18th Oct 2007 07:01
Syntopix Group plc18 October 2007 For immediate release 18 October 2007 SYNTOPIX GROUP PLC ("Syntopix" or "the Company") Preliminary results for the year ended 31 July 2007 Syntopix Group plc (AIM: SYN), the speciality pharmaceutical research anddevelopment company focused on dermatological diseases, today announces itspreliminary results for the year ended 31 July 2007. Highlights: • Phase I study completed in August, validating the Group's methodology for determining the potential of compounds as acne treatments; • Phase II cosmetic study began in June 2007 and will report later this year; • An in vivo study is planned to begin shortly to study the effectiveness of our compounds against the Staphylococcus aureus (S. aureus) bacterium; • More than 300 compounds from our library have now been shown to exhibit significant antimicrobial activity; • Board of Directors and Scientific Advisory Panel strengthened with key appointments; • Careful control of expenditure resulting in cash balances at 31 July 2007 of £1.5 million (2006: £3.2 million); • Significant newsflow anticipated during the next 12 months. Dr Rod Adams (Chairman) and Dr Stephen Jones (Chief Executive Officer)commented: "We are delighted by the rapid progress we have made during the year:we have validated the Group's methodology, increased our library of compounds tomore than 1,000 and advanced our trial programmes. We enter the current yearwith increasing momentum and look forward to further newsflow during the next 12months." Enquiries Syntopix Group plc + 44 (0) 845 125 9204Dr Rod Adams, ChairmanDr Stephen Jones, Chief Executive Officer Buchanan Communications + 44 (0) 20 7466 5000Mark CourtCatherine Breen KBC Peel Hunt Ltd + 44 (0) 20 7418 8900Capel Irwin Notes to editors About Syntopix Group plc Syntopix is a group focused on the discovery and development of drugs for thetopical treatment of dermatological diseases. The company was founded in 2003 asa spin-out from the University of Leeds by Dr Jon Cove and Dr Anne Eady, two ofthe leading experts in skin microbiology, with initial funding from The WellcomeTrust. Syntopix' strategy is to seek to reduce the risks and costs of drug discoveryand development by discovering novel uses for known compounds. The companyconcentrates on compounds and combinations of compounds that have a history ofuse in man; and that have well characterised properties, for exampleantimicrobials and anti-inflammatories. The Group currently has 12 pending UKpatent applications. Syntopix is currently concentrating on acne and Staphylococcus aureus infectionsand has identified a pipeline of lead drug candidates that it intends to takethrough pre-clinical and, as appropriate, clinical trials. The Group intends toout-license products to commercial partners on obtaining proof of principle andto seek co-development partnerships. The Group is based at the Institute of Pharmaceutical Innovation in Bradford,giving access to the expertise in skin biology, formulation and toxicology atthe universities of Bradford and Leeds. Syntopix' shareholders include Techtran Group Limited (a subsidiary of IP Groupplc), The Wellcome Trust Limited, University of Leeds Limited and Ridings EarlyGrowth Investment Company Limited. Syntopix joined the AIM market of the LondonStock Exchange in March 2006. For further information please visit www.syntopix.com. Joint Statement from the Chairman and Chief Executive Officer Introduction During the second year as a public company, following our AIM flotation in March2006, Syntopix has continued to make progress in positioning itself as aspeciality pharmaceutical research and development company. We seek to identifyantimicrobial compounds and develop products that treat dermatologicalconditions, principally acne and staphylococcal infections including those dueto MRSA. Syntopix searches for antimicrobial compounds and synergisticcombinations of compounds that already have a history of use in man. We aim toreduce the high risks and costs of early drug discovery and reduce the lead-timeto market normally associated with conventional drug development. We arecommitted to improving the health and appearance of our consumers by offeringsafe and effective treatments of the highest quality, thereby creating value forour shareholders and other stakeholders. The prescription market for dermatologicals is in excess of $11 billion, withthe acne market share representing over $2.5 billion of these sales. Themedicated skin care market is worth another $10 billion, with sales for acneproducts in excess of $1 billion. In 2005 the number of patients requiring acnetreatments in Western Europe, the USA and Japan was estimated to be 142 million.