14th Apr 2010 07:00
AGI Therapeutics, plc
Preliminary financial results for the year ended 31 December 2009
AGI reports solid cash position, reduced cost base and progress
on new product pipeline
Dublin, Ireland,14th April 2010 - AGI Therapeutics plc ("AGI" or the "Company"), a specialty pharmaceutical company, today reports preliminary audited financial results for the year ended 31 December 2009, and provides a business update to shareholders.
Financial highlights
·; Cash and short-term deposits at 31 December 2009 of $12.0 million, (2008: $23.6 million)
·; Research and Development (R&D) spend of $8.3 million (2008:$15.9 million)
·; Reduced net loss of $10.6 million (2008: $18.2 million)
·; Loss per ordinary share of 15.8 cents (2008: 27.0 cents)
Operational Summary
In May 2009, we announced that we were discontinuing the development of our lead development programme, Rezular™, in the broad indication of diarrhoea-predominant irritable bowel syndrome (IBS-D) following disappointing results from our Phase III ARDIS-1 efficacy study. In conjunction with this decision we terminated the ongoing Phase III ARDIS-3 safety study.
In September 2009, we announced a new business strategy for the Company, focusing onthe development of specialty products for unmet medical needs, without being restricted to any specific therapeutic area. In particular, we announced our intention to pursue products in specialty niche or "orphan" designated markets that represent an attractive return on investment for a company of our size.
We have commenced the implementation of this new business strategy and restructured the activities of the Company accordingly.
New Product Pipeline
·; We have conducted extensive commercial, technical and intellectual property (IP) due diligence on a number of external product candidates with a view to in-licensing in order to build a robust and enhanced product pipeline. While some opportunities have been rejected for various regulatory, clinical or commercial reasons, we continue to actively pursue discussions on selected promising candidates with the objective of adding one or more new programmes to our portfolio during 2010. These products will meet our criteria of targeting unmet medical needs in specialty markets and will have potential in-market sales which provide an attractive return on investment for AGI.
·; We have also applied the same technical, commercial and risk-return analysis to our internal product pipeline:
o As outlined in September of 2009, we completed a comprehensive review of the data from ARDIS-1, our Phase III clinical efficacy study of Rezular in IBS-D. We subsequently met with the US Food and Drug Administration (FDA) and key opinion leaders to explore future development possibilities for this product. While we believe, based on an analysis of the ARDIS data, that there may be potential to develop this product in a sub-set of severe IBS-D patients, we do not at this time intend to fund the development of Rezular in any IBS-related indication, but will determine if there is a potential to out-license this opportunity. We continue to evaluate the potential benefits of Rezular in a number of chronic diarrhoea indications that represent interesting specialty and potential orphan indications and proof of concept trials are currently under consideration.
o We have also commenced pre-clinical evaluation of Rezular in a new, non-gastrointestinal (GI) therapeutic area. The unique pharmacology and mechanism of action of this drug may provide a valuable therapeutic benefit in this orphan indication. These studies are ongoing and we await data before deciding upon next steps.
o We continue to actively seek and engage with potential development partners for the other products in our pipeline. These include: AGI-004, transdermal mecamylamine for the treatment of Chemotherapy-Induced Diarrhoea (CID), AGI-010, a controlled-release omeprazole directed to nocturnal acid breakthrough (NAB), AGI-022, a targeted and controlled-release aminosalicylate for ulcerative colitis and AGI-006, an upper-GI prokinetic agent.
We are pleased to announce significant progress in establishing an IP platform in relation to our aminosalicylate (ASA) delivery system. Specifically a notice of allowance of claims has been granted in the US for our lead patent application and we expect progress shortly on the European Patent Office equivalent.
Operations review: costs reduced
In the last quarter of 2009 and continuing into 2010, we took action to reset the cost base of the Company and align it more closely with the earlier stage of development of our product pipeline.
Specifically;
·; We closed our US office, reducing our overall headcount, and have established a panel of regulatory and clinical consultants to provide expert input into our programmes. In particular we are pleased to have retained Dr. David Young on our Board and look forward to his advice and guidance in relation to FDA interactions.
