TIDMMTPH
RNS Number : 0340S
Midatech Pharma PLC
28 September 2017
Midatech will host an analyst briefing, conference call and live
Q&A session today (Thursday 28 September 2017) at 1400 BST /
0900 EDT discuss the Interim Results. Dr Jim Phillips, Chief
Executive Officer, and Nick Robbins-Cherry, Chief Financial
Officer, will participate. Dial-in details are: UK: +44 1452 555
566, US: +1 86 69 66 94 39, ID: 82774809. The presentation will be
available on Midatech's website shortly before the call, and a
recording will be available shortly afterwards.
28 September 2016
Midatech Pharma PLC
("Midatech" or the "Company")
Interim results for the six months ended 30 June 2017
Midatech Pharma plc (AIM: MTPH), the international specialty
pharmaceutical company focussed on commercialising and developing
products in oncology, immunology and other therapeutic areas,
announces its results for the six months ended 30 June 2017.
OPERATIONAL HIGHLIGHTS (including post period end)
-- Q-Octreotide (MTD201), for the treatment for carcinoid cancer
and acromegaly, ready to commence its first-in-human bioequivalence
study in H2 2017
-- MTX110, for the treatment of diffuse intrinsic pontine glioma
(DIPG), is preparing to enter a first clinical trial in
patients
-- MTR104, for the treatment of hepatocellular carcinoma (HCC),
demonstrated a high degree of preference for HCC cancer cells over
heathy tissue and very significant anti-tumour activity. This
programme is due to commence its first human study in 2018.
-- Positive progress with our early stage cancer immunotherapy programmes
-- Strong performance from Midatech's US commercial business, Midatech Pharma US Inc.
FINANCIAL HIGHLIGHTS
-- Total gross revenues(1) increased by 42% to GBP5.39 million (H1 2016: GBP3.80 million)
-- Total net revenues(2) increased by 17% to GBP3.45million (H1 2016: GBP2.95 million)
-- Statutory revenue also grew strongly, by 16%, to GBP3.02 million (H1 2016: GBP2.60 million)
-- Research and development costs increased by 3% to GBP2.12 million (H1 2016: GBP2.05 million)
-- Distribution costs, sales and marketing decreased slightly to
GBP4.11 million (H1 2016: GBP4.24 million)
-- Administrative expenses were broadly constant at GBP6.92 million (H1 2016: GBP6.82 million)
-- Net cash outflow used in operations (after changes in working
capital) was GBP10.18 million, up 23% from GBP8.25 million in H1
2016. The cash balance at 30 June 2017 was GBP6.19 million
-- Loss per share was 19p compared to 25p in H1 2016
-- Placing announced on 28 September 2017 to raise up to GBP6
million in new equity with up to a further GBP2 million by way of
an Open Offer to shareholders
Commenting on the interim results, Dr. Jim Philips, CEO of
Midatech Pharma, said: "Across both our internal pipeline and
commercial activities I am pleased to report a good first half to
2016. With our broad pipeline moving forward, we will continue to
invest in R&D and Midatech's future, led by Q-Octreotide. Our
commercial arm in the US is providing increasing revenues, and the
platform to launch our own products in the coming years. The Board
believes that the Company's R&D programme pipeline could add
significant shareholder value to the Company and is evaluating a
number of funding options to ensure that the Company has the
resources to progress these programmes further. The Placing
announced today to raise up to GBP6 million with up to a further
GBP2 million by way of an Open Offer to shareholders, in addition
to further funds raised by potentially negotiating a revised debt
facility in due course, will be invested to progress Midatech's
three lead programmes, each of which has key value inflection
points in 2017-2018."
This announcement contains insider information for the purposes
of Article 7 of Regulatory (EU) No596/2014.
- Ends -
For more information, please contact:
Midatech Pharma PLC
Jim Phillips, CEO
Tel: +44 (0)1235 888300
www.midatechpharma.com
Panmure Gordon (UK) Limited (Nominated Adviser and Broker)
Corporate Finance
Freddy Crossley / Duncan Monteith
Corporate Broking
Tom Salvesen
Tel: +44 (0)20 7886 2500
Consilium Strategic Communications (Financial PR)
Mary Jane Elliott / Ivar Milligan
Tel: +44 (0)20 3709 5700
Email: midatech@consilium-comms.com
Westwicke Partners (US Investor Relations)
Chris Brinzey
Tel: +1 339 970 2843
Email: chris.brinzey@westwicke.com
Notes for Editors
About Midatech Pharma PLC
Midatech is an international specialty pharmaceutical company
focused on the research and development of a pipeline of medicines
for oncology and other therapeutic areas, and marketing these
through its established US commercial operation which includes four
cancer care supportive products and two further co-promoted
products Midatech's strategy is to internally develop oncology
products, and to drive growth both organically and through
strategic acquisitions. The Company has three high value lead
programmes progressing through pre-clinical and clinical
development, which the Directors believe are poised to deliver key
value drivers in the next 9-18 months. The Company's R&D
activities are focused on three innovative platform technologies to
deliver drugs at the "right time, right place": gold nanoparticles
("GNPs") to enable targeted delivery; Q-Sphera polymer microspheres
to enable sustained release ("SR") delivery; and Nano Inclusion
("NI") to provide local delivery of therapeutics, initially to the
brain. The Group, listed on AIM: MTPH and Nasdaq: MTP, employs
c.100 staff in four countries. For further company information see:
www.midatechpharma.com
Forward-Looking Statements
Certain statements in this press release may constitute
"forward-looking statements" within the meaning of legislation in
the United Kingdom and/or United States, including estimates for
interim results for the six months ended 30 June 2017. These
forward-looking statements are based upon assumptions made by
Midatech as of the date hereof and are subject to known and unknown
risks and uncertainties that could cause actual results to differ
materially from those anticipated. Actual results may differ from
those indicated as a result of the finalization of the interim
results for the six months ended 30 June 2017, as well as other
risks and uncertainties, including, without limitation, the risks
and uncertainties described from time to time in the filings made
by the Company with the Securities and Exchange Commission ("SEC").
