RNS Number:8877L
Protherics PLC
04 June 2003
4 June 2003
PROTHERICS PLC
PRELIMINARY RESULTS FOR THE YEAR ENDED 31 MARCH 2003
Protherics PLC ("Protherics"), the international biopharmaceuticals company,
today announces its preliminary results for the year ended 31 March 2003.
HIGHLIGHTS
* Turnover up 64% to #11.3 million (#6.9million last year) on continuing
operations
* CroFab sales up 70% to #8.5 million (#5 million last year)
* DigiFab completes successful first year with #1.2 million sales
* Operating loss decreased to #0.6 million from #2.2 million on continuing
operations
* Offer for Enact Pharma plc, announced 2 May 2003, declared unconditional
with regard to acceptances on first closing date, 28 May 2003.
Commenting on the results, Stuart Wallis, Chairman, said:
"Building a profitable business is Protherics' first objective. This reduces
risk in our business and to our shareholders. It provides the funding for our
ongoing research and development programmes in large and exciting therapeutic
areas, and provides us with the financial cushion to acquire products and
businesses in later stage development where the risk of failure is lower.
"Biotechnology is potentially very rewarding and yet for shareholders in many
companies it has been a highly volatile experience. In Protherics, we are
working to reduce risk and to build a stable, diverse revenue stream, which, in
turn will fund an exciting research and development programme.
"The quality of our current institutional investor base is testimony to the
progress we continue to make. We aim to build on this, to create value for
investors in Protherics in line with our own belief and expectations."
For further information contact:
Protherics PLC +44 (0) 20 7246 9950
Andrew Heath, Chief Executive +44 (0) 7919 480510 (mobile)
Barry Riley, Finance Director +44 (0) 1928 518000
The Maitland Consultancy +44 (0) 20 7379 5151
Brian Hudspith
Simone Cheetham
Protherics PLC
Protherics PLC was formed in September 1999 from the merger of Proteus
International plc and Therapeutic Antibodies Inc. Protherics is an international
biopharmaceutical company, whose platform technology is the development and
production of immunotherapeutics.
The Company's ordinary shares are listed on the Official List of the UK Listing
Authority and are traded on the London Stock Exchange.
An electronic version of this will be available at: www.protherics.com
This release, and oral statements made from time to time by Company
representatives concerning the subject matter hereof, may contain so-called
"forward looking statements". These statements can be identified by introductory
words such as "expects", "plans", "will", "estimates", "forecasts", "projects",
words of similar meaning, and by the fact that they do not relate strictly to
historical or current facts. Forward-looking statements frequently are
discussing the Company's growth strategy, operating and financial goals, plans
relating to regulatory submissions and approvals and development programs. Many
factors may cause actual results to differ from the Company's forward-looking
statements, including inaccurate assumptions and a broad variety of risks and
uncertainties, some of which are known and others of which are not. Those and
other risks are described in the Company's filings with the Securities and
Exchange Commission, copies of which are available from the SEC or may be
obtained upon request from the Company. No forward-looking statement is a
guarantee of future results or events, and one should avoid placing undue
reliance on such statements.
CHAIRMAN'S STATEMENT
In 2002, the value of publicly traded biotechnology companies almost halved.
Although a small recovery, particularly in larger US companies, has taken place
over the past few months, 2002 was not a good year for the sector which was
rocked by scandal (ImClone), bankruptcy (22 biotechnology bankruptcies in the US
in 2002), and drug failures late in development. Venture capitalists investing
in early stage companies must now look far beyond the 5 to 7 year horizon to
expect a payback.
For the major pharmaceutical companies, the situation is not much better. In
2001, of 32 new medicines approved by the FDA, only 5 were new molecules - and
none of these originated from those largest companies. The top 14 pharmaceutical
companies spent over 65% ($29 billion) of the total research and development
expenditure of $44.5 billion, yet obtained just 26% of FDA approvals.
What does this environment mean for Protherics?
Building a profitable business is Protherics' first objective. This reduces risk
in our business and to our shareholders. It provides the funding for our ongoing
research and development programmes in large and exciting therapeutic areas, and
provides us with the financial cushion to acquire products and businesses in
later stage development where the risk of failure is lower.
