London, UK, 23 March 2011: Proximagen Group plc (AIM: PRX), the rapidly growing company with a focus on the treatment of disorders of the central nervous system, is pleased to announce its unaudited preliminary annual results for the year ended 30 November 2010.
Drug Pipeline Highlights:
• Considerable pipeline expansion, underpinned by attractive commercial agreements
• Key programme developments:
Tonabersat – clinical stage drug candidate for the treatment of epilepsy acquired in February 2010 - Positive non-clinical efficacy results announced following National Institutes of Health (“NIH”) assessment of tonabersat for epilepsy
- Out-licensing agreement signed with Upsher-Smith Laboratories Inc. for US rights to tonabersat with Proximagen retaining EU rights and a share of Rest of the World rights
Naluzotan
- Agreement signed with the NIH whereby the NIH is funding a Phase II proof of concept study, assessing the efficacy of naluzotan in epilepsy, with Proximagen retaining worldwide rights
Sabcomeline
- Agreement signed for the sale of sabcomeline to BrainCells Inc. with up-front and milestone payments totaling up to $51 million plus royalties on future sales
Operational Highlights:
• Successful integration of Cambridge Biotechnology Limited (acquired late 2009) and Minster Pharmaceuticals plc (acquired 2010)
• Management team strengthened with the appointment of Dr Stevo Knezevic, formerly Chief Medical Officer (EMEA) at Wyeth, as Head of Development
• Continued strong research and development investment of £6.1 million in the year (year to 30 November 2009: £2.8 million)
• Cash and other financial assets of £48.2 million at 30 November 2010 (2009: £55.6 million)
Post Period-end Highlights:
• Exclusive agreement signed with GlaxoSmithKline to acquire the global rights to two drug development programmes targeting diseases of the central nervous system
• Phase II proof of concept study initiated for naluzotan, funded by the NIH in the United States
Commenting on this announcement, Kenneth Mulvany, Chief Executive Officer of Proximagen Group plc, said: “In 2010, Proximagen made excellent progress in building a balanced and focused pipeline, underpinned by attractive commercial agreements. Our business strategy has enabled us to acquire and develop our programmes in a way that mitigates development cost and risk whilst providing us with significant upside in their success. We are excited about the future as we look to build Proximagen into a leading sustainable and value creating European biotechnology company.”
For further information, please contact:
Proximagen Group plc Tel: +44 (0)20 7400 7700 Kenneth Mulvany, Chief Executive Officer James Hunter, Finance Director
Numis Securities Limited Tel: +44 (0)20 7260 1000 Nominated Adviser – Michael Meade Corporate Broker – James Black
M: Communications Tel: +44 (0)20 7920 2330 Mary-Jane Elliott, Emma Thompson, Nick Francis
Chairman’s Statement
2010 was a year of continued good progress for Proximagen. The Company’s growth strategy is beginning to bear fruit and Proximagen now has 15 programmes in development, a number of valued partnerships underway, more than £48m of cash at the year end and a strong scientific and commercial team in place. With considerable external interest and excitement in its pipeline, Proximagen is moving closer to becoming a sustainable European biotechnology company. One of the highlights of the year was the acquisition of Minster Pharmaceuticals plc (“Minster”) in early 2010 and the subsequent out-licensing of certain rights to Minster’s two programmes (tonabersat and sabcomeline) which involved four separate transactions and was carried out within the space of six months. It is a good example of the management’s focus on execution, its strong due diligence processes which unearthed the potential value of tonabersat in epilepsy, and its ability to structure innovative transactions. The Company executed four further transactions during the year including entering into a Co-operative Research and Development Agreement with the National Institute of Neurological Disorders and Stroke at the NIH, and renegotiating terms with Ligand Pharmaceuticals Inc., for the CXCR4 programme. This good progress has carried on into the current year with the acquisition of two programmes from GlaxoSmithKline. A key characteristic of these transactions is that Proximagen is retaining marketing rights to major markets in all indications including in its core area of neurology, thus paving the way for the Company either to market its own products or to out-license at a later stage of development for enhanced royalty rates and milestones. I am impressed by the quality of work undertaken at all levels in the Company. During the year, Proximagen has continued to attract to the Company high calibre people who complement the existing staff, all of whom make an important contribution to the business. I would like to take this opportunity, on behalf of the Board and the Group’s shareholders, to thank the staff for all of their unstinting hard work. I believe the prospects for the Company are very promising, something also recognised by the Company’s shareholders who continue to be supportive of the Company and its management. The Company is set up for an exciting future and we look forward to 2011 being another very productive year. The Company has a broad pipeline of potentially valuable drug development programmes and we believe that they will prove attractive to partners and collaborators. Furthermore, the Company remains very well funded and has the resources to develop its existing pipeline as well as to bring in additional high quality programmes. We look forward to updating investors during the coming year as the Company continues to grow.
