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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Midatech Pharma Plc | LSE:MTPH | London | Ordinary Share | GB00BNGF1L75 | ORD GBP0.02 |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 18.00 | 17.00 | 19.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMMTPH
RNS Number : 0340S
Midatech Pharma PLC
28 September 2017
Midatech will host an analyst briefing, conference call and live Q&A session today (Thursday 28 September 2017) at 1400 BST / 0900 EDT discuss the Interim Results. Dr Jim Phillips, Chief Executive Officer, and Nick Robbins-Cherry, Chief Financial Officer, will participate. Dial-in details are: UK: +44 1452 555 566, US: +1 86 69 66 94 39, ID: 82774809. The presentation will be available on Midatech's website shortly before the call, and a recording will be available shortly afterwards.
28 September 2016
Midatech Pharma PLC
("Midatech" or the "Company")
Interim results for the six months ended 30 June 2017
Midatech Pharma plc (AIM: MTPH), the international specialty pharmaceutical company focussed on commercialising and developing products in oncology, immunology and other therapeutic areas, announces its results for the six months ended 30 June 2017.
OPERATIONAL HIGHLIGHTS (including post period end)
-- Q-Octreotide (MTD201), for the treatment for carcinoid cancer and acromegaly, ready to commence its first-in-human bioequivalence study in H2 2017
-- MTX110, for the treatment of diffuse intrinsic pontine glioma (DIPG), is preparing to enter a first clinical trial in patients
-- MTR104, for the treatment of hepatocellular carcinoma (HCC), demonstrated a high degree of preference for HCC cancer cells over heathy tissue and very significant anti-tumour activity. This programme is due to commence its first human study in 2018.
-- Positive progress with our early stage cancer immunotherapy programmes -- Strong performance from Midatech's US commercial business, Midatech Pharma US Inc.
FINANCIAL HIGHLIGHTS
-- Total gross revenues(1) increased by 42% to GBP5.39 million (H1 2016: GBP3.80 million) -- Total net revenues(2) increased by 17% to GBP3.45million (H1 2016: GBP2.95 million) -- Statutory revenue also grew strongly, by 16%, to GBP3.02 million (H1 2016: GBP2.60 million) -- Research and development costs increased by 3% to GBP2.12 million (H1 2016: GBP2.05 million)
-- Distribution costs, sales and marketing decreased slightly to GBP4.11 million (H1 2016: GBP4.24 million)
-- Administrative expenses were broadly constant at GBP6.92 million (H1 2016: GBP6.82 million)
-- Net cash outflow used in operations (after changes in working capital) was GBP10.18 million, up 23% from GBP8.25 million in H1 2016. The cash balance at 30 June 2017 was GBP6.19 million
-- Loss per share was 19p compared to 25p in H1 2016
-- Placing announced on 28 September 2017 to raise up to GBP6 million in new equity with up to a further GBP2 million by way of an Open Offer to shareholders
Commenting on the interim results, Dr. Jim Philips, CEO of Midatech Pharma, said: "Across both our internal pipeline and commercial activities I am pleased to report a good first half to 2016. With our broad pipeline moving forward, we will continue to invest in R&D and Midatech's future, led by Q-Octreotide. Our commercial arm in the US is providing increasing revenues, and the platform to launch our own products in the coming years. The Board believes that the Company's R&D programme pipeline could add significant shareholder value to the Company and is evaluating a number of funding options to ensure that the Company has the resources to progress these programmes further. The Placing announced today to raise up to GBP6 million with up to a further GBP2 million by way of an Open Offer to shareholders, in addition to further funds raised by potentially negotiating a revised debt facility in due course, will be invested to progress Midatech's three lead programmes, each of which has key value inflection points in 2017-2018."
This announcement contains insider information for the purposes of Article 7 of Regulatory (EU) No596/2014.
- Ends -
For more information, please contact:
Midatech Pharma PLC
Jim Phillips, CEO
Tel: +44 (0)1235 888300
www.midatechpharma.com
Panmure Gordon (UK) Limited (Nominated Adviser and Broker)
Corporate Finance
Freddy Crossley / Duncan Monteith
Corporate Broking
Tom Salvesen
Tel: +44 (0)20 7886 2500
Consilium Strategic Communications (Financial PR)
Mary Jane Elliott / Ivar Milligan
Tel: +44 (0)20 3709 5700
Email: midatech@consilium-comms.com
Westwicke Partners (US Investor Relations)
Chris Brinzey
Tel: +1 339 970 2843
Email: chris.brinzey@westwicke.com
Notes for Editors
About Midatech Pharma PLC
Midatech is an international specialty pharmaceutical company focused on the research and development of a pipeline of medicines for oncology and other therapeutic areas, and marketing these through its established US commercial operation which includes four cancer care supportive products and two further co-promoted products Midatech's strategy is to internally develop oncology products, and to drive growth both organically and through strategic acquisitions. The Company has three high value lead programmes progressing through pre-clinical and clinical development, which the Directors believe are poised to deliver key value drivers in the next 9-18 months. The Company's R&D activities are focused on three innovative platform technologies to deliver drugs at the "right time, right place": gold nanoparticles ("GNPs") to enable targeted delivery; Q-Sphera polymer microspheres to enable sustained release ("SR") delivery; and Nano Inclusion ("NI") to provide local delivery of therapeutics, initially to the brain. The Group, listed on AIM: MTPH and Nasdaq: MTP, employs c.100 staff in four countries. For further company information see: www.midatechpharma.com
Forward-Looking Statements
Certain statements in this press release may constitute "forward-looking statements" within the meaning of legislation in the United Kingdom and/or United States, including estimates for interim results for the six months ended 30 June 2017. These forward-looking statements are based upon assumptions made by Midatech as of the date hereof and are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those anticipated. Actual results may differ from those indicated as a result of the finalization of the interim results for the six months ended 30 June 2017, as well as other risks and uncertainties, including, without limitation, the risks and uncertainties described from time to time in the filings made by the Company with the Securities and Exchange Commission ("SEC"). Such forward-looking statements include, but are not limited to statements regarding Midatech's anticipated interim financial results, the anticipated financial results for the full year 2017, future revenue growth, future advancement and success of its oncology programmes, and the successful development and regulatory approval of Midatech's products. Any forward-looking statements are based on currently available competitive, financial and economic data together with management's views and assumptions regarding future events and business performance as of the time the statements are made and are subject to risks and uncertainties. We wish to caution you that there are some known and unknown factors that could cause actual results to differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements.