Such forward-looking statements include, but are not limited to
statements regarding Midatech's anticipated interim financial
results, the anticipated financial results for the full year 2017,
future revenue growth, future advancement and success of its
oncology programmes, and the successful development and regulatory
approval of Midatech's products. Any forward-looking statements are
based on currently available competitive, financial and economic
data together with management's views and assumptions regarding
future events and business performance as of the time the
statements are made and are subject to risks and uncertainties. We
wish to caution you that there are some known and unknown factors
that could cause actual results to differ materially from any
future results, performance or achievements expressed or implied by
such forward-looking statements.
Reference should be made to those documents that Midatech shall
file from time to time or announcements that may be made by
Midatech in accordance with the London Stock Exchange AIM Rules for
Companies ("AIM Rules"), the Disclosure and Transparency Rules
("DTRs") and the rules and regulations promulgated by the SEC,
which contains and identifies other important factors that could
cause actual results to differ materially from those contained in
any projections or forward-looking statements. These
forward-looking statements speak only as of the date of this
announcement. All subsequent written and oral forward-looking
statements by or concerning Midatech are expressly qualified in
their entirety by the cautionary statements above. Except as may be
required under the AIM Rules or the DTRs or by relevant law in the
United Kingdom or the United States, Midatech expressly disclaims
any obligation or undertaking to publicly update or revise any
forward-looking statements presented herein because of new
information, future events, changes in expectations, or events
otherwise arising. For further information regarding risks and
uncertainties associated with Midatech's business, please refer to
Midatech's filings with the SEC, including the Annual Report on
Form 20-F for the fiscal year ended December 31, 2016, filed by
Midatech with the SEC on April 6, 2017.
CHAIRMAN AND CHIEF EXECUTIVE'S REVIEW
We are pleased to report that the first half of 2017 has been
another positive period for the Midatech business. There has been
significant progress in our value driving R&D programmes and
strong growth from our US commercial organisation as it moves
towards becoming a profitable business.
Value driving R&D
During the first half of 2017 Midatech has made considerable
progress in its three lead R&D programmes.
Q-Octreotide (MTD201) is our treatment for carcinoid cancer and
acromegaly, built on Midatech's Q-Sphera(TM) sustained release
platform technology. During its pre-clinical programme, we
demonstrated that Q-Octreotide is a therapeutic match for the
Novartis product, Sandostatin LAR(R) , and offers some important
advantages to clinicians and patients. Sandostatin LAR(R) is in a
$2bn p.a. market and we are optimistic that Q-Octreotide can
capture up to 5% market share.
The Q-Octreotide programme will commence its first-in-human
bioequivalence study in Q4 2017 and the results of this initial
study will determine the regulatory path and time to filing for
marketing approval.
The second of our key, near-term programmes is our MTX110
product for the treatment of diffuse intrinsic pontine glioma
(DIPG), a rare but deadly childhood brain cancer. This terrible
condition affects a small number of young children every year and,
due to the lack of an effective, existing treatment, DIPG has an
average survival time of around nine months. MTX110 uses the
approved product, panobinostat which Midatech in-licenced from
Novartis during the period. Midatech's innovative formulation of
this well-established oncology compound has already been used to
treat a small number of children in the UK and the US, on a
compassionate use basis, and it is about to enter a first clinical
trial in patients which, if successful, could lead to an early
approval. Early approvals are considered by the US Food and Drug
Administration where drugs for serious conditions that fill an
unmet medical need (there are no effective, existing therapies for
DIPG) are approved based on a surrogate endpoint. A surrogate
endpoint in this case is likely to be progression free survival of
the patients over a 12-month period, as opposed to looking for
clinical benefits over a longer period. This study should read out
towards the end of 2018 and, if successful, expedited approval will
be sought from regulators.
Midatech's third key programme is MTR104 for the treatment of
hepatocellular carcinoma (HCC). MTR104 is built on our proprietary
gold nanoparticle platform and in its pre-clinical studies the
product has demonstrated a high degree of preference for HCC cancer
cells over heathy tissue and has shown very significant anti-tumour
activity. Recent pre-clinical studies have suggested that MTR104 is
potentially more effective at treating HCC than Bayer's Nexavar(R)
(sorafenib). This programme is due to commence its first human
study in 2018.
The global HCC market is estimated to be worth around $1bn by
2024 however, due to the limited efficacy and high toxicity of
existing treatments, we believe there is scope to significantly
expand this market.
In addition to these three key programmes we have also made good
progress elsewhere including our early stage cancer immunotherapy
programmes which are showing early promise. These activities are
expected to drive additional value in the mid to longer-term.
Existing commercialisation capability
Midatech's US commercial operation is now well-established. This
business was acquired to enable the commercialisation of Midatech's
pipeline of R&D stage products when they are approved for sale.
By selling these products ourselves, our strategy is to retain
significantly higher value for Midatech versus a partnering
approach.
Midatech Pharma US (MPUS) currently sells four cancer supportive
care products, including Gelclair(R) and Zuplenz(R) , and two
co-promoted products. This portfolio of products continues to enjoy
strong growth and we anticipate that MPUS, as a standalone entity,
will become profitable on a monthly basis by early 2018.
Total gross revenues for the first half of the year were
GBP5.39m (H1 2016: GBP3.80m). Gross product sales grew by 50% to
GBP4.91m, compared to GBP3.27m for the first half of 2016.
Statutory revenue from product sales grew by 23% to GBP2.97m from
GBP2.41m in H1 2016 reflecting higher discounts and other sales
incentives that are necessary to access the larger hospital
accounts and drive top-line sales. Total gross revenues are in line
with market expectations and we have seen a strong start to the
second half of the financial year.
In-house manufacturing
Our manufacturing facility in Bilbao, Spain has been at the
centre of R&D activity in the first half of 2017. Towards the
end of 2016 we completed the expansion of this facility to enable
production of our Q-Sphera sustained release products, specifically
Q-Octreotide for its forthcoming human clinical programme. The
manufacturing run has now been successfully completed and we are
ready to commence the Q-Octreotide study once the necessary
regulatory approval is received.