·; We made significant changes to our remaining cost structure. Our day-to-day running costs have been reduced by more than half as a result of these changes.
·; We terminated all ongoing clinical programmes associated with Rezular in IBS-D and will in future only invest in programmes designed to provide proof of concept data for potential new orphan and unmet need indications for this compound.
·; We will limit ongoing spending on our IP portfolio (patents and patent applications) to those products that are part of our new pipeline or where we believe there is good possibility of partnering in the future.
As a result of these efforts, at the end of 2009 we had a cash balance of $12.0 million which we intend to invest in our new development pipeline. It is our intention to progress a selected number of projects to a stage where they will have tangible worth that will enhance shareholder value.
Commenting on the results, Dr. John Devane, CEO of AGI, said:
"While 2009 proved to be a very difficult year for AGI, we have successfully resized our operations and are implementing a strategy to rebuild our pipeline. While we have yet to announce the details of our new product pipeline, we have already identified a number of attractive opportunities on which we are undertaking rigorous technical and commercial due diligence, and believe this will result in a valuable pipeline of products that will re-build value in our business. ''
Contact Information:
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AGI Therapeutics plc. |
Tel: +353 1 449 3254 |
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David Kelly, Chief Financial Officer |
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Davy John Frain |
Tel: +353 1 614 8761 |
For further information: www.agitherapeutics.com
Notes to Editors:
About AGI Therapeutics plc
AGI is a specialty pharmaceutical company which is focused on the development and commercialisation of differentiated specialty drug products to treat unmet medical needs, including conditions which qualify for orphan drug status.
The Company has a portfolio of product candidates and aims to bring its products to the market either directly or through out-licensing or other partnering arrangements.
AGI's common shares are listed on the Alternative Investment Market of the London Stock Exchange (AIM) and on the Irish Enterprise Exchange of the Irish Stock Market (IEX) as AGI.
For further information please see www.agitherapeutics.com.
Statements contained within this press release may contain forward-looking comments which involve risks and uncertainties that may cause actual results to vary from those contained in the forward-looking statements. In some cases, you can identify such forward-looking statements by terminology such as 'may', 'will', 'could', 'forecasts', 'expects', 'plans', 'anticipates', 'believes', 'estimates', 'predicts', 'potential', or 'continue'. Predictions and forward-looking references in this press release are subject to the satisfactory progress of research which is, by nature, unpredictable. Forward projections reflect management's best estimates based on information available at the time of issue.
AGI Therapeutics, plc
Chairman's and Chief Executive's review:
Overview
The first half of 2009 was dominated by activities associated with progressing AGI's lead product, Rezular, for the treatment of IBS-D. We received the top-line results from the ARDIS-1 study in mid-May. The study did not show statistically significant differences between drug and placebo in the primary endpoint of patient-reported adequate relief of IBS symptoms. Statistically significant evidence favouring Rezular treatment was achieved in a number of secondary endpoints, particularly those relating to aspects of diarrhoea, stool frequency and in the majority of sub-categories of quality-of-life (IBS-QOL) scores and in the overall IBS-QOL score. There were no statistically significant differences between treatments in adequate relief of pain/discomfort or change in severity of pain.
Based on analysis of these data, we did not believe that the results of ARDIS-1 would meet the current regulatory requirements for an effective therapy for the broad IBS-D population and therefore decided to cease development of Rezular in this indication.
New Business Strategy
Following a full review of our business and pipeline, in September 2009 we announced our new business strategy that is now being pursued in 2010. We are leveraging our strengths in product and clinical development to focus on developing specialty products for areas where unmet medical needs exist. This means that we intend to concentrate our development efforts and spend on market segments where the clinical and regulatory route to approval may be less costly and where commercialisation can be successfully undertaken by a smaller and more focused specialty company. Some of these indications will, we believe, meet the criteria for orphan drug status under the current guidelines of the FDA and other regulatory bodies.
