TIDMCEL
RNS Number : 9058N
Celadon Pharmaceuticals PLC
28 September 2023
Celadon Pharmaceuticals plc
("Celadon" or the "Company" or the
"Group")
Unaudited Interim results for the six
months ended 30 June 2023
London, 28 September 2023 - Celadon Pharmaceuticals Plc (AIM:
CEL), a UK-based pharmaceutical company focused on the development,
production and sale of breakthrough cannabis-based medicines, today
announces its unaudited condensed interim results for the six
months ended 30 June 2023.
Strategic and operational highlights
-- Registration of the Group's Midlands facility with UK MHRA
for GMP manufacturing of its cannabis Active Pharmaceutical
Ingredient (API)
-- Home Office licence successfully updated to allow commercial
sale of the Group's high <DELTA>-9 tetrahydrocannabinol (THC)
product
-- Successfully completed 7 harvests from Phase 1 grow facility.
Further progress made on development and fit out of Phase 2, and
certain works undertaken on Phase 3 facility ahead of schedule
-- Inaugural GBP3m product sale over three years to a leading UK
Medical Cannabis company - first shipments anticipated in Q4
2023
-- Second product sales contract on a three-year term with
option to extend for a further two years - fully contracting Phase
1 grow facility with expected revenue generation of up to
GBP1.2m
-- Receipt of approval from the NHS Research Ethics Committee to
roll out LVL Health's non-cancer chronic pain trial for up to 5,000
patients (post-period)
Financial highlights for the period
-- Revenue of GBP8.0k (30 June 2022: GBP11.0k)
-- Operating loss of GBP3.2 million (30 June 2022: GBP2.0 million)
-- Loss before tax of GBP4.4 million (30 June 2022: GBP13.5 million)
-- Cash balance as at 30 June 2023 of GBP1.6m (30 June 2022: GBP9.1 million)
-- Committed credit facility for GBP7.0m signed with a 2-year
term, providing additional balance sheet flexibility
James Short, CEO of Celadon, commented:
"The period has been one of strong operational and strategic
progress against the ambitious targets we set out at the beginning
of 2022 and ahead of the Company's admission to AIM. While the UK
market for cannabis-based medicinal products is early in its
development, we are increasingly optimistic around the medium to
long-term sector outlook and the prospects for Celadon within this
market.
"Having successfully obtained our Home Office licence to sell
the Group's EU-GMP pharmaceutical cannabis products, we have since
signed our first two contracts with UK pharmaceutical companies and
have received multiple expressions of interest that we are working
hard to convert. The commercial pipeline demonstrates the high
demand for high-quality UK produced product and our ability to
attract premium pricing; it also gives us confidence to further
roll out capacity to support this demand.
"I am grateful for the continued support shown by our
shareholders as we pursue our primary mission of improving the
quality of life for patients most in need. "
Analyst briefing: 10.00am BST today
James Short (Chief Executive Officer), Jonathan Turner (Chief
Financial Officer) and Arthur Wakeley (Managing Director), will
host a virtual analyst presentation followed by a Q&A session
at 10.00am BST today.
Analysts wishing to join should register their interest by
contacting Powerscourt at celadon@powerscourt-group.com , or by
calling +44 (0) 20 7250 1446.
A copy of the presentation will be published on the Company's
website at www.celadonpharma.co.uk
Investor Presentation: 3.30pm BST today
Management will be hosting a live presentation and Q&A
session today at 3.30pm BST via the online platform Investor Meet
Company.
Investors can sign up to Investor Meet Company for free and
attend the presentation via the following link:
https://www.investormeetcompany.com/celadon-pharmaceuticals-plc/register-investor
Questions can be submitted pre-event and at any time during the
live presentation via the Investor Meet Company platform.
Enquiries:
Celadon Pharmaceuticals Plc
James Short Via Powerscourt
Jonathan Turner
Arthur Wakeley
Canaccord Genuity Limited (Nominated Adviser and Broker)
Bobbie Hilliam / Max Hartley +44 (0)20 7523 8000
Powerscourt Group
Sarah MacLeod / Nick Johnson / Sam Austrums / +44 (0)20 7250 1446
celadon@powerscourt-group.com
About Celadon Pharmaceuticals Plc
Celadon Pharmaceuticals Plc is a UK based pharmaceutical company
focused on the research, cultivation, manufacturing, and sale of
breakthrough cannabis-based medicines. Its primary focus is on
improving quality of life for chronic pain sufferers, as well as
exploring the potential of cannabis-based medicines for other
conditions such as autism. Its 100,000 sq. ft UK facility is EU-GMP
approved and comprises indoor hydroponic cultivation, proprietary
GMP extraction and manufacturing and an analytical and R&D
laboratory. Celadon's Home Office licence allows for the commercial
supply of its GMP pharmaceutical cannabis product. The Group owns
an approved clinical trial using cannabis-based medicinal products
to treat chronic pain in the UK. Celadon also has a minority
interest in early-stage biopharma Kingdom Therapeutics which is
developing a licensed cannabinoid medicine to treat children with
Autism Spectrum Disorder.
For further information please visit our website
www.celadonpharma.co.uk
This announcement contains inside information for the purposes
of article 7 of the Market Abuse Regulation (EU) 596/2014 as
amended by regulation 11 of the Market Abuse (Amendment) (EU Exit)
Regulations 2019/310. With the publication of this announcement,
this information is now considered to be in the public domain.
Chief Executive Officer's Report
Introduction & Overview
I am pleased to present Celadon's interim results for the six
months ended 30 June 2023. The period has been one of strong
operational and strategic progress against the ambitious targets we
set out at the beginning of 2022 and ahead of the Company's
admission to AIM.
At Celadon, our mission is to improve quality of life for
patients most in need by developing breakthrough cannabis-based
medicines. To unlock this opportunity, we are pursuing a strategy
to open up the UK market by combining domestic production of
pharmaceutical-grade medicinal cannabis with the clinical evidence
generation that is required to support prescribing by doctors, and
research into future medicines.
Our aim is to become a leader in breakthrough cannabis-based
medicines, capitalising on our early-mover advantage in a highly
regulated market as one of only two UK companies of our kind with
the licences to cultivate and manufacture pharmaceutical-grade
cannabis in the UK for commercial sale.
In the past few years, cannabis-based medicinal products
("CBMPs") have expanded rapidly in several international
geographies, with a growing evidence base for their efficacy across
a number of conditions, including chronic pain, epilepsy, and
autism. Interest in CBMPs as medicines to treat pain has been
driven by the opioid crisis in the US, and the recommendations of
UK regulators in 2021 to reduce opioid prescription for chronic
pain. In August 2023, the House of Commons Home Affairs Committee
published a report urging the further clinical trials into CBMPs
for chronic pain and supporting widening access to these medicines
on the NHS. Australia provides a good case study for the market
potential and how quickly a market can open up to CBMPs, with
estimates of over 200,000 patients using medicinal cannabis at the
start of 2022.
There is a substantial need for high-quality UK produced
cannabis to reduce the need for overseas imports, which often place
an unacceptable cost burden on the patient as well as delays in
them receiving their medication. We believe the opportunity for
CBMPs in the UK and internationally remains compelling for the
following reasons:
-- Large addressable market: there are an estimated eight
million people in the UK with moderate to severely disabling
chronic pain, with around 50 million in the US. CBMPs are expanding
rapidly internationally across a number of territories, including
Germany and Australia;
-- Growing evidence of efficacy for a number of conditions:
there is a growing evidence base for the efficacy of CBMPs (e.g.,
chronic pain, epilepsy, autism), which we are experiencing through
the early results from the first patients on the chronic pain study
being administered through Harley Street (CPC) Ltd trading as LVL
Health ("LVL"). The previous standard of care - opioids - has been
estimated to work for only 5-10% of patients, with widespread
evidence noting the harmful side effects of long-term opioid use;
and
-- Challenges facing healthcare systems require innovative
solutions: the NHS faces mounting budgetary pressures, with back
pain alone costing the UK an estimated GBP10 billion p.a. and
accounting for a significant proportion of the 2.5 million people
out of work due to ill health. New treatments for chronic
conditions that are cost-effective and efficacious are increasingly
important.
Strategy
Celadon's strategy places the Group in a strong position to open
up the UK market, having successfully built a strong foundation
over the past five years. The regulatory and capital barriers to
entry remain high, and Celadon's successful Good Manufacturing
Practice ("GMP") registration and Home Office licence update
underpin our ability to supply our pharmaceutical-grade product to
the market.
