29th Jan 2008 07:01
Henderson Morley PLC29 January 2008 29 JANUARY 2008 HENDERSON MORLEY PLC (AIM: HML) INTERIM RESULTS FOR THE SIX MONTHS TO 31 OCTOBER 2007 The Board of Henderson Morley plc ("Henderson Morley" or "the Company"), the AIMlisted drug discovery company, announces its interim results for the six monthsto 31 October 2007. HIGHLIGHTS • Strategic Review Update; • Collaborative Agreement with Australian Government-back Research organisation; • Progress on animal health pipeline; and • New formulations for ICVT. Executive Chairman Andrew Knight said: "We are excited about the prospects forthe future of the Company as we have the strongest pipeline, with the greatestnumber of patents, both granted and under application, in the history ofHenderson Morley." ---ENDS--- ENQUIRIES: HENDERSON MORLEY PLC 0121 442 4600Andrew Knight, Chairman BISHOPSGATE COMMUNICATIONS LTD 0207 562 3350Maxine BarnesNick Rome BREWIN DOLPHIN SECURITIES LTD 0113 241 0126Neil Baldwin Notes to Editors: Henderson Morley was founded in 1996 with the objective of developing its antiviral application (Ionic Contra Viral Therapy (ICVT). ICVT is the Lead Platformand has been developed in-house and HML wholly owns the patent IPR. Further information on Henderson Morley plc can be accessed through the Company's website at www.henderson-morley.com CHAIRMAN'S STATEMENT Financial Summary Turnover for the period under review was £686 (2006:£838) which, after expensesand R&D costs, showed a pre tax loss of £592,494 (2006: £461,202). Cash at Bankas at 31 October 2007 was £875,120 (2006: £1,363,338). The total number ofshares in issue is now 491,928,631. Overview The period under review has been highly active and has seen the Company completework on its refurbished laboratory, resulting in a newly formed MolecularVirology Lab and the provision of significantly larger facilities for virusculture. Strategic Review On 3 July 2007, your Board announced that it was to undertake a review toexplore strategic options in order to maximise shareholder value. This wasexpected to be a lengthy process and has, so far, proved to be the case. Theobject of the review, which is still ongoing, is exploring options which includethe possible sale of some or all of the business. Under The City Code onTakeovers and Mergers, the announcement of a review which does not rule out thesale of the business placed the Company into what is technically referred to asan "offer period" - for the sake of clarity this does not (and did not) meanthat the Company had received any offer at the time the announcement was made. This process has resulted in dialogue with several companies both here andinternationally and we now have a short listing of companies with whom we wishto have further discussions, which may or may not lead to an offer being madefor some or all of the Company's business. The Company will remain in an offer period until such time as the Companyterminates the strategic review, and the ongoing discussions are ended (at whichpoint the Company would announce this via Regulatory News Service) or until,following the announcement of a firm intention to make an offer that offer isunsuccessful or lapses. PREPS and L-Particles Collaborative Agreement with Australian Government-backed Research team Since the end of the period, we announced that the Company has signed acollaborative research and material transfer agreement with the AustralianGovernment-backed Centre for Vaccine Development ("ACVD"), which is part of theQueensland Institute of Medical Research. The collaborative research agreement is to participate in the continuingdevelopment of a vaccine targeted at preventing Cytomegalovirus (CMV) disease.CMV is the most important preventable infectious disease of unborn children inthe developed world. This collaboration will use a combination of technologiesfrom Henderson Morley and ACVD. Henderson Morley is developing PREPS andL-particles vaccine candidates based upon non replicating herpes viruses thatare DNA free. Each party will bear its own development costs and Henderson Morley will fundits costs from the current burn, and any new Intellectual Property arising outof this collaboration will be owned jointly by Henderson Morley and ACVD. ACVD has a world class reputation for quality research and is at the forefrontin the discovery of candidate vaccine antigens as well as vaccine production andthe testing of potential vaccines and drugs from cellular through to clinicallevels. We believe that this is an important validation for the use of PREPS andL-Particles; work has commenced with ACVD and I look forward to reporting onprogress in due course. We would expect that this work will lead to severalmore collaborations and licences. HSV Vaccine Other laboratory studies are underway in a US-based contract researchlaboratory. These studies are examining the safety and immunogenicity of PREPSand L-Particles in an established and