Outlook
Our key pipeline R&D products have all reached critical
points in their development, with pivotal human studies due to
commence in the second half of 2017 or early in 2018. We believe
that these programmes are all poised to drive significant value for
Midatech. Our commercial business continues to enjoy strong growth
and, notwithstanding the challenges in maintaining margins, we
anticipate that it will become profitable on a month to month basis
by early 2018. Recent challenges have temporarily slowed the
Company's development programme progression, including commercial
organisation costs and margins being under pressure and clinical
study designing taking longer than expected, and reduced its
ability to invest in key programmes. The Placing announced today to
raise up to GBP6 million with up to a further GBP2 million by way
of an Open Offer to shareholders, in addition to further funds
raised by potentially negotiating a revised debt facility in due
course, will be invested to progress Midatech's three lead
programmes, each of which has key value inflection points in
2017-2018.
Rolf Stahel Dr Jim Phillips
Chairman Chief Executive
Officer
FINANCIAL REVIEW
Key performance indicators
H1 2017 H1 2016 Change
Total gross revenues(1) GBP5.39m GBP3.80m 42%
Statutory revenue GBP3.02m GBP2.60m 16%
R&D costs GBP2.12m GBP2.05m 3%
R&D as % of operating costs 16% 16% n/a
Loss from operations GBP10.04m GBP10.34m -3%
Net cash outflow for the
period GBP11.42m GBP8.80m 30%
Average headcount 82 79 4%
(1) Total gross revenues represents the full list price of
products shipped to wholesales and other customers before product
returns, discounts, rebates and other incentives based on the sales
price and grant revenue.
Revenue from product sales and cash management continue to be
the main areas of focus for Midatech's KPIs along with, R&D
spend and operating results. Additional, non-financial KPIs,
including further KPIs in respect of the research and development
programmes, will be added as the business continues to develop.
Revenue
Statutory revenue for the six months to 30 June 2017 was
GBP3.02m compared to GBP2.60m in the first six months of 2016, an
increase of 16%. This was driven by strong US product sales which
grew by 23%, from GBP2.41m in H1 2016 to GBP2.97m for the six
months to 30 June 2017. A further GBP53k of revenue (H1 2016:
GBP190k) came from collaborations and sales made by the UK
business. Other income of GBP0.42m (H1 2016: GBP0.35m) came from
grant income received under the Group's two European grant funded
programmes.
The Board is pleased with this growth in revenue, however, the
increase in allowances, discounts and Medicaid rebates, over the
previous year is a key area to improve on going forward.
Research and development costs
Expenditure on research and development increased slightly in H1
2017 to GBP2.12m, a 3% increase. During the first half of the year,
significant progress has been made in our three, key R&D
programmes. The scheduled, pivotal clinical trials for both our
Q-Octreotide (MTD201) and DIPG (MTX110) programmes, and HCC product
(MTD119) due to start in H2 2017, are expected to drive increased
R&D spending for the second half of the year.
Distribution costs, sales and marketing
Distribution, sales and marketing costs for the six-month period
to 30 June 2017 were GBP4.10m (H1 2016: GBP4.24m) and relate
exclusively to MPUS. This includes GBP0.78m (H1 2016: GBP1.71m) of
amortisation charges relating to the acquired intangibles in the
consolidated accounts.
Administrative costs
Administrative expenses in the six-month period to 30 June 2017
were GBP6.92m (H1 2016: GBP6.82m). This is consistent with H1 2016.
Over 50% of administrative costs relate to salary costs of GBP3.81m
and a further GBP0.5m of depreciation charges. We do not anticipate
any significant change to administration expenses in the
immediate
Cash outflows used in operations (after changes in working
capital) in H1 2017 were GBP10.18m compared to GBP8.25m in H1 2016.
This difference of GBP1.93m was substantially due to the
distribution in January 2017 of GBP1.15m of grant monies held at
the end of 2016 on behalf of H2020 grant consortium members and
reflected in the year-end cash balance and in liabilities.
future.
Cash flows
A further GBP1.21m of cash was used in investing activities in
H1 2017 (H1 2016: GBP0.60m), including milestone payments
associated with Midatech's MTX110 product. Capital expenditure for
H1 2017 was GBP0.44m, which is significantly lower than the
GBP0.75m in H1 2016 (this was offset by a credit of GBP157k in
interest received in 2016, compared to GBP14k this year). During
2016, we undertook a significant expansion of our Bilbao
manufacturing facility to enable the production of sustained
release products and in particular Q-Octreotide for use in the
forthcoming human clinical trial. This work was completed in 2016.
Capital expenditure in H1 2017 was mainly adding further analytical
capability to our UK gold nanoparticle and sustained release
research facilities, as well as further enhancements to the
manufacturing facility in Bilbao.
These cash movements resulted in a cash balance of GBP6.19m as
at 30 June 2017 compared to GBP17.61m at 31 December 2016. The
Group continues to maintain its usual stringent controls over
costs.
On 27 February 2017, the Company announced a senior secured GBP6
million loan agreement. The Company has not drawn down any tranches
of this loan due to the subsequent financial and operational
performance of the Company causing the terms of the loan agreement
to no longer be suitable for the Company's requirements or
purposes. As such, the Company is negotiating a revised debt
facility, with the Group currently in advanced negotiation with a
number of new providers in addition to its existing provider, which
the Directors reasonably believe could be agreed by the end of
2017.
Whilst the first half of 2017 included around GBP1.93m of
non-recurring cash outflow (the largest part of this being the
GBP1.15m of grant monies distributed referenced above) the likely
cash burn in the second half of the year, given the expected
increase in R&D expenditures, implies limited headroom afforded
by existing funding. The Board is evaluating various near-term
funding options available to the Group, including the proposed
Placing and Open Offer, and, based on on-going discussions and the
net proceeds from the proposed Placing and Open Offer, the
Directors are confident that additional working capital will become
available before the end of the year. We are therefore satisfied
that it is appropriate to prepare these accounts on a going concern
basis.
