26th Sep 2006 07:04
Sinclair Pharma PLC26 September 2006 Sinclair Pharma plc Preliminary Results Sinclair Delivers Strong Growth Godalming, 26 September 2006: Sinclair Pharma plc ("Sinclair"), theinternational specialty pharmaceutical company, today announces its preliminaryresults for the year ended 30 June 2006. Financial Highlights • Turnover up 67% to £11.6m (2005: £7.0m) • Organic product sales growth of 58% to £5.7m (excl license fees and milestones) • Operating loss of £3.0m (2005: £2.0m restated under IFRS) • Loss per share 4.5p (2005 3.7p restated under IFRS) • Cash of £5.0m at 30 June 2006 (2005 £4.9m) • Vendor Placing of £35 million in March 2006 to acquire Groupe CS Dermatologie (CSD) • £7.4m (£7.1m net of expenses) raised via institutional placing in November 2005 Operating Highlights • Growth of own sales and marketing operations: acquisition of CSD expanding commercial presence in France, Spain, Portugal • Integration of Sinclair Srl (previously Euroderm) in Italy completed • Sinclair's own sales and marketing companies launched four products/ line extensions in Italy and France • Growth of global network of marketing partners: 22 new marketing agreements, involving 10 products and 35 countries, including Johnson & Johnson's OraPharma for prescription Decapinol(R) rinse in the US. • Product launches: 23 product launches by marketing partners, involving 14 countries and 8 products. • Continued regulatory progress: one US and four EU product approvals, addition of 'treatment of dental plaque' to Decapinol(R) label • Positive clinical trial results for Atopiclair(TM) and Sebclair(TM) • Pipeline advancement with acquisition of new product, under development for onychomycosis, 14 products in late stage development Commenting on the results, Steve Harris, Chairman, said: "This has been asuccessful year for Sinclair, with revenues increasing by 67%. Sales have grownthrough our own expanding sales and marketing network including the CSDacquisition, and we have also seen strong growth in revenues from existing andnew members of our global marketing partner network. Among our new marketingpartners we welcome Johnson & Johnson's OraPharma Inc., US partner for ourflagship brand Decapinol(R). Priorities for now include harnessing our newcommercial setup to maximise revenues and achieve profitability, delivering bestvalue for our shareholders." -ends- for further information please contact: Sinclair Pharma plcDr Michael Flynn, CEO Tel: +44 (0) 1483 410 600Jerry Randall ACA CFOZoe McDougall, Corporate Communications Tel: +44 (0) 7973 792 520John Barrington-Carver, Corporate Communications Tel: +44 (0) 7831 655 630 Financial DynamicsBen Atwell Tel +44 (0) 207 831 3113John Gilbert A meeting and conference call for analysts will be held today at 8.15am UK timeat the offices of Financial Dynamics, Holborn Gate, 26 Southampton Buildings,London WC2. Please call Mo Noonan on 020 7269 7116 for further details. CHAIRMAN'S STATEMENT A year in which the Sinclair Group's structure was transformed, giving aplatform for further revenue growth and profitability I am pleased to report that the momentum in the business, described at theinterims, continued throughout the second half of the current financial year andis reflected in a 67% increase in revenues from last year. Sinclair has achievedexcellent progress in its goal of becoming a profitable integrated internationalspecialty pharmaceutical company with a broad portfolio of on-market products.Notably, in June we reached a significant US licensing agreement with Johnson &Johnson's OraPharma Inc., for prescription sales of our anti-gingivitis anddental plaque product, Decapinol(R) rinse. Revenues were up 67% to £11.6m, and within this number Sinclair's productrevenues increased organically by 58% to £5.7m (excluding license fees andmilestone payments). In March this year, the Group acquired the private Frenchcompany Groupe CS Dermatologie ("CSD") which contributed approximately £2.7m inrevenues after the acquisition completed on 30 March 2006. Our previous year'sItalian acquisition, Sinclair Srl (previously Euroderm), contributed a fullyear's revenue of £2.7m compared with five months' contribution of £1.1m lastyear. As well as making important financial contributions, these acquisitions are keyto building the sales & marketing structure of the Group. Sinclair now has itsown sales and marketing operations in the EU territories of France, Spain, Italyand Portugal. We are now looking to build sales and marketing in the UK andGermany to complete our direct commercial presence in the remaining key EUmarkets. This structure will enable us to benefit from cross-sellingopportunities within our expanded product portfolio, as new products wereacquired with these companies. We also expect to see increased margins onproduct sales, and believe that with a complete European presence, ourattractiveness as a commercial partner will increase. CHIEF EXECUTIVE'S REVIEW Overview Our priority is to establish a sustainably profitable international specialtypharmaceutical company with sales and marketing coverage in the major Europeanmarkets. During the last year we made strong progress in this strategicobjective by adding a commercial presence in France, Spain and Portugal throughthe acquisition of Groupe CS Dermatologie ("CSD") whilst integrating our salesand marketing operation in Italy. At the same time we delivered a 58% increasein sales of our product portfolio through our marketing partners. We continued to develop our global sales through 22 new deals with marketingpartners covering 35 countries. There were 23 new launches of Sinclair productsthrough our partners, new product registrations in the EU and the US and thelate stage pipeline was advanced. A year of successful product commercialisation We are now able to commercialise dermatology products directly in France, Spain,Italy and Portugal and intend to expand into the UK and Germany. To maximisesales for our products, we need to access, ourselves and through partners, allthe relevant target audiences, whether they are specialist doctors, GPs, dentalprofessionals or even consumers. At this time all our oral health products, anddermatology products in non-core countries, are commercialised through ourmarketing partner network. For long term growth, we are focusing on plans toensure that we have the capacity to target a broader range of specialtyaudiences so that we may commercialise a broader range of specialty productsbeyond