28th Jun 2006 07:01
ReNeuron Group plc28 June 2006 Guildford, UK: 28 June 2006 ReNeuron Group plc Preliminary Results for the Year Ended 31 March 2006 Operational Highlights • Significant progress with late pre-clinical development of lead ReN001 stroke therapy, including repeat efficacy and dose response data and completion of scale-up to full cGMP(1) standard • Pre-clinical testing programme for ReN001 cell line approaching completion, with IND(2) clinical trial application expected by the end of 2006 • Scale-up and pre-clinical development commenced for ReN005 therapy for Huntington's disease • Early pre-clinical data presented for ReN004 programme for Parkinson's disease and ReN003 programme for degenerative diseases of the retina • Manufacturing and marketing rights licensed to Chemicon, Inc. for ReNcell neural stem cell lines for non-therapeutic applications • ReNcell hepatocyte (liver) cell line developed for non-therapeutic applications • Cross-licence and cell supply agreements signed with StemCells, Inc. • Intellectual property portfolio greatly strengthened Financial Highlights • Successful flotation on AIM, raising £9.5 million before expenses • Interim funding of £0.7 million announced today, satisfying outstanding licence obligation regarding aggregate funds raised by the Company • Loss for the year of £6.3 million (2005: £3.2 million) after non-cash, non-recurring exceptional charges of £1.2 million (2005: nil) • Net cash outflow before cash management and financing items £4.6 million (2005: £2.7 million) • Cash and short term investments at 31 March 2006 of £5.1 million (2005: £0.4 million) Commenting on the results, Professor Trevor Jones, Chairman, said: "Over the past year, we have made significant progress towards the execution ofour strategy to exploit the full potential of ReNeuron's stem cell technologies. Most importantly, we remain on track to achieve our 2006 objective ofsubmitting an IND application to the FDA for approval to commence human clinicaltrials with our lead ReN001 stem cell therapy for disabled stroke patients.This filing will represent a substantial milestone for the Company and will be asignificant event, we believe, in the wider stem cell field in its efforts totranslate the potential of stem cell science into safe and effective therapiesaddressing major unmet medical needs. We have also been able to demonstrate progress with our other therapeuticprogrammes during the year, as well as successfully exploit the near-termrevenue potential of our stem cell lines in non-therapeutic applications. Welook forward to building on the progress made over the past year as ReNeuronmoves towards becoming a clinical stage biotechnology company in one of the mostexciting fields in medicine." For further information: Michael Hunt, Chief Executive OfficerReNeuron Group plc +44 (0)1483 302560 David YatesSarah MacleodFinancial Dynamics - Europe +44 (0)20 7831 3113 Jonathan Birt, John CapodannoFinancial Dynamics - US +1 (212) 850 5755 Chairman's and Chief Executive Officer's Joint Statement REVIEW OF OPERATIONS The year ended 31 March 2006 has seen a transformation in the fortunes andprospects of the Group, with respect to both its research and developmentprogrammes and its financial condition. ReN001 stem cell therapy for stroke ReNeuron's most advanced therapeutic programme is its ReN001 stem cell therapyfor disabled stroke patients, a group representing a significant unmet medicalneed. During the period, our original ReN001 pre-clinical rodent efficacy datain stroke were published in the Journal of Experimental Neurology. Importantly,we were able to replicate these results during the period using ReN001 cellsdrawn from production lots manufactured to cGMP standard, equivalent to thosethat will be used in clinical trials. These new results also showed a cleardose-ranging effect, indicating that a higher ReN001 dose has the potential toreverse both the sensory and motor symptoms associated with stroke disability.We believe that this is the first time such a dose-ranging effect has beenclearly shown using neural stem cells in a pre-clinical model of aneurodegenerative condition. During the year, we have made significant progress in driving ReN001 through anintensive pre-clinical safety testing programme ahead of our first applicationto commence clinical trials with this therapy. In designing this pre-clinicaltesting programme, we benefited greatly from input received at meetings takenwith regulatory authorities in the UK, mainland Europe and the US during theyear, including our pre-IND meeting with the US Food and Drug Administration(FDA) held in July 2005. A pre-IND meeting is a formally minuted precursor tothe filing of an IND application to the FDA, and serves to alert the applicantto items or concerns that the regulator may have with the proposed therapy, andwhich the regulator will consequently expect to have been addressed in the INDsubmission. We have been encouraged