TIDMFARN
RNS Number : 6574A
Faron Pharmaceuticals Oy
13 September 2018
Faron Pharmaceuticals Ltd
("Faron" or the "Company")
Interim Results for the six months ended 30 June 2018
TURKU - FINLAND, 13 September 2018 - Faron Pharmaceuticals Ltd
("Faron") (LON: FARN), the clinical stage biopharmaceutical
company, today announces its unaudited Interim Results for the six
months ended 30 June 2018 (the "Period").
HIGHLIGHTS
Operational (including post period-end)
-- Traumakine - lead product in development for the treatment of organ failures
o The Company has continued the analysis of INTEREST trial data
following the finding that Traumakine treatment produced
inconsistent interferon beta-1a bioactivity across the treatment
group.
o The Company intends to present an overview of the trial and
data analysis at the ESICM (European Society for Intensive Care
Medicine) conference on October 22, 2018.
o Further recommendations were received from the Independent
Monitoring Committee (IDMC) to continue the Phase II INFORAAA study
for the prevention of Multi-Organ Failure (MOF) and associated
mortality of surgically operated Ruptured Abdominal Aorta Aneurysm
(RAAA). The Company has decided to continue the trial to the first
advanced interim analysis. This analysis is expected to take place
in Q1-2019.
o EMA approved paediatric development plan for Traumakine in
paediatric ARDS and updated orphan definition of orphan status in
Europe, in which the patient population is now defined according to
the Berlin classification of ARDS patients.
o Patents to use certain biomarkers to measure the severity and
treatment efficacy of ARDS patients were granted in Europe, Japan
and Canada. Similar is also expected to be granted in the US.
o Top-line data from the Phase III ARDS trial with Japanese
partner Maruishi are expected in H2 2018.
-- Clevegen - wholly-owned novel cancer immunotherapy in development
o Completion of successful preclinical toxicity studies which
showed good safety profile and potential to block Clever-1 on
circulating monocytes.
o On track to file first-in-human open label Phase I/II MATINS
clinical trial application (CTA) during Q3 2018 and initiate
patient recruitment in Q4 2018 to investigate the safety and
efficacy of Clevegen in selected metastatic or inoperable solid
tumours.
o Patent granted by the European Patent Office for the use of
Clever-1 antibodies, the mechanism behind Clevegen, for the
treatment of cancer, extending the existing patent estate for
Clevegen until 2030.
o Clever-1 control of B-cell mediated antibody formation in vivo
is re-enforcing the importance of Company's program on turning
immunity on which could lead to enhanced Clevegen use outside
cancer areas.
Financial
o Raised GBP15.0 million (net EUR 15.9 million) through a
placing in February 2018.
o Cash balances of EUR 11.2 million at 30 June 2018 (2017: EUR
10.3 million).
o Operating loss of EUR 14.0 million for the six months ended 30
June 2018 (2017: EUR 6.8 million).
o Net assets of EUR 6.7 million (2017: EUR 7.7 million) as at 30
June 2018.
o Cash preservation program implemented to reduce cash burn and
preserve existing resources in order to deliver value to
shareholders.
Commenting on the results, Dr Markku Jalkanen, CEO of Faron,
said: "Whilst we were disappointed with the results from the
INTEREST study, we have made, and are continuing to make, efforts
to fully understand the data in order to define the next steps in
the Company's strategy for Traumakine. The Company will closely
collaborate with the clinical community to complete this analysis
and plan to provide full analysis of these findings in October.
"We have continued to make good progress with our Clevegen
programme and are very excited to start the first human clinical
trial later this year. Our focus for the remainder of 2018 will be
to continue to rapidly progress Clevegen through the clinic whilst
also continuing to preserve cash in order to deliver value to
shareholders."
