6th Dec 2006 07:00
ReNeuron Group plc06 December 2006 Guildford, UK: 6 December 2006 ReNeuron Group plc Interim Results for the six months ended 30 September 2006 Highlights • Completion of late pre-clinical development of lead ReN001 stem cell therapy for stroke, leading to filing of application to commence initial clinical studies in US, announced today • Principal Investigator appointed for ReN001 initial clinical study • Participation in key US grant-funded stem cell research programme • Worldwide market launch of ReNcellTM neural cell lines for non-therapeutic applications and collaboration signed to develop ReNcellTM liver cell products • Interim fundraising of £0.7 million completed, and outstanding warrants re-priced to provide further near term funding opportunity • Net loss of £3.2 million (2005: £4.3 million after exceptional charges of £1.2 million); net cash outflow before cash management and financing items £3.1 million (2005: £2.3 million); cash and short term investments at 30 September 2006 of £2.8 million (2005: £7.4 million) Commenting on the results, Professor Trevor Jones, Chairman, said: "ReNeuron has made excellent progress during the period under review, andsubsequently, in exploiting the full potential of its stem cell technologies.Today's announcement of our first application to commence human clinical studieswith ReN001, our lead stem cell therapy, represents the most important milestonein ReNeuron's history to date. In addition to this, progress is continuing tobe made with our other therapeutic programmes and we are excited to havecommercially launched our first range of ReNcellTM stem cell products fornon-therapeutic use. We look forward to building on this year's significantachievements with high confidence." For further information: Michael Hunt, Chief Executive OfficerReNeuron Group plc +44 (0)1483 302560 David Yates, Nicola DaleyFinancial 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 ReN001 stem cell therapy for stroke The overriding focus of ReNeuron's activities in the six-month period to 30September 2006, and subsequently, has been the ongoing late pre-clinicaldevelopment of our ReN001 stem cell therapy for disabled stroke patients. Asannounced separately today, these efforts have culminated in the filing with theUS Food and Drug Administration (FDA) of our first Investigational New Drug(IND) application to commence initial clinical studies with ReN001 in the US. This filing is a key milestone in ReNeuron's history and, we believe, theworld's first such application concerning a neural stem cell treatment for amajor neurological disorder. Stroke is the single largest cause of adultdisability in the developed world. ReNeuron's ReN001 stem cell therapy seeks totreat those patients who have suffered a stroke and have been left disabled byit. These patients constitute approximately one third of the total strokepatient population. There are currently no approved treatments available toaddress the causes of their disability. In the course of generating the data necessary for the IND package for ReN001,our knowledge of the pre-clinical safety and efficacy profile of this therapyhas grown considerably. Importantly, we have also scaled up the ReN001 productinto a series of clinical-grade banks of cells, manufactured and tested to fullGood Manufacturing Practice (GMP) standards. This manufacturing process formsan important part of the IND package for ReN001, and leaves ReNeuron well-placedas the therapy moves into the clinical phase. There should be no need to goback and re-derive new ReN001 cells from new tissue sources as clinical studiesprogress, providing a significant time and cost advantage over other approachesto generating a viable stem cell therapy. ReNeuron's patented and highly efficient c-mycERTAM stem cell expansiontechnology has enabled us to successfully pursue the above cell manufacturingapproach. We believe our technology gives us a unique ability to generate astandardised, non-patient specific stem cell product, capable of treating largepatient populations such as those left disabled after a stroke. We believe thatthis approach will enable ReN001, and our other stem cell therapies, to bereadily commercialised if successful in the clinical phase, thereby making thesetherapies attractive to potential commercial development partners. During the period, we were delighted to announce the appointment of ProfessorDouglas Kondziolka MD, MSc, FRCS, FACS as Principal Investigator for the initialclinical study with ReN001. Professor Kondziolka is a leading expert in thedelivery of cell therapy treatments to stroke patients and until his appointmentas Principal Investigator, sat on ReNeuron's Clinical Advisory Board. Followingapproval of the IND, he and his clinical team will perform the initial ReN001clinical study at the renowned University of Pittsburgh Medical Center. The initial Phase I clinical study with ReN001 will involve a small number ofdisabled stroke patients. The primary objective of the study will be to monitorthe safety profile of the treatment. Preliminary efficacy measures will also