CRX.L Regulatory News (CRX)

30 Aug 2006 07:01

Cyprotex PLC30 August 2006 Press Release 30 August 2006 Cyprotex PLC ("Cyprotex" or "the company") Interim results for the six months to 30 June 2006 Cyprotex PLC (LSE:CRX), the drug discovery technology and information company,today reports its Interim Results for the half year ended 30 June 2006. HIGHLIGHTS • Improving trade and working capital management has resulted in Cyprotex becoming cash flow positive during the first six months of 2006. Cash resources rose to £0.86m, from £0.69m at the end of 2005; • Revenues increased by approximately 16% to £1.62m (1H 2005: £1.40m); • Gross profits rose by over 16% to £1.41m (1H 2005: £1.22m); • Gross margin, at 87%, was stable compared with the same period last year; • Basic loss per share declined to 0.23p (1H 2005: 0.37p*); and • The rapid expansion of the Group's customer base accelerated further as a result of the marketing drive from its expanded sales force and greater penetration in the United States. *Restated following the adoption of FRS20 on 1 January 2006 Commenting on the results, Robert Morrisson Atwater, Chairman and ChiefExecutive Officer of Cyprotex PLC, said: "Cyprotex is a high technology companywith exceptional operational gearing. We expect the benefits of the US salesand marketing drive implemented in recent months to be seen in the comingmonths." For further information: Cyprotex PLCRobert Morrisson Atwater, Chief Executive Officer Tel: +44 (0) 1625 505 100ir@cyprotex.com www.cyprotex.comNomura Code Securities LimitedCharles Walker Tel: +44 (0) 20 7776 1206cew@codesecurities.com www.codesecurities.com Media enquiries: Abchurch Communications LimitedHeather Salmond / Georgina Bonham Tel: +44 (0) 20 7398 7700georgina.bonham@abchurch-group.com www.abchurch-group.com CHAIRMAN AND CHIEF EXECUTIVE OFFICER'S STATEMENT Meeting Key Objectives The Chairman's statement in the 2005 Annual Report and Accounts detailedCyprotex's Key Objectives for the current year. Significant progress towardthese had been made by the half-year stage. This bodes well for the full year. During the period, improved trade and working capital management allowedCyprotex to become cash flow positive for the first time. Cash at hand rose to£855,000 at 30th June, compared with £690,000 at the end of 2005. With capitalexpenditure requirements for existing operations now significantly lower thanduring the expansion phase of the past two years, such resources position thecompany well going forward. The customer base meanwhile continues to buildrapidly, particularly in North America, whilst overall visibility is heightenedthrough the creation of integrated drug discovery collaborations. Cyprotex's installed facilities provide both high automation and scalability.Capacity now accommodates anticipated expansion beyond end 2007. Wishing tocapitalise on its exceptional operational gearing, an expansion of the Sales andMarketing team took place during the first half, including the appointment of anew Head of Global Business Development. The focus of the enlarged team,particularly widening the Group's marketing reach throughout North America, isalready bearing fruit. Important customer Master Service Agreements haverecently been signed, leading to confidence that the United States will accountfor over half Group sales during 2007. Against a background of excellentcustomer retention and the flexibility to satisfy an ever-broadening list ofcustomer requirements, Cyprotex remains confident for the future. Financial Highlights of the 2006 Half Year • Improving trade and working capital management has resulted in Cyprotex becoming cash flow positive during the first six months of 2006. Cash resources rose to £0.86m, from £0.69m at the end of 2005, despite continued investment in new products and services; • Revenues increased by 15.9% to £1,623,944 (First half 2005: £1,400,860); • Gross profit rose by 16.2% to £1,414,237 (First half 2005: £1,216,604); • Gross Margin, at 87%, was stable compared with the same period last year; • Basic loss per share down to 0.23p (First half 2005: 0.37p*); and • The rapid expansion of the Group's customer base will accelerate further in the second half as a result of the marketing push from an expanded sales force and greater penetration in the United States. * Restated for FRS20 Setting Standards in Pharmacokinetic Screening The past two years has seen Cyprotex continuing to perfect and validate a marketleading, industrial-scale high throughput pharmacokinetic screening laboratoryservice (Cloe(R) Screen), supported by integrated predictive software products(Cloe(R) PK) that offer 'virtual human' simulation. This major investment phasehas now been completed. The pharmaceutical world, in