Reference should be made to those documents that Midatech shall file from time to time or announcements that may be made by Midatech in accordance with the London Stock Exchange AIM Rules for Companies ("AIM Rules"), the Disclosure and Transparency Rules ("DTRs") and the rules and regulations promulgated by the SEC, which contains and identifies other important factors that could cause actual results to differ materially from those contained in any projections or forward-looking statements. These forward-looking statements speak only as of the date of this announcement. All subsequent written and oral forward-looking statements by or concerning Midatech are expressly qualified in their entirety by the cautionary statements above. Except as may be required under the AIM Rules or the DTRs or by relevant law in the United Kingdom or the United States, Midatech expressly disclaims any obligation or undertaking to publicly update or revise any forward-looking statements presented herein because of new information, future events, changes in expectations, or events otherwise arising. For further information regarding risks and uncertainties associated with Midatech's business, please refer to Midatech's filings with the SEC, including the Annual Report on Form 20-F for the fiscal year ended December 31, 2016, filed by Midatech with the SEC on April 6, 2017.
CHAIRMAN AND CHIEF EXECUTIVE'S REVIEW
We are pleased to report that the first half of 2017 has been another positive period for the Midatech business. There has been significant progress in our value driving R&D programmes and strong growth from our US commercial organisation as it moves towards becoming a profitable business.
Value driving R&D
During the first half of 2017 Midatech has made considerable progress in its three lead R&D programmes.
Q-Octreotide (MTD201) is our treatment for carcinoid cancer and acromegaly, built on Midatech's Q-Sphera(TM) sustained release platform technology. During its pre-clinical programme, we demonstrated that Q-Octreotide is a therapeutic match for the Novartis product, Sandostatin LAR(R) , and offers some important advantages to clinicians and patients. Sandostatin LAR(R) is in a $2bn p.a. market and we are optimistic that Q-Octreotide can capture up to 5% market share.
The Q-Octreotide programme will commence its first-in-human bioequivalence study in Q4 2017 and the results of this initial study will determine the regulatory path and time to filing for marketing approval.
The second of our key, near-term programmes is our MTX110 product for the treatment of diffuse intrinsic pontine glioma (DIPG), a rare but deadly childhood brain cancer. This terrible condition affects a small number of young children every year and, due to the lack of an effective, existing treatment, DIPG has an average survival time of around nine months. MTX110 uses the approved product, panobinostat which Midatech in-licenced from Novartis during the period. Midatech's innovative formulation of this well-established oncology compound has already been used to treat a small number of children in the UK and the US, on a compassionate use basis, and it is about to enter a first clinical trial in patients which, if successful, could lead to an early approval. Early approvals are considered by the US Food and Drug Administration where drugs for serious conditions that fill an unmet medical need (there are no effective, existing therapies for DIPG) are approved based on a surrogate endpoint. A surrogate endpoint in this case is likely to be progression free survival of the patients over a 12-month period, as opposed to looking for clinical benefits over a longer period. This study should read out towards the end of 2018 and, if successful, expedited approval will be sought from regulators.
Midatech's third key programme is MTR104 for the treatment of hepatocellular carcinoma (HCC). MTR104 is built on our proprietary gold nanoparticle platform and in its pre-clinical studies the product has demonstrated a high degree of preference for HCC cancer cells over heathy tissue and has shown very significant anti-tumour activity. Recent pre-clinical studies have suggested that MTR104 is potentially more effective at treating HCC than Bayer's Nexavar(R) (sorafenib). This programme is due to commence its first human study in 2018.
The global HCC market is estimated to be worth around $1bn by 2024 however, due to the limited efficacy and high toxicity of existing treatments, we believe there is scope to significantly expand this market.
In addition to these three key programmes we have also made good progress elsewhere including our early stage cancer immunotherapy programmes which are showing early promise. These activities are expected to drive additional value in the mid to longer-term.
Existing commercialisation capability
Midatech's US commercial operation is now well-established. This business was acquired to enable the commercialisation of Midatech's pipeline of R&D stage products when they are approved for sale. By selling these products ourselves, our strategy is to retain significantly higher value for Midatech versus a partnering approach.
Midatech Pharma US (MPUS) currently sells four cancer supportive care products, including Gelclair(R) and Zuplenz(R) , and two co-promoted products. This portfolio of products continues to enjoy strong growth and we anticipate that MPUS, as a standalone entity, will become profitable on a monthly basis by early 2018.
Total gross revenues for the first half of the year were GBP5.39m (H1 2016: GBP3.80m). Gross product sales grew by 50% to GBP4.91m, compared to GBP3.27m for the first half of 2016. Statutory revenue from product sales grew by 23% to GBP2.97m from GBP2.41m in H1 2016 reflecting higher discounts and other sales incentives that are necessary to access the larger hospital accounts and drive top-line sales. Total gross revenues are in line with market expectations and we have seen a strong start to the second half of the financial year.
In-house manufacturing
Our manufacturing facility in Bilbao, Spain has been at the centre of R&D activity in the first half of 2017. Towards the end of 2016 we completed the expansion of this facility to enable production of our Q-Sphera sustained release products, specifically Q-Octreotide for its forthcoming human clinical programme. The manufacturing run has now been successfully completed and we are ready to commence the Q-Octreotide study once the necessary regulatory approval is received.
