RNS Number:4888H
K.S. Biomedix Holdings PLC
14 February 2003
Embargoed until 0700 14 February 2003
KS Biomedix Holdings plc
("KSB" or "the Group")
Interim Results For The Six Months To 30 November 2002
KS Biomedix Holdings plc, the biopharmaceutical company
focused on the development of therapeutic products for the
treatment of cancer, announces its interim results for the
six months to 30 November 2002.
Highlights
Commercial Developments
- Three further licensing agreements for lead TransMID
product concluded in the period
- Nycomed to be European licensing partner in an
agreement worth up to $60m
- Medison Pharma to act as licensing partner in Israel
- Ranbaxy Laboratories signed as licensing partner in
India (with option to roll out into other Asian markets)
- Total revenues now secured for TransMID product in
excess of $85 million
- Rights to product in the US being retained by the Group
- Discerna joint venture secures first commercial
collaborations, providing additional funding and
independent endorsement of the technology
Clinical Progress
- Phase I study of TransMID initiated in children with
malignant brain cancer
- Phase I/II study of KSB303 commenced in pancreatic
cancer
- Protocol for pivotal Phase III trial of TransMID107R
submitted to EU and US regulatory authorities
- Pivotal Phase III trial of TransMID107R expected to
commence imminently
- Board strengthened with appointment of additional
non-executive director
- Cash balances of #11.6 million at 30 November 2002
- Underlying cash burn held at #6.0 million in line
with expectations
Dr Steven Powell, Chief Executive, commented: "The
Group's objectives for the remainder of the second half
will be to achieve further progress with its clinical and
commercialisation programmes, whilst continuing to make
optimum use of its existing cash resources."
Enquiries:
KS Biomedix Holdings plc (14/02/03) 020 7067 0700
Dr Steven Powell,
Chief Executive Officer (Thereafter) 01483 307 500
Ian Miscampbell,
Chief Operating Officer
Weber Shandwick Square Mile 020 7067 0700
Kevin Smith/Graham Herring
KS Biomedix Holdings plc
("KSB" or "the Group")
Unaudited Interim Results For The Six Months Ended 30
November 2002
Chairman's Statement
Overview
The business environment for biotechnology companies has
continued to be difficult during the six months ended 30
November 2002. Against this background KSB has been
focused on its two principal objectives; maintaining
progress with its clinical programme and commercialising
its late stage product pipeline through the negotiation
of licensing agreements. Key milestones have been
achieved in each of these areas.
With the funding environment remaining difficult
throughout the period the Group has also undertaken a
thorough review of its operating costs, concentrating
resources on its lead products, reducing research and
development expenditure where possible and cutting Group
overheads.
Commercialisation
The Group made further significant progress in
commercialising its late stage pipeline during the
period, concluding three licensing agreements for the
TransMID product. The total potential value of licenses
now secured for TransMID has increased to in excess of
$85 million, in addition to which KSB will receive
further revenues from manufacturing and royalties payable
on product sales.
In September 2002, the Group announced that it had
appointed Nycomed as the European Licensee for TransMID
in an agreement worth up to $60 million in milestone and
development funding. Under the terms of the
collaboration KSB has licensed the rights to the initial
indication in patients with recurrent inoperable glioma,
together with the rights for additional brain cancer
indications including those relating to newly diagnosed
and metastatic brain cancer patients. Conclusion of this
license was a major milestone for the Group and the
partnership with Nycomed has already enabled significant
regulatory and clinical progress to be made with the
product.
Two further TransMID licensing agreements with Medison
Pharma for Israel and Ranbaxy Laboratories for India were
also signed in the period. The agreement with Ranbaxy
includes an option to extend the coverage of this
agreement to a number of Asian markets. These
agreements, together with the Nycomed license and the
Sosei license announced previously, provide marketing and
development coverage for the TransMID programme for major
territories outside the Americas, which have been
retained as originally planned.
After the period end the Group announced the first
commercial collaborations to be secured by its Discerna
joint venture. The agreements, with a major US
pharmaceutical company and Randox Laboratories Limited,
are the first independent commercial endorsements of its
technology and underline the significant progress made by
Discerna since its formation in mid-2001.
Clinical Progress
The Group maintained its investment in the clinical
trials programme during the first half. Resources have
been concentrated on the most advanced programmes -
TransMID and KSB303. Opportunities for expansion of the
clinical pipeline into other indications have been kept
under review but in the current funding environment the
Board is taking a prudent view of the balance between
pipeline development and cash management.
