28th Feb 2006 07:02
Evolutec Group PLC28 February 2006 For immediate release 28 February 2006 EVOLUTEC GROUP PLC ("Evolutec" or "Company") PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2005 Evolutec Group plc (AIM: EVC), the biopharmaceutical company developing novelproducts for the treatment of allergic, inflammatory and autoimmune diseases, ispleased to announce its preliminary results for the year ended 31 December 2005. Highlights • Delivered a positive Phase IIa clinical result in allergic rhinitis (hay fever) with lead development candidate rEV131, showing efficacy (p25%), even at low doses. In AMI the heart muscle is damaged followingcoronary thrombosis and the objective of therapy is to reduce this damage. Theapproved thrombolytic drugs re-establish blood flow following heart attack butdo not address damage to the heart tissue. There are approximately one millioncases of acute myocardial infarction per annum in the USA making this asubstantial market opportunity with unmet need. rEV576 has a circulatinghalf-life that makes it particularly suitable for acute conditions. There isconsiderable scientific interest in this molecule and we aim to utilize this inthe planning of further preclinical work. The AMI result emphasizes thepotential for rEV576 in acute cardiovascular indications such as acutemyocardial infarction, stroke and cardiopulmonary bypass. On the basis of the rEV576 results Evolutec has commenced work on processdevelopment associated with the manufacture of this molecule. It is ourintention to appoint a contract manufacturer to produce cGMP material enablingprogress to the clinic on the successful completion of the pre-clinicalprogramme. rEV598 - POTENTIAL IN CHEMOTHERAPY INDUCED NAUSEA AND VOMITING rEV598 binds serotonin and histamine and is targeted at the chemotherapy inducednausea and vomiting (CINV) market. In vitro work has previously demonstrated thepotential for additive effects with the commercial standard Lanreotide. The CINVmarket is valued at $1.8 billion and unmet need exists because the existingtherapies only partially relieve chronic sickness following chemotherapy. Thisis because several receptors and messenger molecules are involved in driving thesymptoms associated with CINV. rEV598, because it targets serotonin andhistamine, the two messenger molecules involved in CINV, has the potential tomeet this unmet need. Towards the end of 2005 work was initiated to producematerial for these studies in 2006 and plans made to undertake a preclinicalstudy in emesis. Evolutec now has two preclinical candidates in different therapeutic areas wherethere is substantial unmet medical need. PATENTS The intellectual assets of your company were strengthened in 2005. The overarching vaso-active amine binding protein patent was granted in Europe andChina. The screening method patent was granted in Europe and use patents weregranted for rhinitis (Australasia) and conjunctivitis (Australasia and NewZealand). PERSONNEL Successful recruitment enabled the company to establish a strong middlemanagement structure within the business. Wynne Weston-Davies and John Hamerwere joined by Ian Evans and Paul Whyte, directors of Research and BusinessDevelopment respectively. Ian is a molecular biologist with protein expertisewho worked previously for Zeneca and Celltech. He will lead collaborativeresearch programmes. Paul Whyte has a strong track record in businessdevelopment and previously worked for Avidex and Cancer Research UK. Paul willlead our partnering activities. In addition, new support staff in the financeand development areas joined the business and we now have 11 full time employeesin Reading. LOOKING FORWARD Evolutec remains committed to an outsourced business model and tightly managedcost base. In 2006 projected expenditure will approximately double with threePhase II trials, enhanced investment in the preclinical product developmentcandidates and a modest investment in collaborative research. The bulk of ourinvestment will continue to be around rEV131 where in addition to the previouslydisclosed clinical studies we also intend to undertake a Phase I asthma study.These activities are intended to diversify and develop the pipeline creating arange of commercial opportunities for Evolutec. The preclinical work in 2006will drive the selection of appropriate clinical indications and strategies forrEV576 and rEV598. Partnering is key to the development of Evolutec and its technology. The recentpositive nature of the licensing market and the generation of good clinical datahas increased interest from prospective partners in rEV131. It is intended thatan appropriate partner will be selected to accelerate and diversify thedevelopment of rEV131 and access the primary care markets for the company.Equally important is that deal making retains Evolutec's involvement in thedevelopment process, builds on our core competencies and above all representsstrong share holder value for this first-in-class molecule. It is intended thatthe rhinitis Phase IIb study aids