dermatology, through our own sales and marketing operation. Commercialisation through our marketing partner network This year we recorded a 58% growth in product sales through our marketingpartners. This was largely driven by our flagship brands Atopiclair(TM) ,Decapinol(R) and Aloclair(TM). We have demonstrated our capability to achieverapid regulatory approval for our products in development, and therefore bringproducts to market in a relatively short time. During the year, our businessdevelopment team has completed 22 new marketing agreements, involving 10products and 35 countries. Commercialisation through our own sales and marketing operations The acquisition of CSD this year has given us an established specialistdermatology sales force in France, Spain and Portugal and has supplemented ourproduct range with more than 12 on-market dermatology products. We will alsoexploit the cross-selling potential afforded by this important acquisition andaim to build on the synergies of complementary technologies. Our sales andmarketing operation in Italy is now fully integrated as Sinclair Srl (previouslyEuroderm). Developing our future product portfolio The Group's strategy is to acquire products and technologies that are throughthe high-risk development stage and then apply its own regulatory anddevelopment expertise to secure the completion of their development. This yearwe acquired a novel product for onychomychosis (fungal nail infection), and wecontinue to develop new products with intellectual property protection to add toour strong pipeline. To maximise the market potential of each brand, the Groupdevelops line extensions as appropriate and the year has been marked by threeline extension approvals: Atopiclair(TM) fluid (EU, US), Decapinol(R) toothpaste(EU), Decapinol(R) gel (EU). Our near term in-house pipeline includes 14products including line extensions and we hope to file for the approval of nineof these this financial year. Other significant progress this year include positive clinical trial results forAtopiclair(TM) and Sebclair(TM), and winning a prestigious Frost & Sullivanaward for Decapinol(R) Rinse. With the seeds for growth already planted, I am confident that the SinclairGroup has the team and business platform to drive Sinclair to profitability. OPERATIONAL REVIEW Acquisition of Groupe CS Dermatologie The profitable, privately owned French company Groupe CS Dermatologie ("CSD")was acquired in March 2006. This represents a transforming acquisition forSinclair, with direct sales and marketing operations in France, Spain andPortugal and a product range that includes prescription, OTC and dermo-cosmeticproducts in the therapeutic areas of fungal infections, acne, eczema, nappyrash, skin bacterial infections, superficial burns and warts, and beautytreatments such as anti-ageing creams and skin lotions including a range forblack and brown skins. The acquisition not only gives Sinclair an infrastructure in France, Spain andPortugal but it also gives Sinclair access to higher revenues and gross marginsassociated with selling products directly. The strong revenue base of CSD provides critical mass for Sinclair's currentcommercial activities. The pre-acquisition management remains in place and iscommitted to the business moving forward, and integration of CSD within theGroup is progressing well. I am confident that the anticipated benefits of theacquisition will be rapidly achieved. PRODUCT REVIEW Overview Sinclair's current product range focuses on dermatology and oral health.Excluding products acquired as a result of the CSD acquisition, the Group has 16approved products in the EU, ten in the US, and marketing agreements in 60countries globally. This year, our products brought in increased revenues andgained market exposure in more countries; 23 product launches were performed bymarketing partners, involving 14 countries and 8 products. Further launcheswere made by The Group's own sales and marketing companies: Sinclair Srllaunched Atopiclair(TM), Dermachronic(TM) and Sebclair(TM) in Italy, and CSDlaunched a line extension of Mela'Aura in France. Building further for thefuture, the Group negotiated 22 new marketing agreements, involving 10 productsand 35 countries. Competence in registration: delivering short time-to-market Regulatory expertise is a core competency for Sinclair. In just six years,Sinclair has achieved a remarkable number of product registrations, both in theUS (10) and in Europe (16). This year, we achieved one US registration and fourEU registrations. Most of our product approvals allow both prescription and OTCsales. DERMATOLOGY Our Dermatology business now has a total of three products approved for the USand five for the EU, including the EU approval of a new emollient atopicdermatology product, Dermachronic(TM), designed for use during periods ofremission of chronic dermatological conditions. Sinclair has also acquired 12new on-market products with the acquisition of CSD. Maximising value for ourflagship brands is a key objective and Sinclair has registered the lineextension Atopiclair(TM) Fluid in both the EU and the US this year This year there have been product launches for each of our main dermatologyproducts in US or European countries. With this commercial progress and the 12established products from CSD joining our portfolio, plus the benefit of our ownsales forces in four European countries, we can expect that our dermatologybrands will contribute increasingly to Sinclair revenues. Atopiclair(TM) and Line Extensions Atopiclair(TM) is steroid-free topical cream designed to relieve the signs andsymptoms of atopic dermatitis (eczema), contact (allergic/irritant) dermatitis,and other dermatoses. This year, the results were published of a large scale US multicentredouble-blind study demonstrating the effectiveness of Atopiclair(TM) in mild tomoderate adult atopic dermatitis. These results demonstrate the safety andefficacy of Atopiclair(TM) and assist our marketing partners in building productsales among clinical audiences. Regulatory status: Atopiclair(TM) cream already has regulatory approval in the USand in the EU. This year registration was achieved in Indonesia following theappointment last year of our Indonesian marketing partner Dankos. The lineextension Atopiclair(TM) Lotion, which makes it easier to use Atopiclair(TM) onlarger areas of skin, received both EU and US regulatory approval late thisyear. Atopiclair(TM) Lotion has been launched by Sinclair Srl