With a strategy based around patient needs and an initial focus
on chronic pain, Celadon generates revenue from selling its
pharmaceutical-grade product while positioning for substantial
upside potential from developing approved medicines. Specifically,
this includes:
-- Pharmaceutical product: creating an integrated UK supply
chain that is licenced to cultivate, manufacture and sell
pharma-grade cannabis product to the market on a commercial basis;
supported by data generated by LVL's chronic pain trial will
support doctors' prescriptions and the case for reimbursement by
the NHS
-- Breakthrough therapeutics: developing advanced cannabinoid
medicines with novel delivery technologies, led by Celadon's
in-house R&D team and de-risked through industry
partnerships
Operational Update for the Period and to date
During the period and to date, Celadon has continued to make
substantial progress against its key operational goals.
MHRA and Home Office Licencing
In January 2023, Celadon obtained confirmation from the MHRA
that it had achieved GMP certification to manufacture its
pharmaceutical-grade cannabis product. This followed a successful
inspection in Q4 2022 and the submission of the results of
independently verified testing of its cannabis product.
On the basis of the successful MHRA registration, the Home
Office updated the Group's licence in March 2023 to allow the
commercial supply of its cannabis product.
This is a significant achievement for the business, and the
Directors believe that the Group is the first in the UK to be
licensed to cultivate and sell high-THC EU-GMP grade cannabis
product from its own facility following the changes to
pharmaceutical cannabis licensing in 2018, and one of a small
number of EU-GMP facilities of its kind globally.
Expansion of Cultivation Facility Operations
Following seven successful harvests of high THC medical cannabis
in 2022 for validation purposes, Phase 1 underwent planned
maintenance improvements in Q1 2023. Commercial cultivation has
since commenced to fulfil the first sales contract signed in May
2023.
During the period, rigorous independent third-party testing on
Celadon's cannabis flower was undertaken, the results of which have
demonstrated its consistency, quality and cannabinoid profile. In
addition to tight batch-to-batch consistency, the specification of
Celadon's indoor hydroponic cultivation and smart environmental
monitoring has driven high levels of yield. This has all attracted
significant customer demand and expressions of interest, further
validating our strategy to focus on UK production and the highest
level of quality.
During the period, the Group made further progress in the
development and fit out of Phase 2 of its cannabis cultivation
space, having started the works during 2022. Certain works were
also undertaken on Phase 3, ahead of the original schedule, on the
recommendation of the regulatory auditors, in order to avoid
disrupting live cultivation operations at a later date.
The Group also took the decision to ramp up operations in line
with demand during 2023, with further fitting requirements (e.g.,
lighting, drying) to be put in place to support this. The design of
the further fit out will be based on specifications aligned with
customers signing commercial contracts. At full capacity, Phase 2
will have the potential to achieve an annualised yield of
approximately three tonnes of high THC pharmaceutical cannabis in
the form of dry flower, with a potential revenue opportunity of
GBP30 million per year.
Commercialisation
Since announcing its GMP and Home Office licencing updates in
early 2023, Celadon has signed two commercial supply contracts with
leading pharmaceutical companies.
In May 2023, Celadon signed its inaugural commercial sales
contract, under which the Group will supply a minimum of GBP3
million worth of product over the next three years, with the
ability to extend the contract by a further two years. In September
2023, the Group signed a further contract with a UK customer, which
we anticipate could generate up to GBP1.2 million in revenue, which
will also run over a three year term. The Group anticipates that
the first shipments for both contracts will be made in Q4 2023.
Celadon has also received multiple expressions of interest in
the sale of its pharmaceutical grade product, and is currently in
discussions to convert these into commercial contracts.
LVL's Chronic Pain Trial
The LVL chronic pain trial received approval in August 2023 from
the NHS's Ethics Committee to roll-out its clinical trial for
chronic pain, which will allow the enrolment of up to 5,000
patients.
The Group previously held conditional approval for the trial
from the MHRA, on the basis that a Feasibility Study requested by
the NHS's Ethics Committee be conducted before it commenced. The
Feasibility Study was designed to demonstrate the ability to engage
and retain patients and results were submitted to the regulators in
December 2022, with final approval being received in August 2023.
While conducting the Feasibility Study we have gained some valuable
insights and generated promising early results.
Feedback from patients who received treatment has been positive,
with improvements in quality of life (including pain and sleep
levels), and significant reduction in other medications (some
respondents noted reductions in their opioid usage by 60%), being
reported. York University is conducting independent analysis on the
study's data in order to assess the potential case for
reimbursement by the UK's National Health Service.
The Group remains confident that a positive outcome from the
full clinical trial will facilitate expansion of the UK market by
providing the data to support doctors' prescriptions in private
pain clinics and supporting the case for reimbursement by insurance
companies and the NHS. The approved trial carries a number of
advantages, most notably the ability of General Practitioners
("GP") to prescribe under the trial protocol - something that is
not currently permitted in the UK - and the clarity of its fully
approved status, which is expected to substantially increase the
recruitment of patients and sponsoring organisations . The Group is
currently working with its partners to finalise the plan for the
optimal and timely roll-out of the trial.
Breakthrough therapeutics
While the Group's immediate focus is on revenue generation from
its licensed pharmaceutical production, there is a substantial
value creation opportunity from developing novel medicines to
pursue licensed approvals for which there already exists a
regulatory pathway.
Leveraging the data from LVL's initial chronic pain Feasibility
Study, as well as using widespread clinical and real world efficacy
data, Celadon's in-house R&D team are exploring opportunities
to develop a range of medicinal products using its proprietary
cannabinoid API.
We aim to create IP around differentiated delivery (e.g.,
tablets, pills) and are targeting therapeutic indications where the
existing data supports intervention with cannabinoid medicines.
This is currently being done at very low cost to the business, by
leveraging the expertise of our highly experienced in-house R&D
team. Given the capital requirements of clinical trials, ultimately
the Group's aim is to identify partners to scale IP that we have
created in-house; thus giving the business substantial future
upside potential.
This approach combines multiple "shots on goal" across different
conditions (e.g., pain, autism), and is accelerated through
partnerships such as the Group's 19% stake in Kingdom Therapeutics,
an early-stage biopharmaceutical company focused on the development
of cannabinoid medicines for Autism Spectrum Disorder who have had
some very positive early-stage research results. These results will
be presented at a significant autism conference in the US in
October. Our goal for these partnerships is to give Celadon an
equity stake in a potentially successful biopharma, and the supply
contract for our cannabinoid API which could generate substantial
revenue if the medicine becomes a mass market product.
Building the team
During the period, the Group made significant progress in
continuing to augment its high-quality management team and
strengthening its operations across all parts of the business.
In January 2023, Jonathan Turner joined as Chief Financial
Officer from the FTSE-250 listed Oxford Instruments, with
additional senior hires for Head of Quality (to oversee our
interactions with the MHRA), GMP Operations (to oversee our
production programme) and Business Development (to convert our
pipeline of demand into contracts). These are significant hires for
a business at Celadon's stage of growth. Additional hires have been
made in our Operations team to support scaled cultivation and
deliver on the recent contracts that have been signed.
ESG
We recognise the importance of operating to the highest
standards of compliance across the business, and in the period, we
have continued to advance our approach to ESG, focusing on
identifying those issues that are most material to Celadon's
business and its key stakeholders. This work will form part of a
comprehensive ESG strategy.
At the heart of Celadon's approach to ESG is that societal
benefit will flow from addressing the UK's 'silent epidemic' of
chronic pain (and opioid misuse), with eight million people
experiencing moderate or severely disabling chronic pain and
largely not benefiting from current treatments.
Furthermore, as a UK pharmaceutical group aiming to develop
medicines that might one day be reimbursed on the UK's NHS, Celadon
is working to align with the NHS's requirement that by 2027
suppliers report emissions and publish a carbon reduction plan
aligned with its 2045 net zero targets.
Where possible the Group is also taking measures now to reduce
the impact that it has on the environment. As of January 2023, the
Group's Midlands facility switched exclusively to renewable energy
supply. The Group is also in advanced discussions about installing
solar panels to further reduce its environmental impact.
