30 March 2010

 

 

PROXIMAGEN NEUROSCIENCE PLC

("Proximagen" or "the Company")

 

Unaudited Preliminary Results for the

Year Ended 30 November 2009

 

London, UK, 30 March 2010 - Proximagen Neuroscience plc (AIM: PRX), the biotechnology company focused on diseases of the central nervous system, today announces its unaudited preliminary results for the year ended 30 November 2009. 

 

Highlights:

 

·       £50 million fund-raising completed in June 2009 to enable the Company to acquire and in-license drug development programmes

·       Acquisition of Cambridge Biotechnology Limited and certain programmes from Biovitrum AB completed in November 2009

·       Considerable expansion of our programme pipeline, spanning a range of central nervous system diseases at varying stages of development from discovery, through pre-clinical and clinical development

·       Strong balance sheet with cash balance at year-end of £55.6 million (2008: £10.2 million)

 

Post Year-End Highlights:

 

·       Acquisition of Minster Pharmaceuticals plc ("Minster") announced in January 2010 and now nearing completion - compulsory acquisition of remaining shares underway

·       Positive epilepsy results announced in March 2010 on tonabersat, one of the programmes acquired through Minster

·       Board of directors strengthened in January 2010 with the appointment as a non-executive director of Dr Jackie Hunter, currently the Senior Vice President and Head of Science Environment Development at GlaxoSmithKline ("GSK") and formerly the Senior Vice President and Head of the Neurology & GI Centre of Excellence for Drug Discovery at GSK

 

Commenting on the Preliminary Results, Kenneth Mulvany, Chief Executive Officer of Proximagen, said: 

"2009 was a transformational year for Proximagen and the Company is now one of the best funded companies in the European biotechnology sector.  We are excited by the potential of the programmes that we have in our pipeline and by the acquisition and in-licensing opportunities that we are seeing.  With a strong Board, senior management team and balance sheet, we look forward to building on our progress to date and delivering significant value in the near and longer term."

 

For further information, please contact:

 

Proximagen Neuroscience plc	Tel: 020 7848 6938
Kenneth Mulvany, Chief Executive Officer
James Hunter, Finance Director
Pelham Bell Pottinger	Tel: 020 7861 3800
Charles Cook, Dan de Belder, Zoë Pocock
Evolution Securities Limited (NOMAD)	Tel: 020 7071 4300
Stuart Andrews, Bobbie Hilliam, Tim Redfern

Chairman's statement

 

I am pleased to report that your Company made strong progress during the year towards achieving its long-term goal of becoming one of the world's leading biotechnology companies developing drugs to address diseases of the central nervous system.

 

As I mentioned in my statement last year, the acquisition and in-licensing of clinical stage programmes will be key components for enabling management to achieve its growth goals, and the Board has been pleased to see material progress in this area over the past nine months. A major factor underpinning this progress was the £50 million investment in the Company which existing and new shareholders made in June last year, in what were challenging economic conditions. We were very encouraged that our major shareholders share our view that there is a real opportunity to capitalise on the investment that has been made in the biotechnology sector over the past few years and the Company is working hard to realise this opportunity.

 

Since the fund-raising, the Company has made two company acquisitions - Cambridge Biotechnology Limited ("CBT") in November 2009 and Minster in March 2010, as well as several programme acquisitions. Collectively, these acquisitions have strengthened the Company's drug development pipeline which has grown considerably from five programmes this time last year. The acquisitions have been on commercial terms that did not involve significant up-front payments, allowing the Company to remain very well funded. The management team will continue to act prudently in its use of funds and is confident that it can generate value from these programmes with a comparatively much-reduced cost base.

 

The Company's strategy of managing risk by partnering programmes on a case-by-case basis is, we believe, an appropriate one for a company of Proximagen's current size and stage of development and management will continue to take a flexible and innovative approach to developing potential partnerships and collaborations.