The majority of the clinical team's resources have been
focused on the TransMID programme as it nears its pivotal
trial. TransMID is a novel product for the treatment of
brain cancer and is based on transferrin-mediated
delivery of a modified diphtheria toxin, which is a
highly potent means of killing cancer cells.
In July 2002, KSB initiated a Phase I study of TransMID
in children with malignant brain tumours. Patient
recruitment for the trial is underway and it is hoped
that, as in the studies conducted in adults, patients who
respond to treatment will survive for longer. The study
will be undertaken at leading cancer treatment centres in
the USA.
The TransMID pivotal Phase III trial for the Group's lead
indication, recurrent or progressive inoperable
glioblastoma multiforme is scheduled to commence as soon
as the final protocol has been approved. This was
submitted to European and US regulatory authorities in
January 2003. The start date is slightly later than
planned as preparations for the trial were extended to
take account of more stringent trial design rules
recently introduced by the regulatory authorities. In
particular, the size of the trial has been expanded to
take account of the new regulatory climate. Extensive
discussions with Nycomed, the Group's European partner
for the product, have also taken place to ensure the
trial design is suitable for single trial product
registration in both the USA and Europe.
In October 2002, a Phase I/II clinical study of KSB303
was initiated in pancreatic cancer, following receipt of
approval from the Medicines Control Agency (UK). KSB303
is a radiolabelled, high affinity, chimaeric monoclonal
antibody under development for a range of cancer
indications. Pancreatic cancer is a malignancy that is
poorly served by existing treatments and the trial
demonstrates KSB's strategy of focusing on niche cancer
indications.
Regulatory
The Group's regulatory efforts during the first half have
been dominated by discussions with the regulatory
agencies in both Europe and the USA relating to the
pivotal trial design for TransMID. Having met all
criteria successfully for a single trial submission the
Group hopes to benefit from rapid regulatory approval in
the US and Europe on conclusion of the trial.
Following KSB's success in achieving Orphan Drug
designation for TransMID in the US and Europe, a similar
application has been made in Japan through Sosei, the
licensing partner for that territory.
Technology Platforms
Although conserving cash to invest in its late stage
clinical programme KSB remains committed to its pre-
clinical development pipeline and has continued to
develop valuable technologies on a selective basis. In
September 2002 KSB secured an option to in-license a
novel protein engineering technology, Triomics, from the
technology transfer office of Oxford University (UK).
Triomic proteins are natural 'scaffolds' to which other
molecules can be attached enabling greater concentration
of therapeutic drugs to be achieved at the tumour. The
Group believes that this technology could provide a
valuable new generation of products for the treatment of
cancer with the potential for additional licensing
opportunities.
In November 2002 KSB announced an innovative CRADA (Co-
Operative Research and Development Agreement) with the
National Institute of Neurological Disorders and Stroke
at the National Institutes of Health, Bethesda, Maryland,
USA, to develop a new generation of cancer-killing
protein molecules. Initial results from this
relationship are encouraging.
In January 2003 the Group's joint venture, Discerna
Limited, announced the achievement of key milestones in
its development. The creation of the first potential
drug candidates for KSB, together with the endorsement of
Discerna's ribosome display technology via two commercial
agreements, one with a major US pharmaceutical company,
underscore the value that is being generated within this
venture.
Management & Board
During the period Dr Michael Young joined the Board as a
Non-executive Director. Dr Young brings with him
extensive pharmaceutical product development experience
from his time as Development Director / Chief Scientific
Officer of Medeva plc and before that at a number of
major pharmaceutical companies.
Financial Review
Results for the six months to 30 November 2002 are in
line with expectations.
Turnover for the period has increased as a result of the
receipt in the period of initial payments arising from
the TransMID licensing agreements. The Group's revenue
recognition policy is to recognise such up-front, non-
refundable access fees when they become contractually
binding; provided that there are no related commitments
to the Group and the recoverability is assured. Revenue
also included income generated from sales of antibodies
manufactured by the Group for diagnostic purposes, which
again increased during the period under review.
Operating expenses were in line with those achieved in
the previous six months and were lower than those
incurred in the comparable period last year. Operating
expenses comprise expenditure on research and development
programmes, goodwill arising on the acquisition of the
Canadian subsidiary in July 2001 and other underlying
overheads.
Research and development expenditure in the six months
fell to #4.2 million. In the comparable period last year
the Group incurred #6.9 million of costs in this area
including #1.7 million of one-off costs incurred through
licensing and acquisition of projects in July 2001 to
build the product pipeline. Expenditure in this area
continues to be driven by expenditure on clinical
programmes. Goodwill arising on the acquisition of the
Group's Canadian subsidiary, KS Avicenna Inc. ("KSA")
totalled #1.6 million in the period. Other
administrative expenditure increased from #1.1 million to
#1.3 million in the period, driven largely by increased
business and corporate development activity within the
Group.