As part of this process, we undertook an analysis of our existing pipeline to identify if new development paths existed for our products, and as a result announced that we would consider future development efforts on alternative indications for Rezular. We continue to recognise that Rezular has a unique and novel pharmacology which may have utility in indications outside gastroenterology. We have consulted directly with expert clinicians in one non-GI therapeutic area of interest and have commenced robust pre-clinical studies to test the potential benefits of Rezular in this indication. We are not yet at liberty to disclose the therapeutic area at this time due to ongoing patenting activities. We have also identified and are considering the potential of other development pathways for Rezular in niche GI conditions which have chronic diarrhoea as a primary symptom.
Since closing down the Phase III Rezular programme, we have spent significant time and effort in evaluating potential new additions to our pipeline. For each identified opportunity we have applied similar assessment criteria. The product should be in a specialist niche market, preferably one where it will receive "orphan drug" status in the US and/or Europe, and be capable of being developed by AGI to a significant value-generating inflection point. Other important features assessed include market exclusivity, product differentiation, regulatory pathway, commercial sales potential and IP protection.
In recent months we have entered into full due diligence on a number of potential opportunities. Inevitably the majority of the products evaluated did not meet all the above criteria. Nevertheless, a selected number of opportunities have been advanced and we are optimistic that we will bring one or more new products into our pipeline during 2010.
With regard to products already in our pipeline that no longer meet our criteria for internal investment, we will now seek to realise value through potential out-licensing or sale of these products and associated IP assets.
While the failure of the ARDIS Phase III programme has been a significant challenge, we believe that our actions in the latter months of 2009 to restructure the Company, establish a new viable and attractive business strategy, and conserve cash resources were prudent actions taken in the best interests of our shareholders.
We believe that current trends in the pharmaceutical industry auger well for companies such as ours. Large pharmaceutical companies around the globe are cutting back on internal development activities and will rely more on in-licensing products with established clinical benefit, and with an increasing focus on specialty rather than primary care-driven markets. We believe that a sustainable business can be created through targeted investment and building a portfolio of specialty products which will ultimately be out-licensed to other companies. The key challenge is to select those opportunities that are both attractive from a risk-reward perspective and can be progressed by AGI to a stage where value can be realised, for instance, through a transaction with a third party. We believe that successful execution of our strategy and playing to the strengths of our management team will drive the future growth of our Company and create significant value for you, our shareholders.
Dr. Ronan Lambe Dr. John Devane
Chairman Chief Executive Officer
Dublin, 14 April 2010
AGI Therapeutics, plc
Financial review
for the year ended 31 December 2009
Revenue
AGI recorded its first revenues as a result of a license agreement signed in September 2006, with Axcan Pharma Inc, a Canadian headquartered specialty pharmaceutical company with a focus on GI diseases. An initial milestone payment of $1.5 million has been recognised on a straight line basis over approximately three years, in conjunction with the term of the underlying development programme. For the year to 31 December 2009, a total of $289,000 was recognised as revenue in respect of this licence agreement (2008: $577,000). This license agreement has now been recognised in full. In August 2009, Axcan and AGI terminated this agreement and all product rights have reverted to AGI.
Research and development expenses
R&D expenses for the year ended 31 December 2009 were $8.3 million (2008: $15.9 million). During 2009 and 2008, the Company was conducting a Phase III pivotal clinical programme of Rezular™ for the treatment of IBS-D (ARDIS). This programme accounted for over 95% of direct R&D expenses in 2009 and 2008. In May 2009, the Phase III programme was terminated when headline data from the ARDIS study showed that Rezular had not met its primary efficacy endpoint.
General and administrative expenses
General and administrative (G&A) expenses in 2009 were $2.6 million (2008: $3.5 million). The reduction in G&A expenses is due to the Company's efforts to reduce its cost base following the termination of the ARDIS programme.
Restructuring and impairment charges
For the year ended 31 December 2009, the Company incurred $321,000 (2008: Nil), relating to the termination of certain positions, as well as the impairment of certain acquired patents and computer and office equipment, in conjunction with the closure of our US office.
Interest income and expense
The Company earned interest on its cash balances, primarily the proceeds of the IPO during 2006. This amounted to $140,000 (2008: $1.0 million). The decline in interest income reflects both the declining interest rates available for deposits as well as the declining cash balances available for deposit.
