30th Nov 2005 07:00
ReNeuron Group plc30 November 2005 Guildford, UK: 30 November 2005 ReNeuron Group plc Interim Results for the six months ended 30 September 2005 Highlights • Lead ReN001 stroke therapy progresses to plan, including positive pre-IND meeting with FDA • Initial results of late pre-clinical studies show that ReN001 stem cells are non-tumour forming • Manufacturing scale-up of ReN001 on track for completion to full GMP standards • ReNcell hepatocyte (liver) cell line developed for drug discovery applications, generating significant interest from the pharmaceutical industry • Landmark cross-licence signed with StemCells, Inc. • Successful flotation on AIM, raising £9.5 million before expenses, with further £5.7 million possible through exercise of warrants • Net loss of £4.3 million (2004: £1.5 million) after non-cash, non-recurring exceptional and other charges of £1.4 million (2004: nil); net cash outflow before cash management and financing items £2.3 million (2004: £1.8 million); cash and short term investments at 30 September 2005 of £7.4 million (2004: £0.7 million) Commenting on the results, Professor Trevor Jones, Chairman, said: "ReNeuron's achievements during the period under review, and subsequently, havegiven the business a sound footing from which to achieve further success. Weremain on track to achieve our 2006 objective of submitting an IND applicationto the FDA for approval to commence human clinical trials with our lead ReN001stem cell therapy for disabled stroke patients. "Beyond this, we are excited by the potential of our other therapeuticprogrammes and also by the near term commercial opportunities presented by ourReNcell non-therapeutic products. With the financial stability gained from theCompany's recent flotation, we are well placed to make further good progressacross all of ReNeuron's activities." For further information: Michael Hunt, Chief Executive OfficerReNeuron Group plc +44 (0)1483 302560 David YatesSarah MacleodFinancial Dynamics - Europe +44 (0)20 7831 3113 Jonathan Birt, John CapodannoFinancial Dynamics - US +1 (212) 850 5755 Chairman's and Chief Executive Officer's Joint Statement Review of Operations The six-month period to 30 September 2005 has been an eventful one for ReNeuron,with significant progress made on a number of fronts. Late pre-clinical development of our lead ReN001 stem cell therapy for disabledstroke patients continues apace. A significant milestone in the periodconcerning this programme was the formal pre-IND1 meeting with the US Food andDrug Administration (FDA) held in July 2005. As a result of this meeting, wewere able to confirm our development timelines for ReN001, with the aim ofsubmitting an IND application to the FDA in mid-2006 for approval to commenceinitial human clinical trials. We have subsequently had meetings with the UK and other European regulatoryauthorities with respect to the ReN001 programme, and they too have confirmedthe appropriateness of our pre-clinical safety testing programme for thistherapy. Earlier this month, we also announced the first results from our latepre-clinical safety studies for ReN001. These provisional results indicate thatthe ReN001 stem cells are non-tumour forming in vivo, a critical safetycharacteristic from a regulatory perspective. Further safety studies areongoing. The Company is on track to shortly complete manufacturing scale-up and testingof both master and working cell banks for the ReN001 product, to full GMP2standard. These cell banks contain the material from which all future clinicaland in-market supplies will ultimately be drawn for our ReN001 therapy. Our follow-on therapeutic programmes continue to show promise at the researchstage and we will make further announcements regarding progress with theseprogrammes in due course. The early development work associated with ourReN004 programme for Parkinson's disease and our ReN005 programme forHuntington's disease is being funded in part under the £2.2 million UKDepartment of Trade and Industry Technology Programme grant awarded to ReNeuronand the other consortium members in January of this year. The Company receivedthe first grant instalment during the period. We have also made progress during the period with our ReNcell products for drugdiscovery applications in the pharmaceutical industry. Our first generationReNcell neural stem cell lines are currently under evaluation by a leading USreagent supplier. During the period, we completed initial development of asecond generation ReNcell hepatocyte (liver) cell line with high potentialutility as a drug toxicology testing and screening tool. Key functional datarelating to this cell line was subsequently presented in conference in October2005, with substantial interest being shown by the pharmaceutical industry. Weare currently evaluating the most effective routes through which to exploit thecommercial potential of this second generation product. In July 2005, we signed a landmark cross-licence