TIDMCIR
RNS Number : 8772K
Circassia Pharmaceuticals Plc
27 September 2016
CIRCASSIA PHARMACEUTICALS PLC
INTERIM RESULTS FOR THE SIX MONTHSED 30 JUNE 2016
- Strong NIOX(R) sales growth; respiratory pipeline progressing
-
- Unexpected phase III allergy results; Spring 2017 house dust
mite results will inform allergy approach -
- Commercial infrastructure expanded as strategic growth
platform -
- Robust portfolio strategy; early work underway on three new
products -
Oxford, UK - 27 September 2016: Circassia Pharmaceuticals plc
("Circassia" or "the Company"; LSE: CIR) today announces its
interim results for the six months ended 30 June 2016 and a
post-period strategic update.
Steve Harris, Circassia's Chief Executive, said: "While the
first half of 2016 was dominated by June's unexpected and
disappointing phase III cat allergy results, we have made good
progress in our wider business and are capitalising on a number of
strategic opportunities. During the last three months we have taken
a prudent approach to our allergy investment and rationalised our
cost base. We have also focused on strengthening our existing
business and taking initial steps to broaden our pipeline. As a
result, we have completed early work on a number of new product
opportunities giving us additional pipeline options while we await
the results of our house dust mite allergy field study that will
inform our wider portfolio strategy. We have also initiated
negotiations for the return of EU rights to Fliveo(R), our recently
approved Flixotide(R) pMDI substitute, and significantly expanded
our direct sales presence to boost our NIOX(R) revenues and
establish ourselves as an attractive commercialisation partner.
Our ambition to build a world-class specialty biopharmaceutical
business remains undimmed and we believe the combination of our
marketed products, broad pipeline and robust commercial platform
gives us the foundation we need to achieve this goal."
OPERATIONAL HIGHLIGHTS
NIOX(R) performing strongly
-- Sales increased 21% (14% at CER(1) ) to GBP11.1 million (H1
2015 CER: GBP9.7 million - GBP0.6 million under Circassia ownership
and GBP9.1 million under previous ownership)
-- Direct clinical sales (ie non-research(2) ) increased 35% (26% CER) compared with H1 2015
-- Study to extend US label down to four year olds on track to report H2 2016
Respiratory portfolio progressing
-- Seriveo(R) (Seretide(R) pMDI substitute) filing on track for H2 2017
-- Triple combination study shows no significant safety
concerns; all three components bioavailable
Prudent approach to allergy portfolio
-- No major confounding factors identified in cat allergy phase III dataset
-- Allergy investment curtailed following cat allergy phase III results
-- Portfolio review to follow results from house dust mite
allergy study (n=715) anticipated Spring 2017
Commercial platform expanded as strategic asset for product
in-licensing, partnering & acquisition
-- Global commercial group expanded to 200
-- US sales force increased to approximately 100; managed
markets and key accounts teams in place
-- Commercial presence strengthened in Germany and China
-- UK direct sales force recruitment underway
Portfolio strengthened
-- Negotiations initiated with partner for EU rights to Fliveo(R) (Flixotide(R) pMDI substitute)
-- Particle-engineered Spiriva(R) DPI substitute progressed into development
-- Two new product opportunities initiated leveraging respiratory expertise
-- Non-specialty, non-substitutable products to be partnered (including triple combination)
-- R&D reorganised; allergy team and R&D facilities rationalised; device group strengthened
-- Evaluation of further specialty product opportunities underway
FINANCIAL HIGHLIGHTS
-- Revenues increased to GBP11.1 million (H1 2015: GBP0.6 million)
-- R&D expenditure GBP25.1 million (H1 2015: GBP18.4
million) including GBP13.8 million on allergy
-- Underlying loss for period GBP25.4 million (H1 2015: GBP21.7 million)
-- Provisions against and impairment of allergy portfolio(3) GBP76.4 million
-- Strong balance sheet with GBP138.0 million cash(4) at 30 June
2016 one-off payments of GBP33.2 million relating to 2015
acquisitions paid H1 2016 (cash(4) at 31 December 2015: GBP203.8
million)
(1) Constant exchange rates (see note 3 in the Notes to the
Condensed Interim Consolidated Financial Statements)
(2) Direct clinical sales include those to clinicians, hospitals
and distributors; research sales include those to pharmaceutical
companies for use in clinical studies
(3) Includes impairment of goodwill (GBP74.5 million), other
intangible assets (GBP0.3 million) and provision for termination of
certain contracts (GBP1.6 million)
(4) Cash, cash equivalents and short-term deposits
Analyst meeting and webcast
An analyst meeting will take place today at 9.30am at FTI
Consulting, 200 Aldersgate, Aldersgate Street, London, EC1A 4HD. A
webcast of the event will be available in the Media section of the
Company's website at www.circassia.com.
Enquiries
Circassia
Steve Harris, Chief Executive Officer Tel: +44 (0) 1865 405
560
Julien Cotta, Chief Financial Officer
Rob Budge, Corporate Communications
JP Morgan Cazenove
James Mitford / Chris Cargill Tel: +44 (0) 20 7742 4000
Numis Securities
Clare Terlouw / Michael Meade Tel: +44 (0) 20 7260 1000
FTI Consulting
Ben Atwell / Simon Conway / Mo Noonan Tel: +44 (0) 20 3727
1000
About Circassia
Circassia is a specialty biopharmaceutical business with
established commercial infrastructure, marketed products, a
pipeline of near-term therapies and portfolio of
particle-engineered treatments targeting major market
opportunities. Circassia sells its novel, market-leading NIOX(R)
asthma management products directly to specialists in the United
States and Germany. Its products are also promoted in a number of
other countries by the Company's network of partners.
Circassia's broad-based development pipeline includes a range of
respiratory medicines. The Company's lead asthma treatment,
Fliveo(R), targets substitution of GSK's Flixotide(R) pMDI and is
approved in the UK and Sweden. Circassia is also developing a
direct substitute for Seretide(R) pMDI, Seriveo(R). In addition,
the Company's pipeline includes a number of inhaled medicines for
chronic obstructive pulmonary disease, including single and
combination dose products. For more information on Circassia please
visit www.circassia.com.
Forward-looking statements
This press release contains certain projections and other
forward-looking statements with respect to the financial condition,
results of operations, businesses and prospects of Circassia. The
use of terms such as "may", "will", "should", "expect",
"anticipate", "project", "estimate", "intend", "continue", "target"
or "believe" and similar expressions (or the negatives thereof) are
generally intended to identify forward-looking statements. These
statements are based on current expectations and involve risk and
uncertainty because they relate to events and depend upon
circumstances that may or may not occur in the future. There are a
number of factors that could cause actual results or developments
to differ materially from those expressed or implied by these
forward-looking statements. Any of the assumptions underlying these
forward-looking statements could prove inaccurate or incorrect and
therefore any results contemplated in the forward-looking
statements may not actually be achieved. Nothing contained in this
press release should be construed as a profit forecast or profit
estimate. Investors or other recipients are cautioned not to place
undue reliance on any forward-looking statements contained herein.
Circassia undertakes no obligation to update or revise (publicly or
otherwise) any forward-looking statement, whether as a result of
new information, future events or other circumstances.
OPERATING AND STRATEGY REVIEW
This year has been a period of both challenges and new
opportunities for Circassia. We have substantially increased
revenues from our market-leading asthma management products,
advanced our respiratory portfolio and expanded our commercial
presence. However, we also received disappointing results from our
cat allergy phase III study. The subsequent review by both internal
and external experts shows the study was well conducted and the
design robust, but despite a dramatic decrease in subjects'
symptoms and rescue medication use in the active treatment groups
the placebo response was extremely high. In light of these
unexpected results we acted quickly to rationalise our R&D
costs, and we now await results from our house dust mite allergy
field study, due in Spring 2017, to finalise the approach to our
allergy portfolio.
Following receipt of the phase III results we have reviewed our
wider strategy to ensure we deploy our resources effectively to
build shareholder value. As a result of this review the Board has
concluded that our specialty product focus and direct sales model
continue to provide significant opportunities. By expanding our
commercial infrastructure we have the opportunity to create an
attractive platform to commercialise our own and third-party
specialty products. By leveraging our in-house technology we have
the opportunity to broaden our pipeline and balance our risk
profile. Importantly, by committing only modest investment for
early-stage new product development in the short-term we can
conserve resources, position our pipeline for expansion and retain
the opportunity to revisit our portfolio strategy if we receive
compelling house dust mite allergy results in Spring next year.
In recent weeks we have advanced each area of this approach. We
have continued to grow our commercial infrastructure and have
initiated our pipeline expansion plans. We have initiated
discussions for the return of EU commercialisation rights to our
lead asthma therapy and have advanced early development work for
three new chronic obstructive pulmonary disease products. We remain
committed to our goal of building a world-class, self-sustaining
specialty biopharmaceutical business and with a strong commercial
platform and growing specialty portfolio we are continuing to make
progress towards achieving our objective.
NIOX(R) franchise progress
Strong sales growth
Clinicians in over 40 countries use our NIOX(R) products to
improve asthma diagnosis and management by accurately monitoring
patients' fractional exhaled nitric oxide (FeNO). NIOX(R) is the
only point-of-care FeNO device available across all major markets
and our current generation VERO(R) model is now launched in many
key territories, including the US, Europe, Japan and China. During
H1 2016 NIOX(R) sales continued to grow strongly, with revenues
increasing 21% to GBP11.1 million (14% at constant exchange rates
[CER]) compared with the same period the previous year (H1 2015
CER: GBP9.7 million - GBP0.6 million under Circassia ownership and
GBP9.1 million under previous ownership).
Importantly, NIOX(R) direct clinical sales increased 35%
compared with the year before (26% CER) reflecting strong growth in
the underlying business. In contrast, revenues from more
unpredictable pharmaceutical company use decreased during the
period by 12% (17% CER).
During 2016 we developed a number of initiatives to introduce
potential customers to NIOX(R) and convert those using the previous
MINO(R) generation to VERO(R). In particular, we rolled out
'experience programmes' that give clinicians the opportunity to use
the product in their clinical practise and in the US we have placed
over 80% more devices in the year to date than in the whole of last
year. This has helped drive VERO(R) uptake and with the US market
now converted to the new device we will continue to expand
placement of experience programmes in the coming months.
