11th Apr 2007 07:01
AGI Therapeutics plc11 April 2007 AGI Therapeutics, plc Financial results for the twelve months ended 31 December 2006 Dublin, Ireland, 11th April 2007 - AGI Therapeutics plc ("AGI" or the"Company"), a speciality pharmaceutical company focused on gastrointestinal drugproducts, today reports audited financial results for the twelve months ended 31December 2006. Financial highlights: • Cash and short term deposits at 31 December 2006 of €40 million• R & D spend of €3.5 million• Net loss of €4.3 million• Loss per ordinary share of 6.9 cent Operating highlights: • Positive Phase II data for arverapamil (AGI-003) in the treatment of non-constipation dominant Irritable Bowel Syndrome (IBS)• Co-development and license agreement with Axcan Pharma Inc. to jointly develop a controlled release omeprazole product based on AGI's CHRONAB formulation approach for North American markets• Phase I results for 4-ASA Na (AGI-022) supportive of further clinical development for ulcerative colitis Corporate highlights: • Completed a successful listing on the AIM Market of the London Stock Exchange and the IEX Market of the Irish Stock Exchange on 27 February 2006, raising gross proceeds of €42.5 million (£29.2 million) • Strengthened the management team and Board through the appointment of: • Dr. David Young as President of U.S. Operations • David Kelly as Chief Financial Officer • Dr Chris Blackwell, Chief Executive of Vectura Group plc, as a non-executive director Post year-end highlights: • Received FDA approval to file IND for Arverapamil Phase III study. See separate release issued today • Phase II results for arbaclofen (AGI-006) supportive of further clinical development for treatment of gastroparesis • Mecamylamine (AGI-004) - preliminary clinical results reported and further investigation being carried out on the role of this product in chemotherapy-induced diarrhoea (CID) • Appointment of Medical Advisory Panel, consisting of recognised international experts in the field of clinical and gastroenterological sciences, to advise management Dr. John Devane, CEO of AGI, said: "2006 has been an important year for AGI. In line with our stated objectives, wehave advanced all of our product candidates through key clinical proof ofconcept trials and recently outlined to the market our plans for 2007. Theproceeds from our successful IPO in February 2006 provide us with the financialresources to advance our chosen programmes to the next stage of theirdevelopment. In particular, we are now getting ready to move arverapamil, ourlead programme for IBS, into Phase III, and are delighted with the outcome ofour discussions with the FDA in this regard. We continue to make progress inthe development of omeprazole for nocturnal acid breakthrough in GERD(gastro-esophageal reflux disease) and plan to progress a number of our otherpipeline products into further Phase II clinical evaluation. "We look forward to establishing strong marketing positions for our products,through collaboration with pharmaceutical partners or by retaining marketingrights for products targeting important niche market segments." Contact Information: AGI Therapeutics, plc.Tel: +353 1 449 3254David Kelly, Chief Financial Officer Financial Dynamics - UKTel: +44 (0) 20 7269 7182Anna Keeble Financial Dynamics - IrelandTel: +353 1 663 3607Aisling Garvey For further information: www.agitherapeutics.com About AGI Therapeutics, plc AGI is a speciality pharmaceutical company which is focused on the developmentand commercialisation of differentiated drug products for gastrointestinal (GI)diseases and disorders. AGI's common shares are listed on the AlternativeInvestment Market of the London Stock Exchange (AIM) and on the Irish EnterpriseExchange of the Irish Stock Market (IEX) as AGI. The Company has a portfolio of product candidates derived from its KnownMolecular Entity (KME) approach to drug re-profiling and development. KME is are-profiling methodology used by the Company to identify existing therapeuticdrugs which typically have been marketed for a number of years, have establishedsafety profiles and can be developed for new clinical indications or withimproved profiles in their existing clinical indications. In this way, theCompany seeks to reduce the risk, time and cost of new product development ascompared to the development of new chemical entities. AGI is developing a range of product candidates to treat a variety of prevalentGI diseases and disorders, including irritable bowel syndrome (IBS), dyspepsia,gastroparesis, ulcerative colitis, gastro-esophageal reflux disease (GERD) anddiarrhea-related conditions