(Sources: Business Insights Ltd., Euromonitor International). Dermatological anti-infective treatments have a market value of $3.5 billion,with superficial Staphylococcus aureus (S. aureus) infections accounting forapproximately 14% of this total. The number of patients in 2005 requiringtreatment for infectious diseases in Western Europe, the USA and Japan has beenestimated at greater than 116 million (Source: Business Insights Ltd). Themanagement of these infections, and the prophylaxis of nasal carriage, continuesto rely heavily on antibiotics with the associated concerns about resistance.Our approach uses synergistic combinations of antimicrobial compounds, thuscombating any issues of resistance. The global market for the compounds we are identifying and developing is large.Additionally, we continue to seek alternative uses for our antimicrobialexpertise, thereby expanding the commercial potential of our compounds. During the year we have added to our library of potential drug candidates, whichis now in excess of 1,100 compounds. We have continued to use the Syntopixscreening process and have shown that approximately 30% of these compoundsexhibit significant antimicrobial activity against the organisms that are key toour success: S. aureus and/or Propionibacterium acnes. We have continued to carry out some consultancy and contract work this year butthis has been at a modest level, with a revenue of £30,962 (2006: £31,914).However the relationships that are nurtured through such activities are veryvaluable, and could form the basis of future collaborations and partnerships.For this reason we intend to continue these activities. The Board On 1 January 2007 the following Board changes were implemented: Dr StephenJones, formerly Chief Operating Officer, was promoted to Chief ExecutiveOfficer; Dr Rod Adams, formerly Chief Executive Officer, became Non-ExecutiveChairman and Dr Gwyn Humphreys, formerly Non-Executive Chairman, became SeniorNon-Executive Director. During the year the Scientific Advisory Panel was strengthened by the additionof Professor Adrian Williams, a formulation expert. Research and Development We have made rapid progress in moving our lead compounds from research intoclinical development. Earlier this year we reported and announced some aspectsof our clinical development programme. Our first Phase I proof of principlehuman use study was conducted on SYN 0017 (an antioxidant present in foods andcosmetics), SYN 0401 (an antifungal present in personal healthcare products),and a combination of SYN 0017 and SYN 0016 (an oxidizing agent present inpharmaceutical preparations). This study validated the Company's methodology for determining the potential ofcompounds as topical treatments for acne, with positive and negative controlsperforming as expected. The study also confirmed the safety and tolerability ofall three test treatments in the skin environment. Although all the testtreatments exhibited some antibacterial activity, with some modest activitysustained throughout the trial in one of the three treatment groups, furtheroptimisation work will be required before the test treatments can proceed tolater stages of clinical development. A further human use study will start earlyin 2008 and will take into account the information obtained from the Phase Istudy results and is likely to include at least one new test compound. Additionally, a Phase II proof of concept study started in June 2007, with 130human subjects using Syntopix' library compounds SYN 0126 (a compound currentlyused in a wide variety of cosmetic preparations) and a combination of SYN 0126with SYN 0091 (a bacteriostatic agent used in soaps and cosmetics). This studywill be completed before the end of 2007. An in vivo study using a model system is planned for November 2007 to determinethe effectiveness of SYN 0017, SYN 0854, SYN 0564 and SYN 0017 in combinationwith SYN 0710 against the carriage of methicillin resistant S. aureus (MRSA).It is expected that the results will be available before the end of 2007. These data will form the basis of commercial partnerships with third parties,and will build upon the relationships that we are developing with our keycustomers. Licensing discussions will be initiated as soon as the clinicalprogramme confirms the activity of our lead compounds. We continue to build andfoster good relationships with potential partners in the pharmaceutical andcosmetic industries, and routinely