up to $375 million. In addition, royalties on product sales will be paid for the monotherapy and thecombination product. If a third combination product is developed by Novartisusing NVA237, further milestones and royalties may be payable on that product.This is therefore one of the most significant European biotech licensing dealsthat the sector has seen for a single product, and provides a major endorsementof Vectura's business strategy. VR315 for asthma successfully out-licensed for Europe We signed a European collaboration, development and licence agreement with aleading international pharmaceutical company for VR315, our combination asthmatherapy, in March 2006. VR315 will be developed as a generic combinationproduct using our GyroHaler(R) dry powder inhaler. We will be responsible for further formulation development of VR315 and for thesupply of our GyroHaler(R) device. Our partner will be responsible for theclinical development, manufacture and European marketing of the product. We willhave access to all clinical data, and our partner intends to provide, ifrequired, US-compliant manufacturing facilities for the blister filling andassembly of VR315 for the US and other territories. The agreement covers Europeand certain other countries, with Vectura retaining the rights for the US,Japan, Canada, South America, Australia, New Zealand and some other territories. Combination therapy for asthma is the biggest and fastest growing sector of theasthma market with annual sales currently exceeding $6 billion and Europeanannual sales estimated at approximately $1.5 billion. With the validation of theEuropean deal we believe we will be a very attractive partner for a largegenerics company with a presence in the US and other markets. VR496 for Cystic Fibrosis (CF) receives Orphan Drug Status VR496 was granted Orphan Drug Status by the European Committee for Orphan DrugProducts and by the US Office of Orphan Products Development in 2005. Thisprovides VR496 with regulatory approval advantages to speed its progress throughthe required CF trials which are expected to start in late 2006. VR496 for CFis a product that we now intend taking through Phase III clinical trials. VR496also has potential use for COPD patients. We currently intend out-licensing theCOPD indication following completion of our Phase II programme for thisindication. We expect there will be advantages of working with a partner on theCOPD indication while we progress the CF indication on our own. VR694 VR694 is our exploratory development product targeted at asthma. NEUROLOGY FRANCHISE We are currently developing two products in our neurology franchise.Product Description Partner Status IndicationVR040 Inhaled apomorphine - Phase IIa Parkinson's diseaseVR147 Inhaled neurovascular - Exploratory development Migraine agent VR040 for Parkinson's disease (PD) commences Phase IIa Another new development programme this year is VR040 (inhaled apomorphinehydrochloride) for Parkinson's disease. Apomorphine is an established, effective treatment for hypomobility, a disablingsymptom of PD, and we believe that inhaled apomorphine delivery will address thetwo key clinically-unmet patient needs of rapid onset of symptom relief andnon-invasive administration. Inhalation of apomorphine, we believe, will reducethe therapeutic dose required, thereby minimising unwanted side-effects whencompared with other direct-acting dopaminergic drugs, including apomorphinedelivered by injection. Our Phase IIa study using our proprietary formulation,delivered with our Aspirair(R) device, commenced in early 2006 and plan toreport results in H2 2006. VR147 for migraine We are considering a number of potential compounds for treating migraine.Although currently at an early stage, we anticipate this product could enterclinical development within the next 18 months. The rapid onset of actioncombined with the potential to reduce the amount of medication required makesinhalation an ideal route of administration for migraine therapies. SEXUAL DYSFUNCTION FRANCHISE We are developing three products in our sexual dysfunction franchise for whichwe will be seeking licensing partners when the current Phase II trials arecomplete. Product Description Partner Status IndicationVR004 Inhaled apomorphine - Phase IIb Erectile dysfunctionVR776 Acts via 5HT- and noradrenergic-mediated - Phase IIa Premature ejaculation pathways in the brainVR400 Inhaled apomorphine - This is the Female sexual same active as dysfunction VR004 and will be out-licensed with VR004 VR004 for erectile dysfunction (ED) continues Phase IIb VR004 is a proprietary dry powder formulation of apomorphine hydrochloride,delivered using our Aspirair(R) delivery device. Apomorphine hydrochloride isalso used in VR040, however VR004 utilises a lower dose range. The aim withVR004 is to provide an effective, well-tolerated and rapidly-acting treatmentoption for patients who suffer from ED. VR004 is currently under investigation in two Phase IIb clinical studies. Theobjective of these double-blind, placebo-controlled