Registration extension studies on track
During the first half of 2016 we initiated two clinical studies
to support label extensions for NIOX VERO(R). The first is designed
to demonstrate the accuracy of the device in children aged four to
six years old using both six- and 10-second test functions. This
use is already included in our European registration and we plan to
use the study to seek a label extension in the US. Recruitment for
the trial is well underway and the study is on track to report in
H2 2016 with a subsequent filing planned for H1 2017.
The second study aims to demonstrate the utility of NIOX VERO(R)
in diagnosing primary ciliary dyskinesia (PCD). People with PCD
have unusually low levels of nasal nitric oxide and we have adapted
the VERO(R) to measure this exhaled gas. PCD affects roughly 50,000
people in the EU and currently diagnosis can be complex, involving
genetic testing or ciliary biopsy. Our clinical study aims to
identify diagnostic levels of exhaled nitric oxide for PCD and
recruitment is nearing completion. The study results are expected
in H2 2016 and we anticipate adding this expanded usage to our
European registration in 2017.
Next generation product
With NIOX VERO(R) increasingly established in key markets, we
have initiated concept development for a further generation device
to ensure we retain our dominant position in the FeNO field. The
new device has the opportunity to leverage ongoing developments in
wireless connectivity and further improve the clinician and patient
experience.
Respiratory portfolio advancing
Seriveo(R) (Seretide(R) pMDI substitute) on track
Our fluticasone / salmeterol combination asthma therapy
Seriveo(R) targets direct substitution of GSK's Seretide(R) pMDI.
This wholly-owned product has a major market opportunity with
originator sales in pMDI format accounting for approximately $1.5
billion worldwide in 2015.
In Q1 2016 the treatment completed an initial clinical
pharmacokinetic study. Based on the results we have optimised two
formulations of the product and both have performed as hoped in in
vitro studies. We have now initiated clinical testing of the
formulations, and based on the results we aim to move the best
performing into a final pharmacokinetic study. We remain on track
to file an initial Marketing Authorisation Application for the
product in H2 2017.
Triple fixed dose combination study complete
Our fixed dose combination treatment for moderate-to-severe
chronic obstructive pulmonary disease (COPD) contains an inhaled
corticosteroid (ICS), long-acting beta agonist (LABA) and
long-acting muscarinic antagonist (LAMA). Currently, COPD patients
require multiple devices to receive these medications and
consequently 'triple' products have significant market potential
with sales of nearly $8 billion predicted for 2025.
In H2 2015 we progressed our particle-engineered triple
combination into a first-in-human clinical study (n=38). The
crossover study assessed the safety and pharmacokinetics of single,
double and triple combination formulations. In a limited number of
subjects the study also compared the formulations' LABA component
with the marketed LABA Serevent(R).
The results show there were no significant safety or
tolerability concerns and no serious adverse events. The data also
show each of the product components were bioavailable following
inhalation. For those formulations that were compared to the
marketed product, including the triple combination, the overall
relative bioavailability of the LABA component was similar to
Serevent(R). Although the study did not compare the relative
bioavailability of the other components with marketed products, the
triple combination formulation showed increased ICS relative
bioavailability compared with the single corticosteroid
formulation. As a result, the study provides an important clinical
foundation to inform future development plans.
Prudent allergy approach
Phase III data mirror top-line results
Following the announcement of our cat allergy phase III results
in June we have now completed an extensive analysis of the full
dataset and reviewed the outcome with international experts. The
full results are similar to the top-line data with a powerful
placebo response eliminating the ability to meet the primary,
secondary and exploratory endpoints. This was also the case for a
large number of sub-populations, including countries, baseline
symptom levels, number of allergies, year of enrolment and a range
of demographic characteristics. When pooled by geographical region
the data showed a trend towards a treatment effect in European
subjects who received two courses of immunotherapy, but this was
not statistically significant and did not meet regulators'
requirements. The analysis also confirmed subjects received the
correct treatment or placebo. Consequently, the review concluded
the study's design and conduct were robust and no significant
confounding factors were identified.
Broader allergy investment curtailed
Following receipt of the phase III results we halted significant
investments in the allergy portfolio and have stopped development
activities in our grass and ragweed allergy programmes. Our
large-scale house dust mite field study has enrolled over 700
subjects and is well advanced requiring only limited further
expenditure. Consequently, the study will continue to completion in
Spring 2017, when we will have the opportunity to reassess our
wider portfolio strategy if this large-scale phase IIb study
delivers compelling results.
Birch allergy phase IIa study complete
We recently received results from our birch allergy phase IIa
study (n=64). The data show the treatment was well tolerated with a
favourable safety profile. While the study was primarily focused on
safety it also included a number of efficacy and pharmacodynamic
measures. Overall, the results show improvements compared to
placebo in both skin responses and the amount of allergen required
to trigger ocular symptoms when subjects were challenged with birch
pollen. During natural exposure subjects' symptoms did not improve
significantly but the season's pollen levels were modest. While the
data from this early-stage, small-scale study are encouraging
overall, we will continue to pursue the allergy investment approach
outlined above while we await the outcome of our large house dust
mite allergy field study.
Commercial infrastructure established as growth platform
Commercial team expansion
During the last six months we have significantly strengthened
our commercial capabilities, particularly in the key US market. We
have doubled our US NIOX(R) sales territories to approximately 100
and capitalised on recent retrenchment in 'big pharma' respiratory
teams to complete the recruitment and training of our expanded
sales force. In addition, we have strengthened our medical affairs,
managed markets and key accounts teams and our US field-based
resources now total approximately 140.
With limited competition currently, and no competitors in the
US, our NIOX(R) products have a major commercial opportunity. The
US specialist segment alone is estimated at $190 million and we
have captured only a modest portion of this market to date. With
our enlarged sales forces now targeting a substantially greater
proportion of specialists across the United States we plan to
significantly increase uptake of our novel products and accelerate
revenue growth.
Expanding geographical presence
As well as growing our capabilities in the US we have begun the
process of boosting our commercial presence in a number of other
key territories. In the EU's largest market, Germany, we have
appointed a new Commercial Director, while in the UK, France and
Italy we have terminated our distributor agreements. We are
currently building a direct sales team in the UK with a new
Commercial Director now in place and we are evaluating the optimal
approach to establish our presence in France and Italy. In
parallel, we have strengthened our presence in China where NIOX(R)
sales have grown significantly during 2016. Our Beijing-based team
manages a network of distributors and we have recently added market
access and medical support to help local partners increase revenues
in this significant market.
Building partner-of-choice platform
As a result of our major investment our global commercial team
now totals approximately 200. With a growing presence in the US,
Germany, UK and China, and plans to expand into further key
countries, we are rapidly becoming an attractive commercialisation
partner offering expertise that is rare in the specialty market.
With our NIOX(R) franchise supporting our infrastructure expansion
we intend to capitalise on the opportunity to complement our
in-house portfolio through partnering, in-licensing or
acquisition.
Portfolio expansion underway
With our allergy investment curtailed following June's
disappointing phase III results we have accelerated plans to
broaden and balance our portfolio and during the last three months
we have made good progress.
Negotiations for return of EU rights to Fliveo(R) (Flixotide(R)
pMDI substitute) initiated
Fliveo(R), our particle-engineered product targeting
substitution of GlaxoSmithKline's Flixotide(R) pMDI, was recently
approved in the UK and Sweden. Under previous ownership the product
was out-licensed in key territories and we have now initiated
negotiations for the return of the rights in the EU. While the
United States is the main market for the product, these smaller
territories represent an important commercial opportunity for
Circassia.
Development initiated for Spiriva(R) DPI substitute
We have completed early technical work on a particle-engineered
formulation of tiotropium bromide targeting direct substitution of
Spiriva(R) DPI. Spiriva(R) is approved for use in the treatment of
COPD and currently generates revenues of $3.9 billion. Following
this initial success we have now progressed the product into
development and intend to pursue an abbreviated regulatory route.
As a result, we anticipate initiating a pharmacokinetic clinical
study next year.
Out-licensing non-specialty non-substitutable products
With our strategy firmly focused on building a specialty product
business, we plan to out-license primary care treatments if they
are not potential direct substitutes for marketed originators. This
will allow us to concentrate our resources on products we can sell
to specialists and direct substitutes we can commercialise using
our existing infrastructure without significant promotion.
Consequently, we will not undertake further in-house development of
our triple fixed dose combination treatment for COPD and will seek
to partner the programme. Similarly we plan to out-license our
glycopyrronium bromide COPD therapy, which is already partnered in
China, Taiwan, Hong Kong and Macau.
Early work initiated on two new respiratory products
As part of the strategy to broaden our portfolio we are
leveraging our respiratory expertise to deliver additional in-house
development programmes. We are undertaking early development work
on two novel formulations of currently approved drugs for an
underserved segment of the specialist moderate-to-severe COPD
market and we have successfully completed initial technical and
market assessments for both.
-- The first contains a LABA / LAMA fixed dose combination.
Third-party research suggests the product targets a patient
population of up to 350,000 in the US and EU5 with a potential peak
sales opportunity of up to $700 million.
-- The second targets reductions in COPD exacerbations. The US /
EU5 target patient population totals up to 200,000 and market
research indicates the product has a potential peak sales
opportunity of up to $250 million.
R&D refocused
Since the receipt of our cat allergy phase III results in June
we have refocused our R&D organisation to reflect the halting
of clinical activities in our grass and ragweed allergy programmes
and our focus on a broader portfolio.
-- We acted rapidly to reduce the size of our R&D team
cutting positions by approximately 25% through a mixture of natural
wastage, halted recruitment and redundancy. Subsequently this
reduction has allowed us to vacate a portion of our R&D
facilities on the Oxford Science Park.
-- We have refocused R&D capacity onto our respiratory
programmes while maintaining the capability to advance our allergy
portfolio if justified by compelling results from our ongoing
large-scale house dust mite allergy study. We are also
strengthening our device development capabilities and recently
appointed a highly experienced head for our in-house team who
previously held senior positions at Mundipharma and Pfizer as well
as working on GSK's portfolio of inhaled respiratory products.