 

There have been some recent changes to Proximagen's Board of Directors and I am very pleased to welcome Jackie Hunter as a new non-executive director. Jackie is highly regarded in the field of neurology and we look forward to bringing her experience to bear as the Company builds on its progress to date. In addition, Peter Jenner and Bruce Campbell have both stepped down as directors and I would like to take this opportunity, on behalf of the Company, to reiterate my thanks to them for their service to the Board.

 

Proximagen has entered 2010 in a strong position. There is still much work to be done in acquiring and developing further programmes, as well as developing those that are already in our pipeline. The Company remains excited by the opportunity that exists to build a world-class, sustainable biotechnology company addressing the needs of patients with diseases of the central nervous system. We expect the next 12-24 months to be transformational for the Company and look forward to updating shareholders on our progress over the coming months. 

 

 

Peter Allen

Non-Executive Chairman

 

30 March 2010

Chief Executive's Review

Overview

2009 was a year of unprecedented corporate activity for Proximagen and one in which we made a notable transition from specialising in the development of mainly neurodegenerative disease related programmes to drug development in the wider area of diseases of the brain and nervous system (collectively "CNS").

 

In early 2009, we outlined a business strategy to build value through asset consolidation within the biotechnology sector. We noted that the UK biotechnology sector has historically been a world leader, pioneering some truly life-changing scientific discoveries and, as such, has historically attracted a large amount of investment capital from each of the government, institutional and private investors, venture capitalists and academia. However, despite this heritage and funding, proportionally few companies have delivered value to investors, leaving little investor appetite to continue to finance biotechnology companies. In June 2009, the Company raised £50 million to fund the acquisition of CNS companies and drug development programmes. The fund-raising was one of the largest in the biotechnology sector in the past decade and uniquely positioned Proximagen within this sector. As your Company continues to deliver on its acquisition and consolidation strategy, our portfolio has grown from five programmes at the beginning of 2009 to a much broader portfolio of programmes at varying stages of development, from discovery, through pre-clinical and clinical development.

 

Consolidation strategy

Proximagen intends to continue to use the proceeds of the fund-raising, and work in alliance with companies via a number of different approaches, to acquire, develop and commercialise innovative drug candidate programmes in diseases of the CNS. We believe that significant value creation opportunities can arise by building critical mass, reducing the cost base, and focusing resources on a more promising pipeline where tough decisions will be taken to discontinue weak programmes.

 

We are taking a flexible approach to how far we develop our programmes before partnering or otherwise monetising them. In taking these decisions, we are mindful of a number of factors, including development risk, the progress of competitor programmes, our financial position and our belief that the retention of marketing rights to certain territories is an important long-term value driver.

 

Science first, always

Our commitment to science is fundamental. We look for programmes that represent true scientific innovations breaking new ground in treatment. Using this standard as a development benchmark makes things more challenging, but demonstrates our commitment to pursuing only those opportunities that improve upon current therapies in meaningful ways and represent the best chance of generating significant commercial value.

 

Our research and development ("R&D") goal is to pursue CNS therapeutic possibilities wherever the scientific trail leads and, as with everything else we do, our approach to such a goal is disciplined, focused and strategic.

 

Proximagen's R&D programmes are grounded in the neurological sciences, where advancing technology and rapidly expanding knowledge allows the Company to pursue a broader therapeutic footprint. In recent years, Proximagen's internal development pipeline has increased in size and has grown more diverse, reflecting the Company's ability to pursue treatments in various indications including cognitive decline and neuropathic pain. We are proud of the calibre of our internal R&D, where we have designed our drug development programmes to provide effective treatments over the entire duration of the illnesses and to avoid side-effects associated with existing therapies.

 

Of course, we recognise that Proximagen is not the only place for great science. Great ideas with the potential to deliver life-changing therapeutics will feed Proximagen's growth, and therefore we look forward to collaborations and M&A activity continuing to play an important role in our pipeline development in 2010 and beyond.

 

Proximagen is well-suited to be the partner of choice in the area of CNS, having the capabilities and financial strength of a much larger company. We can offer potential partners, or their investors, the resources needed to support a drug candidate as it advances from the laboratory and through the clinic. At the same time, Proximagen is an entrepreneurial company. Therefore, we feel a strong sense of urgency to act decisively with each opportunity, focusing development efforts on programmes showing the most visible commercialisation opportunities. When promising partnership opportunities arise, Proximagen can move quickly.