update them of our progress. Intellectual Property Our intellectual property portfolio is critical for our success in licensingcompounds and continues to grow. Currently we have 1 granted UK patent, 3published patents and a further 12 patent applications which are not yetpublished. The portfolio is now being evaluated for worldwide coverage whereverappropriate, recognising the investment that is required to maintain such aportfolio. Financials The post-tax loss for the year is £1,740,692 (2006: £927,678). The increase inthe loss is attributable to the planned expansion of the research anddevelopment activity undertaken, including the completion of our first Phase Istudy and the commencement of a Phase II proof of concept study. The researchand development expenditure has been carefully controlled and is within thebudget set by the Board at the start of the financial year. The Group will applyfor research and development tax credits in respect of qualifying expenditure. Operating overheads remain at a similar level to the previous year. During theyear the Group has adopted FRS 20 "Share-based payment" for the first time andthis has necessitated a charge to the profit and loss account of £115,965 inrespect of the fair value of share options granted. During the year, surplus cash balances have been invested in short term depositaccounts to maximise returns and this has resulted in increased bank interestreceivable of £100,678 (2006: £53,993). In accordance with the new EU regulations, the Group will be required to prepareits interim financial statements for the period ending 31 January 2008 inaccordance with IFRS. The Group is currently reviewing the changes to itscurrent accounting policies that will be required on adoption of IFRS and has aproject plan in place to ensure full compliance with all relevant standards whenthey become effective. Outlook We continue to invest in our discovery pipeline to fuel our developmentprogrammes, and take the most promising candidates into human use studies. Weare confident that these studies will deliver data that will convince potentialpartners of the commercial attractiveness of our compounds in treatingdermatological conditions, principally in acne and staphylococcal infections.We enter the current year with increasing momentum and look forward to furthernewsflow during the next 12 months. Dr Rod Adams, ChairmanDr Stephen Jones, Chief Executive Officer 17 October 2007 Consolidated profit and loss accountFor the year ended 31 July 2007 Year ended Year ended 31 July 31 July 2006 2007 (restated) £ £Turnover 30,962 31,914Research and development costs (1,398,092) (493,645)Administrative expenses (628,785) (608,982)Other operating income 21,921 2,949Operating loss (1,973,994) (1,067,764)Interest receivable 100,678 53,993Interest payable (937) (76)Loss on ordinary activities before taxation (1,874,253) (1,013,847)Taxation 133,561 86,169Loss for the financial period (1,740,692) (927,678) Loss per shareBasic and diluted (30.6p) (22.0p) Statement of total recognised gains and lossesLoss for the period (1,740,692) (927,678)Total gains and losses relating to the period (1,740,692) (927,678)Prior year adjustment (16,832)Total recognised gains and losses since the last Annual Report (1,757,524) All Group activities relate to continuing operations. Consolidated balance sheet As at 31 July 2007 At At 31 July 31 July 2006 2007 (restated) £ £Fixed assetsTangible assets 112,401 121,041Current assetsDebtors 341,671 123,976Cash at bank and in hand 1,494,018 3,247,430 1,835,689 3,371,406Creditors: amounts falling due within one year (306,001) (230,493)Net current assets 1,529,688 3,140,913Total assets less current liabilities 1,642,089 3,261,954Provision for liabilities - -Net assets 1,642,089 3,261,954 Capital and reservesCalled up share capital 573,260 568,398Share premium account 3,379,046 3,379,046Merger reserve 337,935 337,935Share based payments reserve 132,311 16,832Profit and loss account (2,780,463) (1,040,257)Equity shareholders' funds 1,642,089 3,261,954 Consolidated cash flow statement For the year ended 31 July 2007 Year ended Year ended 31 July 31 July 2006 2007 (restated) £ £Cash outflow from operating activities (1,919,492) (878,390)Returns on investments and servicing of finance 99,741 53,917Taxation 86,169 -Capital expenditure and financial investment (24,692) (141,346)Cash outflow before financing (1,758,274) (965,819)Financing 4,862 3,567,826(Decrease)/increase in cash in the period (1,753,412) 2,602,007 Reconciliation of net cash flow to movement in net funds Year ended Year ended 