by the FDA's response at our pre-INDmeeting and by the results of the ReN001 pre-clinical testing programme thusfar, which indicate that our cells are safe when tested across a range ofimportant in vitro and in vivo studies. During the year, we have also successfully completed the scale-up and cellbanking of the ReN001 product. One of ReNeuron's key competitive advantages isthe ability of its proprietary c-mycERTAM expansion technology to scale up humanstem cells into a well-characterised, consistent and stable product forwide-scale clinical use. Master and working cell banks of ReN001 cells have nowbeen manufactured to full cGMP standard, and fully tested for purity, sterilityand stability. These cell banks contain the vials of ReN001 cells from whichall future clinical and in-market product will eventually be grown. This givesus the potential to progress our ReN001 stroke therapy to the clinic and beyondwithout the need to re-derive ReN001 cells from source material at any stage inthe future, thereby reducing risk, cost and time from the development pathwayfor this product. As a result of the above progress, and subject to successful completion of theremaining pre-clinical testing programme, we intend to submit an IND applicationto the FDA, by the end of 2006, for approval to commence initial human clinicaltrials with ReN001. Other therapeutic and non-therapeutic programmes We have made considerable progress with our follow-on therapeutic programmesduring the year. In February 2006, we signed a contract with Angel BiotechnologyHoldings plc to scale up our ReN005 stem cell line for Huntington's disease,initially producing a master cell bank to full cGMP standards. We have alreadygenerated positive pre-clinical efficacy data with this cell line in aHuntington's disease model, and the ReN005 programme is currently inpre-clinical development. During the period, we announced that initial in vivo testing of our ReN004candidate stem cell lines showed them to have attributes that may favour thereversal of the neurological deficits seen in Parkinson's disease. Furtherpre-clinical studies are underway in appropriate models of this disease. Afurther medium term goal with this programme is to develop a delivery systemwhich will serve to protect the ReN004 cells once implanted. The early development work associated with our ReN004 programme for Parkinson'sdisease and our ReN005 programme for Huntington's disease is being funded inpart under the £2.2 million UK Department of Trade and Industry TechnologyProgramme grant awarded to ReNeuron and the other consortium members in January2005. Shortly after the year end, we also announced initial survival efficacy datawith our ReN003 stem cell therapy programme for diseases of the retina, as wellas signing a collaborative research agreement with the Schepens Eye ResearchInstitute at Harvard Medical School in Boston to further pursue this programme. We have made good progress during the period with our ReNcell stem cell linesfor drug discovery applications in the pharmaceutical industry. Shortly afterthe year end, we licensed two of our first generation ReNcell neural stem celllines to Chemicon International, Inc., a leading US-based provider of biologicalproducts. Under the licence, Chemicon will exclusively manufacture anddistribute the cell lines worldwide for research purposes, providing ReNeuronwith a near-term royalty stream. During the period, we also completed initialdevelopment of a second generation ReNcell hepatocyte (liver) cell line withhigh potential utility as a drug toxicology testing and screening tool. We havegenerated and presented key functional data relating to this cell line and weare currently optimising its growth characteristics ahead of seeking a partnerto launch the line commercially. Other activities In July 2005, we signed a landmark cross-licence with StemCells, Inc., a leadingUS, NASDAQ-quoted adult stem cell development company. In April 2006, we signeda further agreement with StemCells providing for ReNeuron to supply StemCellswith cell lines generated using our c-mycERTAM stem cell expansion technology,for use in StemCells' areas of therapeutic focus. These cell lines will beproduced to standards appropriate for clinical and commercial use, and ReNeuronwill derive a commercial return from the supply of the cell lines. During the period, we have continued to strengthen our intellectual propertyposition. In January 2006, we received a Notice of Allowance from the USPatent and Trademark Office concerning a key patent application. Thisapplication contains broad claims covering methods of treatment of differenttypes of brain damage by the transplantation of conditionally immortal3 neuralstem cells, such as those generated by ReNeuron's c-mycERTAM stem cell expansiontechnology. Equivalent patents to this US application had already been grantedin Europe and other significant territories. We have filed further patent applications during