Other income/(expenses) comprise foreign exchange gains/(losses) of $53,000 (2008: ($362,000)).
Taxation
The Company has incurred losses to date, and no tax charge arises for 2009 or 2008.
Share based compensation expense
During 2009, the Company issued 3,830,000 (2008: 1,410,000) share options to certain employees. The Company accounts for the fair value of option grants as a charge in the income statement, using the Black-Scholes option-pricing model. A charge of $0.8 million (2008: $1.5 million) was recognised in 2009 in respect of share based compensation expense, disclosed within research and development and general and administration expenses.
AGI Therapeutics, plc
Condensed Consolidated Income Statement
for the year ended 31 December 2009
Note 2009 2008
$'000 $'000
Revenue - continuing operations 320 577
______ ______
Operating expenses
Research and development expenses
(share based payment charge of $330,000
(2008: $853,000)) (8,271) (15,937)
General and administrative expenses
(share based payment charge of $477,000
(2008: $685,000)) (2,559) (3,473)
Restructuring and impairment charges 3 (321) -
______ ______
Loss from operating activities - continuing
operations (10,831) (18,833)
______ ______
Finance income/finance expense
Interest income 140 992
Other income/(expense) 53 (362)
______ ______
Net finance income 193 630
______ ______
Loss before income tax (10,638) (18,203)
Income tax - -
______ ______
Net loss for the year - attributable to equity
holders of the Company (10,638) (18,203)
Loss per ordinary share
Basic and diluted loss per ordinary share 4 (15.8) (27.0)
AGI Therapeutics, plc
Condensed Consolidated Statement of Comprehensive Income/(Loss)
For the year ended 31 December 2009
2009 2008
$'000 $'000
Net loss for the year (10,638) (18,203)
______ ______
Total comprehensive income/(loss) for the year (10,638) (18,203)
AGI Therapeutics, plc
Condensed Consolidated Balance Sheet
at 31 December 2009
Note 2009 2008
$'000 $'000
Non-current assets
Property, plant and equipment 3 2 34
Intangible assets 3 1,549 1,793
______ ______
Total non-current assets 1,551 1,827
______ ______
Current assets
Other current assets 75 163
Cash and cash equivalents 11,972 23,577
______ ______
Total current assets 12,047 23,740
______ ______
Total assets 13,598 25,567
Shareholders' equity
Share capital 992 992
Share premium 75,194 75,194
Share based compensation reserve 4,994 4,187
Retained deficit (68,066) (57,428)
______ ______
Total shareholders' equity 13,114 22,945
______ ______
Current liabilities
Trade and other payables 484 2,622
______ ______
Total current liabilities 484 2,622
______ ______
Total liabilities 484 2,622
______ ______
Total shareholders' equity and liabilities 13,598 25,567
AGI Therapeutics, plc
Condensed Consolidated Statement of Cash Flows
for the year ended 31 December 2009
2009 2008
$'000 $'000
Loss for the year (10,638) (18,203)
Adjustments to reconcile loss to net cash used in
operating activities:
Depreciation of property, plant and equipment 22 37
Amortisation of intangible assets 143 143
Interest income (140) (992)
Foreign currency (gain)/(loss) (53) 362
Impairment of intangible assets and property, plant
and equipment 111 -
Share based payment expense 807 1,538
______ ______
Operating cash outflow before changes
in working capital (9,748) (17,115)
Decrease/(increase) in other current assets 89 291
(Decrease)/increase in trade and other payables (2,138) (5,484)
______ ______
Cash absorbed by operations (11,797) (22,308)
Interest received 139 1,227
Tax paid - (263)
______ ______
Net cash outflow from
operating activities (11,658) (21,344)
______ ______
Cash flows from investing activities
Acquisition of intangible assets - (221)
______ ______
Net cash used in investing activities - (221)
______ ______
Net decrease in cash and cash equivalents (11,658) (21,565)
Cash and cash equivalents at the beginning
of the year 23,577 45,504
Effect of foreign exchange rate changes 53 (362)
______ ______
Cash and cash equivalents at the
end of the year 11,972 23,577
AGI Therapeutics, plc
Condensed Consolidated statement of changes in shareholders' equity
for the year ended 31 December 2009
Ordinary Share Based
Number Share Share Compensation Retained Total
of Shares Capital Premium Reserve Deficit Amount
$'000 $'000 $'000 $'000 $'000
Balance at 1 January 2008 67,412,783 992 75,194 2,649 (39,225) 39,610
Comprehensive income/(loss):
Net loss for the year - - - - (18,203) (18,203)
Other comprehensive income - - - - - -
Total comprehensive income/(loss) - - - - - (18,203)
