26th Nov 2007 07:01
Vectura Group plc26 November 2007 VECTURA GROUP PLC - INTERIM RESULTS FOR SIX MONTHS ENDED 30 SEPTEMBER 2007 - Chippenham, UK - 26 November 2007: Vectura Group plc (LSE: VEC) ("Vectura"), thepulmonary product development company focused on respiratory and neurologicaldiseases, today announced its financial results for the six months ended 30September 2007. Announced Today - Achievement of milestone on collaboration with Boehringer Ingelheim - Vectura will receive €10 million cash payment, and an additional €5 million equity investment Financial Highlights - Revenues increased by 102% to £12.3 million (2006 H1: £6.1 million) - Gross profit up by 116% to £9.8 million (2006 H1 £4.5 million) - Investment in research and development up by 120% to £14.6 million (2006 H1: £6.7 million) - Cash of £71.4 million at 30 September 2007 (£77.5 million at 31 March 2007) Corporate Highlights - Innovata integration complete with cost savings in excess of expectations - Successful move from AIM to the Official List of the London Stock Exchange in July 2007 Product Highlights - VR315 for asthma (partnered with major generics companies) o Milestone successfully achieved; €3 million received October 2007 - NVA237 and QVA149 for COPD (partnered with Novartis) o Initiation of three Phase II clinical studies - VR040 for Parkinson's disease o Successful completion of second Phase II study - VR147 for migraine o Initiation of Phase I trial - VR004 for erectile dysfunction o Successful completion of second Phase IIb study - VR776 for premature ejaculation o Successful completion of Phase IIa study - QDose inhaled insulin programme for diabetes o Successful completion of Phase 1 glucose clamp study Dr Chris Blackwell, Chief Executive of Vectura, commented: "This is an exciting time at Vectura as we continue to build momentum bydelivering on our commercial, development and operational goals. We have madesignificant advances across our product portfolio and we are very pleased toannounce this morning that we have achieved an important development milestoneon our collaboration with Boehringer Ingelheim. We believe Vectura will play akey role in the rapidly growing respiratory market and we are approaching somesignificant growth catalysts for the Company with the start of pivotal studiesin our asthma and COPD programmes." - Ends - Vectura's Chief Executive Chris Blackwell and Chief Financial Officer AnneHyland will discuss the Company's results at an analyst/investor presentationand conference call today at 9:30 a.m. GMT. For further details please contactClaire Rowell at Financial Dynamics on +44(0)207 2697285. Enquiries: Vectura Group plc Tel: +44 (0)1249 667700Chris Blackwell, Chief ExecutiveAnne Hyland, Chief Financial OfficerJulia Wilson, Director of Investor Relations & Corporate Communications Financial Dynamics Tel: +44 (0)207 831 3113David YatesSanjeev PandyaSusan Quigley Notes for Editors: About Vectura Vectura Group plc is a pulmonary product development company focused principallyon the development of a range of inhaled therapies for the treatment ofrespiratory and neurological diseases. Vectura develops products to treatrespiratory diseases such asthma, chronic obstructive pulmonary disease (COPD)and cystic fibrosis, the market for which is forecast to achieve sales of $32billion by 2011. Vectura also develops products for non-respiratory diseaseswhere optimised delivery via the lungs into the blood stream can providesignificant benefits, such as a rapid onset of action, improved efficacy andimproved tolerability compared with current therapies. Vectura has eight marketed products and a portfolio of drugs in clinical andpre-clinical development, some of which have been licensed to majorpharmaceutical companies. The Company seeks to develop certain programmesfurther through development to optimise value at a later licensing stage.Vectura also offers its formulation and inhalation technologies to otherpharmaceutical companies on a licensing basis where this complements Vectura'sbusiness strategy. Vectura has development collaborations with several pharmaceutical companiesincluding Boehringer Ingelheim, Novartis and Chiesi. The acquisition of Innovatain January 2007 brought established alliances with a number of additionalcompanies, such as Baxter, GlaxoSmithKline (GSK), Merck Generics (part of MylanInc), UCB and Otsuka, as well as providing revenue streams, complementaryproducts and critical mass. For further information, please visit Vectura's website at www.vectura.com. Forward-Looking Statements This press release contains "forward-looking statement", including statementsabout the discovery, development and commercialisation of products. Variousrisks may cause Vectura's actual results to differ materially from thoseexpressed or implied by the forward-looking statements, including adverseresults in clinical development programmes; failure to obtain patent protectionfor inventions; commercial limitations imposed by patents owned or controlled bythird parties; dependence upon strategic alliance partners to develop andcommercialise products and services; difficulties or delays in obtainingregulatory approvals to market products and services resulting from developmentefforts; the requirement for substantial funding to conduct research anddevelopment and to expand commercialisation activities; and product initiativesby competitors. As a result of these factors, prospective investors arecautioned not to rely on any forward-looking statement. We disclaim anyintention or obligation to update or revise any forward-looking statements,whether as a result of new information, future events or otherwise. CHAIRMAN AND CHIEF EXECUTIVE'S REVIEW OVERVIEW We are pleased to report progress across all aspects of our business. Successon the corporate front was