 

Of course, a carefully constructed R&D strategy is meaningless without results. Through a combination of internal research, partnerships and acquisitions, we now have a rich and growing pipeline in four key therapeutic areas - Parkinson's disease, epilepsy, cognition and neuropathic pain.

 

 

Operational review

The Group's operations expanded in 2009 with the acquisition of CBT, based just outside Cambridge, which also brought 17 people into the Group.  With increases expected in the number of our commercial and clinical staff, we anticipate having to relocate some of our operations from present facilities at King's College London.  We will, however, retain a laboratory and small office at King's College which will remain the focus for our neurodegenerative R&D. 

 

We are pleased to report that in 2009, the National Parkinson Foundation again designated our academic facility as a Parkinson's disease Center of Excellence.

 

Over the past six months, Proximagen has significantly expanded its patent portfolio. As a result of the recent acquisitions, the Group now owns the rights to 33 families of patents and patent applications relating to our drug programmes in pre-clinical and clinical development.

 

Outlook: Moving forward with confidence

We anticipate exciting times ahead, though we will approach our investments in development programmes with a keen eye to mitigating risk through partnerships and collaborations with pharmaceutical partners where appropriate.

 

We have broadened our pipeline, both in terms of therapeutic indications addressed and the development profile, and we have a flexible, scalable operating infrastructure that can accommodate further programmes without replicating overhead costs. We look forward to building on this progress with the expectation of reporting significant events in due course, which will reinforce our ability to generate value from our balanced and focused pipeline.

 

The key to our success is our people and we are grateful for their continued contribution. Their knowledge and expertise is important but it is their passion to make a difference to the lives of people with illness that really counts. Our thanks also go to our business partners for the confidence they have shown in us and for their continuous support, as well as to the Board of Directors for their healthy challenge and support.

 

Importantly, we would like to thank again our investors for their trust and for sharing our enthusiasm to build a better Proximagen.

 

 

Kenneth Mulvany

Chief Executive Officer

 

30 March 2010

Financial Review

 

2009 was the second consecutive year that Proximagen succeeded in raising equity finance, with the £50 million fund-raising in June 2009 following the $6 million investment by Upsher-Smith Laboratories Inc, in October 2008.  The more recent of the equity issues was undertaken to facilitate the acquisition and development by the Group of drug development programmes that present attractive commercialisation opportunities.

 

Cashflow

Our cash balances at the year-end stood at £55.6 million (2008: £10.2 million), comprising held-to-maturity financial assets of £20.0 million (2008: £6.7 million) and cash of £35.6 million (2008: £3.5 million). We received interest from funds invested of £0.37 million (2008: £0.43 million), a year-on-year decline which, given the material increase in average cash balances, reflected the sharply lower interest rates prevailing in 2009.

 

The Group received R&D tax credits in 2009 of £0.27 million and expects to reclaim some £0.52 million in 2010.

 

Income statement

R&D expenditure totalled £2.8 million (2008: £2.3 million).  We expect our R&D expenditure in general to accelerate rapidly from 2009 levels as we begin to invest in the programmes we have acquired in recent months.  

 

Administrative expenses in 2009 totalled £2.1 million (2008: £1.4 million). The year-on-year increase has arisen from legal and advisory fees incurred in undertaking acquisitions, and fees in respect of recruitment and the ensuing salary costs.

 

The loss after tax was £3.2 million (2008: loss of £2.3 million) and the loss per share was 8.7p (2008: loss of 11.4p).  The reduction in the loss per share, despite the increase in the overall loss after tax, is explained by the increase in the weighted average number of shares in issue in 2009.

 

Balance sheet

Net assets at 30 November 2009 amounted to £54.2 million (2008: £8.3 million).  The principal movements in the balance sheet over the period were as follows:

 

·      Trade and other receivables: the £1.4 million increase in the balance from £0.3 million to £1.7 million relates predominantly to a receivable owing to the Group by the vendor of the company acquired by the Group during the year under the terms of the Sale and Purchase agreement signed in relation to that acquisition.