We are pleased to report that in the last six months of the financial year to 31
March 2003, Protherics traded profitably. Our objective to be a viable,
self-sustaining biopharmaceutical company is now within our grasp. This
important milestone is the foundation upon which we will continue to build our
business.
In this past year we have worked hard to reduce our operating expenses. We took
an opportunity to buy back the rights for the second tranche of convertible debt
(where Citadel was the lead investor) for #375,000, removing concerns expressed
to us by our major shareholders. The result for the full year was a loss after
tax of #238,000 which was obtained despite in excess of #3 million of sales,
planned for the end of the year to 31 March 2003, moving forward into the
current year. This strong result was achieved through better than projected
reductions in cost of goods, and continued tight cost controls.
On 2 May 2003, we announced that we had reached an agreement with Enact Pharma
plc ("Enact") on the terms of a recommended offer to acquire that company. On 28
May 2003, we declared the offer unconditional as to acceptances and we expect to
declare the offer wholly unconditional in the first half of June. This
acquisition provides Protherics with a late stage product, Voraxaze, used to
manage toxicity from methotrexate, a widely used cancer drug. We should start to
generate revenues from named patient sales of Voraxaze in this current financial
year. Voraxaze leverages our regulatory and manufacturing skills, and should
provide significant revenue growth in the near to medium term, with a FDA
approval anticipated in 2005. We also acquire a project (NQO2) aimed at
selectively enabling patients with solid cell cancers - such as colorectal and
liver tumours - to be treated without the adverse events usually associated with
chemotherapy. This acquisition is accompanied by an underwritten cash placing
and open offer issuing new ordinary shares to raise #3 million to provide
adequate working capital to fund the Enact acquisition. The new ordinary shares
were admitted to trading on the London Stock Exchange today.
Despite current valuations, biotechnology sector revenues are forecast to grow
from their present $36.1 billion to $61.8 billion in 12 years, a compound annual
growth rate of 12%. At Protherics, we believe that our late stage product
portfolio will enable us to share in this growth, to contribute to the funding
for our very exciting pipeline, and to become increasingly profitable.
Biotechnology is potentially very rewarding and yet for shareholders in many
companies it has been a highly volatile experience. In Protherics, we are
working to reduce risk and to build a stable, diverse revenue stream, which, in
turn will fund an exciting research and development programme.
The quality of our current institutional investor base is testimony to the
progress we continue to make. We aim to build on this, to create value for
investors in Protherics in line with our own belief and expectations.
CHIEF EXECUTIVE'S REVIEW
The business environment for biotechnology companies has been quite difficult
this past year. For many companies, the primary objective has been to simply
avoid running out of cash, and as fund raising in the sector has slowed, R&D
programmes have been cut and headcounts reduced.
Protherics' situation is different. We are now making the appropriate
investments to reduce our cost of goods and to support our own research, in
particular our angiotensin programme, and those projects recently obtained
through the acquisition of Enact.
Operations
We continue to invest in process improvements at our operations in Wales and
Australia. These have already generated substantially increased output at
significantly reduced costs per unit. Year on year, the cost of producing a vial
of CroFabTM has been reduced by 28%. Our plans for the current year include
continued cost reductions and increases in output. Beyond this, we plan a more
fundamental re-engineering of the process which, while needing regulatory
approvals, can, over two to three years, deliver even more dramatic
improvements.
Risk management remains a high priority. Supplies of sheep serum from our second
(external) supplier in Tasmania have now received FDA approval, and work is well
underway in qualifying a second supplier of filling/freeze drying capability.
PORTFOLIO REVIEW
Marketed Products
CroFabTM
Demand for CroFabTM , our treatment for rattlesnake bites, which is marketed by
Altana's US subsidiary, Fougera, continues to increase as its use expands into
the earlier treatment of milder bites and also into Copperhead bites, a
previously un-served market. We estimate that the market opportunity (shared
with our distributor) remains in the range of $80 million per annum.
Production capacity has doubled over the past twelve months. Batch yields are
increasing and significant progress has been made in reducing our cost of goods.