-- We plan to further broaden our pipeline by leveraging our
R&D, device and commercialisation capabilities. We are making
good progress and are currently assessing a number of product and
technology opportunities that fit our specialty product focus.
Summary and outlook
This year has seen both significant challenges and opportunities
for Circassia. While our NIOX(R) products and respiratory portfolio
have progressed, the first half of 2016 culminated in unexpected
and disappointing phase III cat allergy results. Despite compelling
data from previous studies and impressive improvements in allergy
symptoms and rescue medication use an exceptional placebo effect
eliminated the ability to meet the study endpoints. As a result we
took rapid action to curtail investment in our allergy programmes,
rationalise our cost base, strengthen our existing business and
accelerate our strategy to build a broad and balanced
portfolio.
In the last three months we have made significant progress
across each of these areas. We have greatly expanded our commercial
infrastructure, both to increase our NIOX(R) revenues and establish
Circassia as a partner-of-choice for specialty product
commercialisation. We have also continued to advance our in-house
development programmes and have broadened our portfolio by
leveraging our respiratory expertise to advance a potential
substitute for Spiriva(R) and initiate early development work on
two further new products.
In the coming months we plan to continue this progress. We hope
to conclude our negotiations and regain EU rights to Fliveo(R). The
product is already approved in the UK and Sweden, and in parallel
we plan to complete our regulatory and launch strategy, leveraging
our growing commercialisation capabilities in Europe. We also
intend to progress the development of Seriveo(R) our Seretide(R)
pMDI substitute in preparation for an initial regulatory filing at
the end of next year. We plan to complete the ongoing registration
extension studies for our market-leading NIOX(R) products, advance
the development of our Spiriva(R) DPI substitute and complete the
evaluation of product and technology opportunities to further
broaden our pipeline. In addition, we plan to accelerate NIOX(R)
revenue growth as our expanded sales team becomes established in
the market and our promotional initiatives come to fruition. We
also intend to complete the large-scale house dust mite allergy
field study and finalise our investment strategy for our allergy
and broader portfolio.
Our ambition to build a world-class specialty biopharmaceutical
business remains undimmed, and despite recent setbacks our strategy
to achieve this remains in place. With an established franchise of
market-leading products, strong commercial infrastructure and
growing portfolio of development programmes we are well positioned
to achieve our goal of building a successful company, serving
patients around the world and creating significant value for our
shareholders.
FINANCIAL REVIEW
The financial results for the six months to 30 June 2016 are
dominated by two main factors that differentiate the first half of
this year from the same period in 2015. The first is the impairment
of goodwill that was allocated to the allergy franchise to reflect
the future benefit of the acquired Aerocrine commercial
infrastructure in the commercialisation of the Company's allergy
portfolio. Following the disappointing results from the cat allergy
phase III study, this goodwill has been fully impaired. The second
factor is the full six months' contribution in H1 2016 from the
NIOX(R) and Prosonix respiratory businesses compared with a limited
contribution in H1 2015. Aerocrine and Prosonix were acquired on 18
June 2015 and 15 June 2015 respectively and the H1 2015 figures
include sales and costs from these businesses from the date of
acquisition only.
The financial results for the six months to 30 June 2016 are set
out in the table below.
Underlying Non-underlying Total Total
operations items(1) Group Group
GBPm GBPm 2016 2015
GBPm GBPm
---------------------------- ------------ ---------------- -------- -------
Revenue 11.1 - 11.1 0.6
---------------------------- ------------ ---------------- -------- -------
Gross profit 7.5 - 7.5 0.4
---------------------------- ------------ ---------------- -------- -------
Sales and marketing
costs (13.1) (74.5) (87.6) (2.2)
---------------------------- ------------ ---------------- -------- -------
Research and development
costs (23.2) (1.9) (25.1) (18.4)
---------------------------- ------------ ---------------- -------- -------
Administrative expenditure (9.5) - (9.5) (7.2)
---------------------------- ------------ ---------------- -------- -------
Other gains - - - 1.1
---------------------------- ------------ ---------------- -------- -------
Operating loss (38.3) (76.4) (114.7) (26.3)
---------------------------- ------------ ---------------- -------- -------
Finance income -
net 6.3 - 6.3 -
---------------------------- ------------ ---------------- -------- -------
Share of profit
of joint venture 0.8 - 0.8 0.3
---------------------------- ------------ ---------------- -------- -------
Loss before tax (31.2) (76.4) (107.6) (26.0)
---------------------------- ------------ ---------------- -------- -------
Taxation 5.8 - 5.8 4.3
---------------------------- ------------ ---------------- -------- -------
Loss for the financial
period (25.4) (76.4) (101.8) (21.7)
---------------------------- ------------ ---------------- -------- -------
Cash(2) 138.0 - 138.0 238.9
---------------------------- ------------ ---------------- -------- -------
(1) Includes impairment of goodwill (GBP74.5 million) and other
intangible assets (GBP0.3 million), and onerous contract costs
provision (GBP1.6 million).
(2) Includes cash and cash equivalents and short-term
deposits.
Revenue
Sales of GBP11.1 million reflect a full six months' contribution
from the NIOX(R) business that accounts for nearly all the Group's
turnover for the period. These revenues include sales of NIOX
VERO(R) and NIOX MINO(R) for use in the management of asthma by
clinicians in the US, Europe and Asia Pacific, and for research use
in pharmaceutical companies' clinical studies.
Included in total sales of GBP11.1 million are clinical sales of
GBP8.8 million and research sales of GBP2.0 million and other
revenues of GBP0.3 million, which include freight.
Gross profit
Gross profit on NIOX(R) sales was GBP7.5 million, with a gross
margin of 68%. This reflects the continuous growth of NIOX(R) test
kit sales across the globe with favourable pricing options to drive
conversion from the earlier NIOX MINO(R) model to NIOX VERO(R) in
the US.
Sales and marketing
During the period, sales and marketing expenditure was GBP13.1
million (H1 2015: GBP2.2 million). This reflects a significant
strengthening of the Company's commercial presence in the US, both
as a result of the acquisition of Aerocrine and subsequently. In
particular, the US sales force increased substantially, and the
managed markets, key accounts and medical affairs teams have also
expanded in support of the Company's sales effort.
Goodwill arising on the acquisition of Aerocrine last year was
allocated to Circassia to reflect the benefit provided by the
acquired commercial infrastructure in the future commercialisation
of the allergy franchise. The goodwill has now been fully impaired
following the disappointing outcome of the cat allergy phase III
study resulting in a charge of GBP74.5 million to sales and
marketing expenses.
Research and development activities
Underlying investment in research and development activities
increased to GBP23.2 million (H1 2015: GBP18.4 million). Of this,
GBP13.8 million (H1 2015: GBP15.3 million) relates to Circassia's
portfolio of allergy candidates, GBP3.2 million (H1 2015: GBP0.1
million) to the development of the respiratory portfolio and GBP2.3
million (H1 2015: GBP0.3 million) to the NIOX(R) franchise, of
which GBP1.0 million relates to amortisation charge for acquired
R&D technology. Costs not specific to R&D projects were
GBP3.9 million (H1 2015: GBP2.7 million).
Following the results from the cat allergy phase III study,
expenditure on the allergy portfolio has been halted except for the
following activities:
-- Limited costs that have already been committed.
-- Completion of the house dust mite allergy field study (TH005).
-- Expenditure required to maintain drug product and drug stability programmes.
Overall, investment in the allergy portfolio during the period
was lower than the prior half year. The grass allergy programme
moved into the final phase of clinical testing with the start of a
registration field study (TG005). Consequently, costs for this
programme were higher than for the same period in 2015. This
increase was offset by decreases in expenditure on the cat, ragweed
and house dust mite allergy programmes. Expenditure on these was
lower this year because enrolment in clinical trials was completed
in 2015. We anticipate remaining costs to the end of the year in
respect of these activities will be considerably less than those
incurred in H1 2016.
Investment in the respiratory portfolio mainly relates to the
Seretide(R) / Advair(R) pMDI substitute development programme and
the triple fixed dose combination clinical study.
In addition, a charge of GBP1.9 million has been recorded as
non-underlying expenditure. Of this, GBP1.6 million relates to an
onerous contract provision for the manufacture of trial batches for
the cat and grass allergy programmes and an impairment of GBP0.3
million for allergy licences and patents following the
disappointing result of the cat allergy phase III study.
Administrative expenditure
Underlying administrative expenses, which include overheads
specific to corporate functions, centrally managed support
functions and corporate costs, increased to GBP9.5 million (H1
2015: GBP7.2 million). The increase in H1 2016 reflects the full
six months' operation of the two businesses acquired in June
2015.
Finance income - net
Net finance income increased to GBP6.3 million (H1 2015:
GBPNil). This includes a foreign exchange gain of GBP5.8 million
(H1 2015: foreign exchange loss GBP0.8 million) that arose as a
result of weakening sterling during the period. The gain was mainly
made on US dollar and Swedish krona bank balances.
R&D tax credits on qualifying expenditure
Included within GBP5.8 million tax for the period is a tax
credit of GBP5.7 million for the current period (H1 2015: GBP4.3
million) which is recoverable under current legislation relating to
R&D expenditure. The increase over the previous year reflects
greater R&D expenditure during H1 2016 and an increase in tax
relief from 225% to 230% from 1 April 2015.
Loss after tax and loss per share
Basic loss per share for the period was 36p (H1 2015: 11p)
reflecting a loss for the financial period of GBP101.8 million (H1
2015: GBP21.7 million). This includes impairment charges of GBP74.8
million. The loss per share for the underlying operations was 9p
(H1 2015: 11p), which reflects the positive contribution of the
NIOX(R) business.
Statement of financial position
The Group's net assets at 30 June 2016 were GBP312.7 million (31
December 2015: GBP409.7 million). The decrease mainly reflects
impairment charges of GBP74.5 million and GBP0.3 million to
goodwill and intangible assets respectively. Further detail can be
found in notes 7 and 8. Other factors are commented on below.
The weakening of sterling against the US dollar and Swedish
krona resulted in a credit of GBP7.6 million to Other Comprehensive
Income and Expense due to the retranslation of the Group's overseas
operations.
Current liabilities were GBP23.2 million (31 December 2015:
GBP48.3 million). The decrease is mainly due to the payment in
January 2016 of contingent consideration of GBP30.0 million for the
purchase of Prosonix.