 

·      Trade and other payables: the £1.2 million increase in the balance from £2.7 million to £3.9 million relates predominantly to an accrual by the company acquired by the Group during the year for certain expenses incurred at the time of completion of the acquisition, and for which the Group will be repaid by the vendor.

 

·      The increase of £45.4 million in the combined balance of Other financial assets and Cash and cash equivalents from £10.2 million to £55.6 million over the year is accounted for as follows:

 

-       issue of new equity, raising £49.0 million, net of expenses;

-       cash used in operations of £4.2 million (2008: £1.2 million outflow);

-       interest received of £0.3 million (2008: £0.6 million); and

-       R&D tax credits received of £0.3 million (2008: £0.4 million).

 

2009 Report and Accounts

The full audited 2009 Report and Accounts for the Group are expected to be sent out to shareholders by Friday 16 April 2010 and an electronic copy will be available from the Company's website at the same time.

 

 

James Hunter

Finance Director

 

30 March 2010

CONSOLIDATED INCOME STATEMENT

 

For the year ended 30 November 2009

 

 

		(Unaudited)		(Audited)
	Note	2009		2008
		£'000		£'000
Revenue		945		272
Cost of sales		(59)		(32)
Net operating costs
Research and development		(2,818)		(2,318)
Administrative expenses		(2,070)		(1,381)
		(4,888)		(3,699)
Operating loss		(4,002)		(3,459)
Finance income		372		491
Finance costs		(100)		-
Loss on ordinary activities before tax		(3,730)		(2,968)
Taxation		518		661
Loss after taxation		(3,212)		(2,307)
Basic loss per share (pence)	2	(8.7)		(11.4)
Diluted loss per share (pence)	2	(8.7)		(11.4)

 

 

 

 

CONSOLIDATED BALANCE SHEET AT 30 NOVEMBER 2009

 

			(Unaudited)		(Audited)
			2009		2008
			£'000		£'000
Non-current assets
Property, plant and equipment			336		262
Current assets
Trade and other receivables			1,739		296
Current tax receivable			518		268
Other financial assets			10,000		1,200
Cash and cash equivalents			45,577		9,013
Total current assets			57,834		10,777
Current liabilities
Trade and other payables			(3,922)		(2,738)
Net current assets			53,912		8,039
Net assets			54,248		8,301
Equity
Ordinary shares			573		216
Share premium			63,228		14,527
Merger reserve			299		299
Share based payment reserve			300		199
Retained earnings			(10,152)		(6,940)
Total equity attributable to equity holders of the parent			54,248		8,301

CONSOLIDATED CASH FLOW STATEMENT

 

For the year ended 30 November 2009

 

 

		(Unaudited)		(Audited)
		2009		2008
		£'000		£'000
Cash flows from operating activities
Loss before tax		(3,730)		(2,968)
Adjustments for:
Depreciation		95		90
Net finance income		(272)		(491)
Share based payment		101		73
Cash flow from operations before changes in working capital		(3,806)		(3,296)
Changes in working capital
(Increase)/decrease in  trade and other receivables		(37)		160
(Decrease)/increase in trade and other payables		(344)		1,896
Cash used in operations		(4,187)		(1,240)
Income taxes received		268		393
Net cash used in operating activities		(3,919)		(847)
Cash flow from investing activities
Acquisition of subsidiary - cash acquired		22		-
Financial assets (acquired)/realised		(8,800)		6,800
Interest received		317		604
Purchase of property, plant and equipment		(14)		(1)
Proceeds from sale of  property, plant and equipment		-		3
Net cash (used in)/generated from investing activities		(8,475)		7,406
Cash flows from financing activities
Net proceeds from the issue of ordinary shares		49,058		1,881
Net cash generated from financing activities		49,058		1,881
Foreign exchange (loss)/gain		(100)		66
Net increase in cash and cash equivalents		36,564		8,506
Cash and cash equivalents at the beginning of the year		9,013		507
Cash and cash equivalents at end of the year		45,577		9,013