Outlook
Our key pipeline R&D products have all reached critical points in their development, with pivotal human studies due to commence in the second half of 2017 or early in 2018. We believe that these programmes are all poised to drive significant value for Midatech. Our commercial business continues to enjoy strong growth and, notwithstanding the challenges in maintaining margins, we anticipate that it will become profitable on a month to month basis by early 2018. Recent challenges have temporarily slowed the Company's development programme progression, including commercial organisation costs and margins being under pressure and clinical study designing taking longer than expected, and reduced its ability to invest in key programmes. The Placing announced today to raise up to GBP6 million with up to a further GBP2 million by way of an Open Offer to shareholders, in addition to further funds raised by potentially negotiating a revised debt facility in due course, will be invested to progress Midatech's three lead programmes, each of which has key value inflection points in 2017-2018.
Hot Features
Premium
Rolf Stahel Dr Jim Phillips
Chairman Chief Executive
Officer
FINANCIAL REVIEW
Key performance indicators
H1 2017 H1 2016 Change
Total gross revenues(1) GBP5.39m GBP3.80m 42%
Statutory revenue GBP3.02m GBP2.60m 16%
R&D costs GBP2.12m GBP2.05m 3%
R&D as % of operating costs 16% 16% n/a
Loss from operations GBP10.04m GBP10.34m -3%
Net cash outflow for the
period GBP11.42m GBP8.80m 30%
Average headcount 82 79 4%
(1) Total gross revenues represents the full list price of products shipped to wholesales and other customers before product returns, discounts, rebates and other incentives based on the sales price and grant revenue.
Revenue from product sales and cash management continue to be the main areas of focus for Midatech's KPIs along with, R&D spend and operating results. Additional, non-financial KPIs, including further KPIs in respect of the research and development programmes, will be added as the business continues to develop.
Revenue
Statutory revenue for the six months to 30 June 2017 was GBP3.02m compared to GBP2.60m in the first six months of 2016, an increase of 16%. This was driven by strong US product sales which grew by 23%, from GBP2.41m in H1 2016 to GBP2.97m for the six months to 30 June 2017. A further GBP53k of revenue (H1 2016: GBP190k) came from collaborations and sales made by the UK business. Other income of GBP0.42m (H1 2016: GBP0.35m) came from grant income received under the Group's two European grant funded programmes.
The Board is pleased with this growth in revenue, however, the increase in allowances, discounts and Medicaid rebates, over the previous year is a key area to improve on going forward.
Research and development costs
Expenditure on research and development increased slightly in H1 2017 to GBP2.12m, a 3% increase. During the first half of the year, significant progress has been made in our three, key R&D programmes. The scheduled, pivotal clinical trials for both our Q-Octreotide (MTD201) and DIPG (MTX110) programmes, and HCC product (MTD119) due to start in H2 2017, are expected to drive increased R&D spending for the second half of the year.
Distribution costs, sales and marketing
Distribution, sales and marketing costs for the six-month period to 30 June 2017 were GBP4.10m (H1 2016: GBP4.24m) and relate exclusively to MPUS. This includes GBP0.78m (H1 2016: GBP1.71m) of amortisation charges relating to the acquired intangibles in the consolidated accounts.
Administrative costs
Administrative expenses in the six-month period to 30 June 2017 were GBP6.92m (H1 2016: GBP6.82m). This is consistent with H1 2016. Over 50% of administrative costs relate to salary costs of GBP3.81m and a further GBP0.5m of depreciation charges. We do not anticipate any significant change to administration expenses in the immediate
Cash outflows used in operations (after changes in working capital) in H1 2017 were GBP10.18m compared to GBP8.25m in H1 2016. This difference of GBP1.93m was substantially due to the distribution in January 2017 of GBP1.15m of grant monies held at the end of 2016 on behalf of H2020 grant consortium members and reflected in the year-end cash balance and in liabilities.
future.
Cash flows
A further GBP1.21m of cash was used in investing activities in H1 2017 (H1 2016: GBP0.60m), including milestone payments associated with Midatech's MTX110 product. Capital expenditure for H1 2017 was GBP0.44m, which is significantly lower than the GBP0.75m in H1 2016 (this was offset by a credit of GBP157k in interest received in 2016, compared to GBP14k this year). During 2016, we undertook a significant expansion of our Bilbao manufacturing facility to enable the production of sustained release products and in particular Q-Octreotide for use in the forthcoming human clinical trial. This work was completed in 2016. Capital expenditure in H1 2017 was mainly adding further analytical capability to our UK gold nanoparticle and sustained release research facilities, as well as further enhancements to the manufacturing facility in Bilbao.
These cash movements resulted in a cash balance of GBP6.19m as at 30 June 2017 compared to GBP17.61m at 31 December 2016. The Group continues to maintain its usual stringent controls over costs.
On 27 February 2017, the Company announced a senior secured GBP6 million loan agreement. The Company has not drawn down any tranches of this loan due to the subsequent financial and operational performance of the Company causing the terms of the loan agreement to no longer be suitable for the Company's requirements or purposes. As such, the Company is negotiating a revised debt facility, with the Group currently in advanced negotiation with a number of new providers in addition to its existing provider, which the Directors reasonably believe could be agreed by the end of 2017.
Whilst the first half of 2017 included around GBP1.93m of non-recurring cash outflow (the largest part of this being the GBP1.15m of grant monies distributed referenced above) the likely cash burn in the second half of the year, given the expected increase in R&D expenditures, implies limited headroom afforded by existing funding. The Board is evaluating various near-term funding options available to the Group, including the proposed Placing and Open Offer, and, based on on-going discussions and the net proceeds from the proposed Placing and Open Offer, the Directors are confident that additional working capital will become available before the end of the year. We are therefore satisfied that it is appropriate to prepare these accounts on a going concern basis.
