CAMBRIDGE, England, May 22 /PRNewswire-FirstCall/ -- Cambridge Antibody Technology Group plc ; today announces financial results for the six months ended 31 March 2006 and a business update. This follows AstraZeneca UK Limited’s announcement on 15 May 2006 of its firm intention to make a recommended 702 million pounds Sterling cash offer for CAT.
Product Development Pipeline
HUMIRA(R) (adalimumab) is a fully human anti-TNF alpha monoclonal antibody, isolated and optimised by CAT in collaboration with Abbott and now approved for marketing as a treatment for rheumatoid arthritis (RA), early RA and psoriatic arthritis. In January 2006, Abbott announced full year 2005 sales of HUMIRA of US$1.4 billion, making it the first product originating from the UK biotechnology industry to achieve “blockbuster” status (sales of over US$1 billion). In April 2006, Abbott announced first quarter sales of HUMIRA of US$392 million and repeated its full year forecast of worldwide sales in 2006 of more than US$1.9 billion. CAT receives royalty payments based on HUMIRA sales at the rate of 2.688%.
In October 2005, Abbott submitted a regulatory application for HUMIRA as a potential treatment for ankylosing spondylitis (AS) and, in January 2006, stated that it anticipates approval in the second half of 2006. In April 2006, Abbott reported that European regulators had granted a positive opinion recommending approval and that the European Commission is expected to issue a decision granting the marketing authorisation for HUMIRA as a treatment for AS within 60 days.
In December 2005, Abbott submitted a new drug application for HUMIRA to treat RA in Japan. In April 2006, Abbott commented that it expects approval in the first half of 2007.
Abbott continues to develop HUMIRA as a potential treatment for a number of additional indications: Crohn’s disease, psoriasis, ulcerative colitis and juvenile RA. In April 2006, Abbott commented that it would be presenting the results from the Phase III clinical maintenance trial for HUMIRA in Crohn’s disease at Digestive Disease Week (20-25 May 2006), and that it expects to file a supplementary BLA submission (SBLA) during 2006. Abbott also commented that Phase III trials for psoriasis are progressing well and that it expects to submit in 2007 for this indication. In colitis, Abbott expects to commence Phase II/III clinical trials during 2006.
CAT Products
CAT-354 is a fully human anti-IL-13 monoclonal antibody being developed by CAT, initially as a treatment for severe asthma. Following the completion in 2005 of a Phase I clinical trial, CAT has received approval from the Medicines and Healthcare products Regulatory Agency (MHRA) to commence a repeat-dose safety study of CAT-354 in patients with mild/moderate asthma. The trial, which will take place in the UK, is now expected to start in the third quarter of calendar year 2006 and will study safety, tolerability and pharmacokinetics. The delay has been caused by amendments to the protocol, required as a result of evolving interpretation of the new Clinical Trial Directive. Following the announcement by AstraZeneca UK Limited of its firm intention to make a recommended offer for CAT, partnering discussions regarding CAT-354 have been suspended.
The development of CAT-3888 and CAT-8015, immunotoxins that are potential treatments for a number of B-cell malignancies, continues as planned. CAT- 3888 is currently in a Phase II trial for the treatment of hairy cell leukaemia and two Phase I trials -- one in patients with paediatric refractory CD22-positive leukaemias and lymphomas and one in patients with chronic lymphocytic leukaemia and non-Hodgkins lymphoma. Data are expected to be available from all three trials of CAT-3888 by the end of 2006.
GC-1008 is a pan-specific fully human anti-TGF beta monoclonal antibody being developed by CAT and Genzyme. In the Phase I clinical trial of GC-1008 in idiopathic pulmonary fibrosis (IPF), patient recruitment is ongoing. The objectives of the trial are to evaluate the safety, tolerability and pharmacokinetics of single intravenous infusions of GC-1008 in patients with IPF. Preliminary results of this trial are expected to be available in 2007.
An IND has been granted for GC-1008 in oncology. The Phase I trial is expected to commence in patients with renal cell carcinoma or malignant melanoma at the end of the second quarter of calendar year 2006. The study, which will be a dose escalation study, will take place at four centres in the U.S. Data are expected to be available in 2008.
