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Syntopix Group plc - Preliminary Results

RNS Number:9102F Syntopix Group plc 18 October 2007 For immediate release 18 October 2007 SYNTOPIX GROUP PLC ('Syntopix' or 'the Company') Preliminary results for the year ended 31 July 2007 Syntopix Group plc (AIM: SYN), the speciality pharmaceutical research and development company focused on dermatological diseases, today announces its preliminary results for the year ended 31 July 2007. Highlights: * Phase I study completed in August, validating the Group's methodology for determining the potential of compounds as acne treatments; * Phase II cosmetic study began in June 2007 and will report later this year; * An in vivo study is planned to begin shortly to study the effectiveness of our compounds against the Staphylococcus aureus (S. aureus) bacterium; * More than 300 compounds from our library have now been shown to exhibit significant antimicrobial activity; * Board of Directors and Scientific Advisory Panel strengthened with key appointments; * Careful control of expenditure resulting in cash balances at 31 July 2007 of #1.5 million (2006: #3.2 million); * Significant newsflow anticipated during the next 12 months. Dr Rod Adams (Chairman) and Dr Stephen Jones (Chief Executive Officer) commented: 'We are delighted by the rapid progress we have made during the year: we have validated the Group's methodology, increased our library of compounds to more than 1,000 and advanced our trial programmes. We enter the current year with increasing momentum and look forward to further newsflow during the next 12 months.' Enquiries Syntopix Group plc + 44 (0) 845 125 9204 Dr Rod Adams, Chairman Dr Stephen Jones, Chief Executive Officer Buchanan Communications + 44 (0) 20 7466 5000 Mark Court Catherine Breen KBC Peel Hunt Ltd + 44 (0) 20 7418 8900 Capel Irwin Notes to editors About Syntopix Group plc Syntopix is a group focused on the discovery and development of drugs for the topical treatment of dermatological diseases. The company was founded in 2003 as a spin-out from the University of Leeds by Dr Jon Cove and Dr Anne Eady, two of the leading experts in skin microbiology, with initial funding from The Wellcome Trust. Syntopix' strategy is to seek to reduce the risks and costs of drug discovery and development by discovering novel uses for known compounds. The company concentrates on compounds and combinations of compounds that have a history of use in man; and that have well characterised properties, for example antimicrobials and anti-inflammatories. The Group currently has 12 pending UK patent applications. Syntopix is currently concentrating on acne and Staphylococcus aureus infections and has identified a pipeline of lead drug candidates that it intends to take through pre-clinical and, as appropriate, clinical trials. The Group intends to out-license products to commercial partners on obtaining proof of principle and to seek co-development partnerships. The Group is based at the Institute of Pharmaceutical Innovation in Bradford, giving access to the expertise in skin biology, formulation and toxicology at the universities of Bradford and Leeds. Syntopix' shareholders include Techtran Group Limited (a subsidiary of IP Group plc), The Wellcome Trust Limited, University of Leeds Limited and Ridings Early Growth Investment Company Limited. Syntopix joined the AIM market of the London Stock Exchange in March 2006. For further information please visit www.syntopix.com. Joint Statement from the Chairman and Chief Executive Officer Introduction During the second year as a public company, following our AIM flotation in March 2006, Syntopix has continued to make progress in positioning itself as a speciality pharmaceutical research and development company. We seek to identify antimicrobial compounds and develop products that treat dermatological conditions, principally acne and staphylococcal infections including those due to MRSA. Syntopix searches for antimicrobial compounds and synergistic combinations of compounds that already have a history of use in man. We aim to reduce the high risks and costs of early drug discovery and reduce the lead-time to market normally associated with conventional drug development. We are committed to improving the health and appearance of our consumers by offering safe and effective treatments of the highest quality, thereby creating value for our shareholders and other stakeholders. The prescription market for dermatologicals is in excess of $11 billion, with the acne market share representing over $2.5 billion of these sales. The medicated skin care market is worth another $10 billion, with sales for acne products in excess of $1 billion. In 2005 the number of patients requiring acne treatments in Western Europe, the USA and Japan was estimated to be 142 million. (Sources: Business Insights Ltd., Euromonitor International). Dermatological anti-infective treatments have a market value of $3.5 billion, with superficial Staphylococcus aureus (S. aureus) infections accounting for approximately 14% of this total. The number of patients in 2005 requiring treatment for infectious diseases in Western Europe, the USA and Japan has been estimated at greater than 116 million (Source: Business Insights Ltd). The management of these infections, and the prophylaxis of nasal carriage, continues to rely heavily on antibiotics with the associated concerns about resistance. Our approach uses synergistic combinations of antimicrobial compounds, thus combating any issues of resistance. The global market for the compounds we are identifying and developing is large. Additionally, we continue to seek alternative uses for our antimicrobial expertise, thereby expanding the commercial