CRX.L Regulatory News (CRX)

29 Mar 2007 07:01

Cyprotex PLC29 March 2007 Press Release 29 March 2007 Cyprotex PLC ("Cyprotex" or "the Company") Preliminary Results for year ended 31 December 2006 Cyprotex, a drug discovery technology and information company, today reports itspreliminary results for the year ended 31 December 2006. Highlights • Cyprotex recorded its first quarterly net profit and generated cash from operational activities during the final three months of 2006 • Revenue increased by 30% to £3.5 million from £2.7 million • Gross profits similarly rose by 30% to £3.0 million up from £2.3 million • Despite continued investment in equipment and services, cash resources remained healthy at £0.46 million (2005: £0.69 million) • Basic loss per share down to 0.48p (2005: loss 0.78p*) • The rapid expansion of the Group's customer base accelerated further during the second half as a result of the marketing push to gain greater penetration in the United States. * Restated following the adoption of FRS20, ('Share based payment') Commenting on the results, Robert Morrisson Atwater, Chairman and ChiefExecutive Officer of Cyprotex, said: "2007 has started with great optimism. In meeting the demands of its exactingcustomer base, Cyprotex is now able to measure the global opportunity facing it.Management now expects to report a positive outcome for 2007." For further information, please contact: Cyprotex PLCRobert Atwater, Chairman & Chief Executive Officer Tel: +44 (0) 207 930 9030ir@cyprotex.com www.cyprotex.com Cyprotex PLCRussell Gibbs, Chief Financial Officer Tel: +44 (0) 207 930 9030ir@cyprotex.com www.cyprotex.com Media enquiries: WMC CommunicationsCharlie Geller or Alex Glover Tel: +44 (0) 207 930 9030charlie.geller@wmccommunications.com www.wmccommunications.com Chairman and Chief Executive Officer's Statement Anticipating a Positive Outcome for 2007 2006 proved to be a particularly satisfactory year for Cyprotex. Not only did the Group match both the market and its management's bestexpectations for full-year revenues, but also reinforced its position at theforefront of human-discovery ADMET, whilst securing a further dramatic expansionof its core customer base. In so doing, Cyprotex has underlined the scope andopportunity for outsourced highly automated screening services to theinternational pharmaceutical industry. Activity levels picked up significantly during the second half. Having investedheavily in proving its unique and proprietary technologies, the Group increasedthe size of its sales force at the half-year stage with a specific view to 'picking the lower hanging fruit' evident in the United States. As a result,revenue growth accelerated to 45% higher than the corresponding second halfyear, with the non-European contribution approaching half total sales. Grossmargins matched the exceptional level achieved during 2005. 2007 has started with great optimism. Cyprotex's operations achieved a netprofit and generated cash from operational activities during the final quarterof 2006. Moreover, it has demonstrated the robustness and capacity of itshigh-tech facilities, its ability to meet the demands of an exacting customerbase and recognised the global opportunity in front of it. Management nowexpects to report a positive outcome for 2007. Financial Highlights for Full Year 2006 Cyprotex recorded its first quarterly net profit and generated cash fromoperational activities during the final three months of 2006; Revenues increased by 29.8% to £3,504,830 (2005: £2,701,256); Gross profits similarly rose by 29.5% to £2,971,659, ( 2005: £2,295,126); Despite continued investment in equipment and services, cash resources remainedhealthy at £455,279 (2005: £690,102); Basic loss per share down to 0.48p (2005: loss 0.78p*); and The rapid expansion of the Group's customer base accelerated further during thesecond half as a result of the marketing push to gain greater penetration in theUnited States. * Restated following the adoption of FRS20, ('Share based payment') A Global Customer Opportunity The international pharmaceutical industry is recognised as being one of theworld's hardest taskmasters. Today Cyprotex boasts over 115 customers aroundthe globe, which include half of the world's 'top-ten' pharmaceutical giants anda myriad of mid-sized companies and small biotech/CROs. Whilst continuing tobuild the customer base rapidly, focus is now moving toward expansion ofindividual relationships from simple 'fee-for-service' to longer-termcollaborations. Such partnerships should enable Cyprotex to secure a muchlarger share of the available work, as interdependence develops and forwardvisibility improves. Evaluation of early stage molecules is possibly the most sensitive part of anyprospective drug development. 