For more information please contact:
Faron Pharmaceuticals Ltd
Dr Markku Jalkanen, Chief Executive Officer
investor.relations@faron.com
Consilium Strategic Communications
Mary-Jane Elliott, Matthew Neal, Lindsey Neville
Phone: +44 (0)20 3709 5700
E-mail: faron@consilium-comms.com
Westwicke Partners, IR (US)
Chris Brinzey
Phone: 01 339 970 2843
E-Mail: chris.brinzey@westwicke.com
Panmure Gordon (UK) Limited, Nomad and Broker
Freddy Crossley, Emma Earl, Ryan McCarthy
Phone: +44 207 886 2500
About Faron Pharmaceuticals Ltd
Faron (AIM:FARN) is a clinical stage biopharmaceutical company
developing novel treatments for medical conditions with significant
unmet needs. The Company currently has a pipeline focusing on acute
organ traumas, vascular damage and cancer immunotherapy. The
Company's lead candidate Traumakine, to prevent vascular leakage
and organ failures, has completed a Phase III clinical trial in
Acute Respiratory Distress Syndrome (ARDS). An additional European
Phase II Traumakine trial is underway for the Rupture of Abdominal
Aorta Aneurysm ("RAAA"). Faron's second candidate Clevegen is a
ground breaking pre-clinical anti-Clever-1 antibody. Clevegen has
the ability to switch immune suppression to immune activation in
various conditions, with potential across oncology, infectious
disease and vaccine development. This novel macrophage-directed
immuno-oncology switch called Tumour Immunity Enabling Technology
("TIET") may be used alone or in combination with other immune
checkpoint molecules for the treatment of cancer patients. Faron is
based in Turku, Finland. Further information is available at
www.faron.com
Chairman's and Chief Executive Officer's Review
Introduction
The first half of 2018 has been a challenging period for the
Company during which we announced that Traumakine did not meet the
primary outcome in the Phase III INTEREST trial. As you would
expect, these results have required the Company to shift its focus
and, whilst we are continuing to complete further detailed analysis
in order to fully understand the data, we have also had to take the
necessary steps to significantly reduce our cash burn by initiating
a cash preservation program and by halting the commercial,
manufacturing and regulatory activities underway for Traumakine. We
are encouraged by the progress made with Clevegen and with
successful preclinical toxicity studies now completed, we remain on
track to initiate the MATINS trial in Q4 2018. We remain cautiously
optimistic about the future and still believe Faron has the
potential to become a leading company in relation to organ
protection in cardiovascular surgery, transplantation, and other
ischemic-reperfusion injuries of vital central organs.
Traumakine - further detailed analysis of the Phase III INTEREST
trial data
Traumakine did not meet the primary end-point in the pivotal,
pan-European, Phase III INTEREST trial for the treatment of Acute
Respiratory Distress Syndrome ("ARDS"). The data showed that
treatment with Traumakine did not result in a reduced mortality
rate, or an increased number of ventilator free days compared to
placebo, however there were no safety concerns and administration
of Traumakine was well tolerated.
Following announcement of these initial results, the Company
conducted early analysis of certain biomarker indicators which
suggested that the treatment did not produce the expected
interferon-beta bioactivity in the treatment group that was
previously seen in Faron's Phase I/II trial for Traumakine. We
believe that the inconsistent biomarker expression may be explained
through on going further analysis. We have observed a significant
effect on the mortality in the INTEREST trial related to other
concurrent and widely used ARDS treatments. Further experiments are
ongoing and the results of these and analysis of the INTEREST trial
will be presented at the ESICM in October.
The Company is pleased to report that the paediatric
investigational plan (PIP) for Traumakine use has been accepted by
the European Medicine Agency (EMA), as was the updated orphan
application to comply with the new Berlin definition of ARDS
patients.
Our partner Maruishi expects to complete their phase III data
analysis later this year.
The Company's patent protecting the use of certain biomarkers to
estimate the severity and treatment efficacy of ARDS has been
granted in Europe, Japan and Canada, further protection for
TRAUMAKINE to potentially be used as a significant proprietary
monitoring tool for intensivists.
Whilst the Company's primary focus has been on developing
Traumakine for the treatment of ARDS, we also believe that the
product has the potential for application in additional disease
areas and we initiated a Phase II INFORAAA clinical trial of
Traumakine for the treatment of Multi-Organ Failure (MOF) and
mortality prevention of surgically repaired Ruptured Abdominal
Aortic Aneurysm (RAAA). RAAA is a surgical emergency with an
overall mortality of 70 to 80% and requires immediate surgery and
aortic repair. The main cause of death for these patients is
multiple organ failure following a post-operative reperfusion
injury of ischemic organs including kidneys, liver, brain and
intestines. In July, we received a second recommendation from the
IDMC to continue the INFORAAA trial and will take the study to the
first interim point.
