27th Mar 2006 07:01
Allergy Therapeutics PLC27 March 2006 Allergy Therapeutics plc Interim Results for the six months ended 31 December 2005 Allergy Therapeutics plc ("Allergy Therapeutics" or "the Company"), thespecialty pharmaceuticals Company focused on allergy vaccines, today announcesinterim results for the six months ended 31 December 2005. Highlights • Significant progress in the clinical development programmes: - Positive outcome of Pollinex(R) Quattro Ragweed pivotal study in Canada, paving the way for registration in Canada - 6 Phase I and II studies completed • 10% growth in Pollinex(R) Quattro sales • German rebates lower at £0.5m (6 months to 31 December 2004 (H1) 2004: £2.0m), net sales up 17% to £14.2m (H1 2004: £12.1m) • Operating profit, before development costs, up 23% to £4.8m (H1 2004, pre-exceptional costs: £3.9m) • Expansion of EU sales and marketing infrastructure in Poland, Austria, the UK, and the Czech and Slovak Republics • Board and senior management team strengthened with three key appointments • New bank facilities agreed for £4m • Extensive manufacturing upgrade commenced Commenting on the results, Keith Carter, CEO of Allergy Therapeutics, said: "I am pleased to report that Allergy Therapeutics has made such an excellentstart to the financial year. The Company is making good clinical progress aswell as continuing to deliver strong financial results. "The positive outcome of several of our clinical studies has been particularlypleasing and we continue to progress our strategy to become a mainstreamprovider of novel therapies for the prevention and treatment of allergy. "Allergy Therapeutics has made significant strides in the first half of thefinancial year and the Company can look forward to the opportunities that thesecond half of the year will present with confidence." - ends - For further information: Allergy Therapeutics 01903 844720Keith Carter, Chief Executive Bell Pottinger 020 7861 3232Dan de Belder / Emma Charlton Joint Statement from the Chairman and CEO We are pleased to report that the Company has made substantial progress in thesix months ended 31 December 2005 ("the Period") and that it has continued toaccomplish its financial and business objectives. Allergy Therapeutics continued to pursue its strategy as a fully integratedspecialist pharmaceutical company based in Europe, building its EU sales andmarketing infrastructure, progressing its development pipeline of innovativeultra-short course allergy vaccines and strengthening its UK manufacturing base.With significant investments of energy, time and money in executing its plans,the Company made progress on many fronts during the Period. Development The Period saw significant progress in the clinical development programmes. Tenpre-Phase III studies were undertaken with a total of 636 subjects, representingan overall investment of £5.6m in the Period and, by the end of the Period, sixstudies had completed their clinical phases and are currently under evaluation.All these studies are designed to provide answers to the questions posed by theUS Food and Drug Administration (FDA). The next phase will entail presenting thecomprehensive data to the FDA and discussing our Phase III plans for 2006-2007which are already well advanced. The initial results of the recent studies areexpected in the second half of the financial year. Three studies are of specialnote: * The Grass 203 study, part of the Company's development of ultra-short- courseallergy vaccines, under the brand name Pollinex(R) Quattro, relates specificallyto the treatment of patients allergic to grass pollen. The successful results ofthis study were announced on 6 March 2006 and demonstrate that Pollinex(R)Quattro Grass - Grass M.A.T.A. (Modified Allergen Tyrosine Adsorbate) with MPL(R) (Monophosphoryl Lipid A) - was safe and well tolerated at all dosingregimens and increased antibody levels compared to placebo in a dose-dependentmanner. MPL(R) is the Company's innovative TLR4-agonist which acts as anefficient allergy vaccine adjuvant. This study will form an important part ofthe submissions to the FDA leading up to the Phase III programme for Pollinex(R)Quattro. * The pivotal Ragweed 204 study, the results of which were announced on 24 March2006, utilised a pollen challenge chamber and demonstrated significantstatistical and clinical benefit of the new vaccine. This study is particularlyimportant as, with this positive outcome, we are planning to submit a dossierfor registration for an MPL(R)-based vaccine for allergy to Ragweed pollen inCanada. It is