Current tax assets were GBP17.5 million (31 December 2015:
GBP11.8 million), representing an R&D tax credit due from H M
Revenue and Customs. Of the GBP17.5 million, GBP13.8 million
relates to expenditure on allergy programmes and GBP3.7 million on
the respiratory programmes. Receipt of last year's claim is
anticipated before the end of the year pending review by HMRC.
Cash flow
The Group's cash position (including short-term deposits)
decreased from GBP203.8 million at 31 December 2015 to GBP138.0
million at 30 June 2016. Main cash outflows were:
-- GBP30.0 million deferred consideration paid to the former
shareholders of Prosonix in January 2016 following receipt of UK
marketing authorisation for its lead product in December 2015.
-- GBP37.4 million cash used in operations (HY1 2015: GBP24.6
million) reflecting the full six months of operations of the two
businesses acquired in June 2015 as well as R&D investment in
the allergy programmes and the expansion of the US sales and
marketing infrastructure.
-- GBP3.2 million payment to acquire the remaining 2.1% of
issued shares of Aerocrine AB under the Swedish formal 'squeeze
out' procedure. Please see note 13 for further details of the
transaction.
The exchange gain on cash and cash equivalents for the period
was GBP5.4 million (H1 2015: exchange loss of GBP1.7 million).
Summary and outlook
Following the disappointing cat allergy phase III results in
June 2016, Circassia moved quickly to minimise expenditure on the
allergy portfolio with costs in H2 2016 expected to be considerably
less than those incurred in H1 2016. In addition, the Company is
expanding its commercial platform with an anticipated increase in
investment in sales and marketing in H2 2016 of approximately 50%
compared to H1 2016 to further strengthen this key strategic asset
and to maximise the opportunity for NIOX(R) sales growth. The
Company will also continue to invest in its broader respiratory
portfolio, which includes a Seretide(R) pMDI substitute that is
targeting an initial regulatory filing at the end of next year.
PRINCIPAL RISKS AND UNCERTAINTIES
Management of risks is a key responsibility of the Board of
Directors of the Company. The Board ensures that the risks taken by
the Group are understood, and are appropriate in the light of the
Group's strategy and objectives, and that internal controls are in
place to effectively identify, assess, and manage important
risks.
A risk register is updated periodically by those individuals in
the business who manage risks on a day to day basis. This process
is coordinated by the Chief Financial Officer. The register is
reviewed by the Board of Directors and the Senior Management Team,
with a particular emphasis on ensuring that the risk appetite of
the Board is fully understood by the relevant employees. The
register also sets out activities that are designed to mitigate the
identified risks, and the Board and the Senior Management Team
analyse these mitigation strategies and ensure that the approach
taken is consistent with the nature and degree of risks which are
considered acceptable by the Board.
Risk owners across the business are also responsible for
reporting any significant issues to the Senior Management Team and
for ensuring that other members of their teams are aware of the
risk management process. The Senior Management Team will, in turn,
update the Board on a timely basis where important developments
occur. Within the R&D function, project team meetings take
place at least once a month at which the progress and risks
associated with each individual project are discussed. These
discussions are then set out in detailed reports which are
circulated to the Senior Management Team.
The risk management system is designed to manage risks, rather
than eliminate them at the expense of achieving corporate
objectives. Accordingly, it can only provide a reasonable and not
an absolute assurance against material misstatement or loss.
Principal Risks
The main risks relevant to the Group have been identified below,
together with an explanation of how they are managed and
controlled. Some risks are common across the pharmaceutical
industry, while others reflect the Group's specific strategy. The
Board considers all of these risks relevant to any decision to
invest in the Company.
Regulatory approvals
The Company may not obtain regulatory approval for its products.
Even where products are approved, subsequent regulatory
difficulties may arise, or the conditions relating to the approval
may be more onerous or restrictive than the Company expects.
The pharmaceutical and medical device industries are highly
regulated. Regulatory authorities across the world enforce a range
of laws and regulations which govern the testing, approval,
manufacturing, labelling and marketing of pharmaceuticals and
medical devices. Stringent standards are imposed which relate to
the quality, safety and efficacy of these products. These
requirements are a major determinant of whether it is commercially
feasible to develop a drug substance or drug device combination or
a medical device, given the time, expertise, and expense which must
be invested. Moreover, approval in one territory offers no
guarantee that regulatory approval will be obtained in any other
territory.
In order to obtain regulatory approval for the products being
developed by the Company, it will be necessary to successfully
complete the required supporting clinical studies. Clinical studies
are typically expensive, complex and time-consuming, and have
uncertain outcomes. Conditions in which clinical studies are
conducted differ, and results achieved in one set of conditions
could be different from the results achieved in different
conditions or with different subject populations. Regulatory
authorities or institutional review boards may suspend or terminate
clinical studies at any time if the subjects participating in such
studies are being exposed to unacceptable health risks or may
require additional studies to be performed. Difficulties or delays
in the enrolment of subjects could result in significant delays in
the completion of those studies and even in their abandonment.
This risk is demonstrated by the recent failure of the Company's
trial of its cat allergy treatment to achieve its primary or
secondary endpoints in a Phase III study. An analysis of the
reasons for this failure - including the very substantial placebo
effect - found no significant confounding factors and therefore
these risks may be relevant to the Company's other allergy
programs. These programmes may not successfully complete their own
clinical studies and supporting studies; it may not be possible to
successfully move to field studies from chamber studies; and
problems may arise in validating the manufacturing process for the
active pharmaceutical ingredients in the products.
The Company is also developing other drugs and drug device
combinations which form part of its respiratory franchise and is
seeking to expand the approved indications for its marketed NIOX
devices, but these outcomes too are dependent upon the successful
conclusion of clinical trials.
The Company relies on third party sub-contractors and service
providers for the execution of most aspects of its development
programmes. Failure of these third parties to provide services of a
suitable quality within acceptable timeframes - for example due to
technical reasons or bankruptcy of the provider - may cause the
failure or delay of these development programmes.
Even where approval is obtained, regulatory authorities may
still impose significant restrictions on the indicated uses or
marketing of the product or impose costly, ongoing requirements for
post-marketing surveillance or post-approval studies.
Mitigating activities: The Group manages its regulatory risk by
employing highly experienced clinical managers and regulatory
affairs professionals who, where appropriate, will commission
advice from external advisers and consult with the regulatory
authorities on the design of the Group's pre-clinical and clinical
programs. These in-house experts ensure that high quality protocols
and other documentation are submitted during the regulatory
process, and that well-reputed contract research organisations with
global capabilities are retained to manage the trials. An
experienced Medical Advisory Board also advises on the design of
the clinical trials which the Company undertakes.
Unforeseen side effects
Unforeseen side effects may result from the use of the Company's
marketed products or product under development.
There is a risk of adverse reactions with all drugs and drug
device combinations. If any of the Company's products that are in
trials are found to cause adverse reactions or unacceptable side
effects, then product development may be delayed, additional
expenses may be incurred if further studies are required, and, in
extreme circumstances, it may prove necessary to suspend or
terminate development. This may occur even after regulatory
approval has been obtained, in which case additional trials may be
required or the approval may be suspended or withdrawn or
additional safety warnings may have to be included on the
label.
There is also a risk that the Company's marketed devices might
have to be withdrawn if some unforeseen problem affecting patient
health or safety arises due to their use.
Adverse events or unforeseen side effects may also potentially
lead to product liability claims being raised against the Company
as the manufacturer and developer of marketed products and as the
sponsor of clinical trials.
Mitigating activities: The Company conducts extensive
pre-clinical and clinical trials which test for and identify
adverse side effects associated with its pharmaceutical products. A
robust pharmacovigilance plan administered by the in-house
pharmacovigilance team is in place to ensure any safety issues that
arise affecting the marketed devices, or the drugs and drug/device
combinations which are in trials, are identified and reported.
Insurance is in place to cover product liability claims that may
arise during the conduct of clinical trials, or from the sale and
use of NIOX devices.
Commercial success
The Company's products may not be commercially successful.
The Company may not be able to sell its products profitably if
reimbursement from third party payers such as private health
insurers and government health authorities is restricted or not
available because for example it proves difficult to build a strong
enough economic case based on the burden of illness and population
impact. Third party payers are increasingly attempting to curtail
healthcare costs by challenging the prices that are charged for
pharmaceutical products and denying or limiting coverage and the
level of reimbursement. Moreover, even if the products can be sold
profitably, they may not be accepted by patients and the medical
community.
Alternatively, the Company's competitors - many of whom have
considerably greater financial and human resources - may develop
safer or more effective products or be able to compete more
effectively in the markets targeted by the Company. New companies
may enter these markets and novel products and technologies may
become available that are more commercially successful than those
being developed or sold by the Company.
The Group's NIOX MINO(R) and NIOX VERO(R) devices currently
compete with products made by Bedfont Limited and Medisoft SA.
Neither of these competing products are currently available in the
US. Outside the US, Germany, and (recently) the UK, the Group
relies on distributors to sell its NIOX(R) devices and such
relationships must be carefully managed in order to ensure the
services provided are of a sufficiently high quality.
The successful commercialisation of the Group's fluticasone
propionate product in the US will, once approved and launched, be
largely dependent upon its partner which has the exclusive rights
to sell the product in that territory. Moreover, this product and
certain other drug products being developed by the Group for
treatment of asthma, such as its Seretide substitute, are generic
products and so will compete with the innovator products as well as
potentially with generics from other third parties.
Other factors that may undermine the Company's efforts to
commercialise its products include: the inability to train and
retain effective sales and marketing personnel; a failure to
persuade prescribers to prescribe products; and higher costs of
marketing and promotion than are anticipated by the Company.
Mitigating activities: The Company monitors competitor activity
relevant to its marketed NIOX devices and to its development
programmes and ensures it has robust intellectual property
protection that would prevent copying. With respect to NIOX, the
Company continues to support trials that would expand usage of the
product, and is progressing concept development activities for a
next-generation device. The sales force in the largest market (the
US) has increased significantly since the acquisition of the NIOX
franchise in June 2015, and a dedicated in-house market access team
has been formed and is developing strategies to maximise
reimbursement.