 

 

Unaudited Consolidated Statement of Changes in Equity

 

For the year ended 30 November 2009

 

 

 

		Ordinary shares		Share premium account		Merger reserve		Share based payment reserve		Retained earnings		Total
		£'000		£'000		£'000		£'000		£'000		£'000
At 1 December 2007		201		12,661		299		126		(4,633)		8,654
Loss for the year		-		-		-		-		(2,307)		(2,307)
Total recognised income and expense for the year		-		-		-		-		(2,307)		(2,307)
Share based payments		-		-		-		73		-		73
Issue of share capital		15		1,866		-		-		-		1,881
Balance at 30 November 2008		216		14,527		299		199		(6,940)		8,301
Loss for the year		-		-		-		-		(3,212)		(3,212)
Total recognised income and expense for the year		-		-		-		-		(3,212)		(3,212)
Share based payments		-		-		-		101		-		101
Issue of share capital (net of expenses)		357		48,701		-		-		-		49,058
Balance at 30 November 2009		573		63,228		299		300		(10,152)		54,248

 

  

Notes

 

1.             Basis of preparation

 

The financial information does not constitute statutory financial statements as defined by section 434 of the Companies Act 2006 for the years ended 30 November 2009 or 30 November 2008.

 

The statutory financial statements for the year ended 30 November 2009 will be finalised and signed on the basis of the financial information presented by the directors in this preliminary announcement and will be delivered to the Registrar of Companies following the Company's General Meeting.  The statutory financial statements for the year ended 30 November 2009 will be prepared applying International Financial Reporting Standards and IFRIC interpretations ("IFRS") as adopted by the European Union, with those parts of the Companies Act 2006 applicable to companies reporting under IFRS and using accounting policies that are consistent with those as stated in the financial statements for the year ended 30 November 2008.

 

The financial information for the year ended 30 November 2008 is derived from the statutory accounts for that year which have been reported on by the Company's auditors and have been delivered to the Registrar of Companies. The report of the auditors was unqualified and did not contain an emphasis of matter statement. The auditors' report did not contain a statements under Section 237(2) or (3) of the Companies Act 1985.

 

This preliminary announcement was approved by the Board of directors on 29 March 2010.  Copies of this announcement are available from the Company's website, www.proximagen.com.

 

 

2.             Basic and diluted loss per ordinary share

	2009	2008
Loss for the year (£'000)	(3,212)	(2,307)
Weighted average number of shares in issue	37,139,445	20,213,242

 

The loss attributable to ordinary shareholders and weighted average number of ordinary shares for the purpose of calculating the diluted earnings per ordinary share are identical to those used for basic earnings per share. This is because the exercise of share options would have the effect of reducing the loss per ordinary share and is therefore not dilutive under the terms of IAS 33.

 

At 30 November 2009 there were 1,820,927 options outstanding (30 November 2008: 2,069,072 options outstanding). 

 

3.             Events after the balance sheet date

               

On 4 January 2010, Proximagen Neuroscience plc made a recommended cash offer for the entire issued and to be issued share capital of Minster Pharmaceuticals Plc ("Minster"). Under the terms of the offer, Minster shareholders will receive 6.0 pence in cash for each share held by them, valuing the entire issued and to be issued share capital of Minster at approximately £4.3 million.

 

On 16 February 2010, Proximagen Neuroscience plc announced the offer had become unconditional as to acceptances and subsequently on 5 March 2010 announced that the company had valid acceptances of over 90%. The company has now commenced the compulsory acquisition procedure.

 

The directors consider that the disclosure of the financial effects to be impracticable as the purchase price allocation, including the fair value of individual assets and liabilities has not been finalised.

 

4.            Annual General Meeting Notice

 

The Annual General Meeting will be held at 11.30am on Tuesday 18 May 2010 at the offices of Pelham Bell Pottinger, 12 Arthur Street, London, EC4R 9AB. The Notice of Annual General Meeting and proxy materials will be posted to shareholders with the 2009 Annual Report and Accounts in April.