ReNeuron Group plc Interim Results for the six months ending September 2005. 30/11/05
Highlights
- Lead ReN001 stroke therapy progresses to plan, including positive pre-IND meeting with FDA
- Initial results of late pre-clinical studies show that ReN001 stem cells are non-tumour forming
- Manufacturing scale-up of ReN001 on track for completion to full GMP standards
- ReNcellTMhepatocyte (liver) cell line developed for drug discovery applications, generating significant interest from the pharmaceutical industry
- Landmark cross-licence signed with StemCells, Inc.
- Successful flotation on AIM, raising £9.5 million before expenses, with further £5.7 million possible through exercise of warrants
- Net loss of £4.3 million (2004: £1.5 million) after non-cash, non-recurring exceptional and other charges of £1.4 million (2004: nil); net cash outflow before cash management and financing items £2.3 million (2004: £1.8 million); cash and short term investments at 30 September 2005 of £7.4 million (2004: £0.7 million)
Commenting on the results, Professor Trevor Jones, Chairman, said:
“ReNeuron’s achievements during the period under review, and subsequently, have given the business a sound footing from which to achieve further success. We currently remain on track to achieve our 2006 objective of submitting an IND application to the FDA for approval to commence human clinical trials with our lead ReN001 stem cell therapy for disabled stroke patients.
“Beyond this, we are excited by the potential of our other therapeutic programmes and also by the near term commercial opportunities presented by our ReNcellTM non-therapeutic products. With the financial stability gained from the Company’s recent flotation, we are well placed to make further good progress across all of ReNeuron’s activities.”
Chairman’s and Chief Executive Officer’s Joint Statement
Review of Operations
The six-month period to 30 September 2005 has been an eventful one for ReNeuron, with significant progress made on a number of fronts.
Late pre-clinical development of our lead ReN001 stem cell therapy for disabled stroke patients continues apace. A significant milestone in the period concerning this programme was the formal pre-IND1 meeting with the US Food and Drug Administration (FDA) held in July 2005. As a result of this meeting, we were able to confirm our development timelines for ReN001, with the aim of submitting an IND application to the FDA in mid-2006 for approval to commence initial human clinical trials.
We have subsequently had meetings with the UK and other European regulatory authorities with respect to the ReN001 programme, and they too have confirmed the appropriateness of our pre-clinical safety testing programme for this therapy. Earlier this month, we also announced the first results from our late pre-clinical safety studies for ReN001. These provisional results indicate that the ReN001 stem cells are non-tumour forming in vivo, a critical safety characteristic from a regulatory perspective. Further safety studies are ongoing.
The Company is on track to shortly complete manufacturing scale-up and testing of both master and working cell banks for the ReN001 product, to full GMP2 standard. These cell banks contain the material from which all future clinical and in-market supplies will ultimately be drawn for our ReN001 therapy.
Our follow-on therapeutic programmes continue to show promise at the research stage and we will make further announcements regarding progress with these programmes in due course. The early development work associated with our ReN004 programme for Parkinson’s disease and our ReN005 programme for Huntington’s disease is being funded in part under the £2.2 million UK Department of Trade and Industry Technology Programme grant awarded to ReNeuron and the other consortium members in Janu ary of this year. The Company received the first grant instalment during the period.
We have also made progress during the period with our ReNcellTM products for drug discovery applications in the pharmaceutical industry. Our first generation ReNcellTM neural stem cell lines are currently under evaluation by a leading US reagent supplier. During the period, we completed initial development of a second generation ReNcellTM hepatocyte (liver) cell line with high potential utility as a drug toxicology testing and screening tool. Key functional data relating to this cell line was subsequently presented in conference in October 2005, with substantial interest being shown by the pharmaceutical industry. We are currently evaluating the most effective routes through which to exploit the commercial potential of this second generation product.
In July 2005, we signed a landmark cross-licence with StemCells, Inc., a leading US, NASDAQ-quoted adult stem cell development company. We are delighted to be associated with a company of StemCells, Inc.’s calibre, and look forward to working more closely with them over the coming months.
In August 2005, we successfully floated the Company on the AIM market of the London Stock Exchange, raising £9.5 million before expenses and making ReNeuron the only publicly-quoted adult stem cell company in the UK. Despite the prevailing tough market conditions facing biotechnology initial public offerings, the Company was able to raise the amount it had targeted, a testament to the strength of ReNeuron’s technology, its therapeutic programmes and its people. We were also greatly encouraged to have raised these funds from both UK and US-based institutional investors, given the importance of both territories as regards stem cell research generally and ReNeuron’s activities in particular.