31 July 31 July 2006 2007 (restated) £ £Increase in cash in the period (1,753,412) 2,602,007Cash flow from decrease in debt financing - 62,101Movement in net funds in the period (1,753,412) 2,664,108Net funds at the beginning of the period 3,247,430 583,322Net funds at the end of the period 1,494,018 3,247,430 Notes to the preliminary announcement 1. a) Basis of preparation The consolidated financial information for the year ended 31 July 2007 has beenprepared using the accounting policies and practices consistent with thoseapplied in the 2006 Annual Report and Accounts with the exception of theapplication of FRS20 (see below). The financial information on the Group set out above does not constitute 'statutory accounts' within the meaning of section 240 of the Companies Act 1985. This preliminary report was approved by the Board of Directors on 17 October2007. The statutory accounts for the year ended 31 July 2007 have not beenfiled with the Registrar of Companies, but will be delivered to the Registrar ofCompanies following the Group's Annual General Meeting and will also beavailable on the Group's website at www.syntopix.com. The financial information for the year ended 31 July 2007 has been extractedfrom the Group's audited consolidated statutory accounts upon which theauditors, BDO Stoy Hayward LLP, issued an unqualified opinion, but whichincludes references to matters to which the auditors drew attention by way ofemphasis in respect of uncertainties over the Group's ability to continue as agoing concern. The report did not contain a statement under section 237(2) or(3) of the Companies Act 1985. The figures for the year ended 31 July 2006 have been extracted from thestatutory accounts which have been filed with the Registrar of Companies buthave been restated for the impact of FRS20. The auditors' report for the 2006accounts was unqualified and did not contain a statement under section 237(2) or(3) of the Companies Act 1985. 1. b) Going concern The financial statements have been prepared on the going concern basis whichassumes that the Group will have sufficient funds available to enable it tocontinue to trade for the foreseeable future. The Group's principal activity ispharmaceutical drug discovery, research and development which should ultimatelypresent opportunities to enter into licensing agreements with third parties.The nature of the Group's development programme means that the timing ofmaterial revenues is difficult to predict. In preparing financial forecasts to estimate the likely cash requirement of theGroup over the next 12 months based on the planned development programme, theGroup has had to make certain assumptions with regard to the costs of outsourcedcontract research and development work, the timing and amount of future revenuestreams and several other key factors. The directors have attempted to take abalanced and prudent view in preparing these forecasts, however their accuracyis uncertain. These forecasts show that the Group will need additional fundingduring the next six to nine months to enable it to continue with its planneddevelopment programme. The directors continue to monitor the developmentprogramme, and will make revisions to this plan, if necessary, in order topreserve cash in the event that further funding cannot be secured. The directors are confident however, that the Group will be able to raisesufficient additional funds to enable it to continue with its planneddevelopment programme and to ensure that the Group can continue as a goingconcern. For this reason, the directors have prepared the financial statements on a goingconcern basis. The financial statements do not contain any adjustments whichmay be required if the Group is unable to secure additional funding. 1. c) Basis of consolidation The Group's financial statements consolidate the financial statements ofSyntopix Group plc and all its subsidiaries made up to 31 July 2007. No separateprofit and loss account is presented for Syntopix Group plc as permitted bySection 230 of the Companies Act 1985. The Company loss for the period includesa loss after taxation of £139,399 (2006: £137,371) which is dealt with in thefinancial statements of the parent company. 