So far in 2017, we have continued to build on the progress made over the previous two years since our AIM IPO and to deliver on all areas of our stated strategy of:
-- In-house development of our own product portfolio in rare cancers and with partners in other indications;
-- Expansion of our commercial operations to facilitate the future commercialisation of Midatech's pipeline products; and
-- Acceleration of growth through strategic acquisition of complementary products and technologies.
The Group had a shift in focus for 2017 as Midatech has made a significant effort to build on its commercial development in 2016 by moving its in-house products closer to market. Partnering will continue to be considered where it can bring added value.
At this time, we have not seen any significant impact of the UK's decision to leave the European Union, however, until the nature of the UK's "post-Brexit" relationship with the EU becomes clearer it is difficult to predict the longer-term effects. We do not believe that there will be any implications on our existing EU funded grant programmes, however, we are evaluating how the Group should deal with any future opportunities.
Euro and US dollar exchange rates have been substantially more stable during 2017 than was the case in 2016, particularly in the period immediately following the "Brexit" decision. Costs incurred in those currencies are broadly comparable with 2016, and whilst the US dollar denominated revenues have grown strongly, the impact of any exchange rate movements in this regard has not been material.
Nick Robbins-Cherry
Chief Financial Officer
Condensed consolidated unaudited statement of comprehensive income
for the six month period ended 30 June 2017
Note Six months Six months
ended ended
30 30
June 2017 June 2016
unaudited (re-stated)
unaudited
GBP'000 GBP'000
Gross sales 4 4,965 3,456
Grant revenue 421 347
_______ _______
Total gross revenues 5,386 3,803
------------------------------- ----- ----------- -------------
Revenue 4 3,024 2,604
Grant revenue 421 347
_______ _______
Total net revenue 3,445 2,951
Cost of sales 4 (343) (180)
_______ _______
Gross profit 3,102 2,771
Research and development
costs 4 (2,116) (2,048)
Distribution costs,
sales and marketing (4,107) (4,237)
Administrative costs (6,916) (6,821)
_______ _______
Loss from operations (10,037) (10,335)
Finance income 420 765
Finance expense (61) -
________ _______
Loss before tax (9,678) (9,570)
Taxation 3 644 1,365
________ _______
Loss for the period
attributable to the
owners of the parent (9,034) (8,205)
________ ________
Other comprehensive
income:
Items that will or
may be reclassified
subsequently to profit
or loss when specific
conditions are met:
Exchange (losses)/
gains arising on translation
of foreign operations (148) 1,974
________ _______
Total other comprehensive
income, net of tax (148) 1,974
________ _______
Total comprehensive
loss attributable
to the owners of the
parent (9,182) (6,231)
________ ________
Loss per share
Basic and diluted
loss per ordinary
share - pence 5 (19p) (25p)
________ ________
Condensed consolidated unaudited statement of financial position at 30 June 2017
Note As at As at
30 June 31
2017 December
unaudited 2016
Assets GBP'000 GBP'000
Non-current assets
Property, plant and
equipment 6 2,728 2,766
Intangible assets 7 30,388 31,172
Other receivables
due in greater than
one year 460 448
_______ _______
33,576 34,386
_______ _______
Current assets
Inventories 913 817
Trade and other receivables 2,579 2,439
Income tax receivable 2,027 1,439
Cash and cash equivalents 6,185 17,608
_______ _______
11,704 22,303
_______ _______
Total assets 45,280 56,689
_______ _______
Liabilities
Non-current liabilities
Borrowings 1,219 1,620
_______ _______
1,219 1,620
_______ _______
Current liabilities
Trade and other payables 6,647 8,407
Borrowings 557 538
Derivative financial
liability-equity settled 9 44 400
_______ _______
7,248 9,345
_______ _______
Total liabilities 8,467 10,965
_______ _______
Issued capital and
reserves attributable
to owners of the parent
Share capital 10 1,002 1,002
Share premium 47,211 47,211
Merger reserve 53,003 53,003
Foreign exchange reserve 3,470 3,618
Accumulated deficit (67,873) (59,110)
_______ _______
Total equity 36,813 45,724
_______ _______
Total equity and liabilities 45,280 56,689
_______ _______
Condensed consolidated unaudited statement of cash flows
for the six month period ended 30 June 2017
Six months Six months
ended ended
30 30
June 2017 June 2016
unaudited unaudited
GBP'000 GBP'000
Cash flows from operating
activities
Loss after tax (9,034) (8,205)
Adjustments for:
Depreciation of property,
plant and equipment 499 442
Amortisation of intangible
fixed assets 780 1,709
Share based payment expense 271 75
Net finance income (359) (765)
Taxation (644) (1,365)
Loss on disposal of tangible 29 -
fixed assets
_______ _______
Cash flows from operating
activities before changes
in working capital (8,458) (8,109)
Increase in inventories (141) (328)
(Increase)/Decrease in
trade and other receivables (223) 891
Decrease trade and other
payables (1,358) (702)
_______ _______
Cash used in operations (10,180) (8,248)
Taxes received 66 204
_______ _______
Net cash used in operating
activities (10,114) (8,044)
_______ _______
Investing activities
Purchases of property,
plant and equipment (440) (752)
Purchases of Intangible (781) -
Assets
Interest received 14 157
_______ _______
Net cash used in investing
activities (1,207) (595)
Financing activities
Payments to finance lease
creditors (28) (15)
Repayment of borrowings (70) (149)
_______ _______
Net cash used in financing
activities (98) (164)
Net decrease in cash and
cash equivalents (11,419) (8,803)
Cash and cash equivalents
at beginning of period 17,608 16,175
Exchange gains on cash
and cash equivalents (4) (146)
_______ _______
Cash and cash equivalents
at end of period 6,185 7,226
_______ _______
Condensed consolidated unaudited statement of changes in equity
for the six month period ended 30 June 2017
Share Share Merger Shares Foreign Accumulated Total
capital premium reserve to be issued exchange deficit equity
reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January 2017 1,002 47,211 53,003 - 3,618 (59,110) 45,724
Loss for the period - - - - - (9,034) (9,034)
Foreign exchange
translation - - - - (148) - (148)
______ ______ ______ ______ ______ ______ ______
Total comprehensive
loss - - - - (148) (9,034) (9,182)
______ ______ ______ ______ ______ ______ ______
Transactions with
owners
Share based payment - - - - - 271 271
______ ______ ______ ______ ______ ______ ______
At 30 June 2017 1,002 47,211 53,003 - 3,470 (67,873) 36,813
______ ______ ______ ______ ______ ______ ______
At 1 January 2016 1,002 31,643 52,803 200 390 (39,151) 46,887
Loss for the period - - - - - (8,205) (8,205)
Foreign exchange
translation - - - - 1,974 - 1,974
______ ______ ______ ______ ______ ______ ______
Total comprehensive