As part of the flotation, warrants were also issued on the basis of one warrant for every two new Ordinary shares, exercisable at 30p per share by 12 February 2007. Should these warrants be exercised in full, a further £5.7 million proceeds will be raised for the Company.
In preparation for the flotation, the Board was re-structured. As a result, Bill Edge and Mark Clement stepped down from the Board during the period and Dr Paul Harper joined the Board. We thank Bill and Mark for their contribution to ReNeuron’s development during their respective tenures and we are delighted to welcome Paul to the Board. As a previous Chief Executive Officer of both Cambridge Antibody Technology and Provensis, Paul brings with him substantial commercial skills and a wealth of experience in the development of biologics through to the clinic and beyond.
Summary of Results
In the six months to 30 September 2005, net operating expenses before exceptional items increased, as expected, to £3.1 million (2004: £1.6 million). Of this increase, £1.1 million relates to research and development costs, principally due to the late pre-clinical development costs associated with the ReN001 stroke programme. The balance of the increase in operating expenses relates to general and administration costs which increased by £0.4 million in the period. Again, this increase was expected, and was largely attributable to costs associated with business development activities during the period.
Exceptional charges in the period totalled £1.2m (2004: £nil). Of these, £0.9 million relates to a provision against the intangible asset arising from the licence granted to the Company to certain patents and intellectual property owned by StemCells, Inc. The directors believe that it is prudent to fully provide against this asset, given the early stage nature of the technologies to which this licence relates. The £0.3 million balance of exceptional charges in the period relates to non-recurring net charges associated with the cancellation a nd re-issue of employee share options.
The resulting loss for the period increased to £4.3 million (2004: £1.5 million). Of this increase, £1.4 million relates to non-recurring, non-cash charges, being the exceptional charges explained above, together with a £0.25 million premium on short term debt issued prior to the Company’s flotation.
Partially offsetting these charges was an increase in other operating income to £0.2 million (2004: £24,000), relating to grant income in the period.
Net cash outflow before management of liquid resources and financing increased to £2.3 million (£1.8 million) in the period, reflecting the increase in underlying operating expenses, offset primarily by an increase in short term creditors and accruals of £0.8 million. The increase in creditors reflects a general increase in research and development activity and also ReN001 pre-clinical development work contracted for and undertaken but not yet billed.
As at 30 September 2005, the Group had cash and short term investments totalling £7.4 million (2004: £0.7 million). The increase is largely due to net flotation proceeds of £8.3 million received in the period, together with a further £1.25 million of short term debt financing, including premium, which converted to equity on the Group’s flotation. The directors believe that the Group’s current cash resources are sufficient to meet expenditure requirements for at least the next twelve months.
Outlook
ReNeuron’s achievements during the period under review, and subsequently, have given the business a sound footing from which to achieve further success. We currently remain on track to achieve our 2006 objective of submitting an IND application to the FDA for approval to commence human clinical trials with our lead ReN001 stem cell therapy for disabled stroke patients.
Beyond this, we are excited by the potential of our other therapeutic programmes and also by the near term commercial opportunities presented by our ReNcellTM non-therapeutic products. With the financial stability gained from the Company’s recent flotation, we are well placed to make further good progress across all of ReNeuron’s activities.
Professor Trevor Jones – Chairman
Michael Hunt – Chief Executive Officer
30 November 2005
- Investigational New Drug
- Good Manufacturing Practice
- The terms ‘ReNeuron’, ‘the Company’ or ‘the Group’ used in this statement refer to ReNeuron Group plc and/or its subsidiary undertakings, depending on the context.
ReNeuron Group plc Consolidated profit and loss account
For the six months ended 30 September 2005
|
Note |
Six months ended 30 September 2005 Unaudited £’000 |
Six months ended 30 September 2004 Unaudited £’000 |
Year ended 31 March 2005 Audited £’000 |
| Turnover |
|
– |
– |
3 |
| Cost of sales |
|
– |
– |
– |
| Gross profit |
|
– |
– |
3 |
| Net operating expenses excluding exceptional items |
2 |
(3,074) |
(1,584) |
(3,382) |
| Exceptional operating expenses |
3 |
(1,167) |
– |
– |
| Net operating expenses including exceptional items |
|
(4,241) |
(1,584) |
(3,382) |
| Other operating income |
|
165 |
24 |
43 |
| Operating loss |
|
(4,076) |
(1,560) |
(3,336) |
| Interest receivable |
|
50 |
30 |
53 |
| Interest payable |
|
(250) |
– |
(250) |
| Loss on ordinary activities before taxation |
|
(4,276) |
(1,530) |
(3,533) |
| Tax credit on loss on ordinary activities |
|
– |
– |
319 |
| Loss for the period |
|
(4,276) |
(1,530) |
(3,214) |
| Loss per 10p ordinary share |
|
|
|
|
| Basic and diluted |
4 |
(8.3p) |
(4.3p) |
(9.0p) |
The group has no recognised gains and losses other than the results above and therefore no separate statement of total recognised gains and losses is presented.