with StemCells, Inc., a leadingUS, NASDAQ-quoted adult stem cell development company. We are delighted to beassociated with a company of StemCells, Inc.'s calibre, and look forward toworking more closely with them over the coming months. In August 2005, we successfully floated the Company on the AIM market of theLondon Stock Exchange, raising £9.5 million before expenses and making ReNeuronthe only publicly-quoted adult stem cell company in the UK. Despite theprevailing tough market conditions facing biotechnology initial publicofferings, the Company was able to raise the amount it had targeted, a testamentto the strength of ReNeuron's technology, its therapeutic programmes and itspeople. We were also greatly encouraged to have raised these funds from both UKand US-based institutional investors, given the importance of both territoriesas regards stem cell research generally and ReNeuron's activities in particular. As part of the flotation, warrants were also issued on the basis of one warrantfor every two new Ordinary shares, exercisable at 30p per share by 12 February2007. Should these warrants be exercised in full, a further £5.7 millionproceeds will be raised for the Company. In preparation for the flotation, the Board was re-structured. As a result,Bill Edge and Mark Clement stepped down from the Board during the period and DrPaul Harper joined the Board. We thank Bill and Mark for their contribution toReNeuron's development during their respective tenures and we are delighted towelcome Paul to the Board. As a previous Chief Executive Officer of bothCambridge Antibody Technology and Provensis, Paul brings with him substantialcommercial skills and a wealth of experience in the development of biologicsthrough to the clinic and beyond. Summary of Results In the six months to 30 September 2005, net operating expenses beforeexceptional items increased, as expected, to £3.1 million (2004: £1.6 million).Of this increase, £1.1 million relates to research and development costs,principally due to the late pre-clinical development costs associated with theReN001 stroke programme. The balance of the increase in operating expensesrelates to general and administration costs which increased by £0.4 million inthe period. Again, this increase was expected, and was largely attributable tocosts associated with business development activities during the period. Exceptional charges in the period totalled £1.2m (2004: £nil). Of these, £0.9million relates to a provision against the intangible asset arising from thelicence granted to the Company to certain patents and intellectual propertyowned by StemCells, Inc. The directors believe that it is prudent to fullyprovide against this asset, given the early stage nature of the technologies towhich this licence relates. The £0.3 million balance of exceptional charges inthe period relates to non-recurring net charges associated with the cancellationand re-issue of employee share options. The resulting loss for the period increased to £4.3 million (2004: £1.5million). Of this increase, £1.4 million relates to non-recurring, non-cashcharges, being the exceptional charges explained above, together with a £0.25million premium on short term debt issued prior to the Company's flotation. Partially offsetting these charges was an increase in other operating income to£0.2 million (2004: £24,000), relating to grant income in the period. Net cash outflow before management of liquid resources and financing increasedto £2.3 million (£1.8 million) in the period, reflecting the increase inunderlying operating expenses, offset primarily by an increase in short termcreditors and accruals of £0.8 million. The increase in creditors reflects ageneral increase in research and development activity and also ReN001pre-clinical development work contracted for and undertaken but not yet billed. As at 30 September 2005, the Group had cash and short term investments totalling£7.4 million (2004: £0.7 million). The increase is largely due to net flotationproceeds of £8.3 million received in the period, together with a further £1.25million of short term debt financing, including premium, which converted toequity on the Group's flotation. The directors believe that the Group's currentcash resources are sufficient to meet expenditure requirements for at least thenext twelve months. Outlook ReNeuron's achievements during the period under review, and subsequently, havegiven the business a sound footing from which to achieve further success. Weremain on track to achieve our 2006 objective of submitting an IND applicationto the FDA for approval to commence human clinical trials with our lead ReN001stem cell therapy for disabled stroke patients. Beyond this, we are excited by the potential of our other therapeutic programmesand also by the near term commercial opportunities presented by our ReNcellnon-therapeutic products. With the financial stability gained from theCompany's recent flotation, we are well placed