loss - - - - 1,974 (8,205) (6,231)
______ ______ ______ ______ ______ ______ ______
Transactions with
owners
Issue of shares - - 200 (200) - - -
Share based payment - - - - - 75 75
______ ______ ______ ______ ______ ______ ______
At 30 June 2016 1,002 31,643 53,003 - 2,364 (47,281) 40,731
______ ______ ______ ______ ______ ______ ______
Notes forming part of the condensed consolidated unaudited interim financial information
for the six month period ended 30 June 2017
1 Basis of preparation
The unaudited interim consolidated financial information for the six months ended 30 June 2017 has been prepared following the recognition and measurement principles of the International Financial Reporting Standards, International Accounting Standards and Interpretations (collectively IFRS) issued by the International Accounting Standards Board (IASB), and as adopted by the EU and in accordance with International Accounting Standard 34 Interim Financial Reporting ('IAS34'). The interim consolidated financial information does not include all the information and disclosures required in the annual financial information, and should be read in conjunction with the audited financial statements for the year ended 31 December 2016.
The condensed interim financial information contained in this interim statement does not constitute statutory financial statements as defined by section 434(3) of the Companies Act 2006. The condensed interim financial information has not been audited. The financial information for the year ended 31 December 2016 is derived from the audited statutory financial statements for the year ended 31 December 2016. The independent auditor's report was unqualified and did not contain any statement under section 498(2) or 498(3) of the Companies Act 2006. Midatech's annual reports may be downloaded from the Company's website at http://www.midatechpharma.com/investors/financial-reports.html, or a copy may be obtained from 65 Innovation Drive, Milton Park, Abingdon, Oxfordshire OX14 4RQ.
There are no new standards or interpretations applicable to the Group for the accounting period commencing 1 January 2017 for adoption.
Going concern
The Group is subject to a number of risks similar to those of other development and early-commercial stage pharmaceutical companies. These risks include, amongst others, generation of revenues from the existing product portfolio and in due course the development portfolio and risks associated with research, development, testing and obtaining related regulatory approvals of its pipeline products. Ultimately, the attainment of profitable operations is dependent on future uncertain events which include obtaining adequate financing to fulfil the Group's commercial and development activities and generating a level of revenue adequate to support the Group's cost structure.
The Group has experienced net losses and significant cash outflows from cash used in operating activities over the past years as it develops its portfolio. As at 30 June 2017 the Group had total equity of GBP36.81m (GBP45.72m 31 December 2016), it incurred a net loss after tax for the six months to 30 June 2017 of GBP9.03m (GBP8.21m H1 2016) and used cash in operating activities of GBP10.18m (GBP8.25m H1 2016) for the same period. As at 30 June 2017, the Group had cash and cash equivalents of GBP6.19m.
The future viability of the Group is dependent on its ability to generate cash from operating activities, to raise additional capital to finance its operations or to successfully obtain regulatory approval to allow marketing of the Group's development products. The Group's failure to raise capital as and when needed could have a negative impact on its financial condition and ability to pursue its business strategies.
The Directors have prepared cash flow forecasts and considered the cash flow requirement for the Group for a period including twelve months from the date of approval of this interim financial information. These forecasts show that further financing will be required during the course of the next 12 months. This requirement for additional financing in the short term represents a material uncertainty that may cast significant doubt upon the Group's ability to continue as a going concern.
In addition to utilising the existing cash reserves, the Directors are evaluating a number of near-term funding options available to the Group and are confident that additional working capital will become available in the timeframe required and on terms acceptable to the Board and shareholders. Therefore, after considering the uncertainties the Directors consider it is appropriate to continue to adopt the going concern basis in preparing the interim financial information.
The condensed financial information for the six-month period was approved by the board on 27 September 2017.
2 Accounting policies
The accounting policies adopted are consistent with those followed in the preparation of the audited statutory financial statements for the year ended 31 December 2016.
A number of new standards, amendments to standards, and interpretations are not effective for 2017, and therefore have not been applied in preparing this interim financial information.
The directors are currently reviewing the impact of IFRS 9 "Financial Instruments", IFRS 15 "Revenue from Contracts with Customers and IFRS 16 "Leases" and are yet to conclude on whether any of these standards will have a significant impact on the financial statements of the Group in the year of initial application.
The other standards, interpretations and amendments issued by the IASB (of which some are still subject to endorsement by the European Union), but not yet effective are not expected to have a material impact on the Group's future consolidated financial statements.
Some of the significant accounting policies require management to make difficult, subjective or complex judgments or estimates. The policies which management consider critical because of the level of complexity, judgment or estimation involved in their application and their impact on the financial Information are:
-- Business combinations -- Impairment of goodwill and intangible assets not yet ready for use -- Share-based payments -- Income Taxes -- Intangible asset recognition -- Fair value through profit and loss derivative liabilities 3 Taxation
Income tax is recognised or provided at amounts expected to be recovered or to be paid using the tax rates and tax laws that have been enacted or substantively enacted at the Group Statement of Financial Position date. Research and development tax credits are recognised on an accruals basis and are included as an income tax credit under current assets. The research and development tax credit recognised is based on management's best estimate of the expected tax claim for the period and is recorded within taxation as under the Small and Medium-sized Enterprise Scheme.