Peter Allen Chairman
Chief Executive Officer’s Review of the Year
Becoming a leading European biotechnology company
At Proximagen our aspiration is simple. We strive to be a leading European biotechnology company. The pharmaceutical industry is undergoing one of the most significant periods of change in its history, and is increasingly looking to biotechnology companies, such as Proximagen, for research partnerships and collaborations. New models of development will shape our industry over the next decade, and we believe Proximagen has the strategy in place to be a leader in this new world.
Our strategy is not something new; it has been in place from our early days. Firstly, we take a rigorous approach to the scientific evaluation of our own programmes and those we are considering acquiring. We ensure that investments are made in only those programmes with the greatest chance of clinical and commercial success, where tough decisions as to whether to progress or not are taken early. Secondly, we operate a risk-mitigated approach to drug development, aiming to share cost and risk with our partners, thereby providing lower risk for our shareholders. And thirdly, we aim to retain European marketing rights to our partnered programmes, giving us the option either to build our own recurring revenue by taking drugs to market ourselves or out-licensing at a later stage of development.
Proximagen remains one of the best-funded companies in the European biotechnology sector, which will continue to fuel our acquisition strategy and fund important development efforts.
Key highlights of the year – solid foundations for future growth
One of the particular highlights of the year was our acquisition of tonabersat, a drug candidate that is in development for the treatment of epilepsy. The acquisition of this programme plays to a number of our strengths. It leverages our expertise in diseases of the central nervous system, exemplified by the work our scientific team completed prior to acquisition to suggest that there was a strong scientific foundation for the clinical potential for tonabersat in epilepsy. Seeing opportunities where others do not is an important element of our business strategy. We were very pleased to note that the NIH subsequently published a prestigious Red Book report confirming tonabersat’s potential after a year-long series of studies in various non- clinical models of epilepsy.
Within three months of the acquisition, management successfully renegotiated the tonabersat head licence with GSK and sub-licensed the programme. Sub-licensing the programme illustrates the scientific strength of the programme as well as our ability to partner programmes with innovative agreements, in this case with Upsher-Smith Laboratories Inc. (“Upsher- Smith”), who signed a development and sub-license agreement in relation to tona bersat in April 2010. Under the terms of the agreement, Upsher-Smith will undertake and pay for the clinical development, regulatory filing and commercialisation of tonabersat for epilepsy in North America and Proximagen will be entitled to royalty-free use of Upsher-Smith’s arising clinical data package when developing tonabersat for Europe, a market to which Proximagen is retaining full rights, thereby creating value in the programme for Proximagen’s shareholders while balancing risks and costs.
Also within our epilepsy franchise, in July 2010, Proximagen announced that it had signed a Co-operative Research and Development Agreement (“CRADA”) with the National Institute of Neurological Disorders and Stroke (“NINDS”) at the NIH. Naluzotan is a selective 5HT1a agonist for epilepsy in refractive patients. Under the terms of the CRADA, NINDS will fully fund and carry out a double blind, crossover, placebo-controlled, Phase II clinical trial in patients with epilepsy, a trial that commenced in January 2011. Proximagen, which owns the full commercial worldwide rights to naluzotan, will use the data from this clinical trial to support the further development and commercialisation of the programme.
The successful clinical trials of tonabersat and naluzotan could represent major breakthroughs for sufferers of epilepsy, a disease affecting approximately 50 million people worldwide. The strength of the scientific data of both drug candidates has enabled Proximagen to fund the clinical development of these programmes using two third parties’ resources, with little or no further risk to be taken by Proximagen’s shareholders for these indications.
At Proximagen we recognise that our research and development efforts represent only a small percentage of the ongoing R&D occurring across the pharmaceutical and biotechnology industries. Our ability to build our pipeline depends, in part, on a thorough approach to assessing a programme’s scientific quality and likelihood of commercial success. Our strong cash position puts Proximagen in a unique and privileged position, allowing us to actively pursue business development opportunities at a time of significant challenges facing our industry. By the end of 2010, we had evaluated over 160 different programme or company acquisition opportunities, executing on a very select few that successfully passed our high scientific standards. Furthermore, we believe that our team’s growing reputation for scientific excellence and our ability to identify quality external opportunities and execute deals affords us the credibility of being a valued partner for other companies and collaborators. This is particularly important at a time when larger pharmaceutical companies are actively looking to the biotechnology sector for partnering and collaboration opportunities.