trials, evaluating up to 150patients on the first trial and approximately 250 patients on the second trial,is to identify the safe, effective dose to be used in a Phase III trial.Patients with mild, moderate or severe ED will receive treatment for a maximumof 12 weeks at home. Published clinical data from ED studies demonstrate thatmultiple dose "at home studies" normally demonstrate higher response rates thanclinic-based ones. In the first Phase IIb study, an independent safety review group noted transientfalls in blood pressure following orthostatic challenge (standing and sittingmanoeuvres to expose intolerance to vasodilation) in a small number of patientsthat had been given either of the two highest fine particle doses (250 (micro)gand 300 (micro)g) in the study. As a result, it was recommended that no furtherpatients should be randomised to these two doses. Patients already randomised tothese top doses that had not experienced these effects upon orthostaticchallenge were allowed to continue their allocated treatment for the full12-week period. Randomisation continued on placebo and the low dose (150 (micro)g). Final un-blinded data from the study is expected in H2 2006. The second dose-defining Phase IIb study is now underway to evaluate doses of100 (micro)g, 150 (micro)g and 200 (micro)g which are all lower than the top twodoses used in the first study. This second study is due to report in H1 2007.We believe it should be possible to achieve target effectiveness at a dose withacceptable side-effects. The market for ED is currently estimated to be worth $2.5 billion a year and isexpected to be $4.4 billion a year by 2010. Through market research withdoctors, patients and opinion leaders, we believe that there is a clear unmetneed for products with a faster onset of action than current oral and buccalproducts. Studies to date have shown that VR004 is likely to offer distinctadvantages in this area. VR776 for premature ejaculation (PE) commenced Phase IIa We are pleased to announce that recruitment has started for the Phase IIa studyof VR776 in patients with premature ejaculation. This follows the successfulcompletion of the Phase I study in early 2006. The utility of the activeingredient of VR776 for PE is described in the literature, but it is generallytaken as an oral tablet 3 - 6 hours before intercourse. We believe the deliveryof VR776 via the lungs will provide rapid delivery of this active component andtherefore a rapid onset of action, offering significant clinical benefit.Currently, no product is licensed in the US or EU specifically for the treatmentof PE, although we are aware of a number of products in development. PE isestimated to affect between 27 and 34 percent of men across all age ranges, andthus may represent a bigger market opportunity than ED. VR776 is formulated with our dry powder technology, PowderHale(R), and deliveredwith our Aspirair(R) inhaler. Generating value from our enabling technologies demonstrated by deal withBoehringer Ingelheim Vectura's three dry powder inhaler ("DPI") technologies, Gyrohaler(R),PowderHale(R) and Aspirair(R), are based on our in-depth knowledge of deviceengineering and particle science, which enable Vectura to re-formulate andpatent a broad range of drugs for pulmonary delivery. Vectura's strategy is to license rights to these technologies to otherpharmaceutical companies where the resulting licence will complement the Group'soverall business strategy and commercial returns. There is a growing demand for dry powder inhalers, particularly those that candeliver high performance and consistent doses. We believe that our device andformulation technologies are well placed to capture a significant market share,as they can provide critical benefits which are needed by both patients andregulatory authorities. In April 2006, we agreed a worldwide collaboration, development and licenceagreement with Boehringer Ingelheim to develop a dry powder inhaler (DPI) as atailored Boehringer Ingelheim device. It will deliver a range of theirproprietary respiratory products, mainly for treating asthma and COPD. Under the non-exclusive agreement, we will work with Boehringer Ingelheim on thecontinued development of the inhaler until the end of 2007, after which theywill be responsible for any further development, manufacturing, clinical trialuse with their proprietary compounds, and the commercialisation of theseproducts. Most treatments for asthma and COPD are delivered by inhalation. Global marketsfor these treatments are valued in excess of $17 billion today and are forecastto grow to over $28 billion by 2010. Dry powder inhalers are increasingly thefirst choice for patients with these diseases and it is expected that DPIs willbe used to deliver the majority of the drugs sold in these markets by 2010. FINANCIAL REVIEW In the 12 months to 31 March 2006, revenues were £8.4 million, an increase over2004/05 of 88%. Our first product licensing revenues (£3.8 million) were generated during theperiod, all of which relate to our licensing agreement