therefore our first pivotal clinical trial with the 4-injectionMPL(R)-containing vaccines. Ragweed pollen is one of the most important causesof allergy across the whole of North America, a target market of approximately50 million sufferers. * The oral Grass 103 study is a Phase I/II trial, incorporating elements ofdose-ranging as well as tolerability, and is the first sublingual use of theadjuvant MPL(R). Being injection-free efficacious and well-tolerated allergyvaccines by this route of administration would have considerable commercialpotential. Results are expected in the second half of this financial year. Operations In January 2006 the MHRA inspectorate conducted a Good Manufacturing Practice(GMP) audit of the existing facility. There were no critical findings in theaudit, a testimony to the integrity of the Company's quality systems. As part of the plan for preparing for the FDA requirements, new premises wereleased in December neighbouring the current facility in Worthing. This newfacility will be devoted to the production of named-patient products andwarehousing, creating the flexibility in the main plant to upgrade andrefurbish. Competing demands on manufacturing resources from markets and theclinical development programme caused some supply issues during the last sixmonths. The new facility, due to be operational over the summer of 2006, willpermit clearer segregation in these functions. Board and Senior Management A key component in achieving the Company's strategy is to recruit and retain theright people. Consequently we were delighted that, during the period, Dr.Virinder Nohria agreed to join the Board as a Non-Executive Director. Hisexpertise in drug development and dealing with the FDA will be an invaluablesupport to our excellent and growing internal R&D team as our new MPL(R)-basedvaccines move through the late phases of clinical trials. Dr. Nohria works as astrategic consultant in international drug development and has led teams in manysuccessful interactions with regulatory bodies in several countries,particularly in the US . Two further key positions were filled in November 2005, strengthening the seniormanagement team: Ray Keeling, 46, an experienced pharmaceutical manufacturingand supply executive with particular expertise in sterile manufacture andmeeting the requirements of the US FDA, joined as Head of Supply Operations.Prior to joining the Company, Ray held senior supply operations positions atAventis. Dr. Manjit Rahelu, 38, who has a PhD in immunology and over sevenyears' experience in business development in the pharmaceutical industry, joinedthe Company as Head of Business Development. Prior to joining the Company,Manjit was a senior business development executive at UCB. Including these key appointments, the headcount across the Company increased to279 by the end of the period (H1 2004: 226) reflecting the significantinvestment required in building the commercialisation infrastructure, upgradingmanufacturing and preparing for initiation of the Phase III developmentprogramme during 2006 and for potential commercial launches. Financial Review The results for the six months to 31 December 2005 have been very encouragingand have continued the progress shown in previous years. At present, approximately 77% of Allergy Therapeutics' sales are generated inGermany, so the reduction of the compulsory rebate from 16% to 6% in January2005 was beneficial to the company with a reduction in the charge to £0.5m (H12004: £2m) in the period. Consequently, after the rebate, group net salesincreased by 17% to £14.2 (H1 2004: £12.1m). Gross sales (before the rebate inGermany) for the period were £14.7m (H1 2004: £14.1m). This represents anincrease of 4% over the previous period, driven primarily by growth of 10% innamed-patient sales of Pollinex(R) Quattro, the Group's four-shot allergyvaccine. Year-on-year improvement in operating profit was inhibited by somemanufacturing issues, resulting primarily from the demands made on allmanufacturing resources in meeting the needs of both the markets and theclinical trials. We are confident that the investments and actions initiatedover the period will prevent a recurrence of these problems. Owing to the seasonality of the allergy market, some 60-70% of AllergyTherapeutics' sales are generated in the first half of the Company's financialyear and as a consequence the interim results give a better indication thannormal for the full year performance. Gross profit grew by 21% to £11.4m, representing a gross margin of 80% of sales,compared with £9.4m and 78% in the same period last year. This was an expectedtrend because of the decrease in German rebates. The initiation of theinvestment programme in the manufacturing facility and further investment inmanufacturing headcount to maintain compliance with good manufacturingcompliance will reduce the gross margin in the short term. 