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For immediate release

30 September 2009

Neuropharm Group plc

('Neuropharm' or 'the Company')

Preliminary results for the year ended 30 June 2009

 

Neuropharm Group plc (AIM: NPH), a speciality pharmaceutical company focused on neurodevelopmental disorders, announces its preliminary results for the year ended 30 June 2009.

Key points

• Discussions ongoing regarding potential collaboration on further development and commercialisation of NPL-2008 in Autistic Disorder

• Pipeline expanded with two new near-term revenue-generating opportunities

 -     NPL-2505, a branded pharmaceutical targeting a substantial patient population

 -     NPL-2510, a novel biological screen for autism

• Positive Phase IIa results from NPL-2009 and NPL-2005 have placed Neuropharm at the forefront of Fragile X Syndrome research

• Patent filing in connection with NPL-2003 in Obsessive Compulsive Disorder, focused on the treatment of child-onset OCD

• Cash, cash equivalents and money market investments at 30 June 2009 of £7.0 million (2008: £12.7 million) 

For further information please contact: 

Neuropharm	+ 44 (0) 1372 371 171
Robert Mansfield, Chief Executive Officer Graham Yeatman, Chief Financial Officer
Piper Jaffray Limited	+ 44 (0) 203 142 8700
Neil Mackison, Rupert Winckler
Buchanan Communications	+ 44 (0) 207 466 5000
Mark Court, Catherine Breen

  

Notes to Editors:

About Neuropharm

Neuropharm is a speciality pharmaceutical company focused on the development of products for the treatment and management of neurodevelopmental disorders. Please visit www.neuropharm.co.uk for further information.

JOINT STATEMENT FROM THE CHAIRMAN AND CHIEF EXECUTIVE OFFICER

We announce our preliminary results for the year ended 30 June 2009 and provide an update on progress to date.

At the start of the 2009 financial year we were focused on the completion of the Phase III SOFIA study of NPL-2008 in the treatment of Autistic Disorder. This was a major study carried out in the US in collaboration with Autism Speaks, the US patient organisation, and included more than 150 patients at specialist centres.

We were disappointed to announce in February 2009 that the SOFIA study had not met its primary endpoint of providing a statistically significant reduction in repetitive behaviours in patients with Autistic Disorder. The SOFIA study showed that repetitive behaviours were reduced both by NPL-2008 and by placebo. This positive placebo response was unexpected, as two previous studies of the active ingredient of NPL-2008 had shown a positive effect of treatment in the absence of any placebo effect.

We have undertaken a detailed analysis of the SOFIA data to gain a better understanding of the study results. We have investigated the extent to which placebo effects can impact clinical studies in Autistic Disorder and have worked with clinicians and regulatory experts to understand this unexpected effect. This analysis has led us to conclude that NPL-2008 merits further study in the treatment of Autistic Disorder and that the compound retains the potential to be the world's first licensed therapy for this indication. Our view on the potential of NPL-2008 is supported by clinicians, academics and other experts in the field of Autistic Disorder whose advice we have taken.

We are well advanced in planning the design of a second Phase III study, which would have important differences to the SOFIA study and which we estimate would cost approximately £5 million to complete. The second Phase III study would employ a specific design to mitigate the placebo effect seen in the SOFIA study and would also include changes to the dosing regimen.

As we do not currently have the financial resources to carry out a further Phase III study we have put further project expenditure on NPL-2008 on hold whilst we assess the funding alternatives. Discussions are ongoing regarding potential collaboration on the further development and commercialisation of the product, after initial exclusive negotiations on a North American deal were terminated. Changes to the arrangements with Mount Sinai School of Medicine have been agreed and discussions with Catalent on the arrangements for the future are at an advanced stage.

Whilst much of our effort during the year has been directed towards NPL-2008, we have also made significant advances on other projects in our pipeline. The Company is now focusing on two new near-term revenue-generating opportunities, NPL-2505 and NPL-2510, both of which are global opportunities and could be funded over the next financial year from existing resources. NPL-2505 is a branded pharmaceutical and NPL-2510 is a biological screen for autism.