Compliance with healthcare regulations
The Group must comply with complex regulations in relation to
the marketing of its device products (and in the future will need
to comply with such regulations in relation to its drug products
once approved). These regulations are strictly enforced. Failure by
the Group (or its commercial partners) to comply with the US False
Claims Act, Anti-Kickback Statute and the US Foreign and Corrupt
Practices Act and regulations relating to data privacy (amongst
others) and similar legislation in countries outside the US may
result in criminal and civil proceedings against the Group.
Mitigating activities: The Group has an in-house Compliance
function headed by an experienced compliance professional as Vice
President, Global Compliance Officer. The Global Compliance Officer
reports to the General Counsel and also has a direct reporting line
to the Chair of the Audit and Risk Committee. A Compliance
Committee has been formed to oversee activities in this area. The
Compliance function works with a network of external advisers in
the relevant territories to ensure the appropriate regulations are
understood and that strategies are in place to support products in
development and those already approved and sold. Processes are in
place to ensure that sales compliance requirements are met and any
failures or allegations of failure are swiftly investigated and
addressed. This includes training of employees and audits of
distributors and suppliers. In August 2016 a new Code of Conduct
applicable to the whole Group was launched and on-line training has
been carried out which will be supplemented in the future by face
to face training.
Supply Chain
The Company relies on third party contractors for the supply of
key materials and services. Problems at contractors, such as
technical issues, contamination, and regulatory actions may lead to
delays or even loss of supply or inadequate supply of these
materials and services either prior to launch or thereafter. Some
materials may only be available from one source, as is currently
the case for the electrochemical sensor contained in the Company's
NIOX devices and the allergy peptides contained in the Company's
potential House Dust Mite allergy treatment.
Mitigating activities: Audits of sub-contractors are routinely
conducted according to procedures set out in the Company's Quality
system. Dual sourcing is put in place where this is practicable.
Manufacturing sites for active pharmaceutical ingredients are well
established FDA-approved facilities.
Research and development risks
The Company may not be successful in its efforts to build a
pipeline of allergy treatments and develop them into marketable
products. The failure of the Company's Phase III trial of its
candidate cat allergy treatment to meet its primary or secondary
endpoints highlights this risk.
Research and development risks will apply to the development
programmes that the Company is undertaking or intends to undertake
in respect of the products that make up its respiratory franchise.
These risks may manifest themselves as a failure to progress
pre-clinical or clinical trials.
Mitigating activities: The Company has recruited highly
experienced R&D executives. Projects are closely monitored
against goals and regularly reported to the Senior Management Team
and the Board, and external resources are retained where this is
deemed appropriate. In addition, the Company will seek, through
business development activity, to identify opportunities that would
expand and diversify its portfolio.
Intellectual property, know how, and trade secrets
The Company may be subject to challenges relating to the
validity of its patents. If these challenges are successful then
the Company may be exposed to generic competition. Two of the
Company's granted European patents (one relevant to its cat allergy
treatment and a second relevant to its particle engineering
technology) are currently the subject of opposition proceedings at
the European Patent Office although neither of these oppositions
affect currently marketed products, or products that the Company
expects to market in the near term.
Alternatively, the Company may be sued for infringement of third
party patent rights. If these actions are successful then it would
have to pay substantial damages and potentially remove its products
from the market.
Such litigation, particularly in the US, involves significant
costs and uncertainties.
It is possible that the Company will not be able to secure
intellectual property protection, or sufficient protection, in
relation to products that are acquired or in development.
Similarly, a failure by the Company to maintain or renew key
patents would lead to the loss of such protection. In both cases
the potential of the Company to earn revenue from its products
could be compromised as it would be less difficult for third
parties to copy the products.
The Company may rely upon know how and trade secrets to protect
its products and maintain a competitive advantage. This may be
especially important where patent protection is limited or lacking.
Conversely, the Company may be subject to claims that its employees
or agents have wrongfully used or disclosed the confidential
information of third parties, which could lead to damages or
injunctions that affect particular products.
The Company licenses certain intellectual property rights from
third parties. If the Company fails to comply with its obligations
under these agreements it may enable the other party to terminate
the agreement. This could impair the Company's freedom to operate
and potentially lead to third parties preventing it from selling
certain of its products.
Mitigating activities: Important products are covered by more
than one patent family and challenges to patents are defended using
carefully selected external patent attorneys and lawyers. The NIOX
device, for example, is protected by numerous patents that relate
to different aspects of its form and mode of operation. A robust
system is in place that ensures patents are renewed on time. Third
party patent filings are monitored to ensure the Company continues
to have freedom to operate and oppositions are filed where this is
considered expedient. Confidential information (both of the Company
and belonging to third parties) is protected through use of
confidential disclosure agreements with third parties, and suitable
provisions relating to confidentiality and intellectual property
exist in the Company's employment contracts. Licences are monitored
for compliance with their terms.
Organisational capabilities and capacity
The Company may be unable to successfully implement its plans if
it does not attract and retain employees with the requisite
capabilities and experience, in appropriate numbers. Setbacks in
development programmes may mean that the Company finds it difficult
to attract sufficient talented new employees and loses existing
employees. The Company depends on the skills and experience of its
current management team and employees, and is generally subject to
competition for, and may fail to retain, skilled personnel.
Existing employees, investigators, consultants and commercial
partners may engage in misconduct or improper activities, including
non-compliance with regulatory standards and laws.
Where the Company acquires complementary technologies, products,
or businesses it may not be able to integrate those acquisitions
effectively or realise their expected benefits.
The Company may be vulnerable to disruption and damage as a
result of failures of its computer systems.
Mitigating activities: The Company believes its remuneration
packages are competitive, and incentive plans based on the
contingent award of shares, are in place to attract, motivate and
retain staff.
Disciplinary and whistleblowing policies exist to address
misconduct by employees and officers, and committee structures have
been established with the Contract Research Organisations
instructed by the Group to monitor and manage the conduct of the
Group's clinical trials. To address IT risks, a disaster recovery
plan has been developed. Data is backed up daily on off-site
servers and the Group operates from a number of physically separate
sites.
The Senior Management Team has considerable experience of
integrating acquired businesses and assets, and will assess
opportunities using conservative assumptions.
Free Float
The UK Listing Authority requires listing issuers to maintain at
least 25% free float in their listed shares. At 31 August 2016 the
Company had a free float of approximately 14%. If the level of free
float cannot be increased to 25% then the UKLA can ultimately
require the Company to delist from the Official List. This would
adversely affect the ability of new and existing shareholders to
buy Ordinary shares and of holders to sell them.
Mitigating activities: The Company will keep the free float
under review, and if it remains below 25% will: (i) discuss with
Shareholders who own more than 5% of the issue share capital of the
Company whether any of their holdings can be disaggregated because
decisions are being taken by independent investment managers within
that Shareholder's organisation; (ii) discuss with such
Shareholders the prospect of reducing their holding below 5%; (iii)
seek a derogation from the UKLA while such measures are being
implemented.
Financial Operations
The Company has incurred significant losses since its inception
and anticipates that it will continue to do so, at least until it
is able to launch some of the products that are currently under
development or in-license, partner or acquire commercial stage
products.
Foreign exchange fluctuations may adversely affect the Company's
results and financial condition. The Company records its
transactions and prepares its financial statements in pounds
sterling, but a significant proportion of its expenditure is in US
dollars, Swedish Krona, or Euros.
Adverse decisions of regulators, including tax authorities, or
changes in tax treaties, laws, or the interpretation of those laws,
could reduce or eliminate research and development tax credits
which the Company, and its joint venture Adiga Life Sciences Inc.
currently receive in the United Kingdom and Canada
respectively.
Mitigating activities: The Directors assess the viability of the
Group over a three year period on a rolling annual basis. The most
recent viability statement is set out in the report and accounts
for the year ending 31 December 2015. Forward purchases of foreign
currencies are made when exchange rates are favourable to provide
for expenditure in those currencies. Markets are constantly
monitored and an external commentary is provided by Investec on a
daily basis. If tax credits are lost in the future then action
would be taken to reduce discretionary expenditure.
CONDENSED INTERIM CONSOLIDATED STATEMENT OF COMPREHENSIVE
INCOME
FOR THE SIX MONTHSED 30 JUNE 2016
Notes 30 June 2016 30 June
2015
Underlying Non-underlying
operations items* Total Total
GBPm GBPm GBPm GBPm
Unaudited Unaudited Unaudited Unaudited
---------------------------------- ------ ------------ --------------- ---------- ----------
Revenue 11.1 - 11.1 0.6
Cost of sales (3.6) - (3.6) (0.2)
---------------------------------- ------ ------------ --------------- ---------- ----------
Gross profit 7.5 - 7.5 0.4
Research and development
costs (23.2) (1.9) (25.1) (18.4)
Sales and marketing (13.1) (74.5) (87.6) (2.2)
Administrative expenses (9.5) - (9.5) (7.2)
Other gains - - - 1.1
---------------------------------- ------ ------------ --------------- ---------- ----------
Operating loss 4 (38.3) (76.4) (114.7) (26.3)
Finance costs (0.1) - (0.1) (1.0)
Finance income 6.4 - 6.4 1.0
---------------------------------- ------ ------------ --------------- ---------- ----------
Finance income - net 5 6.3 - 6.3 -
Share of profit of joint
venture 9 0.8 - 0.8 0.3
---------------------------------- ------ ------------ --------------- ---------- ----------
Loss before tax (31.2) (76.4) (107.6) (26.0)
Taxation 5.8 - 5.8 4.3
---------------------------------- ------ ------------ --------------- ---------- ----------
Loss for the financial
period (25.4) (76.4) (101.8) (21.7)
---------------------------------- ------ ------------ --------------- ---------- ----------
Loss attributable to:
Owners of Circassia
Pharmaceuticals plc (25.3) (76.4) (101.7) (21.6)
Non-controlling interests (0.1) - (0.1) (0.1)
---------------------------------- ------ ------------ --------------- ---------- ----------
Loss for the financial
period (25.4) (76.4) (101.8) (21.7)
---------------------------------- ------ ------------ --------------- ---------- ----------
Other comprehensive
income/(expense)
Items that may be subsequently
reclassified to profit
or loss:
Share of other comprehensive
expense of joint venture 9 (0.1) - (0.1) -
Currency translation
differences 7.6 - 7.6 (2.5)
Total comprehensive
expense for the period (17.9) (76.4) (94.3) (24.2)
---------------------------------- ------ ------------ --------------- ---------- ----------
Total comprehensive
expense attributable
to:
Owners of Circassia
Pharmaceuticals plc (17.8) (76.4) (94.2) (24.1)
Non-controlling interests (0.1) - (0.1) (0.1)
---------------------------------- ------ ------------ --------------- ---------- ----------
Total comprehensive
expense for the period (17.9) (76.4) (94.3) (24.2)
---------------------------------- ------ ------------ --------------- ---------- ----------
Loss per share
---------------------------------- ------ ------------ --------------- ---------- ----------
Loss per share from 10 (GBP0.36) (GBP0.11)
continuing operations
attributable to the
equity holders of the
parent during the period
---------------------------------- ------ ------------ --------------- ---------- ----------
The notes on pages 20 to 26 are an integral part of these
condensed interim consolidated financial statements.
