SR Pharma plc announces its preliminary results
for year ended 31 December 2002
London, 3 April 2003 - SR Pharma plc (LSE: SPA) today announced its results for
the year ended 31 December 2002.
Commenting on the Group's results for 2002, Chairman of SR Pharma Eric Boyle
said: "Despite a challenging year for the biotechnology sector, SR Pharma made
steady and encouraging progress. Our acquisition of the Rodaris assets also
announced today significantly expands our product pipeline and confirms our
stated commitment to diversification."
Results highlights are as follows:
* Group turnover for the year ended 31 December 2002 increased to over �1
million (2001: �138,000)
* Cash and short-term deposits as at 31 December 2002 were over �7 million
representing 3 years' funding at current burn-rate
* Sakai agreed to fund extension of European asthma trial which is due to
complete in the first half of 2004
* A second phase II UK multi-centre clinical trial of SRP299 commenced in
November 2002 in atopic dermatitis
* In late 2002 the Group acquired 100% ownership of Innopeg our 50:50 joint
venture company with Rodaris
* Since the year-end, SR Pharma has acquired from Rodaris over 250
well-characterised compounds with potential in a number of major therapy
areas
* Corixa commenced a major US phase II trial of PVAC(tm) in psoriasis
* SR Pharma and Genesis ready to move to phase II with AVAC(tm) in atopic
dermatitis
Chairman's statement
2002 was a challenging year for the biotechnology sector, however SR Pharma has
made steady and encouraging progress.
Products in development
The Group has continued to advance with its lead candidate, SRP299, which is in
phase II clinical trials for the treatment of allergic asthma and atopic
dermatitis (eczema). Our partners in the USA, Corixa Corporation (Corixa), and
in New Zealand, Genesis Research and Development Corporation (Genesis) have
made progress in clinical trials with PVAC(tm) for psoriasis and AVAC(tm) for atopic
dermatitis respectively. The Board remains convinced that developing products
in partnership with other pharmaceutical companies provides the right balance
of risk to reward for shareholders.
New generation compounds
During the second half of 2002, the Group acquired the other 50% of our joint
venture company Innopeg from Rodaris Pharmaceuticals. Innopeg has identified a
number of new compounds derived from Mycobacterium vaccae (M. vaccae)
technology. I am pleased to report that significant progress was made in 2002
and the Board expects that our research division will generate several new
compounds with potential application in the fields of allergy, autoimmune
diseases, diabetes and obesity over the course of 2003.
In a related move, the Group also recently acquired an additional 250 compounds
from Rodaris. Several of these molecules have demonstrated activity in
diabetes, obesity, autoimmune diseases and the diagnosis of pre-eclampsia.
These well-characterised compounds complement very well our strategy of
developing medicines in diseases with a well-defined immunological basis.
Marketing
Discussions continue to take place with potential marketing partners for SRP299
in asthma and other allergic disorders outside of Japan, where the product is
already licensed to Sakai Chemical Industry Co., Ltd. (Sakai). Our target is to
sign at least one major marketing deal in 2003. SRP299 is also available for
licensing as an immune adjuvant in the treatment of allergies (immunotherapy).
Finance
The Group's cash position remains robust with just over �7 million in the bank
at the year-end, with net cash expenditure being a little under �2 million for
the year. SR Pharma generated just over �1 million of revenue during 2002. The
majority of the revenue generated will be received in April 2003. Consequently
the �7 million year-end cash figure understates the strength of the Group's
funding position. The Board expects that net cash expenditure will remain at
around �2 million in the coming year. The Group has sufficient capital to fund
current development programmes, including the new compounds recently acquired
from Rodaris.
Outlook
Regardless of SR Pharma's disappointing share price, which stood at 38%
discount to cash at the year-end, the Group's prospects remain exciting. SR
Pharma has a range of products progressing through the clinic and a number of
exciting compounds in research. The Group has valuable collaborations with a
number of companies and these coupled with prudent cash management have ensured
sufficient capital for the foreseeable future. Our aim is to maximise
shareholder value over the next 24 months.