in Italy. Afurther line extension, Atopiclair(TM) Foam, is also under development. Product launches: Sales of Atopiclair(TM) cream commenced with the launch of theproduct in the US by CVP late last year. This was followed with an Italianlaunch by Sinclair Srl (the first company product to be marketed by ourSinclair's own sales force), a Portuguese launch by Dysanovis and a Turkishlaunch by Farma Tek. Paediatric market: As a non-steroidal product Atopiclair(TM) is well suited tothe paediatric market; approximately one third of atopic dermatitisprescriptions are for children or infants. CVP and Sinclair Srl have concludedjoint marketing agreements respectively with Lupin Pharmaceuticals and MedausSrl, to access the paediatric market their territories. The company alsorecently announced (post period) positive results of a double-blind multicentreUS paediatric study to support the effectiveness of Atopiclair(TM)' in treatinginfants and children. (This is reported in the post period section). A keyresult for this study was the reduced need for usage of topical steroids withAtopiclair(TM) when compared to an emollient cream. New deals: Atopiclair(TM) continues to attract commercial interest as aneffective product to treat dermatitis. Marketing agreements have been signedwith the following new partners: Farma Group in Turkey; Italfarmaco in Spain;Tabuk Pharma in Saudia Arabia and 15 Middle East and North African countries. Sebclair(TM) Sebclair(TM) is a non-steroidal cream, indicated for the management ofseborrheic dermatitis, including relief and management of the most common signsand symptoms such as scaling/flaking, reddening, burning and pain. Sebclair(TM) was licenced to CVP in the US this year and Sinclair anticipates USregulatory approval in H1 2007. Having already obtained EU regulatory approval,our dermatology sales team at Sinclair Srl launched the product in Italy in Junethis year. At the Company's R&D day on 15th June Professor Ruggero Caputo,Professor & Chairman, Institute of Dermatological Sciences, University of Milanpresented the full results of a multicentre, double-blind trial of Sebclair(TM)in the US and Italy. The study concludes that Sebclair(TM) is effective in thetreatment of mild to moderate seborrheic dermatitis of the face and that its usein combination with topical or oral antimycotics might also be considered. Xclair(TM) Xclair(TM) is a hydrolipidic cream that has been formulated specifically for usein radiation dermatitis. Xclair(TM) was licenced to Align Pharmaceuticals for the US and Canadian marketsin late June at the end of the last financial year and they launched the productin the US this January. Crawfords launched Xclair(TM) in July at the beginning ofthis financial year. During the year Xclair(TM) was licensed to Pharmis Group inPortugal, Brazil and Spain; Anabiosis in Greece and to Normeda in Estonia,Latvia and Lithuania Dermachronic(TM) Dermachronic(TM) is an emollient moisturiser, developed specifically for long termuse in remission by patients with chronic skin conditions, to moisturise, sootheand soften the skin where the skin is cracked and hardened due to a chronic skincondition. It is hypoallergenic, preservative and perfume free, and istherefore designed to avoid triggering recurrences of dermatitis. Tests insubjects showed no allergic or sensitivity responses. Dermachronic(TM) is now approved for sale in the EU and has been launched bySinclair Srl. in Italy. This new product has two presentations, a cream and adetergent. ORAL HEALTH As at 30th June 2006, Sinclair had ten Oral Health products including lineextensions registered in the EU and seven in the US. The combined presentationsof Aloclair(R) Rinse, Spray and Gel have provided the bulk of revenues from ouroral health portfolio to date. Aloclair(R) has been launched in more than 25countries including the US. With regulatory approval in the US and the EU forDecapinol(R) Rinse and EU approval for Decapinol(R) toothpaste and gel, we haveseen the first launch of this innovative technology in Europe. The US launch ofDecapinol(R) rinse into the prescription market is expected this financial yearand it is anticipated that this flagship product will from now on increasinglycontribute to Sinclair's revenues. Decapinol(R) rinse, toothpaste, gel Decapinol(R) is Sinclair's novel product for the treatment of gingivitis anddental plaque, and the prevention of periodontitis. This year, Sinclair reached an agreement with OraPharma Inc., part of Johnson &Johnson, to market Decapinol(R) rinse on prescription in the US and a US launchinto the prescription market is expected this financial year. Decapinol(R)Rinse was also launched in Spain by our marketing partner Inibsa and newmarketing agreements were completed with Pharmbio Co Ltd in South Korea andDompe in Greece & Cyprus. Kivema in Israel will market Decapinol(R) toothpaste. Regulatory endorsement for Decapinol(R) was received when the FDA extended thelabelling to allow the inclusion of the important wording "for the prevention ofplaque." Decapinol(R) Toothpaste and Decapinol(R) Gel both received EUregulatory approval this year and were also filed with the FDA for US approval.Further Decapinol(R) product innovations are in development. Aloclair(R) Aloclair(R) is Sinclair's product for the relief of mouth ulcers and minor orallesions and is now marketed in three presentations: Rinse, Gel and Spray. Aloclair(R) was one of Sinclair's earliest products and continues to provide asignificant contribution to revenues. Sunstar Butler ("Sunstar") is a keymarketing partner with Aloclair(R) rights in more than 20 countries. During thisyear all three Aloclair(R) presentations were licensed to Sunstar in Mexico andPanama, to join Sunstar's other North American and European licences. Aloclair(R) Rinse was also licensed to Normeda in Estonia, Latvia and Lithuania andAloclair(R) gel in Turkey to SSM. Earlier licensing agreements are now beginning to result in further Aloclair(R)launches, with the following taking place this year: • Aloclair(R) Rinse: Finland, Sweden, Norway, Denmark and Holland by Sunstar. • Aloclair(R) gel: Holland and Czech republic/Slovakia by Sunstar. • Aloclair(R) spray: Holland and Czech republic/Slovakia by Sunstar. Italy by Recordati, Turkey by SSM In June Sinclair announced the development of a new Aloclair(R) line extensionto address the market for teething problems in infants. This will add toSinclair's product range, addressing the important market segment