'Go' or 'No Go' decisions at this time cancommit laboratories to seven-plus years of costly phased development and in-vivotesting before a product reaches the market. With poor pharmacokinetics acommon reason for project failure, it is perhaps no surprise that even todaysome 90% of such ADMET screening is still carried out as an in-house function.Yet, historically, drug development companies have not desired such genericprofiling to be part of their core competence. Internal evaluation clearly failsthe all-important 'independence test' of such analysis. Even recently, themarket has been stunned by both the cost and blow to reputation resulting fromhigh profile, late stage drug failures suffered by industry majors due toinadequate pre-clinical evaluation. By treating pharmacokinetic profiling as a specialisation, Cyprotex's businessplan moved manual and labour intensive laboratory screening services into afully automated and computerised process. The benefits of such an approach aremeasured in rapid turnaround, lower cost and, most importantly, exceptionallyrobust, independent data. In all these counts, Cyprotex now claims the industrystandard for highly automated ADMET screening. The industry's willingness to move toward much greater levels of outsourcing hasbeen widely reported. Various external agencies provide independent estimatesfor the size of the specific global markets addressed by Cyprotex which,supported by background data and pre-clinical industry statistics, concludesthat global spending for in-vitro ADMET screening this year will exceed $2.0bn.The extent to which this work becomes available to trusted outsourcing partners,such as Cyprotex, depends on their ability to add value in terms of both qualityof service and client confidentiality. Seizing the Opportunity Four years of investment have seen Cyprotex perfect and validate a unique marketleading, industrial-scale high throughput screening laboratory service (Cloe(R)Screen), supported by integrated predictive software products (Cloe(R) PK) thatoffer 'virtual human' simulation. Laboratory services are complemented bymodelling tools designed to unbundle the saturation of quality data and thussignificantly accelerate hit-to-lead analysis. This investment phase is now drawing to a close. Capacity now accommodatesanticipated expansion beyond 2008. Despite plans for further expansion of itsproducts and services, Cyprotex's capital expenditure requirement for the nexttwo years is small. Given the relatively low cost of consumables and a highlyautomated facility designed to break even at close to half available capacity,Cyprotex now boasts exceptional operational gearing. Recognising the hugeuntapped universe of potential customers, and that any initial screening workwon from pharmaceutical giants can multiply enormously as Cyprotex proves itsability to deliver to their rigorous standards, management looks forward to 2007as a landmark year. Product Development As a result of a large number of general enquiries, both academic andcommercial, regarding Cyprotex's unique screening facilities, its scientistslaunched an educational guide, entitled 'Everything you needed to know aboutADME, but were too afraid to ask'. This guide can be found on Cyprotex'swebsite, along with comprehensive product sheets for each of the Group'sexperimental assays, in order to share our experience and expertise withcustomers. 2006 saw Cyprotex further increase its Cloe(R) Screen portfolio, by extendingits parallel artificial membrane permeation assay (PAMPA) across multiple pHvalues. Similarly, MDR1-MDCK was included to assess P-glycoprotein-mediated drugefflux, whilst adding cytochrome P450 assays offered a more detailed analysis ofmechanism-based inhibition. Using industry recommended probe substrates,Cyprotex derives data used to identify early drug-drug interactions and therebyreduce the risk that its customers may have to face of costly late-stagefailure. Cyprotex's scientists and IT-teams continue to develop a range of alternativesolutions in order to mimic specific in vivo processes. The first of these tobe introduced is a predictor of human intestinal absorption, a key determinantin developing a successful oral therapy. The integration of these into Cloe(R)PK will allow the accuracy of pharmacokinetic