demonstrated by the completion of the integration ofInnovata, where we achieved cost savings of £2 million in the six months, whichwere ahead of our expectations. The Innovata business contributed an impressive£3.9 million of EBITDA in the six months. We also successfully moved from AIMto the Official List of the London Stock Exchange in July 2007. These successeshave been accompanied by excellent clinical trial results and milestones acrossa number of our products and collaborations. Our partner, Novartis has initiated two Phase II trials with NVA237, aonce-daily muscarinic antagonist for COPD, in addition to a Phase II trial forQVA149, the combination therapy of NVA237 with indacaterol. Also in therespiratory therapy area, we have generated milestone payments on both ourBoehringer Ingelheim collaboration and our asthma programme, VR315. A number of our proprietary programmes have made significant progress, includingVR040 for Parkinson's disease, which has successfully completed a second PhaseII study, and our migraine programme, VR147, which has entered clinical trials.We have also achieved good clinical trial results for the three products we areseeking to out-license; VR004 for erectile dysfunction, VR776 for prematureejaculation and our inhaled insulin. PRODUCT PIPELINE Respiratory Boehringer Ingelheim collaboration We announce today in a separate press release that we have achieved a pre-agreedmilestone payment under our collaboration with Boehringer Ingelheim to develop anew dry powder inhaler (DPI). Vectura will receive in December a cash paymentof €10 million and a €5 million equity investment. In April 2006, Vectura entered a worldwide collaboration, development andlicence agreement with Boehringer Ingelheim to develop a DPI as a tailoredBoehringer Ingelheim device to deliver a range of their proprietary respiratoryproducts, primarily for treating asthma and COPD. Boehringer Ingelheimultimately will be responsible for further development, manufacturing andclinical trial use of the DPI with their proprietary compounds, and thecommercialisation of these products. Vectura will receive development milestonesand royalties on sales of each product that uses the device. The non-exclusivenature of the agreement with Boehringer Ingelheim provides Vectura with anexcellent opportunity to deliver further value from our inhaled therapytechnologies. NVA237 and QVA149 for COPD NVA237 is a once-daily, rapid onset, long-acting muscarinic antagonist (LAMA),which Novartis intends to launch as a differentiated treatment for COPD, withimproved benefits for patients compared with existing therapies. QVA149comprises the combination of NVA237 with Novartis's once-daily, long-acting betaagonist (LABA), indacaterol (or QAB149), which is currently in Phase IIIdevelopment. We believe that QVA149 is one of the most advanced once-daily LAMA/LABA combinations in development, and that it could be the first suchcombination to come to market for COPD. Vectura developed NVA237 in collaboration with Sosei Co Ltd, applying PowderHale(R), Vectura's proprietary technology, to improve the formulation for deliveryto the lungs. Vectura and Sosei licensed NVA237 to Novartis in April 2005. Over the past six months, Novartis has initiated additional Phase II trialsincluding a dose-ranging study and a US IND (Investigational New Drug)regulatory authorisation to support the safety of NVA237, as well as a Phase IIsafety study with QVA149. Novartis announced in September 2007 that it expectsto initiate Phase III trials in 2008, with an expectation to file NDAs (New DrugApplications) in 2010. VR315 for asthma VR315 is an inhaled combination asthma therapy that is being developed as ageneric product using GyroHaler(R) as the delivery device. Vectura licensed theEuropean rights for VR315 to an undisclosed leading international pharmaceuticalcompany in March 2006. The US rights were licensed to an undisclosed leadinginternational pharmaceutical company in December 2006. As at 30 September 2007,Vectura was due to receive €3 million in cash from its European partner inrelation to milestones achieved during the six months to 30 September 2007.Vectura expects VR315 to enter clinical registration studies in 2008. VR496 treatment for Cystic Fibrosis (CF) and COPD VR496 is being developed as an inhaled, locally-acting treatment for CF, withthe potential to be developed as a therapy for COPD. The active component ofVR496 is a drug that has been approved worldwide as an injected or infusedtreatment for other indications. The European Medicines Evaluation Agency (EMEA)and US Food and Drug Administration (FDA) have designated VR496 an orphan drug.It is expected that this product will enter Phase II studies in early 2008. Duohaler(R) Vectura has two exclusive agreements with a leading European pharmaceuticalcompany for the, development marketing and distribution in Europe and otherspecified countries (excluding the US and Japan) of two Duohaler(R) products,each of which co-delivers two established respiratory drugs. Vectura expectsone of these products to enter clinical registration studies during 2008. Neurology VR040 treatment for Parkinson's disease (PD) VR040 is an inhaled, systemically acting product for treating "off" episodesassociated with advanced PD that do not respond to oral treatment. The activeingredient in VR040, apomorphine hydrochloride, has previously been approved asan injectable formulation in Europe, and more recently in the US, for treating "off" episodes. VR040 is Vectura's formulation of apomorphine, delivered byinhalation using the Company's proprietary DPI technology. In October 2007 Vectura announced successful completion of a second Phase IIclinical study for VR040 in patients with PD. The study demonstrated that VR040was safe, well-tolerated, and successfully