22nd Sep 2009 07:00
AGI Therapeutics
Interim financial results for the six months ended 30 June 2009
New business strategy announced
Dublin, Ireland, 22 September 2009 - AGI Therapeutics plc ("AGI" or "the Company") (AIM, IEX: AGI), a speciality pharmaceutical development company, today announces interim financial results for the six months ended 30 June 2009.
The Company also today announces that, following a comprehensive review of the business by management, it has implemented a revised business strategy which has been endorsed by the Board.
Financial summary
Operational summary
Business strategy review
Following the announcement on May 15th that AGI was discontinuing the development of Rezular in the broad indication of IBS-D, the Company commenced a full review of its business strategy, including a fundamental review of its pipeline products, and an extensive post-hoc analysis of the data from the ARDIS 1 study and the ARDIS 3 safety study of Rezular. That business review has now been completed and a new business strategy, prepared by management, has been approved by AGI's Board of Directors.
The key elements of the new business strategy are as follows:
Business focus
Product pipeline
Applying criteria based on the new business strategy, AGI has completed a comprehensive review of its product pipeline and associated indications
Following the review, AGI has identified a number of potential diarrhea-associated indications for Rezular that could be appropriate for further development. Some of these indications may qualify for Orphan drug status and approval. For competitive and intellectual property protection reasons, AGI does not intend to reveal these indications until priority has been established. AGI estimates that if Rezular was ultimately successfully developed, approved and launched in all these indications, peak sales could be in excess of $1.0 billion
The management team has also determined that AGI-004, transdermal mecamylamine for the treatment of Chemotherapy Induced Diarrhoea (CID), meets the criteria of AGI's new business strategy and will be considered for further development
New products
Cost structure and cash
In the June 11 AGM statement, AGI announced that it expected to have cash resources of approximately $12.0 million at the end of Q2 2009. Cash on hand at 30 June 2009 was $15.1 million, before current liabilities of $2.7 million, most of which related to close out costs on the ARDIS programme and restructuring costs. These liabilities are due to be discharged in the third quarter of 2009, leaving pro-forma cash reserves of $12.4 million available as of the end of June for the execution of the new business strategy. The Company has moved to reduce its cost base which will allow for future clinical programmes to be funded to ensure it can rebuild value in its pipeline. The Company envisages that it will have sufficient cash resources for at least two years.
Commenting on the announcement today, John Devane, CEO of AGI stated; "We are pleased to have completed a rigorous business strategy and portfolio review, which provides a realistic route for rebuilding value in our pipeline, using the assets and resources available to us. In recent months we have spent considerable time identifying assets that will benefit best from further internal development and those better monetised by out-licensing. Over the next year we will concentrate our efforts on building value based on clinical and other scientific evidence in those indications where we see the greatest value for AGI."
- Ends -
Conference Call:
Please note that AGI will hold a conference call to discuss these results today, beginning at 11:00 BST.
To participate, please call +353 1 486 0922 (Ireland) or +44 (0) 20 7806 1951(UK) quoting the confirmation code 8869040. A slide presentation accompanying this call will be available in the Investors/Publications section of the AGI website 15 minutes before the call commences, or by following this link:
http://phx.corporate-ir.net/phoenix.zhtml?c=196905&p=irol-reports
Contact Information:
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AGI Therapeutics plc. |
Tel: +353 1 449 3254 |
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David Kelly, Chief Financial Officer |
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Financial Dynamics - UK |
Tel: +44 (0) 20 7269 7182 |
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Jonathan Birt/John Dineen |
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Financial Dynamics - Ireland |
Tel: +353 1 663 3607 |
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Niamh Lyons |
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Piper Jaffray Limited Neil Mackison Will Carnwath |
Tel: +44 (0) 20 3142 8700 |
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Davy John Frain |
Tel: +353 1 614 8761 |
Notes to Editors:
About Rezular™ (AGI-003)
RezularTM (AGI-003) is an orally administered multiple action intestinal regulator. Rezular contains arverapamil, a single enantiomer moiety of the racemic drug verapamil.
About AGI Therapeutics plc
AGI is a specialty pharmaceutical company which is focused on the development and commercialisation of differentiated specialty drug products to treat unmet medical needs, including conditions which qualify for Orphan drug status.
The Company has a portfolio of product candidates derived from its Known Molecular Entity (KME™) approach to drug re-profiling and development and aims to bring its products to the market either directly or through out-licensing or other partnering arrangements.