potential of our compounds. During the year we have added to our library of potential drug candidates, which is now in excess of 1,100 compounds. We have continued to use the Syntopix screening process and have shown that approximately 30% of these compounds exhibit significant antimicrobial activity against the organisms that are key to our success: S. aureus and/or Propionibacterium acnes. We have continued to carry out some consultancy and contract work this year but this has been at a modest level, with a revenue of #30,962 (2006: #31,914). However the relationships that are nurtured through such activities are very valuable, and could form the basis of future collaborations and partnerships. For this reason we intend to continue these activities. The Board On 1 January 2007 the following Board changes were implemented: Dr Stephen Jones, formerly Chief Operating Officer, was promoted to Chief Executive Officer; Dr Rod Adams, formerly Chief Executive Officer, became Non-Executive Chairman and Dr Gwyn Humphreys, formerly Non-Executive Chairman, became Senior Non-Executive Director. During the year the Scientific Advisory Panel was strengthened by the addition of Professor Adrian Williams, a formulation expert. Research and Development We have made rapid progress in moving our lead compounds from research into clinical development. Earlier this year we reported and announced some aspects of our clinical development programme. Our first Phase I proof of principle human use study was conducted on SYN 0017 (an antioxidant present in foods and cosmetics), SYN 0401 (an antifungal present in personal healthcare products), and a combination of SYN 0017 and SYN 0016 (an oxidizing agent present in pharmaceutical preparations). This study validated the Company's methodology for determining the potential of compounds as topical treatments for acne, with positive and negative controls performing as expected. The study also confirmed the safety and tolerability of all three test treatments in the skin environment. Although all the test treatments exhibited some antibacterial activity, with some modest activity sustained throughout the trial in one of the three treatment groups, further optimisation work will be required before the test treatments can proceed to later stages of clinical development. A further human use study will start early in 2008 and will take into account the information obtained from the Phase I study results and is likely to include at least one new test compound. Additionally, a Phase II proof of concept study started in June 2007, with 130 human subjects using Syntopix' library compounds SYN 0126 (a compound currently used in a wide variety of cosmetic preparations) and a combination of SYN 0126 with SYN 0091 (a bacteriostatic agent used in soaps and cosmetics). This study will be completed before the end of 2007. An in vivo study using a model system is planned for November 2007 to determine the effectiveness of SYN 0017, SYN 0854, SYN 0564 and SYN 0017 in combination with SYN 0710 against the carriage of methicillin resistant S. aureus (MRSA). It is expected that the results will be available before the end of 2007. These data will form the basis of commercial partnerships with third parties, and will build upon the relationships that we are developing with our key customers. Licensing discussions will be initiated as soon as the clinical programme confirms the activity of our lead compounds. We continue to build and foster good relationships with potential partners in the pharmaceutical and cosmetic industries, and routinely update them of our progress. Intellectual Property Our intellectual property portfolio is critical for our success in licensing compounds and continues to grow. Currently we have 1 granted UK patent, 3 published patents and a further 12 patent applications which are not yet published. The portfolio is now being evaluated for worldwide coverage wherever appropriate, recognising the investment that is required to maintain such a portfolio. Financials The post-tax loss for the year is #1,740,692 (2006: #927,678). The increase in the loss is attributable to the planned expansion of the research and development activity undertaken, including the completion of our first Phase I study and the commencement of a Phase II proof of concept study. The research and development expenditure has been carefully controlled and is within the budget set by the Board at the start of the financial year. The Group will apply for research and development tax credits in respect of qualifying expenditure. Operating overheads remain at a similar level to the previous year. During the year the Group has adopted FRS 20 'Share-based payment' for the first time and this has necessitated a charge to the profit and loss account of #115,965 in respect of the fair value of share options granted. During the year, surplus cash balances have been invested in short term deposit accounts to maximise returns and this has resulted in increased bank interest receivable of #100,678 (2006: #53,993). In accordance with the new EU regulations, the Group will be required to prepare its interim financial statements for the period ending 31 January 2008 in accordance with IFRS. The Group is currently reviewing the changes to its current accounting policies that will be required on adoption of IFRS and has a project plan in place to ensure full compliance with all relevant standards when they become effective. Outlook We continue to invest in our discovery pipeline to fuel our development programmes, and take the most promising candidates into human use studies. We are confident that these studies will deliver data that will convince potential partners of the commercial attractiveness of our compounds