All results arise from continuing operations.
ReNeuron Group plc Consolidated balance sheet
As at 30 September 2005
|
Note |
30 September 2005 Unaudited £’000 |
30 September 2004 Unaudited £’000 |
31 March 2005 Audited £’000 |
| Fixed assets |
|
|
|
|
| Negative goodwill |
5 |
(1,515) |
(1,702) |
(1,609) |
| Tangible assets |
|
1,263 |
1,511 |
1,383 |
|
|
(252) |
(191) |
(226) |
| Current assets |
|
|
|
|
| Debtors |
|
898 |
715 |
624 |
| Short term investments |
6 |
7,314 |
647 |
361 |
| Cash at bank and in hand |
|
92 |
65 |
70 |
|
|
8,304 |
1,427 |
1055 |
|
|
|
|
|
Creditors
amounts falling due within one year |
|
(1,380) |
(559) |
(579) |
| Convertible loan |
7 |
– |
– |
(1,250) |
| Net current assets/(liabilities) |
|
6,924 |
868 |
(774) |
| Total assets less current liabilities |
|
6,672 |
677 |
(1,000) |
|
|
|
|
|
Creditors
amounts falling due after more than one year |
|
(7) |
– |
(8) |
| Net assets /(liabilities) |
|
6,665 |
677 |
(1,008) |
|
|
|
|
|
| Capital and reserves |
|
|
|
|
| Called up share capital |
8 |
9,355 |
3,587 |
3,587 |
| Share premium account |
8 |
5,472 |
– |
– |
| Merger reserve account |
8 |
365 |
365 |
365 |
| Warrant reserve account |
8 |
436 |
– |
– |
| Profit and loss account |
8 |
(8,963) |
(3,275) |
(4,960) |
|
|
|
|
|
| Total equity shareholders’ funds |
|
6,665 |
677 |
(1,008) |
ReNeuron Group plc Consolidated cash flow statement
For the six months ended 30 September 2005
|
Note |
Six months ended 30 September 2005 Unaudited £’000 |
Six months ended 30 September 2004 Unaudited £’000 |
Year ended 31 March 2005 Audited £’000 |
| Net cash outflow from operating activities |
9 |
(2,348) |
(1,871) |
(3,150) |
|
|
|
|
|
| Returns on investments and servicing of finance |
|
|
|
|
|
|
|
|
|
| Interest |
|
50 |
30 |
50 |
| Net cash inflow from returns on investments and servicing of finance |
|
50 |
30 |
50 |
| Taxation |
|
|
|
|
| UK corporation tax – research and development tax credits received |
|
– |
– |
364 |
| Capital expenditure |
|
|
|
|
| Purchase of tangible fixed assets |
|
(9) |
(6) |
(27) |
| Disposal of tangible fixed assets |
|
– |
– |
– |
| Net cash outflow from capital expenditure |
|
(9) |
(6) |
(27) |
| Acquisitions |
|
|
|
|
| Refund of VAT on acquisition expenses |
|
– |
86 |
86 |
| Net cash inflow from acquisitions |
|
– |
86 |
86 |
| Net cash outflow before management of liquid resources and financing |
|
(2,307) |
(1,761) |
(2,677) |
| Management of liquid resources |
|
|
|
|
| (Decrease)/increase in cash in the period |
10 |
(6,953) |
1,329 |
1,615 |
| Financing |
|
|
|
|
| Issue of ordinary share capital |
|
9,500 |
– |
– |
| Increase in loans |
|
1,000 |
365 |
1,000 |
| Share issue costs |
|
(1,218) |
– |
– |
|
|
|
|
|
| Increase/(decrease) in cash |
10 |
22 |
(67) |
(62) |
Notes to the interim financial statements
For the six months ended 30 September 2005
1. Basis of preparation
These interim financial statements have been prepared on the basis of the accounting policies set out in the consolidated statutory accounts for ReNeuron Holdings Limited for the year ended 31 March 2005.
The consolidated accounts include the financial statements of the Company and its subsidiary undertakings, made up to 30 September 2005. A reconstruction of the ReNeuron Group took place during the period, as described below, in preparation for the admission of the Company’s shares to the AIM market of the London Stock Exchange in August 2005.