Our pipeline
Over the past year, we have transformed our pipeline to create a much broader and more balanced portfolio featuring a variety of attractive compounds that provide the potential for multiple pathways for growth and multiple potential revenue streams. Our primary focus remains neurological diseases, markets which are key opinion leader-driven and require a relatively small sales force yet offer large commercial opportunities. Executing our strategy of building a strong commercial pipeline is our number one focus and priority as a company.
Over the past year, Proximagen’s pipeline has tripled in size with multiple programmes either in or about to enter Phase II studies, reflecting the Company’s ability to pursue clinical and pre-clinical opportunities in various indications. As of the end of February 2011, we had seven new molecules in our early development pipeline. We also had three programmes enter pre-clinical development during the period and we are hopeful that these programmes will reach the clinic within the next twelve months. Four programmes are in clinical development. Our pipeline of drug development candidates is designed to contain a balance of both novel and validated mechanisms and all of our drug candidates are based on promising biology and could represent significant treatment advances. Over the next few years, we look forward to generating clinical data with new molecules and building our late-stage pipeline through advancement of these molecules.
Operational review
During 2010, we strengthened our leadership team with the appointments of Dr Stevo Knezevic and Dr Jackie Hunter. Dr Knezevic joined as Head of Development having been Chief Medical Officer for EMEA at Wyeth. Dr Hunter, who held a number of senior roles at GSK including Senior Vice President and Head of Science Environment Development and Senior Vice President and Head of the Neurology CEDD, joined us as a non-executive director. We are proud to have a highly productive workforce of more than 40 people who all share a desire to improve the lives of patients suffering from unmet medical needs.
We maintain a small research facility and laboratories at King’s College London, but the majority of our research and development activities are performed out of our facilities on the Babraham Research Campus near Cambridge, an 8,000 sq ft facility that was acquired as part of the CBT acquisition in 2009.
We are very pleased to report that all acquisitions have been fully integrated and there were no significant or unexpected issues arising or expense incurred.
Looking ahead
We enter 2011 with a diversified and attractive portfolio of promising drug candidates coupled with a strong cash position and will seek to maintain our strong forward momentum by continuing to:
• Invest wisely and appropriately in acquisitions;
• Advance our pipeline with the right partners;
• Retain a lean, flexible cost structure; and
• Ensure that we have the right people and culture in place to help Proximagen excel.
We are excited about the prospects for Proximagen. We believe that our strategy will enable us to benefit from the significant trends seen lately in the pharmaceutical sector wherein a number of large companies are reducing investment in internal R&D and looking to acquire programmes that have been developed externally. Consequently, we expect our pipeline will offer very attractive partnering and collaboration opportunities for larger pharmaceutical companies. We have an experienced team of dedicated employees and 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 again to thank our investors for their trust and for sharing our enthusiasm to build a better Proximagen.
Kenneth Mulvany Chief Executive Officer
Financial Review
Introduction
The Group’s financial position remains robust with £48.2m of cash at the year end and with the development of a number of our programmes being funded by our partners.
Statement of Comprehensive Income
As expected, our research and development (“R&D”) expenditure increased significantly during the year. Total expenditure on R&D more than doubled from 2009 levels, totalling £6.1m (2009: £2.8m). This increase reflects the significant escalation in the number of programmes the Group is funding, following the acquisitions of Cambridge Biotechnology Limited (“CBT”) in November 2009 and Minster in early 2010. The R&D tax credit increased commensurately to £0.9m (2009: £0.5m).
Administrative expenses totalled £2.8m compared to £2.1m in 2009. The increase is, to a large extent, accounted for by an increase in the number of staff as we strengthened our commercial team and in the costs of supporting our growing patent estate, which now contains nearly 300 national or international patent applications of which 147 are granted or allowed.
Following the business combination of CBT we have undertaken a full fair valuation of the business’s balance sheet on acquisition as required under IFRS3 “Business combinations”, and we are reporting a gain on business combination arising from the recognition of negative goodwill of £0.4m which is recorded in the 2009 results (see Note 1 for further details).
Finance income totalled £0.55m compared with £0.37m in 2009, with lower average interest rates outweighed by higher average cash balances during the period.
The loss after tax was £6.4m (2009 restated: loss of £2.9m) and the loss per share was 11.2p (2009 restated: loss of 7.7p).