Following the outcome of the SOFIA study, we acted promptly to implement a cost reduction programme in the UK and the US and, as a result, at 30 June 2009 we had cash, cash equivalents and money market investments of £7.0 million. The Company is also preparing grant applications for external funding of anticipated future projects.

NPL-2505

This programme involves a new formulation of an existing marketed compound targeting an opportunity associated with unmet need in substantial patient populations, identified during the recent interactions with psychiatrists, neurologists and regulators. In contrast to NPL-2008, the technical and commercial issues with this product are minimal. On present plans, working closely with Catalent, the programme is set for submission of a New Drug Application ('NDA') in the US in 2011. This low-cost programme represents an opportunity for the Company to bring the product to market in the US using non-sales force promotion targeting specialist physicians. The product could be partnered in other non-US markets.

NPL-2510: Autism Screen    

The Company has an exclusive option to negotiate a licence for proprietary technology on a novel biological screen for autism in infants, children and adults. The university group that developed the screen has already conducted work showing the potential of the results from the screen, which identifies specific markers for autism. Further validation work is planned in the US and Europe to prepare the product for launch by 2012.

This screen represents an exciting near-term global opportunity with significant market potential in a favourable regulatory environment, which the Company could fund over the next financial year from existing resources. This low-cost programme is a second opportunity for the Company to introduce a product targeting specialist physicians using non-sales force promotion.

NPL-2008: Autistic Disorder

On 18 February 2009 we announced that the SOFIA study had not met its primary endpoint of a statistical reduction in repetitive behaviours and that, compared with the previously successful trial, the results were both unexpected and disappointing. Unlike other SSRIs in paediatric studies in autism, NPL-2008 was well tolerated by patients in the SOFIA study and no serious adverse events were reported. NPL-2008 and placebo conferred benefit in the SOFIA study, with both treatments reducing repetitive behaviours in patients, according to the response criterion of a 25 percent reduction in CYBOCS-PDD. In the SOFIA study the placebo effect was markedly higher than in the Mount Sinai study and, accordingly, no statistically significant difference was observed on the primary endpoint between the active and placebo treatment groups. The follow-on EMMA study, offered to patients who had participated in SOFIA, was wound down with considerable cost savings.

We undertook a detailed analysis and review of the SOFIA data, which has convinced us that modifications to the design of the study are required to take into account the positive placebo response, which has also been observed with other compounds in psychiatric and neurology studies.  

We are now at an advanced stage in planning a further Phase III study, which would employ a modified design and would enrol a similar number of patients to the SOFIA study. The design for this study has been evolved in consultation with independent advisers and potential partners and is designed to mitigate the placebo effect seen in SOFIA.  

In addition, our analysis of the SOFIA data suggests that the placebo effect seen impacted the dose titration executed in the study, to the extent that the doses required to demonstrate clinical effect may not have been reached. Since a higher dosage of NPL-2008 could be of benefit, we would propose to include higher dosages in a second Phase III study design. These proposed dosages are within the FDA's existing approved dose range for fluoxetine for use in children and adolescents. 

It is estimated that a second Phase III study would cost approximately £5 million over a two year period. Assuming the successful completion of a second Phase III study and subsequent approval by FDA, we project that NPL-2008 could be ready for launch in the US as an orphan drug for the treatment of a core symptom of Autistic Disorder in 2012.

The low starting dose approach with fluoxetine continues to be endorsed by Mount Sinai School of Medicine and Great Ormond Street Hospital.

NPL-2005 & NPL-2009: Fragile X Syndrome

We reported significant progress during the period in our two programmes in Fragile X Syndrome, a condition caused by a mutation in the X chromosome that affects approximately 1 in every 3,800 male children and approximately 1 in every 8,000 female children.  In Fragile X Syndrome the FMR1 gene on the affected part of the chromosome shuts down and is unable to produce a protein needed by the brain for normal brain functioning. The condition, thought to be the most common cause of inherited intellectual disability, is the focus of considerable interest from medical, scientific and patient communities because the genetics and proteomics of the condition are fully understood, suggesting that successful treatment should be achievable. 