the year relating to specificcell lines for both therapeutic and non-therapeutic applications. Ourcross-licence with StemCells, Inc. has also greatly strengthened our overallportfolio of proprietary and licensed patents covering both neural and otherstem cell types. As a result, the Group remains well-placed to aggressivelyprotect its stem cell products and technologies from an intellectual propertyperspective as those products move towards commercialisation. In August 2005, we successfully floated the Company on the London AIM market,raising £9.5 million before expenses from both UK and US institutional investorsand making ReNeuron the only publicly-quoted adult stem cell company in the UK. As part of the flotation, warrants were also issued on the basis of one warrantfor every two new Ordinary shares, exercisable at 30p per share by 12 February2007. In April 2006, we announced our intention to raise further funds through aninstitutional placing. The resolutions pertaining to this proposed funding werecarried at an Extraordinary General Meeting of the Company held on 28 April2006. We have, however, decided to defer the bulk of these fundraising effortspending further progress with the ReN001 stroke programme later this year, mostnotably the filing of the IND application for this programme. We believe thatthis will offer the Company a greater opportunity to raise the funds requiredfor the early clinical phase of the stroke programme on terms less dilutive toexisting shareholders. In the meantime, we have today announced a small interimfunding of £0.7 million at a narrow discount to current mid-market price. Thisinterim funding, when combined with the funds raised on flotation, will satisfyan outstanding licence obligation regarding aggregate equity funds raised by theCompany. During the year, we have restructured the Board of the Company to reflect itspublic company status. As a result, Bill Edge and Mark Clement stepped downduring the period and we welcomed Dr Paul Harper to the Board. We intend tomake further appointments to the Board and senior management team in due course,reflecting the ongoing transition of the Company from a research-centredorganisation to a product-focused, clinical stage enterprise. SUMMARY OF RESULTS In the year ended 31 March 2006, the Group recorded turnover of £9,000 (2005:£3,000), principally representing sub-licence income arising from theout-licensing of a non-core patent jointly owned by the Group and a UK academicinstitution. Net operating expenses before exceptional items increased in the period, asexpected, to £5.9 million (2005: £3.4 million). Of this increase, £1.9 millionrelates to research and development costs which increased to £4.3 million (2005:£2.4 million) in the period, principally due to the late pre-clinicaldevelopment costs associated with the ReN001 stroke programme. The balance ofthe increase in operating expenses relates to general and administration costswhich increased by £0.6 million to £1.6 million (2005: £1.0 million) in theperiod. Again, this increase was expected, and was largely attributable tocosts associated with business development activities during the period, as wellas incremental costs associated with the Company's newly acquired public statusfollowing its flotation. Exceptional charges in the period totalled £1.2m (2005: £nil). Of these, £0.9million relates to a provision against the intangible asset arising from thelicence granted to ReNeuron in July 2005 to certain patents and intellectualproperty owned by StemCells, Inc. Based upon an impairment review, thedirectors believe that it is appropriate to fully provide against this asset,given the early stage nature of the technologies to which this licence relates.The £0.3 million balance of exceptional charges in the period relates tonon-recurring net charges associated with the cancellation and re-issue ofemployee share options. Other operating income increased to £270,000 in the period (2005: £43,000),representing grant income recognised as the Group's UK DTI Technology Programmestem cell grant was initiated. Interest receivable increased to £197,000 in the period (2005: £53,000), due tointerest earned on proceeds from the Company's flotation. Interest payable inthe period totalled £250,000 (2005: £250,000), representing the premium payableon short term debt issued prior to the Company's flotation. Tax credits booked against research and development expenditure increased to£0.5 million in the period (2005: £0.3 million), reflecting the Group'sincreased research and development expenditure during the period. The resulting loss for the financial year increased to £6.3 million (2005: £3.2million), with £1.2 million of the increase attributable to the non-recurring,non-cash exceptional charges explained above. Net cash outflow before management of liquid resources and financing increasedto £4.6 million (2005: £2.7 million) in the period. This was due to the increasein underlying