searching to refill its pipeline with innovativeand groundbreaking molecules, fully recognises that poor pharmacokineticprofiling is one of the most common reasons for project failure. Representingthe most significant element of the pre-clinical drug discovery process, earlyelimination of non-viable candidates ensures avoidance of costly late-stagefailure whilst significantly narrowing selection of best opportunities. Yet,despite the industry's search for high-grade outsourcing partners, some 90% ofsuch screening remains internal to the drug development companies. In recognising the huge potential market for such screening services, Cyprotexoffers them as a core competency. After four years of significant investmentand research, the Group's scientists can now justifiably claim to set industrystandards in human discovery ADMET (Absorption, Distribution, Metabolism,Excretion and Toxicity) screening, offering unmatched scale, turnaround,robustness and pricing. Leading technologies, proprietary operating systems, 'state-of-the-art' instrumentation and automation offer Cyprotex's customers thesophistication required to speed their discovery process. These laboratoryservices are complemented by predictive modelling tools, designed to unbundlethe saturation of high-quality data and provide an opportunity to significantlyaccelerate analyses from hit-to-lead. Product Development In meeting the needs of a rapidly growing customer base and tighteningregulatory requirements, Cyprotex's high throughput product offering continuesto expand. During the first half, new mechanism-based inhibition assays,incorporating various industry recommended probe substrates, have beendeveloped. Information derived can be used to identify drug-drug interactionsearly in the discovery process, thereby reducing the possibility of late stagefailure. Modification of Cyprotex's existing hepatocyte stability offering willfurther raise capacity while enhancing throughput and turnaround. The range ofhigh-throughput permeability assays also now includes MDR1-MDCK to permitassessment of mediated efflux. The second half will see Cyprotex validating a more detailed human absorptionpackage, with a view to offering specific transporter studies. In tandem withthis, development of alternative modules extend the Cloe(R) PK service to offerprediction of specific in vivo processes (such as absorption) based onlaboratory-derived in vitro ADMET properties. New funding has been awarded toprovide in silico support to the EU's OSIRIS (Optimized Strategies for RiskAssessment of Chemicals based on Intelligent Testing) project, whose goal is todevelop integrated testing strategies fit for REACH (registration, evaluation,authorisation and restriction of chemicals) that significantly increase the useof non-testing information for regulatory decision making. The Group alsoparticipates in other EU-funded ventures and in European consortiums, in whichin silico goals target acceleration of the drug development process towardclinical trials and identification of reliable alternatives to traditionalindustry methods. Customer Development The first six months of 2006 saw the number of active customers expand by some15%, with a similar amount already committed to work with the Group before theyear-end. This take-up is being witnessed not only through smaller biotech/CRO's that have no desire to develop their own in-house ADMET laboratories, butalso from within the world's top-ten 'big pharma' whose own facilities do notpresently match Cyprotex's capabilities. Cyprotex anticipates an increasingwillingness to outsource such requirements, whilst recognising the enormousscale of this business opportunity. A further specific change that has been witnessed this year is in the Group'sgeographical exposure. An important opportunity to grasp the 'lowest hangingfruit' was recognised by a Business Development team that was significantlyexpanded during the first half. As a result, US sales are expected to accountfor as much as half monthly sales by the year-end and will continue to grow insignificance during 2007. Within this, Cyprotex expects to form an increasingnumber of collaborative agreements that embed Cyprotex's high-grade ADMETservices ongoing drug development programmes. This will both increasevisibility and endorse Cyprotex's services as the industry standard. Directorate Changes The Board of Directors was enlarged in April 2006, with the appointment ofRussell Gibbs as Group Chief Financial Officer. Russell's experience has beengained through over twenty years in the international capital markets, workingfor a number of financial institutions including UBS, Natwest and Banca Intesa.Being able to call on such skills and contacts will be increasingly