28th Feb 2007 07:01
Allergy Therapeutics PLC28 February 2007 28 February 2007 Allergy Therapeutics plc ("Allergy Therapeutics" or "the Company") Interim Results Statement Landmark Year in Prospect Allergy Therapeutics plc (AIM: AGY), the specialist pharmaceutical companyfocused on allergy vaccination, announces interim results for the six monthsended 31 December 2006. Financial Highlights • Gross sales increased by 19% to £17.5m (2005: £14.7m) o Pollinex(R) Quattro named-patient sales increased by 23% o Legacy products continue to perform strongly • Operating profit before R&D costs was £3m (2005: £4.7m), 36% lower due to continuing strategic investments • R&D expenditure increased 100% to £11m (2005: £5.5m) Operational Highlights • Pollinex Quattro Grass Phase III study started dosing patients in January • The world's first global Phase III allergy vaccine development programme • Successful end of Phase II meeting with FDA for Pollinex Quattro Ragweed, clearing path for pivotal Phase III trial in 2007 • Promising interim data from Phase IIa study of an oral (sub-lingual) grass allergy vaccine • New UK manufacturing facility opened as part of an extensive manufacturing upgrade Keith Carter, Chief Executive of Allergy Therapeutics, said: "Significant progress was made in the past six months but 2007 could prove to bea truly landmark year for Allergy Therapeutics with two Phase III studiesongoing during the year. These products have the potential to be the 'best-in-class' in a huge market with a significant unmet need. At the same time,we are investing to increase production capacity and are focused on reviewingvarious commercialisation options. Now that we are in the final stages of clinical development for our PollinexQuattro allergy vaccines, we are aggressively pursuing opportunities on allfronts and are preparing for a period of significant growth." A briefing for analysts will be held at 10.00am today at the offices ofFinancial Dynamics, Holborn Gate, 26 Southampton Buildings, London WC2A 1PB.Please call Mo Noonan for further details on 020 7269 7116. In addition, thepresentation will be made available on the Company's website atwww.allergytherapeutics.com For further information Allergy Therapeutics +44 (0) 1903 844 720Keith Carter, Chief ExecutiveIan Postlethwaite, Finance Directorwww.allergytherapeutics.com Financial Dynamics +44 (0) 207 831 3113David YatesBen Brewerton Joint Statement from the Chairman and Chief Executive Officer Introduction Allergy Therapeutics is developing a new generation of allergy vaccines able todeliver fast, effective and long-lasting relief to allergy sufferers. Allergicrhinitis (hay fever) is a large and growing problem with 150 million peopleestimated to suffer worldwide. Prevalence estimates vary on a country bycountry basis but range from 14-29% of the total population. Existing vaccine treatments typically require between 16 and 50 injections takenunder specialist supervision over the course of many weeks prior to the start ofthe hay fever season. Allergy Therapeutics' new generation of allergy vaccines,Pollinex Quattro, use MPL(R), an innovative TLR4-agonist which boosts andaccelerates the immune response. Pollinex Quattro is an ultra-short coursevaccine requiring only four shots over three weeks and therefore has thepotential to transform allergy treatment by providing a safe, effective andhighly convenient method of vaccination. Furthermore, Allergy Therapeutics hasembarked upon the next possible step of developing an effective, rapid-onset,orally delivered allergy vaccine also using MPL(R). The market opportunity is considerable with the American Academy of Allergy,Asthma and Immunology estimating that 33 million allergy injections a year aregiven in the United States alone. There is a substantial unmet medical need ina market currently worth an estimated US$12 billion per annum. Period overview During the six months to the end of December 2006, Allergy Therapeutics achievedseveral significant milestones and continued on its journey to transform allergytreatment. We have now started one Phase III trial (Grass) and have received regulatoryapproval to begin a second (Ragweed), for Pollinex Quattro, our ultra shortcourse 4-shot vaccine. It is a significant achievement for a company of thissize to be running the two largest allergy vaccine clinical trials everundertaken. Allergy Therapeutics is the only company with a global allergy vaccinedevelopment programme, with activity in Europe, the United States and Japan, andthe only company in clinical development with adjuvant-containing oral vaccines,promising enhanced convenience through reduced treatment duration and increasedefficacy. During the 2007 calendar year it is our intention to complete the pivotal PhaseIII studies for our grass and ragweed vaccines, and complete the Phase IIrecruitment for our tree vaccine. We expect to launch the products in theworld's major markets in 2009. This also requires attention to the manufacturing infrastructure needed tosupport the supply of the new products to those markets and we are investing toincrease our production capacity. Allergy Therapeutics now has to look beyond the development of its products andincreasingly focus on 'routes to market' with commercialisation