Outlook
While the UK market for CBMPs is early in its development, we
are increasingly optimistic around the medium to long-term sector
outlook and the prospects for Celadon within this market. Having
made significant progress in the first half of the year on both the
approvals front and commercially through the award of our first two
sale contracts, our focus for the remainder of the year and beyond
is on converting further expressions of interest into contracted
sales, which will serve to underpin the further development of our
Phase 2 grow facility. Allied to this, we will continue to explore
practical ways in which we can encourage broad participation in
what is understood to be the UK's only MHRA approved trial of its
kind for cannabis medicines so that patients are able to access
high quality cannabis-based medicines to meet their needs.
James Short
CEO
Financial overview
Revenues - in the six months ended 30 June 2023, the Group
recorded revenues from the feasibility stages of its LVL chronic
pain clinical trial of GBP8k (six months ended 30 June 2022:
GBP11k, year ended 31 December 2022: GBP24k). The Group submitted
the results of its feasibility study to the Research Ethics
Committee ("REC") in December 2022. REC formally approved the full
clinical trial in August 2023.
Cost of sales - includes all costs for the LVL chronic pain
feasibility study's patients, including initial suitability tests,
medical consultation and onboarding of all patients.
Gross profit - for the six months ended 30 June 2023 the Group
reported a gross loss of GBP26k (six months ended 30 June 2022:
loss of GBP12k, year ended 31 December 2022: GBP66k). The gross
losses were due to the mix of paying and non-paying patients for
the feasibility study, and the lower patient numbers meaning that
operational efficiencies were unavailable.
Operating costs - include all people costs, property costs
(including utilities, repairs and maintenance), marketing, and
legal and professional costs. These totalled GBP2.9 million in the
six months ended 30 June 2023, and were consistent with the
operating costs for the six months to 31 December 2022 of GBP3.1
million (year ended 31 December 2022: GBP4.8 million). The
comparator figure of GBP1.8 million for the six months to 30 June
2022 comprises all the Vertigrow operating costs, with Summerway's
corporate costs included from 28 March 2022 onwards.
Operating loss - is gross margin less operating costs,
depreciation and amortisation. The operating loss for the six
months ended 30 June 2023 was GBP3.2 million (six months ended 30
June 2022: GBP2.0 million, year ended 31 December 2022: GBP5.4
million).
One off and non-cash items - in this reporting period, and the
comparator period there were a number of non-recurring and non-cash
items below Operating Profit, which are detailed as follows:
Reverse acquisition and transaction related costs in the six
months ended 30 June 2023, six months ended 30 June 2022 and year
ended 31 December 2022:
-- Transaction related costs - a GBP0.6 million charge arose in
the period to 30 June 2023 in respect of due diligence costs for a
potential transaction, and on certain internal reorganisations. The
comparator figure of GBP1.5 million for the six months to 30 June
2022 (year ended 31 December 2022: GBP1.5 million) related to the
costs of advisors in respect of the Group's IPO, including GBP245k
of warrants issued to Canaccord Genuity for their work on the
readmission of the Group to AIM; -
-- Reverse acquisition share based payment and IPO costs - in
the six months ended 30 June 2022 a GBP6.4 million share based
payment charge reflecting the net cost of Vertigrow acquiring
Summerway and the AIM listing (year ended 31 December 2022: GBP6.4
million). This is a non-cash cost.
-- Finance charges on convertible loan notes - in February and
March 2021 Vertigrow raised GBP4.13 million in pre IPO finance via
convertible loan notes (the "CLNs"). These CLNs are categorised at
inception between an Embedded Derivative and a Host Liability,
recognising the optionality in the CLN for the investor to convert
their loan note in Vertigrow shares immediately prior to the
acquisition by Summerway. In the six months ended 30 June 2022, the
Group recorded a finance charge of GBP3.4 million (year ended 31
December 2022: GBP3.4 million) on the convertible loan notes, and a
finance credit of GBP556k (year ended 31 December 2022: GBP556k) on
the derivative liability. These are non-cash items as the loan
notes converted into equity on 28 March 2022.
Non-cash movements relating to Harley Street (CPC) Limited
In the six months to 30 June 2022, the Group released the
contingent consideration originally booked on the acquisition of
its original 57.5% investment in Harley Street (CPC) Limited to its
income statement as it became apparent that this element of the
original consideration would not be payable. In the six months to
31 December 2022, the Group impaired the goodwill on its investment
in Harley Street (CPC) Limited by GBP639k, giving a net charge in
the year to 31 December 2022 of GBP264k. All of these costs are
non-recurring.
Long term incentive plans - the Group has two share based long
term incentive plans for certain directors, advisors and employees;
the Subsidiary Incentive Scheme and a separate Long Term Incentive
Plan (see note 12).
In the six months to 30 June 2023, the total charge in respect
of the long term incentive plans was GBP420k (six months ended 30
June 2022: GBP768k, year ended 31 December 2022 GBP1.1
million).
The first awards under the Long Term Incentive Plan were made in
January and February 2023. The fair value charge associated with
the January and February 2023 LTIP awards was GBP248k (six months
ended 30 June 2022: GBPnil, year ended 31 December 2022: GBP nil).
The Group also recognised a GBP76k charge for the Subsidiary
Incentive Scheme (six months ended 30 June 2022: GBP768k, year
ended 31 December 2022: GBP910k). A further GBP96k charge related
to warrants awarded to an advisor in respect of services to be
provided between April 2022 and March 2024 (six months ended 30
June 2022: GBP226k, year ended 31 December 2022: GBP471k).
Finance charges on leased assets - Celadon has a Right of Use
lease on its production facility with over 21 years remaining.
There is also a 3 year Right of Use lease on one item of production
equipment, with 2 years left to run. The finance charge on these
leased assets of GBP297k is a fair valuation charge to unwind the
respective balance sheet lease liabilities (six months ended 30
June 2022: GBP264k, year ended 31 December 2022: GBP531k).
Loan interest charges - In the period to 30 June 2023, Celadon's
only drawn external funding line was a UK Government backed COVID
related Bounce Back loan. The external loan interest charged on the
Bounce Back loan in the period was GBP0.4k (six months ended 30
June 2022: GBP0.5k, year ended 31 December 2022: GBP1k).
In the prior period to 30 June 2022, the Vertigrow Technology
Limited group had two additional funding lines:
(a) a Supplier Loan; and,
(b) a pre IPO loan from Summerway Capital Plc.
There was no external interest charged on the Supplier Loan or
pre-IPO loan in the period to 30 June 2023 (six months ended 30
June 2022: GBP63k, year ended 31 December 2022: GBP60k).
Non Current Assets - were maintained at GBP6.9 million in the
six months ended 30 June 2023 (2022: GBP6.6 million), as the Group
continued the design elements for the continuation of its facility
fit out.
Current Assets - decreased by GBP3.7 million in the six months
to 30 June 2023 to GBP2.6 million (2022: GBP9.8 million). The
decrease since June 2022 reflects the utilisation of the cash
proceeds from the IPO being utilised to fund the facility expansion
and operating expenses for the business.
Current Liabilities - increased by GBP198k in the six months
ended 30 June 2023 to GBP1.4 million but were consistent with the
position at June 2023 (30 June 2022: GBP1.4 million, 31 December
2022: GBP1.2 million). The increase since December 2022 is due to
an increase in accounts payable as the business prepared itself for
its first commercial sales.
Non-current liabilities - remained consistent at GBP5.0 million
in the six months ended 30 June 2023 (30 June 2022: GBP4.4 million,
31 December 2022: GBP5.0 million). The increase compared with June
2022 is as a result of an increase in the lease liability and the
recognition of a provision in respect of the property
decommissioning costs of GBP0.4 million.
Net assets - at 30 June 2023 were GBP3.0 million (30 June 2022:
GBP10.7 million, 31 December 2022: GBP7.0 million).
Shareholders' Equity - Share Capital including Share Premium and
the Merger Relief Reserve total GBP88.3 million at 30 June 2023, 30
June 2022 and 31 December 2022 following the IPO and acquisition of
Vertigrow by Summerway Capital Plc; the Reverse Acquisition Reserve
of GBP59.2 million (which is the consolidation reserve created on
the reverse acquisition of combining Summerway Capital Plc and
Vertigrow); the Retained losses (increased to GBP27.9 million). The
Non-controlling Interest of GBP638k at 31 December 2022 comprised
an element of GBP23k relating to the Subsidiary Incentive Scheme
and (GBP661k) relating to Harley Street (CPC) Limited. The element
relating to Harley Street (CPC) Limited was recaptured in Retained
losses when the Group purchased the shares it did not previously
own.
Cash outflows from operating activities - for the six months
ended 30 June 2023 were GBP3.0 million (2022: GBP3.0 million, year
ended 31 December 2022: GBP6.1 million). The main spend items
include people, advisers and utility costs.