The Board is currently undertaking a fundamental review of the Group's strategy
and prospects. Following completion of this review the intention will be to
confirm to shareholders the Group's strategic imperatives at the time of the
AGM in May 2003.
We are grateful to our shareholders and advisors for their continued support
and on behalf of the Board I would like to thank the management and staff for
their contribution over the last year.
Review of operations
SR Pharma's proprietary M. vaccae-based technology is the source of a number of
product developments. SRP299 and AVAC(tm) are currently being evaluated for the
treatment of asthma and atopic dermatitis.
Overview
The past 12 months have seen further advancement in the development of the
Company's M. vaccae-based technology for the treatment of inflammatory
disorders:
* Patient recruitment is proceeding in the UK and Eastern Europe in a phase
II, 120-patient trial of SRP299 in allergic asthma being funded by Sakai
* A second SRP299 phase II trial, in atopic dermatitis, commenced during
November 2002 in 10 leading centres across the UK and Ireland
* Scientists at Novartis UK published two key papers in major scientific
journals on the mechanism of action of SRP299
* Phase I trials in AVAC(tm) have been successfully completed in adults and
children in collaboration with Genesis.
* Corixa commenced a major US phase II trial of PVAC(tm) for psoriasis
* Purchase of Innopeg with new molecular candidates for the potential
treatment of diabetes and obesity
* Acquisition of over 250 compounds from Rodaris with potential application
in major therapy areas.
Two phase II trials are underway in asthma and atopic dermatitis with results
expected in 2004. Confirmation of the efficacy of SRP299 must await the
completion of these formal studies.
Efforts to diversify M. vaccae-related product development options have also
proven productive. In partnership with Genesis, SR Pharma is co-developing AVAC
(tm) for the treatment of atopic dermatitis. In addition, Corixa, SR Pharma's US
licensing partner, is developing and funding PVAC(tm) for the treatment of the
autoimmune disease, psoriasis.
Phase I atopic dermatitis safety trials of intradermally administered AVAC(tm) in
children and adults have been successfully completed by Genesis and results
indicate that the treatment was well tolerated and not associated with any
serious adverse events. A phase II trial in New Zealand is planned for 2003.
The understanding of the mechanism of action of M. vaccae technology has been
advanced through a research collaboration with scientists at Novartis UK, which
resulted in publications in Nature Medicine and the Journal of Immunology. In
addition, a neuroscience collaboration with Bristol University continues to
investigate the therapeutic utility of M. vaccae in pain management and other
disorders of the central nervous system.
The recent purchase of Innopeg and the subsequent acquisition of over 250
compounds from Rodaris provide SR Pharma with a number of well-characterised
product candidates for the treatment of allergy, autoimmune diseases, diabetes,
obesity and the diagnosis of pre-eclampsia. Several of these compounds have
already demonstrated activity in these therapy areas and benefit from patent
protection. SR Pharma is currently assessing them with a view to early
out-licensing.
Projects by indication
Allergic disorders
Development projects
The mechanism of action of M. vaccae technology has been elucidated through a
research collaboration with scientists at the Novartis Respiratory Research
Centre UK, which resulted in two publications in the highly prestigious
journals Nature Medicine and the Journal of Immunology. These papers confirmed
the standing of SRP299 within "Hygiene Hypothesis" circles. In particular,
pre-clinical allergy models demonstrated that SRP299 conferred long-term
protection against airway inflammation and gave rise to the development of
newly generated allergen-specific Treg cells that selectively downregulate the
Th2 response, without inducing a Th1 response. Thus SRP299-induced Treg cells
may play an essential role in restoring the balance of the immune system to
prevent allergic diseases and offer advantages over treatments aimed at
inducing a shift from an allergen-specific Th2 to a Th1 response.
The allergy clinical development programme continues to be given high priority.
Asthma
The results of an earlier phase I/II trial of the beneficial effects of a
single-dose of M. vaccae on allergen-induced airway responses in atopic asthma
were recently published in the European Respiratory Journal.
Over 70 patients have been recruited to date for the Company's SRP299 phase II,
multi-centre, dose-ranging asthma trial. This 120-patient trial is sponsored by
our partner for Japan, Sakai. Given the importance of this trial, the Board has
decided to accelerate enrolment by extending recruitment into Eastern Europe.