Clevegen - novel cancer immunotherapy approaching start of first
Phase I/II trials
Clevegen (FP-1305), Faron's pre-clinical immunotherapy
candidate, causes conversion of the immune environment around a
tumour from immune suppressive to immune stimulating by reducing
the number and function of tumour-associated macrophages (TAMs).
Recent developments in the exciting field of cancer immunotherapy
have been well documented with a number of important indications of
clinical success. We believe that Clevegen is differentiated from
other immunotherapies through its specific targeting of M2 TAMs
which facilitate tumour growth, while leaving intact the M1 TAMs
that support immune activation against tumours.
Successful preclinical toxicity studies of Clevegen have been
completed. Clevegen showed no toxicity in dose escalation studies
in large preclinical models and also blocked Clever-1 on
circulating monocytes as expected. The Company remains on track to
file the clinical trial application (CTA) for the MATINS study, a
first-in-human open label Phase I/II adaptive clinical trial in
selected metastatic or inoperable solid tumours in Q3 2018 with
patient recruitment expected to initiate in Q4 2018. The selected
tumours are cutaneous melanoma, hepatobiliary, pancreatic, ovarian
or colorectal cancer, which are all known to contain high amounts
of Clever-1 positive TAMs. The trial is to be run in three parts.
Part I will be conducted to determine the safe and tolerable dose
of Clevegen, which will then be used in Part II to expand the
cohorts of individual tumour types. Part III of the trial aims to
confirm the efficacy of Clevegen with the cohorts selected based on
Part II.
The Company believes Clevegen could also be beneficial in other
disease areas where a temporary reduction of immune suppression
could help to fight the disease or prevent its formation. As such,
the Company believes Clevegen could be used as an adjuvant in
vaccinations to boost their response. A recent article, which
supports this use and demonstrates Clever-1 role in the control of
antibody formation by B cells, has recently been published by
Faron's scientific network (Dunkel et al. 2018). This
ground-breaking finding of macrophages controlling B cell antibody
production could result in numerous medical applications and will
be tested in the future development of Clevegen.
Financial Review
During the period, Faron initiated a cash preservation program,
suspending all Traumakine commercialization, manufacturing and
regulatory filing activities to reduce cash burn and preserve
existing resources. In February 2018, the Company raised
approximately GBP15.0 million through a placing of 1,729,350
Placing Shares and the Subscription of 134,000 Subscription Shares
at the Issue Price of 805 pence per share.
The Company has executed a significant savings program
throughout the whole organization including management and Board
members
Statement of Comprehensive Income
The loss from operations for the six months ended 30 June 2018
was EUR 14.0 million (six months ended 30 June 2017: loss of EUR
6.8 million). The Company's revenue for the period was EUR 0.0
million (2017: EUR nil) from product sales to Maruishi
Pharmaceutical. The Company also recorded EUR 0.0 million (2017:
EUR 0.7 million) of other operational income from the various
sources. Research and development expenditure increased by EUR 5.7
million to EUR 11.7 million (2017: EUR 6.0 million) as a result of
the increased costs associated with clinical trial costs related to
the end phase of the INTEREST study as well as an increase in
development activities for Clevegen. Administrative expenses
increased by EUR 0.9 million to EUR 2.4 million (2017: EUR 1.5
million) mainly due to external costs related to the development of
internal accounting, financial and reporting processes. Both the
research and development and the administrative expenses include
the IFRS charge resulting from the options allocated by the Board
to the personnel. This had no impact on the cash flow nor the
Company's equity.
The loss after tax for the period was EUR 14.1 million (2017:
loss of EUR 7.2 million) and the basic loss per share was 0.45
(2017: loss per share of 0.26).
Statement of Financial Position and Cash Flows
At 30 June 2018, net assets amounted to EUR 6.7 million (30 June
2017: EUR 7.7 million). The net cash flow for the first six months
in 2018 was EUR 1.8 million positive (2017: EUR 1.1 million
negative). As at 30 June 2018, total cash and cash equivalents held
were EUR 11.2 million (2017: EUR 10.3 million).
Events after the interim period
There have been no major events after the end of the interim
period.
Corporate
As part of the Company's re-focus, Faron today announces that Dr
Jonathan Knowles has resigned from the Board to take up a position
as Chair of the newly formed Clevegen Scientific Advisory Board and
Dr Huaihzeng Peng has resigned from the Board but will continue as
an invited Board Observer.
Both Jonathan and Huaizheng have been invaluable to Faron and we
are grateful to them for their time, expertise and commitment to
the Company.