CAM-3001 is a fully human anti-GMCSF receptor antibody, being developed by CAT and Zenyth as a potential treatment for RA. It is currently in pre- clinical development and the companies expect to file a Clinical Trial Application (CTA) for a Phase I clinical trial in the first half of calendar year 2007.
The strategic alliance with AstraZeneca has continued its excellent progress.
Licensed Products
ABT-874 is a fully human anti-IL-12 monoclonal antibody, isolated and optimised by CAT in collaboration with Abbott and licensed to Abbott. Abbott continues to develop ABT-874 as a potential treatment for autoimmune diseases and, in January 2006, Abbott stated that it was “encouraged by the early data for the class of molecule in both psoriasis and Crohn’s disease.” Also in January 2006, Abbott stated that it “anticipates publishing data from a Phase II study in multiple sclerosis later in the year.”
LymphoStat-B(TM) (belimumab) is a fully human anti-BLyS monoclonal antibody, licensed by CAT to Human Genome Sciences, Inc (HGSI). HGSI is developing LymphoStat-B as a potential treatment for systemic lupus erythematosus (SLE), for which HGSI has a Fast Track designation from the U.S. Food and Drug Administration (FDA), and RA. In January 2006, HGSI stated that, with its collaborator GlaxoSmithKline, it expects to initiate Phase III development of LymphoStat-B in SLE in 2006.
HGS-ETR1 (mapatumumab) is a fully human anti-TRAIL Receptor-1 monoclonal antibody licensed by CAT to HGSI. HGSI is developing HGS-ETR1 as a potential treatment for multiple cancer indications. In January 2006, HGSI reported that it plans to initiate Phase II development of HGS-ETR1 in combination with chemotherapy in hematopoietic cancers.
HGS-ETR2 is a fully human anti-TRAIL Receptor-2 monoclonal antibody licensed by CAT to HGSI. In January 2006, HGSI stated that the results of recently completed Phase I clinical trials warrant additional Phase II trials. It also stated that it plans to reach “go/no go decisions” in 2006 regarding Phase II development of HGS-ETR2 as a single agent and/or in combination with chemotherapy.
ABthrax(TM) is a fully human monoclonal antibody licensed by CAT to HGSI. ABthrax was isolated and developed by HGSI from antibody libraries licensed from CAT and HGSI is developing it as a potential treatment for anthrax disease. In January 2006, HGSI stated that it is working to achieve an order from the U.S. Government to supply ABthrax for the US Strategic National Stockpile.
Financial Reporting
A review of the financial results for the six months ended 31 March 2006 is set out below. For financial periods commencing on or after 1 October 2005, CAT is producing its financial results in accordance with the recognition and measurement principles of International Financial Reporting Standards (IFRS) as endorsed by the European Union and, accordingly, has restated the comparative figures for the six months ended 31 March 2005, previously produced in accordance with UK GAAP. The comparative figures in brackets are the restated figures for the corresponding period in the prior financial year (see note 2 to the financial information). Results for the year ended 30 September 2005 have also been prepared in accordance with IFRS, and are included within this statement. These are as previously presented in the 2005 Annual Report, except for a subsequent amendment to revenue and direct costs (no impact on cash or operating loss) as detailed in note 3.
Financial Results
CAT made a profit after taxation for the six months ended 31 March 2006 of 4.6 million pounds (2005: loss of 16.5 million pounds). Net cash used by operations was 13.0 million pounds in the six months ended 31 March 2006 (2005: net cash provided 9.6 million pounds) including the one off outflow arising from the settlement with Abbott of 15.3 million pounds (2005: nil). Net cash and liquid resources at 31 March 2006 amounted to 161.7 million pounds (30 September 2005: 175.6 million pounds).