such as chemotherapy-induced diarrhoea (CID). TheCompany is targeting areas of the GI therapeutic drug products market for itsproduct candidates where there are currently unmet medical needs or where theeffectiveness of existing drug therapies can be further improved. The Company has five active clinical stage product candidates which are eitherisomers or new drug delivery formulations of existing approved drugs, and whichhave established safety and tolerability profiles in their currently approvedclinical indications. Statements contained within this press release may contain forward-lookingcomments which involve risks and uncertainties that may cause actual results tovary from those contained in the forward-looking statements. In some cases, youcan identify such forward-looking statements by terminology such as 'may', 'will', 'could', 'forecasts', 'expects', 'plans', 'anticipates', 'believes', 'estimates', 'predicts', 'potential', or 'continue'. Predictions andforward-looking references in this press release are subject to the satisfactoryprogress of research which is, by nature, unpredictable. Forward projectionsreflect management's best estimates based on information available at the timeof issue. Chairman's and Chief Executive's review: Overview 2006 was a significant year for AGI. Founded in late 2003, the Company set aboutdeveloping six product candidates targeted at a range of gastrointestinal (GI)diseases. All of these initial six candidates reported clinical results during2006 or early in 2007. In February, 2006, the Company was admitted to the AIMand IEX listings of the London and Dublin stock exchanges, raising €42.5 millionand thus providing the financial resources for the next phase of growth in thebusiness. Arverapamil, AGI-003, has been identified as our lead development programme andwill be our primary focus during 2007. In May 2006 we reported the initialresults of a Phase II clinical study for this product in the treatment ofnon-constipation predominant Irritable Bowel Syndrome (IBS). We are extremelyencouraged by those results and the potential of this product in treating IBS,and we now intend to advance arverapamil into Phase III development. We recentlymet with the FDA to discuss the Phase III development and New Drug Application(NDA) submission requirements for this product. Following a review of the current data on arverapamil, including the previouslyreported successful Phase II clinical trial (conducted in Europe under theClinical Trials Directive), the FDA determined that the existing pre-clinicaland clinical data would support an Investigational New Drug (IND) submission anda Phase III trial for arverapamil. The design and scope of the Phase III trialwas also agreed upon pending a final review of the Phase III protocol andsupporting data during the statutory 30 days post-IND submission. In addition,the FDA and AGI agreed on the overall manufacturing, pre-clinical, and clinicaldevelopment plans to support the submission of the NDA in diarrhoea predominantIBS (d-IBS) under FDA's 505(b)(2) NDA regulations. The discussions includedFDA's concurrence that the remaining pre-clinical and supporting clinicalstudies required for the NDA could be performed in parallel with the Phase IIIprogramme. As a result of the meeting, AGI now intends to finalise and submit an IND with aPhase III protocol and, subject to FDA review, would expect to initiate patientenrolment into a Phase III trial in 2H07. In addition to arverapamil, we remain committed to further developing our otherclinical candidates and to our approach of building the Company based on aportfolio of different products to treat a variety of GI diseases. In 2007 wewill progress further development of compounds in gastroesophageal refluxDisease (GERD), gastroparesis, ulcerative colitis (UC), and diarrhoea-relatedconditions such as chemotherapy-induced diarrhoea (CID). During 2006 we also strengthened the management team through the appointment ofDr David Young as President of US Operations and added David Kelly as CFO. Bothindividuals make significant contributions in helping AGI grow into anintegrated specialty pharmaceutical development company. We were also pleased towelcome Dr Chris Blackwell, Chief Executive of Vectura Group plc, as anon-executive director to our Board. We value Chris's contributions and lookforward to continuing to work with him in the future. Strategy AGI remains dedicated to the strategy developed at the time of its founding, offocusing on the development of new products for GI diseases which are based onKnown Molecular Entities, or KME's. This approach to pharmaceutical