berecorded, however, to provide an indication of therapeutic potential ahead offurther efficacy studies in a larger cohort of patients once the safety of theReN001 therapy has been confirmed. The surgical technique that will be used inthe study is well-established in neurosurgery and relatively straightforward,taking no longer than half an hour and performed under local anaesthetic. Thepatient would typically be expected to be discharged the morning after surgery. Other therapeutic and non-therapeutic programmes Beyond our ReN001 therapy for stroke, we continue to progress the development ofour follow-on therapeutic programmes. We are working with both academic andcommercial technology collaborators to drive these programmes. An example ofthis approach is the collaborative research agreement we announced in the periodwith the Schepens Eye Research Institute at Harvard Medical School. Thisagreement complements our existing relationship with the UCL Institute ofOphthalmology in London, and will enable ReNeuron to pursue early pre-clinicaldevelopment of its ReN003 stem cells for disorders of the retina in conjunctionwith leading UK and US academics working in this field. ReNeuron is also a participant in a new research project involving US and UKacademic teams and funded under the US National Institutes of Health (NIH)Quantum Grant Programme. The project's major aim is to engineer regenerative,cell-based therapeutic "units" for implantation into stroke patients, therebyproviding a source of neural and vascular cells for repair of stroke-inducedtissue damage. ReNeuron is advising the grant consortium on the project andwill be responsible for assisting in the development of these neuro-vascularunits for clinical application in stroke patients. The NIH Quantum Programmehas been developed to make a profound (or "quantum" level) advance in healthcareby funding research on targeted projects that will develop new technologies andmodalities for the diagnosis, treatment or prevention of disease. We have made significant progress during the period with our ReNcellTM productsfor non-therapeutic applications in research and in the pharmaceutical industry.These products will provide early commercial validation of our technologiesand bring ReNeuron a near term revenue stream. Our first generation ReNcellTMCX and ReNcellTM VM neural cell lines have now been officially launched onto themarket by Chemicon International Inc., now part of the US-based MilliporeCorporation, who are marketing the cell lines world-wide through their reagentcatalogue. We are also continuing development of our second generationReNcellTM HEP hepatocyte (liver) cell line, which has high potential utility asa drug toxicology testing and screening tool. We recently signed acollaboration with CellSeed Inc., a Japan-based tissue engineering company, todevelop novel, liver cell culture systems using the ReNcellTM HEP cell line inconjunction with CellSeed's temperature-sensitive polymer technology. Summary of Results In the six months to 30 September 2006, turnover was £42,000 (2005: nil),representing initial licensing income from Millipore Corporation in respect ofthe ReNcellTM CX and ReNcellTM VM cell lines. Net operating expenses before exceptional items increased in the period, asexpected, to £3.5 million (2005: £3.1 million). There were increases in bothresearch and development expenditure and administrative costs in the period, dueprimarily to increased out-sourced resourcing in support of the ReN001 programmeleading up to the IND filing, as well as increased levels of activity across theCompany's other research and development programmes. Operating expenses includea charge of £50,000 (2005 re-stated: £6,000) in the period following the Group'sadoption of Financial Reporting Standard 20, "Share based payments". There were no exceptional charges in the period (2005: £1.2 million), and nointerest payable (2005: £0.25 million). Other operating income and interestreceived in total were broadly equivalent in both periods at £0.2 million. Theresulting net loss for the period decreased to £3.2 million (2005: £4.3million). Net cash outflow before management of liquid resources and financing increasedin the period to £3.1 million (2005: £2.3 million), reflecting the increase inoperating expenses, together with a reduced financing effect in the periodcompared to that in the prior period caused by an increase in creditor balancesover that prior period. As at 30 September 2006, the Group had cash and short term investments totalling£2.8 million (2005: £7.4 million). During the period, the Group raised £0.7million in an interim share placing, and the exercise price and expiry date ofthe Company's outstanding warrants were adjusted to 10p and 12 December 2006respectively. The directors estimate that the Group's current cash resources are sufficient tomeet expenditure requirements into the second quarter of 2007. The directorsare confident of raising further funds in the near term through the exercise ofthe outstanding warrants, and are confident of raising further funds from equityissues and other sources in due