validated model. The data from thesestudies is will be the first step towards the development of a lead candidate totarget the herpes simplex virus, which is a considerable market opportunity. Systems Biology Laboratory UK Ltd ("SBL") The Company announced a collaborative research agreement with SBL. The teambased in Abingdon has considerable expertise in the study of dendritic cells -important immune cells that help co-ordinate an immune response in many diseasesincluding cancer. The work that they have undertaken, at no cost to HendersonMorley, is to study the effects of PREPS and L-particles on these specialistcells. We are very pleased with this collaboration, as success in these studieswill assist the licensing efforts of several applications of PREPS andL-particles. Animal Health KHV Vaccine The Company has now finalised terms, pending ratification, for a sponsoreddevelopment and an option to licence with a multi national pharmaceuticalcompany to take an exclusive worldwide licence to commercially exploit vaccinecandidates produced by Henderson Morley. This agreement is a precursor to thegrant of a Licence for the intellectual property rights of Henderson Morley'sKoi Carp herpes vaccine. The Licence will be worldwide and the pharmaceuticalcompany has agreed to pay towards development costs of the vaccine. We expect that the Company will release an announcement with more information in respect of this transaction shortly. Feline Herpes Virus The clinical trial in conjunction with Triveritas continues and is examining thesafety and efficacy of ICVT ophthalmic drops for animal health. This study isunderway in Germany, and several veterinary centres have been recruited. Thefirst patients have been recruited and we are still expecting to have results bythe end of Q1 2008. ICVT - New Formulations The Company announced that it was planning a pre-IND meeting with the US FDAwith regard to injectable formulations of ICVT for use in the treatment ofgenital warts and the orphan disease, recurrent respiratory papillomatosis. This result of this development is that the Company now has a formulation thatmay be suitable for clinical development. However, following detaileddiscussions with formulation experts, it has been decided to use the datacreated to develop a second, more advanced, formulation with a longer mode ofaction. Consequently, we are now focussing on this aspect with a team whoseexpertise is in developing and marketing long acting synthetic polymers. Thiswork will begin in Q1 08. Partner Update With regard to the current agreements with Croma, Cutanea and Amistad, there isno further development at this stage. We envisage being able to update themarket in respect of these three partnerships in due course, using the normalchannels Outlook The period under review has been exceptionally busy for the Company. Not onlyare we meeting and speaking to many companies as far as the strategic review isconcerned but we are also establishing record numbers of contacts of potentialpartners. Following the ACVD announcement, we have seen a significant uplift inthe number of enquiries we have received regarding PREPS and L-Particles. We also continue to have discussions with regard to potential licence agreementsfor the remaining applications of ICVT. We are excited about the prospects for the future of the Company as we have thestrongest pipeline, with the greatest number of patents both granted and underapplication, in the history of Henderson Morley. Furthermore, we are pleased toreport that by careful negotiation of these agreements, we are able to containresearch costs to within budgeted burn and therefore maximise shareholder funds. We look forward to updating shareholders on our further progress. ANDREW KNIGHTExecutive Chairman 6 months ended 6 months ended 12 months ended 31 October 31 October 30 April 2007 2006 2007 Note Unaudited Unaudited Audited Continuing operationsRevenue 686 838 19,251 Cost of sales (408) (568) (1,905) ------------------------------------------------Gross profit 278 270 17,346Research and development (270,444) (214,749) (327,674)Other administrative expenses (349,052) (251,036) (647,873)Amortisation of intangible assets (2,656) (2,656) (5,312) ------------------------------------------------Results from operating activities (621,874) (468,171) (963,513) Finance income 31,363 8,669 36,053Finance expenses (1,983) (1,700) (604) ------------------------------------------------Net finance income 29,380 6,969 35,449 Loss before taxation (592,494) (461,202) (928,064) Research and development tax credit 44,601 34,334 45,364 ------------------------------------------------Loss from continuing operations (547,893) (426,868) (882,700) ================================================ Basic and diluted loss per ordinary share 4 (0.11p) (0.10)p (0.20)p ================================================ There were no recognised income or expenses other than the loss