AGI's common shares are listed on the Alternative Investment Market of the London Stock Exchange (AIM) and on the Irish Enterprise Exchange of the Irish Stock Market (IEX) as AGI.
For further information please see www.agitherapeutics.com.
Statements contained within this press release may contain forward-looking comments which involve risks and uncertainties that may cause actual results to vary from those contained in the forward-looking statements. In some cases, you can identify such forward-looking statements by terminology such as 'may', 'will', 'could', 'forecasts', 'expects', 'plans', 'anticipates', 'believes', 'estimates', 'predicts', 'potential', or 'continue'. Predictions and forward-looking references in this press release are subject to the satisfactory progress of research which is, by nature, unpredictable. Forward projections reflect management's best estimates based on information available at the time of issue.
Chairman's and Chief Executive's review
The first half of 2009 was dominated by activities associated with progressing AGI's lead product, Rezular, for the treatment of diarrhoea-predominant irritable bowel syndrome, (IBS-D). Two Phase III studies, ARDIS 1 and ARDIS 3 were underway during the first half of 2009. ARDIS 1 was a randomised, double-blind, placebo-controlled, parallel-group, Phase III study in IBS-D patients (both men and women). There were four treatment arms (placebo and three dose levels of Rezular) and patients were treated for 12 weeks of double-blind therapy. A total of 711 patients were randomised in 123 clinical centres in the United States, Europe and South America. Of the total patients randomised, 63% were in the United States. ARDIS 3 was an extended safety study, designed to track at least 100 patients exiting ARDIS 1 for a total exposure of one year on active drug.
The Company received the top-line results from ARDIS 1 in mid-May. In summary;
Statistically significant evidence favouring Rezular treatment was achieved in a number of secondary endpoints, particularly those relating to aspects of diarrhoea e.g. stool form (as assessed by the Bristol Stool Scale), stool frequency and in the majority of sub-categories of quality-of-life (IBS-QOL) scores and in the overall IBS-QOL score
This was a disappointing result for the Company, shareholders and IBS-D patients for whom no effective therapy to address all their symptoms exists. Having made the decision to discontinue the ARDIS programme, AGI commenced a review of its business strategy, including a fundamental review of its pipeline products and a post-hoc analysis of the data from the ARDIS 1 & 3 studies of Rezular. The Company moved quickly to limit the close out costs of the ARDIS Phase III programme as well as other project commitments in order to maximise the cash available to the business pending completion of the strategy review. The results of that review are made public today and form the basis of AGI's plans to re-build value in the Company.
Business Strategy
The Company intends to leverage its strength in product development by focusing on specialty products in areas where unmet medical needs exist. This means that AGI intends to concentrate its efforts on market segments where the clinical and regulatory route to approval may be less costly and where commercialisation can be successfully undertaken by a smaller and more focused specialty company. Some of these indications will, the Company believes, meet the criteria for Orphan drug status under regulations of the US Food and Drug administration (FDA).
While the therapeutic focus of the Company up until now has been on GI diseases, AGI's approach to development and experience is applicable to numerous therapeutic areas. AGI now intends to pursue products that fit with the Company's revised business strategy rather than being limited to a single therapeutic area.
Of the current pipeline products, AGI intends to concentrate its future development efforts on alternative applications for Rezular and on AGI-004, AGI's transdermal patch containing mecamylamine where we believe significant additional value can be created for our business and shareholders.
AGI has identified a number of potential new indications for Rezular and intends to prioritise, design and execute value-creating clinical trials in these indications. Where appropriate, study design and endpoints will be reviewed with the FDA. Rezular is discussed in more detail below. AGI-004 has already established clinical proof-of-concept in Chemotherapy Induced Diarrhoea (CID) and AGI is exploring the optimal study design for the next stage of this product's development.
While it is AGI's intention to advance these programmes using its own resources, the Company may consider co-development partnerships or strategic alliances with other pharmaceutical companies.
Non-core products will be monetised and developed through out-licensing or other partnership arrangements. Based on its current financial resources, AGI believes that the most productive way to advance AGI-010 controlled-release omeprazole, AGI-022, a targeted and controlled-release aminosalycilate, and AGI-006, an upper-GI pro kinetic agent, will be through partnering. This will allow these products to be financed externally, providing cash and/or future value to AGI. The Company will pursue the establishment of such partnerships over the next year. The Company has already started the process of identifying and meeting with potential partners.