*Non-underlying items comprise impairment of goodwill (GBP74.5
million) and other intangible assets (GBP0.3m million), please
refer to note 7 and 8, and onerous contract costs provision (GBP1.6
million)
CONDENSED INTERIM CONSOLIDATED STATEMENT OF FINANCIAL
POSITION
AS AT 30 JUNE 2016
Notes 30 June 31 December
2016 2015
GBPm GBPm
Unaudited Audited
------------------------------ ------ ---------- ------------
Assets
Non-current assets
Property, plant & equipment 1.3 1.3
Goodwill 7 9.6 81.2
Intangible assets 8 168.8 165.6
Deferred tax assets 6 18.7 17.2
Investment in joint
venture 9 0.9 0.2
199.3 265.5
------------------------------ ------ ---------- ------------
Current assets
Inventory 3.4 3.0
Trade and other receivables 10.2 5.1
Current tax assets 6 17.5 11.8
Short term bank deposits 34.7 37.8
Cash and cash equivalents 103.3 166.0
------------------------------ ------ ---------- ------------
169.1 223.7
------------------------------ ------ ---------- ------------
Total assets 368.4 489.2
------------------------------ ------ ---------- ------------
Equity and liabilities
Equity attributable
to the owners of the
parent company
Ordinary shares 12 0.2 0.2
Share premium 12 564.0 564.0
Other reserves 13 8.7 2.8
Accumulated losses (260.2) (158.5)
------------------------------ ------ ---------- ------------
312.7 408.5
Non-controlling interests - 1.2
Total equity 312.7 409.7
Liabilities
Non-Current liabilities
Deferred income tax
liabilities 6 32.5 31.2
------------------------------ ------ ---------- ------------
32.5 31.2
------------------------------ ------ ---------- ------------
Current liabilities
Trade and other payables 23.2 48.3
23.2 48.3
Total liabilities 55.7 79.5
------------------------------ ------ ---------- ------------
Total equity and liabilities 368.4 489.2
------------------------------ ------ ---------- ------------
The notes on pages 20 to 26 are an integral part of these
condensed interim consolidated financial statements.
CONDENSED INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHSED 30 JUNE 2016
Notes 30 June 30 June
2016 2015
GBPm GBPm
Unaudited Unaudited
------------------------------------------------------ ------ ---------- ------------
Cash flows from operating activities
Cash used in operations 11 (37.4) (24.6)
Interest paid (0.1) -
Tax credit (paid)/received (0.2) 0.2
------------------------------------------------------ ------ ---------- ------------
Net cash used in operating activities (37.7) (24.4)
------------------------------------------------------ ------ ---------- ------------
Cash flows from investing activities
Interest received 0.3 2.0
Acquisition of subsidiaries, net of cash acquired - (190.0)
Contingent consideration payment (30.0) -
Purchase of property, plant and equipment (0.3) -
Purchase of intangible assets - (0.2)
Decrease in short term bank deposits 3.2 54.2
Net cash used in investing activities (26.8) (134.0)
------------------------------------------------------ ------ ---------- ------------
Cash flows from financing activities
Purchase of treasury shares 13 (0.4) (0.3)
Proceeds from issue of ordinary shares - 266.9
Transactions with non-controlling interests 13 (3.2) -
Net cash (used in)/from financing activities (3.6) 266.6
------------------------------------------------------ ------ ---------- ------------
Net (decrease)/increase in cash and cash equivalents (68.1) 108.2
Cash and cash equivalents at beginning of period 166.0 29.7
Exchange gain/(loss) on cash and cash equivalents 5.4 (1.7)
------------------------------------------------------ ------ ---------- ------------
Cash and cash equivalents at 30 June 103.3 136.2
------------------------------------------------------ ------ ---------- ------------
The notes on pages 20 to 26 are an integral part of these
condensed interim consolidated financial statements.
CONDENSED INTERIM CONSOLIDATED STATEMENT OF CHANGES IN
EQUITY
Attributable to owners
of the parent
----------
Notes Share Share Other(1) Accumulated Total Non-cont- Total
Capital Premium reserves losses rolling Equity
interests
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------- ------ --------- --------- ---------- ------------ -------- ----------- --------
At 1 January 2016
(audited) 0.2 564.0 2.8 (158.5) 408.5 1.2 409.7
Comprehensive
expense:
Loss for the year - - - (101.7) (101.7) (0.1) (101.8)
Other comprehensive
income/(expense):
Share of other
comprehensive
expense of joint
venture 9 - - (0.1) - (0.1) - (0.1)
Currency translation
differences - - 7.6 - 7.6 - 7.6
------------------------- ------ --------- --------- ---------- ------------ -------- ----------- --------
Total comprehensive
expense - - 7.5 (101.7) (94.2) (0.1) (94.3)
Transactions with
owners:
Purchase of own
shares 13 - - (0.4) - (0.4) - (0.4)
Employee share
option scheme - - 0.9 - 0.9 - 0.9
Transactions with
non-controlling
interests 13 - - (2.1) - (2.1) (1.1) (3.2)
------------------------- ------ --------- --------- ---------- ------------ -------- ----------- --------
At 30 June 2016
(unaudited) 0.2 564.0 8.7 (260.2) 312.7 - 312.7
------------------------- ------ --------- --------- ---------- ------------ -------- ----------- --------
At 1 January 2015
(audited) 0.2 297.9 1.3 (108.6) 190.8 - 190.8
Comprehensive
expense:
Loss for the year - - - (21.6) (21.6) (0.1) (21.7)
Other comprehensive
expense:
Currency translation
differences - - (2.5) - (2.5) - (2.5)
Total comprehensive
expense - - (2.5) (21.6) (24.1) (0.1) (24.2)
Transactions with
owners:
Purchase of own
shares 13 - - (0.3) - (0.3) - (0.3)
Issue of Ordinary
shares - 266.1 - - 266.1 - 266.1
Employee share
option scheme - - 1.4 - 1.4 - 1.4
------------------------- ------ --------- --------- ---------- ------------ -------- ----------- --------
Total contributions
by owners of the
parent, recognized 12,
directly in equity 13 0.2 564.0 - (130.2) 433.9 (0.1) 433.8
------------------------- ------ --------- --------- ---------- ------------ -------- ----------- --------
Acquisition of
subsidiary 3.1 3.1
------------------------- ------ --------- --------- ---------- ------------ -------- ----------- --------
Total changes
in ownership interests
that do not result
in a change in
control recognized
directly in equity 3.1 3.1
------------------------- ------ --------- --------- ---------- ------------ -------- ----------- --------
At 30 June 2015
(unaudited) 0.2 564.0 - (130.2) 433.9 3.0 436.9
------------------------- ------ --------- --------- ---------- ------------ -------- ----------- --------
The notes on pages 20 to 26 are an integral part of these
condensed interim consolidated financial statements.
(1) Other reserves include the share option reserve, translation
reserve, treasury shares reserve and transactions with NCI
reserve.
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
1. General information
Circassia Pharmaceuticals plc is a public limited company which
is listed on the London Stock Exchange and incorporated and
domiciled in England and Wales. The address of its registered
office is The Magdalen Centre, Robert Robinson Avenue, Oxford
Science Park, Oxford, Oxfordshire, England, OX4 4GA.
The condensed consolidated interim financial statements were
approved for issue on 27 September 2016.
The condensed consolidated interim financial statements do not
comprise statutory accounts within the meaning of section 434 of
the Companies Act 2006. Statutory accounts for the year ended 31
December 2015 were approved by the Board of Directors on 11 March
2016 and delivered to the Registrar of Companies. The report of the
auditors on those accounts was unqualified, did not contain an
emphasis of matter paragraph and did not contain any statement
under section 498 of the Companies Act 2006.
The condensed consolidated interim financial statements have
been reviewed, but not audited, and the independent review report
is set out on pages 28 to 29 of this document.
Basis of preparation
The condensed consolidated interim financial statements for the
six months ended 30 June 2016 have been prepared in accordance with
the Disclosure and Transparency Rules of the Financial Conduct
Authority (previously the Financial Services Authority) and IAS 34
'Interim financial reporting', as adopted by the European
Union.
The condensed consolidated interim financial statements should
be read in conjunction with the annual financial statements for the
year ended 31 December 2015, which have been prepared in accordance
with IFRSs as adopted by the European Union.
Going concern
The Group has sufficient cash and cash equivalents to meet its
day-to-day working capital requirements. Though the Group continues
to make losses, the Directors have reviewed the current and
projected financial position of the Group, taking into account
existing cash balances. On the basis of this review, the Directors
have not identified any material uncertainties to the Group's
ability to meet its liabilities as they fall due for the
foreseeable future.
Accounting policies
The accounting policies adopted are consistent with those of the
previous financial year except as described below.
Non-underlying items
The Group presents certain items of income and expense as
non-underlying in the Statement of Comprehensive Income and
Expense. The determination that an item should be presented as
non-underlying is a judgement of the management. The management
considers whether providing separate disclosure is helpful in
understanding the underlying performance of the business, based on
the nature and size of the items and infrequency of the events
giving rise to them.
There are not considered to be any new standards, amendments to
IFRS's and interpretations effective for the financial year ending
31 December 2016 that would have a material impact on the
Group.
