17th Nov 2006 07:01
Vectura Group PLC17 November 2006 Vectura Group plc - Interim Results for six months ended 30 September 2006 Chippenham, UK, 17 November 2006 - Vectura Group plc (LSE: VEC) today announcesits results for the six months ended 30 September 2006. ANNOUNCED TODAY • Acquisition of Innovata plc for £131m, creating the UK leader in pulmonary drug development (see separate press release) PERIOD HIGHLIGHTS • Worldwide collaboration, development and licence agreement, signed in April 2006 with Boehringer Ingelheim to develop a new inhaler• Successful outcome of Phase IIb trial of NVA237 for Chronic Obstructive Pulmonary Disease (COPD)• Successful outcome of Phase IIb clinical study of VR004 for erectile dysfunction (ED)• VR040 demonstrates safety and efficacy in Phase IIa study for treatment of "off" periods in patients with Parkinson's disease (PD)• Revenues increased by 71% to £6.1m• Net cash inflow from operations £1.5m (HI 05/06 cash inflow of £4.3m)• Placing completed in July 2006, raising £42.9m (post expenses)• Strong financial position with closing cash of £68.6m Commenting on the results, Dr. Chris Blackwell, Chief Executive of Vectura,said: "This has been another extremely successful six months in which we havedemonstrated our ability to take the key products in our pipeline to the nextstages of development, established a third major licensing deal and successfullyexecuted a secondary fundraising. We look forward to building on theachievements of the first six months reporting on further clinical trials andprogressing our US licensing discussions for VR315, as well as integrating theacquisition of Innovata plc that has been announced today." There will be a meeting and conference call for analysts today at 9.30am GMT atthe offices of Financial Dynamics. Please contact Claire Rowell at FinancialDynamics on 020 7269 7285 for details. Enquiries:Vectura Group plcChris Blackwell, Chief Executive On 17/11/06 +44 (0) 207 831 3113Anne Hyland, Chief Financial Officer Thereafter +44 (0) 1249 667 700 Financial DynamicsDavid Yates / Anna Keeble +44 (0) 207 831 3113 Notes to Editors: Vectura's principal focus is the development of a range of inhaled drugs for thetreatment both of lung diseases and other conditions where optimised deliveryvia the lungs can provide significant benefits, such as a rapid onset of action,improved efficacy and improved tolerability compared with current therapies. Vectura's products combine its proprietary, innovative, pulmonary formulationand device technologies (Aspirair(R) , GyroHaler(R) and PowderHale(R)) withexisting, off-patent drugs either for use in new indications or to provideinhalation as an improved route of administration. Using drugs that have alreadybeen approved in some form in at least one major pharmaceutical market lowersthe risk of product development failure compared to new chemical entities.Vectura is able to secure patent protection for its portfolio by identifying newindications for off-patent compounds and applying the Company's proprietarydelivery technologies to create new methods of administration. The Company hasdevelopment collaborations with a number of companies, including BoehringerIngelheim, Novartis, GSK and Chiesi and an un-named leading internationalpharmaceutical company. For further information, please visit Vectura's website at www.vectura.com. _____________ This press release contains "forward-looking statements," including statementsabout the discovery, development and commercialisation of products. Variousrisks may cause Vectura's actual results to differ materially from thoseexpressed or implied by the forward-looking statements, including adverseresults in clinical development programs; failure to obtain patent protectionfor discoveries; commercial limitations imposed by patents owned or controlledby third parties; dependence upon strategic alliance partners to develop andcommercialise products and services; difficulties or delays in obtainingregulatory approvals to market products and services resulting from developmentefforts; the requirement for substantial funding to conduct research anddevelopment and to expand commercialisation activities; and product initiativesby competitors. As a result of these