for thefinancial period. UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (IFRS)For the six months ended 31 October 2007 Called up Share Profit and Total share premium loss equity capital account account £ £ £ £ At start of period 614,911 5,940,641 (4,865.427) 1,690,125Loss for the period - - (547,893) (547,893) --------------------------------------------------------At end of period 614,911 5,940,641 (5,413,320) 1,142,232 ======================================================== For the 12 months ended 30 April 2007 Called up Share Profit and Total share premium loss equity capital account account £ £ £ £ At start of period 479,911 3,913,641 (3,982,727) 410,825Issue of shares (net of issue costs) 135,000 2,027,000 - 2,162,000Loss for the year - - (882,700) (882,700) ---------------------------------------------------------At end of period 614,911 5,940,641 (4,865,427) 1,690,125 ========================================================= For the six months ended 31 October 2006 Called up Share Profit and Total share premium loss equity capital account account £ £ £ £ At start of period 479,911 3,913,641 (3,982,727) 410,825Issue of Shares (net of issue costs) 97,500 1,488,501 - 1,586,001Loss for the period - - (426,868) (426,838) --------------------------------------------------------- At end of period 577,411 5,402,142 (4,409,595) 1,569,988 ========================================================= At At At 31 October 2007 31 October 2006 30 April Unaudited Unaudited 2007 Audited £ £ £Non current assetsProperty, plant and equipment 113,038 52,393 74,500Goodwill 58,964 58,964 58,964Intangible assets 34,528 39,840 37,184 ----------------------------------------------------Total non current assets 206,530 151,197 170,648 ---------------------------------------------------- Current assetsInventories 400 1,228 400Trade and other receivables 173,739 130,573 138,340Cash and cash equivalents 875,120 1,363,338 1,478,460 ----------------------------------------------------Total current assets 1,049,259 1,495,139 1,617,200 ----------------------------------------------------Total assets 1,255,789 1,646,336 1,787,848 Current liabilitiesBank loans and overdrafts - - 8,311Trade and other payables 113,557 76,378 89,412 ----------------------------------------------------Total current liabilities 113,557 76,678 97,723 ----------------------------------------------------Net assets 1,142,232 1,569,958 1,690,125 ----------------------------------------------------Capital and reservesCalled up share capital 614,911 577,411 614,911Share premium account 5,940,641 5,402,142 5,940,641Profit and loss account (5,413,320) (4,409,595) (4,865,427)Shareholders' funds 1,142,232 1,569,958 1,690,125 Note 6 months 6 months 12 months ended 31 ended 31 ended 30 October 2007 October April Unaudited 2006 2007 Unaudited Audited £ £ £ Net cash outflow from operations 5 (603,852) (456,128) (929,750) Interest paid (1,983) (1,700) (604)Research and development tax credit received 17,394 - 32,317 -----------------------------------------Net cashflow from operating activities (588,441) (457,828) (898,037) -----------------------------------------Cashflow from investing activitiesPurchases of property, plant and equipment (56,770) (21,128) (62,261)Interest received 31,363 8,669 36,053 -----------------------------------------Net cash outflow from investing activities (25,407) (12,459) (26,208) ----------------------------------------- FinancingProceeds from issue of shares - 1,650,000 2,250,000Costs of share issue - (64,000) (88,000)Finance lease - 710 -Amount introduced/ (withdrawn) by Directors 18,819 - (14,521) -----------------------------------------Net cash inflow from financing 18,819 1,586,710 2,147,479 -----------------------------------------(Decrease)/Increase in cash and cash equivalents (595,329) 1,116,423 1,223,234 -----------------------------------------Cash and cash equivalents at beginning of period 1,470,149 246,915 246,915Cash and cash equivalents at end of period 875,120 1,363,338 1,470,149 -----------------------------------------Cash and cash equivalents for cash flow statement purposes 875,120 1,363,338 1,470,149 1 BASIS OF PREPARATION OF INTERIM REPORT The information for the period ended 31 October 2007 is not audited and does notconstitute statutory accounts as defined in section 240 of the Companies Act1985. The statutory accounts for the year ended 30 April 2007 were given anunqualified audit report and extracts from those accounts have been adjustedabove for the adoption of IFRS. A copy of the statutory accounts for that yearhas been delivered to the Registrar of Companies. The interim accounts for the six month period to 31 October 2006 were alsounaudited. 