Investing activities - in the period ended 30 June 2023 capex
items totalled GBP208k (2022: GBP1.2 million, year ended 31
December 2022: GBP2.1 million). In the period to 30 June 2022, the
Group increased its investment in Kingdom Therapeutics Limited by
GBP18k (to GBP218k) and the Group also received GBP3.5 million of
cash inflow on the acquisition of Summerway Capital Plc.
Financing activities - in the six months ended 30 June 2022, the
Group raised GBP7.5 million of new equity financing (net of
allocated issue costs, which were specifically related to the
fundraise process) and repaid a supplier loan of GBP1.5 million
which was not used.
Cash balance - at 30 June 2023 the Group had GBP1.6 million in
cash (30 June 2022: GBP9.1 million, 31 December 2022: GBP5.1
million).
New funding line - on 29 May 2023, the Group obtained GBP7.0
million of new funding via a 2-year fixed rate Revolving Credit
Facility Agreement. Interest will accrue at a rate of 10% on
balances drawn under the Facility Agreement. The Revolving Credit
Facility Agreement will be repayable in the event that the Group
obtains sufficient alternative funding to allow the Revolving
Credit Facility Agreement to be repaid in full. At 30 June 2023 the
Revolving Credit Facility remained undrawn.
Jonathan Turner
CFO
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the six-month period ended 30 June 2023
Six months Six months Year ended
ended 30 ended 30 31 December
June 2023 June 2022 2022
Unaudited Unaudited
Notes GBP'000 GBP'000 GBP'000
Revenue 6 8 11 24
Cost of sales (34) (23) (90)
Gross Profit (26) (12) (66)
Operating costs (2,902) (1,799) (4,849)
Depreciation and amortisation (260) (171) (466)
----------- ----------- -------------
Operating loss (3,188) (1,982) (5,381)
Share-based payment costs for
reverse acquisition - (6,400) (6,400)
Transaction related costs (556) (1,465) (1,465)
Finance costs 7 (271) 231 (23)
Non-cash movements relating
to Harley Street (CPC) Limited - 375 (264)
Finance charge on convertible
loan note
- Interest and charges - (43) (43)
- Redemption - (3,406) (3,406)
Long term incentive plans 12 (420) (768) (1,136)
(1,247) (11,476) (12,737)
----------- ----------- -------------
Loss before taxation (4,435) (13,458) (18,118)
Taxation 12 - 707
Loss for the period, being
total comprehensive loss for
the period (4,423) (13,458) (17,411)
----------- ----------- -------------
Loss attributable to:
Controlling Interest (4,301) (13,247) (17,006)
Non-controlling interest (122) (211) (405)
(4,423) (13,458) (17,411)
=========== =========== =============
Basic and diluted loss per
share 8 (7.2)p (25.1)p (29.5)p
----------- ----------- -------------
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June 2023
30 June 2023 30 June 2022 31 December
2022
Unaudited Unaudited
Notes GBP000 GBP000 GBP000
Non-current assets
Intangible assets 378 1,092 428
Property, plant and equipment 3,001 2,064 2,921
Right of use assets 3,272 3,247 3,354
Investments 10 218 218 218
Total non-current assets 6,869 6,621 6,921
------------- ------------- ------------
Current assets
Inventories 24 21 20
Trade and other receivables 956 720 1,249
Cash and cash equivalents 1,611 9,075 5,061
Total current assets 2,591 9,816 6,330
------------- ------------- ------------
Current liabilities
Trade and other payables (1,304) (1,188) (1,106)
Bounce Back Loan 11 (10) (10) (10)
Lease liabilities 11 (56) (208) (56)
Deferred tax liability (25) - (25)
Total current liabilities (1,395) (1,406) (1,197)
------------- ------------- ------------
Non-current liabilities
Bounce Back Loan 11 (19) (29) (24)
Lease liabilities 11 (4,565) (4,342) (4,542)
Provisions (397) - (389)
Deferred tax liability (50) - (62)
Total non-current liabilities (5,031) (4,371) (5,017)
------------- ------------- ------------
Net assets 3,034 10,660 7,037
============= ============= ============
Shareholders' funds
Share capital 617 617 617
Share premium 22,553 22,553 22,553
Merger Reserve 65,082 65,082 65,082
Reverse Acquisition Reserve (59,200) (59,200) (59,200)
Warrant Reserve 566 245 471
Capital Redemption Reserve 49 49 49
Share Based Payment Reserve 1,235 792 910
Retained earnings (27,891) (19,010) (22,807)
Non-controlling interest 23 (468) (638)
Total Equity 3,034 10,660 7,037
============= ============= ============
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the six months ended 30 June 2023
Equity
Share attributable
Merger Reverse Capital Based to owners
Share Share Relief Acquisition Warrant Redemption Payment Retained of the Non-controlling Total
Capital Premium Reserve Reserve Reserve Reserve Reserve Earnings parent interest Equity
Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
---------- ---------- ---------- ------------ ---------- ----------- ---------- ---------- ------------- ---------------- ----------
Balance at 31
December
2021 80 7,367 - (5,835) - 49 - (5,801) (4,140) (256) (4,396)
Measurement
period
adjustment 38 38 38
Recognition of
PLC Net
Assets at
acquisition
date 5,751 5,751 5,751
Issue of
shares for
acquisition
of subsidiary 433 65,082 (65,515) - -
Share-based
payment
charge 6,399 792 7,191 7,191
Settlement of
convertible
loan notes of
Vertigrow
Technology
Ltd 52 7,765 7,817 7,817
Issue of
shares for
cash 52 8,448 8,500 8,500
Cost of share
issue (1,009) (1,009) (1,009)
Warrants
issued (18) 245 227 227
- -
Loss for the
period - - - - - - - (13,247) (13,247) (212) (13,459)
---------- ---------- ------------ ---------- ----------- ---------- ---------- ------------- ---------------- ----------
Total
comprehensive
loss
for the
period - - - - - - - (13,247) (13,247) (212) (13,459)
Balance at 30
June 2022 617 22,553 65,082 (59,200) 245 49 792 (19,010) 11,128 (468) 10,660
Subsidiary
Incentive
Share
issue 23 23
Share-based
payment
charge 226 118 344 344
Loss for the
period - - - - - - - (3,797) (3,797) (193) (3,990)
Total
comprehensive
loss
for the
period - - - - - - - (3,797) (3,797) (193) (3,990)
Balance at 31
December
2022 617 22,553 65,082 (59,200) 471 49 910 (22,807) 7,675 (638) 7,037
Equity
Share attributable
Merger Reverse Capital Based to owners
Share Share Relief Acquisition Warrant Redemption Payment Retained of the Non-controlling Total
Capital Premium Reserve Reserve Reserve Reserve Reserve Earnings parent interest Equity
Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
---------- ---------- ---------- ------------ ---------- ----------- ---------- ---------- ------------- ---------------- ----------
Balance at 31
December
2022 617 22,553 65,082 (59,200) 471 49 910 (22,807) 7,675 (638) 7,037
Share-based
payment
charge 95 325 420 420
Acquisition of
42.5% of
Harley Street
(CPC) Limited (783) (783) 783 -
Loss for the
period - - - - - - - (4,301) (4,301) (122) (4,423)
---------- ---------- ---------- ------------ ---------- ----------- ---------- ---------- ------------- ---------------- ----------
Total movement
for the
period 617 22,553 65,082 (59,200) 566 49 1,235 (27,891) 3,011 23 3,034
Balance at 30
June 2023 617 22,553 65,082 (59,200) 566 49 1,235 (27,891) 3,011 23 3,034
========== ========== ========== ============ ========== =========== ========== ========== ============= ================ ==========
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
As at 30 June 2023
30 June 30 June 31 December
2023 2022 2022
Unaudited Unaudited
GBP000 GBP000 GBP000
Operating activities
Loss for the Period (4,423) (13,458) (17,411)
Adjustments for:
Depreciation and amortisation 260 171 466
Finance charges on leased assets 288 264 532
Finance charge on convertible loan
notes - 3,449 3,449
Fair value (loss) on derivative
liability - (556) (556)
Finance charge on loans 2 53 53
Long term incentive plan 420 768 910
Warrant costs - 226 471
Reverse acquisition share-based
payment expense - 6,400 6,400
Non-cash movements in respect of
Harley Street (CPC) Ltd - (375) 264
Other finance cost (net) (18) 8 (5)
Release of deferred tax liability
on intangible assets (12) - (25)
Operating cash-flow before working
capital movements (3,483) (3,050) (5,452)
Decrease/(increase) in trade and
other receivables 293 (385) (985)
Increase in trade and other payables 199 438 355
(Increase) in inventories (3) (19) (18)
Cash (outflow) from operating
activities (2,994) (3,016) (6,100)
---------- ---------- ------------
Investing activities
Cash received on reverse acquisition - 3,494 3,494
Purchase of property, plant and
equipment (208) (1,153) (2,086)
Purchase of investments - (18) (18)
Net cash (outflow)/inflow from
investing activities (208) 2,323 1,390
---------- ---------- ------------
Financing activities
Interest received 18 1 17
Repayment of Lease Liabilities (258) - (8)
Supplier loan - interest payment (2) (41) (41)
Supplier loan - (repayment) - (1,500) (1,500)
Bounce back Loan repayment (6) (5) (11)
Proceeds from issuing share capital,
net of issue costs - 7,491 7,491
Net cash (outflow)/inflow from
financing activities (248) 5,946 5,948
---------- ---------- ------------
Net (decrease)/increase in cash
and cash equivalents (3,450) 5,253 1,238
Cash and cash equivalents at beginning
of period 5,061 3,822 3,823
Cash and cash equivalents at end
of period 1,611 9,075 5,061
========== ========== ============
NOTES TO THE INTERIM RESULTS
For the six-months ended 30 June 2023
1. About Celadon Pharmaceuticals Plc
Celadon Pharmaceuticals Plc (the "Company") and its subsidiaries
(together "the Group") are a UK based pharmaceutical group with a
primary focus on growing indoor hydroponic high-quality cannabis
initially for use within the chronic pain market.