with Novartis for NVA237. We received an upfront access fee of £7.9 million in April 2005, which isnon-refundable. This revenue is being recognised over a 24-month period. Pharmaceutical Development Services revenues of £4.4 million were a 64% increaseon the prior year (£2.7 million). These revenues include £1.1 million fromNovartis in relation to our continued work on NVA237 and £1.1 million forre-imbursement of work undertaken during 2005/06 on VR315, the product welicensed on 31 March 2006. In addition to the Pharmaceutical DevelopmentServices revenue there was a VR315 access payment of £2.8 million and thisrevenue will be recognised over a four-year period. Technology licensing revenues of £0.2 million were realised during the period.The majority of the 2004/05 income was generated from our licensing agreementwith SkyePharma PLC signed in June 2004. Our agreement with SkyePharma onAspirair(R) has now lapsed. The gross profit for the year to 31 March 2006 was £6.4 million, a 114%improvement on the previous period (£3 million). The main reason for theincrease was the increase in milestone licensing revenues. Total investment in research and development was £12.4 million, a 28% increaseon the prior year (£9.7 million). Expenditure was incurred primarily on thePhase IIb VR004 trials, VR776 clinical trials and the VR040 Phase IIa trial. Administrative expenses are £0.3 million lower at £2.5 million as thecomparative costs include additional expenditure incurred at the time of theflotation. £1.0 million of R&D tax credits were received in the year (2005 - £1.1 million). Net cash outflow from operating activities in the period was £1.6 millioncompared to the £5.0 million in the prior period. As at 31 March 2006, Vecturahad cash and short-term deposits totalling £16.8 million. This excludes the£14.0 million cash receipts from the VR315 and Boehringer Ingelheim dealsreceived after the period end. The net loss per share in 2006 was 6.0p, a 31% reduction on the prior year. Headcount at 31 March 2006 was 126 (31 March 2005 - 110). OUTLOOK As Vectura carries out its strategy for growth, the key drivers for 2006/07 arethe results from our development work on VR315 and the partnering of the productfor the US together with results from the NVA237 and VR004 Phase IIb clinicaland the VR040 and VR776 Phase IIa trials. We will continue to advance theproducts in our pipeline and pursue appropriate licensing opportunities for bothour products and our technologies to generate value for our shareholders. Consolidated Income Statementfor the year ended 31 March 2006 31 March 31 March 2006 2005 Notes £'000 £'000 Revenue 3 8,411 4,484Cost of sales (1,965) (1,472) ______ ______Gross profit 6,446 3,012 Research and development expenses (12,397) (9,719) Other administrative expenses (1,783) (2,239)Share-based compensation (741) (621) ______ ______Administrative expenses (2,524) (2,860) ______ ______Operating loss (8,475) (9,567) Interest income 1,042 755Finance costs (6) (155) ______ ______Loss before taxation (7,439) (8,967)Taxation 984 1,181 ______ ______Loss after taxation attributable to equity holders of theCompany (6,455) (7,786) ______ ______ Loss per ordinary share basic and diluted 5 (6.0p) (8.7p) ______ ______ All results are all derived from continuing activities. Consolidated Balance Sheetat 31 March 2006 31 March 31 March 2006 2005 Notes £'000 £'000ASSETSGoodwill and intangible assets 2,012 2,012Property, plant and equipment 4,071 3,102Other receivables 428 428 ______ ______Non-current assets 6,511 5,542 ______ ______Trade and other receivables 6 4,689 850Cash and cash equivalents 16,828 18,388 ______ ______Current assets 21,517 19,238 ______ ______Total assets 28,028 24,780 ______ ______LIABILITIESLoans and obligations under finance leases - 14Deferred income 8 2,258 - ______ ______Non-current liabilities 2,258 14 ______ ______Trade and other payables 7 4,489 2,784Deferred income 8 4,666 - ______ ______Current liabilities 9,155 2,784 ______ ______Total liabilities 11,413 2,798 ______ ______NET ASSETS 16,615 21,982 ______ ______ EQUITYShare capital 9 62 61Share premium 22,869 22,523Shares to be issued 918 918Special reserve 8,245 8,245Merger reserve 3,211 3,211Share-based compensation reserve 1,403 662Retained loss (20,093) (13,638) ______ ______TOTAL EQUITY 16,615 21,982 ______ ______ Consolidated Cash Flow Statementfor the year ended 31 March 2006 31 March 31 March 2006 2005 Notes £'000 £'000 Net cash flows from operating activities 10 (1,560) (4,982) ______ ______Cash flows from investing activitiesInterest received 1,042 755Purchase of property plant and equipment (1,295) (492) ______ ______Net cash flows from investing activities (253) 263 ______ ______ Cash flows from financing activitiesProceeds from issue of redeemable preference shares - 34Proceeds from issue of ordinary shares 347 23,651Share issue costs - (1,117)Payment of finance lease liabilities (84) (141)Repayment of loans (4) (1,272)Interest element of payments under finance leases (5) (16)Interest on loans (1) (139) ______ ______Net cash flows from financing activities 253 21,000 ______ ______ (Decrease)/Increase in cash and cash equivalents (1,560) 16,281 ______ ______ Cash and cash equivalents at beginning of period 18,388 2,107 ______ ______Cash and cash equivalents at end of period 16,828 18,388 ______ ______ Notes to the Financial Information 1. Basis of preparation The financial information included in this statement does not constitutestatutory accounts as defined in Section 240 of the Companies Act 1985. Thefinancial information has been extracted without material adjustment from theconsolidated financial statements of Vectura Group plc for the year ended 31March 2006, which have been audited. The auditors have made a report underSection 235 of the Companies Act 1985 in respect of the statutory consolidatedaccounts for the year ended 31 March 2006 and 31 March 2005. Their reports wereunqualified within the meaning of Section 262(1) of the Companies Act 1985 anddid not contain a statement under Section 237 (2) or (3) of that Act. Whilst the information included in this preliminary announcement has beencomputed in accordance with International Financial Reporting Standards (IFRS),this announcement does not itself contain sufficient information to comply withIFRSs. Statutory accounts for the financial year ended 31 March 2005 have beendelivered to the registrar of Companies pursuant to Section 242 of the Act,whereas those for 2005/06 will be delivered following the Annual GeneralMeeting. The Group's Annual Report and Accounts will be sent to shareholders in June 2006and will be available on our website www.vectura.com. 2. Accounting policies The financial information has been prepared in accordance with IFRS and iscovered by IFRS 1, "First-time Adoption of IFRS". These financial statementshave been prepared in accordance with those IFRS standards and IFRICinterpretations issued and effective and early adopted at the time of preparingthese statements (May 2006). The policies have been consistently applied to allperiods presented, and the comparative figures in respect of 2004/05 have beenrestated to reflect IFRS adjustments. Full details of the Group's IFRS accounting policies can be found in the 2005/06Interim Report, which is available on our website www.vectura.com. The requireddisclosures concerning the transition from UK Generally Accepted AccountingPrinciples (UK GAAP) to IFRS will be included in the Group's Annual Report andAccounts. 3. Revenue Revenue represents amounts invoiced to third parties, derived from the provisionof licences and services which fall within the group's sole ordinary activity,the development of pharmaceutical products. 31 March 31 March 2006 2005Revenue by category: £'000 £'000 Product Licensing 3,803 -Technology Licensing 238 1,822Pharmaceutical Development Services 4,370 2,662 ______ ______ 8,411 4,484 ______ ______ 4. Staff numbers and costs The average monthly number of employees (including Executive Directors) employedby the Group during the year, analysed by category, was as follows: 2006 2005 No. No. Pharmaceutical Development Services 24 23Research and development 88 71Business development and administration 8 8 ______ ______ 120 102 ______ ______ The aggregate payroll costs of these persons were as follows: 2006 2005 £'000 £'000 Wages and salaries 4,878 4,142Social security costs 627 481Other pension costs 303 256 ______ ______ 5,808 4,879 ______ ______ In addition to the wages and salaries analysis above are the effects of thecharge for share-based compensation under IFRS 2 during the year of £741,000(2005 - £621,000). 5. Loss per ordinary share The calculations of loss per share are based on the following losses and numberof shares: 31 March 31 March 2006 2005 Retained loss for the year (£'000) (6,455) (7,786)Weighted average number of ordinary shares (No.'000) 108,298 89,193Loss per share (6.0p) (8.7p) ______ ______ The loss per share is based on the weighted average number of shares in issueduring the period. IAS 33, "Earnings per share", requires presentation ofdiluted earnings per share when a company could be called upon to issue sharesthat would decrease net profit or increase net loss per share. No adjustment hasbeen made to the basic loss per share, as the exercise of share options wouldhave the effect of reducing the loss per ordinary share and is therefore notdilutive. 6. Trade and other receivables 2006 2005 £'000 £'000 Trade receivable 4,156 668Other receivables 36 23Prepayments and accrued income 278 66VAT recoverable 219 93 ______ ______ 4,689 850 ______ ______ Included within trade receivables is a £2.8 million milestone payment due from aleading pharmaceutical company under the terms of the VR315 licence agreementsigned on 31 March 2006. The £2.8 million was received on 28 April 2006 and hasbeen deferred as described in note 8, below. 