Statement of Financial Position
Cash resources at the year end totalled £48.2m (2009: £55.6m). We take a conservative approach to managing our cash resources and we have actively moved to shorten deposit terms over the last two years given the economic environment prevailing in Europe.
Net assets at the year end totalled £48.3m (2009 restated: £54.6m) and the principal movements in the Statement of Financial Position during the year were:
- a reduction of £7.4m in cash resources accounted for as follows:
- cash used in operations of £8.0m
- R&D tax credits received of £0.5m
- Foreign exchange gain of £0.1m
- a reduction in trade and other receivables of £1.6m
- a reduction in trade and other payables of £1.8m
- an increase in intangible assets of £0.9m
The consolidated financial statements have been prepared for the year to 30 November 2010 and the 2009 comparative figures have been restated under IFRS 3.62 to reflect final adjustments made to provisional fair values determined for CBT which was acquired shortly before the end of the 2009 financial year.
Group reorganisation
During the year we took steps to simplify the Group structure which had grown with the acquisitions of CBT and Minster. The business and assets of CBT and Minster Research Limited have now been transferred to Proximagen Limited, the Group’s main operating subsidiary, together with their respective tax losses.
James Hunter
Finance Director
Notes to the preliminary announcement
1. Basis of preparation
The preliminary announcement has been prepared in accordance with International Financial Reporting Standards (“IFRS”) adopted by the European Union. All IFRS’s issued by the International Accounting Standards Board (“IASB”) that were effective at the time of preparing the preliminary announcement and adopted by the European Commission for use inside the EU were applied by the Group.
The preliminary announcement has been prepared in accordance with IFRS and the interpretations issued by the International Financial Reporting Interpretations Committee (“IFRIC”) and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. In preparing this preliminary announcement the Group has consistently applied the accounting policies as set out in the Group’s consolidated accounts for the year ended 30 November 2009.
The financial information in this preliminary announcement does not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006 for the years ended 30 November 2009 and 2010.
The consolidated statutory financial statements for the year ended 30 November 2010 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 consolidated statutory financial statements for the year ended 30 November 2010 will be prepared applying IFRS and IFRIC interpretations 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 2009.
The financial information for the year ended 30 November 2009 has been extracted from the Group’s audited consolidated accounts for the year ended 30 November 2009, amended as described below under “Prior Period Adjustment”. The auditors’ report and opinion on those accounts was unmodified and did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006. The audited accounts for the year ended 30 November 2009 have been delivered to the Registrar of Companies.
The preliminary announcement has been prepared under the historical cost convention. The preliminary announcement is presented in Sterling and all values are rounded to the nearest £ thousand.
This preliminary announcement was approved by a committee of the Board of directors on 22 March 2011. Copies of this announcement are available from the Company’s website, www.proximagen.com.
Prior Period Adjustment
The 2009 comparative figures for the Consolidated Accounts have been restated to include the final fair values of the net assets of Cambridge Biotechnology Limited (“CBT”) at the time of its acquisition by the Company on 23 November 2009.
The fair values in the 2009 Annual Report were based on provisional assessments pending final determination because the acquisition of CBT took place shortly before the year end.
The 2009 comparative amounts for the Group have been restated because the final fair values assigned on acquisition resulted in negative goodwill. In accordance with IFRS3 “Business Combinations”, negative goodwill is recognised immediately and classified as a gain on business combination in the 2009 Consolidated Statement of Comprehensive Income. This led to the following adjustments:
• The loss for the year to 30 November 2009 has decreased from £3,212,000 to £2,858,000
• Retained losses reduced from a loss of £10,152,000 to a loss of £9,798,000
This prior period adjustment had no impact on the opening balances at 1 December 2008.
2. Basic and diluted loss per ordinary share
(Restated)
2010 2009 Loss for the year (£’000) (6,426) (2,858)
Weighted average number of shares in issue 57,310,549 37,139,445
The loss attributable to ordinary shareholders and weighted average number of ordinary shares for the purpose of calculating the diluted loss per ordinary share are identical to those used for basic loss 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 2010 there were 6,647,375 options outstanding (30 November 2009: 1,820,927 options outstanding).
3. Events after the balance sheet date
On 21 December 2010, the Company signed an exclusive agreement with GlaxoSmithKline to acquire the global rights to two drug development programmes.
4. Annual General Meeting Notice
The Annual General Meeting will be held at 11.30am on Tuesday 17 May 2011 at the offices of M:Communications, 1 Ropemaker Street, 34th Floor, CityPoint, London EC2Y 9AW. The Notice of Annual General Meeting and proxy materials will be posted to shareholders with the 2010 Annual Report and Accounts in April 2011.
