CRX.L Regulatory News (CRX)

5 Apr 2006 07:00

Cyprotex PLC05 April 2006 Press Release 5 April 2006 Cyprotex PLC ("Cyprotex" or "the Company") Preliminary Results for year ended 31 December 2005 Cyprotex PLC, a drug discovery technology and information company, today reportsits preliminary results for the year ended 31 December 2005. Highlights • Revenue increased over 27% to £2.70 million from £2.12 million • Gross profits up more than 36% to £2.3 million up from £1.7 million • Gross margins rose to 85%, compared with 80% • Cash resources were carefully guarded. Year end free cash amounted to £0.7m, despite significant capital investment in process automation, capability and capacity • The loss on ordinary activities after taxation was £0.9m down from £1.3m in 2004, a 30% reduction • A rapidly expanding customer base has ensured the Group does not have a high dependence on any single client; the largest of which contributed less than 20 % of total revenues in 2005 Commenting on the results, Robert Morrisson Atwater, Chairman and ChiefExecutive Officer of Cyprotex PLC, said: "Anticipating a continued high-level of "repeat business" and furtherenlargement of the customer base and contract type amid continued marketexpansion, Cyprotex sees an excellent opportunity for further significant growthin 2006." For further information, please contact:Cyprotex PLCRobert Atwater, Chairman & Chief Executive Officer Tel: +44 (0) 207 398 7700rmatwater@cyprotex.com www.cyprotex.com Media enquiries:AbchurchHeather Salmond Tel: +44 (0) 207 398 7700heather.salmond@abchurch-group.com www.abchurch-group.com Chairman and Chief Executive Officer's Statement Meeting Key Objectives The Chairman's statement in the 2004 Annual Report and Accounts detailedCyprotex's Key Objectives for the past year. I am delighted to say that all sixof these objectives were achieved. Business expansion, both in terms of numbers of clients and scale ofcollaborations met with the Board's expectations. The Group now has keycustomer relationships in the three global territories where opportunities forhigh-throughput pharmacokinetic profiling are centred. Anticipating a continuedhigh-level of 'repeat-business' and further enlargement of the customer base andcontract type amid continued market expansion, Cyprotex sees an excellentopportunity for further significant growth in 2006. At the Forefront of Discovery ADMET During the past year, Cyprotex underlined its commitment to remain at theforefront of human-discovery ADMET (Absorption, Distribution, Metabolism,Excretion and Toxicity). By the end of the third quarter, the planned expansionof its "wet" facilities was largely complete. Having specified'state-of-the-art' instrumentation to be operational within the Group's highlyautomated environment and wholly supported by its proprietary operating systems,Cyprotex ensures it remains unequalled in its field. Capacity now accommodatesanticipated expansion beyond end-2007. In the current year, Cloe(R) Screen isalso expected to benefit from a further step improvement in the sophisticationof its offering: a newly integrated predictive modelling tool, designed tounbundle the saturation of high-quality data and provide an opportunity tosignificantly accelerate analyses through the 'hit-to-lead' process will beincorporated. Effectively, this product will showcase the scope and depth ofCloe(R) PK services, whilst adding an additional dimension to industry standardscreening services. The Group's product offering was also enhanced through the addition of newhigh-throughput assays and further refinement of Cloe(R) PK. This builds uponCyprotex's reputation for innovation and 'best-in-class' quality of service.Tangible results from these endeavours were adequately demonstrated through thesigning of new long-term contracts with major international pharmaceuticalgroups, such as Sepracor. Working relationships, such as these, improve forwardvisibility and confirm the Group's ability to add value in one of the world'smost prestigious technological arenas. 2006 - Starting from a Strong Base 2006 has seen a strong start. Having built upon its principal customerrelationships, Cyprotex is presently benefiting from the overflow of work thatwas evident toward the end of the fourth quarter 2005. By setting standards inquality of service, turnaround and reproducibility, exceptional customerretention has always been a feature of the Group. By further driving into theenormous and still largely untapped global ADMET marketplace, Cyprotex remainsconfident of significantly outpacing the underlying growth of its sector onceagain in the current year. Despite continued high investment during the period, Cyprotex ended 2005 with anet cash position (after excluding lease-finance obligations). Whilstanticipating further optimisation of improved facilities this year, with a viewto a significant further expansion of the Group's automated capability andcapacity within the existing structure, the Board of Directors now foresee aperiod of lower capital expenditure. Cyprotex will employ such advantages inbuilding market position and customer development. Meanwhile, its management'spromise, to continue to