Expenditure remains under constant review with further
savings from the Group's low overhead base being
identified subsequent to the period end. While costs
will continue to be kept under tight control, investment
in the core programmes, which drive value within the
business, will be maintained.
Investment income decreased during the period reflecting
the reduced levels of cash and cash equivalents available
for investment and the lower returns available in the
capital markets. Taxation reflected in the accounts for
the period relates to the claim for a refund of R&D tax
credits in the UK.
Within the balance sheet, goodwill arising on the
acquisition of KSA stood at #28.3 million at the period
end. The Group continues to carry this asset at its
amortised historic cost, in the light of the value of
commercial partnerships achieved around the TransMID
programme and the potential value of the contract
manufacturing business based in Edmonton, Canada.
Capital investment in Edmonton to extend the biologics
manufacturing suite to accommodate the commercial supply
of TransMID resulted in an increase in fixed assets in
the period.
Reserves include #23.6 million of shares to be issued.
These relate to the ordinary shares to be issued on
exchange of the exchangeable shares of KS Canada Inc., an
indirectly owned subsidiary undertaking, which were
issued as consideration for the KSA acquisition.
The net cash outflow from operations (the Group's
underlying cash burn for the period) was #6.0 million.
This is in line with previous forecasts. Excluding one-
off costs last year the comparative burn was #6.2 million
and expenditure is anticipated to continue at this rate
for the remainder of the year.
Outlook
Operationally, the Group's objectives for the remainder
of the second half will be to achieve further progress
with its clinical and commercialisation programmes,
whilst continuing to make optimum use of its existing
cash resources.
The Group will be actively pursuing patient recruitment
into its ongoing paediatric brain cancer and pancreatic
cancer studies. It will also move to initiate trial
sites and to secure patient recruitment into the TransMID
pivotal study. Commercially, KSB will pursue
collaborations around its earlier stage programmes as a
means of driving these forward within the limited
resources currently available to the Group.
Recognising the requirement to raise further funds before
the end of 2003, the Board is currently examining the
full range of fund raising alternatives to meet its cash
requirements for the foreseeable future. In the meantime
the Group will continue to invest its existing cash
resources in programmes that will drive shareholder
value.
In assessing its future funding options the Group is
assuming that current depressed Stock Market conditions
will persist for the foreseeable future. In this
environment KSB will continue to take a prudent approach
to cash management, focusing its investment on its late
stage pipeline. Inevitably, this will mean that a number
of promising early stage projects will not progress as
rapidly as originally anticipated but the Board believes
that concentrating on those products which are nearest to
market launch is in the best interests of all
shareholders.
John Rennocks 13 February 2003
Chairman
- ends -
Consolidated Profit & Loss Account
for the 6 months ended 30 November 2002
Unaudited Unaudited Audited
6 Months 6 Months Year
ended ended ended
30 November 30 November 31 May
2002 2001 2002
# # #
Turnover 1,206,180 192,051 445,370
Cost of sales (22,784) (70,366) (157,045)
___________ ___________ ___________
Gross Profit 1,183,396 121,685 288,325
Research & development expenses (4,158,655) (6,918,386) (11,201,684)
Amortisation of goodwill (1,638,790) (1,223,028) (2,867,882)
Other operating expenses (1,346,515) (1,123,735) (2,178,141)
___________ ___________ ___________
Operating expenses (7,143,960) (9,265,149) (16,247,707)
___________ ___________ ___________
Operating Loss (5,960,564) (9,143,464) (15,959,382)
Share of loss of joint venture (154,405) (66,809) (286,411)
Investment income 261,257 914,221 983,996
___________ ___________ ___________
Loss on Ordinary Activities
before Taxation (5,853,712) (8,296,052) (15,261,797)
Tax on loss on ordinary
activities 387,783 - 1,083,425
___________ ___________ ___________
Loss on Ordinary Activities
after Taxation (5,465,929) (8,296,052) (14,178,372)
___________ ___________ ___________
Retained Loss for the Period (5,465,929) (8,296,052) (14,178,372)
___________ ___________ ___________
Loss per share - basic (8.5p) (13.6p) (22.7p)
Loss per share - diluted (8.5p) (13.6p) (22.7p)
Consolidated Statement of Total Recognised Gains and Losses
for the 6 months ended 30 November 2002
