26th Feb 2009 07:00
Sinclair Pharma plc Interim results for the six months ended 31 December 2008
Sinclair announces strong results and records its first profitable H1 since IPO
26th February 2009, Godalming, UK: Sinclair Pharma plc (SPH.L), ("Sinclair" orthe "Company") the international specialty pharma company, today announces itsinterim results for the six months ended 31 December 2008.
FINANCIAL HIGHLIGHTS
* Total revenues up 56% to £16.2m (H1 08: £10.4m) * Gross profit up 77% to £11.8m (H1 08: £6.7m)
* Operating profit of £4.1m after exceptional items (H1 08: Operating loss of
£0.9m)
* Profit Before Tax £3.2m (H1 08: loss of £0.9m)
* EBITDA of £2.2m before exceptional items (H1 08: EBITDA loss of £1.6m )
* Net exceptional credits of £3.2m (H1 08: £1.6m)
* Earnings per share of 4.0p (H1 08:loss per share of 1.1p)
* Cash balance of £2.4m (Dec 07: £0.4m)
OPERATING HIGHLIGHTS
* Revenues through own operations increased 5% to £6.0m (H1 08: £5.7m)
+ European sales and marketing operations strengthened with acquisition
of the minority interest in Laboratorios Novo Pharma SL in Spain
* Revenues through marketing partners increased 118% to £10.2m (H1 08: £4.7m)
* This includes: + an increase in product sales of 36% to £3.9m (H1 08: £2.9m), + the license of US rights to Atopiclair to Graceway for £2.1m + the non-cash out-licensing of early stage gynaecology technology to BMG Pharma for £3.3m
* 25 new distribution agreements covering 16 products in 14 markets, with a
further 14 signed post period
+ This brings the total number of new deals in this financial year to 39,
representing minimum purchase obligations of €3.5 million in the first
year after product launch
* Strong performance of dermo-cosmetics portfolio with revenues increasing by
70% to £2.3m (H1 08: £1.3m)
Grahame Cook, Non-Executive Chairman, commented:
"We are pleased with Sinclair's achievements this half year. The positive halfyear performance demonstrates the ongoing strength of Sinclair's business modeland product portfolio. We have continued to grow sales, launch products andsign new distribution agreements whilst expanding our product portfolio. We areconfident about continuing our positive progress during the second half of
theyear." - Ends -
For further information please contact:
Sinclair Pharma plc Tel: +44 (0) 1483 410 600
Dr Michael Flynn, CEO
Jerry Randall, CFO
Mariyam Rawat, Director of Communications & Investor relations
Capital MS&L
Mary Clark, Anna Mitchell Tel +44 (0)20 7307 5340
Chief Executive Officer Michael Flynn and Chief Financial Officer Jerry Randallwill present the company's results at a presentation and conference call foranalysts today at 9.30am which will be held at Teathers, 3rd Floor, BerkeleySquare House, Berkeley Square, London W1J 6BU.
Please contact Joanna Whineray at Capital MS&L for further information on Tel +44 (0)20 7307 5337.
Notes to Editors:
About Sinclair Pharma Plc www.sinclairpharma.com
Sinclair Pharma plc is an international specialty pharmaceutical company. Ithas a growing sales and marketing operation that is already present in France,Italy, UK, Spain and Portugal, and a complementary marketing partner networkthat spans more than 80 countries."Safe Harbor" Statement under the US Private Securities Litigation Reform Actof 1995: Some or all of the statements in this document that relate to futureplans, expectations, events, performances and the like are forward-lookingstatements, as defined in the US Private Securities Litigation Reform Act of1995. Actual results of events could differ materially from those described inthe forward-looking statements due to a variety of factors.
*Sinclair's Dermo-cosmetics portfolio contains the following products:
* B.lift a range of corrective dermatology products which are applied as
creams and gels and which have unique matrices that facilitate the
penetration of the active ingredient, Hexapeptide B, a 'botox' mimicking
molecule, to reverse skin wrinkles. * B.derm a range of patented products containing hyaluronic acid for sensitive and hyper reactive skin.
* Papulex is a line of cosmetic products specifically targeted at cleansing,
protecting and keeping acne prone skin in good condition. The patent for
this product was granted this year. It has been developed with a unique
combination of ingredients making them suitable for use alone or in
combination with other acne treatments. The Papulex range is available as a
cream, lotion, Isocorrexion, gel and cleanser.
* M©la'Aura, the first dermo-cosmetic skincare range designed and
manufactured by a pharmaceutical laboratory, specifically for people with
darker skin. It gives dermatologists an adapted response to factors such as
dryness and dyschromia. The M©la'Aura range contains a variety of creams
and lotions for both hair and body.
* The derma omnium product range which includes Affina Lift, Genongles and
Bio-Taches. The Bio-Taches range has been developed to treat
hyperpigmentation. Bio-Taches cream contains Biotanoid which is
particularly rich in Arbutin which promotes the inhibition of the enzyme
which is responsible for the synthesis of brown pigment spots.
* The portfolio also includes Fadiamone, Effadiane and Claro
CHIEF EXECUTIVE'S REVIEWOverviewThe first six months of this financial year saw continued progress forSinclair, with revenues growing by 56% despite the challenges presented by theturbulent economic environment. This growth was underpinned by a steady streamof revenues from products marketed by our own sales and marketing operations,our extensive marketing partner network, and a significant contribution fromlicensing and royalty payments. Careful management of our resources has enabledus to end the six month period with a cash balance of £2.4m.The achievements of the first half demonstrate the success of our core strategyand further advance Sinclair toward realising its ambition of becoming a worldclass specialty pharma company.