Six months Six months
ended ended
30 June 30 June
2017 unaudited 2016 unaudited
GBP'000 GBP'000
Income tax credit 644 725
Deferred tax credit
Reversal of temporary differences
(note 8) - 640
_______ _______
Total tax credit 644 1,365
_______ _______
4 Segment information
Re-statement of income statement for the six months ended 30 June 2016
Total gross revenues represents the full list price of products shipped to wholesalers and other customers before product returns, discounts, rebates and other incentives based on the sales price, and grant revenue. Total net revenues represents statutory revenue plus grant revenue. In preparing our financial statements for the year ended 31 December 2016, it was identified that, throughout H1 2016, credits for product returns, rebates, discounts and other incentives based on sales price totaling GBP0.85m had been incorrectly classified as cost of sales instead of as a reduction from total gross revenues. This was correctly presented in the audited financial statements for the year ended 31 December 2016 and the comparative figures for the six months ended 30 June 2016 have been re-stated in this interim financial information to reduce both Revenue and Cost of sales by this amount. This re-statement has not impacted gross profit, loss from operations or total equity in any of the periods presented.
Revenue
Geographical analysis of statutory revenue by destination of customer
Six months Six months
ended ended
30 June 30 June
2017 unaudited 2016 (re-stated)
unaudited
GBP'000 GBP'000
United Kingdom 28 42
Austria 25 34
United States 2,971 2,528
_______ _______
3,024 2,604
_______ _______
In 2017, the Group's top three customers in the Commercial segment all accounted for over 10% of revenue. Similarly, in 2016 the Group had three customers, all in the Commercial segment, that each accounted for at least 10% of total revenue.
2017 2016
Customer A (Commercial) 25% 20%
Customer B (Commercial) 16% 15%
Customer C (Commercial) 14% 10%
The Group contains two reportable operating segments as follows:
-- Pipeline Research and Development: The Pipeline Research and Development ("Pipeline R&D") segment seeks to develop products using the Group's nanomedicine and sustained release technology platforms.
-- Commercial: The Commercial segment distributes and sells the Group's commercial products. Midatech Pharma US promotes the Group's commercial, cancer supportive care products in the US market, in which the Group has exclusive licenses to Soltamox, Oravig and Zuplenz, an exclusive license to distribute, promote and market Gelclair, and a marketing agreement to co-promote two other products: Ferralet 90 and Aquoral. As and when new products are introduced the Commercial segment will include revenues from the marketing of these commercial products.
4 Segment information (continued)
The accounting policies of the reportable segments are consistent with the Group's accounting policies described in note 2. Segment result represents the result of each segment without the allocation of interest expense, interest income and tax.
No measures of segment assets and segment liabilities are reported to the Group's Board of Directors in order to assess performance and allocate resources. There is no intersegment activity and all revenue is generated from external customers.
The UK and Spanish entities meet the aggregation criteria and have therefore been presented as a single reportable segment under Pipeline R&D. The research and development activities involve the discovery and development of pharmaceutical products in the field of nanomedicine and sustained release technology. The US operating company is engaged in the sale and marketing of cancer supportive care products and is reported under the Commercial segment.
Segmented results for the 6 months ended 30 June 2017
Pipeline Commercial Consolidated
R&D
unaudited unaudited unaudited
GBP'000 GBP'000 GBP'000
Revenue 53 2,971 3,024
Grant revenue 421 - 421
_______ _______ _______
Total revenue 474 2,971 3,445
---------------------------- ---------- ----------- -------------
Cost of sales - (343) (343)
Depreciation (497) (2) (499)
Amortisation - (780) (780)
Research and development
costs (2,116) - (2,116)
Other distribution costs,
sales and marketing (988) (2,339) (3,327)
Other administrative
costs (3,873) (2,544) (6,417)
_______ _______ _______
Segmental result/operating
loss (7,000) (3,037) (10,037)
_______ _______ _______
Finance income 420
Interest payable (61)
_______
Loss before tax (9,678)
Taxation 644
_______
Loss after tax (9,034)
_______
4 Segment information (continued)
Segmented results for the 6 months ended 30 June 2016
Pipeline Commercial Consolidated
R&D
(re-stated) (re-stated)
unaudited unaudited unaudited
GBP'000 GBP'000 GBP'000
Revenue 190 2,414 2,604
Grant revenue 347 - 347
_______ _______ _______
Total revenue 537 2,414 2,951
---------------------------- ------------ ------------ -------------
Cost of sales - (110) (180)
Depreciation (437) (5) (442)
Amortisation (3) (1,706) (1,709)
Contract settlement costs - (1,138) (1,138)
Research and development
costs (2,048) - (2,048)
Other distribution costs,
sales and marketing (21) (2,507) (2,528)
Other administrative
costs (3,493) (1,748) (5,241)
_______ _______ _______
Segmental result/operating
loss (5,389) (4,946) (10,335)
_______ _______ _______
Finance income 765
_______
Loss before tax (9,570)
Taxation 1,365
_______
Loss after tax (8,205)
_______
Non-current assets by location of assets
2017 2016
GBP'000 GBP'000
unaudited
Spain 2,234 2,125
United Kingdom 17,040 16,489
United States 14,302 15,772
_______ _______
33,576 34,386
_______ _______
5 Loss per share
Basic loss per share amounts are calculated by dividing the net loss for the period attributable to ordinary equity holders of the parent company by the weighted average number of ordinary shares outstanding during the period. As the Group made a loss for the period the diluted earnings per share is equal to the basic earnings per share.