Summary & Outlook
We have a number of important inflection points expected to
occur during the remainder of 2018. We are particularly excited to
start our first-in-human MATINS trial with Clevegen later this
year. On behalf of the Board, I would like to take this opportunity
to thank our shareholders for their continued support and patience
during this period whilst we have continued to analyse results from
the Phase III INTEREST trial.
Our focus for the remainder of 2018 will be to continue to
rapidly progress Clevegen through the clinic whilst also continuing
to preserve cash in order to deliver value to shareholders. We hope
to be able to communicate a new strategy and commercial pathway for
Traumakine over the coming months and remain optimistic about our
future.
Caution regarding forward looking statements
Certain statements in this announcement, are, or may be deemed
to be, forward looking statements. Forward looking statements are
identified by their use of terms and phrases such as "believe",
"could", "should", "expect", "envisage", "estimate", "intend",
"may", "plan", "potentially", "will" or the negative of those,
variations or comparable expressions, including references to
assumptions. These forward looking statements are not based on
historical facts but rather on the Directors' current expectations
and assumptions regarding the Company's future growth, results of
operations, performance, future capital and other expenditures
(including the amount, nature and sources of funding thereof),
competitive advantages, business prospects and opportunities. Such
forward looking statements reflect the Directors' current beliefs
and assumptions and are based on information currently available to
the Directors.
A number of factors could cause actual results to differ
materially from the results and expectations discussed in the
forward looking statements, many of which are beyond the control of
the Company. In particular, the outcome of clinical trials may not
be favourable or clinical trials over and above those currently
planned may be required before the Company is able to apply for
marketing approval for a product. In addition, other factors which
could cause actual results to differ materially include risks
associated with vulnerability to general economic and business
conditions, competition, environmental and other regulatory
changes, actions by governmental authorities, the availability of
capital markets, reliance on key personnel, uninsured and
underinsured losses and other factors. Although any forward looking
statements contained in this announcement are based upon what the
Directors believe to be reasonable assumptions, the Company cannot
assure investors that actual results will be consistent with such
forward looking statements. Accordingly, readers are cautioned not
to place undue reliance on forward looking statements. Subject to
any continuing obligations under applicable law or any relevant AIM
Rule requirements, in providing this information the Company does
not undertake any obligation to publicly update or revise any of
the forward looking statements or to advise of any change in
events, conditions or circumstances on which any such statement is
based.
Statement of comprehensive income
EUR '000 Note Unaudited Unaudited For the
six months six year ended
ended months 31 December
30 Jun ended 2017
2018 30 Jun
2017
(Restated)
------------------------------------------------ ------ ------------ ------------ -------------
Revenue 20 0 -
Other operating income 14 665 1,495
Research and development expenses (11,701) (5,996) (19,100)
General and administrative expenses (2,368) (1,505) (3,054)
Operating loss (14,034) (6,835) (20,659)
Financial expense (327) (319) (408)
Financial income 305 6 7
-------------------------------------------------------- ------------ ------------ -------------
Loss before tax (14,055) (7,149) (21,060)
Tax expense - (1) (1)
-------------------------------------------------------- ------------ ------------ -------------
Loss for the period (14,055) (7,150) (21,061)
Comprehensive loss for the period attributable
to the equity holders of the Company (14,055) (7,150) (21,061)
-------------------------------------------------------- ------------ ------------ -------------
Loss per ordinary share
Basic and diluted loss per share, EUR (0,45) (0,26) (0.76)
======================================================== ============ ============ =============
Balance Sheet
EUR '000 Note Unaudited Unaudited For the
six months six months year
ended 30 ended 30 ended
Jun 2018 Jun 2017 31 December
(Restated) 2017
----------------------------------- ------ ------------ ------------ -------------
Assets
Non-current assets
Machinery and equipment 20 18 22
Subsidiary shares 18 0 -
Intangible assets 419 313 325
Prepayments and other receivables 1,305 1,527 1,310
------------------------------------------- ------------ ------------ -------------
Total non-current assets 1,761 1,858 1,657
Current assets
Prepayments and other receivables 3,805 2,845 3,920
Cash and cash equivalents 11,155 10,333 9,310
------------------------------------------- ------------ ------------ -------------
Total current assets 14,960 13,178 13,230
Total assets 16,721 15,036 14,887
=========================================== ============ ============ =============