factors, prospective investors arecautioned not to rely on any forward-looking statement. We disclaim anyintention or obligation to update or revise any forward-looking statements,whether as a result of new information, future events or otherwise. CHAIRMAN'S AND CHIEF EXECUTIVE'S REVIEW OVERVIEW We are pleased to report that we have continued to see positive progress on allfronts with solid advances in our product pipeline, progress on technologyout-licensing, and a 71% increase in revenues to £6.1 million. The periodstarted with our global licensing agreement with Boehringer Ingelheim, which wassigned on 13 April 2006, providing further validation for our innovativeinhalation technologies (in this case our multi-dose dry powder inhalers). Importantly, we also demonstrated the strength of our product pipeline during2006 by the successful outcome of three important studies. NVA237, for thetreatment of chronic obstructive pulmonary disease (COPD) and VR004, for thetreatment of erectile dysfunction (ED), both completed Phase IIb clinicaltrials. VR040 for Parkinson's disease (PD) completed its proof-of-conceptstudy. We also demonstrated the strong investment support for Vectura, whichenabled us to conclude a very well-supported fundraising in July. Consequentlyour balance sheet has been significantly strengthened and we closed the periodwith £68.6m of cash reserves. PRODUCT PIPELINE NVA237 completes Phase IIb The NVA237 Phase IIb dose range study that we announced in June 2006 furthervalidates the clinical profile of NVA237 and supports the potential of theproduct to provide an important addition to the available therapeutic options totreat COPD, a common and costly disease with high unmet patient need. NVA237, which uses our PowderHale(R) technology, is being developed andcommercialised by Novartis both as a monotherapy and in combination withNovartis' once-daily bronchodilator indacaterol, under the terms of a globallicence agreement signed in April 2005. The trial randomised 335 subjects in 35 European sites into a multi-centredouble-blind, parallel group, placebo-controlled study, including an additionalopen label tiotropium group, to assess the efficacy, safety and tolerability offour doses of NVA237 inhaled once-daily for 28 days in subjects with COPD. NVA237 demonstrated bronchodilatory efficacy, as determined by a range ofpulmonary function measures. NVA237 achieved statistical significance overplacebo in terms of the primary efficacy variable, trough Forced ExpiratoryVolume in one second - FEV1 and was comparable to tiotropium. These data supportthe use of NVA237 as a once-daily bronchodilator. VR315 for asthma preparing for Phase III We signed a European collaboration, development and licence agreement with aleading international pharmaceutical company for VR315, our combination asthmatherapy, in March 2006. VR315 will be developed as a generic combinationproduct using our GyroHaler(R) dry powder inhaler. Combination therapy for asthma is the biggest and fastest growing sector of theasthma market with annual sales currently exceeding $6 billion and Europeanannual sales estimated at approximately $1.5 billion. With the validation of theEuropean deal we believe VR315 will be a very attractive product for a USgenerics company and discussions are continuing with several potential partners. VR040 for Parkinson's disease (PD) completes Phase II proof of concept study In August, we reported on our Phase II "proof-of concept" clinical study forVR040 for the treatment of induced "off" periods in patients with PD. The study demonstrated that VR040 was safe, well tolerated and successfullyrecovered patients from an induced "off" episode with a rapid onset of action. The randomised, double-blind, placebo-controlled, four parallel group, ascendingdose study was designed to assess the safety and tolerability profile of VR040.Preliminary pharmacokinetic (PK) analysis and an assessment of efficacy werealso undertaken. The study evaluated six fine particle doses (200(micro)g, 300(micro)g, 500(micro)g, 750(micro)g, 800(micro)g and 1,200(micro)g) and placebo in 24idiopathic PD patients who experience "off" episodes. Each patient received oneor two doses. The study demonstrated that VR040 can provide rapid