course. Consequently, the going concern basishas been adopted in the preparation of these interim financial statements. Outlook ReNeuron has made excellent progress during the period under review, andsubsequently, in exploiting the full potential of our stem cell technologies.Today's announcement of our first application to commence human clinical studieswith ReN001, our lead stem cell therapy, represents the most important milestonein ReNeuron's history to date. In addition to this, progress is continuing tobe made with our other therapeutic programmes and we are excited to havecommercially launched our first range of ReNcellTM stem cell products fornon-therapeutic use. We look forward to building on this year's significantachievements with high confidence. Professor Trevor Jones Michael HuntChairman Chief Executive Officer 6 December 2006 ReNeuron Group plcConsolidated profit and loss accountfor the six months ended 30 September 2006 Six months Six months Year ended ended ended 30 September 30 September 31 March 2006 2005 2006 Restated Restated Unaudited Unaudited Audited Note £'000 £'000 £'000 ______ ______ ______Turnover 42 - 9Cost of sales - - - ______ ______ ______Gross profit 42 - 9Net operating expenses excluding exceptional 2 (3,483) (3,080) (5,939)itemsExceptional operating expenses 3 - (1,167) (1,167) ______ ______ ______Net operating expenses including exceptional (3,483) (4,247) (7,106)itemsOther operating income 137 165 270 ______ ______ ______Operating loss (3,304) (4,082) (6,827)Interest receivable 87 50 197Interest payable - (250) (250) ______ ______ ______Loss on ordinary activities before taxation (3,217) (4,282) (6,880)Tax credit on loss on ordinary activities - - 513 ______ ______ ______Loss for the period 6,7 (3,217) (4,282) (6,367) ______ ______ ______ Loss per ordinary shareBasic and diluted 4 (3.3p) (8.3p) (8.8p) ______ ______ ______ All results arise from continuing operations Consolidated statement of total recognised gains and lossesfor the six months ended 30 September 2006 Six months Six months Year ended ended ended 30 September 30 September 31 March 2006 2005 2006 Restated Restated Unaudited Unaudited Audited £'000 £'000 £'000 ______ ______ ______Loss for the period (3,217) (4,282) (6,367) ______ ______ ______Total recognised Losses for the period (3,217) (4,282) (6,367) ______ ______Prior Year Adjustment - Share-based payment (54) ______Total recognised losses since last annual report (3,271) ______ ReNeuron Group plcConsolidated balance sheetas at 30 September 2006 30 September 30 September 31 March 2006 2005 2006 Unaudited Unaudited Audited Note £'000 £'000 £'000 ______ ______ ______Fixed assetsNegative goodwill 5 (1,327) (1,515) (1,421)Tangible assets 1,112 1,263 1,208 ______ ______ ______ (215) (252) (213)Current assetsDebtors 1,001 898 1,027Cash at bank and in hand 2,791 7,406 5,134 ______ ______ ______ 3,792 8,304 6,161Creditors:Amounts falling due within one year (1,345) (1,380) (1,320) ______ ______ ______Net current assets 2,447 6,924 4,841 ______ ______ ______Total assets less current liabilities 2,232 6,672 4,628Creditors:Amounts falling due after more than one year - (7) - ______ ______ ______Net assets 2,232 6,665 4,628 ______ ______ ______ Capital and reservesCalled up share capital 6 997 9,355 9,355Share premium account 6 5,637 5,472 5,472Capital redemption reserve 6 8,964 - -Merger reserve 6 365 365 365Warrant reserve 6 436 436 436Profit and loss account 6,7 (14,167) (8,963) (11,000) ______ ______ ______ Total equity shareholders' funds 2,232 6,665 4,628 ______ ______ ______ ReNeuron Group plcConsolidated cash flow statementfor the six months ended 30 September 2006 Six months Six months Year ended ended ended 30 September 30 September 31 March 2006 2005 2006 Restated Restated Unaudited Unaudited Audited Note £'000 £'000 £'000 ______ ______ ______Net cash outflow from operating activities 8 (3,127) (2,348) (4,995) 9Returns on investments and servicing of financeInterest 87 50 179 ______ ______ ______Net cash inflow from returns on investments andservicing of finance 87 50 179 ______ ______ ______TaxationUK corporation tax - research and development taxcredits received - - 329 ______ ______ ______Capital expenditurePurchase of tangible fixed assets (18) (9) (92) ______ ______ ______Net cash outflow from capital expenditure (18) (9) (92) ______ ______ ______Net cash outflow before management of liquidresources and financing (3,058) (2,307) (4,579) ______ ______ ______Management of liquid resourcesIncrease in cash from short term investments in theperiod 9 - 361 361 ______ ______ ______FinancingIssue of ordinary share capital 715 9,500 9,500Increase in loans - 1,000 1,000Share issue costs - (1,218) (1,218) ______ ______ ______(Decrease)/increase in cash 9 (2,343) 7,336 5,064 ______ ______ ______ Notes to the interim financial statementsfor the six months ended 30 September 2006 1. Accounting policies 1.1 Basis of preparation These interim financial statements have been prepared on the basis of theaccounting policies set out in the consolidated statutory accounts for ReNeuronGroup plc for the year ended 31 March 