15th Mar 2006 11:01
ReGen Therapeutics PLC15 March 2006 REGEN THERAPEUTICS PLC Chairman's Statement and preliminary results to 31 December 2005 PRELIMINARY STATEMENT to 31 December 2005 In 2005 ReGen progressed on the financial, scientific and commercial fronts. FINANCIALS As expected ReGen reported an operating loss for the year of £2.26m an increaseof 46% over the previous year. This reflected an increase in development spendof 63%, some of which is reflected in future and not actual payments this year,and the real rise in development spend was 33%. The results of our increaseddevelopment spend in 2004 and 2005 are shown in our encouraging scientificdevelopment. The acquisition of Guildford Clinical Pharmacology Unit Limited(GCPUL) in October 2004 doubled the number of full time employees within thegroup but our close control of costs and reorganisation of GCPUL meant that therise in non development spend was only 40%. We are pleased to report thatGCPUL's order book now stands at £663,000 and this has been achieved since thebeginning of January 2006. Turning now to the balance sheet the dramatic drop in debtors is merely thatlast year we had cash due to us from our stockbroker, who had made a December2004 Placing for us and this was not received until January 2005. SCIENTIFIC AND COMMERCIAL DEVELOPMENT During the year we continued our long-term research contracts at the Universityof Texas Medical Branch (UTMB), Galveston, Texas, USA and Roswell Park CancerInstitute (RPCI), Buffalo, New York, USA. These collaborations produced threeimportant publications during the year. In June 2005 the peer-reviewed journalNeuropeptides published an article showing that ColostrininTM can prevent theaggregation of beta amyloid - a toxic protein that builds up in the brains ofAlzheimer's disease sufferers. In October 2005 ReGen presented an article at the2005 Alzheimer's Disease Conference which showed that ColostrininTM increaseslifespan of mouse cells predisposed to premature ageing. In November 2005another peer reviewed article regarding ColostrininTM driven neurite outgrowthwas published in the Cellular and Molecular Neurobiology journal. Furthermore the scientific background provided by our collaborators gave usthree more granted patents during the year. In addition to covering the use ofColostrininTM as a medicament, particularly in the treatment of chronicdisorders of the central nervous system and the immune system, our patentportfolio claims have been enhanced by 1) the use of ColostrininTM and itsconstituent peptides as a promoter of neuronal cell differentiation, 2) the useof ColostrininTM and its constituent peptides to promote induction of cytokines,and 3) the use of ColostrininTM and its constituent peptides as oxidative stressregulators. In addition, a further study was carried out by Proximagen, which showed thatColostrininTM and a synthetic homolog of a ColostrininTM derived peptide showedneuroprotection in a cell line model of Parkinson's disease. This is veryimportant, as, although we had theoretically predicted that ColostrininTM andits constituent peptides should have activity in other CNS neurodegenerativediseases, this was the first independent observation of this effect. We were pleased to welcome Professor Michael Stewart of the Open University, whohad previously completed work for us, as a consultant to provide furtherlong-term scientific advice. COMMERCIAL DEVELOPMENT In March Pali Capital our US Investment Bank started making a market in ReGenshares in New York. This is a further step in the progress of accessing the UScapital markets for the long-term development of the Company. In a furtherdevelopment in our funding we appointed JM Finn & Co as our broker in July andthey successfully raised £1.56m for us in September. As part of our development of ColostrininTM as a nutraceutical in June weannounced the successful definition of the production process for ColostrininTMat industrial scale. We are now working to make this process fully compliantwith the necessary standards of Good Manufacturing Practice (GMP). We are inadvanced stages of licensing discussions with a US based partner, and are inless advanced discussions with several companies around the world. Most important for the year was the option to acquire Sciencom Limited and itsnew use for zolpidem. On the 6 September it was announced that ReGen had enteredinto an exclusive option arrangement with Sciencom, a private company, which hasdiscovered an important new use for zolpidem, a long established drug, currentlymarketed for the treatment of insomnia. A patent application has been filed tocover this new use. Following the success of the feasibility study Sciencom wasacquired by us in February 2006. The clinical effect discovered in a number of 'open' clinical case observationsis that zolpidem can normalise areas of brain dormancy secondary to a primarylesion in brain damage conditions. The clinical effects of this dormancyreversal have been restoration of consciousness, swallowing, co-ordination andmotor function after stroke and traumatic brain injury. Given that stroke aloneis the largest single cause of severe disability in England and Wales, with over250,000 people being affected at any one