Highlights
· ReN001 stem cell therapy for stroke
o Review of UK clinical trial filing well-advanced – further update to be given shortly
o Clinical trial application filed in Australia
o Studies in support of US clinical trial filing continue
· UK-based collaboration underway to test lead stem cell line in lower limb ischaemia
· Business restructuring complete, with substantial reduction in underlying cost base
· £2.5 million convertible loan facility secured in the period. Further financing discussions in progress
· Board strengthened with appointment of Bryan Morton as nonexecutive director
· Loss for the period of £3.1 million (2007: £3.1 million); net cash outflow from operating activities £3.0 million (2007: £3.1 million); cash and cash equivalents at 30 September 2008 of £0.8 million (2007: £5.7 million); undrawn convertible loan finance of £1.5 million at 30 September 2008.
Commenting on the results, Professor Trevor Jones, Chairman, said:
“During the period under review, and subsequently, we have achieved a number of notable goals across the business whilst also completing a significant restructuring and cost-reduction initiative. In order to best position the business for further financing and the future, we have re-focused our efforts on pursuing those programmes which make best use of the resources we have available to us and which offer the fastest route to the clinic.
“Our stated intention at the time of the Group’s preliminary results announcement in June 2008 was to secure regulatory approval for an initial clinical trial with ReN001 within six to nine months. Based on progress made during the period and subsequently, we remain confident of achieving that objective and look forward to providing a further update in this respect shortly.”
Chairman’s and Chief Executive Officer’s Joint Statement
Review of Operations
During the six months ended 30 September 2008, and subsequently, we have made good progress in pursuing our strategy to make clinical trial applications for ReN001 in targeted territories with established and recognised regulatory frameworks. We have submitted an application to the UK’s Medicines and Healthcare products Regulatory Agency (MHRA) to commence a Phase I dose-ranging clinical study for ReN001 in the UK. We have also very recently submitted an application to the Australian regulatory authorities to commence a similar study in Australia. We hope to be able to give a further update on progress with these applications shortly. In the meantime, we have progressed further studies in support of our earlier US clinical trial application for ReN001 and we intend to continue our dialogue with the FDA in this regard.
Our ReN001 therapy for stroke is based around our lead neural stem cell line, designated “CTX” by virtue of its origin from the cortex region of the brain. During the period, we have continued to focus on exploring the utility of the CTX cell line in other conditions beyond stroke, as well as seeking to develop enhanced methods of administration for our ReN001 stroke therapy in broader stroke patient populations. We have commenced a UK-based research collaboration with the Bristol Heart Institute to test the CTX cell line in pre-clinical models of peripheral lower limb ischaemia. This is a debilitating condition affecting up to 12 per cent of the adult population, in which reduced blood supply to the limbs causes cramping, chronic pain and in extreme cases, loss of limb. The initial data from this collaboration are encouraging, and we hope to be able to give a more detailed update on positive progress with the collaboration over the coming months.
We believe that, given the requirement to conserve our financial resources, the most appropriate strategy for the business at the current time is to maintain this principal focus on the lead CTX cell line. The extensive knowledge base and regulatory data package we have built around this cell line over the last few years will assist in accelerating timelines to clinic in other disease settings and methods of administration, where we believe the cell line has broad utility.
Our therapeutic programmes involving separately-generated cell lines are currently only being pursued where third party collaborations can be secured. For example, we are hoping to extend our collaboration with the Schepens Eye Research Institute at Harvard Medical School to complete pre-clinical development of our retinal cell line as a treatment for retinitis pigmentosa, a leading blindness-causing disease of the retina. During the period, we were also pleased to publish further positive pre-clinical efficacy data regarding our candidate cell lines for Parkinson’s disease, where sustained improvements in behavioural outcomes were seen compared to non-cell control groups over the course of six months in a rodent model of Parkinson’s disease.