importantfor Cyprotex, as it expands its global reach, product offering and enters intofinancially sophisticated joint ventures and collaborative agreements. FRS20 In line with the requirements of UK standard accounting practice, Cyprotexadopted FRS 20 for the first time in its half-year accounts to 30th June 2006.Relating to 'Share Based Payments', FRS 20 requires the Group to expense sharesoptions granted to employees and directors. Charges are recognised on a 'straight line basis' and assessed on estimated performance over the period inwhich the share options eventually vest. Its adoption has no net effect on theGroup's retained reserves 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 modeladopted used price volatility from an appropriate basket of peer groupcompanies, in order to calculate the valuations. Robert Morrisson Atwater Chairman and Chief Executive Officer 30 August 2006 GROUP PROFIT AND LOSS ACCOUNTFor the six months ended 30 June 2006 Restated* Restated* Unaudited Unaudited Audited 6 months 6 months 12 months ended ended ended 30 June 30 June 31 December 2006 2005 2005Continuing activities Note £ £ £ TURNOVER 2 1,623,944 1,400,860 2,701,256 Cost of sales (209,707) (184,256) (406,130) --------- --------- ---------GROSS PROFIT 1,414,237 1,216,604 2,295,126 Administrative expenses - share based payments (66,726) (53,860) (107,720)Administrative expenses - other (1,704,342) (1,711,899) (3,355,169) --------- --------- ---------Administrative expenses - total (1,771,068) (1,765,759) (3,462,889) --------- --------- --------- OPERATING LOSS (356,831) (549,155) (1,167,763) Interest receivable 15,413 34,037 57,289Interest payable (25,819) (26,369) (44,425) --------- --------- --------- LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION (367,237) (541,487) (1,154,899) Taxation 3 48,187 68,464 147,472 --------- --------- ---------LOSS FOR THE PERIOD (319,050) (473,023) (1,007,427) --------- --------- ---------Loss per ordinary share - basic & diluted 4 (0.23)p (0.37)p (0.78)p * Restated following the adoption of FRS20 from 1 January 2006 (see note 1) GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSESFor the six months ended 30 June 2006 Restated* Restated* Unaudited Unaudited Audited 6 months 6 months 12 months ended ended ended 30 June 30 June 31 December 2006 2005 2005 £ £ £ Loss for the financial period (319,050) (473,023) (1,007,427)Exchange difference on the re-translation of netassets of subsidiary undertaking - (26,251) (419) ---------- ----------- ----------- Total recognised gains and losses relating to the (319,050) (499,274) (1,007,846)period ----------- ----------- ---------- GROUP BALANCE SHEETAs at 30 June 2006 Restated* Restated* Unaudited Unaudited Audited At At At 30 June 30 June 31 December 2006 2005 2005 Note £ £ £FIXED ASSETSTangible assets 1,520,211 1,690,827 1,695,952 ------ ------ ------CURRENT ASSETSStocks 80,387 89,388 91,227Debtors 565,206 562,254 857,826Cash at bank and in hand 854,793 1,338,409 690,102 ------ ------ ------ 1,500,386 1,990,051 1,639,155 CREDITORS: due within one year (353,754) (384,746) (377,180) ------ ------ ------NET CURRENT ASSETS 1,146,632 1,605,305 1,261,975 ------ ------ ------TOTAL ASSETS LESS CURRENT LIABILITIES 2,666,843 3,296,132 2,957,927 CREDITORS: due after more than one year (714,805) (689,750) (754,669) ------ ------ ------NET ASSETS 1,952,038 2,606,382 2,203,258 ------ ------ ------ CAPITAL AND RESERVESCalled up share capital 138,423 127,620 138,325Share premium account 9,661,368 9,619,479 9,660,362Merger reserve 128,070 128,070 128,070Other reserve 230,044 109,458 163,318Profit and loss account (8,205,867) (7,378,245) (7,886,817) ------ ------ ------EQUITY SHAREHOLDERS' FUNDS 7 1,952,038 2,606,382 2,203,258 ------ ------ ------ GROUP CASH FLOW STATEMENTFor the six months ended 30 June 2006 Unaudited Unaudited Audited 6 months 6 months 12 months ended ended ended 30 June 30 June 31 December Note 2006 2005 2005 £ £ £ net cash INFLOW/(outflow) from operating activities 5 77,361 (436,998) (1,093,469) ---- ---- ---- returns on investment and servicing of financeInterest received 15,413 34,037 56,188Interest paid (20,353) (26,369) (39,153)Interest element of finance lease and hire purchase contracts (5,466) - (5,272) ---- ---- ---- (10,406) 7,668 11,763 ---- ---- ----taxationUK corporation tax received 146,792 166,416 166,416 ---- ---- ----capital expenditure and financial INVESTMENTPayments to acquire tangible fixed assets (6,436) (941,793) (965,776)Receipts from sales of tangible fixed assets - - - ---- ---- ---- (6,436) (941,793) (965,776) ---- ---- ---- management of liquid resources (81,434) 505,383 1,249,555 ---- ---- ----financingIssue of ordinary share capital 1,104 3,066 54,654Increase in