Operational review
Sales & Marketing
Sinclair's sales and marketing operations
We experienced continued growth in revenues through our own sales and marketing operations, which rose by 5%.
UKWe have restructured the UK business to focus on specialty dermatology sales.This resulted in lower sales for the half year but a stronger performance isanticipated in the second half aided by doubling the sales force through thecollaboration with York Pharma. The team has successfully launched Atopiclairlotion in the UK and has achieved its first hospital formulary listings in
theUK.France
The French operation continues to deliver on its strategy and generated £4.7m in revenues during the six months to 31 December 2008 which represents an increase of 15% year on year (H1 08 £4.1m).
Spain
Sinclair firmly established its presence in Spain through the acquisition of the remaining shares in Laboratorios Novo Pharma S.L. This move was strengthened with the appointment of Santiago Calavia Torres as Operations Manager of Dermatology and renaming the entity to Sinclair Pharma Espana.
Italy
Following organisational restructuring in Italy at the end of the last financial year, Sinclair Srl in Italy contributed £0.8m to group revenues during the period and successfully launched Sebclair Shampoo and Sebclair Scalp Fluid. It also welcomed Paolo Prioglio as its Sales and Marketing Director.
Marketing partner network
Sinclair's marketing partner network spans over 82 countries and leverages theexperience and local knowledge of our partners to extend the commercial reachof our product portfolio. This network is managed by our business developmentand alliance management team and continues to be a very important part of thebusiness.The first half saw the continued geographical expansion of Sinclair's productdistribution with 118% growth in revenues through marketing partners. Productsales increased 36% to £3.9m. Licensing payments contributed £5.8m to revenues(H1 08: £1.5m). These include the licence of US rights to Atopiclair toGraceway for £2.1m and the out-licensing of early stage gynaecology technologyto BMG Pharma for £3.3m.During the half year, there were 19 launches in 11 markets covering sevenproduct ranges including the Decapinol and Aloclair product ranges. Byextending the commercial presence of our product portfolio on a global basis,we aim to provide patients all around the world with an effective solution totheir oral health and dermatological needs.Sinclair continues to increase its global footprint and during the periodsigned 25 new distribution agreements covering 16 products in 14 markets. Wecontinue our expansion in emerging markets, signing a distribution agreement inPakistanwith Ismara, covering 19 Sinclair products. Eight of these agreementssaw the commercialisation of new pipeline products including Herpclair (forherpes simplex virus), Sinlice (for head lice), Decapinol Perio (for managementof gum pockets in periodontal disease) and T-Go (for the relief of teething
ininfants).Product review
Sinclair has a broad portfolio of products on the market for treating skin anddental conditions, including the growing range of dermo-cosmetics products. Theproducts are available through prescriptions and over-the-counter (OTC) and areat the beginning of their commercial lives. With a broad and growing range ofproducts Sinclair becomes less susceptible to any single productunderperformance.
Oral Health
Decapinolwas developed for treating and preventing gingivitis and plaque.During the half year period it generated revenue of £0.2m (H1 08: £0.1m) with anumber of launches in various export markets during the period. In the US weare closely working with Orapharma to support their launch preparations ofDecapinol in the next financial year.The Decapinol range was expanded with the addition of the "Decapinol Suite".This innovative system includes two different options for treating localperiodontal pockets. The first step is professional intervention with DecapinolPerio, composed of a unique ergonomically designed applicator that is used withPerio-Vialswhich contain Decapinol solution. The second step is follow-updomiciliary care with Decapinol gel. These two formulations can be used alongthe margins of the sub and supra-gingival and into interdental spacesAloclair, Sinclair's product for the relief of mouth ulcers is available in arinse, gel and spray format. During the period the global roll out of Aloclaircontinued with launches in six markets including Mexico. Aloclair deliveredrevenues of £1.0m this half year (H1 08: £0.4m).
Dermatology
Sinclair's dermatology portfolio comprises three product groups: prescriptions,over-the-counter (OTC) and dermo-cosmetics (which may be promoted to doctors,pharmacists and the public). This allows us to develop a tailored strategy foreach channel taking into consideration the different patient and promotionalneeds.
Atopiclair is a non-steroidal cream registered in the US and EU for the management of symptoms of atopic dermatitis and contact dermatitis.
Sinclair signed an agreement to sell the US distribution rights and license thepatent for use in atopic dermatitis, pertaining to Atopiclair cream and lotion,to its US marketing partner Graceway for £2.1m ($3.1million). The payment isequivalent to the royalties Sinclair would have anticipated to receive fromGraceway over the next five years. Atopiclair sales in the US had been impactedby the economic environment, in common with other atopic dermatitis treatmentsales in the US.
Atopiclair delivered £1.1m revenue for the period (H1 08: £0.9m). Total revenues for the year are anticipated to increase as a result of three new launches in the first half and a number of distribution agreements signed for Atopiclair during the last 12 months.
Sebclairis a non steroidal treatment for seborrheic dermatitis, a common skincondition that affects areas of the body with a high concentration of sebaceousglands. Following the initiation of commercial rollout Sebclair deliveredrevenues of £0.3m (H1 08: £0.05m).