The Company (called Summerway Capital Plc until 25 March 2022)
is a public limited company incorporated in England and Wales and
domiciled in the United Kingdom (company number: 11545912). It is a
public company listed on the AIM market of the London Stock
Exchange. The registered address is 32-33 Cowcross Street, London,
EC1M 6DF.
On 28 March 2022, the Company completed the acquisition of
Vertigrow Technology Limited (and its subsidiaries Celadon Pharma
Limited and Harley Street (CPC) Limited) and the settlement of the
Vertigrow Technology Limited convertible loan notes via an issuance
of new shares. Vertigrow Technology Limited was renamed Celadon
Property Co Limited on 3 January 2023 - the company's new name will
be used in the following. Further details on this transaction and
the subsequent Group structure is included at note 5.
2. Basis of preparation
These interim Condensed Consolidated Financial Statements and
accompanying notes have neither been audited nor reviewed by the
auditor, do not constitute statutory accounts within the meaning of
Section 434 of the Companies Act 2006 and do not include all the
information and disclosures required in annual statutory financial
statements. They should be read in conjunction with the Group's
Annual Report and Accounts for the year ended 31 December 2022
which are available on the Group's website. Those statutory
accounts were approved by the Board of Directors on 2 June 2023 and
have been filed with Companies House. The report of the auditors in
those accounts was unqualified and also did not contain a statement
under section 498(2) or (3) of the Act.
The interim financial information has been prepared under the
historical cost convention except for certain items that are shown
at fair value as disclosed in the accounting policies.
The financial statements are presented in Sterling which is the
functional currency of the group and all values are rounded to the
nearest Pound Sterling Thousand (GBP000s).
The accounting policies applied by the Group in these interim
condensed consolidated financial statements are the same as those
applied by the Group in the audited consolidated financial
statements for the year ended 31 December 2022 and those which will
form the basis of the 2023 Annual Report.
These interim Condensed Consolidated Financial Statements were
approved by the Board of Directors on 27 September 2023.
a. Basis of consolidation
The interim condensed consolidated financial statements
incorporate the financial statements of the Company and entities
controlled by the Company (its subsidiary undertakings). Where
necessary, adjustments are made to the financial statements of the
subsidiaries to bring their accounting policies in line with those
of the Group. All intra-Group transactions, balances, income and
expenses are eliminated on consolidation.
Subsidiaries are entities controlled by the Group. The Group
"controls" an entity when it is exposed to, or has rights to,
variable returns from its involvement with the entity and has the
ability to affect those returns through its power over the entity.
The financial statements of subsidiaries are included in the
consolidated financial statements from the date on which control
commences until the date on which control ceases.
Non-controlling interests are measured initially at their
proportionate share of the acquiree's identifiable net assets at
the date of acquisition.
b. Going concern
These interim condensed consolidated financial statements have
been prepared on a going concern basis, which assumes that the
Group will continue in operational existence for the foreseeable
future.
The Group currently consumes cash resources and will continue to
do so as it completes the construction of its growing facilities
and until sales revenues are sufficiently high enough to generate
net cash inflows.
In assessing whether the going concern assumption is
appropriate, the Directors have taken into account all relevant
information about the current and future position of the Group and
including the current level of resources.
At 30 June 2023 the Group had GBP1.6 million of cash and net
assets of GBP3.0 million. In addition on 29 May 2023, the Group
entered into a 2 year GBP7.0 million Revolving Credit Facility to
provide additional liquidity for operating and capital
expenditure.
Taking these matters into consideration, the Directors consider
that the continued adoption of the going concern basis is
appropriate having prepared cash flow forecasts for the coming 12
months. The financial statements do not reflect any adjustments
that would be required if they were to be prepared on a non going
concern basis.
3. Accounting policies
Details of significant accounting policies are set out
below.
a. Reverse Acquisition of Summerway Capital Plc and creation of
the Celadon Pharmaceuticals Plc group of companies
On 28 March 2022 the Company, then named Summerway Capital Plc,
became the legal parent of Celadon Property Co Limited.
Summerway Capital Plc was renamed Celadon Pharmaceuticals
Plc.
The results for the six months ended, and as at 30 June 2023 are
those of the Celadon Pharmaceuticals Plc group. The comparative
results for the six months ended 30 June 2022 represent the
consolidated position of the Celadon Property Co Limited group of
companies prior to the reverse acquisition with the inclusion of
the Celadon Pharmaceuticals Plc group from the acquisition date of
28 March 2022 through to 30 June 2022. The position as at 30 June
2022 represents the consolidated position of the Celadon
Pharmaceuticals Plc group.
This transaction was deemed outside the scope of IFRS 3 Business
Combinations (Revised 2008) ("IFRS 3") and not considered a
business combination because the directors made a judgement that
prior to the transaction, that Celadon Pharmaceuticals Plc was not
a business under the definition of IFRS 3 Appendix A and the
application guidance in IFRS 3.B7-B12 due to that company being a
company that had no processes or capability for outputs (IFRS
3.B7).
On this basis, the Directors developed an accounting policy for
this transaction, applying the principles set out in IAS 8
Accounting Policies, Changes in Accounting Estimates and Errors
("IAS 8") paragraphs 10-12, in that the policy adopted:
-- Provides more relevant financial information to users of these statements;
-- Is more representative of the performance, financial position, and cash flows of the Group;
-- Reflects the economic substance of the transaction, not merely the legal form; and
-- Is free from bias, prudent and complete in all material aspects.
The accounting policy adopted by the Directors applies certain
principles of IFRS 3 in identifying the accounting acquirer
(Celadon Property Co Limited) and the presentation of the
consolidated financial statements of the legal acquirer (Celadon
Pharmaceuticals Plc) as a continuation of the accounting acquirer's
financial statements (Celadon Property Co Limited).
This policy reflects the commercial substance of this
transaction as:
-- the original shareholders of Celadon Property Co Limited are
the most significant shareholders after the business combination
and initial public offering, owning 86 per cent of the issued share
capital; and
-- the executive management team of Celadon Property Co Limited
became the executive management of Celadon Pharmaceuticals Plc.
Accordingly, the following accounting treatment and terminology
has been applied in respect of the reverse acquisition:
-- the assets and liabilities of the legal subsidiary Celadon
Property Co Limited group are recognised and measured in the group
financial statements at the pre-combination carrying amounts,
without reinstatement to fair value;
-- the retained earnings and other equity balances recognised in
the group financial statements reflect the retained earnings and
other equity balances of the Celadon Property Co Limited group
immediately before the business combination; and
-- the results of the period from 1 January 2022 to 28 March
2022 are those of the Celadon Property Co Limited group.