operating expenses, offset in part by increases in other operatingincome, interest received and short term creditors and accruals in the period.The increase in creditors and accruals of £0.7 million in the period reflects ageneral increase in research and development activity in the period and alsoReN001 pre-clinical development work contracted for and undertaken in the periodbut not billed or paid for as at 31 March 2006. The Group had cash and short term investments totalling £5.1 million as at 31March 2006 (2005: £0.4 million). The increase is largely due to net flotationproceeds of £8.3 million received in the period, together with a further £1.25million of short term debt financing, including premium, which converted toequity on the Group's flotation in August 2005. The directors estimate that theGroup's current cash resources, including the funding announced today, aresufficient to meet expenditure requirements into the second quarter of 2007.The directors are confident of raising further funds subsequent to the INDapplication for ReN001 towards the end of 2006. Consequently, the going concernbasis has been adopted in the preparation of the preliminary announcement. SUMMARY AND OUTLOOK ReNeuron has developed and maintained a clear strategy to exploit the fullpotential of its stem cell platform technology in therapeutic areas offering thebest chances of clinical benefit and commercial return. Over the past year, wehave made significant progress towards the execution of this strategy. Mostimportantly, we remain on track to achieve our 2006 objective of submitting anIND application to the FDA for approval to commence human clinical trials withour lead ReN001 stem cell therapy for disabled stroke patients. This filingwill represent a substantial milestone for the Company and will be a significantevent, we believe, in the wider stem cell field in its efforts to translate thepotential of stem cell science into safe and effective therapies addressingmajor unmet medical needs. We have also been able to demonstrate progress with our other therapeuticprogrammes during the year. Furthermore, we have successfully exploited thenear-term revenue potential of our stem cells in non-therapeutic applications,culminating in the first commercial licence of our ReNcell range of stem celllines, to Chemicon, Inc., in April 2006. We look forward to building on the progress made over the past year as ReNeuronmoves towards becoming a clinical stage biotechnology company in one of the mostexciting fields in medicine. Professor Trevor Jones Michael HuntChairman Chief Executive Officer28 June 2006 1. Current Good Manufacturing Practice 2. Investigational New Drug 3. Conditionally immortal stem cells are those that, through modification, are capable of dividing indefinitely in vitro to produce stem cell lines, but whose division can be fully arrested by various means, such as removal of certain constituents present in the cell culture media. 4. The terms 'ReNeuron', 'the Company' or 'the Group' used in this statement refer to ReNeuron Group plc and/or its subsidiary undertakings, depending on the context. Consolidated profit and loss accountfor the year ended 31 March 2006 Year ended Year ended Note 31 March 31 March 2005 2006 Audited Unaudited £'000 £'000 Turnover 9 3Cost of sales - -Gross profit 9 3 ______ ______Net operating expenses excluding exceptional items 2 (5,885) (3,382)Exceptional operating costs 3 (1,167) - ______ ______Net operating expenses including exceptional items (7,052) (3,382)Other operating income 270 43 ______ ______Operating loss (6,773) (3,336)Interest receivable and similar income 197 53Interest payable and similar charges (250) (250) ______ ______Loss on ordinary activities before taxation (6,826) (3,533)Tax credit on loss on ordinary activities 513 319 ______ ______Loss for the financial year (6,313) (3,214) ______ ______ Loss per 10p ordinary shareBasic and diluted 4 (8.7p) (9.0p) ______ ______ All results arise from continuing operations. The Group has no recognised gains and losses other than the results above, andtherefore no separate statement of total recognised gains and losses ispresented. Consolidated balance sheet as at 31 March 2006 2006 2005 Note Unaudited Audited £'000 £'000Fixed assetsNegative goodwill 5 (1,421) (1,609)Tangible assets 1,208 1,383 ______ ______ (213) (226)Current assetsDebtors 1,027 624Short term investments 6 - 361Cash at bank and in hand 5,134 70 ______ ______ 6,161 1,055Creditors: amounts falling due within one year (1,320) (579)Convertible loan 7 - (1,250) ______ ______Net current assets/(liabilities) 4,841 (774) ______ ______Total assets less current liabilities 4,628 (1,000)Creditors: amounts falling due after more than one year - (8) ______ ______Net assets/(liabilities) 4,628 (1,008) ______ ______Capital and reservesCalled up share capital 8 9,355 3,587Share premium account 8 5,472 -Other reserves 8 365 365Warrant reserve 8 436 -Profit and loss