jealously guard the Group's cash resources, remainsunchanged. Product Development Meeting both customer demand and increasingly stringent regulatory guidelines,Cyprotex extended its range of high throughput assays by expanding the number ofCytochrome P450 inhibition assays, introducing a parallel artificial membraneassay (PAMPA) and expanding Caco-2 permeability assays, using multiple pH's inorder to closely mimic in-vivo situations. Modelling applied to Caco-2 data,for example, is crucial to the understanding of absorption at the blood-brainbarrier. Regular forums helped gain valuable insights into customer needs, as aresult of which, 2005 saw features being added to our interactive website,backed by education programmes and in-depth guidance to simplify interpretation. The new year will see Cyprotex providing in-silico support for an EU-fundedEUMAPP (European Union Microdose AMS Partnership Programme) project, designed toaccelerate molecules through 'lab-to-clinic'. Within a European consortium, theGroup is also contracted as part of a team investigating whether in-vivotoxicity can be predicted using a combination of in-vitro ADME data andcytotoxicity. The urgent goal here, of course, being to establish a crediblealternative to animal toxicity testing. Further refinement and improved presentation of the existing offering, isdesigned to add greater flexibility to the Group's predictive modelling toolsand satisfy demand for increasingly customised solutions. Newly integrated Cloe(R) Screen and Cloe(R) PK packages are also being developed to showcase theunique solutions offered by the Cloe(R) range of products and add value toexisting services. External partnerships are now being sought in order to broaden current studiesin human absorption. Meanwhile, the on-going programme of expanding the productrange, depth and sophistication continues with the ambition to eliminate theneed to outsource elements of the 'wet' activities in a drive towards offering 'one-stop-shopping'. Customer Development The total number of active customers serviced by Cyprotex during 2005 expandedby some 60%, whilst doubling the actual number of individual studies undertaken.Revenue generating contracts were secured from a range of global names, suchas Solvay, Sepracor, Novo Nordisk, Johnson and Johnson, Takeda, etc. Quiteclearly, the market opportunity for sophisticated ADMET services is large andexpanding. Cyprotex sees increased regulatory pressures, a desire to prove/economise in-house discovery operations within 'big pharma' and thebiotechnology industry's increasing domination of early discovery, continuing toheighten the need for such outsourcing. Having recognised the global potential for the Group's services over the pasttwo years, Cyprotex is now able to concentrate on securing higher-value,collaborative agreements. Alternative higher-added revenue streams have alsobeen identified through partnership and consortium agreements (Peakdale) andwithin associated, but complementary, product areas (Unilever). Cyprotex alsosees opportunities to participate in longer-term co-operations with specialistchemistry providers looking for opportunities to embed ADMET services withintheir offering. Laboratory Expansion The relatively high level of capital expenditure seen in 2005 is not expected tobe a feature of the current year. The successful integration of the Group's fourth Quadropole Mass Spectrometer,its hERG channel inhibition, robotised liquid handling for cell culturefacility, adoption of automated quality control and order processing procedures,significantly enlarged capacity, guaranteed reproducibility, acceleratedturnaround and multiplied flexibility for customers. Moreover, as these relationships develop, the opportunity to further embed Groupservices is available offering direct custom feeds that enable real-timeinteraction and data interrogation. Without anticipating any deterioration of the exceptional gross margin enjoyedby the Group's in-vitro facilities, Cyprotex remains confident of its ability toservice the requirements, and to outpace the expansion, of its competitivemarket place. Directorate Changes in 2005 In October there were two directorate changes. Nikolas Sofronis joined the Boardas a Non-executive director. He is a lawyer and has fifteen years experience inbiopharmaceutical asset management organisations and will add considerableknowledge and expertise which will be of great value to the Group in the future.Dr. David Leahy stepped down from the Board in order to concentrate on researchand the further development of the Group's predictive technology capabilities. Key Objectives for 2006 • Target achieving a break-even situation • Significantly outpace sector growth as recognised standard-setter industry-wide • Broaden Cyprotex's range of products, services and technologies, both organically and through acquisition • Add further downstream value and visibility through integrated drug discovery collaborations • Build rapidly upon contribution from the US • Expand foothold in Japanese market Robert Morrisson AtwaterChairman and Chief Executive Officer5 April 2006 Cyprotex PLCConsolidated Profit and Loss Accountfor the