Revenue in the period was 27.7 million pounds (2005: 9.8 million pounds) plus the US$255 million (144.7 million pounds) received from Abbott in October 2005 and paid out immediately to CAT’s licensors as part of the litigation settlement with Abbott in respect of HUMIRA (see note 3). The remaining royalty income consists of royalties received on sales of HUMIRA for the three months to 31 December 2005 (6.9 million pounds) and accrued royalties for the three months to 31 March 2006 (6.0 million pounds), plus the first two of five annual payments of US$9.375 million (10.9 million pounds), (the first received from Abbott in January 2006, the second due in January 2007, conditional only on there having been sales of HUMIRA in the 2006 calendar year, under the terms of the settlement agreement). Licence fees of 2.6 million pounds (2005: 2.5 million pounds) were recognised as revenue in the period having been released from deferred income brought forward at 30 September 2005. Clinical milestone payments of 0.3 million pounds (2005: 0.5 million pounds) were received during the quarter. Other revenues of 1.1 million pounds (2005: 0.3 million pounds) were received during the quarter, primarily consisting of a payment received from MorphoSys under the terms of the December 2002 Framework Agreement. In April 2006, Chugai extended its licence of CAT’s libraries for a further year; CAT received $1.0 million in licence fees in May 2006. No revenue was recognised in the period regarding this extension payment.
Direct costs comprise primarily the US$255 million payment referred to above and US$4 million (2.3 million pounds) for the payments made or due to CAT’s licensors out of the two amounts of US$9.375 million recognised as revenue in the period (see note 4).
Operating costs for the period amounted to 24.2 million pounds (2005: 27.3 million pounds). Research and development expenses were 17.6 million pounds for the six months ended 31 March 2006 (2005: 17.3 million pounds). External development costs for the six month period were 5.3 million pounds (2005: 6.0 million pounds).
General and administration expenses decreased to 6.5 million pounds for the six months ended 31 March 2006 (2005: 10.0 million pounds). Litigation expenses decreased from 3.1 million pounds from the six months ended 31 March 2005 to 0.1 million pounds in the six months ended 31 March 2006, with the settlement of the litigation with Abbott in October 2005. Included in general and administration expenses for the six months ended 31 March 2006 is a foreign exchange credit of 0.4 million pounds arising from the retranslation of U.S. dollar deposits held, a charge of 0.7 million pounds arose in the comparative period.
CAMBRIDGE ANTIBODY TECHNOLOGY GROUP PLC
RESULTS FOR THE SIX MONTHS ENDED 31 MARCH 2006
This financial information has been prepared in accordance with International Financial Reporting Standards (IFRS) as endorsed by the European Union. Preliminary results for the year ended 30 September 2005 were prepared and presented in accordance with IFRS in the 2005 Annual Report. Results for the six months ended 31 March 2005 have been restated for the first time in accordance with IFRS, having previously been presented under UK GAAP. See notes 1, 2 and 3 for further details.
CONSOLIDATED INCOME STATEMENT (unaudited) Six Three Three Six months months months months Year ended ended ended ended Ended 31 31 31 31 30 March March December March September 2006 2006 2005 2005 2005 pounds pounds pounds pounds pounds ‘000 ‘000 ‘000 ‘000 ‘000 Revenue (note 7) 27,729 13,723 14,006 9,845 49,242 Royalty buy out, settlement with Abbott (note 3) 144,722 - 144,722 - - Total revenue 172,451 13,723 158,728 9,845 49,242 Direct costs (2,529) (1,367) (1,162) (2,035) (10,503) Royalty buy out, settlement with Abbott (note 3) (144,722) - (144,722) - - Total direct costs (147,251) (1,367)(145,884) (2,035) (10,503) Gross profit 25,200 12,356 12,844 7,810 38,739 Research and development expenses (17,631) (8,695) (8,936)(17,349) (37,017) General and administration expenses (6,527) (3,830) (2,697)(10,000) (12,375) Operating profit/(loss) 1,042 (169) 1,211 (19,539) (10,653) Profit on sale of available for sale investments - - - - 1,461 Investment income 3,563 1,687 1,876 3,034 7,507 Finance costs (10) (3) (7) (27) (233) Profit/(loss) before tax 4,595 1,515 3,080 (16,532) (1,918) Taxation - - - - (1,047) Profit/(loss) for the period attributable to equity holders of the parent 4,595 1,515 3,080 (16,532) (2,965) Profit/(loss) per share -- basic (pence) (note 6) 8.7p 2.9p 5.9p (35.1)p (6.0)p Profit per share -- diluted (pence) (note 6) 8.6p 2.8p 5.8p n/a n/a The profit/losses for all periods arise from continuing operations. CAMBRIDGE ANTIBODY TECHNOLOGY GROUP PLC RESULTS FOR THE SIX MONTHS ENDED 31 MARCH 2006 CONSOLIDATED BALANCE SHEET (unaudited) As at 31 As at 31 As at 30 March March September 2006 2005 2005 pounds pounds pounds ‘000 ‘000 ‘000 Fixed assets Intangible assets 10,340 5,307 2,581 Property, plant and equipment 12,403 12,166 11,706 Available for sale investments 12,322 11,301 9,729 35,065 28,774 24,016 Current assets Trade and other receivables 18,708 7,715 14,566 Short term investments 78,952 98,953 100,037 Cash and cash equivalents 83,259 79,811 76,378 180,919 186,479 190,981 Total assets 215,984 215,253 214,997 Liabilities Current liabilities Obligations under finance leases (246) (390) (405) Overdraft (551) (579) (803) Trade and other payables (7,080) (34,749) (22,335) Current taxation (1,047) - (1,047) Deferred income (5,385) (5,451) (4,977) (14,309) (41,169) (29,567) Non-current liabilities Obligations under finance leases - (246) (40) Deferred income (17,754) (19,956) (18,575) Deferred taxation (2,956) (2,457) (2,178) (20,710) (22,659) (20,793) Total liabilities (35,019) (63,828) (50,360) Net assets 180,965 151,425 164,637 Equity Called-up share capital 5,310 5,161 5,164 Share premium account 310,883 301,716 301,804 Other reserves 24,250 22,188 21,742 Retained losses (159,478)(177,640) (164,073) Total equity shareholders’ funds 180,965 151,425 164,637 CAMBRIDGE ANTIBODY TECHNOLOGY GROUP PLC RESULTS FOR THE SIX MONTHS ENDED 31 MARCH 2006 STATEMENT OF CHANGES IN EQUITY (unaudited) Profit Share Share Other and loss capital premium reserves reserve pounds pounds pounds pounds ‘000 ‘000 ‘000 ‘000 Balance at 1 October 2005 5,164 301,804 21,742 (164,073) New shares issued 146 9,079 - - Available for sale investments (unrealised gain) - - 1,814 - Share option charge - - 1,029 - Foreign exchange - - (335) - Retained profit for the period - - - 4,595 Balance at 31 March 2006 5,310 310,883 24,250 (159,478) CONSOLIDATED CASH FLOW STATEMENT (unaudited) Six Six Year months months ended ended 31 ended 31 30 March March September 2006 2005 2005 pounds pounds pounds ‘000 ‘000 ‘000 Net cash (used)/provided by operating activities (13,003) 9,617 6,062 Net cash from/(used in) investing activities 11,101 (31,869) (31,892) (1,902) (22,252) (25,830) Net cash from financing activities 9,026 75,753 75,653 Increase in cash and cash equivalents (net of overdraft) 7,124 53,501 49,823 Cash and cash equivalents at beginning of year (net of overdraft) 75,575 25,737 25,737 Effect of foreign exchange rate changes 6 (21) 10 Effects of fair value movements 3 15 5 Cash and cash equivalents at end of period (net of overdraft) 82,708 79,232 75,575 Notes to the financial information 1. Accounting policies
For financial periods commencing on or after 1 October 2005, CAT is producing its financial results in accordance with IFRS as endorsed by the European Union and, accordingly, has restated the comparative figures for the six months ended 31 March 2005, previously produced in accordance with UK GAAP. Preliminary results were prepared in accordance with IFRS for the year ended 30 September 2005 and presented in the 2005 Annual Report. Except for the subsequent adjustment, detailed in note 3 below, the results for the 2005 financial year have been presented in this financial statement on the same basis. See note 2 below for further details of the impact of the restatement of the comparative figures.