Unaudited Unaudited Audited
6 Months 6 Months Year
ended ended ended
30 November 30 November 31 May
2002 2001 2002
# # #
Retained Loss for Period (5,465,929) (8,296,052) (14,178,372)
Loss on foreign currency
translation (55,346) (4,437) (17,865)
___________ ___________ ___________
(5,521,275) (8,300,489) (14,196,237)
___________ ___________ ___________
Consolidated Balance Sheet
As at 30 November 2002
Unaudited Unaudited Audited
30 November 30 November 31 May
2002 2001 2002
# # #
Fixed Assets
Tangible fixed assets 2,252,960 1,710,626 1,964,882
Goodwill 28,269,124 31,552,768 29,907,914
Investment in joint venture 48,016 28,324 93,671
___________ ___________ ___________
30,570,100 33,291,718 31,966,467
Current Assets
Stock 25,849 4,030 44,582
Debtors 3,357,899 1,327,983 2,569,122
Cash on deposit as short
term investment 11,412,367 22,480,000 17,275,000
Cash at bank and in hand 248,111 1,032,053 328,459
___________ ___________ ___________
15,044,226 24,844,066 20,217,163
Creditors: amounts falling due
within one year (1,574,340) (2,597,886) (2,684,030)
___________ ___________ ___________
Net Current Assets 13,469,886 22,246,180 17,533,133
Total Assets less current
liabilities 44,039,986 55,537,898 49,499,600
Creditors: amounts falling due
after more than one year (271,971) (421,416) (266,750)
___________ ___________ ___________
Net Assets 43,768,015 55,116,482 49,232,850
___________ ___________ ___________
Capital and Reserves
Called-up share capital 1,139,975 1,136,298 1,136,404
Share premium account 47,073,759 46,949,027 46,961,037
Shares to be issued 23,580,485 23,640,337 23,640,337
Other reserves 419,287 419,287 419,287
Profit & loss account (28,445,491) (17,028,467) (22,924,215)
___________ ___________ ___________
Equity Shareholders' Funds 43,768,015 55,116,482 49,232,850
___________ ___________ ___________
Consolidated Cash Flow Statement
for the 6 months ended 30 November 2002
Unaudited Unaudited Audited
6 Months 6 Months Year
ended ended ended
30 November 30 November 31 May
2002 2001 2002
# # #
Operating loss (5,960,564) (9,143,464) (15,959,382)
Depreciation 122,884 99,950 227,233
Amortisation of goodwill 1,638,790 1,223,028 2,867,882
Loss / (profit) on disposal of
fixed assets 58 - (19,734)
Decrease / (increase) in stock 18,733 - (40,552)
(Increase) / decrease in debtors (838,559) 327,644 (202,138)
(Decrease) / increase in
creditors (1,015,972) 376,892 462,176
___________ ___________ ___________
Net Cash outflow from operating
activities (6,034,630) (7,115,950) (12,664,515)
Returns on investments and
servicing of finance 293,628 914,221 1,203,868
Taxation 405,193 - 47,443
Capital expenditure and
financial investment (570,568) (81,263) (475,567)
Acquisitions and disposals - - (4,524,835)
___________ ___________ ___________
Cash outflow before management
of liquid resources and
financing (5,906,377) (6,282,992) (16,413,606)
Management of liquid resources 5,862,633 (5,419,956) (683,242)
Financing (36,604) 12,735,000 16,957,021
___________ ___________ ___________
(Decrease) / increase in cash in
the period (80,348) 1,032,052 (139,827)
___________ ___________ ___________
Notes to the Interim Financial Information
For the six months ended 30 November 2002
1. Basis of preparation
The unaudited interim financial information, which was
approved by the Board of Directors on 13 February 2003,
has been prepared on the basis of accounting policies set
out in the Group's accounts for the year ended 31 May
2002. These accounts do not constitute the Group's
statutory accounts within the meaning of section 240 of
the Companies Act 1985. The Group's statutory accounts for
the year ended 31 May 2002 have been reported on by the
auditors and delivered to the Registrar of Companies. The
report of the auditors was unqualified and did not contain
a statement under section 237(2) or (3) of the Companies
Act 1985.
In preparing the interim financial information, the
Directors have considered the funding position of the
Group carefully. The Group will require further funding
before the end of 2003 to continue the development of its
products before it is able to generate significant
revenues. The Directors are actively pursuing a number of
options including the possibility of further fund raising
and the extraction of value from existing assets in order
to secure the resources necessary to continue development
of its product pipeline. The Directors believe that there
is a reasonable prospect to conclude one or more of the
options currently being considered and on this basis have
prepared the interim financial information on the going
concern basis, which therefore does not include any
adjustments that might prove necessary in the event of not
concluding one of the above options.