year ended 31 December 2005 Notes 2005 2004Continuing activities £ £ TURNOVER 2 2,701,256 2,117,321Cost of sales (406,130) (432,441) GROSS PROFIT 2,295,126 1,684,880 Administrative expenses (3,355,169) (3,255,104) OPERATING LOSS (1,060,043) (1,570,224) Interest receivable 57,289 107,697Interest payable (44,425) (1,762) LOSS ON ORDINARY ACTIVITIES BEFORE (1,047,179) (1,464,289)TAXATIONTaxation 3 147,472 165,182 LOSS FOR THE PERIOD (899,707) (1,299,107) Loss per shareBasic and diluted 6 (0.70)p (1.04)p The accompanying notes are an integral part of this consolidated profit and lossaccount. Cyprotex PLCConsolidated Statement of Total Recognised Gains and Lossesfor the year ended 31 December 2005 2005 2004 £ £ Loss for the financial period (899,707) (1,299,107)Exchange difference on the re-translation of net assets (419) 20,266 of subsidiary undertakingTotal recognised gains and losses relating to the period (900,126) (1,278,841) Cyprotex PLCConsolidated Balance Sheetat 31 December 2005 Notes 2005 2004 £ £Fixed AssetsTangible Assets 1,695,952 915,124 Current AssetsStocks 91,227 86,028Debtors 857,826 770,863Cash at bank and in hand 690,102 1,839,800 1,639,155 2,696,691 Creditors: amounts falling due within one year (377,180) (563,085) Net current assets 1,261,975 2,133,606 Total assets less current liabilities 2,957,927 3,048,730 Creditors: amounts falling due after one year (754,669) - Net assets 2,203,258 3,048,730 Capital and ReservesCalled up share capital 7 138,325 127,312Share premium 7 9,660,362 9,616,721Merger reserve 7 128,070 128,070Profit and loss account 7 (7,723,499) (6,823,373) Equity shareholders' funds 7 2,203,258 3,048,730 The accompanying notes are an integral part of this balance sheet.Cyprotex PLC Consolidated Cash Flow Statementfor the year ended 31 December 2005 Notes 2005 2004 £ £ Net cash outflow from operating activities 4 (1,093,469) (1,487,748) Returns on investments and servicing of financeInterest received 56,188 107,697Interest paid (39,153) (75)Interest element of finance leases and hire purchase contracts (5,272) (1,687) 11,763 105,935 TaxationUK corporation tax received 166,416 163,141 Capital expenditurePayments to acquire tangible fixed assets (965,776) (545,432)Receipts from sales of tangible fixed assets - 16,702Net cash outflow from capital expenditure (965,776) (528,730) Management of liquid resources 1,249,555 (1,742,580) FinancingIssue of ordinary share capital 54,654 3,104,332Increase in bank loans 704,000 -Repayment of bank loans (20,000) -Repayment of finance leases and hire purchase contracts (15,412) (8,360) Net cash inflow from financing 723,242 3,095,972 Increase/(decrease) in cash 5 91,731 (394,010) The accompanying notes are an integral part of this consolidated cash flowstatement.Consolidated Cash Flow Statement (continued) Reconciliation of net cash flows to movement in net (debt)/funds 2005 2004 £ £ Increase/(decrease) in cash during the year 91,731 (394,010)Cash (inflow)/outflow (from)/to short term deposits (1,249,555) 1,742,580Cash inflow from increase in bank loans (704,000) -Cash outflow from repayment of bank loans 20,000 -Repayment of finance leases and hire purchase contracts 15,412 8,360 Movement in net (debt)/funds (1,826,412) 1,356,930Exchange movements 8,126 -New finance leases (160,852) -Movement in net (debt)/funds during the period (1,979,138) 1,356,930 Net funds at the start of the period 1,839,800 482,870 Net (debt)/funds at period end (139,338) 1,839,800 1. Basis of preparation The preliminary statements have been prepared under the historical costconvention and in accordance with applicable accounting standards. The principal accounting policies of the group have remained unchanged from theprevious year with the exception of the adoption of Financial Reporting StandardNo 21 (Events after the balance sheet date), Financial Reporting Standard No 22(Earnings per share) and the presentation requirements under Financial ReportingStandard No 25 (Financial Instruments: disclosure and presentation). There hasbeen no impact on the Group on the adoption of these new standards. 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 theLondon Stock Exchange announced that, following changes to existing AIM rules,AIM Groups can continue until financial periods commencing on or after 1 January2007 to report in either UK GAAP or International Accounting Standards 'IAS'.These preliminary statements have been prepared under UK GAAP. The Board willreview further the impact of adopting IFRS in the current year and will reportunder IFRS from 1 January 2007. The directors have reviewed the budget, financial forecasts including cash flowforecasts and other relevant information and believe that the Group has adequateresources to continue in operation for the foreseeable future. Accordingly, thepreliminary statements are prepared on a going concern basis. This assumptionbeing supported by the continued improvement in monthly cash flow, in line withmanagement projections, and the continued readiness of key shareholders tosupport the financial ambitions of the Group. 2. 