RNS Number:9851Q
Phynova Group PLC
28 March 2008
Press release 28 March 2008
Phynova Group plc
("Phynova" or "the Company")
Preliminary Results
For the Year Ended
30 September 2007
Phynova Group PLC (AIM: PYN), the developer of prescription pharmaceuticals
derived from Chinese botanical medicines, is pleased to announce preliminary
results for the year ended 30 September 2007.
Financial Highlights
* Loss before tax �2.9M (2006: �1.6M)
* Cash at 30 September 2007 �1.4M (2006: �2.0M)
Operational Highlights
* Appointment of experienced entrepreneur Karl E Watkin MBE as a
non-executive director and subsequently as Chairman of the Board
* Encouraging results from the pre-clinical research on PYN18, a novel
anti-viral drug candidate against hepatitis C and dengue fever
* Completion of acquisition of a minority stake in Botanic Century
* Admission for trading of our Ordinary shares on the PLUS Markets trading
platform
Post Year-end Highlights
* Preliminary data from Phase I/II trial of PYN17 successfully confirmed
safety and tolerability in chronic hepatitis C (CHC) patients
* Promising pre-clinical results with PYN6 for the treatment of MRSA
* PYN22 for the treatment of fatty liver continuing in successful
pre-clinical development, with planned initiation of clinical programme
during 2008
* Successfully obtained commitments to provide in excess of �1.1 million
through a placing of new ordinary shares at 40 pence per share with
existing investors and private investors
* Today announces that in April it will establish an ADR programme on the new
US OTCQX trading platform
Commenting on the results Karl Watkin, Chairman of Phynova, said: "This has been
a significant year for Phynova. We have substantially progressed our research
and development programme, most notably with the successful phase I/II trials of
PYN 17 for the treatment of the symptoms of chronic hepatitis C. The completion
of our 45% shareholding in Botanic Century has given us a significant footprint
for future growth in China, which is the fastest growing pharmaceutical market
in the world. We are in a strong position to capitalise on the global demand
for botanical drugs and I look forward to updating you."
The audited Annual Report and Accounts will be posted to shareholders on or
before 31 March 2008. The Annual General Meeting of the Company will be held on
30 April 2008.
For further information, please contact:
Phynova Group PLC +44 (0) 1993 880700
Robert Miller, Chief Executive Officer www.phynova.com
Nominated Adviser:
Nabarro Wells & Co. Limited +44 (0) 20 7710 7400
Marc Cramsie
Broker:
Evolution Securities China Limited +44 (0) 20 7220 4850
Barry Saint
Media enquiries:
Abchurch Communications +44 (0) 20 7398 7700
Peter Laing/Ashley Tapp/Stephanie Cuthbert
ashley.tapp@abchurch-group.com www.abchurch-group.com
- ENDS -
Chairman's Statement
Phynova is on track to achieve its aim of becoming a leading international
developer of botanical drugs targeted at areas of significant unmet therapeutic
need in major global markets.
2007 was a year of significant achievement and important progress for Phynova,
with advances being made on all fronts. Our research and development programme
has produced consistently encouraging results whilst business development
activity continues to deliver opportunities to grow the business and build
shareholder value.
During the period under review, we have delivered on our promise to capitalise
on the global potential of botanical drugs and continue to establish a strong
presence in China, which is one of the world's fastest growing pharmaceutical
markets and also the source of much of Phynova's raw material and scientific
expertise.
I believe our achievements in 2007 validate our business model, which seeks to
reduce the risk inherent in the pharmaceutical drug development process by
working with tried and tested medicinal plants with established efficacy and
safety profiles, thus potentially also reducing the time and cost traditionally
associated with taking drug candidates through the pre-clinical and clinical
development stages towards market.
Drug Development Programme
Advances have been made across our development pipeline. The Company is
particularly pleased with the progress made with PYN17, Phynova's lead drug
candidate for the treatment of patients with chronic hepatitis C. The US Food &
Drug Administration (FDA) approved our Investigational New Drug (IND)
application in January 2007. Positive results were reported in November from
the subsequent Phase I/II trial. A Phase IIb clinical trial is expected to
commence on schedule during the first half of 2008.
Elsewhere in the pipeline we can report good progress. For example, PYN6, which
has produced promising pre-clinical results for the treatment of MRSA and as an
acne therapy, has attracted considerable commercial attention from potential
partners.
Encouraging results continue to emerge from our research to evaluate the
effectiveness of PYN18, our novel anti-viral drug candidate against hepatitis C
and dengue fever.