time, the Company believes that thisrepresents a significant medical and commercial opportunity. This reversal of dormancy has been visualised by SPECT (Scanning PositronEmission Computed Tomography) brain scanning on dosing with zolpidem. Theclinical effect is generally proportional to the size and position of thedormant area and correlates with drug levels in the brain/plasma. Whilst to datethese effects have been achieved with existing formulations these are less thanideal for the new use, with sedation as a significant limiting factor. ReGen istherefore looking to develop new formulations to optimise the delivery of thisimportant clinical benefit to a diverse range of patients. ReGen is planning a Phase II clinical study on zolpidem, managed by oursubsidiary CRO Guildford Clinical Pharmacology Unit Limited, which will becarried out in South Africa. In this study we will be comparing a novelformulation with a standard formulation in known zolpidem responders. Weestimate the potential market size to be $4.3 billion. A new formulation for this indication could be licensed to another drug companyfor further development as early as 2007. Given the size of the market ReGencould obtain very significant milestone payments. SUMMARY 2005 was a solid year of development for ReGen and we believe that 2006 shouldshow in commercial terms the fruits of our development to date. I amparticularly excited in the short term about the prospects of zolpidem and inthe longer term for the overall uses of ColostrininTM and its constituentpeptides in neurodegenerative diseases. I would also like to thank our shareholders for their continued supportthroughout the year. MALCOLM BEVERIDGE For personal reasons Malcolm Beveridge retired from the Board in April. He wascrucial to the start of this Company and has played a role in it ever since. Percy W Lomax Executive Chairman 15th March 2006 REGEN THERAPEUTICS PLC Consolidated profit and loss account for the year ended 31 December 2005 2002 2005 2004 £ £ (Unaudited) (Audited) Turnover 115,657 98,794 Cost of sales 39,713 44,665 ________ ________ Gross Profit 75,944 54,129 Administrative costs Development costs 745,012 456,566Other 1,496,465 1,063,446Goodwill amortisation 94,036 77,748 ________ ________ (2,335,513) (1,597,760) ________ ________ Operating loss (2,259,569) (1,543,631) Interest receivable 47,139 46,126Interest payable (10,216) (4,723) ________ ________ Loss on ordinary activities before taxation (2,222,646) (1,502,228) Taxation on loss from ordinary activities 81,930 114,202 ________ ________ Loss on ordinary activities after taxation (2,140,716) (1,388,026) ________ ________ ========== ========== Basic and diluted loss per share (0.56)p (0.49)p REGEN THERAPEUTICS PLC Consolidated balance sheet at 31 December 2005 2005 2005 2004 2004 £ £ £ £ (Unaudited) (Unaudited) (Audited) (Audited) (Restated) (Restated) Fixed assetsIntangible assets 2,166,765 2,190,130Tangible assets 21,180 18,498 ________ ________ 2,187,945 2,208,628 Current assets Stocks 4,276 500Debtors 309,419 1,163,549Cash at bank and in 941,503 771,185hand ________ ________ 1,255,198 1,935,234 Creditors: amountsfalling duewithin one year 618,477 601,068 ________ ________ Net current assets 636,721 1,334,166 ________ ________ Total assets lesscurrent 2,824,666 3,542,794liabilities ________ ________ ========== ========== Capital and reservesCalled up share 5,797,689 5,639,868capitalShare premium 10,437,948 9,173,181Other reserves 242,308 242,308Profit and loss (13,653,279) (11,512,563)account ________ ________ Equity shareholders' 2,824,666 3,542,794funds ________ ________ ========== ========== REGEN THERAPEUTICS PLC Consolidated cash flow statement for the year ended 31 December 2005 2005 2005 2004 2004 £ £ £ £ (Unaudited) (Unaudited) (Audited) (Audited) Net cash outflow fromoperating activities (1,263,628) (1,760,901) Returns on investmentsandservicing of financeInterest received 47,139 46,126Interest paid (10,216) (4,723) ________ ________ 36,923 41,403 Taxation 104,202 - Capital expenditure andfinancial investmentPayments to acquiretangible fixed assets (10,814) (4,346)Payments to acquireintangible fixed assets (95,754) (66,234) ________ ________ (106,568) (70,580)Acquisitions Purchase of a business:Acquisition expenses - (73,050)Cash acquired - (115,234) ________ - (188,284) ________ ________ Net cash outflow beforemanagementof liquid resources andfinancing (1,229,071) (1,978,362) Management of liquidresources(Increase)/decrease inshort term deposits (175,095) 206,058 ________ ________ (175,095) 206,058 FinancingProceeds of sharesissued 1,556,000 1,748,000for cashExpenses paid on shareissue (133,412) (95,254) ________ ________ 1,422,588 1,652,746 ________ ________ Increase/(decrease) incash 18,422 (119,558) ________ ________ ========== ========== ReGen Therapeutics Plc Notes forming part of the financial statements for the year ended 31 December2005 1 Accounts The financial information contained in this announcement does not constitutestatutory financial statements within the meaning of Section 240 of theCompanies Act 1985. The financial information for the year ended 31 December2004 has been extracted from the statutory financial statements for that year,which have been filed with the Registrar of Companies. The audit report on thosefinancial statements was unqualified and did not contain any statement undersection 237 (2) or (3) of the Companies Act 1985. It did contain however anexplanatory paragraph dealing with a fundamental uncertainty relating to goingconcern. The financial information for the year ended 31 December 2005 has beenextracted from the draft statutory financial statements for that year upon whichthe auditors have yet to report. The auditors have indicated that their finalaudit report will contain an explanatory paragraph dealing with the fundamentaluncertainty referred to in the next paragraph. 