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: 2005 2004 £ £ United Kingdom 286,922 808,820Rest of Europe 1,644,041 1,183,168USA 747,670 125,333Rest of World 22,623 - 2,701,256 2,117,321 The geographical analysis of turnover by source and the geographical analysis ofoperating loss and loss on ordinary activities before taxation are as follows: Segmental Turnover profit/(loss) 2005 2004 2005 2004 £ £ £ £ United Kingdom 2,701,256 2,117,321 (1,060,043) (1,570,224)USA - - - - 2,701,256 2,117,321 (1,060,043) (1,570,224) Operating loss (1,060,043) (1,570,224)Net interest receivable 12,864 105,935 Loss on ordinary activities before (1,047,179) (1,464,289)taxation The geographical analysis of net assets and liabilities is as follows: United USA 2005 2004 Kingdom Total Total £ £ £ £Net assets/(liabilities) - 2005 2,204,299 (7,941) 2,196,358 - 2004 1,049,485 (5,737) 1,043,748 The net assets/(liabilities) are reconciled toshareholders' funds as follows: Cash at bank and in hand 690,102 1,839,800Bank loans (684,000) -Corporation tax recoverable 146,238 165,182Obligations due under leases and hire purchase (145,440) -contracts 2,203,258 3,048,730 3. 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: 2005 2004 £ £ Loss on ordinary activities before taxation (1,047,179) (1,464,289) Loss on ordinary activities multiplied by the standard rate of corporation tax in the UK of 30% (2004 30%) 314,154 439,287 Effects of:Expenses not allowable/(income not chargeable) for tax purposes 301,975 (4,680)Differences between capital allowances and depreciation (33,177) 42,874Short term timing differences (7,363) (1,460)Tax losses current period (392,792) (269,544)Difference in tax rates on losses surrendered for research & development tax credit (36,559) (41,295)Adjustment to charge in respect of prior periods 1,234 - Current tax credit for the period 147,472 165,182 The Group has tax losses of £5,966,432 (2004 £4,653,857) that are available foroffset against future taxable trading profits. 4. Reconciliation of operating loss to net cash flow from operating activities 2005 2004 £ £ Operating loss (1,060,043) (1,570,224)Depreciation of tangible fixed assets 345,697 272,641Loss on sale of tangible fixed assets 103 2,522Increase in stocks (5,199) (18,262)Increase in operating debtors and prepayments (104,806) (360,985)(Decrease)/increase in operating creditors and accruals (260,676) 166,294Non cash movements including exchange (8,545) 20,266 Net cash outflow from operating activities (1,093,469) (1,487,748) 5. Analysis of movement in net (debt)/funds At At 1 January Cash 31 December 2005 Flow Exchange Non cash 2005 £ £ £ £ £ Cash at bank and in 97,220 91,731 3,044 - 191,995hand 97,220 91,731 3,044 - 191,995 Short term deposits 1,742,580 (1,249,555) 5,082 - 498,107Bank loans - (684,000) - - (684,000)Finance leases 15,412 - (160,852) (145,440) 1,839,800 (1,826,412) 8,126 (160,852) (139,338) Short term deposits are included within cash at bank and in hand in the balancesheet. 6. Loss per ordinary share Basic loss per ordinary share is calculated based on the loss for the period of£899,707 (2004 £1,299,107) and on 128,824,514 ordinary shares (2004 125,338,821ordinary shares), being the weighted average number of ordinary shares in issueduring the period. The loss for the period and the weighted average number of ordinary shares forthe purpose of calculating the diluted earnings per share are the same as forthe basic 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(FRS 22). 7. Reconciliation of shareholders' funds and movement on reserves Share Share Merger Profit and 2005 2004 Capital Premium Reserve Loss Account Total Total £ £ £ £ £ £ At 1 January 2005 127,312 9,616,721 128,070 (6,823,373) 3,048,730 1,223,239Issue of shares 11,013 13,688 - - 24,701 3,162,256Issue costs recovered/ - 29,953 - - 29,953 (57,924)(expensed)Loss for the year - - - (899,707) (899,707) (1,299,107)Exchange difference on - - - (419) (419) 20,266 retranslation of net assets At 31 December 2005 138,325 9,660,362 128,070 (7,723,499) 2,203,258 3,048,730 8. The annual report will be posted to shareholders on the 5 May 2006. Further copies will be available on request from the Company Secretary, Cyprotex PLC, 15 Beech Lane, Macclesfield, Cheshire, SK10 2DR. 9. The Annual General Meeting will be held at 10:00 am on Thursday, 1 June 2006 at The Institute of Directors, 116 Pall Mall, London SW1Y 5ED. 10. The financial information set out in this preliminary announcement does not constitute full accounts within the meaning of section 240 of the Companies Act 1985. The balance sheet at 31 December 2005 and the consolidated profit and loss account, consolidated cash flow statement and associated notes for the year then ended have been extracted from the Group's 2005 statutory financial statements upon which the auditors opinion is unqualified and does not include any statement under section 237 of the Companies Act 1985. The financial statements for the year ended 31 December 2004 have been delivered to the Registrar of Companies and those for the year ended 31 December 2005 will be delivered to the Registrar of Companies following the Annual General Meeting of the Company. This information is provided by RNS The company news service from the London Stock Exchange