Six months Six months
ended 30 ended 30
June 2017 June 2016
unaudited unaudited
Numerator GBP'000 GBP'000
_______ _______
Loss used in basic EPS
and diluted EPS (9,034) (8,205)
_______ _______
Denominator
Weighted average number
of ordinary shares used
in basic EPS 48,699,459 33,469,150
_______ _______
Basic and diluted loss
per share - pence (19p) (25p)
_______ _______
6 Property, plant and equipment
Fixtures Leasehold Computer Laboratory
and fittings improve-ments equipment equipment Total
unaudited unaudited unaudited unaudited unaudited
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost
At 1 January 2017 228 1,999 281 3,050 5,558
Additions 13 289 23 115 440
Disposals - - - (41) (41)
Exchange differences 4 59 2 48 113
_______ _______ _______ _______ _______
At 30 June 2017 245 2,347 306 3,172 6,070
_______ _______ _______ _______ _______
Accumulated depreciation
At 1 January 2017 149 872 122 1,649 2,792
Charge for the
period 21 156 28 294 499
Disposals - - - (12) (12)
Exchange differences 3 27 2 31 63
_______ _______ _______ _______ _______
At 30 June 2017 173 1,055 152 1,962 3,342
_______ _______ _______ _______ _______
Net book value
At 30 June 2017 72 1,292 154 1,210 2,728
At 1 January 2017 79 1,127 159 1,401 2,766
_______ _______ _______ _______ _______
Fixtures Leasehold Computer Laboratory
and fittings improve-ments equipment equipment Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost
At 1 January 2016 1,319 1,112 354 983 3,768
Additions 2 715 43 609 1,369
Disposals - - (1) - (1)
Transfer (1,125) - (122) 1,247 -
Exchange differences 32 172 7 211 422
_______ _______ _______ _______ _______
At 31 December
2016 228 1,999 281 3,050 5,558
_______ _______ _______ _______ _______
Accumulated depreciation
At 1 January 2016 458 733 180 413 1,784
Charge for the
period 41 134 54 543 772
Transfer (369) (96) (118) 583 -
Exchange differences 19 101 6 110 236
_______ _______ _______ _______ _______
At 31 December
2016 149 872 122 1,649 2,792
_______ _______ _______ _______ _______
Net book value
At 31 December
2016 79 1,127 159 1,401 2,766
At 1 January 2016 861 379 174 570 1,984
_______ _______ _______ _______ _______
The transfers between asset classes during the year ended 31 December 2016 arose as a result of reallocation of assets acquired in 2015, to more appropriately recognise their classification.
7 Intangible assets
In-process Product Goodwill IT/Website
research and marketing costs Total
and development
unaudited unaudited unaudited unaudited unaudited
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost
At 1 January
2017 12,600 21,481 14,488 26 48,595
Additions 779 - - 2 781
Exchange differences - (971) (624) - (1,595)
_______ _______ _______ _______ _______
At 30 June
2017 13,379 20,510 13,864 28 47,781
_______ _______ _______ _______ _______
Accumulated
amortisation
and impairment
At 1 January
2017 1,800 15,608 - 15 17,423
Amortisation
charge for
the period - 780 - - 780
Exchange differences - (810) - - (810)
_______ _______ _______ _______ _______
At 30 June
2017 1,800 15,578 - 15 17,393
_______ _______ _______ _______ _______
Net book value
At 30 June
2017 11,579 4,932 13,864 13 30,388
At 1 January
2017 10,800 5,873 14,488 11 31,172
_______ _______ _______ _______ _______
In-process Product Goodwill IT/Website
research and marketing costs Total
and development
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost
At 1 January
2016 12,600 18,321 12,456 15 43,392
Additions - - - 19 19
Disposals (8) (8)
Exchange differences - 3,160 2,032 5,192
_______ _______ _______ _______ _______
At 31 December
2016 12,600 21,481 14,488 26 48,595
_______ _______ _______ _______ _______
Accumulated
amortisation
and impairment
At 1 January
2016 1,800 243 - 10 2,053
Amortisation
charge for
the period - 3,578 - 5 3,583
Impairment - 11,413 - - 11,413
Exchange differences - 374 - - 374
_______ _______ _______ _______ _______
At 31 December
2016 1,800 15,608 - 15 17,423
_______ _______ _______ _______ _______
Net book value
At 31 December
2016 10,800 5,873 14,488 11 31,172
At 1 January
2016 10,800 18,078 12,456 5 41,339
_______ _______ _______ _______ _______
8 Deferred tax
Deferred tax is calculated in full on temporary differences under the liability method using tax rates applicable in the tax jurisdictions where the tax asset or liability would arise.
30 June 31 December
2017 2016
unaudited
GBP'000 GBP'000
Liability at 1 January - 6,547
Credited to income statement
on impairment and amortisation
of intangibles - (5,509)
Credited to income statement - (1,740)
Foreign exchange gain/(loss) - 702
_______ _______
Liability at - -
period end
_______ _______
9 Derivative financial liability
30 June 31 December
2017 2016
unaudited
GBP'000 GBP'000
Equity settled derivative
financial liability - fair
value through profit and
loss 44 400
_______ _______
Liability at 1 January 400 1,573
Gain recognised in finance
income within the consolidated
statement of comprehensive
income (356) (1,173)
______ ______
Liability at period end 44 400
_______ _______
9 Derivative financial liability (continued)
Equity settled derivative financial liability is not a liability that is to be settled for cash. The Group assumed fully vested warrants and share options on the acquisition of DARA Biosciences, Inc. which are to be settled in shares of Midatech Pharma plc. The number of ordinary shares to be issued when exercised is fixed, however the exercise prices are denominated in US Dollars being different to the functional currency of the parent company. Therefore, the warrants and share options are classified as equity settled derivative financial liabilities through the profit and loss account. The financial liabilities were valued using the Black-Scholes option pricing model based on assumptions described below. Financial liabilities at FVTPL are stated at fair value, with any gains or losses arising on re-measurement recognised in profit or loss. The net gain or loss recognised in profit or loss incorporated any interest paid on the financial liability and is included in the 'other gains and losses' line item in the income statement. A key input in the valuation of the instrument is the company share price.