PYN22, our candidate for the potential treatment of fatty liver, is moving
forward successfully in pre-clinical development, having produced very
encouraging initial screening data during the year. We plan to commence a
clinical programme during 2008.
We also expect to commence clinical development during 2008 on PYN9 for the
treatment of post-operative ileus (or temporary bowel stasis). This candidate
has been developed by our Chinese partner, Botanic Century.
Within the next twelve months, Phynova expects to have three drug candidates
undergoing clinical trials (PYN17, PYN22, PYN9) with other candidates
progressing closer to clinical development. This is a remarkable achievement
for a company of our size. At the same time, our broad pipeline means that we
are not over-reliant on any one single project.
Finance
Prudent management of the funds raised in the previous year has enabled the
Company to carry out its development programme. We have just obtained
commitments to provide �1.1 million from existing investors and new private
investors. However, in order to enable the business to fulfil the development
programme further fundraising will be necessary in 2008. We continue to take
the view that core operational resources should be strengthened within the
business whilst we outsource high cost, low-volume services where appropriate.
Despite extremely volatile and challenging market conditions, generally poor
share price performance and low liquidity across the entire UK Life Sciences
sector, we continue to enjoy strong support from our shareholders.
Operations
Phynova China Ltd, our Hong Kong-based wholly-owned subsidiary established in
2006, continues to make a positive contribution to the business and a range of
new opportunities is constantly under consideration. In 2006, we acquired a 45%
shareholding in the Beijing-based drug development company Botanic Century.
This collaboration gives us a significant "footprint" in China, one which will
enable sustained growth in the period ahead.
The Future
I believe three principal underlying factors offer the prospect of sustained
future growth:
Firstly, the demand for new and effective therapies continues to be high. The
drug candidates in our development pipeline are targeted against global diseases
where prevalence is not only increasing but which remain generally poorly
treated.
Secondly, we believe that botanical drugs can offer 'big pharma' companies
genuine new and valuable opportunities at a time when conventional drug
discovery pipelines are looking thin, and with development costs and the risk of
being turned down by the regulators higher than ever. Increasingly, the big
players are paying significant premiums for high potential projects with which
to re-stock their own development pipelines. This represents a possible
lucrative source of revenue as Phynova's projects move along the development
process and has contributed to the widespread increase in interest being
expressed in our approach and our pipeline.
Thirdly, Phynova is exceptionally well placed to take advantage of China's
development as the world's fastest growing pharmaceutical market. Phynova has
created an effective East-West bridge, giving the Company the potential to
address the needs of the Chinese, as well as Western markets.
People
I would like to thank all members of staff for their expertise, commitment and
enthusiasm. It is these attributes which have delivered the considerable
progress made this year. My thanks go also to my fellow Board members and our
Scientific Advisors for their valuable contribution to the Company. Working
together, I look forward to meeting the exciting challenges which lie ahead and
fulfilling Phynova's potential.
Outlook
The Directors remain convinced that the market for pharmaceuticals derived from
medicinal plants and developed at relatively low cost is one with enormous
potential. Phynova now operates on three continents. With a strong development
pipeline and with social and economic trends moving our way, Phynova is uniquely
well placed within the industry and we can look forward to the period ahead with
confidence.
Chief Executive's Review
In 2007, Phynova made a number of important advances towards securing its
position as one of the world's leading developers of new drugs sourced from
plants used in Chinese medicine. Our research and development portfolio has
moved strongly forward and our business development activity has opened up many
interesting new opportunities for the Company.
It is said that the 21st century will be China's century, just as the 20th
Century was America's. Forecasters predict that China will grow from its current
position as the world's ninth largest pharmaceutical market to the fifth by
2010. China is of critical importance to Phynova, not just as the source of
many of our pharmaceutical raw materials and scientific expertise, but also as a
major marketplace for our development skills and, ultimately, our products.
During the year, we have taken important, strategic steps to strengthen our
existing presence in the region and we look forward to consolidating these
achievements in 2008.
I believe Phynova is ideally placed to act as a bridge between China and the
West, developing new therapies for common but hitherto poorly treated diseases
in the West whilst helping to introduce western development programmes to China.
An enormous opportunity exists for Phynova to develop a range of innovative
pharmaceutical products for the global market.
Drug Development Programme
Our development programme made excellent progress in 2007 and continues to show
considerable commercial potential. We received recognition of this fact during
the year when the Company was nominated in the category "Innovation in Discovery
and Drug Development" at the prestigious "UK Bioentrepreneur of 2007" awards.