of paediatricconditions. Gelclair(TM) Gelclair(TM) is Sinclair's product for the relief of severe oral ulceration andinflammation from various causes but most significantly as a side effect ofcancer therapies (mucositis). Helsinn SA remains the worldwide distributor forGelclair(TM). SST(TM) & Salinum(TM) SST(TM) & Salinum(TM) are Sinclair's products for the treatment of xerostomia, a drymouth condition caused by a deficiency of saliva production. Sales of these two products increased from last year as both products werelaunched in the US by Align Pharmaceuticals during the year. Salinum(TM) waslaunched in Austria by our licensee, Novapharm and in the UK by CrawfordsPharmaceuticals. Both products were licensed to the Turkish company SSM and Anabiosis in Greece.licensing deals for Estonia, Latvia and Lithuania were concluded for SST(TM) withNormeda and Medac extended its existing licensing agreement for SST(TM) to includesix other territories: Austria, Australia, Czech Republic, Russia, Slovakia andthe Ukraine. PRODUCT PIPELINE Sinclair has made strong progress over the last few years in progressing itsproducts to the market. It has continued to source and develop noveltechnologies with clearly differentiated characteristics and strong intellectualproperty that can be brought to the market within a three year time frame. Wehave a twofold approach to product pipeline; acquisition of commerciallyinteresting and IP-protected products from outside the company, and maximisingour in-house IP, brands and technologies by developing some of our own productsand line extensions. Sinclair avoids the early, high-risk and expensive stage ofdrug discovery and research. Many of our products gain marketing approval for both prescription and OTCroutes. However, we tailor our launch route and therefore choice of marketingpartner according to the product. For some products, for example Aloclair(TM), anOTC launch is appropriate. For certain other products the product needs to beestablished in a prescription market before OTC sales are appropriate. Sinclair recognises the importance of clinical data for the credibility andcommercial success of our products and we have in-house expertise in carryingout clinical trials but often share costs with marketing partners. We havecompleted major studies this year on Atopiclair(TM) and Sebclair(TM); details ofthese studies are found in the relevant product sections. Onychomycosis Sinclair announced in March that the Group had licensed the rights from Dr MarkBogart, a US inventor, to develop and commercialise a new topical product totreat fungal infections of the nails - usually the toenails. The patents claim amethod of treating onychomycosis using compositions consisting of carboxylicacids and alcohols. The intellectual property includes a granted US patent andcorresponding applications in Europe, Japan, Australia, and Canada. Onychomycosis affects between 2 and 4% of the adult population and the combinedsystemic and topical US market in 2003 was US$1.1bn of which US$900 million wasfor prescription systemic products. It is difficult to treat; treatmentscurrently available are either systemic which can have unwelcome side effects ortopical, and clinical clearance of the disease is poor with current treatments.Patients may initially seek treatment because of cosmetic concerns, however,there is even a risk of amputation in more severe cases, for example in diabetespatients. The Sinclair product under development is applied topically and penetrates nailsreadily. Early observations in humans leads the company to anticipate thatclinical trials will demonstrate significant therapeutic activity. The productis in early human testing and the Group aims to file for registration in 2007-8. SPHD400 for the treatment of psoriasis This is a proprietary combination discovered in-house which addresses theunderlying biochemical processes responsible for the hyperproliferation of theskin and the inflammation that are key features of this distressing condition.This product is in early clinical development and the Group aims to file forregistration in 2007-8. SPHD420 for the treatment of acne Acne is a common condition, causing distress and affecting the self confidenceof many young people. SPHD420 uses a multifaceted approach to address thevarious causes of acne. It is designed to break up the protective "envelope"(biofilm) in which bacteria may be protected from their surrounding environment.It then delivers an antibacterial combination to kill the organisms. Thisproduct is in pre-clinical development and the Group aims to file forregistration in 2007-8. SPHR900 for the treatment of herpes simplex (cold sores) This product is designed to simultaneously kill the herpes virus with a potentnaturally occurring antiviral agent, dry up the lesion using an anhydrous "gel"and reduce the surrounding inflammation. Unlike existing products it is designedto simultaneously treat the symptoms and suppress the herpes virus. It is inpre-clinical testing with a target filing date of 2007-8. SPHP700 for the treatment of dry eye syndrome Impairment of the quality or quantity of tear production leads to dry eyesyndrome, which affects about ten million people in America and almost 10% ofwomen over the age of 75. The current market leader in prescription dry eyeproducts in the US achieves sales of $100m. The key feature is a constantfeeling of "grittiness" in the eyes. It is commonly treated with artificialtears but there is a need for a rapid onset, long acting product for thiscondition. SPHP700 uses a natural polysaccharide combined with a polymer toprovide prolonged wetting and lubrication to achieve this goal. It is approvedin the EU and the Group aims to file for US registration in 2006-7. DIRECTORS AND ADVISERS Management Alexis Prenn, who had been a non-executive director for more than five years,decided not to propose himself for re-election at last year's AGM and resignedfrom the Board. Alexis' advice and support has been invaluable and with therest of the Board I would like to put on record our appreciation of hisservices. We have been fortunate in replacing Alexis as Non-executive Director with PennyFreer. Penny has been involved in small and mid-cap investment banking foralmost 20 years, most recently as Head of Equities in London for Robert W Baird,the US investment bank. Penny was previously responsible for Credit Lyonnais'small and mid-cap equities activities. Change of Advisers Company Brokers In January 