Dermo-cosmetics
Sinclair's dermo-cosmetic portfolio* continued its strong growth with revenuesincreasing by 70% to £2.3m (H1 08: £1.3m). Revenue contributors in thedermo-cosmetics range include the B.Lift and B.Derm corrective dermatologyproducts which generated revenues of £0.3m (H1 08: £0.05m). The B.Lift rangecontain unique matrices that facilitate the penetration of the activeingredient, Hexapeptide B, a 'Botox' mimicking molecule, to reverse skinwrinkles. The B.Derm range contains hyaluronic acid for sensitive and hyperreactive skin. Seven new distribution deals have been signed for these productsduring the period.ThePapulex range for acne also experienced growth, generating revenues of £0.5m(H1 08: £0.4m). This range is specifically targeted at cleansing, protectingand keeping acne prone skin in good condition. It has been developed with aunique combination of ingredients making it suitable for use alone or incombination with other acne treatments. The Papulex range is available as acream, lotion, Isocorrexion, gel and cleanser.
Pipeline development
During the period we expanded the future potential of our pipeline and signedtwo product development and commercialization deals with BMG Pharma, aprivately-owned US-based company. BMG will be developing and registering anumber of women's health products from Sinclair's pipeline. Sinclair hasin-licensed a range of skin anti-infection products based on patented silvernanotechnology from BMG. These innovative deals present Sinclair withsignificant pipeline development opportunities and new product assets.
R&D update
Product Registrations
During the first half of FY09 we achieved two new product registrations in theEU. These registrations were the EU approval of Decapinol Perio vials for themanagement of gum pockets in periodontal disease and Dermachronic foam for thetreatment of sensitive skin or chronic skin conditions such as atopicdermatitis, xerosis, psoriasis and eczema.
Clinical publications
Sinclair continues to be committed to generating robust clinical data to support its portfolio of innovative products. As a result three new publications were generated and ten clinical abstracts were presented at the 17th Congress of the European Academy of Dermatology and Venereology (EADV) during September 2008 in Paris.
Financial Review
Highlights
Sinclair recorded its first profitable half year at the EBITDA level since IPO,recording an EBITDA profit of £2.2m before exceptional items (H1 08: loss of £1.6m) and basic earnings per share of 4.0p (H1 08: loss per share of 1.1p)after exceptional items. The results for the six months ended 31st December2008 show total revenues of £16.2m (H1 08: £10.4m) for the Group. Gross profitincreased by 77% to £11.8m (H1 08: £6.7m) whilst the operating profit for thesix months was £4.1m, after exceptional items (H1 08: operating loss of £0.9m).This strong performance was driven by sustained sales growth from Sinclair'sown sales operations, as well as its partners, and by a significantcontribution from licence fees and ongoing royalty payments.
Revenue
Total revenue for the six months increased 56% to £16.23m (H1 08: £10.4m). Product revenue for the six months increased 15% to £9.9m (H1 08: £8.6m). Growth was driven by a number of products including Decapinol and Aloclair.
Direct sales through own sales and marketing operations
Revenue through Sinclair's own sales and marketing operations increased 5% to £ 6.0m (H1 08: £5.7m).
Revenue from our sales & marketing operations was driven by a 15% growth of theFrench business and progressive growth of the Italian, Spanish and Portugueseoperations. The UK business was restructured in July 2008 to focus on specialtydermatology sales in place of sales to dispensing doctors, following thechanges in UK legislation which resulted in the cessation of the dispensingdoctors market. This resulted in lower sales for the half year but a strongerperformance is anticipated in the second half as a result of doubling the salesforce with the York Pharma collaboration and hospital formulary listings.
A breakdown of the contribution from Sinclair's own sales and marketing operations for the period are summarised below:
H1 09 H1 08 £m £m France 4.7 4.1 Italy 0.8 0.6 UK 0.2 0.8 Spain & Portugal 0.3 0.2 Total 6.0 5.7
Revenue through marketing partner network
Revenue from our marketing partners for the six month period generated revenuesof £10.2m, an increase of 118% year on year (H1 08: £4.7m). A breakdown issummarised below: H1 09 H1 08 £m £m Product sales 3.9 2.9 Royalties 0.5 0.3 License fees and milestones 5.8 1.5 Total 10.2 4.7
Product sales through marketing partners have grown 36% year on year. This growth has been primarily driven by Aloclair, Decapinol and Sebclair
During the six months Sinclair recognised license fees and milestones of £5.8m(H1 08: £1.5m). The main components of this are the agreement with Graceway forthe sales of US distribution rights to Atopiclair Cream and Lotion for £2.1m,and the non-cash licensing agreement with BMG Pharma for the license ofSinclair's gynaecological portfolio which contributed £3.3m.
Exceptional items
During the six months there were some exceptional items recorded which were outside the normal trading activities of the company:
* Foreign exchange gains of £4.4m were recorded during the period on the translation of an intra-group loan balance as a result of Sterling's weakening against the Euro.
* Charges of £0.7m in total were recorded for the UK and Italian business
units following a restructuring exercise to optimise efficiency.
* Costs of £0.5m were incurred in relation to the strategic opportunity that
was pursued during the summer.