developmentprovides AGI with a lower risk and faster pathway to commercialisation. Thesuccess of the KME approach is dependent upon the experience of the AGImanagement team and employees who have a successful track record of working overthe course of many years in the pharmaceutical industry on a range of similarprojects across various therapeutic categories. They are now bringing thatexperience to bear in developing new applications and more effective therapies,based on known drugs, in the GI therapeutic area. While our current focus is on pharmaceutical and clinical development of ourportfolio of exciting compounds, it remains an ambition of AGI to grow into afully integrated specialty pharmaceutical business, eventually managing thesale, marketing and distribution of our own products in the market, most likelytargeting medical specialists in our therapeutic category. In order to maximisethe commercial success of our products, we will out-license or partner thoseproducts that would benefit from being promoted by or co-marketed with largercompanies with more extensive commercial operations and greater market reach.However we intend to retain co-ownership rights to our products where possibleand leverage our relationships with strategic partners to allow us to build ourown market presence with our proprietary projects and achieve our commercialaims. Operations Arverapamil (AGI-003) in IBS IBS is a functional disorder that comprises a cluster of gastrointestinalsymptoms which are likely to be life long and which affect between 10% and 20%of the population in developed markets. Altered intestinal motility is a majorcomponent of IBS and patients are diagnosed and sub-typed according to theirpredominant symptom of bowel disturbance. Arverapamil is being developed in anoral dosage form for the treatment of diarrhoea-predominant irritable bowelsyndrome ("d-IBS") in both men and women. The d-IBS segment of the IBS market isestimated to account for at least one-third of all IBS patients and there iscurrently an estimated 6 million diagnosed d-IBS patients who could benefit fromsafe and effective drug therapy. D-IBS represents a significant unmet medicalneed as there are currently few or no safe and effective therapeutic optionsavailable to these patients. In June 2006 we announced the positive outcome of a Phase II clinical trialevaluating arverapamil in 129 patients (male and female) meeting ROME IIcriteria (modified) for non-constipation predominant IBS. The clinical trial wasa randomised, double-blind, placebo-controlled, parallel group, forceddose-escalation study (dose escalated every 4 weeks), which evaluated theefficacy of arverapamil versus placebo over a 12-week period. Using anintent-to-treat analysis and the entire 12 weeks of therapy, the arverapamiltreated patients showed a significantly higher response rate than placebo basedon patient global impression (56.9% vs. 37.5%) and based on relief of abdominalpain/discomfort (56.9% vs. 43.8%). No differences between treatments were seenin use of rescue medications. Compared with placebo, the arverapamil treatedpatients also showed significant favourable differences in change from baselinein a) the Bristol Stool Scale at week 8 and week 12, b) bloating and stoolfrequency at week 4 and c) urgency and composite gastrointestinal symptoms atweek 4 and week 12. Patients also completed the IBS Quality-of-Life (QOL)survey, a validated 34-item condition-specific QOL survey consisting of 8subscales at the 4, 8 and 12 week visits. Scores can range from 0 to 100 with ahigher score indicating better QOL. Significant improvements were recorded inthe arverapamil treated patients compared with placebo at week 12 for both thetotal score (24.9 points vs. 3.55 points) and for all 8 sub-scales and at week 8for total score and each of the sub-scales with the exception of sexual andrelationship sub-scales. Arverapamil was generally well tolerated and there wereno serious adverse events. The results of this Phase II study demonstrates the efficacy of arverapamil inIBS patients with non-constipation predominant symptoms and AGI expects thatthis drug will be of benefit to those d-IBS patients who are currently without asafe and effective therapy for this condition. AGI believes arverapamil may alsohave utility in the treatment of other diarrhoea-related conditions. CHRONAB omeprazole (AGI-010) for nocturnal acid breakthrough (NAB) in GERD We are developing a modified release formulation of the proton pump inhibitordrug (PPI), omeprazole based on our CHRONAB technology which we believe will beeffective in treating NAB, a prevalent aspect of