Our approach and pipeline projects are fully compliant with the FDA's Botanical
Drug Guidelines published in 2004.
PYN17
Our lead candidate for the treatment of the symptoms of chronic hepatitis C
(CHC) received its first patent in July 2006. Following the FDA's acceptance
early in 2007 of our IND (Investigational New Drug) application, a Phase I/II
clinical trial commenced on schedule in May 2007 in five hepatology centres in
the US. Positive results were received in November 2007 from this double-blind,
placebo-controlled study, confirming the safety profile of this product in
patients with CHC. A Phase IIb trial is expected to commence on schedule in the
first half of 2008. PYN17 remains the only product currently in clinical
development specifically aimed at treating the debilitating symptoms of
hepatitis C. It targets a hepatitis C market currently dominated by antiviral
drugs that is forecast to grow from its current level of around $3.0bn to around
$12.0bn by 2015.
PYN18
An anti-viral candidate for the treatment of the hepatitis C virus. Screening
data has also confirmed the potential for PYN18 to be developed as a treatment
for Dengue Fever which infects between 50 and 100 million people each year,
mainly across Asia, Africa and South America and for which there is currently no
approved medication or vaccine. Work will continue in 2008 on both potential
indications with development partners in Europe and Thailand. This novel
compound was discovered by Phynova's own scientists and is attracting
significant interest from 'big pharma' companies.
PYN22
A candidate for the treatment of the increasingly recognised condition of
non-alcoholic fatty liver disease, which is part of the metabolic syndrome that
includes obesity. Initial pre-clinical tests to investigate the efficacy and
toxicology produced encouraging results during the course of the year. This
project is expected to move into the clinic during 2008. There remains a high
unmet therapeutic need in this area and we believe this drug candidate has
significant commercial potential.
PYN6
This drug candidate is a novel anti-bacterial in-licensed from Botanic Century.
Pre-clinical studies continue to yield positive results on the product's
activity against a number of important human pathogens. In particular, work
with the University of East London has demonstrated promising levels of
inhibition against clinical isolates of Methicillin Resistant Staphylococcus
aureus ("MRSA"). The results show that PYN6 compares very favourably with
mupirocin, the topical antibiotic currently routinely used for the treatment of
skin infections involving MRSA. Moreover, continuous culture over three weeks
in the presence of PYN6 failed to produce PYN6-resistant strains of MRSA - a
finding that could be clinically significant. PYN6 also has shown activity
against the bacterium that is associated with acne and this indication has
attracted considerable interest from potential pharmaceutical partners during
the year. Studies designed to strengthen the PYN6 pre-clinical package will
continue during 2008.
PYN7
Compounds potentially useful in the treatment of cancer were obtained in early
2007 through our relationship with the Hong Kong Jockey Club Institute of
Chinese Medicine. Mode-of-action studies carried out on Phynova's behalf during
2007 at the Institute of Cancer Studies at the University of Birmingham and at
the Hong Kong University of Science and Technology confirm Phynova's initial
view of the promise of these compounds. Further work to underpin these studies
is planned for 2008. It is anticipated that a commercially attractive data
package to support the out-licensing of PYN7 will be built up during the year.
PYN9
Developed by Botanic Century for the treatment of post-operative ileus,
temporary bowel stasis associated with abdominal surgery. Positive results
continue to emerge from this high potential drug candidate. Currently, there
are no approved treatments for the condition which is estimated to affect up to
10 million surgical procedures every year in the USA alone. We are expecting to
commence clinical trials in China in 2008 to produce safety and efficacy data.
This will be followed by a new drug approval application to the SFDA, the
Chinese drug registration agency. If successful, PYN9 could be marketed in
China in 2010. Botanic Century has already signed a distribution agreement
which has the potential to generate significant near-term revenues in China.
Simultaneously, Phynova has commenced pre-clinical work in the UK and Europe
with a view towards completing future global development.
Finance
The results for the year ended 30 September 2007 show a post tax loss of �2.9
million (2005/6: �1.6 million). As an early stage biopharmaceutical company
involved in the development of pharmaceuticals, Phynova expects to incur an
operating loss for a number of years. The cash balance as at 30 September 2007
was �1.4 million compared with �2.7 million at 31 March 2007 and �2.0 million at
30 September 2006.
In March 2008, despite challenging and volatile market conditions, Phynova
successfully obtained commitments to provide in excess of �1.1 million through a
placing of new ordinary shares at 40 pence per share with existing investors and
private investors. We continue to manage our development spend in a controlled
and consistent way and deliver results from our pipeline in accordance with
expectations. In order to enable the business to fulfil its current development
program, Phynova intends to raise further funds during 2008. Negotiations are
also progressing with a number of potential partners for several of our
products, on terms that could include funding of development programmes or
out-licensing. Phynova's unique, cost-efficient approach to drug development
should mean that it incurs less cost taking drugs to market than that required
by traditional drug development models.