Operating expenses
Selling, marketing and distribution costs increased to £5.1m from £3.6m lastyear. This reflects our increased focus on sales and marketing as well as theSterling's weakness which added £0.5m to reported costs.Administrative expenses and pre exceptional items increased to £5.9m a rise ofjust 6%. This includes increases in amortisation and the cost of share-basedpayments of £0.6m. Underlying administrative expenses excluding amortisationand share-based payment costs fell by 2% in the period when the impact offoreign exchange changes are removed, reflecting our continued commitment togrowing the business while keeping costs under tight control.
Operating profit
Sinclair recorded an operating profit for the six months of £4.1m (H1 08: operating loss of £0.9m) after exceptional items.
Taxation
The tax credit of £0.4m (H1 08: charge of £0.02m) results from the increase in the value of the deferred tax asset linked to the value of product rights acquired with Groupe CS Dermatologie in 2006.
Liquidity & capital resources
Sinclair had cash balances of £2.4m on 31December 2008 (Dec 07: £0.4m). Netcash inflow during the six months was £0.8m (H1 08: outflow of £3.2m), whichincluded cash inflow from operations of £1.5m (H1 08: outflow of £2.3m) andcash used in investing activities of £2.5m (H1 08: £2.2m). Cash inflow fromfinancing was £1.7m (H1 08: £1.3m), which includes £1.0m, net of expenses, froman institutional placing of new shares in December 2008.
Earnings per share
Sinclair recorded a basic earnings per share of 4.0p (H1 08: loss per share of 1.1p).
Additions to intangible assets
Additions to intangible assets were £5.7m including from the addiition of thesilver nanotechnology arm to the skincare portfolio (£3.3m) and in-licensedzinc technology, both of which are non cash transactions. These additionsresulted in an increased amortisation charge of £1.1m (H1 08: £0.6m).
Board and Management changes
In November 2008, Steve Harris stepped down as Non-Executive Chairman. Grahame Cook, previously the Senior Independent Director, was appointed as Non-Executive Chairman.
We also announced the appointment of Dr Ross Macdonald as Vice President ofBusiness Development for North America & South Pacific, responsible fordeveloping new commercial opportunities for Sinclair with a particular focus ondermatology products in that region. In December Sinclair welcomed SantiagoCalavia as Operations Manager, Dermatology of the newly created Sinclair PharmaEspana and Paolo Prioglio as Sales and Marketing Director of Italy Srl.
Outlook
We are pleased to have recorded our first H1 profit at the EBITDA level sinceSinclair's IPO in December 2003. We continue to seegood progress across allparts of our business with an increase in product sales, new product launches,licence approvals and new distribution agreements. This progress has resultedin the generation of a steady stream of revenues for the Sinclair Group anddemonstrates the ongoing strength of Sinclair's business model and productportfolio.Sinclair's existing pipeline of products has been bolstered by the technologyand commercialisation agreements with BMG Pharma. The deals present Sinclairwith significant pipeline development opportunities and new product assets. Webelieve they will make a valuable and lucrative contribution to our broadportfolio of innovative products.The implementation of a short term strategy with clear focus on our long termambitions and diligent management of our cash resources has enabled us to growrevenues by 56% and end the six month period with a £2.4m cash balance.Combined with our renewed efforts to enhance our internal capabilities,Sinclair remains well positioned to meet the challenges of the market placewithout compromising our deliverables or strategic goals.In summary, the achievements of the first half demonstrate the success of ourcore strategy and further advanced Sinclair toward realising its ambition ofbecoming a world class specialty pharma company. We are confident aboutcontinuing our positive progress during the second half of the year.
Dr. Michael Flynn Jerry Randall ACA
Chief Executive Officer Chief Financial Officer
Unaudited Consolidated Income Statement
For the six months ended 31 December 2008
Unaudited Unaudited Six months ended 31 December 2008 Six months ended 31 December 2007 Notes Pre-exceptional Exceptional Total Pre-exceptional Exceptional Total items items items items (note 5) (note 5) £'000 £'000 £'000 £'000 £'000 £'000 Revenue 4 16,245 - 16,245 10,434 - 10,434 Cost of sales (4,413) - (4,413) (3,762) - (3,762) Gross profit 11,832 - 11,832 6,672 - 6,672 Selling, marketing (5,075) - (5,075) (3,629) - (3,629)and distribution costs Administrative (5,886) 3,179 (2,707) (5,548) 1,642 (3,906)expenses Operating profit/ 871 3,179 4,050 (2,505) 1,642 (863)(loss) Finance income 6 79 - 79 32 - 32 Finance costs 6 (960) - (960) (79) - (79) Profit/(loss) before (10) 3,179 3,169 (2,552) 1,642 (910)taxation Taxation 395 - 395 (22) - (22) Profit/(loss) for 385 3,179 3,564 (2,574) 1,642 (932)the period Attributable to: Minority interest - - - - - - Equity holders of 385 3,179 3,564 (2,574) 1,642 (932)the Company 385 3,179 3,564 (2,574) 1,642 (932) Earnings/(loss) per 7 0.4p 3.6p 4.0p (3.0)p 1.9p (1.1)pshare (basic) Earnings/(loss) per 7 0.4p 3.4p 3.8p (3.0)p 1.9p (1.1)pshare (diluted)
The notes on pages 13 to 18 form an integral part of this condensed consolidated interim financial information.