So far in 2017, we have continued to build on the progress made
over the previous two years since our AIM IPO and to deliver on all
areas of our stated strategy of:
-- In-house development of our own product portfolio in rare
cancers and with partners in other indications;
-- Expansion of our commercial operations to facilitate the
future commercialisation of Midatech's pipeline products; and
-- Acceleration of growth through strategic acquisition of
complementary products and technologies.
The Group had a shift in focus for 2017 as Midatech has made a
significant effort to build on its commercial development in 2016
by moving its in-house products closer to market. Partnering will
continue to be considered where it can bring added value.
At this time, we have not seen any significant impact of the
UK's decision to leave the European Union, however, until the
nature of the UK's "post-Brexit" relationship with the EU becomes
clearer it is difficult to predict the longer-term effects. We do
not believe that there will be any implications on our existing EU
funded grant programmes, however, we are evaluating how the Group
should deal with any future opportunities.
Euro and US dollar exchange rates have been substantially more
stable during 2017 than was the case in 2016, particularly in the
period immediately following the "Brexit" decision. Costs incurred
in those currencies are broadly comparable with 2016, and whilst
the US dollar denominated revenues have grown strongly, the impact
of any exchange rate movements in this regard has not been
material.
Nick Robbins-Cherry
Chief Financial Officer
Condensed consolidated unaudited statement of comprehensive
income
for the six month period ended 30 June 2017
Note Six months Six months
ended ended
30 30
June 2017 June 2016
unaudited (re-stated)
unaudited
GBP'000 GBP'000
Gross sales 4 4,965 3,456
Grant revenue 421 347
_______ _______
Total gross revenues 5,386 3,803
------------------------------- ----- ----------- -------------
Revenue 4 3,024 2,604
Grant revenue 421 347
_______ _______
Total net revenue 3,445 2,951
Cost of sales 4 (343) (180)
_______ _______
Gross profit 3,102 2,771
Research and development
costs 4 (2,116) (2,048)
Distribution costs,
sales and marketing (4,107) (4,237)
Administrative costs (6,916) (6,821)
_______ _______
Loss from operations (10,037) (10,335)
Finance income 420 765
Finance expense (61) -
________ _______
Loss before tax (9,678) (9,570)
Taxation 3 644 1,365
________ _______
Loss for the period
attributable to the
owners of the parent (9,034) (8,205)
________ ________
Other comprehensive
income:
Items that will or
may be reclassified
subsequently to profit
or loss when specific
conditions are met:
Exchange (losses)/
gains arising on translation
of foreign operations (148) 1,974
________ _______
Total other comprehensive
income, net of tax (148) 1,974
________ _______
Total comprehensive
loss attributable
to the owners of the
parent (9,182) (6,231)
________ ________
Loss per share
Basic and diluted
loss per ordinary
share - pence 5 (19p) (25p)
________ ________
Condensed consolidated unaudited statement of financial position
at 30 June 2017
Note As at As at
30 June 31
2017 December
unaudited 2016
Assets GBP'000 GBP'000
Non-current assets
Property, plant and
equipment 6 2,728 2,766
Intangible assets 7 30,388 31,172
Other receivables
due in greater than
one year 460 448
_______ _______
33,576 34,386
_______ _______
Current assets
Inventories 913 817
Trade and other receivables 2,579 2,439
Income tax receivable 2,027 1,439
Cash and cash equivalents 6,185 17,608
_______ _______
11,704 22,303
_______ _______
Total assets 45,280 56,689
_______ _______
Liabilities
Non-current liabilities
Borrowings 1,219 1,620
_______ _______
1,219 1,620
_______ _______
Current liabilities
Trade and other payables 6,647 8,407
Borrowings 557 538
Derivative financial
liability-equity settled 9 44 400
_______ _______
7,248 9,345
_______ _______
Total liabilities 8,467 10,965
_______ _______
Issued capital and
reserves attributable
to owners of the parent
Share capital 10 1,002 1,002
Share premium 47,211 47,211
Merger reserve 53,003 53,003
Foreign exchange reserve 3,470 3,618
Accumulated deficit (67,873) (59,110)
_______ _______
Total equity 36,813 45,724
_______ _______
Total equity and liabilities 45,280 56,689
_______ _______
Condensed consolidated unaudited statement of cash flows
for the six month period ended 30 June 2017
Six months Six months
ended ended
30 30
June 2017 June 2016
unaudited unaudited
GBP'000 GBP'000
Cash flows from operating
activities
Loss after tax (9,034) (8,205)
Adjustments for:
Depreciation of property,
plant and equipment 499 442
Amortisation of intangible
fixed assets 780 1,709
Share based payment expense 271 75
Net finance income (359) (765)
Taxation (644) (1,365)
Loss on disposal of tangible 29 -
fixed assets
_______ _______
Cash flows from operating
activities before changes
in working capital (8,458) (8,109)
Increase in inventories (141) (328)
(Increase)/Decrease in
trade and other receivables (223) 891
Decrease trade and other
payables (1,358) (702)
_______ _______
Cash used in operations (10,180) (8,248)
Taxes received 66 204
_______ _______
Net cash used in operating
activities (10,114) (8,044)
_______ _______
Investing activities
Purchases of property,
plant and equipment (440) (752)
Purchases of Intangible (781) -
Assets
Interest received 14 157
_______ _______
Net cash used in investing
activities (1,207) (595)
Financing activities
Payments to finance lease
creditors (28) (15)
Repayment of borrowings (70) (149)
_______ _______
Net cash used in financing
activities (98) (164)
Net decrease in cash and
cash equivalents (11,419) (8,803)
Cash and cash equivalents
at beginning of period 17,608 16,175
Exchange gains on cash
and cash equivalents (4) (146)
_______ _______
Cash and cash equivalents
at end of period 6,185 7,226
_______ _______
Condensed consolidated unaudited statement of changes in
equity
for the six month period ended 30 June 2017
Share Share Merger Shares Foreign Accumulated Total
capital premium reserve to be issued exchange deficit equity
reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January 2017 1,002 47,211 53,003 - 3,618 (59,110) 45,724
Loss for the period - - - - - (9,034) (9,034)
Foreign exchange
translation - - - - (148) - (148)
______ ______ ______ ______ ______ ______ ______
Total comprehensive
loss - - - - (148) (9,034) (9,182)
______ ______ ______ ______ ______ ______ ______
Transactions with
owners
Share based payment - - - - - 271 271
______ ______ ______ ______ ______ ______ ______
At 30 June 2017 1,002 47,211 53,003 - 3,470 (67,873) 36,813
______ ______ ______ ______ ______ ______ ______
At 1 January 2016 1,002 31,643 52,803 200 390 (39,151) 46,887
Loss for the period - - - - - (8,205) (8,205)
Foreign exchange
translation - - - - 1,974 - 1,974
______ ______ ______ ______ ______ ______ ______
Total comprehensive