bank loans - 704,000 704,000Repayment of bank loans (12,000) (3,750) (20,000)Repayment of capital lease and hire purchase contracts (25,560) - (15,412) ---- ---- ---- (36,456) 703,316 723,242 ---- ---- ----Increase in cash 6 89,421 3,992 91,731 ----- ----- ----- GROUP CASH FLOW STATEMENT (continued)For the six months ended 30 June 2006 RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS/(DEBT) Unaudited Unaudited Audited 6 months 6 months 12 months ended ended ended 30 June 30 June 31 December 2006 2005 2005 £ £ £ Increase in cash during the period 89,421 3,992 91,731 Cash outflow/(inflow) to/(from) short term deposits 81,434 (505,383) (1,249,555) Cash inflow from increase in bank loans - (704,000) (704,000) Cash outflow from repayment of bank loans 12,000 3,750 20,000 Repayment of capital element of finance lease and hire purchase contracts 25,560 - 15,412 ---- ---- ----Movement in net funds/(debt) 208,415 (1,201,641) (1,826,412) Exchange movements (6,164) - 8,126 New finance leases - - (160,852) ---- ---- ----Movement in net funds/(debt) during the period 202,251 (1,201,641) (1,979,138) Opening net (debt)/funds (139,338) 1,839,800 1,839,800 ---- ---- ----Closing net funds/(debt) 62,913 638,159 (139,388) ----- ----- ----- NOTES TO THE UNAUDITED INTERIM REPORT 1. BASIS OF PREPARATION OF INTERIM FINANCIAL INFORMATION The principal accounting policies of the Group have remained unchanged fromthose set out in the Group's 2005 Annual Report and Financial Statements, withthe exception of accounting for share based payments. This follows the adoptionof Financial Reporting Standard No. 20 ('FRS20' - share based payments) for theyear ending 31 December 2006. The interim results include the impact of theFRS20 charge and both comparative 2005 results have been restated to reflect thechange in accounting policy. The financial information is prepared on a goingconcern basis, which assumes that the Group will continue in operationalexistence for the foreseeable future. The financial information contained in this interim report does not constitutestatutory accounts as defined in section 240 of the Companies Act 1985. Thefigures for the year ending 31 December 2005 have been extracted from thestatutory financial statements (restated following the adoption of FRS20) whichhave been filed with the Registrar of Companies. The auditors' report on thosefinancial statements was unqualified and did not contain a statement undersection 237(2) or 237(3) of the Companies Act 1985. The accounts have beenprepared in accordance with applicable accounting standards and under thehistorical cost accounting rules. The interim financial information has been reviewed by the Company's auditors. Acopy of the auditors' review report is attached to this interim report. 2. SEGMENTAL ANALYSIS 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. The geographical analysis of turnover by destination is as follows: Unaudited Unaudited Audited 6 months 6 months 12 months ended ended ended 30 June 30 June 31 December 2006 2005 2005 £ £ £ United Kingdom 162,305 139,930 286,922Rest of Europe 745,006 1,058,776 1,644,041USA 695,580 202,154 747,670Rest of World 21,053 - 22,623 ----- ---- ---- 1,623,944 1,400,860 2,701,256 ----- ---- ----- 3. TAXATION The tax credit represents a claim by the Group for repayable R&D tax credits. 4. LOSS PER SHARE The loss per share is calculated by reference to the earnings attributable toordinary shareholders divided by the weighted average of 138,367,404 ordinaryshares for the 6 months to 30 June 2006, 127,387,951 ordinary shares for the 6months to 30 June 2005, and 128,824,514 for the 12 months to 31 December 2005. Restated* Restated* Unaudited Unaudited Audited 6 months 6 months 12 months ended ended ended 30 June 30 June 31 December 2006 2005 2005 Attributable loss (£) (319,050) (473,023) (1,007,427) ----- ----- -----Average number of ordinary shares in issue for basic and diluted loss per share 138,367,404 127,387,951 128,824,514 ----- ----- -----Basic and diluted loss per share (0.23)p (0.37)p (0.78)p ----- ----- ----- The loss for the period and the weighted average number of ordinary shares forcalculating the diluted loss per share for the period to 30 June 2006, 30 June2005 and 31 December 2005 are identical to those used for the basic loss pershare. This is because the outstanding share options would have the effect ofreducing the loss per ordinary share and would therefore not be dilutive underthe terms of Financial Reporting Standard No. 14 'Earnings per share' (FRS 14). 