Unaudited consolidated balance sheet
31 December 31 December 30 June 2008 2007 2008 Notes £'000 £'000 £'000 Non-current assets Goodwill 8 55,394 46,019 48,110 Intangible assets 9 22,729 13,387 14,811 Property, plant and equipment 2,052 1,843 1,827 Non-current tax assets 1,000 1,617 708 Other non-current assets 374 502 317 81,549 63,368 65,773 Current assets Inventories 4,266 3,165 3,380 Trade and other receivables 10 13,218 6,982 14,469 Current tax receivables 57 50 1,580 Cash and cash equivalents 2,400 411 1,052 19,941 10,608 20,481 Total assets 101,490 73,976 86,254 Current liabilities Financial liabilities - borrowings 12 (4,009) (1,681) (3,108) Trade and other payables 11 (13,730) (8,962) (11,666) Deferred income (440) (280) (566) Current tax liabilities (131) (22) (86) (18,310) (10,945) (15,426) Non-current liabilities Financial liabilities - borrowings 12 (5,187) (1,639) (4,140) Non-current tax liabilities - (1,296) - Deferred income (357) (429) (357) (5,544) (3,364) (4,497) Total liabilities (23,854) (14,309) (19,923) Net assets 77,636 59,667 66,331 Equity Share capital 1,034 935 935 Share premium account 23,131 21,472 21,472 Merger reserve 50,474 50,474 50,474 Other reserves 9,846 2,358 4,198 Retained deficit (6,849) (15,583) (10,760) Total shareholders' equity 77,636 59,656 66,319 Minority interests - 11 12 Total equity 77,636 59,667 66,331
The notes on pages 13 to 18 form an integral part of this condensed consolidated interim financial information.
Unaudited consolidated statement of changes in equity
Share Share Merger Other Retained
Attributable Minority Total
capital premium reserve deficit to equity interest reserves holders of equity the parent £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Balance at 1 July 935 21,472 50,474 271 (14,775) 58,377 11 58,3882007 Exchange differences - - - 2,087 - 2,087 - 2,087arising on translation of overseas subsidiaries Loss for the period - - - - (932) (932) - (932) Total recognised - - - 2,087 (932) 1,155 - 1,155income/(expense) for the period Share based payments - - - - 124 124 - 124- value of employee services Balance at 31 935 21,472 50,474 2,358 (15,583) 59,656 11 59,667December 2007 Exchange differences - - - 1,840 - 1,840 - 1,840arising on translation of overseas subsidiaries Profit for the period - - - - 4,269 4,269 1 4,270 Total recognised - - - 1,840 4,269 6,109 1 6,110income for the period Share based payments - - - - 554 554 - 554- value of employee services Balance at 30 June 935 21,472 50,474 4,198 (10,760) 66,319 12 66,3312008 Exchange differences - - - 5,648 - 5,648 - 5,648arising on translation of overseas subsidiaries Profit for the period - - - - 3,564 3,564 - 3,564 Total recognised - - - 5,648 3,564 9,212 - 9,212income for the period Share based payments - - - - 347 347 - 347- value of employee services Issue of share 99 1,722 - - - 1,821 - 1,821capital Share issue expenses - (63) - - - (63) - (63) Purchase of minority - - - - - - (12) (12)interest Balance at 31 1,034 23,131 50,474 9,846 (6,849) 77,636 - 77,636December 2008
The notes on pages 13 to 18 form an integral part of this condensed consolidated interim financial information.
Unaudited consolidated cash flow statement
Six months Six months ended ended 31 December 31 December Notes 2008 2007 £'000 £'000 Net cash inflow/(outflow) from operati 13 14 (2,213)ons Interest paid (413) (51) Interest paid on finance leases (33) (28) Taxation recovered/(paid) 1,978 (50) Net cash generated from/(used in) 1,546 (2,342)operating activities Investing activities Interest received 382 32 Purchases of property, plant and (464) (52)equipment Proceeds from sale of property, plant - 10and equipment Purchase of intangible assets (1,824) (2,154)
Payment of contingent consideration (237) -regarding Groupe CS Dermatologie
Purchase of minority interest (317) - Net cash used ininvesting activities (2,460) (2,164) Financing activities Repayments of obligations under (108) (110)finance leases Proceeds from borrowings 1,284 1,654 Repayments of borrowings (811) (288)
Proceeds from issue of share capital 1,383
- Share issue costs (63) - Net cash from financing activities 1,685
1,256
Net increase/(decrease)in cash,cash 771
(3,250)
equivalentsand bank overdrafts Cash, cash equivalents and bank (354) 2,604overdrafts at 1 July Exchange gains on cash and bank 42 211overdrafts Cash, cash equivalents and bank 459 (435)overdrafts at end of period
Cash, cash equivalents and bank
overdrafts includes: Cash and cash equivalents 2,400 411 Bank overdrafts (1,941) (846) Cash,cash equivalents and bank 459
(435)
overdrafts
The notes on pages 13 to 18 form an integral part of this condensed consolidated interim financial information.
Notes to the unaudited condensed consolidated interim financial information
1. General Information
These interim financial results do not comprise statutory accounts within themeaning of Section 434-436 of the Companies Act 20065. Statutory accounts(within the meaning of s240 of the Companies Act 1985) for the year ended 30June 2008 were approved by the board of directors on 31 October 2008 anddelivered to the Registrar of Companies. The report of the auditors on thoseaccounts was unqualified but did contain a material uncertainty in respect ofgoing concern, and did not contain any statement under Section 237 of theCompanies Act 1985.The Company is a limited liability company, incorporated and domiciled in theUnited Kingdom. The address of the registered office is: Unit 4, GodalmingBusiness Centre, Woolsack Way, Godalming, Surrey, GU7 1XW. The Company has itsprimary listing on the London Stock Exchange and a secondary listing onEuronext in Paris.