recovered patients from an induced "off" episode with a rapid onset of action; this effect was also durable.Importantly, the novel delivery via inhalation could offer patients an improvedalternative to the currently available formulations of apomorphine. VR147 for migraine VR147 is an undisclosed inhaled compound with the potential to provide a rapidonset of action, which is expected to provide key benefits to migraine patients.In the third quarter of 2007, Vectura initiated a Phase I clinical trial ofVR147 for the treatment of migraine. Other development products VR004 for the treatment of erectile dysfunction (ED) VR004 is an inhaled, systemic product for treating mild, moderate and severe ED.As with VR040, the active ingredient is apomorphine, previously approved inEurope for treating ED as a sublingual tablet. VR004 is formulated in aproprietary Vectura formulation and delivered using Vectura's Aspirair(R)device. Vectura has demonstrated efficacy and a rapid onset of action in ED patients ina Phase IIa clinical study. In subsequent Phase IIb clinical trials, completedin June 2006 and April 2007, Vectura demonstrated in an "at home" setting thatVR004 was effective in a larger population and also identified an effective doserange associated with an acceptable side-effect profile. Vectura is now seekinglicensing partners for the product. VR776 for the treatment of premature ejaculation (PE) VR776 is a Vectura proprietary inhaled, systemic treatment for PE in which theactive ingredient is an off-patent neuro-active drug approved worldwide fortreating other indications. VR776 is formulated using PowderHale(R) anddelivered with Aspirair(R). Vectura has completed pre-clinical toxicology studies and a "first-time-in-manstudy". A successful Phase IIa proof-of-concept study was announced in May 2007.Vectura is now seeking licensing partners for the product. Inhaled insulin In August 2007 Vectura announced the successful completion of a glucose clampstudy on the QDose inhaled insulin programme. QDose Limited is a 50/50 jointventure with MicroDose Technologies Inc. The study demonstrated a faster onsetof action with the inhaled formulation compared with that of subcutaneousinsulin. In addition, the relative bioavailability observed in this studycompares favourably with available information on competitor inhaled insulinprogrammes. QDose is now seeking licensing partners for the product. MARKETED PRODUCTS ADVATE(R) In 2000 Baxter was granted worldwide rights to use Vectura's stabilisationpatents and has utilised the technology in its serum-free recombinant FactorVIII, ADVATE(R). ADVATE(R) is indicated for the treatment of haemophilia A andis marketed worldwide by Baxter. Vectura receives royalties on sales of ADVATE(R). Baxter has projected that sales for calendar year 2007 will be in excess of $1.1 billion. Adept(R) Adept(R) is a 4% icodextrin solution used during surgery to reduce post-surgicaladhesions, a frequent and major complication following gynaecological and otherabdominal surgery. It has been used for this purpose in Europe since 2000.Vectura signed a global licence deal with Baxter in December 2005 for themanufacture and distribution of Adept(R). On 1 August 2006, Baxter announced that the FDA had approved Adept(R) adhesionreduction solution for intraperitoneal use as an adjunct to good surgicaltechnique for the reduction of post-surgical adhesions in patients undergoinggynaecological laparoscopic adhesiolysis. Adept(R) was launched by Baxter in theUS in October 2006. We announced the publication of the Phase III clinicaltrial results for this product in the November 2007 US issue of Fertility andSterility and this should assist Baxter with their marketing campaign in the US. Extraneal(R) Extraneal(R) is a peritoneal dialysis solution containing icodextrin, licensedto Baxter in 1996 and now marketed worldwide. The product has been launched inover 45 countries worldwide including, in 2003, the major markets of the US andJapan. Since September 2006, Vectura no longer receives royalties on the salesof Extraneal(R) in Europe, but continues to receive royalties on sales in theUS, Japan and the rest of the world. Asmasal(R) and Asmabec(R) Two products for the treatment of asthma, Asmasal(R) containing salbutamol andAsmabec(R) containing beclometasone, are marketed by UCB S.A. in the UK, Franceand Ireland. These products are delivered using Vectura's Clickhaler(R), amulti-dose, single reservoir DPI. Budesonide Clickhaler(R) and Formoterol Clickhaler(R) Two further Clickhaler(R) products for the treatment of asthma, the BudesonideClickhaler(R) and the Formoterol Clickhaler(R), are marketed by Merck Generics(now part of Mylan Inc.) in some European countries. The product dossiers arecurrently with other European regulatory authorities awaiting approval. On 30October 2007, the EMEA published further guidelines on the requirements for DPIregulatory dossiers and we believe this guidance should assist these products ingaining a more rapid approval in key European territories. Meptin Clickhaler(R) Meptin(R) Clickhaler(R) is marketed in Japan by Otsuka Pharmaceutical Co Ltd andis for the delivery of its beta-agonist asthma treatment, procaterol. Vectura receives royalties and/or product margin on these five Clickhaler(R)products and continues to explore licensing opportunities for Clickhaler(R)products in other countries. Budesonide Clickhaler(R) is licensed to an unnamedpartner in Japan and it is hoped that marketing authorisation for this productwill be achieved in 2009. Vectura also supplies the Clickhaler(R) devices to these licensees and earns amargin on their sales. OUTLOOK Vectura has a broad, innovative clinical pipeline that combines valuable mid-and late-stage pharmaceutical products and earlier stage opportunities with highcommercial potential. These