account 8 (11,000) (4,960) ______ ______Total equity shareholders' funds/(deficit) 8 4,628 (1,008) ______ ______ Consolidated cash flow statement for the year ended 31 March 2006 Year ended Year ended Note 31 March 31 March 2006 2005 Unaudited Audited £'000 £'000 Net cash outflow from operating activities 9 (4,995) (3,150)Returns on investments and servicing of financeInterest received 179 50 ______ ______Net cash inflow from returns on investments and servicing of 179 50finance ______ ______TaxationUK corporation tax -- research and development tax credits 329 364received ______ ______Capital expenditurePurchase of tangible fixed assets (92) (27) ______ ______Net cash outflow from capital expenditure (92) (27) ______ ______AcquisitionsRefund of VAT on acquisition expenses - 86 ______ ______Net cash inflow from acquisitions - 86Net cash outflow before use of liquid resources and financing (4,579) (2,677) ______ ______Management of liquid resourcesDecrease in short term investments 10 361 1,615 ______ ______FinancingIncrease in loans 1,000 1,000Issue of ordinary share capital 9,500 -Share issue costs (1,218) - ______ ______Increase/(decrease) in cash in the period 10 5,064 (62) ______ ______ Notes to the financial statements for the year ended 31 March 2006 1. Basis of preparation These preliminary results do not constitute statutory financial statementswithin the meaning of Section 240 of the Companies Act 1985. Results for theyear ended 31 March 2006 have not been audited. The results for the year ending31 March 2005 have been extracted from the statutory financial statements ofReNeuron Holdings Limited that have been filed with the Registrar of Companiesand upon which the auditors reported without qualification. The statutoryaccounts and audit report for the year ended 31 March 2006 have not yet beensigned by the directors or the auditors respectively. These preliminary results for the year ended 31 March 2006 have been prepared inaccordance with the accounting policies set out in the statutory financialstatements of ReNeuron Holdings Limited for the year ended 31 March 2005. Thefollowing additional accounting policies are applicable to the preliminaryresults for the year ended 31 March 2006: Going concern The preliminary announcement is prepared on the going concern basis. Should theGroup not be a going concern, the balance sheet would need to be reviewed withassets restated to net realisable values and all long term assets andliabilities being reclassified as short-term and provision would be made forfurther liabilities that might arise. The Directors estimate that cash held bythe Group at the date of approval of the annual results (which includes cashreceived subsequent to the period end) will not be sufficient to continuefunding the trading activities of the Group for a further twelve months from thedate of approval of the annual results. However, the directors are confident ofraising further funds as outlined in the Chairman's and Chief ExecutiveOfficer's Joint Statement. Consequently, the directors have adopted the goingconcern basis in the preparation of the preliminary announcement. If furtherfunds were not to be raised in the ways described, the Company would be unableto meet its future financial obligations as they fell due. Basis of consolidation The consolidated accounts include the financial statements of the Company andits subsidiary undertakings, made up to 31 March 2006. A reconstruction of theReNeuron Group took place during the period, as described below, in preparationfor the admission of the Company's shares to the AIM market of the London StockExchange in August 2005. The Company was incorporated as MF59657 Limited on 7 June 2005. On 21 June2005, the Company acquired the entire issued share capital of ReNeuron HoldingsLimited by way of a one-for-one share exchange. On 22 June 2005, the Companywas re-registered as a public limited company and its name was changed toMF59657 plc and then to ReNeuron Group plc on 23 June 2005. As a result of the above reconstruction, the results of ReNeuron HoldingsLimited and its subsidiary undertakings have been consolidated using theprinciples of merger accounting, and the comparative results have therefore beenpresented as if the new group had been established throughout the year to 31March 2005. Warrants Where warrants have been issued together with ordinary shares, the proportion ofthe proceeds received that relates to the warrants is determined by reference tothe relative market values of the warrants and options. The proportion of theproceeds that relates to the warrants is credited to a warrant reserve withinequity shareholders' funds. 