During the period, three further US patent applications covering our platform technologies and cell lines were granted, bringing the total number of issued patents written or exclusively licensed by ReNeuron to over 80, of which over 50 have issued in the key European and US territories.
More recently, we were delighted to announce the appointment of Bryan Morton to the Board as a non-executive director. Bryan’s contacts in the industry and his impressive track record of successfully growing and financing a number of significant businesses, and subsequently realising value for shareholders, will be invaluable to ReNeuron as it enters its next phase of development. We welcome him to the Company.
Summary of Results
The Group reports under International Financial Reporting Standards (IFRS) in the preparation of these interim financial statements, including prior period comparative information.
In the six months to 30 September 2008, revenues were £6,000 (2007: £4,000), representing royalty income from the Group’s non-therapeutic licensing activities.
Net operating expenses were £3.1 million in the period (2007: £3.5 million). Research and development expenditure decreased in the period to £1.9 million (2007: £2.6 million), due principally to the effects of the cost reduction programme instigated in the period, together with a significant reduction in outsourced pre-clinical testing in the ReN001 stroke programme. General and administrative costs increased in the period to £1.2 million (2007: £0.9 million), due principally to both operating and subsequent closure costs associated with the Company’s US facility. Full year operating expenses to 31 March 2009 are forecast to be significantly lower than the prior year as a result of the cost reduction programme.
Other operating income dropped to nil in the period (2007: £0.2 million) as a result of the completion of certain projects for which grant income was being received. Interest received also decreased in the period to £45,000 (2007: £0.2 million) as a result of lower average cash balances over the period. Interest costs of £14,000 in the period (2007: nil) relate to interest accrued on amounts drawn down under the convertible loan facility referred to below. The resulting net loss for the period remained at £3.1 million (2007: £3.1 million).
Net cash outflow from operating activities decreased in the period to £3.0 million (2007: £3.1 million). During the period, the Group secured a £2.5 million convertible loan facility from its principal investors, of which £1.0 million had been drawn down as at 30 September 2008. The Group had cash and cash equivalents totalling £0.8 million as at 30 September 2008 (2007: £5.7 million), with the remaining £1.5 million of convertible loan finance expected to be fully drawn down by the end of the calendar year.
Funding
During the period, we completed the cost-reduction programme announced earlier in the year, including the closure of our US laboratory facility and a significant headcount reduction in the UK. ReNeuron now employs 15 fulltime equivalents from its Surrey laboratories and operates a more flexible, semi-virtual business model, with much of its research, development, quality, regulatory and administrative activities undertaken using outsourced providers. We believe ReNeuron is structured appropriately for a business entering its clinical development phase. However, we will continue to look at ways to take further cost out of the business, including, where necessary, the suspension of programmes that do not utilise our lead CTX cell line and where collaborative arrangements cannot be secured to progress those programmes.
As a result of the above measures, together with the availability of the convertible loan facility referred to above, we expect our current financial resources to last into the second quarter of 2009 and our projected financial requirements thereafter have been significantly reduced. We are currently in discussions with our advisers and certain existing, and prospective, investors regarding further financing for the business, predicated on near term progress with our ReN001 programme. Beyond the steps taken above, we will configure the business as appropriate to ensure that such financing can be secured and that it is adequate for the Company’s ongoing programmes. Based on this, the directors expect to secure sufficient further financing and consequently, the going concern basis has been adopted in the preparation of these interim financial statements.
Outlook
During the period under review, and subsequently, we have achieved a number of notable goals across the business whilst also completing a significant restructuring and cost-reduction initiative. In order to best position the business for further financing and the future, we have re-focused our efforts on pursuing those programmes which make best use of the resources we have available to us and which offer the fastest route to the clinic. Our stated intention at the time of the Group’s preliminary results announcement in June 2008 was to secure regulatory approval for an initial clinical trial with ReN001 within six to nine months. Based on progress made during the period and subsequently, we remain highly confident of achieving that objective and look forward to providing a further update in this respect shortly.