2006 the Company announced that Nomura International plc was nolonger acting as joint broker to the Company. Piper Jaffray Ltd. who wereappointed as nominated advisor and joint broker to the Company in September 2005will continue in this role along with joint broker Bridgewell SecuritiesLimited. POST PERIOD I am pleased to report that the first ophthalmology product from our pipeline,SPHP700 which will address the prescription market for dry eye product, hasreceived EU regulatory approval. Sinclair's product will be commercialisedthrough marketing partners in key territories and licensing discussions willstart in the second half of the current financial year. Decapinol(R) Spray, is now approved in the EU. The spray is a new presentationof Sinclair's gingivitis product Decapinol(R) Rinse, which is already approvedin the EU and US. The new Decapinol(R) Spray presentation offers a convenientalternative to the oral rinse. New marketing agreements Between 1 July 2006 and 19 September 2006, the following new marketingagreements were completed: • PT Kalbe Farma Tbk: Aloclair rinse and gel - Indonesia • Farmakate: Decapinol - Sweden • Arriani Pharmaceuticals Ltd: Decapinol Rinse, Gel and Toothpaste - Cyprus and Greece • Ivax Argentina SA: Xclair - Argentina and Uruguay • Instel Chimos: Salinum and SST - France • Medisan: Atopiclair, Xclair - Hungary Atopiclair(TM) paediatric atopic dermatitis study results Sinclair recently announced that the results of a multicentre, double-blind,vehicle-controlled 142-patient clinical trial for infants and children (betweenthe ages of 6 months and 12 years) treated with Atopiclair(TM) cream versus anemollient vehicle cream. This demonstrated very significant efficacy in mild tomoderate atopic dermatitis (eczema). It also showed that patients usingAtopiclair(TM) needed significantly less steroid rescue treatment during thestudy, compared to the emollient group. The results strongly support the use of Atopiclair(TM) in infants and children,where clinicians are more reluctant to prescribe topical steroids and needproducts to provide fast relief from the itch associated with atopic dermatitis.Approximately a third of atopic dermatitis prescriptions are for pediatricpatients (1) and these data will provide very material support for thesuccessful commercialisation of Atopiclair. For more detailed results pleaserefer to the press release, which can be found at www.sinclairpharma.com/news.php Management In early July we announced the appointment of Danilo Casadei Massari to theBoard of the Group's principal operating company, Sinclair Pharmaceuticals Ltd.He joins Sinclair as Vice President of Corporate Development. In this role, MrMassari will be responsible for the operation and expansion of Sinclair's ownsales and marketing operations. His experience will greatly assist in the rapidintegration of CSD and provide in depth support for the Board. We also announced the promotion of Alan Olby to the new role of Finance Directorof Sinclair Pharmaceuticals Ltd., the Group's principal operating company. BothMr. Massari and Mr. Olby will join the Executive Management Board of Sinclair. Corporate Headquarters In September 2006, Sinclair moved into a new corporate headquarters inGodalming. These offices offer an improved working environment for the Group'sstaff and allow space for some expansion. OUTLOOK We believe that Sinclair is making excellent progress in it goal of becoming aprofitable integrated international specialty pharmaceutical company with abroad portfolio of on-market products. The acquisition of CSD has extended our reach and product range across Europeand we expect to supplement this in due course with further bolt on acquisitionsin the UK and Germany. This direct commercialisation strategy increases our margins substantially andgives us greater control of the future of our brands and we believe that itpromotes Sinclair as a desirable commercial partner for third parties, inparticular for those seeking European exposure. Meanwhile, we will continue to build our portfolio of registered productsthrough a combination of acquisition and in-house development. We expect continued strong revenue growth, both from our own direct sales andthrough our marketing partner network and are continuing to drive Sinclairtowards profitability. Dr. M.J. Flynn Chief Executive FINANCIAL REVIEW Highlights This last year has seen Sinclair make great strides towards becoming a fullyintegrated international pharmaceutical company. With overall revenue growth of67% over the previous year, organic sales growth of 58% and our own salesorganisations now in four European countries, Sinclair continues to exploit itsassets and strengthen its presence in international markets, and build aplatform for future sustainable profitable growth. The acquisition of CSD at the end of March 2006, for a total consideration of£38m, was a significant highlight for the Group. CSD is one of the largestdermatology businesses in France with a strong reputation for innovation andprofitable growth. Acquiring this profitable business has acceleratedSinclair's move towards sustainable profitability. During the year Sinclair raised £42.4m from new and existing investors in theUK, mainland Europe and the US in testing market conditions. £7.4m (£7.1m netof expenses) was raised through a placing in November 2005, to be used for M&Aactivities, and £35.0m in March 2006, through a vendor placing in order to fundthe acquisition of CSD. These fund raisings demonstrate the continued supportfrom our existing and new shareholders alike for the unique business model ofSinclair and its path to profitability. This year Sinclair is reporting its full year results for the first time underInternational Financial Reporting Standards. There are two key changes underthis regime: 1) Goodwill is no longer amortised, but rather assessed forimpairment each year, and 2) we have a charge for the cost of share basedincentives for employees, under IFRS 2. Also, there are much more specificrequirements regarding the fair valuation and disclosure of assets in the caseof acquisitions. Revenue Total revenue for the year increased 67% to £11.6m (2005: £7.0m), reflecting thecontinued organic growth of our products in the overseas markets, a full year'scontribution from Sinclair Srl in Italy, and the addition of 3 months of revenuefrom CSD. Direct sales The Group now has its own sales presence in 4 European countries - France,Italy, Spain and Portugal, and these