are supported by a wide range of devices,technologies and expertise that allow Vectura to address fast-growing marketsectors. Vectura expects to continue to invest in advancing its productpipeline from a position of financial strength and plans on taking selectedproprietary products through to registration, whilst maintaining a balanced risk/reward strategy of pursuing product and technology collaborations with largepharmaceutical partners where appropriate. The key drivers over the remainder of the year relate to the continued successof Vectura's development work, particularly on the respiratory programmespartnered with Novartis and the asthma programmes licensed to undisclosedpartners and the Company expects some important pivotal trials to initiate onthese projects over the course of 2008. Vectura also expects to announce clinical data from VR147 for migraine during2008, which has the potential to provide a rapid onset of action and which it ishoped will provide key benefits to migraine patients. The Company hasopportunities for new licensing deals from its sexual dysfunction programmes,VR004 in erectile dysfunction and VR776 for premature ejaculation and expects tosee advancement in the royalties earned on its licensed products, particularlyADVATE(R). In relation to trading in second half of the year, Vectura expects to be cashgenerative in the six months to 31 March 2008. This will be achieved as a resultof the receipt of £10m from Boehringher Ingleheim due in December 2007 and the£2m received from our VR315 partner in October 2007. These receipts willoff-set the continued increase in our investment in research and developmentactivities. With eight marketed products, one Phase III product, eight Phase II products andfour products entering registration studies in the next 12-18 months Vectura iswell placed to deliver valuable returns for shareholders. With stable revenuesfrom marketed products and £71.4 million in cash Vectura is also making goodprogress on its goal to become a sustainable, self-funding principal player inthe development of pulmonary pharmaceutical products. Jack Cashman Chris BlackwellChairman Chief Executive 23 November 2007 FINANCIAL REVIEW Summary of results The results for the six months ended 30 September 2007 show total revenue of£12.3 million (H1 2006 - £6.1 million) with gross profit of £9.8 million (H12006 - £4.5 million). The operating loss for the period was £13.0 million (H12006 - £3.6 million). The loss before tax was £11.3 million (2006 - £2.7million) and the loss after tax £9.6 million (2006 - £1.9 million). Theincrease in losses is mainly due to the £7.9 million increase in investment inresearch and development. Risks and uncertainties There are a number of potential risks and uncertainties which could have amaterial impact on the Group's performance over the remaining six months of thefinancial year and could cause actual results to differ materially from expectedand historical results. Particular risks include industry risk, clinical andregulatory risk, competition and intellectual property risk, economic risk andfinancial risk (cash flow, credit, liquidity and price). Innovata acquisition Comparison of the results with the previous year is affected by the acquisitionof Innovata in January 2007. Innovata is a profitable cash generative businesswith revenues of £8.3 million for the six months to 30 September 2007 and EBITDAof £3.9 million. This compares to revenues of £8.6 million for the six monthsto 31 March 2007 and an EBITDA before exceptionals of £1.9 million. Vecturagenerated savings in excess of £2 million from the combination of the twobusinesses in the six-month period which is ahead of our expectations. We nowexpect to generate over £5 million per annum in cost savings from the Innovatabusiness. Revenue Revenue includes fee income from product licensing, technology licensing,development fees, royalties and device sales. In the six-months to 30 September2007, revenue increased compared to the six-months to 30 September 2006 by 102%to £12.3 million, and included a contribution of £8.3 million from Innovata.The underlying revenue for the existing Vectura Group decreased by 34%, from£6.1 million to £4 million due to the recognition of one-off milestone paymentsin the six months to 30 September 2006. Product licensing revenues in the period were £2.2 million, and include £1.4million for VR315, £0.5 million of which was released from deferred income and£0.9 million relates to a new milestone recognised in the period. Licensingrevenues also include £0.5 million released from deferred income and generatedfrom the 2003 licensing agreement between Innovata and GSK relating toformulation and delivery patents for DNA vaccine delivery. As at 30 September2007, Vectura was due to receive £2 million in cash from its VR315 Europeanpartner in relation to achievement of a milestone in the period. £0.9 millionhas been recognised as revenue in the period and £1.1 million relates to thesale of a blister filling machine. The total £2 million was received in October2007 and is included in trade debtors at 30 September 2007. Technology licensing revenues of £0.9 million were released from deferred incomeduring the period. This was the access fee from Boehringer Ingelheim, which isbeing recognised over a two-year period in line with the period in whichservices are being provided. The milestone payment of €10 million announcedtoday (due to be received in December 2007) will also be recognised over atwo-year period. Pharmaceutical Development Services (PDS) revenues were £4.1 million. Theserevenues represent principally contractual development fees charged to licensingpartners for work carried out during the period, particularly in relation towork with our European partner on VR315. It is expected that these