We expect a further significant improvement in this current financial year. With
a strong order book, we continue to invest in production capability. This will
enable us to increase throughput, thus reducing work in progress but increasing
stocks of finished goods. The ability to supply the market from inventory will
enable us to smooth supply versus demand, thereby avoiding the roll over of
revenues from one financial year to another.
CroFabTM revenues were #8.5 million, up from #5.0 million the previous year.
With the release of 3 batches delayed from March, we can expect strong sales in
first half of 2003.
DigiFabTM
DigiFabTM , a treatment for Digoxin overdose and our second product launched in
the US, has had an excellent start in its first full year, with sales of #1.2
million. Our partner Altana has orders in hand that represent a share of more
than half of the market, and we have increased production of DigiFabTM to meet
this demand.
ViperaTabTM
Sales of ViperaTabTM, approximately #200,000, were affected by high stocks being
carried forward in response to strong sales (#350,000) in the prior year. We
anticipate a growth in sales in the current year and are actively seeking to
expand the product beyond Scandinavia and into the rest of Europe, through the
appointment of a marketing partner to assist with product registration in this
region. Although this is not a large market, high margins mean that ViperaTabTM
is potentially capable of generating an attractive return.
Prion recognition (BSE testing)
Royalties from our licensee, Enfer, remained in line with the prior year, as
increasing revenues from Europe offset reductions in the Irish market. Abbott,
Enfer's distributor in Europe, has launched the test in Germany, and we expect
further penetration both in Germany and in other countries as annual contracts
are renewed, although price competition may offset some of the volume gains.
Our intellectual property position in abnormal prion recognition is strong, and
discussions continue with potential partners on licensing for use in human
testing, such as screening of blood donors.
Research and Development
Angiotensin Vaccine
A vaccine treatment for high blood pressure is attractive because of the high
proportion of patients who fail to have their blood pressure adequately
controlled by existing tablet-based treatment. This is generally because of poor
compliance. Patients commonly suffer no symptoms and often neglect or forget to
take tablets.
A small Phase II study has already shown statistically significant effects on
levels of hormones involved in the regulation of blood pressure and fluid
balance. One of these hormones, aldosterone, is increasingly seen as an
excellent therapeutic target in its own right for use in the treatment of
congestive heart failure and kidney failure, both very large markets. The
primary market for high blood pressure alone is in excess of $30 billion per
annum.
Currently, a series of small formulation studies involving different
combinations of vaccine and proprietary adjuvants is under way to select the
best possible combination, before undertaking a larger proof of concept Phase II
study. This is planned to start early in 2004 and, if successful, we will have a
valuable product for outlicensing to a major pharmaceutical company.
CytoFabTM
The treatment of sepsis, a life threatening condition resulting from severe
infection, remains difficult. The first drug approved for this condition - Eli
Lilly's Xigris(R) - has not generated the level of sales expected because of its
safety profile. A market in excess of $1 billion per annum remains to be
captured by a more widely prescribed product. CytoFabTM achieved its clinical
endpoints in a Phase IIb study, reducing the time patients spend in intensive
care. We therefore remain confident of the prospects for this product and
continue discussions with prospective partners to fund the large Phase III study
required for registration. In the meantime, we are investing modest resources in
developing and optimising the production process.
VEGF Vaccine
VEGF (vascular endothelial growth factor) promotes angiogenesis, the development
of new blood vessels. This is understood to be important in the spread and
growth of secondary cancers. Genentech have recently announced very encouraging
results in a Phase III study of their anti-VEGF monoclonal antibody in
metatstatic colorectal cancer, thus providing the first validation in patients
of an anti-VEGF therapy.
Our vaccine has shown encouraging results in preclinical studies. We are
currently carrying out formulation studies with a target of a first clinical
study in patients in early 2004.
Acquired Products
The acquisition of Enact announced on 2 May 2003, brings with it both a high
margin, late stage product, Voraxaze, with revenues anticpated to start in the
current financial year, and an earlier stage product, NQO2, with the potential
to be out-licensed within two years.