current PPI therapy of GERD.GERD is the most prevalent of the major gastrointestinal disorders and is mostcommonly treated with PPI drugs which achieve global annual sales in excess ofUS$20 billion. NAB is estimated to occur in at least 50 per cent of GERDpatients on PPI therapy. In March 2006 we announced the preliminary outcome of a combined humanpharmacokinetics and pharmacodynamics study in 16 healthy subjects designed tocharacterise the in-vivo drug release profile and pharmacokinetics and theintra-gastric pH profiles of three modified release formulations of omeprazolegiven as 40mg once-daily at bedtime for five consecutive days compared tomarketed omeprazole (Losec(R)) given as 20mg twice-daily morning and eveningbefore meals. Data from the study demonstrated that while modified releasecharacteristics were clearly achieved, the time-course of in-vivo release wasmarkedly delayed resulting in peak drug exposure at 5-6am. AGI entered into a co-development and license agreement with Axcan Pharma Inc.in September 2006 to jointly develop a modified release omeprazole product basedon AGI's CHRONAB formulation approach for North American markets. AGI is workingclosely with Axcan to progress omeprazole through the current Phase II productoptimisation. Once this optimisation is successfully completed, AGI and Axcanplan to submit a request for a meeting with the FDA to define and agree thefinal phase of development for this product. Arbaclofen (AGI-006) in dyspepsia Preliminary results of a 64 patient exploratory Phase II trial of arbaclofen infunctional dyspepsia were reported on February 1 2007. The results demonstrateda robust profile of beneficial effects on a range of dyspeptic symptoms butwithout a matching response in the primary endpoint of patient globalimpression. Functional dyspepsia continues to represent a difficult indicationto translate drug activity into a global response. The recentsub-classification of functional dyspepsia in ROME III reflects this continuingdifficulty and may offer a strategy for further development in this indicationin the future. Nonetheless, arbaclofen did demonstrate statistically significant improvementsacross a range of secondary endpoints in this trial, including patient globalseverity, bloating, nausea, condition specific Quality-of-Life (QOL) and rescueantacids. Therefore, AGI has determined that the profile of activity ofarbaclofen in various dyspeptic symptoms matches well with the desired profileof a therapy for the dyspeptic symptoms of gastroparesis. Diabetic gastroparesisis the most common manifestation of the dyspeptic symptoms of gastroparesis,however effective and well-tolerated therapy options are extremely limited forthese patients. AGI is now developing plans for the further Phase II clinicaldevelopment for gastroparesis. 4-ASA-Na (AGI-022) in ulcerative colitis We are developing a modified release oral formulation of 4-aminosalicylatesodium (4-ASA-Na) for the induction and maintenance of remission of mild tomoderate ulcerative colitis (UC). UC is a chronic, recurrent, relapsing andremitting inflammatory disease of the colon and/or rectum. We believe that our4-ASA-Na product may offer certain advantages compared with current 5-ASA basedtherapies which are commonly used to treat UC, including a superior tolerabilityprofile, and a more reliable delivery to the target sites of action in UCleading to a higher efficiency of therapy with potential dosing advantages. In March 2006, we reported on the outcome of a human pharmacokinetics trial in16 human subjects designed to characterise the in-vivo drug release profile andpharmacokinetics of three delayed release/controlled release formulationscompared with a reference solution of 4-ASA-Na. The study demonstrated delayedand controlled in-vivo release profiles consistent with targeted colonicdelivery. A lead formulation has been selected as optimal and will be the basisfor future clinical development. Based on the positive Phase I results, we have decided to progress this productinto Phase II clinical evaluation for the treatment of ulcerative colitis (UC).The goal of the planned Phase II study will be to confirm the efficacy/dosageadvantages of the product in UC patients. Formulation development work andscale-up of manufacture is now underway and a Phase II trial design is beingdeveloped. Mecamylamine (AGI-004) in chemotherapy-induced diarrhoea Preliminary results for controlled release mecamylamine in Functional Diarrhoeawere reported recently (February 1 2007). The data from this study demonstrated a strong and statistically significantsignal in improved stool consistency