Business development and M&A activity
We continue to put increased resources into our business development activity.
Based in Europe with a major presence in China and, to a lesser degree, in the
US, Phynova is well placed to take advantage of its particular expertise in the
development of botanical drugs in order to deliver them into markets throughout
the world.
Our focus is increasingly turning to the commercialisation of our work.
Phynova's profile in China and the Far East was boosted by the strategic
establishment last year of Phynova China Ltd, based in Hong Kong, which has led
to a very positive response from Chinese pharmaceutical and biotech companies,
with whom we are reviewing a range of high potential collaborative business
development opportunities.
We are finding that our message is being well received by major international
pharmaceutical manufacturers and marketing companies. At any time, a range of
high potential drug development opportunities are under review within the
Company with a view to possible future collaborations, in-licensing or
acquisitions.
The acquisition of a 45% stake in Botanic Century in November 2006 and the
consequent in-licensing of PYN6 have helped establish a remarkably close and
effective working relationship between the two companies. The partnership
immediately gave Phynova access to a number of potential new drug candidates
being taken forward by Botanic Century, whilst our Chinese partners can expect
Phynova to introduce their projects to wider audiences and markets outside
China.
People
I am delighted to take this opportunity to thank all members of the Phynova
team. We are fortunate to have so many talented and experienced people who,
working together, make up a formidable and committed resource, easily capable of
meeting the challenges of delivering Phynova's full potential in the years
ahead.
Conclusion
During 2007, Phynova has achieved several important milestones. We have
demonstrated that we can take projects into the clinic and make swift progress
in the clinical trials process. Our broad development pipeline means that we
are not over-reliant on any one particular project. We have made successful
product acquisitions as well as mutually beneficial strategic alliances with
organisations such as the Hong Kong Jockey Club Institute of Chinese Medicine.
Considerable interest in our projects and our capabilities has been generated
from other, much larger, companies in the industry. We have a growing presence
on three continents and have particularly deep roots now in the fastest growing
pharmaceutical market in the world, China.
I believe Phynova is a company which punches above its weight. Since its
inception it has worked hard to deliver on its promise of creating novel and
cost effective new drug opportunities from plant based medicines. I am
confident that the year ahead will be a transformational one for the Company in
which we will begin to see the commercial realisation of that promise.
Unaudited Consolidated Profit and loss account for the year ended 30 September 2007
Note Year ended Year ended
30 September 30 September
2007 2006
(unaudited) (audited)
� �
Turnover - -
Cost of sales - research and development 1,027,506 497,799
________ ________
Gross loss (1,027,506) (497,799)
________ ________
Administrative expenses 1,943,285 1,034,147
AIM listing expenses - 131,781
_________ _________
Total administrative expenses 1,943,285 1,165,928
Group operating loss (2,970,791) (1,663,727)
Share of operating loss in associated undertaking (58,652) -
Loss on ordinary activities before taxation (3,029,443) (1,663,727)
Interest receivable and similar income 87,240 24,708
Interest payable and similar charges (3,633) (1,417)
Loss on ordinary activities before taxation (2,945,836) (1,640,436)
Taxation on ordinary activities 93,144 -
Loss on ordinary activities after taxation (2,852,692) (1,640,436)
======= =======
Basic and diluted loss per share 2 (15.1p) (13.6p)
All amounts relate to continuing activities.