2006, except as noted below. The financial information contained in this interim report does not constitutestatutory accounts within the meaning of Section 240 of the Companies Act 1985.Results for the six month periods ended 30 September 2005 and 30 September 2006have not been audited. Statutory accounts of ReNeuron Group plc and itssubsidiaries in respect of the year ended 31 March 2006 have been delivered tothe Registrar of Companies, upon which the Company's auditors have given areport which was unqualified and did not contain a statement under Section 237(2) or 237(3) of that Act. 1.2 New accounting standards In the period, the Group has adopted the accounting treatments necessary tocomply with the Financial Reporting Standard 20, "Share based payments" (FRS20).This constitutes a change in accounting policy. In accordance with this standard, the cost of share options awarded to employeesunder the Group's share option schemes is measured by reference to the fairvalue of the options granted at the date of grant. This cost is recognised overthe vesting period based on the number of options, which, in the opinion of thedirectors, will ultimately vest. A fair value charge of £50,000 has been taken to the profit and loss account inthe period relating to share options issued by the Group. Comparable charges forthe six months ended 30 September 2005 and the year ended 31 March 2006 were£6,000 and £54,000 respectively, and these are reflected in the restated profitand loss accounts. Replacement share options issued at the time of the Company's flotation inAugust 2005 are not covered by FRS20 and were accounted for in the prior periodsin accordance with Urgent Issues Task Force Abstract 17, "Employee share schemes" (UITF17). 1.3 Going concern The Company is developing its technologies for the marketplace and as suchabsorbs cash until sufficient funds from either licensing or products sold aregenerated. The directors estimate that the cash held by the company will notsupport the current level of activities for the next twelve months. However, thedirectors are confident of raising further funds by the issue of equity or otherfinancial instruments. Consequently, the directors have adopted the goingconcern basis in the preparation of the financial statements. If further fundswere not to be raised, adjustments would have to be made to revise the balancesheet value of assets to their realisable amounts and to provide for furtherliabilities that may arise. 2. Total net operating expenses Six months Six months Year ended ended Ended 30 September 30 September 31 March 2006 2005 2006 Restated Restated Unaudited Unaudited Audited £'000 £'000 £'000 ______ ______ ______Administrative expenses 1,007 785 1,607Research and development expenditure 2,476 2,295 4,332 ______ ______ ______ 3,483 3,080 5,939 ______ ______ ______ Research and development expenses include sub-licence payments falling due onreceipt of gross licence income. 3. Exceptional operating expenses Six months Six months Year ended ended ended 30 September 30 September 31 March 2006 2005 2006 Unaudited Unaudited Audited £'000 £'000 £'000 ______ ______ ______ Provision against intangible assets acquired - 894 894Share option compensation charge - 273 273 ______ ______ ______ - 1,167 1,167 ______ ______ ______ The prior year provision against intangible assets acquired relates to a licencegranted to the Company to certain intellectual property and patents owned byStemCells, Inc. Due to the early stage nature of the underlying technology, thedirectors carried out an impairment review of the intangible asset so created,and considered that it was appropriate to provide against the asset in full. The prior period share option compensation charge refers to net charges made tothe profit and loss account in respect of replacement share options issued atthe time of the Company's flotation in August 2005. These share options wereissued fully vested, therefore pre-dating the relevant effective date forapplying FRS20. Hence the transitional rules of FRS20 do not apply to theseoptions which remain accounted for under UITF17. 4. Loss per share The basic and diluted loss per share is calculated by dividing the loss for thefinancial period of £3,217,000 (September 2005 (restated): £4,282,000, March2006 (restated): £6,367,000) by 96,659,058 shares (September 2005: 51,632,417shares, March 2006: 72,532,756), being the weighted average number of ordinary10p or 1p shares in issue during the period. Restatement of the loss for theyear to March 2006 resulted in an increase in loss per share of 0.1p. Potential ordinary shares are not treated as dilutive as their conversion toordinary shares does not increase the net loss per share. 5. Negative goodwill Negative goodwill arose during the period ended 31 March 2004 on the acquisitionof ReNeuron (UK) Limited by ReNeuron Holdings Limited. There is remainingnegative goodwill, equal to the fair values of non-monetary assets acquired,which is being amortised over a period of 10 years, being the period over whichthe non -monetary assets are expected to be recovered. 