in patients with functional diarrhoea (perprotocol) but without a matching response in the primary endpoint of patientglobal impression. AGI believes that controlled release mecamylamine has thepotential to be an effective agent in diarrhoeal states characterised by a highfrequency of watery stools. Given the mechanism of action of mecamylamine onnAChR (nicotinic acetylcholine) receptors and the pathophysiology of certaindiarrhoeal states which are not satisfied by current therapy, AGI has identifiedCID as an area of unmet clinical need where controlled release mecamylamine mayhave therapeutic benefit and is finalising plans for progression to Phase IIclinical development in this indication. Outlook 2006 has been a significant year for AGI, with the Company successfullycompleting its IPO, making strong clinical progress across our portfolio and,more recently in 2007, setting out a clearly defined strategy for the future.AGI's lead product, arverapamil, is well positioned to move into the final phaseof clinical testing and significant advancement is planned for the rest of thepipeline during the course of the coming year. Dr Ronan Lambe Dr John DevaneChairman Chief Executive Officer Dublin, 11 April 2007 Financial review Basis of preparation and International Financial Reporting Standards (IFRS) The results set out below are the first set of full year results of AGI as apublic company. However, as a result of a reverse acquisition of AGITherapeutics Research Limited by AGI Therapeutics, plc, on January 20, theresults presented are a continuation of the precursor entity. The FinancialStatements have been prepared according to IFRS, as adopted by the EU. Operating performance In 2006 AGI recorded its first revenues as a result of a License Agreementsigned in September 2006 with Axcan Pharma Inc, a Canadian headquarteredspecialty pharmaceutical company with a focus on GI diseases. An initialmilestone payment of $1.5 million is being recognised on a straight line basisover three years, an estimate of the likely term of the underlying developmentprogramme. For the year to December 31, 2006 a total of €0.2 million wasrecognised as revenue (2005: •Nil ). Research and Development expenses Total Research and Development Expenses for the year to December 31, 2006 were€3.5 million (2005: €4.4 million). During 2006 many of the clinical programmesinitiated in 2005 reached completion and thus the total costs for 2006 show adecline over the prior year. This is not expected to be the case in 2007 as wewill be moving into the next phase of clinical development on virtually all ourproducts and these costs are therefore expected to be substantially higher nextyear. General and Administrative expenses General and Administrative expenses in 2006 were €1.9 million (2005: €0.2million). This increase was due to the expansion of the management team and thetransition to being a public limited company with a listing on AIM and IEX. Interest Income and Expense The company earned interest on its cash balances, primarily the proceeds of theIPO during 2006. This amounted to €1.0 million. An interest expense of €0.09million arose as a result of imputing interest on Preference Shares issued atthe time of the Company's first private financing. All these preference shareswere converted into ordinary shares of AGI Therapeutics plc at the time of theIPO. Taxation While the company has had a loss to date, not all of this is available foroffset against the interest income referred to above. Therefore we incurred atax charge of €0.1 million for the year (2005:Nil) Share based compensation expense During 2006 the Company issued share options to certain employees. While theoptions were issued at a strike price equal to the market price of our shares onthe date of grant, a calculation is required of the potential expense to thecompany of issuing those options which is determined using the Black-Scholesoption-pricing formula. A total amount of €0.8 million was expensed during 2006for these share based compensation charges, divided between Research andDevelopment and General and Administration expenses. Acquisition of Intangibles During 2006 AGI incurred an expense of €0.3 million triggered by certainmilestones in existing patent rights agreements with third parties for rights tointellectual property relating to our arverapamil product. Such payments arecommon in our industry and likely to continue as we advance our products towardscommercialisation. Operating Cashflow Net cash outflow from operating activities in the period was €4.5 million (2005:€4.6 million). Sources of cash in the 2006 included net