prediction to be improved. By wayof an endorsement of its research, Cyprotex is providing in silico support to anEU-funded project (EUMAPP). This aims to accelerate the drug discovery processfrom laboratory to clinic using a combination of human micro dosing, improvedanalytical capabilities, and computational approaches. In 2006, Cyprotex wasalso awarded funding to provide in silico support for the EU-funded project(OSIRIS). This work began during the first quarter of 2007. The overall goal ofthe consortium is to develop predictive software to emulate toxicity and in vivoexposure. Directorate Changes In April 2006, Russell Gibbs was appointed as Group Chief Financial Officer andjoined the Board of Directors. Russell brings with him over twenty years ofexperience in the international capital markets and a wide range of skills,including many customer facing activities, that have seen him advising oninitial public offerings, merger and acquisitions and new fund raising in boththe quoted equity and bond markets. Being able to call on such skills will beincreasingly important for Cyprotex, as it expands its global reach, productoffering and enters into increasingly sophisticated joint ventures andcollaborative agreements. Accounting Policies In line with the requirements of UK standard accounting practice, Cyprotexadopted FRS 20 ('Share based payment') from 1 January 2006. FRS 20 requires theGroup to expense shares options granted to employees and directors. Charges areallocated over the vesting period based upon the best available estimate of thenumber of share options expected to vest. Its adoption has no net effect on theGroup's net assets or cash flow. As a relatively young listed company, management did not consider informationregarding the historic volatility of the Cyprotex's share price eithersufficiently reliable, or a realistic indicator, on which to base a validestimate of future performance. Accordingly, the Black-Scholes financial modelused price volatility from an appropriate basket of peer group companies as oneof a number of inputs used to calculate the valuations. The Directors having reviewed operational requirements and forecasts for thisyear and beyond consider that Cyprotex will have sufficient cash resources tocontinue to offer high quality services to the drug discovery industry. Thisassumption is underpinned by the readiness of key shareholders to support theGroup. In the event of unforeseen circumstances, including any failure by theGroup to meet performance expectations, management understands that suchresources could rapidly deplete, thereby requiring some external means of fundraising in order to remain a going-concern. Being a publicly quoted company,Cyprotex has the option of approaching shareholders with a view to offering apre-emptive rights issue, an open offer or a restricted offer of new shares.Other options for short-term fund raising include a sale-and-lease-back of itsMacclesfield head office. Post Balance Sheet Event On 12 February 2007, Cyprotex received a notice (the "Requisition Notice") fromDr. David Leahy and Robert Long, being shareholders of the Company holding notless than one tenth of the paid up share capital of the Company, pursuant tosection 368 of the Companies Act 1985. Under UK company law, Cyprotex is obligedto put these resolutions (the "Resolutions") to an extraordinary general meeting('EGM'). A circular containing the formal notice of the EGM was sent toshareholders last week, and the EGM has been convened for 10:30am on Monday 2April 2007 at the offices of Wedlake Bell, 52 Bedford Row, London WC1R 4LR. The letter to shareholders sets out the Resolutions proposed in the RequisitionNotice and the reasons why the Board of Directors of the Company unanimouslybelieves that the Resolutions are AGAINST the best interests of Cyprotex and itsshareholders as a whole. Robert Morrisson AtwaterChairman and Chief Executive Officer29 March 2007 Cyprotex PLC Consolidated Profit and Loss Account for the year ended 31 December 2006 Notes restated* 2006 2005Continuing activities £ £ TURNOVER 2 3,504,830 2,701,256Cost of sales (533,171) (406,130) GROSS PROFIT 2,971,659 2,295,126 Administrative expenses - share based payment charge (136,666) (107,720)Administrative expenses - other (3,575,747) (3,355,169) Administrative expenses - total (3,712,413) (3,462,889) OPERATING LOSS (740,754) (1,167,763) Interest receivable 27,573 57,289Interest payable (47,630) (44,425) LOSS ON ORDINARY ACTIVITIES BEFORE (760,811) (1,154,899)TAXATIONTaxation 