to make further good progressacross all of ReNeuron's activities. Professor Trevor Jones Michael HuntChairman Chief Executive Officer 30 November 2005 1. Investigational New Drug 2. Good Manufacturing Practice 3. The terms 'ReNeuron', 'the Company' or 'the Group' used in this statement refer to ReNeuron Group plc and/or its subsidiary undertakings, depending on the context. ReNeuron Group plcConsolidated profit and loss account for the six months ended 30 September 2005 Six months Six months Year ended ended ended 30 September 30 September 31 March 2005 2004 2005 Unaudited Unaudited Audited Note £'000 £'000 £'000Turnover - - 3Cost of sales - - - ______ ______ ______Gross profit - - 3Net operating expenses excludingexceptional items 2 (3,074) (1,584) (3,382)Exceptional operating expenses 3 (1,167) - - ______ ______ ______Net operating expenses includingexceptional items (4,241) (1,584) (3,382)Other operating income 165 24 43 ______ ______ ______Operating loss (4,076) (1,560) (3,336)Interest receivable 50 30 53Interest payable (250) - (250) ______ ______ ______Loss on ordinary activities before taxation (4,276) (1,530) (3,533) ______ ______ ______Tax credit on loss on ordinary activities - - 319 ______ ______ ______Loss for the period (4,276) (1,530) (3,214) ______ ______ ______ Loss per 10p ordinary shareBasic and diluted 4 (8.3p) (4.3p) (9.0p) The group has no recognised gains and losses other than the results above andtherefore no separate statement of total recognised gains and losses ispresented. All results arise from continuing operations. ReNeuron Group plcConsolidated balance sheet as at 30 September 2005 30 September 30 September 31 March 2005 2004 2005 Unaudited Unaudited Audited Note £'000 £'000 £'000Fixed assetsNegative goodwill 5 (1,515) (1,702) (1,609)Tangible assets 1,263 1,511 1,383 ______ ______ ______ (252) (191) (226)Current assetsDebtors 898 715 624Short term investments 6 7,314 647 361Cash at bank and in hand 92 65 70 ______ ______ ______ 8,304 1,427 1055Creditors amounts falling due within one year (1,380) (559) (579)Convertible loan 7 - - (1,250) ______ ______ ______Net current assets/(liabilities) 6,924 868 (774)Total assets less current liabilities 6,672 677 (1,000)Creditors amounts falling due after more than one year (7) - (8) ______ ______ ______Net assets /(liabilities) 6,665 677 (1,008) ______ ______ ______ Capital and reservesCalled up share capital 8 9,355 3,587 3,587Share premium account 8 5,472 - -Merger reserve account 8 365 365 365Warrant reserve account 8 436 - -Profit and loss account 8 (8,963) (3,275) (4,960) ______ ______ ______Total equity shareholders' funds 6,665 677 (1,008) ______ ______ ______ ReNeuron Group plcConsolidated cash flow statement for the six months ended 30 September 2005 Six months Six months Year ended ended ended 30 September 30 September 31 March 2005 2004 2005 Unaudited Unaudited Audited Note £'000 £'000 £'000Net cash outflow from operating activities 9 (2,348) (1,871) (3,150) Returns on investments and servicing of financeInterest 50 30 50 ______ ______ ______Net cash inflow from returns on investments andservicing of finance 50 30 50 ______ ______ ______TaxationUK corporation tax - research and development taxcredits received - - 364 ______ ______ ______Capital expenditurePurchase of tangible fixed assets (9) (6) (27)Disposal of tangible fixed assets - - - ______ ______ ______Net cash outflow from capital expenditure (9) (6) (27) ______ ______ ______AcquisitionsRefund of VAT on acquisition expenses - 86 86Net cash inflow from acquisitions - 86 86Net cash outflow before management of liquidresources and financing (2,307) (1,761) (2,677) ______ ______ ______Management of liquid resources(Decrease)/increase in cash in the period 10 (6,953) 1,329 1,615 ______ ______ ______FinancingIssue of ordinary share capital 9,500 - -Increase in loans 1,000 365 1,000Share issue costs (1,218) - - ______ ______ ______Net cash inflow from financing 9,282 365 1,000 ______ ______ ______Increase/(decrease) in cash 10 22 (67) (62) ______ ______ ______ Notes to the interim financial statements for the six months ended 30 September2005 1. Basis of preparation These interim financial statements have been prepared on the basis of theaccounting policies set out in the consolidated statutory accounts for ReNeuronHoldings Limited for the year ended 31 March 2005. The consolidated accounts include the financial statements of the Company andits subsidiary undertakings, made up to 30 September 2005. A reconstruction ofthe ReNeuron Group took place during the period, as described below, inpreparation for the admission of the Company's shares to the AIM market of theLondon Stock Exchange in August 2005. The Company was incorporated as MF59657 Limited on 7 June 2005. On 21 June2005, the Company acquired the entire issued share capital of ReNeuron HoldingsLimited by way of a one-for-one share exchange. On 22 June 2005, the Companywas re-registered as a public limited company