This financial information has been prepared in accordance with the IFRS policies expected to be in place in 2006 as set out in the Annual Report for the year ended 30 September 2005. During the year ending 30 September 2006, CAT adopted IAS 32 (International Accounting Standard) and IAS 39 and there were no material adjustments as a result of that adoption. The Annual Report for the year ended 30 September 2005 sets out the UK GAAP accounting policies together with the relevant IFRS differences.
2. Restatement of the comparative figures
Preliminary results prepared in accordance with IFRS for the year ended 30 September 2005 were presented in the 2005 Annual Report with details of the key reconciling items. The results contained in this statement for the year ended 30 September 2005 are the same as those previously presented except for the adjustment detailed below in note 3.
The net effect of presenting the comparative figures for the six months ended 31 March 2005 under IFRS rather than previously reported UK GAAP is to increase the loss after tax reported from 16.3 million pounds to 16.5 million pounds principally due to the IFRS 2 share option charge for the period (0.8 million pounds) partially offset by a foreign exchange credit regarding the translation of overseas operations (0.5 million pounds). Net assets increased from 145.6 million pounds to 151.4 million pounds principally due to the recognition of an unrealised holding gain arising from recording available for sale investments at fair value as opposed to cost, as previously recorded under UK GAAP. The net effect of the restatement on the cashflow is nil, all changes are reclassifications for disclosure purposes.
Further details of the revised accounting policies adopted in accordance with IFRS and of the key reconciling items for the year ended 30 September 2005 are contained within the 2005 Annual Report.
3. Results for year ended 30 September 2005
The results for the six months ended 31 March 2006 have been prepared under IFRS as endorsed by the European Union. These results include as revenue and as a direct cost the US$255m received from Abbott in October 2005 and paid out immediately to CAT’s licensors as a part of the litigation settlement with Abbott in respect of HUMIRA. Previously this receipt and subsequent payment were accounted for in the same manner as the remainder of the litigation settlement with Abbott, as an adjusting post balance sheet event, and therefore included in revenue and direct costs in both the 2005 UK GAAP financial statements and the preliminary IFRS reconciliations. The 2005 Annual Report was finalised on 28 November 2005 and reported on by CAT’s auditors, Deloitte & Touche LLP (Deloitte). The 2005 Annual Report also contains the preliminary reconciliations to IFRS, which were also reported on by Deloitte.
Since that time, there has been continuing debate within the accounting profession as to the interpretation of IFRS and in particular its relationship with US GAAP and, to a lesser extent, UK GAAP. As a consequence of this debate and after reporting on the preliminary IFRS reconciliation contained in the 2005 Annual Report, Deloitte have subsequently altered their view on the interpretation and application of IFRS to the payments of US$255 million received and made by CAT in October 2005 as a part of the litigation settlement with Abbott. Deloitte’s revised interpretation and application of IFRS to these payments, contrary to the treatment endorsed in the preliminary IFRS reconciliation contained in the 2005 Annual Report, is that they should be treated as a non-adjusting post balance sheet event.
Under this revised interpretation and application of IFRS the payments received from Abbott and made by CAT to its licensors should not be included as 2005 revenues and direct costs but should be treated as revenue and direct costs in the 2006 financial year. Accordingly, these amounts will be included and treated as revenue and as a direct cost in CAT’s 2006 financial statements prepared under IFRS.
It should be emphasised that this is a technical accounting adjustment, reflecting one element of the Abbott settlement as a non-adjusting rather than an adjusting post balance sheet event, and there are no implications for cash flow or operating loss.