3 100,641 147,472 LOSS FOR THE YEAR (660,170) (1,007,427) Loss per shareBasic and diluted 6 (0.48)p (0.78)p* * Restated following the adoption of FRS20 on 1 January 2006 The accompanying notes are an integral part of this consolidated profit and lossaccount. Cyprotex PLC Consolidated Statement of Total Recognised Gains and Losses for the year ended 31 December 2006 restated* 2006 2005 £ £ Loss for the financial year (660,170) (1,007,427)Exchange difference on the re-translation of net assets - (419) of subsidiary undertakingTotal recognised gains and losses relating to the year (660,170) (1,007,846) * Restated following the adoption of FRS20 on 1 January 2006 Cyprotex PLC Consolidated Balance Sheet at 31 December 2006 Notes restated* 2006 2005 £ £Fixed AssetsTangible assets 1,422,026 1,695,952 Current AssetsStocks 85,636 91,227Debtors 858,491 857,826Cash at bank and in hand 455,279 690,102 1,399,406 1,639,155 Creditors: amounts falling due within one year (467,272) (377,180) Net current assets 932,134 1,261,975 Total assets less current liabilities 2,354,160 2,957,927 Creditors: amounts falling due after one year (671,607) (754,669) Net assets 1,682,553 2,203,258 Capital and ReservesCalled up share capital 8 138,573 138,325Share premium 8 9,662,913 9,660,362Merger reserve 8 128,070 128,070Other reserve 8 299,984 163,318Profit and loss account 8 (8,546,987) (7,886,817) Equity shareholders' funds 8 1,682,553 2,203,258 * Restated following the adoption of FRS20 on 1 January 2006 The accompanying notes are an integral part of this balance sheet. Cyprotex PLC Consolidated Cash Flow Statement for the year ended 31 December 2006 Notes 2006 2005 £ £ Net cash outflow from operating activities 4 (192,043) (1,093,469) Returns on investments and servicing of financeInterest received 27,573 56,188Interest paid (38,233) (39,153)Interest element of finance leases and hire purchase contracts (9,397) (5,272) (20,057) 11,763 TaxationUK corporation tax received 146,812 166,416 Capital expenditurePayments to acquire tangible fixed assets (77,602) (965,776)Receipts from sales of tangible fixed assets - -Net cash outflow from capital expenditure (77,602) (965,776) Management of liquid resources 318,700 1,249,555 FinancingIssue of ordinary share capital 2,799 54,654Increase in bank loans - 704,000Repayment of bank loans (25,700) (20,000)Repayment of finance leases and hire purchase contracts (52,756) (15,412) Net cash (outflow)/inflow from financing (75,657) 723,242 Increase in cash 5 100,153 91,731 The accompanying notes are an integral part of this consolidated cash flow statement. Consolidated Cash Flow Statement (continued) Reconciliation of net cash flows to movement in net (debt)/funds 2006 2005 £ £ Increase in cash during the year 100,153 91,731Cash inflow from short term deposits (318,700) (1,249,555)Cash inflow from increase in bank loans - (704,000)Cash outflow from repayment of bank loans 25,700 20,000Repayment of finance leases and hire purchase contracts 52,756 15,412 Movement in net debt (140,091) (1,826,412)Exchange movements (16,276) 8,126New finance leases - (160,852)Movement in net debt during the year (156,367) (1,979,138) Net (debt)/funds at the start of the year (139,338) 1,839,800 Net debt at the end of the year (295,705) (139,338) Basis of preparation The preliminary announcement has been prepared in accordance with applicableUnited Kingdom accounting standards and under the historical cost accountingrules. The principal accounting policies of the Company are set out in the Company's2006 Annual Report and Financial Statements and have remained unchanged from theprevious year with the exception of the adoption of Financial Reporting StandardNo 20 ('Share based payment'). The adoption of this standard represents a changein accounting policy and the comparative figures have been restated accordingly.An effect of this change in policy is that the group records a charge to theprofit and loss account relating to share based payments in the year of £136,666(2005: £107,720). Details of the effect of prior year adjustments are given innote 7. International Financial Reporting Standards ('IFRS') were set to replace UnitedKingdom Generally Accepted Accounting Practice ('UK GAAP') for EU regulatedmarkets for consolidated reporting in 2005. However, on 7 October 2004 the London Stock Exchange announced that, following changes toexisting AIM rules, AIM Groups can continue until financial periods commencingon or after 1 January 2007 to report in either UK GAAP or IFRS These