Equity and liabilities
Capital and reserves attributable
to the equity holders of the
Company
Share capital 2,691 2,691 2,691
Reserve for invested unrestricted
equity 64,464 38,161 48,576
Accumulated deficit (60,429) (33,201) (46,524)
------------------------------------ --------- --------- ---------
Total equity 6,727 7,650 4,743
Non-current liabilities
Borrowings 2,105 2,451 2,088
Other liabilities - - 0
------------------------------------ --------- --------- ---------
Total non-current liabilities 2,105 2,451 2,088
Current liabilities
Borrowings - 65 338
Trade payables 4,869 2,011 3,196
Other current liabilities 3,020 2,859 4,522
------------------------------------ --------- --------- ---------
Total current liabilities 7,889 4,936 8,056
Total liabilities 9,994 7,386 10,144
Total equity and liabilities 16,721 15,036 14,887
==================================== ========= ========= =========
Statement of Changes in Equity
EUR '000 Note Share Reserve for Accumulated Total
capital invested unrestricted deficit equity
equity
----------------------------------- ------ --------- ----------------------- ------------ ---------
Balance as at 1 January 2017 2,691 32,362 (26,652) 8,401
Comprehensive loss for the
first six months 2017 - - (7,150) (7,150)
Transactions with equity holders
of the Company
Issue of ordinary shares,
net of transaction costs EUR
388 thousand - 5,448 - 5,448
Share options exercised - 97 - 97
Warrants exercised - 254 - 254
Share-based compensation - 0 600 600
----------------------------------- ------ --------- ----------------------- ------------ ---------
- 5,799 600 6,399
Balance as at 30 June 2017 2,691 38,161 (33,201) 7,650
=================================== ====== ========= ======================= ============ =========
Comprehensive loss for the
last six months 2017 - - (13,911) (13,911)
Transactions with equity holders
of the Company
Issue of ordinary shares,
net of transaction costs EUR
423 thousand - 10,415 - 10,415
Share options exercised - - - -
Warrants exercised - - - -
Share-based compensation - - 589 589
----------------------------------- ------ --------- ----------------------- ------------ ---------
- 10,415 589 11,004
Balance as at 31 December
2017 2,691 48,576 (46,524) 4,743
=================================== ====== ========= ======================= ============ =========
Comprehensive loss for the
first six months 2018 - - (14,055) (14,055)
Transactions with equity holders -
of the Company
Issue of ordinary shares,
net of transaction costs EUR
1,135 thousand - 15,888 - 15,888
Share options exercised - - - -
Warrants exercised - - - -
Share-based compensation - - 150 150
----------------------------------- ------ --------- ----------------------- ------------ ---------
- 15,888 150 16,038
Balance as at 30 June 2018 2,691 64,464 (60,429) 6,727
=================================== ====== ========= ======================= ============ =========
Statement of Cash Flows
EUR '000 Note Unaudited Unaudited For the
six months six months year ended
ended ended 31 December
30 Jun 30 Jun 2017
2018 2017
(Restated)
---------------------------------------- ------ ------------ ------------ -------------
Cash flow from operating activities
Loss before tax (14,056) (7,150) (21,060)
Adjustments for:
Depreciation and amortisation 42 35 76
Interest expense 47 36 75
Unrealised foreign exchange loss
(gain), net (35) 283 290
Share-based compensation 150 589 1,189
------------------------------------------------ ------------ ------------ -------------
Change in net working capital: (13,852) (6,207) (19,430)
Prepayments and other receivables
(increase -) 120 (429) (1,286)
Trade payables (increase +) 1,668 (10) 1,175
Other liabilities (1,502) (288) 1,189
------------------------------------------------ ------------ ------------ -------------
Cash used in operations (13,566) (6,934) (18,352)
Taxes paid 0 (1) (1)
Interest paid (13) (36) (10)
------------------------------------------------ ------------ ------------ -------------
Net cash used in operating activities (13,579) (6,970) (18,363)
Cash flow from investing activities
Payments for intangible assets (150) (41) (90)
Payments for equipment (2) - (8)
------------------------------------------------ ------------ ------------ -------------
Net cash used in investing activities (152) (41) (98)
Cash flow from financing activities
Proceeds from issue of shares 17,023 6,197 17,362
Share issue transaction cost (1,135) (388) (1,148)
Proceeds from borrowings - 368 453
Repayment of borrowings (347) (28) (84)
------------------------------------------------ ------------ ------------ -------------
Net cash from financing activities 15,541 6,149 16,583
Net increase (+) / decrease (-) in
cash and cash equivalents 1,810 (863) (1,878)
Effect of exchange rate changes on cash
and cash equivalents 35 (283) (290)
Cash and cash equivalents at 1 January 9,310 11,478 11,478
Cash and cash equivalents at the
end of period 11,155 10,333 9,310
================================================ ============ ============ =============
Notes to the financial statements
1 Corporate information
Faron Pharmaceuticals Ltd. (the "Company") is a clinical stage
biopharmaceutical company incorporated and domiciled in Finland,
with its headquarters at Joukahaisenkatu 6 B, 20520 Turku, Finland.