Use of estimates and assumptions
The preparation of interim financial statements requires
management to make judgements, estimates and assumptions that
affect the application of accounting policies and the reported
amounts of assets and liabilities, income and expense. Actual
results may differ from these estimates.
In preparing these condensed interim financial statements, the
significant judgements made by management in applying the Group's
accounting policies and the key sources of estimation uncertainty
were the same as those that applied to the annual financial
statements for the year ended 31 December 2015 except as disclosed
below.
Goodwill and other intangible assets
Goodwill and other intangible assets impairment reviews are
undertaken annually or more frequently if events or changes in
circumstances indicate a potential impairment. Judgements and
estimates are made in respect of the carrying value of the CGU
containing the goodwill taking into account key assumptions about
the product candidates. If the Group is unable to obtain regulatory
approval or to commercialise its product candidates, or experiences
significant delays in doing so, this could result in an impairment
of the related goodwill and intellectual property rights.
2. Financial and capital risk management
Financial risk factors
The condensed interim financial statements do not include all
financial and capital risk management information and disclosures
required in the annual financial statements; they should be read in
conjunction with the Group's annual financial statements for the
year ended 31 December 2015. The viability consideration has been
disclosed in the last annual report and the Directors believe that
the year-end position remains unchanged.
The nature or level of risk that the Group is exposed to has
changed in the first half of 2016 as a result of the UK referendum
decision to leave the European Union. It is considered that it is
too early to quantify the exact impact for the Group and the
Directors will keep the situation under review and act to mitigate
any increased risks accordingly. There have been no changes in the
risk management process or in any risk management policies since
the year end except for those disclosed below.
The majority of operating costs are denominated in Sterling,
United States dollars, Canadian dollars, Euro, Swiss francs or
Swedish krona. Foreign exchange risk arises from future commercial
transactions and recognised assets and liabilities.
The foreign exchange risk is considered to have been amplified
by the recent EU referendum result in the UK. The Directors expect
foreign exchange volatility to affect the Group's results and the
resulting impact will be assessed in the annual report.
3. Operating segments
The chief operating decision-maker (the Executive Directors) are
responsible for making key operating decisions in the Group.
Assessment of performance and decisions regarding the allocation of
resources are made by operating segment. Performance of each
segment is assessed on revenue and operating profit/loss.
The table presents revenue from external customers and
profit/loss information regarding the Group's operating segments
for the six months ended 30 June 2016 and 30 June 2015. There have
been no sales between segments in either reporting period.
Allergy NIOX(R) Respiratory Total
GBPm GBPm GBPm GBPm
------------------------------ -------- -------- ------------ --------
Six months to 30 June 2016
Revenue - 11.1 - 11.1
Operating loss (104.1) (6.9) (3.7) (114.7)
Six months to 30 June 2015
Revenue - 0.6 - 0.6
Operating loss (25.4) (0.7) (0.2) (26.3)
------------------------------ -------- -------- ------------ --------
There have been no material changes in total assets or total
liabilities from the amounts disclosed in the last annual financial
statements except for Circassia goodwill impairment disclosed in
note 7 that is allocated to the Allergy segment.
NIOX(R) performance
Constant exchange rates numbers for H1 2015 represent reported
H1 2015 numbers re--stated using average exchange rates in H1 2016.
Management believes constant currency numbers better represent the
underlying performance of the businesses within the Group that have
a functional currency that is subject to significant fluctuations
against the Sterling. H1 2015 reported revenue is GBP9.1 million at
actual exchange rates in H1 2015 (GBP0.6 million revenues recorded
by Circassia for 19 - 30 June 2015 period and GBP8.5 million under
previous ownership).
4. Operating loss
Included within the operating loss to 30 June 2016 is a goodwill
impairment charge of GBP74.5 million (H1 2015: acquisition-related
costs of GBP4.0 million).
5. Finance income and costs
Six months Six months
ended 30 June ended 30
June
2016 2015
GBPm GBPm
-------------------------- --------------- -----------
Finance costs:
Interest payable (0.1) (0.2)
Loss on foreign exchange - (0.8)
-------------------------- --------------- -----------
Total finance costs (0.1) (1.0)
-------------------------- --------------- -----------
Finance income:
Bank interest receivable 0.6 1.0
Gain on foreign exchange 5.8 -
Total finance income 6.4 1.0
-------------------------- --------------- -----------
Net finance income 6.3 -
-------------------------- --------------- -----------
6. Taxation
R&D tax credit
The amount included in the interim financial statements for the
six months ended 30 June 2016 and 2015 represents the credit
receivable by the Group for the period and adjustments to prior
years. The amounts are not currently agreed with the relevant tax
authorities and have been calculated at a rate of 14.5% for
qualifying expenditure, being the prevailing R&D tax credit
rate at the time. An uplift of 130% has been applied to all
qualifying expenditure in line with R&D tax rules.
Deferred taxation
Intangibles Tax losses Net deferred tax liability
GBPm GBPm GBPm
At 1 January 2016 31.2 (17.2) 14.0
(Credit)/charge to the income statement (0.4) 0.2 (0.2)
Exchange differences 1.7 (1.7) -
At 30 June 2016 32.5 (18.7) 13.8
----------------------------------------- ------------ ----------- ---------------------------
30 June 2016 31 December 2015
GBPm GBPm
Deferred tax liabilities 32.5 31.2
Deferred tax assets (18.7) (17.2)
Total deferred tax position 13.8 14.0
----------------------------- ------------- -----------------
The Group has the following unrecognised potential deferred tax
assets as at
30 June 2016 31 December 2015
GBPm GBPm
Losses 45.1 40.2
Accelerated capital allowances 0.4 0.5
Share based payments and provisions 1.7 1.7
Total unrecognised deferred tax asset 47.2 42.4
--------------------------------------- ------------- -----------------
7. Goodwill
GBPm
At 31 December 2015
Cost 81.2
Accumulated impairment -
------------------------------- -------
Net book amount 81.2
------------------------------- -------
Six months ended 30 June 2016
Opening net book amount 81.2
Foreign exchange movement 2.9
Impairment (74.5)
------------------------------- -------
Closing net book amount 9.6
------------------------------- -------
At 30 June 2016
Cost 84.1
Accumulated impairment (74.5)
------------------------------- -------
Net book amount 9.6
------------------------------- -------
The negative result of the investigational cat allergy
immunotherapy phase III study is considered to be an indicator of
impairment in the Circassia CGU as at 30 June 2016.
The Group revised its forecasts to current expectations of the
future performance of its CGUs based on the current development
plans. The recoverable amount of CGUs was determined based on value
in use calculations using a consistent methodology to that
disclosed in the 2015 annual report except as described below.
Following the cat allergy immunotherapy phase III study results,
the Allergy portfolio value has been fully discounted resulting in
the impairment charge for the Circassia CGU of GBP74.5 million.
There has been no key assumption change for Aerocrine and
Prosonix CGUs.
The carrying value of goodwill, translated at period end
exchange rates, is allocated to the following CGUs:
30 June 2016 31 December 2015
Cash generating GBPm GBPm
unit
Circassia - 72.1
Aerocrine 5.2 4.7
Prosonix 4.4 4.4
----------------- ------------- -----------------
9.6 81.2
================= ============= =================
8. Intangible assets
Total intangible assets
Customer relationships
IPR&D Technology Other
GBPm GBPm GBPm GBPm GBPm
---------------------------- -------- ------------------------- ------------- -------- --------------------------
At 31 December 2015
Cost 88.9 30.8 46.8 1.8 168.3
Accumulated amortisation
and impairment - (0.9) (0.9) (0.9) (2.7)
---------------------------- -------- ------------------------- ------------- -------- --------------------------
Net book amount 88.9 29.9 45.9 0.9 165.6
---------------------------- -------- ------------------------- ------------- -------- --------------------------
Six months ended 30 June
2016
Opening net book amount 88.9 29.9 45.9 0.9 165.6
Amortisation charge (0.1) (0.9) (1.0) (0.1) (2.1)
Impairment - - - (0.3) (0.3)
Exchange differences - 3.0 2.6 - 5.6
---------------------------- -------- ------------------------- ------------- -------- --------------------------
Closing net book amount 88.8 32.0 47.5 0.5 168.8
---------------------------- -------- ------------------------- ------------- -------- --------------------------
At 30 June 2016
Cost 88.9 33.8 49.4 1.8 173.9
Accumulated amortisation
and impairment (0.1) (1.8) (1.9) (1.3) (5.1)
---------------------------- -------- ------------------------- ------------- -------- --------------------------
Net book amount 88.8 32.0 47.5 0.5 168.8
---------------------------- -------- ------------------------- ------------- -------- --------------------------
Due to the negative result of the investigational cat allergy
immunotherapy phase III study and the subsequent impact on a wider
Allergy product portfolio, related licences and patents have been
fully impaired.
9. Investment in joint venture
Six months ended 30 June 2016 Year ended Six months ended
GBPm 31 Dec 2015 30 June 2015
GBPm GBPm
At 1 January 0.2 0.1 0.1
Share of profit 0.8 0.1 0.3
Foreign exchange difference on consolidation (0.1) - -
At period end 0.9 0.2 0.4
---------------------------------------------- ------------------------------ ------------- -----------------
10. Net loss per Ordinary share
Basic loss per share is calculated by dividing the loss
attributable to ordinary equity holders of the parent company by
the weighted average number of Ordinary shares in issue during the
period.
6 months ended 30 June
--------------------------------------------------
2016 2016 2015
Total Underlying operations
-------------------------------------------------------- -------- ------------ ---------------------- ------------
Loss from continuing operations for the period
attributable to ordinary equity owners of the
parent company GBPm (101.7) (25.3) (21.6)
Weighted average number of Ordinary shares in issue Number 284,889,171 284,889,171 199,496,974
Loss per share (GBP0.36) (GBP0.09) (GBP0.11)
------------------------------------------------------------------ ------------ ---------------------- ------------
As net losses from continuing operations were recorded in 2016
and 2015, the dilutive potential shares are anti-dilutive for the
earnings per share calculation.
Underlying operations loss per share is calculated in order to
provide information about underlying performance and is based on
the loss attributable to ordinary equity holders of the parent
company excluding non-underlying items.