preliminarystatements have been prepared under UK GAAP. The Company will report under IFRSfrom 1 January 2007. The Group recorded a loss after taxation of £660,170 in the year ended 31December 2006 and cash and deposits fell by £234,823 to £455,279 in the yearthen ended. However, the directors have reviewed the budget, financial forecastsincluding cash flow forecasts and other relevant information and believe thatthe Group has adequate resources to continue in operation for the foreseeablefuture. Accordingly, the preliminary statements are prepared on a going concernbasis. This assumption is further underpinned by the readiness of keyshareholders to support the Group. The directors having reviewed operationalrequirements and forecasts for this year and beyond consider that Cyprotex PLCwill have sufficient cash resources to continue to operate. In the event ofunforeseen circumstances, including any failure by the Group to meet performanceexpectations, management understands that such resources could rapidly deplete,thereby requiring some external means of fund raising in order to remain agoing-concern. Being a publicly quoted company, Cyprotex PLC has the option ofapproaching shareholders with a view to offering a pre-emptive rights issue, anopen offer or a restricted offer of new shares. Other options for short-termfund raising include a sale-and-lease-back of its Macclesfield head office. Thepreliminary statements do not include any adjustments that would result if theGroup was unable to continue as a going concern The financial information contained in this preliminary announcement does notconstitute statutory accounts as defined in section 240 of the Companies Act1985. The balance sheet at 31 December 2006 and the profit and loss account,cash flow statement and associated notes for the year then ended have beenextracted from the Company's 2006 statutory financial statements upon which theauditors opinion is unqualified and does not include any statement under section237 (2) of the Companies Act 1985. Those financial statements have not beendelivered to the Registrar of Companies. The figures for the year ended 31December 2005 have been extracted from the statutory financial statements, asamended by the adoption of FRS 20, which have been filed with the Registrar ofCompanies. Turnover and segmental analysis Turnover represents the amounts derived from the provision of goods and serviceswhich fall within the Group's ordinary activities and is stated net of valueadded tax and trade discounts. The Group operates in one principal area of activity, that of providing in vitroand in silico ADMET/PK (Absorption, Distribution, Metabolism, Excretion,Toxicity/ Pharmacokinetic) information to the pharmaceutical industry. Theturnover and operating result for the periods are derived from the Group'sprincipal activity. 2. Turnover and segmental analysis (continued) The geographic analysis of turnover by destination is as follows: 2006 2005 £ £United Kingdom 481,656 286,922Rest of Europe 1,642,940 1,644,041USA 1,354,998 747,670Rest of World 25,236 22,623 3,504,830 2,701,256 The geographical analysis of turnover by source and the geographical analysis ofoperating loss and loss on ordinary activities before taxation are as follows: restated Segmental Turnover profit/(loss) 2006 2005 2006 2005 £ £ £ £ United Kingdom 3,504,830 2,701,256 (740,754) (1,167,763)USA - - - - 3,504,830 2,701,256 (740,754) (1,167,763)Operating loss (740,754) (1,167,763)Net interest (payable)/ receivable (20,057) 12,864Loss on ordinary activities before (760,811) (1,154,899)taxation The geographical analysis of net assets and liabilities is as follows: United USA 2006 2005 Kingdom Total Total £ £ £ £Net assets/(liabilities) - 2006 1,878,191 - 1,878,191 - 2005 2,204,299 (7,941) 2,196,358 The net assets/(liabilities) are reconciled toshareholders' funds as follows: Cash at bank and in hand 455,279 690,102Bank Loans (658,300) (684,000)Corporation tax recoverable 100,067 146,238Obligations due under leases and hire purchase (92,684) (145,440)contracts 1,682,553 2,203,258 Taxation on loss on ordinary activities The current tax credit for the period is lower than the standard rate ofcorporation tax at 30% due to the differences explained below: restated 2006 2005 £ £Loss on ordinary activities before taxation (760,811) (1,154,899) Loss on ordinary activities multiplied by the standard rate of corporation tax in the UK of 30% (2005 30%) 228,243 346,470 Effects of:(Income not chargeable)/expenses not allowable for tax purposes (49,846) 269,659Differences between capital allowances and depreciation (37,815) (33,177)Short term timing differences 8,736 (7,363)Tax losses current year (24,234) (392,792)Difference in tax rates on losses surrendered for research & development tax credit (25,017) (36,559)Adjustment to charge in respect of prior periods 574 1,234 Current tax credit for the year 100,641 147,472 The Group has tax losses arising of £6,044,908 (2005 £5,966,432) that areavailable for offset against future taxable trading profits.4. Reconciliation of operating loss to net cash flow from operatingactivities restated 2006 2005 £ £Operating loss (740,754) (1,167,763)Depreciation of tangible fixed assets 351,528 345,697Loss on sale of tangible fixed assets - 103Decrease/(increase) in stocks 5,591 (5,199)Increase in operating debtors and prepayments (46,836) (104,806)Increase/(decrease) in operating creditors and accruals 85,486 (260,676)Share based payments charge 136,666 107,720Non cash movements including exchange 16,276 (8,545) Net cash outflow from operating activities (192,043) (1,093,469) 5. Analysis of movement in net debt At At 1 January Cash 31 December 2006 Flow Exchange 2006 £ £ £ £Cash at bank and in 191,995 100,153 (8,527) 283,621hand 191,995 100,153 (8,527) 283,621 Short term deposits 498,107 (318,700) (7,749) 171,658Bank loans (684,000) 25,700 - (658,300)Finance leases (145,440) 52,756 - (92,684) (139,338) (140,091) (16,276) (295,705) Short term deposits are included within cash at bank and in hand in the balancesheet. Loss per ordinary share Basic loss per ordinary share is calculated based on the loss for the year of£660,170 (2005 £1,007,427) and on 138,420,822 ordinary shares (2005 128,824,514ordinary shares), being the weighted average number of ordinary shares in issueduring the year. The loss for the year and the weighted average number of ordinary shares for thepurpose of calculating the diluted earnings per share are the same as for thebasic earnings per share calculation. This is because the outstanding shareoptions would have the effect of reducing the loss per ordinary share and wouldtherefore not be dilutive under the terms of Financial Reporting Standard No.22. Prior year adjustments The prior year adjustment relates to the implementation of FRS 20, 'Share basedpayment'. On 1 January 2006, the Company adopted FRS 20 'Share based payment'. Theadoption of this standard constitutes a change in accounting policy. Thereforethe impact has been reflected as a prior year adjustment in accordance withFinancial Reporting Standard No 3 'Reporting Financial Performance'. The standard requires that where shares or rights to shares are granted to thirdparties, including employees, a charge should be recognised in the profit andloss account based on the fair value of the shares at the date of the grant ofshares or right to shares is made. The effect of the adoption of FRS 20 'Share based payment' on the comparativesis as follows: As previously Impact of As reported FRS 20 restated £ £ £ Gross profit 2,295,126 - 2,295,126Administrative expenses (3,355,169) (107,720) (3,462,889)Operating loss (1,060,043) (107,720) (1,167,763) Loss for the financial year (899,707) (107,720) (1,007,427) Net assets 2,203,258 - 2,203,258 Reconciliation of shareholders' funds and movement on reserves restated Share Share Merger Other Profit and 2006 2005 Capital Premium Reserve Reserve Loss Account Total Total £ £ £ £ £ £ £ At 31 December 2005 138,325 9,660,362 128,070 - (7,723,499) 2,203,258 3,048,730Restatement- Share based payment- At 1 January 2005 - - - 55,598 (55,598) - -- For the year ended - - - 107,720 (107,720) - - 31 December 2005As restated at 138,325 9,660,362 128,070 163,318 (7,886,817) 2,203,258 3,048,730 1 January 2006 Issue of shares 248 2,551 - - - 2,799 24,701Issue costs recovered - - - - - 29,953Share based payment - - - 136,666 - 136,666 107,720chargeLoss for the year - - - - (660,170) (660,170) (1,007,427)Exchange difference on - - - - - -retranslation of netassets (419) At 31 December 2006 138,573 9,662,913 128,070 299,984 (8,546,987) 1,682,553 2,203,258 The annual report will be posted to shareholders on the 9 May 2007. Furthercopies will be available on request from the Company Secretary, Cyprotex PLC, 15Beech Lane, Macclesfield, Cheshire, SK10 2DR. The Annual General Meeting will be held at 10:00 am on Wednesday, 6 June 2007 atThe Institute of Directors, 116 Pall Mall, London SW1Y 5ED. This information is provided by RNS The company news service from the London Stock Exchange