revenueswill decrease in the second half of the year following the achievement of amilestone in September 2007. Total royalties for the period were £4.5 million and relate to products in theportfolio acquired from Innovata. The principal royalty income streams were fromADVATE(R) and Extraneal(R), with smaller contributions from Adept(R) andproducts delivered in Clickhaler(R). Product sales revenue of £0.6 million was derived from the sale of devices tolicensees. Gross profit The gross profit in the period to 30 September 2007 was £9.8 million, a £5.3million improvement on the same period in the prior period (£4.5 million). Grossprofit in the period to 30 September 2007 represents 79% of revenue (2006 -74%). Research and development expenses Total investment in research and development was £14.6 million, a 120% increaseon the same period in the prior year (£6.7 million). We expect our investment inthis area to continue to increase as some of our key products move to late-stagedevelopment. Other Administrative expenses Other administrative expenses for the period were £1.7 million, a £0.5 millionincrease on the prior period mainly due to the expanded operations. Loss after taxation and loss per share The loss for the year after taxation was £9.6 million (2006 - £1.9 million)giving a loss per ordinary share of 3.1p (2006 - 1.5p). Non-current assets Non-current assets were £146.2 million, compared with £156.2 million at 31 March2007, including goodwill (£71.1 million), intangible assets (£67.7 million), adeferred tax asset (£1.9 million and property, plant and equipment (£3.8million). In accordance with accounting practice, the calculation of the fairvalue of the assets acquired with the Innovata business is provisional and maybe adjusted at any time up to the anniversary of the acquisition in January2008. Deferred tax liability Liabilities include £19.0 million of deferred tax, which is equivalent to 28%(current UK corporation tax rate) of the value of the intangible assets acquiredwith Innovata as at 30 September 2007. The write down of this liability willreduce the tax charge in the income statement annually. The annual reduction inthis liability will equate to 28% of the annual amortisation charge on theseInnovata intangible assets. Financial liability Current liabilities include £3.9 million of a total £15.8 million financialliability, which represents an Innovata liability to a third party in respect ofa loan secured on Adept(R) and Extraneal(R) royalty streams. Deferred income Deferred income relates to milestones received but not yet recognised asrevenue. The £9.2 million to be recognised as revenue in later periods includes£2.5 million for VR315, £0.9 million relating to Boehringer Ingelheim, £3.4million for Clickhaler(R) and £2.4 million for Duohaler(R). Operating cash flow Net cash outflow from operating activities in the period was £7.9 millioncompared to a cash inflow of £1.5 million in the 6 months to 30 September 2006.At 30 September 2007, Vectura had cash and short-term deposits of £71.4 million(31 March 2007 - £77.5 million). As discussed in the Chairman and ChiefExecutive's review Vectura expects to be cash generative in the six months to 31March 2008. Anne HylandChief Financial Officer23 November 2007 RESPONSIBILITY STATEMENT We confirm that to the best of our knowledge: a) the condensed set of financial statement has been prepared inaccordance with IAS 34 "Interim Financial Reporting"; b) this report includes a fair review of the information required by theDisclosure and Transparency Directive DTR 4.2.7R (indication of important eventsduring the first six months and description of principal risks and uncertaintiesfor the remaining six months of the year); and c) this report includes a fair review of the information required by DTR4.2.8R (disclosure of related party transactions and changes therein). By order of the Board Anne HylandCompany Secretary23 November 2007 Consolidated income statement for the six months ended 30 September 2007 (unaudited) 6 months 6 months Year ended ended ended 30 September 30 September 31 March 2007 2006 2007 (unaudited) (unaudited) (audited) Notes £000 £000 £000Revenue 2 12,270 6,079 14,051Cost of sales (2,517) (1,561) (3,295) ______ ______ ______Gross profit 9,753 4,518 10,756 ______ ______ ______Research and development expenses (14,637) (6,660) (16,994) ______ ______ ______Other administrative expenses (1,694) (1,161) (2,615)Amortisation (4,786) - (1,995)Share-based compensation (1,471) (463) (1,633) ______ ______ ______Administrative expenses (7,951) (1,624) (6,243) ______ ______ ______Share of loss of associate (153) (61) (208) ______ ______ ______Other income - 199 1,423Operating loss 3 (12,988) (3,628) (11,266) ______ ______ ______ Finance income 2,137 932 2,816Finance costs (467) (2) (242) ______ ______ ______Loss before taxation (11,318) (2,698) (8,692)Taxation 4 1,696 776 1,865 ______ ______ ______Loss after taxation attributable to equity (9,622) (1,922) (6,827)holders of the company ______ ______ ______Loss per ordinary share basic and diluted 5 (3.1p) (1.5p) (4.4p) ______ ______ ______ All results are derived from continuing activities. Consolidated balance sheet at 30 September 2007 (unaudited) 30 September 30 September 31 March 2007 2006 2007 (unaudited) (unaudited) (audited) Notes £000 £000 £000ASSETSIntangible assets, including goodwill 11 138,775 2,012 146,784Property, plant and equipment 3,839 3,535 5,635Investments accounted for using the equity 1,074 - 1,228methodTrade investment 250 - 250Deferred tax asset 1,871 - 1,871Other non-current assets 428 428 428 ______ ______ ______Non-current assets 146,237 5,975 156,196 ______ ______ ______Inventories 122 - 202Trade and other receivables 6 8,740 3,278 8,230Short-term investments - - 500Cash and cash equivalents 71,422 68,614 77,029 ______ ______ ______Current assets 80,284 71,892 85,961 ______ ______ ______Total assets 226,521 77,867 242,157 ______ ______ ______LIABILITIESTrade and other payables 7 (7,988) (5,569) (8,060)Obligations under finance leases - - (410)Deferred income 8 (2,918) (4,567) (4,400)Financial liabilities 9 (3,882) - (3,216) ______ ______ ______Current liabilities (14,788) (10,136) (16,086) ______ ______ ______Deferred income 8 (6,312) (2,662) (6,888)Financial liabilities 9 (11,905) - (15,163)Deferred tax 11 (18,961) - (21,752) ______ ______ ______Non-current liabilities (37,178) (2,662) (43,803) ______ ______ ______Total liabilities (51,966) (12,798) (59,889) ______ ______ ______NET ASSETS 174,555 65,069 182,268 ______ ______ ______EQUITYShare capital 10 113 76 113Share premium 73,327 72,768 72,889Shares to be issued - 918 -Other reserves 137,657 13,322 136,186Retained loss (36,542) (22,015) (26,920) ______ ______ ______TOTAL EQUITY 174,555 65,069 182,268 ______ ______ ______ Consolidated cash flow statement for the six months ended 30 September 2007 (unaudited) 6 months 6 months Year ended ended ended 30 September 30 September 31 March 2007 2006 2007 (unaudited) (unaudited) (audited) Notes £000 £000 £000Cash flow from operating activitiesLoss before tax (11,318) (2,698) (8,692)Finance income and expense (1,670) (930) (2,574)Depreciation, amortisation and share based 7,101 1,017 4,893compensationIncrease in working capital 1,773 3,936 1,938(Decrease)/increase in deferred income (2,058) 305 (2,236)(Decrease) in financial liabilities (2,049) - -Other 153 (138) (1,235) ______ ______ ______Cash (outflow)/inflow from operating activities (8,068) 1,492 (7,906)Taxation paid (52) - -Research and development tax credits received 228 - 1,396 ______ ______ ______Net cash (outflow)/inflow from operating (7,892) 1,492 (6,510)activities ______ ______ ______Cash flows from investing activitiesCash acquired as part of Innovata - - 19,882Costs in association with acquisition of - - (2,830)InnovataInterest received 2,137 930 2,816Investment in associate - (10) (160)Purchase of property plant and equipment (366) (523) (2,438)Receipts from sale of property, plant and - - 22equipment ______ ______ ______Net cash flows from investing activities 1,771 397 17,292 ______ ______ ______ Cash flows from financing activitiesProceeds from issue of ordinary shares 438 51,985 52,143Share issue costs - (2,072) (2,072)Payment of finance lease liabilities (410) (14) (139)Interest element of payments under finance (14) (2) (10)leasesRepayment of loans - - -Interest on loans - - (3) ______ ______ ______Net cash flows from financing activities 14 49,897 49,919 ______ ______ ______(Decrease)/increase in cash and cash (6,107) 51,786 60,701equivalentsCash and cash equivalents at beginning of 77,529 16,828 16,828period ______ ______ ______Cash and cash equivalents at end of period 71,422 68,614 77,529 ______ ______ ______ Consolidated statement of changes in equity for the six months ended 30 September 2007 (unaudited) Share Share Shares to Special capital premium be issued reserve £000 £000 £000 £000At 1 April 2006 62 22,869 918 8,245 ______ ______ ______ ______Loss for the period - - - - ______ ______ ______ ______Total recognised income and expense for the - - - -periodIssue of ordinary shares 14 51,889 - -Share issue costs (2,072) - -Share-based compensation - - - -Exercise of warrants and options - 82 - - ______ ______ ______ ______At 30 September 2006 76 72,768 918 8,245Loss for the period - - - - ______ ______ ______ ______Total recognised income and expense for the - - - -periodIssue of ordinary shares 37 - (918) -Share-based compensation - - - -Exercise of warrants and options - 121 - - ______ ______ ______ ______At 31 March 2007 113 72,889 - 8,245Loss for the period - - - - ______ ______ ______ ______ Total recognised income and expense for theperiod - - - -Issue of ordinary shares - 438 - -Share-based compensation - - - - ______ ______ ______ ______At 30 September 2007 113 73,327 - 8,245 ______ ______ ______ ______ (continued from table above) Merger reserve Share-based Retained loss Total equity compensation reserve £000 £000 £000 £000At 1 April 2006 3,211 1,403 (20,093) 16,615 ______ ______ ______ ______Loss for the period - - (1,922) (1,922) ______ ______ ______ ______Total recognised income and expense for the - - (1,922) (1,922)periodIssue of ordinary shares - - - 51,903Share issue costs - - - (2,072)Share-based compensation - 463 - 463Exercise of warrants and options - - - 82 ______ ______ ______ ______At 30 September 2006 3,211 1,866 (22,015) 65,069Loss for the period - - (4,905) (4,905) ______ ______ ______ ______Total recognised income and expense for the - - (4,905) (4,905)periodIssue of ordinary shares 121,694 - - 120,813Share-based compensation - 1,170 - 1,170Exercise of warrants and options - - - 121 ______ ______ ______ ______At 31 March 2007 124,905 3,036 (26,920) 182,268Loss for the period - (9,622) (9,622) ______ ______ ______ ______ Total recognised income and expense for the - - (9,622) (9,622)period Issue of ordinary shares - - - 438Share-based compensation - 1,471 - 1,471 ______ ______ ______ ______At 30 September 2007 124,905 4,507 (36,542) 174,555 ______ ______ ______ ______ Notes to the condensed set of financial statements 1. Basis of preparation of interim financial statements The unaudited interim financial statements have been prepared in accordance withInternational Financial Reporting Standards and International AccountingStandards (collectively IFRS) as adopted by the European Union. Details of theaccounting policies applied are those set out in Vectura Group plc's AnnualReport for the year ended 31 March 2007. These interim financial statementshave been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting" they do not include all the statements