It is the Company's intention to allocate some of its cash resources to the development of new products if suitable candidates are identified. These should meet the criteria of being directed to specialty markets where unmet medical needs exist.
Rezular™
Based on the comprehensive analysis of the ARDIS data including a variety of post-hoc analyses, the Company reached the following key conclusions in relation to the efficacy of Rezular in IBS-D:
The analysis has confirmed the preliminary findings that Rezular at the medium (112.5mg per day) and high dose (225mg per day) showed a clear effect to normalise the loose/watery stool pattern of the IBS-D patients (measured by improvements in stool form using the BSS scale)
Overall, the analysis has confirmed the view of AGI that Rezular may offer an effective treatment for chronic diarrhea in a variety of conditions, particularly those associated with altered gut motility.
The immediate focus for AGI is to develop and implement a detailed operational plan that is consistant with the new business strategy approved by the Board. Ultimately we are confident that this new strategy will create increased value in the business.
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Dr. Ronan Lambe Chairman Dublin, 22 September 2009 |
Dr. John Devane Chief Executive Officer |
Financial review
Basis of preparation and International Financial Reporting Standards (IFRS)
The financial information for the six months ended 30 June 2009 has been prepared in accordance with IFRS as adopted by the European Union.
Functional Currency
Commencing on January 1st 2008, AGI has adopted the US Dollar as the functional currency for the Company. This decision is based on the fact that the Company's primary market for its products under development are in the US, the majority of the Company's costs are denominated in US dollars, and it is likely that most future revenues, whether in the form of license fees, development fees, royalties or product sales, are likely to be earned in dollars. Previously the Company's functional currency was the euro as most of its costs were euro-denominated and its funding was raised in euro.
Operating performance
Revenue
AGI received an initial milestone payment of $1.5 million from Axcan Pharma Inc. in 2006 related to a co-development agreement for AGI-010, Chronab omeprazole. This upfront fee has been recognised on a straight line basis over three years, an estimate of the likely term of the underlying development programme. For the six months to June 30 2009 a total of $0.3 million was recognised as revenue (2008: $0.3 million). As of 30 June 2009 the full amount of $1.5 million has been recognised. In August 2009 AGI announced that, by mutual consent, AGI and Axcan have terminated this co-development and all associated intellectual property and ownership of the asset has reverted to AGI. There are no further financial obligations on either party associated with this termination.
Research and Development expenses
Total Research and Development expenses for the six months to June 30 2009 were $7.8 million (2008: $8.3 million). R&D costs in both 2008 and 2009 were dominated by the ARDIS Phase III clinical programmes associated with Rezular. As a result of the Company's decision to discontinue ARDIS in May 2009, all significant remaining costs associated with ARDIS were accrued in June 2009 and therefore R&D costs will be substantially lower in the second half of 2009.
General and Administrative expenses
General and Administrative expenses in the first six months of 2009 were $1.5 million (2008: $2.0 million). This decrease is attributable to the elimination of salary bonus payments in 2009, a reduced share-based compensation charge as well as other cost containment measures. As a result of continuing measures to contain costs AGI expects G&A costs to decline further in the second half of 2009.
Interest Income and other income
The Company earned interest on its cash balances amounting to $0.1 million in the first six months of 2009 (2008: $0.7 million). Interest income has fallen as cash balances have reduced and interest rates for cash deposits declined in 2009 compared to 2008. This category also includes an unrealised loss of $21K in 2009 (2008: $469K unrealised gain) arising from the translation, of those cash balances AGI still holds in euro into dollars at the period end.
Reorganisation expense
A charge of $0.4 million has been recognised in the first half of 2009 to account for costs associated with making certain positions redundant and the costs of writing down certain intellectual property. There was no comparable charge in 2008.
Taxation
The Company has had a loss to date and continues to incur losses. Because of these losses no charge for tax arose in the first six months of 2009, although there was a small charge of $0.1 million for the comparable period of 2008.
Share based compensation expense
The Company issues share options to certain employees on an annual basis. While the options were issued at a strike price equal to the market price of the Company's shares on the date of grant, a calculation is required of the potential expense to the Company of issuing those options which is determined using the Black-Scholes option-pricing formula. A total amount of $0.6 million was expensed during the first half of 2009 (2008: $0.8 million) for these share based compensation charges, divided between Research and Development and General and Administration expenses.