Neuropharm has Orphan Drug Designation from FDA's Office of Orphan Product Development for its two potentially complementary programmes in Fragile X, NPL-2005 and NPL-2009. At the National Fragile X Foundation's 11th International Fragile X Conference in St Louis, Missouri, in July 2008, positive results were presented from Phase IIa studies of both compounds.

The positive results from the Phase IIa study of NPL-2009, which is based on the existing mGluR5 antagonist fenobam, were later published in the peer-reviewed Journal of Medical Genetics at the beginning of 2009. The results are believed to mark the first time that the effects of a potential targeted treatment have been reported in patients with Fragile X Syndrome. The data obtained from this study suggested that NPL-2009 was well tolerated after an initial dose and that a positive effect was seen on a surrogate assessment of brain function.

We have since been working on improving the formulation of the compound to improve the levels of NPL-2009 in plasma as pharmacokinetic analysis had shown that NPL-2009 plasma levels were dose dependent but variable. 

The results of the fenobam Phase IIa study have prompted considerable interest and placed Neuropharm in at the forefront of Fragile X Syndrome research. 

The clinical investigators in the study of NPL-2005, which is based on the existing anti-convulsant compound valproate, concluded that the compound could be effective in the treatment of Attention Deficit Hyperactivity Disorder (ADHD) (behavioural) like symptoms in young males with Fragile X Syndrome.

NPL-2003: Obsessive Compulsive Disorder

NPL-2003 is an existing marketed product that the Company believes could be of benefit to children and some adults with Obsessive Compulsive Disorder (OCD). 

Patients with OCD display two principal features: repeated (obsessional) thoughts of a severely anxious nature and, in an attempt to reverse the obsessional anxieties, repeated ineffectual (compulsive) behaviour or thoughts, such as repeated hand-washing. Depression, social phobia and substance abuse rates are higher in these patients than in the general population.  

There are a number of different types of OCD, some of which occur for the first time in adults and others that are characterised as having an onset in childhood.

Two small, open-label Phase II studies of NPL-2003 have been carried out in the US through our collaborations with Columbia University, New York, and University Hospitals Case Medical Center at Case Western Reserve University School of Medicine, Cleveland.

The first study was a paediatric study of six patients at Columbia University; the second study comprised an adult population of 15 patients and was conducted by both Columbia University and Case Western.

The combined data from the studies suggest that NPL-2003 demonstrates therapeutic benefit in patients whose OCD started in childhood, irrespective of their age during treatment. The data from the adult study suggest that NPL-2003 does not show benefit in patients whose OCD starts in adulthood. The results of the two studies are close to publication. The Company has filed a patent application.

The investigators in the studies believe that the data are compatible with the hypothesis that oxidative stress could be involved in the onset of OCD in children. Oxidative stress is caused by an over-production of free radicals during cellular metabolism.  

Outlook

Our detailed analysis of the data from the SOFIA trial indicates that NPL-2008 retains the potential to be the world's first licensed therapy for Autistic Disorder. We are therefore well advanced in planning the design of a second Phase III study, which would cost approximately £5 million to complete. Project expenditure on NPL-2008 is on hold as we continue in partnering discussions and assess the alternatives for funding the study.

Our two new near-term programmes in NPL-2505 and NPL-2510 could both be funded over the next financial year from existing resources and represent attractive opportunities for revenue generation in the US market and potential licensing and partnering in other markets.

We reported cash, cash equivalents and money market investments of £7.0 million at the year end and will continue to manage resources carefully, whilst continuing to progress our pipeline of product opportunities.

Graeme M. Hart                                        Robert G. Mansfield

Chairman                                                    Chief Executive Officer

29 September 2009

FINANCIAL REVIEW

The financial statements for the year ended 30 June 2009 are presented in accordance with the Group's accounting policies based on International Financial Reporting Standards ('IFRS') as adopted by the European Union.

Cash, cash equivalents and money market investments at 30 June 2009 totalled £7.0 million (2008: £12.7 million).