2 Going concern The directors have reviewed and amended the Company's plans for utilising itsexisting resources and believe that future funds available together with anypotential licensing deal will be sufficient for the group's purposes for aminimum of 12 months. On this basis the Directors consider it appropriate to prepare the financialstatements on the going concern basis. If a licensing deal, further fundraising or ongoing drug development programmeare not successful then adjustments may be necessary to write down assets totheir recoverable amounts, reclassify fixed assets and long term liabilities ascurrent and provide for additional liabilities. 3 Accounting policies In preparing this statement the Group has adopted FRS 25 "Financial instruments:disclosure and presentation" for the first time. The adoption of this standardrepresents a change in accounting policy and the comparative figures have beenrestated accordingly. Further details are given in note 4 below. With thisexception the accounting policies used to prepare the financial informationcontained in this statement are consistent with those set out in the statutoryfinancial statements for the year ended 31 December 2004. All accountingpolicies are in accordance with applicable accounting standards. 4 Prior year adjustment The Group has adopted FRS 25 "Financial instruments: disclosure andpresentation" for the first time. The effect of this change in accounting policyto adopt the presentation requirements of FRS 25 was to reclassify non equityminority interests of £176 (2004: £176) from equity to liabilities. 5 Intangible fixed assets Costs amounting to £95,754 relating to patent rights have been capitalised inthe year in accordance with the Group's stated accounting policy. 6 Share Capital On 15 September 2005, the Company issued 2,222,222 ordinary shares of 0.1p eachat a premium of 1.25p per share for a consideration of £30,000 representing theunderwriting commission payable upon entering in to an agreement with theHeadstart Group of Funds under which Headstart will make available to theCompany a committed share finance facility of up to £2,000,000. On 15 September 2005, the Company issued 89,000,000 ordinary shares of 0.1p eachat a premium of 0.9p per share. On 10 October 2005, the Company issued 66,600,000 ordinary shares of 0.1p eachat a premium of 0.9p per share. The issued shares rank pari passu with existing shares. 7 Loss per share The basic loss per ordinary share has been calculated using the weighted averagenumber of shares in issue during the relevant financial year. The weightedaverage number of equity shares in issue are 383,344,701 and the loss is£2,140,716 (2004 - 280,747,760 shares and the loss £1,388,026). The effect of all potential ordinary shares is anti-dilutive. 8 Reconciliation of movements in equity shareholders' funds 2005 2004 £ £ (Unaudited) (Audited) Loss for the financial year (2,140,716) (1,388,026)New share issue 157,821 80,135Premium on new share issue net of issue costs 1,264,767 1,822,611 ________ ________ (Decrease)/increase to equity shareholders' funds (718,128) 514,720 Opening equity shareholders' funds 3,542,794 3,028,074 ________ ________ Closing equity shareholders' funds 2,824,666 3,542,794 ________ ________ 9 Reconciliation of operating loss to net cash outflow from operating activities 2005 2004 £ £ (Unaudited) (Audited) Operating loss (2,259,569) (1,543,631)Amortisation 119,119 92,460Depreciation 8,132 4,947(Increase) in stocks (3,776) (500)Decrease/(increase) in debtors 831,858 (570,882)Increase in creditors 40,608 256,705 ________ ________ Net cash outflow from operating activities (1,263,628) (1,760,901) ________ ________ ============= ================ 10 Reconciliation of net cash flow to movement in net funds 2005 2004 £ £ (Unaudited) (Audited) Increase/(decrease) in cash in the year 18,422 (119,558)Increase/(decrease) in liquid resources 175,095 (206,058) ________ ________ Movement in net funds in the year 193,517 (325,616) Net funds at start of year 670,599 996,215 ________ ________ Net funds at end of year 864,116 670,599 ________ ________ ========== ========== The annual report and financial statements for the year ended 31 December 2005will be sent to all shareholders in due course and copies will be available fromthe company's business address at Suite 406, Langham House, 29-30 MargaretStreet, London, W1W 8SA. Further information:Andrew MarshallGreycoat CommunicationsTel: 020 7960 6007Mobile: 07785 297111 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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