Share-based compensation - - - 1,538 - 1,538
Balance at 31 December 2008 67,412,783 992 75,194 4,187 (57,428) 22,945
Comprehensive income/(loss):
Net loss for the year - - - - (10,638) (10,638)
Other comprehensive income - - - - - -
Total comprehensive income/(loss) - - - - - (10,638)
Share-based compensation - - - 807 - 807
Balance at 31 December 2009 67,412,783 992 75,194 4,994 (68,066) 13,114
AGI Therapeutics, plc
Notes to the condensed consolidated preliminary financial information
for the year ended 31 December 2009
1 Basis of preparation
The condensed consolidated preliminary financial information included in the preliminary financial results announcement, which should be read in conjunction with the 2008 Annual Report, has been prepared in accordance with the measurement principles of International Financial Reporting Standards ("IFRS") as adopted by the European Union ("EU"), and as effective at 31 December 2009. The consolidated financial statements of the Company for the prior year are available on the Company's website http://www.agitherapeutics.com.
The condensed consolidated preliminary financial information presented herein does not constitute the Company's statutory financial statements for the years ended 31 December 2009 and 2008, within the meaning of the Companies Acts, 1963 to 2009 but is derived from those financial statements. The statutory financial statements for the year ended 31 December 2009 will be finalised on the basis of the financial information presented by the directors in this preliminary results announcement, and together with the independent auditor's report thereon, will be filed with the Irish Registrar of Companies following the Company's Annual General Meeting and will also be available on the Company's website. Statutory financial statements for the year ended 31 December 2008 have been filed with the Irish Registrar of Companies. The auditor's report on those financial statements was unqualified.
The financial information is presented in US dollars rounded to the nearest thousand, being the functional currency of the parent company and its subsidiaries. It has been prepared on the historical cost basis of accounting, except for share based payments, which are based on fair value determined at the grant date of the relevant share option.
The condensed consolidated preliminary financial information includes the results and financial position of the Company and all of its subsidiary undertakings. All significant intercompany account balances, transactions, and any unrealised gains and losses or income and expenses arising from intercompany transactions have been eliminated in preparing the financial information.
The preparation of the condensed consolidated preliminary financial information requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. Actual results could differ materially from these estimates. In preparing this financial information, the significant judgements made by management in applying the Company's accounting policies and the key sources of estimation uncertainty are the same as those that applied to the consolidated financial statements as at and for the year ended 31 December 2008.
The accounting policies applied in the condensed consolidated preliminary financial information are the same as those applied in the consolidated financial statements as at and for the year ended 31 December 2008, as set out on pages 32 to 36 of the 2008 Annual Report, except for the application of new standards as explained below.
The following new standards and amendments to standards are mandatory for the first time for the financial year beginning 1 January 2009.
AGI Therapeutics, plc
Notes(continued)
1 Basis of preparation (continued)
·; IFRS 8 - Operating Segments. We adopted IFRS 8 which replaces IAS 14 - Segmental Reporting ("IAS 14"), for the year ended 31 December 2009. IFRS 8 requires a "management approach" under which segment information is presented on the same basis as that used for internal reporting purposes. IAS 14 required identification of two sets of segments - one based on business units and the other on geographical areas. IFRS 8 requires additional disclosures around identifying segments and their products and services. Our operations are organised into one business unit, the development of drug products. There has been no change to the operating segment as a result of the adoption of IFRS 8 and the reportable segment is consistent with that previously reported under the primary business segment format of the segment reporting under IAS 14.