This condensed consolidated interim financial information was approved for issue on 25 February 2009.
2. Basis of preparation
This condensed consolidated interim financial information for the half-yearended 31 December 2008 has been prepared in accordance with the Disclosures andTransparency Rules of the Financial Services Authority and with IAS 34,`Interim financial reporting' as adopted by the European Union. The condensedconsolidated interim financial report should be read in conjunction with theannual financial statements for the year ended 30 June 2008, which have beenprepared in accordance with IFRSs as adopted by the European Union.
Going concern
The Group had net cash balances of £0.5m at 31 December 2008. The Directors expect a net cash outflow in the twelve months to 31 December 2009 and recognise that there will be a need to have increased facilities.
The condensed consolidated interim financial information has been prepared onthe going concern basis which assumes that the Group will continue inoperational existence for the foreseeable future. The Directors have reviewedthe working capital requirements of the Group for the next 12 months, and areconfident that the further facilities required can be obtained. The Directorshave also identified a number of steps that could be taken to improve theworking capital situation, should further facilities not be available in thetimeframe required. The condensed consolidated interim financial informationdoes not reflect any adjustments that would be required if it were to beprepared on a basis other than the going concern basis.
3. Accounting policies
The accounting policies adopted are consistent with those of the annual financial statements for the year ended 30 June 2008, as described in those annual financial statements, and the following new accounting standards and interpretations.
The following interpretation to published standards is mandatory for accountingperiods beginning on or after 1 January 2008 but is not relevant to the group'soperations:IFRIC 11, 'IFRS 2 - Group and treasury share transactions' - The company'saccounting policy for share based compensation arrangements is already incompliance with the interpretation.IFRIC 12, 'Service concession arrangements'; andIFRIC 13, 'Customer loyalty programmes'; andIFRIC 14, 'IAS 19 - The limit on a defined benefit asset, minimum fundingrequirements and their interaction',
Principal risks and uncertainties
There are a number of risks and uncertainties which could have a material impact on the Group's performance over the remaining six months of the financial year and could cause actual results to differ materially from expected results. The principal risks remain those set out on page 20 of the Group's Annual Report for 2008, a copy of which is available on the Group's website www.sinclairpharma.com.
4. Segment information
The Group is organised into two operating segments; development, registrationand commercialisation of products through marketing partners and direct salesand marketing of pharmaceutical products. These segments are the basis on whichthe group reports its primary segment information. Six months ended 31 December 2008 Six months ended 31 December 2007 Business Segments Marketing Direct Total Marketing Direct Total partners partners £'000 £'000 £'000 £'000 £'000 £'000 Revenue 10,205 6,040 16,245 4,679 5,755 10,434 Segmental operating 1,801 (930) 871 (1,323) (1,182) (2,505)profit/(loss) before exceptional items Exceptional items 3,179 1,642 Operating Profit/ 4,050 (863)(loss) Revenue analysis - an analysis of revenue by category is set out in the tablebelow: Six months Six months ended Ended 31 December 31 December 2008 2007 £'000 £'000 Product revenue 9,873 8,597 Royalties 560 312 Licence fees and milestones 5,812 1,525 16,245 10,4345. Exceptional ItemsExceptional items represent significant items of income and expense which dueto their nature, size or the expected infrequency of the events giving rise tothem, are presented separately on the face of the income statement to give abetter understanding to shareholders of the elements of financial performancein the period, so as to facilitate comparison with prior periods and to betterasses trends in financial performance. Six months Six months ended Ended 31 December 31 December 2008 2007 £'000 £'000 Foreign exchange gains 4,413 1,963 Restructuring costs (744) - Aborted acquisition costs (490) (321) 3,179 1,642
Foreign exchange gains of £4,413,000 (2007: gain of £1,963,000) represent the gain on the translation of an intra-group loan balance. This is a non cash item.
Restructuring costs of £744,000 include severance costs and costs related to the re-structuring of Sinclair Pharma UK Limited (formerly Ashbourne Pharmaceuticals Limited), and Sinclair srl.
Exceptional acquisition related costs were incurred in relation to a strategicacquisition opportunity during the summer of 2008. These discussions were puton hold as a result of the market volatility in the autumn of 2008. Costs of £490,000 were incurred to that point.In July 2007, exceptional acquisition related costs were incurred in preparingfor a major acquisition. Sinclair was substantially outbid in this transactionwhich resulted in a charge of £321,000 to cover professional fees.6. Finance income and costs Six months Six months ended Ended 31 December 31 December 2008 2007 £'000 £'000 Finance costs
Interest on bank loans and overdrafts (319) (49) Interest due on finance leases (33) (28) Net foreign exchange losses on financing (492) -
activities Other finance charges (116) (2) Finance costs (960) (79) Finance income Bank interest receivable 1 16 Other finance income 78 16 Finance income 79 32 Net finance expense (881) (47)7. Earnings/(loss) per share
The basic earnings / (loss) per share has been calculated by dividing the profit/(loss) for the period, by the weighted average number of shares in existence for the period.