required for full annual financial statements, and should be read in conjunction with theconsolidated financial statements of the group as at the year ended 31 March2007. These interim financial statements are unaudited and do not constitute statutoryaccounts of the group as defined in section 240 of the Companies Act 1985. Theauditors, Deloitte & Touche LLP, have carried out a review of the financialinformation in accordance with the guidance contained in International Standardon Review Engagements (UK and Ireland) 2410 'Review of Interim FinancialInformation Performed by the Independent Auditor of the Entity' and their reviewreport is set out at the end of this report. The financial information for the year ended 31 March 2007 has been extractedfrom the group's published financial statements for that year, which contain anunqualified audit report from Ernst & Young LLP, which did not containstatements under section 237of the Companies Act 1985 and which have been filedwith the Registrar of Companies. 2. Revenue 6 months 6months Year ended ended ended 30 September 30 September 31 March 2007 2006 2007Revenue by category: £000 £000 £000Product licensing 2,182 2,327 4,592Technology licensing 860 809 1,713Pharmaceutical Development Services 4,138 2,943 5,838Royalties 4,450 - 1,443Product sales 640 - 465 ______ ______ ______ 12,270 6,079 14,051 ______ ______ ______ 6 months 6months Year ended ended ended 30 September 30 September 31 March 2007 2006 2007Revenue by customer location: £000 £000 £000United Kingdom 4,511 848 3,246Rest of Europe 2,735 5,231 9,371United States of America 4,839 - 1,397Rest of World 185 - 37 ______ ______ ______ 12,270 6,079 14,051 ______ ______ ______ Interest income is disclosed separately in the income statement and has beenexcluded from this note. For management purposes the group is currently organised into one businesssegment, which is the development of pharmaceutical products. Since this is theonly primary reporting segment, no further information has been shown. Allrevenue and losses before taxation originate in the United Kingdom. 3. Operating loss This is stated after charging/(crediting): 6 months 6months Year ended ended ended 30 September 30 September 31 March 2007 2006 2007 £000 £000 £000Amortisation of intangibles 4,786 - 1,995Depreciation of property, plant and equipment- owned 829 547 1,242- held under finance leases and hire purchase contracts 15 7 23Share-based compensation 1,471 463 1,633Share of loss of associate (after taxation) 153 - 208 Auditor's remuneration:- Audit fees to Ernst & Young LLP - 6 71- Audit related services to Deloitte & Touche LLP 15 - -- Other services to Ernst & Young LLP 47 30 120- Other services to Deloitte & Touche LLP 30 - - Operating lease rentals:- land and buildings 395 174 456- plant and machinery 76 39 86Net foreign exchange (gain)/loss (73) 70 32 ______ ______ ______ 4. Taxation 6 months 6months Year ended ended ended 30 September 30 September 31 March 2007 2006 2007 £000 £000 £000Current income tax Current income tax charge (52) - (41)Utilisation of Innovata tax losses (777) - (130)Research and development tax credits 1,185 776 1,437 ______ ______ ______ 356 776 1,266Deferred income tax:Deferred tax relating to 28% of amortisation charge 1,340 - 599 ______ ______ ______ 1,696 776 1,865 ______ ______ ______ Utilisation of Innovata tax losses is a non-cash charge which will be charged tothe income statement until the estimated tax losses of £88 million acquired withthe business are utilised. The utilisation of these tax losses will reduce thegoodwill acquired with the business by an amount equivalent to the tax lossesutilised each year. Included in the research and development tax credits aboveis £957,000 yet to be received. 5. Loss per ordinary share The calculation of loss per share is based on the following losses and number ofshares: 6 months 6months Year ended ended ended 30 September 30 September 31 March 2007 2006 2007Retained loss for the period (£000) (9,622) (1,922) (6,827)Weighted average number of ordinary shares (No. 000) 315,106 129,038 155,205Loss per share (3.1p) (1.5p) (4.4p) ______ ______ ______ The loss per share is based on the weighted average number of shares in issueduring the period. IAS 33, "Earnings per Share", requires presentation ofdiluted earnings per share when a company could be called upon to issue sharesthat would decrease net profit or increase net loss per share. No adjustment hasbeen made to the basic loss per share, as the exercise of share options andwarrants would have the effect of reducing the loss per ordinary share, and istherefore not dilutive. 6. Trade and other receivables 30 September 30 September 31 March 2007 2006 2007 £000 £000 £000Trade receivables 3,853 561 2,099Other receivables 2,223 2,096 14Prepayments and accrued income 2,497 359 5,538VAT recoverable 167 262 579 ______ ______ ______ 8,740 3,278 8,230 ______ ______ ______ 7. Trade and other payables 30 September 30 September 31 March 2007 2006 2007 £000 £000 £000Trade payables 1,435 1,156 1,063Other taxes and social security costs 342 236 416Other payables 408 - 438Accruals 5,803 4,177 6,143 ______ ______ ______ 7,988 5,569 8,060 ______ ______ ______ 8. Deferred income Deferred income relates to amounts received under licensing agreements whereVectura Group plc continues to provide services to these licensing partners overa period of time. Revenue arising from milestone receipts under such licensingagreements is recognised over the period of time the services are beingprovided. Deferred income is as follows: 30 September 30 September 31 March 2007 2006 2007 £000 £000 £000Amounts due in more than one year 6,312 2,662 6,888Amounts due within one year 2,918 4,567 4,400 ______ ______ ______ 9,230 7,229 11,288 ______ ______ ______ 9. Financial liabilities 6 months 