2 ACCOUNTING POLICIES Basis of Accounting The Interim financial report has been prepared using accounting policiesconsistent with International Financial Reporting Standards (IFRS) for the firsttime. The disclosures required by IFRS 1 concerning the transition from UK GAAPto IFRS are given in note 6. The report has been prepared on a going concern basis in accordance withInternational Financial Reporting Standards ("IFRS") as issued by theInternational Accounting Standards Board ("IASB") at 31 October 2007 as well asall interpretations issued by the International Financial ReportingInterpretations Committee ("IFRIC") at 31 October 2007. The group has notavailed itself of early adoption options in such standards and interpretations. The validity of a going concern basis may depend on the ability of the directorsto arrange further funding, in the form of proceeds from the issue of newshares, to support the activities of its subsidiary undertaking, HendersonMorley Research and Development Limited and on the completion and commercialsuccess of products under development. The directors have confirmed theirintention to seek appropriate levels of additional funding when required and tocontinue to support the development activities of its subsidiary undertaking. The financial statements have been prepared under the historical cost basis.The principal accounting policies adopted are set out below: Basis of consolidation The consolidated financial statements incorporate the financial statements ofthe Company and entities controlled by the Company (its subsidiaries) made up to31 October and 30 April each year. Control is achieved where the Company hasthe power to govern the financial and operating policies so as to obtainbenefits from its activities. Revenue recognition Revenue is measured at the fair value of the consideration received orreceivable and represents amounts receivable for goods and services provided inthe normal course of business, net of discounts, VAT and other sales-relatedtaxes. Research and Development The group considers that the regulatory, technical and market uncertaintiesinherent in the development of new products mean that internal development costsshould not be capitalised as intangible non-current assets until commercialviability of a project is demonstratable and appropriate resource is in place tolaunch the products. Except in those circumstances, research and developmentexpenditure is expensed as incurred. Taxation The tax charge or credit represents the sum of the current and deferred tax. Current tax is provided as amounts expected to be paid or recovered using thetax rates and laws that have been enacted or substantively enacted by thebalance sheet date. Deferred tax is the tax expected to be payable or recoverable on differencesbetween the carrying amounts of assets and liabilities in the financialstatements and corresponding tax bases used in the computation of taxableprofit, and is accounted for using the balance sheet liability method. Deferredtax liabilities are generally recognised for all taxable temporary differencesand deferred tax assets are recognised to the extent that it is probable thattaxable profits will be available against which deductible temporary differencescan be utilised. Such assets and liabilities are not recognised if thetemporary difference arises from goodwill or from the initial recognition ofother assets and liabilities in a transaction that affects neither the taxprofit nor the accounting profit. Deferred tax liabilities are recognised for taxable temporary differencesarising on investments in subsidiaries and associates, and interests in jointventures, except where the Group is able to control the reversal of thetemporary difference and it is probable that the temporary difference will notreverse in the foreseeable future. The carrying amount of deferred tax assets is reviewed at each balance sheetdate and reduced to the extent that is no longer probable that sufficienttaxable profits will be available to allow all, or part, of the asset to berecovered. Deferred tax is calculated at the tax rates that are expected to apply in theperiod when the liability is settled or the asset is realised. Deferred tax ischarged or credited in the income statement, except when it relates to itemscharged or credited directly to equity, in which case the deferred tax is alsodealt with in equity. Intangible assets Intangible assets acquired separately are measured on initial recognition atcost. Following initial recognition, intangible assets are carried at cost lessany accumulated authorisation and any accumulated impairment losses. Internallygenerated intangible assets are not capitalised until commercial viability of aproject is demonstrable and appropriate resource is in place to launch theproduct. Except in those circumstances expenditure is charged against profit inthe year in which the expenditure is incurred. Intangible assets with a futureuseful life are amortised over their useful economic lives. The intangibleassets residual values, useful lives and methods of valuation are reviewed andadjusted, if appropriate, at each financial period