loss - - - - 1,974 (8,205) (6,231)
______ ______ ______ ______ ______ ______ ______
Transactions with
owners
Issue of shares - - 200 (200) - - -
Share based payment - - - - - 75 75
______ ______ ______ ______ ______ ______ ______
At 30 June 2016 1,002 31,643 53,003 - 2,364 (47,281) 40,731
______ ______ ______ ______ ______ ______ ______
Notes forming part of the condensed consolidated unaudited
interim financial information
for the six month period ended 30 June 2017
1 Basis of preparation
The unaudited interim consolidated financial information for the
six months ended 30 June 2017 has been prepared following the
recognition and measurement principles of the International
Financial Reporting Standards, International Accounting Standards
and Interpretations (collectively IFRS) issued by the International
Accounting Standards Board (IASB), and as adopted by the EU and in
accordance with International Accounting Standard 34 Interim
Financial Reporting ('IAS34'). The interim consolidated financial
information does not include all the information and disclosures
required in the annual financial information, and should be read in
conjunction with the audited financial statements for the year
ended 31 December 2016.
The condensed interim financial information contained in this
interim statement does not constitute statutory financial
statements as defined by section 434(3) of the Companies Act 2006.
The condensed interim financial information has not been audited.
The financial information for the year ended 31 December 2016 is
derived from the audited statutory financial statements for the
year ended 31 December 2016. The independent auditor's report was
unqualified and did not contain any statement under section 498(2)
or 498(3) of the Companies Act 2006. Midatech's annual reports may
be downloaded from the Company's website at
http://www.midatechpharma.com/investors/financial-reports.html, or
a copy may be obtained from 65 Innovation Drive, Milton Park,
Abingdon, Oxfordshire OX14 4RQ.
There are no new standards or interpretations applicable to the
Group for the accounting period commencing 1 January 2017 for
adoption.
Going concern
The Group is subject to a number of risks similar to those of
other development and early-commercial stage pharmaceutical
companies. These risks include, amongst others, generation of
revenues from the existing product portfolio and in due course the
development portfolio and risks associated with research,
development, testing and obtaining related regulatory approvals of
its pipeline products. Ultimately, the attainment of profitable
operations is dependent on future uncertain events which include
obtaining adequate financing to fulfil the Group's commercial and
development activities and generating a level of revenue adequate
to support the Group's cost structure.
The Group has experienced net losses and significant cash
outflows from cash used in operating activities over the past years
as it develops its portfolio. As at 30 June 2017 the Group had
total equity of GBP36.81m (GBP45.72m 31 December 2016), it incurred
a net loss after tax for the six months to 30 June 2017 of GBP9.03m
(GBP8.21m H1 2016) and used cash in operating activities of
GBP10.18m (GBP8.25m H1 2016) for the same period. As at 30 June
2017, the Group had cash and cash equivalents of GBP6.19m.
The future viability of the Group is dependent on its ability to
generate cash from operating activities, to raise additional
capital to finance its operations or to successfully obtain
regulatory approval to allow marketing of the Group's development
products. The Group's failure to raise capital as and when needed
could have a negative impact on its financial condition and ability
to pursue its business strategies.
The Directors have prepared cash flow forecasts and considered
the cash flow requirement for the Group for a period including
twelve months from the date of approval of this interim financial
information. These forecasts show that further financing will be
required during the course of the next 12 months. This requirement
for additional financing in the short term represents a material
uncertainty that may cast significant doubt upon the Group's
ability to continue as a going concern.
In addition to utilising the existing cash reserves, the
Directors are evaluating a number of near-term funding options
available to the Group and are confident that additional working
capital will become available in the timeframe required and on
terms acceptable to the Board and shareholders. Therefore, after
considering the uncertainties the Directors consider it is
appropriate to continue to adopt the going concern basis in
preparing the interim financial information.
The condensed financial information for the six-month period was
approved by the board on 27 September 2017.
2 Accounting policies
The accounting policies adopted are consistent with those
followed in the preparation of the audited statutory financial
statements for the year ended 31 December 2016.
A number of new standards, amendments to standards, and
interpretations are not effective for 2017, and therefore have not
been applied in preparing this interim financial information.
The directors are currently reviewing the impact of IFRS 9
"Financial Instruments", IFRS 15 "Revenue from Contracts with
Customers and IFRS 16 "Leases" and are yet to conclude on whether
any of these standards will have a significant impact on the
financial statements of the Group in the year of initial
application.
The other standards, interpretations and amendments issued by
the IASB (of which some are still subject to endorsement by the
European Union), but not yet effective are not expected to have a
material impact on the Group's future consolidated financial
statements.
Some of the significant accounting policies require management
to make difficult, subjective or complex judgments or estimates.
The policies which management consider critical because of the
level of complexity, judgment or estimation involved in their
application and their impact on the financial Information are:
-- Business combinations
-- Impairment of goodwill and intangible assets not yet ready for use
-- Share-based payments
-- Income Taxes
-- Intangible asset recognition
-- Fair value through profit and loss derivative liabilities
3 Taxation
Income tax is recognised or provided at amounts expected to be
recovered or to be paid using the tax rates and tax laws that have
been enacted or substantively enacted at the Group Statement of
Financial Position date. Research and development tax credits are
recognised on an accruals basis and are included as an income tax
credit under current assets. The research and development tax
credit recognised is based on management's best estimate of the
expected tax claim for the period and is recorded within taxation
as under the Small and Medium-sized Enterprise Scheme.