the commercial positioning of rEV131, enhancesthe value of the asset and drives a partnering deal over the next 12 to 18months. The Company intends to retain marketing rights in specialist markets andestablish its own top line revenue in addition to partnering revenues in theprimary care markets. I intend Evolutec to become an international biopharmaceutical business whichcommercialises superior products to deliver unmet patient need. To develop thebusiness the Company intends to recruit staff in the USA and build upon itsexisting business model. The results and momentum generated in 2005 provideeffective endorsement of Evolutec's approach and its technology. They emphasizethe potential of molecules sourced from the saliva of ticks and the opportunityto build on the current pipeline of molecules in different therapeutic areas. In2006 we aim to build on the positive results of 2005 and deliver further valuedriving clinical results. FINANCIAL REVIEW Evolutec reported an operating loss for 2005 of £6.6 million, in line withmarket expectations, and a net loss of £5.6 million. Evolutec had a net cash andshort-term investments of £17.6 million as at 31 December 2005. These numbersreflect interest received of £0.4 million, a £0.4 million foreign exchange gainon the Group's US dollar denominated deposits, and a £0.5 million research anddevelopment tax credit. CAPITAL STRUCTURE Share capital The Company issued a total of 13.4 million shares in two separate placings in2005 bringing the number of 10p ordinary shares in issue at the year end up to23.6 million. The deferred shares, which arose on a share consolidation duringthe preparation for the Company's AIM listing in 2004, were cancelled in May2005. Liquidity The Group had net cash and short-term investments of £17.6 million as at 31December 2005 compared with £3.9 million as at 31 December 2004. The increase incash and cash equivalents reflects a £9.5 million placing (net) in April 2005and a £9.2 million placing (net) in November 2005. The net cash outflow beforethe management of liquid resources and financing of £5.3 million (18 monthperiod to 31 December 2004: £2.1 million) reflects the Group's increasedexpenditure on research and development for the year. The Group had no borrowings during the year (18 month period to 31 December2004: £nil). Treasury As at 31 December 2005 the Group had £17.2 million on treasury deposit. TheGroup's policy is to split its deposits between at least two banks each with aminimum credit rating of F1/A. The objective is to derive the maximum interestconsistent with flexibility to undertake ongoing activity and safeguarding theasset. A material portion of Evolutec's expenditure is US Dollar denominated and asmaller portion is Euro denominated. This means that Evolutec is exposed toexchange rate movements in these currencies. The Group's policy is not to engagein speculative transactions or derivatives trading. The objective is to monitorclosely the movement in these exchange rates and to buy foreign currencies asand when appropriate. A significant portion of the proceeds raised in April were converted into USDollars at an average rate of $1.91 to cover the cost of budgeted expenditure inUS Dollars. The favourable US Dollar exchange rate movement led to a foreignexchange gain of £0.4 million for 2005, of which £0.1 million was realised. CASH FLOW The higher net cash outflow from operating activities for 2005 of £5.8 million(18 month period to 31 December 2004: £2.3 million) reflects the increased levelof development expenditure on rEV131. The principal cash inflow items were net interest receipts of £0.4 million,receipt of the research and development tax credit for the 18 month period to 31December 2004 of £0.2 million, and the realised portion of the foreign exchangegain of £0.1 million. The principal cash outflows were the expenses relating to the two share issuestotalling £1.2 million and capital expenditure of £0.2 million. The capitalexpenditure was mainly in relation to the purchase of equipment for the cGMPmanufacture of rEV131 being undertaken by Cambrex Inc ("Cambrex"), Evolutec'srelocation from Oxford to Reading, and additional information technologyequipment. PROFIT AND LOSS Revenue Evolutec is a clinical stage biopharmaceutical company and as such has no sourceof direct revenue. The revenue for the period of £14,000 (18 month period to 31December 2004: £28,000) relates to payments for materials supplied to Merial inconnection with its work in relation to animal vaccines. Research and development Higher research and development expenditure of £5.3 million (18 month period to31 December 2004: £1.0 million) reflects increased development activity with thelead product candidate rEV131. In particular, it includes the cost of the 112patient Phase IIa allergic rhinitis clinical trial and the development of a cGMPmanufacturing process for rEV131 carried out by Cambrex. Administrative expenses Administrative expenses of £1.2 million (18 month period to 31 December 2004:£1.5 million) includes