being givengreater attention and resources. We are aggressively pursuing opportunities onall these fronts. Operating Review Product Development Two Pollinex Quattro subcutaneous vaccines will be in pivotal Phase III studiesin 2007. Pollinex Quattro is an ultra-short course vaccine requiring only fourshots over three weeks and incorporates the TLR4 agonist adjuvant MPL(R). TheCompany's three programmes are for Grass, Tree and Ragweed pollens. In the period under review, Allergy Therapeutics successfully satisfied the FDAon the Phase II package required by the agency for the Pollinex Quattro Grassvaccine. This enabled, in January 2007, patient treatment to commence in thebiggest ever allergy vaccine study, G301. On the Ragweed project, the resultsof R203, a Phase II study, announced in October 2006, paved the way for thisvaccine to proceed into Phase III. For Pollinex Quattro Tree, the further PhaseII requirements were established with the agency and work commenced on studyT204, designed to meet these. The changes to the studies following discussionswith the FDA have led to an increase in the overall cost of the developmentprogramme; this is still being quantified, but the Company has plans to fund theincreases without recourse to shareholders; discussions with financial partnersare at an advanced stage and the directors are confident that sufficient fundswill be secured. Sublingual (under the tongue) delivery of allergy vaccines has attained a highprofile recently, and such products have had commercial success despite evidencesuggesting that allergy vaccines delivered by this route have less efficacy thaninjected vaccines and despite the long periods of daily dosing required.However, in December, Allergy Therapeutics reported interim clinical data on anoral vaccine containing MPL, and the initial results were encouraging. Afurther, 'high dose' study group was taken forward and the results from thisgroup are expected shortly. This raises the potential of developing a trulyinnovative, patented, orally delivered allergy vaccine with a profile superiorto current offerings in efficacy and speed of onset. Existing Products The Company's European sales and marketing efforts have resulted in anotherrecord half-year, with sales up 19%. Most growth came from the Pollinex QuattroNamed Patient Products ("NPPs") which saw growth of 23% although they arecurrently only available in certain European countries. Over 87,000 patients have now been safely treated with Pollinex Quattro on anamed-patient basis, giving us further confidence that the current Phase IIItrials will be successful. We expect to see the demand for our existing products, including PollinexQuattro NPPs, to remain strong until the full launch of Pollinex Quattro in2009. Manufacturing During 2006 we began to implement our plans for refurbishment of our UnitedKingdom based manufacturing facilities. A new sterile facility has been creatednear to the existing main facility. This investment is key to the delivery ofour strategy to globalise the Pollinex Quattro brand. It will release capacityfor the introduction of improved, higher volume manufacturing plant in theexisting facility which will ensure the timely launch of Pollinex Quattroworldwide once registrations are achieved. Additional benefits of thisinvestment are: the doubling of capacity for manufacturing NPPs; the creation ofmore warehousing capacity; improved compliance, and the uninterrupted supply ofNPP vaccines. Commercial and Business Development Looking further ahead, routes to market generally fall into two classes:directly owned sales and marketing infrastructure, and partnering in its variousforms. There is a multiplicity of variations and combinations on these basicthemes. Allergy Therapeutics is in the fortunate position of having an existinginfrastructure in the important markets of Europe, and a high level of expertisein the commercialisation of allergy vaccines. Furthermore, the Company is able to continue its development projects as anindependent company giving us greater flexibility in our options forcommercialisation. In recognition of this, the Company has engaged the lifesciences specialist merchant bank, Burrill and Company, to assist in theassessment of all the opportunities open to us. Financial Review The results for the six months to 31 December 2006 have been very encouragingand have continued the progress shown in previous years. Gross sales (before the rebate in Germany) for the period were £17.5m (H1 2005:£14.7m). This represents an increase of 19% over the previous period, drivenprimarily by growth of 23% in named-patient sales of Pollinex Quattro, theCompany's 4-shot allergy vaccine. At present, approximately 73% of sales aregenerated in Germany, so an increase in the compulsory rebate following pricerises in November of on average 7% increased the rebate to £1m (H1 2005: £0.5m)in the period. After the rebate, group net sales increased by 16% to £16.5m (H12005: £14.2m). Gross profit reduced by 4% to £10.9m, representing a gross margin of 66% ofsales, compared with £11.4m and 80% in the same period last year. This reductionin the short term gross margin was an expected trend resulting from theinvestment needed to prepare the Company for the expected