Six months Six months
ended ended
30 June 30 June
2017 unaudited 2016 unaudited
GBP'000 GBP'000
Income tax credit 644 725
Deferred tax credit
Reversal of temporary differences
(note 8) - 640
_______ _______
Total tax credit 644 1,365
_______ _______
4 Segment information
Re-statement of income statement for the six months ended 30
June 2016
Total gross revenues represents the full list price of products
shipped to wholesalers and other customers before product returns,
discounts, rebates and other incentives based on the sales price,
and grant revenue. Total net revenues represents statutory revenue
plus grant revenue. In preparing our financial statements for the
year ended 31 December 2016, it was identified that, throughout H1
2016, credits for product returns, rebates, discounts and other
incentives based on sales price totaling GBP0.85m had been
incorrectly classified as cost of sales instead of as a reduction
from total gross revenues. This was correctly presented in the
audited financial statements for the year ended 31 December 2016
and the comparative figures for the six months ended 30 June 2016
have been re-stated in this interim financial information to reduce
both Revenue and Cost of sales by this amount. This re-statement
has not impacted gross profit, loss from operations or total equity
in any of the periods presented.
Revenue
Geographical analysis of statutory revenue by destination of
customer
Six months Six months
ended ended
30 June 30 June
2017 unaudited 2016 (re-stated)
unaudited
GBP'000 GBP'000
United Kingdom 28 42
Austria 25 34
United States 2,971 2,528
_______ _______
3,024 2,604
_______ _______
In 2017, the Group's top three customers in the Commercial
segment all accounted for over 10% of revenue. Similarly, in 2016
the Group had three customers, all in the Commercial segment, that
each accounted for at least 10% of total revenue.
2017 2016
Customer A (Commercial) 25% 20%
Customer B (Commercial) 16% 15%
Customer C (Commercial) 14% 10%
The Group contains two reportable operating segments as
follows:
-- Pipeline Research and Development: The Pipeline Research and
Development ("Pipeline R&D") segment seeks to develop products
using the Group's nanomedicine and sustained release technology
platforms.
-- Commercial: The Commercial segment distributes and sells the
Group's commercial products. Midatech Pharma US promotes the
Group's commercial, cancer supportive care products in the US
market, in which the Group has exclusive licenses to Soltamox,
Oravig and Zuplenz, an exclusive license to distribute, promote and
market Gelclair, and a marketing agreement to co-promote two other
products: Ferralet 90 and Aquoral. As and when new products are
introduced the Commercial segment will include revenues from the
marketing of these commercial products.
4 Segment information (continued)
The accounting policies of the reportable segments are
consistent with the Group's accounting policies described in note
2. Segment result represents the result of each segment without the
allocation of interest expense, interest income and tax.
No measures of segment assets and segment liabilities are
reported to the Group's Board of Directors in order to assess
performance and allocate resources. There is no intersegment
activity and all revenue is generated from external customers.
The UK and Spanish entities meet the aggregation criteria and
have therefore been presented as a single reportable segment under
Pipeline R&D. The research and development activities involve
the discovery and development of pharmaceutical products in the
field of nanomedicine and sustained release technology. The US
operating company is engaged in the sale and marketing of cancer
supportive care products and is reported under the Commercial
segment.
Segmented results for the 6 months ended 30 June 2017
Pipeline Commercial Consolidated
R&D
unaudited unaudited unaudited
GBP'000 GBP'000 GBP'000
Revenue 53 2,971 3,024
Grant revenue 421 - 421
_______ _______ _______
Total revenue 474 2,971 3,445
---------------------------- ---------- ----------- -------------
Cost of sales - (343) (343)
Depreciation (497) (2) (499)
Amortisation - (780) (780)
Research and development
costs (2,116) - (2,116)
Other distribution costs,
sales and marketing (988) (2,339) (3,327)
Other administrative
costs (3,873) (2,544) (6,417)
_______ _______ _______
Segmental result/operating
loss (7,000) (3,037) (10,037)
_______ _______ _______
Finance income 420
Interest payable (61)
_______
Loss before tax (9,678)
Taxation 644
_______
Loss after tax (9,034)
_______
4 Segment information (continued)
Segmented results for the 6 months ended 30 June 2016
Pipeline Commercial Consolidated
R&D
(re-stated) (re-stated)
unaudited unaudited unaudited
GBP'000 GBP'000 GBP'000
Revenue 190 2,414 2,604
Grant revenue 347 - 347
_______ _______ _______
Total revenue 537 2,414 2,951
---------------------------- ------------ ------------ -------------
Cost of sales - (110) (180)
Depreciation (437) (5) (442)
Amortisation (3) (1,706) (1,709)
Contract settlement costs - (1,138) (1,138)
Research and development
costs (2,048) - (2,048)
Other distribution costs,
sales and marketing (21) (2,507) (2,528)
Other administrative
costs (3,493) (1,748) (5,241)
_______ _______ _______
Segmental result/operating
loss (5,389) (4,946) (10,335)
_______ _______ _______
Finance income 765
_______
Loss before tax (9,570)
Taxation 1,365
_______
Loss after tax (8,205)
_______
Non-current assets by location of assets
2017 2016
GBP'000 GBP'000
unaudited
Spain 2,234 2,125
United Kingdom 17,040 16,489
United States 14,302 15,772
_______ _______
33,576 34,386
_______ _______
5 Loss per share
Basic loss per share amounts are calculated by dividing the net
loss for the period attributable to ordinary equity holders of the
parent company by the weighted average number of ordinary shares
outstanding during the period. As the Group made a loss for the
period the diluted earnings per share is equal to the basic
earnings per share.