Results of operations

We report a loss after tax of £5.9 million for the year ended 30 June 2009 (2008: £4.2 million), which is to be set against reserves. The Directors do not recommend the payment of a dividend (2008: £nil).

Our virtual model enables us to have a low fixed cost base and keep variable costs tightly controlled, with decisions regarding investment in our pipeline and development of our US organisation dependent on regular review by the Directors.  We ensured that the committed costs of our US organisation and pre-launch marketing of NPL-2008, were kept to a minimum awaiting the result of the SOFIA study in February 2009. Following the outcome of the SOFIA study, we acted promptly to implement a cost reduction programme. This approach has given us increased control over our cash-burn which has enabled us to preserve our cash balance.

Research and development expenses

Research and development expenses are primarily in respect of undertaking clinical trials and use of consultants for regulatory advice, market research and supply chain consultancy.

Research and development expenses were £3.5 million this year (2008: £3.0 million), of which £3.2 million was in respect of our lead programme NPL-2008 (2008: £2.4 million) and within this £1.9 million was attributable to SOFIA, £0.6 million to EMMA, £0.3 million to bioequivalence studies, £0.3 million to regulatory work and £0.1 million to other consultancy.

Selling, marketing and distribution expenses

Selling, marketing and distribution expenses were £0.5 million (2008: £0.1 million). These consist primarily of consultancy fees for market research, brand identity and launch planning strategy invested in initial preparations for the pre-launch marketing of NPL-2008.

Other management and administration expenses

Other management and administration expenses were £3.2 million (2008: £2.6 million). These consist primarily of remuneration for UK and US employees, rent, travel and expenses, professional fees for legal, tax and audit services, and fees for Non-Executive Directors.

Share option expense

A share option expense of £0.4 million has been charged for the year (2008: £0.1 million).

Impairment charge

An impairment charge of £0.2 million has been charged for the year (2008: £nil) as a result of the Directors decision to impair in full the value of the intangible asset and tooling pending the outcome of partnering discussions and assessment of alternatives for funding NPL-2008.

Investment income

The Company invests its surplus funds in bank deposits and money market investments of up to one year, according to the terms of the Group's Treasury Policy.  In the year ended 30 June 2009 interest receivable was £0.4 million (2008: £0.9 million), in line with the decrease in surplus funds during the course of the year and the decline in the interest rates commercially available.

FINANCIAL REVIEW (continued)

Taxation

The Group makes claims each year for Research and Development Tax Credits and, as it is loss-making, elects to surrender these tax credits for a cash rebate. The amount credited to the consolidated income statement in respect of amounts receivable for the surrender of research and development expenditure is £0.6 million for the year ended 30 June 2009 (2008: £0.8 million).

Liquidity, cash and cash equivalents, and money market investments

The net cash used in operating activities was £6.8 million (2008: £5.7 million).

Accrued income and margin deposits at 30 June 2009 were £0.1 million (2008: £0.5 million).  The decrease is mainly due to the Company's decision to shorten maturity dates for term deposits to less than three months. There was no hedging of foreign currency exposure through forward foreign exchange contracts and, therefore, no margin deposits at the year end.

Trade and other receivables at 30 June 2009 were £0.1 million (2008: £0.2 million).

Trade and other payables at 30 June 2009 were £0.6 million (2008: £1.3 million), primarily due to the retrenchment of spend following the result of the SOFIA study and the Company's decision not to award bonuses to employees for the year ended 30 June 2009.

Going concern

As disclosed in note 2 to the consolidated financial information, having made relevant and appropriate enquiries, including consideration of the Group's current cash resources and cash flow forecasts, the Board has a reasonable expectation that, at the time of approving the financial statements, the Group has adequate resources to continue in operational existence for at least the next 12 months. Accordingly, the Board continues to adopt the going concern basis in preparing the financial statements.