the foreign exchange gain of £0.4 million. Before theforeign exchange gain administrative expenses were £1.7 million. On alike-for-like basis, the increase over the prior period primarily reflects therecruitment of additional staff. At the end of 2005, Evolutec had 11 full-timeemployees compared to six employees at the beginning of the year. Taxation The Group's research and development tax credit of £0.5 million (18 month periodto 31 December 2004: £0.2 million) is higher due to the increased level ofqualifying research and development expenditure. INTERNATIONAL FINANCIAL REPORTING STANDARDS ("IFRS") IFRS are mandatory for all fully listed companies within the European Union foryears commencing on or after 1 January 2005. As an AIM listed company, thisrequirement does not apply to Evolutec until the financial year 2007. However,Evolutec has decided to adopt IFRS for its financial year 2006. The first financial information to be reported by the Group in accordance withIFRS will be for the six months ending 30 June 2006. However, the requirement topresent comparative information means that a balance sheet as at 30 June 2005and primary statements for the six months to 30 June 2005 and 31 December 2005,prepared in accordance with IFRS, will also be required. The Group has undertaken a review of the impact of IFRS on its accountingpolicies and financial statements, summarised below. Furthermore, the Group hasalready adopted FRS 20 (IFRS 2), Share-Based Payments. The summary is notintended to be a complete list of areas. Further differences may arise as aresult of the Group's continued detailed assessment and interpretations of IFRSand any pronouncements issued by the International Accounting Standards Board ("IASB"). Deferred tax - Under IAS 12 Income Taxes, certain temporary timing differences,for example in relation to fixed assets, that previously were not recognisedunder UK GAAP, will be recognised. Definition of cash and cash equivalents - The definition of cash and cashequivalents under UK GAAP has been expanded by IFRS to include short-termdeposits of several months duration. This adjustment will have no impactoverall. The effect of this adjustment will be to re-categorise certain amountsshown as short-term deposits and investments under UK GAAP as cash and cashequivalents. The overall impact of the adoption of IFRS on Evolutec's financial statementswill be limited. CONSOLIDATED PROFIT AND LOSS ACCOUNTFor the year ended 31 December 2005 Year ended 18 month period 31 December ended 31 December 2005 2004 Note £000 £000 Turnover 14 28Cost of sales (6) -Gross profit 8 28 Research and development expenditure (5,346) (993)Administrative expenses (1,224) (1,543)Total administrative expenses (6,570) (2,536) Operating loss on ordinary activities before interest (6,562) (2,508)and taxation Interest receivable and similar income 429 94 Loss on ordinary activities before taxation (6,133) (2,414)Tax credit on loss on ordinary activities 528 177Loss for the year (5,605) (2,237) Basic and diluted loss per share - pence 2 (34.8) (33.6) Continuing operations All the activities of the Group are classed as continuing operations. Statement of recognised gains and losses There are no recognised gains and losses other than the losses above, andtherefore no separate statement of total recognised gains and losses has beenpresented. BALANCE SHEETSAs at 31 December 2005 Group Group Company Company 31 December 31 December 31 December 31 December 2005 2004 2005 2004 Note £000 £000 £000 £000Fixed assetsTangible assets 161 11 - -Investments - - 29,186 10,446 161 11 29,186 10,446 Current assetsDebtors 1,321 255 - -Short-term deposits and investments 17,013 3,761 - -Cash 603 113 - - 18,937 4,129 - - Current liabilitiesCreditors: amounts falling duewithin one year (1,915) (367) - - Net current assets 17,022 3,762 - -Net assets 17,183 3,773 29,186 10,446 Capital and reservesShare capital 3 2,359 5,824 2,359 5,824Share premium account 3 22,043 4,622 22,043 4,622Capital redemption reserve 3 4,804 - 4,804 -Other reserves 4 3,989 3,734 (20) -Profit and loss account 3 (16,012) (10,407) - -Total shareholders' funds 3 17,183 3,773 29,186 10,446 CONSOLIDATED CASHFLOW STATEMENTFor the year ended 31 December 2005 Year ended 18 months 31 December ended 31 December 2005 2004 Note £000 £000 Reconciliation of operating loss to operating cash flows (6,562) (2,508) Operating lossDepreciation 29 16Increase in debtors (741) (69)Increase in creditors 1,548 261Unrealised foreign exchange (gain)/loss (311) 4Share-based payment charge 275 -Net cash outflow from operating activities (5,762) (2,296)Cash flow statement (5,762) (2,296) Net cash outflow from operating activitiesReturns on investments and servicing of finance 429 94 Interest receivedNet cash inflow from investments and servicing of finance 429 94Taxation 203 86 Research and development tax credit receivedNet cash inflow from taxation 203 86Capital expenditure (179) (13) Purchase of tangible fixed assetsNet cash outflow from capital expenditure (179) (13)Net