business contributed revenue of £5.4m(2005: £1.1m). Sinclair Srl had sales of £2.7m (2005: £1.1m) reflecting a full yearscontribution compared to 5 months in 2005 and have included the launch ofSinclair's own products Atopiclair, Sebclair, and Dermachronic in the period.There were already within the Sinclair Srl portfolio some small products whichcompete head on with these Sinclair products and during the current financialyear a number of these will be disposed of. During the year the sales force was fully reviewed and rationalised withinSinclair Srl, and changed from a sales force of 21 commissioned agents to 17full time employees, which has provided improved control and monitoring of thesales force. This has allowed us to replace a number of the agents with higherquality employees, with a consequent increase in effectiveness at the saleslevel. CSD contributed £2.7m (2005:£nil) to the revenue of Sinclair for the period fromacquisition to 30th June 2006. We have been particularly pleased with theprogress of the integration of CSD and that the business has itself continued totrade in line with our expectations. Sales through marketing partner network Revenues from our out-licensing activities for the period are summarised below: 2006 2005 £m £m Product sales 5.0 3.4Royalties 0.7 0.2License fees and milestones 0.5 2.3 _____ _____Total 6.2 5.9 _____ _____ Recurring revenue from product sales and royalties increased 58% to £5.7m from£3.6m in 2005. Product sales growth has been driven principally by sales of Atopiclair Creaminto the US of £0.7 m (2005: £0.4m), where it was launched by Chester ValleyPharmaceuticals, and was running at 2,000 prescriptions per week in June 2006.Also growth has come from sales of Decapinol in Italy, Spain, and Israel of£0.5m (2005: £0.2 m). Royalties are principally derived from the sales of Atopiclair Cream in the USof £0.3m (2005: £nil) and Gelclair worldwide of £0.2m (2005: £0.2m). During the period Sinclair recognised license fees and milestones of £0.5m(2005: £2.3m), including launch fees for Decapinol in Spain and Xclair andSalinum in the US. On 29th June 2006 a license fee of $1.0 m was received fromOraPharma Inc., a subsidiary of Johnson & Johnson, upon the signing of adistribution agreement for the sale of Decapinol Rinse in the US. In accordancewith Sinclair's accounting policies this fee will be amortised over the initial5 year period of the agreement and so there has been negligible impact of thison the results to 30th June 2006. Losses Sinclair recorded a loss before tax for the year of £2.8m (2005: £1.8m). Thisincluded a charge for the non-cash cost of share based incentives of £0.1m(2005: £0.1m) charged in accordance with IFRS2. The reported loss was inaccordance with the board's expectations and reflects investment in pipeline andinfrastructure to achieve future profitable growth. CSD contributed £0.3m profit before tax in the three months post acquisition. The charge for amortisation of intangible assets of £0.3m (2005: £0.1m) included£0.2m in respect of the intangible assets of CSD. Taxation The taxation charge for the year of £0.1m (2005: £0.1m) represents tax payablein France and Italy. At the start of the year the Group had brought forward taxlosses of £4.0m which will be increased by the tax losses for this year. Liquidity and Capital Resources Sinclair had cash balances of £5.0m (2005: £4.9m) at 30th June. Net cash inflowduring the year was £0.0m (2005: (£3.3m)), which included equity capitalraisings (net of expenses) of £5.3m (2005: £0.5m) and was after the deduction ofoperating cash outflow of £3.2m (2005: £2.6m) and acquisition related costs of£2.1m (2005: £1.2m). Loss per share Sinclair recorded a loss per share of 4.5pence (2005: 3.7pence). Jerry Randall ACA Chief Financial Officer Further information Please visit our corporate website www.sinclairpharma.com for more informationand latest news. Our individual product websites, listed below, provide moreextensive product information and list our marketing partner network for eachproduct. www.decapinol.com www.aloclair.com www.sst-drymouth.com www.salinum.comwww.sebclair.com www.atopiclair.com www.xclair.com Unaudited Consolidated Income StatementFor the year ended 30 June 2006 Unaudited Unaudited 2006 2005 Notes £000 £000 REVENUE 2 11,623 6,971 Cost of sales (4,576) (2,216) _____ _____ GROSS PROFIT 7,047 4,355 Administrative expenses Selling, marketing and distribution (5,019) (2,141) Other administrative expenses (5,001) (4,205) _____ _____Total administrative expenses (10,020) (6,346) OPERATING LOSS (2,973) (1,991) Interest receivable 276 248Interest payable and similar charges (54) (18) _____ _____ LOSS BEFORE TAXATION (2,751) (1,761)Taxation (85) (45) _____ _____ LOSS FOR THE YEAR (2,836) (1,806) _____ _____ Loss per share (basic and diluted) 3 (4.5)p (3.7)p Unaudited Consolidated Balance SheetAt 30 June 2006 Unaudited Unaudited 2006 2005 Notes £000 £000 NON-CURRENT ASSETSGoodwill 4 43,692 18,071Intangible assets 5 9,336 1,183Property, plant and equipment 1,558 393Non-current tax assets 1,796 -Other non-current assets 55 - _____ _____ 56,437 19,647CURRENT ASSETSInventories 2,609 601Trade and other receivables 6 8,072 4,901Cash and cash equivalents 5,036 4,908 _____ _____ 15,717 10,410 TOTAL ASSETS 72,154 30,057 CURRENT LIABILITIESTrade and other payables 7 (6,155) (4,343)Current tax liabilities (348) (17)Financial liabilities - borrowings (806) (480) _____ _____ (7,309) (4,840)NON-CURRENT LIABILITIESFinancial liabilities - borrowings (295) (175)Non-current tax liabilities (1,211) -Other non-current liabilities (529) -Provisions (140) - _____ _____ (2,175) (175) _____ _____ TOTAL LIABILITIES (9,484) (5,015) _____ _____ NET ASSETS 62,670 25,042 _____ _____ EQUITYShare capital 933 592Share premium account 21,386 16,171Other reserves 51,153 16,384Retained deficit (10,807) (8,101) _____ _____Total shareholders' equity 62,665 25,046 Minority equity interests 5 (4) _____ _____ TOTAL EQUITY 62,670 25,042 _____ _____ Unaudited Consolidated Statement of Changes in Shareholders' EquityFor the year ended 30 June 2006 Share Share Merger Other capital premium reserve reserves £000 £000 £000 £000Balance at 1 July 2004 (Unaudited) 539 16,030 10,062 5,065Exchange differences arising on translation of - - - 14overseas subsidiaries _____ _____ _____ _____Net (expense) recognised directly in equity - - - 14Loss for the period - - - - _____ _____ _____ _____Total recognised (expense)/ income for the - - - 