Graham E. Yeatman 

Chief Financial Officer

29 September 2009

 

 

	Note			2009 £'000	2008 £'000
Research and development expenses				(3,472)	(3,000)
Selling, marketing and distribution expenses				(454)	(132)
Other management and administration expenses				(3,167)	(2,605)
Movement on provision for National Insurance on share option gains				97	4
Share option expense				(450)	(147)
Impairment charge				(189)	-
Total management and administration expenses				(3,709)	(2,748)
Operating loss				(7,635)	(5,880)
Investment income				442	881
Other gains and losses				693	54
Loss on ordinary activities before tax				(6,500)	(4,945)
Taxation				616	754
Loss for the year				(5,884)	(4,191)
Loss per share
Basic and diluted	3			(18.7)p	(13.3)p

All results derive from continuing operations.

 

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Year ended 30 June 2009

	Called up share capital £’000	Share premium account £’000	Other reserve £’000	Foreign currency translation reserve £’000	Share-based compensation £’000	Retained loss £’000	Total £’000
Balance as at 30 June 2007	3,154	17,313	(651)	-	485	(3,599)	16,702
Share option expense	-	-	-	-	147	-	147
Reserve transfer	-	(44)	44	-	-	-	-
Loss for the year	-	-	-	-	-	(4,191)	(4,191)
Balance as at 30 June 2008	3,154	17,269	(607)	-	632	(7,790)	12,658
Share option expense	-	-	-	-	450	-	450
Foreign exchange adjustments on consolidation	-	-	-	33	-	-	33
Loss for the year	-	-	-	-	-	(5,884)	(5,884)
Balance as at 30 June 2009	3,154	17,269	(607)	33	1,082	(13,674)	7,257

 

 

CONSOLIDATED BALANCE SHEET

30 June 2009

	Note			2009 £'000	2008 £'000
Non-current assets
Intangible assets				-	42
Property, plant and equipment				16	181
				16	223
Current assets
Accrued income and margin deposits				63	472
Trade and other receivables				95	232
Research and development tax credit receivable				600	500
Derivative financial instruments				-	2
Money market investments				1,000	9,510
Cash and cash equivalents				6,037	3,148
				7,795	13,864
Current liabilities
Trade and other payables				(554)	(1,332)
Net current assets				7,241	12,532
Total assets less current liabilities				7,257	12,755
Non-current liabilities
Long-term provisions				-	(97)
Net assets				7,257	12,658
Equity
Share capital	4			3,154	3,154
Share premium account				17,269	17,269
Other reserve				(607)	(607)
Foreign currency translation reserve				33	-
Retained loss				(13,674)	(7,790)
Share-based compensation				1,082	632
Total equity				7,257	12,658

CONSOLIDATED CASH FLOW STATEMENT

Year ended 30 June 2009

	Note		2009 £'000	2008 £'000
Net cash used in operating activities	5		(6,777)	(5,743)
Investing activities
Interest received			442	881
Sales of money market investments			8,510	2,495
Purchases of property, plant and equipment			(12)	(185)
Net cash from investing activities			8,940	3,191
Net increase / (decrease) in cash and cash equivalents			2,163	(2,552)
Cash and cash equivalents at beginning of year			3,148	5,646
Effect of foreign exchange rate changes			726	54
Cash and cash equivalents at end of year			6,037	3,148

NOTES TO THE CONSOLIDATED FINANCIAL INFORMATION

Year ended 30 June 2009

1.      GENERAL INFORMATION

The financial information in this preliminary statement does not constitute statutory accounts as defined in section 435 of the Companies Act 2006. The information has been extracted from the consolidated financial statements for the years ended 30 June 2009 and 30 June 2008. The statutory accounts of Neuropharm Group plc for the year ended 30 June 2008 have been delivered to the Registrar of Companies and those for the year ended 30 June 2009 will be delivered following the Company's Annual General Meeting. The Auditors have reported on those financial statements and their reports were (i) unqualified, (ii) did not draw attention to any matters by way of emphasis, and (iii) did not contain any statements under section 237 (2) or (3) of the Companies Act 1985 in respect of the financial statements for 2008 nor a statement under section 498 (2) or (3) of the Companies Act 2006 in respect of the financial statements for 2009.

Whilst the financial information included in this preliminary statement has been prepared in accordance with International Financial Reporting Standards (IFRSs) as endorsed by the European Union, this statement does not itself contain sufficient information to comply with IFRSs.