2. Turnover
Turnover represents revenues from license agreements and
the sale of products, net of VAT and other taxes.
Revenues from license agreements are recognised in order
to match revenues with the underlying deliverables
required to fulfil the specific agreement or the
achievement of the related milestone. In recognising
revenue, consideration is given to the terms and
conditions of the agreement. Non-refundable access fees
and milestone payments are recognised when they become
contractually binding, provided that there are no related
commitments for the Group, and that the recoverability is
assured.
3. Shares to be issued
KS Canada Inc. an intermediate holding company issued
8,658,000 exchangeable shares in July 2001 as part of the
total consideration for the acquisition of Avicenna Medica
Inc. Immediately on issue 1,153,131 exchangeable shares
were exchanged. Each exchangeable share is equivalent to
one ordinary share in KS Biomedix Holdings plc and can be
converted into ordinary shares in the Company at the rate
of one to one at any time at the request of the holder. On
14 June 2002 a further 28,879 exchangeable shares were
exchanged. On 17 June 2002 a further 27,057 exchangeable
shares were issued in accordance with the terms of the
acquisition agreement as a result of a price adjustment
concerning working capital at completion. The
exchangeable shares rank equally with the ordinary shares
in the Company, with the same rights and benefits
including voting and receiving of dividends. Therefore for
the consolidated accounts to present a true and fair view
it is necessary to differ from the presentational
requirements of the Companies Act 1985 by including these
exchangeable shares in the capital and reserves section of
the balance sheet as Ordinary Shares of the Company to be
issued. The Companies Act 1985 would require the
presentation of such shares as a minority interest within
shareholders' funds.
4. Analysis of net funds
1 June Exchange November
2002 Cashflow Movement 2002
# # # #
Cash 328,459 (80,348) - 248,111
Liquid resources* 17,275,000 (5,862,633) - 11,412,367
Finance leases due
within one year (43,267) (1,625) 2,704 (42,188)
Finance leases due
after one year (53,712) 18,431 3,357 (31,924)
Debt due within one
year (49,244) - 3,078 (46,166)
Debt due after one
year (213,038) 23,083 13,315 (176,640)
___________ ___________ ________ ___________
Net funds 17,244,198 (5,903,092) 22,454 11,363,560
___________ ___________ ________ ___________
* Liquid resources represent term deposits of less than
one year.
INDEPENDENT REVIEW REPORT TO KS BIOMEDIX HOLDINGS PLC
Introduction
We have been instructed by the company to review the
financial information for the six months ended 30
November 2002, which comprises the profit and loss
account, the balance sheets, the cash flow statement and
related notes. We have read the other information
contained in the interim report and considered whether it
contains any apparent misstatements or material
inconsistencies with the financial information.
This report is made solely to the company in accordance
with Bulletin 1999/4 issued by the Auditing Practices
Board. Our work has been undertaken so that we might
state to the company those matters we are required to
state to them in an independent review report and for no
other purpose. To the fullest extent permitted by law, we
do not accept or assume responsibility to anyone other
than the company, for our review work, for this report,
or for the conclusions we have formed.
Directors' responsibilities
The interim report, including the financial information
contained therein, is the responsibility of, and has been
approved by, the directors. The directors are also
responsible for ensuring that the accounting polices and
presentation applied to the interim figures are
consistent with those applied in preparing the preceding
annual accounts except where any changes, and the reasons
for them, are disclosed.
Review work performed
We conducted our review in accordance with the guidance
contained in Bulletin 1999/4 issued by the Auditing
Practices Board for use in the United Kingdom. A review
consists principally of making enquiries of group
management and applying analytical procedures to the
financial information and underlying financial data and,
based thereon, assessing whether the accounting policies
and presentation have been consistently applied unless
otherwise disclosed. A review excludes audit procedures
such as tests of controls and verification of assets,
liabilities and transactions. It is substantially less
in scope than an audit performed in accordance with
United Kingdom auditing standards and therefore provides
a lower level of assurance than an audit. Accordingly,
we do not express an audit opinion on the financial
information.
Going Concern
In arriving at our review conclusion, we have considered
the adequacy of the disclosures made in the financial
information concerning the Group's ability to continue as
a going concern and the need for further fundraising to
complete the development of its products. Details of the
circumstances relating to this matter are described in
Note 1.
Review conclusion
On the basis of our review we are not aware of any
material modifications that should be made to the
financial information as presented for the six months
ended 30 November 2002.
Deloitte & Touche
Chartered Accountants
Reading
13 February 2003
This information is provided by RNS
The company news service from the London Stock Exchange
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