6 months Year ended ended ended 30 September 30 September 31 March 2007 2006 2007 £000 £000 £000Opening balance 18,379 - -Acquired as part of Innovata - - 18,657Utilised (3,046) - (507)Interest 454 - 229 ______ ______ ______Closing balance 15,787 - 18,379 ______ ______ ______Due after more than one year 11,905 - 15,163Due within one year 3,882 - 3,216 ______ ______ ______Closing balance 15,787 - 18,379 ______ ______ ______ 10. Share capital 30 September 2007 30 September 2006 £000 No.000 £000 No.000Authorised:Ordinary shares of 0.025p each 110 441,200 65 261,200Redeemable preference shares of £1 each 34 34 34 34 ______ ______ ______ ______Allotted, called up and fully paid:Ordinary shares of 0.025p each 79 315,446 42 168,581Redeemable preference shares of £1 each 34 34 34 34 ______ ______ ______ ______ (continued from table above) 31 March 2007 £000 No.000Authorised:Ordinary shares of 0.025p each 110 441,200Redeemable preference shares of £1 each 34 34 ______ ______Allotted, called up and fully paid:Ordinary shares of 0.025p each 79 314,518Redeemable preference shares of £1 each 34 34 ______ ______ Between 1 April 2007 and 30 September 2007 the company issued 816,660 (2006 -370,831) ordinary shares of 0.025p each on exercise of employee share options atan average exercise price of 53.6p per share (2006 - 22.1p). 11. Innovata acquisition On 18 January 2007, Vectura Group plc ("Vectura") acquired Innovata plc("Innovata") and its subsidiaries for a consideration of £123.6 million. Thiswas satisfied by the issue of 143.8 million new Ordinary shares in Vecturawhereby Innovata's share capital was acquired by Vectura and Innovatashareholders were allotted new shares in Vectura. Innovata earned revenues of £8.3m for the six months to 30 September 2007 (yearto 31 March 2007 - £23.1m), and achieved an operating profit of £2.0m (year to31 March 2007 - £4.7 million before exceptional costs). Innovata retainedprofit for the six months to 30 September 2007 was £3.3m (year to 31 March 2007- £5.5 million loss). An analysis of the EBITDA for the two operations for theperiod is shown below: 6 months 6 months 6 months ended ended ended 30 September 30 September 30 September 2007 2007 2007 Group Vectura Innovata excld. IOV excld. VEC £000 £000 £000Revenues 12,270 3,996 8,274Cost of sales (2,517) (813) (1,704) ______ ______ ______Gross profit 9,753 3,183 6,570Research and development costs (13,946) (11,545) (2,401)Administrative costs (1,694) (1,392) (302) ______ ______ ______EBITDA (5,887) (9,754) 3,867Depreciation (844)Amortisation (4,786)Share-based compensation (1,471)Net interest income 1,670 ______Loss before taxation (11,318)Taxation 1,696 ______Loss after taxation (9,622) ______ In accordance with International Financial Reporting Standard 3 "BusinessCombinations", the fair values assigned to the identifiable assets, liabilitiesand contingent liabilities acquired with the Innovata business on 18 January2007 were determined provisionally on that date and these provisional estimatesmay be subject to revision in the period to 17 January 2008. INDEPENDENT REVIEW REPORT TO VECTURA GROUP PLC We have been engaged by the company to review the condensed set of financialstatements in the half-yearly financial report for the six months ended 30September 2007 which comprises the income statement, the balance sheet, thestatement of changes in equity, the cash flow statement and related notes 1 to11. We have read the other information contained in the half-yearly financialreport and considered whether it contains any apparent misstatements or materialinconsistencies with the information in the condensed set of financialstatements. This report is made solely to the company in accordance with InternationalStandard on Review Engagements 2410 issued by the Auditing Practices Board. Ourwork has been undertaken so that we might state to the company those matters weare required to state to them in an independent review report and for no otherpurpose. To the fullest extent permitted by law, we do not accept or assumeresponsibility to anyone other than the company, for our review work, for thisreport, or for the conclusions we have formed. Directors' responsibilities The half-yearly financial report is the responsibility of, and has been approvedby, the directors. The directors are responsible for preparing the half-yearlyfinancial report in accordance with the Disclosure and Transparency Rules of theUnited Kingdom's Financial Services Authority. As disclosed in note 1, the annual financial statements of the group areprepared in accordance with International Financial Reporting Standards asadopted by the European Union. The condensed set of financial statementsincluded in this half-yearly financial report has been prepared in accordancewith International Accounting Standard 34, "Interim Financial Reporting", asadopted by the European Union. Our responsibility Our responsibility is to express to the company a conclusion on the condensedset of financial statements in the half-yearly financial report based on ourreview. Scope of the 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 inquiries, 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, wedo not express an audit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believethat the condensed set of financial statements in the half-yearly financialreport for the six months ended 30 September 2007 is not prepared, in allmaterial respects, in accordance with International Accounting Standard 34 asadopted by the European Union and the Disclosure and Transparency Rules of theUnited Kingdom's Financial Services Authority. Deloitte & Touche LLP Chartered Accountants and Registered Auditor Cambridge, UK 23 November 2007 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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