Six months Six months
ended 30 ended 30
June 2017 June 2016
unaudited unaudited
Numerator GBP'000 GBP'000
_______ _______
Loss used in basic EPS
and diluted EPS (9,034) (8,205)
_______ _______
Denominator
Weighted average number
of ordinary shares used
in basic EPS 48,699,459 33,469,150
_______ _______
Basic and diluted loss
per share - pence (19p) (25p)
_______ _______
6 Property, plant and equipment
Fixtures Leasehold Computer Laboratory
and fittings improve-ments equipment equipment Total
unaudited unaudited unaudited unaudited unaudited
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost
At 1 January 2017 228 1,999 281 3,050 5,558
Additions 13 289 23 115 440
Disposals - - - (41) (41)
Exchange differences 4 59 2 48 113
_______ _______ _______ _______ _______
At 30 June 2017 245 2,347 306 3,172 6,070
_______ _______ _______ _______ _______
Accumulated depreciation
At 1 January 2017 149 872 122 1,649 2,792
Charge for the
period 21 156 28 294 499
Disposals - - - (12) (12)
Exchange differences 3 27 2 31 63
_______ _______ _______ _______ _______
At 30 June 2017 173 1,055 152 1,962 3,342
_______ _______ _______ _______ _______
Net book value
At 30 June 2017 72 1,292 154 1,210 2,728
At 1 January 2017 79 1,127 159 1,401 2,766
_______ _______ _______ _______ _______
Fixtures Leasehold Computer Laboratory
and fittings improve-ments equipment equipment Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost
At 1 January 2016 1,319 1,112 354 983 3,768
Additions 2 715 43 609 1,369
Disposals - - (1) - (1)
Transfer (1,125) - (122) 1,247 -
Exchange differences 32 172 7 211 422
_______ _______ _______ _______ _______
At 31 December
2016 228 1,999 281 3,050 5,558
_______ _______ _______ _______ _______
Accumulated depreciation
At 1 January 2016 458 733 180 413 1,784
Charge for the
period 41 134 54 543 772
Transfer (369) (96) (118) 583 -
Exchange differences 19 101 6 110 236
_______ _______ _______ _______ _______
At 31 December
2016 149 872 122 1,649 2,792
_______ _______ _______ _______ _______
Net book value
At 31 December
2016 79 1,127 159 1,401 2,766
At 1 January 2016 861 379 174 570 1,984
_______ _______ _______ _______ _______
The transfers between asset classes during the year ended 31
December 2016 arose as a result of reallocation of assets acquired
in 2015, to more appropriately recognise their classification.
7 Intangible assets
In-process Product Goodwill IT/Website
research and marketing costs Total
and development
unaudited unaudited unaudited unaudited unaudited
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost
At 1 January
2017 12,600 21,481 14,488 26 48,595
Additions 779 - - 2 781
Exchange differences - (971) (624) - (1,595)
_______ _______ _______ _______ _______
At 30 June
2017 13,379 20,510 13,864 28 47,781
_______ _______ _______ _______ _______
Accumulated
amortisation
and impairment
At 1 January
2017 1,800 15,608 - 15 17,423
Amortisation
charge for
the period - 780 - - 780
Exchange differences - (810) - - (810)
_______ _______ _______ _______ _______
At 30 June
2017 1,800 15,578 - 15 17,393
_______ _______ _______ _______ _______
Net book value
At 30 June
2017 11,579 4,932 13,864 13 30,388
At 1 January
2017 10,800 5,873 14,488 11 31,172
_______ _______ _______ _______ _______
In-process Product Goodwill IT/Website
research and marketing costs Total
and development
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost
At 1 January
2016 12,600 18,321 12,456 15 43,392
Additions - - - 19 19
Disposals (8) (8)
Exchange differences - 3,160 2,032 5,192
_______ _______ _______ _______ _______
At 31 December
2016 12,600 21,481 14,488 26 48,595
_______ _______ _______ _______ _______
Accumulated
amortisation
and impairment
At 1 January
2016 1,800 243 - 10 2,053
Amortisation
charge for
the period - 3,578 - 5 3,583
Impairment - 11,413 - - 11,413
Exchange differences - 374 - - 374
_______ _______ _______ _______ _______
At 31 December
2016 1,800 15,608 - 15 17,423
_______ _______ _______ _______ _______
Net book value
At 31 December
2016 10,800 5,873 14,488 11 31,172
At 1 January
2016 10,800 18,078 12,456 5 41,339
_______ _______ _______ _______ _______
8 Deferred tax
Deferred tax is calculated in full on temporary differences
under the liability method using tax rates applicable in the tax
jurisdictions where the tax asset or liability would arise.
30 June 31 December
2017 2016
unaudited
GBP'000 GBP'000
Liability at 1 January - 6,547
Credited to income statement
on impairment and amortisation
of intangibles - (5,509)
Credited to income statement - (1,740)
Foreign exchange gain/(loss) - 702
_______ _______
Liability at - -
period end
_______ _______
9 Derivative financial liability
30 June 31 December
2017 2016
unaudited
GBP'000 GBP'000
Equity settled derivative
financial liability - fair
value through profit and
loss 44 400
_______ _______
Liability at 1 January 400 1,573
Gain recognised in finance
income within the consolidated
statement of comprehensive
income (356) (1,173)
______ ______
Liability at period end 44 400
_______ _______
9 Derivative financial liability (continued)
Equity settled derivative financial liability is not a liability
that is to be settled for cash. The Group assumed fully vested
warrants and share options on the acquisition of DARA Biosciences,
Inc. which are to be settled in shares of Midatech Pharma plc. The
number of ordinary shares to be issued when exercised is fixed,
however the exercise prices are denominated in US Dollars being
different to the functional currency of the parent company.
Therefore, the warrants and share options are classified as equity
settled derivative financial liabilities through the profit and
loss account. The financial liabilities were valued using the
Black-Scholes option pricing model based on assumptions described
below. Financial liabilities at FVTPL are stated at fair value,
with any gains or losses arising on re-measurement recognised in
profit or loss. The net gain or loss recognised in profit or loss
incorporated any interest paid on the financial liability and is
included in the 'other gains and losses' line item in the income
statement. A key input in the valuation of the instrument is the
company share price.