relief from "off" episodesfor patients with PD, within minutes of inhalation. This study also showed thathigh plasma levels can be achieved very quickly with VR040, which translate intothe very quick onset of benefit for patients with PD who have motor fluctuationsin the more advanced stages of their condition. This bodes well for futureclinical development, which will now focus on determining optimal titrated dosesof VR040. Our increased funds now provide us with the opportunity to generatesignificant value from VR040 as we proceed through later stages of development. VR004 for erectile dysfunction (ED) completes first Phase IIb study In June, we reported on the first of two Phase IIb studies designed todemonstrate that VR004 improves erectile performance with a rapid onset ofaction that is both durable and well tolerated. The results of the studyvalidate our belief that VR004 has potential as a rapidly-acting, safe andeffective treatment. The combination of these attributes meets our target profile and the unmet needfor a spontaneous product, providing activity on demand for patients with ED. VR004 is our proprietary formulation of apomorphine, delivered by oralinhalation to the lungs using our Aspirair(R) dry powder inhaler (DPI). Our second dose-defining Phase IIb study is underway and is due to report in2007. VR776 for premature ejaculation (PE) commenced Phase II Recruitment started in May for a Phase II study of VR776 in patients with PE andwill report in 2007. We believe the delivery of VR776 via the lungs willprovide rapid delivery of the active component and therefore a rapid onset ofaction, offering significant clinical benefit. Currently, no product is licensedin the US or EU specifically for the treatment of PE. PE is estimated to affectbetween 27 and 34 percent of men across all age ranges, and thus may represent abigger market opportunity than ED. VR776 is formulated with our dry powder technology, PowderHale(R), and deliveredwith our Aspirair(R) inhaler. GENERATING VALUE FROM OUR ENABLING TECHNOLOGIES DEMONSTRATED BY DEAL WITHBOEHRINGER INGELHEIM Vectura's three dry powder inhaler ("DPI") technologies, Gyrohaler(R),PowderHale(R) and Aspirair(R), are based on our in-depth knowledge of deviceengineering and particle science, which enable Vectura to re-formulate andpatent a broad range of drugs for pulmonary delivery. Vectura's strategy is to license rights to these technologies to otherpharmaceutical companies where the resulting licence will complement the Group'soverall business strategy and commercial returns. There is a growing demand for dry powder inhalers, particularly those that candeliver high performance and consistent doses. We believe that our device andformulation technologies are well placed to capture a significant market share,as they can provide critical benefits which are needed by both patients andregulatory authorities. In April 2006, we agreed a worldwide collaboration, development and licenceagreement with Boehringer Ingelheim to develop a dry powder inhaler (DPI) as atailored Boehringer Ingelheim device. It will deliver a range of theirproprietary respiratory products, mainly for treating asthma and COPD. Under the non-exclusive agreement, we will work with Boehringer Ingelheim on thecontinued development of the inhaler until the end of 2007, after whichBoehringer Ingelheim will be responsible for any further development,manufacturing, clinical trial use with their proprietary compounds, and for thecommercialisation of those products. Most treatments for asthma and COPD are delivered by inhalation. Global marketsfor those treatments are valued in excess of $17 billion today and are forecastto grow to over $28 billion by 2010. Dry powder inhalers are increasingly thefirst choice for patients with these diseases and it is expected that DPIs willbe used to deliver the majority of the drugs sold in these markets by 2010. FINANCIAL REVIEW In the 6 months to 30 September 2006, revenues were £6.1m, an increase over 2005/06 of 71%. Product licensing revenues of £2.3m were 28% higher than in the comparativeperiod (2005/06: H1 £1.8m; H2 £2.0m) and relate to our licensing agreement withNovartis for NVA237 and with our European partner for VR315. We received £7.9mfrom Novartis in April 2005 and this revenue is being recognised over a 24-monthperiod. Pharmaceutical Development Services revenues of £2.9m represented an 81%increase on the prior period (2005/06: H1 £1.6m; H2 £2.8m). These revenuesinclude £1.9m in relation to our continuing work on VR315. Technology licensing revenues of £0.8m were realised during the period. Themajority of the income was generated from our licensing agreement withBoehringer Ingelheim. The gross profit in the period to 30 September 2006 was £4.5m, a £1.8mimprovement over the previous period (2005/06: H1 £2.7m; H2 £3.7m). This wasdriven by the increase in milestone licensing revenues. Total investment in research and development was £6.7m, a 51% increase on theprior year (2005/06: H1 £4.4m; H2 £8.0m). Expenditure was incurred primarily onthe Phase IIb VR004 trials and the VR040 Phase II trial. The work on our newdry powder inhaler, VR040 Phase II trials and our VR315 US programme will resultin an increase in our investment in research and development in the second halfof the year, which will be almost double that incurred in the first half of theyear. Administrative expenses, excluding share-based compensation, are £0.2m higher at£1.2m (2005/06: H1 £0.9m; H2 £0.9m). R&D tax credits of £0.8m have been recorded in the period (2005/06: H1 £0.9m; H2£0.1m). Net cash inflow from operating activities in the six months to 30 September 2006was £1.5m compared to the £4.3m cash inflow in the prior period (2005/06: H2£5.9m outflow). As at 30 September 2006, we had cash and short-term depositstotalling £68.6m. The net loss per share in the six months to 30 September 2006 was 1.5p, a 7%increase on the prior year (2005/06: H1 1.4p; H2 4.6p). Headcount at 30 September 2006 was 146 (31 March 2006: 126). OUTLOOK As Vectura implements its strategy for growth, the key drivers for the remainderof the period are the results from our development work on VR315 and thepartnering of the product for the US, together with results from VR004 Phase IIband VR776 Phase IIa trials. We will continue to advance the products in ourpipeline and pursue appropriate licensing opportunities for both our productsand our technologies to generate value for our shareholders. Consolidated income statementfor the six months ended 30 September 2006 6 months 6 months Year ended ended ended 30 September 30 September 31 March 2006 2005 2006 (unaudited) (unaudited) (audited) Notes £'000 £'000 £'000 Revenue 2 6,079 3,564 8,411Cost of sales (1,561) (847) (1,965) ______ ______ ______Gross profit 4,518 2,717 6,446Research and development expenses (6,660) (4,424) (12,397)Other administrative expenses (1,161) (922) (1,783)Share-based compensation (463) (371) (741) ______ ______ ______Administrative expenses (1,624) (1,293) (2,524) ______ ______ ______Operating loss 3 (3,766) (3,000) (8,475)Share of loss of associate accounted for using the 4 (61) - -equity methodOther income 5 199 - -Interest income 932 568 1,042Finance costs (2) (4) (6) ______ ______ ______Loss before taxation (2,698) (2,436) (7,439)Taxation 6 776 894 984 ______ ______ ______Loss after taxation attributable to equity holders (1,922) (1,542) (6,455)of the Company ______ ______ ______Loss per ordinary share basic and diluted 7 (1.5p) (1.4p) (6.0p) ______ ______ ______ All results are derived from continuing activities. Consolidated balance sheet at 30 September 2006 30 September 30 September 31 March 2006 2005 2006 (unaudited) (unaudited) (audited) Notes £'000 £'000 £'000ASSETSGoodwill and intangible assets 2,012 2,012 2,012Property, plant and equipment 3,535 2,848 4,071Investments accounted for using the equity method 4 - - -Other receivables 8 428 428 428 ______ ______ ______Non current assets 5,975 5,288 6,511 ______ ______ ______Trade and other receivables 9 3,278 824 4,689Cash and cash equivalents 68,614 23,129 16,828 ______ ______ ______Current assets 71,892 23,953 21,517 ______ ______ ______Total assets 77,867 29,241 28,028 ______ ______ ______LIABILITIESDeferred income 2,662 2,150 2,258 ______ ______ ______Non current liabilities 2,662 2,150 2,258 ______ ______ ______Trade and other payables 10 5,569 2,256 4,489Deferred income 4,567 3,968 4,666 ______ ______ ______Current liabilities 10,136 6,224 9,155 ______ ______ ______Total liabilities 12,798 8,374 11,413 ______ ______ ______NET ASSETS 65,069 20,867 16,615 ______ ______ ______EQUITYShare capital 11 76 61 62Share premium 72,768 22,579 22,869Shares to be issued 918 918 918Special reserve 8,245 8,245 8,245Merger reserve 3,211 3,211 3,211Share-based compensation reserve 1,866 1,033 1,403Retained loss (22,015) (15,180) (20,093) ______ ______ ______TOTAL EQUITY 65,069 20,867 16,615 ______ ______ ______ Consolidated cash flow statement for the six months ended 30 September 2006 6 months 6 months Year ended ended ended 30 September 30 September 31 March 2006 2005 2006 (unaudited) (unaudited) (audited) Notes £'000 £'000 £'000 Net cash flows from operating activities 12 1,492 4,294 (1,560) ______ ______ ______Cash flows from investing activitiesInterest received 930 568 1,042Purchase of property plant and equipment (523) (113) (1,295)Investment in associate 4 (10) - - ______ ______ ______Net cash flows from investing activities 397 455 (253) ______ ______ ______ Cash flows from financing activitiesProceeds from issue of ordinary shares 51,985 56 347Share issue costs (2,072) - -Payment of finance lease liabilities (14) (56) (84)Interest element of payments under finance leases (2) (4) (5)Repayment of loans - (4) (4)Interest on loans - - (1) ______ ______ ______Net cash flows from financing activities 49,897 (8) 253 ______ ______ ______(Decrease) / increase in cash and cash equivalents 51,786 4,741 (1,560)Cash and cash equivalents at beginning of period 16,828 18,388 18,388 ______ ______ ______Cash and cash equivalents at end of period 68,614 23,129 16,828 ______ ______ ______ Consolidated statement of changes in equity for the six months ended 30 September 2006 (unaudited) Share Share Shares to Special capital premium be issued reserve £'000 £'000 £'000 £'000 At 1 April 2005 61 22,523 918 8,245Loss for the period - - - - ______ ______ ______ ______Total recognised income and expense for the period - - - -Share-based compensation - - - -Exercise of warrants and options - 56 - -At 30 September 2005 61 22,579 918 8,245Loss for the period - - - - ______ ______ ______ ______Total recognised income and expense for the period - - - -Share-based compensation - - - -Exercise of warrants and options 1 290 - - ______ ______ ______ ______At 1 April 2006 62 22,869 918 8,245 ______ ______ ______ ______Loss for the period - - - - ______ ______ ______ ______Total recognised income and expense for the period - - - -Issue of ordinary shares 14 51,889 - -Share issue costs - (2,072) - -Share-based compensation - - - -Exercise of warrants and options - 82 - - ______ ______ ______ ______At 30 September 2006 76 72,768 918 8,245 ______ ______ ______ ______ Consolidated statement of changes in equity for the six months ended 30 September 2006 (unaudited) - continued Share-based Merger compens-ation Retained Total reserve reserve loss equity £'000 £'000 £'000 £'000 At 1 April 2005 3,211 662 (13,638) 21,982Loss for the period - - (1,542) (1,542) ______ ______ ______ ______Total recognised income and expense for the period - - (1,542) (1,542)Share-based compensation - 371 - 371Exercise of warrants and options - - - 56 ______ ______ ______ ______At 30 September 2005 3,211 1,033 (15,180) 20,867Loss for the period - - (4,913) (4,913) ______ ______ ______ ______Total recognised income and expense for the period - - (4,913) (4,913)Share-based compensation - 370 - 370Exercise of warrants and options - - - 291 ______ ______ ______ ______At 1 April 2006 3,211 1,403 (20,093) 16,615 ______ ______ ______ ______Loss for the period - - (1,922) (1,922) ______ ______ ______ ______Total recognised income and expense for the period - - (1,922) (1,922)Issue of ordinary shares - - - 51,903Share issue costs - - - (2,072)Share-based compensation - 463 - 463Exercise of warrants and options - - - 82 ______ ______ ______ ______At 30 September 2006 3,211 1,866 (22,015) 65,069 ______ ______ ______ ______ Notes to the financial information 1. Basis of preparation of interim financial information These interim financial statements have been prepared in accordance withInternational Accounting Standard 34 'Interim Financial Reporting' using, on aconsistent basis, the accounting policies set out in