2. Net operating expenses excluding exceptional items Year ended Year ended 31 March 31 March 2006 2005 Unaudited Audited £'000 £'000 Administrative expenses 1,589 987Research and development expenditure 4,296 2,395 ______ ______ 5,885 3,382 ______ ______ 3. Exceptional operating costs Year ended Year ended 31 March 31 March 2006 2005 Unaudited Audited £'000 £'000Exceptional administrative expenses:Share option compensation charge 273 -Exceptional research and development expenditure:Impairment of intangible assets acquired 894 - ______ ______ 1,167 - ______ ______ Share option compensation charge A charge of £453,000 was made to the profit and loss account in the period,relating to the grant of replacement options over shares in the Company onflotation, the charge being the estimated market value of the shares at the dateof grant less the exercise price of the options. This charge was credited backto the profit and loss account reserve. Similarly, a number of share optionswere cancelled during the period. Compensation charges totalling £180,000previously made in respect of these options were consequently written back tothe profit and loss account in the period, the credits previously made toreserves in respect of these compensation charges being similarly reversed. Provision against intangible assets acquired On 1 July 2005, ReNeuron entered into licence and subscription and shareexchange agreements with StemCells, Inc., whereby the Group was granted alicence to certain intellectual property and patents owned by StemCells, Inc.,and pursuant to which the Company issued, as part consideration for the licence,a total of 8,939,493 ordinary shares of 10p each to StemCells, Inc. Due to theearly stage nature of the underlying technology, the directors have carried outan impairment review of the intangible asset so created, and consider that it isappropriate to provide against the asset in full. 4. Loss per share The basic and diluted loss per share are calculated by dividing the loss for thefinancial year attributable to ordinary shareholders by the weighted averagenumber of ordinary shares in issue during the year. The loss for the financialyear ended 31 March 2006 is £6,313,000 (2005: £3,214,000) and the weightedaverage number of 10p ordinary shares in issue during the year ended 31 March2006 is 72,532,756 (2005: 35,874,704) Potential ordinary shares are not treated as dilutive as the group has made aloss in each year. 5. Amortisation of negative goodwill Negative goodwill arose during the period ended 31 March 2004 on the acquisitionof ReNeuron (UK) Limited by ReNeuron Holdings Limited. The amount of negativegoodwill arising on acquisition was £2,830,000. The amount that was in excess ofthe fair values of non-monetary assets acquired was immediately amortised to theprofit and loss account. The remaining negative goodwill of £1,883,000, beingequal to the fair values of non-monetary assets acquired, is being amortisedover a period of 10 years, the period over which the non-monetary assets areexpected to be recovered. 6. Short term investments Short term investments comprise fixed rate deposits with banks and money marketfunds, which are not repayable on demand. 7. Convertible loan The convertible loan outstanding at 31 March 2005 was an amount payable toMerlin General Partner II Limited in respect of a bridging loan. The convertibledebt increased to £2,500,000 in the period, including accrued repayment premium,and was converted into equity on the Group's flotation. 8. Share capital and reserves Share capital Share premium Other reserves account account £'000 £'000 £'000 At 1 April 2005 3,587 - 365Issue of new ordinary shares 5,768 6,690 -Issue of warrants - - -Costs of share issue - (1,218) -Loss for the financial year - - -Share option compensation charge - - - ______ ______ ______At 31 March 2006 (unaudited) 9,355 5,472 365 ______ ______ ______ 8. Share capital and reserves (continued) Warrant Profit and loss Total equity reserve account shareholders' (deficit)/funds £'000 £'000 £000 At 1 April 2005 - (4,960) (1,008)Issue of new ordinary shares - - 12,458Issue of warrants 436 - 436Costs of share issue - - (1,218)Loss for the financial year - (6,313) (6,313)Share option compensation charge - 273 273 ______ ______ ______At 31 March 2006 (unaudited) 436 (11,000) 4,628 ______ ______ ______ On 21 June 2005 the Company issued 35,874,704 ordinary shares of 10p each to theshareholders of ReNeuron Holdings Limited as part of a one for one shareexchange. ReNeuron Group plc was admitted to trading on the AIM Market of the London StockExchange on 12 August 2005, raising £9.5 million before costs of £1.2m, placing38,000,000 new ordinary 10p shares at a price of 25p per ordinary share. At thesame time, the Company issued warrants to subscribers of new ordinary shares onthe basis of one warrant for every two new ordinary shares. Each warrant holderis entitled to subscribe for ordinary shares at a fixed price of 30p per share.The warrants expire on 12 February 2007. A credit was made to the warrant reserve during the period, reflecting theproceeds received from the issue of the warrants issued at the time of theCompany's flotation. The proceeds attributable to the warrants have beendetermined by reference