At 31 December 2016, some 398,315 options and 16,664 warrants had lapsed. In addition, the share price had fallen to GBP1.18, which resulted in a gain of GBP1.17m on re-measurement, which was credited to finance income in 2016. At 30 June 2017, a further 149,441 options and 456,156 warrants had lapsed and the share price further reduced to GBP1.08, resulting in a gain of GBP356k on re-measurement, also credited to finance income.
As at 30 June 2017 there were DARA options outstanding over 137,390 Midatech ordinary shares with a weighted average exercise price of $7.41 per share, within a range of $2.54 to $770.59, and a weighted average remaining contractual life of 7.6 years. The risk-free rate ranged from 0.30% to 1.08%, volatility at 40% and the expected life from 0.3 - 8.3 years. The exercise of all options would raise additional cash of $1.02m.
Also at the period-end there were DARA warrants outstanding over 2,628,666 Midatech ordinary shares with a weighted average exercise price of $7.90 per share, within a range of $3.05 to $138.24, and a weighted average remaining contractual life of 1.9 years. The risk-free rate ranged from 0.30% to 0.70%, volatility at 40% and the expected life from 0.5 - 5.4 years. The exercise of all warrants would raise additional cash of $20.80m.
Fair value hierarchy
The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:
-- Level 1: quoted (unadjusted) prices in active markets for identical assets and liabilities;
-- Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly; and
-- Level 3: techniques which use inputs that have a significant effect on the recorded fair value that are not based on observable market data.
The fair value of the Group's financial liability is measured at fair value on a recurring basis.
9 Derivative financial liability (continued)
The following table gives information about how the fair value of this financial liability is determined:
1)
1)
Financial Fair Fair Valuation Significant Relationship
liabilities value value technique unobservable of unobservable
as at as at and key inputs level inputs to
30/06/2017 31/12/2016 input 3 fair value
GBP'000 GBP'000
Volatility
rates of 40%
Equity Black determined
settled Scholes using historical The higher
financial option volatility the volatility
derivative pricing of comparable the higher
liability 44 400 model companies. the fair value.
Expected life The shorter
between a the expected
range of 0.3 life the lower
and 8.3 years the fair value.
determined
using the
remaining
life of the
share options.
Risk-free The higher
rate between the risk-free
a range of rate the higher
0.30% and the fair value.
1.08% determined
using the
expected life
assumptions.
If the above unobservable volatility input to the valuation model were 10% higher while all other variables were held constant, the carrying amount of shares would increase by GBP12k (H1 2016: GBP194k).
If the above unobservable expected life input to the valuation model were 1 year shorter while all other variables were held constant, the carrying amount of shares would decrease by GBP10k (H1 2016: GBP74k).
If the above unobservable risk free rate input to the valuation model were 10% higher while all other variables were held constant, the carrying amount of shares would increase by GBP0.3k (H1 2016: GBP11k).
The financial liability measured at fair value on Level 3 fair value measurement represents consideration relating to a business combination.
10 Share Capital
As at 30 As at 30 As at 31 As at 31
June 2017 June 2017 December December
2016 2016
Allotted and fully paid - number GBP number GBP
classified as equity
At 1 January
Ordinary shares of 0.005p
each 48,719,456 2,436 48,699,456 2,435
Deferred shares of GBP1 each 1,000,001 1,000,001 1,000,001 1,000,001
__________ __________
Total 1,002,437 1,002,436
__________ __________
In accordance with the Articles of Association for the Company adopted on 13 November 2014, the share capital of the Company consists of an unlimited number of ordinary shares of nominal value 0.005 pence each.
Date of Issue Type of Share Issue Ordinary Deferred
Shares Shares
number number
2017
As at 1 January 2017 48,699,456 1,000,001
Issue of shares to Employee
25 May 2017 Share Incentive Plan 20,000 -
_________ _________
As at 30 June 2017 48,719,456 1,000,001
_________ _________
2016
As at 1 January 2016 33,467,504 1,000,001
27 June 2016 Deferred consideration 74,908 -
re: acquisition of Q Chip
Limited
31 October 2016 Placing and Open Offer 15,157,044 -
_________ _________
As at 31 December 2016 48,699,456 1,000,001
_________ _________
11 Related party transactions and
ultimate controlling party
Transactions with Monosol RX, LLC
Monosol RX LLC ("Monosol") is a former shareholder in the Company and the two entities were formerly collaborative partners in the MidaSol Therapeutics joint operation. The Directors considered Monosol to be a related party by virtue of its shareholding in the Company. There was no trading between the group and Monosol during the period ended 30 June 2017 (in 2016 Midatech Limited recharged to Monosol GBP105k for research services). There was no period end receivable due from Monosol (at 30 June 2016: nil). Monosol ceased to be a related party on 2 May 2016.
Monosol is also the licensor of the Group's Zuplenz product. In this capacity, the Group incurred royalty costs up to the date at which it ceased to be a related party, in May 2016, of GBP187.7k payable to Monosol.
The Directors do not consider that there is an ultimate controlling party.
12 Contingent liabilities
The Group had no material contingent liabilities at 30 June 2017 or 31 December 2016.
13 Events after the reporting date
On 28 September 2017 the Company announced its intention to raise up to GBP6 million in new equity via a proposed Placing with up to a further GBP2 million by way of an Open Offer to shareholders.
(1) Total gross revenues represents the full list price of products shipped to wholesalers and other customers before product returns, discounts, rebates and other incentives based on the sales price and grant revenue.
(2) Total net revenues represents statutory revenue plus grant revenue.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR EAANXAESXEAF
(END) Dow Jones Newswires
September 28, 2017 02:02 ET (06:02 GMT)
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