The Company has two major drug development projects focusing on
acute trauma, cancer growth and spread and inflammatory
diseases.
The Company is listed on the London Stock Exchange's AIM market
since 17 November 2015, with a ticker FARN.
2 Summary of significant accounting policies
2.1 Basis of preparation
The unaudited interim financial statements have been prepared in
accordance with the International Financial Reporting Standards
(IFRS) of the International Accounting Standards Board (IASB) and
the interpretations of the International Financial Reporting
Standards Interpretations Committee (IFRS IC). The financial
statements have been prepared on a historical cost basis, unless
otherwise stated.
The interim financial statements have been prepared on the basis
of a full retrospective application of IFRS 15, Revenue from
Contracts with Customers, with the adoption date as of 1 January
2017. These policies are consistent with those used in the
financial statements for the year ended 31 December 2017 and with
those that the Company expects to apply in its financial statements
for the year ending 31 December 2018.
The interim financial statements do not include all of the
information required for full annual financial statements and do
not comply with all the disclosures in IAS 34 "Interim Financial
Reporting". Additionally though the interim financial statements
have been prepared in accordance with IFRS, they are not in full
compliance with IFRS.
All amounts are presented in thousands of euros, unless
otherwise indicated, rounded to the nearest euro thousand
2.2 Restatements of previously issued financial statements
Subsequent to the original issuance of the Company's interim
financial statements for the period ended 30 June 2017, the Company
has adopted new and amended accounting standards and corrected
certain prior period (2015 and 2016) errors in its accounting. The
30 June 2017 interim financial statements, as initially reported,
have therefore been amended and restated as follows.
In the process of adopting IFRS 15 Revenue from contracts with
customers (see note 2.23) we identified errors in the application
of IAS 18, which resulted in the following corrections to our
previously issued 30 June 2017 financial statements:
Under IAS 18, the Company deferred EUR 750 thousand upfront fee
from Korean license partner Pharmbio Korea Inc. ("Pharmbio") as at
31 December, 2016. This was not consistent with the revenue
recognition policy that the Company had applied earlier on a
license agreement with similar characteristics. Consequently, this
recognition of upfront fee as revenue resulted in a EUR 750
thousand decrease in accumulated deficit as well as in a reduction
of advances received in the 1 January 2017 opening balance
sheet.
The Company entered into a joint purchase agreement with a third
party pharmaceutical company whereby they agreed to purchase Active
Pharmaceutical Ingredient ('API') from a supplier. Under this
arrangement, the Company received cash from the pharmaceutical
company that it passed on to the supplier. In 2016 the Company had
recognised this cash receipt as revenue and recorded the cost of
both Company's and the third party's API in research and
development expenses, which had zero net impact on equity. Further,
the correction of the related VAT posting of EUR 68 thousand
resulted in an increase in current prepayments and other
receivables and decrease in research and development expenses and
in accumulated deficit in the 1 January 2017 opening balance sheet.
For the period ending 30 June 2017 the correction resulted in a
reduction of revenue by EUR 7 thousand and research and development
expenses by the same amount.
The Company revisited the substance and the accounting treatment
of its financing agreement with A&B (HK) Company Limited
("A&B") entered into in May 2015 and concluded that the share
subscription by A&B comprised of a linked transaction, whereby
A&B simultaneously acquired a license to the Company's
intellectual property. Management has assessed that the
consideration received in excess of the estimated fair value of the
Company's ordinary shares subscribed for by A&B should have
been allocated to the transaction price for the sale of the
licensed intellectual property. The Company has determined that the
license to intellectual property is a right to use type license and
the transaction price should have been recognised in revenue at the
point in time when control to the intellectual property transferred
in May 2015. Therefore the transaction price for the sale of the
licensed intellectual property EUR 690 thousand has been
reclassified in the opening balance of 1 January 2017 within equity
reducing the reserve for invested unrestricted equity and reducing
accumulated deficit.