6. Share capital and reserves Share Capital Share premium redemption capital account reserve £'000 £'000 £'000 ______ ______ ______ At 1 April 2006 9,355 5,472 -Issue of new ordinary shares 606 165 -Share-based credit - - -Subdivision of ordinary shares (8,964) - 8,964Loss for the period - - - ______ ______ ______At 30 September 2006 997 5,637 8,964 ______ ______ ______ (continued from table above) Merger Warrant Profit and reserve reserve loss account £'000 £'000 £'000 ______ ______ ______ At 1 April 2006 365 436 (11,000)Issue of new ordinary shares - - -Share-based credit - - 50Subdivision of ordinary shares - - -Loss for the period - - (3,217) ______ ______ ______At 30 September 2006 365 436 (14,167) ______ ______ ______ The Company raised £715,000 through a private placing of 5,500,000 ordinaryshares of 10p in June 2006. In addition a further 556,767 shares were issued inaccordance with the licence and subscription and share exchange agreements withStemCells, Inc. At the AGM of the Company on 21 September 2006, shareholders agreed to each ofthe Company's ordinary shares, previously of 10p in nominal value, beingsubdivided into one new ordinary share of 1p in nominal value and one deferredshare of 9p in nominal value. All such deferred shares were thereafterrepurchased by the Company for 1p in aggregate and have now been cancelled. Therepurchase of the deferred shares was financed from the proceeds of the issue ofone ordinary share at nominal value. At the warrant holders meeting on 21 September 2006, the following changes wereagreed to the Warrant Instrument. The period within which the warrants can beexercised was shortened by changing the final subscription date from 12 February2007 to 12 December 2006. Further, the subscription price payable on exercise ofthe warrants was reduced from 30 pence per ordinary share to 10 pence perordinary share. 7. Profit and loss account reconciliation Six months Six months Year ended ended ended 30 September 30 September 31 March 2006 2005 2006 Unaudited Unaudited Audited £'000 £'000 £'000 ______ ______ ______Opening profit and loss account as previously (11,000) (4,960) (4,960)stated:Retained loss for the period as restated (3,217) (4,282) (6,367)Share option compensation charge - 273 273Share-based credit to reserves 50 6 54 ______ ______ ______Closing profit and loss account (14,167) (8,963) (11,000) ______ ______ ______ 8. Reconciliation of operating loss to net cash outflow from operating activities Six months Six months Year ended ended ended 30 September 30 September 31 March 2006 2005 2006 Restated Restated Unaudited Unaudited Audited £'000 £'000 £'000 ______ ______ ______Operating loss (3,304) (4,082) (6,827)Depreciation of tangible fixed assets 114 129 265Amortisation of negative goodwill (94) (94) (188)Provision against intangible fixed assets acquired 56 894 894Share option compensation charge - 273 273Share-based payment charge 50 6 54Decrease/ (increase) in debtors 26 (274) (199)Increase in creditors 25 800 733 ______ ______ ______Net cash outflow from operating activities (3,127) (2,348) (4,995) ______ ______ ______ 9. Reconciliation of net cash flow to movement in net funds Six months Six months Year ended ended Ended 30 September 30 September 31 March 2006 2005 2006 Unaudited Unaudited Audited £'000 £'000 £'000 ______ ______ ______(Decrease)/increase in cash in the period (2,343) 7,336 5,064Cash flow from decrease in short term investments - (361) (361)Cash inflow from increase in debt - (1,000) (1,000)Non cash movement - (250) (250)Conversion of debt to equity - 2,500 2,500 ______ ______ ______Change in net funds from cash flows (2,343) 8,225 5,953Net funds/(debt) at the beginning of the period 5,134 (819) (819) ______ ______ ______Net funds at the end of the period 2,791 7,406 5,134 ______ ______ ______ Note to editors: ReNeuron is a leading, UK-based adult stem cell therapy business. It 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. ReNeuron has filed for approval to commence initial clinical studies in the USwith its lead ReN001 stem cell therapy for chronic stroke disability. Thisrepresents the world's first such filing concerning a neural stem cell treatmentfor a major neurological disorder. There are an estimated 50 million strokesurvivors worldwide, approximately one half of which are left with permanentdisabilities. The annual health and social costs of caring for these patientsis estimated to be in excess of £5 billion in the UK and in excess of US$50billion in the US. ReNeuron has also generated pre-clinical efficacy data with its ReN005 stem celltherapy for Huntington's disease, a genetic and fatal neurodegenerative disorderthat affects around 1 in 10,000 people. This programme is in pre-clinicaldevelopment. 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. Data sources: UK Stroke Association, American Stroke Association. 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. The terms 'ReNeuron', 'the Company' or 'the Group' used in this statement referto ReNeuron Group plc and/or its subsidiary undertakings, depending on thecontext. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
RENE.L