4. Settlement with Abbott
In November 2003, CAT announced that it had commenced legal proceedings against Abbott in the High Court in London regarding the royalty rate payable on sales of HUMIRA under a licence agreement between the parties. In October 2005, CAT announced it had reached an agreement with Abbott regarding royalties payable to CAT under this licence agreement:
* Abbott would pay CAT royalties at 2.688% on sales of HUMIRA from 1 January 2005. CAT would retain all of these royalties. * CAT would retain all royalties received from Abbott in respect of sales of HUMIRA up to 31 December 2004, net of approximately 7.6 million pounds which was paid to its licensors, Medical Research Council, Scripps Institute and Stratagene. * Abbott paid CAT the sum of US$255 million, which CAT paid to its licensors in lieu of their entitlement to royalties arising on sales of HUMIRA from 1 January 2005 onwards. This was both received from Abbott and paid to CAT’s licensors in October 2005. * CAT refunded to Abbott approximately 9.2 million pounds for royalties paid in respect of sales of HUMIRA from 1 January 2005 through to 30 June 2005. * Abbott would pay CAT five annual payments of US$9.375 million commencing January 2006, contingent on the continued sale of HUMIRA. From each of these payments, CAT would pay US$2 million to its licensors. 5. Convenience translation The consolidated financial statements are presented in Sterling. The following table provides a U.S. Dollar convenience translation of certain elements of the consolidated financial statements as of and for the period ended 31 March 2006. The Dollar amounts are presented solely for the convenience of the reader and have been calculated using an exchange rate of 1 pound:US$1.73978, the closing rate as of 31 March 2006. No representation is made that the amounts could have been or could be converted into U.S. Dollars at this or any other rates. Six months Six months ended 31 ended 31 March March 2006 2006 Convenience translation pounds $'000 ‘000 Revenue (excluding Royalty buy out) 48,242 27,729 Gross profit 43,842 25,200 Research and development expenses (30,674) (17,631) General and administration expenses (11,356) (6,527) Operating profit 1,812 1,042 Profit after tax 7,994 4,595 Fixed assets 61,005 35,065 Current assets 314,759 180,919 Total assets 375,764 215,984 Current liabilities (24,895) (14,309) Non-current liabilities (36,030) (20,710) Total liabilities (60,925) (35,019) Net assets 314,839 180,965 Net cash used by operating activities (22,622) (13,003) Net cash from investing activities 19,313 11,101 (3,309) (1,902) Net cash from financing activities 15,703 9,026 Increase in cash and cash equivalents (net of overdraft) 12,394 7,124 Cash and cash equivalents at beginning of year (net of overdraft) 131,484 75,575 Effect of foreign exchange rate changes 10 6 Effect of fair value movements 5 3 Cash and cash equivalents at end of period (net of overdraft) 143,893 82,708 6. Profit/(loss) per share
Basic net profit/loss per share is calculated by dividing net profit/loss for the period by the weighted average number of ordinary shares outstanding during the period. The computation of diluted net profit/loss per share reflects the potential dilution that could occur if dilutive securities and other contracts to issue ordinary shares were exercised or converted into ordinary shares or resulted in the issue of ordinary shares that then shared in the net profit/loss of the Group.
The loss per ordinary share and diluted loss per share are equal because share options are only included in the calculation of diluted earnings per share if their issue would decrease the net profit per share or increase the net loss per share.
The calculation is based on information in the table shown below. Six months Six months Year ended 31 ended 31 ended 30 March March September 2006 2005 2005 Profit/(loss) for the period attributable to equity holders of the parent (‘000 pounds) 4,595 (16,532) (2,965) Weighted average number of shares 52,732,901 47,128,201 49,381,476 Weighted average number of dilutive options 626,586 n/a n/a
The Company had ordinary shares in issue of 53,100,128 and a total of 2,296,218 ordinary shares under option as of 31 March 2006.
7. Revenue Six months Six months Six months Year ended 31 ended 31 ended 31 ended 30 March March March September 2006 2006 2005 2005 Convenience translation pounds pounds pounds US$'000 ‘000 ‘000 ‘000 Royalties (excluding buy out) 41,362 23,774 5,166 40,521 Licence fees 4,522 2,599 2,505 5,168 Technical milestones - - 1,099 1,099 Clinical milestones 492 283 518 1,118 Contract research fees 33 19 223 356 Other 1,834 1,054 334 980 48,243 27,729 9,845 49,242 Royalty buy out