The Company was incorporated as MF59657 Limited on 7 June 2005. On 21 June 2005, the Company acquired the entire issued share capital of ReNeuron Holdings Limited by way of a one-for-one share exchange. On 22 June 2005, the Company was re-registered as a public limited company and its name was changed to ReNeuron Group plc.
As a result of the above reconstruction, the results of ReNeuron Holdings Limited and its subsidiary undertakings have been consolidated using the principles of merger accounting, and the comparative results have therefore been presented as if the new group had been established throughout the year to 31 March 2005.
The financial information contained in this interim report does not constitute statutory accounts within the meaning of Section 240 of the Companies Act 1985. Statutory accounts of ReNeuron Limited, ReNeuron (UK) Limited and ReNeuron Holdings Limited in respect of the year ended 31 March 2005 have been delivered to the Registrar of Companies, upon which the Company’s auditors have given a report which was unqualified and did not contain a statement under Section 237(2) or 237(3) of that Act.
2. Total net operating expenses
|
Six months ended 30 September 2005 Unaudited £’000 |
Six months ended 30 September 2004 Unaudited £’000 |
Year ended 31 March 2005 Audited £’000 |
| Administrative expenses |
783 |
423 |
799 |
| Research and development expenditure |
2,291 |
1,161 |
2,583 |
|
3,074 |
1,584 |
3,382 |
3. Exceptional operating expenses
|
Six months ended 30 September 2005 Unaudited £’000 |
Six months ended 30 September 2004 Unaudited £’000 |
Year ended 31 March 2005 Audited £’000 |
| Provision against intangible assets acquired |
894 |
– |
– |
| Share option compensation charge |
273 |
– |
– |
|
1,167 |
– |
– |
Provision against intangible assets acquired
On 1 July 2005, ReNeuron entered into licence and subscription and share exchange agreements with StemCells, Inc., whereby the Group was granted a licence to certain intellectual property and patents owned by StemCells, Inc., and pursuant to which the Company issued, as part consideration for the licence, a total of 8,939,493 ordinary shares of 10p each to StemCells, Inc. Due to the early stage nature of the underlying technology, the directors have carried out an impairment review of the intangible asset so created, and consider that it is appropriate to provide against the asset in full.
Share option compensation charge
A charge of £0.5 million was made to the profit and loss account in the period, relating to the grant of replacement options over shares in the Company on flotation, the charge being the estimated market value of the shares at the date of grant less the exercise price of the options. This charge was credited back to the profit and loss account reserve. Similarly, a number of share options were cancelled during the period. Compensation charges totalling £0.2 million previously made in respect of these options were consequently written back to the profit and loss account in the period, the credits previously made to reserves in respect of these compensation charges being similarly reversed.
4. Loss per share
The basic and diluted loss per share is calculated by dividing the loss for the financial period of £4,276,000 (September 2004: £1,530,000, March 2005: £3,214,000) by 51,632,417 shares (September 2004: 35,873,705 shares, March 2005: 35,873,705), being the weighted average number of ordinary 10p shares in issue during the period.
Potential ordinary shares are not treated as dilutive as their conversion to ordinary shares does not increase the net loss per share.
5. Negative goodwill
Negative goodwill arose during the period ended 31 March 2004 on the acquisition of ReNeuron (UK) Limited by ReNeuron Holdings Limited. The amount of negative goodwill that was in excess of fair values of non-monetary assets acquired of £947,000 was immediately amortised to the profit and loss account. The remaining negative goodwill, equal to the fair values of non-monetary assets acquired, is being amortised over a period of 10 years, being the period over which the non -monetary assets are expected to be recovered.
6. Sho rt term investments
Short term investments comprise fixed rate deposits with banks and money market funds, which are not repayable on demand.
7. Convertible Loan
The convertible loan outstanding at 31 March 2005 was an amount payable to Merlin General Partner II Limited in respect of a bridging loan. The convertible debt increased to £2,500,000 in the period, including accrued repayment premium, and was converted into equity on the Group’s flotation.