14periodShare based payments - value of employee - - - -servicesOptions and warrants exercised 4 141 - (12)Acquisition of Biosurface AB 26 - 2,824 (4,367)Acquisition of Euroderm RDC 23 - 2,798 - _____ _____ _____ _____Balance at 30 June 2005 (Unaudited) 592 16,171 15,684 700Exchange differences arising on translation of - - - 49overseas subsidiaries _____ _____ _____ _____Net (expense) recognised directly in equity - - - 49Loss for the period - - - - _____ _____ _____ _____Total recognised (expense)/ income for the - - - 49periodShare based payments - value of employee - - - -servicesOptions and warrants exercised 2 114 - -Issue of share capital 59 7,343 - -Acquisition of Groupe CS Dermatologie SAS 280 - 34,720 -Share issue expenses - (2,242) - - _____ _____ _____ _____Balance at 30 June 2006 (Unaudited) 933 21,386 50,404 749 _____ _____ _____ _____ Retained Attributable Minority TOTAL deficit to equity interest holders of the EQUITY parent £000 £000 £000 £000Balance at 1 July 2004 (Unaudited) (6,577) 25,119 (4) 25,115Exchange differences arising on translation of - 14 - 14overseas subsidiaries _____ _____ _____ _____Net (expense) recognised directly in equity - 14 - 14Loss for the period (1,806) (1,806) - (1,806) _____ _____ _____ _____Total recognised (expense)/ income for the period (1,806) (1,792) - (1,792Share based payments - value of employee services 84 84 - 84Options and warrants exercised 198 331 - 331Acquisition of Biosurface AB - (1,517) - (1,517)Acquisition of Euroderm RDC - 2,821 - 2,821 _____ _____ _____ _____Balance at 30 June 2005 (Unaudited) (8,101) 25,046 (4) 25,042Exchange differences arising on translation of - 49 - 49overseas subsidiaries _____ _____ _____ _____Net (expense) recognised directly in equity - 49 - 49Loss for the period (2,836) (2,836) - (2,836) _____ _____ _____ _____Total recognised (expense)/ income for the period (2,836) (2,787) - (2,787)Share based payments - value of employee services 130 130 - 130Options and warrants exercised - 116 - 116Issue of share capital - 7,402 - 7,402Acquisition of Groupe CS Dermatologie SAS - 35,000 9 35,009Share issue expenses - (2,242) - (2,242) _____ _____ _____ _____Balance at 30 June 2006 (Unaudited) (10,807) 62,665 5 62,670 _____ _____ _____ _____ Unaudited Consolidated Cash Flow StatementFor the year ended 30 June 2006 Unaudited Unaudited 2006 2005 £'000 £'000Cash flows from operating activitiesLoss before tax (2,751) (1,761)Interest received (276) (248)Interest paid 54 18Share based payment - value of employee services 130 84Depreciation 157 99Amortisation of intangible assets 307 83Exchange loss/(gains) 30 (57) _____ _____ (2,349) (1,782)Changes in working capital (excluding effects of acquisitions)Increase in inventories (33) (287)Decrease/(increase) in receivables (195) (2,267)(Decrease)/increase in payables (379) 1,928Increase in provisions 19 23 _____ _____Net cash outflow from operations (2,937) (2,385)Taxation paid (172) (238)Taxation received - 23Interest paid (43) (18)Interest paid on finance lease (11) - _____ _____Net cash used in operating activities (3,163) (2,618) _____ _____Investing activitiesInterest received 268 248Purchases of property, plant and equipment (126) (280)Purchase of intangible assets (57) -Acquisition of subsidiary undertaking, net of cash acquired (2,181) (1,201) _____ _____Net cash used in investing activities (2,096) (1,233) _____ _____Financing activitiesRepayments of obligations under finance leases (33) (1)Proceeds from issue of new loans 42 135Proceeds from issue of share capital 7,518 195Share issue costs (2,242) -Proceeds from issue of share capital - ESOT - 222 _____ _____Net cash from financing activities 5,285 551 _____ _____ Net increase/(decrease) in cash and cash equivalents 26 (3,300) Cash and cash equivalents at the beginning of the year 4,444 7,683Effect of foreign exchange rate changes - 61Cash and cash equivalents at end of year 4,470 4,444 1. Basis of preparation The preliminary financial information has not been audited and does notconstitute the Group's statutory accounts within the meaning of Section 240 ofthe Companies Act 1985. The auditors' reports on the financial statements forthe year 30 June 2005 was unqualified and did not contain statements undereither section 237 (2) or section 237 (3) of the Companies Act 1985. Thefinancial statements for the year ended 30 June 2005 have been delivered to theregistrar of Companies. Prior to 1 July 2005, the Group prepared its financial statements in accordancewith UK Generally Accepted Accounting Practice ("UK GAAP"). For the year ended30 June 2006 the Group has chosen to prepare its statutory financial statementsin accordance with International Financial Reporting Standards ("IFRS").Accordingly, the financial statements have been prepared in accordance with IFRSand International Financial Reporting Interpretations Committee ("IFRIC")interpretations endorsed by the European Union and with those parts of theCompanies Act 1985 applicable to companies reporting under IFRS. The financialstatements have been prepared under the historical cost convention as modifiedto fair value for certain financial assets and liabilities. Financialinformation relating to the year ended 30 June 2005 has been restated inaccordance with IFRS and the accounting policies adopted under IFRS. On 13 March 2006, with its interim results for the six months ended 31 December2005, the Group released an IFRS transition document which is available on thewebsite, www.sinclairpharma.com. This document set out the Group's principalaccounting policies under IFRS, which have been applied consistently in thisfinancial information. The IFRS transition document also includedreconciliations of the income statement, balance sheet and equity together withexplanations of the impacts of IFRS. This announcement was approved by the Board of Sinclair Pharma plc on 25September 2006. 