It is anticipated that recruitment will be completed in the first half of 2003.
Atopic dermatitis
SR Pharma and Genesis are jointly developing SRP299 together with AVAC(tm) for the
treatment of atopic dermatitis in children.
SRP299
A preliminary investigation demonstrated that treatment with M. vaccae
significantly reduced the severity of atopic dermatitis symptoms in 41 children
aged 5-18 years. Following this study, Dr Arkwright, Booth Hall Children's
Hospital, Manchester, conducted a second phase involving a further 56 children
aged 2-6 with moderate-to-severe disease. The main objective of this
double-blind, placebo-controlled phase was to further define the optimum
patient population for the phase II trial of SRP299 in children with atopic
dermatitis. Preliminary results from the second phase of this trial indicated
that SRP299 produced a similar 40-50% improvement in eczema symptoms as seen in
the older age group. However, this effect was masked by the unstable nature of
the disease in the youngest children that resulted in a large number of
spontaneous remissions. Consequently it was decided to concentrate on the 5-16
year old age group for the phase II trial.
Based on the results from the studies mentioned previously, recruitment
commenced in November in a phase II, randomised, placebo-controlled trial of
SRP299 for the treatment of moderate-to-severe atopic dermatitis in children
aged 5-16. The trial, which aims to recruit 120 evaluable patients, is being
conducted in 10 leading research centres across the UK and Ireland. It is
evaluating the effects of SRP299 on the extent and severity of atopic
dermatitis, assessing the duration of action and patients' quality of life. The
trial will also monitor the safety and tolerability of SRP299. Each patient
will be randomised to one of three treatment arms and will receive a single
injection of either a standard dose of SRP299, a low dose of SRP299 or placebo.
The results from this study are expected to be available in the second half of
2004.
AVAC(tm)
AVAC(tm) is also being investigated for the intradermal treatment of atopic
dermatitis. Following the completion of the adult phase I study where good
tolerability results were reported, a study in children was conducted. This
open-label paediatric tolerability study recruited 12 children aged 5-16 years
with atopic dermatitis at one study site in New Zealand. Results indicated that
the treatment was well tolerated and not associated with any serious adverse
events. A phase II trial in New Zealand is planned to start during the second
half of 2003 and is expected to report in 2004.
Autoimmune diseases
PVAC(tm)
Corixa is funding the development of another M. vaccae derivative, PVAC(tm), for
the treatment of psoriasis under a licence from SR Pharma. Phase II clinical
trials in psoriasis have been conducted in the USA, Brazil and the Philippines,
with encouraging but not definitive results.
Corixa has initiated an additional phase II trial in the USA designed to
evaluate the potential effectiveness of PVAC(tm) in non-immunosuppressed patients
with mild-to-moderate plaque psoriasis. In this double-blind,
placebo-controlled trial, 240 patients will be randomised for intradermal
treatment with either placebo or one of three different dosages of PVAC(tm).
Efficacy endpoints will include improvements in disease severity as assessed by
a decrease in baseline area and severity index scores. Patient enrolment has
begun at 14 clinical sites in 10 states of the USA and is progressing
satisfactorily. The results are expected in 2003.
In the original PVAC(tm) phase II trial in psoriasis, physicians noted that
several patients who had not responded to PVAC(tm) treatment responded rapidly to
subsequent UVB light treatment. Hence, Corixa's partner Genesis has designed a
combination PVAC(tm)/UVB trial to explore the therapeutic benefit of the combined
treatment. This double-blind, randomised, placebo-controlled phase II study
commenced at one site in Auckland, New Zealand in June 2002 and will recruit 60
patients aged 16-70 with mild-to-moderate psoriasis. Final results are expected
during 2003.
New generation compounds
SR Pharma recently added several M. vaccae derivatives to its portfolio by
achieving full ownership of its joint venture with Rodaris. The Group also
acquired from Rodaris a further 250 compounds which demonstrated activity in
diabetes, obesity, autoimmune diseases and the diagnosis of pre-eclampsia.