The Company has corrected amounts in its previous years'
accounting for government grants received in the form of direct
funding from the European Commission and in the form of indirect
government assistance through the below-market rate government
loans. The corrections for direct funding from the European
Commissions related to the timing of the recognition of the
eligible costs and to matching of the grant income to incurred
eligible costs. The correction for the below-market rate government
loans related to recognition of the grant income based on an
accrual basis, instead of recognition upon proceeds received. In
addition, the Company has corrected the carrying value of the
government loans recognised at amortised cost due to an error in
the effective interest rate calculation. These restatements
resulted in EUR 369 thousand decrease in prepayments and other
receivables with corresponding increase in the deficit. The other
operating income in the comprehensive statement of income is
restated and adjusted by EUR 717 thousand with EUR 1 thousand
decrease in financial expense, with a corresponding adjustment in
accumulated deficit, EUR 629 thousand decrease prepayments in other
receivables, EUR 50 thousand increase in the borrowings and EUR 36
thousand increase in other current liabilities. The impact of all
these restatements are reflected in the opening balance of 1
January 2017. During the six months period ended in 30 June 2017,
the amount of direct funding from the European Commissions was
adjusted based on correct recognition of the eligible costs and to
matching of the grant income to incurred eligible costs. This
resulted in an increase of EUR 398 thousand in prepayments and
other receivables and corresponding decrease in accumulated deficit
in closing balance 30 June 2017. During the same period the
correction for the below-market rate government loans related to
recognition of the grant income based on an accrual basis, instead
of recognition upon proceeds received. This resulted in a further
increase of EUR 58 thousand in prepayments and other receivables
and corresponding decrease in accumulated deficit, a decrease of
EUR 34 thousand in non-current borrowings and a decrease of EUR 52
thousand in other current liabilities in the closing balance 30
June 2017.
The Company has incorrectly capitalised in-process research and
development expenditures, which had not met the capitalisation
criteria in IAS 38. Consequently, the asset of EUR 718 thousand was
derecognised and the amortization of EUR 90 thousand has been
reversed in the statement of comprehensive income. Thus the opening
balance 1 January 2017 was adjusted accordingly. During six months
period ended in 30 June 2017 the amortization of EUR 45 thousand
has been reversed in the statement of comprehensive income
decreasing the value of intangible assets.
In the balance sheet, EUR 1,212 thousand relating to prepayments
to a third party Contract Research Organisations and EUR 24
thousand rental deposits have been reclassified from current
prepayments and other receivables to non-current prepayments and
receivables due to the long-term nature of the items. In 30 June
2017 closing balance EUR 52 thousands of prepayments have been
reclassified from current to non-current.
The Company has revised its previous balance sheet
classification of inventories and re-classified the balances
previously presented as inventory prepayments and finished goods to
prepayments and other receivables as such goods are not held for
sale in the Company's ordinary course of business, but will be used
in the Company's research and development activities. This
reclassification totalled to EUR 1,451 thousand in the opening
balance of 1 January 2017.
The Company has corrected the effects of certain prior period
cut-off errors related to charges by vendors and their
sub-contractors in its restated financial statements resulting in
an increase of EUR 614 thousand in non-current other liabilities,
EUR 845 thousand increase in other current liabilities, EUR 146
thousand net increase in trade payables, EUR 19 thousand increase
in prepayments and other receivables and corresponding increase of
EUR 1 586 thousand in accumulated deficit as at 1 January 2017.
During the six months period ended in 30 June 2017 the correction
of cut-off errors resulted in a decrease of other non-current
liabilities of EUR 613 thousand and an increase of Other current
liabilities of EUR 686 thousand and a EUR 74 thousand increase in
accumulated deficit.