Shares held by the Employee's Share Trust, including shares over which optionshave been granted to Directors and staff, have been excluded from the weightedaverage number of shares for the purposes of calculation of the basic earnings/(loss) per share.Diluted earnings per share is calculated by adjusting the weighted averagenumber of ordinary shares outstanding to assume conversion of all dilutivepotential ordinary shares. Potential ordinary shares of the Company are shareoptions, warrants and awards. A calculation has been undertaken to determinethe number of shares that could have been acquired at fair value (determined asthe average annual market price of the company's shares) based on the monetaryvalue of the subscription rights attached to outstanding options, warrants
andawards. Six months Six months ended Ended 31 December 31 December 2008 2007 Basic and diluted EPS
Profit/(loss) attributable to equity 3,564 (932)shareholders (£000) Weighted average number of shares 88,978,838 87,047,526
Adjustment for share options, warrants and 3,915,407 n/a awards
Diluted weighted average number of shares 92,894,245 87,047,526 Basic profit/(loss) per share 4.0p (1.1)p Diluted profit/(loss) per share 3.8p (1.1)p
8. Goodwill 31 December 31 December 30 June 2008 2007 2008 £'000 £'000 £'000 Cost At 1 July 50,989 45,929 45,929 Additions 381 - 67 Exchange adjustments 6,903 2,601 4,993 At period end 58,273 48,530 50,989
Accumulated amortisation and impairment
At 1 July 2,879 2,511 2,511 Impairment charge - - 368 At period end 2,879 2,511 2,879
Net book value at period end 55,394 46,019 48,110
Additions in the period relate to the purchase of the minority interest in Laboratorios Novo Pharma SL for €330,000 plus expenses.
9. Intangible Assets 31 December 31 December 30 June 2008 2007 2008 £'000 £'000 £'000 Cost At 1 July 17,779 11,511 11,511 Additions 5,704 3,274 4,586 Disposals - (423) (491) Exchange adjustments 3,666 1,133 2,173 At period end 27,149 15,495 17,779 Amortisation and impairment At 1 July 2,968 1,469 1,469 Charge for the period/year 1,094 633 1,483 Disposals - (22) (51) Impairment charge - - 13 Exchange adjustments 358 28 54 At period end 4,420 2,108 2,968 Net book value at period end 22,729 13,387 14,811
Additions in the current period relate to the acquisition of the silver nanotechnology, the zinc technology, and the buy-out of a future royalty obligation. Additions of £4.7m were from non-cash transactions.
10. Trade and other receivables
31 December 31 December 30 June 2008 2007 2008 £'000 £'000 £'000 Trade receivables 10,596 5,657 12,154 Less provision for impairment of trade (178) (102) (113)receivables Trade receivables-net 10,418 5,555 12,041 Other receivables 2,195 638 1,144
Prepayments and accrued income 605 789 1,284 13,218 6,982 14,469
11. Trade and other payables
31 December 31 December 30 June 2008 2007 2008 £'000 £'000 £'000 Trade payables 7,073 4,703 6,418
Other tax and social security 894 550 426
Other payables 1,556 2,054 2,060 Accruals 4,207 1,655 2,762 13,730 8,962 11,66612. Borrowings 31 December 31 December 30 June 2008 2007 2008 £'000 £'000 £'000 Bank loans 5,097 1,496 4,022
Obligations under finance leases 90 143 118 Non-current borrowings 5,187 1,639 4,140 Obligations under finance leases 164 230 218
Bank loans 1,555 605 1,350 Bank overdrafts 1,941 846 1,406 Other borrowings 349 - 134 Current borrowings 4,009 1,681 3,108 Total borrowings 9,196 3,320 7,248
Borrowings included above are repayable as follows: On demand or within one year 4,009 1,681 3,108 Over one and under two years 2,801 644 1,299 Over two and under five years 2,386 989 2,841 Beyond five years, by installments - 6 - Total borrowings 9,196 3,320 7,248
13. Cash flow from operating activities
Six months Six months ended ended 31 December 31 December 2008 2007 £'000 £'000 Profit/(loss) before tax 3,169 (910) Adjustments for: Finance income (79) (32) Finance costs 960 79
Share based payment - value of employee services 347 124 Depreciation 254 261 Amortisation of intangible assets 1,094 633 Non-cash purchase of intangible assets (4,381) - Profit on disposal of property, plant & - (2)equipment Profit on sale of product rights - (40) Increase/(decrease) in provision for doubtful 65 (709)
debts Exchange gains (6,014) (2,105) (4,585) (2,701)
Changes in working capital (excluding effects of
acquisitions) Increase in inventories (259) (831) Decrease in receivables 4,041 1,784 Increase in payables 943 71 Decrease in deferred income (126) (536)
Net cash inflow/(outflow) from operations 14 (2,213)
14. Related party transactions
During the period ended 31 December 2008, the Group was charged £157,919 (inthe period to 31 December 2007, £176,738 and in the year ended 30 June 2008 £500,074) by Axcan Pharma (Ireland) Ltd for the cost of Photofrin® sold in theperiod less reimbursable costs. At 31 December 2008 the amount owing to Axcanwas £241,170 (31 December 2007 £182,029 and at 30 June 2008 £269,940).
Dr MJ Flynn, Chief Executive Officer is a remunerated Non Executive Director of Axcan Pharma (Ireland) Ltd.