2. Segmental information The information below is not the full segmental information disclosure asrequired by IAS 14 but selected segmental information. The Group's primary segment reporting is by business sector with geographicallocation of assets being the secondary format. The Group's revenues are derivedentirely from its principal activity, direct sales and marketing partner sales. Primary reporting format - business sector 2006 2005 Marketing Direct Total Marketing Direct Total Partners partners £'000 £'000 £'000 £'000 £'000 £'000Revenue 6,190 5,433 11,623 5,900 1,071 6,971Segmental operating loss (2,883) (90) (2,973) (1,838) (153) (1,991)Interest cost (19) (35) (54) (7) (11) (18)Interest income 273 3 276 248 - 248 ______ ______ ______ ______ ______ ______Loss before tax (2,629) (122) (2,751) (1,597) (164) (1,761)Taxation - (85) (85) (45) - (45) ______ ______ ______ ______ ______ ______Loss for the financial year (2,629) (207) (2,836) (1,642) (164) (1,806) ______ ______ ______ ______ ______ ______ Revenue Analysis Revenue analysed by geographic destination is as follows: 2006 2005 £'000 £'000United Kingdom 496 752Rest of Europe 7,978 3,811United States of America 2,755 2,278Rest of World 394 130 _____ _____ 11,623 6,971 _____ _____ An analysis of revenue by category is set out in the table below: 2006 2005 £'000 £'000Product revenue 10,386 4,476Royalties 709 238Licence fees and milestones 528 2,257 _____ _____ 11,623 6,971 _____ _____ 3. Loss per share The basic loss per share has been calculated by dividing the loss for the year,by the weighted average number of shares in existence for the year. Shares heldby the Employee's Share Trust, including shares over which options have beengranted to Directors and staff, have been excluded from the weighted averagenumber of shares for the purposes of calculation of the basic loss per share. The loss and weighted average number of shares for the purpose of calculatingthe diluted loss per share are identical to those used for the basic loss pershare at 30 June 2006, as the exercise of share options and warrants would havethe effect of reducing the loss per share and is therefore not dilutive. 2006 2005Loss attributable to equity shareholders (£000) (2,836) (1,806) Weighted average number of shares 63,400,983 49,055,798Diluted weighted average number of shares 63,400,983 49,055,798Basic and diluted loss per share (pence) (4.5)p (3.7)p 4. Goodwill £'000CostAt 1 July 2005 20,578Additions through business combinations 25,618Exchange adjustments 3 _____At 30 June 2006 46,199 _____ Accumulated amortisation and impairmentAt 1 July 2005 and 30 June 2006 2,507 _____ Net book value at 30 June 2006 43,692 _____Net book value at 30 June 2005 18,071 _____ Goodwill arising during the year relates to the acquisition of Groupe CSDermatologie details of which are outlined in note 8. 5. Intangible assets Licenses, Other Total patents, etc. £'000 £'000 £'000CostAt 1 July 2005 141 1,225 1,366Additions 57 - 57Additions through business combinations 8,383 - 8,383Exchange adjustments 20 - 20 _____ _____ _____At 30 June 2006 8,601 1,225 9,826 _____ _____ _____AmortisationAt 1 July 2005 47 136 183Provision for the year 236 68 307 _____ _____ _____At 30 June 2006 282 204 490 _____ _____ _____ Net book value at 30 June 2006 8,314 1,021 9,336 _____ _____ _____Net book value at 30 June 2005 94 1,089 1,183 _____ _____ _____ The licences are held in a subsidiary company and comprise product distributionrights that have been capitalised and are being amortised over their usefullife, a period of 10 years. Licences and patents arising during the year relateto the acquisition of Groupe CS Dermatologie details of which are outlined innote 8, these are being amortised over periods ranging from 5 to 10 years. The other intangible fixed assets arose on the buy-out of future royaltyobligations on certain of the Group's products. The directors have determinedthat the useful economic life of the other intangible asset is 18 years. 6. Trade and other receivables 2006 2005 £'000 £'000 Trade receivables 6,294 4,201Other receivables 1,214 387Prepayments and accrued income 564 313 _____ _____ 8.072 4,901 _____ _____ 7. Trade and other payables 2006 2005 £'000 £'000 Trade payables 3,687 2,475Other taxes and social security costs 579 101Other payables 203 732Accruals and deferred income 1,686 1,035 _____ _____ 6,155 4,343 _____ _____ 8. Acquisition of Groupe CS Dermatologie On 30 March 2006 the group acquired 100% of the ordinary share capital of GroupeCS Dermatologie SAS (CSD) for a consideration of £37.2m, before expenses,satisfied by the following. (i) Consideration of £35.0m in 28,000,000 Sinclair Pharma plc1p ordinary shares at a market value of £1.25p per ordinary share and £0.3m incash on completion with a further £1.4m paid 20 days after completion. (ii) Performance related deferred consideration in the form ofcash or ordinary shares in the company (at the option of the vendor), up to amaximum value of €25.0m is payable by Sinclair in annual instalments over aperiod of four years based upon annual incremental increases in revenues beingachieved by CSD. The directors have estimated the fair value of the deferredconsideration at 30 June 2006 to be £529,000, this has been included in thebalance sheet as a non-current financial liability. The pre-acquisition carrying values and provisional fair values of the netassets acquired were: Carrying values Fair value Provisional pre-acquisition adjustments fair value £'000 £'000 £'000AssetsProperty, plant and equipment 659 415(1) 1,074Goodwill 7,034 (7,034) -Intangible fixed assets 10,563 (2,180)(2) 8,383Non-current tax assets 1,213 583 1,796Other non current assets 73 - 73 _____ _____ _____Non-current assets 19,542 (8,216) 11,326 _____ _____ _____ Inventories 1,975 - 1,975Trade and other receivables 2,950 - 2,950Cash and cash equivalents 548 - 548 _____ _____ _____Current assets 5,473 - 5,473 _____ _____ _____ Total assets 25,015 (8,216) 16,799 _____ _____ _____ LiabilitiesTrade and other payables 2,173 - 2,173Current tax liabilities 418 - 418Financial liabilities - borrowings 143 - 143 _____ _____ _____Current liabilities 2,734 - 2,734 _____ _____ _____ Financial liabilities - borrowings 83 - 83Non-current tax liabilities 1,211 - 1,211Provisions 122 - 122 _____Non-current liabilities 1,416 - 1,416 _____ _____ _____ Total liabilities 4,150 - 4,150 _____ _____ _____ Minority interests (9) - (9) _____ _____ _____ Net assets acquired 20,856 (8,216) 12,640 _____ _____ _____ Goodwill arising on consolidation 25,618 _____ 38,258 _____ Consideration satisfied by: Vendor placing of 28,000,000 ordinary shares of 1p at £1.25p each 35,000Cash 1,764Costs associated with the acquisition 965Fair value of earn out 529 _____ 38,258 _____ 1. Adjustment to reflect land at manufacturing site to market value. 2. Allocation of purchase price to separately identifiable intangibleassets (1) Din Link UK 2006, patients under 17 were given 28.5% of eczema prescriptions This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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