in treating dermatological conditions, principally in acne and staphylococcal infections. We enter the current year with increasing momentum and look forward to further newsflow during the next 12 months. Dr Rod Adams, Chairman Dr Stephen Jones, Chief Executive Officer 17 October 2007 Consolidated profit and loss account For the year ended 31 July 2007 Year ended Year ended 31 July 31 July 2006 2007 (restated) # # Turnover 30,962 31,914 Research and development costs (1,398,092) (493,645) Administrative expenses (628,785) (608,982) Other operating income 21,921 2,949 Operating loss (1,973,994) (1,067,764) Interest receivable 100,678 53,993 Interest payable (937) (76) Loss on ordinary activities before taxation (1,874,253) (1,013,847) Taxation 133,561 86,169 Loss for the financial period (1,740,692) (927,678) Loss per share Basic and diluted (30.6p) (22.0p) Statement of total recognised gains and losses Loss for the period (1,740,692) (927,678) Total gains and losses relating to the period (1,740,692) (927,678) Prior year adjustment (16,832) Total recognised gains and losses since the last Annual Report (1,757,524) All Group activities relate to continuing operations. Consolidated balance sheet As at 31 July 2007 At At 31 July 31 July 2006 2007 (restated) # # Fixed assets Tangible assets 112,401 121,041 Current assets Debtors 341,671 123,976 Cash at bank and in hand 1,494,018 3,247,430 1,835,689 3,371,406 Creditors: amounts falling due within one year (306,001) (230,493) Net current assets 1,529,688 3,140,913 Total assets less current liabilities 1,642,089 3,261,954 Provision for liabilities - - Net assets 1,642,089 3,261,954 Capital and reserves Called up share capital 573,260 568,398 Share premium account 3,379,046 3,379,046 Merger reserve 337,935 337,935 Share based payments reserve 132,311 16,832 Profit and loss account (2,780,463) (1,040,257) Equity shareholders' funds 1,642,089 3,261,954 Consolidated cash flow statement For the year ended 31 July 2007 Year ended Year ended 31 July 31 July 2006 2007 (restated) # # Cash outflow from operating activities (1,919,492) (878,390) Returns on investments and servicing of finance 99,741 53,917 Taxation 86,169 - Capital expenditure and financial investment (24,692) (141,346) Cash outflow before financing (1,758,274) (965,819) Financing 4,862 3,567,826 (Decrease)/increase in cash in the period (1,753,412) 2,602,007 Reconciliation of net cash flow to movement in net funds Year ended Year ended 31 July 31 July 2006 2007 (restated) # # Increase in cash in the period (1,753,412) 2,602,007 Cash flow from decrease in debt financing - 62,101 Movement in net funds in the period (1,753,412) 2,664,108 Net funds at the beginning of the period 3,247,430 583,322 Net funds at the end of the period 1,494,018 3,247,430 Notes to the preliminary announcement 1. a) Basis of preparation The consolidated financial information for the year ended 31 July 2007 has been prepared using the accounting policies and practices consistent with those applied in the 2006 Annual Report and Accounts with the exception of the application of FRS20 (see below). 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. This preliminary report was approved by the Board of Directors on 17 October 2007. The statutory accounts for the year ended 31 July 2007 have not been filed with the Registrar of Companies, but will be delivered to the Registrar of Companies following the Group's Annual General Meeting and will also be available on the Group's website at www.syntopix.com. The financial information for the year ended 31 July 2007 has been extracted from the Group's audited consolidated statutory accounts upon which the auditors, BDO Stoy Hayward LLP, issued an unqualified opinion, but which includes references to matters to which the auditors drew attention by way of emphasis in respect of uncertainties over the Group's ability to continue as a going concern. The report did not contain a statement under section 237(2) or (3) of the Companies Act 1985. The figures for the year ended 31 July 2006 have been extracted from the statutory accounts which have been filed with the Registrar of Companies but have been restated for the impact of FRS20. The auditors' report for the 2006 accounts was unqualified and did not contain a statement under section 237(2) or (3) of the Companies Act 1985. 1. b) Going concern The financial statements have been prepared on the going concern basis which assumes that the Group will have sufficient funds available to enable it to continue to trade for the foreseeable future. The Group's principal activity is pharmaceutical drug discovery, research and development which should ultimately present opportunities to enter into licensing agreements with third parties. The nature of the Group's development programme means that the timing of material revenues is difficult to predict. In preparing financial forecasts to estimate the likely cash requirement of the Group over the next 12 months based on the planned development programme, the Group has had to make certain assumptions with regard to the costs of outsourced contract research and development work, the timing and amount of future revenue streams and several other key factors. The directors have attempted to take a balanced and prudent view in preparing these forecasts, however their accuracy is uncertain. These forecasts show that the Group will need additional funding during the next six to nine months to enable it to continue with its planned development programme. The directors continue to monitor the development programme, and will make revisions to this plan, if necessary, in order to preserve cash in the event that further funding cannot be secured. The directors are confident however, that the Group will be able to raise sufficient additional funds to enable it to continue with its planned development programme and to ensure that the Group can continue as a going concern. For this reason, the directors have prepared the financial statements on a going concern basis. The financial statements do not contain any adjustments which may be required if the Group is unable to secure additional funding. 