1. d) Adoption of new accounting policy - Share Based Payments, and resulting prior year adjustment The cost of providing share based payments to employees is charged to theconsolidated profit and loss account over the vesting period of the relatedshare options or share allocations. The cost is based on the fair value of theoptions and shares allocated using the Black-Scholes option-pricing model, whichis appropriate given the vesting and other conditions attached to the options.The value of the charge is adjusted at each balance sheet date to reflectexpected and actual levels of vesting. Where share options are awarded to employees, the fair value of the options atthe date of grant is charged to the profit and loss over the vesting period.Non-market vesting conditions are taken into account by adjusting the number ofequity instruments expected to vest at each balance sheet date so that,ultimately, the cumulative amount recognised over the vesting period is based onthe number of options that eventually vest. Market vesting conditions arefactored into the fair value of the options granted. As long as all othervesting conditions are satisfied, a charge is made irrespective of whether themarket vesting conditions are satisfied. The cumulative expense is not adjustedfor failure to achieve a market vesting condition. Where terms and conditions of options are modified before they vest, theincrease in the fair value of the options, measured immediately before and afterthe modification, is also charged to the profit and loss over the remainingperiod. Where equity instruments are granted to person other than employees, the profitand loss is charged with the fair value of goods and services received. In accordance with FRS20 "Share-based payment" the Group has elected to applyFRS20 to all grants, options and other equity instruments as they have all beengranted since November 2002, the effective date of the standard. The adoptionof FRS20 this year has necessitated a prior year adjustment to be made, creatinga share based payments reserve of £16,832 at 31 July 2006. For the year ended 31 July 2007, the impact of adopting FRS20 is an increase inthe loss for the year of £115,965. No charge was made in previous accountingperiods under UITF Abstract 17 (revised 2003) "Employee Share Schemes". 2. Basic and diluted earnings per share 2006 2007 (restated) £ £Loss for the financial period (1,740,692) (927,678)Weighted average number of shares No. Of shares No. Of sharesFor basic and diluted earnings per share 5,697,035 4,211,384 The comparative figures are proforma based on the number of shares that wouldhave been in issue had the capital structure of the new parent company alwaysbeen in place. There are 426,298 (2006: 389,658) potentially issuable sharesthat have not been included in the diluted EPS as they are antidilutive. 3. Reserves Share Share based Profit premium Merger payments and loss account reserve reserve account TotalGroup £ £ £ £ £1 August 2006, as originally 3,379,046 337,935 - (1,023,425) 2,693,556statedPrior year adjustment: sharebased payment charge - - 16,832 (16,832) -1 August 2006, as restated 3,379,046 337,935 16,832 (1,040,257) 2,693,556 Deficit for the period - - - (1,740,692) (1,740,692)Share option charge in the year - - 115,965 - 115,965Exercise of share options inthe year - - (486) 486 -31 July 2007 3,379,046 337,935 132,311 (2,780,463) 1,068,829 4. Reconciliation of movement in shareholders' funds 2006 2007 (restated)Group £ £Loss for the period (1,740,692) (927,678)Proceeds from issue of shares 4,862 4,136,213Share option reserve 115,965 16,832Share issue expenses - (453,557)Merger reserve arising - (52,729)Net (depletion from)/addition to shareholders' funds (1,619,865) 2,719,081Opening shareholders' funds 3,261,954 542,873Closing shareholders' funds 1,642,089 3,261,954 5. Cash flows a Reconciliation of operating loss to net cash outflow from operatingactivities 2006 2007 (restated) £ £Operating loss (1,973,994) (1,050,932)Depreciation 33,332 20,305Share option charge 115,965 -(Increase) in debtors (170,303) (30,657)Increase in creditors 75,508 182,894Net cash outflow from operating activities (1,919,492) (878,390) b Analysis of cash flows for headings netted in the cash flow 2007 2006 £ £Returns on investments and servicing of financeInterest received 99,741 53,917Net cash inflow from returns on investments and servicing of finance 99,741 53,917Capital expenditure and financial investmentPurchase of tangible fixed assets (24,692) (141,346)Net cash outflow for capital expenditure and financial investment (24,692) (141,346)FinancingIssue of share capital (net of expenses) 4,862 3,629,927Loans repaid - (62,101)Net cash inflow from financing 4,862 3,567,826 c Analysis of net funds At At 1 August Cash 31 July 2006 flow 2007 £ £ £Cash at bank 3,247,430 (1,753,412) 1,494,018 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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