proceeds from our IPO,€42.5 million, license fees of €1.1 million and interest income of €1.0 million.At 31 December 2006, AGI had cash and short-term deposits of €40.0 million,(2005 €3.0 million). AGI Therapeutics, plc Consolidated Income Statementfor the year ended 31 December 2006 Year ended Year ended 31 December 31 December Note 2006 2005 •'000 •'000 Revenue 2 196 - ______ ______Operating expenses Research and development expenses (share based payment charge of €287,000) (3,519) (4,369)General and administrative expenses (share based payment charge of €484,000) (1,893) (232)Other operating income 65 - ______ ______Operating loss (5,151) (4,601) ______ ______Interest income 1,064 105Interest expense (98) (705) ______ ______Net finance costs 966 (600) ______ ______Loss before income tax (4,185) (5,201)Income tax expense (137) - ______ ______Loss for the year (4,322) (5,201) ______ ______Attributable to equity holders (4,322) (5,201) ______ ______Basic loss per ordinary shareBasic loss per share in cents 3 6.9 16.2Diluted loss per share in cents 3 6.9 16.2 ______ ______ AGI Therapeutics, plc Consolidated Balance Sheetas at 31 December 2006 2006 2005 Note •'000 •'000Non-current assetsProperty, plant and equipment 39 2Intangible assets 1,810 1,521 ______ ______Total non-current assets 1,849 1,523 ______ ______Current assetsOther current assets 223 110Cash and cash equivalents 40,007 2,915 ______ ______Total current assets 40,230 3,025 ______ ______Total assets 42,079 4,548 ______ ______Shareholder equityShare capital 4 674 1Share premium 51,079 4,167Other reserve 795 24Retained deficit (12,644) (8,322) ______ ______Total shareholders' equity 39,904 (4,130) ______ ______Non-current liabilitiesConvertible preference shares - 7,943 ______ ______Total non-current liabilities - 7,943 ______ ______Current liabilitiesTrade and other payables 2,175 735 ______ ______Total current liabilities 2,175 735 ______ ______Total liabilities 2,175 8,678 ______ ______Total equity and liabilities 42,079 4,548 ______ ______ AGI Therapeutics, plc Consolidated Statement of Cash Flowsfor the year ended 31 December 2006 2006 2005 •'000 •'000 (Loss) for the year (4,322) (5,201)Adjustments to reconcile loss to net cash used in operatingactivities:Depreciation of property, plant & equipment 10 2Amortisation of intangible assets 41 34Interest income (1,064) (105)Interest expense 98 705Share based payment 771 14 ______ ______Operating cash outflow before changes in working capital (4,466) (4,551) (Increase)/decrease in other current assets (48) 11Increase in trade and other payables 1,440 590 ______ ______Cash absorbed by operations (3,074) (3,950)Interest received 1,005 83 ______ ______Net cash outflow from operating activities (2,069) (3,867) ______ ______Cash flows from investing activitiesAcquisition of intangibles (330) -Purchases of property, plant and equipment (47) - ______ ______Net cash used in investing activities (377) - ______ ______Cash flows from financing activitiesProceeds from issue of share capital 42,517 -Expenses in respect of the issue of share capital (2,979) ______ ______Net cash from financing activities 39,538 - ______ ______Net increase/(decrease) in cash & cash equivalents 37,092 (3,867)Cash and cash equivalents at the beginning of the year 2,915 6,782 ______ ______Cash and cash equivalents at the end of the year 40,007 2,915 ______ ______ AGI Therapeutics, plc Consolidated statement of changes in shareholders' equityfor the year ended 31 December 2006 Ordinary Preference Number Share Share Share of Shares Capital Capital Premium •'000 •'000 •'000 •'000 Balance at 1 January 2005 - 1 - 4,167Loss for the period - - - -Share based compensation - - - - ______ ______ ______ ______Balance at 31 December 2006 - 1 - 4,167 ______ ______ ______ ______Issue of share capital 1,663,599 17 - -Restructuring of share capital and reverseacquisitionAmalgamation of subsidiary share capital - (1) - 1Fair value of new issued shares to acquire 32,019,025 137 183 (320)subsidiaryConversion of preference shares - 183 (183) -Redemption of convertible debt - - - 8,047Issue of ordinary shares on listing on AIM 33,730,159 337 - 42,163Costs of share issue - - - (2,979)Loss for the period - - - -Share-based compensation - - - - ______ ______ ______ ______Balance at 31 December 2006 67,412,783 674 - 51,079 ______ ______ ______ ______ Consolidated statement of changes in shareholders' equity for the year ended 31 December 2006 (continued from above) Other Retained Total Reserve Deficit Amount •'000 •'000 •'000 Balance at 1 January 2005 10 (3,121) 1,057Loss for the period - (5,201) (5,201)Share based