However, in the Group financial statements:
-- the equity structure presented, reflects the equity structure of the legal parent (Celadon Pharmaceuticals Plc), including the equity instruments issued under the share-for-share exchange to effect the business combination; and
-- the cost of the combination has been determined from the
perspective of Celadon Property Co Limited group.
Transaction costs of equity transactions relating to the issue
and re-admission of the Company's shares, are accounted for as a
deduction from equity where they relate to the issue of new shares,
and listing costs are charged to the consolidated statement of
comprehensive income. See note 5 for further explanation.
b. Acquisition of Harley Street (CPC) Limited
On 14 July 2021, Celadon Property Co Limited acquired a 57.5%
shareholding in Harley Street (CPC) Limited for GBP2.0 million, of
which GBP500k was paid in cash and GBP1,500k of contingent
consideration was to be paid in shares in December 2022 (subject to
certain targets being achieved).
In addition to acquiring the share ownership Celadon Property Co
Limited had the ability to appoint four directors to the board of
Harley Street (CPC) Limited compared with two from the other
investor. Celadon also exercised operational control of the
business. Given the degree of control, it is appropriate to include
Harley Street (CPC) Limited as part of the consolidation and
reflect the ownership by third parties as a non-controlling
interest.
The GBP1,500k contingent consideration payment was estimated to
have an acquisition date fair value of GBP375k based upon a 6.2%
discount rate and management's probability estimate of the payment
criteria being satisfied.
In June 2022, the Directors reassessed that the targets for the
contingent consideration payment would not be met within the time
frame set, and released the contingent liability of GBP375k back to
the consolidated statement of comprehensive income.
On 31 May 2023, Celadon Property Co Limited acquired the
remaining 42.5% shareholding for GBP1. An adjustment of GBP661k was
made to the retained reserves to release the non-controlling
interest share of the accumulated losses.
c. New and amended accounting standards
New and amended standards and interpretations applied
The following accounting standards and updates were applicable
in the reporting period but did not have a material impact on the
Company:
-- IFRS 17: Insurance Contracts (effective 1 January 2023)
-- Amendments to IAS 17: Insurance Contracts (effective 1 January 2023)
-- Amendments to IAS 8: Accounting Policies, Changes in
Accounting Estimates and Errors (effective 1 January 2023)
-- Amendments to IAS 12: Income Taxes (effective 1 January 2023)
-- Amendments to IAS 1: Presentation of Financial Statements (effective 1 January 2023)
The Company has considered the IFRS's in issue but not yet
effective and do not consider any to have a material impact on the
Company.
4. Use of critical judgements and key accounting estimates
In preparing the financial statements, management has made
judgements and estimates that affect the application of the Group's
accounting policies and the reported amounts of assets,
liabilities, income, expenses, shareholders' equity and reserves.
Actual results may differ from these estimates. Estimates and
underlying assumptions are reviewed on an ongoing basis. Revisions
to estimates are recognised prospectively. In the process of
applying the Group's accounting policies, management has made the
following judgements and estimates, which have the most significant
effect on the amounts recognised in the financial statements:
Critical Judgements
a. Tax Losses
The Group has significant tax losses and has incurred
significant capital expenditure on leasehold improvements and plant
and machinery. The corporation tax treatment of these items and the
potential recognition of deferred tax assets requires management
judgement. The Group has decided not to recognise a deferred tax
asset at the balance sheet date, given the uncertainty of when
profits will arise.
Key Accounting Estimates
b. Research & Development Tax Credits
The Group has submitted its first R&D tax credit application
to HMRC totalling GBP269k relating to 2021 activities. Elements of
the R&D claims required judgement by management. At the date of
these financial statements GBP269k had been received by the company
in respect of the year to 31 December 2021. Using the same
methodology, the estimated R&D claim for the year to 31
December 2022 is GBP412k.
5. Reverse Acquisition of Vertigrow Technology Group
On 28 March 2022, Celadon Pharmaceuticals Plc (previously
Summerway Capital Plc) acquired through a share-for-share exchange,
the entire share capital of Celadon Property Co Limited and its
subsidiary companies Celadon Pharma Limited and Harley Street (CPC)
Limited (together the "Celadon Group"), whose principal activity is
growing highly controlled indoor hydroponic, high THC cannabis for
use within medicinal products used to treat chronic pain.
Although the transaction resulted in the Celadon Group becoming
a wholly-owned subsidiary group of the Company, the substance of
the transaction means it constitutes a reverse acquisition, as the
previous shareholders of Celadon Property Co Limited own a
substantial majority of the Ordinary Shares of the Company and the
executive management of Celadon Property Co Limited became the
executive management of Celadon Pharmaceuticals Plc.
Furthermore, as Celadon Pharmaceuticals plc's activities prior
to the acquisition were purely the maintenance of the AIM Listing,
acquiring Celadon Property Co Limited and raising equity finance to
provide the required funding for the operations of the acquisition,
it did not meet the definition of a business in accordance with
IFRS 3.
Accordingly, this reverse acquisition does not constitute a
business combination and was accounted for in accordance with IFRS
2 Share-based Payments ("IFRS 2") and associated IFRIC
guidance.
Although, the reverse acquisition is not a business combination,
the Company has become a legal parent and is required to apply IFRS
10 Consolidated Financial Statements ("IFRS 10") and prepare
consolidated financial statements with Caledon Pharmaceuticals Plc
consolidated as a subsidiary. The Directors have prepared this
interim financial information using the reverse acquisition
methodology, but rather than recognising goodwill, the difference
between the equity value given up by the shareholders of Celadon
Property Co Limited and the share of the fair value of net assets
gained by the shareholders of Celadon Property Co Limited is
charged to the statement of comprehensive income as a share-based
payment on reverse acquisition. In substance, this represents the
cost of acquiring an AIM listing.
In accordance with reverse acquisition accounting principles,
this consolidated interim financial information represents a
continuation of the consolidated statements of Celadon Property Co
Limited and its subsidiaries and include:
a. the assets and liabilities of Celadon Property Co Limited and
its subsidiaries at their pre-acquisition carrying value amounts
and the results for the periods presented; and
b. the assets and liabilities of the Company (and its wholly
owned subsidiary Celadon Subco Limited (previously Summerway Subco
Limited)) as at 28 March 2022 and its results from the date of the
reverse acquisition (28 March 2022) to 31 December 2022.
On 28 March 2022, Celadon issued 43,316,201 ordinary shares to
acquire the entire share capital of Celadon Property Co Limited,
and issued 5,168,647 ordinary shares to redeem the Celadon Property
Co Limited convertible loan notes. At 28 March 2022, the average
share price of Celadon for the day was GBP1.5125.
On consolidation and presentation of the Group's financial
position, performance and cash flows, Celadon Property Co Limited,
was treated as the accounting acquirer, and the legal parent
company, Celadon, was treated as the accounting acquiree.
The fair value of the shares deemed to have been issued by
Celadon Property Co Limited was calculated at GBP12,151k based on
an assessment of the purchase consideration for a 100% holding of
Celadon on the reverse acquisition date.
The fair value of the net assets of Celadon plc at acquisition
was as follows:
GBP000
---------------------------------------- --------
Cash and equivalents 3,494
Other assets 2,285
Accounts payable and other liabilities (28)
Net assets 5,751
---------------------------------------- --------
The difference between the deemed cost GBP12,151k and the fair
value of the net assets assumed per above of GBP5,751k resulted in
GBP6,400k being expensed within "Reverse Acquisition Expenses" in
accordance with IFRS 2, reflecting the economic cost to the
shareholders of Celadon Property Co Limited of acquiring a quoted
entity.
The professional fees in the six months ended 30 June 2022
relating to the reverse acquisition of Vertigrow Technology Limited
in the period were GBP2,493k (year ended 31 December 2022:
GBP2,493k ), of which GBP1,027k (year ended 31 December 2022:
GBP1,027k ) was charged to the share premium account, and GBP1,465k
( year ended 31 December 2022: GBP1,465k) was expensed in the
consolidated statement of comprehensive income.
The Transaction Related Costs in the six months ended 30 June
2023 of GBP556k relate to the costs incurred in the acquisition of
the shares of Harley Street (CPC) Limited that were not already
owned, and the post period disposal of that entity, and further
costs in related to an aborted transaction.
6. Revenue
The Group recorded revenue in the 6 months ended 30 June 2023 of
GBP8k (6 months ended 30 June 2022: GBP11k; year ended 31 December
2022: GBP24k) from patients on the Group's clinical study in Harley
Street (CPC) Limited.