the 2005/06 Vectura Groupplc Annual Report and Accounts. These interim financial statements are unaudited and do not constitute statutoryaccounts of the Group as defined in section 240 of the Companies Act 1985. Theauditors have carried out a review of the financial information in accordancewith the guidance contained in Bulletin 1999/4 'Review of interim financialinformation' issued by the Auditing Practices Board and their report is set outat the end of this report. The financial information for the year ended 31 March 2006 has been extractedfrom the Group's published financial statements for that year, which contain anunqualified audit report and which have been filed with the Registrar ofCompanies. 2. Revenue 6 months 6months Year ended ended ended 30 September 30 September 31 March 2006 2005 2006Revenue by category: £'000 £'000 £'000 Product Licensing 2,327 1,819 3,803Technology Licensing 809 120 238Pharmaceutical Development Services 2,943 1,625 4,370 ______ ______ ______ 6,079 3,564 8,411 ______ ______ ______ 6 months 6months Year ended ended ended 30 September 30 September 31 March 2006 2005 2006Revenue by customer location: £'000 £'000 £'000 United Kingdom 848 897 2,928Rest of Europe 5,231 2,667 5,477United States of America - - 6 ______ ______ ______ 6,079 3,564 8,411 ______ ______ ______ Interest income is disclosed separately in the income statement and has beenexcluded from this note. All revenue and losses before taxation originate in the United Kingdom. 3. Operating loss This is stated after charging: 6 months 6months Year ended ended ended 30 September 30 September 31 March 2006 2005 2006 £'000 £'000 £'000Depreciation of property, plant and equipment- owned 547 373 767- held under finance leases and hire purchase contracts 7 33 49Share-based compensation 463 371 741Operating lease rentals- land and buildings 174 148 309- plant and machinery 39 46 97Net foreign exchange loss 70 - 17 ______ ______ ______ 4. Investment in associates The Group has the following associated undertaking: 30 September 30 September 31 March 2006 2005 2006 £'000 £'000 £'000 Balance at 1 April - - -Additions 61 - -Share of loss (61) - - ______ ______ ______Balance at period end - - - ______ ______ ______ PharmaKodex Limited was a 100% owned subsidiary up to 12 May 2006. From thisdate, the Group has held a 49.99% shareholding and has accounted for PharmaKodexLimited as an associate under the equity method in accordance with InternationalFinancial Reporting Standard 28 'Investments in associates'. The investment in PharmaKodex Limited consisted of £10,000 cash and equity of£50,909, received by the Group as its disposal consideration of PharmaKodexLimited. In accordance with IAS 28, the Group has recognised its share of losses fromPharmaKodex Limited up to the value of its interest. The Group does notrecognise any further losses as it does not have a legal or constructiveobligation on behalf of PharmaKodex Limited. If the associate subsequentlyreports profits, the Group will recognise its share of those profits only afterits share of the profits equals the share of losses not recognised. 5. Disposal of subsidiary The gain on disposal of the Company's interest in PharmaKodex Limited followinga share issue on 12 May 2006, is calculated as follows: 6 months ended 30 September 2006 £'000 Trade and other receivables 18Trade and other payables (166) ______Net liabilities disposed of (148)Consideration received 51 ______Net gain on disposal 199 ______ The consideration received represents the Company's interest in PharmaKodexLimited following the share issue, net of an investment of £10,000. 6. Taxation 6 months 6months Year ended ended ended 30 September 30 September 31 March 2006 2005 2006 £'000 £'000 £'000 Research and development tax credits 776 894 984 ______ ______ ______ The taxation recorded in the income statement relates to research anddevelopment tax credits. The credit is recorded on confirmation from the InlandRevenue that the claim has been approved. 