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 ourhigh margin products. Costs increased to £5.0m (H1 2004: £3.8m), an increase of33% over the previous period. Returns on these revenue investments areanticipated in coming years. Administration costs of £1.7m (H1 2004: £2.0m) werelower by 13%, benefiting by the release in the period of a bad debt provision. Research and development expenditure increased during the period to £5.5m (H12004: £0.7m) as the development activity for the MPL(R)-based vaccine range wasprogressed. The operating loss for the period was £0.7m (H1 2004 profit: £2.6m) but beforedevelopment costs, the operating profit was £4.8m (H1 2004, pre-exceptionalcosts: £3.9m). Capital expenditure for the period was £0.6m (H1 2004: £0.5m) and mainlyrepresents upgrades to plant and machinery. Net current assets excluding cashwere up to £3.2m (H1 2004: £2.2m) reflecting higher activity levels. Net assets of £19.7m (H1 2004: £24.8m) show a net decrease of £5.1m against theprevious period end, due primarily to the investment in R&D over the period. Net cash outflow before financing for the period was £4.2m (H1 2004 inflow:£1.7m), less than the previous period by £5.9m due principally to theaccelerated investment in R&D in the period. Funding New funding lines were agreed in March 2006 with the Company's bank, RBOS, toprovide a facility of £4m. This facility will be used to fund the investmentrequired to prepare the production facilities for the US launch of its productsand to support working capital requirements as the Company grows. Outlook Trading remains on track with market expectation and excellent opportunities lieahead for the Company in the second half of the financial year with thesuccessful outcome of Ragweed 204. The next target is a successful outcome ofthe oral Grass 103 trials as well as the continued marketing and expansion ofexisting products into the European markets. The most exciting phase of growth,however, will come when regulatory clearance is achieved to sell Pollinex(R)Quattro in the chosen markets and the Company's efforts and resources arefocused on this objective. Allergy Therapeutics plcConsolidated interim statements Consolidated profit and loss accountfor the six month period ended 31 December 2005 6 months 6 months Year ended to to 30 June 31 Dec 31 Dec 2005 2005 2004 Note £'000 £'000 £'000 Turnover 2 14,200 12,140 20,606 Cost of sales (2,807) (2,709) (4,853) --------- -------- ---------Gross profit 11,393 9,431 15,753 Distribution costs (4,974) (3,750) (8,012) --------- -------- ---------Administrative expenses- other (1,729) (1,978) (4,303) Research and development costs (5,493) (665) (5,620) Exceptional costs - (614) (614) --------- -------- ---------Administrative expenses (7,222) (3,257) (10,537) Other operating income 133 160 378 --------- -------- ---------Operating (loss)/ profit (670) 2,584 (2,418) Interest receivable and similarincome 245 163 531Interest payable on loans andoverdrafts - (39) (42) --------- -------- --------- (Loss)/profit on ordinaryactivities before tax (425) 2,708 (1,929)Tax on (loss)/profit on ordinary activities - - - --------- -------- ---------Retained (loss)/profit for thefinancial period (425) 2,708 (1,929) --------- -------- --------- Basic (loss)/earnings per share 3 (0.7p) 5.2p (3.4p)Diluted (loss)/earnings pershare 3 (0.7p) 4.5p (3.4p) All amounts relate to continuing activities Consolidated balance sheetat 31 December 2005 Note 31 Dec 31 Dec 30 June 2005 2004 2005 £'000 £'000 £'000Fixed assetsIntangible assetsGoodwill 2,484 2,850 2,617Other intangible assets 893 1,013 951 --------- -------- --------- 3,377 3,863 3,568Tangible assets 2,414 1,926 2,111 --------- -------- --------- 5,791 5,789 5,679Current assetsStocks 3,242 2,185 2,741Debtors: amounts falling duewithin one year 4,023 3,832 3,160Cash at bank and in hand 10,912 17,234 15,080 --------- -------- --------- 18,177 23,251 20,981 Creditors: amounts fallingdue within one year (4,011) (3,801) (6,121) --------- -------- --------- Net current assets 14,166 19,450 14,860 --------- -------- ---------Total assets less currentliabilities 19,957 25,239 20,539 Creditors: amounts fallingdue after one year (226) (459) (455) --------- -------- --------- Net