Studies in around 1,000 pregnant women suggested the potential of the
technology to predict which women will become pre-eclamptic during their
pregnancy.
Infection
Hepatitis B
A phase I study of SRL172 is currently assessing the efficacy of the product in
the treatment of chronic hepatitis carriers in Adelaide, Australia. Final
results are expected during the second half of 2003.
HIV / tuberculosis
A number of HIV-related studies have been carried out in the USA, France, UK,
Finland and Zambia, showing that SRL172 is generally well tolerated and induces
a potentially beneficial immunological response in HIV-positive individuals.
These studies have resulted in a $2.4 million grant from the US NIH to an
independent investigator to conduct a 2000-patient TB-prevention study of
SRL172 in HIV-positive individuals in Tanzania. The NIH has also provided
further infrastructure support. This 5-year study commenced in September 2001.
Central nervous system (CNS) disorders
Further to the lung cancer study where SRL172 demonstrated a significant
improvement in patients' quality of life, SR Pharma in collaboration with
Bristol University is currently investigating the therapeutic utility of immune
adjuvants in pain management and other disorders of the CNS.
Financial review
During the past year, the continuing bear market has created a difficult
climate for SR Pharma to operate within.
The success of the Company depends upon achieving sufficient development
milestones, which would entice other investors, either in the form of the
equity markets or other pharmaceutical companies to provide finance in return
for a share of the future profitability of the intellectual property. Market
sentiment over the past 2 years and more has reduced the willingness of
companies to invest in emerging technology such as ours and restricted our
ability to access additional sources of finance. This puts increasing pressure
on maximising the benefits from our existing agreements and utilisation of our
resources.
Nonetheless, the achievement of development milestones in respect of existing
agreements during the year has enabled the Company to return its turnover to
over �1 million from its low level of �138,000 for 2001.
The legislation in respect of Research and Development (R&D) tax credits
introduced 2 years ago has also helped the Company to conserve its cash
balances by allowing us to claim tax rebates based on qualifying levels of R&D
expenditure. The Group recovered �357,961 from the Inland Revenue during 2002
and �328,725 during 2001 in respect of these rebates, based on expenditure
levels in the preceding year respectively. The continuation of this government
support will be an important factor in restricting the Group's net cash outflow
and enabling investment in R&D.
Recognising the need to trade through the current adverse conditions, the Group
has continued to maintain tight control over its expenditure plans. Overall
expenditure on R&D activities fell slightly from �2,492,000 in 2001 to �
2,456,000 in 2002. With the expansion of the Group's clinical trials programme
announced in late 2002, we are expecting that this aspect of our expenditure
will rise during 2003 but should be balanced by the culmination of other
projects during the year. Administration costs rose slightly in the year to �
700,000 from �673,000 in 2001 and back to a similar level to that for 2000. The
costs for the year include compensation paid to one Director upon his leaving
office in May.
During 2002, the Group's net cash outflow overall came to less than �2 million,
compared to over �2.3 million in 2001 and approximately �3 million in 2000.
With closing bank balances in excess of �7 million, this leaves the Group in a
strong financial position from which to continue its operation for the
foreseeable future.
SR PHARMA PLC
CONSOLIDATED PROFIT AND LOSS ACCOUNT
YEAR ENDED 31ST DECEMBER 2002
Unaudited Audited
2002 2001
� �
Turnover 1,151,003 138,481
Research and development direct (2,456,070) (2,491,886)
costs
________ ________
Gross Loss (1,305,067) (2,353,405)
Administrative expenses (699,827) (673,244)
________ ________
Operating Loss (2,004,894) (3,026,649)
Share of operating loss of joint (14,730) (42,780)
venture
________ ________
(2,019,624) (3,069,429)
Interest receivable 317,122 521,938
________ ________
Loss for the year before taxation (1,702,502) (2,547,491)
Taxation credit for the year 219,920 353,725
________ ________
Retained loss for the year after (1,482,582) (2,193,766)
taxation transferred from
reserves
======= =======
Loss per share 6.21p 9.19p
==== ====
All transactions arose from continuing activities.
There were no recognised gains or losses other than the loss for the year.