to the relative market values of shares and warrantsfollowing the flotation. A total of 8,939,493 ordinary 10p shares were issued in relation to the licenceand subscription and share exchange agreements with StemCells, Inc. See Note 3. A total of 10,666,666 ordinary 10p shares were issued in relation to theconversion of the debt finance on flotation. See Note 7. A total of 67,068 ordinary 10p shares were issued in relation to the settlementof the Merlin fee agreement entered into on 31 March 2000. Other reserves relates to a merger reserve arising on consolidation, being theshare capital and share premium account balances of ReNeuron Holdings Limited at1 April 2005 less the nominal value of the shares issued by the Company toacquire the shares, reflecting the position as if the merger had occurred on 1April 2005. 9. Reconciliation of operating loss to net cash outflow from operating activities Year ended Year ended 31 March 31 March 2006 2005 Unaudited Audited £'000 £'000 Operating loss (6,773) (3,336)Depreciation of tangible fixed assets 265 269Amortisation of negative goodwill (188) (188)Impairment of intangible assets acquired (see Note 3) 894 -Loss on sale of fixed assets - 2Share option compensation charge (see Note 3) 273 -(Increase)/decrease in debtors (199) 184Increase/(decrease) in creditors 733 (81) ______ ______Net cash outflow from operating activities (4,995) (3,150) ______ ______ 10. Reconciliation of movement in net (deficit)/funds At 1 April Cashflow Non cash At 31 March 2005 Movements 2006 Audited Unaudited £'000 £'000 £'000 £'000 Cash at bank and in hand 70 5,064 - 5,134Short term investments 361 (361) - -Convertible loan (1,250) (1,000) 2,250 - ______ ______ ______ ______Net (debt)/funds (819) 3,703 2,250 5,134 As referred to in Note 7, the convertible loan outstanding at 31 March 2005 wasan amount payable to Merlin General Partner II Limited in respect of a bridgingloan. The convertible debt increased to £2,500,000 in the period, including£500,000 accrued repayment premium (of which £250,000 was accrued in the year),and was converted into equity on the Group's flotation. Note to editors: ReNeuron is a leading, UK-based adult stem cell therapy business. The Group isapplying its novel stem cell platform technologies in the development ofground-breaking stem cell therapies to serve significant and unmet or poorly-metclinical needs. ReNeuron has used its c-mycERTAM technology to generate genetically stableneural stem cell lines. This technology platform has multi-national patentprotection and is fully regulated by means of a chemically-induced safetyswitch. Cell growth can therefore be completely arrested prior to in vivoimplantation. The Group's lead stem cell therapy, ReN001 for chronic stroke disability, is inlate pre-clinical development. Subject to successful completion of pre-clinicaltesting, the Company plans to file for approval to commence initial clinicaltrials in stroke by the end of 2006, with trials commencing as soon as possiblethereafter. The Group has also generated pre-clinical efficacy data with its ReN005 stemcell therapy for Huntington's disease, a rare, genetic and fatalneurodegenerative disorder that affects around 1 in 10,000 people. Thisprogramme is in pre-clinical development. In addition to its stroke and Huntington's disease programmes, ReNeuron isdeveloping stem cell therapies for Parkinson's disease, Type 1 diabetes anddiseases of the retina. ReNeuron has also leveraged its stem cell technologies into non-therapeuticareas - its ReNcell range of cell lines for use in drug discovery applicationsin the pharmaceutical industry. ReNeuron's shares are traded on the London AIM market under the symbol RENE.L,and its warrants are traded under the symbol RENW.L. Further information on ReNeuron and its products can be found atwww.reneuron.com. This announcement contains forward-looking statements with respect to thefinancial condition, results of operations and business achievements/performanceof ReNeuron and certain of the plans and objectives of management of ReNeuronwith respect thereto. These statements may generally, but not always, beidentified by the use of words such as "should", "expects", "estimates","believes" or similar expressions. This announcement also containsforward-looking statements attributed to certain third parties relating to theirestimates regarding the growth of markets and demand for products. By theirnature, forward-looking statements involve risk and uncertainty because theyreflect ReNeuron's current expectations and assumptions as to future events andcircumstances that may not prove accurate. A number of factors could causeReNeuron's actual financial condition, results of operations and businessachievements/performance to differ materially from the estimates made or impliedin such forward-looking statements and, accordingly, reliance should not beplaced on such statements. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
RENE.L