Voraxaze
Voraxaze (Carboxypeptidase G2) is a new drug for the treatment of methotrexate
toxicity during cancer therapy. Voraxaze can very rapidly reduce dangerously
elevated serum methotrexate levels. Methotrexate is a widely used
chemotherapeutic agent that can cause kidney damage in a predictable number of
cases. The market potential, when used as a rescue therapy, as well as for the
management of patients with signs of kidney damage during methotrexate
treatment, is in excess of #80 million per annum. The availability of an
effective antidote opens up a much larger market opportunity, as high dose
treatment protocols for methotrexate are adapted to accommodate Voraxaze.
Clinical trials involving over 200 patients have been completed in Europe and
the USA. Orphan drug status has been granted in Europe and is expected in the
USA. Revenues from named patient sales are expected in the current year in
Europe, with marketing approval in Europe anticipated in 2004, and FDA approval
for US marketing expected in 2005.
NQO2
A common problem with the treatment of cancer by chemotherapy is that the drugs
used, because of their ability to kill cells (cytotoxicity), also damage
healthy, non-cancerous cells.
NQO2 is an enzyme that is over-expressed in certain tumour types (particularly
liver and colorectal cancers). Normally, the enzyme is latent in these cells.
However, Enact scientists have discovered that a co-factor (EP-0152R) activates
NQO2. In its activated form, NQO2 converts a pro-drug (CB1954) to its cytotoxic
form, thus selectively killing the tumour cells containing the enzyme, and
therefore avoiding harm to healthy, non-cancerous cells.
A Phase I/II trial is planned for 2004. Good clinical data should result in a
highly attractive licensing opportunity for a major pharmaceutical company. The
worldwide market for an effective treatment for liver cancer is estimated at
#2.8 billion per annum.
Other Products
A further vaccine project to combat kidney failure is progressing through
pre-clinical studies. Other targets are under investigation in the areas of
inflammation and metabolic control.
The two GnRH vaccines (licensed to ML Laboratories plc for human use in prostate
cancer, and to Janssen Animal Health for fertility control of animals) have not
been progressed further by the licensees. We are considering the possibility of
re-acquiring these products, but do not plan to devote significant resources to
them.
Looking Forward
The acquisition of Enact provides an opportunity to add to revenues in the
short-to-medium term, and may enable us to establish a small, focused team to
market Voraxaze in the US. Furthermore, we have acquired an exciting new
technology platform for the management of solid cell tumours which we believe
can provide us with a significant outlicensing agreement in 1 to 2 years.
With strong orders for our existing lead products, CroFabTM and DigiFabTM and
the prospect of further manufacturing cost reductions, we look forward to the
future confident in the belief that our strategy of funding an exciting research
and development portfolio from internally generated revenues is delivering
success
FINANCIAL REVIEW
The results from continuing operations continue the trend of year-on-year
improvements seen since Protherics was formed in September 1999.
Turnover for the year to 31 March 2003 increased to #11.3 million against #6.9
million from continuing operations in the prior year. In the same period, CroFab
TM sales increased to #8.5 million from #5 million. DigiFabTM contributed sales
of #1.2 million in its first full year, against #0.1 million in the prior year,
while revenues from BSE testing were #1.3 million compared to #1.4 million, with
increased testing in Europe and reduced levels in Ireland. ViperaTab(R) sales
reduced slightly to #0.2 million from #0.3 million while other income was #0.1
million in both years. Revenues from discontinued operations (the Computer-aided
Molecular Design "CAMD" division sold in July 2001) were #1.0 million in the
year to 31 March 2002.
Cost of sales, at #5.9 million compares with #4.7 million in the prior year. The
modest increase of #1.2 million year-on-year supported additional sales from
manufactured products (excluding BSE licensing revenues and other income) of
#4.5 million. This resulted in a gross margin on manufactured products of 40.4%
against 13.0% in the prior year, underlining the progress made in cost reduction
and process optimisation.
Research and development expenditure was #1.6 million for the year, compared to
#0.3 million on continuing operations in the year to 31 March 2002. However, the
prior year benefited from an exceptional credit of #0.7 million as provisions
against stocks were released following FDA approval of DigiFabTM. The underlying
increase year on year is therefore #0.6 million, largely representing increased
spending on the Angiotensin Vaccine.