5. RECONCILIATION OF OPERATING LOSS TO NET CASH FLOW FROM OPERATING ACTIVITIES Restated* Restated* Unaudited Unaudited Audited 6 months 6 months 12 months ended ended ended 30 June 30 June 31 December 2006 2005 2005 £ £ £ Operating loss (356,831) (549,155) (1,167,763)Depreciation of tangible fixed assets 182,177 166,090 345,697Loss on sale of tangible fixed assets - - 103Decrease/(increase) in stocks and work in progress 10,840 (3,360) (5,199)Decrease/(increase) in operating debtors and prepayments 194,015 110,657 (104,806)Decrease in operating creditors and accruals (25,730) (188,839) (260,676)Share based payments 66,726 53,860 107,720Exchange rate differences 6,164 (26,251) (8,545) ----- ----- ----- 77,361 (436,998) (1,093,469) ----- ----- ----- 6. ANALYSIS OF MOVEMENT IN NET FUNDS At At 1 January Re- Exchange 30 June 2006 Cash flow classification movements 2006 £ £ £ £ £ Cash at bank and in hand 191,995 89,421 - (2,167) 279,249 ----- ----- ----- ----- ---- Short term deposits 498,107 81,434 - (3,997) 575,544Bank loans due within one year (22,500) 12,000 (13,500) - (24,000)Bank loans due after one year (661,500) - 13,500 - (648,000)Finance lease (145,440) 25,560 - - (119,880) ----- ----- ----- ----- ----- (139,338) 208,415 - (6,164) 62,913 ----- ----- ----- ----- ----- In the Group balance sheet short term deposits are included within cash at bankand in hand. 7. RECONCILIATION OF EQUITY SHAREHOLDERS' FUNDS Restated* Restated* Unaudited Unaudited Audited 6 months 6 months 12 months ended ended ended 30 June 30 June 31 December 2006 2005 2005 £ £ £ Loss for the financial period (319,050) (473,023) (1,007,427) Issue of share capital 1,104 3,066 24,701Share issue costs recovered - - 29,953Share based payments 66,726 53,860 107,720Exchange difference on the re-translation of net assets of subsidiary undertaking - (26,251) (419) ----- ----- -----Decrease in equity shareholders' funds (251,220) (442,348) (845,472) Opening equity shareholders' funds 2,203,258 3,048,730 3,048,730 ----- ----- ----Closing equity shareholders' funds 1,952,038 2,606,382 2,203,258 ----- ----- ----- 8. Copies will be available on request from the Company Secretary,Cyprotex PLC, 15 Beech Lane, Macclesfield, Cheshire, SK10 2DR. 9. The interim report was approved by the board of directors on 30August 2006. INDEPENDENT REVIEW REPORT TO CYPROTEX PLC Introduction We have been instructed by the company to review the financial information forthe six months ended 30 June 2006 which comprises the group profit and lossaccount, group statement of total recognised gains and losses, group balancesheet, group cash flow statement, reconciliation of net cash flow to movement innet funds, and the related notes 1 to 9. We have read the other informationcontained in the interim report, which comprises only the Chairman and ChiefExecutive Officer's Statement, and considered whether it contains any apparentmisstatements or material inconsistencies with the financial information. Ourresponsibilities do not extend to any other information. This report is made solely to the company in accordance with guidance containedin APB Bulletin 1999/4 "Review of interim financial information". Our reviewwork has been undertaken so that we might state to the company's members thosematters we are required to state to them in a review report and for no otherpurpose. To the fullest extent permitted by law, we do not accept or assumeresponsibility to anyone other than the company for our review work, for thisreport, or for the conclusion we have formed. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the directors. The directorsare responsible for preparing the interim report and ensuring that theaccounting policies and presentation applied to the interim figures areconsistent with those applied in preparing the preceding annual accounts exceptwhere any changes, and the reasons for them, are disclosed. Review work performed We conducted our review having regard to the guidance contained in Bulletin 1999/4 'Review of interim financial information' issued by the Auditing PracticesBoard for use in the United Kingdom. A review consists principally of makingenquiries of group management and applying analytical procedures to thefinancial information and underlying financial data, and based thereon,assessing whether the accounting policies and presentation have beenconsistently applied, unless otherwise disclosed. A review excludes auditprocedures such as tests of controls and verification of assets, liabilities andtransactions. It is substantially less in scope than an audit performed inaccordance with United Kingdom Auditing Standards and therefore provides a lowerlevel of assurance than an audit. Accordingly we do not express an auditopinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 June 2006. Grant Thornton UK LLPChartered AccountantsManchester30 August 2006 This information is provided by RNS The company news service from the London Stock Exchange