cash outflow before management of liquid resources and financing (5,309) (2,129)Management of liquid resources (12,941) (3,590) Increase in short-term deposits with bank 5Net cash outflow from management of liquid resources (12,941) (3,590)Financing 20,000 6,067 Issue of sharesConversion of warrants - 300Purchase of own shares (20) -Costs of share issue (1,240) (587)Net cash inflow from financing 18,740 5,780Increase in cash in the period 5 490 61Reconciliation of net cash flow to movement in net cash / (debt) 490 61 Increase in cash in the periodMovement in net funds in the period 490 61Net funds at start of the period 113 52Net funds at end of the period 603 113 1 Financial Information The financial information set out in the preliminary statement does not comprisethe Company's statutory accounts within the meaning of section 240(5) of theCompanies Act 1985. The preliminary statement is prepared on the basis of the accounting policies asstated in the financial statements for the year ended 31 December 2005. The financial information for 2005 has been extracted from the statutoryaccounts of the Company for the year ended 31 December 2005 which have beenaudited by the Company's auditors Grant Thornton UK LLP and whose report thereonis unqualified and did not contain any statement under section 237(2) or (3) ofthe Companies Act 1985. The Company's statutory accounts will be delivered tothe Registrar of Companies for England and Wales in due course and will also besent to shareholders. The financial information for the eighteen month period ended 31 December 2004has been extracted from the statutory accounts for the year ended 31 December2004, which have been delivered to the Registrar of Companies. The auditors'report on those accounts was unqualified and did not contain any statement undersection 237(2) or (3) of the Companies Act 1985. The preliminary statement was approved by the Board on 27 February 2006. 2 Loss per ordinary share Year ended 18 months ended 31 December 31 December 2005 2004 Attributable loss (£000) (5,605) (2,237)Weighted average number of shares in issue (000) 16,096 6,660Loss per share (basic and diluted) pence (34.8) (33.6) The calculation of loss per share is based on the weighted average number ofordinary shares in issue during the period. The calculation of the weightedaverage number of shares for the 18 month period ended 31 December 2004 has beenadjusted to take account of the one for ten share consolidation which took placeon 17 June 2004 as part of the preparation for the Company's admission to AIM. 3 Reconciliation of movements in shareholders' funds Called-up Share Capital Profit share premium redemption Other & loss capital account reserve reserves account Total £000 £000 £000 £000 £000 £000 Group 5,824 4,622 - 3,734 (10,407) 3,773Balance at 1 January 2005Issue of ordinary shares 1,339 18,661 - - - 20,000Expenses of issues of - (1,240) - - - (1,240)ordinary sharesCancellation of deferred (4,804) - 4,804 - - -sharesPurchase of own shares - - - (20) - (20)Loss for the period - - - - (5,605) (5,605)Fair-value of share-based - '- - 275 - 275paymentsBalance at 31 December 2,359 22,043 4,804 3,989 (16,012) 17,1832005Company 5,824 4,622 - - - 10,446 Balance at 1 January 2005Issues of ordinary shares 1,339 18,661 - - - 20,000Expenses of issues of - (1,240) - - - (1,240)ordinary sharesCancellation of deferred (4,804) - 4,804 - - -sharesPurchase of own shares - - - (20) - (20)Loss for the period - - - - - -Balance at 31 December 2,359 22,043 4,804 (20) - 29,1862005 The expenses of issues of ordinary shares are shown net of VAT recovered onprevious share issues of £82,000. 4. Other reserves Own shares held Share-based Merger by Employee payments reserve Benefit Trust Total £000 £000 £000 £000 Group Balance at 1 January 2005 - 3,734 - 3,734 Fair value of share-based payments 275 - - 275 Purchase of own shares - - (20) (20) Balance at 31 December 2005 275 3,734 (20) 3,989 Company Balance at 1 January 2005 - - - -Purchase of own shares - - (20) (20)Balance at 31 December 2005 - - (20) (20) Purchase of own shares On 20 October 2005, Bailhache Labesse Trustees Limited, the Trustees of theEvolutec Group plc Employee Benefit Trust, purchased 12,222 ordinary shares inEvolutec Group plc. 5. Analysis of movement in net funds At 31 December Other non- At 31 December 2004 Cash flows cash flows 2005 £000 £000 £000 £000Analysis of net fundsCash 113 490 - 603Liquid resources 3,761 12,941 311 17,013Net funds 3,874 13,431 311 17,616 Liquid resources comprised short-term deposits with banks which mature within 12months of the date of inception. Other non-cash flows represents the unrealised foreign exchange gain on theGroup's US Dollar denominated treasury deposits. 6. Notice of Annual General Meeting The Company's 2006 Annual General Meeting of shareholders will take place on 26April 2006 at 10.30 a.m. at 100 Longwater Avenue, Green Park, Reading RG2 6GP. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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