SR PHARMA PLC
CONSOLIDATED BALANCE SHEET
AT 31 DECEMBER 2002
Unaudited Audited
2002 2001
� �
Fixed assets
Tangible fixed assets 72,462 55,564
______ ______
Investment in joint venture
Share of gross assets - 67,611
Share of gross liabilities - (50,391)
_____ _____
- 17,220
_____ _____
Current assets
Debtors 1,258,480 520,822
Cash at bank 7,159,402 9,076,131
_________ ________
8,417,882 9,596,953
Creditors: amounts falling due (1,027,874) (724,685)
within one year
_________ _________
Net current assets 7,390,008 8,872,268
_________ _________
Total assets less current 7,462,470 8,945,052
liabilities
======== ========
Share capital 238,607 238,607
Share premium account 19,978,803 19,978,803
Merger reserve 183,916 183,916
Profit and loss account (12,938,856) (11,456,274)
________ _________
Shareholders' funds 7,462,470 8,945,052
======= ========
SR PHARMA PLC
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31ST DECEMBER 2002
Unaudited Audited
2002 2001
� �
Net cash outflow from operating (2,422,799) (3,133,759)
activities
Return on investments and
servicing of finance
Interest received 317,122 521,938
Taxation received 264,922 328,725
Capital expenditure
Payment to acquire tangible fixed (73,590) (5,822)
assets
Sale of tangible fixed assets 900 -
Acquisitions and disposals
Investment in joint venture - (60,000)
Acquisition of subsidiary (3,000) -
Net bank balances acquired with (284) -
subsidiary
________ ________
Net cash (outflow) before (1,916,729) (2,348,918)
financing
Management of liquid resources
Cash released from liquid 8,008,583 1,576,919
resources
Financing - -
________ ________
Increase/(decrease) in cash 6,091,854 (771,999)
balances
======== ========
Reconciliation of operating loss
to net operating cash flows � �
Operating loss (2,004,894) (3,026,649)
Depreciation charges 55,792 41,847
(Increase)/decrease in debtors (776,886) 90,190
Increase/(decrease) in creditors 303,189 (239,147)
_______ _______
Net cash outflow from operating (2,422,799) (3,133,759)
activities
_______ _______
SR PHARMA PLC
NOTES
1. The above financial information does not constitute statutory accounts
within the meaning of Section 240, Companies Act 1985.
2. Information relating to the year ended 31 December 2002 is unaudited. The
information relating to the year ended 31 December 2001 is extracted from
the audited accounts of the Group which have been filed at Companies House
and on which the auditors issued an unqualified opinion.
3. The above information has been prepared using the accounting policies set
out in the most recently published full accounts (for the year ended 31
December 2001).
4. Loss per share is based on the loss for the financial year after taxation
of �1,482,582 (2001: loss �2,193,766) and on the weighted average of
23,860,714 (2001: 23,860,714) ordinary shares in issue during the year. The
options outstanding at 31 December 2002 and 31 December 2001 are considered
to be non-dilutive in that their conversion into ordinary shares would not
increase the net loss per share. Consequently, there is no diluted earnings
per share to report for either year.
5. The credit for UK Corporation Tax arises from the Group taking advantage of
the legislation regarding the treatment and surrender of tax losses arising
from certain qualifying research and development expenditure.
6. The Directors are not proposing the payment of a dividend.
7. Analysis of changes in Net Funds
Cash at bank At 1 January Cash At 31 December
2002 Flows 2002
� � �
Instant access 35,488 6,091,854 6,127,342
accounts
Deposits 9,040,643 (8,008,583) 1,032,060
________ ________ _________
Total 9,076,131 (1,916,729) 7,159,402
======= ======= ========
The deposits held at bank are treated as liquid resources under the definitions
of Financial Reporting Standard 1 (revised). Although the sums are held on
short term fixed rate deposit, they are not instantly available to the Group
without breaking the terms of the deposit which may incur penalties.
For further information please contact:
Steeve Lamontagne, SR Pharma plc
Tel: +44 (0) 20 7307 1628
Email: s.lamontagne@srpharma.com
END