The Group's principal accounting policies are unchanged compared to the year ended 30 June 2008 and there have been no new accounting standards during the year that have significantly impacted the results of the Group.

 

2.      SIGNIFICANT ACCOUNTING POLICIES

Going concern

In determining the appropriate basis of preparation of the financial statements, the Directors are required to consider whether the Group can continue in operational existence for the foreseeable future, being a period of not less than twelve months from the date of the approval of the financial statements. During the year ended 30 June 2009, there was a continuing focus on the management of costs within the Group. As at 30 June 2009, the Group had cash, cash equivalents and money market investments of £7.0 million, and the Group had net assets of £7.3 million. Management prepares detailed cash flow forecasts which are reviewed by the Board on a regular basis. The forecasts include assumptions regarding future income and expenditure together with various scenarios which reflect opportunities, risks and appropriate mitigating actions.

Whilst there are inherent uncertainties regarding the cash flows associated with product development and future commercialisation, together with the partnering discussions and alternatives for funding discussed in the Joint Statement from the Chairman and Chief Executive Officer, the Directors are satisfied that there is sufficient discretion and control as to the timing and quantum of cash outflows to ensure that the Group is able to meet its liabilities as they fall due for at least the next 12 months. Therefore, having made relevant and appropriate enquiries, including consideration of the Group's current cash resources and the cash flow forecasts, the Board has a reasonable expectation that, at the time of approving the financial statements, the Group has adequate resources to continue in operational existence for at least the next 12 months. Accordingly, the Board continues to adopt the going concern basis in preparing the financial statements.

This preliminary statement was approved by the Board on 29 September 2009.

  NOTES TO THE CONSOLIDATED FINANCIAL INFORMATION (continued)

Year ended 30 June 2009

3.      LOSS PER SHARE

As at the year end there were outstanding options over 4,784,948 ordinary shares (2008: 5,432,011 ordinary shares) in the Company.

IAS 33 'Earnings per Share' requires presentation of diluted earnings per share when a company could be called upon to issue shares that would decrease net profit or increase net loss per share. Only options that are 'in the money' are treated as dilutive and net loss per share would not be increased by the exercise of these options. Therefore no adjustment has been made to dilute loss per share for any outstanding share options.

The calculation of the basic and diluted loss per share is based on the following data:

		2009 £'000	2008 £'000
Loss
Loss for the purposes of basic and diluted loss per share being net loss attributable to equity holders of the parent		5,884	4,191
		Number	Number
Number of shares
Weighted average number of ordinary shares for the purposes of the basic and diluted loss per share		31,536,697	31,536,697

 

4.      SHARE CAPITAL

The Company has one class of ordinary share which carries no right to fixed income.

		2009 £'000	2008 £'000
Authorised
50,000,000 ordinary shares of £0.10 each		5,000	5,000
Called up, allotted and fully paid
31,536,697 ordinary shares of £0.10 each		3,154	3,154

  NOTES TO THE CONSOLIDATED FINANCIAL INFORMATION (continued)

Year ended 30 June 2009

5.      NOTES TO THE CASH FLOW STATEMENT

		2009 £'000	2008 £'000
Operating loss		(7,635)	(5,880)
Adjustments for:
Amortisation of intangible assets		2	5
Impairment of intangible assets		40	-
Depreciation of property, plant and equipment		28	16
Impairment of property, plant and equipment		149	-
Share option expense		450	147
Operating cash flows before movements in working capital		(6,966)	(5,712)
Decrease / (increase) in receivables		446	(246)
Decrease in payables		(875)	(21)
Decrease / (increase) in derivative financial investments		2	(24)
Net cash used in operations		(7,393)	(6,003)
Research and development tax credit received		616	260
Net cash used in operating activities		(6,777)	(5,743)

Cash and cash equivalents (which are presented as a single class of assets on the face of the balance sheet) comprise cash at bank and other short-term highly liquid investments with a maturity of three months or less.

ENDFR EALNEDLDNEEE