end. For intangible assets with finite useful lives, amortisation is calculated soas to write off the cost of an asset less its estimated residual value over itsuseful economic life as follows: Know how, patents and licences - over 10 years. Goodwill Goodwill arising on consolidation represents the excess cost of acquisition overthe group's interest in the fair value of the identifiable assets andliabilities of a subsidiary, associate or jointly controlled entity at the dateof acquisition. Goodwill is recognised as an asset and reviewed for impairment at leastannually. Any impairment is recognised immediately in the income statement andis not subsequently reversed. Goodwill arising on acquisition before the dateof transition to IFRS has been retained at the previous UK GAAP amounts subjectto being tested for impairment at that date. Impairment of tangible and intangible assets excluding goodwill At each balance sheet date, the Group reviews the carrying amounts of itstangible and intangible assets to determine whether there is any indication thatthose assets have suffered an impairment loss. If any such indication exists,the recoverable amount of the asset is estimated in order to determine theextent of the impairment loss (if any). Where the asset does not generate cashflows that are independent from other assets, the Group estimates therecoverable amount of the cash-generating unit to which the asset belongs. Anintangible asset with an indefinite useful life is tested for impairmentannually and whenever there is an indication that the asset may be impaired. Recoverable amount is the higher of fair values less costs to sell and value inuse. In assessing value in use, the estimated future cash flows are discountedto their present value using a pre-tax discount rate that reflects currentmarket assessments of the time value of money and the risks specific to theasset for which the estimate of future cash flows have not been adjusted. If the recoverable amount of an asset (or cash-generating unit) is estimated tobe less than its carrying amount, the carrying amount of the asset(cash-generating unit) is reduced to its recoverable amount. An impairment lossis recognised as an expense immediately, unless the relevant asset is carried ata revalued amount, in which case the impairment loss is treated as a revaluationdecrease. Where an impairment loss subsequently reverses, the carrying amount of the asset(cash-generating unit) is increased to the revised estimate of its recoverableamount, but so that the increased carrying amount does not exceed the carryingamount that would have been determined had no impairment loss been recognisedfor the asset (cash-generating unit) in prior years. A reversal of animpairment loss is recognised as income immediately, unless the relevant assetis carried at a revalued amount, in which case the reversal of the impairmentloss is treated as a revaluation increase. Property, plant and equipment Property, plant and equipment are stated at cost less accumulated depreciationand any recognised impairment loss. Depreciation is charged so as to write off the cost or valuation of assets overtheir estimated useful lives on the following bases: Plant and machinery equipment, fixtures and fittings 25% per annumon reducing balance Leasehold property Straightline over10 years The gain or loss arising on the disposal or retirement of an asset is determinedas the difference between the sales proceeds and the carrying amount of theasset and is recognised in income. Leases Rentals under operating leases are charged against profit as incurred. Foreign currencies Assets and liabilities in foreign currencies are translated into sterling at therates of exchange ruling at the balance sheet date. Transactions in foreigncurrencies are translated into sterling at the rate of exchange ruling at thedate of transaction. Exchange differences are taken into account in arriving atthe operating result. Share based payments The only share based payments of the group are equity settled share options. Anoption pricing model is used to estimate the fair value of each option at grantdate. That fair value is charged on a straight line basis as an expense in theincome statement over the period that the employee becomes unconditionallyentitled to the options (vesting period), with a corresponding increase inequity. The number of such options is increased annually to reflect best estimates ofthose expecting to vest (ignoring purely market based conditions) withconsequent changes to the expense. Equity is also increased by the proceedsreceivable as and when employees choose to exercise their options. If the group modifies the terms and conditions on which the equity instrumentswere granted, as a minimum, the services received measured at the grant datefair value of the equity instruments granted (unless those equity instruments donot vest because of a failure to satisfy a vesting condition other than a marketcondition) are charged to the income statement. Inventories Inventories are stated at the lower of cost and net realisable value. Costcomprises direct materials. Cost is calculated using the first in first out(FIFO) basis. Net realisable value represents the estimated selling price lessall estimated costs to be incurred in marketing and selling. Trade receivables Trade receivables do not carry any interest and are stated at their nominalvalue as reduced by appropriate allowances for estimated irrecoverable amounts. Trade payables Trade payables are not interest-bearing and are stated at their nominal value. 