At 31 December 2016, some 398,315 options and 16,664 warrants
had lapsed. In addition, the share price had fallen to GBP1.18,
which resulted in a gain of GBP1.17m on re-measurement, which was
credited to finance income in 2016. At 30 June 2017, a further
149,441 options and 456,156 warrants had lapsed and the share price
further reduced to GBP1.08, resulting in a gain of GBP356k on
re-measurement, also credited to finance income.
As at 30 June 2017 there were DARA options outstanding over
137,390 Midatech ordinary shares with a weighted average exercise
price of $7.41 per share, within a range of $2.54 to $770.59, and a
weighted average remaining contractual life of 7.6 years. The
risk-free rate ranged from 0.30% to 1.08%, volatility at 40% and
the expected life from 0.3 - 8.3 years. The exercise of all options
would raise additional cash of $1.02m.
Also at the period-end there were DARA warrants outstanding over
2,628,666 Midatech ordinary shares with a weighted average exercise
price of $7.90 per share, within a range of $3.05 to $138.24, and a
weighted average remaining contractual life of 1.9 years. The
risk-free rate ranged from 0.30% to 0.70%, volatility at 40% and
the expected life from 0.5 - 5.4 years. The exercise of all
warrants would raise additional cash of $20.80m.
Fair value hierarchy
The Group uses the following hierarchy for determining and
disclosing the fair value of financial instruments by valuation
technique:
-- Level 1: quoted (unadjusted) prices in active markets for identical assets and liabilities;
-- Level 2: other techniques for which all inputs which have a
significant effect on the recorded fair value are observable,
either directly or indirectly; and
-- Level 3: techniques which use inputs that have a significant
effect on the recorded fair value that are not based on observable
market data.
The fair value of the Group's financial liability is measured at
fair value on a recurring basis.
9 Derivative financial liability (continued)
The following table gives information about how the fair value
of this financial liability is determined:
1)
1)
Financial Fair Fair Valuation Significant Relationship
liabilities value value technique unobservable of unobservable
as at as at and key inputs level inputs to
30/06/2017 31/12/2016 input 3 fair value
GBP'000 GBP'000
Volatility
rates of 40%
Equity Black determined
settled Scholes using historical The higher
financial option volatility the volatility
derivative pricing of comparable the higher
liability 44 400 model companies. the fair value.
Expected life The shorter
between a the expected
range of 0.3 life the lower
and 8.3 years the fair value.
determined
using the
remaining
life of the
share options.
Risk-free The higher
rate between the risk-free
a range of rate the higher
0.30% and the fair value.
1.08% determined
using the
expected life
assumptions.
If the above unobservable volatility input to the valuation
model were 10% higher while all other variables were held constant,
the carrying amount of shares would increase by GBP12k (H1 2016:
GBP194k).
If the above unobservable expected life input to the valuation
model were 1 year shorter while all other variables were held
constant, the carrying amount of shares would decrease by GBP10k
(H1 2016: GBP74k).
If the above unobservable risk free rate input to the valuation
model were 10% higher while all other variables were held constant,
the carrying amount of shares would increase by GBP0.3k (H1 2016:
GBP11k).
The financial liability measured at fair value on Level 3 fair
value measurement represents consideration relating to a business
combination.
10 Share Capital
As at 30 As at 30 As at 31 As at 31
June 2017 June 2017 December December
2016 2016
Allotted and fully paid - number GBP number GBP
classified as equity
At 1 January
Ordinary shares of 0.005p
each 48,719,456 2,436 48,699,456 2,435
Deferred shares of GBP1 each 1,000,001 1,000,001 1,000,001 1,000,001
__________ __________
Total 1,002,437 1,002,436
__________ __________
In accordance with the Articles of Association for the Company
adopted on 13 November 2014, the share capital of the Company
consists of an unlimited number of ordinary shares of nominal value
0.005 pence each.
Date of Issue Type of Share Issue Ordinary Deferred
Shares Shares
number number
2017
As at 1 January 2017 48,699,456 1,000,001
Issue of shares to Employee
25 May 2017 Share Incentive Plan 20,000 -
_________ _________
As at 30 June 2017 48,719,456 1,000,001
_________ _________
2016
As at 1 January 2016 33,467,504 1,000,001
27 June 2016 Deferred consideration 74,908 -
re: acquisition of Q Chip
Limited
31 October 2016 Placing and Open Offer 15,157,044 -
_________ _________
As at 31 December 2016 48,699,456 1,000,001
_________ _________
11 Related party transactions and
ultimate controlling party
Transactions with Monosol RX, LLC
Monosol RX LLC ("Monosol") is a former shareholder in the
Company and the two entities were formerly collaborative partners
in the MidaSol Therapeutics joint operation. The Directors
considered Monosol to be a related party by virtue of its
shareholding in the Company. There was no trading between the group
and Monosol during the period ended 30 June 2017 (in 2016 Midatech
Limited recharged to Monosol GBP105k for research services). There
was no period end receivable due from Monosol (at 30 June 2016:
nil). Monosol ceased to be a related party on 2 May 2016.
Monosol is also the licensor of the Group's Zuplenz product. In
this capacity, the Group incurred royalty costs up to the date at
which it ceased to be a related party, in May 2016, of GBP187.7k
payable to Monosol.
The Directors do not consider that there is an ultimate
controlling party.
12 Contingent liabilities
The Group had no material contingent liabilities at 30 June 2017
or 31 December 2016.
13 Events after the reporting date
On 28 September 2017 the Company announced its intention to
raise up to GBP6 million in new equity via a proposed Placing with
up to a further GBP2 million by way of an Open Offer to
shareholders.
(1) Total gross revenues represents the full list price of
products shipped to wholesalers and other customers before product
returns, discounts, rebates and other incentives based on the sales
price and grant revenue.
(2) Total net revenues represents statutory revenue plus grant
revenue.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR EAANXAESXEAF
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