compensation 14 - 14 ______ ______ ______Balance at 31 December 2006 24 (8,322) (4,130) ______ ______ ______Issue of share capital - - 17Restructuring of share capital andreverse acquisitionAmalgamation of subsidiary share capital - - -Fair value of new issued shares to - - -acquire subsidiaryConversion of preference shares - - -Redemption of convertible debt - - 8,047Issue of ordinary shares on listing on - 42,500AIMCosts of share issue - - (2,979)Loss for the period - (4,322) (4,322)Share-based compensation 771 - 771 ______ ______ ______Balance at 31 December 2006 795 (12,644) 39,904 ______ ______ ______ AGI Therapeutics, plc Notes to the consolidated preliminary financial statements 1 Basis of preparation These consolidated preliminary financial statements are presented in eurorounded to the nearest thousand, being the functional currency of the companyand its subsidiaries. They have been prepared on the historical cost basis ofaccounting, except for share based payments and financial instruments, which arestated at fair value. The accounting policies have been applied consistently by all group companies. These preliminary consolidated financial statements do not constitute fullstatutory financial statements of the Group within the meaning of Regulation 40of the European Communities (Companies: Group Accounts) Regulations, 1992. Statement of compliance These preliminary consolidated financial statements are the group's firstconsolidated financial statements, and have been prepared in accordance with theInternational Financial Reporting Standards (IFRSs) as issued by theInternational Accounting Standards Board (IASB) as adopted by the European Union(herein "EU IFRS"). The group has applied the IFRSs which are effective foraccounting periods ending on or after 31 December 2006 to these financialstatements with 1 October 2003 being the transition date, (the date subsidiarywas incorporated), under IFRS 1, 'First Time Adoption'. 2 Revenue The Group operates in one business segment and one geographical segment.On 25 September 2006 the company completed a licensing transaction with AxcanPharma Inc under which it may receive total consideration of US$19 million ifcertain contract milestones are achieved. To date, the company has received anupfront non-refundable licence fee of $1.5 million (€1.175 million) which isbeing amortised on a straight line basis to the income statement over the periodof the underlying product development. This is estimated to be three years andthe company recognised €0.2 million as revenue in the current year. 3 Loss per share Basic loss per share is computed by dividing the loss for the period availableto ordinary shareholders by the weighted average number of ordinary sharesoutstanding during the period. For the year ended 31 December 2005 the ordinaryshares in issue include the Ordinary Shares of 13,749,900 and A OrdinaryPreference Shares of 18,269,125 issued to acquire AGI Therapeutics ResearchLimited. Diluted loss per share is computed by dividing the loss for the period, by theweighted average number of ordinary shares outstanding and, when dilutive,adjusted for the effect of all potentially dilutive shares, including stockoptions, warrants, and convertible debt securities on an as-if-converted basis. The following table sets forth the computation for basic and diluted loss pershare for the year ended 31 December 2006 and 2005: Year ended Year ended 31 December 31 December 2006 2005 •'000 •'000NumeratorLoss attributable to ordinary shareholders (4,322) (5,201) _________ _________Denominator:Denominator for basic-weighted average 61,961,771 32,019,124shares _________ _________Basic loss per share 6.9 cent 16.2 cent _________ _________ For the year ended 31 December 2005 and 31 December 2006, there is no differencein the weighted average number of ordinary shares used for basic and diluted netloss per Ordinary share as the effect of all potentially dilutive ordinaryshares outstanding for each period was anti-dilutive. The potential effect ofall anti-dilutive stock options at 31 December 2006 was 653,530 shares (31December 2005: Nil). 