3 Dividends The Company will not be declaring an interim dividend. 4 loss per share The calculation is based on the loss attributable to ordinary shareholdersdivided by the weighted average number of ordinary shares in issue during theperiod as follows: 6 months 6 months 12 months ended 31 ended 31 ended 30 October 2007 October 2006 April 2007 Numerators; earnings attributable to equity (547,893) (426,868) (882,700) ----------------------------------------Denominators; weighted average number of equity sharesBasic and Diluted 491,928,631 411,515,588 443,451,919 ---------------------------------------- 5 CASH USED IN OPERATIONS 6 months 6 months 12 months ended 31 ended 31 ended 30 October 2007 October 2006 April 2007 Results from operating activities (621,874) (468,171) (963,513)Depreciation of property, plant and equipment 18,232 7,380 26,406Amortisation of intangible assets 2,656 2,656 5,312Decrease in inventories - 480 1,308Decrease/(increase) in receivables (21,036) 21,820 5,611Increase/(decrease) in payables 18,170 (20,293) (4,874) -----------------------------------------Cash flows generated from operations (603,852) (456,128) (929,750) ========================================= 6. EXPLANATION OF TRANSITION TO IFRS The Group has applied IFRS 1 "First Time Adoption of International FinancialReporting Standards" as a starting point for reporting under IFRS. The Group'sdate of transition is 1 May 2006 and comparative information has been restatedto reflect in the Group's adoption of IFRS except where otherwise required orpermitted by IFRS 1. IFRS 1 requires an entity to comply with each IFRS and IAS effective at thereporting date for its first financial statements prepared under IFRS. As ageneral rule, IFRS 1 requires such standards to be applied retrospectively.However, the standard allows several optional exemptions from full retrospectiveapplication. The Group has elected to take advantage of the following exemption. Businesscombinations made prior to 1 May 2006 will not be accounted for under IFRS 3 "Business Combinations" and as such the value of goodwill in the balance sheet atthat date will be the same amount under IFRS as that recorded in the UK GAAPfinancial statements, subject to the completion of an annual impairment review The reconciliations of equity at 1 May 2006 (date of transition to IFRS) and at30 April 2007 (date of last UK GAAP financial statements) and the reconciliationof (loss) for 2006 and 2007, as required by IFRS 1, are set out below. Thereconciliation of equity at 31 October 2006 and the reconciliation of (loss) forthe six months ended 31 October 2007 are also included below to enable acomparison of the 2007 published interim figures with those published in thecorresponding period of the previous financial year. RECONCILIATION OF (LOSS) FROM UK GAAP TO IFRS 6 months 6 months 12 months ended 31 ended 31 ended 30 October 2007 October 2006 April 2007 £ £ £ UK GAAP loss for the financial period (555,263) (434,238) (897,040)Amortisation of goodwill 7,370 7,370 14,740 ---------------------------------------------Loss from continuing operations - IFRS (547,893) (426,868) (882,700) --------------------------------------------- RECONCILIATION OF NET ASSETS FROM UK GAAP TO IFRS 31 October 31 October 30 April 2007 2006 2007 £ £ £ Net assets per UK GAAP 1,120,123 1,562,588 1,675,385Amortisation of goodwill 22,110 7,370 14,740 ---------------------------------------------Net assets - IFRS 1,142,233 1,569,958 1,690,125 --------------------------------------------- Goodwill International Financial Reporting Standards require goodwill to be frozen as atthe date of transition to IFRS, 1 May 2006, and to be subject to review forimpairment rather than regular amortisation. Previously amortised amounts inthe UK GAAP accounts for the period ended 31 October 2006 and the year ended 30April 2007 of £7,370 and £14,740 respectively have been reversed in the IFRSincome statement. The effect of the transition on the balance sheet is shownabove. This report is available on the company's website at www.henderson-morley.com.Copies are available upon request from the Company's registered office atMetropolitan House, 2 Salisbury Road, Moseley, Birmingham, West Midlands B138JS. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
HML.L