8. Share capital and reserves
|
Share capital £’000 |
Share premium account £’000 |
Merger reserve account £’000 |
Warrant reserve account £’000 |
Profit and loss account £’000 |
Total equity shareholders’ funds £’000 |
| At 1 April 2005 |
3,587 |
– |
365 |
– |
(4,960) |
(1,008) |
| Issue of new ordinary shares |
5,768 |
6,707 |
– |
436 |
– |
12,911 |
| Costs of share issue |
– |
(1,235) |
– |
– |
– |
(1,235) |
| Loss for the period |
– |
– |
– |
– |
(4,276) |
(4,276) |
| Reversal of Share option compensation charge |
– |
– |
– |
– |
273 |
273 |
| At 30 September 2005 |
9,355 |
5,472 |
365 |
436 |
(8,963) |
6,665 |
ReNeuron Group plc was admitted to trading on the AIM Market of the London Stock Exchange on 12 August 2005, raising £9.5 million before costs at a placing price of 25p per ordinary share. At the same time, the Company issued warrants to subscribers of new ordinary shares on the basis of one warrant for every two new ordinary shares. Each warrant holder is entitled to subscribe for ordinary shares at a fixed price of 30p per share. The warrants expire on 12 February 2007.
A credit was made to the warrant reserve during the period, reflecting the fair value of the warrants issued at the time of the Company’s flotation.
In addition to 38,000,000 new ordinary 10p shares issued in consideration for the £9.5 million gross flotation proceeds, the Company issued further ordinary 10p shares in relation to the conversion of the debt finance on flotation, and also in relation to the licence and subscription and share exchange agreements with StemCells, Inc.
9. Reconciliation of operating loss to net cash outflow from operating activities
|
Six months ended 30 September 2005 Unaudited £’000 |
Six months ended 30 September 2004 Unaudited £’000 |
Year ended 31 March 2005 Audited £’000 |
| Operating loss |
(4,076) |
(1,560) |
(3,336) |
| Depreciation of tangible fixed assets |
129 |
121 |
269 |
| Amortisation of negative goodwill |
(94) |
(94) |
(188) |
| Loss/ (profit) on sale of fixed assets |
– |
– |
2 |
| Provision against intangible fixed assets acquired |
894 |
– |
– |
| Share option compensation charge |
273 |
– |
– |
| (Increase)/decrease in debtors |
(274) |
136 |
184 |
| Increase/(decrease) in creditors |
800 |
(474) |
(81) |
| Net cash outflow from operating activities |
(2,348) |
(1,871) |
(3,150) |
10. Reconciliation of net cash flow to movement in net funds
|
Six months ended 30 September 2005 Unaudited £’000 |
Six months ended 30 September 2004 Unaudited £’000 |
Year ended 31 March 2005 Audited £’000 |
| Increase/(decrease) in cash in the period |
22 |
(67) |
(62) |
| Cash flow from (decrease)/increase in short term investments |
6,953 |
(1,329) |
(1,615) |
| Cash inflow from increase in debt |
(1,000) |
– |
(1,000) |
| Non cash movement |
(250) |
– |
(250) |
| Conversion of debt to equity |
2,500 |
– |
– |
| Change in net funds from cash flows |
8,225 |
(1,396) |
(2,927) |
| Net funds/(debt) at the beginning of the period |
(819) |
2,108 |
2,108 |
| Net funds/(debt) at the end of the period |
7,406 |
712 |
(819) |
Notes to editors
ReNeuron is a leading UK-based adult stem cell therapy business. The Company is applying its novel stem cell platform technologies in the development of ground-breaking stem cell therapies to serve significant and unmet or poorly-met clinical needs.
ReNeuron has used its c-mycERTAM technology to generate genetically stable neural stem cell lines. This technology platform has multi-national patent protection and is fully regulated by way of a chemically-induced safety switch. Cell growth can therefore be completely arrested prior to in vivo implantation.
The Company’s lead stem cell therapy, ReN001 for chronic stroke disability, is in late pre-clinical development. The Company plans to file for approval to commence initial clinical trials in stroke by mid-2006, with trials commencing as soon as possible thereafter.
In addition to its ReN001 stroke programme, ReNeuron has programmes to develop stem cell therapies to address Huntington’s disease, Parkinson’s disease, Type 1 diabetes and diseases of the retina.
ReNeuron has also leveraged its stem cell technologies into non-therapeutic areas by marketing its ReNcellTM range of cell lines for use in drug discovery applications in the pharmaceutical industry.
ReNeuron’s shares are traded on the London AIM Market under the symbol RENE.L, and its warrants are traded under the symbol RENW.L.
Further information on ReNeuron and its products can be found at www.reneuron.com
Further information
ReNeuron Group plc
Michael Hunt, Chief Executive Officer
+44 (0)1483 302560
Financial Dynamics – Europe
David Yates
Sarah Macleod
+44 (0)20 7831 3113
Financial Dynamics – US
Jonathan Birt, John Capodanno
+1 (212) 850 5755
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