Operating cash flow
Net cash outflow from operating activities in the period was $8.5 million (2008: $12.5 million), which consisted principally of the loss from operations and changes in working capital balances. At June 30, 2009, AGI had cash and short-term deposits of $15.1 million, (2008 $32.8 million). The Company also had short tem liabilities consisting of trade payables and accruals in the amount of $2.7 million at 30 June 2009 a large portion of which related to Rezular. These liabilities are due to be fully discharged in the third quarter of 2009. The Directors have considered the Company's cash position and are satisfied that it is sufficient to meet the Company's financial obligations for at least the coming twelve months.
UNAUDITED CONDENSED CONSOLIDATED INTERIM INCOME STATEMENTS
For the six months ended 30 June 2009
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Notes |
Period ended 30 June 2009 $'000 |
Period ended 30 June 2008 $'000 |
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|
Revenue |
288 |
288 |
|
|
Research and development expenses (share based payment charge of $322 (2008: $439)) |
7,824 |
8,340 |
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General and administrative expenses (share based payment charge of $242 (2008: $400)) |
1,467 |
2,016 |
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|
Reorganisation expense |
380 |
- |
|
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Total operating expenses |
(9,671) |
10,356 |
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Operating loss |
(9,383) |
(10,068) |
|
|
Interest income and other income |
100 |
1,121 |
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|
Loss before tax |
(9,283) |
(8,947) |
|
|
Income tax |
- |
(59) |
|
|
Loss for the period |
(9,283) |
(9,006) |
|
|
Basic loss per ordinary share: |
|||
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Basic loss per share ($ cents) |
3 |
(13.8) |
(13.3) |
UNAUDITED CONDENSED CONSOLIDATED INTERIM BALANCE SHEETS
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30 June 2009 $'000 |
31 December 2008 $'000 |
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Non-Current Assets |
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Property, plant and equipment |
21 |
34 |
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Intangible assets |
1,618 |
1,793 |
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Total Non-Current Assets |
1,639 |
1,827 |
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Current Assets |
||
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Other current assets |
189 |
163 |
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Cash and cash equivalents |
15,073 |
23,577 |
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Total Current Assets |
15,262 |
23,740 |
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Total Assets |
16,901 |
25,567 |
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Current Liabilities |
||
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Trade and other payables |
2,675 |
2,622 |
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Total Current Liabilities |
2,675 |
2,622 |
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Total Liabilities |
2,675 |
2,622 |
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Shareholders' Equity |
||
|
Share capital |
992 |
992 |
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Share premium |
75,194 |
75,194 |
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Other reserves |
4,751 |
4,187 |
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Retained loss |
(66,711) |
(57,428) |
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Total Shareholders' Equity |
14,226 |
22,945 |
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Total Shareholders' Equity and Liabilities |
16,901 |
25,567 |
UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS
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30 June 2009 $'000 |
30 June 2008 $'000 |
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Loss for the period |
(9,283) |
(9,006)) |
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Adjustments to reconcile loss to net cash used in operating activities: |
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Depreciation of property, plant and equipment |
13 |
18 |
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Amortisation and writedown of intangibles |
175 |
70 |
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Interest income |
(100) |
(652) |
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Income tax |
- |
59 |
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Share-based compensation |
564 |
839 |
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Operating cash outflow before changes in working capital |
(8,631) |
(8,672) |
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Increase in other current assets |
(36) |
(84) |
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Increase/(decrease) in trade and other payables |
51 |
(4,544) |
|
Cash used by operations |
(8,616) |
(13,300) |
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Interest received |
110 |
826 |
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Tax refunded/(paid) |
2 |
(25) |
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Net cash outflow from operating activities |
(8,504) |
(12,499) |
|
Investing activities |
||
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Acquisition of intellectual property and other investments |