Unaudited Consolidated Balance sheet at 30 September 2007
As at 30 September 2007 As at 30 September 2006
(unaudited) (audited)
� � � �
Fixed assets
Tangible assets 16,367 - 7,590 -
Investment in associated undertaking 531,236 - - -
547,603 - 7,590
Current assets
Debtors 418,815 - 254,400 -
Cash at bank and in hand 1,426,681 - 1,977,967 -
1,845,496 - 2,232,367 -
Creditors: amounts falling due within one (374,800) - (206,533) -
year
Net current assets - 1,470,696 2,025,834
Total assets less current liabilities - 2,018,299 - 2,033,424
Provision for liabilities - (343,366) - (371,183)
- 1,674,933 - 1,662,241
======= =======
Capital and reserves
Called up share capital - 195,363 - 147,998
Share premium account - 6,271,548 - 3,497,856
Warrant reserve - 369,459 - 369,459
Merger difference reserve - 642,711 - 642,711
Profit and loss account - (5,804,148) - (2,995,783)
Shareholders' funds - 1,674,933 - 1,662,241
======= =======
Unaudited Consolidated Cash Flow Statement for the year ended 30 September 2007
Year ended Year ended
30 September 2007 30 September 2006
(unaudited) (audited)
� �
Net cash outflow from operating activities (2,847,417) (1,586,394)
_________ _________
Returns on investments and servicing of finance
Interest received 87,240 24,708
Interest paid and similar charges (3,633) (1,417)
_________ _________
Net cash inflow from returns on investments and 83,607 23,291
servicing of finance
Capital expenditure and financial investment
Purchase of tangible fixed assets (15,972) (7,931)
_________ _________
Net cash outflow from capital expenditure and
financial investment (15,972) (7,931)
_________ _________
Acquisitions and Disposals
Investment in Associated Undertakings (592,561) -
_________ _________
Net cash outflow from acquisitions and (592,561) -
disposals
Cash outflow before financing (3,372,343) (1,571,034)
Financing
Issue of ordinary share capital 3,033,445 4,198,342
Share issue expenses (212,388) (678,119)
_________ _________
Net cash inflow from financing 2,821,057 3,520,223
_________ _________
Increase / (decrease) in cash (551,286) 1,949,189
========= =========
Notes to the accounts
1. Basis of preparation
The financial information has been prepared in accordance with accounting
policies as presented in the Financial Statements as at 30 September 2006 as
amended for the adoption of the following standards:
FRS 9: Associates and Joint Ventures
FRS 20: Share Based Payments,
The financial information on the Group set out above does not constitute
statutory accounts within the meaning of section 240 of the Companies Act 1985.
Information relating to the period ended 30 September 2006 is derived from the
statutory accounts for that year, which have been delivered to the Registrar of
Companies. The auditors' report on those accounts was unqualified and did not
contain a statement under section 237(2) or (3) of the Companies Act 1985.
The financial information above has been derived from the draft unaudited
financial statements of Phynova Group Public Limited Company for the year ended
30 September 2007. The financial information does not constitute the Group's
full financial statements for the year ended 30 September 2007. The statutory
accounts for 2007 will be finalised on the basis of the financial information
presented in this preliminary announcement and will be delivered to the
Registrar of Companies following the Company's Annual General Meeting.
2 Loss per share
The calculation of the basic and diluted loss per share is based on the loss on
ordinary activities after tax and on the weighted average number of ordinary
shares in issue during the period. The loss and weighted average number of
shares used in the calculation are set out below:
Basic and diluted Loss Weighted average Loss per share
loss per share number of shares
� pence
Year ended 30 (2,852,692) 18,855,303 (15.1)
September 2007
Year ended 30 (1,640,436) 12,027,943 (13.6)
September 2006
At 30 September 2007, the Company had 5,690,920 share options outstanding,
representing 22.6% of the Company's enlarged share capital, on the basis of all
the share options being exercised before expiration. The share options have not
been included in the calculation of the diluted loss per share as they would
dilute a loss.
3. Audited Annual Report and Accounts
The audited Annual Report and Accounts will be posted to shareholders on or
before 31 March 2008.
4. Fixed Asset Investments
Group
Associated
undertaking
Cost
At 30 September 2006 -
Additions 592,561
Exchange Movements (2,673)
Share of retained losses (42,850)
547,038
Goodwill 344,740
Other 202,298
At 30 September 2007 547,038
Amortisation of goodwill (15,802)
At 30 September 2007 (15,802)
Net book value
Goodwill 328,938
Other 202,298
At 30 September 2007 531,236
The principal undertakings, in which the Company's interest in the year is 20%
or more, are as follows:
Subsidiary undertakings Country of Incorporation Proportion of voting rights Nature of business
and ordinary share capital
held
Phynova Limited England 100% Drug Development
Phynova China Limited Hong Kong 100% Holding Company
Associated undertakings Country of Incorporation Proportion of voting rights Nature of business
and ordinary share capital
held
Botanic Century Beijing. China 45% Drug Development
Co Ltd*
* Undertakings held indirectly by the Company
Company
Group
undertakings
�
Cost at 30 September 2006 67,305
Loans to subsidiary undertakings 592,561
Cost at 30 September 2007 659,866
Cost at 30 September 2006 67,305
This information is provided by RNS
The company news service from the London Stock Exchange
END
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