Other administration costs on continuing operations, at #4.3 million showed a
marginal increase on the prior year figure of #4.2 million.
The operating loss for the year has decreased to #0.6 million from #2.2 million
(from continuing operations) in the prior year. A one-off profit from the
disposal of the CAMD division of #5.0 million in the prior year resulted in a
profit before and after tax of #2.9 million. In the year to 31 March 2003, tax
credits on research and development and deferred tax produced a benefit of #0.4
million and reduced the pre-tax loss of #0.6 million to #0.2 million after tax.
Balance sheet strength was maintained in the year, with net assets of #10.3
million at 31 March 2003 compared to #10.1 million at 31 March 2002. Investment
at our operations in Wales and Australia increased fixed assets to #6.2 million
from #5.3 million at 31 March 2002, and further investment is planned over the
next two years as we continue to improve manufacturing efficiencies, drive down
costs and increase throughput.
As expected, the second half of the year was stronger than the first. The
production necessary to meet this demand was supported by investment in fixed
assets and resulted in increased stocks and debtors. Stocks increased to #7.1
million from #4.0 million at the previous year end, as high levels of stocks
were awaiting release by the FDA. In the first two months of the current
financial year, goods with a sales value of over #3 million have been released
and sold, giving an excellent start to the current year. Debtors also increased
(to #3.5 million from #2.0 million) as a result of heavy shipments in the final
quarter of the year. Creditors due within one year increased to #8.5 million
from #6.2 million due to advance payments on orders received and generally
higher levels of manufacturing activity. Amounts due after more than one year
reduced to #0.7 million from #1.1 million as some longer term loans and leasing
arrangements were repaid. As a result of this investment, cash levels have
reduced from #6.2 million at the prior year end to #2.8 million. Working capital
levels are expected to decline as payments for goods supplied are received from
our distributor, Altana.
Net cash outflow from operations remained similar to the prior year (#1.7
million compared to #1.6 million in the prior year) reflecting the substantial
reduction in operating loss offset by the increased investment in working
capital referred to above. Cash outflow from capital investment increased from
#0.8 million to #1.8 million as a result of the first part of the fixed asset
investment programme now being implemented in Wales and Australia.
Summary
The strong performance in the last six months of the year (despite the delay in
release of some product until the current year) has delivered a profitable
second half. With maintained balance sheet strength, we look forward to the
future from a sound foundation.
Protherics PLC
CONSOLIDATED PROFIT & LOSS ACCOUNT (UNAUDITED)
For the year ended 31 March 2003
Year ended Year ended 31 March 2002
31 March Continuing Discontinued 31 March
2003 operations Operations 2002
#'000 #'000 #'000 #'000
Turnover 11,270 6,961 963 7,924
Cost of Sales (5,920) (4,649) - (4,649)
Gross profit 5,350 2,312 963 3,275
Administration expenses
Research & development expenses (note 3) (1,591) (295) (588) (883)
Other administration expenses (4,363) (4,182) (312) (4,494)
(5,954) (4,477) (900) (5,377)
Operating (loss) / profit (604) (2,165) 63 (2,102)
Profit on sales of discontinued operations (note 4) - - 5,032 5,032
(Loss) / profit on ordinary activities before (604) (2,165) 5,095 2,930
interest
Interest receivable 100 139
Interest payable (95) (202)
(Loss) / profit on ordinary activities before (599) 2,867
taxation
Taxation 361 -
(Loss)/profit on ordinary activities after taxation (238) 2,867
Basic and fully diluted (loss) / earnings per share
(pence) (note 2) (0.13) 1.61
The results for the year ended 31 March 2003 relate to continuing operations.
The result for the year has been calculated on the historical cost basis.
CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES (UNAUDITED)
For the year ended 31 March 2003
Group
2003 2002
#'000 #'000
(Loss) / profit for the financial year (238) 2,867
Currency translation differences on foreign currency equity
investments 435 18
Total recognised gains in the year 197 2,885
CONSOLIDATED BALANCED SHEET (UNAUDITED)
at 31 March 2003
2003 2002
#'000 #'000
Fixed assets
Intangible fixed assets 873 1,004
Tangible fixed assets 5,351 4,264
6,224 5,268
Current assets
Stock 7,085 3,979
Debtors 3,460 1,972
Cash at bank and in hand 2,756 6,211
13,301 12,162
Creditors:
Amounts falling due within one year (8,470) (6,183)
Net current assets 4,831 5,979
Total assets less current liabilities 11,055 11,247
Creditors:
Amounts falling due after more than one year: (717) (1,106)
Net assets 10,338 10,141
Capital and reserves
Called up equity share capital 3,765 3,765
Share premium account 63,350 63,350
Other reserves 51,163 51,163
Profit and loss account (107,940) (108,137)
Equity shareholders' funds 10,338 10,141
CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED)
For the year ended 31 March 2003
2003 2002
#'000 #'000 #'000 #'000
Net cash outflow from operating activities (1,723) (1,635)
Returns on investment and servicing of finance
Interest received 100 139
Finance lease interest paid (12) (15)
Other interest paid (83) (99)
Net cash inflow / (outflow) from returns on investments
and servicing of finance 5 25
Taxation
UK Corporation tax received 582 -
Net cash inflow from taxation 582 -
Capital expenditure and financial investment
Payments to acquire tangible fixed assets (1,862) (657)
Payments to acquire intangible fixed assets - (172)
Proceeds from the sale of tangible fixed assets 22 37
Net cash outflow from capital investment and financial (1,840) (792)
investment
Acquisitions and disposals
Sale of business - 5,823
Net cash inflow from acquisitions and disposals - 5,823
Net cash (outflow) / inflow before management of liquid (2,976) 3,421
resources and financing
Management of liquid resources
Cash withdrawn from money market deposits - 1,686
Net cash inflow from management of liquid resources - 1,686
Financing
Issue of share capital, net - (2)
Repayment of loans (484) (345)
Repayment of finance leases and hire purchase agreements (51) (75)
Net cash (outflow) from financing (535) (422)
(Decrease) / Increase in cash during the year (3,511) 4,685
RECONCILIATION OF OPERATING LOSS TO NET CASH OUTFLOW FROM OPERATING ACTIVITIES
(UNAUDITED)
31 March 31 March
2003 2002
#'000 #'000
Operating loss (604) (2,102)
Depreciation and amortisation 1,025 958
(Profit) / Loss on disposal of tangible fixed assets (2) 16
Deferred grant income (101) (55)
Grant received 122 -
Increase in stocks (3,092) (2,295)
Increase in debtors (1,677) (388)
Increase in creditors 2,606 2,264
(Profit) on sale of current asset investments - (33)
Net cash outflow from operating activities (1,723) (1,635)
NOTES TO THE PRELIMINARY RESULTS
1. The financial information set out above is an abridged version of the Group's
full accounts for the year ended 31 March 2003. The full accounts for 2003 have
not been filed with the Registrar of Companies and have not been reported on by
the Group's auditors. The full accounts for the year ended 31 March 2002
received an unqualified report and have been filed with the Registrar of
Companies.
2. Basic and fully diluted earnings per share are based on attributable losses
of #238,000 (2002: profits of #2,867,000) and on a weighted average number of
shares in issue during the year of 188,232,913 (2002: 178,119,748). Share
options, warrants and the convertible debenture are at present anti-dilutive.
3. Research and development costs relating to continuing operations are stated
after an exceptional credit of #nil, (2002: #674,000) arising from the
re-instatement of stocks written off in the prior year, following FDA approval
of DigiFabTM (the Group's treatment for digoxin poisoning) in August 2001.
4. On 12 July 2001, the Group sold its computer aided molecular design division
(CAMD) to Tularik Inc. The sale included the Group's propriety Prometheus
software and related computer hardware, together with laboratory equipment.
Existing CAMD research agreements also transferred to Tularik under the terms of
the agreement.
Copies of this statement will be available to the public at the Company's
registered office at The Heath Business & Technical Park, Runcorn, Cheshire
WA7 4QF.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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