7. Net finance costs
30 June 30 June 31 December
2023 2022 2022
Unaudited Unaudited
GBP000 GBP000 GBP000
--------------------------------------- ---------- ---------- ------------
Finance gain on derivative
liability associated with convertible
loan notes - 556 556
Finance (charge) on leased
assets (297) (264) (531)
Finance (charge) on related
party loan - (53) (53)
Finance (charge) on external
loans - (10) (7)
Finance income on bank deposits 26 3 12
(271) 232 (23)
--------------------------------------- ---------- ---------- ------------
8. Loss per share
Basic loss per ordinary share is calculated by dividing the loss
attributable to equity holders of the Company by the weighted
average number of ordinary shares in issue during the period.
Six months Six months Year ended
ended 30 ended 30 31 December
June 2023 June 2022 2022
Unaudited Unaudited
GBP000 GBP000 GBP000
------------------------------------- ----------- ----------- -------------
Loss attributable to the owners
of the Company (4,423) (13,285) (16,906)
Weighted average number of ordinary
shares in issue 61,669,773 52,847,890 57,295,086
Basic and diluted loss per share (7.2p) (25.1p) (29.5p)
9. Acquisitions - Harley Street (CPC) Limited
On 14 July 2021, Vertigrow acquired 57.5% of the issued share
capital of Harley Street (CPC) Limited ("HSCPCL"), which is in the
advanced stages of obtaining MHRA and Research Ethics Committee
approval for a UK-based cannabis trial for a maximum consideration
of GBP2,000,000.
GBP500,000 was paid in cash on completion with a contingent
consideration payment of GBP1,500,000 due in ordinary shares of the
Company in the event that (a) each of MHRA and REC authorise the
Trial in full; and (b) 5,000 paying patients of the Company's
clinic are accepted onto the Trial and receive their first
prescriptions under the Trial within 18 months of completion of the
acquisition of LVL.
GBP000
------------------------------------------ -------
Fair value of initial cash consideration
paid 500
Fair value of contingent consideration 375
-------
Total consideration 875
Fair value of net liabilities acquired 238
Non-controlling interest (101)
------------------------------------------ -------
Estimated Goodwill at 30 June 2022 1,012
------------------------------------------ -------
The GBP1,500,000 contingent consideration payment was estimated
to have an acquisition date fair value of GBP374,768 based upon
6.2% discount rate and management's probability estimate of the
payment criteria being satisfied.
The Directors completed the assessment of the fair value of net
assets acquired in the 31 December 2022 reporting, and therefore
the above figures were amended as follows:
GBP000
-------------------------------------- -------
Goodwill 719
Intangible Assets 498
Deferred tax liability in respect of
intangible asset (125)
-------------------------------------- -------
1,092
-------------------------------------- -------
At 30 June 2022, the Directors reassessed that the targets for
the contingent consideration payment would not be met within the
time frame set, and released the contingent consideration liability
back to consolidated statement of comprehensive income.
On 31 May 2023, Celadon Property Co Limited acquired the
remaining 42.5% shareholding for GBP1. An adjustment of GBP661k was
made to the retained reserves to release the non-controlling
interest share of the accumulated losses.
10. Investments
In 2021 Vertigrow Technology Ltd invested GBP200,000 in Kingdom
Therapeutics Limited (a 17% holding) and acquired an additional
holding for GBP18,000 in May 2022. At 30 June 2023 Vertigrow
Technology Limited has a 19% shareholding in Kingdom Therapeutics
Limited.
11. Loans and borrowings
30 June 30 June 31 December
2023 2022 2022
Unaudited Unaudited
GBP000 GBP000 GBP000
------------------------- ---------- ---------- ------------
Current liabilities
Bounce back bank loan (10) (10) (10)
Lease liabilities (56) (208) (56)
(66) (218) (66)
------------------------- ---------- ---------- ------------
Non-current liabilities
Bounce back bank loan (19) (29) (24)
Lease liabilities (4,565) (4,342) (4,542)
(4,584) (4,371) (4,566)
------------------------- ---------- ---------- ------------
1- Celadon Pharma Limited has a 6 year GBP50,000 Bounce Back
Loan with Barclays Bank plc with interest fixed at 2.5% pa.
12. Long Term Incentive Plans
The Group operates two different long term incentive plans, the
Subsidiary B-Share LTIP Incentive Scheme and the Long Term
Incentive Plan. Both plans were adopted at the time of the
Company's readmission to AIM in March 2022, though until January
2023 awards had only been made under the Subsidiary B-Share LTIP
Incentive Scheme. No further awards have been made in 2023, but the
first awards under the Company's LTIP Scheme were made in January
and February 2023.
Subsidiary B-Shares LTIP Incentive Scheme
On 28 March 2022, the Company amended its Subsidiary Incentive
Scheme in order to incentivise and retain certain key employees and
directors of, and advisers to, the Company.
Under the terms of the Subsidiary Incentive Scheme, the
principles will remain in line with the Company's existing scheme
such that participants are entitled to subscribe for Subsidiary B
Shares. Subsidiary B Shares provide the holder with a right to
participate in any Shareholder value that is created over a
predetermined level and over a three- to five-year period (or upon
a change of control of the Company or the Subsidiary, whichever
occurs first). This is calculated on a formula basis by reference
to the growth in market capitalisation of the Company, following
adjustments for the issue of any new Ordinary Shares and taking
into account dividends and capital returns ("Shareholder Value"),
and realised by participants through the exercising of a put option
in respect of their Subsidiary B Shares and satisfied either in
cash or by the issue of new Ordinary Shares at the election of the
Company.
On 28 March 2022, the Subsidiary Incentive Scheme was amended to
create three classes of Subsidiary B Shares in issue under the
Subsidiary Incentive Scheme:
The 400,000 Subsidiary B Shares held by participants under the
current Subsidiary Incentive Scheme (which commenced on 15 January
2021) were converted into B1 Shares. These B1 Shares will
participate in up to 4 per cent. of Shareholder Value created above
a current threshold of GBP96,305,000 ("B1 Initial Value"), being
the initial market cap of the Company, plus the amount of funds
raised on 15 January 2021, plus the total subscription value of the
Consideration Shares and the Placing Shares. The B1 Shares will
only participate in that Shareholder Value, however, if the
individual elements of the B1 Initial Value grow at an annual rate
of 7.5 per cent. (compounded), measured over a period of three to
five years commencing on 15 January 2021.
650,000 B2 Shares were issued to advisers of Celadon. These B2
Shares will participate in up to 6.5 per cent. of Shareholder Value
created above a current threshold of GBP81,755,125 ("B2 Initial
Value"), being the pre-Acquisition value of the Company plus a
discounted value of the Celadon Group (to reflect pre-agreed
incentive arrangements and the advisers' contribute to date) plus
the total subscription value of the Placing Shares. The B2 Shares
will only participate in that Shareholder Value, however, if the
individual elements of the B2 Initial Value grow at an annual rate
of 17.5 per cent. (compounded), measured over a period of three to
five years commencing on 28 March 2022.
600,000 B3 Shares were issued to selected management of Celadon.
These B3 Shares will participate in up to 6 per cent. of
Shareholder Value created above a current threshold of
GBP101,755,125 ("B3 Initial Value"), being the pre-Acquisition
value of the Company plus the total subscription value of the
Consideration Shares and the Placing Shares. The B3 Shares will
only participate in that Shareholder Value, however, if the
individual elements of the B3 Initial Value grow at an annual rate
of 17.5 per cent. (compounded), measured over a period of three to
five years commencing on 28 March 2022.
Overall, therefore, the maximum dilution from the Subsidiary
Incentive Plan could be 16.5 per cent. of the Shareholder Value
generated above the specified threshold amounts (and this is
contingent on achieving the specified annual growth rates) across
each individual class of Subsidiary B Share. A summary of the
changes made to the Subsidiary Incentive Scheme are set out in the
following table.