assets 4 19,731 24,780 20,084 --------- -------- ---------Capital and reservesCalled up share capital 73 73 73Share premium account 14,924 14,945 14,924Other reserves - sharepremium on shares issued bysubsidiary 40,128 40,128 40,128Other reserves - shares heldin Employee Benefit Trust (296) (346) (322)Profit and loss account (35,098) (30,020) (34,719) --------- -------- --------- Shareholders' funds - equity 19,731 24,780 20,084 --------- -------- --------- Consolidated cash flow statementfor the six month period ended 31 December 2005 6 months to 6 months to Year ended 31 Dec 2005 31 Dec 2004 30 June 2005 Note £'000 £'000 £'000 Cash (outflow)/ inflow fromoperating activities 5 (3,857) 2,057 (15) Returns on investment and servicing offinanceInterest received 245 163 531Interest paid - (39) (42) --------- -------- --------- 245 124 489 --------- -------- ---------Capital expenditure and financialinvestmentPurchase of fixed assets (582) (456) (903)Sale of tangible fixed assets - 3 - --------- -------- --------- (582) (453) (903) --------- -------- ---------Cash (outflow)/ inflow beforefinancing (4,194) 1,728 (429) FinancingGross funds raised on AIM - 16,000 16,000Bank loans repaid - (945) (945)Sale of EBT shares 26 27 51Expenses paid in connection withissue of shares - (1,033) (1,054) --------- -------- --------- 26 14,049 14,052 --------- -------- ---------(Decrease)/increase in cash inperiod (4,168) 15,777 13,623 Reconciliation of net cash flow to movement in net funds 6 months to 6 months to Year ended 31 Dec 2005 31 Dec 30 June 2005 2004 £'000 £'000 £'000 (Decrease)/increase in cash in theperiod (4,168) 15,777 13,623Net loans repaid - 945 945 --------- -------- ---------Movement in net funds in period (4,168) 16,722 14,568Net funds at beginning of period 15,080 512 512 --------- -------- ---------Net funds at end of period 10,912 17,234 15,080 --------- -------- --------- Notes to the interim reportsFor the six month period ended 31 December 2005 1 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 2005 annual report and financial statements. Thefinancial information set out in this interim report is unaudited and does notconstitute statutory accounts as defined in section 240 of the Companies Act1985. 2 Analysis of turnover 6 months to 6 months to Year ended 31 Dec 2005 31 Dec 2004 30 June 2005 £'000 £'000 £'000Turnover by destinationGermany 10,956 9,017 14,175Rest of Europe 3,056 2,939 4,714North America 39 12 1,371Asia 149 172 346 ----------- ----------- ----------- 14,200 12,140 20,606 ----------- ----------- -----------Turnover by originGermany 10,963 9,017 14,175Rest of Europe 2,039 1,861 3,481UK 1,198 1,262 2,950 ----------- ----------- ----------- 14,200 12,140 20,606 ----------- ----------- ----------- 3 (Loss)/earnings per share 6 months to 6 months to Year ended 31 Dec 2005 31 Dec 2004 30 June 2005 (Loss)/earnings for the period(£'000) (425) 2,708 (1,929) Weighted number of shares in issue 62,950,632 51,991,728 57,471,180Diluted weighted number of sharesin issue n/a 60,787,224 n/a Basic (loss)/earnings per share(pence) (0.7) 5.2 (3.4)Diluted (loss)/earnings per share(pence) (0.7) 4.5 (3.4) 4 Reconciliation of movement in shareholders' funds 6 months to 6 months to Year ended 31 Dec 2005 31 Dec 30 June 2004 2005 £'000 £'000 £'000 (Loss)/profit for the financialperiod (425) 2,708 (1,929)Other recognised gains and lossesrelating to the period (net) 46 2 (60)Issue of shares - 16,000 16,000Sale of shares by EBT 26 27 51Expenses paid in connection withissue of shares - (1,033) (1,054) ----------- ----------- -----------Net (decrease)/increase inshareholders' funds (353) 17,704 13,008 Opening shareholders' funds 20,084 7,076 7,076 ----------- ----------- ----------- Closing shareholders' funds 19,731 24,780 20,084 ----------- ----------- ----------- 5 Reconciliation of operating (loss)/ profit to operating cash flow 6 months to 6 months to Year ended 31 Dec 2005 31 Dec 30 June 2004 2005 £'000 £'000 £'000 Operating (loss)/ profit (670) 2,584 (2,418)Depreciation 287 203 436Amortisation of intangibles 225 228 448(Gain)/loss on disposal of fixedassets 5 (3) 5Effect of foreign exchange ratechanges (1) (95) (58)(Increase) / decrease in stocks (501) (360) (916)Increase in debtors (863) (1,547) (875)Increase/ (decrease) in creditors (2,339) 1,047 3,363 ----------- ----------- ----------- Net cash (outflow)/inflow fromcontinuing activities (3,857) 2,057 (15) ----------- ----------- ----------- This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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