sales of PollinexQuattro to the global market - including: a 16% increase in manufacturingheadcount, additional purchases of MPL and the introduction of a complianceimprovement plan to ensure the Company continues to meet the Good ManufacturingPractice requirements - as well as higher manufacturing costs associated withincreases in utilities and consumables, and the additional running costs of therecently opened Noon building. Marketing expenses, the major component of distribution costs, have increased inline with our budgets as we have set up new markets in Poland, Austria, the UKand the Czech and Slovak Republics, and intensified the promotional spend on ourhigher margin products. Costs increased to £5.3m (H1 2005: £5.0m), an increaseof 7% over the previous period. Administration costs of £2.6m (H1 2005: £1.8m)were higher by 43%, due mainly to lower foreign currency exchange gains (most ofthe Company's sales are booked in Euros), higher corporate costs linked tomanaging a growing business and the benefit in the previous period of a bad debtprovision reversal. Research and development expenditure increased during the period to £11.0m (H12005: £5.5m) as the development activity for the MPL(R)-based vaccine range wasprogressed into Phase III. The operating loss for the period was £8.0m (H1 2005: £0.8m). Before developmentcosts, the operating profit was £3.0m (H1 2005: £4.7m), lower mainly due to theinvestments affecting the gross margin mentioned above. Capital expenditure for the period was £1.5m (H1 2005: £0.6m) and mainlyrepresents upgrades to the facilities in preparation for launching PollinexQuattro into the United States. Net current assets excluding cash were broadlythe same at £3.4m (H1 2005: £3.3m). Net assets of £26m (H1 2005: £19.7m) show an increase of £6.3m against theprevious period end, due primarily to the £18.3m proceeds raised from theplacing of new shares in May 2006 less investments in R&D over the period. Net cash outflow before financing for the period was £8.7m (H1 2005: £4.2m),higher than the previous period due principally to the accelerated investment inR&D and manufacturing preparedness in the period. Outlook Allergy Therapeutics continues to deliver on its plans and potential, and thefuture looks very promising. The level of activity across the Company, as thescale of the clinical trials steps up and the Company's operations are augmentedand improved, is reaching new highs. The team is responding with energy to theresulting challenges. Trading in the first weeks of the current period continuesin the positive trend of the six months just ended. The new manufacturing unitcommences operations in March. In short, in the clinic and operationally, 2007promises to be a landmark year. Ignace Goethals Keith CarterChairman Chief Executive Officer27 February 2007 27 February 2007 Consolidated profit and loss accountfor the six month period ended 31 December 2006 6 months to 6 months to Year ended 31 Dec 2006 31 Dec 2005 30 June 2006 (restated*) (restated*) Note £'000 £'000 £'000 Turnover 16,460 14,200 23,558 Cost of sales (5,526) (2,807) (6,513) Gross profit 10,934 11,393 17,045 Distribution costs (5,332) (4,974) (9,833) Administrative expenses- other (2,636) (1,839) (4,626) Research and development costs (11,009) (5,493) (9,560) Administrative expenses (13,645) (7,332) (14,186) Other operating income - 133 260 Operating loss (8,043) (780) (6,714) Interest receivable and similar income 434 245 545Interest payable on loans and overdrafts (2) - (4) Loss on ordinary activities before tax (7,611) (535) (6,173) Tax on loss on ordinary activities 816 - - Retained loss for the financial period (6,795) (535) (6,173) Basic loss per share 4 (8.3p) (0.8p) (9.3p) All amounts relate to continuing activities *Restated for adoption of FRS20 Consolidated balance sheetat 31 December 2006 Note 31 Dec 2006 31 Dec 2005 30 June 2006 (restated*) (restated*) £'000 £'000 £'000Fixed assetsIntangible assets Goodwill 2,132 2,484 2,326 Other intangible assets 773 893 829 2,905 3,377 3,155Tangible assets 4,771 2,414 3,637 7,676 5,791 6,792Current assetsStocks 3,836 3,242 3,651Debtors: amounts falling due within one year 4,852 4,023 3,577Cash at bank and in hand 15,204 10,912 23,860 23,892 18,177 31,088 Creditors: amounts falling due within one year (5,329) (4,011) (4,939) Net current assets 18,563 14,166 26,149 Total assets less current liabilities 26,239 19,957 32,941 Creditors: amounts falling due after one year (193) (226) (239) Net assets 5 26,046 19,731 32,702 Capital and reservesCalled up share capital 92 73 92Share premium account 33,173 14,924 33,173Other reserve - shares issued by subsidiary 40,128 40,128 40,128Other reserve - shares held in EBT (60) (296) (60)Other reserve - share based payments 494 184 306Profit and loss account (47,781) (35,282) (40,937) Shareholders' funds 26,046 19,731 32,702 *Restated for adoption of FRS20 Consolidated cash flow statementfor the six month period ended 31 December 2006 6 months to 6 months to Year ended 31 Dec 2006 31 Dec 2005 30 June 2006 Note £'000 £'000 £'000 Cash outflow from operating activities 6 (8,438) (3,857) (8,099) Returns on investment and servicing of finance Interest received 434 245 545 Interest paid (2) - (4) 432 245 541 Taxation 816 - - Capital