7. Loss per ordinary share The calculation of loss per share is based on the following losses and number ofshares: 6 months 6months Year ended ended ended 30 September 30 September 31 March 2006 2005 2006 Retained loss for the period (£'000) (1,922) (1,542) (6,455)Weighted average number of ordinary shares (No.'000) 129,038 108,057 108,298Loss per share (1.5p) (1.4p) (6.0p) ______ ______ ______ The loss per share is based on the weighted average number of shares in issueduring the period. IAS 33 "Earnings per share" requires presentation of dilutedearnings per share when a company could be called upon to issue shares thatwould decrease net profit or increase net loss per share. No adjustment has beenmade to the basic loss per share, as the exercise of share options would havethe effect of reducing the loss per ordinary share and is therefore notdilutive. 8. Other receivables Other receivables represent an investment bond in respect of a rental depositpaid under the terms of a lease agreement for the premises at Chippenham. Thedeposit is for a fixed period of one year and is renewed annually. The interestrate is fixed annually and is 3.75% for the year ending 30 June 2007. Interestis recognised on the accruals basis. 9. Trade and other receivables 30 September 30 September 31 March 2006 2005 2006 £'000 £'000 £'000 Trade receivables 561 641 4,156Other receivables 2,096 2 36Prepayments and accrued income 359 124 278VAT recoverable 262 57 219 ______ ______ ______ 3,278 824 4,689 ______ ______ ______ 10. Trade and other payables 30 September 30 September 31 March 2006 2005 2006 £'000 £'000 £'000 Loans - 1 -Trade payables 1,156 996 698Obligations under finance leases - 42 14Other taxes and social security costs 236 139 144Other payables - 4 -Accruals 4,177 1,074 3,633 ______ ______ ______ 5,569 2,256 4,489 ______ ______ ______ 11. Share capital 30 September 2006 30 September 2005 £000 No.'000 £000 No.'000Authorised:Ordinary shares of 0.025p each 65 261,200 45 181,200Redeemable preference shares of £1 each 34 34 34 34 ______ ______ ______ ______Allotted, called up and fully paid:Ordinary shares of 0.025p each 42 168,581 27 108,450Redeemable preference shares of £1 each 34 34 34 34 ______ ______ ______ ______ Share capital - continued 31 March 2006 £000 No.'000Authorised:Ordinary shares of 0.025p each 45 181,200Redeemable preference shares of £1 each 34 34 ______ ______Allotted, called up and fully paid:Ordinary shares of 0.025p each 28 110,330Redeemable preference shares of £1 each 34 34 ______ ______ Redeemable preference shares The rights attaching to the redeemable preference shares are summarised asfollows: a) the shares do not confer any right to dividend or otherdistributions; b) on a return of capital on liquidation or otherwise, the assetsof the Company available for distribution among the members are to be appliedfirst in repaying to the holders of the redeemable preference shares the amountspaid up or credited as paid up in respect of such shares; c) holders ofredeemable preference shares have the right to receive notice of and attendgeneral meetings, but have no right to vote thereat; d) the price per share atwhich redeemable preference shares are transferred may not exceed the amountpaid or credited as being paid up, and e) the Company may specify by notice inwriting the date upon which it intends to redeem all (but not some only) of theshares. The price per share payable by the Company to the holders of theredeemable preference shares on their redemption shall be the amount paid up orcredited as paid up on each such share. Deferred share consideration Under a share purchase agreement dated 5 February 2002 between Vectura Group plcand Cambridge Consultants Limited ("CCL"), whereby Vectura acquired the entireshare capital of Vectura Delivery Devices Limited, CCL are due deferredconsideration in the form of ordinary shares of 0.025p each. The outstandingbalance of deferred consideration is to be issued on the satisfaction of certainpatent and revenue milestones, or by 31 December 2006 if earlier. As at 30September 2005, 1,350,000 (30 September 2004 - 1,800,000; 31 March 2005 -1,350,000) ordinary shares remained to be issued under these arrangements. Options The Company's Directors, officers and employees hold options under the VecturaUnapproved Share Option Plan (the "Unapproved Plan"), Enterprise ManagementIncentive arrangements (the "EMI Plan") and the Vectura Group plc Save as YouEarn Share Option Scheme (the "Sharesave Scheme") to