Item Previous Subsidiary Incentive Scheme Amended Subsidiary Incentive Scheme
Date in place 15 January 2021 to 28 March 2022 From 28 March 2022
Percentage of Shareholder Value Up to 20 per cent 16.5 per cent.
available to Scheme Participants
(pre acquisition of, or
investment in operating company)
Target compound annual growth rate
hurdle 7.5 per cent B1 Shares - 7.5 per cent
B2 / B3 Shares - 17.5 per cent
Commencement date 15 January 2021 B1 Shares - 15 January 2021
B2 / B3 Shares - 28 March 2022
Initial Value GBP7.6 million B1 - GBP96.3 million
B2 - GBP81.8 million
B3 - GBP101.8 million
Vesting period B1 - 3 to 5 years from 15 January
3 to 5 years from January 2021 2021
B2 / B3 - 3 to 5 years from 28 March
2022
Scheme Participants, respective B Alexander Anton - 75,000 Alexander Anton - 241,666
Share holdings Benjamin Shaw - 75,000 Benjamin Shaw - 241,667
and current aggregate Mark Farmiloe - 75,000 Mark Farmiloe - 241,667
Shareholder Value participation Tony Morris - 175,000 Tony Morris - 125,000
Vin Murria - 1,000,000 Paul Gibson - 50,000
Paul Gibson - 50,000 James Short - 200,000
Aggregated - 1,450,000 Kathleen Long - 150,000
Arthur Wakeley - 300,000
Iqbal Gill - 100,000
Aggregated - 1,650,000
If a participant ceases to be employed or engaged by the Company
for a 'bad leaver' reason (fraud or gross negligence), the Company
Subsidiary will have the right to buy-back their Subsidiary B
Shares for a price equal to the original subscription price paid by
the participant. In relation to the new awards of B3 Shares to
selected members of the Celadon management team, the Subsidiary B
Shares will also be subject to time-based annual vesting over 3
years. If a participant ceases to be employed by the Company (not
as a 'bad leaver') then the Company will also have the right to
buy-back their unvested Subsidiary B Shares for a price equal to
the original subscription price paid by the participant.
The charge to the income statement in the six months ended 30
June 2023 in respect of the Subsidiary B-Share Incentive Scheme was
GBP76k (six months ended 30 June 2022: GBP768k).
Long Term Incentive Plan
Under the terms of the Long Term Incentive Plan, the Company is
permitted to award share options to employees and advisors. These
option awards provide the holder with a right to acquire Ordinary
Shares of the Company in exchange for a payment of the nominal
value of the shares. This right is exercisable subject to the
satisfaction of either personal or Company Performance Conditions.
In January and February 2023, five awards were made; one to an
advisor to the Company with the remaining four awards being made to
a director and employees.
The vesting periods for the Long Term Incentive Plan awards
varied from awards that immediately vested due to the satisfaction
of Performance Conditions prior to the option award being made, to
three years from the date of the award. In the case of the award to
a director, there is a requirement to hold the shares for a further
two years after vesting.
The charge to the income statement in the period in respect of
the Long Term Incentive Plan was GBP248k (2022: nil)
13. Related Party Transactions
Dr. Steve Hajioff
Dr. Steve Hajioff provided consultancy services to Harley Street
(CPC) Limited prior to the Vertigrow's acquisition of its interest
in that company.
Vertigrow Technology Ltd entered a consulting agreement with Dr.
Steve Hajioff from 1 June 2021, which terminated on 28 March 2022
when he was appointed to the Board of Celadon Pharmaceuticals Plc.
In the period ended 30 June 2023 no consulting fees were charged
(2022: GBP8,000). At 30 June 2023, GBPnil was unpaid (30 June 2022:
GBPnil).
Kingdom Therapeutics Limited ("Kingdom")
Liz Shanahan is a Director and shareholder of Kingdom, and has
been a Director of Celadon Pharmaceuticals Plc since September
2021.
On 7 June 2021, Vertigrow Technology Ltd subscribed for a 17%
shareholding in Kingdom for GBP200,000.
On 5 May 2022 Vertigrow Technology Ltd purchased an additional
2.5% shareholding in Kingdom from a selling shareholder for
GBP18,000.
Related Party Loan (between Summerway Capital Plc and Vertigrow
Technology Ltd)
In October 2021 Summerway Capital Plc provided Vertigrow
Technology Ltd with a secured short term working capital loan with
10% interest pa. At 31 December 2021 and 28 March 2022,
GBP2,125,000 had been drawn down. Interest of GBP53,125 was
incurred by Vertigrow Technology Ltd in the period from 31 December
2021 up to 28 March 2022. After 28 March 2022 the loan interest and
balance have been eliminated on consolidation.
AFS Advisors LLP
AFS Advisors LLP is an entity indirectly and directly owned by
Alexander Anton (Chairman of the Company) and Benjamin Shaw (a
Director of the Company until 28 March 2022).
On 1 February 2021, Vertigrow Technology Ltd entered into an
agreement with AFS Advisors LLP for the provision of strategic and
general corporate advice, including IPO services. Under the terms
of the agreement with Vertigrow Technology Ltd, AFS Advisors LLP
were entitled to 5 per cent. of shareholder value created over
certain market capitalisation thresholds. Pursuant to the
agreement, this entitlement was replaced by AFS Advisors LLP's
participation in the Company's Subsidiary Incentive Scheme as
described further in note 12.
On 14 January 2022, AFS Advisors LLP and Vertigrow Technology
Ltd entered into an agreement under which AFS Advisors LLP would be
entitled to receive an initial contingent transaction success fee
of GBP350,000 on Admission for corporate finance and strategic
advisory services provided as part of the transaction. Furthermore,
under the terms of the agreement, Vertigrow Technology Ltd may at
its election, award AFS Advisors LLP a discretionary fee of a
further GBP580,000 within 12 months of Admission, which if paid,
would equate to a total success fee of 1 per cent. of the pre-money
value of the Enlarged Group. No discretionary payment has been
made.
In the six months ended 30 June 2023 GBPnil was charged to the
Company (2022: GBP350k). At 30 June 2023 GBPnil was unpaid (30 June
2022: GBPnil).
Tessera Investment Management Limited ("Tessera")
Tony Morris (a former Director of Summerway Capital Plc), and
Katie Long (the former Chief Financial Officer of Celadon
Pharmaceuticals Plc) are the directors and shareholders of
Tessera.
On 15 January 2021, Summerway Capital Plc entered into an
agreement with Tessera pursuant to which Tessera agreed to provide
strategic and general corporate advice, and M&A and capital
raising transaction support services. Tessera charged GBP12,500 per
month (plus VAT) payable monthly in arrears from the date of the
agreement. The agreement terminated on readmission of the Group to
AIM on 28 March 2022. The agreement was subsequently varied on 15
August 2022 and 23 March 2023, with initially a lower retainer of
GBP5,000 (plus VAT) with additional fees chargeable for work
outside the scope of the agreement, then a capped fee of GBP10,000
(plus VAT).
On 3 March 2021, Vertigrow Technology Ltd entered into an
agreement with Tessera pursuant to which Tessera has agreed to
provide strategic and general corporate advice, and M&A and
capital raising transaction support services. Under the agreement,
Tessera was to participate in the Vertigrow Technology Ltd share
incentive scheme to be implemented in the region of 1.5 per cent.
of additional shareholder value created through such scheme, by way
of an allocation to Katie Long on her appointment as CFO. This
entitlement was replaced by Katie Long's participation in the
Subsidiary Incentive Scheme (note 15) at re-admission on comparable
terms. In the six months ended 30 June 2022, GBP54,783 of advisory
fees were charged to the Company (six months ended 30 June 2021:
GBP60,000; year ended 31 December 2021: GBP150,000). At 30 June
2022 GBPnil was unpaid (30 June 2021: GBPnil; at 31 December 2021:
GBPnil). This agreement was terminated on 28 March 2022.
In the six months ended 30 June 2023, GBP63k (2022: GBP55k) of
fees were charged to the Company. At 30 June 2023 GBP6k was unpaid
(30 June 2022: GBPnil).
14. Subsequent Events
On 1 August 2023, the Research Ethics Committee ("REC") of the
Medicines and Healthcare products Regulatory Agency ("MHRA")
approved the roll-out of the Group's non-cancer chronic pain
clinical trial for up to 5,000 patients. The Group conducted a
feasibility study to demonstrate its ability to onboard patients
during the latter half of 2022 and submitted its results to REC on
30 December 2022. The Group is able to use the data generated from
the feasibility study as part of its data set from the clinical
trial. The Group is working with its partners to finalise the plan
for the optimal and timely roll-out of the trial.
On 5 September 2023, the Group announced its second sales
contract, to provide the commercial sale of its cannabis product to
a UK pharmaceuticals company, that the Group anticipates could
generate up to GBP1.2 million in revenue over three years, with the
option to extend the contract for a further two years.
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END
IR FLFSDALIDFIV
(END) Dow Jones Newswires
September 28, 2023 02:00 ET (06:00 GMT)
Celadon Pharmaceuticals (LSE:CEL)
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