and its name was changed toReNeuron Group plc. As a result of the above reconstruction, the results of ReNeuron HoldingsLimited and its subsidiary undertakings have been consolidated using theprinciples of merger accounting, and the comparative results have therefore beenpresented as if the new group had been established throughout the year to 31March 2005. The financial information contained in this interim report does not constitutestatutory accounts within the meaning of Section 240 of the Companies Act 1985.Statutory accounts of ReNeuron Limited, ReNeuron (UK) Limited and ReNeuronHoldings Limited in respect of the year ended 31 March 2005 have been deliveredto the Registrar of Companies, upon which the Company's auditors have given areport which was unqualified and did not contain a statement under Section 237(2) or 237(3) of that Act. 2. Total net operating expenses Six months Six months Year ended ended Ended 30 September 30 September 31 March 2005 2004 2005 Unaudited Unaudited Audited £'000 £'000 £'000Administrative expenses 783 423 799Research and development expenditure 2,291 1,161 2,583 ______ ______ ______ 3,074 1,584 3,382 ______ ______ ______ 3. Exceptional operating expenses Six months Six months Year ended ended ended 30 September 30 September 31 March 2005 2004 2005 Unaudited Unaudited Audited £'000 £'000 £'000Provision against intangible assets acquired 894 - -Share option compensation charge 273 - - ______ ______ ______ 1,167 - - ______ ______ ______ Provision against intangible assets acquired On 1 July 2005, ReNeuron entered into licence and subscription and shareexchange agreements with StemCells, Inc., whereby the Group was granted alicence to certain intellectual property and patents owned by StemCells, Inc.,and pursuant to which the Company issued, as part consideration for the licence,a total of 8,939,493 ordinary shares of 10p each to StemCells, Inc. Due to theearly stage nature of the underlying technology, the directors have carried outan impairment review of the intangible asset so created, and consider that it isappropriate to provide against the asset in full. Share option compensation charge A charge of £0.5 million was made to the profit and loss account in the period,relating to the grant of replacement options over shares in the Company onflotation, the charge being the estimated market value of the shares at the dateof grant less the exercise price of the options. This charge was credited backto the profit and loss account reserve. Similarly, a number of share optionswere cancelled during the period. Compensation charges totalling £0.2 millionpreviously made in respect of these options were consequently written back tothe profit and loss account in the period, the credits previously made toreserves in respect of these compensation charges being similarly reversed. 4. Loss per share The basic and diluted loss per share is calculated by dividing the loss for thefinancial period of £4,276,000 (September 2004: £1,530,000, March 2005:£3,214,000) by 51,632,417 shares (September 2004: 35,873,705 shares, March 2005:35,873,705), being the weighted average number of ordinary 10p shares in issueduring the period. Potential ordinary shares are not treated as dilutive as their conversion toordinary shares does not increase the net loss per share. 5. Negative goodwill Negative goodwill arose during the period ended 31 March 2004 on the acquisitionof ReNeuron (UK) Limited by ReNeuron Holdings Limited. The amount of negativegoodwill that was in excess of fair values of non-monetary assets acquired of£947,000 was immediately amortised to the profit and loss account. The remainingnegative goodwill, equal to the fair values of non-monetary assets acquired, isbeing amortised over a period of 10 years, being the period over which the non-monetary assets are expected to be recovered. 6. Short term investments Short term investments comprise fixed rate deposits with banks and money marketfunds, which are not repayable on demand. 7. Convertible Loan The convertible loan outstanding at 31 March 2005 was an amount payable toMerlin General Partner II Limited in respect of a bridging loan. The convertibledebt increased to £2,500,000 in the period, including accrued repayment premium,and was converted into equity on the Group's flotation. 