11. Cash used in operations
Reconciliation of loss before tax to net cash used in
operations
For the six months ended 30 June
---------------------------------------------------------- -----------------------------------
2016 2015
GBPm GBPm
---------------------------------------------------------- ------------------ ---------------
Continuing operations
Loss before tax (107.6) (26.0)
Adjustment for:
Finance income (0.6) (1.0)
Finance costs 0.1 0.2
Depreciation 0.4 0.1
Impairment 74.8 -
Amortisation (note 8) 2.1 0.1
Share of joint venture profit (note 9) (0.8) (0.3)
Fair value gain on derivative - (1.1)
Share based payment charge 0.9 1.4
Foreign exchange (loss)/gain on non-operating cash flows (7.4) 2.2
(Increase)/decrease in trade and other receivables (4.1) 0.2
Decrease/(increase) in inventories 0.5 (0.3)
Increase/(decrease) in trade and other payables 4.3 (0.1)
Net cash used in operations (37.4) (24.6)
---------------------------------------------------------- ------------------ ---------------
12. Share capital and share premium
Number of shares Share capital Share premium
(millions) GBPm GBPm
----------------------------------------------- ----------------- -------------- --------------
Balance as at 1 January 2016 and 30 June 2016 284.9 0.2 564.0
----------------------------------------------- ----------------- -------------- --------------
Number of shares Share capital Share premium
(millions) GBPm GBPm
-------------------------------------- ----------------- -------------- --------------
Opening balance as at 1 January 2015 189.4 0.2 297.9
Issue of new shares 95.5 - 266.1
At 31 December 2015 284.9 0.2 564.0
-------------------------------------- ----------------- -------------- --------------
13. Other reserves
Share Translation Treasury Transactions Total
option reserve reserve with non-controlling other
reserve interests reserves
GBPm GBPm GBPm GBPm GBPm
---------------------- --------- ------------ --------- ---------------------- ----------
At 1 January 2016 4.0 3.1 (0.3) (4.0) 2.8
Employee share
option scheme 0.9 - - - 0.9
Currency translation
differences - 7.5 - - 7.5
Purchase of own
shares - - (0.4) - (0.4)
Transactions with
non-controlling
interests - - - (2.1) (2.1)
---------------------- --------- ------------ --------- ---------------------- ----------
At 30 June 2016 4.9 10.6 (0.7) (6.1) 8.7
---------------------- --------- ------------ --------- ---------------------- ----------
At January 2015 1.3 - - - 1.3
Employee share
option scheme 2.7 - - - 2.7
Currency translation
differences - 3.1 - - 3.1
Purchase of own
shares - - (0.3) - (0.3)
Transactions with
non-controlling
interests - - - (4.0) (4.0)
---------------------- --------- ------------ --------- ---------------------- ----------
At 31 December
2015 4.0 3.1 (0.3) (4.0) 2.8
---------------------- --------- ------------ --------- ---------------------- ----------
On 13 May 2016, the group acquired the remaining 2.1% of the
issued shares of Aerocrine AB for SEK37.6 million (GBP3.2 million)
to become the owner of 100% of the shares in Aerocrine AB.
Immediately prior to the purchase, the carrying amount of the
existing 2.1% non-controlling interests in Aerocrine AB was GBP1.1
million. The group recognised a decrease in non-controlling
interests of GBP1.1 million and a decrease in equity attributable
to owners of the parent of GBP2.1 million. The effect on the equity
attributable to the owners of Circassia Pharmaceuticals plc during
the year is summarised as follows:
2016
GBPm
-------------------------------------------------------------------------------------------- ------
Carrying amount of non-controlling interests 1.1
Consideration paid to non-controlling interests (3.2)
--------------------------------------------------------------------------------------------- ------
Excess of consideration paid recognised in the transactions with non-controlling interests
reserve within equity (2.1)
--------------------------------------------------------------------------------------------- ------
The arbitration process with non-controlling interests is
ongoing, however no further payments have been provided in the
interim financial statements.
14. Related party transactions
There have been no new related party transactions that have
taken place in the first six months of the current financial
year.
15. Events occurring after the reporting period
Following the negative result from the cat allergy phase III
study, management has reassessed R&D expenditure in line with
the updated strategy resulting in the below detailed provisions
recognised after 30 June 2016.
Onerous contract provision
GBP0.9 million provision relates to the termination of a trial
batch manufacturing contract.
Reorganisation provision
GBP0.5 million provision relates to redundancy payments to staff
in the research and development team.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors confirm that these condensed interim financial
statements have been prepared in accordance with International
Accounting Standard 34, 'Interim Financial Reporting', as adopted
by the European Union and that the interim management report
includes a fair review of the information required by DTR 4.2.7 and
DTR 4.2.8, namely:
- an indication of important events that have occurred during
the first six months and their impact on the condensed set of
financial statements, and a description of the principal risks and
uncertainties for the remaining six months of the financial year;
and
- material related-party transactions in the first six months
and any material changes in the related-party transactions
described in the last annual report. The Directors of Circassia
Pharmaceuticals plc are listed on page 30.
The Directors are responsible for the maintenance and integrity
of the Group's website www.circassia.com. Legislation in the UK
governing the preparation and dissemination of interim financial
statements may differ from legislation in other jurisdictions.
On behalf of the Board
Steven Harris Julien Cotta
Chief Executive Officer Chief Financial Officer
27 September 2016
INDEPENT REVIEW REPORT TO CIRCASSIA PHARMACEUTICALS PLC
Report on the condensed consolidated interim financial
statements
Our conclusion
We have reviewed the condensed consolidated interim financial
statements, defined below, in the Interim Report of Circassia
Pharmaceutical plc for the six months ended 30 June 2016. Based on
our review, nothing has come to our attention that causes us to
believe that the condensed consolidated interim financial
statements are not prepared, in all material respects, in
accordance with International Accounting Standard 34 as adopted by
the European Union and the Disclosure and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
This conclusion is to be read in the context of what we say in
the remainder of this report.
What we have reviewed
The condensed consolidated interim financial statements, which
are prepared by Circassia Pharmaceutical plc, comprise:
-- the condensed consolidated statement of financial position as at 30 June 2016;
-- the condensed consolidated income statement and statement of
comprehensive income for the period then ended;
-- the condensed consolidated statement of cash flows for the period then ended;
-- the condensed consolidated statement of changes in equity for the period then ended; and
-- the explanatory notes to the condensed consolidated interim financial statements.
As disclosed in note 1, the financial reporting framework that
has been applied in the preparation of the full annual financial
statements of the group is applicable law and International
Financial Reporting Standards (IFRSs) as adopted by the European
Union.
The condensed consolidated interim financial statements included
in the Interim report have been prepared in accordance with
International Accounting Standard 34, 'Interim Financial
Reporting', as adopted by the European Union and the Disclosure and
Transparency Rules of the United Kingdom's Financial Conduct
Authority.
What a review of condensed consolidated financial statements
involves
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity' issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK and
Ireland) and, consequently, does not enable us to obtain assurance
that we would become aware of all significant matters that might be
identified in an audit. Accordingly, we do not express an audit
opinion.
We have read the other information contained in the Interim
report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed consolidated interim financial statements.
Responsibilities for the interim financial statements and the
review
Our responsibilities and those of the directors
The Interim report, including the condensed consolidated interim
financial statements, is the responsibility of, and has been
approved by, the directors. The directors are responsible for
preparing the Interim report in accordance with the Disclosure and
Transparency Rules of the United Kingdom's Financial Conduct
Authority.
Our responsibility is to express to the company a conclusion on
the condensed consolidated interim financial statements in the
Interim report based on our review. This report, including the
conclusion, has been prepared for and only for the company for the
purpose of complying with the Disclosure and Transparency Rules of
the Financial Conduct Authority and for no other purpose. We do
not, in giving this conclusion, accept or assume responsibility for
any other purpose or to any other person to whom this report is
shown or into whose hands it may come save where expressly agreed
by our prior consent in writing.
PricewaterhouseCoopers LLP
Chartered Accountants
27 September 2016
London
SHAREHOLDER INFORMATION
Financial calendar
Preliminary results for the 12 months ending 31 December 2016:
Q1 2017
Annual General Meeting: H1 2017
Registrars
All administrative enquiries relating to shareholdings and
requests to receive corporate documents by email should, in the
first instance, be directed to Equiniti. Shareview is Equiniti's
shareholder portal offering access to services and information to
help manage your shareholdings and inform your important investment
decisions.
Shareview portfolio
Shareview Portfolio is an online portfolio management tool which
enables you view and manage all the shareholdings you have, where
Equiniti is the Registrar, in one place. It is free to use and
provides access to a wide range of market information and
investment services. Please visit www.shareview.co.uk.
This is not a recommendation to buy or sell shares. The price of
shares can go down as well as up, and you are not guaranteed to get
back the amount that you originally invested.
Addresses for correspondence
Head office Registrars
Circassia Pharmaceuticals Equiniti Limited
plc Aspect House
Northbrook House Spencer Road
Robert Robinson Avenue Lancing
The Oxford Science Park West Sussex BN99 6DA
Oxford OX4 4GA United Kingdom
United Kingdom
Shareholder support: 0871
Tel: +44 (0)1865 405560 384 2030
Fax: +44 (0)7092 987560
Calls to this number are
General enquiries: info@circassia.com charged at 10p per minute
Investors: IR@circassia.com plus network extras. Lines
Website: www.circassia.com are open 8:30am to 5:30pm
Monday to Friday.
Directors
Dr Francesco Granata (Chairman)
Steven Harris (Chief Executive Officer and co-founder)
Julien Cotta (Chief Financial Officer)
Dr Rod Hafner (Senior Vice President Research and
Development)
Dr Jean-Jacques Garaud (Independent Non-Executive Director and
Senior Independent Director)
Dr Tim Corn (Independent Non-Executive Director)
Russell Cummings (Non-Executive Director)
Cathrin Petty (Non-Executive Director)
Marvin Samson (Independent Non-Executive Director)
Charles Swingland (Non-Executive Director and co-founder)
Lota Zoth (Independent Non-Executive Director)
This information is provided by RNS
The company news service from the London Stock Exchange
END
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