- |
(221) |
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Net cash used by investing activities |
- |
(221) |
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Net (decrease) in cash and cash equivalents |
(8,504) |
(12,720) |
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Cash and cash equivalents at the beginning of period |
23,577 |
45,503 |
|
Cash and cash equivalents at the end of the period |
15,073 |
32,783 |
UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
|
Numberof Shares |
Ordinary shareCapital $'000 |
SharePremium $'000 |
Other Reserves $'000 |
Retained deficit $'000 |
TotalAmount $'000 |
|
|
Balance at 31 December 2007 |
67,412,783 |
992 |
75,194 |
2,649 |
(39,225) |
39,610 |
|
Loss for the period |
- |
- |
- |
- |
(9,006) |
(9,006) |
|
Share-based compensation |
- |
- |
- |
839 |
- |
839 |
|
Balance at 30 June 2008 |
67,412,783 |
992 |
75,194 |
3,488 |
(48,231) |
31,443 |
|
Loss for the period |
- |
- |
- |
- |
(9,197) |
(9,197) |
|
Share-based compensation |
- |
- |
- |
699 |
- |
699 |
|
Balance at 31 December 20087 |
67,412,783 |
992 |
75,194 |
4,187 |
(57,428) |
22,945 |
|
Loss for the period |
- |
- |
- |
- |
(9,283) |
(9,283) |
|
Share-based compensation |
- |
- |
- |
564 |
- |
564 |
|
Balance at 30 June 2009 |
67,412,783 |
992 |
75,194 |
4,751 |
(66,711) |
14,226 |
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
1 BASIS OF PREPARATION
These unaudited condensed consolidated interim financial statements (the interim financial statements) have been prepared in accordance with IFRS that are adopted by the European Union (EU) and effective at 30 June 2009. The interim financial statements do not include all of the information required for full annual financial statements.
These interim financial statements are presented in US Dollar rounded to the nearest thousand, being the functional currency of the parent company and the group companies. They are prepared on the historical cost basis, except for share based payments, which are stated at fair value.
The accounting policies applied by AGI in these interim financial statements are the same as those applied by AGI in its consolidated financial statements as at and for the year ended 31 December 2008.
The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. Actual results could differ materially from these estimates. In preparing these interim financial statements, the significant judgements made by management in applying our accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as at and for the year ended 31 December 2008.
These interim financial statements do not constitute Statutory Financial Statements of the Group within the meaning of Regulation 40 of the European Communities (Companies: Group Accounts) Regulations, 1992. Statutory Financial Statements for the year ended 31 December 2008 have been filed with the Companies Office. The auditor's report on those financial statements was unqualified.
2 FUNCTIONAL CURRENCY
On 1 January 2008, the functional currency of the Company changed from Euro to US Dollars as the Company's cost structure became primarily US Dollar based. The Company's principal clinical trials are carried out in the United States and billed in dollars. In addition the Company earns only US Dollar revenue. The US Dollar is the currency of the primary economic environment in which the Company operates. At 1 January 2008 the Company translated its financial statements at 31 December 2007 to US Dollars at the exchange rate prevailing at that date.
Transactions in currencies other than the functional currency of the entities are recorded at the rate of exchange prevailing on the date of the transactions. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are retranslated into the respective functional currencies of Group entities at the rate of exchange prevailing at the balance sheet date.
3 LOSS PER SHARE
Basic loss per share is computed by dividing the loss for the period available to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period. Diluted loss per share is computed by dividing the loss for the period, by the weighted average number of ordinary shares outstanding and, when dilutive, adjusted for the effect of all potentially dilutive shares, including stock options, warrants, and convertible debt securities on an as-if-converted basis.
The following table sets forth the computation for basic and diluted loss per share for the six months ended 30 June 2009 and 2008:
|
30 June 2009 $000 |
30 June 2008 $000 |
||
|
Numerator: |
|||
|
Loss attributable to ordinary shareholders |
(9,283) |
(9,006) |
|
|
Denominator: |
|||
|
Denominator for basic-weighted average number of shares |
67,412,783 |
67,412,783 |
|
|
Basic loss per share: |
|||
|
Basic loss per share (US$ cents) |
(13.8) |
(13.3) |
|
Potentially dilutive instruments, such as share options have not been treated as dilutive as the Group made a loss in both periods.
4 RELATED PARTY TRANSACTIONS
(a) Transactions with founding members and shareholders
Frank Kenny, John O'Sullivan and Peter Sandys are Directors of the Company and are board nominees of Delta Partners, ACT Venture Capital and Seroba Bioventures respectively. Fees of $25,000 annually are paid by the Company to each of Delta, ACT and Seroba in respect of their nominees' appointment.
5 APPROVAL
The unaudited condensed consolidated interim financial statements were approved by the directors on 17 September, 2009
Related Shares:
Potentially Ai