subscribe for ordinaryshares in the Company, as shown below. Unapproved EMI Sharesave Total Plan Plan Scheme options Shares under option at 1 April 2006 7,274,120 4,032,436 701,660 12,008,216Options granted 940,462 - - 940,462Options exercised (153,111) (217,720) - (370,831)Options forfeited (4,000) - - (4,000) _________ _________ ________ __________Shares under option at 30 September 2006 8,057,471 3,814,716 701,660 12,573,847 _________ _________ ________ __________ Option price per share 0.025p - 93.755p 0.025p - 48.125p 50.8p - 72.0pWeighted average option price per share 52.65p 32.75p 55.86p The options exercised during the six months ended 30 September 2006 providedproceeds of £82,105.45. Long-Term Incentive Plan Under the rules of this plan, set up in accordance with an ordinary resolutionof the shareholders at the Annual General Meeting held on 12 September 2005,Executive Directors and certain senior managers received conditional rights toacquire a maximum number of shares at the beginning of a three-year period, aproportion of which they will be entitled to receive at the end of that perioddepending on the extent to which the challenging performance conditions set bythe Remuneration Committee at the time the allocation was made are satisfied. At30 September 2006, eligible employees hold rights which may result in the issueof 1,032,611 ordinary shares on 12 September 2008. 12. Reconciliation of net cash flows from operating activities 6 months 6months Year ended ended ended 30 September 30 September 31 March 2006 2005 2006 £'000 £'000 £'000 Operating loss (3,766) (3,000) (8,475)Depreciation of property plant and equipment 554 406 816(Increase) / decrease in receivables 3,502 26 (3,839)Increase / (decrease) in payables 434 (521) 1,289Deferred income 305 6,118 6,924Share-based compensation 463 371 741 ______ ______ ______Net cash inflow / (outflow) from operations 1,492 3,400 (2,544)Research and development tax credit - 894 984 ______ ______ ______Net cash inflow / (outflow) from operating activities 1,492 4,294 (1,560) ______ ______ ______ INDEPENDENT REVIEW REPORT TO VECTURA GROUP PLC Introduction We have been instructed by the Company to review the financial information forthe six months ended 30 September 2006, which comprises the Consolidated IncomeStatement, Consolidated Balance Sheet, Consolidated Cash Flow Statement,Consolidated Statement of Changes in Equity and the related notes 1 to 12. Wehave read the other information contained in the interim report and consideredwhether it contains any apparent misstatements or material inconsistencies withthe financial information. This report is made solely to the company having regard to guidance contained inBulletin 1999/4 'Review of interim financial information' issued by the AuditingPractices Board. To the fullest extent permitted by the law, we do not acceptor assume responsibility to anyone other than the Company, for our work, forthis report, or for the conclusions we have formed. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the Directors. The Directorsare responsible for preparing the interim report as required by the AIM Rulesissued by the London Stock Exchange. Review work performed We conducted our review having regard to the guidance contained in Bulletin 1999/4 'Review of interim financial information' issued by the Auditing PracticesBoard for use in the United Kingdom. A review consists principally of makingenquiries of group management and applying analytical procedures to thefinancial information and underlying financial data, and based thereon,assessing whether the accounting policies and presentation have beenconsistently applied, unless otherwise disclosed. A review excludes auditprocedures such as tests of controls and verification of assets, liabilities andtransactions. It is substantially less in scope than an audit performed inaccordance with International Standards on Auditing (UK and Ireland) andtherefore provides a lower level of assurance than an audit. Accordingly, we donot express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 September 2006. Ernst & Young LLPBristol16 November 2006 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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