7. Trade and other payables 2006 2005 £'000 £'000 Loans - 4Trade payables 698 880Obligations under finance leases 14 84Other taxes and social security costs 144 128Other payables - 1Accruals 3,633 1,687 ______ ______ 4,489 2,784 ______ ______ 8. Deferred income Deferred income relates to amounts received under product licensing agreements.Vectura Group plc continues to provide services to these licensing partners overa period of time. Milestone payments under these licensing agreements aretherefore spread. The total deferred income as at 31 March 2006 relates to twocontracts. The first was signed in April 2005 with Novartis InternationalPharmaceutical Limited for NVA237, giving rise to £4.1 million of deferredincome as at 31 March 2006. A second contract was signed on 31 March 2006 with aleading pharmaceutical company for VR315, giving rise to £2.8 million ofdeferred income. The £2.8 million is also included within receivables, asdisclosed in note 6. £2 million included within amounts due after more than oneyear is potentially repayable if there is an early termination of the VR315agreement. Deferred income is as follows: 2006 2005 £'000 £'000 Amounts due within 1 year 4,666 -Amounts due in more than 1 year 2,258 - _____ _____At 31 March 6,924 - _____ _____ 9. Share capital 31 March 2006 31 March 2005 £'000 No.'000 £'000 No.'000Authorised:Ordinary shares of 0.025p each 45 181,200 45 181,200Redeemable preference shares of £1 each 34 34 34 34 ______ ______ ______ ______Allotted, called up and fully paid: Ordinary shares of 0.025p each 28 110,330 27 107,899Redeemable preference shares of £1 each 34 34 34 34 ______ ______ ______ ______ Warrants On 30 August 2005, Pictet Private Equity Investors S.A. exercised the rightconferred on them under a Warrant Instrument dated 20 November 2002 andsubscribed £73.32 for 293,271 ordinary shares of 0.025p each. On 30 August 2005, GATX European Venture Finance Limited exercised the rightconferred on them under a Warrant Instrument dated 20 November 2002 andsubscribed £8.15 for 32,585 ordinary shares of 0.025p each. Options Under a licensing agreement dated 13 April 2006, Boehringer IngelheimInternational GmbH has an option to subscribe for ordinary shares in the Companyfor a consideration of €5,000,000 based on the average share price of VecturaGroup plc's ordinary shares calculated over a 30-day period ending threebusiness days prior to the date of the decision to exercise the option, plus apremium. Deferred share consideration Under a share purchase agreement dated 5 February 2002 between Vectura Group plcand Cambridge Consultants Limited ("CCL"), whereby Vectura acquired the entireshare capital of Vectura Delivery Devices Limited, CCL are due deferredconsideration in the form of ordinary shares of 0.025p each. The outstandingbalance of deferred consideration is to be issued on the satisfaction of certainpatent and revenue milestones, or by 31 December 2006 if earlier. As at 31 March2006, 1,350,000 (31March 2005 - 1,350,000) ordinary shares remained to be issuedunder these arrangements. 10. Reconciliation of net cash flows from operating activities Year Year ended ended 31 March 31 March 2006 2005 £'000 £'000 Operating loss (8,475) (9,567)Amortisation of intangible assets - 1,043Depreciation of property plant and equipment 816 909Increase in receivables (3,839) (167)Increase in payables 1,289 998Deferred income 6,924 -Share-based compensation 741 621 ______ ______Net cash outflow from operations (2,544) (6,163)Research and development tax credit received 984 1,181 ______ ______Net cash outflow from operating activities (1,560) (4,982) ______ ______ 11. Post Balance Sheet Events Agreement with Boehringer Ingelheim International GmbH On 13 April 2006 Vectura signed a worldwide collaboration, development andlicence agreement with the leading pharmaceutical company, Boehringer IngelheimInternational GmbH ("Boehringer Ingelheim"). The aim of the collaboration is todevelop a dry powder inhaler ("DPI"), as a Boehringer Ingelheim branded device,to deliver a range of proprietary respiratory products of Boehringer Ingelheim,mainly for the treatment of asthma and chronic obstructive pulmonary disease(COPD). Under the terms of the agreement, Vectura received an initial payment of£3.5 million and a £6.9 million equity investment. These payments are notreflected in the accounts for the year ended 31 March 2006. As a result of theequity investment 4,939,536 ordinary shares of 0.025p each were issued toBoehringer Ingelheim on 10 May 2006. PharmaKodex Limited On 12 May 2006 Vectura Group plc entered into a shareholders agreement inrelation to the investment in PharmaKodex Limited ("PharmaKodex") of UnileverVentures Limited, Dr Andrew Richards and others. Up to this date Vectura Groupplc retained a 100% investment in PharmaKodex. As a result of the investmentsmade by these parties, Vectura Group plc's shareholding in PharmKodex wasreduced to 49.99% with effect from this date and Dr. Richards acquired 4.81% ofthe shares in issue at an arms length valuation. Dr. Richards was appointed aNon-Executive Director of PharmaKodex on 11 May 2006 and will representVectura's interest on the board of that company. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
VEC.L