·; IAS 1 (revised) - Presentation of Financial Statements. The presentation of our primary financial statements has been updated to reflect the requirements of IAS 1 (revised), effective from 1 January 2009. Accordingly, we now present two performance statements: an income statement and a statement of comprehensive income/(loss). Also, the revised standard includes the statement of changes in shareholders' equity as a primary statement, rather than as a note to the financial statements.
The Board of Directors, approved the condensed consolidated preliminary financial information for the year ended 31 December 2009 on 13 April 2010.
2 Going concern
The directors are satisfied that the Company has sufficient cash resources to support its research programmes for a period of twelve months from the date of approval of this financial information and therefore the Company can continue to trade during this period. Consequently, the directors have adopted the going concern basis in the preparation of the financial information.
3 Restructuring and impairment charges
For the year ended 31 December 2009, the Company incurred $321,000 (2008: Nil), relating to the termination of certain positions, as well as the impairment of certain acquired patents and computer and office equipment, in conjunction with the closure of our US office.
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2009 $000 |
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2008 $000 |
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Severance and other expenses |
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210 |
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- |
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Impairment of intangible assets |
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101 |
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- |
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Impairment of property, plant and equipment |
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10 |
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- |
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Total restructuring and impairment charges |
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321 |
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- |
AGI Therapeutics, plc
Notes(continued)
4 Loss per ordinary share
Basic loss per share is computed by dividing the loss for the period available to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period. Diluted loss per share is computed by dividing the loss for the period, by the weighted average number of ordinary shares outstanding and, when dilutive, adjusted for the effect of all potentially dilutive shares, including stock options, on an as-if-converted basis.
The following table sets forth the computation for basic and diluted loss per share for the year ended 31 December 2009 and 2008:
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2009 $000 |
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2008 $000 |
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Numerator: |
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Loss attributable to ordinary shareholders |
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(10,638) |
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(18,203) |
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Denominator: |
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Denominator for basic-weighted average number of shares |
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67,412,783 |
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67,412,783 |
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Basic and diluted loss per share: |
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Basic and diluted loss per share (US$ cents) |
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(15.8) |
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(27.0) |
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For the years ended 31 December 2009 and 2008, there was no difference in the weighted average number of ordinary shares used for the basic and diluted net loss per ordinary share computation, as the effect of all potentially dilutive shares are anti-dilutive due to the existence of net losses of the Company. At 31 December 2009, there were share options outstanding of 6,576,948 (2008: 6,207,000) which could potentially have a dilutive impact in the future, but which were anti-dilutive in 2009 and 2008.
5 Related party transactions
In January 2008 the Company acquired intellectual property from J. Dev, a company owned and controlled by John Devane, a director of the Company, for consideration of $221,000.
Frank Kenny, John O'Sullivan and Peter Sandys are directors of the company and are board nominees of Delta Partners, ACT Venture Capital and Seroba Bioventures respectively. Fees of $24,820 annually are paid by the company to each of Delta, ACT and Seroba in respect of their nominees' appointment.
Remuneration of key management personnel, defined as the executive directors of the Company, totaled $1,816,000 (2008: $2,668,000) during the year as follows:
AGI Therapeutics, plc
Notes (continued)
5 Related party transactions
2009 2008
$'000 $'000
Wages, salaries and bonuses 1,066 1,361
Post employment benefits - contributions to defined
contribution pension plan 122 156
Share-based compensation expense 628 1,151
_____ _____
Total remuneration of key management personnel 1,816 2,668
2009 2008
Number Number
Number of share options granted
during the period 3,410,000 1,130,000
Number of share options outstanding
at the year-end 6,576,948 5,055,342
No loans, quasi-loans or other guarantees have been given to any of the directors during the year (2008: nil) and no such transactions existed at the year end.
6 Subsequent events
There were no events subsequent to the balance sheet date, requiring adjustment to, or disclosure in, the condensed consolidated financial information.
Related Shares:
Potentially Ai