expenditure and financial investment Purchase of fixed assets (1,466) (582) (2,192) (1,466) (582) (2,192) Cash outflow before financing (8,656) (4,194) (9,750) Financing Gross funds raised on issue of shares - - 19,000 Issue of shares from EBT - 26 262 Expenses paid in connection with issue of - - (732) shares - 26 18,530 (Decrease)/increase in cash in period (8,656) (4,168) 8,780 Reconciliation of net cash flow to movement in net funds 6 months to 6 months to Year ended 31 Dec 2006 31 Dec 2005 30 June 2006 £'000 £'000 £'000 (Decrease)/increase in cash in the period (8,656) (4,168) 8,780 Movement in net funds in the period (8,656) (4,168) 8,780Net funds at the beginning of the period 23,860 15,080 15,080 Net funds at end of the period 15,204 10,912 23,860 Notes to the interim reportsFor the six month period ended 31 December 2006 1. Interim financial information The financial information set out in this interim report is unaudited and doesnot constitute statutory accounts as defined in section 240 of the Companies Act1985. 2. Basis of preparation The interim financial statements have been prepared in accordance withapplicable accounting standards and under the historical cost convention. Theprincipal accounting policies of the Group have remained unchanged from thoseset out in the Group's June 2006 annual report and financial statements exceptfor the adjustments resulting from the adoption of FRS20 in the period asdescribed below. 3. FRS20 - Share Based Payments The Group has adopted FRS20 with effect from 1 July 2006. FRS20 requires therecognition of a charge to the profit and loss account for all applicable sharebased payments, including share options, SAYE schemes and share based Long TermIncentive Plans. The Group has equity-settled share based payments but no cash-settled sharebased payments. All share based payment awards granted after 7 November 2002which had not vested prior to 1 July 2006 are recognised in the financialstatements at their fair value at the date of grant. If vesting periods or non-market based vesting conditions apply, the expense isallocated over the vesting period, based on the best available estimate of shareoptions expected to vest. Estimates are revised subsequently if there is anyindication that the number of share options expected to vest differs fromprevious estimates. Any cumulative adjustment prior to vesting is recognised inthe current period. If market based vesting conditions apply, the expense is allocated over therelevant period, usually the period over which performance is measured. Vestingassumptions and resulting expenses are fixed at the date of grant, regardless ofwhether market conditions are actually met. Any adjustment for options whichlapse prior to vesting is recognised in the current period. All equity-settled share based payments are ultimately recognised as an expensein the profit and loss account with a corresponding credit to 'other reserves'. The adoption of FRS20 requires a prior period adjustment to be made for awardsgranted before 1 July 2006. This has created a reserve for share based paymentsat 31 December 2006 of £494,000. Of this amount £188,000 relates to the sixmonths ended 31 December 2006; £232,000 relates to the year ended 30 June 2006of which £110,000 relates to the six months ended 31 December 2005. The share based payments reserve replaces the Long Term Incentive Plan reserveof £178,000 held at 30 June 2006 and recognised under UITF17. The profit andloss reserve account has been adjusted as follows: Previously reported Restated £'000 £'000 Profit and loss reserve at 1 July 2005 (34,719) (34,793)Profit and loss reserve at 31 December 2005 (35,098) (35,282)Profit and loss reserve at 30 June 2006 (40,809) (40,937) 4 Loss per share 6 months to 6 months to Year ended 31 Dec 2006 31 Dec 2005 30 June 2006 Loss for the period (£'000) (6,795) (535) (6,173) Weighted number of shares in issue 81,950,632 62,950,632 66,117,299Diluted weighted number of shares in issue n/a n/a n/a Basic loss per share (pence) (8.3) (0.8) (9.3) 5 Reconciliation of movement in shareholders' funds 6 months to 6 months to Year ended 31 Dec 2006 31 Dec 2005 30 June 2006 £'000 £'000 £'000 Loss for the financial period (6,795) (535) (6,173)Other recognised gains and losses relating to the period (net) (49) 46 29Issue of shares - - 19,000Issue of shares from EBT - 26 262Share based payments 188 110 232Expenses paid in connection with share issue - - (732) Net (decrease)/increase in shareholders' funds (6,656) (353) 12,618 Opening shareholders' funds 32,702 20,084 20,084 Closing shareholders' funds 26,046 19,731 32,702 6 Reconciliation of operating loss to operating cash flow 6 months to 6 months to Year ended 31 Dec 2006 31 Dec 2005 30 June 2006 £'000 £'000 £'000 Operating loss (8,043) (780) (6,714)Depreciation 308 287 668Amortisation of intangibles 224 225 450Loss on disposal of fixed assets 11 5 10Effect of foreign exchange rate changes (10) (1) (20)Charge for share based payments 188 110 232Increase in stocks (185) (501) (910)Increase in debtors (1,275) (863) (416)Increase/ (decrease) in creditors 344 (2,339) (1,399) Net cash outflow from operating activities (8,438) (3,857) (8,099) This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Allergy Thera.