On 31 October 2008, the Group received unsecured, interest-bearing short-term loans from certain directors and connected persons as follows:
Received Owed at 31 December Mr JAP Randall £100,000 £36,000 Mrs S Flynn (wife of Dr MJ £200,000 £200,000Flynn) Mr J-C Tschudin €62,500 €62,500
These loans are repayable on 30 April 2009. On 8 December 2008, £64,000 of MrJAP Randall's loan was converted into a subscription for 400,000 new ordinaryshares of 1p each at a price of 16p each, as part of the institutional placing.On 12 November 2008 Dr MJ Flynn agreed to subscribe in cash for 1,739,130 newordinary shares of 1p each at a price of 23p, amounting to £400,000. £200,000remained due at 31 December 2008 and was received on 12 and 20 January 2009,the delay in settlement arose from administrative difficulties with Dr Flynn'sSIPP.
Also on 12 November 2008, Mr J-C Tschudin subscribed in cash for 217,391 new ordinary shares of 1p each at a price of 23p, amounting to £50,000.
On 18 November 2008, Mr G Cook subscribed in cash for 400,000 new ordinary shares of 1p each at a price of 23p, amounting to £92,000.
Statement of directors' responsibilities
The directors' confirm that this condensed consolidated interim financial information has been prepared in accordance with IAS 34 as adopted by the European Union, and that the interim management report herein includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8, namely:
* an indication of important events that have occurred during the first six
months and their impact on the condensed consolidated interim financial
information, and a description of the principal risks and uncertainties for
the remaining six months of the financial year; and
* material related-party transactions in the first six months and any
material changes in the related-party transactions described in the last
annual report.
The directors of Sinclair Pharma Plc are listed in the Group's Annual Reportfor the year ended 30 June 2008, with the exception of Mr R S Harris who didnot stand for re-election at the AGM and therefore stood down on 8 December
2008.By order of the BoardDr MJ FlynnChief Executive OfficerJAP RandallChief Financial Officer26 February 2009
Independent review report to Sinclair Pharma Plc
Introduction
We have been engaged by the company to review the condensed consolidatedinterim financial information in the interim financial report for the sixmonths ended 31 December 2008, which comprises the income statement, balancesheet, statement of changes in equity, cash flow statement and related notes.We have read the other information contained in the interim financial reportand considered whether it contains any apparent misstatements or materialinconsistencies with the information in the condensed consolidated interimfinancial information
Directors' responsibilities
The interim financial report is the responsibility of, and has been approvedby, the directors. The directors are responsible for preparing the interimfinancial report in accordance with the Disclosure and Transparency Rules ofthe United Kingdom's Financial Services Authority.As disclosed in note 2, the annual financial statements of the group areprepared in accordance with IFRSs as adopted by the European Union. Thecondensed consolidated interim financial information included in this interimfinancial report has been prepared in accordance with International AccountingStandard 34, "Interim Financial Reporting", as adopted by the European Union.
Our responsibility
Our responsibility is to express to the company a conclusion on the condensedset of financial statements in the interim financial report based on ourreview. This report, including the conclusion, has been prepared for and onlyfor the company for the purpose of the Disclosure and Transparency Rules of theFinancial Services Authority and for no other purpose. We do not, in producingthis report, accept or assume responsibility for any other purpose or to anyother person to whom this report is shown or into whose hands it may come savewhere expressly agreed by our prior consent in writing.
Scope of review
We conducted our review in accordance with International Standard on ReviewEngagements (UK and Ireland) 2410, `Review of Interim Financial InformationPerformed by the Independent Auditor of the Entity' issued by the AuditingPractices Board for use in the United Kingdom. A review of interim financialinformation consists of making enquiries, primarily of persons responsible forfinancial and accounting matters, and applying analytical and other reviewprocedures. A review is substantially less in scope than an audit conducted inaccordance with International Standards on Auditing (UK and Ireland) andconsequently does not enable us to obtain assurance that we would become awareof all significant matters that might be identified in an audit. Accordingly,we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us tobelieve that the condensed consolidated interim financial information in theinterim financial report for the six months ended 31 December 2008 is notprepared, in all material respects, in accordance with International AccountingStandard 34 as adopted by the European Union and the Disclosure andTransparency Rules of the United Kingdom's Financial Services Authority.Emphasis of matter - going concernIn forming our conclusion, we have considered the adequacy of the disclosuresmade in note 2 of the condensed consolidated interim financial informationconcerning the ability of the company to continue as a going concern due to theuncertainty associated with the company's ability to obtain further facilities,or generate additional funds. The matters explained in note 2 indicate theexistence of a material uncertainty which may cast significant doubt about thecompany's ability to continue as a going concern. These condensed financialstatements have been prepared on a going concern basis and do not include anyadjustments that would result if the company were unable to continue as a goingconcern. In view of this material uncertainty we consider that it should bedrawn to your attention but our conclusion is not qualified in this respect.PricewaterhouseCoopers LLPChartered AccountantsCambridge25 February 2009Notes:
(a) The maintenance and integrity of the Sinclair Pharma Plc website is theresponsibility of the directors; the work carried out by the auditors does notinvolve consideration of these matters and, accordingly, the auditors accept noresponsibility for any changes that may have occurred to the financialstatements since they were initially presented on the website.
(b) Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
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