1. c) Basis of consolidation The Group's financial statements consolidate the financial statements of Syntopix Group plc and all its subsidiaries made up to 31 July 2007. No separate profit and loss account is presented for Syntopix Group plc as permitted by Section 230 of the Companies Act 1985. The Company loss for the period includes a loss after taxation of #139,399 (2006: #137,371) which is dealt with in the financial statements of the parent company. 1. d) Adoption of new accounting policy - Share Based Payments, and resulting prior year adjustment The cost of providing share based payments to employees is charged to the consolidated profit and loss account over the vesting period of the related share options or share allocations. The cost is based on the fair value of the options and shares allocated using the Black-Scholes option-pricing model, which is appropriate given the vesting and other conditions attached to the options. The value of the charge is adjusted at each balance sheet date to reflect expected and actual levels of vesting. Where share options are awarded to employees, the fair value of the options at the date of grant is charged to the profit and loss over the vesting period. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each balance sheet date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that eventually vest. Market vesting conditions are factored into the fair value of the options granted. As long as all other vesting conditions are satisfied, a charge is made irrespective of whether the market vesting conditions are satisfied. The cumulative expense is not adjusted for failure to achieve a market vesting condition. Where terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured immediately before and after the modification, is also charged to the profit and loss over the remaining period. Where equity instruments are granted to person other than employees, the profit and loss is charged with the fair value of goods and services received. In accordance with FRS20 'Share-based payment' the Group has elected to apply FRS20 to all grants, options and other equity instruments as they have all been granted since November 2002, the effective date of the standard. The adoption of FRS20 this year has necessitated a prior year adjustment to be made, creating a share based payments reserve of #16,832 at 31 July 2006. For the year ended 31 July 2007, the impact of adopting FRS20 is an increase in the loss for the year of #115,965. No charge was made in previous accounting periods under UITF Abstract 17 (revised 2003) 'Employee Share Schemes'. 2. Basic and diluted earnings per share 2006 2007 (restated) # # Loss for the financial period (1,740,692) (927,678) Weighted average number of shares No. Of shares No. Of shares For basic and diluted earnings per share 5,697,035 4,211,384 The comparative figures are proforma based on the number of shares that would have been in issue had the capital structure of the new parent company always been in place. There are 426,298 (2006: 389,658) potentially issuable shares that have not been included in the diluted EPS as they are antidilutive. 3. Reserves Share Share based Profit premium Merger payments and loss account reserve reserve account Total Group # # # # # 1 August 2006, as originally 3,379,046 337,935 - (1,023,425) 2,693,556 stated Prior year adjustment: share based payment charge - - 16,832 (16,832) - 1 August 2006, as restated 3,379,046 337,935 16,832 (1,040,257) 2,693,556 Deficit for the period - - - (1,740,692) (1,740,692) Share option charge in the year - - 115,965 - 115,965 Exercise of share options in the year - - (486) 486 - 31 July 2007 3,379,046 337,935 132,311 (2,780,463) 1,068,829 4. Reconciliation of movement in shareholders' funds 2006 2007 (restated) Group # # Loss for the period (1,740,692) (927,678) Proceeds from issue of shares 4,862 4,136,213 Share option reserve 115,965 16,832 Share issue expenses - (453,557) Merger reserve arising - (52,729) Net (depletion from)/addition to shareholders' funds (1,619,865) 2,719,081 Opening shareholders' funds 3,261,954 542,873 Closing shareholders' funds 1,642,089 3,261,954 5. Cash flows a Reconciliation of operating loss to net cash outflow from operating activities 2006 2007 (restated) # # Operating loss (1,973,994) (1,050,932) Depreciation 33,332 20,305 Share option charge 115,965 - (Increase) in debtors (170,303) (30,657) Increase in creditors 75,508 182,894 Net cash outflow from operating activities (1,919,492) (878,390) b Analysis of cash flows for headings netted in the cash flow 2007 2006 # # Returns on investments and servicing of finance Interest received 99,741 53,917 Net cash inflow from returns on investments and servicing of finance 99,741 53,917 Capital expenditure and financial investment Purchase of tangible fixed assets (24,692) (141,346) Net cash outflow for capital expenditure and financial investment (24,692) (141,346) Financing Issue of share capital (net of expenses) 4,862 3,629,927 Loans repaid - (62,101) Net cash inflow from financing 4,862 3,567,826 c Analysis of net funds At At 1 August Cash 31 July 2006 flow 2007 # # # Cash at bank 3,247,430 (1,753,412) 1,494,018 This information is provided by RNS The company news service from the London Stock Exchange END FR MGMMGRNNGNZM

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