The Company has also revised the presentation of share-based
compensation of EUR 954 thousand in the balance sheet as at 1
January 2017 from reserve for invested unrestricted equity to
accumulated deficit
The Company has corrected the proceeds from borrowings in the
statement of cash flow for the financial year ended 31 December
2016 by EUR 339 thousand to reflect gross proceeds received. The
cash flows for the withdrawal of the borrowings in the form of
R&D loans were previously presented net of grant benefit. In
addition, the Company has revised the presentation of the statement
of cash flows for the financial year ended 31 December 2016
relating to unrealised foreign exchange gains amounting to EUR 627
thousand, interest expense of EUR 24 thousand and the interest paid
of EUR 357 thousand, previously presented on a combined basis as
financial items. The Company corrected its presentation to disclose
share issue transaction cost and the proceeds from issue of shares
on a gross basis.
Statement of comprehensive income
EUR'000 Reference As originally Restatement Amount
within reported as adjusted
note June June
2.2 2017 2017
------------------------------------------------ ----------- -------------- ------------ -------------
Revenue 1b 7 (7) 0
Other operating income 2 103 562 665
Research and development expenses 1b,3,5,6,7 (5,709) (287) (5,996)
General and administrative expenses 7 (1,320) (185) (1,505)
Operating loss (6,919) 84 (6,835)
Financial expense 2 (299) (20) (319)
Financial income 6 - 6
------------------------------------------------ ----------- -------------- ------------ -------------
Loss before tax (7,212) 63 (7,149)
Tax expense (1) - (1)
------------------------------------------------ ----------- -------------- ------------ -------------
Loss for the period (7,213) 63 (7,150)
Comprehensive loss for the period attributable
to the equity holders of the Company (7,213) 63 (7,150)
------------------------------------------------ ----------- -------------- ------------ -------------
Loss per ordinary share
Basic and diluted loss per share, EUR (0,26) (0,26)
================================================ =========== ============== ============ =============
EUR'000 Reference As originally Restatements Amount as
within reported, by 30.6.2017 adjusted,
note 2.2 as at (cumul.) as at 31 June
June 2017
30, 2017
Assets
Non-current assets
Machinery and equipment 18 18
Intangible assets 3 897 -584 313
Prepayments and other receivables 4,5 0 1 527 1 527
Total non-current assets 915 943 1 858
Current assets
Inventories 4,5 1 503 -1 503 0
1b), 2,
Prepayments and other receivables 4, 6 3 333 -487 2 845
Cash and cash equivalents 10 333 0 10 333
Total current assets 15 169 -1 990 13 178
Total assets 16 084 -1 047 15 036
Equity and liabilities
Capital and reserves
Share capital 2 691 0 2 691
Reserve for invested unrestricted
equity 39 815 -1 654 38 161
1,2,3,
Accumulated deficit 6, 7 -33 027 -176 -33 202
Total equity 9 480 -1 830 7 650
Non-current liabilities
Borrowings 2 2 434 16 2 450
Other liabilities 6 1 1
Total non-current liabilities 2 434 17 2 451
Current liabilities
Borrowings 65 0 65
Trade and other payables 6 2 011 1 2 011
1a), 2,
Other current liabilities 6 2 094 765 2 859
Total current liabilities 4 170 766 4 936
Total liabilities 6 604 783 7 386
Total equity and liabilities 16 084 -1 047 15 036
2.3 Going Concern
The Company has forecast its estimated cash requirements over
the next twelve months. In order to make these forecasts the
Company has made a number of assumptions regarding the quantity and
timing of future expenditure and income as well as other key
factors. Though these estimates have been made with caution and
care, they continue to contain significant amount of uncertainty.
Based on the forecast the Company believes that it has adequate
financial resources to continue its operations for the foreseeable
future (at least twelve months from the date of this report) and
therefore these interim financial statements have been prepared on
a going concern basis. In its meeting on 12 September 2018 the
Board of Directors of Faron Pharmaceuticals Ltd. approved the
publishing of interim financial statements.
3 Revenue
The revenue for the first six months in 2018 was EUR 20,424
euro. This consisted of sales of clinical study material to
Maruishi.
4 Other operating income
Other operating income of EUR 13,850 consists of income from
various sources.
5 Tekes loans
On 30 June 2018 the total amount of all Tekes loans was EUR
2,487,160. The loans have a maturity of 10 years from the first
instalment, of which the first five years are free of repayment.
The Interest of all Tekes loans is currently one per cent. Loans
are unsecured and if the projects fall short of their goals and
results cannot be commercialised, part or all of the loans may
afterwards be converted into a grant.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR UOVVRWRAKARR
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