4 Share-based compensation The Company grants share options under the company share option plan to certainemployees and non-employee directors. The options are granted at fixed exerciseprices equal to the market value of the company shares on the date of grant. The fair value of services received in return for share options granted toemployees is measured by reference to the fair value of share options granted.The estimate of the fair value of the services received is measured based on theBlack-Scholes option-pricing model. The fair value is calculated using the following inputs into the option pricingmodels; Year ended 31 December 2006 Weighted average share price 1.45Weighted average exercise price 1.45Expected life 5 yearsExpected volatility 40%Expected dividend yield -Risk-free rate 3.9 As the Company has only traded on AIM since February 2006 the Company hasdetermined volatility by considering the limited historical volatility of itsown shares and the volatility of stock options issued by a group of comparablepharmaceutical companies listed on a US or UK Exchange having options with anexpected life of five years. The risk-free interest rate assumption is basedupon observed interest rates appropriate for the term of our employee stockoptions. The dividend yield assumption is based on the history and expectationof dividend payouts. The Company recognised an expense of €0.8 million in respect of equity-settledshare-based compensation during the year ended 31 December 2006. 5 Share capital 2006 2005Authorised •'000 •'000 100,000,000 ordinary shares of €0.01 each (2005: 100,000 Ordinary 1,000 100Shares of €1 each) ______ _____ 1,000 100 ______ ______Allotted, called up and fully paid67,412,783 Ordinary shares of €0.01 each (2005: 1) 674 118,269,125 "A" Preference shares of €0.01 each 183 -18,269,125 "A" Preference shares of €0.01 each converted into (183) -ordinary shares ______ ______ 674 1 ______ ______ On incorporation of the Company on 16 December 2005 the authorised share capitalwas €100,000 divided into 100,000 Ordinary shares of €1 each, with 1 Ordinaryshare issued. On 19 January 2006, the Company sub-divided its ordinary sharecapital into 10 million Ordinary shares of €0.01 each and the Company issued1,663,599 Ordinary shares for cash at par. The authorised share capital of the company was increased on 20 January 2006 bythe creation of 70 million Ordinary shares of €0.01 each and 20 million AOrdinary Preference shares of €0.01 each in the Company. On 27 February 2006 the 20,000,000 A Ordinary Preference shares were convertedinto 20,000,000 authorised Ordinary shares. On 20 January 2006 the Company entered into a reverse acquisition of AGITherapeutics Research Limited and the company issued 13,749,900 Ordinary sharesof €0.01 each and 18,269,125 A Ordinary Preference shares at a fair value of€1.26 per share to acquire the entire interest of AGI Therapeutics ResearchLimited, which became its wholly owned subsidiary. The shares were issued tothe shareholders of AGI Therapeutics Research Limited in the ratio of 125 sharesin the company for one share in AGI Therapeutics Research Limited. The fairvalue of the Company's identifiable assets and liabilities at that date was€16,639 and no goodwill arose on the reverse acquisition. On 27 February 2006 the entire issued A Ordinary Preference shares in thecompany were converted into Ordinary shares at a rate of one Ordinary share forevery one A Preference share. On 27 February 2006 the Company issued 33,730,159 Ordinary shares of €0.01 eachon the AIM market of the London Stock Exchange at a price of €1.26. The totalcost of the listing amounted to €2,979,000. This has been accounted for as areduction to the share premium account. 6 Related parties (a) Transactions with directors The Company paid Icon Clinical Research Limited fees of €509,247 for clinicalresearch studies in 2006. Ronan Lambe, chairman of AGI's Board of Directors(appointed on 17 January 2006) is also a director of Icon Clinical ResearchLimited. Dr. David Young, President of AGI Therapeutics Inc and an executivedirector of AGI Therapeutics plc (appointed on 5 June 2006), was formerly anExecutive Vice President of ICON. Frank Kenny, John O'Sullivan and Peter Sandys are directors of the company andare board nominees of Delta Partners, ACT Venture Capital and Seroba Bioventuresrespectively. Fees of €17,000 annually are paid by the company to each ofDelta, ACT and Seroba in respect of their nominees' appointment. The balance outstanding to these related parties is as follows as at 31 December2006: Icon €44,219, Delta €5,143, ACT •nil and Seroba €5,143. (b) Transactions with other related parties The Company entered into an agreement with BioClin Research Laboratories Ltd ("BioClin") on 25 April 2005. Under this agreement, BioClin providesBioanalytical Sample Analysis to the company at contracted rates. During theyear ended 31 December 2006, €98,250 (2005: €96,190) was paid to BioClin forthese services. Mary Martin, a director of the company is also a director ofBioClin. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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