8. Share capital and reserves Share Merger Share premium reserve capital account account £'000 £'000 £'000 At 1 April 2005 3,587 - 365Issue of new ordinary shares 5,768 6,707 -Costs of share issue - (1,235) -Loss for the period - - -Reversal of Share option compensation charge - - - At 30 September 2005 9,355 5,472 365 ______ ______ ______ 8. Share capital and reserves (continued) Warrant Profit and Total equity reserve loss shareholders' account account funds £'000 £'000 £'000 At 1 April 2005 - (4,960) (1,008)Issue of new ordinary shares 436 - 12,911Costs of share issue - - (1,235)Loss for the period - (4,276) (4,276)Reversal of Share option compensation charge - 273 273 At 30 September 2005 436 (8,963) 6,665 ______ ______ ______ ReNeuron Group plc was admitted to trading on the AIM Market of the London StockExchange on 12 August 2005, raising £9.5 million before costs at a placing priceof 25p per ordinary share. At the same time, the Company issued warrants tosubscribers of new ordinary shares on the basis of one warrant for every two newordinary shares. Each warrant holder is entitled to subscribe for ordinaryshares at a fixed price of 30p per share. The warrants expire on 12 February2007. A credit was made to the warrant reserve during the period, reflecting the fairvalue of the warrants issued at the time of the Company's flotation. In addition to 38,000,000 new ordinary 10p shares issued in consideration forthe £9.5 million gross flotation proceeds, the Company issued further ordinary10p shares in relation to the conversion of the debt finance on flotation, andalso in relation to the licence and subscription and share exchange agreementswith StemCells, Inc. 9. Reconciliation of operating loss to net cash outflow from operatingactivities Six months Six months Year ended ended ended 30 September 30 September 31 March 2005 2004 2005 Unaudited Unaudited Audited £'000 £'000 £'000Operating loss (4,076) (1,560) (3,336)Depreciation of tangible fixed assets 129 121 269Amortisation of negative goodwill (94) (94) (188)Loss/ (profit) on sale of fixed assets - - 2Provision against intangible fixed assets acquired 894 - -Share option compensation charge 273 - -(Increase)/decrease in debtors (274) 136 184Increase/(decrease) in creditors 800 (474) (81) ______ ______ ______Net cash outflow from operating activities (2,348) (1,871) (3,150) ______ ______ ______ 10. Reconciliation of net cash flow to movement in net funds Six months Six months Year ended ended ended 30 September 30 September 31 March 2005 2004 2005 Unaudited Unaudited Audited £'000 £'000 £'000 Increase/(decrease) in cash in the period 22 (67) (62)Cash flow from (decrease)/increase in short term investments 6,953 (1,329) (1,615)Cash inflow from increase in debt (1,000) - (1,000)Non cash movement (250) - (250)Conversion of debt to equity 2,500 - - ______ ______ ______Change in net funds from cash flows 8,225 (1,396) (2,927)Net funds/(debt) at the beginning of the period (819) 2,108 2,108 ______ ______ ______Net funds/(debt) at the end of the period 7,406 712 (819) ______ ______ ______ Note to editors: ReNeuron is a leading UK-based adult stem cell therapy business. The Company isapplying its novel stem cell platform technologies in the development ofground-breaking stem cell therapies to serve significant and unmet or poorly-metclinical needs. ReNeuron has used its c-mycERTAM technology to generate genetically stableneural stem cell lines. This technology platform has multi-national patentprotection and is fully regulated by way of a chemically-induced safety switch.Cell growth can therefore be completely arrested prior to in vivo implantation. The Company's lead stem cell therapy, ReN001 for chronic stroke disability, isin late pre-clinical development. The Company plans to file for approval tocommence initial clinical trials in stroke in mid-2006, with trials commencingas soon as possible thereafter. In addition to its ReN001 stroke programme, ReNeuron has programmes to developstem cell therapies to address Huntington's disease, Parkinson's disease, Type 1diabetes and diseases of the retina. ReNeuron has also leveraged its stem cell technologies into non-therapeuticareas by marketing its ReNcell range of cell lines for use in drug discoveryapplications in the pharmaceutical industry. ReNeuron's shares are traded on the London AIM Market under the symbol RENE.L,and its warrants are traded under the symbol RENW.L. Further information on ReNeuron and its products can be found atwww.reneuron.com. This announcement contains forward-looking statements with respect to thefinancial condition, results of operations and business achievements/performanceof ReNeuron and certain of the plans and objectives of management of ReNeuronwith respect thereto. These statements may generally, but not always, beidentified by the use of words such as "should", "expects", "estimates","believes" or similar expressions. This announcement may also containforward-looking statements attributed to certain third parties relating to theirestimates regarding the growth of markets and demand for products. By theirnature, forward-looking statements involve risk and uncertainty because theyreflect ReNeuron's current expectations and assumptions as to future events andcircumstances that may not prove accurate. A number of factors could causeReNeuron's actual financial condition, results of operations and businessachievements/performance to differ materially from the estimates made or impliedin such forward-looking statements and, accordingly, reliance should not beplaced on such statements. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
RENE.L